Exhibit
10.3


 


EXECUTION
COPY


 


LOAN AGREEMENT


 


THIS LOAN AGREEMENT (this “Agreement”) is made as of this 28 day of September, 2005 by and
between (i) COMSTOCK BELLEMEADE, L.C., a
Virginia limited liability company (“Borrower”) and (ii) BANK OF AMERICA, N.A., a national banking association (the “Lender”).


 


R E C I T A L S:


 


Pursuant to and subject to the terms of a certain
Commitment Letter from Lender to Borrower dated September 2, 2005 (the “Commitment”)
and subject to the terms sets forth hereinbelow, Lender agrees to make a loan
to Borrower, as more particularly described herein for the purpose of (i) the
acquisition of certain residential buildings containing in the aggregate 316
units (each a “Unit” and collectively, the “Units”) and the improvement of common
area facilities within the complex and (ii) the renovation and condominium
conversion of the Units (the “Renovation”). 
All of the foregoing shall be constructed on real property in Leesburg,
Virginia more particularly described in Exhibit “A” hereto.


 


WHEREAS, Comstock Homebuilding Companies, Inc.
has executed and delivered to Lender a Guaranty (as defined herein); and


 


WHEREAS, Lender and Borrower have agreed to execute
this Agreement for the purpose of describing together with the other Loan
Documents (as herein defined) some of the terms and conditions relating to the
disbursement of Loan proceeds, and to otherwise set forth together with the
other Loan Documents (as herein defined) some of the obligations of Borrower
and the Lender.


 


W I T N E S S E T H:


 


For and in consideration of these presents, and in
further consideration of the mutual covenants and agreements herein set forth,
and in consideration of the sum of Ten and no/100 Dollars ($10.00) lawful money
of the United States of America by each of the parties to the other paid,
receipt of which is hereby acknowledged, the parties hereto, intending to be
legally bound, do hereby covenant and agree as follows:


 


1





















 


ARTICLE I – DEFINITIONS 


 


1.1                               Definitions.  Borrower and the Lender agree
that, unless the context otherwise specifies or requires, the following terms
shall have the meanings herein specified, such definitions to be applicable
equally to the singular and the plural forms of such terms and to all genders:


 


(a)                                  Appraised Value - The then current market value determined
pursuant to the most recent appraisal for the Property. All such appraisals
shall be ordered by the Lender, prepared at Borrower’s expense by a certified
appraiser acceptable to the Lender and otherwise satisfactory to the Lender in
all respects. The Lender may order, if required by the Lender’s internal
policies, reappraisals of the Property, at the Lender’s sole discretion and at
Borrower’s expense.


 


(b)                                 Borrower - The entity hereinabove
designated as such.


 


(c)                                  Contract - A fully executed contract of sale for a
Unit that: (i) has been accepted by Borrower and meets the Lender’s
criteria for acceptable contracts; (ii) is not subject to cancellation
without forfeiture of all deposits thereunder (except for cause in accordance
with applicable law and in the event the purchaser fails to obtain the
necessary mortgage loan); (iii) contains no contingencies (including,
without limitation, the sale of the purchaser’s home) except ordinary financing
contingencies; (iv) is accompanied by a cash deposit or deposits in form,
content and amount acceptable to the Lender; and (v) that either (A) provides
for a cash sale (i.e., a sale not contingent upon financing) by a purchaser
whose creditworthiness is satisfactory to the Lender in all respects, or (B) is
accompanied by a pre-qualification letter from a permanent mortgage lender in
form, amount and content satisfactory to the Lender in all respects.  In lieu of copies of Contracts, the Borrower
may elect to submit a “Unit Contract Summary Report” in form attached hereto as
Exhibit “C”.  At Lender’s
option, no more than twice monthly Lender shall verify the accuracy of the
information on each Unit Contract Summary Report through a review of Borrower’s
files.  Notwithstanding the foregoing,
the Lender shall retain the right to request copies of Contracts at any time
during the term of the Loan.  At the time
any Unit Contract Summary Report is submitted to the Lender for its approval,
Borrower shall specifically identify to the Lender each Contract wherein the
purchaser is affiliated with or related to Borrower, Guarantor (hereinafter
defined) or any of their respective employees, shareholders, partners, members
or other principals, as applicable “Related Party Contracts”).  The number of Related Party Contracts shall
not exceed ten percent (10%) of the total Units without Lender’s prior consent.


 


(d)                                 Deed of Trust - Collectively, that certain
Credit Line Deed of Trust and Security Agreement of even date herewith,
executed and delivered by Borrower to secure the Loan, as any of the same may
from time to time be amended, modified, supplemented or spread.


 


(e)                                  Default - Any of the happenings, events,
circumstances or occurrences designated as such in this Agreement.


 


2





















 


(f)                                    Environmental Regulations - “Environmental Regulations” as defined in
the Deed of Trust.


 


(g)                                 Guarantor – Comstock Homebuilding Companies, Inc.
and any other party that executes and delivers a Guaranty, and its or their
respective successors, personal representatives and permitted assigns.


 


(h)                                 Guaranty - That certain (i) Guaranty Agreement
of even date herewith executed and delivered by Guarantor to secure the Loan
and all other indebtedness under the Loan Documents (hereinafter defined), and (ii) any
and all other guaranty agreements executed for the benefit of the Lender to
secure the Loan, as any of the same may from time to time be amended, modified,
replaced or supplemented.


 


(i)                                     Hazardous Materials -  “Hazardous
Materials” as defined in the Deed of Trust.


 


(j)                                     Improvements - Any and all buildings,
structures, improvements, alterations or appurtenances already existing or at
any time hereafter constructed or placed upon the Land, and any replacements
thereof, additions thereto and substitutions therefor, including without
limitation, all equipment, apparatus, machinery and fixtures of any kind or
character forming a part thereof.


 


(k)                                  Indebtedness - All amounts due or to become due
to the Lender pursuant to or on account of the Note (hereinafter defined) or
the Letter of Credit Note (hereinafter defined), this Agreement and each of the
other Loan Documents, including, without limitation, all principal (whether
advanced prior to, upon execution of, or after the date of this Agreement),
interest, late charges, loan fees, extension fees, prepayment fees, amounts
drawn under any letters of credit, any letter of credit fees and all other
payments required to be made by the Borrower pursuant to or on account of the
Note, this Agreement and any of the other Loan Documents, and including any and
all amounts advanced by the Lender for the account of the Borrower pursuant to
the provisions of this Agreement and any of the other Loan Documents, whether
or not such amounts are advanced from the proceeds of the Loan.


 


(l)                                     Jurisdiction of Choice - The Commonwealth of Virginia, the
jurisdiction under whose laws this Agreement shall be governed, unless
otherwise provided herein.


 


(m)                               Land  — Any or all of the real property now owned or hereafter
acquired by the Borrower with Loan proceeds and more particularly described in
the Deed of Trust.


 


(n)                                 Lender - The party hereinabove designated
as such, its successors and assigns.


 


(o)                                 Letter of Credit Note – that certain Letter of Credit Note of even
date herewith in the principal amount of $1,000,000.00 made by the Borrower,
payable to the order


 


3





















 


of the Lender, as the same may from time to
time be amended, modified, replaced or supplemented.


 


(p)                                 Loan – That certain acquisition and development
loan in the amount of $46,725,000.00, and that certain $1,000,000.00 letter of
credit, each made pursuant to this Agreement, to finance the acquisition and
development of certain property, as evidenced by the Note and the Letter of
Credit Note and secured by the Deed of Trust and the other Loan Documents.


 


(q)                                 Loan Documents - This Agreement, the Note, the Letter
of Credit Note, the Deed of Trust, any Guaranty and any other instrument or
documents executed in connection with the Loan, as any of the same may from
time to time be amended, modified or supplemented.


 


(r)                                    Maturity Date – October        ,
2007.


 


(s)                                  Note - That certain Deed of Trust Note
of even date herewith in the original principal amount of $46,725,000.00, or so
much thereof as shall be advanced, made by the Borrower, payable to the order
of the Lender, as the same may from time to time be amended, modified, replaced
or supplemented.


 


(t)                                    Obligations - Any and all of the covenants,
warranties, representations, agreements, promises and other obligations (other
than the Indebtedness) made or owing by the Borrower, the Guarantors or others
to the Lender pursuant to or as otherwise set forth in the Loan Documents.


