Document:

Exhibit
10.2

MEZZANINE LOAN AGREEMENT

BY AND AMONG

BREOF UVA GP LLC

And

BREOF UVA LLC

And

PPC-UVA 15TH STREET LIMITED PARTNERSHIP

And

PPC
CHARLOTTESVILLE GP, INC.

(“Borrowers”)

AND

BEHRINGER HARVARD UVA,
LLC

(“Lender”)

  
  TABLE OF
CONTENTS
  	  1.
  	  RECITALS
  	   
  	  2
  
	  2.
  	  DEFINITIONS
  	   
  	  2
  
	  3.
  	  THE LOAN; DISBURSEMENT OF LOAN
  	   
  	  6
  
	   
  	  (a)
  	  Loan
  	   
  	  6
  
	   
  	  (b)
  	  Loan Disbursements
  	   
  	  6
  
	  4.
  	  INTEREST PAYMENTS; NO USURY, LOAN COMMITMENT FEE;
  PREPAYMENT; MATURITY; REPAYMENT
  	   
  	  7
  
	   
  	  (a)
  	  Interest
  	   
  	  7
  
	   
  	  (b)
  	  No Usury
  	   
  	  7
  
	   
  	  (c)
  	  Prepayment
  	   
  	  7
  
	   
  	  (d)
  	  Maturity Date
  	   
  	  7
  
	  5.
  	  SECURITY FOR LOAN
  	   
  	  8
  
	   
  	  (a)
  	  Pledge Agreement
  	   
  	  8
  
	   
  	  (b)
  	  Other Loan Documents
  	   
  	  8
  
	  6.
  	  CONDITIONS PRECEDENT TO CLOSING OF THE LOAN
  	   
  	  8
  
	   
  	  (a)
  	  Loan Documents
  	   
  	  8
  
	   
  	  (b)
  	  Third Party Agreements
  	   
  	  8
  
	   
  	  (c)
  	  Certification
  	   
  	  9
  
	   
  	  (d)
  	  Financial Statements
  	   
  	  9
  
	   
  	  (e)
  	  Insurance Policies
  	   
  	  9
  
	   
  	  (f)
  	  Contracts
  	   
  	  10
  
	   
  	  (g)
  	  Plans
  	   
  	  10
  
	   
  	  (h)
  	  Budget and Cost Review
  	   
  	  10
  
	   
  	  (i)
  	  Leases
  	   
  	  10
  
	   
  	  (j)
  	  Title Insurance Policy
  	   
  	  10
  
	   
  	  (k)
  	  UCC Policy
  	   
  	  10
  
	   
  	  (l)
  	  ALTA Survey
  	   
  	  10
  
	   
  	  (m)
  	  Zoning; Conditional Use Permits and Government
  Approvals
  	   
  	  10
  
	   
  	  (n)
  	  Flood Plain Certification
  	   
  	  10
  
	   
  	  (o)
  	  Appraisal
  	   
  	  10
  
	   
  	  (p)
  	  Engineering Report
  	   
  	  11
  
	   
  	  (q)
  	  Environmental Report
  	   
  	  11
  
	   
  	  (r)
  	  Certification of Organizational Documents
  	   
  	  11
  
	   
  	  (s)
  	  Legal Opinion
  	   
  	  11
  
	   
  	  (t)
  	  UCC Searches
  	   
  	  11
  
	   
  	  (u)
  	  Access and Utility Easements
  	   
  	  11
  
	   
  	  (v)
  	  Utilities
  	   
  	  11
  
	   
  	  (w)
  	  Environmental Disclosure
  	   
  	  11
  
	   
  	  (x)
  	  No Default
  	   
  	  12
  
	   
  	  (y)
  	  Additional Matters
  	   
  	  12
  
	  7.
  	  TITLE INSURANCE
  	   
  	  12
  
	   
  	  (a)
  	  Owner’s Policy of Title Insurance
  	   
  	  12
  
	   
  	  (b)
  	  UCC Policy
  	   
  	  12
  
	  8.
  	  INSURANCE
  	   
  	  12
  
	   
  	  (a)
  	  Insurance Requirements
  	   
  	  12
  

   

 i
 

     
  	   
  	  (b)
  	  Insurance Premiums; Evidence of Renewal
  	   
  	  13
  
	   
  	  (c)
  	  Policy Requirements
  	   
  	  13
  
	   
  	  (d)
  	  Notice of Casualty
  	   
  	  13
  
	   
  	  (e)
  	  Settlement of Claim
  	   
  	  13
  
	   
  	  (f)
  	  Application of Insurance Proceeds
  	   
  	  14
  
	  9.
  	  EMINENT DOMAIN
  	   
  	  14
  
	   
  	  (a)
  	  Notice of Condemnation
  	   
  	  14
  
	   
  	  (b)
  	  Settlement of Claim
  	   
  	  14
  
	   
  	  (c)
  	  Application of Condemnation Awards
  	   
  	  14
  
	   
  	  (d)
  	  Lender Not Required to Act
  	   
  	  14
  
	  10.
  	  RIGHTS OF ACCESS AND INSPECTION
  	   
  	  15
  
	  11.
  	  EXPENSES
  	   
  	  15
  
	  12.
  	  FINANCIAL REPORTS, PROPERTY REPORTS AND BUDGET
  	   
  	  15
  
	  13.
  	  GENERAL COVENANTS OF BORROWERS
  	   
  	  17
  
	   
  	  (a)
  	  Commencement and Completion of Project
  	   
  	  17
  
	   
  	  (b)
  	  Lender Approval
  	   
  	  17
  
	   
  	  (c)
  	  Operation and Maintenance of Project
  	   
  	  18
  
	   
  	  (d)
  	  Restricted Sale and Encumbrance of Project and of
  Borrower Interests; Other Indebtedness
  	   
  	  19
  
	   
  	  (e)
  	  General Indemnity
  	   
  	  20
  
	   
  	  (f)
  	  Leases
  	   
  	  20
  
	   
  	  (g)
  	  Notices
  	   
  	  21
  
	   
  	  (h)
  	  Development
  	   
  	  21
  
	   
  	  (i)
  	  Management
  	   
  	  22
  
	   
  	  (j)
  	  Senior Loan
  	   
  	  22
  
	   
  	  (k)
  	  Principal Place of Business; Choice of Law
  	   
  	  22
  
	   
  	  (l)
  	  Compliance with Governmental Prohibitions
  	   
  	  22
  
	   
  	  (m)
  	  Compliance with REIT Regulations
  	   
  	  23
  
	  14.
  	  FURTHER ASSURANCES
  	   
  	  23
  
	  15.
  	  APPRAISALS
  	   
  	  23
  
	  16.
  	  GENERAL REPRESENTATIONS AND WARRANTIES OF BORROWERS
  	   
  	  23
  
	   
  	  (a)
  	  Organization; Corporate Powers; Authorization of
  Borrowing
  	   
  	  23
  
	   
  	  (b)
  	  Title to Property; Matters Affecting Property
  	   
  	  24
  
	   
  	  (c)
  	  Financial Statements
  	   
  	  26
  
	   
  	  (d)
  	  Budget Projections
  	   
  	  26
  
	   
  	  (e)
  	  No Loan Broker
  	   
  	  26
  
	   
  	  (f)
  	  No Default
  	   
  	  27
  
	   
  	  (g)
  	  Solvency
  	   
  	  27
  
	   
  	  (h)
  	  Violations of Governmental Prohibitions
  	   
  	  27
  
	  17.
  	  EVENT OF DEFAULT
  	   
  	  27
  
	   
  	  (a)
  	  Non-Payment
  	   
  	  27
  
	   
  	  (b)
  	  Insurance
  	   
  	  27
  
	   
  	  (c)
  	  Special Purpose Entity Covenants
  	   
  	  27
  
	   
  	  (d)
  	  Fraud or Material Misrepresentation
  	   
  	  28
  
	   
  	  (e)
  	  Sale, Encumbrance or Other Indebtedness
  	   
  	  28
  
	   
  	  (f)
  	  Reports and Documents
  	   
  	  28
  

   

 ii
 

     
  	   
  	  (g)
  	  Contribution Agreement
  	  28
  
	   
  	  (h)
  	  Other Breaches under this Agreement
  	  28
  
	   
  	  (i)
  	  Other Breaches Under Other Loan Documents
  	  28
  
	   
  	  (j)
  	  Senior Loan Documents
  	  28
  
	   
  	  (k)
  	  Bankruptcy Proceedings
  	  28
  
	  18.
  	  REMEDIES
  	  29
  
	   
  	  (a)
  	  Actions upon Event of Default
  	  29
  
	   
  	  (b)
  	  Lender’s Right to Perform
  	  29
  
	   
  	  (c)
  	  Appointment of Lender as Attorney-in-Fact
  	  30
  
	   
  	  (d)
  	  Cross-Default to Note, Pledge Agreement and Other
  Loan Documents
  	  30
  
	  19.
  	  TRANSFER OF LOAN; LOAN SERVICER
  	  30
  
	   
  	  (a)
  	  Lender’s Right to Transfer
  	  30
  
	   
  	  (b)
  	  Loan Servicer
  	  31
  
	   
  	  (c)
  	  Dissemination of Information
  	  31
  
	  20.
  	  LENDER’S EXPENSES; RIGHTS OF LENDER
  	  31
  
	  21.
  	  MISCELLANEOUS
  	  31
  
	   
  	  (a)
  	  Notices
  	  31
  
	   
  	  (b)
  	  Waivers
  	  32
  
	   
  	  (c)
  	  Lender Not Partner of Borrowers; Borrower in Control
  	  33
  
	   
  	  (d)
  	  No Third Party
  	  33
  
	   
  	  (e)
  	  Time of Essence; Context
  	  33
  
	   
  	  (f)
  	  Successors and Assigns
  	  33
  
	   
  	  (g)
  	  Governing Jurisdiction
  	  33
  
	   
  	  (h)
  	  SUBMISSION TO JURISDICTION/SERVICE OF PROCESS
  	  33
  
	   
  	  (i)
  	  WAIVER WITH RESPECT TO DAMAGES
  	  34
  
	   
  	  (j)
  	  Entire Agreement
  	  35
  
	   
  	  (k)
  	  Headings
  	  35
  
	   
  	  (l)
  	  Severability
  	  35
  
	   
  	  (m)
  	  Counterparts
  	  35
  
	   
  	  (n)
  	  Waiver of Jury Trial
  	  35
  
	   
  	  (o)
  	  Sole and Absolute Discretion
  	  35
  
	   
  	  (p)
  	  Press Releases
  	  36
  
	   
  	  (q)
  	  Recourse Limitations
  	  36
  
	   
  	  (r)
  	  Joint and Several Liability
  	  36
  
	  22.
  	  SPECIAL REPRESENTATIONS, WARRANTIES AND COVENANTS OF
  BORROWERS
  	  37
  

   

 iii

MEZZANINE LOAN AGREEMENT

This
MEZZANINE LOAN AGREEMENT (this “Agreement”) is
made and entered into as of this 1st day of February 2007, by and between BREOF UVA
GP LLC, a Delaware limited liability company (“BREOF GP”),
BREOF UVA LLC, a Delaware limited liability company (“BREOF”),
PPC-UVA 15TH STREET LIMITED PARTNERSHIP, a Texas limited
partnership (“Phoenix”) and PPC CHARLOTTESVILLE
GP, INC., a Texas corporation (“Phoenix GP”) ,
each of whose address is c/o Phoenix Property Company, 2626 Howell St., Suite
800, Dallas, Texas 75204 (each of BREOF GP, BREOF, Phoenix and Phoenix GP is a “Borrower” and collectively are “Borrowers”),
and BEHRINGER HARVARD UVA, LLC, a Delaware limited liability company, whose
address is 15601 Dallas Parkway, Suite 600, Addison, Texas 75001 (“Lender”).

R E C I T A L S:

This Agreement is
made with reference to the following facts:

A.                                   PPC
Charlottesville Limited Partnership, a Delaware limited partnership (“Mortgagor”) is the owner of a leasehold interest in that
certain land located in the City of Charlottesville, Virginia and more
particularly described on Exhibit A attached hereto (together with
all improvements, fixtures and other appurtenances, the “Property”),
and Mortgagor is constructing on the Property a 649-bed student housing
apartment project known as The GrandMarc at the Corner (the “Project”).  The Senior
Note (as defined below) is secured by a deed of trust, mortgage, or deed to
secure debt, of even date herewith (together with any and all extensions,
renewals, substitutions, replacements, amendments, modifications and/or
restatements thereof (the “Security Instrument”)
in favor of Senior Lender (as defined below) encumbering the Project.

B.                                     Keybank
National Association, a national banking association (“Senior
Lender”) has made a mortgage loan in the amount of Twenty-Nine
Million Nine Hundred Eighteen Thousand Five Hundred Forty-Three Dollars
($29,918,543.00) (the “Senior Loan”)
to Mortgagor evidenced by an Amended and Restated Promissory Note dated October
19, 2006 (the “Senior Note”).

C.                                     Borrowers
are the legal and beneficial owners of one hundred percent (100%) of the Equity
Interests in Mortgagor.

 1
 

D.                                    Borrowers
have requested that Lender, as mezzanine lender, make a loan to Borrowers (the “Loan”) in the amount of Six Million Forty Thousand Dollars
($6,040,000.00) (the “Loan Amount”)
subject to the term and provisions of this Agreement, which Loan is to be
advanced as hereinafter provided and is to be evidenced by the Note.  The Note is to be secured by the Pledge and
Security Agreement and the other collateral referred to in Section 5
below.

E.                                      Borrowers
desire to borrow the Loan Amount from Lender, the proceeds of which are to be
used by Borrowers to, among other things, pay the costs and expenses, if any,
referred to in Section 3(b) below.

NOW, THEREFORE, in
consideration of the foregoing and the mutual promises and agreements
hereinafter contained and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:

1.                                       RECITALS.  The
recitals set forth above are true and correct and are incorporated herein by
reference.

2.                                       DEFINITIONS.  The
following terms, when used in this Agreement (including when used in the above
recitals), shall have the following meanings:

(a)                                  “Accounting Records”: 
shall mean financial statements and such records used to prepare and
evaluate financial statements including but not limited to: (i) a balance
sheet, (ii) an income statement, (iii) a trial balance, (iv) a project budget
and (v) such other documentation in the possession of Borrowers or their
Affiliates or which Borrowers will use commercially reasonable efforts to
acquire, as Lender shall reasonably request for the consolidation of the
Project if required; provided, however, that Borrowers shall not be required to
change their accounting methods or make adjustments to their statements to
accommodate a consolidation desired by Lender using Lender’s accounting
methods.  During the term of the Loan,
Lender shall keep all such financial statements and Accounting Records
confidential and shall not divulge the contents of the Accounting Records to
any persons other than to those persons who are responsible for preparing or
reviewing any reports, records, budgets, statements, filings or disclosures
using the Accounting Records, including, but not limited to, Lender’s
consultants, professionals, lender, accountants, attorneys, partners, officers
and employees, except to the extent required by law, financial reporting
requirements, or any court order or as reasonably necessary in the
administration of the Loan or in connection with disclosures to investors.

(b)                                 “Affiliate”:  of any
specified person or entity shall mean any other person or entity, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified person or entity. 
For purposes of this definition, “control” shall mean the ability,
whether by the ownership of shares or other equity interests, by contract or
otherwise, to elect a majority of the directors of a corporation, to make
management decisions on behalf of, or independently to select the managing
partner of, a partnership, or otherwise to have the power independently to
remove and then select a majority of those individuals exercising managerial

 2
 

authority over an
entity.  Control of an entity shall be
conclusively presumed in the case of the ownership of more than fifty percent
(50%) of the equity interests in the entity.

(c)                                  “Annual Budget”:  shall
mean, for any period, the budget submitted to Lender for Lender’s approval and
in effect for such period as provided in Section 12 hereof.

(d)                                 “Bankruptcy Proceedings”: 
is defined in Section 17(j).

(e)                                  “Borrowers”:  means the
entities identified as “Borrowers” in the first paragraph of this Agreement,
together with their successors and assigns, provided that no such successor or
assign shall have any liability for the Loan or any other obligation of
Borrowers except to the extent, if any, expressly otherwise specified in a
formal writing signed by such successor or assign.

(f)                                    “Borrowers’ Permitted Transfers”:  means and includes any transfers of
forty-nine percent (49%) or less of any partnership or other ownership
interests in any Borrower after ten (10) days written notice to Lender, so long
as such transfers do not violate, breach or otherwise result in a default under
the Senior Loan Documents and (i) such transfers are made to any of the
Borrowers, the Principals, J. Blake Pogue, Jason P. Runnels or Brookfield Asset Management Inc. or any
Affiliate thereof, any members of the immediate families of the
foregoing individuals or any trusts for the benefit of any of the foregoing
persons, any corporations or other business entities controlled directly by any
of the Borrowers, the Principals, J. Blake Pogue, Jason P. Runnels or Brookfield Asset Management Inc. or any
Affiliate thereof (individually or collectively); and provided that (ii)
following such transfer, the Borrowers, the Principals, J. Blake Pogue, Jason
P. Runnels or Brookfield Asset
Management Inc. or any Affiliate thereof (individually or collectively)
retain both the ability to direct the day-to-day management of the business
affairs of the entity in which such interest was transferred and an economic
interest in such entity that is not less than the economic interest held on the
date hereof.

