exv10w4






Exhibit 10.4




CONSTRUCTION LOAN AGREEMENT




BETWEEN




CAMPUS CREST AT DENTON, LP,

a Delaware limited partnership




AND




AMEGY MORTGAGE COMPANY, L.L.C. d/b/a Q-10 Amegy Mortgage Capital,

a Texas limited liability company




Loan No. 99-10-71209






 









 








Table of Contents




	 	 	 	 	 	 	 
	ARTICLE I: DEFINITIONS
	 	 	1	 
	1.01

	 	Advance
	 	 	1	 
	1.02

	 	Application for Advance
	 	 	1	 
	1.03

	 	Appraisal
	 	 	1	 
	1.04

	 	Approved Budget
	 	 	1	 
	1.05

	 	Assignment of Construction Contracts
	 	 	2	 
	1.06

	 	Assignment of Permits and Licenses
	 	 	2	 
	1.07

	 	Assignment of Purchase Contracts
	 	 	2	 
	1.08

	 	Assignment of Rights to Plans and Specifications
	 	 	2	 
	1.09

	 	Availability of Utilities Letter
	 	 	2	 
	1.10

	 	Borrower’s Equity
	 	 	2	 
	1.11

	 	Closing Date
	 	 	2	 
	1.12

	 	Completion Date
	 	 	2	 
	1.13

	 	Compliance Letter
	 	 	2	 
	1.14

	 	Construction Contract
	 	 	3	 
	1.15

	 	Contractor
	 	 	3	 
	1.16

	 	Current Survey
	 	 	3	 
	1.17

	 	Deed of Trust
	 	 	3	 
	1.18

	 	Depository Bank
	 	 	3	 
	1.19

	 	Design Professional
	 	 	3	 
	1.20

	 	Engineering Reports
	 	 	3	 
	1.21

	 	Event of Default
	 	 	3	 
	1.22

	 	Force Majeure
	 	 	4	 
	1.23

	 	Governmental Authority
	 	 	4	 
	1.24

	 	Governmental Requirements
	 	 	5	 
	1.25

	 	Guarantor
	 	 	5	 
	1.26

	 	Guaranty Agreement
	 	 	5	 
	1.27

	 	Improvements
	 	 	5	 
	1.28

	 	Inspecting Engineers
	 	 	5	 
	1.29

	 	Inspection Certificate
	 	 	5	 
	1.30

	 	Land
	 	 	5	 
	1.31

	 	Letters of Credit
	 	 	5	 
	1.32

	 	Loan
	 	 	5	 
	1.33

	 	Loan Documents
	 	 	5	 
	1.34

	 	Master Plan
	 	 	5	 
	1.35

	 	Note
	 	 	6	 
	1.36

	 	Operating Account
	 	 	6	 
	1.37

	 	Phases
	 	 	6	 
	1.38

	 	Plans
	 	 	6	 
	1.39

	 	Property
	 	 	6	 
	1.40

	 	Purchase Contracts
	 	 	6	 
	1.41

	 	Supervision Professional
	 	 	6	 
	1.42

	 	TCEQ
	 	 	6	 
	1.43

	 	Title Company
	 	 	6	 
	1.44

	 	Title Insurance Policy
	 	 	6	 






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	1.45

	 	Title Underwriter
	 	 	6	 
	1.46

	 	Other Terms
	 	 	6	 
	ARTICLE II: ADVANCES BY LENDER
	 	 	7	 
	2.01

	 	Use of Loan Proceeds
	 	 	7	 
	2.02

	 	Procedure for Advances
	 	 	7	 
	2.03

	 	Requirements for Subsequent Advances
	 	 	10	 
	2.04

	 	Conditions to Subsequent Advances
	 	 	11	 
	2.05

	 	Completion of Improvements
	 	 	12	 
	2.06

	 	No Waiver
	 	 	13	 
	2.07

	 	Conditions Precedent for the Benefit of Lender
	 	 	13	 
	2.08

	 	Subordination
	 	 	13	 
	2.09

	 	Operating Account
	 	 	13	 
	2.10

	 	Letters of Credit
	 	 	13	 
	ARTICLE III: REPRESENTATIONS AND WARRANTIES OF BORROWER
	 	 	15	 
	3.01

	 	Representations and Warranties
	 	 	15	 
	3.02

	 	Survival of Representations and Warranties
	 	 	16	 
	3.03

	 	Inducement to Lender
	 	 	16	 
	ARTICLE IV: COVENANTS AND AGREEMENTS OF BORROWER
	 	 	16	 
	4.01

	 	Compliance with Governmental Requirements
	 	 	16	 
	4.02

	 	The Construction Contract
	 	 	17	 
	4.03

	 	Construction of the Improvements and Supervision
	 	 	17	 
	4.04

	 	Correction of Construction Defects
	 	 	17	 
	4.05

	 	Storage of Materials
	 	 	17	 
	4.06

	 	Inspection of the Property
	 	 	18	 
	4.07

	 	Notices by Governmental Authority, Fire and Casualty Losses, Etc.
	 	 	18	 
	4.08

	 	Application of Advances
	 	 	18	 
	4.09

	 	Direct Disbursement and Application by Lender
	 	 	18	 
	4.10

	 	Costs and Expenses
	 	 	18	 
	4.11

	 	Change Orders
	 	 	18	 
	4.12

	 	No Liability of Lender
	 	 	18	 
	4.13

	 	No Conditional Sale Contracts, Etc.
	 	 	19	 
	4.14

	 	Defense of Action
	 	 	19	 
	4.15

	 	Assignment of Construction Contract
	 	 	19	 
	4.16

	 	Assignment of Plans
	 	 	20	 
	4.17

	 	Payment of Claims
	 	 	21	 
	4.18

	 	Inspections
	 	 	21	 
	4.19

	 	Indemnity
	 	 	21	 
	4.20

	 	Lender’s Action for its Own Protection Only
	 	 	22	 
	ARTICLE V: RIGHTS AND REMEDIES OF LENDER
	 	 	22	 
	5.01

	 	Rights of Lender
	 	 	22	 
	5.02

	 	Cessation of Advances
	 	 	23	 
	5.03

	 	Funds of Lender
	 	 	23	 
	5.04

	 	No Waiver or Exhaustion
	 	 	23	 
	ARTICLE VI: GENERAL TERMS AND CONDITIONS
	 	 	23	 
	6.01

	 	Notices
	 	 	23	 
	6.02

	 	Entire Agreement and Modifications
	 	 	23	 
	6.03

	 	Severability
	 	 	24	 






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	6.04

	 	Election of Remedies
	 	 	24	 
	6.05

	 	Form and Substance
	 	 	24	 
	6.06

	 	No Third Party Beneficiary
	 	 	24	 
	6.07

	 	Borrower In Control
	 	 	24	 
	6.08

	 	Number and Gender
	 	 	24	 
	6.09

	 	Captions
	 	 	24	 
	6.10

	 	Applicable Law
	 	 	24	 
	6.11

	 	Multiple Counterparts
	 	 	24	 






Exhibits:




Exhibit “A” — Description of Land

Exhibit “B-1” — Draw Request

Exhibit “B-2” — Draw Request Certification

Exhibit “B-3” — AIA Form of Application of Advance

Exhibit “B-4” — Contractor Draw Certification

Exhibit “C-1” — Initial Approved Budget

Exhibit “C-2” — Budget Revision Request Form

Exhibit “C-3” — Budget Revision Request Certification

Exhibit “D-1” — Assignment of Builder Takedown Contracts (Intentionally Omitted)

Exhibit “D-2” — Assignment of Construction Contracts

Exhibit “D-3” — Assignment of Unit Purchase Contract (Intentionally Omitted)

Exhibit “D-4” — Assignment of Right of Reimbursement (District Receivables) (Intentionally Omitted)

Exhibit “D-5” — Assignment of Rights to Plan and Specifications

Exhibit “E” — Form of Compliance Letter

Exhibit “F” — Affidavit of Commencement

Exhibit “G-1” — Partial Waiver and Release of Lien

Exhibit “G-2” — Final Waiver and Release of Lien

Exhibit “H” — Affidavit and Certificate of Completion

Exhibit “I-1” — Affidavit of Bills Paid

Exhibit “I-2” — Owner’s Affidavit of Bills Paid

Exhibit “J” — List of Tenant Leases (Intentionally Omitted)




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CONSTRUCTION LOAN AGREEMENT




     THIS
CONSTRUCTION LOAN AGREEMENT (“Agreement”) dated November 16, 2010 is made
by and between AMEGY MORTGAGE COMPANY, L.L.C. d/b/a Q-10 Amegy Mortgage Capital, a Texas limited
liability company (“Lender”), and CAMPUS CREST AT DENTON, LP, a Delaware limited partnership
(“Borrower”).



     Borrower has applied to Lender for a loan for the purposes hereinafter described concerning
the Land (hereinafter defined) described on Exhibit “A” attached hereto and made a part
hereof for all purposes; and Lender is willing to make such loan upon the terms and conditions
herein set forth in consideration of the mutual covenants and agreements herein contained, Borrower
and Lender agree as follows:



ARTICLE 1: DEFINITIONS




     For purposes of this Agreement, the following terms shall have the respective meanings
assigned to them.



     1.01 Advance . The term “Advance” shall mean a disbursement by Lender of any of the
proceeds of the Loan.



     1.02 Application for Advance . The term “Application for Advance” shall mean a written
application by Borrower (and such other parties as Lender may require) to Lender utilizing (i) the
Draw Request form, a copy of which is attached hereto as Exhibit “B-1”, (ii) the Draw
Request Certification to be signed by Borrower, a copy of which is attached hereto as Exhibit
“B-2”, (iii) the American Institute of Architects’ Forms G-702 and G-703, copies of which are
attached hereto as Exhibit “B-3” and (iv) the Contractor Draw Request Certification to be
signed by the Contractor, a copy of which is attached hereto as Exhibit “B-4” and if
requested by Lender, a Contractor’s Affidavit of Bills Paid described in Section 2.05(b), all
accompanied by such schedules, certificates, affidavits, releases, waivers, statements, invoices,
bills, and other documents as Lender may reasonably request.