 


(u)                                 Progress Inspector - Such person or firm as the
Lender may from time to time appoint or designate to inspect the progress of
the Renovation and conformity of construction with applicable laws, and for
such other purposes as may from time to time seem appropriate to the Lender or
as may be required by the terms of this Agreement.


 


(v)                                 Project – Bellemeade Farms Project (hereinafter
defined).


 


(w)                               Property - The property described as such
in the Deed of Trust, including, but not limited to, the Land and the
Improvements.


 


(x)                                   Title Company - Any title company approved by the Lender
that provides mortgagee title insurance covering the lien of the Deed of Trust
in favor of the Lender thereon.


 


(y)                                 Bellemeade Farms Project – acquisition, renovation and condominium
conversion of up to 316 Units in Leesburg, Loudoun County, Virginia and the
improvement of common area facilities within the complex.


 


4





















 


ARTICLE II – CONDITIONS PRECEDENT TO CLOSING


 


In
addition to any other conditions stated in this Agreement, the following
conditions must be satisfied prior to Lender having any obligation to advance
funds hereunder:


 


2.1                               Loan
Documents.  Receipt by Lender of
appropriately completed and duly executed originals of this Agreement and the
other Loan Documents.  In addition,
Borrower shall provide a written
opinion of counsel to the Borrower and the Guarantor as to the authority of the
Borrower and the Guarantor to execute and deliver the Loan Documents, as to the
enforceability and validity of the Loan Documents, and as to such other matters
as the Lender may reasonably require.


 


2.2.                            Organizational
Documents.    Borrower shall supply,
with respect to the Borrower and Guarantor: (i) a currently certified copy
of the Articles of Organization or Certificate of Incorporation and all
amendments thereto, as applicable; (ii) evidence satisfactory to Lender
and its counsel that Borrower and Guarantor in good standing in the
jurisdiction where organized and qualified to do business in every jurisdiction
in which the nature of their businesses or their properties makes such
qualification necessary; (iii) resolutions of the Borrower and Guarantor
authorizing the due execution and delivery of the Loan Documents to which it is
a party, to the extent necessary; and (iv) certified true copies of the
Operating Agreement or By-laws and all amendments thereto, as applicable.


 


None of the documents
pursuant to which the Borrower or Guarantor is organized shall be amended or
modified in any respect without the prior written consent of the Lender, which
may be given or withheld in the reasonable discretion of the Lender.


 


2.3                               Insurance.  Borrower shall provide Lender with a complete
and fully paid up policy or policies of casualty and fire insurance with
standard extended coverage in an amount not less than the replacement cost of
the improvements and personalty located on the Property; $2,000,000.00 covering all claims for bodily
injury or death and property damage arising out of a single occurrence and
$2,000,000.00 for the aggregate of all occurrences during any given annual
policy period, plus $5,000,000.00 of “umbrella” coverage; builder’s risk
insurance with on a completed value, nonreporting form with permission to
complete and occupy; malicious mischief insurance; business interruption
insurance and insurance against such other hazards as Lender may require, in
amounts, with insurers and under forms of policies containing such provisions
and endorsements as Lender may require. 
All policies of insurance (except employee benefit and public liability
insurance which shall name Lender as an additional insured) shall contain a
lender’s loss payable clause and standard mortgagee clause for the benefit of
Lender, and shall provide, in part, that: 
(a) in the event of a loss, all insurance proceeds shall be paid to
Lender and Lender shall be authorized and empowered by Borrower to settle,
adjust or compromise any claims for loss, damage or destruction under such
policies of insurance; (b) any loss covered by such insurance shall be
payable by the insurer in accordance with the terms of such policy
notwithstanding any act or negligence of Borrower, its agents or employees, the
named insured or any owner, tenant or occupant of the Property which might
otherwise result in forfeiture of said insurance; (c) the insurer waives
all rights of setoff, counterclaim or deduction against Borrower; and (d) should
title to and beneficial


 


5





















 


ownership of the Property
become vested in Lender, the insurance provided by such policies shall continue
for the term thereof for the benefit of Lender. 
All required insurance shall provide that (i) the insurance
afforded all parties named as insureds shall be primary insurance and shall not
participate with, nor be in excess over, any other valid and collectible
insurance available to Lender, (ii) any other insurance obtained by any
named insured shall not be called upon to contribute until the limits of the
policies required hereunder are exhausted, and (iii) the insurance
required hereunder cannot be canceled or materially amended or altered without
at least thirty (30) days prior written notification to Lender.  All insurance required hereunder shall be
issued by companies and in an amounts in each company approved in advance by
Lender, in its sole discretion, and such insurance shall be in the form and on
terms (including but not limited to deductibles, self-insured retentions or
similar provisions) approved in advance by Lender, in its sole discretion.


 


Borrower
shall deliver all such policies (or certified copies thereof) to Lender,
together with a one-year’s paid receipt for each such policy.  In addition, Lender shall be furnished with
satisfactory evidence indicating whether the Property is located within an area
that has been identified as a “special flood hazard area” as that term is used
in the Flood Disaster Protection Act of 1973. 
If any insurable improvements on the Property are located in any area so
designated, a flood insurance policy satisfactory to Lender shall be deposited
with Lender prior to the closing on the Loan and shall be maintained in full
force until the Loan is repaid in full.


 


2.4                               Financing
Statement.  The financing statement
necessary to perfect Lender’s security interest in the personal property
subject to the Deed of Trust shall be duly filed in all appropriate offices and
jurisdictions, all other financing statements covering any of such personal
property shall be terminated, and filing and recording receipts evidencing such
filings and terminations shall be delivered to Lender, all in form and
substance satisfactory to Lender.


 


2.5                               Real
Estate Documents.  Lender shall have
received and approved, in its sole discretion, the following:


 


(a)                                  Appraisal.  An appraisal of the Property, prepared by an
appraiser acceptable to Lender, in form and content acceptable to Lender,
conforming to all regulatory and internal appraisal guidelines applicable to or
established by Lender, in its sole, absolute, nonreviewable discretion,
reflecting an as-finished discounted value for the Property satisfactory to
Lender in its sole, absolute nonreviewable discretion.  Lender acknowledges that the appraisal
received by it is acceptable.


 


(b)                                 Title
Insurance. An irrevocable commitment to issue a full-coverage mortgagee
title insurance policy (the “Title Policy”) on the ALTA 1992 form insuring the
first lien of the Deed of Trust to Lender in a form and issued by a title
insurance company or companies acceptable to Lender, said policy (i) containing
only those exceptions to title as shall be reasonably approved by Lender and
Lender’s counsel, and (ii) showing the lien of the Deed of Trust securing
the Loan to be a first lien of record, on the fee simple estate of Borrower in
the Property, together with true and complete copies of all documents or
instruments identified therein as exceptions to title.  The title policy shall be delivered to Lender
promptly after


 


6





















 


recordation of the Deed of Trust. Lender shall have the right to
designate such co-insurers or re-insurers as it deems advisable in its sole
discretion.  Such policy or policies
shall be endorsable or assignable to Lender’s successors and assigns, upon
request, without cost to Lender. Such policy or policies shall contain
affirmative insurance against filed and unfiled mechanic’s liens in form
acceptable to Lender. Lender shall receive satisfactory evidence that there is
no pending litigation with respect to the Property.


 


(c)                                  Survey.  A current survey (or other documentation
acceptable to Lender) and legal description of the Property satisfactory to
Lender from a registered land surveyor of the Commonwealth of Virginia, which
survey shall show all easements, rights of way and other matters of record,
shall locate all proposed improvements on the Land and shall generally show a
state of facts acceptable to Lender and contain a surveyor’s certificate
satisfactory to the Lender.


 


(d)                                 Environmental
Audit.  An environmental audit of the
Property prepared by an environmental consulting firm acceptable to Lender, in
its sole discretion, confirming that the Property is in compliance with all
applicable environmental laws.


 


(e)                                  Budget.  Receipt by Lender of the final budget for the
Project, which shall be attached hereto as Exhibit “B”, and which
shall be reasonably acceptable to Lender.


 


(f)                                    Evidence
of Zoning Compliance.   Such written
evidence as the Lender may require to the effect that the Property has been
zoned for purposes consistent with the uses contemplated beyond any possibility
of appeal and to the effect, further, that there are no pending proceedings,
either administrative, legislative or judicial which would in any manner
adversely affect the status of the zoning with respect to such property or any
part thereof.


