Exhibit 10.10

 

 

LOAN AGREEMENT

 

Dated as of January 27, 2005

 

between

 

CORUS BANK, N.A.

 

 

(“Lender”)

 

and

 

COMSTOCK PENDERBROOK, L.C.,
a Virginia limited liability company

 

 

(“Borrower”)

 

 

LOAN:  $67,000,000

 

 

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

 

TABLE OF CONTENTS

 

RECITALS

 

 

 

 

 

I.

Borrower

 

 

 

 

II.

The Land

 

 

 

 

III.

The Project

 

 

 

 

IV.

The Property

 

 

 

 

V.

The Loan

 

 

 

 

ARTICLE I

DEFINITIONS

 

 

 

 

SECTION 1.1

Definition of Terms Used in This Agreement

 

 

 

 

ARTICLE II

BASIC LOAN TERMS

 

 

 

 

SECTION 2.1

The Loan

 

 

 

 

SECTION 2.2

Maturity Date

 

 

 

 

SECTION 2.3

Loan Fees

 

 

 

 

SECTION 2.4

Loan Expenses

 

 

 

 

SECTION 2.5

Loan Documents

 

 

 

 

SECTION 2.6

Borrower’s Equity

 

 

 

 

SECTION 2.7

Voluntary Prepayment

 

 

 

 

SECTION 2.8

Exit Fee

 

 

 

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES

 

 

 

 

SECTION 3.1

Status of Documents

 

 

 

 

SECTION 3.2

Due Organization; Authority

 

 

 

 

SECTION 3.3

Enforceability

 

 

 

 

SECTION 3.4

Pending Litigation

 

 

 

 

SECTION 3.5

No Violation

 

 

 

 

SECTION 3.6

No Conflict

 

 

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

 

SECTION 3.7

No Consent

 

 

 

 

SECTION 3.8

Truth of Financial Statements; Financial Condition Warranty

 

 

 

 

SECTION 3.9

Access

 

 

 

 

SECTION 3.10

Project Budget

 

 

 

 

SECTION 3.11

Leases

 

 

 

 

SECTION 3.12

Business Purpose

 

 

 

 

SECTION 3.13

Material Facts

 

 

 

 

SECTION 3.14

Title

 

 

 

 

SECTION 3.15

Brokerage Fees and Commissions

 

 

 

 

SECTION 3.16

Conditions Preventing Compliance

 

 

 

 

SECTION 3.17

Taxes

 

 

 

 

SECTION 3.18

ERISA

 

 

 

 

SECTION 3.19

Regulations G, U and X

 

 

 

 

SECTION 3.20

Government Regulation

 

 

 

 

SECTION 3.21

Principal Place of Business and Chief Executive Office

 

 

 

 

SECTION 3.22

Ownership Structure

 

 

 

 

SECTION 3.23

Priority and Perfection

 

 

 

 

SECTION 3.24

Condominium Contracts

 

 

 

 

SECTION 3.25

Condominium Documents

 

 

 

 

SECTION 3.26

Borrower’s Equity; Advances

 

 

 

 

SECTION 3.27

Patriot Act

 

 

 

 

SECTION 3.28

Solvency

 

 

 

 

SECTION 3.29

Single Purpose Entity

 

 

ii

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

 

SECTION 3.30

Indebtedness

 

 

 

 

SECTION 3.31

Representations and Warranties to be Continuing

 

 

 

 

SECTION 3.32

Acknowledgment of Lender’s Reliance

 

 

 

 

ARTICLE IV

CLOSING DELIVERY CONDITIONS; CONDITIONS TO INITIAL DISBURSEMENT

 

 

 

 

SECTION 4.1

Conditions to Loan Closing; Closing Date

 

 

 

 

ARTICLE V

OTHER PROVISIONS CONCERNING ADVANCES

 

 

 

 

SECTION 5.1

General Terms and Conditions for Advances

 

 

 

 

SECTION 5.2

Payout Conditions and Deliveries

 

 

 

 

SECTION 5.3

Final Advance

 

 

 

 

SECTION 5.4

Payment of Interest; Interest Reserve

 

 

 

 

ARTICLE VI

PROJECT BUDGET, BORROWER’S EQUITY, LOAN BALANCING, AND CHANGE ORDERS

 

 

 

 

SECTION 6.1

Project Costs and Project Budget

 

 

 

 

SECTION 6.2

Change Orders and Changes to the Project Budget

 

 

 

 

SECTION 6.3

Loan Balancing

 

 

 

 

SECTION 6.4

Accounts

 

 

 

 

SECTION 6.5 [a05-2917_1ex10d10.htm#Section6_5_134537]

Deposits for Real Estate Taxes [a05-2917_1ex10d10.htm#Section6_5_134537]

 

 

 

 

ARTICLE VII [a05-2917_1ex10d10.htm#ArticleVii_134551]

CERTAIN COVENANTS BY BORROWER [a05-2917_1ex10d10.htm#ArticleVii_134551]

 

 

 

 

SECTION 7.1 [a05-2917_1ex10d10.htm#Section7_1_134557]

Inspection [a05-2917_1ex10d10.htm#Section7_1_134557]

 

 

 

 

SECTION 7.2 [a05-2917_1ex10d10.htm#Section7_2_134600]

Mechanics’ Liens, Real Estate Taxes and Condominium Homeowner’s Association Dues
[a05-2917_1ex10d10.htm#Section7_2_134600]

 

 

 

 

SECTION 7.3 [a05-2917_1ex10d10.htm#Section7_3_134612]

Compliance; Construction; Operation [a05-2917_1ex10d10.htm#Section7_3_134612]

 

 

 

 

SECTION 7.4 [a05-2917_1ex10d10.htm#Section7_4_134615]

Transfers; Changes in Organization [a05-2917_1ex10d10.htm#Section7_4_134615]

 

 

iii

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

 

SECTION 7.5 [a05-2917_1ex10d10.htm#Section7_5_134618]

Leases [a05-2917_1ex10d10.htm#Section7_5_134618]

 

 

 

 

SECTION 7.6 [a05-2917_1ex10d10.htm#Section7_6_134626]

Management Agreement [a05-2917_1ex10d10.htm#Section7_6_134626]

 

 

 

 

SECTION 7.7 [a05-2917_1ex10d10.htm#Section7_7_134636]

Financial and Other Reports and Deliveries
[a05-2917_1ex10d10.htm#Section7_7_134636]

 

 

 

 

SECTION 7.8 [a05-2917_1ex10d10.htm#Section7_8_134705]

Insurance Requirements [a05-2917_1ex10d10.htm#Section7_8_134705]

 

 

 

 

SECTION 7.8.1 [a05-2917_1ex10d10.htm#Section7_8_1_134708]

Insurance [a05-2917_1ex10d10.htm#Section7_8_1_134708]

 

 

 

 

SECTION 7.8.2 [a05-2917_1ex10d10.htm#Section7_8_2_134724]

Policy Requirements [a05-2917_1ex10d10.htm#Section7_8_2_134724]

 

 

 

 

SECTION 7.8.3 [a05-2917_1ex10d10.htm#Section7_8_3_134741]

Notice of Policies [a05-2917_1ex10d10.htm#Section7_8_3_134741]

 

 

 

 

SECTION 7.8.4 [a05-2917_1ex10d10.htm#Section7_8_4_134744]

Insurance Review [a05-2917_1ex10d10.htm#Section7_8_4_134744]

 

 

 

 

SECTION 7.9 [a05-2917_1ex10d10.htm#Section7_9_134746]

Borrower’s Indemnities [a05-2917_1ex10d10.htm#Section7_9_134746]

 

 

 

 

SECTION 7.10 [a05-2917_1ex10d10.htm#Section7_10_134759]

Single Purpose Entity [a05-2917_1ex10d10.htm#Section7_10_134759]

 

 

 

 

SECTION 7.11 [a05-2917_1ex10d10.htm#Section7_11_134801]

Further Assurances [a05-2917_1ex10d10.htm#Section7_11_134801]

 

 

 

 

SECTION 7.12 [a05-2917_1ex10d10.htm#Section7_12_134804]

ERISA [a05-2917_1ex10d10.htm#Section7_12_134804]

 

 

 

 

SECTION 7.13 [a05-2917_1ex10d10.htm#Section7_13_134806]

New Appraisals [a05-2917_1ex10d10.htm#Section7_13_134806]

 

 

 

 

SECTION 7.14 [a05-2917_1ex10d10.htm#Section7_14_134809]

Contract Maintenance; Other Agreements
[a05-2917_1ex10d10.htm#Section7_14_134809]

 

 

 

 

SECTION 7.15 [a05-2917_1ex10d10.htm#Section7_15_134830]

Liens [a05-2917_1ex10d10.htm#Section7_15_134830]

 

 

 

 

ARTICLE VIII [a05-2917_1ex10d10.htm#ArticleViii_134832]

CONDOMINIUM MATTERS [a05-2917_1ex10d10.htm#ArticleViii_134832]

 

 

 

 

SECTION 8.1 [a05-2917_1ex10d10.htm#Section8_1_134839]

Condominium Contracts [a05-2917_1ex10d10.htm#Section8_1_134839]

 

 

 

 

SECTION 8.2 [a05-2917_1ex10d10.htm#Section8_2_134849]

No Modification or Termination of Condominium Contracts
[a05-2917_1ex10d10.htm#Section8_2_134849]

 

 

 

 

SECTION 8.3 [a05-2917_1ex10d10.htm#Section8_3_134851]

Performance under Condominium Contracts
[a05-2917_1ex10d10.htm#Section8_3_134851]

 

 

 

 

SECTION 8.4 [a05-2917_1ex10d10.htm#Section8_4_134853]

Sale Activity [a05-2917_1ex10d10.htm#Section8_4_134853]

 

 

 

 

SECTION 8.5 [a05-2917_1ex10d10.htm#Section8_5_134900]

Minimum Unit Sales Price [a05-2917_1ex10d10.htm#Section8_5_134900]

 

 

 

 

SECTION 8.6 [a05-2917_1ex10d10.htm#Section8_6_134902]

Condominium Documents [a05-2917_1ex10d10.htm#Section8_6_134902]

 

 

 

 

SECTION 8.7 [a05-2917_1ex10d10.htm#Section8_7_134911]

Condominium Sales; Release of Units [a05-2917_1ex10d10.htm#Section8_7_134911]

 

 

iv

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

 

SECTION 8.8 [a05-2917_1ex10d10.htm#Section8_8_134949]

Establishing the Condominium Regime [a05-2917_1ex10d10.htm#Section8_8_134949]

 

 

 

 

SECTION 8.9 [a05-2917_1ex10d10.htm#Section8_9_135002]

Application of Unit Release Payments [a05-2917_1ex10d10.htm#Section8_9_135002]

 

 

 

 

SECTION 8.10 [a05-2917_1ex10d10.htm#Section8_10_135004]

Upgrades [a05-2917_1ex10d10.htm#Section8_10_135004]

 

 

 

 

ARTICLE IX [a05-2917_1ex10d10.htm#ArticleIx_135020]

CASUALTY AND CONDEMNATION [a05-2917_1ex10d10.htm#ArticleIx_135020]

 

 

 

 

SECTION 9.1 [a05-2917_1ex10d10.htm#Section9_1_135028]

Insurance and Condemnation Proceeds [a05-2917_1ex10d10.htm#Section9_1_135028]

 

 

 

 

SECTION 9.2 [a05-2917_1ex10d10.htm#Section9_2_152440]

Disbursement of Property Proceeds [a05-2917_1ex10d10.htm#Section9_2_152440]

 

 

 

 

SECTION 9.3 [a05-2917_1ex10d10.htm#Section9_3_135038]

Reduction in Secured Obligations [a05-2917_1ex10d10.htm#Section9_3_135038]

 

 

 

 

ARTICLE X [a05-2917_1ex10d10.htm#ArticleX_135042]

EVENTS OF DEFAULT [a05-2917_1ex10d10.htm#ArticleX_135042]

 

 

 

 

SECTION 10.1 [a05-2917_1ex10d10.htm#Section10_1_135051]

Events of Default [a05-2917_1ex10d10.htm#Section10_1_135051]

 

 

 

 

ARTICLE XI [a05-2917_1ex10d10.htm#ArticleXi_135121]

REMEDIES [a05-2917_1ex10d10.htm#ArticleXi_135121]

 

 

 

 

SECTION 11.1 [a05-2917_1ex10d10.htm#Section11__135136]

Accelerate the Note [a05-2917_1ex10d10.htm#Section11__135136]

 

 

 

 

SECTION 11.2 [a05-2917_1ex10d10.htm#Section11_2_135137]

Terminate Lender’s Obligations [a05-2917_1ex10d10.htm#Section11_2_135137]

 

 

 

 

SECTION 11.3 [a05-2917_1ex10d10.htm#Section11_3_135140]

Take Possession of the Property and Complete the Project (Borrower’s Power of
Attorney) [a05-2917_1ex10d10.htm#Section11_3_135140]

 

 

 

 

SECTION 11.4 [a05-2917_1ex10d10.htm#Section11_4_135158]

Offset [a05-2917_1ex10d10.htm#Section11_4_135158]

 

 

 

 

SECTION 11.5 [a05-2917_1ex10d10.htm#Section11_5_135200]

Default Interest [a05-2917_1ex10d10.htm#Section11_5_135200]

 

 

 

 

ARTICLE XII [a05-2917_1ex10d10.htm#ArticleXii_135202]

MISCELLANEOUS PROVISIONS [a05-2917_1ex10d10.htm#ArticleXii_135202]

 

 

 

 

SECTION 12.1 [a05-2917_1ex10d10.htm#Section12_1_135207]

Agreement Binding Only Upon Execution by Lender
[a05-2917_1ex10d10.htm#Section12_1_135207]

 

 

 

 

SECTION 12.2 [a05-2917_1ex10d10.htm#Section12_2_135209]

Entire Agreement [a05-2917_1ex10d10.htm#Section12_2_135209]

 

 

 

 

SECTION 12.3 [a05-2917_1ex10d10.htm#Section12_3_135210]

No Waiver [a05-2917_1ex10d10.htm#Section12_3_135210]

 

 

 

 

SECTION 12.4 [a05-2917_1ex10d10.htm#Section12_4_135212]

Amendments [a05-2917_1ex10d10.htm#Section12_4_135212]

 

 

 

 

SECTION 12.5 [a05-2917_1ex10d10.htm#Section12_5_135213]

No Third Party Benefits [a05-2917_1ex10d10.htm#Section12_5_135213]

 

 

 

 

SECTION 12.6 [a05-2917_1ex10d10.htm#Section12_6_135228]

Successors and Assigns [a05-2917_1ex10d10.htm#Section12_6_135228]

 

 

v

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

 

SECTION 12.7 [a05-2917_1ex10d10.htm#Section12_7_135235]

Participations and Assignments [a05-2917_1ex10d10.htm#Section12_7_135235]

 

 

 

 

SECTION 12.8 [a05-2917_1ex10d10.htm#Section12_8_135237]

All Advances Obligatory and Secured [a05-2917_1ex10d10.htm#Section12_8_135237]

 

 

 

 

SECTION 12.9 [a05-2917_1ex10d10.htm#Section12_9_135253]

Publicity [a05-2917_1ex10d10.htm#Section12_9_135253]

 

 

 

 

SECTION 12.10 [a05-2917_1ex10d10.htm#Section12_10_135255]

Notices [a05-2917_1ex10d10.htm#Section12_10_135255]

 

 

 

 

SECTION 12.11 [a05-2917_1ex10d10.htm#Section12_11_135431]

Form of Documents [a05-2917_1ex10d10.htm#Section12_11_135431]

 

 

 

 

SECTION 12.12 [a05-2917_1ex10d10.htm#Section12_12_135433]

Severability [a05-2917_1ex10d10.htm#Section12_12_135433]

 

 

 

 

SECTION 12.13 [a05-2917_1ex10d10.htm#Section12_13_135436]

Lender Not Partner of Borrower [a05-2917_1ex10d10.htm#Section12_13_135436]

 

 

 

 

SECTION 12.14 [a05-2917_1ex10d10.htm#Section12_14_135438]

Joint and Several Obligations [a05-2917_1ex10d10.htm#Section12_14_135438]

 

 

 

 

SECTION 12.15 [a05-2917_1ex10d10.htm#Section12_15_135456]

Survival [a05-2917_1ex10d10.htm#Section12_15_135456]

 

 

 

 

SECTION 12.16 [a05-2917_1ex10d10.htm#Section12_16_135457]

Time of the Essence [a05-2917_1ex10d10.htm#Section12_16_135457]

 

 

 

 

SECTION 12.17 [a05-2917_1ex10d10.htm#Section12_17_135500]

Conflicts [a05-2917_1ex10d10.htm#Section12_17_135500]

 

 

 

 

SECTION 12.18 [a05-2917_1ex10d10.htm#Section12_18_135502]

Waiver of Subrogation [a05-2917_1ex10d10.htm#Section12_18_135502]

 

 

 

 

SECTION 12.19 [a05-2917_1ex10d10.htm#Section12_19_135514]

Governmental Regulation [a05-2917_1ex10d10.htm#Section12_19_135514]

 

 

 

 

SECTION 12.20 [a05-2917_1ex10d10.htm#Section12_20_135516]

Counterparts; FAX [a05-2917_1ex10d10.htm#Section12_20_135516]

 

 

 

 

SECTION 12.21 [a05-2917_1ex10d10.htm#Section12_21_135843]

Partial Release [a05-2917_1ex10d10.htm#Section12_21_135843]

 

 

 

 

SECTION 12.22 [a05-2917_1ex10d10.htm#Section12_22_135844]

Governing Law; Jurisdiction; Venue; and Service of Process
[a05-2917_1ex10d10.htm#Section12_22_135844]

 

 

 

 

SECTION 12.23 [a05-2917_1ex10d10.htm#Section12_23_135856]

Waiver of Punitive and Consequential Damages
[a05-2917_1ex10d10.htm#Section12_23_135856]

 

 

 

 

SECTION 12.24 [a05-2917_1ex10d10.htm#Section12_24_135858]

Written Credit Agreements [a05-2917_1ex10d10.htm#Section12_24_135858]

 

 

vi

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

 

LOAN AGREEMENT

 

This Loan Agreement (this “Agreement”) is made and entered into as of January
27, 2005, by and between COMSTOCK PENDERBROOK, L.C., a Virginia limited
liability company (“Borrower”) and CORUS BANK, N.A. (“Lender”).

 

R E C I T A L S

 

Borrower hereby represents, warrants and covenants to Lender as follows:

 

I.              Borrower.  Borrower is a Virginia limited liability company
which is wholly-owned and controlled by Comstock Homebuilding Companies, Inc., a
Delaware corporation (“Comstock”) and Comstock is the sole member and manager of
Borrower as set forth on Exhibit D attached hereto.

 

II.            The Land.  Borrower owns, or will own as of the Closing Date, in
fee simple that certain parcel of real property commonly known as Fair Oaks
Penderbrook, as more particularly described on Exhibit A attached hereto, and
all easements, licenses, agreements, rights, hereditaments and privileges
appurtenant to that parcel of real property (the “Land”).  The Land is located
at 3905 Penderview Drive in Fairfax, Virginia.

 

III.           The Project.  The existing improvements on the Land consist of an
18-building apartment complex (the “Building”) with 424 units comprising no less
than 327,396 square feet of net saleable space (collectively, “Residential
Units”) and no less than 637 parking spaces (collectively, “Parking Units”). 
The net saleable square footage shall be measured from the outside of exterior
walls and from the middle of walls separating Residential Units and shall
exclude balconies, hallways and all common areas.  The Building, all other
improvements and construction to be made to the Land, and all fixtures,
machinery, furnishings, equipment, supplies, and all other property of any kind
installed or used at the Land are collectively called the “Project”.

 

IV.           The Property.  The Land and Project are collectively called the
“Property”.

 

V.            The Loan.  Borrower desires to arrange financing for the purpose
of providing funds for the acquisition of the Property, conversion of the
Project to condominiums and for certain other Project expenses specified in this
Agreement. Lender has agreed to lend to Borrower and Borrower has agreed to
borrow an amount not to exceed $67,000,000 (the “Loan”), on the terms and
conditions set forth in this Agreement.

 

THEREFORE, in consideration of the foregoing and of the various agreements set
forth in this Agreement, Lender and Borrower agree as follows:

 

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

 

ARTICLE I

 

DEFINITIONS

 

SECTION 1.1                  DEFINITION OF TERMS USED IN THIS AGREEMENT.  UNLESS
THE CONTEXT SHALL OTHERWISE REQUIRE, CAPITALIZED TERMS USED AND NOT DEFINED
HEREIN SHALL HAVE THE MEANINGS ASSIGNED THERETO IN APPENDIX A ATTACHED HERETO
FOR ALL PURPOSES OF THIS AGREEMENT.  THE RULES OF INTERPRETATION SET FORTH IN
APPENDIX A TO THIS AGREEMENT SHALL APPLY TO THIS AGREEMENT AND ALL OF THE OTHER
LOAN DOCUMENTS.

 

ARTICLE II

 

BASIC LOAN TERMS

 

SECTION 2.1                  THE LOAN.  SUBJECT TO THE TERMS AND CONDITIONS OF
THIS AGREEMENT, LENDER AGREES TO LEND AND BORROWER AGREES TO BORROW SUMS UP TO
THE MAXIMUM AMOUNT OF THE LOAN.  THE LOAN WILL BE USED FOR THE ACQUISITION,
RENOVATION AND CONVERSION OF THE PROJECT INTO CONDOMINIUMS AND OTHER PROJECT
COSTS AS SET FORTH IN THE PROJECT BUDGET OR ELSEWHERE IN THIS AGREEMENT.  THE
LOAN IS EVIDENCED BY THE NOTE.  THE LOAN SHALL BEAR INTEREST AS SET FORTH IN THE
NOTE.  ALL DISBURSEMENTS MADE BY LENDER PURSUANT TO THE TERMS OF THIS AGREEMENT
SHALL BE ADDED TO THE OUTSTANDING PRINCIPAL BALANCE OF THE NOTE.

 

SECTION 2.2                  MATURITY DATE.  BORROWER WILL MAKE PAYMENT IN FULL
OF ALL UNPAID PRINCIPAL AND INTEREST ON THE NOTE AND ALL OTHER AMOUNTS OWING IN
CONNECTION WITH THE LOAN ON THE MATURITY DATE, OR EARLIER UPON ACCELERATION OF
THE LOAN.

 

SECTION 2.3                  LOAN FEES.  IN CONSIDERATION OF LENDER’S MAKING THE
LOAN TO BORROWER (AND IN ADDITION TO OTHER AMOUNTS PAYABLE UNDER THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS), BORROWER SHALL PAY TO LENDER A FEE IN AN
AGGREGATE AMOUNT EQUAL TO $670,000, OF WHICH: (A) $50,000 (THE “APPLICATION
FEE”) WAS PAID (AND LENDER HEREBY ACKNOWLEDGES RECEIPT) UPON ISSUANCE OF THE
APPLICATION LETTER; (B) $150,000 (THE “COMMITMENT FEE”) SHALL BE DUE AND PAYABLE
UPON BORROWER’S ACCEPTANCE OF THE COMMITMENT LETTER; AND (C) $470,000 SHALL BE
DUE AND PAYABLE ON THE CLOSING DATE (THE “CLOSING FEE”, THE APPLICATION FEE, THE
COMMITMENT FEE AND THE CLOSING FEE, COLLECTIVELY, THE “LOAN FEES”) AND SHALL BE
REFERRED TO AS THE LOAN FEE ON THE PROJECT BUDGET ATTACHED HERETO AS EXHIBIT B).

 

SECTION 2.4                  LOAN EXPENSES.

 

(A)           BORROWER SHALL PAY ALL FEES, COSTS AND EXPENSES PAID OR INCURRED
BY LENDER IN CONNECTION WITH THE LOAN, INCLUDING:  (I) ALL COSTS OF CLOSING,
ADMINISTERING AND ENFORCING THE LOAN, INCLUDING ALL UNPAID LOAN FEES; (II) ALL
COSTS OF PREPARATION, NEGOTIATION AND EXECUTION OF THE LOAN DOCUMENTS AND ALL
CLOSING OR LOAN ADMINISTRATION DOCUMENTS; (III) ALL COSTS OF THE TITLE
COMMITMENT, THE TITLE POLICY, DATE DOWNS TO ANY EXISTING TITLE COMMITMENT OR
TITLE POLICY AND ANY AND ALL ENDORSEMENTS TO ANY OF THE FOREGOING, THE SURVEY
AND ANY AND ALL ADDITIONS OR UPDATES TO THE SURVEY, ESCROW CHARGES, TITLE
CHARGES, UCC, TAX LIEN AND JUDGMENT AND ALL SIMILAR SEARCHES AND REPORTS WHICH
LENDER MAY REQUIRE IN ASSESSING THE STATUS OF THE SECURITY FOR THE LOAN IN EACH

 

2

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

 

of the foregoing cases, as such items may be required from time to time in the
discretion of Lender; (iv) all fees and expenses of any consultants engaged by
Lender in connection with this Loan, including cost-estimators, construction
inspectors, consulting architects, appraisers, insurance consultants,
environmental consultants, investigators and Lender’s Project Consultant; (v)
all Project Costs; (vi) brokerage commissions (if any); (vii) recording and
filing fees, and taxes, levies or fees required to be paid with respect to the
Note, the Deed of Trust or any other of the Loan Documents or the filing or
recordation thereof, even if such taxes, levies or fees are levied or assessed
against, or under applicable Laws are to be borne by, Lender; and (viii) all of
Lender’s travel and lodging costs relating to Property site inspections.  With
respect to travel expenses, airfare for each officer or analyst who inspects the
Project as part of Lender’s due diligence will be charged to Borrower.  If
Lender employees utilize a commercial airline, the amount charged will be the
actual expense incurred.  In the event Lender utilizes a private aircraft, the
amount charged will be $800 per individual.

 

(B)           BORROWER SHALL ALSO PAY ALL REASONABLE FEES AND DISBURSEMENTS OF
LENDER’S ATTORNEYS (WHETHER CHARGED BY OUTSIDE OR “IN-HOUSE” COUNSEL) IN
CONNECTION WITH THE LOAN, INCLUDING FEES AND DISBURSEMENTS RELATED TO: (I)
PREPARING AND NEGOTIATING DOCUMENTATION FOR THE LOAN; (II) LOAN ADMINISTRATION
ITEMS (SUCH AS REVIEWING ITEMS TO BE APPROVED DURING THE TERM OF THE LOAN);
(III) ENFORCING OR EXERCISING LENDER’S RIGHTS OR REMEDIES CONNECTED WITH THE
LOAN; AND (IV) ANY LITIGATION OR THREATENED LITIGATION OR THE PREPARATION
THEREFOR WHICH IN ANY WAY WHATSOEVER RELATES TO THE LOAN, THE LOAN DOCUMENTS OR
THE PROPERTY. THE TERMS “ATTORNEYS FEES,” “LEGAL FEES AND EXPENSES” OR OTHER
TERMS OF SUCH IMPORT WHETHER USED HEREIN OR IN ANY OTHER LOAN DOCUMENT SHALL
INCLUDE, WITHOUT LIMITATION, THE FEES CHARGED BY LENDER FOR ITS IN-HOUSE
COUNSEL, PROVIDED SUCH FEES ARE WITHIN THE RANGE OF FEES CHARGED BY ATTORNEYS OF
SIMILAR EXPERIENCE AT MEDIUM TO LARGE SIZED LAW FIRMS LOCATED IN THE CITY OF
CHICAGO, ILLINOIS.

 

(C)           ALL AMOUNTS PAYABLE BY BORROWER UNDER THIS SECTION 2.4 WHICH ARE
KNOWN AS OF THE CLOSING DATE SHALL, UNLESS LENDER AGREES OTHERWISE, BE PAID BY
BORROWER, AS A CONDITION TO THE CLOSING OF THE LOAN.  OTHERWISE ALL AMOUNTS
PAYABLE UNDER THIS SECTION 2.4 SHALL BE: (I) PAYABLE UPON DEMAND, (II) SHALL
BEAR INTEREST AS PROVIDED IN THE NOTE FOR SUMS ADVANCED UNDER THIS AGREEMENT
FROM THE DATE OF DEMAND UNTIL PAYMENT IN FULL AND (III) SHALL BE A SECURED
OBLIGATION UNDER THIS AGREEMENT, SECURED BY THE DEED OF TRUST AND OTHER LOAN
DOCUMENTS.  BORROWER HEREBY AUTHORIZES LENDER TO DEDUCT THE SAME FROM LOAN
PROCEEDS AS THEY ARE DISBURSED.  IF THE ACTUAL AMOUNT OF CHARGES ARE NOT
ASCERTAINABLE AS OF THE CLOSING DATE, BORROWER HEREBY AUTHORIZES LENDER TO
CHARGE ANY APPLICABLE LINE ITEM OF THE PROJECT BUDGET TO PAY OR TO REIMBURSE
LENDER FOR ANY AMOUNTS PAYABLE UNDER THIS SECTION 2.4 AND BORROWER SHALL PAY ON
DEMAND ANY EXCESS MONIES DUE.  ANY SUCH DISBURSEMENT, IF MADE, SHALL BE ADDED TO
THE OUTSTANDING PRINCIPAL BALANCE OF THE NOTE.  THE AUTHORIZATION HEREBY GRANTED
SHALL NOT OBLIGATE LENDER TO MAKE SUCH DISBURSEMENTS.

 

SECTION 2.5                  LOAN DOCUMENTS.  THE LOAN SHALL BE EVIDENCED AND
SECURED BY THE LOAN DOCUMENTS.

 

SECTION 2.6                  BORROWER’S EQUITY.  ON OR PRIOR TO THE CLOSING
DATE, BORROWER SHALL FURNISH TO LENDER EVIDENCE ESTABLISHING TO LENDER’S SOLE
SATISFACTION THAT BORROWER HAS INVESTED EIGHTEEN MILLION ONE HUNDRED THIRTY-FIVE
THOUSAND AND NO/100 DOLLARS ($18,135,000) TO PAY FOR APPROVED PROJECT COSTS
CONTAINED IN THE PROJECT BUDGET (“BORROWER’S MINIMUM EQUITY

 

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Investment”).  Borrower’s Minimum Equity Investment shall be: (i) subject to
such verification as requested by Lender in its sole discretion and (ii) subject
to increases as a result of any increases to the Project Budget.  In addition,
Borrower shall make additional equity contributions from time to time as may be
required to keep the Loan In Balance as required in Section 6.3 (“Borrower’s
Additional Equity”; Borrower’s Minimum Equity Investment and Borrower’s
Additional Equity are collectively referred to herein as “Borrower’s Equity”).
It is understood and agreed that Lender shall not be required to disburse any
proceeds of the Loan which shall be used to reimburse Borrower for Borrower’s
Equity.  In the event Borrower or any other party invests more than Borrower’s
Minimum Equity Investment, the amount of the Loan shall be permanently reduced
by the amount of such excess deposit unless either: (x) such amount is
Borrower’s Additional Equity required to be invested pursuant to Section 6.3 and
is used in accordance with the terms thereof, or (y) Borrower delivers to Lender
a written request for a reimbursement of such excess within thirty (30) days of
such excess investment, but in no event shall a request be required sooner than
thirty (30) days after the Closing Date.  In order to qualify to Borrower’s
Equity, Borrower must receive the Borrower’s Minimum Equity Investment as a
contribution to capital from Comstock.  Comstock is also referred to herein as a
“Contributor”.  Borrower may not be indebted to any of the Contributors or any
other entities for the contribution to capital.  Any contributors of equity
shall be subordinate to Lender and to general unsecured creditors of Borrower
and, if requested by Lender, shall execute a subordination agreement evidencing
such subordination in form and substance satisfactory to Lender in its sole
discretion.

 

SECTION 2.7                  VOLUNTARY PREPAYMENT.  IN THE EVENT BORROWER REPAYS
THE LOAN IN WHOLE OR IN PART PRIOR TO THE MATURITY DATE FROM A SOURCE OTHER THAN
UNIT RELEASE PAYMENTS, BORROWER SHALL PAY LENDER A PREPAYMENT FEE IN AN AMOUNT
EQUAL TO TWO PERCENT (2%) OF THE AMOUNT BEING PREPAID OR, IN THE EVENT OF
PREPAYMENT IN FULL, WHETHER BY ACCELERATION OF OTHERWISE, TWO PERCENT (2%) OF
THE AMOUNT PREPAID PLUS ANY UNFUNDED COMMITMENT UNDER THE LOAN (“PREPAYMENT
FEE”).  THE PREPAYMENT FEE PAYABLE PURSUANT TO THIS SECTION SHALL BE IN ADDITION
TO ALL OTHER SECURED OBLIGATIONS (INCLUDING COSTS AND THE EXIT FEE) DUE PURSUANT
TO THE TERMS HEREOF.  THE PREPAYMENT FEE SHALL BE APPLICABLE TO ALL PREPAYMENTS
OF PRINCIPAL, FROM ANY SOURCE OF FUNDS (OTHER THAN UNIT RELEASE PAYMENTS) OR
CAUSE OF PREPAYMENT, INCLUDING BUT NOT LIMITED TO VOLUNTARY PREPAYMENTS,
MANDATORY PAYMENTS MADE AFTER AN EVENT OF DEFAULT AND ACCELERATION (OR SHALL BE
INCLUDED AS PRINCIPAL DUE IN THE EVENT OF A JUDGMENT OF FORECLOSURE), AND
PAYMENTS MADE BY GUARANTOR OR ANY OTHER PERSON PURSUANT TO THE ENVIRONMENTAL
INDEMNITY AGREEMENT, THE GUARANTY OR OTHERWISE.  ANY AMOUNTS PREPAID MAY NOT BE
REBORROWED.

 

SECTION 2.8                  EXIT FEE.  IN CONSIDERATION OF LENDER’S MAKING THE
LOAN TO BORROWER (AND IN ADDITION TO OTHER AMOUNTS PAYABLE UNDER THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS), BORROWER SHALL PAY TO LENDER A FEE (THE “EXIT
FEE”) EQUAL TO $335,000.  THE EXIT FEE WILL BE DUE AND PAYABLE AS FOLLOWS:  (A)
$5,000 PER INDIVIDUAL RESIDENTIAL UNIT (THE “INDIVIDUAL UNIT EXIT FEE”) SHALL BE
DUE AND PAYABLE IN CONNECTION WITH THE SALE AND RELEASE OF EACH RESIDENTIAL UNIT
AND (B) A FINAL PAYMENT, EQUAL TO THE DIFFERENCE BETWEEN THE EXIT FEE LESS THE
SUM OF ANY PREVIOUSLY PAID INDIVIDUAL UNIT EXIT FEES, SHALL BE DUE AND PAYABLE
AT THE EARLIER OF (I) PAYMENT IN FULL OF THE LOAN FOR ANY REASON (WHICH SHALL BE
DEEMED TO INCLUDE BORROWER’S CANCELLATION OR TERMINATION OF THE LOAN PRIOR TO
THE FUNDING OF ANY ADVANCES); OR (II) AT LOAN MATURITY, WHETHER BY ACCELERATION
OR OTHERWISE.  IN NO EVENT, HOWEVER, SHALL THE AGGREGATE SUM OF INDIVIDUAL UNIT
EXIT FEES EXCEED THE AGGREGATE AMOUNT OF THE EXIT FEE.

 

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ARTICLE III

 

REPRESENTATIONS AND WARRANTIES

 

The Recitals set forth above are made a part of this Article and constitute
representations, warranties and covenants of Borrower.  Borrower further
represents, warrants, covenants, and agrees as follows:

 

SECTION 3.1                  STATUS OF DOCUMENTS.  EACH OF (A) THE
ORGANIZATIONAL DOCUMENTS AND (B) THE MANAGEMENT AGREEMENT ARE IN FULL FORCE AND
EFFECT AND ARE FREE FROM ANY DEFAULT ON THE PART OF BORROWER.  SUCH DOCUMENTS
ARE HEREINAFTER SOMETIMES COLLECTIVELY CALLED THE “BASIC AGREEMENTS”.  BORROWER
HAS PROVIDED LENDER WITH TRUE, CORRECT AND COMPLETE COPIES OF THE BASIC
AGREEMENTS WHICH ARE IN EFFECT AS OF THE CLOSING DATE.

 

SECTION 3.2                  DUE ORGANIZATION; AUTHORITY.

 

(A)           BORROWER IS A LIMITED LIABILITY COMPANY QUALIFIED TO DO BUSINESS
AND IN GOOD STANDING UNDER THE LAWS OF THE COMMONWEALTH OF VIRGINIA AND ANY
OTHER JURISDICTION IN WHICH BORROWER IS REQUIRED TO QUALIFY TO DO BUSINESS AND
MAINTAIN ITS GOOD STANDING THEREIN.  BORROWER HAS BEEN DULY AUTHORIZED BY ALL
NECESSARY CORPORATE, LIMITED LIABILITY COMPANY OR PARTNERSHIP ACTION AND HAS ALL
REQUISITE POWER AND AUTHORITY TO CARRY ON ITS BUSINESS, TO HOLD TITLE TO THE
PROPERTY, TO EXECUTE, DELIVER, BORROW MONEY UNDER AND OTHERWISE PERFORM THIS
AGREEMENT AND THE LOAN DOCUMENTS, AND TO CONSUMMATE THE TRANSACTIONS
CONTEMPLATED THEREBY.

 

(B)           EACH BORROWER PARTY IS A CORPORATION, PARTNERSHIP OR LIMITED
LIABILITY COMPANY, AS THE CASE MAY BE, DULY ORGANIZED AND VALIDLY EXISTING IN
THE STATE OF ITS INCORPORATION OR FORMATION (AS THE CASE MAY BE), AND IS
QUALIFIED TO DO BUSINESS AND IN GOOD STANDING UNDER THE LAWS OF THE STATE WHERE
THE PROPERTY IS LOCATED AND ANY OTHER JURISDICTION IN WHICH SUCH BORROWER PARTY
IS REQUIRED TO QUALIFY TO DO BUSINESS AND MAINTAIN ITS GOOD STANDING THEREIN. 
EACH BORROWER PARTY HAS BEEN DULY AUTHORIZED BY ALL NECESSARY CORPORATE,
PARTNERSHIP OR LIMITED LIABILITY COMPANY ACTION (AS THE CASE MAY BE) AND HAS ALL
REQUISITE CORPORATE, PARTNERSHIP OR LIMITED LIABILITY COMPANY POWER AND
AUTHORITY TO CARRY ON ITS BUSINESS AND TO EXECUTE, DELIVER AND PERFORM, FOR
ITSELF AND ON BEHALF OF BORROWER THE LOAN DOCUMENTS ENTERED INTO BY SUCH
BORROWER PARTY EITHER FOR ITSELF OR ON BEHALF OF BORROWER IN CONNECTION WITH THE
LOAN.

