Document:

Exhibit
10.1

 

AMENDED
AND RESTATED

 

ADVISORY
MANAGEMENT AGREEMENT

 

This AMENDED AND RESTATED ADVISORY MANAGEMENT
AGREEMENT (this “Agreement”) is
entered into on this the 2nd day of October, 2009, by and between BEHRINGER
HARVARD OPPORTUNITY REIT II, INC., a Maryland corporation (the “Company”), and BEHRINGER HARVARD
OPPORTUNITY ADVISORS II LP, a Texas limited partnership (the “Advisor”).

 

W I T N E S
S E T H

 

WHEREAS, the Company and the Advisor previously entered into that certain
Advisory Management Agreement dated January 4, 2008, amended by that
certain First Amendment to the Advisory Management Agreement dated August 13,
2008 (collectively, the “Original Agreement”); and

 

WHEREAS, the Company and the Advisor desire to amend the Original Agreement to,
among other things, (i) change the timing in determining the reimbursement
of organization and offering expenses by the Company during the Offering (as
defined below) and to amend certain other terms regarding the reimbursement of
organization and offering expenses, including the waiver of certain
organization and offering expenses, (ii) provide that acquisition expenses
reimbursable to the Advisor include expenses related to the Advisor directly
providing certain accounting and environmental services in connection with an
acquisition, which services are customarily provided by third parties and
reimbursed as third-party expenses in connection with completed acquisitions,
and (iii) permit the parties to audit the records, books and accounts of
the other party, as related to any fees and reimbursements paid to the Advisor;

 

WHEREAS, the Company
desires to avail itself of the experience, sources of information, advice,
assistance and certain facilities available to the Advisor and to have the
Advisor undertake the duties and responsibilities hereinafter set forth, on
behalf of, and subject to the supervision of, the Board, all as provided
herein; and

 

WHEREAS, the Advisor
is willing to undertake to provide these services, subject to the supervision
of the Board, on the terms and conditions hereinafter set forth.

 

NOW,
THEREFORE, in consideration of the foregoing and of the
mutual covenants and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereby amend and restate the Original Agreement as follows:

 

 

ARTICLE ONE

 

DEFINITIONS

 

The following defined terms used in this
Agreement shall have the meanings specified below:

 

Acquisition Expenses. A
non-accountable acquisition expense reimbursement in the amount of: (i) 0.25%
of the funds paid for purchasing an Asset, including any debt attributable to
the Asset, plus 0.25% of the funds budgeted for development, construction or
improvement in the case of Assets that we acquire and intend to develop,
construct or improve or (ii) 0.25% of the funds advanced in respect of a
loan or other investment.  In addition,
to the extent the Advisor directly provides services formerly provided or
usually provided by third parties, including without limitation accounting
services related to the preparation of audits required by the Securities and
Exchange Commission, property condition reports, title services, title
insurance, insurance brokerage or environmental services related to the preparation
of environmental assessments in connection with a prospective or completed
investment (the “Additional Services”), the direct employee costs and burden to
the Advisor of providing the Additional Services shall be Acquisition Expenses.  Acquisition Expenses also include any
investment-related expenses due to third parties in the case of a completed
investment, including, but not limited to legal fees and expenses, travel and
communications expenses, costs of appraisals, accounting fees and expenses, third-party
brokerage or finder’s fees, title insurance, premium expenses and other closing
costs.  Acquisition Expenses also include
any payments made to (i) a prospective seller of an asset, (ii) an
agent of a prospective seller of an asset, or (iii) a party that has the
right to control the sale of an asset intended for investment by the Company
that are not refundable and that are not ultimately applied against the
purchase price for such asset (“Non-Refundable Payments”).

 

Acquisition Fees. Any and all fees and
commissions, exclusive of Acquisition Expenses but including the Acquisition
and Advisory Fees, paid by any Person to any other duly qualified and licensed
Person (including any fees or commissions paid by or to any duly qualified and
licensed Affiliate of the Company or the Advisor) in connection with making or
investing in Mortgages or other loans or the purchase, development or
construction of an Asset, including, without limitation, real estate
commissions, selection fees, investment banking fees, third party seller’s fees
(to the extent the Company agrees to pay any such fees as part of an
acquisition), Development Fees, Construction Fees, non-recurring management
fees, loan fees, points or any other fees of a similar nature. Excluded shall
be Development Fees and Construction Fees paid to any Person not affiliated
with the Sponsor in connection with the actual development and construction of
any Property.

 

Acquisition and Advisory Fees.  The fees
payable to the Advisor pursuant to Section 3.01(b).

 

Advisor. Behringer Harvard
Opportunity Advisors II LP, a Texas limited partnership, any successor advisor
to the Company, or any Person to which Behringer Harvard Opportunity Advisors
II LP or any successor advisor subcontracts all or substantially all of its
functions.

 

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Affiliate or Affiliated. As to any
Person, (i) any Person directly or indirectly owning, controlling, or
holding, with the power to vote, 10% or more of the outstanding voting securities
of such other Person; (ii) any Person 10% or more of whose outstanding
voting securities are directly or indirectly owned, controlled, or held, with
power to vote, by such other Person; (iii) any Person, directly or
indirectly, controlling, controlled by, or under common control with such other
Person; (iv) any executive officer, director, trustee or general partner
of such other Person; and (v) any legal entity for which such Person acts
as an executive officer, director, trustee or general partner.

 

Articles of Incorporation. The Articles
of Incorporation of the Company filed with the Maryland State Department of
Assessments and Taxation in accordance with the Maryland General Corporation
Law, as amended or restated from time to time.

 

Assets. Properties, Mortgages,
loans and other direct or indirect investments (other than investments in bank
accounts, money market funds or other current assets) owned by the Company,
directly or indirectly through one or more of its Affiliates or Joint Ventures
or through other investment interests.

 

Asset Management Fee. The fee
payable to the Advisor for day-to-day professional management services in
connection with the Company and its investments in Assets pursuant to Section 3.01(a) of
this Agreement.

 

Average Invested Assets. For a
specified period, the average of the aggregate book value of the Assets before
deduction for depreciation, bad debts or other non-cash reserves, computed by
taking the average of the values at the end of each month during the period.

 

Board. The Board of Directors of
the Company.

 

Bylaws. The bylaws of the Company,
as the same are in effect from time to time.

 

Change of Control. Any (i) event
(including, without limitation, issue, transfer or other disposition of Shares
of capital stock of the Company or equity interests in the Partnership, merger,
share exchange or consolidation) after which any “person” (as that term is used
in Sections 13(d) and 14(d) of the Exchange Act) is or becomes
the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act),
directly or indirectly, of securities of the Company or the Partnership
representing greater than 50% of the combined voting power of the Company’s or
the Partnership’s then outstanding securities, respectively; provided, that, a
Change of Control shall not be deemed to occur as a result of any widely
distributed public offering of the Shares or (ii) direct or indirect sale,
transfer, conveyance or other disposition (other than pursuant to clause (i)),
in one or a series of related transactions, of all or substantially all of the
properties or assets of the Company or the Partnership, taken as a whole, to
any “person” (as that term is used in Sections 13(d) and 14(d) of
the Exchange Act).

 

Code. Internal Revenue Code of
1986, as amended from time to time, or any successor statute thereto. Reference
to any provision of the Code shall mean the provision as in effect from time to
time, as the same may be amended, and any successor provision thereto, as
interpreted by any applicable regulations as in effect from time to time.

 

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Company. Behringer Harvard
Opportunity REIT II, Inc., a corporation organized under the laws of the
State of Maryland.  Unless the context
clearly indicates otherwise, references to the Company shall include its direct
and indirect subsidiaries, including the Partnership.

 

Competitive Real Estate Commission. A real estate
or brokerage commission paid or, if no commission is paid, the amount that
customarily would be paid for the purchase or sale of a Property that is
reasonable, customary, and competitive in light of the size, type and location
of the Property (as determined by the Board, including a majority of the
Independent Directors).

 

Construction Fee. A fee or other remuneration
for acting as general contractor and/or construction manager to construct
improvements, supervise and coordinate projects or to provide major repairs or
rehabilitations on a Property.

 

Contract Purchase Price. The amount (i) actually
paid and/or budgeted in respect of the purchase, development, construction or
improvement of a Property, (ii) of funds advanced with respect to a
Mortgage or other loan or (iii) actually paid and/or budgeted in respect
to the purchase of other Assets, in each case exclusive of Acquisition Fees and
Acquisition Expenses but including any debt attributable to such acquired
Assets.

 

Contract Sales Price. The total
consideration provided for in the sales contract for the Sale of a Property.

 

Cost of Investment. For each Asset, (i) with
respect to an Asset wholly owned by the Company or any wholly owned subsidiary,
the Fully Loaded Cost, and (ii) in
the case of an Asset owned by any Joint Venture or in some other manner in
which the Company is a co-venturer or partner or otherwise a co-owner, (A) the Fully Loaded Cost if the Company (or any
subsidiary) controls the Asset; owns a majority interest, directly or
indirectly, in the Asset; or provides a substantial amount of services in the
acquisition, development, or management of the Asset (as determined by a
majority of the Independent Directors) or (B) the portion of the Fully
Loaded Cost that is attributable to the Company’s investment in the
Joint Venture or other interest in such Asset if the Company does not control,
own a majority of, or provide substantial services in the acquisition,
development, or management of, the Asset.

 

Dealer Manager. Behringer Securities LP,
an Affiliate of the Advisor, or such Person selected by the Board to act as the
dealer manager for an Offering.

 

Development Fee. A fee for the packaging of
an Asset, including the negotiation and approval of plans, and any assistance
in obtaining zoning and necessary variances and financing for a specific
development Property, either initially or at a later date.

 

Director. A member of the Board.

 

Disposition Fee. The fee payable to the
Advisor for services provided in connection with the Sale of one or more
Properties pursuant to Section 3.01(c).

 

Distributions. Any dividends or other
distributions of money or other property by the Company to Stockholders,
including distributions that may constitute a return of capital for federal
income 

 

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tax purposes but excluding distributions that constitute the redemption
of any Shares and excluding distributions on any Shares before their
redemption.

 

Exchange Act.  The
Securities Exchange Act of 1934, as amended from time to time, or any successor
statute thereto.  Reference to any
provision of the Exchange Act shall mean such provision as in effect from time
to time, as the same may be amended, and any successor provision thereto, as
interpreted by any applicable regulations as in effect from time to time.

 

Fully Loaded Cost.  The
Contract Purchase Price of an Asset at the time of acquisition (exclusive of
closing costs), plus the amount actually paid and/or budgeted for the
development, construction or improvement of the Asset, inclusive of expenses
related thereto, plus the amount of any subsequent debt attributable to such
Asset.

 

Gross Proceeds. The aggregate purchase
price of all Shares sold for the account of the Company through an Offering,
without deduction for Selling Commissions, volume discounts, any marketing
support and due diligence expense reimbursement or Organization and Offering
Expenses. For the purpose of computing Gross Proceeds, the purchase price of
any Share for which reduced Selling Commissions are paid to the Dealer Manager
or a Soliciting Dealer (where net proceeds to the Company are not reduced)
shall be deemed to be the full amount of the Offering price per Share pursuant
to the Prospectus for the Offering without reduction.

 

Independent Director. A Director
who is not on the date of determination, and within the last two years from the
date of determination has not been, directly or indirectly associated with the
Sponsor or the Advisor by virtue of (i) ownership of an interest in the
Sponsor, the Advisor or any of their Affiliates, other than the Company, (ii) employment
by the Sponsor, the Company, the Advisor or any of their Affiliates, (iii) service
as an officer or director of the Sponsor, the Advisor or any of their
Affiliates, other than as a Director of the Company, (iv) performance of
services for the Company, other than as a Director of the Company, (v) service
as a director or trustee of more than three real estate investment trusts
organized by the Sponsor or advised by the Advisor, or (vi) maintenance of
a material business or professional relationship with the Sponsor, the Advisor
or any of their Affiliates. 
Notwithstanding the foregoing, and consistent with (v) above,
serving as a director of or receiving director fees from or owning an interest
in a REIT or other real estate program organized by the Sponsor or advised or
managed by the Advisor or its Affiliates shall not, by itself, cause a Director
to be deemed associated with the Sponsor or the Advisor.  A business or professional relationship is
considered material if the aggregate annual gross revenue derived by the
Director from the Sponsor, the Advisor and their Affiliates (excluding fees for
serving as a director of the Company or other REIT or real estate program
organized or advised or managed by the Advisor or its Affiliates) exceeds five
percent of either the Director’s annual gross income during either of the last
two years or the Director’s net worth on a fair market value basis. An indirect
association with the Sponsor or the Advisor shall include circumstances in
which a Director’s spouse, parent, child, sibling, mother- or father-in-law,
son- or daughter-in-law, or brother- or sister-in-law is or has been associated
with the Sponsor, the Advisor, any of their Affiliates, or the Company.

 

Intellectual Property Rights. All rights,
titles and interests, whether foreign or domestic, in and to any and all trade
secrets, confidential information rights, patents, invention rights,
copyrights, service marks, trademarks, know-how, or similar intellectual
property rights and all applications 

 

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and rights to apply for such rights, as well as any and all moral
rights, rights of privacy, publicity and similar rights and license rights of
any type under the laws or regulations of any governmental, regulatory, or
judicial authority, foreign or domestic and all renewals and extensions
thereof.