 


(g)                                 Public
Utilities.  Evidence to the effect
that sanitary sewer, water, electric, gas, telephone and other public utilities
are available and adequate to serve the Property for purposes consistent with
the Renovation on the Property.


 


(h)                                 Sale
Agreement. A copy of the purchase contract for the Property,
satisfactory to the Lender and Lender’s counsel in form and substance.


 


(i)                                     No
Default.  No event shall have
occurred and be continuing that constitutes a Default (as defined below).


 


(j)                                     Representations.  All representations and warranties contained
in this Agreement shall be true and correct in every material respect as of the
date of the first disbursement under this Agreement and on the date of any
future disbursements hereunder.


 


(k)                                  Satisfactory
Documents.  All documents delivered
pursuant to this Agreement must be in form and substance reasonably
satisfactory to Lender and its counsel, and all legal matters incident to this
Agreement must be reasonably satisfactory to Lender’s counsel.


 


7





















 


2.6                               Equity
Requirement.   At or prior to Closing, Borrower shall provide Lender
evidence that Borrower has contributed $8,872,548.00 toward the purchase price
of the Property (“Equity Contribution”).


 


2.7                               Loan
Fee. Upon the closing of the Loan,
the Borrower shall pay Lender a
non-refundable loan fee in accordance with the Fee Letter Agreement of even
date hererwith between Borrower and Lender.


 




ARTICLE III - CONDITIONS FOR RENOVATION
ADVANCES


 


3.1                               In
addition to any other conditions stated in this Agreement, the following
conditions must be satisfied prior to Lender making any advances under this
Agreement for the Renovation.  Borrower
shall obtain and submit to Lender for Lender’s approval, in its reasonable
discretion, the following, as they pertain to the Project:


 


(a)                                  Permits.  Copies of any and all building and similar
permits required in connection with the Renovation, together with such evidence
as the Lender may require to the effect that all fees for such permits have
been paid.  Satisfactory evidence shall
be submitted to Lender of the receipt of all governmental approvals necessary
for the Renovation and condominium conversion of the Units have been
obtained.  Lender shall also receive
satisfactory evidence that all applicable safety, ecological and environmental
laws and any other codes or regulations affecting the Renovation and/or
proposed use of the Property have been complied with.


 


(b)                                 General
Contractor.  The general contractor
must be approved by Lender in Lender’s sole discretion (the “General Contractor”).
The contract for the Renovation shall be subject to Lender’s approval, and
shall be assigned to Lender, effective on a Default under any of the Loan Documents.  The General Contractor shall consent to such
assignment, and the General Contractor shall agree, in the event of any such
Default, to continue performance of the contract for Lender, if Lender so
requests.  In addition, the General
Contractor shall maintain workers’ compensation and disability insurance in
amounts required by law, and employer’s liability insurance.


 


(c)                                  List
of Subcontractors and Materialmen. 
If required by Lender, a list of the names of all subcontractors and
materialmen intended by the Borrower to perform work or supply materials in
connection with the Renovation, and conformed copies of executed contracts for
such work and materials, in form and substance reasonably satisfactory to
Lender.


 


(d)                                 Builder’s
Risk Insurance.  Evidence that the
insurance policy referred to in paragraph 2.2 hereof contains builder’s risk
coverage on a completed value, non-reporting form with permission to complete
and occupy.


 


8





















 


ARTICLE IV
- ADVANCES FOR THE RENOVATION


 


4.1  Loan disbursements for the Renovation shall
be governed and conditioned on the following:


 


(a)                                  The
Renovation shall be performed by the Borrower in strict accordance with all
applicable (whether present or future) laws, ordinances, rules, regulations,
requirements and order of any governmental or regulatory authority having or
claiming jurisdiction.  The Renovation
shall be completed in a manner so as not to encroach upon any easement or
right-of-way, or upon the land of others. The Renovation shall be wholly within
all applicable building restriction lines and set-backs or variances made
therefor, however established, and shall be in strict accordance with all
applicable use or other restrictions and the provisions of any prior declarations,
covenants and zoning ordinances and regulations.


 


(b)                                 Borrower
shall submit to Lender or the Progress Inspector, at Lender’s discretion, such
information as may be reasonably requested by Lender or the Progress Inspector
to verify the Renovation costs which are to be incurred in connection with the
Renovation.  Lender shall not be
obligated to authorize disbursement of Loan proceeds with respect to the
Renovation for an amount in excess of the Renovation costs to be incurred in
connection therewith as verified by Lender or the Progress Inspector pursuant
to the provisions of the preceding sentence. The funding of each draw request
is subject to an inspection and approval by an authorized officer of the Lender
and the Progress Inspector. Sufficient time shall be required between the
submission of the draw request and the actual advances in order to permit
on-site inspection by an authorized officer of the Lender and the Progress
Inspector.


 


(c)                                  The
Loan proceeds will be advanced in installments as the Renovation progresses in
accordance with the terms of this Agreement to finance the Renovation, but no
more often than twice each thirty (30) days; provided that Lender is satisfied
that the undisbursed amount of the Loan will be sufficient to complete the work,
costs estimates, approved change orders on file with the Lender, and pay or
provide for all reasonably anticipated Renovation costs through the maturity of
the Loan and the Lender is satisfied that the Borrower has paid all costs
incurred in connection with the Renovation prior to the date of the requested
advance.  In the event Lender determines
that the undisbursed portion of the Loan is insufficient to complete the
Renovation in such manner as Lender may require, the Borrower shall provide
such funds necessary to complete the Renovation.


 


(d)                                 Each
advance shall be conditioned upon receipt of (i) a written certification,
on AIA forms G-702 and G-703 by the Borrower, that the work which is the basis
of the requested advance was satisfactorily completed and within the cost
estimates approved by Lender (or such adjustments of cost estimates of line
items as shall be required and approved by Lender, provided that sufficient
funds to complete the Renovation will be available under such adjusted
estimates), to the satisfaction of Lender, and (ii) evidence that all then
necessary certificates required to be obtained from any board, agency or
department (government or otherwise) have been obtained.  All documents required to be submitted to
Lender as a condition of each disbursement shall be on standard AIA forms or
such other agreed upon draw


 


9





















 


mechanism and shall be furnished to Lender at the address designated by
Lender from time to time.


 


(e)                                  Lender
shall also require notice of continuation or an endorsement to the title
insurance policy theretofore delivered, indicating that since the last
preceding advance there has been no change in the status of title and no title
exceptions not theretofore approved by the Lender and bringing the policy to
the date of the advance then being made and increasing the coverage of the
policy by an amount equal to the advance then being made if the policy does not
by its terms provide for such an increase.


 


(f)                                    Before
making any advance of Loan proceeds, the Lender may require the Borrower to
obtain from the General Contractor, acknowledgments of payment and releases of
liens and rights to claim liens, if applicable, down to the date of the last
preceding advance and concurrently with the final advance.  All such acknowledgments and releases shall
be in the form and substance satisfactory to the Lender.


 


(g)                                 The
Lender shall not be obligated to make the final advance of Loan proceeds
hereunder, unless (i) the Progress Inspector has certified to the Lender
on standard AIA forms that the work is complete; (ii) the Lender has
received evidence satisfactory to it that all work requiring inspection by
governmental or regulatory authorities having or claiming jurisdiction has been
duly inspected and approved by such authorities and by any rating or inspection
organization, bureau, association, or office having or claiming jurisdiction;
and (iii) the Lender has received evidence satisfactory to it that
requisite certificates of occupancy for permanent occupancy have been validly
issued and that completion of the Renovation has occurred free and clear of all
mechanics’ or materialmens’ liens and any bills or claims for labor, materials
and services in connection with the completion of the Renovation.  All fees and costs of the Progress Inspector
incurred by the Lender shall be paid by the Borrower at its sole expense.


 


(h)                                 The
Lender shall not be obligated to make any advances of Loan proceeds hereunder
unless, in the reasonable judgment of the Lender, all work completed at the
time of the application for advance has been performed in a good and
workmanlike manner, and all materials and fixtures usually furnished and
installed at that stage of the Renovation have been furnished and installed, and
no Default which has not been cured has occurred under any of the documents
evidencing, securing or guaranteeing the Loan.


