EX

                                                           [Fixed Rate Pool B-1]
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                                 LOAN AGREEMENT


            ARC SPEI I, L.L.C., a Delaware limited liability company

                                       AND

    MORGAN STANLEY DEAN WITTER MORTGAGE CAPITAL INC., a New York corporation





                            Dated: As of May 2, 2002






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                          This Instrument Prepared by:


                            Kenneth J. Friedman, Esq.
                      Paul, Hastings, Janofsky & Walker LLP
                               75 East 55th Street
                            New York, New York 10022





                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----

ARTICLE I.        DEFINITIONS; PRINCIPLES OF CONSTRUCTION.....................2

        Section 1.1.      Definitions.........................................2

        Section 1.2.      Principles of Construction.........................17

ARTICLE II.       THE LOAN...................................................17

        Section 2.1.      The Loan...........................................17

        Section 2.2.      Interest Rate......................................18

        Section 2.3.      Loan Payments......................................18

        Section 2.4.      Prepayments........................................19

        Section 2.5.      Defeasance.........................................20

        Section 2.6.      Fees...............................................22

ARTICLE III.      INTENTIONALLY OMITTED......................................23

ARTICLE IV.       REPRESENTATIONS AND WARRANTIES.............................23

        Section 4.1.      Borrower Representations...........................23

        Section 4.2.      Survival of Representations........................28

ARTICLE V.        BORROWER COVENANTS.........................................28

        Section 5.1.      Affirmative Covenants..............................28

        Section 5.2.      Negative Covenants of Borrower.....................35

ARTICLE VI.       INSURANCE, CASUALTY AND CONDEMNATION.......................38

        Section 6.1.      Insurance Coverage.................................38

        Section 6.2.      Condemnation.......................................45

ARTICLE VII.      PROPERTY MANAGEMENT........................................45

        Section 7.1.      The Management Agreement...........................45

        Section 7.2.      Subordination of Fees; Removal of Property
                          Manager............................................46

ARTICLE VIII.     ENVIRONMENTAL PROVISIONS...................................46

        Section 8.1.      Environmental Provisions...........................49

ARTICLE IX.       RESERVE FUNDS..............................................49

        Section 9.1.      Tax Funds..........................................49

        Section 9.2.      Insurance Premium Funds............................50

        Section 9.3.      Ordinary Capital Expenditures Funds................51

        Section 9.4.      Capital Improvement Funds..........................52


                                       -i-


                                TABLE OF CONTENTS
                                -----------------
                                  (continued)

        Section 9.5.      Additional Provisions relating to Ordinary
                          Capital Expenditure Funds and Capital
                          Improvement Funds..................................54

        Section 9.6.      Intentionally Omitted..............................55

        Section 9.7.      Prepaid Rent Funds.................................55

        Section 9.8.      Security Interest in Funds.........................55

        Section 9.9.      Cash Management....................................56

ARTICLE X.        DEFAULTS...................................................56

        Section 10.1.     Events of Default..................................56

        Section 10.2.     Remedies...........................................59

        Section 10.3.     Application of Moneys..............................61

        Section 10.4.     Remedies Cumulative................................61

        Section 10.5.     Right to Cure Defaults.............................61

ARTICLE XI.       INTENTIONALLY OMITTED......................................62

ARTICLE XII.      SALE AND SECURITIZATION AND SERVICER.......................62

        Section 12.1.     Syndication of the Loan............................62

        Section 12.2.     Cooperation........................................63

        Section 12.3.     Securitization Indemnification.....................65

        Section 12.4.     Rating Surveillance................................67

        Section 12.5.     Component Notes....................................67

        Section 12.6.     Event of Default...................................67

        Section 12.7.     Servicer...........................................67

        Section 12.8.     Creation of Security Interest......................68

ARTICLE XIII.     PARTIAL RELEASE OF PROPERTIES..............................68

        Section 13.1.     Partial Release of Properties......................68

        Section 13.2.     Release of Portions of Zoppe's Property and
                          Burntwood Property.................................69

        Section 13.3.     Allocated Loan Amounts.............................70

ARTICLE XIV.      MISCELLANEOUS..............................................70

        Section 14.1.     Non-Waiver.........................................70

        Section 14.2.     Sole Discretion....................................70

        Section 14.3.     Absolute and Unconditional Obligation..............71

                                      -ii-


                                TABLE OF CONTENTS
                                  (continued)

                                                                           Page
                                                                           ----

        Section 14.4.     Relationship.......................................71

        Section 14.5.     Anti-Forfeiture....................................71

        Section 14.6.     Deposits...........................................72

        Section 14.7.     No Brokers.........................................72

        Section 14.8.     Submission to Jurisdiction.........................73

        Section 14.9.     Retention of Counsel and Consultants...............73

        Section 14.10.    Waiver of Notice...................................73

        Section 14.11.    Indemnification of Lender..........................73

        Section 14.12.    Construction of Agreement..........................73

        Section 14.13.    Parties Bound, etc.................................74

        Section 14.14.    COMPLETE AGREEMENT.................................74

        Section 14.15.    Governing Law......................................74

        Section 14.16.    Severability.......................................74

        Section 14.17.    Notices............................................74

        Section 14.18.    Modification.......................................76

        Section 14.19.    Waivers............................................76

        Section 14.20.    WAIVER OF TRIAL BY JURY............................76



                                     -iii-


EXHIBITS

Exhibit A         Consolidated Summary of Capital Improvement Plan
Exhibit B         Intentionally Omitted
Exhibit C         Form of Note
Exhibit D         Form of Mortgage
Exhibit E         Form of Deed of Trust
Exhibit F         Form of Assignment of Leases and Rents
Exhibit G         Intentionally Omitted
Exhibit H         Intentionally Omitted
Exhibit I         Intentionally Omitted
Exhibit J         Intentionally Omitted
Exhibit K         Intentionally Omitted
Exhibit L         Intentionally Omitted
Exhibit M         Form of Annual Consolidated Operating Statement of Properties
                  (Section 5.1.8(ii))
Exhibit N         Form of Annual Operating and Capital Expenditure Budget
                  Section 5.1.8(iii))
Exhibit O         Form of Monthly Operating Statements
                  (Section 5.1.8(iv))
Exhibit P         Form of Quarterly Operating Statements (Section 5.1.8(v))
Exhibit Q         Intentionally Omitted
Exhibit R         Intentionally Omitted
Exhibit S         Form of Monthly Statement for ARC IV (Section 5.1.8(ix))
Exhibit T         Intentionally Omitted
Exhibit U         Insurance Requirements
Exhibit V         Form of Capital Improvement Reconciliation
Exhibit W         Intentionally Omitted
Exhibit X         Cap-X Information Sheet
Exhibit Y         Form of Certificate for Prepaid Rent
Exhibit Z         Form of Evidence of Payment of Taxes
Exhibit AA        Form of Rent Roll

SCHEDULES

Schedule 1        List of Properties and Portion of Principal Balance
                  allocated to each Property
Schedule 2        Capital Improvement Costs for Properties
Schedule 4.1.16   Trade Names
Schedule 4.1.21   Exceptions to Violations Representation
Schedule 4.1.22   Exceptions to Condemnation Representation


                                      -iv-



                                 LOAN AGREEMENT
                                  [Fixed Rate]

               THIS LOAN AGREEMENT made as of the 2nd day of May, 2002, among
MORGAN STANLEY DEAN WITTER MORTGAGE CAPITAL INC., a New York corporation having
an office at 1585 Broadway, 38th Floor, New York, New York ("LENDER"), and ARC
SPEI I, L.L.C., a Delaware limited liability company ("BORROWER") having an
office c/o Affordable Residential Communities, 600 Grant Street, Suite 900,
Denver, Colorado 80203.

                              PRELIMINARY STATEMENT

               Borrower is a special purpose limited liability company
established for the sole purpose of the operation of real property on which
manufactured home communities are located.

               ARCMEZII  L.L.C.,  a Delaware  limited  liability  company  ("ARC
MEZZ"), is the owner and holder of a 100% membership interest in Borrower.

               ARC Real Estate Holdings, LLC, a Delaware limited liability
company ("ARC"), is the owner and holder of a 100% membership interest in ARC
MEZZ.

               ARC Real Estate, LLC, a Delaware limited liability company ("ARC
LLC") is the owner and holder of 99% of the "Class B" member interest in ARC.

               Affordable Residential Communities, IV, LP, a Delaware limited
partnership ("ARC IV") is the owner and holder of (i) 1% of the "Class B" member
interest in ARC and the sole managing member thereof and (ii) a 100% membership
interest in ARC LLC; and GMAC Commercial Mortgage Corporation ("GMAC") is the
owner and holder of 100% of the "Class A" member interest in ARC.

               ARC IV REIT,  Inc.,  a Maryland  corporation  ("ARC REIT") is the
sole general partner of ARC IV.

               Lender has agreed on the terms, covenants and provisions of this
Agreement hereinafter set forth to extend a loan in the principal sum of
$46,589,188 (the "LOAN") to Borrower pursuant to which Lender will make the Loan
to Borrower (i) to finance certain manufactured home community properties owned
by Borrower and (ii) to finance the cost of certain capital improvements to be
made at the Properties.

               NOW, THEREFORE, in consideration of Ten Dollars ($10.00) and
other good and valuable consideration, the receipt of which is hereby
acknowledged, and to induce Lender to extend the Loan to Borrower, Borrower and
Lender hereby represent and warrant to and covenant and agree as follows:


                                   ARTICLE I.

                     DEFINITIONS; PRINCIPLES OF CONSTRUCTION

               SECTION 1.1 Definitions. As used in this Agreement, the following
terms shall have the following definitions:

"ACCOUNTS" shall mean the Deposit Account, the Cash Management Account, the Tax
Account, the Insurance Premium Account, the Ordinary Capital Expenditures
Account, the Capital Improvement Account, the Operating Account and the Prepaid
Rent Account established in accordance with this Agreement and the Cash
Management Agreement.

"AFFILIATE" shall mean any Person directly or indirectly controlling, controlled
by or under direct or indirect common control with any other Person. A Person
shall be deemed to control another Person if the controlling Person owns
fifty-one (51%) percent or more of any class of voting securities of the
controlled Person or possesses, directly or indirectly, the power to direct or
cause the direction of the management or policies of the controlled Person,
whether through ownership of stock, by contract or otherwise.

"AGENT BANK" shall mean LaSalle Bank National Association, as agent and as
securities intermediary with respect to the Agent Bank Accounts under the Cash
Management Agreement.

"AGREEMENT" shall mean this Agreement.

"ALLOCATED LOAN AMOUNT" shall mean the allocated Principal Balance of the Loan
among the Properties, as set forth on SCHEDULE 1 opposite the trade name for
each such Property.

"APPROVED ACCOUNTING FIRM" shall have the meaning given to such term in SECTION
2.5.1(VIII).

"ARC" shall have the meaning given to such term in the Preliminary Statement.

"ARC IV" shall have the meaning given to such term in the Preliminary Statement.

"ARC LLC" shall have the meaning given to such term in the Preliminary
Statement.

"ARC MEZZ" shall have the meaning given to such term in the Preliminary
Statement.

"ARC PROPERTIES" shall mean the manufactured home community properties owned by
ARC, as further described in Schedule 1.

"ARC REIT" shall have the meaning given to such term in the Preliminary
Statement.

"ASSIGNMENTS OF LEASES AND RENTS" shall mean the Assignments of Leases and Rents
to be given by Borrower to Lender, as security for the payment of the Debt and
constituting a first lien on all of Borrower's right, title and interest now
owned or hereafter acquired in and to all Leases and Rents pertaining to or
derived from the Properties, the form of which is attached to this

                                      -2-



Agreement as EXHIBIT F, as the same may from time to time be amended, modified,
extended, supplemented, renewed, replaced or restated.

"AVAILABLE CASH FLOW" shall mean Underwritable Cash Flow, except that there
shall be deducted from Gross Revenues in the definition of Underwritable Cash
Flow the fees and expenses payable to Property Manager under the Management
Agreement and in compliance with SECTION 5.2.11 hereof.

"BORROWER" shall have the meaning given to such term in the preamble to this
Agreement.

"BUSINESS DAY" shall mean any day other than a Saturday, a Sunday or a legal
holiday on which national banks are not open for general business in (i) the
State of New York (ii) the state where the corporate trust office of the Trustee
is located or (iii) the state where servicing offices of the Servicer are
located.

"CAPITAL IMPROVEMENT ACCOUNT" shall have the meaning given to such term in
SECTION 9.9.

"CAPITAL IMPROVEMENT COSTS" shall mean, with respect to a particular Property,
the cost associated with the Capital Improvement Plan for such Property.

"CAPITAL IMPROVEMENT FUNDS" shall have the meaning given to such term in SECTION
9.4.1.

"CAPITAL IMPROVEMENT PLAN" shall mean, with respect to a particular Property,
the capital improvement plan for such Property approved by Lender, which plan
shall contain the anticipated date of completion for each capital improvement
and a consolidated summary of such capital improvement plan in the form of
EXHIBIT A attached hereto.

"CAPITAL WORK" shall mean any item of work specified in the Capital Improvement
Plan or other item of work at the Property which would constitute a capital item
entitled to be capitalized in accordance with GAAP.

"CASH AND CASH EQUIVALENTS" shall mean any or a combination of currency of the
government of the United States of America and U.S. Government Obligations.

"CASH MANAGEMENT ACCOUNT" shall have the meaning given to such term in SECTION
9.9.

"CASH MANAGEMENT AGREEMENT" shall mean the Cash Management Agreement dated as of
the date hereof entered into among Borrower, Property Manager, Lender, Agent
Bank and Deposit Bank, as the same may from time to time be amended, modified,
extended, supplemented, renewed, replaced or restated.

"CASUALTY RETAINAGE" shall have the meaning given to such term in SECTION 6.1.1.

"CERTIFIED INSURANCE AMOUNT" shall have the meaning given to such term in
SECTION 9.2.2.

"CERTIFIED TAX AMOUNT" shall have the meaning given to such term in SECTION
9.1.2.

"CLOSING DATE" shall mean May 2, 2002.

                                      -3-


"CONDEMNATION RETAINAGE" shall have the meaning given to such term in SECTION
6.2.

"CONSULTANT" shall mean an independent consulting engineer selected by Lender.

"DAMAGED PROPERTY" shall have the meaning given to such term in SECTION 6.1.

"DEBT" shall mean all principal, interest, additional interest and other sums of
any nature whatsoever which may or shall become due and payable to Lender in
accordance with the provisions of the Loan Documents.

"DEBT SERVICE" shall mean, with respect to any period of time an amount equal to
the Principal Balance of the Loan multiplied by the Interest Rate multiplied by
a fraction, the numerator of which is the number of days in such period of time,
and the denominator of which is 360.

"DEBT SERVICE COVERAGE RATIO" shall mean, for the relevant computation period,
the ratio of Underwritable Cash Flow of the Properties to the Debt Service on
the Principal Balance of the Loan. Except as otherwise set forth herein, the
Debt Service Coverage Ratio shall be calculated by Borrower on a calendar
quarter basis and shall be subject to verification and final determination by
Lender which determination shall be conclusive and binding on Borrower absent
manifest error.

"DEFAULT" as used in this Agreement shall mean the occurrence of any default by
Borrower or any other Person in the observance or performance of any of the
terms, covenants or provisions of this Agreement, the Note, the Mortgages or the
other Loan Documents on the part of Borrower or such other Person to be observed
or performed without regard to whether such default constitutes or would upon
notice or lapse of time, or both, constitute an Event of Default under this
Agreement, the Note, the Mortgages or the other Loan Documents or the other ARC
Loan Documents.

"DEFAULT RATE" shall mean a rate per annum equal to the lesser of (a) the
maximum rate permitted by applicable law, or (b) three percent (3%) plus the
Interest Rate.

"DEFEASANCE COLLATERAL" shall mean U.S. Government Obligations, which provide
payments (i) on or prior to, but as close as possible to, the Business Day
immediately preceding the Monthly Payment Date under the Note after the
Defeasance Date and (ii) in amounts equal to or greater than the Scheduled
Defeasance Payments and other scheduled payment dates.

"DEFEASANCE COLLATERAL ACCOUNT" shall have the meaning set fort in SECTION
2.5.2.

"DEFEASANCE DATE" shall have the meaning set fort in SECTION 2.5.1(A)(I).

"DEFEASANCE EVENT" shall have the meaning set forth in SECTION 2.5.1(A).

"DEPOSIT BANK" shall mean Compass Bank, an Alabama banking corporation, as
deposit bank under the Cash Management Agreement.

"ELIGIBLE ACCOUNT" shall mean a separate and identifiable account from all other
funds held by the holding institution that is either (i) an account or accounts
maintained with a federal or state-

                                      -4-


chartered depository institution or trust company which complies with the
definition of Eligible Institution or (ii) a segregated trust account or
accounts maintained with a federal or state chartered depository institution or
trust company acting in its fiduciary capacity which, in the case of a state
chartered depository institution or trust company is subject to regulations
substantially similar to 12 C.F.R. ss.9.10(b), having in either case a combined
capital and surplus of at least $50,000,000 and subject to supervision or
examination by federal and state authority. An Eligible Account will not be
evidenced by a certificate of deposit, passbook or other instrument.

"ELIGIBLE INSTITUTION" shall mean a depository institution or trust company
insured by the Federal Deposit Insurance Corporation the short term unsecured
debt obligations or commercial paper of which are rated at least A-1 by Standard
& Poor's Ratings Services, P-1 by Moody's Investors Service, Inc. and F-1+ by
Fitch, Inc. in the case of accounts in which funds are held for thirty (30) days
or less or, in the case of accounts in which funds are held for more than thirty
(30) days, the long term unsecured debt obligations of which are rated at least
"AA" by Fitch, and S&P and "Aa2" by Moody's. For purposes of this Agreement
only, as of the Closing Date, Deposit Bank is deemed to be an Eligible
Institution provided; however, that in the event the long and/or short-term
credit rating of the Deposit Bank is downgraded (or withdrawn) by any of the
Rating Agencies from its credit rating as of the Effective Date, the Deposit
Bank shall no longer be deemed an Eligible Institution unless Borrower shall
secure from the Rating Agencies a Rating Confirmation letter within thirty (30)
days of such downgrade.

"ENVIRONMENTAL REQUIREMENTS" shall mean, collectively, all present and future
laws, statutes, ordinances, rules, regulations, orders, codes, licenses,
permits, decrees, judgments, directives or the equivalent of or by any
Governmental Authority and relating to or addressing the protection of the
environment or human health.

"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time.

"EVENTS OF DEFAULT" shall have the meaning given to such term in SECTION 10.1.

"EXCHANGE ACT" shall have the meaning given such term in SECTION 12.3.

"EXPOSURE FEE" shall mean a fee equal to $833,469 paid by Borrower to Lender.

"FASIT" shall mean Financial Asset Securitization Investment Trust.

"FINANCING STATEMENTS" shall mean Uniform Commercial Code Financing Statements,
in form and content acceptable to Lender.

"FIRREA" shall mean the Financial Institutions Reform, Recovery and Enforcement
Act.

"GAAP" shall mean generally accepted accounting practices consistently applied.

"GMAC" shall have the meaning given to such term in the Preliminary Statement.

                                      -5-


"GOVERNMENTAL AUTHORITY" shall mean any court or governmental board, agency,
commission, office or authority of any nature whatsoever or any governmental
unit or political subdivision thereof (federal, state, district, municipal,
city, foreign or otherwise) whether now or hereafter in existence, exercising
executive, legislative, judicial, regulatory or administrative functions.

"GROSS REVENUE" shall mean, with respect to a particular period of time, all
revenue of Borrower during such period relating to the ownership and operation
of the Properties to be included in the calculation or in connection with any
services, equipment or furnishing provided in connection with the operation of
such Properties from whatever source, including but not limited to, Rents
(excluding security deposits until such time as they may become available to
Borrower for application to a tenant's obligations), but excluding revenues
derived from (i) the rental of manufactured homes and (ii) sales, use and
occupancy or other taxes on receipts required to be accounted for by Borrower to
any Governmental Authority, non-recurring revenues as determined by Lender,
refunds and uncollectible accounts, proceeds of casualty insurance and
condemnation awards (other than business interruption or other loss of income
insurance), and any disbursements to Borrower of the Required Reserve Funds or
any other fund established by the Loan Documents. Gross Revenues shall be
determined in a manner consistent with GAAP.

"GUARANTOR" shall mean collectively, ARC LLC and ARC IV and any other Person now
or hereafter guaranteeing all or any portion of the Debt or the performance by
Borrower of all or any of the obligations of Borrower under the Loan Documents.

"GUARANTY (RECOURSE OBLIGATIONS)" shall mean that certain Guaranty (Recourse
Obligations) dated as of the date hereof given by ARC LLC and ARC IV to Lender,
as the same may from time to time be amended, modified, extended, supplemented,
renewed, replaced or restated.

"HAZARDOUS MATERIAL" shall mean any material or substance that, whether by its
nature or use, is now or hereafter defined as a hazardous waste, hazardous
substance, pollutant or contaminant under any Environmental Requirement, or
which is toxic, explosive, corrosive, flammable, infectious, radioactive,
carcinogenic, mutagenic or otherwise hazardous and which is now or hereafter
regulated under any Environmental Requirement, or which is or contains
petroleum, gasoline, diesel fuel or another petroleum hydrocarbon product.

"HAZARDOUS MATERIAL GUARANTY AND INDEMNIFICATION AGREEMENT" shall mean that
certain Hazardous Material Guaranty and Indemnification Agreement dated the date
hereof given by Borrower, ARC IV and ARC LLC to Lender, as the same may from
time to time be amended, modified, extended, supplemented, renewed, replaced or
restated.

"INDEPENDENT DIRECTOR" and "INDEPENDENT MANAGER" shall mean an individual
reasonably satisfactory to Lender who shall not have been at the time of such
individual's appointment, may not have been at any time during the preceding
five (5) years and shall not during its tenure as Independent Director or
Independent Manager be (i) a shareholder, director, officer, employee, partner,
member, attorney or counsel of Borrower or any of its members, subsidiaries or
affiliates, (ii) a customer of, or supplier to, or any other Person who derives
any of its purchases or revenues for its activities with Borrower or any of its
members, subsidiaries or Affiliates, (iii) a person or other entity controlling
or under common control with any such member,

                                      -6-



customer, supplier or other Person, or (iv) a member of the immediate family of
any such shareholder, director, officer, employee, partner, customer, supplier
or other Person. As used herein, the term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a person or entity, whether through ownership of
voting securities, by contract or otherwise.

"INITIAL INTEREST PERIOD" shall mean, the period commencing on the date hereof
and ending on the day immediately preceding the first (1st) day of the first
(1st) full month following the date hereof.

"INSURANCE POLICIES" shall have the meaning given to such term in SECTION 6.1.

"INSURANCE PREMIUM ACCOUNT" shall have the meaning given to such term in SECTION
9.9.

"INSURANCE PREMIUM FUNDS" shall have the meaning given to such term in SECTION
9.2.1.

"INSURANCE PREMIUMS" shall have the meaning given to such term in SECTION 6.1.

"INTEREST PERIOD" shall mean (a) the Initial Interest Period, and (b) for each
period thereafter, the period commencing on the first (1st) day of each calendar
month during the term of the Loan and ending on the last day of such calendar
month.

"INTEREST RATE" shall mean a rate per annum equal to 7.35%.

"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of 1986, as
amended, or any successor statute.

"INVESTOR ACCOUNT" shall have the meaning as defined in the Cash Management
Agreement.

"LEASES" shall mean collectively all leases, licenses and other agreements now
or hereafter entered into and affecting or relating to the use or occupancy of
the Properties or any portion thereof.

"LEGAL REQUIREMENTS" shall mean all federal, state, county, municipal and other
governmental statutes, laws, rules, orders, regulations, ordinances, judgments,
decrees and injunctions of Governmental Authorities affecting Borrower or the
Properties or any part thereof or the construction, use, alteration or operation
thereof, or any part thereof, whether now or hereafter enacted and in force,
including, without limitation, the Americans with Disabilities Act of 1990, and
all permits, licenses and authorizations and regulations relating thereto, and
all covenants, agreements, restrictions and encumbrances contained in any
instruments, either of record or known to Borrower, at any time in force
affecting the Properties or any part thereof, including, without limitation, any
which may (i) require repairs, modifications or alterations in or to the
Properties or any part thereof, or (ii) in any way limit the use and operation
thereof as it is currently being utilized.

"LENDER" shall have the meaning given to such term in the Preamble.

"LENDER GROUP" shall have the meaning given to such term in SECTION 12.3.

                                      -7-


"LETTER OF CREDIT" shall mean an irrevocable, unconditional, transferable, clean
sight draft letter of credit acceptable to Lender and the Rating Agencies
(either an evergreen letter of credit or one which does not expire until at
least thirty (30) Business Days after the Maturity Date) in favor of Lender and
entitling Lender to draw thereon in New York, New York, issued by a domestic
Eligible Institution or the U.S. agency or branch of a foreign Eligible
Institution, or if there are no domestic U.S. agencies or branches of a foreign
Eligible Institution then issuing letters of credit, then such letter of credit
may be issued by a domestic bank, the long term unsecured debt rating of which
is the highest such rating then given by the Rating Agencies to a domestic
commercial bank. If at any time the bank issuing any such Letter of Credit shall
cease to be an Eligible Institution, Lender shall have the right immediately to
draw down the Letter of Credit in full and hold the proceeds of such draw in
accordance with the applicable provisions hereof.

"LIABILITIES" shall have the meaning given to such term in SECTION 12.3.

"LOAN" shall have the meaning given to such term in the Preliminary Statement.

"LOAN DOCUMENTS" shall collectively mean this Agreement, the Note, the
Mortgages, the Assignments of Leases and Rents, the Hazardous Material Guaranty
and Indemnification Agreement, Guaranty (Recourse Obligations), the Cash
Management Agreement and all other documents and instruments of any nature
whatsoever now or hereafter executed and delivered in connection with this
Agreement or the Loan, as any of the same may from time to time be amended,
modified, extended, supplemented, renewed, replaced or restated.

"MANAGEMENT AGREEMENT" shall mean that certain Property and Asset Management
Agreement dated May 2, 2002 entered into between Borrower and Property Manager,
or such other management agreement with respect to the Properties as may be
entered into by Borrower with the approval of Lender.

"MATURITY DATE" shall mean May 1, 2012.

"MAXIMUM LEGAL RATE" shall mean the maximum non-usurious interest rate, if any,
that at any time or from time to time may be contracted for, taken, reserved,
charged or received on the indebtedness evidenced by the Note and as provided
for herein or the other Loan Documents, under the laws of such state or states
whose laws are held by any court of competent jurisdiction to govern the
interest rate provisions of the Loan.

"MAXIMUM LOAN TO VALUE RATIO" shall mean with respect to all Properties
seventy-seven percent (77%).

"MONTHLY DEBT SERVICE PAYMENT AMOUNT" shall mean an amount equal to the
interest, computed at the Applicable Interest Rate, due on the outstanding
balance of the Loan on any given Monthly Payment Date, plus a monthly
amortization payment as set forth on Schedule 3.

"MONTHLY INSURANCE PREMIUM DEPOSIT" shall have the meaning given to such term in
SECTION 9.2.1.

"MONTHLY ORDINARY CAPITAL EXPENDITURES DEPOSIT" shall have the meaning given to
such term in SECTION 9.3.1.

                                      -8-


"MONTHLY PAYMENT DATE" shall mean the first Business Day of every calendar month
occurring during the term of the Loan.

"MONTHLY TAX DEPOSIT" shall have the meaning given to such term in SECTION
9.1.1.

