Exhibit 10.35





Exhibit 10.35




EXECUTION VERSION




MASTER CREDIT FACILITY AGREEMENT




BY AND AMONG




THE PARTIES LISTED ON SCHEDULE I ATTACHED HERETO




AND




RED MORTGAGE CAPITAL, INC.




DATED AS OF




DECEMBER 31, 2008



 


 









 





TABLE OF CONTENTS




	 	 	 	 	 
	 	 	Page	 
	 
	 	 	 	 
	ARTICLE 1 THE COMMITMENT

	 	 	2	 
	Section 1.01. The Commitment
	 	 	2	 
	Section 1.02. Requests for Advances
	 	 	3	 
	Section 1.03. Maturity Date of Advances; Amortization
	 	 	3	 
	Section 1.04. Interest on Advances
	 	 	4	 
	Section 1.05. Coupon Rates for Variable DMBS Advances
	 	 	5	 
	Section 1.06. Notes
	 	 	6	 
	Section 1.07. Reserved
	 	 	6	 
	Section 1.08. Conversion from Variable Facility Commitment to Fixed Facility
Commitment
	 	 	6	 
	Section 1.09. Limitations on Right to Convert
	 	 	7	 
	Section 1.10. Conditions to Conversion
	 	 	7	 
	Section 1.11. Yield Maintenance
	 	 	7	 
	Section 1.12. Interest Rate Cap
	 	 	8	 
	ARTICLE 2 THE ADVANCES
	 	 	8	 
	Section 2.01. Rate Setting for an Advance
	 	 	8	 
	Section 2.02. DMBS Refinance Confirmation Form for Rollover Variable Advances
	 	 	9	 
	Section 2.03. Breakage and other Costs
	 	 	9	 
	Section 2.04. Advances
	 	 	9	 
	Section 2.05. Determination of Allocable Facility Amount and Valuations
	 	 	10	 
	Section 2.06. Future Advances Made on Increased Values
	 	 	10	 
	ARTICLE 3 COLLATERAL CHANGES
	 	 	11	 
	Section 3.01. Right to Add Collateral
	 	 	11	 
	Section 3.02. Procedure for Adding Collateral
	 	 	11	 
	Section 3.03. Right to Obtain Releases of Collateral
	 	 	12	 
	Section 3.04. Procedure for Obtaining Releases of Collateral
	 	 	12	 
	Section 3.05. Right to Substitutions
	 	 	14	 
	Section 3.06. Procedure for Substitutions
	 	 	14	 
	Section 3.07. Substitution Deposit
	 	 	15	 
	ARTICLE 4 INCREASE OF CREDIT FACILITY
	 	 	17	 
	Section 4.01. Request to Increase Commitment
	 	 	17	 
	Section 4.02. Procedure for Obtaining Increases in Commitment
	 	 	17	 
	Section 4.03. Closing
	 	 	17	 
	ARTICLE 5 TERMINATION OF FACILITIES
	 	 	18	 
	Section 5.01. Right to Complete or Partial Termination of Facilities
	 	 	18	 
	Section 5.02. Procedure for Complete or Partial Termination of Facilities
	 	 	18	 
	Section 5.03. Right to Terminate Credit Facility
	 	 	18	 
	Section 5.04. Procedure for Terminating Credit Facility
	 	 	19	 






 


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	 	 	Page	 
	 
	 	 	 	 
	ARTICLE 6 CONDITIONS PRECEDENT TO ALL REQUESTS
	 	 	19	 
	Section 6.01. Conditions Applicable to All Requests
	 	 	19	 
	Section 6.02. Conditions Precedent to Initial Advance
	 	 	21	 
	Section 6.03. Conditions Precedent to Future Advances
	 	 	22	 
	Section 6.04. Conditions Precedent to Addition of an Additional Mortgaged Property to
the Collateral Pool
	 	 	23	 
	Section 6.05. Conditions Precedent to Release of Property from the Collateral Pool.

	 	 	24	 
	Section 6.06. Conditions Precedent to Substitutions
	 	 	25	 
	Section 6.07. Conditions Precedent to Increase in Commitment
	 	 	26	 
	Section 6.08. Conditions Precedent to Conversion
	 	 	27	 
	Section 6.09. Conditions Precedent to Complete or Partial Termination of
Facilities
	 	 	27	 
	Section 6.10. Conditions Precedent to Termination of Credit Facility
	 	 	28	 
	Section 6.11. Delivery of Opinion Relating to Advance Request, Addition Request,
Substitution Request, Conversion Request or Expansion Request
	 	 	28	 
	Section 6.12. Delivery of Property-Related Documents
	 	 	28	 
	Section 6.13. Additional Collateral
	 	 	30	 
	Section 6.14. Letters of Credit
	 	 	30	 
	ARTICLE 7 REPRESENTATIONS AND WARRANTIES
	 	 	32	 
	Section 7.01. Representations and Warranties of Borrower
	 	 	32	 
	Section 7.02. Representations and Warranties of Lender
	 	 	32	 
	ARTICLE 8 AFFIRMATIVE COVENANTS OF BORROWER AND GUARANTOR
	 	 	32	 
	Section 8.01. Compliance with Agreements
	 	 	32	 
	Section 8.02. Maintenance of Existence
	 	 	33	 
	Section 8.03. Financial Statements; Accountants’ Reports; Other Information
	 	 	33	 
	Section 8.04. Access to Records; Discussions With Officers and Accountants
	 	 	36	 
	Section 8.05. Certificate of Compliance
	 	 	36	 
	Section 8.06. Maintain Licenses
	 	 	37	 
	Section 8.07. Inform Lender of Material Events
	 	 	37	 
	Section 8.08. Compliance with Applicable Law
	 	 	38	 
	Section 8.09. Alterations to the Mortgaged Properties
	 	 	38	 
	Section 8.10. Loan Document Taxes
	 	 	39	 
	Section 8.11. Further Assurances
	 	 	39	 
	Section 8.12. Transfer of Ownership Interests in Borrower or Guarantor
	 	 	39	 
	Section 8.13. Transfer of Ownership of Mortgaged Property
	 	 	40	 
	Section 8.14. Consent to Prohibited Transfers
	 	 	42	 
	Section 8.15. Date-Down Endorsements
	 	 	43	 
	Section 8.16. Ownership of Mortgaged Properties
	 	 	43	 
	Section 8.17. Compliance with Net Worth Test
	 	 	43	 
	Section 8.18. Compliance with Liquidity Test
	 	 	43	 
	Section 8.19. Change in Property Manager
	 	 	43	 
	Section 8.20. Single Purpose Entity
	 	 	43	 
	Section 8.21. ERISA
	 	 	44	 
	Section 8.22. Consents or Approvals
	 	 	44	 
	Section 8.23. Prepayment of Rents
	 	 	44	 
	Section 8.24. Affiliate Contracts
	 	 	44	 
	Section 8.25. Post Closing Obligation
	 	 	44	 
	Section 8.26. Geographical Diversification Requirements
	 	 	45	 






 


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	 	 	Page	 
	 
	 	 	 	 
	ARTICLE 9 NEGATIVE COVENANTS OF BORROWER
	 	 	45	 
	Section 9.01. Other Activities
	 	 	45	 
	Section 9.02. Liens
	 	 	45	 
	Section 9.03. Indebtedness
	 	 	45	 
	Section 9.04. Principal Place of Business
	 	 	45	 
	Section 9.05. Condominiums
	 	 	46	 
	Section 9.06. Restrictions on Distributions
	 	 	46	 
	Section 9.07. No Hedging Arrangements
	 	 	46	 
	Section 9.08. Confidentiality of Certain Information
	 	 	46	 
	ARTICLE 10 FEES
	 	 	46	 
	Section 10.01. Reserved
	 	 	46	 
	Section 10.02. Occupancy Deficiency Origination Fee
	 	 	46	 
	Section 10.03. Origination Fees
	 	 	47	 
	Section 10.04. Due Diligence Fees
	 	 	48	 
	Section 10.05. Legal Fees and Expenses
	 	 	49	 
	Section 10.06. Failure to Close any Request
	 	 	49	 
	ARTICLE 11 EVENTS OF DEFAULT
	 	 	49	 
	Section 11.01. Events of Default
	 	 	49	 
	ARTICLE 12 REMEDIES
	 	 	51	 
	Section 12.01. Remedies; Waivers
	 	 	51	 
	Section 12.02. Waivers; Rescission of Declaration
	 	 	52	 
	Section 12.03. Lender’s Right to Protect Collateral and Perform Covenants and
Other Obligations
	 	 	52	 
	Section 12.04. No Remedy Exclusive
	 	 	52	 
	Section 12.05. No Waiver
	 	 	53	 
	Section 12.06. No Notice
	 	 	53	 
	ARTICLE 13 INSURANCE, REAL ESTATE TAXES AND REPLACEMENT RESERVES
	 	 	53	 
	Section 13.01. Insurance and Real Estate Taxes
	 	 	53	 
	Section 13.02. Replacement Reserves
	 	 	55	 
	Section 13.03. Completion/Repair Reserves
	 	 	55	 
	ARTICLE 14 LIMITS ON PERSONAL LIABILITY
	 	 	55	 
	Section 14.01. Personal Liability to Borrower
	 	 	55	 
	Section 14.02. Additional Borrowers
	 	 	57	 
	Section 14.03. Borrower Agency Provisions
	 	 	58	 
	Section 14.04. Joint and Several Obligation; Cross-Guaranty
	 	 	58	 
	Section 14.05. Waivers With Respect to Other Borrower Secured Obligation
	 	 	59	 
	Section 14.06. No Impairment
	 	 	62	 
	Section 14.07. Election of Remedies
	 	 	63	 
	Section 14.08. Subordination of Other Obligations
	 	 	64	 
	Section 14.09. Insolvency and Liability of Other Borrower
	 	 	64	 
	Section 14.10. Preferences, Fraudulent Conveyances, Etc
	 	 	65	 
	Section 14.11. Maximum Liability of Each Borrower
	 	 	66	 
	Section 14.12. Liability Cumulative
	 	 	66	 






 


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	 	 	Page	 
	 
	 	 	 	 
	ARTICLE 15 MISCELLANEOUS PROVISIONS
	 	 	66	 
	Section 15.01. Counterparts
	 	 	66	 
	Section 15.02. Amendments, Changes and Modifications
	 	 	66	 
	Section 15.03. Payment of Costs, Fees and Expenses
	 	 	67	 
	Section 15.04. Payment Procedure
	 	 	67	 
	Section 15.05. Payments on Business Days
	 	 	68	 
	Section 15.06. Choice of Law; Consent to Jurisdiction; Waiver of Jury Trial
	 	 	68	 
	Section 15.07. Severability
	 	 	69	 
	Section 15.08. Notices
	 	 	69	 
	Section 15.09. Further Assurances and Corrective Instruments
	 	 	71	 
	Section 15.10. Term of this Agreement
	 	 	72	 
	Section 15.11. Assignments; Third-Party Rights
	 	 	72	 
	Section 15.12. Headings
	 	 	72	 
	Section 15.13. General Interpretive Principles
	 	 	72	 
	Section 15.14. Interpretation
	 	 	73	 
	Section 15.15. Standards for Decisions, Etc
	 	 	73	 
	Section 15.16. Decisions in Writing
	 	 	73	 
	Section 15.17. Requests
	 	 	73	 
	Section 15.18. Conflicts Between Agreements
	 	 	73	 
	Section 15.19. Timing of Decisions
	 	 	74	 






 


iv









 






EXHIBITS




	 	 	 
	EXHIBIT A

	 	Schedule of Initial Mortgaged Properties and Initial Valuations
	EXHIBIT B

	 	RESERVED
	EXHIBIT C

	 	RESERVED
	EXHIBIT D

	 	RESERVED
	EXHIBIT E

	 	Confirmation of Guaranty
	EXHIBIT F

	 	Compliance Certificate
	EXHIBIT G-1

	 	Borrower Organizational Certificate
	EXHIBIT G-2

	 	Guarantor Organizational Certificate
	EXHIBIT H

	 	Conversion Request
	EXHIBIT I

	 	Master Credit Facility Agreement Conversion Amendment
	EXHIBIT J

	 	Rate Form
	EXHIBIT K

	 	RESERVED
	EXHIBIT L

	 	Advance Request
	EXHIBIT M

	 	Request (Addition/Release)
	EXHIBIT N

	 	Confirmation of Obligations
	EXHIBIT O

	 	Expansion Request
	EXHIBIT P

	 	Facility Termination Request
	EXHIBIT Q

	 	Amendment to Master Credit Facility Agreement
	EXHIBIT R

	 	Credit Facility Termination Request
	EXHIBIT S

	 	RESERVED
	EXHIBIT T

	 	RESERVED
	EXHIBIT U

	 	Cash Collateral, Security and Custody Agreement
	EXHIBIT V

	 	Letter of Credit
	EXHIBIT W-1

	 	Bank Legal Opinion (Foreign)
	EXHIBIT W-2

	 	Bank Legal Opinion (Domestic)
	EXHIBIT X

	 	Form of Rent Roll
	 
	 	 
	APPENDIX I

	 	Definitions
	 
	 	 
	SCHEDULE I

	 	List of Borrowers







 


v









 







MASTER CREDIT FACILITY AGREEMENT




THIS MASTER CREDIT FACILITY AGREEMENT is made as of the 31st day of December, 2008, by and
among (i) the parties listed on Schedule I attached hereto, each as a Borrower hereunder; (ii) RED
MORTGAGE CAPITAL, INC., an Ohio corporation; and (iii) EDUCATION REALTY TRUST, INC., a Maryland
corporation, and EDUCATION REALTY OPERATING PARTNERSHIP, LP, a Delaware limited partnership, as
guarantor.



RECITALS




A. Borrower owns one (1) or more Rental Properties (unless otherwise defined or the context
clearly indicates otherwise, capitalized terms shall have the meanings ascribed to such terms in
Appendix I of this Agreement) as more particularly described in Exhibit A to this
Agreement.



B. Borrower has requested that Lender establish a $222,411,000 Credit Facility in favor of
Borrower, comprised initially of (a) a $74,550,000 Variable Facility, of which $49,874,000 will be
advanced initially, all or part of which can be converted to a Fixed Facility in accordance with,
and subject to, the terms and conditions of this Agreement and (b) a $147,861,000 Fixed Facility.



C. To secure the obligations of Borrower under this Agreement and the other Loan Documents
issued in connection with the Credit Facility, Borrower shall create a Collateral Pool in favor of
Lender. The Collateral Pool shall be comprised of (i) the Rental Properties listed on Exhibit
A and (ii) any other collateral pledged to Lender from time to time by Borrower pursuant to
this Agreement or any other Loan Documents.



D. Each Note and Security Document related to the Mortgaged Properties comprising the
Collateral Pool shall be cross-defaulted (i.e., a default under any Note, Security Document
relating to the Collateral Pool and under this Agreement, shall constitute a default under each
Note, Security Document and this Agreement related to the Mortgaged Properties comprising the
Collateral Pool) and cross-collateralized (i.e., each Security Instrument related to the
Mortgaged Properties within the Collateral Pool shall secure all of Borrower’s obligations under
this Agreement and the other Loan Documents) and it is the intent of the parties to this Agreement
that, after an Event of Default, Lender may accelerate any Note without needing to accelerate any
other Note and that in the exercise of its rights and remedies under the Loan Documents, Lender
may, except as provided in this Agreement, exercise and perfect any and all of its rights in and
under the Loan Documents with regard to any Mortgaged Property without needing to exercise and
perfect its rights and remedies with respect to any other Mortgaged Property and that any such
exercise shall be without regard to the Allocable Facility Amount assigned to such Mortgaged
Property and that Lender may recover an amount equal to the full amount outstanding in respect of
any of the Notes in connection with such exercise and any such amount shall be applied as
determined by Lender pursuant to the terms of this Agreement, the Notes and the other Loan
Documents.


 


 









 





E. Subject to the terms, conditions and limitations of this Agreement, Lender has agreed to
establish the Credit Facility.



NOW, THEREFORE, Borrower, Lender, and Guarantor in consideration of the mutual promises and
agreements contained in this Agreement, hereby agree as follows:



ARTICLE 1

THE COMMITMENT





Section 1.01. The Commitment. 




Subject to the terms, conditions and limitations of this Agreement:


 (a) Variable Facility Commitment.

 (i) Subject to the provisions of subsection (a)(ii)
below, Lender agrees to make Variable DMBS Advances and Variable Structured ARM Advances to
Borrower from time to time during the Variable Facility Availability Period in accordance with the
terms and provisions of this Agreement. The aggregate principal balance of the Variable Advances
Outstanding at any time shall not exceed the Variable Facility Commitment. No Variable DMBS
Advances shall be made, or be permitted to remain Outstanding unless the aggregate of Variable DMBS
Advances Outstanding is at least $25,000,000. The borrowing of a Variable Advance shall
permanently reduce the Variable Facility Commitment by the original principal amount of such
Variable Advance. Borrower may not re-borrow any part of a Variable Advance which it has
previously borrowed and repaid. Except as set forth in Section 2.06 of this Agreement, no
Variable Advances shall be made as a result of increases in the Valuation of any Mortgaged
Property. Any portion of the Variable Facility Commitment that is not advanced on the Initial
Closing Date and which Lender determines may be advanced to Borrower, is available to be advanced
to Borrower within ninety (90) days of the Initial Closing Date.



(ii) Limitation on Variable DMBS Advances. Fannie Mae, in its sole discretion, shall
determine whether a Variable DMBS Advance execution is available to Borrower in connection with
each proposed Variable DMBS Advance. The limitations set forth in this Section 1.01(a)(ii) do not
apply to Rollover Variable Advances.



(b) Fixed Facility Commitment. Lender agrees to make Fixed Advances to Borrower from
time to time during the Fixed Facility Availability Period. The aggregate original principal of
the Fixed Advances shall not exceed the Fixed Facility Commitment. The borrowing of a Fixed
Advance shall permanently reduce the Fixed Facility Commitment by the original principal amount of
such Fixed Advance. Borrower may not re-borrow any part of a Fixed Advance which it has previously
borrowed and repaid. Except as set forth in Section 2.06, no Fixed Advances shall be made
as a result of increases in the Valuation of any Mortgaged Property. Any portion of the Fixed
Facility Commitment that is not advanced on the Initial Closing Date and which Lender determines
may be advanced to Borrower, is available to be advanced to Borrower within ninety (90) days of the
Initial Closing Date.


 


2









 






Section 1.02. Requests for Advances. 



Borrower shall request an Advance by giving Lender an Advance Request in accordance with
Section 2.04. The Advance Request shall indicate whether the Request is for a Fixed
Advance, a Variable DMBS Advance, a Variable Structured ARM Advance or more than one type of
Advance.




Section 1.03. Maturity Date of Advances; Amortization. 



(a) Variable Advances; Amortization. The maturity date of each Variable Advance shall
be the earlier of (i) the Variable Facility Termination Date, (ii) the maturity date of the
applicable outstanding DMBS (with respect to a Variable DMBS Advance), or (iii) such other maturity
date referenced in any Variable Facility Note. Subject to the terms of the preceding sentence, the
maturity date of any Variable Advance shall be specified by Borrower for such Variable Advance,
provided that such maturity date shall be no earlier than the date five (5) years after the Closing
Date of such Variable Advance and no later than the date ten (10) years after the Closing Date of
such Variable Advance, provided that no maturity date shall exceed the Variable Facility
Termination Date. Not less than thirty (30) Business Days prior to the maturity date of the
applicable outstanding DMBS, the relevant Borrower may request that the Variable DMBS Advance
backing the outstanding DMBS be (1) refinanced with a Rollover Variable Advance through the sale of
a new DMBS using the DMBS Refinance Request Form (in the form attached to the applicable Variable
Facility Note) which, shall take effect on the maturity date of the outstanding DMBS and shall be
funded by the sale of a single DMBS, in an amount sufficient to fund the aggregate outstanding
principal balance of such Variable DMBS Advance or (2) converted to a Fixed Advance which, shall
take effect on the maturity date of the outstanding DMBS. No Borrower may refinance any Variable
DMBS Advance on or after the Variable Facility Termination Date. The DMBS Issue Date shall be the
first day of the month in which the DMBS is issued, and the maturity date of the DMBS funding each
Variable DMBS Advance shall be specified by Borrower in its Advance Request, which date shall be
three, six or nine full months after the DMBS Issue Date; provided, however, in connection with a
release, an addition or a substitution of a Mortgaged Property and subject to Borrower’s payment to
Lender of an administrative fee of $2,500, the maturity date of the DMBS funding a Variable DMBS
Advance may be one or two full months after the DMBS Issue Date.



For these purposes, a year shall be deemed to consist of twelve (12) 30-day months. For
example, the date which completes three full months after September 1 shall be December 1; and the
date which completes three full months after January 1 shall be April 1. The initial Variable
Advance will require amortization calculated over the Amortization Period. Any Future Advances
that are Variable Advances may be payable interest only, in Lender’s sole and absolute discretion.



(b) Fixed Advances; Amortization. The maturity date of any Fixed Advance shall be
specified by Borrower for such Fixed Advance, provided that such maturity date shall be no earlier
than the date five (5) years after the Closing Date of such Fixed Advance and no later than the
date ten (10) years after the Closing Date of such Fixed Advance, provided that no maturity date
shall exceed the Fifteenth Anniversary. The initial Fixed Advance will require amortization
calculated over the Amortization Period. Any Future Advances that are Fixed Advances may be
payable interest only, in Lender’s sole and absolute discretion.


 


3









 






(c) Prepayment.



(i) Fixed Advances are not prepayable at any time, provided that, notwithstanding the
foregoing, Borrower may prepay all or a portion of any Fixed Advance pursuant to the yield
maintenance provisions of the Fixed Facility Note.



(ii) Subject to the terms and conditions of the Variable Facility Notes, the Indebtedness
extended to Borrowers hereunder through Variable Advances is prepayable in whole or in part at any
time pursuant to the fee maintenance provisions of the Variable Facility Notes.




Section 1.04. Interest on Advances.



(a) Partial Month Interest. Notwithstanding anything to the contrary in this
Section 1.04, if an Advance is not made on the first day of a calendar month, and, with
respect to a Variable DMBS Advance, the DMBS Issue Date is the first day of the month following the
month in which the Advance is made, Borrower shall pay interest on the original stated principal
amount of the Advance for the partial month period commencing on the Closing Date for the Advance
and ending on the last day of the calendar month in which the Closing Date occurs. Borrower shall
pay interest for such partial month on any (i) Variable DMBS Advance at a rate per annum equal to
the greater of (1) the Coupon Rate as determined in accordance with Section 1.05 and (2) a
rate determined by Lender, based on Lender’s cost of funds and approved at least three (3) Business
Days prior to such Advance, in writing, by Borrower, (ii) Variable Structured ARM Advance at a rate
per annum equal to a rate determined by Lender based on Lender’s cost of funds and approved at
least three (3) Business Days prior to such Advance in writing by Borrower; and (iii) Fixed Advance
at a rate, per annum equal to the greater of (1) the interest rate described in subsection (d)(i)
of this Section 1.04 and (2) a rate determined by Lender, based on Lender’s cost of funds,
and approved at least three (3) Business Days prior to such Advance, in writing, by Borrower.




(b) Variable DMBS Advances.



(i) Discount. Each Variable DMBS Advance shall be a discount loan. The original
stated principal amount of a Variable DMBS Advance shall be the sum of the Price and the Discount.
The Price and Discount of each Variable DMBS Advance shall be determined in accordance with the
procedures set forth in Section 2.01. The proceeds of the
Variable DMBS Advance made available by Lender to Borrower will equal the Price. Borrower
shall pay to Lender, in advance of Lender making the initial Variable DMBS Advance requested by
Borrower, the entire Discount for the Variable DMBS Advance. With respect to any subsequent
Variable DMBS Advances, Borrower shall pay to Lender the Discount for the Variable DMBS Advance in
monthly installments. Each monthly installment shall be equal to the product of (1) a fraction
with one as the numerator and the number of months in the term of the applicable DMBS as the
denominator, multiplied by (2) the Discount calculated on the applicable then Outstanding DMBS
(for example, if the DMBS term is three (3) months and the entire Discount is $100,000, such
monthly installments shall equal one third (1/3) of the entire Discount (i.e. $33,333).
The first installment shall be payable on or prior to the Closing Date of such Variable DMBS
Advance. Subsequent installments shall be payable on the first day of each calendar month,
commencing on the first day of the second full calendar month following the DMBS Issue Date, to
the first day of the month prior to the maturity date of such DMBS.


 


4









 





(ii) Variable Facility Fee. In addition to paying the Discount and the partial month
interest, if any, Borrower shall pay monthly installments of the Variable Facility Fee to Lender
for each Variable DMBS Advance Outstanding from the applicable DMBS Issue Date to its maturity
date. The Variable Facility Fee shall be payable in advance, in accordance with the terms of the
Variable Facility Note. The first installment shall be payable on or prior to the Closing Date
for the Variable DMBS Advance and shall apply to the first full calendar month of the DMBS issued
in connection with such Variable DMBS Advance. Subsequent installments shall be payable on the
first day of each calendar month, commencing on the first day of the second full calendar month of
such DMBS, to its maturity date. Each installment of the Variable Facility Fee shall be in an
amount equal to the product of (1) the Variable Facility Fee, (2) the Variable DMBS Advance
Outstanding, and (3) 1/12.




(c) Variable Structured ARM Advances.



(i) Adjustable Rate. Each Variable Structured ARM Advance shall bear interest at an
Adjustable Rate which Adjustable Rate shall include the Margin. The Adjustable Rate with respect
to each Variable Structured ARM Advance shall change on each Rate Change Date until such Variable
Structured ARM Advance is repaid in accordance with the applicable Variable Facility Note.




(d) Fixed Advances.



(i) Annual Interest Rate. Each Fixed Advance shall bear interest at a rate, per
annum, equal to the Cash Interest Rate for such Fixed Advance.



(ii) Monthly Payment. In addition to paying the partial month interest, if any,
Borrower shall pay monthly installments of the Cash Interest Rate to Lender for each Fixed Advance
from the first day of the month following the Closing Date for such Advance, to its maturity date.
The Cash Interest Rate shall be payable in arrears, in accordance with the terms of the Fixed
Facility Note. Installments shall be payable on the first day of each calendar month, commencing on the first day of the second full calendar month of such
Advance, to its maturity date.




Section 1.05. Coupon Rates for Variable DMBS Advances. 



The Coupon Rate applicable to a Variable DMBS Advance shall mean the sum of (1) an imputed
interest rate as determined by Lender pursuant to Section 2.01 of this Agreement (rounded to three
places) payable for the DMBS pursuant to the DMBS Commitment (“DMBS Imputed Interest Rate”)
and (2) the Variable Facility Fee.


 


5









 






Section 1.06. Notes. 



(a) Variable Advances. The obligation of Borrower to repay the Variable Advances
shall be evidenced by the Variable Facility Notes. The Variable Facility Notes shall be payable to
the order of Lender and shall be made in the original principal amount of each Variable Advance.



(b) Fixed Advances. The obligation of Borrower to repay the Fixed Advances shall be
evidenced by the Fixed Facility Notes. The Fixed Facility Notes shall be payable to the order of
Lender and shall be made in the original principal amount of each Fixed Advance.




Section 1.07. Reserved. 




Section 1.08. Conversion from Variable Facility Commitment to Fixed Facility Commitment.




Except as provided in Section 1.09, Borrower shall have the right, from time to time
prior to the Variable Facility Termination Date, to convert all or any portion of the Variable
Facility Commitment to the Fixed Facility Commitment, provided that the maturity date for any such
Fixed Advance shall be as required generally for Fixed Advances pursuant to Section
1.03(b). If any Variable Advances Outstanding under a Variable Facility Note are converted to
a Fixed Advance, the Fixed Facility Note executed in connection with such Fixed Advance shall not
have a maturity date beyond the maturity date set forth in the original Variable Facility Note.
The Variable Facility Commitment shall be reduced by, and the Fixed Facility Commitment shall be
increased by, the amount of each conversion.



(a) Request. To convert all or a portion of the Variable Facility Commitment to the
Fixed Facility Commitment, Borrower shall deliver a Conversion Request to Lender. Each Conversion
Request shall designate (i) the amount of the Variable Facility Commitment to be converted, and
(ii) any Variable Advances Outstanding that will be prepaid on or before the Closing Date for the
conversion as required by Section 1.09(c).



(b) Closing. Subject to Section 1.09 and provided that all conditions
contained in Section 1.10 are satisfied, Lender shall permit the requested conversion to
close at offices designated by Lender on a Closing Date selected by Lender, and, with respect to a
Variable DMBS Advance, occurring on the maturity date of the applicable outstanding DMBS, within
thirty (30) Business Days after Lender’s receipt of the Conversion Request (or on such other date
as Borrower and Lender may agree). At the closing, Lender and Borrower shall execute and deliver,
at the sole cost and expense of Borrower, in form and substance satisfactory to Lender, the
Conversion Documents. Borrower shall be obligated to pay an interest rate and fees in connection
with a conversion as determined in accordance with the applicable requirements of the Fannie Mae
product line then in effect.



(c) Minimum Remaining Amount of Variable DMBS Advances. After the closing of any
conversion, if any Variable DMBS Advances remain Outstanding, the minimum aggregate principal
amount Outstanding of such remaining Variable DMBS Advances shall be not less than $25,000,000. If
the aggregate principal amount Outstanding of Variable DMBS Advances is less than $25,000,000, such
Variable DMBS Advances must be repaid or converted to Fixed Advances pursuant to the terms of this
Section and Sections 1.09 and 1.10.


 


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Section 1.09. Limitations on Right to Convert. 



Borrower’s right to convert all or any portion of the Variable Facility Commitment to the
Fixed Facility Commitment is subject to the following limitations:




(a) Reserved.



(b) Minimum Request. Each Conversion Request shall be in the minimum amount of
$3,000,000.



(c) Obligation to Prepay Variable Advances. Borrower shall prepay any difference by
which, after the conversion, the aggregate unpaid principal balance of all Variable Advances
Outstanding will exceed the Variable Facility Commitment.



(d) Failure to Convert. In the event all or a portion of the amount of the Variable
Facility Commitment set forth in the Conversion Request cannot be converted because the increased
Fixed Facility Commitment does not satisfy the Underwriting Requirements, Borrower shall prepay the
amount of the Variable Facility Commitment that cannot be converted to a Fixed Facility Commitment
and shall pay all prepayment premiums and other fees associated with such prepayment.




Section 1.10. Conditions to Conversion. 



The conversion of all or any portion of the Variable Facility Commitment to the Fixed Facility
Commitment is subject to the satisfaction, on or before the Closing Date, of (a) the
conditions precedent contained in Section 6.08 and Section 6.11 and (b) all
applicable General Conditions contained in Section 6.01.




Section 1.11. Yield Maintenance. 



At such time as Borrower requests the first Fixed Advance, or, if prior in time, elects to
convert all or a portion of the Variable Facility Commitment to a Fixed Facility Commitment,
Borrower shall select yield maintenance with respect to Fixed Advances. Borrower shall notify
Lender of such selection on the Advance Request for the first Fixed Advance or on the first
Conversion Request, as applicable. The terms and conditions of yield maintenance are contained in
the Fixed Facility Notes. The selection of Borrower as to yield maintenance made at the time of
the first Advance Request for a Fixed Advance or the first Conversion Request shall apply to all
Fixed Advances made pursuant to this Agreement.


 


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Section 1.12. Interest Rate Cap.



To protect against fluctuations in interest rates during the term, pursuant to the terms of
the Pledge, Interest Rate Cap Agreement, Borrower shall make arrangements for a LIBOR-based
interest rate cap in form and substance satisfactory to Lender with a counterparty satisfactory to
Lender (“Interest Rate Cap”) to be in place and maintained at all times with respect to the
portion of the Variable Facility Commitment which has been funded and remains Outstanding. As set
forth in the Pledge, Interest Rate Cap Agreement, Borrower agrees to pledge its right, title and
interest in the Interest Rate Cap to Lender as additional collateral for the Indebtedness.



ARTICLE 2

THE ADVANCES





Section 2.01. Rate Setting for an Advance. 




Rates for an Advance shall be set in accordance with the following procedures:



(a) Preliminary, Nonbinding Quote. At Borrower’s request, Lender shall quote an
estimate of the Cash Interest Rate (for a proposed Fixed Advance), or the Adjustable Rate (for a
proposed Variable Structured ARM Advance) or the DMBS Imputed Interest Rate (for a proposed
Variable DMBS Advance). Lender’s quote shall be based on (i) in the case of a proposed Variable
DMBS Advance, a solicitation of bids from institutional investors selected by Lender in the case of
a DMBS execution or, in the case of a Fixed Advance or a Variable Structured ARM Advance, the rate
quoted by Fannie Mae for a cash execution and (ii) the proposed terms and amount of the Advance
selected by Borrower. The quote shall not be binding upon Lender.



