Document:

10.1 ModificationAgreement

MODIFICATION AGREEMENT

THIS MODIFICATION AGREEMENT (“Agreement”), dated April 4, 2013 is entered into by and between (i) PREFERRED APARTMENT COMMUNITIES OPERATING PARTNERSHIP, L.P., a Delaware limited partnership (“Borrower”); (ii) PREFERRED APARTMENT COMMUNITIES, INC., a Maryland corporation (“PAC REIT”); (iii) the lenders from time to time party hereto (each a “Lender” and collectively, the “Lenders”); and (iv) KEYBANK NATIONAL ASSOCIATION, as administrative agent (“Administrative Agent”).

RECITALS:

(1)    Pursuant to the terms of that certain Credit Agreement, dated as of August 31, 2012, by and among Borrower, PAC REIT, Administrative Agent and Lenders (as amended and modified by this Agreement, the “Credit Agreement”), Lenders agreed to make revolving loans to Borrower in the maximum principal amount of FIFTEEN MILLION AND NO/100THS DOLLARS ($15,000,000.00) (the “Existing Commitments”).  The Existing Commitments are evidenced by that certain Revolving Facility Note, dated as of August 31, 2012, executed by Borrower payable to the order of KeyBank National Association, as Lender (“KeyBank”), in the aggregate principal amount of the Existing Commitments (the “Existing Note”) and are further evidenced by certain other documents described in the Credit Agreement as Loan Documents. Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement.

(2)    As of the date hereof, KeyBank is the sole Lender.

(3)    Subject to the terms and conditions of this Agreement, Lenders have agreed to 
 
(i) increase their aggregate Revolving Commitments to THIRTY MILLION AND NO/100THS DOLLARS ($30,000,000.00) and (ii) modify and/or amend certain terms and provisions of the Loan Documents as of the Effective Date (hereinafter defined), as provided herein.  Concurrently with the execution of this Agreement, Borrower has executed and delivered to KeyBank an Amended and Restated Revolving Facility Note, dated as of the date hereof, in the maximum principal amount of THIRTY MILLION AND NO/100THS DOLLARS ($30,000,000.00) (the “Amended Note”).  The Amended Note amends and restates the Existing Note in its entirety.  

(4)    Borrower, as a grantor, and the other grantors named therein have previously executed and delivered to Administrative Agent that certain Pledge and Security Agreement, dated as of August 31, 2012 (as amended in connection herewith, the “Security Agreement”). 
 
In connection with the increase in the Revolving Commitments described in Recital 3 above and the amendments pursuant hereto, the grantors have agreed to amend the Security Agreement pursuant to that certain Reaffirmation of and Amendment to Pledge and Security Agreement, dated as of the date hereof (the “Security Agreement Amendment”).

(5)    The Note, Credit Agreement, the Security Agreement, this Agreement, the other documents described in the Credit Agreement as Loan Documents, together with all modifications, 

Page 1

extensions, renewals and amendments thereto, including all modifications pursuant hereto, and any document required hereunder, are collectively referred to hereinafter as the “Loan Documents”.

(6)    By this Agreement, Borrower, PAC REIT, Lenders and Administrative Agent intend to modify and amend certain terms and provisions of the Credit Agreement.

NOW, THEREFORE, Borrower, PAC REIT, Lenders and Administrative Agent agree as follows:

ARTICLE 1

CONDITIONS PRECEDENT

The following are conditions precedent to Administrative Agent’s and Lenders’ obligations under this Agreement:

Section 1.01    Deliverables. Receipt by Administrative Agent of the following, each in form and content acceptable to Administrative Agent:
		
	(a)
	executed originals of this Agreement;

		
	(b)
	executed originals of the Security Agreement Amendment;

		
	(c)
	executed original of the Amended Note; 

		
	(d)
	executed originals of a Security Agreement Joinder;

		
	(e)
	executed originals of a Reaffirmation of Guaranty;

		
	(f)
	executed originals of a Guaranty Supplement;

		
	(g)
	executed originals of an Amended and Restated Environmental and     Hazardous Materials Indemnity Agreement;

		
	(h)
	executed originals of a Buy-Sell Agreement for each of WAM McNeil     Ranch, LLC, Lake Cameron, LLC and Ashford Park, LLC; 

		
	(i)
	executed originals of a Collateral Assignment of Loan Documents by     Charles Hight Square Mezzanine Lending, LLC (“Charles Hight”)     together with an original note and allonge;

		
	(j)
	an opinion or opinions from Borrower’s counsel in favor of     Administrative Agent, in form reasonably acceptable to Administrative     Agent; and

		
	(k)
	any and all other documents and agreements which are required by this     Agreement or by any other Loan Document.