"MORTGAGES" shall mean fully cross defaulted and cross collateralized blanket
mortgages and deeds of trust constituting a first lien on the fee estate of
Borrower in all Properties constituting collateral for the Loan executed and
delivered by Borrower to or for the benefit of Lender and securing payment in
full of the Debt, the forms of which are attached hereto as EXHIBITS D
(mortgage) and E (deed of trust), as the same may from time to time be amended,
modified, extended, supplemented, renewed, replaced or restated.

"NET AWARD DEFICIENCY" shall have the meaning given to such term in SECTION 6.2.

"NET PROCEEDS" shall have the meaning given to such term in SECTION 6.1.1.

"NET PROCEEDS DEFICIENCY" shall have the meaning given to such term in SECTION
6.1.1.

"NET RESTORATION AWARD" shall have the meaning given to such term in SECTION
6.2.

"NON-CONSOLIDATION OPINION" shall have the meaning given to such term in the
definition of the term "Single-Purpose" in this SECTION 1.1.

"NOTE" shall mean the consolidated, amended and restated note in the aggregate
principal amount of $46,589,188 given by Borrower to Lender evidencing the Loan,
which shall be in the form of EXHIBIT C as the same may from time to time be
amended, modified, extended, supplemented, renewed, replaced or restated.

"OFFICER'S CERTIFICATE" shall mean a certificate delivered to Lender by Borrower
which is signed by an authorized representative of Borrower.

"OPERATING ACCOUNT" shall have the meaning given to such term in SECTION 9.9.

"OPERATING EXPENSE" shall mean, with respect to any period of time, all costs
and expenses paid (or due and payable) by Borrower (or by Property Manager for
the account of Borrower) during such period relating to the operation,
maintenance and management of the Properties to be included in the calculation,
including, without limitation, utilities, repairs and maintenance, insurance,
property taxes and assessments (which insurance, property taxes and assessments
shall be calculated in accordance with GAAP), advertising expenses, payroll and
related taxes, equipment lease payments permitted under the terms of this
Agreement, a management fee equal to the greater of (i) 4% of Gross Revenues of
the Properties to be included in the calculation for the applicable period or
(ii) the actual management fees paid under the Management Agreement for such
period, but excluding depreciation and amortization and any extraordinary
non-recurring expenses. Operating Expenses shall be determined in a manner
consistent with GAAP except as otherwise set forth herein. It is expressly
understood that for purposes of calculating Operating Expenses, Operating
Expenses shall be deemed to include a $50 per annum capital expenditure
allowance per pad site located at the Properties.

                                      -9-


"ORDINARY CAPITAL EXPENDITURES ACCOUNT" shall have the meaning given to such
term in SECTION 9.9.

"ORDINARY CAPITAL EXPENDITURES FUNDS" shall have the meaning given to such term
in SECTION 9.3.1.

"ORIGINATION FEE" shall have the meaning given to such term in SECTION 2.6.2.

"PERMITTED FUND MANAGER" means any entity which is not subject to a bankruptcy
proceeding and either (a) as determined by Lender has been approved from time to
time by the Rating Agencies as the general partner, managing member or fund
manager of a Permitted Investment Fund or (b) a nationally-recognized manager of
investment funds investing in debt or equity interests relating to commercial
real estate which is investing through a fund which has committed capital of at
least $250,000,000.

"PERMITTED INVESTMENT FUND" shall have the meaning set forth in the definition
of Qualified Transferee.

"PERMITTED INVESTMENTS" shall have the meaning set forth in the Cash Management
Agreement.

"PERMITTED TITLE EXCEPTIONS" shall mean those matters set forth in the title
insurance policies insuring the respective liens of the Mortgages and those
matters otherwise approved by Lender.

"PERSON" shall mean an individual, a corporation, a firm, a limited or general
partnership, a limited liability company, a limited liability partnership, an
association, a joint venture or any other entity or organization, including a
governmental or political subdivision or an agent or instrumentality thereof.

"PREPAID RENT ACCOUNT" shall have the meaning given to such term in SECTION 9.9.

"PREPAID RENT CERTIFICATE" shall have the meaning given to such term in SECTION
9.7.1.

"PREPAID RENT FUNDS" shall have the meaning given to such term in SECTION 9.7.1.

"PREPAID RENTS" shall mean for purposes of SECTION 9.7 hereof, and, as of any
given date during the term of the Loan, the amount of Rent paid by or for the
benefit of a tenant under a Lease that exceeds the amount of Rent that has
accrued and is due and payable through the last day of the calendar month in
which such given date occurs, provided that, notwithstanding anything herein to
the contrary, Prepaid Rent shall not include tenant security deposits.

"PRINCIPAL BALANCE" shall mean the outstanding principal balance of the Note.

"PROPERTY" shall mean individually and collectively the manufactured home
communities owned by Borrower and which constitute collateral for the Loan
including any personal property, equipment or manufactured home owned by
Borrower and located thereon or otherwise used in connection with the management
thereof.

                                      -10-


"PROPERTY MANAGER" shall mean (i) ARC Management Services, Inc., a Delaware
corporation, (ii) such other Qualified Manager of the Properties as may be
approved by GMAC or a Qualified Transferee if GMAC or such Qualified Transferee
shall become the managing member of ARC, or (iii) such other manager of the
Properties as may be approved by Lender in its sole and absolute discretion.

"QUALIFIED MANAGER" shall mean a reputable and experienced nationally-recognized
manager having not less than five (5) years experience in the management of
commercial properties similar in type and class as the manufactured home
communities presently owned by Borrower and at the time of engagement as manager
manage at least twenty-five (25) manufactured home communities similar to the
Properties, not including manufactured home communities owned by Borrower or any
affiliate of Borrower.

"QUALIFIED TRANSFEREE" means (a) GMAC or any Affiliate of GMAC, or (b) one or
more of the following: (i) a real estate investment trust, bank, saving and loan
association, investment bank, insurance company, trust company, commercial
credit corporation, pension plan, pension fund or pension advisory firm, mutual
fund, government entity or plan, (ii) investment company, money management firm
or "qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, as amended, or an institutional "accredited investor"
within the meaning of Regulation D under the Securities Act of 1933, as amended,
which is regularly engaged in the business of making debt and/or equity
investments in real estate, (iii) a Qualified Trustee in connection with a
securitization of, the creation of collateralized debt obligations ("CDO")
secured by or financing through an "owner trust" of, GMAC's equity investment in
ARC, so long as (I) the special servicer or manager of such securitization, CDO
or trust has the Required Special Servicer Rating, (II) the "controlling class"
of such securitization vehicle is held by GMAC or a Qualified Transferee and
(III) the operative documents of the related securitization vehicle, CDO or
financing must require that (x) the "controlling class" or "equity interest" in
such securitization vehicle or CDO are owned by GMAC, a Qualified Transferee or
a Permitted Investment Fund and (y) if any of the relevant trustee, special
servicer, manager or controlling class fails to meet the requirements of such
clause, such entity must be replaced by a qualifying entity within 30 days, (iv)
an investment fund, limited liability company, limited partnership or general
partnership (a "Permitted Investment Fund") where GMAC or a Qualified Transferee
or a Permitted Fund Manager acts as the general partner, managing member or fund
manager and at least 50% of the equity interests in such Investment Fund are
owned, directly or indirectly, by one or more of the following: GMAC, a
Qualified Transferee, an institutional "accredited investor", within the meaning
of Regulation D promulgated under the Securities Act of 1933, as amended, and/or
a "qualified institutional buyer" or both within the meaning of Rule 144A
promulgated under the Securities Exchange Act of 1934 (provided each
institutional "accredited investor" or "qualified institutional buyer" meets the
test set forth in clause (A) below), as amended, (v) any other entity (including
any opportunity funds) regularly engaged in the business of making debt and/or
equity investments in real estate which has been approved as a Qualified
Transferee hereunder by the Rating Agencies, (vi) an institution substantially
similar to any of the foregoing entities described in clauses (b)(i) or (ii) of
this definition, provided that any institution described in clauses (b)(i), (ii)
and (vi) of this definition (A) has total assets (in name or under management)
in excess of $650,000,000 (excluding its investment in ARC) and (except with
respect to a pension advisory firm or similar fiduciary) capital/statutory
surplus or shareholders' equity of $250,000,000 (excluding its investment in
ARC); and (B) is regularly

                                      -11-


engaged in the business of making debt and/or equity investments in real estate
or (vii) any entity Controlled (as defined below) by any one or more of the
entities described in clause (b) above. For purposes of this definition only,
"Control" means the ownership, directly or indirectly, in the aggregate of more
than fifty percent (50%) of the beneficial ownership interest 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.

"QUALIFIED TRUSTEE" means (i) a corporation, national bank, national banking
association or a trust company, organized and doing business under the laws of
any state or the United States of America, authorized under such laws to
exercise corporate trust powers and to accept the trust conferred, having a
combined capital and surplus of at least $100,000,000 and subject to supervision
or examination by federal or state authority, (ii) an institution insured by the
Federal Deposit Insurance Corporation or (iii) an institution whose long-term
senior unsecured debt is rated either of the then in effect top two rating
categories of S&P and either Fitch or Moody's (provided, however, if the Loan
has been Securitized, the rating requirement of any Rating Agency which has not
rated such transactions will be disregarded).

"RATING AGENCIES" shall mean Standard & Poor's Ratings Services, Moody's
Investors Service, Inc. and Fitch, Inc. or, if any such corporation shall for
any reason no longer perform the functions of a securities rating agency, any
other nationally recognized statistical rating agency designated by Lender.

"RATING CONFIRMATION" with respect to the matter in question, shall mean that as
a condition precedent thereto one or more of the Rating Agencies shall have
confirmed in writing that such action shall not result, in and of itself, in a
downgrade, withdrawal or qualification to any rating then assigned to any
outstanding Securities.

"REGISTRATION STATEMENT" shall have the meaning given to such term in SECTION
12.3.

"REGULATION D, G, T, V AND X" shall mean, respectively, Regulation D, G, T, V
and X of the Board of Governors of the Federal Reserve System as from time to
time in effect and any successor to all or a portion thereof.

"REQUIRED SPECIAL SERVICER RATING" means a special servicer rating of "CSS1" in
the case of Fitch, a servicer on its approved list of special servicers in the
case of S&P and, in the case of Moody's, such special servicer is acting as
special servicer in a commercial mortgage loan securitization that was rated by
Moody's within the six month period prior to the date of determination and
Moody's has not downgraded or withdrawn the then-current rating on any class of
commercial mortgage securities or placed any class of commercial mortgage
securities on watch citing the continuation of such special servicer as special
servicer of such commercial mortgage securities provided, however, if the Loan
has been Securitized, the rating requirement of any Rating Agency which has not
rated such transaction shall be disregarded.

"RELEASE DATE" shall mean the date that is two (2) years from (i) the "startup
day" (within the meaning of Section 860G(a)(9) of the Code) of the REMIC Trust
established in connection with

                                      -12-



the last Securitization involving any portion of the Loan or (ii) the last date
of a Secondary Market Transaction arranged by Lender.

"RELEASE PARCEL(S)" shall have the meaning given to such term in Section 13.2.

"REMIC TRUST" shall mean a "real estate mortgage investment conduit" within the
meaning of Section 860D of the Code that holds the Note.

"RENT ROLLS" shall mean the rent rolls for the Properties delivered by Borrower
to Lender in connection with the Loan.

"RENTS" shall mean all rents, income, receipts, accounts, accounts receivable,
royalties, issues, profits, rent equivalent income, security deposits, insurance
proceeds, tax refunds and any other revenues, income benefits or proceeds of any
nature whatsoever generated by, arising from or otherwise relating to the
Properties or any portion thereof excluding rent collected for the rental of
manufactured homes, storage sheds or other assets which are not owned by the
Borrower.

"REQUIRED RESERVE FUNDS" shall mean, collectively, the Tax Funds, the Insurance
Premium Funds, the Capital Improvement Funds, and the Ordinary Capital Reserve
Funds or any other reserves required hereunder.

"SCHEDULED DEFEASANCE PAYMENTS" shall mean in the case of a (i) full Defeasance
Event, the scheduled payments of interest and principal under the Note for all
Monthly Payment Dates occurring after the Defeasance Date and up to and
including the Maturity Date (including the outstanding principal balance on the
Note as of the Maturity Date) and (ii) a partial Defeasance Event, 125% of the
scheduled payments of interest and principal with respect to the Allocated Loan
Amount for the released Property for all Monthly Payment Dates occurring after
the Defeasance Date and up to and including the Maturity Date (including the
outstanding principal balance allocated to the released Property on the Note as
of the Maturity Date).

"SECONDARY MARKET CLOSING DATE" shall have the meaning given to such term in
SECTION 12.2.

"SECONDARY MARKET TRANSACTIONS" shall have the meaning given to such term in
SECTION 12.1.

"SECURITIES" shall have the meaning given to such term in SECTION 12.1.

"SECURITIES ACT" shall have the meaning given to such term in SECTION 12.3.

"SECURITIZATION" shall have the meaning given to such term in SECTION 12.1.

"SECURITY AGREEMENT" shall mean a security agreement and subordinate security
agreement (as to the other ARC Loans) in form and substance that would be
satisfactory to a prudent lender pursuant to which Borrower grants Lender a
perfected, first priority security interest or second priority security
interest, as the case may be, in the Defeasance Collateral Account and the
Defeasance Collateral.

"SERVICER" shall have the meaning given to such term in SECTION 12.7.

                                      -13-


"SINGLE-PURPOSE" The term "Single Purpose" shall mean, with respect to a Person,
other than an individual, that such Person at all times since its formation (i)
has not and will not merge into or consolidate with any Person or dissolve,
terminate or liquidate in whole or in part, transfer or otherwise dispose of all
or substantially all of its assets or change its legal structure, (ii) is formed
or organized solely for the purpose of holding, directly, or, indirectly, an
ownership interest in the Properties, (iii) does not engage in any business
unrelated to the Properties and the financing thereof, (iv) has not and will not
have any assets other than those related to its interest in the Properties or
the financing thereof or any indebtedness other than the Loan and unsecured
trade payables not more than sixty (60) days past due incurred in the ordinary
course of business and in an aggregate amount of not more than 4% of the
Principal Balance, from time to time, of the Loan, (v) maintains its own
separate books and records and its own accounts, in each case which are separate
and apart from the books and records and accounts of any other Person, (vi)
holds itself out as being a Person, separate and apart from any other Person,
(vii) does not and will not commingle its funds or assets with those of any
other Person, (viii) conducts its own business in its own name, (ix) maintains
separate financial statements and will not (A) permit its assets or liabilities
to be listed as assets or liabilities on the financial statement of any other
Person or (B) include the assets or liabilities of any other Person on its
financial statements unless, in connection with any consolidated statements,
such assets are clearly identified as the separate assets of such Person, (x)
pays its own liabilities out of its own funds, (xi) observes all partnership
formalities or corporate formalities or limited liability company formalities,
as applicable and will not, without prior consent of Lender and delivery to
Lender of a Rating Confirmation, amend, modify, terminate or fail to comply with
the provisions of such Person's partnership agreement, articles or certificate
of incorporation, articles of organization or similar organizational documents,
as the case may be, (xii) maintains an arm's-length relationship with its
Affiliates, (xiii) pays the salaries of its own employees and maintains a
sufficient number of employees in light of its contemplated business operations,
(xiv) does not guarantee or otherwise obligate itself with respect to the debts
of any other Person or hold out its credit as being available to satisfy the
obligations of any other Person, (xv) does not acquire obligations or securities
of its partners, members or shareholders, (xvi) allocates fairly and reasonably
shared expenses, including, without limitation, any overhead for shared office
space and services performed by any employee of an Affiliate, (xvii) uses
separate stationery, telephone numbers, invoices, and checks or otherwise
identifies itself as a separate legal entity from its Affiliates, (xviii) does
not and will not pledge its assets for the benefit of any other Person or make
any loans or advances to any other Person, (xix) does and will correct any known
misunderstanding regarding its separate identity, (xx) maintains adequate
capital in light of its contemplated business operations, (xxi) does not and
will not own any subsidiary or make an investment in any Person without the
consent of the Lender and delivery to the Lender of a Rating Confirmation,
(xxii) has not and will not become insolvent or fail to pay its debts and
liabilities (including, as applicable, shared personnel and overhead expenses)
from its assets as the same shall become due, (xxiii) has not and will not seek
dissolution or winding up in whole, or in part, of such Person, (xxiv) has and
will file its own tax returns and not be included on the tax returns of any
other Person except as required by applicable law, (xxv) has and will conduct
its business solely in its own name or a name franchised or licensed to it by a
Person other than an Affiliate of such Person and not as a division or part of
any other Person in order not to (A) mislead others as to the identity with
which such other party is transacting business, or (B) suggest that such Person
is responsible for the debts of any third party (including any Affiliate of such
Person), (xxvi) has


                                      -14-


not and will not share any common logo with or hold itself out as or be
considered as a department or division of any other Person, (xxvii) has and will
hold all of its assets in its own name, (xxviii) other than the Guaranty
(Recourse Obligations) has not and will not have any of its obligations
guaranteed by any Affiliate of such Person (xxix) will not violate or cause to
be violated the assumptions made with respect to such Person and its general
partner(s) or managing member(s), as applicable (collectively, a "Controlling
Party") in any opinion letter pertaining to substantive consolidation (a
"Non-Consolidation Opinion") delivered to the Lender and one or more of the
Rating Agencies in connection with the Loan, (xxx) if applicable, permit the
board of directors of its Controlling Party to take any action which, under the
terms of any certificate of incorporation, by-laws or any voting trust agreement
with respect to any common stock, requires the unanimous vote of one hundred
percent (100%) of the members of the board unless at the time of such action
there shall be at least two (2) members who are Independent Directors, and
(xxxi) has and will have a partnership or operating agreement, certificate of
incorporation or other organizational document which complies with the
Single-Purpose standards and requirements set by the Rating Agencies at such
time. In addition, if such Person is a limited partnership, then, at all times:
(1) all general partners of such Person shall be a Single-Purpose Person and (2)
if such Person has more than one general partner, then the organizational
documents shall provide that such Person shall continue (and not dissolve) for
so long as a solvent general partner exists. In addition, if such Person is a
corporation, then, at all times: (1) such Person shall have at least two (2)
Independent Directors, (2) the board of directors of such Person may not take
any action requiring the unanimous affirmative vote of one hundred percent
(100%) of the members of the board of directors unless all of the directors,
including the Independent Directors, shall have participated in such vote and
(3) such Person shall consider the interests of its creditors in connection with
all corporate actions to the extent permitted by applicable law. In addition, if
such Person is a limited liability company, then, at all times: (1) each
managing member shall be a Single-Purpose Person, (2) its articles of
organization, certificate of formation and/or operating agreement, as
applicable, shall provide that such entity will dissolve only upon the
bankruptcy of each managing member, and (3) if such Person has more than one
managing member, then the organizational documents shall provide that such
Person shall continue (and not dissolve) for so long as a solvent managing
member exists; in the alternative, if the members of such limited liability
company are not the managers, such limited liability company shall be managed by
not less than three individuals, two of which shall constitute Independent
Managers and such Person may not take any action requiring the unanimous
affirmative vote of one hundred percent (100%) of the managers unless at the
time of such action there shall be at least two (2) managers who are Independent
Managers, and all the managers, including the Independent Managers, shall have
participated in such vote and such Person shall consider the interests of its
creditors in connection with all limited liability company actions to the extent
permitted by applicable law. In addition, such Person (1) without the unanimous
consent of all of the partners, directors, members or managers, as applicable,
has not and will not with respect to itself or to any other Person in which it
has a direct or indirect legal or beneficial interest (a) seek or consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator,
custodian or other similar official for such Person or all or any portion of
such Person's properties, or (b) take any action that might cause such Person to
become insolvent, (2) has and will maintain its books, records, resolutions and
agreements as official records, (3) has held and will hold its assets in its own
name, (4) has and will maintain its financial statements, accounting records and
other entity documents separate and apart from any

                                      -15-


other Person, (5) has not and will not identify its partners, members or
shareholders, or any affiliates of any of them as a division or part of it.
Notwithstanding the foregoing, Lender agrees that until a Securitization of the
Loan shall occur, the requirements with respect to an Independent Director
and/or Manager shall be satisfied by one (1) such Independent Director and/or
Manager.

"SPONSOR OWNED HOME" shall mean any manufactured home located at the Properties
owned by Borrower, any affiliate of Borrower and any parent entity of Borrower.

"SUCCESSOR BORROWER" shall have the meaning set forth in SECTION 2.5.3.

"TAKEN PROPERTY" shall have the meaning given to such term in SECTION 6.2.

"TAX ACCOUNT" shall have the meaning given to such term in SECTION 9.9.

"TAX FUNDS" shall have the meaning given to such term in SECTION 9.1.1.

"TAXES" shall mean, with respect to the Properties, all real estate taxes,
personal property taxes, assessments, water rates, sewer rents, and other
charges, including vault charges and license fees for the use of vaults, chutes
and similar areas adjoining the Properties, now or hereafter levied or assessed
against the Properties.

"TITLE COMPANY" shall mean, First American Title Insurance Company, Land America
and Chicago Title Insurance Company and other national title company acceptable
to Lender.

"TITLE INSURANCE POLICY" shall mean a title insurance policy issued by the Title
Company in favor of Lender, its successors and assigns, as their interests may
appear insuring the lien of a mortgage in an amount determined by Lender.

"TRUSTEE" shall mean any trustee holding the Loan in a Securitization.

"UNDERWRITABLE CASH FLOW" shall, with respect to any period of time, mean the
excess of Gross Revenue for such period of time over Operating Expenses for such
period of time. Lender's calculation of Underwritable Cash Flow (including
determination of items that do not qualify as Gross Revenue or Operating
Expenses) shall be final absent manifest error. Underwritable Cash Flow shall be
subject to adjustment by Lender to normalize extraordinary costs of expenses and
receipt of extraordinary Gross Revenue items.

"UNDERWRITER GROUP" shall have the meaning given to such term in SECTION 12.3.

"USPAP" shall mean Uniform Standards of Professional Appraisal Practices.

"U.S. GOVERNMENT OBLIGATIONS" shall mean any direct obligations of the United
States Government or any agency or instrumentality thereof, provided that such
obligations are backed by the full faith and credit of the United States,
including, without limitation, treasury bills, notes and bonds, and having a
maturity of not more than one (1) year.

                                      -16-


"YIELD MAINTENANCE PREMIUM" shall mean an amount equal to the greater of: (i)
one percent (1%) of the principal amount of the Loan being prepaid or (ii) the
present value as of the Prepayment Date of the Calculated Payments from the
Prepayment Date through the Maturity Date determined by discounting such
payments at the Discount Rate. As used in this definition, the term "PREPAYMENT
DATE" shall mean the date on which prepayment is made. As used in this
definition, the term "CALCULATED PAYMENTS" shall mean the monthly payments of
interest only which would be due based on the principal amount of the Loan being
prepaid on the Prepayment Date and assuming an interest rate per annum equal to
the difference (if such difference is greater than zero) between (y) the
Interest Rate and (z) the Yield Maintenance Treasury Rate, when compounded
semi-annually. As used in this definition, the term "DISCOUNT RATE" shall mean
the rate which, when compounded monthly, is equivalent to the Yield Maintenance
Treasury Rate, when compounded semi-annually. As used in this definition, the
term "YIELD MAINTENANCE TREASURY RATE" shall mean the yield calculated by Lender
by the linear interpolation of the yields, as reported in the Federal Reserve
Statistical Release H.15-Selected Interest Rates under the heading U.S.
Government Securities/Treasury Constant Maturities for the week ending prior to
the Prepayment Date, of U.S. Treasury Constant Maturities with maturity dates
(one longer or one shorter) most nearly approximating the Maturity Date. In the
event Release H.15 is no longer published, Lender shall select a comparable
publication to determine the Yield Maintenance Treasury Rate. In no event,
however, shall Lender be required to reinvest any prepayment proceeds in U.S.
Treasury obligations or otherwise.

          SECTION 1.2 Principles of Construction. All references to sections,
exhibits and schedules are to sections, exhibits and schedules in or to this
Agreement unless otherwise specified. Unless otherwise specified, the words
"hereof", "herein" and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement. Unless otherwise specified, all meanings attributed
to defined terms herein shall be equally applicable to both the singular and
plural forms of the terms so defined.

                                  ARTICLE II.

                                    THE LOAN

          SECTION 2.1 The Loan.

                    2.1.1. Agreement to Lend and Borrow. Subject to and upon the
terms and conditions set forth herein, Lender hereby agrees to make the Loan to
Borrower and Borrower hereby accepts the Loan from Lender. Borrower shall
receive only one borrowing hereunder in respect of the Loan and any amount
borrowed and repaid hereunder in respect of the Loan may not be reborrowed.

                    2.1.2. The Note, the Mortgage and the Other Loan Documents.
The Loan shall be evidenced by, and payable, together with interest thereon, in
accordance with the provisions of the Note and this Agreement, shall be secured
by the Mortgages, the Assignment of Leases and the other Loan Documents and
shall be governed by this Agreement, it being

                                      -17-


understood that the Note, the Mortgages and the other Loan Documents shall be
cross-defaulted and cross-collateralized in the manner hereinafter set forth.

                    2.1.3. Use of Proceeds. Borrower shall use the proceeds of
the Loan to (i) finance the Properties, (ii) fund capital improvements of the
Properties in the manner hereinafter set forth, and (iii) retain for use by
Borrower or, subject to the terms of this Agreement, distribute to its members
the balance, if any.

                    2.1.4. Loan. The Loan shall be made by Lender to Borrower on
the Closing Date and shall be evidenced by the Note and secured by, inter alia,
the Mortgages.

          SECTION 2.2 Interest Rate.

                    2.2.1. Interest Rate. Subject to the provisions of SECTION
2.2.2, interest on the Principal Balance of the Note shall accrue from the date
of advance up to, but not including, the Maturity Date at the Interest Rate.

                    2.2.2. Default Rate. The Principal Balance of the Loan and,
to the extent permitted by law, overdue interest in respect of the Loan, shall
accrue interest at the Default Rate from the earlier to occur of an Event of
Default and the Maturity Date to, but not including, the earlier to occur of the
date the Principal Balance of the Loan and all other amounts due and owing under
this Agreement, the Note and the other Loan Documents have been paid in full and
the date the Event of Default has been cured.

                    2.2.3. Interest Calculation. Interest on the Principal
Balance shall be calculated by multiplying (a) the actual number of days elapsed
in the period for which the calculation is being made by (b) a daily rate based
on a three hundred sixty (360) day year by (c) the Principal Balance.

                    2.2.4. Usury Savings. This Agreement and the other Loan
Documents are subject to the express condition that at no time shall Borrower be
required to pay interest on the Principal Balance at a rate which could subject
Lender to either civil or criminal liability as a result of being in excess of
the Maximum Legal Rate. If by the terms of this Agreement or the other Loan
Documents, Borrower is at any time required or obligated to pay interest on the
Principal Balance due hereunder at a rate in excess of the Maximum Legal Rate,
the interest rate shall be deemed immediately reduced to the Maximum Legal Rate
and all previous payments in excess of the Maximum Legal Rate shall be deemed
payments in reduction of principal and not on account of interest due hereunder.
All sums paid or agreed to be paid to Lender for the use, forbearance, or
detention of the sums due under the Loan shall, to the extent permitted by
applicable law, be amortized, prorated, allocated, and spread throughout the
full term of the Loan until payment in full so that the rate or amount of
interest on account of the Loan does not exceed the Maximum Legal Rate.

          SECTION 2.3. Loan Payments.

                    2.3.1. Payment Before Maturity Date. Borrower shall make a
payment to Lender of interest only with respect to the Loan on the date hereof
for the period from the Closing Date to, but not including, June 1, 2002.
Borrower shall make a payment to Lender of

                                      -18-


an equal monthly payment in the amount of $320,987 on the Monthly Payment Date
occurring on July 1, 2002 and on each Monthly Payment Date thereafter to, but
not including, the Maturity Date

                    2.3.2. Payment on Maturity Date. Borrower shall pay to
Lender on the Maturity Date, the Principal Balance of the Loan, all accrued and
unpaid interest and all other amounts due hereunder and under the Note, the
Mortgages and the other Loan Documents.