 

SECTION 3.3                  ENFORCEABILITY.

 

(A)           THIS AGREEMENT IS, AND ALL OTHER LOAN DOCUMENTS EXECUTED BY
BORROWER, ON THE EXECUTION AND DELIVERY THEREOF, WILL BE, THE LEGAL, VALID AND
BINDING OBLIGATION OF BORROWER ENFORCEABLE IN ACCORDANCE WITH THEIR TERMS;

 

(B)           THIS AGREEMENT IS, AND ALL OTHER LOAN DOCUMENTS EXECUTED BY EACH
BORROWER PARTY ON BEHALF OF BORROWER, ON THE EXECUTION AND DELIVERY THEREOF,
WILL BE, THE LEGAL, VALID AND BINDING OBLIGATION OF SUCH BORROWER PARTY
ENFORCEABLE IN ACCORDANCE WITH THEIR TERMS; AND

 

(C)           THE GUARANTY, THE ENVIRONMENTAL INDEMNITY AND EACH OTHER LOAN
DOCUMENT EXECUTED BY GUARANTOR, ON THE EXECUTION AND DELIVERY THEREOF, WILL BE,
THE LEGAL, VALID AND BINDING OBLIGATION OF GUARANTOR ENFORCEABLE IN ACCORDANCE
WITH THEIR TERMS.

 

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SECTION 3.4                  PENDING LITIGATION.  EXCEPT AS DISCLOSED ON EXHIBIT
C ATTACHED TO THIS AGREEMENT, NO ACTIONS, SUITS, OR PROCEEDINGS (INCLUDING
CONDEMNATION OR EMINENT DOMAIN PROCEEDINGS) ARE PENDING OR, TO BORROWER’S
KNOWLEDGE, THREATENED AGAINST OR AFFECTING BORROWER, ANY BORROWER PARTY,
GUARANTOR, THE PROPERTY OR ANY OTHER ASSETS SUBJECT TO THE LOAN DOCUMENTS.  NONE
OF THE ITEMS (IF ANY) LISTED ON EXHIBIT C OR DISCLOSED TO LENDER IN WRITING
DURING THE TERM OF THE LOAN WILL HAVE A MATERIAL ADVERSE EFFECT.

 

SECTION 3.5                  NO VIOLATION.  THERE EXISTS NO VIOLATION, OR
DEFAULT WITH RESPECT TO ANY OF THE BASIC AGREEMENTS OR OF ANY MORTGAGE, DEED OF
TRUST, INDENTURE OR ANY OTHER MATERIAL CONTRACT, AGREEMENT OR INSTRUMENT
APPLICABLE TO BORROWER, GUARANTOR OR THE PROPERTY, OR BY WHICH ANY OF THE
FOREGOING IS BOUND.  THE EXECUTION, DELIVERY AND PERFORMANCE OF THE LOAN
DOCUMENTS WILL NOT RESULT IN ANY SUCH VIOLATION, CONFLICT OR DEFAULT, OR RESULT
IN THE CREATION OF ANY LIEN ON ANY OF THE ASSETS OF BORROWER, ANY BORROWER PARTY
OR GUARANTOR, OTHER THAN THE PERMITTED EXCEPTIONS.

 

SECTION 3.6                  NO CONFLICT.  THE LOAN AND ALL OTHER TRANSACTIONS
CONTEMPLATED BY THE LOAN DOCUMENTS WILL NOT CONFLICT WITH OR RESULT IN A BREACH
OR VIOLATION OF ANY GOVERNMENTAL APPROVAL APPLICABLE TO ANY OF BORROWER, ANY
BORROWER PARTY, GUARANTOR OR THE PROPERTY.

 

SECTION 3.7                  NO CONSENT.  NO CONSENT, APPROVAL, OR AUTHORIZATION
OF, OR REGISTRATION, DECLARATION OR FILING WITH ANY GOVERNMENTAL AUTHORITY IS
REQUIRED AND HAS NOT BEEN OBTAINED IN CONNECTION WITH THE EXECUTION, DELIVERY
AND PERFORMANCE BY BORROWER, ANY BORROWER PARTY OR GUARANTOR OF EACH OF THE LOAN
DOCUMENTS TO WHICH IT IS A PARTY OR ANY OF THE TRANSACTIONS CONTEMPLATED IN THE
LOAN DOCUMENTS.

 

SECTION 3.8                  TRUTH OF FINANCIAL STATEMENTS; FINANCIAL CONDITION
WARRANTY.  ANY FINANCIAL STATEMENTS DELIVERED TO LENDER BY BORROWER, ANY
BORROWER PARTY OR GUARANTOR PRIOR TO OR AFTER THE DATE OF THIS AGREEMENT: (A)
ARE MATERIALLY TRUE, CORRECT AND COMPLETE AND (B) FAIRLY PRESENT IN A MANNER
INTERNALLY CONSISTENT AND CONSISTENT WITH PRIOR STATEMENTS SUBMITTED TO LENDER
THE RESPECTIVE FINANCIAL CONDITIONS OF THE SUBJECTS THEREOF AND FOR THE PERIODS
REFERENCED THEREIN.  ALL CHARGES PAYABLE WITH RESPECT TO THE PROJECT ARE CURRENT
AND NOT IN DEFAULT.  BORROWER FURTHER WARRANTS THAT EXCEPT AS DISCLOSED TO
LENDER IN WRITING, NEITHER BORROWER, ANY GUARANTOR, ANY MANAGER/DIRECTOR OF
BORROWER, ANY EQUITY OWNER OF BORROWER NOR ANY OF THEIR RESPECTIVE AFFILIATES:
(I) HAS EVER BEEN THE SUBJECT OF ANY CRIMINAL PROCEEDINGS, OTHER THAN MINOR
TRAFFIC VIOLATIONS; (II) HAS EVER BEEN THE OWNER, WHETHER DIRECTLY OR
INDIRECTLY, OF A PARCEL OF REAL PROPERTY WHICH WAS THE SUBJECT OF FORECLOSURE
PROCEEDINGS (WHETHER JUDICIAL OR NON JUDICIAL); (III) HAS EVER BEEN A PARTY
DIRECTLY OR INDIRECTLY, TO A DEED IN LIEU OF FORECLOSURE; AND (IV) IS NOT
CURRENTLY A PARTY TO ANY MATERIAL PENDING LITIGATION OR ADMINISTRATIVE
PROCEEDINGS, OR SUBJECT TO ANY JUDICIAL OR NON-JUDICIAL ORDERS OR CONSENT
AGREEMENTS.

 

SECTION 3.9                  ACCESS.  THE PROPERTY IS CONTIGUOUS TO PUBLIC
STREETS, ROADS OR HIGHWAYS, AND VEHICULAR AND PEDESTRIAN ACCESS FROM THE
PROPERTY IS PERMITTED TO SUCH STREETS, ROADS OR HIGHWAYS.

 

SECTION 3.10                PROJECT BUDGET.  THE PROJECT BUDGET IN GOOD FAITH
ESTIMATES ALL MATERIAL COSTS AND EXPENSES WHICH WILL BE INCURRED BY BORROWER IN
THE ACQUISITION, DEVELOPMENT, RENOVATION, CONVERSION AND OPERATION OF THE
PROJECT THROUGH THE MATURITY DATE.

 

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SECTION 3.11                LEASES.  ALL LEASES ARE IN FULL FORCE AND EFFECT AND
ARE FREE FROM ANY DEFAULT ON THE PART OF BORROWER.

 

SECTION 3.12                BUSINESS PURPOSE.  BORROWER WILL USE THE PROCEEDS OF
THE LOAN SOLELY FOR BUSINESS PURPOSES.

 

SECTION 3.13                MATERIAL FACTS.  NEITHER THIS AGREEMENT, NOR THE
OTHER LOAN DOCUMENTS, NOR ANY OTHER DOCUMENT, FINANCIAL INFORMATION, CERTIFICATE
OR STATEMENT REQUIRED BY ANY LOAN DOCUMENT TO BE FURNISHED TO LENDER BY
BORROWER, ANY BORROWER PARTY OR THE GUARANTOR CONTAINS, OR WILL CONTAIN, AT THE
TIME OF SUBMISSION, ANY UNTRUE STATEMENT OF A MATERIAL FACT OR INTENTIONALLY
OMITS TO STATE A MATERIAL FACT NECESSARY TO MAKE THE STATEMENTS THEREIN, IN THE
LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY ARE MADE, NOT MISLEADING.

 

SECTION 3.14                TITLE.  BORROWER HAS GOOD AND MARKETABLE FEE TITLE
TO THE PROPERTY, SUBJECT ONLY TO THE PERMITTED EXCEPTIONS.

 

SECTION 3.15                BROKERAGE FEES AND COMMISSIONS.  NEITHER BORROWER
NOR ANY PERSON CLAIMING BY, THROUGH OR UNDER BORROWER, HAS DEALT WITH ANY PERSON
IN CONNECTION WITH THE LOAN IN A MANNER THAT WOULD ENTITLE SUCH PERSON TO ANY
BROKERAGE FEE OR COMMISSION.

 

SECTION 3.16                CONDITIONS PREVENTING COMPLIANCE.  TO THE KNOWLEDGE
OF BORROWER, NO CONDITIONS EXIST WHICH WOULD PREVENT BORROWER, ANY BORROWER
PARTY OR GUARANTOR FROM COMPLYING WITH THE PROVISIONS OF THE LOAN DOCUMENTS
WITHIN THE TIME LIMITS SET FORTH IN THE LOAN DOCUMENTS.

 

SECTION 3.17                TAXES.  EACH OF BORROWER, GUARANTOR AND EACH
BORROWER PARTY HAS FILED ALL TAX RETURNS AND REPORTS REQUIRED BY LAW TO HAVE
BEEN FILED BY IT, AND EACH HAS PAID ALL TAXES, ASSESSMENTS AND GOVERNMENTAL
CHARGES LEVIED UPON EACH OF THEM AND ANY OF ITS ASSETS WHICH ARE DUE AND
PAYABLE.

 

SECTION 3.18                ERISA.  NEITHER BORROWER, ANY BORROWER PARTY, NOR
GUARANTOR IS AN “EMPLOYEE BENEFIT PLAN” (WITHIN THE MEANING OF SECTION 3(3) OF
ERISA) TO WHICH ERISA APPLIES AND NEITHER BORROWER’S, ANY BORROWER PARTY’S NOR
GUARANTOR’S ASSETS CONSTITUTE ASSETS OF ANY SUCH PLAN.

 

SECTION 3.19                REGULATIONS G, U AND X.  BORROWER IS NOT ENGAGED IN
THE BUSINESS OF EXTENDING CREDIT FOR THE PURPOSE OF PURCHASING OR CARRYING
MARGIN STOCK, AND NO PROCEEDS OF THE LOAN WILL BE USED FOR A PURPOSE WHICH
VIOLATES, OR WOULD BE INCONSISTENT WITH FEDERAL RESERVE SYSTEM BOARD OF
GOVERNORS’ BOARD REGULATIONS G, U OR X.  TERMS FOR WHICH MEANINGS ARE PROVIDED
IN FEDERAL RESERVE SYSTEM BOARD OF GOVERNORS’ BOARD REGULATIONS G, U OR X OR ANY
REGULATIONS SUBSTITUTED THEREFOR, AS FROM TIME TO TIME IN EFFECT, ARE USED IN
THIS SECTION WITH SUCH MEANINGS.

 

SECTION 3.20                GOVERNMENT REGULATION.  NEITHER BORROWER, ANY
BORROWER PARTY NOR GUARANTOR IS: (I) AN “INVESTMENT COMPANY” OR A COMPANY
“CONTROLLED” BY AN “INVESTMENT COMPANY” WITHIN THE MEANING OF THE INVESTMENT
COMPANY ACT OF 1940, AS AMENDED; (II) A “HOLDING COMPANY” OR A “SUBSIDIARY
COMPANY” OF A “HOLDING COMPANY” OR AN “AFFILIATE” OF EITHER A “HOLDING COMPANY”
OR A “SUBSIDIARY COMPANY” WITHIN THE MEANING OF THE PUBLIC UTILITY

 

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Holding Company Act of 1935, as amended; or (iii) subject to any other federal
or State Law or regulation which purports to restrict or regulate its ability to
borrow money.

 

SECTION 3.21                PRINCIPAL PLACE OF BUSINESS AND CHIEF EXECUTIVE
OFFICE.  THE PRINCIPAL PLACE OF BUSINESS AND CHIEF EXECUTIVE OFFICE (AS SUCH
TERM IS DEFINED IN ARTICLE 9 OF THE UCC) OF BORROWER IS LOCATED AT C/O COMSTOCK
HOMEBUILDING COMPANIES, INC., 11465 SUNSET HILLS ROAD, SUITE 510, RESTON,
VIRGINIA 20190.  THE STATE OF ORGANIZATION OF BORROWER IS VIRGINIA.  THE FEDERAL
EMPLOYMENT IDENTIFICATION NUMBER OF BORROWER IS [20-2176975] AND THE
ORGANIZATIONAL IDENTIFICATION NUMBER OF BORROWER, AS DESIGNATED BY THE
COMMONWEALTH OF VIRGINIA IS [S 139465-1].  BORROWER SHALL NOT CHANGE ITS STATE
OF ORGANIZATION WITHOUT LENDER’S PRIOR WRITTEN CONSENT.

 

SECTION 3.22                OWNERSHIP STRUCTURE.  THE OWNERSHIP STRUCTURE OF
BORROWER (INCLUDING THE OWNERSHIP INTERESTS) IS ACCURATELY SET FORTH ON EXHIBIT
D HERETO.

 

SECTION 3.23                PRIORITY AND PERFECTION.  AS OF THE CLOSING DATE,
LENDER HAS A FIRST PRIORITY, PERFECTED SECURITY INTEREST IN THE PROPERTY, IN
EACH ITEM THEREOF, AND IN EACH OTHER ITEM OF PROPERTY  (TANGIBLE OR INTANGIBLE)
GIVEN TO LENDER BY BORROWER OR GUARANTOR OR ANY OTHER PARTY PURSUANT TO ANY OF
THE LOAN DOCUMENTS AS SECURITY FOR THE LOAN. FROM AND AFTER THE CLOSING DATE,
BORROWER WILL NOT TAKE ANY ACTION WHICH HAS ANY EFFECT ON LENDER’S FIRST
PRIORITY PERFECTED SECURITY INTEREST IN THE PROPERTY.

 

SECTION 3.24                CONDOMINIUM CONTRACTS.  UPON THE EXECUTION AND
DELIVERY THEREOF, ALL APPROVED CONDOMINIUM CONTRACTS SHALL BE IN FULL FORCE AND
EFFECT AND SHALL BE IN COMPLIANCE WITH SECTION 8.1.  NO EVENT OF DEFAULT, OR ANY
EVENT WHICH, WITH THE PASSAGE OF TIME OR THE GIVING OF NOTICE, OR BOTH, WOULD
CONSTITUTE AN EVENT OF DEFAULT, HAS OCCURRED PURSUANT TO THE TERMS OF ANY OF THE
APPROVED CONDOMINIUM CONTRACTS, UPON THE EXECUTION AND DELIVERY THEREOF, ON THE
PART OF BORROWER OR, TO BORROWER’S KNOWLEDGE, THE OTHER PARTIES THERETO.

 

SECTION 3.25                CONDOMINIUM DOCUMENTS.  BORROWER HAS DELIVERED (OR
WILL DELIVER) TO LENDER TRUE, CORRECT AND COMPLETE COPIES OF EACH CONDOMINIUM
DOCUMENT AND EACH CONDOMINIUM DOCUMENT IS (OR WILL BE) IN COMPLIANCE WITH
APPLICABLE LAWS.

 

SECTION 3.26                BORROWER’S EQUITY; ADVANCES.  BORROWER HAS USED (OR
WILL USE) ALL OF BORROWER’S MINIMUM EQUITY INVESTMENT, ALL OF BORROWER’S
ADDITIONAL EQUITY AND ALL ADVANCES SOLELY FOR PURPOSES SET FORTH IN, AND
CONSISTENT WITH, THE PROJECT BUDGET.

 

SECTION 3.27                PATRIOT ACT.  NEITHER BORROWER, GUARANTOR, NOR ANY
OF THEIR RESPECTIVE OFFICERS, DIRECTORS, SHAREHOLDERS, PARTNERS, MEMBERS OR
AFFILIATES (INCLUDING THE INDIRECT HOLDERS OF EQUITY INTERESTS IN BORROWER OR
GUARANTOR) IS OR WILL BE AN ENTITY OR PERSON: (I) THAT IS LISTED IN THE ANNEX
TO, OR IS OTHERWISE SUBJECT TO THE PROVISIONS OF EXECUTIVE ORDER 13224 ISSUED ON
SEPTEMBER 24, 2001 (“EO13224”); (II) WHOSE NAME APPEARS ON THE UNITED STATES
TREASURY DEPARTMENT’S OFFICE OF FOREIGN ASSETS CONTROL (“OFAC”) MOST CURRENT
LIST OF “SPECIFICALLY DESIGNATED NATIONAL AND BLOCKED PERSONS” (WHICH LIST MAY
BE PUBLISHED FROM TIME TO TIME IN VARIOUS MEDIUMS INCLUDING, BUT NOT LIMITED TO,
THE OFAC WEBSITE, HTTP:WWW.TREAS.GOV/OFAC/T11SDN.PDF); (III) WHO COMMITS,
THREATENS TO COMMIT OR SUPPORTS “TERRORISM”, AS THAT TERM IS DEFINED IN EO13224;
OR (IV) WHO IS OTHERWISE AFFILIATED WITH ANY

 

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entity or person listed above (any and all parties or persons described in
clauses [i] – [iv] above are herein referred to as a “Prohibited Person”). 
Borrower covenants and agrees that neither Borrower, Guarantor, nor any of their
respective officers, directors, shareholders, partners, members or any
Affiliates (including the indirect holders of equity interests in Borrower or
Guarantor) will: (i) conduct any business, nor engage in any transaction or
dealing, with any Prohibited Person, including, but not limited to, the making
or receiving of any contribution of funds, goods, or services, to or for the
benefit of a Prohibited Person; or (ii) engage in or conspire to engage in any
transaction that evades or avoids, or has the purpose of evading or avoiding, or
attempts to violate, any of the prohibitions set forth in EO13224.  Borrower
further covenants and agrees to deliver (from time to time) to Lender any such
certification or other evidence as may be requested by Lender in its sole and
absolute discretion, confirming that: (i) neither Borrower, Guarantor, nor any
of their respective officers, directors, shareholders, partners, members or
Affiliates (including the indirect holders of equity interests in Borrower or
Guarantor) is a Prohibited Person; and (ii) neither Borrower, Guarantor, nor any
of their respective officers, directors, shareholders, partners, members or
Affiliates (including the indirect holders of equity interests in Borrower or
Guarantor) has engaged in any business, transaction or dealings with a
Prohibited Person, including, but not limited to, the making or receiving of any
contribution of funds, goods, or services, to or for the benefit of a Prohibited
Person.

 

SECTION 3.28                SOLVENCY.  BORROWER:  (I) IS NOW AND AT ALL TIMES
DURING THE TERM OF THIS AGREEMENT SHALL BE GENERALLY PAYING ITS DEBTS AS THEY
MATURE; (II) NOW OWNS, AND AT ALL TIMES DURING THE TERM OF THIS AGREEMENT SHALL
OWN, PROPERTY WHICH, AT A FAIR VALUATION, IS GREATER THAN THE SUM OF ITS DEBTS;
AND (III) NOW HAS AND AT ALL TIMES DURING THE TERM OF THIS AGREEMENT SHALL HAVE
CAPITAL SUFFICIENT TO CARRY ON ITS BUSINESS AND TRANSACTIONS AND ALL BUSINESS
TRANSACTIONS IN WHICH IT IS ABOUT TO ENGAGE.

 

SECTION 3.29                SINGLE PURPOSE ENTITY.  BORROWER SHALL REMAIN A
SINGLE PURPOSE ENTITY.

 

SECTION 3.30                INDEBTEDNESS.  BORROWER HAS AND SHALL HAVE NO
INDEBTEDNESS, OTHER THAN THE SECURED OBLIGATIONS EVIDENCED HEREBY OR
INDEBTEDNESS ARISING IN THE ORDINARY COURSE OF ITS BUSINESS (WHICH INDEBTEDNESS
IS NOT INDEBTEDNESS FOR BORROWED MONEY).

 

SECTION 3.31                REPRESENTATIONS AND WARRANTIES TO BE CONTINUING. 
ALL OF THE REPRESENTATIONS AND WARRANTIES IN THIS AGREEMENT SHALL BE TRUE,
CORRECT AND COMPLETE IN ALL RESPECTS AT THE CLOSING DATE AND THE DATE OF THE
INITIAL DISBURSEMENT, AND WILL CONTINUE TO BE TRUE, CORRECT AND COMPLETE IN ALL
RESPECTS THROUGHOUT THE TERM OF THE LOAN AS IF REMADE AT ALL TIMES AFTERWARDS. 
ALL REPRESENTATIONS AND WARRANTIES MADE IN THIS AGREEMENT, THE COMMITMENT
LETTER, THE LOAN DOCUMENTS OR IN ANY OTHER DOCUMENT DELIVERED TO LENDER BY OR ON
BEHALF OF BORROWER, ANY BORROWER PARTY OR GUARANTOR SHALL SURVIVE THE MAKING OF
THE LOAN AND SHALL CONTINUE IN FULL FORCE AND EFFECT AS LONG AS THERE REMAINS
UNPERFORMED ANY SECURED OBLIGATION TO LENDER UNDER ANY OF THE LOAN DOCUMENTS.

 

SECTION 3.32                ACKNOWLEDGMENT OF LENDER’S RELIANCE.  BORROWER
ACKNOWLEDGES THAT THE LOAN WILL BE MADE BY LENDER IN RELIANCE UPON THE
REPRESENTATIONS, WARRANTIES, AND AGREEMENTS CONTAINED IN THE LOAN DOCUMENTS OR
ANY CERTIFICATE DELIVERED TO LENDER PURSUANT TO

 

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the Loan Documents.  Lender shall be entitled to such reliance notwithstanding
any investigation which has been or will be conducted by Lender or on its
behalf.

 

ARTICLE IV

 

CLOSING DELIVERY CONDITIONS; CONDITIONS TO INITIAL DISBURSEMENT

 

SECTION 4.1                  CONDITIONS TO LOAN CLOSING; CLOSING DATE.  PRIOR TO
AND AS A CONDITION TO THE CLOSING OF THE LOAN AND DISBURSEMENT OF THE INITIAL
DISBURSEMENT, LENDER MUST HAVE RECEIVED AND APPROVED THE ITEMS SPECIFIED IN THIS
SECTION 4.1 ON OR BEFORE THE CLOSING DATE.  THESE ITEMS MUST BE FULLY EXECUTED
WHERE APPLICABLE, AND ALL SUBMISSIONS WHICH ARE NOT ORIGINALS MUST BE TRUE AND
COMPLETE COPIES OF THESE ITEMS AND IF REQUESTED BY LENDER, MUST BE SO CERTIFIED
BY BORROWER OR GUARANTOR OR ANY OF SUCH PARTIES (AS THE CASE MAY BE). IN THE
EVENT THAT LENDER AGREES TO CLOSE THE LOAN WITHOUT REQUIRING BORROWER TO HAVE
SATISFIED EACH AND EVERY CONDITION SET FORTH IN THIS SECTION 4.1 OR OTHERWISE
(IT BEING UNDERSTOOD THAT LENDER SHALL HAVE NO OBLIGATION TO DO SO), THEN EACH
AND EVERY CONDITION NOT SO SATISFIED AS OF THE CLOSING DATE SHALL BE A CONDITION
TO THE FUNDING OF ANY ADDITIONAL ADVANCE UNLESS AND UNTIL BORROWER SHALL HAVE
SATISFIED SUCH CONDITION OR LENDER SHALL HAVE EXPRESSLY AGREED IN WRITING TO
PERMANENTLY WAIVE SUCH CONDITION.

 

(A)           LOAN DOCUMENTS.  THE LOAN DOCUMENTS AND THE COMMITMENT LETTER.

 

(B)           UCC SEARCHES.  FEDERAL, STATE AND LOCAL TAX AND JUDGMENT LIEN
SEARCHES AND SEARCHES OF THE APPROPRIATE UNIFORM COMMERCIAL CODE FILING OFFICES
SHOWING NO LIENS AFFECTING THE PROPERTY OR BORROWER, OTHER THAN THE PERMITTED
EXCEPTIONS.

 

(C)           INSURANCE.  BORROWER SHALL PROVIDE, AT LEAST FOUR (4) BUSINESS
DAYS PRIOR TO THE CLOSING DATE, EVIDENCE THAT THE INSURANCE REQUIRED UNDER
SECTION 7.8 IS IN EFFECT.

 

(D)           FORMATION, AUTHORITY AND GOOD STANDING DOCUMENTS.  THE FOLLOWING
ITEMS: (I) EVIDENCE OF THE DUE ORGANIZATION OR INCORPORATION AND GOOD STANDING
OF BORROWER, ITS MEMBERS AND GUARANTOR (IF A LEGAL ENTITY), AS CERTIFIED BY THE
SECRETARY OF STATE OF SUCH PARTY’S STATE OF ORGANIZATION OR INCORPORATION, THE
SECRETARY OF STATE OF THE STATE WHERE THE PROPERTY IS LOCATED AND ANY OTHER
JURISDICTION WHERE SUCH PARTY IS REQUIRED TO QUALIFY TO DO BUSINESS AND MAINTAIN
ITS GOOD STANDING THEREIN; (II) TRUE, CORRECT AND COMPLETE COPIES OF ALL
ORGANIZATIONAL DOCUMENTS; AND (III) EVIDENCE OF THE DUE AUTHORIZATION OF THIS
TRANSACTION BY BORROWER, ITS MEMBERS AND GUARANTOR, INCLUDING, WITHOUT
LIMITATION, CORPORATE, PARTNERSHIP OR LIMITED LIABILITY COMPANY RESOLUTIONS
SPECIFICALLY AUTHORIZING THIS TRANSACTION AND INCUMBENCY CERTIFICATES WITH
ORIGINAL SPECIMEN SIGNATURES FOR THE OFFICERS SIGNING THE LOAN DOCUMENTS.  THE
FOREGOING ORGANIZATIONAL DOCUMENTS MUST DEMONSTRATE THAT THE OWNERSHIP,
MANAGEMENT AND CAPITAL STRUCTURE OF THE BORROWER IS CONSISTENT WITH RECITAL I OF
THIS AGREEMENT.

 

(E)           OPINIONS OF BORROWER’S AND GUARANTOR’S COUNSEL.  LEGAL OPINIONS
FROM BORROWER’S AND GUARANTOR’S COUNSEL, WHOSE IDENTITY MUST BE SATISFACTORY TO
LENDER, ADDRESSING CORPORATE, PARTNERSHIP AND LIMITED LIABILITY ORGANIZATION,
AUTHORITY AND GOOD STANDING, THE ENFORCEABILITY OF THE LOAN DOCUMENTS, USURY AND
SUCH OTHER MATTERS WHICH LENDER MAY REASONABLY  REQUEST.

 

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(F)            FINANCIAL STATEMENTS.  THE MOST CURRENT FINANCIAL STATEMENTS
AVAILABLE FOR BORROWER AND GUARANTOR, CERTIFIED AS REQUIRED IN AND MEETING THE
OTHER REQUIREMENTS OF SECTION 7.7.

 

(G)           REPRESENTATIONS.  ALL REPRESENTATIONS AND WARRANTIES OF BORROWER
CONTAINED IN THIS AGREEMENT AND IN ALL OF THE OTHER LOAN DOCUMENTS SHALL BE TRUE
AND CORRECT AS OF THE CLOSING DATE.

 

(H)           EVENT OF DEFAULT.  NO DEFAULT OR EVENT OF DEFAULT SHALL HAVE
OCCURRED AND BE CONTINUING.

 

(I)            ADVERSE CHANGE.  THERE SHALL BE NO MATERIAL ADVERSE CHANGE IN THE
FINANCIAL CONDITION OF BORROWER OR GUARANTOR OR THE CONDITION OF THE PROPERTY.

 

(J)            CASUALTY; CONDEMNATION.  NEITHER THE PROPERTY NOR ANY PART
THEREOF SHALL HAVE SUFFERED ANY CASUALTY OR BE SUBJECT TO ANY EXISTING OR
THREATENED CONDEMNATION OR TAKING BY EMINENT DOMAIN PROCEEDINGS OR OTHERWISE.

 

(K)           PENDING LITIGATION.  THERE SHALL BE NO PENDING OR THREATENED
LITIGATION AGAINST BORROWER, GUARANTOR OR THE PROPERTY KNOWN TO BORROWER OR ITS
COUNSEL.

 

(L)            COMMITMENT LETTER.  THERE SHALL HAVE BEEN FULL COMPLIANCE BY
BORROWER WITH ALL OF THE TERMS AND CONDITIONS OF THE APPLICATION LETTER AND THE
COMMITMENT LETTER.

 

(M)          COMPLIANCE WITH LAWS.  LENDER SHALL HAVE RECEIVED EVIDENCE
SATISFACTORY TO IT THAT THE PROPERTY IS IN COMPLIANCE WITH ALL LAWS (INCLUDING
ALL LOCAL, STATE AND FEDERAL ENVIRONMENTAL LAWS), INCLUDING A COPY OF THE FINAL
TRACT MAP OR OTHER GOVERNMENTAL APPROVAL BY EACH PLANNING COMMISSION OR OTHER
GOVERNMENTAL AUTHORITY WITH JURISDICTION OVER THE LAWFUL DEVELOPMENT OF THE
PROJECT, AND THAT THERE ARE NO CONDITIONS EXISTING CURRENTLY OR LIKELY TO EXIST
DURING THE TERM OF THE LOAN THAT REQUIRE OR ARE LIKELY TO REQUIRE CLEAN-UP,
REMOVAL OR OTHER REMEDIAL ACTION PURSUANT TO ANY OF THE AFORESAID ENVIRONMENTAL
LAWS.

 

(N)           APPRAISAL.  A CURRENT APPRAISAL OF THE PROPERTY ADDRESSED TO
LENDER, WHICH MUST BE ACCEPTABLE TO LENDER IN ITS SOLE DISCRETION. ACCEPTABILITY
SHALL BE PREDICATED UPON, AMONG OTHER THINGS: (A) A STATED “AS-IS” VALUE OF THE
PROPERTY OF NO LESS THAN $75,000,000, (B) A STATED “AS-COMPLETED” VALUE OF THE
PROJECT ON THE BASIS OF A GROSS RETAIL SELL-OUT AS CONDOMINIUMS OF NO LESS THAN
$99,000,000, (C) A STATED BULK SALE UPON COMPLETION VALUE FOR THE PROJECT AS
CONDOMINIUMS OF NO LESS THAN $79,000,000, (D) A LOGICAL AND CONSISTENT
PRESENTATION, AND (E) CONFORMANCE WITH FEDERAL REGULATIONS GOVERNING THE CONTENT
OF THE APPRAISAL.

 

(O)           TITLE POLICY.  THE TITLE POLICY.  THE TITLE POLICY SHALL NOT
CONTAIN ANY EXCEPTIONS RELATING TO THE USE BY BORROWER OF ANY CONTRACT
PURCHASER’S DEPOSIT WITH RESPECT TO UPGRADES AS FUNDS WITH RESPECT TO THE
CONVERSION OF THE PROJECT.

 

(P)           SURVEY.  THE SURVEY WHICH SHALL BE PREPARED AND BE CERTIFIED IN
ACCORDANCE WITH THE SURVEY CERTIFICATION ATTACHED AS EXHIBIT F.

 

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(Q)           ENVIRONMENTAL REPORT.  A COMPLETE PHASE I ENVIRONMENTAL REPORT
ADDRESSED TO AND APPROVED BY LENDER, PREPARED IN SUCH DETAIL AS LENDER MAY
REQUIRE BY A FIRM APPROVED BY LENDER IN ITS SOLE DISCRETION, TOGETHER WITH
COMPLETE COPIES OF ALL EXISTING ENVIRONMENTAL AND HAZARDOUS MATERIAL STUDIES AND
REPORTS, AND ANY DISCLOSURE DOCUMENT REQUIRED PURSUANT TO THE LAWS OF THE STATE
WHERE THE PROPERTY IS LOCATED.

 

(R)            LICENSES AND PERMITS.  A CERTIFICATE OF OCCUPANCY FOR THE
PROPERTY.  PRIOR TO THE CLOSING DATE, BORROWER SHALL PROVIDE LENDER WITH
SATISFACTORY EVIDENCE THAT BORROWER HAS OBTAINED ALL PERMITS AND GOVERNMENTAL
APPROVALS NECESSARY FOR CONVERSION OF THE PROJECT, EXCEPT FOR PERMITS REQUIRED
FOR THE UPGRADES TO EACH UNIT, INCLUDING APPROPRIATE BUILDING PERMITS, AND
APPLICATION FOR PERMITS FOR THE PROJECT ISSUED BY THE APPROPRIATE GOVERNMENTAL
AUTHORITIES.

 

(S)           ZONING.  EVIDENCE, IN THE FORM OF A ZONING ENDORSEMENT AND LETTERS
OR APPROVALS FROM ANY GOVERNMENTAL AUTHORITIES HAVING JURISDICTION OVER THE
ZONING OF THE PROPERTY, CONFIRMING THAT THE DEVELOPMENT AND PLANNED USE OF THE
PROJECT IS IN COMPLIANCE WITH ALL APPLICABLE ZONING LAWS AND OTHER APPLICABLE
GOVERNMENTAL APPROVALS.

 

(T)            UTILITIES.  EVIDENCE THAT ALL SEWER, WATER, ELECTRICAL, TELEPHONE
AND ANY OTHER UTILITY SERVICES ARE AVAILABLE AT THE PROPERTY IN ADEQUATE SUPPLY
FOR THE PROJECT.  THIS EVIDENCE SHALL INCLUDE LETTERS FROM THE APPLICABLE
UTILITY PROVIDERS.

 

(U)           MANAGEMENT AGREEMENT.  A TRUE CORRECT AND COMPLETE COPY OF THE
MANAGEMENT AGREEMENT, TOGETHER WITH A SUBORDINATION OF THE MANAGEMENT AGREEMENT
IN FORM AND SUBSTANCE ACCEPTABLE TO LENDER.

 

(V)           AGREEMENTS. COPIES OF ALL BASIC AGREEMENTS AND ANY OTHER
DEVELOPMENT, REDEVELOPMENT, RECIPROCAL EASEMENT OR OTHER MATERIAL AGREEMENTS
RELATING TO THE PROPERTY CERTIFIED BY BORROWER.

 

(W)          WETLANDS COMPLIANCE. EVIDENCE THAT ANY “WETLANDS” ON THE LAND HAVE
BEEN IDENTIFIED, AND THAT ANY SUCH WETLANDS WILL BE PRESERVED, REPLACED OR
OTHERWISE DEALT WITH IN COMPLIANCE WITH ALL GOVERNMENTAL APPROVALS.

 

(X)            TAX BILL.  A COPY OF THE MOST RECENT REAL ESTATE TAX BILLS FOR
THE PROPERTY.

 

(Y)           IRS FORM.  AN INTERNAL REVENUE SERVICE TAX RETURN VERIFICATION
FORM (FORM 4506T) EXECUTED BY BORROWER AND GUARANTOR.

 

(Z)            FORM OF CONDOMINIUM CONTRACT.  LENDER SHALL HAVE RECEIVED AND
APPROVED THE FORM OF CONDOMINIUM CONTRACT TO BE USED FOR THE PROPERTY, WHICH
SHALL BE ATTACHED HERETO AS EXHIBIT G.

 

(AA)         BORROWER’S EQUITY.  EVIDENCE THAT BORROWER HAS INVESTED BORROWER’S
MINIMUM EQUITY INVESTMENT.

 

(BB)         PROJECT BUDGET.  THE PROJECT BUDGET.  THE PROJECT BUDGET SHALL NOT
CONTAIN ANY LINE ITEMS PAYABLE TO BORROWER, GUARANTOR OR ANY AFFILIATE OF
BORROWER OR GUARANTOR, EXCEPT FOR

 

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the Production Overhead line item in the amount of $392,000.  Borrower warrants
that, except as set forth in the preceding sentence, no other Advances of the
Loan shall be made to any Affiliates of Borrower or Guarantor.

 

(CC)         PRICE LIST.  BORROWER SHALL HAVE PROVIDED LENDER WITH THE PRICE
LIST, WHICH MUST BE ACCEPTABLE TO LENDER IN ITS REASONABLE DISCRETION. APPROVAL
OF THE PRICE LIST WILL BE PREDICATED ON LENDER’S EVALUATION AND OPINION, IN ITS
REASONABLE DISCRETION, OF THE REASONABLENESS OF THE PROPOSED PRICES, PROVIDED
THAT THE PROPOSED PRICES MUST AVERAGE AT LEAST $300 PER NET SALEABLE SQUARE
FOOT, EXCLUDING ANY UPGRADES AND/OR EXTRAS, IN THE PROJECT.  NO REDUCTION TO THE
PRICE LIST SHALL BE MADE WITHOUT LENDER’S PRIOR WRITTEN APPROVAL IF THE RESULT
OF SUCH DECREASES WOULD BE TO REDUCE THE AVERAGE PRICE OF THE UNITS TO LESS THAN
$300 PER NET SALEABLE SQUARE FOOT.

 

(DD)         PATRIOT ACT.  ALL DOCUMENTS AND INFORMATION DEEMED NECESSARY BY
LENDER TO COMPLY WITH SECTION 326 OF THE USA PATRIOT ACT AND REGULATIONS
PROMULGATED PURSUANT TO SUCH LAW.

