**Exhibit 10.6**

 

 

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SENIOR MEZZANINE LOAN AGREEMENT

 

 

 

BY

 

 

 

ANDBETWEEN

 

 

 

SW131 ST. ROSE MEZZANINE BORROWER LLC(“Borrower”)

 

 

 

AND

 

 

 

BEHRINGERHARVARD ST. ROSE REIT, LLC(“Lender”)

 

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| 1.     | RECITALS                                                                           | 2                                         |
|--------|------------------------------------------------------------------------------------|-------------------------------------------|
| 2.     | DEFINITIONS                                                                        | 2                                         |
| 3.     | THE LOAN; DISBURSEMENT  OF LOAN                                                    | 9                                         |
|   |                                                                               |                                      |
|   | (a)                                                                                | Loan                                      | 9 |
|   | (b)                                                                                | Loan Disbursements                        | 9 |
|   |                                                                               |                                      |   |
| 4.     | INTEREST PAYMENTS; NO  USURY, LOAN COMMITMENT FEE; PREPAYMENT; MATURITY; REPAYMENT | 9                                         |
|   |                                                                               |                                      |
|   | (a)                                                                                | Interest                                  | 9 |
|   | (b)                                                                                | No Usury                                  | 10 |
|   | (c)                                                                                | Loan Commitment Fee                       | 11 |
|   | (d)                                                                                | Prepayment                                | 11 |
|   | (e)                                                                                | Maturity Date                             | 11 |
|   |                                                                               |                                      |   |
| 5.     | SECURITY FOR LOAN;  GUARANTY                                                       | 11                                        |
|   |                                                                               |                                      |
|   | (a)                                                                                | Security Instrument                       | 11 |
|   | (b)                                                                                | Other Loan Documents                      | 11 |
|   | (c)                                                                                | Guaranty                                  | 11 |
|   |                                                                               |                                      |   |
| 6.     | CONDITIONS PRECEDENT TO  CLOSING OF THE LOAN                                       | 11                                        |
|   |                                                                               |                                      |
|   | (a)                                                                                | Loan Documents                            | 11 |
|   | (b)                                                                                | Third Party Agreements                    | 12 |
|   | (c)                                                                                | Certification                             | 12 |
|   | (d)                                                                                | Financial Statements                      | 12 |
|   | (e)                                                                                | Insurance Policies                        | 12 |
|   | (f)                                                                                | Contracts                                 | 13 |
|   | (g)                                                                                | Title Insurance Policy                    | 13 |
|   | (h)                                                                                | ALTA Survey                               | 13 |
|   | (i)                                                                                | Flood Plain Certification                 | 13 |
|   | (j)                                                                                | Appraisal                                 | 13 |
|   | (k)                                                                                | Environmental Report                      | 13 |
|   | (l)                                                                                | Certification of Organizational Documents | 13 |
|   | (m)                                                                                | Legal Opinion                             | 13 |
|   | (n)                                                                                | UCC Searches                              | 14 |
|   | (o)                                                                                | Utilities                                 | 14 |
|   | (p)                                                                                | Environmental Disclosure                  | 14 |
|   | (q)                                                                                | No Default                                | 14 |
|   |                                                                               |                                      |   |
| 7.     | TITLE INSURANCE                                                                    | 14                                        |
|   |                                                                               |                                      |
| 8.     | INSURANCE                                                                          | 14                                        |
|   |                                                                               |                                      |
|   | (a)                                                                                | Insurance Requirements                    | 14 |
|   | (b)                                                                                | Initial Policies; Renewals                | 16 |
|   | (c)                                                                                | Notices                                   | 16 |
|   | (d)                                                                                | Notice of Casualty                        | 16 |
|   | (e)                                                                                | Settlement of Claim                       | 16 |

 

 

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|   | (f)                                                    | Application of Insurance Proceeds                                                         | 17     |
|--------|--------------------------------------------------------|-------------------------------------------------------------------------------------------|--------|
|   |                                                   |                                                                                      |   |
| 9.     | EMINENT DOMAIN                                         | 17                                                                                        |
|   |                                                   |                                                                                      |
|   | (a)                                                    | Notice of Condemnation                                                                    | 17     |
|   | (b)                                                    | Settlement of Claim                                                                       | 18     |
|   | (c)                                                    | Application of Condemnation Awards                                                        | 18     |
|   | (d)                                                    | Continuing Obligation to Repair                                                           | 18     |
|   | (e)                                                    | Lender Not Required to Act                                                                | 18     |
|   |                                                   |                                                                                      |   |
| 10.    | RIGHTS OF ACCESS AND  INSPECTION                       | 18                                                                                        |
| 11.    | EXPENSES                                               | 19                                                                                        |
| 12.    | FINANCIAL REPORTS,  PROPERTY REPORTS AND ANNUAL BUDGET | 19                                                                                        |
| 13.    | GENERAL COVENANTS OF  BORROWER                         | 21                                                                                        |
|   |                                                   |                                                                                      |
|   | (a)                                                    | Commencement and Completion of Project                                                    | 21     |
|   | (b)                                                    | Lender Approval                                                                           | 21     |
|   | (c)                                                    | Operation and Maintenance of Project                                                      | 22     |
|   | (d)                                                    | Restricted Sale and Encumbrance of Project and of  Borrower Interests; Other Indebtedness | 23     |
|   | (e)                                                    | General Indemnity                                                                         | 24     |
|   | (f)                                                    | Leases                                                                                    | 25     |
|   | (g)                                                    | Notices                                                                                   | 26     |
|   | (h)                                                    | Development                                                                               | 26     |
|   | (i)                                                    | Management                                                                                | 26     |
|   | (j)                                                    | Senior Loan                                                                               | 26     |
|   | (k)                                                    | Principal Place of Business; Choice of Law                                                | 27     |
|   | (l)                                                    | Compliance with Governmental Prohibitions                                                 | 27     |
|   |                                                   |                                                                                      |   |
| 14.    | FURTHER ASSURANCES                                     | 28                                                                                        |
| 15.    | APPRAISALS                                             | 28                                                                                        |
| 16.    | GENERAL REPRESENTATIONS  AND WARRANTIES OF BORROWER    | 28                                                                                        |
|   |                                                   |                                                                                      |
|   | (a)                                                    | Organization; Corporate Powers; Authorization of  Borrowing                               | 28     |
|   | (b)                                                    | Title to Property; Matters Affecting Property                                             | 29     |
|   | (c)                                                    | Financial Statements                                                                      | 31     |
|   | (d)                                                    | Budget Projections                                                                        | 31     |
|   | (e)                                                    | Intentionally Deleted                                                                     | 32     |
|   | (f)                                                    | No Loan Broker                                                                            | 32     |
|   | (g)                                                    | No Default                                                                                | 32     |
|   | (h)                                                    | Solvency                                                                                  | 32     |
|   | (i)                                                    | Violations of Governmental Prohibitions                                                   | 32     |
|   |                                                   |                                                                                      |   |
| 17.    | EVENT OF DEFAULT                                       | 33                                                                                        |
|   |                                                   |                                                                                      |
|   | (a)                                                    | Non-Payment                                                                               | 33     |
|   | (b)                                                    | Insurance                                                                                 | 33     |
|   | (c)                                                    | Special Purpose Entity Covenants                                                          | 33     |
|   | (d)                                                    | Borrower                                                                                  | 33     |
|   | (e)                                                    | Guaranty                                                                                  | 33     |
|   | (f)                                                    | Construction                                                                              | 33     |

 

 

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|   | (g)                                                            | Fraud or Material Misrepresentation                                   | 33     |
|--------|----------------------------------------------------------------|-----------------------------------------------------------------------|--------|
|   | (h)                                                            | Sale, Encumbrance or Other Indebtedness                               | 34     |
|   | (i)                                                            | Reports and Documents                                                 | 34     |
|   | (j)                                                            | Other Breaches under this Agreement.                                  | 34     |
|   | (k)                                                            | Other Breaches Under Other Loan Documents                             | 34     |
|   | (l)                                                            | Senior Loan Documents                                                 | 34     |
|   | (m)                                                            | Judgments                                                             | 34     |
|   | (n)                                                            | Bankruptcy Proceedings                                                | 35     |
|   |                                                           |                                                                  |   |
| 18.    | REMEDIES                                                       | 35                                                                    |
|   |                                                           |                                                                  |
|   | (a)                                                            | Actions upon Event of Default                                         | 35     |
|   | (b)                                                            | Lender’s Right to Perform                                        | 36     |
|   | (c)                                                            | Appointment of Lender as Attorney-in-Fact                             | 36     |
|   | (d)                                                            | Cross-Default to Note, Security Instrument, and  Other Loan Documents | 36     |
|   | (e)                                                            | Recourse Limitations                                                  | 37     |
|   |                                                           |                                                                  |   |
| 19.    | ADDITIONAL ADVANCES                                            | 37                                                                    |
|   |                                                           |                                                                  |
|   | (a)                                                            | Disbursement of Additional Advances                                   | 37     |
|   | (b)                                                            | Conditions Precedent to Additional Advance.                           | 38     |
|   |                                                           |                                                                  |   |
| 20.    | TRANSFER OF LOAN; LOAN  SERVICER                               | 39                                                                    |
|   |                                                           |                                                                  |
|   | (a)                                                            | Lender’s Right to Transfer                                       | 39     |
|   | (b)                                                            | Loan Servicer                                                         | 39     |
|   | (c)                                                            | Dissemination of Information                                          | 39     |
|   |                                                           |                                                                  |   |
| 21.    | LENDER’S EXPENSES;  RIGHTS OF LENDER                      | 39                                                                    |
| 22.    | MISCELLANEOUS                                                  | 40                                                                    |
|   |                                                           |                                                                  |
|   | (a)                                                            | Notices                                                               | 40     |
|   | (b)                                                            | Waivers                                                               | 41     |
|   | (c)                                                            | Lender Not Partner of Borrower; Borrower in Control                   | 41     |
|   | (d)                                                            | No Third Party                                                        | 42     |
|   | (e)                                                            | Time of Essence; Context                                              | 42     |
|   | (f)                                                            | Successors and Assigns                                                | 42     |
|   | (g)                                                            | Governing Jurisdiction                                                | 42     |
|   | (h)                                                            | SUBMISSION TO JURISDICTION; SERVICE OF PROCESS                        | 42     |
|   | (i)                                                            | WAIVER WITH RESPECT TO DAMAGES                                        | 43     |
|   | (j)                                                            | Entire Agreement                                                      | 44     |
|   | (k)                                                            | Headings                                                              | 44     |
|   | (l)                                                            | Severability                                                          | 44     |
|   | (m)                                                            | Counterparts                                                          | 44     |
|   | (n)                                                            | WAIVER OF JURY TRIAL                                                  | 44     |
|   | (o)                                                            | Sole and Absolute Discretion                                          | 44     |
|   | (p)                                                            | Straight Debt Harbor                                                  | 45     |
|   | (q)                                                            | Assignment                                                            | 45     |
|   | (r)                                                            | Retainage of Subcontractors                                           | 45     |
|   |                                                           |                                                                  |   |
| 23.    | SPECIAL  REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER | 45                                                                    |

 

 

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| 24. | JUNIOR MEZZANINE LOAN   | 48 |
|-----|-------------------------|----|
| 25. | SUBDIVISION AND RELEASE | 50 |

 

 

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** **

**SENIOR MEZZANINE LOAN AGREEMENT**

** **

This SENIOR MEZZANINE LOAN AGREEMENT (this “**Agreement**”) is made and entered into as of December 31,2008, by and between SW 131 ST. ROSE MEZZANINE BORROWER LLC, a Delaware limitedliability company, whose address is 2001 Bryan Street, Suite 3250, Dallas,Texas 75201 (“**Borrower**”), and BEHRINGER HARVARDST. ROSE REIT, LLC, a Delaware limited liability company, whose address is15601 Dallas Parkway, Suite 600, Addison, Texas, 75001 (“**Lender**”).

R E C I T A L S:

 

This Agreement is made with reference to the following facts:

 

A.            Borrower isdirectly or indirectly the legal and beneficial owner of one-hundred percent(100%) of the Equity Interests in SW 132 ST. ROSE SENIOR BORROWER LLC, aDelaware limited liability company (“**Mortgagor**”).

 

B.            Mortgagor isthe owner of that certain land located in Henderson, Clark County, Nevada, andmore particularly described on Exhibit A attached hereto, togetherwith appurtenances (the “**Land**”).  The Land is comprised of a portion that iszoned RH-36 (High Density Residential), which is generally the western 18.151acres of the Land (the “**Residential Tract**”)and a portion that is zoned CC-PUD (Community Commercial with Planned UnitDevelopment Overlay), which is generally the eastern 6.271 acres of the Land(the “**Commercial Tract**”).  Mortgagor will construct on the ResidentialTract a 430-unit apartment complex (the “**Project**”).

 

C.            Contemporaneouslyherewith, Mortgagor will enter into a Construction Loan Agreement with Bank ofAmerica, N.A. and the lenders who from time to time agree to fund parts of suchloan (“**Senior Lender**”), providing a loan inthe amount of Thirty Eight Million Six Hundred Thousand and No/Dollars($38,600,000) (the “**Senior Loan**”),secured by a deed of trust, of even date herewith (together with any and allextensions, renewals, substitutions, replacements, amendments, modificationsand/or restatements thereof) in favor of Senior Lender encumbering the Land andthe Project.

 

D.            Contemporaneouslywith entering into the Senior Loan, SW 122 St. Rose Senior Borrower LLC, aDelaware limited liability company (“**Commercial Tract Borrower**”),will enter into a Term Loan Agreement with Bank of America, N.A., as lender forits sole account (“**Commercial Tract Lender**”),providing a loan in the amount of Two Million Nine Hundred Fifty Thousand andNo/Dollars ($2,950,000) (the “**CommercialTract Loan**”), secured by a deed of trust, of even date herewith(together with any and all extensions, renewals, substitutions, replacements,amendments, modifications and/or restatements thereof) in favor of CommercialTract Lender encumbering the Land and the Project.

 

 

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E.             Borrower hasrequested that Lender, as lender, make one or more loans to Borrower in the aggregateamount of Twenty One Million Forty Three Thousand One Hundred Ninety Seven andNo/Dollars ($21,043,197) (the “**Maximum Aggregate AdvanceAmount**”), one of such loans (the “**Loan**”)will be made pursuant to this Agreement, which Loan is to be advanced ashereinafter provided and is to be evidenced by the Note.  $14,185,154 of the Loan will be advancedunder this Agreement at the execution of this Agreement (the “**Initial Advance**”), subject to the terms and provisions ofthis Agreement, and $1,000 of the Maximum Aggregate Advance Amount will beadvanced under the Junior Mezzanine Loan Agreement (defined below), subject tothe terms and provisions of the Junior Mezzanine Loan Agreement.  The Note is to be secured by the SeniorSubordinate Deed of Trust, Assignment of Rents and Leases, Security Agreement,Fixture Filing and Financing Statement (the “**SecurityInstrument**”) and other collateral as specified in Section 5below.

 

F.             Mortgagor iscurrently pursuing a subdivision of the Land and intends to convey to CommercialTract Borrower the Commercial Tract. When Commercial Tract Borrower acquires title to the Commercial Tract(the “**Transfer Date**”), the lien of theSecurity Instrument will be partially released as to the Commercial Tract.

 

G.            The proceeds ofthe Loan are to be used by Borrower to, among other things, pay the costs andexpenses, if any, referred to in Section 3(b) below.

 

NOW, THEREFORE, in consideration of the foregoing and the mutualpromises and agreements hereinafter contained and other good and valuableconsideration, the receipt and sufficiency of which are hereby acknowledged,the parties hereby agree as follows:

 

**1.****            ****RECITALS**.  The recitals set forth above are true andcorrect and are incorporated herein by reference.

 

**2.****            ****DEFINITIONS**.  The following terms, when used in thisAgreement (including when used in the above recitals), shall have the followingmeanings:

 

(a)           “**Accounting Records**”: shall mean such records used to prepare financial statements includingbut not limited to:  (i) supportingdocumentation for cash disbursements (including check copies and invoices); (ii) supportingdocumentation for cash receipts (including deposit slips); (iii) contracts;(iv) check registers; (v) monthly bank account reconciliations; (vi) generalledger; (vii) job cost detail of construction in progress in the same formas provided to Senior Lender; (viii) detail of draw requests on the SeniorLoan; (ix) Senior Lender’s monthly loan statement; and (x) such otherdocumentation in the possession of Borrower or its Affiliates or which Borrowerwill use all commercially reasonable efforts to acquire, as Lender shallreasonably require for the preparation of financial statements for the Project,Mortgagor or Borrower.

 

 

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(b)           “**ADA**” shall mean Americans with Disabilities Act of 1990,Pub. L. No. 89-670, 104 Stat. 327 (1990), as amended, and all regulationspromulgated pursuant thereto.

 

(c)           “**Additional Advance**”: shall have the meaning given in Section 19hereof.

 

(d)           “**Affiliate**”:  of anyspecified person or entity shall mean any other person or entity, directly orindirectly, controlling or controlled by or under direct or indirect commoncontrol with such specified person or entity. For purposes of this definition, “control” shall mean the ability,whether by the ownership of shares or other equity interests, by contract orotherwise, to elect a majority of the directors of a corporation, to makemanagement decisions on behalf of, or independently to select the managingpartner of, a partnership, or otherwise to have the power independently toremove and then select a majority of those individuals exercising managerialauthority over an entity.  Control of anentity shall be conclusively presumed in the case of the ownership of more than50% of the equity interests in the entity.

 

(e)           “**Annual Budget**”:  shallmean, for any period, the budget submitted to Lender and in effect for suchperiod as provided in Section 12 hereof.

 

(f)            “**Approved Change Orders**”: shall mean any change orders to the Plans requested by the Borrower andapproved by the Lender as outlined in Section 13(b) hereof.

 

(g)           “**Available Assets**”: shall have the meaning given in the Guaranty.

 

(h)           “**Bankruptcy Proceedings**”: shall have the meaning given in Section 17(n).

 

(i)            “**Borrower**”:  means theentity identified as “Borrower” in the first paragraph of this Agreement,together with its successors and assigns.

 

(j)            “**Business Day**”:  shall mean all days other than Saturday,Sunday or any other day on which national banks doing business in Dallas,Texas are not open for business.

 

(k)           “**Code**”:  the InternalRevenue Code of 1986, as amended from time to time, or the correspondingprovisions of any successor federal income tax law.  Any reference to a particular provision ofthe Code shall include any amendment of such provision or the correspondingprovision of any successor federal income tax law.

 

(l)            “**Collateral**”:  shallhave the meaning given in the Security Instrument.

 

 

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(m)          “**Commercial Deed of Trust**”: shall mean that certain deed of trust made by the Mortgagor for thebenefit of the Commercial Tract Lender, which prior to the Transfer Date, willencumber both the Residential Tract and the Commercial Tract, and after theTransfer Date will encumber only the Commercial Tract.

 

(n)           “**Commercial Tract**”: shall have the meaning given in the Recitals of this Agreement.

 

(o)           “**Commercial Tract Borrower**”: shall have the meaning given in the Recitals of this Agreement.

 

(p)           “**Commercial Tract Lender**”: shall have the meaning given in the Recitals of this Agreement.

 

(q)           “**Commercial Tract Loan**”: shall have the meaning given in the Recitals of this Agreement.

 

(r)            “**Completion**”:  shallhave the meaning given in the Guaranty.

 

(s)           “**Construction Budget**”: shall mean the construction budget attached hereto as Exhibit D.

 

(t)            “**Default Interest Rate**”: shall have the meaning given in the Note.

 

(u)           “**Draw Request**”:  shallmean a request for additional advances on the Loan and/or under the JuniorMezzanine Loan Agreement submitted by Borrower in the form attached hereto as Exhibit E.

 

(v)           “**Encumbrance**”:  shallmean any pledge, encumbrance, hypothecation or other grant of securityinterest, whether direct or indirect, voluntary or involuntary or by operationof law, and whether or not consented to by Lender, of or in (i) all or anyportion of, or interest in, the Project (other than any encumbrance by theSenior Loan Documents and the Permitted Exceptions), or (ii) any EquityInterests in Mortgagor,  or (iii) anypart of the Principal’s Equity Interests in Borrower.

 

(w)          “**Environmental Indemnity**”: shall mean the Mezzanine Environmental Indemnity Agreement of even dateherewith, executed by Borrower and containing representations, warranties,covenants and indemnities in favor of Lender with respect to HazardousMaterials.

 

(x)            “**Equity Interests**”: means, with respect to any Person, shares of capital stock, partnershipinterests, membership interests in a limited liability company, beneficialinterests in a trust or other equity ownership interests in such Person, andany warrants, options or other rights entitling the holder thereof to purchaseor acquire from such Person any such equity interest issued by such Person.

 

 

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(y)           “**Estimated Collateral Value Statement**”:  shall have the meaning given in the Guaranty.

 

(z)            “**Estimated Value**” means the estimated value of the propertyencumbered by the Security Instrument, as such value may be determined fromtime to time by Lender, less the amount, if any, of all other debt secured bysuch property that is senior to both the Loan and the loan under the JuniorMezzanine Loan Agreement.

 

(aa)         “**Event of Default**”: shall have the meaning given in Section 17 hereof.

 

(bb)         “**Final Map**”:  shallhave the meaning given in Section 25 hereof.

 

(cc)         “**General Contractor**”: means TCR Nevada Construction Limited Partnership, a Texas limitedpartnership.

 

(dd)         “**Governmental Authority**”: shall mean any federal, state,county, municipal, parish, provincial, tribal or other government, or anydepartment, commission, board, court, agency (including, without limitation,the U. S. Environmental Protection Agency), whether of the United States ofAmerica or any other country, or any instrumentality of any of them, or anyother political subdivision thereof (a) in which any portion of the Landis located, (b) in which any of Mortgagor, Borrower, Guarantor or Lenderis located or conducts business, or (c) exercising jurisdiction overMortgagor, Borrower, Guarantor or Lender, or any of the Land, and any entityexercising legislative, judicial, regulatory, or administrative functions of,or pertaining to, government including, without limitation, any arbitrationpanel, any court or any commission.

 

(ee)         “**Governmental Requirements**”: shall mean all laws, ordinances, rules, regulations, orders anddirectives of any Governmental Authority applicable to any of Mortgagor,Borrower, Guarantor, Lender or any of the Land, including, without limitation,all applicable licenses, building codes, restrictive covenants, zoning andsubdivision ordinances, flood disaster, health and environmental laws andregulations, and the ADA.

 

(ff)           **“Guarantor”**:  shall mean CFP Residential, L.P., Kenneth J.Valach, J. Ronald Terwilliger, and Bruce Hart.

 

(gg)         “**Guaranty**”:  means thatcertain Mezzanine Guaranty, of even date herewith, executed by the Guarantors,jointly and severally, in favor of Lender.

 

(hh)         “**Hazardous Materials**”: shall have the meaning given in the Environmental Indemnity.

 

(ii)           “**Indebtedness**”:  shallmean the principal of, interest on, and any other amounts due at any timeunder, this Agreement, the Note, the Security 

 

 

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Instrumentor any other Loan Document, including prepayment premiums, late charges,default interest, and advances to protect the security of the Collateral.

 

(jj)           “**Initial Advance**”: shall have the meaning given in the Recitals of this Agreement.

 

(kk)         “**Inspecting Architects/Engineers**”:  shall mean architects and/or engineersselected by Borrower and reasonably acceptable to Lender.

 

(ll)           “**Junior Mezzanine Advance Amount**” means the principal amountoutstanding under the Junior Mezzanine Loan Agreement.

 

(mm)       “**JuniorMezzanine Loan Agreement**” means that certain Junior Mezzanine LoanAgreement between Borrower and Lender dated of even date herewith.

 

(nn)         “**Land**”:  shall have the meaning given in the Recitalsof this Agreement; provided, however, that from and after the Transfer Date,the Land shall be deemed to be comprised solely of the Residential Tract.

 

(oo)         “**Leases**”:  shall meanall present and future leases, subleases, licenses, concessions or otherpossessory interests now or hereafter in force, whether oral or written, coveringor affecting the Project, or any portion of the Project, and all modifications,extensions or renewals.

 

(pp)         “**Lender**”:  means theentity identified as “Lender” in the first paragraph of this Agreement and itssuccessors and assigns.

 

(qq)         “**Loan**”:  shall have themeaning given in the Recitals of this Agreement.

 

(rr)           “**Loan Documents**”: shall mean the Note, this Loan Agreement, the Security Instrument, theGuaranty, the Environmental Indemnity, and all other documents executed byBorrower or Guarantors to evidence, secure or set out the terms of the Loan,each as the same may hereafter be amended, modified and restated from time totime.

 

(ss)         “**Loan Commitment Fee**”: means $631,296, which fee is payable as of the date of this Agreement.

 

(tt)           “**Management Agreement**”: shall mean the Management Agreement,to be entered into between Mortgagor and Manager, upon the approval of Lender,pursuant to which Manager will agree to manage the operations of the Project,as the same may be amended from time to time, or any other management agreementapproved by Lender pursuant to Section 13(i) .

 

(uu)         “**Manager**”:  shall meana property management company approved by Lender pursuant to Section 13(i) hereof.

 

 

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(vv)         “**Maturity Date**” shall have the meaning given in the Note.

 

(ww)       “**MaximumAggregate Advance Amount**” shall have the meaning given in theRecitals of this Agreement.

 

(xx)          “**Mortgagor**”:  shallhave the meaning given in the Recitals of this Agreement.

 

(yy)         “**Note**”:  shall meanthat certain Senior Mezzanine Promissory Note, dated of even date herewith, inthe Maximum Aggregate Advance Amount, made payable by Borrower to the order ofLender, evidencing all amounts outstanding under the Loan from time to time, asthe same may be amended from time to time.

 

(zz)          “**Permits**”:  shall meanall licenses, permits, approvals, franchises, privileges, immunities, grants,ordinances, classifications, certificates and registrations which are necessaryfor Mortgagor to develop, construct and operate the Project.

 

(aaa)       “**Permitted Exceptions**”: shall mean (1) the title exceptions included in the Policy requiredto be delivered to Lender pursuant to Section 7(a) hereof, asthe same may be endorsed from time to time with the consent of the Lender, (2) liensand security interests securing the Loan, the Senior Loan and, prior to theTransfer Date, the Commercial Tract Loan, (3) liens for taxes, assessmentsor other governmental charges or levies that are not then due or that are beingcontested in good faith and in accordance with applicable statutory procedures,(4) mechanic’s liens against the Project which are bonded off, released ofrecord or otherwise remedied to Lender’s reasonable satisfaction within 30 daysof the date of creation, (5) Leases entered into on terms allowed by thisAgreement and (6) other matters approved in writing by Lender, whichincludes any liens and security interests granted in connection with the JuniorMezzanine Loan Agreement or the loan thereunder.

 

(bbb)      “**Person**”:  shall meanany individual, corporation, partnership, limited liability company, jointventure, estate, trust, or unincorporated association, any other entity, anyfederal, state, county or municipal government or any bureau, department oragency thereof and any fiduciary acting in such capacity on behalf of theforegoing.

 

(ccc)       “**Plans**”:  shall meanthe plans and specifications identified in Exhibit C hereto.

 

(ddd)      “**Policy**”: shall have the meaning given in Section 7(a) hereof.

 

(eee)       “**Principal**”:  shallmean SW 130 St. Rose Limited Partnership, a Delaware limited partnership, thesole member of Borrower and the holder of all Equity Interests in Borrower, andany person or entity who becomes 

 

 

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theowner of any Equity Interest in Borrower after the date of this Agreement andis identified as such in an amendment or supplement to this Agreement.

 

(fff)         “**Project**”:  shall havethe meaning given in the Recitals of this Agreement.  The Project includes the Residential Tract.

 

(ggg)      “**REA**”:  shall have themeaning given in Section 25 hereof.

 

(hhh)      “**Residential Tract**”: shall have the meaning given in the Recitals of this Agreement.

 

(iii)          “**Sale**”:  shall mean anysale, assignment, transfer, conveyance or other disposition, whether voluntaryor involuntary, and whether or not consented to by Lender of (i) all orany portion of, or interest in, the Land or the Project (other than theconveyance of the Commercial Tract to the Commercial Tract Borrower), (ii) allor any portion of the Equity Interests in Mortgagor, or (iii) all or anyportion of the Principal’s Equity Interests in Borrower.

 

(jjj)          “**Security Instrument**”: shall have the meaning given in the Recitals to this Agreement.

 

(kkk)       “**Senior Deed of Trust**”: shall mean that certain deed of trust securing the Senior Loan.

 

(lll)          “**Senior Indemnity**”: shall mean theEnvironmental Indemnity Agreement between Mortgagor, Senior Lender and theother parties thereto.

 

(mmm)    “**Senior Loan**”: shall have the meaning given in the Recitalsof this Agreement.

 

(nnn)      “**Senior Loan Agreement**”: shall mean the Construction Loan Agreement between Senior Lender andMortgagor evidencing the Senior Loan.

 

(ooo)      “**Senior Loan Documents**”: shall mean the Senior Note, the Senior Deed of Trust, the Senior LoanAgreement, the Senior Indemnity Agreement, any guaranty provided by theguarantors to the Senior Loan, financing statements filed in connection withthe Senior Loan, and all other documents executed by Mortgagor or Guarantor infavor of Senior Lender to evidence or secure the Senior Loan or reasonablyrelated to the Senior Loan, including, but not limited to, budgets and drawrequests, as each may be amended, modified or restated with the consent ofSenior Lender.

 

(ppp)      “**Senior Mezzanine Advance Amount**” means the principal amountoutstanding on the Loan.

 

 

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(qqq)      “**Senior Note**”:  shallmean the promissory notes evidencing the Senior Loan and all schedules, riders,allonges and addenda, as such promissory notes may be amended from time to timewith the consent of Senior Lender.

 

(rrr)         “**Title Insurer**”:  shallmean Chicago Title Insurance Company.

 

(sss)       “**Third Party Agreement**”: shall mean any agreement other than Leases and the Permitted Exceptionsthat will be binding on the Project, Mortgagor or Borrower after the closing ofthe Loan.

 

(ttt)         “**Transfer Date**”:  shallhave the meaning given in the Recitals of this Agreement.

 

**3.****            ****THE LOAN;DISBURSEMENT OF LOAN**.

 

(a)           Loans.  On the basis of the covenants, agreements andrepresentations of Borrower contained herein and comparable provisions of theJunior Mezzanine Loan Agreement and subject to the terms and conditionshereinafter set forth and comparable provisions of the Junior Mezzanine Loan Agreement,Lender shall lend to Borrower the Maximum Aggregate Advance Amount, theproceeds of which are to be disbursed by Lender in accordance with theprovisions of Section 3(b) hereof and comparable provisions ofthe Junior Mezzanine Loan Agreement.

 

(b)           LoanDisbursements.  At theexecution of this Agreement, Lender has advanced the Initial Advance to theBorrower.  All Additional Advancesagainst the Loan will be disbursed in accordance with Section 19hereof.  Upon submission by Borrower of aDraw Request, Lender shall (subject to satisfaction of the terms and conditionsof Section 19) advance to Borrower hereunder against the Loan the amountrequested by Borrower less the portion thereof simultaneously advanced pursuantto the Junior Mezzanine Loan Agreement. In no event shall the aggregate principal amount outstanding hereunderexceed the Maximum Aggregate Advance Amount less the Junior Mezzanine AdvanceAmount as it stands at such time.

 

**4.****            ****INTERESTPAYMENTS; NO USURY, LOAN COMMITMENT FEE; PREPAYMENT; MATURITY; REPAYMENT.**

 

(a)           Interest.  Interest on the principal balance of the Loanshall accrue and shall be payable in the amounts and at the times set forth inthe Note.  Borrower agrees to pay, on theMaturity Date, the unpaid principal balance of the Loan, together with allaccrued but unpaid interest thereon.

 

(b)           No Usury.  The provisions of this Agreement, the Note,the Security Instrument and of all other agreements between Borrower andLender, whether now existing or hereafter arising and whether written or oral, 

 

 

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including,but not limited to, the Loan Documents, are hereby expressly limited so that inno contingency or event whatsoever, whether by reason of demand or accelerationof the maturity of this Note or otherwise, shall the amount contracted for,charged, taken, reserved, paid, or agreed to be paid to Lender for the use,forbearance, retention or detention of the money loaned under the Note andrelated indebtedness exceed the maximum amount permissible under applicablelaw.  If, from any circumstancewhatsoever, performance or fulfillment of any provision hereof or of anyagreement between Borrower and Lender shall, at the time performance or fulfillmentof such provision shall be due, exceed the limit for interest prescribed by lawor otherwise transcend the limit of validity prescribed by applicable law, thenipso facto the obligation to be performed or fulfilled shall be reduced to suchlimit; and if, from any circumstance whatsoever, Lender shall ever receiveanything of value deemed interest by applicable law in excess of the maximumlawful amount, an amount equal to any excessive interest shall be applied tothe reduction of the principal balance owing under the Note in the inverse orderof its maturity (whether or not then due) or at the option of Lender be paidover to Borrower, and not to the payment of interest.  All interest (including any amounts orpayments judicially or otherwise under the law deemed to be interest)contracted for, charged, taken, reserved, paid or agreed to be paid to Lendershall, to the extent permitted by applicable law, be amortized, prorated,allocated and spread throughout the full term of the Note, including anyextensions or renewals thereof, until payment in full of the Indebtedness sothat the interest on the Loan for such full period will not exceed at any timethe maximum amount permitted by applicable law. To the extent that Lender is relying on Chapter 303, as amended, ofthe Texas Finance Code to determine the maximum amount of interest permitted byapplicable law on the principal of the Loan, Lender will utilize the weeklyrate ceiling from time to time in effect as provided in such Chapter 303,as amended.  To the extent United Statesfederal law permits a greater amount of interest on the Loan than is permittedunder Texas law, Lender will rely on United States federal law instead of suchChapter 303, as amended, for the purpose of determining the maximum amountpermitted by applicable law.  Additionally,to the extent permitted by applicable law now or hereafter in effect, Lendermay, at its option and from time to time, implement any other method ofcomputing the maximum lawful rate under such Chapter 303, as amended, orunder other applicable law by giving notice, if required, to Borrower asprovided by applicable law now or hereafter in effect.  This Section 4(b) willcontrol all agreements between Borrower and Lender.

 

(c)           Loan CommitmentFee.  Concurrently with the closingof the Loan, and as a condition precedent thereto, Lender shall receive theLoan Commitment Fee.  The Loan CommitmentFee shall be deemed to have been earned in full by Lender, and isnon-refundable, upon the disbursement of the Initial Advance.

 

 

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(d)           Prepayment.  All amounts due and owing under the Note fromtime to time may only be prepaid in accordance with the terms of the Noteexcept at any time after 150 days after Completion.

 

(e)           Maturity Date.

 

(i)            The outstandingprincipal balance of the Note and all accrued and unpaid interest thereon shallbecome due and payable on the Maturity Date unless the same is otherwiseaccelerated in accordance with the provisions hereof or the other LoanDocuments.

 

(ii)           Subject to theprovisions of Section 13(d) hereof, in the event that theSenior Note is paid in full at any time prior to the Maturity Date of the Loan,the Indebtedness shall then be immediately due and payable regardless of thethen stated Maturity Date of the Loan.

 

**5.****            ****SECURITYFOR LOAN; GUARANTY.**

 

(a)           SecurityInstrument.  The Loanshall be secured by, among other things, the Security Instrument.

 

(b)           Other LoanDocuments.  The Loanshall be further secured and supported by the Environmental Indemnity and theother Loan Documents.

 

(c)           Guaranty.  As additional security for the Loan, theGuarantors shall execute and deliver to Lender the Guaranty.

 

**6.****            ****CONDITIONSPRECEDENT TO CLOSING OF THE LOAN**.  Prior to the funding of the Loan (unlessotherwise provided), all of the following conditions shall have been satisfied,and/or Borrower, Guarantor or Mortgagor, as applicable, shall have furnished toLender the following, all in form and substance satisfactory to Lender in itssole and absolute discretion:

 

(a)           Loan Documents.  Borrower, Guarantor and Mortgagor, asapplicable, shall have provided to Lender duly executed and, where appropriate,notarized originals of the Loan Documents, each satisfactory to Lender in itssole and absolute discretion, including the following:

 

(i)            this Agreement;

 

(ii)           the Note;

 

(iii)          the SecurityInstrument, in recordable form in the State of Nevada;

 

(iv)          the Guaranty;

 

(v)           theEnvironmental Indemnity;

 

 

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(vi)          Certificationof Organizational Documents; and

 

(vii)         such otheragreements by Borrower as may be required by other provisions of thisAgreement.

 

(b)           Third PartyAgreements.

 

(i)            Copies.  Borrower shall have provided to Lenderexecuted copies, certified by Borrower as being true, correct and complete, ofthe Senior Loan Documents and the other Third Party Agreements then in effect,if any.

 

(ii)           Intercreditorand Subordination Agreement.  Senior Lender shall have provided to Lenderan executed copy of that certain Intercreditor and Subordination Agreement byand between Senior Lender and Lender dated of even date herewith.

 

(c)           Certification.  Borrower shall have provided to Lender acertification by Borrower as of the date of this Agreement (which is the datethat the commitment of Lender to make the Loan to Borrower becomes binding onLender) of the Construction Budget and the reasonably estimated costs of theimprovements that would be capitalized by Mortgagor as real property forfederal income tax purposes consistent with past practices of the affiliates ofMortgagor.