     1.03 Appraisal . The term “Appraisal” shall mean a written appraisal of the Land and
Improvements in form and substance and prepared by an appraiser acceptable to Lender. The
Appraisal shall comply and be in conformity with the regulatory requirements for federally
chartered national banks.



     1.04 Approved Budget . The term “Approved Budget” shall mean a budget or cost
itemization prepared by Borrower and approved by Lender specifying the cost by item of (a) Land
acquisition or refinance and closing costs related thereto, (b) all labor, materials, and services
necessary for the construction of the Improvements in accordance with the Plans and all
Governmental Requirements, and (c) all other expenses anticipated by Borrower incident to the
development of the Property, and the construction of Improvements. The Approved Budget will show
total costs of all items and proposed allocation of Advances and Borrower’s Equity to such items.
The initial Approved Budget is attached hereto as Exhibit “C-1” and incorporated herein by
reference. The Approved Budget may be amended by Borrower, from time to time, with the prior
written consent of Lender, which consent will not be unreasonably withheld or delayed. It is
contemplated by Borrower and Lender that the Approved



1









 




Budget shall be amended, as construction of the Improvements is undertaken by Borrower and
Loan proceeds are used for payment of portions of the cost of construction. In connection with
said amendments, Borrower shall have the right to reallocate savings and/or surplus on a particular
line item of the Approved Budget to one or more other line items without Lender’s prior written
consent; provided that any use of the “Contingency” line item shall require Lender’s prior
approval. A copy of the Budget Revision Request Form and Budget Revision Request Certification to
be utilized by Borrower for amendment of the Approved Budget are attached hereto as Exhibit
“C-2” and Exhibit “C-3”, respectively. Lender hereby agrees not to unreasonably
withhold its consent to any budget line item reallocation request and to use good faith efforts to
respond to any such request within five (5) Business Days after Borrower’s request.




     1.05 Assignment of Construction Contracts . The term “Assignment of Construction
Contracts” shall collectively mean one or more collateral assignments in the form attached hereto
as Exhibit “D-2” and incorporated herein for all purposes, executed by Borrower and
acknowledged by the general contractor, assigning the construction contract with the general
contractor to Lender.



     1.06 Assignment of Permits and Licenses . The term “Assignment of Permits and
Licenses” shall mean a collateral assignment in form and substance acceptable to Lender, executed
by Borrower to Lender, assigning all permits, licenses and other agreements affecting the Property
and/or necessary or desirable for the ownership, use and operation thereof, as and if same shall
come into existence.



     1.07 Assignment of Purchase Contracts . [Intentionally deleted.]



     1.08 Assignment of Rights to Plans and Specifications . The term “Assignment of Rights
to Plans and Specifications” shall mean a collateral assignment in form attached hereto as
Exhibit “D-5” and incorporated herein for all purposes of Borrower’s rights with respect to
the Plans, duly executed by Borrower and acknowledged by Design Professional.



     1.09 Availability of Utilities Letter . The term “Availability of Utilities Letter”
shall mean a letter or letters or other evidence, in form and substance acceptable to Lender, to be
completed by parties acceptable to Lender certifying that the Property, when the Improvements are
completed, will have adequate rights and means of access to all water, storm and sanitary sewer
facilities, gas, cable t.v., telephone, and electric service necessary for the intended use of the
Property and adequate pedestrian and vehicular access to one or more dedicated public streets.



     1.10 Borrower’s Equity . The term “Borrower’s Equity” shall mean the amount of
Borrower’s cash equity investment in the Land and the Improvements as reasonably calculated from
time to time by Lender. Borrower’s Equity shall be at least equal to the total cost shown on the
Approved Budget less the proceeds of the Loan, but will in no event be less than $7,785,789.00.
The amount of Borrower’s Equity required may be increased in the event additional funding is
required pursuant to the terms of Section 2.02 of this Agreement.



     1.11 Closing Date . The term “Closing Date” shall mean the date of the execution and
delivery of this Agreement by Borrower and Lender.



     1.12 Completion Date . The term “Completion Date” shall mean twelve months from the
effective date hereof, or such earlier date on which Borrower is required to deliver space to
tenants under



2









 




any lease agreements.




     1.13 Compliance Letter . The term “Compliance Letter” shall mean a letter to be
delivered to Lender upon approval of the Plans, and at any time that there shall be a change or
modification in the Plans, in form or substance satisfactory to Lender, completed by the Design
Professional, certifying that the Improvements, when completed as designed, including such changes
and modifications, will be in compliance with all applicable Governmental Requirements of each
Governmental Authority having jurisdiction over the Property [including but not limited to Section
404 of the Federal Clean Water Act,] and in compliance with the conditions which must be satisfied
to maintain any permits for the Improvements. An acceptable form of Compliance Letter is attached
hereto as Exhibit “E” and made a part hereof for all purposes.



     1.14 Construction Contract . The term “Construction Contract” shall mean all
contracts executed between Borrower and each Contractor for the rendering of services or furnishing
of materials in connection with the completion of Improvements.



     1.15 Contractor . The term “Contractor” shall mean each “original contractor” (as
defined in Section 53.001 of the Texas Property Code, as amended from time to time), with whom
Borrower contracts for the construction of any of the Improvements or any other work with respect
to the Property. All Contractors under any Construction Contract exceeding ten percent (10%) of
the amount of the Approved Budget shall be bonded with payment and performance bonds in accordance
with Lender’s reasonable requirements unless waived by Lender based upon Lender’s review of the
Contractor’s financial condition. The term “Contractor” shall not include CAMPUS CREST
CONSTRUCTION, INC.



     1.16 Current Survey . The term “Current Survey” shall mean an on-the ground survey of
the Land (and Improvements, if applicable) dated within ninety days of the date such survey is
required to be furnished pursuant to any provision of this Agreement, performed by a surveyor duly
licensed as such in the State of Texas, in form and substance acceptable to Lender and Title
Company such that the Title Company may amend the Title Insurance Policy under procedural rule P-2
to delete the standard pre-printed exception concerning areas and boundary, save “shortages in
area”.



     1.17 Deed of Trust . The term “Deed of Trust” shall mean the deed of trust securing
the payment of the Note and the payment and performance of all obligations specified in said deed
of trust and this Agreement, and evidencing a valid and enforceable first priority lien on the
Property.



     1.18 Depository Bank . The term “Depository Bank” shall mean Amegy Bank National
Association.



     1.19 Design Professional . The term “Design Professional” shall mean the architect,
designer, draftsman, engineer or other professional selected by the Borrower and approved in
writing by Lender, who is responsible for the creation of the Plans.



     1.20 Engineering Reports . The term “Engineering Reports” shall mean all soil
analysis reports, construction and mechanical feasibility reports and plans and such other reports
of engineers and others regarding improvement and site development of the Land as shall be
reasonably required by Lender.



3









 





     1.21 Event of Default . The term “Event of Default” shall mean:




	 	(a)	 	A default under or failure by Borrower to comply with any of the terms or
conditions, or breach of any covenant or warranty specified herein or in any other Loan
Document and the expiration of any cure period as follows: (i) ten (10) days after
notice from Lender, for any default under any term, covenant or condition of any of the
Loan Documents (excepting the default for failure to pay the Debt as described in
subsection 10(a) of the Security Instrument) which default can be cured by the payment
of a sum of money and (ii) thirty (30) days after 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
that no such extension shall be for a period in excess of sixty (60) days;
	 
	 	(b)	 	The cessation of the construction of the Improvements for more than thirty (30)
consecutive days (excluding Force Majeure events) without the written consent of
Lender;
	 
	 	(c)	 	A failure of any of the materials supplied for the construction of the
Improvements to comply with the Plans or any Governmental Requirements and such failure
is not cured within thirty (30) days after written notice from Lender of such default;
	 
	 	(d)	 	A reasonable determination by Lender that construction of the Improvements will
not be completed on or before the Completion Date.





     Notwithstanding anything contained herein to the contrary, Borrower shall have all grace
periods and notice and curative rights as provided in the Note prior to Lender declaring an Event
of Default; provided however, during any such grace periods and notice and curative rights periods,
Lender shall have no obligation to make Advances.



     1.22 Force Majeure . The term “Force Majeure” shall mean occurrence beyond the
control of the party affected, including, but not limited to, acts of God or of the public enemy;
expropriation or confiscation of facilities or property; compliance with any order or request of
any Governmental Authority or person purporting to act therefor, adversely affecting the supply,
availability or use of materials or labor; acts of war, public disorders, rebellion, sabotage,
fires, explosions, floods, storms, or breakdowns; riots, strikes or other concerted acts of
workmen, whether direct or indirect, or any other causes whether or not of the class or kind
specifically named above, not within the reasonable control of the party affected and which, by the
exercise of reasonable diligence, said party is unable to prevent or avoid; provided, however, that
any claim for an extension of time or excused non-performance as a result of such occurrence shall
be made by written notice to Lender, claiming such extension or excused non-performance and
delivered not more than thirty days after the commencement of such occurrence.



     1.23 Governmental Authority . The term “Governmental Authority” shall mean the United



4









 




States of America, the State, the County, the TCEQ, the City, Municipal Utility District, Road
Utility District, or any other political subdivision in which the Property is located, and any
other political subdivision, agency, district, department, commission, board, bureau, court or
instrumentality which now or hereafter has jurisdiction or extra territorial jurisdiction over
Lender, Borrower, Contractor or any part of the Property (including, but not limited to, platting,
zoning, utilities and site development or construction on the Property).




     1.24 Governmental Requirements . The term “Governmental Requirements” shall mean all
applicable laws, ordinances, orders, rules, and regulations of any Governmental Authority
applicable to Borrower or the Property.



