**EXHIBIT 10.39****Execution Copy****LOAN AGREEMENT**     **THIS LOAN AGREEMENT**(this “Agreement”) is made as of this 31st day of January, 2006 by andbetween (i) **COMSTOCK CARTER LAKE, L.C.**, a Virginia limited liability company (“Borrower”) and (ii)**BANK OF AMERICA, N.A.**, a national banking association (the “Lender”).R E C I T A L S:     WHEREAS, Lender has agreed to make a loan to Borrower as more particularly described herein(the “Loan”) for the purpose of the acquisition of an apartment complex in Reston, Fairfax County,Virginia containing in the aggregate 259 units (each a “Unit” and collectively, the “Units”), morefully described in Exhibit “A” hereto.     WHEREAS, Lender acknowledges that Borrower intends to renovate and convert the Units intocondominiums (the “Renovation”) during the term of the Loan, such Renovation being subject to theprovisions of this Agreement;     WHEREAS, Comstock Homebuilding Companies, Inc. has executed and delivered to Lender a Guaranty(as defined herein); and     WHEREAS, Lender and Borrower have agreed to execute this Agreement for the purpose ofdescribing together with the other Loan Documents (as herein defined) some of the obligations ofBorrower and the Lender.W I T N E S S E T H:     For and in consideration of these presents, and in further consideration of the mutualcovenants and agreements herein set forth, and in consideration of the sum of Ten and no/100Dollars ($10.00) lawful money of the United States of America by each of the parties to the otherpaid, receipt of which is hereby acknowledged, the parties hereto, intending to be legally bound,do hereby covenant and agree as follows:**ARTICLEI — DEFINITIONS**     **1.1**Definitions. Borrower and the Lender agree that, unless the context otherwisespecifies or requires, the following terms shall have the meanings herein specified, suchdefinitions to be applicable equally to the singular and the plural forms of such terms and to allgenders:
-1-

 
**Execution Copy**          (a)**Appraised Value**— The then current market value determined pursuant to the most recentappraisal for the Property. All such appraisals shall be ordered by the Lender, prepared atBorrower’s expense by a certified appraiser acceptable to the Lender and otherwise satisfactory tothe Lender in all respects. The Lender may order, if required by the Lender’s internal policies,reappraisals of the Property, at the Lender’s sole discretion and at Borrower’s expense.          (b)**Borrower**— The entity hereinabove designated as such.          (c)**Contract**— A fully executed contract of sale for a Unit that: (i) has been accepted byBorrower and meets the Lender’s criteria for acceptable contracts; (ii) is not subject tocancellation without forfeiture of all deposits thereunder (except for cause in accordance withapplicable law and in the event the purchaser fails to obtain the necessary mortgage loan); (iii)contains no contingencies (including, without limitation, the sale of the purchaser’s home) exceptordinary financing contingencies; (iv) is accompanied by a cash deposit or deposits in form,content and amount acceptable to the Lender; and (v) that either (A) provides for a cash sale(i.e., a sale not contingent upon financing) by a purchaser whose creditworthiness is satisfactoryto the Lender in all respects, or (B) is accompanied by a pre-qualification letter from a permanentmortgage lender in form, amount and content satisfactory to the Lender in all respects. In lieu ofcopies of Contracts, the Borrower may elect to submit a “Unit Contract Summary Report” in formattached hereto as Exhibit “B”. At Lender’s option, no more than twice monthly Lendershall verify the accuracy of the information on each Unit Contract Summary Report through a reviewof Borrower’s files. Notwithstanding the foregoing, the Lender shall retain the right to requestcopies of Contracts at any time during the term of the Loan. At the time any Unit Contract SummaryReport is submitted to the Lender for its approval, Borrower shall specifically identify to theLender each Contract wherein the purchaser is affiliated with or related to Borrower, Guarantor(hereinafter defined) or any of their respective employees, shareholders, partners, members orother principals, as applicable “Related Party Contracts”). The number of Related Party Contractsshall not exceed ten percent (10%) of the total Units without Lender’s prior consent.          (d)**Deed of Trust**— Collectively, that certain Credit Line Deed of Trust and SecurityAgreement of even date herewith, executed and delivered by Borrower to secure the Loan, as any ofthe same may from time to time be amended, modified, supplemented or spread.          (e)**Default**— Any of the happenings, events, circumstances or occurrences designated as suchin this Agreement.          (f)**Environmental Regulations**— “Environmental Regulations” as defined in the Deed of Trust.          (g)**Guarantor**— Comstock Homebuilding Companies, Inc. and any other party that executes anddelivers a Guaranty, and its or their respective successors, personal representatives and permittedassigns. 
-2-

 
**Execution Copy**          (h)**Guaranty**— That certain (i) Guaranty Agreement of even date herewith executed anddelivered by Guarantor to secure the Loan and all other indebtedness under the Loan Documents(hereinafter defined), and (ii) any and all other guaranty agreements executed for the benefit ofthe Lender to secure the Loan, as any of the same may from time to time be amended, modified,replaced or supplemented.          (i)**Hazardous Materials**— “Hazardous Materials” as defined in the Deed of Trust.          (j)**Improvements**— Any and all buildings, structures, improvements, alterations orappurtenances already existing or at any time hereafter constructed or placed upon the Land, andany replacements thereof, additions thereto and substitutions therefor, including withoutlimitation, all equipment, apparatus, machinery and fixtures of any kind or character forming apart thereof.          (k)**Indebtedness**— All amounts due or to become due to the Lender pursuant to or on account ofthe Note (hereinafter defined), this Agreement and each of the other Loan Documents, including,without limitation, all principal (whether advanced prior to, upon execution of, or after the dateof this Agreement), interest, late charges, loan fees, extension fees, prepayment fees, amountsdrawn under any letters of credit, any letter of credit fees and all other payments required to bemade by the Borrower pursuant to or on account of the Note, this Agreement and any of the otherLoan Documents, and including any and all amounts advanced by the Lender for the account of theBorrower pursuant to the provisions of this Agreement and any of the other Loan Documents, whetheror not such amounts are advanced from the proceeds of the Loan.          (l)**Jurisdiction of Choice**— The Commonwealth of Virginia, the jurisdiction under whose lawsthis Agreement shall be governed, unless otherwise provided herein.          (m)**Land**— Any or all of the real property now owned or hereafter acquired by the Borrowerwith Loan proceeds and more particularly described in the Deed of Trust.          (n)**Lender**— The party hereinabove designated as such, its successors and assigns.          (o)**Loan**— That certain acquisition loan in the amount of $26,000,000.00, made pursuant tothis Agreement, to finance the acquisition of certain property, as evidenced by the Note andsecured by the Deed of Trust and the other Loan Documents.          (p) **Loan Document**s — This Agreement, the Note, the Deed of Trust, any Guaranty and any otherinstrument or documents executed in connection with the Loan, as any of the same may from time totime be amended, modified or supplemented.          (q)**Maturity Date**— July 31, 2006.
-3-