 

(d)           FinancialStatements.  Borrowershall have provided to Lender with (i) respect to Borrower, Mortgagor, andthe Project, financial statements and other financial information (includingbut not limited to the items listed on Exhibit J after Completionof the Project and to the extent not already provided pursuant to Section 12hereof), certified by Borrower and Mortgagor as being true, correct andcomplete in all material respects, and in the form and containing the detailand supporting information as required by Lender for the underwriting for theLoan, and (ii) with respect to all Guarantors, the Estimated CollateralValue Statement, dated as of June 30, 2008.

 

(e)           InsurancePolicies.  Borrowershall have provided to Lender the original insurance policies, certified copiesthereof or certificates thereof, together with evidence of premium payments,for the insurance as more fully provided in Section 8 hereof, whichshould include Hazard and Public Liability and Worker’s Compensation Insurance.

 

(f)            Contracts.  Borrower shall have provided or will provideto Lender copies of any contracts regarding the Project entered into byMortgagor with any contractors or engineers and, if requested by Lender, copiesof contracts, if any, with any subcontractors for the construction orinstallation of the improvements made or to be made in connection with theProject.

 

 

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(g)           Title InsurancePolicy.  Lender shall have received,reviewed and approved Mortgagee’s Policy of Title Insurance described in Section 7hereof.

 

(h)           ALTA Survey.  Lender shall have received a current ALTAsurvey of the Land (the “**Survey**”)completed in accordance with Senior Lender’s requirements, satisfactory to Lenderand to the Title Insurer and certified to Senior Lender, Lender (and itssuccessors and assigns) and the Title Insurer.

 

(i)            Flood PlainCertification.  To theextent not provided on the Survey, Lender shall have received evidence that theLand is not located within any flood plain or, if the Land is located within aflood plain, Borrower has obtained and is maintaining in full force and effecta policy or policies of flood insurance pursuant to Section 8hereof.  Any such certifications shallalso be certified to Lender and its successors and assigns.

 

(j)            Appraisal.  Lender shall have received an appraisal ofthe Project prepared by a licensed appraiser acceptable to Lender, in form andsubstance required by Senior Lender, but also addressed to Lender and itssuccessors and assigns, in an amount equal to or greater than $80,900,000.

 

(k)           EnvironmentalReport.  Lender shall have received anenvironmental report covering the Land, prepared by a professional acceptableto Lender, in form and substance as required by Senior Lender, and alsocertified to Lender and its successors and assigns.

 

(l)            Certificationof Organizational Documents.  Lender shall have received a writtencertification attaching the required documents with respect to both Mortgagorand Borrower, confirming (i) that true, complete and correct copies of theorganizational documents have been attached to the certification, (ii) thatno modifications of such documents exist which have not been provided toLender, and (iii) that the provisions of Section 23 hereofhave been incorporated into the organizational documents.

 

(m)          Legal Opinion.  Lender shall have received a written legalopinion or legal opinions from Borrower’s counsel (which counsel must beacceptable to Lender) in form acceptable to Lender and its counsel, opining asto such matters as Lender may reasonably require, including an opinionregarding:  (1) due organization andvalid existence, (2) authority, (3) enforceability of the LoanDocuments, and (4) no usury.

 

(n)           UCC Searches.  Lender shall have received full UniformCommercial Code searches, performed by a search company and in jurisdictionssatisfactory to Lender, with respect to Borrower and the Mortgagor disclosingno matters objectionable to Lender.

 

 

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(o)                                 Utilities.  Lender shall have received evidence that allsewer, water, electrical, telephone and any other utility services necessary toobtain a certificate of occupancy for the Project are available at the Land inadequate supply for the use and operation of the Land and each provider ofutility services has a binding obligation to deliver the necessary services tothe completed residences.  This evidencemay include letters from the applicable utility providers.

 

(p)                                 EnvironmentalDisclosure.  In accordancewith all applicable laws, Borrower shall provide a true, correct and completecopy of any disclosure document or other instrument required by any such lawrelating to environmental matters.

 

(q)                                 No Default.  The representations and warranties of Borrowercontained in this Agreement shall be true, correct and complete in all materialrespects, except the representations in Section 16(c) whichneed be accurate only as of the effective date of such financial statements,and no Event of Default, as defined below, or circumstance or event which uponthe lapse of time, the giving of notice or both, could become an Event ofDefault shall have occurred.

 

Lender acknowledges, by its execution of thisAgreement, that all conditions listed in this Section 6 have beensatisfied to Lender’s satisfaction or waived by Lender, both as to the InitialAdvance under the Loan and any Additional Advance to be made in the future.

 

**7.****                                     ****TITLEINSURANCE**. Concurrently with the closing of the Loan, Borrower shall deliver or causeto be delivered to Lender, a Mortgagee’s Policy of Title Insurance (“**Policy**”) naming Mortgagor as fee simpleowner of the Land issued by the Title Insurer, meeting the followingrequirements: (i) with coverage amount not less than the Loan Amount; (ii) datedas of a date not earlier than the date of Closing; and (iii) the legaldescription insured under such policy shall include any easements benefitingthe Land.

 

**8.****                                     ****INSURANCE**.

 

(a)                                  InsuranceRequirements.  Borrower shall obtain and keep in fullforce and effect builder’s risk insurance (the “**Builder’sRisk Insurance Policy**”) coverage or permanent Commercial PropertyCauses of Loss — Special Form insurance coverage as appropriate,reasonably satisfactory to Lender, on the Project.  All insurance policies shall be issued bycarriers with a Best’s Insurance Reports policy holder’s rating of A- orbetter, and a financial size category of Class IX or larger.  The policies shall provide for the following,and any other coverage that Lender may from time to time deem reasonablynecessary.

 

(i)                                     Lender’scontact information in its capacity as mortgagee and/or additional insured, asappropriate:

 

 

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Behringer Harvard St. Rose REIT, LLC and itsaffiliates, successors and/or assigns

15601 Dallas Parkway, Ste. 600

Addison, Texas 75001

Attn:                    Risk Management

 

(ii)           Commercial PropertyCauses of Loss — Special Form and/or Builders Risk in the amount of 100%of the replacement cost of all structures and personal property located or tobe located on the Project. Coverage shall include ordinance and law, increasedcost of construction, and demolition costs. If the policy is written on aCO-INSURANCE basis, the policy MUST contain an AGREED AMOUNT ENDORSEMENT asevidence that the coverage is in an amount sufficient to insure the full amountof the mortgage indebtedness. Unless inconsistent with the requirements of theSenior Lender or the Commercial Tract Lender, “Behringer Harvard St. Rose REIT,LLC and its affiliates, successors and/or assigns” is to be named as the“Mortgagee” and “Loss Payee” (without contribution).

 

(iii)          Commercial GeneralLiability coverage in a minimum amount of not less than $1,000,000.00 peroccurrence and $2,000,000.00 in the aggregate, together with excess liabilitycoverage in a minimum amount of not less than $15,000,000.00.  “Behringer Harvard St. Rose REIT, LLC and itsaffiliates, successors and/or assigns” is to be named as “Additional Insured”.  Please note this coverage must be separatelyissued and provided for both (i) Mortgagor, (ii) Borrower, and (iii) Mortgagor’sgeneral contractor.

 

(iv)          Rent Loss orbusiness interruption coverage in a minimum amount of not less that theappraised rentals for a minimum of twelve (12) months.

 

(v)           Flood hazardcoverage in at least the minimum amount available, if the Project is located ina special flood hazard area (“**Flood HazardArea**”) as designated by the Federal Emergency Management Agency onits Flood Hazard Boundary Map and Flood Insurance Rate Maps, and the Departmentof Housing and Urban Development, Federal Insurance Administration, SpecialFlood Hazard Area Maps.  Unlessinconsistent with the requirements of the Senior Lender or the Commercial TractLender, “Behringer Harvard St. Rose REIT, LLC and its affiliates, successorsand/or assigns” is to be named as the “Mortgagee” and “Loss Payee” (withoutcontribution).

 

 

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(vi)          Earthquake coveragein the amounts/deductibles and in the form and substance reasonablysatisfactory to the Lender in the event the Project is located in an area witha high degree of seismic activity.

 

(vii)         Workers Compensationinsurance as required by law.

 

(viii)        Such other types andamounts of insurance with respect to the premises and the operation thereofwhich are commonly maintained in the case of the other property and buildingssimilar to the Project in nature, use, location, height, and type ofconstruction, as may from time to time be reasonably required by Lender in itscapacity as mortgage.

 

(ix)           Each policy shallprovide that it may not be canceled, reduced or terminated without at leastthirty (30) days prior written notice to the Lender.

 

(x)            Proof of insurancerequired under (ii), (iv), (v), (vi) shall be evidenced on Accord Form 28Evidence of Commercial Property Insurance. Proof of insurance required under (iii) and (vii) shall beevidenced on Accord Form 25 Certificate of Liability Insurance.

 

(xi)           The evidence ofinsurance must identify the Borrower as an Insured/Additional Insured.

 

(xii)          The Projectlocation must be referenced on the evidence of insurance.

 

(b)           Initial Policies;Renewals.  The initial policies shallbe prepaid and delivered to the Lender prior to closing, and all renewalpolicies shall be provided to Lender as evidence of such insurance.  Certificates as referenced in Section 8(a)(x) maybe substituted for actual policies.

 

(c)           Notices.  Borrower shall cause a copy of thecertificate(s) to be sent to Jill Buffington via — e-mail jbuffington@bhfunds.comor facsimile (214) 655-1610 [Phone: (469) 341-2420], with the original beingmailed to the Lender as shown above in Section 8(a)(i).

 

(d)           Notice ofCasualty.  Borrower shall give toLender immediate notice of any material loss occurring on or with respect tothe Project.

 

(e)           Settlement ofClaim.  In case of loss covered byany of such policies, Lender is authorized to adjust, collect and compromise,in its discretion, all claims thereunder if an Event of Default has occurredand is continuing at the time, subject to the rights of the Senior Lender and,prior to the Transfer Date, the Commercial Tract Lender.  In the event of any adjustment, collectionand compromise by Lender, Borrower covenants to sign upon demand, or Lender maysign or endorse on Borrower’s behalf, 

 

 

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allnecessary proofs of loss, receipts, releases and other papers required by theinsurance companies to be signed by Borrower. Borrower hereby irrevocably appoints Lender as its attorney-in-fact forthe purposes set forth in the preceding sentence, subject to the rights of theSenior Lender and, prior to the Transfer Date, the Commercial TractLender.  Subject to the rights of theSenior Lender and, prior to the Transfer Date, the Commercial Tract Lender,Lender may deduct from such insurance proceeds any reasonable expenses incurredby Lender in the collection and settlement thereof, including attorneys’ andadjustors’ fees and charges.  Nothingcontained in this Agreement shall create any responsibility or obligation ofthe Lender to collect any amounts owing on any insurance policy, to rebuild orreplace the damaged or destroyed portions of the Project or to perform anyother related act.  The Lender shall not,by the fact of approving, disapproving, accepting, preventing, obtaining orfailing to obtain any insurance, incur any liability for or with respect to theamount of insurance carried, the form or legal sufficiency of insurancecontracts, solvency of insurance companies, or payment or defense of lawsuits,and Borrower hereby expressly assumes full responsibility therefor and allliability, if any, with respect thereto.

 

(f)                                    Application ofInsurance Proceeds.  Anyinsurance proceeds received by Mortgagor or Borrower under any of such casualtypolicies shall, subject to the rights of the Senior Lender and, prior to theTransfer Date, the Commercial Tract Lender, be applied, at the option of theLender, toward pre-payment or reimbursement of the Loan and any other amountsevidenced or secured by the Loan Documents, or to the rebuilding or repairingof the Project so damaged or destroyed, as the Lender in its sole andunreviewable discretion may elect; provided, however, that Lender will allowinsurance proceeds to be used for restoration of the Project if (i) theconditions for Borrower’s use of insurance contained in the Senior LoanDocuments are satisfied (substituting Lender for Senior Lender thereunder inmaking related decisions) or (ii) so directed by the Senior Lender or, priorto the Transfer Date, the Commercial Tract Lender.  Lender’s election to apply such insuranceproceeds to the Loan and other amounts evidenced or secured by the LoanDocuments shall not relieve Borrower of the duty to rebuild or repair.

 

**9.****                                     ****EMINENTDOMAIN**.

 

(a)                                  Notice ofCondemnation.  Borrowershall give to Lender immediate notice of any taking by condemnation of anyportion of the Project or the institution of any proceedings the effect ofwhich is to achieve a taking of any portion of the Project by condemnation.

 

(b)                                 Settlement ofClaim.  In case the Project, or anypart or interest in any thereof, is taken by condemnation, then subject to therights of the Senior Lender or, prior to the Transfer Date, the CommercialTract Lender, the 

 

 

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Lenderis hereby empowered to collect and receive all compensation and awards of anykind whatsoever (referred to collectively herein as “**Condemnation Awards**”) which may be paid for any property takenor for damages to any property not taken (all of which Borrower hereby assignsto the Lender, subject to the rights of the Senior Lender and, prior to theTransfer Date, the Commercial Tract Lender in the same).  Borrower covenants to sign upon demand, orLender may sign or endorse on Borrower’s behalf, all necessary proofs of loss,receipts, releases and other papers required by the condemning authority to besigned by Borrower for such purpose. Borrower hereby irrevocably appoints Lender as its attorney-in-fact forthe purposes set forth in this Section 9.  Lender may deduct from any CondemnationAwards, any expenses reasonably incurred by Lender in the collection andsettlement thereof, including reasonable attorneys’ and adjusters’ fees andcharges.

 

(c)                                  Application ofCondemnation Awards.  AllCondemnation Awards so received shall, subject to the rights of the SeniorLender or, prior to the Transfer Date, the Commercial Tract Lender, beforthwith applied by the Lender, as it may elect in its sole and unreviewablediscretion, to the payment or reimbursement of the Loan or the other amountsevidenced or secured by the Loan Documents, or to the repair and restoration ofany property not so taken or damaged; provided, however, that Lender will allowCondemnation Awards to be used for restoration of the Project if (i) theconditions for Borrower’s use of Condemnation Awards contained in the SeniorLoan Documents are satisfied (substituting Lender for Senior Lender thereunderin making related decisions) or (ii) so directed by the Senior Lender or,prior to the Transfer Date, the Commercial Tract Lender.

 

(d)                                 ContinuingObligation to Repair.  No electionmade by the Lender under this Section 9 shall relieve Borrower ofthe duty to repair and restore.

 

(e)                                  Lender NotRequired to Act.  Nothingcontained in this Agreement shall create a responsibility or obligation ofLender to collect any amounts owing on account of any such condemnation orproceedings relating to the Project, to rebuild or replace any damaged ordestroyed property or to perform any other related act.

 

**10.****                              ****RIGHTSOF ACCESS AND INSPECTION**. Borrower shall cause Mortgagor to permit agents, representatives andemployees of Lender to inspect the Land and the installation of the Project orany part thereof during reasonable business hours upon reasonable advancenotice.  Without limiting the foregoing,Lender shall also be permitted access to the Project in order to examine, copyand audit Mortgagor’s books and records (including as part of any auditperformed pursuant to Section 12(f) hereof) and any plans,drawings, contracts, books or records relating to the Project.  Borrower shall, to the extent within itscontrol, cause any contractors or subcontractors to cooperate with Lender orits agents in connection with any inspection. Lender is under no duty to visit or observe the Project or to examineany books or 

 

 

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records.  Anysite visit, observation or examination by Lender shall be solely for thepurpose of protecting Lender’s security and preserving Lender’s rights underthe Loan Documents.  Neither Borrower,Mortgagor nor any other party is entitled to rely on any site visit,observation or testing by Lender or its agents or representatives.  Lender owes no duty of care to protectBorrower, Mortgagor or any other party against, or to inform Borrower or anyother party of, any adverse condition affecting the Project, including anydefects in the design or construction of any improvements on the Land or thepresence of any Hazardous Materials on the Land.  So long as no Event of Default has occurredand is continuing, Lender shall give Borrower and Mortgagor reasonable priornotice of its intent to enter the Project.

 

**11.****                              ****EXPENSES**.  Borrower shall pay, as and when due, allreasonable costs and expenses incurred in the procuring and making of the Loanby Lender, including without limitation, to the extent reasonable, TitleInsurer’s fees and premiums, charges for examination of title to the Land,expenses of surveys, transfer taxes and recording expenses, appraisal andappraisal review fees, fees of an inspector and fees and expenses of anyattorneys, accountants, engineers, architects, surveyors, contractors,inspectors or other consultants, professionals or independent contractorsemployed, retained or utilized by Lender in connection with the Loan.  Borrower shall cause Mortgagor to pay whendue any and all insurance premiums, taxes, assessments, water, sewer and otherutility charges, impact fees, liens and encumbrances on the Project and anyother amounts payable for the cost of improvements to the Land, provided thatBorrower and/or Mortgagor may in good faith contest any such liens, claims oramounts so long as it provides, for any filed lien, a bond in accordance withstatutory requirements or other security reasonably satisfactory toLender.  Borrower shall pay upon demandor reimburse Lender for any and all reasonable fees, costs and expensesincurred by Lender in collecting the Indebtedness after an Event of Defaultincluding reasonable attorneys’ fees. All such amounts shall be paid to Lender or at Lender’s direction tosuch other person to whom payments are due or Lender may, at its option, paysuch amounts and all sums paid shall be deemed a portion of the Indebtednessand shall bear interest at the Default Interest Rate.

 

**12.****                              ****FINANCIALREPORTS, PROPERTY REPORTS AND ANNUAL BUDGET**.  The parent company of Lender is a real estatefund that issues securities, maintains U.S. GAAP audited financial statementsand/or is publicly registered with the United States Securities and ExchangeCommission (“**SEC**”).  As a result, such parent company is subjectto GAAP financial statement requirements and other reporting requirements.These requirements include but are not limited to quarterly and annualfinancial reporting (including for public companies on Form 10-Q and Form 10-Kand reporting under Rule 3-14 of Regulation S-X, which requires the filingof pro forma financial statements of acquired properties).  In addition, certain accounting requirementsmay dictate that Lender report Borrower, Mortgagor and/or the Project as asubsidiary of Lender.  Therefore,Borrower agrees to provide Lender with all information that Borrower or its Affiliateshave in their possession and Borrower will use all commercially reasonableefforts to obtain such information not in its possession as Lender reasonablyrequires in order to prepare, audit and/or review financial statements of theProject, Mortgagor and Borrower for the applicable reporting periods.

 

(a)           Borrower agrees thatall accounting for the Project will be conducted by Borrower and/or theMortgagor and also by Lender.  Borroweragrees to provide Lender with copies of all Accounting Records (other thanleases, 

 

 

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whichBorrower and/or the Mortgagor may make available at the Project rather thancopying) on a monthly basis in order to enable Lender to prepare and maintainfinancial statements on Borrower, Mortgagor and/or the Project in accordancewith accounting principles generally accepted in the United States of America.

 

(b)           Borrower agrees toprovide Accounting Records by the 10th of the month for the preceding month.

 

(c)           Borrower agrees toallow Lender and Lender’s external independent accountants access to originalAccounting Records if needed in the process of their quarterly reviews andvarious audit processes.

 

(d)           Borrower agrees tocooperate with any inquiries or interviews by Lender or its externalindependent accountants as may be necessary in relation to Lender’s or itsAffiliates’ compliance with the Sarbanes-Oxley Act of 2002.

 

(e)           In addition,Borrower shall furnish to Lender:

 

(i)            within 30 daysafter the end of each fiscal year of Mortgagor, and at any other time uponLender’s request, a statement that identifies all owners of any interest inMortgagor and the interest held by each, if Mortgagor is a corporation, allofficers and directors of Mortgagor, and if Mortgagor is a limited liabilitycompany, all members and managers (whether members or not);

 

(ii)           within 10 daysafter the end of each month, a monthly property management report for theProject, showing the number of inquiries made and rental applications receivedfrom tenants or prospective tenants, deposits received from tenants and anyother information reasonably requested by Lender;

 

(iii)          within 10 daysfollowing the end of each month, a monthly statement of income and expense forthe Project; and

 

(iv)          beginning sixty (60)days prior to the first occupancy of the Project and for each succeedingcalendar year, not later than ninety (90) days prior to the commencement ofsuch calendar year, an annual budget which sets forth, in sufficient detail,Borrower’s projection of gross receipts and expenses for such period (the “**Annual Budget**”).  Each Annual Budget shall be for a calendaryear except that the Annual Budgets for the year of first occupancy of theProject shall only cover the remainder of the then-current year.

 

(f)            If Borrower failsto provide in a timely manner the Accounting Records, statements, schedules andreports required by this Section 12, Lender shall have the right tohave Mortgagor’s and Borrower’s books and records 

 

 

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auditedor to perform any other procedure reasonably requested by Lender, at Borrower’sexpense, by independent certified public accountants selected by Lender inorder to obtain such statements, schedules and reports, and all related costsand expenses of Lender shall become immediately due and payable and shallbecome an additional part of the Indebtedness as provided in Section 21.

 

(g)           If Lender acquiresthe Project through foreclosure, Borrower shall deliver, or cause to bedelivered, to Lender upon written demand all books and records relating to theProject or its operation. Otherwise, during the term of the Loan, to the extentthat copies of such books and records have not been provided pursuant to theprovisions of this Section 12 set forth above, Borrower willprovide Lender with all cost records necessary for Lender to perform itsaccounting procedures including, but not limited to, balance sheets, incomestatements, trial balance activity reports, general ledger detail reports, cashreceipts journal, check register or cash disbursements journal and copies ofchecks and vendor invoices for all invoices paid.   Borrower agreesto make available to Lender for examination and copying any other books andrecords upon Lender’s written demand.

 

(h)           Borrower authorizesLender to obtain one (1) credit report per calendar year; provided,however, that Lender may obtain a credit report on Borrower, Mortgagor andGuarantors at any time, even if a credit report has been obtained in the samecalendar year, if an Event of Default has occurred.

 

**13.****                              ****GENERALCOVENANTS OF BORROWER**. Until the full and final payment of the Loan, unless Lender waivescompliance in writing, Borrower hereby covenants and agrees as follows:

 

(a)           Commencement andCompletion of Project.  Borrowershall or shall cause Mortgagor to prosecute the construction and installationwith diligence so that the construction and Completion of the Project (otherthan payment of claims that are being contested in accordance with the LoanDocuments) shall have occurred by the completion deadline set forth in theSenior Loan Documents.

 

(b)           Lender Approval.  No changes to the Construction Budget or thecompletion date required by the Senior Loan Documents shall be permittedwithout Lender’s written consent, with the exception of (i) completiondate extensions due to force majeure and (ii) reallocation of amountsamong the line items of the Construction Budget; provided that Borrower shallprovide Lender with notice of any changes in connection with (i) and (ii) aboveor any change orders modifying the Plans as provided below.  Lender shall have the right to approve allcontractors (except General Contractor) and all construction contracts between 

 

 

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Mortgagorand such contractors, with the exception of construction contracts that do notexceed $100,000.00.  No changes to thePlans shall be permitted without Lender’s written consent, with the exceptionof (i) changes required by governmental authorities or Senior Lender and (ii) otherchanges that, individually, do not increase or decrease Project costs by morethan $100,000 and, in the aggregate, do not increase or decrease Project costsby more than $300,000.  Lender shall haveten (10) business days to provide any approval required under this Section 13(b) butif Lender does not provide written notice that it does not approve within theten (10) business days, then the action shall be deemed approved.

 

(c)           Operation andMaintenance of Project.  In additionto the terms, conditions and provisions set forth in the other Loan Documents:

 

(i)            Payment ofLawful Claims.  Borrower shall pay ordischarge all lawful claims, including taxes, assessments and governmentalcharges or levies imposed upon Borrower or its income or profits or upon anyproperty belonging to Borrower prior to the date upon which penalties attachthereto; provided that Borrower may in good faith contest any such taxes,assessments, charges or levies so long as it provides, for any filed lien, abond in accordance with statutory requirements or other security reasonablysatisfactory to Lender.  Without limitingthe generality of the foregoing, Borrower shall, or shall cause Mortgagor to,pay (a) all taxes and recording expenses, including stamp taxes, if any,relating to all documents and instruments securing the Loan, (b) the feesand commissions (if any) lawfully due to brokers engaged by Borrower or itsAffiliates in connection with this transaction (and Borrower shall hold Lenderharmless from all such claims, whether or not lawfully due), and (c) thefees and expenses of Lender’s counsel relating to Lender’s consultation withsuch counsel in connection with the negotiation, documentation and closing ofthe Loan and any subsequent modifications of the Loan.

 

(ii)           No Amendments.  Borrower shall not, nor shall it permitMortgagor to, without Lender’s prior written consent, enter into any amendmentsor modifications of (a) if Borrower or Mortgagor is a corporation,Borrower’s and Mortgagor’s by-laws and articles of incorporation, (b) ifBorrower or Mortgagor is a limited liability company, such entity’s operatingagreement or articles of organization, (c) if Borrower or Mortgagor is alimited partnership, such entity’s partnership agreement or partnershipcertificate, (d) the construction contract between Mortgagor and GeneralContractor except for change orders (i) implementing changes required bygovernmental authorities or Senior Lender and (ii) other changes that,individually, do not increase or decrease Project costs by more than $100,000and, in the aggregate, do not 

 

 

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increaseor decrease Project costs by more than $300,000, (e) the ManagementAgreement, or (f) the Senior Loan Documents.

 

(iii)          Maintenance andRepair of Project.  After completionof the Project, Borrower shall cause Mortgagor to (a) maintain theProject, including the parking and landscaping portions thereof, in goodcondition and repair, (b) promptly make all necessary structural andnon-structural repairs to the Project, (c) not demolish, alter, remove oradd to any improvements on the Land, excepting (i) the repair andrestoration of improvements following damage thereto as required by thisAgreement, and (ii) as otherwise required by any applicable law, rule orregulations, and (d) not erect any new buildings, structures or buildingadditions on the Land, without the prior written consent of Lender.  Borrower shall pay when due all claims forlabor performed and materials furnished therefor in connection with anyimprovements or construction activities on the Land; provided that Borrower mayin good faith contest any liens, claims or amounts so long as it provides, forany filed lien, a bond in accordance with statutory requirements or othersecurity reasonably satisfactory to Lender.

 

(d)           Restricted Saleand Encumbrance of Project and of Borrower Interests; Other Indebtedness.  Borrower shall not engage in any Sale orEncumbrance without the prior written consent of Lender (which may be withheldby Lender in Lender’s sole and absolute discretion).  Borrower will not issue any additional EquityInterests in Borrower, except to Lender or Lender’s designee.  In addition, Borrower shall not permitMortgagor to issue any additional Equity Interests in Mortgagor.  In addition, Borrower shall not, nor shall itpermit Mortgagor to, incur any indebtedness, whether secured or unsecured,other than (i) the Senior Loan and this Loan, (ii) obligations underinterest rate hedging arrangements related to the Senior Loan and (iii) tradeand operational indebtedness incurred in the ordinary course of business(including construction and operation of the Project) or for its administrativefunctions.  Notwithstanding theforegoing, Lender’s consent shall not be required for:

 

(i)            the grant of aleasehold interest in an individual dwelling unit for a term of two years orless not containing an option to purchase and otherwise in compliance with Section 13(f) hereof;

 

(ii)           a Sale of obsolete,worn out or damaged property or fixtures that is contemporaneously replaced byitems of equal or better function and quality, which are free of liens,encumbrances and security interests other than Permitted Exceptions, thosecreated by the Loan Documents, the Senior Loan Documents or the Commercial Deedof Trust or those otherwise consented to by Lender;

 

 

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(iii)          a Sale that resultsfrom theft, condemnation or other involuntary conversion;

 

(iv)          the Sale (includingthrough consumption) of personal property in the ordinary course of businessthat is contemporaneously replaced by items of equal or better function andquality;

 

(v)           the grant of aneasement if, before the grant, Lender determines (which determination must bemade reasonably) that the easement will not materially affect the operation orvalue of the Project and Borrower pays to Lender, upon demand, all reasonablecosts and expenses incurred by Lender in connection with reviewing Borrower’srequest (it being understood that Lender has approved the REA);

 

(vi)          the creation of (1) alien for taxes, assessments or other governmental charges or levies that arenot then due or that are being contested in good faith and in accordance withapplicable statutory procedures or (2) a mechanic’s lien against theProject which is bonded off, released of record or otherwise remedied to Lender’sreasonable satisfaction within 30 days of the date of creation; and

 

(vii)         transfer of theCommercial Tract to the Commercial Tract Borrower on or after the TransferDate.

 

Nothing in this Section 13(d) prohibitsMortgagor from providing the Commercial Deed of Trust.

 

(e)           General Indemnity.  Borrower shall, at Borrower’s expense,protect, defend, indemnify, save and hold Lender and each of its members andits respective members, stockholders, directors, officers, employees and agents(collectively the “**Indemnified Parties**”)harmless against any and all claims, demands, losses, expenses (including courtcosts and reasonable attorney’s fees and expenses), damages and causes ofaction (whether legal or equitable in nature) asserted by any person or entityarising out of, caused by or relating to the Project and the Lender’s exerciseof its rights under the Loan Documents upon an Event of Default, except to theextent the same arises out of, is caused by or results from the grossnegligence or willful misconduct of an Indemnified Party.  Borrower shall pay to Lender upon demand allclaims, judgments, damages, losses and expenses (including court costs andreasonable attorneys’ fees and expenses) incurred by Lender as a result of anylegal or other action arising out of the aforesaid matters.  Borrower acknowledges that the IndemnifiedParties may defend any matter covered by the above indemnification by counsel ofthe relevant Indemnified Party’s choice, and the costs of such defense(including reasonable attorney’s fees) are part of 

 

 

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thecosts covered by the indemnity.  Theforegoing indemnification shall survive repayment of the Loan.

 

(f)            Leases.

 

(i)            ResidentialLease Requirements.  Mortgagor shallhave the right, and Borrower may permit Mortgagor to, enter into residentialLeases without Lender’s prior written consent, so long as all Leases forresidential dwelling units (A) are on forms approved by Lender, (B) shallnot include options to purchase, and (C) shall be for initial terms of atleast six months and not more than two years (with the exception of Leases forup to 3% of the units in the Project, which may have terms of less than sixmonths).

 

(ii)           Commercial LeaseRequirements.  Mortgagor shall not,nor shall Borrower permit Mortgagor to, enter into any non-residential Leaseswithout Lender’s prior written consent in each instance.  Mortgagor shall not, nor shall Borrowerpermit Mortgagor to, modify the terms of, or extend or terminate, any Lease fornon-residential use (including any Lease in existence on the date of thisAgreement) without the prior written consent of Lender.  Borrower shall, without request by Lender,deliver a copy of each executed non-residential Lease to Lender promptly aftersuch Lease is signed.

 

(iii)          Advance Rent.  Mortgagor shall not, nor shall Borrowerpermit Mortgagor to, receive or accept rent under any Lease (whether residentialor non-residential) for more than two months in advance.

 

(iv)          Performance ofObligations.  Borrower shall causeMortgagor to pay, perform and discharge, as and when payment, performance anddischarge are due, all obligations of Mortgagor as landlord under all Leases.

 

(v)           Security Interest.  Except for the assignment to Lender or SeniorLender or, prior to the Transfer Date, the Commercial Tract Lender, Borrowershall not permit Mortgagor to further assign, pledge, transfer or otherwiseencumber the Leases or the rents under the Leases.

 

(vi)          Defense; Pursuitof Remedies.  Borrower shall or shallcause Mortgagor to, at its sole cost and expense, appear in and defend anyaction or proceeding arising from or connected with any of the Leases or any obligationor liability of Mortgagor as landlord thereunder.  Borrower shall, or shall cause Mortgagor to,use commercially reasonable efforts to pursue all remedies, including 

 

 

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claimsfor damages available at law or in equity, against any tenant under a Lease whodefaults in the performance of its obligations under the Lease.

 

(g)           Notices.  Borrower shall promptly notify Lender inwriting of any litigation affecting (a) Borrower, Mortgagor and anygeneral partner, managing member or controlling shareholder of Borrower orMortgagor (excluding a general partner, managing member or controllingshareholder which is a natural person or trust), or (b) the Project, tothe extent the same may result in a material adverse change in (i) thefinancial condition of any of the foregoing parties, (ii) Borrower’sability to timely perform any of its obligations under any of the LoanDocuments or Mortgagor’s ability to timely perform any of its obligations underany of the Senior Loan Documents or (iii) the physical condition oroperation of the Project.

 

(h)           Development.  If after the date of this Agreement, Borroweror Mortgagor intends to engage a developer of the Project, Lender shall havethe right to approve such new developer and the written development agreementfor the Project.

 

(i)            Management.  The Project shall be managed at all times byManager (or another professional residential rental property managersatisfactory to Lender under a contract approved by Lender).  At the time such property managementagreement is executed, at the request of Lender, Mortgagor and the Managershall enter into a Subordination of Management Agreement in the form attachedas Exhibit K or another form reasonably acceptable to Lender.  Lender hereby accepts the Manager as theinitial property manager.  If Borrower orMortgagor intends to change the management of the Project, Lender shall havethe right to approve such new property manager and the written contract for themanagement of the Project and require that Mortgagor and such new propertymanager enter into a Subordination of Management Agreement on the form attachedas Exhibit K or on another form reasonably acceptable to Lender.

 

(j)            Senior Loan.  Borrower shall, or shall cause Mortgagor to,fully and timely pay all amounts owing under the Senior Loan Documents andtimely and fully perform all of Mortgagor’s covenants and agreements containedtherein.  Borrower shall provide Lenderwith copies of all notices (except routine notices which would not include anynotice related to any failure to comply with any terms of the Senior LoanDocuments or regarding any event of default under the Senior Loan Documents)given or received by Mortgagor under or pursuant to the Senior Loan Documents,promptly upon delivery or receipt as the case may be.  Without limiting the Lender’s right todeclare an Event of Default on account of a failure to comply with the termsand provisions of the Senior Loan Documents, if Borrower or Mortgagor fail toso pay or perform such obligations, and if such failure either (i) becomesan Event of Default hereunder or (ii) prior 

 

 

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tobecoming an Event of Default continues for twenty (20) days after Lender giveswritten notice to Borrower to cure, the Lender may pay or perform the samepursuant to Section 18(b) hereof.  Notwithstanding the foregoing, (i) Lendershall have no obligation whatsoever to pay any of the amounts evidenced orsecured by, or to perform any of the covenants or obligations imposed by, anySenior Loan Documents, and (ii) any such payment by Lender shall not cureMortgagor’s default hereunder or under the Senior Loan Documents but shall onlyprotect Lender’s interest in the Project. Borrower shall not, nor shall it permit Mortgagor to, amend or modifyany of the Senior Loan Documents without the prior written consent of Lender.

 

(k)           Principal Placeof Business; Choice of Law.  Borrowershall not change its principal place of business or, if Borrower has more thanone place of business, its chief executive office, from its address set forthin the first paragraph of this Agreement. In addition, Borrower shall not make an election under the UniformCommercial Code to treat, as the governing law for perfection of uncertificatedsecurities, the law of any jurisdiction other than the jurisdiction of itsformation.  Lender agrees not tounreasonably withhold its consent to any change in Borrower’s principal placeof business or the governing law with respect to uncertificated securities solong as (1) Borrower and any other party reasonably requested by Lenderexecutes all documents and instruments reasonably deemed necessary by Lender toperfect the security interests granted pursuant to the Loan Documents, (2) Borrowerpays all of the Lender’s reasonable costs and expenses of perfecting suchsecurity interests and (3) if requested by Lender, Borrower delivers toLender an opinion from counsel reasonably satisfactory to Lender opining as tothe continued perfection of such security interest.

 

(l)            Compliance withGovernmental Prohibitions.  Noportion of the Loan proceeds will be used, disbursed or distributed by Borrowerfor any purpose, or to any person, in violation of any Law (as defined in Section 16(i)) including, without limitation, any of the Terrorism Laws (as definedin Section 16 (i)).  Borrowershall provide Lender with immediate written notice (a) of any failure ofany of the representations and warranties set forth in Section 16(i) ofthis Agreement to be true, correct and complete in all material respects at anytime, or (b) if Borrower obtains knowledge that Borrower or any holder atany time of any direct or indirect equitable, legal or beneficial interest inBorrower (other than Lender or an affiliate or designee of Lender) is thesubject of any of the Terrorism Laws. Borrower shall immediately and diligently take, or cause to beimmediately and diligently taken, all necessary action to comply with allTerrorism Laws and to cause the representations and warranties set forth in Section 16(i) tobe true, correct and complete in all material respects.

 

 

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**14.****                              ****FURTHERASSURANCES**.  Borrowershall, from time to time, upon Lender’s request, at Borrower’s sole cost andexpense, execute, deliver, record and furnish such documents and do such otheracts as Lender may reasonably deem necessary or desirable to (i) perfectand maintain valid liens upon the security contemplated by the Loan Documents, (ii) correctany errors of a typographical or other manifest nature which may be containedin any of the Loan Documents, (iii) evidence Borrower’s compliance withthe Loan Documents, and (iv) consummate fully and carry out the intent ofthe transactions contemplated under this Agreement or the Loan Documents.

 

**15.****                              ****APPRAISALS**.  Lender has the right to obtain a newappraisal or update an existing appraisal of the Project at any time while theLoan or any portion thereof remains outstanding (a) when, in Lender’sreasonable judgment, such an appraisal is warranted as a result of Lender’sinternal evaluation of the Loan, and/or (b) to comply with statutes,rules, regulations or directives of governmental agencies having jurisdictionover Lender.  Borrower shall pay, upondemand, all reasonable appraisers’ fees and related expenses incurred by Lenderfrom time to time in obtaining such appraisal reports; provided, however, thatBorrower shall not be required to pay for a re-appraisal more than once everythree years unless an Event of Default has occurred and is continuing.