(g)                                 “Budget”:  shall mean
that construction budget attached hereto as Exhibit B for the
Property.

(h)                                 “Business Day”:  shall mean all days other than Saturday,
Sunday or any other day on which national banks doing business in
Dallas, Texas are not open for business.

(i)                                     “Code”:  the Internal
Revenue Code of 1986, as amended from time to time, or the corresponding
provisions of any successor federal income tax law.  Any reference to a particular provision of
the Code shall include any amendment of such provision or the corresponding
provision of any successor federal income tax law.

(j)                                     “Collateral”:  is
defined in the Pledge Agreement.

(k)                                  “Completion”:  means
that the Project will be deemed substantially completed in accordance with the
Plans and Specifications upon the issuance of the final certificate of
occupancy, the issuance of a certificate of substantial completion from the
Mortgagor’s architect, receipt of a contractor’s release and the receipt of
lien waivers or similar evidence of payment from the general contractor and all
major subcontractors (i.e.,

 3
 

subcontractors whose
contract amount exceeds One Hundred Thousand Dollars ($100,000.00)) to Lender’s
reasonable satisfaction, provided, however, that if Senior Lender shall deem
the Project substantially complete then Lender shall deem the Project
substantially complete.

(l)                                     “Contribution Agreement” means that certain Contribution
Agreement between Borrowers and Lenders dated of even date herewith.

(m)                               “Default Interest Rate”: 
is defined in the Note.

(n)                                 “Developer”:  shall
mean any developer that is an Affiliate of Phoenix Property Company or any
other developer approved by Lender pursuant to Section 13(h) hereof.

(o)                                 “Encumbrance”:  shall
mean any pledge, encumbrance, hypothecation or other grant of security
interest, whether direct or indirect, voluntary or involuntary or by operation
of law, and whether or not consented to by Lender, of or in (i) all or any portion
of, or interest in, the Project (other than any encumbrance by the Senior Loan
Documents and the Permitted Exceptions), or (ii) any Equity Interests in
Mortgagor, or (iii) any part of the Principals’ Equity Interests in Borrowers
(other than Borrowers’ Permitted Transfers).

(p)                                 “Environmental Indemnity”: 
shall mean the Mezzanine Environmental Indemnity Agreement of even date
herewith, executed by Borrowers and containing representations, warranties,
covenants and indemnities in favor of Lender with respect to Hazardous
Materials.

(q)                                 “Equity Interests”: 
means, with respect to any Person, shares of capital stock, partnership
interests, membership interests in a limited liability company, beneficial
interests in a trust or other equity ownership interests in such Person, and
any warrants, options or other rights entitling the holder thereof to purchase
or acquire from such Person any such equity interest issued by such Person.

(r)                                    “Event of Default”: 
shall have the meaning given in Section 17 hereof.

(s)                                  “Hazardous Materials”: 
shall have the meaning given in the Environmental Indemnity.

(t)                                    “Indebtedness”:  shall
mean the principal of, interest on, and any other amounts due at any time
under, this Agreement, the Note, the Pledge Agreement or any other Loan
Document, including prepayment premiums, late charges, default interest, and
advances to protect the security of the Collateral.

(u)                                 “Intercreditor Agreement”: 
shall mean that certain Intercreditor Agreement dated of even date
herewith between Senior Lender and Lender.

(v)                                 “Leases”:  shall mean
all present and future leases, subleases, licenses, concessions or other
possessory interests now or hereafter in force, whether oral or written,
covering or affecting the Project, or any portion of the Project, and all
modifications, extensions or renewals.

 4
 

(w)                               “Lender”:  means the
entity identified as “Lender” in the first paragraph of this Agreement and its
successors and assigns.

(x)                                   “Loan Documents”: 
shall mean the Note, this Loan Agreement, the Pledge Agreement, the
Environmental Indemnity, the Subordination of Management Agreement, the
Contribution Agreement, the Post-Closing Agreement and all other documents
executed by Borrowers to evidence, secure or set out the terms of the Loan,
each as the same may hereafter be amended, modified and restated from time to
time.

(y)                                 “Management Agreement”: 
shall mean that certain Management Agreement dated October 13, 2006,
entered into by and between Mortgagor and Manager, pursuant to which Manager
has agreed to manage the operations of the Project, as the same may be amended
from time to time, or any other management agreement approved by Lender
pursuant to Section 13(i) hereof.

(z)                                   “Manager”:  shall mean
JPI Management Services, L.P.or any other
property management company approved by Lender pursuant to Section 13(i)
hereof.

(aa)                            “Maturity Date” shall have the meaning given in the Note.

(bb)                          “Note”:  shall mean
that certain Mezzanine Promissory Note, dated of even date herewith, in the
Loan Amount, made payable by Borrowers to the order of Lender, evidencing all
amounts outstanding under the Loan from time to time, as the same may be
amended from time to time.

(cc)                            “Plans and Specifications”: 
shall mean those plans and specifications attached hereto as Exhibit
C as modified from time to time in accordance with the terms herein.

(dd)                          “Permitted Exceptions”: 
shall mean the title exceptions included in the Policy required to be
delivered to Lender pursuant to Section 7(a) hereof, as the same may be
endorsed from time to time with the consent of the Lender.

(ee)                            “Person”:  shall mean
any individual, corporation, partnership, limited liability company, joint
venture, estate, trust, or unincorporated association, any other entity, any
federal, state, county or municipal government or any bureau, department or
agency thereof and any fiduciary acting in such capacity on behalf of the
foregoing.

(ff)                                “Pledge Agreement”: 
shall mean that certain Mezzanine Pledge and Security Agreement, dated
of even date herewith, from the Borrowers to Lender, as the same may be
amended, modified and restated from time to time, pursuant to which the
Borrowers have pledged all of the Equity Interests in the Mortgagor.

(gg)                          “Principals”:  shall
mean the holders of all of the Equity Interests in BREOF GP, BREOF, Phoenix and
Phoenix GP and any person or entity who becomes the owner of any Equity
Interest in Borrowers after the date of this Agreement and is identified as
such in an amendment or supplement to this Agreement.

 5
 

(hh)                          “Sale”:  shall mean any
sale, assignment, transfer, conveyance or other disposition, whether voluntary
or involuntary, and whether or not consented to by Lender of (i) all or any
portion of, or interest in, the Property or the Project, (ii) all or any
portion of the Equity Interests in Mortgagor, (iii) a full or partial release
of the lien of the Security Instrument in connection with a transfer of the
Property or a defeasance of the Senior Note, or (iv) all or any portion of the
Principals’ Equity Interests in Borrowers (other than Borrowers’ Permitted
Transfers).  Notwithstanding the
foregoing, in the event that Lender has materially breached the Contribution
Agreement such that the transactions contemplated therein are not timely
closed, and if Borrowers are not then in default under the Contribution
Agreement, then “Sale” shall specifically exclude entering any agreement to
sell or otherwise transfer the Property, the Project or any part of or interest
in either of them provided that any closing date under such agreement would
occur after repayment of the Loan.

(ii)                                  “Senior Loan Agreement”: 
shall mean that certain Construction Loan Agreement dated October 14,
2005 between Senior Lender and Mortgagor as amended pursuant to the terms of
that certain Increase and Modification Agreement dated as of October 19, 2006,
between Senior Lender and Mortgagor.

(jj)                                  “Senior Loan Documents”: 
shall mean the Senior Note, the Security Instrument, the Senior Loan
Agreement and all other documents and instruments evidencing, securing or
pertaining to the Senior Loan, as they each may be amended, modified or
restated with the consent of Senior Lender.

(kk)                            “Senior Note”:  shall
mean the Promissory Note described in the Recitals to this Agreement, and all
schedules, riders, allonges and addenda, as such Promissory Note may be amended
from time to time with the consent of Senior Lender.

(ll)                                  “Title Insurer”:  shall
mean Republic Title of Texas, Inc., 2626 Howell St., 10th Floor, Dallas, Texas 75204, Attn: Ms. Jeanne
Ragland.

(mm)                      “Third Party Agreement”: 
shall mean any agreement other than Leases and the Permitted Exceptions
that will be binding on the Project, Mortgagor or Borrowers after the closing
of the Loan.

3.                                       THE LOAN; DISBURSEMENT OF LOAN.

(a)                                  Loan.  On the
basis of the covenants, agreements and representations of Borrowers contained
herein and subject to the terms and conditions hereinafter set forth, Lender
shall lend to Borrowers and Borrowers shall borrow from Lender a sum not to
exceed the Loan Amount, the proceeds of which are to be disbursed by Lender in
accordance with the provisions of Section 3(b) hereof.

(b)                                 Loan
Disbursements.  Upon satisfaction of all the conditions set forth in Section
6 hereof, Borrowers hereby direct and authorize Lender to disburse the
principal balance of the Loan to Borrowers to be used to pay for or reimburse
Borrowers for payment of costs as described in the Budget.  The Loan is not revolving.  In no event shall the aggregate amount
disbursed hereunder exceed the original principal amount of the Loan.

 6
 

4.                                             INTEREST PAYMENTS; NO USURY, LOAN COMMITMENT FEE; PREPAYMENT; MATURITY;
REPAYMENT.

(a)                                  Interest.  Interest on the principal balance of the Loan
shall be payable in the amounts and at the times set forth in the Note.  Borrowers agree to pay, on the Maturity Date,
the unpaid principal balance of the Loan, unless otherwise accelerated or
prepaid pursuant to the terms of the Note, together with all accrued but unpaid
interest thereon.

(b)                                 No
Usury.  The provisions of this
Agreement, the Note, the Contribution Agreement and of all other agreements
between Borrowers and Lender, whether now existing or hereafter arising and
whether written or oral, including, but not limited to, the Loan Documents, are
hereby expressly limited so that, after taking into account all amounts deemed
interest or as reducing the true principal balance of the Loan, in no
contingency or event whatsoever, whether by reason of demand or acceleration of
the maturity of this Note or otherwise, shall the amount contracted for,
charged, taken, reserved, paid, or agreed to be paid to Lender for the use,
forbearance, retention or detention of the money loaned under this Note and
related indebtedness exceed the maximum amount permissible under applicable
law.  If, from any circumstance
whatsoever, performance or fulfillment of any provision hereof or of any
agreement between Borrowers and Lender shall, at the time performance or
fulfillment of such provision shall be due, exceed the limit for interest
prescribed by law or otherwise transcend the limit of validity prescribed by
applicable law, then ipso facto the obligation to be performed or fulfilled
shall be reduced to such limit; and if, from any circumstance whatsoever,
Lender shall ever receive anything of value deemed interest by applicable law in
excess of the maximum lawful amount, an amount equal to any excessive interest
shall be applied to the reduction of the principal balance owing under this
Note in the inverse order of its maturity (whether or not then due) or at the
option of Lender be paid over to Borrowers, and not to the payment of
interest.  All interest (including any
amounts or payments judicially or otherwise under the law deemed to be
interest) contracted for, charged, taken, reserved, paid or agreed to be paid
to Lender shall, to the extent permitted by applicable law, be amortized,
prorated, allocated and spread throughout the full term and amount of the Note,
including any extensions or renewals thereof, until payment in full of the
Indebtedness, so that the interest thereof for such full period will not exceed
at any time the maximum amount permitted by applicable law.  This paragraph 4(b) will control all
agreements (including the Contribution Agreement) between Borrowers and Lender.  The loan is
not for family, household or personal purposes, but is a commercial purpose
loan.

(c)                                  Prepayment.  All amounts due and owing under the Note from
time to time may only be prepaid in accordance with the terms of the Note.

(d)                                 Maturity
Date.  The outstanding principal
balance of the Note and all accrued and unpaid interest thereon shall become
due and payable on the Maturity Date unless the same is otherwise accelerated
or prepaid in accordance with the provisions hereof or the other Loan
Documents.  Subject to the provisions of Section
13(d) hereof, in the event that the Senior Note is paid in full at any time
prior to the Maturity Date of the Loan, the Indebtedness shall then be
immediately due and payable regardless of the then stated maturity date of the
Loan.

 7
 

5.                                       SECURITY FOR LOAN.

(a)                                  Pledge
Agreement.  The Loan shall be secured
by, among other things, the Pledge Agreement.

(b)                                 Other
Loan Documents.  The Loan shall be
further secured and supported by the Environmental Indemnity and the other Loan
Documents.

6.                                       CONDITIONS PRECEDENT TO CLOSING OF THE LOAN.  Prior to the funding of the Loan (unless
otherwise provided), all of the following conditions shall have been satisfied
and/or Borrowers or Mortgagor, as applicable, shall have furnished to Lender
the following, all in form and substance satisfactory to Lender in its sole and
absolute discretion:

(a)                                  Loan
Documents.  Borrowers or Mortgagor,
as applicable, shall have provided to Lender duly executed and, where
appropriate, notarized originals of the Loan Documents, each satisfactory to Lender
in its sole and absolute discretion, including the following:

(i)                                     this
Agreement;

(ii)                                  the
Note;

(iii)                               the
Pledge Agreement;

(iv)                              the
Environmental Indemnity;

(v)                                 the
Subordination of Management Agreement;

(vi)                              UCC
Financing Statements, both state and local, as appropriate, with respect to
items which are, or may be, personal property or other collateral including the
Collateral as described in the Pledge Agreement;

(vii)                           Certification
of Organizational Documents;

(viii)                        the
Contribution Agreement;

(ix)                                the
Post-Closing Agreement; and

(x)                                   such
other agreements by Borrowers or Mortgagor as may be required by other
provisions of this Agreement or as Lender may reasonably require in order to
evidence or secure the Loan.

(b)                                 Third Party Agreements.

(i)                                     Copies.  Borrowers shall have provided to Lender
executed copies, certified by the appropriate Borrower(s) and Mortgagor as
being true, correct and complete, of the Senior Loan Documents, the Management
Agreement and the other Third Party Agreements then in effect, if any.

 8
 

(ii)                                  Senior
Lender Certificate.  If requested by
Lender, a certification signed by Senior Lender confirming that the copies of
the Senior Loan Documents delivered by Borrowers and Mortgagor to Lender are
true, correct and complete copies of the Senior Loan Documents and that there
are no other documents evidencing, securing or otherwise affecting the Senior
Loan.

(iii)                               Intercreditor
Agreement.  Senior Lender shall have
provided to Lender an executed copy of that certain Intercreditor Agreement by
and between Senior Lender and Lender dated of even date herewith, which shall
be satisfactory to Lender in form and substance.

(iv)                              Manager’s
Subordination Agreement.  The
Borrowers shall cause the Manager to enter into an agreement with the Lender whereby
the Manager:

1)              consents to the
termination of the Management Agreement without fee or penalty upon the
occurrence of an Event of Default or foreclosure against the Collateral and,

2)              consents to the
removal and replacement of Manager upon the occurrence of an Event of Default
or foreclosure against the Collateral.

(c)                                  Certification  Borrowers hereby certify that as of the
effective date of this Agreement (which is the date that the commitment of
Lender to make the Loan to Borrowers becomes binding on Lender), the fair
market value of the portion of the Project that is capitalized by Mortgagor as
real property for federal income tax purposes consistent with past practices of
the affiliates of Mortgagor exceeds the sum of all amounts actually advanced and
outstanding under the Senior Loan plus the stated principal amount of this Loan
and, upon completion of construction of the Project, the fair market value of
the portion of the Project that is capitalized by Mortgagor as real property
for federal income tax purposes consistent with past practices of the
affiliates of Mortgagor will exceed the sum of the stated principal amount of
the Senior Loan plus the stated principal amount of this Loan.

(d)                                 Financial
Statements.  Borrowers shall have
provided to Lender with respect to each Borrower, the Project and the
Mortgagor, financial statements and other financial information, certified by
the Borrowers and Mortgagor as being true, correct and complete in all material
respects, and in the form and containing the detail and supporting information
as required by Lender for the underwriting for the Loan.

(e)                                  Insurance
Policies.  The Borrowers shall have
provided to Lender the original insurance policies, certified copies thereof or
certificates thereof, together with evidence of premium payments, for the
insurance as more fully provided in Section 8 hereof, which should
include Builder’s Risk, Hazard and Public Liability and Worker’s Compensation
Insurance in the event such insurance is not required by Senior Lender.

 9
 

(f)                                    Contracts.  Borrowers shall have provided to Lender
copies of any contracts regarding the Project entered into by Mortgagor with
any contractors or engineers and, if requested by Lender, copies of contracts
with any subcontractors for the construction or installation of the
improvements made in connection with the Project.

(g)                                 Plans.  Borrowers shall have provided to Lender
copies of all available plans prepared by any engineers or architects in
connection with the Project.