Section 1.02     Reimbursement of Costs and Expenses. Reimbursement to Administrative Agent by Borrower of Administrative Agent’s and Lenders’ reasonable costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby, including, without limitation, title insurance costs, recording fees, reasonable attorneys’ fees, appraisal, engineers’ and inspection fees and documentation costs and charges, whether such 

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services are furnished by Administrative Agent’s employees or agents or by independent contractors.
Section 1.03    Representations and Warranties. The representations and warranties contained in this Agreement are true and correct;
Section 1.04    Payments. All payments due and owing to Administrative Agent and Lenders under the Loan Documents have been paid current as of the effective date of this Agreement; and
Section 1.05    Fees.     The payment of that certain upfront fee in the amount of $105,000 to Administrative Agent pursuant to that certain letter agreement regarding fees, dated as of the date hereof, between Borrower and Administrative Agent (the “Agreement Regarding Fees”).
Section 1.06    Delivery of Senior Lender Consent.  The following covenant shall be added to the Credit Agreement:
On or before May 2, 2013, Borrower shall deliver to Administrative Agent the written consent of Georgia Commerce Bank, a Georgia state bank, consenting to the pledge by Borrower to Administrative Agent for the benefit of the Lenders of 100% of the equity interest in Charles Hight and any foreclosure of such pledge.
Section 1.07    Delivery of Owner’s Policy of Title Insurance.  Borrower shall deliver to Administrative Agent the Owner’s Policy of Title Insurance for Madison Retail – Rome, LLC on or before May 2, 2013.

ARTICLE 2
REPRESENTATIONS AND WARRANTIES

Section 2.01    No Event of Default. Borrower and PAC REIT hereby represent and warrant that no Default, breach or failure of condition has occurred, or would exist with notice or the lapse of time or both, under any of the Loan Documents (as modified by this Agreement) and that all representations and warranties herein are true and correct and all representations and warranties in the other Loan Documents are true and correct in all material respects with the same effect as though such representations and warranties had been made on and as of the date hereof, except to the extent that such representations and warranties expressly relate to an earlier specified date, in which case such representations and warranties are true and correct as of the date when made, which representations and warranties shall survive execution of this Agreement.
Section 2.02    Authority. Each of Borrower and PAC REIT is authorized to execute, deliver and perform its obligations under this Agreement.  The respective obligations  of Borrower, PAC REIT, the other Credit Parties and their Subsidiaries under the Loan Documents, as modified by this Agreement, are valid, binding and enforceable obligations of each of them, 

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subject to bankruptcy laws and other similar laws of general application affecting rights and remedies of creditors generally and subject to the application of the rules of equity and concepts of reasonableness, unconscionability, good faith and fair dealing.
Section 2.03    Amendment Documents. The execution and delivery of this Agreement and the other documents to be executed in connection herewith (collectively, the “Amendment Documents”) and Borrower’s, PAC REIT’s, the other Credit Parties’ and their Subsidiaries’ performance of and compliance with the terms hereof in the manner contemplated by this Agreement (a) will not violate the Organizational Documents of Borrower, PAC REIT, the other Credit Parties and their Subsidiaries, and (b) will not constitute a default (or any event which, with notice or expiration of grace/cure period or both, would constitute a default) under any material contract, agreement or other instrument to which Borrower, PAC REIT, the other Credit Parties or any of their Subsidiaries is a party or which may be applicable to any of its assets, except in each case where such conflict would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
Section 2.04    Organizational Documents. Borrower and PAC REIT have previously delivered to Administrative Agent all of the relevant Organizational Documents of Borrower, PAC REIT, each other Credit Party and the Subsidiaries, and all such Organizational Documents remain in full force and effect and have not been amended or modified since they were delivered to Administrative Agent. Borrower and PAC REIT hereby certify that: (i) the above documents are all of the relevant formation and organizational documents of Borrower, PAC REIT, each other Credit Party and the Subsidiaries; (ii) they remain in full force and effect; and (iii) they have not been amended or modified since they were previously delivered to Administrative Agent.

ARTICLE 3
LOAN INCREASE AND MODIFICATION

The Loan Documents are hereby supplemented and modified to incorporate the following, which shall supersede and prevail over any conflicting provisions of the Loan Documents:
Section 3.01    Loan Increase.    Subject to the terms and conditions of this Agreement, Lenders hereby grant to Borrower and Borrower hereby accepts an increase in Lenders’ aggregate Revolving Commitments to THIRTY MILLION AND NO/100THS DOLLARS ($30,000,000.00) (the “Increased Commitment”).  All references in the Loan Documents to the Revolving Commitments are hereby amended to reference the Increased Commitment.  
 
Schedule 1 to the Credit Agreement is hereby deleted and replaced with Schedule 1 attached hereto.
Section 3.02    Amended and Restated Promissory Note.  As a condition to this Agreement, Borrower shall execute and deliver an Amended and Restated Revolving Facility Note in the form attached hereto as Exhibit A, in the maximum principal amount of THIRTY MILLION AND 

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NO/100THS DOLLARS ($30,000,000.00). Borrower hereby agrees that all terms, covenants and conditions of the Amended Note shall be effective as of the Effective Date. As of the date hereof, the Amended Note is the Note referenced in the Credit Agreement.      
Section 3.03    Effective Date. The effective date of this Agreement and the Amended Note shall be the date all of the conditions precedent defined in Article 1 above have been met to Administrative Agent’s satisfaction (“Effective Date”).    
Section 3.04    Reference to Loan Documents. The Credit Agreement and any and all other agreements, instruments or documentation now or hereafter executed and delivered pursuant to the terms of the Credit Agreement as amended hereby, are hereby amended so that any reference therein to the Loan Documents shall include the Loan Documents as amended hereby, the Credit Agreement as amended hereby, the Schedules to the Credit Agreement as amended hereby and the Security Agreement as amended by the Security Agreement Amendment.
Section 3.05    New Definition.  The following definition is hereby added to Section 1.01 of the Credit Agreement: 
“Hazardous Materials Indemnity” means that certain Amended and Restated Environmental and Hazardous Materials Indemnity Agreement given by Borrower and PAC REIT in favor of Administrative Agent for the benefit of Lenders, as the same may be modified, amended, supplemented or replaced from time to time.