(b) Rate Setting. Borrower may submit to Lender, by facsimile transmission before
1:00 p.m. Washington, D.C. time on any Business Day (“Rate Setting Date”), a
completed and executed Rate Form. The Rate Form shall specify the amount, term, DMBS Issue
Date, Variable Facility Fee, any breakage fee deposit amount, the proposed maximum Coupon Rate
(“Maximum Annual Coupon Rate”), the proposed Maximum Adjustable Rate or Cash Interest Rate,
as applicable, and Closing Date for the Advance.



(c) Rate Confirmation. In the case of a DMBS execution, within one (1) Business Day
after receipt of the Rate Form and upon satisfaction of all of the conditions to Lender’s
obligation to make the Advance, Lender shall solicit bids from institutional investors selected by
Lender based on the information in the Rate Form and, provided the actual Coupon Rate would be at
or below the Maximum Annual Coupon Rate, shall obtain a commitment (“DMBS Commitment”) for
the purchase of a DMBS having the bid terms described in the related Rate Form. In the case of a
cash execution, within one (1) Business Day after receipt of the Rate Form, Lender shall obtain a
commitment from Fannie Mae (“Fannie Mae Commitment”) for the purchase of the proposed
Advance having the terms described in the related Rate Form. Lender shall then complete and
countersign the Rate Form thereby confirming the amount, term, and Closing Date for the Advance, in
the case of a Variable DMBS Advance, the DMBS Issue Date, DMBS Delivery Date, DMBS Imputed Interest
Rate, Variable Facility Fee, Coupon Rate, Discount and Price, in the case of the Variable
Structured ARM Advance, the Adjustable Rate, and in the case of a Fixed Advance, the Cash Interest
Rate and shall immediately deliver by facsimile transmission the Rate Form to Borrower.


 


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Section 2.02. DMBS Refinance Confirmation Form for Rollover Variable Advances. 



Not later than four (4) Business Days before the Closing Date for a Rollover Variable Advance,
Borrower shall execute and deliver to Lender a fully executed DMBS Refinance Confirmation Form (in
the form attached to the applicable Variable Facility Note).




Section 2.03. Breakage and other Costs. 



If Lender obtains, and then fails to fulfill, the DMBS Commitment or Fannie Mae Commitment
because the Advance is not made (for a reason other than Lender’s default), Borrower shall pay all
reasonable out-of-pocket costs payable to the potential investor and other reasonable costs, fees
and damages incurred by Lender in connection with its failure to fulfill the DMBS Commitment or
Fannie Mae Commitment. Lender reserves the right to require Borrower to post a deposit at the time
the DMBS Commitment or Fannie Mae Commitment is obtained. Such deposit shall be refundable to
Borrower upon the delivery of the related DMBS or the purchase of the Advance for cash by Fannie
Mae.




Section 2.04. Advances. 



Borrower may deliver an Advance Request to Lender:



(a) If the Advance Request is to obtain the Initial Advance and all conditions precedent
contained in Section 6.02 and Section 6.11 and the General Conditions contained in
Section 6.01 are satisfied on or before the Closing Date for the Initial Advance, Lender
shall make the Initial Advance on the Initial Closing Date or on such other date as Borrower and
Lender may agree.



(b) If the Advance Request is to obtain a Future Advance, such Advance Request shall be in the
minimum amount of $3,000,000, except that any Request for a Variable DMBS Advance shall be in the
minimum amount of $25,000,000. If all conditions precedent contained in Section 6.03 and
Section 6.11 and the General Conditions contained in Section 6.01 are satisfied,
Lender shall make the requested Future Advance, at a closing to be held at offices designated by
Lender on a Closing Date selected by Lender, which date shall be not more than three (3) Business
Days after Borrower’s receipt from Lender of the confirmed Rate Form (or on such other date as
Borrower and Lender may agree).


 


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Section 2.05. Determination of Allocable Facility Amount and Valuations. 



(a) Initial Determinations. On the Initial Closing Date, Lender shall determine (i)
the Allocable Facility Amount and Valuation for each Initial Mortgaged Property, (ii) the Aggregate
Debt Service Coverage Ratio and the Aggregate Loan to Value Ratio, (iii) the Advance Amount, and
(iv) the Commitment amount. The determinations made as of the Initial Closing Date shall remain
unchanged until the First Anniversary. Changes in Allocable Facility Amount, Valuations, the
Aggregate Debt Service Coverage Ratio and the Aggregate Loan to Value Ratio shall be made pursuant
to Section 2.05(b).



(b) Monitoring Determinations. Once each Calendar Quarter within twenty (20) Business
Days after Borrower has delivered to Lender the reports required in Section 8.03, Lender
shall determine the Aggregate Debt Service Coverage Ratio, the Aggregate Loan to Value Ratio, the
Valuations and the Allocable Facility Amounts and whether Borrower is in compliance with the other
covenants set forth in the Loan Documents. With respect to the third Calendar Quarter during any
Loan Year, monitoring determinations shall be calculated based on the prior twelve (12) month
period. After the First Anniversary, on an annual basis, and if Lender decides that changed market
or property conditions warrant, Lender shall redetermine Allocable Facility Amounts and Valuations.
Lender shall also redetermine Allocable Facility Amounts to take account of any addition or
release of Collateral or other event that invalidates the outstanding determinations. In
determining Valuations, Lender shall use Cap Rates based on its internal survey and analysis of cap
rates for comparable sales in the vicinity of the Mortgaged Property, with such adjustments as
Lender deems appropriate and without any obligation to use any information provided by Borrower.
If Lender is unable to determine a Cap Rate for a Mortgaged Property, Lender shall have the right,
not more than once annually, to obtain, at Borrower’s expense, a market study in order to establish
a Cap Rate. Lender shall promptly disclose its determinations to Borrower. Until redetermined,
the outstanding Allocable Facility
Amounts and Valuations shall remain in effect. Notwithstanding anything in this Agreement to
the contrary, no change in Allocable Facility Amounts, Valuations, the Aggregate Loan to Value
Ratio or the Aggregate Debt Service Coverage Ratio shall, unless resulting from the removal of
Collateral from the Collateral Pool, (i) result in a Potential Event of Default or Event of
Default, (ii) require the prepayment of any Advances, (iii) require the addition of Collateral to
the Collateral Pool, or (iv) preclude the making of a Rollover Variable Advance.




Section 2.06. Future Advances Made on Increased Values.



Borrower may request, and Lender, in its sole discretion, may advance Future Advances based on
decreases in the Aggregate Loan to Value Ratio and increases in the Aggregate Debt Service Coverage
Ratio as determined by Lender in accordance with this Agreement and based on Lender’s determination
that such Future Advance may be made pursuant to Lender’s Underwriting Requirements for the Fannie
Mae “Supplemental Loan” product line then in effect, and pursuant to the terms and conditions of
the Loan Documents, but only to the extent that such Future Advance and subsequent reallocation of
the Allocable Facility Amounts do not cause the Geographical Diversification Requirements to be
violated. Borrower shall pay all reasonable costs related to such Future Advance requested under
this Section 2.06 (whether or not such Future Advance is actually made), including but not limited
to Appraisal costs, environmental site assessment costs, physical needs assessment costs, Lender’s
nonrefundable due diligence fee of $4,000 for each Mortgaged Property in the Collateral Pool at the
time plus out-of-pocket expenses payable at the time a Request for a Future Advance is made, a
reunderwriting fee in the amount equal to the greater of $50,000 or one percent (1%) of such
proposed Future Advance, all legal fees incurred by Lender and Fannie Mae in connection with such
proposed Future Advance and any other actual out of pocket third party costs incurred in connection
with such proposed Future Advance. In relation to any Future Advance made pursuant to this Section
2.06, Borrower shall be obligated to pay an interest rate and fees, determined in accordance with
the applicable requirements of the Fannie Mae “Supplemental Loan” product line then in effect.
Borrower shall request such Future Advance by giving Lender an Advance Request in accordance with
Section 2.04 and an Expansion Request, requesting an Expansion in the amount of such Future Advance
in accordance with Section 4.01.


 


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ARTICLE 3

COLLATERAL CHANGES





Section 3.01. Right to Add Collateral. 



Subject to the terms and conditions of this Article, Borrower shall have the right, from time
to time during the Fixed Facility Availability Period and the Variable Facility Availability
Period, as applicable, to add Rental Properties to the Collateral Pool.




Section 3.02. Procedure for Adding Collateral. 



The procedure for adding Collateral contained in this Section 3.02 shall apply to all
additions of Collateral.



(a) Request. Subject to the limitations set forth in Section 15.17, Borrower
may deliver to Lender an Addition Request to add one (1) or more Rental Properties to the
Collateral Pool. Each Addition Request shall be accompanied by the following: (i) the quality and
type of property-related information required by Lender in connection with the Initial Advances
made hereunder and any additional information Lender may reasonably request; and (ii) the payment
of all Additional Collateral Due Diligence Fees and the Additional Collateral Due Diligence
Deposit.



(b) Underwriting. Borrower may add any Additional Mortgaged Property provided that,
after such addition, the proposed Additional Mortgaged Property itself has a Debt Service Coverage
Ratio of not less than 1.30:1.0 with respect to the amount of the Advance which equals the
Allocated Facility Amount which is allocated to such Additional Mortgaged Property drawn from the
Fixed Facility Commitment and 1.05:1.0 with respect to the amount of the Advance which equals the
Allocated Facility Amount which is allocated to such Additional Mortgaged Property drawn from the
Variable Facility Commitment, and its Loan to Value Ratio must not exceed seventy-five percent
(75%), and, after such addition, the Collateral Pool must satisfy the Coverage and LTV Tests,
provided, that if either of the tests described above are not met, Lender may permit the Additional
Mortgaged Property to be added to the Collateral Pool. Lender shall evaluate the proposed
Additional Mortgaged Property in accordance with the Underwriting Requirements and shall make
underwriting determinations as to the Debt Service Coverage


 


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Ratio and the Loan to Value Ratio of
the proposed Additional Mortgaged Property and the Aggregate Debt Service Coverage Ratio and the
Aggregate Loan to Value Ratio applicable to the Collateral Pool on the basis of the lesser of (i)
the acquisition price of the proposed Additional Mortgaged Property if purchased by Borrower within
twelve (12) months of the related Addition Request, and (ii) a Valuation made with respect to the
proposed Additional Mortgaged Property. In addition, Lender shall determine whether an exit
strategy acceptable to Lender is available with respect to such Additional Mortgaged Property.
Within thirty (30) Business Days after receipt of (1) the Addition Request and (2) all reports,
certificates and documents required by the Underwriting Requirements, including a zoning analysis
required by Lender in connection with similar loans anticipated to be sold to Fannie Mae, Lender
shall notify Borrower whether it has determined whether the proposed Additional Mortgaged Property
meets the Underwriting Requirements and the other conditions for addition set forth in this
Agreement. If Lender determines that the proposed Additional Mortgaged Property meets the
Underwriting Requirements and the other conditions set forth in this Agreement, it shall set forth
the Aggregate Debt Service Coverage Ratio, the Aggregate Loan to Value Ratio, and the Advance
Amount that Lender estimates shall result from the addition of the proposed Additional Mortgaged
Property. Within five (5) Business Days after receipt of Lender’s written consent to the Addition
Request, Borrower shall notify Lender in writing whether it elects to add the
proposed Additional Mortgaged Property to the Collateral Pool. If Borrower fails to respond
within the period of five (5) Business Days, it shall be conclusively deemed to have elected not to
add the proposed Additional Mortgaged Property to the Collateral Pool.



(c) Closing. If Lender determines that the proposed Additional Mortgaged Property
meets the conditions set forth in this Agreement, Borrower timely elects to add the proposed
Additional Mortgaged Property to a Collateral Pool and all conditions precedent contained in
Section 6.04, Section 6.11 and Section 6.12 and all General Conditions
contained in Section 6.01 are satisfied, the proposed Additional Mortgaged Property shall
be added to the Collateral Pool, at a closing to be held at offices designated by Lender on a
Closing Date selected by Lender, occurring within thirty (30) Business Days after Lender’s receipt
of Borrower’s election (or on such other date as Borrower and Lender may agree).




Section 3.03. Right to Obtain Releases of Collateral. 



Subject to the terms and conditions of this Article 3 and the limitations set forth in
Section 15.17, Borrower shall have the right from time to time to obtain a release of
Collateral from the Collateral Pool.




Section 3.04. Procedure for Obtaining Releases of Collateral.



(a) Request. To obtain a release of Collateral from the Collateral Pool, Borrower
shall deliver a Release Request to Lender. The Release Request shall result in a termination of
all or any part of the Credit Facility and Borrower shall lose the borrowing capacity associated
with such release and all or a part of the Variable Facility Commitment and/or Fixed Facility
Commitment comprising such borrowing capacity shall be terminated.


 


12









 





(b) Closing. If all conditions precedent contained in Section 6.05 and all
General Conditions contained in Section 6.01 are satisfied, Lender shall cause the Release
Mortgaged Property to be released, at a closing to be held at offices designated by Lender on a
Closing Date selected by Lender, and occurring within thirty (30) days after Lender’s receipt of
the Release Request (or on such other date as Borrower and Lender may agree), by executing and
delivering, and causing all applicable parties to execute and deliver, all at the sole cost and
expense of Borrower, the Release Documents. Borrower shall prepare the Release Documents and
submit them to Lender for its review.



(c) Release Price. The “Release Price” for each Release Mortgaged Property
means the greater of (i) one hundred percent (100%) of the Allocable Facility Amount for the
Release Mortgaged Property and (ii) one hundred percent (100%) of the amount, if any, of Advances
Outstanding that are required to be repaid by Borrower to Lender in connection with the proposed
release of the Release Mortgaged Property from the Collateral Pool so that, immediately after the
release, the Coverage and LTV Tests will be satisfied. In addition to the Release Price, Borrower
shall pay to Lender all associated prepayment premiums and other
amounts due under the Notes being repaid. In connection with a non-simultaneous substitution
of Collateral pursuant to Section 3.06(c)(ii) of this Agreement, Borrower shall be
permitted, in lieu of paying the Release Price, to post a Letter of Credit issued by a financial
institution acceptable to Lender and having terms and conditions acceptable to Lender, having a
face amount equal to one hundred fifteen percent (115%) of the Allocable Facility Amount for the
Release Mortgaged Property.



(d) Application of Release Price. The Release Price for the Release Mortgaged
Property will be applied first against the Variable Advances Outstanding until there are no further
Variable Advances Outstanding, then against the prepayment of Fixed Advances Outstanding, so long
as the prepayment is permitted under the applicable Fixed Facility Note. The remainder of the
Release Price, if any, shall be held by Lender (or its appointed collateral agent) as Additional
Collateral, in accordance with a security agreement and other documents in form and substance
acceptable to Lender. Any such Additional Collateral remaining will be returned to Borrower on the
Termination Date. If, on the date Borrower pays the Release Price, Variable Advances are
Outstanding but not then due and payable, Lender shall hold the Release Price as Additional
Collateral, until the next date on which Variable Advances are due and payable, at which time
Lender shall apply the appropriate portion of the Release Price to such Variable Advances.



(e) Release of Borrower and Guarantor. Upon the release of a Mortgaged Property, the
Borrower that is the owner of such Release Mortgaged Property and the Guarantor shall be released
of all obligations related to the Release Mortgaged Property under this Agreement and the other
Loan Documents except for any provisions of this Agreement and the other Loan Documents that are
expressly stated to survive any release or termination.


 


13









 






Section 3.05. Right to Substitutions. 



Subject to the terms and conditions of this Article 3 and the limitations sets forth
in Section 15.17, Borrower shall have the right to obtain the release of the Mortgaged
Property securing the Advances made to such Borrower by replacing such Mortgaged Property with one
or more Rental Properties that meet the requirements of this Agreement (the “Substitute
Mortgaged Property”) thereby effecting a "Substitution” of Collateral.




Section 3.06. Procedure for Substitutions. 



(a) Request. Borrower shall deliver to Lender a completed and executed Substitution
Request. Each Substitution Request shall be accompanied by the following: (i) the information
required by the Underwriting Requirements with respect to the proposed Substitute Mortgaged
Property and any additional information Lender reasonably requests; and (ii) the payment of all
Additional Collateral Due Diligence Fees and the Additional Collateral Due Diligence Deposit.



(b) Underwriting.



(i) Lender shall evaluate the proposed Substitute Mortgaged Property in accordance with the
Underwriting Requirements.



(ii) A Substitution may be effected if (A) (1) the Substitute Mortgaged Property has a
Valuation equal to or greater than the Valuation of the Release Mortgaged Property, and (2) the
Substitute Mortgaged Property has Net Operating Income (as determined by Lender in its discretion)
equal to or greater than the Net Operating Income (as determined by Lender in its discretion) of
the Release Mortgaged Property and (3) Lender determines that the Substitute Mortgaged Property is
of similar or better quality and located in a similar or better market as the Release Mortgaged
Property and (B) after the Substitution, the Collateral Pool meets the Coverage and LTV Tests and
the Substitute Mortgaged Property itself has a Debt Service Coverage Ratio of not less than
1.30:1.0 with respect to the amount of the Advance which equals the Allocated Facility Amount
which is allocated to such Substitute Mortgaged Property drawn from the Fixed Facility Commitment
and 1.05:1.0 with respect to the amount of the Advance which equals the Allocated Facility Amount
which is allocated to such Substitute Mortgaged Property drawn from the Variable Facility
Commitment and a Loan to Value Ratio of not more than seventy-five percent (75%). If any of the
tests described in (A) and (B) are not met, Lender may, in its discretion, permit the substitution
to be effected.



(iii) Within thirty (30) Business Days after receipt of (A) the Substitution Request and (B)
all reports, certificates and documents required by the Underwriting Requirements and this
Agreement, including a zoning analysis required by Lender in connection with similar loans
anticipated to be sold to Fannie Mae, Lender shall notify the applicable Borrower whether the
Substitute Mortgaged Property meets the requirements of this Section 3.06(b) and the
Underwriting Requirements and the other requirements for the Substitution of a Mortgaged Property
as set forth in this Agreement. Within five (5) Business Days after receipt of Lender’s written
notice in response to the Substitution Request, Borrower shall notify Lender whether it elects to
proceed with the Substitution. If Borrower fails to respond within the period of five (5)
Business Days, it shall be conclusively deemed to have elected not to proceed with the
Substitution.


 


14









 





(c) Closing. If Lender determines that the Substitution Request satisfies the
conditions set forth herein, Borrower timely elects to proceed with the substitution, and all
conditions precedent contained in Section 3.05, Section 3.06, Section 6.04,
Section 6.05, Section 6.06, Section 6.11, Section 6.12 and all
General Conditions contained in Section 6.01 are satisfied, the proposed Substitute
Mortgaged Property shall be added in replacement of the Mortgaged Property being released, at a
closing to be held at offices designated by Lender on a Closing Date selected by Lender and
occurring —



(i) if the substitution of the proposed Substitute Mortgaged Property is to occur
simultaneously with the release of the Release Mortgaged Property, within sixty (60) days after
Lender’s receipt of the applicable Borrower’s election (or on such other date to which Borrower
and Lender may agree); or



(ii) if the substitution of the proposed Substitute Mortgaged Property is to occur subsequent
to the release of the Release Mortgaged Property, within ninety (90) days after the release of
such Release Mortgaged Property (provided such date may be extended an additional ninety (90) days
if Borrower provides evidence satisfactory to Lender of Borrower’s diligent efforts in finding a
suitable proposed Substitute Mortgaged Property) (the “Property Delivery Deadline”) in
accordance with the terms of this Section 3.06(c).




Section 3.07. Substitution Deposit.



(a) The Deposit. If a Substitution of the proposed Substitute Mortgaged Property is to
occur subsequent to the release of the Release Mortgaged Property pursuant to Section 3.06(c)(ii),
at the Closing Date of the release of the Release Mortgaged Property, Borrower shall deposit with
Lender the “Substitution Deposit” described in Section 3.07(b) in the form of cash
or, in lieu of depositing cash for the Substitution Deposit, Borrower may post a Letter of Credit
issued by a financial institution acceptable to Lender and having terms and conditions acceptable
to Lender, having a face amount equal to the Substitution Deposit.



(b) Substitution Deposit Amount. The “Substitution Deposit” for each proposed
substitution shall be an amount equal to the sum of (i) the Release Price, plus (ii) any and all of
the fee maintenance for the DMBS, or the prepayment premium for a Note funded through a cash
execution, calculated as of the end of the month in which the Property Delivery Deadline occurs, as
if the Note (and applicable DMBS, if applicable) were to be prepaid in such month, plus (iii)
interest on the Note (or Discount, if applicable, and if necessary as estimated by Lender) through
the end of the month in which the Property Delivery Deadline occurs, if necessary as reasonably
estimated by Lender, plus (iv) costs, expenses and fees of Lender pertaining to the substitution
(the “Substitution Cost Deposit”). If a Substitution of the last remaining asset is taking
place, the cash collateral or Letter of Credit must include, (A) any yield maintenance that would
be due to the extent that the Fixed Advance must be prepaid to effect a Release at that time, (B)
any Discount that would be due for any Variable DMBS Advance, as applicable, if necessary as
reasonably estimated by Lender and (C) any fee maintenance that would be due to the extent that the
Variable Structured ARM Advance must be prepaid to effect a Release at that time. The Substitution
Cost Deposit shall be used by Lender to cover all reasonable out-of-pocket costs and expenses
incurred by Lender and Fannie Mae, including any out-of-pocket legal fees and expenses incurred by
Fannie Mae and Lender in connection with such substitution whether such substitution actually
closes. In the event that the Borrower elects to post a Letter of Credit in lieu of cash for the
Substitution Deposit, Borrower shall also be obligated to make any regularly scheduled payments of
principal and interest due under the applicable Note during any period between the closing of the
Release Mortgaged Property and the earlier of the closing of the Substitute Mortgaged Property and
the date of prepayment of the Note, or the applicable DMBS.


 


15









 





(c) Failure to Close Substitution. If the substitution of the proposed Substitute
Mortgaged Property does not occur by the Property Delivery Deadline in accordance with Section
3.06(c)(ii), then such Borrower shall have irrevocably waived its right to substitute such
Release Mortgaged Property with the proposed Substitute Mortgaged Property, and the release of
the Release Mortgaged Property shall be deemed a prepayment of the Note and the DMBS, if
applicable. The Property Delivery Deadline shall be no later than the date ninety (90) days (or
one hundred eighty (180) days, if applicable) after the date the Lender’s lien on such Release
Mortgaged Property is released. Any DMBS being prepaid shall be deemed to be prepaid as of the end
of the month in which the Property Delivery Deadline falls, and the Lender, shall follow standard
Fannie Mae procedures for the prepayment of the Note, or any applicable DMBS, including delivery of
the Substitution Deposit (less the Substitution Cost Deposit) to Fannie Mae in accordance with such
procedures. Any portion of the Substitution Deposit not needed to prepay the Note, or any
applicable DMBS, all interest, and any prepayment fees (including any portion of the Substitution
Cost Deposit not used by Lender to cover all reasonable out-of-pocket costs and expenses incurred
by Lender and Fannie Mae, including any out-of-pocket legal fees and expenses incurred by Fannie
Mae and Lender in connection with such Substitution) shall be promptly refunded to the applicable
Borrower after the Property Delivery Deadline.



(d) Substitution Deposit Disbursement. At closing of the Substitution, the Lender
shall disburse the Substitution Deposit (less any portion of the Substitution Cost Deposit used by
Lender to cover all reasonable out-of-pocket costs and expenses incurred by Lender and Fannie Mae,
including any out-of-pocket legal fees and expenses incurred by Fannie Mae and Lender in connection
with such substitution) directly to the Borrower at such time as the conditions set forth in
Sections 3.05, 3.06, 6.06, 6.11, 6.12 and all General
Conditions contained in Section 6.01 have been satisfied, which must occur no later than
the Property Delivery Deadline.


 


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ARTICLE 4

INCREASE OF CREDIT FACILITY





Section 4.01. Request to Increase Commitment.



Subject to the terms, conditions and limitations of this Article and this Agreement, Borrower
may request, during the Fixed Facility Availability Period, to increase the Fixed Facility
Commitment, during the Variable Facility Availability Period, to increase the Variable Facility
Commitment, or both (the “Expansion”). Lender has the right to agree to Borrower’s request
in its sole discretion. Any Expansion is subject to the following limitations:



(a) Maximum Amount of Increase in Commitment. The maximum amount of the Expansion is
$77,589,000 (for a maximum total Commitment of $300,000,000).



(b) Minimum Request. Each Request for an Expansion shall be in the minimum amount of
$3,000,000, except that an Expansion that will result in a Variable DMBS Advance shall be in a
minimum amount of $25,000,000.



(c) Terms and Conditions. The terms and conditions (including pricing) applicable to
any Expansion shall be mutually agreed upon by Lender and Borrower at the time of the Expansion.




Section 4.02. Procedure for Obtaining Increases in Commitment.



To obtain an Expansion, Borrower shall deliver an Expansion Request to Lender. Each Expansion
Request shall be accompanied by a nonrefundable deposit of $25,000 and shall include the following:




(a) the total amount of the proposed increase;



(b) a designation of the increase as being part of the Fixed Facility Commitment and/or the
Variable Facility Commitment;



(c) a request that Lender inform Borrower of an indication of the interest rate and fees that
will apply to Advances drawn from such Expansion; and



(d) a request that Lender inform Borrower of Net Worth and Liquidity requirements that will
apply upon the Expansion.




Section 4.03. Closing.



If Lender in its sole discretion agrees to the Expansion Request and if all conditions
precedent contained in Section 6.07 and Section 6.11 and all applicable General
Conditions contained in Section 6.01 are satisfied, Lender shall permit the Expansion to
occur, at a closing to be held at offices designated by Lender on a Closing Date selected by
Lender, and occurring within fifteen (15) Business Days after Lender’s receipt of the Expansion
Request (or on such other date as Borrower and Lender may agree).


 


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ARTICLE 5

TERMINATION OF FACILITIES





Section 5.01. Right to Complete or Partial Termination of Facilities. 



Subject to the terms and conditions of this Article, Borrower shall have the right from time
to time to permanently reduce the Variable Facility Commitment and/or the Fixed Facility
Commitment.




Section 5.02. Procedure for Complete or Partial Termination of Facilities.



(a) Request. To permanently reduce the Variable Facility Commitment or the Fixed
Facility Commitment, Borrower shall deliver a Facility Termination Request to Lender. A permanent
reduction of the Variable Facility Commitment to $0 shall be referred to as a “Complete
Variable Facility Termination.” A permanent reduction of the Fixed Facility
Commitment to $0 shall be referred to as a “Complete Fixed Facility Termination.” The
Facility Termination Request shall include the following:



(i) The proposed amount of the reduction in the Variable Facility Commitment and/or Fixed
Facility Commitment; and



(ii) Unless there is a Complete Variable Facility Termination or a Complete Fixed Facility
Termination, a designation by Borrower of any Variable Advances that will be prepaid and/or any
Fixed Advances that will be prepaid.



Any release of Collateral, whether or not made in connection with a Facility Termination Request,
must comply with all conditions to a release that are contained in Section 6.05.



(b) Closing. If all conditions precedent contained in Section 6.09 and all
General Conditions contained in Section 6.01 are satisfied, Lender shall reduce the
Variable Facility Commitment or Fixed Facility Commitment, as the case may be, to the amount
designated by Borrower, at a closing to be held at offices designated by Lender on a Closing Date
selected by Lender, within thirty (30) Business Days after Lender’s receipt of the Facility
Termination Request (or on such other date as Borrower and Lender may agree), by executing and
delivering the Facility Termination Document evidencing the reduction in the Facility Commitment.




Section 5.03. Right to Terminate Credit Facility. 



Subject to the terms and conditions of this Article, Borrower shall have the right to
terminate this Agreement and the Credit Facility and receive a release of all of the Collateral.


 


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Section 5.04. Procedure for Terminating Credit Facility.



(a) Request. To terminate this Agreement and the Credit Facility, Borrower shall
deliver a Credit Facility Termination Request to Lender.



(b) Closing. If all conditions precedent contained in Section 6.10 are
satisfied, this Agreement shall terminate, and Lender shall cause all of the Collateral to be
released, at a closing to be held at offices designated by Lender on a Closing Date selected by
Lender, within thirty (30) Business Days after Lender’s receipt of the Credit Facility Termination
Request (or on such other date as Borrower and Lender may agree), by executing and delivering, and
causing all applicable parties to execute and deliver, all at the sole cost and expense of
Borrower, the Credit Facility Termination Documents.



ARTICLE 6

CONDITIONS PRECEDENT TO ALL REQUESTS





Section 6.01. Conditions Applicable to All Requests. 



Borrower’s right to close the transaction requested in a Request shall be subject to Lender’s
determination that all of the following general conditions precedent (“General Conditions”)
have been satisfied, in addition to any other conditions precedent contained in this Agreement:



(a) Geographical Diversification. For each Request on or after the First Anniversary,
the Geographical Diversification Requirements shall be satisfied. In the event Borrower decides to
wind down the Credit Facility over a period no longer than six (6) months by releasing all of the
Mortgaged Properties then currently remaining in the Collateral Pool, Borrower shall send a notice
in writing to Lender, which notice shall include a statement that Borrower intends to wind down the
Credit Facility and a timeline for each of the releases (the “Wind Down Notice”). After
receipt of the Wind Down Notice, the Geographical Diversification Requirements for any Release may
be waived in Lender’s discretion, provided that Borrower satisfies each of the following at the
time of the Release: (x) all other conditions of a Release shall be met and (y) each Mortgaged
Property then currently remaining in the Collateral Pool has a Debt Service Coverage Ratio of not
less than 1.30:1.0 with respect to the amount of the Advance which equals the Allocated Facility
Amount which is allocated to each such Mortgaged Property and drawn from the Fixed Facility
Commitment and 1.05:1.0 with respect to the amount of the Advance which equals the Allocated
Facility Amount which is allocated to each such Mortgaged Property and drawn from the Variable
Facility Commitment and a Loan to Value Ratio of not more than seventy-five percent (75%). At
Borrower’s request, Lender may in its discretion permit that the Geographical Diversification
Requirements be waived in connection with any Request.



(b) Payment of Expenses. The payment by Borrower of Lender’s and Fannie Mae’s
reasonable third party out-of-pocket fees and expenses payable in accordance with this Agreement,
including, but not limited to, the legal fees and expenses described in Section 10.05.


 


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(c) No Material Adverse Change. Except in connection with a Credit Facility
Termination Request, there has been no material adverse change in the financial condition, business
or prospects of Borrower or Guarantor or in the physical condition, operating performance or value
of any of the Mortgaged Properties since the date of the most recent Compliance Certificate (or,
with respect to the conditions precedent to the Initial Advance, from the condition, business or
prospects reflected in the financial statements, reports and other information obtained by Lender
during its review of Borrower and Guarantor and the Initial Mortgaged Properties).



(d) No Default. Except in connection with a Credit Facility Termination Request,
there shall exist no Event of Default or Potential Event of Default on the Closing Date
for the Request and, after giving effect to the transaction requested in the Request, no Event
of Default or Potential Event of Default shall have occurred.



(e) No Insolvency. Except in connection with a Credit Facility Termination Request,
receipt by Lender on the Closing Date for the Request of evidence satisfactory to Lender that
neither Borrower nor Guarantor is insolvent (within the meaning of any applicable federal or state
laws relating to bankruptcy or fraudulent transfers) or will be rendered insolvent by the
transactions contemplated by the Loan Documents, including the making of a Future Advance, or,
after giving effect to such transactions, will be left with an unreasonably small capital with
which to engage in its business or undertakings, or will have intended to incur, or believe that it
has incurred, debts beyond its ability to pay such debts as they mature or will have intended to
hinder, delay or defraud any existing or future creditor.



(f) No Untrue Statements. The Loan Documents shall not contain any untrue or
misleading statement of a material fact and shall not fail to state a material fact necessary to
make the information contained therein not misleading.



(g) Representations and Warranties. Except in connection with a Credit Facility
Termination Request, all representations and warranties made by Borrower and Guarantor in the Loan
Documents shall be true and correct in all material respects on the Closing Date for the Request
with the same force and effect as if such representations and warranties had been made on and as of
the Closing Date for the Request.



(h) No Condemnation or Casualty. Except in connection with a Credit Facility
Termination Request or a Release Request or a Substitution Request, there shall not be pending or
threatened any condemnation or other taking, whether direct or indirect, against the Mortgaged
Property and there shall not have occurred any casualty to any improvements located on the
Mortgaged Property, which casualty would have a Material Adverse Effect.


 


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(i) Delivery of Closing Documents. The receipt by Lender of the following, each dated
as of the Closing Date for the Request, in form and substance satisfactory to Lender in all
respects:




(i) The Loan Documents relating to such Request;




(ii) A Compliance Certificate;




(iii) An Organizational Certificate; and



(iv) Such other documents, instruments, approvals (and, if requested by Lender, certified
duplicates of executed copies thereof) and opinions as Lender may reasonably request.