 
**Execution Copy**          (r)**Note**— That certain Deed of Trust Note of even date herewith in the original principalamount of $26,000,000.00, or so much thereof as shall be advanced, made by the Borrower, payable tothe order of the Lender, as the same may from time to time be amended, modified, replaced orsupplemented.          (s)**Obligations**— Any and all of the covenants, warranties, representations, agreements,promises and other obligations (other than the Indebtedness) made or owing by the Borrower, theGuarantor or others to the Lender pursuant to or as otherwise set forth in the Loan Documents.          (t)**Progress Inspector**— Such person or firm as the Lender may from time to time appoint ordesignate to inspect the progress of the Renovation and conformity of construction with applicablelaws, and for such other purposes as may from time to time seem appropriate to the Lender or as maybe required by the terms of this Agreement          (u)**Project**— Carter Lake Project (hereinafter defined).          (v)**Property**— The property described as such in the Deed of Trust, including, but not limitedto, the Land and the Improvements.          (w)**Title Company**— Any title company approved by the Lender that provides mortgagee titleinsurance covering the lien of the Deed of Trust in favor of the Lender thereon.          (x)**Carter Lake Project**— acquisition of an apartment complex in Reston, Fairfax County,Virginia containing 259 apartment Units to be converted into 258 condominium Units.**ARTICLEII — CONDITIONS PRECEDENT TO CLOSING**     In addition to any other conditions stated in this Agreement, the following conditions must besatisfied prior to Lender having any obligation to advance funds hereunder:     **2.1**Loan Documents. Receipt by Lender of appropriately completed and duly executedoriginals of this Agreement and the other Loan Documents. In addition, Borrower shall provide awritten opinion of counsel to the Borrower and the Guarantor as to the authorityof the Borrower and the Guarantor to execute and deliver the Loan Documents, as to theenforceability and validity of the Loan Documents, and as to such other matters as the Lender mayreasonably require.     **2.2**. Organizational Documents. Borrower shall supply, with respect to the Borrowerand Guarantor: (i) a currently certified copy of the Articles of Organization or Certificate ofIncorporation and all amendments thereto, as applicable; (ii) evidence satisfactory to Lender andits counsel that Borrower and Guarantor in good standing in the jurisdiction where
-4-

 
**Execution Copy**organized andqualified to do business in every jurisdiction in which the nature of their businesses or theirproperties makes such qualification necessary; (iii) resolutions of the Borrower and Guarantorauthorizing the due execution and delivery of the Loan Documents to which it is a party, to theextent necessary; and (iv) certified true copies of the Operating Agreement or By-laws and allamendments thereto, as applicable.None of the documents pursuant to which the Borrower or Guarantor is organized shall be amended ormodified in any respect without the prior written consent of the Lender, which may be given orwithheld in the reasonable discretion of the Lender.     **2.3**Insurance. Borrower shall provide Lender with a complete and fully paid up policyor policies of casualty and fire insurance with standard extended coverage in an amount not lessthan the replacement cost of the improvements and personalty located on the Property; $2,000,000.00covering all claims for bodily injury or death and property damage arising out of a singleoccurrence and $2,000,000.00 for the aggregate of all occurrences during any given annual policyperiod, plus $5,000,000.00 of “umbrella” coverage; builder’s risk insurance with on a completedvalue, nonreporting form with permission to complete and occupy; malicious mischief insurance;business interruption insurance and insurance against such other hazards as Lender may require, inamounts, with insurers and under forms of policies containing such provisions and endorsements asLender may require. All policies of insurance (except employee benefit and public liabilityinsurance which shall name Lender as an additional insured) shall contain a lender’s loss payableclause and standard mortgagee clause for the benefit of Lender, and shall provide, in part, that:(a) in the event of a loss, all insurance proceeds shall be paid to Lender and Lender shall beauthorized and empowered by Borrower to settle, adjust or compromise any claims for loss, damage ordestruction under such policies of insurance; (b) any loss covered by such insurance shall bepayable by the insurer in accordance with the terms of such policy notwithstanding any act ornegligence of Borrower, its agents or employees, the named insured or any owner, tenant or occupantof the Property which might otherwise result in forfeiture of said insurance; (c) the insurerwaives all rights of setoff, counterclaim or deduction against Borrower; and (d) should title toand beneficial ownership of the Property become vested in Lender, the insurance provided by suchpolicies shall continue for the term thereof for the benefit of Lender. All required insuranceshall provide that (i) the insurance afforded all parties named as insureds shall be primaryinsurance and shall not participate with, nor be in excess over, any other valid and collectibleinsurance available to Lender, (ii) any other insurance obtained by any named insured shall not becalled upon to contribute until the limits of the policies required hereunder areexhausted, and (iii) the insurance required hereunder cannot be canceled or materially amendedor altered without at least thirty (30) days prior written notification to Lender. All insurancerequired hereunder shall be issued by companies and in an amounts in each company approved inadvance by Lender, in its sole discretion, and such insurance shall be in the form and on terms(including but not limited to deductibles, self-insured retentions or similar provisions) approvedin advance by Lender, in its sole discretion.     Borrower shall deliver all such policies (or certified copies thereof) to Lender, togetherwith a one-year’s paid receipt for each such policy. In addition, Lender shall be furnished with
-5-

 
**Execution Copy**satisfactory evidence indicating whether the Property is located within an area that has beenidentified as a “special flood hazard area” as that term is used in the Flood Disaster ProtectionAct of 1973. If any insurable improvements on the Property are located in any area so designated,a flood insurance policy satisfactory to Lender shall be deposited with Lender prior to the closingon the Loan and shall be maintained in full force until the Loan is repaid in full.     **2.4**Financing Statement. The financing statement necessary to perfect Lender’ssecurity interest in the personal property subject to the Deed of Trust shall be duly filed in allappropriate offices and jurisdictions, all other financing statements covering any of such personalproperty shall be terminated, and filing and recording receipts evidencing such filings andterminations shall be delivered to Lender, all in form and substance satisfactory to Lender.     **2.5**Real Estate Documents. Lender shall have received and approved, in its solediscretion, the following:          (a) Appraisal. An appraisal of the Property, prepared by an appraiser acceptable toLender, in form and content acceptable to Lender, conforming to all regulatory and internalappraisal guidelines applicable to or established by Lender, in its sole, absolute, nonreviewablediscretion, reflecting an as-finished discounted value for the Property satisfactory to Lender inits sole, absolute nonreviewable discretion. Lender acknowledges that the appraisal received by itis acceptable.          (b) Title Insurance. An irrevocable commitment to issue a full-coverage mortgageetitle insurance policy (the “Title Policy”) on the ALTA 1992 form insuring the first lien of theDeed of Trust to Lender in a form and issued by a title insurance company or companies acceptableto Lender, said policy (i) containing only those exceptions to title as shall be reasonablyapproved by Lender and Lender’s counsel, and (ii) showing the lien of the Deed of Trust securingthe Loan to be a first lien of record, on the fee simple estate of Borrower in the Property,together with true and complete copies of all documents or instruments identified therein asexceptions to title. The title policy shall be delivered to Lender promptly after recordation ofthe Deed of Trust. Lender shall have the right to designate such co-insurers or re-insurers as itdeems advisable in its sole discretion. Such policy or policies shall be endorsable or assignableto Lender’s successors and assigns, upon request, without cost to Lender. Such policy or policiesshall contain affirmative insurance against filed and unfiledmechanic’s liens in form acceptable to Lender. Lender shall receive satisfactory evidence thatthere is no pending litigation with respect to the Property.          (c) Survey. A current survey (or other documentation acceptable to Lender) and legaldescription of the Property satisfactory to Lender from a registered land surveyor of theCommonwealth of Virginia, which survey shall show all easements, rights of way and other matters ofrecord, shall locate all proposed improvements on the Land and shall generally show a state offacts acceptable to Lender and contain a surveyor’s certificate satisfactory to the Lender.
-6-

