Document:

exhibit10.htm

    
      

      

    

    
      	
              10.2

            	
              Form
      of Letter Agreement Amending Employment Agreements of James D. Rickard,
      Paul A. Chrisco, Michael K. Bauer, Kevin J. Cecil and Bill D.
      Wright

            

    

     

     

    

     

     

    

     

     

    May
[___], 2009

     

    [Senior
Executive Officer]

    Community
Bank Shares of Indiana, Inc.

    101 West
Spring Street

    New
Albany, IN  47150

     

    Dear
[Senior Executive Officer],

     

     

              Community
Bank Shares of Indiana, Inc. (the “Company”) anticipates
entering into a Securities Purchase Agreement (the “Purchase Agreement”)
with the United States Department of Treasury (the “Treasury”) that
provides, among other things, for the Treasury’s purchase of Company securities.
This purchase is anticipated to occur as part of the Company’s participation in
the Treasury’s Troubled Asset Relief Program (“TARP”) - Capital
Purchase Program (the “CPP”).  If
the Company does not participate or ceases at any time to participate in TARP,
this letter shall be of no further force and effect.

     

     

              As
a condition to the closing of the investment contemplated by the Purchase
Agreement, the Company is required to take certain actions with respect to
compensation arrangements of some of its executive officers. For purposes of the
CPP, the Company has determined that you are or may be a Senior Executive
Officer (defined below) or one of the next 5 most highly-compensated employees
of the Company.  To comply with the requirements of the CPP, and in
consideration of the benefits that you will receive because of the Company’s
participation in the CPP and for other good and valuable consideration, the
sufficiency of which you hereby acknowledge, you agree as follows:

     

     

                (1)           No Golden Parachute
(Severance) Payments. The Company may not pay and you will not be
entitled to receive from the Company any Golden Parachute Payment (as defined
below) during any Restricted Period (defined below).

     

     

                (2)           Recovery of Bonus and
Incentive Compensation.  Any bonus, retention award or
incentive compensation paid to you during the Restricted Period or prior to the
Restricted Period is subject to recovery or “clawback” by the Company if the
payments were based on materially inaccurate statements of earnings, revenues,
gains or other criteria.  In such an event, you will be required to
and shall return to the Company any bonus, retention award or incentive
compensation paid to you by the Company if such bonus, retention award or
incentive compensation was paid to you based on materially inaccurate statements
of earnings, revenues, gains or other criteria.

     

     

                (3)           Compensation Program
Amendments. Each of the Company’s compensation, bonus, incentive and
other benefit plans, arrangements and agreements, including your employment
agreement (the “Employment Agreement”), and compensation policies (all such
plans, arrangements and agreements, and policies, the “Compensation Plans”)
are hereby amended with respect to you to the extent necessary to give effect to
provisions (1) and (2) of this letter, and you agree to execute any further
amendments as may be necessary to implement the agreements contained in this
letter.

     

     

                (4)           Compensation Plan
Review.  In addition, the Company is required to review its
Compensation Plans to ensure that the Compensation Plans do not (a) provide
incentives or otherwise encourage its Senior Executive Officers to take
unnecessary and excessive risks that threaten the value of the Company, (b)
encourage manipulation of the Company’s reported earnings to enhance
compensation of any employees or (c) commit the Company to make excessive or
luxury expenditures as identified under EESA (defined below).  To the
extent any such review requires revisions to any Compensation Plan, you agree
that the Company may implement unilaterally such changes to the Compensation
Plans that the Company determines are necessary because of such review of its
Compensation Plans.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

               
(5)           Bonus
Restriction.  If you are the most highly compensated employee
of the Company, to the extent required by Section 111 of EESA, you will not
receive or accrue during the Restricted Period any bonus, retention award or
incentive compensation except as described in the next sentence.  This
prohibition does not apply to the award of long-term restricted stock in a year
that (i) does not fully vest during the Restricted Period, (ii) does not have a
value of greater than one-third of your total annual compensation amount for
such year and (iii) is subject to such other terms and conditions as the
Treasury may determine are in the public interest.

     

     

                (6)           Definitions and
Interpretation. This letter shall be interpreted as follows:

     

     

    · “Company” includes any
entities treated as a single employer with the Company under EESA, including
Your Community Bank and The Scott County State Bank.  You are also
delivering a waiver pursuant to the Securities Purchase Agreement, and, as
between the Company and you, the term “employer” in that waiver will be deemed
to mean the Company as used in this letter. 

     

     

    · “EESA” means the Emergency
Economic Stabilization Act of 2008, as amended, and any future amendments
thereto and regulations and other authorized guidance issued
thereunder.

     

     

    · “Golden Parachute Payment”
means any payment upon departure from employment for any reason, except for
payments for services performed or benefits accrued, pursuant to subsection
111(a)(2) of EESA.

     

     

    · “Restricted Period” means any
period that the Investor under the Purchase Agreement owns any debt or equity
securities of the Company acquired pursuant to the Purchase Agreement or the
Warrants issued thereunder.

     

     

    ·  “Senior Executive Officer”
means an individual who is 1 of the top 5 most highly paid executives of the
Company, whose compensation is required to be disclosed pursuant to the
Securities Exchange Act of 1934, and any regulations issued thereunder, pursuant
to subsection 111(a)(1) of EESA, as determined in accordance with
EESA.

     

     

    · This
letter is intended to, and shall be interpreted, administered and construed to
comply with Section 111 of EESA (and, to the maximum extent consistent with the
preceding, to permit operation of the Compensation Plans in accordance with
their terms before giving effect to this letter).

     

     

                (7)           Payments following TARP
Participation.   Once the Restricted Period has ended and
if applicable law permits, the Company will pay you all cash amounts, if any, it
would have paid to you as a result of any event(s) that occurred during the
Restricted Period that would have entitled you to cash payment rights under your
employment agreement with the Company.  Any such payment amounts will
not accrue interest.

     

            
   (8)        
 Termination of
Noncompetition Provisions in Employment Agreement.  If, during
the Restricted Period, your employment is terminated by the Company under your
Employment Agreement for other than Cause, Disability, Retirement or Death, of
if, during the Restricted Period, your employment is terminated by you due to a
material breach of the Employment Agreement which has not been cured within
fifteen (15) days after a written notice of non-compliance has been given by you
to the Company, then the provisions in your Employment Agreement prohibiting you
from competing with or being employed by any company that competes with the
Company within a certain geographic region shall not apply to you, but the
provisions of the Employment Agreement prohibiting you from soliciting or
attempting to entice away any employees, customers, projects, loan arrangements
or prospective business opportunities of the Company shall continue in force and
shall be enforceable against you for a period of one year following your
termination of employment with the Company.

     

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

               
(9)           Miscellaneous. To the
extent not subject to federal law, this letter will be governed by and construed
in accordance with the laws of the State of Indiana. This letter may be executed
in two or more counterparts, each of which will be deemed an original. A
signature transmitted by facsimile will be deemed an original
signature.

     

     

    We
appreciate the concessions you are making and look forward to your continued
leadership during these financially turbulent times.

     

     

    Sincerely,

                                       

                                                                                                   
Community Bank Shares of Indiana, Inc.

     

     

                                        

     

    By:  _________________________________ 

                                                                                                          
Name:

                                                                                                          
Title:

    Intending
to be legally bound,

    I agree
with and accept the foregoing

    terms on
the date set forth below.

     

                                                                             

     

     

    By:
____________________________                                                                            

     

    Name:   [Senior
Executive Officer]

    Title:                                                                       

    Date:exv10w1

Exhibit 10.1

MASTER CREDIT FACILITY AGREEMENT

BY AND AMONG

BORROWERS SIGNATORY HERETO

AND

GRANDBRIDGE REAL ESTATE CAPITAL LLC

dated as of

May 29, 2009

Colonial/ Grandbridge — Master Credit Facility Agreement

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page	 
	 
	ARTICLE 1 THE COMMITMENT
	 	 	2	 
	 
	 	 	 	 
	Section 1.01. The Commitment
	 	 	2	 
	Section 1.02. Requests for Advances
	 	 	3	 
	Section 1.03. Maturity Date of Advances; Amortization; Prepayment
	 	 	3	 
	Section 1.04. Interest on Advances
	 	 	5	 
	Section 1.05. Notes
	 	 	5	 
	Section 1.06. Conversion of SARM Variable Advances to Fixed Advances
	 	 	6	 
	Section 1.07. Limitations on Right to Convert to Fixed Advances
	 	 	6	 
	Section 1.08. Conditions to Conversion
	 	 	7	 
	Section 1.09. Interest Rate Protection
	 	 	7	 
	Section 1.10. Limitation on All Advances
	 	 	7	 
	 
	 	 	 	 
	ARTICLE 2 THE ADVANCES
	 	 	8	 
	 
	 	 	 	 
	Section 2.01. Rate Setting for an Advance
	 	 	8	 
	Section 2.02. Breakage and Other Costs
	 	 	9	 
	Section 2.03. Advances
	 	 	9	 
	Section 2.04. Determination of Allocable Facility Amount and Valuations
	 	 	9	 
	Section 2.05. Supplemental Loan
	 	 	10	 
	Section 2.06. Increase in Commitment
	 	 	11	 
	 
	 	 	 	 
	ARTICLE 3 COLLATERAL CHANGES
	 	 	11	 
	 
	 	 	 	 
	Section 3.01. Right to Add Collateral
	 	 	11	 
	Section 3.02. Procedure for Adding Collateral
	 	 	11	 
	Section 3.03. Right to Obtain Releases of Collateral
	 	 	12	 
	Section 3.04. Procedure for Obtaining Releases of Collateral
	 	 	13	 
	Section 3.05. Substitutions
	 	 	15	 
	 
	 	 	 	 
	ARTICLE 4 TERMINATION OF FACILITIES
	 	 	19	 
	 
	 	 	 	 
	Section 4.01. Right to Terminate Credit Facility
	 	 	19	 
	Section 4.02. Procedure for Terminating Credit Facility
	 	 	19	 
	 
	 	 	 	 
	ARTICLE 5 CONDITIONS PRECEDENT TO ALL REQUESTS
	 	 	19	 
	 
	 	 	 	 
	Section 5.01. Conditions Applicable to All Requests
	 	 	19	 
	Section 5.02. Conditions Precedent to Initial Advance
	 	 	21	 
	Section 5.03. Conditions Precedent to Future Advances
	 	 	22	 

Colonial/ Grandbridge — Master Credit Facility Agreement

 

 

	 	 	 	 	 
	 	 	Page	 
	 
	Section 5.04. Conditions Precedent to Addition of an Additional Mortgaged Property to the Collateral Pool
	 	 	23	 
	Section 5.05. Conditions Precedent to Release of Property from the Collateral Pool
	 	 	24	 
	Section 5.06. Conditions Precedent to Substitution of a Substitute Mortgaged Property into the Collateral Pool
	 	 	25	 
	Section 5.07. Conditions Precedent to Conversion
	 	 	26	 
	Section 5.08. Conditions Precedent to Termination of Credit Facility
	 	 	27	 
	Section 5.09. Opinion Relating to Advance Request, Addition Request, Conversion Request, or Substitution Request
	 	 	27	 
	Section 5.10. Delivery of Property-Related Documents
	 	 	27	 
	Section 5.11. Conditions Precedent to Letters of Credit
	 	 	28	 
	 
	 	 	 	 
	ARTICLE 6 REPRESENTATIONS AND WARRANTIES
	 	 	30	 
	 
	 	 	 	 
	Section 6.01. Representations and Warranties of Borrower
	 	 	30	 
	Section 6.02. Representations and Warranties of Lender
	 	 	30	 
	 
	 	 	 	 
	ARTICLE 7 AFFIRMATIVE COVENANTS OF BORROWER
	 	 	31	 
	 
	 	 	 	 
	Section 7.01. Compliance with Agreements
	 	 	31	 
	Section 7.02. Maintenance of Existence
	 	 	31	 
	Section 7.03. Maintenance of REIT Status
	 	 	31	 
	Section 7.04. Financial Statements; Accountants’ Reports; Other Information
	 	 	31	 
	Section 7.05. Confidentiality of Certain Information
	 	 	34	 
	Section 7.06. Access to Records; Discussions With Officers and Accountants
	 	 	34	 
	Section 7.07. Certificate of Compliance
	 	 	35	 
	Section 7.08. Maintain Licenses
	 	 	35	 
	Section 7.09. Inform Lender of Material Events
	 	 	35	 
	Section 7.10. Compliance with Applicable Laws
	 	 	36	 
	Section 7.11. Alterations to the Mortgaged Properties
	 	 	37	 
	Section 7.12. Loan Document Taxes
	 	 	37	 
	Section 7.13. Further Assurances
	 	 	38	 
	Section 7.14. Transfer of Ownership Interests in Borrower or Guarantor
	 	 	38	 
	Section 7.15. Transfer of Ownership of Mortgaged Property
	 	 	41	 
	Section 7.16. Change in Senior Management
	 	 	43	 
	Section 7.17. Date-Down Endorsements
	 	 	43	 
	Section 7.18. Ownership of Mortgaged Properties
	 	 	44	 
	Section 7.19. Change in Property Manager
	 	 	44	 
	 
	 	 	 	 
	ARTICLE 8 FINANCIAL COVENANTS
	 	 	44	 
	 
	 	 	 	 
	Section 8.01. Cash on Hand
	 	 	44	 
	Section 8.02. Net Worth
	 	 	44	 
	 
	 	 	 	 
	ARTICLE 9 NEGATIVE COVENANTS OF BORROWER AND GUARANTOR
	 	 	45	 
	 
	 	 	 	 

Colonial/ Grandbridge — Master Credit Facility Agreement

 

 

	 	 	 	 	 
	 	 	Page	 
	 
	Section 9.01. Other Activities
	 	 	45	 
	Section 9.02. Liens
	 	 	46	 
	Section 9.03. Indebtedness
	 	 	46	 
	Section 9.04. Principal Place of Business
	 	 	46	 
	Section 9.05. Condominiums
	 	 	46	 
	Section 9.06. Restrictions on Distributions
	 	 	46	 
	Section 9.07. Conduct of Business
	 	 	46	 
	Section 9.08. Ownership of Property
	 	 	46	 
	 
	 	 	 	 
	ARTICLE 10 FEES
	 	 	47	 
	 
	 	 	 	 
	Section 10.01. Origination Fees
	 	 	47	 
	Section 10.02. Due Diligence Fees
	 	 	47	 
	Section 10.03. Legal Fees and Expenses
	 	 	48	 
	Section 10.04. Failure to Close any Request
	 	 	48	 
	 
	 	 	 	 
	ARTICLE 11 EVENTS OF DEFAULT
	 	 	48	 
	 
	 	 	 	 
	Section 11.01. Events of Default
	 	 	48	 
	 
	 	 	 	 
	ARTICLE 12 REMEDIES
	 	 	51	 
	 
	 	 	 	 
	Section 12.01. Remedies; Waivers
	 	 	51	 
	Section 12.02. Waivers; Rescission of Declaration
	 	 	51	 
	Section 12.03. Lender’s Right to Protect Collateral and Perform Covenants and Other Obligations
	 	 	52	 
	Section 12.04. No Remedy Exclusive
	 	 	52	 
	Section 12.05. No Waiver
	 	 	52	 
	Section 12.06. No Notice
	 	 	52	 
	 
	 	 	 	 
	ARTICLE 13 INSURANCE, REAL ESTATE TAXES AND REPLACEMENT RESERVES
	 	 	53	 
	 
	 	 	 	 
	Section 13.01. Insurance and Real Estate Taxes
	 	 	53	 
	Section 13.02. Replacement Reserves
	 	 	53	 
	 
	 	 	 	 
	ARTICLE 14 LIMITS ON PERSONAL LIABILITY
	 	 	53	 
	 
	 	 	 	 
	Section 14.01. Personal Liability to Borrower
	 	 	53	 
	Section 14.02. Additional Borrowers
	 	 	54	 
	Section 14.03. Borrower Agency Provisions
	 	 	55	 
	Section 14.04. Waivers With Respect to Other Borrower Secured Obligation (for Mortgaged Properties located in California)
	 	 	55	 
	Section 14.05. Joint and Several Obligation; Cross-Guaranty
	 	 	59	 
	Section 14.06. No Impairment
	 	 	60	 
	Section 14.07. Election of Remedies
	 	 	60	 
	Section 14.08. Subordination of Other Obligations
	 	 	61	 

Colonial/ Grandbridge — Master Credit Facility Agreement

 

 

	 	 	 	 	 
	 	 	Page	 
	 
	Section 14.09. Insolvency and Liability of Other Borrower
	 	 	62	 
	Section 14.10. Preferences, Fraudulent Conveyances, Etc.
	 	 	62	 
	Section 14.11. Maximum Liability of Each Borrower
	 	 	63	 
	Section 14.12. Liability Cumulative; References to California Law
	 	 	63	 
	 
	 	 	 	 
	ARTICLE 15 MISCELLANEOUS PROVISIONS
	 	 	63	 
	 
	 	 	 	 
	Section 15.01. Counterparts
	 	 	63	 
	Section 15.02. Amendments, Changes and Modifications
	 	 	64	 
	Section 15.03. Payment of Costs, Fees and Expenses
	 	 	64	 
	Section 15.04. Payment Procedure
	 	 	65	 
	Section 15.05. Payments on Business Days
	 	 	65	 
	Section 15.06. Choice of Law; Consent to Jurisdiction; Waiver of Jury Trial
	 	 	65	 
	Section 15.07. Severability
	 	 	66	 
	Section 15.08. Notices
	 	 	67	 
	Section 15.09. Further Assurances and Corrective Instruments
	 	 	68	 
	Section 15.10. Term of this Agreement
	 	 	69	 
	Section 15.11. Assignments; Third-Party Rights
	 	 	69	 
	Section 15.12. Headings
	 	 	69	 
	Section 15.13. General Interpretive Principles
	 	 	69	 
	Section 15.14. Interpretation
	 	 	70	 
	Section 15.15. Standards for Decisions, Etc.
	 	 	70	 
	Section 15.16. Decisions in Writing
	 	 	70	 
	Section 15.17. Approval of Waivers
	 	 	70	 
	Section 15.18. USA Patriot Act
	 	 	70	 
	Section 15.19. All Asset Filings
	 	 	71	 
	Section 15.20. Recitals
	 	 	71	 

Colonial/ Grandbridge — Master Credit Facility Agreement

 

 

EXHIBITS

	 	 	 
	EXHIBIT A

	 	Schedule of Initial Mortgaged Properties and Initial Valuations
	EXHIBIT B-1

	 	Fixed Facility Note (Standard Maturity)
	EXHIBIT B-2

	 	Fixed Facility Note (Fixed+1 Maturity)
	EXHIBIT C-1

	 	Variable Facility Note (SARM One-Month LIBOR)
	EXHIBIT C-2

	 	Variable Facility Note (SARM Three-Month LIBOR)
	EXHIBIT D

	 	Interest Rate Cap Security, Pledge and Assignment Agreement (Cap Security Agreement)
	EXHIBIT E-1

	 	Guaranty
	EXHIBIT E-2

	 	Confirmation of Guaranty
	EXHIBIT F

	 	Compliance Certificate
	EXHIBIT G-1

	 	Organizational Certificate (Borrower)
	EXHIBIT G-2

	 	Organizational Certificate (Guarantor)
	EXHIBIT H

	 	Conversion Request
	EXHIBIT I

	 	Rate Form
	EXHIBIT J

	 	Certificate of Borrower Parties
	EXHIBIT K

	 	Advance Request
	EXHIBIT L

	 	Request (Addition/Release/Substitution)
	EXHIBIT M

	 	Confirmation of Obligations
	EXHIBIT N

	 	Credit Facility Termination Request
	EXHIBIT O

	 	Form of Letter of Credit
	 
	 	 
	APPENDIX I

	 	Definitions

Colonial/ Grandbridge — Master Credit Facility Agreement

 

 

MASTER CREDIT FACILITY AGREEMENT

     THIS MASTER CREDIT FACILITY AGREEMENT (this “Agreement”) is made as of May 29, 2009,
by and among (i) (a) CMF 7 PORTFOLIO LLC, a Delaware limited liability company, and (b) such
Additional Borrowers as may from time to time become borrowers under this Agreement (individually
and collectively, “Borrower”), (ii) COLONIAL REALTY LIMITED PARTNERSHIP, a Delaware limited
partnership (“Guarantor”), and (iii) GRANDBRIDGE REAL ESTATE CAPITAL LLC, a North Carolina
limited liability company (“Lender”).

RECITALS

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

     B. Borrower has requested that Lender establish a $156,359,000 Credit Facility in favor of
Borrower.

     C. To secure the obligations of Borrower under this Agreement and the other Loan Documents
issued in connection with the Credit Facility, Borrower shall create a Collateral Pool in favor of
Lender. The Collateral Pool shall be comprised of (i) certain Multifamily Residential Properties
owned by Borrower or any Additional Borrower and (ii) any other collateral pledged to Lender from
time to time by any Borrower or Additional Borrower pursuant to this Agreement or any other Loan
Documents. As of the Initial Closing Date, the Collateral Pool shall consist of the Mortgaged
Properties listed on Exhibit A.

     D. Each Note and Security Document shall be cross-defaulted (i.e., a default under any
Note, Security Document, or under this Agreement, shall constitute a default under each Note,
Security Document, and this Agreement) and cross-collateralized (i.e., each Security
Instrument shall secure all of Borrower’s obligations under this Agreement and the other Loan
Documents) and it is the intent of the parties to this Agreement that Lender may accelerate any
Note without the obligation, but with the right to accelerate any other Note and that in the
exercise of its rights and remedies under the Loan Documents, Lender may, except as provided in
this Agreement, exercise and perfect any and all of its rights in and under the Loan Documents with
regard to any Mortgaged Property without the obligation (but with the right) to exercise and
perfect its rights and remedies with respect to any other Mortgaged Property and that any such
exercise shall be without regard to the Allocable Facility Amount assigned to such Mortgaged
Property and that Lender may recover an amount equal to the full amount Outstanding in respect of
any of the Notes in connection with such exercise and any such amount shall be applied to the
Obligations as determined by Lender.

     Subject to the terms, conditions and limitations of this Agreement, Lender has agreed to
establish the Credit Facility.

Colonial/ Grandbridge — Master Credit Facility Agreement

1

 

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

ARTICLE 1

THE COMMITMENT

     Section 1.01. The Commitment. 

     Subject to the terms, conditions and limitations of this Agreement:

     (a) Commitment Amount; No Increase. The amount of the Commitment is $156,359,000. As
of the Initial Closing Date, the amount advanced under the Fixed Facility Commitment is
$156,359,000, and the amount advanced under the Variable Facility Commitment is $0. Subject to the
terms and conditions of this Agreement, including without limitation Section 1.10, Borrower
may obtain Future Advances in accordance with Section 1.01(b) and (c) for the
remainder of the Commitment not advanced on the Initial Closing Date. Subject to the provisions of
Section 2.05, notwithstanding anything to the contrary contained in this Agreement,
Borrower shall have no right to increase the amount of the Commitment (except for an increase in
the Fixed Commitment pursuant to a conversion under Section 1.06 of this Agreement).

     (b) Variable Facility Commitment. Subject to the terms and conditions of this
Agreement, including without limitation Section 1.10, Lender agrees to make SARM Variable
Advances to Borrower from time to time during the Variable Facility Availability Period.  The
aggregate principal balance of the Variable Advances Outstanding at any time shall not exceed the
Variable Facility Commitment.  The repayment of a Variable Advance shall permanently reduce the
Variable Facility Commitment by the original principal amount of such Variable Advance. Borrower
may not re-borrow any part of any Variable Advance which it has previously borrowed and repaid.
Unless permitted by the provisions of Section 2.05, no Advances shall be made as a result
of increases in the Debt Service Coverage Ratio or decreases in the Loan to Value Ratio of any
Mortgaged Property. 

     (c) Fixed Facility Commitment. Subject to the terms and conditions of this Agreement,
including without limitation Section 1.10, Lender agrees to make Fixed Advances to Borrower
from time to time during the Fixed Facility Availability Period. Fixed Advances may be a cash
execution or an MBS execution at Lender’s discretion. The aggregate original principal amount of
the Fixed Advances Outstanding shall not exceed the Fixed Facility Commitment. The repayment of a
Fixed Advance shall permanently reduce the Fixed Facility Commitment by the original principal
amount of such Fixed Advance. Borrower may not re-borrow any part of any Fixed Advance which it
has previously borrowed and repaid. Unless permitted by the provisions of Section 2.05, no
Advance shall be made as a result of increases in the Debt Service Coverage Ratio or decreases in
the Loan to Value Ratio of any Mortgaged Property.

Colonial/ Grandbridge — Master Credit Facility Agreement

2

 

     Section 1.02. Requests for Advances.

     Borrower shall request an Advance by giving Lender an Advance Request in accordance with
Section 2.03. The Advance Request shall indicate whether the Request is for a Fixed
Advance, a Variable Advance, or both.

     Section 1.03. Maturity Date of Advances; Amortization; Prepayment.

     (a) Variable Advances.

          (i) Maturity Date of SARM Variable Advances. Borrower may request a SARM Variable
Advance at the Initial Closing Date. The maturity date of such SARM Variable Advance made at the
Initial Closing Date shall be ten (10) years.