(j) Covenants. Except in connection with a Credit Facility Termination Request,
Borrower is in full compliance with each of the covenants contained in Article 8 and
Article 9 of this Agreement, without giving effect to any notice and cure rights of
Borrower.



(k) Execution. For any Advance, conversion of an Advance or any refinance of an
Advance, Lender must confirm with Fannie Mae that Fannie Mae is purchasing Advances of the type
requested by Borrower in the marketplace at the time of the Request and on the Closing Date for the
requested Advance, conversion or refinance. Borrower acknowledges that if Lender does not confirm
that Fannie Mae is purchasing Advances of the type requested by Borrower in the marketplace,
Borrower will not be entitled to any Advance, conversion or refinance under this Agreement.




Section 6.02. Conditions Precedent to Initial Advance. 



The obligation of Lender to make the Initial Advance is subject to the following conditions
precedent:




(a) Receipt by Lender of the fully executed Advance Request;



(b) If the Initial Advance is a Variable Advance, receipt by Lender at least five (5) days
prior to the Initial Closing Date, of the confirmation of an Interest Rate Cap commitment, in
accordance with the Pledge, Interest Rate Cap Agreement, effective as of the Initial Closing Date;



(c) If the Initial Advance is a Variable Advance, receipt by Lender of Interest Rate Cap
Documents in accordance with the Pledge, Interest Rate Cap Agreement, effective as of the Initial
Closing Date;



(d) Delivery to the Title Company, for filing and/or recording in all applicable
jurisdictions, of all applicable Loan Documents required by Lender, including duly executed and
delivered original copies of the Variable Facility Note or Fixed Facility Note, as applicable, the
Guaranty, the Initial Security Instruments covering the Initial Mortgaged Properties and UCC-1
Financing Statements covering the portion of the Collateral comprised of personal property, and
other appropriate instruments, in form and substance satisfactory to Lender and in form proper for
recordation, as may be necessary in the opinion of Lender to perfect the Liens created by the
applicable Security Instruments and any other Loan Documents creating a Lien in favor of Lender,
and the payment of all taxes, fees and other charges payable in connection with such execution,
delivery, recording and filing;


 


21









 





(e) If the Initial Advance is a Variable DMBS Advance, receipt by Lender of the first
installment of Variable Facility Fee and the entire Discount payable by Borrower pursuant to
Section 1.04; and



(f) Receipt by Lender of the Initial Origination Fee pursuant to Section 10.03(a), the
Initial Due Diligence Deposit pursuant to Section 10.03(a) and the Initial Due Diligence
Fee pursuant to Section 10.04(a).




Section 6.03. Conditions Precedent to Future Advances.




A Future Advance is subject to the satisfaction of the following conditions precedent:



(a) Except in connection with a Rollover Variable Advance, receipt by Lender of the fully
executed Advance Request;



(b) Except in connection with a Rollover Variable Advance, delivery by Lender to Borrower of
the Rate Form for the Future Advance;



(c) Except in connection with a Rollover Variable Advance, after giving effect to the
requested Future Advance, the Coverage and LTV Tests will be satisfied;



(d) If the Advance is a Fixed Advance, delivery of a Fixed Facility Note, duly executed by
Borrower, in the amount and reflecting all of the terms of the Fixed Advance;



(e) If the Advance is a Variable DMBS Advance, delivery of the DMBS Refinance Confirmation
Form, duly executed by Borrower and/or (in the case of a Variable Advance that is not a Rollover
Variable Advance) a new Variable Facility Note, as applicable;



(f) For any Title Insurance Policy not containing a revolving credit or future advance
endorsement, the receipt by Lender of an endorsement to the Title Insurance Policy, amending the
effective date of the Title Insurance Policy to the applicable Closing Date and showing no
additional exceptions to coverage other than the exceptions shown on the Initial Closing Date and
other exceptions approved by Lender;



(g) If the Advance is a Variable DMBS Advance, the receipt by Lender of the first installment
of Variable Facility Fee for the Variable DMBS Advance and the entire Discount for the Variable
DMBS Advance payable by Borrower pursuant to Section 1.04;



(h) If the Advance is a Variable Advance (and not a Rollover Variable Advance), receipt by
Lender at least five (5) days prior to the applicable Closing Date, of the confirmation of an
Interest Rate Cap commitment, in accordance with the Pledge, Interest Rate Cap Agreement, effective
as of the Closing Date;



(i) If the Advance is a Variable Advance (and not a Rollover Variable Advance), receipt by
Lender of Interest Rate Cap Documents, in accordance with the Pledge, Interest Rate Cap Agreement,
effective as of the Closing Date;


 


22









 





(j) Except in connection with a Rollover Variable Advance, receipt by Lender of a Confirmation
of Guaranty; and



(k) Receipt by Lender of one or more endorsements as specified by Lender increasing the amount
of any or all Title Insurance Policies in the aggregate equal to the amount of Future Advances made
pursuant to Section 2.06.



Section 6.04. Conditions Precedent to Addition of an Additional Mortgaged Property to
the Collateral Pool. 



The addition of an Additional Mortgaged Property to the Collateral Pool on the applicable
Closing Date is subject to the satisfaction of the following conditions precedent:



(a) The proposed Additional Mortgaged Property itself has a Debt Service Coverage Ratio of not
less than 1.30:1.0 with respect to the amount of the Advance which equals the Allocated Facility
Amount which is allocated to such Additional Mortgaged Property drawn from the Fixed Facility
Commitment and 1.05:1.0 with respect to the amount of the Advance which equals the Allocated
Facility Amount which is allocated to such Additional Mortgaged Property drawn from the Variable
Facility Commitment and a Loan to Value Ratio of not more than seventy-five percent (75%) and
immediately after giving effect to the requested addition, the Coverage and LTV Tests will be
satisfied, provided that if either of the tests described above are not met, Lender may permit the
Additional Mortgaged Property to be added to the Collateral Pool;



(b) Receipt by Lender of the Additional Collateral Due Diligence Deposit, the Addition Fee,
(provided that no such fee shall be due with respect to an Additional Mortgaged Property that is
added in connection with an Expansion and the payment of an Expansion Origination Fee) and the
Additional Collateral Due Diligence Fees, or if the Additional Mortgaged Property is being added in
connection with a substitution made pursuant to Section 3.05 of this Agreement, receipt by
Lender of the Substitution Fee and the Additional Collateral Due Diligence Deposit and the
Additional Collateral Due Diligence Fees;



(c) Delivery to the Title Company, with fully executed instructions directing the Title
Company to file and/or record in all applicable jurisdictions, all applicable Addition Loan
Documents required by Lender, including duly executed and delivered original copies of any Security
Instruments and UCC-1 Financing Statements covering the portion of the Additional Mortgaged
Property comprised of personal property, and other appropriate documents, in form and substance
satisfactory to Lender and in form proper for recordation, as may be necessary in the opinion of
Lender to perfect the Lien created by the applicable additional Security Instrument, and any other
Addition Loan Document creating a Lien in favor of Lender, and the payment of all taxes, fees and
other charges payable in connection with such execution, delivery, recording and filing;


 


23









 





(d) If required by Lender, amendments to the Notes and the Security Instruments, reflecting
the addition of the Additional Mortgaged Property to the Collateral Pool and, as to any Note or
Security Instrument so amended or if Lender determines that such endorsement is necessary to
maintain the priority of the Lien created in favor of Lender with respect to the Outstanding
Indebtedness or to maintain the validity of any Title Insurance Policy, the receipt by Lender of an
endorsement to each Title Insurance Policy insuring the Security Instruments, amending the
effective date of each Title Insurance Policy to the Closing Date and showing no additional
exceptions to coverage other than the exceptions shown on the Initial Closing Date, Permitted Liens
and other exceptions approved by Lender;



(e) If the Title Insurance Policy for the Additional Mortgaged Property contains a tie-in
endorsement, an endorsement to each other Title Insurance Policy containing a tie-in endorsement,
adding a reference to the Additional Mortgaged Property;



(f) Any proposed Additional Borrower meets and satisfies all of the requirements and
conditions of Section 14.02;




(g) Receipt by Lender on the Closing Date of a Confirmation of Obligations; and



(h) For any Addition on or after the First Anniversary, the Mortgaged Properties in the
Collateral Pool after the Addition shall satisfy the Geographical Diversification Requirements.



Section 6.05. Conditions Precedent to Release of Property from the Collateral Pool .




The release of a Mortgaged Property from the Collateral Pool is subject to the satisfaction of
the following conditions precedent on or before the Closing Date:




(a) Receipt by Lender of the fully executed Release Request;



(b) Immediately after giving effect to the requested release the Coverage and LTV Tests will
be satisfied;




(c) Receipt by Lender of the Release Price;




(d) Receipt by Lender of the Release Fee and all other amounts owing under Section 3.04(c);



(e) Receipt by Lender on the Closing Date of one (1) or more counterparts of each Release
Document, dated as of the Closing Date, signed by each of the parties (other than Lender) who is a
party to such Release Document;


 


24









 





(f) If required by Lender, amendments to the Notes and the Security Instruments, reflecting
the release of the Release Mortgaged Property from the Collateral Pool and, as to any Security
Instrument or Note so amended or if Lender determines that such endorsement is necessary to
maintain the priority of the Lien created in favor of Lender with respect to the Outstanding
Indebtedness or to maintain the validity of any Title Insurance Policy, the receipt by Lender of an
endorsement to each Title Insurance Policy insuring the Security Instruments, amending the
effective date of each Title Insurance Policy to the Closing Date and showing no additional
exceptions to coverage other than the exceptions shown on the Initial Closing Date, Permitted Liens
and other exceptions approved by Lender;



(g) If Lender determines the Release Mortgaged Property to be one (1) phase of a project, and
one (1) or more other phases of the project are Mortgaged Properties which will remain in the
Collateral Pool (“Remaining Mortgaged Properties”), Lender must determine that the
Remaining Mortgaged Properties can be operated separately from the Release Mortgaged Property and
any other phases of the project which are not Mortgaged Properties and whether any cross use
agreements or easements are necessary. In making this determination, Lender shall evaluate access,
utilities, marketability, community services, ownership and operation of the Release Properties and
any other issues identified by Lender in connection with similar loans anticipated to be sold to
Fannie Mae;



(h) Receipt by Lender of endorsements to the tie-in endorsements of the Title Insurance
Policies, if deemed necessary by Lender, to reflect the release;




(i) Receipt by Lender on the Closing Date of a Confirmation of Obligations; and



(j) For any Release on or after the First Anniversary, the remaining Mortgaged Properties in
the Collateral Pool shall satisfy the Geographical Diversification Requirements.




Section 6.06. Conditions Precedent to Substitutions.



The obligation of Lender to make a requested Substitution is subject to Lender’s determination
that each of the following conditions precedent has been met:




(a) Receipt by Lender of the fully executed Substitution Request;




(b) Receipt by Lender of the Substitution Deposit to the extent necessary under Section 3.07;



(c) Receipt by Lender of the Additional Collateral Due Diligence Fees, Additional Collateral
Due Diligence Deposit and Substitution Fee;



(d) Such Substitute Mortgaged Property securing such Advance shall comply with the provisions
of Section 3.06(b) of this Agreement;



(e) Delivery to the Title Company, with fully executed instructions directing the Title
Company to file and/or record in all applicable jurisdictions, all applicable Loan Documents
reasonably required by Lender to be filed or recorded, including duly executed and delivered
original copies of any Security Instrument and UCC-1 Financing Statements covering the portion of
the Substitute Mortgaged Property comprised of personal property, and other appropriate documents,
in form and substance reasonably satisfactory to Lender and in form proper for recordation, as may
be necessary in the reasonable opinion of Lender to perfect the Lien created by the applicable
additional Security Instrument, and any other relevant Loan Document creating a Lien in favor of
Lender, and the payment of all taxes, fees and other charges payable in connection with such
execution, delivery, recording and filing;




 


25











 




(f) Receipt by Lender of endorsements to the tie-in endorsements of the Title Insurance
Policies, if deemed necessary by Lender, to reflect the substitution;



(g) Receipt of all documents required for the addition of the Substitute Mortgaged Property
pursuant to the Underwriting Requirements;



(h) Any proposed Additional Borrower meets and satisfies all of the requirements and
conditions of Section 14.02;




(i) Receipt by Lender on the Closing Date of a Confirmation of Obligations;



(j) If required by Lender, amendments to the Notes and the Security Instruments, reflecting
the Substitution and, as to any Security Instrument or Note so amended or if Lender determines that
such endorsement is necessary to maintain the priority of the Lien created in favor of Lender with
respect to the Outstanding Indebtedness or to maintain the validity of any Title Insurance Policy,
the receipt by Lender of an endorsement to each Title Insurance Policy insuring the Security
Instruments, amending the effective date of each Title Insurance Policy to the Closing Date and
showing no additional exceptions to coverage other than the exceptions shown on the Initial Closing
Date, Permitted Liens and other exceptions approved by Lender;



(k) For any Substitution on or after the First Anniversary, the Mortgaged Properties in the
Collateral Pool after the Substitution shall satisfy the Geographical Diversification Requirements.




Section 6.07. Conditions Precedent to Increase in Commitment.



Any Expansion is subject to Lender’s consent in its sole discretion and to the satisfaction of
the following conditions precedent on or before the Closing Date:




(a) Receipt by Lender of the fully executed Expansion Request;




(b) Receipt by Lender of the Expansion Origination Fee;



(c) Receipt by Lender of an endorsement to each Title Insurance Policy, amending the effective
date of the Title Insurance Policy to the Closing Date, increasing the limits of liability to the
Commitment, as increased under this Article, showing no additional exceptions to coverage other
than the exceptions shown on the applicable Title Insurance Policy and other exceptions approved by
Lender, together with any reinsurance agreements required by Lender; and


(d) Receipt by Lender of fully executed original copies of all Expansion Loan Documents, each
of which shall be in full force and effect, and in form and substance satisfactory to Lender in all
respects.




 


26









 







Section 6.08. Conditions Precedent to Conversion. 



The conversion of all or a portion of the Variable Facility Commitment to the Fixed Facility
Commitment is subject to the satisfaction of the following conditions precedent on or before the
Closing Date:



(a) Receipt by Lender of the fully executed Conversion Request;



(b) After giving effect to the requested conversion, the Coverage and LTV Tests will be
satisfied;



(c) Prepayment by Borrower in full of any Variable Advances Outstanding that Borrower has
designated for payment solely with respect to the conversion; provided, however, no associated
prepayment premiums and other amounts due with respect to the prepayment of such Variable Advances
shall be payable by Borrower;



(d) If required by Lender, receipt by Lender of an endorsement to each Title Insurance Policy,
amending the effective date of the Title Insurance Policy to the Closing Date and showing no
additional exceptions to coverage other than the exceptions shown on the Initial Closing Date and
other exceptions approved by Lender; and



(e) Receipt by Lender of one (1) or more counterparts of each Conversion Document, dated as of
the Closing Date, signed by each of the parties (other than Lender) to such Conversion Document.



Section 6.09. Conditions Precedent to Complete or Partial Termination of Facilities.




The right of Borrower to reduce the Commitment and the obligation of Lender to execute the
Facility Termination Document, are subject to the satisfaction of the following conditions
precedent on or before the Closing Date:





(a) Receipt by Lender of the fully executed Facility Termination Request;



(b) Payment by Borrower in full of all of the Variable Advances Outstanding and Fixed Advances
Outstanding, as the case may be, required to reduce the aggregate unpaid principal balance of all
Variable Advances Outstanding and Fixed Advances Outstanding, as the case may be, to not greater
than the Variable Facility Commitment and Fixed Facility Commitment, as the case may be, including
any associated prepayment premiums or other amounts due under the Notes (but if Borrower is not
required to prepay all of the Variable Advances Outstanding or Fixed Advances Outstanding, as the
case may be, Borrower shall have the right to select which of the Variable Advances or Fixed
Advances, as the case may be, shall be repaid); and



(c) Receipt by Lender on the Closing Date of one (1) or more counterparts of the Facility
Termination Document, dated as of the Closing Date, signed by each of the parties (other than
Lender) who is a party to such Facility Termination Document.



 


27









 






Section 6.10. Conditions Precedent to Termination of Credit Facility. 



The right of Borrower to terminate this Agreement and the Credit Facility and to receive a
release of all of the Collateral from the Collateral Pool and Lender’s obligation to execute and
deliver the Credit Facility Termination Documents on the Closing Date are subject to the following
conditions precedent:




(a) Receipt by Lender of the fully executed Credit Facility Termination Request; and



(b) Payment by Borrower in full of all of the Notes Outstanding on the Closing Date, including
any associated prepayment premiums or other amounts due under the Notes and all other amounts owing
by Borrower to Lender under this Agreement.



Section 6.11. Delivery of Opinion Relating to Advance Request, Addition Request,
Substitution Request, Conversion Request or Expansion Request. 



With respect to the closing of an Advance Request, an Addition Request, a Substitution
Request, a Conversion Request or an Expansion Request, it shall be a condition precedent that
Lender receives favorable opinions of counsel (including local counsel, as applicable) to Borrower,
as to the due organization and qualification of Borrower, the due authorization, execution,
delivery and enforceability of each Loan Document executed in connection with the Request and such
other matters as Lender may reasonably require, each dated as of the Closing Date for the Request,
in form and substance satisfactory to Lender in all respects.




Section 6.12. Delivery of Property-Related Documents. 



With respect to each of the Initial Mortgaged Properties or an Additional Mortgaged Property
or a Substitute Mortgaged Property, it shall be a condition precedent that Lender receive from
Borrower each of the documents and reports required by Lender pursuant to the Underwriting
Requirements in connection with the addition of such Mortgaged Property to the Collateral Pool and,
each of the following, each dated as of the applicable Closing Date for the Initial Mortgaged
Property or an Additional Mortgaged Property or a Substitute Mortgaged Property, as the case may
be, if applicable, in form and substance satisfactory to Lender in all respects:


(a) A commitment for the Title Insurance Policy applicable to the Mortgaged Property and a pro
forma Title Insurance Policy based on the Commitment;



(b) the Insurance Policy (or a certified copy of the Insurance Policy) applicable to the
Mortgaged Property;




(c) The Survey applicable to the Mortgaged Property;




 


28









 





(d) Evidence satisfactory to Lender of compliance of the Mortgaged Property with Applicable
Laws;



(e) A Replacement Reserve Agreement or an amendment thereto, providing for the establishment
of a replacement reserve account, to be pledged to Lender, in which the owner shall (unless waived
by Lender) periodically deposit amounts for replacements for improvements at the Mortgaged Property
and as additional security for Borrower’s obligations under the Loan Documents;



(f) If required by Lender, a Completion/Repair and Security Agreement or an amendment thereto,
together with required escrows, on the standard form required by Lender;



(g) An Assignment of Management Agreement or an amendment thereto, on the standard form
required by Lender;



(h) An Assignment of Leases and Rents, if Lender determines one to be necessary or desirable,
provided that the provisions of any such assignment shall be substantively identical to those in
the Security Instrument covering the Collateral, with such modifications as may be necessitated by
applicable state or local law;



(i) In relation to each Initial Mortgaged Property, a Security Instrument to effectuate the
addition of such Initial Mortgaged Property to the Collateral Pool, in relation to each Additional
Mortgaged Property, a Security Instrument to effectuate the addition of such Additional Mortgaged
Property to the Collateral Pool, and in relation to each Substitute Mortgaged Property, a Security
Instrument to effectuate the addition of such Substitute Mortgaged Property to the Collateral Pool
and a Note relating to the Mortgaged Properties. The amount secured by each Security Instrument
shall be equal to the Commitment in effect from time to time;




(j) A Certificate of Borrower Parties;




(k) A Confirmation of Guaranty by each party providing a guaranty to Lender; and




(l) A Contribution Agreement or an amendment thereto.


 


29









 






Section 6.13. Additional Collateral.



If Lender determines that, with respect to the addition, release or substitution of Mortgaged
Properties, the Coverage and LTV Tests are not met when required to be satisfied by
the terms of this Agreement, Borrower shall have the option of either (A) providing to Lender
a Letter of Credit which shall either have a term equal to the Term of this Agreement or shall have
a term of at least 364 days and provide for a drawing 30 days prior to its date of termination in
the event it is not renewed; (B) depositing cash or Cash Equivalents to the Cash Collateral
Account; (C) adding an Additional Mortgaged Property to the Collateral Pool in a manner which meets
the requirements of Article 3 but which Additional Mortgaged Property is to be encumbered solely by
a Security Instrument in favor of Lender securing all of the Obligations (any of the above
constituting “Additional Collateral”); or (D) to the extent permitted under the Loan
Documents, prepaying in part or in whole the outstanding principal amount of Advances designated by
Lender, in each case in an amount or, in relation to an Additional Mortgaged Property, with value
equal to that amount which Lender determines will cause the Coverage and LTV Tests to be satisfied.
For purposes of making such calculation, Lender shall deduct the amount of cash and Cash
Equivalents deposited to the Cash Collateral Account or the amount available under the Letter of
Credit from the outstanding principal balance of all Advances (the “Assumed Mortgage Principal
Amount”) and (i) calculate the interest component of debt service based on such Assumed
Mortgage Principal Amount and (ii) calculate the principal component of debt service by multiplying
the actual amount of principal times a fraction with a numerator equal to the Assumed Mortgage
Principal Amount and a denominator equal to the actual outstanding principal amount of all of the
Advances. In the event such Borrower exercises either of the options set forth in clauses (A) or
(B) of this paragraph, Borrower shall execute and deliver a Cash Collateral Agreement. Lender
shall agree at the request of Borrower to exchange one type of Additional Collateral for another
type of Additional Collateral provided such other type of Additional Collateral is of equivalent
value and which meets the requirements of this Agreement. Notwithstanding any provision hereof to
the contrary, except for any Substitution Deposit delivered in accordance with Section 3.07 (the
amount and application of which shall be determined in accordance with said Section 3.07), (i) the
value of any Additional Collateral delivered pursuant to this Section 6.13 (other than Substitution
Deposits) shall not exceed ten percent (10%) of the aggregate Valuation of all Mortgaged
Properties in the Collateral Pool, and (ii) in the event the Coverage and LTV Tests (without regard
to the Additional Collateral) are not satisfied within one year after delivery of the Additional
Collateral, Borrower shall be required to prepay the Advances Outstanding in an amount determined
by Lender to cause the Coverage and LTV Tests to be satisfied, and the Lender may draw on such
Additional Collateral and use the monies to make such prepayment. Any Advances required to be
prepaid pursuant to the preceding sentence shall be selected by the Borrower and, in addition to
the prepayment of the related Notes, Borrower shall pay all associated prepayment premiums and
other amounts due under the Notes being prepaid.




Section 6.14. Letters of Credit.



(a) Letter of Credit Requirements. If Borrower provides Lender with a Letter of
Credit pursuant to this Agreement, the Letter of Credit shall be in form and substance satisfactory
to Lender and Lender shall be entitled to draw under such Letter of Credit solely upon presentation
of a sight draft to the LOC Bank. Any Letter of Credit shall be for a term of at least 364 days.
Any Letter of Credit shall be issued by a financial institution satisfactory to
Lender and shall have its long-term debt obligations and its short-term debt obligations rated
in accordance with the requirements of Fannie Mae then in effect.


 


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(b) Draws Under Letter of Credit. Lender shall have the right to draw monies under
the Letter of Credit:



(i) upon the occurrence of (A) an Event of Default; or (B) a Potential Event of Default of
which the Borrower has knowledge has occurred and continued for two (2) Business Days;



(ii) if 30 days prior to the expiration of the Letter of Credit, the Letter of Credit has not
been extended for a term of at least 364 days or has not been substituted with a replacement Letter
of Credit which satisfies the requirements of this Agreement; or



(iii) upon the downgrading of the ratings of the long-term or short term debt obligations of
the LOC Bank below the requirements of Fannie Mae then in effect, provided Borrower does not
immediately take action to substitute the Letter of Credit with a replacement Letter of Credit
which satisfies the requirements of this Agreement and does not deliver such replacement Letter of
Credit within thirty (30) days of such downgrading.



(c) Deposit to Cash Collateral Agreement. If Lender draws under the Letter of Credit
pursuant to Section 6.15(b)(ii) or (iii) above, Lender shall deposit such draw monies into the Cash
Collateral Account, pursuant to the terms of the Cash Collateral Agreement.



(d) Default Draws. If Lender draws under the Letter of Credit pursuant to Section
6.15(b)(i) above, Lender shall have the right to use monies drawn under the Letter of Credit for
any of the following purposes:



(i) to pay any amounts required to be paid by Borrower under the Loan Documents (including,
without limitation, any amounts required to be paid to Lender under this Agreement);



(ii) to (on such Borrower’s behalf, or on its own behalf if Lender becomes the owner of the
Mortgaged Property) prepay any Note;



(iii) to make improvements or repairs to any Mortgaged Property which Lender determines are
necessary to ensure that the Mortgaged Property meets the requirements set forth in the Loan
Documents; or




(iv) to deposit monies into the Cash Collateral Account.



(e) Legal Opinion. Prior to or simultaneous with the delivery of any new Letter of
Credit (but not the extension of any existing Letter of Credit), such Borrower shall cause the LOC
Bank’s counsel to deliver a legal opinion substantially in the form of Exhibit W-1
or Exhibit W-2, as applicable, and in any event satisfactory in form and substance to
the Lender in the Lender’s reasonable discretion.


 


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ARTICLE 7

REPRESENTATIONS AND WARRANTIES





Section 7.01. Representations and Warranties of Borrower. 



The representations and warranties of Borrower Parties are contained in the Certificate of
Borrower Parties.




Section 7.02. Representations and Warranties of Lender. 




Lender hereby represents and warrants to Borrower as follows as of the date hereof:



(a) Due Organization. Lender is a corporation duly organized, validly existing and in
good standing under the laws of Ohio.



(b) Power and Authority. Lender has the requisite power and authority to execute and
deliver this Agreement and to perform its obligations under this Agreement.



(c) Due Authorization. The execution and delivery by Lender of this Agreement, and
the consummation by it of the transactions contemplated thereby, and the performance by it of its
obligations thereunder, have been duly and validly authorized by all necessary action and
proceedings by it or on its behalf.



ARTICLE 8

AFFIRMATIVE COVENANTS OF BORROWER AND GUARANTOR




Borrower agrees and covenants with Lender that, at all times during the Term of this
Agreement:




Section 8.01. Compliance with Agreements.



(a) Borrower and Guarantor shall comply with all the terms and conditions of each Loan
Document to which it is a party or by which it is bound; provided, however, that Borrower’s or
Guarantor’s failure to comply with such terms and conditions shall not be an Event of Default until
the expiration of the applicable notice and cure periods, if any, specified in the applicable Loan
Document.



(b) Borrower shall comply with all the material terms and conditions of any building permits
or any conditions, easements, rights-of-way or covenants of record, restrictions of record or any
recorded or, to the extent Borrower has knowledge thereof, unrecorded
agreement affecting or concerning any Mortgaged Property including planned development
permits, condominium declarations, and reciprocal easement and regulatory agreements with any
Governmental Authority; provided, however, that Borrower’s failure to comply with such terms and
conditions shall not be an Event of Default until the expiration of the applicable notice and cure
periods, if any, specified in the applicable document.


 


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Section 8.02. Maintenance of Existence.



(a) Each Borrower Party shall maintain its existence and continue to be organized under the
laws of the state of its organization. Borrower shall continue to be duly qualified to do business
in each jurisdiction in which such qualification is necessary to the conduct of its business and
where the failure to be so qualified would adversely affect the validity of, the enforceability of,
or the ability to perform, its obligations under this Agreement or any other Loan Document.



(b) During the Term of this Agreement, REIT Guarantor shall qualify, and be taxed as, a real
estate investment trust under Subchapter M of the Internal Revenue Code and will not be engaged in
any activities which would reasonably be anticipated to jeopardize such qualification and tax
treatment.




Section 8.03. Financial Statements; Accountants’ Reports; Other Information. 



(a) Each Borrower Party shall keep and maintain at all times at the address set forth in
Section 15.08 of this Agreement, and upon Lender’s request shall make available at the Mortgaged
Property, complete and accurate books of accounts and records (including copies of supporting bills
and invoices) in sufficient detail to correctly reflect (i) all of Borrower’s and Guarantor’s
financial transactions and assets, and (ii) the results of the operation of each Mortgaged
Property, and copies of all written contracts, Leases and other instruments which affect each
Mortgaged Property (including all bills, invoices and contracts for electrical service, gas
service, water and sewer service, waste management service, telephone service and management
services, if any). The books, records, contracts, Leases and other instruments shall be subject to
examination and inspection at any reasonable time by Lender.



(b) In addition, each Borrower and Guarantor (with respect to clauses (i), (ii), (iii), (ix)
and (xi) set forth below) shall furnish, or cause to be furnished, to Lender:



(i) Annual Financial Statements. As soon as available, and in any event within
ninety (90) days after the close of its fiscal year during the Term of this Agreement, the balance
sheet showing all assets and liabilities of Borrower and REIT Guarantor as of the end of such
fiscal year, the statement of income, expenses, equity and retained earnings of Borrower’s
operation and REIT Guarantor’s operation for such fiscal year, and the statement of changes in
financial position and cash flows of Borrower and REIT
Guarantor for such fiscal year, all in reasonable detail and stating in comparative form the
respective figures for the corresponding date and period in the prior fiscal year, prepared in
accordance with GAAP consistently applied and accompanied by a certificate of REIT Guarantor’s
independent certified public accountants to the effect that such financial statements have been
reviewed by such accountants, and that such financial statements fairly present the results of its
operations and financial condition for the periods and dates indicated, with such certification to
be free of exceptions and qualifications as to the scope of the audit as to the going concern
nature of the business and accompanied by a certificate of an authorized representative of
Borrower reasonably acceptable to Lender stating that such financial statements fairly present the
results of its operations and financial condition for the periods and dates indicated;


 


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(ii) Quarterly Financial Statements. As soon as available, and in any event within
forty five (45) days after each of the first three fiscal quarters of each fiscal year during the
Term of this Agreement, the unaudited balance sheet showing all assets and liabilities of Borrower
as of the end of such fiscal quarter, the unaudited statement of income, expenses, equity and
retained earnings of Borrower and the unaudited statement of changes in financial position and
cash flows of Borrower for the portion of the fiscal year ended with the last day of such quarter,
and if required by Lender, a statement of income and expenses of each Mortgaged Property for the
prior month, all prepared in accordance with GAAP and in reasonable detail and stating in
comparative form the respective figures for the corresponding date and period in the previous
fiscal year, accompanied by a certificate of an authorized representative of Borrower reasonably
acceptable to Lender stating that such financial statements have been prepared in accordance with
GAAP, consistently applied, and fairly present the results of its operations and financial
condition for the periods and dates indicated, subject to year end adjustments in accordance with
GAAP;



(iii) Quarterly Property Statements. As soon as available, and in any event within
forty five (45) days after each Calendar Quarter, a statement of income and expenses of each
Mortgaged Property prepared in accordance with GAAP and accompanied by a certificate of an
authorized representative of Borrower reasonably acceptable to Lender to the effect that each such
statement of income and expenses fairly, accurately and completely presents the operations of each
such Mortgaged Property for the period indicated;



(iv) Annual Property Statements. On an annual basis within forty five (45) days
after the close of its fiscal year, an annual statement of income and expenses of each Mortgaged
Property accompanied by a certificate of an authorized representative of Borrower reasonably
acceptable to Lender to the effect that each such statement of income and expenses fairly,
accurately and completely presents the operations of each such Mortgaged Property for the period
indicated;



(v) Monthly Property Statements. Upon Lender’s request, a monthly property
management report for each Mortgaged Property, showing the number of inquiries
made and rental applications received from tenants or prospective tenants and deposits
received from tenants and any other information requested by Lender;



(vi) Updated Rent Rolls. Within 120 days after the end of each fiscal year of each
Borrower, and at any other time upon Lender’s request, a current Rent Roll for each Mortgaged
Property, showing the name of each tenant, and for each tenant, the space occupied, the lease
expiration date, the rent payable for the current month, the date through which rent has been paid
and any other information requested by Lender and accompanied by a certificate of an authorized
representative of Borrower reasonably acceptable to Lender to the effect that each such Rent Roll
fairly, accurately and completely presents the information required therein;


 


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(vii) Security Deposit Information. Within 120 days after the end of each fiscal
year of Borrower, and at any other time upon Lender’s request, an accounting of all security
deposits held in connection with any Lease of any part of any Mortgaged Property, including the
name and identification number of the accounts in which such security deposits are held, the name
and address of the financial institutions in which such security deposits are held and the name
and telephone number of the person to contact at such financial institution, along with any
authority or release necessary for Lender to access information regarding such accounts;



(viii) Accountants’ Reports; Other Reports. Promptly upon receipt thereof: (1)
copies of any reports or management letters submitted to Borrower by its independent certified
public accountants in connection with the examination of its financial statements made by such
accountants (except for reports otherwise provided pursuant to subsection (a) above); provided,
however, that Borrower shall only be required to deliver such reports and management letters to
the extent that they relate to Borrower or any Mortgaged Property; and (2) all schedules,
financial statements or other similar reports delivered by Borrower pursuant to the Loan Documents
or requested by Lender with respect to Borrower’s business affairs or condition (financial or
otherwise) or any of the Mortgaged Properties;



(ix) Ownership Interests. Within 120 days after the end of each fiscal year of
Borrower and REIT Guarantor, and at any other time upon Lender’s request, a statement that
identifies all owners of any interest in Borrower and the interest held by each, if Borrower is a
corporation, all officers and directors of Borrower, and if Borrower is a limited liability
company, all managers who are not members;



(x) Annual Budgets. Prior to the start of its fiscal year, an annual budget for each
Mortgaged Property for such fiscal year, setting forth an estimate of all of the costs and
expenses, including capital expenses, of maintaining and operating each Mortgaged Property; and



(xi) Federal Tax Returns. Within thirty (30) days of filing, the Federal tax return
of Borrower and REIT Guarantor.