 


(i)                                     Upon
Default hereunder, Lender, at its option, may make any and all advances, or any
part thereof, directly to the contractors or subcontractors against
requisitions for payment under the Renovation contracts or subcontracts, as the
case may be; the execution of this Agreement by Borrower shall and does
constitute an irrevocable direction and authorization to so advance funds.  All payments made pursuant to the foregoing
shall be made within the scope of the respective contracts.


 


(j)                                     Lender,
at its option, may make any advance to itself for the payment of interest or
any and all other reasonable costs incurred by Lender in connection with or
pursuant


 


10





















 


to the Loan Documents, and the execution of this Agreement by Borrower
shall and does constitute an irrevocable direction and authorization to so
advance funds.


 


ARTICLE V — REPRESENTATIONS AND WARRANTIES


 


Borrower hereby represents and warrants to the
Lender, as of the date hereof and at all times hereafter, that:


 


5.1                               Organization, Power, Etc.   (a) Borrower
is a duly organized, validly existing limited liability company, in good standing
under the laws of the jurisdiction of its organization; (b) Guarantor is a
duly organized, validly existing corporation under the laws of the jurisdiction
of its organization (c) each of the Borrower and Guarantor has the power
and authority to own its properties and to carry on its business as now being
conducted; (c) each of the Borrower and Guarantor is duly qualified to do
business in the jurisdiction where the Property is located and in every
jurisdiction in which the nature of its business or its properties makes such
qualification necessary; (d) each of the Borrower and Guarantor is in
compliance with all laws, regulations, ordinances and orders of public
authorities applicable to it; and (e) each of the Borrower and Guarantor
has the full power, authority and legal right to execute, deliver and perform
the covenants and obligations set forth in this Agreement and the other Loan
Documents and to carry out the terms hereof and thereof.


 


5.2                               Validity of Loan Documents.  The
execution, delivery and performance by Borrower of the Note, the Letter of
Credit Note and the other Loan Documents: (a) are within the legal powers
of Borrower; (b) have been duly authorized by all requisite partnership
and/or membership action, as applicable; (c) have received all necessary
governmental approvals; (d) will not violate any provision of law, any
order of any court or other agency of government or any articles of
organization, membership and/or operating agreement, partnership agreement,
indenture, agreement or other instrument to which Borrower is a party or by
which it or any of its property is bound, or be in conflict with, result in a
breach of or constitute (with due notice or lapse of time or both) a default
under any such indenture, agreement or other instrument, or result in the
creation or imposition of any lien, charge or encumbrance of any nature
whatsoever upon any of its property or assets, except as contemplated by the
provisions of the Loan Documents; and (e) when executed and delivered by
Borrower, will constitute the legal, valid and binding obligations of the
Borrower and other obligors named therein, if any, in accordance with their
respective terms.


 


5.3                               Financial Statements.  All
financial statements delivered to the Lender are true and correct in all
respects, have been prepared in accordance with generally accepted accounting
practices consistently applied (other than with respect to individual
Guarantors), and fairly present the financial condition of the Borrower and
other parties named therein as of the dates thereof.  No material adverse change has occurred in
the financial condition reflected therein since the dates thereof and no
material additional liabilities have been incurred since the


 


11





















 


most
recent date thereof other than the borrowing contemplated in the Commitment and
this Agreement.


 


5.4                               Other Information.  All
other information, reports, papers and data given to the Lender with respect to
Borrower or others obligated under the terms of the Loan Documents and the
Property are accurate and correct in all material respects and complete insofar
as completeness may be necessary to give the Lender a true and accurate
knowledge of the subject matter.


 


5.5                               Utilities and Access.  All
utility services and access necessary for the Renovation are available,
including, without limitation, roads, telephone service, water supply, storm
and sanitary sewer facilities, and natural gas or electric facilities.


 


5.6                               Defaults.  There is no Default on the part
of the Borrower under the Note or any of the other Loan Documents and no event
has occurred that may give rise to a Default.


 


ARTICLE VI — AFFIRMATIVE COVENANTS


 


Until the Indebtedness has been paid in full and the
Loan has been terminated, Borrower hereby affirmatively covenants and agrees as
follows:


 


6.1                               Financial Statements; Sales and Inventory
Reports.  Borrower shall provide the following with
respect to the Guarantor:


 


(a)                                  as soon as available, but in no event later
than ninety (90) days after the close of its fiscal year (but in no event
earlier than the date such financial statements must be submitted to
governmental authorities), financial statements (all of which financial
statements may include, as requested by the Lender, a balance sheet, income
statement, sources and uses of funds for such fiscal and/or calendar year,
projected sources and uses of funds for the coming year, detailed listing and
description of all contingent liabilities, tax returns, written verification of
liquidity and such other supporting schedules and documentation which the
Lender may request).  All such financial
statements shall be audited by a certified public accountant acceptable to the
Lender in all respects; and


 


(b)                                 if requested by the Lender, within forty-five
(45) days after the close of its quarterly business period (but in no event
earlier than the date such financial statements must be submitted to
governmental authorities), the financial statements to be filed with applicable
governmental authorities.


 


6.2                               Construction. 
After each advance of proceeds under the Loan, Borrower shall commence
to acquire the Land and/or proceed with the Renovation for which each such
advance is designated and will prosecute the same in good faith with diligence
and continuity.


 


6.3                               Approval and Permits.  No
work associated with the Renovation shall be commenced by Borrower unless and
until all necessary approvals by all governmental


 


12





















 


authorities having or claiming jurisdiction and
by the beneficiary of any applicable restrictive covenant have been obtained,
and unless and until all required building and other permits have been validly
issued and all required fees and bonds have been paid or posted, as the
circumstances may require.


 


6.4                               Free and Clear of Liens. 
Except as may be otherwise specifically permitted under the Loan
Documents, Borrower shall not make any contract or arrangement of any kind
which would give rise to a lien on any portion of the Property.  The Renovation shall be completed by Borrower
free and clear of all mechanics’ and materialmen’s liens.


 


6.5                               Compliance with Laws - Encroachments.  The
Renovation shall be performed in strict accordance with all applicable present
and future laws, ordinances, rules, regulations, requirements and orders of any
governmental or regulatory authority having or claiming jurisdiction.


 


6.6                               Inspections; Cooperation. 
Borrower shall permit the Lender and its duly authorized representatives
(including, without limitation, the Progress Inspector) to enter upon the
Property at all reasonable times and in a reasonable manner to inspect the
Improvements and any and all materials and to examine all detailed plans and
shop drawings and similar materials relating to the Renovation.  Borrower will at all times cooperate and
request its subcontractors and materialmen to cooperate with the Lender and its
duly authorized representatives (including, without limitation, the Progress
Inspector) in connection with or in aid of the performance of the Lender’s
functions under this Loan Agreement. 
Borrower shall pay all inspection fees incurred by the Lender in
connection with the Loan; however, so long as no Default exists, inspections
shall be limited to two site inspection visits per month to be performed by the
Progress Inspector at Borrower’s sole cost and expense.  Inspection fees may be deducted by the Lender
from the Borrower’s applicable Loan disbursement.


 


6.7                               Vouchers and Receipts. 
Borrower will furnish to the Lender, promptly on demand, a computer
generated report of job costs and accounts payable for the Project financed
under the Loan, and from and after any Default under the Loan, (i) any
contracts, bills of sale, statements, receipted vouchers or agreements pursuant
to which Borrower has any claim of title to any materials, fixtures or other
articles delivered or to be delivered to the Land or incorporated or to be
incorporated into the Improvements and (ii) a verified written statement,
in such form and detail as the Lender may require, showing all amounts paid and
unpaid for labor and materials and all items of labor and materials to be
furnished for which payment has not been made and the amounts to be paid
therefor.


 


6.8                               Payments for Labor and Materials. 
Borrower will pay when due all bills for materials supplied and for
services or labor performed in connection with the Renovation.


 


6.9                               Correction of Construction Defects. 
Borrower will promptly correct or cause the correction of any structural
defects in the Improvements and any substantial departures or deviations from
the Plans and Specifications.


 


13





















 


6.10                        Insurance.  Borrower will comply with all
insurance requirements set forth in the Deed of Trust.


