Exhibit 10.9


 


 




 





 


INTERCREDITOR AND SUBORDINATION AGREEMENT


 


 


by and between


 


 


BANK OF AMERICA, N.A.,
a national banking association,

in its capacity as Administrative Agent on behalf of the Senior Construction
Lenders

and for its own benefit, as Land Loan Lender


 


 


and


 


 


BEHRINGER HARVARD ST. ROSE REIT, LLC,

a Delaware limited liability company 

as Subordinate Lender


 


 


Dated as of December 31, 2008


 


 


Project: 
Alexan St. Rose Apartments, Henderson, Clark County, Nevada




 


 





 





















 


INTERCREDITOR AND
SUBORDINATION AGREEMENT


 


This INTERCREDITOR AND SUBORDINATION AGREEMENT (this “Agreement”) dated as of December 31, 2008, by and
between BEHRINGER HARVARD ST. ROSE REIT, LLC, a
Delaware limited liability company (“Subordinate Lender”)
and BANK OF AMERICA, N.A., a national
banking association, as Administrative Agent for itself, and the other Senior
Construction Lenders now or hereafter made a party to the Senior Construction
Loan Agreement described and defined below (in such capacity, together with any
successor Administrative Agent appointed pursuant to such Senior Construction
Loan Agreement, the “Administrative Agent”),
and as Land Loan Lender and a Senior Construction Lender (as such terms are
defined below), whose address for the purposes of notice is 700 Louisiana, 5th
Floor, P.O. Box 2518, Houston, TX 77252-2518 Attention:  Real Estate Loan Administration; and
acknowledged and consented to by SW 132 St. Rose Senior Borrower LLC, a
Delaware limited liability company (“Borrower”), and
SW 131 St. Rose Mezzanine Borrower LLC, a Delaware limited liability company (“Mezzanine Borrower”).


 


R  E  C
I  T  A  L  S:


 


A.                                   Pursuant
to the terms, provisions and conditions set forth in that certain Construction
Loan Agreement, dated of even date herewith (“Senior
Construction Loan Agreement”), by and between Borrower,
Administrative Agent and the lenders now or hereafter made a party thereto
(such lenders are sometimes referred to herein, collectively, as the “Senior Construction Lenders”), Senior Construction Lenders
have made or are about to make a loan to Borrower in the original principal
amount of $38,600,000.00 (the “Senior Construction Loan”),
for the purpose of financing, in part, construction of the Improvements (as
defined in the Senior Construction Loan Agreement) on approximately 18.151
acres (such 18.151 acres more or less is referred to herein as the “Multi-Family Tract”) of the 24.423 acre parcel of real
property described on Exhibit A attached hereto (the “Site Parcel”);


 


B.                                     The
Senior Construction Loan is evidenced, in part, by one or more Deed of Trust
Notes issued by Borrower in accordance with the Senior Construction Loan
Agreement (such notes, together with any additional notes in substitution and
replacement thereof, issued by Borrower in accordance with the Senior Construction
Loan Agreement, as amended, modified, replaced, restated, extended or renewed
from time to time, are referred to herein, collectively, as the “Senior Construction Loan Note”);


 


C.                                     Borrower’s
Affiliate, SW 122 St. Rose Senior Borrower LLC, a Delaware limited liability
company (“Land Loan Borrower”) also intends to
obtain a $2,950,000 land loan (the “Senior Land Loan”)
from Bank of America, N.A., as a lender for its sole account (in such capacity,
“Land Loan Lender”), for the purpose of
financing all of the Site Parcel except the Multi-Family Tract (such portion of
the Site Parcel is referred to herein as the “Commercial
Tract”);


 


D.                                    The
Senior Land Loan is evidenced, in part, by (i) a Deed of Trust Note issued
by Land Loan Borrower to the order of Land Loan Lender in the amount of
$2,950,000 (such note, together with any note issued in substitution and
replacement thereof by Land Loan Borrower, as amended, modified, replaced,
restated, extended or renewed from time to time, are referred to 


 





















 


herein, collectively, as
the “Senior Land Loan Note”); and (ii) a
certain Term Loan Agreement of even date with the Senior Land Loan Note between
Land Loan Lender and Land Loan Borrower (as amended, supplemented, modified,
restated, renewed or extended from time to time, the “Senior Land
Loan Agreement”);


 


E.                                      The
Senior Construction Loan Note and the Senior Land Loan Note and the total
indebtedness evidenced thereby are guaranteed by J. Ronald Terwilliger, CFP
Residential, L.P., Bruce Hart, and Kenneth J. Valach (collectively, the “Guarantors”), pursuant to one or more Limited Recourse
Guaranty Agreements dated of even date herewith, executed by Guarantors to and
for the benefit of Administrative Agent, for itself and on behalf of the Senior
Construction Lenders, and to Land Loan Lender, respectively (collectively, the “Senior Guaranties”);


 


F.                                      Borrower
and Guarantors also executed and delivered to Administrative Agent, for itself
and on behalf of the Senior Construction Lenders, and to Land Loan Lender,
respectively, Environmental Indemnity Agreements, each dated of even date
herewith (together, the “Senior Environmental
Indemnity”);


 


G.                                     Pursuant
to the terms, provisions and conditions set forth in that certain Senior
Mezzanine Loan Agreement, dated of even date herewith, between Mezzanine
Borrower and Subordinate Lender (the “Senior Mezzanine Loan
Agreement”), and that certain Junior Mezzanine Loan Agreement, dated
of even date herewith, between Mezzanine Borrower and Subordinate Lender (the “Junior Mezzanine Loan Agreement”; the Senior Mezzanine Loan
Agreement and the Junior Mezzanine Loan Agreement are sometimes referred to
herein, together, as the “Mezzanine Loan Agreement”),
Subordinate Lender made one or more loans to Mezzanine Borrower in the
aggregate principal amount of $21,043,197.00 (collectively, the “Mezzanine Loan”), which Mezzanine Loan is evidenced by that
certain Senior Mezzanine Promissory Note and Junior Mezzanine Promissory Note,
each dated of even date with the Mezzanine Loan Agreement (collectively, the “Mezzanine Note”), made by Mezzanine Borrower in favor of
Subordinate Lender in the amount of the Mezzanine Loan;


 


H.                                    The
Commercial Tract and Multi-Family Tract are not currently separate, legal lots
and, in order to properly convey fee title of the Commercial Tract to Land Loan
Borrower and to separate the legal entitlements that currently inure to the
entirety of the Site Parcel, Borrower must complete a legal subdivision of the
Site Parcel;


 


I.                                         Land
Loan Borrower has prepared and submitted to the appropriate governmental
authorities a proposed subdivision map, which map will, upon approval by all
applicable governmental authorities and recordation of the same, establish the
Multi-Family Tract and Commercial Tract as separate, legal lots;


 


J.                                        Because
the final subdivision of the Site Parcel has not yet been completed as
described in Section 1.2 of the Senior Construction Loan Agreement, on the
date hereof, Borrower will execute and deliver the following documents:  (i) to Administrative Agent, that certain
Deed of Trust, Assignment of Rents and Leases, Security Agreement, Fixture
Filing and Financing Statement dated of even date herewith, executed by
Borrower for the benefit of Administrative Agent, on behalf of the Senior
Construction Lenders, encumbering the entirety of the Site Parcel, which shall
be recorded as a first priority lien and security interest in the Official 


 


2





















 


Records of Clark County,
Nevada (as amended, supplemented, modified, restated, renewed or extended from
time to time, collectively, the “Senior Construction Loan
Deed of Trust”); (ii) to Land Loan Lender, that certain Deed of
Trust, Assignment of Rents and Leases, Security Agreement, Fixture Filing and
Financing Statement dated of even date herewith, executed by Borrower for the
benefit of Commercial Tract Lender, encumbering the entirety of the Site
Parcel, which shall be recorded as a second priority lien and security interest
in the Official Records of Clark County, Nevada (the “Senior Land
Loan Deed of Trust”) (the Senior Construction Loan Deed of Trust and
the Senior Land Loan Deed of Trust are sometimes referred to herein as the “Senior Deed of Trust”); and (iii) to Subordinate
Lender, those certain Deeds of Trust, Assignment of Rents, Security Agreement
and Fixture Filing, dated as of even date herewith, executed by Borrower for
the benefit of Subordinate Lender, encumbering the entirety of the Site Parcel,
which shall be recorded as third and fourth priority liens and security
interests, respectively, in the Official Records of Clark County, Nevada
(collectively, the “Mezzanine Deed of Trust”);


 


K.                                    Upon
completion of the final subdivision of the Site Parcel as described in Section 1.2
of the Senior Construction Loan Agreement, (i) Borrower will convey the
Commercial Tract to Land Loan Borrower, subject to the lien of the Senior Land
Loan Deed of Trust, (ii) Land Loan Borrower will assume and perform the
obligations of Borrower under the Senior Land Loan Deed of Trust (whereupon
Borrower will be released from all obligations and liabilities of, under or in
respect of the Senior Land Loan or the loan documents executed in connection
with the Senior Land Loan), (iii) Administrative Agent will execute a
partial release as to the Senior Construction Loan Deed of Trust to release the
Commercial Tract from the lien thereof, (iv) Land Loan Lender will execute
a partial release as to the Senior Land Loan Deed of Trust to release the
Multi-Family Tract from the lien thereof, and (v) Subordinate Lender will
execute a partial release as to each Mezzanine Deed of Trust to release the
Commercial Tract from the lien thereof.


 


L.                                      The
Senior Construction Loan Documents contain restrictions on Borrower’s ability
to incur additional indebtedness.  Senior
Construction Lenders are unwilling to make the Senior Construction Loan and
Land Loan Lender is unwilling to make the Senior Land Loan, unless Subordinate
Lender agrees, subject to the provisions of this Agreement, to subordinate and
make inferior:  (i) the right,
title, security interest, lien and interest created by the Mezzanine Loan
Documents to the right, title, security interest, lien and interest of the
Senior Deed of Trust and the other Senior Construction Loan Documents and
Senior Land Loan Documents; and (ii) Subordinate Lender’s rights to
receive any payments under or on account of the Mezzanine Loan Obligations to
Senior Construction Lender’s and Land Loan Lender’s rights to receive payments
under or on account of the Senior Construction Loan Obligations and Senior Land
Loan Obligations, respectively.


 


NOW
THEREFORE, for and in consideration of the mutual
covenants hereinafter set forth and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Administrative Agent,
for itself and on behalf of the Senior Construction Lenders, Land Loan Lender,
and Subordinate Lender hereby agree as follows:


 


1.                                       Recitals Incorporated.  The recitals set forth hereinabove are
incorporated herein by reference to the same extent and with the same force and
effect as if fully set forth herein 


 


3





















 


below, provided, however,
that such recitals shall not be deemed to modify the express provisions
hereinafter set forth.


 


2.                                       Definitions.  The following terms shall have the meanings
indicated below:


 


“Affiliate”
means, as to any particular Person, any Person directly or indirectly, through
one or more intermediaries, controlling, Controlled by or under common Control
with the Person or Persons in question.


 


“Agreement”
means this Agreement, as the same may be amended, modified and in effect from
time to time, pursuant to the terms hereof.


 


“Award”
is defined in Section 16.


 


“Bankruptcy
Code” means the Bankruptcy Code of the United States of America, as the
same may be amended or modified from time to time.


 


“Bankruptcy
Event” means (a) any insolvency or bankruptcy case or proceeding, or
any receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, relative to Borrower, Mezzanine Borrower or
their partners or members, or (b) any liquidation, dissolution or other
winding up of Borrower, Mezzanine Borrower or their partners or members,
whether voluntary or involuntary and whether or not involving insolvency or
bankruptcy, or (c) any assignment for the benefit of creditors or any
other marshalling of assets or liabilities of Borrower, Mezzanine Borrower or
their partners or members.


 


“Borrower
Affiliate” means Borrower, Mezzanine Borrower, and Guarantors and any of
their constituent partners, members or shareholders, however remote, of
Borrower, Mezzanine Borrower or any Guarantor, as applicable.


