Document:

Business Loan Agreements

    Exhibit
      10.21

     

    

      BUSINESS
        LOAN AGREEMENT

       

      
        	
                Principal

                $525,000.00

              	
                Loan
                  Date

                06-29-2006

              	
                Maturity

                06-29-2009

              	
                Loan
                  No

                1000564

              	
                Call/Coll

              	
                Account

              	
                Officer

                CS

              	
                Initials

              
	
                 

                References
                  in the shaded area are for Lender's use only and do not limit the
                  applicability of this document to any particular loan or
                  item.

                Any
                  item above containing “***” has been omitted due to text length
                  limitations.

              
	
                Borrower:

              	
                Seawright
                  Holdings, Inc.

                600
                  Cameron Street

                Alexandria,
                  VA 22314

              	
                Lender:

              	
                Fidelity
                  & Trust Bank

                4831
                  Cordell Ave.

                Bethesda,
                  MD 20814-9930

              

      

       

      THIS
        BUSINESS LOAN AGREEMENT dated June 29, 2006, is made and executed between
        Seawright Holdings, Inc. (‘Borrower”) and Fidelity & Trust
        Bank (“Lender”)
        on the following terms and conditions. Borrower has received prior commercial
        loans from Lender or has applied to Lender for a commercial loan or loans
        or
        other financial accommodations, including those which may be described on
        any
        exhibit or schedule attached to this Agreement (“Loan”). Borrower understands
        and agrees that: (A) in granting, renewing, or extending any Loan, Lender
        is
        relying upon Borrower’s representations, warranties, and agreements as set forth
        in this Agreement; (B) the granting, renewing, or extending
of any
        Loan by
        Lender at all times shall
        be subject to Lender’s sole judgment and
        discretion; and (C) all such Loans shall be
        and remain subject
        to the terms and conditions of this Agreement.

       

      TERM.
        This
        Agreement shall be effective as of June 29, 2006, and shall continue in full
        force and effect until such time as all of Borrower’s Loans in favor of Lender
        have been paid in full, including principal, interest, costs, expenses,
        attorneys’ fees, and other fees and charges, or until such time as the parties
        may agree in writing to terminate this Agreement.

       

      CONDITIONS
        PRECEDENT TO EACH ADVANCE.
        Lender’s
        obligation to make the initial Advance and each subsequent Advance under
        this
        Agreement shall be subject to the fulfillment to Lender’s satisfaction of all of
        the conditions set forth in this Agreement and in the Related
        Documents.

       

      Loan
        Documents.
        Borrower
        shall provide to Lender the following documents for the Loan: (1) the Note;
        (2) Security Agreements granting to Lender security interests in the
        Collateral; (3) financing statements and all other documents perfecting
        Lender’s Security Interests; (4) evidence of insurance as required below;
        (5) guaranties; (6) together with all such Related Documents as Lender
        may require for the Loan; all in form and substance satisfactory to Lender
        and
        Lender’s counsel.

       

      Borrower’s
        Authorization.
        Borrower
        shall have provided in form and substance satisfactory to Lender properly
        certified resolutions, duly authorizing the execution and delivery of this
        Agreement, the Note and the Related Documents. In addition, Borrower shall
        have
        provided such other resolutions, authorizations, documents and instruments
        as
        Lender or its counsel, may require.

       

      Payment
        of Fees and Expenses.
        Borrower
        shall have paid to Lender all fees, charges, and other expenses which are
        then
        due and payable
        as
        specified in this Agreement or any Related Document.

       

      Representations
        and Warranties.
        The
        representations and warranties set forth in this Agreement, in the Related
        Documents, and in any document or certificate delivered to Lender under this
        Agreement are true and correct.

       

      No
        Event of Default.
        There
        shall not exist at the time of any Advance a condition which would constitute
        an
        Event of Default under this Agreement or under any Related
        Document.

       

      
        
           

        

        
           

          
            

          

        

        
          
            BUSINESS
              LOAN AGREEMENT

            
              
                	
                        Loan
                          No: 2000564

                      	
                        (Continued)

                      	
                        Page
                          1

                      

              

            

          

        

      

      REPRESENTATIONS
        AND WARRANTIES.
        Borrower
        represents and warrants to Lender, as of the date of this Agreement, as of
        the
        date of each disbursement of loan proceeds, as of the date of any renewal,
        extension or modification of any Loan, and at all times any Indebtedness
        exists:

       

      Organization.
        Borrower
        is a corporation for profit which is, and at all times shall be, duly organized,
        validly existing, and in good standing under and by virtue of the laws of
        the
        State of Delaware. Borrower is duly authorized to transact business in all
        other
        states in which Borrower is doing business, having obtained all necessary
        filings, governmental licenses and approvals for each state in which Borrower
        is
        doing business. Specifically, Borrower is, and at all times shall be, duly
        qualified as a foreign corporation in all states in which the failure to
        so
        qualify would have a material adverse effect on its business or financial
        condition. Borrower has the full power and authority to own its properties
        and
        to transact the business in which it is presently engaged or presently proposes
        to engage. Borrower maintains an office at 600 Cameron Street, Alexandria,
        VA
        22314. Unless Borrower has designated otherwise in writing, the principal
        office
        is the office at which Borrower keeps its books and records including its
        records concerning the Collateral. Borrower will
        notify
        Lender prior to any change in the location of Borrower’s state of organization
        or any change in Borrower’s name. Borrower shall do all things necessary to
        preserve and to keep in full force and effect its existence, rights and
        privileges, and shall comply with all regulations, rules, ordinances, statutes,
        orders and decrees of any governmental or quasi-governmental authority or
        court
        applicable to Borrower and Borrower’s business activities.

       

      Assumed
        Business Names.
        Borrower
        has filed or recorded all documents or filings required by law relating to
        all
        assumed business names used by Borrower. Excluding the name of Borrower,
        the
        following is a complete list of all assumed business names under which Borrower
        does business: None.

       

      Authorization.
        Borrower’s execution, delivery, and performance of this Agreement and all the
        Related Documents have been duly authorized by all necessary action by Borrower
        and do not conflict with, result in a violation of, or constitute a default
        under (1) any provision of (a) Borrower’s articles of incorporation or
        organization, or bylaws, or (b) any agreement or other instrument binding
        upon
        Borrower or (2) any law, governmental regulation, court decree, or order
        applicable to Borrower or to Borrower’s properties.

       

      Financial
        Information.
        Each of
        Borrower’s financial statements supplied to Lender truly and completely
        disclosed Borrower’s financial condition as of the date of the statement, and
        there has been no material adverse change in Borrower’s financial condition
        subsequent to the date of the most recent financial statement supplied to
        Lender. Borrower has no material contingent obligations except as disclosed
        in
        such financial statements.

       

      Legal
        Effect.
        This
        Agreement constitutes, and any instrument or agreement Borrower is required
        to
        give under this Agreement when delivered will constitute legal, valid, and
        binding obligations of Borrower enforceable against Borrower in accordance
        with
        their respective terms.

       

      Properties.
        Except
        as contemplated by this Agreement or as previously disclosed in Borrower’s
        financial statements or in writing to Lender and as accepted by Lender, and
        except for property tax liens for taxes not presently due and payable, Borrower
        owns and has good title to all of Borrower’s properties free and clear of all
        Security Interests, and has not executed any security documents or financing
        statements relating to such properties. All of Borrower’s properties are titled
        in Borrower’s legal name, and Borrower has not used or filed a financing
        statement under any other name for at least the last five (5)
        years.

       

      
        
           

        

        
           

          
            

          

        

        
          
            BUSINESS
              LOAN AGREEMENT

            
              
                	
                        Loan
                          No: 2000564

                      	
                        (Continued)

                      	
                        Page
                          2

                      

              

            

          

        

      

       

      Hazardous
        Substances.
        Except
        as disclosed to and acknowledged by Lender in writing, Borrower represents
        and
        warrants that: (1) During the period of Borrower’s ownership of the Collateral,
        there has been no use, generation, manufacture, storage, treatment, disposal,
        release or threatened release of any Hazardous Substance by any person on,
        under, about or from any of the Collateral. (2) Borrower has no knowledge
        of, or
        reason to believe that there has been (a) any breach or violation of any
        Environmental Laws; (b) any use, generation, manufacture, storage, treatment,
        disposal, release or threatened release of any Hazardous Substance on, under,
        about or from the Collateral by any prior owners or occupants of any of the
        Collateral; or (c) any actual or threatened litigation or claims of any kind
        by
        any person relating to such matters. (3) Neither Borrower nor any tenant,
        contractor, agent or other authorized user of any of the Collateral shall
        use,
        generate, manufacture, store, treat, dispose of or release any Hazardous
        Substance on, under, about or from any of the Collateral; and any such activity
        shall be conducted in compliance with all applicable federal, state, and
        local
        laws, regulations, and ordinances, including without limitation all
        Environmental Laws. Borrower authorizes Lender and its agents to enter upon
        the
        Collateral to make such inspections and tests as Lender may deem appropriate
        to
        determine compliance of the Collateral with this section of the Agreement.
        Any
        inspections or tests made by Lender shall be at Borrower’s expense and for
        Lender’s purposes only and shall not be construed to create any responsibility
        or liability on the part of Lender to Borrower or to any other person. The
        representations and warranties contained herein are based on Borrower’s due
        diligence in investigating the Collateral for hazardous waste and Hazardous
        Substances. Borrower hereby (1) releases and waives any future claims against
        Lender for indemnity or contribution in the event Borrower becomes liable
        for
        cleanup or other costs under any such laws, and (2) agrees to indemnify and
        hold
        harmless Lender against any and all claims, losses, liabilities, damages,
        penalties, and expenses which Lender may directly or indirectly sustain or
        suffer resulting from a breach of this section of the Agreement or as a
        consequence of any use, generation, manufacture, storage, disposal, release
        or
        threatened release of a hazardous waste or substance on the Collateral. The
        provisions of this section of the Agreement, including the obligation to
        indemnify, shall survive the payment of the Indebtedness and the termination,
        expiration or satisfaction of this Agreement and shall not be affected by
        Lender’s acquisition of any interest in any of the Collateral, whether by
        foreclosure or otherwise.

       

      Litigation
        and Claims.
        No
        litigation, claim, investigation, administrative proceeding or similar action
        (including those for unpaid taxes) against Borrower is pending or threatened,
        and no other event has occurred which may materially adversely affect Borrower’s
        financial condition or properties, other than litigation, claims, or other
        events, if any, that have been disclosed to and acknowledged by Lender in
        writing.

       

      Taxes.
        To the
        best of Borrower's knowledge, all of Borrower's tax returns and reports that
        are
        or were required to be filed, have been filed, and all taxes, assessments
        and
        other governmental charges have been paid in full, except those presently
        being
        or to be contested by Borrower in good faith in the
        ordinary
        course of business and for which adequate reserves have been
        provided.

       

      Lien
        Priority.
        Unless
        otherwise previously disclosed to Lender in writing, Borrower has not entered
        into or granted any Security Agreements, or permitted the filing or attachment
        of any Security Interests on or affecting any of the Collateral directly
        or
        indirectly securing repayment of Borrower’s Loan and Note, that would be prior
        or that may in any way be superior to Lender’s Security Interests and rights in
        and to such Collateral.

       

      Binding
        Effect.
        This
        Agreement, the Note, all Security Agreements (if any), and all Related Documents
        are binding upon the signers thereof, as well as upon their successors,
        representatives and assigns, and are legally enforceable in accordance with
        their respective terms.

       

      AFFIRMATIVE
        COVENANTS.
        Borrower
        covenants and agrees with Lender that, so long as this Agreement remains
        in
        effect, Borrower will:

       

      Notices
        of Claims and Litigation.
        Promptly
        inform Lender in writing of (1) all material adverse changes in Borrower’s
        financial condition, and (2) all existing and all threatened litigation,
        claims,
        investigations, administrative proceedings or similar actions affecting Borrower
        or any Guarantor which could materially affect the financial condition of
        Borrower or the financial condition of any Guarantor.

       

      
        
           

        

        
           

          
            

          

        

        
          
            BUSINESS
              LOAN AGREEMENT

            
              
                	
                        Loan
                          No: 2000564

                      	
                        (Continued)

                      	
                        Page
                          3

                      

              

            

          

        

      

       

      Financial
        Records.
        Maintain
        its books and records in accordance with GAAP, applied on a consistent basis,
        and permit Lender to examine and audit Borrower’s books and records at all
        reasonable times.

       

      Financial
        Statements.
        Furnish
        Lender with the following:

       

      Interim
        Statements.
        As soon
        as available, but in no event later than 45 days after the end of each fiscal
        quarter, Borrower’s balance sheet and profit and loss statement for the period
        ended, prepared by Borrower.

       

      Tax
        Returns.
        As soon
        as available, but in no event later than ninety (90) days after the applicable
        filing date for the tax reporting period ended, Federal and other governmental
        tax returns, prepared by a certified public accountant satisfactory to
        Lender.

       

      All
        financial reports required to be provided under this Agreement shall be prepared
        in accordance with GAAP, applied on a consistent basis, and certified by
        Borrower as being true and correct.

       

      Additional
        Information.
        Furnish
        such additional information and statements, as Lender may request from time
        to
        time.

       

      Insurance.
        Maintain
        fire and other risk insurance, public liability insurance, and such other
        insurance as Lender may require with respect to Borrower’s properties and
        operations, in form, amounts, coverages and with insurance companies acceptable
        to Lender. Borrower, upon request of Lender, will deliver to Lender from
        time to
        time the policies or certificates of insurance in form satisfactory to Lender,
        including stipulations that coverages will not be cancelled or diminished
        without at least ten (10) days prior written notice to Lender. Each insurance
        policy also shall include an endorsement providing that coverage in favor
        of
        Lender will not be impaired in any way by any act, omission or default of
        Borrower or any other person. In connection with all policies covering assets
        in
which
        Lender
        holds or is offered a security interest for the Loans, Borrower will provide
        Lender with such lender’s loss payable or other endorsements as Lender may
        require.

       

      Insurance
        Reports.
        Furnish
        to Lender, upon request of Lender, reports on each existing insurance policy
        showing such information as Lender may reasonably request, including without
        limitation the following: (1) the name of the insurer; (2)
        the
        risks
        insured; (3) the amount of the policy; (4) the properties insured; (5) the
        then
        current property values on the basis of which
        insurance
        has been obtained, and the manner of determining those values; and (6) the
        expiration date of the policy. In addition, upon request of Lender (however
        not
        more often than annually), Borrower will have an independent appraiser
        satisfactory to Lender determine, as applicable, the actual cash value or
        replacement cost of any Collateral. The cost of such appraisal shall be paid
        by
        Borrower.

       

      Guaranties.
        Prior to
        disbursement of any Loan proceeds, furnish executed guaranties of the Loans
        in
        favor of Lender, executed by the guarantor named below, on Lender’s forms, and
        in the amount and under the conditions set forth in
        those
        guaranties.

       

      

        

        
          	 	
                  Name
                    of Guarantor

                	
                  Amount

                
	 	
                  Joel
                    P. Sens

                	
                  Unlimited

                

        

        

      

       

      
        
           

        

        
           

          
            

          

        

        
          
            BUSINESS
              LOAN AGREEMENT

            
              
                	
                        Loan
                          No: 2000564

                      	
                        (Continued)

                      	
                        Page
                          4

                      

              

            

          

        

      

       

      
        Other
          Agreements.
          Comply
          with all terms and conditions of all other agreements, whether now or hereafter
          existing, between Borrower and any other party and notify Lender immediately
          in
          writing of any default in connection with any other such
          agreements.

      

       

      Loan
        Proceeds.
        Use all
        Loan proceeds solely for Borrower’s business operations, unless specifically
        consented to the contrary by Lender in writing.

       

      Taxes,
        Charges and Liens.
        Pay and
        discharge when due all of its indebtedness and obligations, including without
        limitation all assessments, taxes, governmental charges, levies and liens,
        of
        every kind and nature, imposed upon Borrower or its properties, income, or
        profits, prior to the date on which penalties would attach, and all lawful
        claims that, if unpaid, might become a lien or charge upon any of Borrower’s
        properties, income, or profits.

       

      Performance.
        Perform
        and comply, in a timely manner, with all terms, conditions, and provisions
        set
        forth in this Agreement, in the Related Documents, and in all other instruments
        and agreements between Borrower and Lender. Borrower shall notify Lender
        immediately in writing of any default in connection with any
        agreement.

       

      Operations.
        Maintain
        executive and management personnel with substantially the same qualifications
        and experience as the present executive and management personnel; provide
        written notice to Lender of any change in executive and management personnel;
        conduct its business affairs in a reasonable and prudent manner.

       

      Environmental
        Studies.
        Promptly
        conduct and complete, at Borrower’s expense, all such investigations, studies,
        samplings and testings as may be requested by Lender or any governmental
        authority relative to any substance, or any waste or by-product of any substance
        defined as toxic or a hazardous substance under applicable federal, state,
        or
        local law, rule, regulation, order or directive, at or affecting any property
        or
        any facility owned, leased or used by Borrower.

       

      Compliance
        with Governmental Requirements.
        Comply
        with all laws, ordinances, and regulations, now or hereafter in effect, of
        all
        governmental authorities applicable to the conduct of Borrower’s properties,
        businesses and operations, and to the use or occupancy of the Collateral,
        including without limitation, the Americans With Disabilities Act. Borrower
        may
        contest in good faith any such law, ordinance, or regulation and withhold
        compliance during any proceeding, including appropriate appeals, so long
        as
        Borrower has notified Lender in writing prior to doing so and so long as,
        in
        Lender’s sole opinion, Lender’s interests in the Collateral are not jeopardized.
        Lender may require Borrower to post adequate security or a surety bond,
        satisfactory to Lender, to protect Lender’s interest.

       

      Inspection.
        Permit
        employees or agents of Lender at any reasonable time to inspect any and all
        Collateral for the Loan or Loans and Borrower’s other properties and to examine
        or audit Borrower’s books, accounts, and records and to make copies and
        memoranda of Borrower’s books, accounts, and records. If Borrower now or at any
        time hereafter maintains any records (including without limitation computer
        generated records and computer software programs for the generation of such
        records) in the possession of a third party, Borrower, upon request of Lender,
        shall notify such party to permit Lender free access to such records at all
        reasonable times and to provide Lender with copies of any records it may
        request, all at Borrower’s expense.

       

      Environmental
        Compliance and Reports.
        Borrower
        shall comply in all respects with any and all Environmental Laws; not cause
        or
        permit to exist, as a result of an intentional or unintentional action or
        omission on Borrower’s part or on the part of any third party, on property owned
        and/or occupied by Borrower, any environmental activity where damage may
        result
        to the environment, unless such environmental activity is pursuant to and
        in
        compliance with the conditions of a permit issued by the appropriate federal,
        state or local governmental authorities; shall furnish to Lender promptly
        and in
        any event within thirty (30) days after receipt thereof a copy of any notice,
        summons, lien, citation, directive, letter or other communication from any
        governmental agency or instrumentality concerning any intentional or
        unintentional action or omission on Borrower’s part in connection with any
        environmental activity whether or not there is damage to the environment
        and/or
        other natural resources.

       

      
        
           

        

        
           

          
            

          

        

        
           

            BUSINESS
              LOAN AGREEMENT

            
              
                	
                        Loan
                          No: 2000564

                      	
                        (Continued)

                      	
                        Page
                          5

                      

              

            

          

        

      

       

      Additional
        Assurances.
        Make,
        execute and deliver to Lender such promissory notes, mortgages, deeds of
        trust,
        security agreements, assignments, financing statements, instruments, documents
        and other agreements as Lender or its attorneys may reasonably request to
        evidence and secure the Loans and to perfect all Security
        Interests.

       

      RECOVERY
        OF ADDITIONAL COSTS.
        If the
        imposition of or any change in any law, rule, regulation or guideline, or
        the
        interpretation or application of any thereof by any court or administrative
        or
        governmental authority (including any request or policy not having the force
        of
        law) shall impose, modify or make applicable any taxes (except federal, state
        or
        local income or franchise taxes imposed on Lender), reserve requirements,
        capital adequacy requirements or other obligations which would (A) increase
        the cost to Lender for extending or maintaining the credit facilities to
        which
        this
        Agreement relates, (B) reduce the amounts payable to Lender under this Agreement
        or the Related Documents, or (C) reduce the rate of return on Lender’s
        capital as a consequence of Lender’s obligations with respect to the credit
        facilities to which this Agreement relates, then Borrower agrees to pay Lender
        such additional amounts as will compensate Lender therefor, within five (5)
        days
        after Lender’s written demand for such payment, which demand shall be
        accompanied by an explanation of such imposition or charge and a calculation
        in reasonable detail of the additional amounts payable by Borrower, which
        explanation
        and calculations shall be conclusive in the absence of manifest
        error.

       

      LENDER’S
        EXPENDITURES.
        If any
        action or proceeding is commenced that would materially affect Lender’s interest
        in the Collateral or if Borrower fails to comply with any provision of this
        Agreement or any Related Documents, including but not limited to Borrower’s
        failure to discharge or pay when due any amounts Borrower is required to
        discharge or-pay under this Agreement or any Related Documents, Lender on
        Borrower’s behalf may (but shall not be obligated to) take any action that
        Lender deems appropriate, including but not limited to discharging or paying
        all
        taxes, liens, security interests, encumbrances and other claims, at any time
        levied or placed on any Collateral and paying all costs for insuring,
        maintaining and preserving any Collateral. All such expenditures incurred
        or
        paid by Lender for such purposes will then bear interest at the rate charged
        under the Note from the date incurred or paid by Lender to the date of repayment
        by Borrower. All such expenses will become a part of the Indebtedness and,
        at
        Lender’s option, will (A) be payable on demand; or (B) be added to the balance
        of the Note and be apportioned among and be payable with any installment
        payments to become due during either (1) the term of any applicable insurance
        policy; or (2) the remaining term of the Note.

       

      NEGATIVE
        COVENANTS.
        Borrower
        covenants and agrees with Lender that while this Agreement is in effect,
        Borrower shall not, without the prior written consent of Lender:

       

      Indebtedness
        and Liens.
        (1)
        Except for trade debt incurred in the normal course of business and indebtedness
        to Lender contemplated by this Agreement, create, incur or assume indebtedness
        for borrowed money, including capital leases, (2) sell, transfer, mortgage,
        assign, pledge, lease, grant a security interest in, or encumber any of
        Borrower’s assets (except as allowed as Permitted Liens), or (3) sell with
        recourse any of Borrower’s accounts, except to Lender.

       

      Continuity
        of Operations.
        (1)
        Engage in any business activities substantially different than those in
which
        Borrower
        is presently engaged, (2) cease operations, liquidate, merge, transfer, acquire
        or consolidate with any other entity, change its name, dissolve or transfer
        or
        sell Collateral out of the ordinary course of business, or (3) pay any dividends
        on Borrower’s stock (other than dividends payable in its stock), provided,
        however that notwithstanding the foregoing, but only so long as no Event
        of
        Default has occurred and is continuing or would result from the payment of
        dividends, if Borrower is a “Subchapter S Corporation” (as defined in the
        Internal Revenue Code of 1986, as amended), Borrower may
        pay
cash
        dividends on its stock to its shareholders from time to time in amounts
        necessary to enable the shareholders to pay income taxes and make estimated
        income tax payments to satisfy their liabilities under federal and state
        law
        which arise solely from their status as Shareholders of a Subchapter S
        Corporation because of their ownership of shares of Borrower’s stock, or
        purchase or retire any of Borrower’s outstanding shares or alter or amend
        Borrower’s capital structure.

       

      
        
           

        

        
           

          
            

          

        

        
           

            BUSINESS
              LOAN AGREEMENT

            
              
                	
                        Loan
                          No: 2000564

                      	
                        (Continued)

                      	
                        Page
                          5

                      

              

            

          

        

      

       

      Loans,
        Acquisitions and Guaranties.
        (1)
        Loan, invest in or advance money or assets to any other person, enterprise
        or
        entity, (2) purchase, create or acquire any interest in any other enterprise
        or
        entity, or (3) incur any obligation as surety or guarantor other than in
        the
        ordinary course of business.

       

      Agreements.
        Borrower
        will not enter into any agreement containing any provisions which
        would
        be
        violated or breached by the performance of Borrower’s obligations under this
        Agreement or in connection herewith.

       

      CESSATION
        OF ADVANCES.
        If
        Lender has made any commitment to make any Loan to Borrower, whether under
        this
        Agreement or under any other agreement, Lender shall have no obligation to
        make
        Loan Advances or to disburse Loan proceeds if: (A) Borrower or any Guarantor
        is
        in default under the terms of this Agreement or any of the Related Documents
        or
        any other agreement that Borrower or any Guarantor has with Lender; (B) Borrower
        or any Guarantor dies, becomes incompetent or becomes insolvent, files a
        petition in bankruptcy or similar proceedings, or is adjudged a bankrupt;
        (C)
        there occurs a material adverse change in Borrower’s financial condition, in the
        financial condition of any Guarantor, or in the value of any Collateral securing
        any Loan; or (D) any Guarantor seeks, claims or otherwise attempts to limit,
        modify or revoke such Guarantor’s guaranty of the Loan or any other loan with
        Lender; or (E) Lender in good faith deems itself insecure, even though no
        Event
        of Default shall have occurred.

       

      RIGHT
        OF SETOFF.
        To the
        extent permitted by applicable law, Lender reserves a right of setoff in
        all
        Borrower’s accounts with Lender (whether checking, savings, or some other
        account). This includes all accounts Borrower holds jointly with someone
        else
        and all accounts Borrower may open in the future. However, this does not
        include
        any IRA or Keogh accounts, or any trust accounts for which setoff would be
        prohibited by law. Borrower authorizes Lender, to the extent permitted by
        applicable law, to charge or setoff all sums owing on the Indebtedness against
        any and all such accounts, and, at Lender’s option, to administratively freeze
        all such accounts to allow Lender to protect Lender’s charge and setoff rights
        provided in this paragraph.

       

      DEFAULT.
        Each of
        the following shall constitute an Event of Default under this
        Agreement:

       

      Payment
        Default.
        Borrower
        fails to make any payment when due under the Loan.

       

      Other
        Defaults.
        Borrower
        fails to comply with or to perform any other term, obligation, covenant or
        condition contained in this Agreement or in any of the Related Documents
        or to
        comply with or to perform any term, obligation, covenant or condition contained
        in any other agreement between Lender and Borrower.

       

      Default
        in Favor of Third Parties.
        Borrower
        or any Grantor defaults under any loan, extension of credit, security agreement,
        purchase or sales agreement, or any other agreement, in favor
        of
        any
        other creditor or person that may materially affect any
        of
        Borrower’s or any Grantor’s property or Borrower’s or any Grantor’s ability to
        repay the Loans or perform their respective obligations under this Agreement
        or
        any of the Related Documents.

       

      False
        Statements.
        Any
        warranty, representation or statement made or furnished to Lender by Borrower
        or
        on Borrower’s behalf under this Agreement or the Related Documents is false or
        misleading in any material respect, either now or at the time made or furnished
        or becomes false or misleading at any time thereafter.