Section 3.06    Modified Definitions.  The following definitions in Section 1.01 of the Credit Agreement are hereby amended and restated to read in their entirety as follows:
“Applicable Revolving Loan Margin” means (A) 350 basis points for Revolving Loans that are Base Rate Loans, and (B) 450 basis points for Revolving Loans that are Eurodollar Loans.

“Loan Documents” means this Agreement, the Notes, the Guaranty, the Hazardous Materials Indemnity, the Security Documents, the Management Subordination Agreement and the Fee Letter.

“Revolving Facility Termination Date” means the earlier of (i) April 4, 2014, or 
 
(ii) the date that the Commitments have been terminated pursuant to Section 8.02.

Section 3.07    Financial Covenants.  Sections 7.07(a) and (b) of the Credit Agreement are hereby amended to read in their entirety as follows:
(a)    Consolidated Net Worth.  
(i)    The Credit Parties will not permit the Consolidated Net Worth of the Consolidated Entities to at any time be less than the sum of (i) $50,000,000 plus (ii) 

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75% of the net proceeds of any equity offering (or any debt offering to the extent converted into equity) by any Credit Party or any of their Subsidiaries.

(ii)    The Credit Parties will not permit Consolidated Net Worth of the Consolidated Entities as of December 31, 2013 to be less than $125,000,000.

(b)    Leverage Ratios.  
(i)    The Credit Parties will not permit at any time the Senior Leverage Ratio to be greater than 0.60 to 1:00.

(ii)    The Credit Parties will not permit at any time the Total Leverage Ratio to be greater than 0.65 to 1:00.

Section 3.08    Agreement to Pay Fees.  Borrower shall pay to Administrative Agent as and when due all fees required to be paid in accordance with the Agreement Regarding Fees.

Section 3.09    Investments and Guaranty Obligations.  Section 7.05(k) of the Credit Agreement is hereby amended to read in its entirety as follows:

(k)    the Investment by Borrower in the Advisor in the nature of a $1,500,000 revolving line of credit from the Borrower to the Advisor evidenced by a Promissory Note, dated as of January 3, 2013, made by the Advisor payable to the order of the Borrower; provided that after the occurrence and during the continuance of an Event of Default, the Borrower will cause all outstanding amounts thereunder to be paid in full and no further loans and advance will be permitted thereunder; and

ARTICLE 4
RELEASE
Section 4.01    Release. As of the Effective Date, Borrower, PAC REIT, each of the other Credit Parties and each of their Subsidiaries and each of their past, present and future officers, directors, principals, employees, members, managers, shareholders, partners, agents, parents, subsidiaries and affiliates (hereinafter collectively referred to as the “Releasing Parties”), do hereby fully and forever release, discharge and acquit each of Administrative Agent and the Lenders and their respective past, present and future officers, directors, principals, employees, members, managers, shareholders, partners, agents, parents, subsidiaries and affiliates and their respective attorneys, accountants, legal representatives, agents and employees and their respective successors, heirs and assigns (collectively, “Released Parties”), of and from and against any and all claims, demands, obligations, duties, liabilities, damages, expenses, indebtedness, debts, breaches of contract, acts, omissions, misfeasance, malfeasance, causes of action, sums of money, accounts, compensation, contracts, controversies, promises, damages, costs, losses and remedies therefor, choses in action, rights of indemnity, rights of offsets, defenses or liability of any type, kind, nature, description or character whatsoever (collectively, the “Claims”), irrespective of how, why or by 

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reason of what facts, whether known or unknown, whether liquidated or unliquidated, contingent or non-contingent, which any Releasing Party may now have or heretofore have had, from the beginning of the world to the Effective Date, against any of the Released Parties (including any Claim arising in connection with (i) the Loan, the Collateral, any notice of breach or default; (ii) the Released Parties’ acts, statements, conduct, representations and omissions made in connection with any of the foregoing, (iii) all relationships between any of the Releasing Parties and the Released Parties and any course of conduct between or among any of them made in connection with any of the foregoing, and (vi) any fact, matter, transaction or event relating to any of the foregoing, whether known or unknown). 
Section 4.02    No Defenses or Claims. Each of Borrower, PAC REIT, each other Credit Party and each of their Subsidiaries acknowledges and agrees that it has no defenses, counterclaims, offsets, cross-complaints, causes of action, rights, claims or demands of any kind or nature whatsoever, including, without limitation, any usury, lender liability or one-action claims or defenses, arising out of the Loan, the Loan Documents, the acts or omissions of Administrative Agent or Lenders taken with respect to the Loans, the Revolving Commitments or any past or present relationship between or among the Borrower, PAC REIT, the other Credit Parties, any of their Subsidiaries, Administrative Agent, the Lenders, or any of their respective past, present and/or future parent, subsidiary and affiliated entitles and, with respect to each of the foregoing, their respective past and present officers, directors, shareholders, partners, limited partners, members, representatives, principals, owners, affiliates, attorneys, accountants, agents and employees, and their successors, heirs and assigns and each of them, that can be asserted either to reduce or eliminate all or any part of Borrower’s liability for the Loans, the liability of the Credit Parties or any of their Subsidiaries under the Loan Documents, the validity, priority, perfection and enforceability of the liens and security interests granted to Administrative Agent for the benefit of the Lenders under the Loan Documents or to seek affirmative relief or damages of any kind or nature from Administrative Agent or the Lenders. Each of the Borrower, PAC REIT, each other Credit Party and each of their Subsidiaries further acknowledges that to the extent that any such claim should in fact exist, including without limitation, any usury, lender liability or one-action claim, it is being fully, finally and irrevocably released by the Borrower, PAC REIT, each other Credit Party and each of their Subsidiaries as provided in Section 4.01 of this Agreement above. 
Section 4.03    No Representations. Each of the Releasing Parties does hereby acknowledge that it has not relied upon any representation of any kind made by any of the Released Parties in making the foregoing release. 
Section 4.04    No Assignment. Each of the Releasing Parties represents and warrants to each of the Released Parties that it has not heretofore assigned or transferred, or purported to assign or to transfer, to any person or entity any matter released by such party hereunder or any portion thereof or interest therein, and each of the Releasing Parties agrees to indemnify, protect, defend and hold each of the Released Parties harmless from and against any and all claims based on or arising out of any such assignment or transfer or purported assignment or transfer by any of the Releasing Parties. 