          (ii) Interest Only; Amortization of Variable Advances. A term of ten (10) years shall
not require amortization and all payments shall be interest only.

          (iii) Adjustable Rate LIBOR Options for SARM Variable Advance. At such time as
Borrower elects any SARM Variable Advance, Borrower shall elect an Adjustable Rate based on either
(A) One-Month LIBOR, as more specifically set forth in the applicable Variable Facility Note, the
form of which is attached as Exhibit C-1 to this Agreement, or (B) Three-Month LIBOR, as
more specifically set forth in the Variable Facility Note, the form of which is attached as
Exhibit C-2 to this Agreement.

          (iv) Prepayment of Variable Advances. Subject to the terms and conditions of
Section 3.04(d), Borrower may prepay all or a portion of any Variable Advance pursuant to
the prepayment provisions of the applicable Variable Facility Note. Any repaid Variable Advances
shall automatically result in a reduction of the Variable Facility Commitment.

     (b) Fixed Advances.

          (i) Maturity Date of Fixed Advances. Subject to the terms of Section 1.03(c),
Borrower may request a Fixed Advance at the Initial Closing Date. The maturity date of any Fixed
Advance made at the Initial Closing Date shall be ten (10) years. The maturity date for any Fixed
Advance made in connection with a conversion pursuant to Section 1.06 shall be specified by
Borrower for such Fixed Advance, provided that such maturity date shall be no earlier than the date
that is the first day of the month following the date five (5) years after the Closing Date of such
Fixed Advance and not later than the first day of the month following the date ten (10) years after
the Closing Date of such Fixed Advance, provided that the maturity date of any Fixed Advance shall
not be later than the first day of the month following the date ten (10) years after the Initial
Closing Date.

          (ii) Interest Only; Amortization of Fixed Advances. Amortization and interest only
payments for Fixed Advances made at the Initial Closing Date or pursuant to a conversion in
accordance with Section 1.06 shall be as follows:

Colonial/ Grandbridge — Master Credit Facility Agreement

3

 

          (A) for a term of up to seven (7) years, all payments shall include amortization;

          (B) for a term of between seven (7) years but less than ten (10) years, the first five
(5) years shall be interest only payments and the remainder of the term shall include
amortization; and

          (C) for a term of ten (10) years, the entire term shall be interest only payments and
shall not require amortization.

All references to amortization in this Section 1.03(b)(ii) shall mean an amount necessary
to fully amortize the original principal amount of the Fixed Advance over the Amortization Period.

          (iii) Prepayment of Fixed Advances. Subject to the terms and conditions of
Section 3.04(d), Borrower may prepay all or a portion of any Fixed Advance pursuant to the
prepayment provisions of the Fixed Facility Note. Any repaid Fixed Advances shall automatically
result in a reduction of the Fixed Facility Commitment.

     (c) Fixed Advance Executions. At such time as Borrower elects any Fixed Advance, and
subject to the other terms and conditions contained in this Agreement, Borrower shall select
either:

          (i) a Fixed Advance with a fixed rate term that matures not earlier than the date that is the
first day of the month following the date five (5) years after the Closing Date of such Fixed
Advance, and not later than the date that is the first day of the month following the date ten (10)
years after the Closing Date of such Fixed Advance, provided that no final maturity date of any
Fixed Advance shall be later than the date that is the first day of the month following the date
ten (10) years after the Initial Closing Date (the “Fixed Standard Yield Maintenance Maturity
Option”) as more specifically set forth in the Fixed Facility Note, the form of which is
attached as Exhibit B-1 to this Agreement, or

          (ii) a Fixed Advance with an initial fixed rate term with an initial maturity date that is not
earlier than the first day of the month following the date five (5) years after the Closing Date
and not later than the first day of the month following the date that is nine (9) years after the
Closing Date which initial maturity date is automatically followed by a 1-year adjustable rate
term, such that the Fixed Advance has a final maturity date that is not earlier than the first day
of the month following the date six (6) years and not later than the first day of the month
following the date that is ten (10) years after the Closing Date of such Fixed Advance, provided
that no final maturity date of any Fixed Advance shall be later than the date that is the first day
of the month following the date ten (10) years after the Initial Closing Date (the “Fixed+1
Maturity Option”) as more specifically set forth in the Fixed Facility Note, the form of which
is attached as Exhibit B-2 to this Agreement.

     (d) Early Rate Lock. Borrower shall be permitted to rate lock any Fixed Advance
subject to the requirements of Fannie Mae’s “Early Rate Lock” program. If Borrower elects to rate
lock a Fixed Advance pursuant to the Early Rate Lock program, Borrower shall execute an

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Early Rate Lock commitment provided by Lender and an Early Rate Lock Borrower Certification
(the “ERL Certification”) in the form required by Fannie Mae for the DUS Early Rate Lock
Product, modified as acceptable to Fannie Mae to take into account the terms of this Agreement,
evidencing the terms of the Fixed Advance. At the time Borrower executes the ERL Commitment,
Borrower shall select the maturity option for such Fixed Advance as set forth in Section
1.03(c) above.

     Section 1.04. Interest on Advances.

     (a) Partial Month Interest. Notwithstanding anything to the contrary in this
Section 1.04(a), if an Advance is not made on the first day of a calendar month, Borrower
shall pay interest on the original stated principal amount of such Advance for the partial month
period commencing on the Closing Date for such Advance and ending on the last day of the calendar
month in which the Closing Date occurs. Borrower shall pay interest for such partial month on any
such Advance at a rate per annum equal to the greater of (i) the interest rate described in the
applicable Note, and (ii) a rate determined by Lender, based on Lender’s cost of funds and approved
in advance, in writing, by Borrower.

     (b) Interest Rate on SARM Variable Advances. Interest shall accrue on the unpaid
balance of a SARM Variable Advance from the date such Advance is made at the Adjustable Rate.
Interest accrued through the end of each month shall be payable two (2) Business Days before the
first day of the following month as more particularly set forth in the applicable Variable Facility
Note. The Adjustable Rate shall change on each Rate Change Date until the Advance is repaid in
accordance with the applicable Variable Facility Note. Interest payments for SARM Variable
Advances shall be calculated on an actual/360 basis.

     (c) Interest Rate on Fixed Advances. Each Fixed Advance shall be a cash execution or
an MBS execution and bear interest at a rate, per annum, equal to the sum of (i) the Cash Interest
Rate (for a cash execution) or the MBS Interest Rate (for an MBS execution) for such Fixed Advance
and (ii) the Margin. Subject to the terms of Section 1.03(b)(ii), interest payments for
Fixed Advances shall be calculated on an actual/360 basis.

     Section 1.05. Notes.

     (a) Variable Advances. The obligation of Borrower to repay each Variable Advance
shall be evidenced by a separate Variable Facility Note in the form attached to this Agreement as
Exhibit C-1 or Exhibit C-2. Each Variable Facility Note shall be payable to the
order of Lender and shall be made in the original principal amount of such Variable Facility
Advance.

     (b) Fixed Advances. The obligation of Borrower to repay each Fixed Advance shall be
evidenced by a separate Fixed Facility Note in the form attached to this Agreement as Exhibit
B-1 or Exhibit B-2. Each Fixed Facility Note shall be payable to the order of Lender
and shall be made in the original principal amount of such Fixed Advance.

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     Section 1.06. Conversion of SARM Variable Advances to Fixed Advances.

     (a) Right to Convert. Subject to the terms and conditions of this Agreement,
including without limitation Section 1.10, Borrower shall have the right, from time to time
during the Conversion Availability Period, to convert all or any portion of a SARM Variable Advance
on the first day of a month to a Fixed Advance. The Variable Facility Commitment shall be reduced
by, and the Fixed Facility Commitment shall be increased by the amount of the converted Advance.

     (b) Request. To convert one or more SARM Variable Advances, or a portion thereof, to
one or more Fixed Advances, Borrower shall deliver a Conversion Request to Lender which shall
designate the amount of the Variable Advance to be converted.

     (c) Closing. Subject to Section 1.07 and provided that all conditions
contained in Section 1.08 are satisfied, Lender shall permit the requested conversion to
close at offices designated by Lender on a Closing Date selected by Lender, on a date that is not
earlier than thirty (30) Business Days after Lender’s receipt of the Conversion Request (or on such
other date as Borrower and Lender may agree). At the closing, Lender and Borrower shall execute
and deliver, at the sole cost and expense of Borrower, in form and substance reasonably
satisfactory to Lender, the Conversion Documents.

     Section 1.07. Limitations on Right to Convert to Fixed Advances.

     Borrower’s right to convert one (1) or more Variable Advances to one (1) or more Fixed
Advances is subject to the terms and conditions of this Agreement, including without limitation,
Section 1.10 and the following limitations:

     (a) Closing Date. With respect to SARM Variable Advances, the Closing Date shall
occur during the Conversion Availability Period on the first day of a month.

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

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

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

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     Section 1.08. Conditions to Conversion.

     The conversion of all or any portion of the SARM Variable Advances to one (1) or more Fixed
Advances is subject to the satisfaction on or before the Closing Date, of all applicable conditions
contained in Section 5.01 and Section 5.07. The interest rate for any converted
Advance shall be determined pursuant to the terms of Section 2.01 of this Agreement. The Margin
applicable to the converted Advance shall be determined by Lender prior to such conversion.

     Section 1.09. Interest Rate Protection.

     (a) To protect against fluctuations in interest rates during the term, pursuant to the terms
of the Cap Security Agreement, Borrower shall make arrangements for a LIBOR-based hedge instrument
(“Interest Rate Cap”) to be in place at the Strike Rate set forth in the Cap Security
Agreement and maintained at all times with respect to any portion of the Variable Facility
Commitment which has been funded and remains Outstanding.  The seller of the Interest Rate Cap
(seller and its transferees and assigns, the “Counterparty”) shall be a financial
institution meeting the minimum requirements for hedge counterparties reasonably and customarily
acceptable to Lender.  An Interest Rate Cap shall be documented on a form acceptable to Lender. As
set forth in the applicable Cap Security Agreement, Borrower agrees to pledge its right, title and
interest in the Interest Rate Cap to Lender as additional collateral for the Indebtedness. The
Interest Rate Cap shall have a minimum initial term of five (5) years.

     (b) In the event that an Interest Rate Cap is no longer deemed “approved” by Lender,
for reasons including but not limited to, (i) a termination, transfer or consent to transfer of an
Interest Rate Cap, (ii) the occurrence of a “Termination Event” as that term is defined in each
Interest Rate Cap, or (iii) Lender’s determination that the Counterparty on such Interest Rate Cap
no longer meets its minimum requirements for hedge counterparties, such Interest Rate Cap shall no
longer be deemed approved and shall no longer serve to satisfy the requirements of this Section
1.09.  If an Interest Rate Cap is determined by Lender not to satisfy the requirements of this
Section 1.09, or if an Interest Rate Cap unexpectedly and unavoidably terminates on a date
other than its scheduled expiration date, the Borrower shall, within ten (10) days of such
termination, obtain a new Interest Rate Cap satisfying the requirements of this Agreement.

     Section 1.10. Limitation on All Advances.

     Notwithstanding anything in this Agreement or any other Loan Document to the contrary, any
Future Advance, whether a Variable Advance or a Fixed Advance, and any conversion of an Advance or
any refinance of an Advance shall be subject to the precondition that Lender must confirm with
Fannie Mae that Fannie Mae is generally offering to purchase in the marketplace advances of the
execution type requested by Borrower at the time of the request and at the time of the Rate Setting
Date for the requested Advance. In the event Fannie Mae is not purchasing advances of the type
requested by Borrower, Lender agrees to offer, to the extent available from Fannie Mae, alternative
advance executions based on the types of executions Fannie Mae is generally offering to purchase in
the marketplace at that time. Any alternative execution offered

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would be subject to mutually agreeable documentation necessary to implement the terms and
conditions of such alternative execution.

ARTICLE 2

THE ADVANCES

     Section 2.01. Rate Setting for an Advance.

     Rates for an Advance shall be set in accordance with the following procedures:

     (a) Preliminary, Nonbinding Quote. At Borrower’s request Lender shall quote an
estimate of the interest rate (for such proposed Advance). Lender’s quote shall be based on (i) a
solicitation of bids from institutional investors selected by Lender, in the case of a proposed
Fixed Advance with an MBS execution, or the rate quoted by Fannie Mae in the case of a proposed
SARM Variable Advance or Fixed Advance with a cash execution, and (ii) the proposed terms and
amount of the Advance selected by Borrower. The quote shall not be binding upon Lender.

     (b) Rate Setting. If Borrower satisfies all of the conditions to Lender’s obligation
to make an Advance, then Borrower may request that Lender submit to Borrower a completed draft Rate
Form in the form attached to this Agreement as Exhibit I. The draft Rate Form shall
specify the proposed maximum interest rate for such Advance (“Maximum Annual Interest
Rate”) and other terms set forth therein. If the draft Rate Form is approved by Borrower,
Borrower shall execute and return the approved draft Rate Form to Lender before 1:00 p.m. Eastern
Standard Time or Eastern Daylight Savings Time, as applicable, on any Business Day (“Rate
Setting Date”).

     (c) Rate Confirmation.

          (i) SARM Variable Advances or Fixed Advances with Cash Execution. In the case of SARM
Variable Advances or Fixed Advances with a cash execution, within one (1) Business Day after
receipt of the draft Rate Form executed by Borrower and upon satisfaction of all of the conditions
to Lender’s obligation to make such Advance, Lender shall seek to obtain a commitment from Fannie
Mae (the “Fannie Mae Commitment”) for the purchase of the proposed SARM Variable Advance or
Fixed Advance having the terms described in the related draft Rate Form.  If Lender obtains a
Fannie Mae Commitment on terms equivalent (or better than) the terms in the draft Rate Form, Lender
shall then complete and sign the Rate Form thereby confirming the terms set forth therein and shall
immediately deliver the confirmed Rate Form to Borrower.

          (ii) Fixed Advances with MBS Execution. In the case of an MBS execution, within one
(1) Business Day after receipt of the Rate Form and upon satisfaction of all of the conditions to
Lender’s obligation to make such Fixed Advance (or for conversion, as applicable), Lender shall
solicit bids from institutional investors selected by Lender based on the information in the Rate
Form. If Lender obtains a commitment (“MBS Commitment”) on terms equivalent (or better
than) the terms in the draft Rate Form, Lender shall then complete and countersign the

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Rate Form thereby confirming the terms set forth therein, and shall immediately deliver the
Rate Form to Borrower.

     Section 2.02. Breakage and Other Costs.

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

     Section 2.03. Advances.

     Borrower may deliver an Advance Request to Lender.

     (a) Initial Advance. If the Advance Request is to obtain the Initial Advance and all
conditions precedent contained in Section 5.02 and the General Conditions contained in
Section 5.01 are satisfied on or before the Initial Closing Date for the Initial Advance,
Lender shall make the Initial Advance on the Initial Closing Date or on such other date as Borrower
and Lender may agree.

     (b) Future Advance. If the Advance Request is to obtain a Future Advance, such
Advance Request shall be in the minimum amount of $5,000,000. If all conditions precedent
contained in Section 5.03 and the General Conditions contained in Section 5.01 are
satisfied, Lender shall make the requested Future Advance, at a closing to be held at offices
reasonably designated by Lender on a Closing Date reasonably selected by Lender, which date shall
be not more than three (3) Business Days after Borrower’s receipt from Lender of the confirmed Rate
Form (or on such other date as Borrower and Lender may agree). The Commitment will be fully drawn
on the Initial Closing Date and accordingly no Future Advances are anticipated hereunder.

     Section 2.04. Determination of Allocable Facility Amount and Valuations.

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

     (b) Monitoring Determinations. Once each Calendar Quarter, or, if the Commitment
consists only of a Fixed Facility Commitment that has an Aggregate Debt Service Coverage Ratio
equal to or greater than 1.25:1.0, once each Calendar Year, within twenty (20) Business Days after
Borrower has delivered to Lender the reports required in Section 7.04, Lender shall

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determine the Aggregate Debt Service Coverage Ratio and the Aggregate Loan to Value Ratio, the
Valuations and the Allocable Facility Amounts and whether Borrower is in compliance with the other
covenants set forth in the Loan Documents. After the First Anniversary, Lender shall redetermine
Allocable Facility Amounts and Valuations (i) quarterly, or (ii) if the Commitment consists only of
a Fixed Facility Commitment that has an Aggregate Debt Service Coverage Ratio equal to or greater
than 1.25:1.0, annually, or (iii) at such other time if Lender reasonably determines that changed
market or property conditions warrant, Lender shall also redetermine Allocable Facility Amounts to
take account of any addition, release or substitution of Collateral or other event that invalidates
the outstanding determinations. In determining Valuations, Lender shall use Capitalization Rates
in its sole and absolute discretion based on its internal survey and analysis of Capitalization
Rates for comparable sales in the vicinity of the Mortgaged Property, with such adjustments as
Lender deems appropriate and without any obligation to use any information provided by Borrower.
If Lender is unable to determine a Capitalization Rate for a Mortgaged Property, Lender shall have
the right, not more than once annually, to obtain, at Borrower’s expense, a market study in order
to establish a Capitalization Rate. Lender shall promptly disclose its determinations to Borrower.
Until redetermined, the outstanding Allocable Facility Amounts and Valuations determined by Lender
shall remain in effect. Notwithstanding anything in this Agreement to the contrary, no change in
Allocable Facility Amounts, Valuations, the Aggregate Loan to Value Ratio or the Aggregate Debt
Service Coverage Ratio shall, (A) result in a Potential Event of Default or Event of Default, or
(B) require the prepayment of any Advances.

     Section 2.05. Supplemental Loan.

     After the First Anniversary, Borrower may participate in the Fannie Mae Supplemental Loan
product if the Supplemental Loan product is offered by Fannie Mae at the time. Any such
Supplemental Loan is subject to Lender’s determination that, as a result of its annual valuation of
the Collateral Pool, a Supplemental Loan may be made pursuant to Lender’s Underwriting Requirements
for loans which meet the Coverage and LTV Tests. The Supplemental Loan will be documented with
loan documents similar to the Loan Documents (“Supplemental Loan Documents”). Supplemental
Loans will not be Advances advanced under this Agreement. Any Supplemental Loan will be priced at
market at the time of the loan and will be cross-defaulted with the Advances made hereunder. To
secure the obligations of Borrower under the Supplemental Loan Documents, Borrower shall grant,
convey and assign to Lender a second Lien on each Mortgaged Property in the Collateral Pool and on
any other collateral pledged to Lender from time to time pursuant to the Supplemental Loan
Documents. On the closing date of the Supplemental Loan, Lender shall determine the portion of the
Supplemental Loan allocated to a particular Mortgaged Property (the “Supplemental Allocable
Loan Amount”), which Supplemental Allocable Loan Amounts shall be set forth in a separate
exhibit to this Agreement. Lender shall redetermine the Supplemental Allocable Loan Amounts in the
same manner and at the same time as the redetermination of the Allocable Facility Amounts pursuant
to Section 2.04(b). Notwithstanding the foregoing, the Supplemental Loan shall be
monitored pursuant to Section 2.04 of this Agreement and Lender shall include the
Supplemental Loan upon calculating the Coverage and LTV Tests, Aggregate Debt Service Coverage
Ratio and Aggregate Loan to Value Ratio, in connection with any Request. Borrower agrees to pay any
fees (including legal fees) that may be charged in connection with a Supplemental Loans.

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     Section 2.06. Increase in Commitment.

     Borrower shall have no right under this Agreement to increase the Commitment.

ARTICLE 3

COLLATERAL CHANGES

     Section 3.01. Right to Add Collateral.

     Subject to the terms and conditions of this Article 3, Borrower shall have the right,
from time to time during the Term of this Agreement, to add Multifamily Residential Properties to
the Collateral Pool.

     Section 3.02. Procedure for Adding Collateral.

     The procedure for adding Multifamily Residential Properties to the Collateral Pool contained
in this Section 3.02 shall apply to all additions of Mortgaged Property including, but not
limited to, additions of Mortgaged Property in connection with substitutions of Mortgaged Property.

     (a) Request. From time to time Borrower may deliver to Lender an Addition Request to
add one (1) or more Multifamily Residential Properties to the Collateral Pool (the
“Addition”). Each Addition Request shall be accompanied by the following: (i) the
property-related information required by Lender, and (ii) the payment of all Additional Collateral
Due Diligence Fees.

     (b) Underwriting.

          (i) Borrower may add an Additional Mortgaged Property provided that:

          (A) the Additional Mortgaged Property itself meets the Individual Property Coverage and
LTV Tests,

          (B) after such Addition, the Coverage and LTV Tests are satisfied,

          (C) after the Addition, the Geographical Diversification Requirements shall be
satisfied, and

          (D) all other terms and conditions set forth in this Agreement are satisfied.

Notwithstanding the foregoing, if the Individual Property Coverage and LTV Tests, the Coverage and
LTV Tests, or the Geographic Diversification Requirements are not satisfied after the Addition of a
proposed Additional Mortgaged Property, such Addition may be permitted by Lender if the Addition
improves the Collateral Pool based on factors that are consistent with Lender’s Underwriting
Requirements and result in improvement in one or both of the following areas: the then current
Aggregate Debt Service Coverage Ratio or the then current Aggregate

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Loan to Value Ratio. Notwithstanding the foregoing, under no circumstances shall the Aggregate
Loan to Value Ratio exceed ninety percent (90%).

          (ii) Lender shall evaluate the proposed Additional Mortgaged Property in accordance with the
Underwriting Requirements, including an exit analysis performed by Lender and acceptable to Fannie
Mae. Lender shall make underwriting determinations as to the Debt Service Coverage Ratio and the
Loan to Value Ratio of the proposed Additional Mortgaged Property and the Aggregate Debt Service
Coverage Ratio and the Aggregate Loan to Value Ratio applicable to the Collateral Pool on the basis
of the lesser of (A) the acquisition price of the proposed Additional Mortgaged Property if
purchased by Borrower within twelve (12) months of the related Addition Request, and (B) a
Valuation made with respect to the proposed Additional Mortgaged Property. Notwithstanding the
provisions of Section 2.04 regarding the recalculation of Valuations and the calculation of
Debt Service Coverage Ratios, for purposes of reviewing proposed Additional Mortgaged Properties,
if Lender reasonably determines market conditions have changed in a manner adversely affecting any
of the Mortgaged Properties since the determination of the then effective Aggregate Loan to Value
Ratio and Aggregate Debt Service Coverage Ratio, Lender may make new determinations of Aggregate
Debt Service Coverage Ratio and Aggregate Loan to Value Ratio for purposes of determining whether
to permit the addition of the proposed Additional Mortgaged Property to the Collateral Pool.
Borrower shall promptly provide any information reasonably required by Lender to make the
determination required by the preceding sentence.

          (iii) After receipt of (A) the Addition Request and (B) all reports, certificates and
documents required by the Underwriting Requirements, Lender shall notify Borrower whether the
proposed Additional Mortgaged Property meets the conditions for an Addition. If Lender determines
that the proposed Additional Mortgaged Property meets the conditions set forth in this Agreement,
Lender shall set forth the Aggregate Debt Service Coverage Ratio, the Aggregate Loan to Value Ratio
that Lender estimates shall result from the Addition of the proposed Additional Mortgaged Property
to the Collateral Pool and the Advance Amount. After receipt of Lender’s written consent to the
Addition Request, Borrower shall notify Lender in writing whether it elects to add the proposed
Additional Mortgaged Property to the Collateral Pool.

     (c) Closing. If Lender determines that the proposed Additional Mortgaged Property
meets the conditions of Lender’s Underwriting Requirements and as set forth in this Agreement,
Borrower timely elects to add the proposed Additional Mortgaged Property to the Collateral Pool,
and all conditions precedent contained in Section 5.04 and all General Conditions contained
in Section 5.01 are satisfied, the proposed Additional Mortgaged Property shall be added to
the Collateral Pool, at a closing to be held at offices designated by Lender on a Closing Date
selected by Lender, occurring within sixty (60) Business Days after Lender’s receipt of Borrower’s
election (or on such other date as Borrower and Lender may agree).

     Section 3.03. Right to Obtain Releases of Collateral.

     Subject to the terms and conditions of this Article 3, Borrower shall have the right
from time to time to obtain a release of a Mortgaged Property from the Collateral Pool.

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     Section 3.04. Procedure for Obtaining Releases of Collateral.

     (a) Request. To obtain a release of a Mortgaged Property from the Collateral Pool (a
“Release”), Borrower shall deliver a Release Request to Lender. The delivery of the
Release Request itself shall not result in a termination of all or any part of the Credit Facility;
however, any prepayments associated with such Release shall automatically result in a permanent
reduction of the Fixed Facility Commitment, which repaid amount shall not be available to be
re-borrowed, or, as applicable, a permanent reduction of the Variable Facility Commitment, which
repaid amount shall not be available to be re-borrowed.