 
**Execution Copy**          (d) Environmental Audit. An environmental audit of the Property prepared by anenvironmental consulting firm acceptable to Lender, in its sole discretion, confirming that theProperty is in compliance with all applicable environmental laws.          (e) Evidence of Zoning Compliance. Such written evidence as the Lender may requireto the effect that the Property has been zoned for purposes consistent with the uses contemplatedbeyond any possibility of appeal and to the effect, further, that there are no pending proceedings,either administrative, legislative or judicial which would in any manner adversely affect thestatus of the zoning with respect to such property or any part thereof.          (g) Public Utilities. Evidence to the effect that sanitary sewer, water, electric,gas, telephone and other public utilities are available and adequate to serve the Property.          (h) Sale Agreement. A copy of the purchase contract for the Property, satisfactory tothe Lender and Lender’s counsel in form and substance.          (i) No Default. No event shall have occurred and be continuing that constitutes aDefault (as defined below).          (j) Representations. All representations and warranties contained in this Agreementshall be true and correct in every material respect as of the date of the first disbursement underthis Agreement and on the date of any future disbursements hereunder.          (k) Satisfactory Documents. All documents delivered pursuant to this Agreement mustbe in form and substance reasonably satisfactory to Lender and its counsel, and all legal mattersincident to this Agreement must be reasonably satisfactory to Lender’s counsel.     **2.6**Equity Requirement. At or prior to Closing, Borrower shall provide Lenderevidence that Borrower has contributed a minimum of $10,250,000.00 toward the purchase price ofthe Property and the related closing costs (“Equity Contribution”).     **2.7**Loan Fee. Upon the closing of the Loan, the Borrower shall pay Lender anon-refundable loan fee in the amount of Sixty-Five Thousand and 00/100 Dollars ($65,000.00).**ARTICLE III –CONDITIONS PRECEDENT FOR COMMENCEMENT OF RENOVATION**     **3.1**In addition to any other conditions stated in this Agreement, the following conditionsmust be satisfied prior to commencement of the Renovation. Borrower shall obtain and submit toLender, the following, as they pertain to the Renovation:          (a) Permits. Copies of any and all building and similar permits required inconnection with the Renovation, together with such evidence as the Lender may require to the effectthat all fees for such permits have been paid. Satisfactory evidence shall be submitted to Lenderof the receipt of all governmental approvals necessary for the Renovation and
-7-

 
**Execution Copy**condominiumconversion of the Units have been obtained. Lender shall also receive satisfactory evidence thatall applicable safety, ecological and environmental laws and any other codes or regulationsaffecting the Renovation and/or proposed use of the Property have been complied with.          (b) General Contractor. The Borrower shall disclose to Lender the name of thegeneral contractor, who must maintain workers’ compensation and disability insurance in amountsrequired by law, and employer’s liability insurance (the “General Contractor”) and submit to Lenderthe executed contract for the Renovation.          (c) List of Subcontractors and Materialmen. If required by Lender, a list of thenames of all subcontractors and materialmen intended by the Borrower to perform work or supplymaterials in connection with the Renovation, and conformed copies of executed contracts for suchwork and materials.          (d) Builder’s Risk Insurance. Evidence that the insurance policy referred to inparagraph 2.3 hereof contains builder’s risk coverage on a completed value, non-reporting form withpermission to complete and occupy.          (e) Budget. Borrower shall submit to Lender a budget forthe Renovation.          (f) Plans and Specifications. Borrower shall submit to Lender the plans andspecifications for the Renovation, as certified by an architect.**ARTICLE IV – REQUIREMENTS FOR THE RENOVATION**     **4.1**The Renovation shall be performed by the Borrower in strict accordance with all applicable(whether present or future) laws, ordinances, rules, regulations, requirements and order of anygovernmental or regulatory authority having or claiming jurisdiction. The Renovation shall becompleted in a manner so as not to encroach upon any easement or right-of-way, or upon the land ofothers. The Renovation shall be wholly within all applicable buildingrestriction lines and set-backs or variances made therefor, however established, and shall bein strict accordance with all applicable use or other restrictions and the provisions of any priordeclarations, covenants and zoning ordinances and regulations.     **4.2**Borrower shall submit to Lender or the Progress Inspector, at Lender’s discretion, suchinformation as may be reasonably requested by Lender or the Progress Inspector to verify theRenovation costs which are to be incurred in connection with the Renovation. On-site inspection byan authorized officer of the Lender and the Progress Inspector shall be permitted at all timesduring the term of the Loan.     **4.3**Borrower shall permit the Lender and its duly authorized representatives (including,without limitation, the Progress Inspector) to enter upon the Property at all reasonable times andin a reasonable manner to inspect the Improvements and any and all materials and to examine alldetailed plans and shop drawings and similar materials relating to
-8-

 
**Execution Copy**the Renovation. Borrower willat all times cooperate and request its subcontractors and materialmen to cooperate with the Lenderand its duly authorized representatives (including, without limitation, the Progress Inspector) inconnection with or in aid of the performance of the Lender’s functions under this Loan Agreement.Borrower shall pay all inspection fees incurred by the Lender in connection with the Loan; however,so long as no Default exists, inspections shall be limited to two site inspection visits per monthto be performed by the Progress Inspector at Borrower’s sole cost and expense.     **4.4**Borrower will furnish to the Lender, promptly on demand, a computer generated report ofjob costs and accounts payable for the Renovation.     **4.5**Borrower will pay when due all bills for materials supplied and for services or laborperformed in connection with the Renovation.     **4.6**Borrower will promptly correct or cause the correction of any structural defects in theImprovements and any substantial departures or deviations from the plans and specifications for theRenovation.     **4.7**Lender may also require an endorsement to the title insurance policy theretoforedelivered, indicating that there has been no change in the status of title and no title exceptionsnot theretofore approved by the Lender.     **4.8**Lender may require the Borrower to obtain from the General Contractor, acknowledgments ofpayment and releases of liens and rights to claim liens, if applicable. All such acknowledgmentsand releases shall be in the form and substance satisfactory to the Lender.     **4.9**Lender may require (i) evidence satisfactory to it that all work requiring inspection bygovernmental or regulatory authorities having or claiming jurisdiction has been duly inspected andapproved by such authorities and by any rating or inspection organization,bureau, association, or office having or claiming jurisdiction; and (ii) evidence satisfactoryto it that requisite certificates of occupancy for permanent occupancy have been validly issued andthat the Renovation has occurred free and clear of all mechanics’ or materialmens’ liens and anybills or claims for labor, materials and services in connection with the Renovation. All fees andcosts of the Progress Inspector incurred by the Lender shall be paid by the Borrower at its soleexpense.
-9-