       

      
        
           

        

        
           

          
            

          

        

        
           

            BUSINESS
              LOAN AGREEMENT

            
              
                	
                        Loan
                          No: 2000564

                      	
                        (Continued)

                      	
                        Page
                          7

                      

              

            

          

        

      

       

      Insolvency.
        The
        dissolution or termination of Borrower’s existence as a going business, or a
        trustee or receiver is appointed for Borrower or for all or a substantial
        portion of the assets of Borrower, or Borrower makes a general assignment
        for
        the benefit of Borrower’s creditors, or Borrower files for bankruptcy, or an
        involuntary bankruptcy petition is filed against Borrower and such involuntary
        petition remains undismissed for sixty (60) days.

       

      Defective
        Collateralization.
        This
        Agreement or any of the Related Documents ceases to be in full force and effect
        (including failure of any collateral document to create a valid and perfected
        security interest or lien) at any time and for any reason.

       

      Creditor
        or Forfeiture Proceedings.
        Commencement of foreclosure or forfeiture proceedings, whether by judicial
        proceeding, self-help, repossession or any other method, by any creditor
        of
        Borrower or by any governmental agency against any collateral securing the
        Loan.
        This includes a garnishment of any of Borrower’s accounts, including deposit
        accounts, with Lender. However, this Event of Default shall not apply if
        there
        is a good faith dispute by Borrower as to the validity or reasonableness
        of the
        claim which
        is
        the
        basis of the creditor or forfeiture proceeding and if Borrower gives Lender
        written notice of the creditor or forfeiture proceeding and deposits with
        Lender
        monies or a surety bond for the creditor or forfeiture proceeding, in an
        amount
        determined by Lender, in its sole discretion, as being an adequate reserve
        or
        bond for the dispute.

       

      Events
        Affecting Guarantor.
        Any of
        the preceding events occurs with respect to any Guarantor of any of the
        Indebtedness or any Guarantor dies or becomes incompetent, or revokes or
        disputes the validity of, or liability under, any Guaranty of the Indebtedness.
        In the event of a death, Lender, at its option, may, but shall not be required
        to, permit the Guarantor’s estate to assume unconditionally the obligations
        arising under the guaranty in a manner satisfactory to Lender, and, in doing
        so,
        cure any Event of Default.

       

      Change
        In Ownership.
        Any
        change in ownership of twenty-five percent (25%) or more of the common stock
        of
        Borrower.

       

      Adverse
        Change.
        A
        material adverse change occurs in Borrower’s financial condition, or Lender
        believes the prospect of payment or performance of the Loan is
        impaired.

       

      Insecurity.
        Lender
        in good faith believes itself insecure.

       

      EFFECT
        OF AN EVENT OF DEFAULT.
        If any
        Event of Default shall occur, except where otherwise provided in this Agreement
        or the Related Documents,
        all commitments and obligations of Lender under this Agreement or the Related
        Documents or any other agreement immediately will terminate
        (including any obligation to make further Loan Advances or disbursements),
        and,
        at Lender’s option, all sums owing in connection with the Loans, including all
        principal, interest, and all other fees, costs and charges, if any, will
        become
        immediately due and payable, all without notice of any kind to Borrower,
        except
        that in the case of an Event of Default of the type described in
        the
        “Insolvency” subsection above, such acceleration shall be automatic and not
        optional. In addition, Lender shall have all the rights and remedies provided
        in
        the Related Documents or available at law, in equity, or otherwise. Except
        as
        may be prohibited by applicable law, all of Lender’s rights and remedies shall
        be cumulative and may be exercised singularly or concurrently. Election by
        Lender to pursue any remedy shall not exclude pursuit of any other remedy,
        and
        an election to make expenditures or to take action to perform an obligation
        of
        Borrower or of any Grantor shall not affect Lender’s right to declare a default
        and to exercise its rights and remedies.

       

      PRIMARY
        DEPOSIT ACCOUNT.
        Borrower agrees and covenants with Lender that while this Agreement is in
        effect, Borrower shall maintain a primary deposit account with
        Lender.

       

      NET
        INCOME.
        Beginning one year after the note date of this note, the Borrower shall maintain
        Net Income tested on a monthly basis of not less than $145,000.00 per year
        with
        a minimum shareholders equity of $600,000.00. For purposes hereof, “Net Income”
means, for any period of determination, the after tax net income (or deficit)
        of
        the Borrower, determined in conformity with generally accepted accounting
        principles in the United States of America in effect from time to time
        consistently applied (“GAAP’).

       

       

      
        
           

        

        
           

          
            

          

        

        
           

            BUSINESS
              LOAN AGREEMENT

            
              
                	
                        Loan
                          No: 2000564

                      	
                        (Continued)

                      	
                        Page
                          8

                      

              

            

          

        

      

       

      RENT
        ROLL AND COPIES OF LEASES.
        Borrower
        agrees and covenants with Lender that while this Agreement is in effect,
        Borrower shall provide
        Lender
        with a Rent Roll and copies of leases on an annual basis.

       

      LOAN
        TO VALUE RATIO MAINTENANCE REQUIREMENT.
        The
        outstanding principal balance under this Promissory Note shall not exceed
        75%
        of
        the “as
        is” appraised value of the property. For purposes hereof, “Loan to Value Ratio”
means the ratio of the outstanding balance of the loan to the value of the
        collateral, as determined by the Lender.

       

      MISCELLANEOUS
        PROVISIONS.
        The
        following miscellaneous provisions are a part of this Agreement:

       

      Amendments.
        This
        Agreement, together with any Related Documents, constitutes the entire
        understanding and agreement of the parties as to the matters set forth in
        this
        Agreement. No alteration of or amendment to this Agreement shall be effective
        unless given in writing and signed by the party or parties sought to be charged
        or bound by the alteration or amendment.

       

      Attorneys’
        Fees; Expenses.
        Borrower
        agrees that if Lender hires an attorney to help enforce this Agreement, Borrower
        will pay, subject
        to any limits under applicable law, Lender’s attorneys’ fees equal to 15.000% of
        the principal balance due on the Loan and all of Lender’s other collection
        expenses, whether or not there is a lawsuit and including without limitation
        additional legal expenses for bankruptcy proceedings.

       

      Caption
        Headings.
        Caption
        headings in this Agreement are for convenience purposes only and are not
        to be
        used to interpret or define the provisions of this Agreement.

       

      Consent
        to Jurisdiction.
        Borrower
        irrevocably submits to the jurisdiction of any state or federal court sitting
        in
        the State of Maryland over any suit, action, or proceeding arising out of
        or
        relating to this Agreement. Borrower irrevocably waives, to the fullest extent
        permitted by law, any objection that Borrower may now or hereafter have to
        the
        laying of venue of any such suit, action, or proceeding brought in any such
        court and any claim that any such suit, action, or proceeding brought in
        any
        such court has been brought in an inconvenient forum. Final judgment in any
        such
        suit, action, or proceeding brought in any such court shall be conclusive
        and
        binding upon Borrower and may be enforced in any court in which Borrower
        is
        subject to jurisdiction by a suit upon such judgment provided that service
        of
        process is effected upon Borrower as provided in this Agreement or as otherwise
        permitted by applicable law.

       

      Consent
        to Loan Participation.
        Borrower
        agrees and consents to Lender’s sale or transfer, whether now or later, of one
        or more participation interests in the Loan to one or more purchasers, whether
        related or unrelated to Lender. Lender may provide, without any limitation
        whatsoever, to any one or more purchasers, or potential purchasers, any
        information or knowledge Lender may have about Borrower or about any other
        matter relating to the Loan, and Borrower hereby waives any rights to privacy
        Borrower may have with respect to such matters. Borrower additionally waives
        any
        and all notices of sale of participation interests, as well as all notices
        of
        any repurchase of such participation interests. Borrower also agrees that
        the
        purchasers of any such participation interests will be considered as the
        absolute owners of such interests in the Loan and will have all the rights
        granted under the participation agreement or agreements governing the sale
        of
        such participation interests. Borrower further waives all rights of offset
        or
        counterclaim that it may have now or later against Lender or against any
        purchaser of such a participation interest and unconditionally agrees that
        either Lender or such purchaser may enforce Borrower’s obligation under the Loan
        irrespective of the failure or insolvency of any holder of any interest in
        the
        Loan. Borrower further agrees that the purchaser of any such participation
        interests may enforce its interests irrespective of any personal claims or
        defenses that Borrower may have against Lender.

       

       

      
        
           

        

        
           

          
            

          

        

        
           

            BUSINESS
              LOAN AGREEMENT

            
              
                	
                        Loan
                          No: 2000564

                      	
                        (Continued)

                      	
                        Page
                          9

                      

              

            

          

        

      

       

      Governing
        Law. This Agreement will be governed by federal law applicable to Lender
        and, to
        the extent not preempted by federal law, the laws
        of the State of Maryland
        without regard
        to its conflicts of law provisions. This Agreement
        has been accepted by Lender in the
        State
        of Maryland.

       

      Choice
        of Venue.
        If there
        is a lawsuit, Borrower agrees upon Lender’s request to submit to the
        jurisdiction of the courts of Montgomery County, State of Maryland.

       

      JURY
        WAIVER. LENDER AND BORROWER EACH HEREBY WAIVE TRIAL BY JURY IN ANY ACTION
        OR
        PROCEEDING TO WHICH LENDER OR
        BORROWER MAY BE PARTIES, ARISING OUT OF, OR IN ANY WAY PERTAINING TO, THIS
        AGREEMENT. IT IS AGREED THAT THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY
        JURY
        OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR PROCEEDINGS. THIS WAIVER
        IS
        KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY LENDER AND BORROWER, AND LENDER
        AND
        BORROWER EACH
        HEREBY REPRESENT THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE
        BY
        ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY
        OR
        NULLIFY ITS EFFECT. BORROWER FURTHER REPRESENTS THAT BORROWER
        HAS BEEN REPRESENTED IN THE SIGNING OF THIS AGREEMENT AND IN THE MAKING OF
        THIS
        WAIVER BY INDEPENDENT LEGAL
        COUNSEL, SELECTED OF BORROWER’S OWN FREE WILL, AND
        THAT BORROWER HAS HAD THE OPPORTUNITY TO DISCUSS THIS
        WAIVER WITH COUNSEL.

       

      No
        Waiver by Lender.
        Lender
        shall not be deemed to have waived any rights under this Agreement unless
        such
        waiver is given in writing and signed by Lender. No delay or omission on
        the
        part of Lender in exercising any right shall operate as a waiver of such
        right
        or any other right. A waiver by Lender of a provision of this Agreement shall
        not prejudice or constitute a waiver of Lender’s right otherwise to demand
        strict compliance with that provision or any other provision of this Agreement.
        No prior waiver by Lender, nor any course of dealing between Lender and
        Borrower, or between Lender and any Grantor, shall constitute a waiver of
        any of
        Lender’s rights or of any of Borrower’s or any Grantor’s obligations as to any
        future transactions. Whenever the consent of Lender is required under this
        Agreement, the granting of such consent by Lender in any instance shall not
        constitute continuing consent to subsequent instances where such consent
        is
        required and in all cases such consent may be granted or withheld in the
        sole
        discretion of Lender.

       

      Notices.
        Any
        notice required to be given under this Agreement shall be given in writing,
        and
        shall be effective when actually delivered, if hand delivered, when
        actually
        received
        by telefacsimile (unless otherwise required by law), when deposited with
        a
        nationally recognized overnight courier, or, if mailed, when deposited in
        the
        United States mail, as first class, certified or registered mail postage
        prepaid, directed to the addresses shown near the beginning of this Agreement.
        Any party may change its address for notices under this Agreement by giving
        formal written notice to the other parties, specifying that the purpose of
        the
        notice is to change the party’s address. For notice purposes, Borrower agrees to
        keep Lender informed at all times of Borrower’s current address. Unless
        otherwise provided or required by law, if there is more than one Borrower,
        any
        notice given by Lender to any Borrower is deemed to be notice given to all
        Borrowers.

       

      Severability.
        If a
        court of competent jurisdiction finds any provision of this Agreement to
        be
        illegal, invalid, or unenforceable as to any circumstance, that finding shall
        not make the offending provision illegal, invalid, or unenforceable as to
        any
        other circumstance. If feasible, the offending provision shall be considered
        modified so that it becomes legal, valid and enforceable. If the offending
        provision cannot be so modified, it shall be considered deleted from this
        Agreement. Unless otherwise required by law, the illegality, invalidity,
        or
        unenforceability of any provision of this Agreement shall not affect the
        legality, validity or enforceability of any other provision of this
        Agreement.

       

       

      
        
           

        

        
           

          
            

          

        

        
           

            BUSINESS
              LOAN AGREEMENT

            
              
                	
                        Loan
                          No: 2000564

                      	
                        (Continued)

                      	
                        Page
                          10

                      

              

            

          

        

      

       

      Subsidiaries
        and Affiliates of Borrower.
        To the
        extent the context of any provisions of this Agreement makes it appropriate,
        including without limitation any representation, warranty or covenant, the
        word
“Borrower” as used in this Agreement shall include all of Borrower’s
        subsidiaries and affiliates. Notwithstanding the foregoing however, under
        no
        circumstances shall this Agreement be construed to require Lender to make
        any
        Loan or other financial accommodation to any of Borrower’s subsidiaries or
        affiliates.

       

      Successors
        and Assigns.
        All
        covenants and agreements by or on behalf of Borrower contained in this Agreement
        or any Related Documents shall bind Borrower’s successors and assigns and shall
        inure to the benefit of Lender and its successors and assigns. Borrower shall
        not, however, have the right to assign Borrower’s rights under this Agreement or
        any interest therein, without the prior written consent of Lender.

       

      Survival
        of Representations and Warranties.
        Borrower
        understands and agrees that in making the Loan, Lender is relying on all
        representations, warranties, and covenants made by Borrower in this Agreement
        or
        in any certificate or other instrument delivered by Borrower to Lender under
        this Agreement or the Related Documents. Borrower further agrees that regardless
        of any investigation made by Lender, all such representations, warranties
        and
        covenants will survive the making of the Loan and delivery to Lender of the
        Related - Documents, shall be continuing in nature, and shall remain in full
        force and effect until such time as Borrower’s Indebtedness shall be paid in
        full, or until this Agreement shall be terminated in the manner provided
        above,
        whichever is the last to occur.

       

      Time
        is of the Essence.
        Time is
        of the essence in the performance of this Agreement.

       

      DEFINITIONS.
        The
        following capitalized words and terms shall have the following meanings when
        used in this Agreement. Unless specifically stated to the contrary, all
        references to dollar amounts shall mean amounts in lawful money of the United
        States of America. Words and terms used in the singular shall include the
        plural, and the plural shall include the singular, as the context may require.
        Words and terms not otherwise defined in this Agreement shall have the meanings
        attributed to such terms in the Uniform Commercial Code. Accounting words
        and
        terms not otherwise defined in this Agreement shall have the meanings assigned
        to them in accordance with generally accepted accounting principles as in
        effect
        on the date
        of
        this Agreement.

       

      Advance.
        The word
“Advance” means a disbursement of Loan funds made, or to be made, to Borrower or
        on Borrower’s behalf on a line of credit or multiple advance basis under the
        terms and conditions of this Agreement.

       

      Agreement.
        The word
“Agreement” means this Business Loan Agreement, as this Business Loan Agreement
        may be amended or modified from time to time, together with all exhibits
        and
        schedules attached to this Business Loan Agreement from time to
        time.

       

      Borrower.
        The word
“Borrower” means Seawright Holdings, Inc. and includes all co-signers and
        co-makers signing the Note and all their successors and assigns.

       

      Collateral.
        The word
“Collateral” means all property and assets granted as collateral security for a
        Loan, whether real or personal property, whether granted directly or indirectly,
        whether granted now or in the future, and whether granted in the form of
        a
        security interest, mortgage, collateral mortgage, deed of trust, assignment,
        pledge, crop pledge, chattel mortgage, collateral chattel mortgage, chattel
        trust, factor’s lien, equipment trust, conditional sale, trust receipt, lien,
        charge, lien or title retention contract, lease or consignment intended as
        a
        security device, or any other security or lien interest whatsoever, whether
        created by law, contract, or otherwise.

       

       

      
        
           

        

        
           

          
            

          

        

        
           

            BUSINESS
              LOAN AGREEMENT

            
              
                	
                        Loan
                          No: 2000564

                      	
                        (Continued)

                      	
                        Page
                          11

                      

              

            

          

        

      

       

      Environmental
        Laws.
        The
        words “Environmental Laws” mean any and all state, federal and local statutes,
        regulations and ordinances relating to the protection of human health or
        the
        environment, including without limitation the Comprehensive Environmental
        Response, Compensation, and liability Act of 1980, as amended, 42 U.S.C.
        Section
        9601, et seq. (“CERCLA”), the Superfund Amendments and Reauthorization Act of
        1986, Pub. L. No. 99-499 (“SARA”), the Hazardous Materials Transportation Act,
        49 U.S.C. Section 1801, et seq., the Resource Conservation and Recovery Act,
        42
        U.S.C. Section 6901, et seq., or other applicable state or federal laws,
        rules,
        or regulations adopted pursuant thereto.

       

      Event
        of Default.
        The
        words “Event of Default” mean any of the events of default set forth in this
        Agreement in the default section of this Agreement.

       

      GAAP.
        The word
“GAAP” means generally accepted accounting principles.

       

      Grantor.
        The word
“Grantor” means each and all of the persons or entities granting a Security
        Interest in any Collateral for the Loan, and their personal representatives,
        successors and assigns.

       

      Guarantor.
        The word
“Guarantor” means any guarantor, surety, or accommodation party of any or all of
        the Loan.

       

      Guaranty.
        The word
“Guaranty” means the guaranty from Guarantor to Lender, including without
        limitation a guaranty of all or part of the Note.

       

      Hazardous
        Substances.
        The
        words “Hazardous Substances” mean materials that, because of their quantity,
        concentration or physical, chemical or infectious characteristics, may cause
        or
        pose a present or potential hazard to human health or the environment when
        improperly used, treated, stored, disposed of, generated, manufactured,
        transported or otherwise handled. The words “Hazardous Substances” are used in
        their very broadest sense and include without limitation any and all hazardous
        or toxic substances, materials or waste as defined by or listed under the
        Environmental Laws. The term “Hazardous Substances” also includes, without
        limitation, petroleum and petroleum by-products or any fraction thereof and
        asbestos.

       

      Indebtedness.
        The word
“Indebtedness” means the indebtedness evidenced by the Note or Related
        Documents, including all principal and interest together with all other
        indebtedness and costs and expenses for which Borrower is responsible under
        this
        Agreement or under any of the Related Documents.

       

      Lender.
        The word
“Lender” means Fidelity & Trust Bank, its successors and
        assigns.

       

      Loan.
        The word
“Loan” means any and all loans and financial accommodations from Lender to
        Borrower whether now or hereafter existing, and however evidenced, including
        without limitation those loans and financial accommodations described herein
        or
        described on any exhibit or schedule attached to this Agreement from time
        to
        time.

       

      Note.
        The word
“Note” means the Note executed by Seawright Holdings, Inc. in the principal
        amount of $525,000.00 dated June 29, 2006, together with all modifications
        of
        and renewals, replacements, and substitutions for the note or credit
        agreement.

       

      Permitted
        Liens.
        The
        words “Permitted Liens” mean (1) liens and security interests securing
        Indebtedness owed by Borrower to Lender; (2) liens for taxes, assessments,
        or
        similar charges either not yet due or being contested in good faith; (3)
        liens
        of materialmen, mechanics, warehousemen, or carriers, or other like liens
        arising in the ordinary course of business and securing obligations which
        are
        not yet delinquent; (4) purchase money liens or
        purchase
        money security interests upon or in any property acquired or held by Borrower
        in
        the ordinary course of business to secure indebtedness outstanding on the
        date
        of this Agreement or permitted to be incurred under the paragraph of this
        Agreement titled “Indebtedness and Liens”; (5) liens and security interests
        which, as of the date of this Agreement, have been disclosed to and approved
        by
        the Lender in writing; and (6) those liens and security interests which
        in
        the
        aggregate constitute an immaterial and insignificant monetary amount with
        respect to the net value of Borrower’s assets.

       

       

      
        
           

        

        
           

          
            

          

        

        
           

            BUSINESS
              LOAN AGREEMENT

            
              
                	
                        Loan
                          No: 2000564

                      	
                        (Continued)

                      	
                        Page
                          11

                      

              

            

          

        

      

       

      Related
        Documents.
        The
        words “Related Documents” mean all promissory notes, credit agreements, loan
        agreements, environmental agreements, guaranties, security agreements,
        mortgages, deeds of trust, security deeds, collateral mortgages, and all
        other
        instruments, agreements and documents, whether now or hereafter existing,
        executed in connection with the Loan.

       

      Security
        Agreement.
        The
        words “Security Agreement” mean and include without limitation any agreements,
        promises, covenants, arrangements, understandings or other agreements, whether
        created by law, contract, or otherwise, evidencing, governing, representing, or
        creating a Security Interest.

       

      Security
        Interest.
        The
        words “Security Interest” mean, without limitation, any and all types of
        collateral security, present and future, whether in the form of a lien, charge,
        encumbrance, mortgage, deed of trust, security deed, assignment, pledge,
        crop
        pledge, chattel mortgage, collateral chattel mortgage, chattel trust, factor’s
        lien, equipment trust, conditional sale, trust receipt, lien or title retention
        contract, lease or consignment intended as a security device, or any other
        security or lien interest whatsoever whether created by law, contract, or
        otherwise.

       

      BORROWER
        ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN AGREEMENT
        AND
        BORROWER AGREES TO ITS
        TERMS. THIS BUSINESS LOAN AGREEMENT IS DATED JUNE 29, 2006.

       

      THIS
        AGREEMENT IS GIVEN UNDER SEAL AND IT IS INTENDED THAT THIS AGREEMENT IS AND
        SHALL CONSTITUTE AND HAVE THE EFFECT
        OF
        A SEALED INSTRUMENT ACCORDING TO LAW.

       

      BORROWER:

       

      SEAWRIGHT
        HOLDINGS, INC.

       

      By: ______
        /s/
        Joel P. Sens ___________________(Seal)

          Joel
        P. Sens,
        President of Seawright Holdings, Inc.

       

       

      LENDER:

       

      FIDELITY
        & TRUST BANK

       

      By: _________________________________________(Seal)

          Authorized
        Signer

       

      

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

      PROMISSORY
        NOTE

      

      
        	
                Principal
                  $525,000.00

              	
                Loan
                  Date 

                06-29-2006

              	
                Maturity

                06-29-2009

              	
                Loan
                  No. 10000564

              	
                Call
                  / Call

              	
                Account

              	
                Officer
                  CS

              	
                Initials

              
	
                References
                  in the shaded area are for Lender’s use only and do not limit the
                  applicability of this document to any particular loan or item.
                  Any item
                  above containing “***” has been omitted due to text length
                  limitations.

              

      

      

      
        	
                Borrower: Seawright
                  Holdings, Inc.

                600
                  Cameron Street

                Alexandra,
                  VA 22314

              	
                Lender: Fidelity
                  & Trust Bank

                4831
                  Cordell Ave.

                Bethesda,
                  MD 20814-9930

              
	 	 

      

      

      

        
          	
                  Principal
                    Amount: $525,000.00

                   

                	
                  Interest
                    Rate: 9.375%

                   

                	
                  Date
                    of Note: June 29, 2006

                   

                

        

      

       

      PROMISE
        TO PAY. Seawright Holdings, Inc. (“Borrower”) promises to pay to Fidelity &
Trust Bank (“Lender”), or order, in lawful money of the United States of
        America, the principal amount of Five Hundred Twenty-five Thousand & 00/100
        Dollars ($525,000.00), together with Interest at the rate of 9.375% per annum
        on
        the unpaid principal balance from June 29, 2006, until paid in full. The
        interest rate may change under the terms and conditions of the “INTEREST AFTER
        DEFAULT” section. 

       

      PAYMENT.
        Borrower
        will pay this loan in 35 regular payments of $4,591.52 each and one irregular
        last payment estimated at $511,798.47. Borrower's first payment is due July
        29,
        2006, and all subsequent payments are due on the same day of each month after
        that. Borrower's final payment will be due on June 29, 2009, and will be
        for all
        principal, accrued interest, and all other applicable fees, costs and charges,
        if any, not yet paid. Payments include principal and interest. Unless otherwise
        agreed or required by applicable law, payments will be applied first to any
        accrued unpaid interest; then to principal; then to any late charges; and
        then
        to any unpaid collection coats. The annual interest rate for this Note is
        computed on a 365/360 basis; that is, by applying the ratio of the annual
        interest rate over a year of 360 days, multiplied by the outstanding principal
        balance, multiplied by the actual number of days the principal balance is
        outstanding. Borrower will pay Lender at Lender's address shown above or
        at such
        other place as Lender may designate in writing.

       

      PREPAYMENT.
        Borrower may pay without penalty all or a portion of the amount owed earlier
        than it is due. Early payments will not, unless agreed to by Lender in writing,
        relieve Borrower of Borrower's obligation to continue to make payments under
        the
        payment schedule. Rather, early payments will reduce the principal balance
        due
        and may result in Borrower's making fewer payments. Borrower agrees not to
        send
        Lender payments marked “paid in full”, “without recourse”, or similar language.
        If Borrower sends such a payment, Lender may accept it without losing any
        of
        Lender's rights under this Note, and Borrower will remain obligated to pay
        any
        further amount owed to Lender. All written communications concerning disputed
        amounts, including any check or other payment instrument that indicates that
        the
        payment constitutes “payment in full” of the amount owed or that is tendered
        with other conditions or limitations or as full satisfaction of a disputed
        amount must be mailed or delivered to: Fidelity & Trust Bank, 4831 Cordell
        Ave. Bethesda, MD 20814-9930.

       

      LATE
        CHARGE.
        If a
        payment is 10 days or more late, Borrower will be charged 5.000%
        of the unpaid portion of the regularly scheduled payment.

       

      INTEREST
        AFTER DEFAULT.
        Upon
        default, including failure to pay upon final maturity, the interest rate
        on this
        Note shall be increased by 5.000 percentage points. However, in no event
        will
        the interest rate exceed the maximum interest rate limitations under applicable
        law.

       

      DEFAULT.
        Each of
        the following shall constitute an event of default (“Event of Default') under
        this Note: 

       

      Payment
        Default.
        Borrower fails to make any payment when due under this Note.

       

      
        
           

        

        
           

          
            

          

        

        
          
            PROMISSORY
              NOTE

            
              
                	
                        Loan
                          No: 1000564

                      	
                        (Continued)

                      	
                        Page
                          2

                      

              

            

          

        

      

       

      Other
        Defaults.
        Borrower fails to comply with or to perform any other term, obligation, covenant
        or condition contained in this Note or in any of the related documents or
        to
        comply with or to perform any term, obligation, covenant or condition contained
        in any other agreement between Lender and Borrower.

       

      Default
        in Favor of Third Parties.
        Borrower or any Grantor defaults under any loan, extension of credit, security
        agreement, purchase or sales agreement, or any other agreement, in favor
        of any
        other creditor or person that may materially affect any of Borrower's property
        or Borrower's ability to repay this Note or perform Borrower's obligations
        under
        this Note or any of the related documents.