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Section 4.05    No Admissions. It is hereby further understood and agreed that the acceptance of delivery of the foregoing release shall not be deemed or construed as an admission of liability of any nature whatsoever arising from or related to the subject of the within release. 
Section 4.06    Covenant Not to Sue. Each of the Releasing Parties hereby waives any right it may have to institute any action, claim or suit against any Released Parties or to raise any defense against any claim brought by any of the Released Parties against any of the Releasing Parties based on any matter directly or indirectly related to any Claim released hereunder. Each of the Releasing Parties covenants and agrees (a) not to sue any Released Party in any court or tribunal or bring (or aid in the institution or prosecution of) any action, lawsuit or cause of action (whether by way of direct action, counterclaim, cross-claim, objection, contested matter, adversary proceeding, interpleader or otherwise) based on any matter directly or indirectly related to any Claim released hereunder, and (b) to be forever barred from asserting or bringing or aiding in the bringing of any such action, lawsuit or cause of action or asserting any defense against any claim or action brought by any of the Released Parties based on any matter directly or indirectly related to any Claim. Nothing herein shall be construed to preclude any Released Party from enforcing the foregoing release and/or protecting its rights and interests hereunder. If any Releasing Party breaches this covenant not to sue, or hereafter commences, joins In, or in any manner seeks relief through any suit arising out of, based upon, or relating to any of the Claims released hereunder or in any manner asserts against any Released Party any of the Claims released hereunder, then said Releasing Party will pay to such Released Party, in addition to any other damages caused thereby, all costs and expenses and attorneys’ fees incurred by such Released Party in defending or otherwise responding thereto, and said Releasing Party shall indemnify the Released Party from and against any and all liability, damage, loss or claim resulting therefrom. It is the intention of the parties that this indemnity does not require payment as a condition precedent to recovery under this indemnity. 
Section 4.07    No Waivers. Any acceptance now, or at any time in the future, by Administrative Agent or the Lenders of any full or partial payments may, unless otherwise agreed by Lenders, be applied to interest, principal, fees or other amounts due under and in accordance with the Loan Documents, and shall not be deemed to constitute (a) an agreement amending, modifying or qualifying in any respect the terms and provisions of the Loan Documents, (b) a waiver by Administrative Agent or the Lenders of any of Administrative Agent’s or the Lenders’ rights or remedies under the Loan Documents or under applicable law or in equity, (c) an accord or satisfaction with respect to all or a portion of the indebtedness evidenced and secured by the Loan Documents, or (d) a rescission of any notices theretofore sent to the Credit Parties.
ARTICLE 5
MISCELLANEOUS
Section 5.01    Non-Impairment.  Except as expressly provided herein, nothing in this Agreement shall alter or affect any provision, condition, or covenant contained in the Note or other Loan Document or affect or impair any rights, powers, or remedies of Lender, it being the intent of the parties hereto that the provisions of the Note and other Loan Documents shall continue in full force and effect except as expressly modified hereby.

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Section 5.02    Survival of Representations and Warranties.  All representations and warranties made in this Agreement shall survive the execution and delivery of this Agreement.
Section 5.03    Severability.  Any term or provision of this Agreement held by a court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Agreement and the effect thereof shall be confined to the term or provision so held to be invalid or unenforceable.
Section 5.04    Applicable Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of New York.
Section 5.05    Headings.  The headings, captions and arrangements used in this Agreement are for convenience only and shall not affect the interpretation of this Agreement.
Section 5.06    Entire Agreement.  This Agreement shall be binding upon and inure to the benefit of Borrower, Agent and Lender and their respective permitted successors and assigns.  This Agreement is specifically limited to the matters expressly set forth herein.  The Credit Agreement, this Agreement and the other Loan Documents and all other instruments, agreements and documentation executed and delivered in connection with this Agreement embody the final, entire agreement among the parties hereto with respect to the subject matter hereof and supersede any and all prior commitments, agreements, representations and understandings, whether written or oral, relating to the matters covered by the Credit Agreement, this Agreement and the other Loan Documents, and may not be contradicted or varied by evidence of prior, contemporaneous or subsequent oral agreements or discussions of the parties hereto. There are no oral agreements among the parties hereto relating to the subject matter hereof or any other subject matter relating to the Credit Agreement and the other Loan Documents.
Section 5.07    Counterparts.     This Agreement may be executed by the parties hereto separately in one or more counterparts, each of which when so executed shall be deemed to be an original, but all of which when taken together shall constitute one and the same agreement.  Each party hereto may rely on the facsimile signature, or signature sent by e-mail in pdf format, of each other party hereto.
Section 5.08    Time.  Time is of the essence with respect to each and every provision of this Agreement.

