Document:

Exhibit 10.1

Exhibit 10.1

MASTER CREDIT FACILITY AGREEMENT

BY AND AMONG

SUMMIT RUSSETT, LLC,

2009 CPT COMMUNITY OWNER, LLC,

2009 CUSA COMMUNITY OWNER, LLC,

2009 CSP COMMUNITY OWNER, LLC AND

2009 COLP COMMUNITY OWNER, LLC

AND

CAMDEN PROPERTY TRUST

AND

RED MORTGAGE CAPITAL, INC.

DATED AS OF

APRIL 17, 2009

 

 

 

MASTER CREDIT FACILITY AGREEMENT

THIS MASTER CREDIT FACILITY AGREEMENT is made as of the 17th day of April, 2009 (this
“Agreement”), by and among (i) SUMMIT RUSSETT, LLC, 2009 CPT COMMUNITY OWNER, LLC, 2009 CUSA
COMMUNITY OWNER, LLC, 2009 CSP COMMUNITY OWNER, LLC AND 2009 COLP COMMUNITY OWNER, LLC, each a
Delaware limited liability company, individually and collectively (“Borrower”); (ii) RED MORTGAGE
CAPITAL, INC., an Ohio corporation (“Lender”); and (iii) CAMDEN PROPERTY TRUST, a Real Estate
Investment Trust organized under the laws of the State of Texas, as guarantor (“Guarantor”).

RECITALS

A. Borrower (other than Summit Russett, LLC) and Camden Summit owns one (1) or more
Multifamily Residential Properties (unless otherwise defined or the context clearly indicates
otherwise, capitalized terms shall have the meanings ascribed to such terms in Appendix I of this
Agreement) as more particularly described in Exhibit A to this Agreement.

B. Borrower has requested that Lender make a Term Loan in the amount of $420,000,000 in favor
of Borrower, comprised of a $420,000,000 Fixed Loan.

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

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

 

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E. Subject to the terms, conditions and limitations of this Agreement, Lender has agreed to
make a Term Loan.

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

ARTICLE 1

THE TERM LOAN

Section 1.01. Term Loan. 

Subject to the terms, conditions and limitations of this Agreement, Lender agrees to make the
Term Loan to Borrower on the Initial Closing Date. The aggregate original principal amount of the
Term Loan shall be $420,000,000.

Section 1.02. Notes. 

The obligation of the Borrower to repay the Term Loan shall be evidenced by the following
Notes: (i) a Fixed Note in the principal amount of $420,000,000 and (ii) any other Notes as may be
necessary for Borrower to execute during the Term in connection with a conversion. The Notes shall
be payable to the order of Lender and shall equal the aggregate original principal amount of the
Term Loan to the Borrower.

Section 1.03. Maturity Date.

The maturity date of the Fixed Loan made on the Initial Closing Date shall be May 1, 2019.
The Term Loan is payable interest only and shall not require amortization, except as otherwise set
forth in Section 1.05(e)(ii).

Section 1.04. Yield Maintenance/Prepayment. 

The terms and conditions of yield maintenance and/or prepayment premiums, as applicable, are
contained in the Notes and such terms and conditions shall apply to the prepayment in part or whole
of the Term Loan during the term of this Agreement.

Section 1.05. Conversion from Variable Loan to Fixed Loan.

Except as provided in Section 1.06 and subject to the terms of Section 1.10, Borrower shall have
the right to convert all or any portion of the Variable Loan to a Fixed Loan. Borrower shall not
be required to pay any fee maintenance in connection with any such conversion.

(a) Request. To convert all or a portion of the Variable Loan
to a Fixed Loan, Borrower shall deliver a Conversion Request to Lender. Each
Conversion Request shall designate the amount of the
Variable Loan to be converted, and the maturity date of such converted
Fixed Loan, subject to Section 1.05(e).

 

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(b) Closing. Subject to Section 1.06 and Section
1.10, and provided that all conditions contained in Section 1.07
are satisfied, Lender shall permit the requested conversion to close at
offices designated by Lender on a Closing Date selected by Lender, within
thirty (30) Business Days after all of the conditions for a conversion have
been satisfied (or on such other date as Borrower and Lender may agree). At
the closing, Lender and Borrower shall execute and deliver, at the sole cost
and expense of Borrower, in form and substance satisfactory to Lender, the
Conversion Documents. Borrower shall be obligated to pay an interest rate
and fees in connection with a conversion as determined in accordance with the
applicable requirements of the Fannie Mae product line then in effect.

(c) Minimum Remaining Amount of Variable Loans. After the
closing of any conversion, if any Variable Loan remains Outstanding, the
minimum aggregate principal amount Outstanding of such remaining Variable
Loan shall be not less than $25,000,000. If the aggregate principal amount
Outstanding of the Variable Loan is less than $25,000,000, such Variable Loan
must be repaid (together with all associated prepayment premiums and other
amounts due under the Variable Note) or converted to a Fixed Loan pursuant to
the terms of this Section and Sections 1.06 and 1.07.

(d) If the Variable Loan is converted to a Fixed Loan, such Fixed Loan
may be a cash execution or an MBS execution at Lender’s option and rates
shall be set in accordance with the following procedures:

(i) Preliminary, Nonbinding Quote. At Borrower’s request, Lender shall quote an
estimate of the Cash Interest Rate (for a Fixed Loan with a cash execution) or the MBS Pass-Through
Rate plus Fixed Facility Fee (for a Fixed Loan with an MBS execution). Lender’s quote shall be
based on (A) in the case of an MBS execution, a solicitation of bids from institutional investors
selected by Lender or, in the case of a cash execution, the rate quoted by Fannie Mae and (B) the
proposed terms and amount of the Fixed Loan selected by Borrower. The quote shall not be binding
upon Lender.

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

 

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(iii) Rate Confirmation. In the case of an MBS execution, within one (1) Business Day
after receipt of the Rate Form and upon satisfaction of all of the conditions for conversion,
Lender shall solicit bids from institutional investors selected by Lender based on the
information in the Rate Form and, provided the MBS Pass-Through Rate would be at or below the
Maximum Annual Interest Rate, shall obtain a commitment (“MBS Commitment”) for the purchase
of an MBS having the bid terms described in the related Rate Form. In the case of a cash
execution, within one (1) Business Day after receipt of the Rate Form, Lender shall obtain a
commitment from Fannie Mae (“Fannie Mae Commitment”) for the converted Fixed Loan having
the terms described in the related Rate Form. Lender shall then complete and countersign the Rate
Form thereby confirming the amount, term, and Closing Date for the conversion, for a Fixed Loan
with an MBS execution, the MBS Issue Date, MBS Delivery Date, MBS Pass-Through Rate, and Fixed
Facility Fee and for a Fixed Loan with a cash execution, the Cash Interest Rate, and shall
immediately deliver by facsimile transmission the Rate Form to Borrower.

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

(e) Term and Conditions of Converted Loans.

(i) Until the date which is five years from the Initial Closing Date, Borrower shall have the
right to convert all or a portion of the Outstanding Variable Loan to a Fixed Loan for a term of at
least five (5) years from the Closing Date of the conversion, provided that the amendment to the
Variable Note executed in connection with such Fixed Loan shall not have a maturity date beyond the
Fixed Loan Termination Date.

(ii) As an alternative to its rights under Section 1.05(e)(i) and subject to Section 1.10,
during the period of time between the first day of the fourth month after the Initial Closing Date
and the last Business Day of the fourth month prior to the Variable Loan Termination Date, Borrower
shall have the right to convert all or a portion of the Outstanding Variable Loan to a Fixed Loan
for a term as determined by Borrower of no more than ten (10) years from the Closing Date of the
conversion. The maturity date of such Fixed Loan may extend beyond May 1, 2019. Any Fixed Loan
converted in accordance with this subsection 1.05(e)(ii) shall require amortization calculated over
the Amortization Period. No Collateral may be released from the Collateral Pool, upon the maturity
dates of any Loan made under this Agreement, unless the requirements of Sections 3.04 and 6.05 are
satisfied.

Section 1.06. Limitations on Right to Convert. 

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

(a) Minimum Request. Each Conversion Request shall be in the
minimum amount of $5,000,000.

 

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(b) Failure to Underwrite. In the event all or a portion of the
amount of the Variable Loan set forth in the Conversion Request cannot be
converted because the increased debt service on the Fixed Loan does not
result in the Collateral Pool satisfying the Coverage and LTV Tests, Borrower
shall prepay the amount of the Variable Loan that cannot be converted to a
Fixed Loan and shall pay all prepayment premiums and other fees associated
with such prepayment.

(c) Notwithstanding the foregoing, if either of the tests set forth
above in subsection (b), are not satisfied after the conversion, such
conversion may be permitted by Lender if the conversion improves the
Collateral Pool based on factors that are consistent with Lender’s
Underwriting Requirements and results in improvement in one or both of the
following areas: the then current Aggregate Debt Service Coverage Ratio or
the then current Aggregate Loan to Value Ratio. Notwithstanding the
foregoing, under no circumstances shall the Aggregate Loan to Value Ratio
exceed ninety percent (90%).

Section 1.07. Conditions to Conversion. 

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

Section 1.08. Interest Rate Execution . 

In the event that the Term Loan made on the Initial Closing Date is solely a Fixed Loan, the
provisions in this Agreement referencing the Variable Loan and Variable Note shall be deemed to be
of no further force and effect and be deemed to be eliminated from this Agreement.

Section 1.09. Interest Rate Cap.

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

Section 1.10. Limitation on All Loans.

Notwithstanding anything in this Agreement or any other Loan Document to the contrary, any
conversion of a Loan shall be subject to the precondition that the Lender must confirm with Fannie
Mae that Fannie Mae is generally offering to purchase in the marketplace loans of the execution
type requested by Borrower at the time of the Request and at the time of the rate setting date for
the conversion. In the event Fannie Mae is not purchasing loans of the type requested by Borrower,
Lender agrees to offer, to the extent available from Fannie Mae, alternative loan executions based
on the types of executions Fannie Mae is generally offering to purchase in the marketplace at that
time. Any alternative execution offered would be subject to mutually agreeable documentation
necessary to implement the terms and conditions of such alternative execution.

 

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ARTICLE 2

THE ALLOCABLE LOAN AMOUNT/SUPPLEMENTAL LOANS

Section 2.01. Determination of Allocable Loan Amount and Valuations. 

(a) Initial Determinations. On the Initial Closing Date, Lender
shall determine the Allocable Loan Amount and Valuation for each Initial
Mortgaged Property, and the Aggregate Debt Service Coverage Ratio and the
Aggregate Loan to Value Ratio. Subject to Section 2.01(b), the
determinations made as of the Initial Closing Date shall remain unchanged
until the First Anniversary. Changes in Allocable Loan Amount, Valuations,
the Aggregate Debt Service Coverage Ratio and the Aggregate Loan to Value
Ratio shall be made pursuant to Section 2.01(b).

(b) Monitoring Determinations. Once each Calendar Quarter or,
if only Fixed Loans are Outstanding, once each Calendar Year, within twenty
(20) Business Days after Borrower has delivered to Lender the reports
required in Section 8.03, Lender shall determine the Aggregate Debt Service Coverage
Ratio, the Aggregate Loan to Value Ratio, the Valuations and the Allocable
Loan Amounts and whether Borrower is in compliance with the other covenants
set forth in the Loan Documents. After the First Anniversary, on an annual
basis, and if Lender decides that changed market or property conditions
warrant, Lender shall redetermine Allocable Loan Amounts and Valuations.
Lender shall also redetermine Allocable Loan Amounts to take account of any
substitution or release of Collateral or a conversion of interest rate or
other event that invalidates the outstanding determinations. In determining
Valuations, Lender shall use Capitalization Rates based on its internal
survey and analysis of capitalization rates for comparable sales in the
vicinity of the Mortgaged Property, with such adjustments as Lender deems
appropriate and without any obligation to use any information provided by
Borrower. If Lender is unable to determine a Capitalization Rate for a
Mortgaged Property, Lender shall have the right,
with the prior consent of Borrower, not more than once annually, to
obtain, at Borrower’s expense, a market study in order to establish a
Capitalization Rate. In the event Borrower fails to consent to Lender
obtaining a market study, Lender shall determine the Capitalization Rate
pursuant to the Underwriting Requirements. Lender shall promptly disclose
its determinations to Borrower. Until redetermined, the outstanding
Allocable Loan Amounts and Valuations shall remain in effect.
Notwithstanding anything in this Agreement to the contrary, no change in
Allocable Loan Amounts, Valuations, the Aggregate Loan to Value Ratio or the
Aggregate Debt Service Coverage Ratio shall, unless resulting from the
concurrent release or substitution of Collateral from the Collateral Pool or
the concurrent conversion of the interest rate, result in a Potential Event
of Default or Event of Default, require the prepayment of any Note in whole
or in part, or require the addition of Collateral to the Collateral Pool.

 

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Section 2.02. Supplemental Loan.

After the First Anniversary, Borrower may participate in the Fannie Mae Supplemental Loan
product if the Supplemental Loan product is offered by Fannie Mae at the time. Any such
Supplemental Loan is subject to Lender’s determination that, as a result of its annual valuation of
the Collateral Pool, a Supplemental Loan may be made pursuant to Lender’s Underwriting Requirements
for Loans which meet the Coverage and LTV Tests. The Supplemental Loan will be documented with
loan documents similar to the Loan Documents (“Supplemental Loan Documents”). Supplemental
Loans will not be loans advanced under this Agreement. Any Supplemental Loan will be priced at
market at the time of the loan and will be cross-defaulted with the Term Loan. To secure the
obligations of Borrower under the Supplemental Loan Documents, Borrower shall grant, convey and
assign to Lender a second Lien on each Mortgaged Property in the Collateral Pool and on any other
collateral pledged to Lender from time to time pursuant to the Supplemental Loan Documents. On the
closing date of the Supplemental Loan, Lender shall determine the portion of the Supplemental Loan
allocated to a particular Mortgaged Property by Lender (the “Supplemental Allocable Loan
Amount”), which Supplemental Allocable Loan Amounts shall be set forth in a separate exhibit to
this Agreement. Lender shall redetermine the Supplemental Allocable Loan Amounts in the same
manner and at the same time as the redetermination of the Allocable Loan Amounts pursuant to
Section 2.01(b). In the event of a Supplemental Loan, Borrower shall pay the Supplemental
Loan Fee on the date of the closing of such Supplemental Loan. Notwithstanding the foregoing, the
Supplemental Loan shall be monitored pursuant to Section 2.01 of this Agreement and Lender shall
include the Supplemental Loan upon calculating the Coverage and LTV Tests, Aggregate Debt Service
Coverage Ratio and Aggregate Loan to Value Ratio, in connection with any Request.

ARTICLE 3

COLLATERAL CHANGES

Section 3.01. Reserved.

Section 3.02. Reserved.

Section 3.03. Right to Obtain Releases of Collateral.

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

Section 3.04. Procedure for Obtaining Releases of Collateral.

(a) Request. To obtain a release of Collateral from the
Collateral Pool, Borrower shall deliver a Release Request to Lender. Upon
delivery of the Release Request, Borrower shall not be permitted to re-borrow
any amounts that will be prepaid in connection with the release of
Collateral.

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

(c) Release Price. The “Release Price” for each Release
Mortgaged Property means the greater of one hundred percent (100%) of the
Allocable Loan Amount for the Release Mortgaged Property plus one hundred
percent (100%) of the Supplemental Allocable Loan Amount for the Release
Mortgaged Property and one hundred percent (100%) of the amount, if any, of
the amount of the Term Loan Outstanding and any Supplemental Loan Outstanding
that is required to be repaid by Borrower to Lender in connection with the
proposed release of the Release Mortgaged Property from the Collateral Pool
so that, immediately after the release, the Collateral Pool satisfies the
better of the following tests (i.e. the test which produces a lower Aggregate
Loan to Value Ratio and a higher Aggregate Debt Service Coverage Ratio): (1)
the Aggregate Debt Service Coverage Ratio and the Aggregate Loan to Value
Ratio immediately prior to the release or (2) the Coverage and LTV Test. In
addition to the Release Price, Borrower shall pay to Lender all associated
prepayment premiums and other amounts due under the Notes being repaid. In
connection with a non-simultaneous substitution of Collateral pursuant to
Section 3.06(c)(ii) of this Agreement, Borrower shall be permitted,
in lieu of paying the
Release Price, to post a Letter of Credit issued by a financial
institution acceptable to Lender and having terms and conditions acceptable
to Lender, having a face amount equal to the Release Price.

 

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(d) Application of Release Price. (i) The Release Price for the
Release Mortgaged Property shall be applied in the order selected by
Borrower, provided that (A) any amount of the Supplemental Loan Outstanding
which Borrower elects to prepay must be prepaid in full, or if the Release
Price is not sufficient to do so, the Supplemental Loan shall only be
partially prepaid; (B) any amount of the Term Loan Outstanding which Borrower
elects to prepay must be prepaid in full, or if the Release Price is not
sufficient to do so, the Term Loan shall be only partially prepaid; (C) any
prepayment is permitted under the applicable Note; (D) any prepayment premium
due and owing is paid; and (E) interest is paid through the end of the month.
If Borrower is unable to meet the conditions set forth in (A) through (E),
then the Release Price shall be applied first against any variable rate
Supplemental Loan Outstanding so long as the prepayment is permitted under
the applicable note, until any variable rate Supplemental Loan is no longer
Outstanding, then against any Variable Loan Outstanding so long as the
prepayment is permitted under the Variable Note, until any Variable Loan is
no longer Outstanding, then against any fixed rate Supplemental Loan
Outstanding so long as the prepayment is permitted under the applicable note,
until any fixed rate Supplemental Loan is not longer Outstanding, then
against any Fixed Loan Outstanding so long as the prepayment is permitted
under the applicable Fixed Note.

(ii) In the event Borrower desires to release a Release Mortgaged Property on
a date other than the last Business Day of the month, the Release Price or
the remainder of the Release Price, if any, shall be held by Lender (or its
appointed collateral agent) as Additional Collateral, in accordance with a
security agreement (if required by Lender) and other documents in form and
substance acceptable to Lender. Any Additional Collateral shall first be used
to prepay the applicable Supplemental Loan and then the applicable Term Loan
on the last Business Day of the month.

(e) Release of Borrower and Guarantor. Upon the release of a
Mortgaged Property, the Borrower that is the owner of such Release Mortgaged
Property shall be released of all obligations under this Agreement and the
other Loan Documents with respect to the Release Mortgaged Property, except
for any provisions of this Agreement and the other Loan Documents that are
expressly stated to survive any release or termination or for any liabilities
or obligations of such Borrower which arose prior to the Closing Date of such
release. In addition, each Borrower and Guarantor shall be released of all
obligations related to the Release Mortgaged Property under this Agreement
and the other Loan Documents except for any provisions of this Agreement and
the other Loan Documents
that are expressly stated to survive any release or termination or for
any liabilities or obligations of such Borrower or Guarantor which arose
prior to the Closing Date of such release.

 

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(f) Test for Release. A Release may be effected if immediately
after giving effect to the requested release, the better of the following
tests are satisfied (i.e. the test which produces a lower Aggregate Loan to
Value Ratio and a higher Aggregate Debt Service Coverage Ratio), (1) the
Aggregate Debt Service Coverage Ratio and the Aggregate Loan to Value Ratio
immediately prior to the release or (2) the Coverage and LTV Test.
Notwithstanding the foregoing, if either of the tests set forth above in
subsection (1) or (2) are not satisfied after the release of a Mortgaged
Property, such release may be permitted by Lender if the release improves the
Collateral Pool based on factors that are consistent with Lender’s
Underwriting Requirements and results in improvement in one or both of the
following areas: the then current Aggregate Debt Service Coverage Ratio or
the then current Aggregate Loan to Value Ratio.

Section 3.05. Right to Substitutions. 

Subject to the terms and conditions of this Article 3 and the limitations sets forth
in Section 15.17, Borrower shall have the right to obtain the release of the Mortgaged
Property securing the Term Loan made to such Borrower by replacing such Mortgaged Property with a
Multifamily Residential Property that meets the requirements of this Agreement (the “Substitute
Mortgaged Property”) thereby effecting a “Substitution” of Collateral.

Section 3.06. Procedure for Substitutions. 

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

(b) Underwriting.

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

(ii) A Substitution may be effected if (1) the proposed Substitute Mortgaged Property has a
Debt Service Coverage Ratio of not less than 1.35:1.0 with respect to the amount of the Fixed Loan
which is allocated as the Allocable Loan Amount for such Substitute Mortgaged Property and 1.10:1.0
with respect to the amount of the Variable Loan which is allocated as the Allocable Loan Amount for
such Substitute Mortgaged Property and its Loan to Value Ratio must not exceed seventy percent
(70%) and (2) the Collateral Pool,
immediately after the Substitution, satisfies the better of the following tests (i.e. the test
which produces a lower Aggregate Loan to Value Ratio and a higher Aggregate Debt Service Coverage
Ratio): (A) the Coverage and LTV Test and (B) the Aggregate Debt Service Coverage Ratio and the
Aggregate Loan to Value Ratio of the Collateral Pool immediately prior to the Substitution. If
necessary in order for the Collateral Pool to meet the tests set forth in this Section 3.06(b)(ii)
after the Substitution, Borrower may prepay a portion of the Term Loan (including all prepayment
premiums) pursuant to the terms of the Notes and this Agreement. Notwithstanding the foregoing, if
either of the tests set forth above in subsection (1) or (2) are not satisfied after the
Substitution of a proposed Substitute Mortgaged Property, such Substitution may be permitted by
Lender if the Substitution improves the Collateral Pool based on factors that are consistent with
Lender’s Underwriting Requirements and result in improvement in one or more of the following areas:
the then current Valuation of the Mortgaged Properties, the then current Aggregate Debt Service
Coverage Ratio, or the then current Aggregate Loan to Value Ratio.

 

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

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

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

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

 

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Section 3.07. Substitution Deposit.

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

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

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

 

11

 

(d) Substitution Deposit Disbursement. At closing of the
Substitution, the Lender shall disburse the Substitution Deposit (less any
portion of the Substitution Cost Deposit used by Lender to cover all
reasonable out-of-pocket costs and expenses incurred by Lender and Fannie
Mae, including any out-of-pocket legal fees and expenses incurred by Fannie
Mae and Lender in connection with such substitution) directly to the Borrower
at such time as the conditions set forth in Sections 3.05,
3.06, 6.05, 6.06, 6.11, 6.12 and all
General Conditions contained in Section 6.01 have been satisfied,
which must occur no later than the Property Delivery Deadline.

ARTICLE 4

RESERVED

ARTICLE 5

RESERVED

ARTICLE 6

CONDITIONS PRECEDENT TO ALL REQUESTS

Section 6.01. Conditions Applicable to All Requests. 

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

(a) Reserved.

(b) Payment of Expenses. The payment by Borrower of Lender’s
and Fannie Mae’s reasonable third party out-of-pocket fees and expenses
payable in accordance with this Agreement, including, but not limited to, the
legal fees and expenses described in Section 10.03.

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

 

12

 

(d) No Default. There shall exist no Event of Default or
Potential Event of Default in each case under Sections 11.01 (b)-(l) or , in
any material respect, under Sections 11.01 (a), (m) or (n) (it being
understood and agreed that any default comparable to the Events of Default
listed in 11.01(b) — (l) in the other Loan Documents or Supplemental Loan
Documents will be treated to be material) on the Closing Date for the Request
and, after giving effect to the transaction requested in the Request, no
Event of Default or Potential Event of Default shall have occurred.

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

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

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

(h) No Condemnation or Casualty. Except in connection with a
Release Request, there shall not be pending or threatened any condemnation or
other taking, whether direct or indirect, against the Mortgaged Property and
there shall not have occurred any casualty which has not been previously
completely repaired in accordance with the terms of the Loan Documents to any
improvements located on the Mortgaged Property, which casualty would have a
Material Adverse Effect.

 

13

 

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

(i) The Loan Documents relating to such Request;

(ii) A Compliance Certificate;

(iii) An Organizational Certificate; and

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

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

Section 6.02. Conditions Precedent to the Term Loan. 

The obligation of Lender to make the Term Loan is subject to the following conditions
precedent:

(a) Reserved;

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

(c) Receipt by Lender of Interest Rate Cap Documents in accordance with
the Pledge, Interest Rate Cap Agreement, effective as of the Initial Closing
Date;

(d) Receipt by Lender of the Guaranty, Certificate of Camden Summit,
Indemnification Agreement Regarding Taxes and the Indemnity Multifamily Deed
of Trust, Assignment of Rents and Security Agreement;

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

 

14

 

(f) Receipt by Lender of the documents and instruments required by
Section 6.12; and

(g) Receipt by Lender of the Initial Origination Fee pursuant to Section 10.01(a) and
the Initial Due Diligence Fee pursuant to Section 10.02(a).

Section 6.03. Reserved.

Section 6.04. Reserved.

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

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

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

(b) Immediately after giving effect to the requested release, the
provisions of Section 3.04(f) are satisfied;

(c) Receipt by Lender of the Release Price;

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

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

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

 

15

 

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

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

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

Section 6.06. Conditions Precedent to Substitutions. 

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

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

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

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

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

 

16

 

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

(f) Receipt by Lender of endorsements to the tie-in endorsements of the
Title Insurance Policies, if deemed necessary by Lender, to reflect the
substitution, to the extent a tie-in endorsement is available with respect to
the applicable Title Insurance Policies;

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

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

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

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

Section 6.07. Reserved.

Section 6.08. Conditions Precedent to Conversion.

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

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

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

 

17

 

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

(d) Receipt by Lender of one (1) or more executed, original counterparts
of all Conversion Documents, dated as of the Closing Date, each of which
shall be in full force and effect and in form and substance reasonably
satisfactory to Lender in all respects.

Section 6.09. Reserved.

Section 6.10.  Reserved.

Section 6.11. Delivery of Opinion Relating to Substitution Request or
Conversion Request. 

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

Section 6.12. Delivery of Property-Related Documents. 

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

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

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

(c) The Survey applicable to the Mortgaged Property;

 

18

 

\

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

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

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

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

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

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

(j) A Certificate of Borrower Parties;

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

(l) A Contribution Agreement or an amendment thereto.

 

19

 

Section 6.13. Additional Collateral.

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

Section 6.14. Reserved.

Section 6.15. Letters of Credit.

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

 

20

 

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

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

(ii) if 30 days prior to the expiration of the Letter of Credit, the Letter of Credit has not
been extended for a term of at least 364 days; or

(iii) upon the downgrading of the ratings of the long-term or short-term debt obligations of
the LOC Bank below the requirements of Fannie Mae then in effect.

(c) Deposit to Cash Collateral Agreement. If Lender draws under the Letter of Credit
pursuant to Section 6.15(b)(ii) or (iii) above, Lender shall deposit such draw monies into the Cash
Collateral Account. Borrower shall have the right to obtain a release of such draw monies in the
Cash Collateral Account pursuant to the Cash Collateral Agreement if Borrower provides Lender with
a replacement Letter of Credit in accordance with Section 6.15(a) above and in an amount of the
draw monies in the Cash Collateral Account.