     (b) Closing. As a condition precedent to the release of the Release Mortgaged
Property, the (i) Aggregate Loan to Value Ratio for the proposed Collateral Pool (after giving
effect to such release) shall be less than or equal to the Aggregate Loan to Value Ratio of the
Collateral Pool immediately prior to the release (and without giving effect to such release), and
(ii) the Aggregate Debt Service Coverage Ratio of the proposed Collateral Pool (after giving effect
to such release) shall be equal to or greater than the Aggregate Debt Service Coverage Ratio of the
Collateral Pool immediately prior to the release of the Release Mortgaged Property (and without
giving effect to such release), and (iii) the Coverage and LTV Tests shall be satisfied.
Notwithstanding the foregoing, if the tests identified in the immediately preceding sentence or the
Geographic Diversification Requirements are not satisfied after the Release of the Mortgaged
Property, such Release may be permitted by Lender if the Release improves the Collateral Pool based
on factors that are consistent with Lender’s Underwriting Requirements and result in improvement in
one or both of the following areas: the then current Aggregate Debt Service Coverage Ratio or the
then current Aggregate Loan to Value Ratio. If Lender determines that all conditions precedent are
satisfied, including without limitation those in Section 5.01 and Section 5.05,
Lender shall cause the Release Mortgaged Property to be released, at a closing to be held at
offices designated by Lender on a Closing Date selected by Lender, and occurring within thirty (30)
days after Lender’s receipt of the Release Request (or on such other date as Borrower and Lender
may agree), by executing and delivering, and causing all applicable parties to execute and deliver,
all at the sole cost and expense of Borrower, the Release Documents. At Lender’s option, Borrower
shall prepare the Release Documents and submit them to Lender for its review.

     (c) Release Price. Subject to the terms of this Section 3.04(c), the “Release
Price” for each Release Mortgaged Property means the greater of:

          (i) one hundred percent (100%) of the Allocable Facility Amount for the Release Mortgaged
Property plus one hundred percent (100%) of the Supplemental Allocable Loan Amount for the Release
Mortgaged Property, or

          (ii) one hundred percent (100%) of the amount of Advances Outstanding that are required to be
repaid by Borrower to Lender in connection with the proposed release of the Release Mortgaged
Property from the Collateral Pool so that, immediately after the release the conditions precedent
set forth in the first sentence of Section 3.04(b) is satisfied.

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     In addition to the Release Price, Borrower shall pay to Lender all associated prepayment
premiums, accrued interest and other amounts due under the Notes evidencing the Advances being
repaid to and including the date such Advance may be repaid.

     (d) Application of Release Price.

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

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

     (e) Release of Borrower and Guarantor. Upon the Release of a Mortgaged Property,
Borrower that owns such Release Mortgaged Property shall automatically without further action be
released from its obligations under this Agreement and the other Loan Documents with respect to the
Release Mortgaged Property, except for (i) any liabilities or obligations of such Borrower which
arose prior to the Closing Date of such Release, and (ii) any Obligations that survive release as
specifically set forth in Section 18 (Environmental Hazards) of the Security Instrument. In
addition, each Borrower and Guarantor shall be released of all obligations related to the Release
Mortgaged Property under this Agreement and the other Loan Documents except for any provisions of
this Agreement and the other Loan Documents that are expressly stated to survive any release or
termination or for any liabilities or obligations of such Borrower or Guarantor which arose prior
to the Closing Date of such release.

     (f) Title Insurance. Notwithstanding the other provisions of this Section
3.04, no Release of any of the Mortgaged Properties shall be made unless the title insurance,
taking into

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14

 

account tie-in endorsements, insuring Lender in respect of each of the remaining Mortgaged
Properties in the Collateral Pool is in an amount equal to one hundred fifteen percent (115%) of
the Valuation of each of such remaining Mortgaged Properties (or such lesser amount that is the
maximum allowed by law or regulation).

     Section 3.05. Substitutions.

     (a) Right to Substitute Collateral. Subject to the terms, conditions and limitations
of Article 3 and Article 5, Borrower shall have the right prior to the date twelve
(12) months before the Termination Date to obtain the Release of one or more Release Mortgaged
Properties from the Collateral Pool by replacing such Release Mortgaged Property with one (1) or
more Additional Mortgaged Properties that meet the requirements of this Agreement (the
“Substitute Mortgaged Property”) thereby effecting a “Substitution” of Collateral.

     (b) Request. Borrower shall simultaneously deliver to Lender both a completed and
executed Addition Request (unless such Substitute Mortgaged Property has not been identified by
Borrower, in which case Borrower shall submit the Addition Request not less than thirty (30)
Calendar Days prior to the date on which Borrower desires to add such Substitute Mortgaged
Property, but not later than thirty (30) Calendar Days prior to the Property Delivery Deadline
(defined hereinafter)) and Release Request (together, the “Substitution Request”). Each
Substitution Request shall be accompanied by the following: (i) the information required by the
Underwriting Requirements with respect to the proposed Substitute Mortgaged Property and any
additional information Lender reasonably requests; and (ii) the payment of all Additional
Collateral Due Diligence Fees.

     (c) Underwriting. Borrower may add a Substitute Mortgaged Property to the Collateral
Pool provided that:

          (i) the Substitute Mortgaged Property itself meets the Individual Property Coverage and LTV
Tests,

          (ii) the Substitute Mortgaged Property will be evaluated by the Lender in accordance with the
Underwriting Requirements,

          (iii) after such Substitution, the Geographical Diversification Requirements shall be
satisfied, and

          (iv) the following tests are satisfied: (A) Aggregate Loan to Value Ratio of the proposed
Collateral Pool shall be less than or equal to the Aggregate Loan to Value Ratio of the Collateral
Pool immediately prior to the Substitution, and (B) Aggregate Debt Service Coverage Ratio of the
proposed Collateral Pool must be equal to or greater than the Aggregate Debt Service Coverage Ratio
of the Collateral Pool immediately prior to the Substitution (and without giving effect to such
Substitution), and (C) the Coverage and LTV Tests shall be satisfied.

Lender shall determine whether the proposed Substitute Mortgaged Property satisfies the
requirements for an Additional Mortgaged Property set forth in Section 3.02(b)(ii) and
Section 3.02(b)(iii). Within ten (10) days after receipt of Lender’s written consent to
the proposed

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Substitution, Borrower shall notify Lender in writing whether it elects to add the proposed
Substitute Mortgaged Property to the Collateral Pool and release the identified Mortgaged Property.
If Borrower fails to notify Lender of its election within the timeframe stated, then the Request
will be deemed withdrawn.

Notwithstanding the foregoing, if any of the tests identified in Section
3.05(c)(i)-(iv) are not satisfied after the Substitution of a proposed Substitute
Mortgaged Property, such Substitution may be permitted by Lender if the Substitution improves the
Collateral Pool based on factors that are consistent with Lender’s Underwriting Requirements and
result in improvement in one or more of the following areas: the then current Valuation of the
Mortgaged Properties, the then current Aggregate Debt Service Coverage Ratio or the then current
Aggregate Loan to Value Ratio.

     (d) Closing. If, pursuant to this Section 3.05, Lender determines that the
conditions set forth herein for the Substitution of the proposed Substitute Mortgaged Property into
the Collateral Pool in replacement of the proposed Release Mortgaged Property, and Borrower timely
elects to cause such Substitution to occur and all conditions contained in this Section
3.05 and Article 5 are satisfied, then the proposed Substitute Mortgaged Property shall
be substituted into the Collateral Pool in replacement of the proposed Release Mortgaged Property,
at a closing to be held at offices designated by Lender on a Closing Date selected by Lender, and
occurring —

          (i) if the Substitution of the proposed Substitute Mortgaged Property is to occur
simultaneously with the release of the proposed Release Mortgaged Property, within thirty (30) days
after Lender’s receipt of Borrower’s election (or on such other date to which Borrower and Lender
may agree); or

          (ii) if the Substitution of the proposed Substitute Mortgaged Property is to occur subsequent
to the Release of the Release Mortgaged Property, within ninety (90) days after the effective date
of the release of such Release Mortgaged Property (provided such date does not exceed one hundred
eighty (180) days after Lender’s receipt of Borrower’s Release Request, unless otherwise agreed to
by Lender) (the “Property Delivery Deadline”); in accordance with the terms of this
Section 3.05(d); provided that on a case by case basis if Borrower provides evidence that
it is diligently pursuing a suitable property for Substitution (e.g., evidence of a 1031 exchange),
Lender may extend the Property Delivery Deadline by one (1) additional ninety (90) day period.

     (e) Substitution Deposit.

          (i) The Deposit. If the Addition of the proposed Substitute Mortgaged Property is to
occur subsequent to the Release of the Release Mortgaged Property pursuant to Section
3.05(d), at the Closing Date of the Release of the Release Mortgaged Property, Borrower shall
deposit with Lender the “Substitution Deposit” described in Section 3.05(e)(ii) in
the form of cash or, in lieu of (and/or in addition to) depositing cash for the Substitution
Deposit, Borrower may post a Letter of Credit in accordance with the terms of Section 5.11
of this Agreement, having a face amount equal to the Substitution Deposit (or such lesser amount
that has been deposited in cash).

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          (ii) Substitution Deposit Amount. The “Substitution Deposit” for each proposed
Substitution shall be an amount equal to the sum of:

          (A) the Release Price relating to such proposed Release Mortgaged Property, plus

          (B) any and all of the yield maintenance, fee maintenance or the prepayment premium, as
applicable, through the end of the month in which the Property Delivery Deadline occurs as
if the Fixed Advance or SARM Variable Advance were to be prepaid in such month, plus

          (C) interest on such Advance through the end of the month in which the Property
Delivery Deadline occurs, plus

          (D) costs, expenses and fees of Lender pertaining to the substitution (the
“Substitution Cost Deposit”). Borrower shall also be obligated to make any
regularly scheduled payments of principal and interest due under the applicable Note during
any period between the closing of the Release Mortgaged Property and the earlier of the
closing of the Substitute Mortgaged Property and the date of prepayment of the Note or MBS,
as applicable. If a Substitution of the last remaining asset is taking place, the cash
collateral or Letter of Credit must include (1) any yield maintenance that would be due to
the extent that the Fixed Facility Notes must be prepaid to effect a release at that time,
and (2) any fee maintenance that would be due to the extent that the Variable Facility Note
must be prepaid to effect a release at that time. The Substitution Cost Deposit shall be
used by Lender to cover all reasonable out-of-pocket costs and expenses incurred by Lender
and Fannie Mae, including any out-of-pocket legal fees and expenses incurred by Fannie Mae
and Lender in connection with such substitution whether such substitution actually closes.

          (iii) Failure to Close Substitution. If the Addition of the proposed Substitute
Mortgaged Property does not occur by the Property Delivery Deadline in accordance with Section
3.05(d)(ii), then such Borrower shall have irrevocably waived its right to substitute such
Release Mortgaged Property with the proposed Substitute Mortgaged Property, and the release of the
Release Mortgaged Property shall be deemed to be a Release pursuant to Section 3.04 and
shall trigger a prepayment of the Note and the MBS, if applicable, together with all yield
maintenance, fee maintenance or prepayment premium then due in connection with such payment. The
Property Delivery Deadline shall be no later than the date ninety (90) days (or one hundred eighty
(180) days, if applicable) after the effective date Lender’s lien on such Release Mortgaged
Property is released. Any Advance or MBS (as applicable) being prepaid shall be deemed to be
prepaid as of the end of the month in which the Property Delivery Deadline falls. Lender shall
follow standard Fannie Mae procedures for the prepayment of the Note or any applicable MBS,
including delivery of the Substitution Deposit, together with all yield maintenance, fee
maintenance, or prepayment premium, if any, then due, to Fannie Mae in accordance with such
procedures.

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Borrower shall comply with the requirements set forth in Section 3.04(c) and Section
3.04(d) not previously satisfied with respect to the Release Mortgaged Property, including
payment of the Release Price. Such Release Price, or the applicable portion thereof, shall be
applied in the manner set forth in Section 3.04(d) and the Substitution Deposit delivered
by Borrower pursuant to Section 3.05(e) of this Agreement shall be returned to Borrower.
However, if Borrower fails to timely pay the Release Price, Lender may draw upon the Substitution
Deposit delivered by Borrower in satisfaction of such obligation. Any portion of the Substitution
Deposit not needed to prepay the Note, or any applicable MBS, all interest, and any prepayment fees
(including any portion of the Substitution Cost Deposit not used by Lender to cover all reasonable
out-of-pocket costs and expenses incurred by Lender and Fannie Mae, including any out-of-pocket
legal fees and expenses incurred by Fannie Mae and Lender in connection with such Substitution)
shall be promptly refunded to the applicable Borrower after the Property Delivery Deadline.

          (iv) Substitution Deposit Disbursement. At closing of the Substitution, Lender shall
disburse or return the Substitution Deposit , as applicable (less any portion of the Substitution
Cost Deposit used by Lender to cover all reasonable out-of-pocket costs and expenses incurred by
Lender and Fannie Mae, including any out-of-pocket legal fees and expenses incurred by Fannie Mae
and Lender in connection with such substitution), directly to Borrower at such time as the
conditions precedent for the Substitution have been satisfied, which must occur no later than the
Property Delivery Deadline. Notwithstanding the foregoing, in the event that Borrower adds an
Additional Mortgaged Property to the Collateral Pool prior to the Property Delivery Deadline but
the Addition of such Additional Mortgaged Property has not in and of itself satisfied the
requirements to close the Substitution, the Substitution Deposit shall be reduced by the Allocable
Facility Amount of such Additional Mortgaged Property as determined by Lender, and such reduction
in the Substitution Deposit shall be returned to Borrower, or in the case of a Letter of Credit,
such Letter of Credit shall be reduced by such reduction in the Substitution Deposit. If Borrower
has not completely satisfied the requirements to close the Substitution by the Property Delivery
Deadline, the terms of Section 3.05(e)(iii) shall apply with respect to the remaining
Substitution Deposit.

     (f) Conditions Precedent to Substitutions. The obligation of Lender to make a
requested Substitution is also subject to Lender’s determination that each of the conditions
precedent for Additions of Additional Mortgaged Properties and Releases of Release Mortgaged
Properties set forth in Section 5.01 and Section 5.06 of this Agreement have been
satisfied.

     (g) Restriction on Borrowings. If the Addition of the Substitute Mortgaged Property
to the Collateral Pool and the release of the Release Mortgaged Property from the Collateral Pool
do not occur simultaneously (i.e., within thirty (30) days pursuant to Section 3.05(d)
above) then, until the Addition of the Substitute Mortgaged Property to the Collateral Pool, the
aggregate principal balance of Advances Outstanding shall not exceed the amount of the (i) Advances
Outstanding immediately prior to the release of such Release Mortgaged Property minus (ii) the
Allocable Facility Amount of the Release Mortgaged Property. If the aggregate unpaid principal
balance of Advances Outstanding exceeds the amount resulting from subtracting (i) minus (ii) in the
preceding sentence, Borrower shall pay such excess amount as a condition precedent to any Future
Advances made under this Agreement and the Addition of a Substitute Mortgaged

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Property. Any payment received by Lender under this Section 3.05 shall be applied
against Advances Outstanding in the manner prescribed for Release Prices pursuant to Section
3.04(c).

ARTICLE 4

TERMINATION OF FACILITIES

     Section 4.01. Right to Terminate Credit Facility.

     Subject to the terms and conditions of this Article 4, Borrower shall have the right
to terminate this Agreement and the Credit Facility and receive a Release of all of the Collateral.

     Section 4.02. Procedure for Terminating Credit Facility.

     (a) Request. To terminate this Agreement and the Credit Facility, Borrower shall
deliver a Credit Facility Termination Request to Lender.

     (b) Closing. If Lender determines that all conditions precedent contained in
Section 5.08 are satisfied, this Agreement shall terminate, and Lender shall cause all of
the Collateral to be released, at a closing to be held at offices designated by Lender on a Closing
Date selected by Lender, within thirty (30) Business Days after Lender’s receipt of the Credit
Facility Termination Request (or on such other date as Borrower and Lender may agree), by executing
and delivering, and causing all applicable parties to execute and deliver, all at the sole cost and
expense of Borrower, the Credit Facility Termination Documents.

ARTICLE 5

CONDITIONS PRECEDENT TO ALL REQUESTS

     Section 5.01. Conditions Applicable to All Requests.

     The obligation of Lender to close the transaction requested in a Request (other than a Credit
Facility Termination Request made pursuant to Section 4.02) shall be subject to Lender’s
determination that all of the following general conditions precedent (“General Conditions”)
have been satisfied in addition to any other conditions precedent contained in this Agreement:

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

     (b) No Material Adverse Effect. Except in connection with a Credit Facility
Termination Request, there has been no Material Adverse Effect on the financial condition or
business or prospects of Borrower or Guarantor or in the physical condition, operating performance
or value of any of the Mortgaged Properties since the date of the most recent Compliance
Certificate (or, with respect to the conditions precedent to the Initial Advance, from the
condition, business or prospects reflected in the financial statements, reports and other
information obtained by Lender during its review of Borrower and Guarantor and the Initial
Mortgaged Properties).

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     (c) No Default. Except in connection with a Credit Facility Termination Request, (i)
there shall exist no Event of Default or Potential Event of Default in each case under Section
11.01 (b)-(k), or, material respect, under Section 11.01 (a), (l) or (m) (it being understood and
agreed that any default comparable to the Events of Default listed in Section 11.01 (b)-(k) in the
other Loan Documents or Supplemental Loan Documents will be treated to be material) on the Closing
Date for the Request and (ii) the closing of such Request shall not result in an Event of Default
or Potential Event of Default.

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

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

     (f) Representations and Warranties. Except in connection with a Credit Facility
Termination Request, all representations and warranties made by Borrower and Guarantor in the Loan
Documents shall be true and correct in all material respects on the Closing Date for the Request
with the same force and effect as if such representations and warranties had been made on and as of
the Closing Date for the Request. On the Closing Date of any Request, the representations and
warranties as referred to in this Section 5.01(f) shall be deemed remade by Borrower and
Guarantor.

     (g) No Condemnation or Casualty. Except in connection with a Credit Facility
Termination Request or a Release Request, there shall not be pending any condemnation or other
taking, whether direct or indirect, against any Mortgaged Property (other than a Release Mortgaged
Property subject to a Release Request or Substitution Request) and there shall not have occurred
any casualty to any improvements located on any Mortgaged Property (other than a Release Mortgaged
Property subject to a Release Request or Substitution Request), which condemnation or casualty
would have a Material Adverse Effect.

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

          (i) The Loan Documents required to be delivered in connection with the Request;

          (ii) A Compliance Certificate;

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          (iii) An Organizational Certificate; and

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

     (i) Covenants. Except in connection with a Credit Facility Termination Request,
Borrower is in full compliance with each of the covenants contained in the Loan Documents, without
giving effect to any notice and cure rights of Borrower.

     Section 5.02. Conditions Precedent to Initial Advance.

     The obligation of Lender to make the Initial Advance is subject to Lender’s determination that
each of the following conditions precedent has been satisfied:

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

     (b) The Coverage and LTV Tests are satisfied;

     (c) If the Initial Advance includes a Variable Advance, receipt by Lender at least five (5)
days prior to the Initial Closing Date, of the confirmation of an Interest Rate Cap commitment, in
accordance with the Cap Security Agreement, effective as of the Initial Closing Date;

     (d) If the Initial Advance includes a Variable Advance, receipt by Lender of Interest Rate Cap
Documents in accordance with the Cap Security Agreement, effective as of the Initial Closing Date;

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

     (f) Receipt by Lender of any Lender required subordination, non-disturbance and attornment
agreements and/or estoppel certificates with respect to any commercial leases and/or ground leases
affecting the Initial Mortgaged Property;

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

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     (h) Delivery by Lender to Borrower of the confirmed Rate Form for the Initial Advance pursuant
to Section 2.01(c).

     Section 5.03. Conditions Precedent to Future Advances.

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

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

     (b) Delivery by Lender to Borrower of the confirmed Rate Form for the Future Advance pursuant
to Section 2.01(c);

     (c) After giving effect to the requested Future Advance, the Coverage and LTV Tests shall be
satisfied;

     (d) If the Future Advance is being made pursuant to Section 2.03(b), receipt by Lender
of the Additional Collateral Due Diligence Fees.

     (e) If the Future Advance is a Fixed Advance, delivery of a Fixed Facility Note, duly executed
by Borrower, in the amount and reflecting all of the terms of the Fixed Advance;

     (f) If the Future Advance is a Variable Advance, delivery of a Variable Facility Note, duly
executed by Borrower, in the amount and reflecting all of the terms of the Variable Advance;

     (g) Receipt by Lender of the Additional Origination Fee, if any such fee is due, pursuant to
Section 2.03(b) or Section 2.05;

     (h) For any Title Insurance Policy not containing a revolving credit endorsement or future
advance endorsement, the receipt by Lender of an endorsement to the Title Insurance Policy,
amending the effective date of the Title Insurance Policy to the Closing Date and showing no
additional exceptions to coverage other than Permitted Liens;

     (i) If the Future Advance is a Variable Advance, receipt by Lender at least five (5) days
prior to the Closing Date, of the confirmation of an Interest Rate Cap commitment, in accordance
with the Cap Security Agreement, effective as of the Closing Date;

     (j) If the Future Advance is a Variable Advance, receipt by Lender of Interest Rate Cap
Documents in accordance with the Cap Security Agreement, effective as of the Closing Date;

     (k) No Governmental Approval not already obtained or made is required for the execution and
delivery of the documents to be delivered in connection with the Future Advance;

     (l) Borrower or Guarantor is not under any cease or desist order or other orders of a similar
nature, temporary or permanent of any Governmental Authority which would have the

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effect of preventing or hindering performance of the terms and provisions of the Agreement or
any other Loan Documents, nor are there any proceedings presently in progress or, to its knowledge,
contemplated which, if successful, would lead to the issuance of any such order; and

     (m) Receipt by Lender of a Confirmation of Guaranty for each Guaranty then in effect.

     Section 5.04. Conditions Precedent to Addition of an Additional Mortgaged Property to the
Collateral Pool.

     The Addition of an Additional Mortgaged Property to the Collateral Pool (but not the
Substitution of a Substitute Mortgaged Property into the Collateral Pool, which is governed
exclusively by Section 5.06) on the applicable Closing Date is subject to Lender’s
determination that each of the following conditions precedent has been satisfied:

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

     (b) The Underwriting Requirements will be satisfied;

     (c) The requirements of Section 3.02(b) will be satisfied;

     (d) Receipt by Lender of the Addition Fee or Additional Origination Fee pursuant to Section
10.01(b);

     (e) Receipt by Lender of the Additional Collateral Due Diligence Fee pursuant to Section
10.02(b);

     (f) Receipt by Lender of all legal fees and expenses payable by Borrower in connection with
the Addition Request pursuant to Section 10.03;

     (g) Receipt by Lender of any required subordination, non-disturbance and attornment agreements
and/or estoppel certificates with respect to any commercial leases and/or ground leases affecting
the Additional Mortgaged Property;

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

     (i) If reasonably required by Lender, amendments to the Notes and the Security Instruments,
reflecting the Addition of any Additional Borrower and/or the Additional

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Mortgaged Property to the Collateral Pool and, as to any Security Instrument so amended, the
receipt by Lender of an endorsement to the Title Insurance Policy insuring the Security Instrument,
amending the effective date of the Title Insurance Policy to the Closing Date and showing no
additional exceptions to coverage other than Permitted Liens;

     (j) If the Title Insurance Policy for the Additional Mortgaged Property contains a tie-in
endorsement, an endorsement to each other Title Insurance Policy containing a tie-in endorsement,
adding a reference to the Additional Mortgaged Property; and

     (k) Receipt by Lender of evidence that any code violations have been resolved to Lender’s
satisfaction.

     Section 5.05. Conditions Precedent to Release of Property from the Collateral Pool.

     The obligation of Lender to Release a Mortgaged Property from the Collateral Pool by executing
and delivering the Release Documents on the Closing Date is subject to Lender’s determination that
each of the following conditions precedent has been satisfied:

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

     (b) The requirements of Section 3.04 are satisfied;

     (c) Receipt by Lender of the Release Price;

     (d) Receipt by Lender of the Release Fee;

     (e) Receipt by Lender of all legal fees and expenses payable by Borrower in connection with
the Release Request;

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

     (g) If required by Lender, amendments to this Agreement, the Notes and the Security
Instruments, reflecting the release of the Release Mortgaged Property from the Collateral Pool and,
as to any Security Instrument so amended, the receipt by Lender of an endorsement to the Title
Insurance Policy insuring the Security Instrument, amending the effective date of the Title
Insurance Policy to the Closing Date and showing no additional exceptions to coverage other than
Permitted Liens;

     (h) If Lender determines the Release Mortgaged Property to be one phase of a project, and one
or more other phases of the project are Mortgaged Properties which will remain in the Collateral
Pool (“Remaining Mortgaged Properties”), Lender must reasonably determine that the
Remaining Mortgaged Properties can be operated separately from the Release Mortgaged Property and
any other phases of the project which are not Mortgaged Properties and whether any cross use
agreements or easements are necessary. In making this determination,

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Lender shall evaluate access, utilities, marketability, community services, ownership and
operation of the Release Mortgaged Properties and any other issues identified by Lender in
connection with similar loans anticipated to be sold to Fannie Mae;

     (i) Receipt by Lender on the Closing Date of a Confirmation of Obligations, dated as of the
Closing Date, signed by Borrower and Guarantor, pursuant to which Borrower and Guarantor confirm
their remaining obligations under the Loan Documents; and

     (j) Receipt by Lender of endorsements to the tie-in endorsements of the Title Insurance
Policies, if deemed necessary by Lender, to reflect the release.  Notwithstanding anything to the
contrary herein, no release of any Mortgaged Property in the Collateral Pool shall be made unless
Borrower has provided title insurance to Lender in respect of each of the remaining Mortgaged
Properties in the Collateral Pool in an amount equal to one hundred fifteen percent (115%) of the
Initial Valuation of such Mortgaged Properties (taking into account the title insurance coverage
provided by “tie-in” endorsements, if available).