 

(EE)         OWNERSHIP, MANAGEMENT AND CAPITAL STRUCTURE.  THE OWNERSHIP,
MANAGEMENT AND CAPITAL STRUCTURE OF BORROWER MUST BE ACCEPTABLE TO LENDER AND
ANY MATERIAL CHANGE TO THE OWNERSHIP, MANAGEMENT OR CAPITAL STRUCTURE OF
BORROWER OR ANY MATERIAL MODIFICATION TO THE OWNERSHIP OR MANAGEMENT OF THE
MEMBERS OF BORROWER (WHETHER DIRECT OR INDIRECT) FOLLOWING THE CLOSING DATE
SHALL BE SUBJECT TO LENDER’S PRIOR WRITTEN APPROVAL; PROVIDED HOWEVER, LENDER
ACKNOWLEDGES THAT THE SOLE MEMBER OF BORROWER IS A PUBLICLY TRADED COMPANY AND
HEREBY APPROVES OF ITS SECURITIES BEING TRADED ON THE NASDAQ MARKET.

 

(FF)           PROJECT SCHEDULE.  LENDER HAS RECEIVED AND APPROVED THE PROJECT
SCHEDULE.

 

(GG)         CONDITIONS FOR ADVANCES.  BORROWER HAS SATISFIED ALL CONDITIONS FOR
ADVANCES SET FORTH IN SECTION 5.1 AND SECTION 5.2.

 

ARTICLE V

 

OTHER PROVISIONS CONCERNING ADVANCES

 

This Article contains terms, conditions and delivery requirements which pertain
to Advances under this Agreement other than the Initial Disbursement.  These
terms, conditions and delivery requirements are in addition to those set forth
elsewhere in this Agreement.

 

SECTION 5.1                  GENERAL TERMS AND CONDITIONS FOR ADVANCES.  EACH
ADVANCE SHALL BE SUBJECT TO THE FOLLOWING GENERAL TERMS AND CONDITIONS:

 

(A)           NO EVENT OF DEFAULT.  THE REPRESENTATIONS, WARRANTIES AND
COVENANTS OF THE GUARANTOR IN THE GUARANTY, THE ENVIRONMENTAL INDEMNITY AND EACH
OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY AND OF BORROWER IN THIS AGREEMENT AND
THE OTHER LOAN DOCUMENTS TO WHICH IT IS A PARTY SHALL BE TRUE AND CORRECT IN ALL
MATERIAL RESPECTS ON AND AS OF THE DATE OF SUCH ADVANCE AND NO EVENT OF DEFAULT
OR DEFAULT SHALL HAVE OCCURRED AND BE CONTINUING.  EACH REQUEST FOR AN ADVANCE
BY BORROWER SHALL, EXCEPT AS OTHERWISE DISCLOSED TO LENDER IN WRITING, BE DEEMED
TO BE A CERTIFICATION OF THE FOREGOING.

 

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(B)           ARTICLE IV CONDITIONS.  ALL REQUIREMENTS SET FORTH IN ARTICLE IV
OF THIS AGREEMENT AS A CONDITION PRECEDENT TO THE CLOSING DATE SHALL HAVE BEEN
SATISFIED, INCLUDING, BUT NOT LIMITED TO, THE DELIVERY OF EVIDENCE SATISFACTORY
TO LENDER THAT BORROWER HAS INVESTED BORROWER’S MINIMUM EQUITY INVESTMENT AND
ANY REQUIRED BORROWER’S ADDITIONAL EQUITY INTO THE PROJECT.

 

(C)           NOTICE, FREQUENCY AND AMOUNTS.  LENDER SHALL USE COMMERCIALLY
REASONABLY EFFORTS TO FUND REQUESTS FOR ADVANCES WITHIN TEN (10) BUSINESS DAYS;
PROVIDED, HOWEVER, THAT ALL REQUESTS FOR ADVANCES MUST BE ORDERLY, COMPLETE AND
IN WRITING AND MUST INCLUDE ALL SUBMISSIONS REQUIRED UNDER THIS AGREEMENT BEFORE
THE TEN (10) BUSINESS DAY PERIOD BEGINS TO RUN.  ADVANCES SHALL NOT BE MADE MORE
FREQUENTLY THAN ONCE A MONTH.  BORROWER SHALL PAY LENDER A PROCESSING FEE OF
$500 FOR EACH ADVANCE, WHICH SHALL BE PAYABLE FROM LOAN PROCEEDS.

 

(D)           PURPOSES AND PAYEES.  ALL DISBURSEMENTS OF LOAN PROCEEDS MUST BE
APPROVED BY LENDER IN ITS SOLE BUT REASONABLE DISCRETION BASED ON COSTS EXPENDED
ON THE CONDOMINIUM CONVERSION AS CONTAINED IN THE PROJECT BUDGET.  PROVIDED NO
DEFAULT OR EVENT OF DEFAULT THEN EXISTS, LENDER WILL ALLOW MONTHLY ADVANCES OF
THE PRODUCTION OVERHEAD UP TO $16,333 PER MONTH UNTIL THE PRODUCTION OVERHEAD
LINE ITEM IS EXHAUSTED. THE AMOUNT OF THE REQUESTED ADVANCE SHALL NOT EXCEED THE
COST OF WORK IN PLACE AND OTHER AMOUNTS ACTUALLY PAID OR PAYABLE BY BORROWER FOR
PROJECT COSTS.  UPON CONFIRMATION OF ALL REQUIREMENTS SPECIFIED HEREIN AND UPON
RECEIPT OF THE TITLE INSURER’S COMMITMENT TO ISSUE A DATE DOWN TO THE TITLE
POLICY INSURING THE FUNDS ABOUT TO BE DISBURSED, LENDER SHALL WIRE TRANSFER THE
ADVANCE DIRECTLY TO BORROWER AT SUCH LOCATION AS BORROWER MAY DIRECT, WHO WILL
THEN DISBURSE DIRECTLY TO THE GENERAL CONTRACTORS OR SUBCONTRACTORS AS
APPLICABLE.  AFTER A DEFAULT OR EVENT OF DEFAULT, IF, IN LENDER’S REASONABLE
OPINION, ITS POSITION WILL BE IMPAIRED IF IT DOES NOT MAKE THE ADVANCE, LENDER
MAY (BUT SHALL NOT BE OBLIGATED TO MAKE) MAKE ADVANCES FROM ANY PROJECT BUDGET
CATEGORY (WHETHER OR NOT SUCH ADVANCES ARE CONSISTENT WITH THE PROJECT BUDGET)
TO OR FOR ANY OF THE FOLLOWING PARTIES OR PURPOSES:  (A) DIRECTLY TO ANY PERSON
OR PERSONS, INCLUDING LENDER, WHO IN LENDER’S REASONABLE JUDGMENT IS ENTITLED TO
PAYMENT FOR PROJECT COSTS, (B) FOR PAYMENT OR PERFORMANCE OF ANY OF BORROWER’S
SECURED OBLIGATIONS UNDER ANY OF THE LOAN DOCUMENTS, INCLUDING FEES, COSTS,
EXPENSES OWING TO LENDER OR ITS CONSULTANTS, OR (C) TO THE TITLE INSURER OR ANY
LIEN CLAIMANT FOR THE INDEMNITY OVER OR SETTLEMENT OF ANY CLAIM FOR LIEN OTHER
THAN A PERMITTED EXCEPTION.  LENDER MAY MAKE ADVANCES UNDER THE PRIOR SENTENCE
WITHOUT FURTHER AUTHORIZATION BY BORROWER, BUT LENDER WILL USE REASONABLE
EFFORTS TO GIVE BORROWER NOTICE OF SUCH AN ADVANCE WITHIN TEN (10) BUSINESS DAYS
AFTER MAKING SUCH AN ADVANCE.  LENDER’S FAILURE TO GIVE SUCH NOTICE SHALL NOT BE
REGARDED AS A DEFAULT BY LENDER OR IMPAIR ANY OF LENDER’S RIGHTS.  SUCH ADVANCES
SHALL BE TREATED AS AN ADVANCE OF THE LOAN AS SET FORTH IN SECTION 12.8 BELOW. 
THIS PARAGRAPH SHALL NOT LIMIT LENDER’S RIGHTS TO MAKE ADVANCES UNDER OTHER
PROVISIONS OF THE LOAN DOCUMENTS.

 

(E)           BALANCING COMPLIANCE.  THE LOAN MUST BE IN BALANCE AS REQUIRED
UNDER SECTION 6.3 BELOW, AND THE LOAN PROCEEDS MUST BE FOR THE PURPOSES SET
FORTH IN AND MUST BE APPLIED IN COMPLIANCE WITH THE PROJECT BUDGET.

 

(F)            TITLE INSURANCE ENDORSEMENTS.  LENDER SHALL HAVE RECEIVED A
“DATEDOWN” ENDORSEMENT TO THE TITLE POLICY EXTENDING THE COVERAGE TO INCLUDE THE
DATE AND AMOUNT OF THE REQUESTED ADVANCE.  THE DATEDOWN ENDORSEMENT SHALL SHOW
NO EXCEPTIONS TO TITLE OTHER THAN THE PERMITTED EXCEPTIONS.  ANY NEW EXCEPTIONS
MUST BE APPROVED BY LENDER IN WRITING, ACTING REASONABLY.  UPON SUCH APPROVAL,
SUCH NEW EXCEPTION SHALL BE CONSIDERED A PERMITTED EXCEPTION.

 

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Lender shall also be furnished a mechanic’s lien endorsement to the Title Policy
in the form and substance acceptable to Lender.

 

(G)           NOI.  IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT BORROWER SHALL
USE ALL AVAILABLE NOI FROM THE PROJECT FOR PROJECT COSTS WITHIN THE PROJECT
BUDGET PRIOR TO THE USE OF ANY LOAN PROCEEDS.  EACH REQUEST FOR AN ADVANCE BY
BORROWER SHALL BE DEEMED TO BE A CERTIFICATION FROM BORROWER THAT NOI IS
INSUFFICIENT TO COVER THE PROJECT COSTS SET FORTH IN ANY REQUESTED ADVANCE.

 

(H)           CASUALTY OR CONDEMNATION.  NO CASUALTY HAS OCCURRED OR
CONDEMNATION PROCEEDING HAS BEEN INITIATED, WHICH IN LENDER’S SOLE AND ABSOLUTE
DISCRETION, COULD HAVE A MATERIAL ADVERSE EFFECT.

 

(I)            MATERIAL ADVERSE EFFECT.  NO EVENT OR SERIES OF EVENTS SHALL HAVE
OCCURRED WHICH HAS RESULTED IN A MATERIAL ADVERSE EFFECT.

 

SECTION 5.2                  PAYOUT CONDITIONS AND DELIVERIES.  PRIOR TO EACH
ADVANCE OTHER THAN THE INITIAL DISBURSEMENT, BORROWER SHALL SUBMIT TO LENDER OR
LENDER SHALL HAVE RECEIVED BY THE TIME REQUIRED IN SECTION 5.1(C) THE FOLLOWING
DOCUMENTS, EACH OF WHICH MUST BE APPROVED BY LENDER:

 

(A)           FOR EACH REQUEST FOR AN ADVANCE, A COMPLETE SET OF THE “REQUEST
FOR ADVANCE DOCUMENTS” WHICH SHALL INCLUDE:

 

(I)                                     A WRITTEN REQUEST FOR ADVANCE FROM
BORROWER WHICH SHALL COVER AND ADDRESS ALL WORK FOR WHICH DISBURSEMENT IS TO BE
MADE TO A DATE SPECIFIED THEREIN;

 

(II)                                  FOLLOWING THE OCCURRENCE OF AN EVENT OF
DEFAULT, WITH RESPECT TO ADVANCES FOR HARD COSTS ONLY, CONTRACTOR’S,
SUBCONTRACTORS’, ARCHITECT’S, ENGINEER’S, MATERIAL SUPPLIER’S AND OTHER DESIGN
PROFESSIONAL’S WAIVERS OF LIENS, SUBORDINATIONS OF LIENS AND ALL OTHER
STATEMENTS AND FORMS REQUIRED FOR COMPLIANCE WITH THE MECHANICS’ LIEN OR SIMILAR
LAWS OF THE STATE WHERE THE PROPERTY IS LOCATED THROUGH THE DATE SUCH
CONTRACTOR, SUBCONTRACTOR, ARCHITECT, ENGINEER, MATERIAL SUPPLIER OR OTHER
DESIGN PROFESSIONAL HAS BEEN PAID, SUBSTANTIATING EACH DRAW REQUEST; PROVIDED,
HOWEVER, THAT IN THE EVENT CONDITIONAL LIEN WAIVERS ARE PROVIDED TO SUBSTANTIATE
SUCH DRAW REQUEST, THEN BORROWER SHALL ALSO PROVIDE AN UNCONDITIONAL LIEN WAIVER
COVERING ALL PRIOR DRAW REQUESTS MADE;

 

(III)                               A STATEMENT, IN FORM REASONABLY PRESCRIBED
BY LENDER, EXECUTED BY BORROWER STATING AMONG OTHER THINGS: (1) THE NAMES AND
ADDRESSES OF ALL CONTRACTORS WITH WHOM BORROWER HAS CONTRACTED, (2) THE AMOUNT
OF EACH CONTRACT, (3) AMOUNTS PAID TO DATE UNDER EACH CONTRACT AND (4) THE
AMOUNTS OF CURRENT PAYMENT UNDER EACH CONTRACT, RETAINAGE AND BALANCES DUE,
BROKEN DOWN IN A CONSISTENT MANNER (“SWORN OWNER’S STATEMENT”), TOGETHER WITH
COPIES OF ALL SUBCONTRACTS AND PROOF OF PAYMENT UNDER SUCH SUBCONTRACTS AS MAY
BE REQUIRED BY LENDER; AND

 

(IV)                              WITH RESPECT TO ADVANCES FOR HARD COSTS ONLY,
A STATEMENT, IN FORM REASONABLY PRESCRIBED BY LENDER, EXECUTED BY THE CONTRACTOR
OF THE PROJECT STATING AMONG OTHER THINGS: (1) THE NAMES AND ADDRESSES OF ALL
SUPPLIERS, CONTRACTORS AND ITS OWN

 

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FORCES CONTRACTED TO WORK, (2) THE AMOUNT OF EACH CONTRACT, (3) AMOUNTS PAID TO
DATE UNDER EACH CONTRACT, (4) CHANGE ORDERS  AND (5) THE AMOUNTS OF CURRENT
PAYMENT UNDER EACH CONTRACT AND BALANCES DUE, BROKEN DOWN IN A CONSISTENT MANNER
(“SWORN CONTRACTOR’S STATEMENT”; THE SWORN OWNER’S STATEMENT AND THE SWORN
CONTRACTOR’S STATEMENT ARE COLLECTIVELY REFERRED TO HEREIN AS THE “SWORN
STATEMENT”); AND

 

(V)                                 BORROWER’S APPLICATION AND CERTIFICATION FOR
PAYMENT EXECUTED BY BORROWER.

 

(B)           TITLE INSURER DOCUMENTS.  BORROWER SHALL HAVE FURNISHED, AND
COVENANTS AND AGREES TO FURNISH, TO THE TITLE INSURER THE SWORN STATEMENTS, LIEN
WAIVERS AND ALL OTHER DOCUMENTS REQUIRED BY THE TITLE INSURER FOR IT TO FURNISH
THE ENDORSEMENTS REFERRED TO IN SECTION 5.1(F) ABOVE, INCLUDING, BUT NOT LIMITED
TO, A WRITTEN CERTIFICATION BY BORROWER OF THE WORK COMPLETED TO DATE ON THE
PROJECT WHICH WILL BE COVERED BY SUCH TITLE ENDORSEMENT.  UPON REQUEST BY
LENDER, BORROWER SHALL FURNISH COPIES OF THESE ITEMS TO LENDER.

 

(C)           SOFT COST BACKUP.  FOR EACH REQUEST FOR AN ADVANCE FOR SOFT COSTS,
COPIES OF BONAFIDE THIRD PARTY INVOICES, CONTRACTS AND OTHER DOCUMENTS AND
VERIFICATION OF SUCH EXPENSES IN LENDER’S REASONABLE DISCRETION.

 

(D)           SITE INSPECTION.  LENDER MAY RELY ON THE ADVICE OF LENDER’S
PROJECT CONSULTANT, WHO SHALL BE RETAINED BY LENDER AT BORROWER’S EXPENSE.
 LENDER, THROUGH LENDER’S PROJECT CONSULTANT OR ITS OWN EMPLOYEES, MAY PERFORM A
SITE INSPECTION TO CONFIRM THAT PROGRESS WITH THE CONVERSION OF THE PROJECT TO A
CONDOMINIUM PROPERTY CONFORMS TO THE SWORN STATEMENT AND IS PROGRESSING WITHIN
THE PROJECT BUDGET.  IN NO EVENT, HOWEVER, SHALL THE OPINION OF LENDER’S PROJECT
CONSULTANT BE BINDING ON LENDER.

 

(E)           CHANGE ORDERS.  ALL CHANGE ORDERS (INCLUDING PENDING CHANGE
ORDERS), REGARDLESS OF WHETHER OR NOT LENDER’S APPROVAL IS REQUIRED UNDER
SECTION 6.2.

 

(F)            OTHER ITEMS.  SUCH OTHER DOCUMENTS AND INFORMATION AS LENDER MAY
REASONABLY REQUEST.  THESE MAY INCLUDE COPIES OF ANY NEW CONTRACTS OR
SUBCONTRACTS WHICH BORROWER MAY HAVE ENTERED INTO RESPECTING THE PROJECT; BONDS
PERTAINING TO THESE SUBCONTRACTS AS MAY BE REQUIRED BY LENDER; AND
CERTIFICATIONS FROM THE STRUCTURAL, MECHANICAL AND ELECTRICAL ENGINEERS.

 

SECTION 5.3                  FINAL ADVANCE.  LENDER SHALL MAKE THE FINAL ADVANCE
FOR COSTS OF CONSTRUCTION FOR THE PROJECT UPON BORROWER’S DELIVERY TO LENDER OF
THE FOLLOWING ITEMS, EACH TO BE REASONABLY SATISFACTORY TO LENDER.  THESE
CONDITIONS SHALL BE IN ADDITION TO THOSE SET FORTH IN SECTION 5.1 AND SECTION
5.2 AND ELSEWHERE IN THIS AGREEMENT.

 

(A)           REQUEST FOR ADVANCE DOCUMENTS, WHICH INCLUDE CERTIFICATIONS FROM
BORROWER THAT THE PROJECT HAS BEEN COMPLETED;

 

(B)           A FINAL MECHANIC’S LIEN ENDORSEMENT FOR THE CURRENT ADVANCE AND
DELETION OF THE PENDING CONSTRUCTION EXCEPTION TO THE TITLE POLICY, TOGETHER
WITH SUCH OTHER ENDORSEMENTS AS MAY BE REASONABLY REQUESTED BY LENDER;

 

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(C)           FOLLOWING THE OCCURRENCE OF AN EVENT OF DEFAULT, FINAL LIEN
WAIVERS FROM ANY CONTRACTOR AND ALL SUBCONTRACTORS AND MATERIALMEN; PROVIDED,
HOWEVER, THAT IN THE EVENT CONDITIONAL LIEN WAIVERS ARE PROVIDED TO SUBSTANTIATE
SUCH DRAW REQUEST, THEN BORROWER SHALL ALSO PROVIDE AN UNCONDITIONAL LIEN WAIVER
COVERING ALL PRIOR DRAW REQUESTS MADE AND SHALL PROVIDE A FINAL UNCONDITIONAL
LIEN WAIVER NO LATER THAN 30 DAYS FOLLOWING THE FINAL ADVANCE; AND

 

(D)           AN UPDATE OF THE TAX, JUDGMENT LIEN AND UNIFORM COMMERCIAL CODE
FINANCING STATEMENT SEARCHES OBTAINED PURSUANT TO SECTION 4.1(B) SHOWING NO
MATTERS WHICH ARE NOT PERMITTED EXCEPTIONS.

 

SECTION 5.4                  PAYMENT OF INTEREST; INTEREST RESERVE.

 

(A)           A PORTION OF THE PROCEEDS OF THE LOAN IN THE AMOUNT OF ONE MILLION
SEVEN HUNDRED THIRTY-ONE THOUSAND AND NO/100 DOLLARS ($1,731,000) SHALL BE
DESIGNATED IN THE PROJECT BUDGET AS THE INTEREST RESERVE FOR THE PAYMENT OF
INTEREST ON THE NOTE.  IN THE EVENT THE PROPERTY, IN ANY MONTH, ACHIEVES A
POSITIVE NOI, THEN SUCH MONTHLY NOI SHALL BE APPLIED TO COVER THE MONTHLY
PAYMENT UNDER THE NOTE PRIOR TO THE USE OF ANY ADVANCES FROM THE INTEREST
RESERVE LINE ITEM OF THE PROJECT BUDGET, AND LENDER IS HEREBY AUTHORIZED TO
APPLY ANY FUNDS IN THE OPERATING ACCOUNT TO COVER THE MONTHLY PAYMENT.  EITHER
UPON BORROWER’S DELIVERY OF A REQUEST FOR AN ADVANCE FROM THE INTEREST RESERVE
OR, IF SUCH REQUEST IS NOT TIMELY DELIVERED BY BORROWER, THEN UPON LENDER’S
DETERMINATION, IN ITS DISCRETION, THAT NOI HELD IN THE OPERATING ACCOUNT IS
INSUFFICIENT TO COVER THE MONTHLY PAYMENT, THEN, PROVIDED THAT NO EVENT OF
DEFAULT SHALL HAVE OCCURRED AND BE CONTINUING, LENDER SHALL DISBURSE TO ITSELF
FROM THE INTEREST RESERVE AN AMOUNT SUFFICIENT TO PAY ALL SUCH ACCRUED BUT
UNPAID INTEREST.  BORROWER HEREBY ACKNOWLEDGES THAT LENDER IS AUTHORIZED TO
CHARGE INTEREST MONTHLY AGAINST THE INTEREST RESERVE LINE ITEM OF THE PROJECT
BUDGET, IRRESPECTIVE OF WHETHER BORROWER HAS MADE A REQUEST FOR SUCH ADVANCE. 
NOTHING CONTAINED IN THIS SECTION SHALL RELIEVE BORROWER OF THE ABSOLUTE AND
UNCONDITIONAL OBLIGATION TO PAY ACCRUED INTEREST ON NOTE AS PROVIDED HEREIN AND
IN THE NOTE AND OTHER LOAN DOCUMENTS.  IF THE FUNDS UNDER THE INTEREST RESERVE
ARE INSUFFICIENT OR ARE OTHERWISE UNAVAILABLE FOR DISBURSEMENT (AS THE RESULT OF
POSITIVE NOI FOR SUCH MONTH OR AN EVENT OF DEFAULT), THEN BORROWER SHALL PAY OR
CAUSE TO BE PAID, DIRECTLY TO LENDER THE ACCRUED INTEREST THEN DUE AND PAYABLE
FROM BORROWER’S FUNDS AND NOT FROM THE PROCEEDS OF THE LOAN.

 

ARTICLE VI

 

PROJECT BUDGET, BORROWER’S EQUITY,
LOAN BALANCING, AND CHANGE ORDERS

 

SECTION 6.1                  PROJECT COSTS AND PROJECT BUDGET.

 

(A)           PROJECT COSTS.  THE PROCEEDS OF THE LOAN SHALL BE USED SOLELY FOR
THE COSTS OF ACQUIRING THE PROPERTY AND THE PAYMENT OF PROJECT COSTS IN
ACCORDANCE WITH THE PROJECT BUDGET.  BORROWER SHALL HOLD ALL ADVANCES IN TRUST
TO BE SPENT FOR THE PROJECT COSTS FOR WHICH SUCH ADVANCE WAS MADE.  FOR THE
PURPOSES OF THIS AGREEMENT, “PROJECT COSTS” SHALL MEAN ALL HARD COSTS AND SOFT
COSTS OF THE PROJECT WHICH HAVE BEEN OR WILL BE INCURRED IN CONNECTION WITH THIS
AGREEMENT AND CONSISTENT WITH THE PROJECT BUDGET, AS APPROVED BY LENDER IN ITS
SOLE DISCRETION.  BORROWER SHALL PAY ALL PROJECT COSTS AS THEY BECOME DUE AND
OWING, NOTWITHSTANDING THAT LENDER

 

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may not be obligated to make an Advance hereunder or that the amount of any
particular Advance may be insufficient to pay such costs and Borrower shall pay
from its own funds any deficiency as Borrower’s Additional Equity hereunder.

 

(B)           PROJECT BUDGET.  THE PROJECT BUDGET IS ATTACHED AS EXHIBIT B.
BORROWER MUST OBTAIN LENDER’S PRIOR WRITTEN APPROVAL BEFORE ANY MODIFICATIONS OR
AMENDMENTS ARE MADE TO THE PROJECT BUDGET.  THE AMOUNT WHICH LENDER SHALL BE
OBLIGATED TO DISBURSE FOR ANY ITEM OF PROJECT COSTS SHALL NOT BE IN EXCESS OF
THE AMOUNT SHOWN FOR THAT ITEM ON THE PROJECT BUDGET.  IN THE EVENT THE TOTAL
ACTUAL PROJECT COSTS ARE LESS THAN THE AMOUNT SET FORTH IN THE PROJECT BUDGET,
THE LOAN SHALL BE REDUCED BY THE AMOUNT OF THE SAVINGS.

 

SECTION 6.2                  CHANGE ORDERS AND CHANGES TO THE PROJECT BUDGET.

 

(A)           MODIFICATIONS AND CHANGES ORDERS.  BORROWER SHALL PROMPTLY NOTIFY
LENDER OF ANY ANTICIPATED CHANGES IN HARD COSTS OR SOFT COSTS LINE ITEMS, WHICH
IF APPROVED BY LENDER, WOULD RESULT IN A NET INCREASE IN THE TOTAL AMOUNT OF THE
HARD COSTS OR SOFT COSTS LINE ITEMS (COLLECTIVELY, “CHANGE ORDERS”). ANY
AGREEMENT BETWEEN BORROWER AND ANY CONTRACTOR REGARDING CHANGE ORDERS SHALL BE
MADE ONLY AFTER THE LENDER’S PRIOR WRITTEN APPROVAL, WHICH APPROVAL SHALL NOT BE
UNREASONABLY WITHHELD.  IF AS A RESULT OF ANY SUCH CHANGE, WHEN TAKEN TOGETHER
IN THE AGGREGATE WITH ANY PRIOR CHANGES, THE LOAN WILL BE OUT OF BALANCE, THEN
BORROWER MUST ALSO COMPLY WITH THE REQUIREMENTS OF SECTION 6.3.

 

(B)           INTEREST RESERVE AND PRODUCTION OVERHEAD. THERE SHALL BE NO
REALLOCATIONS TO OR FROM THE INTEREST RESERVE LINE ITEM OF THE PROJECT BUDGET
AND NO REALLOCATIONS TO OR FROM THE PRODUCTION OVERHEAD LINE OF THE PROJECT
BUDGET, WITHOUT THE PRIOR WRITTEN CONSENT OF LENDER.

 

(C)           SOFT COST CONTINGENCY.  THE SOFT COST CONTINGENCY LINE ITEM OF THE
PROJECT BUDGET MAY BE REALLOCATED TO PAY OTHER SOFT COSTS, SUBJECT TO LENDER’S
PRIOR WRITTEN APPROVAL, TO BE DETERMINED IN ITS REASONABLE DISCRETION.

 

(D)           REDUCTION BASED ON SAVINGS. IN THE EVENT THE FINAL COST TO
RENOVATE AND CONVERT THE PROJECT IS LESS THAN THE AMOUNT SET FORTH IN THE
PROJECT BUDGET, THE LOAN AMOUNT SHALL BE REDUCED BY THE AMOUNT OF SUCH REDUCTION
IN COST.

 

SECTION 6.3                  LOAN BALANCING.

 

(A)           IN BALANCE; OUT OF BALANCE.  NOTWITHSTANDING ANYTHING TO THE
CONTRARY CONTAINED HEREIN, IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT THE LOAN
SHALL AT ALL TIMES BE IN “IN BALANCE”.  THE LOAN SHALL BE DEEMED TO BE “IN
BALANCE” ONLY AT SUCH TIME, AND FROM TIME TO TIME, AS LENDER MAY DETERMINE, IN
ITS REASONABLE DISCRETION, THAT THE REMAINING AMOUNT AVAILABLE UNDER THE LOAN
EQUALS OR EXCEEDS THE TOTAL PROJECT COSTS. CONVERSELY, THE LOAN SHALL BE DEEMED
TO BE “OUT OF BALANCE” AT SUCH TIME, AND FROM TIME TO TIME, AS LENDER MAY
DETERMINE, IN ITS REASONABLE DISCRETION, THAT THE REMAINING AMOUNT AVAILABLE
UNDER THE LOAN DOES NOT EQUAL OR EXCEED THE TOTAL PROJECT COSTS.

 

(B)           REALLOCATION OF LINE ITEMS. IN DETERMINING WHETHER THE AMOUNT OF
THE UNDISBURSED LOAN PROCEEDS ARE SUFFICIENT TO PAY TOTAL PROJECT COSTS, LINE
ITEMS OF THE PROJECT BUDGET SHALL BE REALLOCATED ONLY IN STRICT COMPLIANCE WITH
SECTION 6.2 AND ANY SURPLUS FUNDS IN LINE ITEMS WHICH

 

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are not available for reallocation shall not be considered.  For greater
certainty, and not in limitation of the foregoing, in determining whether the
Loan is In Balance, Borrower shall not be permitted to make any reallocation to
or from the Interest Reserve line item or the Production Overhead line item of
the Project Budget to or from any other line items of the Project Budget.

 

(C)           DEFICIENCY DEPOSIT.  IF LENDER DETERMINES THAT THE LOAN IS OUT OF
BALANCE, THEN, WITHIN TEN (10) DAYS AFTER WRITTEN NOTICE THEREOF FROM LENDER TO
BORROWER, BORROWER SHALL DEPOSIT, IN IMMEDIATELY AVAILABLE FUNDS, AN AMOUNT OF
CASH EQUAL TO THE AMOUNT LENDER REASONABLY ESTIMATES WILL BE SUFFICIENT TO PLACE
THE LOAN IN BALANCE (THE “DEFICIENCY DEPOSIT”). THEREAFTER, THE DEFICIENCY
DEPOSIT WILL BE DISBURSED BY LENDER PRIOR TO ANY FURTHER ADVANCES OF LOAN
PROCEEDS AND SHALL BE USED FOR PROJECT COSTS, SUBJECT TO BORROWER’S COMPLIANCE
WITH ALL CONDITIONS WHICH WOULD BE APPLIED TO AN ADVANCE FOR THE SAME PROJECT
BUDGET ITEMS TO WHICH THE DEFICIENCY DEPOSIT WILL BE APPLIED. ANY DEFICIENCY
DEPOSITS SHALL BE ADDED TO AND MADE A PART OF BORROWER’S EQUITY IN THE PROJECT
AND NO INTEREST SHALL BE PAID TO BORROWER WITH RESPECT TO ANY SUCH AMOUNTS. 
FAILURE TO DEPOSIT THE DEFICIENCY DEPOSITS SHALL CONSTITUTE AN EVENT OF
DEFAULT.  LENDER SHALL MAKE NO FURTHER DISBURSEMENTS OF THE LOAN AT ANY TIME THE
LOAN IS OUT OF BALANCE.

 

SECTION 6.4                  ACCOUNTS.

 

(A)           PROJECT ACCOUNT.  AS AND WHEN REQUIRED BY LENDER DURING THE TIME
OF THE LOAN, BORROWER COVENANTS AND AGREES TO ESTABLISH AND THEREAFTER (UNTIL
THE SECURED OBLIGATIONS HAVE BEEN PAID IN FULL) SHALL MAINTAIN WITH LENDER, ONE
OR MORE (AS DETERMINED BY LENDER) DEPOSIT ACCOUNTS INTO WHICH ALL OF BORROWER’S
ADDITIONAL EQUITY, DEFICIENCY DEPOSITS AND REAL ESTATE TAX DEPOSITS SHALL BE
DEPOSITED (COLLECTIVELY, THE “PROJECT ACCOUNT”); PROVIDED HOWEVER, LENDER
ACKNOWLEDGES THAT ADVANCES OF THE LOAN MAY BE MADE FROM THE REAL ESTATE TAXES
LINE ITEM OF THE PROJECT BUDGET TO PAY REAL ESTATE TAXES IN ACCORDANCE WITH
SECTION 6.5.

 

(B)           OPERATING ACCOUNT.  BORROWER COVENANTS AND AGREES TO ESTABLISH THE
OPERATING ACCOUNT WITH LENDER ON OR BEFORE THE CLOSING DATE.  BORROWER COVENANTS
AND AGREES TO DEPOSIT, OR CAUSE TO BE DEPOSITED, ALL NOI WITH RESPECT TO THE
PROPERTY INTO THE OPERATING ACCOUNT AND THE FAILURE TO DEPOSIT ALL NOI INTO THE
OPERATING ACCOUNT SHALL CONSTITUTE AN EVENT OF DEFAULT. ALL AVAILABLE NOI IN THE
OPERATING ACCOUNT SHALL BE USED BY BORROWER FIRST FOR THE PAYMENT OF MONTHLY
INTEREST DUE ON THE LOAN IN ACCORDANCE WITH SECTION 5.4, AND THEN SHALL BE USED
FOR OTHER PROJECT COSTS PRIOR TO ANY FURTHER ADVANCES OF LOAN PROCEEDS.
DISBURSEMENTS FROM THE OPERATING ACCOUNT WILL BE SUBJECT TO LENDER’S APPROVAL
BASED UPON BORROWER’S COMPLIANCE WITH ALL CONDITIONS WHICH WOULD BE APPLIED TO
AN ADVANCE FOR THE SAME PROJECT BUDGET ITEMS TO WHICH THE NOI WILL BE APPLIED.

 

(C)           PLEDGE OF ACCOUNTS.  TO SECURE THE PAYMENT AND PERFORMANCE OF THE
SECURED OBLIGATIONS, BORROWER HEREBY PLEDGES AND ASSIGNS TO LENDER, ALL OF
BORROWER’S RIGHT, TITLE AND INTEREST IN, AND HEREBY GRANTS TO LENDER, A SECURITY
INTEREST IN AND RIGHT OF SET-OFF AGAINST (SAID RIGHT OF SET-OFF SHALL NOT BE
EXERCISED UNTIL THE OCCURRENCE OF AND DURING THE CONTINUANCE OF AN EVENT OF
DEFAULT): (I) THE PROJECT ACCOUNT AND THE OPERATING ACCOUNT; (II) ALL CASH,
INSTRUMENTS, SECURITIES, INVESTMENTS AND OTHER PROPERTY FROM TIME TO TIME
TRANSFERRED OR CREDITED TO, CONTAINED IN OR COMPRISING THE OPERATING ACCOUNT AND
THE PROJECT ACCOUNT; (III) ALL STATEMENTS, CERTIFICATES, PASSBOOKS AND
INSTRUMENTS REPRESENTING THE PROJECT ACCOUNT AND THE OPERATING ACCOUNT OR ANY

 

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of the foregoing; (iv) any and all substitutions or additions of or with respect
to any of the foregoing; and (v) any and all proceeds and products of any of the
foregoing, whether now owned and existing or hereafter acquired or arising,
including, without limitation (A) interest, principal, dividends and other
amounts or distributions received with respect to any of the foregoing and (B)
property received upon the sale, exchange or other disposition of any of the
foregoing.  All amounts held in the Accounts shall be held by Lender to be
irrevocably applied for the purposes for which made as herein provided, and
shall not be subject to the direction or control of Borrower.

 

(D)                                 NO OTHER ACCOUNTS.  BORROWER COVENANTS AND
AGREES THAT, EXCEPT FOR THE OPERATING ACCOUNT, THE PROJECT ACCOUNT AND ANY OTHER
ACCOUNT MAINTAINED WITH LENDER PURSUANT TO THE TERMS HEREOF, IT WILL NOT
MAINTAIN OR PERMIT ANY PROPERTY MANAGER TO MAINTAIN ANY BANK OR DEPOSIT ACCOUNTS
(OF ANY KIND OR NATURE) WITH RESPECT TO THE PROPERTY.  NOTWITHSTANDING HE
FOREGOING, THE MANAGER SHALL BE ALLOWED TO MAINTAIN AN INDEPENDENT OPERATING
ACCOUNT.

 

(E)                                  DEFAULT.  UPON THE OCCURRENCE OF A DEFAULT
OR EVENT OF DEFAULT HEREUNDER, AND IN ADDITION TO ALL OTHER RIGHTS, POWERS AND
REMEDIES OF LENDER UNDER THIS AGREEMENT OR UNDER ANY OTHER LOAN DOCUMENT, LENDER
MAY, AT ITS OPTION, WITHOUT BEING REQUIRED TO DO SO AND TO THE EXTENT PERMITTED
BY LAW, APPLY ANY AMOUNTS IN THE ACCOUNTS ON HAND TO ANY OF THE SECURED
OBLIGATIONS, IN SUCH ORDER AND MANNER AS LENDER MAY ELECT IN ITS DISCRETION. 
WHEN THE SECURED OBLIGATIONS HAVE BEEN FULLY PAID AND PERFORMED, AS THE CASE MAY
BE, AMOUNTS HELD IN THE ACCOUNTS SHALL BE PAID TO BORROWER.

 

SECTION 6.5                                                       DEPOSITS FOR
REAL ESTATE TAXES.