(c) Each of the statements, schedules and reports required by Section 8.03 shall be
certified to be complete and accurate by an individual having authority to bind Borrower, and shall
be in such form and contain such detail as Lender may reasonably require. Lender also may require
that any statements, schedules or reports be audited at Borrower’s expense by independent certified
public accountants acceptable to Lender.



(d) If Borrower fails to provide in a timely manner the statements, schedules and reports
required by Section 8.03, Lender shall have the right to have Borrower’s books and records
audited, at Borrower’s expense, by independent certified public accountants selected by Lender in
order to obtain such statements, schedules and reports, and all related costs and expenses of
Lender shall become immediately due and payable and shall become an additional part of the
Indebtedness as provided in Section 12 of each Security Instrument.


 


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(e) If an Event of Default has occurred and is continuing, Borrower shall deliver to Lender
upon written demand all books and records relating to the Mortgaged Property or its operation.




(f) Borrower irrevocably authorizes Lender to obtain a credit report on Borrower at any time.



(g) If an Event of Default has occurred and Lender has not previously required Borrower to
furnish a quarterly statement of income and expense for the Mortgaged Property, Lender may require
Borrower to furnish such a statement within forty five (45) days after the end of each fiscal
quarter of Borrower following such Event of Default.




Section 8.04. Access to Records; Discussions With Officers and Accountants. 



To the extent permitted by law and in addition to the applicable requirements of the Security
Instruments, Borrower shall permit Lender to:



(a) inspect, make copies and abstracts of, and have reviewed or audited, such of Borrower’s
books and records as may relate to the Obligations or any Mortgaged Property;



(b) at any time discuss Borrower’s affairs, finances and accounts with Borrower’s senior
management or property managers and independent public accountants; after an Event of Default,
discuss Borrower’s affairs, finances and account with Guarantor’s officers, partners and employees;



(c) discuss the Mortgaged Properties’ conditions, operations or maintenance with the managers
of such Mortgaged Properties, the officers and employees of Borrower and/or the Guarantor; and



(d) receive any other information that Lender reasonably deems necessary or relevant in
connection with any Advance, any Loan Document or the Obligations from the officers and employees
of such Borrower or third parties.



Notwithstanding the foregoing, prior to an Event of Default or Potential Event of Default and in
the absence of an emergency, all inspections shall be conducted at reasonable times during normal
business hours upon reasonable notice to Borrower.




Section 8.05. Certificate of Compliance. 



Borrower shall deliver to Lender concurrently with the delivery of the financial statements
and/or reports required by Section 8.03(a) and Section 8.03(b) a certificate signed
by an authorized representative of Borrower reasonably acceptable to Lender (i) setting forth in
reasonable detail the calculations required to establish whether Borrower and Guarantor were in
compliance with the requirements of Article 8 of this Agreement on the date of such
financial statements, and (ii) stating that, to the best knowledge of such individual following
reasonable inquiry, no Event of Default or Potential Event of Default has occurred, or if an Event
of Default or Potential Event of Default has occurred, specifying the nature thereof in reasonable
detail and the action Borrower is taking or proposes to take. Any certificate required by this
Section shall run directly to and be for the benefit of Lender and Fannie Mae.


 


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Section 8.06. Maintain Licenses. 



Borrower shall procure and maintain in full force and effect all licenses, Permits, charters
and registrations which are material to the conduct of its business and shall abide by and satisfy
all terms and conditions of all such licenses, Permits, charters and registrations.




Section 8.07. Inform Lender of Material Events. 



Borrower shall promptly inform Lender in writing of any of the following (and shall deliver to
Lender copies of any related written communications, complaints, orders, judgments and other
documents relating to the following) of which Borrower has actual knowledge:



(a) Defaults. The occurrence of any Event of Default or any Potential Event of
Default under this Agreement or any other Loan Document;



(b) Regulatory Proceedings. The commencement of any rulemaking or disciplinary
proceeding or the promulgation of any proposed or final rule which would have, or may reasonably be
expected to have, a Material Adverse Effect; the receipt of notice from any Governmental Authority
having jurisdiction over Borrower that (i) Borrower is being placed under regulatory supervision,
(ii) any license, Permit, charter, membership or registration material to the conduct of Borrower’s
business or the Mortgaged Properties is to be suspended or revoked or (iii) Borrower is to cease
and desist any practice, procedure or policy employed by



Borrower in the conduct of its business, and such cessation would have, or may reasonably be
expected to have, a Material Adverse Effect;



(c) Bankruptcy Proceedings. The commencement of any proceedings by or against
Borrower or Guarantor under any applicable bankruptcy, reorganization, liquidation, insolvency or
other similar law now or hereafter in effect or of any proceeding in which a receiver, liquidator,
trustee or other similar official is sought to be appointed for it;



(d) Environmental Claim. The receipt from any Governmental Authority or other Person
of any notice of violation, claim, demand, abatement, order or other order or direction
(conditional or otherwise) for any damage, including personal injury (including sickness, disease
or death), tangible or intangible property damage, contribution, indemnity, indirect or
consequential damages, damage to the environment, pollution, contamination or other adverse effects
on the environment, removal, cleanup or remedial action or for fines, penalties or restrictions,
resulting from or based upon (i) the existence or occurrence, or the alleged existence or
occurrence, of a Hazardous Substance Activity on any Mortgaged Property in violation of any law or
(ii) the violation, or alleged violation, of any Hazardous Materials Laws in connection with any
Mortgaged Property or any of the other assets of Borrower;


 


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(e) Material Adverse Effects. The occurrence of any act, omission, change or event
(including the commencement or written threat of any proceedings by or against Borrower in any
Federal, state or local court, or before any Governmental Authority, or before any arbitrator),
that has, or would have, a Material Adverse Effect, subsequent to the date of the most recent
audited financial statements of Borrower delivered to Lender pursuant to Section 8.03;



(f) Accounting Changes. Any material change in Borrower’s accounting policies or
financial reporting practices;



(g) Legal and Regulatory Status. The occurrence of any act, omission, change or
event, including any Governmental Approval, the result of which is to change or alter in any way
the legal or regulatory status of Borrower; and




(h) Change in Senior Management. Any change in the identity of Senior Management.




Section 8.08. Compliance with Applicable Law. 



Borrower shall comply in all material respects with all Applicable Laws now or hereafter
affecting any Mortgaged Property or any part of any Mortgaged Property or requiring any
alterations, repairs or improvements to any Mortgaged Property. Borrower shall procure and
continuously maintain in full force and effect, and shall abide by and satisfy all material terms
and conditions of all Permits, and shall comply with all written notices from Governmental
Authorities.




Section 8.09. Alterations to the Mortgaged Properties. 



Except as otherwise provided in the Loan Documents, Borrower shall have the right to undertake
any alteration, improvement, demolition, removal or construction (collectively,
“Alterations”) to the Mortgaged Property which it owns without the prior consent of Lender;
provided, however, that in any case, no such Alteration shall be made to any Mortgaged
Property without the prior written consent of Lender if (i) such Alteration could reasonably be
expected to adversely affect the value of such Mortgaged Property or its operation as a multifamily
housing facility in substantially the same manner in which it is being operated on the date such
property became Collateral, (ii) the construction of such Alteration could reasonably be expected
to result in interference to the occupancy of tenants of such Mortgaged Property such that tenants
in occupancy with respect to five percent (5%) or more of the Leases would be permitted to
terminate their Leases or to abate the payment of all or any portion of their rent, or (iii) such
Alteration will be completed in more than twelve (12) months from the date of commencement or in
the last year of the Term of this Agreement. Notwithstanding the foregoing, Borrower must obtain
Lender’s prior written consent to construct Alterations with respect to the Mortgaged Property
costing in excess of, with respect to any Mortgaged Property, the number of bedrooms in such
Mortgaged Property multiplied by $2,000, but in any event, costs in excess of $250,000 and Borrower
must give prior written notice to Lender of its intent to construct Alterations with respect to
such Mortgaged Property costing in excess of $100,000; provided, however, that the preceding
requirements shall not be applicable to Alterations made, conducted or undertaken by Borrower as
part of Borrower’s routine maintenance and repair of the Mortgaged Properties as required by the
Loan Documents.


 


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Section 8.10. Loan Document Taxes. 



If any tax, assessment or Imposition (other than a franchise tax or excise tax imposed on or
measured by, the net income or capital (including branch profits tax) of Lender (or any transferee
or assignee thereof, including a participation holder)) (“Loan Document Taxes”) is levied,
assessed or charged by the United States, or any State in the United States, or any political
subdivision or taxing authority thereof or therein upon any of the Loan Documents or the
obligations secured thereby, the interest of Lender in the Mortgaged Properties, or Lender by
reason of or as holder of the Loan Documents, Borrower shall pay all such Loan Document Taxes to,
for, or on account of Lender (or provide funds to Lender for such payment, as the case may be) as
they become due and payable and shall promptly furnish proof of such payment to Lender, as
applicable. In the event of passage of any law or regulation permitting, authorizing or requiring
such Loan Document Taxes to be levied, assessed or charged, which law or regulation in the opinion
of counsel to Lender may prohibit Borrower from paying the Loan Document Taxes to or for Lender,
Borrower shall enter into such further instruments as may be permitted by law to obligate Borrower
to pay such Loan Document Taxes.




Section 8.11. Further Assurances. 



Borrower, at the request of Lender, shall execute and deliver and, if necessary, file or
record such statements, documents, agreements, UCC financing and continuation statements and such
other instruments and take such further action as Lender from time to time may reasonably request
as reasonably necessary, desirable or proper to carry out more effectively the purposes of this
Agreement or any of the other Loan Documents or to subject the Collateral to the lien and security
interests of the Loan Documents or to evidence, perfect or otherwise implement, to assure the lien
and security interests intended by the terms of the Loan Documents or in order to exercise or
enforce its rights under the Loan Documents. If Lender believes that an “all-asset” collateral
description, as contemplated by Section 9-504(2) of the UCC, is appropriate as to any Collateral
under any Loan Document, the Lender is irrevocably authorized to use such a collateral description,
whether in one or more separate filings or as part of the collateral description in a filing that
particularly describes the collateral.




Section 8.12. Transfer of Ownership Interests in Borrower or Guarantor. 



(a) Prohibition on Transfers. Subject to paragraph (b) of this Section, no Targeted
Entity shall cause or permit a Transfer or a Change of Control.



(b) Permitted Transfers. Notwithstanding the provisions of paragraph (a) of this
Section, the following Transfers by a Targeted Entity, upon thirty (30) days’ prior written notice
to Lender, in the case of subclause (ii), (iii) and (iv) below, are permitted without the consent
of Lender (except that with respect to subclauses (iii) and (iv) below, changes to the
Organizational Documents must be approved by Lender):



(i) The issuance by REIT Guarantor of stock and the subsequent Transfer of such stock;
provided, however, that no Change of Control occurs as the result of such Transfer.



(ii) A merger with or acquisition of another entity by Guarantor, provided that (1) such
Guarantor is the surviving entity after such merger or acquisition, (2) no Change of Control
occurs, and (3) such merger or acquisition does not result in an Event of Default, as such terms
are defined in this Agreement.


 


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(iii) A Transfer of no greater than 49% of the limited partnership interest or membership
interests in any of the Borrowers to a Person, provided, however, after such Transfer, (A) there
shall be no Change of Control, (B) such Transfer shall not be to a Prohibited Person, (C) no
Borrower shall be in any manner Controlled by such Person and such Person shall not have consent
rights over decisions and (D) any changes to the Borrower Organizational Documents are
satisfactory to Lender.



(iv) A Transfer of no greater than 49% of the limited partnership interest in the EROP
Guarantor to a Person, provided, however, after such Transfer, (A) there shall be no Change of
Control, (B) such Transfer shall not be to a Prohibited Person, (C) the
EROP Guarantor shall not be in any manner Controlled by such Person and such Person shall not
have consent rights over decisions and (D) any changes to the EROP Guarantor Organizational
Documents are satisfactory to Lender.




Section 8.13. Transfer of Ownership of Mortgaged Property.



(a) Prohibition on Transfers. Subject to paragraph (b) of this Section, neither
Borrower nor Guarantor shall cause or permit a Transfer of all or any part of a Mortgaged Property
or interest in any Mortgaged Property.



(b) Permitted Transfers. Notwithstanding provision (a) of this Section, the following
Transfers of a Mortgaged Property by Borrower or Guarantor, upon thirty (30) days prior written
notice to Lender, are permitted without the consent of Lender:



(i) The grant of a leasehold interest in individual dwelling units or commercial spaces in
accordance with the Security Instrument.



(ii) A sale or other disposition of obsolete or worn out personal property which is
contemporaneously replaced by comparable personal property of equal or greater value which is free
and clear of liens, encumbrances and security interests other than those created by the Loan
Documents or Permitted Liens.


 


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(iii) The creation of a mechanic’s or materialmen’s lien or judgment lien against a Mortgaged
Property which is released of record or otherwise remedied to Lender’s satisfaction within thirty
(30) days of the date of creation.



(iv) The grant of an easement if, prior to the granting of the easement, Borrower causes to be
submitted to Lender all information required by Lender to evaluate the easement, and if Lender
consents to such easement based upon Lender’s determination that the easement will not materially
affect the operation of the Mortgaged Property or Lender’s interest in the Mortgaged Property and
Borrower pays to Lender, on demand, all reasonable third party out-of-pocket costs and expenses
incurred by Lender in connection with reviewing Borrower’s request. Lender shall not unreasonably
withhold its consent to or withhold its agreement to subordinate the lien of a Security Instrument
to (1) the grant of a utility easement serving a Mortgaged Property to a publicly operated utility,
or (2) the grant of an easement related to expansion or widening of roadways, provided that any
such easement is in form and substance reasonably acceptable to Lender and does not materially and
adversely affect the access, use or marketability of a Mortgaged Property.



(c) Assumption of Collateral Pool. Notwithstanding paragraph (a) of this Section, a
Transfer of the entire Collateral Pool may be permitted with the prior written consent of Lender if
each of the following requirements is satisfied:



(i) the transferee (“New Collateral Pool Borrower”) is a Single Purpose entity, and
executes an assumption agreement that is acceptable to Lender pursuant to
which such New Collateral Pool Borrower assumes all obligations of a Borrower under all the
applicable Loan Documents and Borrower and Guarantor are released from their obligations in a
manner satisfactory to Lender;



(ii) the applicable Loan Documents shall be amended and restated as deemed necessary or
appropriate by Lender to meet the then-applicable requirements of Fannie Mae; provided, however,
any waivers granted in connection with the Initial Advances will not be reinstated unless
specifically approved by Lender and Fannie Mae, and provided further, the interest rates and
pricing in connection with any Outstanding Notes shall remain unchanged, subject to the terms of
the Loan Documents;



(iii) after giving effect to the assumption, the requirements of Section 6.05 and the General
Conditions contained in Section 6.01 shall be satisfied;



(iv) New Collateral Pool Borrower shall make such deposits to the reserves or escrow funds
established under the Loan Documents, including replacement reserves, completion/repair reserves,
and all other required escrow and reserve funds at such times and in such amounts as determined by
Lender at the time of the assumption;



(v) New Collateral Pool Borrower shall propose a guarantor acceptable to Lender, which
guarantor executes and delivers a guaranty acceptable to Lender;



(vi) Lender shall be the servicer of the loan; and



(vii) the requirements of Section 8.14 are satisfied.


 


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Section 8.14. Consent to Prohibited Transfers.



(a) Consent to Prohibited Transfers. Lender may, in its sole and absolute discretion,
consent to a Transfer that would otherwise violate Sections 8.12 and 8.13 if, prior to the
Transfer, Borrower or Guarantor, as the case may be, has satisfied each of the following
requirements:



(i) the submission to Lender of all information required by Lender to make the determination
required by this Section;




(ii) the absence of any Event of Default;



(iii) the transferee meets all of the eligibility, credit, management and other standards
(including any standards with respect to previous relationships between Lender and the transferee
and the organization of the transferee) customarily applied by Lender at the time of the proposed
Transfer to the approval of borrowers or guarantors, as the case may be, in connection with the
origination or purchase of similar mortgages, deeds of trust or deeds to secure debt on multifamily
properties;



(iv) in the case of a Transfer of direct or indirect ownership interests in Borrower or
Guarantor, as the case may be, if transferor or any other person has obligations under any Loan
Documents, the execution by the transferee of one (1) or more individuals or entities acceptable to
Lender and/or Fannie Mae of an assumption agreement that is acceptable to Lender and that, among
other things, requires the transferee to perform all obligations of transferor or such person set
forth in such Loan Document, and may require that the transferee comply with any provisions of this
Instrument or any other Loan Document which previously may have been waived by Lender;



(v) if a Variable DMBS Advance is Outstanding, the Transfer shall not cause any adverse
consequences in the taxes or accounting of the trust pursuant to which the DMBS is issued as
determined by Fannie Mae;




(vi) Lender’s receipt of all of the following:



(1) a transfer fee equal to one (1) percent of the Commitment immediately prior to the
transfer.



(2) In addition, Borrower shall be required to reimburse Lender for all of Lender’s reasonable
out-of-pocket costs (including reasonable attorneys’ fees) incurred in reviewing the Transfer
request.


 


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Section 8.15. Date-Down Endorsements. 



Before the release or substitution of a Mortgaged Property and at any time and from time to
time that Lender has reason to believe that an additional lien may encumber a Mortgaged Property,
Lender may obtain an endorsement to each Title Insurance Policy containing a revolving credit
endorsement, amending the effective date of each such Title Insurance Policy to the date of the
title search performed in connection with the endorsement. Borrower shall pay for the cost and
expenses incurred by Lender to the Title Company in obtaining such endorsement, provided that, for
each Title Insurance Policy, it shall not be liable to pay for more than one (1) such endorsement
in any consecutive twelve (12) month period.




Section 8.16. Ownership of Mortgaged Properties. 



Borrower shall be the sole owner of each of the Mortgaged Properties free and clear of any
Liens other than Permitted Liens.




Section 8.17. Compliance with Net Worth Test.



Guarantor and Borrower shall at all times maintain its Net Worth so that it is not less than
$135,000,000.




Section 8.18. Compliance with Liquidity Test. 



Guarantor and Borrower shall at all times maintain cash and Cash Equivalents in an amount not
less than an amount that equals six (6) months of Facility Debt Service based upon the actual
Outstanding principal amount of Advances calculated for the prior six (6) month period.




Section 8.19. Change in Property Manager. 



Borrower shall give Lender notice of any change in the identity of the property manager of
each Mortgaged Property, and except with respect to property managers which are Affiliates of the
applicable Borrower, no such change shall be made without the prior consent of Lender.



Any management agreement must be in form and substance satisfactory to Lender. Borrower
agrees to enter into and cause any property manager to enter into an assignment and subordination
of property management agreement in form and substance satisfactory to Lender and any other
documents or agreements Lender shall deem necessary in connection with the execution of any
property management agreement.




Section 8.20. Single Purpose Entity.



Borrower and each general partner or managing member of Borrower shall maintain itself as a
Single Purpose entity.


 


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Section 8.21. ERISA.



Borrower shall at all times remain in compliance in all material respects with all applicable
provisions of ERISA, if any, and shall not incur any liability to the PBGC on a Plan under Title IV
of ERISA. Neither the Borrower, nor any member of the Controlled Group is or ever has been
obligated to contribute to any Multiemployer Plan. The assets of the Borrower do not constitute
plan assets within the meaning of Department of Labor Regulation §2510.3-101 of any employee
benefit plan subject to Title I of ERISA.




Section 8.22. Consents or Approvals.



Borrower shall obtain any required consent or approval of any creditor of Borrower, any
Governmental Authority or any other Person to perform its obligations under this Agreement and any
other Loan Documents.




Section 8.23. Prepayment of Rents.



Subject to the terms of the Security Instruments, Borrower may collect or accept payment of
any Rents for not more than six (6) months prior to the due dates of such Rents, provided that the
aggregate amount of such Rents at any time does not exceed an amount equal to ten percent (10%) of
the aggregate amount of Rents payable for the entire Collateral Pool during the preceding twelve
(12) month period.




Section 8.24. Affiliate Contracts.



Borrower will cause the parties to the Purchasing Agency Agreement dated as of October 1,
2007 between Allen & O’Hara, Inc. and Allen & O’Hara Education Services, Inc., both Affiliates of
Borrower, to not amend, restate, modify or extend such agreement, unless (a) Borrower delivers to
Lender a copy of any such amendment, restatement, modification or extension of such agreement or
within ten (10) days of execution and (b) the terms of the agreement (including the fee) are
consistent with and no worse than the then prevailing market conditions for a similar arms-length
transaction. The fee paid pursuant to the Purchasing Agency Agreement, will at all times be a
market or below market fee.




Section 8.25. Post Closing Obligation.



Borrower acknowledges that EDR Lubbock Limited Partnership is in “Temporary Good Standing”
with the Texas Comptroller of Public Accounts, because, for administrative reasons, on the Initial
Closing Date, the Texas Comptroller of Public Accounts will only indicate that entities are in
“Temporary Good Standing”. On or prior to February 1, 2009, Borrower shall deliver evidence
reasonably satisfactory to Lender indicating that EDR Lubbock Limited Partnership has achieved
“Good Standing”, “Permanent Good Standing” or a similar status according to the Texas Comptroller
of Public Accounts.


 


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Section 8.26. Geographical Diversification Requirements.



On or prior to the First Anniversary, the Geographical Diversification Requirements shall be
satisfied, unless Lender otherwise consents in its discretion.



ARTICLE 9

NEGATIVE COVENANTS OF BORROWER




Borrower and Guarantor, as applicable, agree and covenant with Lender that, at all times
during the Term of this Agreement:




Section 9.01. Other Activities. 



(a) No Targeted Entity shall amend its Organizational Documents in any material respect,
including without limitation the allocation of decision-making rights among the members and/or
partners, without the prior written consent of Lender;




(b) No Targeted Entity shall dissolve or liquidate in whole or in part;



(c) No Targeted Entity shall, except as otherwise provided in this Agreement, without the
prior written consent of Lender, merge or consolidate with any Person; or



(d) Borrower shall not use, or permit to be used, any Mortgaged Property for any uses or
purposes other than as a Rental Property and ancillary uses consistent with Rental Properties.




Section 9.02. Liens. 



Borrower shall not create, incur, assume or suffer to exist any Lien on Borrower’s interest in
any Mortgaged Property or any part of any Mortgaged Property, except the Permitted Liens.




Section 9.03. Indebtedness. 



Borrower shall not incur or be obligated at any time with respect to any Indebtedness (other
than Advances) in connection with any of the Mortgaged Properties. Neither Borrower nor any owner
of Borrower shall incur any “mezzanine debt,” issue any preferred equity or incur any similar
Indebtedness or equity with respect to any Mortgaged Property.




Section 9.04. Principal Place of Business. 



Borrower shall not change its principal place of business, state of formation, legal name or
the location of its books and records, each as set forth in the Certificate of Borrower Parties,
without first giving thirty (30) days’ prior written notice to Lender.


 


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Section 9.05. Condominiums. 



Borrower shall not submit any Mortgaged Property to a condominium regime during the Term of
this Agreement.




Section 9.06. Restrictions on Distributions. 



Borrower shall not make any distributions of any nature or kind whatsoever to the owners of
its Ownership Interests as such if, at the time of such distribution, a Potential Event of Default
or an Event of Default has occurred and remains uncured.




Section 9.07. No Hedging Arrangements.



Without the prior written consent of Lender, or unless otherwise required by the Pledge,
Interest Rate Cap Agreement, Borrower will not enter into or guarantee, provide security for or
otherwise undertake any form of contingent obligation with respect to any Hedging Arrangement.




Section 9.08. Confidentiality of Certain Information.



Borrower Parties shall not disclose any terms, conditions, underwriting requirements or
underwriting procedures of the Credit Facility or any of the Loan Documents; provided, however,
that such confidential information may be disclosed (A) as required by law or pursuant to generally
accepted accounting procedures, (B) to officers, directors, employees, agents, partners, attorneys,
accountants, engineers and other consultants of Borrower Parties who need to know such information,
provided such Persons are instructed to treat such information confidentially, (C) to any
regulatory authority having jurisdiction over a Borrower Party, (D) in connection with any filings
with the Securities and Exchange Commission or other Governmental Authorities, or (E) to any other
Person to which such delivery or disclosure may be necessary or appropriate (1) in compliance with
any law, rule, regulation or order applicable to a Borrower Party, or (2) in response to any
subpoena or other legal process or information investigative demand. Borrower permits Lender to
disclose all financial and other information received from or on behalf of Borrower to Fannie Mae
in connection with the assignment of the Loan.



ARTICLE 10

FEES




Section 10.01. Reserved.



Section 10.02. Occupancy Deficiency Origination Fee.



(a) Borrower shall pay the Occupancy Deficiency Origination Fee in the amount of $28,125 for
all of the Deficient Mortgaged Properties prior to or on the Initial Closing Date. Borrower shall
pay the Occupancy Deficiency Origination Fee in an amount as calculated by Lender on the Closing
Date of any addition of a Deficient Mortgaged Property.


 


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(b) If on the First Anniversary, Lender determines that any of the Deficient Mortgaged
Properties have failed to achieve economic equivalent occupancy of at least eighty percent (80%)
(taking into account any physical vacancy, bad debts and rental concessions) for the prior three
(3) consecutive months, Lender shall notify Borrower in writing of the status of the Deficient
Mortgaged Properties and whether Borrower shall have the option to pay the Occupancy Deficiency
Origination Fee (the “Deficiency Notice”). Upon receipt of the Deficiency Notice, Borrower
must: (i) deliver a Release Request to Lender within thirty (30) days of receipt of the Deficiency
Notice, pay the Release Price and the Release Fee with respect to the non-compliant Deficient
Mortgaged Properties (together with any prepayment premiums and other amounts due) and comply with
the other conditions for a Release and Lender shall release such non-compliant Deficient Mortgage
Properties from the Collateral Pool in accordance with the terms of this Agreement, (ii) deliver a
Substitution Request to Lender within thirty (30) days of receipt of the Deficiency Notice and
cause the Substitution of the non-compliant Deficient Mortgaged Properties with Substitute
Mortgaged Properties in accordance with the terms of this Agreement or (iii) if Borrower is given
the option pursuant to the
Deficiency Notice, pay an additional Occupancy Deficiency Origination Fee with respect to one or
more of the non-compliant Deficient Mortgaged Properties, for which Lender decides to permit an
Occupancy Deficiency Origination Fee to be paid, within thirty (30) days of receipt of the
Deficiency Notice.



(c) In the event the additional Occupancy Deficiency Origination Fee is paid pursuant to
Section 10.02(b), on the date that is two (2) years from the Initial Closing Date, if Lender
determines that any of the Deficient Mortgaged Properties have failed to achieve economic
equivalent occupancy of at least eighty percent (80%) (taking into account any physical vacancy,
bad debts and rental concessions) for the prior three (3) consecutive months, Borrower shall not
have the option to pay the Occupancy Deficiency Origination Fee and Lender shall notify Borrower in
writing of the status of the Deficient Mortgaged Properties (the “Second Deficiency
Notice”). Upon receipt of the Second Deficiency Notice, Borrower must (i) deliver a Release
Request to Lender within thirty (30) days of receipt of the Second Deficiency Notice, pay the
Release Price and the Release Fee with respect to the non-compliant Deficient Mortgaged Properties
(together with any prepayment premiums and other amounts due) and comply with the other conditions
for a Release and Lender shall release such non-compliant Deficient Mortgage Properties from the
Collateral Pool in accordance with the terms of this Agreement or (ii) deliver a Substitution
Request to Lender within thirty (30) days of receipt of the Second Deficiency Notice and cause the
Substitution of the non-compliant Mortgaged Properties with Substitute Mortgaged Properties in
accordance with the terms of this Agreement.




Section 10.03. Origination Fees.



(a) Initial Origination Fee. Borrower shall pay to Lender on or before the Initial
Closing Date an origination fee (“Initial Origination Fee”) equal to $790,940 (40 basis
points (.40%) multiplied by the Initial Advance).



(b) Expansion Origination Fee. Upon the closing of a Expansion Request under
Article 4, Borrower shall pay to Lender an origination fee (“Expansion Origination
Fee”) equal to the product obtained by multiplying (i) the Expansion made on the Closing Date
for the Expansion Request, by (ii) 40 basis points (.40%). Borrower shall pay the Expansion
Origination Fee on or before the Closing Date for the Expansion Request.


 


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Section 10.04. Due Diligence Fees.



(a) Initial Due Diligence Fees. Borrower shall pay to Lender non-refundable due
diligence fees (“Initial Due Diligence Fees”) with respect to each Initial Mortgaged
Property in an amount equal to $4,000 per Initial Mortgaged Property. Borrower shall also deposit
with Lender an amount equal to $10,000 for each Initial Mortgaged Property (“Initial Due Diligence
Deposit”) to be used for the payment of third party costs and out-of-pocket fees and expenses
incurred by Lender. All Initial Due Diligence Fees shall have been paid prior to the Initial
Closing Date and all third party costs and out-of-pocket fees and expenses (not otherwise covered
by the Initial Due Diligence Deposit) incurred by Lender and Fannie Mae shall be paid by Borrower
on the Initial Closing Date (or, if the proposed Initial Mortgaged
Properties do not become part of the Collateral Pool, on demand). Any portion of the Initial
Due Diligence Fee Deposit deposited with Lender and not actually used by Lender to cover due
diligence expenses shall be refunded to Borrower on the Initial Closing Date.



(b) Additional Due Diligence Fees for Additional Collateral. Borrower shall pay to
Lender non-refundable additional due diligence fees (the “Additional Collateral Due Diligence
Fees”) with respect to each proposed Additional Mortgaged Property or Substitute Mortgaged
Property, as applicable, in an amount equal to $4,000 per Additional Mortgaged Property or
Substitute Mortgaged Property, as applicable, which represents the estimated cost for due diligence
expenses. Borrower shall also deposit with Lender an amount equal to $10,000 for each proposed
Additional Mortgaged Property or Substitute Mortgaged Property, as applicable (“Additional
Collateral Due Diligence Deposit”) to be used for the payment of third party costs and
out-of-pocket expenses incurred by Lender and Fannie Mae. All Additional Collateral Due Diligence
Fees, third party costs and out-of-pocket fees and expenses (not otherwise covered by the
Additional Collateral Due Diligence Deposit) incurred by Lender and Fannie Mae shall be paid by
Borrower on the applicable Closing Date (or if the relevant proposed Additional Mortgaged Property
or Substitute Mortgaged Property, as applicable, does not become part of a Collateral Pool, on
demand) for the Additional Mortgaged Property or Substitute Mortgaged Property, as applicable. Any
portion of the Additional Collateral Due Diligence Deposit deposited with Lender and not actually
used by Lender to cover due diligence expenses shall be refunded to Borrower on the applicable
Closing Date.




 


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Section 10.05. Legal Fees and Expenses.



(a) Initial Legal Fees. Borrower shall pay, or reimburse Lender for, all
out-of-pocket third party legal fees and expenses incurred by Lender and by Fannie Mae in
connection with the preparation, review and negotiation of this Agreement and any other Loan
Documents executed on the date of this Agreement.



(b) Fees and Expenses Associated with Requests. Borrower shall pay, or reimburse
Lender for, all reasonable out-of-pocket third party costs and expenses incurred by Lender,
including the out-of-pocket legal fees and expenses incurred by Lender in connection with the
preparation, review and negotiation of all documents, instruments and certificates to be executed
and delivered in connection with each Request, the performance by Lender of any of its obligations
with respect to the Request, the satisfaction of all conditions precedent to Borrower’s rights or
Lender’s obligations with respect to the Request, and all transactions related to any of the
foregoing, including the cost of title insurance premiums and applicable recordation and transfer
taxes and charges and all other reasonable costs and expenses in connection with a Request. The
obligations of Borrower under this subsection shall be absolute and unconditional, regardless of
whether the transaction requested in the Request actually occurs. Borrower shall pay such costs
and expenses to Lender on the Closing Date for the Request, or, as the case may be, after demand by
Lender when Lender determines that such Request will not close.