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

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

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

(iii) to make improvements or repairs to any Mortgaged Property; or

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

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

ARTICLE 7

REPRESENTATIONS AND WARRANTIES

Section 7.01. Representations and Warranties of Borrower. 

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

 

21

 

Section 7.02. Representations and Warranties of Lender. 

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

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

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

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

ARTICLE 8

AFFIRMATIVE COVENANTS OF BORROWER AND GUARANTOR

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

Section 8.01. Compliance with Agreements.

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

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

Section 8.02. Maintenance of Existence.

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

 

22

 

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

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

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

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

(i) Annual Financial Statements. As soon as available, and in any event within one
hundred twenty (120) days after the close of its fiscal year during the Term of this Agreement, the
audited consolidated balance sheet showing all assets and liabilities of Camden, the audited
consolidated statement of operations of Camden and the unaudited consolidated statement of
operations of Borrower for such fiscal year, and the audited consolidated statement of cash flows
of Camden and the unaudited consolidated statement of cash flows of Borrower for such fiscal year,
all in reasonable detail and stating in comparative form the respective figures for the
corresponding date and period in the prior fiscal year, prepared in accordance with GAAP
consistently applied and as to Camden, accompanied by an unqualified opinion of Camden’s
independent certified public accountants to the effect that such financial statements have been
audited by such accountants, and that such financial statements fairly present the results of
Camden’s operations and financial condition for the periods and dates indicated with such opinion
to be free of exceptions and qualifications as to the scope of the audit and as to the going
concern nature of the business;

 

23

 

(ii) Quarterly Financial Statements. As soon as available, and in any event within
forty five (45) days after each of the first three fiscal quarters of each fiscal year during the
Term of this Agreement, beginning with the fiscal quarter ending September 30, 2009, the unaudited
consolidated balance sheet showing all assets and liabilities of Camden as of the end of any such
fiscal quarter, the unaudited consolidated statement of operations of Borrower and Camden and the
unaudited consolidated statement of cash flows of Borrower and Camden for the portion of the fiscal
year ended with the last day of such quarter, all prepared in accordance with GAAP and in
reasonable detail and stating in comparative form the respective figures for the corresponding date
and period in the previous fiscal year, accompanied by a certificate of an authorized
representative of Borrower and Camden reasonably acceptable to Lender stating that such financial
statements have been prepared in accordance with GAAP, consistently applied, and fairly present the
results of its operations and financial condition for the periods and dates indicated, subject to
year end adjustments in accordance with GAAP;

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

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

(v) Monthly Property Statements. Upon Lender’s request and no later than 30 days
after such request, a monthly electronic property management report for each Mortgaged Property,
showing the number of inquiries made and rental applications received from tenants or prospective
tenants and deposits received from tenants and any other information requested by Lender and a
statement of income and expense of each Mortgaged Property for the prior month;

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

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

 

24

 

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

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

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

(xi) Federal Tax Returns. Upon the request of Lender, after an Event of Default, the
Federal tax return of Borrower and Guarantor that was filed with the Internal Revenue Service,
United States Department of Treasury; and

(xii) Quarterly Litigation Report. Within forty five (45) days after each Calendar
Quarter or from time to time as Lender may request or as Camden may deem appropriate, Camden shall
provide Lender with a written update, reasonably satisfactory to Lender, with respect to the
pending litigation against Affiliates of Camden, as more particularly described in Section
14.01(a)(vi) of this Agreement.

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

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

 

25

 

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

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

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

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

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

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

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

 

26

 

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

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

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

Section 8.05. Certificate of Compliance. 

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

 

27

 

Section 8.06. Maintain Licenses. 

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

Section 8.07. Inform Lender of Material Events. 

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

(a) Defaults. The occurrence of any Event of Default or any Potential Event of
Default under this Agreement or any other Loan Document or any loan document in connection with a
Supplemental Loan;

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

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

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

 

28

 

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

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

(g) Legal and Regulatory Status. The occurrence of any act, omission, change or
event, including any Governmental Approval, the result of which is to change or alter in any way
the legal or regulatory status of Borrower; if such act, omission, change or event has or may
reasonably be expected to have, a Material Adverse Effect; and

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

Section 8.08. Compliance with Applicable Law. 

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

Section 8.09. Alterations to the Mortgaged Properties. 

Except as otherwise provided in the Loan Documents, Borrower shall have the right to undertake
any alteration, improvement, demolition, removal or construction (collectively,
“Alterations”) to the Mortgaged Property which it owns without the prior consent of Lender;
provided, however, that in any case, no such Alteration shall be made to any Mortgaged
Property without the prior written consent of Lender if such Alteration could reasonably be
expected to adversely affect the value of such Mortgaged Property or its operation as a multifamily
housing facility in substantially the same manner in which it is being operated on the date such
property became Collateral, the construction of such Alteration could reasonably be expected to
result in interference to the occupancy of tenants of such Mortgaged Property such that tenants in
occupancy with respect to five percent (5%) or more of the Leases would be permitted to terminate
their Leases or to abate the payment of all or any portion of their rent, or such Alteration will
be completed in more than fifteen (15) months from the date of commencement or in the last year of
the Term of this Agreement. Notwithstanding the foregoing, Borrower must obtain Lender’s prior
written consent to construct Alterations with respect to the Mortgaged Property costing in excess
of, with respect to any Mortgaged Property, the number of units in such Mortgaged Property
multiplied by $2,000, but in any event, costs in excess of $250,000 and Borrower must give prior
written notice to Lender of its intent to construct Alterations with
respect to such Mortgaged Property costing in excess of $100,000; provided, however, that the
preceding requirements shall not be applicable to Alterations made, conducted or undertaken by
Borrower as part of Borrower’s routine maintenance, and repair or replacement of obsolete equipment
of the Mortgaged Properties as required by the Loan Documents. Notwithstanding anything contained
in this paragraph, in the event that the cost of an Alteration is less than $100,000 for any
Mortgaged Property and such Alteration shall take place in the last year of the Term of this
Agreement, the Borrower shall not be required to request the prior written consent of Lender prior
to making such Alteration.

 

29

 

Section 8.10. Loan Document Taxes. 

If any tax, assessment or Imposition (other than a franchise tax or excise tax imposed on or
measured by, the net income or capital (including branch profits tax) of Lender (or any transferee
or assignee thereof, including a participation holder)) (“Loan Document Taxes”) is levied,
assessed or charged by the United States, or any State in the United States, or any political
subdivision or taxing authority thereof or therein upon any of the Loan Documents or the
obligations secured thereby, the interest of Lender in the Mortgaged Properties, or Lender by
reason of or as holder of the Loan Documents, Borrower shall pay all such Loan Document Taxes to,
for, or on account of Lender (or provide funds to Lender for such payment, as the case may be)
within thirty (30) days after written notice from Lender and shall promptly furnish proof of such
payment to Lender, as applicable. In the event of passage of any law or regulation permitting,
authorizing or requiring such Loan Document Taxes to be levied, assessed or charged, which law or
regulation in the opinion of counsel to Lender may prohibit Borrower from paying the Loan Document
Taxes to or for Lender, Borrower shall enter into such further instruments as may be permitted by
law to obligate Borrower to pay such Loan Document Taxes.

Section 8.11. Further Assurances. 

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

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

(a) Prohibition on Transfers. Subject to paragraph (b) of this Section, neither
Borrower nor Guarantor shall cause or permit a Transfer or a Change of Control.

 

30

 

(b) Permitted Transfers. Notwithstanding the provisions of paragraph (a) of this
Section, the following Transfers by Borrower or Guarantor (or owners of interests in Guarantor),
upon prior written notice to Lender (however, prior notice will not be required with respect to the
Transfers described in subsections (i), (ii) or (iii) below), are permitted without the consent of
Lender (or the payment of any fee):

(i) The issuance by Camden of additional stock and the subsequent Transfer of such stock and
the issuance by Camden Summit and Camden OP of additional partnership units and subsequent Transfer
of such units; provided, however, that no Change in Control occurs as the result of such Transfer.

(ii) A merger with or acquisition of another entity by Camden (or, with respect to a merger
solely to reincorporate in another state, by Camden into another entity), provided that Camden is
the surviving entity (other than a merger to reincorporate in another state when the other entity
can be the surviving entity in which case Lender is satisfied that the surviving corporation in
such merger shall succeed to all the rights, properties, assets and liabilities of Camden) after
such merger or acquisition, no Change in Control occurs, and such merger or acquisition does not
result in an Event of Default, as such terms are defined in this Agreement.

(iii) The Transfer of shares of common stock of Camden; provided, however, that no Change in
Control occurs as the result of such Transfer.

(iv) A Transfer of Ownership Interests in CPT-LP, Inc.; provided, however, after such
Transfer, CPT-LP, Inc. shall continue to own at least 51% of the Ownership Interests in Camden OP.

(v) A Transfer of Ownership Interests in Camden Summit; provided, however, after such
Transfer, Camden General Partner shall maintain Control of Camden Summit and shall continue to own
at least 51% of the Ownership Interests in Camden Summit.

(vi) A Transfer of Ownership Interests in Camden OP; provided, however, after such Transfer,
CPT-GP, Inc. shall maintain Control of Camden OP and CPT-LP, Inc. shall continue to own at least
51% of the Ownership Interests in Camden OP.

(vii) A Transfer of Ownership Interests in Camden Legacy Park Member; provided, however, after
such Transfer, Camden OP shall maintain Control of Camden Legacy Park Member and shall continue to
own at least 51% of the Ownership Interests in Camden Legacy Park Member.

(viii) A Transfer of Ownership Interests in Camden CSP Member; provided, however, after such
Transfer, Camden Summit shall maintain Control of Camden CSP Member and shall continue to own at
least 51% of the Ownership Interests in Camden CSP Member.

 

31

 

(ix) A Transfer of Ownership Interests in Camden CUSA Member; provided, however, after such
Transfer, Camden USA shall maintain Control of Camden CUSA
Member and shall continue to own at least 51% of the Ownership Interests in Camden CUSA
Member.

(x) A Transfer of Ownership Interests in Camden CPT Member; provided, however, after such
Transfer, Camden shall maintain Control of Camden CPT Member and shall continue to own at least 51%
of the Ownership Interests in Camden CPT Member.

(xi) A Transfer of any or all, direct or indirect, Ownership Interests in Borrower to any
wholly-owned subsidiary of Camden.

Section 8.13. Transfer of Ownership of Mortgaged Property.

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

(b) Permitted Transfers. Notwithstanding provision (a) of this Section, the following
Transfers of a Mortgaged Property by Borrower or Guarantor, upon prior written notice to Lender
(however, prior notice will not be required with respect to the Transfers permitted pursuant to
subsections (i) and (ii) below), are permitted without the consent of Lender (or the payment of any
fee):

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

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

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

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

 

32

 

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

(i) the transferee (“New Collateral Pool Borrower”) is a Single Purpose entity, and
executes an assumption agreement that is acceptable to Lender pursuant to which such New Collateral
Pool Borrower assumes all obligations of Borrower and Camden Summit (with respect to the Mortgaged
Property known as Camden Russett) under all the applicable Loan Documents and Supplemental Loan
Documents;

(ii) the applicable Loan Documents and Supplemental Loan Documents shall be amended and
restated as deemed necessary or appropriate by Lender to meet the then-applicable requirements of
Fannie Mae; provided, however, any waivers granted in connection with the Term Loan or Supplemental
Loan will not be reinstated unless specifically approved by Lender and Fannie Mae;

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

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

(v) New Collateral Pool Borrower shall propose a guarantor acceptable to Lender, which
guarantor executes and delivers a guaranty acceptable to Lender provided that the guaranty is
guaranteeing a non-recourse loan with comparable exceptions to non-recourse as set forth in Section
14.01;

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

(vii) the requirements of Section 8.14 are satisfied.

Section 8.14.  Consent to Prohibited Transfers.

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

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

(ii) the absence of any Event of Default;

 

33

 

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

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

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

(1) a transfer fee equal to one (1) percent of the unpaid Outstanding principal balance of the
Term Loan.

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

(vi) the Transfer will not result in a significant modification under Section 1001 of the
Internal Revenue Code of any Fixed Loan or any Variable Loan that has been securitized in a
mortgage-backed security.

Section 8.15. Date-Down Endorsements. 

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

Section 8.16. Ownership of Mortgaged Properties. 

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

 

34

 

Section 8.17. Compliance with Net Worth Test.

Camden shall at all times maintain its Net Worth so that it is not less than: $325,000,000.

Section 8.18. Compliance with Liquidity Test. 

Camden shall at all times maintain cash and Cash Equivalents of not less than $20,000,000.

Section 8.19. Change in Property Manager. 

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

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

Section 8.20. Single Purpose Entity.

Borrower and each general partner or managing member of Borrower shall maintain itself as a
Single Purpose entity, provided, however, that (i) Borrower may own more than one Mortgaged
Property, each of which is part of the Collateral Pool and (ii) Borrower and each general partner
or managing member may commingle its funds with Camden provided that such funds are separately
identified and accounted for.

Section 8.21. ERISA.

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

Section 8.22. Consents or Approvals.

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

 

35

 

Section 8.23. Post-Closing Obligations.

Borrower shall use commercially reasonable efforts to deliver to Lender, at Borrower’s sole
cost and expense, no later than thirty (30) days from the Initial Closing Date (“Estoppel and SNDA
Delivery Date”) the estoppel certificates and subordination, non-disturbance and attornment
agreements as described below in form and substance satisfactory to Lender, provided, however, on a
rolling thirty (30) day basis, Borrower shall have the right to extend the Estoppel and SNDA
Delivery Date for an additional thirty (30) days if Borrower furnishes proof satisfactory to Lender
that it is diligently pursuing and undertaking all commercially reasonable efforts to obtain an
estoppel certificate and a subordination, non-disturbance and attornment agreement as described
below. Borrower shall pay, or reimburse Lender for, all reasonable out-of-pocket third party legal
fees and expenses incurred by Lender and by Fannie Mae in respect of the review and/or negotiation
of such estoppel certificates and subordination, non-disturbance and attornment agreements.

(a) Tenant Estoppel Certificate from Moto Enterprises, Inc. for a sit-in and take-out coffee
and tea house located on the property commonly known as Camden Harbor View.

(b) Tenant Estoppel Certificate from Frank Buono for a family-style Italian restaurant located
on the property commonly known as Camden Harbor View.

(c) Tenant Estoppel Certificate from Design X Manufacturing, Inc. for the operation of a salon
furniture showroom and design center located on the property commonly known as Camden Harbor View.

(d) Tenant Estoppel Certificate from Healthcare Partners Medical Group for general medical
office use located on the property commonly known as Camden Harbor View.

(e) Tenant Estoppel Certificate from Mosher’s Gourmet, Inc. for a sit-in and take-out
delicatessen-style restaurant located on the property commonly known as Camden Harbor View.

(f) Tenant Estoppel Certificate from Andrew M. Kripp for an upscale hair salon located on the
property commonly known as Camden Harbor View.

(g) Tenant Estoppel Certificate from Stuart Smith and Lisa Smith for an upscale wine bar
located on the property commonly known as Camden Harbor View.

(h) Tenant Estoppel Certificate from Yoga World Studio, Inc. for the operation of a yoga
studio located on the property commonly known as Camden Harbor View.

(i) Subordination, Non-Disturbance and Attornment Agreement by and between Camden USA, Inc.
and Moto Enterprises, Inc. for a sit-in and take-out coffee and tea house located on the property
commonly know as Camden Harbor View. Borrower shall, at Borrower’s sole cost and expense, make
immediate arrangements for delivery to the Title Company with fully executed instructions directing
the Title Company to file and/or record such Subordination, Non-Disturbance and Attornment
Agreement in the recorder’s office in the County of Los Angeles, State of California.

 

36

 

(j) Subordination, Non-Disturbance and Attornment Agreement by and between Camden USA, Inc.
and Frank Buono for a family-style Italian restaurant located on the property commonly know as
Camden Harbor View. Borrower shall, at Borrower’s sole cost and expense, make immediate
arrangements for delivery to the Title Company with fully executed instructions directing the Title
Company to file and/or record such Subordination, Non-Disturbance and Attornment Agreement in the
recorder’s office in the County of Los Angeles, State of California.

(k) Subordination, Non-Disturbance and Attornment Agreement by and between Camden USA, Inc.
and Design X Manufacturing, Inc. for the operation of a salon furniture showroom and design center
located on the property commonly know as Camden Harbor View. Borrower shall, at Borrower’s sole
cost and expense, make immediate arrangements for delivery to the Title Company with fully executed
instructions directing the Title Company to file and/or record such Subordination, Non-Disturbance
and Attornment Agreement in the recorder’s office in the County of Los Angeles, State of
California.

(l) Subordination, Non-Disturbance and Attornment Agreement by and between Camden USA, Inc.
and Healthcare Partners Medical Group for general medical office use located on the property
commonly know as Camden Harbor View. Borrower shall, at Borrower’s sole cost and expense, make
immediate arrangements for delivery to the Title Company with fully executed instructions directing
the Title Company to file and/or record such Subordination, Non-Disturbance and Attornment
Agreement in the recorder’s office in the County of Los Angeles, State of California.

(m) Subordination, Non-Disturbance and Attornment Agreement by and between Camden USA, Inc.
and Mosher’s Gourmet, Inc. for a sit-in and take-out delicatessen-style restaurant located on the
property commonly know as Camden Harbor View. Borrower shall, at Borrower’s sole cost and expense,
make immediate arrangements for delivery to the Title Company with fully executed instructions
directing the Title Company to file and/or record such Subordination, Non-Disturbance and
Attornment Agreement in the recorder’s office in the County of Los Angeles, State of California.

(n) Subordination, Non-Disturbance and Attornment Agreement by and between Camden USA, Inc.
and Andrew M. Kripp for an upscale hair salon located on the property commonly know as Camden
Harbor View. Borrower shall, at Borrower’s sole cost and expense, make immediate arrangements for
delivery to the Title Company with fully executed instructions directing the Title Company to file
and/or record such Subordination, Non-Disturbance and Attornment Agreement in the recorder’s office
in the County of Los Angeles, State of California.

 

37

 

(o) Subordination, Non-Disturbance and Attornment Agreement by and between Camden USA, Inc.
and Stuart Smith and Lisa Smith for an upscale wine bar located on the property commonly know as
Camden Harbor View. Borrower shall, at Borrower’s sole cost and expense, make immediate
arrangements for delivery to the Title Company with fully executed instructions directing the Title
Company to file and/or record such Subordination, Non-Disturbance and Attornment Agreement in the
recorder’s office in the County of Los Angeles, State of California.

(p) Subordination, Non-Disturbance and Attornment Agreement by and between Camden USA, Inc.
and Yoga World Studio, Inc. for the operation of a yoga studio located on the property commonly
know as Camden Harbor View. Borrower shall, at Borrower’s sole cost and expense, make immediate
arrangements for delivery to the Title Company with fully executed instructions directing the Title
Company to file and/or record such Subordination, Non-Disturbance and Attornment Agreement in the
recorder’s office in the County of Los Angeles, State of California.

ARTICLE 9

NEGATIVE COVENANTS OF BORROWER

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

Section 9.01. Other Activities. 

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

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

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

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

Section 9.02. Liens. 

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

Section 9.03. Indebtedness. 

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

 

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Section 9.04. Principal Place of Business. 

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

Section 9.05. Condominiums. 

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

Section 9.06. Restrictions on Distributions. 

Borrower shall not make any distributions of any nature or kind whatsoever to the owners of
its Ownership Interests as such if, at the time of such distribution, a Potential Event of Default
that may reasonably be expected to result in a Material Adverse Effect or an Event of Default has
occurred and remains uncured.

Section 9.07. No Hedging Arrangements.

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

Section 9.08. Confidentiality of Certain Information.

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

 

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ARTICLE 10

FEES

Section 10.01. Origination Fees.

(a) Initial Origination Fee. Borrower shall pay to Lender on the Initial Closing Date
an origination fee (“Initial Origination Fee”) equal to [*].

(b) Reserved.

Section 10.02. Due Diligence Fees.

(a) Initial Due Diligence Fees. Borrower shall pay to Lender non-refundable due
diligence fees (“Initial Due Diligence Fees”) with respect to each Initial Mortgaged
Property in an amount equal to $5,000 per Initial Mortgaged Property. All Initial Due Diligence
Fees shall have been paid prior to the Initial Closing Date and all third party costs and
out-of-pocket fees and expenses incurred by Lender and Fannie Mae shall be paid by Borrower on the
Initial Closing Date (or, if the proposed Initial Mortgaged Properties do not become part of the
Collateral Pool, on demand).

(b) Additional Due Diligence Fees for Additional Collateral. Borrower shall pay to
Lender non-refundable additional due diligence fees (the “Additional Collateral Due Diligence
Fees”) with respect to each proposed Substitute Mortgaged Property, in an amount equal to
$5,000 per Substitute Mortgaged Property, which represents the estimated cost for due diligence
expenses. All Additional Collateral Due Diligence Fees, third party costs and out-of-pocket fees
and expenses incurred by Lender and Fannie Mae shall be paid by Borrower on the applicable Closing
Date (or if the relevant proposed Substitute Mortgaged Property does not become part of a
Collateral Pool, on demand) for the Substitute Mortgaged Property.

Section 10.03. Legal Fees and Expenses.

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

 

	 	 	 
	*	 	Indicates material that has been omitted and for which
confidential treatment has been requested. All such omitted material has been
filed with the Securities and Exchange Commission pursuant to Rule 406
promulgated under the Securities Act of 1933, as amended.

 

40

 

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

Section 10.04. Failure to Close any Request. 

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

ARTICLE 11

EVENTS OF DEFAULT

Section 11.01. Events of Default. 

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

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

(b) the failure by Borrower to pay when due any amount payable by Borrower, beyond any
applicable cure period, under any Note, any Security Instrument, this Agreement or any other Loan
Document, including any fees, costs or expenses, provided that any payment relating to any fee,
cost or expense that is not a scheduled payment must be paid (if not otherwise specified in the
applicable Loan Document) within ten (10) days of written notice by Lender; or

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

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

 

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

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

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

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

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

 

42

 

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

(i) the failure by Borrower to comply with any requirement of any Governmental Authority by
the time required by the Governmental Authority; or

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

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

(l) any judgment against Camden, any attachment or other levy against any portion of Camden’s
assets with respect to a claim or claims in an amount in excess of $2,500,000 in the aggregate
remains unpaid, unstayed on appeal, undischarged, unbonded, not fully insured or undismissed for a
period of ninety (90) days; or

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

(n) the failure by Borrower or Guarantor to perform or observe any material term, covenant,
condition or agreement hereunder, other than as contained in subsections (a) through (m) above,
within thirty (30) days after receipt of notice from Lender identifying such failure, provided such
period shall be extended for up to sixty (60) additional days if Borrower, in the discretion of
Lender, is diligently pursuing a cure of such default within sixty (60) days after receipt of
notice from Lender.

ARTICLE 12

REMEDIES

Section 12.01. Remedies; Waivers. 

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

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

 

43

 

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

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

Section 12.02. Waivers; Rescission of Declaration. 

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

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

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

Section 12.04. No Remedy Exclusive. 

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

 

44

 

Section 12.05. No Waiver. 

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

Section 12.06. No Notice. 

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

ARTICLE 13

INSURANCE, REAL ESTATE TAXES AND REPLACEMENT RESERVES

Section 13.01. Insurance and Real Estate Taxes. 

(a) Insurance and Tax Escrow; Waiver. Borrower shall establish funds for taxes, insurance
premiums and certain other charges for each Mortgaged Property in accordance with Section 7(a) of
the Security Instrument for each Mortgaged Property. Notwithstanding the foregoing, so long as no
Event of Default or Potential Event of Default has occurred, and with respect to the waiver of tax
escrows only, so long as Camden has its long-term debt obligations rated at least “BBB” by S&P or
“Baa2” by Moody’s, Lender hereby waives the obligations of Borrower under Section 7(a) of each
Security Instrument with respect to the escrow of premiums for insurance and taxes (the
“Required Escrow Payments”). During any period in which the obligation to pay the Required
Escrow Payments has been waived pursuant to this Section 13.01, each Borrower shall: (i)
pay taxes, (ii) pay insurance premiums with respect to the insurance policy meeting the
requirements of the Security Instrument for each Mortgaged Property, (iii) not later than fifteen
(15) days prior to the expiration date of such policy send Lender copies of binding quotes received
by Camden which set forth the gross pre-tax premiums for new or renewal insurance policies,
complete information on who is providing the insurance and to whom the premiums are due, evidence
of Camden’s acceptance of such quotes or renewals, certified copies of evidence of insurance
effective on or prior to the expiration date of the old existing policy, (iv) not later than thirty
five (35) days after
the then-current expiration date of the insurance policy, send Lender paid receipts or other
documentation satisfactory to Lender evidencing that the premiums for such new or renewal insurance
policies have been paid, (v) send Lender invoices and paid receipts, or other documentation
satisfactory to Lender, evidencing payment of such taxes on the date such taxes are due and
payable, (vi) provide to Lender written proof at least fifteen (15) days prior to the then-current
expiration date of the insurance policy, certified by the insurance provider, that such policy has
been extended for a period of at least one (1) year, and (vii) include all payments of insurance
premiums and taxes in its monthly and annual property income and expense data. In the event that
the rating of the long-term debt obligations of Camden falls below “BBB” by S&P and below “Baa2” by
Moody’s, Borrower shall notify Lender of such downgrade within two (2) business days and Borrower
shall have fifteen (15) days to deliver a Letter of Credit to Lender as set forth in Section
13.04 or deposit funds with Lender, in accordance with this Agreement and the Security
Instruments, for tax escrows.

 

45

 

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

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

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

(iii) failure by any Borrower to (A) participate in a blanket insurance policy that complies
with Fannie Mae’s insurance requirements and (B) annually furnish signed insurance binders to
Lender within fifteen (15) days prior to the insurance renewal date.

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

Section 13.02. Replacement Reserves. 

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

Section 13.03. Completion/Repair Reserves.

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

Section 13.04. Tax Escrows — Letter of Credit. 

(a) In the event that Borrower shall be required to make monthly escrow
payments for taxes, Borrower may, upon written notice to Lender, elect to
provide in lieu of the required deposits for taxes a Letter of Credit in
accordance with this subsection and pursuant to Section 6.15 of this
Agreement. Any Letter of Credit delivered to Fannie Mae in accordance with
this subsection shall be a clean, irrevocable Letter of Credit, naming Fannie
Mae as beneficiary, in the amount equal to the highest aggregate amount of
any tax balance for the Mortgaged Property on an annual basis, which amount
shall be determined in Fannie Mae’s sole discretion (the “Maximum Escrow
Amount”).

 

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(b) Administrative Fee. For so long as Lender or Fannie Mae is
holding the Letter of Credit in accordance with this Section 13.04, Borrower
shall pay Lender a nonrefundable annual administrative fee in an amount equal
to $500 per Mortgaged Property for which a Letter of Credit has been
delivered to Fannie Mae in lieu of making monthly escrow payments for taxes
(the “LOC Fee”). Such LOC Fee shall be paid by Borrower in advance of the
effective date of the Letter of Credit and shall not be prorated if the
Letter of Credit is returned prior to time period set forth in Section
13.04(d)(2) hereof.