       

      False
        Statements.
        Any
        warranty, representation or statement made or furnished to Lender by Borrower
        or
        on Borrower's behalf under this Note or the related documents is false or
        misleading in any material respect, either now or at the time made or furnished
        or becomes false or misleading at any time thereafter.

       

      Insolvency.
        The
        dissolution or termination of Borrower's existence as a going business, or
        a
        trustee or receiver is appointed for Borrower or for all or a substantial
        portion of the assets of Borrower, or Borrower makes a general assignment
        for
        the benefit of Borrower's creditors, or Borrower files for bankruptcy, or
        an
        involuntary bankruptcy petition is filed against Borrower and such involuntary
        petition remains undismissed for sixty (60) days.

       

      Creditor
        or Forfeiture Proceedings.
        Commencement of foreclosure or forfeiture proceedings, whether by judicial
        proceeding, self-help, repossession or any other method, by any creditor
        of
        Borrower or by any governmental
        agency against any collateral securing the loan. This includes a garnishment
        of
        any of Borrower's accounts, including deposit accounts, with Lender. However,
        this Event of Default shall not apply if there is a good faith dispute by
        Borrower as to the validity or reasonableness of the claim which is the basis
        of
        the creditor or forfeiture proceeding and if Borrower gives Lender written
        notice of the creditor or forfeiture proceeding and deposits with Lender
        monies
        or a surety bond for the creditor or forfeiture proceeding, in an amount
        determined by Lender, in its sole discretion, as being an adequate reserve
        or
        bond for the dispute.

       

      Events
        Affecting Guarantor.
        Any of
        the preceding events occurs with respect to any Guarantor of any of the
        indebtedness or any Guarantor dies or becomes incompetent, or revokes or
        disputes the validity of, or liability under, any guaranty of the indebtedness
        evidenced by this Note. In the event of a death, Lender, at its option, may,
        but
        shall not be required to, permit the Guarantor's estate to assume
        unconditionally the obligations arising under the guaranty in a manner
        satisfactory to Lender, and, in doing so, cure any Event of
        Default.

       

      Change
        In Ownership.
        Any
        change in ownership of twenty-five percent (25%) or more of the common stock
        of
        Borrower.

       

      Adverse
        Change.
        A
        material adverse change occurs in Borrower's financial condition, or Lender
        believes the prospect of payment or performance of this Note is
        impaired.

       

      Insecurity.
        Lender
        in good faith believes itself insecure.

       

      LENDER'S
        RIGHTS.
        Upon
        default, Lender may declare the entire unpaid principal balance under this
        Note
        and all accrued unpaid interest, together with all other applicable fees,
        costs
        and charges, if any, immediately due and payable, and then Borrower will
        pay
        that amount.

       

      ATTORNEYS'
        FEES; EXPENSES.
        Subject
        to any limits under applicable law, upon default, Borrower agrees to pay
        Lender's attorneys'
        fees
        equal to 15.000% of the principal balance due on the loan and all of Lender's
        other collection expenses, whether or not there is a lawsuit, including without
        limitation legal expenses for bankruptcy proceedings.

       

      
        
           

        

        
           

          
            

          

        

        
           

            PROMISSORY
              NOTE

            
              
                	
                        Loan
                          No: 1000564

                      	
                        (Continued)

                      	
                        Page
                          3

                      

              

            

          

        

      

       

      JURY
        WAIVER. LENDER AND BORROWER EACH HEREBY WAIVE TRIAL BY JURY IN ANY ACTION
        OR
        PROCEEDING TO WHICH LENDER OR BORROWER MAY BE PARTIES, ARISING OUT OF, OR
        IN ANY
        WAY PERTAINING TO, THIS NOTE. IT IS AGREED THAT THIS WAIVER CONSTITUTES A
        WAIVER
        OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR
        PROCEEDINGS. THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY
        LENDER
        AND BORROWER, AND LENDER AND BORROWER EACH HEREBY REPRESENT THAT NO
        REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE
        THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT.
        BORROWER FURTHER
        REPRESENTS THAT BORROWER HAS BEEN REPRESENTED IN THE SIGNING OF THIS NOTE
        AND IN
        THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED OF
        BORROWER'S OWN
        FREE WILL, AND THAT BORROWER HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER
        WITH
        COUNSEL.

       

      GOVERNING
        LAW. This Note will be governed by federal law applicable to Lender and,
        to the
        extent not preempted by federal law, the laws of the State of Maryland without
        regard to its conflicts of law provisions. This Note has been accepted by
        Lender
        in the State of Maryland.

       

      CHOICE
        OF VENUE.
        If
        there is a lawsuit, Borrower agrees upon Lender's request to submit to the
        jurisdiction of the courts of Montgomery County, State of Maryland.

       

      CONFESSED
        JUDGMENT.
        UPON THE OCCURRENCE OF A DEFAULT, BORROWER HEREBY AUTHORIZES ANY ATTORNEY
        DESIGNATED BY LENDER OR ANY CLERK OF ANY COURT OF RECORD TO APPEAR FOR BORROWER
        IN ANY COURT OF RECORD AND CONFESS JUDGMENT WITHOUT PRIOR HEARING AGAINST
        BORROWER IN FAVOR OF LENDER FOR, AND IN THE AMOUNT OF, THE UNPAID BALANCE
        OF THE
        PRINCIPAL AMOUNT OF THIS NOTE, ALL INTEREST ACCRUED AND UNPAID THEREON, ALL
        OTHER AMOUNTS PAYABLE BY BORROWER TO LENDER UNDER THE TERMS OF THIS NOTE
        OR ANY
        OTHER AGREEMENT, DOCUMENTS, INSTRUMENT EVIDENCING, SECURING OR GUARANTYING
        THE
        OBLIGATIONS EVIDENCED BY THIS NOTE, COSTS OF SUIT, AND
        ATTORNEYS'
        FEES OF FIFTEEN PERCENT (15%) OF THE UNPAID BALANCE OF THE PRINCIPAL AMOUNT
        OF
        THIS NOTE AND INTEREST THEN DUE HEREUNDER.

       

      Borrower
        hereby releases, to the extent permitted by applicable law, all errors and
        all
        rights of exemption, appeal, stay of execution, inquisition, and other rights
        to
        which Borrower may otherwise be entitled under the laws of the United States
        or
        of any state or possession of the United States now in force and which may
        hereafter be enacted. The authority and power to appear for and enter judgment
        against Borrower shall not be exhausted by one or more exercises thereof
        or by
        any imperfect exercise thereof and shall not be extinguished by any judgment
        entered pursuant thereto. Such authority may be exercised on one or more
        occasions or from time to time in the same or different jurisdictions as
        often
        as Lender shell deem necessary or desirable, for all of
        which this
        Note shell be a sufficient warrant.

       

      DISHONORED
        ITEM FEE.
        Borrower will pay a fee to Lender of $25.00 if Borrower makes a payment on
        Borrower's loan and the check with which Borrower pays is later
        dishonored.

       

      RIGHT
        OF SETOFF.
        To the
        extent permitted by applicable law, Lender reserves a right of setoff in
        all
        Borrower's accounts with Lender (whether checking, savings, or some other
        account). This includes all accounts Borrower holds jointly with someone
        else
        and all accounts Borrower may open in the future. However, this does not
        include
        any IRA or Keogh accounts, or any trust accounts for which setoff would be
        prohibited by law. Borrower authorizes Lender, to the extent permitted by
        applicable law, to charge or setoff all sums owing on the indebtedness against
        any and all such accounts, and, at Lender's option, to administratively freeze
        all such accounts to allow Lender to protect Lender's charge and setoff rights
        provided in this paragraph.

       

      COLLATERAL.
        Borrower acknowledges this Note is secured by the following collateral described
        in the security instruments listed herein:

       

       

      
        
           

        

        
           

          
            

          

        

        
           

            PROMISSORY
              NOTE

            
              
                	
                        Loan
                          No: 1000564

                      	
                        (Continued)

                      	
                        Page
                          4

                      

              

            

          

        

      

       

      (A)
        a
        Deed of Trust dated June 29, 2006, to a trustee in favor of Lender on real
        property located in Augusta County, Commonwealth of Virginia. The Real Property
        or its address is commonly known as 33.522 acres on State Route 275 East,
        Woodrow Wilson Parkway, Verona, VA 24482.

       

      (B)
        an
        Assignment of All Rents to Lender on real property located in Augusta County,
        Commonwealth of Virginia. The Real Property or its address is commonly known
        as
        33.522 acres on State Route 275 East, Woodrow Wilson Parkway, Verona, VA
        24482.

       

      (C)
        fixtures described in a Commercial Security Agreement dated June 29,
        2006.

       

      CONSENT
        TO JURISDICTION.
        Borrower irrevocably submits to the jurisdiction of any state or federal
        court
        sitting in the State of Maryland over any suit, action, or proceeding arising
        out of or relating to this Note. Borrower irrevocably waives, to the fullest
        extent permitted by law, any objection that Borrower may now or hereafter
        have
        to the laying of venue of any such suit, action, or proceeding brought in
        any
        such court and any claim that any such suit, action, or proceeding brought
        in
        any such court has been brought in an inconvenient forum. Final judgment
        in any
        such suit, action, or proceeding brought in any such court shall be conclusive
        and binding upon Borrower and may be enforced in any court in which Borrower
        is
        subject to jurisdiction by a suit upon such judgment provided that service
        of
        process is effected upon Borrower as provided in this Note or as otherwise
        permitted by applicable law.

       

      SUCCESSOR
        INTERESTS.
        The
        terms of this Note shall be binding upon Borrower, and upon Borrower's heirs,
        personal representatives, successors and assigns, and shall inure to the
        benefit
        of Lender and its successors and assigns.

       

      NOTIFY
        US OF INACCURATE INFORMATION WE REPORT TO CONSUMER REPORTING
        AGENCIES.
        Please
        notify us if we report any inaccurate information about your account(s) to
        a
        consumer reporting agency. Your written notice describing the specific
        inaccuracy(ies) should be sent to us at the following address: Fidelity &
Trust Bank 4831 Cordell Ave. Bethesda, MD 20814-9930.

       

      GENERAL
        PROVISIONS.
        If any
        part of this Note cannot be enforced, this fact will not affect the rest
        of the
        Note. Borrower does not agree or intend to pay, and Lender does not agree
        or
        intend to contract for, charge, collect, take, reserve or receive (collectively
        referred to herein as “charge or collect”), any amount in the nature of interest
        or in the nature of a fee for this loan, which would in any way or event
        (including demand, prepayment, or acceleration) cause Lender to charge or
        collect more for this loan than the maximum Lender would be permitted to
        charge
        or collect by federal law or the law of the State of Maryland (as applicable).
        Any such excess interest or unauthorized fee shall, instead of anything stated
        to the contrary, be applied first to reduce the principal balance of this
        loan,
        and when the principal has been paid in full, be refunded to Borrower. Lender
        may delay or forgo enforcing any of its rights or remedies under this Note
        without losing them. Borrower and any other person who signs, guarantees
        or
        endorses this Note, to the extent allowed by law, waive presentment, demand
        for
        payment, and notice of dishonor. Upon any change in the terms of this Note,
        and
        unless otherwise expressly stated in writing, no party who signs this Note,
        whether as maker, guarantor, accommodation maker or endorser, shall be released
        from liability. All such parties agree that Lender may renew or extend
        (repeatedly and for any length of time) this loan or release any party or
        guarantor or collateral; or impair, fail to realize upon or perfect Lender's
        security interest in the collateral; and take any other action deemed necessary
        by Lender without the consent of or notice to anyone. All such parties also
        agree that Lender may modify this loan without the consent of or notice to
        anyone other than the party with whom the modification is made.

       

      PRIOR
        TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
        THIS
        NOTE. BORROWER AGREES TO THE TERMS OF THE NOTE.

       

      BORROWER
        ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY
        NOTE.

       

      THIS
        NOTE IS GIVEN UNDER SEAL AND IT IS INTENDED THAT THIS NOTE IS AND SHALL
        CONSTITUTE AND HAVE THE EFFECT OF A SEALED INSTRUMENT ACCORDING TO
        LAW.

       

      

      
        
           

        

        
           

          
            

          

        

        
           

            PROMISSORY
              NOTE

            
              
                	
                        Loan
                          No: 1000564

                      	
                        (Continued)

                      	
                        Page
                          5

                      

              

            

          

        

      

       

      BORROWER:

       

      SEAWRIGHT
        HOLDINGS, INC.

       

      By: _____
        /s/
        Joel P. Sens____________________(Seal)

          Joel
        P. Sens,
        President of Seawright Holdings, Inc.

       

      

       

      

       

      

       

      

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      COMMERCIAL
        GUARANTY

       

      
        	
                Principal
                  

              	
                Loan
                  Date 

              	
                Maturity

              	
                Loan
                  No. 

              	
                Call
                  / Call

              	
                Account

              	
                Officer
                  

                CS

              	
                Initials

              
	
                References
                  in the shaded area are for Lender’s use only and do not limit the
                  applicability of this document to any particular loan or item.
                  Any item
                  above containing “***” has been omitted due to text length
                  limitations.

              

      

      

       

      
        	
                Borrower: Seawright
                  Holdings, Inc. 

                600
                  Cameron Street 

                Alexandria,
                  VA 22314

              	
                Lender: Fidelity
                  & Trust Bank

                4831
                  Cordell Ave.

                Bethesda,
                  MD 20814-9930

              
	
                Guarantor:
                   Joel
                  P. Sens

                900
                  North Stafford Street

                Arlington,
                  VA 22203

              	 
	 

      

      

       

      CONTINUING
        GUARANTEE OF PAYMENT AND PERFORMANCE.
        For
        good and valuable consideration, Guarantor absolutely and unconditionally
        guarantees full and punctual payment and satisfaction of the Indebtedness
        of
        Borrower to Lender, and the performance and discharge of all Borrower's
        obligations under the Note and the Related Documents. This is a guaranty
        of
        payment and performance and not of collection, so Lender can enforce this
        Guaranty against Guarantor even when Lender has not exhausted Lender's remedies
        against anyone else obligated to pay the Indebtedness or against any collateral
        securing the Indebtedness, this Guaranty or any other guaranty of the
        Indebtedness. Guarantor will make any payments to Lender or its order, on
        demand, in legal tender of the United States of America, in same-day funds,
        without set-off or deduction or counterclaim, and will otherwise perform
        Borrower's obligations under the Note and Related Documents. Under this
        Guaranty, Guarantor's liability is unlimited and Guarantor's obligations
        are
        continuing.

       

      INDEBTEDNESS.
        The
        word “Indebtedness” as used in this Guaranty means all of the principal amount
        outstanding from time to time and at any one or more times, accrued unpaid
        interest thereon and all collection costs and legal expenses related thereto
        permitted by law, attorneys' fees, arising from any and all debts, liabilities
        and obligations of every nature or form, now existing or hereafter arising
        or
        acquired, that Borrower individually or collectively or interchangeably with
        others, owes or will owe Lender. “Indebtedness” includes, without limitation,
        loans, advances, debts, overdraft indebtedness, credit card indebtedness,
        lease
        obligations, liabilities and obligations under any interest rate protection
        agreements or foreign currency exchange agreements or commodity price protection
        agreements, other obligations, and liabilities of Borrower, and any present
        or
        future judgments against Borrower, future advances, loans or transactions
        that
        renew, extend, modify, refinance, consolidate or substitute these debts,
        liabilities and obligations whether: voluntarily or involuntarily incurred;
        due
        or to become due by their terms or acceleration; absolute or contingent;
        liquidated or unliquidated; determined or undetermined; direct or indirect;
        primary or secondary in nature or arising from a guaranty or surety; secured
        or
        unsecured; joint or several or joint and several; evidenced by a negotiable
        or
        non-negotiable instrument or writing; originated by Lender or another or
        others;
        barred or unenforceable against Borrower for any reason whatsoever; for any
        transactions that may be voidable for any reason (such as infancy, insanity,
        ultra vires or otherwise); and originated then reduced or extinguished and
        then
        afterwards increased or reinstated.

       

      If
        Lender
        presently holds one or more guaranties, or hereafter receives additional
        guaranties from Guarantor, Lender's rights under all guaranties shall be
        cumulative. This Guaranty shall not (unless specifically provided below to
        the
        contrary) affect or invalidate any such other guaranties. Guarantor's liability
        will be Guarantor's aggregate liability under the terms of this Guaranty
        and any
        such other unterminated guaranties.

       

       

      
        
           

        

        
           

          
            

          

        

        
           

            COMMERCIAL
              GUARANTY

            
              
                	
                        Loan
                          No: 1000564

                      	
                        (Continued)

                      	
                        Page
                          2

                      

              

            

          

        

      

       

      CONTINUING
        GUARANTY.
        THIS IS
        A “CONTINUING GUARANTY” UNDER WHICH GUARANTOR AGREES TO GUARANTEE THE FULL AND
        PUNCTUAL PAYMENT, PERFORMANCE AND SATISFACTION OF THE INDEBTEDNESS OF BORROWER
        TO LENDER, NOW EXISTING OR HEREAFTER ARISING OR ACQUIRED, ON AN OPEN AND
        CONTINUING BASIS. ACCORDINGLY, ANY PAYMENTS MADE ON THE INDEBTEDNESS WILL
        NOT
        DISCHARGE OR DIMINISH GUARANTOR'S OBLIGATIONS AND LIABILITY UNDER THIS GUARANTY
        FOR ANY REMAINING AND SUCCEEDING INDEBTEDNESS EVEN WHEN ALL OR PART OF THE
        OUTSTANDING INDEBTEDNESS MAY BE A ZERO BALANCE FROM TIME TO TIME.

       

      DURATION
        OF GUARANTY.
        This
        Guaranty will take effect when received by Lender without the necessity of
        any
        acceptance by Lender, or any notice to Guarantor or to Borrower, and will
        continue in full force until all the indebtedness incurred or contracted
        before
        receipt by Lender of any notice of revocation shall have been fully and finally
        paid and satisfied and all of Guarantor's other obligations under this Guaranty
        shall have been performed in full. If Guarantor elects to revoke this Guaranty,
        Guarantor may only do so in writing. Guarantor's written notice of revocation
        must be mailed to Lender, by certified mail, at Lender's address listed above
        or
        such other place as Lender may designate in writing. Written revocation of
        this
        Guaranty will apply only to advances or new Indebtedness created after actual
        receipt by Lender of Guarantor's written revocation. For this purpose and
        without limitation, the term “new Indebtedness” does not include the
        Indebtedness which at the time of notice of revocation is contingent,
        unliquidated, undetermined or not due and which later becomes absolute,
        liquidated, determined or due. This Guaranty will continue to bind Guarantor
        for
        all the Indebtedness incurred by Borrower or committed by Lender prior to
        receipt of Guarantor's written notice of revocation, including any extensions,
        renewals, substitutions or modifications of the Indebtedness. All renewals,
        extensions, substitutions, and modifications of the Indebtedness granted
        after
        Guarantor's revocation, are contemplated under this Guaranty and, specifically
        will not be considered to be new Indebtedness. This Guaranty shall bind
        Guarantor's estate as to the Indebtedness created both before and after
        Guarantor's death or incapacity, regardless of Lender's actual notice of
        Guarantor's death. Subject to the foregoing, Guarantor's executor or
        administrator or other legal representative may terminate this Guaranty in
        the
        same manner in which Guarantor might have terminated it and with the same
        effect. Release of any other guarantor or termination of any other guaranty
        of
        the Indebtedness shall not affect the liability of Guarantor under this
        Guaranty. A revocation Lender receives from any one or more Guarantors shall
        not
        affect the liability of any remaining Guarantors under this Guaranty.
It
        is anticipated that fluctuations may occur in the aggregate amount of the
        Indebtedness covered by this Guaranty, and Guarantor specifically acknowledges
        and agrees that reductions in the amount of the Indebtedness, even to zero
        dollars ($0.00), prior to Guarantor's written revocation of this Guaranty
        shall
        not constitute a termination of this Guaranty. This Guaranty is binding upon
        Guarantor and Guarantor's heirs, successors and assigns so long as any of
        the
        Indebtedness remains unpaid and even though the Indebtedness may from time
        to
        time be zero dollars ($0.00).

       

      GUARANTOR'S
        AUTHORIZATION TO LENDER.
        Guarantor authorizes Lender, either before or after any revocation hereof,
        without
        notice or demand and without lessening Guarantor's liability under this
        Guaranty, from time to time:
        (A)
        prior to revocation as set forth above, to make one or more additional secured
        or unsecured loans to Borrower, to lease equipment or other goods to Borrower,
        or otherwise to extend additional credit to Borrower; (B) to alter, compromise,
        renew, extend, accelerate, or otherwise change one or more times the time
        for
        payment or other terms of the Indebtedness or any part of the Indebtedness,
        including increases and decreases of the rate of interest on the Indebtedness;
        (C) to take and hold security for the payment of this Guaranty or the
        Indebtedness, and exchange, enforce, waive, subordinate, fail or decide not
        to
        perfect, and release any such security, with or without the substitution
        of new
        collateral; (D) to release, substitute, agree not to sue, or deal with any
        one
        or more of Borrower's sureties, endorsers, or other guarantors on any terms
        or
        in any manner Lender may choose; (E) to determine how, when and what
        application of payments and credits shall be made on the Indebtedness; (F)
        to
        apply such security and direct the order or manner of sale thereof, including
        without limitation, any nonjudicial sale permitted by the terms of the
        controlling security agreement or deed of trust, as Lender in its discretion
        may
        determine; (G) to sell, transfer, assign or grant participations in all or
        any
        part of the Indebtedness; and (H) to assign or transfer this Guaranty in
        whole
        or in part.

       

       

      
        
           

        

        
           

          
            

          

        

        
           
            
            COMMERCIAL
              GUARANTY

            
              
                	
                        Loan
                          No: 1000564

                      	
                        (Continued)

                      	
                        Page
                          3

                      

              

            

          

        

      

       

      GUARANTOR'S
        REPRESENTATIONS AND WARRANTIES.
        Guarantor represents and warrants to Lender that (A) no representations or
        agreements of any kind have been made to Guarantor which would
        limit or qualify in any way the terms of this Guaranty; (B) this Guaranty
        is
        executed at Borrower's request and not at the request of Lender; (C) Guarantor
        has full power, right and authority to enter into this Guaranty; (D) the
        provisions of this Guaranty do not conflict with or result in a default under
        any agreement or other instrument binding upon Guarantor and do not result
        in a
        violation of any law, regulation, court decree or order applicable to Guarantor;
        (E) Guarantor has not and will not, without the prior written consent of
        Lender,
        sell, lease, assign, encumber, hypothecate, transfer, or otherwise dispose
        of
        all or substantially all of Guarantor's assets, or any interest therein;
        (F)
        upon Lender's request, Guarantor will provide to Lender financial and credit
        information in form acceptable to Lender, and all such financial information
        which currently has been, and all future financial information which will
        be
        provided to Lender is and will be true and correct in all material respects
        and
        fairly present Guarantor's financial condition as of the dates the financial
        information is provided; (G) no material adverse change has occurred in
        Guarantor's
        financial condition since the date of the most recent financial statements
        provided to Lender and no event has occurred which may materially adversely
        affect Guarantor's financial condition; (H) no litigation, claim, investigation,
        administrative proceeding or similar action (including those for unpaid taxes)
        against Guarantor is pending or threatened; (I) Lender has made no
        representation to Guarantor as to the creditworthiness of Borrower; and (J)
        Guarantor has established adequate means of obtaining from Borrower on a
        continuing basis information regarding Borrower's financial condition. Guarantor
        agrees to keep adequately informed from such means of any facts, events,
        or
        circumstances which might in any way affect Guarantor's risks under this
        Guaranty, and Guarantor further agrees that, absent a request for information,
        Lender shall have no obligation to disclose to Guarantor any information
        or
        documents acquired by Lender in the course of its relationship with
        Borrower.

       

      GUARANTOR'S
        FINANCIAL STATEMENTS.
        Guarantor agrees to furnish Lender with the following:

       

      Tax
        Returns.
        As soon
        as available, but in no event later than ninety (90) days after the applicable
        filing date for the tax reporting period ended, Federal and other governmental
        tax returns, prepared by a certified public accountant satisfactory to
        Lender.

       

      Additional
        Requirements.
        Guarantor will provide PERSONAL FINANCIAL STATEMENTS on an annual
        basis.

       

      All
        financial reports required to be provided under this Guaranty shall be prepared
        in accordance with GAAP, applied on a consistent basis, and certified by
        Guarantor as being true and correct.

       

      GUARANTOR'S
        WAIVERS.
        Except
        as prohibited by applicable law, Guarantor waives any right to require Lender
        (A) to continue lending money or to extend other credit to Borrower; (B)
        to make
        any presentment, protest, demand, or notice of any kind, including notice
        of any
        nonpayment of the Indebtedness or of any nonpayment related to any collateral,
        or notice of any action or nonaction on the part of Borrower, Lender, any
        surety, endorser, or other guarantor in connection with the Indebtedness
        or in
        connection with the creation of new or additional loans or obligations; (C)
        to
        resort for payment or to proceed directly or at once against any person,
        including Borrower or any other guarantor; (D) to proceed directly against
        or
        exhaust any collateral held by Lender from Borrower, any other guarantor,
        or any
        other person; (E) to give notice of the terms, time, and place of any public
        or
        private sale of personal property security held by Lender from Borrower or
        to
        comply with any other applicable provisions of the Uniform Commercial Code;
        (F)
        to pursue any other remedy within Lender's power; or (G) to commit any act
        or
        omission of any kind, or at any time, with respect to any matter
        whatsoever.

       

       

      
        
           

        

        
           

          
            

          

        

        
           
            
            COMMERCIAL
              GUARANTY

            
              
                	
                        Loan
                          No: 1000564

                      	
                        (Continued)

                      	
                        Page
                          4

                      

              

            

          

        

      

       

      Guarantor
        also waives any and all rights or defenses based on suretyship or impairment
        of
        collateral including, but not limited to, any rights or defenses arising
        by
        reason of (1) any election of remedies by Lender which destroys or otherwise
        adversely affects Guarantor's subrogation rights or Guarantor's rights to
        proceed against Borrower for reimbursement, including without limitation,
        any
        loss of rights Guarantor may suffer by reason of any law limiting, qualifying,
        or discharging the Indebtedness; (2) any disability or other defense of
        Borrower, of any other guarantor, or of any other person, or by reason of
        the
        cessation of Borrower's liability from any cause whatsoever, other than payment
        in full in legal tender, of the Indebtedness; (3) any right to claim discharge
        of the Indebtedness on the basis of unjustified impairment of any Collateral
        for
        the Indebtedness; or (4) any statute of limitations, if at any time any action
        or suit brought by Lender against Guarantor is commenced, there is outstanding
        Indebtedness which is not barred by any applicable statute of limitations.
        Guarantor acknowledges and agrees that Guarantor's obligations under this
        Guaranty shall apply to and continue with respect to any amount paid to Lender
        which is subsequently recovered from Lender for any reason whatsoever (including
        without limitation as a result of bankruptcy, insolvency or fraudulent
        conveyance proceeding), notwithstanding the fact that all or a part of the
        Indebtedness may have been previously paid, or this Guaranty may have been
        terminated, or both.