     1.25 Guarantor . The term “Guarantor” shall mean CAMPUS CREST COMMUNITIES, INC., a
Maryland corporation.



     1.26 Guaranty Agreement . The term “Guaranty Agreement” shall mean any guaranty
agreement executed by the Guarantor from time to time, to guarantee payment of the Loan and
performance of the Loan Documents.



     1.27 Improvements . The term “Improvements” shall mean all site and building
improvements (including, but not limited to, the clearing, grading, paving, and appurtenances
directly related thereto), buildings, utility improvements, drainage improvements, landscaping,
amenities, infrastructures and all other facilities and on-site and off-site improvements to the
Property, the construction of which is required to properly develop the Land in accordance with the
Master Plan, the Plans and the Approved Budget.



     1.28 Inspecting Engineers . The term “Inspecting Engineers” shall mean the inspecting
or consulting engineers or other third party inspectors retained by Lender for the purpose of
making the inspections contemplated hereunder.



     1.29 Inspection Certificate . The term “Inspection Certificate” shall mean a
certificate issued by the Inspecting Engineers approving, among other matters, soils test, Plans
(including, without limitation, systems, structural details, and compliance with any local, state
or federal laws), construction cost breakdown, progress schedules and contracts with the Contractor
and major subcontractors.



     1.30 Land . The term “Land” shall mean the land described on Exhibit “A”
attached hereto and incorporated herein by reference for all purposes.



     1.31 Letters of Credit . The term “Letters of Credit” shall mean one or more standby
letters of credit issued by Depository Bank for the benefit of Borrower in favor of a Governmental
Authority or other beneficiary to assure completion of the development and furnishing of the
Property.



     1.32 Loan . The term “Loan” shall mean the financing evidenced by the Loan Documents.



     1.33 Loan Documents . The term “Loan Documents” shall mean this Agreement, the Deed
of Trust, the Note, and such other instruments evidencing, securing, or pertaining to the Loan as
shall, from time to time, be executed and delivered by Borrower, any guarantor of the Loan, or any
other party, to Lender pursuant to this Agreement.



5









 





     1.34 Master Plan . The term “Master Plan” shall mean collectively, the various
related materials provided to the Lender by Borrower with regard to the construction of
Improvements on the Property. Such Master Plan shall include appropriate budgets, construction
schedules, draw schedules, plans, specifications, list of construction contracts, construction
timeline and other particulars, in form and content, as required by Lender. Any component of the
Master Plan may be amended from time to time by Borrower, upon Lender’s prior written consent.
Except for the Initial Advance, no Loan proceeds shall be advanced until Borrower submits and
Lender approves the Master Plan.



     1.35 Note . The term “Note” shall mean the promissory note from Borrower to Lender
dated of even date herewith in the amount of $17,167,000.00 and evidencing the Loan.



     1.36 Operating Account . The term “Operating Account” shall mean an Operating Account
established by Borrower with Depository Bank which shall be the exclusive operating and deposit
account used by Borrower in connection with the Property.



     1.37 Phases . [Intentionally deleted.]



     1.38 Plans . The term “Plans” shall mean, if any, architectural, structural,
electrical, plumbing, heating, ventilation, air conditioning, sprinkler system, topography, on-site
utilities, off-site utilities, landscaping, road and parking plans and specifications, all
certified as such by the Design Professional, if any, preparing the same. The Plans shall be
approved in writing by Lender, and Borrower and, if applicable, all necessary Governmental
Authorities for the construction of the Improvements. With respect to any Plans for Improvements
costing more than $100,000.00, Lender reserves the right to have an independent architect or
engineer of its choice review the Plans so submitted and to provide a written report thereon to
Lender prior to the acceptance or rejection of the Plans by Lender, the cost of which shall be
borne by Borrower. Lender shall have the right to require reasonable changes in the Plans.



     1.39 Property . The term “Property” shall mean the Land together with the
Improvements and all other property constituting the “Property,” as described in the Deed of Trust.



     1.40 Purchase Contracts . [Intentionally deleted.]



     1.41 Supervision Professional . The term “Supervision Professional” shall mean the
architect, engineer, construction consultant or other third party selected by the Borrower and
approved in writing by Lender to supervise the construction of the Improvements on behalf of the
Borrower. Borrower is required to hire and direct the Supervision Professional until completion of
the Improvements. Lender hereby approves Campus Crest Development, Inc. as the Supervision
Professional hereunder.



     1.42 TCEQ . The term “TCEQ” shall mean the Texas Commission on Environmental Quality
or its successors.



     1.43 Title Company . The term “Title Company” shall mean Chicago Title Insurance
Company.



     1.44 Title Insurance Policy . The term “Title Insurance Policy” shall mean the
mortgagee



6









 




title insurance policy or title policy binder on interim construction, issued by the Title
Company, naming Lender as the insured party, in the amount of the Loan, insuring or committing to
insure that the Deed of Trust constitutes a valid first priority lien covering the Property, and
subject only to exceptions approved by Lender.




     1.45 Title Underwriter . The “Title Underwriter” shall mean Chicago Title Insurance
Company.



     1.46 Other Terms . Other terms used, but not defined, herein shall have the meaning
assigned to such term as provided in the Deed of Trust. The term “construction” as used herein
shall also include renovation of existing Improvements and the development of infrastructure
improvements of the Land.



ARTICLE 2: ADVANCES BY LENDER




     2.01 Use of Loan Proceeds . Advances shall be made from time to time at the request of
Borrower in accordance with the terms of this Agreement. Advances shall be made only for:




	 	(a)	 	an “Initial Advance” at closing for costs of acquisition of the Property (or
for refinance of such acquisition costs) and for other items approved by Lender and
shown on the Approved Budget;
	 
	 	(b)	 	labor, materials (stored on the Property in accordance with the requirements of
this Agreement) and services for the construction of Improvements on the Property
approved by Lender and in accordance with the Plans and the Approved Budget (the
“Construction Allocation”); and
	 
	 	(c)	 	other items approved by Lender and shown on the Approved Budget which may
include costs associated with the development of the Property which are not included in
the Initial Advance and Construction Allocation such as architectural and engineering
fees, tenant improvements costs, interest, property taxes, insurance, leasing
commissions, title and recording fees, and loan fees (the “Non Construction
Allocation”).





     2.02 Procedure for Advances .




	 	(a)	 	Subject to the terms of this Agreement, the amount of each Advance for the
Construction Allocation shall not exceed a sum calculated by multiplying the
Construction Allocation portion of the Loan amount times the percentage of completion
of the Improvements less the total aggregate amount of funds previously disbursed under
such Loan for the Construction Allocation, less applicable Retainage, provided however,
that the total amount advanced shall never exceed the original principal amount of the
Note. Percentage of completion of the Improvements shall be determined in the
reasonably discretion of the Lender.
	 
	 	(b)	 	Subject to the terms of this Agreement, the amounts available for the Non
Construction Allocation shall be advanced, but only to the extent that such




7









 






	 	 	 	charges have been incurred, or that the Borrower is otherwise entitled to
payment on account of such items as provided for in the Approved Budget or
otherwise in accordance with the Loan Documents.
	 
	 	(c)	 	Each Application for Advance shall be made in writing, signed by the Borrower,
and shall be accompanied by a certificate prepared by the Borrower, or at Lender’s
election, Borrower’s Supervision Professional, which certificate shall state the
percentage of completion of the Improvements and the services and/or materials to be
paid for therefrom. Upon approval of such certificate by the Lender, the Advance shall
be made. Prior to approval by Lender, the Lender shall be entitled to make any and all
inspections and require further documentation from Borrower, all as Lender may deem
necessary in order to substantiate and determine the percentage of completion of such
Improvements. Lender may retain, at Borrower’s cost, the Inspecting Engineers to
complete said inspections and to review the Master Plan and the Plans, prior to
approval. Borrower agrees to pay to the Lender the actual cost of each inspection made
by the Lender, its employees, agents, or contractors.
	 
	 	(d)	 	Advances shall be made after construction of the Improvements (“Work”) has
commenced and shall be made for Work done preceding the date of request upon Lender’s
receipt of an Affidavit of Commencement in the form provided on Exhibit “F”
attached hereto and made a part hereof for all purposes. Application for Advance shall
be filed no more often than twice monthly, shall be filed at least ten working days
before the date upon which an Advance is desired, shall be certified by the Supervision
Professional, if any, and Borrower, and (if required by Lender) approved by the
Inspecting Engineers, shall specify which contractors, subcontractors/suppliers are
being paid out of said Advance and in what amounts, making reference to specific line
items on the Approved Budget, and shall contain such information as Lender reasonably
may request. Lender, at its discretion, may require a Compliance Letter and/or an
Inspection Certificate prior to approving any Application for Advance. The amount of
each Advance of the Construction Allocation under the Loan shall be the amount which
the Contractor has earned under the Construction Contract, as approved by Lender, less
amounts for which sums have been previously advanced, less the Retainage as more fully
described in subparagraph (e) hereinafter and such amount shall be advanced under the
Loan on behalf of Borrower and shall be delivered directly to Borrower. Lender shall
not be required to advance funds if in the good faith opinion of Lender (i) the Work is
not being completed in a timely and good and workmanlike manner, in accordance with the
Plans, (ii) Borrower fails to promptly pay for any labor or materials relating to the
Work, or (iii) the portion of the Loan then remaining unadvanced will not be sufficient
to complete the Work in accordance with the Master Plan and the Approved Budget,
whereupon no additional Advances will be due Borrower unless and until Borrower at its
sole cost performs a sufficient portion of the Work so that such portion of the Loan
then remaining unadvanced (including the Borrower Deposit as such term is defined in
Subsection 1.10 hereinabove) is determined by Lender to be sufficient to so complete
the Work. In such latter event, Lender may also require




8









 






	 	 	 	Borrower to provide evidence of availability of additional funds to make up
such deficiency and/or may require that the additional funds be held by
Lender as part of the Borrower Deposit, to be funded in accordance with the
terms hereof. Notwithstanding the foregoing, completion of the Work for
which an Advance is requested and the amount of each Advance shall be
determined in the reasonable discretion of Lender. Borrower shall utilize
all Advances made to it by Lender only for the payment of the costs itemized
in the Approved Budget as amended from time to time. Anything to the
contrary contained in this Section notwithstanding, in the event that
Borrower is required to deposit balancing funds with Lender hereunder and
the Property is thereafter completed with subsequent savings that, had they
occurred prior to the requirement of the balancing funds, would have
rendered all or a portion of such deposit to be unnecessary, Borrower shall
be entitled to a reimbursement of the funds deposited equal to the lesser of
(a) the amount of such subsequent savings or (b) the amount of the balancing
funds deposit.
	 