     Section 5.06. Conditions Precedent to Substitution of a Substitute Mortgaged Property into
the Collateral Pool. 

     The Substitution of a Substitute Mortgaged Property into the Collateral Pool is subject to
Lender’s determination that each of the following conditions precedent has been satisfied:

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

     (b) The provisions of Section 3.05(c) shall be satisfied;

     (c) Receipt by Lender of the Substitution Deposit, if applicable;

     (d) Receipt by Lender of all legal fees and expenses payable by Borrower in connection with
the Substitution pursuant to Section 10.03;

     (e) Receipt by Lender of any required subordination, non-disturbance and attornment agreements
and/or estoppel certificates with respect to any commercial leases and/or ground lease (if any)
affecting the Substitute Mortgaged Property;

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

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

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

     (i) If required by Lender, amendments to the Notes and the Security Instruments, reflecting
the addition of the Substitute Mortgaged Property to the Collateral Pool and, as to any Security
Instrument so amended, the receipt by Lender of an endorsement to the Title Insurance Policy
insuring the Security Instrument, amending the effective date of the Title Insurance Policy to the
Closing Date and showing no additional exceptions to coverage other than Permitted Liens; and

     (j) If the Title Insurance Policy for the Substitute Mortgaged Property contains a tie-in
endorsement, and endorsement to each other Title Insurance Policy containing a tie-in endorsement,
adding a reference to the Substitute Mortgaged Property.

     Section 5.07. Conditions Precedent to Conversion.

     The conversion of all or a portion of a SARM Variable Advance to a Fixed Advance is subject to
Lender’s determination that each of the following conditions precedent has been satisfied:

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

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

     (c) The provisions of Section 1.06, Section 1.07 and Section 1.08
shall be satisfied;

     (d) Prepayment by Borrower of any Variable Advances Outstanding that Borrower has designated
for payment, together with any other amounts due with respect to the prepayment of such Variable
Advances; provided that, subject to the terms of Section 1.07(c), there shall be no
associated prepayment premiums due in connection with a conversion pursuant to the terms of
Section 1.06, Section 1.07 and Section 1.08 of this Agreement;

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

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

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     Section 5.08. Conditions Precedent to Termination of Credit Facility.

     The right of Borrower to terminate this Agreement and the Credit Facility and to receive a
release of all of the Collateral from the Collateral Pool and Lender’s obligation to execute and
deliver the Credit Facility Termination Documents on the Closing Date are subject to Lender’s
determination Borrower has paid in full all of the Notes Outstanding on the Closing Date, including
any associated prepayment premiums or other amounts due under the Notes, any Release Fees, and all
other amounts owing by Borrower to Lender under this Agreement.

     Section 5.09. Opinion Relating to Advance Request, Addition Request, Conversion Request,
or Substitution Request.

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

     Section 5.10. Delivery of Property-Related Documents.

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

     (a) A commitment for the Title Insurance Policy applicable to the Mortgaged Property and a pro
forma Title Insurance Policy based on the title commitment in the amount of title insurance
afforded by the Title Insurance Policy for each Mortgaged Property in the Collateral Pool equal to
one hundred fifteen percent (115%) of the Initial Valuation of such Mortgaged Property (taking into
account the title insurance coverage provided by “tie-in” endorsements, if available) Commitment
and approved by Lender;

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

     (c) Unless waived by Lender, the Survey applicable to the Mortgaged Property and approved by
Lender (which shall be last revised no less than forty-five (45) days prior to the Closing Date);

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

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     (e) An Appraisal of the Mortgaged Property;

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

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

     (h) If no management agreement is in effect for a Mortgaged Property, an Agreement Regarding
Management Agreement or, if a management agreement is in effect for a Mortgaged Property, an
Assignment of Management Agreement or an amendment thereto, on the standard form required by
Lender;

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

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

     (k) A Certificate of Borrower Parties; and

     (l) Any other document that Lender may reasonably determine is required in connection with a
Mortgaged Property.

     Section 5.11. Conditions Precedent to Letters of Credit.

     The right or requirement of Borrower to provide a Letter of Credit in connection with this
Agreement is subject to Lender’s determination that each of the following conditions precedent has
been satisfied:

     (a) Letter of Credit Requirements. Any Letter of Credit shall be issued by a
financial institution satisfactory to Fannie Mae (the “Issuer”). If Borrower provides
Lender with a Letter of Credit pursuant to this Agreement, the Letter of Credit shall be in form
and substance satisfactory to Lender and Lender shall be entitled, upon occurrence of circumstances
in (b), to draw under such Letter of Credit solely upon presentation of a sight draft to the
Issuer. Any Letter of Credit shall be for a term of at least three hundred sixty-four (364) days
(provided that in connection with a Substitution, the term of any Letter of Credit shall be until
the date five (5) days after the Property Delivery Deadline).

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

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

          (ii) if thirty (30) days prior to the expiration of the Letter of Credit, either the Letter of
Credit has not been extended for a term of at least three hundred sixty four (364) days (provided
that in connection with a Substitution, the term of any Letter of Credit shall be at least until
the date five (5) days after the Property Delivery Deadline) or Borrower has not replaced the
Letter of Credit with substitute cash collateral in the amount required by Lender; or

          (iii) upon the downgrading of the ratings of the long-term or short-term debt obligations of
the Issuer below a level satisfactory to Fannie Mae; provided that Borrower shall have five (5)
Business Days after notice of such downgrading to deliver to Lender either (A) an acceptable
replacement Letter of Credit or (B) substitute cash collateral in the amount required by Lender.

     (c) Deposit to Cash Collateral Account. If Lender draws under the Letter of Credit
pursuant to Section 5.11(b)(ii) or Section 5.11(b)(iii) above, Lender shall deposit
such draw monies into a Cash Collateral Account established pursuant to a Cash Collateral Agreement
entered into the first time Lender draws any such monies. Lender shall hold the Letter of Credit
drawn monies in the Cash Collateral Account until the earliest of the following events occurs:

          (i) Borrower presents an acceptable replacement Letter of Credit and Lender agrees, in its
sole discretion, to accept such Letter of Credit (provided that any agreement by Lender to accept a
replacement Letter of Credit will be conditioned upon Borrower’s payment of all administrative and
legal costs incurred by Lender and Fannie Mae in connection with the replacement of the Letter of
Credit.)

          (ii) the applicable provisions of this Agreement pursuant to which the Letter of Credit was
provided are satisfied;

          (iii) Borrower pays all amounts due and payable under the Loan Documents and Lender releases
the liens of all Security Instruments;

          (iv) Lender, in its sole discretion, consents to Borrower’s request to apply the funds to the
principal balance of a Note and any prepayment premium due in connection with such application; or

          (v) an Event of Default occurs and Lender elects to apply the proceeds as described below in
Section 5.11(d);

During any period that Lender holds the cash proceeds resulting from a draw on any Letter of
Credit, Lender will not pay interest to, or on behalf of, Borrower in connection with such funds.

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

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

          (ii) to (on such Borrower’s behalf, or on its own behalf if Lender becomes the owner of the
Mortgaged Property) pre-pay any Note in whole or in part, including any prepayment premium or yield
maintenance;

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

          (iv) deposit monies into the Cash Collateral Account.

     (e) Legal Opinion. Prior to or simultaneous with the delivery of any new Letter of
Credit (but not the extension of any existing Letter of Credit), such Borrower shall cause the
Issuer’s counsel to deliver a legal opinion satisfactory in form and substance as approved by
Lender.

ARTICLE 6

REPRESENTATIONS AND WARRANTIES

     Section 6.01. Representations and Warranties of Borrower.

     The representations and warranties of Borrower Parties are contained in the Certificate of
Borrower Parties, the form of which is attached to this Agreement as Exhibit J.

     Section 6.02. Representations and Warranties of Lender.

     Lender hereby represents and warrants to Borrower and Guarantor as follows:

     (a) Due Organization. Lender is a limited liability company duly organized, validly
existing and in good standing under the laws of North Carolina.

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

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

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ARTICLE 7

AFFIRMATIVE COVENANTS OF BORROWER

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

     Section 7.01. Compliance with Agreements.

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

     Section 7.02. Maintenance of Existence.

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

     Section 7.03. Maintenance of REIT Status.

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

     Section 7.04. Financial Statements; Accountants’ Reports; Other Information.

     Each Borrower Party shall keep and maintain at all times complete and accurate books of
accounts and records in sufficient detail to correctly reflect (i) all of Borrower’s and
Guarantor’s financial transactions and assets and (ii) the results of the operation of each
Mortgaged Property and copies of all written contracts, Leases and other instruments which affect
each Mortgaged Property (including all bills, invoices and contracts for electrical service, gas
service, water and sewer service, waste management service, telephone service and management
services). In addition, Borrower or Guarantor, as applicable, shall furnish, or cause to be
furnished, to Lender:

     (a) Annual Financial Statements. As soon as available, and in any event within ninety
(90) days after the close of its fiscal year during the Term of this Agreement, the balance sheet
of Borrower, Guarantor and its Subsidiaries on a consolidated basis as of the end of such fiscal
year, the statement of income, Borrower’s and Guarantor’s equity and retained earnings of Borrower,
Guarantor and its Subsidiaries on a consolidated basis for such fiscal year and the statement of
cash flows of Borrower, Guarantor and its Subsidiaries on a consolidated basis for such fiscal
year, all in reasonable detail and stating in comparative form the respective figures for the
corresponding date and period in the prior fiscal year, prepared in accordance with GAAP,

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consistently applied, and with respect to the audited statements (as required below)
accompanied by a certificate of independent certified public accountants to the effect that such
financial statements have been prepared in accordance with GAAP, consistently applied, and that
such financial statements fairly present the results of its operations and financial condition for
the periods and dates indicated, with such certification to be free of exceptions and
qualifications as to the scope of the audit or as to the going concern nature of the business. All
financial statements required by this subsection (a) with respect to Guarantor shall be
audited and all financial statements required by this subsection (a) with respect to
Borrower may be unaudited.

     (b) Quarterly Financial Statements. As soon as available, and in any event within
forty-five (45) days after each of the first three fiscal quarters of each fiscal year during the
Term of this Agreement, the unaudited balance sheet of Borrower, Guarantor and its Subsidiaries on
a consolidated basis as of the end of such fiscal quarter, the unaudited statement of income and
retained earnings of Borrower, Guarantor and its Subsidiaries on a consolidated basis and the
unaudited statement of cash flows of Borrower, Guarantor and its Subsidiaries on a consolidated
basis for the portion of the fiscal year ended with the last day of such quarter, all in reasonable
detail and stating in comparative form the respective figures for the corresponding date and period
in the previous fiscal year, accompanied by a certificate of a Proper Officer to the effect that
such financial statements have been prepared in accordance with GAAP, consistently applied and
subject to customary exceptions, and that such financial statements fairly present the results of
its operations and financial condition for the periods and dates indicated, subject to year end
adjustments in accordance with GAAP.

     (c) Quarterly Property Statements. As soon as available, and in any event within
forty-five (45) days after each Calendar Quarter, a statement of income and expenses of each
Mortgaged Property accompanied by a certificate of a Proper Officer to the effect that each such
statement of income and expenses fairly, accurately and completely presents the operations of each
such Mortgaged Property in all material respects for the period indicated.

     (d) Annual Property Statements. On an annual basis within ninety (90) days of the end
of its fiscal year, an annual statement of income and expenses of each Mortgaged Property
accompanied by a certificate of a Proper Officer to the effect that each such statement of income
and expenses fairly, accurately and completely presents the operations of each such Mortgaged
Property in all material respects for the period indicated.

     (e) Updated Rent Rolls. As soon as available, and in any event within forty-five (45)
days after each Calendar Quarter, a current Rent Roll for each Mortgaged Property, showing the name
of each tenant, and for each tenant, the space occupied, the lease expiration date, the rent
payable, the rent paid and any other information requested by Lender and accompanied by a
certificate of a Proper Officer to the effect that each such Rent Roll fairly, accurately and
completely presents the information required therein in all material respects.

     (f) Security Deposit Information. Upon Lender’s request, an accounting of all
security deposits held in connection with any Lease of any part of any Mortgaged Property,
including the name and identification number of the accounts in which such security deposits are
held, the name and address of the financial institutions in which such security deposits are held

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and the name and telephone number of the person to contact at such financial institution,
along with any authority or release necessary for Lender to access information regarding such
accounts.

     (g) Security Law Reporting Information. So long as General Partner is a reporting
company under the Securities Exchange Act of 1934, promptly upon becoming available, (i) copies of
all financial statements, reports and proxy statements sent or made available generally by General
Partner, or any of its Affiliates, to its respective security holders, (ii) all regular and
periodic reports and all registration statements (other than the exhibits thereto and any
registration statements on Form S-8 or a similar form) and prospectuses, if any, filed by General
Partner, or any of its Affiliates, with the Securities and Exchange Commission or other
Governmental Authorities, and (iii) all press releases and other statements made available
generally by General Partner, or any of its Affiliates, to the public concerning material
developments in the business of General Partner or other party.

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

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

     (j) Plans and Projections. To the extent prepared in the ordinary course of business
of Borrower and in the form prepared by Guarantor in the ordinary course of business, within thirty
(30) days after its preparation, copies of (i) Guarantor’s business plan for the current and the
succeeding two fiscal years, (ii) Borrower’s annual budget (including capital expenditure budgets)
and projections for each Mortgaged Property; and (iii) Guarantor’s financial projections for the
current and the succeeding two fiscal years.

     (k) Strategic Plan. To the extent prepared in the ordinary course of business of
Borrower and in the form prepared by Guarantor in the ordinary course of business, within thirty
(30) days after its preparation, a written narrative discussing Guarantor’s short and long range
plans, including its plans for operations, mergers, acquisitions and management, and accompanied by
supporting financial projections and schedules, certified by a Proper Officer as true, correct and
complete in all material respects (“Strategic Plan”). If Guarantor’s Strategic Plan
materially changes, then Guarantor shall deliver to Lender the Strategic Plan as so changed.

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     (l) Annual Rental and Sales Comparable Analysis. To the extent prepared in the
ordinary course of business of Borrower and in the form prepared by Borrower in the ordinary course
of business, within thirty (30) days after its preparation, a rental and sales comparable analysis
of the local real estate market in which each Mortgaged Property is located.

     (m) Statement of Ownership. At any time upon Lender’s request, a statement that
identifies: (i) all owners of any interest in Borrower and the interest held by each and (ii) if
Borrower is a corporation, all officers and directors of Borrower, and if Borrower is a limited
liability company, all managers who are not members.

     (n) Other Information. Within forty-five (45) days after Lender’s request, but not
more frequently than once per Calendar Year, such other information reasonably requested by Lender.

     (o) Federal Tax Returns. Within thirty (30) days of filing, the Federal Tax Return of
Borrower and Guarantor.

     Section 7.05. Confidentiality of Certain Information.

     No Borrower Party shall disclose any terms, conditions, underwriting requirements or
underwriting procedures of the Credit Facility or any of the Loan Documents; provided, however,
that such confidential information may be disclosed (a) as required by law or pursuant to generally
accepted accounting procedures, (b) to officers, directors, employees, agents, partners, attorneys,
accountants, engineers and other consultants of Borrower who need to know such information,
provided such Persons are instructed to treat such information confidentially, (c) to any
regulatory authority having jurisdiction over Borrower, (d) in connection with any filings with the
Securities and Exchange Commission or other Governmental Authorities, or (e) to any other Person to
which such delivery or disclosure may be necessary or appropriate (i) in compliance with any law,
rule, regulation or order applicable to Borrower, (ii) in response to any subpoena or other legal
process or information investigative demand or (iii) in connection with any litigation to which
Borrower is a party.

     Section 7.06. Access to Records; Discussions With Officers and Accountants.

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

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

     (b) discuss Borrower’s affairs, finances and accounts with any Proper Officer or any other
person performing the functions of the Proper Officers;

     (c) discuss Borrower’s affairs, finances and accounts with its independent public accountants,
provided that a Proper Officer has been given the opportunity by Lender to be a party to such
discussions;

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     (d) discuss the Mortgaged Properties’ conditions, operations or maintenance with the Property
Managers and/or asset manager of such Mortgaged Properties and the officers and employees of
Borrower and Guarantor; and

     (e) receive any other information that Lender deems reasonably necessary or relevant in
connection with any Advance, any Loan Document or the Obligations from the officers of Borrower or
Guarantor or officers and employees of Property Manager.

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

     Section 7.07. Certificate of Compliance.

     Guarantor shall deliver to Lender concurrently with the delivery of the financial statements
and/or reports required by Section 7.04(a) and Section 7.04(b) a certificate signed
by a Proper Officer (i) setting forth in reasonable detail the calculations required to establish
whether Borrower and Guarantor were in compliance with the requirements of Article 7 of
this Agreement on the date of such financial statements, and (ii) stating that, to the best
knowledge of such individual following reasonable inquiry, no Event of Default or Potential Event
of Default has occurred, or if an Event of Default or Potential Event of Default has occurred,
specifying the nature thereof in reasonable detail and the action Borrower or Guarantor is taking
or proposes to take. Any certificate required by this Section 7.07 shall run directly to
and be for the benefit of Lender and Fannie Mae.

     Section 7.08. Maintain Licenses.

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

     Section 7.09. Inform Lender of Material Events.

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

     (a) Defaults. The occurrence of any Event of Default or any Potential Event of
Default under this Agreement or any other Loan Document;

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

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and desist any practice, procedure or policy employed by Borrower or Guarantor in the conduct
of its business, and with respect to (i) or (ii) the same would have, or may reasonably be expected
to have, a Material Adverse Effect;

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

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

     (e) Material Adverse Effects. The occurrence of any act, omission, change or event
(including the commencement or written threat of any proceedings by or against Borrower or
Guarantor in any Federal, state or local court, or before any Governmental Authority, or before any
arbitrator), which has, or would have, a Material Adverse Effect, subsequent to the date of the
most recent financial statements of Borrower or Guarantor delivered to Lender pursuant to
Section 7.03;

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

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

     Section 7.10. Compliance with Applicable Laws.

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

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     Section 7.11. Alterations to the Mortgaged Properties.

     Except as otherwise provided in the Loan Documents, Borrower shall have the right to undertake
any alteration, improvement, demolition, removal or construction (collectively,
“Alterations”) to the Mortgaged Property which it owns without the prior consent of Lender;
provided, however, that in any case, no such Alteration shall be made to any
Mortgaged Property without the prior written consent of Lender if (i) such Alteration could
reasonably be expected to materially and adversely affect the value of such Mortgaged Property or
its operation as a multifamily housing facility in substantially the same manner in which it is
being operated on the date such property became Collateral, (ii) the construction of such
Alteration could reasonably be expected to result in interference to the occupancy of tenants of
such Mortgaged Property such that tenants in occupancy with respect to five percent (5%) or more of
the Leases would be permitted to terminate their Leases or to abate the payment of all or any
portion of their rent, or (iii) such Alteration will be completed in more than twelve (12) months
from the date of commencement or in the last year of the Term of this Agreement. Notwithstanding
the foregoing, Borrower must obtain Lender’s prior written consent to construct Alterations (other
than scheduled repairs and maintenance to existing improvements) with respect to any Mortgaged
Property costing in excess of the lesser of (A) ten percent (10%) of the Allocable Facility Amount
of such Mortgaged Property or (B) $500,000, and Borrower must give prior written notice to Lender
of its intent to construct Alterations (other than scheduled repairs and maintenance to existing
improvements) with respect to such Mortgaged Property costing in excess of $100,000; provided,
however, that the preceding requirements shall not be applicable to Alterations made, conducted or
undertaken by Borrower as part of Borrower’s routine maintenance and repair of the Mortgaged
Properties as required by or contemplated under the Loan Documents.

     Section 7.12. Loan Document Taxes.

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

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     Section 7.13. Further Assurances.

     Borrower Parties, at the request of Lender, shall execute and deliver and, if necessary, file
or record such statements, documents, agreements, UCC financing and continuation statements and
such other instruments and take such further action as Lender from time to time may request as
reasonably necessary, desirable or proper to carry out more effectively the purposes of this
Agreement or any of the other Loan Documents or to subject the Collateral to the lien and security
interests of the Loan Documents or to evidence, perfect or otherwise implement, to assure the lien
and security interests intended by the terms of the Loan Documents or in order to exercise or
enforce its rights under the Loan Documents.

     Section 7.14. Transfer of Ownership Interests in Borrower or Guarantor. 

     (a) Prohibition on Transfers. Subject to paragraph (b) of this Section 7.14,
Borrower and Guarantor shall not cause or permit a Transfer or a Change of Control.

     (b) Permitted Transfers. Notwithstanding the provisions of paragraph (a) of this
Section 7.14, the following Transfers of Ownership Interests in Borrower, Guarantor, or
General Partner are permitted without the consent of Lender, provided that Borrower shall provide
fifteen (15) Business Days prior written notice thereof to Lender (provided, however, that no such
notice to Lender need be given with respect to those Permitted Transfers that occur due to the
ordinary course of trading of a Publicly-Held Corporation) (“Permitted Transfers”):

          (i) A Transfer that occurs by inheritance, devise, or bequest or by operation of law upon the
death of a natural person who is the owner of a direct or indirect Ownership Interest in Borrower
or Guarantor.

          (ii) A Transfer to trusts or other entities established for the benefit of the transferor
and/or immediate family members for estate planning purposes.

          (iii) A Transfer of any direct or indirect Ownership Interest in Borrower, Guarantor, or
General Partner; provided, however, that no Change of Control occurs as the result of such
Transfer.

          (iv) The issuance by Borrower or Guarantor of additional membership interests, partnership
interests or stock (including by creation of a new class or series of interests or stock and all
varieties of convertible debt, equity and other similar securities), as the case may be, and the
subsequent direct or indirect Transfer of such interests or stock; provided, however, that no
Change of Control occurs as the result of such Transfer.

          (v) Any amendment, modification or any other change in the governing instrument or instruments
of Borrower or Guarantor in connection with the creation of a new class or series of interests of
stock pursuant to (iv) above; provided, however, that no Change of Control occurs as the
result of such Transfer.

          (vi) A merger with or acquisition of or by another entity by Borrower provided that (A) such
Borrower is the surviving entity after such merger or acquisition, (B) no Change of

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Control occurs, and (C) such merger or acquisition does not result in an Event of Default, as
such terms are defined in this Agreement.

          (vii) A Transfer of any minority non-controlling Ownership Interest in Borrower or Guarantor
provided no Change of Control occurs as a result of such Transfer.

          (viii) A conversion of Borrower from one type of legal entity into another type of legal
entity for tax or other structuring purposes, provided:

          (A) no Change of Control occurs,

          (B) Borrower provides Lender with prior written notice of such conversion,

          (C) Borrower provides Lender any certificates evidencing such conversion filed with the
appropriate Secretary of State,

          (D) Borrower provides Lender new certificates of good standing for such entity,

          (E) Lender reserves the right to file UCC-3 amendments where necessary reflecting the
conversion,

          (F) Borrower executes an amendment to this Agreement documenting the conversion, and

          (G) The Title Company shall confirm (via electronic mail or letter) that nothing is
needed in the land records (of each of the appropriate jurisdictions) at such time to
evidence such conversion, and no endorsements to the title policies are necessary to
maintain Lender’s coverage.

          (ix) The Transfer of limited partnership interests by the limited partners of Guarantor,
including without limitation, the conversion or exchange of limited partnership interests in
Guarantor to shares of common stock or other beneficial or ownership interests or other forms of
securities in the General Partner; provided, however, that no Change of Control occurs as the
result of such Transfer.

Notwithstanding anything in this Section 7.14 to the contrary, a “Permitted
Transfer” shall not include any transfer that Lender, in its reasonable discretion, determines
is unacceptable because it would overexpose the Lender or Fannie Mae to the credit risk posed by a
third party transferee or its Affiliates, if any.