[Signatures on following page.]

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IN WITNESS WHEREOF, Borrower, PAC REIT, Lender and Administrative Agent have caused this Agreement to be duly executed as of the date first above written.

	
		
	 
	PREFERRED APARTMENT COMMUNITIES OPERATING PARTNERSHIP, L.P., as the Borrower
By:  Preferred Apartment Advisors, LLC, its  
         manager

By:   /s/ John A. Williams   
Name:    John A. Williams   
Title:   Chief Executive Officer   

	 
	

PREFERRED APARTMENT COMMUNITIES, INC., as a Credit Party
By:  Preferred Apartment Advisors, LLC, its  
        manager

By:   /s/ John A. Williams   
Name:    John A. Williams   
Title:   Chief Executive Officer   

	 
	 

	 
	KEYBANK NATIONAL ASSOCIATION, as the sole initial Lender and as the Administrative Agent

By:   /s/ James K. Komperda   
Name:    James K. Komperda
Title:    Vice President

	

Signature Page
To 
Modification Agreement

Schedule 1
    

Schedule 1 
 
Lenders and Commitments
	
						
	Lender
	Revolving  
Commitment
	Revolving Facility Percentage as of  
April 4, 2013

	KeyBank National Association
	

	$30,000,000
	

	100
	%

	Total:
	

	$30,000,000
	

	100
	%

EXHIBIT A

Form of Promissory Note

	
		
	AMENDED AND RESTATED REVOLVING FACILITY NOTE

	 

	$________________
	________, 20__

	 
	New York, NY

FOR VALUE RECEIVED, the undersigned PREFERRED APARTMENT COMMUNITIES OPERATING PARTNERSHIP, L.P., a Delaware limited partnership (the “Borrower”), hereby promises to pay to the order of [______________________] (the “Lender”) the principal sum of _________________ ($__________) or, if less, the then unpaid principal amount of all Revolving Loans (such term and each other capitalized term used herein without definition shall have the meanings ascribed thereto in the Credit Agreement referred to below) made by the Lender to the Borrower pursuant to the Credit Agreement, in Dollars and in immediately available funds, at the Payment Office on the Revolving Facility Termination Date.
The Borrower also promises to pay interest in like currency and funds at the Payment Office on the unpaid principal amount of each Revolving Loan made by the Lender from the date of such Revolving Loan until paid at the rates and at the times provided in Section 2.06 of the Credit Agreement.
This Revolving Facility Note is one of the Notes referred to in the Credit Agreement, dated as of August 31, 2012, among the Borrower, Preferred Apartment Communities, Inc., a Maryland corporation (the “PAC REIT”), the lenders from time to time party thereto (including the Lender), and KeyBank National Association, as administrative agent (the “Administrative Agent”), as amended by that certain Modification Agreement, dated as of April 4, 2013, among the Borrower, the PAC REIT, the lenders and the Administrative Agent (as the same may be amended, restated or otherwise modified from time to time, the “Credit Agreement”),  and is entitled to the benefits thereof and of the other Loan Documents.  As provided in the Credit Agreement, this Revolving Facility Note is subject to mandatory repayment prior to the Revolving Facility Termination Date, in whole or in part.
In case an Event of Default shall occur and be continuing, the principal of and accrued interest on this Revolving Facility Note may be declared to be due and payable in the manner and with the effect provided in the Credit Agreement.
The Borrower hereby waives presentment, demand, protest or notice of any kind in connection with this Revolving Facility Note, except as expressly set forth in the Credit Agreement. No failure to exercise, or delay in exercising, any rights hereunder on the part of the holder hereof shall operate as a waiver of any such rights.
THIS REVOLVING FACILITY NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).
THE UNDERSIGNED HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS REVOLVING FACILITY NOTE, THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

This Note is given in replacement of the Revolving Facility Note, dated as of August 31, 2012, in the original principal amount of $15,000,000 (the “Other Note”) previously delivered to the Lender pursuant to the Credit Agreement.  THIS NOTE IS NOT INTENDED TO BE, AND SHALL NOT BE CONSTRUED TO BE, A NOVATION OF ANY OF THE OBLIGATIONS OWING UNDER OR IN CONNECTION WITH THE OTHER NOTE.
 
[Signature Page Follows]

    
    

	
		
	 
	PREFERRED APARTMENT COMMUNITIES OPERATING PARTNERSHIP, L.P.

By:  Preferred Apartment Advisors, LLC, its  
        manager

 
By:__________________________________
      Name:
      Title:

    
    

CONSENT TO MODIFICATION AGREEMENT

The undersigned (individually and collectively, the “Other Credit Parties”) consent to the foregoing Modification Agreement (“Agreement”) and the transactions contemplated thereby.