 

(A)                                  ALL REAL ESTATE TAXES SHALL BE PAID FROM
ADVANCES FROM THE REAL ESTATE TAXES LINE ITEM IN THE PROJECT BUDGET, PROVIDED
SUCH LINE ITEM HAS NOT BEEN EXHAUSTED.  AFTER THE REAL ESTATE TAXES LINE ITEM IN
THE PROJECT BUDGET HAS BEEN DEPLETED, BORROWER SHALL THEREAFTER ON THE FIRST
(1ST) DAY OF EACH AND EVERY MONTH DURING THE TERM OF THE LOAN DEPOSIT AN AMOUNT
EQUAL TO ONE-TWELFTH (1/12) OF 100% OF THE ANNUAL REAL ESTATE TAXES NEXT TO
BECOME DUE UPON THE PROPERTY TO BE HELD IN THE PROJECT ACCOUNT FOR THE PAYMENT
OF REAL ESTATE TAXES WHEN DUE; PROVIDED THAT IN THE CASE OF THE FIRST SUCH
DEPOSIT THERE SHALL BE DEPOSITED, IN ADDITION, AN AMOUNT WHICH, WHEN ADDED TO
THE AGGREGATE AMOUNT OF MONTHLY SUMS NEXT PAYABLE UNDER THIS SECTION 6.5, WILL
RESULT IN A SUFFICIENT RESERVE TO PAY THE REAL ESTATE TAXES NEXT BECOMING DUE
ONE MONTH PRIOR TO THE DATE WHEN SUCH REAL ESTATE TAXES ARE, IN FACT, DUE AND
PAYABLE PURSUANT TO APPLICABLE LAW.  IF LENDER DETERMINES AT ANY TIME THAT
MONTHLY PAYMENTS ARE NOT ADEQUATE TO FUND THE NEXT INSTALLMENT OF REAL ESTATE
TAXES DUE, BORROWER SHALL MAKE AN ADDITIONAL DEPOSIT IN AN AMOUNT EQUAL TO THE
EXPECTED DEFICIENCY.  THE AMOUNT OF THE DEPOSITS DESCRIBED IN THIS PARAGRAPH
(HEREIN GENERALLY CALLED “REAL ESTATE TAX DEPOSITS”) SHALL BE BASED UPON
LENDER’S REASONABLE ESTIMATE AS TO THE AMOUNT OF REAL ESTATE TAXES NEXT TO BE
PAYABLE.  FAILURE OF BORROWER TO MAKE THE MONTHLY REAL ESTATE DEPOSITS SHALL
CONSTITUTE AN EVENT OF DEFAULT.

 

(B)                                 SUBSEQUENT TO THE MASS CLOSING, IF REQUIRED
PURSUANT TO SECTION 6.5(A) BORROWER SHALL CONTINUE TO MAKE MONTHLY REAL ESTATE
TAX DEPOSITS EQUAL TO ONE-TWELFTH OF ONE HUNDRED PERCENT (100%) OF THE ANNUAL
ESTIMATED REAL ESTATE TAXES DUE WITH RESPECT TO THE UNSOLD UNITS IN THE PROJECT
INTO THE PROJECT ACCOUNT.  PROVIDED AN ESCROW BALANCE IS BUILT UP WHICH IN
LENDER’S SOLE BUT REASONABLE DISCRETION IS SUFFICIENT TO PAY BORROWER’S FUTURE
REAL ESTATE TAX OBLIGATIONS WITH

 

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respect to the Project, the Real Estate Tax Deposits may cease.  However, if
Lender subsequently determines at any time that the remaining tax escrow balance
is not sufficient to pay Borrower’s future Real Estate Tax obligations with
respect to the Project, Borrower shall make one or more additional Real Estate
Tax Deposit in amounts equal to the expected deficiency in the manner required
by Lender.  Failure of Borrower to make such Real Estate Tax Deposits shall
constitute an Event of Default.

 

(C)                                  THE AGGREGATE OF THE MONTHLY REAL ESTATE
TAX DEPOSIT, IF REQUIRED, TOGETHER WITH MONTHLY PAYMENTS OF INTEREST AND/OR
PRINCIPAL AND INTEREST PAYABLE ON THE NOTE SHALL BE PAID IN A SINGLE PAYMENT
EACH MONTH, TO BE APPLIED, SO LONG AS NO DEFAULT OR EVENT OF DEFAULT HAS
OCCURRED HEREUNDER AND IS CONTINUING, TO PAYMENT OF REAL ESTATE TAXES SUBJECT TO
THE PROVISIONS OF SECTION 6.5(D) BELOW.

 

(D)                                 IT SHALL BE THE RESPONSIBILITY OF BORROWER
TO FURNISH LENDER WITH THE BILLS FOR THE REAL ESTATE TAXES NOT LATER THAN THE
DATE THAT IS THIRTY (30) DAYS (OR SUCH LATER DATE IF BORROWER DOES NOT RECEIVE
THE TAX BILL FROM THE TAXING AUTHORITY BY SUCH DATE) PRIOR TO THE DATE ON WHICH
THE SAME ARE DUE AND PAYABLE WITHOUT PENALTY OR PREMIUM OF ANY KIND.  IF THE
TOTAL REAL ESTATE TAX DEPOSITS ON HAND SHALL NOT BE SUFFICIENT TO PAY ALL OF THE
REAL ESTATE TAXES WHEN THE SAME SHALL BECOME DUE, THEN BORROWER SHALL DELIVER TO
LENDER AT THE TIME OF THE SUBMISSION OF THE BILLS TO LENDER AS DESCRIBED ABOVE
AN AMOUNT EQUAL TO THE DEFICIENCY.  IF THE TOTAL OF SUCH REAL ESTATE TAX DEPOSIT
EXCEEDS THE AMOUNT REQUIRED TO PAY THE REAL ESTATE TAXES, SUCH EXCESS SHALL BE
CREDITED AGAINST SUBSEQUENT PAYMENTS TO BE MADE FOR SUCH DEPOSITS.

 

ARTICLE VII

 

CERTAIN COVENANTS BY BORROWER

 

SECTION 7.1                                                       INSPECTION. 
BORROWER WILL PERMIT LENDER AND LENDER’S CONSULTANTS TO INSPECT THE PROPERTY AND
ALL MATTERS RELATING TO THE DEVELOPMENT AND OPERATION OF THE PROPERTY.  BORROWER
WILL COOPERATE AND WILL CAUSE ITS AGENTS AND CONTRACTORS TO COOPERATE TO GIVE
LENDER AND ITS CONSULTANTS FULL ACCESS TO THE PROPERTY.  LENDER WILL ENDEAVOR TO
MINIMIZE INTERFERENCE WITH THE ACTIVITIES AT THE PROPERTY IN CONNECTION WITH ANY
SUCH INSPECTION.  ALL INSPECTIONS BY LENDER AND ITS CONSULTANTS SHALL BE FOR THE
SOLE BENEFIT OF LENDER FOR ITS LOAN ADMINISTRATION PURPOSES ONLY.  NEITHER
LENDER NOR ITS CONSULTANTS ASSUMES ANY LIABILITY TO BORROWER OR ANY OTHER PERSON
BY REASON OF LENDER’S OR ITS CONSULTANT’S INSPECTIONS, EXCEPT AS A RESULT OF
SUCH PARTY’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.  NEITHER BORROWER NOR ANY
OTHER PERSON MAY RELY ON LENDER’S INSPECTIONS FOR ANY PURPOSE (INCLUDING STAGE
OF COMPLETION, ADEQUACY OR WORKMANSHIP, COMPLIANCE WITH GOVERNMENTAL APPROVALS,
OR OTHER MATTERS RELATED TO DESIGN, CONSTRUCTION AND OPERATION).  LENDER’S
INSPECTION OF AN ITEM SHALL NOT RESULT IN ANY WAIVER OF LENDER’S RIGHTS IN THE
EVENT SUCH ITEM DOES NOT CONFORM WITH THIS AGREEMENT.  BORROWER SHALL KEEP BOOKS
AND RECORDS FAIRLY REFLECTING ALL OF ITS BUSINESS AFFAIRS AND TRANSACTIONS. 
BORROWER SHALL GRANT LENDER ACCESS TO BORROWER’S BOOKS AND RECORDS DURING NORMAL
BUSINESS HOURS AND WILL PERMIT LENDER TO MAKE COPIES OF BORROWER’S BOOKS AND
RECORDS.

 

SECTION 7.2                                                       MECHANICS’
LIENS, REAL ESTATE TAXES AND CONDOMINIUM HOMEOWNER’S ASSOCIATION DUES.  BORROWER
SHALL KEEP THE PROPERTY FREE FROM ALL LIENS, INCLUDING MECHANICS’ AND
MATERIALMEN’S LIENS. BORROWER SHALL PAY BEFORE DELINQUENT ALL REAL ESTATE TAXES

 

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and its portion of the condominium homeowner’s association dues against the
Property. Failure of Borrower to pay its portion of condominium homeowner’s
association dues prior to delinquency at any time shall constitute an Event of
Default. Upon request, Borrower will furnish Lender with receipts indicating
that all Real Estate Taxes have been paid currently.

 

SECTION 7.3                                                       COMPLIANCE;
CONSTRUCTION; OPERATION.  BORROWER SHALL CAUSE ALL CONSTRUCTION TO BE DONE FREE
OF DEFECTS IN A GOOD AND WORKMANLIKE MANNER WITH MATERIALS WHICH ARE NEW AND OF
HIGH QUALITY. BORROWER WILL PROMPTLY CORRECT ANY DEFECTS IN CONSTRUCTION. THE
PROJECT WILL BE EQUIPPED WITH FURNISHINGS, FIXTURES AND EQUIPMENT WHICH ARE NEW
AND OF HIGH QUALITY. BORROWER SHALL COMPLY WITH ALL GOVERNMENTAL APPROVALS
PERTAINING TO THE CONSTRUCTION OF THE PROJECT AND THE USE AND OPERATION OF THE
PROPERTY. BORROWER WILL NOT COMMENCE ANY PHASE OF CONSTRUCTION OR OPERATION
UNTIL IT HAS SECURED ALL REQUIRED PERMITS, LICENSES OR OTHER AUTHORIZATIONS FROM
THE APPLICABLE GOVERNMENTAL AUTHORITIES. ALL MATERIALS AND LABOR PURCHASED AND
EMPLOYED FOR THE PROJECT SHALL BE USED SOLELY FOR THE PROJECT AND FOR NO OTHER
PURPOSE.   BORROWER SHALL PERFORM ALL OF ITS OBLIGATIONS UNDER THE BASIC
AGREEMENTS, ALL LEASES, ALL COVENANTS, CONDITIONS AND RESTRICTIONS OF RECORD AND
ALL OTHER MATERIAL AGREEMENTS AFFECTING THE PROPERTY.  EXCEPT AS OTHERWISE
PROVIDED ELSEWHERE IN THIS AGREEMENT, BORROWER SHALL NOT MAKE OR PERMIT ANY
MATERIAL MODIFICATION TO OR TERMINATION OF ANY OF THE BASIC AGREEMENTS WITHOUT
LENDER’S CONSENT.  PRIOR TO THE CONVERSION OF THE PROPERTY, THE PROJECT SHALL BE
OPERATED IN A FIRST-CLASS MANNER AS A RESIDENTIAL APARTMENT BUILDING AND
FOLLOWING CONVERSION OF THE PROJECT THE PROJECT SHALL BE OPERATED IN A
FIRST-CLASS MANNER AS A RESIDENTIAL CONDOMINIUM BUILDING. BORROWER SHALL NOT
APPLY FOR OR PERMIT TO OCCUR ANY MATERIAL ANNEXATION, ZONING OR SUBDIVISION
CHANGE RESPECTING THE PROPERTY.

 

SECTION 7.4                                                       TRANSFERS;
CHANGES IN ORGANIZATION.

 

(A)                                  BORROWER SHALL NOT CAUSE OR PERMIT ANY
TRANSFER OF (I) ANY OF ITS RIGHTS UNDER THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENTS, (II) ANY OF ITS INTEREST, LEGAL OR BENEFICIAL, IN ANY PART OF THE
PROPERTY, EXCEPT AS OTHERWISE PERMITTED BY THIS AGREEMENT OR THE OTHER LOAN
DOCUMENTS OR AS MAY BE CONSENTED TO BY LENDER IN WRITING.

 

(B)                                 BORROWER SHALL NOT PERMIT ANY BORROWER PARTY
TO CAUSE OR PERMIT ANY TRANSFER OF ANY OF ITS INTEREST AS A BORROWER PARTY IN
BORROWER.

 

(C)                                  BORROWER SHALL NOT PERMIT ANY SHAREHOLDER
OR OTHER OWNER OF AN INTEREST IN ANY BORROWER PARTY TO CAUSE OR PERMIT ANY
TRANSFER OF ANY OF ITS SHARES OR OTHER OWNERSHIP INTERESTS IN SUCH BORROWER
PARTY; PROVIDED HOWEVER, LENDER ACKNOWLEDGES THAT THE SOLE MEMBER OF BORROWER IS
A PUBLICLY TRADED COMPANY AND HEREBY APPROVES OF ITS SECURITIES BEING TRADED ON
THE NASDAQ.

 

(D)                                 BORROWER SHALL NOT, NOR SHALL BORROWER
PERMIT ITS MEMBERS OR GUARANTOR, TO MAKE ANY MATERIAL AMENDMENTS TO ITS
RESPECTIVE ORGANIZATIONAL DOCUMENTS, WITHOUT LENDER’S PRIOR WRITTEN CONSENT.

 

SECTION 7.5                                                       LEASES.

 

(A)                                  BORROWER SHALL NOT ENTER INTO ANY LEASE
THAT IS NOT FOR A MARKET RENT AND THAT IS NOT TERMINABLE ON 90 DAYS NOTICE OR
LESS, WITHOUT LENDER’S PRIOR WRITTEN CONSENT.

 

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(B)                                 BORROWER SHALL, AT ITS OWN COST AND EXPENSE:
(A) EXCEPT AS OTHERWISE CONSISTENT WITH PRUDENT RESIDENTIAL APARTMENT MANAGEMENT
PRACTICES, FAITHFULLY ABIDE BY, PERFORM AND DISCHARGE EACH AND EVERY OBLIGATION,
COVENANT AND AGREEMENT UNDER ANY LEASE TO BE PERFORMED BY THE LANDLORD
THEREUNDER; (B) EXCEPT AS OTHERWISE CONSISTENT WITH PRUDENT RESIDENTIAL
APARTMENT MANAGEMENT PRACTICES, ENFORCE OR SECURE THE PERFORMANCE OF EACH AND
EVERY OBLIGATION, COVENANT, CONDITION AND AGREEMENT IN ANY LEASE BY THE TENANT
THEREUNDER TO BE PERFORMED; (C) NOT BORROW AGAINST, PLEDGE OR FURTHER ASSIGN ANY
RENTALS DUE UNDER ANY LEASE; (D) NOT PERMIT THE PREPAYMENT OF ANY RENTS DUE
UNDER ANY LEASE FOR MORE THAN NINETY (90) DAYS IN ADVANCE NOR FOR MORE THAN THE
NEXT ACCRUING INSTALLMENT OF RENTS, NOR ANTICIPATE, DISCOUNT, COMPROMISE,
FORGIVE OR WAIVE ANY SUCH RENTS; (E) EXCEPT AS OTHERWISE CONSISTENT WITH PRUDENT
RESIDENTIAL APARTMENT MANAGEMENT PRACTICES, NOT WAIVE, EXCUSE, CONDONE OR IN ANY
MANNER RELEASE OR DISCHARGE ANY TENANT OF OR FROM THE OBLIGATIONS, COVENANTS,
CONDITIONS AND AGREEMENTS BY SAID TENANTS TO BE PERFORMED UNDER ANY LEASE,
UNLESS IN CONNECTION WITH THE EXERCISE OF REMEDIES AGAINST SUCH TENANT;
(F) EXCEPT AS OTHERWISE CONSISTENT WITH PRUDENT RESIDENTIAL APARTMENT MANAGEMENT
PRACTICES, NOT TERMINATE ANY LEASE OR ACCEPT A SURRENDER THEREOF OR A DISCHARGE
OF THE TENANT, UNLESS IN CONNECTION WITH THE EXERCISE OF REMEDIES AGAINST SUCH
TENANT; AND (G) NOT CONSENT TO A SUBORDINATION OF THE INTEREST OF ANY TENANT TO
ANY PARTY OTHER THAN LENDER, AND THEN ONLY IF SPECIFICALLY CONSENTED TO BY
LENDER.

 

(C)                                  SHOULD BORROWER FAIL TO PERFORM, COMPLY
WITH OR DISCHARGE ANY OBLIGATIONS OF BORROWER UNDER ANY LEASE, OR SHOULD LENDER
BECOME AWARE OF OR BE NOTIFIED BY ANY TENANT UNDER ANY LEASE, OF A FAILURE ON
THE PART OF BORROWER TO SO PERFORM, COMPLY WITH OR DISCHARGE ITS OBLIGATIONS
UNDER SAID LEASE, LENDER MAY, BUT SHALL NOT BE OBLIGATED TO, REMEDY SUCH
FAILURE.  ANY SUCH ACTION BY LENDER SHALL NOT WAIVE OR RELEASE BORROWER FROM ANY
OBLIGATION CONTAINED IN THIS AGREEMENT.  ANY AMOUNT EXPENDED BY LENDER IN SUCH
PERFORMANCE OR ATTEMPTED PERFORMANCE SHALL BE DEEMED TO BE COSTS.

 

SECTION 7.6                                                       MANAGEMENT
AGREEMENT.  (A) BORROWER COVENANTS AND AGREES AS FOLLOWS:

 

(I)            BORROWER SHALL DULY PERFORM AND OBSERVE ALL OF THE TERMS AND
CONDITIONS ON ITS PART TO BE PERFORMED AND OBSERVED UNDER THE MANAGEMENT
AGREEMENT.

 

(II)           BORROWER SHALL USE COMMERCIALLY REASONABLE EFFORTS TO CAUSE
MANAGER TO MANAGE AND OPERATE THE PROPERTY IN ACCORDANCE WITH THE MANAGEMENT
AGREEMENT.

 

(III)          WITHOUT THE PRIOR WRITTEN CONSENT OF LENDER WHICH SHALL NOT BE
UNREASONABLY WITHHELD OR DELAYED, BORROWER WILL NOT TERMINATE, MATERIALLY MODIFY
OR AMEND (OR PERMIT TO BE TERMINATED, MATERIALLY MODIFIED OR AMENDED) THE
MANAGEMENT AGREEMENT.

 

(B)           WITHOUT LIMITATION OF THE PROVISIONS OF PARAGRAPH (A) ABOVE, IF
THE MANAGEMENT AGREEMENT TERMINATES OR IS TERMINATED, BORROWER SHALL PROMPTLY
ENTER INTO A REPLACEMENT MANAGEMENT AGREEMENT WITH A REPLACEMENT MANAGER, WHICH
MANAGEMENT AGREEMENT AND MANAGER SHALL BE SUBJECT TO LENDER’S PRIOR WRITTEN
APPROVAL (WHICH APPROVAL SHALL NOT BE UNREASONABLY WITHHELD, CONDITIONED OR
DELAYED).  BORROWER SHALL ALSO CAUSE SUCH REPLACEMENT MANAGER TO ENTER INTO A
SUBORDINATION AGREEMENT SATISFACTORY TO LENDER.

 

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SECTION 7.7                                                       FINANCIAL AND
OTHER REPORTS AND DELIVERIES.  BORROWER SHALL FURNISH (OR CAUSE TO BE FURNISHED)
TO LENDER, THE FOLLOWING FINANCIAL STATEMENTS AND INFORMATION AT THE FOLLOWING
TIMES:

 

(A)                                  FINANCIAL STATEMENTS.  WITHIN 90 DAYS OF
THE END OF EACH FISCAL YEAR, COMPLETED, SIGNED AND DATED, INTERNALLY PREPARED,
ANNUAL FINANCIAL STATEMENTS (INCLUDING INCOME STATEMENTS AND BALANCE SHEETS AND
SUCH VERIFICATIONS, SUPPORTING SCHEDULES OR ADDITIONAL STATEMENTS NECESSARY TO
SUBSTANTIATE ANY INFORMATION CONTAINED IN SUCH FINANCIAL STATEMENTS), FOR
BORROWER, GUARANTOR AND THE PROPERTY, CERTIFIED BY AN OFFICER OF BORROWER OR
GUARANTOR, AS APPLICABLE, AS BEING ACCURATE. WITHIN 30 DAYS OF THE END OF EACH
MONTH, AN INTERNALLY PREPARED STATEMENT OF INCOME AND EXPENSES FOR THE PROJECT
INDICATING SOURCES AND USES OF FUNDS, AND SUCH OTHER STATEMENTS AS LENDER MAY
REASONABLY REQUIRE, CERTIFIED BY AN OFFICER OF BORROWER OR GUARANTOR, AS
APPLICABLE, AS BEING COMPLETE, TRUE AND CORRECT IN ALL MATERIAL RESPECTS.

 

(B)                                 REQUIRED NOTICES.  BORROWER SHALL PROMPTLY
NOTIFY LENDER IN WRITING OF THE OCCURRENCE OF:  (I) ANY EVENT OF DEFAULT OR
DEFAULT; (II) ANY EVENT WHICH MATERIALLY AND ADVERSELY AFFECTS THE ABILITY OF
BORROWER, ANY BORROWER PARTY OR GUARANTOR TO PERFORM ANY OF ITS RESPECTIVE
SECURED OBLIGATIONS HEREUNDER OR UNDER ANY OF THE LOAN DOCUMENTS; (III) ANY
EVENT WHICH ADVERSELY AFFECTS THE PRIORITY OF LENDER’S FIRST LIEN ON THE
PROPERTY; (IV) ANY JUDGMENTS, LITIGATION OR OTHER PROCEEDING FILED OR THREATENED
AGAINST ANY BORROWER, GUARANTOR OR THE PROPERTY; (V) ANY MATERIAL CHANGE IN THE
FINANCIAL CONDITION OF BORROWER OR GUARANTOR NOT PREVIOUSLY DESCRIBED IN THE
FINANCIAL REPORTS DELIVERED TO LENDER PURSUANT TO THIS SECTION 7.7; (VI) THE
INSTITUTION OF ANY STEPS BY BORROWER, ANY BORROWER PARTY, GUARANTOR OR ANY OTHER
PERSON TO TERMINATE ANY PENSION PLAN, OR THE FAILURE TO MAKE A REQUIRED
CONTRIBUTION TO ANY PENSION PLAN IF SUCH FAILURE IS SUFFICIENT TO GIVE RISE TO A
LIEN UNDER SECTION 302(F) OF ERISA, OR THE TAKING OF ANY ACTION WITH RESPECT TO
A PENSION PLAN WHICH COULD RESULT IN THE REQUIREMENT THAT BORROWER, ANY BORROWER
PARTY OR GUARANTOR FURNISH A BOND OR OTHER SECURITY TO THE PBGC OR SUCH PENSION
PLAN, OR THE OCCURRENCE OF ANY EVENT WITH RESPECT TO ANY PENSION PLAN WHICH
COULD RESULT IN THE INCURRENCE BY BORROWER, ANY BORROWER PARTY OR GUARANTOR OF
ANY MATERIAL LIABILITY, FINE OR PENALTY, OR ANY MATERIAL INCREASE IN THE
CONTINGENT LIABILITY OF BORROWER, ANY BORROWER PARTY OR GUARANTOR WITH RESPECT
TO ANY POST-RETIREMENT WELFARE PLAN BENEFIT; (VII) AS SOON AS POSSIBLE AFTER
BORROWER SHALL HAVE RECEIVED KNOWLEDGE THEREOF, NOTICE THAT AN AMENDMENT SHALL
BE REQUIRED OR DESIRABLE TO THE PROJECT BUDGET; OR (VIII) ANY NOTICES ALLEGING A
MATERIAL DEFAULT (BY ANY PARTY THERETO) UNDER ANY OF THE BASIC AGREEMENTS OR THE
MANAGEMENT AGREEMENT.

 

(C)                                  FURNISHING REPORTS AND NOTICES.  UPON
REQUEST BY LENDER, BORROWER SHALL PROVIDE LENDER WITH COPIES OF: (I) ALL
INSPECTIONS, REPORTS, TEST RESULTS AND OTHER INFORMATION RECEIVED BY BORROWER
FROM TIME TO TIME FROM ITS EMPLOYEES, AGENTS, REPRESENTATIVES, ARCHITECTS,
ENGINEERS, CONTRACTORS AND ANY OTHER PARTIES INVOLVED IN THE PROJECT AND (II)
ANY NOTICES PERTAINING TO THE PROJECT WHICH BORROWER HAS RECEIVED FROM ANY
GOVERNMENTAL AUTHORITIES OR ANY INSURANCE COMPANY PROVIDING INSURANCE IN
CONNECTION WITH THE PROJECT.

 

(D)                                 TAX RETURNS. ON OR BEFORE APRIL 30 OF EACH
YEAR DURING THE TERM OF THE LOAN, TRUE, CORRECT AND COMPLETE COPIES OF
BORROWER’S FEDERAL AND STATE INCOME TAX RETURNS, GUARANTOR’S FEDERAL AND STATE
INCOME TAX RETURNS AND THE FEDERAL AND STATE TAX RETURNS FOR ALL ENTITIES
REPORTING INCOME AND EXPENSES ON THE PROJECT; PROVIDED, THAT IF AN EXTENSION IS
FILED BY ANY SUCH PARTY WITH THE INTERNAL REVENUE SERVICE OR APPLICABLE STATE
REVENUE DEPARTMENT, THEN IF LENDER IS PROVIDED A

 

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true, correct and complete copy of such extension, Borrower may deliver such
income tax returns to Lender simultaneously upon the filing thereof.

 

(E)                                  SALES REPORTS.  THE SALES REPORT AS AND
WHEN REQUIRED BY THE TERMS OF SECTION 8.4.

 

(F)                                    CONDOMINIUM CONTRACTS.  UPON EXECUTION
THEREOF, COMPLETE COPIES OF ALL CONDOMINIUM CONTRACTS.

 

(G)                                 HOMEOWNER’S ASSOCIATION DUES.  WITHIN 15
DAYS OF THE END OF EACH MONTH,  EVIDENCE REASONABLY SATISFACTORY TO LENDER
VERIFYING THAT BORROWER’S PORTION OF THE CONDOMINIUM HOMEOWNER’S ASSOCIATION
DUES HAVE BEEN PAID.

 

(H)                                 BOOKS AND RECORDS.  BORROWER SHALL MAINTAIN
COMPLETE BOOKS OF ACCOUNT AND OTHER RECORDS FOR THE PROPERTY, AND THE SAME SHALL
BE MADE AVAILABLE FOR AUDIT, INSPECTION AND COPYING BY LENDER AND ITS AGENTS AT
REASONABLE TIMES AND UPON REASONABLE PRIOR NOTICE.

 

(I)                                     OTHER.  BORROWER SHALL ALSO FURNISH
LENDER SUCH OTHER MATERIAL FINANCIAL INFORMATION OR VERIFICATIONS CONCERNING THE
PROPERTY, BORROWER, ANY BORROWER PARTY OR GUARANTOR AS LENDER MAY REASONABLY
REQUEST FROM TIME TO TIME. LENDER MAY RETAIN AN INVESTIGATOR TO RESEARCH THE
PUBLIC RECORDS AND REPUTATION OF ANY PRINCIPAL OF BORROWER OR GUARANTOR.

 

SECTION 7.8                          INSURANCE REQUIREMENTS.

 

SECTION 7.8.1                 INSURANCE.  BORROWER, AT ITS SOLE COST AND
EXPENSE, SHALL INSURE AND KEEP THE PROPERTY INSURED AGAINST SUCH PERILS AND
HAZARDS, AND IN SUCH AMOUNTS AND WITH SUCH LIMITS, AS LENDER MAY FROM TIME TO
TIME REASONABLY REQUIRE AT ALL TIMES DURING THE TERM OF THE LOAN, INCLUDING, BUT
NOT LIMITED TO THE INSURANCE COVERAGE SET FORTH BELOW.  UNLESS OTHERWISE
EXPRESSLY DEFINED HEREIN, CAPITALIZED TERMS SET FORTH IN THIS SECTION ARE TERMS
OF ART, AS USED IN AND UNDERSTOOD IN THE INSURANCE INDUSTRY OR ARE DEFINED TERMS
ELSEWHERE IN THIS AGREEMENT.

 

(A)                                  CASUALTY/ “ALL RISK”.  BORROWER SHALL
MAINTAIN OR OBTAIN INSURANCE AGAINST LOSS CUSTOMARILY INCLUDED UNDER STANDARD
“ALL RISK” INSURANCE POLICIES INCLUDING FLOOD, EARTHQUAKE AND SUCH OTHER
INSURABLE HAZARDS AS, UNDER GOOD INSURANCE PRACTICES ARE INSURED AGAINST FOR
OTHER PROPERTY AND BUILDINGS SIMILAR TO THE PROPERTY IN NATURE, USE, LOCATION,
HEIGHT, AND TYPE OF CONSTRUCTION (THE “ALL RISK INSURANCE”).  THE AMOUNT OF SUCH
INSURANCE SHALL BE NOT LESS THAN ONE HUNDRED PERCENT (100%) OF THE REPLACEMENT
COST OF THE IMPROVEMENTS OF THE PROPERTY.  SUCH INSURANCE POLICY SHALL CONTAIN
AN AGREED AMOUNT ENDORSEMENT. FLOOD AND EARTHQUAKE SUBLIMITS SHALL BE AT LEAST
25% OF THE REPLACEMENT COST OF THE PROPERTY, BUT NOT LESS THAN $5,000,000 EACH
PER OCCURRENCE AND IN THE ANNUAL AGGREGATE, UNLESS THE RISK IS LOCATED IN A
MERCALLI ZONE VII OR GREATER OR A FLOOD ZONE “A”, AS DEFINED BY THE NATIONAL
INSURANCE FLOOD PLAN.  IF THE PROPERTY IS LOCATED IN AN EARTHQUAKE MERCALLI ZONE
VII OR GREATER, BORROWER SHALL MAINTAIN EARTHQUAKE LIMITS PROVIDING FOR 75% OF
THE REPLACEMENT COST, WITH A DEDUCTIBLE NOT GREATER THAN 5% OF THE REPLACEMENT
COST.  IF THE PROPERTY IS LOCATED IN A FLOOD ZONE “A”, BORROWER SHALL MAINTAIN
FLOOD LIMITS PROVIDING FOR 20% OF THE REPLACEMENT COST, WITH A DEDUCTIBLE NOT
GREATER THAN 3% OF REPLACEMENT COSTS.  SUCH INSURANCE SHALL COVER INCREASED COST
OF LAW OR ORDINANCE INSURANCE, COSTS OF DEMOLITION AND INCREASED COST OF
CONSTRUCTION, WITH A SUBLIMIT OF NOT LESS THAN

 

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$1,000,000. If coverage is provided under a blanket policy, Lender shall be
named as sole Loss Payee and Mortgagee for the Property.

 

(B)                                 INTENTIONALLY DELETED.

 

(C)                                  COMMERCIAL GENERAL LIABILITY. COMMERCIAL
GENERAL LIABILITY INSURANCE, INCLUDING, BUT NOT LIMITED TO, COVERAGE FOR OWNED
(IF ANY), HIRED AND NON-OWNED AUTO LIABILITY, AND UMBRELLA LIABILITY COVERAGE
FOR PERSONAL INJURY, BODILY INJURY, DEATH, ACCIDENT AND PROPERTY DAMAGE,
PROVIDING IN COMBINATION NO LESS THAN $10,000,000 PER OCCURRENCE AND IN THE
ANNUAL AGGREGATE, PER LOCATION.  THE POLICIES DESCRIBED IN THIS PARAGRAPH SHALL
COVER, WITHOUT LIMITATION: ELEVATORS, ESCALATORS, INDEPENDENT CONTRACTORS,
CONTRACTUAL LIABILITY AND PRODUCTS AND COMPLETED OPERATIONS LIABILITY COVERAGE.

 

(D)                                 WORKER’S COMPENSATION. WORKER’S COMPENSATION
INSURANCE COVERING BORROWER AND ITS EMPLOYEES AT THE PROPERTY TO THE EXTENT
REQUIRED, AND IN THE AMOUNTS REQUIRED BY APPLICABLE LAWS.

 

(E)                                  BUSINESS INTERRUPTION. UPON LENDER’S
REASONABLE REQUEST, BUSINESS INCOME AND EXTRA EXPENSE INSURANCE, AGAINST THE
PERILS INSURED BY THE ALL RISK INSURANCE, FOR A PERIOD OF INDEMNITY OF TWELVE
MONTHS.

 

(F)            DRAM SHOP. UPON LENDER’S REASONABLE REQUEST OR PRIOR TO ANY
TENANT SELLING ALCOHOLIC BEVERAGES ON ANY PART OF THE PROPERTY, BORROWER EITHER
ITSELF OR THROUGH THE TENANT SHALL PROVIDE EVIDENCE OF SO-CALLED “DRAM SHOP”
INSURANCE AGAINST CLAIMS OR LIABILITIES ARISING DIRECTLY OR INDIRECTLY TO
PERSONS OR PROPERTY ON ACCOUNT OF THE SALE OR DISPENSING OF ALCOHOLIC
BEVERAGES.  COVERAGE SHALL INCLUDE LOSS OF MEANS OF SUPPORT.  LIMITS SHALL EQUAL
THOSE LIMITS AS MAY BE REQUIRED BY APPLICABLE LAWS OR AS LENDER MAY REASONABLY
SPECIFY.  IF STATE LAW ALLOWS, LENDER SHALL BE NAMED AS AN ADDITIONAL INSURED ON
SUCH POLICY.

 

(G)           OTHER. SUCH OTHER INSURANCES AS MAY BE REASONABLY REQUESTED BY
LENDER.

 

SECTION 7.8.2                 POLICY REQUIREMENTS.

 

(A)           ALL INSURANCE POLICIES SHALL BE ISSUED BY AN INSURER OR INSURERS
WITH AN A.M. BEST RATING OF A:IX OR BETTER OR A STANDARD AND POOR’S RATING OF
“AA”, OR EQUIVALENT RATING FROM ANOTHER AGENCY ACCEPTABLE TO LENDER AND BE
AUTHORIZED IN THE STATE WHERE THE PROPERTY IS LOCATED.  ALL INSURANCE ACQUIRED
PURSUANT TO THIS AGREEMENT SHALL BE IN FORM, AMOUNTS AND WITH COVERAGE AND
DEDUCTIBLES SATISFACTORY TO LENDER, IN LENDER’S SOLE DISCRETION.

 

(B)                                 THE ALL RISK INSURANCE REQUIRED PURSUANT TO
SECTION 7.8.1(A) AND (B) SHALL NAME BORROWER AS THE INSURED AND SHALL ALSO NAME
LENDER AS LOSS PAYEE AND MORTGAGEE, UNDER A NON-CONTRIBUTING STANDARD MORTGAGEE
CLAUSE.  WITHOUT LENDER’S PRIOR WRITTEN CONSENT, BORROWER SHALL NOT NAME ANY
PERSON OTHER THAN LENDER AS LOSS PAYEE UNDER ANY PROPERTY INSURANCE POLICIES
THAT BORROWER IS REQUIRED TO INSURE PURSUANT TO ANY LEASE.

 

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(C)                                  THE COMMERCIAL GENERAL LIABILITY, AUTO
LIABILITY AND “DRAM SHOP” INSURANCE SET FORTH IN SECTIONS 7.8.1(C) AND (F),
SHALL NAME LENDER, ITS DIRECTORS, OFFICERS AND EMPLOYEES AS AN ADDITIONAL
INSURED.

 

(D)                                 THE AMOUNT OF ANY DEDUCTIBLE UNDER ANY
INSURANCE POLICY MUST BE REASONABLY ACCEPTABLE TO LENDER.

 

(E)                                  BORROWER MAY PROVIDE REQUIRED INSURANCE
UNDER BLANKET POLICIES.  BORROWER SHALL NOT MAINTAIN ANY INSURANCE ON THE
PROPERTY THAT DOES NOT NAME LENDER AS LOSS PAYEE.

 

(F)                                    BORROWER SHALL PAY THE PREMIUMS FOR THE
INSURANCE POLICIES AS THE SAME BECOME DUE AND PAYABLE.  BORROWER SHALL DELIVER
TO LENDER CERTIFIED COPIES OF THE INSURANCE POLICIES REQUIRED TO BE MAINTAINED
PURSUANT TO THIS AGREEMENT WITHIN SIXTY (60) DAYS AFTER THE CLOSING DATE, OR TEN
(10) DAYS AFTER THE ISSUANCE OF THE POLICIES BY THE INSURER, WHICHEVER IS LATER,
BUT IN ALL EVENTS, NO LATER THAN NINETY (90) DAYS AFTER THE CLOSING DATE, AND
FAILURE TO DO SO WILL BE AN IMMEDIATE EVENT OF DEFAULT.  NOTWITHSTANDING THE
FOREGOING, LENDER SHALL NOT BE DEEMED BY REASON OF THE CUSTODY OF SUCH INSURANCE
POLICIES TO HAVE KNOWLEDGE OF THE CONTENTS THEREOF.  BORROWER ALSO SHALL DELIVER
TO LENDER, WITHIN TEN (10) DAYS OF LENDER’S REQUEST, A CERTIFICATE OF BORROWER
OR BORROWER’S INSURANCE AGENT SETTING FORTH THE PARTICULARS AS TO ALL SUCH
INSURANCE POLICIES, THAT ALL PREMIUMS DUE THEREON HAVE BEEN PAID CURRENTLY AND
THAT THE SAME ARE IN FULL FORCE AND EFFECT.  BORROWER SHALL DELIVER A
CERTIFICATE OR OTHER EVIDENCE OF INSURANCE ACCEPTABLE TO LENDER EVIDENCING THE
INSURANCE REQUIRED HEREUNDER ON THE CLOSING DATE, TOGETHER WITH RECEIPTS FOR THE
PAYMENT OF PREMIUMS THEREON.  ALL CERTIFICATES FOR PROPERTY INSURANCE MUST BE ON
ACCORD FORM 27 OR THE EQUIVALENT;  ACCORD 25 CERTIFICATES ARE ACCEPTABLE FOR
LIABILITY INSURANCE.  NOT LATER THAN FIFTEEN (15) DAYS PRIOR TO THE EXPIRATION
DATE OF EACH OF THE INSURANCE POLICIES BORROWER SHALL DELIVER TO LENDER A
CERTIFICATE OF INSURANCE EVIDENCING RENEWAL OF COVERAGE AS REQUIRED HEREIN. 
WITHIN TEN (10) DAYS AFTER SUCH RENEWAL, BORROWER SHALL DELIVER TO LENDER
EVIDENCE OF PAYMENT OF PREMIUM SATISFACTORY TO LENDER.  NOT LATER THAN NINETY
(90) DAYS AFTER THE RENEWAL OF EACH OF THE INSURANCE POLICIES, BORROWER SHALL
DELIVER TO LENDER AN ORIGINAL OR CERTIFIED COPY (AS REQUIRED PURSUANT TO THIS
SECTION) OF A RENEWAL POLICY OR POLICIES.