 


6.11                        Hazardous Materials. 
Borrower will comply with the provisions of the Deed of Trust regarding
Hazardous Materials and all applicable Environmental Regulations.


 


6.12                        Subcontractors. 
Borrower shall immediately disclose to the Lender upon request the names
of all subcontractors with whom Borrower has contracted or intends to contract
for the Renovation or for the furnishing of labor or materials therefor.


 


6.13                        Equity Contribution.  At
or prior to closing, Borrower shall make the Equity Contribution.


 


6.14                        Condominium Conversion.  The
Borrower shall take all steps necessary to validly and legally convert the
Property into a condominium regime with approximately 316 residential Units.
The condominium documents, including without limitation, the condominium
declaration and by-laws, shall be acceptable to the Lender in its discretion.
From time to time, upon the Lender’s request, the Borrower shall provide Lender
with evidence that Borrower has complied with any applicable requirements of
the condominium documents and any applicable laws. Borrower shall, within 150 days of the
closing of the Loan, provide Lender with all condominium documents, including
without limitation, the public offering statement. Lender recognizes that the
Bellemeade Farms Project will utilize an expandable condominium regime, whereby
the condominium will be established in phases to expand over the Property.
Lender shall not unreasonably withhold its consent to certain cross easements
as the condominium regime expands within the complex.


 


6.15                        Curtailment Schedule.  Borrower
agrees to comply with the following curtailment schedule for advances
under the Loan (the “Mandatory Principal Curtailment Requirement”):


 


 


	
  Due Date

  	
   

  	
  $ Amount of Curtailment

  	
   

  	
  Remaining Commitment

  	
   

  
	
  June 30, 2006

  	
   

  	
  $

  	
  7,400,000

  	
   

  	
  $

  	
  39,325,000

  	
   

  
	
  September 30, 2006

  	
   

  	
  $

  	
  5,550,000

  	
   

  	
  $

  	
  33,775,000

  	
   

  
	
  December 31, 2006

  	
   

  	
  $

  	
  5,550,000

  	
   

  	
  $

  	
  28,225,000

  	
   

  
	
  March 31, 2007

  	
   

  	
  $

  	
  5,550,000

  	
   

  	
  $

  	
  22,675,000

  	
   

  
	
  June 30, 2007

  	
   

  	
  $

  	
  5,550,000

  	
   

  	
  $

  	
  17,125,000

  	
   

  
	
  September 30, 2007

  	
   

  	
  $

  	
  5,550,000

  	
   

  	
  $

  	
  11,575,000

  	
   

  
	
  Extension Period

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  December 31, 2007

  	
   

  	
  $

  	
  5,550,000

  	
   

  	
  $

  	
  6,025,000

  	
   

  
	
  March 31, 2008

  	
   

  	
  $

  	
  6,025,000

  	
   

  	
  $

  	
  0

  	
   

  



 


14





















 


ARTICLE VII — NEGATIVE COVENANTS


 


Until the Indebtedness has been paid in full and the
Loan has been terminated, Borrower hereby covenants and agrees as follows:


 


7.1                               Restrictions on Subordinate Financing. 
Throughout the term of the Loan, Borrower shall not place any
subordinate financing on the Property.


 


7.2                               Changes to Plans and Specifications. 
Without the prior written consent of the Lender, Borrower will not
permit any substantial changes in the design concept for the Units.


 


7.3                               Prohibition on Transfer of Assets. 
Without the prior written consent of the Lender, Borrower will not
transfer any of its assets, except for transfers in the ordinary course of
business and transfers for which Borrower receives consideration substantially
equivalent to the fair market value of the transferred asset.


 


7.4                               Assignments.  Without the prior written
consent of Lender, Borrower will not transfer, assign, pledge or hypothecate
any of its rights to advances, or any of its rights or obligations under this
Agreement.  Any assignment made or
attempted by Borrower without the prior written consent of the Lender shall be
void.  No consent by the Lender to an
assignment by Borrower shall either (a) release Borrower as the party
primarily obligated and liable under the terms of this Agreement unless
Borrower shall be released specifically by the Lender in writing, or (b) be
deemed to be a waiver of the requirement of prior written consent by the Lender
with respect to each and every further assignment.


 


ARTICLE VIII — DEFAULT


 


Each of the following events shall constitute a “Default”
under this Agreement and each of the other Loan Documents:


 


8.1                               Payment of Indebtedness.  Any
failure by the Borrower to pay when due any and all amounts payable by the
Borrower under the terms of the Note or any of the other Loan Documents, which
failure to pay remains uncured for a period of five (5) calendar days
after the date such payment is due (or five (5) calendar days after notice
fromLender in the case of amounts due that are not regular monthly payments),
including, without limitation, any principal payment, interest payment, letter
of credit reimbursement, loan fee, extension fee, letter of credit fee or late
charge, and including any advances made by the Lender from the proceeds of the
Loan or otherwise and interest thereon at the applicable rate set forth in the
Loan Documents.


 


8.2                               Performance of Obligations.  Any
default by the Borrower or Guarantor in the due observance or performance of
any of the Obligations and such default, if other than in payment of the
Indebtedness, shall remain uncured thirty (30) days after the receipt by
Borrower of written notice from Lender identifying such default.  If Borrower receives such notice, Borrower
shall diligently pursue a cure of such default.


 


15





















 


8.3                               Other Defaults.  The
occurrence of any Default under the Deed of Trust or the Note or any of the
other Loan Documents.


 


8.4                               Representations and Warranties.  Any
determination by the Lender that any representation or warranty contained in
any of the Loan Documents or in any certificate, opinion, financial information
or any other form delivered to the Lender in connection with the Loan, is
incorrect or misleading in any material respect at any time.


 


8.5                               Progress of Construction. 
Except for delays unavoidably occasioned by strikes, lock- outs, war or
civil disturbance, natural disaster or acts of God (a) any delay in the
Renovation caused by lack of good faith or reasonable dispatch, (b) any
abandonment of the work or discontinuation of construction for a period of more
than thirty (30) consecutive days, unless the Lender is notified of Borrower’s
abandonment of work or discontinuance of construction is otherwise approved by
the Lender, or (c) any failure to complete the Renovation on or before the
maturity date of the Loan.


 


8.6                               Proceeds Insufficient to Complete.  Any
failure by Borrower to pay or deposit the amount of the deficiency required
pursuant to Section 4.1(c) hereof, if the Lender determines that the
amount of undisbursed Loan proceeds available is less than the amount necessary
or required to complete and pay for the Renovation.


 


8.7                               Mechanic’s Lien.  The
establishment of any mechanics’ or materialmen’s lien against any portion of
the Property, unless the same is insured over by the Title Company, satisfied,
or bonded to the satisfaction of the Lender within thirty (30) days.


 


8.8                               Adverse Action or Insolvency.  (a) the
entry of a final judgment for the payment of money in excess of $50,000.00
against the Borrower or the Guarantor that is not discharged or bonded within
thirty (30) days after the date of entry, (b) the institution of any
proceeding by or against the Borrower or the Guarantor in bankruptcy, or for a
reorganization or an arrangement with creditors under any insolvency or debtor
relief law which is not dismissed or stayed within thirty (30) days of the date
of filing, (c) the appointment of any receiver, liquidator, assignee,
custodian or similar official for the Borrower or the Guarantor or any portion
of the Property, or (d) the issuance of any writ or order of attachment,
levy or garnishment against the Borrower or the Guarantor which is not
discharged to the Lender’s satisfaction within thirty (30) days after the date
of such issuance.


 


8.9                               Financial Condition.  Any
reasonable determination by the Lender that a material adverse change has occurred
in the financial condition of the Borrower or Guarantor, including without limitation, the failure
of Guarantor to meet the financial covenants of set forth in Section 4 of
the Guaranty.


 


8.10                        Hazardous Materials. 
Violations of any applicable Environmental Regulations or requirements
of the Deed of Trust pertaining to Hazardous Materials.


 


16





















 


8.11                        Death and Dissolution.  The
death, legal incompetence, dissolution, liquidation or termination of Borrower or
Guarantor, or of any general partner of Borrower or Guarantor, subject to the
provisions of the Guaranty Agreement.


