**AGREEMENT REGARDING MASTER FINANCING AGREEMENT**

**THISAGREEMENT REGARDING MASTER FINANCING AGREEMENT**(“**Agreement**”) is made as of December__, 2009 by and between **WELLS FARGO BANK, NATIONAL ASSOCIATION**, anational banking association (“**Lender**”) and **ASSOCIATED ESTATES REALTYCORPORATION**, an Ohio corporation (the “**Sponsor**”) provides asfollows:

**RECITALS**

A.                Lender is preparedto enter into a certain Master Financing Agreement dated as of even dateherewith (the “**Master Financing Agreement**”).

B.                Once the Master FinancingAgreement is fully executed, Lender and the Sponsor have agreed that the Sponsor(or a Borrower, as defined in the Master Financing Agreement) may request that Lendermake Mortgages pursuant to the Master Financing Agreement and Lender has agreedto make Mortgages pursuant to the Master Financing Agreement as set forthherein.

C.                Lender’s executionof the Master Financing Agreement is conditioned upon the Sponsor’s executionof this Agreement and payment of (i) the Transaction Fee in the amount of$100,000.00 as set forth in Section 7.5.1 of the Master Financing Agreement(the “**Transaction Fee**”) and (ii) a Facility Processing Fee of $50,000 asset froth in the application letter dated December 2, 2009 between the parties(the “**Facility Processing Fee**”).

D.                All capitalizedbut otherwise undefined terms set forth herein shall have the same meaning asset forth in the Master Financing Agreement.

**AGREEMENT**

NOW THEREFORE, for and inconsideration of Ten Dollars ($10.00) and other good and valuableconsideration, the receipt and sufficiency of which are hereby acknowledged,the parties hereto agree as follows:

1.                 The parties herebyincorporate the covenants, terms and conditions of the Master Financing Agreementinto this Agreement by reference.

2.                 The Sponsor agreesto pay (i) the Transaction Fee and (ii) the Facility Processing Fee, each inaccordance with the wiring instructions set forth below upon execution of thisAgreement.  The Sponsor further agrees to perform the covenants and observe theterms and conditions set forth in the Master Financing Agreement, including,without limitation, those covenants as set forth in Sections 7.5.2, 7.5.3,7.5.4, 7.7.1.a, 8.2, 10.1 and specifically acknowledges the circumstancesdescribed in Sections 7.2, 7.3, 7.4 and 7.7.1.b.; provided, however, theSponsor shall have no obligation to perform covenants in the Master FinancingAgreement that are personal to Lender and that by their nature cannot beperformed by the Sponsor.  The wiring instructions are as follows:

 

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Bank:    Wells Fargo Bank, N.A.

ABA:     121000

Credit:   Wells Fargo Bank, N.A.

               McLean, VA

                                Acct#:   412-1489116

            Ref:             AEC Credit Facility

 

3.                 Upon Lender’sreceipt of a copy of this Agreement executed by the Sponsor, along with paymentin immediately available funds sufficient to pay the Transaction Fee and theFacility Processing Fee, Lender shall execute the Master Financing Agreementand deliver an executed copy to Freddie Mac, and thereafter Lender agrees (i) toprocess, underwrite, document and fund Mortgages to Borrowers in accordancewith and subject to the covenants, terms and conditions set forth in the MasterFinancing Agreement, and (ii) not to modify the Master Financing Agreement inany way that would adversely affect the interests of the Sponsor in the waythat Lender processes, underwrites, documents and funds the Mortgages withoutthe prior written consent of the Sponsor.

4.                 The Sponsor agreesto pay reasonable attorney’s fees of Freddie Mac’s counsel and the Lender’s counselin connection with the Master Financing Agreement and this Agreement.

5.                 In addition to thefees and costs set forth in the Master Financing Agreement, each applicationand commitment with respect to a proposed Mortgage or a proposed Substitutionshall provide that the applicable Borrower (i) shall pay, at the time of theapplication, a review fee to Lender in the amount of $5,000.00, (ii) shalldeposit, at the time of application, an amount equal to the estimated costs ofthe out-of-pocket expenses in connection with the processing of the proposedMortgage, including the cost of the appraisal, engineering reports, auditchecks and other third party expenses, (iii) shall pay reasonable legalexpenses in connection with the proposed Mortgage, whether or not the Mortgagecloses and (iv) shall pay, at the time a Mortgage closes, an origination fee inan amount based on the applicable percentage of the amount of the Mortgage,such applicable percentage being 0.60% (60 bps) on the first $30,000,000.00 ofMortgages, 0.55% (55 bps) on the next $30,000,000.00 of Mortgages, and 0.50 (50bps) on the amount of Mortgages over $60,000,000.00.

6.                 This Agreementshall terminate upon the earlier of (i) the termination of the Master FinancingAgreement in accordance with the terms of the Master FinancingAgreement or (ii) a termination of this Agreement as set forth in Section7 below.

7.                 The liability ofthe Sponsor under this Agreement shall be limited to the payment of theTransaction Fee, the Facility Processing Fee, any fee expressly set forth in anapplication or commitment executed by the Sponsor or its Borrower affiliate fora proposed Mortgage and all actual out-of-pocket costs 9includingreasonable legal fees) incurred by Freddie Mac or Lender in connection with theMaster Financing Agreement or this Agreement. Lender’s sole remedy for theSponsor’s breach of any other provision of this Agreement (not involving thepayment of the amounts set forth in the preceding sentence) shall be toterminate this Agreement.

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IN WITNESS WHEREOF, theparties have executed this Agreement pursuant to due authorization.

**WELLS FARGO BANK,NATIONAL ASSOCIATION**

 

 

 

By:_______________________________________ 

Name:

Title:

 

 

 

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**ASSOCIATED ESTATES REALTY CORPORATION**, an Ohio corporation 

 

 

By:   ________________________________

Name:

Title:

 

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MASTERFINANCING AGREEMENT

BY AND BETWEEN

WELLS FARGO BANK, NATIONAL ASSOCIATION

AND

FEDERAL HOME LOAN MORTGAGE CORPORATION

 

December 22, 2009

 

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TABLE OFCONTENTS

Page

**RECITALS**. 1

1.    DEFINITIONS. 1

1.1.           Definitions. 1

1.2.           Termsnot Defined Herein. 9

1.3.           Construction. 10

1.3.1.   Number;Inclusion. 10

1.3.2.   Determination. 10

1.3.3.   FreddieMac's Discretion and Consent; References to Freddie Mac's Requirements. 10

1.3.4.   DocumentsTaken as a Whole. 10

1.3.5.   Headings. 10

1.3.6.   ImpliedReferences to this Agreement. 10

1.3.7.   Persons. 10

1.3.8.   Modificationsto Documents. 11

1.3.9.   From,To and Through. 11

1.3.10. Conflicts with Other Loan Documents. 11

1.4.           AccountingPrinciples. 11

2.    COMMITMENT. 11

2.1.           Amountof Commitment. 11

2.2.           ApplicationPeriod. 12

2.3.           GoodFaith Deposit. 12

2.4.           BreakageProvisions. 12

2.4.           Nondelivery. 12

 

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3.    MORTGAGETERMS APPLICABLE TO ALL MORTGAGES. 12

3.1.           MortgageAmount 12

3.1.1.   Minimumand Maximum Mortgage Amount. 12

3.1.2.   Determinationof Loan Amount for Fixed Rate Loans and Fixed to Float Loans. 13

3.2.           Borrower. 14

3.2.1.   Typeof Borrower. 14

3.2.2    Ownershipand Control. 14

3.2.3.   SingleAsset Entity. 14

3.3.           Properties. 14

3.3.1.   PropertyFundamentals. 15

3.3.2.   Occupancy. 15

3.4.           PropertyManagement 15

3.5.           Rate-Lock. 15

3.6.           Amortization;Interest Calculation Convention. 15

3.6.1.   AmortizationPeriod. 15

3.6.2.   InterestCalculation. 15

3.7.           Guaranties. 15

3.8.           Escrows. 16

3.9.           ReplacementReserves. 16

3.10.         Repairs. 16

3.10.1. Repair and Escrow Agreement 16

3.10.2. Repair Escrow Fund. 16

3.10.3. Immediate Repairs. 16

3.11.         Transfers/Assumptions. 16

3.11.1. Variable Rate Loans subject to Third Party Cap Agreement 17

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3.11.2. All Other Loans. 17

3.12.         Third-PartySubordinate Financing. 17

3.13.         SubstitutionRights. 17

3.13.1  SubstitutionAgreement 17

3.14.         ReportingRequirements. 17

3.15.         SupplementalFinancing. 18

3.16.         MoistureManagement Plan. 18

4.    FIXEDRATE LOANS. 18

4.1.           LoanTerm. 18

4.2.           FixedInterest Rate. 18

4.3.           FixedRate Prepayment Premium.. 18

5.    FIXEDRATE LOANS. 18

5.1.           LoanTerm. 18

5.2.           InterestRates. 18

5.2.1.   FixedRate Period. 18

5.2.2.   ExtensionPeriod. 19

5.3.           Fixedto Float Prepayment Premium.. 19

6.    VARIABLERATE LOANS. 19

6.1.           LoanTerm. 19

6.2.           InterestRates. 19

6.3.           ThirdParty Cap Agreements. 19

6.3.1.   InterestRate Cap Required. 19

6.3.2.   ThirdParty Cap Agreement Terms. 20

6.3.3.   ReplacementCap Escrow. 20

6.3.4.  Third Party Cap Agreement Guaranty. 20

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6.4.           VariableRate Prepayment Premium. 20

6.5.           Conversionof Variable Rate Mortgages. 21

7.    ADDITIONALTERMS. 21

7.1.           LoanApplications under this Agreement. 21

7.2.           MultifamilySeller/Servicer Guide, Commitment and Loan Documents. 21

7.3.           Servicingof Mortgage. 21

7.4.           Replacementof Seller. 22

7.5.           Feesand Expenses. 22

7.5.1.   Feesand Expenses Due on the Closing Date. 22

7.5.2.   FeesDue in Connection with the Issuance of each Commitment 22

7.5.3.   SubstitutionFees. 23

7.5.4.   AnnualServicing Fee. 23

7.6.           Useof Proceeds. 23

7.7.           MaterialAdverse Change. 23

7.7.1.   ReportingRequirements. 23

7.7.2.   MonitoringCompliance. 24

7.7.3.   Consequencesof a Material Adverse Change. 24

7.8.           NoRenewal or Extension Options. 24

7.9.           Term. 24

8.    ACKNOWLEDGEMENTSBY SELLER. 24

8.1.           Insurance. 24

8.2.           FurtherDocumentation. 24

9.    RIGHTOF TERMINATION.. 24

9.1.           TerminationEvents. 24

9.1.1.   Defaultunder this Agreement. 24

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9.1.2.   Eventof Default under the Loan Documents. 25