       

      Guarantor
        further waives and agrees not to assert or claim at any time any deductions
        to
        the amount guaranteed under this Guaranty for any claim of setoff, counterclaim,
        counter demand, recoupment or similar right, whether such claim, demand or
        right
        may be asserted by the Borrower, the Guarantor, or both.

       

      Guarantor's
        Understanding With Respect To Waivers.
        Guarantor warrants and agrees that each of the waivers set forth above is
        made
        with Guarantor's full knowledge of its significance and consequences and
        that,
        under the circumstances, the waivers are reasonable and not contrary to public
        policy or law. If any such waiver is determined to be contrary to any applicable
        law or public policy, such waiver shall be effective only to the extent
        permitted by law or public policy.

       

      Right
        of Setoff.
        To the
        extent permitted by applicable law, Lender reserves a right of setoff in
        all
        Guarantor's accounts with Lender (whether checking, savings, or some other
        account). This includes all accounts Guarantor holds jointly with someone
        else
        and all accounts Guarantor may open in the future. However, this does not
        include any IRA or Keogh accounts, or any trust accounts for which setoff
        would
        be prohibited by law. Guarantor authorizes Lender, to the extent permitted
        by
        applicable law, to hold these funds if there is a default, and Lender may
        apply
        the funds in these accounts to pay what Guarantor owes under the terms of
        this
        Guaranty.

       

      Subordination
        of Borrower's Debts to Guarantor.
        Guarantor agrees that the Indebtedness, whether now existing or hereafter
        created, shall be superior to any claim that Guarantor may now have or hereafter
        acquire against Borrower, whether or not Borrower becomes insolvent. Guarantor
        hereby expressly subordinates any claim Guarantor may have against Borrower,
        upon any account whatsoever, to any claim that Lender may now or hereafter
        have
        against Borrower. In the event of insolvency and consequent liquidation of
        the
        assets of Borrower, through bankruptcy, by an assignment for the benefit
        of
        creditors, by voluntary liquidation, or otherwise, the assets of Borrower
        applicable to the payment of the claims of both Lender and Guarantor shall
        be
        paid to Lender and shall be first applied by Lender to the Indebtedness.
        Guarantor does hereby assign to Lender all claims which it may have or acquire
        against Borrower or against any assignee or trustee in bankruptcy of Borrower;
        provided however, that such assignment shall be effective only for the purpose
        of assuring to Lender full payment in legal tender of the Indebtedness. If
        Lender so requests, any notes or credit agreements now or hereafter evidencing
        any debts or obligations of Borrower to Guarantor shall be marked with a
        legend
        that the same are subject to this Guaranty and shall be delivered to Lender.
        Guarantor agrees, and Lender is hereby authorized, in the name of Guarantor,
        from time to time to file financing statements and continuation statements
        and
        to execute documents and to take such other actions as Lender deems necessary
        or
        appropriate to perfect, preserve and enforce its rights under this
        Guaranty.

       

      
        
           

        

        
           

          
            

          

        

        
           
            
            COMMERCIAL
              GUARANTY

            
              
                	
                        Loan
                          No: 1000564

                      	
                        (Continued)

                      	
                        Page
                          5

                      

              

            

          

        

      

       

      CONFESSED
        JUDGMENT.
        UPON THE OCCURRENCE OF A DEFAULT ON THE INDEBTEDNESS, GUARANTOR HEREBY
        AUTHORIZES ANY ATTORNEY DESIGNATED BY LENDER OR ANY CLERK OF ANY COURT OF
        RECORD
        TO APPEAR FOR GUARANTOR IN ANY COURT OF RECORD AND CONFESS JUDGMENT WITHOUT
        PRIOR HEARING AGAINST GUARANTOR IN FAVOR OF LENDER FOR, AND IN THE AMOUNT
        OF,
        THE UNPAID BALANCE OF THE PRINCIPAL AMOUNT OF THIS GUARANTY, ALL INTEREST
        ACCRUED AND UNPAID THEREON, ALL OTHER AMOUNTS PAYABLE BY GUARANTOR TO LENDER
        UNDER THE TERMS OF THIS GUARANTY OR ANY OTHER AGREEMENT, DOCUMENTS, INSTRUMENT
        EVIDENCING, SECURING OR GUARANTYING THE OBLIGATIONS EVIDENCED BY THIS GUARANTY,
        COSTS OF SUIT, AND ATTORNEYS' FEES OF FIFTEEN PERCENT (15%) OF THE UNPAID
        BALANCE OF THE PRINCIPAL AMOUNT OF THIS GUARANTY AND INTEREST THEN DUE
        HEREUNDER.

       

      Guarantor
        hereby releases, to the extent permitted by applicable law, all errors and
        all
        rights of exemption, appeal, stay of execution, inquisition, and other rights
        to
        which Borrower may otherwise be entitled under the laws of the United States
        or
        of any state or possession of the United States now in force and which may
        hereafter be enacted. The authority and power to appear for and enter judgment
        against Guarantor shall not be exhausted by one or more exercises thereof
        or by
        any imperfect exercise thereof and shall not be extinguished by any judgment
        entered pursuant thereto. Such authority may be exercised on one or more
        occasions or from time to time in the same or different jurisdictions as
        often
        as Lender shall deem necessary or desirable, for all of which this Guaranty
        shall be a sufficient warrant.

       

      Miscellaneous
        Provisions.
        The
        following miscellaneous provisions are a part of this Guaranty:

       

      Amendments.
        This
        Guaranty, together with any Related Documents, constitutes the entire
        understanding and agreement of the parties as to the matters set forth in
        this
        Guaranty. No alteration of or amendment to this Guaranty shall be effective
        unless given in writing and signed by the party or parties sought to be charged
        or bound by the alteration or amendment.

       

      Attorneys'
        Fees; Expenses.
        Guarantor agrees that if Lender hires an attorney to help enforce this Guaranty,
        Guarantor will pay, subject to any limits under applicable law, Lender's
        attorneys' fees equal to 15.000% of the amount due under this Guaranty and
        all
        of Lender's other collection expenses, whether or not there is a lawsuit
        and
        including without limitation additional legal expenses for bankruptcy
        proceedings.

       

      Caption
        Headings.
        Caption
        headings in this Guaranty are for convenience purposes only and are not to
        be
        used to interpret or define the provisions of this Guaranty.

       

      Governing
        Law.
        This
        Guaranty will be governed by federal law applicable to Lender and, to the
        extent
        not preempted by federal law, the laws of the State of Maryland without regard
        to its conflicts of law provisions. This Guaranty has been accepted by Lender
        in
        the State of Maryland.

       

      Choice
        of Venue.
        If
        there is a lawsuit, Guarantor agrees upon Lender's request to submit to the
        jurisdiction of the courts of Montgomery County, State of Maryland.

       

      
        
           

        

        
           

          
            

          

        

        
           
            
            COMMERCIAL
              GUARANTY

            
              
                	
                        Loan
                          No: 1000564

                      	
                        (Continued)

                      	
                        Page
                          6

                      

              

            

          

        

      

       

      Integration.
        Guarantor further agrees that Guarantor has read and fully understands the
        terms
        of this Guaranty; Guarantor has had the opportunity to be advised by Guarantor's
        attorney with respect to this Guaranty; the Guaranty fully reflects Guarantor's
        intentions and parol evidence is not required to interpret the terms of this
        Guaranty. Guarantor hereby indemnifies and holds Lender harmless from all
        losses, claims, damages, and costs (including Lender's attorneys' fees) suffered
        or incurred by Lender as a result of any breach by Guarantor of the warranties,
        representations and agreements of this paragraph.

       

      Interpretation.
        In all
        cases where there is more than one Borrower or Guarantor, then all words
        used in
        this Guaranty in the singular shall be deemed to have been used in the plural
        where the context and construction so require; and where there is more than
        one
        Borrower named in this Guaranty or when this Guaranty is executed by more
        than
        one Guarantor, the words “Borrower” and “Guarantor” respectively shall mean all
        and any one or more of them. If a court finds that any provision of this
        Guaranty is not valid or should not be enforced, that fact by itself will
        not
        mean that the rest of this Guaranty will not be valid or enforced. Therefore,
        a
        court will enforce the rest of the provisions of this Guaranty even if a
        provision of this Guaranty may be found to be invalid or unenforceable. If
        any
        one-or
        more
        of Borrower or Guarantor are corporations, partnerships, limited liability
        companies, or similar entities, it is not necessary for Lender to inquire
        into
        the powers of Borrower or Guarantor or of the officers, directors, partners,
        managers, or other agents acting or purporting to act on their behalf, and
        any
        indebtedness made or created in reliance upon the professed exercise of such
        powers shall be guaranteed under this Guaranty.

       

      JURY
        WAIVER. LENDER AND BORROWER AND GUARANTOR EACH HEREBY WAIVE TRIAL BY JURY
        IN ANY
        ACTION OR PROCEEDING TO WHICH LENDER OR BORROWER OR GUARANTOR MAY BE PARTIES,
        ARISING OUT OF, OR IN ANY WAY PERTAINING TO, THIS GUARANTY. IT IS AGREED
        THAT
        THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL
        PARTIES TO SUCH ACTIONS OR PROCEEDINGS. THIS WAIVER IS KNOWINGLY, WILLINGLY
        AND
        VOLUNTARILY MADE BY LENDER AND BORROWER AND GUARANTOR, AND LENDER AND BORROWER
        AND GUARANTOR EACH HEREBY REPRESENT THAT NO REPRESENTATIONS OF FACT OR OPINION
        HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR
        TO IN
        ANY WAY MODIFY OR NULLIFY ITS EFFECT. BORROWER AND GUARANTOR EACH FURTHER
        REPRESENT THAT EACH HAS BEEN REPRESENTED IN THE SIGNING OF THIS GUARANTY
        AND IN
        THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED OF EACH'S
        OWN
        FREE WILL, AND THAT EACH HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH
        COUNSEL.

       

      Notices.
        Any
        notice required to be given under this Guaranty shall be given in writing,
        and,
        except for revocation notices by Guarantor, shall be effective when actually
        delivered, if hand delivered, when actually received by telefacsimile (unless
        otherwise required by law), when deposited with a nationally recognized
        overnight courier, or, if mailed, when deposited in the United States mail,
        as
        first class, certified or registered mail postage prepaid, directed to the
        addresses shown near the beginning of this Guaranty. All revocation notices
        by
        Guarantor shall be in writing and shall be effective upon delivery to Lender
        as
        provided in the section of this Guaranty entitled “DURATION OF GUARANTY.” Any
        party may change its address for notices under this Guaranty by giving formal
        written notice to the other parties, specifying that the purpose of the notice
        is to change the party's address. For notice purposes, Guarantor agrees to
        keep
        Lender informed at all times of Guarantor's current address. Unless otherwise
        provided or required by law, if there is more than one Guarantor, any notice
        given by Lender to any Guarantor is deemed to be notice given to all
        Guarantors.

       

      
        
           

        

        
           

          
            

          

        

        
           
            
            COMMERCIAL
              GUARANTY

            
              
                	
                        Loan
                          No: 1000564

                      	
                        (Continued)

                      	
                        Page
                          7

                      

              

            

          

        

      

       

      No
        Waiver by Lender.
        Lender
        shall not be deemed to have waived any rights under this Guaranty unless
        such
        waiver is given in writing and signed by Lender. No delay or omission on
        the
        part of Lender in exercising any right shall operate as a waiver of such
        right
        or any other right. A waiver by Lender of a provision of this Guaranty shall
        not
        prejudice or constitute a waiver of Lender's right otherwise to demand strict
        compliance with that provision or any other provision of this Guaranty. No
        prior
        waiver by Lender, nor any course of dealing between Lender and Guarantor,
        shall
        constitute a waiver of any of Lender's rights or of any of Guarantor's
        obligations as to any future transactions. Whenever the consent of Lender
        is
        required under this Guaranty, the granting of such consent by Lender in any
        instance shall not constitute continuing consent to subsequent instances
        where
        such consent is required and in all cases such consent may be granted or
        withheld in the sole discretion of Lender.

       

      Successors
        and Assigns.
        Subject
        to any limitations stated in this Guaranty on transfer of Guarantor's interest,
        this Guaranty shall be binding upon and inure to the benefit of the parties,
        their heirs, personal representatives, successors and assigns.

       

      Definitions.
        The
        following capitalized words and terms shall have the following meanings when
        used in this Guaranty. Unless specifically stated to the contrary, all
        references to dollar amounts shall mean amounts in lawful money of the United
        States of America. Words and terms used in the singular shall include the
        plural, and the plural shall include the singular, as the context may require.
        Words and terms not otherwise defined in this Guaranty shall have the meanings
        attributed to such terms in the Uniform Commercial Code:

       

      Borrower.
        The
        word “Borrower” means Seawright Holdings, Inc. and includes all co-signers and
        co-makers signing the Note and all their successors and assigns.

       

      GAAP.
        The
        word “GAAP” means generally accepted accounting principles.

       

      Guarantor.
        The
        word “Guarantor” means everyone signing this Guaranty, including without
        limitation Joel P. Sens, and in each case, any signer's successors and
        assigns.

       

      Guaranty.
        The
        word “Guaranty” means this guaranty from Guarantor to Lender.

       

      Indebtedness.
        The
        word “Indebtedness” means Borrower's indebtedness to Lender as more particularly
        described in this Guaranty. 

       

      Lender.
        The
        word “Lender” means Fidelity & Trust Bank, its successors and
        assigns.

       

      Note.
        The
        word “Note” means and includes without limitation all of Borrower's promissory
        notes and/or credit agreements evidencing Borrower's loan obligations in
        favor
        of Lender, together with all renewals of, extensions of, modifications of,
        refinancings of, consolidations of and substitutions for promissory notes
        or
        credit agreements.

       

      Related
        Documents.
        The
        words “Related Documents” mean all promissory notes, credit agreements, loan
        agreements, environmental agreements, guaranties, security agreements,
        mortgages, deeds of trust, security deeds, collateral mortgages, and all
        other
        instruments, agreements and documents, whether now or hereafter existing,
        executed in connection with the Indebtedness.

       

      EACH
        UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS
        GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS
        THAT
        THIS GUARANTY IS EFFECTIVE UPON GUARANTOR'S EXECUTION AND DELIVERY OF THIS
        GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE UNTIL TERMINATED IN
        THE
        MANNER SET FORTH IN THE SECTION TITLED “DURATION OF GUARANTY”. NO FORMAL
        ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE. THIS GUARANTY
        IS DATED JUNE 29, 2006.

       

      
        
           

        

        
           

          
            

          

        

        
           
            
            COMMERCIAL
              GUARANTY

            
              
                	
                        Loan
                          No: 1000564

                      	
                        (Continued)

                      	
                        Page
                          8

                      

              

            

          

        

      

       

      THIS
        GUARANTY IS GIVEN UNDER SEAL AND IT IS INTENDED THAT THIS GUARANTY IS AND
        SHALL
        CONSTITUTE AND HAVE THE EFFECT OF A SEALED INSTRUMENT ACCORDING TO
        LAW.

       

      

       

      GUARANTOR:

       

      X
        /s/
        Joel P. Sens            (Seal)

          Joel
        P.
        Sens

       

      

       

      
        
          

        

      

       

      INDIVIDUAL
        ACKNOWLEDGMENT

       

      

       

      STATE
        OF_____________________)

       )

      COUNTY
        OF___________________)

      

       

      On
        this
        day before me, the undersigned Notary Public, personally appeared Joel P.
        Sens,
        to me known to be the individual described in and who executed the Commercial
        Guaranty, and acknowledged that he or she signed the Guaranty as his or her
        free
        and voluntary act and deed, for the uses and purposes therein
        mentioned.

       

      Given
        under any hand and official seal this ____ day
        of ___________,
        20__ .

       

      By
        _______________________________    Residing
        at _____________________________________

       

      Notary
        Public in and for _______________        My
        commission expires ___________________________exv4w1

 

Exhibit 4.1

 

ARCHSTONE-SMITH OPERATING TRUST

as Issuer

and

U.S. BANK NATIONAL ASSOCIATION

as Trustee

THIRD SUPPLEMENTAL INDENTURE

Dated as of July 14, 2006

4.00% Exchangeable Senior Notes Due 2036

 

 

 

Table of Contents

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	 
	 	ARTICLE 1	 	 	 	 
	 
	 	Definitions	 	 	 	 
	 
	 	 	 	 	 	 
	Section 1.01
	 	Relation to Base Indenture and Supplemental Indentures	 	 	2	 
	Section 1.02
	 	Definitions	 	 	2	 
	 
	 	 	 	 	 	 
	 
	 	ARTICLE 2	 	 	 	 
	 
	 	Issue, Description, Execution, Registration and Exchange of Notes	 	 	 	 
	 
	 	 	 	 	 	 
	Section 2.01
	 	Designation and Amount	 	 	8	 
	Section 2.02
	 	Form of Notes	 	 	8	 
	Section 2.03
	 	Date and Denomination of Notes; Payments of Interest	 	 	9	 
	Section 2.04
	 	Reserved	 	 	9	 
	Section 2.05
	 	Execution, Authentication and Delivery of Notes	 	 	9	 
	Section 2.06
	 	Exchange and Registration of Transfer of Notes; Restrictions on Transfer; Depositary	 	 	10	 
	Section 2.07
	 	Additional Notes; Repurchases	 	 	11	 
	Section 2.08
	 	No Sinking Fund	 	 	11	 
	Section 2.09
	 	Ranking	 	 	11	 
	 
	 	 	 	 	 	 
	 
	 	ARTICLE 3	 	 	 	 
	 
	 	Redemption	 	 	 	 
	 
	 	 	 	 	 	 
	Section 3.01
	 	Right to Redeem	 	 	12	 
	Section 3.02
	 	Selection of Notes to be Redeemed	 	 	12	 
	Section 3.03
	 	Notice of Redemption	 	 	12	 
	 
	 	 	 	 	 	 
	 
	 	ARTICLE 4	 	 	 	 
	 
	 	Particular Covenants of the Company	 	 	 	 
	 
	 	 	 	 	 	 
	Section 4.01
	 	Payment of Principal and Interest	 	 	13	 
	Section 4.02
	 	No Limitation on Incurrence of Debt	 	 	13	 
	 
	 	 	 	 	 	 
	 
	 	ARTICLE 5	 	 	 	 
	 
	 	Defaults and Remedies	 	 	 	 
	 
	 	 	 	 	 	 
	Section 5.01
	 	Events of Default	 	 	14	 
	 
	 	 	 	 	 	 
	 
	 	ARTICLE 6	 	 	 	 
	 
	 	Supplemental Indentures	 	 	 	 
	 
	 	 	 	 	 	 
	Section 6.01
	 	Supplemental Indentures Without Consent of Noteholders	 	 	14	 
	Section 6.02
	 	Modification and Amendment with Consent of Noteholders	 	 	14	 
	Section 6.03
	 	Effect of Supplemental Indentures	 	 	15	 

i

 

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	 
	 	ARTICLE 7	 	 	 	 
	 
	 	Consolidation, Merger, Sale, Conveyance and Lease	 	 	 	 
	 
	 	 	 	 	 	 
	Section 7.01
	 	Company May Consolidate, Etc. on Certain Terms	 	 	15	 
	 
	 	 	 	 	 	 
	 
	 	ARTICLE 8	 	 	 	 
	 
	 	Exchange of Notes	 	 	 	 
	 
	 	 	 	 	 	 
	Section 8.01
	 	Exchange	 	 	15	 
	Section 8.02
	 	Exchange Procedures	 	 	19	 
	Section 8.03
	 	Reserved	 	 	23	 
	Section 8.04
	 	Adjustment of Exchange Rate	 	 	23	 
	Section 8.05
	 	Sufficient Shares to be Delivered	 	 	30	 
	Section 8.06
	 	Effect of Reclassification, Consolidation, Merger or Sale	 	 	30	 
	Section 8.07
	 	Certain Covenants	 	 	32	 
	Section 8.08
	 	Responsibility of Trustee	 	 	32	 
	Section 8.09
	 	Notice to Holders Prior to Certain Actions	 	 	32	 
	Section 8.10
	 	Shareholder Rights Plans	 	 	33	 
	Section 8.11
	 	Ownership Limit	 	 	33	 
	Section 8.12
	 	Net Share Settlement Election	 	 	33	 
	Section 8.13
	 	Registration of Common Shares	 	 	33	 
	 
	 	 	 	 	 	 
	 
	 	ARTICLE 9	 	 	 	 
	 
	 	Repurchase of Notes at Option of Holders	 	 	 	 
	 
	 	 	 	 	 	 
	Section 9.01
	 	Repurchase of Securities at Option of the Holder on Specified Dates	 	 	34	 
	Section 9.02
	 	Repurchase at Option of Holders Upon a Fundamental Change	 	 	38	 
	 
	 	 	 	 	 	 
	 
	 	ARTICLE 10	 	 	 	 
	 
	 	Miscellaneous Provisions	 	 	 	 
	 
	 	 	 	 	 	 
	Section 10.01
	 	Ratification of Base Indenture	 	 	41	 
	Section 10.02
	 	Provisions Binding on Company’s Successors	 	 	41	 
	Section 10.03
	 	Official Acts by Successor Corporation	 	 	41	 
	Section 10.04
	 	Addresses for Notices, Etc.	 	 	41	 
	Section 10.05
	 	Governing Law	 	 	42	 
	Section 10.06
	 	Evidence of Compliance with Conditions Precedent; Certificates and Opinions of Counsel to Trustee	 	 	42	 
	Section 10.07
	 	Non-Business Day	 	 	42	 
	Section 10.08
	 	No Security Interest Created	 	 	42	 
	Section 10.09
	 	Benefits of Indenture	 	 	42	 
	Section 10.10
	 	Table of Contents, Headings, Etc.	 	 	42	 
	Section 10.11
	 	Execution in Counterparts	 	 	43	 
	Section 10.12
	 	Trustee	 	 	43	 
	Section 10.13
	 	Further Instruments and Acts	 	 	43	 
	Section 10.14
	 	Waiver of Jury Trial	 	 	43	 
	Section 10.15
	 	Force Majeure	 	 	43	 

ii

 

     THIRD SUPPLEMENTAL INDENTURE dated as of July 14, 2006 (the “Third Supplemental Indenture”),
by and between ARCHSTONE-SMITH OPERATING TRUST (formerly known Archstone Communities Trust and
prior thereto as Security Capital Pacific Trust and Property Trust of America), a real estate
investment trust organized under the laws of the State of Maryland having its principal office at
9200 E. Panorama Circle, Suite 400, Englewood, Colorado 80112 (hereinafter sometimes called the
“Company”), and U.S. BANK NATIONAL ASSOCIATION (as successor in interest to State Street Bank and
Trust Company), a national banking association having a corporate trust office at 100 Wall Street,
Suite 1600, New York, New York 10005, as successor trustee under the Base Indenture (as defined
below)(the “Trustee”).

W I T N E S S E T H:

     WHEREAS, the Company has heretofore delivered to the Trustee an indenture dated as of February
1, 1994 (the “Base Indenture”) by and between Property Trust of America (as the Company was
formerly known) and Morgan Guaranty Trust Company of New York (as predecessor to State Street Bank
and Trust Company, which became the successor trustee pursuant to the First Supplemental Indenture,
as defined below) providing for the issuance by the Company from time to time of its senior debt
securities evidencing its unsecured and unsubordinated indebtedness (the “Securities”); and

     WHEREAS, Section 301 of the Base Indenture provides for various matters with respect to any
series of Securities issued under the Base Indenture to be established in an indenture supplemental
to the Base Indenture; and

     WHEREAS, Section 901(7) of the Base Indenture provides for the Company and the Trustee to
enter into an indenture supplemental to the Base Indenture to establish the form or terms of
Securities of any series as provided by Section 201 and Section 301 of the Base Indenture; and

     WHEREAS, the terms of the Base Indenture, other than Section 801, Section 1004, Article 12 and
Article 13 thereof, as amended and supplemented by the first supplemental indenture thereto, dated
as of February 2, 1994 (the “First Supplemental Indenture”), and except as otherwise provided in
this Third Supplemental Indenture, are binding upon the Notes (as defined below) issued pursuant to
this Third Supplemental Indenture (together with the Base Indenture and the First Supplemental
Indenture, the “Indenture”); and

     WHEREAS, the terms of this Third Supplemental Indenture apply only to the Notes (as defined
below), which Notes shall be subject to additional issuances at the discretion of the Company
pursuant to Section 2.07; and

     WHEREAS, the second supplemental indenture to the Base Indenture, dated as of August 2, 2004
(the “Second Supplemental Indenture”), does not apply to the Notes (as defined below); and

     WHEREAS, for its lawful corporate purposes, the Company has duly authorized the issuance of
its 4.00% Exchangeable Senior Notes Due 2036 (hereinafter referred to as the

 

 

“Notes”), initially in an aggregate principal amount not to exceed $575,000,000, and in order
to provide the terms and conditions upon which the Notes are to be authenticated, issued and
delivered, the Company and the board of trustees of Archstone-Smith Trust, a Maryland real estate
investment trust (“Archstone-Smith Trust”), on behalf of Archstone-Smith Trust, including in
Archstone-Smith Trust’s capacity as the sole trustee of the Company, have each duly authorized the
execution and delivery of this Third Supplemental Indenture; and

     WHEREAS, the Notes (including the certificate of authentication to be borne by the Notes), a
form of Put Right Repurchase Notice, a form of Fundamental Change Repurchase Notice, a form of
Exchange Notice and a form of assignment and transfer are to be substantially in the forms
hereinafter provided for; and

     WHEREAS, all acts and things necessary to make the Notes, when executed by the Company and
authenticated and delivered by the Trustee or a duly authorized Authenticating Agent, as in this
Indenture provided, the valid, binding and legal obligations of the Company, and to constitute
these presents a valid agreement according to its terms, have been done and performed, and the
execution of this Third Supplemental Indenture and the issue hereunder of the Notes have in all
respects been duly authorized.

     NOW, THEREFORE, THIS THIRD SUPPLEMENTAL INDENTURE WITNESSETH:

     That in order to declare the terms and conditions upon which the Notes are, and are to be,
authenticated, issued and delivered, and in consideration of the premises and of the purchase and
acceptance of the Notes by the Holders thereof, the Company covenants and agrees with the Trustee
for the equal and proportionate benefit of the respective Holders from time to time of the Notes
(except as otherwise provided below), as follows:

ARTICLE 1

Definitions

     Section 1.01 Relation to Base Indenture and Supplemental Indentures.

     (a) This Third Supplemental Indenture shall constitute an Integral part of the Base Indenture.