 


ARTICLE IX — DEFAULT - REMEDIES


 


9.1                               Remedies on Default.  Upon
the happening of any Default, the Lender shall not be obligated to advance any
additional Loan proceeds, and, in addition to any other rights or remedies
available to it under this Section, the Deed of Trust and other Loan Documents,
the Lender may enter into possession of the Property or any portion thereof,
and perform any and all work and labor necessary to complete the Renovation and
to employ watchmen to protect the Property.


 


All sums expended by the Lender for such purposes
shall be deemed to have been paid to the Borrower or for its benefit and shall
constitute part of the Indebtedness secured by the Deed of Trust.   Borrower hereby constitutes and appoints the
Lender as its true and lawful attorney-in-fact with full power of substitution
to complete the work in the name of Borrower, and hereby empowers said attorney
or attorneys as follows:  (a)  to
use any funds of Borrower, including any escrow balances and any unadvanced
Loan proceeds, for the purpose of completing the Renovation;  (b)  to make such additions and changes
and corrections in the plans and specifications as may be necessary or
desirable in the judgment of the Lender to complete the Renovation;  (c)  to employ such contractors,
subcontractors, agents, architects and inspectors as may be required for such
purpose;  (d)  to pay, settle or
compromise all existing bills and claims which are or may be liens against the
Property, or may be necessary or desirable for the completion of the work or
the clearance of title; (e) in the name of Borrower to execute all
applications and certificates that may be required; (f)  to execute,
acknowledge and deliver such documents, instruments and certificates, and to
take such other actions, in the name and on behalf of Borrower and at the sole
cost and expense of Borrower, as the Lender, in its sole discretion, deems
necessary, desirable or appropriate to effectuate the provisions of this
section; and (g)  to do any and every act with respect to the Renovation
that Borrower may do in its own behalf.


 


It is understood and agreed that this power of
attorney shall be deemed to be a power coupled with an interest which cannot be
revoked.  Such attorney-in-fact shall
also have power to prosecute and defend all actions or proceedings in
connection with the Renovation and to take such actions and require such
performance as is deemed necessary.


 


The Lender shall also have the right, upon the
happening of any Default, to do any one or more of the following, at its
election, but without any obligation to do so:


 


(a)                                  to declare the Indebtedness immediately due
and payable;


 


(b)                                 to terminate the Loan;


 


(c)                                  to decline to make any further Loan advances
and/or readvances;


 


17





















 


(d)                                 to reduce any claim to judgment;


 


(e)                                  to exercise any and all rights and remedies
afforded by this Agreement and the other Loan Documents, as well as any and all
legal or equitable rights and remedies afforded under any statute or otherwise;
and


 


(f)                                    to set off and apply against the Indebtedness
any and all deposits, funds or assets at any time held, and any and all indebtedness
at any time owed, by the Lender to or for the credit or account of Borrower.


 


9.2                               No Conditions Precedent to Exercise of Remedies. 
Neither Borrower nor Guarantor shall be relieved of any obligation by
reason of the failure of the Lender to comply with any request of Borrower or
of any other person to take action to foreclose on the Deed of Trust or
otherwise to enforce any provisions of the Note, the Letter of Credit Note or
the other Loan Documents, or by reason of the release, regardless of consideration,
of all or any part of the Property, or by reason of any agreement of
stipulation between any subsequent owner of any portion of the Property and the
Lender extending the time of payment or modifying the terms of the Notes or the
other Loan Documents without first having obtained the consent of Borrower or
such Guarantor; and in the latter event, Borrower and each Guarantor shall
continue to be liable to make payments according to the terms of any such
extension or modification agreement, unless expressly released and discharged
in writing by the Lender.


 


9.3                               Remedies Cumulative and Concurrent.  No
remedy herein conferred upon or reserved to the Lender is intended to be
exclusive of any other remedies provided for in the Note or in the other Loan Documents,
and each and every such remedy shall be cumulative, and shall be in addition to
every other remedy given hereunder, or under the Note, the Deed of Trust or the
other Loan Documents, or now or hereafter existing at law or in equity or by
statute.  Every right, power and remedy
given by the Note and the Loan Documents to the Lender shall be concurrent and
may be pursued separately, successively or together against the Borrower,
Guarantor, or the Property or any part thereof, or any one or more of them; and
every right, power and remedy given by the Note or the other Loan Documents may
be exercised from time to time as often as may be deemed expedient by the
Lender.


 


9.4                               Strict Performance.  No
delay or omission of the Lender in exercising any right, power or remedy
accruing upon the happening of a Default shall impair any such right, power or
remedy or shall be construed to be a waiver of any such Default or any
acquiescence therein.  No delay or
omission on the part of the Lender in exercising any option for acceleration of
the maturity of the Indebtedness, or for foreclosure under the Deed of Trust
following any Default as aforesaid, or any other option granted to the Lender
hereunder in any one or more instances, or the acceptance by the Lender of any
partial payment on account of the Indebtedness, shall constitute a waiver of
any such Default and each such option shall remain continuously in full force
and effect.


 


18





















 


9.5                               Dispute Resolution.


 


(a)                                  Arbitration. 
Except to the extent expressly provided below, any Dispute shall, upon
the request of either party, be determined by binding arbitration in accordance
with the Federal Arbitration Act, Title 9, United States Code (or if not
applicable, the applicable state law), the then-current rules for
arbitration of financial services disputes of the American Arbitration
Association, or any successor thereof (“AAA”) and the “Special Rules” set forth
below.  “Dispute” means any controversy,
claim or dispute between or among the parties to this Note, Agreement, or
Guaranty,  as applicable, including any
controversy, claim or dispute arising out of or relating to (a) this
Agreement, (b) any other Loan Documents, (c) any related agreements
or instruments, or (d) the transaction contemplated herein or therein
(including any claim based on or arising from an alleged personal injury or
business tort). In the event of any inconsistency, the Special Rules shall
control.  The filing of a court action is
not intended to constitute a waiver of the right of Borrower or Lender,
including the suing party, thereafter to require submittal of the Dispute to
arbitration.  Any party to this Agreement
may bring an action, including a summary or expedited proceeding, to compel
arbitration of any Dispute in any court having jurisdiction over such
action.  For the purposes of this Dispute
Resolution Section only, the terms “party” and “parties” shall include any
parent corporation, subsidiary or affiliate of Lender involved in the servicing,
management or administration of any obligation described in or evidenced by
this Agreement, together with the officers, employees, successors and assigns
of each of the foregoing.


 


(b)                                 Special Rules.


 


(i)                                     The arbitration shall be conducted in any
U.S. state where real or tangible personal property collateral is located, or
if there is no such collateral, in the City and County where Lender is located
pursuant to its address for notice purposes in this Agreement.


 


(ii)                                  The arbitration shall be administered by AAA,
who will appoint an arbitrator.  If AAA
is unwilling or unable to administer or legally precluded from administering
the arbitration, or if AAA is unwilling or unable to enforce or legally
precluded from enforcing any and all provisions of this Dispute Resolution
Section, the any party to this Agreement, may substitute another arbitration
organization that has similar procedures to AAA and that will observe and
enforce any and all provisions of this Dispute Resolution Section.  All Disputes shall be determined by one
arbitrator; however, if the amount in controversy in a Dispute exceeds Five
Million Dollars ($5,000,000), upon the request of any party, the Dispute shall
be decided by three arbitrators (for purposes of this Agreement, referred to collectively
as the “arbitrator”).


 


(iii)                               All arbitration hearings will be commenced
within ninety (90) days of the demand for arbitration and completed within
ninety (90) days from the date of commencement; provided, however, that upon a
showing of good cause, the arbitrator shall be permitted to extend the
commencement of such hearing for up to an additional sixty (60) days.


 


19





















 


(iv)                              The judgment and the award, if any, of the
arbitrator shall be issued within thirty (30) days of the close of the
hearing.  The arbitrator shall provide a
concise written statement setting forth the reasons for the judgment and for
the award, if any.  The arbitration
award, if any, may be submitted to any court having jurisdiction to be
confirmed and enforced, and such confirmation and enforcement shall not be
subject to arbitration.


 


(v)                                 The arbitrator will give effect to statutes
of limitations and any waivers thereof in determining the disposition of any
Dispute and may dismiss one or more claims in the arbitration on the basis that
such claim or claims is or are barred. 
For purposes of the application of the statute of limitations, the
service on AAA under applicable AAA rules of a notice of Dispute is the
equivalent of the filing of a lawsuit.