 

**16.****                              ****GENERALREPRESENTATIONS AND WARRANTIES OF BORROWER**.  Borrower represents and warrants to Lender,which representations and warranties shall survive the termination of thisAgreement, the repayment of the Loan, any investigations, inspections orinquiries made by Lender or any of Lender’s representatives, and anydisbursements made by Lender hereunder, as follows:

 

(a)                                  Organization;Corporate Powers; Authorization of Borrowing.

 

(i)                                     Organization.  Borrower’s ownership structure set forth on Exhibit Fattached hereto is a true and correct depiction of the Equity Interests inBorrower and Mortgagor, and each entity set forth on Exhibit F isduly organized and is validly existing and in good standing under the laws ofthe state of its organization, and Mortgagor is qualified to do business in thejurisdiction where the Land is located.

 

(ii)                                  Power andAuthority.  Borrowerhas the full limited liability company power and authority to execute the LoanDocuments and to undertake and consummate the transactions contemplated herebyand thereby, and to pay, perform and observe the conditions, covenants,agreements and obligations herein and therein contained; and the Loan Documentshave been duly and validly executed by Borrower and constitute the legal, validand binding obligations of Borrower and are enforceable against Borrower inaccordance with their respective terms, except as such enforcement may bequalified or limited by bankruptcy, insolvency or other similar laws affectingcreditors’ rights generally and general principles of equity.

 

 

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(iii)                               Not a ForeignPerson.  Neither Borrower, nor anyentity that is a holder of an Equity Interest in Borrower, is organized underthe laws of any jurisdiction other than the United States or one of the statesthereof.

 

(iv)                              No DefaultsUnder Existing Agreements.  Theconsummation of the transactions contemplated hereby and the performance byBorrower of its obligations under the Loan Documents will not result in anybreach of, or constitute a default under, the Senior Loan Documents, any othermaterial Third Party Agreements or any mortgage, deed of trust, bank loan orsecurity agreement, or other material instrument to which Borrower or Mortgagorare a party or by which the Land or Borrower or Mortgagor are bound.

 

(v)                                 True andCorrect Copies of Documents.  All due diligence documents required to bedelivered by Borrower to Lender hereunder (including those due diligencedocuments referred to in Section 6 hereof) are true, correct andcomplete copies thereof and the same have not been amended or modified exceptas expressly disclosed therein.

 

(vi)                              OutstandingDebt to Lender.  During theterm of the Loan, Borrower will not borrow funds from Lender or an Affiliate ofLender other than the Loan and the loan made pursuant to the Junior MezzanineLoan Agreement and as contemplated by the partnership agreement of Principal.

 

(b)                                 Title toProperty; Matters Affecting Property.

 

(i)                                     Title toProperty.  Mortgagorhas good and marketable fee simple title to the Land, subject only to theSenior Loan Documents, the Loan Documents and the Permitted Exceptions, andgood, marketable and freely alienable title to all personal property located onthe Land, subject only to the Senior Loan Documents, the Loan Documents and thePermitted Exceptions; Borrower will cause Mortgagor to protect or cause to beprotected the title to the Project, and Borrower will forever warrant anddefend the same against any other claims of any persons or parties whomsoever,subject to the Senior Loan Documents, the Loan Documents and the PermittedExceptions.

 

(ii)                                  Mortgagor’sEquity Interests.  Borrowerowns and will own one hundred percent (100%) of the Equity Interests inMortgagor, and Borrower has not transferred, conveyed, pledged or encumbered(and will not transfer, convey, pledge or encumber) such interests except toLender.

 

 

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(iii)                               No Actions.  There are no actions, suits or proceedings atlaw or in equity (including condemnation or eminent domain proceedings)currently pending, or to the knowledge of Borrower threatened, againstMortgagor, Borrower, or the Project or, to the knowledge of Borrower, involvingthe validity or enforceability of the Senior Loan Documents or the LoanDocuments or the priority of the liens granted thereunder, by or before any governmentalauthority having or exercising jurisdiction over the Project.  Borrower will promptly notify Lender of anysuch future actions, suits or proceedings. Except as provided in Exhibit G, to Borrower’s knowledge,neither Borrower, nor Mortgagor, nor the Project is in default with respect to,or in violation of, any order, writ, injunction, decree or demand of any courtor any governmental authority having or exercising jurisdiction over theProject.

 

(iv)                              No ContractsGiving Rise to Liens.  NeitherBorrower, nor Mortgagor, has made any contract or arrangement of any kind, thatdoes or could give rise to a lien on the Project, except for (i) theSenior Loan Documents, the Loan Documents and the Permitted Exceptions and (ii) contractsrelated to design and construction of the Project which have been provided toLender.  Borrower has not made anycontract or arrangement of any kind that does or could give rise to a lien orencumbrance on any of the Equity Interests in Mortgagor.

 

(v)                                 No Construction.  Prior to the disbursement of the Loan and therecordation of the Security Instrument, no construction whatsoever has beenperformed on the Land by Borrower or its Affiliates.

 

(vi)                              Compliance withProperty Agreements.  Except asprovided in Exhibit H, the Project when constructed will in allrespects conform to and comply with all covenants, conditions, restrictions,reservations, regulatory agreements, conditional or special use permits andzoning ordinances affecting the Project whether or not recorded against theProject.

 

(vii)                           Leases.  Except as provided in Exhibit I,there are no Leases of the Land in effect as of the closing of the Loan.

 

(viii)                        Tax Treatment.  Borrower and Mortgagor are (and at all timesduring the term of the Loan will be) disregarded as entities separate fromPrincipal within the meaning of Treasury Regulation §301.7701-3(b)(i)(2).  Borrower and Mortgagor have not elected (andat all times during the term of the Loan will not elect) to be classified as anassociation taxable as a corporation within the meaning of Treasury Regulation§301.7701-3(c).

 

 

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(ix)                                Permits.  All Permits required for the operation andconstruction of the Project are in effect or Borrower expects them to beavailable as required for construction of the Project in accordance with theschedule required by the Senior Loan Documents. Once issued, all such Permits will remain in effect and the Project andits contemplated use and operation will comply therewith.  All discretionary approvals for theconstruction of the Project in accordance with the Plans have been obtained orwill be obtained prior to commencement of construction of the Project.

 

(x)                                   HazardousSubstances.  So long asMortgagor owns the Project, Borrower shall cause Mortgagor to (a) keep theProject free from Hazardous Substances, except those in de minimis amountsancillary to the Project activities that are used in compliance with allenvironmental laws, (b) promptly notify Lender if Borrower or Mortgagor becomesaware that any Hazardous Substance is on or near the Land or the Project inviolation of any environmental laws or if the Project otherwise is in violationof any environmental laws, and (c) remove such Hazardous Substancescontamination that violates any environmental laws and/or cure such violationsas required by law.

 

(c)                                  FinancialStatements.  Thefinancial statements heretofore delivered to Lender by Borrower, Mortgagor andPrincipal are true and correct in all material respects, have been prepared inaccordance with sound accounting practices, and fairly present the financialcondition(s) of the person(s) referred to therein as of the date(s) indicated;no materially adverse change has occurred in the financial condition(s) reflectedin such financial statements since the date(s) shown thereon and noadditional borrowings or liabilities have been made or incurred by such person(s) sincethe date(s) thereof other than the borrowing contemplated hereby, theSenior Loan, or other borrowings disclosed in writing to and approved byLender.  The Estimated Collateral ValueStatement, dated as of June 30, 2008, for each Guarantor accurately liststhe Available Assets of the Guarantor (as defined in the Guaranty) as of suchdate and the value of such Available Assets calculated on the basis provided inthe notes thereto.

 

(d)                                 BudgetProjections.  Borrower’sand/or Mortgagor’s budget projections indicate that monthly income from Projectoperations will be sufficient to pay the combined monthly accrual of intereston the Senior Loan and the Loan by the Maturity Date and the projections arereasonable in Borrower’s opinion and have been prepared in a manner consistentwith the past practices of affiliates of Borrower.

 

(e)                                  IntentionallyDeleted.

 

 

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(f)                                    No Loan Broker.  Borrower has not dealt with any person, firmor corporation who is or may be entitled to any finder’s fee, brokeragecommission, loan commission or other sum in connection with the execution of thisAgreement or the making of the Loan by Lender to Borrower.  Borrower does hereby indemnify and agree todefend and hold Lender harmless from and against any and all loss, liability orexpense, including court costs and reasonable attorneys’ fees and expenses,which Lender may suffer or sustain should such warranty or representation proveinaccurate in whole or in part.

 

(g)                                 No Default.  There are no defaults under any of the SeniorLoan Documents or the Loan Documents on the part of Borrower, Mortgagor or, tothe knowledge of Borrower, the other parties signatory thereto, and no eventhas occurred and is continuing which, with the giving of notice or the passageof time, or both, would constitute a default under any thereof.

 

(h)                                 Solvency.  As of the date hereof, Borrower and Mortgagorare each solvent and able to pay their debts as the same shall become due andpayable.

 

(i)                                     Violations ofGovernmental Prohibitions. Neither the making of the Loan, nor the receipt of Loan proceeds byBorrower, violates any federal, state, county, municipal and other governmentaland quasi-governmental statutes, laws, rules, orders, regulations, ordinances,judgments or decrees (collectively, “**Law**”)applicable to Borrower, including, without limitation, any of the TerrorismLaws.  Neither the making of the Loan,nor the receipt of Loan proceeds by Borrower or Mortgagor, violates any of theTerrorism Laws applicable thereto.  ToBorrower’s best knowledge, no holder of any direct or indirect equitable, legalor beneficial interest in Borrower or Principal (other than Lender or anaffiliate or designee of Lender) is the subject of any of the TerrorismLaws.  No portion of the Loan proceedswill be used, disbursed or distributed by Borrower for any purpose, or to anyperson, directly or indirectly, in violation of any Law including, withoutlimitation, any of the Terrorism Laws.  “**Terrorism Laws**” means Executive Order 13224issued by the President of the United States of America, the TerrorismSanctions Regulations (Title 31 Part 595 of the U.S. Code of FederalRegulations), the Terrorism List Governments Sanctions Regulations (Title 31 Part 596of the U.S. Code of Federal Regulations), and the Foreign TerroristOrganizations Sanctions Regulations (Title 31 Part 597 of the U.S. Code ofFederal Regulations), and all other present and future federal, state and locallaws, ordinances, regulations, policies and any other requirements of anygovernmental agency (including, without limitation, the United StatesDepartment of the Treasury Office of Foreign Assets Control) addressing,relating to, or attempting to eliminate, terrorist acts and acts of war, eachas hereafter supplemented, amended or modified from time to time, and thepresent 

 

 

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andfuture rules, regulations and guidance documents promulgated under any of theforegoing.

 

**17.****                              ****EVENTOF DEFAULT**.  Borrowershall be in default under this Agreement upon the occurrence of any of thefollowing events (hereinafter referred to as an “Event of Default”):

 

(a)                                  Non-Payment.  The failure of Borrower to pay when due anyamount required by the Note, this Agreement or any other Loan Documents whichcontinues, in the case of monthly interest payments required under the Note,for twenty (20) days or, in the case of other sums payable under the Note, thisAgreement or the Loan Documents, for 10 days following written demand forpayment on Borrower by Lender.

 

(b)                                 Insurance.  The failure of Borrower to keep in force anyinsurance policy required hereunder or to deliver evidence of its renewal toLender and the continuation of such failure for 10 days following writtendemand on Borrower by Lender.

 

(c)                                  Special PurposeEntity Covenants.  The failureof Borrower to comply with the provisions of Section 23.

 

(d)                                 Borrower.  The liquidation, dissolution or terminationof Borrower.

 

(e)                                  Guaranty.  The Guaranty for any reason shall cease to bein full force and effect, or be declared null and void or unenforceable inwhole or in part; or the validity or enforceability of the Guaranty shall bechallenged or denied by any Guarantor. Notwithstanding the foregoing, a challenge or denial of the validity orenforceability of the Guaranty will not be considered an Event of Default if,excluding the Available Assets of the challenging guarantor, the collectiveaggregate value of the Available Assets of the Guarantor (defined collectivelyin the Guaranty) does not fall below $80,000,000.00.

 

(f)                                    Construction.  The cessation of the construction of any orall of the Project after work thereon has commenced for a period of more than30 consecutive days****without thewritten consent of Lender, except for any cessation due to events of forcemajeure as expressly permitted by the documents evidencing or securing theSenior Loan, except as otherwise provided in Section 13(b) ofthe Loan Agreement.

 

(g)                                 Fraud orMaterial Misrepresentation  Fraud or material misrepresentation byBorrower, Mortgagor or any of their partners, officers, directors or managers,or by any Guarantor in connection with (i) the application for or creationof the Indebtedness, (ii) any financial statement, rent roll, or otherreport or information provided to Lender during the term of the Indebtedness,or (iii) any request for Lender’s consent to any proposed action.

 

 

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(h)                                 Sale,Encumbrance or Other Indebtedness.  The taking of any action by Borrower,Mortgagor, or any other person contrary to the provisions of Section 13(d) ofthis Agreement.

 

(i)                                     Reports andDocuments.  The failureof Borrower to deliver any notice, report, assignment, certificate, instrumentor other document which Borrower is required to deliver to Lender under any ofthe Loan Documents within the twenty (20) days following written demand byLender therefor.

 

(j)                                     Other Breachesunder this Agreement. The failure by Borrower to perform any of itsobligations under this Agreement, as and when required, except as specificallyset forth otherwise herein, which continues for a period of 30 days afternotice of such failure by Lender to Borrower, if such failure is not reasonablysusceptible of cure within such 30 day period, and if Borrower promptlycommences such cure within such 30 day period and diligently prosecutes thesame to completion, then the cure period shall be extended for such period oftime as may be reasonably necessary to effect a cure but in no event shall suchperiod exceed 90 days.

 

(k)                                  Other BreachesUnder Other Loan Documents.  The failure of Borrower or any Guarantor,indemnitor or obligor to perform and observe any covenant, obligation,agreement or undertaking under any Loan Document other than this Agreementfollowing such notice and/or grace period, if any, as may be provided thereinfor curing such failure.

 

(l)                                     Senior LoanDocuments.  The failureof Borrower or Mortgagor or any Guarantor to perform and observe any covenant,obligation, agreement or undertaking under any Senior Loan Documents followingany notice or cure period, if any, as may be provided therein for curing suchfailure.

 

(m)                               Judgments.

 

(i)                                     An order,judgment or decree shall be entered by any court of competent jurisdictionappointing a custodian, receiver, trustee, or liquidator of Borrower or of allor any substantial part of any of Borrower’s assets; or

 

(ii)                                  The failure ofBorrower to pay any money judgment against it at least twenty (20) days priorto the date on which the assets of the Borrower may be sold to satisfy suchjudgment; or

 

(iii)                               The failure tohave discharged within a period of twenty (20) days after the commencementthereof any attachment, sequestration, or similar proceedings against any ofthe assets of Borrower.

 

(n)                                 BankruptcyProceedings.

 

 

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(i)                                     If Borrower orMortgagor shall become insolvent, make a transfer in fraud of, or a generalassignment for the benefit of, creditors, or admit in writing its inability,generally to pay its debts as they become due; or

 

(ii)                                  If Borrower orMortgagor shall have a receiver, custodian, liquidator or trustee appointed forall or substantially all of its assets or for the Project in any proceedingbrought by Borrower, Mortgagor or the Project, or any such receiver or trusteeis appointed in any proceeding brought against Borrower, Mortgagor or theProject and such appointment is not promptly contested and is not dismissed ordischarged within ninety (90) days after such appointment; or

 

(iii)                               If Borrower orMortgagor shall file a petition under Title 11 of the United States Code asamended or under any similar Federal or state law or statute; or

 

(iv)                              If Borrower orMortgagor shall have a petition filed against it commencing an involuntary caseunder any present or future Federal or state bankruptcy or similar law and suchpetition is not dismissed or discharged within ninety (90) days after thefiling thereof; or

 

(v)                                 If Borrower orMortgagor shall request any composition, rearrangement, liquidation, extension,reorganization or other relief as a debtor under any present or future Federalor state bankruptcy or similar law now or hereafter existing.

 

The proceedings or events set forth inparagraph (n) are collectively referred to as “**BankruptcyProceedings**”.

 

**18.****                              ****REMEDIES**.

 

(a)                                  Actions uponEvent of Default.  Upon theoccurrence and during the continuance of an Event of Default beyond anyapplicable grace and cure period, Lender may, in addition to any other rightsor remedies available to it pursuant to this Agreement and the other LoanDocuments or at law or in equity, take such action, without notice or demand,that Lender deems advisable to protect and enforce its rights against theCollateral or the Project, including, without limitation, at its option andwithout prior notice or demand, declare the unpaid principal balance of theNote and all accrued but unpaid interest thereon, as well as all other sumsowing under the Loan Documents, immediately due and payable. Lender may makeany advances on the Loan after the happening of any one or more of said Eventsof Default without thereby waiving the right to demand payment in 

 

 

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fullof the Note and such other amounts and without liability to make any other orfurther advances.

 

(b)                                 Lender’s Rightto Perform.  If Borrowerfails to perform any covenant or obligation contained herein or in the otherLoan Documents and such failure continues for a period of 30 days after writtennotice of such failure by Lender to Borrower, or if such failure is notreasonably susceptible of cure within such 30 day period and if Borrowerpromptly commences such cure within such 30 day period and diligentlyprosecutes the same to completion, then the cure period shall be extended forsuch period of time as may be reasonably necessary to effect a cure but in noevent shall such period exceed 90 days, without in any way limiting Lender’sright to exercise any of its rights, powers or remedies as provided hereunder,or under any of the other Loan Documents, Lender may, but shall have noobligation to, perform, or cause performance of, such covenant or obligation,and all costs, expenses, liabilities, penalties and fines of Lender reasonablyincurred or paid in connection therewith shall be payable by Borrower to Lenderupon demand and if not paid shall be added to the Indebtedness (and to theextent permitted under applicable laws, secured by the Security Instrument andother Loan Documents) and shall bear interest from the date expended at theDefault Interest Rate.  Notwithstandingthe foregoing, Lender shall have no obligation to send notice to Borrower ofany such failure.

 

(c)                                  Appointment ofLender as Attorney-in-Fact.  Borrower hereby irrevocably, unconditionallyand presently constitutes Lender as Borrower’s attorney-in-fact, with fullpower of substitution, to be exercised by Lender only upon the occurrence andduring the continuation of an Event of Default, to exercise its rights underthe Security Instrument (in its own name or the name of a designee) forpurposes of preserving and protecting the Project or the Collateral and, asLender in its sole discretion deems necessary or proper, to execute,acknowledge (when appropriate) and deliver all instruments and documents in thename of Borrower which may be necessary or desirable in order to do any andevery act which Borrower might do on its own behalf in the performance of itsobligations hereunder.  This power ofattorney is a power coupled with an interest and is irrevocable.

 

(d)                                 Cross-Defaultto Note, Security Instrument and Other Loan Documents.  At the option of Lender, any Event of Defaultby Borrower under this Agreement shall constitute a default under the Note, theSecurity Instrument or any of the other Loan Documents to the same extent asthough the Note had by its own terms become due and payable at maturity andpayment thereof had been refused, and in such event Lender may, withoutliability to Borrower, assert and exercise any and all rights and remediesprovided for herein or in the Note, the Security Instrument or any of the otherLoan Documents or otherwise as may be provided by law.  

 

 

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Suchrights and remedies may be asserted concurrently or successively from time totime (either before or after commencement of foreclosure proceedings or beforeor after the exercise of any other remedy of Lender) until the Note, includinginterest thereon, and all of the Indebtedness of Borrower to Lender under thisAgreement and the other Loan Documents, have been paid in full.

 

(e)                                  RecourseLimitations.  Borrower’sliability in connection with this Agreement, the Note and the other LoanDocuments (including Borrower’s liability for all amounts due hereunder orthereunder) is collectible only from the Project and other property encumberedby the Security Instrument.  In no casewill any person who holds a direct or indirect ownership interest in Borrower,or any officer, director, manager, trustee, employee, agent or affiliate ofBorrower or any such direct or indirect owner, have any responsibility forBorrower’s obligations in connection with this Agreement, the Note and theother Loan Documents (including Borrower’s liability for any amounts duehereunder or thereunder); provided, however, that nothing in this Section 18(e) limitsthe liability of any person under a guaranty or other agreement executed bysuch person.

 

**19.****                              ****ADDITIONALADVANCES**

 

(a)                                  Disbursement ofAdditional Advances.    Borrowermay submit a Draw Request in the form attached as Exhibit E fromtime to time, but no more frequently than monthly (or twice monthly for thefollowing subcontractors: framing, drywall, retaining walls, electrical, trim,carpentry, HVAC, floor coverings, concrete, final-clean and plumbing), for thepayment of the cost of labor, materials, and services supplied for theconstruction of the Project and other costs incurred in connection with theProject, all to the extent contemplated in the Construction Budget (“**Additional Advance**”).  Lender may require, at Borrower’s expense, aninspection of, and favorable report upon, the Project, as built at the time ofthe Draw Request, by the Inspecting Architects/Engineers prior to making anyAdditional Advance.  Each Draw Requestshall be submitted by Borrower to Lender not less than ten (10) BusinessDays prior to the date upon which the Additional Advance requested is desiredby Borrower.  Upon satisfaction of allconditions precedent to Lender’s obligation to make Additional Advanceshereunder, and provided that the Additional Advance, when aggregated with theJunior Mezzanine Advance Amount, does not exceed the Maximum Aggregate AdvanceAmount and is consistent with the Construction Budget, Lender shall fund toBorrower the requested Additional Advance (less the portion of the amount inthe related Draw Request that is simultaneously funded under the JuniorMezzanine Loan Agreement), on the later of (i) the date such advance isrequested in the Draw Request, and (ii)  five (5) Business Days after

 

 

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receiptof a complete Draw Request, together with the required accompanying materials,reasonably satisfactory to Lender.

 

(b)                                 ConditionsPrecedent to Additional Advance.

 

(i)                                     There shallexist no Event of Default;

 

(ii)                                  The Senior Loanis in full force and effect;

 

(iii)                               There exists nodefault by Mortgagor under the Senior Loan;

 

(iv)                              Therepresentations and warranties made in this Agreement shall be true and correctin all material respects on and as of the date of each Additional Advance, withthe same effect as if made on such date, other than (i) those which bytheir specific terms relate only to the Closing Date or another specified date,and (ii) those which relate to Section 6(d) and Section 16(c) hereofwhich need be true and correct only as of the effective date of this Agreement;

 

(v)                                 Borrower shallhave provided to Lender (a) the form lease for residential units withinthe Project (it being agreed that Borrower has already provided such form toLender) and (b) copies of any non-residential Leases affecting theProject;

 

(vi)                              Borrower shall haveprovided to Lender copies of all available Plans prepared by any engineers orarchitects in connection with the Project;

 

(vii)                           Lender shallhave received copies of any inspection reports prepared by the InspectingArchitects/Engineers with respect to the specific Additional Advance and/or byany Governmental Authority having jurisdiction over the Project and Lendershall have received inspection reports, in form and substance reasonablyacceptable to Lender, from the Inspecting Architect/Engineers at not less thanthirty (30)-day intervals (and Lender shall request such reports from theInspecting Architect/Engineers);

 

(viii)                        Borrower shallprocure and deliver to Lender, if required by Lender, evidence reasonablysatisfactory to Lender that the amount theretofore invested by Mortgagor in theProject, together with the funds remaining to be advanced to Borrower by Lenderunder the terms of this Agreement and the Junior Mezzanine Loan Agreement andto Mortgagor by Senior Lender under the Senior Loan, or sums which Borroweragrees to make available, are adequate to meet all costs incurred and to beincurred in connection with the construction of the Project;

 

 

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(ix)                                Borrower shallprocure and deliver to Lender, if required by Lender, evidence reasonablysatisfactory to Lender supporting the amounts requested by Borrower, including,without limitation, statements, invoices and bills evidencing the requestedamounts; and

 

(x)                                   Borrower shallprocure and deliver to Lender a lien waiver and/or subordination agreement fromeach contractor or subcontractor who has performed work valued at or in excessof $150,000 at or upon the Land, or who has supplied material, supplies orequipment for the construction of the Project and who is intended to have beenpaid by the proceeds of the Additional Advance current through the last paymentto such contractor or subcontractor.

 

**20.****                              ****TRANSFEROF LOAN; LOAN SERVICER**.

 

(a)                                  Lender’s Rightto Transfer  Borrowerhereby acknowledges that Lender shall have the right to transfer, assign orsell the Loan Documents, or grant participation interests in all or any portionof the Loan, in such manner and to such entities as Lender in its sole andabsolute discretion shall select.

 

(b)                                 Loan Servicer.  At the option of Lender, the Loan may beserviced by a servicer selected by Lender and Lender may delegate all or anyportion of its responsibilities under this Agreement and the other LoanDocuments to such servicer pursuant to a servicing agreement between Lender andsuch servicer.  A sale may result in achange of the Loan servicer.  There alsomay be one or more changes of Loan servicer unrelated to a sale of the Note.  If there is a change of Loan servicer,Borrower will be given notice of the change.

 

(c)                                  Disseminationof Information.  Lender mayforward to each purchaser, transferee, assignee, or servicer of, and eachparticipant or investor in, the Loan (collectively, the “**Investor**”), any governmental regulators orothers as may be required by securities law, all documents and informationwhich Lender now has or may hereafter acquire relating to the Indebtedness andto Borrower, Mortgagor and Principal, except as limited by the Principal’spartnership agreement, including financial statements, whether furnished byBorrower or otherwise, as Lender determines necessary or desirable.  Borrower irrevocably waives any and allrights it may have under applicable Laws to prohibit such disclosure.

 

**21.****                              ****LENDER’SEXPENSES; RIGHTS OF LENDER**.  Borrower shall promptly pay to Lender, upondemand, with interest thereon from the date of demand at the Default InterestRate, reasonable attorneys’ fees and all other reasonable costs and expensespaid or incurred by Lender in enforcing or exercising its rights or remediescreated by, connected with or 

 

 

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provided for in this Agreement or any of the otherLoan Documents following an Event of Default, and payment thereof shall besecured by the Security Instrument.

 

**22.****                              ****MISCELLANEOUS**.

 

(a)                                  Notices. All notices,demands and other communications (“**Notice**”)under or concerning this Agreement shall be in writing.  Each Notice shall be addressed to theintended recipient at its address set forth below, and a Notice shall be deemedgiven on the earliest to occur of (1) the date when the Notice is receivedby the addressee; (2) the first Business Day after the Notice is deliveredto a recognized overnight courier service, with arrangements made for paymentof charges for next Business Day delivery; or (3) the third Business Dayafter the Notice is deposited in the United States mail with postage prepaid,certified mail, return receipt requested.

 

If to Lender:                                                                               BehringerHarvard St. Rose REIT, LLC

15601 Dallas Parkway, Suite 600

Addison, Texas  75001

Attention: Chief Legal Officer

Facsimile: (214) 655-1610

 

with copy to:                                                                          BehringerHarvard St. Rose REIT, LLC

15601 Dallas Parkway, Suite 600

Addison, Texas  75001

Attention: Mark Alfieri

Facsimile: (214) 655-1610

 

with copy to:                                                                          Wick Phillips,LLP

2100 Ross Avenue, Suite 950

Dallas, Texas 75201

Attention: Walt Miller

Facsimile: (214) 692-6255

 

If to Borrower:                                                                   SW 131 St. RoseMezzanine Borrower LLC

2001 Bryan Street, Suite 3250

Dallas, Texas 75201

Attention: Timothy J. Hogan

Facsimile: (214) 922-8553

 

with a copy to:                                                                 SW 131 St. RoseMezzanine Borrower LLC

7373 N. Scottsdale Road, Suite C-228

Scottsdale, Arizona  85253

Attention: Bruce Hart

Facsimile: (480) 596-8848

 

 

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with copy to:                                                                          Jones Day

325 John H. McConnell Blvd., Suite 600

Columbus, Ohio 43216

Attention: Michael K. Ording

Facsimile: (614) 461-4198

 

Anyparty to this Agreement may change the address to which notices intended for itare to be directed by means of notice given to the other party in accordancewith this Section 22(a). Each party agrees that it will not refuse or reject delivery of anynotice given in accordance with this Section 22(a), that it willacknowledge, in writing, the receipt of any notice upon request by the otherparty and that any notice rejected or refused by it shall be deemed forpurposes of this Section 22(a) to have been received by therejecting party on the date so refused or rejected, as conclusively establishedby the records of the U.S. Postal Service or the courier service. Any noticeunder the Note and any other Loan Document which does not specify how noticesare to be given shall be given in accordance with this Section 22(a).

 

(b)                                 Waivers.  No delay or omission in exercising any rightor power arising from any default shall be construed as a waiver of suchdefault or as an acquiescence therein, nor shall any single or partial exercisethereof preclude any further exercise thereof or the exercise of any otherright or power arising from any default. No waiver of any breach of any of the covenants or conditions of thisAgreement shall be construed to be a waiver of or acquiescence in or consent toany previous or subsequent breach of the same or of any other condition orcovenant.

 

(c)                                  Lender NotPartner of Borrower; Borrower in Control.  Neither the execution nor the performance ofany of the Loan Documents by Lender, nor the exercise by the Lender of any ofits rights, privileges or remedies conferred under the Loan Documents or underapplicable law, shall be deemed to render the Lender a partner or a jointventurer with Borrower, any guarantor of the Loan or any other person, or torender Borrower an agent of Lender for any purposes.  Nothing contained herein shall characterizeor be deemed to characterize, or be used as a basis for characterizing, Lenderas a “mortgagee-in-possession”.  Lenderand Borrower agree that Mortgagor remains in control of the Project, and thatit determines the business plan for the Project and employment, management,leasing and operating directions and decisions for the Project.  All of Lender’s rights, and actions taken byLender as provided or permitted, in or under this Agreement or the other LoanDocuments are for and in its capacity as a secured lender attempting to protectthe collateral security for the Loan and to collect the Indebtedness and anyother amounts owing or outstanding under the Note or the Loan Documents.

 

 

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d)                                     No Third Party.  This Agreement is made for the sole benefitof Borrower and Lender and Lender’s successors and assigns, and no other personor persons shall have any rights or remedies under or by reason of thisAgreement or any right to the exercise of any right or power hereunder orarising from any default, nor shall Lender owe any duty whatsoever to anyclaimant for labor performed or materials furnished in connection with theconstruction of the improvements to apply any undisbursed portion of the Loanto the payment of any such claims.

 

(e)                                  Time of Essence; Context.  Time is hereby declared to be of the essenceof this Agreement and of every part hereof. When the context and construction so require, all words used in thesingular herein shall be deemed to have been used in the plural and themasculine shall include the feminine and the neuter and vice versa.

 

(f)                                    Successors and Assigns.  This Agreement shall bind, and the rightsgranted by this Agreement shall inure to, the respective successors and assignsof Lender and Borrower.  However, a Saleor Encumbrance prohibited by Section 13(d) shall be an Eventof Default.

 

(g)                                 Governing Jurisdiction.  This Agreement and all of the other LoanDocuments (except as otherwise expressly provided therein with respect to theenforcement of specific remedies) shall be governed by and construed inaccordance with the substantive law of the State of Texas without regard to theapplication of choice of law principles.

 

(h)                                 SUBMISSION TO JURISDICTION;SERVICE OF PROCESS.  BORROWERAND LENDER EACH HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE STATECOURTS OF THE STATE OF TEXAS SITTING IN DALLAS COUNTY, TEXAS, FOR THE PURPOSESOF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF OR BASED UPON THISAGREEMENT, THE SUBJECT MATTER HEREOF, ANY OTHER LOAN DOCUMENT AND THE SUBJECTMATTER THEREOF, OR THE LOAN.  EACH OFBORROWER AND LENDER TO THE EXTENT PERMITTED BY APPLICABLE LAW (A) HEREBYWAIVES, AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE, OR OTHERWISE,IN ANY SUCH SUIT, ACTION OR OTHER PROCEEDING BROUGHT IN THE ABOVE-NAMED COURTSANY CLAIM THAT IT IS NOT SUBJECT PERSONALLY TO THE JURISDICTION OF SUCH COURTS,THAT ITS PROPERTY IS EXEMPT OR IMMUNE FROM ATTACHMENT OR EXECUTION BY ANY SUCHCOURT, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM,THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER OR THAT THIS  AGREEMENT, THE SUBJECT MATTER HEREOF, THEOTHER LOAN DOCUMENTS, THE SUBJECT 

 

 

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MATTER THEREOF, OR THE LOAN (AS APPLICABLE) MAY NOT BE ENFORCED INOR BY SUCH COURT, (B) HEREBY WAIVES THE RIGHT TO REMOVE ANY SUCH ACTION,SUIT OR PROCEEDING INSTITUTED IN STATE COURT TO FEDERAL COURT, OR TO REMAND ANACTION INSTITUTED IN FEDERAL COURT TO STATE COURT AND (C) HEREBY WAIVESTHE RIGHT TO ASSERT IN ANY SUCH ACTION, SUIT OR PROCEEDING ANY OFFSETS ORCOUNTERCLAIMS EXCEPT COUNTERCLAIMS THAT ARE COMPULSORY OR OTHERWISE ARISE FROMTHE SAME SUBJECT MATTER.  BORROWER ANDLENDER EACH HEREBY CONSENTS TO SERVICE OF PROCESS BY MAIL AT THE ADDRESS TOWHICH NOTICES ARE TO BE GIVEN TO IT PURSUANT TO SECTION 22(a) HEREOF,BUT ANY SUCH SERVICE WILL BE EFFECTIVE ONLY WHEN RECEIVED AT SUCH ADDRESS.  BORROWER AND LENDER EACH AGREES THAT ITS SUBMISSIONTO JURISDICTION AND CONSENT TO SERVICE OF PROCESS BY MAIL IS MADE FOR THEEXPRESS BENEFIT OF THE OTHER PARTY. FINAL JUDGMENT AGAINST A PARTY IN ANY SUCH ACTION, SUIT OR PROCEEDINGSHALL BE CONCLUSIVE, AND MAY BE ENFORCED IN ANY OTHER JURISDICTION (X) BYSUIT, ACTION OR PROCEEDING ON THE JUDGMENT, A CERTIFIED OR TRUE COPY OF WHICHSHALL BE CONCLUSIVE EVIDENCE OF THE FACT AND OF THE AMOUNT OF INDEBTEDNESS ORLIABILITY OF THE PARTY THEREIN DESCRIBED, OR (Y) IN ANY OTHER MANNERPROVIDED BY OR PURSUANT TO THE LAWS OF SUCH OTHER JURISDICTION.

 

(i)                                     WAIVER WITH RESPECT TODAMAGES.  BORROWER ACKNOWLEDGES THATLENDER DOES NOT HAVE ANY FIDUCIARY OR OTHER SPECIAL RELATIONSHIP WITH, ORFIDUCIARY OR SPECIAL DUTY TO, BORROWER ARISING OUT OF OR IN CONNECTION WITH THISAGREEMENT OR ANY OTHER LOAN DOCUMENT, AND THE RELATIONSHIP BETWEEN LENDER ANDBORROWER, IN CONNECTION HEREWITH AND THEREWITH, IS SOLELY THAT OF DEBTOR ANDCREDITOR.  TO THE EXTENT PERMITTED BYAPPLICABLE LAW, BORROWER SHALL NOT ASSERT, AND BORROWER HEREBY WAIVES, ANYCLAIMS AGAINST LENDER, ON ANY THEORY OF LIABILITY, FOR SPECIAL, INDIRECT,CONSEQUENTIAL OR PUNITIVE DAMAGES (AS OPPOSED TO DIRECT OR ACTUAL DAMAGES)ARISING OUT OF, IN CONNECTION WITH, OR AS A RESULT OF, THIS AGREEMENT, ANYOTHER LOAN DOCUMENT, ANY AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY ORTHEREBY, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

 

 

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(j)                                     Entire Agreement.  This Agreement and all of the other LoanDocuments constitute the entire understanding between the parties hereto withrespect to the subject matter hereof, superseding all prior written or oralunderstandings, and may not be modified, amended or terminated except by awritten agreement signed by each of the parties hereto or thereto that is to bebound by the modification, amendment or termination.  Notwithstanding the foregoing, the provisionsof this Agreement are not intended to supersede the provisions of the SecurityInstrument but shall be construed as supplemental thereto.  Borrower and Lender each hereby acknowledgesthat this Agreement and the other Loan Documents accurately reflect theagreements and understandings of the parties hereto with respect to the subjectmatter hereof and hereby waives any claims against the other which it may nowhave or may hereafter acquire to the effect that the actual agreements andunderstandings of the parties hereto with respect to the subject matter hereofmay not be accurately set forth in this Agreement or such other Loan Documents.

 

(k)                                  Headings.  The various headings of this Agreement areincluded for convenience only and shall not affect the meaning orinterpretation of this Agreement or any provision hereof.

 

(l)                                     Severability.  Each provision of this Agreement shall beinterpreted so as to be effective and valid under applicable law, but if anysuch provision shall in any respect be ineffective or invalid under such law,such ineffectiveness or invalidity shall not affect the remainder of suchprovision or the remaining provisions of this Agreement.