	 	(e)	 	Lender may, at its election, retain the statutory 10% Retainage from each
Advance relating to construction of Improvements hereunder in order to allow Borrower
to fully comply with Section 53.101 of the Texas Property Code for the payment of
mechanics, materialmen, subcontractors, contractors and artisans or others entitled to
liens against the Property for work done or materials supplied (the “Retainage”), such
Retainage to be held until thirty days after the date the Lender has received the
following: (1) a substantial completion certificate executed by Inspecting Engineers,
the Supervision Professional, Contractor and Borrower, (2) evidence that all
Governmental Requirements have been satisfied, including if applicable, but not limited
to, delivery to Lender of certificates of occupancy permitting the Improvements to be
legally occupied, (3) evidence that no mechanic’s or materialmen’s liens or other
encumbrances have been filed and remain in effect against the Property, (4) final lien
releases or waivers by Contractor, and all subcontractors, materialmen, and other
parties who have supplied labor, materials, or services for the construction of the
Improvements, or who otherwise might be entitled to claim a contractual, statutory, or
constitutional lien against the Property, and (5) issuance by the Title Company of an
endorsement to the mortgagee title policy deleting the mechanic’s lien and pending
disbursements exceptions and recertifying the survey deletion endorsement, at which
time, such retained sums shall be disbursed by Lender to Borrower and then by Borrower
to contractors, suppliers, artisans, and others entitled thereto. In the event that
Lender does not retain the statutory 10% Retainage from each Advance relating to
construction of Improvements, it is agreed that Borrower, upon request by Lender, shall
provide the Lender with proof in form and content satisfactory to the Lender that such
statutory Retainage requirement is being complied with by Borrower. At the Lender’s
discretion, upon notice to Borrower, the Lender may withhold such Retainage from each
such Advance in a special account of Borrower established for that purpose for the use
and benefit of those entitled thereto. Notwithstanding anything contained in this
Agreement to the contrary, Lender shall not withhold Retainage on materials, soft
costs, payments to subcontractors




9









 






	 	 	 	whose work has been completed and who have furnished a final lien waiver and
release, and any Construction Contract for which payment and performance
bonds acceptable to Lender have been obtained. Notwithstanding anything
contained herein to the contrary, Lender shall retain five percent (5.00%)
of each Advance in lieu of the statutory ten percent (10%) Retainage, and
Borrower shall not be required to provide Lender with proof that such
statutory Retainage requirement is being complied with by Borrower.
	 
	 	(f)	 	All Advances hereunder shall be made directly to Borrower, provided if an Event
of Default has occurred, the Lender at its option may make Advances directly to
Borrower’s contractors, subcontractors, suppliers and artisans for work done, or other
person entitled thereto, or jointly to Borrower and the applicable third party, or
Lender may elect to make one or more Advances through the title company, at Borrower’s
expense.
	 
	 	(g)	 	Any provision in the Loan Documents to the contrary notwithstanding, Lender
shall have no obligation to make any Advance hereunder or under any of the Loan
Documents if, as a result of such Advance, Lender would be in violation of any
applicable federal or state statute, law, regulation, or interpretation thereof,
whether effective or prospective, regarding lending limits imposed upon Lender,
including but not limited to the Garn-St. Germain Depository Institutions Act of 1982,
the Federal Reserve Act and applicable interpretive letters issued by the Office of the
Comptroller of the Currency.
	 
	 	(h)	 	Any provision hereof or in the Loan Documents to the contrary notwithstanding,
the total of the Advances for the Improvements hereunder shall not exceed the lesser of
(1) $17,167,000.00; (2) an amount equal to seventy percent (70%) of the appraised value
of the Property on an “as completed” basis, as set forth in the Appraisal; or (3) an
amount equal to seventy percent (70%) of Borrower’s costs expended on the Land and
Improvements on items included in the Approved Budget, exclusive of any developer fees
not included in the Approved Budget.
	 
	 	(i)	 	The initial Approved Budget does contain a line item for $751,698.00 in
Development Fees, such fees may be funded through Application for Advance as follows:






	 	(1)	 	Twenty-five percent (25%) to be funded at
Borrower’s request with the Initial Advance;
	 
	 	(2)	 	Fifty percent (50%) to be funded monthly based
on a straight line basis at Borrower’s request as Advances are made on
the Loan; and
	 
	 	(3)	 	The balance equal to twenty-five percent (25%)
to be funded at Borrower’s request after the project certificate of
occupancy has been issued by the City of Denton, Texas.





     2.03 Requirements for Subsequent Advances . Prior to Lender funding additional
Advances



10









 




subsequent to the Initial Advance funding on the Closing Date, Borrower shall have provided
Lender with the following:





	 	(a)	 	Executed originals of all of the Loan Documents;
	 
	 	(b)	 	All required Title Insurance Policies;
	 
	 	(c)	 	Evidence from Borrower of Borrower’s Equity in the project;
	 
	 	(d)	 	Satisfactory evidence the Borrower has established the Operating Account with
Depository Bank. All Advances made subsequent to closing shall be funded into such
account;
	 
	 	(e)	 	Executed original of the Availability of Utilities Letter;
	 
	 	(f)	 	Building permits for the construction of the Improvements, except that Lender
agrees to Advance for Borrower to obtain Letters of Credit or to pay soft costs prior
to receipt of said building permits;
	 
	 	(g)	 	Adequate evidence of appropriate zoning for the intended usage of the Property;
	 
	 	(h)	 	Final Plans of the proposed Improvements;
	 
	 	(i)	 	If required by the Governmental Authority, a copy of the final recorded
subdivision plat;
	 
	 	(j)	 	The Appraisal in form and substance satisfactory to Lender indicating a fair
market value in compliance with the limitations of Section 2.02(h) of this Agreement;
	 
	 	(k)	 	Borrower and the general contractor shall have executed and delivered the
Assignment of Construction Contract;
	 
	 	(l)	 	Borrower and the Design Professional shall have executed and delivered the
Assignment of Rights to Plans and Specifications;
	 
	 	(m)	 	Borrower shall have executed and delivered the Assignment of Permits and
Licenses;
	 
	 	(n)	 	Satisfactory evidence of the compliance by Borrower with all insurance
requirements provided in the Deed of Trust;
	 
	 	(o)	 	Receipt and approval by Lender of the Master Plan;
	 
	 	(p)	 	If required in writing by Lender, receipt and approval of an attorney’s opinion
rendered by Borrower’s counsel in form and substance satisfactory to Lender;




11









 






	 	(q)	 	Receipt and approval by Lender of the Compliance Letter;
	 
	 	(r)	 	Fully executed copy of the Affidavit of Commencement in form of the affidavit
attached hereto as Exhibit “F” and made a part hereof for all purposes;
	 
	 	(s)	 	Receipt and approval by Lender of all change orders affecting the Work; and
	 
	 	(t)	 	Satisfactory evidence with regard to adequate parking.





     2.04 Conditions to Subsequent Advances . As a condition precedent to each Advance
subsequent to the Closing Date, and, in addition to all other requirements herein, Borrower must
satisfy the following requirements and, if required by Lender, deliver to Lender evidence of such
satisfaction:




	 	(a)	 	There shall then exist no Event of Default or any condition or event which,
with the giving of notice and/or passing of time, would constitute an Event of Default;
	 
	 	(b)	 	The representations and warranties made in this Agreement and all Loan
Documents shall be true and correct on and as of the date of each Advance, with the
same effect as if made on that date;
	 
	 	(c)	 	Borrower will procure and deliver to Lender, if required by Lender, releases or
waivers of mechanic’s liens in form of the Partial Waiver and Release attached hereto
as Exhibit “G-1” and made a part hereof for all purposes, and receipted bills
showing payment of all parties who have furnished materials or services or performed
labor of any kind in connection with the construction of any of the Improvements;
	 
	 	(d)	 	The Title Insurance Policy shall, if available under local rules, be endorsed
and extended to cover each Advance with no additional title exceptions objectionable to
Lender; and
	 
	 	(e)	 	Borrower shall be required to furnish Lender an acceptable “slab” or “forms”
survey prior to disbursement of the first Advance following the completion of all
foundation and slab work for the Improvements. All surveys are to be satisfactory to
Lender in all respects, and are to include among other things, encroachments, building
set-back lines, public access and flood plain disclosures, and must be dated, signed
and stamped by a surveyor licensed by the State of Texas.