 

Joint Ventures. A legal organization
formed to provide for the sharing of the risks and rewards in an enterprise
co-owned and operated for mutual benefit by two or more business partners and
established to acquire or hold Assets.

 

Listing or Listed.  The filing of a Form 8-A to register any
class of the Company’s securities on a national securities exchange and an
original listing application related thereto; provided, that the Shares shall
not be deemed to be Listed until trading in the Shares shall have commenced on
the relevant national securities exchange.

 

Mortgages. In connection with
mortgage financing provided, invested in or purchased by the Company, all of
the notes, deeds of trust, security interests or other evidence of indebtedness
or obligations, which are secured or collateralized by Real Property owned by
the borrowers under such notes, deeds of trust, security interests or other
evidence of indebtedness or obligations.

 

NASAA Guidelines. The Statement of Policy
Regarding Real Estate Investment Trusts adopted by the North American
Securities Administrators Association, Inc. on May 7, 2007, and in
effect on the date hereof.

 

Net Income. For any period, the
Company’s total revenues applicable to that period, less the total expenses
applicable to the period other than additions to reserves for depreciation, bad
debts or other similar non-cash reserves and excluding any gain from the sale
of the Assets.

 

Offering. Any public offering of
Shares pursuant to an effective registration statement filed under the
Securities Act, other than a public offering of Shares under a distribution
reinvestment plan.

 

Organization and Offering Expenses. Any and all
costs and expenses incurred by and to be paid by the Company in connection with
an Offering, the formation of the Company, and including the qualification and
registration of the Offering and the marketing and distribution of its Shares,
including, without limitation:  total
underwriting and brokerage discounts and commissions (including fees of the
underwriters’ attorneys); expenses for printing, engraving, amending
registration statements and supplementing prospectuses; mailing and
distribution costs; salaries of employees while engaged in sales activity, such
as preparing supplemental sales literature; telephone and other
telecommunication costs; all advertising and marketing expenses, including the
costs related to investor and broker-dealer meetings; charges of transfer
agents, registrars, trustees, escrow holders, depositories and experts; filing,
registration and qualification fees and taxes relating to the Offering under
federal and state laws; and accountants’ and attorneys’ fees.

 

Partnership. Behringer Harvard
Opportunity OP II, LP, a Delaware limited partnership, through which the
Company may own Assets or otherwise conduct its operations.

 

6

 

Person. An individual,
corporation, association, business trust, estate, trust, partnership, limited
liability company or other legal entity.

 

Property or Properties. As the
context requires, any, or all, respectively, of the Real Property acquired by
the Company, either directly or indirectly (whether through Joint Ventures or
other investment interests, regardless of whether the Company consolidates the
financial results of these entities).

 

Proprietary Property. All modeling
algorithms, tools, computer programs, know-how, methodologies, processes,
technologies, ideas, concepts, skills, routines, subroutines, operating
instructions and other materials and aides used in performing the duties set
forth in Section 2.02 that relate to advice regarding current and
potential Assets, and all modifications, enhancements and derivative works of
the foregoing.

 

Prospectus. Prospectus has the meaning
set forth in Section 2(a)(10) of the Securities Act, including a
preliminary prospectus, an offering circular as described in Rule 253 of
the General Rules and Regulations under the Securities Act or, in the case
of an intrastate offering, any document by whatever name known, utilized for
the purpose of offering and selling securities of the Company.

 

Real Property or Real Estate. Land, rights
in land (including leasehold interests), and any buildings, structures,
improvements, furnishings, fixtures and equipment located on or used in
connection with land and rights or interests in land.

 

REIT. A corporation, trust,
association or other legal entity (other than a real estate syndication) that
is engaged primarily in investing in interests in Real Estate (including fee
ownership and leasehold interests) or in loans secured by Real Estate or both
in accordance with Sections 856 through 860 of the Code.

 

Sale or Sales. (i) Any transaction
or series of transactions whereby: (A) the Company or the Partnership
directly or indirectly (except as described in other subsections of this
definition) sells, grants, transfers, conveys, or relinquishes its ownership of
any Property or portion thereof, including the lease of any Property consisting
of a building only, and including any event with respect to any Property which
gives rise to a significant amount of insurance proceeds or condemnation
awards; (B) the Company or the Partnership directly or indirectly (except
as described in other subsections of this definition) sells, grants, transfers,
conveys, or relinquishes its ownership of all or substantially all of the
interest of the Company or the Partnership in any Joint Venture in which it is
a co-venturer or partner; (C) any Joint Venture directly or indirectly
(except as described in other subsections of this definition) in which the
Company or the Partnership as a co-venturer or partner sells, grants,
transfers, conveys, or relinquishes its ownership of any Property or portion
thereof, including any event with respect to any Property which gives rise to
insurance claims or condemnation awards; (D) the Company or the
Partnership directly or indirectly (except as described in other subsections of
this definition) sells, grants, conveys or relinquishes its interest in any
Mortgage or other loan or portion thereof (including with respect to any
Mortgage or other loan, all payments thereunder or in satisfaction thereof
other than regularly scheduled interest payments of amounts owed pursuant to
the Mortgage or other loan) and any event with respect to a Mortgage or other
loan which gives rise 

 

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to a significant amount of insurance proceeds or similar awards; or (E) the
Company or the Partnership directly or indirectly (except as described in other
subsections of this definition) sells, grants, transfers, conveys, or
relinquishes its ownership of any other Asset not previously described in this
definition or any portion thereof, but (ii) not including any transaction
or series of transactions specified in clause (i) (A) through (E) above
in which the proceeds of such transaction or series of transactions are
reinvested in one or more Assets within 180 days thereafter.

 

Securities Act. The Securities Act of
1933, as amended from time to time, or any successor statute thereto. Reference
to any provision of the Securities Act shall mean the provision as in effect
from time to time, as the same may be amended, and any successor provision
thereto, as interpreted by any applicable regulations as in effect from time to
time.

 

Selling Commissions. Any and all commissions
payable to underwriters, dealer managers or other broker-dealers in connection
with the sale of Shares, including, without limitation, commissions payable to
Behringer Securities LP.

 

Shares. Any shares of the
Company’s common stock, par value $0.0001 per share.

 

Soliciting Dealers. Broker-dealers who are
members of the Financial Industry Regulatory Authority, or that are exempt from
broker-dealer registration, and who, in either case, have executed
participating broker or other agreements with the Dealer Manager to sell
Shares.

 

Sponsor. Sponsor has the meaning
ascribed to such term in the Articles of Incorporation.

 

Stockholders. The record holders of the
Company’s Shares as maintained in the books and records of the Company or its
transfer agent.

 

Termination Date. The date of termination of
this Agreement.

 

Texas Tax Code. The Texas Tax
Code as amended by Texas H.B. 3, 79th Leg., 3rd C.S. (2006).  Reference to any provision of the Texas Tax
Code Act shall mean the provision as in effect from time to time, as the same
may be amended, and any successor provision thereto, as interpreted by any
applicable administrative rules as in effect from time to time.

 

Total Operating Expenses. All costs and
expenses paid or incurred by the Company, as determined under generally
accepted accounting principles, which are in any way related to the operation
of the Company or to Company business, including the Asset Management Fee, but
excluding (i) the expenses of raising capital such as Organization and
Offering Expenses, legal, audit, accounting, underwriting, brokerage, listing,
registration, and other fees, printing and other expenses and tax incurred in connection
with the issuance, distribution, transfer, registration and Listing of the
Shares, (ii) interest payments, (iii) taxes, (iv) non-cash
expenditures such as depreciation, amortization and bad debt reserves, (v) Acquisition
Fees and Acquisition Expenses, (vi) real estate commissions on the Sale of
Assets (including the Disposition Fee), and (vii) other fees and expenses
connected with the acquisition, disposition, management and ownership of real
estate interests, mortgage loans or other property (including the costs of
foreclosure, insurance premiums, legal services, maintenance, repair and
improvement of property).

 

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Value of Investment.  For each Asset, if available, (i) with
respect to an Asset wholly owned by the Company or any wholly owned subsidiary,
the Asset’s value established
by the most recent independent valuation report (without reduction for
depreciation, bad debts or other non-cash reserves), and (ii) in the case of an Asset owned by any Joint
Venture or in some other manner in which the Company is a co-venturer or
partner or otherwise a co-owner, (A) the Asset’s value established by the most recent independent
valuation report (without reduction for depreciation, bad debts or other non-cash
reserves) if the Company (or any
subsidiary) controls the Asset; owns a majority interest, directly or
indirectly, in the Asset; or provides a substantial amount of services in the
acquisition, development, or management of the Asset (as determined by a
majority of the Independent Directors) or (B) the portion of the
Asset’s value established by the most recent independent valuation report
(without reduction for depreciation, bad debts or other non-cash reserves) that
is attributable to the Company’s investment in the Joint Venture or other
interest in such Asset if the Company does not control, own a majority of, or
provide substantial services in the acquisition, development, or management of,
the Asset.  Nothing in this definition is
intended to obligate the Advisor to obtain independent valuations at any point
in time beyond those specified in the Company’s Prospectus.

 

ARTICLE II

 

THE ADVISOR

 

2.01         Appointment. The Company hereby appoints the Advisor to
serve as its advisor on the terms and conditions set forth in this Agreement,
and the Advisor hereby accepts such appointment.

 

2.02         Duties of the Advisor. The Advisor shall be
deemed to be in a fiduciary relationship to the Company and its Stockholders.
Subject to Section 2.08, the Advisor undertakes to use its commercially
reasonable best efforts to present to the Company potential investment
opportunities consistent with the investment objectives and policies of the
Company as determined and adopted from time to time by the Board. In performing
its duties, subject to the supervision of the Board and consistent with the
provisions of the Company’s most recent Prospectus for Shares, the Articles of
Incorporation and Bylaws, the Advisor shall, either directly or by engaging a
duly qualified and licensed Affiliate of the Advisor or other duly qualified
and licensed Person:

 

(a)           provide the Company with research and economic and
statistical data in connection with the Assets and investment policies;

 

(b)           manage the Company’s day-to-day operations and
perform and supervise the various administrative functions reasonably necessary
for the management and operations of the Company;

 

(c)           maintain and preserve the books and records of the
Company, including stock books and records reflecting a record of the Stockholders
and their ownership of the Company’s Shares;

 

9

 

(d)           investigate, select, and, on behalf of the Company,
engage and conduct business with the duly qualified and licensed Persons as the
Advisor deems necessary to the proper performance of its obligations hereunder,
including but not limited to duly qualified and licensed consultants,
accountants, correspondents, lenders, technical advisors, attorneys, brokers,
underwriters, corporate fiduciaries, escrow agents, depositaries, custodians,
agents for collection, insurers, insurance agents, banks, builders, developers,
property owners, mortgagors, property management companies, transfer agents and
any and all agents for any of the foregoing, including duly qualified and
licensed Affiliates of the Advisor, and duly qualified and licensed Persons
acting in any other capacity deemed by the Advisor necessary or desirable for
the performance of any of the foregoing services, including but not limited to
entering into contracts in the name of the Company with any of the foregoing;

 

(e)           consult with the officers and the Board and assist
the Board in the formulation and implementation of the Company’s financial
policies, and, as necessary, furnish the Board with advice and recommendations
with respect to the making of investments consistent with the investment
objectives and policies of the Company and in connection with any borrowings
proposed to be undertaken by the Company;

 

(f)            subject to the provisions of Sections 2.02(h) and
2.03 hereof, (i) locate, analyze and select potential investments in
Assets, (ii) structure and negotiate the terms and conditions of
transactions pursuant to which investment in Assets will be made; (iii) make
investments in Assets on behalf of the Company or the Partnership in compliance
with the investment objectives and policies of the Company; (iv) arrange
for financing and refinancing and make other changes in the asset or capital
structure of, and dispose of, reinvest the proceeds from the sale of, or
otherwise deal with the investments in, Assets; and (v) enter into leases
of Property and service contracts for Assets with duly qualified and licensed
Persons and, to the extent necessary, perform all other operational functions
for the maintenance and administration of the Assets, including the servicing
of Mortgages;

 

(g)           provide the Board with periodic reports regarding
prospective investments in Assets;

 

(h)           obtain the prior approval of the Board (including a
majority of all Independent Directors) for any and all investments in Assets;

 

(i)            negotiate on behalf of the Company with banks or
lenders for loans to be made to the Company, negotiate on behalf of the Company
with investment banking firms and broker-dealers, and negotiate private sales
of Shares and other securities of the Company or obtain loans for the Company,
as and when appropriate, but in no event in such a way so that the Advisor
shall be acting as broker-dealer or underwriter; and provided, further, that
any fees and costs payable to third parties incurred by the Advisor in
connection with the foregoing shall be the responsibility of the Company;

 

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(j)            obtain reports (which may be prepared by or for the
Advisor or its Affiliates), where appropriate, concerning the value of
investments or contemplated investments of the Company in Assets;

 

(k)           from time to time, or at any time reasonably
requested by the Board, make reports to the Board of its performance of
services to the Company under this Agreement;

 

(l)            assist the Company in arranging for all necessary
cash management services;

 

(m)          deliver to or maintain on behalf of the Company
copies of all appraisals obtained in connection with the investments in Assets;

 

(n)           upon request of the Company, act, or obtain the
services of duly qualified and licensed others to act, as attorney-in-fact or
agent of the Company in making, acquiring and disposing of Assets, disbursing,
and collecting the funds, paying the debts and fulfilling the obligations of
the Company and retaining counsel or other advisors to assist in handling,
prosecuting and settling any claims of the Company, including foreclosing and
otherwise enforcing mortgage and other liens and security interests comprising
any of the Assets;

 

(o)           supervise the preparation and filing and
distribution of returns and reports to governmental agencies and to
Stockholders and other investors and act on behalf of the Company;

 

(p)           provide office space, equipment and personnel as
required for the performance of the foregoing services as Advisor;

 

(q)           assist the Company in preparing all reports and
returns required by the Securities and Exchange Commission, Internal Revenue
Service and other state or federal governmental agencies; and

 

(r)            do all things necessary to assure its ability to
render the services described in this Agreement.