 

(m)                               Counterparts.  This Agreement may be executed in two or morecounterparts, each of which shall be deemed an original but all of whichtogether shall constitute but one and the same document.

 

(n)                                 WAIVER OF JURY TRIAL.  BORROWER AND LENDER EACH HEREBY KNOWINGLY,VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT THAT IT MAY HAVE TO A TRIALBY JURY IN ANY LITIGATION ARISING IN ANY WAY IN CONNECTION WITH THIS LOANAGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, OR ANY OTHER STATEMENTS ORACTIONS OF THE LENDER OR BORROWER RELATED THERETO.  BORROWER AND LENDER EACH ACKNOWLEDGES THATTHIS WAIVER IS A MATERIAL INDUCEMENT FOR THE OTHER TO ENTER INTO THIS AGREEMENTAND EACH OTHER LOAN DOCUMENT, AND THAT THIS WAIVER SHALL BE EFFECTIVE AS TOEACH OF THE OTHER LOAN DOCUMENTS AS IF FULLY INCORPORATED THEREIN.

 

(o)                                 Sole and Absolute Discretion.  Any option, consent, approval, or discretionor similar right of Lender set forth in this Agreement or any of 

 

 

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the other Loan Documents may be exercised by Lender in its sole,absolute and unreviewable discretion, unless the provisions of this Agreementor the other Loan Documents specifically requires a different standard.

 

(p)                                 Straight Debt Harbor.  It is the intent of Borrower and Lender thatthe Loan shall be treated as a security that satisfies the requirements of Section 856(m)(1)(A) andSection 856(m)(2) of the Code (the “**StraightDebt Safe Harbor**”). Accordingly, notwithstanding any indication herein to the contrary, theparties hereto agree that the terms of the Loan shall be interpreted in such amanner that the Loan satisfies the Straight Debt Safe Harbor for so long as itis owned by Lender; and the terms of the Note shall be applied such that theNote has a constant effective yield to maturity, as determined under Section 1372of the Code, at a fixed rate over the entire term of the Note equal to theInterest Rate (as defined in the Note) (or, during any time at which an Eventof Default is continuing, at the Default Interest Rate); provided, however,that such contraction shall not alter the dates of the principal or interestpayments (described in Section 1.1 of the Note) or the amounts of theprincipal or interest payments required to be paid on an interest payment date(described in Section 1.1. of the Note) prior to the Maturity Date orearlier prepayment date.

 

(q)                                 Assignment.  Lender may, without the consent of any otherparty, assign its rights and obligations under this Agreement and the LoanDocuments to any Affiliate of Lender.

 

(r)                                    Retainage of Subcontractors.  Lender understands and agrees that noretainage will be withheld for general conditions or the followingsubcontractor trades: floor and roof trusses, cabinets and countertops,appliances, lumber, drywall, concrete and reinforcing materials, cultured stoneand CMU materials, interior trim, electric light fixtures, windows, doors andmillwork, HVAC components, metals, floor coverings, surveying and stocking,materials testing and utilities. Borrower understands and agrees that ten (10%) retainage will bewithheld for all other subcontractors provided that at such time as the Projectis at least fifty percent (50%) completed (as confirmed by the Senior Lender’sconstruction consultant, if any), retainage may be reduced to five percent (5%)for such other subcontractors.

 

**23.          SPECIAL REPRESENTATIONS, WARRANTIES AND COVENANTS OFBORROWER. **Borrower shall do all things necessary to preserve the existence ofBorrower and Mortgagor as a separate Special Purpose Bankruptcy Remote Entityunless Lender otherwise consents, in its sole discretion, in writing.  Borrower covenants and agrees that withrespect to Borrower and Mortgagor, until payment in full of the Indebtedness,it will not do, or permit Mortgagor to do, directly or indirectly, any of thefollowing unless Lender consents thereto, in its 

 

 

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sole discretion, inwriting.  A “Special Purpose BankruptcyRemote Entity” means a corporation, limited partnership or limited liabilitycompany which shall not:

 

(a)                                  engage in any business oractivity other than the ownership, construction, operation and maintenance, ineach case directly or indirectly, of the Land and the Project (in case ofMortgagor) or the Equity Interests in Mortgagor (in case of Borrower) andactivities incidental thereto;

 

(b)                                 acquire or own any materialassets other than (i) the Equity Interests, (ii) the Land or theProject, and (iii) such incidental personal property as may be necessaryfor the operation of the Project or as may arise out of the other activities ofBorrower or Mortgagor;

 

(c)                                  merge into or consolidatewith any person, or dissolve, terminate or liquidate, or transfer or otherwisedispose of all or substantially all of its assets or change its legalstructure;

 

(d)                                 fail to preserve itsexistence as a person duly organized, validly existing and in good standing (ifapplicable) under the laws of the jurisdiction of its organization orformation, or amend, modify, or terminate the provisions of its organizationaldocuments if such amendment, modification, or termination would adverselyaffect the ability of such Person to perform its obligations hereunder or underthe other Loan Documents or would affect any other clause of this Section 23;

 

(e)                                  own any subsidiary (except,in the case of Borrower, the Mortgagor) or make any investment in any person(except, in the case of Borrower, the Mortgagor);

 

(f)                                    commingle its assets withthe assets of any of its general partners, members, shareholders, Affiliates,principals or of any other Person in such a manner that it will be costly ordifficult to segregate, ascertain or identify its individual assets from thoseof any general partner, member, shareholder, principal or Affiliate of Borroweror Mortgagor or any other Person;

 

(g)                                 incur any debt, secured orunsecured, direct or contingent (including guaranteeing any obligation), otherthan (i) the Senior Loan, the Loan and the loan made pursuant to theJunior Mezzanine Loan Agreement, (ii) obligations under interest ratehedging arrangements related to the Senior Loan and (iii) trade andoperational indebtedness incurred in the ordinary course of business (includingconstruction and operation of the Project) or for its administrative functions;

 

(h)                                 fail to maintain itsrecords, books of account and bank accounts separate and apart from those ofits general partners, members, shareholders, principals and Affiliates and anyother Person;

 

 

46

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(i)                                     enter into any contract oragreement with any general partner, member, shareholder, principal or Affiliateof Borrower or Mortgagor except upon terms and conditions that areintrinsically fair and substantially similar to those that would be availableon an arms-length basis with third parties other than any general partner,member, shareholder, principal or Affiliate of Borrower or Mortgagor;

 

(j)                                     seek the dissolution orwinding up of Borrower or Mortgagor;

 

(k)                                  maintain its assets in sucha manner that it will be costly or difficult to segregate, ascertain oridentify its individual assets from those of any general partner, member,shareholder, principal or Affiliate of Borrower or Mortgagor or any otherPerson.

 

(l)                                     hold itself out to beresponsible for the debts of another person, except through endorsement ofnegotiable instruments in the ordinary course of collection;

 

(m)                               make any loans or advancesto any third party, including any general partner, member, shareholder, principalor Affiliate of Borrower or Mortgagor (except, in the case of Borrower, to theMortgagor);

 

(n)                                 fail to file its own taxreturns, if any, as may be required under applicable law, to the extent thatBorrower or Mortgagor is (i) not part of a consolidated group filing aconsolidated return or returns or (ii) not treated as a “disregardedentity” for tax purposes not required to file tax returns under applicable law;or

 

(o)                                 fail either to hold itselfout to the public as a legal person separate and distinct from any other personor to conduct its business solely in its own name if the result is (i) tomislead others as to the identity of the person with which such other party istransacting business; or (ii) to suggest that it is responsible for thedebts of any third party (including any general partner, principal or Affiliateof Borrower or Mortgagor), provided, however, Mortgagor and Borrower may holditself out as doing business under the “Trammel Crow Residential” or “AlexanCommunities” names.

 

In addition to the foregoing, Borrower shallhave at least one independent manager who is provided by a nationallyrecognized company that provides professional independent directors and whoshall not be at the time of initial appointment, and may not have been duringthe preceding five years (i) a stockholder, director, officer, employee,partner, member, attorney or counsel of Mortgagor or an Affiliate of Mortgagoror Borrower, (ii) a customer, supplier (other than a supplier ofregistered agent or registered office service) or other Person who derives anyof its purchases or revenues from its activities with Mortgagor or Borrower, (iii) aPerson or other entity controlling or under common control with any suchstockholder, director, officer employee, partner, customer, supplier (otherthan a supplier of registered agent or registered office service) or otherPerson or (iv) a member of the immediate family of any such 

 

 

47

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stockholder, director, officer, employee,partner, customer, supplier or other Person (the “**IndependentDirector**”).  At any time whilethe Loan is outstanding, the consent of the Independent Director should berequired to: (i) file, consent to the filing of, or join in any filing of,a bankruptcy or insolvency petition; (ii) dissolve, liquidate, merge orconsolidate; (iii) engage in any business or activity other than theownership, construction, operation and maintenance, directly or indirectly, ofthe Project; and (iv) amend the articles of organization, limitedliability agreement or partnership agreement.

 

**24.          JUNIOR MEZZANINE LOAN.**

 

(a)                                  Borrower and Lender areentering into the Junior Mezzanine Loan Agreement contemporaneously with thisAgreement.  Under this Agreement and theJunior Mezzanine Loan Agreement, Lender may advance to Borrower an aggregatemaximum principal amount up to, but not in excess of, the Maximum AggregateAdvance Amount.  The Borrower and Lenderagree that, at any given time, any principal amounts advanced to Borrower by Lenderunder this Agreement and the Junior Mezzanine Loan Agreement shall be allocatedas follows:

 

(i)                                     At all times while principalamounts are outstanding and/or additional principal amounts may be advancedunder this Agreement or the Junior Mezzanine Loan Agreement, an aggregateprincipal amount of at least $2,000 shall be advanced to Borrower by Lenderunder this Agreement and the Junior Mezzanine Loan Agreement, taken together,and the principal amount outstanding under this Agreement shall be at least$1,000 and the principal amount outstanding under the Junior Mezzanine LoanAgreement shall be at least $1,000;

 

(ii)                                  If an aggregate principalamount of more than $2,000 has been advanced to Borrower by Lender under thisAgreement and the Junior Mezzanine Loan Agreement, Lender may decide whetheradditional amounts requested by Borrower pursuant to a Draw Request are fundedpursuant to this Agreement or pursuant to the Junior Mezzanine Loan Agreement,or in part pursuant to this Agreement and in part pursuant to the JuniorMezzanine Loan Agreement, and if in parts pursuant to both this Agreement andthe Junior Mezzanine Loan Agreement, the respective parts funding pursuant toeach, so long as the aggregate amount advanced to Borrower pursuant to this Agreementand the Junior Mezzanine Loan Agreement in all cases equals the amountrequested by Borrower in the Draw Request.

 

(b)                                 Borrower acknowledges thatLender has advised it that Lender desires that at no time will the SeniorMezzanine Advance Amount exceed the Estimated Value.  Accordingly, Borrower agrees that if at anytime the Senior Mezzanine Advance Amount is more than the Estimated Value, 

 

 

48

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Lender shall, subject to Section 24(a)(i), be deemed to haveadvanced principal under the Junior Mezzanine Loan Agreement in an amount equalto the amount by which the Senior Mezzanine Advance Amount exceeds theEstimated Value and to have used such advance to repay the portion of the Loanthen outstanding so as to reduce the Senior Mezzanine Advance Amount to theEstimated Value.  Conversely, Borroweragrees that if at any time the Senior Mezzanine Advance Amount is less than theEstimated Value, Lender shall, subject to Section 24(a)(i), bedeemed to have advanced principal against the Loan in an amount equal to thelesser of (i) the Junior Mezzanine Advance Amount minus $1,000 and (ii) theamount by which the Estimated Value exceeds the Senior Mezzanine AdvanceAmount, and in such event Lender shall be deemed to have used the amount soadvanced to repay a portion of the loan outstanding under the Junior MezzanineLoan Agreement.  An advance pursuant tothis Section 24(b) will not reduce the amount Borrower isentitled to draw under this Agreement and the Junior Mezzanine Loan Agreement,it being the intent of Lender and Borrower that Borrower will be entitled toobtain advances up to the Maximum Aggregate Advance Amount.  An advance and contemporaneous repaymentmade, or deemed to be made, pursuant to this Section 24(b) willnot be considered an advance in excess of the Maximum Aggregate Advance Amountfor purposes of this Agreement.

 

(c)                                  Borrower acknowledges thatLender has advised it that Lender desires that at no time will the SeniorMezzanine Advance Amount and the accrued and unpaid interest on the Loan, takentogether, exceed the Estimated Value. Therefore, to the extent that, after any adjustments pursuant to Section 24(b),the Senior Mezzanine Advance Amount and the accrued and unpaid interest on theLoan, taken together, exceed the Estimated Value, then such accrued and unpaidinterest will be deemed to be payable under the loan pursuant to the JuniorMezzanine Loan Agreement rather than payable under the Loan to the extentnecessary to prevent the Senior Mezzanine Advance Amount and the accrued andunpaid interest on the Loan, taken together, from exceeding the EstimatedValue.  Any such interest deemed to bepayable under the loan pursuant to the Junior Mezzanine Loan Agreement pursuantto this Section 24(c) shall automatically to revert to beingpayable under the Loan to the extent possible without causing the SeniorMezzanine Advance Amount and the accrued and unpaid interest on the Loan, takentogether, from exceeding the Estimated Value. In no event shall the accrued and unpaid interest under the Loan, whencombined with the accrued and unpaid interest owing under the loan pursuant tothe Junior Mezzanine Loan Agreement, exceed the amount of interest that wouldbe owing (taking into account payments of interest made prior to the time inquestion) if interest had accrued at the rate applicable under the Note and thenote issued pursuant to the Junior Mezzanine Loan Agreement on a principalbalance equal to the Senior Mezzanine Advance Amount plus the Junior MezzanineAdvance Amount.

 

 

49

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(d)                                 Lender shall endeavor togive Borrower written notice of any advance, repayment or adjustment pursuantto this Section 24 simultaneously with such action, and Lender shall,upon request by Borrower, give Borrower written notice of the amountoutstanding under the Loan and the loan under the Junior Mezzanine LoanAgreement.

 

**25.          SUBDIVISIONAND RELEASE.**

 

(a)                                  On or before June 30,2009, Borrower will have caused the Mortgagor to have (i) obtained allfinal, non-appealable approvals of all applicable Governmental Authoritiesnecessary to cause the Land to be lawfully subdivided into separate andconforming legal lots comprised of the Commercial Tract and the ResidentialTract, substantially as reflected on the proposed subdivision map (a copy ofwhich is attached as Exhibit A-1 to the Senior Loan Agreement); (ii) recorded(or cause to have been recorded) within the applicable real property records ofClark County, Nevada the final subdivision map as so approved by all applicableGovernmental Authorities (the “**Final Map**”);and (iii) caused the Title Insurer to have issued an endorsement to thetitle insurance insuring that, after giving effect to the recordation of theFinal Map, the Residential Tract constitutes a separate, legal lot pursuant toapplicable laws.  If any GovernmentalAuthority conditions approval of the proposed subdivision map on revisionsthereto, Lender shall be deemed to have consented to such revisions if and tothe extent the Senior Lender consents to such revisions in accordance with theSenior Loan Documents.

 

(b)                                 Lender shallexecute and deliver (or shall direct the trustee under the Security Instrumentto execute and deliver) a partial release or reconveyance of the lien of theSecurity Instrument with respect to the Commercial Tract, subject to andconditioned upon the satisfaction of each of the following conditionsprecedent:

 

(i)                                     The Final Mapshall have been recorded in the applicable real property records of ClarkCounty, Nevada;

 

(ii)                                  The TitleInsurer shall have issued an endorsement to the title insurance insuring thatthe Residential Tract constitutes a separate legal lot in accordance with therequirements of applicable law;

 

(iii)                               Borrower or Mortgagorshall have prepared and delivered to Lender, a reciprocal easement agreement(and any documents referenced therein or executed therewith), in such form asis approved by the Senior Lender in accordance with the Senior Loan Documents,duly executed by Mortgagor and Commercial Tract Borrower, encumbering theentirety of the Land and establishing non-exclusive, perpetual and reciprocaleasements for ingress, 

 

 

50

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egress, access and public utilities over and acrossthe Land (the “**REA**”); and

 

(iv)                              Borrower shallhave reimbursed Lender for its out-of-pocket expenses incurred in connectionwith such partial release.

 

(c)                                  Lender agreesto execute and deliver a subordination of lien, in form and substance reasonablyacceptable to Borrower and the Senior Lender, subordinating the liens andsecurity interests of the Security Instrument to the REA.

 

[Signatures Follow on Next Page]

 

 

51

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INWITNESS WHEREOF, the parties hereto have duly executed and delivered thisAgreement as of the day and year first above written.

 

BORROWER:

 

SW131 ST. ROSE MEZZANINE BORROWER LLC,

aDelaware limited liability company

 

| By:    | SW  130 St. Rose Limited Partnership, |
|--------|---------------------------------------|
|   | a  Delaware limited partnership,      |
|   | its  sole member                      |
|   |                                  |
|   | By:                                   | SW  129 St. Rose Limited Partnership, |
|   |                                  | a  Delaware limited partnership, |
|   |                                  | its  general partner |
|   |                                  |   |
|   |                                  | By: | SW  104 Development GP LLC, |
|   |                                  |   | a  Delaware limited liability company, |
|   |                                  |   | its  general partner |
|   |                                  |   |   |
|   |                                  |   |   |
|   |                                  |   | By: | /s/  Timothy J. Hogan |   |
|   |                                  |   |   | Timothy  J. Hogan, Vice President |   |

 

 

----

 

LENDER:

 

BEHRINGERHARVARD ST. ROSE REIT, LLC,

aDelaware limited liability company

 

| By:    | Behringer  Harvard St. Rose Venture, LLC, |
|--------|-------------------------------------------|
|   | a  Delaware limited liability company,    |
|   | its  manager                              |
|   |                                      |
|   | By:                                       | Behringer  Harvard St. Rose, LLC, |
|   |                                      | a  Delaware limited liability company, |
|   |                                      | its  manager |
|   |                                      |   |
|   |                                      | By: | /s/  Gerald J. Reihsen, III |   |
|   |                                      |   | Gerald  J. Reihsen, III |
|   |                                      |   | Executive  Vice President-Corporate |
|   |                                      |   | Development &  Legal and Secretary |

 

 

----

 

** **

**EXHIBIT A**

** **

**DESCRIPTIONOF THE LAND**

** **

Allthat land situated in the County of Clark, State of Nevada, more particularlydescribed as follows:

 

**PARCEL1:**

 

TheNorth Half (N 1⁄2) of the Northwest Quarter (NW 1⁄4) of the Southwest Quarter (SW1⁄4) of the Northwest Quarter (NW 1⁄4) of Section 35, Township 22 South, Range61 East, M.D.B.&M., Clark County, Nevada.

 

**PARCEL2:**

 

TheSouth Half (S 1⁄2) of the Northeast Quarter (NE 1⁄4) of the Southwest Quarter (SW1⁄4) of the Northwest Quarter (NW 1⁄4) of Section 35, Township 22 South, Range61 East, M.D.B.&M.

 

EXCEPTINGTHEREFROM that portion lying within St. Rose Parkway.

 

**PARCEL3:**

 

Thatportion of the Northwest Quarter (NW 1⁄4) of Section 35, Township 22 South,Range 61 East, M.D.M., City of Henderson, Clark County, Nevada, more particularlydescribed as follows:

 

TheSouth Half (S 1⁄2) of the Northwest Quarter (NW 1⁄4) of the Southwest Quarter (SW1⁄4) of the Northwest Quarter (NW 1⁄4) of said Section 35.

 

TOGETHERWITH:

 

Thoseportions of the North Half (N 1⁄2) of the South Half (S 1⁄2) of the SouthwestQuarter (SW 1⁄4) of the Northwest Quarter (NW 1⁄4) of said Section 35 lyingNorthwesterly of the Northwesterly right of way of St. Rose Parkway.

 

**PARCEL4:**

 

Beinga portion of the South Half (S 1⁄2) of the Southeast Quarter (SE 1⁄4) of theNorthwest Quarter (NW 1⁄4) of the Northwest Quarter (NW 1⁄4) of Section 35,Township 22 South, Range 61 East, M.D.B.&M., Clark County, Nevada.

 

TOGETHERWITH that portion of the North Half (N 1⁄2) of the Northeast Quarter (NE 1⁄4) ofthe Southwest Quarter (SW 1⁄4) of the Northwest Quarter (NW 1⁄4), also togetherwith that portion of the North Half (N 1⁄2) of the Northwest Quarter (NW 1⁄4) ofsaid Section 35, lying Northwesterly of St. Rose Parkway, furtherdescribed as follows:

 

----

 

BEGINNINGat the Southeast (SE) corner of the Northwest Quarter (NW 1⁄4) of the NorthwestQuarter (NW 1⁄4) of said Section 35, said corner being marked by an aluminumcap marked “PLS 5269, 1994, NW 1/16”;

ThenceSouth 41°41’09” East,174.75 feet to the Northwesterly line of St. Rose Parkway as granted in Book250 as Document No. 202951, Official Records, Clark County, Nevada;

Thencealong said Northwesterly line, South 46°18’51” West, 297.97 feet toa point of intersection of said Northwesterly line with the South line of theNorth Half (N 1⁄2) of the Northeast Quarter (NE 1⁄4) of the Southwest Quarter (SW1⁄4) of the Northwest Quarter (NW 1⁄4) of said Section 35;

Thencealong the lines of said North Half (N 1⁄2) the following Three (3) courses:

1)              North 89°22’43” West,553.55 feet;

2)              North 00°33’34” West,330.00 feet;

3)              South 89°22’04” East,663.09 feet to the POINT OF BEGINNING;

 

EXCEPTING THEREFROM:

 

Aportion of the South Half (S 1⁄2) of the Southeast Quarter (SE 1⁄4) of theNorthwest Quarter (NW 1⁄4) of the Northwest Quarter (NW 1⁄4) of said Section 35,described as follows:

 

BEGINNINGat the Southwest (SW) corner of the South Half (S 1⁄2) of the Southeast Quarter(SE 1⁄4) of the Northwest Quarter (NW 1⁄4) of the Northwest Quarter (NW 1⁄4) of said Section 35;

ThenceNorth 00°33’55” West,330.09 feet to the Northwest (NW) corner of the South Half (S 1⁄2) of theSoutheast Quarter (SE 1⁄4) of the Northwest Quarter (NW 1⁄4) of the NorthwestQuarter (NW 1⁄4) of said Section 35; Thence South 89°21’56” East,663.21 feet to the Northeast Corner of the South Half (S1/2) of the SoutheastQuarter (SE 1⁄4) of the Northwest Quarter (NW 1⁄4) of the Northwest Quarter (NW 1⁄4)of said Section 35; Thence South 00°32’39” East, 330.06 feet tothe Southeast (SE) corner of the South Half (S 1⁄2) of the Southeast Quarter (SE1⁄4) of the Northwest Quarter (NW 1⁄4) of the Northwest Quarter (NW 1⁄4) of said Section 35;Thence North 41°41’09” West,316.13 feet; Thence South 48°18’51” West, 153.68 feet tothe beginning of a 500 foot radius curve, concave Northwesterly; Thence alongsaid curve to the right, 369.29 feet through a central angle of 42°19’05” to thePOINT OF BEGINNING.

(DeedReference 20070720 / 2463 and 2464)

 

**SURVEYOR’SPERIMETER LEGAL DESCRIPTION:**

 

THEFOLLOWING IS A METES AND BOUNDS LEGAL DESCRIPTION OF PARCELS 1, 2, 3 AND 4COMBINED PREPARED BY THE CERTIFYING SURVEYOR.

 

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

 

BEGINNINGAT THE SOUTHEAST CORNER OF THE NORTHWEST QUARTER (NW 1/4) OF THE NORTHWEST QUARTER(NW 1/4) OF SAID SECTION 35; THENCE SOUTH 41°41’09” EAST, A DISTANCE OF174.75 FEET TO THE NORTHWESTERLY RIGHT-OF-WAY LINE OF ST. ROSE PARKWAY (300.00FEET WIDE);   THENCE SOUTH 48°18’51” 

 

----

 

WESTALONG SAID RIGHT-OF-WAY LINE, A DISTANCE OF 1,278.38 FEET TO THE SOUTH LINE OFTHE NORTH HALF (N 1/2) OF THE SOUTHWEST QUARTER (SW 1/4) OF THE SOUTHWESTQUARTER (SW 1/4) OF THE NORTHWEST QUARTER (NW 1/4) OF SAID SECTION 35;THENCE DEPARTING SAID RIGHT-OF-WAY LINE, NORTH 89°24’01” WEST ALONG SAID SOUTHLINE, A DISTANCE OF 477.63 FEET TO THE WEST LINE OF SAID SECTION 35;   THENCE DEPARTING SAID SOUTH LINE, NORTH00°34’46” WEST ALONG SAID WEST LINE, A DISTANCE OF 990.37 FEET TO THE SOUTHLINE OF THE NORTHWEST QUARTER (NW 1/4) OF THE NORTHWEST QUARTER (NW 1/4) OFSAID SECTION 35;   THENCE DEPARTINGSAID WEST LINE, SOUTH 89°22’04” EAST ALONG SAID SOUTH LINE, A DISTANCE OF663.09 FEET TO THE SOUTHEAST CORNER OF THE SOUTHWEST QUARTER (SW 1/4) OF SAIDNORTHWEST QUARTER (NW 1/4) OF THE NORTHWEST QUARTER (NW 1/4) OF SECTION 35,SAME BEING THE BEGINNING OF A CURVE, CONCAVE NORTHWESTERLY, HAVING A RADIUS OF500.00 FEET;   THENCE DEPARTING SAIDSOUTH LINE, NORTHEASTERLY 369.29 FEET ALONG SAID CURVE, THROUGH A CENTRAL ANGLEOF 42°19’05”;   THENCE NORTH 48°18’51”EAST, A DISTANCE OF 153.68 FEET; THENCE SOUTH 41°41’09” EAST, A DISTANCE OF316.13 FEET TO THE SOUTHEAST CORNER OF THE NORTHWEST QUARTER (NW 1/4) OF THENORTHWEST QUARTER (NW 1/4) OF SAID SECTION 35, SAME BEING THE POINT OFBEGINNING.

 

Preparedby:

MichaelA. Lathan, PLS No. 14414

DRCSurveying Nevada, Inc.

9330West Martin Avenue

LasVegas, Nevada  89148

 

----

 

**EXHIBIT B**

 

[INTENTIONALLY OMITTED]

 

----

 

**EXHIBIT C**

 

**PLANS**

 

[ATTACHED]

 

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**EXHIBIT D**

 

**CONSTRUCTIONBUDGET**

 
| **LINE ITEMS**                           | ** ** | **Total Costs** | ** ** |
|------------------------------------------|------------|-----------------|------------|
| ** **                               | ** ** | ** **      | ** ** |
| **LAND COSTS**                           | ** ** | ** **      | ** ** |
| LAND                                     |       | 14,200,000.00   |       |
| ***TOTAL LAND COSTS***                   |       | 14,200,000.00   |       |
|                                     |       |            |       |
| **HARD COSTS**                           | ** ** | ** **      | ** ** |
| Construction Hard Costs                  |       | 34,235,846.00   |       |
| Hard Costs Contingency                   |       | 1,431,465.00    |       |
| ***TOTAL HARD COSTS***                   | ** ** | 35,667,311.00   | ** ** |
|                                     |       |            |       |
| SOFT COSTS                               |       |            |       |
| Taxes                                    |       | 220,000.00      |       |
| Legal                                    |       | 375,000.00      |       |
| Closing Costs                            |       | 100,000.00      |       |
| Municipal Fees                           |       | 4,150,000.00    |       |
| Architect                                |       | 700,000.00      |       |
| Engineering & Surveying         |       | 200,000.00      |       |
| Preleasing                               |       | 175,000.00      |       |
| Marketing                                |       | 465,000.00      |       |
| Mezzanine Loan Fee                       |       | 631,296.00      |       |
| Non-Accrual Mezzanine Interest           |       | 6,413,523.00    |       |
| Financing Costs                          |       | 1,501,870.00    |       |
| Deferred Developer Offsite Overhead      |       | 3,613,196.00    | ** ** |
| Interest Reserve                         |       | 1,181,558.00    |       |
| Operating Deficit                        |       | 275,237.00      |       |
| Soft Cost Contingency                    |       | 275,000.00      |       |
| ***TOTAL SOFT COSTS***                   |       | 20,276,680.00   | ** ** |
| ***TOTAL BUDGET***                       |       | 70,143,991.00   |       |
|                                     |       |            |       |
| **SOURCE**                               | ** ** | ** **      | ** ** |
| Mezzanine Debt                           |       | 21,043,197.00   |       |
| Equity Partner                           |       | 5,172,333.00    |       |
| TCR Cash-including Pre Development Costs |       | 1,715,265.00    |       |
| Deferred Equity-Offsite Overhead         |       | 3,613,196.00    | ** ** |
| ***TOTAL SOURCES***                      |       | 31,543,991.00   |       |
| ***LOAN PROCEEDS***                      |       | 38,600,000.00   |       |

 

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** **

**EXHIBIT E**

** **

**DRAWREQUEST**

** **

**[BORROWER’S LETTERHEAD]**

** **

**DRAW REQUEST NO.                          **

** **

TO:  BEHRINGER HARVARD ST. ROSE REIT, LLC (“Lender”)

 
| LOAN  NO.           |                                    | DATE |   |
|---------------------|-----------------------------------------|------|--------|
| PROJECT             | ALEXAN  ST. ROSE                        |
| LOCATION            | HENDERSON,  NEVADA                      |
| BORROWER            | SW  131 ST. ROSE MEZZANINE BORROWER LLC |
|                |                                    |
|                |                                    |
| FOR  PERIOD  ENDING |                                    |

 

In accordance with the Senior Mezzanine LoanAgreement in the amount of up to $21,043,197 dated December     ,2008 between Borrower and Lender, Borrower requests that $                    be advanced from Loan proceeds.  Theproceeds should be credited to the account of                                         ,Account No.                     ,at                                         .

 
| 1.     | ORIGINAL CONTRACT SUM                      |            | $                    |   |   |
|--------|--------------------------------------------|-----------------|----------------------|--------|--------|
|   |                                       |            |                 |   |
| 2.     | TOTAL CHANGE ORDERS                        |            | $                    |   |   |
|   |                                       |            |                 |   |
| 3.     | CONTRACT SUM TO DATE  (Line 1 + 2)         |            | $                    |   |   |
|   |                                       |            |                 |   |
| 4.     | TOTAL  COMPLETED & STORED TO DATE |            | $                    |   |   |
|   |                                       |            |                 |   |
| 5.     | SOFT COSTS                                 |            | $                    |   |   |
|   |                                       |            |                 |   |
| 6.     | RETAINAGE:                                 |            |                 |   |
|   |                                       |            |                 |   |
|   | a.                                         |            | % of Completed Work  |   | $      |   |   |
|   |                                       |            |                 |   |   |   |
|   | b.                                         |            | % of Stored Material |   | $      |   |   |
|   |                                       |            |                 |   |   |   |
|   |                                       | Total Retainage |                 | $      |   |   |
|   |                                       |            |                 |   |
| 7.     | TOTAL EARNED LESS  RETAINAGE               |            | $                    |   |   |
|   | (Line 4 less Line 6  Total)                |            |                 |   |
|   |                                       |            |                 |   |
| 8.     | LESS PREVIOUS PAYMENTS                     |            | $                    |   |   |
|   |                                       |            |                 |   |
| 9.     | CURRENT PAYMENT DUE                        |            | $                    |   |   |
|   |                                       |            |                 |   |
| 10.    | BALANCE TO FINISH, PLUS  RETAINAGE         |            | $                    |   |   |
|   | (Line 3 less Line 7)                       |            |                 |   |   |

 

----

 

The undersigned Borrower represents that, to thebest of Borrower’s knowledge, information, and belief, the Work covered by thisapplication has been completed substantially in accordance with theabove-referenced Contract, that all amounts have been paid by Borrower for Workfor which previous payments were received from Owner, and that the currentpayment requested herein represents a just estimate of reimbursement toBorrower.  Borrower further representsthat: (i) there are no known mechanic’s liens or materialmen’s liensoutstanding at the date of this application (other than items being contestedin accordance with the Loan Documents); (ii) all due and payable billswith respect to the Work have been paid to date (other than items being contested in accordance with the Loan Documents)or are included in the amount requested in this application; (iii) exceptfor such bills not paid but so included, there is no known basis for the filingof any mechanic’s liens or materialmen’s liens on the Work or the Project(other than items being contested in accordance with the Loan Documents); and (iv) effectivewaivers and releases of liens have been obtained from all subcontractorsthrough the immediately preceding advance of Loan proceeds (other than itemsbeing contested in accordance with the Loan Documents).

 

This Draw Request isexecuted                     ,200    .

 

**BORROWER:**

 

SW131 ST. ROSE MEZZANINE BORROWER LLC,

aDelaware limited liability company

 

| By:    | SW  130 St. Rose Limited Partnership, |                                  |                                   |
|--------|---------------------------------------|---------------------------------------|----------------------------------------|
|   | a  Delaware limited partnership,      |                                  |                                   |
|   | its  sole member                      |                                  |                                   |
|   |                                  |                                  |                                   |
|   | By:                                   | SW  129 St. Rose Limited Partnership, |                                   |   |
|   |                                  | a  Delaware limited partnership,      |                                   |   |
|   |                                  | its  general partner                  |                                   |   |
|   |                                  |                                  |                                   |   |
|   |                                  | By:                                   | SW  104 Development GP LLC,            |   |   |
|   |                                  |                                  | a  Delaware limited liability company, |   |   |
|   |                                  |                                  | its  general partner                   |   |   |
|   |                                  |                                  |                                   |   |   |
|   |                                  |                                  |                                   |   |   |
|   |                                  |                                  | By:                                    |   |   |   |
|   |                                  |                                  | Name:                                  |   |   |   |
|   |                                  |                                  | Title:                                 |   |   |   |

 

----

 

**NOTES:**

 

Each Draw Request shall include invoices, receipts and/orcopies of checks evidencing the Cost of Work performed during the precedingmonth and unconditional lien releases for all prior payments, from GeneralContractor and all Subcontractors.  Rawmaterials or work-in-process at a manufacturer’s plant location are noteligible for payment.  For materials notyet incorporated in the Work, the following shall be provided by Borrower as acondition to payment:

 

1.                                       Items shall belisted separately on the Draw Request;

 

2.                                       An appropriatetransfer of title shall be executed;

 

3.                                       The methodsused to store off-Site items shall be described;

 

4.                                       Items instorage shall be identified as property of Borrower or Mortgagor, and adescription of the identification methods used shall be submitted for approvalby Lender;

 

5.                                       A writteninventory of items and method used to verify such inventory, includingBorrower’s certification that all quantities have been received in goodcondition, shall be submitted for approval by Lender; and

 

6.                                       Proof ofinsurance in Borrower’s name shall be secured.

 

Lender shall have the right to verify storage by aphysical inspection prior to invoice approval and at any time thereafter.  Such payment shall not relieve Borrower ofthe responsibility for protecting, safeguarding, and proper installation of thematerials.

 

----

 

**EXHIBIT F**

** **

**OWNERSHIPCHART**

** **

[ATTACHED]

 

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** **

**EXHIBIT G**

** **

**PENDINGACTIONS AT LAW**

** **

None.

 

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** **

**EXHIBIT H**

** **

**VIOLATIONSOF PROPERTY AGREEMENTS**

** **

None.

 

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** **

**EXHIBIT I**

** **

**LEASES**

** **

None.