(c) Letter of Credit as Additional Collateral. Borrower agrees
that the Letter of Credit provides collateral for each Note and all
Obligations in addition to the lien of each Security Instrument.

(d) Conditions for Providing and Holding Letter of Credit.

(1) Period During Which Borrower Must Provide Letter of Credit. Until the earliest of
(i) payment in full of all Obligations and sums secured by each Security Instrument, or (ii) the
date that Fannie Mae fully draws on the Letter of Credit as permitted by this Agreement, Borrower
shall renew, amend or replace the Letter of Credit in accordance with the terms of this Agreement
to ensure that the Letter of Credit remains in effect and does not expire or shall provide cash to
Fannie Mae in the amount of tax escrow deposits which would have been required at the time if
Borrower had not elected to furnish the Letter of Credit at least fifteen (15) days prior to the
date the Letter of Credit terminates.

(2) Return of the Letter of Credit or the Proceeds Thereof. Fannie Mae shall return
the Letter of Credit, or the proceeds of any draws on such Letter of Credit (less all amounts which
have been applied by Fannie Mae pursuant to the terms of this Section) to Borrower within five (5)
business days after the date on which Fannie Mae releases the lien of all of the Security
Instruments.

(3) Adjustment of the Letter of Credit. Borrower shall deliver to Fannie Mae copies
of the paid bills and notices of assessments for Taxes for each Mortgaged
Property within thirty (30) days after the date on which the Taxes are due and payable. Not
more than one time each calendar year, Borrower shall, promptly after receipt of notice from Fannie
Mae, deliver to Fannie Mae an amendment or replacement of the Letter of Credit in the Maximum
Escrow Amount for the then-current calendar year, as such yearly amount is reasonably determined by
Fannie Mae pursuant to this Agreement.

(e) Renewal or Replacement of Letter of Credit.

 

47

 

(1) Renewal or Replacement. At least fifteen (15) days prior to the expiration date
of the Letter of Credit, Borrower shall either (i) cause the Letter of Credit to be amended to
extend its expiration date, (ii) furnish a replacement Letter of Credit or (iii) provide cash to
Fannie Mae in the amount of tax escrow deposits which would have been required at the time if
Borrower had not elected to furnish the Letter of Credit.

(2) Draw on Letter of Credit. If Borrower does not provide an amendment to, or
replacement of, the Letter of Credit when required pursuant to paragraph (1) above or provide the
amount of cash referenced in paragraph (1) above or the long-term obligations of the LOC Bank are
downgraded as set forth in Section 6.15(b)(iii) of this Agreement, Fannie Mae shall draw the full
amount of the Letter of Credit and hold the funds in escrow pursuant to Section 7(b) of the
Security Instrument.

(f) (1) Remedies. If an Event of Default or Potential Event of Default has occurred,
Fannie Mae may apply the proceeds of the Letter of Credit in its discretion pursuant to
Section 6.15 of this Agreement.

(2) No Obligation to Apply Proceeds; No Cure. Nothing in this Section shall obligate
Fannie Mae to apply all or any portion of the proceeds of the Letter of Credit to cure any default
under the Loan Documents or to reduce the indebtedness evidenced by any Note. No application of
proceeds of the Letter of Credit by Fannie Mae shall be deemed to cure any default.

ARTICLE 14

LIMITS ON PERSONAL LIABILITY

Section 14.01. Personal Liability to Borrower. 

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

(a) Exceptions to Limits on Personal Liability. Borrower shall be personally liable
to Lender for the repayment of a portion of the Term Loan and other amounts due under the Loan
Documents equal to any loss, expense, cost, liability or damage suffered by Lender as a
result of or in any manner relating to (i) failure of Borrower to pay to Lender upon demand after
an Event of Default all Rents received by Borrower or its property manager to which Lender is
entitled under Section 3(a) of the Security Instrument encumbering the Mortgaged Property and the
amount of all security deposits held by Borrower from tenants then in residence; (ii) failure of
Borrower to apply all insurance proceeds, condemnation proceeds or security deposits from tenants
as required by the Security Instrument encumbering the Mortgaged Property; (iii) failure of such
Borrower to comply with its obligations under the Loan Documents with respect to the delivery of
books and records and financial statements; (iv) fraud or intentional material misrepresentation by
Borrower or any officer, director, partner, member or employee of Borrower in connection with the
application for or creation of the Obligations or any request for any action or consent by Lender;
(v) any and all indemnification obligations contained in Section 18 of any Security Instrument;
(vi) the litigation against Camden Property Trust and Camden Builders Inc., filed by the Equal
Rights Center in the United States District Count for the District of Maryland as Case No. PJM 07
CV 2357 with respect to the Fair Housing Act and the Americans with Disabilities Act and the
litigation against Camden Development, Inc. filed by Meredith Ponce as a class action complaint in
Los Angeles County, California alleging that late fees charged constituted unlawful penalties;
(vii) a Camden Summit Bankruptcy Event, or (viii) failure to apply Rents, first, to the payment of
reasonable operating expenses and then to amounts (“Debt Service Amounts”) payable under
the Loan Documents (except that Borrower will not be personally liable to the extent that Borrower
lacks the legal right to direct the disbursement of such sums because of a bankruptcy, receivership
or similar judicial proceeding, or with respect to Rents of a Mortgaged Property that are
distributed in any Calendar Quarter if Borrower has paid all operating expenses and Debt Service
Amounts for the preceding Calendar Quarter). For purposes of this subsection (a), the term
“Rents” shall have the meaning given to such term in the Security Instrument.

 

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

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

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

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

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

 

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

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

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

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

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

 

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Section 14.02. Additional Borrowers. 

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

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

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

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

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

Section 14.03. Borrower Agency Provisions.

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

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

 

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

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

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

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

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

 

52

 

(b) The Waiving Borrower hereby waives any defense it may now or
hereafter have that relates to: (i) any disability or other defense of the
other Borrower or any other person; (ii) the cessation, from any cause other
than full performance, of the Other Borrower Secured Obligation; (iii) the
application of the proceeds of the Other Borrower Secured Obligation, by the
other Borrower or any other person, for purposes other than the purposes
represented to the Waiving Borrower by the other Borrower or otherwise
intended or understood by the Waiving Borrower or the other Borrower; (iv)
any act or omission by Lender which directly or indirectly results in or
contributes to the release of the other Borrower or any other person or any
collateral for any Other Borrower Secured Obligation; (v) the
unenforceability or invalidity of any Security Document or Loan Document
(other than the Security Instrument executed by the Waiving Borrower that
secures the Other Borrower Secured Obligation) or guaranty with respect to
any Other Borrower Secured Obligation, or the lack of perfection or
continuing perfection or lack of
priority of any Lien (other than the Lien of such Security Instrument)
which secures any Other Borrower Secured Obligation; (vi) any failure of
Lender to marshal assets in favor of the Waiving Borrower or any other
person; (vii) any modification of any Other Borrower Secured Obligation,
including any renewal, extension, acceleration or increase in interest rate;
(viii) any and all rights and defenses arising out of an election of remedies
by Lender, even though that election of remedies, such as a nonjudicial
foreclosure with respect to security for a guaranteed obligation, has
destroyed the Waiving Borrower’s rights of subrogation and reimbursement
against the principal by the operation of Section 580d of the California Code
of Civil Procedure or otherwise; (ix) any law which provides that the
obligation of a surety or guarantor must neither be larger in amount nor in
other respects more burdensome than that of the principal or which reduces a
surety’s or guarantor’s obligation in proportion to the principal obligation;
(x) any failure of Lender to file or enforce a claim in any bankruptcy or
other proceeding with respect to any person; (xi) the election by Lender, in
any bankruptcy proceeding of any person, of the application or
non-application of Section 1111(b)(2) of the Bankruptcy Code; (xii) any
extension of credit or the grant of any lien under Section 364 of the
Bankruptcy Code; (xiii) any use of cash collateral under Section 363 of the
Bankruptcy Code; or (xiv) any agreement or stipulation with respect to the
provision of adequate protection in any bankruptcy proceeding of any person.
The Waiving Borrower further waives any and all rights and defenses that it
may have because the Other Borrower Secured Obligation is secured by real
property; this means, among other things, that: (A) Lender may collect from
the Waiving Borrower without first foreclosing on any real or personal
property collateral pledged by the other Borrower; (B) if Lender forecloses
on any real property collateral pledged by the other Borrower, then (1) the
amount of the Other Borrower Secured Obligation may be reduced only by the
price for which that collateral is sold at the foreclosure sale, even if the
collateral is worth more than the sale price, and (2) Lender may foreclose on
the real property encumbered by the Security Instrument executed by the
Waiving Borrower and securing the Other Borrower Secured Obligation even if
Lender, by foreclosing on the real property collateral of the Other Borrower,
has destroyed any right the Waiving Borrower may have to collect from the
Other Borrower. Subject to the last sentence of Section 14.04, the foregoing
sentence is an unconditional and irrevocable waiver of any rights and
defenses the Waiving Borrower may have because the Other Borrower Secured
Obligation is secured by real property. These rights and defenses being
waived by the Waiving Borrower include, but are not limited to, any rights or
defenses based upon Section 580a, 580b, 580d or 726 of the California Code of
Civil Procedure. Without limiting the generality of the foregoing or any
other provision hereof, the Waiving Borrower further expressly waives, except
as provided in Section 14.05(g) below, to the extent permitted by law any and
all rights and defenses that might
otherwise be available to it under California Civil Code Sections 2787
to 2855, inclusive, 2899 and 3433, or under California Code of Civil
Procedure Sections 580a, 580b, 580d and 726, or any of such sections.

 

53

 

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

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

 

54

 

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

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

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

 

55

 

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

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

 

56

 

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

Section 14.06. No Impairment.

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

Section 14.07. Election of Remedies.

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

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

 

57

 

Section 14.08. Subordination of Other Obligations. 

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

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

 

58

 

Section 14.09. Insolvency and Liability of Other Borrower. 

So long as any of the Obligations are outstanding, if a petition under any chapter of the
Bankruptcy Code is filed by or against any Borrower (the “Subject Borrower”), each other
Borrower (each, an “Other Borrower”) agrees to file all claims against the Subject Borrower
in any bankruptcy or other proceeding in which the filing of claims is required by law in
connection with indebtedness owed by the Subject Borrower and to assign to Lender all rights
thereunder up to the amount of such indebtedness. In all such cases, the Person or Persons
authorized to pay such claims shall pay to Lender the full amount thereof and Lender agrees to pay
such Other Borrower any amounts received in excess of the amount necessary to pay the Obligations.
Each Other Borrower hereby assigns to Lender all of such Other Borrower’s rights to all such
payments to which such Other Borrower would otherwise be entitled but not to exceed the full
amount of the Obligations. In the event that, notwithstanding the foregoing, any such payment
shall be received by any Other Borrower before the Obligations shall have been finally paid in
full, such payment shall be held in trust for the benefit of and shall be paid over to Lender upon
demand. Furthermore, notwithstanding the foregoing, the liability of each Borrower hereunder shall
in no way be affected by:

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

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

Section 14.10. Preferences, Fraudulent Conveyances, Etc. 

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

 

59

 

Section 14.11. Maximum Liability of Each Borrower. 

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

Section 14.12. Liability Cumulative; References to California Law. 

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

All references in Article 14 to California law are only applicable if any Mortgaged Property
is located in California.

ARTICLE 15

MISCELLANEOUS PROVISIONS

Section 15.01. Counterparts. 

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

 

60

 

Section 15.02. Amendments, Changes and Modifications. 

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

Section 15.03. Payment of Costs, Fees and Expenses. 

In addition to the payments required by Section 10.03 of this Agreement, Borrower
shall pay, on demand, all reasonable third party out-of-pocket fees, costs, charges or expenses
(including the fees and expenses of attorneys, accountants and other experts) incurred by Lender in
connection with:

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

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

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

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

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

 

61

 

Section 15.04. Payment Procedure. 

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

Section 15.05. Payments on Business Days. 

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

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

NOTWITHSTANDING ANYTHING IN THE NOTES, THE SECURITY DOCUMENTS OR ANY OF THE OTHER LOAN
DOCUMENTS TO THE CONTRARY, EACH OF THE TERMS AND PROVISIONS, AND RIGHTS AND OBLIGATIONS OF BORROWER
UNDER THIS AGREEMENT AND THE NOTES, GUARANTOR UNDER THE GUARANTY, AND BORROWER AND GUARANTOR UNDER
THE OTHER LOAN DOCUMENTS, SHALL BE GOVERNED BY, INTERPRETED, CONSTRUED AND ENFORCED PURSUANT TO AND
IN ACCORDANCE WITH THE LAWS OF THE DISTRICT OF COLUMBIA (EXCLUDING THE LAW APPLICABLE TO CONFLICTS
OR CHOICE OF LAW) EXCEPT TO THE EXTENT OF PROCEDURAL AND SUBSTANTIVE MATTERS RELATING ONLY TO THE
CREATION, PERFECTION AND FORECLOSURE OF LIENS AND SECURITY INTERESTS, AND ENFORCEMENT OF THE RIGHTS
AND REMEDIES, AGAINST THE MORTGAGED PROPERTIES, WHICH MATTERS SHALL BE GOVERNED BY THE LAWS OF THE
JURISDICTION IN WHICH THE MORTGAGED PROPERTY IS LOCATED, THE PERFECTION, THE EFFECT OF PERFECTION
AND NON-PERFECTION AND FORECLOSURE OF SECURITY INTERESTS ON PERSONAL PROPERTY, WHICH MATTERS SHALL
BE GOVERNED BY THE LAWS OF THE JURISDICTION DETERMINED BY THE CHOICE OF LAW PROVISIONS OF THE
UNIFORM COMMERCIAL CODE IN EFFECT FOR THE JURISDICTION IN WHICH THE BORROWERS’ ARE ORGANIZED.
BORROWER AND GUARANTOR AGREE THAT ANY CONTROVERSY ARISING UNDER OR IN RELATION TO THE NOTES, THE
SECURITY DOCUMENTS (OTHER THAN THE SECURITY INSTRUMENTS) OR ANY OTHER LOAN DOCUMENT SHALL BE,
EXCEPT AS OTHERWISE PROVIDED HEREIN, LITIGATED IN THE DISTRICT OF COLUMBIA. THE LOCAL AND FEDERAL
COURTS AND AUTHORITIES WITH JURISDICTION IN THE DISTRICT OF COLUMBIA SHALL, EXCEPT AS OTHERWISE
PROVIDED HEREIN, HAVE JURISDICTION OVER ALL CONTROVERSIES WHICH MAY ARISE UNDER OR IN RELATION TO
THE LOAN DOCUMENTS, INCLUDING THOSE CONTROVERSIES RELATING TO THE EXECUTION, JURISDICTION, BREACH,
ENFORCEMENT OR COMPLIANCE WITH THE NOTES, THE SECURITY DOCUMENTS (OTHER THAN THE SECURITY
INSTRUMENTS) OR ANY OTHER ISSUE ARISING UNDER, RELATING TO, OR IN
CONNECTION WITH ANY OF THE LOAN DOCUMENTS. EACH OF BORROWER AND GUARANTOR IRREVOCABLY
CONSENTS TO SERVICE, JURISDICTION, AND VENUE OF SUCH COURTS FOR ANY LITIGATION ARISING FROM THE
NOTES, THE SECURITY DOCUMENTS OR ANY OF THE OTHER LOAN DOCUMENTS, AND WAIVES ANY OTHER VENUE TO
WHICH IT MIGHT BE ENTITLED BY VIRTUE OF DOMICILE, HABITUAL RESIDENCE OR OTHERWISE. NOTHING
CONTAINED HEREIN, HOWEVER, SHALL PREVENT LENDER FROM BRINGING ANY SUIT, ACTION OR PROCEEDING OR
EXERCISING ANY RIGHTS AGAINST EITHER OR ALL OF BORROWER AND GUARANTOR AND AGAINST THE COLLATERAL IN
ANY OTHER JURISDICTION. INITIATING SUCH SUIT, ACTION OR PROCEEDING OR TAKING SUCH ACTION IN ANY
OTHER JURISDICTION SHALL IN NO EVENT CONSTITUTE A WAIVER OF THE AGREEMENT CONTAINED HEREIN THAT THE
LAWS OF THE DISTRICT OF COLUMBIA SHALL GOVERN THE RIGHTS AND OBLIGATIONS OF EACH OF BORROWER AND
GUARANTOR AND LENDER AS PROVIDED HEREIN OR THE SUBMISSION HEREIN BY EACH OF BORROWER AND GUARANTOR
TO PERSONAL JURISDICTION WITHIN THE DISTRICT OF COLUMBIA. BORROWER AND GUARANTOR (I) COVENANT AND
AGREE NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING UNDER ANY OF THE LOAN
DOCUMENTS TRIABLE BY A JURY AND (II) WAIVE ANY RIGHT TO TRIAL BY JURY TO THE EXTENT THAT ANY SUCH
RIGHT SHALL NOW OR HEREAFTER EXIST. THIS WAIVER IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH
INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A JURY TRIAL WOULD OTHERWISE ACCRUE. FURTHER,
EACH OF BORROWER AND GUARANTOR HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF LENDER
(INCLUDING, BUT NOT LIMITED TO, LENDER’S COUNSEL) HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO
BORROWER AND/OR GUARANTOR THAT LENDER WILL NOT SEEK TO ENFORCE THE PROVISIONS OF THIS SECTION. THE
FOREGOING PROVISIONS WERE KNOWINGLY, WILLINGLY AND VOLUNTARILY AGREED TO BY BORROWER AND GUARANTOR
UPON CONSULTATION WITH INDEPENDENT LEGAL COUNSEL SELECTED BY BORROWER’S AND GUARANTOR’S FREE WILL.

 

62

 

Section 15.07. Severability. 

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

Section 15.08. Notices.

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

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

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

 

63

 

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

addressed to the parties as follows:

	 	As to Borrower:	 	2009 COLP Community Owner, LLC

2009 CSP Community Owner, LLC

2009 CUSA Community Owner, LLC

2009 CPT Community Owner, LLC

Summit Russett, LLC

c/o Camden Property Trust

Three Greenway Plaza, Suite 1300

Houston, Texas 77046

Attention: Alex Jessett

Telecopy: (713) 354-2710

	 
	 	with a copy to:	 	Camden Property Trust

Three Greenway Plaza, Suite 1300

Houston, Texas 77046

Attention: J. Robert Fisher

Telecopy: (713) 354-2710

	 
	 	As to Lender:	 	Red Mortgage Capital, Inc.

Two Miranova Place, 12th Floor

Columbus, Ohio 43215

Attention: Servicing Manager

Telecopy: (614) 857-1620

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

Two Miranova Place, 12th Floor

Columbus, Ohio 43215

Attention: Director, Loan Servicing and Asset Management

Telecopy: (614) 857-1610

 

64

 

	 	with a copy to:	 	Arent Fox LLP

1675 Broadway

New York, New York 10019

Attention: David L. Dubrow, Esq.

Telecopy: (212) 484-3990

	 
	 	As to Fannie Mae:	 	Fannie Mae

3900 Wisconsin Avenue, N.W.

Washington, D.C. 20016-2899

Attention: Vice President for Multifamily Asset Management

Telecopy No.: (301) 280-2064

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

Two Miranova Place, 12th Floor

Columbus, Ohio 43215

Attention: Director, Loan Servicing and Asset Management

Telecopy: (614) 857-1610

	 
	 	with a copy to:	 	Arent Fox LLP

1675 Broadway

New York, NY 10019

Attention: David L. Dubrow, Esq.

Telecopy No.: (212) 484-3990

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

Section 15.09. Further Assurances and Corrective Instruments.

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

 

65

 

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

(c) Compliance with Investor Requirements. Without limiting the generality of
subsection (a), Borrower shall comply with the reasonable requirements of Lender to enable Lender
to sell the MBS backed by a Fixed Loan.

Section 15.10. Term of this Agreement. 

This Agreement shall continue in effect until the Termination Date.

Section 15.11. Assignments; Third-Party Rights. 

No Borrower shall assign this Agreement, or delegate any of its obligations hereunder, without
the prior written consent of Lender. Lender may assign its rights under this Agreement separately
or together, without Borrower’s consent, but may not delegate its obligations under this Agreement
unless it first receives Fannie Mae’s written approval. Lender shall first assign its rights under
this Agreement separately or together, without Borrower’s consent, to Fannie Mae. Upon assignment
to Fannie Mae, Fannie Mae shall be permitted to further assign its rights under this Agreement
subject to Section 9.08 of this Agreement.

Section 15.12.  Headings.

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

Section 15.13. General Interpretive Principles. 

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

 

66

 

Section 15.14. Interpretation. 

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

Section 15.15. Standards for Decisions, Etc. 

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

Section 15.16. Decisions in Writing. 

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

Section 15.17. Requests. 

Borrower may submit up to a total of four (4) Requests per Calendar Year.

Section 15.18.  Conflicts Between Agreements.

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

(Signatures appear on following pages)

 

67

 

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

	 	 	 	 	 
	 	BORROWER:

SUMMIT RUSSETT, LLC, a Delaware limited liability company

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

	 	 	 	 	 
	 	2009 CPT COMMUNITY OWNER, LLC, 

a Delaware limited liability company

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	2009 CUSA COMMUNITY OWNER,
LLC,
a Delaware limited liability company

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	2009 CSP COMMUNITY OWNER, LLC, a Delaware limited liability company

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	2009 COLP COMMUNITY OWNER, LLC, a Delaware limited liability company

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

[Signatures continue on following page.]

 

S-1

 

	 	 	 	 	 
	 	GUARANTOR:

CAMDEN PROPERTY TRUST, a Texas real estate investment trust

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

[Signatures continue on following page.]

 

S-2

 

	 	 	 	 	 
	 	LENDER:

RED MORTGAGE CAPITAL, INC., an Ohio corporation

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

 

S-3

 

APPENDIX I

DEFINITIONS

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

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

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

“Additional Collateral” shall have the meaning set forth in Section 6.13.

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

“Adjustable Rate” in connection with a particular Variable Loan has the meaning given
such term in the applicable Variable Note.

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

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

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

to

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

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

	 	(a)	 	the amount of the Term Loan Outstanding and Supplemental Loan Outstanding on
the specified date,

to

 

Appendix I-1 

 

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

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

“Allocable Loan Amount” means the portion of the Term Loan allocated to a particular
Mortgaged Property by Lender in accordance with the Agreement. The initial Allocable Loan Amount
for each of the Initial Mortgaged Properties is as set forth in Exhibit A to the Agreement.

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

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

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

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

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

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

 

Appendix I-2 

 

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

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

“Borrower” means individually and collectively, the Initial Borrower and any
Additional Borrower becoming a party to the Agreement and other Loan Documents and shall exclude
any Borrower that no longer owns any Mortgaged Property on account of the release of a Mortgaged
Property.

“Borrower Agent” means Camden.

“Borrower Parties” means collectively, Borrower and Guarantor.

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

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

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

“Camden” means Camden Property Trust, a Texas Real Estate Investment Trust organized
under the laws of the State of Texas, and its permitted successors and assigns.

“Camden CPT Member” means 2009 CPT Community Owner Member, LLC, a Delaware limited
liability company.

“Camden CSP Member” means 2009 CSP Community Owner Member, LLC, a Delaware limited
liability company.

“Camden CUSA Member” means 2009 CUSA Community Owner Member, LLC, a Delaware limited
liability company.

“Camden General Partner” means Camden Summit, Inc., the general partner of Camden
Summit.

“Camden Legacy Park Member” means 2009 COLP Community Owner Member, LLC, a Delaware
limited liability company.

“Camden OP” means Camden Operating, L.P., a Delaware limited partnership.

“Camden Summit” means Camden Summit Partnership, L.P., a Delaware limited partnership.

“Camden USA” means Camden USA, Inc., a Delaware corporation.

 

Appendix I-3 

 

“Capitalization Rate” means, for each Mortgaged Property, a capitalization rate
selected by Lender for use in determining the Valuations, which rate is determined as set forth in
Section 2.01(b).

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

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

“Cash Equivalents” means

(a) securities issued or fully guaranteed or insured by the United States Government or
any agency thereof and backed by the full faith and credit of the United States having
maturities of not more than twelve (12) months from the date of acquisition (for the
purposes of this definition, agency securities shall mean “Government Securities” within the
meaning of the Investment Act of 1940 or Section 1.860G-2(a)(8)(1) of the Treasury
Regulations); and

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

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

(d) the amount of available balances under any line of credit.

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

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

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

 

Appendix I-4 

 

“Change of Control” means the earliest to occur of: (a) the date an Acquiring Person
becomes (by acquisition, consolidation, merger or otherwise), directly or indirectly, the
beneficial owner of more than 50% of the total Voting Equity Capital of Camden then outstanding or
(b) the replacement (other than solely by reason of retirement at age sixty-two or older, death or
disability) of more than 50% (or such lesser percentage as is required for decision-making by the
board of directors or trustees, if applicable) of the members of the board of directors (or
trustees, if applicable) of Camden over a one-year period where such replacement shall not have
been approved by a vote of at least a majority of the board of directors (or trustees, if
applicable) of Camden then still in office who either were members of such board of directors (or
trustees, if applicable) at the beginning of such one-year period or whose election as members of
the board of directors (or trustees, if applicable) was previously so approved or (c) Camden ceases
to Control Camden USA or Camden General Partner or Camden CPT Member or (d) Camden General Partner
ceases to Control Camden Summit or (e) Camden Summit ceases to Control Camden CSP Member or (f)
Camden CSP Member ceases to Control 2009 CSP Community Owner, LLC or Summit Russett, LLC or (g)
Camden USA ceases to Control Camden CUSA Member or CPT-GP, Inc. or (h) Camden CUSA Member ceases to
Control 2009 CUSA Community Owner, LLC or (i) Camden CPT Member ceases to Control 2009 CPT
Community Owner, LLC or (j) Camden OP ceases to Control Camden Legacy Park Member or (k) Camden
Legacy Park Member ceases to Control 2009 COLP Community Owner, LLC or (l) CPT-GP, Inc. ceases to
Control Camden OP or (m) Camden ceases to directly or indirectly Control each Borrower.

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

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

“Collateral Pool” means all of the Collateral.

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

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

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

 

Appendix I-5 

 

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

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

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

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

“Conversion Documents” means the amendment to each Security Document, an amendment to
the Variable Note, and other applicable Loan Documents, in form and substance satisfactory to
Lender, reflecting the change in the Fixed Loan and the Variable Loan pursuant to Section
1.05.

“Conversion Request” means a written request, substantially in the form of Exhibit
E to the Agreement, to convert all or any portion of the Variable Loan to a Fixed Loan pursuant
to Section 1.05.

“Coverage and LTV Tests” mean, for any specified date, each of the following financial
tests:

(a) The Aggregate Debt Service Coverage Ratio is not less than 1.35:1.0 with respect to the
amount of the Fixed Loan and any fixed rate Supplemental Loan, and 1.10:1.0 with respect to the
amount of the Variable Loan and any variable rate Supplemental Loan.

(b) The Aggregate Loan to Value Ratio does not exceed seventy percent (70%).