 
**Execution Copy****ARTICLE V — REPRESENTATIONS AND WARRANTIES**     Borrower hereby represents and warrants to the Lender, as of the date hereof and at all timeshereafter, that:     **5.1**Organization, Power, Etc. (a) Borrower is a duly organized, validly existinglimited liability company, in good standing under the laws of the jurisdiction of its organization;(b) Guarantor is a duly organized, validly existing corporation under the laws of the jurisdictionof its organization (c) each of the Borrower and Guarantor has the power and authority to own itsproperties and to carry on its business as now being conducted; (c) each of the Borrower andGuarantor is duly qualified to do business in the jurisdiction where the Property is located and inevery jurisdiction in which the nature of its business or its properties makes such qualificationnecessary; (d) each of the Borrower and Guarantor is in compliance with all laws, regulations,ordinances and orders of public authorities applicable to it; and (e) each of the Borrower andGuarantor has the full power, authority and legal right to execute, deliver and perform thecovenants and obligations set forth in this Agreement and the other Loan Documents and to carry outthe terms hereof and thereof.     **5.2**Validity of Loan Documents. The execution, delivery and performance by Borrowerof the Note, and the other Loan Documents: (a) are within the legal powers of Borrower; (b) havebeen duly authorized by all requisite partnership and/or membership action, as applicable; (c) havereceived all necessary governmental approvals; (d) will not violate any provision of law, any orderof any court or other agency of government or any articles of organization, membership and/oroperating agreement, partnership agreement, indenture, agreement or other instrument to whichBorrower is a party or by which it or any of its property is bound, or be in conflict with, resultin a breach of or constitute (with due notice or lapse of time or both) a default under any suchindenture, agreement or other instrument, or result in the creation or imposition of any lien,charge or encumbrance of any nature whatsoever upon any of its property or assets, except ascontemplated by the provisions of the Loan Documents; and (e) when executed and delivered byBorrower, will constitute the legal, valid and binding obligations of the Borrower and otherobligors named therein, if any, in accordance with their respective terms.     **5.3**Financial Statements. All financial statements delivered to the Lender are trueand correct in all respects, have been prepared in accordance with generally accepted accountingpractices consistently applied (other than with respect to individual Guarantors), and fairlypresent the financial condition of the Borrower and other parties named therein as of the datesthereof. No material adverse change has occurred in the financial condition reflected thereinsince the dates thereof and no material additional liabilities have been incurred since the mostrecent date thereof other than the borrowing contemplated in the Commitment and this Agreement.     **5.4**Other Information. All other information, reports, papers and data given to theLender with respect to Borrower or others obligated under theterms of the Loan Documents
-10-

 
**Execution Copy**and the Property are accurate and correct in all material respects andcomplete insofar as completeness may be necessary to give the Lender a true and accurate knowledgeof the subject matter.     **5.5**Utilities and Access. All utility services and access necessary for the continuedoperation of the Property are available, including, without limitation, roads, telephone service,water supply, storm and sanitary sewer facilities, and natural gas or electric facilities.     **5.6**Defaults. There is no Default on the part of the Borrower under the Note or anyof the other Loan Documents and no event has occurred that may give rise to a Default.     **5.7**Use of Proceeds. The proceeds of the Loan shall be used solely for theacquisition of the Property. None of the proceeds of the Loan shall be applied toward the costs ofthe Renovation.**ARTICLE VI — AFFIRMATIVE COVENANTS**     Until the Indebtedness has been paid in full and the Loan has been terminated, Borrower herebyaffirmatively covenants and agrees as follows:     **6.1**Financial Statements . Borrower shall provide the following with respect to theGuarantor:          (a) as soon as available, but in no event later than ninety (90) days after the close of itsfiscal year (but in no event earlier than the date such financial statements must be submitted togovernmental authorities), financial statements (all of which financial statements may include, asrequested by the Lender, a balance sheet, income statement, sources and uses of funds for suchfiscal and/or calendar year, projected sources and uses of funds for the coming year, detailedlisting and description of all contingent liabilities, tax returns, written verification ofliquidity and such other supporting schedules and documentation which the Lender may request). Allsuch financial statements shall be audited by a certified public accountant acceptable to theLender in all respects; and          (b) if requested by the Lender, within forty-five (45) days after the close of its quarterlybusiness period (but in no event earlier than the date such financial statements must be submittedto governmental authorities), the financial statements to be filed with applicable governmentalauthorities.     **6.2**Approval and Permits. No work associated with the Renovation shall be commencedby Borrower unless and until all necessary approvals by all governmental authorities having orclaiming jurisdiction and by the beneficiary of any applicable restrictive covenant have beenobtained, and unless and until all required building and other permits have been validly issued andall required fees and bonds have been paid or posted, as the circumstances may require.
-11-

 
**Execution Copy**     **6.3**Free and Clear of Liens. Except as may be otherwise specifically permitted underthe Loan Documents, Borrower shall not make any contract or arrangement of any kind which wouldgive rise to a lien on any portion of the Property. The Renovation shall be completed by Borrowerfree and clear of all mechanics’ and materialmen’s liens.     **6.4**Insurance. Borrower will comply with all insurance requirements set forth in theDeed of Trust.     **6.5**Hazardous Materials. Borrower will comply with the provisions of the Deed ofTrust regarding Hazardous Materials and all applicable Environmental Regulations.     **6.6**Compliance with Laws. Borrower, at its own cost and expense, will promptly, fullyand faithfully comply with, conform to and obey all present and future applicable federal, stateand local statutes, laws, ordinances, rules, regulations, requirements, determinations, judgments,decrees and orders of any governmental authority, governmental agency (including, withoutlimitation, any Board of Fire Underwriters) or court having or claiming jurisdiction over theBorrower or the Property or any part thereof.     **6.7**Equity Contribution. At or prior to closing, Borrower shall make the EquityContribution.     **6.8**Condominium Conversion. The Borrower shall take all steps necessary to validlyand legally convert the Property into a condominium regime with approximately 258 residentialUnits. The condominium documents, including without limitation, the condominium declaration andby-laws, shall be acceptable to the Lender in its discretion. From time to time, upon the Lender’srequest, the Borrower shall provide Lender with evidence that Borrower has complied with anyapplicable requirements of the condominium documents and any applicable laws. Borrower shall,within 150 days of the closing of the Loan, provide Lender with all condominium documents,including without limitation, the public offering statement.     **6.9**Condominium Sales. Borrower will provide Lender with copies of any and allContracts within two (2) business days of execution.**ARTICLE VII — NEGATIVE COVENANTS**     Until the Indebtedness has been paid in full and the Loan has been terminated, Borrower herebycovenants and agrees as follows:     **7.1**Restrictions on Subordinate Financing. Throughout the term of the Loan, Borrowershall not place any subordinate financing on the Property.
-12-