The Other Credit Parties hereby affirm and make as though each is a party to the Agreement the releases and other agreements contained in Article 4 of the Agreement.  Each of the Other Credit Parties further affirms and makes as to itself each of the representations contained in the Agreement and consents and agrees to the terms and modifications of the Agreement and the modifications of the Loan Documents pursuant thereto.

[Signatures on following page.] 

    
    

Agreed and Acknowledged:

Dated as of:  April 4, 2013

	
		
	 
	TRAIL CREEK MEZZANINE LENDING, LLC

By:   Preferred Apartment Advisors, LLC, its  
    advisor

By:   /s/ John A. Williams   
Name:    John A. Williams   
Title:   Chief Executive Officer   

SUMMIT CROSSING MEZZANINE LENDING, LLC

By:   Preferred Apartment Advisors, LLC, its    
    advisor

By:   /s/ John A. Williams   
Name:    John A. Williams   
Title:   Chief Executive Officer   

Signature Page
To
Consent to Modification Agreement

    
    

	
		
	 
	IRIS CROSSTOWN MEZZANINE LENDING, LLC

By:   Preferred Apartment Advisors, LLC, its  
   advisor

By:   /s/ John A. Williams   
Name:    John A. Williams   
Title:   Chief Executive Officer   

CITY VISTA MEZZANINE LENDING, LLC

By:   Preferred Apartment Advisors, LLC, its advisor

By:   /s/ John A. Williams   
Name:    John A. Williams   
Title:   Chief Executive Officer   

CITY PARK MEZZANINE LENDING, LLC

By:   Preferred Apartment Advisors, LLC, its  
    advisor

By:   /s/ John A. Williams   
Name:    John A. Williams   
Title:   Chief Executive Officer   

CHARLES HIGHT SQUARE MEZZANINE LENDING, LLC

By:   Preferred Apartment Advisors, LLC, its  
    advisor

By:   /s/ John A. Williams   
Name:    John A. Williams   
Title:   Chief Executive Officer   

Signature Page
To
Consent to Modification Agreement10.2 Buy-SellAgreementAshfordPark

BUY-SELL AGREEMENT
BUY-SELL AGREEMENT (this “Agreement”) dated as of April 4, 2013 made by and between PREFERRED APARTMENT COMMUNITIES OPERATING PARTNERSHIP, L.P., a Delaware limited partnership (“PACOP”), and KEYBANK NATIONAL ASSOCIATION, as administrative agent (the “Administrative Agent”), for the benefit of the Lenders.
W I T N E S S E T H:
A.    PACOP currently owns 100% of the membership interests in ASHFORD PARK, LLC, a Delaware limited liability company (the “Company”).  Administrative Agent has received, pursuant to a Pledge and Security Agreement, dated as of August 31, 2012, among PACOP and certain of its affiliates, as grantors (the “Grantors”), and the Administrative Agent, as amended by that certain Reaffirmation of and Amendment to the Pledge and Security Agreement, dated as of the date hereof, among PACOP, the Grantors and the Administrative Agent (as the same may be amended, restated or otherwise modified from time to time, the “Security Agreement”), a pledge (the “Ownership Pledge”), from PACOP, of 49% of the Company’s ownership interests (the “Pledged Interests”; the Pledged Interests, together with the 51% non-pledged interests, each a “Membership Interest” and collectively, “Membership Interests”).
B.    The Company is governed by the Amended and Restated Limited Liability Company Agreement of ASHFORD PARK, LLC, dated as of January __, 2013 (the “Operating Agreement”).
C.    The Company has issued that certain Multifamily Note, dated as of January 24, 2013, made payable to Prudential Affordable Mortgage Company, LLC (the “Senior Lender”) in the initial aggregate principal amount of $25,626,000 (the “Secured Note”), which Secured Note is secured by the real property and other assets of the Company (all assets of the Company, tangible and intangible, fixed or contingent, referred to herein, collectively, as the “Property”).
D.    PACOP has entered into a Credit Agreement, dated as of August 31, 2012, between PACOP, as borrower, Preferred Apartment Communities, Inc., a Maryland corporation (“PAC REIT”), the lenders from time to time party thereto (the “Lenders”) and the Administrative Agent, as amended by that certain Modification Agreement, dated as of the date hereof, among PACOP, PAC REIT, KeyBank National Association, as lender, and the Administrative Agent (as the same may be amended, restated or otherwise modified from time to time, the “Credit Agreement”), pursuant to which PACOP may obtain revolving loans in an amount not to exceed $30,000,000 (the “Mezzanine Loan Agreement”).
E.    As a condition to making the loans contemplated by the Mezzanine Loan Agreement, the Administrative Agent and the Lenders have required that PACOP execute and deliver this Agreement, setting forth the terms on which Administrative Agent can force a sale, by either the Administrative Agent or PACOP, of their respective Membership Interests in the Company, one to the other.
NOW, THEREFORE, in consideration of the foregoing, and in order to induce the Lenders to make the loans contemplated by the Mezzanine Loan Agreement, and for other good and valuable 

consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
1.Buy-Sell.  
(a)    Following foreclosure of the Pledged Interests by the Administrative Agent, pursuant to the Security Agreement, on as much of the Pledged Interests as Administrative Agent may foreclose on expeditiously and without opposition in accordance with the provisions of the Security Agreement, or, at the Administrative Agent’s election, following an Event of Default under the Loan Agreement and concurrently with the Administrative Agent’s exercise of remedies under the Security Agreement, Administrative Agent may exercise at any time the rights set forth in this Agreement.  (For purposes of this Agreement, “foreclosure” shall include any transfer in lieu of foreclosure.)
(b)    To initiate the procedure under this Section 1, Administrative Agent first must offer in writing to sell the entire Membership Interest held by the Administrative Agent (i.e., up to a 49% interest following foreclosure on the Pledged Interests, or 100% of the Administrative Agent’s rights with respect to the Pledged Interests under the Security Agreement, if Administrative Agent elects to exercise the Buy-Sell concurrently with its exercise of rights with respect to the Pledged Interest under the Security Agreement) to PACOP in the manner described below (the “Buy-Sell Offer”).  The Buy-Sell Offer shall state the amount which Administrative Agent establishes, in its sole discretion, as the value of the Property (the “Buy-Sell Stated Value”).  During the fifteen (15) day period beginning on the date that Administrative Agent gives notice of such Buy-Sell Offer (“Option Period”), PACOP may elect to purchase Administrative Agent’s Membership Interest for an amount equal to the amount that the Lenders would have received, as both a Member and a creditor of the Company, if the events described in Section 2(a) below had occurred.  PACOP may exercise such right only by giving unconditional notice thereof to Administrative Agent before the end of the Option Period.  If PACOP does not validly exercise its right to purchase Administrative Agent’s Membership Interest during the Option Period, PACOP shall sell, and the Administrative Agent shall, on behalf of the Lenders, purchase, the Membership Interest of PACOP for an amount equal to PACOP Sale Price as defined in Section 2 below.
(c)    If PACOP validly exercises the option to purchase Administrative Agent’s Membership Interest in accordance with subsection (b) above, PACOP shall purchase, and Administrative Agent shall sell, Administrative Agent’s entire Membership Interest for the Administrative Agent Sale Price, as defined in Section 2 below.
(d)    A party who is obligated to purchase the other party’s(ies’) Membership Interest shall make a nonrefundable deposit of ten percent (10%) of the product of (i) the Buy-Sell Stated Value (less the full payoff amount of the Secured Loan and any Mezzanine Loan Deficiency (as defined below)), times (ii) the selling party’s percentage ownership interest in the Company.  Administrative Agent shall make such a deposit not later than five (5) days after the end of the Option Period (presuming the option was not exercised), and PACOP shall make such deposit to the Escrow Holder (defined below) not later than five (5) days after the date that it exercises the option to purchase.  For purposes of this Agreement, the phrase “full payoff amount” shall include all principal and interest and other obligations of borrower under the applicable financing, including 

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any prepayment premium, yield maintenance premium or other charges, calculated in each case as of the closing date hereunder.
(e)    Closing of a purchase under this Agreement shall occur on the date and place that the buying party chooses but not earlier than five (5 ) and not later than ten (10) days after the end of the Option Period, or as the selling party and the buying party otherwise agree in writing.  The closing of a purchase hereunder shall be through a title or escrow company (the “Escrow Holder”) selected by Administrative Agent, and all relevant documents and funds shall be submitted to Escrow Holder in a timely manner, pursuant to escrow instructions of the parties consistent with this Agreement, in order to facilitate the closing.  Any escrow fees or charges shall be split 50/50 between Administrative Agent and PACOP.
2.    Purchase Price; Closing.
(a)    The total amount which the buying party shall pay the selling party in a purchase shall be the amount that the selling party would have received if the Company (i) sold the Property for an amount equal to the Buy-Sell Stated Value, (ii) satisfied the indebtedness of the Company specifically referred to in subsection (b) below (and no other liabilities) out of the sale proceeds and (iii) distributed the remaining balance to Administrative Agent and PACOP in accordance with their respective percentage ownership interests in the Company (i.e., 51%, in the case of PACOP, and up to 49%, in the case of Administrative Agent).
(b)    In determining the amount of the liabilities that the Company would pay pursuant to Subsection 2(a)(ii), it shall be assumed that the Company would satisfy (through payment of the full payoff amount), in order, the following liabilities in full (and no others):  (i) the Secured Note, and (ii) any Mezzanine Loan Deficiency.  As used in this Agreement “Mezzanine Loan Deficiency” shall be determined based upon the actual amount received (or bid or credited, as applicable) by Administrative Agent at a foreclosure sale under and in accordance with the Security Agreement on such Membership Interests as Administrative Agent may foreclose on expeditiously and without opposition; the full payoff amount of the loans evidenced by the Mezzanine Loan Agreement, less the amounts so received, bid or credited, as applicable, shall be the Mezzanine Loan Deficiency.  In the event that Administrative Agent has not yet foreclosed on the Pledged Interests, the Mezzanine Loan Deficiency shall be an amount equal to the full outstanding amount of the Mezzanine Loan.  Administrative Agent shall provide PACOP notice of such foreclosure sale as required by the New York Uniform Commercial Code.  PACOP hereby fully waives any right to challenge the determination and calculation of such Mezzanine Loan Deficiency.
(c)    As used herein, the “Administrative Agent Sale Price” shall be equal to the sum of (i) the Mezzanine Loan Deficiency, and (ii) any amounts distributable to the Administrative Agent in accordance with Subsection 2(a)(iii) above.  The “PACOP Sale Price” shall equal only the amounts, if any, distributable to PACOP in accordance with Subsection 2(a)(iii) above.  Each party hereto expressly acknowledges that while exercise of the rights granted hereunder might require consent of the Senior Lender or might result in a required payoff of the Secured Note, such consent and/or payoff shall not be a condition precedent to exercise and consummation of the transactions contemplated hereby.