 


“Business
Day” means any day other than Saturday, Sunday or a day that is a legal
holiday under the laws of the State of Texas or the State of Nevada or on which
banking institutions in the State of Texas or the State of Nevada are required
by law or other governmental action to close.


 


“Buy-Sell
Rights” means any option of Subordinate Lender pursuant to the Partnership
Agreement to acquire any beneficial ownership interests of the Investment
Partnership.


 


“Commercial
Tract” is defined in the Recitals to this Agreement.


 


“Control”
means the ownership, directly or indirectly, in the aggregate of more than
fifty percent (50%) of the beneficial ownership interests of an entity and the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of an entity, whether through the
ability to exercise voting power, by contract or otherwise.  “Controlled by,”
“controlling” and “under common
control with” shall have the respective correlative meaning thereto.


 


4





















 


“Default”
means a “Default” as such term is defined in the Senior Loan Agreement.


 


“Default
Notice” is defined in Section 8(a).


 


“Enforcement
Action” means any (i) judicial or non-judicial foreclosure proceeding,
the exercise of any power of sale, the taking of a deed or assignment in lieu
of foreclosure, the obtaining of a receiver or the taking of any other
enforcement action against the Property or Borrower, including, without
limitation, the taking of possession or control of the Property, (ii) acceleration
of, or demand or action taken in order to collect, all or any indebtedness
secured by the Property (other than giving of notices of default and statements
of overdue amounts) or (iii) exercise of any right or remedy available to
Administrative Agent, on behalf of the Senior Construction Lenders, under the
Senior Construction Loan Documents, at law, in equity or otherwise with respect
to Borrower and/or the Property; or (iv) prior to the Transfer Date, the
exercise of any right or remedy available to Land Loan Lender under the Senior
Land Loan Documents, at law, in equity or otherwise with respect to Borrower
and/or the Property.


 


“Guarantors”
is defined in the Recitals to this Agreement.


 


“Improvements”
is defined in the Senior Construction Loan Agreement.


 


“Interest
Reserve” is defined in the Mezzanine Loan Agreement.


 


“Investment
Partnership” means SW 130 St. Rose Limited Partnership.


 


“Land Loan
Borrower” and “Land Loan Lender” each is defined in the Recitals to
this Agreement.


 


“Mezzanine
Deed of Trust” is defined in the Recitals to this Agreement.


 


“Mezzanine
Loan” or “Mezzanine Loan Obligations” means all indebtedness,
obligations and liabilities of Mezzanine Borrower under the Mezzanine Loan
Documents, including all principal, interest (including interest accruing
subsequent to, and interest that would have accrued but for, the filing of any
petition under any bankruptcy, insolvency or similar law or the commencement of
any Proceeding), default interest, late charges, prepayment fees, expenses,
fees, reimbursements, indemnities and other amounts payable thereunder, in each
case whether now or hereafter arising, direct or indirect, primary or
secondary, joint, several or joint and several, liquidated or unliquidated,
final or contingent and whether incurred as a maker, endorser, guarantor or
otherwise.


 


“Mezzanine
Loan Agreement” is defined in the Recitals to this Agreement.


 


“Mezzanine
Loan Documents” means the Mezzanine Note, the Mezzanine Loan Agreement, the
Mezzanine Deed of Trust and the other documents listed on Exhibit B
hereto, as any of the foregoing may be modified, amended, extended,
supplemented, 


 


5





















 


restated or replaced from time to time, subject to the limitations and
agreements contained in this Agreement.


 


“Mezzanine
Note” is defined in the Recitals to this Agreement


 


“Multi-Family
Tract” is defined in the Recitals to this Agreement.


 


“Partnership
Agreement” means the Limited Partnership Agreement of the Investment
Partnership dated on or about the date hereof between Behringer Harvard St. Rose
REIT, LLC, as the sole limited partner, and SW 129 St. Rose Limited
Partnership, as the sole general partner.


 


“Person”
means any person, individual, sole proprietorship, partnership, joint venture,
corporation, limited liability company, unincorporated organization,
association, institution, entity, party, including any government and any
political subdivision, agency, or instrumentality thereof.


 


“Proceeding”
means (a) any voluntary or involuntary case, action or proceeding before
any court or other governmental authority relating to bankruptcy,
reorganization, insolvency, liquidation, receivership, dissolution, winding-up
or relief of debtors, or (b) any general assignment for the benefit of
creditors, composition, marshaling of assets for creditors, or other, similar
arrangement in respect of its creditors generally or any substantial portion of
its creditors; undertaken under U.S. Federal, state or foreign law, including
the Bankruptcy Code.


 


“Property”
means, collectively, the real property and all other property (whether real,
personal or otherwise) encumbered by the Senior Deed of Trust from time to
time; provided, however, that from and after the Transfer Date
the term “Property” shall not include the
Commercial Tract.


 


“Property
Manager” means Riverstone Residential Group, LLC, the initial property
manager for the Property or any successor thereto as property manager of the
Property, each as approved by Administrative Agent, on behalf of the Senior
Construction Lenders.


 


“Protective
Advances” means any and all sums advanced or expended by Senior Lender or
by Subordinate Lender (whether deemed optional or obligatory advances, or
otherwise) which Senior Lender or Subordinate Lender, as the case may be, deems
necessary or appropriate (a) to complete construction of the Improvements,
including any hard costs or soft costs incurred in connection therewith, with
such changes to the plans and specifications therefor as may be necessary or
desirable in the discretion of Administrative Agent to complete such
Improvements as expeditiously as possible on such terms and with such labor and
materials as may be available at any given time, (b) to pay and discharge
any liens against the Property, (c) to market the Property or any portion
thereof for sale or to pursue and obtain any development rights or approvals
required to make the same marketable for multi-family and commercial uses
including, the issuance or execution of standby letters of credit or developer’s
agreements pertaining to the Property or surrounding properties, (d) to
repair, maintain or otherwise protect the 


 


6





















 


Property and the Improvements thereon or to prevent waste or
destruction or to defend Borrower’s title or the lien priority of Senior Lender,
(e) to pay taxes, assessments or insurance premiums in respect of the
Property or any improvements thereon or to otherwise protect the security
interests of Senior Lender in the Property, the Improvements and any other
Senior Loan Senior Loan Collateral, or (f) in connection with the
protection or exercise by Senior Lender or Subordinate Lender of its or their
rights or remedies under the Senior Construction Loan Documents, Senior Land
Loan Documents or the Mezzanine Loan Documents, as the case may be.


 


“Purchase”
is defined in Section 8.


 


“Purchase
Closing Date” is defined in Section 8.


 


“Qualified
Manager” shall mean a property manager of the Property which (i) is a
reputable management company having at least five (5) years’ experience in
the management of commercial properties with similar uses as the Property and
in the jurisdiction in which the Property is located, (ii) has, for at
least five (5) years prior to its engagement as property manager, managed
at least (5) properties of the same property type as the Property, (iii) at
the time of its engagement as property manager has at least 5,000 units under
management, and (iv) is not the subject of a bankruptcy or similar
insolvency proceeding.  Notwithstanding
the foregoing, the initial Person identified herein as the Property Manager is
hereby approved as a Qualified Manager.


 


“Required
Lenders” is defined in the Senior Construction Loan Agreement.


 


“Senior
Construction Loan,” “Senior Construction Loan Agreement,” and “Senior
Construction Loan Deed of Trust,” each is defined in the Recitals to this
Agreement.


 


“Senior
Construction Loan Documents” means the Senior Construction Loan Agreement,
the Senior Construction Loan Deed of Trust, the Senior Guaranties and the
Senior Environmental Indemnity executed in connection with the Senior
Construction Loan, and any security agreement, pledge agreement, UCC financing
statements, any interest rate swap, collar or other interest rate protection
agreement that Borrower may now or hereafter enter into with Administrative
Agent, on behalf of the Senior Construction Lenders, pertaining to the Senior
Construction Loan, and any other document listed on Exhibit C attached
hereto, as any of the foregoing may be modified, amended, extended,
supplemented, restated or replaced from time to time, subject to the
limitations and agreements contained in this Agreement.


 


“Senior
Construction Loan Lenders” and “Senior Construction Loan Note” each
is defined in the Recitals to this Agreement.


 


“Senior
Deed of Trust” is defined in the Recitals to this Agreement.


 


“Senior
Environmental Indemnity” is defined in the Recitals to this Agreement.


 


“Senior
Guaranties” is defined in the Recitals to this Agreement.


 


7





















 


“Senior
Land Loan,” “Senior Land Loan Agreement,” “Senior Land Loan Deed
of Trust,” and “Senior Land Loan Note,” each is defined in the
Recitals to this Agreement.


 


“Senior
Land Loan Documents” means the Senior Land Loan Agreement, the Senior Land
Loan Deed of Trust, the Senior Guaranties and the Senior Environmental
Indemnity executed in connection with the Senior Land Loan, and any security
agreement, pledge agreement, UCC financing statements, any interest rate swap,
collar or other interest rate protection agreement that Borrower may now or
hereafter enter into with Land Loan Lender, pertaining to the Senior Land Loan,
as any of the foregoing may be modified, amended, extended, supplemented,
restated or replaced from time to time.


 


“Senior
Lender” means Administrative Agent, on behalf of the Senior Construction
Loan Lenders, Senior Construction Loan Lenders, and Land Loan Lender; provided,
however, that after the Transfer Date the term “Senior Lender” shall
mean and refer only to Administrative Agent, on behalf of the Senior Construction
Loan Lenders, and Senior Construction Loan Lenders.


 


“Senior
Loan” means, together, the Senior Construction Loan and the Senior Land
Loan; provided, however, that after the Transfer Date, “Senior Loan” shall mean and refer only to the Senior Construction
Loan.


 


“Senior
Loan Collateral” means, collectively, the Property, any improvements
thereon and any and all other property (whether real, personal or otherwise)
and interests in property which now constitutes or hereafter will constitute
collateral or other security for payment of the Senior Loan pursuant to the
Senior Loan Documents.


 


“Senior
Loan Documents” means the Senior Construction Loan Documents and the Senior
Land Loan Documents; provided, however, that after the Transfer
Date, “Senior Loan Documents” shall mean and
refer only to the Senior Construction Loan Documents.


 


“Senior
Loan Obligations” means all present and future indebtedness, obligations
and liabilities of Borrower under the Senior Loan Documents, including (a) all
principal (including principal which is borrowed, repaid and reborrowed),
interest (including interest accruing subsequent to, and interest that would
have accrued but for, the filing of any petition under any bankruptcy,
insolvency or similar law or the commencement of any Proceeding), default
interest, late charges, prepayment fees, expenses, fees, reimbursement
obligations relating to the issuance or execution by Senior Lender of standby
letters of credit or developer’s agreements pertaining to the Property or
surrounding properties, other reimbursements, interest rate swaps, collars or
other interest rate protection agreements that Borrower may enter into with
Senior Lender pertaining to the Senior Loan, indemnities and other amounts
payable thereunder, in each case whether now or hereafter arising, direct or
indirect, primary or secondary, joint, several or joint and several, liquidated
or unliquidated, final or contingent, and whether incurred as maker, endorser
or otherwise; (b) all indebtedness arising from all present and future
optional or obligatory advances (including advances to cover overdrafts that
pertain to the Property) under the Senior Note or any other Senior Loan
Document, (c) all amounts due 


 


8





















 


and owing to Swap Bank (as defined in the Senior Construction Loan
Agreement) in respect of any Swap Transactions (as defined in the Senior
Construction Loan Deed of Trust), (c) any and all amendments,
modifications, extensions, renewals, refinancing or refundings of any of such
indebtedness, obligations or liabilities, and (d) any and all sums
advanced or expended by Senior Lender (whether deemed optional or obligatory
advances, or otherwise) which Senior Lender deems necessary or appropriate (1) to
market the Property or any portion thereof for sale, (2) to repair,
maintain or otherwise protect the Property and any improvements thereon or to
prevent waste or destruction or to pay or prevent liens or to defend Borrower’s
title or Senior Lender’s lien priority, (3) to pay taxes, assessments or
insurance premiums in respect of the Property or any improvements thereon or to
otherwise protect Senior Lender’s security interest in the Property, any such
improvements and any other Senior Loan Collateral, or (4) in connection
with Senior Lender’s protection or exercise of its rights or remedies under the
Senior Loan Documents.  To the extent any
payment on any of the Senior Loan Obligations, whether by or on behalf of
Borrower, as proceeds of security or enforcement of any right of setoff or
otherwise, is recovered by or required to be paid over to Borrower or a
receiver, trustee in bankruptcy, liquidating trustee, agent or other Person in
a Proceeding, such Senior Loan Obligation or any part thereof originally
intended to be satisfied by such payment shall be deemed to be reinstated and
outstanding as if such payment had not occurred.  All outstanding Senior Loan Obligations shall
be and remain Senior Loan Obligations for all purposes of this Agreement,
regardless of whether they are allowed, not allowed or subordinated in any
Proceeding.