                    2.3.3. Intentionally Omitted.

                    2.3.4. Late Payment Charge. If any principal, payment of
interest and any other sums due under the Loan Documents, other than the payment
of principal due on the Maturity Date is not paid by Borrower on the date on
which it is due, Borrower shall pay to Lender upon demand an amount equal to the
lesser of three percent (3%) of such unpaid sum or the maximum amount permitted
by applicable law in order to defray the expense incurred by Lender in handling
and processing such delinquent payment and to compensate Lender for the loss of
the use of such delinquent payment. Any such amount shall be secured by the
Mortgages and the other Loan Documents.

                    2.3.5. Method and Place of Payment. (a) Except as otherwise
specifically provided herein, all payments and prepayments under this Agreement
and the Note shall be made to Lender not later than 1:00 P.M. New York City
time, on the date when due and shall be made in lawful money of the United
States of America in immediately available funds at Lender's office, and any
funds received by Lender after such time shall, for all purposes hereof, be
deemed to have been paid on the next succeeding Business Day.

     (b) Whenever any payment to be made hereunder or under any other Loan
Document shall be stated to be due on a day which is not a Business Day, the due
date thereof shall be extended to the next succeeding Business Day and, with
respect to payments of principal, interest shall be payable at the Interest Rate
during such extension.

                    SECTION 2.4. Prepayments.

                    2.4.1. Voluntary Prepayments. The Debt may not be prepaid,
either in whole or in part, at any time during the period of this Agreement

                    2.4.2. Mandatory Prepayments. On each date on which Borrower
actually receives a distribution of the Net Proceeds or Net Restoration Award in
respect of any Property, if Lender does not make such proceeds or award
available to Borrower for the restoration of such Property in accordance with
the provisions of ARTICLE VI, Borrower shall prepay the outstanding principal
balance of the Note pertaining to such Property (based on the Allocated Loan
Amount therefore) in an amount equal to one hundred percent (100%) of such Net
Proceeds or Net Restoration Award together with interest that would have accrued
on such amount through, but not including, the next Monthly Payment Date. No
Yield Maintenance Premium shall be due in connection with any prepayment made
pursuant to this SECTION 2.4.2

                    2.4.3. Prepayments After Default. If after the occurrence
and continuance of an Event of Default, payment of all or any part of the
principal of the Loan is

                                      -19-


tendered by Borrower, a purchaser at foreclosure or any other Person, such
tender shall be deemed an attempt to circumvent the prohibition against
prepayment set forth in SECTION 2.4.1 and Borrower, such purchaser at
foreclosure or other Person shall pay the Yield Maintenance Premium, in addition
to the outstanding principal balance of the Loan, all accrued and unpaid
interest and other amounts payable under the Loan Documents. The full amount of
any such prepayment shall be applied by Lender toward the payment of interest
and/or principal of the Loan and/or any other amounts due under the Loan
Documents in such order, priority and proportions as Lender in its sole
discretion shall deem proper.

          SECTION 2.5. Defeasance.

                    2.5.1. Conditions to Defeasance. (a) Provided no Event of
Default shall have occurred and remain uncured, Borrower shall have the right at
any time after the Release Date to voluntarily defease the entire Loan or a
portion thereof (subject to the limitations set forth in SECTION 13.1 and
herein) and obtain a release of the lien of the Mortgages (or in the case of a
partial Defeasance, the Mortgage encumbering such released Property) by
providing Lender with the Defeasance Collateral (hereinafter, a "DEFEASANCE
EVENT"), subject to the satisfaction of the following conditions precedent:

                              (i) Borrower shall provide Lender not less than
                    thirty (30) days notice (or such shorter period of time if
                    permitted by Lender in its sole discretion) specifying a
                    date (the "DEFEASANCE DATE") on which the Defeasance Event
                    is to occur;

                              (ii) Borrower shall pay to Lender (A) all payments
                    of principal and interest due on the Loan to and including
                    the Defeasance Date, and (B) all other sums, then due under
                    the Note, this Agreement, the Mortgages and the other Loan
                    Documents;

                              (iii) Borrower shall deposit the Defeasance
                    Collateral into the Defeasance Collateral Account and
                    otherwise comply with the provisions of SECTIONS 2.5.2 and
                    2.5.3 hereof;

                              (iv) Borrower shall execute and deliver to Lender
                    a Security Agreement in respect of the Defeasance Collateral
                    Account and the Defeasance Collateral;

                              (v) Borrower shall deliver to Lender an opinion of
                    counsel for Borrower that is standard in commercial lending
                    transactions and subject only to customary qualifications,
                    assumptions and exceptions opining, among other things, that
                    (A) Lender has a legal and valid perfected first priority
                    security interest in the Defeasance Collateral Account and
                    the Defeasance Collateral, (B) if a Securitization has
                    occurred, the REMIC Trust formed pursuant to such
                    Securitization will not fail to maintain its status as a
                    "real estate mortgage investment conduit" within the meaning
                    of Section 860D of the Code as a result of a Defeasance
                    Event pursuant to this SECTION 2.5, (C) the Defeasance Event

                                      -20-


                    will not result in a deemed exchange for purposes of the
                    Code and will not adversely affect the status of the Note as
                    indebtedness for federal income tax purposes, (D) delivery
                    of the Defeasance Collateral and the grant of a security
                    interest therein to Lender shall not constitute an avoidable
                    preference under Section 547 of the Bankruptcy Code or
                    applicable state law and (E) a non-consolidation opinion
                    with respect to the Successor Borrower;

                              (vi) Borrower shall deliver to Lender a Rating
                    Confirmation as to the Defeasance Event;

                              (vii) Borrower shall deliver an Officer's
                    Certificate certifying that the requirements set forth in
                    this Section 2.5 have been satisfied;

                              (viii) Borrower shall deliver a certificate of a
                    "Big Five" accounting firm ("Approved Accounting Firm")
                    certifying that the Defeasance Collateral will generate
                    monthly amounts equal to or greater than the Scheduled
                    Defeasance Payments;

                              (ix) Borrower shall deliver such other
                    certificates, opinions, documents and instruments as Lender
                    may reasonably request; and

                              (x) Borrower shall pay all out-of-pocket
                    reasonable costs and expenses of Lender incurred in
                    connection with the Defeasance Event, including Lender's
                    reasonable attorneys' fees and expenses and Rating Agency
                    fees and expenses.

                    (b) If Borrower has elected to defease the Note, either in
full or in part as provided herein, and the requirements of this SECTION 2.5
have been satisfied, the applicable Properties shall be released from the lien
of the Mortgages and, in the case of a full Defeasance Event, the Defeasance
Collateral pledged pursuant to the Security Agreement shall be the sole source
of collateral securing the Note. In connection with the release of such liens,
Borrower shall submit to Lender, not less than thirty (30) days prior to the
Defeasance Date (or such shorter time as is acceptable to Lender in its sole
discretion), a release of such lien(s) (and related Loan Documents) for
execution by Lender. Such release shall be in a form appropriate in the
jurisdiction in which the Properties encumbered thereby are located and that
contains standard provisions protecting the rights of the releasing lender. In
addition, Borrower shall provide all other documentation Lender reasonably
requires to be delivered by Borrower in connection with such release, together
with an Officer's Certificate certifying that such documentation (i) is in
compliance with all Legal Requirements, and (ii) will effect such release in
accordance with the terms of this Agreement. Borrower shall pay all costs, taxes
and expenses associated with the release of the lien of the Mortgages, including
Lender's reasonable attorneys' fees. Except as set forth in this Section 2.5, no
repayment, prepayment or defeasance of all or any portion of the Note shall
cause, give rise to a right to require, or otherwise result in, the release of
the lien of the Mortgage on the Property.

                                      -21-


                  2.5.2. Defeasance Collateral Account. On or before the date on
which Borrower delivers the Defeasance Collateral, Borrower shall open at any
Eligible Institution the defeasance collateral account (the "DEFEASANCE
COLLATERAL ACCOUNT") which shall at all times be an Eligible Account. The
Defeasance Collateral Account shall contain only (i) Defeasance Collateral, and
(ii) cash from interest and principal paid on the Defeasance Collateral. All
cash from interest and principal payments paid on the Defeasance Collateral
shall be paid over to Lender on each Monthly Payment Date and applied first to
accrued and unpaid interest and then to principal. Any cash from interest and
principal paid on the Defeasance Collateral not needed to pay the Scheduled
Defeasance Payments shall be paid to Borrower monthly after Borrower causes the
Scheduled Defeasance Payments to be made to Lender. Borrower shall cause the
Eligible Institution at which the Defeasance Collateral is deposited to enter an
agreement with Borrower and Lender, satisfactory to Lender in its sole
discretion, pursuant to which such Eligible Institution shall agree to hold and
distribute the Defeasance Collateral in accordance with this Agreement. The
Borrower or Successor Borrower, as applicable, shall be the owner of the
Defeasance Collateral Account and shall report all income accrued on Defeasance
Collateral for federal, state and local income tax purposes in its income tax
return. Borrower shall prepay all cost and expenses associated with opening and
maintaining the Defeasance Collateral Account. Lender shall not in any way be
liable by reason of any insufficiency in the Defeasance Collateral Account.

                  2.5.3. Successor Borrower. In connection with a Defeasance
Event under this Section 2.5, Borrower shall, if required by the Rating Agencies
or if Borrower elects to do so, establish or designate a successor entity (the
"SUCCESSOR BORROWER") which shall be a single purpose bankruptcy remote entity
and which shall be approved by the Rating Agencies. Any such Successor Borrower
may, at Borrower's option, be an Affiliate of Borrower unless the Rating
Agencies shall require otherwise. Borrower shall transfer and assign all
obligations, rights and duties under and to the Note, together with the
Defeasance Collateral to such Successor Borrower; provided, however, fee title
to the Property shall not be transferred to such Successor Borrower. Such
Successor Borrower shall assume the obligations under the Note and the Security
Agreement and Borrower shall be relieved of its obligations under such
documents. Borrower shall pay a minimum of $1,000 to any such Successor Borrower
as consideration for assuming the obligations under the Note and the Security
Agreement. Borrower shall pay all costs and expenses incurred by Lender,
including Lender's reasonable out-of-pocket attorney's fees and expenses,
incurred in connection therewith.

         SECTION 2.6. Fees.

                  2.6.1. Intentionally Omitted.

                  2.6.2. Origination Fee. Borrower shall pay to Lender on the
Closing Date a fee (the "ORIGINATION FEE") in an amount equal to 1% multiplied
by the Principal Balance of the Loan less the "EXPOSURE FEE" previously paid by
Borrower to Lender. The Origination Fee shall constitute part of the Debt and
the obligation of Borrower to pay the Origination Fee pursuant to this Section
shall be secured by the Mortgages and the other Loan Documents.

                                      -22-


                                  ARTICLE III.

                              INTENTIONALLY OMITTED

                                  ARTICLE IV.

                         REPRESENTATIONS AND WARRANTIES

               SECTION 4.1. Borrower Representations. Borrower hereby represents
and warrants as follows:

                    4.1.1. Existence; Organization and Authority. Borrower is a
limited liability company duly organized, validly existing and in good standing
under the laws of the State of its organization with full power and authority to
own its assets and conduct its business, is duly qualified in all jurisdictions
in which the ownership or lease of its property or the conduct of its business
requires such qualification, except where the failure to be so qualified would
not have a material adverse effect on its ability to perform its obligations
hereunder, and Borrower has taken all necessary action to authorize the
execution, delivery and performance of this Agreement and the other Loan
Documents by it, and has the power and authority to execute, deliver and perform
under this Agreement, the other Loan Documents and all the transactions
contemplated thereby.

                    4.1.2. Ownership. As of the date of this Agreement, the sole
member of (i) Borrower is ARC MEZZ and (ii) ARC MEZZ is ARC. ARC IV, ARC LLC and
GMAC are the sole members of ARC and ARC IV is the sole managing member of ARC.
As of the date of this Agreement, Scott D. Jackson is the manager of Borrower.
ARC REIT has a one hundred (100%) percent general partnership interest in ARC
IV. Robert C. Campbell is, as of the date of this Agreement, the Independent
Manager of Borrower and Robert W. Grier as of the date of this Agreement, the
Independent Manager of ARC MEZZ. ARC Management Services, Inc., a Delaware
corporation, serves as the Property Manager of the Properties pursuant to the
Management Agreement.

                    4.1.3. Single Purpose Entity. Each of Borrower and ARC MEZZ
is a Single Purpose entity. The sole business of Borrower is the ownership,
management and operation of the Properties and the sole business of ARC MEZZ is
its 100% membership interest in Borrower.

                    4.1.4. No Conflicts. The execution, delivery and performance
by Borrower of this Agreement and the other Loan Documents, will not (i) violate
(A) any provision of any law, rule, regulation, order, writ, judgment, decree,
determination or award having applicability to Borrower or any of the
organizational documents of Borrower, or (B) any indenture, agreement or other
instrument to which Borrower is a party, or by which Borrower or its properties
or assets is bound, or (ii) be in conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any such
indenture, agreement or other instrument, or (iii) result in or require (except
as specifically contemplated by this Agreement)

                                      -23-


the creation or imposition of any lien of any nature upon any of the assets or
property of Borrower.

                    4.1.5. Enforceability. This Agreement has been duly executed
and constitutes, and (when executed and delivered by Borrower) each other Loan
Document now or hereafter executed and delivered by Borrower pursuant hereto or
thereto or in connection herewith, or therewith, will each constitute the legal,
valid and binding obligation of Borrower enforceable against Borrower in
accordance with their terms, except as enforcement may be limited by equitable
principles of law, bankruptcy, insolvency and other similar laws affecting the
enforcement of creditors' rights generally.

                    4.1.6. No Consents. No consent, approval, authorization,
license or formal exemption from, nor any filing, declaration or registration
with, any Person or Governmental Authority is required by Borrower for the
execution, delivery and performance by Borrower or compliance by Borrower with,
this Agreement or the other Loan Documents or the consummation of the
transaction contemplated hereby, other than those already obtained or completed
by Borrower.

                    4.1.7. Litigation. There are no actions, suits or
proceedings pending or, to the knowledge of Borrower, threatened against
Borrower or any of its properties or assets by or before any court or any
Governmental Authority which would materially and adversely affect the ability
of Borrower to perform its obligations hereunder or to consummate the
transaction contemplated hereby.

                    4.1.8. Tax Returns. Borrower has filed, or caused to be
filed, or sought valid extensions for filing, all returns (federal, state, local
and foreign) required to be filed and paid all amounts of taxes shown thereon to
be due (including interest and penalties) and has paid all other taxes, material
fees, assessments and other material governmental charges owing by it, except
such taxes which are not delinquent. No tax liens other than tax liens affecting
individual manufactured homes located on the Property and not affecting the
Property have been filed against Borrower or against its assets and property.

                    4.1.9. No Defaults. Borrower is not in default beyond any
applicable grace or cure period under any contract, lease, agreement or other
instrument or under any order, judgment, award or decree of any court arbitrator
or other Governmental Authority binding upon or affecting it or by which it or
its property or assets may be bound. No Event of Default has occurred and is
continuing and no event has occurred which but for notice, lapse of time, or
both, would constitute an Event of Default.

                    4.1.10. No Misrepresentations. Neither this Agreement, nor
any other Loan Document nor any document, financial statement, report, notice,
schedule, certificate, statement or other writing furnished by Borrower in
connection with the Loan or otherwise in connection with the transactions
contemplated hereby, contains any untrue or misleading statement of, or omission
of, any material fact.

                    4.1.11. Financial Information. All financial data,
including, without limitation, the financial statements of Borrower and
statements of cash flow and income and


                                      -24-


operating expense with respect to each Property, that have been delivered to
Lender, (i) are true, complete and correct in all material respects, and
accurately represent the financial condition of Borrower and the Properties in
all material respects as of the date of such statements, and (iii) have been
prepared in accordance with GAAP through the periods covered. Since the date of
such statements, there has not occurred any material adverse change in the
business, assets, operations, property or financial or other condition of
Borrower or in the operations of any Property which has not been disclosed to
the Lender.

                    4.1.12. Use of Proceeds; Margin Stock. Borrower does not own
"margin stock". None of the proceeds of the Loan will be used for the purpose of
purchasing or carrying an "margin stock" as defined in Regulation U, Regulation
X, Regulation G or Regulation T or for the purpose of reducing or retiring any
indebtedness which might constitute this transaction a "purpose credit" within
the meaning of Regulation U, Regulation X or Regulation G.

                    4.1.13. ERISA. Borrower is not an "employee benefit plan" as
defined in Section 3(3) of ERISA, or a "governmental plan" as defined in Section
3(32) of ERISA, or a "plan" as defined in Section 4975(e)(1) of the Internal
Revenue Code and none of the assets of Borrower constitute "plan assets" as
defined in 29 C.F.R. Section 2510.3-101.

                    4.1.14. Government Regulation. Borrower is not subject to
regulation under the Public Utility Holding Company Act of 1935 or the Federal
Power Act, each as amended. Borrower is not (i) an "investment company"
registered or required to be registered under the Investment Company Act of
1940, as amended and is not controlled by such a company, or (ii) a "holding
company", or a "subsidiary company" of a "holding company" or an "affiliate" of
a "holding company" or of a "subsidiary company" of a "holding company" within
the meaning of the Public Utility Holding Company Act of 1935, as amended.
Borrower is not an investment company within the meaning of the Investment
Company Act of 1940.

                    4.1.15. Bank Holding Company. As of the Closing Date,
Borrower is not a "bank holding company" or a direct or indirect subsidiary of a
"bank holding company" as defined in the Bank Holding Company Act of 1956, as
amended, and Regulation Y thereunder of the Board of Governors of the Federal
Reserve System.


                    4.1.16. Foreign Person. Borrower is not a "foreign person"
within the meaning of Section 1445 or 7701 of the Internal Revenue Code.

                    4.1.17. Trade Name; Place of Business. Other than with
respect to the operation of individual Properties, Borrower does not use a trade
name and Borrower has not conducted and does not presently conduct business
under any name other than its actual name set forth herein. The principal place
of business of Borrower is as stated in the recitals hereto. The trade names
under which Borrower is currently operating any of the Properties are set forth
in SCHEDULE 4.1.16.

                    4.1.18. Solvency; No Intent to Defraud. Borrower is in a
solvent condition. As used herein, "solvent" means that the present fair
saleable value of Borrower's assets is in excess of the total amount of its
liabilities (including contingent liabilities); Borrower is able to pay its
debts as they become due; and Borrower does not have unreasonably small

                                      -25-


capital to carry on such Person's business as theretofore operated and all
businesses in which such Person is about to engage. Borrower has not entered
into the Loan Documents or the transactions contemplated thereby with the actual
intent to hinder, delay or defraud any creditor.

                    4.1.19. Liens. When duly recorded or filed in the
appropriate public records, the Mortgages and the Financing Statements shall
each create in the Lender (i) valid, first priority, perfected liens upon the
applicable Property and (ii) perfected security interests in and to, and
perfected collateral assignments of, all personalty (including the Leases and
Rents), all in accordance with the terms thereof, in such case subject only to
the Permitted Title Exceptions. To the best of Borrower's knowledge, there are
no mechanic's, materialman's or other similar liens or claims which have been
filed for work, labor or materials affecting any Property which are or may be
liens prior to, or equal or coordinate with, the lien of the related Mortgage,
unless such lien is insured against under the related title insurance policy.

                    4.1.20. Assignment of Leases. Each Assignment of Leases and
Rents creates a valid assignment of, or a valid security interest in, the Rents
and certain rights under the related Leases, subject only to a license granted
to Borrower to exercise certain rights and to perform certain obligations of the
lessor under the Leases, including the right to operate the Property unless and
until an Event of Default shall have occurred. No Person other than Borrower and
Lender has any interest in or assignment of the Leases or any portion of the
Rents due and payable or to become due and payable thereunder.

                    4.1.21. Title. Borrower has good, marketable and insurable
title in fee simple to the Properties free and clear of all liens and monetary
encumbrances of any nature whatsoever except for the Permitted Title Exceptions.

                    4.1.22. Compliance; Licenses and Violations. The Properties
and their use comply in all material respects with all applicable zoning
resolutions, building codes, fire safety, environmental, subdivision and other
applicable laws, rules and regulations including, without limitation, the
Americans with Disabilities Act or are grandfathered under prior regulations.
All permits and approvals, including, without limitation, certificates of
occupancy required by any Governmental Authority for the use, occupancy and
operation of each of the Properties in the manner in which such Property is
currently being used, occupied and operated have been obtained and are in full
force and effect other than such immaterial permits and approvals for which the
failure to obtain will not have a material adverse effect on the Property or the
operation thereof. Except as otherwise set forth in SCHEDULE 4.1.21, Borrower
has no knowledge of any notices of violation of Federal law or municipal
ordinances or orders or requirements of the States in which the Properties are
located or any municipal department or other governmental authority having
jurisdiction over any of the Properties.

                    4.1.23. No Damage; No Condemnation. No portion of any
Property nor any improvements located on any Property which are material to the
operation, use or value of a Property, are damaged or injured in any material
respect as a result of any fire, explosion, accident, flood or other casualty.
Except as otherwise set forth in SCHEDULE 4.1.22, no condemnation or eminent
domain proceeding has been commenced or to the knowledge of Borrower is
threatened against any Property.

                                      -26-


                  4.1.24. Leases. Except as may be required by applicable law,
or in circumstances where Leases were in existence at the time Borrower acquired
a particular Property, all Leases at the Properties are in substantially the
standard form submitted to Lender for approval, with such customary market
charges as shall not materially affect the rights of landlord thereunder or are
otherwise on substantially similar terms. The Leases identified on the Rent Roll
submitted to Lender are in full force and effect and except as noted therein, to
the best of Borrower's knowledge, there are no defaults thereunder by either
party. Except as otherwise set forth in the Rent Roll submitted to Lender, no
Rent (excluding security deposits) has been paid more than one (1) month in
advance of its due date.

                  4.1.25. No Material Agreements. Other than the Leases, the
Permitted Title Exceptions, the Management Agreement, service and supply
contracts cancellable on not more than thirty (30) days' notice and arm's-length
third party contracts for cable service, laundry services, trash contracts and
sewer facilities not cancellable on thirty (30) days or less notice and which do
not in the aggregate provide for annual payments by Borrower in excess of
$25,000, there are no other agreements affecting the Properties.

                  4.1.26. Flood Zone. Except as disclosed on the surveys of the
Properties delivered to and approved by Lender, none of the Properties are
located in an area identified by the Federal Emergency Management Agency as a
special flood hazard area.

                  4.1.27. Utilities and Public Access. Each of the Properties
has rights of access to public ways and is served by water, sewer, sanitary
sewer and storm drainage adequate to service such Property for its intended
uses.

                  4.1.28. Separate Lots. Each Property is comprised of one (1)
or more parcels which constitutes a separate tax lot and does not constitute a
portion of any other tax lot not a part of such Property.

                  4.1.29. Assessments. Except as disclosed in writing to Lender,
to the best of Borrower's knowledge, there are no pending or proposed special or
other assessments for public improvements or otherwise affecting any of the
Properties.

                  4.1.30. Intentionally Omitted.

                  4.1.31. Boundaries. Except as shown on the surveys of the
Properties, all of the improvements which were included in determining the
appraised value of each Property lie wholly within the boundaries and building
restriction lines of such Property, and no improvements on adjoining properties
encroach upon such Property, and no easements or other encumbrances affecting
such Property encroach upon any of the improvements, so as to affect the value
or marketability of the applicable Property except those which are insured
against by title insurance.

                  4.1.32. Insurance. Borrower maintains with financially sound
and reputable insurance companies, with premiums at all times currently paid,
property and casualty insurance upon fixed assets and inventories, public
liability insurance, fidelity bond coverage, business interruption insurance,
and all insurance required by law, all in form and amounts required by law and
customary to the nature of its businesses and properties, and including,


                                      -27-


without limitation, the Insurance Policies required pursuant to SECTION 6.1.
Borrower has not received notice from any insurance company or bonding company
of any defect or inadequacy in any Property, or any portion thereof, which would
adversely affect its insurability or cause the imposition of extraordinary
premiums or charges thereon or any termination of any policy of insurance or
bond.

                  4.1.33. Transfer Taxes; Mortgage Taxes; Real Property Taxes.
All transfer taxes, deed stamps, intangible taxes or other amounts in the nature
of transfer taxes required to be paid under applicable legal requirements in
connection with the transfer of the Properties to Borrower have been paid. All
mortgage, mortgage recording, stamp, intangible or other similar tax required to
be paid under applicable Legal Requirements in connection with the execution,
delivery, recordation, filing, registration, perfection or enforcement of any of
the Loan Documents, including, without limitation, the Mortgages, have been
paid. All taxes and governmental assessments due and owing in respect of each
Property have been paid, or an escrow of funds in an amount sufficient to cover
such payments has been established hereunder or are insured against by the title
insurance policy issued in connection with the Mortgages.

                  4.1.34. Usury. No aspect of any of the transactions
contemplated herein violates or will violate any usury laws or laws regarding
the validity of agreements to pay interest in effect on the date hereof.

                  4.1.35. Intentionally Omitted.

                  4.1.36. Non-Consolidation Opinion Assumptions. All of the
assumptions made in
any Non-Consolidation Opinion, including, but not limited to, any exhibits
attached thereto, are true and correct.

         SECTION 4.2. Survival of Representations. The representations and
warranties of Borrower under this Section shall be deemed to be continuing
representations and warranties which may at all times during the term of the
Loan be relied upon by Lender unless Lender shall have been informed by Borrower
of any change in fact or circumstance which would affect the continuing accuracy
of the representations and warranties set forth in this paragraph. Borrower
shall promptly inform Lender (but in no event later than five (5) Business Days
after Borrower shall have knowledge thereof) of the occurrence of any fact,
circumstance or event which would materially change or materially affect in any
way the continuing accuracy of the representations and warranties set forth in
this Section or which would render any such representation or warranty
inaccurate or false in any material respect.


                                   ARTICLE V.

                               BORROWER COVENANTS

         SECTION 5.1. Affirmative Covenants. Borrower hereby covenants and
agrees that so long as this Agreement is in effect to and until the Debt has
been paid in full, Borrower shall observe and perform the following:

                                      -28-


                  5.1.1. Payment of Debt, Observance and Performance. Borrower
shall pay the Debt in accordance with the provisions of this Agreement, the Note
and the other Loan Documents and shall observe and perform all of the terms,
covenants and provisions contained in the Loan Documents.

                  5.1.2. Preservation of Existence and Franchises. Borrower
shall do or cause to be done all things commercially reasonably required to
preserve, renew and keep in full force and effect and in good standing, its
existence, foreign qualifications, rights, licenses, permits and franchises.

                  5.1.3. Legal Requirements. Borrower shall comply in all
material respects with all existing and future governmental laws, orders,
ordinances, rules and regulations applicable to it and/or its Properties or the
use thereof. Notwithstanding the foregoing, in the case of any material item,
Borrower, at its own expense, may contest by appropriate legal proceeding,
promptly initiated and conducted in good faith and with due diligence, the
amount or validity or application in whole or in part of any such legal
requirements, provided that (i) Borrower shall have given prior notice of such
contest to Lender, no default shall have occurred and shall be continuing under
the Note, the Mortgage, this Agreement or any of the other Loan Documents, (ii)
such proceeding shall suspend application of such legal requirements to Borrower
and the Properties, (iii) such proceeding shall be permitted under and be
conducted in accordance with the provisions of any other instrument to which
Borrower or the Properties are subject and shall not constitute a default
thereunder, (iv) neither the Properties nor any part thereof nor any interest
therein will in the opinion of Lender be in danger of being sold, forfeited,
terminated, canceled or lost, and (v) Borrower shall, if required by Lender,
have delivered to Lender in escrow all sums necessary for the compliance by
Borrower or the Properties with such legal requirements, together with all
interest and penalties that may be required to be paid in connection therewith.