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

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

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

to

 

Appendix I-6 

 

(b) the Facility Debt Service on the specified date, assuming, for the purpose of calculating
the Facility Debt Service for this definition, that the amount of the Term Loan Outstanding shall
be the Allocable Loan Amount and the amount of the Supplemental Loan Outstanding shall be the
Supplemental Allocable Loan Amout, in each case for the subject Mortgaged Property.

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

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

“Facility Debt Service” means —

For use in determining the Aggregate Debt Service Coverage Ratio, for purposes of determining
compliance with the Coverage and LTV Tests, and in connection with the underwriting of any
substitution, release or conversion, the sum of:

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

	 	(A)	 	each Variable Loan and Supplemental Loan shall
be deemed to require level monthly payments of principal and interest
(at a rate equal to (1) One-Month LIBOR plus (2) the Margin plus (3) a
stressed underwriting margin of 300 basis points or if the Underwriting
Requirements change to specify a new stressed underwriting margin which
is a specific number of basis points with no range or discretion in its
amount (the “New Stressed Margin”) then such New Stressed Margin plus
(D) any Monthly Cap Escrow Payment for the succeeding twelve (12) month
period) in an amount necessary to fully amortize the original principal
amount of the Variable Loan and Supplemental Loan over the Amortization
Period, with such amortization deemed to commence on the first day of
the twelve (12) month period;

	 	(B)	 	each Fixed Loan and Supplemental Loan that is a
cash execution shall require level monthly payments of principal and
interest (at the Cash Interest Rate for such Fixed Loan as set forth in
the Fixed Rate Note or for such Supplemental Loan in the note
evidencing such Supplemental Loan) in an amount necessary to fully
amortize the original principal amount of the Fixed Loan and
Supplemental Loan over the Amortization Period, with such amortization
to commence on the first day of the twelve (12) month period;

	 	(C)	 	each Fixed Loan and Supplemental Loan that is
an MBS execution shall require level monthly payments of principal and
interest (at a
rate equal to the (1) MBS Pass-Through Rate plus (2) the Fixed
Facility Fee) in an amount necessary to fully amortize the original
principal amount of the Fixed Loan and Supplemental Loan over the
Amortization Period, with such amortization to commence on the first
day of the twelve (12) month period.

 

Appendix I-7 

 

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

“Fannie Mae Commitment” shall have the meaning set forth in Section
1.05(d)(ii).

“Fees” means Additional Collateral Due Diligence Fees, Supplemental Loan Fee, Initial
Due Diligence Fees, Initial Origination Fee, Release Fee, Substitution Fee, LOC Fee and any and all
other fees specified in the Agreement.

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

“Fixed Facility Fee” means [*] on the Initial Closing Date and for
any Fixed Loan with a MBS execution resulting from a conversion or for any Supplemental Loan with a
MBS execution, the number of basis points determined at the time of such MBS execution by Lender as
the Fixed Facility Fee for such Fixed Loan or such Supplemental Loan.

“Fixed Loan” means the loan in the amount of $420,000,000 evidenced by the Fixed Note,
plus such amount as Borrower may elect to convert to a Fixed Loan in accordance with Section
1.05.

“Fixed Loan Termination Date” means May 1, 2019, which date may be extended pursuant
to the terms of Section 1.05(e)(ii).

“Fixed Note” means a promissory note (together with all schedules, riders, allonges,
addenda, renewals, extensions, amendments and modifications thereto) which will be issued by
Borrower to Lender, concurrently with the funding of the Fixed Loan on the Initial Closing and upon
the conversion of all or a portion of the Variable Loan to a Fixed Loan, to evidence Borrower’s
obligation to repay the Fixed Loan, and which promissory note will be the same or substantially
similar in form to the promissory note issued by Borrower to Lender in connection with the Fixed
Loan made on the Initial Closing Date or if no promissory note evidencing a Fixed Loan is issued by
Borrower to Lender on the Initial Closing Date, the promissory note will be in the then current
form of promissory note utilized by Fannie Mae for Fixed Loans.

“GAAP” means generally accepted accounting principles in the United States in effect
from time to time, consistently applied or any other principles required under Applicable Law.

 

	 	 	 
	*	 	Indicates material that has been omitted and for which
confidential treatment has been requested. All such omitted material has been
filed with the Securities and Exchange Commission pursuant to Rule 406
promulgated under the Securities Act of 1933, as amended.

 

Appendix I-8 

 

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

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

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

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

“Guarantor” means Camden or a substitute Guarantor consented to by Lender.

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

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

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

“Highest Rating Category” means an S&P rating category of “A-1+” for instruments
having a term of one year or less and “AAA” for instruments having a term of greater than one year,
and a Moody’s rating category of “P-1” for instruments having a term of one year or less and “Aaa”
for instruments having a term greater than one year.

 

Appendix I-9 

 

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

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

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

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

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

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

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

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

(f) as to any Person (“guaranteeing person”), any obligation of (a) the guaranteeing
person or (b) another Person (including any bank under any letter of credit) to induce the creation
of a primary obligation (as defined below) with respect to which the guaranteeing person has issued
a reimbursement, counterindemnity or similar obligation, in either case guaranteeing, or in effect
guaranteeing, any indebtedness, lease, dividend or other obligation (“primary obligations”)
of any third person (“primary obligor”) in any manner, whether directly or indirectly,
including any obligation of the guaranteeing person, whether or not contingent, to (1) purchase any
such primary obligation or any property constituting direct or indirect security therefor,
(2) advance or supply funds for the purchase or payment of any such primary obligation or to
maintain working capital or equity capital of the primary obligor or otherwise to maintain the net
worth or solvency of the primary obligor, (3) purchase property, 

 

Appendix I-10 

 

securities or services primarily
for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation,
or (4) otherwise assure or hold harmless the owner of any such primary obligation against loss in
respect of the primary obligation, provided, however, that the term “Contingent Obligation”
shall not include endorsements of instruments for deposit or collection in the ordinary course of
business. The amount of any Contingent Obligation of any guaranteeing person shall be deemed to be
the lesser of (i) an amount equal to the stated or determinable amount of the primary obligation in
respect of which such Contingent Obligation is made and (ii) the maximum amount for which such
guaranteeing person may be liable pursuant to the terms of the instrument embodying such Contingent
Obligation, unless such primary obligation and the maximum amount for which such guaranteeing
person may be liable are not stated or determinable, in which case the amount of such Contingent
Obligation shall be such guaranteeing person’s maximum reasonably anticipated liability in respect
thereof as determined by such person in good faith.

“Indemnification Agreement Regarding Taxes” means that certain Indemnification
Agreement Regarding Taxes executed by Borrower, Camden and Camden Summit on the Initial Closing
Date.

“Initial Borrower” means each Borrower under this Agreement as of the Initial Closing
Date and its permitted successors and assigns.

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

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

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

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

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

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

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

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

 

Appendix I-11 

 

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

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

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

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

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

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

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

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

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

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

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

to

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

 

Appendix I-12 

 

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

“LOC Fee” shall have the meaning set forth in Section 13.04(b).

“Margin” has the definition set forth in the Variable Note or the note evidencing a
Supplemental Loan, as applicable.

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

“Maximum Annual Interest Rate” shall have the meaning set forth in Section
1.05(d)(ii).

“Maximum Escrow Amount” shall have the meaning set forth in Section 13.04(a).

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

“MBS Commitment” shall have the meaning set forth in Section 1.05(d)(iii).

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

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

“MBS Pass-Through Rate” means [*] for the initial Fixed Loan, and for
any Fixed Loan or Supplemental Loan, the interest rate as calculated by Lender (rounded to three
places) payable in respect of the Fannie Mae MBS issued pursuant to the MBS Commitment backed by a
Fixed Loan as determined in accordance with Section 1.05 or by a Supplemental Loan, as
applicable. For purposes of clarity, the MBS Pass-Through Rate does not include the Fixed Facility
Fee.

 

	 	 	 
	*	 	Indicates material that has been omitted and for which
confidential treatment has been requested. All such omitted material has been
filed with the Securities and Exchange Commission pursuant to Rule 406
promulgated under the Securities Act of 1933, as amended.

 

Appendix I-13 

 

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

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

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

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

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

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

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

“New Collateral Pool Borrower” shall have the meaning set forth in Section
8.13(c).

“Note” means each Fixed Note and/or each Variable Note.

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

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

 

Appendix I-14 

 

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

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

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

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

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

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

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

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

 

Appendix I-15 

 

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

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

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

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

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

“Qualified Financial Institution” means any of the following having a senior unsecured
debt rating in the Highest Rating Category and approved by Fannie Mae:

(a) bank or trust company organized under the laws of any state of the United States of
America,

(b) national banking association,

(c) savings bank, a savings and loan association, or an insurance company or association
chartered or organized under the laws of any state of the United States of America,

(d) federal branch or agency pursuant to the International Banking Act of 1978 or any
successor provisions of law or a domestic branch or agency of a foreign bank which branch or agency
is duly licensed or authorized to do business under the laws of any state or territory of the
United States of America,

(e) government bond dealer reporting to, trading with, and recognized as a primary dealer by
the Federal Reserve Bank of New York, and

(f) securities dealer approved in writing by Fannie Mae the liquidation of which is subject to
the Securities Investors Protection Corporation or other similar corporation.

“Rate Form” means the completed and executed document from Borrower to Lender pursuant
to Section 1.05(d)(ii), substantially in the form of Exhibit G to the Agreement,
specifying the terms and conditions of the MBS to be issued for the converted Fixed Loan.

 

Appendix I-16 

 

“Rate Setting Date” shall have the meaning set forth in Section 1.05(d)(ii).

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

“Release Fee” means with respect to any release effected in accordance with Section
3.04(c), a fee in the amount of $5,000 per Release Mortgaged Property.

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

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

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

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

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

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

“Request” means a Release Request, a Substitution Request, or a Conversion Request.

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

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

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

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

“Security Documents” means the Security Instruments, the Replacement Reserve
Agreement, the Completion/Repair and Security Agreement and any other documents executed
by Borrower from time to time to secure any of Borrower’s obligations under the Loan Documents
as the same may be amended, restated, modified or supplemented from time to time.

 

Appendix I-17 

 

“Security Instrument” means, for each Mortgaged Property, a Multifamily Mortgage, Deed
of Trust or Deed to Secure Debt, Assignment of Leases and Rents and Security Agreement and that
certain Indemnity Multifamily Deed of Trust, Assignment of Rents and Security Agreement, given by a
Borrower to or for the benefit of Lender to secure the obligations of Borrower and Camden Summit
(with respect to the Mortgaged Property known as Camden Russett) under the Loan Documents. With
respect to each Mortgaged Property owned by a Borrower or Camden Summit (with respect to the
Mortgaged Property known as Camden Russett), the Security Instrument shall be substantially in the
form published by Fannie Mae for use in the state in which the Mortgaged Property is located. The
amount secured by the Security Instrument shall be equal to the Term Loan amount.

“Senior Management” means (i) Richard J. Campo, (ii) D. Keith Oden and (iii) Dennis M.
Steen.

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

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

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

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

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

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

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

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

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

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

 

Appendix I-18 

 

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

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

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

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

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

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

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

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

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

“Substitution Fee” means with respect to any Substitution effected in accordance with
Section 3.05, a fee in the amount which is the greater of (i) 50 basis points multiplied by
the Allocable Loan Amount of the Mortgaged Property being added in connection with the
Substitution, and (ii) $50,000 per Substitute Mortgaged Property.

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

“Supplemental Allocable Loan Amount” shall have the meaning set forth in Section
2.02.

“Supplemental Loan” means such loan given in accordance to the Fannie Mae Supplemental
Loan product.

“Supplemental Loan Documents” shall have the meaning set forth in Section
2.02.

“Supplemental Loan Fee” means with respect to any Supplemental Loan effected in
accordance with Section 2.02, a fee in the amount which is the greater of (i) 50 basis
points multiplied by the Supplemental Loan amount, and (ii) $50,000.

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

 

Appendix I-19 

 

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

“Targeted Entity” means individually and collectively, Borrower, Guarantor, Camden CPT
Member, Camden CUSA Member, Camden Legacy Park Member, Camden CSP Member, Camden General Partner,
Camden OP, Camden USA, CPT-GP, Inc., CPT-LP, Inc and shall exclude any Targeted Entity that no
longer owns directly or indirectly any Mortgaged Property on account of the release of a Mortgaged
Property.

“Term Loan” means each Variable Loan and/or each Fixed Loan.

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

“Termination Date” means at any time during which a Fixed Loan is Outstanding, the
latest maturity date for any Fixed Loan and at any time during which a Variable Loan is
Outstanding, the Variable Loan Termination Date.

“Title Company” means First American Title Insurance Company.

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

“Transfer” means

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

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

 

Appendix I-20 

 

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

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

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

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

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

“Variable Loan” means the loan evidenced by the Variable Note.

“Variable Note” means the promissory note (together with all schedules, riders,
allonges, addenda, renewals, extensions, amendments and modifications thereto), which has been
issued by Borrower to Lender to evidence Borrower’s obligation to repay the Variable Loan.

“Variable Loan Termination Date” means May 1, 2019.

“Voting Equity Capital” shall mean Securities of any class or classes, the holders of
which are ordinarily, in the absence of contingencies, entitled to elect a majority of the board of
directors (or Persons performing similar functions).

 

Appendix I-21Exhibit 10.1

Exhibit 10.1

 

ASSET PURCHASE AGREEMENT

AMONG

HELIX HEARING INC.

AND

HELIX HEARING CARE OF AMERICA CORP.

AND

3371727 CANADA INC.

April 27, 2009

 

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	ARTICLE 1 - INTERPRETATION
	 	 	2	 
	1.1 Definitions
	 	 	2	 
	1.2 Currency
	 	 	8	 
	1.3 Sections and Headings
	 	 	8	 
	1.4 Number, Gender and Persons
	 	 	8	 
	1.5 Accounting Principles
	 	 	9	 
	1.6 Entire Agreement
	 	 	9	 
	1.7 Time of Essence
	 	 	9	 
	1.8 Applicable Law
	 	 	9	 
	1.9 Severability
	 	 	9	 
	1.10 Successors and Assigns
	 	 	9	 
	1.11 Amendment and Waivers
	 	 	9	 
	1.12 Exhibits
	 	 	10	 
	1.13 Schedules
	 	 	10	 
	 
	 	 	 	 
	ARTICLE 2 - PURCHASE AND SALE OF PURCHASED ASSETS
	 	 	11	 
	2.1 Transfer of Purchased Assets
	 	 	11	 
	2.2 Excluded Assets
	 	 	13	 
	 
	 	 	 	 
	ARTICLE 3 - PURCHASE PRICE
	 	 	14	 
	3.1 Purchase Price
	 	 	14	 
	3.2 Satisfaction of Purchase Price and other Closing Payments
	 	 	14	 
	3.3 Assumption of Certain Liabilities by the Purchaser
	 	 	14	 
	3.4 Excluded Liabilities
	 	 	15	 
	3.5 Purchase Price Adjustments at Closing
	 	 	15	 
	3.6 Net Asset Adjustment to Purchase Price
	 	 	16	 
	3.7 Allocation of Purchase Price
	 	 	17	 
	3.8 ETA Election
	 	 	17	 
	3.9 ITA Elections
	 	 	17	 
	3.10 Transfer Taxes
	 	 	18	 
	 
	 	 	 	 
	ARTICLE 4 - REPRESENTATIONS AND WARRANTIES
OF THE VENDOR
	 	 	18	 
	4.1 Organization
	 	 	18	 
	4.2 Authorization and Enforceability
	 	 	18	 
	4.3 Business and Affairs of 3371727
	 	 	18	 
	4.4 Corporate Records of 3371727
	 	 	19	 
	4.5 Tax Matters
	 	 	19	 
	4.6 Residency of Vendor
	 	 	21	 
	4.7 No Violation
	 	 	21	 
	4.8 Consents and Approvals
	 	 	21	 
	4.9 Accounts Receivable
	 	 	21	 
	4.10 Inventories
	 	 	22	 
	4.11 Title to Personal and other Property and Sufficiency of Assets
	 	 	22	 
	4.12 No other Agreement to Purchase
	 	 	22	 

 

(i)

 

	 	 	 	 	 
	4.13 Location of Real Property
	 	 	22	 
	4.14 Leased Property
	 	 	22	 
	4.15 Compliance with Laws; Permits
	 	 	23	 
	4.16 Litigation
	 	 	24	 
	4.17 Contracts
	 	 	24	 
	4.18 Insurance
	 	 	24	 
	4.19 Environmental
	 	 	24	 
	4.20 Intellectual Property
	 	 	25	 
	4.21 Labour Relations and Collective Agreements
	 	 	25	 
	4.22 Employees
	 	 	25	 
	4.23 Employee Plans
	 	 	27	 
	4.24 Balance Sheets
	 	 	27	 
	4.25 Books and Records
	 	 	28	 
	4.26 No Undisclosed Liabilities
	 	 	28	 
	4.27 Ordinary and Normal Course
	 	 	28	 
	4.28 No Bankruptcy or Insolvency
	 	 	28	 
	4.29 Tax Registrations
	 	 	28	 
	4.30 No Subsidiaries
	 	 	28	 
	4.31 Brokerage Fees
	 	 	28	 
	4.32 Bank Accounts
	 	 	29	 
	 
	 	 	 	 
	ARTICLE 5 - REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER
	 	 	29	 
	5.1 Organization
	 	 	29	 
	5.2 Authorization
	 	 	29	 
	5.3 No Violation
	 	 	29	 
	5.4 Consents and Approvals
	 	 	29	 
	5.5 GST Registration
	 	 	30	 
	5.6 Brokerage Fees
	 	 	30	 
	5.7 No Bankruptcy or Insolvency
	 	 	30	 
	 
	 	 	 	 
	ARTICLE 6 - SURVIVAL OF COVENANTS,
REPRESENTATIONS AND WARRANTIES
	 	 	30	 
	6.1 Survival of Representations and Warranties of the Vendor
	 	 	30	 
	6.2 Survival of the Representations and Warranties of the Purchaser
	 	 	31	 
	6.3 Survival of Covenants
	 	 	31	 
	 
	 	 	 	 
	ARTICLE 7 - OTHER COVENANTS
	 	 	31	 
	7.1 Regulatory Approvals
	 	 	31	 
	7.2 Consents and Approvals
	 	 	31	 
	7.3 Bulk Sales Act
	 	 	31	 
	7.4 Accounts Receivable Trust Agreement
	 	 	31	 
	7.5 Delivery of Books and Records
	 	 	32	 
	7.6 Corporate Action
	 	 	32	 
	7.7 Employee Matters
	 	 	32	 
	7.8 Non-Transferable and Non-Assignable Assets.
	 	 	34	 
	7.9 Tax Returns
	 	 	35	 
	7.10 Leased Property
	 	 	35	 

 

(ii)

 

	 	 	 	 	 
	ARTICLE 8 - CONDITIONS OF CLOSING
	 	 	37	 
	8.1 Conditions of Closing in Favour of the Purchaser
	 	 	37	 
	8.2 Conditions of Closing in Favour of the Vendor
	 	 	39	 
	 
	 	 	 	 
	ARTICLE 9 - CLOSING DATE AND TRANSFER
OF POSSESSION
	 	 	41	 
	9.1 Place of Closing
	 	 	41	 
	9.2 Further Assurances
	 	 	41	 
	 
	 	 	 	 
	ARTICLE 10 - INDEMNIFICATION
	 	 	41	 
	10.1 Indemnification by the Vendor
	 	 	41	 
	10.2 Indemnification by the Purchaser
	 	 	42	 
	10.3 Notice of Claim
	 	 	42	 
	10.4 Direct Claims
	 	 	43	 
	10.5 Third Party Claims
	 	 	44	 
	10.6 Settlement of Third Party Claims
	 	 	44	 
	10.7 Co-operation
	 	 	44	 
	10.8 Exclusivity
	 	 	44	 
	10.9 Limitations on Amount
	 	 	45	 
	10.10 Insurance Proceeds and Taxes
	 	 	45	 
	10.11 Right to Claim Escrow Amount
	 	 	45	 
	10.12 Other Limitations
	 	 	45	 
	 
	 	 	 	 
	ARTICLE 11 - GUARANTEE OF HEARUSA
	 	 	46	 
	11.1 Guarantee of HearUSA
	 	 	46	 
	11.2 Time of Essence
	 	 	46	 
	11.3 Severability
	 	 	46	 
	11.4 Further Assurances.
	 	 	46	 
	11.5 Successors and Assigns
	 	 	46	 
	11.6 Applicable Law
	 	 	47	 
	11.7 Notices
	 	 	47	 
	 
	 	 	 	 
	ARTICLE 12 - MISCELLANEOUS
	 	 	47	 
	12.1 Notices
	 	 	47	 
	12.2 Announcements
	 	 	48	 
	12.3 Disclosure
	 	 	49	 
	12.4 Reasonable Commercial Efforts
	 	 	49	 
	12.5 Expenses
	 	 	49	 
	12.6 Counterparts
	 	 	49	 

 

(iii)

 

ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT made as of the 27th day of April, 2009,

AMONG:

HELIX HEARING INC., a corporation existing under the laws of Ontario, (hereinafter referred to as the “Purchaser”),

OF THE FIRST PART,

- and -

HELIX HEARING CARE OF AMERICA CORP., a corporation existing under the laws of
Canada,
(hereinafter referred to as the “Vendor”),

OF THE SECOND PART.

-and-

3371727 CANADA INC., a corporation existing under the laws of Canada,(hereinafter referred to as “3371727”)

OF THE THIRD PART

WHEREAS the Vendor has carried on in the Province of Ontario the business of marketing,
distribution and selling of hearing aids to product end-users (the “Business”);

AND WHEREAS the Purchaser is willing to purchase the Purchased Assets (as hereinafter
defined), and the Vendor is willing to sell the Purchased Assets to the Purchaser, on the terms and
conditions of this Agreement;

AND WHEREAS the Vendor is an indirect wholly-owned subsidiary of HearUSA, Inc., a Delaware
corporation, (“HearUSA”) and 3371727 is a direct wholly-owned subsidiary of the Vendor; and

AND WHEREAS HearUSA has agreed to guarantee the obligations of the Vendor hereunder.

 

 

 

NOW THEREFORE THIS AGREEMENT WITNESSES THAT in consideration of the respective covenants,
agreements, representations, warranties and indemnities of the parties
herein contained and for other good and valuable consideration (the receipt and sufficiency of
which are acknowledged by each party), the parties agree as follows:

ARTICLE 1 — INTERPRETATION

	1.1	 	Definitions

For the purposes of this Agreement, unless the context otherwise requires, the following terms
shall have the respective meanings set out below and grammatical variations of such terms shall
have corresponding meanings:

“3371727 Contract” means any Contract under which (a) 3371727 has or may acquire any rights
or benefits, (b) 3371727 has or may become subject to any obligation or liability, or (c)
3371727 or any of the assets owned or used by 3371727 is or may become bound;

“Accounting Records” means all of the Vendor’s books of account (including the general
ledger), records relating to Accounts Receivable, Inventory, Accounts Payable and Prepaid
Expenses, accounting records and other financial data and information relating to the
Business or the Purchased Assets, including Tax Returns;

“Accounts Receivable” means any and all accounts, accounts receivable, trade accounts,
notes, notes receivable, book debts or other debts due or accruing to a Company in
connection with the Business as reflected on the Closing Balance Sheet, including the
benefit of any security thereon, and any claim, right or remedy relating thereto;

“Accounts Receivable Trust Account Agreement” means the accounts receivable trust account
agreement to be entered into between the Vendor and the Purchaser, in the form attached
hereto as Exhibit C;

“Accounts Receivable Trust Bank Account” means the bank concentration deposit account of the
Vendor with the Royal Bank of Canada, Business Banking, Montreal Downtown, 1 Place
Ville-Marie, M-1, Montreal, QC H3C 3B5, identified as account number 008861052109;

“Affiliate” has the meaning attributed to that term in the Canada Business Corporations Act,
as amended from time to time;

“Applicable Law” means any law, statute, ordinance, regulation, rule, by-law, decree, writ
or order, protocol, code, guideline, treaty, policy, notice, direction and judicial,
arbitral, administrative, ministerial or departmental judgements, awards or requirements of
any Authority having jurisdiction over the Vendor or over any part of the Business or the
Purchased Assets and includes, without limitation, Environmental Laws;

“Assignment of Leases” means assignments of the Leases by the Vendor in favour of the
Purchaser, and an “Assignment of Lease” means an assignment of any one of the Leases;

 

- Page 2 -

 

“Assumed Liabilities” means the liabilities and obligations of the Vendor assumed by the
Purchaser pursuant to Section 3.3;

“Authority” means any governmental or regulatory authority, department, body or agency or
any court, tribunal, bureau, commission, arbitrator or arbitration board or other similar
body, whether federal, provincial, state, municipal or other geographic or political
subdivision thereof;

“Books and Records” means all books, records, files and papers, manuals and data, sales and
advertising materials, lists of present and former suppliers, price lists, sales records,
personnel, employment and other records, customer data, documentary evidence of all
licenses, orders and permits, and all other correspondence, data and information, financial
or otherwise, in any format or media whatsoever, of the Vendor, including copies of all
Accounting Records and books and records required by Applicable Law to be retained by the
Vendor (the originals of which shall be retained by the Vendor), and all books and records
of 3371727, but excluding Tax Returns of the Vendor and books and records relating to the
Excluded Assets;

“Business” has the meaning set out in the Recitals of this Agreement;

“Business Day” means any day, other than a Saturday or a Sunday, on which chartered banks in
Toronto, Ontario are open for business;

“Cash” means, as of the Effective Time, the amount of cash and bank deposits as reflected in
a Company’s bank statements and certificates of deposit less escrowed amounts or other
restricted cash balances and less the amounts of any unpaid checks, drafts and wire
transfers issued on or prior to the date of determination, calculated in accordance with
GAAP. For avoidance of doubt, Cash shall (i) be calculated net of issued but uncleared
checks and drafts, (ii) include checks and drafts deposited for the account of the
Company’s, and (iii) be calculated net of overdrawn accounts.