(h)                                 Budget
and Cost Review.  Lender shall have
received a report of its or Senior Lender’s inspecting engineer with respect to
Mortgagor’s construction budget and the available plans for the Project, which
shall be satisfactory to Lender.

(i)                                     Leases.  Borrowers shall have provided to Lender (i)
the form lease for residential units within the Project and (ii) copies of any
non-residential Leases affecting the Project.

(j)                                     Title
Insurance Policy.  Lender shall have
received, reviewed and approved the title insurance policy with respect to the
Property and copies of all exceptions to such title insurance that have been
delivered to Senior Lender in connection with its review and approval of the
Senior Loan.

(k)                                  UCC
Policy.  Lender shall have received a
commitment to issue the UCC Policy referred to in Section 7(b) hereof
subject only to conditions reasonably satisfactory to Lender.

(l)                                     ALTA
Survey.  Lender shall have received
the most recent ALTA survey of the Property (the “Survey”)
completed in accordance with Senior Lender’s requirements, satisfactory to
Lender and to the Title Insurer and certified to Senior Lender, Lender (and its
successors and assigns) and the Title Insurer.

(m)                               Zoning;
Conditional Use Permits and Government Approvals.  Lender shall have received any conditional use
permit(s) affecting the Property and such evidence as Lender may require
(including the written certification of Borrowers’ engineer or any other person
satisfactory to Lender) that the zoning of the Property is satisfactory and
compatible with the development of the Project according to the plans and that
the Project will be developed in accordance with all applicable governmental
requirements and upon completion will satisfy all applicable governmental
requirements.  Any such certifications
shall also be certified to Lender and its successors and assigns.

(n)                                 Flood
Plain Certification.  To the extent
not provided on the Survey, Lender shall have received evidence that the
Property is not located within any flood plain or, if the Property is located
within a flood plain, Borrowers have obtained and is maintaining in full force
and effect a policy or policies of flood insurance pursuant to Section 8
hereof.  Any such certifications shall
also be certified to Lender and its successors and assigns.

(o)                                 Appraisal.  Lender shall have received an appraisal of
the Property prepared by a licensed appraiser acceptable to Lender, in form and
substance required by Senior

 10
 

Lender, but also
addressed to Lender and its successors and assigns, in the amount of Forty-Four
Million Five Hundred Thousand Dollars ($44,500,000.00).

(p)                                 Engineering
Report.  Lender shall have received
an engineering report covering the construction, structural integrity and
functional utility of the Property as well as its compliance with the Americans
With Disabilities Act and all other applicable laws, in form and substance as
required by Lender and certified to Lender, its successors and assigns.

(q)                                 Environmental
Report.  Lender shall have received
an environmental report covering the Property, prepared by a professional
acceptable to Lender, in form and substance as required by Senior Lender, and
also certified to Lender and its successors and assigns.

(r)                                    Certification
of Organizational Documents.  Lender
shall have received a written certification attaching the required documents
with respect to both Mortgagor and Borrowers, confirming (i) that true,
complete and correct copies of the organizational documents have been attached
to the certification, (ii) that no modifications of such documents exist
which have not been provided to Lender, and (iii) that the provisions of Section
22 hereof have been incorporated into the organizational documents.

(s)                                  Legal
Opinion.  Lender shall have received
a written legal opinion or legal opinions from Borrowers’ counsel (which
counsel must be acceptable to Lender) in form acceptable to Lender and its
counsel, opining as to such matters as Lender may reasonably require, including
an opinion regarding:  (1) due
organization and valid existence, (2) authority; (3) enforceability of the Loan
Documents, (4) perfection of the security interests described herein and other
such matters as Lender may reasonably require and (5) no usury.

(t)                                    UCC
Searches.  Lender shall have received
full Uniform Commercial Code searches, performed by a search company and in
jurisdictions satisfactory to Lender, with respect to the Borrowers and the
Mortgagor and disclosing no matters objectionable to Lender.

(u)                                 Access
and Utility Easements.  Borrowers
shall have established such easements as may be necessary to adequately assure
access and the availability of utilities to the Project.

(v)                                 Utilities.  Lender shall have received evidence that all
sewer, water, electrical, telephone and any other utility services necessary to
obtain a certificate of occupancy for the Project are (or upon Completion, will
be) available at the Property in adequate supply for the use and operation of
the Project and each provider of utility services has (or upon Completion, will
have) a binding obligation to deliver the necessary services to the completed
residences.  This evidence may include
letters from the applicable utility providers.

(w)                               Environmental
Disclosure.  In accordance with all
applicable laws, including the laws of the jurisdiction of the Property,
Borrowers shall provide a true, correct and complete copy of any disclosure
document or other instrument required by any such law relating to environmental
matters.

 11
 

(x)                                   No
Default.  The representations and
warranties of Borrowers contained in this Agreement shall be true, correct and
complete in all material respects, and no Event of Default, as defined below,
or circumstance or event which upon the lapse of time, the giving of notice or
both, could become an Event of Default shall have occurred; and

(y)                                 Additional
Matters.  Borrowers shall have
delivered to Lender such other or additional documents, instruments,
information or items as the Lender may request prior to the initial
disbursement of the Loan.

7.                                       TITLE INSURANCE. 
Concurrently with the closing of the Loan:

(a)                                  Owner’s
Policy of Title Insurance.  Borrowers
shall deliver or cause to be delivered to Lender a duplicate original of
Mortgagor’s Owner’s Policy of Title Insurance (the “Policy”)
issued by the Title Insurer, meeting the following requirements:

(i)            with
coverage amount not less than the purchase price of the Property;

(ii)           dated
as of a date not earlier than the closing date of the Senior Loan;

(iii)          the
Policy shall not be subject to any exceptions other than the Senior Loan
Documents and the Permitted Exceptions;

(iv)          the
legal description insured under the Policy shall include any easements
benefiting the Property; and

(v)           if
available under local regulations, the Policy shall also contain a mezzanine
financing endorsement, acknowledging that the coverage afforded by the Policy
runs to the Lender.

(b)                                 UCC
Policy.  Borrowers shall deliver or
cause to be delivered to Lender an Eagle 9 UCC Insurance Policy issued by First
American Title Insurance Company (or a similar policy), which policy shall
(i) insure Lender’s first priority security interest in all of the Equity
Interests covered by the Pledge Agreement, (ii) be dated not earlier than
the date of the disbursement of the Loan, (iii) be subject only to matters
which would customarily appear on such a policy, and (iv) be in form and
substance reasonably satisfactory to Lender (such policy, the “UCC Policy”).

8.                                       INSURANCE.

(a)                                  Insurance
Requirements.  Borrowers, at their
sole cost (or at Mortgagor’s sole cost), for the mutual benefit of Borrowers,
Mortgagor and Lender, shall cause Mortgagor or Manager to obtain and maintain
policies of insurance with respect to the Project as required by the Senior
Loan Documents, as those requirements may from time to time be amended;
provided that Lender shall be named as an additional insured under such
liability coverage.  Borrowers agree that
they will cause Mortgagor or its contractors, provided that in either case
Lender shall be named as an additional insured, to maintain coverage under its
products/completed liability

 12
 

insurance for a period of
no less than two (2) years after Completion. 
If commercial general liability insurance as required in the Senior Loan
Documents is unavailable for residential construction in the state where the
Project is located, Owner shall or shall cause Manager or the contractor to
purchase wrap-up construction insurance covering Mortgagor, contractor and all
subcontractors for general liability and products/completed operations for a
period of no less than two (2) years with limits no less than Five Million
Dollars ($5,000,000.00), naming Lender as additional insured.

(b)                                 Insurance
Premiums; Evidence of Renewal.  All
premiums on insurance policies required under this Section 8 shall
be paid in the manner required by the Senior Loan Documents, provided, however,
that if Senior Lender waives the requirement for impound of insurance premiums,
Borrowers agree to provide evidence of payment of all insurance premiums.
Borrowers shall use their best commercially reasonable efforts to deliver
originals of all policies and renewals (or certificates evidencing the same),
marked “paid” (or other evidence satisfactory to Lender of the continuing
coverage) to Lender at least ten (10) days before the expiration of existing
policies.  If Lender has not received
satisfactory evidence of such renewal or substitute insurance in the time frame
herein specified, Lender shall have the right, but not the obligation, to
purchase such insurance for Lender’s interest only.

(c)                                  Policy
Requirements.  All Policies provided
for or contemplated by Section 8.1(b) shall name Mortgagor as the
insured and Borrowers as the insured or additional insured and Lender as the
additional insured, in each case as their interests may appear.  All insurance policies and renewals of
insurance policies required by this Section 8 shall (i) be in such
amounts and for such periods as Senior Loan Documents may from time to time
require, (ii) be issued by insurance companies reasonably satisfactory to
Lender, (iii) provide thirty (30) days’ advance written notice to Lender
before any cancellation, adverse material modification or notice of non-renewal
and (iv) to the extent limits are not otherwise specified herein, contain
deductibles which are in amounts acceptable to Lender.  All certificates of insurance and “blanket”
insurance policies shall reference the specific project being covered by name
and address.

(d)                                 Notice
of Casualty.  Borrowers shall give to
Lender immediate notice of any loss occurring on or with respect to the Project.

(e)                                  Settlement
of Claim.  In case of loss covered by
any of such policies, Lender is authorized to adjust, collect and compromise,
in its reasonable discretion, all claims thereunder, subject to the rights of
the Senior Lender.  In the event of any
such adjustment, collection and compromise by Lender, Borrowers covenant to
sign upon demand, or Lender may sign or endorse on Borrowers’ behalf, all
necessary proofs of loss, receipts, releases and other papers required by the
insurance companies to be signed by Borrowers. 
Borrowers hereby irrevocably appoint Lender as their attorney-in-fact
for the purposes set forth in the preceding sentence, subject to the rights of
the Senior Lender.  Subject to the rights
of the Senior Lender, Lender may deduct from such insurance proceeds any
reasonable expenses incurred by Lender in the collection and settlement
thereof, including attorneys’ and adjustors’ fees and charges.  Nothing contained in this Agreement shall
create any responsibility or obligation of the Lender to collect any amounts
owing on any insurance policy, to rebuild or replace the damaged or destroyed
portions of the Project or to perform any other related act.  The Lender shall not, by

 13
 

the fact of approving,
disapproving, accepting, preventing, obtaining or failing to obtain any
insurance, incur any liability for or with respect to the amount of insurance
carried, the form or legal sufficiency of insurance contracts, solvency of
insurance companies, or payment or defense of lawsuits, and the Borrowers
hereby expressly assume full responsibility therefor and all liability, if any,
with respect thereto.

(f)                                    Application
of Insurance Proceeds.  Any insurance
proceeds received by Mortgagor or Borrowers under any of such policies shall,
subject to the rights of the Senior Lender, be applied, at the option of the
Lender, toward pre-payment or reimbursement of the Loan and any other amounts
evidenced or secured by the Loan Documents, or to the rebuilding or repairing
of the Project so damaged or destroyed, as the Lender in its sole and
unreviewable discretion may elect; provided, however, that Lender will allow
casualty awards to be used for the restoration of the Project if the conditions
for Borrower’s use of insurance contained in the Senior Loan Documents are
satisfied (substituting Lender for Senior Lender thereunder in making
decisions).

9.                                       EMINENT DOMAIN.

(a)                                  Notice
of Condemnation.  Borrowers shall
give to Lender immediate notice of any taking by condemnation of any portion of
the Project or the institution of any proceedings the effect of which is to
achieve a taking of any portion of the Project by condemnation.

(b)                                 Settlement
of Claim.  In case the Project, or
any part or interest in any thereof, is taken by condemnation, then subject to
the rights of the Senior Lender, the Lender is hereby empowered to collect and
receive all compensation and awards of any kind whatsoever (referred to
collectively herein as “Condemnation Awards”)
which may be paid for any property taken or for damages to any property not
taken (all of which the Borrowers hereby assign to the Lender, subject to the
rights of the Senior Lender in the same). 
Borrowers covenant to sign upon demand, or Lender may sign or endorse on
Borrowers’ behalf, all necessary proofs of loss, receipts, releases and other
papers required by the condemning authority to be signed by Borrowers for such
purpose.  Borrowers hereby irrevocably
appoint Lender as their attorney-in-fact for the purposes set forth in this Section
9.  Lender may deduct from any Condemnation
Awards, any reasonable expenses incurred by Lender in the collection and
settlement thereof, including attorneys’ and adjusters’ fees and charges.

(c)                                  Application
of Condemnation Awards.  All
Condemnation Awards so received shall, subject to the rights of the Senior
Lender, be forthwith applied by the Lender, as it may elect in its sole and
unreviewable discretion, to the payment or reimbursement of the Loan or the
other amounts evidenced or secured by the Loan Documents, or to the repair and restoration
of any property not so taken or damaged; provided, however, that Lender will
allow condemnation awards to be used for the restoration of the Project if the
conditions for Borrower’s use of insurance contained in the Senior Loan
Documents are satisfied (substituting Lender for Senior Lender thereunder in
making decisions).

(d)                                 Lender
Not Required to Act.  Nothing
contained in this Agreement shall create a responsibility or obligation of
Lender to collect any amounts owing on account of any

 14
 

such condemnation or
proceedings relating to the Project, to rebuild or replace any damaged or
destroyed property or to perform any other related act.

10.                                 RIGHTS OF ACCESS AND INSPECTION.  Borrowers shall cause Mortgagor to permit
agents, representatives and employees of Lender to inspect the Project and the
installation of the Project or any part thereof during reasonable business
hours upon reasonable advance notice. 
Without limiting the foregoing, Lender shall also be permitted access to
the Project in order to examine, copy and audit Mortgagor’s books and records
(including as part of any audit performed pursuant to Section 12(e)
hereof) and any plans, drawings contracts, books or records relating to the
Project.  Borrowers shall cause any
contractors or subcontractors to cooperate with Lender or its agents in
connection with any inspection.  Lender
is under no duty to visit or observe the Project or to examine any books or
records.  Any site visit, observation or
examination by Lender shall be solely for the purpose of protecting Lender’s
security and preserving Lender’s rights under the Loan Documents.  Neither Borrowers, Mortgagor nor any other
party is entitled to rely on any site visit, observation or testing by Lender
or its agents or representatives.  Lender
owes no duty of care to protect Borrowers, Mortgagor or any other party
against, or to inform Borrowers or any other party of, any adverse condition
affecting the Project, including any defects in the design or construction of
any improvements on the Property or the presence of any Hazardous Materials on
the Property (but excluding any damage or harm caused by Lender or its
agents).  So long as no Event of Default
has occurred and is continuing, Lender shall give Borrowers and Mortgagor
reasonable prior notice of its intent to enter the Project.

11.                                 EXPENSES.  Borrowers
shall pay, as and when due, all reasonable fees, costs and expenses incurred in
the procuring and making of the Loan by Lender, including without limitation,
Title Insurer’s fees and premiums, charges for examination of title to the
Property, expenses of surveys, transfer taxes and recording expenses, appraisal
and appraisal review fees, fees of an inspector and fees and expenses of any
attorneys, accountants, engineers, architects, surveyors, contractors,
inspectors or other consultants, professionals or independent contractors
employed, retained or utilized by Lender in connection with the Loan.  Borrowers shall cause Mortgagor to pay when
due any and all insurance premiums, taxes, assessments, water, sewer and other
utility charges, impact fees, liens and encumbrances on the Project and any
other amounts payable for the cost of improvements to the Property, provided
that Borrowers and/or Mortgagor may in good faith contest any such liens,
claims or amounts so long as it provides, for any filed lien, a bond in
accordance with statutory requirements or other security reasonably
satisfactory to Lender.  Borrowers shall
pay upon demand or reimburse Lender for any and all fees, costs and expenses
incurred by Lender in collecting the Indebtedness after an Event of Default
including reasonable attorneys’ fees. 
All such amounts shall be paid to Lender or at Lender’s direction to
such other person to whom payments are due or Lender may, at its option, pay
such amounts and all sums paid shall be deemed a portion of the Indebtedness
and shall bear interest at the Default Interest Rate.

12.                                 FINANCIAL REPORTS, PROPERTY REPORTS AND BUDGET.  The parent company of Lender is a real estate
fund that issues securities, maintains U.S. GAAP audited financial statements
and/or is publicly registered with the United States Securities and Exchange
Commission (“SEC”).  As a result, such parent company is subject
to GAAP financial statement requirements and other reporting requirements.
These requirements include but are not limited to quarterly and annual
financial reporting (including the reports for public companies on

 15

Form 10-Q and Form 10-K and reporting under Rules
3-05, 3-09 or 3-14 of Regulation S-X). 
In addition, certain accounting requirements may dictate that Lender
report Borrowers, Mortgagor and/or the Project as a subsidiary of Lender.  Therefore, Borrowers agree to provide Lender
with all such information requested by Lender that Borrowers or their
Affiliates have in their possession, and Borrowers will obtain such information
not in its possession, as Lender reasonably requires in order to consolidate,
audit and/or review financial statements of the Project, Mortgagor and
Borrowers for the applicable reporting periods. 
As of the execution hereof, Lender’s fiscal year for purposes of such
reporting ends on December 31st, and Lender shall give reasonable notice to Borrowers
of any change in such fiscal year or any other such reporting requirements.