 

2.03         Authority
of Advisor.

 

(a)           Pursuant to the terms of this Agreement (including
the restrictions included in this Section 2.03 and in Section 2.06),
and subject to the continuing and exclusive authority of the Board over the
management of the Company, the Board hereby delegates to the Advisor the
authority to (i) locate, analyze and select investment opportunities, (ii) structure
the terms and conditions of transactions pursuant to which investments will be
made or acquired for the Company or the Partnership, (iii) acquire
Properties, make and acquire Mortgages and other loans and invest in other
Assets in compliance with the investment objectives and policies of the
Company, (iv) arrange for financing or refinancing of Assets, (v) enter
into leases for the Properties and service contracts for the Assets with duly
qualified and licensed non-affiliated and Affiliated Persons, including
oversight of non-affiliated and Affiliated Persons that perform property
management, acquisition, advisory, disposition or other services for the
Company, (vi) oversee duly 

 

11

 

qualified and licensed property managers and
other Persons who perform services for the Company, and (vii) arrange for,
or provide, accounting and other record-keeping functions at the Asset level.

 

(b)           Notwithstanding the foregoing, any investment in
Assets by the Company or the Partnership (as well as any financing acquired by
the Company or the Partnership in connection with the investment), will require
the prior approval of the Board (including a majority of the Independent
Directors).

 

(c)           The prior approval of a majority of the Independent
Directors and a majority of the Board not otherwise interested in the
transaction will be required for each transaction with the Advisor or its
Affiliates.

 

(d)           If a transaction requires approval by the Board, the
Advisor will deliver to the Directors all documents required by them to
properly evaluate the proposed transaction.

 

The Board may, at any time upon the giving of
notice to the Advisor, modify or revoke the authority set forth in this Section 2.03.
If and to the extent the Board so modifies or revokes the authority contained
herein, the Advisor shall henceforth submit to the Board for prior approval the
proposed transactions involving investments in Assets as thereafter require
prior approval; provided, however, that the modification or revocation shall be
effective upon receipt by the Advisor and shall not be applicable to investment
transactions to which the Advisor has committed the Company prior to the date
of receipt by the Advisor of the notification.

 

2.04         Bank Accounts. The Advisor may establish and maintain one
or more bank accounts in its own name for the account of the Company or in the
name of the Company and may collect and deposit into any account or accounts,
and disburse from any account or accounts, any money on behalf of the Company,
under the terms and conditions as the Board may approve; provided that no funds
of the Company or the Partnership shall be commingled nor shall any of such
funds be commingled with the funds of the Advisor; and the Advisor shall from
time to time render accountings of the collections and payments to the Board,
its Audit Committee and the auditors of the Company.

 

2.05         Records; Access. The Advisor shall maintain records of all
its activities hereunder and make the records available for inspection by the
Board and by counsel, auditors and authorized agents of the Company, at any
time or from time to time during normal business hours. The Advisor shall at
all reasonable times have access to the books and records of the Company.

 

2.06         Limitations on Activities. Anything else in this
Agreement to the contrary notwithstanding, the Advisor shall refrain from
taking any action which, in its sole judgment made in good faith, would (a) adversely
affect the status of the Company as a REIT, (b) subject the Company to
regulation under the Investment Company Act of 1940, as amended, or (c) violate
any law, rule, regulation or statement of policy of any governmental body or
agency having jurisdiction over the Company, the Shares or any of the Company’s
securities, or otherwise not be permitted by the Articles of Incorporation or
Bylaws, except if the action shall be ordered by the Board, in which case the
Advisor shall notify promptly the Board of the Advisor’s judgment of the
potential impact of the action and shall refrain from taking the action 

 

12

 

until it receives further clarification or instructions from the Board.
In such event the Advisor shall have no liability for acting in accordance with
the specific instructions of the Board so given. The Advisor, its directors,
officers, employees and stockholders, and the directors, officers, employees
and stockholders of the Advisor’s Affiliates shall not be liable to the Company
or to the Board or Stockholders for any act or omission by the Advisor, its
directors, officers, employees or stockholders, or for any act or omission of
any Affiliate of the Advisor, its directors, officers or employees or
stockholders except as provided in Section 5.02 of this Agreement.

 

2.07         Relationship with Directors. Directors, officers and
employees of the Advisor or an Affiliate of the Advisor may serve as Directors,
officers or employees of the Company, except that no director, officer or
employee of the Advisor or its Affiliates who also is a Director shall receive
any compensation from the Company for serving as a Director other than
reasonable reimbursement for travel and related expenses incurred in attending
meetings of the Board.

 

2.08         Other Activities of the Advisor. Nothing herein contained
shall prevent the Advisor or its Affiliates from engaging in other activities,
including, without limitation, the rendering of advice to other Persons
(including other REITs) and the management of other programs advised, sponsored
or organized by the Advisor or its Affiliates; nor shall this Agreement limit
or restrict the right of any director, officer, employee, or stockholder of the
Advisor or its Affiliates to engage in any other business or to render services
of any kind to any other Person. The Advisor may, with respect to any
investment in which the Company is a participant, also render advice and
service to each and every other participant therein. The Advisor shall report
to the Board the existence of any condition or circumstance, existing or
anticipated, of which it has knowledge, which creates or could create a
conflict of interest between the Advisor’s obligations to the Company and its
obligations to or its interest in any other Person. The Advisor or its
Affiliates shall promptly disclose to the Board knowledge of such condition or
circumstance.  The Advisor shall inform
the Board at least quarterly of the investment opportunities that have been
offered to other programs with similar investment objectives sponsored by the
Sponsor, Advisor, Director or their Affiliates. 
If the Sponsor, Advisor, Director or Affiliates thereof have sponsored
other investment programs with similar investment objectives which have
investment funds available at the same time as the Company, it shall be the
duty of the Board (including the Independent Directors) to adopt the method set
forth in the Company’s most recent Prospectus for its Shares or another
reasonable method by which investments are to be allocated to the competing
investment entities and to use their best efforts to apply such method fairly
to the Company.

 

2.09         Payment of Certain Organization and Offering Expenses.  The Company shall pay directly all
Organization and Offering Expenses considered underwriting compensation by the
Financial Industry Regulatory Authority, or FINRA.  Such payments, other than Selling Commissions
and the dealer manager fee, shall apply towards the limit on Organization and
Offering Expenses reimbursable by the Company to the Advisor pursuant to Section 3.02(a)(i) below.

 

13

 

ARTICLE III

 

COMPENSATION AND REIMBURSEMENT OF SPECIFIED COSTS

 

3.01         Fees.

 

(a)           Asset Management Fee. The Company shall pay the
Advisor a monthly Asset Management Fee on the 15th day of each
month in an amount equal to 1/12 th of 1.0% of
the sum of, for each and every Asset, the higher of the Cost of Investment or
the Value of Investment.  The Advisor, in
its sole discretion, may waive, reduce or defer all or any portion of the Asset
Management Fee to which it would otherwise be entitled.

 

(b)           Acquisition and Advisory Fees. The Company
shall pay the Advisor a fee in the amount of 2.5% of the Contract Purchase
Price of each Asset as Acquisition and Advisory Fees.  The total of all Acquisition Fees and any
Acquisition Expenses shall be limited in accordance with the Articles of
Incorporation.  Acquisition and Advisory
Fees shall be paid as follows: (1) for real property (including properties
where development/redevelopment is expected), at the time of acquisition, (2) for
development/redevelopment projects (other than the initial acquisition of the
real property), at the time a final budget is approved, and (3) for loans
and similar assets (including without limitation mezzanine loans), quarterly
based on the value of loans made or acquired. 
In the case of a development/redevelopment project subject to clause (2) above,
upon completion of the development/redevelopment project, the Advisor shall
determine the actual amounts paid.  To
the extent the amounts actually paid vary from the budgeted amounts on which the
Acquisition and Advisory Fee was initially based, the Advisor will pay or
invoice the Company for 2.5% of the budget variance such that the Acquisition
and Advisory Fee is ultimately 2.5% of amounts expended on such
development/redevelopment project.  The
Advisor, in its sole discretion, may waive, reduce or defer all or any portion
of the Acquisition and Advisory Fees to which it would otherwise be entitled.

 

(c)           Disposition Fee. If the Advisor or an
Affiliate provides a substantial amount of services (as determined by a
majority of the Independent Directors) in connection with the Sale of one or
more Assets, the Advisor or the Affiliate shall receive, subject to the
satisfaction of the condition outlined below, a Disposition Fee in an amount
(the “Disposition Fee”) equal to
(subject to the limitation in the following paragraph) (i) in the case of
the sale of Property, the lesser of (A) one-half of a Competitive Real
Estate Commission or (B) 3% of the sales price of the Property and (ii) in
the case of the sale of any Asset other than Property, 3% of the sales price of
the Asset or Assets.

 

The Disposition Fee may be payable in
addition to real estate commissions paid to persons not affiliated with the
Company or the Advisor and their respective Affiliates; provided, however, that
the total real estate commissions paid to all Persons by the Company (together
with the Disposition Fee) shall in no case exceed an amount equal to the lesser
of (i) 6% of the Contract Sales Price of an Asset or (ii) the
Competitive Real Estate Commission in respect of any Property.  The Advisor, in its sole discretion, may 

 

14

 

waive, reduce or defer all or any portion of
the Disposition Fee to which it would otherwise be entitled.

 

(d)           Debt Financing Fee. In the event of any debt
financing obtained by or for the Company (including any refinancing of debt),
the Company will pay to the Advisor a debt financing fee equal to 1% of the
amount available under the financing. 
The Debt Financing Fee includes the reimbursement of the specified cost
incurred by the Advisor of engaging third parties to source debt financing, and
nothing herein shall prevent the Advisor from entering fee-splitting
arrangements with third parties with respect to the Debt Financing Fee.  The Advisor, in its sole discretion, may
waive, reduce or defer all or any portion of the Debt Financing Fee to which it
would otherwise be entitled.

 

(e)           Development Fee. If the Advisor or an
Affiliate provides the development services, the Company shall pay the Advisor
Development Fees in amounts that are usual and customary for comparable
services rendered to similar projects in the geographic market; provided,
however, that a majority of the Independent Directors must determine that such
Development Fees are fair and reasonable and on terms and conditions not less
favorable than those available from unaffiliated third parties.  Development Fees will include the
reimbursement of the specified cost incurred by the Advisor of engaging third
parties for such services.  The Advisor,
in its sole discretion, may waive, reduce or defer all or any portion of the
Development Fee to which it would otherwise be entitled.  Notwithstanding the above, the Advisor may
engage (on behalf of the Company) third parties to provide development services
pursuant to its authority under Section 2.03 and pay such third parties
all applicable Development Fees.

 

3.02         Expenses.

 

(a)           In addition to the compensation paid to the Advisor
pursuant to Section 3.01 hereof and except as noted in Section 2.09
above, the Company shall pay directly or reimburse the Advisor for all of the
costs and expenses paid or incurred by the Advisor that are in any way related
to the operations of the Company or the business of the Company or the services
the Advisor provides to the Company pursuant to this Agreement, including, but
not limited to:

 

(i)            Organization and Offering Expenses;

 

(ii)           Acquisition Fees and Acquisition Expenses;

 

(iii)          the actual cost of goods, services and materials
used by the Company and obtained from Persons not affiliated with the Advisor,
other than Acquisition Expenses, including brokerage fees paid in connection
with the purchase and sale of Shares or other securities;

 

(iv)          interest and other costs for borrowed money,
including discounts, points and other similar fees;

 

(v)           taxes and assessments on income or property and
taxes as an expense of doing business;

 

15

 

(vi)          costs associated with insurance required in
connection with the business of the Company or by the Board;

 

(vii)         expenses of managing and operating Assets owned by
the Company, whether or not payable to an Affiliate of the Advisor;

 

(viii)        all expenses in connection with payments to the Board
for attendance at meetings of the Board and Stockholders;

 

(ix)           except as otherwise limited by the Articles of
Incorporation, expenses associated with Listing or with the issuance and
distribution of Shares and other securities of the Company, such as selling
commissions and fees, advertising expenses, taxes, legal and accounting fees
and Listing and registration fees, but excluding Organization and Offering
Expenses;

 

(x)            expenses connected with payments of Distributions in
cash or otherwise made or caused to be made by the Company to the Stockholders;

 

(xi)           expenses of organizing, reorganizing, liquidating or
dissolving the Company and the expenses of filing or amending the Articles of
Incorporation;

 

(xii)          expenses of any third party transfer agent for the
Shares and of maintaining communications with Stockholders, including the cost
of preparation, printing, and mailing annual reports and other Stockholder
reports, proxy statements and other reports required by governmental entities;

 

(xiii)         personnel and related employment costs incurred by
the Advisor or its Affiliates in performing the services described herein,
including but not limited to reasonable salaries and wages, benefits and
overhead of all employees directly involved in the performance of such
services; provided, that no reimbursement shall be made for costs of such
employees of the Advisor or its Affiliates to the extent that such employees
perform services for which the Advisor receives a separate fee other than in
connection with the Advisor directly providing the Additional Services; and

 

(xiv)        audit, accounting and legal fees.