 

(G)                                 EACH INSURANCE POLICY SHALL CONTAIN A
PROVISION WHEREBY THE INSURER AGREES THAT SO LONG AS THE LOAN IS OUTSTANDING,
SUCH POLICY SHALL NOT BE CANCELED OR FAIL TO BE RENEWED, LAPSED OR MATERIALLY
CHANGED WITHOUT, IN EACH CASE, AT LEAST THIRTY (30) DAYS PRIOR WRITTEN NOTICE TO
LENDER, EXCEPT TEN (10) DAYS PRIOR WRITTEN NOTICE TO LENDER OF NON-PAYMENT OF
PREMIUM.

 

(H)                                 IN THE EVENT ANY INSURANCE POLICY (EXCEPT
FOR GENERAL AND OTHER LIABILITY AND WORKERS COMPENSATION INSURANCE) SHALL
CONTAIN BREACH OF WARRANTY PROVISIONS, SUCH POLICY SHALL PROVIDE THAT WITH
RESPECT TO THE INTEREST OF LENDER, SUCH INSURANCE POLICY SHALL NOT BE
INVALIDATED BY AND SHALL INSURE LENDER REGARDLESS OF: (A) ANY ACT, FAILURE TO
ACT OR NEGLIGENCE OF OR VIOLATION OF WARRANTIES, DECLARATIONS OR CONDITIONS
CONTAINED IN SUCH POLICY BY ANY NAMED INSURED; (B) THE OCCUPANCY OR USE OF THE
PROPERTY FOR PURPOSES MORE HAZARDOUS THAN PERMITTED BY THE TERMS THEREOF; OR (C)
ANY FORECLOSURE OR OTHER ACTION OR PROCEEDING TAKEN BY LENDER PURSUANT TO ANY
PROVISION OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS.

 

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(I)                                     ANY INSURANCE MAINTAINED PURSUANT TO
THIS AGREEMENT MAY BE EVIDENCED BY BLANKET INSURANCE POLICIES COVERING THE
PROPERTY AND OTHER PROPERTIES OR ASSETS OF BORROWER OR ITS AFFILIATES; PROVIDED
THAT ANY SUCH POLICY SHALL IN ALL OTHER RESPECTS COMPLY WITH THE REQUIREMENTS OF
THIS SECTION.  LENDER, IN ITS REASONABLE DISCRETION, SHALL DETERMINE WHETHER
SUCH BLANKET POLICIES CONTAIN SUFFICIENT LIMITS OF INSURANCE.

 

(J)                                     ANY INSURANCE CARRIED BY LENDER SHALL BE
FOR ITS SOLE BENEFIT AND SHALL NOT INURE TO THE BENEFIT OF BORROWER AND
INSURANCE REQUIRED FROM BORROWER SHALL BE PRIMARY TO ANY AVAILABLE, IF ANY, TO
LENDER.

 

(K)                                  ALL REQUIRED POLICIES, OTHER THAN
PROFESSIONAL LIABILITY, SHALL PROVIDE THAT INSURERS HAVE WAIVED RIGHTS OF
SUBROGATION AGAINST LENDER.  THE REQUIRED INSURANCE SHALL BE PRIMARY WITHOUT
RIGHT OF CONTRIBUTION FROM ANY INSURANCE WHICH MAY BE CARRIED BY LENDER.

 

(L)                                     THE REQUIRED LIMITS ARE MINIMUM LIMITS
ESTABLISHED BY LENDER AND NOTHING CONTAINED HEREIN SHALL BE CONSTRUED TO MEAN
THE REQUIRED LIMITS ARE ADEQUATE OR APPROPRIATE TO PROTECT BORROWER FROM GREATER
LOSS.

 

SECTION 7.8.3                 NOTICE OF POLICIES.  ANY NOTICE PERTAINING TO
INSURANCE AND REQUIRED PURSUANT TO THIS SECTION 7.8 SHALL BE GIVEN IN THE MANNER
PROVIDED IN SECTION 12.10 BELOW AT LENDER’S ADDRESS STATED ABOVE.

 

SECTION 7.8.4                 INSURANCE REVIEW.  AT LENDER’S OPTION, BUT NOT
MORE OFTEN THAN ANNUALLY, BORROWER SHALL PROVIDE LENDER WITH A REPORT FROM AN
INDEPENDENT INSURANCE CONSULTANT OF REGIONAL OR NATIONAL PROMINENCE, ACCEPTABLE
TO LENDER, CERTIFYING THAT BORROWER’S INSURANCE IS IN COMPLIANCE WITH THIS
SECTION 7.8.

 

SECTION 7.9                                                       BORROWER’S
INDEMNITIES.  BORROWER SHALL INDEMNIFY, PROTECT, DEFEND LENDER AND EACH OF ITS
STOCKHOLDERS, DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS (EACH, A “LENDER PARTY”
AND COLLECTIVELY THE “LENDER PARTIES”) AND HOLD LENDER PARTIES HARMLESS FROM AND
AGAINST ANY AND ALL ACTIONS, SUITS, LOSSES, LIABILITIES, DAMAGES, CLAIMS, COSTS
AND EXPENSES OF ANY KIND WHATSOEVER (INCLUDING REASONABLE ATTORNEY’S FEES AND
DISBURSEMENTS) ACTUALLY PAID, INCURRED OR SUFFERED BY OR ASSERTED AGAINST THE
RELEVANT LENDER PARTY (IRRESPECTIVE OF WHETHER SUCH LENDER PARTY IS A PARTY TO
THE ACTION FOR WHICH INDEMNIFICATION IS SOUGHT) (COLLECTIVELY, “LOSSES”) AS A
RESULT OF OR ARISING OUT OF:

 

(A)                                  ANY MATTER FINANCED OR EXPECTED TO BE
FINANCED WITH THE PROCEEDS OF THE LOAN;

 

(B)                                 THE ENTERING INTO AND PERFORMANCE OF THIS
AGREEMENT AND ANY OTHER LOAN DOCUMENT BY ANY OF LENDER PARTIES (INCLUDING ANY
ACTION BROUGHT BY OR ON BEHALF OF BORROWER OR ANY OTHER PARTY AS THE RESULT OF
ANY DETERMINATION BY LENDER PURSUANT TO THIS AGREEMENT NOT TO FUND ANY ADVANCE);

 

(C)                                  ANY INJURY, DAMAGE OR LIABILITY TO PERSONS
OR PROPERTY AT OR ABOUT THE PROPERTY OR OTHERWISE OCCURRING IN CONNECTION WITH
THE CONSTRUCTION OF THE PROJECT OR THE OWNERSHIP, OPERATION OR MAINTENANCE OF
THE PROPERTY;

 

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(D)                                 THE CONSTRUCTION OF THE RELATIONSHIP BETWEEN
LENDER AND BORROWER CONTRARY TO SECTION 12.13 BELOW; AND

 

(E)                                  ANY CLAIM OF A BROKER’S OR FINDER’S FEE
AGAINST LENDER BY ANY PERSON OR ENTITY IN CONNECTION WITH ANY OF THE
TRANSACTIONS HEREIN CONTEMPLATED, EXCEPT FOR ANY SUCH INDEMNIFIED LIABILITIES
ARISING FOR THE ACCOUNT OF A PARTICULAR LENDER PARTY BY REASON OF THE RELEVANT
LENDER PARTY’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.  IF AND TO THE EXTENT
THAT THE FOREGOING UNDERTAKING MAY BE UNENFORCEABLE FOR ANY REASON, BORROWER
HEREBY AGREES TO MAKE THE MAXIMUM CONTRIBUTION TO THE PAYMENT AND SATISFACTION
OF EACH OF THE INDEMNIFIED LIABILITIES WHICH IS PERMISSIBLE UNDER APPLICABLE
LAW. BORROWER ACKNOWLEDGES THAT THE INDEMNIFIED LENDER PARTIES MAY DEFEND ANY
MATTER COVERED BY THE ABOVE INDEMNIFICATION BY COUNSEL OF THE RELEVANT LENDER
PARTY’S CHOICE, AND THE COSTS OF SUCH DEFENSE (INCLUDING REASONABLE ATTORNEY’S
FEES) ARE PART OF THE COSTS COVERED BY THE INDEMNITY;

 

PROVIDED, THAT THE FOREGOING INDEMNIFICATION OBLIGATIONS SET FORTH IN (A)-(E)
ABOVE SHALL NOT INCLUDE ANY OBLIGATION TO INDEMNIFY ANY LENDER PARTY FOR LOSSES
SUSTAINED OR INCURRED BY SUCH LENDER PARTY AS A RESULT OF SUCH LENDER PARTY’S
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.

 

The foregoing indemnification obligations shall survive repayment of the Loan as
set forth in Section 12.15 below.

 

SECTION 7.10                                                 SINGLE PURPOSE
ENTITY.  BORROWER WILL AT ALL TIMES REMAIN A SINGLE PURPOSE ENTITY.

 

SECTION 7.11                                                 FURTHER
ASSURANCES.  BORROWER SHALL, FROM TIME TO TIME, UPON LENDER’S REQUEST, EXECUTE,
DELIVER, RECORD AND FURNISH SUCH DOCUMENTS AND DO SUCH OTHER ACTS AS LENDER MAY
REASONABLY DEEM NECESSARY OR DESIRABLE TO: (I) PERFECT AND MAINTAIN VALID LIENS
UPON THE SECURITY CONTEMPLATED BY THE LOAN DOCUMENTS, (II) CORRECT ANY ERRORS OF
A TYPOGRAPHICAL OR OTHER MANIFEST NATURE WHICH MAY BE CONTAINED IN ANY OF THE
LOAN DOCUMENTS, (III) EVIDENCE BORROWER’S COMPLIANCE WITH THE LOAN DOCUMENTS,
AND (IV) CONSUMMATE FULLY AND CARRY OUT THE INTENT OF THE TRANSACTIONS
CONTEMPLATED UNDER THIS AGREEMENT.

 

SECTION 7.12                                                 ERISA.  BORROWER
HEREBY COVENANTS TO LENDER FOR SO LONG AS THE NOTE REMAINS UNPAID, BORROWER WILL
NOT BE AN “EMPLOYEE BENEFIT PLAN” (WITHIN THE MEANING OF SECTION 3(3) OF ERISA)
TO WHICH ERISA APPLIES AND BORROWER’S ASSETS WILL NOT CONSTITUTE ASSETS OF ANY
SUCH PLAN.

 

SECTION 7.13                                                 NEW APPRAISALS. 
BORROWER ACKNOWLEDGES LENDER’S RIGHT TO OBTAIN A NEW APPRAISAL (OR UPDATE OF AN
EXISTING APPRAISAL) AT ANY TIME WHILE THE LOAN OR ANY PORTION THEREOF REMAINS
OUTSTANDING (A) WHEN, IN LENDER’S REASONABLE JUDGMENT, SUCH AN APPRAISAL IS
WARRANTED (AT A MINIMUM, A REAPPRAISAL WILL BE REQUIRED THREE YEARS FROM THE
DATE OF VALUE CITED IN THE ORIGINAL APPRAISAL REPORT), AND/OR (B) TO COMPLY WITH
STATUTES, RULES, REGULATIONS, OR DIRECTIVES OF GOVERNMENTAL AUTHORITIES HAVING
JURISDICTION OVER LENDER.  BORROWER HEREBY AGREES TO PAY, UPON DEMAND, ALL
REASONABLE APPRAISERS’ FEES AND RELATED EXPENSES INCURRED BY LENDER FROM TIME TO
TIME IN OBTAINING APPRAISAL REPORTS.

 

SECTION 7.14                                                 CONTRACT
MAINTENANCE; OTHER AGREEMENTS.  BORROWER WILL, FOR THE BENEFIT OF LENDER, FULLY
AND PROMPTLY KEEP, OBSERVE, PERFORM AND SATISFY EACH OBLIGATION,

 

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condition, covenant and restriction affecting the Property or imposed on it
under any agreement between Borrower and a third party relating to the
Collateral or the Secured Obligations, so that there will be no default
thereunder and so that the Persons (other than Borrower) obligated thereon shall
be and remain at all times obligated to perform for the benefit of Borrower and
Lender.  Except as expressly contemplated in the Loan Documents, Borrower will
not permit to exist any condition, event or fact which could allow or serve as a
basis or justification for any such Person to avoid such performance.

 

SECTION 7.15                                                 LIENS.  NEITHER
BORROWER NOR GUARANTOR SHALL TAKE ANY ACTION THAT WOULD IMPAIR THE LIENS CREATED
UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.  BORROWER SHALL NOT BE
PERMITTED TO HAVE ANY LIENS ON THE PROPERTY OTHER THAN THE LIENS CREATED BY THE
LOAN DOCUMENTS, AND PERMITTED EXCEPTIONS WITHOUT THE PRIOR WRITTEN CONSENT OF
LENDER, WHICH PRIOR CONSENT MAY BE GRANTED OR WITHHELD IN LENDER’S SOLE BUT
REASONABLE DISCRETION.

 

ARTICLE VIII

 

CONDOMINIUM MATTERS

 

SECTION 8.1                                                       CONDOMINIUM
CONTRACTS.  EXCEPT AS SET FORTH IN THE IMMEDIATELY FOLLOWING SENTENCE, WITHOUT
THE PRIOR WRITTEN CONSENT OF LENDER, BORROWER SHALL NOT, AND SHALL NOT CAUSE,
PERMIT OR SUFFER ANY OTHER PERSON ACTING ON BEHALF OF OR AS AGENT FOR BORROWER,
TO ENTER INTO A CONTRACT FOR THE SALE OF ANY UNIT (EACH A “CONDOMINIUM CONTRACT”
AND COLLECTIVELY, “CONDOMINIUM CONTRACTS”).  NOTWITHSTANDING THE FOREGOING,
PROVIDED NO EVENT OF DEFAULT HAS OCCURRED, BORROWER MAY ENTER INTO A BONAFIDE,
THIRD PARTY CONDOMINIUM CONTRACT IF EACH OF THE FOLLOWING CONDITIONS IS
SATISFIED (EACH SUCH CONDOMINIUM CONTRACT WHICH SATISFIES SUCH CONDITIONS IS
REFERRED TO AS AN “APPROVED CONDOMINIUM CONTRACT” AND COLLECTIVELY AS THE
“APPROVED CONDOMINIUM CONTRACTS”):

 

(A)                                  SUCH AGREEMENT SHALL BE EVIDENCED BY A FORM
OF PURCHASE AGREEMENT, TOGETHER WITH FORM RIDERS OR APPROVED MODIFICATION
LANGUAGE, WHICH ARE ATTACHED HERETO AS EXHIBIT G (THE “FORM CONDOMINIUM
CONTRACT”);

 

(B)                                 THE CONTRACT BUYER MUST BE A THIRD PARTY NOT
RELATED TO OR AFFILIATED, DIRECTLY OR INDIRECTLY, WITH BORROWER, GUARANTOR OR
ANY PRINCIPAL OF BORROWER AND WHICH HAS NO DIRECT OR INDIRECT INTEREST IN THE
PROPERTY, UNLESS SAID CONDOMINIUM CONTRACT IS APPROVED BY LENDER AND MEETS OR
EXCEEDS ALL RELEASE REQUIREMENTS CONTAINED HEREIN, AND IS PURCHASING THE UNIT
FOR HIS OWN USE AND NOT FOR INVESTMENT, UNLESS APPROVED BY LENDER;

 

(C)                                  UNLESS CONSENTED TO BY LENDER, THE CONTRACT
BUYER UNDER SAID CONDOMINIUM CONTRACT HAS (IN THE AGGREGATE WITH ALL ITS
AFFILIATES) NOT CONTRACTED TO PURCHASE MORE THAN TWO (2) RESIDENTIAL UNITS;

 

(D)                                 THE EARNEST MONEY DEPOSIT REQUIRED
THEREUNDER IS NO LESS THAN ONE PERCENT (1%) OF THE BASE PURCHASE PRICE OF SUCH
UNIT;

 

(E)                                  THERE ARE NO UNEXPIRED CONTINGENCIES
THEREUNDER, INCLUDING A MORTGAGE CONTINGENCY;

 

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(F)                                    THE BASE PURCHASE PRICE FOR EACH UNIT
SHALL BE GREATER THAN OR EQUAL TO THE FOLLOWING CALCULATIONS, AS APPLICABLE TO
SUCH UNIT: (1) IF UPGRADES ARE REQUIRED FOR SUCH UNIT AND SUCH UNIT IS INCLUDED
IN THE MASS CLOSING, THEN THE BASE PURCHASE PRICE FOR SUCH UNIT SHALL BE GREATER
THAN OR EQUAL TO THE MINIMUM UNIT SALES PRICE FOR SUCH UNIT; (2) IF SUCH UNIT IS
INCLUDED IN THE MASS CLOSING BUT THE UNIT IS TO BE SOLD “AS-IS” WITH NO REQUIRED
UPGRADES, THEN THE BASE PURCHASE PRICE FOR SUCH UNIT SHALL BE GREATER THAN OR
EQUAL TO 95% OF THE MINIMUM UNIT SALES PRICE FOR SUCH UNIT; OR (3) IF SUCH UNIT
IS NOT INCLUDED IN THE MASS CLOSING, THEN THE BASE PURCHASE PRICE FOR SUCH UNIT
SHALL BE GREATER THAN OR EQUAL TO 95% OF THE MINIMUM UNIT SALES PRICE FOR SUCH
UNIT; AND

 

(G)                                 ALL  CONDITIONS OF APPLICABLE LAWS TO THE
CONTRACTING FOR THE SALE OF SUCH UNIT HAVE BEEN SATISFIED.

 

BORROWER WILL COOPERATE FULLY WITH LENDER AS TO ANY VERIFICATION LENDER REQUIRES
WITH RESPECT TO AN APPROVED CONDOMINIUM CONTRACT.  IT IS EXPRESSLY UNDERSTOOD
AND AGREED THAT EACH APPROVED CONDOMINIUM CONTRACT SHALL PROVIDE FOR THE SALE
AND CONVEYANCE OF ONE PARKING UNIT IN CONNECTION WITH THE SALE AND CONVEYANCE OF
EACH RESIDENTIAL UNIT.

 

SECTION 8.2                                                       NO
MODIFICATION OR TERMINATION OF CONDOMINIUM CONTRACTS.  BORROWER SHALL NOT, AND
SHALL NOT CAUSE, SUFFER OR PERMIT ANY BORROWER PARTY OR ANY OTHER PERSON ACTING
ON BEHALF OF OR AS AGENT FOR BORROWER TO: (I) MODIFY OR AMEND ANY APPROVED
CONDOMINIUM CONTRACT OTHER THAN NON-MATERIAL MODIFICATIONS; OR (II) CANCEL,
TERMINATE OR SURRENDER ANY APPROVED CONDOMINIUM CONTRACT EXCEPT, IF NO EVENT OF
DEFAULT SHALL HAVE OCCURRED, UPON THE DEFAULT OF THE CONTRACT BUYER THEREUNDER. 
ANY DEFAULT, BREACH OR VIOLATION OF THIS SECTION 8.2 SHALL BE AN AUTOMATIC EVENT
OF DEFAULT (WITHOUT ANY NOTICE, GRACE OR CURE PERIOD).

 

SECTION 8.3                                                       PERFORMANCE
UNDER CONDOMINIUM CONTRACTS.  BORROWER SHALL: (I) OBSERVE AND PERFORM ALL THE
OBLIGATIONS IMPOSED UPON THE SELLER UNDER THE APPROVED CONDOMINIUM CONTRACTS AND
APPLICABLE LAWS AND NOT DO OR PERMIT TO BE DONE ANYTHING TO IMPAIR THE VALUE OF
ANY OF THE APPROVED CONDOMINIUM CONTRACTS; (II) PROMPTLY SEND COPIES TO LENDER
OF ALL NOTICES OF DEFAULT WHICH BORROWER OR ITS AGENTS OR REPRESENTATIVES SHALL
SEND OR RECEIVE THEREUNDER; (III) ENFORCE ALL OF THE TERMS, COVENANTS AND
CONDITIONS CONTAINED IN THE APPROVED CONDOMINIUM CONTRACTS UPON THE PART OF THE
CONTRACT BUYER THEREUNDER TO BE OBSERVED OR PERFORMED; PROVIDED, HOWEVER,
WITHOUT THE PRIOR WRITTEN CONSENT OF LENDER, BORROWER SHALL NOT (A) CANCEL,
TERMINATE OR SURRENDER ANY APPROVED CONDOMINIUM CONTRACT EXCEPT AS SET FORTH IN
SECTION 8.2 ABOVE OR (B) EXECUTE ANY OTHER ASSIGNMENT OF THE SELLER’S INTEREST
IN ANY OF THE APPROVED CONDOMINIUM CONTRACTS OR THE PURCHASE PRICE PAYABLE
THEREUNDER, EXCEPT PURSUANT TO THE LOAN DOCUMENTS.

 

SECTION 8.4                                                       SALE
ACTIVITY.  BORROWER SHALL USE COMMERCIALLY REASONABLE EFFORTS TO MARKET AND SELL
ALL UNITS IN THE PROJECT FOR A BASE PURCHASE PRICE NOT LESS THAN THE MINIMUM
UNIT SALES PRICE.  BORROWER SHALL PROVIDE LENDER WITHIN TEN (10) DAYS OF THE END
OF EACH MONTH A CURRENT CERTIFIED SALES REPORT. WITHIN TEN (10) DAYS AFTER
WRITTEN REQUEST FROM LENDER, BORROWER SHALL ALSO PROVIDE LENDER WITH ANY
INFORMATION REASONABLY REQUESTED BY LENDER REGARDING SALES ACTIVITY AT THE
PROJECT.

 

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SECTION 8.5                                                       MINIMUM UNIT
SALES PRICE.  ATTACHED HERETO AS EXHIBIT E IS A PRICE LIST THAT PROVIDES A
DETAILED BREAKDOWN OF THE SIZE, TYPE, LOCATION AND MINIMUM UNIT SALES PRICE FOR
EACH RESIDENTIAL UNIT AND/OR PARKING UNIT (THE “PRICE LIST”).

 

SECTION 8.6                                                       CONDOMINIUM
DOCUMENTS.  WITHOUT THE PRIOR WRITTEN CONSENT OF LENDER, BORROWER SHALL NOT, AND
SHALL NOT CAUSE, SUFFER OR PERMIT ANY BORROWER PARTY OR ANY OTHER PERSON ACTING
ON BEHALF OF OR AS AGENT FOR BORROWER TO: (I) ENTER INTO ANY CONDOMINIUM
DOCUMENT; (II) RECORD ANY CONDOMINIUM DOCUMENT; (III) MODIFY OR AMEND, IN ANY
MATERIAL RESPECT ANY CONDOMINIUM DOCUMENT OR THE FORM THEREOF SUBMITTED TO AND
APPROVED BY LENDER IN ACCORDANCE WITH SECTION 8.8; OR (IV) CANCEL, TERMINATE OR
SURRENDER ANY CONDOMINIUM DOCUMENT.  NOTWITHSTANDING THE FOREGOING, THIS SECTION
SHALL NOT APPLY TO ANY CONDOMINIUM CONTRACT, THE SUBJECT MATTER OF WHICH IS
GOVERNED BY SECTIONS 8.1, 8.2 AND 8.3. ANY DEFAULT, BREACH OR VIOLATION OF THIS
SECTION SHALL BE AN AUTOMATIC EVENT OF DEFAULT (WITHOUT ANY NOTICE, GRACE OR
CURE PERIOD).  IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT THE DECLARATION OF
CONDOMINIUM MAY NOT BE RECORDED OTHER THAN IMMEDIATELY PRIOR TO THE SALE AND
CONVEYANCE OF THE FIRST RESIDENTIAL UNIT.

 

SECTION 8.7                                                       CONDOMINIUM
SALES; RELEASE OF UNITS.

 

(A)                                  INITIAL CONDOMINIUM CLOSING CONDITIONS.
PRIOR TO THE TRANSFER OF TITLE OF THE FIRST RESIDENTIAL UNITS OR PARKING UNITS,
BORROWER SHALL, IN ADDITION TO AND NOT IN LIMITATION OF ANY OTHER REQUIREMENTS
SET FORTH HEREIN, AND THE REQUIREMENTS OF APPLICABLE LAWS, SATISFY EACH OF THE
FOLLOWING CONDITIONS (“INITIAL CONDOMINIUM CLOSING CONDITIONS”):

 

(I)                                     ALL OFFERING MATERIALS SHALL HAVE BEEN
APPROVED BY LENDER AND SHALL CONTAIN ALL DOCUMENTS AND INSTRUMENTS BY WHICH
RESIDENTIAL UNITS AND PARKING UNITS WILL BE TRANSFERRED TO CONTRACT BUYERS,
INCLUDING, WITHOUT LIMITATION, THE DECLARATION OF CONDOMINIUM PURSUANT TO WHICH
THE PROPERTY SHALL BE CONVERTED TO CONDOMINIUM OWNERSHIP; THE BYLAWS AND OTHER
GOVERNING INSTRUMENTS PURSUANT TO WHICH THE ASSOCIATION SHALL BE CREATED AND
GOVERNED; AND THE FORM OF THE DEED BY WHICH THE UNITS SHALL BE CONVEYED TO
CONTRACT BUYERS.

 

(II)                                  BORROWER SHALL HAVE FILED AND RECORDED THE
DECLARATION OF CONDOMINIUM AND THE PLAT OF CONDOMINIUM IMMEDIATELY PRIOR TO THE
FIRST CONVEYANCE OF A UNIT, AND LENDER SHALL HAVE EXECUTED A DOCUMENT OR
DOCUMENTS, PREPARED BY BORROWER AT BORROWER’S EXPENSE BUT SUBJECT TO LENDER’S
APPROVAL IN ITS REASONABLE DISCRETION, SUBORDINATING THE LIEN OF THE DEED OF
TRUST AND THE UCC FINANCING STATEMENTS TO THE DECLARATION OF CONDOMINIUM, THE
CONDOMINIUM BYLAWS AND THE PLAT OF CONDOMINIUM.

 

(III)                               BORROWER SHALL HAVE OBTAINED A TEMPORARY OR
PERMANENT CERTIFICATE OF OCCUPANCY OR OTHER EVIDENCE REASONABLY ACCEPTABLE TO
LENDER THAT A CERTIFICATE OF OCCUPANCY SHALL BE ISSUED, COVERING THE RESIDENTIAL
UNITS OR THE RESIDENTIAL UNIT PROPOSED TO BE TRANSFERRED.

 

(IV)                              IF REQUIRED BY LENDER, AT BORROWER’S EXPENSE,
LENDER SHALL HAVE RECEIVED FROM THE TITLE INSURER OR ANOTHER TITLE INSURANCE
COMPANY DULY LICENSED TO DO BUSINESS AND

 

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IN GOOD STANDING IN THE COMMONWEALTH OF VIRGINIA A COPY OF A WRITTEN BULK
COMMITMENT FROM SUCH TITLE INSURANCE COMPANY TO PROSPECTIVE PURCHASERS OF THE
RESIDENTIAL UNITS COMMITTING TO INSURE TITLE OF PURCHASERS OF SUCH UNITS WHO
DESIRE SUCH INSURANCE.

 

(V)                                 BORROWER SHALL HAVE SATISFIED ANY OTHER
CONDITIONS REQUIRED TO BE SATISFIED PRIOR TO SUCH TRANSFER OF TITLE PURSUANT TO
THE LOAN DOCUMENTS AND APPLICABLE LAWS.

 

(VI)          BORROWER MUST PROVIDE PROOF ACCEPTABLE TO LENDER IN ITS SOLE
DISCRETION THAT (I) BORROWER HAS RECEIVED FULLY EXECUTED APPROVED CONDOMINIUM
CONTRACTS FOR AT LEAST 100 UNITS COMPRISING AT LEAST 77,000 NET SELLABLE SQUARE
FEET AND CONSTITUTING MINIMUM AGGREGATE GROSS SALE PROCEEDS (EXCLUDING UPGRADES)
OF AT LEAST $23,000,000 AND (II) BORROWER WILL BE ABLE TO CLOSE ON AT LEAST 90
OF THE FOREGOING UNITS OVER A 90 DAY PERIOD (“MASS CLOSING”).  EACH AND EVERY
RESIDENTIAL UNIT INVOLVED IN THE MASS CLOSING MUST:  (A) HAVE A GROSS SELLING
PRICE OF AT LEAST THE MINIMUM UNIT SALES PRICE FOR SUCH RESIDENTIAL UNIT AS SET
FORTH IN EXHIBIT E (EXCLUSIVE OF ANY EXTRAS AND/OR UPGRADES) AND (B) GENERATE
PROCEEDS SATISFYING THE UNIT RELEASE PAYMENT CRITERIA SET FORTH IN SECTION
8.7(C).

 

(B)                                 MASS CLOSING TIMEFRAME.  BORROWER COVENANTS
AND AGREES THAT IT WILL COMPLETE THE MASS CLOSING WITHIN THE MASS CLOSING
TIMEFRAME.  IN THE EVENT THE MASS CLOSING IS NOT ACHIEVED BY THE EARLIER OF THE
EXPIRATION OF THE MASS  CLOSING TIMEFRAME OR THE TWELVE (12) MONTH ANNIVERSARY
OF THE CLOSING DATE, BORROWER SHALL IMMEDIATELY MAKE A PRINCIPAL REDUCTION
PAYMENT ON THE LOAN IN AN AMOUNT EQUAL TO (A) $4,000,000 MULTIPLIED BY (B) (ONE
(1) MINUS (THE NUMBER OF UNITS CLOSED DURING THE MASS CLOSING TIMEFRAME DIVIDED
BY 90), FROM ADDITIONAL CASH EQUITY AND NOT FROM ANY PROCEEDS DERIVED FROM THE
PROPERTY TOGETHER WITH PAYMENT OF THE PREPAYMENT FEE APPLICABLE TO SUCH
PREPAYMENT.

 

(C)                                  CONDOMINIUM CLOSINGS.  NO LESS THAN TEN
(10) BUSINESS DAYS PRIOR TO THE SALE OF EACH RESIDENTIAL UNIT OR PARKING UNIT
PURSUANT TO AN APPROVED CONDOMINIUM CONTRACT, BORROWER SHALL DELIVER NOTICE TO
LENDER (A “CLOSING NOTICE”) WHICH CLOSING NOTICE SHALL: (I) SPECIFICALLY
IDENTIFY THE RESIDENTIAL UNIT(S) AND PARKING UNITS TO BE CONVEYED; (II) STATE
THE PURCHASE PRICE TO BE PAID THEREFOR, SPECIFICALLY IDENTIFYING THE PORTION
THEREOF APPLICABLE TO THE RESIDENTIAL UNIT, UPGRADES, IF ANY, AND THE PARKING
UNITS AND SPECIFICALLY STATING IF SUCH PURCHASE PRICE IS LESS THAN THE MINIMUM
UNIT SALES PRICE; (III) BE ACCOMPANIED BY A COPY OF THE DRAFT CLOSING STATEMENT
INDICATING THE AMOUNT, IF ANY, OF ANY PROPOSED HOLDBACK AND THE PROVISIONS
PURSUANT TO WHICH SUCH HOLDBACK SHALL BE RELEASED TO LENDER; AND (IV) BE
ACCOMPANIED BY THE FORM OF THE PARTIAL RELEASE TO BE EXECUTED BY LENDER IN ORDER
TO RELEASE ITS SECURITY INTEREST UNDER THE DEED OF TRUST IN THE APPLICABLE
RESIDENTIAL UNIT AND/OR PARKING UNITS TO BE SOLD AND CONTAINING A DESCRIPTION OF
THE RESIDENTIAL UNIT AND/OR PARKING UNITS, AS APPLICABLE, TO BE RELEASED, WHICH
PARTIAL RELEASE SHALL BE PREPARED BY BORROWER AT BORROWER’S SOLE COST AND
EXPENSE (“UNIT RELEASES”). NOTWITHSTANDING THE FOREGOING, LENDER IS WILLING, SO
LONG AS THE SAME IS ACCEPTABLE TO THE TITLE INSURER, TO DELIVER GROUPS OF
PARTIAL RELEASES IN ARREARS. IN NO EVENT SHALL THE CONSIDERATION PAYABLE TO
LENDER FROM THE PROCEEDS OF SUCH CLOSING BE LESS THAN THE UNIT RELEASE
PAYMENTS.  LENDER SHALL APPROVE OR DISAPPROVE THE ADEQUACY OF THE ITEMS
IDENTIFIED IN THE CLOSING NOTICE WITHIN FIVE (5) BUSINESS DAYS AFTER RECEIPT
THEREOF.

 

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(D)                                 RELEASE OF UNITS.  UPON RECEIPT OF A CLOSING
NOTICE AND SATISFACTION OF ALL CONDITIONS PRECEDENT SET FORTH IN SECTION 8.7(A)
AND THIS SECTION 8.7(C) AND UPON THE CONFIRMATION OF THE CLOSING OF A SALE OF A
RESIDENTIAL UNIT AND PARKING UNITS PURSUANT TO AN APPROVED CONDOMINIUM CONTRACT,
LENDER SHALL RELEASE THE APPLICABLE RESIDENTIAL UNIT, PARKING UNITS AND ITS
APPURTENANT UNDIVIDED INTEREST IN THE COMMON ELEMENTS, FROM THE LIEN OF THE DEED
OF TRUST AND THE OTHER LOAN DOCUMENTS ON THE CONDITION THAT LENDER SHALL HAVE
RECEIVED PAYMENT OF THE UNIT RELEASE PAYMENT FOR EACH UNIT SO SOLD.  AS USED
HEREIN, “UNIT RELEASE PAYMENT” MEANS THE GREATEST OF: (I) 100% OF THE NET SALES
PRICE FOR SUCH RESIDENTIAL UNIT AND/OR PARKING UNIT(S), AS THE CASE MAY BE, (II)
93% OF THE BASE PURCHASE PRICE FOR SUCH RESIDENTIAL UNIT AND ITS PARKING UNITS,
PLUS 100% OF ANY UPGRADE PROFITS, OR (III) 90% OF THE MINIMUM UNIT SALES PRICE. 
BORROWER SHALL CAUSE THE TITLE INSURER, AS ESCROWEE, TO PAY THE PROCEEDS OF SALE
IN AN AMOUNT OF NOT LESS THAN THE UNIT RELEASE PAYMENT DIRECTLY TO LENDER BY
WIRE-TRANSFER OF IMMEDIATELY AVAILABLE FUNDS. THE PROCEEDS OF SALE SHALL BE
APPLIED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 8.9 OF THIS AGREEMENT.

 

SECTION 8.8                                                       ESTABLISHING
THE CONDOMINIUM REGIME.

 

(A)                                  CONDOMINIUM DOCUMENTS. BORROWER HEREBY
COVENANTS AND AGREES TO CAUSE TO BE PREPARED THE DECLARATION OF CONDOMINIUM, THE
PLAT OF CONDOMINIUM, THE ASSOCIATION BYLAWS, AND ALL OTHER DOCUMENTS AND
INSTRUMENTS REQUIRED TO CONVERT THE PROPERTY TO A CONDOMINIUM FORM OF OWNERSHIP
UNDER THE LAWS OF THE COMMONWEALTH OF VIRGINIA (THE “CONDOMINIUM REGIME”) AND TO
PREPARE THE OFFERING OF THE RESIDENTIAL UNITS AND PARKING UNITS TO THE PUBLIC IN
CONFORMANCE WITH THE REQUIREMENTS OF ALL APPLICABLE LAWS.  AT LEAST TWENTY (20)
DAYS PRIOR TO THE MASS CLOSING, BORROWER SHALL FURNISH TO LENDER, FOR LENDER’S
APPROVAL, THE CONDOMINIUM DOCUMENTS, WHICH INCLUDE, WITHOUT LIMITATION, THE
PROPOSED DECLARATION OF CONDOMINIUM AND ALL OTHER DECLARATIONS OF COVENANTS,
CONDITIONS, RESTRICTIONS OR EASEMENTS THAT AFFECT THE PROPERTY. ALL OF THE
CONDOMINIUM DOCUMENTS ARE SUBJECT TO THE APPROVAL OF LENDER. BORROWER HEREBY
COVENANTS TO INCLUDE IN THE OFFERING MATERIALS ALL DISCLOSURES REGARDING THE
PROPERTY REQUIRED BY ALL APPLICABLE LAWS. TO SECURE PAYMENT AND PERFORMANCE OF
ALL SECURED OBLIGATIONS, AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, BORROWER
HEREBY COLLATERALLY ASSIGNS TO LENDER AND GRANTS A SECURITY INTEREST TO LENDER
IN: (I) BORROWER’S INTEREST AS DECLARANT UNDER THE DECLARATION OF CONDOMINIUM
AND ALL OTHER CONDOMINIUM DOCUMENTS AND (II) ALL CONDOMINIUM CONTRACTS. ONCE ALL
OF THE CONDOMINIUM DOCUMENTS HAVE BEEN APPROVED BY LENDER, THE DECLARATION OF
CONDOMINIUM, THE OTHER CONDOMINIUM DOCUMENTS AND ALL OTHER DOCUMENTS SHALL NOT
BE REVISED OR AMENDED WITHOUT LENDER’S PRIOR WRITTEN APPROVAL, EXCEPT FOR SUCH
NON-MATERIAL MODIFICATIONS AS MAY BE NECESSARY TO COMPLY WITH APPLICABLE LAW.

 

(B)                                 RECIPROCAL EASEMENTS. BORROWER SHALL DELIVER
TO LENDER, FOR LENDER’S REVIEW AND APPROVAL, IN LENDER’S REASONABLE DISCRETION:
(I) A PLAN OF SUBDIVISION AND DECLARATION OF RECIPROCAL EASEMENTS FOR PARTY WALL
RIGHTS, ACCESS, INGRESS, EGRESS, SUPPORT, ENCROACHMENT, UTILITIES, COMMON USAGE,
AND SUCH OTHER MATTERS FOR ALL PORTIONS OF THE PROPERTY, AS LENDER SHALL DEEM
NECESSARY OR DESIRABLE, IN LENDER’S REASONABLE DISCRETION; AND (II) EVIDENCE
THAT SAID PLAN OF SUBDIVISION COMPLIES WITH ALL REQUIREMENTS OF LAW.

 

(C)                                  RECORDING OF CONDOMINIUM DOCUMENTS.
NOTWITHSTANDING THE FOREGOING, BORROWER SHALL NOT PERMIT OR CAUSE: (X) THE
DECLARATION OF CONDOMINIUM, (Y) THE PLAT OF CONDOMINIUM, OR (Z) ALL OTHER
DOCUMENTS, AND INSTRUMENTS REQUIRED BY APPLICABLE LAWS TO BE

 

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duly recorded in the appropriate office in the Commonwealth of Virginia without
the prior written approval of Lender. Borrower shall not be entitled to record
the foregoing documents prior to the Mass Closing and if an Event of Default has
occurred and is continuing at the time of such proposed recording.  Not later
than the date of the Mass Closing (or on such earlier date as may be required by
applicable Laws and approved in writing by Lender) Borrower shall cause: (x) the
Declaration of Condominium, (y) the Plat of Condominium and (z) all other
documents, and instruments required by applicable Laws to be duly recorded in
the appropriate office in the Commonwealth of Virginia.