     (b) Section 801, Section 1004, Article 12 and Article 13 of the Base Indenture shall not apply
to the Notes, and the Second Supplemental Indenture shall not apply to the Notes;

     Section 1.02 Definitions. For all purposes of this Third Supplemental Indenture, except as
otherwise expressly provided for or unless the context otherwise requires:

     (a) Capitalized terms used but not defined herein shall have the respective meanings assigned
to them in the Base Indenture;

     (b) Terms defined both herein and in the Base Indenture shall have the meanings assigned to
them herein;

2

 

     (c) All references herein to Articles and Sections, unless otherwise specified, refer to the
corresponding Articles and Sections of this Third Supplemental Indenture; and

     (d) All other terms used in this Third Supplemental Indenture, which are defined in the Trust
Indenture Act or which are by reference therein defined in the Securities Act (except as herein
otherwise expressly provided or unless the context otherwise requires) shall have the meanings
assigned to such terms in the Trust Indenture Act and in the Securities Act as in force at the date
of the execution of this Third Supplemental Indenture. The words “herein,” “hereof,” “hereunder,”
and words of similar import refer to this Third Supplemental Indenture as a whole and not to any
particular Article, Section or other Subdivision. The terms defined in this Article include the
plural as well as the singular.

     “Additional Settlement Consideration” shall have the meaning specified in Section 8.02(k).

     “Additional Shares” shall have the meaning specified in Section 8.01(g).

     “Archstone-Smith Trust” shall have the meaning specified in the Recitals.

     “Base Indenture” shall have the meaning specified in the Recitals.

     “Board of Trustees” means the board of trustees of Archstone-Smith Trust, acting on behalf of
Archstone-Smith Trust as the sole trustee of the Company.

     “Close of Business” means 5:00 p.m. (New York City time).

     “Common Shares” means, subject to Section 8.06, the common shares of beneficial interest of
Archstone-Smith Trust, par value $0.01 per share, at the date of this Third Supplemental Indenture
or shares of any class or classes resulting from any reclassification or reclassifications thereof
and that have no preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding up of Archstone-Smith Trust and that
are not subject to redemption by Archstone-Smith Trust; provided that if at any time there shall be
more than one such resulting class, the shares of each such class then so issuable shall be
substantially in the proportion which the total number of shares of such class resulting from all
such reclassifications bears to the total number of shares of all such classes resulting from all
such reclassifications.

     “Common Units” means the Class A-1 common units of beneficial interest, par value $0.01 per
unit, of the Company.

     “Company” shall have the meaning specified in the Preamble, and subject to the provisions of
Article 7, shall include its successors and assigns.

     “Company Put Right Notice” shall have the meaning specified in Section 9.01(c).

     “Company Put Right Notice Date” shall have the meaning specified in Section 9.01(c).

3

 

     “Daily Exchange Value” means, for each of the 20 consecutive Trading Days during the
Observation Period, one-twentieth (1/20) of the product of (a) the applicable Exchange Rate and (b)
the Daily VWAP of the Common Shares (or the Reference Property, if applicable) on such day.

     “Daily Settlement Amount,” for each of the 20 Trading Days during the Observation Period,
shall consist of:

     (i) cash in an amount equal to the Specified Percentage, multiplied by the
Daily Exchange Value relating to such day or equal to the Specified Amount (or, if
the Company makes the Net Share Settlement Election, cash in an amount equal to not
less than the lower of $50 and the Daily Exchange Value relating to such day); and

     (ii) a number of Common Shares equal to (x) the difference between such Daily
Exchange Value and the Specified Amount (to the extent that the Specified Amount is
greater than zero), divided by (y) the Daily VWAP of the Common Shares for such day.

     “Daily VWAP” for each Common Share means, for each of the 20 consecutive Trading Days during
the Observation Period, the per share volume-weighted average price as displayed under the heading
“Bloomberg VWAP” on Bloomberg page [ASN<equity> AQR] in respect of the period from 9:30 a.m.
to 4:00 p.m. (New York City time) on such Trading Day (or if such volume-weighted average price is
unavailable, the market value of one Common Share on such Trading Day as the Board of Trustees
determines in good faith using a volume-weighted method).

     “Depositary” means, with respect to the Notes issuable or issued in whole or in part in global
form, the person specified in the Base Indenture as the Depositary with respect to such Notes,
until a successor shall have been appointed and become such pursuant to the applicable provisions
of this Indenture, and thereafter, “Depositary” shall mean or include such successor.

     “Distributed Property” shall have the meaning specified in Section 8.04(c).

     “Dividend Threshold Amount” shall have the meaning specified in Section 8.04(d).

     “Effective Date” shall have the meaning specified in Section 8.01(g)(ii).

     “Event of Default” means, with respect to the Notes, any event specified in Section 5.01,
continued for the period of time, if any, and after the giving of notice, if any, therein
designated.

     “Ex-Dividend Date” means, (a) with respect to Section 8.01(e), the first date upon which a
sale of a Common Share does not automatically transfer the right to receive the relevant dividend
from the seller of the Common Shares to its buyer, and (b) in all other cases, with respect to any
issuance or distribution on the Common Shares or any other equity security, the first date on which
the Common Shares or such other equity security trade on the applicable
exchange or in the applicable market, regular way, without the right to receive such issuance
or distribution.

4

 

     “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.

     “Exchange Agent” shall mean the Trustee or any successor office or agency where the Notes may
be surrendered for exchange.

     “Exchange Date” shall have the meaning specified in Section 8.02(c).

     “Exchange Obligation” shall have the meaning specified in Section 8.01(a).

     “Exchange Price” means as of any date $1,000 divided by the Exchange Rate as of such date.

     “Exchange Rate” shall have the meaning specified in Section 8.01(a).

     “Exchange Trigger Price” shall have the meaning specified in Section 8.01(c).

     “First Supplemental Indenture” shall have the meaning specified in the Recitals.

     “Fundamental Change” shall be deemed to occur upon the consummation of any transaction or
event (whether by means of an exchange offer, liquidation, tender offer, consolidation, merger,
combination, reclassification, recapitalization or otherwise) in connection with which more than
50% of the Common Shares are exchanged for, converted into, acquired for or constitutes solely the
right to receive, consideration which is not at least 90% common equity (or American Depositary
Shares representing shares of common equity) that is: (a) listed on, or immediately after the
consummation of such transaction or event, will be listed on, a United States national securities
exchange, or (b) approved, or immediately after such transaction or event will be approved, for
quotation on the Nasdaq Global Market or any similar United States system of automated
dissemination of quotations of securities prices.

     “Fundamental Change Company Notice” shall have the meaning specified in Section 9.02(b).

     “Fundamental Change Repurchase Date” shall have the meaning specified in Section 9.02(a).

     “Fundamental Change Repurchase Notice” shall have the meaning specified in Section 9.02(a)(i).

     “Fundamental Change Repurchase Price” shall have the meaning specified in Section 9.02(a).

     “Global Note” shall have the meaning specified in Section 2.06(b).

     “Indenture” shall have the meaning specified in the Recitals.

     “Interest Payment Date” means January 15 and July 15 of each year, beginning on January 15,
2007.

5

 

     “Last Reported Sale Price” means, with respect to the Common Shares or any other security for
which a Last Reported Sale Price must be determined, on any date, the closing sale price per share
of the Common Shares or unit of such other security (or, if no closing sale price is reported, the
average of the last bid and last ask prices or, if more than one in either case, the average of the
average last bid and the average last ask prices) on such date as reported in composite
transactions for the principal U.S. securities exchange on which the Common Shares or such other
security is traded or, if the Common Shares or such other security are not listed on a U.S.
national or regional securities exchange, as reported by the Nasdaq Global Market. If the Common
Shares or such other security are not listed for trading on a United States national or regional
securities exchange and not reported by the Nasdaq Global Market on the relevant date, the Last
Reported Sale Price shall be the last quoted bid price per Common Share or such other security in
the over-the-counter market on the relevant date, as reported by the National Quotation Bureau or
similar organization. If the Common Shares or such other security is not so quoted, the Last
Reported Sale Price shall be the average of the mid-point of the last bid and ask prices for the
Common Shares or such other security on the relevant date from each of at least three nationally
recognized independent investment banking firms selected from time to time by the Board of Trustees
for that purpose. The Last Reported Sale Price shall be determined without reference to extended
or after hours trading.

     “Market Disruption Event” means the occurrence or existence for more than a one-half hour
period in the aggregate on any scheduled Trading Day for the Common Shares of any suspension or
limitation imposed on trading (by reason of movements in price exceeding limits permitted by the
applicable stock exchange or otherwise) in the Common Shares or in any options, contracts or future
contracts relating to the Common Shares, and such suspension or limitation occurs or exists at any
time before 1:00 p.m. (New York City time) on such day.

     “Maturity Date” means July 15, 2036, unless the Notes are earlier repurchased, exchanged or
redeemed.

     “Measurement Period” shall have the meaning specified in Section 8.01(b).

     “Merger Event” shall have the meaning specified in Section 8.06.

     “Net Share Settlement Election” shall have the meaning specified in Section 8.12.

     “Noteholder” or “Holder,” as applied to any Note, or other similar terms, means any person in
whose name at the time a particular Note is registered on the Security Register.

     “Notice of Exchange” shall have the meaning specified in Section 8.02(c).

     “Observation Period” means the 20 consecutive Trading Day period beginning on and including
the second Trading Day after the related Exchange Date in respect of such Note.

     “Predecessor Note” of any particular Note means every previous Note evidencing all or a
portion of the same debt as that evidenced by such particular Note; and, for the purposes of this
definition, any Note authenticated and delivered under Section 306 of the Base Indenture in
lieu of a lost, destroyed or stolen Note shall be deemed to evidence the same debt as the lost,
destroyed or stolen Note that it replaces.

6

 

     “Put Right Repurchase Date” shall have the meaning assigned to it in Section 9.01(b).

     “Put Right Repurchase Notice” shall have the meaning assigned to it in Section 9.01(b)(i).

     “Put Right Repurchase Price” shall have the meaning assigned to it in Section 9.01(b).

     “Record Date,” with respect to the payment of interest on any Interest Payment Date, shall
have the meaning specified in Section 2.03, and with respect to Section 8.04, shall have the
meaning specified in Section 8.04(f).

     “Redemption Price” shall have the meaning specified in Section 3.01(c).

     “Reference Property” shall have the meaning specified in Section 8.06(b).

     “Second Supplemental Indenture” shall have the meaning specified in the Recitals.

     “Securities” shall have the meaning specified in the Recitals.

     “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.

     “Specified Amount” and “Specified Percentage” mean the aggregate principal amount of Notes, or
percentage thereof, respectively, for which the Company elects to pay cash pursuant to Section 8.01
and Section 8.12 herein; provided that the Company may provide that the Specified Amount or
Specified Percentage for any Trading Day will not be in excess of the Daily Exchange Value.

     “Spin-Off” shall have the meaning specified in Section 8.04(c).

     “Share Price” means the price paid per Common Share in connection with a Fundamental Change
pursuant to which Additional Shares shall be added to the Exchange Rate as set forth in Section
8.01(e)(ii), which shall be equal to (i) if Holders of Common Shares receive only cash in such
Fundamental Change, the cash amount paid per Common Share and (ii) in all other cases, the average
of the Last Reported Sale Prices of the Common Shares over the five consecutive Trading Day period
ending on the Trading Day preceding the Effective Date of the Fundamental Change.

     “Third-Party Financial Institution” shall have the meaning specified in Section 8.01(b).

     “Third Supplemental Indenture” shall have the meaning specified in the Preamble.

     “Trading Day” means a day during which (i) trading in Common Shares generally occurs, (ii)
there is no Market Disruption Event and (iii) a Last Reported Sale Price for Common
Shares (other than a Last Reported Sale Price referred to in the next to last sentence of such
definition) is available for such day; provided that if the Common Shares is not admitted for
trading or quotation on or by any exchange, bureau or other organization referred to in the
definition of Last Reported Sale Price (excluding the next to last sentence of that definition),
Trading Date shall mean any Business Day.

7

 

     “Trading Price” with respect to the Notes, on any date of determination, means the average of
the secondary market bid quotations obtained by the Trustee for $2.0 million principal amount of
Notes at approximately 3:30 p.m., New York City time, on such determination date from three
independent nationally recognized securities dealers selected by the Company; provided that if
three such bids cannot reasonably be obtained by the Trustee, but two such bids are obtained, then
the average of the two bids shall be used, and if only one such bid can reasonably be obtained by
the Trustee, that one bid shall be used. If the Trustee cannot reasonably obtain at least one bid
for $2.0 million principal amount of Notes from a nationally recognized securities dealer, then the
Trading Price per $1,000 principal amount of Notes will be deemed to be less than 98% of the
product of the Last Reported Sale Price of the Common Shares and the Exchange Rate.

     “Trigger Event” shall have the meaning specified in Section 8.04(c).

     “Trustee” shall have the meaning specified in the Preamble until a successor trustee shall
have become such pursuant to the applicable provisions of the Indenture. The Trustee shall
initially serve as the Security Registrar and Paying Agent for the Notes.

     “Trust Indenture Act” refers to the Trust Indenture Act of 1939, as amended, and the rules and
regulations promulgated thereunder.

ARTICLE 2

Issue, Description, Execution, Registration and Exchange of Notes

     Section 2.01 Designation and Amount. The Notes shall be designated as the “4.00% Exchangeable
Senior Notes Due 2036.” The aggregate principal amount of Notes that may be authenticated and
delivered under this Third Supplemental Indenture is initially limited to $575,000,000, subject to
Section 2.07 and except for Notes authenticated and delivered upon registration or transfer of, or
in exchange for, or in lieu of other Notes pursuant Section 2.06, Section 8.02 and Section 9.02
hereof and Sections 303,304, 305, 306, 906 and 1107 of the Base Indenture.

     Section 2.02 Form of Notes. The Notes and the Trustee’s certificate of authentication to be borne
by such Notes shall be substantially in the form set forth in Exhibit A.

     Any of the Notes may have such letters, numbers or other marks of identification and such
notations, legends or endorsements as the officers executing the same may approve (execution
thereof to be conclusive evidence of such approval) and as are not inconsistent with the provisions
of this Indenture, or as may be required to comply with any law or with any rule
or regulation made pursuant thereto or with any rule or regulation of any securities exchange
or automated quotation system on which the Notes may be listed or designated for issuance, or to
conform to usage or to indicate any special limitations or restrictions to which any particular
Notes are subject.

8

 

     The Global Note shall represent such principal amount of the Outstanding Notes as shall be
specified therein and shall provide that it shall represent the aggregate principal amount of
Outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of
Outstanding Notes represented thereby may from time to time be increased or reduced to reflect
repurchases, exchanges, transfers or exchanges permitted hereby. Any endorsement of the Global
Note to reflect the amount of any increase or decrease in the amount of Outstanding Notes
represented thereby shall be made by the Trustee or the Custodian, at the direction of the Trustee,
in such manner and upon instructions given by the Holder of such Notes in accordance with this
Indenture. Payment of principal and accrued and unpaid interest on the Global Note shall be made
to the Holder of such Note on the date of payment, unless a Record Date or other means of
determining Holders eligible to receive payment is provided for herein.

     The terms and provisions contained in the form of Note attached as Exhibit A hereto are
incorporated herein and shall constitute, and are hereby expressly made, a part of this Third
Supplemental Indenture and to the extent applicable, the Company and the Trustee, by their
execution and delivery of this Third Supplemental Indenture, expressly agree to such terms and
provisions and to be bound thereby.

     Section 2.03 Date and Denomination of Notes; Payments of Interest. The Notes shall be issuable in
registered form without coupons in denominations of $1,000 principal amount and integral multiples
thereof. Each Note shall be dated the date of its authentication and shall bear interest from the
date specified on the face of the form of Note attached as Exhibit A hereto. Interest on the Notes
shall be computed on the basis of a 360-day year comprised of twelve 30-day months.

     The Person in whose name any Note (or its Predecessor Note) is registered on the Security
Register at the Close of Business on any Record Date with respect to any Interest Payment Date
shall be entitled to receive the interest payable on such Interest Payment Date. Interest shall be
payable at the office of the Company maintained by the Company for such purposes, which shall
initially be an office or agency of the Trustee. The Company shall pay interest (i) on any Notes
in certificated form by check mailed to the address of the Person entitled thereto as it appears in
the Security Register (or upon written application by such Person to the Security Registrar not
later than the relevant record date, by wire transfer in immediately available funds to such
Person’s account within the United States, if such Person is entitled to interest on an aggregate
principal amount in excess of $1,000,000) or (ii) on any Global Note by wire transfer of
immediately available funds to the account of the Depositary or its nominee. The term “Record
Date” with respect to any Interest Payment Date shall mean the January 1 or July 1 preceding the
applicable January 15 or July 15 Interest Payment Date, respectively.

     Section 2.04
Reserved.Execution, Authentication and Delivery of Notes. The Notes
shall be signed in the name and on behalf of the Company by the manual or facsimile signature of
its Chairman or Vice-Chairman of the Board of Trustees, Chief Executive Officer, President, any of
its Executive or Senior Vice Presidents, Managing Director, or any of its Vice Presidents (whether
or not designated by a number or numbers or word or words added before or after the title “Vice
President”).

9

 

     At any time and from time to time after the execution and delivery of this Third Supplemental
Indenture, the Company may deliver Notes executed by the Company to the Trustee for authentication,
together with a Company Order for the authentication and delivery of such Notes, and the Trustee in
accordance with such Company Order shall authenticate and deliver such Notes, without any further
action by the Company hereunder.

     Only such Notes as shall bear thereon a certificate of authentication substantially in the
form set forth on the form of Note attached as Exhibit A hereto, manually executed by the Trustee
(or an Authenticating Agent appointed by the Trustee as provided by Section 611 of the Base
Indenture), shall be entitled to the benefits of this Third Supplemental Indenture or be valid or
obligatory for any purpose. Such certificate by the Trustee (or such an Authenticating Agent) upon
any Note executed by the Company shall be conclusive evidence that the Note so authenticated has
been duly authenticated and delivered hereunder and that the Holder is entitled to the benefits of
this Third Supplemental Indenture.

     In case any officer of the Company who shall have signed any of the Notes shall cease to be
such officer before the Notes so signed shall have been authenticated and delivered by the Trustee,
or disposed of by the Company, such Notes nevertheless may be authenticated and delivered or
disposed of as though the person who signed such Notes had not ceased to be such officer of the
Company; and any Note may be signed on behalf of the Company by such persons as, at the actual date
of the execution of such Note, shall be the proper officers of the Company, although at the date of
the execution of this Third Supplemental Indenture any such person was not such an officer.

     Section 2.06 Exchange and Registration of Transfer of Notes; Restrictions on Transfer;
Depositary.

     (a) The Company shall provide for the registration of transfers or exchange of the Notes in
the Security Register. Upon surrender for registration of transfer of any Note to the Security
Registrar or any co-registrar, and satisfaction of the requirements for such transfer set forth in
this Section 2.06, the Company shall execute, and the Trustee shall authenticate and deliver, in
the name of the designated transferee or transferees, one or more new Notes of any authorized
denominations and of a like aggregate principal amount and bearing such restrictive legends as may
be required by this Third Supplemental Indenture (if any).

     Notes may be exchanged for other Notes of any authorized denominations and of a like aggregate
principal amount, upon surrender of the Notes to be exchanged at any such office or agency
maintained by the Company pursuant to Section 4.02. Whenever any Notes are so surrendered for
exchange, the Company shall execute, and the Trustee shall authenticate and
deliver, the Notes which the Noteholder making the exchange is entitled to receive, bearing
registration numbers not contemporaneously outstanding.

     All Notes presented or surrendered for registration of transfer or for exchange, repurchase or
exchange shall (if so required by the Company, the Trustee, the Security Registrar or any
co-registrar) be duly endorsed, or be accompanied by a written instrument or instruments of
transfer in form satisfactory to the Company and duly executed, by the Noteholder thereof or his
attorney-in-fact duly authorized in writing.

10

 

     No service charge shall be charged to the Noteholder for any exchange or registration of
transfer of Notes, but the Company or the Trustee may require payment of a sum sufficient to cover
any tax, assessments or other governmental charges that may be imposed in connection therewith.

     None of the Company, the Trustee, the Security Registrar or any co-registrar shall be required
to exchange or register a transfer of (a) any Notes surrendered for exchange or, if a portion of
any Note is surrendered for exchange, such portion thereof surrendered for exchange or (b) any
Notes, or a portion of any Note, surrendered for repurchase (and not withdrawn), in accordance with
Article 9 hereof.

     All Notes issued upon any registration of transfer or exchange of Notes in accordance with
this Third Supplemental Indenture shall be the valid obligations of the Company, evidencing the
same debt, and entitled to the same benefits under this Indenture as the Notes surrendered upon
such registration of transfer or exchange.

     (b) So long as the Notes are eligible for book-entry settlement with the Depositary, unless
otherwise required by law, all Notes shall be represented by one or more Notes in global form
(each, a “Global Note”) registered in the name of the Depositary or the nominee of the Depositary.
The transfer and exchange of beneficial interests in a Global Note, which does not involve the
issuance of a definitive Note, shall be effected through the Depositary (but not the Trustee or the
Custodian) in accordance with this Indenture (including the restrictions on transfer set forth
herein) and the procedures of the Depositary therefor.

     Section 2.07 Additional Notes; Repurchases. The Company may, without the consent of the
Noteholders and notwithstanding Section 2.01, reopen the Notes and issue additional Notes hereunder
with the same terms and with the same CUSIP number as the Notes initially issued hereunder in an
unlimited aggregate principal amount, which will form the same series with the Notes initially
issued hereunder, provided that no such additional Notes may be issued unless fungible with the
Notes initially issued hereunder for U.S. federal income tax purposes. The Company may also from
time to time repurchase the Notes in open market purchases or negotiated transactions without prior
notice to Noteholders.

     Section 2.08 No Sinking Fund. The provisions of Article Twelve of the Base Indenture shall not be
applicable to the Notes. No sinking fund is provided for the Notes.

     Section 2.09 Ranking. The Notes constitute a senior unsecured general obligation of the Company,
ranking equally with other existing and future senior unsecured and unsubordinated indebtedness of
the Company and ranking senior in right of payment to any future indebtedness of the Company that
is expressly made subordinate to the Notes by the terms of such indebtedness.

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ARTICLE 3

Redemption

     Section 3.01 Right to Redeem.

     (a) Notwithstanding any provision of the Base Indenture, as modified by this Third
Supplemental Indenture, to the contrary, the Company may redeem the Notes at any time, in whole but
not in part, in order to preserve the status of Archstone-Smith Trust as a real estate investment
trust under the Code.

     (b) The Company, at its option, may redeem the Notes from time to time in whole or in part on
or after July 18, 2011 if the Company has made at least 10 semi-annual interest payments (including
the interest payments on January 15, 2007, and July 15, 2011) in the full amount required by this
Indenture; provided that the Company may not provide notice of a redemption of Notes at the
Company’s option that specifies that the Company will settle exchanges of Notes prior to such
redemption in cash, Common Shares or a combination thereof unless, at the time of such notice, the
Company has available to it sufficient registered Common Shares to satisfy its Exchange Obligation
in respect of the Notes to be redeemed.

     (c) Any redemption of Notes shall be at a redemption price equal to 100% of the principal
amount of the Notes being redeemed, plus accrued and unpaid interest, if any, to the Redemption
Date (the “Redemption Price”); provided, however, that the Company may deduct from such Redemption
Price any amount required to be deducted and withheld under applicable law.

     Section 3.02 Selection of Notes to be Redeemed.

     (a) The provisions of Section 1103 of the Base Indenture shall govern the selection of Notes
to be redeemed by the Trustee; provided, however, that if less than all of the Notes are to be
redeemed, the Trustee shall make the selection from the Notes of that series Outstanding and not
previously called for redemption, by lot, or in its discretion, on a pro rata basis.

     (b) If any Note selected for partial redemption is exchanged in part before termination of the
exchange right with respect to the portion of the Note so selected, the exchanged portion of such
Note shall be deemed to be part of the portion selected for redemption. Notes which have been
exchanged subsequent to the Trustee commencing selection of Notes to be redeemed but prior to
redemption of such Notes shall be treated by the Trustee as Outstanding for the purpose of such
selection.

     Section 3.03 Notice of Redemption. The provisions of Section 1104 of the Base Indenture shall govern notices of redemption of the
Notes; provided, however, that in addition to the information specified in Section 1104 of the Base
Indenture, notices of redemption of the Notes shall also state:

     (a) the then-current Exchange Price;

     (b) the name and address of the Exchange Agent; and

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     (c) that Holders who wish to exchange Notes must surrender such Notes for exchange no later
than the Close of Business on the second Business Day immediately preceding the Redemption Date and
must satisfy the other requirements set forth herein.

ARTICLE 4

Particular Covenants of the Company

     Section 4.01 Payment of Principal and Interest. (a) Section 307 and Section 1001 of the Base
Indenture shall apply to the Notes; provided, however, that, with respect to any Noteholder with an
aggregate principal amount in excess of $1,000,000, at the application of such Holder in writing to
the Security Registrar not later than the relevant Record Date, accrued and unpaid interest on such
Holder’s Notes shall be paid by wire transfer in immediately available funds to such Holder’s
account in the United States supplied by such Holder from time to time to the Trustee and Paying
Agent (if different from Trustee); provided further that payment of accrued and unpaid interest
made to the Depositary shall be paid by wire transfer in immediately available funds in accordance
with such wire transfer instructions and other procedures provided by the Depositary from time to
time.

     (a) Except as otherwise provided in this Section 4.01(b), a Holder of any Notes at the Close
of Business on a Record Date shall be entitled to receive interest on such Notes on the
corresponding Interest Payment Date. A Holder of any Notes as of a Record Date that are exchanged
after the Close of Business on such Record Date and prior to the opening of business on the
corresponding Interest Payment Date shall be entitled to receive interest on the principal amount
of such Notes, notwithstanding the exchange of such Notes prior to such Interest Payment Date.
However, a Holder that surrenders any Notes for exchange between the Close of Business on a Record
Date and the opening of business on the corresponding Interest Payment Date shall be required to
pay the Company an amount equal to the interest payable by the Company with respect to such Notes
on such Interest Payment Date at the time such Holder surrenders such Securities for exchange,
provided, however, that this sentence shall not apply to a Holder that converts Securities:

     (i) in respect of which the Company has given notice of redemption pursuant to
Section 3.03 on a Redemption Date that is after the relevant Record Date and on or
prior to the relevant Interest Payment Date; or

     (ii) to the extent of any overdue interest, if any overdue interest exists at
the time of exchange with respect to such Notes.

     Accordingly, a Holder that converts Notes under any of the circumstances described in clauses
(i) or (ii) above will not be required to pay to the Company an amount equal to the interest
payable by the Company with respect to such Notes on the relevant Interest Payment Date.

     Section 4.02 No Limitation on Incurrence of Debt.. The provisions of Section 1004 of the Base
Indenture shall not be applicable to the Notes.