                  5.1.4. Property Agreements. Borrower shall comply in all
material respects with the requirements of, shall maintain, preserve, enforce
and renew all reciprocal easements and operating agreements, rights of way,
easements, grants, privileges, leases, licenses and restrictive covenants which
from time to time affect or pertain to and benefit the whole or any portion of a
Property.

                  5.1.5. Leases. Borrower shall enforce the material obligations
of the tenants under the Leases and observe and perform the material terms,
covenants and provisions of the Leases on Borrower's part to be observed and
performed. All new Leases for the Properties shall be in substantially the state
specific standard form of Lease approved by Lender with such changes as shall
not materially affect the rights of landlord thereunder except as may be
required by applicable law or in circumstances where Leases were, or are, in
existence at the time Borrower acquires a particular Property.

                  5.1.6. Taxes. Borrower shall pay, or cause to be paid, the
Taxes prior to the date upon which any fine, penalty, interest or cost may be
added thereto or imposed by law for non-payment thereof. Borrower shall deliver
to Lender, upon request, receipted bills, canceled checks, and other evidence
satisfactory to Lender (which may include third party reports similar to those
attached as EXHIBIT Z and acceptable to Lender, which forms may be


                                      -29-


modified from time to time with the prior reasonable approval of Lender)
evidencing the payment of the Taxes prior to the date upon which any fine,
penalty, interest or cost may be added thereto or imposed by law for the
non-payment thereof. Notwithstanding the foregoing, in the case of any material
item, Borrower, at its own expense, may contest by appropriate legal proceeding,
promptly initiated and conducted in good faith and with due diligence, the
amount or validity or application in whole or in part of any of the Taxes,
provided that (i) Borrower shall have given prior notice of such contest to
Lender, (ii) no default shall have occurred and shall be continuing under the
Note, the Mortgages, this Agreement or any of the other Loan Documents, (iii) to
the extent Borrower shall not have paid in full the contested taxes, such
proceeding shall suspend the collection of the contested Taxes from Borrower and
from the Properties, (iv) such proceeding shall be permitted under and be
conducted in accordance with the provisions of any other instrument to which
Borrowers, or the Properties, are subject and shall not constitute a default
thereunder, (v) neither the Properties nor any part thereof nor any interest
therein will in the opinion of Lender be in danger of being sold, forfeited,
terminated, canceled or lost, and (vi) to the extent the contested taxes have
not been paid in full, Borrower shall have delivered to Lender in escrow all
sums necessary for the full payment of the contested Taxes, together with all
interest and penalties thereon.

                  5.1.7. Maintenance of Properties. Borrower shall keep the
Properties in good repair, working order and condition, and from time to time
make, or cause to be made in a prompt manner, all repairs, renewals and
replacements thereto, so that the business carried on in connection therewith
may be properly conducted at all times. Borrower shall, to the extent necessary
so that the business carried on at the Property may be properly conducted at all
times, promptly repair, replace or rebuild any part of a Property which may be
damaged or destroyed by fire or other property hazard or casualty (including any
fire or other property hazard or casualty for which insurance was not obtained
or obtainable) or which may be affected by any taking by any public or
quasi-public authority through eminent domain or otherwise, and complete and pay
for, within a reasonable time, any portion of any Property which is at any time
in the process of renovation or repair.

                  5.1.8. Books and Records; Financial Statements. Borrower will
keep and maintain or will cause to be kept and maintained on a fiscal year basis
in accordance with GAAP consistently applied proper and accurate books, records
and accounts reflecting all of the financial affairs of Borrower, and all items
of income and expense in connection with the operation of the Properties or in
connection with any services, equipment or furnishings provided in connection
with the operation of the Properties, whether such income or expense be realized
by Borrower or any other Person in connection with the Properties excepting
lessees unrelated to and unaffiliated with Borrower who have leased from
Borrower portions of any Properties for the purpose of occupying the same.
Lender and its respective employees and agents shall have the right upon
reasonable notice from time to time at all times during normal business hours to
examine such books, records and accounts at the offices of Borrower or other
Person maintaining such books, records and accounts and to make copies or
extracts thereof as Lender, or its employees or agents shall desire. Lender
shall also have the right upon reasonable notice and during normal business
hours to conduct an audit of the books and records of Borrower, which audit may
be performed by an independent certified public accountant selected and retained
by Lender. If such audit is conducted by Lender subsequent to the occurrence of
a default under any of the Loan Documents or if the results of such audit
discloses a material discrepancy from


                                      -30-


the information previously provided by Borrower irrespective of whether or not
such audit was conducted subsequent to the occurrence of a default under the
Loan Documents, then the cost of such audit shall be borne by Borrower, shall be
paid by the Borrower within ten (10) days after demand by Lender and shall
constitute part of the Debt. The obligation of Borrower to pay the
aforementioned audit costs pursuant to this paragraph shall be secured by the
Mortgages and the other Loan Documents. Except as otherwise set forth in this
paragraph, the cost of any audit conducted hereunder shall be paid by Lender.
Borrower shall furnish or cause to be furnished to Lender each of the following:

                           (i) annually, within ninety (90) days next following
                  the end of each calendar year during the term of the Loan,
                  audited financial statements of Borrower prepared by an
                  Approved Accounting Firm for the immediately preceding year,
                  which financial statements shall be in form satisfactory to
                  Lender and shall include an income statement, balance sheet,
                  cash flow statement and statement of member's equity and shall
                  otherwise be in form and substance satisfactory to Lender. Any
                  audit requirements of the Borrower pursuant to this SECTION
                  5.1.8.(I), may also be satisfied by delivery of audited
                  consolidated financial statements of ARC provided that such
                  financial statements of ARC are in form satisfactory to Lender
                  and contains a separate (i) detailed schedule that includes an
                  income and expense statement of Borrower and (ii) a balance
                  sheet of Borrower and a statement of Borrower's equity, each
                  of which may be unaudited;

                           (ii) annually, within ninety (90) days next following
                  the end of each calendar year during the term of the Loan, an
                  unaudited annual consolidated operating statement of the
                  Properties for the immediately preceding calendar year, which
                  operating statement shall be in the form of EXHIBIT M attached
                  hereto and shall be presented in a manner consistent with GAAP
                  for all Properties and shall be reconciled to the audited
                  financial statement of Borrower delivered in accordance with
                  SECTION 5.1.8(I) above and shall otherwise be in form and
                  substance satisfactory to Lender;

                           (iii) annually, within fifteen (15) days following
                  the end of each calendar year during the term of the Loan,
                  individual and consolidated operating and capital expenditure
                  budgets for the then calendar year covering each of the
                  Properties (the operating budget shall be in the form of
                  EXHIBIT N attached hereto; the capital budget shall be in form
                  satisfactory to Lender); provided, however, Borrower shall use
                  commercially reasonable efforts to submit preliminary budgets
                  prior to the end of each calendar year;

                           (iv) monthly, within thirty (30) days following the
                  end of each preceding calendar month during the term of the
                  Loan, monthly individual and consolidated operating statements
                  covering each of the Properties, which statements shall be in
                  the form of EXHIBIT O attached


                                      -31-


                  hereto, shall be compared on a quarterly basis to the then
                  current annual individual and consolidated operating budgets
                  for the Properties showing the actual performance of each of
                  the Properties and shall be presented in a manner consistent
                  with GAAP for such prior calendar month;

                           (v) quarterly, within sixty (60) days following the
                  end of each calendar quarter during the term of the Loan,
                  quarterly unaudited individual and consolidated operating
                  statements covering each of the Properties, which statements
                  shall be in the form of EXHIBIT P attached hereto, shall be
                  compared on a quarterly basis to the then current annual
                  individual and consolidated operating budgets for the
                  Properties and showing the actual performance of each of the
                  Properties and shall be presented in a manner consistent with
                  GAAP of all of the Properties for such prior calendar quarter;

                           (vi) quarterly, within sixty (60) days following the
                  end of each calendar quarter during the term of the Loan, a
                  certified rent roll for each of the Properties, signed and
                  dated by Borrower (which shall be in the form attached as
                  EXHIBIT AA or otherwise reasonably acceptable to Lender);

                           (vii) promptly after it has been sent to investors of
                  ARC, a copy of the investor report, if any, covering the
                  operation of ARC;

                           (viii) quarterly, within sixty (60) days following
                  the end of each calendar quarter during the term of the Loan,
                  an income statement and balance sheet with respect to ARC IV
                  which statement shall be in the form of EXHIBIT S attached
                  hereto;

                           (ix) annually, within ninety (90) days next following
                  the end of each calendar year during the term of the Loan,
                  audited financial statement of ARC IV prepared by an Approved
                  Accounting Firm for the immediately preceding year, which
                  financial statements shall be in form reasonably satisfactory
                  to Lender and shall include an income statement and balance
                  sheet and shall otherwise be in form and substance reasonably
                  satisfactory to Lender; and

                           (x) Such other information with respect to Borrower,
                  ARC, ARC LLC and ARC IV, the properties and the properties and
                  assets owned by Borrower, ARC, ARC LLC and ARC IV and the
                  respective subsidiaries and Affiliates of Borrower, ARC, ARC
                  LLC and ARC IV as may be reasonably requested by Lender.

All audited financial statements required to be prepared pursuant to the
provisions of this Section shall be prepared and certified by an Approved
Accounting Firm, shall be prepared in accordance with GAAP, and shall be in form
and substance satisfactory to Lender. All unaudited financial statements and
operating statements delivered to Lender pursuant to the


                                      -32-


provisions of this paragraph shall be certified to be true and correct in all
material respects by an authorized officer of the managing member of Borrower.
Borrower may, and shall at Lender's request, provide the foregoing annual,
quarterly and monthly reports by electronic media in such format as may be
reasonably requested by Lender.

                  5.1.9. Compliance Certificate. Borrower shall furnish to
Lender within sixty (60) days next following the end of each calendar quarter
during the term of the Loan, a certificate signed by an authorized officer of
the managing member of Borrower certifying on the date thereof either that there
does or does not exist an event which constitutes, or which upon notice or lapse
of time or both would constitute, a default or an Event of Default under any of
the Loan Documents, and if such default or Event of Default exists, the nature
thereof and the period of time it has existed.

                  5.1.10. Notifications. Borrower shall give Lender prompt
written notice of (i) the occurrence and nature of any Event of Default; (ii)
the occurrence and nature of any event which has resulted in, or which Borrower
believes will result in, a materially adverse change in any Property or in the
condition or operations of any Property or in the financial condition or
operations of Borrower; (iii) any litigation or governmental proceedings pending
or threatened against Borrower which if adversely determined, could be
reasonably expected to materially adversely affect Borrower's condition
(financial or otherwise) or business of any Property; or (iv) any matter (other
than those specified above as to which Lender has received due notice) which has
resulted in, or which Borrower reasonably believes will result in, a materially
adverse change in any Property or in the condition or operations of any Property
or in the financial condition or operations of Borrower.

                  5.1.11. Single Purpose. Borrower shall cause to be observed
and performed in all material respects each and every term, covenant and
provision contained in Borrower's organizational documents and in the Loan
Documents relating to Borrower's (and its managing member(s)' or general
partner(s)', as applicable) Single-Purpose nature. ARC MEZZ shall at all times
observe and perform in all material respects each and every term, covenant and
provision contained in its organizational documents and in the Loan Documents
relating to its Single-Purpose nature.

                  5.1.12. Ownership of Borrower; Management. Except as expressly
permitted under SECTION 5.2.2, at all times during the Loan (i) ARC will own,
through ARC MEZZ, on an unencumbered basis, 100% of all membership or ownership
interests in Borrower, (ii) ARC will own, on an unencumbered basis, 100% of all
membership or ownership interests in ARC MEZZ, (iii) ARC IV will own, on an
unencumbered basis (a) 1% of the "Class B" membership interests in ARC and shall
be the sole managing member of ARC and (b) 100% of all membership or ownership
interests in ARC LLC, (iv) ARC LLC will own, on an unencumbered basis, 99% of
the "Class B" membership interests in ARC, (v) GMAC or a Qualified Transferee
will own, on an unencumbered basis, 100% of the "Class A" membership interests
in ARC and (v) ARC REIT will own directly, on an unencumbered basis, not less
than 100% of the general partnership interests in ARC IV.

                  5.1.13. Intentionally Omitted.

                                      -33-


                  5.1.14. Transaction Costs. Borrower shall pay (or the same
shall be paid contemporaneously with the closing) all fees, commissions, costs,
charges, taxes and other expenses incurred by Lender in connection with the
preparation, execution and delivery of this Agreement and the other Loan
Documents and in connection with the Loan, including but not limited to
reasonable fees of Lender's counsel, appraisal fees, fees and expenses incurred
in accounting review, fees and charges for surveys, examination of title to the
Property and mortgage title insurance thereon, hazard insurance, mortgage taxes,
transfer taxes and all recording fees and charges.

                  5.1.15. Servicer Fees. Borrower shall pay all fees, costs and
expenses incurred by Lender in connection with the servicing of the Loan by the
Servicer which shall in no event exceed four hundredths of one percent (0.04%),
per annum, of the Principal Balance of the Loan.

                  5.1.16. Fees and Expenses. Borrower shall pay all fees, cost,
charges and other expenses incurred by Lender in connection with the enforcement
of this Agreement and the other Loan Documents and in connection with the
collection of the Debt, including, without limitation, reasonable attorneys'
fees, appraisal fees, environmental engineer and consultant fees, fees and
expenses incurred in accounting review and fees and expenses relating to
examination of title, title insurance premiums, surveys, hazard insurance and
mortgage recording, documentary, intangible, transfer or other similar taxes,
revenue stamps and all recording fees and charges. Notwithstanding the
foregoing, Borrower shall not be responsible for Lender's costs and expenses
associated with the implementation of any Secondary Market Transaction except as
otherwise provided herein or by separate agreement between the parties.

                  5.1.17. Further Assurances. Borrower agrees to do or cause to
be done all such further reasonable acts and things, and to execute and deliver
or cause to be executed and delivered all such additional conveyances,
assignments, agreements and instruments as Lender may at any time reasonably
request in connection with the administration or enforcement of this Agreement
and the other Loan Documents or in order better to assure, perfect and confirm
unto Lender its rights, powers and remedies under this Agreement and under the
other Loan Documents. Nothing contained in this paragraph shall be construed as
obligating Borrower to provide or to cause to be provided any collateral or
security for the Loan other than as expressly contemplated by the provisions of
this Agreement and the other Loan Documents, or to incur any cost other than as
expressly contemplated under this Agreement.

                  5.1.18. Filing of Mortgages, etc. Borrower forthwith upon the
execution and delivery of the Mortgages and thereafter, from time to time, will
cause the Mortgages, and any security instrument creating a lien or evidencing
the lien thereof upon the Properties and each instrument of further assurance to
be filed, registered or recorded in such manner and in such places as may be
required by any present or future law in order to publish notice of and fully to
protect, preserve and perfect the lien thereof upon, and the interest of Lender
in, the Properties. Borrower will pay all filing, registration and recording
fees, and all expenses incident to the preparation, execution and acknowledgment
of the Mortgages, any deed of trust or mortgage supplemental thereto, any
security instrument with respect to the Properties, and any instrument of
further assurance, and all Federal, state, county and municipal taxes, duties,
imposts, assessments and charges arising out of or in connection with the
execution and delivery


                                      -34-


of the Mortgages, any deed of trust or mortgage supplemental thereto, any
security instrument with respect to the Properties or any instrument of further
assurance. Borrower shall hold harmless and indemnify Lender, and its respective
successors and assigns, against any liability incurred by reason of the
imposition of any tax on the making and recording of the Mortgages.

                  5.1.19. Estoppel Certificates. Borrower, within ten (10)
Business Days after request by Lender and at Borrower's expense, will furnish
Lender with a statement, duly certified, setting forth the amount of the Debt
and the offsets or defenses thereto, if any. Lender, within ten (10) days after
request by Borrower and at Borrower's expense, and provided that no Event of
Default has occurred and is continuing under the Loan Documents, will furnish
Borrower with a statement setting forth the then outstanding principal balance
of the Note and the interest, if any, accrued and unpaid thereon.

                  5.1.20. Capital Improvement Plan. Borrower shall complete
within a reasonable period of time following the date hereof the material
elements of all Capital Work required by the Capital Improvement Plan with
respect to such Property and shall complete such Capital Work as set forth in
the Capital Improvement Plan, subject to delays caused by force majeure. The
term "force majeure" as used in this Section shall include strikes, lockouts or
other labor trouble, fire or other casualty, inclement weather, governmental
preemption in connection with a national emergency, inability to secure
materials or labor because of any such emergency, war, civil disturbance or
other emergency, cause or event beyond the reasonable control of Borrower, it
being agreed insufficient funds shall not constitute an event of force majeure.

         SECTION 5.2. Negative Covenants of Borrower. Borrower covenants and
agrees that, without the prior consent of Lender, at no time during the term of
the Loan shall it do any of the following:

                  5.2.1. Operation of Properties. Borrower shall not (i) modify,
amend or terminate any material rights of way, easements, grants, privileges,
leases, licenses or restrictive covenants which from time to time affect or
pertain to the whole or any portion of a Property that may adversely affect the
use or operation of such Property in any material manner, (ii) initiate, join in
or consent to any private restrictive covenant, zoning ordinance or amendment
thereto, or other public or private restrictions, materially limiting or
materially adversely affecting the uses which may be made of any Property or any
material part thereof, (iii) enter into, modify or amend any Lease for space
located on any Property unless such Lease (or such modification or amendment
thereof) is consistent with normal and prudent business practices pertaining to
comparable leases of space in properties which are similar to the Property in
question and is otherwise consistent with Borrower's usual business practices,
and unless the rent payable thereunder and the other terms of such Lease (or
such modification or amendment) are consistent with prevailing market
conditions, (iv) modify, amend, terminate or enter into any operating agreement,
partnership agreement, joint venture agreement, condominium agreement, ground
lease or, except as otherwise provided herein, any property agreement relating
to any Property, or (v) terminate any Lease for space located in any Property
other than in accordance with normal and prudent business practices; provided,
however, Borrower shall not terminate any Lease if such termination is likely to
result in any ongoing material impairment of the value of any Property.

                                      -35-


                  5.2.2. Further Encumbrance or Sale. Except as otherwise set
forth in this Section 5.2, Borrower shall not further encumber, sell, transfer
or convey or permit to be further encumbered, sold, transferred or conveyed any
Property (or any portion thereof or interest therein) or any direct or indirect
interest in Borrower (or in any of Borrower's members) which would violate the
ownership covenants set forth in Section 5.1.12 hereof. Borrower shall not
create, incur, assume, permit or suffer to exist any lien on any portion of any
Property (or any portion thereof or interest therein) or legal or beneficial
ownership interest in Borrower (or in any of Borrower's members), subject to
Borrower's right to contest such liens as provided herein. Except as otherwise
expressly provided to the contrary in the Loan Documents, no part of the
Properties nor any interest of any nature whatsoever therein (whether legal or
beneficial or whether held directly or indirectly), nor any interest of any
nature whatsoever in Borrower (whether partnership, stock, equity, beneficial,
profit, loss or otherwise or whether held directly or indirectly), shall in any
manner be further encumbered, sold, transferred, assigned or conveyed without
the prior consent of Lender (other than indirect transfers of partnership,
stock, equity or beneficial interests which would not violate the ownership
covenants set forth in Section 5.1.12 hereof), which consent in any and all
circumstances may be withheld in the sole and absolute discretion of Lender. The
provisions of the foregoing sentence of this subsection shall apply to each and
every such further encumbrance, sale, transfer, assignment or conveyance,
regardless of whether or not Lender has consented to, or waived by its action or
inaction its rights hereunder with respect to, any such previous further
encumbrance, sale, transfer, assignment or conveyance, and irrespective of
whether such further encumbrance, sale, transfer, assignment or conveyance is
voluntary, by reason of operation of law or is otherwise made. Notwithstanding
the foregoing, (i) Borrower shall have the right to sell obsolete equipment or
the individual manager's home located at a particular Property, provided that
any such equipment or individual manager's home which is necessary for the
continued operation and management of the Property shall be replaced by
equipment or a home, as the case may be, of adequate quality, (ii) Borrower may
grant utility easements so long as the granting of such easement(s) is to an
unaffiliated third party for the sole purpose of allowing or otherwise providing
for utility service to the Property and does not materially impair its ability
to operate the property or encroach upon any improvements on the Property (iii)
ownership interests in ARC MEZZ may be transferred provided that, following such
transfer, ARC shall retain not less than a 51% ownership interest in ARC MEZZ
and shall be the sole managing member having the right to control day to day and
general management decisions of such entity, (iv) the "Class A" membership
interests in ARC may be transferred to a Qualified Transferee or to ARC IV or an
Affiliate of ARC IV, and (v) GMAC or a Qualified Transferee may become the
managing member of ARC and the "Class B" membership interests in ARC may be
transferred to GMAC or a Qualified Transferee which is the holder of the "Class
A" membership interests, provided that GMAC or such Qualified Transferee shall
then be the managing member of ARC as permitted herein.

                  5.2.3. Governing Documents. Except at the request of Lender,
Borrower shall not modify or amend any provision of its organizational documents
which relates to Borrower's Single-Purpose nature, nor modify or amend in any
material manner any other provision of its organizational documents.

                  5.2.4. Nature of Business. Borrower shall not engage in any
business or activity other than the ownership, operation or management of the
Properties.

                                      -36-


                  5.2.5. Consolidation, Merger, Sale or Purchase of Assets, etc.
Borrower will not (a) dissolve, liquidate or wind up its affairs, (b) enter into
any transaction of merger or consolidation, or sell or otherwise dispose of all
or any part of its property or assets having a value in excess of $50,000, (c)
acquire any assets having a value in excess of $50,000 per Property per year if
such assets do not enhance or improve the value of the Property, or (d) acquire
any assets having a value in excess of $50,000, except for capital improvements
contained in the Capital Improvement Plans approved by Lender or otherwise
permitted under this Agreement and manufactured home community properties
financed with Loans made under this Agreement or under a separate facility
extended by Lender as permitted hereunder.

                  5.2.6. Indebtedness. Borrower shall not incur, either directly
or as a guarantor, any liability (whether recourse or non-recourse) for the
payment of any indebtedness other than (i) the Debt, (ii) trade payables
incurred in the ordinary course of operating Borrower's business, provided that
each such amount shall be paid to trade creditors within sixty (60) days
following the date on which each such amount was incurred unless validly
contested and (iii) current liabilities for taxes and assessments incurred or
arising in the ordinary course of business.

                  5.2.7. Assignment. Borrower shall not assign this Agreement by
agreement, operation of law or otherwise, or the moneys to be advanced and
disbursed hereunder.

                  5.2.8. ERISA. Borrower shall not take any action which would
cause it to become an "employee benefit plan" as defined in Section 3(3) of
ERISA, or a "governmental plan" as defined in Section 3(32) of ERISA, or a
"plan" as defined in Section 4975(e)(1) of the Internal Revenue Code, or its
assets to become "plan assets" as defined in 29 C.F.R. Section 2510.3-101.

                  5.2.9. Waste. Borrower shall not commit or suffer to be
committed any material waste with respect to any Property. The failure of
Borrower to pay any Taxes or any installment thereof, or any Insurance Premiums
payable with respect to any of the Insurance Policies covering the Properties or
any portion thereof, or to use and apply the Rents strictly in accordance with
the provisions of the Loan Documents, shall be deemed for all purposes to
constitute waste, regardless of whether the same would, in the absence of this
provision, otherwise constitute waste under applicable law.

                  5.2.10. Property Management. Borrower shall not modify, amend,
terminate or enter into any management or operating agreement with respect to
any Property, or waive any material provisions of any such management operating
agreement.

                  5.2.11. Distributions. Borrower shall not declare or make any
distribution of any property, cash or rights, or purchase, redeem or otherwise
acquire for value any of its membership interests now or hereafter outstanding,
or advance funds to the holder of any of its membership interests now or
hereafter outstanding; provided, however, that Borrower shall be permitted to
distribute funds in the Operating Account in excess of amounts required for
Borrower to pay its liabilities and obligations on a current basis and amounts
deposited in the Investor Account established under the Cash Management
Agreement in accordance with the


                                      -37-


terms of such agreement shall be deemed indirectly distributed to ARC, provided
no Event of Default shall have occurred and be continuing. The provisions of the
operating agreement of Borrower restricting affiliate payments and the payment
of salaries and compensation shall not be amended or modified without the
consent of Lender, which consent shall not be unreasonably withheld. In no event
shall Borrower have the right to declare or make any distribution of any
property, cash or rights, or purchase, redeem or otherwise acquire for value any
of its membership interests now or hereafter outstanding, or advance funds to
the holder of any of its membership interests now or hereafter outstanding if an
Event of Default shall have occurred and be continuing.

                  5.2.12. Affiliate Transactions. Borrower shall not enter into,
or be a party to, any transaction with an Affiliate of Borrower or any of the
partners of Borrower except in the ordinary course of business and on terms no
less favorable to Borrower or such Affiliate than would be obtained in a
comparable arm's-length transaction with an unrelated third party. Borrower
shall not enter into leases for more than 20% of its home pads (in the
aggregate) with Affiliates of Borrower without the prior written consent of
Lender. Borrower shall cause all leases relating to leasing any portion of the
Property to any Affiliate of Borrower to be entered into on the then current
market terms.


                                  ARTICLE VI.

                      INSURANCE, CASUALTY AND CONDEMNATION

         SECTION 6.1. Insurance Coverage. Borrower will insure the Properties
against such perils and hazards, and in such amounts and with such limits as
Lender may from time to time reasonably require, and in any event will
continuously maintain with respect to each of the Properties, without cost to
Lender, the insurance described in EXHIBIT U of this Agreement (collectively,
the "INSURANCE POLICIES"). All Insurance Policies shall be in form, issued by
companies, in amounts and with deductibles satisfactory to Lender from time to
time and shall be maintained throughout the term of the Loan without cost to
Lender. An insurance company shall not be satisfactory unless such insurance
company (a) has a Standard & Poor's rating of "AA" or better or Moody's Aa2 or
better; (b) is licensed in the State in which the insured Property is located;
(c) has actively been in business for at least five (5) years; (d) if it is a
mutual company, is a nonassessable company; and (e) does not provide insurance
on any one building in excess of ten (10%) percent of its policyholders' surplus
(including capital). Notwithstanding the foregoing, Lender hereby approves
American Modern Lloyd's as a satisfactory insurance company provided American
Modern Lloyd's shall continue to maintain a Best's rating of "AVIII" or better
and a Standard & Poor's rating of "A" or better. All Insurance Policies insuring
against casualty and business interruption and other appropriate policies shall
include non-contributing mortgagee endorsements in favor of Lender with loss
payable to Lender, as well as standard waiver of subrogation endorsements, and
shall provide that the coverage shall not be terminated or modified, nor a risk
changed without thirty (30) days' advance written notice to Lender. A verified
copy of each Insurance Policy shall be delivered to Lender. If a blanket policy
is issued, a certified copy of said policy shall be furnished, together with an
endorsement indicating that Lender, and its affiliates, subsidiaries, successors
and assigns are additional insureds under such policy in the designated amount.
If any portion of the insured


                                      -38-


risks are reinsured, the reinsurance policies shall contain "cut-through"
endorsements in form satisfactory to Lender. Borrower shall pay the premiums for
the Insurance Policies (the "INSURANCE PREMIUMS") as the same become due and
payable. Borrower will deliver all Insurance Policies to Lender and, in case of
Insurance Policies about to expire, Borrower will deliver renewal or replacement
policies to Lender not less than thirty (30) days prior to the date of
expiration. The foregoing requirements of this Section shall apply to any
separate policies of insurance taken out by Borrower concurrent in form or
contributing in the event of loss with the Insurance Policies. If any Insurance
Policy or part thereof shall expire or be withdrawn or become void by reason of
the failure or impairment of the capital of any company in which the insurance
shall be carried, or if at any time Lender is not in receipt of written evidence
that all insurance required hereunder is in force and effect or if the Borrower
fails to obtain the insurance as required in EXHIBIT U and/or as is otherwise
set forth herein, Lender shall have the absolute and unconditional right without
prior notice to Borrower to take such action as Lender deems necessary to
protect the interest of Lender in the Properties, including without limitation,
the obtaining of such insurance coverage as set forth herein, and all expenses
incurred by Lender in connection with such action or by Lender in obtaining such
insurance and keeping it in effect shall be paid by Borrower to Lender upon
demand together with interest thereon at the Default Rate. Borrower shall at all
times comply with and shall cause the Properties, and the use, occupancy,
operation, maintenance, alteration, repair and restoration thereof to comply
with the terms, conditions, stipulations and requirements of the Insurance
Policies. If any building improvement on any Property, or any portion thereof,
is located in a Federally designated flood hazard area other than Zone C or Zone
X, in addition to the other Insurance Policies required under this paragraph, a
flood insurance policy shall be delivered by Borrower to Lender with respect
thereto. If no portion of a Property is located in a Federally designated
"special flood hazard area" such fact shall be substantiated by a certificate in
form satisfactory to Lender from a licensed surveyor, appraiser or professional
engineer or other qualified individual.