 

(D)                                 INTERSTATE LAND SALES FULL DISCLOSURE ACT. 
IN CONNECTION WITH THE CONVERSION OF THE PROPERTY TO A CONDOMINIUM REGIME,
BORROWER WILL COMPLY WITH THE INTERSTATE LAND SALES FULL DISCLOSURE ACT (15
U.S.C. § 1701, ET SEQ.) AND THE RULES AND REGULATIONS ASSOCIATED THEREWITH (IN
THIS SECTION ONLY COLLECTIVELY, THE “LAND ACT”), AND WILL DELIVER TO THE U.S.
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT (“HUD”) TWO (2) COPIES OF THE FINAL
PRINTED VERSION OF THE OFFERING MATERIALS UPON PREPARATION THEREOF AND WILL AT
ALL TIMES THEREAFTER DURING THE TERM HEREOF, FILE THE ANNUAL REPORT OF ACTIVITY
AND ALL AMENDMENTS AND SUPPLEMENTS THERETO, AS REQUIRED PURSUANT TO 24 CFR
1710.310, AND WILL THEREAFTER TAKE ALL ACTION NECESSARY OR DESIRABLE TO COMPLY
WITH THE LAND ACT.  BORROWER SHALL DELIVER COPIES OF ALL SUCH FILINGS TO LENDER
WITHIN TEN (10) DAYS AFTER THE FILING THEREOF, TOGETHER WITH ALL NOTICES,
REQUESTS, CORRESPONDENCE, AND DEMANDS DELIVERED BY HUD TO BORROWER.  FAILURE BY
BORROWER TO COMPLY AT ALL TIMES WITH THE LAND ACT, WHEN APPLICABLE, SHALL
CONSTITUTE AN EVENT OF DEFAULT.  NOTWITHSTANDING ANYTHING TO THE CONTRARY
CONTAINED IN THIS SECTION, BORROWER SHALL NOT BE REQUIRED TO COMPLY WITH THE
PROVISIONS OF THIS SECTION IN THE EVENT BORROWER IS EXEMPT FROM THE REQUIREMENTS
OF THE LAND ACT.

 

SECTION 8.9                                                       APPLICATION OF
UNIT RELEASE PAYMENTS; CASH COLLATERAL ACCOUNT.  UPON LENDER’S RECEIPT OF UNIT
RELEASE PAYMENTS, SO LONG AS NO EVENT OF DEFAULT EXISTS, SUCH FUNDS SHALL BE
APPLIED BY LENDER AS FOLLOWS: (I) FIRST, TO PAY LENDER THE INDIVIDUAL UNIT EXIT
FEE FOR EACH UNIT RELEASED, (II) SECOND, TO REPAY THE PRINCIPAL BALANCE OF THE
LOAN OUTSTANDING FROM TIME TO TIME, (III) THIRD, TO PAY ALL OF LENDER’S COSTS
AND EXPENSES WHICH MAY BE OUTSTANDING FROM TIME TO TIME, (IV) FOURTH, TO PAY
ACCRUED BUT UNPAID INTEREST ON THE LOAN, AND (V) FIFTH, TO ALL OTHER SECURED
OBLIGATIONS, UNTIL THE LOAN IS PAID IN FULL.  IN THE EVENT THAT A UNIT IS SOLD
AND THE PROCEEDS THEREOF ARE PAID ON A DATE WHEN LENDER HAS A COMMITMENT TO FUND
ADDITIONAL LOAN PROCEEDS, BUT THERE ARE NO SECURED OBLIGATIONS THEN DUE AND
OWING, AN AMOUNT EQUAL TO SUCH UNIT RELEASE PAYMENT SHALL BE DEPOSITED INTO A
CASH COLLATERAL ACCOUNT. BORROWERS GRANT TO LENDER A FIRST, PERFECTED SECURITY
INTEREST IN SUCH CASH COLLATERAL ACCOUNT TO SECURE ALL SECURED OBLIGATIONS.
PROVIDED NO EVENT OF DEFAULT OR DEFAULT SHALL HAVE OCCURRED AND BE CONTINUING,
BORROWERS SHALL HAVE THE RIGHT, AS PART OF ANY REQUEST FOR AN ADVANCE, TO DIRECT
LENDER TO DISBURSE FUNDS IN THE CASH COLLATERAL ACCOUNT TO PAY PROJECT COSTS SET
FORTH IN THE PROJECT BUDGET, IN LIEU OF DISBURSEMENTS OF LOAN PROCEEDS TO PAY
SAID PROJECT COSTS. ANY AMOUNTS SO DISBURSED BY LENDER SHALL BE DISBURSED IN THE
MANNER AND SUBJECT TO THE SATISFACTION OF THE CONDITIONS PRECEDENT SET FORTH
HEREIN FOR DISBURSEMENTS OF LOAN PROCEEDS AND THE LOAN SHALL BE REDUCED BY THE
AMOUNT OF ANY DISBURSEMENTS FROM SUCH CASH COLLATERAL ACCOUNT.

 

SECTION 8.10                                                 UPGRADES.  BORROWER
MAY ENTER INTO APPROVED CONDOMINIUM CONTRACT (OR AMENDMENTS THERETO) REQUIRING
UPGRADES WHICH ARE IN ADDITION TO THOSE CONTEMPLATED TO BE FUNDED BY THE UNIT
UPGRADES LINE ITEM OF THE PROJECT BUDGET (“ADDITIONAL

 

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Upgrades”) on the condition that all Upgrades shall be paid for by the Contract
Buyer as consideration payable in addition to the Minimum Unit Sales Price. 
Additional Upgrades shall be subject to Lender’s prior approval, which shall not
be unreasonably withheld.  In the event the sum of any deposit for the cost of
Additional Upgrades made by the Contract Buyer plus available funds in the Unit
Upgrades line item of the Project Budget (provided that the available funds in
the Unit Upgrades line item shall be allocated in an amount of $8,021 per
Residential Unit) is insufficient to cover the cost of the total Upgrades for
such Units, then the Loan shall be deemed Out of Balance by an amount equal to
such shortfall and Borrower shall be required to make a Deficiency Deposit in
the amount of such shortfall no later than 45 days after the date of execution
of the Approved Condominium Contract containing such Upgrade.  Thereafter, the
Deficiency Deposit will be disbursed by Lender prior to any further Advances of
Loan proceeds and shall be used for Project Costs, subject to Borrower’s
compliance with all conditions which would be applied to an Advance for the same
Project Budget items to which the Deficiency Deposit will be applied. Failure to
deposit said funds within said 45 day period shall be an Event of Default.

 

ARTICLE IX

 

CASUALTY AND CONDEMNATION

 

SECTION 9.1                                                       INSURANCE AND
CONDEMNATION PROCEEDS.  (A) BORROWER COVENANTS AND AGREES THAT BORROWER SHALL
PAY OR CAUSE TO BE PAID TO LENDER THE FOLLOWING:  (I) ALL AWARDS OF DAMAGES AND
ALL OTHER COMPENSATION PAYABLE DIRECTLY OR INDIRECTLY BY REASON OF A
CONDEMNATION AFFECTING THE PROPERTY, (II) ALL OTHER CLAIMS AND AWARDS FOR
DAMAGES TO, OR DECREASE IN VALUE OF, THE PROPERTY, (III) ALL PROCEEDS OF ANY
INSURANCE POLICIES PAYABLE BY REASON OF A LOSS SUSTAINED TO THE PROPERTY AND
(IV) ALL INTEREST WHICH MAY ACCRUE ON ANY OF THE FOREGOING (COLLECTIVELY, THE
“PROPERTY PROCEEDS”).  BORROWER AGREES TO EXECUTE AND DELIVER FROM TIME TO TIME
SUCH FURTHER INSTRUMENTS AS MAY BE REASONABLY REQUESTED BY LENDER TO CONFIRM THE
FOREGOING ASSIGNMENT TO LENDER OF THE PROPERTY PROCEEDS.  LENDER IS HEREBY
IRREVOCABLY CONSTITUTED AND APPOINTED THE ATTORNEY-IN-FACT OF BORROWER (WHICH
POWER OF ATTORNEY SHALL BE IRREVOCABLE SO LONG AS ANY INDEBTEDNESS SECURED
HEREBY IS OUTSTANDING, SHALL BE DEEMED COUPLED WITH AN INTEREST, SHALL SURVIVE
THE VOLUNTARY OR INVOLUNTARY DISSOLUTION OF BORROWER AND SHALL NOT BE AFFECTED
BY ANY DISABILITY OR INCAPACITY SUFFERED BY BORROWER SUBSEQUENT TO THE DATE
HEREOF), WITH FULL POWER OF SUBSTITUTION, SUBJECT TO THE TERMS OF THIS ARTICLE
IX, TO COLLECT AND RECEIVE ANY SUCH AWARDS, DAMAGES, INSURANCE PROCEEDS,
PAYMENTS OR OTHER COMPENSATION FROM THE PARTIES OR AUTHORITIES MAKING THE SAME,
TO APPEAR IN ANY PROCEEDINGS THEREFOR AND TO GIVE RECEIPTS THEREFORE.  BORROWER
COVENANTS AND AGREES TO NOTIFY LENDER WITHIN FIVE (5) BUSINESS DAYS OF THE
OCCURRENCE OF ANY EVENT THAT MAY RESULT IN PROPERTY PROCEEDS.  SUBJECT TO
APPLICABLE LAW, LENDER MAY (AT ITS DISCRETION) APPLY ALL OR ANY PORTION OF THE
PROPERTY PROCEEDS THAT IT RECEIVES TO ITS REASONABLE EXPENSES IN SETTLING,
PROSECUTING AND DEFENDING ANY CLAIM RELATED THERETO AND MAY APPLY THE BALANCE OF
THE PROPERTY PROCEEDS TO THE SECURED OBLIGATIONS IN ANY ORDER, AND/OR LENDER MAY
RELEASE ALL OR ANY PART OF THE PROPERTY PROCEEDS TO BORROWER UPON ANY CONDITIONS
LENDER MAY REASONABLY IMPOSE. LENDER MAY COMMENCE, APPEAR IN, DEFEND AND
PROSECUTE ANY ACTION RELATED TO THE PROPERTY PROCEEDS AND MAY ADJUST,
COMPROMISE, SETTLE AND COLLECT ALL PROPERTY PROCEEDS, PROVIDED THAT, PRIOR TO
THE OCCURRENCE OF AN EVENT OF DEFAULT, ANY ADJUSTMENT, COMPROMISE AND SETTLEMENT
SHALL ONLY BE WITH BORROWER’S REASONABLE CONSENT.

 

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SECTION 9.2                  DISBURSEMENT OF PROPERTY PROCEEDS.  NOTWITHSTANDING
ANYTHING TO THE CONTRARY CONTAINED IN SECTION 9.1, IF THE LOSS OR DAMAGE DUE TO
A CASUALTY OR CONDEMNATION IS LESS THAN 25% OF THE OUTSTANDING LOAN BALANCE, AS
DETERMINED BY LENDER IN ITS REASONABLE DISCRETION, LENDER SHALL PERMIT PROPERTY
PROCEEDS HELD BY LENDER TO BE USED FOR REPAIR OR RESTORATION BUT MAY IMPOSE SUCH
CONDITIONS THEREON AS LENDER MAY DETERMINE TO BE APPROPRIATE, INCLUDING, WITHOUT
LIMITATION: (I) THAT NO EVENT OF DEFAULT EXISTS (AND NO EVENT HAS OCCURRED THAT
WITH THE GIVING OF NOTICE OR THE PASSAGE OF TIME (OR BOTH) WOULD CONSTITUTE AN
EVENT OF DEFAULT); (II) THE DEPOSIT WITH LENDER OF SUCH ADDITIONAL FUNDS WHICH
LENDER DETERMINES ARE NEEDED TO PAY ALL COSTS OF THE REPAIR OR RESTORATION;
(III) THE ESTABLISHMENT OF AN ARRANGEMENT FOR LIEN RELEASES AND DISBURSEMENT OF
FUNDS REASONABLY ACCEPTABLE TO LENDER; (IV) THE DELIVERY TO LENDER OF PLANS AND
SPECIFICATIONS FOR THE WORK, A CONTRACT FOR THE WORK SIGNED BY A CONTRACTOR
ACCEPTABLE TO LENDER, A COST BREAKDOWN FOR THE WORK AND A PAYMENT AND
PERFORMANCE BOND FOR THE WORK, ALL OF WHICH SHALL BE ACCEPTABLE TO LENDER; (V)
THE DELIVERY TO LENDER OF EVIDENCE REASONABLY ACCEPTABLE TO LENDER THAT THE
RECONSTRUCTION OF THE PROPERTY WILL BE COMPLETED AT LEAST SIX (6) MONTHS PRIOR
TO THE MATURITY DATE; (VI) EVIDENCE THAT, UPON COMPLETION OF THE WORK, THE SIZE,
QUALITY AND FUNCTIONALITY OF THE PROPERTY WILL BE AT LEAST AS GREAT AS THOSE
WHICH EXISTED IMMEDIATELY BEFORE THE DAMAGE OR CONDEMNATION OCCURRED; (VII) ALL
OF THE THEN EXECUTED APPROVED CONDOMINIUM CONTRACTS REMAIN IN FULL FORCE AND
EFFECT AND WILL REMAIN IN FULL FORCE AND EFFECT NOTWITHSTANDING ANY DELAYS
RESULTING FROM SUCH CASUALTY; (VIII) THE INITIAL CONDOMINIUM CLOSINGS HAVE NOT
OCCURRED; AND (IX) THE DELIVERY TO LENDER OF EVIDENCE REASONABLY ACCEPTABLE TO
LENDER (A) THAT AFTER COMPLETION OF THE WORK THE INCOME FROM THE PROPERTY WILL
BE SUFFICIENT TO PAY ALL EXPENSES FOR THE PROPERTY, (B) THAT UPON COMPLETION OF
THE WORK, THE SIZE, QUALITY AND FUNCTIONALITY OF THE PROPERTY WILL BE AT LEAST
AS GREAT AS IT WAS BEFORE THE DAMAGE OR CONDEMNATION OCCURRED, AND (C) OF THE
SATISFACTION OF ANY ADDITIONAL CONDITIONS THAT LENDER MAY REASONABLY ESTABLISH
AND THAT ARE CUSTOMARILY IMPOSED BY LENDER.  IN ADDITION TO THE CONDITIONS SET
FORTH ABOVE, IF LENDER PERMITS PROPERTY PROCEEDS TO BE USED BY BORROWER TO
RESTORE OR REPAIR THE PROPERTY AFTER THE OCCURRENCE OF A CASUALTY OR A TAKING AS
PROVIDED ABOVE, THE DISBURSEMENT OF ALL INSURANCE PROCEEDS OR CONDEMNATION
AWARDS BY LENDER TO BORROWER SHALL BE CONDITIONED UPON THE SAME GENERAL TERMS
AND CONDITIONS AS THOSE SET FORTH IN ARTICLE V RESPECTING THE FUNDING OF
ADVANCES. IF THE LOSS OR DAMAGE DUE TO A CASUALTY OR CONDEMNATION IS GREATER
THAN 25% OF THE OUTSTANDING LOAN BALANCE, AS DETERMINED BY LENDER IN ITS
REASONABLE DISCRETION, THEN RELEASE OF THE PROPERTY PROCEEDS HELD BY LENDER
SHALL BE AT LENDER’S SOLE DISCRETION. BORROWER ACKNOWLEDGES THAT THE CONDITIONS
DESCRIBED ABOVE ARE REASONABLE.

 

SECTION 9.3                                                       REDUCTION IN
SECURED OBLIGATIONS.  ANY REDUCTION IN THE SECURED OBLIGATIONS RESULTING FROM
LENDER’S APPLICATION OF ANY SUMS RECEIVED BY IT HEREUNDER SHALL TAKE EFFECT ONLY
WHEN LENDER ACTUALLY RECEIVES SUCH SUMS AND APPLIES SUCH SUMS TO THE SECURED
OBLIGATIONS AND, IN ANY EVENT, THE UNPAID PORTION OF THE SECURED OBLIGATIONS
SHALL REMAIN IN FULL FORCE AND EFFECT AND BORROWER SHALL NOT BE EXCUSED IN THE
PAYMENT THEREOF.  IF LENDER REQUIRES BORROWER TO RESTORE OR REPAIR THE PROPERTY
AFTER THE OCCURRENCE OF A CASUALTY OR THE OCCURRENCE OF A TAKING, BORROWER SHALL
PROMPTLY AND DILIGENTLY, AT BORROWER’S SOLE COST AND EXPENSE AND REGARDLESS OF
WHETHER THE PROPERTY PROCEEDS SHALL BE SUFFICIENT FOR THE PURPOSE, RESTORE,
REPAIR, REPLACE AND REBUILD THE PROPERTY AS NEARLY AS POSSIBLE TO ITS VALUE,
CONDITION AND CHARACTER IMMEDIATELY PRIOR TO SUCH CASUALTY OR TAKING IN
ACCORDANCE WITH THE PROVISIONS OF THIS ARTICLE AND BORROWER SHALL PAY TO LENDER
ALL REASONABLE OUT-OF-POCKET COSTS AND EXPENSES OF LENDER INCURRED IN
ADMINISTERING PAYMENTS ON ACCOUNT OF SAID REBUILDING, RESTORATION OR REPAIR,
PROVIDED THAT LENDER MAKES THE PROPERTY PROCEEDS AVAILABLE FOR SUCH PURPOSE.

 

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ARTICLE X

 

EVENTS OF DEFAULT

 

SECTION 10.1                                                 EVENTS OF DEFAULT. 
BELOW ARE LISTED THE EVENTS WHICH CONSTITUTE AN EVENT OF DEFAULT UNDER THIS
AGREEMENT.  THE NOTICE AND/OR CURE PERIODS, IF ANY, APPLICABLE TO EACH ITEM OF
DEFAULT IS LISTED WITH THE SUBPARAGRAPH PERTAINING TO SUCH ITEM OF DEFAULT.  IF
NO NOTICE OR CURE PERIOD IS LISTED, THEN NO NOTICE OR CURE PERIOD SHALL APPLY. 
THE NOTICE AND/OR CURE PERIOD PROVIDED FOR ANY SPECIFIC ITEM OF DEFAULT SHALL
CONTROL OVER THE NOTICE AND/OR CURE PERIOD PROVIDED FOR ANY MORE GENERAL
CATEGORY OF DEFAULTS EVEN THOUGH THE GENERAL CATEGORY INCLUDES THE DEFAULT THAT
IS SPECIFICALLY LISTED SEPARATELY.  EACH OF THE FOLLOWING SHALL CONSTITUTE AN
“EVENT OF DEFAULT” UNDER THIS AGREEMENT:

 

(A)                                  NON-PAYMENT.  BORROWER FAILS TO PAY WHEN
DUE, WHETHER BY ACCELERATION OR OTHERWISE, (I) THE PRINCIPAL, ANY INSTALLMENT OF
INTEREST (EXCEPT FOR THE FAILURE OF LENDER TO ADVANCE AVAILABLE FUNDS FROM THE
INTEREST RESERVE LINE ITEM OF THE PROJECT BUDGET (TO THE EXTENT AVAILABLE FOR
USE BY BORROWER PURSUANT TO THE TERMS AND CONDITIONS OF THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS)), OR ANY OTHER CHARGE OR AMOUNT DUE UNDER THE NOTE, OR
(II) ANY OTHER MONETARY OBLIGATION TO LENDER UNDER THIS AGREEMENT OR THE OTHER
LOAN DOCUMENTS (INCLUDING, WITHOUT LIMITATION, ANY OBLIGATION TO CONTRIBUTE
BORROWER’S EQUITY OR THE REAL ESTATE TAX DEPOSITS AS AND WHEN REQUIRED UNDER
THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS) AND, IN THE CASE OF (I) OR (II),
SUCH FAILURE CONTINUES FOR FIFTEEN (15) DAYS AFTER BORROWER’S RECEIPT OF NOTICE
OF SUCH FAILURE;

 

(B)                                 REPRESENTATIONS.  ANY REPRESENTATION,
WARRANTY OR CERTIFICATION MADE BY BORROWER, ANY BORROWER PARTY OR GUARANTOR IN
OR PURSUANT TO ANY OF LOAN DOCUMENTS IS OR BECOMES MATERIALLY FALSE OR
MISLEADING AT ANY TIME WHEN SUCH REPRESENTATION, WARRANTY, OR CERTIFICATION IS
REQUIRED TO BE OPERATIVE;

 

(C)                                  OTHER BREACHES.  BORROWER, ANY BORROWER
PARTY OR GUARANTOR BREACHES OR DEFAULTS UNDER ANY OTHER TERM OR PROVISION IN ANY
OF THE LOAN DOCUMENTS, AND SUCH BREACH OR DEFAULT CONTINUES FOR THIRTY (30) DAYS
AFTER RECEIPT OF NOTICE THEREOF BY LENDER;

 

(D)                                 OTHER EVENTS OF DEFAULT.  THE OCCURRENCE OF
ANY OTHER MATTER DESIGNATED AS AN EVENT OF DEFAULT OR DEFAULT UNDER ANY OF THE
LOAN DOCUMENTS;

 

(E)                                  BALANCING; DEFICIENCY DEPOSITS.  BORROWER
FAILS TO CONTRIBUTE ALL OR ANY PORTION OF ANY DEFICIENCY DEPOSIT IN ACCORDANCE
WITH THE TERMS HEREOF;

 

(F)                                    BANKRUPTCY, INSOLVENCY, ETC.  ANY OF
BORROWER, ITS MEMBERS OR GUARANTOR SHALL: (I) BECOME INSOLVENT OR GENERALLY FAIL
TO PAY, OR ADMIT IN WRITING ITS INABILITY OR UNWILLINGNESS TO PAY, DEBTS AS THEY
BECOME DUE; (II) APPLY FOR, CONSENT TO, OR ACQUIESCE IN, THE APPOINTMENT OF A
TRUSTEE, RECEIVER, SEQUESTRATOR OR OTHER CUSTODIAN FOR ITSELF OR A SUBSTANTIAL
PART OF ITS PROPERTY, OR MAKE A GENERAL ASSIGNMENT FOR THE BENEFIT OF CREDITORS;
(III) IN THE ABSENCE OF SUCH APPLICATION, CONSENT OR ACQUIESCE, PERMIT OR SUFFER
TO EXIST THE APPOINTMENT OF A TRUSTEE, RECEIVER, SEQUESTRATOR OR OTHER CUSTODIAN
FOR ITSELF OR FOR A SUBSTANTIAL PART OF ITS PROPERTY, AND SUCH TRUSTEE,
RECEIVER, SEQUESTRATOR OR OTHER CUSTODIAN SHALL NOT BE DISCHARGED WITHIN 60
DAYS, PROVIDED THAT LENDER IS

 

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hereby expressly authorized to appear in any court conducting any relevant
proceeding during such 60-day period to preserve, protect and defend its rights
under the Loan Documents; (iv) permit or suffer to exist the commencement of any
bankruptcy, reorganization, debt arrangement or other case or proceeding under
any bankruptcy or insolvency law, or any dissolution, winding up or liquidation
proceeding, in respect of any of Borrower or Guarantor, and, if any such case or
proceeding is not commenced by Borrower or Guarantor, such case or proceeding
shall be consented to or acquiesced in by Borrower or Guarantor, or shall result
in the entry of an order for relief or shall remain for 60 days undismissed,
provided that Lender is hereby expressly authorized to appear in any court
conducting any such case or proceeding during such 60-day period to preserve,
protect and defend its rights under the Loan Documents; or (v) take any
corporate, partnership, trust or other similar action authorizing or in
furtherance of any of the foregoing;

 

(G)                                 ATTACHMENT.  THERE IS AN ATTACHMENT,
EXECUTION OR OTHER JUDICIAL SEIZURE OF ANY PORTION OF BORROWER’S OR GUARANTOR’S
ASSETS AND SUCH SEIZURE IS NOT DISCHARGED WITHIN THIRTY (30) DAYS OF SUCH
ATTACHMENT, EXECUTION OR OTHER JUDICIAL SEIZURE, AS THE CASE MAY BE;

 

(H)                                 SUSPENSION OF BUSINESS; DEATH; DISSOLUTION. 
BORROWER OR GUARANTOR SUSPENDS THE TRANSACTION OF BUSINESS, DISSOLVES,
TERMINATES ITS EXISTENCE, OR (IF A NATURAL PERSON) DIES;

 

(I)                                     MATERIAL ADVERSE CHANGE.  THERE IS A
MATERIAL ADVERSE CHANGE IN THE FINANCIAL POSITION OF GUARANTOR OR BORROWER;

 

(J)                                     BASIC AGREEMENTS.  THERE IS A DEFAULT BY
BORROWER UNDER ANY OF THE BASIC AGREEMENTS WHICH IS NOT CURED WITHIN ANY
APPLICABLE CURE PERIOD, OR ANY OF THE BASIC AGREEMENTS ARE TERMINATED OR AMENDED
WITHOUT OBTAINING THE APPROVAL OF LENDER, IF SUCH APPROVAL IS REQUIRED BY THE
LOAN DOCUMENTS;

 

(K)                                  DUE ON SALE; INSURANCE; CONDOMINIUM
DOCUMENTS.  BORROWER BREACHES OR DEFAULTS UNDER SECTIONS 7.4, 7.8, OR 8.6 OF
THIS AGREEMENT;

 

(L)                                     DESTRUCTION.  ANY MATERIAL PART OF THE
PROJECT IS DAMAGED OR DESTROYED BY FIRE OR OTHER CASUALTY, AND, IN THE
REASONABLE JUDGMENT OF LENDER, THE LOSS IS NOT ADEQUATELY COVERED BY INSURANCE
ACTUALLY COLLECTED OR IN THE PROCESS OF COLLECTION, AND BORROWER FAILS TO
DEPOSIT WITH LENDER THE DEFICIENCY (OR PROVIDE ACCEPTABLE SECURITY FOR THE
DEFICIENCY) WITHIN TEN (10) BUSINESS DAYS OF LENDER’S WRITTEN REQUEST FOR SUCH
DEPOSIT, OR IF LENDER AGREES TO DISBURSE INSURANCE PROCEEDS FOR BORROWER TO
REBUILD AND RESTORE PURSUANT TO ARTICLE IX AND, WITHIN TEN (10) DAYS AFTER THE
GIVING OF NOTICE THAT BORROWER IS FAILING TO SATISFY THE CONDITIONS FOR
DISBURSEMENT, BORROWER OTHERWISE CONTINUES TO FAIL TO SATISFY THE CONDITIONS FOR
REBUILDING OR RESTORING THE PROPERTY;

 

(M)                               CONDEMNATION.  PROCEEDINGS ARE COMMENCED BY
ANY PUBLIC OR QUASI-PUBLIC BODY TO ACQUIRE THE PROPERTY, OR ANY PORTION OF THE
PROPERTY BY EMINENT DOMAIN, CONDEMNATION OR OTHER POWER, WHICH ACQUISITION WOULD
MATERIALLY JEOPARDIZE THE ECONOMIC VIABILITY OF THE PROJECT OR WOULD OTHERWISE
MATERIALLY IMPAIR LENDER’S SECURITY, AND SUCH PROCEEDINGS ARE NOT DISMISSED
WITHIN SIXTY (60) DAYS AND LENDER DETERMINES THAT THE ANTICIPATED AWARD TOGETHER
WITH ANY BORROWER EQUITY IS NOT SUFFICIENT TO SATISFY ALL OF THE SECURED
OBLIGATIONS;

 

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(N)                                 LIEN.  ANY LIEN OR NOTICE OF LIEN OF ANY
KIND (WHETHER FOR THE PERFORMANCE OF WORK, THE SUPPLYING OF MATERIALS, A
JUDGMENT LIEN, A TAX LIEN, OR OTHERWISE) IS FILED OR SERVED AGAINST ANY PART OF
THE PROPERTY, AND BORROWER FAILS EITHER TO SATISFY OR CAUSE SUCH LIEN TO BE
RELEASED AS A LIEN AGAINST THE LAND OR BONDED OVER TO THE SATISFACTION OF LENDER
WITHIN THE EARLIER OF THE TIME NECESSARY TO STAY ENFORCEMENT OF THE LIEN OR
THIRTY (30) DAYS AFTER THE DATE OF FILING OR SERVING OF SUCH LIEN OR NOTICE OF
LIEN;

 

(O)                                 OTHER DEBT.  IF BORROWER  OR GUARANTOR SHALL
FAIL TO PAY ANY DEBT OWED BY IT TO LENDER OR ANY OTHER PARTY OR IS IN DEFAULT
UNDER ANY AGREEMENT WITH LENDER OR ANY OTHER PARTY (OTHER THAN A FAILURE OR
DEFAULT FOR WHICH SUCH PARTY’S MAXIMUM LIABILITY DOES NOT EXCEED $10,000.00) AND
SUCH FAILURE OR DEFAULT CONTINUES AFTER ANY APPLICABLE GRACE PERIOD SPECIFIED IN
THE INSTRUMENT OR AGREEMENT RELATING THERETO;

 

(P)                                 JUDGMENTS.  ANY JUDGMENT OR ORDER FOR THE
PAYMENT OF MONEY IN EXCESS OF $100,000.00 NOT OTHERWISE COVERED BY INSURANCE
(WITH DEDUCTIBLES NOT TO EXCEED $100,000) SHALL BE RENDERED AGAINST BORROWER OR
GUARANTOR AND EITHER: (I) ENFORCEMENT PROCEEDINGS SHALL HAVE BEEN COMMENCED BY
ANY CREDITOR UPON SUCH JUDGMENT OR ORDER; OR (II) THERE SHALL BE ANY PERIOD OF
TEN (10) CONSECUTIVE DAYS DURING WHICH A STAY OF ENFORCEMENT OF SUCH JUDGMENT OR
ORDER, BY REASON OF A PENDING APPEAL OR OTHERWISE, SHALL NOT BE IN EFFECT;

 

(Q)                                 ERISA.  IF AT ANY TIME DURING THE TERM OF
THE LOAN DOCUMENTS: (I) BORROWER IS IN BREACH OF ANY OF ITS REPRESENTATIONS AND
WARRANTIES IN SECTION 3.18 OR (II) BORROWER IS IN BREACH OR FAILS TO PERFORM ANY
OF ITS COVENANTS, AGREEMENTS AND OBLIGATIONS IN SECTION 7.12, OR (III) UPON
DELIVERY OF WRITTEN NOTICE TO BORROWER OF A DETERMINATION BY LENDER THAT IT IS
MORE LIKELY THAN NOT BORROWER IS OR WILL BE IN BREACH OF ANY SUCH
REPRESENTATIONS, WARRANTIES OR COVENANTS; PROVIDED HOWEVER, THERE SHALL BE NO
DEFAULT IF (I) BORROWER CAN DEMONSTRATE TO LENDER, WITHIN THIRTY (30) DAYS OF
DELIVERY OF SUCH NOTICE BASED UPON THE OPINION OF BORROWER’S COUNSEL
SATISFACTORY TO LENDER, THAT SUCH REPRESENTATIONS, WARRANTIES OR COVENANTS HAVE
NOT BEEN AND WILL NOT BE BREACHED, AND (II) BORROWER PROVIDES TO LENDER SUCH
ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS TO BE MADE A PART OF THIS
AGREEMENT WHICH ARE REASONABLY SATISFACTORY TO LENDER; OR

 

(R)                                    IMPAIRMENT OF SECURITY; LOSS OF
PRIORITY.  ANY LOAN DOCUMENT, OR ANY LIEN GRANTED THEREUNDER, SHALL (EXCEPT IN
ACCORDANCE WITH ITS TERMS), IN WHOLE OR IN PART, TERMINATE, CEASE TO BE
EFFECTIVE OR CEASE TO BE THE LEGALLY VALID, BINDING AND ENFORCEABLE OBLIGATION
OF ANY OBLIGOR PARTY THERETO; OR BORROWER, ANY BORROWER PARTY, GUARANTOR, OR ANY
OTHER PARTY SHALL, DIRECTLY OR INDIRECTLY, CONTEST IN ANY MANNER SUCH
EFFECTIVENESS, VALIDITY, BINDING NATURE OR ENFORCEABILITY; OR ANY LIEN SECURING
THE LOAN SHALL, IN WHOLE OR IN PART, CEASE TO BE A PERFECTED FIRST LIEN, SUBJECT
ONLY TO THE PERMITTED EXCEPTIONS.

 

ARTICLE XI

 

REMEDIES

 

Upon the happening of any Event of Default, Lender shall have the power, in
addition to all the remedies conferred upon Lender by law or equity or the terms
of any of the Loan

 

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Documents, to exercise any or all of the following remedies concurrently or
successively without notice to Borrower:

 

SECTION 11.1                                                 ACCELERATE THE
NOTE.  LENDER MAY DECLARE THE NOTE AND ALL OTHER AMOUNTS PAYABLE UNDER THE LOAN
DOCUMENTS TO BE, AND THE NOTE AND ALL OTHER AMOUNTS PAYABLE UNDER THE LOAN
DOCUMENTS SHALL THEREUPON BECOME, IMMEDIATELY DUE AND PAYABLE WITHOUT
PRESENTMENT, DEMAND, PROTEST OR NOTICE OF ANY KIND, ALL OF WHICH ARE HEREBY
EXPRESSLY WAIVED.  IF ANY EVENT OF DEFAULT DESCRIBED IN SECTION 10.1(F) SHALL
OCCUR, THE NOTE AND ALL OTHER AMOUNTS PAYABLE UNDER THE LOAN DOCUMENTS SHALL
AUTOMATICALLY BE AND BECOME IMMEDIATELY DUE AND PAYABLE, WITHOUT PRESENTMENT,
DEMAND, PROTEST OR NOTICE OF ANY KIND, ALL OF WHICH ARE HEREBY EXPRESSLY WAIVED.

 

SECTION 11.2                                                 TERMINATE LENDER’S
OBLIGATIONS.  LENDER MAY TERMINATE AT ANY TIME ITS OBLIGATION TO MAKE ADVANCES
AND ALL OF LENDER’S OTHER OBLIGATIONS UNDER THIS AGREEMENT.  IF ANY EVENT OF
DEFAULT DESCRIBED IN SECTION 10.1(F) SHALL OCCUR, THEN THE OBLIGATIONS OF LENDER
TO MAKE ADVANCES AND ALL OF LENDER’S OTHER OBLIGATIONS UNDER THIS AGREEMENT
SHALL AUTOMATICALLY TERMINATE.

 

SECTION 11.3                                                 TAKE POSSESSION OF
THE PROPERTY AND COMPLETE THE PROJECT (BORROWER’S POWER OF ATTORNEY).  LENDER
MAY, ON ITS OWN BEHALF, OR AS ATTORNEY-IN-FACT FOR BORROWER, ENTER UPON, TAKE
POSSESSION OF AND USE THE PROPERTY AND ALL MATERIAL AT THE PROPERTY AND
ELSEWHERE ORDERED FOR OR APPROPRIATED TO THE CONSTRUCTION OF THE PROJECT, FOR
THE PURPOSE OF COMPLETING THE PROJECT, AND OTHERWISE SATISFYING ALL OF
BORROWER’S SECURED OBLIGATIONS UNDER THIS AGREEMENT AND THE LOAN DOCUMENTS. 
BORROWER HEREBY GRANTS TO LENDER SUCH POWER OF ATTORNEY, WITH FULL POWER OF
SUBSTITUTION, TO PERFORM THOSE ITEMS SET FORTH ABOVE AND BELOW IN THIS SECTION
11.3, WHICH POWER SHALL BE DEEMED TO BE COUPLED WITH AN INTEREST AND SHALL BE
IRREVOCABLE UNTIL ALL OF BORROWER’S SECURED OBLIGATIONS UNDER THE LOAN DOCUMENTS
ARE PAID AND SATISFIED IN FULL.

 

To accomplish the foregoing purposes, Lender may without limitation:  (a) act by
itself or through its designees, representatives, agents, licensees or
contractors; (b) pay or settle all bills and expenses incurred to accomplish the
foregoing purposes; (c) use any funds of Borrower, including any undisbursed
balance of the Loan; (d) procure the performance of any construction contract
and each subcontract, or let new contracts with such contractors,
subcontractors, employees, agents, architects, engineers, watchmen, managers,
consultants and inspectors as Lender may deem appropriate; (e) execute all
applications, certificates or instruments in the name of Borrower which in the
opinion of Lender may be or are required by any Governmental Authority or any
contract; (f) enter into or enforce Leases of the Project; (g) take such action
and require such performance under any surety bond or other obligation, and
execute in the name of Borrower such further bonds or obligations, as may be
reasonably required in connection with the work; (h) prosecute and defend all
actions or proceedings affecting the Property; (i) do any and every act which
Borrower might do in its own behalf; and (j) do any and every act which Lender
deems reasonably necessary or desirable to accomplish the completion of the
Project.

 

All funds advanced by Lender pursuant to this Section 11.3 shall be expenditures
to which the terms of Section 12.8 below apply.

 

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SECTION 11.4                                                 OFFSET.  LENDER MAY
APPLY TO PAYMENT OF THE NOTE OR OTHER AMOUNTS DUE UNDER ANY OF THE LOAN
DOCUMENTS ANY AND ALL BALANCES, CREDITS OR FUNDS OF BORROWER, ANY BORROWER PARTY
OR GUARANTOR THEN OR THEREAFTER HELD BY LENDER.

 

SECTION 11.5                                                 DEFAULT INTEREST. 
LENDER MAY CHARGE INTEREST AT THE DEFAULT RATE IF PERMISSIBLE PURSUANT TO THE
TERMS AS SET FORTH IN THE NOTE, WHETHER OR NOT LENDER HAS ACCELERATED THE NOTE.