(a)                                  Borrowers
agree that all accounting for the Project will be conducted by the Borrowers
and/or the Mortgagor in accordance with GAAP. 
Borrowers agree to provide Lender with copies of all Accounting Records
(other than leases, which Borrowers and/or the Mortgagor may make available at
the Project rather than copying) on a monthly basis.

(b)                                 Borrowers
agree to provide copies of all Accounting Records by the 15th of the month for
the preceding month.

(c)                                  Upon
reasonable advance notice, Borrowers agree to allow Lender and Lender’s
external accountants access to original Accounting Records if needed in the
process of their quarterly reviews and various audit processes.

(d)                                 Upon
reasonable advance notice, Borrowers agree to cooperate with any inquiries or
interviews by Lender or its external independent accountants as may be
necessary in relation to Lender’s or its Affiliates’ compliance with the
Sarbanes-Oxley Act of 2002.

(e)                                  Borrowers
agree to provide a budget for the project at the closing of this Agreement and
to provide updates to the budget as part of the Accounting Records provided by
the 15th of the month for the preceding month.

(f)                                    In
addition, Borrowers shall furnish to Lender:

(i)            within
30 days after the end of each fiscal year of Mortgagor, and at any other time
upon Lender’s request, a statement that identifies all owners of any interest
in Mortgagor and the interest held by each, if Mortgagor is a corporation, all
officers and directors of Mortgagor, and if Mortgagor is a limited liability
company, all members and managers (whether members or not);

(ii)                                  within
15 days after the end of each month, a monthly property management report for
the Project, showing the number of inquiries made and rental applications
received from tenants or prospective tenants, deposits received from tenants
and any other information reasonably requested by Lender;

(iii)          within
15 days following the end of each month, a monthly statement of income and
expense for the Project; and

 16
 

(iv)                              beginning
sixty (60) days prior to the first occupancy of the Property and for each
succeeding calendar year, not later than ninety (90) days prior to the
commencement of such calendar year, an annual budget which sets forth, in
sufficient detail, Borrowers’ projection of gross receipts and expenses for
such period (the “Annual Budget”).  Each Annual Budget shall be for a calendar
year except that the Annual Budgets for the year of first occupancy of the
Property shall only cover the remainder of the then-current year.

(g)                                 If
Borrowers fail to provide in a timely manner the Accounting Records,
statements, schedules and reports required by this Section 12, Lender
shall have the right to have Mortgagor’s and Borrowers’ books and records
audited or to perform any other procedure reasonably requested by Lender, at
Borrowers’ 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
20.

(h)                                 If
Lender acquires the Project or acquires the Collateral through foreclosure,
Borrowers shall deliver, or cause to be delivered, to Lender upon written
demand all books and records relating to the Project or its operation.
Otherwise, during the term of the Loan, to the extent that copies of such books
and records have not been provided pursuant to the provisions of this Section
12 set forth above, Borrowers will provide Lender with all cost records
necessary for Lender to perform its accounting procedures including, but not
limited to, balance sheets, income statements, trial balance activity reports,
general ledger detail reports, cash receipts journal, check register or cash
disbursements journal and copies of checks and vendor invoices for all invoices
paid.  Borrowers agree to make available
to Lender for examination and copying any other books and records upon Lender’s
written demand.

(i)                                     Borrowers
authorize Lender to obtain a credit report on each Borrower and Mortgagor at
any time.

13.                                 GENERAL COVENANTS OF BORROWERS.  Until the full and final payment of the Loan,
unless Lender waives compliance in writing, Borrowers hereby covenant and agree
as follows:

(a)                                  Commencement
and Completion of Project.  Borrowers
shall cause Mortgagor to construct and install the improvements in connection
with the Project with diligence so that the construction and Completion of the
Project (other than payment of claims that are being contested in accordance
with the Loan Documents) shall have occurred by December 31, 2007.

(b)                                 Lender
Approval.  No changes to the Budget
attached hereto or the completion date set forth above shall be permitted
without Lender’s written consent, with the exception of (i) completion date
extensions due to force majeure and (ii) reallocation of amounts among the line
items of the budgets; provided that Borrowers shall provide Lender with notice
of any changes in connection with (i) and (ii) above.  Lender has approved the plans and

 17
 

specifications for the
improvements to be constructed on the Property described in Exhibit C
attached hereto, and no substantial changes to such approved plans and
specifications shall be permitted without Lender’s written consent.  Lender shall have five (5) Business Days to
provide any approval required under this Section 13(b) but if Lender
does not provide written notice that it does not approve within the five (5)
Business Days, then the action shall be deemed approved.

(c)                                  Operation
and Maintenance of Project.  In
addition to the terms, conditions and provisions set forth in the other Loan
Documents:

(i)                                     Payment
of Lawful Claims.  Borrowers shall
pay or discharge all lawful claims, including taxes, assessments and
governmental charges or levies imposed upon Borrowers or its income or profits
or upon any property belonging to Borrowers prior to the date upon which
penalties attach thereto; provided that Borrowers may in good faith contest any
such taxes, assessments, charges or levies so long as it provides, for any
filed lien, a bond in accordance with statutory requirements or other security
reasonably satisfactory to Lender. 
Without limiting the generality of the foregoing, Borrowers shall pay
(a) all taxes and recording expenses, including stamp taxes, if any, relating
to all documents and instruments securing the Loan, (b) the fees and
commissions (if any) lawfully due to brokers engaged by Borrowers or their
Affiliates in connection with this transaction (and Borrowers shall hold Lender
harmless from all such claims, whether or not lawfully due), and (c) the fees
and expenses of Lender’s counsel relating to Lender’s consultation with such
counsel in connection with the negotiation, documentation and closing of the
Loan and any subsequent modifications of the Loan.

(ii)                                  No
Amendments.  Borrowers shall not, nor
shall it permit Mortgagor to, without Lender’s prior written consent, enter
into any amendments or modifications of (a) if Borrowers or Mortgagor is a
corporation, the Borrowers’ and Mortgagor’s by-laws and articles of
incorporation, (b) if Borrowers or Mortgagor is a limited liability company,
such entity’s operating agreement or articles of organization, (c) if Borrowers
or Mortgagor is a limited partnership, such entity’s partnership agreement or
partnership certificate, (d) the Third Party Agreements, or (e) the Senior Loan
Documents.  Nothing herein shall require
lender’s consent for any amendments in connection with Borrowers’ Permitted
Transfers but Borrowers shall provide prior written notice to Lender of same.

(iii)                               Hazardous
Substances.  So long as Mortgagor
owns the Project, Borrowers shall cause Mortgagor to (a) keep the Project free
from Hazardous Substances, except those in de minimis amounts ancillary to the
Project activities that are used in compliance with all environmental laws, (b)
promptly notify Lender if Borrowers or

 18
 

Mortgagor becomes aware
that any Hazardous Substance is on or near the Project except those in de
minimis amounts ancillary to the Project activities that are used in compliance
with all environmental laws or if the Project otherwise is in violation of any
environmental laws, and (c) remove such Hazardous Substances and/or cure such
violations as required by law.

(iv)                              Maintenance
and Repair of Project.  After
completion of the Project, Borrowers shall cause Mortgagor to (a) maintain
the Project, including the parking and landscaping portions thereof, in good
condition and repair, (b) promptly make all necessary structural and
non-structural repairs to the Project, (c) not demolish, alter, remove or
add to any improvements on the Property, excepting (i) the repair and
restoration of improvements following damage thereto as required or permitted
by this Agreement, and (ii) as otherwise required by any applicable law,
rule or regulations, and (d) not erect any new buildings, structures or
building additions on the Project other than in substantial accordance with the
plans for the Project, without the prior written consent of Lender.  Borrowers shall pay when due all claims for
labor performed and materials furnished therefor in connection with any
improvements or construction activities on the Property (subject to right to
contest set out in Section 13(c)(i) above).

(d)                                 Restricted
Sale and Encumbrance of Project and of Borrowers Interests; Other Indebtedness.  Neither Borrowers nor the Principals shall
engage in any Sale or Encumbrance without the prior written consent of Lender
(which may be withheld by Lender in Lender’s sole and absolute
discretion).  Borrowers will not issue
any additional Equity Interests in Borrowers. 
In addition, Borrowers shall not permit Mortgagor to issue any additional
Equity Interests in Mortgagor.  In
addition, Borrowers shall not, nor shall it permit Mortgagor to, incur any
indebtedness, whether secured or unsecured, other than (i) the Senior Loan and
this Loan and (ii) trade and operational indebtedness incurred in the ordinary
course of business.  Notwithstanding the
foregoing, Lender’s consent shall not be required for any Borrowers’ Permitted
Transfers or for:

(i)                                     the
grant of a leasehold interest in a portion of an individual dwelling unit for a
term of two years or less not containing an option to purchase and otherwise in
compliance with Section 13(f) hereof;

(ii)                                  a
Sale of obsolete, worn out or damaged property or fixtures that is
contemporaneously replaced by items of equal or better function and quality,
which are free of liens, encumbrances and security interests other than
Permitted Exceptions, those created by the Loan Documents or the Senior Loan
Documents or those otherwise consented to by Lender;

 19
 

(iii)                               the
Sale (including through consumption) of personal property in the ordinary
course of business that is contemporaneously replaced by items of equal or
better function and quality;

(iv)                              the
grant of an easement if, before the grant, Lender determines that the easement
will not materially affect the operation or value of the Project and Borrowers
pays to Lender, upon demand, all costs and expenses incurred by Lender in
connection with reviewing Borrowers’ request; and

(v)                                 the
creation of (1) a lien for taxes, assessments or other governmental charges or
levies that are not then due or that are being contested in good faith and in
accordance with applicable statutory procedures or (2) a mechanic’s lien
against the Project which is bonded off, released of record or otherwise
remedied to Lender’s reasonable satisfaction within 30 days of the date of
creation.

(e)                                  General
Indemnity.  Borrowers shall, at
Borrowers’ expense, protect, defend, indemnify, save and hold Lender and each
of its members and its respective members, stockholders, directors, officers,
employees and agents (collectively the “Indemnified Parties”)
harmless against any and all claims, demands, losses, expenses (including court
costs and reasonable attorney’s fees and expenses), damages and causes of
action (whether legal or equitable in nature) asserted by any person or entity
arising out of, caused by or relating to the Project and the Lender’s exercise
of its rights under the Loan Documents upon an Event of Default.  Borrowers shall pay to Lender upon demand all
claims, judgments, damages, losses and expenses (including court costs and
reasonable attorneys’ fees and expenses) incurred by Lender as a result of any
legal or other action arising out of the aforesaid matters.  Borrowers acknowledge that the Indemnified
Parties may defend any matter covered by the above indemnification by counsel
of the relevant Indemnified Party’s choice, and the costs of such defense
(including reasonable attorney’s fees) are part of the costs covered by the
indemnity.  The foregoing indemnification
shall survive repayment of the Loan. 
Nothing herein or elsewhere in the Loan Documents is intended or shall
be construed to require Borrowers or Guarantor to indemnify any of the
Indemnified Parties with regard to any loss resulting in whole or part from any
Indemnified Party’s willful misconduct or gross negligence.

(f)                                    Leases.

(i)                                     Residential
Lease Requirements.  Mortgagor shall
have the right, and Borrowers may permit Mortgagor, to enter into residential
Leases without Lender’s prior written consent, so long as: (A) all Leases
for residential dwelling units are on form attached hereto as Exhibit F
as approved by Lender, and shall not include options to purchase and
(B) all Leases shall be for initial terms of not more than (2) two years.

 20
 

(ii)                                  Commercial
Lease Requirements.  Mortgagor shall
not, nor shall Borrowers permit Mortgagor to, enter into any material
non-residential Leases without Lender’s prior written consent in each
instance.  Mortgagor shall not, nor shall
Borrowers permit Mortgagor to, modify the terms of, or extend or terminate, any
material Lease for non-residential use (including any Lease in existence on the
date of this Agreement) without the prior written consent of Lender.  Borrowers shall, without request by Lender,
deliver a copy of each executed non-residential Lease to Lender promptly after
such Lease is signed.

(iii)                               Advance
Rent.  Mortgagor shall not, nor shall
Borrowers permit Mortgagor to, receive or accept rent under any Lease (whether
residential or non-residential) for more than two months in advance.

(iv)                              Performance
of Obligations.  Borrowers shall
cause Mortgagor to pay, perform and discharge, as and when payment, performance
and discharge are due, all obligations of Mortgagor as landlord under all
Leases.

(v)                                 Security
Interest.  Except for the assignment
to Senior Lender, Borrowers shall not permit Mortgagor to further assign,
pledge, transfer or otherwise encumber the Leases or the rents under the
Leases.

(vi)                              Defense;
Pursuit of Remedies.  Borrowers
shall, or shall cause Mortgagor to, at its sole cost and expense, appear in and
defend any action or proceeding arising from or connected with any of the
Leases or any obligation or liability of Mortgagor as landlord thereunder.  Borrowers shall, or shall cause Mortgagor to,
diligently pursue all remedies, including claims for damages available at law
or in equity, against any tenant under a Lease who defaults in the performance
of its obligations under the Lease.

(g)                                 Notices.  Borrowers shall promptly notify Lender in
writing of any litigation affecting (a) Borrowers or Mortgagor and, any general
partner, managing member or controlling shareholder of Borrowers (excluding a
Principal, general partner, managing member or controlling shareholder which is
a natural person or trust), or (b) the Project, to the extent the same may
result in a material adverse change in (i) the financial condition of any of
the foregoing parties, (ii) Borrowers’ ability to timely perform any of
its obligations under any of the Loan Documents or Mortgagor’s ability to
timely perform any of its obligations under any of the Senior Loan Documents,
or (iii) the physical condition or operation of the Project.

(h)                                 Development.  The Project shall be developed at all times
by Developer or a professional developer selected by Mortgagor and reasonably
satisfactory to Lender under a contract approved by Lender.  If after the date of this Agreement,
Borrowers or Mortgagor

 21
 

intends to change the
development of the Project, Lender shall have the right to approve such new
developer and the written contract for the development of the Project and, if
the developer is an Affiliate of Borrowers, require that Borrowers and such new
developer enter into a Subordination of Development Agreement on a form
reasonably acceptable to Lender.

(i)                                     Management.  The Project shall be managed at all times by
Manager or a professional residential rental property manager satisfactory to
Lender under a contract approved by Lender. 
Lender hereby accepts the Manager as the initial property manager and
the Management Agreement as the initial management agreement. If after the date
of this Agreement, Borrowers or Mortgagor intends to change the management of
the Project, Lender shall have the right to approve such new property manager
and the written contract for the management of the Project and, if the manager
is an Affiliate or Borrowers, require that Borrowers and such new property
manager enter into a Subordination of Management Agreement on a form reasonably
acceptable to Lender.

(j)                                     Senior
Loan.  The Borrowers shall, or shall
cause Mortgagor to, fully and timely pay all amounts owing under the Senior
Loan Documents and timely and fully perform all of the Mortgagor’s covenants
and agreements contained therein. 
Borrowers shall provide Lender with copies of all notices given or
received by Mortgagor under or pursuant to the Senior Loan Documents, promptly
upon delivery or receipt as the case may be. 
Without limiting the Lender’s right to declare an Event of Default on
account of a failure to comply with the terms and provisions of the Senior Loan
Documents, if Borrowers or Mortgagor fail to so pay or perform such
obligations, the Lender may pay or perform the same pursuant to Section
18(b) hereof.  Notwithstanding the
foregoing, (i) Lender shall have no obligation whatsoever to pay any of
the amounts evidenced or secured by, or to perform any of the covenants or
obligations imposed by, any Senior Loan Documents, and (ii) any such
payment by Lender shall not cure Mortgagor’s default hereunder or under the
Senior Loan Documents but shall only protect Lender’s interest in the
Project.  Borrowers shall not, nor shall
they permit Mortgagor to, amend or modify any of the Senior Loan Documents
without the prior written consent of Lender.

(k)                                  Principal
Place of Business; Choice of Law 
Borrowers shall not change their principal place of business or, if
Borrowers have more than one place of business, their chief executive office,
from their address set forth in the first paragraph of this Agreement.  In addition, Borrowers shall not make an
election under the Uniform Commercial Code to treat, as the governing law for
perfection of uncertificated securities, the law of any jurisdiction other than
the jurisdiction of their formation. 
Lender agrees not to unreasonably withhold its consent to any change in
the Borrowers’ principal place of business or the governing law with respect to
uncertificated securities so long as (1) Borrowers and any other party
requested by Lender execute all documents and instruments deemed necessary by
Lender to perfect the security interests granted pursuant to the Loan
Documents, (2) the Borrowers pay all of the Lender’s costs and expenses of
perfecting such security interests and (3) if requested by Lender, Borrowers
deliver to Lender an opinion from counsel satisfactory to Lender opining as to
the continued perfection of such security interest.