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ARTICLE 5

Defaults and Remedies

     Section 5.01 Events of Default. The provisions of Sections 501(3), (5) and (6) of the Base
Indenture shall not be applicable to the Notes. As contemplated under Section 501(9) of the Base
Indenture, the following events, in addition to the events described in Sections 501(1), (2),(4),
(7) and (8) of the Base Indenture, shall be Events of Default with respect to the Notes:

     (a) failure by the Company to comply with its obligation to exchange the Notes into cash,
Common Shares or a combination of cash and Common Shares, as applicable, upon exercise of a
Holder’s exchange right, and such failure continues for a period of 10 days;

     (b) failure by the Company to issue a Fundamental Change Company Notice in accordance with
Section 9.02(b) when due, and such failure continues for a period of two days;

     (c) default by the Company in the payment of an aggregate principal amount exceeding
$50,000,000 on any evidence of indebtedness of the Company or any mortgage, indenture or other
instrument of the Company under which the indebtedness is issued or by which the indebtedness is
secured, such default having occurred after the expiration of any applicable grace period and
having resulted in the acceleration of the maturity of the indebtedness, but only if the
indebtedness is not discharged or the acceleration is not rescinded or annulled; and

     (d) the entry by a court of competent jurisdiction of one or more judgments, orders or decrees
against the Company or any of its Subsidiaries in an aggregate amount, excluding amounts fully
covered by insurance, in excess of $50,000,000 and such judgments, orders or decrees remain
undischarged, unstayed and unsatisfied in an aggregate amount, excluding amounts fully covered by
insurance, in excess of $50,000,000 for a period of 30 consecutive days.

ARTICLE 6

Supplemental Indentures

     Section 6.01 Supplemental Indentures Without Consent of Noteholders. The provisions of Section 901
of the Base Indenture shall be applicable to the Notes.

     Section 6.02 Modification and Amendment with Consent of Noteholders. The provisions of Section 902
of the Base Indenture shall be applicable to the Notes. With the consent of the Holders of not
less than a majority in aggregate principal amount of the Notes at the time Outstanding, by Act of
said Holders delivered to the Company and the Trustee, the Company, when authorized by or pursuant
to a Resolution of the Board of Trustees, and the Trustee may enter into an indenture or indentures
supplemental to this Indenture, for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Indenture, or of modifying in any manner the
rights of the Holders of Notes and any related coupons under this Indenture; provided, however,
that no such supplemental indenture shall, without the consent of the Holder of each Note affected
thereby, modify this Indenture in any manner specified in Section 902 of the Base Indenture or, in
addition thereto, either of the following:

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     (a) make any change that adversely affects the exchange rights of any Notes; or

     (b) reduce the Fundamental Change Repurchase Price, Redemption Price or Put Right Repurchase
Price of any Note or amend or modify in any manner adverse to the Holders of the Notes the
Company’s obligation to make such payments, whether through an amendment or waiver of provisions in
the covenants, definitions or otherwise.

     Section 6.03 Effect of Supplemental Indentures. Upon the execution of any supplemental indenture
under this Article, this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder of Notes
theretofore or thereafter authenticated and delivered under this Indenture and of any coupon
appertaining thereto shall be bound thereby.

ARTICLE 7

Consolidation, Merger, Sale, Conveyance and Lease

     Section 7.01 Company May Consolidate, Etc. on Certain Terms. Section 801 of the Base Indenture
shall not be applicable to the Notes and in its place and stead the following provision shall be
applicable:

     The Company may consolidate with, or sell, lease or convey all or substantially all of its
assets to, or merge with or into any other entity, provided that in any such case, (1) either the
Company, Archstone-Smith Trust or another Person controlled by Archstone-Smith Trust shall be the
continuing entity, or the successor entity, if other than the Company, formed by or resulting from
the transaction shall be an entity organized and existing under the laws of the United States, any
State thereof or the District of Columbia and such successor entity shall expressly assume the due
and punctual payment of the principal of (and premium or Make-Whole Amount, if any) and interest
(including any Additional Amounts, if any) on the Notes, according to their tenor, and the due and
punctual performance and observance of all of the covenants and conditions of this Indenture, to be
performed by the Company, in a manner satisfactory to the Trustee, executed and delivered to the
Trustee by such entity; immediately after giving effect to such transaction and treating any
indebtedness which becomes an obligation
of the Company or any of its Subsidiaries as a result thereof as having been incurred by the
Company or such Subsidiary at the time of such transaction, no Event of Default, and no event
which, after notice or the lapse of time, or both, would become an Event of Default, shall have
occurred and be continuing; and (3) an Officers’ Certificate and Opinion of Counsel covering such
conditions shall have been delivered to the Trustee. Upon such consolidation, merger or transfer,
the successor entity shall succeed to and may exercise every right and power of the Company under
this Indenture.

ARTICLE 8

Exchange of Notes

     Section 8.01 Exchange.

     (a) Subject to the conditions described in clauses (b) through (f) below and to Section 8.11,
and upon compliance with the provisions of this Article 8, a Holder of Notes shall have the right,
at such Holder’s option, to exchange all or any portion (if the portion to be exchanged is

15

 

$1,000 principal amount or an integral multiple thereof) of such Notes at any time prior to the Close of
Business on the scheduled Trading Day immediately preceding July 18, 2011 at a rate (the “Exchange
Rate”) of 15.7206 Common Shares (subject to adjustment by the Company as provided in Section 8.04)
per $1,000 principal amount Note (the “Exchange Obligation”) under the circumstances and during the
periods set forth below. On and after July 18, 2011, regardless of the conditions described in
clause (b) through (f) below, upon compliance with the provisions of this Article 8 and subject to
Section 8.11 and 8.12, a Noteholder shall have the right, at such Holder’s option, to exchange all
or any portion (if the portion to be exchanged is $1,000 principal amount or an integral multiple
thereof) of such Note at any time prior to the Close of Business on the scheduled Trading Day
immediately preceding the Maturity Date.

     (b) A Holder of Notes shall have the right, at such Holder’s option, to exchange its Notes
prior to July 18, 2011, during the five Business Day period immediately after any ten consecutive
Trading Day period (the “Measurement Period”) in which the Trading Price per $1,000 principal
amount of Notes for each day of such Measurement Period was less than 98% of the product of the
Last Reported Sale Price of the Common Shares on such date and the Exchange Rate on such date, all
as determined by the Trustee (except the Trading Price). The Trustee shall have no obligation to
determine the Trading Price of the Notes. The Company shall request that a third-party nationally
recognized financial institution authorized to do business in the United States of America other
than the Trustee (the “Third-Party Financial Institution”), determine the Trading Price of the
Notes and provide such determination to both the Company and the Trustee in writing; provided that
the Company shall have no obligation to make such request unless a Noteholder or group of
Noteholders representing at least $1,000,000 aggregate principal amount of Notes provides the
Company with reasonable evidence that the Trading Price per $1,000 principal amount of the Notes
would be less than 98% of the product of the Last Reported Sale Price at such time and the
then-applicable Exchange Rate, at which time the Company shall instruct the Third-Party Financial
Institution to determine the Trading Price of the Notes beginning on the next Trading Day and on
each successive Trading Day until the Trading Price per $1,000 principal amount of the Notes is
greater than or equal to 98% of the product of the Last Reported Sale Price on such date and the
then-applicable Exchange Rate. If the Trading Price condition set forth above has been met, the
Company shall so notify the Noteholders. If at any time after the Trading Price condition set forth above has been met,
the Trading Price per $1,000 principal amount of Notes is greater than 98% of the product of the
Last Reported Sale Price on such date and the then-applicable Exchange Rate, the Company shall so
notify the Noteholders.

     (c) A Holder of Notes shall have the right, at such Holder’s option, to exchange Notes during
any calendar quarter after the quarter ended September 30, 2006, and only during such calendar
quarter, if the Last Reported Sale Price for the Common Shares for at least 20 Trading Days during
the period of 30 consecutive Trading Days ending on the last Trading Day of the previous calendar
quarter exceeds 130% of the Exchange Price (the “Exchange Trigger Price”) on such last Trading Day,
which Exchange Price shall be subject to adjustment in accordance with this Article 8. The Company
shall employ a Third-Party Financial Institution to determine at the beginning of each calendar
quarter whether the Notes are exchangeable as a result of the price of Common Shares, and such
Third-Party Financial Institution shall notify the Company and Trustee of its determination.

16

 

     (d) In the event that the Company has delivered a notice of redemption in accordance with
Section 1104 of the Base Indenture and Section 3.03 of this Third Supplemental Indenture to the
Holders of Notes, a Holder of Notes may exchange Notes at any time prior to the Close of Business
on the second Business Day immediately preceding the corresponding Redemption Date; provided,
however, that a Holder who has delivered a Fundamental Change Repurchase Notice with respect to a
Note may not exchange such Note until the Holder has withdrawn the Fundamental Change Repurchase
Notice in accordance with the terms of the Note and this Third Supplemental Indenture.

     (e) (i) In the event that the Company or Archstone-Smith Trust elects to:

     (A) distribute to all or substantially all Holders of Common Shares
rights entitling them to purchase, for a period expiring within 60 days
after the Record Date for such distribution, Common Shares at a price less
than the Last Reported Sale Price of the Common Shares for the Trading Day
immediately preceding the declaration date of such distribution; or

     (B) distribute to all or substantially all Holders of Common Shares,
assets or debt securities of the Company or Archstone-Smith Trust or rights
to purchase the Company’s or Archstone-Smith Trust’s securities, which
distribution has a per share value (as determined by the Board of Trustees)
exceeding 15% of the Last Reported Sale Price of the Common Shares on the
day immediately preceding the date of declaration of such distribution,

then, in either case, Holders may surrender the Notes for exchange at any time on and after
the date that the Company provides notice to Holders referred to in the next sentence until
the earlier of the Close of Business on the Business Day immediately preceding the
Ex-Dividend Date for such distribution or the date the Company announces that such
distribution will not take place. The Company shall notify Holders of any
distribution referred to in either clause (A) or clause (B) above and of the resulting
exchange right no later than the tenth Business Day prior to the Ex-Dividend Date for such
distribution.

     (ii) If the Company is a party to any transaction or event that constitutes a
Fundamental Change, a Holder may surrender Notes for exchange at any time from and
after the 30th scheduled Trading Day prior to the anticipated Effective Date of such
transaction or event until the related Fundamental Change Repurchase Date and, upon
such surrender, the Holder shall be entitled to the increase in the Exchange Rate,
if any, specified in Section 8.01(g). The Company shall give notice to all record
Noteholders and the Trustee no later than 30 scheduled Trading Days prior to the
anticipated Effective Date of such transaction and issue a press release of the
Fundamental Change no later than 45 scheduled Trading Days prior to the anticipated
effective date of the Fundamental Change.

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     (iii) If Archstone-Smith Trust is a party to a consolidation, merger, binding
share exchange or sale or conveyance of all or substantially all of its properties
and assets, in each case pursuant to which the Common Shares would be converted into
cash, securities and/or other property, then the Holders shall have the right to
exchange Notes at any time beginning fifteen calendar days prior to the date
announced by the Company as the anticipated effective date of the transaction and
until and including the date that is fifteen calendar days after the date that is
the effective date of such transaction; provided such transaction does not otherwise
constitute a Fundamental Change to which the provisions of Section 8.01(e)(ii) shall
apply. The Company will notify Holders of Notes at least 20 calendar days prior to
the anticipated effective date of such transaction. If the Board of Trustees
determines the anticipated effective date of the transaction, such determination
shall be conclusive and binding on the Holders.

     (f) The Notes shall be exchangeable at any time beginning on the first Business Day after any
30 consecutive Trading Day period during which Common Shares are not listed on either a U.S.
national securities exchange or the Nasdaq Global Market.

(g) (i) If a Noteholder elects to exchange Notes in connection with a Fundamental Change
that occurs prior to July 18, 2011, the Exchange Rate applicable to each $1,000 principal
amount of Notes so exchanged shall be increased by an additional number of Common Shares
(the “Additional Shares”) as described below. Settlement of Notes tendered for exchange to
which Additional Shares shall be added to the Exchange Rate as provided in this subsection
shall be settled pursuant to Section 8.02 below, as applicable. For purposes of this
Section 8.01(g), an exchange shall be deemed to be “in connection with” a Fundamental Change
to the extent that the related exchange notice is delivered during the time period beginning
on the 30th Trading Day prior to the anticipated Effective Date of such Fundamental Change
and ending on the related Fundamental Change Repurchase Date, inclusive (regardless of
whether the provisions of clauses (b), (c), (d), (e) or (f) of this Section 8.01 shall apply
to such exchange). Such exchange notice shall indicate that the Holder of Notes has elected
to exchange Notes in connection with a Fundamental Change; provided, however, that the
failure to so indicate shall not in
any way affect the Exchange Obligation or the right of such Holder to receive Additional
Shares in connection with such exchange.

     (ii) The number of Additional Shares by which the Exchange Rate will be
increased shall be determined by reference to the table attached as Schedule A
hereto, based on the date on which the Fundamental Change occurs or becomes
effective (the “Effective Date”), and the Share Price; provided, that if the Share
Price is between two Share Price amounts in the table or the Effective Date is
between two Effective Dates in the table, the number of Additional Shares shall be
determined by a straight-line interpolation between the number of Additional Shares
set forth for the next higher and next lower Share Price amounts and the two nearest
Effective Dates, as applicable, based on a 365-day year; provided further that if
(1) the Share Price is greater than $85.00 per Common Share (subject to adjustment
in the same manner as set forth in Section 8.04), no Additional Shares will be added
to the Exchange Rate, and (2) the Share Price is

18

 

less than $52.14 per share (subject
to adjustment in the same manner as set forth in Section 8.04), no Additional Shares
will be added to the Exchange Rate. Notwithstanding the foregoing, in no event will
the total number of Common Shares issuable upon exchange exceed 19.1791 per $1,000
principal amount of Notes (subject to adjustment in the same manner as set forth in
Section 8.04).

     (iii) The Share Prices set forth in the first row of the table in Schedule A
hereto shall be adjusted as of any date on which the Exchange Rate of the Notes is
adjusted. The adjusted Share Prices shall equal the Share Prices applicable
immediately prior to such adjustment, multiplied by a fraction, the numerator of
which is the Exchange Rate in effect immediately prior to the adjustment giving rise
to the Share Price adjustment and the denominator of which is the Exchange Rate as
so adjusted. The number of Additional Shares within the table shall be adjusted in
the same manner as the Exchange Rate as set forth in Section 8.04 (other than by
operation of an adjustment to the Exchange Rate by adding Additional Shares).

     Section 8.02 Exchange Procedures.

     (a) Subject to Section 8.02(b) and Section 8.12, the Company will satisfy the Exchange
Obligation with respect to each $1,000 principal amount of Notes validly tendered for exchange in
cash, fully paid Common Shares or a combination thereof, as applicable, by delivering, on the third
Trading Day immediately following the last day of the related Observation Period, cash, Common
Shares or a combination thereof, as applicable, equal to the sum of the Daily Settlement Amounts
for each of the 20 Trading Days during the related Observation Period; provided that (i) the
Company will deliver cash in lieu of fractional Common Shares as set forth pursuant to clause (k)
below; (ii) if the Company elects to settle an exchange of notes only in Common Shares, such
settlement will occur as soon as practicable after the Company notifies the Holders of the Notes
that it has chosen such method of settlement, but in any event within three Business Days of the
relevant Exchange Date; and (iii) the Company will inform exchanging Holders by notice to the
Trustee no later than two Trading Days beginning on and including the Exchange Date if the Company
elects to pay cash upon exchange of the Notes and will specify in such notice the amount or percentage of Notes for
which cash will be paid; provided that the Company may provide that the Specified Amount or
Specified Percentage for any Trading Day will not be in excess of the Daily Exchange Value. The
Daily Settlement Amounts shall be determined by the Company promptly following the last day of the
Observation Period.

     (b) Notwithstanding Section 8.02(a), the Company shall satisfy the Exchange Obligation with
respect to each $1,000 principal amount of Notes tendered for exchange to which Additional Shares
shall be added to the Exchange Rate as set forth in Section 8.01(g) pursuant to this clause (b).

     (i) If the last day of the applicable Observation Period related to Notes
surrendered for exchange is prior to the third Trading Day preceding the Effective
Date of the Fundamental Change, the Company will satisfy the related Exchange
Obligation with respect to each $1,000 principal amount of Notes tendered for

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exchange as described in Section 8.02(b)(ii) by delivering the amount of cash,
Common Shares or a combination thereof, as applicable (based on the Exchange Rate,
but without regard to the number of Additional Shares to be added to the Exchange
Rate pursuant to Section 8.01(g)) on the third Trading Day immediately following the
last day of the applicable Observation Period. As soon as practicable following the
Effective Date of the Fundamental Change, the Company will deliver the increase in
such amount of cash and Reference Property deliverable in lieu of Common Shares, if
any, as if the Exchange Rate had been increased by such number of Additional Shares
during the related Observation Period (and based upon the related Daily VWAP prices
during such Observation Period). If such increased amount of cash and shares, if
any, results in an increase to the amount of cash to be paid to Holders, the Company
will pay such increase in cash, and if such increased amount results in an increase
to the number of Common Shares, the Company will deliver such increase by delivering
Reference Property based on such increased number of shares.

     (ii) If the last day of the applicable Observation Period related to Notes
surrendered for exchange is on or following the third scheduled Trading Day
preceding the Effective Date of such Fundamental Change, the Company will satisfy
the Exchange Obligation with respect to each $1,000 principal amount of Notes
tendered for exchange as described in Section 8.01(e)(i) (based on the Exchange Rate
as increased by the Additional Shares pursuant to Section 8.01(g) above) on the
later to occur of (x) the Effective Date of the Fundamental Change and (y) the third
Trading Day immediately following the last day of the applicable Observation Period.

     (c) Before any holder of a Note shall be entitled to exchange the same as set forth above,
such holder shall (1) in the case of a Global Note, comply with the procedures of the Depositary in
effect at that time and, if required, pay funds equal to interest payable on the next Interest
Payment Date to which such holder is not entitled as set forth in Section 8.02(i) and, if required,
pay all taxes or duties, if any, and (2) in the case of a Note issued in certificated form, (a)
complete and manually sign and deliver an irrevocable written notice to the Exchange Agent
in the form on the reverse of such certificated Note (or a facsimile thereof) (a “Notice of
Exchange”) at the office of the Exchange Agent and shall state in writing therein the principal
amount of Notes to be exchanged and the name or names (with addresses) in which such holder wishes
the certificate or certificates for any Common Shares, if any, to be delivered upon settlement of
the Exchange Obligation to be registered, (b) surrender such Notes, duly endorsed to the Company or
in blank (and accompanied by appropriate endorsement and transfer documents), at the office of the
Exchange Agent, (c) if required, pay funds equal to interest payable on the next Interest Payment
Date to which such holder is not entitled as set forth in Section 8.02(i), and (d) if required, pay
all taxes or duties, if any. A Note shall be deemed to have been exchanged immediately prior to
the Close of Business on the date (the “Exchange Date”) that the Holder has complied with the
requirements set forth in this Section 8.02(c).

     No Notice of Exchange with respect to any Notes may be tendered by a holder thereof if such
holder has also tendered a Put Right Repurchase Notice or a Fundamental Change Repurchase Notice
and not validly withdrawn such Put Right Repurchase Notice or Fundamental Change Repurchase Notice
in accordance with the applicable provisions of Section 9.01 or 9.02, as the case may be.

20

 

     If more than one Note shall be surrendered for exchange at one time by the same holder, the
Exchange Obligation with respect to such Notes, if any, that shall be payable upon exchange shall
be computed on the basis of the aggregate principal amount of the Notes (or specified portions
thereof to the extent permitted thereby) so surrendered.

     (d) Delivery of the amounts owing in satisfaction of the Exchange Obligation shall be made by
the Company in no event later than the date specified in Section 8.02(a), except to the extent
specified in Section 8.02(b). The Company shall make such delivery by paying the cash amount owed
to the Exchange Agent or to the Holder of the Note surrendered for exchange, or such Holder’s
nominee or nominees, and by issuing, or causing to be issued, and delivering to the Exchange Agent
or to such Holder, or such Holder’s nominee or nominees, certificates or a book-entry transfer
through the Depositary for the number of full Common Shares to which such Holder shall be entitled
as part of such Exchange Obligation (together with any cash in lieu of fractional shares).

     (e) In case any Note shall be surrendered to the Trustee for partial exchange (along with, if
the Company or the Trustee so requires, due endorsements from such Holder, or written instruments
of transfer in form satisfactory to the Company and the Trustee duly executed by the Holder thereof
or his attorney-in-fact), the Company shall execute and the Trustee shall authenticate and deliver
to or upon the written order of the Holder of the Note so surrendered, without charge to such
Holder, a new Note or Notes containing identical terms and conditions to the Outstanding Notes in
authorized denominations in an aggregate principal amount equal to the unexchanged portion of the
surrendered Note.

     (f) If a Holder submits a Note for exchange, the Company shall pay all documentary, stamp and
other duties, if any, which may be imposed by the United States or any political subdivision
thereof or taxing authority thereof or therein with respect to the issuance of Common Shares, if
any, upon the exchange. However, the Holder shall pay any such tax that is due because the Holder
requests any Common Shares to be issued in a name other than the Holder’s
name. The Exchange Agent may refuse to deliver the certificates representing the Common
Shares being issued in a name other than the Holder’s name until the Trustee receives a sum
sufficient to pay any tax which will be due because the shares are to be issued in a name other
than the Holder’s name. The Exchange Agent may refuse to deliver the certificates representing the
Common Shares being issued in a name other than the holder’s name until the Trustee receives a sum
sufficient to pay any tax which will be due because the shares are to be issued in a name other
than the holder’s name. Nothing herein shall preclude any tax withholding required by law or
regulations.

     (g) Except as provided in Section 8.04, no adjustment shall be made for dividends on any
shares issued upon the exchange of any Note as provided in this Article.

     (h) Upon the exchange of an interest in a Global Note, the Trustee, or the Custodian at the
direction of the Trustee, shall make a notation on such Global Note as to the reduction in
the principal amount represented thereby. The Company shall notify the Trustee in writing of any
exchange of Notes effected through any Exchange Agent other than the Trustee.

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     (i) Upon exchange, a Noteholder will not receive any separate cash payment for accrued and
unpaid interest, except as set forth below. The Company’s settlement of its Exchange Obligation as
described above shall be deemed to satisfy its obligation to pay the principal amount of the Note
and accrued and unpaid interest to, but not including, the Exchange Date. As a result, accrued and
unpaid interest to, but not including, the Exchange Date shall be deemed to be paid in full rather
than cancelled, extinguished or forfeited. Notwithstanding the preceding sentence, if Notes are
exchanged after the Close of Business on a Record Date, Holders of such Notes as of the Close of
Business on the Record Date will receive the interest payable on such Notes on the corresponding
Interest Payment Date notwithstanding the exchange. Notes surrendered for exchange during the
period from the Close of Business on any regular Record Date to the opening of business on the
corresponding Interest Payment Date must be accompanied by payment of an amount equal to the
interest payable on the Notes so exchanged; provided, however, that no such payment need be made
(1) if the Company has called the Notes for redemption or (2) to the extent of any overdue interest
existing at the time of exchange with respect to such Note. Except as described above, no payment
or adjustment will be made for accrued interest on exchanged Notes.

     (j) The Person in whose name the certificate for any Common Shares issued upon exchange is
registered shall be treated as a Holder of such Common Shares of record on and after the Exchange
Date; provided, however, that no surrender of Notes on any date when the share transfer books of
the Company shall be closed shall be effective to constitute the Person or Persons entitled to
receive the Common Shares upon such exchange as the record Holder or Holders of such Common Shares
on such date, but such surrender shall be effective to constitute the Person or Persons entitled to
receive such Common Shares as the record Holder or Holders thereof for all purposes at the Close of
Business on the next succeeding day on which such share transfer books are open; such exchange
shall be at the Exchange Rate in effect on the date that such Notes shall have been surrendered for
exchange, as if the share transfer books of the Company had not been closed. Upon exchange of
Notes, such Person shall no longer be a Noteholder.

     (k) Notwithstanding any other provision of the Notes, no Holder of Notes shall be entitled to
exchange such Notes for Common Shares if and to the extent that the Company has not received such
Common Shares from Archstone-Smith Trust. If the Company is unable to deliver shares to any Holder
of Notes as described above, the Company will at the Company’s option either pay cash to such
Holder in lieu of the Common Shares otherwise deliverable, or issue to such Holder a number of the
Company’s Common Units equal to the shortfall in the number of Common Shares otherwise deliverable,
with such Common Units having all the rights and privileges provided in the Company’s declaration
of trust as in effect on the date of issuance of such Common Units including the right by, and at
Archstone-Smith Trust’ election, to have such units redeemed for cash in an amount equal to the
fair market value of an equal number of Common Shares or for an equal number of Common Shares.

22

 

     If the Company elects to deliver (x) Common Shares pursuant to clause (ii)(B) of the
definition of “Daily Settlement Amount” and such Common Shares constitute “Restricted Securities”
as defined in Rule 144 under the Securities Act or (y) the Company’s Common Units in lieu of Common
Shares pursuant to the immediately preceding paragraph, the Company shall issue to the Holder an
additional 0.03 Common Shares or 0.03 shares of the Company’s Common Units, as applicable, for each
Common Share that would otherwise have been due upon exchange (the “Additional Settlement
Consideration”). Any Additional Settlement Consideration shall be delivered at the time of the
delivery of the Common Shares that would otherwise have been due upon exchange.

     (l) No fractional Common Shares shall be issued upon exchange of any Note or Notes. If more
than one Note shall be surrendered for exchange at one time by the same Holder, the number of full
shares that shall be issued upon exchange thereof shall be computed on the basis of the aggregate
principal amount of the Notes (or specified portions thereof) so surrendered. Instead of any
fractional Common Share that would otherwise be issued upon exchange of any Note or Notes (or
specified portions thereof), the Company shall pay a cash adjustment in respect of such fraction
(calculated to the nearest one-100th of a share) in an amount equal to the same fraction of the
Last Reported Sale Price of the Common Shares on the last day of the applicable Observation Period.

     Section 8.03 Reserved.

     Section 8.04 Adjustment of Exchange Rate. The Exchange Rate shall be adjusted from time to time by
the Company as follows:

     (a) In case Archstone-Smith Trust shall issue Common Shares as a dividend or distribution to
Holders of the outstanding Common Shares, or shall effect a subdivision into a greater number of
Common Shares or combination into a lower number of Common Shares, the Exchange Rate shall be
adjusted based on the following formula:

	 	 	 	 	 	 	 
	 

	 	 	 	 
	 	 
	ER’ = ER0

	 	x
	 	OS’

	 	 
	 

	 	 	 	OS0	 	 

	 	 	 	 	 	 	 
	 

	 	where	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	ER0
	 	=
	 	the Exchange Rate in effect immediately prior to such event;
	 
	 	 	 	 	 	 
	 

	 	ER’
	 	=
	 	the Exchange Rate in effect immediately after such event;
	 
	 	 	 	 	 	 
	 

	 	OS0
	 	=
	 	the number of Common Shares outstanding immediately prior
to such event; and
	 
	 	 	 	 	 	 
	 

	 	OS’
	 	=
	 	the number of Common Shares outstanding immediately after
such event.

Such adjustment shall become effective immediately after 9:00 a.m., New York City time, on the
Business Day following the Record Date fixed for such determination. If any dividend or
distribution of the type described in this Section 8.04(a) is declared but not so paid or made, or
the outstanding Common Shares are not subdivided or combined, as the case may be, the Exchange Rate
shall be immediately readjusted, effective as of the date the Board of Trustees determines not to
pay such dividend or distribution, or subdivide or combine the outstanding Common Shares, as the
case may be, to the Exchange Rate that would then be in effect if such dividend, distribution,
subdivision or combination had not been declared.