     2.05 Completion of Improvements . Construction of the Improvements shall be completed
on or before the Completion Date. Within forty-five days after completion, Borrower must provide
to Lender the following:




	 	(a)	 	If Borrower has provided title insurance coverage during the construction
period by purchase of an title policy binder on interim construction, Borrower shall
provide Lender, at time of completion, a mortgagee title policy with no exceptions
except those approved by Lender. If Borrower has already provided a




12









 






	 	 	 	mortgagee title policy, Borrower shall provide an endorsement of said policy
deleting the mechanic’s lien and pending disbursements exceptions, and
recertifying the survey deletion endorsement;
	 
	 	(b)	 	Borrower shall provide Lender, at time of completion and final funding, those
affidavits, releases and certificates in form of the exhibits attached hereto as
follows:





	 	 	 
	Final Waiver and Release of Lien:

	 	Exhibit “G-2”
	Affidavit of Certificate of Completion:

	 	Exhibit “H”
	Contractor’s Affidavit of Bills Paid:

	 	Exhibit “I-1”
	Owner’s Affidavit of Bills Paid:

	 	Exhibit “I-2”







	 	(c)	 	The final plat or replat, if any, must be recorded if not previously recorded;
	 
	 	(d)	 	Receipt of certificates of occupancy where and when available from the
Governmental Authorities;
	 
	 	(e)	 	Receipt of a hazard and general liability insurance policy meeting the
requirements of the Deed of Trust; and
	 
	 	(f)	 	An “as built” survey in a form satisfactory to Lender in all respects, which
shall include among other things, encroachments, building set-back lines, public access
and flood plain disclosures, and must be dated, signed and stamped by a surveyor
licensed by the State of Texas.





     2.06 No Waiver . No Advance shall constitute a waiver of any condition precedent to
the obligation of Lender to make any further Advance or preclude Lender from thereafter declaring
the failure of Borrower to satisfy such condition precedent to be an Event of Default.



     2.07 Conditions Precedent for the Benefit of Lender . All conditions precedent to the
obligation of Lender to make any Advance are imposed hereby solely for the benefit of Lender, and
no other party may require satisfaction of any such condition precedent or be entitled to assume
that Lender will refuse to make any Advance in the absence of strict compliance with such
conditions precedent. All requirements of this Agreement may be waived by Lender, in whole or in
part, at any time.



     2.08 Subordination . Lender shall not be obligated to make, nor shall Borrower be
entitled to, any Advance until such time as Lender shall have received, to the extent reasonably
requested by Lender, subordination agreements from the general contractor and the Design
Professional, subordinating to the lien of the Deed of Trust any lien, claim, or charge they may
have against Borrower or the Property.



     2.09 Operating Account . The Operating Account shall be maintained by Borrower at all
times during the term of the Loan. The Operating Account shall be, and by execution hereof is,
pledged to secure the Loan. All net revenues generated by Borrower in connection with the Land not
required to be applied to the principal balance of the Loan shall be deposited in the Operating
Account.



     2.10 Letters of Credit . It is contemplated by Borrower and Lender that Borrower, or
one or



13









 




more of its affiliates, may desire to apply for and obtain one or more Letters of Credit from
Depository Bank. In the event that any such party applies for a Letter of Credit with Depository
Bank and is approved, at Borrower’s request, Lender may consent to same and in such event will
reserve an amount of Loan proceeds to cover any potential advances that may be made under the
Letter of Credit to the beneficiary thereunder. Any such approval by Lender will be at Lender’s
sole discretion but will not be unreasonably withheld, and the aggregate amount of Loan proceeds to
cover any potential advances under the Letters of Credit will not exceed $500,000.00 at any one
time. Borrower agrees to execute any and all documents reasonably deemed necessary by Lender in
connection with Letter of Credit transactions, including amendments to this Agreement, amended
Approved Budgets, additional security agreements and other collateral documents. In the event a
Letter of Credit contemplated by the terms of this section is presented to Depository Bank and
drafted upon, Borrower agrees that Lender shall, without the consent of Borrower, advance Loan
proceeds to repay the Depository Bank for advances under the Letter of Credit. Lender will not be
required to release its collateral securing the Loan until such time as all obligations of the
Depository Bank under any Letters of Credit have expired or been terminated, and until the Note is
paid in full. The expiration dates of any such Letters of Credit shall not exceed twelve months
from date of issuance, and shall not extend past the Scheduled Maturity Date as defined in the
Note, as may be extended from time to time. Borrower shall also pay to Lender or to Depository
Bank (but not to both of them) at the time a Letter of Credit is issued by Depository Bank pursuant
to the terms of this section, a letter of credit fee equal to two percent (2%) of the face amount
of each Letter of Credit. If the Note matures prior to expiration of the Letter of Credit, then at
the time of issuance of the Letter of Credit, the Borrower shall deposit with Depository Bank in a
controlled account the principal necessary to fund the Letter of Credit upon any draw on the Letter
of Credit.




     Borrower shall be irrevocably and unconditionally obligated to reimburse Lender for any
amounts to be paid by Lender upon any drawing under any Letter of Credit issued by Depository Bank
for the benefit of Borrower, without presentment, demand, protest or other formalities of any kind.
All such amounts paid by Lender and remaining unpaid by the Borrower shall bear interest at the
Applicable Interest Rate as such term is used and defined in the Note. The Borrower’s obligations
under this paragraph shall be absolute and unconditional under any and all circumstances and
irrespective of any set-off, counterclaim or defense to payment which the Borrower may have or have
had against Lender or the beneficiary of a Letter of Credit issued by Depository Bank pursuant to
the request of Borrower.



     Borrower further irrevocably and unconditionally agrees with Lender that Lender shall not be
responsible for, and Borrower’s reimbursement obligation in respect of any Letter of Credit shall
not be affected by, among other things, the validity or genuineness of documents or any
endorsements thereon, even if such documents should in fact prove to be in any or all respects
invalid, fraudulent or forged, or any dispute between or among Borrower, the beneficiary of any
Letter of Credit or any financing institution or other party or any claims or defenses whatsoever
of any of the Borrower or any of its affiliates against the beneficiary of any Letter of Credit.
Lender shall not be liable for any error, omission, interruption or delay in transmission, dispatch
or delivery of any message or advice, however transmitted, in connection with any Letter of Credit.
Borrower irrevocably and unconditionally agrees that any action taken or omitted by Lender or
Depository Bank under or in connection with each Letter of Credit and the related drafts and
documents, if done without gross negligence or willful misconduct, shall be binding upon Borrower
and shall not put Lender under any liability to Borrower.



     Lender and Depository Bank shall be entitled to rely, and shall be fully protected in relying
upon, any letter of credit, draft, writing, resolution, notice, consent, certificate, affidavit,
letter, cablegram,



14









 




telegram, telecopy, telex or teletype message, statement, order or other document believed by it to
be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and
upon advice and statements of legal counsel, independent accounts and other experts selected by
Lender.




     EXCEPT FOR LENDER’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, BORROWER HEREBY IRREVOCABLY AND
UNCONDITIONALLY AGREES TO INDEMNIFY AND HOLD HARMLESS LENDER AND ITS DIRECTORS, OFFICERS, AGENTS
AND EMPLOYEES FROM AND AGAINST ANY AND ALL CLAIMS AND DAMAGES, LOSSES, LIABILITIES, COSTS OR
EXPENSES WHICH LENDER MAY INCUR (OR WHICH MAY BE CLAIMED AGAINST LENDER BY ANY PERSON WHATSOEVER)
BY REASON OF OR IN CONNECTION WITH THE ISSUANCE, EXECUTION AND DELIVERY OR TRANSFER OF OR PAYMENT
OR FAILURE TO PAY UNDER ANY LETTER OF CREDIT OR ANY ACTUAL OR PROPOSED USE OF ANY LETTER OF CREDIT,
INCLUDING, WITHOUT LIMITATION, ANY CLAIMS, DAMAGES, LOSSES, LIABILITIES, COSTS OR EXPENSES WHICH
LENDER MAY INCUR BY REASON OF OR ON ACCOUNT OF LENDER ISSUING ANY LETTER OF CREDIT WHICH SPECIFIES
THAT THE TERM “BENEFICIARY” INCLUDED THEREIN INCLUDES ANY SUCCESSOR BY OPERATION OF LAW OF THE
NAMED BENEFICIARY, BUT WHICH LENDER DOES NOT REQUIRE THAT ANY DRAWING BY SUCH SUCCESSOR BENEFICIARY
BE ACCOMPANIED BY A COPY OF A LEGAL DOCUMENT, SATISFACTORY TO LENDER, EVIDENCING THE APPOINTMENT OF
SUCH SUCCESSOR BENEFICIARY.



ARTICLE 3: REPRESENTATIONS AND WARRANTIES OF BORROWER




     3.01 Representations and Warranties . Borrower hereby, and upon submission of each
Application for Advance and acceptance of each Advance, represents and warrants as follows:




	 	(a)	 	All representations and warranties made by Borrower under the Deed of Trust are
true and correct;
	 
	 	(b)	 	No claims for unpaid bills for the supplying of labor, materials, or services
for the construction of the Improvements shall have been recorded in the mechanic’s
lien or other appropriate records in the county where the Property is located, or if
such claims are made, Borrower has bonded the liens in accordance with Chapter 53 of
the Texas Property Code. Except as previously disclosed in writing to Lender, as of
this date no work of any kind or nature, however incidental, has been performed by any
party on behalf of Borrower with regard to the preparation of the Property for
construction of the contemplated Improvements or construction of the Improvements
themselves. Except as previously disclosed in writing to Lender, no materials have
been delivered to the Property on behalf of Borrower. Except as previously disclosed
in writing to Lender, the Borrower on the date hereof, has made no verbal or written
contract or arrangement of any kind the performance of which by the other party thereto
would give rise to a lien on the Property which on the date hereof is superior to the
liens created under any of the Loan Documents and/or liens transferred to the Lender
thereunder. Borrower shall not cause or allow any liens to be placed on the Property
without the approval of the Lender;




15









 






	 	(c)	 	No litigation or proceedings have been, to the best of Borrower’s knowledge,
threatened against the Property or the Borrower (i) which would materially and
adversely affect the enforceability or priority of the Loan Documents, or (ii) which
would materially and adversely affect the ability of Borrower to complete the
Improvements or the ability of Borrower to perform its obligations pursuant to and as
contemplated by the terms of this Agreement and the Loan Documents;
	 
	 	(d)	 	The Approved Budget presents a full and complete representation of all costs,
expenses and fees which Borrower expects to pay or anticipates becoming obligated to
pay to complete the construction of the Improvements;
	 