9.1.3.   Nondeliveryof Mortgage. 25

9.1.4.   Insolvency. 25

9.1.5.   Cessationof Business. 25

9.1.6.   Bankruptcyand Other Proceedings. 25

9.1.7.   MaterialAdverse Change. 25

9.1.8.   Preservationof Existence. 25

9.1.9.   Liquidations,Mergers, Consolidations, Acquisitions. 25

9.2.           Consequencesof Termination Event. 26

10.  MISCELLANEOUS. 26

10.1.         Cooperationby the Sponsor and Borrower; the Sponsor's Obligations. 26

10.2.         Successorsand Assigns. 26

10.3.         NoAgency. 26

10.4.         Modifications,Amendments or Waivers. 26

10.5.         RemediesCumulative. 26

10.6.         Notices. 27

10.7.         Severability. 27

10.8.         GoverningLaw; Consent to Jurisdiction and Venue. 28

10.9.         PriorUnderstanding. 28

10.10.       Disclosureof Information. 28

10.11.       NoThird Parties Benefited. 28

10.12.       Advertising. 28

10.13.      Time of Essence. 28

10.14.       Counterparts. 28

10.15.       **WAIVEROF TRIAL BY JURY**. 29

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MASTER Financing AGREEMENT

 

 

**THISMASTER FINANCING AGREEMENT** ("**Agreement**")is dated as of December 22, 2009, and is made between **WELLS FARGO BANK,NATIONAL ASSOCIATION**, having an address at 2010 Corporate Ridge, Suite 1000, McLean, Virginia 22102 (the "**Lender**", the "**Seller**"or the "**Servicer**"), and **FEDERAL HOME LOAN MORTGAGECORPORATION**, a federally chartered corporation organized and existing underthe laws of the United States of America having an address at 8100 Jones BranchDrive, McLean, Virginia 22102 ("**Freddie Mac**").

 

**RECITALS******

 

A.        Associated Estates Realty Corporation, an Ohio corporation (the "**Sponsor**"), has requested thatthe Seller make fixed and adjustable interest rate loans in the aggregateamount of up to $100,000,000 to single asset entities majority owned andcontrolled, directly or indirectly, by the Sponsor.

B.         The Sponsor has offered tocause such entities to grant to the Seller a security interest in real propertyand other assets owned or to be acquired by such entities as security for suchentities' repayment of such loans.  (Any such entity is a "**Borrower**"and all such entities are, collectively, the "**Borrowers**".)

C.        The Seller is willing to makethe above-described loans to the Borrowers secured by an interest in such realproperty and other assets.

D.        In order to finance such loansto the Borrowers, the Seller desires to obtain from Freddie Mac an agreementpursuant to which Freddie Mac will purchase such loans from the Seller.

 

**AGREEMENT**

1.         DEFINITIONS.

1.1.      Definitions.  In addition to words and terms defined elsewhere inthis Agreement, the following words and terms shall have the followingmeanings, respectively, unless the context hereof clearly requires otherwise:

"Acquisition Loan" shallmean a Loan for which the proceeds will be used to purchase the Propertysecuring the Borrower's repayment of such Loan.

 

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"Affiliate" or "Affiliates"as to any Person shall mean any other Person (i) which directly or indirectlyControls, is Controlled by, or is under common Control with such Person, (ii)which beneficially owns or holds 5% or more of any class of the voting or otherequity interests of such Person, or (iii) 5% or more of any class of votinginterests or other equity interests of which is beneficially owned or held,directly or indirectly, by such Person.

"Aggregate Commitment Available"shall mean the maximum aggregate original principal amounts of Mortgages thatmay be purchased from time to time pursuant to the terms of this Agreement,which amount is set forth in **Section 2.1**.  

"Agreement" shall meanthis Master Financing Agreement, as the same may be supplemented or amendedfrom time to time, including all schedules and exhibits attached hereto. 

"Amortizing DCR" shallmean DCR calculated based upon debt service payments of principal and intereston a 30-year amortization schedule.

"Amortizing Loan" shallmean a Loan that will be amortized on a thirty (30) year basis.

"Anniversary Date FinancialDocumentation" shall have the meaning set forth in **Section 7.7.1**of this Agreement.

"Anniversary Delivery Date"shall have the meaning set forth in **Section 7.7.1** of this Agreement.

"Application" shall meanany application between the Seller and a Borrower, evidencing such Borrower'srequest for a Mortgage from the Seller.

"Application Due Date"shall mean the date that is thirty (30) days prior to the Expiration Date.

"Application Fee" shallhave the meaning set forth in **Section 7.5.2** of this Agreement.

"Authorized Representative"shall mean, (i) with respect to anyPerson that is not an individual, such individuals duly authorized to executedocuments on behalf of, and legally bind, such Person and (ii) with respect toany Person that is an individual, such individual himself or herself, asapplicable.

"Borrower" shall havethe meaning set forth in the Recitals of this Agreement.

"Business Day" shallmean any day on which Freddie Mac is open for business.  

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"Cash Out Refinance Loan"shall mean a Loan, the Loan Amount of which is greater than the sum of (i) theunpaid principal balance (the "**UPB**") of any existing mortgageor mortgages on the applicable Property (an "**Existing Mortgage**")being paid off with the proceeds of such Loan, (ii) any prepayment costs and/orpremiums paid by the Borrower in connection with the payoff of the ExistingMortgage, (iii) closing costs paid by the Borrower in connection with thepayoff of the Existing Mortgage that are acceptable to Freddie Mac, (iv) twopercent (2%) of the UPB of the Existing Mortgage, and (v) the amount thatFreddie Mac requires to be placed into escrow for repairs to the applicableProperty, as determined by Freddie Mac in its discretion.

"Closing Date" shallmean the first date on which this Agreement has been fully executed.

"Collateral Agreements"shall mean (i) any agreements between a Borrower and the Seller for the purposeof establishing reserves for the Properties or a particular Property, including(a) agreements establishing a fund to assure the completion of repairs orimprovements specified in any such agreement, or (b) agreements assuring areduction of the outstanding principal balance of the Mortgage if the occupancypercentage or income from a Property does not increase to a level specified insuch agreement, and (ii) any other agreement or agreements between a Borrowerand the Seller which provide for the establishment of any other fund, reserveor account, all of the foregoing to be imposed only pursuant to an expresswritten agreement between such Borrower and the Seller entered into on anOrigination Date in connection with a Mortgage.

"Commitment" shall meanFreddie Mac's written indication that Freddie Mac (i) has made an offer to theSeller to purchase a Mortgage pursuant to a letter of commitment or (ii) hasaccepted the Seller's offer to sell to Freddie Mac any Mortgage pursuant to anearly rate-lock application or early spread-lock application issued by theSeller to Freddie Mac.  The Commitment and any adjustment letters andamendments thereto shall set forth all of the terms and conditions of anyMortgage purchase.

"Control" shall mean thepossession, directly or indirectly, of the power to direct or cause thedirection of the management and policies of a Person whether through ownershipof voting securities, beneficial interests, by contract or otherwise.  The definition is to be construed to apply equally tovariations of the word "Control," including "Controlled,""Controlling" or "Controlled by."

"DCR" shall mean, at thetime of determination, the ratio of the NOI to the annualized debt servicepayments as calculated by Freddie Mac in accordance with **Section 3.1.2**. 

"Dollar", "U.S. Dollars"and the symbol $ shall mean lawful money of the United States of America.

"Expiration Date" shallmean the earlier to occur of the following:  (i) the date a Termination Eventoccurs and Freddie Mac terminates its obligations to issue Commitments as setforth in **Section 9.2** and (ii) December 21, 2011.

"Extension Period" shallmean, for a Fixed to Float Loan, the twelve calendar month period ending on thefirst anniversary of the scheduled initial maturity date of such Fixed to FloatLoan as set forth in the applicable Note.

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"Fixed Interest Rate"shall mean that certain annual fixed interest rate for a Fixed Rate Loanapplicable during the entire term of such Fixed Rate Loan or that certainannual fixed interest rate for a Fixed to Float Loan applicable during theentire term of such Fixed to Float Loan except during the Extension Period forsuch Fixed to Float Loan, if applicable.  The Fixed Interest Rate for eachFixed Rate Loan and Fixed to Float Loan will be established at Rate Lock forsuch Fixed Rate Loan or Fixed to Float Rate Loan.

"Fixed Rate Loan" or"Fixed Rate Mortgage" shall mean a Mortgage with a Fixed InterestRate during its entire term.

"Fixed Rate Period"shall mean, for a Fixed to Float Loan, the period beginning on the date of theNote for such Fixed to Float Loan through the day immediately preceding thescheduled initial maturity date of such Fixed to Float Loan as set forth in theapplicable Note.

"Fixed to Float Loan"shall mean a Mortgage with a Fixed Interest Rate during its entire term exceptfor the Extension Period, if applicable.

"Form ARM Note" shallhave the meaning set forth in **Section 6.4** of this Agreement.

"Form Fixed Rate Note"shall have the meaning set forth in **Section 4.3** of thisAgreement.

"Form FTF Note" shallhave the meaning set forth in **Section 5.3** of this Agreement.

"Form Loan Documents"shall mean the documents required by Freddie Mac under Freddie Mac'sConventional Cash Purchase Program, as such documents are amended or modifiedpursuant to this Agreement.  The modifications approved by Freddie Mac for itscurrent form of loan documents are attached hereto as **Exhibit A**.

"Freddie Mac" shall meanthe Federal Home Loan Mortgage Corporation, a federally chartered corporation.

"GAAP" shall meangenerally accepted accounting principles as are in effect from time to time,subject to the provisions of **Section 1.4**, and applied on aconsistent basis both as to classification of items and amounts.

"Guarantor" shall meanthe Sponsor or any other Person who executes a Guaranty.

"Guaranty" shall meanany Freddie Mac Conventional Cash Purchase Program Guaranty executed by aGuarantor in favor of the Seller as one of the Loan Documents, together withany and all amendments, extensions, renewals or replacements thereof, in wholeor in part.

"Guide" shall mean thethen-current version of the Freddie Mac Multifamily Seller/Servicer Guide.