 

(b)           Expenses, other than Organization and Offering
Expenses (which shall be reimbursed in accordance with subsection (c) herein),
incurred by the Advisor on behalf of the Company and payable pursuant to this Section 3.02
shall be reimbursed no less than quarterly to the Advisor within 60 days after
the end of each quarter.  The Advisor
shall prepare a statement documenting the expenses of the Company during each
quarter, including Organization and Offering Expenses, and shall deliver the
statement to the Company within 45 days after the end of each quarter.

 

(c)           Selling Commissions and the dealer manager fee,
which are included in the definition of Organization and Offering Expenses,
shall be paid by the Company in accordance with Section 2.09 herein and
the dealer manager agreement or similar 

 

16

 

agreement or agreements that the Company
enters into in connection with any Offering. 
Organization and Offering Expenses other than Selling Commissions and
the dealer manager fee incurred by the Advisor on behalf of the Company on or
after January 1, 2009 and payable pursuant to this Section 3.02 shall
be reimbursed no less than quarterly to the Advisor within 60 days after the
end of each quarter until an aggregate of $7,500,000 of such Organization and
Offering Expenses have been reimbursed to the Advisor.  Thereafter, no such Organization and Offering
Expenses shall be reimbursed to the Advisor until the Advisor has prepared and
delivered to the Company within 90 days after the end of the year in which the
current Offering ends a reconciliation of amounts of Organization and Offering
Expenses incurred in connection with such Offering and the reimbursement
obligations of the Company therefor under this Agreement, unless the terms of
this Agreement are amended upon renewal to provide otherwise in connection with
any subsequent Offering.  The Advisor, on
behalf of itself and its Affiliates, and its and their respective successors
and assigns, hereby waives the Company’s obligation to pay $3,500,000 of
Organization and Offering Expenses (other than Selling Commissions and the
dealer manager fee) incurred by the Advisor on behalf of the Company through December 31,
2008.  Notwithstanding the foregoing, the
Company shall not reimburse the Advisor, and the Advisor shall reimburse the
Company, to the extent that the total amount spent by the Company on
Organization and Offering Expenses (other than Selling Commissions and the
dealer manager fee and excluding the $3,500,000 of Organization and Offering
Expenses reimbursement waived by the Advisor as set forth above) would exceed
1.5% of the Gross Proceeds raised in the completed Offering.

 

(d)           Notwithstanding anything to the contrary in this Section 3.02,
(i) the Advisor will be responsible for paying all of the
investment-related expenses that the Company or the Advisor incurs that are due
to third parties or in connection with providing the Additional Services with
respect to investments the Company does not make other than Non-Refundable
Payments and (ii) the Company shall be responsible for paying directly or
reimbursing the Advisor for all Non-Refundable Payments.

 

3.03         Other Services. Should the Board request that the Advisor
or any director, officer or employee thereof render services for the Company
other than set forth in Section 2.02, the services shall be separately
compensated at the rates and in the amounts as are agreed by the Advisor and
the Independent Directors, subject to the limitations contained in the Articles
of Incorporation, and shall not be deemed to be services pursuant to the terms
of this Agreement.

 

3.04         Reimbursement to the Advisor. The Company shall not
reimburse the Advisor for Total Operating Expenses to the extent that Total
Operating Expenses (including the Asset Management Fee), in the four
consecutive fiscal quarters then ended (the “Expense
Year”) exceed (the “Excess Amount”)
the greater of 2% of Average Invested Assets or 25% of Net Income for that
period of four consecutive fiscal quarters. Any Excess Amount paid to the
Advisor during a fiscal quarter shall be repaid to the Company. Reimbursement
of all or any portion of the Total Operating Expenses that exceed the
limitation set forth in the preceding sentence may, at the option of the
Advisor, be deferred without interest and may be reimbursed in any subsequent
Expense Year where such limitation would permit such reimbursement if the Total
Operating Expense were incurred during such period. Notwithstanding the
foregoing, if there is an Excess Amount in any Expense Year and the Independent
Directors determine that all 

 

17

 

or a portion of such excess was justified, based on unusual and
nonrecurring factors which they deem sufficient, the Excess Amount may be
reimbursed to the Advisor.  If the
Independent Directors determine such excess was justified, then, after the end
of any fiscal quarter of the Company for which there is an Excess Amount for
the 12 months then ended paid to the Advisor, the Advisor, at the direction of
the Independent Directors, shall cause such fact to be disclosed in the next
quarterly report of the Company or in a separate writing and sent to the
Stockholders within 60 days of such quarter end, together with an explanation
of the factors the Independent Directors considered in determining that such
Excess Amount was justified. Such determination shall be reflected in the
minutes of the meetings of the Board. The Company will not reimburse the
Advisor or its Affiliates for services for which the Advisor or its Affiliates
are entitled to compensation in the form of a separate fee. All figures used in
any computation pursuant to this Section 3.04 shall be determined in
accordance with generally accepted accounting principles applied on a
consistent basis.

 

3.05         Audit
of Advisor Payments.  It
is the intention of the parties hereto to conform strictly to the applicable
provisions hereof as to fees, reimbursements and any other amounts (the “Advisor Payments”) to be paid to the Advisor hereunder.  However, at any time, either party shall have
the right, upon reasonable written notice, to engage a separate audit, on a
confidential basis, of its own and the other party’s records, books and
accounts in respect of Advisor Payments to ascertain whether the Advisor
Payments were properly determined and paid. 
An audit may be engaged only once in any 12-month period regardless of
which party engages the audit.  Any such
audit shall be conducted by an independent certified public accounting firm of
recognized national standing designated by the party requesting the audit (the
“Requesting Party”), other than the then
current auditor of its or any of its Affiliates’ financial statements, and
shall be conducted during regular business hours and in such a manner so as not
to interfere with the Company’s or the Advisor’s regular business
activities.  The Requesting Party shall
bear the costs of the audit unless the audit conclusively reveals an
underpayment or overpayment of Advisor Payments adverse to the Requesting Party
in an amount greater than 10% of the total amount of Advisor Payments owed for
the period being inspected, in which case the other party shall bear the costs
of the audit.  Any auditor who is engaged
to perform an audit shall not be compensated on a contingent basis or any other
basis that would tend to give the auditor an interest in the outcome of the audit,
and the auditor shall perform its audit on an impartial basis and certify in
writing as such.  If the audit
conclusively reveals an overpayment or underpayment of Advisor Payments, the
Company or the Advisor shall promptly pay to the other party the amount of the
overpayment or underpayment, as the case may be, without interest; provided,
however, that in the event that the audit conclusively reveals an overpayment
of Advisor Payments and the Advisor has at any time previously waived or
forgiven in writing any Advisor Payments that it would otherwise have been
entitled to hereunder (including the $3,500,000 waiver of Organization and
Offering Expense reimbursement set forth in Section 3.02(c) above),
the Company shall credit against the overpayment any amounts previously waived
or forgiven, without interest, and the Advisor shall not be obligated to repay
the Company to the extent that the overpayments do not exceed the aggregate of
the waived or forgiven amounts not already so credited.  Any underpayment or overpayment under this
Agreement shall not be a breach of this Agreement unless and until an audit
performed in accordance with this Section 3.05 is completed and the party
who may be obligated to make a payment hereunder as a result of such audit
shall have failed to promptly make any required payment.

 

18

 

ARTICLE IV

 

TERM AND TERMINATION

 

4.01         Term; Renewal. Subject to Section 4.02 hereof, this
Agreement shall continue in force until January 4, 2010. Thereafter, this
Agreement may be renewed for an unlimited number of successive one-year terms
upon mutual consent of the parties. It is the duty of the Board to evaluate the
performance of the Advisor annually before renewing the Agreement, and each
such renewal shall be for a term of no more than one year.

 

4.02         Termination.  This Agreement will automatically terminate
upon Listing.  This agreement also may be
terminated at the option of either party upon 60 days written notice without
cause or penalty (if termination is by the Company, then the termination shall
be upon the approval of a majority of the Independent Directors).  Notwithstanding the foregoing, the provisions
of Section 4.03, Article V and Article VI shall continue in full
force and effect and shall survive the termination or expiration of this
Agreement.

 

4.03         Payments to and Duties of Advisor upon Termination.

 

(a)           After the Termination Date, the Advisor shall not be
entitled to compensation for further services hereunder except it shall be
entitled to and receive from the Company within 30 days after the effective
date of the termination all unpaid reimbursements of expenses, subject to the
provisions of Section 3.04 hereof, and all contingent liabilities related
to fees payable to the Advisor prior to termination of this Agreement.

 

(b)           The Advisor shall promptly upon termination:

 

(i)            pay over to the Company all money collected and held
for the account of the Company pursuant to this Agreement, after deducting any
accrued compensation and reimbursement for its expenses to which it is then
entitled;

 

(ii)           deliver to the Board a full accounting, including a
statement showing all payments collected by it and a statement of all money
held by it, covering the period following the date of the last accounting
furnished to the Board;

 

(iii)          deliver to the Board all assets, including the
Assets, and documents of the Company then in the custody of the Advisor; and

 

(iv)          cooperate with the Company and take all reasonable
actions requested by the Company to provide an orderly management transition.

 

(c)                                  (i)            In the event that this
Agreement is terminated or allowed to expire without renewal due to a material
breach by the Advisor of this Agreement, which termination or expiration occurs
prior to the Company’s or the Advisor’s reimbursement of Organization and
Offering Expenses pursuant to the provisions of Section 3.02(c), the
appropriate party, within 90 days after the end of the year in which the
Offering terminates shall make the necessary reimbursement.

 

19

 

(ii)           In the event that an Advisory Management Agreement
Termination (as such term is defined in the Articles of Incorporation) occurs
after the commencement of an Offering and prior to the Company’s or the
Advisor’s reimbursement of Organization and Offering Expenses pursuant to the
provisions of Section 3.02(c), the appropriate party, within 90 days after
the end of the year in which such Offering terminates shall make the necessary
reimbursement.

 

ARTICLE V

 

INDEMNIFICATION

 

5.01         Indemnification
by the Company.

 

(a)           The Company shall indemnify and hold harmless the
Advisor and its Affiliates, including their respective officers, directors,
partners and employees, from all liability, claims, damages or losses arising
in the performance of their duties hereunder, and related expenses, including
reasonable attorneys’ fees, to the extent such liability, claims, damages or
losses and related expenses are not fully reimbursed by insurance, subject to
any limitations imposed by the laws of the State of Maryland, the Articles of
Incorporation and the NASAA Guidelines. Notwithstanding the foregoing, the
Company shall not indemnify or hold harmless the Advisor or its Affiliates,
including their respective officers, directors, partners and employees, for any
liability or loss suffered by the Advisor or its Affiliates, including their
respective officers, directors, partners and employees, nor shall it provide
that the Advisor or its Affiliates, including their respective officers,
directors, partners and employees, be held harmless for any loss or liability
suffered by the Company, unless all of the following conditions are met: (i) the
Advisor or its Affiliates, including their respective officers, directors,
partners and employees, have determined, in good faith, that the course of
conduct which caused the loss or liability was in the best interests of the
Company; (ii) the Advisor or its Affiliates, including their respective
officers, directors, partners and employees, were acting on behalf of or performing
services of the Company; (iii) the liability or loss was not the result of
negligence or misconduct by the Advisor or its Affiliates, including their
respective officers, directors, partners and employees; and (iv) the
indemnification or agreement to hold harmless is recoverable only out of the
Company’s net assets and not from stockholders. Notwithstanding the foregoing,
the Advisor and its Affiliates, including their respective officers, directors,
partners and employees, shall not be indemnified by the Company for any losses,
liability or expenses arising from or out of an alleged violation of federal or
state securities laws by such party unless one or more of the following
conditions are met: (i) there has been a successful adjudication on the
merits of each count involving alleged securities law violations as to the
particular indemnitee; (ii) such claims have been dismissed with prejudice
on the merits by a court of competent jurisdiction as to the particular
indemnitee; and (iii) a court of competent jurisdiction approves a
settlement of the claims against a particular indemnitee and finds that
indemnification of the settlement and the related costs should be made, and the
court considering the request for indemnification has been advised of the position
of the Securities and Exchange Commission and of the published position of any
state securities

 

20

 

regulatory authority in which securities of
the Company were offered or sold as to indemnification for violations of
securities laws.