	 	(e)	 	To the best of Borrower’s knowledge: (i) all consents, licenses and permits
and all other authorizations or approvals required to complete the construction of the
Improvements in accordance with the Plans have been or can be obtained during the
course of the construction in time to complete the construction on or before the
Completion Date; (ii) all laws, ordinances, regulations, restrictive covenants and
requirements of all Governmental Authorities (including, building, health, fire, water,
use, zoning laws, environmental and similar laws, codes, ordinances, rules and
regulations) relating to the construction of the Improvements and operation of the
Property have been or can be complied with; and (iii) all permits and licenses required
for the operation of the Property which cannot be obtained until construction of the
Improvements is completed can be obtained if the Property is completed in accordance
with the Plans. The Plans have been approved by all Governmental Authorities or, to
the best of Borrower’s knowledge, will be approved when required during the course of
the construction of the Improvements in time to complete the construction on or before
the Completion Date. To the best of Borrower’s knowledge, construction of the
Improvements and operation of the Property will not be delayed or impeded by virtue of
any Governmental Requirements. To the best of Borrower’s knowledge, upon completion of
the construction of the Improvements, the Property will comply with all Governmental
Requirements; and
	 
	 	(f)	 	When completed in accordance with the Plans, no portion of the Improvements
will encroach upon any adjacent property, building line, setback line, side yard line,
or any recorded or visible easement (or other easement of which Borrower is aware or
has reason to believe may exist) with respect to the Property. Upon completion of
Improvements, the Property will have adequate rights of access to dedicated public
streets and roads and will have (or when the Improvements are completed in accordance
with the Master Plan will have) adequate rights and means of access to all water,
sanitary sewer and storm drainage facilities necessary for the intended use of the
Property; all public roads necessary for adequate ingress and egress to the Property
have been completed with the necessary rights-of-way therefor having been acquired by
the appropriate Governmental Authority, and all necessary steps having been taken by
Borrower and such Governmental Authority to assure the completion, construction and
installation thereof before or by the applicable Completion Date.




16









 











     3.02 Survival of Representations and Warranties . Borrower agrees that all
representations and warranties in this Agreement will be true in all material respects at the date
of the first Advance and at all times thereafter until the Loan is repaid in full. Each
Application for Advance shall constitute a reaffirmation that the representations and warranties
are true and correct in all material respects at such time.



     3.03 Inducement to Lender . The representations and warranties contained in the Loan
Documents are made by Borrower as an inducement to Lender to make the Loan and Borrower understands
that Lender is relying on the truth and accuracy of such representations and warranties.



ARTICLE 4: COVENANTS AND AGREEMENTS OF BORROWER




     Borrower hereby covenants and agrees as follows:



     4.01 Compliance with Governmental Requirements . Borrower shall timely comply with all
Governmental Requirements and deliver to Lender evidence thereof. Borrower assumes full
responsibility for the compliance of the Plans and the Property with all Governmental Requirements
and with sound construction and engineering practices and, notwithstanding any approvals by Lender,
Lender shall have no obligation or responsibility whatsoever for the Plans or any other matter
incident to the Property or the construction of the Improvements.



     4.02 The Construction Contract . Borrower shall not become a party to any contract in
excess of $50,000.00 for the performance of any Work on the Property or for the supplying of any
labor, materials, or services for the construction of the Improvements except upon such terms and
with such parties as shall be approved in writing by Lender. Lender’s approval of any contractor
or contract may be conditioned upon such contractor providing a payment and performance bond for
all or part of the work to be undertaken under the contract. Borrower may retain an affiliated
construction company to act as general contractor; in such case, all approval rights of Lender and
rights to require bonding of Lender shall be for subcontractors and suppliers. The general
contractor must agree in writing that all liens of the general contractor are subordinate to the
lien of the Deed of Trust. The general contractor must agree in writing that no change orders to
the Plans for which Lender’s consent is required hereunder, shall be effective without the prior
written approval of Lender. No approval by Lender of any Construction Contract or change orders
thereto shall make Lender responsible for the adequacy, form, or content of such Construction
Contracts or change orders. Upon written request by Lender, Borrower shall supply Lender with a
list of all original contractors and all second and subsequent tier contractors and suppliers, and
their respective addresses and telephone numbers, and information with respect to the portion of
such contracts completed and sums owed to such contractors and suppliers. If requested by Lender,
Borrower will cause all subcontractors whose contract prices exceeds ten percent (10%) of the
amount of the Approved Budget, as provided in Section 1.15 herein to provide a performance bond and
a payment bond of such character, issued by companies, on forms and in such penal sum in connection
with the construction of the Improvements, as Lender shall designate. Unless waived by Lender, all
such bonds shall name Lender as co-obligee.



     4.03 Construction of the Improvements and Supervision . The construction of the
Improvements shall commence no later than ninety days from the date hereof and shall be prosecuted
with diligence and continuity, in a good and workmanlike manner, and in accordance with sound
building



17









 




and engineering practices, all applicable Governmental Requirements and the Plans, if any.
Except for Force Majeure events, Borrower shall not permit cessation of work for a period in excess
of thirty days without the prior written consent of Lender and shall complete construction of the
Improvements on or before the Completion Date. The construction of the Improvements will be
prosecuted by Borrower with diligence and continuity and Borrower will complete the same in
substantial accordance with the Plans, free and clear of liens, or claims for liens, for material
supplied and for labor or services performed in connection with the construction of the
Improvements, and in compliance with all applicable Governmental Requirements, restrictive
covenants, set back lines and without encroachment into any existing easements which affect the
Property. Borrower shall hire and direct the Supervision Professional at all times prior to
completion of Improvements in a manner reasonably satisfactory to Lender.




     4.04 Correction of Construction Defects . Borrower shall correct or cause to be
corrected (a) any material defect in the Improvements, (b) any material departure in the
construction of the Improvements from the Plans or Governmental Requirements, or (c) any
encroachment by any part of the Improvements or any other structure located on the Property on any
building line, easement, property line, or restricted area.



     4.05 Storage of Materials . Borrower shall cause all materials supplied for, or
intended to be utilized in, the construction of the Improvements, but not affixed to or
incorporated into the Improvements or the Property, to be stored on the Property, with adequate
safeguards, as required by Lender, to prevent loss, theft, damage, or commingling with other
materials or projects.



     4.06 Inspection of the Property . Borrower shall permit Lender and any Governmental
Authority, and their agents and representatives, to enter upon the Property and any location where
materials intended to be utilized in the construction of the Improvements are stored for the
purpose of inspection of the Property and such materials at all reasonable times.



     4.07 Notices by Governmental Authority, Fire and Casualty Losses, Etc. Borrower shall
timely comply with and promptly furnish to Lender true and complete copies of any official notice
or claim by any Governmental Authority pertaining to the Property. Borrower shall promptly notify
Lender of any fire or other casualty or any notice or taking of eminent domain action or proceeding
affecting the Property.



     4.08 Application of Advances . Borrower shall disburse all Advances for payment of
costs and expenses specified in the Approved Budget, and for no other purpose.



     4.09 Direct Disbursement and Application by Lender . Upon the occurrence and during
the continuance of an Event of Default, or any event or condition which, with the giving of notice
and/or passing of time, would constitute an Event of Default, Lender shall have the right, but not
the obligation, to disburse and directly apply the proceeds of any Advance to the satisfaction of
any of Borrower’s obligations hereunder. Any Advance by Lender for such purpose, shall be part of
the Loan and shall be secured by the Loan Documents. Upon the occurrence and during the
continuance of an Event of Default, Borrower hereby authorizes Lender to hold, use, disburse, and
apply the Loan and proceeds of the Borrower Deposit for payment of costs of construction of the
Improvements, expenses incident to the Loan and the Property, and the payment or performance of any
obligation of Borrower hereunder. Borrower hereby assigns and pledges the proceeds of the Loan and
proceeds of the Borrower Deposit to



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Lender for such purposes. Upon the occurrence and during the continuance of an Event of
Default, Lender may advance and incur such expenses hereunder as Lender reasonably deems necessary
for the completion of construction of the Improvements and to preserve the Property, and any other
security for the Loan, and such expenses, even though in excess of the amount of the Loan, shall be
secured by the Loan Documents, and be payable to Lender upon demand. Lender may disburse any
portion of any Advance at any time, and from time to time, to persons other than Borrower for the
purposes specified in this Section 4.09 irrespective of the provisions of Section 2.03 hereof, and
the amount of Advances to which Borrower shall thereafter be entitled shall be correspondingly
reduced.




     4.10 Costs and Expenses . Borrower shall pay when due all costs and expenses required
by this Agreement, including, without limitation, (a) all fees and expenses of the Inspecting
Engineers, (b) all reasonable fees and expenses of counsel of Lender related to the Loan Documents,
the construction of Improvements or protecting the interests of Lender in the Property, (c) all
title insurance downdates/endorsements and title examination charges, including premiums for the
Title Insurance Policies, (d) all premiums for the insurance policies required under the Deed of
Trust, and (e) all other reasonable costs and expenses payable to third parties incurred by Lender
in connection with the consummation of the transactions contemplated by this Agreement.



     4.11 Change Orders . Borrower shall not make any change order to the Plans or any
other change order with respect to the Approved Budget, which individually exceeds $50,000 or in
the aggregate with all other previously approved change orders exceeds $250,000, without the prior
written consent of Lender, which consent will not be unreasonably withheld or delayed.



     4.12 No Liability of Lender . Lender shall have no liability, obligation, or
responsibility whatsoever with respect to the construction of the Improvements except to advance
the Loan proceeds pursuant to this Agreement. Lender shall not be obligated to inspect the
Property or the construction of the Improvements, nor be liable for the performance or default of
Borrower, the Inspecting Engineers, the Contractor, or any other party, or for any failure to
construct, complete, protect, or insure the Improvements, or for the payment of costs of labor,
materials, or services supplied for the construction of the Improvements, or for the performance of
any obligation of Borrower whatsoever. Nothing, including without limitation any Advance or
acceptance of any document or instrument, shall be construed as a representation or warranty,
express or implied, to any party by Lender.