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"Index" shall mean (i)for each Variable Rate Loan, the one (1) month Reference Bills®Security or, at the option of the Borrower, the British Bankers Association's (BBA)one (1) month LIBOR Rate for United States Dollar deposits, as displayed on theLIBOR Index Page used to establish the LIBOR Index Rate, at the time of RateLock, as such terms are defined in, and as more fully described in, the Notefor the applicable Loan; and (ii) during the Extension Period, if applicable,for each Fixed to Float Loan, the one (1) month LIBOR Rate; both subject to theterms of the Note for the applicable Loan in the event an alternative Index isrequired.

"Index Rate" for eachMortgage shall have the meaning given to that term in the Note for suchMortgage.

"Interest Only Loan"shall mean a Loan that will require interest only debt service payments with noamortization of principal prior to the Maturity Date (as defined in the applicableNote).

"Law" shall mean anyapplicable law (including common law), constitution, statute, treaty,regulation, rule, ordinance, ruling, order, injunction, writ, decree or awardof any Official Body.

"Lender" shall mean theSeller and its successors and assigns as holder of a Note evidencing aMortgage.

"Loan" or "Mortgage"shall mean any conventional, cash loan made to any Borrower by the Seller andpurchased by Freddie Mac pursuant to this Agreement.  

"Loan Amount" shallmean, with respect to each Loan, the initial principal amount of the applicableMortgage.  The final Loan Amount for each Mortgage shall be set forth in theCommitment related to such Mortgage.

"Loan Document" or"Loan Documents" shall mean the then-current versions of theForm Loan Documents, any indemnity agreements, Collateral Agreements, O&MPrograms, the MMP, opinions and any other documents now or in the futureexecuted and/or delivered by any Borrower or Guarantor or any other Person inconnection with a Mortgage, together with any and all amendments, extensions,renewals or replacements thereof, in whole or in part.  This Agreement is not aLoan Document.

"LTV" shall mean, withrespect to each Loan, the ratio, expressed as a percentage, of the Loan Amountto Freddie Mac's underwritten value of the Property to serve as collateral forsuch Loan.

"Margin" shall mean thespread (expressed in percentage points and/or basis points) to be added to theapplicable Index Rate.

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"MaterialAdverse Change" shall mean (a) any set of circumstances or eventswhich, in Freddie Mac's reasonable discretion would have or is then reasonablyexpected to have a material adverse effect on: (i) the validity orenforceability of this Agreement, the Seller Master Financing Agreement,Guaranty or any other Loan Document, (ii) the ability of the Sponsor, anyBorrower or Guarantor to duly and punctually pay or perform its respectiveObligations, or (iii) the financial condition or credit of the Sponsor, anyBorrower or Guarantor from that which was disclosed in writing to the Seller orFreddie Mac, or (b) with respect to any Mortgage, a change in the direct orindirect ownership of any Borrower or Guarantor (if such Guarantor is not anatural person) prior to the Origination Date of such Mortgage from that identifiedto the Seller or Freddie Mac as of the Closing Date, which results in astructure in which (i) the Sponsor does not hold a direct or indirect majorityownership interest in such Borrower or Guarantor; or (ii) the Sponsor does notdirectly or indirectly exercise Control of such Borrower or Guarantor withoutthe requirement of consent of any other Person that is a Required BorrowerPrincipal unless such Required Borrower Principal has been reviewed andapproved by Freddie Mac prior to the Origination Date of such Mortgage based onFreddie Mac's then-current credit and underwriting standards.

"MMP" shall mean, withrespect to each Mortgage, the moisture management plan to control waterintrusion and prevent the development of mold or moisture at a Property whichthe applicable Borrower must implement as of the Origination Date of theMortgage for such Property and maintain throughout the term of such Mortgage.

"Mortgage Review Fee"shall have the meaning set forth in **Section 7.5.2** of thisAgreement.

"No Cash Out Refinance Loan"shall mean (a) a Loan, the Loan Amount of which is less than or equal to thesum of (i) the UPB of any Existing Mortgage to be paid off with the proceeds ofsuch Loan, (ii) any prepayment costs and/or premiums in connection with the payoffof the Existing Mortgage, (iii) closing costs paid by the Borrower inconnection with the payoff of the Existing Mortgage that are acceptable toFreddie Mac, (iv) two percent (2%) of the UPB of the Existing Mortgage, and (v)the amount that Freddie Mac requires to be placed into escrow for repairs tothe applicable Property, as determined by Freddie Mac in its discretion, or (b)a refinance Loan securing a Property that was purchased by the Sponsor or oneof its Affiliates not more than two (2) years prior to the Origination Date orconstructed not more than two (2) years prior to the Origination Date.

"NOI" shall mean an annualized dollar amount equal to the income fromthe operation of a Property that is available for repayment of debt and returnof equity after deducting for economic vacancy and all expenses (exclusive ofdebt service).  NOI shall be calculated by Freddie Mac for each individualProperty, in accordance with Freddie Mac's then-current methodology, consistently applied, excluding fromsuch calculation expenses from depreciation, amortization, interest expenses,non-recurring items and capital expenses, but including in such calculation anassumed capital expense reserve in an amount consistent with Freddie Mac's then-currentrequirements for such capital reserves.

"Note" shall mean anyFreddie Mac Conventional Cash Purchase Program Multifamily Note executed by aBorrower, individually or collectively, as the context may require, togetherwith any and all amendments, extensions, renewals or replacements thereof, inwhole or in part. 

"O&M Programs" shallmean any written program of operations and maintenance for a Property approvedin writing by Freddie Mac.

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"Obligation" shall meanany obligation or liability of the Sponsor, any Borrower or Guarantor to theSeller or Freddie Mac, howsoever created, arising or evidenced, whether director indirect, absolute or contingent, now or hereafter existing, or due or tobecome due, under or in connection with this Agreement, the Seller Master FinancingAgreement, the Note or any other Loan Document.

"Official Body" shallmean any applicable national, federal, state, local or other government orpolitical subdivision or any agency, authority, bureau, commission, departmentor instrumentality of any national, federal, state, local or other governmentor political subdivision, or any court, tribunal or grand jury, in each casewhether foreign or domestic (to the extent such court, tribunal or grand juryhas appropriate jurisdiction).

"Origination Date" shallmean, with respect to any Mortgage, the date a Mortgage closes, which shall bea Business Day.

"Partial Interest Only Loan"shall mean a Loan that will require interest only debt service payments with noamortization of principal for a period of up to two (2) years, as set forth inthe applicable Commitment, followed by an amortization period on a thirty (30)year basis.

"Person" shall mean anyindividual, corporation, partnership, limited liability company, association,joint-stock company, trust, unincorporated organization, joint venture,government or political subdivision or agency thereof, or any other entity.

"Property" shall meanmultifamily real property or properties, as the case may be, located in a Stateand all other assets owned or to be acquired by a Borrower as collateral for aMortgage.  Each Property must have five or more apartment units.

"Rate Lock" shall meandetermining the fixed interest rate on a Fixed Rate Loan or Fixed to Float Loanor the Index and the Margin on a Variable Rate Loan pursuant to this Agreementand the applicable Commitment.

"Reference Bills®Securities" shall mean the unsecured general obligations of FreddieMac designated by Freddie Mac as "Reference Bills®Securities" and as more particularly described from time to time in theLoan Documents.

"Repair and Escrow Agreement"shall mean the Freddie Mac Conventional Cash Purchase Program agreementexecuted by a Borrower to complete Repairs in accordance with the termsthereof, which may or may not require a Repair Escrow, together with any andall amendments, extensions, renewals or replacements thereof, in whole or inpart.

"Repair Escrow" shallmean the escrow to be deposited into a Repair Escrow Fund and governed by theapplicable Repair and Escrow Agreement, if applicable, as determined by FreddieMac.

"Repair Escrow Fund"shall mean the account established by the Repair and Escrow Agreement (ifapplicable) into which the applicable Repair Escrow is deposited.

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"Repairs" shall mean anyremediation or repair or capital improvements to the land or improvements on aProperty required by Freddie Mac for such Property as set forth in theapplicable Commitment.

"Replacement Reserve Agreement"shall mean the Freddie Mac Conventional Cash Purchase Program agreementexecuted by a Borrower pursuant to which a Borrower agrees to deposit monthlyescrows for long term repairs and capital improvements to the applicableProperty, together with any and all amendments, extensions, renewals orreplacements thereof, in whole or in part.

"Required Borrower Principal"shall mean, with respect to any Borrower, any Person that directly orindirectly controls the Borrower including (i) any general partner of a generalpartnership or limited partnership, (ii) any manager or a managing member of alimited liability company, (iii) any joint venture partner of a joint venture,(iv) any settler or grantor of a living trust, (v) any Person with a collectiveequity interest in the Borrower equal to or exceeding twenty-five percent(25%), but expressly excluding any publicly-traded shareholders of Sponsor,(vi) any beneficiary with a twenty-five percent (25%) or more interest in atestamentary or irrevocable trust, or (vii) a beneficiary with a twenty-fivepercent (25%) or more interest an Illinois land trust.

"Security Instrument"shall mean any Freddie Mac Conventional Cash Purchase Program mortgage, deed oftrust, or deed to secure debt encumbering any of the Properties, executed by aBorrower as security for a Mortgage, together with any and all amendments,extensions, renewals or replacements thereof, in whole or in part.

"Seismic Report Fee"shall mean a nonrefundable fee equal to Freddie Mac’s out-of-pocket costs andexpenses incurred in connection with obtaining a seismic report and probablemaximum loss (PML) analysis with respect to any Property located in SeismicRisk Zone 3 or 4, as set forth in the current edition of the Uniform BuildingCode.

"Seller" shall meanWells Fargo Bank, National Association, a national banking association.

"Seller Master FinancingAgreement" shall mean the Agreement Regarding Master FinancingAgreement dated on or about the date hereof by and between the Sponsor and theSeller.

"Servicer" shall meanWells Fargo Bank, National Association, or any subsequent independentcontractor appointed by Freddie Mac, at Freddie Mac's sole cost and expense, toadminister each Mortgage and the Loan Documents or otherwise perform certainfunctions in connection therewith under the terms of the Guide or a ServicingAgreement.  Pursuant to the terms of the Guide or any Servicing Agreement,Freddie Mac may designate Servicer to perform some or all of Freddie Mac'sobligations under any Mortgage, Note or other Loan Documents.

"Servicing Agreement"shall mean any agreement between Freddie Mac and an independent contractorpursuant to which Freddie Mac appoints said independent contractor as Servicerunder each Mortgage, Note and other Loan Documents, together with any and allamendments, extensions, renewals or replacements thereof, in whole or in part.