          (c) Consent to Prohibited Transfers. Lender may, in its sole and absolute discretion,
consent to a Transfer that would otherwise violate this Section 7.14 if, prior to the
Transfer, Borrower or Guarantor, as the case may be, has satisfied each of the following
requirements:

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                    (i) the submission to Lender of all information required by Lender to make the determination
required by this Section 7.14;

                    (ii) the absence of any Event of Default or Potential Event of Default;

                    (iii) the transferee meets all of the eligibility (including the requirement that the proposed
transferee is not a Prohibited Person), credit, management and other standards (including any
standards with respect to previous relationships between Lender and the transferee and the
organization of the transferee) customarily applied by Lender at the time of the proposed Transfer
to the approval of borrowers or guarantors, as the case may be, in connection with the origination
or purchase of similar mortgages, deeds of trust or deeds to secure debt on multifamily properties;

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

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

                    (A) a transfer fee equal to one percent (1%) of the Advances Outstanding immediately
prior to the Transfer;

                    (B) a $3,000 review fee; and

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

     For the purposes of Section 7.14 and Section 7.15, “Prohibited Person” means
(i) a Person that is the subject of, whether voluntary or involuntary, any case, proceeding or
other action against such Person under any existing or future law of any jurisdiction relating to
bankruptcy, insolvency, reorganization, liquidation, rehabilitation, receivership, or relief of
debtors, or (ii) any Person with whom Lender is prohibited from doing business pursuant to any law,
rule, regulation, judicial proceeding or administrative directive, or (iii) any Person identified
on the federal “Excluded Parties List System,” the federal “Office of Foreign Assets and Control
Specially Designated Nationals and Blocked Persons” list, the U.S. Department of Housing and Urban
Development’s “Limited Denial of Participation, HUD Funding Disqualifications and Voluntary
Abstentions List,” or on Lender’s “Multifamily Applicant Experience Check,” each of which may be
amended from time to time and any successor or replacement thereof, or (iv) a Person that is
determined by Fannie Mae to have an unacceptable level of outstanding debt to Fannie Mae, or (v) a
Person that has caused any unsatisfactory experience of a material nature

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with Fannie Mae or Lender, such as a default, fraud, intentional misrepresentation, material
litigation, material arbitration or other similar act, or (vi) a Person that is, or whose senior
management is, the subject of any pending criminal indictment or criminal investigation relating to
an alleged felony or has ever been convicted of a felony or held liable for fraud in a civil or
criminal action.

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

     Section 7.15. Transfer of Ownership of Mortgaged Property.

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

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

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

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

                    (iii) The creation of a mechanic’s or materialmen’s lien or judgment lien against a Mortgaged
Property which is released of record or otherwise remedied to Lender’s satisfaction within
forty-five (45) days of the date of creation.

                    (iv) The grant of an easement if, prior to the granting of the easement, Borrower causes to be
submitted to Lender all information required by Lender to evaluate the easement, and if Lender
consents to such easement based upon Lender’s determination that the easement will not materially
adversely affect the operation of the Mortgaged Property or Lender’s interest in the Mortgaged
Property and Borrower pays to Lender, within ten (10) Business Days after demand therefore, all
reasonable third party out-of-pocket costs and expenses incurred by Lender in connection with
reviewing Borrower’s request. Lender shall not unreasonably withhold its consent to or withhold
its agreement to subordinate the lien of a Security Instrument to (A) the grant of a utility
easement serving a Mortgaged Property to a publicly operated utility, or (B) the grant of an
easement related to expansion or widening of roadways, driveways and parking areas, provided that
any such easement is in form and

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substance reasonably acceptable to Lender and does not materially and adversely affect the
access, use or marketability of a Mortgaged Property.

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

                    (i) the transferee (“New Collateral Pool Borrower”) is a Single Purpose entity, and
executes an assumption agreement that is acceptable to Lender pursuant to which such New Collateral
Pool Borrower assumes all obligations of Borrower and Guarantor under all the applicable Loan
Documents and Supplemental Loan Documents;

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

                    (iii) after giving effect to the assumption, the requirements of Section 5.05 and the
General Conditions contained in Section 5.01 shall be satisfied;

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

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

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

                    (vii) the requirements of Section 7.15 are satisfied.

          (d) Consent to Prohibited Transfers. Lender may, in its sole and absolute discretion,
consent to a Transfer that would otherwise violate this Section 7.15 if, prior to the
Transfer, Borrower has satisfied each of the following requirements:

                    (i) the submission to Lender of all information required by Lender to make the determination
required by this Section 7.15;

                    (ii) the absence of any Event of Default or Potential Event of Default;

                    (iii) the transferee meets all of the eligibility (including the requirement that the proposed
transferee is not a Prohibited Person), credit, management and other standards

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

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

                    (v) the Mortgaged Properties, at the time of the proposed Transfer, meets all standards as to
physical condition that are customarily applied by Lender at the time of the proposed Transfer to
the approval of properties in connection with the origination or purchase of similar mortgages on
multifamily properties;

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

                    (A) a transfer fee equal to one percent (1%) of the Outstanding Advances immediately
prior to the Transfer;

                    (B) a $3,000 review fee; and

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

                    (vii) the Transfer will not result in a significant modification under Section 1001 of the
Internal Revenue Code of any Advance that has been securitized in a mortgage backed security.

     Section 7.16. Change in Senior Management. 

     Borrower shall give Lender notice of any change in the identity of the Chief Executive
Officer, Chief Financial Officer or Executive Vice President within ten (10) Business Days of the
occurrence thereof.

     Section 7.17. Date-Down Endorsements. 

     At any time and from time to time, a Lender may obtain an endorsement to each Title Insurance
Policy containing a Revolving Credit Endorsement (if available and if applicable), amending the
effective date of the Title Insurance Policy to the date of the title search performed

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in connection with the endorsement. Borrower shall pay for the cost and expenses incurred by
Lender to the Title Company in obtaining such endorsement, provided that, for each Title Insurance
Policy, it shall not be liable to pay for more than one (1) such endorsement in any consecutive
twelve (12) month period.

     Section 7.18. Ownership of Mortgaged Properties.

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

     Section 7.19. Change in Property Manager.

     No change in the Property Manager of each Mortgaged Property shall be made without the prior
written consent of Lender, which approval shall be based on the criteria for approval of Property
Managers as required by Lender for similar loans anticipated to be sold to Fannie Mae. Lender
acknowledges that the Mortgaged Properties are managed by a wholly owned subsidiary of Guarantor
and do not possess a formal management agreement. If, with Lender’s prior written consent as
provided in this Section 7.19, a third party manager is subsequently retained to manage the
Mortgaged Properties, then such third party manager shall execute an Assignment of Management
Agreement in form and substance acceptable to Lender. In the event Lender exercises its rights and
remedies under the Loan Documents in connection with an Event of Default, then Lender shall also
have the right, but not the obligation, to require and choose a third party manager to manage the
Mortgaged Properties.

ARTICLE 8

FINANCIAL COVENANTS

     Section 8.01. Cash on Hand.

     Borrower and Guarantor covenant and agree that at all times during the Term of this Agreement
that they collectively shall maintain cash, Cash Equivalents, or an immediately available line of
credit with a reputable financial institution acceptable to Lender and Fannie Mae in their sole
discretion in an amount equal to no less than Five Million Dollars ($5,000,000) (cash, Cash
Equivalents and/or the line of credit, collectively, “Cash on Hand”). To the extent not
available in the public reports and statements filed by Guarantor under the Securities Exchange Act
of 1934, Borrower and Guarantor shall send quarterly reports to Lender specifying the amount and
type of Cash on Hand and shall provide such other evidence of the existence of the Cash on Hand as
Lender shall request.

     Section 8.02. Net Worth. 

     Guarantor covenants and agrees that at all times it shall maintain a Consolidated Tangible Net
Worth of no less than One Hundred Million Dollars ($100,000,000). Solely for the purpose of this
Section 8.02, the following terms shall have the meaning set forth below:

     “Consolidated Tangible Net Worth” means, as of any date of determination, for the
Guarantor and the Subsidiaries, (a) the Shareholders’ Equity of the Guarantor and the

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Subsidiaries on that date, exclusive of minority interests, minus (b) the Intangible
Assets of the Guarantor and the Subsidiaries on that date.

     “Intangible Assets” means assets that are considered to be intangible assets under
GAAP, including customer lists, goodwill, computer software, copyrights, trade names, trademarks,
patents, franchises, licenses, unamortized deferred charges, unamortized debt discount and
capitalized research and development costs.

     “Shareholders’ Equity” means, as of any date of determination, consolidated
shareholders’ equity, determined in accordance with GAAP.

     “Subsidiary” of a Person means a corporation, partnership, joint venture, limited
liability company or other business entity of which a majority of the shares of securities or other
interests having ordinary voting power for the election of directors or other governing body (other
than securities or interests having such power only by reason of the happening of a contingency)
are at the time beneficially owned, or the management of which is otherwise controlled, directly,
or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise
specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary
or Subsidiaries of the Guarantor.

ARTICLE 9

NEGATIVE COVENANTS OF BORROWER AND GUARANTOR

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

     Section 9.01. Other Activities.

     No Borrower Party shall:

     (a) amend its Organizational Documents in any material respect without the prior written
consent of Lender, except in connection with a Permitted Transfer;

     (b) change its name without notifying Lender in writing prior to such change;

     (c) dissolve or liquidate in whole or in part;

     (d) except as otherwise provided in this Agreement, without the prior written consent of
Lender, merge or consolidate with any Person; or

     (e) use, or permit to be used, any Mortgaged Property for any uses or purposes other than as a
Multifamily Residential Property and ancillary uses consistent with Multifamily Residential
Properties.

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     Section 9.02. Liens.

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

     Section 9.03. Indebtedness.

     Borrower shall not incur or be obligated at any time with respect to any Indebtedness (other
than Advances) in connection with or secured by any of the Mortgaged Properties. Neither Borrower
nor any owner of Borrower shall (a) incur any “mezzanine debt,” secured or unsecured or issue any
preferred equity in connection with providing such mezzanine type financing, or (b) incur any
similar Indebtedness or equity with respect to any Mortgaged Property.

     Section 9.04. Principal Place of Business.

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

     Section 9.05. Condominiums.

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

     Section 9.06. Restrictions on Distributions.

     To the extent permitted by tax laws and regulations pertaining to the requirements of a real
estate investment trust, Borrower shall not make any distributions of any nature or kind whatsoever
to the owners of its Ownership Interests as such if, at the time of such distribution, a Potential
Event of Default or an Event of Default has occurred and remains uncured.

     Section 9.07. Conduct of Business.

     The conduct of Borrower’s businesses shall not violate the Organizational Documents pursuant
to which it is formed.

     Section 9.08. Ownership of Property.

     Borrower shall not (i) acquire any real or personal property other than the Mortgaged
Properties and personal property related to the operation and maintenance of the Mortgaged
Properties and (ii) operate any business other than the management and operation of the Mortgaged
Properties.

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ARTICLE 10

FEES

     Section 10.01. Origination Fees.

     (a) Initial Origination Fee. Borrower shall pay to Lender an origination fee
(“Initial Origination Fee”) equal to 55 basis points (0.55%) multiplied by the amount
Outstanding under the Commitment.

     (b) Additional Origination Fee. Upon the closing of a Future Advance under
Section 2.03(b), Borrower shall pay to Lender an origination fee (“Additional
Origination Fee”) equal to the product obtained by multiplying (i) the amount of the Advance
made on the Closing Date by (ii) 55 basis points (0.55%).

     Section 10.02. Due Diligence Fees.

     (a) Initial Due Diligence Fees. On the Initial Closing Date (or, if the proposed
Initial Mortgaged Properties do not become part of the Collateral Pool, on demand), Borrower shall
pay to Lender due diligence fees (“Initial Due Diligence Fees”) with respect to each
Initial Mortgaged Property in an amount equal to the reasonable out-of-pocket costs incurred by
Lender in connection with Lender’s due diligence for such Initial Mortgaged Properties, including
but not limited to third party reports required by Lender plus a $4,500 fee per Initial
Mortgaged Property (inclusive of a $1,500 fee payable by Lender to Fannie Mae). On or before the
Initial Closing Date, Borrower shall pay a deposit toward the Initial Due Diligence Fees equal to
the product obtained by multiplying (i) $12,500, by (ii) the number of Initial Mortgaged
Properties, minus the portion of the estimated amount of Initial Due Diligence Fees
previously paid to Lender by Borrower . On or prior to the Initial Closing Date, Lender shall
notify Borrower of the actual amount of the Initial Due Diligence Fees and Borrower shall, on the
Initial Closing Date, pay to Lender the remainder of such Initial Due Diligence Fees (if the actual
amount of the Initial Due Diligence Fees exceeds the deposit and the other amounts previously paid
to Lender by Borrower) or Lender shall promptly refund to Borrower any amounts paid to Lender by
Borrower in excess of the Initial Due Diligence Fees (if the actual amount of the Initial Due
Diligence Fees is less than the deposit and the other amounts previously paid to Lender by
Borrower).

     (b) Additional Due Diligence Fees for Additional Collateral. Borrower shall pay to
Lender additional due diligence fees (the “Additional Collateral Due Diligence Fees”) with
respect to each Additional Mortgaged Property in an amount equal to the actual costs of Lender’s
due diligence for such Additional Mortgaged Properties, including but not limited to third party
reports required by Lender plus a $4,500 fee per Additional Mortgaged Property (inclusive
of a $1,500 fee payable by Lender to Fannie Mae). In connection with any Addition Request,
Borrower shall pay to Lender a deposit toward the Additional Collateral Due Diligence Fees equal to
the product obtained by multiplying (i) $12,500, by (ii) the number of Additional Mortgaged
Properties. The Additional Collateral Due Diligence Fees not covered by the deposit shall be paid
by Borrower on the Closing Date (or if the proposed Additional Mortgaged Property does not become
part of the Collateral Pool, on demand) for the Additional Mortgaged

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Property. Any portion of the Additional Collateral Due Diligence Fee paid to Lender not
actually used by Lender to cover reasonable due diligence expenses shall be promptly refunded to
Borrower.

     Section 10.03. Legal Fees and Expenses.

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

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

     Section 10.04. Failure to Close any Request.

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

ARTICLE 11

EVENTS OF DEFAULT

     Section 11.01. Events of Default.

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

     (a) the occurrence of a default under any Loan Document beyond the cure period, if any, set
forth therein; or

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     (b) the failure by Borrower to pay when due any amount payable by Borrower under any Note, any
Security Instrument, this Agreement or any other Loan Document, including any fees, costs or
expenses;

     (c) the failure by Borrower to perform or observe any covenant set forth in Section
7.09 (Inform Lender of Material Events), Section 7.11 (Alterations to Mortgaged
Properties), Section 7.14 (Transfer of Ownership Interests in Borrower and Guarantor),
Section 7.15 (Transfer of Ownership of Mortgaged Property), Section 7.18 (Ownership
of Mortgaged Properties), Section 7.19 (Change in Property Manager), Section 9.01
(Other Activities), Section 9.02 (Liens), Section 9.03 (Indebtedness), Section
9.06 (Restrictions on Distributions), or Section 9.08 (Ownership of Property); or

     (d) the failure by Borrower to perform or observe any covenant contained in Article 7
or Article 9 (other than those sections specifically referenced in Section 11.01(c)
above) for thirty (30) days after receipt of notice of such failure by Borrower from Lender,
provided that such period shall be extended for up to thirty (30) additional days if Borrower, in
the discretion of Lender, is diligently pursuing a cure of such default within thirty (30) days
after receipt of notice from Lender; or

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

     (f) (i) Any Borrower Party shall (A) commence a voluntary case, whether of such Person or an
Affiliate thereof, under the Federal bankruptcy laws (as now or hereafter in effect), (B) file a
petition as debtor seeking to take advantage of any other laws, domestic or foreign, relating to
bankruptcy, insolvency, reorganization, debt adjustment, winding up or composition or adjustment of
debts, (C) consent to or fail to contest in a timely and appropriate manner any petition filed
against it in an involuntary case under such bankruptcy laws or other laws, (D) apply for or
consent to, or fail to contest in a timely and appropriate manner, the appointment of, or the
taking of possession by, a receiver, custodian, trustee or liquidator of itself or of a substantial
part of its property, domestic or foreign, (E) admit in writing its inability to pay, or generally
not be paying, its debts as they become due, (F) make a general assignment for the benefit of
creditors, (G) assert that any Borrower Party has no liability or obligations under this Agreement
or any other Loan Document to which it is a party; or (H) take any action for the purpose of
effecting any of the foregoing; or (ii) a case or other proceeding shall be commenced against any
Borrower Party in any court of competent jurisdiction seeking (A) relief under the Federal
bankruptcy laws (as now or hereafter in effect) or under any other laws, domestic or foreign,
relating to bankruptcy, insolvency, reorganization, winding upon or composition or adjustment of
debts, or (B) the appointment of a trustee, receiver, custodian, liquidator or the like of any
Borrower Party, whether by such Person or an Affiliate thereof, or of all or a substantial part of
the property, domestic or foreign, of any Borrower Party, whether by such Person or an Affiliate
thereof, and any such case or proceeding shall continue undismissed or unstayed for a period of
sixty (60) consecutive calendar days, or any order granting the relief requested in any

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such case or proceeding against any Borrower Party, whether by such Person or an Affiliate
thereof (including an order for relief under such Federal bankruptcy laws) shall be entered; or

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

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

     (i) the failure by Borrower to comply with any requirement of any Governmental Authority
within thirty (30) days after written notice of such requirement shall have been given to Borrower
by such Governmental Authority; provided that, if action is commenced and diligently pursued by
Borrower within such thirty (30) days, then Borrower shall have an additional ninety (90) days to
comply with such requirement; or

     (j) a dissolution or liquidation for any reason (whether voluntary or involuntary) of any
Borrower Party; or

     (k) any judgment against Borrower or Guarantor, any attachment or other levy against any
portion of Borrower’s or Guarantor’s assets with respect to a claim or claims in an amount in
excess of $300,000 individually and/or $550,000 in the aggregate remains unpaid, unstayed on appeal
undischarged, unbonded, not fully insured or undismissed for a period of ninety (90) days; or

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

     (m) the failure by Borrower or Guarantor to perform or observe any material term, covenant,
condition or agreement hereunder, other than as contained in subsections (a) through (o)
above, or in any other Loan Document, within thirty (30) days after receipt of notice from Lender
identifying such failure, provided such period shall be extended for up to thirty (30)

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additional days if Borrower, in the discretion of Lender, is diligently pursuing a cure of
such default within thirty (30) days after receipt of notice from Lender.

ARTICLE 12

REMEDIES

     Section 12.01. Remedies; Waivers.

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

     (a) Lender may, at its sole option, cease making Future Advances and Supplemental Loans,
permitting Substitutions under this Agreement, permitting Conversions or closing any Requests
and/or not permitting any new Requests under this Agreement.

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

     (c) Lender may accelerate any Note without the obligation, but the right to accelerate any
other Note and that in the exercise of its rights and remedies under the Loan Documents, Lender
may, except as provided in this Agreement, exercise and perfect any and all of its rights in and
under the Loan Documents with regard to any Mortgaged Property without the obligation (but with the
right) to exercise and perfect its rights and remedies with respect to any other Mortgaged Property
and that any such exercise shall be without regard to the Allocable Facility Amount assigned to
such Mortgaged Property and that Lender may recover an amount equal to the full amount Outstanding
in respect of any of the Notes in connection with such exercise and any such amount shall be
applied to the Obligations as determined by Lender in its sole and absolute discretion.

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

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

     Section 12.02. Waivers; Rescission of Declaration.

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

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event or occurrence which occurs subsequent to the date of such waiver. This provision shall
not be construed to permit the waiver of any condition to a Request otherwise provided for herein.

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

     If Borrower or Guarantor fails to perform the covenants and agreements contained in this
Agreement or any of the other Loan Documents, then Lender at Lender’s option may make such
appearances, disburse such sums and take such action as Lender deems necessary, in its sole
discretion, to protect Lender’s interest, including (a) disbursement of reasonable attorneys’ fees,
(b) entry upon the Mortgaged Property to make repairs and replacements, (c) procurement of
satisfactory insurance as provided in Section 5 of the Security Instrument encumbering the
Mortgaged Property, and (d) if the Security Instrument is on a leasehold, exercise of any option to
renew or extend the ground lease on behalf of Borrower and the curing of any default of Borrower in
the terms and conditions of the ground lease. Any amounts disbursed by Lender pursuant to this
Section 12.03, with interest thereon, shall become additional Indebtedness of Borrower
secured by the Loan Documents. Unless Borrower and Lender agree to other terms of payment, such
amounts shall be immediately due and payable and shall bear interest from the date of disbursement
at the weighted average, as determined by Lender, of the interest rates in effect from time to time
for each Advance unless collection from Borrower of interest at such rate would be contrary to
Applicable Law, in which event such amounts shall bear interest at the highest rate which may be
collected from Borrower under Applicable Law. Nothing contained in this Section 12.03
shall require Lender to incur any expense or take any action hereunder.

     Section 12.04. No Remedy Exclusive.

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

     Section 12.05. No Waiver.

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

     Section 12.06. No Notice.

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

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ARTICLE 13

INSURANCE, REAL ESTATE TAXES AND REPLACEMENT RESERVES

     Section 13.01. Insurance and Real Estate Taxes.

     Borrower shall (unless waived by Lender in the Security Instrument) establish funds for Taxes,
insurance premiums and certain other charges for each Mortgaged Property in accordance with Section
7(a) of the Security Instrument for each Mortgaged Property.

     Section 13.02. Replacement Reserves.

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

ARTICLE 14

LIMITS ON PERSONAL LIABILITY

     Section 14.01. Personal Liability to Borrower.

     (a) Limits on Personal Liability. Except as otherwise provided in this Section 14.01,
Borrower and Guarantor shall have no personal liability under the Loan Documents for the repayment
of any Indebtedness or for the performance of any other Obligations of Borrower under the Loan
Documents, and Lender’s only recourse for the satisfaction of the Indebtedness and the performance
of such Obligations shall be Lender’s exercise of its rights and remedies with respect to the
Mortgaged Properties and any other Collateral held by Lender as security for the Indebtedness.

     (b) Exceptions to Limits on Personal Liability. Borrower and Guarantor shall be
personally liable to Lender for the repayment of a portion of the Advances and other amounts due
under the Loan Documents equal to any loss or damage suffered by Lender as a result of (i) failure
of Borrower to pay to Lender upon demand after an Event of Default all Rents to which Lender is
entitled under Section 3(a) of the Security Instrument encumbering the Mortgaged Property and the
amount of all security deposits collected by Borrower from tenants then in residence; (ii) failure
of Borrower to apply all insurance proceeds, condemnation proceeds or security deposits from
tenants as required by the Security Instrument encumbering the Mortgaged Property; (iii) failure of
such Borrower or Guarantor to comply with its obligations under the Loan Documents with respect to
the delivery of books and records and financial statements; (iv) fraud or written material
misrepresentation by Borrower or Guarantor, or any officer, director, partner, member or employee
of Borrower or Guarantor in connection with the application for or creation of the Obligations or
any request for any action or consent by Lender; or (v) failure to apply Rents (including pre-paid
rents), first, to the payment of reasonable operating expenses and then to amounts (“Debt
Service Amounts”) payable under the Loan Documents (except that Borrower or Guarantor will not
be personally liable (A) to the extent that Borrower or Guarantor lacks the legal right to direct
the disbursement of such sums because of a

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bankruptcy, receivership or similar judicial proceeding, or (B) with respect to Rents of a
Mortgaged Property that are distributed in any Calendar Quarter if Borrower has paid all operating
expenses and Debt Service Amounts for that Calendar Quarter).

     (c) Full Recourse. Borrower and Guarantor shall be personally liable to Lender for
the payment and performance of all Obligations upon the occurrence of any of the following: (i)
Borrower acquisition of any property or operation of any business not permitted by the Single
Purpose requirements in the Loan Documents; or (ii) a Transfer that is an Event of Default under
any Loan Documents; or (iii) Borrower’s failure to honor any and all indemnification obligations
contained in Section 18 (environmental) of any Security Instrument; or (iv) any of the items
identified in Section 11.01(f)(i)(A) through (H), inclusive.

     (d) Miscellaneous. To the extent that Borrower or Guarantor has personal liability
under this Section 14.01, or Guarantor has liability under the Guaranty, such liability
shall be joint and several and Lender may exercise its rights against Borrower or Guarantor
personally without regard to whether Lender has exercised any rights against the Mortgaged Property
or any other security, or pursued any rights against any guarantor, or pursued any other rights
available to Lender under the Loan Documents or Applicable Law. For purposes of this Article
14, the term “Mortgaged Property” shall not include any funds that (i) have been
applied by Borrower as required or permitted by the Loan Documents prior to the occurrence of an
Event of Default, or (ii) are owned by Borrower or Guarantor and which Borrower was unable to apply
as required or permitted by the Loan Documents because of a bankruptcy, receivership, or similar
judicial proceeding.

     (e) Permitted Transfer Not Release. No Transfer by any Person of its Ownership
Interests in Borrower shall release Borrower or Guarantor from liability under this Article, this
Agreement or any other Loan Document, unless Lender shall have approved the Transfer and shall have
expressly released Borrower or Guarantor in connection with the Transfer.

     Section 14.02. Additional Borrowers.

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

     (a) such new Borrower complies with the definition of “Additional Borrower;” and

     (b) the Additional Borrower is a Single-Purpose entity, unless otherwise approved by Lender,
and is directly or indirectly wholly owned by Guarantor.