 

(b)           The Company may advance funds to the Advisor or its
Affiliates, including their respective officers, directors, partners and
employees, for legal expenses and other costs incurred as a result of any legal
action for which indemnification is being sought is permissible only if all of
the following conditions are satisfied: (i) the legal action relates to
acts or omissions with respect to the performance of duties or services on
behalf of the Company; (ii) the legal action is initiated by a third-party
who is not a stockholder or the legal action is initiated by a stockholder
acting in his or her capacity as such and a court of competent jurisdiction
specifically approves such advancement; (iii) the Advisor or its Affiliates,
including their respective officers, directors, partners and employees,
undertake to repay the advanced funds to the Company together with the
applicable legal rate of interest thereon, in cases in which the Advisor or its
Affiliates, including their respective officers, directors, partners and
employees, are found not to be entitled to indemnification.

 

(c)           Notwithstanding the provisions of this Section 5.01,
the Advisor shall not be entitled to indemnification or be held harmless
pursuant to this Section 5.01 for any activity which the Advisor shall be
required to indemnify or hold harmless the Company pursuant to Section 5.02.

 

5.02         Indemnification by Advisor. The Advisor shall
indemnify and hold harmless the Company from contract or other liability,
claims, damages, taxes or losses and related expenses including attorneys’
fees, to the extent that the liability, claims, damages, taxes or losses and
related expenses are not fully reimbursed by insurance and are incurred by
reason of the Advisor’s bad faith, fraud, misfeasance, misconduct, gross
negligence or reckless disregard of its duties, but the Advisor shall not be
held responsible for any action of the Board in following or declining to
follow any advice or recommendation given by the Advisor.

 

ARTICLE VI

 

MISCELLANEOUS

 

6.01         Assignment to an Affiliate. This Agreement and any
rights, duties, liabilities and obligations hereunder and the fees and
compensation related thereto may be assigned by the Advisor, in whole or in
part, to a duly qualified and licensed Affiliate of the Advisor without
obtaining the approval of the Board.  Any
other assignment shall be made only with the approval of a majority of the
Board (including a majority of the Independent Directors). The Advisor may
assign any rights to receive fees or other payments under this Agreement
without obtaining the approval of the Board. This Agreement shall not be
assigned by the Company without the consent of the Advisor, except in the case
of an assignment by the Company to a corporation or other organization which is
a successor to all of the assets, rights and obligations of the Company, in
which case the successor organization shall be bound hereunder and by the terms
of said assignment in the same manner as the Company is bound by this
Agreement. This Agreement shall be binding on successors to the Company
resulting from a Change of Control or 

 

21

 

sale of all or substantially all the assets of the Company or the
Partnership, and shall likewise be binding upon any successor to the Advisor.

 

6.02         Relationship of Advisor and Company. The Company and the
Advisor are not partners or joint venturers with each other, and nothing in
this Agreement shall be construed to make them such partners or joint venturers
or impose any liability as such on either of them.

 

6.03         Notices. Any notice, report or other communication required
or permitted to be given hereunder shall be in writing unless some other method
of giving such notice, report or other communication is required by the
Articles of Incorporation, the Bylaws, or accepted by the party to whom it is
given, and shall be given by being delivered by hand or by overnight mail or
other overnight delivery service to the addresses set forth herein:

 

	
  To the Directors and to the Company:

  	
   

  	
  Behringer Harvard Opportunity REIT II, Inc.

  
	
   

  	
   

  	
  15601 Dallas Parkway

  
	
   

  	
   

  	
  Suite 600

  
	
   

  	
   

  	
  Addison, Texas 75001

  
	
   

  	
   

  	
   

  
	
  To the Advisor:

  	
   

  	
  Behringer Harvard
  Opportunity Advisors II LP

  
	
   

  	
   

  	
  15601 Dallas Parkway

  
	
   

  	
   

  	
  Suite 600

  
	
   

  	
   

  	
  Addison, Texas 75001

  

 

Either party shall, as soon as reasonably practicable, give notice in
writing to the other party of a change in its address for the purposes of this Section 6.03.

 

6.04         Modification. This Agreement shall not be changed,
modified, or amended, in whole or in part, except by an instrument in writing
signed by both parties hereto, or their respective successors or permitted
assignees.

 

6.05         Severability. The provisions of this Agreement are
independent of and severable from each other, and no provision shall be
affected or rendered invalid or unenforceable by virtue of the fact that for
any reason any other or others of them may be invalid or unenforceable in whole
or in part.

 

6.06         Choice of Law; Venue. The provisions of this
Agreement shall be construed and interpreted in accordance with the laws of the
State of Texas, and venue for any action brought with respect to any claims
arising out of this Agreement shall be brought exclusively in Dallas County,
Texas.

 

6.07         Entire Agreement. This Agreement contains
the entire agreement and understanding among the parties hereto with respect to
the subject matter hereof, and supersedes all prior and contemporaneous
agreements, understandings, inducements and conditions, express or implied,
oral or written, of any nature whatsoever with respect to the subject matter
hereof. The express terms hereof control and supersede any course of
performance and/or usage of the trade inconsistent with any of the terms
hereof. This Agreement may not be modified or amended other than by an
agreement in writing signed by each of the parties hereto.

 

22

 

6.08         Waiver. Neither the failure nor any delay on the part of a
party to exercise any right, remedy, power or privilege under this Agreement
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, remedy, power or privilege preclude any other or further exercise of
the same or of any other right, remedy, power or privilege, nor shall any
waiver of any right, remedy, power or privilege with respect to any occurrence
be construed as a waiver of the right, remedy, power or privilege with respect
to any other occurrence. No waiver shall be effective unless it is in writing
and is signed by the party asserted to have granted the waiver.

 

6.09         Gender; Number. Words used herein regardless of the number
and gender specifically used, shall be deemed and construed to include any
other number, singular or plural, and any other gender, masculine, feminine or
neuter, as the context requires.

 

6.10         Headings. The titles and headings of sections and
subsections contained in this Agreement are for convenience only, and they
neither form a part of this Agreement nor are they to be used in the
construction or interpretation hereof.

 

6.11         Execution in Counterparts. This Agreement may be
executed in multiple counterparts, each of which shall be deemed to be an
original as against any party whose signature appears thereon, and all of which
shall together constitute one and the same instrument. This Agreement shall
become binding when one or more counterparts hereof, individually or taken
together, shall bear the signatures of all of the parties reflected hereon as
the signatories.

 

6.12         Initial Investment. The Advisor or one of its
Affiliates has contributed $200,000 (the “Initial
Investment”) in exchange for the initial issuance of Shares of the
Company. The Advisor or its Affiliates may not sell any of the Shares purchased
with the Initial Investment while the Advisor acts in an advisory capacity to
the Company. The restrictions included above shall not apply to any Shares
acquired by the Advisor or its Affiliates other than the Shares acquired
through the Initial Investment. Neither the Advisor nor its Affiliates shall vote
any Shares they now own, or hereafter acquires, in any vote for the election of
Directors or any vote regarding the approval or termination of any contract
with the Advisor or any of its Affiliates.

 

6.13         Ownership of Proprietary Property. The Advisor retains
ownership of and reserves all Intellectual Property Rights in the Proprietary
Property. To the extent that the Company has or obtains any claim to any right,
title or interest in the Proprietary Property, including without limitation in
any suggestions, enhancements or contributions that Company may provide
regarding the Proprietary Property, the Company hereby assigns and transfers
exclusively to the Advisor all right, title and interest, including without
limitation all Intellectual Property Rights, free and clear of any liens,
encumbrances or licenses in favor of the Company or any other party, in and to
the Proprietary Property. In addition, at the Advisor’s expense, the Company
will perform any acts that may be deemed desirable by the Advisor to evidence
more fully the transfer of ownership of right, title and interest in the
Proprietary Property to the Advisor, including but not limited to the execution
of any instruments or documents now or hereafter requested by the Advisor to
perfect, defend or confirm the assignment described herein, in a form
determined by the Advisor.

 

6.14         Treatment Under Texas Margin Tax. For purposes of the Texas
margin tax, the Advisor’s performance of the services specified in this
Agreement will cause the Advisor to 

 

23

 

conduct part of the active trade or business of the Company, and the
compensation specified in Article III includes both the payment of
management fees and the reimbursement of specified costs incurred in the
Advisor’s conduct of the active trade or business of the Company.  Therefore, the Advisor and Company intend
Advisor to be, and shall treat Advisor as, a “management company” within the
meaning of Section 171.0001(11) of the Texas Tax Code.  The Company and the Advisor will apply
Sections 171.1011(m-1) and 171.1013(f)-(g) of the Texas Tax Code to the
Company’s reimbursements paid to the Advisor pursuant to this Agreement of
specified costs and wages and compensation. 
The Advisor and the Company further recognize and intend that (i) as
a result of the fiduciary relationship created by this Agreement and
acknowledged in Section 2.02, reimbursements paid to the Advisor pursuant
to this Agreement are “flow-though funds” that the Advisor is mandated by law or
fiduciary duty to distribute, within the meaning of Section 171.1011(f) of
the Texas Tax Code, and (ii) as a result of Advisor’s contractual duties
under this Agreement, certain reimbursements under this Agreement are
“flow-through funds” mandated by contract to be distributed within the meaning
of Section 171.1011(g) of the Texas Tax Code.  The terms of this Agreement shall be
interpreted in a manner consistent with the characterization of the Advisor as
a “management company” as defined in Section 171.0001(11), and with the
characterization of the reimbursements as “flow-though funds” within the
meaning of Section 171.1011(f)-(g) of the Texas Tax Code.

 

6.15 Non-Solicitation. 
During the period commencing on the date on which the Original Agreement was entered
into and ending one year following the termination of this Agreement, the
Company shall not, without the Advisor’s prior written consent, directly or
indirectly, (i) solicit or encourage any person to leave the employment or
other service of the Advisor or its affiliates or (ii) hire, on behalf of
the Company or any other person or entity, any person who has left the
employment within the one year period following the termination of that
person’s employment the Advisor or its affiliates.  During the period
commencing on the date of the Original Agreement through and ending one year
following the termination of this Agreement, the Company shall not, whether for
its own account or for the account of any other person, firm, corporation or
other business organization, intentionally interfere with the relationship of
the Advisor or it affiliates with, or endeavor to entice away from the Advisor
or its affiliates, any person who during the term of the Agreement is, or
during the preceding one-year period was, a customer of the Advisor or its
affiliates.

 

[The remainder of this page intentionally
blank]

 

24

 

IN WITNESS
WHEREOF, the parties hereto have executed this Amended and Restated Advisory
Management Agreement as of the date first above written.

 

	
   

  	
  BEHRINGER HARVARD OPPORTUNITY REIT II, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/Gerald J. Reihsen, III

  
	
   

  	
   

  	
  Gerald J. Reihsen, III

  
	
   

  	
   

  	
  Executive Vice President — Corporate Development & Legal

  
	
   

  	
   

  
	
   

  	
  BEHRINGER HARVARD OPPORTUNITY ADVISORS II LP

  
	
   

  	
   

  
	
   

  	
  By: Harvard Property Trust, LLC, its General Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/Gerald J. Reihsen, III

  
	
   

  	
   

  	
  Gerald J. Reihsen, III

  
	
   

  	
   

  	
  Executive Vice President — Corporate Development & Legal and
  Secretary

  

 

25Exhibit 10.2

 

JUNIOR LOAN AGREEMENT

 

by and between

 

 

REST EASY LLC,

 

a Delaware limited liability company,

 

as Borrower,

 

 

and

 

 

BEHRINGER HARVARD PAL I, LLC,

 

a Delaware limited liability company,

 

as Lender,

 

 

with respect to a

 

$25,000,000 term Loan facility

 

 

 

TABLE OF CONTENTS

 

	
  Article I

  	
  General
  Information

  	
  1

  
	
  Section 1.1

  	
  Conditions
  to Closing; Fees

  	
  1

  
	
  Section 1.2

  	
  Schedules

  	
  2

  
	
  Section 1.3

  	
  Defined
  Terms

  	
  2

  
	
  Section 1.4

  	
  Lock
  Box Agreement

  	
  2

  
	
  Article II

  	
  Advances
  of the Junior Loan

  	
  3

  
	
  Section 2.1

  	
  Junior
  Loan Advances, Requisitions and Drawings

  	
  3

  
	
  Section 2.2

  	
  Direct
  Costs Verification

  	
  5

  
	
  Section 2.3

  	
  Office
  for Advances

  	
  6

  
	
  Section 2.4

  	
  Advances
  After Construction; Monthly Advances

  	
  6

  
	
  Section 2.5

  	
  Notice
  of Lender’s Rights to Make Advances

  	
  6

  
	
  Section 2.6

  	
  Evidence
  of and Security for Junior Loan

  	
  6

  
	