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"Solvent" shall mean,with respect to any Person on a particular date, that on such date (i) the fairvalue of the assets of such Person is greater than the total amount ofliabilities, including, without limitation, contingent liabilities, of suchPerson, (ii) the present fair saleable value of the assets of such Person isnot less than the amount that will be required to pay the probable liability ofsuch Person on its debts as they become absolute and matured, (iii) such Personis able to realize upon its assets and pay its debts and other liabilities,contingent obligations and other commitments as they mature in the normalcourse of business, (iv) such Person does not intend to, and does not believethat it will, incur debts or liabilities beyond such Person's ability to pay assuch debts and liabilities mature, and (v) such Person is not engaged inbusiness or a transaction, and is not about to engage in business or atransaction, for which such Person's property would constitute unreasonablysmall capital after giving due consideration to the prevailing practice in theindustry in which such Person is engaged.  In computing the amount ofcontingent liabilities at any time, it is intended that such liabilities willbe computed at the amount which, in light of all the facts and circumstancesexisting at such time, represents the amount that can reasonably be expected tobecome an actual or matured liability of such Person after giving effect to anyrights of contribution, subrogation or indemnification of such Person.

"Sponsor" shall meanAssociated Estates Realty Corporation.

"Substitution" shallhave the meaning set forth in **Section 3.13.1** of this Agreement.

"Substitution Agreement"shall have the meaning set forth in **Section 3.13.1** of thisAgreement.

"Termination Event"shall mean any of the events described in **Section 9.1** orotherwise referred to herein as a "Termination Event" or an"Event of Default" in the Loan Documents.

"Third Party Cap Agreement"shall mean an interest rate cap agreement described in **Sections 6.3.1 and6.3.2**, together with any and all amendments, extensions, renewals orreplacements thereof, in whole or in part.

"Transaction Fee" shallhave the meaning set forth in **Section 7.5.1** of this Agreement.

"Variable Rate Interest Rate"shall mean an adjustable interest rate, equal to the Margin plus the Index, ineffect on a Variable Rate Loan during its term and on a Fixed to Float Loanduring the Extension Period for such Fixed to Float Loan, if applicable, thatperiodically adjusts as set forth in the Note for such Loan.

"Variable Rate Loan" or"Variable Rate Mortgage" shall mean a Mortgage with a VariableRate Interest Rate during its entire term.

1.2.      Terms Not Defined Herein.  Capitalized terms used but not defined in thisAgreement will have the meanings assigned to them by the Guide.

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1.3.      Construction.  Unless the context of this Agreement otherwiseclearly requires, the following rules of construction shall apply to thisAgreement:

1.3.1.   Number; Inclusion.  References to the plural include the singular, theplural, the part and the whole; "or" has the inclusive meaningrepresented by the phrase "and/or", and "including" has themeaning represented by the phrase "including without limitation".

1.3.2.   Determination.  References to "determination" of or byFreddie Mac shall be deemed to include good-faith estimates by Freddie Mac (inthe case of quantitative determinations) and good-faith beliefs by Freddie Mac(in the case of qualitative determinations) and such determinations shall beconclusive absent manifest error.

1.3.3.   Freddie Mac's Discretion andConsent; References to Freddie Mac's Requirements.  Whenever Freddie Mac is granted the right herein toact in its sole discretion or to grant or withhold consent, such right shall beexercised in good faith, and whenever a reference is made to "FreddieMac's then-current requirements", "Freddie Mac's then-currentprograms" or the like, such reference shall be deemed to mean suchrequirements, programs and the like as are then in effect by Freddie Mac, assuch standards are generally reflected in the Guide.

1.3.4.   Documents Taken as a Whole.  The words "hereof," "herein,""hereunder," "hereto" and similar terms in this Agreementrefer to this Agreement as a whole and not to any particular provision of thisAgreement.

1.3.5.   Headings.  The section and other headings contained in thisAgreement and the Table of Contents preceding this Agreement are for referencepurposes only and shall not control or affect the construction of thisAgreement or the interpretation thereof in any respect.

1.3.6.   Implied References to thisAgreement.  Article, section, subsection, clause, schedule andexhibit references are to this Agreement unless otherwise specified, andschedules and exhibits attached hereto are incorporated herein by thisreference.

1.3.7.   Persons.  Reference to any Person includes such Person'ssuccessors and assigns (but only if such successors and assigns are permittedby this Agreement or such other Loan Document, as the case may be), andreference to a Person in a particular capacity excludes such Person in anyother capacity.

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1.3.8.   Modifications to Documents.  Reference to any agreement (including this Agreementand any Loan Document, together with any schedules and exhibits hereto orthereto), document or instrument means such agreement, document or instrumentas amended, modified, replaced, substituted for, superseded or restated.

1.3.9.   From, To and Through.  Relative to the determination of any period of time,"from" means "from and including", "to" means"to but excluding", and "through" means "through andincluding".

1.3.10. Conflicts with Other LoanDocuments.  In the event of any conflict between the terms andprovisions of this Agreement and any Loan Document, the terms and provisions ofthe Loan Document shall prevail.

1.4.      Accounting Principles.  Except as otherwise provided in this Agreement, allcomputations and determinations as to accounting or financial matters and allfinancial statements to be delivered pursuant to this Agreement shall be madeand prepared in accordance with GAAP (including principles of consolidationwhere appropriate) and all accounting or financial terms shall have themeanings ascribed to such terms by GAAP.  In the event of any change after thedate hereof in GAAP, and if such change would result in the inability todetermine compliance with any financial covenants set forth herein, then theparties hereto agree to endeavor, in good faith, to agree upon an amendment tothis Agreement that would adjust such financial covenants in a manner thatwould not affect the substance thereof, but would allow compliance therewith tobe determined in accordance with Borrower's financial statements at that time.

2.         COMMITMENT.

2.1.      Amount of Commitment.  Subject to the terms and conditions hereof andrelying upon the representations and warranties set forth herein, if any,Freddie Mac agrees to purchase from the Seller Mortgages with an aggregate LoanAmount not to exceed One Hundred Million and 00/100 Dollars ($100,000,000.00)(the "**Aggregate Commitment Available**") under and pursuant tothe Commitments executed by Freddie Mac pursuant to this Agreement at any timeor from time to time during the term hereof.  Subject to the provisions of **Section7.2** of this Agreement, (a) each Mortgage must be purchased pursuant toand conform to Freddie Mac's Multifamily Conventional Cash Mortgage PurchaseProgram, including without limitation all of Freddie Mac's then-currentinternal underwriting standards for its borrowers, guarantors, and theirprincipals, and (b) except as expressly provided herein, all provisions of theGuide shall apply to the underwriting and purchase of such Mortgages.  ThisAgreement is not a revolving credit facility and Borrowers may not borrow,repay and re-borrow with respect to this Agreement.

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            2.2.      ApplicationPeriod.  The Sponsor, or any Borrower, may present the Sellerwith Applications for Mortgages on or before the Application Due Date.  So longas Freddie Mac has received all documentation and information that it requiresto underwrite a Property from the Seller and/or from the applicable Borrower bythe Application Due Date, Freddie Mac will make reasonable efforts tounderwrite such Property and issue a Commitment prior to the Expiration Date. Until Freddie Mac issues a Commitment for a Property, Freddie Mac is notobligated to purchase any Mortgage for which it has received an Application. The Seller must originate each Mortgage that Freddie Mac has agreed to purchaseas set forth in a Commitment by the date necessary to cause the Final DeliveryPackage (as defined in the Guide) for such Mortgage to be received by FreddieMac by the Mandatory Delivery Date for such Mortgage as set forth in theapplicable Commitment.

 

2.3.      Good Faith Deposit.  With respect to any Loan subject to a Freddie Macearly rate-lock application or early spread-lock application, the Seller mustdeliver to Freddie Mac a good faithdeposit in the amount required by the Guide prior to Rate Lock for each suchLoan in accordance with the terms of the Commitment for such Loan.

2.4.      Breakage Provisions.  Neither the Seller nor the Sponsor nor any Borrowerwill be liable for any breakage fee or unused facility fee for failing tosubmit Applications for Mortgages.  Upon Rate Lock of a Mortgage pursuant to aFreddie Mac early rate-lock application or early spread-lock application, theSponsor and the individual Borrower will be responsible (Freddie Mac and theSeller hereby agreeing that the Seller will assign to Freddie Mac all of theSeller's rights under the Seller's Application for the Mortgage for thecollection of the good faith deposit and Freddie Mac's then-current standardfloating or fixed rate borrower breakage fee, as applicable, in the mannerprescribed by Freddie Mac) for the payment of such good faith deposit andFreddie Mac's then-current standard floating or fixed rate borrower breakagefee, as applicable, with respect to such Mortgage as is set forth in theCommitment for such Mortgage.  

2.5.      Nondelivery.  If after Rate Lock of a Mortgage pursuant to aFreddie Mac Commitment issued under Freddie Mac's standard delivery process, anondelivery (as such term is used in the Guide) occurs, the Seller must pay orcause to be paid to Freddie Mac a nondelivery fee in the amount of two percent(2%) of the Loan Amount specified in the Commitment for such Mortgage inaccordance with the requirements of, and as more fully set forth in, the Guide.

3.         MORTGAGE TERMS APPLICABLE TO ALLMORTGAGES.

3.1.      Mortgage Amount.

3.1.1.   Minimum and Maximum MortgageAmount.  The minimum original Loan Amount of each Mortgageshall be $10,000,000.  Notwithstanding the foregoing, the minimum original LoanAmount of the proposed Mortgage to be secured by that certain property known asCambridge at Buckhead and assets related thereto may be less than $10,000,000,but in no event less than $9,000,000.  Without the prior written consent ofFreddie Mac, the aggregate of the Loan Amounts of all Mortgages purchasedpursuant to this Agreement will not exceed the Aggregate Commitment Available.

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3.1.2.   Determination of Loan Amount.  The Loan Amount for each Mortgage will be determinedby Freddie Mac.  Each Loan must satisfy Freddie Mac's refinance requirementsbased on Freddie Mac's then-current underwriting and credit policies.  

For Fixed Rate Loans and Fixed to FloatLoans, the Fixed Interest Rate will be established at Rate Lock.  For purposesof determining the Loan Amount, this Fixed Interest Rate will be the interestrate that produces a minimum Amortizing DCR in accordance with the requirementsof subsection a.ii, b.ii, or cii set forth below, as applicable.

For Variable Rate Loans, the Loan Amountwill be based on the following two tests:  (a)  a comparable fixed rate noterate, as determined by Freddie Mac, will be the interest rate that produces a minimumAmortizing DCR in accordance with the requirements of subsection a.ii, b.ii, orc.ii set forth below, as applicable, and (b) a maximum note rate or maximumcapped note rate, established at the time of Rate Lock, will be the interestrate that produces a minimum Amortizing DCR in accordance with the requirementsof subsection a.ii, b.ii or c.ii set forth below, as applicable.