     In addition, on the Closing Date of the Addition of an Additional Mortgaged Property, the
owner of such Additional Mortgaged Property, if such owner is an Additional Borrower, shall become
a party to a contribution agreement in a manner satisfactory to Lender, shall deliver a Certificate
of Borrower in form and substance satisfactory to Lender, and execute and deliver, along with the
other Borrowers, Variable Facility Notes and/or Fixed Facility Notes. Any Additional Borrower of
an Additional Mortgaged Property which becomes added to the Collateral Pool shall be a Borrower for
purposes of this Agreement and shall execute and deliver

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to Lender an amendment adding such Additional Borrower as a party to this Agreement and
revising the Exhibits hereto, as applicable, to reflect the Additional Mortgaged Property and
Additional Borrower, in each case satisfactory to Lender.

     Upon the release of a Mortgaged Property, in the event that the Borrower which owns such
Release Mortgaged Property owns no other Mortgaged Property in the Collateral Pool, such Borrower
shall automatically without further action be released from its obligations under this Agreement
and the other Loan Documents except for (i) any liabilities or obligations of such Borrower which
arose prior to the Closing Date of such release and (ii) any Obligations that survive release as
specifically set forth in Section 18 (Environmental Hazards) of the Security Instrument.

     Section 14.03. Borrower Agency Provisions.

     (a) Each Borrower and Additional Borrower hereby irrevocably designates CMF 7 Portfolio LLC as
the borrower agent (the “Borrower Agent”) to be its agent and in such capacity to receive
on behalf of Borrower all proceeds, receive all notices on behalf of Borrower under this Agreement,
make all requests under this Agreement, and execute, deliver and receive all instruments,
certificates, requests, documents, amendments, writings and further assurances now or hereafter
required hereunder, on behalf of such Borrower, and hereby authorizes Lender to pay over all loan
proceeds hereunder in accordance with the direction of Borrower Agent. Each Borrower hereby
acknowledges that all notices required to be delivered by Lender to any Borrower shall be delivered
to Borrower Agent and thereby shall be deemed to have been received by such Borrower.

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

     Section 14.04. Waivers With Respect to Other Borrower Secured Obligation (for Mortgaged
Properties located in California).

     To the extent that a Security Instrument or any other Loan Document executed by one Borrower
secures an Obligation of another Borrower (the “Other Borrower Secured Obligation”), and/or
to the extent that a Borrower has guaranteed the debt of another Borrower pursuant to Article
14, Borrower who executed such Loan Document and/or guaranteed such debt (the “Waiving
Borrower”) hereby agrees, to the extent permitted by law, to the provisions of this Section
14.04. To the extent that any Mortgaged Properties are located in California, and to the
extent permitted by law, the references to the California Code below shall apply to this

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Agreement and any California Security Instrument securing a California Mortgaged Property,
otherwise the California Code shall have no effect on this Agreement or any other Loan Document.

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

     (b) The Waiving Borrower hereby waives any defense it may now or hereafter have that relates
to: (i) any disability or other defense of the other Borrower or any other person; (ii) the
cessation, from any cause other than full performance, of the Other Borrower Secured Obligation;
(iii) the application of the proceeds of the Other Borrower Secured Obligation, by the other
Borrower or any other person, for purposes other than the purposes represented to the Waiving
Borrower by the other Borrower or otherwise intended or understood by the Waiving Borrower or the
other Borrower; (iv) any act or omission by Lender which directly or indirectly results in or
contributes to the release of the other Borrower or any other person or any collateral for any
Other Borrower Secured Obligation; (v) the unenforceability or invalidity of any Security Document
or Loan Document (other than the Security Instrument executed by the Waiving Borrower that secures
the Other Borrower Secured Obligation) or guaranty with respect to any Other Borrower Secured
Obligation, or the lack of perfection or continuing perfection or lack of priority of any Lien
(other than the Lien of such Security Instrument) which secures any Other Borrower Secured
Obligation; (vi) any failure of Lender to marshal assets in favor of the Waiving Borrower or any
other person; (vii) any modification of any Other Borrower Secured Obligation, including any
renewal, extension, acceleration or increase in interest rate; (viii) any and all rights and
defenses arising out of an election of remedies by Lender, even though that election of remedies,
such as a nonjudicial foreclosure with respect to security for a guaranteed obligation, has
destroyed the Waiving Borrower’s rights of subrogation and reimbursement against the principal by
the operation of Section 580d of the California Code of Civil Procedure or otherwise; (ix) any law
which provides that the obligation of a surety or guarantor must neither be larger in amount nor in
other respects more burdensome than that of the principal or which reduces a surety’s or
guarantor’s obligation in proportion to the principal obligation; (x) any failure of Lender to file
or enforce a claim in any bankruptcy or other proceeding with respect to any person; (xi) the
election by Lender, in any bankruptcy proceeding of any person, of the application or
non-application of Section 1111(b)(2) of the Bankruptcy Code; (xii) any

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extension of credit or the grant of any lien under Section 364 of the Bankruptcy Code; (xiii)
any use of cash collateral under Section 363 of the Bankruptcy Code; or (xiv) any agreement or
stipulation with respect to the provision of adequate protection in any bankruptcy proceeding of
any person. The Waiving Borrower further waives any and all rights and defenses that it may have
because the Other Borrower Secured Obligation is secured by real property; this means, among other
things, that: (A) Lender may collect from the Waiving Borrower without first foreclosing on any
real or personal property collateral pledged by the other Borrower; (B) if Lender forecloses on any
real property collateral pledged by the other Borrower, then (C) the amount of the Other Borrower
Secured Obligation may be reduced only by the price for which that collateral is sold at the
foreclosure sale, even if the collateral is worth more than the sale price; and (D) Lender may
foreclose on the real property encumbered by the Security Instrument executed by the Waiving
Borrower and securing the Other Borrower Secured Obligation even if Lender, by foreclosing on the
real property collateral of the Other Borrower, has destroyed any right the Waiving Borrower may
have to collect from the Other Borrower. Subject to the last sentence of Section 14.03,
the foregoing sentence is an unconditional and irrevocable waiver of any rights and defenses the
Waiving Borrower may have because the Other Borrower Secured Obligation is secured by real
property. These rights and defenses being waived by the Waiving Borrower include, but are not
limited to, any rights or defenses based upon Section 580a, 580b, 580d or 726 of the California
Code of Civil Procedure. Without limiting the generality of the foregoing or any other provision
hereof, the Waiving Borrower further expressly waives, except as provided in Section
14.04(g) below, to the extent permitted by law any and all rights and defenses, which might
otherwise be available to it under California Civil Code Sections 2787 to 2855, inclusive, 2899 and
3433, or under California Code of Civil Procedure Sections 580a, 580b, 580d and 726, or any of such
sections.

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

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proceed against the other Borrower, (ii) proceed against any general partner or managing
member of the other Borrower, (iii) proceed against or exhaust any collateral held by Lender to
secure the Other Borrower Secured Obligation, or (iv) if the other Borrower is a partnership,
pursue any other remedy it may have against the other Borrower, or any general partner of the other
Borrower, including any and all benefits under California Civil Code Sections 2845, 2849 and 2850.

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

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

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

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

     (h) Each Borrower hereby irrevocably and unconditionally agrees that in the event that,
notwithstanding Section 14.04(g) hereof, to the extent its agreement and waiver set forth
in

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Section 14.04(g) is found by a court of competent jurisdiction to be void or voidable
for any reason and such Borrower has any subrogation or other rights against any other Borrower,
any such claims, direct or indirect, that such Borrower may have by subrogation rights or other
form of reimbursement, contribution or indemnity, against any other Borrower or to any security or
any such Borrower, shall be and such rights, claims and indebtedness are hereby deferred, postponed
and fully subordinated in time and right of payment to the prior payment, performance and
satisfaction in full of the Obligations. Until payment and performance in full with interest
(including post-petition interest in any case under any chapter of the Bankruptcy Code) of the
Obligations, each Borrower agrees not to accept any payment or satisfaction of any kind on
Indebtedness of any other Borrower in respect of any such subrogation rights arising by virtue of
payments made pursuant to this Article 14, and hereby assigns such rights or indebtedness
to Lender, including the right to file proofs of claim and to vote thereon in connection with any
case under any chapter of the Bankruptcy Code, including the right to vote on any plan of
reorganization. In the event that any payment on account of any such subrogation rights shall be
received by any Borrower in violation of the foregoing, such payment shall be held in trust for the
benefit of Lender, and any amount so collected should be turned over to Lender for application to
the Obligations.

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

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

     Section 14.05. Joint and Several Obligation; Cross-Guaranty.

     Notwithstanding anything contained in this Agreement or the other Loan Documents to the
contrary (but subject to the last sentence of this Section 14.05 and the provisions of
Section 14.01 and Section 14.12), each Borrower shall have joint and several
liability for all Obligations. Notwithstanding the intent of all of the parties to this Agreement
that all Obligations of each Borrower under this Agreement and the other Loan Documents shall be
joint and several

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

     Section 14.06. No Impairment.

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

     Section 14.07. Election of Remedies.

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

          (b) If, in the exercise of any of its rights and remedies, Lender shall forfeit any of its
rights or remedies, including its rights to enter a deficiency judgment against any Borrower or any
other Person, whether because of any Applicable Laws pertaining to “election of remedies” or the
like, each Borrower hereby consents to such action by Lender and waives any claim based upon such
action, even if such action by Lender shall result in a full or partial loss or any rights of
subrogation which each Borrower might otherwise have had but for such action by Lender. Any
election of remedies which results in the denial or impairment of the right of Lender to seek a
deficiency judgment against any Borrower shall not impair any other Borrower’s obligation to pay
the full amount of the Obligations. In the event Lender shall bid at any foreclosure or trustee’s
sale or at any private sale permitted by law or any of the Loan Documents, Lender may bid all or
less than the amount of the Obligations and the amount of

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such bid need not be paid by Lender but shall be credited against the Obligations. The amount
of the successful bid at any such sale, whether Lender or any other party is the successful bidder,
shall be conclusively deemed to be fair market value of the Collateral and the difference between
such bid amount and the remaining balance of the Obligations shall be conclusively deemed to be
amount of the Obligations guaranteed under this Article 14, notwithstanding that any
present or future law or court decision or ruling may have the effect of reducing the amount of any
deficiency claim to which Lender might otherwise be entitled but for such bidding at any such sale.

     Section 14.08. Subordination of Other Obligations. 

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

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

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     Section 14.09. Insolvency and Liability of Other Borrower. 

     So long as any of the Obligations are Outstanding, if a petition under any chapter of the
Bankruptcy Code is filed by or against any Borrower (the “Subject Borrower” for the
purposes of Section 14.09, Section 14.10, Section 14.11 and Section
14.12 of this Agreement), each other Borrower (each, an “Other Borrower” for the
purposes of Section 14.09, Section 14.10, Section 14.11 and Section
14.12 of this Agreement) agrees to file all claims against the Subject Borrower in any
bankruptcy or other proceeding in which the filing of claims is required by law in connection with
indebtedness owed by the Subject Borrower and to assign to Lender all rights thereunder up to the
amount of such indebtedness. In all such cases, the Person or Persons authorized to pay such
claims shall pay to Lender the full amount thereof and Lender agrees to pay such Other Borrower any
amounts received in excess of the amount necessary to pay the Obligations. Each Other Borrower
hereby assigns to Lender all of such Borrower’s rights to all such payments to which such Other
Borrower would otherwise be entitled but not to exceed the full amount of the Obligations. In the
event that, notwithstanding the foregoing, any such payment shall be received by any Other Borrower
before the Obligations shall have been finally paid in full, such payment shall be held in trust
for the benefit of and shall be paid over to Lender upon demand. Furthermore, notwithstanding the
foregoing, the liability of each Borrower hereunder shall in no way be affected by:

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

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

     Section 14.10. Preferences, Fraudulent Conveyances, Etc. 

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

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claim that a payment received by Lender in respect of all or any part of the Obligations must
be refunded. The provisions of this Section 14.10 shall survive the termination of Loan
Documents and any satisfaction and discharge of any Borrower by virtue of any payment, court order
or any federal or state law.

     Section 14.11. Maximum Liability of Each Borrower.

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

     Section 14.12. Liability Cumulative; References to California Law.

     The liability of each Borrower under this Article 14 is in addition to and shall be
cumulative with all liabilities of such Borrower to Lender under this Agreement and all the other
Loan Documents to which such Borrower is a party or in respect of any Obligations of any Other
Borrower. All references in Article 14 to California law are only applicable if any
Mortgaged Property is located in California.

ARTICLE 15

MISCELLANEOUS PROVISIONS

     Section 15.01. Counterparts.

     To facilitate execution, this Agreement may be executed in any number of counterparts. It
shall not be necessary that the signatures of, or on behalf of, each party, or that the signatures
of all persons required to bind any party, appear on each counterpart, but it shall be sufficient
that the signature of, or on behalf of, each party, appear on one or more counterparts. All
counterparts shall collectively constitute a single agreement. It shall not be necessary in making

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proof of this Agreement to produce or account for more than the number of counterparts
containing the respective signatures of, or on behalf of, all of the parties hereto.

     Section 15.02. Amendments, Changes and Modifications.

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

     Section 15.03. Payment of Costs, Fees and Expenses.

     In addition to the payments required by Article 10 of this Agreement, Borrower shall
pay, on demand, all reasonable third party out-of-pocket fees, costs, charges or expenses
(including the reasonable fees and expenses of attorneys, accountants and other experts) incurred
by Lender in connection with:

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

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

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

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

Borrower shall also pay, on demand, any transfer taxes, documentary taxes, assessments or charges
made by any Governmental Authority by reason of the execution, delivery, filing, recordation,
performance or enforcement of any of the Loan Documents or the Advances. However, Borrower will
not be obligated to pay any franchise, excise, estate, inheritance, income, excess profits or
similar tax on Lender. Any attorneys’ fees and expenses payable by Borrower pursuant to this
Section 15.03 shall be recoverable separately from and in addition to any other amount
included in such judgment, and such obligation is intended to be severable from the other
provisions of this Agreement and to survive and not be merged into any such judgment. Any amounts
payable by Borrower pursuant to this Section 15.03, with interest thereon if not paid when
due, shall become additional Indebtedness of Borrower secured by the Loan Documents. Such amounts
shall bear interest from the date such amounts are due until paid in full at the weighted average,
as determined by Lender, of the interest rates in effect from time to time for each Advance unless
collection from Borrower of interest at such rate would be contrary to Applicable Law, in which
event such amounts shall bear interest at the highest rate which may be collected from Borrower
under Applicable Law. The provisions of this Section 15.03 are cumulative with, and do not
exclude the application and benefit to Lender of, any

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provision of any other Loan Document relating to any of the matters covered by this Section
15.03.

     Section 15.04. Payment Procedure.

     All payments to be made to Lender pursuant to this Agreement or any of the Loan Documents
shall be made in lawful currency of the United States of America and in immediately available funds
by wire transfer to an account designated by Lender before 2:00 p.m. (Eastern Standard Time or
Eastern Daylight Savings Time, as applicable) on the date when due.

     Section 15.05. Payments on Business Days.

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

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

     NOTWITHSTANDING ANYTHING IN THE NOTES, THE SECURITY DOCUMENTS OR ANY OF THE OTHER LOAN
DOCUMENTS TO THE CONTRARY, EACH OF THE TERMS AND PROVISIONS, AND RIGHTS AND OBLIGATIONS OF BORROWER
UNDER THIS AGREEMENT AND THE NOTES, GUARANTOR UNDER THE GUARANTY, AND BORROWER, GUARANTOR AND
LENDER UNDER THE OTHER LOAN DOCUMENTS, SHALL BE GOVERNED BY, INTERPRETED, CONSTRUED AND ENFORCED
PURSUANT TO AND IN ACCORDANCE WITH THE LAWS OF THE DISTRICT OF COLUMBIA (EXCLUDING THE LAW
APPLICABLE TO CONFLICTS OR CHOICE OF LAW) EXCEPT TO THE EXTENT OF PROCEDURAL AND SUBSTANTIVE
MATTERS RELATING ONLY TO (a) THE CREATION, PERFECTION AND FORECLOSURE OF LIENS AND SECURITY
INTERESTS, AND ENFORCEMENT OF THE RIGHTS AND REMEDIES, AGAINST THE MORTGAGED PROPERTIES, WHICH
MATTERS SHALL BE GOVERNED BY THE LAWS OF THE JURISDICTION IN WHICH THE MORTGAGED PROPERTY IS
LOCATED, (b) THE PERFECTION, THE EFFECT OF PERFECTION AND NON-PERFECTION AND FORECLOSURE OF
SECURITY INTERESTS ON PERSONAL PROPERTY (OTHER THAN DEPOSIT ACCOUNTS), WHICH MATTERS SHALL BE
GOVERNED BY THE LAWS OF THE JURISDICTION DETERMINED BY THE CHOICE OF LAW PROVISIONS OF THE UNIFORM
COMMERCIAL CODE IN EFFECT FOR THE JURISDICTION IN WHICH THE MORTGAGED PROPERTY IS LOCATED AND (c)
THE PERFECTION, THE EFFECT OF PERFECTION AND NON-PERFECTION AND FORECLOSURE OF DEPOSIT ACCOUNTS,
WHICH MATTERS SHALL BE GOVERNED BY THE LAWS OF THE JURISDICTION IN WHICH THE DEPOSIT ACCOUNT IS
LOCATED. BORROWER, GUARANTOR AND LENDER AGREE THAT ANY CONTROVERSY ARISING UNDER OR IN RELATION TO
THE NOTES, THE SECURITY DOCUMENTS (OTHER THAN THE SECURITY

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INSTRUMENTS) OR ANY OTHER LOAN DOCUMENT SHALL BE, EXCEPT AS OTHERWISE PROVIDED HEREIN,
LITIGATED IN DISTRICT OF COLUMBIA. THE LOCAL AND FEDERAL COURTS AND AUTHORITIES WITH JURISDICTION
IN DISTRICT OF COLUMBIA SHALL, EXCEPT AS OTHERWISE PROVIDED HEREIN, HAVE JURISDICTION OVER ALL
CONTROVERSIES WHICH MAY ARISE UNDER OR IN RELATION TO THE LOAN DOCUMENTS, INCLUDING THOSE
CONTROVERSIES RELATING TO THE EXECUTION, JURISDICTION, BREACH, ENFORCEMENT OR COMPLIANCE WITH THE
NOTES, THE SECURITY DOCUMENTS (OTHER THAN THE SECURITY INSTRUMENTS) OR ANY OTHER ISSUE ARISING
UNDER, RELATING TO, OR IN CONNECTION WITH ANY OF THE LOAN DOCUMENTS. BORROWER, GUARANTOR AND
LENDER IRREVOCABLY CONSENT TO SERVICE, JURISDICTION, AND VENUE OF SUCH COURTS FOR ANY LITIGATION
ARISING FROM THE NOTES, THE SECURITY DOCUMENTS OR ANY OF THE OTHER LOAN DOCUMENTS, AND WAIVES ANY
OTHER VENUE TO WHICH IT MIGHT BE ENTITLED BY VIRTUE OF DOMICILE, HABITUAL RESIDENCE OR OTHERWISE.
NOTHING CONTAINED HEREIN, HOWEVER, SHALL PREVENT LENDER FROM BRINGING ANY SUIT, ACTION OR
PROCEEDING OR EXERCISING ANY RIGHTS AGAINST BORROWER AND GUARANTOR AND AGAINST THE COLLATERAL IN
ANY OTHER JURISDICTION. INITIATING SUCH SUIT, ACTION OR PROCEEDING OR TAKING SUCH ACTION IN ANY
OTHER JURISDICTION SHALL IN NO EVENT CONSTITUTE A WAIVER OF THE AGREEMENT CONTAINED HEREIN THAT THE
LAWS OF DISTRICT OF COLUMBIA SHALL GOVERN THE RIGHTS AND OBLIGATIONS OF BORROWER AND GUARANTOR AND
LENDER AS PROVIDED HEREIN OR THE SUBMISSION HEREIN BY BORROWER AND GUARANTOR TO PERSONAL
JURISDICTION WITHIN DISTRICT OF COLUMBIA. BORROWER AND GUARANTOR (i) COVENANT AND AGREE NOT TO
ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING UNDER ANY OF THE LOAN DOCUMENTS TRIABLE BY
A JURY AND (ii) WAIVE ANY RIGHT TO TRIAL BY JURY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR
HEREAFTER EXIST. THIS WAIVER IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS
TO WHICH THE RIGHT TO A JURY TRIAL WOULD OTHERWISE ACCRUE. FURTHER, BORROWER AND GUARANTOR HEREBY
CERTIFY THAT NO REPRESENTATIVE OR AGENT OF LENDER (INCLUDING, BUT NOT LIMITED TO, LENDER’S COUNSEL)
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO BORROWER AND GUARANTOR THAT LENDER WILL NOT SEEK TO
ENFORCE THE PROVISIONS OF THIS SECTION 15.06. THE FOREGOING PROVISIONS WERE KNOWINGLY,
WILLINGLY AND VOLUNTARILY AGREED TO BY BORROWER AND GUARANTOR UPON CONSULTATION WITH INDEPENDENT
LEGAL COUNSEL SELECTED BY BORROWER’S AND GUARANTOR’S FREE WILL.

     Section 15.07. Severability.

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

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     Section 15.08. Notices.

     (a) Manner of Giving Notice. Each notice, direction, certificate or other
communication hereunder (in this Section 15.08 referred to collectively as “notices” and
singularly as a “notice”) which any party is required or permitted to give to the other party
pursuant to this Agreement shall be in writing and shall be deemed to have been duly and
sufficiently given if:

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

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

          (iii) sent by telecopier or facsimile machine which automatically generates a transmission
report that states the date and time of the transmission, the length of the document transmitted,
and the telephone number of the recipient’s telecopier or facsimile machine (to be confirmed with a
copy thereof sent in accordance with paragraphs (i) or (ii) above within two (2) Business Days)
(any notice so delivered shall be deemed to have been received (A) on the date of transmission, if
so transmitted before 5:00 p.m. (local time of the recipient) on a Business Day, or (B) on the next
Business Day, if so transmitted on or after 5:00 p.m. (local time of the recipient) on a Business
Day or if transmitted on a day other than a Business Day), addressed to the parties as follows:

	 	 	 
	As to Borrower:

	 	CMF 7 Portfolio LLC
	 

	 	2101 6th Avenue North, Suite 750
	 

	 	PO Box 11687
	 

	 	Birmingham, Alabama 35202-1687
	 

	 	Attention:     Jerry Brewer, Executive Vice President
	 

	 	Telecopy No.: 205-250-8890
	 
	 	 
	with a copy to:

	 	Leitman, Siegal & Payne
	 

	 	600 North 20th Street
	 

	 	Birmingham, Alabama 35203
	 

	 	Attention:      Brad Siegal, Esq.
	 

	 	Telecopy No.: 205-323-2098
	 
	 	 
	As to Lender:

	 	Grandbridge Real Estate Capital LLC
	 

	 	524 Lorna Square
	 

	 	Birmingham, AL 35216
	 

	 	Attention: Head of Loan Servicing
	 

	 	Telecopy: (205) 978-1280
	 
	 	 
	with a copy to:

	 	Brett N. Blackwood
	 

	 	Senior Vice President and Counsel

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	 	Grandbridge Real Estate Capital LLC
	 

	 	3000 Riverchase Galleria, Suite 1020
	 

	 	Birmingham, AL 35244
	 

	 	Telecopy: (866) 430-8584
	 
	 	 
	As to Guarantor:

	 	Colonial Realty Limited Partnership
	 

	 	2101 6th Avenue North, Suite 750
	 

	 	PO Box 11687
	 

	 	Birmingham, AL 35202-1687
	 

	 	Attention:      Jerry Brewer, Executive Vice President
	 

	 	Telecopy No.: 205-250-8890
	 
	 	 
	with a copy to:

	 	Leitman, Siegal & Payne
	 

	 	600 North 20th Street
	 

	 	Birmingham, AL 35203
	 

	 	Attention:      Brad Siegal, Esq.
	 

	 	Telecopy No.: 205-323-2098
	 
	 	 
	As to Fannie Mae:

	 	Fannie Mae
	 

	 	3900 Wisconsin Avenue, N.W.
	 

	 	Washington, D.C. 20016-2899
	 

	 	Attention: Vice President for Multifamily Asset Management
	 

	 	Telecopy No.: (301) 280-2064
	 
	 	 
	with a copy to:

	 	Venable LLP
	 

	 	575 7th Street, N.W.
	 

	 	Washington, D.C. 20004
	 

	 	Attention:      Stephanie L. DeLong, Esq.
	 

	 	Telecopy No.: (202) 344-8300

     (b) Change of Notice Address. Any party may, by notice given pursuant to this
Section 15.08, change the person or persons and/or address or addresses, or designate an
additional person or persons or an additional address or addresses, for its notices, but notice of
a change of address shall only be effective upon receipt. Each party agrees that it shall not
refuse or reject delivery of any notice given hereunder, that it shall acknowledge, in writing,
receipt of the same upon request by the other party and that any notice rejected or refused by it
shall be deemed for all purposes of this Agreement to have been received by the rejecting party on
the date so refused or rejected, as conclusively established by the records of the U.S. Postal
Service, the courier service or facsimile.

     Section 15.09. Further Assurances and Corrective Instruments.

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

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Lender’s perfected lien status, or effectuate the intention of or facilitate the performance
of this Agreement or any Loan Document.