 
**Execution Copy**     **7.2**Changes to Plans and Specifications. Without the prior written consent of theLender, Borrower will not permit any substantial changes in the plans and specifications for theRenovation.     **7.3**Prohibition on Transfer of Assets. Without the prior written consent of theLender, Borrower will not transfer any of its assets, except for transfers in the ordinary courseof business and transfers for which Borrower receives consideration substantially equivalent to thefair market value of the transferred asset.     **7.4**Assignments. Without the prior written consent of Lender, Borrower will nottransfer, assign, pledge or hypothecate any of its rights to advances, or any of its rights orobligations under this Agreement. Any assignment made or attempted by Borrower without the priorwritten consent of the Lender shall be void. No consent by the Lender to an assignment by Borrowershall either (a) release Borrower as the party primarily obligated and liable under the terms ofthis Agreement unless Borrower shall be released specifically by the Lender in writing, or (b) bedeemed to be a waiver of the requirement of prior written consent by the Lender with respect toeach and every further assignment.     **7.5**Amendments to Purchase Agreement or Holdback Escrow Agreement. Without the priorconsent of Lender, Borrower will not amend, restate, or otherwise modify the Purchase Agreement (asdefined in the Deed of Trust) or that certain Holdback Escrow Agreement by and between ERCarter,L.L.C. and Borrower dated Janauary 31, 2006.**ARTICLE VIII — DEFAULT**     Each of the following events shall constitute a “Default” under this Agreement and each of theother Loan Documents:     **8.1**Payment of Indebtedness. Any failure by the Borrower to pay when due any and allamounts payable by the Borrower under the terms of the Note or any of the other Loan Documents,which failure to pay remains uncured for a period of five (5) calendar days after the date suchpayment is due (or five (5) calendar days after notice from Lender in the case of amounts due thatare not regular monthly payments), including, without limitation, any principal payment, interestpayment, letter of credit reimbursement, loan fee, extension fee, letter of credit fee or latecharge, and including any advances made by the Lender from the proceeds of the Loan or otherwiseand interest thereon at the applicable rate set forth in the Loan Documents.     **8.2**Performance of Obligations. Any default by the Borrower or Guarantor in the dueobservance or performance of any of the Obligations and such default, if other than in payment ofthe Indebtedness, shall remain uncured thirty (30) days after the receipt by
-13-

 
**Execution Copy**Borrower of writtennotice from Lender identifying such default. If Borrower receives such notice, Borrower shalldiligently pursue a cure of such default.     **8.3**Other Defaults. The occurrence of any Default under the Deed of Trust or the Noteor any of the other Loan Documents.     **8.4**Representations and Warranties. Any determination by the Lender that anyrepresentation or warranty contained in any of the Loan Documents or in any certificate, opinion,financial information or any other form delivered to the Lender in connection with the Loan, isincorrect or misleading in any material respect at any time.     **8.5**Mechanic’s Lien. The establishment of any mechanics’ or materialmen’s lienagainst any portion of the Property, unless the same is insured over by the Title Company,satisfied, or bonded off to the satisfaction of the Lender within thirty (30) days.     **8.6**Adverse Action or Insolvency. (a) the entry of a final judgment for the paymentof money in excess of $50,000.00 against the Borrower or the Guarantor that is not discharged orbonded within thirty (30) days after the date of entry, (b) the institution of any proceeding by oragainst the Borrower or the Guarantor in bankruptcy, or for a reorganization or an arrangement withcreditors under any insolvency or debtor relief law which is not dismissed or stayed within thirty(30) days of the date of filing, (c) the appointment of any receiver, liquidator, assignee,custodian or similar official for the Borrower or the Guarantor or any portion of the Property, or(d) the issuance of any writ or order of attachment, levy or garnishment against the Borrower orthe Guarantor which is not discharged to the Lender’s satisfaction within thirty (30) days afterthe date of such issuance.     **8.7**Financial Condition. Any reasonable determination by the Lender that a materialadverse change has occurred in the financial condition of the Borrower or Guarantor, includingwithout limitation, the failure of Guarantor to meet the financial covenants of set forth inSection 4 of the Guaranty.     **8.8**Hazardous Materials. Violations of any applicable Environmental Regulations orrequirements of the Deed of Trust pertaining to Hazardous Materials.     **8.9**Death and Dissolution. The death, legal incompetence, dissolution, liquidation ortermination of Borrower or Guarantor, or of any general partner of Borrower or Guarantor, subjectto the provisions of the Guaranty.     **8.10**Cross Defaults. The occurrence of any Default or Event of Default under anyother loan or credit facility from Lender to (or guaranteed by) Borrower or Guarantor.**ARTICLE IX — DEFAULT — REMEDIES**
-14-

 
**Execution Copy**     **9.1**Remedies on Default. Upon the happening of any Default, the Lender shall not beobligated to advance any additional Loan proceeds, and, in addition to any other rights or remediesavailable to it under this Section, the Deed of Trust and other Loan Documents, the Lender mayenter into possession of the Property or any portion thereof.          All sums expended by the Lender for such purposes shall be deemed to have been paid to theBorrower or for its benefit and shall constitute part of the Indebtedness secured by the Deed ofTrust. Borrower hereby constitutes and appoints the Lender as its true and lawfulattorney-in-fact with full power of substitution to execute, acknowledge and deliver suchdocuments, instruments and certificates, and to take such other actions, in the name and on behalfof Borrower and at the sole cost and expense of Borrower, as the Lender, in its sole discretion,deems necessary, desirable or appropriate to effectuate the provisions of this section.     It is understood and agreed that this power of attorney shall be deemed to be a power coupledwith an interest which cannot be revoked.     The Lender shall also have the right, upon the happening of any Default, to do any one or moreof the following, at its election, but without any obligation to do so:          (a) to declare the Indebtedness immediately due and payable;          (b) to terminate the Loan;          (c) to decline to make any further Loan advances and/or readvances;          (d) to reduce any claim to judgment;          (e) to exercise any and all rights and remedies afforded by this Agreement and the other LoanDocuments, as well as any and all legal or equitable rights and remedies afforded under any statuteor otherwise; and          (f) to set off and apply against the Indebtedness any and all deposits, funds or assets at anytime held, and any and all indebtedness at any time owed, by the Lender to or for the credit oraccount of Borrower.     **9.2**No Conditions Precedent to Exercise of Remedies. Neither Borrower nor Guarantorshall be relieved of any obligation by reason of the failure of the Lender to comply with anyrequest of Borrower or of any other person to take action to foreclose on the Deed of Trust orotherwise to enforce any provisions of the Note or the other Loan Documents, or by reason of therelease, regardless of consideration, of all or any part of the Property, or by reason of anyagreement of stipulation between any subsequent owner of any portion of the Property and the Lenderextending the time of payment or modifying the terms of the Note or the other Loan Documentswithout first having obtained the consent of Borrower or Guarantor; and in the latter event,Borrower and Guarantor shall continue to be liable to make payments
-15-