Notwithstanding the foregoing, Freddie Mac may adjust maximum LTV and minimum DCR forsofter markets as published by Freddie Mac from time to time in the online Multisuite Resource Center under "Multifamily Market Ratings."  If Freddie Machas determined, in its sole discretion, that no market adjustment is required,the initial sizing of each Loan must comply with the following terms andconditions (as also reflected in thechart set forth in **Exhibit C** to this Agreement):

a.         Loan Terms of 5 years or 5years plus Extension Period.  The following terms will apply to Loans witha term of five (5) years or five (5) years plus an Extension Period:

i.          LTV.  For anAcquisition Loan, the LTV for such Mortgage will not exceed 70%.  For a No CashOut Refinance Loan or a Cash Out Refinance Loan, the LTV for such Mortgage willnot exceed 65%.

ii.          DCR.  The Loan Amountfor Acquisition Loans and No Cash Out Refinance Loans will not exceed theamount that produces: (i) for a Fixed Rate Loan or Fixed to Float Loan, anAmortizing DCR of 1.30:1.0, and (ii) for a Variable Rate Loan, an AmortizingDCR of 1.05:1.0.  The Loan Amount for Cash Out Refinance Loans will not exceedthe amount that produces:  (i) for a Fixed Rate Loan or Fixed to Float Loan, anAmortizing DCR of 1.35:1.0, and (ii) for a Variable Rate Loan, an AmortizingDCR of 1.10:1.0.

b.         Loan Term of 7 years, 6years plus Extension Period or 7 years plus Extension Period.  Thefollowing terms will apply to Loans with a term of seven (7) years, six (6)years plus an Extension Period or seven (7) years plus an Extension Period:

i.          LTV.  For anAcquisition Loan, the LTV for such Mortgage will not exceed 75%.  For a No CashOut Refinance Loan or a Cash Out Refinance Loan, the LTV for such Mortgage willnot exceed 70%.

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ii.          DCR.  The Loan Amountfor Acquisition Loans and No Cash Out Refinance Loans will not exceed theamount that produces: (i) for a Fixed Rate Loan or Fixed to Float Loan, anAmortizing DCR of 1.25:1.0, and (ii) for a Variable Rate Loan, an AmortizingDCR of 1.05:1.0.  The Loan Amount for Cash Out Refinance Loans will not exceedthe amount that produces:  (i) for a Fixed Rate Loan or Fixed to Float Loan, anAmortizing DCR of 1.30:1.0, and (ii) for a Variable Rate Loan, an AmortizingDCR of 1.10:1.0.

c.         Loan Term of 10 years, 9years plus Extension Period or 10 years plus Extension Period.  Thefollowing terms will apply to Loans with a term of ten (10) years or nine (9)years plus an Extension Period or ten (10) years plus an Extension Period:

i.          LTV.  For anAcquisition Loan, No Cash Out Refinance Loan or a Cash Out Refinance Loan, theLTV for such Mortgage will not exceed 75%.

ii.          DCR.  The Loan Amountfor Acquisition Loans and No Cash Out Refinance Loans will not exceed theamount that produces: (i) for a Fixed Rate Loan or Fixed to Float Loan, anAmortizing DCR of 1.25:1.0, and (ii) for a Variable Rate Loan, an AmortizingDCR of 1.05:1.0.  The Loan Amount for Cash Out Refinance Loans will not exceedthe amount that produces (i) for a Fixed Rate Loan or Fixed to Float Loan, anAmortizing DCR of 1.30:1.0, and (ii) for a Variable Rate Loan, an AmortizingDCR of 1.10:1.10.

3.2.      Borrower.

3.2.1.   Type of Borrower.  Each Borrower shall be an entity permitted pursuantto the terms of the Guide and organized pursuant to state law.      

3.2.2    Ownership and Control.  The Sponsor must (i) have a direct or indirectmajority ownership interest in each Borrower and (ii) exercise Control of each Borrower without therequirement of consent of any other Person that is a Required BorrowerPrincipal.  Subject to the following sentence, Freddie Mac will consider astructure in which the Sponsor (i) has a direct or indirect majority ownershipinterest in a Borrower and (ii) Controls such Borrower together with one ormore other Required Borrower Principals.  Notwithstanding the foregoing, anyRequired Borrower Principals (other than theSponsor and any publicly-traded shareholders of the Sponsor) in the ownership structure of any Borrower must bereviewed and approved by Freddie Mac prior to the Origination Date of theapplicable Mortgage based on Freddie Mac's then current credit and underwritingstandards.

3.2.3.   Single Asset Entity.  Each Borrower (a) shall be a single asset entitythroughout the term of the applicable Mortgage; (b) shall not own any real orpersonal property other than the applicable Property securing the applicableMortgage and personal property related to the operation and maintenance of suchProperty; (c) shall not operate any business other than the operation ofsuch Property; and (d) shall not maintain its assets in a way difficult tosegregate and identify.

3.3.      Properties.

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3.3.1.   Property Fundamentals.  The physicalcondition, location, and other aspects of each Property, including but notlimited to environmental and zoning, and the conditions in the market whereeach Property is located, must satisfy Freddie Mac's underwriting criteria ineffect from time to time.

3.3.2.   Occupancy.  On orprior to the applicable Origination Date, each Property must be stabilized andthe ratio of units leased to tenants under leases meeting Freddie Mac's leaserequirements (as set forth in the applicable Security Instrument) over totalrentable units must satisfy Freddie Mac's then-current occupancy requirements.

3.4.      PropertyManagement.  With respect to each Property, the Sponsor, and/or the Sponsor'sexisting subsidiary management company wholly owned and controlled by theSponsor and designated by the Sponsor as the property manager for the statewhere the applicable Property is located, is/are approved as initial propertymanager(s).

3.5.      Rate-Lock.  The interest rate or Margin, as the case may be, andterms for each Mortgage will be set forth in the Commitment for such Mortgageand will be fixed at Rate Lock except as otherwise set forth in the applicableCommitment; provided, however, that without the approval of Freddie Mac and theSeller (as evidenced by the execution and delivery by Freddie Mac and Seller ofany applicable Commitment or adjustment letter or amendment thereto), a Commitmentwill not contain terms inconsistent with this Agreement.

 

3.6.      Amortization; Interest CalculationConvention.

3.6.1.   Amortization Period.  Each Loan will be amortized on a thirty (30) yearbasis; provided, however, at the Sponsor's request, Freddie Mac will considerstructuring a particular Loan as an Interest Only Loan or a Partial InterestOnly Loan provided that such Loan meets Freddie Mac's then-current underwritingand credit requirements

                        3.6.2.   InterestCalculation. At the Borrower's option, interest on each Loan shallbe calculated (i) on the basis of a 360-day year and the actual number of daysin the period for which interest is being calculated, or (ii) on the basis of a360-day year and twelve (12) 30-day months.

3.7.      Guaranties.  A Guaranty will be required for each Mortgage.  AnyGuarantor must have a direct or indirect ownership interest in each Borrower. The "Base Recourse" under each Note and the "Base Guaranty"under each Guaranty shall be zero percent (0%).

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3.8.      Escrows.  Collection ofmonthly escrow deposits for the payment of real estate taxes will be requiredfor each Mortgage.  Collection of monthly escrow deposits for the payment offire, hazard and other insurance premiums will be required; provided, however,Freddie Mac will consider deferring collection of such monthly escrow depositssubject to an umbrella insurance policy acceptable to Freddie Mac. Collectionof monthly escrow deposits for water, sewer and other charges that could resultin a lien upon the applicable Property will be deferred.  Notwithstanding theforegoing, (i) commencement of monthly escrow deposits for any charges forwhich monthly escrow deposits have been deferred may be required for a Loan ifthe Borrower does not timely pay any such charges, if the Borrower fails toprovide timely proof of payment of such charges or at any time during theexistence of an Event of Default (as defined in the applicable Loan Documents)and (ii) the Borrower and Guarantor will be personally liable for the amount ofany loss or damage incurred by the Lender as a result of any unpaid charges forwhich escrow deposits are deferred.

3.9.      Replacement Reserves.  Collection of monthly Replacement Reserve depositswill be required with respect to each Mortgage.  Freddie Mac will determine inits discretion the amount of any initial deposit and the monthly deposits undereach Replacement Reserve Agreement.  The amount of any initial deposit and themonthly deposits under a Replacement Reserve Agreement shall be set forth inthe Commitment for such Mortgage.  Notwithstanding the foregoing, Freddie Macwill consider deferring collection of monthly Replacement Reserve deposits on aLoan by Loan basis, provided that such Loan meet Freddie Mac's then-currentunderwriting and credit requirements for deferrals of Replacement Reservedeposits.  As a condition of any such deferral, the applicableBorrower will be obligated to make capital replacements to the applicableProperty, on an annual basis, in an amount not less than the engineer’srecommended amount.

3.10     Repairs.

3.10.1. Repair and Escrow Agreement.  Freddie Mac may require a Repair and EscrowAgreement for each Mortgage, as determined by Freddie Mac.  Freddie Mac mustapprove, and each Commitment will include, a schedule of any required Repairsto be completed for each Property.

3.10.2. Repair Escrow Fund.  If a Repair and Escrow Agreement is required for aparticular Property, and Freddie Mac requires a Repair Escrow, the applicableBorrower must establish a Repair Escrow Fund in the amount required by theCommitment, in accordance with the terms of the Commitment and the Repair andEscrow Agreement.  After satisfactory completion of the Repairs, the Servicer,on behalf of Freddie Mac, will return to such Borrower any funds remaining inthe Repair Escrow Fund.  

3.10.3. Immediate Repairs.  In addition to any Repairs required to be completedpursuant to a Repair and Escrow Agreement, Freddie Mac may in its discretionalso require a Borrower to make immediate Repairs to a Property depending uponthe condition of such Property within a period of time prior to the OriginationDate.  Any immediate Repairs and the timeframe within which such immediateRepairs must be completed will be set forth in the Commitment.  

3.11.    Transfers/Assumptions.

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3.11.1. Variable Rate Loans subject toThird Party Cap Agreement.  Each Security Instrument for a Variable Rate Loansubject to a Third  Party Cap Agreement must contain the version of Section 21entitled TRANSFERS OF THE MORTGAGED PROPERTY OR INTERESTS IN BORROWER.  [NORIGHT TO TRANSFER.]  Variable Rate Loans subject to Third Party Cap Agreementsare not eligible for assumption.