  Section 2.7

  	
  Junior
  Loan Reallocation

  	
  7

  
	
  Section 2.8

  	
  Construction
  Agreements

  	
  7

  
	
  Section 2.9

  	
  Advances
  for Costs of Improvements

  	
  7

  
	
  Section 2.10

  	
  Additional
  Terms Regarding Advances

  	
  7

  
	
  Section 2.11

  	
  Liability
  of Lender

  	
  7

  
	
  Section 2.12

  	
  Payments
  to Lender

  	
  7

  
	
  Section 2.13

  	
  Verified
  Statement

  	
  8

  
	
  Article III

  	
  Representations
  and Warranties

  	
  8

  
	
  Section 3.1

  	
  Organization,
  Power and Authority of Borrower and Managing Member; Junior Loan Documents

  	
  8

  
	
  Section 3.2

  	
  Other
  Documents; Laws

  	
  9

  
	
  Section 3.3

  	
  Taxes

  	
  9

  
	
  Section 3.4

  	
  Legal
  Actions

  	
  9

  
	
  Section 3.5

  	
  Nature
  of Junior Loan

  	
  10

  
	
  Section 3.6

  	
  [Reserved]

  	
  10

  
	
  Section 3.7

  	
  Financial
  Statements

  	
  10

  
	
  Section 3.8

  	
  ERISA
  and Prohibited Transactions

  	
  10

  
	
  Section 3.9

  	
  Compliance
  with Zoning and Other Requirements

  	
  10

  
	
  Section 3.10

  	
  Plans
  and Specifications

  	
  10

  
				

 

ii

 

	
  Section 3.11

  	
  Building
  Permits; Other Permits

  	
  11

  
	
  Section 3.12

  	
  Utilities

  	
  11

  
	
  Section 3.13

  	
  Access;
  Roads

  	
  11

  
	
  Section 3.14

  	
  Other
  Liens

  	
  12

  
	
  Section 3.15

  	
  No
  Material Adverse Change

  	
  12

  
	
  Section 3.16

  	
  Defaults

  	
  12

  
	
  Section 3.17

  	
  Affirmation
  of Representations and Warranties

  	
  12

  
	
  Section 3.18

  	
  Governmental
  Authorities

  	
  12

  
	
  Section 3.19

  	
  Prior
  Work

  	
  13

  
	
  Section 3.20

  	
  Hazardous
  Materials; Related Claims

  	
  13

  
	
  Section 3.21

  	
  Not an
  Investment Company

  	
  13

  
	
  Section 3.22

  	
  Patriot
  Act

  	
  13

  
	
  Section 3.23

  	
  Compliance
  with Laws and Project Documents

  	
  14

  
	
  Article IV

  	
  Affirmative
  Covenants and Agreements

  	
  14

  
	
  Section 4.1

  	
  Commencement
  and Completion of Construction

  	
  14

  
	
  Section 4.2

  	
  Approval
  of Construction

  	
  14

  
	
  Section 4.3

  	
  Deposits

  	
  15

  
	
  Section 4.4

  	
  Compliance
  with Laws; Encroachments

  	
  15

  
	
  Section 4.5

  	
  Inspections;
  Cooperation

  	
  16

  
	
  Section 4.6

  	
  Contracts,
  Vouchers and Receipts

  	
  16

  
	
  Section 4.7

  	
  Payment
  and Performance of Contractual Obligations

  	
  16

  
	
  Section 4.8

  	
  Correction
  of Construction Defects

  	
  17

  
	
  Section 4.9

  	
  Insurance

  	
  17

  
	
  Section 4.10

  	
  Adjustment
  of Condemnation and Insurance Claims

  	
  19

  
	
  Section 4.11

  	
  Utilization
  of Net Award

  	
  20

  
	
  Section 4.12

  	
  Management

  	
  20

  
	
  Section 4.13

  	
  Books
  and Records; Financial Statements; Tax Returns

  	
  21

  
	
  Section 4.14

  	
  Estoppel
  Certificates

  	
  22

  
	
  Section 4.15

  	
  Taxes

  	
  22

  
	
  Section 4.16

  	
  Lender’s
  Rights to Pay and Perform

  	
  23

  
	
  Section 4.17

  	
  Reimbursement;
  Interest

  	
  23

  
	
  Section 4.18

  	
  Notification
  by Borrower

  	
  23

  
	
  Section 4.19

  	
  Indemnification
  by Borrower

  	
  24

  
				

 

iii

 

	
  Section 4.20

  	
  Fees
  and Expenses

  	
  24

  
	
  Section 4.21

  	
  Appraisals

  	
  25

  
	
  Section 4.22

  	
  Yearly
  Budget Approvals

  	
  25

  
	
  Section 4.23

  	
  [Reserved]

  	
  25

  
	
  Section 4.24

  	
  Permanent
  Loan/Capital Markets Transaction

  	
  25

  
	
  Section 4.25

  	
  [Reserved]

  	
  26

  
	
  Section 4.26

  	
  [Reserved]

  	
  26

  
	
  Section 4.27

  	
  [Reserved]

  	
  26

  
	
  Section 4.28

  	
  Organizational
  Documents

  	
  26

  
	
  Section 4.29

  	
  Subordination

  	
  26

  
	
  Section 4.30

  	
  Patriot
  Act

  	
  26

  
	
  Section 4.31

  	
  Single
  Purpose Covenants

  	
  26

  
	
  Section 4.32

  	
  Preservation
  of Rights

  	
  27

  
	
  Section 4.33

  	
  Income
  from Project; Rents

  	
  27

  
	
  Section 4.34

  	
  Notice
  to Lender

  	
  27

  
	
  Section 4.35

  	
  Site
  Assessments and Information

  	
  28

  
	
  Section 4.36

  	
  Response
  to Releases, Non-Compliance and Environmental Claims

  	
  28

  
	
  Section 4.37

  	
  Delivery
  and Maintenance of Payment and Performance Bond

  	
  29

  
	
  Section 4.38

  	
  Intercreditor
  Agreement

  	
  29

  
	
  Article V

  	
  Negative
  Covenants

  	
  29

  
	
  Section 5.1

  	
  Conditional
  Sales

  	
  29

  
	
  Section 5.2

  	
  Changes
  to Plans and Specifications

  	
  29

  
	
  Section 5.3

  	
  Insurance
  Policies and Bonds

  	
  29

  
	
  Section 5.4

  	
  Commingling

  	
  29

  
	
  Section 5.5

  	
  Additional
  Debt

  	
  29

  
	
  Section 5.6

  	
  Compliance
  with Environmental Requirements

  	
  30

  
	
  Section 5.7

  	
  Lease

  	
  30

  
	
  Section 5.8

  	
  Swap
  Contracts

  	
  30

  
	
  Section 5.9

  	
  Construction

  	
  30

  
	
  Section 5.10

  	
  Project
  Document Modifications

  	
  31

  
	
  Article VI

  	
  Events
  of Default

  	
  31

  
	
  Section 6.1

  	
  Payment
  Default

  	
  31

  
				

 

iv

 

	
  Section 6.2

  	
  Default
  Under Other Junior Loan Documents and Project Documents

  	
  31

  
	
  Section 6.3

  	
  Accuracy
  of Information; Representations and Warranties

  	
  31

  
	
  Section 6.4

  	
  Deposits

  	
  31

  
	
  Section 6.5

  	
  Insurance
  Obligations

  	
  32

  
	
  Section 6.6

  	
  Other
  Obligations

  	
  32

  
	
  Section 6.7

  	
  Progress
  of Construction

  	
  32

  
	
  Section 6.8

  	
  Damage
  to Improvements

  	
  32

  
	
  Section 6.9

  	
  Lapse
  of Permits or Approvals

  	
  32

  
	
  Section 6.10

  	
  Completion
  of Construction

  	
  32

  
	
  Section 6.11

  	
  Mechanic’s
  Lien

  	
  33

  
	
  Section 6.12

  	
  Survey
  Matters

  	
  33

  
	
  Section 6.13

  	
  Design/Build
  Contractor Default

  	
  33

  
	
  Section 6.14

  	
  Senior
  and Subordinate Loan Default

  	
  33

  
	
  Section 6.15

  	
  Bankruptcy

  	
  33

  
	
  Section 6.16

  	
  Appointment
  of Receiver, Trustee, Liquidator

  	
  33

  
	
  Section 6.17

  	
  Inability
  to Pay Debts; Judgment

  	
  34

  
	
  Section 6.18

  	
  Dissolution;
  Change in Business Status

  	
  34

  
	
  Section 6.19

  	
  Default
  Under Other Indebtedness

  	
  34

  
	
  Section 6.20

  	
  Liens

  	
  34

  
	
  Section 6.21

  	
  Change
  in Controlling Interest

  	
  34

  
	
  Section 6.22

  	
  Material
  Adverse Change

  	
  34

  
	
  Section 6.23

  	
  Termination
  of Lease or other Project Documents

  	
  34

  
	
  Section 6.24

  	
  Default
  Under Guaranty

  	
  35

  
	
  Article VII

  	
  Remedies
  on Default

  	
  35

  
	
  Section 7.1

  	
  Remedies
  on Default

  	
  35

  
	
  Section 7.2

  	
  No
  Release or Waiver; Remedies Cumulative and Concurrent

  	
  37

  
	
  Article VIII

  	
  Miscellaneous

  	
  37

  
	
  Section 8.1

  	
  Further
  Assurances; Authorization to File Documents

  	
  37

  
	
  Section 8.2

  	
  No
  Warranty by Lender

  	
  38

  
	
  Section 8.3

  	
  Standard
  of Conduct of Lender

  	
  38

  
	
  Section 8.4

  	
  No
  Partnership

  	
  38

  
	
  Section 8.5

  	
  Severability

  	
  38

  
				

 

v

 

	
  Section 8.6

  	
  Notices

  	
  39

  
	
  Section 8.7

  	
  Permitted
  Successors and Assigns; Disclosure of Information

  	
  40

  
	
  Section 8.8

  	
  Amendment;
  Modification; Waiver

  	
  41

  
	
  Section 8.9

  	
  Third
  Parties; Benefit

  	
  41

  
	
  Section 8.10

  	
  Rules of
  Construction

  	
  41

  
	
  Section 8.11

  	
  Counterparts

  	
  42

  
	
  Section 8.12

  	
  Signs;
  Publicity

  	
  42

  
	
  Section 8.13

  	
  Governing
  Law

  	
  42

  
	
  Section 8.14

  	
  Time
  of Essence

  	
  43

  
	
  Section 8.15

  	
  Electronic
  Transmission of Data

  	
  43

  
	
  Section 8.16

  	
  Dispute
  Resolution

  	
  43

  
	
  Section 8.17

  	
  Nature
  of Obligations

  	
  45

  
	
  Section 8.18

  	
  Waiver
  of Jury Trial

  	
  46

  
	
  Section 8.19

  	
  Additional
  Waivers

  	
  46

  
	
  Section 8.20

  	
  Limitation
  on Liability

  	
  47

  
	
  Section 8.21

  	
  Entire
  Agreement

  	
  47

  
	
  Section 8.22

  	
  Lost
  Junior Note

  	
  47

  
	
  Section 8.23

  	
  Method
  of Payment

  	
  48

  
	
  Section 8.24

  	
  Pledge
  to the Federal Reserve

  	
  48

  
	
  Section 8.25

  	
  Right
  of Setoff

  	
  48

  
	
  Section 8.26

  	
  Usury

  	
  48

  
	
  Section 8.27

  	
  Application
  of Payments

  	
  48

  
	
  Section 8.28

  	
  Payment
  Date Adjustment for Non-Business Days

  	
  49

  
	
  Section 8.29

  	
  Payment
  of Fees and Expenses

  	
  49

  
	
  Section 8.30

  	
  [Reserved]

  	
  49

  
	
  Section 8.31

  	
  Capital
  Adequacy

  	
  49

  
	
  Section 8.32

  	
  Right
  to Sell Junior Loan to Participant

  	
  50

  
	
  Section 8.33

  	
  Junior
  Loan Assignment

  	
  50

  
	
  Section 8.34

  	
  [Reserved]

  	
  51

  
	
  Section 8.35

  	
  Integration

  	
  51

  
	
  Section 8.36

  	
  Use of
  Proceeds

  	
  51

  
	
  Section 8.37

  	
  [Reserved]

  	
  51

  
	
  Section 8.38

  	
  [Reserved]

  	
  51

  

 

vi

 

	
  Section 8.39

  	
  [Reserved]

  	
  51

  
	
  Section 8.40

  	
  Administrative
  Agent

  	
  51

  
	
  Section 8.41

  	
  Appraisal

  	
  53

  
	
  Section 8.42

  	
  USA
  Patriot Act Notice

  	
  54

  
	
  Section 8.43

  	
  [Reserved]

  	
  54

  
	
  Section 8.44

  	
  Confidentiality

  	
  54

  
	
  Section 8.45

  	
  Termination

  	
  55

  
	
  Section 8.46

  	
  Documents,
  etc. to be Satisfactory

  	
  55

  
	
  Section 8.47

  	
  Factual
  Matters

  	
  56

  
	
  Section 8.48

  	
  Modification
  of Junior Loan in Accordance With Lease

  	
  56

  
	