                  6.1.1. Damage or Destruction. If any Property shall be damaged
or destroyed, in whole or in part, by fire or other property hazard or casualty,
Borrower shall give prompt notice thereof to Lender and one hundred (100%)
percent of the net amount of all insurance proceeds received by Lender or
Borrower as a result of such damage or destruction after deduction of reasonable
costs and the expenses, if any, in collecting the same, shall be applied in
reduction of the outstanding Principal Balance under the Note pertaining to the
Damaged Property. Notwithstanding anything to the contrary set forth above, if a
particular Property (a "DAMAGED PROPERTY") shall be damaged or destroyed, in
whole or in part, by fire or other casualty, Lender shall, in accordance with
the provisions of this Section hereinafter set forth, make the net amount of all
insurance proceeds received by Lender pursuant to the provisions of this
Agreement as a result of such damage or destruction after deduction of its
reasonable costs and expenses, if any, in collecting the same (hereinafter
referred to as the "NET PROCEEDS") available for the repair and restoration of
the Damaged Property, provided that (i) no default shall have occurred and shall
be continuing under the Loan Documents, (ii) Borrower shall commence the repair
and restoration of the Damaged Property, as nearly as possible to the condition
the Damaged Property was in immediately prior to such fire or other casualty,
with such alterations as may be approved by Lender, as soon as reasonably
practicable, and shall diligently pursue the same to satisfactory completion,
(iii) Lender shall be satisfied that any operating deficits which will be
incurred with respect to the Damaged Property as a result of the occurrence of
any such fire or other casualty will be covered out of the Net Proceeds or by


                                      -39-


Borrower out-of-pocket or with the proceeds, if any, of business interruption or
rental interruption insurance, (iv) Lender shall be satisfied that, within a
reasonable period of time, not to exceed one hundred eighty (180) days following
the completion of such repair and restoration of the Damaged Property, the gross
cash flow and the net cash flow of the Damaged Property will be restored to a
level sufficient to cover all carrying costs and operating expenses of the
Damaged Property, (v) Lender shall be satisfied that the repair and restoration
of the Damaged Property will be completed on or before the earlier to occur of
(w) ninety (90) days prior to the Maturity Date, or (x) the date on which the
business interruption insurance covered by such Borrower shall expire, (vi)
Lender shall be satisfied that all of the terms, covenants and provisions of
this Agreement and the other Loan Documents will continue to be complied with
during and subsequent to the completion of such repair and restoration and (vii)
Borrower and ARC IV shall execute and deliver to Lender a completion guaranty in
form and substance satisfactory to Lender pursuant to the provisions of which
Borrower and ARC IV shall jointly and severally guaranty to Lender the lien-free
completion of the repair and restoration of the Damaged Property in accordance
with the provisions of this paragraph. The Net Proceeds shall be held by Lender
in an interest-bearing account, and until disbursed in accordance with the
provisions of this paragraph, shall constitute additional security for the
payment of the Debt. The Net Proceeds together with interest earned thereon,
shall be disbursed by Lender to, or as directed by, Borrower from time to time
during the course of the repair and restoration of the Damaged Property, upon
receipt of evidence satisfactory to Lender (which evidence shall in each
instance and to the full extent required by Lender include receipted bills,
invoices, lien waivers and a continuation and date down of title to the Damaged
Property in form satisfactory to Lender and issued by the title company insuring
the lien of the Mortgage encumbering such Property or another title company
satisfactory to Lender) that (i) all materials installed and work and labor
performed (except to the extent that they are to be paid for out of the
requested disbursement) in connection with the repair and restoration of the
Damaged Property have been paid for in full, and (ii) there exist no notice of
pendency, stop order, notice of intention to file mechanic's or materialman's
lien, mechanic's or materialman's lien or other lien or encumbrance of any
nature whatsoever on the Damaged Property arising out of the repair and
restoration of the Damaged Property which have not either been fully bonded to
the satisfaction of Lender and discharged of record or in the alternative fully
insured over to the satisfaction of Lender by the title company insuring the
lien of the Mortgage encumbering the Damaged Property. The repair and
restoration of the Damaged Property shall be done and completed by Borrower in
an expeditious and diligent fashion and in compliance with all applicable
governmental laws, rules and regulations (including, without limitation, all
applicable Environmental Requirements), and all plans and specifications
required in connection with the repair and restoration of the Damaged Property
shall be subject to review and acceptance in all respects by Lender and by the
Consultant. If Lender fails to respond within ten (10) Business Days following a
request and submissions of plans and specifications for approval, such plans and
specification shall be deemed approved by Lender. Upon the occurrence of an
Event of Default, Lender shall have the use of such plan and specifications and
all permits, licenses and approvals required or obtained in connection with the
repair and restoration of the Damaged Property. The identity of the contractors,
subcontractors and materialmen engaged in the repair and restoration of the
Damaged Property, as well as the contracts under which they have been engaged,
shall be identified to Lender and Consultant, if any. All costs and expenses
incurred by Lender in connection with making the Net Proceeds available for the
repair and restoration of the Damaged


                                      -40-


Property including, without limitation, reasonable counsel fees and reasonable
fees of the Consultant, shall be paid by Borrower. In no event shall Lender be
obligated to make disbursements of the Net Proceeds in excess of an amount equal
to the costs actually incurred from time to time for work in place as part of
the repair and restoration of the Damaged Property, as certified by the
Consultant, minus the Casualty Retainage. The term "CASUALTY RETAINAGE" as used
in this paragraph shall mean an amount equal to 10% of the costs actually
incurred for work in place as part of the repair and restoration of the Damaged
Property, as certified by the Consultant. The Casualty Retainage shall in no
event, and notwithstanding anything to the contrary therein above set forth in
this paragraph, be less than the amount actually held back by Borrower from
contractors, subcontractors and materialmen engaged in the making of the repair
and restoration of the Damaged Property. Lender shall not be obligated to make
disbursements of the Net Proceeds more frequently than once every thirty (30)
days. The Casualty Retainage shall not be released until the Consultant
certifies to Lender that the repair and restoration of the Damaged Property have
been completed in accordance with the provisions of this paragraph, and Lender
receives evidence satisfactory to Lender that the costs of the repair and
restoration of the Damaged Property have been paid in full or will be paid in
full out of the Casualty Retainage; provided, however, that Lender will release
the portion of the Casualty Retainage being held with respect to any contractor,
subcontractor or materialman engaged in the repair and restoration of the
Damaged Property as of the date upon which the Consultant certifies to Lender
that such contractor, subcontractor or materialman has satisfactorily completed
all work and has supplied all materials in accordance with the provisions of
such contractor's, subcontractor's or materialman's contract, and such
contractor, subcontractor or materialman delivers such lien waivers and evidence
of payment in full of all sums due to such contractor, subcontractor or
materialman as may be reasonably requested by Lender or by the title company
insuring the lien of the Mortgage encumbering the Damaged Property. If required
by Lender, the release of any such portion of the Casualty Retainage shall be
approved by the surety company, if any, which has issued a payment or
performance bond with respect to such contractor, subcontractor or materialman.
Notwithstanding anything to the contrary contained in this paragraph, if the Net
Proceeds shall be less than $250,000 and if the costs of completing the repair
and restoration of the Damaged Property shall be less than $250,000, the Net
Proceeds will be disbursed by Lender to Borrower upon receipt, provided that no
default shall have occurred and shall be continuing under the Loan Documents,
and Borrower delivers to Lender a written undertaking to expeditiously commence
and to satisfactorily complete with due diligence the repair and restoration of
the Damaged Property. If at any time the Net Proceeds or the undisbursed balance
thereof shall not, in the opinion of Lender, be sufficient to pay in full the
balance of the costs which will be incurred in connection with the completion of
the repair and restoration of the Damaged Property, Borrower shall deposit the
deficiency (hereinafter referred to as the "NET PROCEEDS DEFICIENCY") with
Lender before any further disbursement of the Net Proceeds shall be made, which
Net Proceeds Deficiency deposit shall be held by Lender in an interest-bearing
account, shall be disbursed together with interest earned thereon, for costs
actually incurred in connection with the repair and restoration of the Damaged
Property on the same conditions applicable to the disbursement of the Net
Proceeds, and until so disbursed pursuant to this paragraph shall constitute
additional security for the payment of the Debt. Upon the occurrence of an Event
of Default, Lender shall have the right to apply the undisbursed balance of any
Net Proceeds Deficiency deposit, together with interest thereon, to the payment
of the Debt whether or not then due and payable in such order, priority and
proportions as Lender shall deem to be


                                      -41-


appropriate in its discretion. The excess, if any, of the Net Proceeds and the
remaining balance, if any, of the Net Proceeds Deficiency deposit, together with
interest thereon, after the Consultant certifies to Lender that the repair and
restoration of the Damaged Property have been completed in accordance with the
provisions of this paragraph, and the receipt by Lender of evidence satisfactory
to Lender that all costs incurred in connection with the repair and restoration
have been paid in full, shall be applied to the reduction of the outstanding
Principal Balance of the Note with respect to such Damaged Property (based on
the Allocated Loan Amount, with any excess being applied to the Principal
Balance). All costs of the repair and restoration of the Damaged Property in
excess of the Net Proceeds shall be paid for by Borrower. All insurance proceeds
received by Lender and not required to be disbursed for the repair and
restoration of the Damaged Property pursuant to the provisions of this paragraph
herein above set forth may be retained and applied by Lender toward the payment
of the Debt whether or not then due and payable in such order, priority and
proportions as Lender in its discretion shall deem proper or, at the discretion
of Lender, the same may be paid, either in whole or in part, to Borrower for
such purposes as Lender shall designate, in its discretion. If Lender shall
receive and retain insurance proceeds, the lien of the Mortgage with respect to
such Damaged Property shall be reduced only by the amount thereof received and
retained by Lender and actually applied by Lender in reduction of the Debt.

         SECTION 6.2. Condemnation. Notwithstanding any taking by any public or
quasi-public authority through eminent domain or otherwise, Borrower shall
continue to pay the Debt at the time and in the manner provided for its payment
in the Note, this Agreement and the Mortgages and the Debt shall not be reduced
until any award or payment therefor shall have been actually received and
applied by Lender to the discharge of the Debt. Except as hereinafter
specifically provided to the contrary in this paragraph, if all or any portion
of a Property is taken by any public or quasi-public authority through eminent
domain or otherwise, one hundred (100%) percent of the aggregate award or
payment received by Lender or Borrower as a result of such taking after
deduction of reasonable costs and expenses, if any, in collecting the same shall
be applied in reduction of the portion of the outstanding Principal Balance
under the Note which pertains to such Property. If any Property is sold, through
foreclosure or otherwise, prior to the receipt by Lender of such award or
payment, Lender shall have the right, whether or not a deficiency judgment on
the Note shall have been sought, recovered or denied, to receive such award or
payment, or a portion thereof sufficient to pay the Debt, whichever is less.
Borrower shall file and prosecute its claim or claims for any such award or
payment in good faith and with due diligence and cause the same to be collected
and paid over to Lender. Borrower hereby irrevocably authorizes and empowers
Lender, in the name of Borrower or otherwise, to collect and receipt for any
such award or payment and, subsequent to the occurrence of a default beyond the
expiration of applicable notice and cure periods, if any, under any of the Loan
Documents and during the continuance thereof, to file and prosecute such claim
or claims. Although it is hereby expressly agreed that the same shall not be
necessary in any event, Borrower shall, upon demand of Lender, make, execute and
deliver any and all assignments and other instruments sufficient for the purpose
of assigning any such award or payment to Lender, free and clear of any
encumbrances of any kind or nature whatsoever. If less than all of a particular
Property (the "TAKEN PROPERTY") is taken by any public or quasi-public authority
through eminent domain or otherwise, Lender shall, in accordance with the
provisions of this paragraph hereinafter set forth, make the portion of the
aggregate award or payment received by Lender pursuant to the provisions of this
Agreement as a result of such taking which is specifically awarded for the


                                      -42-


repair and restoration of the portion of the Taken Property not taken or, in the
absence of any such specific award, is in the opinion of Lender reasonably
necessary to pay for the costs which will be incurred in connection with the
repair and restoration of the portion of the Taken Property not taken after
deduction of its reasonable costs and expenses, if any, in collecting the same
(hereinafter referred to as the "NET RESTORATION AWARD") available for the
repair and restoration of the Taken Property, provided that (i) no default shall
have occurred and shall be continuing under the Loan Documents, (ii) Borrower
shall commence the repair and restoration of the Taken Property, as nearly as
possible to the condition the Taken Property was in immediately prior to such
taking, with such alterations as may be approved by Lender, as soon as
reasonably practicable and shall diligently pursue the same to satisfactory
completion, (iii) Lender shall be satisfied that any operating deficits which
will be incurred with respect to the Taken Property as a result of the
occurrence of any such taking will be covered out of the Net Restoration Award
or by Borrower out-of-pocket, (iv) Lender shall be of the opinion that it is
economically feasible to repair and restore the Taken Property, (v) Lender shall
be satisfied that within a reasonable period of time, not to exceed one hundred
eighty (180) days following completion of the repair and restoration of the
Taken Property, the gross cash flow and the net cash flow of the Taken Property
will be restored to a level sufficient to cover all carrying costs and operating
expenses of the Taken Property, (vi) Lender shall be satisfied that the repair
and restoration of the Taken Property will be completed on or before the earlier
to occur of (w) ninety (90) days prior to the Maturity Date, or (x) the date on
which the business interruption insurance carried by such Borrower shall expire,
(vii) Lender shall be satisfied that all of the terms, covenants and provisions
of this Agreement and the other Loan Documents will continue to be complied with
during and subsequent to the completion of such repair and restoration and
(viii) Borrower and ARC IV shall execute and deliver to Lender a completion
guaranty pursuant to the provisions of which Borrower and ARC IV shall jointly
and severally guaranty to Lender the lien-free completion of the repair and
restoration of the Taken Property in accordance with the provisions of this
paragraph. Notwithstanding anything to the contrary contained in this paragraph,
Lender shall not be obligated to make the Net Restoration Award available for
the repair and restoration of the Taken Property in accordance with the
provisions of this paragraph if more than 30% of the Property (as measured by
area) is taken. The Net Restoration Award shall be held by Lender in an interest
bearing account, and until disbursed in accordance with the provisions of this
paragraph, shall constitute additional security for the payment of the Debt. The
Net Restoration Award, together with interest thereon, shall be disbursed by
Lender to, or as directed by, Borrower from time to time during the course of
the repair and restoration of the Taken Property, upon receipt of evidence
satisfactory to Lender (which evidence shall in each instance and to the full
extent required by Lender include receipted bills, invoices, lien waivers and a
continuation and date down of title to the Taken Property in form satisfactory
to Lender and issued by the title company insuring the lien of the Mortgage
pertaining to such Property or another title company satisfactory to Lender)
that (i) all materials installed and work and labor performed (except to the
extent that they are to be paid for out of the requested disbursement) in
connection with the repair and restoration of the Taken Property have been paid
for in full, and (ii) there exist no notice of pendency, stop order, notice of
intention to file mechanic's or materialman's lien, mechanic's or materialman's
lien or other lien or encumbrance of any nature whatsoever on the Taken Property
arising out of the repair and restoration of the Taken Property which have not
either been fully bonded to the satisfaction of Lender and discharged of record
or in the alternative otherwise fully insured over to the satisfaction of Lender
by the title company


                                      -43-


insuring the lien of the Mortgage encumbering the Taken Property. The repair and
restoration of the Taken Property shall be done and completed by Borrower in an
expeditious and diligent fashion and in compliance with all applicable
governmental laws, rules and regulations (including, without limitation, all
applicable Environmental Requirements), and all plans and specifications
required in connection with the repair and restoration of the Taken Property
shall be subject to review and acceptance in all respects by Lender and by the
Consultant. If Lender fails to respond within ten (10) Business Days following a
request and submission of plans and specifications for approval, such plans and
specifications shall be deemed approved by Lender. Upon the occurrence of an
Event of Default, Lender shall have the use of such plans and specifications and
all permits, licenses and approvals required or obtained in connection with the
repair and restoration of the Taken Property. The identity of the contractors,
subcontractors and materialmen engaged in the repair and restoration of the
Taken Property, as well as the contracts under which they have been engaged,
shall be identified to Lender and Consultant, if any. All costs and expenses
incurred by Lender in connection with making the Net Restoration Award available
for the repair and restoration of the Taken Property, including, without
limitation, appraisal fees, reasonable counsel fees and reasonable fees of the
Consultant shall be paid by Borrower. In no event shall Lender be obligated to
make disbursements of the Net Restoration Award in excess of an amount equal to
the costs actually incurred for work in place as part of the repair and
restoration of the Taken Property, as certified by the Consultant, minus the
Condemnation Retainage. The term "CONDEMNATION RETAINAGE" as used in this
paragraph shall mean an amount equal to 10% of the costs actually incurred for
work in place as part of the repair and restoration of the Taken Property, as
certified by the Consultant. The Condemnation Retainage shall in no event, and
notwithstanding anything to the contrary herein-above set forth in this
paragraph, be less than the amount actually held back by Borrower from
contractors, subcontractors and materialmen engaged in the making of the repair
and restoration of the Taken Property. Lender shall not be obligated to make
disbursements of the Net Restoration Award more frequently than once every
fifteen (15) days. The Condemnation Retainage shall not be released until the
Consultant certifies that the repair and restoration of the Taken Property have
been completed in accordance with the provisions of this paragraph, and Lender
receives evidence satisfactory to Lender that the costs of the repair and
restoration of the Taken Property have been paid in full or will be paid in full
out of the Condemnation Retainage; provided, however, that Lender will release
the portion of the Condemnation Retainage being held with respect to any
contractor, subcontractor or materialman engaged in the repair and restoration
of the Taken Property as of the date upon which the Consultant certifies to
Lender that such contractor, subcontractor or materialman has satisfactorily
completed all work and has supplied all materials in accordance with the
provisions of such contractor's, subcontractor's or materialman's contract, and
such contractor, subcontractor or materialman delivers such lien waivers and
evidence of payment in full of all sums due to such contractor, subcontractor or
materialman as may be reasonably requested by Lender or by the title company
insuring the lien of the Mortgage encumbering the Taken Property. If required by
Lender, the release of any such portion of the Condemnation Retainage shall be
approved by the surety company, if any, which has issued a payment or
performance bond with respect to such contractor, subcontractor or materialman.
The excess, if any, of the Net Restoration Award after the repair and
restoration of the Taken Property as nearly as possible to their former
condition and the payment in full of all costs incurred in connection therewith
shall be applied by Lender in reduction of the Debt in such order, priority and
proportions as Lender in its discretion shall deem proper.


                                      -44-


Notwithstanding anything to the contrary contained in this paragraph, if the Net
Restoration Award shall be less than $250,000 and if the costs of completing the
repair and restoration of the Taken Property shall be less than $250,000, the
Net Restoration Award will be disbursed by Lender to Borrower upon receipt,
provided that no default shall have occurred and shall be continuing under the
Loan Documents, and Borrower delivers to Lender a written undertaking to
expeditiously commence and to satisfactorily complete with due diligence the
repair and restoration of the Taken Property. If at any time the Net Restoration
Award, or the undisbursed balance thereof, shall not, in the opinion of Lender,
be sufficient to pay in full the balance of the costs which will be incurred in
connection with the completion of the repair and restoration of the Taken
Property, Borrower shall deposit the deficiency (hereinafter referred to as the
"NET AWARD DEFICIENCY") with Lender before any further disbursement of the Net
Restoration Award shall be made, which Net Award Deficiency deposit shall be
held by Lender in an interest bearing special account, shall be disbursed,
together with interest thereon, for costs actually incurred in connection with
the repair and restoration of the Taken Property on the same conditions
applicable to the disbursement of the Net Restoration Award, and shall until so
disbursed pursuant to this paragraph constitute additional security for the
payment of the Debt. Upon the occurrence of an Event of Default, Lender shall
have the right to apply the undisbursed balance of any Net Award Deficiency
deposit, together with interest thereon, to the payment of the Debt whether or
not then due and payable in such order, priority and proportions as Lender shall
deem to be appropriate in its discretion. The excess, if any, of any Net Award
Deficiency deposit, together with interest thereon, remaining after the
Consultant certifies to Lender that the repair and restoration of the Taken
Property have been completed in accordance with the provisions of this
paragraph, and the receipt by Lender of evidence satisfactory to Lender that all
costs incurred in connection with the repair and restoration have been paid in
full, shall be applied to the reduction of the outstanding Principal Balance of
the Note pertaining to the Taken Property (based on the allocated Loan Amount,
with any excess being applied to the Principal Balance All costs of the repair
and restoration of the Taken Property in excess of the Net Restoration Award
shall be paid for by Borrower.


                                  ARTICLE VII.

                               PROPERTY MANAGEMENT

         SECTION 7.1. The Management Agreement. At all times during the term of
the Loan, the Properties shall be managed by ARC Management Services, Inc. or
another manager approved by Lender in its sole and absolute discretion
("PROPERTY MANAGER") pursuant to the Management Agreement. Borrower shall (i)
diligently perform and observe all of the terms, covenants and conditions of the
Management Agreement on the part of Borrower to be performed and observed and
(ii) promptly notify Lender of any notice to Borrower of any default by Borrower
beyond any applicable cure period in the performance or observance of any of the
terms, covenants or conditions of the Management Agreement on the part of
Borrower to be performed and observed. If Borrower shall default in the
performance or observance of any material term, covenant or condition of the
Management Agreement on the part of Borrower to be performed or observed, then,
without limiting Lender's other rights or remedies under this Agreement or the
other Loan Documents, and without waiving or releasing Borrower from any of its
obligations hereunder or under the Management Agreement, Lender shall have the
right,

                                      -45-


but shall be under no obligation, to pay any sums and to perform any act as may
be appropriate to cause all the material terms, covenants and conditions of the
Management Agreement on the part of Borrower to be performed or observed.
Without the prior written consent of Lender, Borrower shall not (a) consent to
the assignment by Property Manager of its interest under the Management
Agreement, (b) terminate, modify, change, supplement, alter or amend the
Management Agreement, (c) change, replace or terminate Property Manager as the
manager of the Properties or (d) enter into a new management agreement with
respect to the Properties. Notwithstanding the foregoing, in the event GMAC or a
Qualified Transferee shall become the managing member of ARC, Borrower may
replace ARC Management Services, Inc. with a Qualified Manager pursuant to a
Management Agreement approved by Lender and provided that such Qualified Manager
shall execute and deliver to Lender an Assignment of Management Agreement and
Subordination of Management Fee in substantially the form delivered to Lender on
the Closing Date with such changes as shall be reasonably approved by Lender.

         SECTION 7.2. SUBORDINATION OF FEES; REMOVAL OF PROPERTY MANAGER.
Borrower agrees that all unpaid management fees shall be expressly subordinate
to the Debt and Property Manager shall not be entitled to receive any property
management fees, asset management fees or any other compensation or
reimbursements payable by Borrower with respect to any period of time during
which an Event of Default shall be continuing, it being agreed that Lender shall
be entitled to recover from Borrower, any and all property management fees,
asset management fees or any other compensation or reimbursements paid by
Borrower to Property Manager or to any Affiliate of Borrower during such period
of time. Lender shall have the right to require Borrower to replace Property
Manager with a Person chosen by Lender at any time following the occurrence of
any one or more of the following events: (i) if an Event of Default shall have
occurred, and/or (ii) if Property Manager has engaged in gross negligence, fraud
or willful misconduct.

                                 ARTICLE VIII.