“Claim” has the meaning set out in Section 10.3;

“Closing” has the meaning set out in Section 9.1;

“Closing Date” means April 27, 2009 or such other date as the Vendor and the Purchaser may
mutually determine;

“Closing Balance Sheet” means the unaudited consolidated balance sheet of the Companies as
at the Effective Time, in respect of the Business and the Purchased Assets, but excluding
the effect of any Excluded Assets and Excluded Liabilities, prepared pursuant to Section 3.6
on the same basis and applying the same accounting principles, policies and practices that
were used in preparing the Existing Balance Sheets;

“Companies” means collectively the Vendor and 3371727, and “Company” means either one of
them individually;

 

- Page 3 -

 

“Contract” means any agreement, indenture, contract, deed of trust, licence, option, right,
promise, assurance, undertaking, whether written or oral, express or implied and whether or
not legally binding, but excluding the Leases;

“Current Assets” means Accounts Receivable, Inventories, Cash and Prepaid Expenses;

“Direct Claim” has the meaning set out in Section 10.3;

“Effective Time” means 11:59 p.m. as of Saturday, April 25, 2009;

“Employee Plans” has the meaning set out in Section 4.23;

“Employees” has the meaning set out in Section 4.22(a);

“Employment Legislation” means, collectively, the Ontario Human Rights Code, the
Occupational Health and Safety Act (Ontario), the Pay Equity Act (Ontario), the Employment
Standards Act, 2000 (Ontario) or predecessor to that Act, the Pension Benefits Act
(Ontario), the Workplace Safety and Insurance Act, 1997 (Ontario) or predecessor to that Act
and the Employment Insurance Act (Canada), all as amended from time to time;

“Encumbrance” means any encumbrance, lien, charge, hypothec, privilege, pledge, mortgage,
title retention agreement, security interest, reservation of title, easement, right of
occupation, any matter capable of registration against title, or any written agreement to
create any of the foregoing;

“Environmental Condition” means the presence of any Hazardous Substance on the Leased
Property attributable to the Vendor;

“Environmental Laws” means any Applicable Law governing pollution or the protection of the
environment in effect as of the Closing Date;

“Environmental Permits” means all licences, permits, approvals, consents, registrations,
certificates, authorizations or other similar approvals issued or granted or required by an
Authority pursuant to an Environmental Law;

“Equipment” has the meaning set out in Section 2.1(a);

“Escrow Agent” means The Bank of Nova Scotia Trust Company;

“Escrow Agreement” means the agreement to be entered into between the Vendor, the Purchaser,
and the Escrow Agent, in the form attached hereto as Exhibit B;

“Escrow Amount” has the meaning set out in Section 3.2(b);

“Estoppel and Consent Certificate” means the form of Estoppel and Consent Certificate
obtained by the Vendor from each landlord for each Leased Property substantially in the form
annexed hereto as Exhibit E;

“ETA” means Part IX of the Excise Tax Act (Canada), as amended from time to time;

 

- Page 4 -

 

“Excluded Assets” has the meaning set out in Section 2.2;

“Excluded Liabilities” has the meaning set out in Section 3.4;

“Existing Balance Sheets” means the annual unaudited consolidated balance sheet of the
Companies as at December 27, 2008, and the interim unaudited consolidated balance sheet of
the Companies as at March 28, 2009, both such balance sheets attached hereto as Schedule
1.1(a);

“GST” means all goods and services taxes payable under the ETA;

“Hazardous Substance” means any substance or waste which is defined as hazardous, toxic, a
pollutant or a contaminant under Environmental Law;

“HearUSA IP” means certain intellectual property and other assets of HearUSA set out in the
HearUSA Licence;

“HearUSA Licence” means the licence agreement between HearUSA and the Vendor dated with
effect on the day prior to the Closing Date in connection with the HearUSA IP, in the form
attached hereto as Schedule 1.1(b);

“including” (and having correlative meaning “include” and “includes”) means including
without limiting the generality of any description preceding such term;

“Indemnified Party” has the meaning set out in Section 10.3;

“Indemnifying Party” has the meaning set out in Section 10.3;

“Intellectual Property” means all rights in patents, patent applications, trade-marks,
trade-mark applications, trade-names, business names, domain names, inventions, technical
data, licensed and unlicensed know-how, copyright and industrial designs;

“Intellectual Property Assets” has the meaning set out in Section 2.1(j);

“Interim Occupancy Agreement” has the meaning set out in Section 7.10(e);

“Inventory” has the meaning set out in Section 2.1(l);

“ITA” means the Income Tax Act (Canada), as amended from time to time;

“knowledge of the Vendor” or similar expressions mean the actual knowledge of the individual
or individuals among Stephen Hansbrough, Gino Chouinard, Frank Puñal, Denise Pottlitzer and
Maggie Black, with responsibility for the relevant matter;

“Lease” means, collectively, all agreements to lease, offers to lease, lease, lease
amendments, renewal agreements, subleases and other rights or licenses granted to the Vendor
or its predecessors in title to possess or occupy the Leased Property or any part thereof as
at the date hereof, in each case amended, renewed or otherwise varied, and all material
correspondence or other agreements related thereto, and “Lease” shall mean any one of the
Leases;

 

- Page 5 -

 

“Leased Properties” means all lands and premises leased by the Vendor pursuant to the Leases
in connection with the operation of the Business, and “Leased Property” means any one of
them;

“Losses”, in respect of any matter, means all claims, demands, losses, damages, liabilities,
Taxes, deficiencies, costs and expenses (including, without limitation reasonable legal and
other professional fees and disbursements, interest, penalties and amounts paid in
settlement) arising as a result of such matter, but excluding any indirect, special,
punitive, exemplary or consequential losses or damages and losses of revenue or profit;

“Material Adverse Effect” means, when used in connection with the Business, any change,
event, violation, inaccuracy, circumstance or event that is materially adverse to the
business, assets, liabilities, financial condition, or results of operation of the Business,
but in each case shall not include the effect of (i) changes in GAAP or official
interpretations of the foregoing, (ii) changes in general economic, financial or market
conditions affecting the Business, (iii) any seasonal effects on the Business, or (iv)
changes arising from this Agreement or the transactions contemplated hereby or arising from
any actions or omissions of the Purchaser or the Companies if consented to in writing by the
Purchaser;

“Non-Assigned Lease” has the meaning set out in Section 7.10(b);

“Order” means any order, decree, instruction, direction, demand, proceeding or other
mandatory communication issued by an Authority or any notification of any intention to
issue or impose the same by an Authority where it could reasonably be concluded that the
notification may be part of a process whereby a mandatory communication having the force of
law will be issued;

“Permits” has the meaning set out in Section 2.1(i);

“Permitted Encumbrances” means:

	 	(i)	 	servitudes, easements, restrictions, rights-of-way and
other similar rights in real property or any interest therein (hereinafter,
collectively, the “Easements”) which do not materially impair its use in the
operation of the Business including, without limitation, any Easements
granted in respect of any sewers, electric lines, telegraphs and telephone
lines and other utilities and services, provided that, in each case, the
Easements have been complied with in all respects;

	 	(ii)	 	any statutory liens and other interests of the landlords
in any Leased Property and liens affecting the interests of the landlords in
any Leased Property, and as to other leased Purchased Assets any interests
of the lessor thereof;

	 	(iii)	 	liens for Taxes not due and payable;

 

- Page 6 -

 

	 	(iv)	 	undetermined or inchoate liens, charges and privileges
incidental to
current construction or current operations and statutory liens, charges,
adverse claims, security interests or encumbrances of any nature whatsoever
claimed or held by any Authority which have not at the time been filed or
registered against the title to the asset or served upon the Vendor,
pursuant to law or which relate to obligations not due or delinquent;

	 	(v)	 	security given in the ordinary course of the Business to
any public utility, municipality or government or to any statutory or public
authority in connection with the operations of the Business, other than
security for borrowed money;

	 	(vi)	 	the reservations in any original grants from the Crown of
any real property or interest therein and statutory exceptions to title
which do not materially detract from the value of the real property
concerned or materially impair its use in the operation of the Business;
and,

	 	(vii)	 	registered subdivision, site plan, development or other
municipal agreements which affect the Leased Property, provided that such
are complied with.

“Person” means any individual, estate, trust, firm, partnership, joint venture, corporation,
unlimited liability company, limited liability company, unincorporated association or
organization, government or any agency or ministry of any government, and includes any
successor to any of the foregoing;

“Prepaid Expenses” has the meaning set out in Section 2.1(m);

“Principal Sites” has the meaning set out in Section 7.10(a);

“Purchase Price” has the meaning set out in Section 3.1;

“Purchased Assets” has the meaning set out in Section 2.1;

“Purchased Shares” has the meaning set out in Section 2.1(r);

“Purchaser Employee Plans” has the meaning set out in Section 7.7(f);

“Returns Reserve” means the amount of $38,266.00, representing an agreed reserve for
products returned by customers within 45 days of sale in accordance with the Vendor’s
current return policy;

“Support Agreement” means the support agreement to be entered into between the Purchaser and
the Vendor, in the form attached hereto as Exhibit D;

 

- Page 7 -

 

“Tax” or “Taxes” means any and all taxes, charges, fees, levies, imposts, and other
assessments, including all income, sales, retail, use, goods and services, harmonized sales,
value added, corporation, premium, environmental, stamp, business, social services, royalty,
occupancy, property development, capital, capital gains, alternative, net
worth, transfer, land transfer, profits, withholding, payroll, employer health, social
security, excise, franchise, recapture, real property and personal property taxes, and any
other taxes, customs duties, tariffs, fees, assessments, reassessments or similar charges in
the nature of a tax, including provincial pension plan contributions, employment insurance
contributions, health services fund contributions and workers’ compensation premiums,
together with any instalments with respect thereto, and any interest, costs of any nature,
surtaxes, fines, penalties, additions to tax or other additional amounts, imposed, levied,
assessed, reassessed or collected by any governmental authority, including a Tax Authority;

“Tax Authority” means, with respect to any Tax, the Authority that imposes, assesses and
reassesses such Tax and the Authority charged with the collection of such Tax;

“Tax Return” means any return, declaration, report, election, form, notice, filing,
information return, or other document (whether in tangible, electronic or other form)
relating to Taxes, including any amendment thereof and including any attachment or
supplements thereto made, prepared, filed or required to be made, prepared or filed by
Applicable Law in respect of Taxes;

“Time of Closing” means 10:00 a.m. (Toronto time) on the Closing Date, or such other time on
the Closing Date as the Vendor and the Purchaser may mutually determine;

“Third Party Claim” has the meaning set out in Section 10.3;

“Transition Period” has the meaning set out in Section 7.7(f); and

“Vendor Contract” means any Contract under which: (a) Vendor has or may acquire any rights
or benefits, (b) Vendor has or may become subject to any obligation or liability, or (c)
Vendor or any of the Purchased Assets is or may become bound.

	1.2	 	Currency

Unless otherwise indicated, all dollar amounts in this Agreement are expressed in Canadian
funds.

	1.3	 	Sections and Headings

The division of this Agreement into sections and the insertion of headings are for convenience
of reference only and shall not affect the interpretation of this Agreement. Unless otherwise
indicated, any reference in this Agreement to a Section or Schedule refers to the specified Section
of or Schedule to this Agreement and any reference in this Agreement to a Section shall include a
subsection of such Section, as applicable.

	1.4	 	Number, Gender and Persons

In this Agreement, words importing the singular number only shall include the plural and vice
versa, words importing gender shall include all genders and words importing persons shall include
individuals, corporations, partnerships, associations, trusts, unincorporated organizations,
governmental bodies and other legal or business entities of any kind whatsoever.

 

- Page 8 -

 

	1.5	 	Accounting Principles

Any reference in this Agreement to generally accepted accounting principles or GAAP refers to
generally accepted accounting principles which have been established in the United States at the
relevant time applied on a consistent basis.

	1.6	 	Entire Agreement

This Agreement constitutes the entire agreement between the parties with respect to the
subject matter hereof and supersedes all prior agreements, understandings, negotiations and
discussions, whether written or oral. There are no conditions, covenants, agreements,
representations, warranties or other provisions, express or implied, collateral, statutory or
otherwise, relating to the subject matter hereof except as herein provided.

	1.7	 	Time of Essence

Time shall be of the essence in this Agreement.

	1.8	 	Applicable Law

This Agreement shall be construed, interpreted and enforced in accordance with, and the
respective rights and obligations of the parties shall be governed by, the laws of the Province of
Ontario and the federal laws of Canada applicable therein and, except as provided in this
Agreement, each party irrevocably attorns to the exclusive jurisdiction of the courts of such
province and all courts competent to hear appeals therefrom.

	1.9	 	Severability

If any provision of this Agreement is determined by a court of competent jurisdiction to be
invalid, illegal or unenforceable in any respect, such determination shall not impair or affect the
validity, legality or enforceability of the remaining provisions hereof, and each provision is
hereby declared to be separate, severable and distinct.

	1.10	 	Successors and Assigns

This Agreement shall enure to the benefit of and shall be binding on and enforceable by the
parties and, where the context so permits, their respective successors and permitted assigns. None
of the parties may assign any of its rights or obligations hereunder without the prior written
consent of the other parties.

	1.11	 	Amendment and Waivers

No amendment or waiver of any provision of this Agreement shall be binding on any party unless
consented to in writing by such party. No waiver of any provision of this Agreement shall
constitute a waiver of any other provision, nor shall any waiver constitute a continuing waiver
unless otherwise provided.

 

- Page 9 -

 

	1.12	 	Exhibits

The following Exhibits are attached to and form part of this Agreement.

	 	 	 	 	 	 	 
	 

	 	Exhibit A
	 	-
	 	Non-Competition Agreement
	 

	 	Exhibit B
	 	-
	 	Escrow Agreement
	 

	 	Exhibit C
	 	-
	 	Accounts Receivable Trust Agreement
	 

	 	Exhibit D
	 	-
	 	Support Agreement
	 

	 	Exhibit E
	 	-
	 	Estoppel and Consent Certificate
	 

	 	Exhibit F
	 	-
	 	Interim Occupancy Agreement

	1.13	 	Schedules

The following Schedules are attached to and form part of this Agreement. The schedules to the
extent reasonably practicable and applicable shall be organized by the Vendor for each individual
location of the Leased Property.

	 	 	 	 	 	 	 
	 

	 	Schedule 1.1(a)
	 	-
	 	Existing Balance Sheets
	 

	 	Schedule 1.1(b)
	 	-
	 	HearUSA Licence
	 

	 	Schedule 2.1(a)
	 	-
	 	Machinery and Equipment
	 

	 	Schedule 2.1(b)
	 	-
	 	Vendor Contracts
	 

	 	Schedule 2.1(c)
	 	-
	 	Leases
	 

	 	Schedule 2.1(g)
	 	-
	 	Furniture, Fixtures and Office Equipment
	 

	 	Schedule 2.1(i)
	 	-
	 	Licenses and Permits
	 

	 	Schedule 2.1(k)
	 	-
	 	Intellectual Property
	 

	 	Schedule 3.7
	 	-
	 	Purchase Price Allocation
	 

	 	Schedule 4.3(a)
	 	-
	 	Share Capital of 3371727
	 

	 	Schedule 4.3(b)
	 	-
	 	3371727 Contracts
	 

	 	Schedule 4.5
	 	-
	 	Tax Matters
	 

	 	Schedule 4.8(a)
	 	-
	 	Regulatory Consents
	 

	 	Schedule 4.8(b)
	 	-
	 	Contractual Consents
	 

	 	Schedule 4.13
	 	-
	 	Location of Leased Property
	 

	 	Schedule 4.16
	 	-
	 	Litigation
	 

	 	Schedule 4.18
	 	-
	 	Insurance
	 

	 	Schedule 4.19
	 	-
	 	Environmental Matters
	 

	 	Schedule 4.21
	 	-
	 	Labour Relations and Collective Agreements
	 

	 	Schedule 4.22
	 	-
	 	Employees
	 

	 	Schedule 4.23
	 	-
	 	Employee Plans
	 

	 	Schedule 4.32
	 	-
	 	Bank Accounts
	 

	 	Schedule 7.7(f)
	 	-
	 	Terminated Plans
	 

	 	Schedule 7.7(j)
	 	-
	 	Assumed Employee Plans

 

- Page 10 -

 

ARTICLE 2- PURCHASE AND SALE OF PURCHASED ASSETS

	2.1	 	Transfer of Purchased Assets

Subject to and upon the terms and conditions contained in this Agreement, the Vendor shall
sell, assign and transfer to the Purchaser and the Purchaser shall purchase from the Vendor, all
right, title and interest of the Vendor to all of the Vendor’s property and assets used in
connection with the Business (other than the Excluded Assets), including without limitation the
property and assets described in clauses (a) through (r) below (collectively, the “Purchased
Assets”), at the Closing Date, free and clear of all Encumbrances except Permitted
Encumbrances, if any:

	 	(a)	 	Equipment. All equipment owned or leased by the Vendor that is used or held
for use in the conduct of the Business, including audiology and medical equipment,
computer hardware, telephones, telephonic equipment and switches, electronic equipment
of any description, cell phones, automobiles, and postage meters (the “Equipment”)
including the Equipment described in Schedule 2.1(a);

	 	(b)	 	Contracts. Subject to Section 7.8, Vendor Contracts, including those set out
in Schedule 2.1(b) including, for greater certainty, all outstanding solicitations and
offers made to or by the Vendor to enter into any Vendor Contract;

	 	(c)	 	Leases. Subject to Section 7.10, all Leases, including, for greater certainty,
if permitted in accordance with the terms and conditions of the Leases, all prepaid
rents, security deposits, options to renew or purchase and rights of refusal contained
in the Leases or made pursuant thereto;

	 	(d)	 	Restrictive Covenants. Without limiting the effect of Section 2.1(b) above, and
to the extent transferable, the benefit of any restrictive covenants and other
contractual rights, including rights of indemnification and any rights of exclusive use
in respect of the Leased Property as more particularly set out in the Leases, if
applicable, obtained by the Vendor in the course of acquiring assets related to the
Business and the Purchased Assets from third parties;

	 	(e)	 	Leaseholds. All leasehold improvements to the Leased Property which were the
property of the Vendor as at the Time of Closing;

	 	(f)	 	Cash. All Cash of the Vendor as at the Effective Time in the Accounts
Receivable Trust Bank Account;

	 	(g)	 	Furniture, Fixtures and Office Equipment. All of the Vendor’s right, title and
interest to the furniture, fixtures and office equipment used in the Business,
including the furniture, fixtures and office equipment described in Schedule 2.1(g);

	 	(h)	 	Books and Records. All Books and Records;

	 	(i)	 	Licences and Permits. To the extent transferable, all rights under licences,
permits (including parking permits), approvals, consents, registrations, certificates
and other regulatory authorizations and enrolments currently held or necessary,
including under Applicable Law, for the lawful operation of the Business as now
conducted and the use or ownership of the Purchased Assets, and any pending
applications for or renewals of any of the foregoing (collectively, the “Permits”),
including those described in Schedule 2.1(i);

	 	(j)	 	Accounts Receivable. All Accounts Receivable of the Vendor;

 

- Page 11 -

 

	 	(k)	 	Intellectual Property. All of the Vendor’s right, title and interest to all
Intellectual Property owned or licensed (as licensor or licensee) by the Vendor
relating to the Business and the Purchased Assets including:

	 	(i)	 	the Vendor’s name, all assumed fictional business names,
trade names, registered and unregistered trademarks, service marks and
applications for marks;

	 	(ii)	 	all patents, patent applications and inventions and
discoveries that may be patentable;

	 	(iii)	 	all registered and unregistered copyrights and
industrial designs in both published works and unpublished works;

	 	(iv)	 	all know-how, trade secrets, confidential or proprietary
information, software, technical information, data, manufacturing,
industrial and business processes and technology, plans, drawings and blue
prints;

	 	(v)	 	all rights in internet websites and internet domain names
owned by or registered in the name of the Vendor, whether or not presently
used, and all email addresses presently used by personnel of the Vendor for
purposes of the Business including email addresses provided by third party
service providers; and

	 	(vi)	 	the HearUSA Licence;

(collectively, the “Intellectual Property Assets”), including as set out in Schedule
2.1(k);

	 	(l)	 	Inventory. The inventory owned by the Vendor of or relating to the Business
(collectively, the “Inventory”) at the Effective Time, including finished goods,
supplies and replacement parts;

	 	(m)	 	Prepaid Expenses. Without limiting any of the foregoing, the benefit of
prepaid expenses relating to the Purchased Assets whether or not reflected on the
Balance Sheet (collectively, the “Prepaid Expenses”);

	 	(n)	 	Telephone Numbers. All telephone and facsimile numbers and other
communications numbers, address and points of contact of the Business;

	 	(o)	 	Customer, Patient and Supplier Files. All customer, patient and supplier lists,
records, files, and contact details and telephone numbers of the Business whether in
hard copy or electronic readable format;

	 	(p)	 	Goodwill. All goodwill relating to the Business, together with the exclusive
right for the Purchaser to represent itself as carrying on the Business in succession
to the Vendor and the right to use any words indicating that the Business is so carried
on;

 

- Page 12 -

 

	 	(q)	 	 Warranty Rights. All warranty rights accruing to the Vendor;

	 	(r)	 	Purchased Shares. All of the issued and outstanding shares in the capital of
3371727 (the “Purchased Shares”).

	2.2	 	Excluded Assets

Notwithstanding anything in the foregoing Section 2.1, the Purchased Assets shall not include
any of the following property and assets (collectively, the “Excluded Assets”) and the Purchaser
shall in no way be construed to acquire any interest in any of the following:

	 	(a)	 	Taxes. All refundable or creditable Taxes of the Vendor, including income
taxes, sales taxes, and GST (or the right to receive such refunds or credits);

	 	(b)	 	Investments. All investments of the Vendor in marketable or other securities;

	 	(c)	 	Inter-Company Debt. All indebtedness of any Affiliate of the Vendor (other than
3371727) to the Vendor;

	 	(d)	 	Insurance. All property and public liability insurance policies of the Vendor
and all claims and rights thereunder;

	 	(e)	 	Corporate Records. All minute books, share certificate books, corporate seals
and other corporate records of the Vendor;

	 	(f)	 	Personnel Records. All personnel records and other records that the Vendor is
required by Applicable Law to retain, provided that the Purchaser shall be provided
with copies thereof;

	 	(g)	 	Employee Plans. Subject to Section 7.7(j), all rights in connection with the
assets of the Employee Plans; and

	 	(h)	 	Other. Accrued deferred compensation payable, retirement accounts and other
similar items accruing to the Vendor, that are not included as a Current Asset in the
Closing Balance Sheet.

If any of the Excluded Assets or any proceeds in respect thereof shall at any time come into the
possession of or under the control of the Purchaser or any of its employees, officers or agents,
such assets and/or proceeds, as applicable, shall be held by the Purchaser in trust for the benefit
of the Vendor. Within ten (10) Business Days from the date on which the Purchaser or any of its
employees, officers or agents, come into possession of or obtain control over any of such assets
and/or proceeds, as applicable, the Purchaser shall by notice in writing delivered to the Vendor in
accordance with the provisions hereof, so advise the Vendor. The Purchaser shall have a duty to
forthwith account and deliver over to the Vendor any of such assets and/or proceeds, as applicable.

 

- Page 13 -

 

ARTICLE 3 — PURCHASE PRICE

3.1 Purchase Price

Subject as hereinafter provided, the purchase price (the “Purchase Price”) payable by the
Purchaser to the Vendor for the Purchased Assets shall be $28,625,000.00.

	3.2	 	Satisfaction of Purchase Price and other Closing Payments

At the Time of Closing, the Purchaser shall satisfy the amount set forth in Section 3.1 as
follows:

	 	(a)	 	part of the Purchase Price shall be paid by the Purchaser as directed by Vendor
to the creditors of the Vendor disclosed pursuant to compliance with Section 4(1) of
the Bulk Sales Act (Ontario) and to such other Persons to whom payments are required to
be made at Closing;

	 	(b)	 	the amount of $1,000,000 of the Purchase Price (the “Escrow Amount”) shall be
paid by the Purchaser to the Escrow Agent to be held in accordance with the terms of
the Escrow Agreement; and

	 	(c)	 	the balance of the Purchase Price shall be paid by the Purchaser to the Vendor
or as it may direct.

	3.3	 	Assumption of Certain Liabilities by the Purchaser

Subject to the provisions of this Agreement, the Purchaser agrees to assume, pay, satisfy,
discharge, perform and fulfill, from and after the Time of Closing, the following liabilities and
obligations (the “Assumed Liabilities”) and no others:

	 	(a)	 	the liabilities and obligations of the Vendor that arise from and after the
Effective Time under Vendor Contracts (including purchase and sales orders) which were
entered into by the Vendor in the ordinary course of conducting the Business prior to
the Closing Date other than any liabilities or obligations arising out of or relating
to a breach that occurred prior to the Effective Time. For greater certainty, the
Purchaser shall not assume or be liable for any liabilities and obligations of the
Vendor that have accrued, even if not due, or become outstanding or otherwise relate to
events that have occurred prior to the Closing Date;

	 	(b)	 	any liabilities or obligations of the Vendor under written warranty agreements
given to customers in the ordinary course of business prior to the Closing Date other
than any liabilities or obligations arising out of or relating to a breach of such
warranty agreement that occurred prior to the Effective Time; and

	 	(c)	 	accrued and unused or unpaid vacation rights of the Employees in connection
with the Business as reflected on the Closing Balance Sheet.

 

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	3.4	 	Excluded Liabilities

The Purchaser shall not assume, pay, satisfy, discharge, perform or fulfil and the Vendor
shall be solely responsible for all other liabilities and obligations of the Vendor whether related
to the Business and the Purchased Assets or otherwise (the “Excluded Liabilities”). For greater
certainty, the Vendor shall be responsible for all of its liabilities that are not Assumed
Liabilities.

	3.5	 	Purchase Price Adjustments at Closing

	 	(a)	 	For the purposes of determining the amount of applicable Excluded Liabilities,
any rents, reality taxes including local improvement rates, unmetered public or private
utility charges and unmetered cost of fuel, as applicable, and other applicable items
shall be apportioned on the basis that the Vendor will be responsible for a portion of
the total of such amounts for the calendar year in which the Closing Date occurs in the
ratio that the number of days in such calendar year up to and including the Closing
Date bears to 365. If any such amount has not been finally determined as of the
Closing Date, then the amount estimated and charged by the applicable payee, or in the
absence of such estimate the amount paid for the preceding calendar year, shall be used
to calculate such prorations. The aggregate pro rated amount shall be an adjustment to
the amount of cash due from the Purchaser to the Vendor at the Closing. The parties
shall readjust any such amounts within ten (10) business days following a request by
either party based on the actual amount of such item.

	 	(b)	 	For the purposes of making a preliminary determination of the Net Current Asset
Adjustment Amount, on the day prior to the Closing Date, the Vendor shall provide a pro
forma balance sheet reflecting (i) Current Assets as reflected in the Accounting
Records on the day prior to the Closing Date, and (ii) a reasonable accrual for Assumed
Liabilities. Based on the foregoing pro forma balance sheet, the parties acting
reasonably will determine an estimated Net Current Asset Adjustment Amount which, only
if positive, shall be an adjustment to the amount of cash due from the Purchaser to the
Vendor at the Closing.

	 	(c)	 	Following the Closing Date, the parties shall make an adjustment (the “Returns
Reserve Adjustment”) reflecting the impact on the Returns Reserve of any product sale
of Vendor that is (i) returned after the Closing Date and within 45 days of the
relevant sale and (ii) returned to the manufacturer by the Purchaser prior to the
expiry of the manufacturer’s return warranty period. To the extent that any portion of
the Returns Reserve remains unutilised after the expiry of 180 days following the
Closing Date, then such surplus shall be a Returns Reserve Adjustment and the Purchaser
shall pay such amount to the Vendor as an adjustment to the Purchase Price. To the
extent that product returns as set out above result in the Returns Reserve being
insufficient to satisfy all such returns, then any such deficiency shall be a Returns
Reserve Adjustment and shall be paid by the Vendor to the Purchaser as an adjustment to
the Purchase Price. The parties shall readjust any such amounts within ten (10)
business days following a request by either party based on the actual amount of such
item.