  Section 8.49

  	
  Not
  Government Obligations

  	
  56

  
	
  Section 8.50

  	
  Refinancing
  of Senior Loan

  	
  56

  
	
  Section 8.51

  	
  Guarantor
  Controlled Person

  	
  57

  
	
  Section 8.52

  	
  New
  York Contacts

  	
  57

  
	
  Section 8.53

  	
  Payment
  at Maturity

  	
  57

  
	
  Section 8.54

  	
  Payment
  in Full of Senior Loan/Purchase of Senior Loan

  	
  57

  
	
  Section 8.55

  	
  Refinance
  of Subordinate Loan

  	
  58

  

 

vii

 

SCHEDULES TO JUNIOR
LOAN AGREEMENT

 

	
  Schedule
  1

  	
  Definitions

  	
   

  
	
  Schedule
  2

  	
  Form of
  Draw Request

  	
   

  
	
  Schedule
  3

  	
  Component
  Budgets

  	
   

  
	
  Schedule
  4

  	
  Project
  Schedule

  	
   

  
	
  Schedule
  5

  	
  Additional
  Terms Regarding Advances

  	
   

  
	
  Schedule
  6

  	
  Form of
  Guaranty and Indemnity

  	
   

  
	
  Schedule 7

  	
  Lien Waivers

  	
   

  
	
  Schedule 8

  	
  [Reserved]

  	
   

  
	
  Schedule 9

  	
  [Reserved]

  	
   

  
	
  Schedule 10

  	
  [Reserved]

  	
   

  
	
  Schedule 11

  	
  Lien Waiver

  	
   

  
	
  Schedule 12

  	
  Construction
  Development Budget

  	
   

  
	
  Schedule 13

  	
  Litigation

  	
   

  
	
  Schedule 14

  	
  Support Leases and
  Licenses

  	
   

  

 

viii

 

Junior Loan Agreement

 

This Junior Loan Agreement (as the same may
be amended or supplemented from time to time, this “Agreement”)
is made as of the 14th day of
August, 2009, by and between Rest Easy LLC, a Delaware limited liability
company (together with its successors and assigns, the “Borrower”),
and Behringer Harvard PAL I, LLC, a Delaware limited liability company (together with its successors and
assigns, the “Lender” or “Junior Lender”).

 

Recitals

 

Borrower has applied to Lender for a Loan
(the “Junior Loan”) to finance certain
costs related to the construction, revitalization, renovation and development
of improvements on real property located or to be located at various
United States Army (the “Army”)
installations, specifically, Fort Hood, Texas, Fort Leavenworth, Kansas,
Fort Myer, Virginia, Fort Polk, Louisiana, Fort Riley, Kansas,
Fort Rucker, Alabama, Fort Sam Houston, Texas, Tripler Army Medical
Center and Fort Shafter, Hawaii, Fort Sill, Oklahoma, and Yuma Proving
Ground, Arizona, through the Privatization of Army Lodging (“PAL”) pursuant to Title 10,
United States Code, Section 2871 et. seq. In
connection with the implementation of the PAL, the Army has agreed, among other
things, to transfer the use of a portion of the installations’ lands under a
long-term ground lease and several shorter term support leases and licenses and
to convey the existing lodging and certain other improvements on the respective
installations to the Borrower. The rentals, profits and income from such
improvements will serve, together with the Mortgages and other Collateral, as
security for the Junior Loan. Lender has agreed to make the Junior Loan on the
terms and conditions set forth in this Agreement and in the other documents
evidencing and securing the Junior Loan.

 

Now, therefore, in consideration of the premises, and in further
consideration of the mutual covenants and agreements herein set forth, the receipt and sufficiency of which are
hereby acknowledged, the parties covenant and agree as follows:

 

Agreements

 

Article I

General Information

 

Section 1.1             Conditions to Closing; Fees.

 

(a)           The conditions precedent to closing the Junior Loan
and recording the Mortgages set forth in the Letter of Intent are satisfied,
subject to Borrower’s payment of the commitment fee as provided in Section 1.1(c) below
and the delivery of the Guaranty as provided in Section 1.1(f) below.

 

(b)           On or prior to the Closing, Borrower shall (i) pay
to Lender an initial commitment fee for Lender’s commitment to fund the Junior
Loan equal to $500,000, payable in immediately available funds, and (ii) pay,
or provide funds for payment of, all reasonable costs and expenses incurred in
connection with the Junior Loan, including, but 

 

1

 

not limited to,
Lender’s reasonable documentation fees, attorneys’ fees (exclusive of Lender’s
in-house attorneys’ fees), travel expenses and all expenses directly associated
with due diligence, including all expenses described in the Letter of Intent.
Borrower shall separately be responsible for payment of all attorneys’ fees
(other than Lender’s in-house counsel), including all local counsel fees and
expenses.

 

(c)           On or prior to the Closing, Lender shall have
received: (i) executed copies of this Agreement, the Junior Note, the
Mortgages, the Environmental Agreement, the Design/Build Agreement, and the
financing statements, (ii) insurance policies or certificates of insurers
evidencing the insurance required by the Mortgages, (iii) paid title
insurance policies in ALTA 1990 form or such other form acceptable to Lender,
in the amount of the Junior Note, insuring the Mortgages to be valid liens on
the Property free and clear of all defects and encumbrances not previously
approved by Lender or its counsel, which shall contain no survey exceptions
other than those previously approved by Lender, full coverage against mechanics’
and materialmen’s liens, subject to availability under applicable law or
commercial title insurance practices, an undertaking by the issuer thereof to
provide the notice of title continuation or endorsement above and a pending
disbursements clause (or such other comparable clause or affirmative insurance
or endorsement to title policy as is available in such jurisdiction), (iv) opinions
of counsel for Borrower in form and substance reasonably satisfactory to
Lender, and (v) such other documents, instruments or assurances as Lender
or its counsel may reasonably request.

 

(d)           No fees payable hereunder, including in this Section 1.1,
shall be deemed to be paid with respect to the acquisition of any interest in
real property located in the State of Hawaii.

 

(e)           As a condition precedent to Lender’s obligation to
fund any portion of the Loan, Borrower must cause Guarantor to execute and
deliver the Guaranty at Closing.

 

Section 1.2             Schedules.

 

The Schedules attached to this Agreement are
incorporated herein and made a part hereof.

 

Section 1.3             Defined Terms.

 

Capitalized terms in this Agreement shall
have the meanings ascribed to such terms in the Preamble hereto and in Schedule 1.

 

Section 1.4             Lock Box Agreement.

 

At or prior to Closing, Borrower will enter
into the Lock Box Agreement and will establish, or will cause to be
established, the Lock Box Account and each of the other accounts and
subaccounts contemplated by the Lock Box Agreement. All Project revenues will
be applied, held and disbursed in the order of priority, and in accordance with
the terms and conditions of the Lock Box Agreement. Except as otherwise
provided in the Lock Box Agreement, Borrower will cause all Project revenues to
be deposited into one of the Collection Accounts in accordance with the Lock
Box Agreement. Funds deposited into the Collection Accounts shall be swept into
the Revenue Subaccount in accordance with the Lock Box Agreement.

 

2

 

Article II

Advances of the Junior
Loan

 

Section 2.1             Junior Loan Advances, Requisitions and
Drawings.

 

(a)           Borrower agrees to borrow the Junior Loan from Lender,
and Lender agrees to lend the Junior Loan to Borrower, subject to the terms and
conditions herein set forth, in incremental advances which will not exceed, in
the aggregate, the Junior Loan Amount. Interest shall accrue and be payable in
arrears only on sums advanced hereunder for the period of time outstanding. The
Junior Loan is not a revolving loan; amounts repaid may not be re-borrowed.

 

(b)           Subject to the provisions of this Agreement, Lender
will advance and Borrower will accept the Junior Loan installments as follows:

 

The Initial Advance will be made upon the
satisfaction of the applicable conditions and upon payment of the then-due fees
set forth in Section 1.1 and this Article II hereof, and all
subsequent Advances shall be made periodically thereafter, upon the
satisfaction of the applicable conditions set forth herein, in amounts which
shall be equal to the aggregate of the unpaid and unreimbursed Direct Costs and
Indirect Costs specified in the Draw Request, less any costs covered by
the Draw Request not approved, certified or verified as provided in Section 2.2
hereof, any Indirect Costs covered by a previous Draw Request for which any
requested proof of payment or payment receipts have not been received by
Lender, and/or any Direct Costs covered by a previous Draw Request for which any
requested proof of payment or payment receipts or Lien Waivers have not been
received by Lender and the Construction Consultant.

 

(c)           Subsequent to the Initial Advance, Advances shall be
made not more frequently than monthly based on Draw Requests signed by an
Authorized Signer in the form attached hereto as Schedule 2 or in
another form reasonably approved by Lender, each of which Draw Request shall
include the applicable Payment Certificate issued by the Construction
Consultant. Unless otherwise agreed to between Borrower and Lender, in
accordance with the Lock Box Agreement, all Advances shall be deposited into
the Loan Proceeds Sub-subaccount of the Construction Escrow Reserve Subaccount
(as defined in the Lock Box Agreement) for application by the Cash Management
Agent in accordance with the terms of the Lock Box Agreement. Each Draw Request
for Direct Costs shall be set forth on AIA Forms G702 and G703 or another form
reasonably approved by Lender, and shall be approved by the Construction
Consultant and signed by the Design/Build Contractor. Draw Requests for Direct
Costs shall show the percentage of completion of construction and shall set
forth on a Component basis and in such detail as may be reasonably required by
Construction Consultant or Lender the amounts expended and/or costs incurred
for work done and materials incorporated in the Improvements. Each Draw Request
shall be supported by such information and documentation (such as paid
receipts, invoices, statements of accounts, lien releases, etc.) as Lender may
reasonably require to assure that amounts requested are to be used to reimburse
Borrower for costs previously paid by Borrower or to pay costs incurred by
Borrower that are to be paid from proceeds of the Junior Loan, as set forth in the
Lock 

 

3

 

Box Agreement, the
Design/Build Agreement and the applicable Component Budgets. If so required by
the Lender, a request for an Advance shall also be accompanied by (i) a
certificate of Borrower, signed by an officer of Borrower, to the effect that
Borrower has paid or actually incurred costs in the amount of the requested
Advance, that such costs have not been made the basis for any other request for
an advance of Junior Loan proceeds under this Agreement or any other agreement
between Borrower and Lender, that all representations and warranties of
Borrower herein are true as of the time of such request, and that no material
adverse change in Borrower’s financial condition has occurred since the immediately
preceding Advance and (ii) a notice of title continuation or an
endorsement to the title policy (or such other comparable clause or affirmative
insurance or endorsement to title policy as is available in such jurisdiction)
indicating that, since the date of the last preceding Advance, there has been
no change in the state of title not approved by Lender and no survey exception
not theretofore approved by Lender, which endorsement shall have the effect of
increasing the coverage of the policy by the amount of the Advance then being
made. Borrower shall only be entitled to payment in the amount and for such
items as are approved in respect of each Draw Request.

 

(d)           The Junior Loan shall be advanced from time to time as
provided herein for the payment of costs described in Section 4.3 and Article V
of the Lock Box Agreement. Lender shall not be obligated to make any advance
unless all conditions to the making of an Advance under this Agreement have
been and continue to be satisfied unless waived in writing by Lender.

 

(e)           No subsequent Advances of the Junior Loan shall be
advanced until the satisfaction of the following conditions:

 

(i)            There shall be (1) no default by Borrower beyond
applicable periods of notice and grace under this Agreement, the Junior Note,
the Mortgages, or any other Junior Loan Document, (2) no Default (as
defined in the PAL Lease) under the PAL Lease that Lender determines cannot be
cured before the end of any applicable notice and cure period, (3) no
Termination Default (as defined in the PAL Lease) under the PAL Lease, (4) no
default that Lender determines cannot be cured before the end of any applicable
notice and cure period under any Project Document (other than the PAL Lease),
and (5) no “Event of Default” (as defined therein) under any Senior Loan
Document or under any Subordinate Loan Document, unless in each instance waived
in writing by Lender; and

 

(ii)           Lender shall have received: (a) executed copies
of this Agreement, the Junior Note, the Mortgages and the Environmental Agreement,
which must be satisfactory to Lender in all respects, and the financing
statements, (b) insurance policies or certificates of insurers evidencing
the insurance required by the Mortgages, (c) paid title insurance policies
in ALTA 1990 form or such other form acceptable to Lender, in the amount of the
Junior Note, insuring the Mortgages to be valid liens on the Property free and
clear of all defects and encumbrances not previously approved by Lender or its
counsel, which shall contain no survey exceptions other than those previously
approved by Lender, full coverage against 

 

4

 

mechanics’ and
materialmen’s liens, an undertaking by the issuer thereof to provide the notice
of title continuation or endorsement above and a pending disbursements clause, (d) an
opinion of counsel for Borrower in form and substance satisfactory to Lender, (e) all
other conditions to receiving an Advance under this Agreement have been met,
and (f) such other standard and customary documents, instruments, opinions
or assurances as Lender or its counsel may reasonably request.