 


“Senior
Note” is defined in the Recitals to this Agreement.


 


“Special
Modification Terms” means any amendment or modification of the Senior Loan
Documents entered into after the date of this Agreement with respect to the
following:  (a) increase the
principal amount secured by the Senior Deed of Trust (other than increases in
respect of Protective Advances), (b) increase the interest rate (other
than an increase to a default rate and imposition of late charges), (c) amend
or modify the provisions limiting transfers of interests in Borrower or the
Property, (d) shorten the maturity date (except that the foregoing shall
not be deemed to restrict or prohibit Senior Lender from accelerating the maturity
of the Senior Loan or Senior Loan Obligations during the existence of a
Default), or (e) amend the default section under the Senior Loan Documents
in a manner that shortens grace or cure periods or adds any provisions to
cross-default or cross-collateralize the Senior Loan with any other
indebtedness.


 


“Subordinate
Lender’s Outside Date” means a date first occurring after the issuance of a
Default Notice that is the date Subordinate Lender’s cure period applicable to
such Default Notice, as more particularly set forth in Section 8(b) below,
expires unless Subordinate Lender has elected in writing to purchase the Senior
Loan pursuant to Section 8(c) below, in which event, “Subordinate Lender’s Outside Date” shall be the Purchase
Closing Date.


 


“Transfer Date”
has the meaning assigned to such term in the Senior Construction Loan
Agreement.


 


9
















 


3.                                       Approval of Loans and Loan
Documents.


 


(a)                                  Subordinate Lender hereby acknowledges
that (i) it has received and reviewed and, subject to the terms and
conditions of this Agreement, hereby consents to and approves of the making of
the Senior Loan and, subject to the terms and provisions of this Agreement, all
of the terms and provisions of the Senior Loan Documents, (ii) the
execution, delivery and performance of the Senior Loan Documents will not
constitute a default or an event which, with the giving of notice or the lapse
of time, or both, would constitute a default under the Mezzanine Loan
Documents, (iii) Senior Lender is under no obligation or duty to, nor has
Senior Lender represented that Senior Lender will, see to the application of
the proceeds of the Senior Loan by Borrower or any other Person to whom Senior
Lender disburses such proceeds, and (iv) any application or use of the
proceeds of the Senior Loan for purposes other than those provided in the
Senior Loan Documents shall not affect, impair or defeat the terms and
provisions of this Agreement or the Senior Loan Documents.  The foregoing consent and acknowledgement by
Subordinate Lender is not intended and shall not be construed to (i) impose
any duty or obligation on Subordinate Lender with respect to Senior Lender or
with respect to the Senior Loan Documents other than as expressly set forth in
this Agreement (and no such duty or obligation shall be implied), or (ii) amend
or modify the respective obligations of the parties to the Mezzanine Loan
Documents other than as expressly set forth herein.


 


(b)                                 Senior Lender hereby acknowledges that (i) it
hereby consents to and approves of the making of the Mezzanine Loan and,
subject to the terms and provisions of this Agreement, the terms of the Mezzanine
Loan Documents, (ii) the execution and delivery of the Mezzanine Loan
Documents will not constitute a default or an event which, with the giving of
notice or the lapse of time, or both, would constitute a default under the
Senior Loan Documents, (iii) Subordinate Lender is under no obligation or
duty to, nor has Subordinate Lender represented that it will, see to the
application of the proceeds of the Mezzanine Loan by Mezzanine Borrower or any
other Person to whom Subordinate Lender disburses such proceeds and (iv) any
application or use of the proceeds of the Mezzanine Loan for purposes other
than those provided in the Mezzanine Loan Documents shall not affect, impair or
defeat the terms and provisions of this Agreement or the Mezzanine Loan Documents.  The foregoing consent and acknowledgement by
Senior Lender is not intended and shall not be construed to (i) impose any
duty or obligation on Senior Lender with respect to Subordinate Lender or with
respect to the Mezzanine Loan Documents other than as expressly set forth in
this Agreement (and no such duty or obligation shall be implied), or (ii) amend
or modify the respective obligations of the parties to the Senior Loan
Documents other than as expressly set forth herein.


 


4.                                       Representations, Warranties
and Covenants.


 


(a)                                  Subordinate Lender hereby represents,
warrants and covenants as follows:


 


(i)                                     Exhibit B attached hereto and made a
part hereof is a true, correct and complete listing of all of the Mezzanine
Loan Documents.  To Subordinate Lender’s knowledge,
there currently exists no default or event which, with the 


 


10

















 


giving of notice or the lapse of time, or both, would constitute a
default under any of the Mezzanine Loan Documents.


 


(ii)                                  Subordinate Lender is the legal and
beneficial owner of the entire Mezzanine Loan free and clear of any lien,
security interest, option or other charge or encumbrance.


 


(iii)                               There are no conditions precedent to the effectiveness
of this Agreement that have not been satisfied or waived.


 


(b)                                 Administrative Agent, for and on behalf
of the Senior Construction Loan Lenders and Land Loan Lender each hereby
severally represents, warrants and covenants as follows:


 


(i)                                     Exhibit C attached hereto and made a
part hereof is a true, correct and complete listing of the Senior Construction
Loan Documents and Senior Land Loan Documents, respectively, as of the date
hereof.  To Administrative Agent’s
knowledge, there currently exists no default or event which, with the giving of
notice or the lapse of time, or both, would constitute a default under any of
the Senior Construction Loan Documents. 
To Land Loan Lender’s knowledge, there currently exists no default or
event which, with the giving of notice or the lapse of time, or both, would
constitute a default under any of the Senior Land Loan Documents.


 


(ii)                                  There are no conditions precedent to the
effectiveness of this Agreement that have not been satisfied or waived.


 


5.                                       Subordination. 
Subject to the terms of this Agreement, Subordinate Lender, for itself
and its successors and assigns (including, without limitation, all subsequent
holders of the Mezzanine Note and the Mezzanine Deed of Trust) does hereby
subordinate (a) the Mezzanine Deed of Trust and the other Mezzanine Loan
Documents, (b) except as set forth in Section 6 below, payment of all
of the Mezzanine Loan Obligations, and (c) all of its right, title,
security interest, lien, and interest in and to the Property, any improvements
thereon and any other Senior Loan Collateral and all sales proceeds, other
proceeds, rents, issues, and profits therefrom, to (i) the Senior Deed of
Trust and all other Senior Loan Documents, (ii) payment of all of the
Senior Loan Obligations, (iii) all of the right, title, security interest,
lien and interest held by Senior Lender and the successors and assigns of
Senior Lender (including, without limitation, all subsequent holders of the
Senior Note and the Senior Deed of Trust), in and to the Property, any
improvements thereon and any other Senior Loan Collateral and all sales
proceeds, proceeds from insurance or condemnation, other proceeds, rents,
issues, and profits therefrom, under and pursuant to (1) the Senior Note, (2) the
Senior Deed of Trust, and (3) all other Senior Loan Documents, and any and
all extensions, renewals, modifications, and replacements thereof, subject to Section 9
hereof.  From and after the date hereof,
all of the documents, indebtedness, right, title, security interest, lien, and
interest described in clauses (a), (b) and (c) hereinabove shall
be subject and subordinate to all of the documents, indebtedness, right, title,
security interest, lien, and interest described in clauses (i), (ii) and
(iii) hereinabove.


 


11

















 


6.                                       Restrictions Regarding
Payments.  Subordinate Lender, for itself and its
successors and assigns (including, without limitation, all subsequent holders
of the Mezzanine Note and the Mezzanine Deed of Trust) does hereby agree that,
notwithstanding anything provided in the Mezzanine Loan Documents to the
contrary, so long as the Senior Loan Obligations remain outstanding, unless
Administrative Agent, on behalf of the Senior Construction Loan Lenders, and
prior to the Transfer Date, Land Loan Lender, shall consent in writing:


 


(a)                                  Payments. 
Except as provided in paragraph (b) below, Subordinate Lender shall
not accept or receive payments (including, without limitation, whether in cash
or other property and whether received directly, indirectly or by set off, counterclaim
or otherwise) from Borrower, Guarantors and/or from the Property prior to the
date that all obligations of Borrower to Administrative Agent and Senior Lender
under the Senior Loan Documents are paid. 
If a Proceeding shall have occurred or a Default shall have occurred and
be continuing, Administrative Agent and Senior Lender shall be entitled to
receive payment and performance in full of all amounts due or to become due to
Administrative Agent and Senior Lender before Subordinate Lender is entitled to
receive any payment on account of the Mezzanine Loan Obligations.  All payments or distributions upon or with
respect to the Mezzanine Loan Obligations which are received by Subordinate
Lender contrary to the provisions of this Agreement shall be received and held
in trust by the Subordinate Lender for the benefit of Senior Lender and shall
be paid over to Administrative Agent, for the benefit of Senior Lender, in the
same form as so received (with any necessary endorsement) to be applied (in the
case of cash) to, or held as collateral (in the case of non cash property or
securities) for, the payment or performance of the Senior Loan Obligations in
accordance with the terms of the Senior Loan Documents.  Nothing contained herein shall prohibit the Subordinate
Lender from making Protective Advances (and adding the amount thereof to the
principal balance of the Mezzanine Loan Obligations) notwithstanding the
existence of a Default under the Senior Loan Obligations at such time.  Notwithstanding anything to the contrary
contained herein, Subordinate Lender shall not be permitted to accept any
prepayment of the Mezzanine Loan without the prior written consent of the
Required Lenders at any time that any of the Senior Loan Obligations remain
outstanding and unpaid.


 


(b)                                 Permitted Payments. 
Notwithstanding the foregoing or any provision of this Agreement to the
contrary, provided that no Default shall then exist under the Senior Loan
Documents and no Proceeding is pending, Subordinate Lender may accept (i) commitment
fees and scheduled payments of interest (calculated at the non-default rate) as
and when the same is due and payable from the Interest Reserve in accordance
with the terms and conditions of the Mezzanine Loan Documents or from Net Cash
Flow (as such term is defined in the Mezzanine Note), and (ii) other
amounts payable to Subordinate Lender on any settlement statement evidencing
the initial advance of Mezzanine Loan to Mezzanine Borrower, and Subordinate
Lender shall have no obligation to pay over to Senior Lender any such amounts
paid to Subordinate Lender in accordance with the terms of this paragraph.


 


(c)                                  Payments Held in Trust for
Senior Lender.  In the event that any payment is made to
Subordinate Lender which is not permitted under this Agreement, 


 


12

















 


such payments shall be held by Subordinate Lender in trust for the
benefit of Senior Lender and shall be paid forthwith over and delivered to
Senior Lender for application to the payment of all of the Senior Loan
Obligations remaining unpaid.


 


7.                                       Enforcement of Mezzanine
Loan Documents.  So long as any of the Senior Loan Obligations
remains outstanding, Subordinate Lender agrees as follows:


 


(a)                                  Subordinate Lender shall not assert,
foreclose, enforce, realize upon or bring a legal action with respect to the
Mezzanine Loan Obligations, or any part thereof, the Mezzanine Deed of Trust,
any of the other Mezzanine Loan Documents; provided, however,
that (i) upon the occurrence of any default under the Mezzanine Loan
Documents and so long as no Default exists under the Senior Loan Documents,
Subordinate Lender may seek collection from or otherwise pursue Guarantors
under the guaranty of the Mezzanine Loan described in Exhibit B attached
hereto; and/or (ii) Subordinate Lender may seek collection from or
otherwise pursue Guarantors under the applicable provisions of the Partnership
Agreement and the joinder page thereto. 
Subordinate Lender shall, prior to commencing any action to enforce any
rights against the Guarantors, give Administrative Agent written notice of the
default which would permit Subordinate Lender to commence such enforcement
action, and Subordinate Lender shall promptly provide Administrative Agent with
copies of any and all material notices, pleadings, agreements, motions and
briefs served upon, delivered to or with any party to any such enforcement
action and otherwise keep Administrative Agent reasonably apprised as to the
status of any enforcement action.