(l)                                     Compliance
with Governmental Prohibitions.  No
portion of the Loan proceeds will be used, disbursed or distributed by
Borrowers for any purpose, or to any person, in violation of any Law (as
defined in Section 16(h)) including, without limitation, any of the

 22
 

Terrorism Laws (as
defined in Section 16(h)). 
Borrowers shall provide Lender with immediate written notice (a) of any
failure of any of the representations and warranties set forth in Section
16(h) of this Agreement to be true, correct and complete in all respects at
any time, or (b) if Borrowers obtain knowledge that Borrowers, Principal, or
any holder at any time of any direct or indirect equitable, legal or beneficial
interest in Borrowers or Principal has violated any of the Terrorism Laws.  Borrowers shall immediately and diligently
take, or cause to be immediately and diligently taken, all necessary action to
comply with all Terrorism Laws and to cause the representations and warranties
set forth in Section 16(h) to be true, correct and complete in all
material respects.

(m)                               Compliance
with REIT Regulations.  At all times
during the term of the Loan, Borrowers shall cause Mortgagor to operate the
Project so that, if Mortgagor were a REIT, Mortgagor could satisfy (i) the
ninety-five percent (95%) gross income test of Section 856(c)(2) of the Code,
(ii) the seventy-five percent (75%) gross income test of Section 856(c)(3) of
the Code and (iii) the asset tests of Section 856(c)(4) of the Code.

14.                                 FURTHER ASSURANCES. 
Borrowers shall, from time to time, upon Lender’s request, at Borrowers’
sole cost and expense, execute, deliver, record and furnish such documents and
do such other acts as Lender may reasonably deem necessary or desirable to (i)
perfect and maintain valid liens upon the security contemplated by the Loan
Documents, (ii) correct any errors of a typographical or other manifest nature
which may be contained in any of the Loan Documents, (iii) evidence Borrowers’
compliance with the Loan Documents, and (iv) consummate fully and carry out the
intent of the transactions contemplated under this Agreement or the Loan
Documents.

15.                                 APPRAISALS.  Lender
has the right to obtain a new appraisal or update an existing appraisal of the
Project at any time while the Loan or any portion thereof remains outstanding
(a) when, in Lender’s reasonable judgment, such an appraisal is warranted as a
result of Lender’s internal evaluation of the Loan, and/or (b) to comply with
statutes, rules, regulations or directives of governmental agencies having
jurisdiction over Lender.  Borrowers
shall pay, upon demand, all reasonable appraisers’ fees and related expenses
incurred by Lender from time to time in obtaining such appraisal reports; provided,
however, that Borrowers shall not be required to pay for a re-appraisal more
than once every three years unless an Event of Default has occurred and is
continuing.

16.                                 GENERAL REPRESENTATIONS AND WARRANTIES OF BORROWERS.  Borrowers represent and warrant to Lender,
which representations and warranties shall survive the termination of this
Agreement, the repayment of the Loan, any investigations, inspections or
inquiries made by Lender or any of Lender’s representatives, and any
disbursements made by Lender hereunder, as follows:

(a)                                  Organization;
Corporate Powers; Authorization of Borrowing.

(i)                                     Organization.  Borrowers’ ownership structure set forth on Exhibit D
attached hereto is a true and correct depiction of the Equity Interests in
Borrowers and Mortgagor, and each entity set forth on Exhibit D is
duly organized and is validly existing and in

 23
 

good standing under the
laws of the state of its organization, and Mortgagor is qualified to do
business in the jurisdiction where the Property is located.

(ii)                                  Power
and Authority.  Borrowers have the
full power and authority to execute the Loan Documents and to undertake and
consummate the transactions contemplated hereby and thereby, and to pay,
perform and observe the conditions, covenants, agreements and obligations
herein and therein contained; and the Loan Documents have been duly and validly
executed by Borrowers and constitute the legal, valid and binding obligations
of Borrowers and are enforceable against Borrowers in accordance with their
respective terms, except as such enforcement may be qualified or limited by
bankruptcy, insolvency or other similar laws affecting creditors’ rights
generally and general principles of equity.

(iii)                               Not
a Foreign Person.  Neither Borrowers,
nor any entity that is a holder of an Equity Interest in Borrowers, are
organized under the laws of any jurisdiction other than the United States or
one of the states thereof.

(iv)                              No
Defaults Under Existing Agreements. 
The consummation of the transactions contemplated hereby and the
performance by Borrowers or by any other parties signatory thereto of their
respective obligations under the Loan Documents will not result in any breach
of, or constitute a default under, the Senior Loan Documents, any other
material Third Party Agreements or any mortgage, deed of trust, bank loan or
security agreement, or other material instrument to which Borrowers or
Mortgagor are a party or by which the Property, the Borrowers or the Mortgagor
or such other parties are bound.

(v)                                 True
and Correct Copies of Documents.  All
due diligence documents required to be delivered by Borrowers to Lender
hereunder (including those due diligence documents referred to in Section 6
hereof) are true, correct and complete copies thereof and the same have not
been amended or modified except as expressly disclosed therein.

(b)                                 Title
to Property; Matters Affecting Property.

(i)                                     Title
to Property.  Mortgagor has good and
indefeasible leasehold title to the Property, subject only to the Senior Loan
Documents and the Permitted Exceptions, and good, indefeasible and freely
alienable title to all personal property owned by Mortgagor and located on the
Property, subject only to the Senior Loan Documents and the Permitted Exceptions;
Borrowers will cause

 24
 

Mortgagor to protect or
cause to be protected the title to the Project, and Borrowers will forever
warrant and defend the same against any other claims of any persons or parties
whomsoever, subject to the Senior Loan Documents and the Permitted Exceptions.

(ii)                                  Mortgagor’s
Equity Interests.  Borrowers own and
will own one hundred percent (100%) of the Equity Interests in Mortgagor, and
Borrowers have not transferred, conveyed, pledged or encumbered (and will not
transfer, convey, pledge or encumber) such interests except to Lender pursuant
to the Loan Documents.  Borrowers have
and will have authority to encumber its Equity Interests in Mortgagor pursuant
to the terms of the Pledge Agreement.

(iii)                               Borrowers’
Equity Interests.  Principals own and
will own one hundred percent (100%) of the ownership interests in Borrowers,
and Principals have not transferred, conveyed, pledged or encumbered (and will
not transfer, convey, pledge or encumber) such interests except with the prior
written consent of Lender and except for any Borrowers’ Permitted Transfers.

(iv)                              No
Other Interests.  Since the date of
formation of each Borrower, Borrowers have only owned the Equity Interests of
Mortgagor and have not owned interests in any other entity or owned any real
property or any other material assets.

(v)                                 No
Actions.  There are no actions, suits
or proceedings at law or in equity (including condemnation or eminent domain
proceedings) currently pending, or to the knowledge of Borrowers threatened,
against Mortgagor, Borrowers or the Project or, to the knowledge of Borrowers,
involving the validity or enforceability of the Senior Loan Documents or the
Loan Documents or the priority of the liens granted thereunder, by or before
any governmental authority having or exercising jurisdiction over the Project.  Borrowers will promptly notify Lender of any
such future actions, suits or proceedings. 
To Borrowers’ knowledge, neither Borrowers, nor Mortgagor, nor the
Property is in default with respect to, or in violation of, any order, writ,
injunction, decree or demand of any court or any governmental authority having
or exercising jurisdiction over the Property.

(vi)                              No
Contracts Giving Rise to Liens. 
Neither Borrowers nor Mortgagor has made any contract or arrangement of
any kind, that does or could give rise to a lien on the Project, except for (i)
the Senior Loan Documents and the Permitted Exceptions and (ii) contracts
related to design and construction of the Project which have been provided to
Lender.  Borrowers have not made any

 25
 

contract or arrangement
of any kind that does or could give rise to a lien or encumbrance on any of the
Equity Interests in Mortgagor.

(vii)                           Compliance
with Property Agreements.  The
Property in all respects conforms to and complies with all covenants,
conditions, restrictions, reservations, regulatory agreements, conditional use
permits and zoning ordinances affecting the Property whether or not recorded
against the Property.

(viii)                        Leases.  There are no Leases of the Property in effect
as of the closing of the Loan other than those set forth on Exhibit E.

(ix)                                Tax
Treatment.  Borrowers and Mortgagor
have not (and at all times during the term of the Loan will not) elect to be
classified as an association taxable as a corporation within the meaning of
Treasury Regulation §301.7701-3(c).

(x)                                   Permits.  All permits required for the operation and
construction of the Project are in effect. 
All such permits will remain in effect and the Project and its
contemplated use and operation will comply therewith.  All discretionary approvals for the
construction of the Project in accordance with the Plans and Specifications
have been obtained.

(c)                                  Financial
Statements.  The financial statements
heretofore delivered to Lender by Borrowers and Mortgagor are true and correct
in all material respects, have been prepared in accordance with sound
accounting practices, and fairly present the financial condition(s) of the
person(s) referred to therein as of the date(s) indicated; no materially
adverse change has occurred in the financial condition(s) reflected in such
financial statements since the date(s) shown thereon and no additional
borrowings or liabilities other than standard trade payables have been made or
incurred by such person(s) since the date(s) thereof other than the borrowing
contemplated hereby, the Senior Loan or other borrowings disclosed in writing
to and approved by Lender.

(d)                                 Budget
Projections.  Borrowers’ and/or
Mortgagor’s budget projections indicate that monthly income from Project
operations will be sufficient to pay the combined monthly accrual of interest
on the Senior Loan and the Loan by the Maturity Date and the projections are
reasonable in Borrowers’ opinion and have been prepared in a manner consistent
with the past practices of affiliates of the Borrowers.

(e)                                  No
Loan Broker.  Borrowers has not dealt
with any person, firm or corporation who is or may be entitled to any finder’s
fee, brokerage commission, loan commission or other sum in connection with the
execution of this Agreement or the making of the Loan by Lender to Borrowers.  Borrowers do hereby indemnify and agree to
defend and hold Lender harmless from and against any and all loss, liability or
expense, including court costs and reasonable attorneys’ fees and expenses,
which Lender may suffer or sustain should such warranty or representation prove
inaccurate in whole or in part.

 26
 

(f)                                    No
Default.  There are no defaults under
any of the Senior Loan Documents or the Loan Documents on the part of
Borrowers, Mortgagor or the other parties signatory thereto, and no event has
occurred and is continuing which, with the giving of notice or the passage of
time, or both, would constitute a default under any thereof.

(g)                                 Solvency.  As of the date hereof, Borrowers and
Mortgagor are each solvent and able to pay their debts as the same shall become
due and payable.

(h)                                 Violations
of Governmental Prohibitions. 
Neither the making of the Loan, nor the receipt of Loan proceeds by
Borrowers, violates any federal, state, county, municipal and other
governmental and quasi-governmental statutes, laws, rules, orders, regulations,
ordinances, judgments or decrees (collectively, “Law”)
applicable to Borrowers, including, without limitation, any of the Terrorism
Laws.  Neither the making of the Loan,
nor the receipt of Loan proceeds by Borrowers or Mortgagor or Principals,
violates any of the Terrorism Laws applicable thereto.  To Borrowers’ best knowledge, no holder of
any direct or indirect equitable, legal or beneficial interest in Borrowers or
Principal is in violation of any of the Terrorism Laws.  No portion of the Loan proceeds will, to
Borrowers’ actual knowledge, be used, disbursed or distributed by Borrowers for
any purpose, or to any person, directly or indirectly, in violation of any Law
including, without limitation, any of the Terrorism Laws.  “Terrorism Laws”
means Executive Order 13224 issued by the President of the United States of
America, the Terrorism Sanctions Regulations (Title 31 Part 595 of the U.S.
Code of Federal Regulations), the Terrorism List Governments Sanctions Regulations
(Title 31 Part 596 of the U.S. Code of Federal Regulations), and the Foreign
Terrorist Organizations Sanctions Regulations (Title 31 Part 597 of the U.S.
Code of Federal Regulations), and all other present and future federal, state
and local laws, ordinances, regulations, policies and any other requirements of
any governmental agency (including, without limitation, the United States
Department of the Treasury Office of Foreign Assets Control) addressing,
relating to, or attempting to eliminate, terrorist acts and acts of war, each
as hereafter supplemented, amended or modified from time to time, and the
present and future rules, regulations and guidance documents promulgated under
any of the foregoing.

17.                                 EVENT OF DEFAULT.  Borrowers
shall be in default under this Agreement upon the occurrence of any of the
following events (hereinafter referred to as an “Event of
Default”):

(a)                                  Non-Payment.  The failure of Borrowers to pay when due any
amount required by the Note, this Agreement or any other Loan Documents which
continues, in the case of monthly interest payments, under the Note, or in the
case of other sums payable under the Note, this Agreement or the Loan
Documents, for a period of five (5) Business Days after notice of such failure
by Lender.

(b)                                 Insurance.  The failure of Borrowers to keep in force any
insurance policy required hereunder.

(c)                                  Special
Purpose Entity Covenants.  The
failure of Borrowers to comply with the provisions of Section 22.

 27
 

(d)                                 Fraud
or Material Misrepresentation  Fraud
or material misrepresentation or material omission by Borrowers or Mortgagor,
or any of their officers, directors or managers in connection with (i) the
application for or creation of the Indebtedness, (ii) any financial
statement, rent roll, or other report or information provided to Lender during
the term of the Indebtedness, or (iii) any request for Lender’s consent to
any proposed action;

(e)                                  Sale,
Encumbrance or Other Indebtedness. 
The taking of any action by Borrowers, Mortgagor, Principals or any other
person contrary to the provisions of Section 13(d) of this Agreement;

(f)                                    Reports
and Documents.  The failure of
Borrowers to deliver any notice, report, assignment, certificate, instrument or
other document which Borrowers are required to deliver to Lender under any of
the Loan Documents within the twenty (20) Business Days following written
demand by Lender therefor;

(g)                                 Contribution
Agreement.  The failure of Borrowers
to comply with the terms of the Contribution Agreement including but not
limited to Borrowers’ satisfaction of all of the Conditions to Closing and
Closing Deliveries set forth therein (after taking into account any applicable
grace, notice and opportunity for cure provided in such agreement.

(h)                                 Other
Breaches under this Agreement. The failure by Borrowers to perform any of
its obligations under this Agreement, as and when required, except as
specifically set forth otherwise herein, which continues for a period of twenty
(20) days after notice of such failure by Lender to Borrowers or if such
failure is not reasonably susceptible of cure within such 20-day period and if
Borrowers promptly commence such cure within such 20-day period and diligently
prosecutes the same to completion, then the cure period shall be extended for
such period of time as may be reasonably necessary to effect a cure but in no
event shall such period exceed 60 days, but no such notice or grace period
shall apply in the case of any such failure which could, in Lender’s judgment,
absent immediate exercise by Lender of a right or remedy under this Agreement,
result in material harm to Lender, impairment of the Note, this Agreement,
Pledge Agreement or any other security given under any other Loan Document;

(i)                                     Other
Breaches Under Other Loan Documents. 
The failure of Borrowers, Mortgagor, or any indemnitor or obligor to
perform and observe any covenant, obligation, agreement or undertaking on the
part of such party under any Loan Document other than this Agreement following
such notice and/or grace and/or cure periods, if any, as may be provided
therein for curing such failure;

(j)                                     Senior
Loan Documents.  The failure of
Borrowers or Mortgagor or any indemnitor or obligor to perform and observe any
covenant, obligation, agreement or undertaking on the part of such party under
any Senior Loan Documents following any grace, notice or cure periods, if any,
as may be provided therein for curing such failure; or

(k)                                  Bankruptcy
Proceedings.

(i)                                     If
the Borrowers or Mortgagor shall become insolvent, make a transfer in fraud of,
or a general assignment for the benefit of,

 28
 

creditors, or admit in
writing its inability, or is unable, generally to pay its debts as they become
due; or

(ii)                                  If
the Borrowers or Mortgagor shall have a receiver, custodian, liquidator or
trustee appointed for all or substantially all of its assets or for the Project
in any proceeding brought by the Borrowers, Mortgagor or the Project, or any
such receiver or trustee is appointed in any proceeding brought against the
Borrowers, Mortgagor or the Project and such appointment is not promptly
contested and is not dismissed or discharged within ninety (90) days after such
appointment; or

(iii)                               If
the Borrowers or Mortgagor shall file a petition under Title 11 of the United
States Code as amended or under any similar Federal or state law or statute; or

(iv)                              If
the Borrowers or Mortgagor shall have a petition filed against it commencing an
involuntary case under any present or future Federal or state bankruptcy or
similar law and such petition is not dismissed or discharged within ninety (90)
days after the filing thereof; or

(v)                                 If
the Borrowers or Mortgagor shall request any composition, rearrangement,
liquidation, extension, reorganization or other relief as a debtor under any
present or future Federal or state bankruptcy or similar law now or hereafter
existing.