 

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	3.6	 	Net Asset Adjustment to Purchase Price

	 	(a)	 	For the purposes hereof:

	 	(i)	 	“Net Current Asset Amount” means the amount, as of the
relevant time, calculated by subtracting the amount of accrued Assumed
Liabilities as of that date and the Returns Reserve from the value of the
Current Assets as of that date, all as set out in the Closing Balance Sheet.

	 	(ii)	 	“Net Current Asset Adjustment Amount” (which may be a
positive or negative number) will be equal to the amount determined by
subtracting the Net Current Asset Amount from the amount of $3,000,000.00.

	 	(b)	 	The Vendor shall prepare the Closing Balance Sheet and shall then determine the
Net Current Asset Amount as of the Effective Time. The Vendor shall deliver the
Closing Balance Sheet and its determination of the Net Current Asset Amount to the
Purchaser after forty-five (45) days but within sixty (60) days following the Closing
Date.

	 	(c)	 	If within thirty (30) days following delivery of the Closing Balance Sheet and
the Net Current Asset Amount calculation, the Purchaser has not given the Vendor
written notice of its objection as to the Net Current Asset Amount calculation (which
notice shall state the basis of the Purchaser’s objection), then the Net Current Asset
Amount calculation by the Vendor shall be binding and conclusive on the parties and
shall be used in computing the Net Current Asset Adjustment Amount.

	 	(d)	 	If the Purchaser duly gives the Vendor such notice of objection, and if the
Purchaser and the Vendor fail to resolve the issues outstanding with respect to the Net
Current Asset Amount calculation within thirty (30) days of the Vendor’s receipt of the
Purchaser’s objection notice the Vendor and the Purchaser shall submit the issues
remaining in dispute to PriceWaterhouse Coopers, Toronto (the “Independent
Accountants”) for resolution. If issues are submitted to the Independent Accountants
for resolution, (i) the Vendor and the Purchaser shall furnish or cause to be furnished
to the Independent Accountants such working papers and other documents and information
relating to the disputed issues as the Independent Accountants may request and are
available to that party or its agents and shall be afforded the opportunity to present
to the Independent Accountants any material relating to the disputed issues and to
discuss the issues with the Independent Accountants; (ii) the determination by the
Independent Accountants, as set forth in a notice to be delivered to both the Vendor
and the Purchaser within sixty (60) days of the submission to the Independent
Accountants of the issues remaining in dispute, shall be final, binding and conclusive
on the parties and shall be used in the calculation of the Net Current Asset Amount;
and (iii) the unsuccessful party in respect of the aggregate of the issues in dispute
shall bear the fees and costs of the Independent Accountants for such determination.

 

- Page 16 -

 

	 	(e)	 	If the Net Current Asset Adjustment Amount is positive, the Net Current Asset
Adjustment Amount shall be paid by wire transfer by the Vendor to an account
specified by the Purchaser. If the Net Current Asset Adjustment Amount is negative,
the Net Current Asset Adjustment Amount shall be paid by wire transfer by the
Purchaser to an account specified by the Vendor. Such payment shall be made within
three (3) business days after the calculation of the Net Current Asset Amount
becomes binding and conclusive on the parties pursuant to this Section 3.6. For
greater certainty, any amounts paid under this paragraph (e) by the Purchaser or the
Vendor, as applicable, shall be considered an adjustment to the Purchase Price.

	3.7	 	Allocation of Purchase Price

The Purchase Price shall be allocated among the Purchased Assets in the manner specified in
Schedule 3.7. The Purchaser and the Vendor agree to be bound by such allocation and to report the
purchase and sale of the Purchased Assets for all federal, provincial and local Tax purposes in a
manner consistent with such allocation.

	3.8	 	ETA Election

The Purchaser and the Vendor shall elect jointly under subsection 167(1) of the ETA, in the
form prescribed for the purposes of that provision, in respect of the sale and transfer hereunder
of the Purchased Assets, and the Purchaser shall file such election with the Canada Revenue Agency
on or before the time specified in subsection 167(1.1) of the ETA for this purpose.

	3.9	 	ITA Elections

	 	(a)	 	The Purchaser and the Vendor agree to make and file, in a timely manner, a
joint election to have the rules in section 22 of the ITA, and any equivalent or
corresponding provision under applicable provincial or territorial tax legislation,
apply in respect of the Accounts Receivable that are the subject of that election and
shall designate therein that portion of the Purchase Price allocated to the Accounts
Receivable that are the subject of such election in accordance with the procedures set
out in Section 3.7 of this Agreement as consideration paid by the Purchaser to the
Vendor.

	 	(b)	 	The Purchaser shall jointly elect with the Vendor in accordance with proposed
subsection 56.4(7) of the ITA to have the provisions of proposed subsection 56.4(5) of
the ITA apply to the restrictive covenants granted by the Vendor in the Non-Competition
Agreement. The Purchaser shall jointly elect with HearUSA, and the Vendor shall cause
HearUSA to so elect, in accordance with proposed subsection 56.4(7) of the ITA to have
the provisions of proposed subsection 56.4(5) of the ITA apply to the restrictive
covenants granted by HearUSA in the Non-Competition Agreement. Each of the foregoing
elections shall be filed in the manner and within the time prescribed in proposed
subsection 56.4(14) of the ITA.

 

- Page 17 -

 

	3.10	 	Transfer Taxes

The Purchaser shall be liable for and shall pay all federal and provincial sales taxes
(including any GST, retail sales taxes and land transfer taxes) and all other similar taxes,
duties, fees or other like charges of any jurisdiction payable in connection with the purchase of
the Purchased Assets. For greater certainty, the Vendor shall be responsible for all income taxes
payable by the Vendor as a result of the transactions contemplated herein.

ARTICLE 4 — REPRESENTATIONS AND WARRANTIES 

OF THE VENDOR

The Vendor represents and warrants, as of the date hereof, to the Purchaser with respect to
the Vendor and 3371727 as follows, and the Vendor acknowledges that the Purchaser is relying on
such representations and warranties in connection with its purchase of the Purchased Assets.

	4.1	 	Organization

	 	(a)	 	Each Company is a company validly existing under the laws of Canada and has the
corporate power to own or lease its property and to carry on the Business as now being
conducted by it and to execute and deliver and perform its obligations under this
Agreement.

	 	(b)	 	HearUSA is a company validly existing under the laws of Delaware and has the
corporate power to execute and deliver and perform its obligations under this
Agreement.

	4.2	 	Authorization and Enforceability

	 	(a)	 	All necessary corporate action has been taken by each of the Companies and
HearUSA to authorize the execution and delivery by it of, and the performance of its
obligations under, this Agreement.

	 	(b)	 	This Agreement has been duly executed and delivered by each Company and HearUSA
and constitutes a legal, valid and binding obligation of each of them, enforceable
against each of them by the Purchaser in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency and other laws affecting the
rights of creditors generally and except that equitable remedies may only be granted in
the discretion of a court of competent jurisdiction.

	4.3	 	Business and Affairs of 3371727

	 	(a)	 	The authorized, issued and outstanding capital of 3371727 is as described on
Schedule 4.3(a). The Vendor is, and at the Time of Closing will be, the registered and
beneficial holder of the Purchased Shares with good and marketable title thereto, free
and clear of all Encumbrances. There are no rights, subscriptions, warrants, options,
conversion rights, calls, commitments or plans or agreements of any kind outstanding
that would enable any person to purchase or otherwise acquire any shares or other
securities of 3371727, including any securities
convertible into or exchangeable or exercisable for shares or other securities of
3371727.

 

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	 	(b)	 	The only assets of 3371727 are Cash and Accounts Receivable of 3371727 and
those 3371727 Contracts expressly described in Schedule 4.3(b). The only liabilities
of 3371727 are accounts payable in an amount not in excess of the Cash and Accounts
Receivable of 3371727, and liabilities and obligations of 3371727 that will arise from
and after the Effective Time under 3371727 Contracts which were entered into by 3371727
in the ordinary course of conducting the Business prior to the Closing Date.

	4.4	 	Corporate Records of 3371727

The minute books of the 3371727 contain true, correct and complete copies of its charter
documents, and its by-laws. The minutes of meetings of its board of directors and every committee
thereof and of its shareholders, including written resolutions of its directors and shareholders
and the share certificate book, register of shareholders, register of transfers and register of
directors and officers of the Corporation are complete and accurate in all material respects.

	4.5	 	Tax Matters

	 	(a)	 	Tax Matters of 3371727

	 	(i)	 	Tax Returns of 3371727. 3371727 has duly and timely
filed all Tax Returns required to be filed by it with the appropriate Tax
Authority. Each such Tax Return is correct and complete. 3371727 is not
required to make any filing in respect of Taxes in any jurisdiction outside
Canada.

	 	(ii)	 	Payment of Taxes. 3371727 has duly and timely paid all
Taxes, including all instalments on account of Taxes and all Taxes assessed
or reassessed by any Tax Authority, that are due and payable by it.
Adequate provision has been made in the Existing Balance Sheets for all
Taxes owing by 3371727 that relate to periods ending on or prior to March
28, 2009, whether or not reflected in the Tax Returns of 3371727. Adequate
provision will also be made in the Closing Balance Sheet for all Taxes owing
by 3371727 that relate to periods ending on or prior to the Closing Date.
The provisions for Taxes reflected in the Existing Balance Sheets and
Closing Balance Sheet are, or will be, as applicable, sufficient to cover
all liabilities for Taxes of 3371727, whether or not assessed, reassessed or
disputed, or that will accrue and be owing in respect of its operations and
property during the periods covered by such Existing Balance Sheets and
Closing Balance Sheet. For greater certainty, except to the extent reflected
in the provisions for Taxes in the Existing Balance Sheets and Closing
Balance Sheet, 3371727 is not liable, or will not be liable, as applicable,
for any Taxes or for the payment of any instalments in respect of Taxes due
in respect of its current taxation year.

 

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	 	(iii)	 	Assessments and Reassessments. Except as disclosed in
Schedule 4.5, all Tax Returns required to be filed by 3371727 for periods
ending on or prior to the Closing Date have been assessed by the relevant
Tax Authority as filed and notices of assessment have been issued to 3371727
by the relevant Tax Authority. No notice of reassessment for Taxes has been
issued to 3371727 by a Tax Authority for periods ending on or prior to the
Closing Date except as disclosed in Schedule 4.5. 3371727 is not in the
process of negotiating any proposed assessment or reassessment with any Tax
Authority. 3371727 has not received any indication from any Tax Authority
that an assessment or reassessment is proposed in respect of any Taxes or
Tax Returns, regardless of its merits. To the knowledge of the Vendor,
there are no inquires, audits, investigations, disputes, objections, appeals
or other proceedings either in progress, pending or threatened against
3371727 in connection with any Taxes or Tax Return.

	 	(iv)	 	Extensions of Time. 3371727 has not requested, offered
to enter into, or entered into, any agreement or other arrangement, or
executed any waiver, providing for any extension of time within which (i) to
file any Tax Return covering any Taxes for which 3371727 is or may be
liable; (ii) to file any elections, designations or similar filings relating
to Taxes for which 3371727 is or may be liable; (iii) 3371727 is required to
pay or remit Taxes or amounts on account of Taxes; or (iv) any Tax Authority
may assess or collect Taxes for which 3371727 is or may be liable.

	 	(v)	 	Withholdings. 3371727 has duly and timely withheld all
Taxes and other amounts required by Applicable Law to be withheld by it,
including Taxes and other amounts required to be withheld by it in respect
of any amount paid or credited or deemed to be paid or credited by it to or
for the account or benefit of any Person, including any employees, officers
or directors and any non-resident Person, and has duly and timely remitted
to the appropriate Tax Authority such Taxes and other amounts required by
Applicable Law to be remitted by it.

	 	(vi)	 	Collection and Remittance of GST, Harmonized Sales Tax
and Provincial Sales Tax. 3371727 has duly and timely self-assessed and
collected all amounts on account of any sales or transfer taxes, including
goods and services, harmonized sales and provincial sales taxes, required by
Applicable Law to be self-assessed or collected by it, and has duly and
timely remitted to the appropriate Tax Authority any such amounts required
by Applicable Law to be remitted by it.

	 	(b)	 	Tax Matters of Vendor

The Vendor has paid all Taxes, including all instalments on account of Taxes for the
current year, that are due and payable by it, as well as all professional fees
incurred in connection with such Taxes, which are capable of forming or resulting in
an Encumbrance (other than a Permitted Encumbrance) on the Purchased Assets or the
Business or which could become a liability or obligation of the
Purchaser. To the knowledge of the Vendor there are no inquiries, audits,
investigations, disputes, objections, appeals or other proceedings either in
progress, pending or threatened in connection with any Taxes in respect of the
Business or the Purchased Assets.

 

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4.6 Residency of Vendor

The Vendor is not a non-resident of Canada for the purposes of the ITA.

	4.7	 	No Violation

	 	(a)	 	The execution and delivery of this Agreement by each Company and HearUSA and,
subject to Section 4.8, the consummation of the transactions herein provided for will
not result in a breach or violation of any of the provisions of, or constitute a
material default under, or conflict with or cause the acceleration of any obligation of
such Company under: (i) any Contract listed on Schedules 2.1(b) and 4.3(b); (ii) any
provision of the constating documents or by-laws or resolutions of the board of
directors (or any committee thereof) or shareholders of such Company; (iii) any Permit
referred to on Schedule 2.1(g); or (iv) any Applicable Law.

	 	(b)	 	The execution and delivery of this Agreement by each Company and the
consummation of the transactions herein provided for will not result in the creation or
imposition of any Encumbrance on any of the Purchased Assets.

	4.8	 	Consents and Approvals

	 	(a)	 	Except as described in Schedule 4.8(a), there is no requirement for any Company
to make any filing with, give any notice to or obtain any Permit from any Authority as
a condition to the lawful consummation of the transactions contemplated by this
Agreement, other than those which relate solely to the identity of the Purchaser or the
nature of any business carried on by the Purchaser.

	 	(b)	 	There is no requirement under any Contract listed in Schedules 2.1(b) and
4.3(b) or under any Lease listed in Section 2.1(c) to give any notice to, or to obtain
the consent or approval of, any party to such agreement, instrument or commitment
relating to the consummation of the transactions contemplated by this Agreement, except
for the notifications, consents and approvals described in Schedule 4.8(b).

	4.9	 	Accounts Receivable

All Accounts Receivable that are reflected on the Closing Balance Sheet or on the Accounting
Records of the Vendor as of the Closing Date represent or will represent valid obligations arising
from sales actually made or services actually performed by the Vendor in the ordinary course of
business. Except to the extent paid prior to the Closing Date, such Accounts Receivable are or
will be as of the Closing Date current and collectable net of the respective reserves shown on the
Closing Balance Sheet (which reserves are adequate and calculated consistent with past practice and
will not represent a Material Adverse Effect in the composition of such Accounts Receivable in
terms of aging). Subject to such reserves, each of such Accounts
Receivable either has been or will be collected in full, without any set off within one
hundred eighty (180) days after the day on which it first becomes due and payable. There is no
contest, claim, defence or right of set off, other then returns in the ordinary course of business
of the Vendor, under any Contract with any account debtor of an Account Receivable relating to the
amount or validity of such Account Receivable.

 

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	4.10	 	Inventories

All items included in the Inventories consist of a quality and quantity useable and saleable
in the ordinary course of business of the Vendor, except for obsolete items and items of
below-standard quality, all of which shall be written off or written down to net realizable value
in the Closing Balance Sheet or in the Accounting Records of the Vendor as of the Closing Date, as
the case maybe. The Vendor is not in possession of any inventory not owned by the Vendor,
including goods already sold. All of the Inventories have been valued at the lower of cost or net
realizable value on a first in, first out basis. Inventories now on hand that were purchased after
the date of the Existing Balance Sheets were purchased in the ordinary course of business of the
Vendor at a cost not exceeding market prices prevailing at the time of purchase. The quantities of
each item of Inventories are not excessive but are reasonable in the present circumstances of the
Business.

	4.11	 	Title to Personal and other Property and Sufficiency of Assets

The Purchased Assets are owned beneficially by the Vendor with good title thereto, free and
clear of all Encumbrances, other than Permitted Encumbrances. The Purchased Assets constitute all
the assets sufficient for the Purchaser to operate the Business in the manner presently operated by
the Vendor, except as contemplated by the HearUSA License and the Support Agreement.

	4.12	 	No other Agreement to Purchase

No person other than the Purchaser has any written or oral agreement or option or any right or
privilege (whether by law, pre-emptive or contractual) capable of becoming an agreement or option
for the purchase or acquisition from the Vendor of any of the Purchased Assets other than pursuant
to purchase orders accepted by the Vendor for products in the ordinary course of business.

	4.13	 	Location of Real Property

Schedule 4.13 sets forth the addresses and area descriptions of the Leased Property. Neither
Company owns any real property, and neither of them leases any real property other than the Leased
Property.

	4.14	 	Leased Property

	 	(a)	 	Neither Company is a party to any lease or agreement to lease in respect of any
real property, whether as a lessor or lessee, in connection with the Business, other
than the Leases. The Leases are in good standing and in full force and effect and
there are no existing defaults in respect of any covenants, conditions or obligations
contained in the Leases, except where such breach would not,
individually or in the aggregate with any other such breaches, have a Material
Adverse Effect.

	 	(b)	 	Use of the Leased Property for the various purposes for which it is presently
being used is permitted as of right under the Leases, and to the knowledge of the
Vendor all applicable zoning legal requirements. To the knowledge of the Vendor, all
Leased Property, including any improvements thereto are in compliance with all
applicable legal requirements, including those pertaining to zoning, building and the
disabled, are in good repair and in good condition, ordinary wear and tear accepted,
and are free from latent and patent defects.

 

- Page 22 -

 

	 	(c)	 	To the knowledge of the Vendor, the Leased Property has not been taken or
expropriated by any Authority, nor has any written notice in respect thereof been
received by the Vendor.

	 	(d)	 	To the knowledge of the Vendor, the Leased Property has adequate rights of
ingress and egress for the operation of the Business in the ordinary course by a
reasonable and prudent owner and operator of the Business.

	 	(e)	 	The Vendor has not received any written notice, and to the knowledge of the
Vendor, is not aware, of any special assessments or levies (including local improvement
charges) on account of on or off site municipal services constructed to service the
Leased Property. All amounts due and owing by the Vendor to any Authority in respect
of the Leased Property have been paid.

	 	(f)	 	The Vendor has not received from any Authority having jurisdiction any written
notice or other information which would show that any of the buildings and other
installations or improvements on the Leased Property are or will become subject to any
outstanding work order or notice of defect or non-compliance from any Authority.

	 	(g)	 	Notwithstanding anything contained in this Agreement, in cases where the rights
and benefits of the Vendor to any of the Leased Properties arise out of a sublease, the
Vendor makes no representations regarding the force and effect of the head lease, the
compliance of the sublandlord with the terms and conditions of such head leases, or to
any default existing under such head leases which may result in the cancellation or
disclaimer of the related Leases. Subject to the foregoing, the Vendor has not
received any written notice in respect of any defaults under any such head leases.

	4.15	 	Compliance with Laws; Permits

Each Company has complied in all material respects with all Applicable Laws (save and except
for Environmental Laws, the compliance of which is dealt with in Section 4.19 hereto). Schedule
2.1(g) sets out a complete and accurate list of all Permits held or granted to each Company, which
Permits are all those necessary for the operation of the Business as currently conducted. All such
Permits are valid, subsisting and in good standing and the Vendor is not in default or breach of
any Permit, except where such default or breach would not have a Material
Adverse Effect and, to the knowledge of the Vendor, no proceeding is pending or threatened to
revoke or limit any Permits.

 

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	4.16	 	Litigation

Except as described in Schedule 4.16, there are no applications, orders, actions, suits,
proceedings, audits, investigations or complaints (whether or not purportedly on behalf of a
Company) pending or, to the knowledge of the Vendor, threatened, at law or in equity or before or
by any Authority affecting the Business, the Purchased Assets or the business and assets of
3371727.

	4.17	 	Contracts

Schedules 2.1(b) and 4.3(b), respectively, set out a complete list of the Vendor Contracts and
3371727 Contracts that will extend over a period of thirty (30) days or involve consideration in
excess of $5,000 and are necessary to operate the Business as at the date hereof. The Vendor has
made available to the Purchaser complete copies of such Vendor Contracts. Except as disclosed in
Schedule 2.1(b), all such Vendor Contracts are in good standing and in full force and effect and no
default has occurred thereunder, and, to the knowledge of the Vendor, no event, condition or
occurrence exists which, after notice or lapse of time or both, would constitute a default
thereunder, except in each case where such default would not, individually or in the aggregate with
all such other defaults, have a Material Adverse Effect.

	4.18	 	Insurance

The Vendor has all of its property and assets insured against loss or damage by all insurable
hazards or risks on a replacement cost basis and such insurance coverage will be continued in full
force and effect as of the Time of Closing. Copies of all applicable policies of insurance have
been provided by the Vendor to the Purchaser, a list of which is included in Schedule 4.18.

	4.19	 	Environmental

Except as disclosed in Schedule 4.19 (or the relevant portion thereof where so indicated
below):

	 	(a)	 	Except as described in Section 4.19(a) of Schedule 4.19, to the knowledge of
the Vendor, the Business and all operations on the Leased Property are in material
compliance with Environmental Laws, and, to the knowledge of the Vendor, there are no
orders under or pursuant to Environmental Laws by any Authority issued or pending with
respect to the Leased Property.

	 	(b)	 	To the knowledge of the Vendor, the Vendor has all material Environmental
Permits required under Environmental Laws for the operation of the Business, all of
which are described in Section 4.19(b) of Schedule 4.19, other than any Environmental
Permits included in the Excluded Assets. To the knowledge of the Vendor, each such
Environmental Permit is valid, subsisting and in good standing, and the Vendor is not
in default or breach of any such Environmental Permit.

 

- Page 24 -

 

	 	(c)	 	Except as disclosed in Section 4.19(c) of Schedule 4.19, to the Vendor’s
knowledge, there are no underground storage tanks at any Leased Property that could
give rise to any claims against or obligations or liabilities for the Vendor under
Environmental Laws. To the knowledge of the Vendor, the Vendor has not removed, closed
or abandoned any underground storage tanks at the Leased Property in a manner that
could give rise to any claims against or obligations or liabilities for the Vendor
under Environmental Laws, and, to the Vendor’s knowledge, any and all underground
storage tanks that have been removed from the Leased Property have been removed or
closed in accordance with all Environmental Laws.

	4.20	 	Intellectual Property

Schedule 2.1(k) sets out all registered or pending Intellectual Property as of the Time of
Closing (including the HearUSA Licence but excluding commonly available software programs with an
individual value of less than $500 under which either Company is the licensee) owned or used by the
Vendor in connection with the Business, which Intellectual Property is all that is necessary for
the operation of the Business as currently conducted. The Vendor is the beneficial owner of or has
the right to use such Intellectual Property, without payment to any third party, and, except as set
out in Schedule 4.8(b), is not bound by any contract whatsoever that limits or impairs its ability
to sell, transfer, assign or convey, or that otherwise affects such Intellectual Property. The
Vendor has not granted any interest in or right to use all or any portion of such Intellectual
Property to any other person. The Vendor has not received any notice that the use of the
Intellectual Property infringes upon or breaches any industrial or intellectual property rights of
any other person.

	4.21	 	Labour Relations and Collective Agreements

None of the employees of the Companies is represented by a trade union or any other employee
association or organization. To the knowledge of the Vendor, other than as disclosed in Schedule
4.21, there are not any current attempts to organize or establish any trade union or employee
association with respect to any Employees of the Companies, nor is there any certification of any
such union with regard to a bargaining unit. There are no applications for certification pending
and no pending or outstanding applications, proceedings or orders of any labour relations board or
similar court, tribunal or board concerning any of the Employees. To the knowledge of the Vendor,
there are no threatened applications to be brought before any labour relations board or similar
court, tribunal or board concerning the Employees. Except as disclosed in Schedule 4.21, there are
no outstanding grievances or arbitration proceedings and there are no unsatisfied arbitration
awards to which the Vendor is a party. There are no grievances against the Vendor of which it has
received written notice under any collective agreement, other than as disclosed in Schedule 4.21.

	4.22	 	Employees

	 	(a)	 	Schedule 4.22 contains a complete and accurate list of all individuals by
employee number who are full-time, part-time or casual employees or individuals engaged
on contract to provide employment or consulting services to a Company in connection
with the Business (the “Employees”) as of March 31, 2009
specifying the length of hire, title or classification and rate of salary or hourly
pay and commission or bonus entitlements (if any) for each such Employee. The
Purchaser agrees to keep such employee information confidential.

	 	(b)	 	All employment, management and consulting Contracts pursuant to which Employees
have been engaged by each Company are set out in Schedule 2.1(b) and, except as
disclosed in Schedule 2.1(b), there are no incentives or special compensation
arrangements, contracts or agreements with respect to any Employees of the Companies.

 

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	 	(c)	 	Each Company has duly and timely made all deductions (including Tax deductions)
required by Applicable Law or by Contract to be made from employee wages, salaries or
benefits relating to a period ending on or prior to the Closing Date and has duly and
timely remitted the amounts deducted and all related employer contributions required to
the appropriate, insurers and Authorities for all periods ending on or prior to the
Closing Date.

	 	(d)	 	Each Company is in compliance in all material respects with all applicable
Employment Legislation.

	 	(e)	 	To the knowledge of the Vendor, there are no circumstances, claims or frequency
of claims which may expose the Purchaser to any charges or assessments on account of
workplace safety and insurance or workers’ compensation, other than the standard
charges or assessments for the rate group and classification of the Business.

	 	(f)	 	Except as disclosed in Schedule 4.22, no Employee or former Employee of either
Company is in receipt of and, to the knowledge of the Vendor, no Employee or former
Employee has threatened to make, a claim for any benefits under any weekly indemnity,
sickness and accident, long term disability or workers’ compensation plan or
arrangement or any other form of disability benefit program. All assessments,
penalties, fines, levies, charges, surcharges, Taxes, premiums or other amounts due and
payable and relating to any disability insurance arising on or prior to the Closing
Date or relating to a period ending on or prior to the Closing Date have been or will
be paid by a Company on or prior to the Time of Closing.

	 	(g)	 	Other than as disclosed in Schedule 4.22, there are no complaints,
applications, investigations, orders, prosecutions or proceedings against either
Company under the Pay Equity Act (Ontario).

	 	(h)	 	Any unpaid Taxes, penalties, interest or other amounts due under the Employer
Health Tax Act (Ontario) and payable by any of the Companies on or prior to the Closing
Date or relating to a period ending on or prior to the Closing Date have been paid or
will be paid by such Company on or prior to the Time of Closing. Each Company is in
compliance with the Employer Health Tax Act (Ontario).

 

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	4.23	 	Employee Plans

	 	(a)	 	Schedule 4.23 identifies each retirement, pension, supplemental pension
benefit, bonus, stock purchase, profit sharing, stock option, deferred compensation,
severance or termination pay, insurance, medical, hospital, dental, vision care, drug,
sick leave, disability, salary continuation, legal benefits, unemployment benefits,
vacation, pay equity, incentive or other compensation plan or arrangement or other
employee benefit which is maintained, or otherwise contributed to or required to be
contributed to, by the Vendor for the benefit of Employees (the “Employee Plans”).
Each Employee Plan has been maintained, administered and funded in material compliance
with its terms and with the requirements prescribed by any and all statutes, orders,
rules and regulations that are applicable to such Employee Plan. The Vendor has made
available to the Purchaser summaries or current and complete copies of all Employee
Plans.