 
**Execution Copy**according to the terms of anysuch extension or modification agreement, unless expressly released and discharged in writing bythe Lender.     **9.3**Remedies Cumulative and Concurrent. No remedy herein conferred upon or reservedto the Lender is intended to be exclusive of any other remedies provided for in the Note or in theother Loan Documents, and each and every such remedy shall be cumulative, and shall be in additionto every other remedy given hereunder, or under the Note, the Deed of Trust or the other LoanDocuments, or now or hereafter existing at law or in equity or by statute. Every right, power andremedy given by the Note and the Loan Documents to the Lender shall be concurrent and may bepursued separately, successively or together against the Borrower, Guarantor, or the Property orany part thereof, or any one or more of them; and every right, power and remedy given by the Noteor the other Loan Documents may be exercised from time to time as often as may be deemed expedientby the Lender.     **9.4**Strict Performance. No delay or omission of the Lender in exercising any right,power or remedy accruing upon the happening of a Default shall impair any such right, power orremedy or shall be construed to be a waiver of any such Default or any acquiescence therein. Nodelay or omission on the part of the Lender in exercising any option for acceleration of thematurity of the Indebtedness, or for foreclosure under the Deed of Trust following any Default asaforesaid, or any other option granted to the Lender hereunder in any one or more instances, or theacceptance by the Lender of any partial payment on account of the Indebtedness, shall constitute awaiver of any such Default and each such option shall remain continuously in full force and effect.     **9.5**Dispute Resolution.     (a) Arbitration. Except to the extent expressly provided below, any Dispute shall, upon therequest of either party, be determined by binding arbitration in accordance with the FederalArbitration Act, Title 9, United States Code (or if not applicable, the applicable state law), thethen-current rules for arbitration of financial services disputes of the American ArbitrationAssociation, or any successor thereof (“AAA”) and the “Special Rules” set forth below. “Dispute”means any controversy, claim or dispute between or among the parties to this Note, Agreement, orGuaranty, as applicable, including any controversy, claim or dispute arising out of or relating to(a) this Agreement, (b) any other Loan Documents, (c) any related agreements or instruments, or (d)the transaction contemplated herein or therein (including any claim based on or arising from analleged personal injury or business tort). In the event of any inconsistency, the Special Rulesshall control. The filing of a court action is not intended to constitute a waiver of the right ofBorrower or Lender, including the suing party, thereafter to require submittal of the Dispute toarbitration. Any party to this Agreement may bring an action, including a summary or expeditedproceeding, to compel arbitration of any Dispute in any court having jurisdiction over such action.For the purposes of this Dispute Resolution Section only, the terms “party” and “parties” shallinclude any parent corporation, subsidiary oraffiliate of Lender involved in the servicing, management or administration of any obligationdescribed in or evidenced by this Agreement, together with the officers, employees, successors andassigns of each of the foregoing.
-16-

 
**Execution Copy**     (b) Special Rules.     (i) The arbitration shall be conducted in any U.S. state where real or tangiblepersonal property collateral is located, or if there is no such collateral, in the City andCounty where Lender is located pursuant to its address for notice purposes in thisAgreement.     (ii) The arbitration shall be administered by AAA, who will appoint an arbitrator. IfAAA is unwilling or unable to administer or legally precluded from administering thearbitration, or if AAA is unwilling or unable to enforce or legally precluded from enforcingany and all provisions of this Dispute Resolution Section, the any party to this Agreement,may substitute another arbitration organization that has similar procedures to AAA and thatwill observe and enforce any and all provisions of this Dispute Resolution Section. AllDisputes shall be determined by one arbitrator; however, if the amount in controversy in aDispute exceeds Five Million Dollars ($5,000,000), upon the request of any party, theDispute shall be decided by three arbitrators (for purposes of this Agreement, referred tocollectively as the “arbitrator”).     (iii) All arbitration hearings will be commenced within ninety (90) days of the demandfor arbitration and completed within ninety (90) days from the date of commencement;provided, however, that upon a showing of good cause, the arbitrator shall be permitted toextend the commencement of such hearing for up to an additional sixty (60) days.     (iv) The judgment and the award, if any, of the arbitrator shall be issued withinthirty (30) days of the close of the hearing. The arbitrator shall provide a concisewritten statement setting forth the reasons for the judgment and for the award, if any. Thearbitration award, if any, may be submitted to any court having jurisdiction to be confirmedand enforced, and such confirmation and enforcement shall not be subject to arbitration.     (v) The arbitrator will give effect to statutes of limitations and any waivers thereofin determining the disposition of any Dispute and may dismiss one or more claims in thearbitration on the basis that such claim or claims is or are barred. For purposes of theapplication of the statute of limitations, the service on AAA under applicable AAA rules ofa notice of Dispute is the equivalent of the filing of a lawsuit.     (vi) Any dispute concerning this arbitration provision, including any such dispute asto the validity or enforceability of this provision, or whether a Dispute is arbitrable,shall be determined by the arbitrator; provided, however, that the arbitrator shall not bepermitted to vary the express provisions of these Special Rules or the Reservations ofRights in subsection (c) below.
-17-