Section 10.06. Failure to Close any Request. 



If Borrower makes a Request and fails to close on the Request for any reason other than the
default by Lender, then Borrower shall pay to Lender and Fannie Mae all damages incurred by Lender
and Fannie Mae in connection with the failure to close.



ARTICLE 11

EVENTS OF DEFAULT





Section 11.01. Events of Default. 



Each of the following events shall constitute an “Event of Default” under this
Agreement, whatever the reason for such event and whether it shall be voluntary or involuntary, or
within or without the control of Borrower or be effected by operation of law or pursuant to any
judgment or order of any court or any order, rule or regulation of any Governmental Authority:



(a) the occurrence of a default under any Loan Document beyond the cure period, if any, set
forth therein or an Event of Default under and as defined in any Loan Document; or



(b) the failure by Borrower to pay when due any amount payable by Borrower, under any Note,
any Security Instrument, this Agreement or any other Loan Document, including any fees, costs or
expenses; or



(c) the failure by Borrower to perform or observe any covenant contained in Sections 8.02,
8.07, 8.12, 8.13, 8.14, 8.16, 8.17, 8.18, 8.20, 8.23 and Article 9; or



(d) any warranty, representation or other written statement made by or on behalf of any
Targeted Entity contained in this Agreement, any other Loan Document or in any instrument furnished
in compliance with or in reference to any of the foregoing, is false or misleading in any material
respect on any date when made or deemed made; or


 


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(e) (i) any Targeted Entity shall (A) commence a voluntary case (or, if applicable, or joint
case) under any Chapter of the Bankruptcy Code (as now or hereafter in effect) or otherwise, (B)
file a petition seeking to take advantage of any other laws, domestic or foreign, relating to
bankruptcy, insolvency, reorganization, debt adjustment, winding up or composition or adjustment of
debts, (C) consent to or fail to contest in a timely and appropriate manner any petition filed
against it in an involuntary case under such bankruptcy laws or other laws, (D) apply for or
consent to, or fail to contest in a timely and appropriate manner, the appointment of, or the
taking of possession by, a receiver, custodian, trustee or liquidator of itself or of a substantial
part of its property, domestic or foreign, (E) admit in writing its inability to pay, or generally
not be paying, its debts as they become due, (F) make a general assignment for the benefit of
creditors, (G) assert that any Borrower or Guarantor (solely with respect to the
Guaranty), has no liability or obligations under this Agreement or any other Loan Document to
which it is a party; or (H) take any action for the purpose of effecting any of the foregoing; or



(ii) a case or other proceeding shall be commenced against any Targeted Entity in any court of
competent jurisdiction seeking (A) relief under the Federal bankruptcy laws (as now or hereafter in
effect) or under any other laws, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, winding upon or composition or adjustment of debts, or (B) the appointment of a
trustee, receiver, custodian, liquidator or the like of any Targeted Entity or of all or a
substantial part of the property, domestic or foreign, of any Targeted Entity and any such case or
proceeding shall continue undismissed or unstayed for a period of sixty (60) consecutive calendar
days, or any order granting the relief requested in any such case or proceeding against any
Targeted Entity (including an order for relief under such Federal bankruptcy laws) shall be
entered; or



(iii) any Targeted Entity files an involuntary petition against Borrower under any Chapter of
the Bankruptcy Code or under any other bankruptcy, insolvency, reorganization, arrangement or
readjustment of debt, dissolution, liquidation or similar proceeding relating to Borrower under the
laws of any jurisdiction.



(f) both (i) an involuntary petition under any Chapter of the Bankruptcy Code is filed against
Borrower or Borrower directly or indirectly becomes the subject of any bankruptcy, insolvency,
reorganization, arrangement, readjustment of debt, dissolution, liquidation or similar proceeding
relating to it under the laws of any jurisdiction, or in equity, and (ii) any Targeted Entity has
acted in concert or conspired with such creditors of Borrower (other than Lender) to cause the
filing thereof.



(g) if any provision of this Agreement or any other Loan Document or the lien and security
interest purported to be created hereunder or under any Loan Document shall at any time for any
reason cease to be valid and binding in accordance with its terms on Borrower or Guarantor, or
shall be declared to be null and void, or the validity or enforceability hereof or thereof or the
validity or priority of the lien and security interest created hereunder or under any other Loan
Document shall be contested by any Targeted Entity seeking to establish the invalidity or
unenforceability hereof or thereof, or Borrower or Guarantor (only with respect to the Guaranty)
shall deny that it has any further liability or obligation hereunder or thereunder; or


 


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(h) (i) the execution by Borrower of a chattel mortgage or other security agreement on any
materials, fixtures or articles used in the construction or operation of the improvements located
on any Mortgaged Property or on articles of personal property located therein (other than in
connection with any Permitted Liens), or (ii) if any such materials, fixtures or articles are
purchased pursuant to any conditional sales contract or other security agreement or otherwise so
that the Ownership thereof will not vest unconditionally in Borrower free from encumbrances, or
(iii) if Borrower does not furnish to Lender upon request the contracts, bills of sale, statements,
receipted vouchers and agreements, or any of them, under which Borrower claim title to such
materials, fixtures, or articles; or



(i) the failure by Borrower to comply with any requirement of any Governmental Authority
within thirty (30) days after written notice of such requirement shall have been given to Borrower
by such Governmental Authority; provided that, if action is commenced and diligently pursued by
Borrower within such thirty (30) days, then Borrower shall have an additional thirty (30) days to
comply with such requirement; or



(j) a dissolution or liquidation for any reason (whether voluntary or involuntary) of any
Targeted Entity; or



(k) any judgment against Borrower or Guarantor, any attachment or other levy against any
portion of Borrower’s or Guarantor’s assets with respect to a claim or claims in an amount in
excess of $250,000 in the aggregate remains unpaid, unstayed on appeal undischarged, unbonded, not
fully insured or undismissed for a period of ninety (90) days; or



(l) the failure by Borrower or Guarantor to perform or observe any material term, covenant,
condition or agreement hereunder, other than as contained in subsections (a) through (k) above, or
in any other Loan Document, within thirty (30) days after receipt of notice from Lender identifying
such failure, provided such period shall be extended for up to thirty (30) additional days if
Borrower, in the discretion of Lender, is diligently pursuing a cure of such default within thirty
(30) days after receipt of notice from Lender.



ARTICLE 12

REMEDIES





Section 12.01. Remedies; Waivers. 



Upon the occurrence of an Event of Default, Lender may do any one or more of the following
(without presentment, protest or notice of protest, all of which are expressly waived by Borrower
Party):



(a) by written notice to Borrower, to be effective upon dispatch, terminate the Commitment and
declare the principal of, and interest on, the Advances and all other sums owing by Borrower to
Lender under any of the Loan Documents forthwith due and payable, whereupon the Commitment will
terminate and the principal of, and interest on, the Advances and all other sums owing by Borrower
to Lender under any of the Loan Documents will become forthwith due and payable.



(b) Lender shall have the right to pursue any other remedies available to it under any of the
Loan Documents.



(c) Lender shall have the right to pursue all remedies available to it at law or in equity,
including obtaining specific performance and injunctive relief.


 


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Section 12.02. Waivers; Rescission of Declaration. 



Lender shall have the right, to be exercised in its complete discretion, to waive any breach
hereunder (including the occurrence of an Event of Default), by a writing setting forth the terms,
conditions, and extent of such waiver signed by Lender and delivered to Borrower. Unless such
writing expressly provides to the contrary, any waiver so granted shall extend only to the specific
event or occurrence which gave rise to the waiver and not to any other similar event or occurrence
which occurs subsequent to the date of such waiver.



Section 12.03. Lender’s Right to Protect Collateral and Perform Covenants and Other
Obligations. 



If Borrower or Guarantor fails to perform the covenants and agreements contained in this
Agreement or any of the other Loan Documents, then Lender at Lender’s option may make such
appearances, disburse such sums and take such action as Lender deems necessary, in its sole
discretion, to protect Lender’s interest, including (i) disbursement of reasonable attorneys’ fees,
(ii) entry upon the Mortgaged Property to make repairs and replacements, (iii) procurement of
satisfactory insurance as provided in Section 5 of the Security Instrument encumbering the
Mortgaged Property, and (iv) if the Security Instrument is on a leasehold, exercise of any option
to renew or extend the ground lease on behalf of Borrower and the curing of any default of Borrower
in the terms and conditions of the ground lease. Any amounts disbursed by Lender pursuant to this
Section, with interest thereon, shall become additional indebtedness of Borrower secured by the
Loan Documents. Unless Borrower and Lender agree to other terms of payment, such amounts shall be
immediately due and payable and shall bear interest from the date of disbursement at the weighted
average, as determined by Lender, of the interest rates in effect from time to time for each
Advance unless collection from Borrower of interest at such rate would be contrary to Applicable
Law, in which event such amounts shall bear interest at the highest rate which may be collected
from Borrower under Applicable Law. Nothing contained in this Section shall require Lender to
incur any expense or take any action hereunder.




Section 12.04. No Remedy Exclusive. 



Unless otherwise expressly provided, no remedy herein conferred upon or reserved is intended
to be exclusive of any other available remedy, but each remedy shall be cumulative and shall be in
addition to other remedies given under the Loan Documents or existing at law or in equity.


 


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Section 12.05. No Waiver. 



No delay or omission to exercise any right or power accruing under any Loan Document upon the
happening of any Event of Default or Potential Event of Default shall impair any such right or
power or shall be construed to be a waiver thereof, but any such right and power may be exercised
from time to time and as often as may be deemed expedient.




Section 12.06. No Notice. 



To entitle Lender to exercise any remedy reserved to Lender in this Article, it shall not be
necessary to give any notice, other than such notice as may be required under the applicable
provisions of this Agreement or any of the other Loan Documents.



ARTICLE 13

INSURANCE, REAL ESTATE TAXES AND REPLACEMENT RESERVES





Section 13.01. Insurance and Real Estate Taxes. 



(a) Insurance and Tax Escrow; Waiver; Real Estate Tax Letter of Credit. Borrower
shall establish funds for taxes, insurance premiums and certain other charges for each Mortgaged
Property in accordance with Section 7(a) of the Security Instrument for each Mortgaged Property.
Notwithstanding the foregoing, so long as no Event of Default or Potential Event of Default has
occurred, Lender hereby waives the obligations of Borrower under Section 7(a) of each Security
Instrument with respect to the escrow of premiums for insurance (the “Required Escrow
Payments”). Furthermore, Borrower may satisfy its obligation to establish a fund for taxes by
delivering to Lender: (1) a Real Estate Tax Letter of Credit that satisfies the requirements set
forth in Section 6.14(a) of this Agreement and (2) a legal opinion pursuant to Section 6.14(e) of
this Agreement. During any period in which the obligation to pay the Required Escrow Payments has
been waived, pursuant to this Section 13.01, each Borrower shall: (i) pay insurance
premiums by or on behalf of Borrower with respect to the insurance policy meeting the requirements
of the Security Instrument for each Mortgaged Property, (ii) make the deliveries to Lender with
respect to insurance policies as required in Section 19(b) of the Security Instrument for each
Mortgaged Property, and (iii) include all payments of insurance premiums in its monthly and annual
property income and expense data. During any period in which Borrower has delivered to Lender a
Real Estate Tax Letter of Credit pursuant to this Section 13.01, each Borrower shall: (i) pay taxes
by or on behalf of Borrower, (ii) send Lender invoices and paid receipts, or other documentation
satisfactory to Lender, evidencing payment of such taxes on the date such taxes are due and
payable, and (iii) include all payments of taxes in its monthly and annual property income and
expense data.



 

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(b) Revocation of Waiver. Lender’s waiver of the Required Escrow Payments shall, at
the option of Lender, be revoked upon the occurrence of any of the following events:





(i) the occurrence of an Event of Default or a Potential Event of Default; or




(ii) any Borrower shall fail to perform its obligations under Section 13.01(a).



(iii) failure by any Borrower to (A) participate in a blanket insurance policy that complies
with Fannie Mae’s insurance requirements and (B) annually furnish
evidence of insurance to Lender in accordance with Section 19(b) of the Security Instrument
for each Mortgaged Property.



(c) Upon Lender’s revocation of its waiver of the Required Escrow Payments, Borrower’s
obligations under Section 7(a) of each of the Security Instruments shall immediately be reinstated.




(d) Real Estate Tax Letter of Credit.



(i) On the Initial Closing Date, the Real Estate Tax Letter of Credit shall be in an amount
equal to the amount of annual taxes as estimated by Lender. On an annual basis, Lender shall
determine the amount of estimated taxes for the next tax year and shall send a notice to Borrower
at least forty-five (45) days prior to the expiration of the Real Estate Tax Letter of Credit.
Within fifteen (15) days of Lender’s notice, Borrower shall deliver a replacement Real Estate Tax
Letter of Credit in an amount equal to Lender’s estimate of taxes for such tax year in accordance
with the terms of this Agreement.




(ii) Lender shall have the right to draw monies under the Real Estate Tax Letter of Credit:




	 	(1)	 	if any Borrower shall fail to perform its obligations under Section
13.01(a); or







	 	(2)	 	upon the occurrence of (A) an Event of Default; or (B) a Potential Event of
Default of which the Borrower has knowledge has occurred and continued for two (2)
Business Days; or







	 	(3)	 	if 30 days prior to the expiration of the Real Estate Tax Letter of Credit, the
Real Estate Tax Letter of Credit has not been extended for a term of at least 364 days
or has not been substituted with a replacement Real Estate Tax Letter of Credit which
satisfies the requirements of this Agreement; or







	 	(4)	 	upon the downgrading of the ratings of the long-term or short term debt
obligations of the LOC Bank below the requirements of Fannie Mae then in effect,
provided Borrower does not immediately take action to substitute the Real Estate Tax
Letter of Credit with a replacement Real Estate Tax Letter of Credit which satisfies
the requirements of this Agreement and does not deliver such replacement Real Estate
Tax Letter of Credit within thirty (30) days of such downgrading.






(iii) If Lender draws under the Real Estate Tax Letter of Credit for any reason set forth
above, Lender shall have the right to use monies drawn under such Real Estate Tax Letter of Credit
for any purpose permitted under this Agreement or any other Loan Documents.




 


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Section 13.02. Replacement Reserves. 



Borrower shall execute a Replacement Reserve Agreement for the Mortgaged Properties and shall
(unless waived by Lender) make all deposits for replacement reserves in accordance with the terms
of the Replacement Reserve Agreement.




Section 13.03. Completion/Repair Reserves.



Borrower shall execute a Completion/Repair and Security Agreement for the Mortgaged Properties
and shall (unless waived by Lender) make all deposits for reserves in accordance with the terms of
the Completion/Repair and Security Agreement.



ARTICLE 14

LIMITS ON PERSONAL LIABILITY





Section 14.01. Personal Liability to Borrower. 



Except as otherwise provided in this Article 14, Borrower shall have no personal
liability under the Loan Documents for the repayment of any Indebtedness or for the performance of
any other Obligations of Borrower under the Loan Documents or for deficiency judgments for the
Indebtedness, and Lender’s only recourse for the satisfaction of such Indebtedness and the
performance of such Obligations shall be Lender’s exercise of its rights and remedies with respect
to the Mortgaged Properties and any other Collateral held by Lender as security for such
Indebtedness.



(a) Exceptions to Limits on Personal Liability. Borrower shall be personally liable
to Lender for the repayment of a portion of the Advances and other amounts due under the Loan
Documents equal to any loss, expense, cost, liability or damage suffered by Lender as a result of
or in any manner relating to (i) failure of Borrower to pay to Lender upon demand after an Event of
Default all Rents to which Lender is entitled under Section 3(a) of the Security Instrument
encumbering the Mortgaged Property and the amount of all security deposits held by Borrower from
tenants then in residence; (ii) failure of Borrower to apply all insurance proceeds, condemnation
proceeds or security deposits from tenants as required by the Security Instrument encumbering the
Mortgaged Property; (iii) failure of such Borrower to comply with its obligations under the Loan
Documents with respect to the delivery of books and records and financial statements; (iv) fraud or
written material misrepresentation by Borrower or any officer, director, partner, member or
employee of Borrower in connection with the application for or creation of the Obligations or any
request for any action or consent by Lender; or (v) failure to apply Rents, first, to the payment
of reasonable operating expenses and then to amounts (“Debt Service Amounts”) payable under
the Loan Documents (except that Borrower will not be personally liable (1) to the extent that
Borrower lacks the legal right to direct the disbursement of such sums because of a bankruptcy,
receivership or similar judicial proceeding, or (2) with respect to Rents of a Mortgaged Property
that are distributed in any Calendar Quarter if
Borrower has paid all operating expenses and Debt Service Amounts for that Calendar Quarter). For
purposes of this subsection (a), the term “Rents” shall have the meaning given to such term
in the Security Instrument.


 


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(b) Full Recourse. Borrower shall be personally liable to Lender for the payment and
performance of all Obligations upon the occurrence of any of the following Events of Default: (i)
Borrower’s acquisition of any property or operation of any business not permitted by Section 33 of
any Security Instrument; or (ii) a Transfer that is an Event of Default under Section 21 of any
Security Instrument; or (iii) any and all indemnification obligations contained in Section 18 of
any Security Instrument; or (iv) a Bankruptcy Event.



As used in this Subsection, the term “Bankruptcy Event” means any one or more of the following
events:




	 	(A)	 	Any Borrower (i) commences a voluntary case (or, if applicable, a joint case)
under any chapter of the Bankruptcy Code or otherwise or consents to or fails to
contest in a timely and appropriate manner any petition filed against it in an
involuntary case under any chapter of the Bankruptcy Code or otherwise, (ii) institutes
(by petition, application, answer, consent or otherwise) any other bankruptcy,
insolvency, reorganization, arrangement, readjustment of debt, dissolution, liquidation
or similar proceeding relating to it under the laws of any jurisdiction, (iii) makes a
general assignment for the benefit of creditors, (iv) applies for, consents to or
acquiesces in the appointment of any receiver, liquidator, custodian, sequestrator,
trustee or similar officer for it or for all or any substantial part of the Mortgaged
Properties or (v) admits in writing its inability to pay its debts generally as they
mature.







	 	(B)	 	Any Borrower, any Affiliate of Borrower, any Guarantor or any Affiliate of
Guarantor files an involuntary petition against any Borrower under any chapter of the
Bankruptcy Code or under any other bankruptcy, insolvency, reorganization, arrangement,
readjustment of debt, dissolution, liquidation or similar proceeding relating to
Borrower under the laws of any jurisdiction.







	 	(C)	 	Both (1) an involuntary petition under any chapter of the Bankruptcy Code is
filed against any Borrower, or any Borrower directly or indirectly becomes the subject
of any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt,
dissolution, liquidation or similar proceeding relating to it under the laws of any
jurisdiction, or in equity, and (ii) any Borrower, any Affiliate of Borrower, any
Guarantor or any Affiliate of Guarantor has acted in concert or conspired with such
creditors of Borrower (other than Fannie Mae or Lender) to cause the filing thereof.





 


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(c) Miscellaneous. To the extent that Borrower has personal liability under this
Section, or Guarantor has liability under the Guaranty, such liability shall be joint and several
and Lender may exercise its rights against Borrower or Guarantor personally without
regard to whether Lender has exercised any rights against the Mortgaged Property or any other
security, or pursued any rights against any guarantor, or pursued any other rights available to
Lender under the Loan Documents or Applicable Law. For purposes of this Article, the term
“Mortgaged Property” shall not include any funds that (i) have been applied by Borrower as
required or permitted by the Loan Documents prior to the occurrence of an Event of Default, or (ii)
are owned by Borrower or Guarantor and which Borrower was unable to apply as required or permitted
by the Loan Documents because of a bankruptcy, receivership, or similar judicial proceeding.




Section 14.02. Additional Borrowers. 



If the owner of an Additional Mortgaged Property or a Substitute Mortgaged Property is an
Additional Borrower, the owner of such Additional Mortgaged Property or Substitute Mortgaged
Property, as the case may be, must demonstrate to the satisfaction of Lender that:




(i) the Additional Borrower is a Single-Purpose entity; and




(ii) the Additional Borrower is directly or indirectly wholly-owned by Guarantor.



In addition, on the Closing Date of the addition of an Additional Mortgaged Property or a
Substitute Mortgaged Property, the owner of such Additional Mortgaged Property or such Substitute
Mortgaged Property, as the case may be, if such owner is an Additional Borrower, shall become a
party to the Contribution Agreement in a manner satisfactory to Lender, shall deliver a Certificate
of Borrower Parties in form and substance satisfactory to Lender, and execute and deliver, along
with the other Borrowers, Variable Facility Notes and/or Fixed Facility Notes. Any Additional
Borrower of an Additional Mortgaged Property or a Substitute Mortgaged Property which becomes added
to the Collateral Pool shall be a Borrower for purposes of this Agreement and shall execute and
deliver to Lender an amendment adding such Additional Borrower as a party to this Agreement and
revising the Exhibits hereto, as applicable, to reflect the Additional Mortgaged Property or
Substitute Mortgaged Property and Additional Borrower, in each case satisfactory to Lender.



Upon the release of a Mortgaged Property, the Borrower that owns such Release Mortgaged
Property shall automatically without further action be released from its obligations under this
Agreement and the other Loan Documents except for any liabilities or obligations of such Borrower
which arose prior to the Closing Date of such release.




 


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Section 14.03. Borrower Agency Provisions.



(a) In the event an Additional Borrower becomes a party to this Agreement, each Borrower shall
irrevocably designate the Borrower Agent to be its agent and in such capacity to receive on behalf
of the Borrower all proceeds, receive all notices on behalf of
Borrower under this Agreement, make all requests under this Agreement, and execute, deliver
and receive all instruments, certificates, requests, documents, writings and further assurances now
or hereafter required hereunder, on behalf of such Borrower, and hereby authorizes the Lender to
pay over all loan proceeds hereunder in accordance with the request of the Borrower Agent. Each
Borrower hereby acknowledges that all notices required to be delivered by Lender to any Borrower
shall be delivered to the Borrower Agent and thereby shall be deemed to have been received by such
Borrower.



(b) The handling of this credit facility as a co-borrowing facility with a Borrower Agent in
the manner set forth in this Agreement is solely as an accommodation to each of Borrower and
Guarantor and is at their mutual request. Lender shall not incur liability to Borrower or
Guarantor as a result thereof. To induce Lender to do so and in consideration thereof, each
Borrower hereby indemnifies the Lender and holds Lender harmless from and against any and all
liabilities, expenses, losses, damages and claims of damage or injury asserted against Lender by
any Person arising from or incurred by reason of the Borrower Agent handling of the financing
arrangements of Borrower as provided herein, reliance by Lender on any request or instruction from
Borrower Agent or any other action taken by the Lender with respect to this Section 14.03 except
due to willful misconduct or gross negligence of the indemnified party.




Section 14.04. Joint and Several Obligation; Cross-Guaranty.



Notwithstanding anything contained in this Agreement or the other Loan Documents to the
contrary (but subject to the provisions of Section 14.01, the last sentence of this Section 14.04
and the provisions of Section 14.11), each Borrower shall have joint and several liability for all
Obligations. Notwithstanding the intent of all of the parties to this Agreement that all
Obligations of each Borrower under this Agreement and the other Loan Documents shall be joint and
several Obligations of each Borrower but subject to the provisions of Section 14.01, each Borrower,
on a joint and several basis, hereby irrevocably guarantees to Lender and its successors and
assigns, the full and prompt payment (whether at stated maturity, by acceleration or otherwise) and
performance of, all Obligations owed or hereafter owing to Lender by each other Borrower. Each
Borrower agrees that its guaranty obligation hereunder is an unconditional guaranty of payment and
performance and not merely a guaranty of collection. The Obligations of each Borrower under this
Agreement shall not be subject to any counterclaim, set-off, recoupment, deduction, cross-claim or
defense based upon any claim any Borrower may have against Lender or any other Borrower; provided,
however, that upon the release of a Mortgaged Property, the Borrower which owns such Release
Mortgaged Property shall automatically without further action be released from its obligations
under this Agreement for the Obligations, except for any liabilities or obligations of such
Borrower which arose prior to the Closing Date of such release.




 


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Section 14.05. Waivers With Respect to Other Borrower Secured Obligation.



To the extent that a Security Instrument or any other Loan Document executed by one Borrower
secures an Obligation of another Borrower (the “Other Borrower Secured Obligation”), and/or
to the extent that a Borrower has guaranteed the debt of another Borrower pursuant to Article 14,
Borrower who executed such Loan Document and/or guaranteed such debt (the “Waiving
Borrower”) hereby agrees as follows:



(a) The Waiving Borrower hereby waives any right it may now or hereafter have to require the
beneficiary, assignee or other secured party under such Loan Document, as a condition to the
exercise of any remedy or other right against it thereunder or under any other Loan Document
executed by the Waiving Borrower in connection with the Other Borrower Secured Obligation: (i) to
proceed against the other Borrower or any other person, or against any other collateral assigned to
Lender by either Borrower or any other person; (ii) to pursue any other right or remedy in Lender’s
power; (iii) to give notice of the time, place or terms of any public or private sale of real or
personal property collateral assigned to Lender by the other Borrower or any other person (other
than the Waiving Borrower), or otherwise to comply with Section 9615 of the California Commercial
Code (as modified or recodified from time to time) with respect to any such personal property
collateral located in the State of California; or (iv) to make or give (except as otherwise
expressly provided in the Security Documents) any presentment, demand, protest, notice of dishonor,
notice of protest or other demand or notice of any kind in connection with the Other Borrower
Secured Obligation or any collateral (other than the Collateral described in such Security
Document) for the Other Borrower Secured Obligation.



(b) The Waiving Borrower hereby waives any defense it may now or hereafter have that relates
to: (i) any disability or other defense of the other Borrower or any other person; (ii) the
cessation, from any cause other than full performance, of the Other Borrower Secured Obligation;
(iii) the application of the proceeds of the Other Borrower Secured Obligation, by the other
Borrower or any other person, for purposes other than the purposes represented to the Waiving
Borrower by the other Borrower or otherwise intended or understood by the Waiving Borrower or the
other Borrower; (iv) any act or omission by Lender which directly or indirectly results in or
contributes to the release of the other Borrower or any other person or any collateral for any
Other Borrower Secured Obligation; (v) the unenforceability or invalidity of any Security Document
or Loan Document (other than the Security Instrument executed by the Waiving Borrower that secures
the Other Borrower Secured Obligation) or guaranty with respect to any Other Borrower Secured
Obligation, or the lack of perfection or continuing perfection or lack of priority of any Lien
(other than the Lien of such Security Instrument) which secures any Other Borrower Secured
Obligation; (vi) any failure of Lender to marshal assets in favor of the Waiving Borrower or any
other person; (vii) any modification of any Other Borrower Secured Obligation, including any
renewal, extension, acceleration or increase in interest rate; (viii) any and all rights and
defenses arising out of an election of remedies by Lender, even though that election of remedies,
such as a nonjudicial foreclosure with respect to security for a guaranteed
obligation, has destroyed the Waiving Borrower’s rights of subrogation and reimbursement
against the principal by the operation of Section 580d of the California Code of Civil Procedure or
otherwise; (ix) any law which provides that the obligation of a surety or guarantor must neither be
larger in amount nor in other respects more burdensome than that of the principal or which reduces
a surety’s or guarantor’s obligation in proportion to the principal obligation; (x) any failure of
Lender to file or enforce a claim in any bankruptcy or other proceeding with respect to any person;



 


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(xi) the election by Lender, in any bankruptcy proceeding of any person, of the application or
non-application of Section 1111(b)(2) of the Bankruptcy Code; (xii) any
 extension of credit or the
grant of any lien under Section 364 of the Bankruptcy Code; (xiii) any use of cash collateral under
Section 363 of the Bankruptcy Code; or (xiv) any agreement or stipulation with respect to the
provision of adequate protection in any bankruptcy proceeding of any person. The Waiving Borrower
further waives any and all rights and defenses that it may have because the Other Borrower Secured
Obligation is secured by real property; this means, among other things, that: (A) Lender may
collect from the Waiving Borrower without first foreclosing on any real or personal property
collateral pledged by the other Borrower; (B) if Lender forecloses on any real property collateral
pledged by the other Borrower, then (1) the amount of the Other Borrower Secured Obligation may be
reduced only by the price for which that collateral is sold at the foreclosure sale, even if the
collateral is worth more than the sale price, and (2) Lender may foreclose on the real property
encumbered by the Security Instrument executed by the Waiving Borrower and securing the Other
Borrower Secured Obligation even if Lender, by foreclosing on the real property collateral of the
Other Borrower, has destroyed any right the Waiving Borrower may have to collect from the Other
Borrower. Subject to the last sentence of Section 14.04, the foregoing sentence is an
unconditional and irrevocable waiver of any rights and defenses the Waiving Borrower may have
because the Other Borrower Secured Obligation is secured by real property. These rights and
defenses being waived by the Waiving Borrower include, but are not limited to, any rights or
defenses based upon Section 580a, 580b, 580d or 726 of the California Code of Civil Procedure.
Without limiting the generality of the foregoing or any other provision hereof, the Waiving
Borrower further expressly waives, except as provided in Section 14.05(g) below, to the extent
permitted by law any and all rights and defenses that might otherwise be available to it under
California Civil Code Sections 2787 to 2855, inclusive, 2899 and 3433, or under California Code of
Civil Procedure Sections 580a, 580b, 580d and 726, or any of such sections.



(c) The Waiving Borrower hereby waives any and all benefits and defenses under California
Civil Code Section 2810 and agrees that by doing so the Security Instrument executed by the Waiving
Borrower and securing the Other Borrower Secured Obligation shall be and remain in full force and
effect even if the other Borrower had no liability at the time of incurring the Other Borrower
Secured Obligation, or thereafter ceases to be liable. The Waiving Borrower hereby waives any and
all benefits and defenses under California Civil Code Section 2809 and agrees that by doing so the
Waiving Borrower’s liability may be larger in amount and more burdensome than that of the other
Borrower. The Waiving Borrower hereby waives the benefit of all principles or provisions of law
that are or might be in conflict with the terms of any of its waivers, and agrees that the Waiving
Borrower’s waivers shall not be affected by any circumstances that might otherwise constitute a
legal or equitable discharge of a surety or a
guarantor. The Waiving Borrower hereby waives the benefits of any right of discharge and all
other rights under any and all statutes or other laws relating to guarantors or sureties, to the
fullest extent permitted by law, diligence in collecting the Other Borrower Secured Obligation,
presentment, demand for payment, protest, all notices with respect to the Other Borrower Secured
Obligation that may be required by statute, rule of law or otherwise to preserve Lender’s rights
against the Waiving Borrower hereunder, including notice of acceptance, notice of any amendment of
the Loan Documents evidencing the Other Borrower Secured Obligation, notice of the occurrence of
any default or Event of Default, notice of intent to accelerate, notice of acceleration, notice of
dishonor, notice of foreclosure, notice of protest, notice of the incurring by the other Borrower
of any obligation or indebtedness and all rights to require Lender to (i) proceed against the other
Borrower, (ii) proceed against any general partner of the other Borrower, (iii) proceed against or
exhaust any collateral held by Lender to secure the Other Borrower Secured Obligation, or (iv) if
the other Borrower is a partnership, pursue any other remedy it may have against the other
Borrower, or any general partner of the other Borrower, including any and all benefits under
California Civil Code Sections 2845, 2849 and 2850.


 


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(d) The Waiving Borrower understands that the exercise by Lender of certain rights and
remedies contained in a Security Instrument executed by the Other Borrower (such as a nonjudicial
foreclosure sale) may affect or eliminate the Waiving Borrower’s right of subrogation against the
Other Borrower and that the Waiving Borrower may therefore incur a partially or totally
nonreimburseable liability. Nevertheless, the Waiving Borrower hereby authorizes and empowers
Lender to exercise, in its sole and absolute discretion, any right or remedy, or any combination
thereof, that may then be available, since it is the intent and purpose of the Waiving Borrower
that its waivers shall be absolute, independent and unconditional under any and all circumstances.



(e) In accordance with Section 2856 of the California Civil Code, the Waiving Borrower also
waives any right or defense based upon an election of remedies by Lender, even though such election
(e.g., nonjudicial foreclosure with respect to any collateral held by Lender to secure repayment of
the Other Borrower Secured Obligation) destroys or otherwise impairs the subrogation rights of the
Waiving Borrower to any right to proceed against the other Borrower for reimbursement, or both, by
operation of Section 580d of the California Code of Civil Procedure or otherwise.