The proceedings or events
set forth in this paragraph (k) are collectively referred to as “Bankruptcy Proceedings”.

18.                                 REMEDIES.

(a)                                  Actions
upon Event of Default.  Upon the
occurrence and during the continuance of an Event of Default, Lender may, in
addition to any other rights or remedies available to it pursuant to this
Agreement and the other Loan Documents or at law or in equity, take such
action, without notice or demand, that Lender deems advisable to protect and
enforce its rights against Borrowers and in the Collateral, including, without
limitation, at its option and without prior notice or demand, declare the
unpaid principal balance of the Note and all accrued but unpaid interest
thereon, as well as all other sums owing under the Loan Documents, immediately
due and payable, Lender may make any advances on the Loan after the happening
of any one or more of said Events of Default without thereby waiving the right
to demand payment in full of the Note and such other amounts and without
liability to make any other or further advances.

(b)                                 Lender’s
Right to Perform.  If Borrowers fail
to perform any monetary covenant or obligation contained herein or in the other
Loan Documents and such failure continues for a period of five (5) Business
Days after written notice of such failure by Lender to Borrowers, or if
Borrowers fail to perform any non-monetary covenant or obligation contained

 29

herein or in the other
Loan Documents and such failure continues for a period of 20 days after written
notice of such failure by Lender to Borrowers, or if such failure is not
reasonably susceptible of cure within such 20 day period and if Borrowers promptly
commence such cure within such 20 day period and diligently prosecutes the same
to completion, then the cure period shall be extended for such period of time
as may be reasonably necessary to effect a cure but in no event shall such
period exceed 60 days, without in any way limiting Lender’s right to exercise
any of its rights, powers or remedies as provided hereunder, or under any of
the other Loan Documents, Lender may, but shall have no obligation to, perform,
or cause performance of, such covenant or obligation, and all costs, expenses,
liabilities, penalties and fines of Lender incurred or paid in connection
therewith shall be payable by Borrowers to Lender upon demand and if not paid
shall be added to the Indebtedness (and to the extent permitted under
applicable laws, secured by the Pledge Agreement and other Loan Documents) and
shall bear interest from the date expended at the Default Interest Rate.  Notwithstanding the foregoing, Lender shall
have no obligation to send notice to any Borrowers of any such failure.

(c)                                  Appointment
of Lender as Attorney-in-Fact. 
Borrowers hereby irrevocably, unconditionally and presently constitute
Lender as Borrowers’ attorney-in-fact, with full power of substitution, to be
exercised by Lender only upon the occurrence of an Event of Default, to
exercise its rights under the Pledge Agreement (in its own name or the name of
a designee) for purposes of preserving and protecting the Project or the
collateral pledged under the Pledge Agreement and, as Lender in its sole discretion
deems necessary or proper, to execute, acknowledge (when appropriate) and
deliver all instruments and documents in the name of Borrowers which may be
necessary or desirable in order to do any and every act which Borrowers might
do on its own behalf in the performance of its obligations hereunder.  This power of attorney is a power coupled
with an interest and is irrevocable.

(d)                                 Cross-Default
to Note, Pledge Agreement and Other Loan Documents.  At the option of Lender, any Event of Default
by Borrowers under this Agreement, or in the performance of any of the
Borrowers’ covenants, agreements or obligations contained herein, shall
constitute a default under the Note, the Pledge Agreement or any of the other
Loan Documents to the same extent as though the Note had by its own terms
become due and payable at maturity and payment thereof had been refused, and in
such event Lender may, without liability to Borrowers, assert and exercise any
and all rights and remedies provided for herein or in the Note, the Pledge
Agreement or any of the other Loan Documents or otherwise as may be provided by
law.  Such rights and remedies may be
asserted concurrently or successively from time to time (either before or after
commencement of foreclosure proceedings or before or after the exercise of any
other remedy of Lender) until the Note, including interest thereon, and all of
the Indebtedness of Borrowers to Lender under this Agreement and the other Loan
Documents, have been paid in full.

19.                                 TRANSFER OF LOAN; LOAN SERVICER.

(a)                                  Lender’s
Right to Transfer  Borrowers hereby
acknowledge that Lender shall have the right to transfer, assign or sell the
Loan Documents to an Affiliate, or grant 
participation interests in all or any portion of the Loan, in such
manner and to such entities as Lender in its sole and absolute discretion shall
select, so long as Lender remains the lead lender and administrative agent.

 30
 

(b)                                 Loan
Servicer.  At the option of Lender,
the Loan may be serviced by a servicer selected by Lender and Lender may
delegate all or any portion of its responsibilities under this Agreement and
the other Loan Documents to such servicer pursuant to a servicing agreement
between Lender and such servicer (but no such delegation shall relieve lender
from any liability or consequences arising from any breach or other act or
omission by the servicer).  There may be
one or more changes of Loan servicer.  If
there is a change of Loan servicer, Borrowers will be given notice of the
change.

(c)                                  Dissemination
of Information.  Lender may forward
to each permitted purchaser, transferee, assignee, or servicer of, and each
participant or investor in, the Loan (collectively, the “Investor”),
any governmental regulators or others as may be required by securities law, all
documents and information which Lender now has or may hereafter acquire
relating to the Indebtedness and to Borrowers, Mortgagor and Principals,
including financial statements, whether furnished by Borrowers or otherwise, as
Lender reasonably determines necessary or desirable.  Borrowers irrevocably waive any and all
rights they may have under applicable Laws to prohibit such disclosure.

20.                                 LENDER’S EXPENSES; RIGHTS OF LENDER.  Borrowers shall promptly pay to Lender, upon
demand, with interest thereon from the date of demand at the Default Interest
Rate, reasonable attorneys’ fees and all other costs and expenses paid or
incurred by Lender in enforcing or exercising its rights or remedies in
connection with a default created by, connected with or provided for in this
Agreement or any of the other Loan Documents, and payment thereof shall be
secured by the Pledge Agreement.  If at
any time Borrowers fail, refuse or neglect to do any of the things herein
provided to be done by Borrowers, Lender shall have the right but not the
obligation, to do the same but at the expense and account of Borrowers.  The amount expended by Lender shall be added
to the Indebtedness and shall accrue interest thereon at the Default Interest
Rate, shall be repaid to Lender upon written demand and payment shall be
secured by the Pledge Agreement.

21.                                 MISCELLANEOUS.

(a)                                  Notices.
All notices, demands and other communications (“Notice”)
under or concerning this Agreement shall be in writing.  Each Notice shall be addressed to the
intended recipient at its address set forth below, and a Notice shall be deemed
given on the earliest to occur of (1) the date when the Notice actually is
received by the addressee; (2) the first Business Day after the Notice is
delivered to a recognized overnight courier service, with arrangements made for
payment of charges for next Business Day delivery; or (3) the third Business
Day after the Notice is deposited in the United States mail with postage
prepaid, certified mail, return receipt requested.

If to Lender:                                                       Behringer
Harvard UVA, LLC

15601 Dallas Parkway, Suite 600

Addison, Texas  75001

Attn: Chief Legal Officer

Facsimile: (214) 655-1610

 31
 

with copy to:                                                  Powell
& Coleman, L.L.P.

8080 North Central Expressway, Suite 1380

Dallas, Texas 75206

Attn: Carol D. Satterfield

Facsimile: (214) 373-8768

If to Borrowers:                                     PPC-UVA 15th
Street Limited Partnership

and PPC Charlottesville GP, Inc.,

c/o Phoenix Property Company

2626 Howell St., Suite 800

Dallas, Texas 75204

Attn: Jason P. Runnels

Facsimile: (214) 880-0320

with copy to:                                                  Brookfield
Real Estate Opportunity Fund

BCE Place, 181 Bay St., Suite 300

Toronto, Ontario

Canada M5J 2T3

Attn: David Arthur

Facsimile: (416) 359-8650

and with copy to:                           Stutzman, Bromberg, Esserman
& Plifka

2323 Bryan St., Suite 2200

Dallas, Texas 75201

Attn: John J. Reoch, Jr.

Facsimile: (214) 969-4999

Any party to this
Agreement may change the address to which notices intended for it are to be
directed by means of notice given to the other party in accordance with this Section
21(a).  Each party agrees that it
will not refuse or reject delivery of any notice given in accordance with this Section
21(a), that it will acknowledge, in writing, the receipt of any notice upon
request by the other party and that any notice rejected or refused by it shall
be deemed for purposes of this Section 21(a) 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 or the courier service.
Any notice under the Note and any other Loan Document which does not specify
how notices are to be given shall be given in accordance with this Section
21(a).

(b)                                 Waivers.  No delay or omission by Lender in exercising
any right or power arising from any default by Borrowers shall be construed as
a waiver of such default or as acquiescence therein, nor shall any single or
partial exercise thereof preclude any further exercise thereof or the exercise
of any other right or power arising from any default by Borrowers.  No waiver of any breach of any of the covenants
or conditions of this Agreement shall be construed to be a waiver of or
acquiescence in or consent to any previous or subsequent breach of the same or
of any other condition or covenant.

 32
 

(c)                                  Lender
Not Partner of Borrowers; Borrowers in Control.  Neither the execution nor the performance of
any of the Loan Documents by Lender, nor the exercise by the Lender of any of
its rights, privileges or remedies conferred under the Loan Documents or under
applicable law, shall be deemed to render the Lender a partner or a joint
venturer with the Borrowers, any guarantor of the Loan or any other person, or
to render Borrowers agents of Lender for any purposes.  Nothing contained herein shall characterize
or be deemed to characterize, or be used as a basis for characterizing, Lender
as a “mortgagee-in-possession”.  Lender
and Borrowers agree that Mortgagor remains in control of the Project, and that
it determines the business plan for the Project and employment, management,
leasing and operating directions and decisions for the Project.  All of Lender’s rights, and actions taken by
Lender as provided or permitted, in or under this Agreement or the other Loan
Documents are for and in its capacity as a secured lender attempting to protect
the collateral security for the Loan and to collect the Indebtedness and any
other amounts owing or outstanding under the Note or the Loan Documents.

(d)                                 No
Third Party.  This Agreement is made
for the sole benefit of Borrowers and Lender and Lender’s successors and
assigns, and no other person or persons shall have any rights or remedies under
or by reason of this Agreement or any right to the exercise of any right or
power of Lender hereunder or arising from any default by Borrowers, nor shall
Lender owe any duty whatsoever to any claimant for labor performed or materials
furnished in connection with the construction of the improvements to apply any
undisbursed portion of the Loan to the payment of any such claims.

(e)                                  Time
of Essence; Context.  Time is hereby
declared to be of the essence of this Agreement and of every part hereof.  When the context and construction so require,
all words used in the singular herein shall be deemed to have been used in the
plural and the masculine shall include the feminine and the neuter and vice versa.

(f)                                    Successors
and Assigns.  This Agreement shall
bind, and the rights granted by this Agreement shall inure to, the respective
successors and assigns of Lender and Borrowers. 
However, a Sale or Encumbrance prohibited by Section 13(d) shall
be an Event of Default.

(g)                                 Governing
Jurisdiction.  This Agreement and all
of the other Loan Documents (except as otherwise expressly provided therein
with respect to the enforcement of specific remedies) shall be governed by and
construed in accordance with the substantive law of the Commonwealth of
Virginia without regard to the application of choice of law principles.

(h)                                 SUBMISSION
TO JURISDICTION/SERVICE OF PROCESS. 
BORROWERS AND LENDER EACH HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION
OF THE STATE COURTS OF THE COMMONWEALTH OF VIRGINIA SITTING IN ALBEMARLE
COUNTY, VIRGINIA FOR THE PURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING
ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE SUBJECT MATTER HEREOF, ANY
OTHER LOAN DOCUMENT AND THE SUBJECT MATTER THEREOF, OR THE LOAN.  BORROWERS TO THE EXTENT PERMITTED BY
APPLICABLE LAW (A) HEREBY WAIVE, AND AGREE NOT TO ASSERT, BY WAY OF MOTION, AS
A DEFENSE, OR OTHERWISE, IN ANY SUCH

 33
 

SUIT, ACTION OR OTHER
PROCEEDING BROUGHT IN THE ABOVE-NAMED COURTS ANY CLAIM THAT IT IS NOT SUBJECT
PERSONALLY TO THE JURISDICTION OF SUCH COURTS, THAT ITS PROPERTY IS EXEMPT OR
IMMUNE FROM ATTACHMENT OR EXECUTION BY ANY SUCH COURT, THAT THE SUIT, ACTION OR
PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT,
ACTION OR PROCEEDING IS IMPROPER OR THAT THIS 
AGREEMENT, THE SUBJECT MATTER HEREOF, THE OTHER LOAN DOCUMENTS, THE
SUBJECT MATTER THEREOF, OR THE LOAN (AS APPLICABLE) MAY NOT BE ENFORCED IN OR
BY SUCH COURT, (B) HEREBY WAIVES THE RIGHT TO REMOVE ANY SUCH ACTION, SUIT OR
PROCEEDING INSTITUTED IN STATE COURT TO FEDERAL COURT, OR TO REMAND AN ACTION
INSTITUTED IN FEDERAL COURT TO STATE COURT AND (C) HEREBY WAIVES THE RIGHT TO
ASSERT IN ANY SUCH ACTION, SUIT OR PROCEEDING ANY OFFSETS OR COUNTERCLAIMS
EXCEPT COUNTERCLAIMS THAT ARE COMPULSORY OR OTHERWISE ARISE FROM THE SAME
SUBJECT MATTER.  BORROWERS AND LENDER
EACH HEREBY CONSENTS TO SERVICE OF PROCESS BY MAIL AT THE ADDRESS TO WHICH
NOTICES ARE TO BE GIVEN TO IT PURSUANT TO SECTION 21(a) HEREOF.  BORROWERS AGREE THAT THEIR SUBMISSION TO
JURISDICTION AND CONSENT TO SERVICE OF PROCESS BY MAIL IS MADE FOR THE EXPRESS
BENEFIT OF THE OTHER PARTY.  FINAL
JUDGMENT AGAINST BORROWER IN ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE
CONCLUSIVE, AND MAY BE ENFORCED IN ANY OTHER JURISDICTION (X) BY SUIT, ACTION
OR PROCEEDING ON THE JUDGMENT, A CERTIFIED OR TRUE COPY OF WHICH SHALL BE
CONCLUSIVE EVIDENCE OF THE FACT AND OF THE AMOUNT OF INDEBTEDNESS OR LIABILITY
OF THE BORROWER THEREIN DESCRIBED, OR (Y) IN ANY OTHER MANNER PROVIDED BY OR PURSUANT
TO THE LAWS OF SUCH OTHER JURISDICTION, PROVIDED, HOWEVER, THAT THE LENDER MAY
AT ITS OPTION BRING SUIT OR INSTITUTE OTHER JUDICIAL PROCEEDINGS, AGAINST
BORROWERS OR ANY OF ITS ASSETS IN ANY STATE OR FEDERAL COURT OF THE UNITED
STATES OR OF ANY COUNTRY OR PLACE WHERE THE SUBMITTING PARTY OR SUCH ASSETS MAY
BE FOUND.

(i)                                     WAIVER
WITH RESPECT TO DAMAGES.  BORROWERS
ACKNOWLEDGES THAT LENDER DOES NOT HAVE ANY FIDUCIARY RELATIONSHIP WITH, OR
FIDUCIARY DUTY TO, BORROWERS ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT, AND THE RELATIONSHIP BETWEEN LENDER AND
BORROWERS, IN CONNECTION HEREWITH AND THEREWITH, IS SOLELY THAT OF DEBTOR AND
CREDITOR.  TO THE EXTENT PERMITTED BY
APPLICABLE LAW, BORROWERS SHALL NOT ASSERT, AND BORROWERS HEREBY WAIVE, ANY
CLAIMS AGAINST LENDER, ON ANY THEORY OF LIABILITY, FOR SPECIAL, INDIRECT,
CONSEQUENTIAL OR PUNITIVE DAMAGES (AS OPPOSED TO DIRECT OR ACTUAL DAMAGES)
ARISING OUT OF, IN CONNECTION WITH, OR AS A RESULT OF, THIS AGREEMENT, ANY
OTHER LOAN DOCUMENT, ANY AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY OR
THEREBY, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

 34
 

(j)                                     Entire
Agreement.  This Agreement and all of
the other Loan Documents constitute the entire understanding between the
parties hereto with respect to the subject matter hereof, superseding all prior
written or oral understandings, and may not be modified, amended or terminated
except by a written agreement signed by each of the parties hereto or thereto
that is to be bound by the modification, amendment or termination.  Notwithstanding the foregoing, the provisions
of this Agreement are not intended to supersede the provisions of the Pledge
Agreement, but shall be construed as supplemental thereto.  Borrowers and Lender each hereby acknowledges
that this Agreement and the other Loan Documents accurately reflect the
agreements and understandings of the parties hereto with respect to the subject
matter hereof and hereby waives any claims against the other which it may now
have or may hereafter acquire to the effect that the actual agreements and
understandings of the parties hereto with respect to the subject matter hereof
may not be accurately set forth in this Agreement or such other Loan
Documents.  THIS WRITTEN
LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT
BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.  THERE ARE NO
UNWRITTEN OR ORAL AGREEMENTS BETWEEN THE PARTIES.