 


(vi)                              Any dispute concerning this arbitration
provision, including any such dispute as to the validity or enforceability of
this provision, or whether a Dispute is arbitrable, shall be determined by the
arbitrator; provided, however, that the arbitrator shall not be permitted to
vary the express provisions of these Special Rules or the Reservations of
Rights in subsection (c) below.


 


(vii)                           The arbitrator shall have the power to award
legal fees and costs pursuant to the terms of this Agreement.


 


(viii)   The arbitration will take place on an
individual basis without reference to, resort to, or consideration of any form
of class or class action.


 


(c)                                  Reservations of Rights.  Nothing in this Agreement shall be deemed to (i) limit
the applicability of any otherwise applicable statutes of limitation and any
waivers contained in this Agreement, or (ii) apply to or limit the right
of Lender (A) to exercise self help remedies such as (but not limited to)
setoff, or (B) to foreclose judicially or nonjudicially against any real
or personal property collateral, or to exercise judicial or nonjudicial power
of sale rights, (C) to obtain from a court provisional or ancillary
remedies such as (but not limited to) injunctive relief, writ of possession,
prejudgment attachment, or the appointment of a receiver, or (D) to pursue
rights against a party to this Agreement, in a third-party proceeding in any
action brought against Lender in a state, federal or international court,
tribunal or hearing body (including actions in specialty courts, such as
bankruptcy and patent courts).  Lender
may exercise the rights set forth in clauses (A) through (D), inclusive,
before, during or after the pendency of any arbitration proceeding brought
pursuant to this Agreement, as applicable. 
Neither the exercise of self help remedies nor the institution or
maintenance of an action for foreclosure or provisional or ancillary remedies
shall constitute a waiver of the right of any party, including the claimant in
any such action, to arbitrate the merits of the Dispute occasioning resort to
such remedies.  No provision in the Loan
Documents regarding submission to jurisdiction and/or venue in any court is
intended or shall be construed to be in derogation of the provisions in any Loan
Document for arbitration of any Dispute.


 


20





















 


(d)                                 Conflicting Provisions for Dispute
Resolution.  If there is any conflict
between the terms, conditions and provisions of this Section and those of
any other provision or agreement for arbitration or dispute resolution, the
terms, conditions and provisions of this Section shall prevail as to any
Dispute arising out of or relating to (i) this Agreement, (ii) any
other Loan Document, (iii) any related agreements or instruments, or (iv) the
transaction contemplated herein or therein (including any claim based on or
arising from an alleged personal injury or business tort).  In any other situation, if the resolution of
a given Dispute is specifically governed by another provision or agreement for
arbitration or dispute resolution, the other provision or agreement shall
prevail with respect to said Dispute.


 


(e)                                  Jury Trial Waiver in Arbitration.  By agreeing to this Section, the parties
irrevocably and voluntarily waive any right they may have to a trial by jury in
respect of any Dispute.


 


ARTICLE IX — MISCELLANEOUS


 


10.1                        No Warranty by Lender.  By
accepting or approving anything required to be observed, performed or fulfilled
by Borrower or Guarantor pursuant to this Agreement or any other Loan
Documents, including, without limitation, any plans, specifications,
certificate, financial information, survey, receipt, appraisal or insurance
policy, the Lender shall not be deemed to have warranted or represented the
sufficiency, legality, effectiveness or legal effect of the same, or of any
term, provision or condition thereof. Any such acceptance or approval thereof
shall not be or constitute any warranty or representation with respect thereto
by the Lender.


 


10.2                        Liability of Lender.  The
Lender shall not be liable for any act or omission by it pursuant to the
provisions of this Agreement in the absence of fraud or gross negligence.  The Lender shall incur no liability to
Borrower or any other party in connection with the acts or omissions of the
Lender in reliance upon any certificate or other paper believed by the Lender
to be genuine or with respect to any other thing which the Lender may do or
refrain from doing, unless such act or omission amounts to fraud or gross negligence.


 


10.3                        Modification - Waiver.  None
of the terms or provisions of this Agreement may be changed, waived, modified,
discharged or terminated except as provided in the Deed of Trust.


 


10.4                        Third Parties - Benefit.  All
conditions set forth herein with respect to the obligations of the Lender to
make Loan advances are imposed solely and exclusively for the benefit of the
Lender, and no other person shall either have standing to require satisfaction
of such condition in accordance with its terms, be entitled to assume that the
Lender will refuse to make advances in the absence of strict compliance with
any or all of such conditions, or be deemed to be beneficiary of such
conditions under any circumstances, any or all of which may be freely waived in
whole or in part by the Lender at any time in the sole and absolute exercise of
its discretion.  The Lender shall in no
event be responsible or liable to any person other than the Borrower for the
disbursement of or failure to disburse any of the proceeds of the Loan, and


 


21





















 


no contractor, subcontractor, laborer or
material supplier or other person shall have any right or claim against the
Lender with respect to this Agreement. 
The terms and provisions of this Agreement are for the benefit of the
parties hereto and, except as herein specifically provided, no other person
shall have any right or cause of action on account thereof.


 


10.5                        Captions and Headings.  The
captions and headings contained in this Agreement are included herein for
convenience of reference only and shall not be considered a part hereof.


 


10.6                        Counterparts.  This
Agreement may be executed in any number of counterparts, each of which shall be
considered an original for all purposes; provided, however, that all such
counterparts shall together constitute one and the same instrument.


 


10.7                        Signs; Publicity.  At
the request and expense of the Lender (subject to applicable law and compliance
with governmental requirements, and subject to Borrower’s approval of the
design and location of said sign, which consent shall not be unreasonably
withheld), Borrower shall install a sign or signs at a location or locations on
the Property satisfactory to the Lender, reciting, among other things, that the
Lender is financing the Renovation. 
Borrower shall (at the expense of Lender) obtain all permits, licenses
and approvals from the appropriate governmental agency or association that are
necessary for the erection and existence of any such signs.  Borrower expressly authorizes the Lender to
prepare and to furnish to the news media for publication from time to time news
releases with respect to any portion of the Property detailing the Lender’s
involvement with the financing.


 


10.8                        Applicable Law.  This
Agreement shall be governed by and construed, interpreted and enforced in
accordance with the laws of the Jurisdiction of Choice, unless the “choice of
law” rules of the Jurisdiction of Choice can be construed or interpreted
to require the laws of another jurisdiction to govern, in which case the “choice
of law” rules of the Jurisdiction of Choice shall not apply.


 


10.9                        Time of Essence.  Time
shall be of the essence of each and every provision of this Agreement of which
time is an element.


 


10.10                 Conflicts.  The terms and conditions of
the Note and the other Loan Documents are incorporated into this Agreement and
made a part hereof as if specifically set forth herein.  In the event any provision of this Agreement
conflicts with the terms of any other Loan Document, the terms of this
Agreement shall prevail.  For purposes of
this Section the absence of a provision from any Loan Documents shall not
constitute a conflict.


 


10.11                 Quality of Documents and Other Items.  Each
document, item or other evidence required to be delivered to the Lender in
connection with this Agreement shall be satisfactory in form and substance to
the Lender in its sole discretion.  In
addition, all surveys, appraisals, environmental site assessments, inspections,
cost reviews, subcontracts, leases, bonds, insurance policies and all other
documents required or contemplated by this Agreement and the other Loan
Documents shall be satisfactory to the Lender and, if required by the Lender,


 


22





















 


Borrower shall provide the Lender and its
counsel with copies of any or all of such documents.  All contractors, subcontractors, sureties,
insurers and any other party responsible for the execution and preparation of
the foregoing documents shall also be satisfactory to the Lender.


 


10.12                 Professional Services.  If
requested by Lender, Borrower shall: (a) not more frequently than
annually, cause an inspection and written appraisal of the Property (or such
parts of it as are designated in the Lender’s request) to be made and provided
to Lender by an appraiser approved and engaged by the Lender in its sole
discretion; and (b) cause to be conducted or prepared any other written
report, summary, opinion, inspection, review, survey, audit or other
professional service relating to the Property or any operations in connection
with it (all as designated in Lender’s request) as Lender may reasonably
request, including, without limitation, any accounting, auctioneering,
architectural, consulting, engineering, design, legal, management, pest
control, surveying, title abstracting or other technical, managerial or
professional service relating to the Property or its operations. The Lender may
elect to deliver any such request by facsimile, by mail or by hand delivery
addressed to the Borrower as provided herein or by any other legally effective
method, and it may be given at any time and from time to time.