 

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** **

**EXHIBIT J**

** **

**FINANCIALINFORMATION**

** **

Borrower must provide thefollowing items, as applicable, to Lender, in addition to any other itemsrequested by Lender prior to Closing or during the term of this Agreement:

 

a)              Detailed accrued expenselisting for each quarter ended during the current calendar year and for theprior full fiscal year

b)             Detailed straight line rentschedule for each quarter ended during the current calendar year and for theprior full fiscal year

c)              Details/abstracts of allpermits and licenses for tenants (i.e. satellite dishes on roof)

d)             Detailed listing of alltenants with termination options

e)              Listing of all servicecontracts and equipment leases, including contracts for elevator, landscaping,electricity, cleaning, HVAC service, security, pest control, disposal, parkinglot maintenance, insurance, etc.

f)                Access to service contracts

g)             Detail of the cash receiptsand disbursements journal, downloaded to Excel if possible for the prior fullfiscal year and the year to date period of the current year

h)             Detailed general ledger ofrevenues and expenses for each quarter during the current calendar year and theprior full fiscal year

i)                 Detailed income statementsby month for the current year and for the prior full fiscal year

j)                 Copies of property taxinvoices for the current year and the previous full fiscal year

k)              Operating expensereconciliations by tenant for the current year to date period and the previousfull fiscal year

l)                 Rent roll – current year andprior year end

m)           Lease abstracts, includingamendments, exhibits and side letters for each tenant

n)             Management/leasingagreement, current year and prior year end

o)             Check registers for theperiod from the current year to date period being reviewed through the date ofthe accountants/auditors field work

p)             Access to vendor accountspayable files

q)             Leases in effect during theprior full fiscal year and during the current year being reviewed

 

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** **

**EXHIBIT K**

** **

**FORM OFSUBORDINATION OF MANAGEMENT AGREEMENT**

** **

[ATTACHED]

** **

----

 

 

 

 

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JUNIOR MEZZANINE LOAN AGREEMENT

 

 

 

BY

 

 

 

ANDBETWEEN

 

 

 

SW131 ST. ROSE MEZZANINE BORROWER LLC(“Borrower”)

 

 

 

AND

 

 

 

BEHRINGERHARVARD ST. ROSE REIT, LLC(“Lender”)

 

----

 

 

 

 

 

----

 
| 1.     | RECITALS                                                                           | 2                                         |
|--------|------------------------------------------------------------------------------------|-------------------------------------------|
| 2.     | DEFINITIONS                                                                        | 2                                         |
| 3.     | THE LOAN; DISBURSEMENT  OF LOAN                                                    | 9                                         |
|   |                                                                               |                                      |   |
|   | (a)                                                                                | Loan                                      | 9 |
|   | (b)                                                                                | Loan Disbursements                        | 9 |
|   |                                                                               |                                      |   |
| 4.     | INTEREST PAYMENTS; NO  USURY, LOAN COMMITMENT FEE; PREPAYMENT; MATURITY; REPAYMENT | 9                                         |
|   |                                                                               |                                      |   |
|   | (a)                                                                                | Interest                                  | 9 |
|   | (b)                                                                                | No Usury                                  | 10 |
|   | (c)                                                                                | Intentionally Deleted                     | 11 |
|   | (d)                                                                                | Prepayment                                | 11 |
|   | (e)                                                                                | Maturity Date                             | 11 |
|   |                                                                               |                                      |   |
| 5.     | SECURITY FOR LOAN;  GUARANTY                                                       | 11                                        |
|   |                                                                               |                                      |   |
|   | (a)                                                                                | Security Instrument                       | 11 |
|   | (b)                                                                                | Other Loan Documents                      | 11 |
|   | (c)                                                                                | Guaranty                                  | 11 |
|   |                                                                               |                                      |   |
| 6.     | CONDITIONS PRECEDENT TO  CLOSING OF THE LOAN                                       | 11                                        |
|   |                                                                               |                                      |   |
|   | (a)                                                                                | Loan Documents                            | 11 |
|   | (b)                                                                                | Third Party Agreements                    | 12 |
|   | (c)                                                                                | Certification                             | 12 |
|   | (d)                                                                                | Financial Statements                      | 12 |
|   | (e)                                                                                | Insurance Policies                        | 12 |
|   | (f)                                                                                | Contracts                                 | 13 |
|   | (g)                                                                                | Title Insurance Policy                    | 13 |
|   | (h)                                                                                | ALTA Survey                               | 13 |
|   | (i)                                                                                | Flood Plain Certification                 | 13 |
|   | (j)                                                                                | Appraisal                                 | 13 |
|   | (k)                                                                                | Environmental Report                      | 13 |
|   | (l)                                                                                | Certification of Organizational Documents | 13 |
|   | (m)                                                                                | Legal Opinion                             | 13 |
|   | (n)                                                                                | UCC Searches                              | 14 |
|   | (o)                                                                                | Utilities                                 | 14 |
|   | (p)                                                                                | Environmental Disclosure                  | 14 |
|   | (q)                                                                                | No Default                                | 14 |
|   |                                                                               |                                      |   |
| 7.     | TITLE INSURANCE                                                                    | 14                                        |
| 8.     | INSURANCE                                                                          | 14                                        |
|   |                                                                               |                                      |   |
|   | (a)                                                                                | Insurance Requirements                    | 14 |
|   | (b)                                                                                | Initial Policies; Renewals                | 16 |
|   | (c)                                                                                | Notices                                   | 16 |
|   | (d)                                                                                | Notice of Casualty                        | 16 |
|   | (e)                                                                                | Settlement of Claim                       | 16 |

 

 

i

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|   | (f)                                                    | Application of Insurance Proceeds                                                         | 17     |
|--------|--------------------------------------------------------|-------------------------------------------------------------------------------------------|--------|
|   |                                                   |                                                                                      |   |
| 9.     | EMINENT DOMAIN                                         | 17                                                                                        |
|   |                                                   |                                                                                      |   |
|   | (a)                                                    | Notice of Condemnation                                                                    | 17     |
|   | (b)                                                    | Settlement of Claim                                                                       | 18     |
|   | (c)                                                    | Application of Condemnation Awards                                                        | 18     |
|   | (d)                                                    | Continuing Obligation to Repair                                                           | 18     |
|   | (e)                                                    | Lender Not Required to Act                                                                | 18     |
|   |                                                   |                                                                                      |   |
| 10.    | RIGHTS OF ACCESS AND  INSPECTION                       | 18                                                                                        |
| 11.    | EXPENSES                                               | 19                                                                                        |
| 12.    | FINANCIAL REPORTS,  PROPERTY REPORTS AND ANNUAL BUDGET | 19                                                                                        |
| 13.    | GENERAL COVENANTS OF  BORROWER                         | 21                                                                                        |
|   |                                                   |                                                                                      |   |
|   | (a)                                                    | Commencement and Completion of Project                                                    | 21     |
|   | (b)                                                    | Lender Approval                                                                           | 21     |
|   | (c)                                                    | Operation and Maintenance of Project                                                      | 22     |
|   | (d)                                                    | Restricted Sale and Encumbrance of Project and of  Borrower Interests; Other Indebtedness | 23     |
|   | (e)                                                    | General Indemnity                                                                         | 24     |
|   | (f)                                                    | Leases                                                                                    | 25     |
|   | (g)                                                    | Notices                                                                                   | 26     |
|   | (h)                                                    | Development                                                                               | 26     |
|   | (i)                                                    | Management                                                                                | 26     |
|   | (j)                                                    | Senior Loan                                                                               | 26     |
|   | (k)                                                    | Principal Place of Business; Choice of Law                                                | 27     |
|   | (l)                                                    | Compliance with Governmental Prohibitions                                                 | 27     |
|   |                                                   |                                                                                      |   |
| 14.    | FURTHER ASSURANCES                                     | 28                                                                                        |
| 15.    | APPRAISALS                                             | 28                                                                                        |
| 16.    | GENERAL REPRESENTATIONS  AND WARRANTIES OF BORROWER    | 28                                                                                        |
|   |                                                   |                                                                                      |   |
|   | (a)                                                    | Organization; Corporate Powers; Authorization of  Borrowing                               | 28     |
|   | (b)                                                    | Title to Property; Matters Affecting Property                                             | 29     |
|   | (c)                                                    | Financial Statements                                                                      | 31     |
|   | (d)                                                    | Budget Projections                                                                        | 31     |
|   | (e)                                                    | Intentionally Deleted                                                                     | 32     |
|   | (f)                                                    | No Loan Broker                                                                            | 32     |
|   | (g)                                                    | No Default                                                                                | 32     |
|   | (h)                                                    | Solvency                                                                                  | 32     |
|   | (i)                                                    | Violations of Governmental Prohibitions                                                   | 32     |
|   |                                                   |                                                                                      |   |
| 17.    | EVENT OF DEFAULT                                       | 33                                                                                        |
|   |                                                   |                                                                                      |   |
|   | (a)                                                    | Non-Payment                                                                               | 33     |
|   | (b)                                                    | Insurance                                                                                 | 33     |
|   | (c)                                                    | Special Purpose Entity Covenants                                                          | 33     |
|   | (d)                                                    | Borrower                                                                                  | 33     |
|   | (e)                                                    | Guaranty                                                                                  | 33     |
|   | (f)                                                    | Construction                                                                              | 33     |

 

 

ii

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|   | (g)                                                            | Fraud or Material Misrepresentation                                   | 33     |
|--------|----------------------------------------------------------------|-----------------------------------------------------------------------|--------|
|   | (h)                                                            | Sale, Encumbrance or Other Indebtedness                               | 34     |
|   | (i)                                                            | Reports and Documents                                                 | 34     |
|   | (j)                                                            | Other Breaches under this Agreement.                                  | 34     |
|   | (k)                                                            | Other Breaches Under Other Loan Documents                             | 34     |
|   | (l)                                                            | Senior Loan Documents                                                 | 34     |
|   | (m)                                                            | Judgments                                                             | 34     |
|   | (n)                                                            | Bankruptcy Proceedings                                                | 35     |
|   |                                                           |                                                                  |   |
| 18.    | REMEDIES                                                       | 35                                                                    |
|   |                                                           |                                                                  |   |
|   | (a)                                                            | Actions upon Event of Default                                         | 35     |
|   | (b)                                                            | Lender’s Right to Perform                                        | 36     |
|   | (c)                                                            | Appointment of Lender as Attorney-in-Fact                             | 36     |
|   | (d)                                                            | Cross-Default to Note, Security Instrument, and  Other Loan Documents | 36     |
|   | (e)                                                            | Recourse Limitations                                                  | 37     |
|   |                                                           |                                                                  |   |
| 19.    | ADDITIONAL ADVANCES                                            | 37                                                                    |
|   |                                                           |                                                                  |   |
|   | (a)                                                            | Disbursement of Additional Advances                                   | 37     |
|   | (b)                                                            | Conditions Precedent to Additional Advance.                           | 38     |
|   |                                                           |                                                                  |   |
| 20.    | TRANSFER OF LOAN; LOAN  SERVICER                               | 39                                                                    |
|   |                                                           |                                                                  |   |
|   | (a)                                                            | Lender’s Right to Transfer                                       | 39     |
|   | (b)                                                            | Loan Servicer                                                         | 39     |
|   | (c)                                                            | Dissemination of Information                                          | 39     |
|   |                                                           |                                                                  |   |
| 21.    | LENDER’S EXPENSES;  RIGHTS OF LENDER                      | 39                                                                    |
| 22.    | MISCELLANEOUS                                                  | 40                                                                    |
|   |                                                           |                                                                  |   |
|   | (a)                                                            | Notices                                                               | 40     |
|   | (b)                                                            | Waivers                                                               | 41     |
|   | (c)                                                            | Lender Not Partner of Borrower; Borrower in Control                   | 41     |
|   | (d)                                                            | No Third Party                                                        | 42     |
|   | (e)                                                            | Time of Essence; Context                                              | 42     |
|   | (f)                                                            | Successors and Assigns                                                | 42     |
|   | (g)                                                            | Governing Jurisdiction                                                | 42     |
|   | (h)                                                            | SUBMISSION TO JURISDICTION; SERVICE OF PROCESS                        | 42     |
|   | (i)                                                            | WAIVER WITH RESPECT TO DAMAGES                                        | 43     |
|   | (j)                                                            | Entire Agreement                                                      | 44     |
|   | (k)                                                            | Headings                                                              | 44     |
|   | (l)                                                            | Severability                                                          | 44     |
|   | (m)                                                            | Counterparts                                                          | 44     |
|   | (n)                                                            | WAIVER OF JURY TRIAL                                                  | 44     |
|   | (o)                                                            | Sole and Absolute Discretion                                          | 44     |
|   | (p)                                                            | Straight Debt Harbor                                                  | 45     |
|   | (q)                                                            | Assignment                                                            | 45     |
|   | (r)                                                            | Retainage of Subcontractors                                           | 45     |
|   |                                                           |                                                                  |   |
| 23.    | SPECIAL  REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER | 45                                                                    |

 

 

iii

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| 24. | SENIOR MEZZANINE LOAN   | 48 |
|-----|-------------------------|----|
| 25. | SUBDIVISION AND RELEASE | 49 |

 

 

iv

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** **

**JUNIOR MEZZANINE LOAN AGREEMENT**

** **

This JUNIOR MEZZANINE LOAN AGREEMENT (this “**Agreement**”) is made and entered into as of December 31,2008, by and between SW 131 ST. ROSE MEZZANINE BORROWER LLC, a Delaware limitedliability company, whose address is 2001 Bryan Street, Suite 3250, Dallas,Texas 75201 (“**Borrower**”), and BEHRINGER HARVARDST. ROSE REIT, LLC, a Delaware limited liability company, whose address is15601 Dallas Parkway, Suite 600, Addison, Texas, 75001 (“**Lender**”).

R E C I T A L S:

 

This Agreement is made with reference to the following facts:

 

A.         Borrower isdirectly or indirectly the legal and beneficial owner of one-hundred percent(100%) of the Equity Interests in SW 132 ST. ROSE SENIOR BORROWER LLC, aDelaware limited liability company (“**Mortgagor**”).

 

B.            Mortgagor isthe owner of that certain land located in Henderson, Clark County, Nevada, andmore particularly described on Exhibit A attached hereto, togetherwith appurtenances (the “**Land**”). TheLand is comprised of a portion that is zoned RH-36 (High Density Residential),which is generally the western 18.151 acres of the Land (the “**Residential Tract**”) and a portion that iszoned CC-PUD (Community Commercial with Planned Unit Development Overlay),which is generally the eastern 6.271 acres of the Land (the “**Commercial Tract**”). Mortgagor willconstruct on the Residential Tract a 430-unit apartment complex (the “**Project**”).

 

C.            Contemporaneouslyherewith, Mortgagor will enter into a Construction Loan Agreement with Bank ofAmerica, N.A. and the lenders who from time to time agree to fund parts of suchloan (“**Senior Lender**”), providing a loan inthe amount of Thirty Eight Million Six Hundred Thousand and No/Dollars($38,600,000) (the “**Senior Loan**”),secured by a deed of trust, of even date herewith (together with any and allextensions, renewals, substitutions, replacements, amendments, modificationsand/or restatements thereof) in favor of Senior Lender encumbering the Land andthe Project.

 

D.            Contemporaneouslywith entering into the Senior Loan, SW 122 St. Rose Senior Borrower LLC, aDelaware limited liability company (“**Commercial Tract Borrower**”),will enter into a Term Loan Agreement with Bank of America, N.A., as lender forits sole account (“**Commercial Tract Lender**”),providing a loan in the amount of Two Million Nine Hundred Fifty Thousand andNo/Dollars ($2,950,000) (the “**CommercialTract Loan**”), secured by a deed of trust, of even date herewith(together with any and all extensions, renewals, substitutions, replacements,amendments, modifications and/or restatements thereof) in favor of CommercialTract Lender encumbering the Land and the Project.

 

 

1

----

 

E.             Borrower hasrequested that Lender, as lender, make one or more loans to Borrower in theaggregate amount of Twenty One Million Forty Three Thousand One Hundred NinetySeven and No/Dollars ($21,043,197) (the “**Maximum Aggregate AdvanceAmount**”), one of such loans (the “**Loan**”)will be made pursuant to this Agreement, which Loan is to be advanced as hereinafterprovided and is to be evidenced by the Note. $14,185,154 of the MaximumAggregate Advance Amount will be advanced under the Senior Mezzanine LoanAgreement, subject to the terms and provisions of the Senior Mezzanine LoanAgreement, and $1,000 of the Loan will be advanced under this Agreement at theexecution of this Agreement (the “**Initial Advance**”),subject to the terms and provisions of this Agreement. The Note is to besecured by the Junior Subordinate Deed of Trust, Assignment of Rents and Leases,Security Agreement, Fixture Filing and Financing Statement (the “**Security Instrument**”) and other collateral as specified in Section 5below.

 

F.             Mortgagor iscurrently pursuing a subdivision of the Land and intends to convey toCommercial Tract Borrower the Commercial Tract. When Commercial Tract Borroweracquires title to the Commercial Tract (the “**TransferDate**”), the lien of the Security Instrument will be partiallyreleased as to the Commercial Tract.

 

G.            The proceeds ofthe Loan are to be used by Borrower to, among other things, pay the costs andexpenses, if any, referred to in Section 3(b) below.

 

NOW, THEREFORE, in consideration of the foregoing and themutual promises and agreements hereinafter contained and other good andvaluable consideration, the receipt and sufficiency of which are herebyacknowledged, the parties hereby agree as follows:

**1.**             **RECITALS**. The recitalsset forth above are true and correct and are incorporated herein by reference.

 

**2.**             **DEFINITIONS**. The followingterms, when used in this Agreement (including when used in the above recitals),shall have the following meanings:

 

(a)                                  “**AccountingRecords**”: shall mean such records used to prepare financialstatements including but not limited to: (i) supporting documentation forcash disbursements (including check copies and invoices); (ii) supportingdocumentation for cash receipts (including deposit slips); (iii) contracts;(iv) check registers; (v) monthly bank account reconciliations; (vi) generalledger; (vii) job cost detail of construction in progress in the same formas provided to Senior Lender; (viii) detail of draw requests on the SeniorLoan; (ix) Senior Lender’s monthly loan statement; and (x) such otherdocumentation in the possession of Borrower or its Affiliates or which Borrowerwill use all commercially reasonable efforts to acquire, as Lender shallreasonably require for the preparation of financial statements for the Project,Mortgagor or Borrower.

 

 

2

----

 

(b)                                 “**ADA**”shall mean Americans with Disabilities Act of 1990, Pub. L. No. 89-670,104 Stat. 327 (1990), as amended, and all regulations promulgated pursuantthereto.

 

(c)                                  “**AdditionalAdvance**”: shall have the meaning given in Section 19hereof.

 

(d)                                 “**Affiliate**”:of any specified person or entity shall mean any other person or entity,directly or indirectly, controlling or controlled by or under direct orindirect common control with such specified person or entity. For purposes ofthis definition, “control” shall mean the ability, whether by the ownership ofshares or other equity interests, by contract or otherwise, to elect a majorityof the directors of a corporation, to make management decisions on behalf of,or independently to select the managing partner of, a partnership, or otherwiseto have the power independently to remove and then select a majority of thoseindividuals exercising managerial authority over an entity. Control of anentity shall be conclusively presumed in the case of the ownership of more than50% of the equity interests in the entity.

 

(e)                                  “**AnnualBudget**”: shall mean, for any period, the budget submitted to Lenderand in effect for such period as provided in Section 12 hereof.

 

(f)                                    “**ApprovedChange Orders**”: shall mean any change orders to the Plans requestedby the Borrower and approved by the Lender as outlined in Section 13(b) hereof.

 

(g)                                 “**AvailableAssets**”: shall have the meaning given in the Guaranty.

 

(h)                                 “**BankruptcyProceedings**”: shall have the meaning given in Section 17(n).

 

(i)                                     “**Borrower**”:means the entity identified as “Borrower” in the first paragraph of thisAgreement, together with its successors and assigns.

 

(j)                                     “**Business Day**”: shall mean all days other than Saturday,Sunday or any other day on which national banks doing business in Dallas,Texas are not open for business.

 

(k)                                  “**Code**”:the Internal Revenue Code of 1986, as amended from time to time, or thecorresponding provisions of any successor federal income tax law. Any referenceto a particular provision of the Code shall include any amendment of suchprovision or the corresponding provision of any successor federal income taxlaw.

 

(l)                                     “**Collateral**”:shall have the meaning given in the Security Instrument.

 

 

3

----

 

(m)                               “**CommercialDeed of Trust**”: shall mean that certain deed of trust made by theMortgagor for the benefit of the Commercial Tract Lender, which prior to theTransfer Date, will encumber both the Residential Tract and the CommercialTract, and after the Transfer Date will encumber only the Commercial Tract.

 

(n)                                 “**CommercialTract**”: shall have the meaning given in the Recitals of thisAgreement.

 

(o)                                 “**CommercialTract Borrower**”: shall have the meaning given in the Recitals ofthis Agreement.

 

(p)                                 “**CommercialTract Lender**”: shall have the meaning given in the Recitals of thisAgreement.

 

(q)                                 “**CommercialTract Loan**”: shall have the meaning given in the Recitals of thisAgreement.

 

(r)                                    “**Completion**”:shall have the meaning given in the Guaranty.

 

(s)                                  “**ConstructionBudget**”: shall mean the construction budget attached hereto as Exhibit D.

 

(t)                                    “**DefaultInterest Rate**”: shall have the meaning given in the Note.

 

(u)                                 “**Draw Request**”:shall mean a request for additional advances on the Loan and/or under theSenior Mezzanine Loan Agreement submitted by Borrower in the form attachedhereto as Exhibit E.

 

(v)                                 “**Encumbrance**”:shall mean any pledge, encumbrance, hypothecation or other grant of securityinterest, whether direct or indirect, voluntary or involuntary or by operationof law, and whether or not consented to by Lender, of or in (i) all or anyportion of, or interest in, the Project (other than any encumbrance by theSenior Loan Documents and the Permitted Exceptions), or (ii) any EquityInterests in Mortgagor, or (iii) any part of the Principal’s EquityInterests in Borrower.

 

(w)                               “**EnvironmentalIndemnity**”: shall mean the Mezzanine Environmental IndemnityAgreement of even date herewith, executed by Borrower and containingrepresentations, warranties, covenants and indemnities in favor of Lender withrespect to Hazardous Materials.

 

(x)                                   “**EquityInterests**”: means, with respect to any Person, shares of capitalstock, partnership interests, membership interests in a limited liabilitycompany, beneficial interests in a trust or other equity ownership interests insuch Person, and any warrants, options or other rights entitling the holderthereof to purchase or acquire from such Person any such equity interest issuedby such Person.

 

 

4

----

 

(y)                                 “**EstimatedCollateral Value Statement**”: shall have the meaning given in theGuaranty.

 

(z)                                   “**EstimatedValue**” means the estimated value of the property encumbered by theSecurity Instrument, as such value may be determined from time to time byLender, less the amount, if any, of all other debt secured by such propertythat is senior to both the Loan and the loan under the Senior Mezzanine LoanAgreement.

 

(aa)                            “**Event ofDefault**”: shall have the meaning given in Section 17hereof.

 

(bb)                          “**Final Map**”:shall have the meaning given in Section 25 hereof.

 

(cc)                            “**GeneralContractor**”: means TCR Nevada Construction Limited Partnership, aTexas limited partnership.

 

(dd)                          “**GovernmentalAuthority**”: shall mean any federal, state, county, municipal,parish, provincial, tribal or other government, or any department, commission,board, court, agency (including, without limitation, the U. S. EnvironmentalProtection Agency), whether of the United States of America or any othercountry, or any instrumentality of any of them, or any other politicalsubdivision thereof (a) in which any portion of the Land is located, (b) inwhich any of Mortgagor, Borrower, Guarantor or Lender is located or conductsbusiness, or (c) exercising jurisdiction over Mortgagor, Borrower,Guarantor or Lender, or any of the Land, and any entity exercising legislative,judicial, regulatory, or administrative functions of, or pertaining to,government including, without limitation, any arbitration panel, any court orany commission.

 

(ee)                            “**GovernmentalRequirements**”: shall mean all laws, ordinances, rules, regulations,orders and directives of any Governmental Authority applicable to any ofMortgagor, Borrower, Guarantor, Lender or any of the Land, including, withoutlimitation, all applicable licenses, building codes, restrictive covenants,zoning and subdivision ordinances, flood disaster, health and environmentallaws and regulations, and the ADA.

 

(ff)                                **“Guarantor”**: shall meanCFP Residential, L.P., Kenneth J. Valach, J. Ronald Terwilliger, and BruceHart.

 

(gg)                          “**Guaranty**”:means that certain Mezzanine Guaranty, of even date herewith, executed by theGuarantors, jointly and severally, in favor of Lender.

 

(hh)                          “**HazardousMaterials**”: shall have the meaning given in the EnvironmentalIndemnity.

 

(ii)                                  “**Indebtedness**”:shall mean the principal of, interest on, and any other amounts due at any timeunder, this Agreement, the Note, the Security

 

 

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Instrument or any other Loan Document, including prepayment premiums,late charges, default interest, and advances to protect the security of theCollateral.

 

(jj)                                  “**InitialAdvance**”: shall have the meaning given in the Recitals of thisAgreement.

 

(kk)                            “**InspectingArchitects/Engineers**”: shall mean architects and/or engineersselected by Borrower and reasonably acceptable to Lender.

 

(ll)                                  “**JuniorMezzanine Advance Amount**” means the principal amount outstandingunder the Loan.

 

(mm)                      “**Land**”: shall have the meaning given in the Recitals of this Agreement;provided, however, that from and after the Transfer Date, the Land shall bedeemed to be comprised solely of the Residential Tract.

 

(nn)                          “**Leases**”:shall mean all present and future leases, subleases, licenses, concessions orother possessory interests now or hereafter in force, whether oral or written,covering or affecting the Project, or any portion of the Project, and allmodifications, extensions or renewals.

 

(oo)                          “**Lender**”:means the entity identified as “Lender” in the first paragraph of thisAgreement and its successors and assigns.

 

(pp)                          “**Loan**”:shall have the meaning given in the Recitals of this Agreement.

 

(qq)                          “**LoanDocuments**”: shall mean the Note, this Loan Agreement, the SecurityInstrument, the Guaranty, the Environmental Indemnity, and all other documentsexecuted by Borrower or Guarantors to evidence, secure or set out the terms ofthe Loan, each as the same may hereafter be amended, modified and restated fromtime to time.

 

(rr)                                “**ManagementAgreement**”: shall mean the Management Agreement, to be entered intobetween Mortgagor and Manager, upon the approval of Lender, pursuant to whichManager will agree to manage the operations of the Project, as the same may beamended from time to time, or any other management agreement approved by Lenderpursuant to Section 13(i) .

 

(ss)                            “**Manager**”:shall mean a property management company approved by Lender pursuant to Section 13(i) hereof.

 

(tt)                                “**MaturityDate**” shall have the meaning given in the Note.

 

(uu)                          “**MaximumAggregate Advance Amount**” shall have the meaning given in theRecitals of this Agreement.

 

 

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(vv)                          “**Mortgagor**”:shall have the meaning given in the Recitals of this Agreement.

 

(ww)                      “**Note**”:shall mean that certain Junior Mezzanine Promissory Note, dated of even dateherewith, in the Maximum Aggregate Advance Amount, made payable by Borrower tothe order of Lender, evidencing all amounts outstanding under the Loan fromtime to time, as the same may be amended from time to time.

 

(xx)                              “**Permits**”:shall mean all licenses, permits, approvals, franchises, privileges,immunities, grants, ordinances, classifications, certificates and registrationswhich are necessary for Mortgagor to develop, construct and operate theProject.

 

(yy)                          “**PermittedExceptions**”: shall mean (1) the title exceptions included inthe Policy required to be delivered to Lender pursuant to Section 7(a) hereof,as the same may be endorsed from time to time with the consent of the Lender, (2) liensand security interests securing the Loan, the Senior Loan and, prior to theTransfer Date, the Commercial Tract Loan, (3) liens for taxes, assessmentsor other governmental charges or levies that are not then due or that are beingcontested in good faith and in accordance with applicable statutory procedures,(4) mechanic’s liens against the Project which are bonded off, released ofrecord or otherwise remedied to Lender’s reasonable satisfaction within 30 daysof the date of creation, (5) Leases entered into on terms allowed by thisAgreement and (6) other matters approved in writing by Lender, whichincludes any liens and security interests granted in connection with the SeniorMezzanine Loan Agreement or the loan thereunder.

 

(zz)                              “**Person**”:shall mean any individual, corporation, partnership, limited liability company,joint venture, estate, trust, or unincorporated association, any other entity,any federal, state, county or municipal government or any bureau, department oragency thereof and any fiduciary acting in such capacity on behalf of theforegoing.

 

(aaa)                      “**Plans**”:shall mean the plans and specifications identified in Exhibit Chereto.

 

(bbb)                   “**Policy**”: shallhave the meaning given in Section 7(a) hereof.

 

(ccc)                      “**Principal**”:shall mean SW 130 St. Rose Limited Partnership, a Delaware limited partnership,the sole member of Borrower and the holder of all Equity Interests in Borrower,and any person or entity who becomes the owner of any Equity Interest inBorrower after the date of this Agreement and is identified as such in anamendment or supplement to this Agreement.

 

 

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(ddd)                   “**Project**”: shallhave the meaning given in the Recitals of this Agreement. The Project includesthe Residential Tract.

 

(eee)                      “**REA**”:shall have the meaning given in Section 25 hereof.

 

(fff)                            “**ResidentialTract**”: shall have the meaning given in the Recitals of thisAgreement.

 

(ggg)                   “**Sale**”: shallmean any sale, assignment, transfer, conveyance or other disposition, whethervoluntary or involuntary, and whether or not consented to by Lender of (i) allor any portion of, or interest in, the Land or the Project (other than theconveyance of the Commercial Tract to the Commercial Tract Borrower), (ii) allor any portion of the Equity Interests in Mortgagor, or (iii) all or anyportion of the Principal’s Equity Interests in Borrower.

 

(hhh)                   “**Security Instrument**”:shall have the meaning given in the Recitals to this Agreement.

 

(iii)                               “**Senior Deedof Trust**”: shall mean that certain deed of trust securing the SeniorLoan.

 

(jjj)                               “**Senior Indemnity**”: shall mean the Environmental IndemnityAgreement between Mortgagor, Senior Lender and the other parties thereto.

 

(kkk)                      “**Senior Loan**”:shall have the meaning given in the Recitals of this Agreement.

 

(lll)                               “**Senior LoanAgreement**”: shall mean the Construction Loan Agreement betweenSenior Lender and Mortgagor evidencing the Senior Loan.

 

(mmm)             “**Senior Loan Documents**”:shall mean the Senior Note, the Senior Deed of Trust, the Senior LoanAgreement, the Senior Indemnity Agreement, any guaranty provided by theguarantors to the Senior Loan, financing statements filed in connection withthe Senior Loan, and all other documents executed by Mortgagor or Guarantor infavor of Senior Lender to evidence or secure the Senior Loan or reasonablyrelated to the Senior Loan, including, but not limited to, budgets and drawrequests, as each may be amended, modified or restated with the consent ofSenior Lender.

 

(nnn)                   “**Senior Mezzanine AdvanceAmount**” means the principal amount outstanding on the SeniorMezzanine Loan Agreement.

 

(ooo)                   “**Senior Mezzanine LoanAgreement**” means that certain Senior Mezzanine Loan Agreementbetween Borrower and Lender dated of even date herewith.

 

 

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(ppp)                   “**Senior Note**”: shallmean the promissory notes evidencing the Senior Loan and all schedules, riders,allonges and addenda, as such promissory notes may be amended from time to timewith the consent of Senior Lender.

 

(qqq)                   “**Title Insurer**”:shall mean Chicago Title Insurance Company.

 

(rrr)                            “**Third PartyAgreement**”: shall mean any agreement other than Leases and thePermitted Exceptions that will be binding on the Project, Mortgagor or Borrowerafter the closing of the Loan.

 

(sss)                      “**TransferDate**”: shall have the meaning given in the Recitals of thisAgreement.

 

**3.**             **THE LOAN;DISBURSEMENT OF LOAN**.

 

(a)                                  Loans. On the basisof the covenants, agreements and representations of Borrower contained hereinand comparable provisions of the Senior Mezzanine Loan Agreement and subject tothe terms and conditions hereinafter set forth and comparable provisions of theSenior Mezzanine Loan Agreement, Lender shall lend to Borrower the MaximumAggregate Advance Amount, the proceeds of which are to be disbursed by Lenderin accordance with the provisions of Section 3(b) hereof andcomparable provisions of the Senior Mezzanine Loan Agreement.

 

(b)                                 Loan Disbursements. At theexecution of this Agreement, Lender has advanced the Initial Advance to theBorrower. All Additional Advances against the Loan will be disbursed inaccordance with Section 19 hereof. Upon submission by Borrower of aDraw Request, Lender shall (subject to satisfaction of the terms and conditionsof Section 19) advance to Borrower hereunder against the Loan the amountrequested by Borrower less the portion thereof, if any, simultaneously advancedpursuant to the Senior Mezzanine Loan Agreement. In no event shall theaggregate principal amount outstanding hereunder exceed the Maximum AggregateAdvance Amount less the Senior Mezzanine Advance Amount as it stands at suchtime.

 

**4.**             **INTEREST PAYMENTS; NO USURY, LOAN COMMITMENT FEE; PREPAYMENT; MATURITY;REPAYMENT.**

 

(a)                                  Interest. Interest onthe principal balance of the Loan shall accrue and shall be payable in theamounts and at the times set forth in the Note. Borrower agrees to pay, on theMaturity Date, the unpaid principal balance of the Loan, together with allaccrued but unpaid interest thereon.

 

(b)                                 No Usury. Theprovisions of this Agreement, the Note, the Security Instrument and of allother agreements between Borrower and Lender, whether now existing or hereafterarising and whether written or oral,

 

 

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including, but not limited to, the Loan Documents, are hereby expresslylimited so that in no contingency or event whatsoever, whether by reason ofdemand or acceleration of the maturity of this Note or otherwise, shall theamount contracted for, charged, taken, reserved, paid, or agreed to be paid toLender for the use, forbearance, retention or detention of the money loanedunder the Note and related indebtedness exceed the maximum amount permissibleunder applicable law. If, from any circumstance whatsoever, performance orfulfillment of any provision hereof or of any agreement between Borrower andLender shall, at the time performance or fulfillment of such provision shall bedue, exceed the limit for interest prescribed by law or otherwise transcend thelimit of validity prescribed by applicable law, then ipso facto the obligationto be performed or fulfilled shall be reduced to such limit; and if, from anycircumstance whatsoever, Lender shall ever receive anything of value deemedinterest by applicable law in excess of the maximum lawful amount, an amountequal to any excessive interest shall be applied to the reduction of theprincipal balance owing under the Note in the inverse order of its maturity(whether or not then due) or at the option of Lender be paid over to Borrower,and not to the payment of interest. All interest (including any amounts orpayments judicially or otherwise under the law deemed to be interest)contracted for, charged, taken, reserved, paid or agreed to be paid to Lendershall, to the extent permitted by applicable law, be amortized, prorated,allocated and spread throughout the full term of the Note, including anyextensions or renewals thereof, until payment in full of the Indebtedness sothat the interest on the Loan for such full period will not exceed at any timethe maximum amount permitted by applicable law. To the extent that Lender isrelying on Chapter 303, as amended, of the Texas Finance Code to determinethe maximum amount of interest permitted by applicable law on the principal ofthe Loan, Lender will utilize the weekly rate ceiling from time to time ineffect as provided in such Chapter 303, as amended. To the extent UnitedStates federal law permits a greater amount of interest on the Loan than ispermitted under Texas law, Lender will rely on United States federal lawinstead of such Chapter 303, as amended, for the purpose of determiningthe maximum amount permitted by applicable law. Additionally, to the extentpermitted by applicable law now or hereafter in effect, Lender may, at itsoption and from time to time, implement any other method of computing themaximum lawful rate under such Chapter 303, as amended, or under otherapplicable law by giving notice, if required, to Borrower as provided byapplicable law now or hereafter in effect. This Section 4(b) willcontrol all agreements between Borrower and Lender.

 

(c)                                  Intentionally Deleted.

 

(d)                                 Prepayment. All amountsdue and owing under the Note from time to time may only be prepaid inaccordance with the terms of the Note except at any time after 150 days afterCompletion.

 

 

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(e)                                  Maturity Date.

 

(i)                                     The outstanding principalbalance of the Note and all accrued and unpaid interest thereon shall becomedue and payable on the Maturity Date unless the same is otherwise acceleratedin accordance with the provisions hereof or the other Loan Documents.

 

(ii)                                  Subject to the provisions ofSection 13(d) hereof, in the event that the Senior Note ispaid in full at any time prior to the Maturity Date of the Loan, theIndebtedness shall then be immediately due and payable regardless of the thenstated Maturity Date of the Loan.

 

**5.**             **SECURITY FOR LOAN; GUARANTY.**

 

(a)                                  Security Instrument. The Loanshall be secured by, among other things, the Security Instrument.

 

(b)                                 Other Loan Documents. The Loanshall be further secured and supported by the Environmental Indemnity and theother Loan Documents.

 

(c)                                  Guaranty. As additionalsecurity for the Loan, the Guarantors shall execute and deliver to Lender theGuaranty.

 

**6.**             **CONDITIONS PRECEDENT TO CLOSINGOF THE LOAN**. Prior to the funding of the Loan (unless otherwiseprovided), all of the following conditions shall have been satisfied, and/orBorrower, Guarantor or Mortgagor, as applicable, shall have furnished to Lenderthe following, all in form and substance satisfactory to Lender in its sole andabsolute discretion:

 

(a)                                  Loan Documents. Borrower,Guarantor and Mortgagor, as applicable, shall have provided to Lender dulyexecuted and, where appropriate, notarized originals of the Loan Documents,each satisfactory to Lender in its sole and absolute discretion, including thefollowing:

 

(i)                                     this Agreement;

 

(ii)                                  the Note;

 

(iii)                               the Security Instrument, inrecordable form in the State of Nevada;

 

(iv)                              the Guaranty;

 

(v)                                 the Environmental Indemnity;

 

(vi)                              Certification ofOrganizational Documents; and

 

 

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(vii)                           such other agreements byBorrower as may be required by other provisions of this Agreement.

 

(b)                                 Third Party Agreements.

 

(i)                                     Copies. Borrowershall have provided to Lender executed copies, certified by Borrower as beingtrue, correct and complete, of the Senior Loan Documents and the other ThirdParty Agreements then in effect, if any.

 

(ii)                                  Intercreditor andSubordination Agreement. Senior Lender shall have provided to Lenderan executed copy of that certain Intercreditor and Subordination Agreement byand between Senior Lender and Lender dated of even date herewith.

 

(c)                                  Certification. Borrower shallhave provided to Lender a certification by Borrower as of the date of thisAgreement (which is the date that the commitment of Lender to make the Loan toBorrower becomes binding on Lender) of the Construction Budget and thereasonably estimated costs of the improvements that would be capitalized byMortgagor as real property for federal income tax purposes consistent with pastpractices of the affiliates of Mortgagor.