                            ENVIRONMENTAL PROVISIONS

         SECTION 8.1. Environmental Provisions. Borrower hereby represents and
warrants to Lender that to the best of Borrower's knowledge (i) except for
standard cleaning products and standard lawn care products used in connection
with the landscaping of any Property and petroleum products used in connection
with the operation of equipment at the Properties, no Hazardous Material is
currently located at, on, in, under or about any Property, except as
specifically set forth in the Environmental Reports, (ii) no Hazardous Material
is currently located at, in, on, under or about any Property in a manner which
violates any Environmental Requirement, or which requires cleanup or corrective
action of any kind under any Environmental Requirement, (iii) no releasing,
emitting, discharging, leaching, dumping or disposing of any Hazardous Material
from any Property onto or into any other property or from any other property
onto or into any Property has occurred or is occurring in violation of any
Environmental Requirement, (iv) no notice of violation, lien, complaint, suit,
order or other notice with respect to any Property is presently outstanding
under any Environmental Requirement, and (v) each Property and the operation
thereof are in compliance with all Environmental Requirements. Borrower shall
comply, and shall use its best efforts to cause all


                                      -46-


tenants or other occupants of the Properties to comply, in all respects with all
Environmental Requirements, and will not generate, store, handle, process,
dispose of or otherwise use, and will not permit any tenant or other occupant of
any Property to generate, store, handle, process, dispose of or otherwise use,
Hazardous Materials at, in, on, under or about any Property in a manner that
could lead or potentially lead to the imposition on Borrower, Lender or any
Property of any liability or lien of any nature whatsoever under any
Environmental Requirement. Borrower shall notify Lender promptly in the event of
any spill or other release of any Hazardous Material at, in, on, under or about
any Property which is required to be reported to a Governmental Authority under
any Environmental Requirement, will promptly forward Lender copies of any
notices received by Borrower relating to alleged violations of any Environmental
Requirement and will promptly pay when due any fine or assessment against
Lender, any Borrower or any Property relating to any Environmental Requirement.
If at any time it is determined that the operation or use of any Property
violates any applicable Environmental Requirement or that there are Hazardous
Materials located at, in, on, under or about any Property which, under any
Environmental Requirement, require special handling in collection, storage,
treatment or disposal, or any other form of cleanup or corrective action,
Borrower shall, within sixty (60) days after receipt of notice thereof from any
Governmental Authority or from Lender (or such shorter period of time as may be
required by any such Governmental Authority or under applicable Environmental
Requirements), take, at Borrower's sole cost and expense, such actions as may be
necessary to fully comply in all respects with all Environmental Requirements;
provided, however, that if such compliance cannot reasonably be completed within
such sixty (60) day period, Borrower shall commence such necessary action within
such sixty (60) day period and shall thereafter diligently and expeditiously
proceed to fully comply in all respects and in a timely fashion with all
Environmental Requirements. If Borrower fails to timely take, or to diligently
and expeditiously proceed to complete in a timely fashion, any such action,
Lender may, in its sole and absolute discretion, make advances or payments
towards the performance or satisfaction of the same, but shall in no event be
under any obligation to do so. All sums so advanced or paid by Lender
(including, without limitation, counsel and consultant fees and expenses,
investigation and laboratory fees and expenses, and fines or other penalty
payments) and all sums advanced or paid in connection with any judicial or
administrative investigation or proceeding relating thereto, will immediately,
upon demand, become due and payable from Borrower and shall bear interest at the
Default Rate from the date any such sums are so advanced or paid by Lender until
the date any such sums are repaid by Borrower to Lender. Borrower will execute
and deliver, promptly upon request, such instruments as Lender may deem useful
or necessary to permit Lender to take any such action, and such additional
notes, as Lender may require to secure all sums so advanced or paid by Lender.
If a lien is filed against any Property by any Governmental Authority resulting
from the need to expend or the actual expending of monies arising from an action
or omission, whether intentional or unintentional, of Borrower or for which
Borrower is responsible, resulting in the releasing, spilling, leaking,
leaching, pumping, emitting, pouring, emptying or dumping of any Hazardous
Material into the waters or onto land located within or without the State in
which any Property is located, then Borrower will, within thirty (30) days from
the date that Borrower is first given notice that such lien has been placed
against such Property (or within such shorter period of time as may be specified
by Lender if such Governmental Authority has commenced steps to cause such
Property to be sold pursuant to such lien) either (a) pay the claim and remove
the lien, or (b) furnish a cash deposit, bond, or such other security with
respect thereto as is satisfactory in all respects to Lender and is


                                      -47-


sufficient to effect a complete discharge of such lien on such Property.
Notwithstanding the foregoing, in the case of any material item, Borrower, at
its own expense, may contest by appropriate legal proceedings, promptly
initiated and conducted in good faith and with due diligence, the validity or
enforceability, in whole or in part, of any Environmental Requirement, provided
that (i) Borrower shall have given prior notice of such contest to Lender, (ii)
no default shall have occurred and be continuing under the Note, the Mortgages,
this Agreement or any of the other Loan Documents, (iii) such proceeding shall
suspend the obligation of Borrower to comply with any such Environmental
Requirement, (iv) such proceeding shall be permitted under and be conducted in
accordance with the provisions of any other instrument to which Borrower, or the
Properties, are subject and shall not constitute a default thereunder, (v)
failure to immediately comply with any such law, order, ordinance, rule or
regulation will not invalidate or vitiate any Insurance Policies, in whole or in
part, and will not in the opinion of Lender constitute a present danger to the
Properties or any portion thereof, or to the individuals using and entering upon
the Properties, (vi) neither the Properties nor any part thereof nor any
interest therein will in the opinion of Lender be in danger of being sold,
forfeited, confiscated, terminated, canceled or lost, (vii) delay in the
compliance with any Environmental Requirement will not, in the opinion of
Lender, result in a worsening or deterioration in the condition requiring
remediation, (viii) Borrower shall have delivered to Lender in escrow all sums
necessary to insure the payment by Borrower of all costs of compliance, fines
and penalties, together with interest thereon, as may be incurred by Borrower in
the event of a determination in such proceeding adverse to Borrower, and (ix)
neither Borrower nor Lender will in the opinion of Lender be subject to any
criminal or civil liability as the result of such contestment by Borrower.
Lender may, at its option, at intervals of not more frequently than once a year,
or more frequently if Lender reasonably believes that a Hazardous Material or
other environmental condition violates or threatens to violate any Environmental
Requirement applicable to a Property, cause an environmental audit of such
Property to be conducted to confirm Borrower's compliance with the provisions of
this paragraph in respect of such Property, and Borrower shall cooperate in all
reasonable ways with Lender in connection with any such audit. Borrower shall
pay all costs and expenses incurred in connection with such audit. If any of the
Mortgages is foreclosed, or if any Property is sold pursuant to the provisions
of the Mortgages, or if Borrower tenders a deed or assignment in lieu of
foreclosure or sale, Borrower shall deliver such Properties to the purchaser at
foreclosure or sale or to Lender, its nominee, or wholly owned subsidiary, as
the case may be, in a condition that complies in all respects with all
Environmental Requirements. Borrower will defend, indemnify, and hold harmless
Lender, its employees, agents, officers, and directors, from and against any and
all claims, demands, penalties, causes of action, fines, liabilities,
settlements, damages, costs, or expenses of whatever kind or nature, known or
unknown, foreseen or unforeseen, contingent or otherwise (including, without
limitation, counsel and consultant fees and expenses, investigation and
laboratory fees and expenses, court costs, and litigation expenses) arising out
of, or in any way related to, (i) any breach by Borrower of any of the
provisions of this Section, (ii) the presence, disposal, spillage, discharge,
emission, leakage, release, or threatened release of any Hazardous Material
which is at, in, on, under, about, from or affecting any Property, including,
without limitation, any damage or injury resulting from any such Hazardous
Material to or affecting any Property or the soil, water, air, vegetation,
buildings, personal property, individuals or animals located on any Property or
on any other property or otherwise, (iii) any personal injury (including
wrongful death) or property damage (real or personal) arising out of or related
to any such Hazardous


                                      -48-


Material, (iv) any lawsuit brought or threatened, settlement reached, or order
or directive of or by any Governmental Authority relating to such Hazardous
Material, or (v) any violation of any Environmental Requirement. The obligations
and liabilities of Borrower under this Section shall survive and continue in
full force and effect and shall not be terminated, discharged or released, in
whole or in part, irrespective of whether the Debt has been paid in full and
irrespective of any foreclosure of any of the Mortgages, sale of any one or more
of the Properties pursuant to the provisions of the Mortgages or acceptance by
Lender, its nominees or wholly owned subsidiaries of one or more deeds or
assignments in lieu of foreclosure or sale and irrespective of any other fact or
circumstance of any nature whatsoever.


                                  ARTICLE IX.

                                  RESERVE FUNDS

         SECTION 9.1. Tax Funds.

                  9.1.1. Deposits of Tax Funds. Borrower shall deposit with
Lender on the Monthly Payment Date an amount (the "MONTHLY TAX DEPOSIT") equal
to one-twelfth of the Taxes that Lender estimates will be payable during the
next ensuing twelve (12) months in order to accumulate with Lender sufficient
funds to pay all such Taxes at least ten (10) days prior to their respective due
dates (such amounts so deposited shall hereinafter be referred to as the "TAX
FUNDS"). If at any time Lender reasonably determines that the Tax Funds will not
be sufficient to pay the Taxes, Lender shall notify Borrower of such
determination and Borrower shall increase its monthly payments to Lender by the
amount that Lender estimates is sufficient to make up the deficiency at least
ten (10) days prior to the respective due dates for the Taxes; provided that if
Borrower receives notice of any deficiency after the date that is ten (10) days
prior to the date that Taxes are due, Borrower will deposit such amount within
two (2) Business Day after its receipt of such notice.

                  9.1.2. Release of Tax Funds. Lender shall, provided no Event
of Default shall have occurred and be continuing, and the Debt Service Coverage
Ratio shall not be less than 1.05:1, release Tax Funds to Borrower for payments
of Taxes prior to the date such Taxes are due or paid by Borrower, upon delivery
to Lender of an Officer's Certificate, certifying as to the actual amount of the
Taxes due and owing (the "CERTIFIED TAX AMOUNT") on the date thereof or within
thirty (30) days from the date thereof. Lender shall advance to Borrower for
same from the Tax Funds, within five (5) business days from the date Lender
receives such Officer's Certificate, an amount equal to the Certified Tax
Amount. In all other cases, provided no Event of Default shall have occurred and
be continuing, Lender shall either (i) release Tax Funds to Borrower for Taxes
paid by Borrower or (ii) apply the Tax Funds to the payment of Taxes. In making
any payment relating to Taxes, Lender may do so according to any bill, statement
or estimate procured from the appropriate public office (with respect to Taxes)
without inquiry into the accuracy of such bill, statement or estimate or into
the validity of any tax, assessment, sale, forfeiture, tax lien or title or
claim thereof. If the amount of the Tax Funds shall exceed the amounts due for
Taxes, Lender shall, in its sole discretion, return any excess to Borrower or
credit such excess against future payments to be made to the Tax Funds. Any Tax
Funds remaining after the Debt has been paid in full shall be returned to
Borrower.

                                      -49-


                  9.1.3. Application of Tax Funds. Upon the occurrence of an
Event of Default, Lender, at its option, may withdraw all the Tax Funds from the
Tax Account and may apply the Tax Funds either to the payment of Taxes or to
payment of the Debt in such order, proportion and priority as Lender may
determine in its sole discretion. Lender's right to withdraw and apply the Tax
Funds shall be in addition to all other rights and remedies provided to Lender
under the Loan Documents.

         SECTION 9.2. Insurance Premium Funds.

                  9.2.1. Deposits of Insurance Premium Funds. Borrower shall
deposit with Lender on each Monthly Payment Date an amount (the "MONTHLY
INSURANCE PREMIUM DEPOSIT") equal to one-twelfth of the Insurance Premiums that
Lender estimates will be payable for the renewal of the coverage afforded by the
Policies upon the expiration thereof in order to accumulate with Lender
sufficient funds to pay all such Insurance Premiums at least thirty (30) days
prior to the expiration of the Policies (such amounts so deposited shall
hereinafter be referred to as the "INSURANCE PREMIUM FUNDS"). If at any time
Lender reasonably determines that the Insurance Premium Funds will not be
sufficient to pay the Insurance Premiums, Lender shall notify Borrower of such
determination and Borrower shall increase its monthly payments to Lender by the
amount that Lender estimates is sufficient to make up the deficiency at least
thirty (30) days prior to expiration of the Policies.

                  9.2.2. Release of Insurance Premium Funds. Lender shall,
provided no Event of Default shall have occurred and be continuing, and the Debt
Service Coverage Ratio shall not be less than 1.05:1, release the Insurance
Premium Funds to Borrower for payment of Insurance Premiums prior to the date
such Insurance Premiums are due or paid by Borrower, upon delivery to Lender of
an Officer's Certificate, certifying as to the actual amount of the Insurance
Premiums then due and owing (the "CERTIFIED INSURANCE AMOUNT") on the date
thereof or within sixty (60) days from the date thereof. Lender shall advance to
Borrower for same from the Insurance Funds, within five (5) business days from
the date Lender receives such Officer's Certificate, an amount equal to the
Certified Insurance Amount. In all other cases, provided no Event of Default
shall have occurred and be continuing, Lender shall either (i) release the
Insurance Premium Funds to Borrower for Insurance Premiums paid by Borrower or
(ii) apply the Insurance Funds to the payment of Insurance Premiums. In making
any payment relating to Insurance Premiums, Lender may do so according to any
bill, statement or estimate procured from the insurer or its agent, without
inquiry into the accuracy of such bill, statement or estimate. If the amount of
the Insurance Premium Funds shall exceed the amounts due for Insurance Premiums,
Lender shall, in its sole discretion, return any excess to Borrower or credit
such excess against future payments to be made to the Insurance Premium Funds.
Any Insurance Premium Funds remaining after the Debt has been paid in full shall
be returned to Borrower.

                  9.2.3. Application of Insurance Premium Funds. Upon the
occurrence of an Event of Default, Lender at its option may withdraw the
Insurance Premium Funds from the Insurance Premium Account and may apply the
Insurance Premium Funds to the payment of Insurance Premiums or to the payment
of the Debt in such order, proportion and priority as Lender shall determine in
its sole discretion. Lender's right to withdraw and apply the Insurance


                                      -50-


Premium Funds shall be in addition to all other rights and remedies provided to
Lender under the Loan Documents.

         SECTION 9.3. Ordinary Capital Expenditures Funds.

                  9.3.1. Deposits of Ordinary Capital Expenditures Funds.
Borrower shall deposit with Lender on each Monthly Payment Date with respect to
each Property constituting collateral for the Loan on such Monthly Payment Date
an amount (the "MONTHLY ORDINARY CAPITAL EXPENDITURES DEPOSIT") equal to
one-twelfth of the product of (x) $50.00 multiplied by (y) the number of
manufactured home sites located at such Property (such amounts so deposited
shall hereinafter be referred to as the "ORDINARY CAPITAL EXPENDITURES FUNDS"),
provided, however, Borrower shall not be required to make a Monthly Ordinary
Capital Expenditure Deposit with respect to a particular Property if on the
Monthly Payment Date, the balance held in the Ordinary Capital Expenditures
Account with respect to such Property is equal to or in excess of $25.00
multiplied by the number of manufactured home sites located at such Property.
Lender may reassess its estimate of the amount necessary for Capital Work from
time to time, and may require Borrower to amend the Ordinary Capital
Expenditures Budget and to increase the Monthly Ordinary Capital Expenditures
Deposit upon thirty (30) days notice to Borrower if Lender determines in its
reasonable discretion that an increase is necessary to maintain proper operation
of the Properties.

                  9.3.2. Release of Ordinary Capital Expenditure Funds. Lender
shall disburse Ordinary Capital Reserve Funds with respect to a particular
Property only for Capital Work with respect to such Property. Lender shall
disburse to Borrower the Ordinary Capital Expenditures Funds to reimburse
Borrower for the actual costs incurred in connection with Capital Work at the
Properties upon satisfaction of each of the following conditions: (i) no default
shall have occurred and be continuing under the Loan Documents, (ii) Borrower
shall submit a request for disbursement to Lender at least ten (10) days prior
to the date on which Borrower requests such disbursement be made, which request
shall be accompanied by a certificate of Borrower (A) describing by category the
Capital Work to be funded by the requested disbursement and the amount requested
to be funded with respect to each category of Capital Work, it being agreed that
the categories to be utilized in connection with such requests shall be
consistent with those utilized for purposes of preparing the annual capital
expenditure budgets submitted to Lender in accordance with SECTION 5.1.8(III)
hereof, (B) stating that all Capital Work to be funded by the requested
disbursement has been completed in good and workmanlike manner and in accordance
with all legal requirements, (C) stating that each Person who has supplied
materials or labor in connection with such Capital Work has been paid all sums
due and owing or will be paid all such sums upon such disbursement, (D) stating
that Borrower has obtained lien waiver from all Persons supplying materials or
labor in connection with any Capital Work having a cost in excess of $10,000 and
(iii) Lender shall have received such other evidence as Lender shall reasonably
request that the Capital Work to be funded by the requested disbursement has
been completed and is paid for or will be paid upon such disbursement to
Borrower, it being agreed that Lender shall have the right, but not the
obligation, at any time, for Capital Work having a cost in excess of $10,000, to
request copies of licenses, permits or approvals, plans and specifications,
contracts, invoices, lien waivers, title searches that such Capital Work has
been completed and paid for. In addition, Lender shall have the right, but not
the obligation, at any time to require an inspection report from Consultant with
respect to any


                                      -51-


Capital Work, provided, however, that such inspection report shall not be a
condition precedent to disbursement unless required by Lender and the cost of a
particular item of Capital Work is in excess of $150,000. Lender shall not be
required to disburse Ordinary Capital Expenditure Funds more frequently than
once each calendar month or in amounts less than $25,000.

                  9.3.3. Application of Ordinary Capital Expenditure Funds. Upon
the occurrence of an Event of Default, Lender, at its option, may withdraw the
Ordinary Capital Expenditure Funds from the Ordinary Capital Expenditures
Account and apply the Ordinary Capital Expenditure Funds to completion of the
Capital Work or to payment of the Debt in such order, proportion and priority as
Lender may determine in its sole discretion. Lender's right to withdraw and
apply the Ordinary Capital Expenditure Funds shall be in addition to all other
rights and remedies provided to Lender under the Loan Documents.

         SECTION 9.4. Capital Improvement Funds.

                  9.4.1. Capital Improvement Funds. Borrower shall, on the date
hereof, deposit with Lender the amounts shown on Schedule 2 attached hereto with
respect to each Property (the "CAPITAL IMPROVEMENT FUNDS").

                  9.4.2. Release of Capital Improvement Funds. Lender shall
disburse the Capital Improvement Funds with respect to a particular Property
only for the costs of those items set forth on the Capital Improvement Plan
approved by Lender with respect to such Property as the same may be revised from
time to time with the approval of Lender. Lender shall disburse to Borrower the
Capital Improvement Funds with respect to a particular Property to reimburse
Borrower for the actual costs incurred in connection with the Capital
Improvement Plan at such Property upon satisfaction of each of the following
conditions: (i) no default shall have occurred and be continuing under the Loan
Documents, (ii) Borrower shall submit a request for disbursement to Lender at
least ten (10) days prior to the date on which Borrower requests such
disbursement be made, which request shall be accompanied by, with respect to
each Property for which a disbursement from the Capital Improvement Funds is
being requested, a certificate of Borrower (A) describing by category the
Capital Work to be funded by the requested disbursement and the amount requested
to be funded with respect to each category of Capital Work, it being agreed that
the categories to be utilized in connection with such requests shall be
consistent with those categories set forth in the reconciliation statement in
EXHIBIT V attached hereto, (B) stating that all Capital Work to be funded by the
requested disbursement has been completed in good and workmanlike manner and in
accordance with all legal requirements, (C) stating that each Person who has
supplied materials or labor in connection with such Capital Work has been paid
all sums due and owing or will be paid all such sums upon such disbursement, (D)
stating that Borrower has obtained lien waiver from all Persons supplying
materials or labor in connection with any Capital Work having a cost in excess
of $10,000 and (iii) Lender shall have received such other evidence as Lender
shall reasonably request that the Capital Work to be funded by the requested
disbursement has been completed and is paid for or will be paid upon such
disbursement to Borrower, it being agreed that Lender shall have the right, but
not the obligation, at any time to request copies of licenses, permits or
approvals, plans and specifications, contracts, invoices, lien waivers, title
searches that such Capital Work has been completed and paid for. In addition, at
the time of each request Borrower shall submit to Lender, for informational
purposes, a statement of capital expenditures in the form of EXHIBIT X


                                      -52-


which shall be certified by Borrower to the best of its knowledge to be true and
complete. In addition, Lender shall have the right, but not the obligation, at
any time to require an inspection report from Consultant with respect to any
Capital Work, provided, however, that such inspection report shall not be a
condition precedent to disbursement unless required by Lender and the cost of a
particular item of Capital Work is in excess of $150,000. At such time as
seventy percent (70%) of the amount originally budgeted with respect to the
Capital Improvement Funds for a particular Property (exclusive of the 25%
contingency funded in connection therewith) has been disbursed to Borrower,
Lender shall not be required to make further disbursements of the Capital
Improvement Funds with respect to such Property until Borrower has submitted to
Lender a category by category reconciliation of the Capital Work done to date
with the Capital Work originally planned and budgeted for in the Capital
Improvement Plan for such Property in the form of EXHIBIT V attached hereto and
Lender shall be satisfied in its reasonable judgment that the balance of the
Capital Improvement Funds with respect to such Property remaining in the Capital
Improvement Account with respect to such Property is sufficient to complete the
remaining items of the Capital Improvement Plan, as the same may be revised with
the reasonable approval of Lender (the amount by which such account balance is
less than the amount necessary to complete, the "DEFICIENCY"). At the option of
Lender, Lender may require Borrower to deposit into the Capital Improvement
Funds Account an amount equal to the Deficiency or to invest in the Capital Work
amounts equal to the Deficiency prior to further disbursements of the Capital
Improvement Funds with respect to such Property. Upon satisfaction by Lender
that sufficient funds remain to complete all necessary Capital Work in the
Capital Improvement Plan with respect to such Property, Lender shall continue to
disburse funds from the Capital Improvement Account with respect to such
Property in accordance with the foregoing procedures, provided, however, that a
second reconciliation and revision of the Capital Improvement Plan, if
necessary, shall be completed at such time as 95% of the amount originally
budgeted in the Capital Improvement Plan for such Property has been disbursed.
In no event shall Lender be required to disburse the 25% contingency funded in
connection with such Property until such time as all Capital Work in connection
with the Capital Improvement Plan, as the same may have been revised from time
to time with the approval of Lender, shall have been completed exclusive of
punch list items. Upon completion of all of the Capital Work set forth in such
Capital Improvement Plan with respect to a particular Property and upon
satisfaction of the conditions for disbursement set forth herein, any remaining
funds held in the subaccount of the Capital Improvement Funds Account with
respect to such Property shall be released to Borrower. Lender shall not be
required to disburse Capital Improvement Funds more frequently than once each
calendar month or in amounts less than $25,000 in the aggregate, provided,
however, that the final disbursement from the Capital Improvement Account may be
in an amount less than $25,000. Notwithstanding the foregoing, Borrower shall,
subject to compliance with the terms hereof, be entitled to up to, but not in
excess of, three (3) additional disbursements from the Capital Improvement
Funds. Disbursements of Capital Improvement Funds shall be deposited into the
Cash Management Account.

                  9.4.3. Application of Capital Improvement Funds. Upon the
occurrence of an Event of Default, Lender, at its option, may withdraw the
Capital Improvement Funds from the Capital Improvements Account and apply the
Capital Improvement Funds to completion of the Capital Work or to the payment of
the Debt in such order, proportion and priority as Lender may determine in its
sole discretion. Lender's right to withdraw and apply the Capital


                                      -53-


Improvement Funds shall be in addition to all other rights and remedies provided
to Lender under the Loan Documents.

         SECTION 9.5. Additional Provisions relating to Ordinary Capital
Expenditure Funds and Capital Improvement Funds.

                  9.5.1. No Obligations. Nothing in SECTION 9.3 or 9.4 shall (i)
make Lender responsible for making or completing any item of work specified in
the Ordinary Capital Expenditure Budget or the Capital Improvement Plan
(collectively, "CAPITAL WORK"); (ii) require Lender to expend funds in addition
to the Ordinary Capital Expenditures Funds or the Capital Improvement Funds to
complete any Capital Work; (iii) obligate Lender to proceed with the Capital
Work; or (iv) obligate Lender to demand from Borrower additional sums to
complete any Capital Work.

                  9.5.2. Right of Inspection. Upon reasonable prior notice by
Lender to Borrower, Borrower shall permit Lender and Lender's agents and
representatives (including, without limitation, any Consultant) or third parties
to enter onto each Property during normal business hours (subject to the rights
of tenants under their Leases) to inspect the progress of any Capital Work and
all materials being used in connection therewith and to examine all plans and
shop drawings relating to such Capital Work. Borrower shall use reasonable
efforts to cause all contractors and subcontractors to cooperate with Lender or
Lender's representatives or such other Persons described above in connection
with inspections described in this SECTION 9.5.2. Borrower shall not be
obligated to pay costs and expenses of Lender in connection with such
inspections in excess of $100,000 over the term of the Loan, provided, however,
if any such inspection reveals that there has been a material deviation in the
Capital Work completed from that certified to have been completed by Borrower,
Borrower shall pay the cost of such inspection regardless of such cap.

                  9.5.3. Intentionally Deleted.

                  9.5.4. Insurance. In addition to any insurance required under
the Loan Documents, Borrower shall provide or cause to be provided workmen's
compensation insurance, builder's risk, and public liability insurance and other
insurance to the extent required under applicable law in connection with all
Capital Work. All such policies shall be in form and amount reasonably
satisfactory to Lender.

                  9.5.5. Compliance; Plans and Specifications and Contractors.
All Capital Work shall be done and completed by Borrower in an expeditious and
diligent fashion and in compliance with all applicable governmental laws, rules
and regulations (including, without limitation, all applicable Environmental
Requirements) and all plans and specifications required in connection with any
Capital Work shall, if the cost of same is estimated to exceed $150,000, be
subject to review and acceptance in all respects by Lender and Consultant. Upon
the occurrence of an Event of Default, Lender shall have the use of such plans
and specifications and all permits, licenses and approvals required or obtained
in connection with the Capital Work. If Lender fails to respond within ten (10)
Business Days following a request and submission of plans and specifications,
such plans and specifications shall be deemed approved by Lender.

                                      -54-


         SECTION 9.6. Intentionally Omitted.

         SECTION 9.7. Prepaid Rent Funds.

                  9.7.1. Prepaid Rent Funds. Borrower shall, on the date hereof,
deposit with Lender the amount specified on Schedule 5 attached hereto with
respect to the Properties (such amount, together with any additional amounts
deposited pursuant to this Section with respect to the Properties, the "PREPAID
RENT FUNDS"). Borrower hereby represents and warrants to Lender that all Prepaid
Rents in existence as of March 31, 2002 have been deposited with Lender on the
Closing Date pursuant to this SECTION 9.7. From and after the Closing Date,
Borrower shall, by no later than the 30th day of each month following the end of
each calendar quarter (including the 30th day of the month following the quarter
in which the Closing Date shall have occurred) deliver to Lender a certificate
(the "PREPAID RENT CERTIFICATE"), in the form attached hereto as EXHIBIT Y,
setting forth the amount of Prepaid Rents in the Cash Management Account as of
the last day of the preceding calendar quarter. Lender shall direct the Agent
Bank to (x) deposit into the Prepaid Rent Account an amount equal to the excess,
if any, of the Prepaid Rents indicated on the Prepaid Rent Certificate over the
amount currently on deposit in the Prepaid Rent Account, and (y) allocate an
amount equal to the excess, if any, of the amounts currently on deposit in the
Prepaid Rent Account over the amount of the Prepaid Rents indicated on the
Prepaid Rent Certificate as provided in the Cash Management Agreement, as may be
applicable.

                  9.7.2. Application of Funds. Upon the occurrence of an Event
of Default, Lender shall have no obligation to make any disbursement of funds
from the Prepaid Rent Account, and Lender shall have the immediate and
continuing right to exercise all rights and remedies afforded to Lender under
this Agreement and the other Loan Documents, or otherwise at law or in equity in
respect of the security for the Debt, including, without limitation, the right
to withdraw and apply the Prepaid Rent Funds on deposit in the Prepaid Rent
Account to the Debt, including, without limitation, to any costs or expenses
relating to the Properties.

         SECTION 9.8. Security Interest in Funds.

                  9.8.1. Grant of Security Interest. Borrower shall be the owner
of the Required Reserve Funds. Borrower hereby pledges, assigns and grants a
security interest to Lender, as security for payment of the Debt and the
performance of all other terms, conditions and covenants of the Loan Documents
on Borrower's part to be paid and performed, in all of Borrower's right, title
and interest in and to the Required Reserve Funds. The Required Reserve Funds
shall be under the sole dominion and control of Lender.

                  9.8.2. Income Taxes. Borrower shall report on its federal,
state and local income tax returns all interest or income accrued on the
Required Reserve Funds.

                  9.8.3. Prohibition Against Further Encumbrance. Borrower shall
not, without the prior consent of Lender, further pledge, assign or grant any
security interest in the Required Reserve Funds, or permit any lien or
encumbrance to attach thereto, or any levy to be made thereon, or any UCC-1
Financing Statements, except those naming Lender as the secured party, to be
filed with respect thereto.