(f) Subject to the last sentence of Section 14.04, in accordance with Section 2856 of the
California Civil Code, the Waiving Borrower waives any and all other rights and defenses available
to the Waiving Borrower by reason of Sections 2787 through 2855, inclusive, of the California Civil
Code, including any and all rights or defenses the Waiving Borrower may have by reason of
protection afforded to the other Borrower with respect to the Other Borrower Secured Obligation
pursuant to the antideficiency or other laws of the State of California limiting or discharging the
Other Borrower Secured Obligation, including Sections 580a, 580b, 580d, and 726 of the California
Code of Civil Procedure.



(g) In accordance with Section 2856 of the California Civil Code and pursuant to any other
Applicable Law, the Waiving Borrower agrees to withhold the exercise of any and all subrogation,
contribution and reimbursement rights against Borrower, against any other person, and against any
collateral or security for the Other Borrower Secured Obligation, including any such rights
pursuant to Sections 2847 and 2848 of the California Civil Code, until the Other Borrower Secured
Obligation has been indefeasibly paid and satisfied in full, all obligations owed to Lender under
the Loan Documents have been fully performed, and Lender has released, transferred or disposed of
all of its right, title and interest in such collateral or security.


 


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(h) Each Borrower hereby irrevocably and unconditionally agrees that, notwithstanding Section
14.05(g) hereof, in the event, and to the extent, that its agreement and waiver set forth in
Section 14.05(g) is found by a court of competent jurisdiction to be void or voidable for any
reason and such Borrower has any subrogation or other rights against any other Borrower, any such
claims, direct or indirect, that such Borrower may have by subrogation rights or other form of
reimbursement, contribution or indemnity, against any other Borrower or to any security or any such
Borrower, shall be, and such rights, claims and indebtedness are hereby, deferred, postponed and
fully subordinated in time and right of payment to the prior payment, performance and satisfaction
in full of the Obligations. Until payment and performance in full with interest (including
post-petition interest in any case under any chapter of the Bankruptcy Code) of the Obligations,
each Borrower agrees not to accept any payment or satisfaction of any kind of Indebtedness of any
other Borrower in respect of any such subrogation rights arising by virtue of payments made
pursuant to this Article 14, and hereby assigns such rights or indebtedness to Lender, including
(i) the right to file proofs of claim and to vote thereon in connection with any case under any
chapter of the Bankruptcy Code and (ii) the right to vote on any plan of reorganization. In the
event that any payment on account of any such subrogation rights shall be received by any Borrower
in violation of the foregoing, such payment shall be held in trust for the benefit of Lender, and
any amount so collected should be turned over to Lender for application to the Obligations.



(i) At any time without notice to the Waiving Borrower, and without affecting or prejudicing
the right of Lender to proceed against the Collateral described in any Loan Document executed by
the Waiving Borrower and securing the Other Borrower Secured Obligation, (i) the time for payment
of the principal of or interest on, or the performance of, the Other Borrower Secured Obligation
may be extended or the Other Borrower Secured Obligation may be renewed in whole or in part; (ii)
the time for the other Borrower’s performance of or compliance with any covenant or agreement
contained in the Loan Documents evidencing the Other Borrower Secured Obligation, whether presently
existing or hereinafter entered into, may be extended or such performance or compliance may be
waived; (iii) the maturity of the Other Borrower Secured Obligation may be accelerated as provided
in the related Note or any other related Loan Document; (iv) the related Note or any other related
Loan Document may be modified or amended by Lender and the Other Borrower in any respect, including
an increase in the principal amount; and (v) any security for the Other Borrower Secured Obligation
may be
modified, exchanged, surrendered or otherwise dealt with or additional security may be pledged
or mortgaged for the Other Borrower Secured Obligation.



(j) It is agreed among each Borrower and Lender that all of the foregoing waivers are of the
essence of the transaction contemplated by this Agreement and the Loan Documents and that but for
the provisions of this Article 14 and such waivers Lender would decline to enter into this
Agreement.




Section 14.06. No Impairment.



Each Borrower agrees that the provisions of this Article 14 are for the benefit of Lender and
their successors, transferees, endorsees and assigns, and nothing herein contained shall impair, as
between any other Borrower and Lender, the obligations of such other Borrower under the Loan
Documents.


 


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Section 14.07. Election of Remedies.



(a) Lender, in its discretion, may (a) bring suit against any one or more Borrowers, jointly
and severally, without any requirement that Lender first proceed against any other Borrower or any
other Person; (b) compromise or settle with any one or more Borrowers, or any other Person, for
such consideration as Lender may deem proper; (c) release one or more Borrowers, or any other
Person, from liability; and (d) otherwise deal with any Borrower and any other Person, or any one
or more of them, in any manner, or resort to any of the Collateral at any time held by it for
performance of the Obligations or any other source or means of obtaining payment of the
Obligations, and no such action shall impair the rights of Lender to collect from any Borrower any
amount guaranteed by any Borrower under this Article 14.



(b) Subject to the provisions of Section 14.01 of this Agreement, if, in the exercise of any
of its rights and remedies, Lender shall forfeit any of its rights or remedies, including its
rights to enter a deficiency judgment against any Borrower or any other Person, whether because of
any Applicable Law pertaining to “election of remedies” or the like, each Borrower hereby consents
to such action by Lender and waives any claim based upon such action, even if such action by Lender
shall result in a full or partial loss of any rights of subrogation that each Borrower might
otherwise have had but for such action by Lender. Subject to the provisions of Section 14.01 of
this Agreement, any election of remedies that results in the denial or impairment of the right of
Lender to seek a deficiency judgment against any Borrower shall not impair any other Borrower’s
obligation to pay the full amount of the Obligations. In the event Lender shall bid at any
foreclosure or trustee’s sale or at any private sale permitted by law or any of the Loan Documents,
Lender may bid all or less than the amount of the Obligations and the amount of such bid need not
be paid by Lender but shall be credited against the Obligations. The amount of the successful bid
at any such sale, whether Lender or any other party is the successful bidder, shall be conclusively
deemed to be fair market value of the Collateral and the difference between such bid amount and the
remaining balance of the Obligations shall be conclusively deemed to be amount of the Obligations
guaranteed under this Article 14,
notwithstanding that any present or future law or court decision or ruling may have the effect
of reducing the amount of any deficiency claim to which Lender might otherwise be entitled but for
such bidding at any such sale.




 


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Section 14.08. Subordination of Other Obligations. 



(a) Each Borrower hereby irrevocably and unconditionally agrees that all amounts payable from
time to time to such Borrower by any other Borrower pursuant to any agreement, whether secured or
unsecured, whether of principal, interest or otherwise, other than the amounts referred to in this
Article 14 (collectively, the “Subordinated Obligations”), shall be and such rights, claims
and indebtedness are, hereby deferred, postponed and fully subordinated in time and right of
payment to the prior payment, performance and satisfaction in full of the Obligations; provided,
however, that payments may be received by any Borrower in accordance with, and only in accordance
with, the provisions of Section 14.08(b) hereof.



(b) Until the Obligations under all the Loan Documents have been finally paid in full or fully
performed and all the Loan Documents have been terminated, each Borrower irrevocably and
unconditionally agrees it will not ask, demand, sue for, take or receive, directly or indirectly,
by set-off, redemption, purchase or in any other manner whatsoever, any payment with respect to, or
any security or guaranty for, the whole or any part of the Subordinated Obligations, and in issuing
documents, instruments or agreements of any kind evidencing the Subordinated Obligations, each
Borrower hereby agrees that it will not receive any payment of any kind on account of the
Subordinated Obligations, so long as any of the Obligations under all the Loan Documents are
outstanding or any of the terms and conditions of any of the Loan Documents are in effect;
provided, however, that, notwithstanding anything to the contrary contained herein, if no Potential
Event of Default or Event of Default has occurred and is continuing under any of the Loan
Documents, then payments may be received by such Borrower in respect of the Subordinated
Obligations in accordance with the stated terms thereof. Except as aforesaid, each Borrower agrees
not to accept any payment or satisfaction of any kind of indebtedness of any other Borrower in
respect of the Subordinated Obligations and hereby assigns such rights or indebtedness to Fannie
Mae, including the right to file proofs of claim and to vote thereon in connection with any case
under any chapter of the Bankruptcy Code, including the right to vote on any plan of
reorganization. In the event that any payment on account of Subordinated Obligations shall be
received by any Borrower in violation of the foregoing, such payment shall be held in trust for the
benefit of Lender, and any amount so collected shall be turned over to Lender upon demand.




Section 14.09. Insolvency and Liability of Other Borrower. 



So long as any of the Obligations are outstanding, if a petition under any chapter of the
Bankruptcy Code is filed by or against any Borrower (the “Subject Borrower”), each other
Borrower (each, an “Other Borrower”) agrees to file all claims against the Subject Borrower
in any bankruptcy or other proceeding in which the filing of claims is required by law in
connection with indebtedness owed by the Subject Borrower and to assign to Lender all rights
thereunder up to the amount of such indebtedness. In all such cases, the Person or Persons
authorized to pay such claims shall pay to Lender the full amount thereof and Lender agrees to pay
such Other Borrower any amounts received in excess of the amount necessary to pay the Obligations.
Each
Other Borrower hereby assigns to Lender all of such Other Borrower’s rights to all
such
payments to which

 


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such Other Borrower would otherwise be entitled but not to exceed the full amount
of the Obligations. In the event that, notwithstanding the foregoing, any such payment shall be
received by any Other Borrower before the Obligations shall have been finally paid in full, such
payment shall be held in trust for the benefit of and shall be paid over to Lender upon demand.
Furthermore, notwithstanding the foregoing, the liability of each Borrower hereunder shall in no
way be affected by:



(a) the release or discharge of any other Borrower in any creditors’, receivership, bankruptcy
or other proceedings; or



(b) the impairment, limitation or modification of the liability of any other Borrower or the
estate of any other Borrower in bankruptcy resulting from the operation of any present or future
provisions of any chapter of the Bankruptcy Code or other statute or from the decision in any
court.




Section 14.10. Preferences, Fraudulent Conveyances, Etc. 



If Lender is required to refund, or voluntarily refunds, any payment received from any
Borrower because such payment is or may be avoided, invalidated, declared fraudulent, set aside or
determined to be void or voidable as a preference, fraudulent conveyance, impermissible setoff or a
diversion of trust funds under the bankruptcy laws or for any similar reason, including without
limitation any judgment, order or decree of any court or administrative body having jurisdiction
over any Borrower or any of its property, or upon or as a result of the appointment of a receiver,
intervenor, custodian or conservator of, or trustee or similar officer for, any Borrower or any
substantial part of its property, or otherwise, or any statement or compromise of any claim
effected by Lender with any Borrower or any other claimant (a “Rescinded Payment”), then
each other Borrower’s liability to Lender shall continue in full force and effect, or each other
Borrower’s liability to Lender shall be reinstated and renewed, as the case may be, with the same
effect and to the same extent as if the Rescinded Payment had not been received by Lender,
notwithstanding the cancellation or termination of any of the Loan Documents, and regardless of
whether Lender contested the order requiring the return of such payment. In addition, each other
Borrower shall pay, or reimburse Lender for, all expenses (including all reasonable attorneys’
fees, court costs and related disbursements) incurred by Lender in the defense of any claim that a
payment received by Lender in respect of all or any part of the Obligations must be refunded. The
provisions of this Section 14.10 shall survive the termination of the Loan Documents and any
satisfaction and discharge of any Borrower by virtue of any payment, court order or any federal or
state law.


 


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Section 14.11. Maximum Liability of Each Borrower. 



Notwithstanding anything contained in this Agreement or any other Loan Document to the
contrary, if the obligations of any Borrower under this Agreement or any of the other Loan
Documents or any Security Instruments granted by any Borrower are determined to exceed the
reasonably equivalent value received by such Borrower in exchange for such obligations or grant
of such Security Instruments under any Fraudulent Transfer Law (as hereinafter defined), then
the liability of such Borrower shall be limited to a maximum aggregate amount equal to the largest
amount that would not render its obligations under this Agreement or all the other Loan Documents
subject to avoidance as a fraudulent transfer or conveyance under Section 548 of Title 11 of the
United States Code or any applicable provisions of comparable state law (collectively, the
“Fraudulent Transfer Laws”), in each case after giving effect to all other liabilities of
such Borrower, contingent or otherwise, that are relevant under the Fraudulent Transfer Laws
(specifically excluding, however, any liabilities of such Borrower in respect of Indebtedness to
any other Borrower or any other Person that is an Affiliate of the other Borrower to the extent
that such Indebtedness would be discharged in an amount equal to the amount paid by such Borrower
in respect of the Obligations) and after giving effect (as assets) to the value (as determined
under the applicable provisions of the Fraudulent Transfer Laws) of any rights to subrogation,
reimbursement, indemnification or contribution of such Borrower pursuant to Applicable Law or
pursuant to the terms of any agreement including the Contribution Agreement.




Section 14.12. Liability Cumulative. 



The liability of each Borrower under this Article 14 is in addition to and shall be cumulative
with all liabilities of such Borrower to Lender under this Agreement and all the other Loan
Documents to which such Borrower is a party or in respect of any Obligations of any other Borrower.



ARTICLE 15

MISCELLANEOUS PROVISIONS





Section 15.01. Counterparts. 



To facilitate execution, this Agreement may be executed in any number of counterparts. It
shall not be necessary that the signatures of, or on behalf of, each party, or that the signatures
of all persons required to bind any party, appear on each counterpart, but it shall be sufficient
that the signature of, or on behalf of, each party, appear on one (1) or more counterparts. All
counterparts shall collectively constitute a single agreement. It shall not be necessary in making
proof of this Agreement to produce or account for more than the number of counterparts containing
the respective signatures of, or on behalf of, all of the parties hereto.




Section 15.02. Amendments, Changes and Modifications. 



This Agreement may be amended, changed, modified, altered or terminated only by written
instrument or written instruments signed by all of the parties hereto.


 


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Section 15.03. Payment of Costs, Fees and Expenses. 



In addition to the payments required by Section 10.05 of this Agreement, Borrower
shall pay, on demand, all reasonable third party out-of-pocket fees, costs, charges or expenses
(including the fees and expenses of attorneys, accountants and other experts) incurred by Lender in
connection with:



(a) Any amendment, consent or waiver to this Agreement or any of the Loan Documents (whether
or not any such amendments, consents or waivers are entered into).



(b) Defending or participating in any litigation arising from actions by third parties and
brought against or involving Lender with respect to (i) any Mortgaged Property, (ii) any event,
act, condition or circumstance in connection with any Mortgaged Property or (iii) the relationship
between Lender and Borrower and Guarantor in connection with this Agreement or any of the
transactions contemplated by this Agreement.



(c) The administration or enforcement of, or preservation of rights or remedies under, this
Agreement or any other Loan Documents or in connection with the foreclosure upon, sale of or other
disposition of any Collateral granted pursuant to the Loan Documents.



(d) Any disclosure documents, including the reasonable fees and expenses of Lender’s attorneys
and accountants.



Borrower shall also pay, on demand, any transfer taxes, documentary taxes, assessments or charges
made by any governmental authority by reason of the execution, delivery, filing, recordation,
performance or enforcement of any of the Loan Documents or the Advances. However, Borrower will
not be obligated to pay any franchise, excise, estate, inheritance, income, excess profits or
similar tax on Lender. Any attorneys’ fees and expenses payable by Borrower pursuant to this
Section shall be recoverable separately from and in addition to any other amount included in such
judgment, and such obligation is intended to be severable from the other provisions of this
Agreement and to survive and not be merged into any such judgment. Any amounts payable by Borrower
pursuant to this Section, with interest thereon if not paid when due, shall become additional
indebtedness of Borrower secured by the Loan Documents. Such amounts shall bear interest from the
date such amounts are due until paid in full at the weighted average, as determined by Lender, of
the interest rates in effect from time to time for each Advance unless collection from Borrower of
interest at such rate would be contrary to Applicable Law, in which event such amounts shall bear
interest at the highest rate which may be collected from Borrower under Applicable Law. The
provisions of this Section are cumulative with, and do not exclude the application and benefit to
Lender of, any provision of any other Loan Document relating to any of the matters covered by this
Section.




Section 15.04. Payment Procedure. 



All payments to be made to Lender pursuant to this Agreement or any of the Loan Documents
shall be made in lawful currency of the United States of America and in immediately available funds
by wire transfer to an account designated by Lender before 1:00 p.m. (Eastern Standard Time) on the
date when due.


 


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Section 15.05. Payments on Business Days. 



In any case in which the date of payment to Lender or the expiration of any time period
hereunder occurs on a day which is not a Business Day, then such payment or expiration of such time
period need not occur on such date but may be made on the next succeeding Business Day with the
same force and effect as if made on the day of maturity or expiration of such period, except that
interest shall continue to accrue for the period after such date to the next Business Day.




Section 15.06. Choice of Law; Consent to Jurisdiction; Waiver of Jury Trial.



NOTWITHSTANDING ANYTHING IN THE NOTES, THE SECURITY DOCUMENTS OR ANY OF THE OTHER LOAN
DOCUMENTS TO THE CONTRARY, EACH OF THE TERMS AND PROVISIONS, AND RIGHTS AND OBLIGATIONS OF BORROWER
UNDER THIS AGREEMENT AND THE NOTES, GUARANTOR UNDER THE GUARANTY, AND BORROWER AND GUARANTOR UNDER
THE OTHER LOAN DOCUMENTS, SHALL BE GOVERNED BY, INTERPRETED, CONSTRUED AND ENFORCED PURSUANT TO AND
IN ACCORDANCE WITH THE LAWS OF THE DISTRICT OF COLUMBIA (EXCLUDING THE LAW APPLICABLE TO CONFLICTS
OR CHOICE OF LAW) EXCEPT TO THE EXTENT OF PROCEDURAL AND SUBSTANTIVE MATTERS RELATING ONLY TO (i)
THE CREATION, PERFECTION AND FORECLOSURE OF LIENS AND SECURITY INTERESTS, AND ENFORCEMENT OF THE
RIGHTS AND REMEDIES, AGAINST THE MORTGAGED PROPERTIES, WHICH MATTERS SHALL BE GOVERNED BY THE LAWS
OF THE JURISDICTION IN WHICH THE MORTGAGED PROPERTY IS LOCATED, (ii) THE PERFECTION, THE EFFECT OF
PERFECTION AND NON-PERFECTION AND FORECLOSURE OF SECURITY INTERESTS ON PERSONAL PROPERTY, WHICH
MATTERS SHALL BE GOVERNED BY THE LAWS OF THE JURISDICTION DETERMINED BY THE CHOICE OF LAW
PROVISIONS OF THE UNIFORM COMMERCIAL CODE IN EFFECT FOR THE JURISDICTION IN WHICH THE BORROWERS’
ARE ORGANIZED. BORROWER AND GUARANTOR AGREE THAT ANY CONTROVERSY ARISING UNDER OR IN RELATION TO
THE NOTES, THE SECURITY DOCUMENTS (OTHER THAN THE SECURITY INSTRUMENTS) OR ANY OTHER LOAN DOCUMENT
SHALL BE, EXCEPT AS OTHERWISE PROVIDED HEREIN, LITIGATED IN THE DISTRICT OF COLUMBIA. THE LOCAL
AND FEDERAL COURTS AND AUTHORITIES WITH JURISDICTION IN THE DISTRICT OF COLUMBIA SHALL, EXCEPT AS
OTHERWISE PROVIDED HEREIN, HAVE JURISDICTION OVER ALL CONTROVERSIES WHICH MAY ARISE UNDER OR
IN RELATION TO THE LOAN DOCUMENTS, INCLUDING THOSE CONTROVERSIES RELATING TO THE EXECUTION,
JURISDICTION, BREACH, ENFORCEMENT OR COMPLIANCE WITH THE NOTES, THE SECURITY DOCUMENTS (OTHER THAN
THE SECURITY INSTRUMENTS) OR ANY OTHER ISSUE ARISING UNDER, RELATING TO, OR IN CONNECTION WITH ANY
OF THE LOAN DOCUMENTS. EACH OF BORROWER AND GUARANTOR IRREVOCABLY CONSENTS TO SERVICE,
JURISDICTION, AND VENUE OF SUCH COURTS FOR ANY LITIGATION ARISING FROM THE NOTES, THE SECURITY
DOCUMENTS OR ANY OF THE OTHER LOAN DOCUMENTS, AND WAIVES ANY OTHER VENUE TO WHICH IT MIGHT BE
ENTITLED BY VIRTUE OF DOMICILE, HABITUAL RESIDENCE OR OTHERWISE. NOTHING CONTAINED HEREIN,
HOWEVER, SHALL PREVENT LENDER FROM BRINGING ANY SUIT, ACTION OR PROCEEDING OR EXERCISING ANY RIGHTS
AGAINST EITHER OR BOTH OF BORROWER AND GUARANTOR AND AGAINST THE COLLATERAL IN ANY


 


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OTHER
JURISDICTION. INITIATING SUCH SUIT, ACTION OR PROCEEDING OR TAKING SUCH ACTION IN ANY OTHER
JURISDICTION SHALL IN NO EVENT CONSTITUTE A WAIVER OF THE AGREEMENT CONTAINED HEREIN THAT THE LAWS
OF THE DISTRICT OF COLUMBIA SHALL GOVERN THE RIGHTS AND OBLIGATIONS OF EACH OF BORROWER AND
GUARANTOR AND LENDER AS PROVIDED HEREIN OR THE SUBMISSION HEREIN BY EACH OF BORROWER AND GUARANTOR
TO PERSONAL JURISDICTION WITHIN THE DISTRICT OF COLUMBIA. BORROWER AND GUARANTOR (I) COVENANT AND
AGREE NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING UNDER ANY OF THE LOAN
DOCUMENTS TRIABLE BY A JURY AND (II) WAIVE ANY RIGHT TO TRIAL BY JURY TO THE EXTENT THAT ANY SUCH
RIGHT SHALL NOW OR HEREAFTER EXIST. THIS WAIVER IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH
INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A JURY TRIAL WOULD OTHERWISE ACCRUE. FURTHER,
EACH OF BORROWER AND GUARANTOR HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF LENDER
(INCLUDING, BUT NOT LIMITED TO, LENDER’S COUNSEL) HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO
BORROWER AND/OR GUARANTOR THAT LENDER WILL NOT SEEK TO ENFORCE THE PROVISIONS OF THIS SECTION. THE
FOREGOING PROVISIONS WERE KNOWINGLY, WILLINGLY AND VOLUNTARILY AGREED TO BY BORROWER AND GUARANTOR
UPON CONSULTATION WITH INDEPENDENT LEGAL COUNSEL SELECTED BY BORROWER’S AND GUARANTOR’S FREE WILL.




Section 15.07. Severability. 



In the event any provision of this Agreement or in any other Loan Document shall be held
invalid, illegal or unenforceable in any jurisdiction, such provision will be severable from the
remainder hereof as to such jurisdiction and the validity, legality and enforceability of the
remaining provisions will not in any way be affected or impaired in any jurisdiction.




Section 15.08. Notices.



(a) Manner of Giving Notice. Each notice, direction, certificate or other
communication hereunder (in this Section referred to collectively as “notices” and singly
as a
“notice”) which any party is required or permitted to give to the other party pursuant
to this Agreement shall be in writing and shall be deemed to have been duly and sufficiently given
if:



(i) personally delivered with proof of delivery thereof (any notice so delivered shall be
deemed to have been received at the time so delivered);



(ii) sent by Federal Express (or other similar reputable overnight courier) designating
morning delivery (any notice so delivered shall be deemed to have been received on the Business
Day it is delivered by the courier);



(iii) sent by telecopier or facsimile machine which automatically generates a transmission
report that states the date and time of the transmission, the length of the document transmitted,
and the telephone number of the recipient’s telecopier or facsimile machine (to be confirmed with
a copy thereof sent in accordance with paragraphs (i) or (ii) above within two Business Days) (any
notice so delivered shall be deemed to have been received (1) on the date of transmission, if so
transmitted before 5:00 p.m. (local time of the recipient) on a Business Day, or (2) on the next
Business Day, if so transmitted on or after 5:00 p.m. (local time of the recipient) on a Business
Day or if transmitted on a day other than a Business Day);


 


69









 





	 
	addressed to the parties as follows:







	 	 	 	 	 	 	 
	 

	 	As to Borrower:
	 	 	 	Education Realty Operating Partnership, LP
	 

	 	 	 	 	 	530 Oak Court Drive, Suite 300
	 

	 	 	 	 	 	Memphis, TN 38117
	 

	 	 	 	 	 	Attention: Paul Bower and Olan Brevard
	 

	 	 	 	 	 	Telecopy: (901) 259-2594
	 
	 	 	 	 	 	 
	 

	 	with a copy to:
	 	 	 	Bass, Berry & Sims PLC
	 

	 	 	 	 	 	The Tower at Peabody Place
	 

	 	 	 	 	 	100 Peabody Place, Suite 900
	 

	 	 	 	 	 	Memphis, TN 38103
	 

	 	 	 	 	 	Attention: John A. Stemmler
	 

	 	 	 	 	 	Telecopy: (901) 543-5999
	 
	 	 	 	 	 	 
	 

	 	As to Lender:
	 	 	 	Red Mortgage Capital, Inc.
	 

	 	 	 	 	 	Two Miranova Place, 12th Floor
	 

	 	 	 	 	 	Columbus, Ohio 43215
	 

	 	 	 	 	 	Attention: Servicing Manager
	 

	 	 	 	 	 	Telecopy: (614) 857-1620
	 
	 	 	 	 	 	 
	 

	 	with a copy to Servicer:
	 	 	 	Red Mortgage Capital, Inc.
	 

	 	 	 	 	 	Two Miranova Place, 12th Floor
	 

	 	 	 	 	 	Columbus, Ohio 43215
	 

	 	 	 	 	 	Attention: Director, Loan Servicing and Asset
Management
	 

	 	 	 	 	 	Telecopy: (614) 857-1610
	 
	 	 	 	 	 	 
	 

	 	with a copy to:
	 	 	 	Arent Fox LLP
	 

	 	 	 	 	 	1675 Broadway
	 

	 	 	 	 	 	New York, New York 10019
	 

	 	 	 	 	 	Attention: David L. Dubrow, Esq.
	 

	 	 	 	 	 	Telecopy: (212) 484-3990






 


70









 





	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	As to Fannie Mae:
	 	 	 	Fannie Mae
	 

	 	 	 	 	 	3900 Wisconsin Avenue, N.W.
	 

	 	 	 	 	 	Washington, D.C. 20016-2899
	 

	 	 	 	 	 	Attention: Vice President for Multifamily Asset Management
	 

	 	 	 	 	 	Telecopy No.: (301) 280-2064
	 
	 	 	 	 	 	 
	 

	 	with a copy to Servicer:
	 	 	 	Red Mortgage Capital, Inc.
	 

	 	 	 	 	 	Two Miranova Place, 12th Floor
	 

	 	 	 	 	 	Columbus, Ohio 43215
	 

	 	 	 	 	 	Attention: Director, Loan Servicing and Asset
Management
	 

	 	 	 	 	 	Telecopy: (614) 857-1610
	 
	 	 	 	 	 	 
	 

	 	with a copy to:
	 	 	 	Arent Fox LLP
	 

	 	 	 	 	 	1675 Broadway
	 

	 	 	 	 	 	New York, NY 10019
	 

	 	 	 	 	 	Attention: David L. Dubrow, Esq.
	 

	 	 	 	 	 	Telecopy No.: (212) 484-3990






(b) Change of Notice Address. Any party may, by notice given pursuant to this
Section, change the person or persons and/or address or addresses, or designate an additional
person or persons or an additional address or addresses, for its notices, but notice of a change of
address shall only be effective upon receipt. Each party agrees that it shall not refuse or reject
delivery of any notice given hereunder, that it shall acknowledge, in writing, receipt of the same
upon request by the other party and that any notice rejected or refused by it shall be deemed for
all purposes of this Agreement to have been received by the rejecting party on the date so refused
or rejected, as conclusively established by the records of the U.S. Postal Service, the courier
service or facsimile.




Section 15.09. Further Assurances and Corrective Instruments.



(a) Further Assurances. To the extent permitted by law, the parties hereto agree that
they shall, from time to time, execute, acknowledge and deliver, or cause to be executed,
acknowledged and delivered, such supplements hereto and such further instruments as Lender or
Borrower may reasonably request and as may be required in the opinion of Lender or its counsel to
effectuate the intention of or facilitate the performance of this Agreement or any Loan Document.



(b) Further Documentation. Without limiting the generality of subsection (a), in the
event any further documentation or information is required by Lender to correct patent mistakes in
the Loan Documents, materials relating to the Title Insurance Policies or the funding of the
Advances, Borrower shall provide, or cause to be provided to Lender, at Borrower’s cost and
expense, such documentation or information. Borrower shall execute and deliver to Lender such
documentation, including but not limited to any amendments, corrections, deletions or additions to
the Notes, the Security Instruments or the other Loan Documents as is reasonably required by
Lender.



(c) Compliance with Investor Requirements. Without limiting the generality of
subsection (a), Borrower shall do anything necessary to comply with the reasonable requirements of
Lender to enable Lender to sell the DMBS backed by an Advance.


 


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Section 15.10. Term of this Agreement. 




This Agreement shall continue in effect until the Termination Date.




Section 15.11. Assignments; Third-Party Rights. 



No Borrower shall assign this Agreement, or delegate any of its obligations hereunder, without
the prior written consent of Lender. Lender may assign its rights and/or obligations under this
Agreement separately or together, without Borrower’s consent, only to Fannie Mae or other entity if
such assignment is made with the intent that such entity will further assign such rights to Fannie
Mae, but may not delegate its obligations under this Agreement unless it first receives Fannie
Mae’s written approval. Lender shall first assign its rights under this Agreement separately or
together, without Borrower’s consent, to Fannie Mae. Upon assignment to Fannie Mae, Fannie Mae
shall be permitted to further assign its rights under this Agreement separately or together,
without Borrower’s consent.




Section 15.12. Headings.



Article and Section headings used herein are for convenience of reference only, are not part
of this Agreement and are not to affect the construction of, or to be taken into consideration in
interpreting, this Agreement.




Section 15.13. General Interpretive Principles. 



For purposes of this Agreement, except as otherwise expressly provided or unless the context
otherwise requires, (i) the terms defined in Appendix I and elsewhere in this Agreement have the
meanings assigned to them in this Agreement and include the plural as well as the singular, and the
use of any gender herein shall be deemed to include the other genders; (ii) accounting terms not
otherwise defined herein have the meanings assigned to them in accordance with GAAP; (iii)
references herein to “Articles,” “Sections,” “subsections,” “paragraphs” and other subdivisions
without reference to a document are to designated Articles, Sections,
subsections, paragraphs and other subdivisions of this Agreement; (iv) a reference to a
subsection without further reference to a Section is a reference to such subsection as contained in
the same Section in which the reference appears, and this rule shall also apply to paragraphs and
other subdivisions; (v) a reference to an Exhibit or a Schedule without a further reference to the
document to which the Exhibit or Schedule is attached is a reference to an Exhibit or Schedule to
this Agreement; (vi) the words “herein,” “hereof,” “hereunder” and other words of similar import
refer to this Agreement as a whole and not to any particular provision; and (vii) the word
“including” means “including, but not limited to.”


 


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Section 15.14. Interpretation. 



The parties hereto acknowledge that each party and their respective counsel have participated
in the drafting and revision of this Agreement and the Loan Documents. Accordingly, the parties
agree that any rule of construction that disfavors the drafting party shall not apply in the
interpretation of this Agreement and the Loan Documents or any amendment or supplement or exhibit
hereto or thereto.




Section 15.15. Standards for Decisions, Etc. 



Unless otherwise provided herein, if Lender’s approval is required for any matter hereunder,
such approval may be granted or withheld in Lender’s sole and absolute discretion. Unless
otherwise provided herein, if Lender’s designation, determination, selection, estimate, action or
decision is required, permitted or contemplated hereunder, such designation, determination,
selection, estimate, action or decision shall be made in Lender’s sole and absolute discretion.




Section 15.16. Decisions in Writing. 



Any approval, designation, determination, selection, action or decision of Lender or Borrower
must be in writing to be effective.




Section 15.17. Requests. 



Borrower may submit up to a total of eight (8) Requests per Calendar Year, subject to the
provisions of Section 2.06.




Section 15.18. Conflicts Between Agreements.



Any terms and conditions contained in this Agreement that may also be contained in another
Loan Document are not, to the extent reasonably practicable, to be construed to be in conflict with
each other but rather is construed as duplicative, confirming, additional, or cumulative
provisions. To the extent that, in the interpretation of this Agreement, any ultimate conflict
between the terms and conditions of this Agreement and those set forth in another Loan Document is determined to exist, the terms and conditions of this Agreement are to control.


 


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Section 15.19. Timing of Decisions.



(a) In the event a Variable DMBS Advance is Outstanding and Lender receives a request from
Borrower concerning a subsequent Variable DMBS Advance, Conversion, Addition, Release,
Substitution, Future Advance pursuant to Section 2.06 of this Agreement and/or Expansion
(“Activity”), the rollover date for all Variable DMBS Advances Outstanding shall be the effective
date for the following: (i) all decisions on the availability of an Activity, (ii) any
designation, determination, selection, estimate, action, or decision made by Lender or Fannie Mae
in connection with any such Activity, including but not limited to one pertaining to the
Geographical Diversification Requirements and (iii) the Activity itself.