3.11.2. All Other Loans.  Each Security Instrument for a Loan other than aVariable Rate Loan subject to a Third Party Cap Agreement must contain theversion of Section 21 entitled TRANSFERS OF THE MORTGAGED PROPERTY OR INTERESTSIN BORROWER [RIGHT TO UNLIMITED TRANSFERS—WITH LENDER APPROVAL], subject to themodifications set forth in **Exhibit A**.  In connection with atransfer that requires approval by the Lender pursuant to the terms of theSecurity Instrument, in addition to the terms and conditions set forth in suchversion of Section 21 of the Security Instrument, each Security Instrument mustprovide (i) that Freddie Mac must approve a third party transferee based onFreddie Mac's underwriting standards customarily applied by Freddie Mac at thetime of the proposed transfer to the approval of borrowers in connection withthe origination or purchase of similar mortgages on multifamily properties and(ii) that the Borrower mustpay to Freddie Mac a transfer fee equal to 1% of the outstanding principalbalance of the applicable Mortgage, a $3,000 review fee, and all costs andexpenses incurred in connection with the approval and implementation of anytransfer and assumption.  Each Security Instrument shall provide that theBorrower must pay to Freddie Mac a $3,000 review fee, and all costs andexpenses incurred in connection with any transfer to a Person related to theSponsor in accordance with the terms of Section 21 of the Security Instrument;provided, however, no transfer fee will be charged in connection therewith. The terms of any assumption will be set forth in Freddie Mac's assumptionapproval.  The review fees and transfer fees shall be allocated between FreddieMac and the Seller as set forth in the Guide.  Any Loan that is assumed will notbe eligible for a Substitution (as defined below).

3.12.    Third-Party SubordinateFinancing.  No subordinate financing will be permitted,including mezzanine financing, from a party other than the Seller/Freddie Mac. 

3.13.    SubstitutionRights.

3.13.1  Substitution Agreement.  TheBorrowers must enter into a Master Substitution Agreement in the form attachedhereto as **Exhibit B** (the "**Substitution Agreement**")on or before the Expiration Date.  Subject to the terms and limitations of, andas more fully set forth in, the Substitution Agreement, if Freddie Mac haspurchased at least two (2) of the Mortgages, each Borrower will have the rightfrom time to time after the Expiration Date to substitute the Property securingsuch Borrower's Mortgage with another Property (a "**Substitution**"). If Freddie Mac does not receive a fully-executed Substitution Agreement on orbefore the Expiration Date, no Substitutions of any of the Properties will bepermitted under any of the Mortgages.

3.14.    ReportingRequirements.  The Loan Documents will provide forperiodic financial reporting for the Sponsor, each Borrower, each Guarantor andeach Property.

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3.15.    Supplemental Financing.  FreddieMac will consider purchasing supplemental Mortgages in accordance with theSupplemental Financing provision set forth in **Exhibit A** to thisAgreement, which will be included in Exhibit B to each Security Instrument.

3.16.    Moisture Management Plan.  A MMPapproved by Freddie Mac in its sole discretion will be required for eachProperty throughout the term of the applicable Mortgage; provided, however,Freddie Mac will consider, in its sole discretion, approving a Borrower’spolicies and procedures regarding moisture and mold as the required MMP subjectto Freddie Mac’s review and approval of such policies and procedures and theProperty Condition Report with respect to the applicable Property.

4.         FIXED RATE LOANS.

4.1.      Loan Term.  Each FixedRate Loan will, at the Sponsor's option, have a term of five (5), seven (7) orten (10) years.

4.2.      Fixed Interest Rate.  At Rate Lock for a Fixed Rate Loan, Freddie Macwill provide to the Seller and the Sponsor an interest rate quote for the FixedInterest Rate, which will be based upon a spread or margin, as determined byFreddie Mac at Rate Lock, above the yield rate on the United States TreasurySecurity applicable to the term of the Fixed Rate Loan.  Such United StatesTreasury Security will also be referenced in the Note for the applicableMortgage for the purposes of calculating prepayment premiums.  Throughout theterm of the Fixed Rate Loan, interest on the principal balance of such FixedRate Loan will accrue at such Fixed Interest Rate.

4.3.      FixedRate Prepayment Premium.  Subject to **Section 7.2** ofthis Agreement, each Fixed Rate Loan shall be documented using Freddie Mac'sthen-current form "Fixed Rate" Multifamily Note ("**Form FixedRate Note**").  Each Fixed Rate Loan shall be subject to payment of aprepayment premium upon prepayment prior to the last three (3) months of theterm of such Fixed Rate Loan as more fully described in the applicable FormFixed Rate Note.

5.         FIXED TO FLOAT LOANS.

5.1.      Loan Term.  Each Fixed to Float Loan will have, at the option ofthe Sponsor, a term of five (5), six (6), seven (7), nine (9) or ten (10) yearsplus the Extension Period, if applicable.

5.2.      Interest Rates.

5.2.1.   Fixed Rate Period.  At Rate Lock for a Fixed to Float Loan, Freddie Macwill provide to the Seller an interest rate quote for the Fixed Interest Rateto be applicable during the Fixed Rate Period, which will be based upon aspread or margin, as determined by Freddie Mac at Rate Lock, above the yieldrate on the United States Treasury Security applicable to the term of the FixedRate Period.  Such United States Treasury Security will also be referenced inthe Note for the applicable Mortgage for the purposes of calculating prepaymentpremiums.  During the Fixed Rate Period, interest on the principal balance ofsuch Fixed to Float Loan will accrue at such Fixed Interest Rate.

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5.2.2.   Extension Period.  If an Extension Period applies to a Fixed to FloatLoan, the interest rate shall convert to a Variable Rate Interest Rate on thefirst day of the Extension Period.  During the Extension Period, the VariableRate Interest Rate shall adjust each calendar month so as to equal the IndexRate plus a Margin as set forth in the Commitment.  The Margin applicableduring the Extension Period for such Fixed to Float Loan shall be determined byFreddie Mac based on the then-current market level determined in its solediscretion.

5.3.      Fixed to Float PrepaymentPremium.  Subject to **Section 7.2** of thisAgreement, each Fixed toFloat Loan shall be documented using Freddie Mac's then-current form"Fixed to Float" Multifamily Note ("**Form FTF Note**"). Each Fixed to Float Loan shall be subject to payment of a prepayment premiumupon prepayment prior to the Extension Period, if applicable, of such Fixed toFloat Loan as more fully described in the applicable Form FTF Note.

6.         VARIABLE RATE LOANS.

6.1.      Loan Term.  Each Variable Rate Loan will have, at the option ofthe Sponsor, a term of five (5), seven (7) or ten (10) years.

6.2.      Interest Rates.  At Rate Lock for a Variable Rate Loan the Seller, inconsultation with the Sponsor or Borrower, shall select as the Index either theone (1) month Reference Bills® Security or the one (1) month LIBORRate, and Freddie Mac will determine the Margin.  The Variable Rate InterestRate will adjust each interest adjustment period (each one calendar monthperiod) so as to equal the Index Rate plus the Margin. The Margin for aVariable Rate Loan will remain constant during the entire term of such VariableRate Loan.  The Index for such Variable Rate Loan shall be selected by theBorrower as provided for by this Agreement, and the Margin for such VariableRate Loan shall be determined by Freddie Mac based on the then-current marketlevel determined in its sole discretion.

6.3.      Third Party Cap Agreements.  

                        6.3.1.   InterestRate Cap Required.  Unless Freddie Mac determines in its sole discretionthat a Property's LTV is less than or equal to 60%, or unless the Commitmentfor a Variable Rate Loan provides for an "internal" interest rate cap(the cost of which will be included in the Margin), the Borrower of eachVariable Rate Loan must maintain in effect during the entire term of such VariableRate Loan a Third Party Cap Agreement.  Each Third Party Cap Agreement shallhave a notional amount equal to the Loan Amount and a term in accordance withthe following requirements:

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| **TERM OF LOAN** | **LTV**                                                  | **MINIMUM TERM OF THIRD PARTY CAP AGREEMENT** |
|------------------|----------------------------------------------------------|-----------------------------------------------|
| 5  years         | At  maximum allowed under §3.1.2                    | 5  years                                      |
| 5  years         | At  least 5% less than maximum allowed under §3.1.2 | 3  years with escrow                          |
| 7  years         | At  maximum allowed under §3.1.2                    | 7  years                                      |
| 7  years         | At  least 5% less than maximum allowed under §3.1.2 | 4  years with escrow                          |
| 10  years        | At  maximum allowed under §3.1.2                    | 10  years                                     |
| 10  years        | At  least 5% less than maximum allowed under §3.1.2 | 5  years with escrow                          |

 

6.3.2.   Third Party Cap AgreementTerms. Each Third Party Cap Agreement shall be with a ratecap provider approved by Freddie Mac as an acceptable interest rate capprovider at such time, and shall be on a form previously agreed upon by FreddieMac and such provider.  Each Third Party Cap Agreement shall have a strike rateor cap rate that produces an Amortizing DCR in accordance with the requirementsof **Section 3.1.2** of this Agreement.

6.3.3.   Replacement Cap Escrow.  With respect to each Variable Rate Mortgage forwhich a Third Party Cap Agreement is required but the term of such Third PartyCap Agreement may be less than the term of the Variable Rate Mortgage pursuantto **Section 6.3.1** of this Agreement, the Security Instrument willprovide that if at any time the term of the Third Party Cap Agreement then inplace is less than the remaining term of the applicable Variable Rate Mortgage,the Borrower shall escrow monthly deposits to allow for the purchase of areplacement Third Party Cap Agreement.  Freddie Mac will determine the amountof the escrow based upon 125% of the projected costs of the existing cap rate,using the original strike rate.  The Security Instrument will also provide thatthe Lender may adjust the amount of such monthly deposits annually, exceptduring the twelve (12) calendar month period immediately prior to theexpiration date of the Third Party Cap Agreement then in place, during whichtwelve (12) month period Lender may adjust the amount of such monthly depositsas frequently as monthly.

6.3.4.   Third Party Cap AgreementGuaranty.  The Loan Documents for each Variable Rate Mortgagefor which a Third Party Cap Agreement is required will provide that Borrowerand Guarantor will be personally liable to Freddie Mac for failure to maintaina Third Party Cap Agreement at any time during the term of a Variable RateMortgage that does not provide for an internal interest rate cap. 