 


10.13                 Further Assurances.  At
the request of the Lender, Borrower shall take any action or execute any
additional document reasonably required by the Lender to secure the
Indebtedness, confirm the lien of the Deed of Trust or further the intent of
any of the Loan Documents.


 


10.14                 Costs and Expenses.  The
Borrower shall pay all out-of-pocket fees, charges and expenses incurred by or
on behalf of the Lender in connection with the Loan and the making, closing and
administration of the Loan, including, without limitation (a) fees and
expenses for the examination of title to the Property; (b) recording and
filing fees, recordation taxes and transfer taxes; (c) Title Company
premiums, fees and charges; (d) surveyor charges; (e) appraisal fees;
(f) inspection fees; (g) the fees and expenses of the Lender’s
counsel; (h) all amounts due the Progress Inspector; (i) the payment,
satisfaction, discharge and release of any encumbrance, tax, assessment or
other charge or lien upon any portion of the Property; (j) any syndication or
participation fees, if applicable, and (k) the construction, maintenance and
protection of the Improvements and every portion thereof.  Further, the Lender may (but shall be under
no obligation to do so) advance for the account of Borrower as part of or in
addition to the Loan any amount or amounts as the Lender may deem necessary or
advisable in order to fulfill the obligations of Borrower hereunder, which
amount or amounts may be disbursed by the Lender directly to a third party in
order to protect its interests, and any amount so applied by the Lender shall
constitute a portion of the Indebtedness, even though the aggregate of the
amounts so applied, together with the other advances under the Note, may exceed
the principal amount of the Note.


 


10.15                 Fees and Expenses - Indemnity. 
Borrower will hold the Lender harmless and indemnify the Lender from all
claims of brokers and “finders” arising by reason of the Loan, the execution
and delivery of this Agreement or the making of the Loan.  Borrower shall protect, indemnify and save
harmless the Lender and its directors, officers, agents, and employees, the


 


23





















 


Deed of Trust trustees, and all independent
contractors from and against all liabilities, obligations, claims, damages,
fines, penalties, causes of action, costs and expenses (including, without
limitation, attorneys’ fees and disbursements), imposed upon or incurred by or
asserted against any of them in connection with the Loan.


 


10.16                 Participation or Sale of the Loan.  The
Lender may sell the Loan or any undivided ownership or participation interest
in the Loan and disclose in confidence such financial and other information
with respect to Borrower, the Loan, Guarantor, and/or the Property, or any
portion thereof, which the Lender may deem necessary in connection with such
sale or participation.  Borrower shall
execute, acknowledge and deliver any and all instruments reasonably requested
by the Lender in connection with the foregoing. 
Borrower shall also pay any expenses of each participant in connection
with the enforcement of the Loan Documents.


 


10.17                 Seal.  If any Borrower is a
corporation, the designation “(SEAL)” on this Agreement shall be effective as
the affixing of such Borrower’s corporate seal physically to this Agreement.


 


10.18                 WAIVER OF JURY TRIAL.  WITHOUT INTENDING IN ANY WAY
TO LIMIT THE PARTIES’ AGREEMENT TO ARBITRATE ANY “DISPUTE” (FOR PURPOSES OF
THIS SECTION, AS DEFINED IN THE “DISPUTE RESOLUTION” SECTION) AS SET FORTH IN
THIS AGREEMENT, TO THE EXTENT ANY “DISPUTE” IS NOT SUBMITTED TO ARBITRATION OR
IS DEEMED BY THE ARBITRATOR OR BY ANY COURT WITH JURISDICTION TO BE NOT
ARBITRABLE OR NOT REQUIRED TO BE ARBITRATED, BORROWER AND LENDER WAIVE TRIAL BY
JURY IN RESPECT OF ANY SUCH “DISPUTE” AND ANY ACTION ON SUCH “DISPUTE.”  THIS WAIVER IS KNOWINGLY, WILLINGLY AND
VOLUNTARILY MADE BY BORROWER AND LENDER, AND BORROWER AND LENDER HEREBY
REPRESENT THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY
PERSON OR ENTITY TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY
OR NULLIFY ITS EFFECT.  THIS PROVISION IS
A MATERIAL INDUCEMENT FOR THE PARTIES ENTERING INTO THE LOAN DOCUMENTS.  BORROWER AND LENDER ARE EACH HEREBY
AUTHORIZED TO FILE A COPY OF THIS SECTION IN ANY PROCEEDING AS CONCLUSIVE
EVIDENCE OF THIS WAIVER OF JURY TRIAL. 
BORROWER FURTHER REPRESENTS AND WARRANTS THAT IT HAS BEEN REPRESENTED IN
THE SIGNING OF THIS AGREEMENT, AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT
LEGAL COUNSEL, OR HAS HAD THE OPPORTUNITY TO BE REPRESENTED BY INDEPENDENT
LEGAL COUNSEL SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE
OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.


 


24





















 


10.19                 Electronic Transmission of Data. 
Lender and Borrower agree that certain data related to the Loan
(including confidential information, documents, applications and reports) may
be transmitted electronically, including transmission over the Internet.  This data may be transmitted to, received
from or circulated among agents and representatives of Borrower and/or Lender
and their affiliates and other persons involved with the subject matter of this
Agreement.  Borrower acknowledges and
agrees that (a) there are risks associated with the use of electronic
transmission and that Lender does not control the method of transmittal or
service providers, (b) Lender has no obligation or responsibility
whatsoever and assumes no duty or obligation for the security, receipt or third
party interception of any such transmission, except for Lender’s fraud or gross
negligence, and (c) Borrower will release, hold harmless and indemnify
Lender from any claim, damage or loss, including that arising in whole or part
from Lender’s strict liability or sole, comparative or contributory negligence,
but excluding that arising from Lender’s fraud or gross negligence, which is
related to the electronic transmission of data.


 


10.20                 USA Patriot Act Notice.  
Lender hereby notifies Borrower that pursuant to the requirements of the
USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26,
2001)) (the “Act”), Lender is required to obtain, verify and record information
that identifies Borrower, which information includes the name and address of
Borrower and other information that will allow Lender to identify Borrower in
accordance with the Act.


 


 


[SIGNATURES
APPEAR ON THE NEXT PAGE]


 


25





















 


IN WITNESS WHEREOF, the Borrower and the Lender,
intending to be executed and delivered under seal, have executed and delivered
these presents or caused these presents to be executed and delivered under seal
as of the year and day first above written.


 


	
   

  	
   

  	
  BORROWER:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  WITNESS/ATTEST:

  	
   

  	
  COMSTOCK BELLEMEADE, L.C.,

  
	
   

  	
   

  	
  a Virginia limited liability company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Jubal R. Thompson

  	
   

  	
   

  	
  By:

  	
  Comstock Homebuilding Companies, Inc.,

  
	
   

  	
   

  	
   

  	
  Its Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By: 

  	
  /s/ Christopher Clemente

  	
   

  
	
   

  	
   

  	
   

  
	
  Name: Jubal R. Thompson

  	
   

  	
   

  	
  Christopher Clemente

  
	
  Title: General Counsel

  	
   

  	
   

  	
  Its Chief Executive
  Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (Seal)

  	
   

  	
  Address:

  	
  11465 Sunset
  Hills Road

  
	
   

  	
   

  	
   

  	
  5 th Floor

  
	
   

  	
   

  	
   

  	
  Reston, Virginia
  20190

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  WITNESS:

  	
   

  	
  LENDER:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  BANK OF AMERICA, N.A.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Kelly Wyche

  	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Linda Long

  	
   

  
	
   

  	
   

  	
   

  
	
  Name: Kelly Wyche

  	
   

  	
  Linda P. Long

  
	
  Title:

  	
   

  	
  Senior Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address:

  	
  8300 Greensboro Drive

  
	
   

  	
   

  	
   

  	
  Suite 300

  
	
   

  	
   

  	
   

  	
  McLean, Va. 22102-3604

  
														



 


26





















 


EXHIBIT “A”


 


Property Description


 


C-27





















 


EXHIBIT “B”


 


Budget


 


C-28





















 


EXHIBIT “C”


 


Unit Contract Summary Report


 


C-1