(b) In the event a Variable DMBS Advance is Outstanding, Lender and Fannie Mae reserves the
right to make any decision, designation, determination, selection, estimate or take any action
required of them individually or collectively under this Agreement, and require any activity
resulting from the above, to be effective on the rollover date for all Variable DMBS Advances
Outstanding.



(Signatures appear on following pages)



 


74









 





IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year
first above written.



	 	 	 	 	 	 	 	 	 	 	 
	 	 	BORROWER:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	EDR TAMPA LIMITED PARTNERSHIP, a Delaware

limited partnership	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	By:	 	EDR Tampa, LLC, a Delaware limited liability

company, its general partner	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	By:	 	EDR Tampa, Inc., a Delaware corporation, its
manager	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	/s/ Olan Brevard	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Name: Olan Brevard	 	 
	 

	 	 	 	 	 	 	 	Title:   Vice President	 	 






	 	 	 	 	 	 	 	 	 	 	 
	 	 	EDR STILLWATER LIMITED PARTNERSHIP, a

Delaware limited partnership	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	By:	 	EDR Stillwater, LLC, a Delaware limited liability company, its general partner	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	By:	 	EDR Stillwater, Inc., a Delaware corporation,
its manager	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	/s/ Olan Brevard
 

Name: Olan Brevard
	 	 
	 

	 	 	 	 	 	 	 	Title:   Vice President	 	 






 


S-1









 





	 	 	 	 	 	 	 	 	 	 	 
	 	 	EDR WESTERN MICHIGAN LIMITED

PARTNERSHIP, a Delaware limited partnership	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	By:	 	EDR Western Michigan, LLC, a Delaware limited liability company, its general partner	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	By:	 	EDR Western Michigan, Inc., a Delaware corporation,
its manager	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	/s/ Olan Brevard
 

Name: Olan Brevard
	 	 
	 

	 	 	 	 	 	 	 	Title:   Vice President	 	 






	 	 	 	 	 	 	 	 	 	 	 
	 	 	EDR WABASH LIMITED PARTNERSHIP, a Delaware

limited partnership	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	By:	 	EDR Wabash, LLC, a Delaware limited liability company, its general partner	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	By:	 	EDR Wabash, Inc., a Delaware corporation,
its manager	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	/s/ Olan Brevard
 

Name: Olan Brevard
	 	 
	 

	 	 	 	 	 	 	 	Title:   Vice President	 	 






	 	 	 	 	 	 	 	 	 	 	 
	 	 	EDR COLUMBUS LIMITED PARTNERSHIP, a

Delaware limited partnership	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	By:	 	EDR Columbus, LLC, a Delaware limited liability

company, its general partner	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	By:	 	EDR Columbus, Inc., a Delaware corporation,
its manager	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	/s/ Olan Brevard
 

Name: Olan Brevard
	 	 
	 

	 	 	 	 	 	 	 	Title:   Vice President	 	 





 


S-2









 





	 	 	 	 	 	 	 	 	 	 	 
	 	 	EDR STATE COLLEGE LIMITED PARTNERSHIP, a

Delaware limited partnership	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	By:	 	EDR State College, LLC, a Delaware limited liability

company, its general partner	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	By:	 	EDR State College, Inc., a Delaware corporation,
its manager	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	/s/ Olan Brevard
 

Name: Olan Brevard
	 	 
	 

	 	 	 	 	 	 	 	Title:   Vice President	 	 






	 	 	 	 	 	 	 	 	 	 	 
	 	 	EDR COLUMBIA LIMITED PARTNERSHIP, a

Delaware limited partnership	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	By:	 	EDR Columbia, LLC, a Delaware limited liability

company, its general partner	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	By:	 	EDR Columbia, Inc., a Delaware corporation, its manager	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	/s/ Olan Brevard
 

Name: Olan Brevard
	 	 
	 

	 	 	 	 	 	 	 	Title:   Vice President	 	 






	 	 	 	 	 	 	 	 	 	 	 
	 	 	EDR KNOXVILLE LIMITED PARTNERSHIP, a

Delaware limited partnership	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	By:	 	EDR Knoxville, LLC, a Delaware limited liability

company, its general partner	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	By:	 	EDR Knoxville, Inc., a Delaware corporation, its manager	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	/s/ Olan Brevard
 

Name: Olan Brevard
	 	 
	 

	 	 	 	 	 	 	 	Title:   Vice President	 	 







 


S-3











 




	 	 	 	 	 	 	 	 	 	 	 
	 	 	EDR LUBBOCK LIMITED PARTNERSHIP,

a Delaware limited partnership	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	By:	 	EDR Lubbock, LLC, a Delaware limited liability

company, its general partner	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	By:	 	EDR Lubbock, Inc.,
a Delaware corporation, its manager	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	/s/ Olan Brevard
 

	 	 
	 

	 	 	 	 	 	 	 	Name: Olan Brevard

Title:   Vice President	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	EDR TUCSON PHASE II LIMITED PARTNERSHIP,

a Delaware limited partnership	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	By:	 	EDR Tucson, LLC, a Delaware limited liability

company, its general partner	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	By:	 	EDR Tucson, Inc.,
a Delaware corporation, its manager	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	/s/ Olan Brevard
 

	 	 
	 

	 	 	 	 	 	 	 	Name: Olan Brevard

Title:   Vice President	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	EDR MURFREESBORO, LLC, a Delaware limited

liability company	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	By:	 	EDR Manager, LLC, a Delaware limited liability

company, its Manager	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	By:	 	Education Realty Operating Partnership, LP,

a Delaware limited partnership, its Manager	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	Education Realty OP GP, Inc., a Delaware

corporation, its General Partner	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	/s/ Olan Brevard	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Name: Olan Brevard

Title:   Vice President	 	 





 


S-4 









 






	 	 	 	 	 	 	 	 	 	 	 
	 	 	EDR AUBURN, LLC, a Delaware limited liability

company	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	By:	 	EDR Manager, LLC, a Delaware limited liability

company, its Manager	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	By:	 	Education Realty Operating Partnership, LP,

a Delaware limited partnership, its Manager	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	Education Realty OP GP, Inc., a Delaware

corporation, its General Partner	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	/s/ Olan Brevard
 

	 	 
	 

	 	 	 	 	 	 	 	Name: Olan Brevard

Title:   Vice President	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	EDR STATESBORO, LLC, a Delaware limited liability

company	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	By:	 	EDR Manager, LLC, a Delaware limited liability

company, its Manager	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	By:	 	Education Realty Operating Partnership, LP,

a Delaware limited partnership, its Manager	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	Education Realty OP GP, Inc., a Delaware

corporation, its General Partner	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	/s/ Olan Brevard
 

	 	 
	 

	 	 	 	 	 	 	 	Name: Olan Brevard

Title:   Vice President	 	 






[Signatures continue on following page.]




 


S-5 









 







	 	 	 	 	 	 	 	 	 	 	 
	 	 	GUARANTOR:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	EDUCATION REALTY OPERATING PARTNERSHIP, LP,
a Delaware limited partnership	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	By:	 	Education Realty OP GP, Inc.

a Delaware corporation, its general partner	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	By:
	 	/s/ Olan Brevard
 

	 	 
	 

	 	 	 	 	 	Name: Olan Brevard

Title:   Vice President	 	 






	 	 	 	 	 	 	 
	 	 	EDUCATION REALTY TRUST, INC., a Maryland corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Olan Brevard
 

	 	 
	 

	 	 	 	Name: Olan Brevard

Title:   Vice President	 	 






[Signatures continue on following page.]




 


S-6 









 







	 	 	 	 	 
	 	LENDER:



RED MORTGAGE CAPITAL, INC., an Ohio corporation

 	 
	 	By:  	/s/ R. Barth Kallmerten
 	 
	 	 	Name:  	R. Barth Kallmerten 	 
	 	 	Title:  	Senior Managing Director 	 



 


S-7 









 





Schedule 1




List of Borrowers




EDR Wabash Limited Partnership

EDR Stillwater Limited Partnership

EDR Lubbock Limited Partnership

EDR Columbus Limited Partnership

EDR Columbia Limited Partnership

EDR Western Michigan Limited Partnership

EDR Knoxville Limited Partnership

EDR Murfreesboro, LLC

EDR State College Limited Partnership

EDR Tampa Limited Partnership

EDR Tucson Phase II Limited Partnership

EDR Auburn, LLC

EDR Statesboro, LLC





 


Schedule 1-1 











 




APPENDIX I




DEFINITIONS




For all purposes of the Agreement, the following terms shall have the respective meanings set forth
below:



“Acquiring Person” means a “person” or “group of persons” within the meaning of
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended.



“Addition Fee” means, with respect to an Additional Mortgaged Property added to the
Collateral Pool in accordance with Section 3.02, the product of —




	 	(i)	 	40 basis points, multiplied by 

	 
	 	(ii)	 	the Allocable Facility Amount of the Additional Mortgaged Property, as determined by Lender.







“Addition Loan Documents” means the Security Instrument covering an Additional
Mortgaged Property and any other documents, instruments or certificates reasonably required by
Lender in form and substance satisfactory to Lender and Borrower in connection with the addition of
the Additional Mortgaged Property to the Collateral Pool pursuant to Article 3.



“Addition Request” means a written request, substantially in the form of Exhibit
M to the Agreement, to add Additional Mortgaged Properties to the Collateral Pool as set forth
in Section 3.02(a).



“Additional Borrower” means the owner of an Additional Mortgaged Property or a
Substitute Mortgaged Property, which entity has been approved by Lender and becomes a Borrower
under the Agreement and the applicable Loan Documents and their permitted successors and assigns.




“Additional Collateral” shall have the meaning given that term in Section 6.13.



“Additional Collateral Due Diligence Deposit” shall have the meaning given that term
in Section 10.04(b).



“Additional Collateral Due Diligence Fees” means the due diligence fees paid by
Borrower to Lender with respect to each Additional Mortgaged Property, as set forth in Section
10.04(b).



“Additional Mortgaged Property” means each Rental Property owned by Borrower (either
in fee simple or as tenant under a ground lease meeting all of Lender’s requirements for similar
loans anticipated to be sold to Fannie Mae) and added to the Collateral Pool after the Initial
Closing Date pursuant to Article 3.


 


Appendix I-1 









 





“Adjustable Rate” in connection with a particular Variable Structured ARM Advance has
the meaning given such term in the applicable Variable Facility Note.



“Advance” means a Variable Advance (including a Rollover Variable Advance) and/or a
Fixed Advance.



“Advance Amount” means the lesser of (a) the amount that would result in an Aggregate
Loan to Value Ratio of 75% or (b) (i) if a Variable Advance, the amount that would result in an
Aggregate Debt Service Coverage Ratio as permitted under the Coverage and LTV Test for the portion
of the Commitment that will be the Variable Facility Commitment (using a prorated portion of the
Net Operating Income and using the Facility Debt Service for only the Variable Facility Commitment
in making such determination of Aggregate Debt Service Coverage Ratio), provided that such amount
shall not exceed 103% of the amount that would result using the calculation set forth in (ii)
below, and (ii) if a Fixed Advance, the amount that would result in an Aggregate Debt Service
Coverage Ratio as permitted under the Coverage and LTV Test for the portion of the Commitment that
will be the Fixed Facility Commitment (using a prorated portion of the Net Operating Income and
using the Facility Debt Service for only the Fixed Facility Commitment in making such determination
of Debt Service Coverage Ratio) or (c) the amount determined by Lender which is based upon an exit
strategy analysis pursuant to the Underwriting Requirements.



“Advance Request” means a written request, substantially in the form of Exhibit L
to the Agreement, for an Advance made pursuant to Section 2.04.



“Affiliate” means, as applied to any Person, any other Person directly or indirectly
controlling, controlled by, or under common control with, that Person. For the purposes of this
definition, “control” (including with correlative meanings, the terms “controlling,” “controlled
by” and “under common control with”), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management (other than property
management) and policies of that Person, whether through the ownership of voting securities,
partnership interests or by contract or otherwise.



“Aggregate Debt Service Coverage Ratio” means, for any specified date, the ratio
(expressed as a percentage) of —




(a) the aggregate of the Net Operating Income for the Mortgaged Properties



to





(b) the Facility Debt Service on the specified date.



“Aggregate Loan to Value Ratio” means, for any specified date, the ratio (expressed as
a percentage) of —



(a) the Advances Outstanding on the specified date,



to




(b) the aggregate of the Valuations most recently obtained prior to the specified
date for all of the Mortgaged Properties.


 


Appendix I-2 









 










“Agreement” means this Master Credit Facility Agreement, as it may be amended,
restated, supplemented or otherwise modified from time to time, including all Recitals and Exhibits
to the Agreement, each of which is hereby incorporated into the Agreement by this reference.



“Allocable Facility Amount” means the portion of the Credit Facility allocated to a
particular Mortgaged Property by Lender in accordance with the Agreement.




“Amortization Period” means a period of thirty (30) years.



“Applicable Law” means (a) all applicable provisions of all constitutions, statutes,
rules, regulations and orders of all governmental bodies, all Governmental Approvals and all
orders, judgments and decrees of all courts and arbitrators, (b) all zoning, building,
environmental and other laws, ordinances, rules, regulations and restrictions of any Governmental
Authority affecting the ownership, management, use, operation, maintenance or repair of any
Mortgaged Property, including the Americans with Disabilities Act (if applicable), the Fair Housing
Amendment Act of 1988 and Hazardous Materials Laws (as defined in the Security Instrument), (c) any
building permits or any conditions, easements, rights-of-way, covenants, restrictions of record or
any recorded or unrecorded agreement affecting or concerning any Mortgaged Property including
planned development permits, condominium declarations, and reciprocal easement and regulatory
agreements with any Governmental Authority, (d) all laws, ordinances, rules and regulations,
whether in the form of rent control, rent stabilization or otherwise, that limit or impose
conditions on the amount of rent that may be collected from the units of any Mortgaged Property,
and (e) requirements of insurance companies or similar organizations, affecting the operation or
use of any Mortgaged Property or the consummation of the transactions to be effected by the
Agreement or any of the other Loan Documents.



“Appraisal” means an appraisal of Rental Property conforming to the requirements of
Lender for similar loans anticipated to be sold to Fannie Mae and accepted by Lender.




“Appraised Value” means the value set forth in an Appraisal.



“Assignment and Subordination of Management Agreement” means the Master Assignment and
Subordination of Management Agreement required by Lender and satisfying Lender’s requirements, as
the same may be amended, restated, modified or supplemented from time to time.



“Assignment of Leases and Rents” means an Assignment of Leases and Rents, required by
Lender and satisfying Lender’s requirements, as the same may be amended, restated, modified or
supplemented from time to time.


 


Appendix I-3 









 





“Bankruptcy Code” means Title 11 of the United States Code entitled “Bankruptcy” as
now and hereafter in effect, or any successor statute.




“Bankruptcy Event” shall have the meaning set forth in Section 14.01(b).



“Borrower” means individually and collectively, the Initial Borrower and any
Additional Borrower becoming a party to the Agreement and any other Loan Documents, together with
their permitted successors and assigns.




“Borrower Agent” means EROP Guarantor.




“Borrower Parties” means collectively, Borrower and Guarantor.




“Business Day” means a day on which Fannie Mae and Servicer is open for business.



“Calendar Quarter” means, with respect to any year, any of the following three month
periods: (a) January-February-March; (b) April-May-June; (c) July-August-September; and (d)
October-November-December.



“Calendar Year” means the 12-month period from the first day of January to and
including the last day of December, and each 12-month period thereafter.



“Cap Rate” means, for each Mortgaged Property, a capitalization rate selected by
Lender for use in determining the Valuations, which rate is determined as set forth in Section
2.05(b).



“Cash Collateral Account” means the cash collateral account established pursuant to
the Cash Collateral Agreement.



“Cash Collateral Agreement” means a cash collateral, security and custody agreement by
and among Fannie Mae, Borrower and a collateral agent for Fannie Mae in the form attached as
Exhibit U to the Agreement, as the same may be amended, modified or supplemented from time
to time.




“Cash Equivalents” means




(a) securities issued or fully guaranteed or insured by the United States Government or
any agency thereof and backed by the full faith and credit of the United States having
maturities of not more than twelve (12) months from the date of acquisition; and




(b) certificates of deposit, time deposits, demand deposits, eurodollar time deposits,
repurchase agreements, reverse repurchase agreements, or bankers’ acceptances, having in
each case a term of not more than twelve (12) months, issued by any commercial bank having
membership in the FDIC, or by any U.S. commercial lender (or any branch or agency of a
non-U.S. bank licensed to conduct business in the U.S.) having
combined capital and surplus of not less than $100,000,000 whose short-term securities
are rated at least A-1 by S&P or P-1 by Moody’s;


 


Appendix I-4 









 






(c) commercial paper of an issuer rated at least A-1 by S&P or P-1 by Moody’s and in
either case having a term of not more than twelve (12) months; and




(d) the amount that a borrower has the right to draw under any line of credit, pursuant
to its terms on any specified date.



“Cash Interest Rate” means a rate of interest, per annum, established by Fannie Mae
for cash loans of similar characteristics then offered by Fannie Mae.



“Certificate of Borrower Parties” means that certain Master Certificate of Borrower
Parties executed by the Borrower Parties as of the date hereof, and which must be executed and
delivered by the Borrower Parties to Lender from time to time in accordance with the terms of this
Agreement, the form of which certificate shall be the same or substantially similar to which the
Borrower Parties execute as of the date hereof.



“Change of Control” means the earliest to occur of: (a) the date on which an Acquiring
Person becomes (by acquisition, consolidation, merger or otherwise), directly or indirectly, the
beneficial owner of more than twenty five percent (25%) of the total ownership interest of Borrower
or Guarantor then outstanding, or (b) the replacement (other than solely by reason of retirement at
age sixty-five or older, death or disability) of more than fifty percent (50%) (or such lesser
percentage as is required for decision-making by the board of directors or an equivalent governing
body) of the members of the board of directors (or an equivalent governing body) of Borrower or
Guarantor over a one-year period from the directors who constituted such board of directors at the
beginning of such period and such replacement shall not have been approved by a vote of at least a
majority of the board of directors of Borrower or Guarantor then still in office who either were
members of such board of directors at the beginning of such one-year period or whose election as
members of the board of directors was previously so approved (it being understood and agreed that
in the case of any entity governed by a trustee, board of managers, or other similar governing
body, the foregoing clause (b) shall apply thereto by substituting such governing body and the
members thereof for the board of directors and members thereof, respectively) or (c) (i) both Paul
O. Bower and Randall H. Brown are no longer part of the Senior Management of Guarantor or (ii) both
Thomas J. Hickey and Craig L. Cardwell are no longer part of the Senior Management of Guarantor or
(iii) any two of Paul O. Bower, Randall H. Brown, Thomas J. Hickey and Craig L. Cardwell are no
longer part of the Senior Management of Guarantor.



“Closing Date” means the Initial Closing Date and each date after the Initial Closing
Date on which the funding or other transaction requested in a Request is required to take place.



“Collateral” means the Mortgaged Properties and other collateral from time to time or
at any time encumbered by the Security Instruments, or any other property securing Borrower’s
obligations under the Loan Documents.


 


Appendix I-5 









 






“Collateral Pool” means all of the Collateral.



“Commitment” means, at any time, the sum of the Fixed Facility Commitment and the
Variable Facility Commitment.



“Complete Fixed Facility Termination” shall have the meaning set forth in Section
5.02(a).



“Complete Variable Facility Termination” shall have the meaning set forth in
Section 5.02(a).



“Compliance Certificate” means a certificate of Borrower substantially in the form of
Exhibit F to the Agreement.



“Completion/Repair and Security Agreement” means a Master Completion/Repair and
Security Agreement required by Lender and satisfying Lender’s requirements, as the same may be
amended, restated, modified or supplemented from time to time.



“Confirmation of Guaranty” means a confirmation of the Guaranty executed by Guarantor
in connection with any Request after the Initial Closing, substantially in the form of Exhibit
E to the Agreement.



“Confirmation of Obligations” means a Confirmation of Obligations delivered in
connection with the addition of an Additional Mortgaged Property or a Substitute Mortgaged Property
to the Collateral Pool or a release of a Release Mortgaged Property from the Collateral Pool, dated
as of the Closing Date for each such addition, signed by Borrower and Guarantor, pursuant to which
Borrower and Guarantor confirm their obligations under the Loan Documents, substantially in the
form of Exhibit N to the Agreement.



“Contribution Agreement” means the Contribution Agreement by and among Initial
Borrower and each Additional Borrower, as the same may be amended, restated, modified or
supplemented from time to time.



“Controlled” (or any variation of such term) of one entity (the “controlled entity”)
by another (the “controlling entity”) means that the controlling entity has the power and
authority, directly or indirectly, to direct or cause the direction of the management and policies
of the controlled entity, by contract or otherwise.



“Controlled Group” means all members of a controlled group of corporations and all
trades or businesses (whether or not incorporated) under common control which, together with the
Borrower, are treated as a single employer under Section 414 of the Internal Revenue Code.



“Conversion Amendment” means the Master Credit Facility Agreement Conversion
Amendment, substantially in the form of Exhibit I to the Agreement, reflecting the
conversion of
all or any portion of the Variable Facility Commitment to the Fixed Facility Commitment as set
forth in Section 1.08.


 


Appendix I-6 









 





“Conversion Documents” means the Conversion Amendment, together with an amendment to
each Security Document if required by Lender and other applicable Loan Documents, in form and
substance satisfactory to Lender, reflecting the change in the Fixed Facility Commitment and the
Variable Facility Commitment pursuant to Section 1.08.



“Conversion Request” means a written request, substantially in the form of Exhibit
H to the Agreement, to convert all or any portion of the Variable Facility Commitment to the
Fixed Facility Commitment pursuant to Section 1.08.



“Coupon Rate” means, with respect to a Variable DMBS Advance, the imputed interest
rate determined by Lender pursuant to Section 1.05.




“Coverage and LTV Tests” mean, each of the following financial tests:



(a) The Aggregate Debt Service Coverage Ratio is not less than (i) 1.30:1.0 during the period
of time from the Initial Closing Date to (and including) the Third Anniversary, 1.35:1.0 during the
period of time from the Third Anniversary to (and including) the Sixth Anniversary and 1.40:1
during the period of time from the Sixth Anniversary to (and including) the Fifteenth Anniversary
with respect to the amount of the Advances drawn from the Fixed Facility Commitment, and (ii)
1.05:1.0 during the period of time from the Initial Closing Date to (and including) the Third
Anniversary, 1.10:1.0 during the period of time from the Third Anniversary to (and including) the
Sixth Anniversary, and 1.15:1.0 during the time of time from the Sixth Anniversary to (and
including) the Fifteenth Anniversary with respect to the amount of the Advances drawn from the
Variable Facility Commitment.



(b) The Aggregate Loan to Value Ratio, on any date, does not exceed seventy-five percent
(75%).




“Credit Facility” means the Fixed Facility and the Variable Facility.



“Credit Facility Termination Documents” means the instruments releasing the Security
Instruments as liens on the Mortgaged Properties, UCC-3 Termination Statements terminating the
UCC-1 Financing Statements in favor of Lender, and such other documents and instruments necessary
to evidence the release of the Collateral from any lien securing the Obligations, and the Notes,
all in connection with the termination of the Agreement and the Credit Facility pursuant to
Article 5.



“Credit Facility Termination Request” means a written request, substantially in the
form of Exhibit R to the Agreement, to terminate the Agreement and the Credit Facility
pursuant to Section 5.04(a).



“Debt Service Amounts” shall have the meaning set forth in Section 14.01(a).


 


Appendix I-7 









 





“Debt Service Coverage Ratio” means, for any Mortgaged Property, for any specified
date, the ratio (expressed as a percentage) of —




(a) the Net Operating Income for the specified period for the subject Mortgaged Property, as
determined in accordance with this Agreement



to





(b) the Facility Debt Service on the specified date, assuming, for the purpose of
calculating the Facility Debt Service for this definition, that Advances Outstanding shall
be the Allocable Facility Amount for the subject Mortgaged Property.



“Dedicated Student Housing Property” means a residential property, located in the
United States, containing five or more dwelling units in which not more than twenty percent (20%)
of the net rentable area is or will be rented to non-residential tenants, and conforming to Fannie
Mae’s then current guidelines, provided that eighty percent (80%) or more of the dwelling units are
leased to undergraduate and/or graduate students.



“Deficient Mortgaged Properties” means the Mortgaged Property known as The Pointe at
Western.



“Discount” means, with respect to any Variable DMBS Advance, an amount equal to the
excess of —




	 	(i)	 	the face amount of the DMBS backed by the Variable DMBS Advance, over

	 
	 	(ii)	 	the Price of the DMBS backed by the Variable DMBS Advance.






“DMBS” means a mortgage-backed security issued by Fannie Mae which is “backed” by an
Advance and has an interest in the Notes and the Collateral Pool securing the Notes, which interest
permits the holder of the DMBS to participate in the Notes and the Collateral Pool to the extent of
such Advance.




“DMBS Commitment” shall have the meaning set forth in Section 2.01(c).




“DMBS Imputed Interest Rate” shall have the meaning set forth in Section 1.05.




“DMBS Issue Date” means the date on which an DMBS is issued by Fannie Mae.




“DMBS Delivery Date” means the date on which an DMBS is delivered by Fannie Mae.



“DUS Guide” means the Fannie Mae Delegated Underwriting and Servicing Guide in its
present form and as amended, modified, supplemented or reissued from time to time (all references
to Parts, Chapters, Sections and other subdivisions of the DUS Guide shall be deemed references to
(i) the Parts, Chapters, Sections and other subdivisions in effect on the date of the
Agreement and (ii) any successor provisions to such Parts, Chapters, Sections and other
subdivisions.


 


Appendix I-8 









 





“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from
time to time, and the regulations promulgated thereunder.




“EROP Guarantor” means Education Realty Operating Partnership, LP.



“Event of Default” means any event defined to be an “Event of Default” under
Article 11.



“Expansion” means an increase in the Commitment made in accordance with
Article 4.



“Expansion Loan Documents” means an additional Variable Facility Note or Fixed
Facility Note, as the case may be, increasing the amount of such Note to the amount of the
Commitment, as increased in accordance with Article 4 and amendments to the Security
Instruments, increasing the maximum amount to be secured by such Security Instruments to the amount
of the Commitment.




“Expansion Origination Fee” has the meaning set forth in Section 10.03(b).



“Expansion Request” means a written request, substantially in the form of
Exhibit O to the Agreement, to obtain an Expansion pursuant to Article 4.




“Facility Debt Service” means —




(a) For use in determining the additional borrowing capacity created by the addition
of Additional Mortgaged Properties, the sum of the amount of interest and principal
amortization, during the twelve (12) month period immediately succeeding the
specified date, with respect to the Advances Outstanding on the specified date and
Advances to be obtained as a result of the Addition of Additional Mortgaged
Properties, except that, for these purposes:




	 	(A)	 	each Variable DMBS Advance Outstanding shall be deemed to require level
monthly payments of principal and interest (at an interest rate equal to
(A) the Three-Month LIBOR rate on the specified date plus (B) the Variable
Facility Fee plus (C) up to 300 basis points plus (D) any Monthly Cap Escrow
Payment for the succeeding twelve (12) month period) in an amount necessary
to fully amortize the original principal amount of the Variable Facility
Commitment with respect to a Variable DMBS Advance over the Amortization
Period, with such amortization deemed to commence on the first day of the
twelve (12) month period; and





 


Appendix I-9 









 











	 	(B)	 	each Variable Structured ARM Advance
Outstanding shall be deemed to require level monthly payments of
principal and interest
(at an interest rate equal to (A) the One-Month LIBOR or Three-Month
LIBOR rate (as applicable) on the specified date plus (B) the
Variable Facility Fee plus (C) the Margin plus (D) up to 300 basis
points plus (E) any Monthly Cap Escrow Payment for the succeeding
twelve (12) month period) in an amount necessary to fully amortize
the original principal amount of the Variable Facility Commitment
with respect to a Variable Structured ARM Advance over the
Amortization Period deemed to commence on the first day of the twelve
(12) month period; and

	 
	 	(C)	 	each Fixed Advance Outstanding shall require
level monthly payments of principal and interest (at the Cash Interest
Rate for the Fixed Advance) in an amount necessary to fully amortize
the original principal amount of the Fixed Advance over the
Amortization Period, with such amortization to commence on the first
day of the twelve (12) month period; and

	 
	 	(D)	 	each Fixed Advance to be obtained shall be
deemed to require level monthly payments of principal and interest at a
rate equal to the estimated Cash Interest Rate for such Fixed Advance
in an amount necessary to fully amortize the original principal amount
of such Fixed Advance over the Amortization Period, with such
amortization deemed to commence on the first day of the twelve (12)
month period.







(b) For use in determining the Aggregate Debt Service Coverage Ratio,
for purposes of determining compliance with the Coverage and LTV Tests, for
purposes of determining Liquidity and for other ongoing monitoring purposes,
and for purposes of determining Release Prices pursuant to Section
3.04(c) as of any specified date, the sum of:




the amount of interest and principal amortization, during the twelve (12)
month period immediately succeeding the specified date, with respect to the
Advances Outstanding on the specified date, except that, for these purposes:




	 	(A)	 	each Variable DMBS Advance shall be deemed to
require level monthly payments of principal and interest (at the Coupon
Rate for such Variable DMBS Advance) in an amount necessary to fully
amortize the original principal amount of the Variable DMBS Advance
over the Amortization Period, with such amortization deemed to commence
on the first day of the twelve (12) month period; and





 


Appendix I-10 









 











	 	(B)	 	each Variable Structured ARM Advance shall be
deemed to require level monthly payments of principal and interest (at
the Adjustable Rate for such Variable Structured ARM Advance) in an
amount necessary to fully amortize the original principal amount of the
Variable Structured ARM Advance over the Amortization Period, with such
amortization deemed to commence on the first day of the twelve (12)
month period; and







	 	(C)	 	each Fixed Advance shall require level monthly
payments of principal and interest (at the Cash Interest Rate for such
Fixed Advance) in an amount necessary to fully amortize the original
principal amount of the Fixed Advance over the Amortization Period,
with such amortization to commence on the first day of the twelve (12)
month period.






“Facility Termination Document” means the Amendment of the Master Credit Facility
Agreement, substantially in the form of Exhibit Q to the Agreement, evidencing the
permanent reduction in the Facility Commitment pursuant to Section 5.02.



“Facility Termination Request” means a written request, substantially in the form of
Exhibit P to the Agreement, for a permanent reduction in the Variable Facility Commitment
or the Fixed Facility Commitment pursuant to Section 5.02.



“Fannie Mae” means the body corporate duly organized under the Federal National
Mortgage Association Charter Act, as amended, 12 U.S.C. §1716 et seq. and duly
organized and existing under the laws of the United States.



“Fees” means Addition Fee, Additional Collateral Due Diligence Fees, Occupancy
Deficiency Origination Fee, Expansion Origination Fee, Initial Due Diligence Fees, Initial
Origination Fee, Release Fee, Substitution Fee, Variable Facility Fee, LOC Fee and any and all
other fees specified in the Agreement.



“Fifteenth Anniversary” means the date that is fifteen (15) years from the Initial
Closing Date.




“First Anniversary” means the date that is one year after the Initial Closing Date.



“Fixed Advance” means a loan made by Lender to Borrower under the Fixed Facility
Commitment.



“Fixed Facility” means the agreement of Lender to make Fixed Advances to Borrower
pursuant to Section 1.01.



“Fixed Facility Availability Period” means the period beginning on the Initial Closing
Date and ending on the date one (1) year after the Initial Closing Date.


 


Appendix I-11 









 




“Fixed Facility Commitment” means an aggregate amount of $147,861,000 which shall be
evidenced by the Fixed Facility Notes plus such amount as is added to or converted to the Fixed
Facility Commitment in accordance with Section 1.08 and Article 4 and less such
amount by which the Fixed Facility Commitment is reduced in accordance with Article 5.



“Fixed Facility Note” means a promissory note (together with all schedules, riders,
allonges, addenda, renewals, extensions, amendments and modifications thereto) which will be issued
by Borrower to Lender, concurrently with the funding of each Fixed Advance, to evidence Borrower’s
obligation to repay the Fixed Advance, and which promissory note will be the same or substantially
similar in form to the promissory note issued by Borrower to Lender in connection with the Fixed
Advance made on the Initial Closing Date.




“Future Advance” means an Advance made after the Initial Closing Date.



“GAAP” means generally accepted accounting principles in the United States in effect
from time to time, consistently applied.




“General Conditions” shall have the meaning set forth in Article 6.