	 	(b)	 	All material obligations of each Company required to be performed in connection
with the Employee Plans established therefor up to the date hereof have been performed,
and there are no outstanding defaults or violations by any party thereto. There have
been no improper withdrawals, applications or transfers of assets from any Employee
Plans.

	 	(c)	 	All required contributions and/or premiums to be made under the Employee Plans
have been fully paid to the date hereof in a timely fashion in accordance with the
terms of that Employee Plan and all Applicable Law, and no Taxes, penalties or fees are
owing or eligible under any Employee Plans.

	 	(d)	 	There are no outstanding actions, suits or claims pending or, to the knowledge
of the Vendor, threatened concerning the assets held in respect of the Employee Plans
(other than routine claims for the payment of benefits submitted by members or
beneficiaries in the normal course), and there is no litigation, legal action, suit,
investigation, claim, counterclaim or proceeding pending or, to the knowledge of the
Vendor, threatened concerning the Employee Plans.

	 	(e)	 	To the knowledge of the Vendor, no written or oral representations or promises
have been made to the Employees to establish new employee plans or to increase the
benefits under the existing Employee Plans.

	4.24	 	Balance Sheets

The Existing Balance Sheets fairly present (and the Closing Balance Sheet will fairly present)
in all material respects the financial condition of the Vendor as at the respective dates of such
balance sheets, all in accordance with GAAP. The Existing Balance Sheets and the Closing Balance
Sheet reflect and will reflect the consistent application of such accounting principles through out
the periods involved. The Existing Balance Sheets and the Closing Balance Sheet have been and will
be prepared from and are in accordance with the Accounting Records of the Vendor. The Vendor has
also delivered to the Purchaser copies of all letters from the Vendor’s accountants to the Vendor,
HearUSA, or the board of directors or audit committee of either of them, in connection with or
relating to the financial condition and results from operations, Accounting Records, Books and
Records, or financial statements of the Vendor, during the five
(5) years preceding the execution of this Agreement, together with copies of all responses
thereto.

 

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	4.25	 	Books and Records

The Books and Records, all of which have been made available to the Purchaser, are complete
and correct in all material respects and represent actual, bona fide transactions and have been
maintained in accordance with sound business practices, including the maintenance of an adequate
system of internal controls. The minute books of the Vendor, all of which have been made available
to the Purchaser, contain accurate and complete records in all material respects of all meetings
held, and corporate action taken, by the shareholders, the board of directors and committees of the
board of directors, and no meeting of any shareholders, board of directors or committee has been
held for which minutes have not been prepared or are not contained in such minute books.

	4.26	 	No Undisclosed Liabilities

The Vendor has no liability that would be required to be reflected or reserved against in a
balance sheet prepared in accordance with GAAP, except for liabilities reflected or reserved
against in the Existing Balance Sheets and current liabilities incurred in the ordinary course of
business of the Vendor since the respective dates of the Existing Balance Sheets.

	4.27	 	Ordinary and Normal Course

Since December 27, 2008, the Business has been carried on in the ordinary and normal course,
consistent with past practice, and there has been no Material Adverse Effect.

	4.28	 	No Bankruptcy or Insolvency

None of the Companies is an insolvent person nor has it committed an act of insolvency within
the meaning of the Bankruptcy and Insolvency Act (Canada), nor has it taken any steps to have
itself declared bankrupt or wound up, reorganized, or to have a receiver appointed over any of its
assets.

	4.29	 	Tax Registrations

The Vendor is a registrant for purposes of the ETA whose registration number is
141759308RT0001.

	4.30	 	No Subsidiaries

The Vendor does not own, either as registered or beneficial owner, shares or interests in any
other Person, save and except for 3371727. 3371727 does not own, either as registered or beneficial
owner, shares or interests in any other Person.

	4.31	 	Brokerage Fees

Neither HearUSA nor either of the Companies has entered into any agreement which would
entitle any Person to any valid claim against the Purchaser for a brokers’ commission,
finders’ fee or any like payment in respect of the purchase and sale of the Purchased Assets
or any other matter contemplated by this Agreement.

 

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	4.32	 	Bank Accounts

Schedule 4.32 sets out a complete and accurate list and particulars of all bank accounts
maintained and operated by the Companies in respect of the Business.

ARTICLE 5 — REPRESENTATIONS AND WARRANTIES

OF THE PURCHASER

The Purchaser represents and warrants to the Vendor as follows and acknowledges and confirms
that the Vendor is relying on such representations and warranties in connection with its sale of
the Business and the Purchased Assets.

	5.1	 	Organization

The Purchaser is existing under the laws of Ontario and has the corporate power to enter into
this Agreement and to perform its obligations hereunder.

	5.2	 	Authorization

All necessary corporate action has been taken by the Purchaser to authorize the execution and
delivery by it of, and the performance of its obligations under, this Agreement. This Agreement
has been duly executed and delivered by the Purchaser. This Agreement is a legal, valid and
binding obligation of the Purchaser, enforceable against the Purchaser by the Vendor in accordance
with its terms, except as enforcement may be limited by bankruptcy, insolvency and other laws
affecting the rights of creditors generally and except that equitable remedies may only be granted
in the discretion of a court of competent jurisdiction.

	5.3	 	No Violation

The execution and delivery of this Agreement by the Purchaser and the consummation of the
transactions herein provided for will not result in a material breach or violation of any of the
provisions of, or constitute a material default under, or materially conflict with or cause the
acceleration of any obligation of the Purchaser under: (i) any material contract or agreement to
which the Purchaser is a party or by which it is or its properties are bound; (ii) any provision of
the constating documents or by-laws or resolutions of the board of directors (or any committee
thereof) or the shareholders of the Purchaser; (iii) any material judgment, decree, order, award,
law, statute, ordinance, regulation, rule or by-law of any Authority having jurisdiction over the
Purchaser, except where such breach, violation, default, conflict or acceleration would not prevent
the Purchaser from fulfilling its obligations under this Agreement.

	5.4	 	Consents and Approvals

There is no requirement for the Purchaser to make any filing with, give any notice to or
obtain from any Authority any licence, permit, approval, consent, registration, certificate or
other regulatory authorization as a condition to the lawful consummation of the transactions
contemplated by this Agreement. There is no requirement under any contract or agreement to
which the Purchaser is a party or by which it is bound to give any notice to, or to obtain the
consent or approval of, any party to such contract or agreement relating to the consummation of the
transactions contemplated by this Agreement, the failure of which to obtain would prevent the
Purchaser from fulfilling its obligations under this Agreement.

 

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	5.5	 	GST Registration

The Purchaser is a registrant for purposes of the ETA whose registration number is
814712824RT0001.

	5.6	 	Brokerage Fees

The Purchaser has not entered into any agreement which would entitle any person to any valid
claim against a HearUSA Company for a brokers’ commission, finders’ fee or any like payment in
respect of the purchase and sale of the Purchased Assets or any other matter contemplated by this
Agreement.

	5.7	 	No Bankruptcy or Insolvency

The Purchaser is not an insolvent person nor has it committed an act of insolvency within the
meaning of the Bankruptcy and Insolvency Act (Canada), nor has it taken any steps to have itself
declared bankrupt or wound up, reorganized, or to have a receiver appointed over any of its assets.

ARTICLE 6 — SURVIVAL OF COVENANTS,

REPRESENTATIONS AND WARRANTIES

	6.1	 	Survival of Representations and Warranties of the Vendor

The representations and warranties of the Vendor contained in the Article 4 or any other
agreement, certificate or instrument delivered pursuant to this Agreement shall survive the Closing
for a period of twenty-four (24) months from the Closing Date, except for:

	 	(a)	 	those matters set out in Sections 4.1, 4.2 and 4.3(a) which shall survive the
Closing Date indefinitely;

	 	(b)	 	the Vendor’s representations and warranties relating to tax matters arising in
or in respect of a particular period ending on, before or including the Closing Date
shall survive until the Tax Authorities shall no longer be entitled to assess or
reassess liability for Taxes against the Vendor or 3371727 for that particular period,
having regard, without limitation to any waivers given by the Vendor or 3371727 in
respect of any taxation year; and

	 	(c)	 	fraudulent or willfully false representations and warranties which shall
survive indefinitely,

and notwithstanding the Closing and any inspection or inquiries made by or on behalf of the
Purchaser, shall continue in full force and effect for the benefit of the Purchaser, after which
time the Vendor shall be released from all obligations in respect of such representations and
warranties except with respect to any Claims asserted by the Purchaser in accordance with Section
10.3 hereof before the expiration, as applicable, of such period.

 

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	6.2	 	Survival of the Representations and Warranties of the Purchaser

The representations and warranties of the Purchaser contained in this Agreement shall survive
the closing of the transactions contemplated herein until the day that is twenty-four (24) months
following the Closing Date, and notwithstanding the Closing and any inspection or inquiries made by
or on behalf of the Vendor, shall continue in full force and effect for the benefit of the Vendor,
after which time the Purchaser shall be released from all obligations in respect of such
representations and warranties except with respect to any Claims asserted by the Vendor in
accordance with Section 10.3 hereof before the expiration of such period.

	6.3	 	Survival of Covenants

To the extent that they were not required to be or have not been fully performed at or prior
to the Time of Closing, and have not been waived, if applicable, the covenants of the Vendor and
the Purchaser contained in this Agreement and any document executed or delivered by any party
hereto shall survive the Closing of the transactions contemplated herein in accordance with their
respective terms.

ARTICLE 7 — OTHER COVENANTS

	7.1	 	Regulatory Approvals

The Vendor shall cooperate with the Purchaser and render all necessary assistance required by
the Purchaser in connection with any application, notification or filing of the Purchaser in
connection with these transactions.

	7.2	 	Consents and Approvals

Subject to Section 7.10, the Vendor shall use its reasonable commercial efforts to give or
obtain, at the Vendor’s own expense, at or prior to the Time of Closing, the notices, consents and
approvals described in Schedule 4.8(a) and 4.8(b).

	7.3	 	Bulk Sales Act

The Vendor shall, on or before the Time of Closing, deliver to the Purchaser the statement as
to its creditors duly verified by affidavit in compliance with subsection 4(i) of the Bulk Sales
Act (Ontario), and shall take such steps as Purchaser may require, acting reasonably, to ensure
that adequate provision is made for the immediate payment in full following the Closing of all
creditors disclosed in the Vendor’s statement.

	7.4	 	Accounts Receivable Trust Agreement

The parties acknowledge that all bank accounts maintained by the Vendor in connection with the
Business are non-transferable. The parties acknowledge and agree that any and all cash deposits
made to such bank accounts after the Effective Time shall be received into such accounts for the
benefit of and on behalf of the Purchaser, and by the Vendor as bare trustee and
agent for the Purchaser. At the Time of Closing, the Vendor and the Purchaser shall each
execute and deliver the Accounts Receivable Trust Agreement, and shall perform its obligations
thereunder in accordance with its terms.

 

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	7.5	 	Delivery of Books and Records

At the Time of Closing there shall be delivered to the Purchaser by the Vendor all of the
Books and Records. The Purchaser agrees that it will maintain and preserve the Books and Records
so delivered to it for a period of eight (8) years from the Closing Date, or for such longer period
as is required by any Applicable Law, and will permit the Vendor or its authorized representatives
reasonable access thereto in connection with their affairs relating to its matters.

	7.6	 	Corporate Action

On or before the Time of Closing, each of the Companies shall take or cause to be taken all
necessary corporate action, steps and proceedings to approve or authorize the transfer of the
Purchased Assets to the Purchaser and the execution and delivery of this Agreement and the other
agreements and documents contemplated hereby and to cause all necessary meetings of directors and
shareholders, as applicable, of each of the Companies to be held for such purpose.

	7.7	 	Employee Matters

	 	(a)	 	The Vendor agrees to provide the Purchaser with an up-to-date list of the names
of the Employees at least two (2) Business Days and not more than four (4) Business
Days prior to the Closing Date. The Purchaser agrees that, as soon as practicable
following the Effective Time, it shall provide written offers of employment to all
Employees on such list effective as at the Effective Time, on terms and conditions of
employment substantially similar to, and at least as favourable as, the terms and
conditions of employment then applicable to the Employees. Except as provided in this
Section 7.7, the Purchaser shall not be obligated to any Employee who refuses the
Purchaser’s offer of employment. The Vendor shall approve the written offers of
employment prior to the Purchaser providing such letters to the Employees. Such
approval by the Vendor shall not be unreasonably withheld or delayed. The Vendor shall
render all reasonable assistance to encourage each Employee to accept the Purchaser’s
offer of employment.

	 	(b)	 	The Vendor shall employ all of the Employees set out in Schedule 4.16 until the
Time of Closing except for any Employees who prior to the Time of Closing: (i) are
terminated for cause; (ii) are terminated with the Purchaser’s consent, which consent
shall not be unreasonably withheld; (iii) voluntarily resign; or (iv) retire.

	 	(c)	 	During the period from March 28, 2009 to the Time of Closing, the Vendor shall
not have hired any employees or increased the wages of any Employees, except in the
normal course or as required by contract or Applicable Law, or with the written consent
of the Purchaser.

 

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	 	(d)	 	Within five (5) Business Days following the Closing Date, the Vendor shall
settle, and pay to each of the Employees, all salaries, commissions, bonuses, and other
amounts that may become payable to or receivable by such Employees for all periods
ending on or before the Closing Date, including accumulated vacation not provided
for as an Assumed Liability or on the Closing Balance Sheet with pay credits in
respect of their employment with the Business or any predecessor of the Business,
and all termination and severance payments and benefits claimed by any Employees who
do not accept offers of employment made by the Purchaser in accordance with Section
7.7(a).

	 	(e)	 	The Purchaser shall be solely responsible for, and shall indemnify the Vendor
from and against, all salaries, commissions, bonuses and other amounts payable to
Employees in relation to any period of employment by the Purchaser and all termination
and severance payments and benefits claimed by any Employees who are terminated or
permanently laid off by the Purchaser after the Closing Date.

	 	(f)	 	The Employees shall cease to participate in, accrue benefits under or be
covered by the Employee Plans set out in Schedule 7.7(f) (the “Terminated Plans”) as of
the Closing Date. Effective on the Closing Date, the Purchaser shall establish
employee plans (the “Purchaser Employee Plans”) which shall provide the Employees with
benefits that are substantially similar to and no less favourable than those of the
Terminated Plans in effect on the day prior to the Closing Date. As of the Closing
Date, the Employees shall commence participation in, accrue benefits under and be
covered by the Purchaser Employee Plans. In the event that the Purchaser Employee
Plans are not established as of the Closing Date, the Purchaser shall advise the Vendor
as far in advance of the Closing Date as is possible. In that event, the Vendor will
use commercially reasonable efforts to continue the Terminated Plans such that the
Employees shall be able to continue to participate in such Terminated Plans for a
period not exceeding 60 days from the Closing Date (the “Transition Period”). The
Vendor and the Purchaser shall cooperate to facilitate the transition of the member
data and history from the Terminated Plans to the Purchaser Employee Plans during the
Transition Period. The Purchaser shall be responsible for all administrative and
accounting procedures necessary to allow Employees to participate in the Terminated
Plans and shall be responsible for and pay all costs and expenses, including premiums,
incurred by the Vendor during the Transition Period in connection with such Terminated
Plans for the Employees.

	 	(g)	 	The Purchaser will ensure that evidence of insurability or pre-existing
conditions and eligibility periods in respect of the Purchaser Employee Plans are
waived. The Purchaser Employee Plans shall honour any deductible, co-payment,
coinsurance, or eligible out-of-pocket expenses paid or incurred by the Employees,
including with respect to their covered dependants, under the Terminated Plans from the
beginning of the current coverage period to the Closing Date, as though such amounts
had been paid in accordance with the terms and conditions of the Purchaser Employee
Plans.

	 	(h)	 	The Purchaser Employee Plans shall recognize service and earnings of the
Employees as recognized under the Terminated Plans for eligibility and determination of
benefits under the Purchaser Employee Plans.

 

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	 	(i)	 	The Vendor agrees that it is responsible under the Employee Plans for any non-
pension benefit related claims arising in respect of the Employees prior to the Closing
Date, in accordance with the terms of such Employee Plans and Applicable Law. The
Purchaser agrees that it is responsible for any non-pension benefits related claims
arising in respect of the Employees from and after the Closing Date in accordance with
the terms of the Purchaser Employee Plans and Applicable Law. For greater certainty,
the date on which a benefit claim arose will be:

	 	(i)	 	in the case of a death claim, the date of death;

	 	(ii)	 	in the case of extended health care benefits, including,
without limitation, dental and medical treatments, the date of treatment;

	 	(iii)	 	in the case of a claim for drug or vision care benefits,
the date the prescription is filled; and

	 	(iv)	 	in the case of a disability claim, the date on which the
disability occurred.

	 	(j)	 	The Vendor agrees to transfer and assign, and the Purchaser agrees to assume,
those Employee Plans specified in Schedule 7.7(j).

	7.8	 	Non-Transferable and Non-Assignable Assets.

To the extent that any of the Purchased Assets or any material assets of 3371727, or any
claim, right or benefit arising under or resulting from such assets (collectively, the “Rights”) is
not capable of being transferred without the approval, consent or waiver of any third Person, or if
the transfer of a Right would constitute a breach of any obligation under, or a violation of, any
agreement or any Applicable Law, unless the approval, consent or waiver of such third Person is
obtained and remedies such breach or violation, then except as expressly otherwise provided in this
Agreement and without limiting the rights and remedies of the Purchaser contained elsewhere in this
Agreement, this Agreement shall not constitute an agreement to transfer such Rights unless and
until such approval, consent or waiver has been obtained. After the Closing and until all such
Rights are transferred to the Purchaser, the Vendor shall respectively:

	 	(a)	 	maintain its existence and hold the Rights as bare trustee and agent for the
Purchaser;

	 	(b)	 	comply with the terms and provisions of the Rights as bare trustee and agent
for the Purchaser at the Purchaser’s cost and for the Purchaser’s benefit;

	 	(c)	 	cooperate with the Purchaser in any reasonable and lawful arrangements designed
to provide the benefits of such Rights to the Purchaser; and

	 	(d)	 	enforce, at the request of the Purchaser and at the expense and for the account
of the Purchaser, any rights of the Vendor arising from such Rights against any third
Person, including the right to elect to terminate any such rights in accordance with
the terms of such rights upon the written direction of the Purchaser.

 

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In order that the full value of the Rights may be realized for the benefit of the Purchaser,
the Vendor shall, at the request and at the Vendor’s expense and under the direction of the
Purchaser, in the name of the Vendor or otherwise as the Purchaser may specify, take all such
action and do or cause to be done all such things as are, in the opinion of the Purchaser acting
reasonably, necessary or proper in order that the obligations of the Vendor, under such Rights may
be performed in such manner that the value of such Rights is preserved and enures to the benefit of
the Purchaser, and that any moneys due and payable and to become due and payable to the Purchaser
in and under the Rights are received by the Purchaser. The Vendor shall promptly pay to the
Purchaser all moneys collected by or paid to it in respect of every such Right.

	7.9	 	Tax Returns

	 	(a)	 	The Vendor shall at its own expense duly and timely make or prepare all Tax
Returns required to be made or prepared by 3371727 and duly and timely file all Tax
Returns required to be filed by 3371727 with the appropriate Tax Authority for any
period ending before the acquisition of control of 3371727 by the Purchaser for which
Tax Returns have not already been filed. Each Tax Return to be prepared and filed in
accordance with this Section 7.9 shall be correct and complete. Such Tax Returns shall
be subject to reasonable review by the Purchaser.

	 	(b)	 	The Purchaser shall using commercially reasonable efforts to co-operate with
the Vendor in the preparation of any such Tax Returns, including, without limitation,
by providing access to any Books and Records or other documents required by the Vendor
in order to fully and completely prepare any such Tax Returns or other documentation.

	7.10	 	Leased Property

	 	(a)	 	The Vendor hereby acknowledges and agrees that it shall be a condition of
Closing that, on or before the Closing Date, the Vendor shall obtain the prior written
consent to the Assignment of Lease from each landlord in respect of each of the Leased
Properties listed in Section 1 of Schedule 4.13 hereto (hereinafter, collectively, the
“Principal Sites” and each, individually, a “Principal Site”). The Vendor shall use
reasonable commercial efforts to provide the Purchaser with an Estoppel and Consent
Certificate for each Principal Site.

	 	(b)	 	The Vendor further covenants and agrees that, immediately following the Closing
Date, the Vendor shall make written requests for the formal written consent of each
landlord to the Assignment of Lease in respect of each of the Leased Properties listed
in Section 2 of Schedule 4.13 hereto (hereinafter, collectively, the “Non-Assigned
Leases” and each, individually, a “Non-Assigned Lease”), and shall also use reasonable
commercial efforts to obtain and provide to the Purchaser an Estoppel and Consent
Certificate from each landlord in respect of each Non-Assigned Lease. Until such time
as such consents have been obtained in respect of the Non-Assigned Leases as aforesaid,
the following provisions shall apply:

	 	(i)	 	The Vendor shall use continuous reasonable commercial
efforts, at its sole cost and expense, to obtain and provide to the
Purchaser the written consent to the Assignment of Lease, from each landlord
for each of the Non-Assigned Leases within twelve (12) months from the
Closing Date;

 

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	 	(ii)	 	The Non-Assigned Leases shall remain in the name of the
Vendor and the Vendor shall hold its interest in the Non-Assigned Leases and
the Leased Properties associated therewith in trust as bare trustee for the
benefit of the Purchaser and shall deal with such Non-Assigned Leases, and
the Vendor’s interest thereunder, as the Purchaser shall in writing
reasonably direct;

	 	(iii)	 	The Vendor shall continue to pay all rent and other
payments due and owing by the Vendor, as tenant under the Non-Assigned
Leases, and shall continue to observe and perform all of the obligations and
covenants of the tenant under such Non-Assigned Leases (including, without
limitation, maintenance and repair obligations, and the obligations of the
Vendor, as tenant, to maintain insurance as more particularly set out
thereunder);

	 	(iv)	 	The Vendor shall use continuous reasonable commercial
efforts to provide the Purchaser with continuous, uninterrupted access to,
and the right to use and occupy, those Leased Properties which form the
subject of the Non-Assigned Leases, so as to enable the Purchaser to conduct
the Business from such Leased Property in the manner consistent, to the
greatest extent possible, with the manner in which the Business was
conducted by the Vendor prior to the Time of Closing;

	 	(c)	 	The Purchaser shall use continuous reasonable commercial efforts to cooperate
and assist the Vendor, at the Vendor’s reasonable request, to obtain the written
consent to the Assignment of Lease from each landlord for each of the Non-Assigned
Leases; provided, for greater certainty that the Purchaser shall not be required to
incur any out-of-pocket expense in providing such cooperation and assistance.

	 	(d)	 	In respect of each of the Non-Assigned Leases, the Vendor and the Purchaser
shall enter into an interim occupancy agreement (each an “Interim Occupancy
Agreement”), as of the Closing Date, substantially in the form annexed hereto as
Exhibit F, providing for the terms under which Purchaser will occupy such Leased
Property and such additional assurances relating to such Leased Property as may be
requested of the Vendor by the Purchaser from time to time, and the Vendor shall take,
or cause to be taken, such reasonable actions, either in the Vendor’s name or otherwise
as the Purchaser may reasonably require, so as to provide the Purchaser with, and not
to deprive the Purchaser of, the right to conduct the Business from each such Leased
Property

 

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	 	(e)	 	The Vendor shall indemnify and save harmless the Purchaser, and its directors,
officers, employees, agents and successors, from and against any Losses suffered or
incurred by any of them as a result of the Purchaser being required to vacate
any Leased Property that is occupied by the Purchaser under an Interim Occupancy
Agreement upon termination of, or interruption or interference with, its use,
occupancy and enjoyment of any portion of such Leased Property within a period of
twelve (12) months from the Closing Date.

	 	(f)	 	The obligations of this Section 7.10 shall survive the Closing Date and the
said obligations shall not merge but shall remain in full force and effect as of the
Closing Date and thereafter.

ARTICLE 8 — CONDITIONS OF CLOSING

	8.1	 	Conditions of Closing in Favour of the Purchaser

The purchase and sale of the Business and the Purchased Assets is subject to the following
terms and conditions for the exclusive benefit of the Purchaser, to be performed or fulfilled at or
prior to the Time of Closing:

	 	(a)	 	Representations and Warranties. The representations and warranties of the
Vendor contained in this Agreement or any certificate or other document delivered
pursuant hereto shall be true and correct at the Time of Closing in all material
respects with the same force and effect as if such representations and warranties were
made at and as of such time, except for any such representations and warranties that
refer to or are expressed to be made as of a specific date, including the date of this
Agreement, in which case such representations shall be true and correct in all material
respects as of such date, and a certificate executed by the Vendor dated the Closing
Date, to that effect shall have been delivered to the Purchaser;

	 	(b)	 	Covenants. All of the terms, covenants and conditions of this Agreement to be
complied with or performed by the Vendor at or before the Time of Closing shall have
been complied with or performed in all material respects, and a certificate executed by
a senior officer of the Vendor, dated the Closing Date, to that effect shall have been
delivered to the Purchaser;

	 	(c)	 	Regulatory Consents. There shall have been obtained from all appropriate
Authorities such consents and approvals as are required to be obtained by the Vendor to
permit the change of ownership of the Purchased Assets contemplated hereby, including,
without limitation, those described in Schedule 4.8(a);

	 	(d)	 	Required Contractual Consents. Subject to Section 7.10, the Vendor shall have
given or obtained the notices, consents and approvals described in Schedule 4.8(b);

	 	(e)	 	No Action or Proceeding. No legal or regulatory action or proceeding shall be
pending or threatened by any person to enjoin, restrict or prohibit the purchase and
sale of the Purchased Assets contemplated hereby or the performance of any party’s
obligations in this Agreement;

 

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	 	(f)	 	Workplace Safety and Insurance. The Vendor shall provide a clearance
certificate or other similar documentary evidence from the Workplace Safety and
Insurance Board or similar authority in each jurisdiction where the Vendor carries on
the Business certifying that there are no outstanding assessments, penalties, fines,
levies, charges, surcharges or other amounts due or owing to those authorities;

	 	(g)	 	Retail Sales Tax. The Vendor shall deliver to the Purchaser on the Closing
Date a certificate issued by the Minister of Finance of Ontario under subsection 6(1)
of the Retail Sales Tax Act (Ontario);

	 	(h)	 	Concurrent Transactions. The transactions set forth under the HearUSA Licence
shall be completed in escrow with effect immediately prior to these transactions, such
that the Purchaser shall at the Closing acquire by assignment the HearUSA Licence;

	 	(i)	 	Delivery of Conveyancing Documents. The Vendor shall deliver to the Purchaser
all necessary deeds, conveyances, bills of sale, assurances, transfers, assignments and
any other documentation reasonably required by the Purchaser to transfer the Purchased
Assets to the Purchaser with a good title, free and clear of all Encumbrances, except
for Permitted Encumbrances.