(k)                                  Headings.  The various headings of this Agreement are
included for convenience only and shall not affect the meaning or
interpretation of this Agreement or any provision hereof.

(l)                                     Severability.  Each provision of this Agreement shall be
interpreted so as to be effective and valid under applicable law, but if any
such provision shall in any respect be ineffective or invalid under such law,
such ineffectiveness or invalidity shall not affect the remainder of such
provision or the remaining provisions of this Agreement.

(m)                               Counterparts.
 This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute but one and the same document.

(n)                                 WAIVER
OF JURY TRIAL.  BORROWERS HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT THAT IT MAY HAVE TO A
TRIAL BY JURY IN ANY LITIGATION ARISING IN ANY WAY IN CONNECTION WITH THIS LOAN
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, OR ANY OTHER STATEMENTS OR
ACTIONS OF THE LENDER.  BORROWERS
ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT FOR THE LENDER TO ENTER
INTO THIS AGREEMENT AND EACH OTHER LOAN DOCUMENT, AND THAT THIS WAIVER SHALL BE
EFFECTIVE AS TO EACH OF THE OTHER LOAN DOCUMENTS AS IF FULLY INCORPORATED
THEREIN.

(o)                                 Sole
and Absolute Discretion.  Any option,
consent, approval, or discretion or similar right of Lender set forth in this
Agreement or any of the other Loan Documents may be exercised by Lender in its
sole, absolute and unreviewable discretion, unless the provisions of this
Agreement or the other Loan Documents specifically requires a different
standard.

 35
 

(p)                                 Press
Releases.  After the closing of this
Loan, Lender shall have the right to issue press releases and other
communications to the media disclosing the identities of the parties, the terms
of this Loan and the Loan Documents and details of the transactions
contemplated therein.

(q)                                 Recourse
Limitations.  Subject to the
provisions of this Section 21(q), the personal liability of Borrowers to
pay the Indebtedness shall be limited to Borrowers’ interest in the Collateral
and in any other collateral given to Lender. 
The provisions of this Section shall not, however, (1) constitute a
waiver, release or impairment of any obligation evidenced or secured by any of
the Loan Documents; (2) impair the right of Lender to name Borrowers as parties
defendant in any action or suit for foreclosure and sale under the Pledge
Agreement; (3) affect the validity or enforceability of any guaranty made in
connection with the Loan or any of the rights and remedies of Lender
thereunder; (4) impair the right of Lender to obtain the appointment of a
receiver; (5) constitute a prohibition against Lender to seek a deficiency
judgment against Borrowers solely in order to fully realize on any security
given by Borrowers in connection with the Loan or to commence any other
appropriate action or proceeding solely in order for Lender to exercise its
remedies against such security (provided Lender shall not seek any personal
recourse against Borrowers by virtue of such deficiency other than Borrowers’
interest in such security); or (6) constitute a waiver of the right of Lender
to enforce the liability and obligation of Borrowers, by money judgment or
otherwise, to the extent of any loss, damage (excluding consequential damages),
cost, expense, liability, claim or other obligation incurred by Lender
(including attorneys’ fees and costs reasonably incurred) arising out of or in
connection with the following:

(i)                                     fraud
or intentional misrepresentation by Borrowers or Mortgage Borrower in
connection with the Loan;

(ii)                                  the
willful misconduct of Borrowers or Mortgage Borrower;

(iii)                               the
breach of any covenant or indemnification provision in the Environmental
Indemnity or in the Security Instrument by Mortgage Borrower concerning environmental
laws, hazardous substances and asbestos and any indemnification therein;

(iv)                              the
intentional removal or disposal of any portion of the Collateral after an Event
of Default;

(v)                                 the
failure to maintain the Policies in full force and effect pursuant to the terms
and provisions of Section 8; or

(vi)                              any
physical damage to the Property caused by intentional waste committed by
Borrowers, Mortgage Borrower or any Affiliate thereof.

(r)                                    Joint
and Several Liability.  Subject to Section
21(q) above, if more than one Person has executed this Agreement as a “Borrower,”
the representations, covenants, warranties and obligations of all such Persons
hereunder shall be joint and several.

 36
 

22.                                 SPECIAL REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWERS.
So long as any of the Indebtedness has been advanced or accrued and remains
outstanding, Borrowers shall do all things necessary to preserve the existence
of Borrowers and Mortgagor each as a separate Special Purpose Bankruptcy Remote
Entity.  Borrowers covenant and agree
that with respect to Borrowers and Mortgagor, until payment in full of the
Indebtedness, it will not do or permit Mortgagor to do, directly or indirectly,
any of the following unless Lender consents thereto, in its sole discretion, in
writing.  A “Special
Purpose Bankruptcy Remote Entity” means a corporation, limited
partnership or limited liability company which shall not:

(a)                                  engage
in any business or activity other than the ownership, construction, operation
and maintenance, in each case directly or indirectly, of the Property and the
Project (in case of Mortgagor) or the Equity Interests in Mortgagor (in case of
Borrowers), and activities incidental thereto;

(b)                                 acquire
or own any material assets other than (i) the Equity Interests, (ii) the
Property and the Project, and (iii) such incidental personal property as may be
necessary for the operation of the Project or as may arise out of the other
activities of the Borrowers or the Mortgagor;

(c)                                  merge
into or consolidate with any person, or dissolve, terminate or liquidate, or
transfer or otherwise dispose of all or substantially all of its assets or
change its legal structure;

(d)                                 fail
to preserve its existence as a person duly organized, validly existing and in
good standing (if applicable) under the laws of the jurisdiction of its
organization or formation, or amend, modify, or terminate the provisions of its
organizational documents if such amendment, modification, or termination would
adversely affect the ability of such Person to perform its obligations
hereunder or under the other Loan Documents or would affect any other clause of
this Section 22;

(e)                                  own
any subsidiary (except, in the case of Borrowers, the Mortgagor) or make any
investment in any person (except, in the case of Borrowers, the Mortgagor);

(f)                                    commingle
its assets with the assets of any of its general partners, members,
shareholders, affiliates, principals or of any other Person;

(g)                                 incur
any debt, secured or unsecured, direct or contingent (including guaranteeing
any obligation), other than (i) the Senior Loan and this Loan and (ii) trade
and operational indebtedness incurred in the ordinary course of business
(including construction and operation of the Project) or for its administrative
functions;

(h)                                 fail
to maintain its records, books of account and bank accounts separate and apart
from those of its general partners, members, shareholders, principals and
Affiliates and any other Person;

(i)                                     enter
into any contract or agreement with any general partner, member, shareholder,
principal or Affiliate of Borrowers or Mortgagor except upon terms and
conditions

 37
 

that are intrinsically
fair and substantially similar to those that would be available on an
arms-length basis with third parties other than any general partner, member,
shareholder, principal or Affiliate of Borrowers or Mortgagor;

(j)                                     seek
the dissolution or winding up of Borrowers or Mortgagor;

(k)                                  maintain
its assets in such a manner that it will be costly or difficult to segregate,
ascertain or identify its individual assets from those of any general partner,
member, shareholder, principal or Affiliate of Borrowers or Mortgagor or any
other Person;

(l)                                     hold
itself out to be responsible for the debts of another person;

(m)                               make
any loans or advances to any third party, including any general partner,
member, shareholder, principal or Affiliate of Borrowers or Mortgagor (except,
in the case of Borrowers, to the Mortgagor);

(n)                                 fail
to file its own tax returns, if any, as may be required under applicable law,
to the extent that the Borrowers or Mortgagor are (1) not part of a
consolidated group filing a consolidated return or returns or (2) not treated
as a “disregarded entity” for tax purposes not required to file tax returns
under applicable law;

(o)                                 fail
either to hold itself out to the public as a legal person separate and distinct
from any other person or to conduct its business solely in its own name in
order not (a) to mislead others as to the identity of the person with which
such other party is transacting business; or (b) to suggest that it is
responsible for the debts of any third party (including any general partner,
principal or Affiliate of Borrowers or Mortgagor;

(p)                                 fail
to maintain adequate capital for the normal obligations reasonably foreseeable
in a business of its size and character in light of its contemplated business
operations; or

(q)                                 file
or consent to the filing of any petition, either voluntary or involuntary, to
take advantage of any applicable insolvency, bankruptcy, liquidation or
reorganization statute, or make an assignment for the benefit of creditors;

[Signatures Follow
on Next Page]

 38

WITNESS the following signatures and seals with the
intent that this shall be deemed an instrument under seal.

	
  

  	
  BORROWERS:

  
	
   

  	
   

  
	
   

  	
  BREOF UVA GP LLC,

  
	
   

  	
  a Delaware limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Steven Ganeless

  	
  (SEAL)

  	
   

  
	
   

  	
  Name:

  	
  Steven Ganeless

  	
   

  
	
   

  	
  Title:

  	
  Authorized Signing Officer

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  BREOF UVA LLC,

  	
   

  
	
   

  	
  a Delaware limited liability company

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Steven Ganeless

  	
  (SEAL)

  	
   

  
	
   

  	
  Name:

  	
  Steven Ganeless

  	
   

  
	
   

  	
  Title:

  	
  Authorized Signing Officer

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PPC-UVA 15TH STREET LIMITED PARTNERSHIP,

  
	
   

  	
  a Texas limited partnership

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  PPC Charlottesville GP, Inc.,

  	
   

  
	
   

  	
   

  	
  a Texas corporation

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Jason P. Runnels

  	
  (SEAL)

  	
   

  
	
   

  	
  Name:

  	
  Jason P. Runnels

  	
   

  
	
   

  	
  Title:

  	
  Vice President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PPC CHARLOTTESVILLE GP, INC.,

  
	
   

  	
  a Texas corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Jason P. Runnels

  	
  (SEAL)

  	
   

  
	
   

  	
  Name:

  	
  Jason P. Runnels

  	
   

  
	
   

  	
  Title:

  	
  Vice President

  	
   

  
							

 

 

	
  

  	
  LENDER:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BEHRINGER HARVARD UVA, LLC,

  
	
   

  	
  a Delaware limited liability company

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Gerald J. Reihsen, III

  	
  (SEAL)

  	
   

  
	
   

  	
   

  	
  Gerald J. Reihsen, III

  	
   

  
	
   

  	
   

  	
  Secretary

  	
   

  

 

JOINDER

The undersigned
have duly executed and delivered this Agreement as of the day and year first
above written for the purpose of agreeing and consenting to the provisions of Section
22 of the Agreement.

WITNESS the following
signatures and seals with the intent that this shall be deemed an instrument
under seal.

	
  

  	
  MORTGAGOR:

  
	
   

  	
   

  
	
   

  	
  PPC CHARLOTTESVILLE LIMITED PARTNERSHIP,

  
	
   

  	
  a Delaware limited partnership

  
	
   

  	
   

  
	
   

  	
  By:

  	
  PPC Charlottesville GP, Inc.,

  
	
   

  	
   

  	
  a Texas corporation,

  
	
   

  	
   

  	
  its Managing General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Jason P. Runnels

  	
  (SEAL)

  	
   

  
	
   

  	
  Name:  

  	
  Jason P. Runnels

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Vice PresidentExhibit
10.3

MEZZANINE PROMISSORY NOTE

	
  $8,125,000.00

  	
  February 1, 2007

  

 

BREOF TCU GP LLC, a
Delaware limited liability company, BREOF TCU LLC, a Delaware limited liability
company, Phoenix Berry Street Limited Partnership, a Texas limited partnership
and Phoenix G.P. XVIII, Inc., a Texas corporation (“Borrowers”),
FOR VALUE RECEIVED, promise to pay to the order of Behringer Harvard TCU, LLC,
a Delaware limited liability company or its assigns (“Lender”),
at such place as Lender may from time to time designate in writing, the
principal sum of Eight Million One Hundred Twenty-Five Thousand Dollars
($8,125,000.00) or so much thereof as may from time to time have been advanced
to Borrowers under this Note with Interest (as defined below) on the
outstanding principal amount at the rates set forth herein.

DEFINITIONS

For the purpose of this Note capitalized terms not
defined below will be as defined in the Loan Agreement:

“Contribution Agreement”
shall mean that certain Contribution Agreement by and between Borrowers and
Lender, dated of even date herewith.

“Default
Interest” shall mean any interest accruing at the Default Interest
Rate and payable pursuant to the terms hereof or of the other Loan Documents.

“Default
Interest Rate” shall mean a rate of interest per annum equal to the
lesser of either (a) eighteen percent (18%) or (b) the maximum rate
of interest which may be collected from Borrowers under applicable law.

“Interest”
shall mean any interest accruing at the Interest Rate or the Default Interest
Rate, as applicable and payable pursuant to the terms hereof or of the other
Loan Documents.

“Interest
Rate” shall mean a rate of interest per annum equal to the lesser
of: (a) ten percent (10%) or (b) the maximum rate of interest which may be
collected from Borrowers under applicable law.

“Late Charge”
shall mean the lesser of (a) five percent (5%) of any unpaid amount, or (b) the
maximum late charge permitted to be charged under applicable law.

“Loan Agreement”
shall mean that certain Mezzanine Loan Agreement, between Lender and Borrowers,
dated of even date herewith, corresponding to this Note, as the same may
hereafter be amended, modified and restated from time to time.

“Maturity
Date” shall mean February 25, 2008.

 1
 

“Payment Date”
shall mean the first day of each calendar month, commencing on the date
set forth in Section 1.1, and the Maturity Date (or, if any such date is not a
Business Day, then the first Business Day immediately before such date).

SECTION 1 - STATED MATURITY; INTEREST AND PRINCIPAL
PAYMENTS.

1.1           Payment
of Interest.  Interest shall accrue on this Note at
the Interest Rate or, during any time at which an Event of Default is
continuing, at the Default Interest Rate. 
Commencing on February 1, 2007, and continuing monthly on the same date
of each calendar month thereafter up to and until the Maturity Date, an
installment of accrued and unpaid Interest shall be due and payable to
Lender.  On the Maturity Date, all
accrued but unpaid Interest, shall be due and payable in full.

1.2           Payments of Principal.  On the Maturity Date, if not earlier prepaid,
the unpaid principal balance, together with all accrued but unpaid Interest,
shall be due and payable in full.

1.3           Payment on Stated Maturity Date.  Any remaining unpaid Indebtedness shall be
due and payable in full at the Maturity Date, subject, however, to the terms of
the Contribution Agreement.

1.4           Computation of Interest.  Subject to the provisions of Section 1.8,
Interest under this Note shall be paid as set forth herein and shall be
calculated based on actual days elapsed and a three hundred sixty (360) day
year.

1.5           Method of Payment.  Each payment due hereunder shall not be
deemed received by Lender until received on a Business Day (as hereafter
defined) in Federal funds in lawful money of the United States of America
immediately available to Lender prior to 2:00 p.m. local time at the place then
designated by Lender.  Any payment
received on a Business Day after the time established by the preceding
sentence, shall be deemed to have been received on the immediately following
Business Day for all purposes.

1.6           Application of Payments.  Payments under this Note shall be applied
first to the payment of Late Charges and Default Interest and other costs and
charges due in connection with this Note, as Lender determines in its sole
discretion, then to the payment of accrued but unpaid Interest, and then to
reduction of the outstanding principal balance. 
No principal amount repaid may be reborrowed.  All amounts due under this Note shall be
payable without setoff, counterclaim or any other deduction whatsoever.

1.7           Prepayment.  No prepayment of this Note shall be
permitted without the written approval of Lender.  Notwithstanding the foregoing, Borrowers
shall be permitted to prepay this Note upon an Event of Default by Lender under
the Contribution Agreement such that the transactions contemplated under the
Contribution Agreement do not close in accordance with the terms thereof and
Borrowers are not then in default under the Contribution Agreement.  Borrower shall be required to prepay this
Note upon earlier to occur of: (a) the closing of the transactions contemplated
in the Contribution Agreement, (b) an uncured default by Borrowers under the
Contribution Agreement and the commencement of the pursuit by Lender or its
assignee of its remedies in connection with such default, (c) the sale of the
Project Owner Membership Interest (as defined in the Contribution Agreement) or
the sale of the Project, (d) the 

 2
 

event of an uncured Event of Default by Borrower under
the Loan Agreement (after taking into account all applicable grace, notices and
opportunity for cure) or (e) the repayment of the Senior Loan. Notwithstanding
the foregoing, any prepayment required under (b), (c) and (d) above shall only
occur with the approval of the Senior Lender (as defined in the Loan
Agreement).