 

(d)                                 Financial Statements. Borrowershall have provided to Lender with (i) respect to Borrower, Mortgagor, andthe Project, financial statements and other financial information (includingbut not limited to the items listed on Exhibit J after Completionof the Project and to the extent not already provided pursuant to Section 12hereof), certified by Borrower and Mortgagor as being true, correct andcomplete in all material respects, and in the form and containing the detailand supporting information as required by Lender for the underwriting for theLoan, and (ii) with respect to all Guarantors, the Estimated CollateralValue Statement, dated as of June 30, 2008.

 

(e)                                  Insurance Policies. Borrowershall have provided to Lender the original insurance policies, certified copiesthereof or certificates thereof, together with evidence of premium payments,for the insurance as more fully provided in Section 8 hereof, whichshould include Hazard and Public Liability and Worker’s Compensation Insurance.

 

(f)                                    Contracts. Borrowershall have provided or will provide to Lender copies of any contracts regardingthe Project entered into by Mortgagor with any contractors or engineers and, ifrequested by Lender, copies of contracts, if any, with any subcontractors forthe construction or installation of the improvements made or to be made inconnection with the Project.

 

 

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(g)                                 Title Insurance Policy. Lender shallhave received, reviewed and approved Mortgagee’s Policy of Title Insurancedescribed in Section 7 hereof.

 

(h)                                 ALTA Survey. Lender shallhave received a current ALTA survey of the Land (the “**Survey**”) completed in accordance withSenior Lender’s requirements, satisfactory to Lender and to the Title Insurerand certified to Senior Lender, Lender (and its successors and assigns) and theTitle Insurer.

 

(i)                                     Flood Plain Certification. To the extentnot provided on the Survey, Lender shall have received evidence that the Landis not located within any flood plain or, if the Land is located within a floodplain, Borrower has obtained and is maintaining in full force and effect apolicy or policies of flood insurance pursuant to Section 8 hereof.Any such certifications shall also be certified to Lender and its successorsand assigns.

 

(j)                                     Appraisal. Lender shallhave received an appraisal of the Project prepared by a licensed appraiseracceptable to Lender, in form and substance required by Senior Lender, but alsoaddressed to Lender and its successors and assigns, in an amount equal to orgreater than $80,900,000.

 

(k)                                  Environmental Report. Lender shallhave received an environmental report covering the Land, prepared by aprofessional acceptable to Lender, in form and substance as required by SeniorLender, and also certified to Lender and its successors and assigns.

 

(l)                                     Certification ofOrganizational Documents. Lender shall have received a writtencertification attaching the required documents with respect to both Mortgagorand Borrower, confirming (i) that true, complete and correct copies of theorganizational documents have been attached to the certification, (ii) thatno modifications of such documents exist which have not been provided toLender, and (iii) that the provisions of Section 23 hereofhave been incorporated into the organizational documents.

 

(m)                               Legal Opinion. Lender shallhave received a written legal opinion or legal opinions from Borrower’s counsel(which counsel must be acceptable to Lender) in form acceptable to Lender andits counsel, opining as to such matters as Lender may reasonably require,including an opinion regarding: (1) due organization and valid existence, (2) authority,(3) enforceability of the Loan Documents, and (4) no usury.

 

(n)                                 UCC Searches. Lender shallhave received full Uniform Commercial Code searches, performed by a searchcompany and in jurisdictions satisfactory to Lender, with respect to Borrowerand the Mortgagor disclosing no matters objectionable to Lender.

 

 

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(o)                                 Utilities. Lender shallhave received evidence that all sewer, water, electrical, telephone and anyother utility services necessary to obtain a certificate of occupancy for theProject are available at the Land in adequate supply for the use and operationof the Land and each provider of utility services has a binding obligation todeliver the necessary services to the completed residences. This evidence mayinclude letters from the applicable utility providers.

 

(p)                                 Environmental Disclosure. In accordancewith all applicable laws, Borrower shall provide a true, correct and completecopy of any disclosure document or other instrument required by any such lawrelating to environmental matters.

 

(q)                                 No Default. Therepresentations and warranties of Borrower contained in this Agreement shall betrue, correct and complete in all material respects, except the representationsin Section 16(c) which need be accurate only as of theeffective date of such financial statements, and no Event of Default, asdefined below, or circumstance or event which upon the lapse of time, thegiving of notice or both, could become an Event of Default shall have occurred.

 

Lender acknowledges, by its execution of this Agreement, that allconditions listed in this Section 6 have been satisfied to Lender’ssatisfaction or waived by Lender, both as to the Initial Advance under the Loanand any Additional Advance to be made in the future.

 

**7.**             **TITLE INSURANCE**. Concurrentlywith the closing of the Loan, Borrower shall deliver or cause to be deliveredto Lender, a Mortgagee’s Policy of Title Insurance (“**Policy**”) naming Mortgagor as fee simple owner of the Landissued by the Title Insurer, meeting the following requirements: (i) withcoverage amount not less than the Loan Amount; (ii) dated as of a date notearlier than the date of Closing; and (iii) the legal description insuredunder such policy shall include any easements benefiting the Land.

 

**8.**             **INSURANCE**.

 

(a)                                  Insurance Requirements.  Borrowershall obtain and keep in full force and effect builder’s risk insurance (the “**Builder’s Risk Insurance Policy**”) coverage or permanentCommercial Property Causes of Loss — Special Form insurance coverage asappropriate, reasonably satisfactory to Lender, on the Project. All insurancepolicies shall be issued by carriers with a Best’s Insurance Reportspolicy holder’s rating of A- or better, and a financial size category of Class IXor larger. The policies shall provide for the following, and any other coveragethat Lender may from time to time deem reasonably necessary.

 

(i)                                     Lender’s contact informationin its capacity as mortgagee and/or additional insured, as appropriate:

 

 

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Behringer Harvard St. Rose REIT, LLC and itsaffiliates, successors and/or assigns

15601 Dallas Parkway, Ste. 600

Addison, Texas 75001

Attn:       Risk Management

 

(ii)                                  Commercial Property Causesof Loss — Special Form and/or Builders Risk in the amount of 100% of thereplacement cost of all structures and personal property located or to belocated on the Project. Coverage shall include ordinance and law, increasedcost of construction, and demolition costs. If the policy is written on aCO-INSURANCE basis, the policy MUST contain an AGREED AMOUNT ENDORSEMENT asevidence that the coverage is in an amount sufficient to insure the full amountof the mortgage indebtedness. Unless inconsistent with the requirements of theSenior Lender or the Commercial Tract Lender, “Behringer Harvard St. Rose REIT,LLC and its affiliates, successors and/or assigns” is to be named as the “Mortgagee”and “Loss Payee” (without contribution).

 

(iii)                               Commercial General Liabilitycoverage in a minimum amount of not less than $1,000,000.00 per occurrence and$2,000,000.00 in the aggregate, together with excess liability coverage in aminimum amount of not less than $15,000,000.00. “Behringer Harvard St. RoseREIT, LLC and its affiliates, successors and/or assigns” is to be named as “AdditionalInsured”. Please note this coverage must be separately issued and provided forboth (i) Mortgagor, (ii) Borrower, and (iii) Mortgagor’s generalcontractor.

 

(iv)                              Rent Loss or businessinterruption coverage in a minimum amount of not less that the appraisedrentals for a minimum of twelve (12) months.

 

(v)                                 Flood hazard coverage in atleast the minimum amount available, if the Project is located in a specialflood hazard area (“**Flood Hazard Area**”)as designated by the Federal Emergency Management Agency on its Flood HazardBoundary Map and Flood Insurance Rate Maps, and the Department of Housing andUrban Development, Federal Insurance Administration, Special Flood Hazard AreaMaps. Unless inconsistent with the requirements of the Senior Lender or theCommercial Tract Lender, “Behringer Harvard St. Rose REIT, LLC and itsaffiliates, successors and/or assigns” is to be named as the “Mortgagee” and “LossPayee” (without contribution).

 

 

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(vi)                              Earthquake coverage in theamounts/deductibles and in the form and substance reasonably satisfactory tothe Lender in the event the Project is located in an area with a high degree ofseismic activity.

 

(vii)                           Workers Compensationinsurance as required by law.

 

(viii)                        Such other types and amountsof insurance with respect to the premises and the operation thereof which arecommonly maintained in the case of the other property and buildings similar tothe Project in nature, use, location, height, and type of construction, as mayfrom time to time be reasonably required by Lender in its capacity as mortgage.

 

(ix)                                Each policy shall providethat it may not be canceled, reduced or terminated without at least thirty (30)days prior written notice to the Lender.

 

(x)                                   Proof of insurance requiredunder (ii), (iv), (v), (vi) shall be evidenced on Accord Form 28Evidence of Commercial Property Insurance. Proof of insurance required under (iii) and (vii) shall beevidenced on Accord Form 25 Certificate of Liability Insurance.

 

(xi)                                The evidence of insurancemust identify the Borrower as an Insured/Additional Insured.

 

(xii)                             The Project location must bereferenced on the evidence of insurance.

 

(b)                                 Initial Policies; Renewals.  The initial policies shall be prepaid anddelivered to the Lender prior to closing, and all renewal policies shall beprovided to Lender as evidence of such insurance.  Certificates as referenced in Section 8(a)(x) maybe substituted for actual policies.

 

(c)                                  Notices.  Borrower shall cause a copy of thecertificate(s) to be sent to Jill Buffington via — e-mailjbuffington@bhfunds.com or facsimile (214) 655-1610 [Phone: (469) 341-2420],with the original being mailed to the Lender as shown above in Section 8(a)(i).

 

(d)                                 Notice of Casualty.  Borrower shall give to Lender immediatenotice of any material loss occurring on or with respect to the Project.

 

(e)                                  Settlement of Claim.  In case of loss covered by any of suchpolicies, Lender is authorized to adjust, collect and compromise, in itsdiscretion, all claims thereunder if an Event of Default has occurred and iscontinuing at the time, subject to the rights of the Senior Lender, prior tothe Transfer Date, the Commercial Tract Lender, and the rights of the lenderunder the Senior Mezzanine Loan Agreement. In the event of any adjustment, collection and compromise by Lender,Borrower covenants to sign upon

 

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demand, or Lender may sign or endorse on Borrower’s behalf, allnecessary proofs of loss, receipts, releases and other papers required by theinsurance companies to be signed by Borrower. Borrower hereby irrevocably appoints Lender as its attorney-in-fact forthe purposes set forth in the preceding sentence, subject to the rights of theSenior Lender, prior to the Transfer Date, the Commercial Tract Lender, and therights of the lender under the Senior Mezzanine Loan Agreement.  Subject to the rights of the Senior Lender,prior to the Transfer Date, the Commercial Tract Lender, and the rights of thelender under the Senior Mezzanine Loan Agreement, Lender may deduct from suchinsurance proceeds any reasonable expenses incurred by Lender in the collectionand settlement thereof, including attorneys’ and adjustors’ fees andcharges.  Nothing contained in thisAgreement shall create any responsibility or obligation of the Lender tocollect any amounts owing on any insurance policy, to rebuild or replace thedamaged or destroyed portions of the Project or to perform any other relatedact.  The Lender shall not, by the factof approving, disapproving, accepting, preventing, obtaining or failing toobtain any insurance, incur any liability for or with respect to the amount ofinsurance carried, the form or legal sufficiency of insurance contracts, solvencyof insurance companies, or payment or defense of lawsuits, and Borrower herebyexpressly assumes full responsibility therefor and all liability, if any, withrespect thereto.

 

(f)                                    Application of InsuranceProceeds.  Anyinsurance proceeds received by Mortgagor or Borrower under any of such casualtypolicies shall, subject to the rights of the Senior Lender, prior to theTransfer Date, the Commercial Tract Lender, and the rights of the lender underthe Senior Mezzanine Loan Agreement, be applied, at the option of the Lender,toward pre-payment or reimbursement of the Loan and any other amounts evidencedor secured by the Loan Documents, or to the rebuilding or repairing of theProject so damaged or destroyed, as the Lender in its sole and unreviewable discretionmay elect; provided, however, that Lender will allow insurance proceeds to beused for restoration of the Project if (i) the conditions for Borrower’suse of insurance contained in the Senior Loan Documents are satisfied(substituting Lender for Senior Lender thereunder in making related decisions)or (ii) so directed by the Senior Lender, the lender under the SeniorMezzanine Loan Agreement or, prior to the Transfer Date, the Commercial TractLender.  Lender’s election to apply suchinsurance proceeds to the Loan and other amounts evidenced or secured by theLoan Documents shall not relieve Borrower of the duty to rebuild or repair.

 

**9.             EMINENT DOMAIN**.

 

(a)                                  Notice of Condemnation.  Borrower shall give to Lender immediatenotice of any taking by condemnation of any portion of the Project or the 

 

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institution of any proceedings the effect of which is to achieve ataking of any portion of the Project by condemnation.

 

(b)                                 Settlement of Claim.  In case the Project, or any part or interestin any thereof, is taken by condemnation, then subject to the rights of theSenior Lender, the lender under the Senior Mezzanine Loan Agreement or, priorto the Transfer Date, the Commercial Tract Lender, the Lender is herebyempowered to collect and receive all compensation and awards of any kindwhatsoever (referred to collectively herein as “**Condemnation Awards**”) which may be paid for any property takenor for damages to any property not taken (all of which Borrower hereby assignsto the Lender, subject to the rights of the Senior Lender, the lender under theSenior Mezzanine Loan Agreement and, prior to the Transfer Date, the CommercialTract Lender in the same).  Borrowercovenants to sign upon demand, or Lender may sign or endorse on Borrower’sbehalf, all necessary proofs of loss, receipts, releases and other papersrequired by the condemning authority to be signed by Borrower for suchpurpose.  Borrower hereby irrevocablyappoints Lender as its attorney-in-fact for the purposes set forth in this Section 9.  Lender may deduct from any CondemnationAwards, any expenses reasonably incurred by Lender in the collection andsettlement thereof, including reasonable attorneys’ and adjusters’ fees andcharges.

 

(c)                                  Application of CondemnationAwards.  All Condemnation Awards soreceived shall, subject to the rights of the Senior Lender the lender under theSenior Mezzanine Loan Agreement or, prior to the Transfer Date, the CommercialTract Lender, be forthwith applied by the Lender, as it may elect in its soleand unreviewable discretion, to the payment or reimbursement of the Loan or theother amounts evidenced or secured by the Loan Documents, or to the repair andrestoration of any property not so taken or damaged; provided, however, thatLender will allow Condemnation Awards to be used for restoration of the Projectif (i) the conditions for Borrower’s use of Condemnation Awards containedin the Senior Loan Documents are satisfied (substituting Lender for SeniorLender thereunder in making related decisions) or (ii) so directed by theSenior Lender the lender under the Senior Mezzanine Loan Agreement or, prior tothe Transfer Date, the Commercial Tract Lender.

 

(d)                                 Continuing Obligation toRepair.  No election made by the Lenderunder this Section 9 shall relieve Borrower of the duty to repairand restore.

 

(e)                                  Lender Not Required to Act.  Nothing contained in this Agreement shallcreate a responsibility or obligation of Lender to collect any amounts owing onaccount of any such condemnation or proceedings relating to the Project, torebuild or replace any damaged or destroyed property or to perform any otherrelated act.

 

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**10.          RIGHTS OF ACCESS AND INSPECTION**.  Borrower shall cause Mortgagor to permitagents, representatives and employees of Lender to inspect the Land and theinstallation of the Project or any part thereof during reasonable businesshours upon reasonable advance notice.  Withoutlimiting the foregoing, Lender shall also be permitted access to the Project inorder to examine, copy and audit Mortgagor’s books and records (including aspart of any audit performed pursuant to Section 12(f) hereof)and any plans, drawings, contracts, books or records relating to the Project.  Borrower shall, to the extent within itscontrol, cause any contractors or subcontractors to cooperate with Lender orits agents in connection with any inspection. Lender is under no duty to visit or observe the Project or to examineany books or records.  Any site visit,observation or examination by Lender shall be solely for the purpose ofprotecting Lender’s security and preserving Lender’s rights under the LoanDocuments.  Neither Borrower, Mortgagornor any other party is entitled to rely on any site visit, observation ortesting by Lender or its agents or representatives.  Lender owes no duty of care to protectBorrower, Mortgagor or any other party against, or to inform Borrower or anyother party of, any adverse condition affecting the Project, including anydefects in the design or construction of any improvements on the Land or thepresence of any Hazardous Materials on the Land.  So long as no Event of Default has occurredand is continuing, Lender shall give Borrower and Mortgagor reasonable priornotice of its intent to enter the Project.

 

**11.          EXPENSES**.  Borrower shall pay, as and when due, allreasonable costs and expenses incurred in the procuring and making of the Loanby Lender, including without limitation, to the extent reasonable, TitleInsurer’s fees and premiums, charges for examination of title to the Land,expenses of surveys, transfer taxes and recording expenses, appraisal andappraisal review fees, fees of an inspector and fees and expenses of anyattorneys, accountants, engineers, architects, surveyors, contractors,inspectors or other consultants, professionals or independent contractorsemployed, retained or utilized by Lender in connection with the Loan.  Borrower shall cause Mortgagor to pay whendue any and all insurance premiums, taxes, assessments, water, sewer and otherutility charges, impact fees, liens and encumbrances on the Project and anyother amounts payable for the cost of improvements to the Land, provided thatBorrower and/or Mortgagor may in good faith contest any such liens, claims oramounts so long as it provides, for any filed lien, a bond in accordance withstatutory requirements or other security reasonably satisfactory toLender.  Borrower shall pay upon demandor reimburse Lender for any and all reasonable fees, costs and expensesincurred by Lender in collecting the Indebtedness after an Event of Defaultincluding reasonable attorneys’ fees. All such amounts shall be paid to Lender or at Lender’s direction tosuch other person to whom payments are due or Lender may, at its option, paysuch amounts and all sums paid shall be deemed a portion of the Indebtednessand shall bear interest at the Default Interest Rate.

 

**12.          FINANCIAL REPORTS,PROPERTY REPORTS AND ANNUAL BUDGET**.  The parent company of Lender is a real estatefund that issues securities, maintains U.S. GAAP audited financial statementsand/or is publicly registered with the United States Securities and ExchangeCommission (“**SEC**”).  As a result, such parent company is subjectto GAAP financial statement requirements and other reporting requirements.These requirements include but are not limited to quarterly and annualfinancial reporting (including for public companies on Form 10-Q and Form 10-Kand reporting under Rule 3-14 of Regulation S-X, which requires the filingof pro forma financial statements of acquired properties).  In addition, certain accounting requirementsmay dictate that Lender report Borrower, Mortgagor and/or the 

 

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Project as a subsidiary ofLender.  Therefore, Borrower agrees toprovide Lender with all information that Borrower or its Affiliates have intheir possession and Borrower will use all commercially reasonable efforts toobtain such information not in its possession as Lender reasonably requires inorder to prepare, audit and/or review financial statements of the Project,Mortgagor and Borrower for the applicable reporting periods.

 

(a)                                  Borrower agrees that allaccounting for the Project will be conducted by Borrower and/or the Mortgagorand also by Lender.  Borrower agrees toprovide Lender with copies of all Accounting Records (other than leases, whichBorrower and/or the Mortgagor may make available at the Project rather thancopying) on a monthly basis in order to enable Lender to prepare and maintainfinancial statements on Borrower, Mortgagor and/or the Project in accordancewith accounting principles generally accepted in the United States of America.

 

(b)                                 Borrower agrees to provideAccounting Records by the 10th of the month for the preceding month.

 

(c)                                  Borrower agrees to allowLender and Lender’s external independent accountants access to originalAccounting Records if needed in the process of their quarterly reviews andvarious audit processes.

 

(d)                                 Borrower agrees to cooperatewith any inquiries or interviews by Lender or its external independentaccountants as may be necessary in relation to Lender’s or its Affiliates’compliance with the Sarbanes-Oxley Act of 2002.

 

(e)                                  In addition, Borrower shallfurnish to Lender:

 

(i)                                     within 30 days after the endof each fiscal year of Mortgagor, and at any other time upon Lender’s request,a statement that identifies all owners of any interest in Mortgagor and theinterest held by each, if Mortgagor is a corporation, all officers anddirectors of Mortgagor, and if Mortgagor is a limited liability company, allmembers and managers (whether members or not);

 

(ii)                                  within 10 days after the endof each month, a monthly property management report for the Project, showingthe number of inquiries made and rental applications received from tenants orprospective tenants, deposits received from tenants and any other informationreasonably requested by Lender;

 

(iii)                               within 10 days following theend of each month, a monthly statement of income and expense for the Project;and

 

(iv)                              beginning sixty (60) daysprior to the first occupancy of the Project and for each succeeding calendaryear, not later than ninety (90) days prior to the commencement of suchcalendar year, an annual 

 

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budgetwhich sets forth, in sufficient detail, Borrower’s projection of gross receiptsand expenses for such period (the “**AnnualBudget**”).  Each Annual Budgetshall be for a calendar year except that the Annual Budgets for the year offirst occupancy of the Project shall only cover the remainder of thethen-current year.

 

(f)                                    If Borrower fails to providein a timely manner the Accounting Records, statements, schedules and reportsrequired by this Section 12, Lender shall have the right to haveMortgagor’s and Borrower’s books and records audited or to perform any otherprocedure reasonably requested by Lender, at Borrower’s expense, by independentcertified public accountants selected by Lender in order to obtain suchstatements, schedules and reports, and all related costs and expenses of Lendershall become immediately due and payable and shall become an additional part ofthe Indebtedness as provided in Section 21.

 

(g)                                 If Lender acquires theProject through foreclosure, Borrower shall deliver, or cause to be delivered,to Lender upon written demand all books and records relating to the Project orits operation. Otherwise, during the term of the Loan, to the extent thatcopies of such books and records have not been provided pursuant to theprovisions of this Section 12 set forth above, Borrower willprovide Lender with all cost records necessary for Lender to perform itsaccounting procedures including, but not limited to, balance sheets, incomestatements, trial balance activity reports, general ledger detail reports, cashreceipts journal, check register or cash disbursements journal and copies ofchecks and vendor invoices for all invoices paid.   Borrower agreesto make available to Lender for examination and copying any other books andrecords upon Lender’s written demand.

 

(h)                                 Borrower authorizes Lenderto obtain one (1) credit report per calendar year; provided, however, thatLender may obtain a credit report on Borrower, Mortgagor and Guarantors at anytime, even if a credit report has been obtained in the same calendar year, ifan Event of Default has occurred.

 

**13.          GENERAL COVENANTS OF BORROWER**.  Until the full and final payment of the Loan,unless Lender waives compliance in writing, Borrower hereby covenants andagrees as follows:

 

(a)                                  Commencement and Completionof Project.  Borrowershall or shall cause Mortgagor to prosecute the construction and installationwith diligence so that the construction and Completion of the Project (otherthan payment of claims that are being contested in accordance with the LoanDocuments) shall have occurred by the completion deadline set forth in theSenior Loan Documents.

 

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(b)                                 Lender Approval.  No changes to the Construction Budget or thecompletion date required by the Senior Loan Documents shall be permittedwithout Lender’s written consent, with the exception of (i) completiondate extensions due to force majeure and (ii) reallocation of amountsamong the line items of the Construction Budget; provided that Borrower shallprovide Lender with notice of any changes in connection with (i) and (ii) aboveor any change orders modifying the Plans as provided below.  Lender shall have the right to approve allcontractors (except General Contractor) and all construction contracts betweenMortgagor and such contractors, with the exception of construction contractsthat do not exceed $100,000.00.  Nochanges to the Plans shall be permitted without Lender’s written consent, withthe exception of (i) changes required by governmental authorities orSenior Lender and (ii) other changes that, individually, do not increaseor decrease Project costs by more than $100,000 and, in the aggregate, do notincrease or decrease Project costs by more than $300,000.  Lender shall have ten (10) business daysto provide any approval required under this Section 13(b) butif Lender does not provide written notice that it does not approve within theten (10) business days, then the action shall be deemed approved.

 

(c)                                  Operation and Maintenance ofProject.  In addition to the terms,conditions and provisions set forth in the other Loan Documents:

 

(i)                                     Payment of Lawful Claims.  Borrower shall pay or discharge all lawfulclaims, including taxes, assessments and governmental charges or levies imposedupon Borrower or its income or profits or upon any property belonging toBorrower prior to the date upon which penalties attach thereto; provided thatBorrower may in good faith contest any such taxes, assessments, charges orlevies so long as it provides, for any filed lien, a bond in accordance withstatutory requirements or other security reasonably satisfactory toLender.  Without limiting the generalityof the foregoing, Borrower shall, or shall cause Mortgagor to, pay (a) alltaxes and recording expenses, including stamp taxes, if any, relating to alldocuments and instruments securing the Loan, (b) the fees and commissions(if any) lawfully due to brokers engaged by Borrower or its Affiliates inconnection with this transaction (and Borrower shall hold Lender harmless fromall such claims, whether or not lawfully due), and (c) the fees andexpenses of Lender’s counsel relating to Lender’s consultation with suchcounsel in connection with the negotiation, documentation and closing of theLoan and any subsequent modifications of the Loan.

 

(ii)                                  No Amendments.  Borrower shall not, nor shall it permitMortgagor to, without Lender’s prior written consent, enter into any amendmentsor modifications of (a) if Borrower or Mortgagor is a corporation,Borrower’s and Mortgagor’s by-laws and articles 

 

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ofincorporation, (b) if Borrower or Mortgagor is a limited liabilitycompany, such entity’s operating agreement or articles of organization, (c) ifBorrower or Mortgagor is a limited partnership, such entity’s partnershipagreement or partnership certificate, (d) the construction contractbetween Mortgagor and General Contractor except for change orders (i) implementingchanges required by governmental authorities or Senior Lender and (ii) otherchanges that, individually, do not increase or decrease Project costs by morethan $100,000 and, in the aggregate, do not increase or decrease Project costsby more than $300,000, (e) the Management Agreement, or (f) theSenior Loan Documents.

 

(iii)                               Maintenance and Repair ofProject.  After completion of theProject, Borrower shall cause Mortgagor to (a) maintain the Project,including the parking and landscaping portions thereof, in good condition andrepair, (b) promptly make all necessary structural and non-structuralrepairs to the Project, (c) not demolish, alter, remove or add to anyimprovements on the Land, excepting (i) the repair and restoration ofimprovements following damage thereto as required by this Agreement, and (ii) asotherwise required by any applicable law, rule or regulations, and (d) noterect any new buildings, structures or building additions on the Land, withoutthe prior written consent of Lender. Borrower shall pay when due all claims for labor performed and materialsfurnished therefor in connection with any improvements or constructionactivities on the Land; provided that Borrower may in good faith contest anyliens, claims or amounts so long as it provides, for any filed lien, a bond inaccordance with statutory requirements or other security reasonablysatisfactory to Lender.

 

(d)                                 Restricted Sale andEncumbrance of Project and of Borrower Interests; Other Indebtedness.  Borrower shall not engage in any Sale orEncumbrance without the prior written consent of Lender (which may be withheldby Lender in Lender’s sole and absolute discretion).  Borrower will not issue any additional EquityInterests in Borrower, except to Lender or Lender’s designee.  In addition, Borrower shall not permitMortgagor to issue any additional Equity Interests in Mortgagor.  In addition, Borrower shall not, nor shall itpermit Mortgagor to, incur any indebtedness, whether secured or unsecured,other than (i) the Senior Loan and this Loan, (ii) obligations underinterest rate hedging arrangements related to the Senior Loan and (iii) tradeand operational indebtedness incurred in the ordinary course of business(including construction and operation of the Project) or for its administrativefunctions.  Notwithstanding theforegoing, Lender’s consent shall not be required for:

 

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(i)                                     the grant of a leaseholdinterest in an individual dwelling unit for a term of two years or less not containingan option to purchase and otherwise in compliance with Section 13(f) hereof;

 

(ii)                                  a Sale of obsolete, worn outor damaged property or fixtures that is contemporaneously replaced by items ofequal or better function and quality, which are free of liens, encumbrances andsecurity interests other than Permitted Exceptions, those created by the LoanDocuments, the Senior Loan Documents or the Commercial Deed of Trust or thoseotherwise consented to by Lender;

 

(iii)                               a Sale that results fromtheft, condemnation or other involuntary conversion;

 

(iv)                              the Sale (including throughconsumption) of personal property in the ordinary course of business that iscontemporaneously replaced by items of equal or better function and quality;

 

(v)                                 the grant of an easement if,before the grant, Lender determines (which determination must be madereasonably) that the easement will not materially affect the operation or valueof the Project and Borrower pays to Lender, upon demand, all reasonable costsand expenses incurred by Lender in connection with reviewing Borrower’s request(it being understood that Lender has approved the REA);

 

(vi)                              the creation of (1) alien for taxes, assessments or other governmental charges or levies that arenot then due or that are being contested in good faith and in accordance withapplicable statutory procedures or (2) a mechanic’s lien against theProject which is bonded off, released of record or otherwise remedied to Lender’sreasonable satisfaction within 30 days of the date of creation; and

 

(vii)                           transfer of the CommercialTract to the Commercial Tract Borrower on or after the Transfer Date.

 

Nothing in this Section 13(d) prohibitsMortgagor from providing the Commercial Deed of Trust.

 

(e)                                  General Indemnity.  Borrower shall, at Borrower’s expense,protect, defend, indemnify, save and hold Lender and each of its members andits respective members, stockholders, directors, officers, employees and agents(collectively the “**Indemnified Parties**”)harmless against any and all claims, demands, losses, expenses (including courtcosts and reasonable attorney’s fees and expenses), damages and causes ofaction (whether legal or equitable in nature) asserted by any person or entityarising out of, caused by or relating to the Project and the Lender’s 

 

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exerciseof its rights under the Loan Documents upon an Event of Default, except to theextent the same arises out of, is caused by or results from the grossnegligence or willful misconduct of an Indemnified Party.  Borrower shall pay to Lender upon demand allclaims, judgments, damages, losses and expenses (including court costs andreasonable attorneys’ fees and expenses) incurred by Lender as a result of anylegal or other action arising out of the aforesaid matters.  Borrower acknowledges that the IndemnifiedParties may defend any matter covered by the above indemnification by counselof the relevant Indemnified Party’s choice, and the costs of such defense(including reasonable attorney’s fees) are part of the costs covered by theindemnity.  The foregoing indemnificationshall survive repayment of the Loan.

 

(f)                                    Leases.

 

(i)                                     Residential LeaseRequirements.  Mortgagorshall have the right, and Borrower may permit Mortgagor to, enter into residentialLeases without Lender’s prior written consent, so long as all Leases forresidential dwelling units (A) are on forms approved by Lender, (B) shallnot include options to purchase, and (C) shall be for initial terms of atleast six months and not more than two years (with the exception of Leases forup to 3% of the units in the Project, which may have terms of less than sixmonths).

 

(ii)                                  Commercial LeaseRequirements.  Mortgagorshall not, nor shall Borrower permit Mortgagor to, enter into any non-residentialLeases without Lender’s prior written consent in each instance.  Mortgagor shall not, nor shall Borrowerpermit Mortgagor to, modify the terms of, or extend or terminate, any Lease fornon-residential use (including any Lease in existence on the date of thisAgreement) without the prior written consent of Lender.  Borrower shall, without request by Lender,deliver a copy of each executed non-residential Lease to Lender promptly aftersuch Lease is signed.

 

(iii)                               Advance Rent.  Mortgagor shall not, nor shall Borrowerpermit Mortgagor to, receive or accept rent under any Lease (whetherresidential or non-residential) for more than two months in advance.

 

(iv)                              Performance of Obligations.  Borrower shall cause Mortgagor to pay,perform and discharge, as and when payment, performance and discharge are due,all obligations of Mortgagor as landlord under all Leases.

 

(v)                                 Security Interest.  Except for the assignment to Lender thelender under the Senior Mezzanine Loan Agreement, Senior Lender or, 

 

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priorto the Transfer Date, the Commercial Tract Lender, Borrower shall not permitMortgagor to further assign, pledge, transfer or otherwise encumber the Leasesor the rents under the Leases.

 

(vi)                              Defense; Pursuit of Remedies.  Borrower shall or shall cause Mortgagor to,at its sole cost and expense, appear in and defend any action or proceedingarising from or connected with any of the Leases or any obligation or liabilityof Mortgagor as landlord thereunder.  Borrowershall, or shall cause Mortgagor to, use commercially reasonable efforts topursue all remedies, including claims for damages available at law or inequity, against any tenant under a Lease who defaults in the performance of itsobligations under the Lease.

 

(g)                                 Notices.  Borrower shall promptly notify Lender inwriting of any litigation affecting (a) Borrower, Mortgagor and anygeneral partner, managing member or controlling shareholder of Borrower orMortgagor (excluding a general partner, managing member or controllingshareholder which is a natural person or trust), or (b) the Project, tothe extent the same may result in a material adverse change in (i) thefinancial condition of any of the foregoing parties, (ii) Borrower’sability to timely perform any of its obligations under any of the LoanDocuments or Mortgagor’s ability to timely perform any of its obligations underany of the Senior Loan Documents or (iii) the physical condition oroperation of the Project.

 

(h)                                 Development.  If after the date of this Agreement, Borroweror Mortgagor intends to engage a developer of the Project, Lender shall havethe right to approve such new developer and the written development agreementfor the Project.

 

(i)                                     Management.  The Project shall be managed at all times byManager (or another professional residential rental property managersatisfactory to Lender under a contract approved by Lender).  At the time such property managementagreement is executed, at the request of Lender, Mortgagor and the Manager shallenter into a Subordination of Management Agreement in the form attached as Exhibit Kor another form reasonably acceptable to Lender.  Lender hereby accepts the Manager as theinitial property manager.  If Borrower orMortgagor intends to change the management of the Project, Lender shall havethe right to approve such new property manager and the written contract for themanagement of the Project and require that Mortgagor and such new propertymanager enter into a Subordination of Management Agreement on the form attachedas Exhibit K or on another form reasonably acceptable to Lender.

 

(j)                                     Senior Loan.  Borrower shall, or shall cause Mortgagor to,fully and timely pay all amounts owing under the Senior Loan Documents andtimely and fully perform all of Mortgagor’s covenants and agreements 

 

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containedtherein.  Borrower shall provide Lenderwith copies of all notices (except routine notices which would not include anynotice related to any failure to comply with any terms of the Senior LoanDocuments or regarding any event of default under the Senior Loan Documents)given or received by Mortgagor under or pursuant to the Senior Loan Documents,promptly upon delivery or receipt as the case may be.  Without limiting the Lender’s right todeclare an Event of Default on account of a failure to comply with the termsand provisions of the Senior Loan Documents, if Borrower or Mortgagor fail toso pay or perform such obligations, and if such failure either (i) becomesan Event of Default hereunder or (ii) prior to becoming an Event ofDefault continues for twenty (20) days after Lender gives written notice toBorrower to cure, the Lender may pay or perform the same pursuant to Section 18(b) hereof.  Notwithstanding the foregoing, (i) Lendershall have no obligation whatsoever to pay any of the amounts evidenced orsecured by, or to perform any of the covenants or obligations imposed by, anySenior Loan Documents, and (ii) any such payment by Lender shall not cureMortgagor’s default hereunder or under the Senior Loan Documents but shall onlyprotect Lender’s interest in the Project. Borrower shall not, nor shall it permit Mortgagor to, amend or modifyany of the Senior Loan Documents without the prior written consent of Lender.

 

(k)                                  Principal Place of Business;Choice of Law.  Borrowershall not change its principal place of business or, if Borrower has more thanone place of business, its chief executive office, from its address set forthin the first paragraph of this Agreement. In addition, Borrower shall not make an election under the UniformCommercial Code to treat, as the governing law for perfection of uncertificatedsecurities, the law of any jurisdiction other than the jurisdiction of itsformation.  Lender agrees not tounreasonably withhold its consent to any change in Borrower’s principal placeof business or the governing law with respect to uncertificated securities solong as (1) Borrower and any other party reasonably requested by Lenderexecutes all documents and instruments reasonably deemed necessary by Lender toperfect the security interests granted pursuant to the Loan Documents, (2) Borrowerpays all of the Lender’s reasonable costs and expenses of perfecting suchsecurity interests and (3) if requested by Lender, Borrower delivers toLender an opinion from counsel reasonably satisfactory to Lender opining as tothe continued perfection of such security interest.

 

(l)                                     Compliance with GovernmentalProhibitions.  No portionof the Loan proceeds will be used, disbursed or distributed by Borrower for anypurpose, or to any person, in violation of any Law (as defined in Section 16(i)) including, without limitation, any of the Terrorism Laws (as definedin Section 16 (i)).  Borrowershall provide Lender with immediate written notice (a) of any failure ofany of the representations and warranties set forth in Section 16(i) ofthis Agreement to be true, correct 

 

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andcomplete in all material respects at any time, or (b) if Borrower obtainsknowledge that Borrower or any holder at any time of any direct or indirectequitable, legal or beneficial interest in Borrower (other than Lender or anaffiliate or designee of Lender) is the subject of any of the TerrorismLaws.  Borrower shall immediately anddiligently take, or cause to be immediately and diligently taken, all necessaryaction to comply with all Terrorism Laws and to cause the representations andwarranties set forth in Section 16(i) to be true, correct andcomplete in all material respects.

 

**14.          FURTHER ASSURANCES**.  Borrower shall, from time to time, uponLender’s request, at Borrower’s sole cost and expense, execute, deliver, recordand furnish such documents and do such other acts as Lender may reasonably deemnecessary or desirable to (i) perfect and maintain valid liens upon thesecurity contemplated by the Loan Documents, (ii) correct any errors of atypographical or other manifest nature which may be contained in any of theLoan Documents, (iii) evidence Borrower’s compliance with the LoanDocuments, and (iv) consummate fully and carry out the intent of thetransactions contemplated under this Agreement or the Loan Documents.