 


(b)                                 In addition, the Mezzanine Deed of Trust
shall, by its terms, be deemed to have been released and discharged and
Subordinate Lender shall have no further rights, claims or interests in the
Property or any other property, rights or interests encumbered by the Mezzanine
Deed of Trust and Subordinate Lender shall, if requested by Administrative
Agent or any title company, immediately deliver to Administrative Agent a
written release or reconveyance of lien confirming the release and termination
of the Mezzanine Deed of Trust upon the occurrence of any one or more of the
following events (each, a “Termination Event”):


 


(i)                                     the occurrence or commencement of any
Proceeding with respect to Borrower, Mezzanine Borrower or the Investment
Partnership, or any other owner of any interest, direct or indirect in
Borrower, Mezzanine Borrower or the Investment Partnership;


 


(ii)                                  the conveyance of the Property to
Administrative Agent, any Senior Lender, or their designees in connection with
a deed in lieu of foreclosure transaction; or


 


(iii)                               a Default resulting from a Monetary Default which is
not cured by Subordinate Lender within the cure period specified in Section 10
of this Agreement and following which the Senior Loan Obligations are
accelerated pursuant to the Senior Loan Documents.


 


13

















 


To induce Administrative Agent and Senior Lender to
consent to the Mezzanine Deed of Trust, Subordinate Lender hereby covenants and
agrees that until the Senior Loan Obligations have been paid in full and all
preconditions to the release and discharge of the Senior Deed of Trust have
been satisfied (i) the Mezzanine Deed of Trust shall not be amended,
modified or supplemented without the prior written consent of the Required
Lenders, (ii) the Senior Deed of Trust shall govern and control over any
contrary provision of the Mezzanine Deed of Trust with respect to casualty and
condemnation and the distribution of insurance proceeds and condemnation
awards, and (iii) Subordinate Lender hereby appoints Administrative Agent
as its attorney-in-fact, coupled with an interest, to execute, deliver and
record such releases and discharges as may be necessary to fully release the
Mezzanine Deed of Trust from the Property and all other property, rights and
interests encumbered by the Mezzanine Deed of Trust, which such power may be
exercised only after a Termination Event.


 


(c)                                  Administrative Agent, on behalf of the
Senior Construction Lenders, hereby consents to Subordinate Lender’s right,
pursuant to the Mezzanine Loan Documents, under certain circumstances, to cause
the termination of the Property Manager. 
If both Subordinate Lender and Administrative Agent shall have such
rights at any time, and Administrative Agent shall fail to exercise such rights
on behalf of the Senior Construction Lenders, Subordinate Lender may exercise
such rights, provided such exercise may be superseded by any subsequent
exercise of such rights by Administrative Agent pursuant to the Senior Loan
Documents.  Upon the occurrence of any
event which would entitle Subordinate Lender to cause the termination of the
Property Manager pursuant to the Mezzanine Loan Documents, Subordinate Lender
shall have the right to select, or cause the selection, of a replacement
property manager (including any asset manager) or leasing agent for the
Property, which replacement manager, asset manager and/or leasing agent shall (i) be
a Qualified Manager and (ii) be subject to the reasonable approval of
Administrative Agent (or the Required Lenders if the consent of the Required
Lenders is necessary).  Notwithstanding
anything in this Section to the contrary, if a Default under the Senior
Loan then exists or any other event shall have occurred pursuant to which
Administrative Agent, on behalf of the Senior Construction Lenders, has the
right to select any replacement manager, asset manager and/or leasing agent
pursuant to the Senior Loan Documents, Administrative Agent shall have the sole
right to select any replacement manager, asset manager and/or leasing agent,
whether or not a new manager or leasing agent was retained by Subordinate
Lender.


 


8.                                       Default under Senior Loan
Documents.


 


(a)                                  Default Notice. 
Prior to commencing any Enforcement Action under the Senior Loan
Documents, Senior Lender shall provide Subordinate Lender with a copy of any
written notice (the “Default Notice”)
sent by Senior Lender to Borrower regarding the occurrence of a Default.


 


(b)                                 Subordinate Lender’s Cure
Right.  Subordinate Lender shall have the right, but
not the obligation, to cure any Default under any of the Senior Loan Documents
within the later of the (i) the expiration of Borrower’s cure period under
the Senior Loan 


 


14

















 


Documents with respect to such Default or (ii) five (5) Business
Days after the giving of the Default Notice if such cure can be accomplished by
the payment of a liquidated sum of money (herein, a “Monetary
Default”).  In addition, if
the Default Notice relates to a Default other than a Monetary Default (herein,
a “Non-Monetary Default”), Subordinate
Lender shall have the right, but not the obligation to cure such Non-Monetary
Default provided  that if such Non Monetary Default is susceptible
of cure but cannot reasonably be cured within thirty (30) days and if curative
action was promptly commenced and is being continuously and diligently pursued
by Subordinate Lender, Subordinate Lender shall be given an additional period
of time as is reasonably necessary for Subordinate Lender in the exercise of
due diligence to cure such Non-Monetary Default for so long as (i) Subordinate
Lender makes or causes to be made timely payment of Borrower’s regularly
scheduled monthly principal and/or interest and/or other payments under the
Senior Loan Documents and any other amounts due under the Senior Loan
Documents, (ii) such additional period of time does not exceed thirty (30)
days, unless such Non-Monetary Default is of a nature that it cannot be cured
within such thirty (30) days, in which case, Subordinate Lender shall have such
additional time as is reasonably necessary to cure such Non-Monetary Default
not to exceed one hundred twenty (120) days from the Default Notice so long as
Subordinate Lender is diligently pursuing same, (iii) such Non-Monetary
Default is not caused by a Proceeding, and (iv) during such cure period,
there is (1) no material impairment to the value, use or operation of the
Property, and (2) no violations of any applicable law, regulation or
ordinance having jurisdiction over the Property.  Subordinate Lender acknowledges and agrees
that Senior Lender’s failure to provide Subordinate Lender with a copy of any
Default Notice delivered to Borrower shall not defeat or impair the
subordination and other agreements herein made, nor shall it defeat, impair or
prevent Senior Lender from exercising any of its rights or remedies as a result
of such Default in whole or in part subject to Subordinate Lender’s right to
cure upon Senior Lender’s delivery to Subordinate Lender of the applicable
Default Notice.  The foregoing cure
periods shall automatically terminate upon the occurrence of a Proceeding.  During any cure period granted herein to
Subordinate Lender, Senior Lender shall be entitled to begin exercising any
rights and remedies it has under the Senior Loan Documents and under applicable
law as a result of such Default, and such Default shall not be cured unless and
until the particular Default under the Senior Loan Documents has been remedied
and Senior Lender has been fully reimbursed for all costs and expenses incurred
by Senior Lender in so exercising its rights (including attorneys’ fees and
costs and foreclosure costs).


 


(c)                                  Subordinate Lender’s Right
to Purchase Senior Loan.  Upon delivery
of a copy of the Default Notice to Subordinate Lender, Subordinate Lender shall
have the right, but not the obligation, to purchase the Senior Loan at par for
a purchase price equal to the sum of (i) all amounts, if any, due and
payable to Swap Bank in connection with the termination of any Swap
Transactions and the early termination and acceleration of all Swap
Transactions executed by Borrower, (ii) the outstanding principal balance
of the Senior Loan, together with all accrued interest and other amounts due
thereon (including, without limitation, any late charges, default interest,
breakage fees, exit fees, advances and post petition interest), and (iii) any
Protective Advances made by Administrative Agent, on behalf of Senior Lender,
and any interest charged by Senior Lender on any advances for monthly payments
of principal and/or interest on the Senior Loan 


 


15

















 


Obligations and/or on any Protective Advances), including all costs and
expenses (including legal fees and expenses) actually incurred by
Administrative Agent and Senior Lender in enforcing the terms of the Senior
Loan Documents (the “Loan Purchase Price”).  If Subordinate Lender elects in writing to
purchase the Senior Loan (the “Purchase”), the
Purchase shall close (“Purchase Closing Date”)
on a date selected by Subordinate Lender that is no later than (30) days after
the delivery of a copy of the Default Notice to Subordinate Lender.  Concurrently with payment to Senior Lender of
the Loan Purchase Price, Senior Lender shall deliver or cause to be delivered
to Subordinate Lender all Senior Loan Documents held by or on behalf of Senior
Lender and will execute in favor of Subordinate Lender or its designee
assignment documentation, in form and substance reasonably acceptable to
Subordinate Lender, Administrative Agent and the Required Lenders, at the sole
cost and expense of Subordinate Lender, to assign the Senior Loan and the
rights of Senior Lender under the Senior Loan Documents (without recourse,
representations or warranties, except for representations as to the outstanding
balance of the Senior Loan and as to Senior Lender’s not having assigned or
encumbered its rights in the Senior Loan). 
Upon consummation of the Purchase, Subordinate Lender shall be
subrogated to the rights of Senior Lender under the Senior Loan Documents.


 


(d)                                 Failure to Elect to
Purchase Senior Loan.  If Subordinate Lender has the
right to purchase the Senior Loan under Section 8(c), and the Subordinate
Lender does not elect to purchase the Senior Loan and close the Purchase by the
Purchase Closing Date, then Senior Lender thereafter shall have the right to
amend, modify, restructure or extend the Senior Deed of Trust or any other
Senior Loan Documents (including without limitation any and all Special
Modification Terms) without notice to or the consent of Subordinate
Lender.  In such event, the Mezzanine
Loan, the Mezzanine Deed of Trust and the other Mezzanine Loan Documents and
all indebtedness, obligations, liens and security interests evidenced or
secured thereby or from time to time outstanding thereunder shall continue to
be junior, subject, and subordinate in all respects to the Senior Loan, the
Senior Deed of Trust and the Senior Loan Documents, as so amended, modified,
extended, or restructured (including without limitation any and all Special
Modification Terms).  Third parties
including title insurance companies insuring the priority of the Senior Deed of
Trust are hereby authorized to rely on this provision as to the priority of the
Senior Loan Documents, as so amended, modified, extended or restructured,
without any requirement to confirm such senior position from Subordinate
Lender.


 


(e)                                  No Sale to Borrower
Affiliate.  Senior Lender covenants not to sell any of
the Senior Loan Obligations to Borrower or any Borrower Affiliate without the
prior written consent of Subordinate Lender. 
Subordinate Lender covenants not to sell any of the Mezzanine Loan
Obligations to Borrower or any Borrower Affiliate without the prior written
consent of Administrative Agent and the Required Lenders.


 


9.                                       Changes in Special Modification
Terms.  Except as otherwise provided in Section 8(d),
Senior Lender shall not modify any of the Special Modification Terms in the
Senior Loan Documents without the prior written approval of Subordinate
Lender.  In addition and notwithstanding the
foregoing provisions of this Section 9, any amounts funded by Senior 


 


16

















 


Lender under the Senior
Loan Documents as a result of (A) the making of any Protective Advances by
Senior Lender, or (B) interest accruals (including default interest and
late charges), shall not be deemed to contravene this Section 9.  Administrative Agent shall deliver to
Subordinate Lender copies of any and all modifications, amendments, extensions,
consolidations, spreaders, restatements, alterations, changes or revisions to
any one or more of the Senior Loan Documents (including, without limitation,
any side letters, waivers or consents entered into, executed or delivered by
Administrative Agent, on behalf of Senior Lender) within a reasonable time
after any of such applicable instruments have been executed by Administrative
Agent.