1.8           No Usury.  The provisions of this Note and of all other
agreements between Borrowers and Lender, whether now existing or hereafter
arising and whether written or oral, including, but not limited to, the Loan
Documents, are hereby expressly limited so that, after taking into account all
amounts deemed interest or as reducing the true principal balance of the Loan,
in no contingency or event whatsoever, whether by reason of demand or
acceleration of the maturity of this Note or otherwise, shall the amount
contracted for, charged, taken, reserved, paid, or agreed to be paid to Lender
for the use, forbearance, retention or detention of the money loaned under this
Note and related indebtedness exceed the maximum amount permissible under
applicable law.  If, from any
circumstance whatsoever, performance or fulfillment of any provision hereof or
of any agreement between Borrower and Lender shall, at the time performance or
fulfillment of such provision shall be due, exceed the limit for interest
prescribed by law or otherwise transcend the limit of validity prescribed by
applicable law, then ipso facto the obligation to be performed or fulfilled
shall be reduced to such limit; and if, from any circumstance whatsoever,
Lender shall ever receive anything of value deemed interest by applicable law
in excess of the maximum lawful amount, an amount equal to any excessive
interest shall be applied to the reduction of the principal balance owing under
this Note in the inverse order of its maturity (whether or not then due) or at
the option of Lender be paid over to Borrower, and not to the payment of
interest.  All Interest (including any
amounts or payments judicially or otherwise under the law deemed to be
interest) contracted for, charged, taken, reserved, paid or agreed to be paid
to Lender shall, to the extent permitted by applicable law, be amortized,
prorated, allocated and spread throughout the full term of the Note, including
any extensions or renewals thereof, until payment in full of the Indebtedness
so that the Interest thereof for such full period will not exceed at any time
the maximum amount permitted by applicable law. 
To the extent that Lender is relying on Chapter 303, as amended, of the
Texas Finance Code to determine the maximum amount of interest permitted by
applicable law on the principal of the Loan, Lender will utilize the weekly
rate ceiling from time to time in effect as provided under Chapter 303, as amended.  To the extent United States federal law
permits a greater amount of interest than is permitted under Texas law, Lender
will rely on United States federal law instead of such applicable law.  Additionally, to the extent permitted by
applicable law now or hereafter in effect, Lender may, at its option and from
time to time, implement any other method of computing the maximum lawful rate
under such Chapter 303, as amended, or under other applicable law by giving
notice, if required, to Borrower as provided by applicable law now or hereafter
in effect.  This paragraph 1.8 will
control all agreements between Borrowers and Lender.

SECTION
2 - DEFAULT; REMEDIES

2.1           Acceleration.  Lender may, by notice to Borrowers at any
time during the existence of an Event of Default (after any applicable grace,
notice or opportunity to cure as may be set forth in the Loan Agreement),
declare immediately due and payable the entire principal amount outstanding
hereunder together with all Interest and other charges due hereunder including,
without limitation, all Late Charges and Default Interest.

 3
 

2.2           Default Interest Rate; Late
Charges.

(a)           After an Event of Default, the
Default Interest Rate shall apply, in place of the Interest Rate, to all
amounts outstanding under the Loan.  Such
Default Interest shall be compounded on the monthly anniversary of such Event
of Default until paid in full.

(b)           If any monthly installment of
Interest due hereunder is not received by Lender on or before the tenth (10th)
day after such installment becomes due, Borrower shall pay to Lender,
immediately and without demand by Lender, the Late Charge on such outstanding
monthly installment.  Borrowers
acknowledge that their failure to make timely payments will cause Lender to
incur additional expenses in servicing and processing the Loan, and that it is
extremely difficult and impractical to determine those additional
expenses.  Borrowers agree that any such
Late Charges payable pursuant to this Section 2.2(b) represents a fair and
reasonable estimate, taking into account all circumstances existing on the date
hereof, of the additional expenses Lender will incur by reason of such late
payment.  Any such Late Charge is payable
in addition to, and not in lieu of, any Interest payable at the Default Rate pursuant
to Section 2.2(a).

2.3           Remedies.  The remedies of Lender as provided herein, or
in the Loan Documents, or at law or in equity shall be cumulative and
concurrent, and may be pursued singularly, successively, or together at the
sole discretion of Lender, and may be exercised as often as occasion therefor
shall occur.  The failure at any time to
exercise any right or remedy shall not constitute a waiver of the right to
exercise the right or remedy at any other time.

SECTION
3 - SECURITY

Borrowers’ obligations under this Note are secured by,
among other instruments, the Pledge Agreement and other Loan Documents.  The covenants of the Pledge Agreement and the
Loan Agreement are incorporated by reference into this Note.

SECTION 4 - WAIVER

Presentment for payment, demand, notice of dishonor,
protest, and notice of protest and stay of execution and all other defenses to
payment generally are hereby waived by Borrowers.  No extension or indulgence or release of
collateral granted from time to time shall be construed as a novation of this
Note or as a reinstatement of the indebtedness evidenced hereby or as a waiver
of the rights of Lender herein.

SECTION
5 - EXCULPATION

5.1           Lender Exculpation.  Notwithstanding anything to the contrary
contained in this Note, no present or future shareholder, director, officer,
member or partner of Lender or of any entity which is now or hereafter a
shareholder, director, officer, member or partner of Lender (or of any entity
which is now or hereafter a shareholder, director, officer, member or partner
of a shareholder, director, officer, member or partner of Lender) shall have
any personal liability, directly or indirectly, under or in connection with
this Note or any agreement made or entered into under or in connection with the
provisions of this Note, or any amendment or amendments to any of the foregoing
made at any time or times, heretofore or hereafter, and Borrowers hereby
forever and irrevocably waive and release any and all such personal liability.  In addition, neither 

 4
 

Lender nor any successor or assign of Lender shall
have at any time or times hereafter any personal liability, directly or
indirectly, under or in connection with any agreement, lease, instrument,
encumbrance, claim or right affecting or relating to the Project or to which
the Project is now or hereafter subject. 
The limitation of liability provided in this paragraph is in addition
to, and not in limitation of, any limitation on liability applicable to Lender
provided by law or by any other contract, agreement or instrument.

SECTION
6 - GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL;
SEVERABILITY

6.1           Governing Law.  This Note shall be governed by, and construed
in accordance with, the substantive law of the State of Texas without regard to
the application of choice of law principles.

6.2           SUBMISSION TO
JURISDICTION/SERVICE OF PROCESS. 
BORROWERS HEREBY IRREVOCABLY SUBMIT TO THE PERSONAL JURISDICTION OF THE
STATE COURTS OF THE STATE OF TEXAS LOCATED IN TARRANT COUNTY, TEXAS FOR THE
PURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF OR BASED UPON
THIS NOTE, THE SUBJECT MATTER HEREOF, OR THE LOAN. BORROWERS TO THE EXTENT
PERMITTED BY APPLICABLE LAW (A) HEREBY WAIVE, AND AGREE NOT TO ASSERT, BY WAY
OF MOTION, AS A DEFENSE, OR OTHERWISE, IN ANY SUCH SUIT, ACTION OR OTHER
PROCEEDING BROUGHT IN THE ABOVE-NAMED COURTS ANY CLAIM THAT IT IS NOT SUBJECT
PERSONALLY TO THE JURISDICTION OF SUCH COURTS, THAT THEIR PROPERTY IS EXEMPT OF
IMMUNE FROM ATTACHMENT OR EXECUTION, THAT THE SUIT, ACTION OR PROCEEDING IS
BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT, ACTION OR
PROCEEDING IS IMPROPER OR THAT THIS NOTE, THE SUBJECT MATTER HEREOF, OR THE
OTHER LOAN (AS APPLICABLE) MAY NOT BE ENFORCED IN OR BY SUCH COURT AND (B)
HEREBY WAIVES THE RIGHT TO REMOVE ANY SUCH ACTION, SUIT OR PROCEEDING
INSTITUTED BY LENDER IN THE ABOVE NAMED COURTS. 
BORROWERS HEREBY CONSENT TO SERVICE OF PROCESS BY MAIL AT THE ADDRESS TO
WHICH NOTICES ARE TO BE GIVEN TO IT PURSUANT TO SECTION 7 HEREOF.  BORROWERS AGREE THAT THEIR SUBMISSION TO
JURISDICTION AND CONSENT TO SERVICE OF PROCESS BY MAIL IS MADE FOR THE EXPRESS
BENEFIT OF LENDER.  FINAL JUDGMENT
AGAINST BORROWERS IN ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE CONCLUSIVE,
AND MAY BE ENFORCED IN ANY OTHER JURISDICTION (X) BY SUIT, ACTION OR PROCEEDING
ON THE JUDGMENT, A CERTIFIED OR TRUE COPY OF WHICH SHALL BE CONCLUSIVE EVIDENCE
OF THE FACT AND OF THE AMOUNT OF INDEBTEDNESS OR LIABILITY OF BORROWERS THEREIN
DESCRIBED, OR (Y) IN ANY OTHER MANNER PROVIDED BY OR PURSUANT TO THE LAWS OF
SUCH OTHER JURISDICTION, PROVIDED, HOWEVER, THAT THE LENDER MAY
AT ITS OPTION BRING SUIT, OR INSTITUTE OTHER JUDICIAL PROCEEDINGS, AGAINST
BORROWERS OR ANY OF THEIR ASSETS IN ANY STATE OR FEDERAL 

 5
 

COURT OF THE UNITED STATES OR OF ANY COUNTRY OR
PLACE WHERE THE SUBMITTING PARTY OR SUCH ASSETS MAY BE FOUND.

6.3           WAIVER WITH RESPECT TO DAMAGES.  BORROWERS ACKNOWLEDGE THAT LENDER DOES NOT
HAVE ANY FIDUCIARY RELATIONSHIP WITH, OR FIDUCIARY DUTY TO, BORROWERS ARISING
OUT OF OR IN CONNECTION WITH THIS NOTE OR ANY OTHER LOAN DOCUMENT AND THE
RELATIONSHIP BETWEEN LENDER AND BORROWERS IN CONNECTION HEREWITH AND THEREWITH
IS SOLELY THAT OF DEBTOR AND CREDITOR. 
TO THE EXTENT PERMITTED BY APPLICABLE LAW, BORROWERS SHALL NOT ASSERT,
AND BORROWERS HEREBY WAIVE, ANY CLAIMS AGAINST LENDER, ON ANY THEORY OF
LIABILITY, FOR SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES (AS OPPOSED
TO DIRECT OR ACTUAL DAMAGES) ARISING OUT OF, IN CONNECTION WITH, OR AS A RESULT
OF, THIS NOTE, ANY OTHER LOAN DOCUMENT, ANY AGREEMENT OR INSTRUMENT
CONTEMPLATED HEREBY OR THEREBY, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY.

6.4           Waiver of Jury Trial.  BORROWERS HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT THAT BORROWERS MAY HAVE TO A TRIAL BY JURY IN ANY
LITIGATION ARISING IN ANY WAY IN CONNECTION WITH THIS NOTE OR ANY OF THE OTHER
LOAN DOCUMENTS, OR ANY OTHER STATEMENTS OR ACTIONS OF THE LENDER IN CONNECTION
WITH THIS NOTE OR ANY OF THE OTHER LOAN DOCUMENTS.  BORROWERS ACKNOWLEDGE THAT THIS WAIVER IS A
MATERIAL INDUCEMENT FOR THE LENDER TO DISBURSE THE MONEY EVIDENCED BY THIS NOTE
AND TO ENTER INTO THE OTHER LOAN DOCUMENTS.

6.5           Severability.  If any provision of this Note is held to be
invalid or unenforceable by a court of competent jurisdiction, the other
provisions of this Note shall remain in full force and effect and shall be
liberally construed in favor of Lender.

SECTION
7 - NOTICES

7.1           Notices.  All notices, demands and other communications
(“Notice”) under or concerning this Note
shall be in writing.  Each Notice shall
be addressed to the intended recipient at its address set forth in the Loan
Agreement.  Each Notice shall be deemed
given on the earliest to occur of (1) the date when the Notice is received by
the addressee; (2) the first (1st) Business Day after the Notice is
delivered to a recognized overnight courier service, with arrangements made for
payment of charges, for next Business Day delivery; or (3) the third Business
Day after the Notice is deposited in the United States mail with postage
prepaid, certified mail, return receipt requested.

7.2           Any party to this Agreement may
change the address to which Notice is intended for it are to be directed by
means of Notice given to the other party in accordance with this Section
7.  Each party agrees that it will not
refuse or reject delivery of any Notice given in accordance with this Section
7, that it will acknowledge, in writing, the receipt of any Notice upon request
by the other party and that any Notice rejected or refused by it shall be
deemed for 

 6
 

purposes of this Section 7 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 or the courier service.
Any Notice under any other Loan Document which does not specify how Notices are
to be given shall be given in accordance with this Section 7.

SECTION
8 - MISCELLANEOUS

8.1           Costs.  If, and as often as, this Note is referred to
an attorney for the collection of any sum payable hereunder, or to defend or
enforce any of Lender’s rights hereunder, or to commence an action,
cross-claim, third-party claim or counterclaim by Lender against Borrowers
relating to this Note, Borrowers agree to pay to Lender all costs incurred in
connection therewith, including reasonable attorney’s fees (including such fees
incurred in appellate, bankruptcy or insolvency proceedings), with or without
the institution of any action or proceeding, and in addition all costs,
disbursements and allowances provided by law.

8.2           Modification.  Neither this Note nor any of the terms hereof
may be terminated, amended, supplemented, waived or modified orally, but only
by an instrument in writing executed by the party against which enforcement of
the termination, amendment, supplement, waiver or modification is sought.

8.3           Successors.  As used herein, the terms “Borrowers” and “Lender”
shall be deemed to include their respective successors and assigns whether by
voluntary action of the parties or by operation of law.  All of the rights, privileges and obligations
hereof shall inure to the benefit of and bind such successors and assigns.

8.4           Loan Agreement.  To the extent not expressly stated otherwise
herein, all of the terms and conditions of the Loan Agreement shall survive the
execution of this Note and shall remain in full force and effect; provided,
however, to the extent of any irreconcilable conflict between the terms and
conditions of the Loan Agreement and this Note, the terms and provisions of
this Note shall govern and control.

8.5           No Waiver.  No failure or delay by Lender in exercising
any right, power or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege.  Without
limiting the foregoing, no disbursement by Lender after a default by Borrowers
hereunder shall constitute a waiver of any of the Lender’s remedies established
or referred to hereunder or shall obligate Lender to make any further
disbursement.  No waiver, consent or
approval of any kind by Lender shall be effective unless (and it shall be
effective only to the extent) expressly set out in a writing signed and
delivered by Lender.  No notice to or
demand on Borrowers in any case shall entitle Borrowers to any other notice or
demand in similar or other circumstances, nor shall such notice or demand
constitute a waiver of the rights of Lender to any other or further actions.  In its sole discretion, Lender may, at any
time and from time to time, waive any one or more of the requirements contained
herein, but such waiver in any instance or under any particular circumstances
shall not be considered a waiver of such requirement or requirements in any
other instance or under any other circumstance.

 7
 

8.6           Sole and Absolute Discretion.  Any option, consent, approval, discretion or
similar right of Lender set forth in this Note may be exercised by Lender in
its reasonable discretion, unless the provisions of this Note or another Loan
Document specifically require another standard.

8.7           Recourse Limitations.  The personal liability of Borrowers to pay
the amounts due under the Note shall be limited to Borrowers’ interest in the
Collateral (as defined in the Loan Agreement) and in any other collateral given
to Lender subject to the provisions of Section 21(q) of the Loan Agreement.

8.8           Joint and Several Liability.  If more than one person or entity signs this
instrument as a Borrower, the obligations of such persons or entities shall be
joint and several.

[Signatures follow
on next page.]

 8

IN WITNESS WHEREOF, the undersigned has duly executed
and delivered this Note as of the date first set forth above.

	
  

  	
  BORROWERS:

  
	
   

  	
   

  
	
   

  	
  BREOF TCU GP LLC,

  
	
   

  	
  a Delaware limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Steven Ganeless

  	
   

  
	
   

  	
  Name:

  	
  Steven Ganeless

  	
   

  
	
   

  	
  Title:

  	
  Authorized Signing Officer

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BREOF TCU LLC,

  	
   

  
	
   

  	
  a Delaware limited liability company

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Steven Ganeless

  	
   

  
	
   

  	
  Name:

  	
  Steven Ganeless

  	
   

  
	
   

  	
  Title:

  	
  Authorized Signing Officer

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PHOENIX BERRY STREET LIMITED 

  PARTNERSHIP,

  
	
   

  	
  a Texas limited partnership

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Phoenix G.P. XVIII, Inc.,

  
	
   

  	
   

  	
  a Texas corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Jason P. Runnels

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Jason P. Runnels

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PHOENIX G.P. XVIII, INC.,

  	
   

  
	
   

  	
  a Texas corporation

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jason P. Runnels

  	
   

  
	
   

  	
  Name:

  	
  Jason P. Runnels

  	
   

  
	
   

  	
  Title:

  	
  Vice President

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00116-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00116-of-00352.parquet"}]]