“Geographical Diversification Requirements” shall mean:



(a) no more than 10% of the units in the Collateral Pool shall be located at Mortgaged
Properties dependent on students from colleges or universities with fewer than 10,000 students; and



(b) no more than 25% of the units in the Collateral Pool shall be located at Mortgaged
Properties dependent on students from colleges or universities with fewer than 17,000 students; and



(c) no more than 20% of the then Outstanding Advances shall be allocated to Mortgaged
Properties dependent on students from any one college or university; and



(d) the Mortgaged Properties in the Collateral Pool must be located in at least five (5)
states.



“Governmental Approval” means an authorization, permit, consent, approval, license,
registration or exemption from registration or filing with, or report to, any Governmental
Authority.



“Governmental Authority” means any court, board, agency, commission, office or
authority of any nature whatsoever for any governmental unit (federal, state, county, district,
municipal, city or otherwise) whether now or hereafter in existence.



“Gross Revenues” means, for any specified period, with respect to any Rental Property,
all income in respect of such Rental Property as reflected on the certified operating statement for
such specified period as adjusted to exclude unusual income (e.g. temporary or nonrecurring
income), income not allowed by Lender for similar loans anticipated to be sold to Fannie Mae
(e.g. interest income, furniture income, etc.), and the value of any unreflected concessions.


 


Appendix I-12 









 





“Guarantor” means REIT Guarantor and EROP Guarantor, or a substitute Guarantor
consented to by Lender.



“Guaranty” means that certain Guaranty executed by Guarantor as of the date hereof, as
the same may be amended, restated, modified or supplemented from time to time.



“Hazardous Substance Activity” means, with respect to any Mortgaged Property, any
storage, holding, existence, release, spill, leaking, pumping, pouring, injection, escaping,
deposit, disposal, dispersal, leaching, migration, use, treatment, emission, discharge, generation,
processing, abatement, removal, disposition, handling or transportation of any Hazardous Materials
(as defined in the Security Instrument) from, under, into or on such Mortgaged Property in
violation of Hazardous Materials Laws (as defined in the Security Instrument), including the
discharge of any Hazardous Materials emanating from such Mortgaged Property in violation of
Hazardous Materials Laws through the air, soil, surface water, groundwater or property and also
including the abandonment or disposal of any barrels, containers and other receptacles containing
any Hazardous Materials from or on such Mortgaged Property in violation of Hazardous Materials
Laws, in each case whether sudden or nonsudden, accidental or nonaccidental.



“Hedging Arrangement” means any interest rate swap, interest rate cap or other
arrangement, contractual or otherwise, which has the effect of an interest rate swap or interest
rate cap or which otherwise (directly or indirectly, derivatively or synthetically) hedges interest
rate risk associated with being a debtor of variable rate debt or any agreement or other
arrangement to enter into any of the above on a future date or after the occurrence of one or more
events in the future.



“Impositions” means, with respect to any Mortgaged Property, all (1) water and sewer
charges which, if not paid, may result in a lien on all or any part of the Mortgaged Property, (2)
premiums for fire and other hazard insurance, rent loss insurance and such other insurance as
Lender may require under any Security Instrument, (3) Taxes, and (4) amounts for other charges and
expenses which Lender at any time reasonably deems necessary to protect the Mortgaged Property, to
prevent the imposition of liens on the Mortgaged Property, or otherwise to protect Lender’s
interests.



 


Appendix I-13 









 





“Indebtedness” means, with respect to any Person, as of any specified date, without
duplication, all:



(a) indebtedness of such Person for borrowed money or for the deferred purchase price of
property or services (other than (i) current trade liabilities incurred in the ordinary course of
business and payable in accordance with customary practices, and (ii) for construction of
improvements to property, if such person has a non-contingent contract to purchase such property);


(b) other indebtedness of such Person that is evidenced by a note, bond, debenture or similar
instrument;



(c) obligations of such Person under any lease of property, real or personal, the obligations
of the lessee in respect of which are required by GAAP to be capitalized on a balance sheet of the
lessee or to be otherwise disclosed as such in a note to such balance sheet;



(d) obligations of such Person in respect of acceptances (as defined in Article 3 of the
Uniform Commercial Code of the District of Columbia) issued or created for the account of such
Person;



(e) liabilities secured by any Lien on any property owned by such Person even though such
Person has not assumed or otherwise become liable for the payment of such liabilities; and



(f) as to any Person (“guaranteeing person”), any obligation of (a) the guaranteeing
person or (b) another Person (including any bank under any letter of credit) to induce the creation
of a primary obligation (as defined below) with respect to which the guaranteeing person has issued
a reimbursement, counterindemnity or similar obligation, in either case guaranteeing, or in effect
guaranteeing, any indebtedness, lease, dividend or other obligation (“primary obligations”)
of any third person (“primary obligor”) in any manner, whether directly or indirectly,
including any obligation of the guaranteeing person, whether or not contingent, to (1) purchase any
such primary obligation or any property constituting direct or indirect security therefor,
(2) advance or supply funds for the purchase or payment of any such primary obligation or to
maintain working capital or equity capital of the primary obligor or otherwise to maintain the net
worth or solvency of the primary obligor, (3) purchase property, securities or services primarily
for the purpose of assuring the owner of any such primary obligation of the ability of the primary
obligor to make payment of such primary obligation, or (4) otherwise assure or hold harmless the
owner of any such primary obligation against loss in respect of the primary obligation, provided,
however, that the term “Contingent Obligation” shall not include endorsements of
instruments for deposit or collection in the ordinary course of business. The amount of any
Contingent Obligation of any guaranteeing person shall be deemed to be the lesser of (i) an amount
equal to the stated or determinable amount of the primary obligation in respect of which such
Contingent Obligation is made and (ii) the maximum amount for which such guaranteeing person may be
liable pursuant to the terms of the instrument embodying such Contingent Obligation, unless such
primary obligation and the maximum amount for which such guaranteeing person may be liable are not
stated or determinable, in which case the amount of such Contingent Obligation shall be such
guaranteeing person’s maximum reasonably anticipated liability in respect thereof as determined by
such person in good faith.



“Initial Advance” means the Fixed Advance and/or Variable Advance made on the Initial
Closing Date in the aggregate amount of $197,735,000.


 


Appendix I-14 









 





“Initial Borrower” means each Borrower under this Agreement as of the Initial Closing
Date.




“Initial Closing Date” means the date of the Agreement.




“Initial Commitment Amount” means $222,411,000.



“Initial Due Diligence Deposit” shall have the meaning set forth in Section
10.04(a).



“Initial Due Diligence Fees” shall have the meaning set forth in Section
10.04(a).



“Initial Mortgaged Properties” means the Dedicated Student Housing Properties
described on Exhibit A to the Agreement and which represent the Dedicated Student Housing
Properties which are made part of the Collateral Pool on the Initial Closing Date.



“Initial Origination Fee” shall have the meaning set forth in Section
10.03(a).



“Initial Security Instruments” means the Security Instruments covering the Initial
Mortgaged Properties.



“Initial Valuation” means, when used with reference to specified Collateral, the
Valuation initially performed for the Collateral as of the date on which the Collateral was added
to the Collateral Pool. The Initial Valuation for each of the Initial Mortgaged Properties is as
set forth in Exhibit A to the Agreement.




“Interest Rate Cap” shall have the meaning set forth in Section 1.12.



“Interest Rate Cap Documents” means the Pledge, Interest Rate Cap Agreement and any
and all other documents required pursuant thereto or hereto or as Lender shall require from time to
time in connection with Borrower’s obligation to maintain an Interest Rate Cap for the term of the
Variable Facility Commitment.



“Insurance Policy” means, with respect to a Mortgaged Property, the insurance coverage
and insurance certificates evidencing such insurance required to be maintained pursuant to the
Security Instrument encumbering the Mortgaged Property.



“Internal Revenue Code” means the Internal Revenue Code of 1986, as amended. Each
reference to the Internal Revenue Code shall be deemed to include (a) any successor internal
revenue law and (b) the applicable regulations whether final, temporary or proposed.



“Lease” means any lease, any sublease or subsublease, license, concession or other
agreement (whether written or oral and whether now or hereafter in effect) pursuant to which any
Person is granted a possessory interest in, or right to use or occupy all or any portion of any
space in any Mortgaged Property, and every modification, amendment or other agreement relating to
such lease, sublease, subsublease or other agreement entered into in connection with such lease,
sublease, subsublease or other agreement, and every guarantee of the performance
and observance of the covenants, conditions and agreements to be performed and observed by the
other party thereto.


 


Appendix I-15 









 





“Lender” means Red Mortgage Capital, Inc., an Ohio corporation and any replacement
Lender designated by Fannie Mae, and its successors and assigns.



“Letter of Credit” means a letter of credit issued by an LOC Bank satisfactory to
Fannie Mae naming Fannie Mae as beneficiary, in form and substance as attached hereto as
Exhibit V.



“LIBOR” means the London interbank offered rate for one-month, three-month, six-month,
or nine-month (as applicable) U.S. Dollar deposits, as such rate is reported in the Wall Street
Journal. In the event that a rate is not published for one-month, three-month, six-month, or
nine-month (as applicable) LIBOR, then the nearest equivalent duration London interbank offered
rate for U.S. Dollar deposits shall be selected at Lender’s reasonable discretion. If the
publication of LIBOR is discontinued, Lender shall determine such rate from another equivalent
source selected by Lender in its reasonable discretion.



“Lien” means any mortgage, deed of trust, deed to secure debt, security interest or
other lien or encumbrance (including both consensual and non-consensual liens and encumbrances).



“Liquidity” means, at any time, the amount of cash and Cash Equivalents owned by a
Person.




“Loan Document Taxes” shall have the meaning set forth in Section 8.10.



“Loan Documents” means the Agreement, the Notes, the Security Documents, the Guaranty,
all documents executed by Borrower or Guarantor pursuant to the General Conditions set forth in
Section 6.01 of the Agreement and any other documents executed by Borrower or Guarantor
from time to time in connection with the Agreement or the transactions contemplated by the
Agreement.



“Loan to Value Ratio” means, for a Mortgaged Property, for any specified date, the
ratio (expressed as a percentage) of —




(a) the Allocable Facility Amount of the subject Mortgaged Property on the specified date,



to





(b) the Valuation most recently obtained prior to the specified date for the subject
Mortgaged Property.



“LOC Bank” means any financial institution issuing the Letter of Credit and meeting
the requirements set forth in Section 6.15(a).


 


Appendix I-16 









 





“Margin” means the spread over One-Month LIBOR or Three-Month LIBOR (as applicable) as
determined by Lender.



“Material Adverse Effect” means, with respect to any circumstance, act, condition or
event of whatever nature (including any adverse determination in any litigation, arbitration, or
governmental investigation or proceeding), whether singly or in conjunction with any other event or
events, act or acts, condition or conditions, or circumstance or circumstances, whether or not
related, a material adverse change in or a materially adverse effect upon any of (a) the business,
operations, property or condition (financial or otherwise) of Borrower or Guarantor, as applicable,
to the extent specifically referred to in the applicable provision of the applicable Loan Document,
(b) the present or future ability of Borrower to perform the Obligations for which it is liable, or
of Guarantor to perform its obligations under the Guaranty, as the case may be, to the extent
specifically referred to in the applicable provision of the applicable Loan Document, (c) the
validity, priority, perfection or enforceability of the Agreement or any other Loan Document or the
rights or remedies of Lender under any Loan Document, or (d) the value of, or Lender’s ability to
have recourse against, any Mortgaged Property.



“Maximum Annual Coupon Rate” shall have the meaning set forth in Section
2.01(b).



“Monthly Cap Escrow Payment” shall have the same meaning as the term “Monthly Deposit”
in the Pledge, Interest Rate Cap Agreement.



“Moody’s” means Moody’s Investors Service, Inc., a corporation organized and existing
under the laws of the State of Delaware, and its successors and assigns, if such successors and
assigns shall continue to perform the functions of a securities rating agency.



“Mortgaged Properties” means, collectively, the Additional Mortgaged Properties, the
Substitute Mortgaged Properties, and the Initial Mortgaged Properties, but excluding each Release
Mortgaged Property from and after the date of its release from the Collateral Pool.




“Multiemployer Plan” has the meaning set forth in Section 4001(a)(3) of ERISA.



“Multifamily Residential Property” means a residential property, located in the United
States, containing five or more dwelling units in which not more than twenty percent (20%) of the
net rentable area is or will be rented to non-residential tenants, and conforming to Fannie Mae’s
then current guidelines.



“Net Operating Income” means, for any specified period, with respect to any Mortgaged
Property, the aggregate net income during such period equal to Gross Revenues during such period
less the aggregate Operating Expenses during such period. If a Mortgaged Property is not owned by
a Borrower or an Affiliate of a Borrower for the entire specified period, the Net Operating Income
for the Mortgaged Property for the time within the specified period during which the Mortgaged
Property was owned by a Borrower or an Affiliate of a Borrower shall be the Mortgaged Property’s
pro forma net operating income determined by Lender in accordance
with the underwriting procedures set forth by Lender for similar loans anticipated to be sold
to Fannie Mae.


 


Appendix I-17 









 





“Net Worth” means, as of any specified date, for any Person, the excess of the
Person’s assets over the Person’s liabilities, determined in accordance with GAAP on a consolidated
basis, provided that all real property shall be valued on an undepreciated basis.



“Non-Dedicated Student Housing Property” means a residential property, located in the
United States, containing five or more dwelling units in which not more than twenty percent (20%)
of the net rentable area is or will be rented to non-residential tenants, and conforming to Fannie
Mae’s then current guidelines, provided that more than twenty percent (20%) and less than eighty
percent (80%) of the dwelling units are leased to undergraduate and or graduate students.




“Note” means any Fixed Facility Note and/or any Variable Facility Note.



“Obligations” means the aggregate of the obligations of Borrower and Guarantor under
the Agreement and the other Loan Documents.



“Occupancy Deficiency Origination Fee” means fifty (50) basis points (.5%) multiplied
by the Allocated Facility Amount for the Deficient Mortgaged Properties on the Initial Closing Date
or for such Deficient Mortgaged Properties as Lender shall determine pursuant to Section 10.02(b).



“One-Month LIBOR” means the London interbank offered rate for One-Month U.S. Dollar
deposits, as such rate is reported in the Wall Street Journal. In the event that a rate is not
published for One-Month LIBOR, then the nearest equivalent duration London interbank offered rate
for U.S. Dollar deposits shall be selected at Lender’s reasonable discretion. If the publication
of One-Month LIBOR is discontinued, Lender shall determine such rate from another equivalent source
selected by Lender in its reasonable discretion.



“Operating Expenses” means, for any period, with respect to any Mortgaged Property,
all expenses in respect of such Mortgaged Property, as determined by Lender based on the certified
operating statement for such specified period as adjusted to provide for the following: (i) all
appropriate types of expenses, including a management fee, deposits for the replacement reserves
(whether funded or not), and deposits for completion/repair reserves are included in the total
operating expense figure; (ii) upward adjustments to individual line item expenses to reflect
market norms or actual costs and correct any unusually low expense items, which could not be
replicated by a different owner or manager (e.g., a market rate management fee will be
included regardless of whether or not a management fee is charged, market rate payroll will be
included regardless of whether shared payroll provides for economies, etc.); and (iii) downward
adjustments to individual line item expenses to reflect unique or aberrant costs (e.g.,
non-recurring capital costs, non-operating borrower expenses, etc.).


 


Appendix I-18 









 





“Organizational Certificate” means, collectively, certificates from Borrower and
Guarantor to Lender, in the form of Exhibits G-1 and G-2 to the Agreement,
certifying as to certain organizational matters with respect to each Borrower and Guarantor.



“Organizational Documents” means all certificates, instruments and other documents
pursuant to which an organization is organized or operates, including but not limited to, (i) with
respect to a corporation, its articles of incorporation and bylaws, (ii) with respect to a limited
partnership, its limited partnership certificate and partnership agreement, (iii) with respect to a
general partnership or joint venture, its partnership or joint venture agreement and (iv) with
respect to a limited liability company, its articles of organization and operating agreement.



“Outstanding” or “outstanding” means, when used in connection with promissory
notes, other debt instruments or Advances, for a specified date, promissory notes or other debt
instruments which have been issued, or Advances which have been made, to the extent not repaid in
full as of the specified date.



“Ownership Interests” means, with respect to any entity, any ownership interests in
the entity and any economic rights (such as a right to distributions, net cash flow or net income)
to which the owner of such ownership interests is entitled.



“PBGC” means the Pension Benefit Guaranty Corporation or any entity succeeding to any
or all of its functions under ERISA.



“Permits” means all permits, or similar licenses or approvals issued and/or required
by an applicable Governmental Authority or any Applicable Law in connection with the ownership,
use, occupancy, leasing, management, operation, repair, maintenance or rehabilitation of any
Mortgaged Property or any Borrower’s business.



“Permitted Liens” means, with respect to a Mortgaged Property, (i) the exceptions to
title to the Mortgaged Property set forth in the Title Insurance Policy for the Mortgaged Property
which are approved by Lender (ii) residential Leases for student housing, (iii) the Security
Instrument encumbering the Mortgaged Property, (iv) any other Liens approved by Lender, (v)
mechanics liens provided the same is removed or bonded within thirty (30) days of notice of filing,
and (vi) real estate taxes and water and sewer and other utility charges that are a lien but not
yet due and payable.



“Person” means an individual, an estate, a trust, a corporation, a partnership, a
limited liability company or any other organization or entity (whether governmental or private).



“Plan” means at any time an employee pension benefit plan which is covered by Title IV
of ERISA or subject to the minimum funding standards under Section 412 of the Internal Revenue Code
and is either (i) maintained by a member of the Controlled Group for employees of any member of the
Controlled Group or (ii) maintained pursuant to a collective bargaining agreement or any other
agreement under which more than one employer makes contributions and
to which a member of the Controlled Group is then making or accruing an obligation to make
contributions or has within the preceding five (5) plan years made contributions.


 


Appendix I-19 









 





“Pledge, Interest Rate Cap Agreement” means that certain Pledge, Interest Rate Cap
Reserve and Security Agreement executed by the Borrowers as of the date hereof, as the same may be
amended, restated, modified or supplemented from time to time.



“Potential Event of Default” means any event that, with the giving of notice or the
passage of time, or both, would constitute an Event of Default.



“Price” means, with respect to an Advance, the proceeds of the sale of the DMBS backed
by the Advance.



“Prohibited Person” means (i) a Person that is the subject of, whether voluntary or
involuntary, any case, proceeding or other action against such Person under any existing or future
law of any jurisdiction relating to bankruptcy, insolvency, reorganization or relief of debtors, or
(ii) any Person with whom Lender or Fannie Mae is prohibited from doing business pursuant to any
law, rule, regulation, judicial proceeding or administrative directive, or (iii) any Person
identified on the federal “Excluded Parties List System,” the federal “Office of Foreign Assets and
Control list, the U.S. Department of Housing and Urban Development’s Limited Denial of
Participation, HUD Funding Disqualifications and Voluntary Abstentions List,” or on the Lender’s
and/or Fannie Mae’s “Multifamily Applicant Experience Check,” each of which may be amended from
time to time and any successor or replacement thereof, or (iv) a Person that is determined by
Fannie Mae or Lender to have an unacceptable level of outstanding debt to Fannie Mae, or (v) a
Person that has caused any unsatisfactory experience of a material nature with Fannie Mae or
Lender, such as a default, fraud, intentional misrepresentation, litigation, arbitration or other
similar act, or (vi) a Person that is, or whose senior management is, the subject of any pending
criminal indictment or criminal investigation relating to an alleged felony or has ever been
convicted of a felony or held liable for fraud in a civil or criminal action or (vii) a Person that
does not meet the requirements of Section 57 of the Master Certificate of Borrower Parties.



“Property” means any estate or interest in any kind of property or asset, whether
real, personal or mixed, and whether tangible or intangible.



“Rate Change Date”, in connection with a particular Advance, has the meaning set forth
in the applicable Note.



“Rate Form” means the completed and executed document from Borrower to Lender pursuant
to Section 2.01(b), substantially in the form of Exhibit J to the Agreement,
specifying the terms and conditions of the DMBS to be issued for the requested Advance.



“Rate Setting Date” shall have the meaning set forth in Section 2.01(b).


 


Appendix I-20 









 





“Real Estate Tax Letter of Credit” means a letter of credit issued by an LOC
Bank satisfactory to Fannie Mae naming Fannie Mae as beneficiary, in form and substance as attached
hereto as Exhibit V as described in Section 13.01 of this Agreement.




“REIT Guarantor” shall mean Education Realty Trust, Inc.



“Release Documents” mean instruments releasing the applicable Security Instrument as a
Lien on a Mortgaged Property, and UCC-3 Termination Statements terminating the UCC-1 Financing
Statements, and such other documents and instruments to evidence the release of such Mortgaged
Property from the Collateral Pool.



“Release Fee” means with respect to any Release effected in accordance with Section
3.04(c), a fee in the amount of $10,000 per Release Mortgaged Property.



“Release Mortgaged Property” means the Mortgaged Property to be released pursuant to
Article 3.




“Release Price” shall have the meaning set forth in Section 3.04(c).



“Release Request” means a written request, substantially in the form of Exhibit
M to the Agreement, to obtain a release of Collateral from the Collateral Pool pursuant to
Section 3.04(a).



“Remaining Mortgaged Properties” shall have the meaning set forth in Section
6.05(g).



“Rent Roll” means, with respect to any Rental Property, a rent roll prepared and
certified by the owner of the Rental Property, on Fannie Mae Form 4243 or on another form approved
by Lender and containing substantially the same information as Form 4243 requires, it being
acknowledged that the forms attached hereto as Exhibit X are satisfactory to Lender.



“Rental Property” means a Dedicated Student Housing Property, Non-Dedicated Student
Housing Property and/or a Multifamily Residential Property, as applicable.



“Replacement Reserve Agreement” means a Master Replacement Reserve and Security
Agreement required by Lender, and satisfying Lender’s requirements, as the same may be amended,
modified or supplemented from time to time.



“Request” means an Advance Request, an Addition Request, an Expansion Request, a
Release Request, a Substitution Request, a Conversion Request, a Credit Facility Termination
Request, or a Facility Termination Request.



“Required Escrow Payments” has the meaning given that term in Section 13.01(a) of this
Agreement.



“Rescinded Payment” has the meaning given that term in Section 14.10 of this
Agreement.


 


Appendix I-21 









 





“Rollover Variable Advance” means a Variable Advance made solely to refinance an
existing Variable Advance on the maturity date of such outstanding DMBS.



“S&P” shall mean Standard & Poor’s Credit Markets Services, a division of The
McGraw-Hill Companies, Inc., a New York corporation, and its successors and assigns, if such
successors and assigns shall continue to perform the functions of a securities rating agency.



“Security” means a “security” as set forth in Section 2(1) of the Securities Act of
1933, as amended.



“Security Documents” means the Security Instruments, the Replacement Reserve
Agreement, the Completion/Repair and Security Agreement and any other documents executed by
Borrower from time to time to secure any of Borrower’s obligations under the Loan Documents.



“Security Instrument” means, for each Mortgaged Property, a Multifamily Mortgage, Deed
of Trust or Deed to Secure Debt, Assignment of Leases and Rents and Security Agreement given by a
Borrower to or for the benefit of Lender to secure the obligations of Borrower under the Loan
Documents. With respect to each Mortgaged Property owned by a Borrower, the Security Instrument
shall be substantially in the form published by Fannie Mae for use in the state in which the
Mortgaged Property is located. The amount secured by the Security Instrument shall be equal to the
Commitment in effect from time to time.



“Senior Management” means Paul O. Bower, Randall H. Brown, Thomas J. Hickey and Craig
L. Cardwell or any Person who replaces such individuals.



“Servicer” means a multifamily seller and servicer approved by Fannie Mae, which
initially shall be Red Mortgage Capital, Inc., an Ohio corporation, and any permitted successor or
assign.



“Single-Purpose” means, with respect to a Person that is any form of partnership or
corporation or limited liability company, that such Person at all times since its formation:




	 	(i)	 	has been a duly formed and existing partnership, corporation or limited
liability company, as the case may be;







	 	(ii)	 	has been duly qualified in each jurisdiction in which such qualification was at
such time necessary for the conduct of its business;







	 	(iii)	 	has complied with the provisions of its organizational documents and the laws
of its jurisdiction of formation in all respects;







	 	(iv)	 	has observed all customary formalities regarding its partnership or corporate
existence, as the case may be;





 


Appendix I-22 









 











	 	(v)	 	has accurately maintained its financial statements, accounting records and
other partnership or corporate documents separate from those of any other Person;

	 
	 	(vi)	 	has not commingled its assets or funds with those of any other Person;







	 	(vii)	 	has identified itself in all dealings with creditors (other than trade
creditors in the ordinary course of business and creditors for the construction of
improvements to property on which such Person has a non-contingent contract to purchase
such property) under its own name and as a separate and distinct entity;







	 	(viii)	 	has been adequately capitalized in light of its contemplated business operations;







	 	(ix)	 	has not assumed, guaranteed or become obligated for the liabilities of any
other Person (except in connection with the Credit Facility or the endorsement of
negotiable instruments in the ordinary course of business) or held out its credit as
being available to satisfy the obligations of any other Person;







	 	(x)	 	has not acquired obligations or securities of any other Person;







	 	(xi)	 	in relation to a Borrower, except for loans made in the ordinary course of
business to Affiliates, has not made loans or advances to any other Person;







	 	(xii)	 	has not entered into and was not a party to any transaction with any Affiliate
of such Person, except in the ordinary course of business and on terms which are no
less favorable to such Person than would be obtained in a comparable arm’s-length
transaction with an unrelated third party;







	 	(xiii)	 	has paid the salaries of its own employees, if any, and maintained a sufficient
number of employees in light of its contemplated business operations;







	 	(xiv)	 	has allocated fairly and reasonably any overhead for shared office space;







	 	(xv)	 	has not engaged in a non-exempt prohibited transaction described in Section 406
of ERISA or Section 4975 of the Internal Revenue Code; and







	 	(xvi)	 	has complied with the requirements of Section 33 of the Security Instrument.






“Sixth Anniversary” means the date that is six (6) years from the Initial Closing
Date.




“Substitution” shall have the meaning set forth in Section 3.05(a).



“Substitution Fee” means with respect to any Substitution effected in accordance with
Section 3.05, a fee which is the sum of the Addition Fee and the Release Fee.



“Substitution Request” means the written request to add a Substitute Mortgaged
Property to the Collateral Pool pursuant to Section 3.05, Section 3.06 and Section 3.07.


 


Appendix I-23 









 





“Survey” means the as-built survey of each Mortgaged Property prepared in accordance
with Lender’s requirements for similar loans that are anticipated to be sold to Fannie Mae.



“Targeted Entity” means individually and collectively, Borrower and/or any direct or
indirect owner of Borrower, including Guarantor.



“Taxes” means all taxes, assessments, vault rentals and other charges, if any,
general, special or otherwise, including all assessments for schools, public betterments and
general or local improvements, which are levied, assessed or imposed by any public authority or
quasi-public authority, and which, if not paid, will become a lien, on the Mortgaged Properties.




“Term of this Agreement” shall be determined as provided in Section 15.10.



“Termination Date” means, at any time during which Fixed Advances are Outstanding, the
latest maturity date for any Fixed Advance Outstanding, and, at any time during which Fixed
Advances are not Outstanding, the Variable Facility Termination Date.



“Third Anniversary” means the date that is three (3) years from the Initial Closing
Date.



“Three-Month LIBOR” means the London interbank offered rate for three-month U.S.
dollar deposits, as such rate is reported in The Wall Street Journal. In the event that a rate is
not published for Three-Month LIBOR, then the nearest equivalent duration London interbank offered
rate for U.S. Dollar deposits shall be selected at Lender’s reasonable discretion. If the
publication of Three-Month LIBOR is discontinued, Lender shall determine such rate from another
equivalent source selected by Lender in its reasonable discretion.




“Title Company” means First American Title Insurance Company.



“Title Insurance Policies” means the mortgagee’s policies of title insurance issued by
the Title Company from time to time relating to each of the Security Instruments, conforming to
Lender’s requirements for similar loans anticipated to be sold to Fannie Mae, together with such
endorsements, coinsurance, reinsurance and direct access agreements with respect to such policies
as Lender may, from time to time, consider necessary or appropriate, including variable credit
endorsements, if available, and tie-in endorsements, if available, and with a limit of liability
under the policy (subject to the limitations contained in sections of the Stipulations and
Conditions of the policy relating to a Determination and Extent of Liability) equal to the
Commitment.


 


Appendix I-24 









 






“Transfer” means



(1) as used with respect to ownership interests in a Targeted Entity (i) a sale, assignment,
pledge, transfer or other disposition of any ownership interest in a Targeted Entity, or (ii) the
issuance or other creation of new ownership interests in a Targeted Entity or (iii) a merger or
consolidation of Targeted Entity into another entity or of another entity into Targeted Entity, as
the case may be or (iv) the reconstitution of Targeted Entity from one type of entity to
another type of entity, or (v) the amendment, modification or any other change in the
governing instrument or instruments of Targeted Entity which has the effect of changing the
relative powers, rights, privileges, voting rights or economic interests of the ownership interests
in such Targeted Entity.



(2) as used with respect to ownership interests in a Mortgaged Property, (i) a sale,
assignment, lease, pledge, transfer or other disposition (whether voluntary or by operation of law)
of, or the granting or creating of a lien (other than a Permitted Lien), encumbrance or security
interest in, any estate, rights, title or interest in a Mortgaged Property, or any portion thereof.
Transfer does not include a conveyance of a Mortgaged Property at a judicial or non-judicial
foreclosure sale under any security instrument or the Mortgaged Property becoming part of a
bankruptcy estate by operation of law under the Bankruptcy Code.



“Underwriting Requirements” means Lender’s overall underwriting requirements for
Dedicated Student Housing Properties in connection with loans anticipated to be sold to Fannie Mae,
pursuant to Fannie Mae’s then current guidelines, including, without limitation, requirements
relating to Appraisals, physical needs assessments, and environmental site assessments, as such
requirements may be amended, modified, updated, superseded, supplemented or replaced from time to
time.



“Valuation” means, for any specified date, with respect to a Rental Property, (a) if
an Appraisal of the Rental Property was more recently obtained than a Cap Rate for the Rental
Property, the Appraised Value of such Rental Property, or (b) if a Cap Rate for the Rental Property
was more recently obtained than an Appraisal of the Rental Property, the value derived by
dividing —




	 	(i)	 	the Net Operating Income of such Rental Property, by

	 
	 	(ii)	 	the most recent Cap Rate determined by Lender.








Notwithstanding the foregoing, any Valuation for a Rental Property calculated for a date occurring
before the first anniversary of the date on which the Rental Property becomes a part of the
Collateral Pool shall equal the Appraised Value of such Rental Property, unless Lender determines
that changed market or property conditions warrant that the value be determined as set forth in the
preceding sentence.



“Variable Advance” means any Variable DMBS Advance and any Variable Structured ARM
Advance.



“Variable DMBS Advance” means a loan made by Lender to Borrower under the Variable
Facility Commitment which is a DMBS execution.



“Variable Facility” means the agreement of Lender to make Variable Advances to
Borrower pursuant to Section 1.01.


 


Appendix I-25 









 





“Variable Facility Availability Period” means the period beginning on the Initial
Closing Date and ending on the date one (1) year after the Initial Closing Date.



“Variable Facility Commitment” means an aggregate amount of $74,550,000 which shall be
evidenced by the Variable Facility Notes, plus such amount as is added to the Variable Facility
Commitment in accordance with Article 4, less such amount as is converted from the Variable
Facility Commitment to the Fixed Facility Commitment in accordance with Section 1.08, and
less such amount by which the Variable Facility Commitment is reduced in accordance with
Article 5.



“Variable Facility Fee” means for any Variable Advance drawn from any portion of the
Variable Facility Commitment increased pursuant to Article 4 at any time during the Term of
this Agreement, the number of basis points per annum determined at the time of such Variable
Advance by Lender as the Variable Facility Fee for such Variable Advance.



“Variable Facility Note” means the promissory notes (together with all schedules,
riders, allonges, addenda, renewals, extensions, amendments and modifications thereto), which have
been issued by Borrower to Lender to evidence Borrower’s obligation to repay Variable Advances, and
with respect to a Variable Structured ARM Advance, the promissory note will be the same or
substantially similar in form to the promissory note issued by Borrower to Lender in connection
with the Variable Structured ARM Advance made on the Initial Closing Date and with respect to a
Variable DMBS Advance, the promissory note will be in the then current form of promissory note
utilized by Fannie Mae for loans with a DMBS execution.



“Variable Facility Termination Date” means the earlier of (i) the date specified in a
Facility Termination Request, delivered by Borrower pursuant to Section 5.02 of this Agreement for
a Complete Variable Facility Termination or (ii) December 31, 2023.



“Variable Structured ARM Advance” means a loan made by lender to Borrower under the
Variable Facility Commitment which is a cash execution.



“Wind Down Notice” shall have the meaning set forth in Section 6.01(a).




 


Appendix I-26