6.4.      Variable Rate PrepaymentPremium.  Subject to **Section 7.2** of thisAgreement, each Variable Rate Loan shall be documented using Freddie Mac'sthen-current form "Adjustable Rate" Multifamily Note ("**FormARM Note**").  Each Variable Rate Loan shall be subject to a prepayment premiumupon prepayment prior to the last three (3) months of the term of such VariableRate Loan as more fully described in the applicable Commitment and Form ARMNote.  Variable Rate Loans may be subject to a lockout period equal to thetwelve (12) month period following the date of the first monthly installment ofinterest payable under the Note for such Variable Rate Loan.  If applicable, noprepayment may be made during such lockout period.

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            6.5.      Conversion of Variable RateMortgages.  The Borrower of a Variable Rate Loan may convertsuch Variable Rate Loan to a Fixed Rate Loan or Fixed to Float Loan at any timeduring the term of the Variable Rate Loan in accordance with Freddie Mac'sStreamlined Refinance Mortgage Purchase Product as then in effect.  The FixedRate Loan or Fixed to Float Loan resulting from a conversion of a Variable RateLoan shall not be counted against the Aggregate Commitment Available orotherwise subject to the terms of this Agreement.

7.         ADDITIONAL TERMS.

7.1.      LoanApplications under this Agreement.  The Seller may from time to time prior to theExpiration Date request Freddie Mac to purchase Mortgages under the terms ofthis Agreement.  Each such request will be made in accordance with FreddieMac's application process in effect from time to time.

7.2.      Multifamily Seller/ServicerGuide, Commitment and Loan Documents.  From time to time, Freddie Mac in its solediscretion revises the Guide, the form Commitment and the Form Loan Documentsto add, delete or change requirements, conditions and form documents.  As theGuide, the form Commitment and the Form Loan Documents are revised, suchrevised documents shall be used for each Mortgage for which a Commitment hasnot yet been issued.  If a conflict develops between this Agreement and therevised form of the Guide, form Commitment or Form Loan Documents, the revisedform of the Guide, form Commitment or Form Loan Documents shall govern, exceptfor the general terms of **Sections 2, 3, 4, 5 and 6** of thisAgreement.  (For example, as the form Guaranty is revised, the terms of suchrevised Guaranty shall apply to each Mortgage for which a Commitment has notyet been issued by Freddie Mac and accepted by the Seller; however, the"Base Guaranty" shall remain at zero percent (0%) as set forth in **Section3.7.1** of this Agreement.  As a further example, if Freddie Mac revisesits underwriting or credit policies, such revised underwriting or creditpolicies shall apply to each Mortgage for which a Commitment has not yet beenissued by Freddie Mac and accepted by the Seller, except as explicitly setforth in **Sections 2** through **6** of this Agreement). Except to the extent that revisions to the Guide, the Form Loan Documents orFreddie Mac’s policies or procedures necessitate a change to the Modifications ofForm Loan Documents set forth in Exhibit A to this Agreement, asdetermined by Freddie Mac in its reasonable discretion, the Modifications ofForm Loan Documents set forth in **Exhibit A** to this Agreement willapply to any revised Form Loan Documents.

If this Agreement is silent with respect to anysubject that is covered by provisions set forth in the Guide or in anyCommitment, the provisions of the Guide and Commitment, respectively, willgovern.

 

7.3.      Servicing of Mortgage.  The Servicer shall service each Mortgage pursuant tothe requirements of the Guide.  In addition, if this Agreement or any LoanDocuments provide additional servicing requirements, the Servicer shall performsuch additional servicing requirements without payment of any additionalservicing fee, except as otherwise agreed in writing by Freddie Mac and theServicer.

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7.4.      Replacement of Seller.  The Seller is an approved Freddie Mac Program PlusSeller/Servicer as of the date of this Agreement.  If at any time the Seller isno longer an approved Program Plus Seller/Servicer, Freddie Mac may replace theSeller with another seller/servicer under this Agreement without payment of anyfee or penalty to the Seller.  Notwithstanding the foregoing, so long as noTermination Event has occurred and is continuing, the Sponsor shall have theright to approve any replacement of such Seller, such approval to not beunreasonably withheld, conditioned or delayed; provided, however, if theSponsor does not approve any such replacement, Freddie Mac will have the rightto terminate this Agreement.  Any Servicer terminatedhereunder must transfer the servicing of any Mortgage in accordance with theGuide to a replacement Servicer selected by Freddie Mac.

7.5.      Feesand Expenses.

7.5.1.   Fees and Expenses Due on theClosing Date.  The Seller shall remit to Freddie Mac on the ClosingDate, as further consideration for Freddie Mac's agreements hereunder, anon-refundable fee equal to one tenth of one percent (0.10%) of the AggregateCommitment Available ("**Transaction Fee**").  In addition, theSeller shall cause the Sponsor to pay or reimburse the Seller and Freddie Macfor their respective expenses, including legal fees incurred in connection withthis Agreement and any other documents related hereto.

7.5.2.   FeesDue in Connection with the Issuance of each Commitment.

a.         With respect to each Loan, theSeller must remit to Freddie Mac, as additional consideration for Freddie Mac'scosts in underwriting the transactions contemplated hereby, a non-refundablefee in the amount of Five Thousand and 00/100 Dollars ($5,000.00) (the "**MortgageReview Fee**") and a Seismic Report Fee, as applicable.  The MortgageReview Fee and a Five Hundred and 00/100 Dollar ($500.00) deposit for theSeismic Report Fee, if applicable, shall be paid at the same time as theApplication Fee pursuant to the terms of the Guide.

b.         With respect to each Loan, theSeller must remit to Freddie Mac a non-refundable application fee equal to thegreater of Two Thousand and 00/100 Dollars ($2,000.00) or one-tenth of onepercent (0.10%) of the proposed Loan Amount (the "**Application Fee**"). For a Loan under Freddie Mac's standard delivery process, the Seller must remitthe Application Fee to Freddie Mac with the full underwriting package inaccordance with the Guide.  For a Loan under Freddie Mac's early rate-lockdelivery process, the Application Fee is deemed earned by Freddie Mac upon RateLock and the Seller must remit the Application Fee to Freddie Mac in accordancewith the terms of the Commitment.  

c.         In addition to the fees andcosts set forth in subsections a. and b. above, the Seller shall pay orreimburse, or cause the Borrowers to pay or reimburse, Freddie Mac for itsother actual third party costs and expenses, including costs and expenses forthirty party reports and reasonable legal fees for outside counsel, incurred inconnection with each Loan.

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d.         The fees payable to FreddieMac hereunder are in addition to any fees, expenses and deposits required to bepaid by a Borrower to the Seller pursuant to an Application.

            7.5.3.   Substitution Fees.  Inconnection with any Substitution, the applicable Borrower must pay theapplicable Substitution fees pursuant to the terms of the SubstitutionAgreement.

            7.5.4.   Annual ServicingFee.  With respect to each Loan, the Servicer willreceive an annual servicing fee in an amount permitted under the Guide but inno event in excess of one-tenth of one percent (0.10%) or ten (10) basis pointsof the original Mortgage Loan Amount, such fee to be included in the FixedInterest Rate for Fixed Rate Loans and Fixed to Float Loans and in the Marginfor Variable Rate Loans.  

7.6.      Use of Proceeds.  The proceeds of any Mortgage may be used for anylawful purpose.

7.7.      MaterialAdverse Change.

7.7.1.   ReportingRequirements.

a.         The Seller Master FinancingAgreement must require the Sponsor to deliver the following to the Seller nolater than sixty (60) days prior to the anniversary of the Closing Date (the"**Anniversary Delivery Date**"):

i.          The Sponsor's and, if theGuarantor is a Person other than the Sponsor, the Guarantor's most recent Form10-K and Form 10-Q; and

ii.          a complete Freddie Mac Form1115 dated within ninety (90) days of the anniversary of the Closing Date.

b.         The Seller must review andanalyze the documentation required by subsection (a) above (collectively, the"**Anniversary Date Financial Documentation**") and, no later thanthirty (30) days prior to the anniversary of the Closing Date, deliver toFreddie Mac (i) all such Anniversary Date Financial Documentation, (ii) theSeller’s analysis thereof, and (iii) a certification from the Seller that theSeller has reviewed the Anniversary Date Financial Documentation and (A) theSeller has determined that the Sponsor's and, if the Guarantor is a Personother than the Sponsor, the Guarantor's current financial position is equal toor better than such party’s financial position as of the Closing Date, or (B)the Seller has determined that either the Sponsor' or, if the Guarantor is aPerson other than the Sponsor, the Guarantor's current financial position isnot equal to or better than such party’s financial position as of the ClosingDate, together with the percentage by which such party’s net worth, liquidityand/or contingent liabilities have changed since the Closing Date.

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7.7.2.   Monitoring Compliance.  The Seller shall monitor compliance with therequirements described in this **Section 7.7**, collect and reviewany documentation described herein and immediately report to Freddie Mac anyviolations of the requirements described above or any other violations of theObligations.

7.7.3.   Underwriting Mortgages.  In addition toFreddie Mac’s assessment of the Anniversary Date Financial Documentation,Freddie Mac may determine that a Material Adverse Change has occurred based onits review and underwriting in connection with each Mortgage.

7.7.4.   Consequences of a MaterialAdverse Change.  If a MaterialAdverse Change has occurred, Freddie Mac may, at its option and in its sole andabsolute discretion, declare a Termination Event and exercise any of its rightsand remedies under **Section 9.2** of this Agreement.

7.8.      No Renewal or ExtensionOptions.  Neither the Sponsor nor any Borrower shall have anyright to renew or extend the terms of this Agreement.

7.9.      Term.  The term of this Agreement shall commence on theClosing Date and terminate on the Expiration Date unless otherwise terminatedearlier pursuant to the provisions hereof.

8.         ACKNOWLEDGEMENTS BY SELLER.

The Selleracknowledges to Freddie Mac as follows:

8.1.      Insurance.  The Seller acknowledges that Freddie Mac, from timeto time, revises its insurance requirements as set forth in the Guide and ineach Commitment and that compliance with all revised insurance requirements isrequired by Freddie Mac during the term of this Agreement.

8.2.      Further Documentation.  In the event Freddie Mac requires any furtherdocumentation or information with respect to a Mortgage prior to theOrigination Date of such Mortgage or with respect to the Sponsor or Guarantorto carry out the intent of this Agreement, the Seller shall provide, or theSeller shall cause any applicable Borrower, the Sponsor or Guarantor, as thecase may be, to provide, or cause to be provided to Freddie Mac at the Seller'sor Borrower's, the Sponsor's and Guarantor's sole cost and expense.