                                      -55-


         SECTION 9.9. Cash Management. On or before the Closing Date, Borrower
shall establish in accordance with the terms and provisions of the Cash
Management Agreement (i) with Deposit Bank an account for the deposit of all
Rents (the "DEPOSIT ACCOUNT"), the Prepaid Rent Funds (the "PREPAID RENT
ACCOUNT"), an operating account (the "OPERATING ACCOUNT") from which, provided
no Event of Default shall have occurred, Borrower shall be entitled to withdraw
monies for uses permitted under this Credit Agreement and the Cash Management
Agreement, and (ii) with Agent an account into which balances held in the
Deposit Account will be swept (the "CASH MANAGEMENT ACCOUNT") and separate
accounts for each of the Tax Funds (the "TAX ACCOUNT"), Insurance Premium Funds
(the "INSURANCE PREMIUM ACCOUNT"), the Ordinary Capital Expenditure Funds (the
"ORDINARY CAPITAL EXPENDITURE FUNDS ACCOUNT"), the Capital Improvement Funds
(the "CAPITAL IMPROVEMENT ACCOUNT"), the Prepaid Rent Funds (the "PREPAID RENT
ACCOUNT") and the Monthly Debt Service Payment Amount and any fees, late
charges, default interest and other charges, expenses or reimbursements due to
Lender under any of the Loan Documents (the "DEBT SERVICE ACCOUNT"). All of the
Accounts shall be held and maintained, invested and governed by the terms of the
Cash Management Agreement. Lender shall have no liability for any loss resulting
from the investments of funds in the Accounts that are invested in Permitted
Investments and no such loss shall affect Borrower's obligations to pay the Debt
or to make the deposits required under ARTICLE IX hereof. Borrower shall report
on its federal, state and local income tax reports all interest or income
accrued on funds in the Accounts. Any reference in this Agreement to the "TAX
ACCOUNT," the "INSURANCE PREMIUM ACCOUNT," the "ORDINARY CAPITAL EXPENDITURES
ACCOUNT," the "CAPITAL IMPROVEMENT ACCOUNT," the PREPAID RENT ACCOUNT," and the
"DEBT SERVICE ACCOUNT," shall be deemed to refer to the funds on deposit in the
Cash Management Account which constitute, respectively, the Tax Funds, Insurance
Premium Funds, Ordinary Capital Expenditure Funds, Capital Improvement Funds,
the Prepaid Rent Funds, Monthly Debt Service Payment Amount (and other sums due
under the Loan Documents), as calculated and determined by Lender or Servicer,
it being understood that the foregoing funds are to remain in and be commingled
with each other in the Cash Management Account until such time as they are
withdrawn for the purposes for which they were intended in accordance with the
terms of this Agreement and the Cash Management Agreement.

                                   ARTICLE X.

                                    DEFAULTS

         SECTION 10.1. Events of Default. The Debt shall become due at the
option of Lender upon the occurrence of any one or more of the following events
(collectively, "EVENTS OF DEFAULT"):

                  (a) if any regularly scheduled payment of interest or
         amortization is not paid on or before the fifth calendar day of the
         month or if the fifth calendar day of the month is not a Business Day,
         then on or before the first Business Day following the fifth calendar
         day of the month;

                  (b) if any tax lien is filed against Borrower, any Guarantor
         or any Property and the same is not discharged of record within thirty


                                      -56-


         (30) days after Borrower or such Guarantor has been notified that the
         same has been filed, subject to Borrower's right to contest liens as
         provided herein;

                  (c) if any Property shall become subject (i) to any tax lien,
         other than a lien for local real estate taxes and assessments not due
         and payable, or (ii) to any lis pendens, notice of pendency, stop
         order, the filing of a mechanic's or materialman's lien, or other lien
         of any nature whatsoever, and the same shall neither be discharged of
         record nor in the alternative insured over to the satisfaction of
         Lender by the title company insuring the lien of the Mortgage
         pertaining to the Property in question within a period of thirty (30)
         days after the date upon which Borrower has been notified that the same
         is filed or recorded, and irrespective of whether the same is superior
         or subordinate in lien or other priority to the lien of the Mortgages
         and irrespective of whether the same constitutes a perfected or
         inchoate lien or encumbrance on the Properties or any portion thereof
         or is only a matter of record or notice, subject to Borrower's right to
         contest Taxes as provided herein;

                  (d) if the Insurance Policies are not kept in full force and
         effect and Borrower fails to cure within ten (10) days after notice
         from Lender, or if the Insurance Policies or certificates of insurance
         are not delivered to Lender within ten (10) business days after request
         for same provided, however, that Lender shall have the right to place
         the required Insurance Policies any time after the first three (3) days
         of such ten (10) day period at the sole cost and expense of the
         Borrower;

                  (e) if Borrower shall solicit payment of any portion of the
         Rents for a period of more than one (1) month in advance or if any of
         the Rents are further assigned;

                  (f) if any of the covenants contained in SECTION 5.2 of this
         Agreement entitled "Negative Covenants" shall be breached;

                  (g) if any representation or warranty of any Borrower or any
         Guarantor made in this Agreement or any of the other Loan Documents, or
         in any certificate, report, financial statement or other instrument
         furnished in connection with the making of the Note, the Mortgages,
         this Agreement or any other Loan Document or the extension of the Loan
         by Lender to Borrower shall prove false or misleading in any material
         respect;

                  (h) if any Borrower or other Person shall be in default of a
         material obligation beyond any applicable notice and cure periods under
         any mortgage, deed of trust, pledge or other security agreement
         (including, without limitation, any such agreement now or hereafter
         held by Lender) affecting or relating to any Property, or any portion
         thereof;

                  (i) if for any reason any of the covenants set forth in
         SECTIONS 5.1.11 and 5.1.12 entitled "Single Purpose" and "Ownership of


                                      -57-


         Borrower" shall at any time during the term of the Loan cease to be
         satisfied and complied with in all material respects or if any
         representation or warranty set forth in SECTION 4.1 entitled "Borrower
         Representations" or elsewhere in this Agreement or the Loan Documents
         shall at any time cease to be true and accurate in all material
         respects;

                  (j) Intentionally Omitted;

                  (k) if Borrower or any Guarantor shall make an assignment for
         the benefit of creditors;

                  (l) (1) if a court of competent jurisdiction enters a decree
         or order for relief with respect to Borrower or any Guarantor under
         Title 11 of the United States Code as now constituted or hereafter
         amended or under any other applicable Federal or state bankruptcy,
         insolvency or other similar law, rule or regulation; (2) if such court
         enters a decree or order appointing a receiver, liquidator, assignee,
         trustee, custodian, examiner, magistrate, arbitrator, sequestrator (or
         similar official) of Borrower or any Guarantor, or of any substantial
         part of their respective properties; or (3) if such court decrees or
         orders the winding up or liquidation of the affairs of Borrower or any
         Guarantor, and such order or decree is not dismissed, discharged or
         vacated of record within sixty (60) days after the same has been
         entered;

                  (m) if Borrower or any Guarantor files a petition for relief
         or answer or consent seeking relief under Title 11 of the United States
         Code as now constituted or hereafter amended, or under any other
         applicable Federal or state bankruptcy, insolvency or other similar
         law, rule or regulation, or if Borrower or any Guarantor fails to
         vigorously and diligently oppose or shall otherwise consent to the
         commencement or prosecution of an involuntary case under Title 11 of
         the United States Code as now constituted or hereafter amended, or
         under any other applicable Federal or state bankruptcy, insolvency or
         similar law, rule or regulation, or to the appointment of or taking
         possession by a receiver, liquidator, assignee, trustee, custodian,
         examiner, magistrate, arbitrator, sequestrator (or other similar
         official) of Borrower or any Guarantor or of any substantial part of
         their respective properties, or if Borrower or any Guarantor fails
         generally to pay its respective debts as such debts become due, or if
         Borrower or any Guarantor takes any action in furtherance of any action
         described in this subparagraph;

                  (n) if Borrower or any other Person which is a party to any of
         the Loan Documents (other than Lender or its agents) shall be in
         default of a material obligation beyond the expiration of any
         applicable notice and cure periods under the Note, the Mortgages, this
         Agreement or any other Loan Document or any other document or
         instrument otherwise executed and delivered in connection therewith or
         in connection with the extension of the Loan by Lender to Borrower or
         if any other such event shall occur or condition shall exist, if the
         effect of such event or condition is to accelerate the maturity of any
         portion of the


                                      -58-


         Debt or to permit Lender to accelerate the maturity of all or any
         portion of the Debt;

                  (o) if Borrower shall fail to furnish or cause to be furnished
         to Lender, any financial or other information required to be provided
         in accordance with the provisions of this Agreement or the other Loan
         Documents or otherwise reasonably requested by Lender or shall fail to
         permit, or to arrange for, the inspection by Lender (or its employees
         and agents) of any books or records of Borrower and such default shall
         continue for five (5) business days after written notice by Lender to
         Borrower provided, however, that with respect to any annual or
         quarterly statements which are required to be furnished to Lender,
         Borrower shall have a total of thirty (30) days (which thirty (30) days
         shall be deemed to include the initial cure period) to cure the same
         provided that (i) the failure to furnish such annual or quarterly
         statements to Lender within the initial cure period was not due, in
         whole or part, to any act or inability to act on the part of the
         Borrower and (ii) such additional cure period shall only be applicable
         one (1) time in any given calendar year;

                  (p) if a material adverse change shall occur with respect to
         Borrower or any Guarantor or with respect to the Properties taken as a
         whole, or if the Property Manager is an Affiliate of Borrower, if a
         material adverse change shall occur with respect to the Property
         Manager; or

                  (q) if Borrower shall continue to be in default under any of
         the other terms, covenants or conditions of this Agreement not
         specifically identified in (a)-(p) above for five (5) days after
         written notice from Lender in the case of any default which can be
         cured by the payment of a sum of money, or for thirty (30) days after
         written notice from Lender in the case of any other default, provided
         that if such default cannot reasonably be cured within such thirty (30)
         day period and Borrower shall have commenced to cure such default
         within such thirty (30) day period and thereafter diligently and
         expeditiously proceeds to cure the same, such thirty (30) day period
         shall be extended for so long as it shall require Borrower in the
         exercise of due diligence to cure such default, it being agreed,
         however, that no such extension shall be for a period in excess of an
         additional sixty (60) days after the expiration of such thirty (30) day
         period.

         SECTION 10.2. Remedies.

                           (i) Upon the occurrence of an Event of Default, and
                  for so long as any such Event of Default continues, Lender (a)
                  shall have the absolute and unconditional right in its sole
                  and absolute discretion to declare the Debt or any portion
                  thereof immediately due and payable, and (b) shall have the
                  right to pursue any and all remedies provided for in this
                  Agreement, the Note, the Mortgages, or any of the other Loan
                  Documents or otherwise available to Lender, at law or in
                  equity or otherwise, including but not limited to foreclosure
                  of the Mortgages and any UCC liens.

                                      -59-


                           (ii) Upon the occurrence of an Event of Default, all
                  or any one or more of the rights, powers, privileges and other
                  remedies available to Lender against Borrower under this
                  Agreement or any of the other Loan Documents executed and
                  delivered by, or applicable to, Borrower or at law or in
                  equity may be exercised by Lender at any time and from time to
                  time, whether or not all or any of the Debt shall be declared
                  due and payable, and whether or not Lender shall have
                  commenced any foreclosure proceeding or other action for the
                  enforcement of its rights and remedies under any of the Loan
                  Documents with respect to all or any of the Properties. Any
                  such actions taken by Lender shall be cumulative and
                  concurrent and may be pursued independently, singly,
                  successively, together or otherwise, at such time and in such
                  order as Lender may determine in its sole discretion, to the
                  fullest extent permitted by law, without impairing or
                  otherwise affecting the other rights and remedies of Lender
                  permitted by law, equity or contract or as set forth herein or
                  in the other Loan Documents. Without limiting the generality
                  of the foregoing, Borrower agrees that if an Event of Default
                  is continuing (i) Lender is not subject to any "one action" or
                  "election of remedies" law or rule, and (ii) all liens and
                  other rights, remedies or privileges provided to Lender shall
                  remain in full force and effect until Lender has exhausted all
                  of its remedies against the Properties and each Mortgage has
                  been foreclosed, sold and/or otherwise realized upon in
                  satisfaction of the Debt or the Debt has been paid in full.

                           (iii) With respect to Borrower and the Properties,
                  nothing contained herein or in any other Loan Document shall
                  be construed as requiring Lender to resort to any Property for
                  the satisfaction of any of the Debt in preference or priority
                  to any other Property, and Lender may seek satisfaction out of
                  all of the Properties or any part thereof, in its absolute
                  discretion in respect of the Debt. In addition, Lender shall
                  have the right from time to time to partially foreclose the
                  Mortgages in any manner and for any amounts secured by the
                  Mortgages then due and payable as determined by Lender in its
                  sole discretion including, without limitation, the following
                  circumstances in the event Borrower defaults beyond any
                  applicable grace period in the payment of one or more
                  scheduled payments of principal and interest, Lender may
                  foreclose one or more of the Mortgages to recover such
                  delinquent payments. Notwithstanding one or more partial
                  foreclosures, the Properties shall remain subject to the
                  Mortgages to secure payment of sums secured by the Mortgages
                  and not previously recovered.

                           (iv) In addition to any rights and remedies of Lender
                  provided by this Loan Agreement and by law, the Lender shall
                  have the right, without prior notice to Borrower, any such
                  notice being expressly waived by Borrower to the extent
                  permitted by applicable law, upon any amount becoming due and
                  payable by Borrower hereunder (whether at the stated maturity,
                  by acceleration or otherwise following an Event of


                                      -60-


                  Default) to set-off and appropriate and apply against such
                  amount any and all deposits (general or special, time or
                  demand, provisional or final), in any currency, and any other
                  credits, indebtedness or claims, in any currency, in each case
                  whether direct or indirect, absolute or contingent, matured or
                  unmatured, at any time held or owing by Lender to or for the
                  credit or the account of Borrower. Lender agrees promptly to
                  notify Borrower after any such set-off and application made by
                  Lender; provided that the failure to give such notice shall
                  not affect the validity of such set-off and application. The
                  provisions of this Section 10.2(iv) shall be applicable only
                  during such time as this Loan shall be held by Morgan Stanley
                  Bank.

         SECTION 10.3. Application of Moneys. All moneys received or collected
by Lender in respect of the Loan after an Event of Default shall be applied by
Lender to the payment of the Debt in such order, priority and proportions as
Lender may in its sole and absolute discretion determine. The balance, if any,
of such moneys remaining after payment in full of such costs and the Debt shall
be remitted to Borrower or as otherwise directed by a court of competent
jurisdiction.

         SECTION 10.4. Remedies Cumulative. The rights, powers and remedies of
Lender under this Agreement shall be cumulative and not exclusive of any other
right, power or remedy which Lender may have against Borrower pursuant to this
Agreement or the other Loan Documents, or existing at law or in equity or
otherwise. Lender's rights, powers and remedies may be pursued singly,
concurrently or otherwise, at such time and in such order as Lender may
determine in Lender's sole discretion. No delay or omission to exercise any
remedy, right or power accruing upon an Event of Default shall impair any such
remedy, right or power or shall be construed as a waiver thereof, but any such
remedy, right or power may be exercised from time to time and as often as may be
deemed expedient. A waiver of one Default or Event of Default with respect to
Borrower shall not be construed to be a waiver of any subsequent Default or
Event of Default by Borrower or to impair any remedy, right or power consequent
thereon.

         SECTION 10.5. Right to Cure Defaults. If default beyond any applicable
notice and cure period in the performance of any of the covenants of Borrower
shall occur and be continuing, Lender may, at its discretion, remedy the same
and for such purpose shall have the right to enter upon the Properties or any
portion thereof without thereby being liable to Borrower or any Person in
possession thereof holding under Borrower, and to pay all sums as may be
necessary to cure any such default (including, without limitation any default by
Borrower in the payment of any Insurance Premiums or any Taxes or other liens or
encumbrances covering the Properties or any part thereof). If Lender shall
remedy such a default (including, without limitation, any default by Borrower in
the payment of any Insurance Premiums or any Taxes or other liens or
encumbrances covering the Properties or any part thereof) or appear in, defend
or bring any action or proceeding to protect the interest of Lender in the
Properties, or any portion thereof, or to foreclose any of the Mortgages or
collect the Debt, the costs and expenses thereof (including reasonable
attorneys' fees to the extent permitted by law) with interest as provided in
this paragraph, shall be paid by Borrower to Lender upon demand, and shall be
added to and constitute part of the Debt secured by the Mortgages. All such
costs and expenses incurred by Lender in remedying such default or in appearing
in, defending or bringing any such action or


                                      -61-


proceeding, shall be paid by Borrower to Lender upon demand, with interest at a
rate per annum equal to the Default Rate.


                                  ARTICLE XI.

                              Intentionally Omitted

                                  ARTICLE XII.

                      SALE AND SECURITIZATION AND SERVICER

         SECTION 12.1. Syndication of the Loan. Lender shall have the absolute
and unconditional right at any time after the date of this Agreement and at any
time during the term of the Loan without requiring any consent or approval from
Borrower or any Guarantor or indemnitor or any other person, party or entity
associated with or connected with the Loan or the collateral therefor (i) to
sell and assign the Loan in whole or in part, or (ii) to place one or more
participation interests therein in one or more separate transactions, or (iii)
to effect a syndication or securitization of the Loan or of any interest therein
in one or more transactions and in a single asset securitization or a pooled
loan securitization, in each case to or with such persons, parties, entities or
investors (including, without limitation, domestic or foreign banks, insurance
companies, pension funds, trusts, other institutional lenders or investors,
natural persons, grantor trusts, owner trusts, special purpose corporations,
REMICs, FASITS, real estate investment trusts or other similar or comparable
investment vehicles) and on such terms and conditions as Lender shall deem to be
appropriate in the exercise of its sole and absolute discretion. (The
transaction referred to in clauses (i), (ii) and (iii) shall hereinafter be
referred to collectively as "SECONDARY MARKET TRANSACTIONS" and the transactions
referred to in clause (iii) shall hereinafter be referred to as a
"SECURITIZATION." Any certificate, notes or other securities issued in
connection with a Securitization are hereinafter referred to as "SECURITIES").
In connection with any such Secondary Market Transaction, Lender shall have the
absolute and unconditional right without obtaining the prior approval of
Borrower, any Guarantor or indemnitor or any other person, party or entity
associated or connected with the Loan or the collateral therefor to disclose,
deliver and to share, on a confidential basis, with any prospective purchaser of
the Loan or of any participation or other interest therein (including any such
interest to be acquired in connection with a syndication or securitization of
the Loan) such information (financial or otherwise), documents and instruments
pertaining to the Loan, the Properties, Borrower or any Guarantor or indemnitor
or any other person, party or entity associated or connected with the Loan or
the collateral therefor as Lender shall deem to be appropriate in the exercise
of its sole and absolute discretion. Except as provided otherwise in SECTION
12.1.1 or as may otherwise be agreed upon by the Borrower in writing, Borrower
shall not be responsible for the payment of any costs and expenses in connection
with any Secondary Market Transaction.

         SECTION 12.1.1 Borrower's Costs and Expenses of a Secondary Market
Transaction. Borrower shall be responsible for the payment of any costs and
expenses in connection with any Secondary Market Transaction associated with the
cost of obtaining:

                                      -62-


                           (i) a current phase one level environmental audit
                  report with respect to certain Properties, (and such
                  additional reports as may be required by Lender if any
                  environmental problems are disclosed by the phase one level
                  reports) prepared by qualified environmental consultant(s) or
                  firm(s) designated and retained by Borrower and approved by
                  Lender, and shall otherwise be in form and substance
                  satisfactory in all respects to Lender;

                           (ii) a detailed structural and physical inspection
                  report ("PROPERTY INSPECTION REPORT"), with respect to certain
                  Properties, prepared by Borrower unless otherwise required by
                  Lender to retain a third party inspecting engineer, which
                  shall give a detailed description of the physical condition of
                  such Property and shall otherwise be in form and substance
                  acceptable to Lender; and

                           (iii) a comprehensive current written appraisal
                  report with respect to certain Properties prepared by an MAI
                  appraiser designated by Lender and complying with FIRREA
                  standards.

Borrower shall only be required to submit a (i) current phase one level
environmental audit report pursuant to SECTION 12.1.1(I) if, at the time of
closing the Loan, the phase one level environmental audit report for those
Properties submitted to Lender was dated earlier than one (1) year prior to the
closing of the Loan, (ii) Property Inspection Report pursuant to SECTION
12.1.1(II) with respect to those Properties which Borrower did not deliver such
Property Inspection Report to Lender after the date which was three months prior
to the closing of the Loan, and (iii) current appraisal report pursuant to
SECTION 12.1.1(III) if the appraisal report for those Properties submitted to
Lender was dated earlier than one (1) year before the closing of the Loan.

         SECTION 12.2. Cooperation. If requested by Lender, Borrower shall,
assist Lender in satisfying the market standards to which Lender customarily
adheres or which may be reasonably required in the marketplace or by the Rating
Agencies in connection with any Secondary Market Transactions, including,
without limitation, to:

                           (i) (A) provide updated financial and other
                  information with respect to the Properties, the business
                  operated at the Properties, Borrower and the Property Manager,
                  (B) provide updated budgets relating to the Properties and (C)
                  provide updated appraisals, market studies, environmental
                  reviews (Phase I's and, if appropriate, Phase II's), property
                  condition reports, ALTA/ACSM, surveys and other due diligence
                  investigations of the Properties together, if customary, with
                  appropriate verification of such updated information through
                  letters of auditors or opinions of counsel acceptable to
                  Lender and the Rating Agencies;

                           (ii) provide access and entry to the Properties
                  during normal business hours and upon prior notice to Lender,
                  any prospective purchaser of the Loan or of any participation
                  or other interest therein


                                      -63-


                  (including any such interest to be acquired in connection with
                  a syndicate or securitization of the Loan, the Rating Agencies
                  or any other Person authorized by Lender);

                           (iii) use best efforts to provide opinions of
                  counsel, which may be relied upon by Lender, the Rating
                  Agencies and their respective counsel, agents and
                  representatives, as to non-consolidation, fraudulent
                  conveyance, and true sale or any other opinion customary in
                  Secondary Market Transactions or required by the Rating
                  Agencies with respect to the Properties and Borrower and
                  Affiliates, which counsel and opinions shall be satisfactory
                  to Lender and the Rating Agencies;

                           (iv) provide updated, as of the closing date of the
                  Secondary Market Transaction (the "SECONDARY MARKET CLOSING
                  DATE"), representations and warranties made in the Loan
                  Documents and such additional representations and warranties
                  as the Rating Agencies may reasonably require;

                           (v) execute amendments to the Loan Documents and
                  Borrower's organizational documents reasonably requested by
                  Lender, provided, however, that Borrower shall not be required
                  to modify or amend any Loan Document if such modification or
                  amendment would (A) change the interest rate, the stated
                  maturity or the amortization of principal as set forth herein
                  or in the Note, or (B) modify or amend any other material
                  economic term of the Loan;

                           (vi) provide any additional financial statements or
                  other information as may be required to satisfy all
                  requirements of the Securities Act (defined below); and

                           (vii) transfer ownership of Properties to newly
                  formed single-purpose entities acceptable to Lender and the
                  Rating Agencies.

         Except as expressly set forth in Section 12.1.1, or as may otherwise be
agreed upon by the Borrower in writing, Lender shall be responsible for all
costs and expenses associated with this ARTICLE XII.











                                      -64-


         SECTION 12.3. Securitization Indemnification.

         (a) Borrower understands that information provided to Lender by
Borrower and its agents, counsel and representatives may be included in
disclosure documents in connection with the Securitization, including, without
limitation, an offering circular, a prospectus, prospectus supplement, private
placement memorandum or other offering document (each, a "DISCLOSURE DOCUMENT")
and may also be included in filings with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, as amended (the "SECURITIES ACT"), or
the Securities and Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and
may be made available to investors or prospective investors in the Securities,
the Rating Agencies, and service providers relating to the Securitization.
Lender shall provide Borrower adequate opportunity to review any such Disclosure
Document and to provide any such comment to Lender as Borrower deems necessary.

         (b) Borrower agrees to provide in connection with each of (i) a
preliminary and a final private placement memorandum or (ii) a preliminary and
final prospectus or prospectus supplement, as applicable, an agreement (A)
certifying that Borrower has examined such Disclosure Documents specified by
Lender and that each such Disclosure Document, as it relates to Borrower,
Borrower Affiliates, the Properties, the Property Manager and all other aspects
of the Loan, does not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements made, in the
light of the circumstances under which they were made, not misleading, (B)
indemnifying (and for purposes of this SECTION 12.3, Lender hereunder shall
include its officers and directors), the Affiliate of Lender that has filed the
registration statement relating to the Securitization (the "REGISTRATION
STATEMENT"), each of its directors, each of its officers who have signed the
Registration Statement and each Person that controls the Affiliate within the
meaning of SECTION 15 of the Securities Act or Section 20 of the Exchange Act
(collectively, the "LENDER GROUP"), and Lender, each of its directors and each
Person who controls Lender within the meaning of Section 15 of the Securities
Act and Section 20 of the Exchange Act (collectively, the "UNDERWRITER GROUP")
for any losses, claims, damages or liabilities (collectively, the "LIABILITIES")
to which Lender, the Lender Group or the Underwriter Group may become subject
insofar as the Liabilities arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in such sections or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated in such sections or necessary in order to
make the statements in such sections, in light of the circumstances under which
they were made, not misleading to the extent that Borrower failed to timely
notify the Lender, Lender Group and/or the Underwriter Group with respect to the
same and (C) agreeing to reimburse Lender, the Lender Group and/or the
Underwriter Group for any legal or other expenses reasonably incurred by Lender,
the Lender Group and the Underwriter Group in connection with investigating or
defending the Liabilities; provided, however, that Borrower will be liable in
any such case under clause (B) or (C) above only to the extent that any such
loss claim, damage or liability arises out of or is based upon any such untrue
statement or omission made therein in reliance upon and in conformity with
information furnished to Lender by or on behalf of Borrower in connection with
the preparation of the Disclosure Document or in connection with the
underwriting or closing of the Loan, including, without limitation, financial
statements of Borrower, operating statements, rent rolls, appraisals, market
studies, environmental site


                                      -65-


assessment reports and property condition reports with respect to the
Properties. This indemnity agreement will be in addition to any liability which
Borrower may otherwise have.

         (c) In connection with Exchange Act filings, Borrower shall (i)
indemnify Lender, the Lender Group and the Underwriter Group for Liabilities to
which Lender, the Lender Group or the Underwriter Group may become subject
insofar as the Liabilities arise out of or are based upon the omission or
alleged omission to state in the Disclosure Document a material fact required to
be stated in the Disclosure Document in order to make the statements in the
Disclosure Document, in light of the circumstances under which they were made,
not misleading to the extent that Borrower failed to timely notify the Lender,
Lender Group and/or the Underwriter Group with respect to the same and (ii)
reimburse Lender, the Lender Group or the Underwriter Group for any legal or
other expenses reasonably incurred by Lender, the Lender Group or the
Underwriter Group in connection with defending or investigating the Liabilities.

         (d) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section, notify the indemnifying party in writing of the commencement thereof,
but the omission to so notify the indemnifying party will not relieve the
indemnifying party from any liability which the indemnifying party may have to
any indemnified party hereunder except to the extent that failure to notify
causes prejudice to the indemnifying party. In the event that any action is
brought against any indemnified party, and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled, jointly with
any other indemnifying party, to participate therein and, to the extent that it
(or they) may elect by written notice delivered to the indemnified party
promptly after receiving the aforesaid notice from such indemnified party, to
assume the defense thereof with counsel satisfactory to such indemnified party.
After notice from the indemnifying party to such indemnified party under this
Section, such indemnified party shall pay for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there are any legal defenses available to it and/or other indemnified
parties that are different from or additional to those available to the
indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to assert such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party at
the cost of the indemnifying party. The indemnifying party shall not be liable
for the expenses of more than one separate counsel unless an indemnified party
shall have reasonably concluded that there may be legal defenses available to it
that are different from or additional to those available to another indemnified
party.

