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

  	
  Deposits for Real Estate Taxes

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
  CERTAIN COVENANTS BY BORROWER

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 7.1

  	
  Inspection

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 7.2

  	
  Mechanics’ Liens, Real Estate Taxes and
  Condominium Homeowner’s Association Dues

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 7.3

  	
  Compliance; Construction; Operation

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 7.4

  	
  Transfers; Changes in Organization

  	
   

  
				



 


iii





















 


	
  SECTION 7.5

  	
  Leases

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 7.6

  	
  Management Agreement

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 7.7

  	
  Financial and Other Reports and Deliveries

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 7.8

  	
  Insurance Requirements

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 7.8.1

  	
  Insurance

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 7.8.2

  	
  Policy Requirements

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 7.8.3

  	
  Notice of Policies

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 7.8.4

  	
  Insurance Review

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 7.9

  	
  Borrower’s Indemnities

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 7.10

  	
  Single Purpose Entity

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 7.11

  	
  Further Assurances

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 7.12

  	
  ERISA

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 7.13

  	
  New Appraisals

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 7.14

  	
  Contract Maintenance; Other Agreements

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 7.15

  	
  Liens

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
  CONDOMINIUM MATTERS

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 8.1

  	
  Condominium Contracts

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 8.2

  	
  No Modification or Termination of
  Condominium Contracts

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 8.3

  	
  Performance under Condominium Contracts

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 8.4

  	
  Sale Activity

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 8.5

  	
  Minimum Unit Sales Price

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 8.6

  	
  Condominium Documents

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 8.7

  	
  Condominium Sales; Release of Units

  	
   

  
					



 


iv





















 


	
  SECTION 8.8

  	
  Establishing the Condominium Regime

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 8.9

  	
  Application of Unit Release Payments

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 8.10

  	
  Upgrades

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
  CASUALTY AND CONDEMNATION

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 9.1

  	
  Insurance and Condemnation Proceeds

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 9.2

  	
  Disbursement of Property Proceeds

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 9.3

  	
  Reduction in Secured Obligations

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE X

  	
  EVENTS OF DEFAULT

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 10.1

  	
  Events of Default

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI

  	
  REMEDIES

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 11.1

  	
  Accelerate the Note

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 11.2

  	
  Terminate Lender’s Obligations

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 11.3

  	
  Take Possession of the Property and
  Complete the Project (Borrower’s Power of Attorney)

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 11.4

  	
  Offset

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 11.5

  	
  Default Interest

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XII

  	
  MISCELLANEOUS PROVISIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 12.1

  	
  Agreement Binding Only Upon Execution by
  Lender

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 12.2

  	
  Entire Agreement

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 12.3

  	
  No Waiver

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 12.4

  	
  Amendments

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 12.5

  	
  No Third Party Benefits

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 12.6

  	
  Successors and Assigns

  	
   

  
				



 


v





















 


	
  SECTION 12.7

  	
  Participations and Assignments

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 12.8

  	
  All Advances Obligatory and Secured

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 12.9

  	
  Publicity

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 12.10

  	
  Notices

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 12.11

  	
  Form of Documents

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 12.12

  	
  Severability

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 12.13

  	
  Lender Not Partner of Borrower

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 12.14

  	
  Joint and Several Obligations

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 12.15

  	
  Survival

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 12.16

  	
  Time of the Essence

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 12.17

  	
  Conflicts

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 12.18

  	
  Waiver of Subrogation

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 12.19

  	
  Governmental Regulation

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 12.20

  	
  Counterparts; FAX

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 12.21

  	
  Partial Release

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 12.22

  	
  Governing Law; Jurisdiction; Venue; and
  Service of Process

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 12.23

  	
  Waiver of Punitive and Consequential
  Damages

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 12.24

  	
  Written Credit Agreements

  	
   

  



 


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


 


3





















 


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.


 


4





















 


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.


 


5





















 


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.


 


6





















 


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


 


7





















 


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


 


8





















 


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


 


9





















 


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.


 


10





















 


(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.


 


11





















 


(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


 


12





















 


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


 


15





















 


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


 


18





















 


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


 


19





















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


 


21





















 


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


 


24





















 


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


 


25





















 


$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.


 


27





















 


(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;


 


28





















 


(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,


 


29





















 


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


 


32





















 


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


 


34





















 


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


 


35





















 


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


 


38





















 


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;


 


39





















 


(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


 


40





















 


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


 


42





















 


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


 


43





















 


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

  



 


44





















 


	
  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


 


45





















 


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


 


46





















 


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.


 


47





















 


(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]


 


48





















 


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

  
							



 


49





















 


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


 


50





















 


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.


 


i





















 


“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.


 


ii





















 


“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


 


iii





















 


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.


 


iv





















 


“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.


 


v





















 


 “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.


 


vi





















 


“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.


 


vii





















 


“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.


 


viii





















 


“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).


 


ix





















 


“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,


 


xi





















 


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.


 


xii





















 


“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


 


xiii





















 


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





















 


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





















 


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.


 





















 


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

  	
   

  



 





















 


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.


 





















 


EXHIBIT D


 


OWNERSHIP CHART


 


 


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


 





















 


EXHIBIT E


 


MINIMUM SALES
GUIDELINES


 


[See attached]


 





















 


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;


 





















 


(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:

  
				



 





















 


EXHIBIT G


 


FORM OF
CONDOMINIUM CONTRACT


 


[See attached]