     (b) Further Documentation. Without limiting the generality of subsection (a),
in the event any further documentation or information is required by Lender to correct patent
mistakes in the Loan Documents, materials relating to the Title Insurance Policies or the funding
of the Advances, Borrower shall provide, or cause to be provided to Lender, at its cost and
expense, such documentation or information. Borrower shall execute and deliver to Lender such
documentation, including any amendments, corrections, deletions or additions to the Notes, the
Security Instruments or the other Loan Documents as is reasonably required by Lender.

     (c) Compliance with Investor Requirements. Without limiting the generality of
subsection (a), Borrower shall do anything necessary to comply with the reasonable
requirements of Lender to enable Lender to sell any MBS backed by an Advance.

     Section 15.10. Term of this Agreement.

     This Agreement shall continue in effect until the Termination Date.

     Section 15.11.  Assignments; Third-Party Rights.

     Borrower shall not assign this Agreement, or delegate any of its obligations hereunder,
without the prior written consent of Lender. Lender may assign its rights and obligations under
this Agreement separately or together, without Borrower’s consent, only to Fannie Mae or other
entity if such assignment is made with the intent that such entity will further assign rights and
obligations to Fannie Mae, but may not delegate its obligations under this Agreement unless it
first receives Fannie Mae’s written approval. Upon assignment to Fannie Mae, Fannie Mae shall be
permitted to further assign its rights and obligations under this Agreement.

     Section 15.12. Headings.

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

     Section 15.13. General Interpretive Principles.

     For purposes of this Agreement, except as otherwise expressly provided or unless the context
otherwise requires, (i) the terms defined in Appendix I and elsewhere in this Agreement have the
meanings assigned to them in this Agreement and include the plural as well as the singular, and the
use of any gender herein shall be deemed to include the other genders; (ii) accounting terms not
otherwise defined herein have the meanings assigned to them in accordance with GAAP; (iii)
references herein to “Articles,” “Sections,” “subsections,” “paragraphs” and other subdivisions
without reference to a document are to designated Articles, Sections, subsections, paragraphs and
other subdivisions of this Agreement; (iv) a reference to a subsection without further reference to
a Section is a reference to such subsection as contained in the same Section in which the reference
appears, and this rule shall also apply to paragraphs and

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other subdivisions; (v) a reference to an Exhibit or a Schedule without a further reference to
the document to which the Exhibit or Schedule is attached is a reference to an Exhibit or Schedule
to this Agreement; (vi) the words “herein,” “hereof,” “hereunder” and other words of similar import
refer to this Agreement as a whole and not to any particular provision; and (vii) the word
“including” means “including, but not limited to.”

     Section 15.14. Interpretation.

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

     Section 15.15. Standards for Decisions, Etc. 

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

     Section 15.16. Decisions in Writing.

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

     Section 15.17. Approval of Waivers.

     Unless otherwise agreed by Lender, any modifications set forth in this Agreement and the other
Loan Documents which are modifications to or waivers from the terms and conditions applicable to
similar loans made by Lender and sold to Fannie Mae shall remain in effect with respect to a
Mortgaged Property or an Advance only for so long as such Mortgaged Property and Advance are
subject to this Agreement and such Borrower is controlled by Guarantor and is a party to this
Agreement.

     Section 15.18. USA Patriot Act.

     Lender hereby notifies each Borrower that pursuant to the requirements of the USA Patriot Act
(Title III of Pub. L. 107-56 (signed into law October 26, 2001)), it is required to obtain, verify
and record information that identifies each Borrower, which information includes the name and
address of each Borrower and other information that will allow such Lender to identify each
Borrower in accordance with such Act.

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     Section 15.19. All Asset Filings.

     If Lender believes that an “all-asset” collateral description, as contemplated by Section
9-504(2) of the UCC, is appropriate as to any Collateral under any Loan Document, Lender is
irrevocably authorized to use such a collateral description, whether in one or more separate
filings or as part of the collateral description in a filing that particularly describes the
Collateral.

     Section 15.20. Recitals.

     The Recitals set forth in this Agreement are incorporated herein as if fully set forth in the
body of the Agreement.

[Remainder of page intentionally left blank.]

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

	 	 	 	 	 	 	 	 	 	 	 
	 	 	BORROWER:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	CMF 7 PORTFOLIO LLC, a Delaware limited liability

company	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	By:	 	Colonial Realty Limited Partnership, a Delaware

limited partnership	 	 
	 	 	Its:	 	Sole Member	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	By:	 	Colonial Properties Trust, an Alabama

real estate investment trust	 	 
	 	 	 	 	Its:	 	General Partner	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	/s/ Jerry Brewer	 	 
	 

	 	 	 	 	 	Name:
	 	 

Jerry Brewer
	 	 
	 

	 	 	 	 	 	Title:
	 	Executive Vice President	 	 

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	 	 	GUARANTOR:	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	COLONIAL REALTY LIMITED PARTNERSHIP, a Delaware

limited partnership	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	Colonial Properties Trust, an Alabama real

estate investment trust	 	 
	 	 	Its:	 	General Partner	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:
	 	/s/ Jerry Brewer	 	 
	 

	 	 	 	Name:
	 	 

Jerry Brewer
	 	 
	 

	 	 	 	Title:
	 	Executive Vice President	 	 

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	 	 	LENDER:	 	 
	 
	 	 	 	 	 	 
	 	 	GRANDBRIDGE REAL ESTATE CAPITAL LLC, a North 

Carolina limited liability company
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Brett N. Blackwood	 	 
	 

	 	Name:
	 	 

Brett N. Blackwood
	 	 
	 

	 	Title:
	 	Senior Vice President	 	 

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APPENDIX I

DEFINITIONS

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

     “Addition” shall have the meaning set forth in Section 3.02.

     “Addition Fee” means, with respect to a Multifamily Residential Property added to the
Collateral Pool in accordance with Article 3, the product of

     (a) 55 basis points (0.55%), multiplied by

     (b) the Allocable Facility Amount of the Mortgaged Property, as determined by Lender.

     “Addition Loan Documents” means the Security Instrument covering an Additional
Mortgaged Property and any other documents, instruments or certificates reasonably required by
Lender in form and substance satisfactory to Lender and Borrower connection with the Addition of
the Additional Mortgaged Property to the Collateral Pool pursuant to Article 3.

     “Addition Request” means a written request, substantially in the form of Exhibit
L to the Agreement, to add Additional Mortgaged Properties to the Collateral Pool as set forth
in Section 3.02(a).

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

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

     “Additional Mortgaged Property” means each Multifamily Residential Property owned by
any Borrower or Additional Borrower (either in fee simple or as tenant under a ground lease meeting
all of Lender’s requirements for similar loans anticipated to be sold to Fannie Mae) and added to
the Collateral Pool after the Initial Closing Date pursuant to Article 3.

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

     “Adjustable Rate” has the meaning set forth in each Variable Facility Note evidencing
a SARM Variable Advance.

     “Advance” means a Variable Advance or a Fixed Advance.

     “Advance Amount” means the lesser of (a) the amount that would result in an Aggregate
Loan to Value Ratio of not more than sixty-five percent (65%), or (b) the amount that would result
in (x) an Aggregate Debt Service Coverage Ratio of not less than 1.35:1.0 for the portion

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of the Advance drawn from the Fixed Facility Commitment and (y) an Aggregate Debt Service
Coverage Ratio of not less than 1.10:1.0 for the portion of the Advance drawn from the Variable
Facility Commitment, provided that such amount shall not exceed one hundred three percent (103%).

     “Advance Request” means a written request, substantially in the form of Exhibit
K to the Agreement, for an Advance made pursuant to Section 2.03.

     “Affiliate” or “Affiliated” means, when used with reference to a specified
Person, (a) any Person that, directly or indirectly, through one or more intermediaries, controls
or is controlled by, or is under common control with, the specified Person, (b) any Person that is
an officer of, partner in or trustee of, or serves in a similar capacity with respect to, the
specified Person or of which the specified Person is an officer, partner or trustee, or with
respect to which the specified Person serves in a similar capacity, (c) any Person that, directly
or indirectly, is the beneficial owner of ten percent (10%) or more of any class of equity
securities of, or otherwise has a substantial beneficial interest in, the specified Person or of
which the specified Person is, directly or indirectly, the owner of ten percent (10%) or more of
any class of equity securities or in which the specified Person has a substantial beneficial
interest, and (d) for the specified Person, any of the individual’s spouse, issue, parents,
siblings and a trust for the benefit of the individual’s spouse or issue, or both. For the
purposes of this definition, “control” (including with correlative meanings, the terms
“controlling,” “controlled by” and “under common control with”), as applied to any Person, means
the possession, directly or indirectly, of the power to direct or cause the direction of the
management (other than property management) and policies of that Person, whether through the
ownership of voting securities, ownership interests or by contract or otherwise.

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

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

to

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

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

	 	(a)	 	the amount of Advances Outstanding plus any Supplemental Loan Outstanding on
the specified date,

to

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

     “Agreement” means the Master Credit Facility Agreement, as it may be amended,
restated, supplemented or otherwise modified from time to time, including all Recitals,

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Appendices and Exhibits to the Agreement, each of which is hereby incorporated into the
Agreement by this reference.

     “Allocable Facility Amount” means the portion of the then Outstanding Advances
allocated to a particular Mortgaged Property by Lender in accordance with the Agreement.

     “Alterations” shall have the meaning set forth in Section 7.11.

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

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

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

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

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

     “Borrower” means, individually and collectively, (a) CMF 7 Portfolio LLC, a Delaware
limited liability company, and (b) any Additional Borrower becoming a party to this Agreement and
any other Loan Documents.

     “Borrower Agent” shall have the meaning set forth in Section 14.03(a).

     “Borrower Parties” means Borrower and Guarantor.

     “Borrower Party” shall mean any of the Borrower Parties, individually.

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

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     “Calendar Day” means any day in the Calendar Year.

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

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

     “Capitalization Rate” means, for each Mortgaged Property, a capitalization rate
reasonably selected by Lender for use in determining the Valuations, as disclosed to Borrower upon
written request therefor from time to time.

     “Cap Security Agreement” means, with respect to an Interest Rate Cap, the Interest
Rate Cap Security, Pledge and Assignment Agreement between Borrower and Lender, for the benefit of
Lender, in the form attached as Exhibit D to this Agreement as such agreement may be
amended, modified, supplemented or restated from time to time.

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

     “Cash Collateral Agreement” means a cash collateral, security and custody agreement by
and among Fannie Mae, Borrower and a collateral agent for Fannie Mae.

     “Cash Equivalents” means:

	 	(a)	 	securities issued or fully guaranteed or insured by the United States
Government or any agency thereof and backed by the full faith and credit of the United
States having maturities of not more than twelve (12) months from the date of
acquisition (for the purposes of this definition, agency securities shall mean
“Government Securities within the meaning of the Investment Act of 1940 or Section
1.860G-2(a)(8)(1) of the Treasury Regulations);
	 
	 	(b)	 	certificates of deposit, time deposits, demand deposits, Eurodollar time
deposits, repurchase agreements, reverse repurchase agreements, or bankers’
acceptances, having in each case a term of not more than twelve (12) months, issued by
any commercial bank having membership in the FDIC, or by any U.S. commercial lender (or
any branch or agency of a non-U.S. bank licensed to conduct business in the U.S.)
having combined capital and surplus of not less than $100,000,000 whose short-term
securities are rated at least A-1 by S&P or P-1 by Moody’s; and
	 
	 	(c)	 	commercial paper of an issuer rated at least A-1 by S&P or P-1 by Moody’s and
in either case having a term of not more than twelve (12) months.

     “Cash Interest Rate” means, on the date of determination, a rate of interest, per
annum, established by Fannie Mae for loans purchased for cash by Fannie Mae of similar
characteristics then offered by Fannie Mae.

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     “Certificate of Borrower Parties” means the written instrument substantially in the
form of Exhibit J to the Agreement.

     “Change of Control” means, with respect to any individual or entity, the earliest to
occur of the following, as applicable:

	 	(i)	 	if such entity is a general partnership or a joint venture, a
Transfer of any general partnership interest or joint venture interest which
would cause the Initial Owners to own less than fifty-one percent (51%) of all
general partnership or joint venture interests in such entity;
	 
	 	(ii)	 	if such entity is a limited partnership, a Transfer (A) of any
general partnership interest, or (B) in which the General Partner ceases for
any reason to the sole general partner of Guarantor;
	 
	 	(iii)	 	if such entity is a limited liability company or a limited
liability partnership, a Transfer of (A) any managing member’s ownership
interest, or (B) any membership or other ownership interest which would cause
the Initial Owners to own less than fifty-one percent (51%) of all membership
or other ownership interests in such entity;
	 
	 	(iv)	 	if such entity is a corporation (other than a Publicly-Held
Corporation) with only one class of voting stock, a Transfer of any voting
stock which would cause the Initial Owners to own less than fifty-one percent
(51%) of voting stock in such corporation;
	 
	 	(v)	 	if such entity is a corporation (other than a Publicly-Held
Corporation) with more than one class of voting stock, a Transfer of any voting
stock which would cause the Initial Owners to own less than a sufficient number
of shares of voting stock having the power to elect the majority of directors
of such corporation;
	 
	 	(vi)	 	if such entity is a trust, the removal, appointment or
substitution of a trustee of such trust other than (A) in the case of a land
trust, or (B) if the trustee of such trust after such removal, appointment or
substitution is a trustee identified in the trust agreement approved by Lender;
	 
	 	(vii)	 	the date on which Guarantor ceases for any reason to be the
holder, directly or indirectly, of at least one hundred percent (100%) of the
voting interests of any Borrower or to own, directly or indirectly at least one
hundred percent (100%) of the equity, profits or other partnership or member
interest in, or Voting Equity Capital (or any other Securities or ownership
interests) of Borrower;
	 
	 	(viii)	 	the date on which General Partner ceases for any reason to be the holder,
directly or indirectly, of at least one hundred percent (100%) of the voting
interests of Guarantor or to own, directly or indirectly at least one hundred
percent (100%) of the Voting Equity Capital (or any other Securities or

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Appendix-5

 

	 		 	ownership interests) of Guarantor, or ceases for any reason to be the sole
general partner of Guarantor;

	 	(ix)	 	with respect to the General Partner or Guarantor, any merger,
consolidation or acquisition of the General Partner or Guarantor with or by a
Person that is an unrelated third party; provided that if there is a merger,
consolidation or acquisition of a unrelated third party by the General Partner
or Guarantor and (A) following such merger, consolidation or acquisition not
more than one (1) officer holding a Senior Management position of Guarantor or
General Partner shall have been or will be replaced in connection therewith,
and (B) the members of the Board of Directors or other governing body of
Guarantor or General Partner prior to such merger, consolidation or acquisition
shall constitute at least sixty-five percent (65%) of the Board of Directors or
other governing body of Guarantor or General Partner after such merger,
consolidation or acquisition, then such merger, consolidation or acquisition by
the General Partner or Guarantor shall not be deemed a Change of Control;
	 
	 	(x)	 	the date on which a Person or Persons become (by acquisition,
consolidation, merger or otherwise), directly or indirectly, the beneficial
owner of more than, in the aggregate, twenty percent (20%) of the total Voting
Equity Capital (or of any other Securities or ownership interest) of the
General Partner then outstanding; or
	 
	 	(xi)	 	the replacement (other than solely by reason of retirement at
age sixty-five or older, death or disability) of fifty percent (50%) (or such
lesser percentage as is required for decision-making by the board of directors
or an equivalent governing body) of the members of the board of directors (or
an equivalent governing body) of Guarantor or of the General Partner over a
one-year period from the directors who constituted such board of directors at
the beginning of such period (it being understood and agreed that in the case
of any entity governed by a trustee, board of managers, or other similar
governing body, the foregoing clause (c) shall apply thereto by substituting
such governing body and the members thereof for the board of directors and
members thereof, respectively).

     (a) “Initial Owners” means, with respect to Borrower, Guarantor, or any other
entity, the persons or entities who on the date of the Agreement own in the aggregate one
hundred percent (100%) of the Ownership Interests in Borrower, Guarantor or that entity.

     (b) “Publicly-Held Corporation” shall mean a corporation the outstanding voting
stock of which is registered under Section 12(b) or 12(g) of the Securities and Exchange Act
of 1934, as amended.

     “Chief Executive Officer” means the chief executive officer of Guarantor or any other
person with responsibility for any of the functions typically performed in a corporation by the
chief executive officer.

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     “Chief Financial Officer” means the chief financial officer of Guarantor or any other
person with responsibility for any of the functions typically performed in a corporation by the
chief financial officer.

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

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

     “Collateral Pool” means all of the Collateral.

     “Commitment” means, at any time, the sum of the Fixed Facility Commitment and the
Variable Facility Commitment.

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

     “Confirmation of Guaranty” means a confirmation of any Guaranty executed by Guarantor
in connection with any Request after the Initial Closing, substantially in the form of Exhibit
E-2 to the Agreement.

     “Confirmation of Obligations” means a document substantially in the form of
Exhibit M to the Agreement.

     “Consolidated Tangible Net Worth” shall have the meaning set forth in Section
8.02.

     “Conversion Amendment” means an amendment to the Master Credit Facility Agreement
reflecting the conversion of all or any portion of any Variable Advance to a Fixed Advance as set
forth in Section 1.06.

     “Conversion Availability Period” means with respect to a conversion, the date
beginning on the Initial Closing Date and ending on the Fifth Anniversary.

     “Conversion Documents” means the Conversion Amendment, together with an amendment to
each Security Document if required by Lender and other applicable Loan Documents, in form and
substance satisfactory to Lender, reflecting the conversion of all or a portion of a Variable
Advance to a Fixed Advance pursuant to Section 1.06.

     “Conversion Request” means a written request, substantially in the form of Exhibit
H to the Agreement, to convert all or a portion of a Variable Advance to a Fixed Advance
pursuant to Section 1.06.

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

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	 	(a)	 	The Aggregate Debt Service Coverage Ratio is not less than (x) 1.35:1.0, with
respect to the portion of the Advances drawn from the Fixed Facility Commitment and any
fixed rate Supplemental Loan, and (y) 1.10:1.0, with respect to the portion of the
Advances drawn from the Variable Facility Commitment and any variable rate Supplemental
Loan.
	 
	 	(b)	 	The Aggregate Loan to Value Ratio does not exceed sixty-five percent (65%).

     “Credit Facility” means the Fixed Facility and the Variable Facility.

     “Credit Facility Termination Documents” means the instruments releasing the Security
Instruments as liens on the Mortgaged Properties, UCC-3 Termination Statements terminating the
UCC-1 Financing Statements in favor of Lender, and such other documents and instruments necessary
to evidence the release of the Collateral from any lien securing the Obligations, and the Notes,
all in connection with the termination of the Agreement and the Credit Facility pursuant to
Article 4.

     “Credit Facility Termination Request” means a written request, substantially in the
form of Exhibit N to the Agreement, to terminate the Agreement and the Credit Facility
pursuant to Section 4.02(a).

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

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

	 	(a)	 	the aggregate of the Net Operating Income for the time period designated by
Lender for the subject Mortgaged Property
	 
	 	 	 	to
	 
	 	(b)	 	the Facility Debt Service on the specified date, assuming, for the purpose of
calculating the Facility Debt Service for this definition, that Advances Outstanding
shall be the Allocable Facility Amount and the amount of the Supplemental Loan
Outstanding shall be the Supplemental Allocable Loan Amount, in each case, for the
subject Mortgaged Property.

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

     “ERL Certification” shall have the meaning set forth in Section 1.03(d).

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

     “Facility Debt Service” means —

	 	(a)	 	For use in determining the Advance Amount for the Initial Advance, the sum of
the amount of interest and principal amortization that would be payable during the

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Appendix-8

 

	 	 	 	twelve (12) month period immediately succeeding the Initial Closing Date, with
respect to the full amount of the Initial Advance, except that, for these purposes:

	 	(i)	 	each SARM Variable Advance to be obtained shall be deemed to
require level monthly payments of principal and interest (at an interest rate
equal to (A) the One-Month LIBOR rate or the Three-Month LIBOR rate, as
applicable, plus (B) the Margin (as determined by Lender), plus (C) a stressed
underwriting margin of 300 basis points or if the Underwriting Requirements
change to specify a new stressed underwriting margin which is a specific number
of basis points with no range or discretion in its amount (the “New
Stressed Margin”) then such New Stressed Margin, plus (D) any Monthly Cap
Escrow Payment required pursuant to the Cap Security Agreement) in an amount
necessary to fully amortize the original principal amount of the SARM Variable
Advance and variable rate Supplemental Loan over the Amortization Period, with
such amortization to commence on the first day of the twelve (12) month period;
and
	 
	 	(ii)	 	each Fixed Advance to be obtained shall be deemed to require
level monthly payments of principal and interest (at an interest rate equal to
(A) the base United States Treasury Index Rate for securities having a maturity
substantially similar to the maturity of the Fixed Advance or fixed rate
Supplemental Loans, as applicable, plus (B) the Margin (as determined by
Lender) for an actual/360 execution for loans having similar characteristics as
the Fixed Advances or fixed rate Supplemental Loans, as applicable, to be made
in connection with the Fixed Facility Commitment) in an amount necessary to
fully amortize the original principal amount of the Fixed Advance and any fixed
rate Supplemental Loan over the Amortization Period, with such amortization to
commence on the first day of the twelve (12) month period.

	 	(b)	 	For use in determining the additional borrowing capacity created by the
Addition of Additional Mortgaged Properties to the Collateral Pool, the Release Price
pursuant to Section 3.04(c), compliance with Substitution requirements pursuant
to Section 3.05, and the additional borrowing capacity created by Section
2.05, the sum of the amount of interest and principal amortization, during the
twelve (12) month period immediately succeeding the specified date, with respect to the
Advances Outstanding and the Supplemental Loans Outstanding and Advances to be obtained
relating to the Additional Mortgaged Properties on the specified date, except that, for
these purposes:

	 	(i)	 	each SARM Variable Advance and each variable rate Supplemental
Loan Outstanding and to be obtained shall be deemed to require level monthly
payments of principal and interest (at an interest rate equal to (A) the
One-Month LIBOR rate or the Three-Month LIBOR rate, as applicable, plus (B) the
Margin (as determined by Lender), plus (C) a stressed underwriting margin of
300 basis points or the New Stressed Margin, as applicable, plus (D) any
Monthly Cap Escrow Payment required pursuant

Colonial/ Grandbridge — Master Credit Facility Agreement

Appendix-9

 

	 	 	 	to the Cap Security Agreement) in an amount necessary to fully amortize the
original principal amount of the SARM Variable Advance and the variable rate
Supplemental Loan over the Amortization Period, with such amortization to
commence on the first day of the twelve (12) month period;

	 	(ii)	 	each Fixed Advance and each fixed rate Supplemental Loan
Outstanding shall require level monthly payments of principal and interest (at
the rate set forth in the Note for the Fixed Advance or in the note evidencing
such Supplemental Loan) in an amount necessary to fully amortize the original
principal amount of the Fixed Advance and fixed rate Supplemental Loan over the
Amortization Period, with such amortization to commence on the first day of the
twelve (12) month period; and
	 
	 	(iii)	 	each Fixed Advance and each fixed rate Supplemental Loan to be
obtained shall be deemed to require level monthly payments of principal and
interest (at an interest rate equal to (A) the base United States Treasury
Index Rate for securities having a maturity substantially similar to the
maturity of the Fixed Advance or Supplemental Loan, as applicable, plus (B) the
Margin (as determined by Lender) for an actual/360 execution for loans having
similar characteristics as the Fixed Advances or Supplemental Loans, as
applicable, to be made in connection with the Fixed Advance and any fixed rate
Supplemental Loan in an amount necessary to fully amortize the original
principal amount of the Fixed Advance and any fixed rate Supplemental Loan over
the Amortization Period, with such amortization to commence on the first day of
the twelve (12) month period.

	 	(c)	 	For use in determining the Aggregate Debt Service Coverage Ratio for purposes
of Section 2.04(b) of the Agreement, for purposes of determining compliance
with the Coverage and LTV Tests (other than with respect to Advances), and for other
ongoing monitoring purposes, as of any specified date, the sum of the amount of
interest and principal amortization, during the twelve (12) month period immediately
succeeding the specified date, with respect to the Advances Outstanding and any
Supplemental Loans Outstanding on the specified date, except that, for these purposes:

	 	(i)	 	each SARM Variable Advance and each variable rate Supplemental
Loan Outstanding shall be deemed to require level monthly payments of principal
and interest (at an interest rate equal to (A) the current rate of interest
paid on such Variable Facility Note, including any Margin, plus (B) any Monthly
Cap Escrow Payment required pursuant to the Cap Security Agreement) in an
amount necessary to fully amortize the original principal amount of the SARM
Variable Advance over the Amortization Period, with such amortization to
commence on the first day of the twelve (12) month period; and

Colonial/ Grandbridge — Master Credit Facility Agreement

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	 	(ii)	 	each Fixed Advance and each fixed rate Supplemental Loan
Outstanding shall require level monthly payments of principal and interest (at
the interest rate set forth in the applicable Fixed Facility Note for such
Fixed Advance or in the note evidencing such Supplemental Loan) in an amount
necessary to fully amortize the original principal amount of the Fixed Advance
over the Amortization Period, with such amortization to commence on the first
day of the twelve (12) month period.