 

ARTICLE XII

 

MISCELLANEOUS PROVISIONS

 

SECTION 12.1                                                 AGREEMENT BINDING
ONLY UPON EXECUTION BY LENDER.  THE SUBMISSION OF THE LOAN DOCUMENTS TO BORROWER
FOR EXAMINATION OR EXECUTION DOES NOT CONSTITUTE A COMMITMENT (OR AN OFFER TO
MAKE A COMMITMENT) BY LENDER FOR A LOAN TO BORROWER.  THE LOAN DOCUMENTS SHALL
BECOME EFFECTIVE AS A COMMITMENT BY LENDER ONLY UPON EXECUTION AND DELIVERY BY
BOTH LENDER AND BORROWER.

 

SECTION 12.2                                                 ENTIRE AGREEMENT. 
THE LOAN DOCUMENTS WHEN AND AS EXECUTED CONSTITUTE THE ENTIRE AGREEMENT OF
BORROWER AND LENDER WITH RESPECT TO THE LOAN.  THERE ARE NO ORAL OR WRITTEN
REPRESENTATIONS OR AGREEMENTS WHICH MODIFY OR PURPORT TO MODIFY THE TERMS OF
SUCH DOCUMENTS.  THE LOAN DOCUMENTS SUPERSEDE ALL PRIOR AGREEMENTS AND
UNDERSTANDINGS, WRITTEN OR ORAL, RELATING TO THE LOAN INCLUDING THE COMMITMENT
LETTER.

 

SECTION 12.3                                                 NO WAIVER.  NO
WAIVER, CONSENT OR APPROVAL OF ANY KIND BY LENDER SHALL BE EFFECTIVE UNLESS
CONTAINED IN A WRITING SIGNED AND DELIVERED BY LENDER.  LENDER’S WAIVER OF ANY
CONDITION OR COVENANT HEREUNDER SHALL NOT BE CONSTRUED AS A CONTINUING WAIVER. 
NO WAIVER WILL BE IMPLIED FROM ANY DELAY OR FAILURE BY LENDER TO TAKE ACTION ON
ACCOUNT OF ANY EVENT OF DEFAULT OR DEFAULT BY BORROWER.  LENDER’S CONSENT TO ANY
ACT OR OMISSION OF BORROWER WILL NOT BE CONSTRUED TO BE A CONSENT TO ANY OTHER
OR SUBSEQUENT ACT OR OMISSION OR TO WAIVE THE REQUIREMENT FOR LENDER’S CONSENT
TO BE OBTAINED IN ANY FUTURE OR OTHER INSTANCE.  IN ADDITION, THE CLOSING OF THE
LOAN OR LENDER’S MAKING OF ANY ADVANCE PRIOR TO THE FULFILLMENT BY BORROWER OF
ONE OR MORE OF THE CONDITIONS SET FORTH IN THE LOAN DOCUMENTS SHALL NOT
CONSTITUTE A WAIVER BY LENDER OF ANY SUCH CONDITION, AND LENDER RESERVES THE
RIGHT TO REQUIRE THE FULFILLMENT OF EACH SUCH CONDITION PRIOR TO MAKING ANY
SUBSEQUENT ADVANCE.  NO FAILURE BY LENDER TO EXERCISE, OR DELAY BY LENDER IN
EXERCISING, ANY RIGHT, POWER OR PRIVILEGE UNDER ANY OF THE LOAN DOCUMENTS SHALL
OPERATE AS A WAIVER THEREOF, NOR SHALL ANY SINGLE OR PARTIAL EXERCISE OF ANY
RIGHT, POWER OR PRIVILEGE UNDER ANY SUCH LOAN DOCUMENTS PRECLUDE ANY OTHER OR
FURTHER EXERCISE THEREOF, OR THE EXERCISE OF ANY OTHER RIGHT, POWER OR
PRIVILEGE.  THE RIGHTS AND REMEDIES PROVIDED TO LENDER IN THE LOAN DOCUMENTS ARE
CUMULATIVE AND NOT EXCLUSIVE OF ANY RIGHT OR REMEDY PROVIDED BY LAW.  WITHOUT
LIMITING THE FOREGOING, NO ADVANCE BY LENDER AFTER AN EVENT OF DEFAULT OR AN
DEFAULT SHALL CONSTITUTE A WAIVER OF ANY OF LENDER’S REMEDIES OR SHALL OBLIGE
LENDER TO MAKE ANY FURTHER ADVANCES NOR SHALL ANY SUCH ADVANCE PRECLUDE LENDER
FROM DECLARING AN EVENT OF DEFAULT AND PURSUING ITS REMEDIES UNDER THE LOAN
DOCUMENTS AND AT LAW.

 

SECTION 12.4                                                 AMENDMENTS.  NO
AMENDMENT, MODIFICATION, DISCHARGE OR OTHER CHANGE IN THE TERMS OF ANY OF THE
LOAN DOCUMENTS SHALL BE VALID UNLESS IN WRITING AND SIGNED BY

 

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the party against which enforcement is sought, and then only to the extent
specifically set forth therein.

 

SECTION 12.5                                                 NO THIRD PARTY
BENEFITS.  BY THEIR EXECUTION OF THE LOAN DOCUMENTS, LENDER AND BORROWER DO NOT
INTEND TO CREATE ANY RIGHTS OF ANY KIND IN ANY THIRD PARTIES (OTHER THAN ANY
PARTICIPANTS AND SUCCESSORS AND ASSIGNEES OF LENDER).  LENDER SHALL NOT BE
DEEMED TO BE IN PRIVITY OF CONTRACT WITH ANY CONTRACTOR, SUBCONTRACTOR OR OTHER
PROVIDER OF SERVICES OR MATERIALS TO THE PROJECT, NOR SHALL ANY PAYMENT OF FUNDS
DIRECTLY TO ANY SUCH PERSON BE DEEMED TO CREATE ANY THIRD-PARTY BENEFICIARY
STATUS OR RECOGNITION OF THE SAME BY LENDER.  WITHOUT LIMITING THE FOREGOING,
LENDER SHALL NOT OWE ANY DUTY WHATSOEVER (I) TO ANY CLAIMANT FOR LABOR PERFORMED
OR MATERIAL FURNISHED IN CONNECTION WITH THE CONSTRUCTION OF THE PROJECT TO
APPLY ANY UNDISBURSED PORTION OF THE LOAN TO THE PAYMENT OF ANY SUCH CLAIM OR TO
EXERCISE ANY RIGHT OR POWER OF LENDER UNDER THE LOAN DOCUMENTS, OR (II) TO ANY
PURCHASER, LICENSEE, TENANT, INVITEE OR USER OF ALL OR ANY PART OF THE PROJECT. 
ANY APPROVAL OR INSPECTION OF THE CONSTRUCTION DOCUMENTS OR ANY OTHER DOCUMENTS
OR ANY PART OF THE CONSTRUCTION OF THE PROJECT OR ANY OTHER ACTION TAKEN BY
LENDER OR ITS CONSULTANTS SHALL BE MADE EXCLUSIVELY FOR THE BENEFIT OF LENDER,
AND NO THIRD PARTY SHALL HAVE ANY RIGHT TO RELY THEREON IN ANY WAY.  LENDER
SHALL NOT IN ANY WAY BE ESTOPPED OR PREJUDICED BY ANY APPROVAL OR INSPECTION
FROM REQUIRING RECONSTRUCTION OF ANY PORTION OF THE PROJECT WHERE CONSTRUCTION
DOES NOT CONFORM TO ANY REQUIREMENTS OF THE LOAN DOCUMENTS.

 

SECTION 12.6                                                 SUCCESSORS AND
ASSIGNS.  SUBJECT TO THE RESTRICTIONS ON TRANSFERS CONTAINED IN SECTION 7.4
ABOVE AND ELSEWHERE IN THE LOAN DOCUMENTS, THE LOAN DOCUMENTS SHALL BE BINDING
UPON AND INURE TO THE BENEFIT OF THE PARTIES HERETO AND THEIR RESPECTIVE
SUCCESSORS AND ASSIGNS (INCLUDING ANY PARTICIPANTS OR ASSIGNEES OF LENDER).

 

SECTION 12.7                                                 PARTICIPATIONS AND
ASSIGNMENTS.  LENDER MAY, AT ANY TIME AND FROM TIME TO TIME, SELL, TRANSFER OR
ASSIGN THIS AGREEMENT, THE NOTE, THE DEED OF TRUST AND THE OTHER LOAN DOCUMENTS,
OR GRANT PARTICIPATIONS THEREIN, OR ISSUE CERTIFICATES OR SECURITIES EVIDENCING
A BENEFICIAL INTEREST THEREIN IN A RATED OR UNRATED PUBLIC OFFERING OR PRIVATE
PLACEMENT, AND LENDER MAY FORWARD TO ANY PURCHASER, TRANSFEREE, ASSIGNEE,
SERVICE, PARTICIPANT, INVESTOR OR CREDIT RATING AGENCY RATING SUCH SECURITIES
(COLLECTIVELY, AN “INVESTOR”) OR PROSPECTIVE INVESTOR ALL DOCUMENTS AND
INFORMATION IN LENDER’S POSSESSION WITH RESPECT TO BORROWER, ANY MEMBERS OR
PARTNERS OF BORROWER, ANY BORROWER PARTY, GUARANTOR, THE PROPERTY AND THE LOAN
DOCUMENTS AS SUCH INVESTOR OR PROSPECTIVE INVESTOR MAY REQUEST.  UPON ANY SUCH
SALE, TRANSFER OR ASSIGNMENT, LENDER SHALL BE AUTOMATICALLY RELEASED FROM ANY
LIABILITY HEREUNDER.

 

SECTION 12.8                                                 ALL ADVANCES
OBLIGATORY AND SECURED.  ANY AND ALL DISBURSEMENTS, PAYMENTS AND AMOUNTS
REASONABLY EXPENDED BY LENDER PURSUANT TO THE LOAN DOCUMENTS, AND ALL OTHER
LENDER LOAN EXPENSES SHALL AS AND WHEN ADVANCED OR INCURRED:  (A) BE DEEMED
OBLIGATORY FOR LENDER, REGARDLESS OF THE PERSON TO WHOM SUCH AMOUNTS ARE
FURNISHED, (B) SATISFY DOLLAR FOR DOLLAR THE OBLIGATIONS OF LENDER HEREUNDER,
(C) BE EVIDENCED BY THE NOTE (EXCEPT TO THE EXTENT THAT SUCH AMOUNTS EXCEED THE
FULL AMOUNT OF PRINCIPAL AND INTEREST THEREUNDER), (D) BE SECURED BY THE DEED OF
TRUST AND THE OTHER APPLICABLE LOAN DOCUMENTS, WHETHER OR NOT THE AGGREGATE OF
SUCH INDEBTEDNESS SHALL EXCEED THE FACE AMOUNT OF THE NOTE OR THE PRINCIPAL
AMOUNT OF THE INDEBTEDNESS SET OUT IN THE DEED OF TRUST AND SUCH OTHER
APPLICABLE LOAN DOCUMENTS AND (E) BEAR INTEREST AT THE RATE PROVIDED IN THE NOTE
(INCLUDING THE DEFAULT RATE IF AN EVENT OF DEFAULT HAS OCCURRED UNDER ANY OF THE
LOAN DOCUMENTS).  A STATEMENT ON BEHALF OF LENDER SIGNED BY AN

 

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officer as to the amount of such disbursements, payments and expenditures and
the reasons for the same shall be presumptive evidence of the same in any court
or other proceeding.  The burden of proving to the contrary shall be upon
Borrower.

 

SECTION 12.9                                                 PUBLICITY.  LENDER
SHALL HAVE THE RIGHT TO PUBLICLY ANNOUNCE IN PRINT OR OTHERWISE THAT LENDER HAS
MADE THE LOAN TO BORROWER.  IN CONNECTION THEREWITH, LENDER SHALL HAVE THE RIGHT
TO DESCRIBE THE LOAN, INCLUDING THE BORROWER’S NAME, THE TYPE OF THE LOAN (I.E.,
CONSTRUCTION, BRIDGE, MINI-PERM, ETC.), AND THE AMOUNT OF THE LOAN AND TO
IDENTIFY THE PROPERTY AND THE LOCATION THEREOF, BY WAY OF DESCRIPTION AND/OR
PHOTOGRAPHS OF THE PROPERTY.  BORROWER SHALL COOPERATE WITH LENDER IN THE
ERECTION OF APPROPRIATE SIGNAGE AT THE PROPERTY ADVERTISING THE FINANCING OF THE
PROJECT BY LENDER.

 

SECTION 12.10                                           NOTICES.  EXCEPT FOR ANY
NOTICE REQUIRED UNDER APPLICABLE LAW TO BE GIVEN IN ANOTHER MANNER, ANY NOTICE
THAT LENDER OR BORROWER MAY DESIRE OR BE REQUIRED TO GIVE UNDER THIS AGREEMENT
TO ANY OTHER PARTY HERETO SHALL BE IN WRITING AND SHALL BE DEEMED TO HAVE BEEN
PROPERLY GIVEN, SERVED AND RECEIVED: (I) IF DELIVERED BY HAND, WHEN DELIVERED;
(II) IF SENT BY REPUTABLE OVERNIGHT COURIER, THE BUSINESS DAY FOLLOWING DELIVERY
TO SUCH COURIER; AND (III) IF MAILED BY UNITED STATES CERTIFIED OR REGISTERED
MAIL, POSTAGE PREPAID, RETURN RECEIPT REQUESTED, ON THE THIRD BUSINESS DAY AFTER
MAILING, TO THE FOLLOWING ADDRESSES:

 

If to Borrower:

 

 

c/o Comstock Homebuilding Companies, Inc.

 

11465 Sunset Hills Road, Suite 510

 

Reston, Virginia 20910

 

Attention: Christopher Clemente

 

Facsimile Number: (703) 760-1520

 

 

with a copy to:

 

 

Bankert & Associates, P.C.

 

3025 Hamaker Court, Suite 501

 

Fairfax, Virginia

 

Attention: Joseph E. Bankert, Esq.

 

Facsimile Number: (703) 876-4628

 

 

If to Lender:

 

 

CORUS Bank, N.A.

 

3959 N. Lincoln Avenue

 

Chicago, Illinois 60613

 

Attention: David H. Krischke, Assistant Vice President

 

Facsimile Number: (773) 832-3553

 

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with a copy to:

 

 

 

 

CORUS Bank, N.A.

 

3959 N. Lincoln Avenue

 

Chicago, Illinois 60613

 

Attention: Joel C. Solomon, Esq.,

 

General Counsel

 

Facsimile Number: (773) 832-3626

 

 

and:

 

 

 

 

Andrea J. Cummings, Esq.

 

Sidley Austin Brown & Wood LLP

 

1501 K Street, N.W.

 

Washington, D.C. 20005

 

Facsimile Number: (202) 736-8711

 

Any party may change the address to which notices may be sent by notice to the
other party or parties as provided herein.  Except as may be otherwise
specifically required herein, notice to Borrower of the exercise of any right or
option granted to Lender by this Agreement is not required.

 

Notwithstanding anything to the contrary contained in this Agreement or any
other Loan Document, except as expressly directed in a writing addressed to
Borrower after the date hereof, any and all communications or notices by
Borrower or any other loan party to Lender concerning disputed debts,
obligations or liabilities, whether arising under this Agreement or otherwise,
including without limitation any instrument tendered as full satisfaction of a
debt, shall be delivered to Corus Bank, Department 311, Attention Rosa Paz, 3959
N. Lincoln, Chicago Illinois 60613 in addition to the aforementioned parties.

 

SECTION 12.11                                           FORM OF DOCUMENTS.  ALL
DOCUMENTS AND OTHER MATTERS REQUIRED BY ANY OF THE PROVISIONS OF THE LOAN
DOCUMENTS TO BE EXECUTED BY BORROWER OR LENDER OR TO BE SUBMITTED OR FURNISHED
TO LENDER SHALL BE IN FORM AND SUBSTANCE SATISFACTORY TO LENDER AND ITS COUNSEL.

 

SECTION 12.12                                           SEVERABILITY. 
INVALIDATION OF ANY ONE OR MORE CLAUSES IN ANY PROVISION OR ANY ENTIRE PROVISION
OF ANY OF THE LOAN DOCUMENTS BY JUDGMENT, ORDER OR DECREE OF STATE OR FEDERAL
COURT SHALL IN NO WAY AFFECT ANY OTHER CLAUSE OR PROVISION IN ANY OF THE LOAN
DOCUMENTS, ALL OF WHICH SHALL REMAIN IN FULL FORCE AND EFFECT.

 

SECTION 12.13                                           LENDER NOT PARTNER OF
BORROWER.  NEITHER THE EXECUTION NOR THE PERFORMANCE OF ANY OF THE LOAN
DOCUMENTS BY LENDER, NOR THE EXERCISE BY LENDER OF ANY OF ITS RIGHTS, PRIVILEGES
OR REMEDIES CONFERRED UNDER THE LOAN DOCUMENTS OR UNDER APPLICABLE LAW SHALL BE
DEEMED TO RENDER LENDER A PARTNER OR A JOINT VENTURER WITH BORROWER, ANY
GUARANTOR OF THE LOAN OR ANY OTHER PERSON, OR TO RENDER BORROWER AN AGENT OF
LENDER FOR ANY PURPOSES.  BORROWER SHALL INDEMNIFY AND HOLD LENDER HARMLESS FROM
ANY AND ALL DAMAGES RESULTING FROM SUCH A CONSTRUCTION OF THE PARTIES AND THEIR
RELATIONSHIP.  ALL OF SUCH ACTIONS WILL BE EXERCISED BY LENDER SOLELY IN
FURTHERANCE OF ITS ROLE AS A SECURED LENDER ADVANCING FUNDS FOR USE BY BORROWER
AS PROVIDED IN THE LOAN DOCUMENTS.

 

SECTION 12.14                                           JOINT AND SEVERAL
OBLIGATIONS.  IF BORROWER, GUARANTOR OR ANY OTHER SIGNATOR OF ANY OF THE LOAN
DOCUMENTS SHALL BE MORE THAN ONE PERSON, EACH SECURED OBLIGATION

 

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of such signators shall be the joint and several Secured Obligation of all of
the Persons constituting such signators.

 

SECTION 12.15                                           SURVIVAL.  ALL
AGREEMENTS, REPRESENTATIONS, WARRANTIES AND COVENANTS MADE IN THE LOAN DOCUMENTS
SHALL SURVIVE THE EXECUTION AND DELIVERY OF THE LOAN DOCUMENTS AND THE MAKING OF
THE LOAN, AND SHALL REMAIN IN FULL FORCE AND EFFECT UNTIL THE NOTE IS PAID IN
FULL AND ALL SECURED OBLIGATIONS UNDER THE LOAN DOCUMENTS ARE SATISFIED, OR
UNTIL SUCH OTHER TIME AS SPECIFIED IN ANY RELEVANT PROVISION OF SUCH LOAN
DOCUMENTS.  NOTWITHSTANDING THE FOREGOING OR ANYTHING ELSE CONTAINED IN THE LOAN
DOCUMENTS, THE SECURED OBLIGATIONS OF BORROWER UNDER SECTION 7.9 SHALL SURVIVE
ANY TERMINATION OF THE LOAN DOCUMENTS, THE REPAYMENT OF THE LOAN AND THE
SATISFACTION OF ALL OF THE OTHER SECURED OBLIGATIONS UNDER THE LOAN DOCUMENTS.

 

SECTION 12.16                                           TIME OF THE ESSENCE. 
TIME IS OF THE ESSENCE FOR BORROWER’S AND GUARANTOR’S PERFORMANCE OF EACH
PROVISION OF THIS AGREEMENT AND THE LOAN DOCUMENTS.

 

SECTION 12.17                                           CONFLICTS.  IN THE EVENT
OF A CONFLICT OR INCONSISTENCY BETWEEN THE PROVISIONS OF THIS AGREEMENT AND THE
PROVISIONS OF ANY OTHER LOAN DOCUMENT, THE PROVISIONS OF THIS AGREEMENT SHALL
GOVERN, UNLESS ANY SUCH PROVISION IN ANY LOAN DOCUMENT PROVIDES THAT SUCH
PROVISION GOVERNS REGARDLESS OF ANY OTHER TERMS IN THIS AGREEMENT OR THE OTHER
LOAN DOCUMENTS.  THIS AGREEMENT SUPERSEDES THE COMMITMENT LETTER.  IN THE EVENT
ANOTHER LOAN DOCUMENT ADDRESSES A PARTICULAR ISSUE AND THIS AGREEMENT DOES NOT
ADDRESS SUCH ISSUE, OR IN THE EVENT THAT THEY BOTH ADDRESS A PARTICULAR ISSUE
BUT DO NOT DIRECTLY CONFLICT, SUCH EVENT IS NOT TO BE CONSTRUED AS A CONFLICT
BETWEEN THE PROVISIONS OF THIS AGREEMENT AND THOSE OF SUCH OTHER LOAN DOCUMENT.

 

SECTION 12.18                                           WAIVER OF SUBROGATION. 
BORROWER, UNTIL THE LOAN IS PAID IN FULL AND ALL FUNDING OBLIGATIONS UNDER THE
LOAN DOCUMENTS ARE TERMINATED, HEREBY WAIVES ANY AND ALL RIGHTS OF SUBROGATION
TO LENDER’S RIGHTS OR CLAIMS TO THE EXTENT AFFECTING THE PROPERTY OR ANY OTHER
SECURITY FOR THE LOAN.

 

SECTION 12.19                                           GOVERNMENTAL
REGULATION.  NOTWITHSTANDING ANYTHING IN THE LOAN DOCUMENTS TO THE CONTRARY,
LENDER SHALL NOT BE OBLIGATED TO LEND MONEY TO BORROWER IN VIOLATION OF ANY
LIMITATION OR RESTRICTION CONTAINED IN ANY APPLICABLE LAW, STATUTE OR
REGULATION.

 

SECTION 12.20                                           COUNTERPARTS; FAX.  THIS
AGREEMENT MAY BE EXECUTED BY DIFFERENT PARTIES IN SEPARATE COUNTERPARTS.  EACH
COUNTERPART WHEN SO EXECUTED SHALL BE DEEMED TO BE AN ORIGINAL.  ALL
COUNTERPARTS TAKEN TOGETHER SHALL CONSTITUTE A COMPLETE AGREEMENT. FOR PURPOSES
OF NEGOTIATING AND FINALIZING THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
(INCLUDING ANY SUBSEQUENT AMENDMENTS THERETO), ANY EXECUTED OR CERTIFIED
DOCUMENT, INCLUDING THE COMMITMENT LETTER, THE LOAN DOCUMENTS AND ALL OTHER
STATEMENTS AND VERIFICATIONS TRANSMITTED BY FACSIMILE MACHINE (“FAX”) SHALL BE
TREATED IN ALL MANNER AND RESPECTS AS AN ORIGINAL DOCUMENT.  THE SIGNATURE OF
ANY PARTY BY FAX SHALL BE CONSIDERED FOR THESE PURPOSES AS AN ORIGINAL
SIGNATURE.  ANY SUCH FAX DOCUMENT SHALL BE CONSIDERED TO HAVE THE SAME USE,
FORCE AND BINDING LEGAL EFFECT AS AN ORIGINAL DOCUMENT.  IN ADDITION, BORROWER
AGREES TO PROVIDE LENDER WITH THE ORIGINAL OF ALL EXECUTED OR CERTIFIED
DOCUMENTS WITHIN A REASONABLE TIME FOLLOWING THE FAX TRANSMITTAL.  AT THE
REQUEST OF EITHER PARTY, ANY FAX DOCUMENT SUBJECT TO THIS AGREEMENT SHALL BE
RE-EXECUTED BY BOTH PARTIES IN AN ORIGINAL FORM.  THE UNDERSIGNED PARTIES HEREBY
AGREE THAT NEITHER SHALL RAISE THE

 

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use of the FAX or the fact that any signature or document was transmitted or
communicated through the use of a FAX as a defense to the formation of this
Agreement.

 

SECTION 12.21                                           PARTIAL RELEASE.  LENDER
SHALL FROM TIME TO TIME DELIVER UNIT RELEASES PURSUANT TO AND IN ACCORDANCE WITH
THE PROVISIONS OF SECTION 8.7 OF THIS AGREEMENT.

 

SECTION 12.22                                           GOVERNING LAW;
JURISDICTION; VENUE; AND SERVICE OF PROCESS.

 

(A)                                  CHOICE OF LAW.  THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A CONTRARY EXPRESS CHOICE OF
LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (WITHOUT
REGARD TO THE CONFLICT OF LAWS PROVISIONS) OF THE COMMONWEALTH OF VIRGINIA, BUT
GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.

 

(B)                                 CONSENT TO JURISDICTION. THE PARTIES TO THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS HEREBY IRREVOCABLY SUBMIT TO THE
NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR VIRGINIA STATE COURT
SITTING IN THE COMMONWEALTH OF VIRGINIA IN ANY ACTION OR PROCEEDING ARISING OUT
OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS AND SUCH
PARTIES HEREBY IRREVOCABLY AGREE THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVE
ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT,
ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN
INCONVENIENT FORUM.  NOTHING HEREIN SHALL LIMIT THE RIGHT OF LENDER TO BRING
PROCEEDINGS AGAINST BORROWER, ANY BORROWER PARTY AND/OR GUARANTOR IN THE COURTS
OF ANY OTHER JURISDICTION.  ANY JUDICIAL PROCEEDING BY BORROWER, ANY BORROWER
PARTY AND/OR GUARANTOR AGAINST LENDER OR ANY OTHER LENDER PARTY INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR
CONNECTED WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL BE BROUGHT ONLY
IN A COURT IN THE COMMONWEALTH OF VIRGINIA. BORROWER HEREBY IRREVOCABLY
DESIGNATES AS AGENT FOR SERVICE OF PROCESS CHRISTOPHER CLEMENTE WITH OFFICES
PRESENTLY AT 11465 SUNSET HILLS ROAD, SUITE 510, RESTON, VIRGINIA 20190 AS ITS
AGENT TO RECEIVE SERVICE OF ANY AND ALL PROCESS AND DOCUMENTS ON ITS BEHALF IN
ANY LEGAL PROCEEDING IN THE COMMONWEALTH OF VIRGINIA

 

(C)                                  WAIVER OF JURY TRIAL.  THE PARTIES TO THIS
AGREEMENT HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT THAT
SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION ARISING IN ANY WAY IN
CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, OR ANY OTHER
STATEMENTS OR ACTIONS OF THE OTHER PARTY TO THIS AGREEMENT.

 

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(D)           INCORPORATION OF PROVISIONS. BORROWER ACKNOWLEDGES THAT BORROWER’S
AGREEMENT TO COMPLY WITH THE PROVISIONS SET FORTH IN THIS SECTION 12.22 IS A
MATERIAL INDUCEMENT FOR LENDER TO ENTER INTO THIS AGREEMENT AND EACH SUCH OTHER
LOAN DOCUMENT, AND THAT THESE PROVISIONS SHALL BE EFFECTIVE AS TO EACH OF THE
OTHER LOAN DOCUMENTS AS IF FULLY INCORPORATED THEREIN.

 

SECTION 12.23              WAIVER OF PUNITIVE AND CONSEQUENTIAL DAMAGES.  IN NO
EVENT SHALL LENDER BE LIABLE TO BORROWER FOR PUNITIVE, EXEMPLARY OR
CONSEQUENTIAL DAMAGES, INCLUDING, WITHOUT LIMITATION, LOST PROFITS, WHATEVER THE
NATURE OF A BREACH BY LENDER OF ITS OBLIGATIONS UNDER THIS AGREEMENT OR ANY OF
THE LOAN DOCUMENTS, AND BORROWER, FOR ITSELF AND GUARANTOR, WAIVES ALL CLAIMS
FOR PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES.

 

SECTION 12.24              WRITTEN CREDIT AGREEMENTS.  BORROWER EXPRESSLY AGREES
THAT FOR PURPOSES OF THIS AGREEMENT AND EACH AND EVERY OTHER LOAN DOCUMENT: (I)
AS A DEBTOR, BORROWER MAY NOT MAINTAIN AN ACTION ON OR IN ANY WAY RELATED TO A
CREDIT AGREEMENT UNLESS THE CREDIT AGREEMENT IS IN WRITING, EXPRESSES AN
AGREEMENT OR COMMITMENT TO LEND MONEY OR EXTEND CREDIT OR DELAY OR FORBEAR
REPAYMENT OF MONEY, SETS FORTH THE RELEVANT TERMS AND CONDITIONS, AND IS SIGNED
BY THE CREDITOR AND THE DEBTOR; (II) NO CREDITOR SHALL BE LIABLE TO A PERSON NOT
IN PRIVITY OF CONTRACT WITH THE CREDITOR FOR CIVIL DAMAGES ARISING OUT OF A
CREDIT AGREEMENT, OR ANY CONDITIONS PRECEDENT THERETO, EXCEPT FOR ACTS OR
CONDUCT BY THE CREDITOR THAT CONSTITUTE FRAUD AGAINST THE PERSON; (III) THIS
AGREEMENT AND EACH AND EVERY OTHER LOAN DOCUMENT SHALL BE A “CREDIT AGREEMENT”
FOR PURPOSES OF INTERPRETING THE FOREGOING CLAUSES, (IV) THE PROVISIONS OF THIS
SECTION APPLY TO THIS TRANSACTION INCLUDING, BUT NOT LIMITED TO, THE EXECUTION
OF THIS AGREEMENT AND EACH AND EVERY OTHER LOAN DOCUMENT; AND (V) ANY ACTION ON
OR IN ANY WAY RELATED TO THIS AGREEMENT AND EACH AND EVERY OTHER LOAN DOCUMENT
SHALL BE GOVERNED BY THE PROVISIONS OF THIS SECTION.

 

SECTION 12.25              ACCORD AND SATISFACTION; DISPUTED DEBT.  BORROWER
HEREBY EXPRESSLY WAIVES ANY AND ALL RIGHTS TO EFFECT AN ACCORD AND SATISFACTION
OF ANY SECURED OBLIGATION OR ANY OTHER DEBT OF BORROWER TO LENDER IN ACCORDANCE
WITH SECTION 3-311 OF THE UCC.  NOTWITHSTANDING ANYTHING TO THE CONTRARY
CONTAINED IN THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, EXCEPT AS EXPRESSLY
DIRECTED IN A WRITING ADDRESSED TO BORROWER AFTER THE DATE HEREOF, ANY AND ALL
COMMUNICATIONS OR NOTICES BY BORROWER OR ANY GUARANTOR TO LENDER CONCERNING
DISPUTED DEBTS, OBLIGATIONS OR LIABILITIES, WHETHER ARISING UNDER THIS AGREEMENT
OR OTHERWISE, INCLUDING WITHOUT LIMITATION ANY INSTRUMENT TENDERED AS FULL
SATISFACTION OF A DEBT, SHALL BE DELIVERED TO CORUS BANK, DEPARTMENT 311,
ATTENTION ROSA PAZ, 3959 N. LINCOLN AVENUE, CHICAGO ILLINOIS 60613.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

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IN WITNESS WHEREOF, the parties have executed this Agreement, as of the date
first above written, pursuant to proper authority duly granted.

 

 

BORROWER:

 

 

 

COMSTOCK PENDERBROOK, L.C.,

 

a Virginia limited liability company

 

 

 

 

By:

Comstock Homebuilding Companies, Inc.,

 

 

a Delaware corporation,

 

 

Its Manager

 

 

 

 

 

By:

/s/ Christopher Clemente

 

 

 

Name:

Christopher Clemente

 

 

Title:

Chief Executive Officer

 

 

 

 

 

LENDER:

 

 

 

CORUS BANK, N.A.

 

 

 

 

 

By:

/s/ David H. Krischke

 

 

Name:

David H. Krischke

 

Title:

Assistant Vice President

 

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TABLE OF EXHIBITS

 

Appendix A - Definitions and Interpretation

 

Exhibit A - The Land

 

Exhibit B - Project Budget

 

Exhibit C - Pending Litigation

 

Exhibit D - Ownership Chart

 

Exhibit E - Minimum Sales Guidelines

 

Exhibit F – Certification of Surveyor

 

Exhibit G – Form of Condominium Contract

 

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APPENDIX A

 

DEFINITIONS AND INTERPRETATION

 

INTERPRETATION

 

In this Agreement and in each other Loan Document which incorporates or uses the
definitions set forth in this Appendix A, unless a clear contrary intention
appears, the following rules of interpretation shall apply:

 

A.            Amendments Included.  Definitions contained in this Agreement or
any other Loan Documents which identify documents, including this Agreement or
any other Loan Documents, shall be deemed to include all amendments,
modifications, supplements, restatements, renewals, and replacements to such
documents which may be entered into from time to time in compliance with the
requirements of this Agreement or otherwise with the consent of Lender.

 

B.            Use of “Including”.  When the term “include” or “including” is
used in this Agreement, it shall be construed to mean “include” or “including
but not limited to” the things specifically mentioned.

 

C.            Captions.  Captions and headings used in this Agreement and the
other Loan Documents are for convenience of reference only, and shall not affect
the construction or interpretation of this Agreement or the other Loan
Documents.

 

D.            Gender, Number, Etc.  Any word in this Agreement which is
expressed in the masculine, feminine or neuter gender shall be deemed to include
the masculine, feminine and neuter genders.  Any word herein which is expressed
in the singular or plural number shall be deemed, whenever appropriate in the
context, to include the singular and the plural.  Any Exhibit, Schedule or other
item referred to herein as being “attached” to this Agreement shall be construed
to mean “attached to and made a part of this Agreement”.

 

E.             Laws.  Reference to any Law means such Law as amended, modified,
codified, replaced or reenacted, in whole or in part, and in effect from time to
time, including rules and regulations promulgated thereunder and reference to
any section or other provision of any Law means that provision of such Law from
time to time in effect and constituting the substantive amendment, modification,
codification, replacement or reenactment of such section or other provision.

 

DEFINITIONS

 

“Account” means, collectively and individually as the context may require, with
such determination made in the sole discretion of Lender, the Project Account
and Operating Account.

 

“ADA” means the Americans with Disabilities Act of 1990, 42 U.S.C. 12101, as
from time to time amended, together with any and all comparable Laws of any
Governmental Authority.

 

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“Advance” means any advance or disbursement of Loan proceeds made by Lender
pursuant to this Agreement.

 

“Affiliate” means any Person directly or indirectly controlling, controlled by,
or under common control with the identified Person or any Person owning a
material interest in such identified Person, either directly or indirectly.

 

“Agreement” means this Loan Agreement by and between Borrower and Lender, as may
be amended, extended, restated, replaced, modified or supplemented from time to
time.

 

“All Risk Insurance” shall have the meaning ascribed thereto in Section
7.8.1(a).

 

“Application Fee” shall have the meaning ascribed thereto in Section 2.3.

 

“Application Letter” means that certain application letter between Lender and
Borrower dated January 12, 2005, respecting the terms and conditions under which
Lender is prepared to make the Loan; it being agreed that in the event of any
conflict between the terms and conditions of the Loan Documents and the terms
and conditions of the Commitment Letter, the terms and conditions of the Loan
Documents shall govern and control.

 

“Approved Condominium Contracts” shall have the meaning ascribed to such term in
Section 8.1 of this Agreement.

 

“Association” means the condominium association for the Property formed pursuant
to the Declaration of Condominium.

 

“Bankruptcy Code” means the Bankruptcy Reform Act of 1978 (11 USC § 101-1330) as
now or hereafter amended or recodified.

 

“Base Purchase Price” means the price (after deducting therefrom the costs of
any Upgrade or extras) to be paid by a Contract Buyer under a Condominium
Contract for a Residential Unit and/or a Parking Unit.

 

“Basic Agreements” shall have the meaning ascribed thereto in Section 3.1.

 

“Borrower” means the entity defined as the “Borrower” in the introductory
paragraph of this Agreement and any of its permitted successors and assigns.

 

“Borrower Party” means Comstock and any of its permitted successors and assigns.

 

“Borrower’s Additional Equity” shall have the meaning ascribed to such term in
Section 2.6.

 

“Borrower’s Equity” shall have the meaning ascribed thereto in Section 2.6.

 

“Borrower’s Minimum Equity Investment” shall have the meaning ascribed to such
term in Section 2.6 of this Agreement.

 

“Building” shall have the meaning ascribed thereto in Recital III of this
Agreement.

 

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“Business Day” means any day other than Saturday or Sunday that Lender is open
for business.

 

“Change Orders” shall have the meaning ascribed to such term in Section 6.2(a).

 

“Closing Date” means the date that all conditions precedent to the closing of
the Loan set forth in Section 4.1 of this Agreement have been satisfied and
Lender has authorized the Title Insurer to record the Deed of Trust.

 

“Closing Fee” shall have the meaning ascribed thereto in Section 2.3.

 

“Closing Notice” shall have the meaning ascribed thereto in Section 8.7(b).

 

“Collateral” means the Property and any and all other property (real, personal
or intangible) in which a security interest has been granted to secure the
Secured Obligations.

 

“Collateral Assignment of Developer’s Rights” means that certain Collateral
Assignment of Developer’s Rights and Agreement with Respect to Condominium
Documents, dated as of the date hereof, made by Borrower in favor of Lender, as
may be amended, extended, restated, replaced, modified or supplemented from time
to time.

 

“Commitment Fee” shall have the meaning ascribed thereto in Section 2.3.

 

“Commitment Letter” means that certain commitment letter between Lender and
Borrower dated on or about the date hereof, respecting the terms and conditions
under which Lender is prepared to make the Loan; it being agreed that in the
event of any conflict between the terms and conditions of the Loan Documents and
the terms and conditions of the Commitment Letter, the terms and conditions of
the Loan Documents shall govern and control.

 

“Completion Guaranty” means that certain Completion Guaranty, dated as of the
date hereof, made by Guarantor in favor of Lender, as may be amended, extended,
restated, replaced, modified or supplemented from time to time.

 

“Comstock” shall have the meaning ascribed thereto in Recital I of this
Agreement.

 

“Condominium Act” means the Virginia Condominium Act, and all amendments and
modifications thereof.

 

“Condominium Contract” shall have the meaning ascribed to such term in Section
8.1.

 

“Condominium Documents” mean, collectively and individually, the Plat of
Condominium, the Declaration of Condominium, all plans, schedules and other
details defining the Units and the general common elements and the limited
common elements, the bylaws of the condominium unit owner’s association or board
of managers, the rules and regulations, the management agreement between the
condominium unit owner’s association or board of managers and the firm that will
be managing the Property, the sales agency agreement, the form of purchase
agreement(s) to be used for the sale of Units and, all sales and promotional
materials

 

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to be used in connection with the sale of condominium Units, and each exhibit
thereto, together with any amendments and attachments to any of the foregoing.