     4.13 No Conditional Sale Contracts, Etc. No materials, equipment, or fixtures shall
be supplied, purchased, or installed for the construction or operation of the Improvements pursuant
to security agreements, conditional sale contracts, lease agreements, or other arrangements or
understandings whereby a security interest or title is retained by any party or the right is
reserved or accrues to any party to remove or repossess any materials, equipment, or fixtures
intended to be utilized in the construction or operation of the Improvements.



     4.14 Defense of Action . Lender may (but shall not be obligated to) commence, appear
in, or defend any action or proceeding purporting to affect the Loan, the Property, or the
respective rights and obligations of Lender and Borrower pursuant to this Agreement. Lender may
(but shall not be obligated to) pay all necessary expenses, including reasonable attorneys’ fees
and expenses incurred in connection with such proceedings or actions, which Borrower agrees to
repay to Lender upon demand.



     4.15 Assignment of Construction Contract . As additional security for the payment of
the



19









 




Loan, Borrower hereby transfers and assigns to Lender all of Borrower’s rights and interest,
but not its obligations, in, under, and to the construction contract with the general contractor
upon the following terms and conditions:





	 	(a)	 	Borrower represents and warrants that the copy of such construction contract it
has furnished to Lender is a true and complete copy thereof and that Borrower’s
interest therein is not subject to any claim, setoff, or encumbrance.
	 
	 	(b)	 	Neither this assignment nor any action by Lender shall constitute an assumption
by Lender of any obligations under the construction contract, and Borrower shall
continue to be liable for all obligations of Borrower thereunder, Borrower hereby
agreeing to perform all of its obligations under the construction contract. Borrower
agrees to indemnify and hold Lender harmless against and from any loss, cost,
liability, or expense (including, but not limited to, reasonable attorneys’ fees)
resulting from any failure of Borrower to so perform.
	 
	 	(c)	 	Upon the occurrence and during the continuance of an Event of Default, Lender
shall have the right at any time (but shall have no obligation) to take in its name or
in the name of Borrower such action as Lender may at any time determine to be necessary
or advisable to cure any default under the construction contract or to protect the
rights of Borrower or Lender thereunder. Lender shall incur no liability if any action
so taken by it or in its behalf shall prove to be inadequate or invalid, and Borrower
agrees to hold Lender free and harmless against and from any loss, cost, liability or
expense (including, but not limited to, reasonable attorneys’ fees) incurred in
connection with any such action.
	 
	 	(d)	 	Borrower hereby irrevocably constitutes and appoints Lender as Borrower’s
attorney-in-fact, in Borrower’s name or in Lender’s name, to enforce all rights of
Borrower under the construction contract during the continuance of an Event of Default.
The power-of-attorney granted hereby is a power coupled with an interest and is
irrevocable.
	 
	 	(e)	 	Prior to an Event of Default, Borrower shall have the right to exercise its
rights as owner under the construction contract, provided that Borrower shall not
cancel or amend the construction contract or do or suffer to be done any act which
would impair the security constituted by this assignment without the prior written
consent of Lender.
	 
	 	(f)	 	This assignment shall inure to the benefit of Lender, its successors and
assigns, including any purchaser upon foreclosure of the Deed of Trust, any receiver in
possession of the Property, and any legal entity formed by or on behalf of Lender which
assumes Lender’s rights and obligations under this Agreement.





     4.16 Assignment of Plans . As additional security for the payment of the Loan,
Borrower hereby transfers and assigns to Lender all of Borrower’s right, title, and interest in and
to the Plans and hereby represents and warrants to and agrees with Lender as follows:



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	 	(a)	 	Borrower has delivered to Lender a complete and accurate description of the
Plans.
	 
	 	(b)	 	The Plans are complete and adequate for the construction of the Improvements
and there have been no modifications thereof except as described in such description.
	 
	 	(c)	 	Lender may use the Plans for any purpose relating to the Improvements,
including but not limited to inspections of construction and the completion of the
Improvements.
	 
	 	(d)	 	Lender’s acceptance of this assignment shall not constitute approval of the
Plans by Lender. Lender has no liability or obligation whatsoever in connection with
the Plans and no responsibility for the adequacy thereof or for the construction of the
Improvements contemplated by the Plans. Lender has no duty to inspect the
Improvements, and if Lender should inspect the Improvements, Lender shall have no
liability or obligation to Borrower arising out of such inspection. No such inspection
nor any failure by Lender to make objections after any such inspection shall constitute
a representation by Lender that the Improvements are in accordance with the Plans or
constitute a waiver of Lender’s right thereafter to insist that the Improvements be
constructed in accordance with the Plans.
	 
	 	(e)	 	This assignment shall inure to the benefit of Lender, its successors and
assigns, including any purchaser upon foreclosure of the Deed of Trust, any receiver in
possession of the Property, and any legal entity formed by or on behalf of Lender which
assumes Lender’s rights and obligations under this Agreement.





     4.17 Payment of Claims . Borrower shall promptly pay or cause to be paid when due all
costs and expenses incurred in connection with the Property and the construction of the
Improvements, and Borrower shall keep the Property free and clear of any liens, charges, or claims
other than the lien of the Deed of Trust and other liens approved in writing by Lender.
Notwithstanding anything to the contrary contained in this Agreement, Borrower (a) may contest the
validity or amount of any claim of any contractor, consultant, architect, or other person providing
labor, materials, or services with respect to the Property, (b) may contest any tax or special
assessment levied by any Governmental Authority, and (c) may contest the enforcement of or
compliance with any Governmental Requirements, and such contest on the part of Borrower shall not
be an Event of Default hereunder and shall not release Lender from its obligations to make Advances
hereunder; provided, however, that during the pendency of any such contest, Borrower shall furnish
to Lender and Title Company an indemnity bond with corporate surety satisfactory to Lender and
Title Company or other security acceptable to them in an amount equal to the amount being contested
plus a reasonable additional sum to cover possible costs, interest, penalties, and attorney’s fees,
and provided further that Borrower shall pay any amount adjudged by a court of competent
jurisdiction to be due, with all costs, interest, penalties and attorney’s fees thereon, before
such judgment becomes a lien on the Property.



     4.18 Inspections . If required by Lender, Inspecting Engineers shall make periodic
inspections of the Property during the course of construction in order to certify to Lender that at
the time an Application for Advance is made: (a) the amount requested is in proportion to the Work
completed;



21









 




(b) that all Work has been performed in a workmanlike manner; (c) the Work performed is
substantially in accordance with the Plans; and (d) there are sufficient funds remaining to
complete the Improvements. The Inspecting Engineers must be satisfied that the Improvements are in
compliance with reasonable fire, safety and health standards, in addition to standards imposed by
law or regulation. All defects in the Improvements disclosed by an engineering report, and
violations of zoning, building, environmental, health, safety or other governmental or regulatory
rules, laws, codes or regulations are to be corrected if in Lender’s reasonable judgment such
defects or violations affect marketability or usage of the Property or the value of the Property
for loan purposes.




     4.19 Indemnity . BORROWER SHALL INDEMNIFY AND DEFEND LENDER AGAINST, AND SHALL HOLD
LENDER HARMLESS FROM ANY AND ALL LOSSES, DAMAGES (WHETHER GENERAL, PUNITIVE OR OTHERWISE),
LIABILITIES, CLAIMS, CAUSES OF ACTION (WHETHER LEGAL, EQUITABLE OR ADMINISTRATIVE), JUDGMENTS,
COURT COSTS AND LEGAL OR OTHER EXPENSES (INCLUDING ATTORNEYS’ FEES) WHICH LENDER MAY SUFFER OR
INCUR AS A DIRECT OR INDIRECT CONSEQUENCE OF: (A) LENDER’S PERFORMANCE UNDER THIS AGREEMENT OR
UNDER ANY OF THE OTHER LOAN DOCUMENTS, INCLUDING WITHOUT LIMITATION LENDER’S EXERCISE OR FAILURE TO
EXERCISE ANY RIGHTS, REMEDIES OR POWERS IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS; (B) BORROWER’S FAILURE TO PERFORM ANY OF BORROWER’S OBLIGATIONS AS AND WHEN REQUIRED BY
THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, INCLUDING WITHOUT LIMITATION, ANY FAILURE OF ANY
REPRESENTATION OR WARRANTY OF BORROWER TO BE TRUE AND CORRECT AND ANY FAILURE BY BORROWER TO
SATISFY ANY CONDITION; (C) ANY CLAIM OR CAUSE OF ACTION OF ANY KIND BY ANY PERSON OR ENTITY TO THE
EFFECT THAT LENDER IS IN ANY WAY RESPONSIBLE OR LIABLE FOR ANY ACT OR OMISSION BY BORROWER, WHETHER
ON ACCOUNT OF ANY THEORY OF DERIVATIVE LIABILITY OR OTHERWISE; (D) ANY ACT OR OMISSION BY BORROWER,
ANY CONTRACTOR, SUBCONTRACTOR OR MATERIAL SUPPLIER, ENGINEER, ARCHITECT OR OTHER PERSON OR ENTITY,
EXCEPT LENDER, WITH RESPECT TO ANY OF THE PROPERTY; (E) THE CONSTRUCTION OR OTHER WORK CONTEMPLATED
HEREIN; (F) THE OPERATION OR MAINTENANCE OF THE PROPERTY; AND (G) ANY OTHER ACTION OR INACTION BY,
OR MATTER WHICH IS THE RESPONSIBILITY OF BORROWER, EXCEPT FOR ANY SUCH CLAIM, INJURY, DAMAGE, LOSS
OR LIABILITY CAUSED SOLELY BY THE WILLFUL MISCONDUCT OR GROSS NEGLIGENCE OF LENDER OR ITS AGENTS OR
EMPLOYEES. LENDERS’ RIGHT OF INDEMNITY SHALL NOT BE DIRECTLY OR INDIRECTLY LIMITED, PREJUDICED,
IMPAIRED OR ELIMINATED IN ANY WAY BY ANY FINDING OR ALLEGATION THAT LENDER’S CONDUCT IS ACTIVE,
PASSIVE OR SUBJECT TO ANY THEORY OF ANY KIND, CHARACTER OR NATURE FOR ANY ACT OR OMISSION BY
BORROWER OR ANY OTHER PERSON OR ENTITY EXCEPT LENDER. NOTWITHSTANDING THE FOREGOING, BORROWER
SHALL NOT BE OBLIGATED TO INDEMNIFY LENDER WITH RESPECT TO ANY INTENTIONAL TORT OR ACT OF GROSS
NEGLIGENCE WHICH LENDER IS PERSONALLY DETERMINED BY THE JUDGMENT OF A COURT OF COMPETENT
JURISDICTION (SUSTAINED ON APPEAL, IF ANY) TO HAVE COMMITTED. BORROWER SHALL PAY ANY INDEBTEDNESS
ARISING UNDER SAID INDEMNITY TO LENDER PROMPTLY UPON DEMAND BY LENDER. THIS INDEMNITY SHALL
SURVIVE



22









 




THE PAYMENT OF ALL AMOUNTS PAYABLE PURSUANT TO THE LOAN DOCUMENTS. PAYMENT BY LENDER SHALL
NOT BE A CONDITION PRECEDENT TO THE OBLIGATIONS OF BORROWER UNDER THIS INDEMNITY.