 

**15.          APPRAISALS**.  Lender has the right to obtain a newappraisal or update an existing appraisal of the Project at any time while theLoan or any portion thereof remains outstanding (a) when, in Lender’sreasonable judgment, such an appraisal is warranted as a result of Lender’sinternal evaluation of the Loan, and/or (b) to comply with statutes,rules, regulations or directives of governmental agencies having jurisdictionover Lender.  Borrower shall pay, upondemand, all reasonable appraisers’ fees and related expenses incurred by Lenderfrom time to time in obtaining such appraisal reports; provided, however, thatBorrower shall not be required to pay for a re-appraisal more than once everythree years unless an Event of Default has occurred and is continuing.

 

**16.          GENERAL REPRESENTATIONS AND WARRANTIES OF BORROWER**.  Borrower represents and warrants to Lender,which representations and warranties shall survive the termination of thisAgreement, the repayment of the Loan, any investigations, inspections orinquiries made by Lender or any of Lender’s representatives, and any disbursementsmade by Lender hereunder, as follows:

 

(a)                                  Organization; CorporatePowers; Authorization of Borrowing.

 

(i)                                     Organization.  Borrower’s ownership structure set forth on Exhibit Fattached hereto is a true and correct depiction of the Equity Interests inBorrower and Mortgagor, and each entity set forth on Exhibit F isduly organized and is validly existing and in good standing under the laws ofthe state of its organization, and Mortgagor is qualified to do business in thejurisdiction where the Land is located.

 

(ii)                                  Power and Authority.  Borrower has the full limited liabilitycompany power and authority to execute the Loan Documents and 

 

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toundertake and consummate the transactions contemplated hereby and thereby, andto pay, perform and observe the conditions, covenants, agreements andobligations herein and therein contained; and the Loan Documents have been dulyand validly executed by Borrower and constitute the legal, valid and binding obligationsof Borrower and are enforceable against Borrower in accordance with theirrespective terms, except as such enforcement may be qualified or limited bybankruptcy, insolvency or other similar laws affecting creditors’ rightsgenerally and general principles of equity.

 

(iii)                               Not a Foreign Person.  Neither Borrower, nor any entity that is aholder of an Equity Interest in Borrower, is organized under the laws of anyjurisdiction other than the United States or one of the states thereof.

 

(iv)                              No Defaults Under ExistingAgreements.  Theconsummation of the transactions contemplated hereby and the performance byBorrower of its obligations under the Loan Documents will not result in anybreach of, or constitute a default under, the Senior Loan Documents, any othermaterial Third Party Agreements or any mortgage, deed of trust, bank loan orsecurity agreement, or other material instrument to which Borrower or Mortgagorare a party or by which the Land or Borrower or Mortgagor are bound.

 

(v)                                 True and Correct Copies ofDocuments.  All duediligence documents required to be delivered by Borrower to Lender hereunder(including those due diligence documents referred to in Section 6hereof) are true, correct and complete copies thereof and the same have not beenamended or modified except as expressly disclosed therein.

 

(vi)                              Outstanding Debt to Lender.  During the term of the Loan, Borrower willnot borrow funds from Lender or an Affiliate of Lender other than the Loan andthe loan made pursuant to the Senior Mezzanine Loan Agreement and ascontemplated by the partnership agreement of Principal.

 

(b)                                 Title to Property; MattersAffecting Property.

 

(i)                                     Title to Property.  Mortgagor has good and marketable fee simpletitle to the Land, subject only to the Senior Loan Documents, the LoanDocuments and the Permitted Exceptions, and good, marketable and freelyalienable title to all personal property located on the Land, subject only tothe Senior Loan Documents, the Loan Documents and the Permitted Exceptions;Borrower will cause Mortgagor to protect or cause to be protected the title tothe 

 

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Project,and Borrower will forever warrant and defend the same against any other claimsof any persons or parties whomsoever, subject to the Senior Loan Documents, theLoan Documents and the Permitted Exceptions.

 

(ii)                                  Mortgagor’s Equity Interests.  Borrower owns and will own one hundredpercent (100%) of the Equity Interests in Mortgagor, and Borrower has nottransferred, conveyed, pledged or encumbered (and will not transfer, convey,pledge or encumber) such interests except to Lender.

 

(iii)                               No Actions.  There are no actions, suits or proceedings atlaw or in equity (including condemnation or eminent domain proceedings) currentlypending, or to the knowledge of Borrower threatened, against Mortgagor,Borrower, or the Project or, to the knowledge of Borrower, involving thevalidity or enforceability of the Senior Loan Documents or the Loan Documentsor the priority of the liens granted thereunder, by or before any governmentalauthority having or exercising jurisdiction over the Project.  Borrower will promptly notify Lender of anysuch future actions, suits or proceedings. Except as provided in Exhibit G, to Borrower’s knowledge,neither Borrower, nor Mortgagor, nor the Project is in default with respect to,or in violation of, any order, writ, injunction, decree or demand of any courtor any governmental authority having or exercising jurisdiction over theProject.

 

(iv)                              No Contracts Giving Rise toLiens.  Neither Borrower, norMortgagor, has made any contract or arrangement of any kind, that does or couldgive rise to a lien on the Project, except for (i) the Senior LoanDocuments, the Loan Documents and the Permitted Exceptions and (ii) contractsrelated to design and construction of the Project which have been provided toLender.  Borrower has not made anycontract or arrangement of any kind that does or could give rise to a lien orencumbrance on any of the Equity Interests in Mortgagor.

 

(v)                                 No Construction.  Prior to the disbursement of the Loan and therecordation of the Security Instrument, no construction whatsoever has beenperformed on the Land by Borrower or its Affiliates.

 

(vi)                              Compliance with PropertyAgreements.  Except asprovided in Exhibit H, the Project when constructed will in allrespects conform to and comply with all covenants, conditions, restrictions,reservations, regulatory agreements, conditional or special use permits andzoning ordinances affecting the Project whether or not recorded against theProject.

 

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(vii)                           Leases.  Except as provided in Exhibit I,there are no Leases of the Land in effect as of the closing of the Loan.

 

(viii)                        Tax Treatment.  Borrower and Mortgagor are (and at all timesduring the term of the Loan will be) disregarded as entities separate fromPrincipal within the meaning of Treasury Regulation §301.7701-3(b)(i)(2).  Borrower and Mortgagor have not elected (andat all times during the term of the Loan will not elect) to be classified as anassociation taxable as a corporation within the meaning of Treasury Regulation§301.7701-3(c).

 

(ix)                                Permits.  All Permits required for the operation andconstruction of the Project are in effect or Borrower expects them to beavailable as required for construction of the Project in accordance with theschedule required by the Senior Loan Documents. Once issued, all such Permits will remain in effect and the Project andits contemplated use and operation will comply therewith.  All discretionary approvals for theconstruction of the Project in accordance with the Plans have been obtained orwill be obtained prior to commencement of construction of the Project.

 

(x)                                   HazardousSubstances.  So long asMortgagor owns the Project, Borrower shall cause Mortgagor to (a) keep theProject free from Hazardous Substances, except those in de minimis amountsancillary to the Project activities that are used in compliance with allenvironmental laws, (b) promptly notify Lender if Borrower or Mortgagorbecomes aware that any Hazardous Substance is on or near the Land or theProject in violation of any environmental laws or if the Project otherwise isin violation of any environmental laws, and (c) remove such HazardousSubstances contamination that violates any environmental laws and/or cure suchviolations as required by law.

 

(c)                                  FinancialStatements.  Thefinancial statements heretofore delivered to Lender by Borrower, Mortgagor andPrincipal are true and correct in all material respects, have been prepared inaccordance with sound accounting practices, and fairly present the financialcondition(s) of the person(s) referred to therein as of the date(s) indicated;no materially adverse change has occurred in the financial condition(s) reflectedin such financial statements since the date(s) shown thereon and noadditional borrowings or liabilities have been made or incurred by such person(s) sincethe date(s) thereof other than the borrowing contemplated hereby, theSenior Loan, or other borrowings disclosed in writing to and approved byLender.  The Estimated Collateral ValueStatement, dated as of June 30, 2008, for each Guarantor accurately liststhe Available Assets of the Guarantor (as defined in the Guaranty) as of suchdate and the value of 

 

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suchAvailable Assets calculated on the basis provided in the notes thereto.

 

(d)                                 BudgetProjections.  Borrower’sand/or Mortgagor’s budget projections indicate that monthly income from Projectoperations will be sufficient to pay the combined monthly accrual of interest onthe Senior Loan and the Loan by the Maturity Date and the projections arereasonable in Borrower’s opinion and have been prepared in a manner consistentwith the past practices of affiliates of Borrower.

 

(e)                                  IntentionallyDeleted.

 

(f)                                    No Loan Broker.  Borrower has not dealt with any person, firmor corporation who is or may be entitled to any finder’s fee, brokeragecommission, loan commission or other sum in connection with the execution ofthis Agreement or the making of the Loan by Lender to Borrower.  Borrower does hereby indemnify and agree todefend and hold Lender harmless from and against any and all loss, liability orexpense, including court costs and reasonable attorneys’ fees and expenses,which Lender may suffer or sustain should such warranty or representation proveinaccurate in whole or in part.

 

(g)                                 No Default.  There are no defaults under any of the SeniorLoan Documents or the Loan Documents on the part of Borrower, Mortgagor or, tothe knowledge of Borrower, the other parties signatory thereto, and no eventhas occurred and is continuing which, with the giving of notice or the passageof time, or both, would constitute a default under any thereof.

 

(h)                                 Solvency.  As of the date hereof, Borrower and Mortgagorare each solvent and able to pay their debts as the same shall become due andpayable.

 

(i)                                     Violations ofGovernmental Prohibitions. Neither the making of the Loan, nor the receipt of Loan proceeds byBorrower, violates any federal, state, county, municipal and other governmentaland quasi-governmental statutes, laws, rules, orders, regulations, ordinances,judgments or decrees (collectively, “**Law**”)applicable to Borrower, including, without limitation, any of the TerrorismLaws.  Neither the making of the Loan,nor the receipt of Loan proceeds by Borrower or Mortgagor, violates any of theTerrorism Laws applicable thereto.  ToBorrower’s best knowledge, no holder of any direct or indirect equitable, legalor beneficial interest in Borrower or Principal (other than Lender or an affiliateor designee of Lender) is the subject of any of the Terrorism Laws.  No portion of the Loan proceeds will be used,disbursed or distributed by Borrower for any purpose, or to any person,directly or indirectly, in violation of any Law including, without limitation,any of the Terrorism Laws.  “**Terrorism Laws**” means Executive Order 13224issued by the President of the 

 

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UnitedStates of America, the Terrorism Sanctions Regulations (Title 31 Part 595of the U.S. Code of Federal Regulations), the Terrorism List GovernmentsSanctions Regulations (Title 31 Part 596 of the U.S. Code of FederalRegulations), and the Foreign Terrorist Organizations Sanctions Regulations(Title 31 Part 597 of the U.S. Code of Federal Regulations), and all otherpresent and future federal, state and local laws, ordinances, regulations,policies and any other requirements of any governmental agency (including,without limitation, the United States Department of the Treasury Office ofForeign Assets Control) addressing, relating to, or attempting to eliminate,terrorist acts and acts of war, each as hereafter supplemented, amended ormodified from time to time, and the present and future rules, regulations andguidance documents promulgated under any of the foregoing.

 

**17.          EVENT OF DEFAULT**.  Borrower shall be in default under thisAgreement upon the occurrence of any of the following events (hereinafterreferred to as an “Event of Default”):

 

(a)                                  Non-Payment.  The failure of Borrower to pay when due anyamount required by the Note, this Agreement or any other Loan Documents whichcontinues, in the case of monthly interest payments required under the Note,for twenty (20) days or, in the case of other sums payable under the Note, thisAgreement or the Loan Documents, for 10 days following written demand forpayment on Borrower by Lender.

 

(b)                                 Insurance.  The failure of Borrower to keep in force anyinsurance policy required hereunder or to deliver evidence of its renewal toLender and the continuation of such failure for 10 days following writtendemand on Borrower by Lender.

 

(c)                                  Special PurposeEntity Covenants.  The failureof Borrower to comply with the provisions of Section 23.

 

(d)                                 Borrower.  The liquidation, dissolution or terminationof Borrower.

 

(e)                                  Guaranty.  The Guaranty for any reason shall cease to bein full force and effect, or be declared null and void or unenforceable inwhole or in part; or the validity or enforceability of the Guaranty shall bechallenged or denied by any Guarantor. Notwithstanding the foregoing, a challenge or denial of the validity orenforceability of the Guaranty will not be considered an Event of Default if,excluding the Available Assets of the challenging guarantor, the collectiveaggregate value of the Available Assets of the Guarantor (defined collectivelyin the Guaranty) does not fall below $80,000,000.00.

 

(f)                                    Construction.  The cessation of the construction of any orall of the Project after work thereon has commenced for a period of more than30

 

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consecutivedays****without the written consent of Lender,except for any cessation due to events of force majeure as expressly permittedby the documents evidencing or securing the Senior Loan, except as otherwiseprovided in Section 13(b) of the Loan Agreement.

 

(g)                                 Fraud orMaterial Misrepresentation  Fraud or material misrepresentation byBorrower, Mortgagor or any of their partners, officers, directors or managers,or by any Guarantor in connection with (i) the application for or creationof the Indebtedness, (ii) any financial statement, rent roll, or otherreport or information provided to Lender during the term of the Indebtedness,or (iii) any request for Lender’s consent to any proposed action.

 

(h)                                 Sale,Encumbrance or Other Indebtedness.  The taking of any action by Borrower,Mortgagor, or any other person contrary to the provisions of Section 13(d) ofthis Agreement.

 

(i)                                     Reports andDocuments.  The failureof Borrower to deliver any notice, report, assignment, certificate, instrumentor other document which Borrower is required to deliver to Lender under any ofthe Loan Documents within the twenty (20) days following written demand byLender therefor.

 

(j)                                     Other Breachesunder this Agreement. The failure by Borrower to perform any of itsobligations under this Agreement, as and when required, except as specificallyset forth otherwise herein, which continues for a period of 30 days afternotice of such failure by Lender to Borrower, if such failure is not reasonablysusceptible of cure within such 30 day period, and if Borrower promptlycommences such cure within such 30 day period and diligently prosecutes thesame to completion, then the cure period shall be extended for such period oftime as may be reasonably necessary to effect a cure but in no event shall suchperiod exceed 90 days.

 

(k)                                  Other BreachesUnder Other Loan Documents.  The failure of Borrower or any Guarantor,indemnitor or obligor to perform and observe any covenant, obligation,agreement or undertaking under any Loan Document other than this Agreementfollowing such notice and/or grace period, if any, as may be provided thereinfor curing such failure.

 

(l)                                     Senior LoanDocuments.  The failureof Borrower or Mortgagor or any Guarantor to perform and observe any covenant,obligation, agreement or undertaking under any Senior Loan Documents followingany notice or cure period, if any, as may be provided therein for curing suchfailure.

 

(m)                               Judgments.

 

(i)                                     An order,judgment or decree shall be entered by any court of competent jurisdictionappointing a custodian, receiver, trustee, or 

 

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liquidatorof Borrower or of all or any substantial part of any of Borrower’s assets; or

 

(ii)                                  The failure of Borrower topay any money judgment against it at least twenty (20) days prior to the date on which the assets of theBorrower may be sold to satisfy such judgment; or

 

(iii)                               The failure to havedischarged within a period of twenty (20) days after the commencement thereof any attachment,sequestration, or similar proceedings against any of the assets of Borrower.

 

(n)                                 BankruptcyProceedings.

 

(i)                                     If Borrower or Mortgagorshall become insolvent, make a transfer in fraud of, or a general assignmentfor the benefit of, creditors, or admit in writing its inability, generally topay its debts as they become due; or

 

(ii)                                  If Borrower or Mortgagorshall have a receiver, custodian, liquidator or trustee appointed for all orsubstantially all of its assets or for the Project in any proceeding brought byBorrower, Mortgagor or the Project, orany such receiver or trustee is appointed in any proceeding brought againstBorrower, Mortgagor or the Project and such appointment is not promptlycontested and is not dismissed or discharged within ninety (90) days after suchappointment; or

 

(iii)                               If Borrower or Mortgagorshall file a petition under Title 11 of the United States Code as amended or under any similar Federal orstate law or statute; or

 

(iv)                              If Borrower or Mortgagorshall have a petition filed against it commencing an involuntary case under anypresent or future Federal or state bankruptcy or similar law and such petitionis not dismissed or discharged within ninety (90) days after the filing thereof;or

 

(v)                                 If Borrower or Mortgagor shall requestany composition, rearrangement, liquidation, extension, reorganization or otherrelief as a debtor under any present or future Federal or state bankruptcy orsimilar law now or hereafter existing.

 

The proceedings or events set forth inparagraph (n) are collectively referred to as “**BankruptcyProceedings**”.

 

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**18.          REMEDIES**.

 

(a)                                  Actions uponEvent of Default.  Upon theoccurrence and during the continuance of an Event of Default beyond anyapplicable grace and cure period, Lender may, in addition to any other rightsor remedies available to it pursuant to this Agreement and the other LoanDocuments or at law or in equity, take such action, without notice or demand,that Lender deems advisable to protect and enforce its rights against theCollateral or the Project, including, without limitation, at its option andwithout prior notice or demand, declare the unpaid principal balance of theNote and all accrued but unpaid interest thereon, as well as all other sumsowing under the Loan Documents, immediately due and payable. Lender may makeany advances on the Loan after the happening of any one or more of said Eventsof Default without thereby waiving the right to demand payment in full of theNote and such other amounts and without liability to make any other or furtheradvances.

 

(b)                                 Lender’s Rightto Perform.  If Borrowerfails to perform any covenant or obligation contained herein or in the otherLoan Documents and such failure continues for a period of 30 days after writtennotice of such failure by Lender to Borrower, or if such failure is notreasonably susceptible of cure within such 30 day period and if Borrowerpromptly commences such cure within such 30 day period and diligentlyprosecutes the same to completion, then the cure period shall be extended forsuch period of time as may be reasonably necessary to effect a cure but in noevent shall such period exceed 90 days, without in any way limiting Lender’sright to exercise any of its rights, powers or remedies as provided hereunder,or under any of the other Loan Documents, Lender may, but shall have noobligation to, perform, or cause performance of, such covenant or obligation,and all costs, expenses, liabilities, penalties and fines of Lender reasonablyincurred or paid in connection therewith shall be payable by Borrower to Lenderupon demand and if not paid shall be added to the Indebtedness (and to theextent permitted under applicable laws, secured by the Security Instrument andother Loan Documents) and shall bear interest from the date expended at theDefault Interest Rate.  Notwithstandingthe foregoing, Lender shall have no obligation to send notice to Borrower ofany such failure.

 

(c)                                  Appointment ofLender as Attorney-in-Fact.  Borrower hereby irrevocably, unconditionallyand presently constitutes Lender as Borrower’s attorney-in-fact, with fullpower of substitution, to be exercised by Lender only upon the occurrence andduring the continuation of an Event of Default, to exercise its rights underthe Security Instrument (in its own name or the name of a designee) forpurposes of preserving and protecting the Project or the Collateral and, asLender in its sole discretion deems necessary or proper, to execute,acknowledge (when appropriate) and deliver all instruments and documents in thename of Borrower which 

 

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maybe necessary or desirable in order to do any and every act which Borrower mightdo on its own behalf in the performance of its obligations hereunder.  This power of attorney is a power coupledwith an interest and is irrevocable.

 

(d)                                 Cross-Defaultto Note, Security Instrument and Other Loan Documents.  At the option of Lender, any Event of Defaultby Borrower under this Agreement shall constitute a default under the Note, theSecurity Instrument or any of the other Loan Documents to the same extent asthough the Note had by its own terms become due and payable at maturity andpayment thereof had been refused, and in such event Lender may, withoutliability to Borrower, assert and exercise any and all rights and remediesprovided for herein or in the Note, the Security Instrument or any of the otherLoan Documents or otherwise as may be provided by law.  Such rights and remedies may be assertedconcurrently or successively from time to time (either before or aftercommencement of foreclosure proceedings or before or after the exercise of anyother remedy of Lender) until the Note, including interest thereon, and all ofthe Indebtedness of Borrower to Lender under this Agreement and the other LoanDocuments, have been paid in full.

 

(e)                                  RecourseLimitations.  Borrower’sliability in connection with this Agreement, the Note and the other LoanDocuments (including Borrower’s liability for all amounts due hereunder orthereunder) is collectible only from the Project and other property encumberedby the Security Instrument.  In no casewill any person who holds a direct or indirect ownership interest in Borrower,or any officer, director, manager, trustee, employee, agent or affiliate ofBorrower or any such direct or indirect owner, have any responsibility forBorrower’s obligations in connection with this Agreement, the Note and theother Loan Documents (including Borrower’s liability for any amounts duehereunder or thereunder); provided, however, that nothing in this Section 18(e) limitsthe liability of any person under a guaranty or other agreement executed bysuch person.

 

**19.          ADDITIONAL ADVANCES**

 

(a)                                  Disbursement ofAdditional Advances.    Borrowermay submit a Draw Request in the form attached as Exhibit E fromtime to time, but no more frequently than monthly (or twice monthly for thefollowing subcontractors: framing, drywall, retaining walls, electrical, trim,carpentry, HVAC, floor coverings, concrete, final-clean and plumbing), for thepayment of the cost of labor, materials, and services supplied for theconstruction of the Project and other costs incurred in connection with the Project,all to the extent contemplated in the Construction Budget (“**Additional Advance**”).  Lender may require, at Borrower’s expense, aninspection of, and favorable report upon, the Project, as built at the time of 

 

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theDraw Request, by the Inspecting Architects/Engineers prior to making anyAdditional Advance.  Each Draw Requestshall be submitted by Borrower to Lender not less than ten (10) BusinessDays prior to the date upon which the Additional Advance requested is desiredby Borrower.  Upon satisfaction of allconditions precedent to Lender’s obligation to make Additional Advanceshereunder, and provided that the Additional Advance, when aggregated with theSenior Mezzanine Advance Amount, does not exceed the Maximum Aggregate AdvanceAmount and is consistent with the Construction Budget, Lender shall fund toBorrower the requested Additional Advance (less the portion of the amount inthe related Draw Request that is simultaneously funded under the SeniorMezzanine Loan Agreement), on the later of (i) the date such advance isrequested in the Draw Request, and (ii)  five (5) Business Days afterreceipt of a complete Draw Request, together with the required accompanyingmaterials, reasonably satisfactory to Lender.

 

(b)                                 ConditionsPrecedent to Additional Advance.

 

(i)                                     There shall exist no Eventof Default;

 

(ii)                                  The Senior Loan is in full force andeffect;

 

(iii)                               There exists no default by Mortgagorunder the Senior Loan;

 

(iv)                              The representations and warrantiesmade in this Agreement shall be true and correct in all material respects onand as of the date of each Additional Advance, with the same effect as if madeon such date, other than (i) those which by their specific terms relateonly to the Closing Date or another specified date, and (ii) thosewhich relate to Section 6(d) and Section 16(c) hereofwhich need be true and correct only as of the effective date of this Agreement;

 

(v)                                 Borrower shall have providedto Lender (a) the form lease for residential units within the Project (it being agreed that Borrower hasalready provided such form to Lender) and (b) copies of anynon-residential Leases affecting the Project;

 

(vi)                              Borrower shall have providedto Lender copies of all available Plans prepared by any engineers or architects in connection with theProject;

 

(vii)                           Lender shall have receivedcopies of any inspection reports prepared by the InspectingArchitects/Engineers with respect to the specific Additional Advance and/or byany Governmental Authority having jurisdiction over the Project and Lendershall have received inspection reports, in form and substance reasonablyacceptable to Lender, from the Inspecting Architect/Engineers at 

 

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notless than thirty (30)-day intervals (and Lender shall request such reports fromthe Inspecting Architect/Engineers);

 

(viii)                        Borrower shall procure anddeliver to Lender, if required by Lender, evidence reasonably satisfactory toLender that the amount theretofore invested by Mortgagor in the Project,together with the funds remaining to be advanced to Borrower by Lender underthe terms of this Agreement and the Senior Mezzanine Loan Agreement and to Mortgagor by Senior Lenderunder the Senior Loan, or sums which Borrower agrees to make available, areadequate to meet all costs incurred and to be incurred in connection with theconstruction of the Project;

 

(ix)                                Borrower shall procure anddeliver to Lender, if required by Lender, evidence reasonably satisfactory to Lendersupporting the amounts requested by Borrower, including, without limitation,statements, invoices and bills evidencing the requested amounts; and

 

(x)                                   Borrower shall procure anddeliver to Lender a lien waiver and/or subordination agreement from eachcontractor or subcontractor who has performed work valued at or in excess of$150,000 at or upon the Land, or whohas supplied material, supplies or equipment for the construction of theProject and who is intended to have been paid by the proceeds of the AdditionalAdvance current through the last payment to such contractor or subcontractor.

 

**20.          TRANSFER OF LOAN; LOAN SERVICER**.

 

(a)                                  Lender’s Rightto Transfer  Borrowerhereby acknowledges that Lender shall have the right to transfer, assign orsell the Loan Documents, or grant participation interests in all or any portionof the Loan, in such manner and to such entities as Lender in its sole andabsolute discretion shall select.

 

(b)                                 Loan Servicer.  At the option of Lender, the Loan may beserviced by a servicer selected by Lender and Lender may delegate all or anyportion of its responsibilities under this Agreement and the other LoanDocuments to such servicer pursuant to a servicing agreement between Lender andsuch servicer.  A sale may result in a changeof the Loan servicer.  There also may beone or more changes of Loan servicer unrelated to a sale of the Note.  If there is a change of Loan servicer,Borrower will be given notice of the change.

 

(c)                                  Disseminationof Information.  Lender mayforward to each purchaser, transferee, assignee, or servicer of, and eachparticipant or investor in, the Loan (collectively, the “**Investor**”), any governmental regulators orothers 

 

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as may be required by securities law, all documents and informationwhich Lender now has or may hereafter acquire relating to the Indebtedness andto Borrower, Mortgagor and Principal, except as limited by the Principal’spartnership agreement, including financial statements, whether furnished byBorrower or otherwise, as Lender determines necessary or desirable.  Borrower irrevocably waives any and allrights it may have under applicable Laws to prohibit such disclosure.

 

**21.          LENDER’S EXPENSES; RIGHTS OF LENDER**.  Borrower shall promptly pay to Lender, upondemand, with interest thereon from the date of demand at the Default InterestRate, reasonable attorneys’ fees and all other reasonable costs and expensespaid or incurred by Lender in enforcing or exercising its rights or remedies createdby, connected with or provided for in this Agreement or any of the other LoanDocuments following an Event of Default, and payment thereof shall be securedby the Security Instrument.

 

**22.          MISCELLANEOUS**.

 

(a)                                  Notices. All notices,demands and other communications (“**Notice**”)under or concerning this Agreement shall be in writing.  Each Notice shall be addressed to theintended recipient at its address set forth below, and a Notice shall be deemedgiven on the earliest to occur of (1) the date when the Notice is receivedby the addressee; (2) the first Business Day after the Notice is deliveredto a recognized overnight courier service, with arrangements made for paymentof charges for next Business Day delivery; or (3) the third Business Dayafter the Notice is deposited in the United States mail with postage prepaid,certified mail, return receipt requested.

 

If to Lender:                                                                               BehringerHarvard St. Rose REIT, LLC15601 Dallas Parkway, Suite 600Addison, Texas  75001Attention:  Chief Legal OfficerFacsimile:  (214) 655-1610

 

with copy to:                                                                          BehringerHarvard St. Rose REIT, LLC15601 Dallas Parkway, Suite 600Addison, Texas  75001Attention:  Mark AlfieriFacsimile:  (214) 655-1610

 

with copy to:                                                                          Wick Phillips,LLP2100 Ross Avenue, Suite 950Dallas, Texas  75201Attention:  Walt MillerFacsimile:  (214) 692-6255

 

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Ifto Borrower:                                                                   SW 131 St. Rose Mezzanine Borrower LLC2001 Bryan Street, Suite 3250Dallas, Texas 75201Attention: Timothy J. HoganFacsimile: (214) 922-8553

 

witha copy to:                                                                 SW 131 St. RoseMezzanine Borrower LLC7373 N. Scottsdale Road, Suite C-228Scottsdale, Arizona  85253Attention: Bruce HartFacsimile:  (480) 596-8848

 

withcopy to:                                                                          Jones Day325 John H. McConnell Blvd., Suite 600Columbus, Ohio 43216Attention:  Michael K. OrdingFacsimile: (614) 461-4198

 

Anyparty to this Agreement may change the address to which notices intended for itare to be directed by means of notice given to the other party in accordancewith this Section 22(a). Each party agrees that it will not refuse or reject delivery of anynotice given in accordance with this Section 22(a), that it willacknowledge, in writing, the receipt of any notice upon request by the otherparty and that any notice rejected or refused by it shall be deemed forpurposes of this Section 22(a) to have been received by therejecting party on the date so refused or rejected, as conclusively establishedby the records of the U.S. Postal Service or the courier service. Any noticeunder the Note and any other Loan Document which does not specify how noticesare to be given shall be given in accordance with this Section 22(a).

 

(b)                                 Waivers.  No delay or omission in exercising any rightor power arising from any default shall be construed as a waiver of suchdefault or as an acquiescence therein, nor shall any single or partial exercisethereof preclude any further exercise thereof or the exercise of any otherright or power arising from any default. No waiver of any breach of any of the covenants or conditions of thisAgreement shall be construed to be a waiver of or acquiescence in or consent toany previous or subsequent breach of the same or of any other condition orcovenant.

 

(c)                                  Lender Not Partner ofBorrower; Borrower in Control.  Neither the execution nor the performance ofany of the Loan Documents by Lender, nor the exercise by the Lender of any ofits rights, privileges or remedies conferred under the Loan Documents or underapplicable law, shall be deemed to render the Lender a partner or a jointventurer with Borrower, any guarantor of the Loan or any other person, or torender Borrower an agent of Lender for any purposes.  Nothing contained herein shall

 

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                                                characterize orbe deemed to characterize, or be used as a basis for characterizing, Lender asa “mortgagee-in-possession”.  Lender andBorrower agree that Mortgagor remains in control of the Project, and that itdetermines the business plan for the Project and employment, management,leasing and operating directions and decisions for the Project.  All of Lender’s rights, and actions taken byLender as provided or permitted, in or under this Agreement or the other LoanDocuments are for and in its capacity as a secured lender attempting to protectthe collateral security for the Loan and to collect the Indebtedness and anyother amounts owing or outstanding under the Note or the Loan Documents.

 

(d)                                 No Third Party.  This Agreement is made for the sole benefitof Borrower and Lender and Lender’s successors and assigns, and no other personor persons shall have any rights or remedies under or by reason of thisAgreement or any right to the exercise of any right or power hereunder orarising from any default, nor shall Lender owe any duty whatsoever to anyclaimant for labor performed or materials furnished in connection with theconstruction of the improvements to apply any undisbursed portion of the Loanto the payment of any such claims.

 

(e)                                  Time of Essence; Context.  Time is hereby declared to be of the essenceof this Agreement and of every part hereof. When the context and construction so require, all words used in thesingular herein shall be deemed to have been used in the plural and themasculine shall include the feminine and the neuter and vice versa.

 

(f)                                    Successors and Assigns.  This Agreement shall bind, and the rightsgranted by this Agreement shall inure to, the respective successors and assignsof Lender and Borrower.  However, a Saleor Encumbrance prohibited by Section 13(d) shall be an Eventof Default.

 

(g)                                 Governing Jurisdiction.  This Agreement and all of the other Loan Documents(except as otherwise expressly provided therein with respect to the enforcementof specific remedies) shall be governed by and construed in accordance with thesubstantive law of the State of Texas without regard to the application ofchoice of law principles.

 

(h)                                 SUBMISSION TO JURISDICTION;SERVICE OF PROCESS.  BORROWERAND LENDER EACH HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE STATECOURTS OF THE STATE OF TEXAS SITTING IN DALLAS COUNTY, TEXAS, FOR THE PURPOSESOF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF OR BASED UPON THISAGREEMENT, THE SUBJECT MATTER HEREOF, ANY OTHER LOAN DOCUMENT AND THE SUBJECTMATTER THEREOF, OR THE LOAN.  EACH OFBORROWER AND LENDER TO THE

 

 

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                                                EXTENT PERMITTEDBY APPLICABLE LAW (A) HEREBY WAIVES, AND AGREES NOT TO ASSERT, BY WAY OFMOTION, AS A DEFENSE, OR OTHERWISE, IN ANY SUCH SUIT, ACTION OR OTHERPROCEEDING BROUGHT IN THE ABOVE-NAMED COURTS ANY CLAIM THAT IT IS NOT SUBJECTPERSONALLY TO THE JURISDICTION OF SUCH COURTS, THAT ITS PROPERTY IS EXEMPT ORIMMUNE FROM ATTACHMENT OR EXECUTION BY ANY SUCH COURT, THAT THE SUIT, ACTION ORPROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT,ACTION OR PROCEEDING IS IMPROPER OR THAT THIS AGREEMENT, THE SUBJECT MATTER HEREOF, THE OTHER LOAN DOCUMENTS, THESUBJECT MATTER THEREOF, OR THE LOAN (AS APPLICABLE) MAY NOT BE ENFORCED INOR BY SUCH COURT, (B) HEREBY WAIVES THE RIGHT TO REMOVE ANY SUCH ACTION,SUIT OR PROCEEDING INSTITUTED IN STATE COURT TO FEDERAL COURT, OR TO REMAND ANACTION INSTITUTED IN FEDERAL COURT TO STATE COURT AND (C) HEREBY WAIVESTHE RIGHT TO ASSERT IN ANY SUCH ACTION, SUIT OR PROCEEDING ANY OFFSETS ORCOUNTERCLAIMS EXCEPT COUNTERCLAIMS THAT ARE COMPULSORY OR OTHERWISE ARISE FROMTHE SAME SUBJECT MATTER.  BORROWER ANDLENDER EACH HEREBY CONSENTS TO SERVICE OF PROCESS BY MAIL AT THE ADDRESS TOWHICH NOTICES ARE TO BE GIVEN TO IT PURSUANT TO SECTION 22(a) HEREOF,BUT ANY SUCH SERVICE WILL BE EFFECTIVE ONLY WHEN RECEIVED AT SUCH ADDRESS.  BORROWER AND LENDER EACH AGREES THAT ITSSUBMISSION TO JURISDICTION AND CONSENT TO SERVICE OF PROCESS BY MAIL IS MADEFOR THE EXPRESS BENEFIT OF THE OTHER PARTY. FINAL JUDGMENT AGAINST A PARTY IN ANY SUCH ACTION, SUIT OR PROCEEDINGSHALL BE CONCLUSIVE, AND MAY BE ENFORCED IN ANY OTHER JURISDICTION (X) BYSUIT, ACTION OR PROCEEDING ON THE JUDGMENT, A CERTIFIED OR TRUE COPY OF WHICHSHALL BE CONCLUSIVE EVIDENCE OF THE FACT AND OF THE AMOUNT OF INDEBTEDNESS ORLIABILITY OF THE PARTY THEREIN DESCRIBED, OR (Y) IN ANY OTHER MANNERPROVIDED BY OR PURSUANT TO THE LAWS OF SUCH OTHER JURISDICTION.

 

(i)                                     WAIVER WITH RESPECT TODAMAGES.  BORROWER ACKNOWLEDGES THATLENDER DOES NOT HAVE ANY FIDUCIARY OR OTHER SPECIAL RELATIONSHIP WITH, ORFIDUCIARY OR SPECIAL DUTY TO, BORROWER ARISING OUT OF OR IN CONNECTION WITHTHIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, AND THE RELATIONSHIP BETWEEN LENDERAND BORROWER, IN CONNECTION HEREWITH AND THEREWITH, IS SOLELY THAT OF DEBTORAND CREDITOR.  TO

 

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                                                THE EXTENTPERMITTED BY APPLICABLE LAW, BORROWER SHALL NOT ASSERT, AND BORROWER HEREBYWAIVES, ANY CLAIMS AGAINST LENDER, ON ANY THEORY OF LIABILITY, FOR SPECIAL,INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES (AS OPPOSED TO DIRECT OR ACTUALDAMAGES) ARISING OUT OF, IN CONNECTION WITH, OR AS A RESULT OF, THIS AGREEMENT,ANY OTHER LOAN DOCUMENT, ANY AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY ORTHEREBY, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

 

(j)                                     Entire Agreement.  This Agreement and all of the other LoanDocuments constitute the entire understanding between the parties hereto withrespect to the subject matter hereof, superseding all prior written or oralunderstandings, and may not be modified, amended or terminated except by awritten agreement signed by each of the parties hereto or thereto that is to bebound by the modification, amendment or termination.  Notwithstanding the foregoing, the provisionsof this Agreement are not intended to supersede the provisions of the SecurityInstrument but shall be construed as supplemental thereto.  Borrower and Lender each hereby acknowledgesthat this Agreement and the other Loan Documents accurately reflect theagreements and understandings of the parties hereto with respect to the subjectmatter hereof and hereby waives any claims against the other which it may nowhave or may hereafter acquire to the effect that the actual agreements andunderstandings of the parties hereto with respect to the subject matter hereofmay not be accurately set forth in this Agreement or such other Loan Documents.

 

(k)                                  Headings.  The various headings of this Agreement areincluded for convenience only and shall not affect the meaning orinterpretation of this Agreement or any provision hereof.