	 	(d)	 	For use in determining the Strike Rate for purposes of Section 2.1(c) of the
Cap Reserve, and Security Agreement, as of any specified date, the sum of the amount of
interest and principal amortization, during the twelve (12) month period immediately
succeeding the specified date, with respect to the Advances and Supplemental Loans
Outstanding on the specified date, except that, for the purposes of determining the
Strike Rate, SARM Variable Advances and variable rate Supplemental Loans shall be
deemed to require level monthly payments of principal (if applicable) and interest (at
an interest rate equal to (A) the current rate of interest paid on such Variable
Facility Note, including any Margin (as determined by Lender), plus (B) any Monthly Cap
Escrow Payment required pursuant to the Cap Security Agreement) in an amount necessary
to fully amortize (if applicable) the original principal amount of the SARM Variable
Advance and variable rate Supplemental Loan over the Amortization Period, with such
amortization to commence on the first day of the twelve (12) month period.

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

     “Fannie Mae Commitment” shall have the meaning set forth in Section 2.01(c).

     “Fees” means Addition Fee, Additional Collateral Due Diligence Fee, Additional
Origination Fee, Fixed Facility Fee, Initial Due Diligence Fee, Initial Origination Fee, Margin,
Release Fee, Substitution Fee, Variable Facility Fee and any and all other fees specified in the
Agreement.

     “Fifth Anniversary” means the date that is the first day of the month following the
date five (5) years after the Initial Closing Date.

     “First Anniversary” means the date that is the first day of the month following the
date one (1) year after the Initial Closing Date.

     “Fixed+1 Maturity Option” shall have the meaning set forth in Section
1.03(c)(ii).

     “Fixed Advance” means a fixed rate loan made by Lender to Borrower under the Fixed
Facility Commitment evidenced by a Fixed Facility Note.

     “Fixed Facility” means the agreement of Lender to make Fixed Advances to Borrower
pursuant to Section 1.01.

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     “Fixed Facility Availability Period” means the period beginning and ending on the
Initial Closing Date. No Advances can be made after the Initial Closing Date.

     “Fixed Facility Commitment” means $350,000,000, plus such amount as Borrower may elect
to add to or convert to the Fixed Facility Commitment in accordance with Section 1.06.

     “Fixed Facility Fee” means for any Fixed Advance drawn or converted from a Variable
Advance, the number of basis points determined by Lender as the Fixed Facility Fee at the time of
draw or conversion of such Fixed Advance.

     “Fixed Facility Note” means a promissory note, in the form attached as Exhibit
B-1 or Exhibit B-2 to the Agreement (as modified from time to time pursuant to Fannie
Mae requirements for similar loans), which will be issued by Borrower to Lender, concurrently with
the funding of each Fixed Advance.

     “Fixed Standard Yield Maintenance Maturity Option” shall have the meaning set forth in
Section 1.03(c)(i).

     “Fraudulent Transfer Laws” shall have the meaning set forth in Section 14.11
of the Agreement.

     “Future Advance” means an Advance made after the Initial Closing Date.

     “GAAP” means generally accepted accounting principles in the United States in effect
from time to time, consistently applied.

     “General Conditions” shall have the meaning set forth in Article 5.

     “General Partner” shall mean Colonial Properties Trust, an Alabama real estate
investment trust, that is the general partner of Guarantor.

     “Geographical Diversification Requirements” shall mean that the Mortgaged Properties
in the Collateral Pool shall consist of three (3) Mortgaged Properties located in at least three
(3) different SMSA’s; provided that after the date two (2) years prior to the Termination Date in
connection with a liquidation of the Credit Facility, no such geographical diversification
requirement shall be required.

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

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

     “Gross Revenues” means, for any specified period and for any specified purpose, with
respect to any Multifamily Residential Property, all income in respect of such Multifamily

Colonial/ Grandbridge — Master Credit Facility Agreement

Appendix-12

 

Residential Property determined in accordance with the Underwriting Requirements based on the
certified operating statement for such specified period.

     “Guarantor” means Colonial Properties Trust, an Alabama real estate investment trust.

     “Guaranty” means that certain Guaranty to be executed by Guarantor in the form of
Exhibit E-1 to this Agreement.

     “Guaranty of Completion/Repair Items” means that Guaranty executed by Guarantor with
respect to all items in the Completion/Repair and Security Agreement.

     “Hazardous Materials,” with respect to any Mortgaged Property, shall have the meaning
given that term in the Security Instrument encumbering the Mortgaged Property.

     “Hazardous Materials Law”, with respect to any Mortgaged Property, shall have the
meaning given that term in the Security Instrument encumbering the Mortgaged Property.

     “Hazardous Substance Activity” shall have the meaning given to the term “Prohibited
Activities or Conditions” in the Security Instrument encumbering the Mortgaged Property.

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

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

	 	(a)	 	indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services (other than (i) current trade liabilities (including, but
not limited to, service contracts, property management agreements, and employment
contracts) incurred in the ordinary course of business and payable in accordance with
customary practices, (ii) for construction of improvements to property, if such person
has a non-contingent contract to purchase such property, or (iii) amounts to be paid by
such Person, in performance stages or upon completion, pursuant to a written contract
for the making of capital improvements to a Mortgaged Property permitted by this
Agreement or the other Loan Documents);
	 
	 	(b)	 	other indebtedness of such Person which is evidenced by a note, bond, debenture
or similar instrument;
	 
	 	(c)	 	obligations of such Person under any lease of property, real or personal, the
obligations of the lessee in respect of which are required by GAAP to be

Colonial/ Grandbridge — Master Credit Facility Agreement

Appendix-13

 

	 	 	 	capitalized on a balance sheet of the lessee or to be otherwise disclosed as such in
a note to such balance sheet;

	 	(d)	 	obligations of such Person in respect of acceptances (as defined in Article 3
of the Uniform Commercial Code of the District of Columbia) issued or created for the
account of such Person;
	 
	 	(e)	 	liabilities secured by any Lien on any property owned by such Person even
though such Person has not assumed or otherwise become liable for the payment of such
liabilities; and
	 
	 	(f)	 	as to any Person (“guaranteeing person”), any obligation of (i) the
guaranteeing person or (ii) another Person (including any bank under any letter of
credit) to induce the creation of a primary obligation (as defined below) with respect
to which the guaranteeing person has issued a reimbursement, counterindemnity or
similar obligation, in either case guaranteeing, or in effect guaranteeing, any
indebtedness, lease, dividend or other obligation (“primary obligations”) of
any third person (“primary obligor”) in any manner, whether directly or
indirectly, including any obligation of the guaranteeing person, whether or not
contingent, to (A) purchase any such primary obligation or any property constituting
direct or indirect security therefor, (B) advance or supply funds for the purchase or
payment of any such primary obligation or to maintain working capital or equity capital
of the primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (C) purchase property, securities or services primarily for the
purpose of assuring the owner of any such primary obligation of the ability of the
primary obligor to make payment of such primary obligation, or (D) otherwise assure or
hold harmless the owner of any such primary obligation against loss in respect of the
primary obligation ((“Contingent Obligation”), provided, however, that the term
“Contingent Obligation” shall not include endorsements of instruments for deposit or
collection in the ordinary course of business). The amount of any Contingent
Obligation of any guaranteeing person shall be deemed to be the lesser of (1) an amount
equal to the stated or determinable amount of the primary obligation in respect of
which such Contingent Obligation is made and (2) the maximum amount for which such
guaranteeing person may be liable pursuant to the terms of the instrument embodying
such Contingent Obligation, unless such primary obligation and the maximum amount for
which such guaranteeing person may be liable are not stated or determinable, in which
case the amount of such Contingent Obligation shall be such guaranteeing person’s
maximum reasonably anticipated liability in respect thereof as determined by Lender in
good faith.

     “Individual Property Coverage and LTV Tests” means, in connection with the
Substitution or Addition of one or more proposed Mortgaged Properties, each of the following tests:
(a) the Debt Service Coverage Ratio is not less than (i) 1.35:1.0 with respect to the portion of
the Advances to be drawn from the Fixed Facility Commitment and any fixed rate Supplemental Loan in
connection with such Addition, and (ii) 1.10:1.0, with respect to the portion of the Advances drawn
from the Variable Facility Commitment and any variable rate

Colonial/ Grandbridge — Master Credit Facility Agreement

Appendix-14

 

Supplemental Loan in connection with such Addition; and (b) the Loan to Value Ratio does not
exceed sixty-five percent (65%).

     “Initial Advance” means the Variable Advance and Fixed Advance made on the Initial
Closing Date in the aggregate amount of $156,359,000.

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

     “Initial Commitment Amount” means $156,359,000.

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

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

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

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

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

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

     “Intangible Assets” shall have the meaning set forth in Section 8.02.

     “Interest Rate Cap” shall have the meaning set forth in Section 1.09.

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

     “Issuer” shall have the meaning set forth in Section 5.11(a).

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

Colonial/ Grandbridge — Master Credit Facility Agreement

Appendix-15

 

and observance of the covenants, conditions and agreements to be performed and observed by the
other party thereto.

     “Lender” shall have the meaning set forth in the first paragraph of the Agreement, but
shall refer to any replacement Lender.

     “Letter of Credit” means a letter of credit issued by a financial institution
satisfactory to Fannie Mae, naming Fannie Mae as beneficiary in form and substance as attached
hereto as Exhibit O, or as otherwise reasonably and customarily acceptable to Fannie Mae.

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

     “Loan Document Taxes” shall have the meaning set forth in Section 7.12.

     “Loan Documents” means the Agreement, the Notes, the Guaranty, the Guaranty of
Completion/Repair Items, the Security Documents, all documents executed by Borrower or Guarantor
pursuant to the General Conditions set forth in Article 5 of the Agreement and any other
documents executed by Borrower or Guarantor from time to time in connection with the Agreement or
the transactions contemplated by the Agreement.

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

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

to

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

     “Margin” means the spread over an index (One-Month LIBOR, Three-Month LIBOR, or United
States Treasury Index Rate (as applicable)) as determined by Lender. The Margin shall include the
Variable Facility Fee or Fixed Facility Fee, as applicable. The Margin varies and may be different
for each Advance.

     “Material Adverse Effect” means, with respect to any circumstance, act, condition or
event of whatever nature (including any adverse determination in any litigation, arbitration, or
governmental investigation or proceeding), whether singly or in conjunction with any other event or
events, act or acts, condition or conditions, or circumstance or circumstances, whether or not
related, a change or effect which does or would materially impair (a) the business, operations,
property or condition (financial or otherwise) of Borrower or Guarantor, (b) the present or future
ability of Borrower or Guarantor to perform the Obligations for which it is liable, (c) the
validity, priority, perfection or enforceability of the Agreement or any other Loan Document or the
rights or remedies of Lender under any Loan Document, or (d) Lender’s ability to have recourse
against any Mortgaged Property subject to Section 14.01.

Colonial/ Grandbridge — Master Credit Facility Agreement

Appendix-16

 

     “Maximum Annual Interest Rate” shall have the meaning set forth in Section
2.01(b).

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

     “MBS Commitment” shall have the meaning set forth in Section 2.01(c)(ii).

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

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

     “MBS Interest Rate” means the interest rate for a Fixed Advance or fixed rate
Supplemental Loan with an MBS execution as calculated by Lender (rounded to three places) payable
in respect of the Fannie Mae MBS issued pursuant to the MBS Commitment backed by a Fixed Advance or
fixed rate Supplemental Loan as determined in accordance with Section 2.01.

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

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

     “Multifamily Residential Property” means a residential property, located in the United
States, containing five or more dwelling units in which not more than twenty percent (20%) of the
net rentable area is or will be rented to non-residential tenants, and conforming to the
requirements of Lender for similar loans anticipated to be sold to Fannie Mae.

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

     “Note” means any Fixed Facility Note or Variable Facility Note.

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

     “One-Month LIBOR” means the British Bankers Association fixing of the London
Inter-Bank Offered Rate for 1-month U.S. Dollar-denominated deposits as reported by Telerate

Colonial/ Grandbridge — Master Credit Facility Agreement

Appendix-17

 

through electronic transmission. If the Index is no longer available, or is no longer posted
through electronic transmission, Lender will choose a new index that is based upon comparable
information and provide notice thereof to Borrower.

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

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

     “Organizational Documents” means all certificates, instruments and other documents in
effect on the date of the Agreement, pursuant to which an entity is organized or operates,
including but not limited to, (a) with respect to a corporation, its articles of incorporation and
bylaws, (b) with respect to a limited partnership, its limited partnership certificate and
partnership agreement, (c) with respect to a general partnership or joint venture, its partnership
or joint venture agreement and (d) with respect to a limited liability company, its articles of
organization and operating agreement.

     “Origination Fee” shall have the meaning set forth in Section 10.01 of the
Agreement.

     “Other Borrower” shall have the meaning set forth in Section 14.09 of the
Agreement.

     “Other Borrower Secured Obligation” shall have the meaning set forth in Section
14.04 of the Agreement.

     “Outstanding” means, when used in connection with promissory notes, other debt
instruments, Advances or the Supplemental Loans, for a specified date, promissory notes or other
debt instruments which have been issued, or Advances or Supplemental Loans which have been made,
but have not been repaid in full as of the specified date.

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

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

Colonial/ Grandbridge — Master Credit Facility Agreement

Appendix-18

 

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

     “Permitted Liens” means, with respect to a Mortgaged Property, (a) the exceptions to
title to the Mortgaged Property set forth in the Title Insurance Policy for the Mortgaged Property
which are approved by Lender, (b) the Security Instrument encumbering the Mortgaged Property, (c)
mechanic’s or materialmen’s liens or judgment liens against a Mortgaged Property which are released
of record or otherwise remedied to Lender’s satisfaction within forty-five (45) days of the date of
creation, and (d) real estate taxes and water and sewer and other utility charges that are lien but
not yet due and payable.

     “Permitted Transfers” shall have the meaning set forth in Section 7.14 of the
Agreement.

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

     “Plan” means a “multiemployer plan” as defined in Section 4001(3) of ERISA and a
“single employee plan” as defined in Section 4001(5) of ERISA.

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

     “Prohibited Person” shall have the meaning set forth in Section 7.14 of the
Agreement.

     “Proper Officer” means of any of the Chief Executive Officer, Chief Financial Officer,
Chief Operating Officer, Senior Executive Vice President or Treasurer.

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

     “Property Delivery Deadline” shall have the meaning set forth in Section
3.05(d)(ii) of the Agreement.

     “Property Manager” means, if any, the entity hired to operate and manage the Mortgaged
Property, whose hiring is subject to the written approval and consent of Lender.

     “Publicly-Held Corporation” shall have the meaning set forth in the definition of
Change of Control.

     “Rate Change Date” shall have the meaning set forth in each Variable Facility Note
evidencing a SARM Variable Advance.

     “Rate Form” means the completed and executed document from Borrower to Lender pursuant
to Section 2.01(b), substantially in the form of Exhibit I to the Agreement.

     “Rate Setting Date” shall have the meaning set forth in Section 2.01(b).

Colonial/ Grandbridge — Master Credit Facility Agreement

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

     “Release Fee” means $9,000 for each Release Mortgaged Property.

     “Release Mortgaged Property” means the Mortgaged Property to be released pursuant to
Section 3.04.

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

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

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

     “Rent Roll” means, with respect to any Multifamily Residential Property, a rent roll
prepared and certified by the owner of the Multifamily Residential Property on a form approved by
Lender.

     “Replacement Reserve Agreement” means a Replacement Reserve and Security Agreement,
reasonably required by Lender, and completed in accordance with the requirements of Lender for
similar loans anticipated to be sold to Fannie Mae.

     “Request” means an Advance Request, an Addition Request, a Substitution Request, a
Release Request, a Conversion Request, a Credit Facility Termination Request, or any request for a
Transfer pursuant to Section 7.14 or Section 7.15.

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

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

     “SARM Variable Advance” a loan made by Lender to Borrower under the Variable Facility
Commitment that is anticipated to be sold to Fannie Mae under the Fannie Mae Structured Adjustable
Rate Mortgage program.

     “SMSA” means a “standard metropolitan statistical area” as defined from time to time
by the United States Office of Management and Budget.

     “Securities Act” means the Securities Act of 1933, as amended from time to time,
together with all rules and regulations issued thereunder.

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

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

     “Security Instrument” means, for each Mortgaged Property, a separate Multifamily
Mortgage, Deed of Trust or Deed to Secure Debt, Assignment of Leases and Rents and Security
Agreement given by a Borrower to or for the benefit of Lender to secure the obligations of Borrower
under the Loan Documents. With respect to each Mortgaged Property owned by a Borrower, the
Security Instrument shall be substantially in the form published by Fannie Mae for use in the state
in which the Mortgaged Property is located.

     “Senior Executive Vice President” means any senior executive vice president of
Guarantor or any other person with responsibility for any of the functions typically performed in a
corporation by a senior executive vice president.

     “Senior Management” means (a) the Chief Executive Officer/Chairman of the Board,
President/Chief Financial Officer and Chief Operating Officer of Guarantor or General Partner, and
(b) any other individuals with responsibility for any of the functions typically performed by the
officers described in clause (a).

     “Shareholders’ Equity” shall have the meaning set forth in Section 8.02.

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

	 	(a)	 	has been a duly formed and existing partnership, corporation or limited
liability company, as the case may be;
	 
	 	(b)	 	has been duly qualified in each jurisdiction in which such qualification was at
such time necessary for the conduct of its business;
	 
	 	(c)	 	has complied with the provisions of its organizational documents and the laws
of its jurisdiction of formation in all respects;
	 
	 	(d)	 	has observed all customary formalities regarding its partnership or corporate
existence, as the case may be;
	 
	 	(e)	 	has accurately maintained its financial statements, accounting records and
other partnership or corporate documents separate from those of any other Person;
	 
	 	(f)	 	has not commingled its assets or funds with those of any other Person provided
that after any assets or funds are deposited in a separate account of any Person such
assets or funds may be transferred to an account which account may hold the assets or
funds of more than one Person;

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	 	(g)	 	has identified itself in all dealings with creditors (other than trade
creditors in the ordinary course of business and creditors for the construction of
improvements to property on which such Person has a non-contingent contract to purchase
such property) under its own name and as a separate and distinct entity;
	 
	 	(h)	 	has been adequately capitalized in light of its contemplated business
operations;
	 
	 	(i)	 	has not assumed, guaranteed or become obligated for the liabilities of any
other Person (except in connection with the Credit Facility or the endorsement of
negotiable instruments in the ordinary course of business) or held out its credit as
being available to satisfy the obligations of any other Person;
	 
	 	(j)	 	has not acquired obligations or securities of any other Person;
	 
	 	(k)	 	in relation to a Borrower, except for loans made in the ordinary course of
business to Affiliates and deposits and investments in Cash Equivalents made in the
ordinary course of business, has not made loans or advances to any other Person;
	 
	 	(l)	 	has not entered into and was not a party to any transaction with any Affiliate
of such Person, except in the ordinary course of business and on terms which are no
less favorable to such Person than would be obtained in a comparable arm’s-length
transaction with an unrelated third Party;
	 
	 	(m)	 	has paid the salaries of its own employees, if any, and maintained a sufficient
number of employees or has entered into binding agreements with third parties to
provide all required services that would otherwise be provided by employees in light of
its contemplated business operations;
	 
	 	(n)	 	has allocated fairly and reasonably any overhead for shared office space;
	 
	 	(o)	 	has not engaged in a non-exempt prohibited transaction described in Section 406
of ERISA or Section 4975 of the Internal Revenue Code to the extent it is subject to
ERISA;
	 
	 	(p)	 	has conducted its own business in its own name;
	 
	 	(q)	 	except as permitted under this Agreement, has not pledged its assets for the
benefit of any other entity or made any loans or advances to any person or entity
except in connection with the Credit Facility; and
	 
	 	(r)	 	in relation to Borrower shall not (i) acquire any real or personal property
other than the Mortgaged Properties and personal property related to the operation and
maintenance of the Mortgaged Properties, (ii) operate any business other than the
management and operation of the Mortgaged Properties, and (iii) shall not maintain its
assets in a way difficult to segregate and identify.

     “Subject Borrower” shall have the meaning set forth in Section 14.09 of the
Agreement.

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     “Subordinated Obligations” shall have the meaning set forth in Section
14.08(a) of the Agreement.

     “Subsidiary” shall have the meaning set forth in Section 8.02.

     “Substitute Cash Collateral” shall have the meaning set forth in Section
3.04(d)(ii) of the Agreement.

     “Substitute Mortgaged Property” means each Multifamily Residential Property owned by
Borrower (either in fee simple or as tenant under a ground lease meeting all of the requirements of
Lender for similar loans anticipated to be sold to Fannie Mae) and added to the Collateral Pool
after the Initial Closing Date in connection with a substitution of Collateral as permitted by
Section 3.05.

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

     “Substitution Cost Deposit” shall have the meaning set forth in Section
3.05(e)(ii)(D).

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

     “Substitution Fee” means $70,000 with respect to each Additional Mortgaged Property
added as part of a Substitution.

     “Substitution Request” shall have the meaning set forth in Section 3.05 of the
Agreement.

     “Supplemental Allocable Loan Amount” shall have the meaning set forth in Section
2.05 of this Agreement.

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

     “Supplemental Loan Documents” shall have the meaning set forth in Section
2.05.

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

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

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

     “Termination Date” means, at any time during which Variable Advances and Fixed
Advances are Outstanding, the latest maturity date for any Advance Outstanding.

     “Three-Month LIBOR” means the British Bankers Association fixing of the London
Inter-Bank Offered Rate for 3-month U.S. Dollar-denominated deposits as reported by Telerate
through electronic transmission. If the Index is no longer available, or is no longer posted

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Appendix-23

 

through electronic transmission, Lender will choose a new index that is based upon comparable
information and provide notice thereof to Borrower.

     “Title Company” means Chicago Title Insurance Company.

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

     “Transfer” means —

	 	(a)	 	as used with respect to Ownership Interests in Borrower, Guarantor or General
Partner means (i) a sale, assignment, pledge, transfer or other disposition of any
Ownership Interest in Borrower, Guarantor or General Partner or in any entity
(including without limitation the General Partner) that has a direct or indirect
Ownership Interest in Borrower, or (ii) the issuance or other creation of new Ownership
Interests in Borrower or Guarantor or in any entity that has a direct or indirect
Ownership Interest in Borrower or Guarantor that is not in compliance with the laws of
the United States, or (iii) a merger or consolidation of Borrower, Guarantor or General
Partner or of any entity that has a direct or indirect Ownership Interest in Borrower,
as the case may be, into another entity or of another entity into Borrower, Guarantor
or General Partner or into any entity that has a direct or indirect Ownership Interest
in Borrower, as the case may be, or (iv) the reconstitution of Borrower, Guarantor or
General Partner or of any entity that has a direct or indirect Ownership Interest in
Borrower, Guarantor or General Partner from one type of entity to another type of
entity, or (v) the amendment, modification or any other change in the governing
instrument or instruments of a Person which has the effect of changing the relative
powers, rights, privileges, voting rights or economic interests of the Ownership
Interests in such Person.
	 
	 	(b)	 	as used with respect to a Mortgaged Property means a sale (except with respect
to a Mortgaged Property for which a Release has been requested), assignment, lease,
pledge, transfer or other disposition (whether voluntary or by operation of law) of, or
the granting or creating of a lien, encumbrance or security interest in, any estate,
rights, title or interest in a Mortgaged Property, or any portion thereof. Transfer
does not include a conveyance of a Mortgaged Property at a judicial or non-judicial
foreclosure sale under any security instrument or the Mortgaged Property becoming part
of a bankruptcy estate by operation of law under the United States Bankruptcy Code.

     “Treasurer” means the treasurer of Guarantor or any other person with responsibility
for any of the functions typically performed in a corporation by the treasurer.

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Appendix-24

 

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

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

	 	(i)	 	the Net Operating Income of such Multifamily Residential Property, by
	 
	 	(ii)	 	the most recent Capitalization Rate determined by Lender.

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

     “Variable Advance” means a SARM Variable Advance.

     “Variable Facility” means the agreement of Lender to make Variable Advances to
Borrower pursuant to Section 1.01.

     “Variable Facility Availability Period” means the period beginning and ending on the
Initial Closing Date. No Advances can be made after the Initial Closing Date.

     “Variable Facility Commitment” means an aggregate amount of $0, which, when advanced,
shall be evidenced by one (1) or more Variable Facility Notes in the form attached hereto as
Exhibit C-1 or Exhibit C-2, less such amount as Borrower may elect to convert from
the Variable Facility Commitment to the Fixed Facility Commitment in accordance with Section
1.06.

     “Variable Facility Fee” means for any Variable Advance drawn, the number of basis
points determined at the time of such Variable Advance by Lender as the Variable Facility Fee for
such Variable Advance.

     “Variable Facility Note” means the promissory note, in the form attached as
Exhibit C-1 or Exhibit C-2 to the Agreement (as modified from time to time pursuant
to Fannie Mae requirements for similar loans), which has been issued by Borrower to Lender to
evidence Borrower’s obligation to repay SARM Variable Advances.

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

     “Waiving Borrower” shall have the meaning set forth in Section 14.04.

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Appendix-26

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