 

“Condominium Regime” shall have the meaning ascribed to such term in Section
8.8(a).

 

“Construction Documents” means any contract, agreement, warranty, service
agreements, maintenance contracts or other agreement entered into by Borrower,
any Borrower Party, Guarantor or any Affiliate of Borrower, any Borrower Party
or Guarantor providing for the design, development, engineering, construction,
provisioning, equipping, furnishing, use, occupancy, repair and service of the
Project, whether presently existing or entered into after the date hereof.

 

“Contract Buyer” means a purchaser of a Unit.

 

“Contributor” shall have the meaning ascribed to such term in Section 2.6.

 

“Costs” means any and all costs, fees or expenses which Borrower or Guarantor is
obligated to pay pursuant to this Agreement or any of the other Loan Documents,
including, but not limited to, those costs and expenses described in Section
2.4(a) and Section 2.4(b) of this Agreement.

 

“Declaration of Condominium” means the form of condominium declaration for the
Property and all related formation, organization and operation documents, which
shall be in form and substance reasonably acceptable to Lender.

 

“Deed of Trust” means that certain Deed of Trust with Absolute Assignment of
Leases and Rents and Security Agreement and Fixture Filing, of even date, by
Borrower in favor of Lender, as may be amended, extended, restated, replaced,
modified or supplemented from time to time.

 

“Default” means any occurrence which, with notice or the passage of time or
both, would constitute an Event of Default under this Agreement or any other
Loan Document.

 

“Default Rate” means the rate of interest designated in the Note as the Default
Rate.

 

“Deficiency Deposit” shall have the meaning ascribed thereto in Section 6.3(c).

 

“Environmental Indemnity Agreement” means the Environmental Indemnity Agreement,
dated as of the date hereof, made by Borrower and Guarantor, jointly and
severally, for the benefit of Lender, as may be amended, extended, restated,
replaced, modified or supplemented from time to time.

 

“EO13224” shall have the meaning ascribed to such term in Section 3.27.

 

“ERISA” means Employee Retirement Income Security Act of 1974, as amended from
time to time.

 

“Event of Default” shall have the meaning ascribed to such term in Section 10.1.

 

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“Exit Fee” shall have the meaning ascribed to such term in Section 2.8.

 

“FAX” shall have the meaning ascribed to such term in Section 12.20.

 

“Financial Statements” means the financial statements of Borrower and Guarantor
delivered to Lender pursuant to Section 4.1(f) of this Agreement and relied upon
by Lender in making this Loan, as well as those statements subsequently
delivered in connection with Section 7.7 of this Agreement.

 

“Form Condominium Contract” shall have the meaning ascribed to such term in
Section 8.1(a).

 

“GAAP” means generally accepted accounting principles.

 

“Governmental Approval” means any Law of any Governmental Authority, including,
without limitation, any zoning, subdivision or building ordinance or
environmental protection law or regulation or any requirement of any kind which
must be complied with in connection with the construction or operation of the
Property or for the issuance or continuing effectiveness of any Permit of any
kind required by any Governmental Authority in connection with the transactions
contemplated by this Agreement and the other Loan Documents.

 

“Governmental Authority” means the United States of America, any State,
including the State where the Property is located and the State of Borrower’s
organization, any political subdivision of the United States of America or any
State, including any city or county in such States, and any department,
commission, board, bureau, court or administrative, regulatory, adjudicatory, or
arbitrational body or other instrumentality or agency of any kind or any of them
having jurisdiction in any way over the Property, Borrower, any Borrower Party
or Guarantor or any of the other parties or documents referred to in this
Agreement or the other Loan Documents.

 

“Gross Operating Income” means, for any period of time, all receipts, revenues,
income and proceeds of sales of every kind actually received in connection with
the operation of the Property as a rental apartment complex, and shall include,
without limitation: rent or other payments received from tenants, licensees, and
occupants of commercial, office, retail or residential space; the proceeds of
insurance with respect to use and occupancy or business interruption insurance;
deposits forfeited and not refunded; and any amount recovered in any legal
action or proceeding or settlement thereof pertaining to rents or other income
which arose out of the operation of the Property.  Gross Operating Income shall
exclude all sales and excise taxes and any similar taxes collected as direct
taxes payable to taxing authorities; gratuities or service charges collected for
payment to and paid to employees; proceeds of insurance (except for proceeds of
insurance with respect to use and occupancy or business interruption insurance);
proceeds of sales of depreciable property; and proceeds of condemnation.

 

“Guarantor” means Comstock Homebuilding Companies, Inc., a Delaware Corporation.
Each singular reference to “Guarantor” shall jointly and severally refer to
Guarantor if there is more than one.

 

“Guaranty” shall mean, collectively and individually, the Completion Guaranty
and the Limited Guaranty.

 

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 “Hard Costs” means any and all costs directly related to and incurred in
connection with the construction of the Project, including, without limitation,
the cost of all labor, materials and equipment incurred pursuant to any
construction contract and any subcontracts, but excluding any fees for
architectural and engineering services, marketing fees, financing costs and
other similar fees and costs.

 

“HUD” shall have the meaning ascribed to such term in Section 8.8(d).

 

“In Balance” shall have the meaning ascribed to this term in Section 6.3(a).

 

“Indebtedness” means with respect to any Person, at a particular time: (i) all
obligations on account of money borrowed by, or credit extended to or on behalf
of, or for or on account of deposits with or advances to, such Person; (ii) all
obligations of such Person evidenced by bonds, debentures, notes or similar
instruments; (iii) all obligations of such Person for the deferred purchase
price of property or services other than trade payables incurred in the ordinary
course of business and on terms customary in the trade; (iv) all obligations
secured by a lien on property owned by such Person (whether or not assumed), and
all obligations of such Person under capitalized leases (without regard to any
limitation of the rights and remedies of the holder of such lien or the lessor
under such capitalized lease to repossession or sale of such property); (v) the
face amount of all letters of credit issued for the account of such Person and,
without duplication, the unreimbursed amount of all drafts drawn thereunder, and
all other obligations of such Person associated with such letters of credit or
draws thereon; (vi) all obligations of such Person in respect of acceptances or
similar obligations issued for the account of such Person; (vii) all obligations
of such Person under a product financing or similar arrangement; (viii) all
obligations of such Person under any interest rate or currency protection
agreement, interest rate or currency future, interest rate or currency option,
interest rate or currency swap or cap or other interest rate or currency hedge
agreement; and (ix) all obligations and liabilities with respect to unfunded
vested benefits under any “employee benefit plan” or with respect to withdrawal
liabilities incurred under ERISA by Borrower or any ERISA Affiliate to a
“multiemployer plan”, as such terms are defined under the Employee Retirement
Income Security Act of 1974.

 

“Individual Unit Exit Fee” shall have the meaning ascribed to such term in
Section 2.8.

 

“Initial Condominium Closing” shall mean the closing of the first Approved
Condominium Contract following satisfaction of the Initial Condominium Closing
Conditions.

 

“Initial Condominium Closing Conditions” shall have the meaning ascribed to such
term in Section 8.7(a) of this Agreement.

 

“Initial Disbursement” means an amount equal to $57,000,000.

 

“Interest Rate” means the rate of interest designated in the Note as the
Interest Rate.

 

“Interest Reserve” means a reserve for the payment of interest on the Loan, set
forth as a line item in the Project Budget and to be established and applied as
set forth herein and in the Note.

 

“Investor” shall have the meaning ascribed thereto in Section 12.7.

 

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“IRC” means Internal Revenue Code of 1986, as amended from time to time.

 

“Land” shall have the meaning ascribed thereto in Recital II of this Agreement.

 

“Land Act” shall have the meaning ascribed to such term in Section 8.8(d).

 

“Laws” means collectively, all federal, State and local laws, statutes, codes,
ordinances, orders, rules and regulations which have been duly authorized and
are currently in effect and/or hereinafter enacted, including judicial opinions
or precedential authority in the applicable jurisdiction, and including, without
limitation, all environmental laws, the Condominium Act, all rules and
regulations relating to life safety and the ADA.

 

“Leases” means all leases, tenancies, licenses or occupancy agreements relating
to the Property.

 

“Lender” means the entity defined as the “Lender” in the introductory paragraph
of this Agreement and any of its successors and assigns.

 

“Lender Parties” shall have the meaning ascribed thereto in Section 7.9.

 

“Lender’s Estimate of Construction Costs” means Lender’s estimate (in Lender’s
reasonable discretion), from time to time, of the cost to complete the marketing
and conversion of the Project to condominiums.  Initially, Lender’s Estimate of
Construction Costs shall be based upon the Project Budget; provided, that Lender
may make such allowances for reserves and contingencies as Lender shall deem
appropriate in its reasonable discretion. Thereafter, Lender’s Estimate of
Construction Costs will take into account all Change Orders approved by Lender,
other contracts and purchase orders entered into by Borrower and other
considerations which Lender, in its reasonable judgment deems relevant or likely
to have an impact upon the cost to convert the Project into a condominium
building.

 

“Lender’s Project Consultant” means the Person or firm employed by Lender to
review and report to Lender on the progress of construction of the Project.

 

“Lien” means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), or other security interest,
security agreement or preferential arrangement of any kind (including any
conditional sale or other title retention agreement, any financing lease
involving substantially the same economic effect as any of the foregoing, and
the filing of any financing statement under the Uniform Commercial Code or
comparable law of any jurisdiction).

 

“Limited Guaranty” means that certain Carve-Out Guaranty dated of even date
herewith made by Guarantor in favor of Lender, as may be amended, extended,
restated, replaced, modified or supplemented from time to time.

 

“Loan” means a loan to be made by Lender to Borrower and to be disbursed in
accordance with the terms hereof in an amount not to exceed $67,000,000.

 

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“Loan Documents” means this Agreement, the Note, the Deed of Trust, the
Environmental Indemnity Agreement, the Limited Guaranty, the Completion
Guaranty, the Collateral Assignment of Developer’s Rights, the UCC Financing
Statements, and any other document evidencing, pertaining to or securing the
Loan which Lender may require to be executed and delivered by Borrower, any
Borrower Party, Guarantor or any Affiliate thereof from time to time, as each of
the same shall be amended, restated, modified, replaced or supplemented from
time to time.

 

“Loan Fees” shall have the meaning ascribed in Section 2.3.

 

“Loan Maturity” shall mean the time at which Borrower is required to pay the
Loan in full, whether by acceleration or by expiration of the term of the Loan.

 

“Losses” shall have the meaning ascribed to such term in Section 7.9.

 

“Management Agreement” means any property management, leasing, development
services or other similar agreement respecting the development, marketing,
leasing, sale, management or operation of the Project entered into between
Borrower or any Borrower Party, Guarantor or their respective Affiliates (as the
case may be) and any other Person, whether presently existing or entered into
after the date of this Agreement.

 

“Manager” means Legum & Norman Realty, Inc., together with any subsequent
property managers which have been approved by Lender in accordance with the
terms of this Agreement.

 

“Mass Closing” shall have the meaning ascribed to such term in Section
8.7(a)(vi).

 

“Mass Closing Timeframe” means the time period commencing with the sale and
conveyance of the first Residential Unit, subject to the satisfaction of the
Initial Condominium Closing Conditions, and ending on the date which is 89
calendar days following the sale and conveyance of the first Residential Unit.

 

“Material”, “material”, “Materially” and “materially” mean material to: (i) the
financial position, business, assets or results of operations of Borrower or
Guarantor, (ii) the ability of Borrower, any Borrower Party, Guarantor or any
Affiliate of such party to observe and perform its obligations under the Loan
Documents to which it is a party, or (iii) the value, condition, use or useful
life of the Property.

 

“Material Adverse Effect” means an event which has the effect of: (i) materially
adversely affecting Borrower’s ability to perform its obligations under this
Agreement or any other Loan Document to which it is a party; (ii) materially
adversely affecting Guarantor’s ability to perform its obligations under any
Guaranty, Environmental Indemnity Agreement or any other Loan Document to which
it is a party; (iii) materially adversely affecting Borrower’s ability to
construct, develop and market the Property in accordance with the Project
Budget, or to own, manage, sell or lease the Property upon the completion of the
construction of the Project; (iv) impairing or reducing the value of the
Property by an amount greater than Two Hundred Fifty Thousand Dollars
($250,000); (v) impairing the validity of the security interest in the Property
or any other Collateral; or (vi) materially adversely affecting the rights or
remedies of Lender under the Loan Documents.

 

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“Maturity Date” shall mean the twenty-four (24) month anniversary of the Closing
Date.

 

“Minimum Unit Sales Price” means, with respect to each Unit, the amount in U.S.
dollars shown on Exhibit E for such Unit (exclusive of any Upgrades or extras).

 

“Monthly Payment” shall mean the monthly payment of interest due and payable in
accordance with the provisions of the Note.

 

“Net Sales Price” means with respect to the sale of any Unit (A) the Base
Purchase Price for such Unit, less (B) customary closing costs, reasonable
warranty reserves, brokerage commissions, expenses and prorations paid by
Borrower as shown on the RESPA statement for such sale and approved by Lender. 
The Net Sales Price for any Unit shall not include the amount of any assessments
or working capital paid to the Association.

 

“NOI” means, for any applicable period, Gross Operating Income minus Operating
Expenses.

 

“Note” means the Promissory Note of even date herewith made by Borrower to
Lender in the original principal amount of the Loan, as may be amended,
extended, restated, replaced, modified or supplemented from time to time.

 

“OFAC” shall have the meaning ascribed to such term in Section 3.27.

 

“Offering Materials”  means any public report required to be filed with Fairfax
County, Virginia or other Governmental Authority in the Commonwealth of Virginia
pursuant to the Condominium Act and any other disclosure materials required by
applicable Law to be made available to prospective purchasers of a Unit.

 

“Operating Account” means a non-interest bearing account to be established with
Lender, in the name of Borrower or Borrower’s designee, into which all Gross
Operating Income will be deposited.

 

“Operating Expenses” means, for any period of time, the normal and customary
expenses incurred operating the Property for said period of time. Said expenses
shall include: (a) management fees in an amount not to exceed three percent (3%)
of the Gross Operating Income for such period and (b) reasonable prorated
reserves for Real Estate Taxes and insurance premiums, but said expenses shall
not include (i) any payment of principal or interest on the Loan, (ii)
amortization, depreciation, income taxes or any other similar expense of a
noncash nature or (iii) income taxes.

 

“Organizational Documents” means all documents, instruments and other papers
constituting the entire organizational documents of Borrower, all Borrower
Parties, all Guarantors and any and all amendments thereto including without
limitation, Borrower’s, each Borrower Party’s and Guarantor’s respective
certificates of formation, incorporation or limited partnership, articles of
organization or incorporation and such party’s respective partnership agreement,
operating agreement, bylaws, code of regulations or other governing documents.

 

“Out of Balance” shall have the meaning ascribed to such term in Section 6.3(a).

 

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“Parking Unit” shall have the meaning ascribed to such term in Recital III of
this Agreement.

 

“Pension Plan” means a “pension plan”, as such term is defined in section 3(2)
of ERISA, which is subject to Title IV of ERISA (other than a “multiemployer
plan” as defined in section 4001(a)(3) of ERISA), and to which Borrower or any
corporation, trade or business that is, along with Borrower, a member of a
“Controlled Group”, may have liability, including any liability by reason of
having been a substantial employer within the meaning of section 4063 of ERISA
at any time during the preceding five years, or by reason of being deemed to be
a contributing sponsor under section 4069 of ERISA.

 

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

 

“Permitted Exceptions” means those matters acceptable to Lender in its sole
discretion listed in the Title Policy to which the interest of Borrower in the
Property may be subject as of the Closing Date and any other title exceptions or
objections, if any, as Lender, or its counsel, may approve in writing after the
Closing Date, including matters over which the Title Insurer has agreed to
insure Lender pursuant to endorsements to Lender’s Title Policy (which
endorsements shall be in form and substance satisfactory to Lender), if the
latter matters are approved in writing by Lender.

 

“Person” means any natural person, partnership, limited liability company,
corporation, firm, association, trust, Governmental Authority, or any other
entity, whether acting in an individual, fiduciary or other capacity.

 

“Plan Asset Regulations” means regulations promulgated by the Department of
Labor in 29 C.F.R. Section 2510.3-101, as amended from time to time.

 

“Plat of Condominium” means the plat of condominium to be recorded as part of
the Initial Condominium Closing Conditions.

 

“Prepayment Fee” shall have the meaning ascribed to such term in Section 2.7.

 

“Price List” shall have the meaning ascribed to such term in Section 8.5.

 

“Production Overhead” means an amount equal to $392,000 payable to Comstock
Homes of Washington, L.C., as set forth in the Production Overhead line item of
the Project Budget.

 

“Prohibited Person” shall have the meaning ascribed to such term in Section
3.27.

 

“Project” shall have the meaning ascribed thereto in Recital III of this
Agreement.

 

“Project Account” shall have the meaning ascribed to such term in Section
6.4(a).

 

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“Project Budget” means the Project Budget attached as Exhibit B, showing all
sources of funds to be used (including Borrower’s Equity), all costs and
expenses to be incurred, and all reserves to be maintained in connection with
the Project during the term of the Loan.

 

“Project Costs” shall have the meaning ascribed thereto in Section 6.1(a).

 

“Project Schedule” means a schedule for the completion of conversion of the
Project, including, without limitation, a trade-by-trade breakdown of the
estimated periods of commencement and completion of the specific work to be
completed on the Project.

 

“Property” shall have the meaning ascribed thereto in Recital IV of this
Agreement.

 

“Property Proceeds” shall have the meaning ascribed to such term in Section 9.1.

 

“Real Estate Tax Deposits” shall have the meaning ascribed thereto in Section
6.5(a).

 

“Real Estate Taxes” means all taxes and assessments, general or special, and any
and all levies, claims, charges, expenses and liens, ordinary or extraordinary,
governmental or non-governmental, statutory or otherwise  that may be levied,
assessed, made, imposed or charged on or against the Property.

 

 “Request for Advance Documents” shall have the meaning ascribed thereto in
Section 5.2(a).

 

“Residential Unit” means a unit which is designed and intended for a
single-family dwelling, or such other uses permitted by the Declaration of
Condominium, but specifically excluding a Unit constituting a Parking Unit, as
more particularly described in Recital III of this Agreement.

 

“Sales Report” means a report certified by Borrower disclosing information
requested by Lender concerning sales activity for each Unit, including (i) the
Residential Unit number and the Parking Unit number and whether the Unit has
been conveyed to a Contract Buyer or is under contract, (ii) the Minimum Unit
Sales Price for such Unit, (iii) the square footage for such Unit, and (iv) with
respect to completed sales or Units under contract, (A) the date of the
associated Condominium Contract, (B) the date such Condominium Contract was
closed (or is scheduled to be closed), (C) the Person to whom such Unit was sold
(or is to be sold), (D) Upgrades selected by such purchaser, (E) the Base
Purchase Price for such Unit plus the Upgrade prices for Upgrades selected by
the Contract Buyer; and (F) the amount of the earnest money deposit for such
Unit(s).

 

“Secured Obligations” means (i) the principal of and interest on the Note and/or
this Agreement; (ii) all other Indebtedness of any kind arising under, and all
amounts of any kind which at any time become due or owing to Lender under or
with respect to any Loan Document; (iii) all of the covenants, obligations and
agreements of Borrower, Guarantor or any other Borrower Party in, under or
pursuant to any Loan Document; (iv) all Costs (including without limitation,
Costs incurred by Lender to protect any or all of the Collateral, perform any
obligation of Borrower, Guarantor or any Borrower Party or under any Loan
Document, or collect any amount owing to Lender); (v) all fees due and payable
by Borrower to Lender,

 

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including, without limitation, the Exit Fee, the Prepayment Fee and any other
fees payable pursuant to the Loan Documents; (vi) any and all other liabilities,
obligations and Indebtedness, howsoever created, arising or evidenced, direct or
indirect, absolute or contingent, recourse or nonrecourse, now or hereafter
existing or due or to become due, owing by Borrower to Lender; and (vii)
interest on all of the foregoing to the extent it accrues under this Agreement
or the Note, including, without limitation, interest accruing after an Event of
Default, acceleration and/or judgment at the Default Rate.

 

“Single Purpose Entity” means that Borrower shall: (a) not own any asset or
property other than (i) the Property and all improvements thereon, and (ii)
incidental personal property relating to the ownership or operation of the
Property; (b) not enter into any contract, agreement or other undertaking to
provide services to any Person; (c) in its organizational documents, limit its
purpose to the acquiring, constructing, owning, operating, maintaining and
leasing the Project and other lawful activities incidental thereto; (d) not
engage in any business other than the acquisition, construction, ownership,
operation, maintenance and leasing of the Property, and other lawful activities
incidental thereto; (e) not make any loans or advances to any Person; provided
however, that nothing shall prohibit Borrower from managing it payables and
other monetary obligations (other than Secured Obligations) in a prudent manner
and paying such obligations in the ordinary course; (f) shall not own a
subsidiary and shall not acquire obligations or securities of any other Person,
other than certificates of deposit, money market accounts or similar short-term
investments; (g) pay its debts and liabilities (including, as applicable, shared
personnel and overhead expenses) only from its own assets as the same shall
become due, or as may be prepayable; (h) do all things necessary to observe
organizational formalities and preserve its existence, and shall not, and shall
not permit any member to, amend, modify or otherwise change any of the
Organizational Documents of Borrower or such member in any manner not permitted
by the provisions of this Agreement without the prior written consent of Lender,
such consent to not be unreasonably withheld, conditioned or delayed; (i)
maintain all of its books, records and bank accounts separate from those of any
other Person; (j) be, and at all times shall hold itself out to the public as, a
legal entity separate and distinct from any other entity, shall correct any
known misunderstanding regarding its status as a separate entity from that of
its members and any other Person, and shall conduct business in its own name,
shall not identify itself as a division or part of any other Person; (k)
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; (l) not seek the dissolution, winding up, liquidation, consolidation
or merger in whole or in part, of Borrower, nor transfer or otherwise dispose of
all or substantially all of its assets, nor change its legal structure, without,
in each case, Lender’s prior written consent; (m) not commingle the funds and
other assets of Borrower with those of any other Person; (n) maintain its assets
in such a manner that it shall not be costly or difficult to segregate,
ascertain or identify its individual assets from those of any other Person; (o)
not hold itself out to be responsible for the debts or obligations of any other
Person and shall not assume, guarantee or pay the debts or obligations of any
other Person; (p) prepare separate tax returns and financial statements, or if
part of a consolidated group, then Borrower shall be shown as a separate member
of such group; (q) allocate and charge fairly and reasonably any common employee
or overhead shared with any other Person; and (r) transact all business with
Affiliates on an arm’s length basis, provided that Lender acknowledges that the
management fees contained in the Management Agreement as of the date hereof
shall be deemed in compliance with the foregoing requirement.

 

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“Soft Costs” means all costs incurred or to be incurred in connection with the
Project other than Hard Costs, including, without limitation, interest on the
Loan, all fees incurred in connection with the Loan and payable to Lender,
commissions, appraisal fees, architectural and engineering fees, title and
recording charges, counsel fees, real estate tax reserves and interest reserves,
real estate taxes and special assessments becoming due and payable during the
period of construction, Real Estate Taxes, marketing fees and those costs (other
than Hard Costs) set forth in the Project Budget.

 

“State” means any state or commonwealth in the United States of America.

 

“Survey” means a current survey of the Land, prepared by a surveyor licensed in
the State where the Property is located and reasonably acceptable to Lender and
the Title Insurer as having been prepared in accordance with the “Minimum
Standard Detail Requirements for ALTA/ACSM Land Title Surveys,” jointly
established and adopted by ALTA, NSPS and ACSM  in 1999, including items 1, 2,
3, 4, 6, 7(a), 7(b-1), 7(c), 8, 9, 10, 11(a), 13, 14, 15 and 16 of Table A
thereof, which shall include a certification from the surveyor preparing the
survey as set forth in Exhibit F to this Agreement.  Without limitation of the
foregoing, the Survey shall show (i) the legal description of the Project; (ii)
dimensions and locations of buildings, fences, and other improvements; (iii)
locations of all visible or recorded easements (and recording numbers, to the
extent recorded), setback lines, rights of way, water courses, drains, sewers,
utility lines, public and private roads (including the names and widths thereof
and recording numbers for the dedications thereof); (iv) if the Project
comprises more than one parcel, interior lines and other data sufficient to
insure contiguity; (v) if the Project is located in a flood plain; and (vi) such
additional information which may be reasonably required by Lender or the Title
Insurer.

 

“Sworn Contractor’s Statement” shall have the meaning ascribed to this term in
Section 5.2(a)(iii).

 

“Sworn Owner’s Statement” shall have the meaning ascribed to this term in
Section 5.2(a)(ii).

 

“Sworn Statement” shall have the meaning ascribed to this term in Section
5.2(a)(iii).

 

“Title Commitment” means a commitment from the Title Insurer to issue to the
Title Policy. The Title Commitment shall include all underlying documents
referenced therein.

 

“Title Insurer” means Lawyers Title Insurance Corporation or any other
nationally recognized title insurance company approved by Lender.

 

“Title Policy” means an ALTA Mortgagee’s Policy (1992) of title insurance, with
extended coverage, issued by the Title Insurer in the maximum amount of the
Loan, containing, to the extent such endorsements are available under the laws
of the State where the Property is located: (i) extended coverage, (ii) Lender’s
comprehensive, (iii) access, (iv) creditors’ rights, (v) survey (accuracy of
survey), (vi) location (survey legal matches title legal), (vii) separate tax
lot, (viii) plat act/subdivision or legal lot, (ix) zoning 3.0, (x) contiguity
(if applicable), (xi) special restrictions (if applicable), (xii) utility
facility endorsement, (xiii) street address, (xiv) variable rate, (xv) usury,
(xvi) pending construction disbursement, (xvii) doing business, (xviii)
foundation, (xix) condominium endorsement, and (xx) such other endorsements as
Lender may

 

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require based upon its counsel’s review of the Title Commitment and Survey,
insuring the Deed of Trust on the Property as a valid first priority mortgage
lien thereon, subject only to the Permitted Exceptions, and naming Lender as the
mortgagee insured.

 

“Total Project Costs” means the sum of, without duplication (and specifically
excluding all costs of construction already paid for): (A) all Hard Costs for
work done and not theretofore paid for or to be done through completion of the
Project in accordance with the Project Budget, based upon Lender’s Estimate of
Construction Costs; (B) all Soft Costs and other costs and expenses payable by
Borrower through completion of the Project, including, but not limited to, those
costs to equip, fixture, furnish, develop, market and operate the Project prior
to the Maturity Date (including, but not limited broker’s fees, marketing fees,
and condominium association dues); (C) all other unpaid costs set forth in the
Project Budget; (D) all condominium assessments (not theretofore paid for) with
respect to unsold Residential Units or Parking Units; (E) all amounts due to
Lender under the terms of this Agreement, including, without limitation, Costs,
and interest due or to become due and payable (and not theretofore paid for)
prior to the completion of the Project, but excluding payment of principal due
on the Maturity Date; (F) all Real Estate Taxes to be due and payable prior to
the Maturity Date, as estimated and determined by Lender, in its reasonable
discretion; and (G) all other amounts as Lender, in its reasonable discretion,
deems necessary or reasonable to complete the Project in accordance with the
Construction Documents, and to pay all liabilities and perform all obligations
of Borrower under the Loan Documents.

 

“Transfer” means any sale, lease, exchange, assignment (either outright or
collateral), conveyance, transfer, pledge, mortgage, trade, or other encumbrance
of any right, title or interest in all or any portion of the Property (whether
legal or equitable), or any interest therein, or all or any part of the direct
or indirect legal or beneficial ownership interest in Borrower (or any other
Person as specifically referenced in this Agreement), whether voluntarily, by
operation of law or otherwise.

 

“UCC Financing Statements” means the UCC Financing Statements naming Borrower,
as debtor, and Lender, as secured party, to be filed in: (a) the county in which
the Property is located, but only if the Deed of Trust alone does not constitute
a fixture filing in such jurisdiction or if local counsel so advises, (b) the
office of the Secretary of State of the State of Borrower’s organization and (c)
in such other jurisdictions as Lender may determine, as the case may be, in
connection with the personal property described in the Deed of Trust and other
Loan Documents.

 

“Uniform Commercial Code” and “UCC” each mean the Uniform Commercial Code as in
effect in any applicable jurisdiction, as amended from time to time.

 

“Unit” means a Residential Unit or a Parking Unit.

 

“Unit Release Payment” shall have the meaning ascribed to such term in Section
8.7(c).

 

“Unit Releases” shall have the meaning ascribed to such term in Section 8.7(b).

 

“Upgrade” means any alteration, additional or extra work or change in or to the
applicable Residential Unit, including changes or alterations to fixtures,
appliances, equipment,

 

xiv

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hardware, the basic floor plan or other base construction standard with respect
to the applicable Residential Unit.

 

“Upgrade Profit” means an amount equal to the difference between the
consideration payable by a Contract Buyer for an Upgrade and the actual cost to
Borrower to construct such Upgrade.

 

“Welfare Plan” means a “welfare plan”, as such term is defined in Section 3(1)
of ERISA.

 

xv

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EXHIBIT A

 

THE LAND

 

All that certain lot, piece or parcel of land, with the buildings and
improvements thereon erected, situate, lying and being in the County of Fairfax
and the Commonwealth of Virginia and being more particularly described as
follows:

 

Beginning at a point on the easterly right-of-way line of West Ox Road (Route
608), said point marking the P.C. of a 55 foot radius return at the
southeasterly intersection of the said West Ox Road and Penderbrook Drive (Route
6558); thence with the said return, a curve to the right, whose chord is N
43°l0’OO”E, 81.21 feet, an arc distance of 91.36 feet to a point on a southerly
right-of-way line of the said Penderbrook Drive; thence with the said
right-of-way line of the said Penderbrook Drive the following courses: with a
curve to the right, whose radius is 729.95 feet and whose chord is S64°26’02”E,
612.64 feet, an arc distance of 632.22 feet; S39°37’20”E, 395.59 feet; with a
curve to the left, whose radius is 576.00 feet and whose chord is S57°32’30”E,
354.44 feet, an arc distance of 360.29 feet to a point marking the P.C. of a 25
foot radius return at the southwesterly intersection of the said Penderbrook
Drive and South Penderbrook Drive (Route 7963); thence with the said return, a
curve to the right, whose chord is S33°24’42”E, 33.49 feet, an arc distance of
36.69 feet to a point on the westerly right-of-way line of the said South
Penderbrook Drive; thence with the said right-of-way line of South Penderbrook
Drive with a curve to the left, whose radius is 476.00 feet and whose chord is
S02° 1 6’57”E, 180.35 feet, an arc distance of 181.45 feet and S 13° 12’ 1 0”E,
483.33 feet to a point marking the northeasterly corner of Penderbrook, Section
7-A; thence running with the northerly and westerly lines of Penderbrook,
Section 7-A the following courses: with a curve to the left, whose radius is
28.50 feet and whose chord is N68°08’37”W, 18.32 feet, an arc distance of 18.65
feet; with a curve to the right, whose radius is 121.50 feet and whose chord is
N78°32’30”W, 35.28 feet, an arc distance of 35.40 feet; N70°l 1 ‘36”W, 43.08
feet; N84°49’33”W, 73.50 feet; N71°38’22”W, 36.91 feet; with a curve to the
right, whose radius is 936.00 feet and whose chord is N67°19’29”W, 93.69 feet,
an arc distance of 93.72 feet and S28°55’50”W, 188.50 feet to a point on a
northerly boundary of Fairfax County Board of Supervisors; thence with the said
boundary of Fairfax County Board of Supervisors N84°32’18”W, 122.85 feet and
with a curve to the right, whose radius is 300.00 feet and whose chord is
N74°l6’20”W, 106.93 feet, an arc distance of 107.51 feet to a point on an
easterly right-of-way line of West Ox Road (Rt. 608); thence with the easterly
right-of-way line of West Ox Road (Rt. 608) and continuing with the easterly and
northerly lines of Fairfax County Board of Supervisors N13°09’12”W, 885.23 feet
and S62°09’05”W, 236.69 feet to a point on the aforementioned right-of-way line
of West Ox Road; thence with the said right-of-way line of West Ox Road the
following courses: with a curve to the left, whose radius is 2919.79 feet and
whose chord is N28°55’18”W, 83.50 feet, an arc distance of 83.50 feet;
N29°44’27”W, 251.91 feet; with a curve to the right, whose radius is 899.93 feet
and whose chord is N18°01’27”W, 365.50 feet, an arc distance of 368.06 feet and
N06°l5’OO”W, 29.66 feet to the point of beginning, containing 19.38373 acres of
land.

 

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EXHIBIT B

 

PROJECT BUDGET

 

PURCHASE PRICE

 

$

75,000,000

 

 

 

 

 

SOFT COSTS

 

 

 

Appraisal, Environmental, Market Study

 

15,000

 

Insurance

 

14,000

 

Title

 

125,000

 

Recordation & Tax Stamp Costs

 

405,000

 

Legal, Organizational & Condo Docs

 

50,000

 

Marketing

 

715,000

 

Production Overhead

 

392,000

 

Real Estate Taxes

 

103,000

 

Sales Management

 

51,000

 

Loan Fee

 

670,000

 

Other Fees/Costs

 

196,000

 

Interest Reserve

 

1,731,000

 

Soft Cost Contingency

 

140,000

 

TOTAL SOFT COSTS

 

4,607,000

 

 

 

 

 

HARD CONSTRUCTION COSTS

 

 

 

Unit Upgrades

 

3,400,837

 

Common Area Upgrades

 

2,127,163

 

TOTAL HARD COSTS

 

5,528,000

 

 

 

 

 

TOTAL PROJECT BUDGET

 

$

85,135,000

 

 

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EXHIBIT C

 

PENDING LITIGATION

 

Open Matters as of 1/24/05

 

1.                                       Kosarski v. Comstock Homes of North
Carolina, L.L.C.

- Litigation filed by purchaser of one of our homes alleging failure to complete
punchlist items post settlement.  Amount in controversy is approximately $9000
plus claimed attorneys fees and costs.

 

2.                                       Ken Hinkle Associates, Inc. v. Comstock
Homes, Inc.

- We have been served with a motion to compel arbitration as a result of
withholding payment from subcontractor whose work we deemed inferior.  Withheld
payment is in the amount of $67,656.30.

 

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EXHIBIT D

 

OWNERSHIP CHART

 

 

Borrower is 100% owned by Comstock Homebuilding Companies, Inc.

 

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EXHIBIT E

 

MINIMUM SALES GUIDELINES

 

[See attached]

 

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EXHIBIT F

 

CERTIFICATION OF SURVEYOR

 

To:                              [BORROWER]; CORUS BANK, N.A., together with its
successors and assigns; and
[TITLE INSURANCE COMPANY]

 

I hereby certify that:

 

(a)   this survey was prepared by me or under my supervision in accordance with
the “Minimum Standard Detail Requirements for ALTA/ACSM Land Title Surveys,”
jointly established and adopted by ALTA and ACSM and NSPS in 1999 and includes
Items 1 through 4, 6 though 11 and 13 through 16 of Table A thereof and was
prepared pursuant to the accuracy standards (adopted by ALTA and ACSM) of a
Class A Survey, as defined therein;

 

(b)   this survey which was established by a transit-tape (instrument) field
survey actually made on the ground pursuant to the record description is true,
correct and accurate as to the boundaries and areas of the subject property and
the location and number of parking spaces, size, location, dimension and type of
buildings and improvements thereon (if any), and as to the other matters shown
hereon, it shows the location and dimension of all improvements, rights-of-way,
easements and any other matters affecting the subject property;

 

(c)   there are no party walls or encroachments on adjoining Property, streets
or alleys by any buildings, structures, or other improvements located on the
subject property and there are no encroachments on the subject property by
buildings, structures or other improvements situated on adjoining property,
except as shown on the survey and set forth as a Field Note;

 

(d)   adequate ingress to and egress from the subject property is provided by
[NAME OF STREETS], the same being paved, dedicated public right(s)-of-way
maintained by [NAME OF MAINTAINING AUTHORITY];

 

(e)   the subject property does not serve any adjoining property for drainage,
ingress and egress or any other purpose except as shown on the survey and set
forth as a Field Note;

 

(f)    the undersigned has received and examined a copy of Title Insurance
Commitment No.           , issued by                                      Title
Insurance Company, and of each instrument listed therein; the location of each
such easement, right-of-way, servitude and other matter affecting title, to the
extent it can be located, has been shown on the survey with appropriate
recording reference; and all matters that cannot be located have been listed
hereon as a Field Note; the subject property shown on the survey is the property
described in the Title Insurance Commitment;

 

(g)   all required building setback lines on the subject property are located as
shown hereon and the location of all improvements (if any) on the subject
property are in accordance with minimum setback provisions and restrictions of
record referenced in the Title Insurance Commitment and required by zoning and
building ordinances applicable in the State, City and County in which the
subject property is situated;

 

(h)   the survey correctly shows: (i) the zoning classification for the subject
property, (ii) the permitted uses within such classification; and (iii) the
sources of such information;

 

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(i)    I have consulted the U.S. Department of Housing and Urban Development,
Federal Insurance Administration Flood Hazard Boundary Map, Community Number
                      , Sheet Number                        revised
                    , and found that the subject property is not located in a
special flood hazard area according to the map;

 

(j)    the undersigned expressly understands and agrees that: (a) this
Certificate is made to induce CORUS BANK, N.A. (together with its successors and
assigns, “Lender”) to extend credit secured by a deed of trust, deed to secure
debt or mortgage lien covering the subject property and to induce [TITLE
INSURANCE COMPANY] (“Title Insurer”) to issue a policy of title insurance
insuring the validity and priority of such lien; (b) both Lender and Title
Insurer are entitled to rely upon this plat of survey as being true and accurate
in all respects and upon this Certificate as being true and accurate; and (c)
the consideration paid to the undersigned for the preparation and certification
of such survey has been paid, in part, for the benefit of Lender and Title
Insurer and in anticipation of their reliance hereon.

 

 

(Signature of Surveyor)

(Surveyor’s Seal)

Registered Surveyor,

 

State of:

 

 

 

 

Registered No.

 

 

 

 

 

 

 

Date of Survey:

 

Date of Last Revision:

 

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EXHIBIT G

 

FORM OF CONDOMINIUM CONTRACT

 

[See attached]

 

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