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(d)    At closing of the purchase of a Membership Interest, the selling party shall assign to the purchasing party such Membership Interest free and clear of all liens, claims, and encumbrances.  The Administrative Agent Sale Price or PACOP Sale Price, as applicable, shall be paid in immediately available funds.  The purchasing party shall assume the obligations of the selling party under the Operating Agreement and all other agreements to which the Company or all of its members are then a party and shall hold the selling party free and harmless from, and will defend and indemnify the selling party against, any and all claims against the Company or arising with respect to the conduct of its business on, or of ownership of, the Property accruing after such closing.  The selling party shall hold the purchasing party free and harmless from, and will defend and indemnify the purchasing party against, any and all claims arising with respect to the selling party assigned Membership Interest that have accrued prior to the closing.
3.    Resolution of Conflicts.  The provisions of this Agreement shall be binding amongst the parties with respect to their respective Membership Interests, notwithstanding any inconsistent provisions contained in the Operating Agreement.  
4.    Expedited Arbitration Process.  In the case of any dispute (including a request for enforcement or interpretation) arising under this Agreement, the parties agree that the same shall be resolved, at the request of either party, pursuant to the binding, expedited arbitration process provided for in this Section 4 (the “Arbitration Proceeding”).  The arbitration hearing shall commence a maximum of fifteen (15) days after service of a written demand for arbitration and the appointment of the arbitrator, unless such expedited time period is waived by the party making such demand.  The arbitrator shall determine the schedule for the Arbitration Proceeding, which shall be completed as expeditiously as possible, but in no event later than forty-five (45) days from service of the written notice of arbitration.  If the involved parties have not agreed on an arbitrator within five (5) days after delivery of the arbitration notice, then any of the involved parties may request JAMS, Inc. to name a neutral person who is willing to serve as arbitrator, which arbitrator shall be a retired Georgia state or federal judge.  If JAMS, Inc. fails or refuses to act within five (5) days after a party’s request, the presiding judge of the Fulton County Superior Court, acting in his or her judicial capacity, shall name a neutral person who is willing to serve as arbitrator, which arbitrator shall be a retired Georgia state or federal judge.  The Arbitration Proceeding shall be conducted in Atlanta, Georgia in accordance with the Georgia Arbitration Code.  The determination of the arbitrator shall be final and binding upon the parties to the Arbitration Proceeding and may not be appealed.  It is intended that the determination of the arbitrator shall be given full faith and credit by the courts and that the court shall enter enforceable, executable judgment(s) giving effect to the arbitrator’s determination upon the request of any party to the Arbitration Proceeding.  Without limiting the foregoing, it is the express intent of the parties that this Agreement be interpreted and enforced to the end that the provisions hereof be fully implemented, and the subject Membership Interests be transferred, expeditiously in accordance with the time period specified herein.
5.    Miscellaneous.
(a)    Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or 

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unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
(b)    By accepting the benefits of this Agreement, each Lender acknowledges and agrees that the rights and obligations of the Administrative Agent shall be as set forth in Article IX of the Credit Agreement.  
(c)    This Agreement may be executed in any number of counterparts and by different parties hereto on separate counterparts, including via facsimile transmission or other electronic transmission capable of authentication, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same agreement.  
(d)    No amendment or waiver of any provision of this Agreement shall in any event be effective unless the same shall be in writing and signed by the Administrative Agent acting at the direction of the requisite number of Lenders, if any, required pursuant to Section 11.12 of the Credit Agreement, and PACOP.  
(e)    THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.
(f)    ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK CITY OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF SUCH STATE, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, PACOP CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS.  PACOP IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR OTHER DOCUMENT RELATED THERETO.  PACOP WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY THE LAW OF SUCH STATE.
(g)    PACOP HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER THIS AGREEMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND PACOP HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 5(g) WITH ANY 

Page 5

COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(h)    All notice hereunder shall be in writing and otherwise in accordance with the notice provisions of the Security Agreement.
(i)    Administrative Agent may assign its rights under this Agreement to any acquirer of any Pledged Interests (including any Lender) as the result of a foreclosure of the Ownership Pledge pursuant to the Security Agreement.  In the case of any such assignment, all references herein to Administrative Agent as a Member shall mean such acquirer.  PACOP may not assign its rights hereunder.
(j)    The parties hereto shall each cooperate with the other to take all additional actions and execute and deliver all additional documents necessary or desirable to effectuate the provisions and spirit of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY BLANK]

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IN WITNESS WHEREOF, the Administrative Agent and PACOP have executed this Agreement as of the date appearing on the first page of this Agreement.

		
	BORROWER:
	PREFERRED APARTMENT COMMUNITIES OPERATION PARTNERSHIP, L.P.

		
	By:
	Preferred Apartment Advisors, LLC, its manager

            
		
	By:
	/s/ John A. Williams    

		
	Name:
	 John A. Williams    

		
	Title:
	Chief Executive Officer    

ADMINISTRATIVE
 
AGENT:            KEYBANK NATIONAL ASSOCIATION
By:    /s/ James K. Komperda            
Name:    James K. Komperda
Its:    Vice President

Signature Page 
To
Buy-Sell Agreement (Ashford Park)

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