 


10.                                 Senior Lender’s Freedom of
Action.  Subordinate Lender agrees that Senior Lender
may at any time and from time to time, without notice to or the consent of
Subordinate Lender, and without affecting the subordination and other
agreements herein made by Subordinate Lender, do any one or more of the
following in Senior Lender’s sole and absolute discretion (subject, however,
to the restriction on Special Modification Terms set forth herein):


 


(a)                                  Extend, renew, modify, amend, increase,
diminish or waive any of the terms of any of the Senior Loan Documents,
including, without limitation, payment provisions under any of the Senior Loan
Documents and provisions relating to the Property or grant any other indulgence
to Borrower or any other Person in respect of any or all of the Senior Loan
Obligations or any other matter;


 


(b)                                 Make such Protective Advances as Senior
Lender may deem appropriate (it being understood that Senior Lender has not in
any way committed to make any such Protective Advances);


 


(c)                                  At any time after Subordinate Lender’s
Outside Date, add or substitute, or take any action or omit to take any action
which results in the release of any endorser, guarantor or any collateral or
security;


 


(d)                                 Apply any sums received from Borrower,
any guarantor, endorser, or cosigner, or from the disposition of any Senior
Loan Collateral or security, to any indebtedness whatsoever owing from such
Person or secured by such Senior Loan Collateral or security, in such manner
and order as Senior Lender determines in its sole discretion, and regardless of
whether such indebtedness is part of the Senior Loan Obligations, is secured,
or is due and payable;


 


(e)                                  Make loans or advances to Borrower
secured in whole or in part by the Senior Loan Collateral or refrain from
making any such loans or advances;


 


(f)                                    Accept partial payments of, compromise or
settle, refuse to enforce, or release all or any parties to, any or all of the
Senior Loan Obligations;


 


(g)                                 Settle, release (with or without receipt
of consideration therefor, and whether by operation of law or otherwise),
compound, compromise, collect or liquidate any of the Senior Loan Obligations
in any manner permitted by applicable law; provided, however,
Senior Lender shall not release any of the Senior Loan Collateral or any
guarantor of the Senior Loan Obligations prior to Subordinate Lender’s Outside
Date; and


 


17

















 


(h)                                 Accept, release (with or without receipt
of consideration), waive, surrender, enforce, exchange, modify, impair or
extend the time for the performance, discharge or payment of, any and all
property of any kind securing any or all of the Senior Loan Obligations or any
guaranty of any or all of the Senior Loan Obligations, or on which Senior
Lender at any time may have a lien, or refuse to enforce its rights or make any
compromise or settlement or agreement therefor in respect of any or all of such
property; Senior Lender is not under and shall not hereafter be under any
obligation to marshal any assets in favor of Subordinate Lender, or against or
in payment of any or all of the Senior Loan Obligations, and may proceed
against any of the Senior Loan Collateral in such order and manner as it
elects; provided, however, Senior Lender shall not release any of
the Senior Loan Collateral or any guarantor of the Senior Loan Obligations
prior to Subordinate Lender’s Outside Date.


 


All such actions, rights and matters set forth in (a) through
(h) above shall be senior in all respects to the Mezzanine Loan
Obligations and the Mezzanine Loan Documents which shall automatically be
subordinate to such actions, rights and matters set forth in (a) through (h) above.  Third parties including title insurance
companies insuring the priority of the Senior Loan Documents are hereby
authorized to rely upon this provision as to the priority of such matters
without requirement to confirm such senior position from Subordinate Lender.


 


11.                                 Buy-Sell Rights. 
Notwithstanding any provision of this Agreement to the contrary,
Subordinate Lender shall have the right, without the consent of Senior Lender
in each instance, to exercise the Buy-Sell Rights after the Completion Date (as
defined in the Senior Loan Documents).


 


12.                                 No Transfer of Mezzanine
Loan; Refinancing.  Subordinate Lender agrees that
it shall not sell, assign, pledge, encumber or otherwise transfer any portion
of its interest in the Mezzanine Loan Documents without the prior written
consent of the Required Lenders, which consent shall be given or withheld in
the good faith business judgment of Required Lenders; provided, that
Subordinate Lender shall have the right to transfer its interest in the
Mezzanine Loan (or any part thereof or interest therein) to an Affiliate upon
fifteen (15) days’ prior written notice to Administrative Agent and
delivery to Administrative Agent by such affiliate of an assumption agreement
whereby it assumes all of Subordinate Lender’s obligations hereunder.  Any such transferee must assume in writing
the obligations of Subordinate Lender hereunder and agree to be bound by the
terms and provisions of this Agreement. 
Such transferee shall also reaffirm, in writing, in all material
respects each of the representations and warranties contained herein for the
benefit of Administrative Agent and Senior Lender.  Subordinate Lender shall provide
Administrative Agent, for the benefit of and distribution to Senior Lender,
such financial and other information on the proposed assignee as Administrative
Agent or Senior Lender reasonably requests. 
In addition, so long as any of the Senior Loan Obligations remains
outstanding, any refinance of the Mezzanine Loan Obligations shall be subject
to the prior written approval of the Required Lenders as to the terms thereof
and the refinance lender, which approval may be granted or withheld by Required
Lenders in their sole discretion.


 


13.                                 Modification of Mezzanine
Loan Documents.  Subordinate Lender shall have the right, without
the consent of Senior Lender in each instance, to enter into any amendment,
deferral, extension, modification, increase, renewal, replacement,
consolidation, supplement or 


 


18

















 


waiver (collectively, a “Mezzanine Loan Modification”) of the Mezzanine Loan or the
Mezzanine Loan Documents; provided that no such Mezzanine Loan
Modification shall (a) increase the interest rate or principal amount of
the Mezzanine Loan; (b) increase in any other material respect any
monetary obligations of Mezzanine Borrower under the Mezzanine Loan Documents; (c) shorten
the scheduled maturity date of the Mezzanine Loan; (d) cross default the
Mezzanine Loan with any other indebtedness; or (e) amend the payment
provisions of the Mezzanine Note (or the definition of “Net Cash Flow” in the
Mezzanine Note) or otherwise modify the amount or timing of the payments on the
Mezzanine Note.  Notwithstanding the
foregoing provisions, any amounts funded by the Subordinate Lender under the
Mezzanine Loan Documents as a result of (i) the making of any Protective
Advances or other advances by the Subordinate Lender, or (ii) interest
accruals or accretions and any compounding thereof (including default
interest), shall not be deemed to contravene this Section 13.  Subordinate Lender shall deliver to
Administrative Agent, for distribution to Senior Lender, copies of any and all
modifications, amendments, extensions, consolidations, spreaders, restatements,
alterations, changes or revisions to any one or more of the Mezzanine Loan
Documents (including, without limitation, any side letters, waivers or consents
entered into, executed or delivered by Subordinate Lender) within a reasonable
time after any of such applicable instruments have been executed by Subordinate
Lender.


 


14.                                 Dealings with Borrower.


 


(a)                                  In making disbursements under any of the
Senior Loan Documents, Senior Lender has no duty to, nor has Senior Lender
represented that it will, see to the application of any proceeds by the Person
or Persons to whom Senior Lender disburses such proceeds.  Any application or use of such proceeds for
purposes other than those provided for in the Senior Loan Documents does not
and shall not defeat the subordination herein made, in whole or in part.


 


(b)                                 In making disbursements under any of the
Senior Loan Documents, Senior Lender may waive any and all conditions to a
disbursement contained in the Senior Loan Documents.  No such waiver shall defeat the subordination
herein made, in whole or in part.


 


(c)                                  The rights granted to Senior Lender
hereunder are solely for its protection and nothing herein contained shall
impose on Senior Lender any duties with respect to Borrower.


 


15.                                 Assignment of the Senior
Loan Obligations.  Senior Lender may assign or transfer any or
all of the Senior Loan Obligations and/or any interest therein or herein,
subject to this Agreement, and, notwithstanding any such assignment or transfer
or any subsequent assignment or transfer thereof, such Senior Loan Obligations
shall be and remain senior to the Mezzanine Loan Obligations, and the Mezzanine
Loan Obligations shall be and remain subject and subordinate to the Senior Loan
Obligations for the purposes of this Agreement, and every immediate and
successive assignee or transferee of any of the Senior Loan Obligations or of
any interest therein or herein shall, to the extent of the interest of such
assignee or transferee in the Senior Loan Obligations, be entitled to the
benefits of this Agreement and subject to the burdens of this Agreement to the
same extent as if such assignee or transferee were Senior Lender;


 


19
















 


provided,
however, that, unless Senior Lender shall otherwise consent in writing,
Senior Lender shall have an unimpaired right, prior and superior to that of any
such assignee or transferee, to enforce this Agreement, as to those portions of
the Senior Loan Obligations which Senior Lender has not assigned or
transferred.


 


16.           Casualty.  In the event of a casualty to the
Improvements or a condemnation or taking under a power of eminent domain of all
or any portion of the Property, Senior Lender shall have a first and prior
interest in and to any payments, awards, proceeds, distributions, or
consideration arising from any such event (the “Award”).  However, if the amount of the Award is in
excess of all amounts owed to Administrative Agent and Senior Lender under the
Senior Loan Documents, then upon payment in full of the Senior Loan
Obligations, such excess Award shall be paid to or at the direction of
Subordinate Lender, unless other Persons have claims to such awards or
proceeds, in which case Administrative Agent shall only be required to provide
notice to Subordinate Lender of such excess Award and of any such claims
thereto.  In the event of any competing
claims for any such excess Award other than claims by Borrower, Administrative
Agent shall continue to hold such excess Award until Administrative Agent
receives an agreement signed by all Persons making a claim to the excess Award
or a final order of a court of competent jurisdiction directing Administrative
Agent as to how and to which Persons, the excess Award is to be
distributed.  Alternatively,
Administrative Agent may tender such excess Award to the registry of any state
or federal court sitting in Dallas, Texas, pending resolution of all competing
claims thereto, whereupon Administrative Agent shall have no further
obligations with respect to such excess Award. 
If Administrative Agent shall release any Award or portion thereof to
Borrower pursuant to the Senior Loan Documents in order to repair and restore
the Property in accordance with the terms and provisions of the Senior Loan
Documents, such Award or portion thereof made available to Borrower for the
repair or restoration of the Property shall not be subject to attachment by
Subordinate Lender


 


17.           Bankruptcy.


 


(a)           Upon
any distribution of the assets or properties of Borrower or upon any
dissolution, winding up, liquidation, bankruptcy or reorganization involving
Borrower (whether in bankruptcy, insolvency or receivership proceedings or any
other Proceeding, or upon an assignment for the benefit of creditors or
otherwise):


 


(i)            Senior
Lender shall first be entitled to receive payment in full of the principal of
and interest on the Senior Loan Obligations and all fees and any other payments
(including post-petition interest and all costs and expenses) due pursuant to
the terms of the Senior Loan Documents, before Subordinate Lender is entitled
to receive any payment on account of the Mezzanine Loan Obligations; and


 


(ii)           any
payment or distribution of the assets or properties of Borrower of any kind or
character, whether in cash, property, or securities, to which Subordinate
Lender would be entitled except for the provisions of this Agreement, shall be
paid by the debtor in possession, liquidating trustee or agent or other person
making such payment or distribution directly to Senior Lender; and


 


20

















 


(iii)          in the event that, notwithstanding the
foregoing, any payment or distribution of the assets or properties of Borrower
of any kind or character, whether in cash, property, or securities, shall be
received by Subordinate Lender on account of principal, interest, fees, or
other amounts on or with respect to the Mezzanine Loan Obligations before all
of the Senior Loan Obligations are paid in full, such payments or distribution
shall be received and held in trust for and shall be paid over to Senior Lender
forthwith, for application to the payment of the Senior Loan Obligations until
all such Senior Loan Obligations shall have been paid in full in accordance
with the terms of the Senior Loan Documents.