 

(l)                                     Severability.  Each provision of this Agreement shall beinterpreted so as to be effective and valid under applicable law, but if anysuch provision shall in any respect be ineffective or invalid under such law,such ineffectiveness or invalidity shall not affect the remainder of suchprovision or the remaining provisions of this Agreement.

 

(m)                               Counterparts.  This Agreement may be executed in two or morecounterparts, each of which shall be deemed an original but all of whichtogether shall constitute but one and the same document.

 

(n)                                 WAIVER OF JURY TRIAL.  BORROWER AND LENDER EACH HEREBY KNOWINGLY,VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT THAT IT MAY HAVE TO A TRIALBY JURY IN ANY LITIGATION ARISING IN ANY WAY IN CONNECTION WITH THIS LOANAGREEMENT OR ANY OF THE OTHER LOAN

 

 

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                                                DOCUMENTS, ORANY OTHER STATEMENTS OR ACTIONS OF THE LENDER OR BORROWER RELATED THERETO.  BORROWER AND LENDER EACH ACKNOWLEDGES THATTHIS WAIVER IS A MATERIAL INDUCEMENT FOR THE OTHER TO ENTER INTO THIS AGREEMENTAND EACH OTHER LOAN DOCUMENT, AND THAT THIS WAIVER SHALL BE EFFECTIVE AS TOEACH OF THE OTHER LOAN DOCUMENTS AS IF FULLY INCORPORATED THEREIN.

 

(o)                                 Sole and Absolute Discretion.  Any option, consent, approval, or discretionor similar right of Lender set forth in this Agreement or any of the other LoanDocuments may be exercised by Lender in its sole, absolute and unreviewablediscretion, unless the provisions of this Agreement or the other Loan Documentsspecifically requires a different standard.

 

(p)                                 Straight Debt Harbor.  It is the intent of Borrower and Lender thatthe Loan shall be treated as a security that satisfies the requirements of Section 856(m)(1)(A) andSection 856(m)(2) of the Code (the “**StraightDebt Safe Harbor**”). Accordingly, notwithstanding any indication herein to the contrary, theparties hereto agree that the terms of the Loan shall be interpreted in such amanner that the Loan satisfies the Straight Debt Safe Harbor for so long as itis owned by Lender; and the terms of the Note shall be applied such that theNote has a constant effective yield to maturity, as determined under Section 1372of the Code, at a fixed rate over the entire term of the Note equal to theInterest Rate (as defined in the Note) (or, during any time at which an Eventof Default is continuing, at the Default Interest Rate); provided, however,that such contraction shall not alter the dates of the principal or interestpayments (described in Section 1.1 of the Note) or the amounts of theprincipal or interest payments required to be paid on an interest payment date(described in Section 1.1. of the Note) prior to the Maturity Date orearlier prepayment date.

 

(q)                                 Assignment.  Lender may, without the consent of any otherparty, assign its rights and obligations under this Agreement and the LoanDocuments to any Affiliate of Lender.

 

(r)                                    Retainage of Subcontractors.  Lender understands and agrees that noretainage will be withheld for general conditions or the following subcontractortrades: floor and roof trusses, cabinets and countertops, appliances, lumber,drywall, concrete and reinforcing materials, cultured stone and CMU materials,interior trim, electric light fixtures, windows, doors and millwork, HVACcomponents, metals, floor coverings, surveying and stocking, materials testingand utilities.  Borrower understands andagrees that ten (10%) retainage will be withheld for all other subcontractorsprovided that at such time as the Project is at least

 

 

45

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                                                fifty percent(50%) completed (as confirmed by the Senior Lender’s construction consultant,if any), retainage may be reduced to five percent (5%) for such othersubcontractors.

 

**23.          SPECIAL REPRESENTATIONS, WARRANTIES AND COVENANTS OFBORROWER. **Borrower shall do all things necessary to preserve the existence ofBorrower and Mortgagor as a separate Special Purpose Bankruptcy Remote Entityunless Lender otherwise consents, in its sole discretion, in writing.  Borrower covenants and agrees that withrespect to Borrower and Mortgagor, until payment in full of the Indebtedness,it will not do, or permit Mortgagor to do, directly or indirectly, any of thefollowing unless Lender consents thereto, in its sole discretion, in writing.  A “Special Purpose Bankruptcy Remote Entity”means a corporation, limited partnership or limited liability company whichshall not:

 

(a)                                  engage in any business oractivity other than the ownership, construction, operation and maintenance, ineach case directly or indirectly, of the Land and the Project (in case ofMortgagor) or the Equity Interests in Mortgagor (in case of Borrower) andactivities incidental thereto;

 

(b)                                 acquire or own any materialassets other than (i) the Equity Interests, (ii) the Land or theProject, and (iii) such incidental personal property as may be necessaryfor the operation of the Project or as may arise out of the other activities ofBorrower or Mortgagor;

 

(c)                                  merge into or consolidatewith any person, or dissolve, terminate or liquidate, or transfer or otherwisedispose of all or substantially all of its assets or change its legalstructure;

 

(d)                                 fail to preserve itsexistence as a person duly organized, validly existing and in good standing (ifapplicable) under the laws of the jurisdiction of its organization orformation, or amend, modify, or terminate the provisions of its organizationaldocuments if such amendment, modification, or termination would adverselyaffect the ability of such Person to perform its obligations hereunder or underthe other Loan Documents or would affect any other clause of this Section 23;

 

(e)                                  own any subsidiary (except,in the case of Borrower, the Mortgagor) or make any investment in any person(except, in the case of Borrower, the Mortgagor);

 

(f)                                    commingle its assets withthe assets of any of its general partners, members, shareholders, Affiliates,principals or of any other Person in such a manner that it will be costly ordifficult to segregate, ascertain or identify its individual assets from thoseof any general partner, member, shareholder, principal or Affiliate of Borroweror Mortgagor or any other Person;

 

(g)                                 incur any debt, secured orunsecured, direct or contingent (including guaranteeing any obligation), otherthan (i) the Senior Loan, the Loan and

 

 

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                                                the loan madepursuant to the Senior Mezzanine Loan Agreement, (ii) obligations underinterest rate hedging arrangements related to the Senior Loan and (iii) tradeand operational indebtedness incurred in the ordinary course of business(including construction and operation of the Project) or for its administrativefunctions;

 

(h)                                 fail to maintain itsrecords, books of account and bank accounts separate and apart from those ofits general partners, members, shareholders, principals and Affiliates and anyother Person;

 

(i)                                     enter into any contract oragreement with any general partner, member, shareholder, principal or Affiliateof Borrower or Mortgagor except upon terms and conditions that areintrinsically fair and substantially similar to those that would be availableon an arms-length basis with third parties other than any general partner,member, shareholder, principal or Affiliate of Borrower or Mortgagor;

 

(j)                                     seek the dissolution or windingup of Borrower or Mortgagor;

 

(k)                                  maintain its assets in sucha manner that it will be costly or difficult to segregate, ascertain oridentify its individual assets from those of any general partner, member,shareholder, principal or Affiliate of Borrower or Mortgagor or any otherPerson.

 

(l)                                     hold itself out to beresponsible for the debts of another person, except through endorsement ofnegotiable instruments in the ordinary course of collection;

 

(m)                               make any loans or advancesto any third party, including any general partner, member, shareholder,principal or Affiliate of Borrower or Mortgagor (except, in the case ofBorrower, to the Mortgagor);

 

(n)                                 fail to file its own taxreturns, if any, as may be required under applicable law, to the extent thatBorrower or Mortgagor is (i) not part of a consolidated group filing aconsolidated return or returns or (ii) not treated as a “disregardedentity” for tax purposes not required to file tax returns under applicable law;or

 

(o)                                 fail either to hold itselfout to the public as a legal person separate and distinct from any other personor to conduct its business solely in its own name if the result is (i) tomislead others as to the identity of the person with which such other party istransacting business; or (ii) to suggest that it is responsible for thedebts of any third party (including any general partner, principal or Affiliateof Borrower or Mortgagor), provided, however, Mortgagor and Borrower may holditself out as doing business under the “Trammel Crow Residential” or “AlexanCommunities” names.

 

 

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In addition to the foregoing, Borrower shallhave at least one independent manager who is provided by a nationallyrecognized company that provides professional independent directors and whoshall not be at the time of initial appointment, and may not have been duringthe preceding five years (i) a stockholder, director, officer, employee,partner, member, attorney or counsel of Mortgagor or an Affiliate of Mortgagoror Borrower, (ii) a customer, supplier (other than a supplier ofregistered agent or registered office service) or other Person who derives anyof its purchases or revenues from its activities with Mortgagor or Borrower, (iii) aPerson or other entity controlling or under common control with any suchstockholder, director, officer employee, partner, customer, supplier (otherthan a supplier of registered agent or registered office service) or otherPerson or (iv) a member of the immediate family of any such stockholder,director, officer, employee, partner, customer, supplier or other Person (the “**Independent Director**”). At any time while the Loan is outstanding, the consent of theIndependent Director should be required to: (i) file, consent to thefiling of, or join in any filing of, a bankruptcy or insolvency petition; (ii) dissolve,liquidate, merge or consolidate; (iii) engage in any business or activityother than the ownership, construction, operation and maintenance, directly orindirectly, of the Project; and (iv) amend the articles of organization,limited liability agreement or partnership agreement.

 

**24.          SENIOR MEZZANINE LOAN.**

 

(a)                                  Borrower and Lender areentering into the Senior Mezzanine Loan Agreement contemporaneously with thisAgreement.  Under this Agreement and theSenior Mezzanine Loan Agreement, Lender may advance to Borrower an aggregatemaximum principal amount up to, but not in excess of, the Maximum AggregateAdvance Amount.  The Borrower and Lenderagree that, at any given time, any principal amounts advanced to Borrower byLender under this Agreement and the Senior Mezzanine Loan Agreement shall beallocated as follows:

 

(i)                                     At all times while principalamounts are outstanding and/or additional principal amounts may be advancedunder this Agreement or the Senior Mezzanine Loan Agreement, an aggregateprincipal amount of at least $2,000 shall be advanced to Borrower by Lenderunder this Agreement and the Senior Mezzanine Loan Agreement, taken together,and the principal amount outstanding under this Agreement shall be at least$1,000 and the principal amount outstanding under the Senior Mezzanine LoanAgreement shall be at least $1,000;

 

(ii)                                  If an aggregate principalamount of more than $2,000 has been advanced to Borrower by Lender under thisAgreement and the Senior Mezzanine Loan Agreement, Lender may decide whetheradditional amounts requested by Borrower pursuant to a Draw Request are fundedpursuant to this Agreement or pursuant to the Senior Mezzanine Loan Agreement,or in part pursuant to this Agreement and in part pursuant to the SeniorMezzanine Loan Agreement, and if in parts pursuant to both this Agreement andthe

 

 

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                                                SeniorMezzanine Loan Agreement, the respective parts funding pursuant to each, solong as the aggregate amount advanced to Borrower pursuant to this Agreementand the Senior Mezzanine Loan Agreement in all cases equals the amountrequested by Borrower in the Draw Request.

 

(b)                                 Borrower acknowledges thatLender has advised it that Lender desires that at no time will the SeniorMezzanine Advance Amount exceed the Estimated Value.  Accordingly, Borrower agrees that if at anytime the Senior Mezzanine Advance Amount is more than the Estimated Value, Lendershall, subject to Section 24(a)(i), be deemed to have advancedprincipal under this Agreement in an amount equal to the amount by which theSenior Mezzanine Advance Amount exceeds the Estimated Value and to have usedsuch advance to repay the portion of the loan under the Senior Mezzanine LoanAgreement then outstanding so as to reduce the Senior Mezzanine Advance Amountto the Estimated Value.  Conversely,Borrower agrees that if at any time the Senior Mezzanine Advance Amount is lessthan the Estimated Value, Lender shall, subject to Section 24(a)(i),be deemed to have advanced principal against the loan made under the SeniorMezzanine Loan Agreement in an amount equal to the lesser of (i) theJunior Mezzanine Advance Amount minus $1,000 and (ii) the amount by whichthe Estimated Value exceeds the Senior Mezzanine Advance Amount, and in suchevent Lender shall be deemed to have used the amount so advanced to repay aportion of the Loan.  An advance pursuantto this Section 24(b) will not reduce the amount Borrower isentitled to draw under this Agreement and the Senior Mezzanine Loan Agreement,it being the intent of Lender and Borrower that Borrower will be entitled toobtain advances up to the Maximum Aggregate Advance Amount.  An advance and contemporaneous repaymentmade, or deemed to be made, pursuant to this Section 24(b) willnot be considered an advance in excess of the Maximum Aggregate Advance Amountfor purposes of this Agreement.

 

(c)                                  Borrower acknowledges thatLender has advised it that Lender desires that at no time will the SeniorMezzanine Advance Amount and the accrued and unpaid interest on the loanpursuant to the Senior Mezzanine Loan Agreement, taken together, exceed theEstimated Value.  Therefore, to theextent that, after any adjustments pursuant to Section 24(b), theSenior Mezzanine Advance Amount and the accrued and unpaid interest on the loanpursuant to the Senior Mezzanine Loan Agreement, taken together, exceed theEstimated Value, then such accrued and unpaid interest will be deemed to bepayable under the Loan rather than payable under the loan pursuant to theSenior Mezzanine Loan Agreement to the extent necessary to prevent the SeniorMezzanine Advance Amount and the accrued and unpaid interest on the loanpursuant to the Senior Mezzanine Loan Agreement, taken together, from exceedingthe Estimated Value.  Any such interestdeemed to be payable under the Loan pursuant to this Section 

 

 

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                                                24(c) shallautomatically to revert to being payable under the loan pursuant to the SeniorMezzanine Loan Agreement to the extent possible without causing the SeniorMezzanine Advance Amount and the accrued and unpaid interest on the loanpursuant to the Senior Mezzanine Loan Agreement, taken together, from exceedingthe Estimated Value.  In no event shallthe accrued and unpaid interest under the Loan, when combined with the accruedand unpaid interest owing under the loan pursuant to the Senior Mezzanine LoanAgreement, exceed the amount of interest that would be owing (taking intoaccount payments of interest made prior to the time in question) if interesthad accrued at the rate applicable under the Note and the note issued pursuantto the Senior Mezzanine Loan Agreement on a principal balance equal to theJunior Mezzanine Advance Amount plus the Senior Mezzanine Advance Amount.

 

(d)                                 Lender shall endeavor togive Borrower written notice of any advance, repayment or adjustment pursuantto this Section 24 simultaneously with such action, and Lendershall, upon request by Borrower, give Borrower written notice of the amountoutstanding under the Loan and the loan under the Senior Mezzanine LoanAgreement.

 

**25.          SUBDIVISIONAND RELEASE.**

 

(a)                                  On or before June 30,2009, Borrower will have caused the Mortgagor to have (i) obtained allfinal, non-appealable approvals of all applicable Governmental Authoritiesnecessary to cause the Land to be lawfully subdivided into separate andconforming legal lots comprised of the Commercial Tract and the ResidentialTract, substantially as reflected on the proposed subdivision map (a copy ofwhich is attached as Exhibit A-1 to the Senior Loan Agreement); (ii) recorded(or cause to have been recorded) within the applicable real property records ofClark County, Nevada the final subdivision map as so approved by all applicableGovernmental Authorities (the “**Final Map**”);and (iii) caused the Title Insurer to have issued an endorsement to thetitle insurance insuring that, after giving effect to the recordation of theFinal Map, the Residential Tract constitutes a separate, legal lot pursuant toapplicable laws.  If any GovernmentalAuthority conditions approval of the proposed subdivision map on revisionsthereto, Lender shall be deemed to have consented to such revisions if and tothe extent the Senior Lender consents to such revisions in accordance with theSenior Loan Documents.

 

(b)                                 Lender shallexecute and deliver (or shall direct the trustee under the Security Instrumentto execute and deliver) a partial release or reconveyance of the lien of theSecurity Instrument with respect to the Commercial Tract, subject to andconditioned upon the satisfaction of each of the following conditionsprecedent:

 

 

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(i)                                     The Final Mapshall have been recorded in the applicable real property records of ClarkCounty, Nevada;

 

(ii)                                  The TitleInsurer shall have issued an endorsement to the title insurance insuring thatthe Residential Tract constitutes a separate legal lot in accordance with therequirements of applicable law;

 

(iii)                               Borrower orMortgagor shall have prepared and delivered to Lender, a reciprocal easementagreement (and any documents referenced therein or executed therewith), in suchform as is approved by the Senior Lender in accordance with the Senior LoanDocuments, duly executed by Mortgagor and Commercial Tract Borrower,encumbering the entirety of the Land and establishing non-exclusive, perpetualand reciprocal easements for ingress, egress, access and public utilities overand across the Land (the “**REA**”); and

 

(iv)                              Borrower shallhave reimbursed Lender for its out-of-pocket expenses incurred in connectionwith such partial release.

 

(c)                                  Lender agreesto execute and deliver a subordination of lien, in form and substancereasonably acceptable to Borrower and the Senior Lender, subordinating theliens and security interests of the Security Instrument to the REA.

 

[Signatures Follow on Next Page]

 

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INWITNESS WHEREOF, the parties hereto have duly executed and delivered thisAgreement as of the day and year first above written.

 
| BORROWER:                                |
|------------------------------------------|
|                                     |
| SW  131 ST. ROSE MEZZANINE BORROWER LLC, |
| a  Delaware limited liability company    |
|                                     |
| By:                                      | SW  130 St. Rose Limited Partnership, |
|                                     | a  Delaware limited partnership, |
|                                     | its sole member |
|                                     |
|                                     | By: | SW  129 St. Rose Limited Partnership, |
|                                     |   | a  Delaware limited partnership, |
|                                     |   | its general  partner |
|                                     |   |   |   |
|                                     |   | By: | SW  104 Development GP LLC, |
|                                     |   |   | a  Delaware limited liability company, |
|                                     |   |   | its general  partner |
|                                     |   |   |   |
|                                     |   |   |   |
|                                     |   |   | By: | /s/  Timothy J. Hogan |
|                                     |   |   |   | Timothy  J. Hogan, Vice President |
|                                     |   |   |   |
|                                     |   |   |   |

 

----

 
| LENDER:                                |
|----------------------------------------|
|                                   |
| BEHRINGER  HARVARD ST. ROSE REIT, LLC, |
| a  Delaware limited liability company  |
|                                   |
| By:                                    | Behringer  Harvard St. Rose Venture, LLC, |
|                                   | a  Delaware limited liability company, |
|                                   | its  manager |
|                                   |
|                                   | By: | Behringer  Harvard St. Rose, LLC, |
|                                   |   | a  Delaware limited liability company, |
|                                   |   | its  manager |
|                                   |
|                                   |   | By: | /s/  Gerald J. Reihsen, III |
|                                   |   |   | Gerald  J. Reihsen, III |
|                                   |   |   | Executive  Vice President-Corporate |
|                                   |   |   | Development &  Legal and Secretary |

 

 

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**EXHIBIT A**

** **

**DESCRIPTIONOF THE LAND**

** **

Allthat land situated in the County of Clark, State of Nevada, more particularlydescribed as follows:

 

**PARCEL1:**

 

TheNorth Half (N 1⁄2) of the Northwest Quarter (NW 1⁄4) of the Southwest Quarter (SW1⁄4) of the Northwest Quarter (NW 1⁄4) of Section 35, Township 22 South, Range61 East, M.D.B.&M., Clark County, Nevada.

 

**PARCEL2:**

 

TheSouth Half (S 1⁄2) of the Northeast Quarter (NE 1⁄4) of the Southwest Quarter (SW1⁄4) of the Northwest Quarter (NW 1⁄4) of Section 35, Township 22 South, Range61 East, M.D.B.&M.

 

EXCEPTINGTHEREFROM that portion lying within St. Rose Parkway.

 

**PARCEL3:**

 

Thatportion of the Northwest Quarter (NW 1⁄4) of Section 35, Township 22 South,Range 61 East, M.D.M., City of Henderson, Clark County, Nevada, more particularlydescribed as follows:

 

TheSouth Half (S 1⁄2) of the Northwest Quarter (NW 1⁄4) of the Southwest Quarter (SW1⁄4) of the Northwest Quarter (NW 1⁄4) of said Section 35.

 

TOGETHERWITH:

 

Thoseportions of the North Half (N 1⁄2) of the South Half (S 1⁄2) of the SouthwestQuarter (SW 1⁄4) of the Northwest Quarter (NW 1⁄4) of said Section 35 lyingNorthwesterly of the Northwesterly right of way of St. Rose Parkway.

 

**PARCEL4:**

 

Beinga portion of the South Half (S 1⁄2) of the Southeast Quarter (SE 1⁄4) of theNorthwest Quarter (NW 1⁄4) of the Northwest Quarter (NW 1⁄4) of Section 35,Township 22 South, Range 61 East, M.D.B.&M., Clark County, Nevada.

 

TOGETHERWITH that portion of the North Half (N 1⁄2) of the Northeast Quarter (NE 1⁄4) ofthe Southwest Quarter (SW 1⁄4) of the Northwest Quarter (NW 1⁄4), also togetherwith that portion of the North Half (N 1⁄2) of the Northwest Quarter (NW 1⁄4) ofsaid Section 35, lying Northwesterly of St. Rose Parkway, furtherdescribed as follows:

----

BEGINNINGat the Southeast (SE) corner of the Northwest Quarter (NW 1⁄4) of the NorthwestQuarter (NW 1⁄4) of said Section 35, said corner being marked by an aluminumcap marked “PLS 5269, 1994, NW 1/16”;

ThenceSouth 41°41’09” East,174.75 feet to the Northwesterly line of St. Rose Parkway as granted in Book250 as Document No. 202951, Official Records, Clark County, Nevada;

Thencealong said Northwesterly line, South 46°18’51” West, 297.97 feet toa point of intersection of said Northwesterly line with the South line of theNorth Half (N 1⁄2) of the Northeast Quarter (NE 1⁄4) of the Southwest Quarter (SW1⁄4) of the Northwest Quarter (NW 1⁄4) of said Section 35;

Thencealong the lines of said North Half (N 1⁄2) the following Three (3) courses:

1)              North 89°22’43” West,553.55 feet;

2)              North 00°33’34” West,330.00 feet;

3)              South 89°22’04” East,663.09 feet to the POINT OF BEGINNING;

 

EXCEPTING THEREFROM:

 

Aportion of the South Half (S 1⁄2) of the Southeast Quarter (SE 1⁄4) of theNorthwest Quarter (NW 1⁄4) of the Northwest Quarter (NW 1⁄4) of said Section 35,described as follows:

 

BEGINNINGat the Southwest (SW) corner of the South Half (S 1⁄2) of the Southeast Quarter(SE 1⁄4) of the Northwest Quarter (NW 1⁄4) of the Northwest Quarter (NW 1⁄4) of said Section 35;

ThenceNorth 00°33’55” West,330.09 feet to the Northwest (NW) corner of the South Half (S 1⁄2) of theSoutheast Quarter (SE 1⁄4) of the Northwest Quarter (NW 1⁄4) of the NorthwestQuarter (NW 1⁄4) of said Section 35; Thence South 89°21’56” East,663.21 feet to the Northeast Corner of the South Half (S1/2) of the SoutheastQuarter (SE 1⁄4) of the Northwest Quarter (NW 1⁄4) of the Northwest Quarter (NW 1⁄4)of said Section 35; Thence South 00°32’39” East, 330.06 feet tothe Southeast (SE) corner of the South Half (S 1⁄2) of the Southeast Quarter (SE1⁄4) of the Northwest Quarter (NW 1⁄4) of the Northwest Quarter (NW 1⁄4) of said Section 35;Thence North 41°41’09” West,316.13 feet; Thence South 48°18’51” West, 153.68 feet tothe beginning of a 500 foot radius curve, concave Northwesterly; Thence alongsaid curve to the right, 369.29 feet through a central angle of 42°19’05” to thePOINT OF BEGINNING.

(DeedReference 20070720 / 2463 and 2464)

 

**SURVEYOR’SPERIMETER LEGAL DESCRIPTION:**

 

THEFOLLOWING IS A METES AND BOUNDS LEGAL DESCRIPTION OF PARCELS 1, 2, 3 AND 4COMBINED PREPARED BY THE CERTIFYING SURVEYOR.

 

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

 

BEGINNINGAT THE SOUTHEAST CORNER OF THE NORTHWEST QUARTER (NW 1/4) OF THE NORTHWESTQUARTER (NW 1/4) OF SAID SECTION 35; THENCE SOUTH 41°41’09” EAST, ADISTANCE OF 174.75 FEET TO THE NORTHWESTERLY RIGHT-OF-WAY LINE OF ST. ROSEPARKWAY (300.00 FEET WIDE);   THENCESOUTH 48°18’51”

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WESTALONG SAID RIGHT-OF-WAY LINE, A DISTANCE OF 1,278.38 FEET TO THE SOUTH LINE OFTHE NORTH HALF (N 1/2) OF THE SOUTHWEST QUARTER (SW 1/4) OF THE SOUTHWESTQUARTER (SW 1/4) OF THE NORTHWEST QUARTER (NW 1/4) OF SAID SECTION 35;THENCE DEPARTING SAID RIGHT-OF-WAY LINE, NORTH 89°24’01” WEST ALONG SAID SOUTHLINE, A DISTANCE OF 477.63 FEET TO THE WEST LINE OF SAID SECTION 35;   THENCE DEPARTING SAID SOUTH LINE, NORTH00°34’46” WEST ALONG SAID WEST LINE, A DISTANCE OF 990.37 FEET TO THE SOUTHLINE OF THE NORTHWEST QUARTER (NW 1/4) OF THE NORTHWEST QUARTER (NW 1/4) OFSAID SECTION 35;   THENCE DEPARTINGSAID WEST LINE, SOUTH 89°22’04” EAST ALONG SAID SOUTH LINE, A DISTANCE OF663.09 FEET TO THE SOUTHEAST CORNER OF THE SOUTHWEST QUARTER (SW 1/4) OF SAIDNORTHWEST QUARTER (NW 1/4) OF THE NORTHWEST QUARTER (NW 1/4) OF SECTION 35,SAME BEING THE BEGINNING OF A CURVE, CONCAVE NORTHWESTERLY, HAVING A RADIUS OF500.00 FEET;   THENCE DEPARTING SAIDSOUTH LINE, NORTHEASTERLY 369.29 FEET ALONG SAID CURVE, THROUGH A CENTRAL ANGLEOF 42°19’05”;   THENCE NORTH 48°18’51”EAST, A DISTANCE OF 153.68 FEET; THENCE SOUTH 41°41’09” EAST, A DISTANCE OF316.13 FEET TO THE SOUTHEAST CORNER OF THE NORTHWEST QUARTER (NW 1/4) OF THENORTHWEST QUARTER (NW 1/4) OF SAID SECTION 35, SAME BEING THE POINT OFBEGINNING.

 

Preparedby:

MichaelA. Lathan, PLS No. 14414

DRCSurveying Nevada, Inc.

9330West Martin Avenue

LasVegas, Nevada  89148

 

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**EXHIBIT B**

 

**[INTENTIONALLY OMITTED]**

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**EXHIBIT C**

 

**PLANS**

 

[ATTACHED]

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**EXHIBIT D**

 

**CONSTRUCTIONBUDGET**

 
| **LINE  ITEMS**                           | **Total  Costs** |
|-------------------------------------------|------------------|
| ** **                                | ** **       |
| **LAND  COSTS**                           | ** **       |
| LAND                                      | 14,200,000.00    |
| ***TOTAL LAND COSTS***                    | 14,200,000.00    |
|                                      |             |
| **HARD  COSTS**                           | ** **       |
| Construction Hard Costs                   | 34,235,846.00    |
| Hard Costs Contingency                    | 1,431,465.00     |
| ***TOTAL HARD COSTS***                    | 35,667,311.00    |
|                                      |             |
| SOFT COSTS                                |             |
| Taxes                                     | 220,000.00       |
| Legal                                     | 375,000.00       |
| Closing Costs                             | 100,000.00       |
| Municipal Fees                            | 4,150,000.00     |
| Architect                                 | 700,000.00       |
| Engineering &  Surveying         | 200,000.00       |
| Preleasing                                | 175,000.00       |
| Marketing                                 | 465,000.00       |
| Mezzanine Loan Fee                        | 631,296.00       |
| Non-Accrual Mezzanine  Interest           | 6,413,523.00     |
| Financing Costs                           | 1,501,870.00     |
| Deferred Developer  Offsite Overhead      | 3,613,196.00     |
| Interest Reserve                          | 1,181,558.00     |
| Operating Deficit                         | 275,237.00       |
| Soft Cost Contingency                     | 275,000.00       |
| ***TOTAL SOFT COSTS***                    | 20,276,680.00    |
| ***TOTAL BUDGET***                        | 70,143,991.00    |
|                                      |             |
| **SOURCE**                                | ** **       |
| Mezzanine Debt                            | 21,043,197.00    |
| Equity Partner                            | 5,172,333.00     |
| TCR Cash-including Pre  Development Costs | 1,715,265.00     |
| Deferred Equity-Offsite  Overhead         | 3,613,196.00     |
| ***TOTAL SOURCES***                       | 31,543,991.00    |
| ***LOAN PROCEEDS***                       | 38,600,000.00    |

 

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** **

**EXHIBIT E**

** **

**DRAWREQUEST**

** **

**[BORROWER’S LETTERHEAD]**

** **

**DRAW REQUEST NO.                          **

** **

TO:  BEHRINGER HARVARD ST. ROSE REIT, LLC (“Lender”)

 
| LOAN  NO.           |                                    | DATE |   |
|---------------------|-----------------------------------------|------|--------|
| PROJECT             | ALEXAN  ST. ROSE                        |
| LOCATION            | HENDERSON,  NEVADA                      |
| BORROWER            | SW  131 ST. ROSE MEZZANINE BORROWER LLC |
|                |                                    |
|                |                                    |
| FOR  PERIOD  ENDING |                                    |

 

In accordance with the Junior Mezzanine LoanAgreement in the amount of up to $21,043,197 dated December     ,2008 between Borrower and Lender, Borrower requests that $                    be advanced from Loan proceeds.  Theproceeds should be credited to the account of                                         ,Account No.                     ,at                                         .

 
| 1.     | ORIGINAL CONTRACT SUM                      |            | $                    |   |   |
|--------|--------------------------------------------|-----------------|----------------------|--------|--------|
|   |                                       |            |                 |   |
| 2.     | TOTAL CHANGE ORDERS                        |            | $                    |   |   |
|   |                                       |            |                 |   |
| 3.     | CONTRACT SUM TO DATE  (Line 1 + 2)         |            | $                    |   |   |
|   |                                       |            |                 |   |
| 4.     | TOTAL  COMPLETED & STORED TO DATE |            | $                    |   |   |
|   |                                       |            |                 |   |
| 5.     | SOFT COSTS                                 |            | $                    |   |   |
|   |                                       |            |                 |   |
| 6.     | RETAINAGE:                                 |            |                 |   |
|   |                                       |            |                 |   |
|   | a.                                         |            | % of Completed Work  |   | $      |   |   |
|   |                                       |            |                 |   |   |   |
|   | b.                                         |            | % of Stored Material |   | $      |   |   |
|   |                                       |            |                 |   |   |   |
|   |                                       | Total Retainage |                 | $      |   |   |
|   |                                       |            |                 |   |
| 7.     | TOTAL EARNED LESS  RETAINAGE               |            | $                    |   |   |
|   | (Line 4 less Line 6  Total)                |            |                 |   |
|   |                                       |            |                 |   |
| 8.     | LESS PREVIOUS PAYMENTS                     |            | $                    |   |   |
|   |                                       |            |                 |   |
| 9.     | CURRENT PAYMENT DUE                        |            | $                    |   |   |
|   |                                       |            |                 |   |
| 10.    | BALANCE TO FINISH, PLUS  RETAINAGE         |            | $                    |   |   |
|   | (Line 3 less Line 7)                       |            |                 |   |   |

 

----

 

The undersigned Borrower represents that, to thebest of Borrower’s knowledge, information, and belief, the Work covered by thisapplication has been completed substantially in accordance with theabove-referenced Contract, that all amounts have been paid by Borrower for Workfor which previous payments were received from Owner, and that the currentpayment requested herein represents a just estimate of reimbursement toBorrower.  Borrower further representsthat: (i) there are no known mechanic’s liens or materialmen’s liensoutstanding at the date of this application (other than items being contestedin accordance with the Loan Documents); (ii) all due and payable billswith respect to the Work have been paid to date (other than items being contested in accordance with the Loan Documents)or are included in the amount requested in this application; (iii) exceptfor such bills not paid but so included, there is no known basis for the filingof any mechanic’s liens or materialmen’s liens on the Work or the Project(other than items being contested in accordance with the Loan Documents); and (iv) effectivewaivers and releases of liens have been obtained from all subcontractorsthrough the immediately preceding advance of Loan proceeds (other than itemsbeing contested in accordance with the Loan Documents).

 

This Draw Request isexecuted                     ,200    .

 

**BORROWER:**

 

SW131 ST. ROSE MEZZANINE BORROWER LLC,

aDelaware limited liability company

 

| By:    | SW  130 St. Rose Limited Partnership, |                                  |                                   |
|--------|---------------------------------------|---------------------------------------|----------------------------------------|
|   | a  Delaware limited partnership,      |                                  |                                   |
|   | its  sole member                      |                                  |                                   |
|   |                                  |                                  |                                   |
|   | By:                                   | SW  129 St. Rose Limited Partnership, |                                   |   |
|   |                                  | a  Delaware limited partnership,      |                                   |   |
|   |                                  | its  general partner                  |                                   |   |
|   |                                  |                                  |                                   |   |
|   |                                  | By:                                   | SW  104 Development GP LLC,            |   |   |
|   |                                  |                                  | a  Delaware limited liability company, |   |   |
|   |                                  |                                  | its  general partner                   |   |   |
|   |                                  |                                  |                                   |   |   |
|   |                                  |                                  |                                   |   |   |
|   |                                  |                                  | By:                                    |   |   |   |
|   |                                  |                                  | Name:                                  |   |   |   |
|   |                                  |                                  | Title:                                 |   |   |   |

 

----

 

**NOTES:**

 

Each Draw Request shall include invoices, receipts and/orcopies of checks evidencing the Cost of Work performed during the precedingmonth and unconditional lien releases for all prior payments, from GeneralContractor and all Subcontractors. Raw materials or work-in-process at amanufacturer’s plant location are not eligible for payment.  For materials not yet incorporated in theWork, the following shall be provided by Borrower as a condition to payment:

 

1.                                       Items shall belisted separately on the Draw Request;

 

2.                                       An appropriatetransfer of title shall be executed;

 

3.                                       The methodsused to store off-Site items shall be described;

 

4.                                       Items instorage shall be identified as property of Borrower or Mortgagor, and a descriptionof the identification methods used shall be submitted for approval by Lender;

 

5.                                       A writteninventory of items and method used to verify such inventory, including Borrower’scertification that all quantities have been received in good condition, shallbe submitted for approval by Lender; and

 

6.                                       Proof ofinsurance in Borrower’s name shall be secured.

 

Lender shall have the right to verify storage by aphysical inspection prior to invoice approval and at any time thereafter.  Such payment shall not relieve Borrower ofthe responsibility for protecting, safeguarding, and proper installation of thematerials.

 

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**EXHIBIT F**

** **

**OWNERSHIPCHART**

** **

[ATTACHED]

 

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**EXHIBIT G**

** **

**PENDINGACTIONS AT LAW**

** **

None.

 

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**EXHIBIT H**

** **

**VIOLATIONSOF PROPERTY AGREEMENTS**

** **

None.

 

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**EXHIBIT I**

** **

**LEASES**

** **

None.

 

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**EXHIBIT J**

** **

**FINANCIALINFORMATION**

** **

Borrower must provide thefollowing items, as applicable, to Lender, in addition to any other itemsrequested by Lender prior to Closing or during the term of this Agreement:

 

a)              Detailed accrued expenselisting for each quarter ended during the current calendar year and for theprior full fiscal year

b)             Detailed straight line rentschedule for each quarter ended during the current calendar year and for theprior full fiscal year

c)              Details/abstracts of allpermits and licenses for tenants (i.e. satellite dishes on roof)

d)             Detailed listing of alltenants with termination options

e)              Listing of all servicecontracts and equipment leases, including contracts for elevator, landscaping,electricity, cleaning, HVAC service, security, pest control, disposal, parkinglot maintenance, insurance, etc.

f)                Access to service contracts

g)             Detail of the cash receiptsand disbursements journal, downloaded to Excel if possible for the prior fullfiscal year and the year to date period of the current year

h)             Detailed general ledger ofrevenues and expenses for each quarter during the current calendar year and theprior full fiscal year

i)                 Detailed income statementsby month for the current year and for the prior full fiscal year

j)                 Copies of property taxinvoices for the current year and the previous full fiscal year

k)              Operating expensereconciliations by tenant for the current year to date period and the previousfull fiscal year

l)                 Rent roll – current year andprior year end

m)           Lease abstracts, includingamendments, exhibits and side letters for each tenant

n)             Management/leasingagreement, current year and prior year end

o)             Check registers for theperiod from the current year to date period being reviewed through the date ofthe accountants/auditors field work

p)             Access to vendor accountspayable files

q)             Leases in effect during theprior full fiscal year and during the current year being reviewed

 

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**EXHIBIT K**

** **

**FORM OFSUBORDINATION OF MANAGEMENT AGREEMENT**

** **

[ATTACHED]

 

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