 
**Execution Copy**     (vii) The arbitrator shall have the power to award legal fees and costs pursuant to theterms of this Agreement.     (viii) The arbitration will take place on an individual basis without reference to,resort to, or consideration of any form of class orclass  action.     (c) Reservations of Rights. Nothing in this Agreement shall be deemed to (i) limit theapplicability of any otherwise applicable statutes of limitation and any waivers contained in thisAgreement, or (ii) apply to or limit the right of Lender (A) to exercise self help remedies such as(but not limited to) setoff, or (B) to foreclose judicially or nonjudicially against any real orpersonal property collateral, or to exercise judicial or nonjudicial power of sale rights, (C) toobtain from a court provisional or ancillary remedies such as (but not limited to) injunctiverelief, writ of possession, prejudgment attachment, or the appointment of a receiver, or (D) topursue rights against a party to this Agreement, in a third-party proceeding in any action broughtagainst Lender in a state, federal or international court, tribunal or hearing body (includingactions in specialty courts, such as bankruptcy and patent courts). Lender may exercise the rightsset forth in clauses (A) through (D), inclusive, before, during or after the pendency of anyarbitration proceeding brought pursuant to this Agreement, as applicable. Neither the exercise ofself help remedies nor the institution or maintenance of an action for foreclosure or provisionalor ancillary remedies shall constitute a waiver of the right of any party, including the claimantin any such action, to arbitrate the merits of the Dispute occasioning resort to such remedies. Noprovision in the Loan Documents regarding submission to jurisdiction and/or venue in any court isintended or shall be construed to be in derogation of the provisions in any Loan Document forarbitration of any Dispute.     (d) Conflicting Provisions for Dispute Resolution. If there is any conflict between theterms, conditions and provisions of this Section and those of any other provision or agreement forarbitration or dispute resolution, the terms, conditions and provisions of this Section shallprevail as to any Dispute arising out of or relating to (i) this Agreement, (ii) any other LoanDocument, (iii) any related agreements or instruments, or (iv) the transaction contemplated hereinor therein (including any claim based on or arising from an alleged personal injury or businesstort). In any other situation, if the resolution of a given Dispute is specifically governed byanother provision or agreement for arbitration or dispute resolution, the other provision oragreement shall prevail with respect to said Dispute.     (e) Jury Trial Waiver in Arbitration. By agreeing to this Section, the parties irrevocablyand voluntarily waive any right they may have to a trial by jury in respect of any Dispute.**ARTICLE X — MISCELLANEOUS**     **10.1**No Warranty by Lender. By accepting or approving anything required to beobserved, performed or fulfilled by Borrower or Guarantor pursuant to this Agreement or any otherLoan Documents, including, without limitation, any plans, specifications, certificate,
-18-

 
**Execution Copy**financialinformation, survey, receipt, appraisal or insurance policy, the Lender shall not be deemed to havewarranted or represented the sufficiency,legality, effectiveness or legal effect of the same, or of any term, provision or conditionthereof. Any such acceptance or approval thereof shall not be or constitute any warranty orrepresentation with respect thereto by the Lender.     **10.2**Liability of Lender. The Lender shall not be liable for any act or omission byit pursuant to the provisions of this Agreement in the absence of fraud or gross negligence. TheLender shall incur no liability to Borrower or any other party in connection with the acts oromissions of the Lender in reliance upon any certificate or other paper believed by the Lender tobe genuine or with respect to any other thing which the Lender may do or refrain from doing, unlesssuch act or omission amounts to fraud or gross negligence.     **10.3**Modification — Waiver. None of the terms or provisions of this Agreement may bechanged, waived, modified, discharged or terminated except as provided in the Deed of Trust.     **10.4**Third Parties — Benefit. All conditions set forth herein with respect to theobligations of the Lender to make Loan advances are imposed solely and exclusively for the benefitof the Lender, and no other person shall either have standing to require satisfaction of suchcondition in accordance with its terms, be entitled to assume that the Lender will refuse to makeadvances in the absence of strict compliance with any or all of such conditions, or be deemed to bebeneficiary of such conditions under any circumstances, any or all of which may be freely waived inwhole or in part by the Lender at any time in the sole and absolute exercise of its discretion.The Lender shall in no event be responsible or liable to any person other than the Borrower for thedisbursement of or failure to disburse any of the proceeds of the Loan, and no contractor,subcontractor, laborer or material supplier or other person shall have any right or claim againstthe Lender with respect to this Agreement. The terms and provisions of this Agreement are for thebenefit of the parties hereto and, except as herein specifically provided, no other person shallhave any right or cause of action on account thereof.     **10.5**Captions and Headings. The captions and headings contained in this Agreement areincluded herein for convenience of reference only and shall not be considered a part hereof.     **10.6**Counterparts. This Agreement may be executed in any number of counterparts, eachof which shall be considered an original for all purposes; provided, however, that all suchcounterparts shall together constitute one and the same instrument.     **10.7**Signs; Publicity. At the request and expense of the Lender (subject toapplicable law and compliance with governmental requirements, and subject to Borrower’s approval ofthe design and location of said sign, which consent shall not be unreasonably withheld), Borrowershall install a sign or signs at a location or locations on the Property satisfactory to theLender, reciting, among other things, that the Lender is financing the acquisition of the Property.Borrower shall (at the expense of Lender) obtain all permits, licenses and approvals from theappropriate governmental agency or association thatare necessary for the erection and
-19-

 
**Execution Copy**existence of any such signs. Borrower expressly authorizes theLender to prepare and to furnish to the news media for publication from time to time news releaseswith respect to any portion of the Property detailing the Lender’s involvement with the financing.     **10.8**Applicable Law. This Agreement shall be governed by and construed, interpretedand enforced in accordance with the laws of the Jurisdiction of Choice, unless the “choice of law”rules of the Jurisdiction of Choice can be construed or interpreted to require the laws of anotherjurisdiction to govern, in which case the “choice of law” rules of the Jurisdiction of Choice shallnot apply.     **10.9**Time of Essence. Time shall be of the essence of each and every provision ofthis Agreement of which time is an element.     **10.10**Conflicts. The terms and conditions of the Note and the other Loan Documentsare incorporated into this Agreement and made a part hereof as if specifically set forth herein.In the event any provision of this Agreement conflicts with the terms of any other Loan Document,the terms of this Agreement shall prevail. For purposes of this Section the absence of a provisionfrom any Loan Documents shall not constitute a conflict.     **10.11**Quality of Documents and Other Items. Each document, item or other evidencerequired to be delivered to the Lender in connection with this Agreement shall be satisfactory inform and substance to the Lender in its sole discretion. In addition, all surveys, appraisals,environmental site assessments, inspections, cost reviews, subcontracts, leases, bonds, insurancepolicies and all other documents required or contemplated by this Agreement and the other LoanDocuments shall be satisfactory to the Lender and, if required by the Lender, Borrower shallprovide the Lender and its counsel with copies of any or all of such documents. All contractors,subcontractors, sureties, insurers and any other party responsible for the execution andpreparation of the foregoing documents shall also be satisfactory to the Lender.     **10.12**Professional Services. If requested by Lender, Borrower shall: (a) not morefrequently than annually, cause an inspection and written appraisal of the Property (or such partsof it as are designated in the Lender’s request) to be made and provided to Lender by an appraiserapproved and engaged by the Lender in its sole discretion; and (b) cause to be conducted orprepared any other written report, summary, opinion, inspection, review, survey, audit or otherprofessional service relating to the Property or any operations in connection with it (all asdesignated in Lender’s request) as Lender may reasonably request, including, without limitation,any accounting, auctioneering, architectural, consulting, engineering, design, legal, management,pest control, surveying, title abstracting or other technical, managerial or professional servicerelating to the Property or its operations. The Lender may elect to deliver any such request byfacsimile, by mail or by hand delivery addressed to the Borrower as provided herein or by any otherlegally effective method, and it may be given at any time and from time to time.     **10.13**Further Assurances. At the request of the Lender, Borrower shall take anyaction or execute any additional document reasonably required by the Lender to secure the
-20-