 


(b)           To
effectuate the foregoing, Subordinate Lender does hereby irrevocably assign to
Senior Lender all of Subordinate Lender’s rights as a secured or unsecured
creditor in any Proceeding and authorizes Senior Lender to take, or refrain
from taking, any action to assert, enforce, modify, waive, release or extend
Subordinate Lender’s lien and/or claim in such Proceeding, including but not
limited to (i) filing a proof of claim arising out of the Mezzanine Loan
Obligations, (ii) voting or refraining from voting claims arising from the
Mezzanine Loan Obligations, either in Administrative Agent’s name, on behalf of
Senior Lender, or in the name of Administrative Agent as attorney-in-fact of
Subordinate Lender including without limitation, the right to vote to accept or
reject a plan, or to make any election under Section 1111(b) of the
Bankruptcy Code, and no other parties other than Administrative Agent shall
have the right to exercise such voting rights, (iii) accepting or
rejecting any payment or distribution made with respect to any claim arising
from the Mezzanine Loan Obligations and applying such payment and distribution
to payment of Senior Lender’s claim until the Senior Loan Obligations are paid
and satisfied in full in accordance with their terms, and (iv) taking any
and all actions and executing any and all instruments necessary to effectuate
the foregoing and, among other things, to establish Senior Lender’s entitlement
to assert Subordinate Lender’s claim in such Proceeding.  Notwithstanding the foregoing provisions,
with respect to any plan of reorganization proposed in a Proceeding in respect
of which creditors are voting, Administrative Agent may vote on behalf of
Subordinate Lender only if the proposed plan would result in Senior Lender
being “impaired” (as such term is defined in
the Bankruptcy Code).


 


(c)           Subordinate
Lender agrees that Administrative Agent and Senior Lender owe no fiduciary duty
to Subordinate Lender in connection with the administration of the Senior Loan
Obligations and the Senior Loan Documents and Subordinate Lender agrees not to
assert any such claim.  Administrative
Agent, on behalf of Senior Lender, agrees that Subordinate Lender owes no
fiduciary duty to Administrative Agent and Senior Lender in connection with the
administration of the Mezzanine Loan and the Mezzanine Loan Documents and each
of Administrative Agent and Senior Lender agree not to assert any such claim.


 


(d)           No
payment or distribution to Administrative Agent or Senior Lender pursuant to
the provisions of this Agreement and no Protective Advance by Subordinate
Lender shall entitle Subordinate Lender to exercise any right of subrogation in
respect thereof prior to the payment in full of the Senior Loan Obligations,
and Subordinate Lender agrees that, except with respect to the enforcement of
its remedies under the


 


21

















 


Mezzanine Loan Documents permitted hereunder, prior to the satisfaction
of all Senior Loan Obligations, Subordinate Lender shall not acquire, by
subrogation or otherwise, any lien, security interest, estate, right or other
interest in any portion of the Property or any other collateral now securing
the Senior Loan Obligations or the proceeds therefrom, including without
limitation, any lien, security interest, estate, right or other interest in any
portion of the Property that is or may be prior to, or of equal priority to,
any of the Senior Loan Documents or the liens, rights, estates and interests created
thereby.


 


(e)           The
provisions of this Agreement shall be applicable both before and after the
commencement, whether voluntary or involuntary, of any Proceeding involving
Borrower, Mezzanine Borrower or Investment Partnership.  For as long as the Senior Loan Obligations
shall remain outstanding, Subordinate Lender shall not, and shall not solicit
any person or entity to, and shall not direct or cause any Borrower Affiliate
to:  (i) commence any Proceeding; (ii) institute
proceedings to have any Borrower Affiliate adjudicated a bankrupt or insolvent;
(iii) consent to, or acquiesce in, the institution of bankruptcy or
insolvency proceedings against any Borrower Affiliate; (iv) file a
petition or consent to the filing of a petition seeking reorganization, arrangement,
adjustment, winding up, dissolution, composition, liquidation or other relief
by or on behalf of any Borrower Affiliate; (v) seek or consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator,
custodian or any similar official for any Borrower Affiliate, the Property (or
any portion thereof) or any other collateral securing the Senior Loan
Obligations (or any portion thereof); (vi) make an assignment for the
benefit of any creditor of any Borrower Affiliate; (vii) seek to
consolidate the Property or any other assets of any Borrower Affiliate with the
assets of any other Borrower Affiliate in any Proceeding; or (viii) take
any action in furtherance of any of the foregoing.


 


18.           Additional
Waivers and Agreements.


 


(a)           Subordinate
Lender waives the right to require Senior Lender to proceed against Borrower or
any other Person liable on any Senior Loan Obligation, to proceed against or
exhaust any security held from Borrower or other Person, or to pursue any other
remedy in Senior Lender’s power whatsoever, and Subordinate Lender waives the
right to have the property of Borrower first applied to the discharge of any
Senior Loan Obligation.  Subject to the
terms of this Agreement, Senior Lender may, at its election, exercise any right
or remedy Senior Lender may have against Borrower or any security held by
Senior Lender, including, without limitation, the right to foreclose upon any
such security by one or more judicial or nonjudicial sales, whether or not
every aspect of any such sale is commercially reasonable, without affecting or
impairing in any way the obligations of Subordinate Lender hereunder, except to
the extent the Senior Loan Obligations have been paid, and Subordinate Lender
waives any defense arising out of the absence, impairment or loss of any right
of reimbursement, contribution or subrogation or any other right or remedy
against Borrower or any such security, whether resulting from such election by
Senior Lender or otherwise except to the extent expressly set forth in this
Agreement.


 


(b)           Subordinate
Lender assumes all responsibility for keeping itself informed as to the
condition (financial or otherwise), business, assets and operations of
Borrower,


 


22

















 


the condition of any Senior Loan Collateral and all other circumstances
that might in any way affect Subordinate Lender’s risk under this Agreement
(including, without limitation, the risk of nonpayment of the Senior Loan
Obligations), and Senior Lender shall have no duty or obligation whatsoever to
obtain or disclose to Subordinate Lender any information or documents relative
to such condition, business, assets, or operations of Borrower or such risk,
whether acquired by Senior Lender in the course of its relationship with
Borrower or otherwise.


 


(c)           Subordinate
Lender acknowledges that Senior Lender has made no warranties or
representations to it with respect to the due execution, legality, validity,
completeness or enforceability of the Senior Loan Documents or the
collectability of the Senior Loan Obligations evidenced thereby.


 


(d)           If
any of the Senior Loan Obligations or any lien securing same, should be
invalidated, avoided or set aside, the subordination provided for herein
nevertheless shall continue in full force and effect and, as between Senior
Lender and Subordinate Lender, shall be and be deemed to remain in full force
and effect.


 


(e)           So
long as Subordinate Lender receives a Default Notice as provided in this
Agreement and fails to cure the applicable Default within the time period
provide in Section 8(b) above, Subordinate Lender expressly waives
the right to receive any additional notice from Senior Lender of any judicial
or nonjudicial foreclosure or sale of any real property or interest therein
subject to the Senior Deed of Trust or other instruments, and Subordinate
Lender’s failure to receive any such additional notice shall not impair or
affect Subordinate Lender’s obligations to Senior Lender or the enforceability
of this Agreement or any lien or any liens created hereby, granted to or
otherwise held by Senior Lender.


 


(f)            Subordinate
Lender hereby expressly, unconditionally and irrevocably waives all rights (i) under
Sections 361 through 365, 502(e) and 509 of the Bankruptcy Code (or
any similar sections hereafter in effect under any other Federal or state laws
or legal or equitable principles relating to bankruptcy, insolvency,
reorganizations, liquidations or otherwise for the relief of debtors or
protection of creditors), and (ii) to seek or obtain conversion to a
different type of proceeding or to seek or obtain dismissal of a proceeding, in
each case in relation to a bankruptcy, reorganization, insolvency or other
proceeding under similar laws with respect to Borrower.  Without limiting the generality of the
foregoing, Subordinate Lender hereby expressly, unconditionally and irrevocably
waives (A) the right to seek to provide credit (secured or otherwise) to
Borrower in any way under Section 364 of the Bankruptcy Code unless the
same is subordinated in right and time of payment in all aspects to the Senior
Loan Obligations in a manner acceptable to Senior Lender in its sole and
absolute discretion; (B) the right to take a position inconsistent with or
contrary to that of Senior Lender (including a position by Senior Lender to
take no action) if Borrower seeks to use, sell or lease Senior Loan Collateral
(or the proceeds or products thereof) under Section 363 of the Bankruptcy
Code; (C) the right to receive any Senior Loan Collateral security (including
any “super priority” or equal or “priming” or replacement lien) for any Mezzanine Loan
Obligation unless Senior Lender has received a senior position acceptable to
Senior Lender in its


 


23

















 


sole and absolute discretion to secure all Senior Loan Obligations (in
the same Senior Loan Collateral to the extent Senior Loan Collateral is
involved); and (D) the right to seek adequate protection in respect of
Senior Loan Collateral (or the proceeds or products thereof) under Section 363
or 361 of the Bankruptcy Code.


 


(g)           Notwithstanding
anything contained in the Mezzanine Loan Documents to the contrary, Subordinate
Lender shall not have any approval rights with respect to the Senior Loan
Obligations relating to the construction of the Improvements on the Property,
revisions to the plans and specifications for the Improvements, changes in the
construction budget, change orders, amendments to construction contracts and
subcontracts and approval of completion of the Improvements and revisions to
the construction schedule, disbursement conditions and completion date if such
items have been approved by Administrative Agent or the Required Lenders;
provided, however, the foregoing shall not affect any covenants or provisions
of the Mezzanine Loan Documents relating to same as between Mezzanine Borrower
and Subordinate Lender.


 


(h)           Subordinate
Lender agrees that it shall not prohibit Borrower from performing any act that
Borrower is permitted to perform under the Senior Loan Documents, subject to
any restrictions contained in this Agreement.


 


(i)            This
Agreement shall bind all successors and permitted assigns of Subordinate
Lender, Administrative Agent and Senior Lender and shall inure to the benefit
of all successors and permitted assigns of Administrative Agent, Senior Lender
and Subordinate Lender.  The rights of
Administrative Agent and Senior Lender hereunder may be exercised only by
Administrative Agent and any successor to Administrative Agent appointed
pursuant to the Senior Construction Loan Agreement, on behalf of Senior Lender;
provided, however, that Subordinate Lender shall have no obligation to deal
with or accept performance from any party other than Administrative Agent
unless and until Subordinate Lender receives notice of the resignation or
replacement of the Administrative Agent named herein.  Administrative Agent may, but shall not be
required to, at any time request instructions from the Required Lenders with
respect to any actions or approvals which, by the terms of this Agreement or of
any of the Senior Construction Loan Documents, Administrative Agent is
permitted or required to take or to grant without instructions from the
Required Lenders, and if such instructions are requested, Administrative Agent
shall be absolutely entitled to refrain from taking any action or to withhold
any approval and shall not be under any liability whatsoever for refraining
from taking any action or withholding any approval under this Agreement until
it shall have received such instructions from the Required Lenders.


 


(j)            Nothing
provided herein is intended to create a joint venture, partnership, tenancy in
common or joint tenancy relationship between or among any of the parties
hereto.


 


(k)           Nothing
herein contained shall operate to release (i) Borrower from its obligation
to keep and perform all of the terms, conditions, obligations, covenants and
agreements contained in the Senior Loan Documents, or any liability of Borrower
under the Senior Loan Documents, or (ii) Mezzanine Borrower from its
obligation to keep and


 


24

















 


perform all of the terms, conditions, obligations, covenants and
agreements contained in the Mezzanine Loan Documents or any liability of
Mezzanine Borrower under the Mezzanine Loan Documents.  This Agreement is a continuing agreement and
shall remain in full force and effect until the earliest of (i) payment in
full of the Senior Loan Obligations, or (ii) transfer of the Property by
foreclosure of the Senior Deed of Trust or the exercise of the power of sale
contained therein or by deed in lieu of foreclosure; provided, however, that
any rights or remedies of either party hereto arising out of any breach of any
provision hereof occurring prior to such date of termination shall survive such
termination.


 


(l)            In
the event that any provision of this Agreement or the application hereof to any
party hereto shall, to any extent, be invalid or unenforceable under any
applicable statute, regulation, or rule of law, then such provision shall
be deemed inoperative to the extent that it may conflict therewith and shall be
deemed modified to conform to such statute, regulation or rule of law, and
the remainder of this Agreement and the application of any such invalid or
unenforceable provisions to parties, jurisdictions or circumstances other than
to whom or to which it is held invalid or unenforceable, shall not be affected
thereby nor shall same affect the validity or enforceability of any other
provision of this Agreement.