23

 

     (b) In case Archstone-Smith Trust shall issue to all or substantially all Holders of its
outstanding Common Shares rights, warrants or convertible securities entitling them (for a period
expiring within sixty (60) calendar days after the issuance thereof) to subscribe for or purchase
Common Shares at a price per share less than the Last Reported Sale Price of the Common Shares on
the Business Day immediately preceding the date of announcement of such issuance, the Exchange Rate
shall be adjusted based on the following formula:

	 	 	 	 	 	 	 
	 

	 	 	 	 
	 	 
	ER’ = ER0

	 	x
	 	OS0 + X

	 	 
	 

	 	 	 	OS0 + Y	 	 

	 	 	 	 	 	 	 
	 

	 	where	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	ER0
	 	=
	 	the Exchange Rate in effect immediately prior to such event;
	 
	 	 	 	 	 	 
	 

	 	ER’
	 	=
	 	the Exchange Rate in effect immediately after such event;
	 
	 	 	 	 	 	 
	 

	 	OS0
	 	=
	 	the number of Common Shares outstanding immediately prior
to such event;
	 
	 	 	 	 	 	 
	 

	 	X
	 	=
	 	the total number of Common Shares issuable pursuant to such
rights, warrants or convertible securities; and
	 
	 	 	 	 	 	 
	 

	 	Y
	 	=
	 	the number of Common Shares equal to the aggregate price
payable to exercise such rights, warrants or convertible
securities divided by the average of the Last Reported Sale
Prices of Common Shares over the ten consecutive Trading
Day period ending on the Business Day immediately preceding
the Record Date (or, if later, the Ex-Dividend Date) for
the issuance of such rights, warrants or convertible
securities.

Such adjustment shall be successively made whenever any such rights, warrants or convertible
securities are issued and shall become effective immediately after 9:00 a.m., New York City time,
on the Business Day following the date fixed for such determination. If such rights, warrants or
convertible securities are not so exercised prior to their expiration, the Exchange Rate shall
again be adjusted to be the Exchange Rate that would then be in effect if such Record Date for such
distribution had not been fixed.

     In determining whether any rights, warrants or convertible securities entitle the Holders to
subscribe for or purchase Common Shares at less than such Last Reported Sale Price, and in
determining the aggregate offering price of such Common Shares, there shall be taken into account
any consideration received by Archstone-Smith Trust for such rights, warrants or convertible
securities and any amount payable on exercise or exchange thereof, the value of such consideration,
if other than cash, to be determined by the Board of Trustees.

     (c) In case Archstone-Smith Trust shall, by dividend or otherwise, distribute to all or
substantially all Holders of its Common Shares any class of beneficial interest of Archstone-Smith
Trust (other than Common Shares as covered by Section 8.04(a)), evidences of its indebtedness or
other assets or property of Archstone-Smith Trust (including securities, but

24

 

excluding dividends, distributions, rights and warrants covered by Section 8.04(a), Section 8.04(b) or Section 8.04(d)
and distributions described below in this paragraph (c) with respect to Spin-Offs) (any of such
shares of beneficial interest, indebtedness, or other asset or property hereinafter in this Section
8.04(c) called the “Distributed Property”), then, in each such case the Exchange Rate shall be
adjusted based on the following formula:

	 	 	 	 	 	 	 
	 

	 	 	 	 
	 	 
	ER’ = ER0

	 	x
	 	SP0

	 	 
	 

	 	 	 	SP0 — FMV	 	 

	 	 	 	 	 	 	 
	 

	 	where	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	ER0
	 	=
	 	the Exchange Rate in effect immediately prior to such distribution;
	 
	 	 	 	 	 	 
	 

	 	ER’
	 	=
	 	the Exchange Rate in effect immediately after such distribution;
	 
	 	 	 	 	 	 
	 

	 	SP0
	 	=
	 	the average of the Last Reported Sale Prices of the Common Shares
over the ten consecutive Trading Day period ending on the Business
Day immediately preceding the Record Date for such distribution
(or, if earlier, the Ex-Dividend Date); and
	 
	 	 	 	 	 	 
	 

	 	FMV
	 	=
	 	the fair market value (as determined by the Board of Trustees) of
the shares of beneficial interest, evidences of indebtedness,
assets or property distributed with respect to each outstanding
Common Share on the Record Date for such distribution (or, if
earlier, the Ex-Dividend Date).

Such adjustment shall become effective immediately prior to 9:00 a.m., New York City time, on the
Business Day following the date fixed for the determination of shareholders entitled to receive
such distribution; provided that if the then fair market value (as so determined) of the portion of
the Distributed Property so distributed applicable to one Common Share is equal to or greater than
SP0 as set forth above, in lieu of the foregoing adjustment, adequate provision shall be made so
that each Noteholder shall have the right to receive, for each $1,000 principal amount of Notes
upon exchange, the amount of Distributed Property such Holder would have received had such Holder
owned a number of Common Shares equal to the Exchange Rate on the Record
Date. If such dividend or distribution is not so paid or made, the Exchange Rate shall again be
adjusted to be the Exchange Rate that would then be in effect if such dividend or distribution had
not been declared. If the Board of Trustees determines the fair market value of any distribution
for purposes of this Section 8.04(c) by reference to the actual or when issued trading market for
any securities, it must in doing so consider the prices in such market over the same period used in
determining SP0 above.

     With respect to an adjustment pursuant to this Section 8.04(c) where there has been a payment
of a dividend or other distribution on the Common Shares of or other beneficial interests in
Archstone-Smith Trust, or on any class or series of stock of or similar beneficial interest in or
relating to a Subsidiary or other business unit thereof (a “Spin-Off”), the Exchange Rate in effect
immediately before 5:00 p.m., New York City time, on the Record Date fixed for determination of
shareholders entitled to receive the distribution will be increased based on the following formula:

	 	 	 	 	 	 	 
	 

	 	 	 	 
	 	 
	ER’ = ER0

	 	x
	 	FMV0 + MP0

	 	 
	 

	 	 	 	MP0	 	 

25

 

	 	 	 	 	 	 	 
	 

	 	where	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	ER0
	 	=
	 	the Exchange Rate in effect immediately prior to such distribution;
	 
	 	 	 	 	 	 
	 

	 	ER’
	 	=
	 	the Exchange Rate in effect immediately after such distribution;
	 
	 	 	 	 	 	 
	 

	 	FMV0
	 	=
	 	the average of the Last Reported Sale Prices of the beneficial
interests distributed to Holders of Common Shares applicable to
one Common Share over the first ten consecutive Trading Day period
after the effective date of the Spin-Off; and
	 
	 	 	 	 	 	 
	 

	 	MP0
	 	=
	 	the average of the Last Reported Sale Prices of Common Shares over
the first ten consecutive Trading Day period after the effective
date of the Spin-Off.

Such adjustment shall occur on the tenth Trading Day from, and including, the effective date of the
Spin-Off; provided that in respect of any exchange within the ten Trading Days following any
Spin-Off, references within this paragraph (c) to ten days shall be deemed replaced with such lower
number of Trading Days as have elapsed between such Spin-Off and the Exchange Date in determining
the applicable Exchange Rate.

     Rights or warrants distributed by Archstone-Smith Trust to all Holders of Common Shares,
entitling the Holders thereof to subscribe for or purchase shares of Archstone-Smith Trust’s
beneficial interests, including Common Shares (either initially or under certain circumstances),
which rights or warrants, until the occurrence of a specified event or events (“Trigger Event”):
(i) are deemed to be transferred with such Common Shares; (ii) are not exercisable; and (iii) are
also issued in respect of future issuances of Common Shares, shall be deemed not to have been
distributed for purposes of this Section 8.04 (and no adjustment to the Exchange Rate under this
Section 8.04 will be required) until the occurrence of the earliest Trigger Event, whereupon such
rights and warrants shall be deemed to have been distributed and an appropriate adjustment (if any
is required) to the Exchange Rate shall be made under this
Section 8.04(c). If any such right or warrant, including any such existing rights or warrants
distributed prior to the date of this Third Supplemental Indenture, are subject to events, upon the
occurrence of which such rights or warrants become exercisable to purchase different securities,
evidences of indebtedness or other assets, then the date of the occurrence of any and each such
event shall be deemed to be the date of distribution and Record Date with respect to new rights or
warrants with such rights (and a termination or expiration of the existing rights or warrants
without exercise by any of the Holders thereof). In addition, in the event of any distribution (or
deemed distribution) of rights or warrants, or any Trigger Event or other event (of the type
described in the preceding sentence) with respect thereto that was counted for purposes of
calculating a distribution amount for which an adjustment to the Exchange Rate under this Section
8.04 was made, (1) in the case of any such rights or warrants that shall all have been redeemed or
repurchased without exercise by any Holders thereof, the Exchange Rate shall be readjusted upon
such final redemption or repurchase to give effect to such distribution or Trigger Event, as the
case may be, as though it were a cash distribution, equal to the per share redemption or repurchase
price received by a Holder or Holders of Common Shares with respect to such rights or warrants
(assuming such Holder had retained such rights or warrants), made to

26

 

all Holders of Common Shares as of the date of such redemption or repurchase, and (2) in the case of such rights or warrants
that shall have expired or been terminated without exercise by any Holders thereof, the Exchange
Rate shall be readjusted as if such rights and warrants had not been issued.

     For purposes of this Section 8.04(c), Section 8.04(a) and Section 8.04(b), any dividend or
distribution to which this Section 8.04(c) is applicable that also includes Common Shares to which
Section 8.04(a) applies or rights or warrants to subscribe for or purchase Common Shares to which
Section 8.04(b) applies (or both), shall be deemed instead to be (1) a dividend or distribution of
the evidences of indebtedness, assets or shares of beneficial interests other than such Common
Shares or rights or warrants to which Section 8.04(c) applies (and any Exchange Rate adjustment
required by this Section 8.04(c) with respect to such dividend or distribution shall then be made)
immediately followed by (2) a dividend or distribution of such Common Shares or such rights or
warrants (and any further Exchange Rate adjustment required by Section 8.04(a) and Section 8.04(b)
with respect to such dividend or distribution shall then be made), except (A) the Record Date of
such dividend or distribution shall be substituted as “the Record Date” and “the date fixed for
such determination” within the meaning of Section 8.04(a) and Section 8.04(b) and (B) any Common
Shares included in such dividend or distribution shall not be deemed “outstanding immediately prior
to such event” within the meaning of Section 8.04(a).

     (d) In case Archstone-Smith Trust shall pay a dividend or make a distribution consisting
exclusively of cash to all or substantially all Holders of its Common Shares to the extent that the
aggregate of all such cash dividends or distributions paid in any quarter exceeds the Dividend
Threshold Amount for such quarter, the Exchange Rate shall be adjusted based on the following
formula:

	 	 	 	 	 	 	 
	ER’ = ER0

	 	x
	 	SP0 — T

	 	 
	 

	 	 	 	SP0 — C	 	 

	 	 	 	 	 	 	 
	 

	 	where	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	ER0
	 	=
	 	the Exchange Rate in effect immediately prior to
the Record Date for such distribution;
	 
	 	 	 	 	 	 
	 

	 	ER’
	 	=
	 	the Exchange Rate in effect immediately after the
Record Date for such distribution;
	 
	 	 	 	 	 	 
	 

	 	SP0
	 	=
	 	the average of the Last Reported Sale Prices of
the Common Shares over the period of ten
consecutive Trading Days ending the Business Day
immediately preceding the Record Date (as defined
in clause (f) of this Section) for such
distribution (or, if earlier, the Ex-Dividend date
relating to such distribution); and
	 
	 	 	 	 	 	 
	 

	 	T
	 	=
	 	the dividend threshold amount (“Dividend Threshold
Amount”), which amount shall initially be $0.435
per quarter and which shall be appropriately
adjusted from time to time for any share dividends
on, or subdivisions or combinations of, Common
Shares; provided, that if an Exchange Rate
adjustment is required to be made as a result of a
distribution that is not a quarterly dividend
either in whole or in part, the Dividend Threshold
Amount shall be deemed to be zero; and

27

 

	 	 	 	 	 	 	 
	 

	 	C
	 	=
	 	the amount in cash per share that Archstone-Smith
Trust distributes to Holders of Common Shares.

Such adjustment shall become effective immediately after 5:00 p.m., New York City time, on the
Record Date for such dividend or distribution; provided that if the portion of the cash so
distributed applicable to one Common Share is equal to or greater than SP0 above, in lieu of the
foregoing adjustment, adequate provision shall be made so that each Noteholder shall have the right
to receive upon exchange of a Note (or any portion thereof) the amount of cash such Holder would
have received had such Holder owned a number of shares equal to the Exchange Rate on the Record
Date. If such dividend or distribution is not so paid or made, the Exchange Rate shall again be
adjusted to be the Exchange Rate that would then be in effect if such dividend or distribution had
not been declared.

     For the avoidance of doubt, for purposes of this Section 8.04(d), in the event of any
reclassification of the Common Shares, as a result of which the Notes become exchangeable into more
than one class of Common Shares, if an adjustment to the Exchange Rate is required pursuant to this
Section 8.04(d), references in this Section to one Common Share or Last Reported Sale Price of one
Common Share shall be deemed to refer to a unit or to the price of a unit consisting of the number
of shares of each class of Common Shares into which the Notes are then exchangeable equal to the
number of shares of such class issued in respect of one Common Share in such reclassification. The
above provisions of this paragraph shall similarly apply to successive reclassifications.

     (e) In case Archstone-Smith Trust or any of its Subsidiaries makes a payment in respect of a
tender offer or exchange offer for all or any portion of the Common Shares, to the extent that the
cash and value of any other consideration included in the payment per Common Share exceeds the Last
Reported Sale Price of the Common Shares on the Trading Day next
succeeding the last date on which tenders or exchanges may be made pursuant to such tender or
exchange offer (as it may be amended), the Exchange Rate shall be increased based on the following
formula:

	 	 	 	 	 	 	 
	ER’ = ER0 
	 	x
	 	AC + (SP’ x OS’)
	 	 
	 

	 	 	 	SP’ x OS0 
	 	 
	 

	 	 	 	 	 	 

	 	 	 	 	 	 	 
	 

	 	where	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	ER0
	 	=
	 	the Exchange Rate in effect on the date such
tender or exchange offer expires;
	 
	 	 	 	 	 	 
	 

	 	ER’
	 	=
	 	the Exchange Rate in effect on the day next
succeeding the date such tender or exchange offer
expires;
	 
	 	 	 	 	 	 
	 

	 	AC
	 	=
	 	the aggregate value of all cash and any other
consideration (as determined by the Board of
Trustees) paid or payable for shares purchased in
such tender or exchange offer;
	 
	 	 	 	 	 	 
	 

	 	OS0
	 	=
	 	the number of Common Shares outstanding
immediately prior to the date such tender or
exchange offer expires;

28

 

	 	 	 	 	 	 	 
	 

	 	OS’
	 	=
	 	the number of Common Shares outstanding
immediately after the date such tender or exchange
offer expires; and
	 
	 	 	 	 	 	 
	 

	 	SP’
	 	=
	 	the average of the Last Reported Sale Prices of
Common Shares over the ten consecutive Trading Day
period commencing on the Trading Day next
succeeding the date such tender or exchange offer
expires,

such adjustment to become effective immediately prior to the opening of business on the day
following the last date on which tenders or exchanges may be made pursuant to such tender or
exchange offer. If the Company is obligated to purchase shares pursuant to any such tender or
exchange offer, but the Company is permanently prevented by applicable law from effecting all or
any such purchases or all or any portion of such purchases are rescinded, the Exchange Rate shall
again be adjusted to be the Exchange Rate that would then be in effect if such tender or exchange
offer had not been made or had only been made in respect of the purchases that had been effected.
No adjustment to the Exchange Rate will be made if the application of the foregoing formula would
result in a decrease in the Exchange Rate.

     (f) For purposes of this Section 8.04 the term “Record Date” shall mean, with respect to any
dividend, distribution or other transaction or event in which the Holders of Common Shares have the
right to receive any cash, securities or other property or in which the Common Shares (or other
applicable security) is exchanged for or exchanged into any combination of cash, securities or
other property, the date fixed for determination of shareholders entitled to receive such cash,
securities or other property (whether such date is fixed by the Board of Trustees or by statute,
contract or otherwise).

     (g) In addition to those required by clauses (a), (b), (c), (d), and (e) of this Section 8.04,
and to the extent permitted by applicable law and subject to the applicable rules of the New York
Stock Exchange, the Company from time to time may increase the Exchange Rate by any
amount for a period of at least 20 days if the Board of Trustees determines that such increase
would be in the Company’s best interest. In addition, the Company may also (but is not required
to) increase the Exchange Rate to avoid or diminish any income tax to Holders of Common Shares or
rights to purchase Common Shares in connection with any dividend or distribution of shares (or
rights to acquire shares) or similar event. Whenever the Exchange Rate is increased pursuant to
the preceding sentence, the Company shall mail to the Holder of each Note at his last address
appearing on the Security Register provided for in Section 2.06 a notice of the increase at least
five days prior to the date the increased Exchange Rate takes effect, and such notice shall state
the increased Exchange Rate and the period during which it will be in effect.

     (h) All calculations and other determinations under this Article 8 shall be made by the
Company and shall be made to the nearest cent or to the nearest one-ten thousandth (1/10,000) of a
share, as the case may be. No adjustment shall be made for Archstone-Smith Trust’s issuance of
Common Shares or any securities convertible into or exchangeable for Common Shares, or the right to
purchase Common Shares or such convertible or exchangeable securities, other than as provided in
this Section 8.04. No adjustment shall be made to the Exchange Rate unless such adjustment would
require a change of at least 1% in the Exchange

29

 

Rate then in effect at such time. The Company shall carry forward any adjustments that are less than 1% of the Exchange Rate and make such
carried forward adjustments, regardless of whether the aggregate adjustment is less than 1% within
one year of the first such adjustment carried forward, upon a Fundamental Change, upon any call of
the Notes for redemption or upon maturity.

     (i) Whenever the Exchange Rate is adjusted as herein provided, the Company shall promptly file
with the Trustee and any Exchange Agent other than the Trustee an Officers’ Certificate setting
forth the Exchange Rate after such adjustment and setting forth a brief statement of the facts
requiring such adjustment. The Trustee and Exchange Agent may conclusively rely on the accuracy of
the Exchange Rate adjustment provided by the Company. Unless and until a Responsible Officer of
the Trustee shall have received such Officers’ Certificate, the Trustee shall not be deemed to have
knowledge of any adjustment of the Exchange Rate and may assume without inquiry that the last
Exchange Rate of which it has knowledge is still in effect. Promptly after delivery of such
certificate, the Company shall prepare a notice of such adjustment of the Exchange Rate setting
forth the adjusted Exchange Rate and the date on which each adjustment becomes effective and shall
mail such notice of such adjustment of the Exchange Rate to the Holder of each Note at his last
address appearing on the Security Register provided for in Section 2.06 of this Third Supplemental
Indenture, within thirty (30) days of the effective date of such adjustment. Failure to deliver
such notice shall not affect the legality or validity of any such adjustment.

     (j) For purposes of this Section 8.04, the number of Common Shares at any time outstanding
shall not include shares held in the treasury of Archstone-Smith Trust but shall include shares
issuable in respect of scrip certificates issued in lieu of fractions of Common Shares.

     Section 8.05 Sufficient Shares to be Delivered. To the extent the Company elects to deliver Common
Shares, and subject to Section 8.02(k) and Section 8.12, the Company shall provide, free from
preemptive rights, sufficient Common Shares to provide for exchange of the Notes from time to time as such Notes are presented for
exchange.

     Section 8.06 Effect of Reclassification, Consolidation, Merger or Sale. If any of the following
events occur, namely (i) any reclassification or change of the outstanding Common Shares (other
than a change in par value, or from par value to no par value, or from no par value to par value,
or as a result of a split, subdivision or combination), (ii) any consolidation, merger or
combination of Archstone-Smith Trust with another Person, or (iii) any sale or conveyance of all or
substantially all of the property and assets of Archstone-Smith Trust to any other Person, in
either case as a result of which Holders of Common Shares shall be entitled to receive cash,
securities or other property or assets with respect to or in exchange for such Common Shares (any
such event a “Merger Event”), then:

     (a) the Company shall execute with the Trustee a supplemental indenture (which shall comply
with the Trust Indenture Act as in force at the date of execution of such supplemental indenture if
such supplemental indenture is then required to so comply) providing for the exchange and
settlement of the Notes as set forth in this Third Supplemental Indenture. Such supplemental
indenture shall provide for adjustments which shall be as nearly equivalent as may be practicable
to the adjustments provided for in this Article and the Trustee may conclusively rely on the
determination by the Company of the equivalency of such adjustments.

30

 

If, in the case of any Merger
Event, the Reference Property includes shares of stock or other securities and assets of a
corporation other than the successor or purchasing corporation, as the case may be, in such
reclassification, change, consolidation, merger, combination, sale or conveyance, then such
supplemental indenture shall also be executed by such other corporation and shall contain such
additional provisions to protect the interests of the Holders of the Notes as the Board of Trustees
shall reasonably consider necessary by reason of the foregoing, including to the extent required by
the Board of Trustees and practicable the provisions providing for the repurchase rights set forth
in Article 9 herein.

In the event the Company shall execute a supplemental indenture pursuant to this Section 8.06, the
Company shall file with the Trustee an Officers’ Certificate briefly stating the kind or amount of
cash, securities or property or asset that will constitute the Reference Property after any such
Merger Event, any adjustment to be made with respect thereto, and the Trustee shall promptly mail
notice thereof to all Noteholders.

     (b) Notwithstanding the provisions of Section 8.02(a) and Section 8.02(b), and subject to the
provisions of Section 8.01, at the effective time of such Merger Event, the right to exchange each
$1,000 principal amount of Notes will be changed to a right to exchange such Note by reference to
the kind and amount of cash, securities or other property or assets that a Holder of a number of
Common Shares equal to the Exchange Rate immediately prior to such transaction would have owned or
been entitled to receive (the “Reference Property”) such that from and after the effective time of
such transaction, a Noteholder will be entitled thereafter to exchange its Notes into cash (up to
the aggregate principal amount thereof) and the same type (and in the same proportion) of Reference
Property, based on the Daily Settlement Amounts of Reference Property in an amount equal to the
applicable Exchange Rate, as described under Section 8.02(a) or Section 8.02(b), as applicable.
For purposes of determining the constitution of
Reference Property, the type and amount of consideration that a Holder of Common Shares would
have been entitled to in the case of reclassifications, consolidations, mergers, sales or
conveyance of assets or other transactions that cause the Common Shares to be converted into the
right to receive more than a single type of consideration (determined based in part upon any form
of shareholder election) will be deemed to be the weighted average of the types and amounts of
consideration received by the Holders of Common Shares that affirmatively make such an election.
The Company shall not become a party to any such transaction unless its terms are consistent with
the preceding. None of the foregoing provisions shall affect the right of a Holder of Notes to
exchange its Notes in accordance with the provisions of this Article 8 prior to the effective time
of such Merger Event.

     (c) The Company shall cause notice of the execution of such supplemental indenture to be
mailed to each Noteholder, at his address appearing on the Security Register provided for in
Section 2.06, within thirty (30) days after execution thereof. Failure to deliver such notice
shall not affect the legality or validity of such supplemental indenture.

     (d) The above provisions of this Section shall similarly apply to successive Merger Events.

31

 

     Section 8.07 Certain Covenants. The Company covenants that all Common Shares delivered upon
exchange of Notes will be fully paid and non-assessable by Archstone-Smith Trust and free from all
taxes, liens and changes with respect to the issue thereof.

     Section 8.08 Responsibility of Trustee. The Trustee and any other Exchange Agent shall not at any
time be under any duty or responsibility to any Noteholder to determine the Exchange Rate or
whether any facts exist which may require any adjustment of the Exchange Rate, or with respect to
the nature or extent or calculation of any such adjustment when made, or with respect to the method
employed, or herein or in any supplemental indenture provided to be employed, in making the same.
The Trustee and any other Exchange Agent shall not be accountable with respect to the validity or
value (or the kind or amount) of any Common Shares, or of any securities or property, which may at
any time be issued or delivered upon the exchange of any Note; and the Trustee and any other
Exchange Agent make no representations with respect thereto. Neither the Trustee nor any Exchange
Agent shall be responsible for any failure of the Company to transfer or deliver any Common Shares
or certificates therefor or other securities or property or cash upon the surrender of any Note for
the purpose of exchange or to comply with any of the duties, responsibilities or covenants of the
Company contained in this Article.

     Without limiting the generality of the foregoing, neither the Trustee nor any Exchange Agent
shall be under any responsibility to determine the correctness of any provisions contained in any
supplemental indenture entered into pursuant to Section 8.06 relating either to the kind or amount
of shares of stock or securities or property (including cash) receivable by Noteholders upon the
exchange of their Notes after any event referred to in such Section 8.06 or to any adjustment to be
made with respect thereto, but, subject to the provisions of Article 6 of the Base
Indenture, may accept as conclusive evidence of the correctness of any such provisions, and
shall be protected in relying upon, the Officers’ Certificate with respect thereto.

     Section 8.09 Notice to Holders Prior to Certain Actions.

     In case:

     (a) Archstone-Smith Trust shall declare a dividend (or any other distribution) on its Common
Shares that would require an adjustment in the Exchange Rate pursuant to Section 8.04; or

     (b) Archstone-Smith Trust shall authorize the granting to all of the Holders of its Common
Shares of rights or warrants to subscribe for or purchase any share of any class or any other
rights or warrants;

     (c) of any reclassification of the Common Shares (other than a subdivision or combination of
outstanding Common Shares, or a change in par value, or from par value to no par value, or from no
par value to par value), or of any consolidation or merger to which Archstone-Smith Trust is a
party and for which approval of any shareholders of Archstone-Smith Trust is required, or of the
sale or transfer of all or substantially all of the assets of Archstone-Smith Trust; or

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     (d) of the voluntary or involuntary dissolution, liquidation or winding-up of Archstone-Smith
Trust,

the Company shall cause to be filed with the Trustee and to be mailed to each Noteholder at his
address appearing on the Security Register as promptly as possible but in any event at least ten
(10) days prior to the applicable date specified in clause (x) or (y) below, as the case may be, a
notice stating (x) the date on which a record is to be taken for the purpose of such dividend,
distribution or rights or warrants, or, if a record is not to be taken, the date as of which the
Holders of Common Shares of record to be entitled to such dividend, distribution or rights are to
be determined, or (y) the date on which such reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding-up is expected to become effective or occur, and the
date as of which it is expected that Holders of Common Shares of record shall be entitled to
exchange their Common Shares for securities or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding-up.
Failure to give such notice, or any defect therein, shall not affect the legality or validity of
such dividend, distribution, reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding-up.

     Section 8.10 Shareholder Rights Plans. Upon exchange of the Notes, the Noteholders shall receive,
in addition to any Common Shares issuable upon such exchange, the associated rights issued under
any shareholder rights plan that Archstone-Smith Trust adopts. If, and only if, the Noteholders
receive rights under such shareholder rights plans as described in the preceding sentence upon
exchange of their Notes, then no other adjustment pursuant to this Article 8 shall be made in
connection with such shareholder rights plans.