9.         RIGHT OF TERMINATION.

9.1.      Termination Events.  The occurrence or existence of any one or more ofthe following events or conditions (whatever the reason therefor and whethervoluntary, involuntary or effected by operation of Law) shall be a "**TerminationEvent**":

9.1.1.   Default under this Agreement.  The Seller shall be in default under this Agreement.

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9.1.2.   Event of Default under theLoan Documents.  Any Borrower shall be in default under any SecurityInstrument or other Loan Document, beyond any applicable cure period or anyGuarantor shall be in default under any Guaranty beyond any applicable cure period.

9.1.3.   Nondelivery of Mortgage.  A nondelivery (as such term is used in the Guide) ofany Mortgage shall have occurred, as determined by Freddie Mac.

9.1.4.   Insolvency.  The Sponsor or Guarantor ceases to be Solvent oradmits in writing its inability to pay its debts as they mature.

9.1.5.   Cessation of Business.  The Sponsor or Guarantor ceases to conduct the businessof the Sponsor or Guarantor, respectively, or the Sponsor or Guarantor isenjoined, restrained or in any way prevented by court order from conducting allor any material part of the business of the Sponsor or Guarantor, respectively,and such injunction, restraint or other preventive order is not stayed ordismissed within twenty (20) Business Days after the entry thereof.

9.1.6.   Bankruptcy and OtherProceedings.  The Sponsor or Guarantor files for bankruptcyprotection under the United States Bankruptcy Code or voluntarily becomessubject to any reorganization, receivership, insolvency proceeding or othersimilar proceeding pursuant to any other federal or state Law affecting debtorand creditor rights, or an involuntary case is commenced against the Sponsor orGuarantor by any creditor (other than the Seller or Freddie Mac) of the Sponsoror Guarantor, respectively, pursuant to the United States Bankruptcy Code orother federal or state Law affecting debtor and creditor rights and is notdismissed or discharged within sixty (60) days after filing.

9.1.7.   Material Adverse Change.  A Material Adverse Change shall have occurred.

9.1.8.   Preservation of Existence.  Any Guarantor that is a corporation, general orlimited partnership or limited liability company fails to maintain its legalexistence as a corporation, general or limited partnership or limited liabilitycompany, as the case may be, and its license or qualification and good standingin each jurisdiction in which its ownership or lease of a Property or thenature of its business makes such license or qualification necessary or desirable,as applicable.

9.1.9.   Liquidations, Mergers,Consolidations, Acquisitions.  Except for transfers permitted by Section 3.11 andExhibit A, any Guarantor that is not a natural person dissolves, liquidates orwinds-up its affairs, or becomes a party to any merger or consolidation, oracquires by purchase, lease or otherwise all or substantially all of the assetsor capital stock of any other Person.

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9.2.      Consequences of TerminationEvent.  Upon the occurrence of a Termination Event under **Section9.1**, Freddie Mac shall be entitled at its sole and exclusive option, toterminate its obligations to issue Commitments; it being understood and agreedthat if a Termination Event shall also constitute a default or event of defaultby Borrower under any Loan Document, then the provisions of this **Section9.2** shall not be deemed to preclude Freddie Mac from exercising all ofits rights and remedies provided for under such applicable Loan Document. Notwithstanding the foregoing, Freddie Mac also shall be entitled at its optionnot to terminate its obligations to issue Commitments and to elect to modifythe terms set forth in this Agreement under which Freddie Mac will agree toissue additional Commitments under this Agreement.

10.       MISCELLANEOUS.

10.1.    Cooperation by the Sponsor andBorrower; the Sponsor's Obligations.  The Sponsor must grant to Freddie Mac the right todistribute on a confidential basis financial and other information concerningthe Sponsor, Guarantor, each Borrower, each indemnitor, other Person, theProperties, and other pertinent information with respect to any Mortgage to anyparty purchasing securities issued by Freddie Mac.

10.2.    Successors and Assigns.  This Agreement shall be binding upon and shall inureto the benefit of Freddie Mac, the Seller and their respective successors andassigns, except that the Seller may not assign or transfer any of its rights orobligations hereunder or any interest herein, except (i) pursuant to any writtenagreement among Freddie Mac, Sponsor (as long as no Termination Event hasoccurred and is continuing) and the Seller permitting such assignment ortransfer, or (ii) as otherwise approved in writing by Freddie Mac and Sponsor(as long as no Termination Event has occurred and is continuing); provided,however, that if the Sponsor does not approve any such assignment, Freddie Macshall have the right to terminate this Agreement.

10.3.    No Agency.  The Seller is not an agent of Freddie Mac.

10.4.    Modifications, Amendments orWaivers.  Freddie Mac and the Seller may from time to timeenter into written agreements amending or changing any provision of this Agreementor the rights of Freddie Mac or the Seller hereunder, or may grant writtenwaivers or consents to a departure from the due performance of the obligationsof the Seller or Freddie Mac hereunder.  Any such written agreement, waiver orconsent shall be effective to bind Freddie Mac and the Seller.

10.5.    Remedies Cumulative.  Each right and remedy provided in this Agreement isdistinct from all other rights or remedies under this Agreement or any LoanDocument or afforded by applicable Law, and each shall be cumulative and may beexercised concurrently, independently, or successively, in any order.

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10.6.    Notices.  All notices, requests, demands, directions and othercommunications given to or made upon any party hereto under the provisions ofthis Agreement shall be in writing unless otherwise expressly providedhereunder and shall be delivered or sent by telex, facsimile, certified mail orhand delivery if to Freddie Mac or to the Seller, to each of them at theaddresses and numbers set forth below, or in accordance with any subsequentunrevoked written direction from any party to the others.  All such noticesshall, except as otherwise expressly herein provided, be effective (a) in thecase of telex or facsimile, when received, (b) in the case of hand-deliverednotice, when hand-delivered, (c) if given by certified mail, three (3) daysafter such communication is deposited in the mail with first-class postageprepaid, return receipt requested, and (d) if given by any other means(including by air courier), when delivered; provided, that all suchnotices to Freddie Mac shall not be effective until received.

FreddieMac's Notice Address:

Freddie Mac

M.S. B-4F

8100 Jones Branch Drive

McLean, Virginia  22102

Attention:Multifamily Business Initiatives Director

 

with acopy to:

Freddie Mac

M.S. B-4B

8100 Jones Branch Drive

McLean, Virginia  22102

Attention: Conventional Structured Transactions Director

 

Seller'sNotice Address:

Wells Fargo Bank, National Association

2010 Corporate Ridge, Suite 1000

McLean, Virginia  22102

Attention: Servicing/Asset Management DepartmentFax No. (866) 359-6885

 

 

10.7.    Severability.  The invalidity or unenforceability of any provisionof this Agreement shall not affect the validity or enforceability of any otherprovision, and all other provisions shall remain in full force and effect. This Agreement and the Guide contain the entire agreement between the parties asto the rights granted and the obligations assumed in this Agreement.  ThisAgreement may not be amended or modified except by a writing signed by theparty against whom enforcement is sought.

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10.8.    Governing Law; Consent toJurisdiction and Venue.  The Laws of the Commonwealth of Virginia shall govern this Agreement.  The Seller agrees that any controversy arising under orin relation to this Agreement shall be litigated exclusively in the courts ofthe Commonwealth of Virginia; provided, however, the Loan Documents shall begoverned by the Laws of the jurisdiction specified therein.  The state andfederal courts and authorities with jurisdiction in the Commonwealth of Virginia shall have exclusive jurisdiction over all controversies that shall arise under or inrelation to this Agreement.  The Seller irrevocably consents to service,jurisdiction, and venue of such courts for any such litigation and waives anyother venue to which it might be entitled by virtue of domicile, habitualresidence or otherwise. 

10.9.    Prior Understanding.  This Agreement and the other Loan Documentssupersede all prior understandings and agreements, whether written or oral,between the parties hereto and thereto relating to the transactions providedfor herein and therein, including any prior term sheets.

10.10.  Disclosure of Information.  Freddie Mac may furnish information regarding theSeller, the Sponsor, any Borrower or any Property to third parties with anexisting or prospective interest in the servicing, enforcement, evaluation,performance, purchase or securitization of a Mortgage, including but notlimited to Freddie Mac's regulators, accountants, trustees, master servicers,special servicers, rating agencies, and organizations maintaining databases onthe underwriting and performance of multifamily mortgage loans.

10.11.  No Third Parties Benefited.  No creditor of any party to this Agreement and noother person shall be a third party beneficiary of this Agreement or any LoanDocument.  Without limiting the generality of the preceding sentence, (i) anagreement, if any, including any Servicing Agreement, between Freddie Mac andthe Seller for purchases of Mortgages shall constitute a contractual obligationof the Seller that is independent of the obligation of Borrower for the paymentof a Mortgage, (ii) neither the Sponsor nor any Borrower shall be a third partybeneficiary of this Agreement, and (iii) no payment by the Seller under anysuch agreement will reduce the outstanding principal amount of a Mortgage orany interest accrued thereon.

10.12.  Advertising.  Freddie Mac may include the name of the Seller, anyBorrower, the Sponsor, the name and location of any Property, the Loan Amountand the number of apartment units contained in any Property on Freddie Mac'sclient list and in any typical advertisement.  

10.13.  Time of Essence.  Time is of the essence with respect to eachobligation of the Seller and Freddie Mac hereunder.

10.14.  Counterparts.  This Agreement may be executed by different partieshereto on any number of separate counterparts, each of which, when so executedand delivered, shall be an original, and all such counterparts shall togetherconstitute one and the same instrument.

 

[Section 10.16 and signatures follow on subsequentpages]

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10.15.  **WAIVER OF TRIAL BY JURY**.  **THE SELLER AND FREDDIE MAC EACH (A) COVENANTS ANDAGREES NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OFTHIS AGREEMENT OR THE RELATIONSHIP BETWEEN THE PARTIES AS THE SELLER ANDFREDDIE MAC UNDER THIS AGREEMENT THAT IS TRIABLE OF RIGHT BY A JURY AND (B)WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE TO THE EXTENT THATANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE.  THIS WAIVER OF RIGHT TO TRIAL BYJURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND VOLUNTARILY WITH THEBENEFIT OF COMPETENT LEGAL COUNSEL.**

**                                                                                              **

Initials of the Authorized Officer ofSeller and Freddie Mac

**[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]**

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IN WITNESS WHEREOF, the parties hereto, bytheir officers thereunto duly authorized, have executed this Agreement as ofthe day and year first above written.

**SELLER:**

** **

**WELLS  FARGO BANK, NATIONAL ASSOCIATION**

 

 

 

By:_______________________________________ 

Name:

Title:

 

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**FREDDIEMAC:**

** **

**FEDERALHOME LOAN MORTGAGE CORPORATION**,****afederally chartered corporation

 

 

 

By:                                                                               

Name:

Title:

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