         (e) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in this Section is
for any reason held to be unenforceable as to an indemnified party in respect of
any losses, claims, damages or liabilities (or action in respect thereof)
referred to therein which would otherwise be indemnifiable under this Section,
the indemnifying party shall contribute to the amount paid or payable by the
indemnified party as a result of such losses, claims, damages or liabilities (or
action in respect thereof); provided, however, that no Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person


                                      -66-


who was not guilty of such fraudulent misrepresentation. In determining the
amount of contribution to which the respective parties are entitled, the
following factors shall be considered: (i) Lender's and Borrower's relative
knowledge and access to information concerning the matter with respect to which
the claim was asserted; (ii) the opportunity to correct and prevent any
statement or omission; and (iii) any other equitable considerations appropriate
in the circumstances. Lender and Borrower hereby agree that it would not be
equitable if the amount of such contribution were determined by pro rata or per
capita allocation.

         (f) The liabilities and obligations of both Borrower and Lender under
this SECTION 12.3 shall survive the termination of this Agreement and the
satisfaction and discharge of the Debt.

         SECTION 12.4. Rating Surveillance. Lender will retain, at its sole
costs, the Rating Agencies to provide rating surveillance services on any
certificates issued in a Securitization.

         SECTION 12.5. Component Notes. At no cost or expense to Borrower,
Lender shall have the right to modify the Note in order to create one or more
"component notes" provided that (a) the total principal balance of such notes as
of the effective date of such modification equals the total principal balance of
the Loan immediately prior to such modification, (b) the total weighted average
of the Interest Rates of all of the component notes as of the effective date of
such modification equals the weighted average of the Interest Rate of the Note
immediately prior to such modification and (c) the aggregate monthly debt
service on such component notes immediately after such modification equals the
monthly debt service immediately prior to such modification. Lender shall have
the right to modify the Notes in the accordance with this Section upon notice to
Borrower (in which event such modification shall then be deemed effective).

         SECTION 12.6. Event of Default. It shall be an Event of Default if
either Borrower or Guarantors shall fail to comply with any of the terms,
covenants or conditions of this Article XII for three (3) Business Days after
notice from Lender provided, however, that if Borrower shall have commenced to
cure such default, and thereafter diligently and expeditiously proceeds to cure
the same, such three (3) day period will be extended for an additional five (5)
business days.

         SECTION 12.7. Servicer. Lender reserves the right to retain a servicer
(the "SERVICER") to act as its agent under the Loan with such powers as are
specifically delegated to the servicer by Lender including, without limitation,
(x) general administration of the Loan, including, without limitation, the
collection and remittance of payments, the maintaining of tax and insurance
escrows, the review of the monthly and quarterly reports required to be
submitted by Borrower and the issuance of periodic reports of available
borrowing capacity under the Loan, (y) the granting or withholding of any and
all consents or approvals which may be requested or given pursuant to the Loan
Documents, and (z) the exercise of, or determination to refrain from exercising,
rights and remedies under the Loan Documents. In the event Lender retains a
Servicer as aforesaid, Borrower shall recognize that the Servicer shall have all
the rights and obligations of the Lender hereunder and Borrower irrevocably
consents to the matters set forth in this SECTION 12.7 and agrees to cooperate
with the Servicer in all respects as if Servicer


                                      -67-


were the Lender named herein. Lender shall be responsible for the payment of all
fees and expenses of Servicer.

         SECTION 12.8. Creation of Security Interest. Notwithstanding any other
provision set forth in this Loan Agreement, the Note, the Mortgage or any of the
other Loan Documents, Lender may at any time create a security interest in all
or any portion of its rights under this Agreement, the Note, the Mortgage and
any other Loan Document (including, without limitation, the advances owing to
it) in favor of any Federal Reserve Bank in accordance with Regulation A of the
Board of Governors of the Federal Reserve System.


                                 ARTICLE XIII.

                          PARTIAL RELEASE OF PROPERTIES

         SECTION 13.1. Partial Release of Properties. Borrower shall have the
right to obtain releases of individual Properties from the lien of the Mortgages
and the other Loan Documents (and to obtain a release of any Ordinary Capital
Expenditure Funds, Capital Improvement Funds, Tax Funds and Insurance Premium
Funds held in connection therewith) upon the following terms and conditions:

                           (i) no default shall have occurred and be continuing
                  under the Loan Documents;

                           (ii) the covenant set forth in SECTION 5.1.11
                  entitled "Single Purpose" shall be fully satisfied, such that
                  the Borrower will no longer own the released Property;

                           (iii) Borrower shall deliver to Lender the Defeasance
                  Collateral required under SECTION 2.5 with respect to such
                  Property, which amount shall be applied in reduction of the
                  Principal Balance of the Note in such manner as Lender shall
                  determine;

                           (iv) Borrower shall deposit the Defeasance Collateral
                  into the Defeasance Collateral Account in an amount equivalent
                  to 125% of the Allocated Loan Amount with respect to such
                  property in such manner as Lender shall determine;

                           (v) the aggregate Allocated Loan Amount of all
                  Properties released in accordance with this SECTION 13.1 shall
                  not exceed 25% of the Principal Balance of the Loan;

                           (vi) Lender shall be satisfied that the Debt Service
                  Coverage Ratio of the Properties after such release shall not
                  be less than the Debt Service Coverage Ratio immediately
                  preceding such release and repayment;

                                      -68-


                           (vii) Borrower shall deliver to Lender such other
                  certificates, documents or instruments as Lender may
                  reasonably request; and

                           (viii) Borrower shall have satisfied the other
                  conditions and requirements set forth in SECTION 2.5.

         SECTION 13.2. Release of Portions of Zoppe's Property and Burntwood
Property. Borrower shall have the right to obtain a release of the nonrevenue
producing (as of the date hereof) commercial frontage property of the Zoppe's
Mobile Home Community located in Seagoville, Texas and the Burntwood Mobile Home
Community located in Oklahoma City, Oklahoma (collectively, the "RELEASE
PARCELS") from the lien of the Mortgage and the other Loan Documents upon the
following terms and conditions:

                           (i) Borrower shall provide Lender not less than
                  thirty (30) days notice (or a shorter period of time if
                  permitted by Lender in its sole discretion) specifying a date
                  on which the partial release is to occur;

                           (ii) To the extent applicable, Borrower shall have
                  delivered to Lender evidence that Borrower has complied with
                  all requirements of and obtained all approvals required under
                  any Leases applicable to the release of the Release Parcel and
                  that the release does not violate any of the provisions of the
                  Leases, including, without limitation, provisions relating to
                  the availability of parking at the Property;

                           (iii) Borrower shall have delivered to Lender (A) an
                  endorsement to the existing Lender's title insurance policy,
                  an opinion of counsel (from counsel reasonably acceptable to
                  Lender) or a certificate of an architect (from an architect
                  reasonably acceptable to Lender and licensed to practice in
                  the State) indicating that the Release Parcel has been legally
                  subdivided for zoning lot purposes from the remainder of the
                  Property pursuant to a zoning lot subdivision in accordance
                  with applicable law, (B) an endorsement to the title insurance
                  policy, an opinion of counsel (from counsel reasonably
                  acceptable to Lender) or a certificate of an architect (from
                  an architect reasonably acceptable to Lender and licensed to
                  practice in the State) indicating that the balance of the
                  Property separately conforms to and is in material compliance
                  with all applicable Legal Requirements and constitutes a
                  separate tax lot(s), (C) a certificate from an architect or
                  engineer licensed to practice in the State to the effect that
                  the Release Parcel is not necessary for the uses of the
                  remainder of the Property, including, without limitation, for
                  support, access, driveways, parking, utilities, drainage flows
                  or any other purpose (giving effect to any easements therefor
                  reserved over the Release Parcel for the benefit of the
                  remainder of the Property) and (D) an Officer's Certificate
                  with supporting documentation indicating that either
                  sufficient parking remains on the remainder of the Property to
                  comply with all Leases of such remainder or reservations of
                  parking (in favor of such


                                      -69-


                  remainder) in that portion of the Property released are
                  sufficient to comply with all Leases of such remainder.
                  Notwithstanding the foregoing, in the event that Borrower
                  determines that it shall not effect a zoning lot subdivision,
                  but shall only effect a tax lot subdivision, in lieu of
                  subparagraph (A) above, Borrower shall deliver evidence
                  (either an opinion of counsel or a certificate from an
                  architect or engineer and licensed to practice in the State)
                  that (y) the entire Property remains a single zoning lot and
                  all improvements located thereon remain in compliance with all
                  Legal Requirements and (z) the entire Property shall be
                  subject to a zoning lot development agreement recorded in the
                  appropriate land records which will restrict the use of the
                  Release Parcel and will permit the use, development and
                  restoration (in the case of a Casualty or other damage) of the
                  remainder of the Property such that the remainder of the
                  Property may continue to be used, developed and restored in
                  the manner existing on the date of release; and

                           (iv) If the requirements of this Section 13.2 have
                  been satisfied, the Release Parcel shall be released from the
                  lien of the Mortgage. In connection with the release of the
                  Lien, Borrower shall submit to Lender, not less than ten (10)
                  days prior to the Partial Release Date (or such shorter time
                  as is acceptable to Lender in its sole discretion), a release
                  of Mortgage (and related Loan Documents) for execution by
                  Lender. Such release shall be in a form appropriate in the
                  jurisdiction in which the Property is located and that
                  contains standard provisions protecting the rights of the
                  releasing lender. Borrower shall pay all costs, taxes and
                  expenses associated with the release of the lien of the
                  Mortgage, including Lender's reasonable attorneys' fees.
                  Borrower shall cause title to the Release Parcel so released
                  from the lien of the Mortgage to be transferred to and held by
                  a Person other than Borrower.

         SECTION 13.3. Allocated Loan Amounts. SCHEDULE 1 sets forth the
allocation of the Principal Balance of the Loan amongst the Properties (such
allocation with respect to each Property, the "ALLOCATED LOAN AMOUNT"). The
Allocated Loan Amounts shall not be subject to adjustment or reallocation as a
result of any prepayments of the Principal Balance.


                                  ARTICLE XIV.

                                  MISCELLANEOUS

         SECTION 14.1. Non-Waiver. The failure of Lender to insist upon strict
performance of any term of this Agreement shall not be deemed to be a waiver of
any term of this Agreement. Borrower shall not be relieved of Borrower's
obligation to pay the Debt at the time and in the manner provided for its
payment in the Note, the Mortgages and this Agreement by reason of (i) failure
of Lender to comply with any request of Borrower to take any action to foreclose
any one or more of the Mortgages or otherwise enforce any of the provisions of
this Agreement, the Mortgages, the Note or any of the other Loan Documents, (ii)
the release,


                                      -70-


regardless of consideration, of the whole or any part of the Properties or any
other collateral or security for the Debt, or (iii) any agreement or stipulation
between Lender and any subsequent owner or owners of the Properties or other
Person extending the time of payment or otherwise modifying or supplementing the
terms of the Note, the Mortgages, this Agreement or any of the other Loan
Documents without first having obtained the consent of Borrower, and in the
latter event, Borrower shall continue to be obligated to pay the Debt at the
time and in the manner provided in the Note, the Mortgages and this Agreement,
as so extended, modified and supplemented, unless, expressly released and
discharged from such obligation by Lender in writing. Regardless of
consideration, and without the necessity for any notice to or consent by the
holder of any subordinate lien, encumbrance, right, title or interest in or to
the Properties, Lender may release any Person at any time liable for the payment
of the Debt or any portion thereof or any part of the security held for the Debt
and may extend the time of payment or otherwise modify the terms of the Note,
the Mortgages, this Agreement or any of the other Loan Documents, including,
without limitation, a modification of the interest rate payable on the Principal
Balance, without in any manner impairing or affecting the Mortgages or the
respective liens thereof or the priority of the Mortgages, as so extended and
modified, as security for the Debt over any such subordinate lien, encumbrance,
right, title or interest. Lender may resort for the payment of the Debt to any
other security held by Lender in such order and manner as Lender in its
discretion, may elect. Lender may take action to recover the Debt, or any
portion thereof, or to enforce any covenant hereof without prejudice to the
right of Lender thereafter to foreclose any one or more of the Mortgages. Lender
shall not be limited exclusively to the rights and remedies herein stated but
shall be entitled to every additional right and remedy set forth in the Loan
Documents or now or hereafter afforded by law. The rights of Lender under this
Agreement and the other Loan Documents shall be separate, distinct and
cumulative and none shall be given effect to the exclusion of the others. No act
of Lender shall be construed as an election to proceed under any one provision
of this Agreement or of the other Loan Documents to the exclusion of any other
provision set forth in this Agreement or the other Loan Documents.

         SECTION 14.2. Sole Discretion. Except as may otherwise be expressly
provided to the contrary, wherever pursuant to the Note, the Mortgages, this
Agreement, or any of the other Loan Documents, Lender exercises any right given
to it to consent or not consent, or to approve or disapprove, or any arrangement
or term is to be satisfactory to Lender, the decision of Lender shall be in the
sole and absolute discretion of Lender and shall be final and conclusive.

         SECTION 14.3. Absolute and Unconditional Obligation. Borrower
acknowledges that Borrower's obligation to pay the Debt in accordance with the
provisions of the Note, the Mortgages and this Agreement is and shall at all
times continue to be absolute and unconditional in all respects, and shall at
all times be valid and enforceable irrespective of any other agreements or
circumstances of any nature whatsoever which might otherwise constitute a
defense to the Note, the Mortgages or this Agreement or the obligation of
Borrower thereunder to pay the Debt or the obligations of any other Person
relating to the Note, the Mortgages or this Agreement or the obligations of
Borrower under the Note, the Mortgages or this Agreement or otherwise with
respect to the Loan, and Borrower absolutely, unconditionally and irrevocably
waives any and all right to assert any defense (other than the defense of
payment), setoff, counterclaim or crossclaim of any nature whatsoever with
respect to the obligation of Borrower to pay the Debt in accordance with the
provisions of the Note, the Mortgages and this Agreement or the obligations of
any other Person relating to the Note, the Mortgages or this Agreement or


                                      -71-


the obligations of Borrower under the Note, the Mortgages or this Agreement or
otherwise with respect to the Loan in any action, case or proceeding brought by
Lender to collect the Debt, or any portion thereof, or to enforce, foreclose and
realize upon the lien and security interest created by the Mortgages or any
other document or instrument securing repayment of the Debt, in whole or in part
(provided, however, that the foregoing provisions of this sentence shall not be
deemed a waiver of the right of Borrower to assert any compulsory counterclaim
in any such action, case or proceeding brought by Lender in any state court if
such counterclaim is compelled under local law or rule or procedure, or in any
such action, case or proceeding brought by Lender in a court of the United
States, nor shall the foregoing provisions of this sentence be deemed a waiver
of the right of Borrower to assert any claim which would otherwise constitute a
defense, setoff, counterclaim or crossclaim of any nature whatsoever against
Lender in any separate action, case or proceeding brought by Borrower against
Lender).

         SECTION 14.4. Relationship. The relationship of Lender to Borrower
hereunder is strictly and solely that of lender and borrower and nothing
contained in the Note, the Mortgages, this Agreement or any of the other Loan
Documents is intended to create, or shall in any event or under any circumstance
be construed as creating, a partnership, joint venture, tenancy-in-common, joint
tenancy or other relationship of any nature whatsoever between Lender and
Borrower other than as lender and borrower.

         SECTION 14.5. Anti-Forfeiture. Borrower hereby covenants and agrees not
to commit, permit or suffer to exist any act or omission affording the Federal
government or any state or local government the right of forfeiture under any
Federal or state RICO or similar law as against the Properties or any part
thereof or interest therein or any monies paid in performance of Borrower's
obligations under this Agreement, the Mortgages, the Note or any of the other
Loan Documents. In furtherance thereof, Borrower hereby indemnifies Lender and
agrees to defend and hold Lender harmless from and against any loss, damage or
injury by reason of the breach of the covenants and agreements set forth in this
paragraph. Without limiting the generality of the foregoing, the filing of
formal charges or the commencement of proceedings against Borrower or against
the Properties or any part thereof or interest therein under any Federal or
state law for which forfeiture of the Properties or any part thereof or of any
monies paid in performance of Borrower's obligations under the Loan Documents is
a potential result, shall, at the election of Lender, but otherwise subject to
the immediately following sentence, constitute an Event of Default hereunder
without notice or opportunity to cure. Notwithstanding the foregoing, after
prior notice to Lender, Borrower, at its own cost and expense, may contest the
validity of or application of any such law affording such forfeiture, provided
that (i) no default shall have occurred and shall be continuing under the Note,
the Mortgages, this Agreement or any of the other Loan Documents, (ii) such
proceeding shall be permitted under and be conducted in accordance with the
provisions of any other instrument to which Borrower, or the Properties, are
subject and shall not constitute a default thereunder, (iii) neither the
Properties nor any portion thereof nor any interest therein will in the opinion
of Lender be in danger of being sold, forfeited, terminated, canceled or lost,
and (iv) Borrower shall have deposited with Lender cash, cash equivalent or
letter of credit satisfactory to Lender in an amount sufficient to discharge any
lien together with interest and penalties thereon arising out of such law.
Notwithstanding the foregoing, Borrower shall not be required to make any
deposit with Lender pursuant to clause (iv) of the preceding sentence, if Lender
is reasonably satisfied that (a) the act or omission affording such forfeiture
was committed by a Person other than


                                      -72-


Borrower or an Affiliate or subsidiary of Borrower, (b) Borrower is diligently
pursuing its rights and remedies against such Person, (c) neither the Properties
nor any portion thereof or interest therein will be in danger of being sold,
forfeited, terminated, canceled or lost, and (d) the respective liens and
priorities of the Mortgages will not be in danger of being primed, diminished or
forfeited.

         SECTION 14.6. Deposits. Whenever in this Agreement, Borrower is
required to deposit monies with Lender to secure obligations of Borrower under
this Agreement or as a condition precedent to Borrower's right to contest
certain obligations, such monies shall (unless otherwise specifically provided
to the contrary in this Agreement) be held in an interest-bearing account
selected by Lender. All such accrued interest shall be held, disbursed and
applied in accordance with the provisions applicable to such deposits, it being
agreed that interest earned on the Tax Fund Account and the Insurance Premium
Account shall be credited against future required monthly deposits. From time to
time, at the request of Borrower, Lender shall disburse interest earned on the
Capital Improvement Account to the Borrower for deposit into the Operating
Account provided Lender is reasonably satisfied that sufficient funds remain in
such Accounts to complete all Capital Work required hereunder. In order to
secure the payment of the Debt and the performance by Borrower of its
obligations under the Loan Documents, Borrower hereby grants and assigns to
Lender a security interest in and to all monies from time to time on deposit in
any such account. Upon the occurrence of an Event of Default and for so long as
such Event of Default shall continue, Lender shall have the absolute right to
apply all or any portion of the balances held in any such accounts to the
payment of the Debt whether or not due and payable in such order, priority and
proportions as Lender in its discretion shall deem appropriate.

         SECTION 14.7. No Brokers. Lender shall not be required to pay any
brokerage fees or commissions or other remuneration of any nature whatsoever
arising from the extension of the Loan or the funding of the Loan and Borrower
agrees to defend, indemnify and hold Lender harmless, from and against any and
all claims made against, or liabilities, obligations, damages, costs and
expenses (including reasonable attorneys' fees and disbursements) incurred by
Lender in connection with any claims which are asserted by any broker with whom
Borrower has, or is alleged to have, dealt in connection with the Loan or any
other Person claiming by, through or under Borrower in connection with the Loan.

         SECTION 14.8. Submission to Jurisdiction. Borrower agrees to submit to
personal jurisdiction in the State of New York in any action, case or proceeding
arising out of the Note, this Agreement or the other Loan Documents (other than
the Mortgages and the Assignments of Leases and Rents), and, in furtherance of
such agreement, Borrower hereby agrees and consents that without limiting other
methods of obtaining jurisdiction, personal jurisdiction over Borrower in any
such action, case or proceeding may be obtained within or without the
jurisdiction of any court located in the State of New York and that any process
or notice of motion or other application to any such court in connection with
any such action, case or proceeding may be served upon Borrower by registered or
certified mail to or by personal service at the last known address of Borrower,
as the case may be, whether such address be within or without the jurisdiction
of any such court. Borrower also agrees that the venue of any litigation arising
in connection with the Debt or in respect of any of the obligations of Borrower
under the Note, this Agreement or the other Loan Documents (other than
enforcement actions


                                      -73-


brought under the Mortgages and the Assignments of Leases and Rents) shall, to
the extent permitted by law, be in New York County, New York.

         SECTION 14.9. Retention of Counsel and Consultants. If Lender deems it
to be in its best interests to retain the assistance of any Person (including,
but not limited to, attorneys, title insurance companies, third party escrow
agents, appraisers, accountants, engineers and surveyors) with respect to any
request for consent or approval by Lender relating to the Loan Documents,
Borrower shall reimburse Lender within ten (10) days of its demand for all
reasonable costs incurred by them in connection with the employment of such
Persons.

         SECTION 14.10. Waiver of Notice. Borrower shall not be entitled to any
notices of any nature whatsoever from Lender except as required by applicable
law and except with respect to matters for which this Agreement specifically and
expressly provides for the giving of notice by Lender to Borrower, and Borrower
hereby expressly waives the right to receive any notice from Lender with respect
to any matter for which applicable law or this Agreement does not specifically
and expressly provide for the giving of notice by Lender to Borrower.

         SECTION 14.11. Indemnification of Lender. Borrower shall indemnify
Lender and its respective affiliates, subsidiaries, directors, officers and
employees against all losses, claims, damages, penalties, judgments, liabilities
and reasonable expenses (including, without limitation, all expenses of
litigation or preparation therefor whether or not Lender is a party thereto)
which any of them may pay or incur arising out of or relating to this Agreement,
the other Loan Documents, the transactions contemplated hereby or the direct or
indirect application or proposed application of the proceeds of any Loan
hereunder; provided, however, that nothing herein shall obligate Borrower to
indemnify Lender from and against any losses, claims, damages, penalties,
judgments, liabilities and expenses, imposed on or incurred by Lender by reason
of Lender's willful misconduct or gross negligence. The obligations of Borrower
under this paragraph shall survive the termination of this Agreement.

         SECTION 14.12. Construction of Agreement. The titles and headings
preceding the Sections of this Agreement have been inserted for convenience of
reference only and are not intended to summarize or otherwise describe the
subject matter of such Section and shall not be given any consideration in the
construction of this Agreement.

         SECTION 14.13. Parties Bound, etc. All of the terms, covenants and
provisions of this Agreement shall be binding upon and inure to the benefit of
Borrower and Lender and their respective successors and assigns. Borrower shall
not have the right without the prior consent of Lender (which consent may be
withheld in the sole and absolute discretion of Lender) to assign or transfer
its rights under this Agreement or under any of the other Loan Documents, in
whole or in part, by agreement, operation of law or otherwise to any other
Person, it being agreed that any such assignment or transfer without the prior
consent of Lender shall be void and of no force and effect and shall constitute
an immediate Event of Default under this Agreement.

         SECTION 14.14. COMPLETE AGREEMENT. NO STATEMENTS, AGREEMENTS OR
REPRESENTATIONS, ORAL OR WRITTEN, WHICH MAY HAVE BEEN MADE BY LENDER, OR BY ANY
EMPLOYEE, AGENT OR BROKER ACTING ON BEHALF OF LENDER, WITH RESPECT TO THIS
AGREEMENT OR THE LOAN SHALL


                                      -74-


BE OF ANY FURTHER FORCE OR EFFECT, EXCEPT TO THE EXTENT SPECIFICALLY SET FORTH
IN THIS AGREEMENT OR IN THE OTHER LOAN DOCUMENTS, AND ALL PRIOR AGREEMENTS AND
REPRESENTATIONS IN RESPECT OF THIS AGREEMENT AND THE LOAN ARE MERGED IN THIS
AGREEMENT SO THAT THIS AGREEMENT SHALL CONSTITUTE THE ENTIRE AGREEMENT BETWEEN
LENDER AND BORROWER WITH RESPECT TO THE LOAN.

         SECTION 14.15. Governing Law. This Agreement shall in all respects be
governed, construed, applied and enforced in accordance with the laws of the
State of New York.

         SECTION 14.16. Severability. If any term, covenant, provision or
condition of this Agreement shall be held to be invalid, illegal or
unenforceable in any respect, this Agreement shall be construed without such
term, covenant, provision or condition.

         SECTION 14.17. Notices. Any notice, request, demand, statement,
authorization, direction, approval or consent made under this Agreement or under
the other Loan Documents shall be in writing and shall be sent by Federal
Express or other reputable national overnight courier service, or by postage
prepaid registered or certified mail, return receipt requested, and shall be
deemed given when received at the following addresses if sent by Federal
Express, or other reputable national courier service, and three (3) Business
Days after being postmarked and addressed as follows if sent by postage prepaid
registered or certified mail, return receipt requested:

         If to Lender:

         Morgan Stanley Dean Witter Mortgage Capital Inc.
         1585 Broadway, 38th Floor
         New York, New York 10036
         Attention: James E. Flaum and Kevin Swartz

































                                      -75-


         With a copy to:

         Paul, Hastings, Janofsky & Walker LLP
         Park Avenue Tower
         75 East 55th Street
         New York, New York  10022
         Attention: Kenneth J. Friedman, Esq.

         If to Borrower, Property Manager, any Guarantor or any Affiliate
         of Borrower, Property Manager or any Guarantor:

         c/o Affordable Residential Communities
         600 Grant Street,  Suite 900
         Denver, CO 80203
         Attention: Frank LoFrisco, Vice President
                    and
                    Scott Gesell, Vice President and
                    General Counsel
                    and
                    Larry Kreider, Chief Financial Officer

         With a copy to:

         GMAC Commercial Mortgage Corporation
         200 Witmer Road
         Horsham, Pennsylvania  19044-0809
         Attention: Loan Servicing

         And an additional copy to:

         Skadden, Arps, Slate, Meagher & Flom LLP
         4 Times Square
         New York, New York  10036
         Attention:  Fred B. White III, Esq.

         And an additional copy to:

         Proskauer Rose LLP
         1585 Broadway
         New York, New York  10036
         Attention:  Steven L. Lichtenfeld, Esq.

Each party may designate a change of address by notice to the other parties,
given at least fifteen (15) days before such change of address is to become
effective. In no event shall GMAC be removed as a notice party without its prior
written approval.

                                      -76-


         SECTION 14.18. Modification. This Agreement may not be modified,
amended or terminated, in whole or in part, except by an agreement in writing
executed by the parties hereto.

         SECTION 14.19. Waivers. Lender may at any time and from time to time
waive any one or more of the terms, covenants, provisions or conditions
contained in this Agreement or in the other Loan Documents, but any such waiver
shall be deemed made in pursuance hereof or thereof and not in modification
thereof, and any such waiver in any particular instance or circumstance shall in
no event or under any circumstance be considered a waiver of any such term,
covenant, provision or condition in any other instance or any other
circumstance.

         SECTION 14.20. WAIVER OF TRIAL BY JURY. BORROWER AND LENDER HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY AND ALL RIGHTS TO TRIAL BY JURY IN ANY
ACTION, SUIT OR COUNTERCLAIM ARISING IN CONNECTION WITH, OUT OF OR OTHERWISE
RELATING TO THE NOTE, THE MORTGAGES, THIS AGREEMENT OR ANY OTHER DOCUMENT OR
INSTRUMENT NOW OR HEREAFTER EXECUTED AND DELIVERED IN CONNECTION THEREWITH OR
WITH THE LOAN.




























                                      -77-





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


                                    MORGAN STANLEY DEAN WITTER MORTGAGE
                                    CAPITAL INC, a New York corporation



                                    By: /s/ Steven R. Maeglin
                                        --------------------------------------
                                        Name: Steven R. Maeglin
                                        Title: Vice President


                                    ARC SPEI I, L.L.C., a Delaware limited
                                    liability company


                                    By: /s/ Scott L. Gesell
                                        --------------------------------------
                                        Name: Scott L. Gesell
                                        Title: Vice President