     Section 8.11 Ownership Limit. Notwithstanding any other provision of this Third Supplemental
Indenture or the Notes, no Holder of Notes shall be entitled to exchange such Notes for Common
Shares to the extent that receipt of such shares would cause such Holder (together with such
Holder’s affiliates) to exceed the applicable ownership limit contained in the declaration of trust
of Archstone-Smith Trust as then in effect.

     Section 8.12 Net Share Settlement Election. Notwithstanding anything to the contrary in this
Article 8, at any time on or prior to the twenty-sixth Business Day immediately preceding the
Maturity Date, the Company may irrevocably elect (“Net Share Settlement Election”) to satisfy the
its Exchange Obligation with respect to the Notes to be exchanged after the date of such election
with a combination of cash in an amount equal to not less than the lower of (x) the aggregate Daily
Exchange Value and (y) the aggregate principal amount of the Notes to be exchanged, and Common
Shares in excess thereof, as described in Section 8.01 and Section 8.02 herein. Such election would
be in the sole discretion of the Company without the consent of the Holders of Notes. If the
Company makes such election, it shall notify the Trustee and the Holders of Notes at their
addresses shown in the Security Register.

     Section 8.13 Registration of Common Shares. If the Company elects to deliver Common Shares upon
exchange of the Notes, the Company shall deliver such Common Shares pursuant to a registration
statement that has been declared or otherwise become automatically effective upon filing under the
Securities Act; provided that if the Company cannot deliver to exchanging Noteholders Common

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Shares
registered pursuant to an effective registration statement, the Company has the right to deliver to
those exchanging Noteholders Common Shares that have not been registered under the Securities Act
or Common Units in accordance with Section 8.02(k) in satisfaction of all or a portion of the
Company’s obligations under the Notes, at the election of the Company.

ARTICLE 9

Repurchase of Notes at Option of Holders

     Section 9.01 Repurchase of Securities at Option of the Holder on Specified Dates.

     (a) The provisions of Article Thirteen of the Base Indenture shall not be applicable to the
Notes.

     (b) At the option of the Holder thereof, Notes shall be repurchased by the Company in
accordance with the provisions of the Notes on July 18, 2011, July 15, 2016, July 15, 2021, July
15, 2026, and July 15, 2031 (each, a “Put Right Repurchase Date”) at a repurchase price per Note
equal to 100% of the aggregate principal amount of the Notes being repurchased, together with any
accrued and unpaid interest up to, but not including, such Put Right Repurchase Date (the “Put
Right Repurchase Price”).

     Repurchases of Notes by the Company pursuant to this Section 9.01 shall be made, at the option
of the Holder thereof, upon:

     (i) delivery to the Trustee (or other Paying Agent appointed by the Company) by
the Holder of a written notice of purchase (a “Put Right Repurchase Notice”) in the
form set forth on the reverse of the Note at any time from the opening of business
on the date that is 25 Business Days prior to the applicable Put Right Repurchase
Date until the Close of Business on the fifth Business Day prior to such Put Right
Repurchase Date stating:

     (A) if certificated, the certificate numbers of the Notes to be
delivered for repurchase;

     (B) the portion of the principal amount of the Notes to be repurchased,
which must be $1,000 or an integral multiple thereof; and

     (C) that the Notes are to be repurchased as of the applicable Put Right
Repurchase Date pursuant to the terms and conditions specified in the Notes
and in this Third Supplemental Indenture; and

     (ii) delivery of such Note to the Paying Agent prior to, on or after the Put
Right Repurchase Date (together with all necessary endorsements) at the offices of
the Paying Agent, such delivery being a condition to receipt by the Holder of the
Put Right Repurchase Price therefor, which shall be so paid pursuant to this Section
9.01 only if the Note so delivered to the Paying Agent shall conform in all respects
to the description thereof in the related Put Right Repurchase Notice, as determined
by the Company.

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     The Company shall repurchase from the Holder thereof, pursuant to this Section 9.01, a portion
of a Note if the principal amount of such portion is $1,000 or an integral multiple of $1,000.
Provisions of this Third Supplemental Indenture that apply to the repurchase of all of a Note also
apply to the repurchase of such portion of such Note.

     Any repurchase by the Company contemplated pursuant to the provisions of this Section 9.01
shall be consummated by the delivery of the consideration to be received by the Holder promptly
following the later of the Put Right Repurchase Date and the time of delivery of the Note.

     The Trustee (or other Paying Agent appointed by the Company) shall promptly notify the Company
of the receipt by it of any Put Right Repurchase Notice or written notice of withdrawal thereof in
accordance with the provisions of Section 9.01(e).

     Any Note that is to be repurchased only in part shall be surrendered to the Trustee (with, if
the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in
form satisfactory to the Company and the Trustee duly executed by the Holder thereof or his
attorney duly authorized in writing), and the Company shall execute, and the Trustee shall
authenticate and make available for delivery to the Holder of such Note without service charge, a
new Note or Notes, containing identical terms and conditions, each in an authorized
denomination in aggregate principal amount equal to and in exchange for the unrepurchased
portion of the principal of the Note so surrendered.

     (c) In connection with any purchase of Notes pursuant to this Section 9.01, the Company shall
give written notice of the Put Right Repurchase Date to the Holders (the “Company Put Right
Notice”).

     The Company Put Right Notice shall be sent by first-class mail to the Trustee and to each
Holder (and to each beneficial owner as required by applicable law) that has delivered a Put Right
Repurchase Notice within 10 Business Days of receipt of such Put Right Repurchase Notice, or, if a
shorter period, at least two Business Days prior to any Put Right Repurchase Date (the “Company Put
Right Notice Date”). Each Company Put Right Notice shall include a form of Put Right Repurchase
Notice to be completed by a Noteholder and shall state:

     (i) the Put Right Repurchase Price and the Exchange Price;

     (ii) the name and address of the Paying Agent and the Exchange Agent;

     (iii) that Notes as to which a Put Right Repurchase Notice has been given may
be exchanged in accordance with Article 8 only if the applicable Put Right
Repurchase Notice has been withdrawn in accordance with the terms of this Third
Supplemental Indenture;

     (iv) that Notes must be surrendered to the Paying Agent to collect payment;

     (v) that the Put Right Repurchase Price for any Note as to which a Put Right
Repurchase Notice has been given and not withdrawn will be paid promptly

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following the later of the Put Right Repurchase Date and the time of surrender of such Note as
described in subclause (iv) above;

     (vi) the procedures the Holder must follow to exercise rights under this
Section and a brief description of those rights;

     (vii) briefly, the exchange rights of the Notes;

     (viii) the procedures for withdrawing a Put Right Repurchase Notice (including
pursuant to the terms of Section 9.01(e);

     (ix) that, unless the Company defaults in making payment on Notes for which a
Put Right Repurchase Notice has been submitted, interest on the Notes in respect of
which a Put Right Repurchase Notice has been delivered and not withdrawn will cease
to accrue on the Put Right Repurchase Date; and

     (x) the CUSIP number of the Notes.

     If any of the Notes are to be redeemed in the form of a Global Note, the Company shall modify
such notice to the extent necessary to accord with the procedures of the Depositary applicable to
redemptions.

     At the Company’s request, the Trustee shall give such Company Put Right Notice in the
Company’s name and at the Company’s expense; provided, however, that, in all cases, the text of
such Company Put Right Notice shall be prepared by the Company.

     (d) Upon receipt by the Trustee (or other Paying Agent appointed by the Company) of the Put
Right Repurchase Notice specified in Section 9.01(b)(i), the Holder of the Note in respect of which
such Put Right Repurchase Notice was given shall (unless such Put Right Repurchase Notice is
withdrawn as specified in Section 9.01(e)) thereafter be entitled to receive solely the Put Right
Repurchase Price with respect to such Note. Such Put Right Repurchase Price shall be paid to such
Holder, subject to receipt of funds by the Paying Agent, promptly following the later of (x) the
Put Right Repurchase Date with respect to such Note (provided the conditions in Section 9.01(b)
have been satisfied) and (y) the time of delivery of such Note to the Paying Agent by the Holder
thereof in the manner required by Section 9.01(b)(i). Notes in respect of which a Put Right
Repurchase Notice has been given by the Holder thereof may not be exchanged pursuant to Article 8
on or after the date of the delivery of such Put Right Repurchase Notice, unless such Put Right
Repurchase Notice has first been validly withdrawn as specified in Section 9.01(e).

     (e) A Put Right Repurchase Notice may be withdrawn by means of a written notice of withdrawal
delivered to the office of the Paying Agent in accordance with the Put Right Repurchase Notice at
any time prior to 10:00 A.M. New York City time on the fourth business on the Business Day prior to
the Put Right Repurchase Date specifying:

     (i) if certificated Notes have been issued, the certificate numbers of the
withdrawn Notes;

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     (ii) the principal amount of the Notes with respect to which such notice of
withdrawal is being submitted; and

     (iii) the principal amount, if any, of such Notes that remains subject to the
original Put Right Repurchase Notice, which portion must be in principal amounts of
$1,000 or an integral multiple of $1,000;

provided, however, that if the Notes are not in certificated form, the notice must comply with
appropriate procedures of the Depositary.

     A written notice of withdrawal of a Put Right Repurchase Notice shall be in the form set forth
in the preceding paragraph.

     Upon receipt of a written notice of withdrawal, the Paying Agent shall promptly return to the
Holders thereof any Notes in respect of which a Put Right Repurchase Notice has been withdrawn in
accordance with the provisions of Section 9.01(f).

     (f) There shall be no repurchase of any Notes pursuant to this Section 9.01 if there has
occurred (prior to, on or after, as the case may be, the giving, by the Holders of such Notes, of
the required Put Right Repurchase Notice) and is continuing an Event of Default with respect to
Notes of such series (other than a default in the payment of the Put Right Repurchase Price with
respect to such Notes). The Paying Agent will promptly return to the respective Holders thereof
any Notes held by it during the continuance of an Event of Default with respect to Notes of such
series (other than a default in the payment of the Put Right Repurchase Price with respect to such
Notes), in which case, upon such return, the Put Right Repurchase Notice with respect thereto shall
be deemed to have been withdrawn.

     (g) Prior to 11:00 a.m. (local time in The City of New York) on the Put Right Repurchase Date,
the Company shall deposit with the Trustee (or other Paying Agent appointed by the Company or if
the Company is acting as its own Paying Agent, set aside, segregate and hold in trust in accordance
with the terms of the Base Indenture as modified by this Third Supplemental Indenture) an amount
(in immediately available funds if deposited on such Business Day) sufficient to pay the aggregate
Put Right Repurchase Price of all the Notes or portions thereof which are to be purchased as of the
Put Right Repurchase Date. The manner in which the deposit required by this Section 9.01(g) is
made by the Company shall be at the option of the Company; provided that such deposit shall be made
in a manner such that the Trustee or a Paying Agent shall have immediately available funds on the
Put Right Repurchase Date.

     If the Trustee (or other Paying Agent appointed by the Company) holds, in accordance with the
terms hereof, money sufficient to pay the Put Right Repurchase Price of any Note, then, on the Put
Right Repurchase Date, such Note will cease to be Outstanding and the rights of the Holder in
respect thereof shall terminate (other than the right to receive the Put Right Repurchase Price as
aforesaid).

     To the extent that the aggregate amount of cash deposited by the Company pursuant to this
Section 9.01(g) exceeds the aggregate Put Right Repurchase
Price of the Notes or portions thereof
that the Company is obligated to purchase, then promptly after the Put Right Repurchase

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Date the Trustee or a Paying Agent, as the case may be, shall return any such excess cash to the Company.

     Section 9.02 Repurchase at Option of Holders Upon a Fundamental Change.

     (a) If a Fundamental Change occurs at any time, then each Noteholder shall have the right, at
such Holder’s option, to require the Company to repurchase all of such Holder’s Notes or any
portion thereof that is a multiple of $1,000 principal amount, for cash on the date (the
“Fundamental Change Repurchase Date”) specified by the Company that is not less than twenty (20)
Business Days and not more than thirty-five (35) Business Days after the date of the Fundamental
Change Company Notice (as defined below) at a repurchase price equal to 100% of the principal
amount thereof, together with accrued and unpaid interest thereon to, but excluding, the
Fundamental Change Repurchase Date (the “Fundamental Change Repurchase Price”).

     Repurchases of Notes under this Section 9.02 shall be made, at the option of the Holder
thereof, upon:

     (i) delivery to the Trustee (or other Paying Agent appointed by the Company) by
a Holder of a duly completed notice (the “Fundamental Change Repurchase Notice”) in
the form set forth on the reverse of the Note prior to the Close of Business on the
Fundamental Change Repurchase Date; and

     (ii) delivery or book-entry transfer of the Notes to the Trustee (or other
Paying Agent appointed by the Company) at any time after delivery of the Fundamental
Change Repurchase Notice (together with all necessary endorsements) at the Corporate
Trust Office of the Trustee (or other Paying Agent appointed by the Company), such
delivery being a condition to receipt by the Holder of the Fundamental Change
Repurchase Price therefor; provided that such Fundamental Change Repurchase Price
shall be so paid pursuant to this Section 9.02 only if the Note so delivered to the
Trustee (or other Paying Agent appointed by the Company) shall conform in all
respects to the description thereof in the related Fundamental Change Repurchase
Notice.

     The Fundamental Change Repurchase Notice shall state:

     (A) if certificated, the certificate numbers of Notes to be delivered
for repurchase;

     (B) the portion of the principal amount of Notes to be repurchased,
which must be $1,000 or an integral multiple thereof; and

     (C) that the Notes are to be repurchased by the Company pursuant to the
applicable provisions of the Notes and this Indenture.

     Any repurchase by the Company contemplated pursuant to the provisions of this Section 9.02
shall be consummated by the delivery of the consideration to be received by the Holder promptly
following the later of the Fundamental Change Repurchase Date and the time of the book-entry
transfer or delivery of the Note.

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     The Trustee (or other Paying Agent appointed by the Company) shall promptly notify the Company
of the receipt by it of any Fundamental Change Repurchase Notice or written notice of withdrawal
thereof in accordance with the provisions of Section 9.02(c).

     Any Note that is to be repurchased only in part shall be surrendered to the Trustee (with, if
the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in
form satisfactory to the Company and the Trustee duly executed by the Holder thereof or his
attorney duly authorized in writing), and the Company shall execute, and the Trustee shall
authenticate and make available for delivery to the Holder of such Note without service charge, a
new Note or Notes, containing identical terms and conditions, each in an authorized denomination in
aggregate principal amount equal to and in exchange for the unrepurchased portion of the principal
of the Note so surrendered.

     (b) On or before the twentieth day after the occurrence of any Fundamental Change, the Company
shall provide to all Holders of record of the Notes and the Trustee and Paying Agent a notice (the
“Fundamental Change Company Notice”) of the occurrence of such
Fundamental Change and of the repurchase right at the option of the Holders arising as a
result thereof. Such mailing shall be by first class mail. Simultaneously with providing such
Fundamental Change Company Notice, the Company shall publish a notice containing the information
included therein once in a newspaper of general circulation in The City of New York or publish such
information on the Company’s website or through such other public medium as the Company may use at
such time.

     Each Fundamental Change Company Notice shall specify:

     (i) the events causing the Fundamental Change;

     (ii) the date of the Fundamental Change;

     (iii) that the Holder must exercise the repurchase right on or prior to the
Close of Business on the Fundamental Change Repurchase Date;

     (iv) the Fundamental Change Repurchase Price;

     (v) the Fundamental Change Repurchase Date;

     (vi) the name and address of the Paying Agent and the Exchange Agent;

     (vii) the applicable Exchange Rate and any adjustments to the applicable
Exchange Rate;

     (viii) that the Notes with respect to which a Fundamental Change Repurchase
Notice has been delivered by a Holder may be exchanged only if the Holder withdraws
the Fundamental Change Repurchase Notice in accordance with the terms of this
Indenture; and

     (ix) the procedures that Holders must follow to require the Company to
repurchase their Notes.

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     No failure of the Company to give the foregoing notices and no defect therein shall limit the
Noteholders’ repurchase rights or affect the validity of the proceedings for the repurchase of the
Notes pursuant to this Section 9.02.

     (c) A Fundamental Change Repurchase Notice may be withdrawn by means of a written notice of
withdrawal delivered to the Paying Agent in accordance with the Fundamental Change Company Notice
at any time prior to the Close of Business on the Business Day prior to the Fundamental Change
Repurchase Date, specifying:

     (i) the principal amount of the Notes with respect to which such notice of
withdrawal is being submitted;

     (ii) if certificated Notes have been issued, the certificate numbers of the
withdrawn Notes; and

     (iii) the principal amount, if any, of such Notes that remains subject to the
original Fundamental Change Repurchase Notice, which portion must be in principal
amounts of $1,000 or an integral multiple of $1,000;

provided, however, that if the Notes are not in certificated form, the notice must comply with
appropriate procedures of the Depositary.

     (d) On or prior to 11:00 a.m. (local time in The City of New York) on the second Business Day
following the Fundamental Change Repurchase Date, the Company will deposit with the Trustee (or
other Paying Agent appointed by the Company or if the Company is acting as its own Paying Agent,
set aside, segregate and hold in trust in accordance with this Indenture) an amount of money
sufficient to repurchase on the Fundamental Change Repurchase Date all of the Notes to be
repurchased on such date at the Fundamental Change Repurchase Price. Subject to receipt of funds
and/or Notes by the Trustee (or other Paying Agent appointed by the Company), payment for Notes
surrendered for repurchase (and not withdrawn) prior to the Close of Business on the Fundamental
Change Repurchase Date will be made promptly after the later of (x) the Fundamental Change
Repurchase Date with respect to such Note (provided the Holder has satisfied the conditions to the
payment of the Fundamental Change Repurchase Price in Section 9.02), and (y) the time of book-entry
transfer or the delivery of such Note to the Trustee (or other Paying Agent appointed by the
Company) by the Holder thereof in the manner required by Section 9.02 by mailing checks for the
amount payable to the Holders of such Notes entitled thereto as they shall appear in the Security
Register, provided, however, that payments to the Depositary shall be made by wire transfer of
immediately available funds to the account of the Depositary or its nominee. The Trustee shall,
promptly after such payment and upon written demand by the Company, return to the Company any funds
in excess of the Fundamental Change Repurchase Price.

     (e) If the Trustee (or other Paying Agent appointed by the Company) holds money or securities
sufficient to repurchase on the Fundamental Change Repurchase Date all the Notes or portions
thereof that are to be purchased as of the second Business Day following the Fundamental Change
Repurchase Date, then on and after the Fundamental Change Repurchase Date (i) such Notes will cease
to be Outstanding, (ii) interest will cease to accrue on such Notes,
and (iii) all other rights of
the Holders of such Notes will terminate, whether or not book-entry transfer of the Notes has been
made or the Notes have been delivered to the Trustee or Paying Agent, other than the right to
receive the Fundamental Change Repurchase Price upon delivery of the Notes.

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ARTICLE 10

Miscellaneous Provisions

     Section 10.01 Ratification of Base Indenture. Except as expressly modified or amended hereby, the
Base Indenture, as modified by the First Supplemental Indenture and the Second Supplemental
Indenture (which is not applicable to the Notes), continues in full force and effect and is in all
respects confirmed, ratified and preserved.

     Section 10.02 Provisions Binding on Company’s Successors. All the covenants, stipulations, promises and agreements of the Company contained in this Third
Supplemental Indenture shall bind its successors and assigns whether so expressed or not.

     Section 10.03 Official Acts by Successor Corporation. Any act or proceeding by any provision of
this Third Supplemental Indenture authorized or required to be done or performed by any board,
committee, trustee or officer of the Company shall and may be done and performed with like force
and effect by the like board, committee, trustee or officer of any corporation, trust or other
entity that shall at the time be the lawful sole successor of the Company.

     Section 10.04 Addresses for Notices, Etc. Any notice or demand which by any provision of this
Third Supplemental Indenture is required or permitted to be given or served by the Trustee or by
the Noteholders on the Company shall be deemed to have been sufficiently given or made, for all
purposes if given or served by being deposited postage prepaid by registered or certified mail in a
post office letter box addressed (until another address is filed by the Company with the Trustee)
to Archstone-Smith Operating Trust, 9200 E. Panorama, Suite 400, Englewood, Colorado 80112,
Attention: General Counsel. Any notice, direction, request or demand hereunder to or upon the
Trustee shall be deemed to have been sufficiently given or made, for all purposes, if given or
served by being deposited postage prepaid by registered or certified mail in a post office letter
box addressed to U.S. Bank National Association, Attention: Corporate Trust Administration, 100
Wall Street, Suite 1600, New York, New York 10005.

     The Trustee, by notice to the Company, may designate additional or different addresses for
subsequent notices or communications.

     Any notice or communication mailed to a Noteholder shall be mailed to him by first class mail,
postage prepaid, at his address as it appears on the Security Register and shall be sufficiently
given to him if so mailed within the time prescribed.

     Failure to mail a notice or communication to a Noteholder or any defect in it shall not affect
its sufficiency with respect to other Noteholders. If a notice or communication is mailed in the
manner provided above, it is duly given, whether or not the addressee receives it.

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     Section 10.05 Governing Law. THIS THIRD SUPPLEMENTAL INDENTURE AND EACH NOTE ISSUED PURSUANT
HERETO SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK, AND FOR ALL
PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS ENTERED INTO AND TO BE PERFORMED THEREIN.

     Section 10.06 Evidence of Compliance with Conditions Precedent; Certificates and Opinions of
Counsel to Trustee. Upon any application or demand by the Company to the Trustee to take any action under any of the
provisions of this Indenture, the Company shall furnish to the Trustee an Officers’ Certificate
stating that all conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with, and an Opinion of Counsel stating that, in the opinion of
such counsel, all such conditions precedent have been complied with.

     Each certificate or opinion provided for by or on behalf of the Company in this Indenture and
delivered to the Trustee with respect to compliance with a condition or covenant provided for in
this Indenture shall include (i) a statement that the person making such certificate or opinion has
read such covenant or condition; (ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statement or opinion contained in such certificate or
opinion is based; (iii) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an informed opinion as to
whether or not such covenant or condition has been complied with; and (iv) a statement as to
whether or not, in the opinion of such person, such condition or covenant has been complied with.

     Section 10.07 Non-Business Day. Section 113 of the Base Indenture shall also apply to any
Fundamental Change Purchase Date, Put Right Repurchase Date or Exchange Date in respect of the
Notes.

     Section 10.08 No Security Interest Created. Nothing in this Indenture or in the Notes, expressed
or implied, shall be construed to constitute a security interest under the Uniform Commercial Code
or similar legislation, as now or hereafter enacted and in effect, in any jurisdiction.

     Section 10.09 Benefits of Indenture. Nothing in this Indenture or in the Notes, expressed or
implied, shall give to any person, other than the parties hereto, any Paying Agent, any
Authenticating Agent, any Security Registrar and their successors hereunder, the Noteholders, any
benefit or any legal or equitable right, remedy or claim under this Indenture.

     Section 10.10 Table of Contents, Headings, Etc. The table of contents and the titles and headings
of the articles and sections of this Third Supplemental Indenture have been inserted for
convenience of reference only, are not to be considered a part hereof, and shall in no way modify
or restrict any of the terms or provisions hereof.

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     Section 10.11 Execution in Counterparts. This Third Supplemental Indenture may be executed in any
number of counterparts, each of which shall be an original, but such counterparts shall together
constitute but one and the same instrument.

     Section 10.12 Trustee. The Trustee makes no representations as to the validity or sufficiency of
this Third Supplemental Indenture. The statements and recitals herein are deemed to be those of
the Company and not of the Trustee.

     Section 10.13 Further Instruments and Acts. Upon request of the Trustee, the Company will execute
and deliver such further instruments and do such further acts as may be reasonably necessary or
proper to carry out more effectively the purposes of this Indenture.

     Section 10.14 Waiver of Jury Trial. EACH OF THE COMPANY AND THE TRUSTEE HEREBY IRREVOCABLY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE, THE NOTES OR THE TRANSACTION CONTEMPLATED
HEREBY.

     Section 10.15 Force Majeure. In no event shall the Trustee be responsible or liable for any
failure or delay in the performance of its obligations hereunder arising out of or caused by,
directly or indirectly, forces beyond its control, including, without limitation, strikes, work
stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural
catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications
or computer (software and hardware) services; it being understood that the Trustee shall use
reasonable efforts which are consistent with accepted practices in the banking industry to resume
performance as soon as practicable under the circumstances.

43

 

     IN WITNESS WHEREOF, the parties hereto have caused this Third Supplemental Indenture to be
duly executed as of the date first written above.

	 	 	 	 	 	 	 
	 	 	ARCHSTONE-SMITH OPERATING TRUST
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Rick D. Jacobsen
	 	 	 	 	 
	 

	 	 	 	Name:
	 	Rick D. Jacobsen
	 

	 	 	 	Title:
	 	Executive Vice President

	 	 	 	 	 	 	 
	[SEAL]
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Attest:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	By:

	 	/s/ Caroline Bower	 	 
	 	 	 	 	 
	 

	 	Name:
	 	Caroline Bower	 	 
	 

	 	Title:
	 	Secretary	 	 

	 	 	 	 	 	 	 
	 	 	U.S. BANK NATIONAL ASSOCIATION,	 	 
	 

	 	 	 	as Trustee, as aforesaid	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Thomas Tabor
	 

	 	 	 	 	 	 
	 

	 	 	 	Authorized Person	 	 

	 	 	 	 	 	 	 
	Attest:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	By:

	 	/s/ Jean Clarke	 	 
	 	 	 	 	 
	 

	 	Name:
	 	Jean Clarke	 	 
	 

	 	Title:
	 	Assistant Vice President	 	 

 

 

SCHEDULE A

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Share Price
	Effective Date	 	$52.14	 	$55.00	 	$60.00	 	$65.00	 	$70.00	 	$75.00	 	$85.00
	July 14, 2006
	 	 	3.4585	 	 	 	2.8269	 	 	 	1.9550	 	 	 	1.3141	 	 	 	0.8468	 	 	 	0.5126	 	 	 	0.1188	 
	July 18, 2007
	 	 	3.4529	 	 	 	2.7997	 	 	 	1.9038	 	 	 	1.2543	 	 	 	0.7892	 	 	 	0.4620	 	 	 	0.0920	 
	July 18, 2008
	 	 	3.4290	 	 	 	2.7442	 	 	 	1.8167	 	 	 	1.1573	 	 	 	0.6983	 	 	 	0.3860	 	 	 	0.0532	 
	July 18, 2009
	 	 	3.3796	 	 	 	2.6484	 	 	 	1.6716	 	 	 	1.0009	 	 	 	0.5559	 	 	 	0.2721	 	 	 	0.0100	 
	July 18, 2010
	 	 	3.3164	 	 	 	2.4923	 	 	 	1.4113	 	 	 	0.7159	 	 	 	0.3093	 	 	 	0.0944	 	 	 	0.0000	 
	July 18, 2011
	 	 	3.4585	 	 	 	2.4612	 	 	 	0.9461	 	 	 	0.0000	 	 	 	0.0000	 	 	 	0.0000	 	 	 	0.0000

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00106-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00106-of-00352.parquet"}]]