	 	(j)	 	Closing Documents. Without limiting the generality of any other provision of
this Section 8.1, the Purchaser shall have received at or before the Time of Closing
sufficient duly executed original copies of the following:

	 	(i)	 	certified copies of resolutions of: (i) the board of
directors of HearUSA, (ii) the board of directors of 3371727, and (iii) the
board of directors and shareholders of the Vendor, approving the transfer of
the Purchased Assets and this Agreement and the transactions contemplated
under this Agreement, as applicable;

	 	(ii)	 	a certificate of an officer of each the Companies
confirming the matters contemplated in Section 8.1(a) and confirming that
all conditions under this Agreement in favour of the Vendor have been either
fulfilled or waived;

	 	(iii)	 	certificates of incumbency of each of the Companies and
HearUSA;

	 	(iv)	 	certificates of status/compliance of each of the
Companies and HearUSA;

	 	(v)	 	certified copies of the articles of incorporation and
by-laws of each of HearUSA and the Companies;

	 	(vi)	 	share certificates representing the Purchased Shares duly
endorsed for transfer;

	 	(vii)	 	all of the books and records, including minute books and
share certificate books of 3371727;

 

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	 	(viii)	 	a DVD in containing all data, current as of not more than three (3)
Business Days prior to the Closing Date, constituting the Helix Database (as
such term is defined in the Support Agreement);

	 	(ix)	 	the Escrow Agreement executed by the Vendor and the
Escrow Agent;

	 	(x)	 	the Non-Competition Agreement executed by each of HearUSA
and the Vendor;

	 	(xi)	 	the Accounts Receivable Trust Agreement executed by the
Vendor and, for the purposes only of its guarantee therein, HearUSA;

	 	(xii)	 	the Support Agreement executed by HearUSA;

	 	(xiii)	 	the Assignment of Leases for each of the Principal Sites, each on terms
acceptable to the Purchaser, acting reasonably, executed by the Vendor and
each applicable landlord;

	 	(xiv)	 	the Interim Occupancy Agreements, for those Leased
Properties that are the subject of Non-Assigned Leases, executed by the
Vendor;

	 	(xv)	 	an assignment of the HearUSA License by the Vendor in
favour of the Purchaser, on terms acceptable to the Purchaser acting
reasonably.

	 	(xvi)	 	an opinion dated the Closing Date from counsel for the
Companies confirming the matters warranted in subsections 4.1 Organization,
4.2(a) Authorization, 4.2(b) Enforceability of Obligations and 4.3(a)
Authorized Capital of 3571727, and of HearUSA confirming the matters
warranted in subsection 4.2(b) Enforceability of Obligations, and such other
matters as Purchaser’s counsel may require.

If any of the conditions contained in this Section 8.1 shall not be performed or fulfilled at
or prior to the Time of Closing to the satisfaction of the Purchaser, acting reasonably, the
Purchaser may, by notice to the Vendor, terminate this Agreement and the obligations of the Vendor
and the Purchaser under this Agreement, other than the obligations contained in Sections 12.2 and
12.3 and any confidentiality agreement entered into by the parties shall be terminated. Any such
condition may be waived in whole or in part by the Purchaser without prejudice to any claims it may
have for breach of covenant, representation or warranty.

	8.2	 	Conditions of Closing in Favour of the Vendor

The purchase and sale of the Purchased Assets is subject to the following terms and conditions
for the exclusive benefit of the Vendor, to be performed or fulfilled at or prior to the Time of
Closing:

	 	(a)	 	Representations and Warranties. The representations and warranties of the
Purchaser contained in this Agreement or any certificate or other document delivered
pursuant hereto shall be true and correct in all material respects at the Time of
Closing with the same force and effect as if such representations and
warranties were made at and as of such time, and a certificate executed by the
Purchaser, dated the Closing Date, to that effect shall have been delivered to the
Vendor;

 

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	 	(b)	 	Covenants. All of the terms, covenants and conditions of this Agreement to be
complied with or performed by the Purchaser at or before the Time of Closing shall have
been complied with or performed in all material respects, and a certificate executed by
a senior officer of the Purchaser, dated the Closing Date, to that effect shall have
been delivered to the Vendor; and

	 	(c)	 	No Action or Proceeding. No legal or regulatory action or proceeding shall be
pending or threatened by any person to enjoin, restrict or prohibit the purchase and
sale of the Purchased Assets contemplated hereby or the performance of any party’s
obligations under any agreement contemplated in this Agreement to be executed and
delivered by either party at the Time of Closing;

	 	(d)	 	Concurrent Transactions. Concurrently with the Closing, HearUSA, as vendor, and
2186935 Ontario Inc., as purchaser, shall have completed the purchase and sale of a
payment stream under the Support Agreement, on terms and conditions satisfactory to
HearUSA;

	 	(e)	 	Closing Documents. Without limiting the generality of any other provision of
this Section 8.2, the Vendor shall have received at or before the Time of Closing
sufficient duly executed original copies of the following:

	 	(i)	 	certified copies of resolutions of the board of directors
of the Purchaser, approving the purchase of the Purchased Assets and this
Agreement and the transactions contemplated under this Agreement;

	 	(ii)	 	a certificate of an officer of the Purchaser confirming
the matters contemplated in Section 8.2(a) and confirming that all
conditions under this Agreement in favour of the Purchaser have been either
fulfilled or waived;

	 	(iii)	 	a certificate of Jeffrey Geigel confirming that as of
the Closing Date he has no actual knowledge of any existing breach of the
representations and warranties of the Vendor contained in Article 4;

	 	(iv)	 	certificates of incumbency of the Purchaser;

	 	(v)	 	certificates of status/compliance of each of the
Purchaser;

	 	(vi)	 	certified copies of the articles of incorporation and
by-laws of the Purchaser;

	 	(vii)	 	the Assignment of Leases for each of the Principal
Sites, each on terms acceptable to the Vendor, acting reasonably;

 

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	 	(viii)	 	the Interim Occupancy Agreements executed by the Purchaser for those
Leased Properties that are the subject of the Non-Assigned Leases;

	 	(ix)	 	the Escrow Agreement executed by the Purchaser and the
Escrow Agent;

	 	(x)	 	the Support Agreement executed by the Purchaser; and

	 	(xi)	 	an assumption of the HearUSA License by the Purchaser.

If any of the conditions contained in this Section 8.2 shall not be performed or fulfilled at
or prior to the Time of Closing to the satisfaction of the Vendor acting reasonably, the Vendor
may, by notice to the Purchaser, terminate this Agreement and the obligations of the Vendor and the
Purchaser under this Agreement, other than the obligations contained in Sections 12.2, 12.3 and any
confidentiality agreement entered into by the parties, shall be terminated. Any such condition may
be waived in whole or in part by the Vendor without prejudice to any claims it may have for breach
of covenant, representation or warranty.

ARTICLE 9 — CLOSING DATE AND TRANSFER

OF POSSESSION

	9.1	 	Place of Closing

The closing of the purchase and sale of the Purchased Assets (the “Closing”) shall take place
at the Time of Closing at the offices of Miller Thomson LLP, 58th Floor, Scotia Plaza,
40 King Street West, Toronto, Ontario M5H 3S1.

	9.2	 	Further Assurances

From time to time subsequent to the Closing Date, each party to this Agreement covenants and
agrees that it will at all times after such date, at the expense of the requesting party, promptly
execute and deliver all such documents, including, without limitation, all such additional
conveyances, transfers, consents and other assurances and do all such other acts and things as the
other party, acting reasonably, may from time to time request be executed or done in order to
better evidence or perfect or effectuate any provision of this Agreement or of any agreement or
other document executed pursuant to this Agreement or any of the respective obligations intended to
be created hereby or thereby.

ARTICLE 10 — INDEMNIFICATION

	10.1	 	Indemnification by the Vendor

Subject to the terms set forth in this Article 10, the Vendor agrees to indemnify and save
harmless the Purchaser from and against any or all Losses suffered or incurred by the Purchaser as
a result of:

	 	(a)	 	any breach by the Vendor of any representation or warranty of the Vendor
contained in this Agreement;

 

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	 	(b)	 	any breach or non-performance by the Vendor of any covenant to be performed by
it which is contained in this Agreement;

(c) any Excluded Assets or the Excluded Liabilities; and

	 	(d)	 	any failure by the Vendor to pay, satisfy, discharge, perform or fulfil any of
the Excluded Liabilities and non-compliance by the Vendor with the Bulk Sales Act
(Ontario).

Notwithstanding the foregoing, the Vendor shall not be required to indemnify or save harmless
the Purchaser in respect of any Loss referred to in Section 10.1(a) or Section 10.1(b) unless the
Purchaser shall have provided notice to the Vendor in accordance with Section 10.3 on or prior to
the expiration of the applicable time period related to such representation or warranty set out in
Section 6.1 or such covenant set out in Section 6.3.

	10.2	 	Indemnification by the Purchaser

Subject to the terms set forth in this Article 10, the Purchaser agrees to indemnify and save
harmless the Vendor from and against any or all Losses suffered or incurred by the Vendor as a
result of:

	 	(a)	 	any breach by the Purchaser of any representation or warranty contained in this
Agreement;

	 	(b)	 	any breach or non-performance by the Purchaser of any covenant to be performed
by it which is contained in this Agreement; and

	 	(c)	 	any failure by the Purchaser to pay, satisfy, discharge, perform or fulfil any
of the Assumed Liabilities or any liabilities and obligations of the Business after
Closing.

Notwithstanding the foregoing, the Purchaser shall not be required to indemnify or save
harmless the Vendor in respect of any Loss referred to in Section 10.2(a) or Section 10.2(b),
unless the Vendor shall have provided notice to the Purchaser in accordance with Section 10.3 on or
prior to the expiration of the applicable time period related to such representation or warranty
set out in Section 6.2 or such covenant set out in Section 6.3.

	10.3	 	Notice of Claim

In the event that a party (the “Indemnified Party”) shall become aware of any claim,
proceeding or other matter (a “Claim”) in respect of which the other party (the “Indemnifying
Party”) has agreed to indemnify the Indemnified Party pursuant to this Agreement, the Indemnified
Party shall promptly give written notice thereof to the Indemnifying Party. Such notice shall
specify whether the Claim arises as a result of a claim by a person against the Indemnified Party
(a “Third Party Claim”) or whether the Claim does not so arise (a “Direct Claim”), and shall also
specify with reasonable particularity (to the extent that the information is available), the
factual basis for the Claim and the amount of the Claim, if known. If, through the fault of the
Indemnified Party, the Indemnifying Party does not receive notice of any Claim in time effectively
to contest the determination of any liability susceptible of being contested, the
Indemnifying Party shall be entitled to set off against the amount claimed by the Indemnified
Party the amount of any Losses incurred by the Indemnifying Party resulting from the Indemnified
Party’s failure to give such notice on a timely basis.

 

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	10.4	 	Direct Claims

	 	(a)	 	With respect to any Direct Claim, following receipt of notice from the
Indemnified Party of the Claim, the Indemnifying Party shall have sixty (60) Business
Days (for the purposes of this Section, the “Investigation Period”) to make such
investigation of the Claim as is considered necessary or desirable. For the purpose of
such investigation, the Indemnified Party shall make available to the Indemnifying
Party the information relied upon by the Indemnified Party to substantiate the Claim,
together with all such other information as the Indemnifying Party may reasonably
request. If both parties agree at or prior to the expiration of the Investigation
Period (or any mutually agreed upon extension thereof) to the validity and amount of
such Claim, the Indemnifying Party shall immediately pay to the Indemnified Party the
full agreed upon amount of the Claim. If the parties are unable to resolve the dispute
within a reasonable time, and in any event within thirty (30) Business Days of such
written request, the dispute shall, at the request of either party, be determined by a
court of competent jurisdiction.

	 	(b)	 	In connection with a Direct Claim arising out of a breach by the Vendor of its
representation and warranty contained in Section 4.9, during the Investigation Period,
the parties shall investigate the Claim for the purposes of making a determination as
to whether or not any uncollected Accounts Receivable are in fact ultimately
collectible. A Direct Claim in respect of such matter shall only be deemed to be valid
to the extent that there is not a substantial likelihood that such Accounts Receivable
are collectible through reasonable commercial efforts. If the parties are unable to
resolve the dispute within a reasonable time, and in any event within thirty (30) days
of such written request, the Vendor and the Purchaser shall submit the issues remaining
in dispute to PriceWaterhouse Coopers, Toronto (the “Independent Accountants”) for
resolution. If issues are submitted to the Independent Accountants for resolution, (i)
the Vendor and the Purchaser shall furnish or cause to be furnished to the Independent
Accountants such working papers and other documents and information relating to the
disputed issues as the Independent Accountants may request and are available to that
party or its agents and shall be afforded the opportunity to present to the Independent
Accountants any material relating to the disputed issues and to discuss the issues with
the Independent Accountants; (ii) the determination by the Independent Accountants, as
set forth in a notice to be delivered to both the Vendor and the Purchaser within
thirty (30) days of the submission to the Independent Accountants of the issues
remaining in dispute, shall be final, binding and conclusive on the parties and shall
be determinative of the amount of the Purchaser’s Direct Claim; and (iii) the
unsuccessful party in respect of the aggregate of the issues in dispute shall bear the
fees and costs of the Independent Accountants for such determination. The determined
amount of the Direct Claim, if any, shall be paid within three (3)
Business Days after the Independent Accountant’s determination becomes binding and
conclusive on the parties pursuant to this Section 10.4(b).

 

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	10.5	 	Third Party Claims

With respect to any Third Party Claim, the Indemnifying Party shall have the right, at its
expense, to participate in or assume control of the negotiation, settlement or defence of the Claim
and, in such event, the Indemnifying Party shall reimburse the Indemnified Party for all the
Indemnified Party’s reasonable and substantiated out-of-pocket expenses as a result of such
participation or assumption. If the Indemnifying Party elects to assume such control, the
Indemnified Party shall have the right to participate in the negotiation, settlement or defence of
such Third Party Claim and to retain counsel to act on its behalf, provided that the fees and
disbursements of such counsel shall be paid by the Indemnified Party unless the Indemnifying Party
consents to the retention of such counsel or unless the named parties to any action or proceeding
include both the Indemnifying Party and the Indemnified Party and the representation of both the
Indemnifying Party and the Indemnified Party by the same counsel would be inappropriate due to the
actual or potential differing interests between them (such as the availability of different
defences). If the Indemnifying Party, having elected to assume such control, thereafter fails to
defend the Third Party Claim within a reasonable time, the Indemnified Party shall be entitled to
assume such control, and the Indemnifying Party shall be bound by the results obtained by the
Indemnified Party with respect to such Third Party Claim.

	10.6	 	Settlement of Third Party Claims

If the Indemnifying Party fails to assume control of the defence of any Third Party Claim, the
Indemnified Party shall have the exclusive right to contest, settle or pay the amount claimed.
Whether or not the Indemnifying Party assumes control of the negotiation, settlement or defence of
any Third Party Claim, the Indemnifying Party shall not settle any Third Party Claim without the
written consent of the Indemnified Party, which consent shall not be unreasonably withheld or
delayed; provided, however, that the liability of the Indemnifying Party shall be limited to the
proposed settlement amount if any such consent is not obtained for any reason.

	10.7	 	Co-operation

The Indemnified Party and the Indemnifying Party shall co-operate fully with each other with
respect to Third Party Claims, and shall keep each other fully advised with respect thereto
(including supplying copies of all relevant documentation promptly as it becomes available).

	10.8	 	Exclusivity

Except for the rights of the Vendor pursuant to Article 11, the provisions of this Article 10
and any other indemnification provisions of this Agreement shall be the sole and exclusive remedies
for any Claim for breach of any covenant, representation, warranty, indemnity or other provision of
this Agreement or any certificate delivered pursuant to this Agreement (other than a claim for
specific performance or injunctive relief or a claim based upon fraud or wilful misconduct) with
the intent that all such Claims shall be subject to the limitations and other provisions contained
in this Article 10.

 

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	10.9	 	Limitations on Amount

The Vendor shall have no liability (for indemnification or otherwise) with respect to claims
made under Section 10.1 until (a) with respect to claims made during the first one hundred and
twenty (120) days after the Closing, the total of all Losses with respect to such matters exceeds
$50,000.00 (in this Section, the “Threshold Amount”), and upon the aggregate amount of all such
claims exceeding the Threshold Amount, the Vendor shall be required to pay all amounts of such
Losses including the first $50,000.00; and (b) with respect to claims made after the first one
hundred and twenty (120) days after the Closing, the total of all Losses with respect to such
claims exceeds $100,000.00 (in this Section, the “Basket”), upon the aggregate amount of all such
claims exceeding the Basket, the Vendor shall only be required to pay all amounts in excess of the
Basket. Any materiality qualification contained in a representation of the Vendor in this
Agreement will not be taken into account in the determination of the magnitude of the Losses
occasioned by the breach of such representation for the purposes of determining whether the
Threshold Amount or the Basket has been exceeded; provided, that the claims based upon the
prorations, Purchase Price adjustments or the Non-Assigned Leases in Sections 3.5, 3.6 and 7.10,
respectively, shall not be subject to the Threshold Amount or the Basket. The aggregate liability
of the Vendor (for indemnification or otherwise) with respect to Claims made under this Agreement
shall not exceed $15,000,000. Provided further that none of the limitations in this Section 10.9
shall apply to Claims under this Agreement with respect to breaches of Vendor’s representations and
warranties in Sections 4.1, 4.2, 4.3(a), 4.5(a) and 4.19 or based upon fraud or wilful misconduct.

	10.10	 	Insurance Proceeds and Taxes

The amount of the Indemnifying Party’s liability under this Agreement shall be determined
taking into account any applicable insurance proceeds and other savings, including tax savings,
that reduce the overall impact of the Losses upon the Indemnified Party. Any payment under this
Article 10 shall be treated for tax purposes as an adjustment to the Purchase Price to the extent
such characterization is proper and permissible under Applicable Law.

	10.11	 	Right to Claim Escrow Amount

The Purchaser may give notice of a claim in any amount to which it may be entitled under this
Article 10 under the Escrow Agreement. Neither the giving of notice of a claim under the Escrow
Agreement nor the failure to do so will constitute an election of remedies or limit the Purchaser
in any manner in the enforcement of any other remedies that may be available to it.

	10.12	 	Other Limitations

No amounts shall be payable under this Article 10 for Losses to the extent such Losses were
accounted for in favour of the Indemnified Party in the calculation of any adjustment to the
Purchase Price pursuant to Sections 3.5 or 3.6.

 

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ARTICLE 11 — GUARANTEE OF HEARUSA

For good and valuable consideration, the receipt and sufficiency of which is hereby
conclusively acknowledged, HearUSA agrees with the Purchaser, as follows:

	11.1	 	Guarantee of HearUSA

HearUSA hereby unconditionally guarantees to the Purchaser the full and punctual payment and
performance when due whether by required payment, declaration, demand or otherwise, of all present
and future indebtedness, liabilities and payment obligations of the Vendor to the Purchaser
pursuant to this Agreement and the Escrow Agreement, at any time owing or remaining unpaid by the
Vendor to the Purchaser, including the payment of all costs and expenses incurred by the Purchaser
in enforcing any rights under this Section (hereinafter in this Section, collectively the
“Guaranteed Obligations”). If any or all of the Guaranteed Obligations are not duly paid by the
Vendor and are not recoverable under the preceding sentence of this Section for any reason
whatsoever, HearUSA will, as a separate and distinct obligation, indemnify and save harmless the
Purchaser from and against all losses resulting from the failure of the Vendor to pay or perform
such Guaranteed Obligations. The Purchaser may proceed to enforce the obligations of HearUSA under
this Section without first pursuing or exhausting any right or remedy which the Purchaser may have
against the Vendor, its successors or assigns or any other person, upon the Vendor failing to pay
or perform when due (subject to any applicable cure period) any of the Guaranteed Obligations. The
obligation of HearUSA to perform its obligations under this Section shall arise and HearUSA shall
perform such obligations immediately upon written demand being provided by the Purchaser; provided,
however, that, before making demand on HearUSA, the Purchaser shall be required to make a claim
under the Escrow Agreement to the extent that a sufficient portion of the Escrow Amount remains
available to satisfy all outstanding claims. HearUSA’s obligations under this Section are
continuing, unconditional and absolute and are not subject to set-off, but for greater certainty
are subject to all defences, limitations and rights available to the Vendor.

	11.2	 	Time of Essence

Time shall be of the essence in this guarantee.

	11.3	 	Severability

If any provision of this guarantee is determined by a court of competent jurisdiction to be
invalid, illegal or unenforceable in any respect, such determination shall not impair or affect the
validity, legality or enforceability of the remaining provisions hereof, and each provision is
hereby declared to be separate, severable and distinct.

	11.4	 	Further Assurances.

HearUSA shall forthwith, at its own expense and from time to time, do or file, or cause to be
done or filed, all such things and shall execute and deliver all such documents, agreements,
opinions, certificates and instruments reasonably requested by the Purchaser or its counsel as may
be necessary or desirable to give effect to this guarantee and carry out its provisions and
intention.

	11.5	 	Successors and Assigns

This guarantee shall enure to the benefit of the Purchaser and its successors and assigns and
shall be binding on HearUSA and its successors, provided that HearUSA shall not have the right to
assign any of its rights or obligations hereunder.

 

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	11.6	 	Applicable Law

This guarantee shall be construed, interpreted and enforced in accordance with, and the rights
and obligations of HearUSA shall be governed by, the laws of the Province of Ontario and the
federal laws of Canada applicable therein and HearUSA irrevocably attorns to the exclusive
jurisdiction of the courts of such province and all courts competent to hear appeals therefrom.

	11.7	 	Notices

Any notice or other communication required or permitted to be given to HearUSA hereunder shall
be provided in accordance with Section 12.1 hereof.

ARTICLE 12 — MISCELLANEOUS

	12.1	 	Notices

	 	(a)	 	Any notice or other communication required or permitted to be given hereunder
shall be in writing and shall be delivered by personal delivery, by overnight courier,
by telecopy or by registered mail addressed as follows:

If to the Vendor and/or HearUSA:

c/o HearUSA Inc.

1250 Northpoint Parkway

West Palm Beach, FL 33407

Attention: Gino Chouinard, President

Fax No.: 561.688.8893

With a copy (which shall not constitute notice) to:

Bryan Cave LLP

700 13th Street NW

Washington, DC 20005

Attention: LaDawn Naegle, Esq.

Fax: 202.220.7346

and to:

Ogilvy Renault LLP

Barristers and Solicitors

Suite 3800, Royal Bank Plaza, South Tower

200 Bay Street

Toronto, ON M5J 2Z4

Attention: Pierre Soulard

Fax: 416.216.3930

 

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If to the Purchaser:

Helix Hearing Inc.

290 McGill Street, Suite A

Hawkesbury, ON K6A 1P8

Attention: Chief Executive Officer

Fax No.: 613.632.5714

With a copy (which shall not constitute notice) to:

Miller Thomson LLP

Barristers and Solicitors

Scotia Plaza, 40 King Street West

Suite 5800, P.O. Box 1011

Toronto, ON M5H 3S1

Attention: James Klotz

Fax No: 416.595.8695

	 	(b)	 	Any such notice or other communication delivered by personal delivery or
overnight courier shall be deemed to have been given and received on the day on which
it was delivered (or, if such day is not a Business Day, on the next following Business
Day), and if transmitted by telecopier, on the day of transmission thereof if such day
is a Business Day and is received before 5:00 pm (local time to the recipient) or
otherwise on the next Business Day after the day of transmittal, provided that the
party so transmitting the notice has received confirmation of its successful
transmittal, and if mailed or sent by registered mail, on the fifth Business Day
following the date of mailing; provided, however, that if at the time of mailing or
within three Business Days thereafter there is or occurs a labour dispute or other
event which might reasonably be expected to disrupt the delivery of documents by mail,
any notice or other communication hereunder shall be delivered or transmitted by means
personal delivery, telecopier or recorded electronic communication as aforesaid. Either
party may at any time change its address for service from time to time by giving notice
to the other party in accordance with this Section 12.1.

	12.2	 	Announcements

The parties shall consult with each other before issuing any press release or making any other
public announcement with respect to this Agreement or the transactions contemplated hereby and,
except as required by any applicable law or regulatory requirement, neither of them shall issue any
such press release or make any such public announcement without the prior written consent of the
other party, which consent shall not be unreasonably withheld or delayed.

 

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	12.3	 	Disclosure

Prior to any public announcement of the transaction contemplated hereby pursuant to Section
12.2, neither party shall disclose this Agreement or any aspects of such transaction except to its
board of directors, its senior management, its legal, accounting, financial or other professional
advisors, any financial institution contacted by it with respect to any financing required in
connection with such transaction and counsel to such institution, or as may be required by any
applicable law or any regulatory authority or stock exchange having jurisdiction.

	12.4	 	Reasonable Commercial Efforts

The parties acknowledge and agree that, for all purposes of this Agreement, an obligation on
the part of either party to use reasonable commercial efforts to obtain any waiver, consent,
approval, permit, licence or other document shall not require such party to make any payment to any
person for the purpose of procuring the same, other than payments for amounts due and payable to
such person, payments for incidental expenses incurred by such person and payments required by any
applicable law or regulation.

	12.5	 	Expenses

Each party shall bear all expenses incurred by it in connection with the negotiation and
entering into of the Agreement and the transactions contemplated therein, including without
limitation, the fees and expenses of their respective counsel, accountants and financial advisors.

	12.6	 	Counterparts

This Agreement may be executed in counterparts, each of which shall constitute an original and
all of which taken together shall constitute one and the same instrument. Execution may be made by
facsimile signature which, for all purposes, shall be deemed to be an original.

IN WITNESS WHEREOF this Agreement has been executed by the parties.

	 	 	 	 	 
	 	HELIX HEARING INC.

 	 
	 	Per:  	“Jeffrey Geigel”
 	 
	 	 	Name:  	Jeffrey Geigel 	 
	 	 	Title:  	President

I/We have the authority to bind the corporation 	 

 

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	 	HELIX HEARING CARE OF AMERICA CORP.

 	 
	 	Per:  	“Stephen J. Hansborough”
 	 
	 	 	Name:  	Stephen J. Hansborough 	 
	 	 	Title:  	Chairman & CEO

I/We have the authority to bind the company 	 

	 	 	 	 	 
	 	3371727 CANADA INC.

 	 
	 	Per:  	“Stephen J. Hansborough”
 	 
	 	 	Name:  	Stephen J. Hansborough 	 
	 	 	Title:  	Chairman & CEO

I/We have the authority to bind the corporation 	 

HearUSA, Inc. hereby joins in the execution of this Agreement solely for the purposes of agreeing
to be bound by Article 11, and hereby further acknowledges receipt of an executed copy of this
Agreement.

	 	 	 	 	 
	 	HEARUSA, INC.

 	 
	 	Per:  	“Stephen J. Hansborough”
 	 
	 	 	Name:  	Stephen J. Hansborough 	 
	 	 	Title:  	Chairman & CEO

I/We have the authority to bind the corporation 	 

 

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