 


(m)          Time
is of the essence of this Agreement.


 


(n)           Each
of Administrative Agent and Senior Lender and Subordinate Lender are
sophisticated lenders and/or investors in real estate and their respective
decision to enter into the Senior Loan Obligations and the Mezzanine Loan
Obligations, respectively, is based upon their own independent expert
evaluation of the terms, covenants, conditions and provisions of, respectively,
the Senior Loan Documents and the Mezzanine Loan Documents and such other
matters, materials and market conditions and criteria which each of
Administrative Agent, Senior Lender, and Subordinate Lender deem relevant.  Each of Administrative Agent and Subordinate
Lender has not relied in entering into this Agreement, and respectively, the
Senior Loan Obligations, the Senior Loan Documents, the Mezzanine Loan or the
Mezzanine Loan Documents, upon any oral or written information, representation,
warranty or covenant from the other, or any of the other’s representatives,
employees, Affiliates or agents other than the representations and warranties
of the other contained herein.  Each of
Administrative Agent and Subordinate Lender further acknowledges that no
employee, agent or representative of the other has been authorized to make, and
that each of Administrative Agent and Subordinate Lender have not relied upon,
any statements, representations, warranties or covenants other than those
specifically contained in this Agreement. 
Without limiting the foregoing, each of Administrative Agent and
Subordinate Lender acknowledges that the other has made no representations or
warranties as to the Senior Loan Obligations or the Mezzanine Loan or the
Property (including, without limitation, the cash flow of the Property, the
value, marketability, condition or future performance thereof, the existence,
status, adequacy or sufficiency of the leases, the tenancies or occupancies of
the Property, or the sufficiency of the cash flow of the Property, to pay all
amounts which may become due from time to time pursuant to the Senior Loan
Documents or the Mezzanine Loan Documents).


 


25
















 


19.                                 Continuing Benefits.  No right of Senior Lender or any present or
future holder of the Senior Loan Obligations to enforce the subordination as
provided herein shall at any time in any way be prejudiced or impaired by any
act or failure to act on the part of Borrower or any other party, whether
borrower, guarantor or otherwise, or by any noncompliance by Borrower or any
borrower, guarantor or otherwise with the terms of the Senior Note or any other
of the Senior Loan Documents regardless of any knowledge thereof which such
holder may have or be otherwise charged with.


 


20.                                 No Waiver; Modification.  Except as otherwise expressly provided in
this Agreement, neither this Agreement nor the transactions herein contemplated
shall operate to waive the enforcement after the date hereof of any due on
sale, due on encumbrance or accelerating transfer provision contained in the
Senior Loan Documents or the Mezzanine Loan Documents.  No delay on the part of Senior Lender or Subordinate
Lender in the exercise of any right or remedy shall operate as a waiver
thereof, and no single or partial exercise by Senior Lender or Subordinate
Lender of any right or remedy shall preclude other or further exercise thereof
or the exercise of any right or remedy; nor shall any modification or waiver of
any of the provisions of this Agreement be binding upon Senior Lender or
Subordinate Lender except as expressly set forth in a writing duly signed and
delivered by or on behalf of Senior Lender or Subordinate Lender.  This Agreement may be executed in any number
of counterparts.


 


21.                                 Reinstatement of Agreement.  The provisions of this Agreement shall
continue to be effective or be reinstated, as the case may be, if at any time
any payment of any of the Senior Loan Obligations or the Mezzanine Loan
Obligations is invalidated, declared to be fraudulent or preferential, set
aside, rescinded or must otherwise be returned by Senior Lender or Subordinate
Lender, as the case may be, under any bankruptcy law, state or federal law,
common law or equitable cause, all as though such payment had not been made.


 


22.                                 Borrower’s Waiver.  Each of Borrower and Mezzanine Borrower
hereby waives (a) notice of acceptance of this Agreement by Senior Lender
and Subordinate Lender, (b) notice of the existence or creation or
nonpayment of all or any of the Senior Loan Obligations and the Mezzanine Loan
Obligations, and (c) all diligence in the collection or protection of or
realization upon the Senior Loan Obligations or the collateral therefor or the
Mezzanine Loan Obligations.


 


23.                                 Book Entry.  Subordinate Lender will make appropriate
entries in the books and records of Subordinate Lender to indicate that the
Mezzanine Loan Obligations are subject to the Senior Loan Obligations.


 


24.                                 Notices.  Any notice which a party is required or may
desire to give the other shall be in writing and may be sent by facsimile,
personal delivery or by mail (either (i) by United States registered or
certified mail, return receipt requested, postage prepaid, or (ii) by
Federal Express or similar generally recognized overnight carrier regularly
providing proof of delivery), addressed as follows (subject to the right of a
party to designate a different address for itself by notice similarly given at
least fifteen (15) days in advance):


 


26

















 


	
  If to Subordinate Lender:

  	
   

  	
  Behringer Harvard St. Rose REIT, LLC

  15601 Dallas Parkway, Suite 600

  Dallas, TX 75001

  Attention: Chief Legal Officer

  Telecopy: (214) 655-1610

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  Behringer Harvard St. Rose REIT, LLC

  15601 Dallas Parkway, Suite 600

  Dallas, TX 75001

  Attention: Mark Alfieri

  Telecopy: (214) 655-1610

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  Wick Phillips, LLP

  2100 Ross Avenue, Suite 950

  Dallas, TX 75201

  Attention: Walter D. Miller

  Telecopy: (214) 692-6255

  
	
   

  	
   

  	
   

  
	
  If to Senior Lender:

  	
   

  	
  Bank of America, N.A.

  TX4-213-05-06

  700 Louisiana, 5th Floor

  P.O. Box 2518

  Houston, TX 77252-2518

  Attention: Real Estate Loan Administration

  Telecopy: (713) 247-6124

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  Greenberg Traurig, LLP

  2200 Ross Avenue, Suite 5200

  Dallas, TX 75201

  Attention: Tina M. Ross

  Telecopy: (972) 665-3601

  
	
   

  	
   

  	
   

  
	
  If to Borrower or

  Mezzanine Borrower:

  	
   

  	
  2001 Bryan Street, Suite 3250

  Dallas, Texas 75201

  Attention: Tim Hogan

  Facsimile: (214) 922-8553

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  Jones Day

  325 John H. McConnell Blvd.

  Suite 600

  Columbus, Ohio 43215-2673

  Attention: Michael Ording

  Telecopy: (614) 461-4198

  



 


25.                                 Priority.  The priorities herein specified are
applicable irrespective of the time of creation of Senior Lender Obligations or
the Subordinate Lender Obligations.


 


27

















 


26.                                 Further Assurances.  So long as the Senior Loan Obligations and
the Mezzanine Loan Obligations remain outstanding, either party shall execute,
acknowledge, and deliver upon the demand of the other party, at any time or
times, any and all further documents or instruments in recordable form for the
purpose of further confirming the subordination and the agreements herein set
forth.


 


27.                                 Estoppel Certificate.  Each of Senior Lender and Subordinate Lender
hereby agrees that within ten (10) days after written demand of the other
party, it shall execute, acknowledge and deliver a certification setting forth
the total amount of indebtedness owed to it under the Senior Loan Documents or
the Mezzanine Loan Documents, as the case may be, and such other certifications
as may be reasonably requested by the other party.  Notwithstanding the foregoing, neither Senior
Lender or Subordinate Lender shall be obligated to give such certification more
frequently than once every other calendar month.


 


28.                                 Governing Law.  This Agreement shall be governed by the laws
of the State of Texas (without reference to its conflict of laws principles).


 


29.                                 Forum.  Senior Lender and Subordinate Lender each
hereby irrevocably submits generally and unconditionally to any state or
federal court sitting in Dallas County, Texas, over any suit, action or
proceeding arising out of or relating to this Agreement or the Senior Loan or
the Mezzanine Loan.  Senior Lender and
Subordinate Lender each hereby irrevocably waives, to the fullest extent
permitted by law, any objection that it may now or hereafter have to the laying
of venue in any such court and any claim that any such court is an inconvenient
forum.


 


30.                                 Waiver of Jury Trial.  SENIOR LENDER AND SUBORDINATE LENDER WAIVE
TRIAL BY JURY IN RESPECT OF ANY CLAIM, COUNTERCLAIM, ACTION OR CAUSE OF ACTION
RELATING TO OR ARISING OUT OF THIS AGREEMENT. 
THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY SENIOR LENDER
AND SUBORDINATE LENDER AND SENIOR LENDER AND SUBORDINATE LENDER HEREBY
REPRESENT THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY
PERSON OR ENTITY TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY
OR NULLIFY ITS EFFECT.  THIS PROVISION IS
A MATERIAL INDUCEMENT FOR THE PARTIES ENTERING INTO THIS AGREEMENT.  SENIOR LENDER AND SUBORDINATE LENDER ARE EACH
HEREBY AUTHORIZED TO FILE A COPY OF THIS SECTION 30 IN ANY PROCEEDING AS
CONCLUSIVE EVIDENCE OF THIS WAIVER OF JURY TRIAL.  SENIOR LENDER AND SUBORDINATE LENDER EACH
FURTHER REPRESENTS AND WARRANTS THAT IT HAS BEEN REPRESENTED IN THE SIGNING OF
THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL,
OR HAS HAD THE OPPORTUNITY TO BE REPRESENTED BY INDEPENDENT LEGAL COUNSEL
SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS
THIS WAIVER WITH COUNSEL.


 


[REMAINDER OF THIS PAGE INTENTIONALLY LEFT
BLANK]


 


28

















 


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


 


	
   

  	
  SUBORDINATE LENDER:

  
	
   

  	
   

  
	
   

  	
  BEHRINGER HARVARD ST. ROSE REIT, LLC,

  a Delaware limited liability company

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Behringer Harvard St. Rose Venture, LLC,

  a Delaware limited liability company, its manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Behringer Harvard St Rose, LLC,

  a Delaware limited liability company, its manager

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Gerald J. Reihsen, III

  
	
   

  	
   

  	
   

  	
   

  	
  Gerald J. Reihsen, III

  Executive Vice President-Corporate

  Development & Legal and Secretary

  



 


Signature Page


 

















 


	
   

  	
  SENIOR LENDER:  

  
	
   

  	
   

  
	
   

  	
  BANK OF AMERICA, N.A., a national banking
  association, in its capacity as Administrative Agent on behalf of the Senior
  Construction Lenders and for its own benefit, as Land Loan Lender 

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Johanna
  Christiansen

  
	
   

  	
   

  	
  Name:

  	
  Johanna Christiansen

  
	
   

  	
   

  	
  Title:

  	
  Senior Vice President

  



 


Signature Page


 

















 


ACKNOWLEDGMENT AND
CONSENT


 


The
undersigned hereby executes and delivers this Acknowledgment and Consent to and
regarding the terms, conditions and covenants set forth in the Intercreditor
and Subordination Agreement attached hereto (the “Intercreditor
Agreement”).  The undersigned
states that it has received a copy of the foregoing Intercreditor Agreement and
agrees that it will recognize all rights granted therein to the respective
lenders that are party thereto, and that it will not undertake any act or
perform any obligation which is not in accordance with the provisions of the
Intercreditor Agreement.


 


The
undersigned further acknowledges and agrees that it is not an intended
beneficiary under the Intercreditor Agreement.


 


EXECUTED
as of December 31, 2008.