 
**Execution Copy**Indebtedness, confirm the lien of the Deed of Trust or further the intent of any of the LoanDocuments.     **10.14**Costs and Expenses. The Borrower shall pay all out-of-pocket fees, charges andexpenses incurred by or on behalf of the Lender in connection with the Loan and the making, closingand administration of the Loan, including, without limitation (a) fees and expenses for theexamination of title to the Property; (b) recording and filing fees, recordation taxes and transfertaxes; (c) Title Company premiums, fees and charges; (d) surveyor charges; (e) appraisal fees; (f)inspection fees; (g) the fees and expenses of the Lender’s counsel; (h) all amounts due theProgress Inspector; (i) the payment, satisfaction, discharge and release of any encumbrance, tax,assessment or other charge or lien upon any portion of the Property; (j) any syndication orparticipation fees, if applicable, and (k) the construction, maintenance and protection of theImprovements and every portion thereof. Further, the Lender may (but shall be under no obligationto do so) advance for the account of Borrower as part of or in addition to the Loan any amount oramounts as the Lender may deem necessary or advisable in order to fulfill the obligations ofBorrower hereunder, which amount or amounts may be disbursed by the Lender directly to a thirdparty in order to protect its interests, and any amount so applied by the Lender shall constitute aportion of the Indebtedness, even though the aggregate of the amounts so applied, together with theother advances under the Note, may exceed the principal amount of the Note.     **10.15**Fees and Expenses — Indemnity. Borrower will hold the Lender harmless andindemnify the Lender from all claims of brokers and “finders” arising by reason of the Loan, theexecution and delivery of this Agreement or the making of the Loan. Borrower shall protect,indemnify and save harmless the Lender and its directors, officers, agents, and employees, the Deedof Trust trustees, and all independent contractors from and against all liabilities, obligations,claims, damages, fines, penalties, causes of action, costs and expenses (including, withoutlimitation, attorneys’ fees and disbursements), imposed upon or incurred by or asserted against anyof them in connection with the Loan.     **10.16**Sale/Assignment of Loan. Lender may sell or offer to sell the Loan or intereststherein to one or more assignees or participants. Borrower shall execute, acknowledge and deliverany and all instruments reasonably requested by Lender in connection therewith, and to the extent,if any, specified in any such assignment or participation, such assignee(s) or participant(s) shallhave the same rights and benefits with respect to the Loan Documents as such person(s) would haveif such person(s) were Lender hereunder. Lender may disseminate any information it now has orhereafter obtains pertaining to the Loan, including any security for the Loan, any credit or otherinformation on the Property (including environmental reports and assessments), Borrower, any ofBorrower’s principals or any Guarantor, to any actual or prospective assignee or participant, toLender’s affiliates, including Banc of America Securities LLC, to any regulatory body havingjurisdiction over Lender, to any actual or prospective counterparty (or its advisors) to any swapor derivative transaction relating to Borrower and the Loan, or to any other party as necessary orappropriate in Lender’s reasonable judgment.
-21-

 
**Execution Copy**     **10.17**Seal. If any Borrower is a corporation, the designation “(SEAL)” on thisAgreement shall be effective as the affixing of such Borrower’s corporate seal physically to thisAgreement.     **10.18****WAIVER OF JURY TRIAL**. **WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES’AGREEMENT TO ARBITRATE ANY “DISPUTE” (FOR PURPOSES OF THIS SECTION, AS DEFINED IN THE “DISPUTERESOLUTION” SECTION) AS SET FORTH IN THIS AGREEMENT, TO THE EXTENT ANY “DISPUTE” IS NOT SUBMITTEDTO ARBITRATION OR IS DEEMED BY THE ARBITRATOR OR BY ANY COURT WITH JURISDICTION TO BE NOTARBITRABLE OR NOT REQUIRED TO BE ARBITRATED, BORROWER AND LENDER WAIVE TRIAL BY JURY IN RESPECT OFANY SUCH “DISPUTE” AND ANY ACTION ON SUCH “DISPUTE.” THIS WAIVER IS KNOWINGLY, WILLINGLY ANDVOLUNTARILY MADE BY BORROWER AND LENDER, AND BORROWER AND LENDER HEREBY REPRESENT THAT NOREPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY PERSON OR ENTITY TO INDUCE THIS WAIVER OFTRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. THIS PROVISION IS A MATERIALINDUCEMENT FOR THE PARTIES ENTERING INTO THE LOAN DOCUMENTS. BORROWER AND LENDER ARE EACH HEREBYAUTHORIZED TO FILE A COPY OF THIS SECTION IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVEROF JURY TRIAL. BORROWER FURTHER REPRESENTS AND WARRANTS THAT IT HAS BEEN REPRESENTED IN THESIGNING OF THIS AGREEMENT, AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, OR HASHAD 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**.     **10.19**Electronic Transmission of Data. Lender and Borrower agree that certain datarelated to the Loan (including confidential information, documents, applications and reports) maybe transmitted electronically, including transmission over the Internet. This data may betransmitted to, received from or circulated among agents and representatives of Borrower and/orLender and their affiliates and other persons involved with the subject matter of this Agreement.Borrower acknowledges and agrees that (a) there are risks associated with the use of electronictransmission and that Lender does not control the method of transmittal or service providers, (b)Lender has no obligation or responsibility whatsoever and assumes no duty or obligation for thesecurity, receipt or third party interception of any such transmission, except for Lender’s fraudor gross negligence, and (c) Borrower will release, hold harmless and indemnify Lender from anyclaim, damage or loss, including that arising in whole or part from Lender’s strict liability orsole, comparative or contributory negligence, but excluding that arising from Lender’s fraud orgross negligence, which is related to the electronic transmission of data.     **10.20**USA Patriot Act Notice. Lender hereby notifies Borrower that pursuant to therequirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26,2001)) (the “Act”), Lender is required to obtain, verifyand record information that identifies.
-22-

 
**Execution Copy**Borrower, which information includes the name and address of Borrower and otherinformation that will allow Lender to identify Borrower in accordance with the Act.[SIGNATURES APPEAR ON THE NEXT PAGE]
-23-

 
**Execution Copy**     IN WITNESS WHEREOF, the Borrower and the Lender, intending to be executed and delivered underseal, have executed and delivered these presents or caused these presents to be executed anddelivered under seal as of the year and day first above written.                 **BORROWER**:             WITNESS/ATTEST:   **COMSTOCK CARTER LAKE, L.C.,**        a Virginia limited liability company                   By: Comstock Homebuilding Companies, Inc.,          Its manager             By:     By:    Name:       Christopher Clemente  Title:       its Chief Executive Officer             (Seal)   Address: 11465 Sunset Hills Road          5 th Floor          Reston, Virginia 20190             WITNESS:     **LENDER**:                   **BANK OF AMERICA, N.A.**                   By:                        Name:       John M. DeZinno  Title:       Senior Vice President                   Address:8300 Greensboro Drive