     4.20 Lender’s Action for its Own Protection Only . The authority herein conferred
upon Lender, and any action taken by Lender, to inspect the Property, to procure waivers or sworn
statements, to approve contracts, subcontracts and purchase orders, and to approve Plans, will be
exercised and taken by Lender for Lender’s protection only and may not be relied upon by Borrower
for any purposes whatever; and Lender shall not be deemed to have assumed any responsibility to
Borrower with respect to any such action herein authorized or taken by Lender or with respect to
the proper construction of the Improvements on the Property, performance of contracts, subcontracts
or purchase orders by any contractor, subcontractor or material supplier, or prevention of
mechanics’ liens from being claimed or asserted against any of the Property. Any review,
investigation or inspection conducted by Lender, or any architectural or engineering consultants
retained by Lender to verify independently Borrower’s satisfaction of any conditions precedent to
Advance under this Agreement, Borrower’s performance of any of the covenants, agreements and
obligations of Borrower under this Agreement, or the validity of any representations and warranties
made by Borrower hereunder (regardless of whether the party conducting such review, investigation
or inspection shall have discovered that any of such conditions precedent were not satisfied or
that any such covenants, agreements or obligations were not performed or that any such
representations or warranties were not true), shall not affect (or constitute a waiver by Lender
of) (a) any of Borrower’s representations and warranties under this Agreement or Lender’s reliance
thereon or (b) Lender’s reliance upon any certifications of Borrower or the Contractor required
under this Agreement or any other facts, information or reports furnished to Lender by Borrower
hereunder.



ARTICLE 5: RIGHTS AND REMEDIES OF LENDER




     5.01 Rights of Lender . Upon the occurrence and during the continuance of an Event of
Default, Lender shall have the right, in addition to any other right or remedy of Lender, but not
the obligation, in its own name or in the name of Borrower, to enter into possession of the
Property; to perform all work necessary to complete the construction of the Improvements
substantially in accordance with the Master Plan and Governmental Requirements, and to employ
watchmen and other safeguards to protect the Property. Borrower hereby appoints Lender as the
attorney-in-fact of Borrower, with full power of substitution, and in the name of Borrower, if
Lender elects to do so, upon the occurrence of an Event of Default, to (a) use such sums as are
necessary, including any proceeds of the Loan and of the Borrower Deposit, make such changes or
corrections in the Plans, and employ such architects, engineers, and contractors as may be required
for the purpose of completing the construction of the Improvements substantially in accordance with
the Master Plan, and the Governmental Requirements, (b) execute all applications and certificates
in the name of Borrower which may be required for completion of construction of the Improvements,
(c) endorse the name of Borrower on any checks or drafts representing proceeds of the insurance
policies, or other checks or instruments payable to Borrower with respect to the Property, (d) do
every act with respect to the construction of the Improvements which Borrower may do, and (e)
prosecute or defend any action or proceeding incident to the Property. The power-of-attorney
granted hereby is a power coupled with an interest and is irrevocable. Lender shall have no
obligation to undertake any of the foregoing actions, and if Lender should do so, it shall have no
liability to Borrower for the sufficiency or adequacy of any such actions taken by Lender.



23









 





     5.02 Cessation of Advances . Upon the occurrence and during the continuance of an
Event of Default, or any event or condition which, with the giving of notice and/or passing of
time, would constitute an Event of Default, the obligation of Lender to disburse the Loan proceeds
and proceeds of the Borrower Deposit and all other obligations of Lender hereunder shall, at
Lender’s option, immediately terminate.



     5.03 Funds of Lender . Any funds of Lender used for any purpose referred to in this
Article V, shall constitute Advances secured by the Loan Documents and shall bear interest at the
rate specified in the Note to be applicable after default thereunder.



     5.04 No Waiver or Exhaustion . No waiver by Lender of any of its rights or remedies
hereunder, in the other Loan Documents, or otherwise, shall be considered a waiver of any other or
subsequent right or remedy of Lender; no delay or omission in the exercise or enforcement by Lender
of any rights or remedies shall ever be construed as a waiver of any right or remedy of Lender;
and, no exercise or enforcement of any such rights or remedies shall ever be held to exhaust any
right or remedy of Lender.



ARTICLE 6: GENERAL TERMS AND CONDITIONS




     6.01 Notices . All notices, demands, requests, and other communications required or
permitted hereunder shall be in writing and shall be given in accordance with the requirements for
notices under the Deed of Trust.



     6.02 Entire Agreement and Modifications . THE LOAN DOCUMENTS CONSTITUTE THE ENTIRE
UNDERSTANDING AND AGREEMENT BETWEEN THE PARTIES HERETO WITH RESPECT TO THE TRANSACTIONS ARISING IN
CONNECTION WITH THE LOAN AND SUPERSEDE ALL PRIOR WRITTEN OR ORAL UNDERSTANDINGS AND AGREEMENTS
BETWEEN THE UNDERSIGNED IN CONNECTION THEREWITH. NO PROVISION OF THIS AGREEMENT OR THE OTHER LOAN
DOCUMENTS MAY BE MODIFIED, WAIVED, OR TERMINATED EXCEPT BY INSTRUMENT IN WRITING EXECUTED BY THE
PARTY AGAINST WHOM A MODIFICATION, WAIVER, OR TERMINATION IS SOUGHT TO BE ENFORCED.



     6.03 Severability . In case any of the provisions of this Agreement shall for any
reason be held to be invalid, illegal, or unenforceable, such invalidity, illegality, or
unenforceability shall not affect any other provision hereof, and this Agreement shall be construed
as if such invalid, illegal, or unenforceable provision had never been contained herein.



     6.04 Election of Remedies . Lender shall have all of the rights and remedies granted
in the Loan Documents and available at law or in equity, and these same rights and remedies shall
be cumulative and may be pursued separately, successively, or concurrently against Borrower, any
guarantor of the Loan, or any property covered under the Loan Documents, at the sole discretion of
Lender. The exercise or failure to exercise any of the same shall not constitute a waiver or
release thereof or of any other right or remedy, and the same shall be nonexclusive.



     6.05 Form and Substance . All documents, certificates, insurance policies, and other
items required under this Agreement to be executed and/or delivered to Lender shall be in form and
substance satisfactory to Lender.



24









 





     6.06 No Third Party Beneficiary . This Agreement is for the sole benefit of Lender and
Borrower and is not for the benefit of any third party.



     6.07 Borrower In Control . In no event shall Lender’s rights and interests under the
Loan Documents be construed to give Lender the right to control, or be deemed to indicate that
Lender is in control of, the business, management or properties of Borrower or the daily management
functions and operating decisions made by Borrower.



     6.08 Number and Gender . Whenever used herein, the singular number shall include the
plural and the singular, and the use of any gender shall be applicable to all genders. The duties,
covenants, obligations, and warranties of Borrower in this Agreement shall be joint and several
obligations of Borrower, and of each party of Borrower if more than one.



     6.09 Captions . The captions, headings, and arrangements used in this Agreement are
for convenience only and do not in any way affect, limit, amplify, or modify the terms and
provisions hereof.



     6.10 Applicable Law . This Agreement shall be governed by and construed in accordance
with the internal laws of the State where the Property is located without reference to conflict of
laws rules.



     6.11 Multiple Counterparts . This Agreement may be executed in multiple counterparts,
and each counterpart hereof executed by any party shall be deemed an original and shall as to such
party constitute one and the same instrument with all other counterparts hereof executed,
regardless of whether the same or any other counterpart hereof is executed by any other party or by
a person intended to be or who becomes a party hereunder.



25









 





     EXECUTED AND DELIVERED on the date first recited.



	 	 	 	 	 	 	 
	 

	 	BORROWER:
	 
	 	 	 	 	 	 
	 

	 	CAMPUS CREST AT DENTON, LP, a

Delaware limited partnership
	 
	 	 	 	 	 	 
	 

	 	By:
	 	Campus Crest GP, LLC, a

Delaware limited liability company,

its general partner
	 
	 	 	 	 	 	 
	 

	 	 	 	By:
	 	/s/ Donald L. Bobbitt, Jr.
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	Donald L. Bobbitt, Jr., Manager
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	LENDER:
	 
	 	 	 	 	 	 
	 

	 	AMEGY MORTGAGE COMPANY, L.L.C.

d/b/a Q10 Amegy Mortgage Capital, a

Texas limited liability company
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Don Hickey
	 

	 	 	 	 
	 

	 	 	 	Don Hickey, Senior Vice President -

Commercial Real Estate Lending







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