 


	
   

  	
  BORROWER: 

  
	
   

  	
   

  
	
   

  	
  SW 132 ST. ROSE SENIOR BORROWER, LLC, a
  Delaware limited liability company

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  SW 131 St. Rose Mezzanine Borrower, LLC, a Delaware limited liability
  company, its sole member

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  SW 130 St. Rose Limited Partnership, a Delaware limited partnership,
  its sole member

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  SW 129 St. Rose Limited Partnership, a Delaware limited partnership,
  its general partner

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  SW 104 Development GP LLC, a Delaware limited liability company, its
  general partner

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  By: 

  	
  /s/ Timothy J. Hogan

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Name: 

  	
  Timothy J. Hogan

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Title:

  	
  Vice President

  



 


Acknowledgement and Consent


 

















 


	
   

  	
  MEZZANINE BORROWER:

  
	
   

  	
   

  
	
   

  	
  SW 131 ST. ROSE MEZZANINE BORROWER, LLC, a
  Delaware limited liability company, its sole member

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  SW 130 St. Rose Limited Partnership, a Delaware limited partnership,
  its sole member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  SW 129 St. Rose Limited Partnership, a Delaware limited partnership,
  its general partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  SW 104 Development GP LLC, a Delaware limited liability company, its
  general partner

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Timothy J. Hogan 

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Name:

  	
  Timothy J. Hogan 

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Title:

  	
  Vice President

  



 


Acknowledgement and Consent


 
















 


EXHIBIT A


 


PROPERTY DESCRIPTION


 


PARCEL I:


 


THE NORTH HALF (N 1⁄2) OF THE NORTHWEST QUARTER (NW 1⁄4) OF THE SOUTHWEST
QUARTER (SW 1⁄4) OF THE NORTHWEST QUARTER (NW 1⁄4) OF SECTION 35, TOWNSHIP 22
SOUTH, RANGE 61 EAST, M.D.B.&M., CLARK COUNTY, NEVADA.


 


PARCEL II:


 


THE SOUTH HALF (S 1⁄2) OF THE NORTHEAST QUARTER (NE 1⁄4) OF THE SOUTHWEST
QUARTER (SW 1⁄4) OF THE NORTHWEST QUARTER (NW 1⁄4) OF SECTION 35, TOWNSHIP 22
SOUTH, RANGE 61 EAST, M.D.B.&M.


 


EXCEPTING THEREFROM THAT PORTION LYING WITHIN ST. ROSE PARKWAY.


 


PARCEL III:


 


THAT PORTION OF THE NORTHWEST QUARTER (NW 1⁄4) OF SECTION 35,
TOWNSHIP 22 SOUTH, RANGE 61 EAST, M.D.M., CITY OF HENDERSON, CLARK COUNTY,
NEVADA, MORE PARTICULARLY DESCRIBED AS FOLLOWS:


 


THE SOUTH HALF (S 1⁄2) OF THE NORTHWEST QUARTER (NW 1⁄4) OF THE SOUTHWEST
QUARTER (SW 1⁄4) OF THE NORTHWEST QUARTER (NW 1⁄4) OF SAID SECTION 35.


 


TOGETHER WITH:


 


THOSE PORTIONS OF THE NORTH HALF (N 1⁄2) OF THE SOUTH HALF (S 1⁄2) OF THE
SOUTHWEST QUARTER (SW 1⁄4) OF THE NORTHWEST QUARTER (NW 1⁄4) OF SAID SECTION 35
LYING NORTHWESTERLY OF THE NORTHWESTERLY RIGHT-OF-WAY OF ST. ROSE PARKWAY.


 


PARCEL IV:


 


BEING A PORTION OF THE SOUTH HALF (S 1⁄2) OF THE SOUTHEAST QUARTER (SE 1⁄4)
OF THE NORTHWEST QUARTER (NW 1⁄4) OF THE NORTHWEST QUARTER (NW 1⁄4) OF SECTION 35,
TOWNSHIP 22 SOUTH, RANGE 61 EAST, M.D.B & M., CLARK COUNTY, NEVADA.


 


TOGETHER WITH THAT PORTION OF THE NORTH HALF (N 1⁄2) OF THE NORTHEAST
QUARTER (NE 1⁄4) OF THE SOUTHWEST QUARTER (SW 1⁄4) OF THE NORTHWEST QUARTER (NW 1⁄4),
ALSO TOGETHER WITH THAT PORTION OF THE NORTH HALF (N 1⁄2) OF THE NORTHWEST
QUARTER (NW 1⁄4) OF SAID SECTION 35, LYING NORTHWESTERLY OF ST. ROSE
PARKWAY, FURTHER DESCRIBED AS FOLLOWS:


 


A-1

















 


BEGINNING AT THE SOUTHEAST CORNER OF THE NORTHWEST QUARTER (NW 1⁄4) OF
THE NORTHWEST QUARTER (NW 1⁄4) OF SAID SECTION 35, SAID CORNER BEING MARKED
BY AN ALUMINUM CAP MARKED “PLS 5269, 1994, NW 1/16”;


 


THENCE SOUTH 41°41’09” EAST, 174.75 FEET TO THE NORTHWESTERLY LINE OF
ST. ROSE PARKWAY AS GRANTED IN BOOK 250 AS DOCUMENT NO. 202981, OFFICIAL
RECORDS OF CLARK COUNTY, NEVADA;


 


THENCE ALONG SAID NORTHWESTERLY LINE, SOUTH 46°18’51” WEST, 297.97 FEET
TO A POINT OF INTERSECTION OF SAID NORTHWESTERLY LINE WITH THE SOUTH LINE OF
THE NORTH HALF (N 1⁄2) OF THE NORTHEAST QUARTER (NE 1⁄4) OF THE SOUTHWEST QUARTER
(SW 1⁄4) OF THE NORTHWEST QUARTER (NW 1⁄4) OF SAID SECTION 35;


 


THENCE ALONG THE LINES OF SAID NORTH HALF (N 1⁄2) THE FOLLOWING THREE (3) COURSES:


 


1.                                       NORTH 89°22’43”
WEST, 553.55 FEET;


2.                                       NORTH 00°33’34”
WEST, 330.00 FEET;


3.                                       SOUTH 89°22’04”
EAST, 663.09 FEET TO THE POINT OF BEGINNING.


 


EXCEPTING THEREFROM:


 


A PORTION OF THE SOUTH HALF (S 1⁄2) OF THE SOUTHEAST QUARTER (SE 1⁄4) OF
THE NORTHWEST QUARTER (NW 1⁄4) OF THE NORTHWEST QUARTER (NW 1⁄4) OF SAID SECTION 35,
DESCRIBED AS FOLLOWS:


 


BEGINNING AT THE SOUTHWEST CORNER OF THE SOUTH HALF (S 1⁄2) OF THE
SOUTHEAST QUARTER (SE 1⁄4) OF THE NORTHWEST QUARTER (NW 1⁄4) OF THE NORTHWEST
QUARTER (NW 1⁄4) OF SAID SECTION 35; THENCE NORTH 00 33’55” WEST, 330.09
FEET TO THE NORTHWEST CORNER OF THE SOUTH HALF (S 1⁄2) OF THE SOUTHEAST QUARTER
(SE 1⁄4) OF THE NORTHWEST QUARTER (NW 1⁄4) OF THE NORTHWEST QUARTER (NW 1⁄4) OF SAID SECTION
35; THENCE SOUTH 89°21’56” EAST, 663.21 FEET TO THE NORTHEAST CORNER OF THE
SOUTH HALF (S 1⁄2) OF THE SOUTHEAST QUARTER (SE 1⁄4) OF THE NORTHWEST QUARTER (NW
1⁄4) OF THE NORTHWEST QUARTER (NW 1⁄4) OF SAID SECTION 35; THENCE SOUTH 00°32’39”
EAST, 330.06 FEET TO THE SOUTHEAST CORNER OF THE SOUTH HALF (S 1⁄2) OF THE
SOUTHEAST QUARTER (SE 1⁄4) OF THE NORTHWEST QUARTER (NW 1⁄4) OF THE NORTHWEST
QUARTER (NW 1⁄4) OF SAID SECTION 35; THENCE NORTH 41°41’09” WEST, 316.13
FEET; THENCE SOUTH 48°18’51” WEST, 153.68 FEET TO THE BEGINNING OF A 500 FOOT
RADIUS CURVE, CONCAVE NORTHWESTERLY; THENCE ALONG SAID CURVE TO THE RIGHT,
369.29 FEET THROUGH A CENTRAL ANGLE OF 42°19’05” TO THE POINT OF BEGINNING.


 


A-2

















 


EXHIBIT B


 


DESCRIPTION OF
MEZZANINE LOAN DOCUMENTS


 


1.                                       Senior
Mezzanine Loan Agreement and Junior Mezzanine Loan Agreement, each dated December 31,
2008 (the “Effective Date”), between
Subordinate Lender and Mezzanine Borrower, relating to the Mezzanine Loan.


 


2.                                       Senior
Mezzanine Promissory Note and Junior Mezzanine Promissory Note, each dated as
of the Effective Date in the aggregate principal amount of the Mezzanine Loan,
executed by Mezzanine Borrower payable to the order of Subordinate Lender.


 


3.                                       Senior
Mezzanine Deed of Trust, Assignment of Rents, Security Agreement, Fixture
Filing and Financing Statement and Junior Mezzanine Deed of Trust, Assignment
of Rents, Security Agreement, Fixture Filing and Financing Statement, each
dated as of the Effective Date and executed by Borrower in favor of the Trustee
named therein for the benefit of Subordinate Lender.


 


4.                                       Mezzanine
Guaranty, dated as of the Effective Date and executed by Guarantors in favor of
Subordinate Lender.


 


5.                                       Mezzanine
Environmental Indemnity Agreement, dated as of the Effective Date and executed
by Mezzanine Borrower in favor of Subordinate Lender.


 


B-1

















 


EXHIBIT C 


 


DESCRIPTION OF
SENIOR LOAN DOCUMENTS


 


Senior Construction Loan Documents.


 


1.                                       Construction
Loan Agreement dated as of the Effective Date between Administrative Agent,
Senior Construction Lenders and Borrower.


 


2.                                       One
or more Deed of Trust Notes issued by Borrower to and for the benefit of the
Senior Construction Lenders, in the aggregate principal amount of the Senior
Construction Loan.


 


3.                                       Deed
of Trust, Assignment of Rents and Leases, Security Agreement, Financing
Statement and Fixture Filing dated as of the Effective Date, executed by
Borrower in favor of the Trustee named therein to Administrative Agent, for the
benefit of Senior Construction Lenders.


 


4.                                       Limited
Recourse Guaranty Agreements, each dated as of the Effective Date, executed by
Guarantors to and for the benefit of Administrative Agent, on behalf of the
Senior Construction Lenders.


 


5.                                       Environmental
Indemnity Agreement dated as of the Effective Date, executed by Borrower and
Guarantor to and for the benefit of Administrative Agent, on behalf of the
Senior Construction Lenders.


 


6.                                       Notice
of Final Agreement dated as of the Effective Date, executed by Borrower and
Guarantors in favor of Administrative Agent, on behalf of the Senior
Construction Lenders.


 


7.                                       UCC-1
Financing Statements covering Borrower in favor of Administrative Agent, on
behalf of the Senior Construction Lenders.


 


8.                                       Any
Master Agreement now or hereafter executed by Borrower and Swap Bank and any
and all amendments thereto and Swap Transactions executed thereunder.


 


Senior Land Loan Documents.


 


1.                                       Term
Loan Agreement dated as of the Effective Date between Land Loan Lender and Land
Loan Borrower.


 


2.                                       Deed
of Trust Note issued by Land Loan Borrower to and for the benefit of Land Loan
Lender, in the aggregate principal amount of the Land Loan.


 


3.                                       Deed
of Trust, Assignment of Rents and Leases, Security Agreement, Financing
Statement and Fixture Filing dated as of the Effective Date, executed by
Borrower in favor of the Trustee named therein for the benefit of Land Loan
Lender.


 


C-1

















 


4.                                       Limited
Recourse Guaranty Agreements, each dated as of the Effective Date, executed by
Guarantors to and for the benefit of Land Loan Lender.


 


5.                                       Environmental
Indemnity Agreement dated as of the Effective Date, executed by Land Loan
Borrower and Guarantor to and for the benefit of Land Loan Lender.


 


6.                                       Notice
of Final Agreement dated as of the Effective Date, executed by Land Borrower
and Guarantors and Land Loan Lender.


 


7.                                       UCC-1
Financing Statements covering Land Loan Borrower in favor of Land Loan Lender.


 


C-2