 

(f)            If at the time of an Advance following the Initial
Advance there are incurred costs which shall be paid by Borrower from such
Advance and which have not been paid by Borrower, then prior to and as a
condition to the next advance, Borrower shall submit to Lender proof reasonably
satisfactory to Lender that such incurred costs have been paid in full.

 

(g)           The Lender shall have the right to approve all material
amendments to the Design/Build Agreement (except for Change Orders not
requiring the consent of the Lender pursuant to the Design/Build Agreement).

 

(h)           Borrower shall comply with the Project Schedule set
forth in Schedule 4, unless the Lender approves a modification of
such Schedule 4 in writing (such approval not to be unreasonably
withheld, conditioned or delayed). The Lender shall not be obligated to fund
any Advance after the Final Project Completion Date.

 

(i)            Notwithstanding the foregoing, other than the Initial
Advance made on the date hereof, no subsequent Advance shall be made hereunder
unless and until (i) all amounts have been advanced by the Subordinate
Lender pursuant to the Subordinate Loan; (ii) the amount to be funded by
Lender in connection with such Draw Request shall not be greater than the
amount necessary to satisfy the Draw Request taking into account the amount of
the balance in the Excess NOI Sub-subaccount (as such capitalized term is
defined in the Lock Box Agreement) as of the date of such Draw Request (except
for any amount less than $10,000 retained in the Excess NOI subaccount); and (iii) the
Control Agreements have been fully executed and delivered and are in full force
and effect; provided, however, that the Borrower shall have three months from
the date hereof to have all Control Agreements in place.

 

(j)            Other than the Initial Advance made on the date
hereof, subsequent Advances made by the Lender hereunder are subject to the
conditions in Schedule 5 hereto.

 

(k)           All disbursements from the Construction Escrow Reserve
Subaccount shall be made in accordance with the terms and conditions of the
Lock Box Agreement.

 

Section 2.2             Direct Costs Verification.

 

All Direct Costs shall be certified by the
Design/Build Contractor and must be in accordance with the Direct Cost
Statement (as the same may be updated and amended by the Borrower as
necessary). Verification of the monthly progress and Direct Costs which have
been 

 

5

 

incurred by Borrower from
time to time, and the estimated total Direct Costs, shall be conclusively
determined by the Construction Consultant (absent manifest error).

 

Section 2.3             Office for Advances.

 

All advances to Borrower are to be made at
such place as Lender may designate. Draw Requests together with all attachments
thereto shall be received by Lender at least seven (7) Business Days prior
to the date of the requested Advance and Borrower shall schedule a site
inspection with Construction Consultant with respect to each such Advance on or
before the date of the submission to the Lender of such Draw Request.

 

Section 2.4             Advances After Construction; Monthly
Advances.

 

Amounts of the Direct Costs not advanced
pursuant to this Section 2.4 or Section 2.1 hereof during the course
of construction of the Improvements may be advanced by Lender in its sole
discretion upon the satisfaction of the conditions set forth herein. Advances
for Indirect Costs not advanced prior to completion of construction of the
Improvements shall be advanced until exhausted, not more frequently than once a
month, for Indirect Costs as incurred after such completion, upon satisfaction
of the conditions set forth herein.

 

Section 2.5             Notice of Lender’s Rights to Make
Advances.

 

(a)           Lender may, in its absolute discretion, accelerate all
or any portion of the amounts requested by Borrower to be advanced hereunder
without regard to Borrower’s satisfaction of the conditions to its entitlement
to Junior Loan proceeds and no person dealing with Borrower or the Design/Build
Contractor and any Subcontractor or any other person shall have standing to
demand any different performance from Lender.

 

(b)           CONTRACTORS, SUBCONTRACTORS, LABORERS, and SUPPLIERS
are cautioned that if Junior Loan advances are made under the alternative set
forth in paragraph (a) above, proceeds of the Junior Loan remaining to be
advanced at the time of the actual completion date, or at any time prior
thereto, may be inadequate to pay all lienable claims incurred by Borrower and
unpaid at that time. All potential lienors are therefore cautioned to exercise
sound business judgment in the extension of credit to Borrower and should not
expect Lender to make Junior Loan advances in such amounts and to exercise such
judgment for themselves.

 

Section 2.6             Evidence of and Security for Junior Loan.

 

Advances under the Junior Loan shall be
evidenced by the Junior Note and secured by the Mortgages, the Junior Loan
Documents and the other Collateral. Borrower’s obligation to repay the
Obligations (including (without limitation) as evidenced by the Junior Note) is
with full recourse as to the Collateral (including all assets of the Borrower)
but shall not be recourse to the Borrower’s members, shareholders, officers,
affiliates, directors, partners, agents, employees or consultants, or any
affiliate of any such person, or to the property or assets of any such person.

 

6

 

Section 2.7             Junior Loan Reallocation.

 

The Lender shall have the right to approve Change
Orders in accordance with Section 8.6.2 of the Design/Build Agreement.
Unless authorized by Change Order, the Guaranteed Maximum Price shall not be
increased and the Guaranteed Scope of Work shall not be reduced and/or modified
without the consent of the Lender.

 

Section 2.8             Construction Agreements.

 

Notwithstanding anything in this Agreement to
the contrary, no advances of the Junior Loan for Direct Costs with respect to
any particular category of expenses shall be made until such time as the Lender
has received from the Borrower copies of the Design/Build Agreement and each
Subcontract in Proper Form in excess of $100,000 with respect to such
category certified by the Borrower to be true, complete and correct.

 

Section 2.9             Advances for Costs of Improvements.

 

Lender shall not be required to make any
advances for Stored Materials, except as permitted by Schedule 5 hereto.

 

Section 2.10           Additional Terms Regarding Advances.

 

Other than the Initial Advance made on the
date hereof, subsequent Advances of the Junior Loan shall also be subject to
the terms and conditions set forth in Schedule 5.

 

Section 2.11           Liability of Lender.

 

Lender shall in no event be responsible or
liable to any Person other than Borrower for the disbursement of or failure to
disburse the Junior Loan proceeds or any part thereof and neither the
Design/Build Contractor, Construction Consultant nor any subcontractor, laborer
or material supplier shall have any right or claim against Lender under this
Agreement or the other Junior Loan Documents.

 

Section 2.12           Payments to Lender.

 

(a)           The Junior Loan shall bear interest on the outstanding
principal amount thereof as provided in the Junior Note, which interest shall
be payable by the Borrower at the times and in the manner provided in the Junior
Note. The principal of the Junior Loan shall be repaid by the Borrower at the
times, in the amounts and in the manner provided in the Junior Note. The
Borrower may prepay the Junior Loan at the times, in the amounts and in the
manner provided in the Junior Note, subject to payment of the Prepayment
Premium, if same is due. All payments to Lender shall be made in accordance
with the provisions of the Lock Box Agreement, the Junior Note and this
Agreement.

 

(b)           Lender shall be entitled, but not obligated, and is
hereby irrevocably authorized to request payment from the Lock Box Agreement
without any notice to Borrower in such sums as are necessary to pay accrued and
unpaid interest on the Junior 

 

7

 

Note and all fees
and expenses payable hereunder or thereunder, to the extent the same are due
and payable.

 

Section 2.13           Verified Statement.

 

At Lender’s written request, Borrower shall
provide Lender with a verified written statement, in such form and detail as
Lender may reasonably require, setting forth: (i) the names and addresses
of all contractors, subcontractors and suppliers furnishing labor or materials
in the development of the Land or the Construction of the Improvements valued
in excess of $100,000 and (ii) such reasonable evidence confirming that
that the Improvements have not been materially damaged by fire or other
Casualty unless Lender shall have received Insurance Proceeds, or satisfactory
assurance that it will receive such proceeds in a timely manner pursuant to Section 4.10,
sufficient in the judgment of Lender to effect a satisfactory restoration and
completion of the Improvements in accordance with the terms of the Mortgages
and this Agreement and (iii) such reasonable evidence confirming that the
Improvements have not been materially damaged by fire or other Casualty unless
Lender shall have received Insurance Proceeds, or satisfactory assurance that
it will receive such proceeds in a timely manner pursuant to Section 4.10,
sufficient in the judgment of Lender to effect a satisfactory restoration and
completion of the Improvements in accordance with the terms of the Mortgages
and this Agreement.

 

Article III

Representations
and Warranties

 

Borrower represents and warrants to Lender
that:

 

Section 3.1             Organization, Power and Authority of
Borrower and Managing Member; Junior Loan Documents.

 

(a)           Borrower (a) is a limited liability company duly
organized, existing and in good standing under the laws of the state in which
it is organized and is duly qualified to do business and in good standing in
each state in which the Land or any portion thereof is located (if different
from the state of its formation) and in any other state where the nature of
Borrower’s business or property requires it to be qualified to do business, and
(b) has the power, authority and legal right to own its property and carry
on the business now being conducted by it and to engage in the transactions
contemplated by the Junior Loan Documents and the Project Documents. The Junior
Loan Documents and the Project Documents to which Borrower is a party have been
duly executed and delivered by Borrower, and the execution and delivery of, and
the carrying out of the transactions contemplated by, such Junior Loan
Documents and Project Documents, and the performance and observance of the
terms and conditions thereof, have been duly authorized by all necessary
organizational action by and on behalf of Borrower. The Junior Loan Documents
and the Project Documents to which Borrower is a party constitute the valid and
legally binding obligations of Borrower and are fully enforceable against
Borrower in accordance with their respective terms, except to the extent that
such enforceability may be limited by laws generally affecting the enforcement
of creditors’ rights or principles of equity.

 

8

 

(b)           Borrower represents and warrants that RE-MM (i) is
a limited liability company duly organized, existing and in good standing under
the laws of the State of Delaware and is duly qualified to do business and in
any state where the nature of RE-MM’s business or property requires it to be
qualified to do business, except where the failure to be so qualified would not
reasonably be expected to have a Material Adverse Effect on the ability of
RE-MM to perform its obligations under the Operating Agreement, and (ii) has
the power, authority and legal right to carry on the business now being
conducted by it and to engage in the transactions contemplated by the Operating
Agreement. The Borrower represents and warrants that the Operating Agreement
has been duly executed and delivered by RE-MM, and the execution and delivery
by RE-MM of, and the carrying out by RE-MM of the transactions contemplated by,
the Operating Agreement, and the performance and observance by RE-MM of the
terms and conditions thereof, have been duly authorized by all necessary
organizational action by and on behalf of RE-MM. The Borrower represents and
warrants that the Operating Agreement constitutes the valid and legally binding
obligation of RE-MM and is fully enforceable against RE-MM in accordance with
its terms, except to the extent that such enforceability may be limited by laws
generally affecting the enforcement of creditors’ rights or principles of
equity.

 

Section 3.2             Other Documents; Laws.

 

The execution and performance of the Junior
Loan Documents and the Project Documents to which Borrower is a party and the
consummation of the transactions contemplated thereby will not conflict with,
result in any breach of, or constitute a default under, the organizational
documents of Borrower, or any contract, agreement, document or other instrument
to which Borrower is a party or by which Borrower, or any of its respective
properties may be bound or affected, and such actions do not and will not
violate or contravene any Law to which Borrower is subject.

 

Section 3.3             Taxes.

 

Borrower has filed all federal, state, county
and municipal Tax returns required to have been filed by Borrower and has paid (or
will pay prior to the due date therefor) all Taxes which have become due
pursuant to such returns or pursuant to any Tax assessments received by
Borrower unless Borrower is contesting such Taxes in good faith as provided in Section 46
of the PAL Lease.

 

Section 3.4             Legal Actions.

 

Except as set forth in Schedule 13
hereto, there are no Claims or investigations by or before any court or
Governmental Authority, pending, or to the best of Borrower’s knowledge and
belief, threatened against or affecting Borrower, Borrower’s business or the
Property which could reasonably be expected to have a Material Adverse Effect.
Borrower is not in default with respect to any order, writ, injunction, decree
or demand of any court or any Governmental Authority affecting Borrower or the
Property which could reasonably be expected to have a Material Adverse Effect.

 

9

 

Section 3.5             Nature of Junior Loan.

 

Borrower is a business or commercial
organization. The Junior Loan is being obtained solely for business or
investment purposes, and will not be used for personal, family, household or
agricultural purposes.

 

Section 3.6             [Reserved].

 

Section 3.7             Financial Statements.

 

Borrower’s financial statements heretofore
delivered by Borrower to Lender are true and correct in all material respects,
have been prepared in accordance with sound accounting principles consistently
applied, and fairly present the respective financial conditions of the subjects
thereof in all material respects as of the respective dates thereof.

 

Section 3.8             ERISA and Prohibited Transactions.

 

As of the date hereof and throughout the term
of the Junior Loan: (a) Borrower is not and will not be (i) an “employee
benefit plan,” as defined in Section 3(3) of ERISA, (ii) a “governmental
plan” within the meaning of Section 3(32) of ERISA, or (iii) a “plan”
within the meaning of Section 4975(e) of the Code; (b) the
assets of Borrower do not and will not constitute “plan assets” within the
meaning of the United States Department of Labor Regulations set forth in Section 2510.3-101
of Title 29 of the Code of Federal Regulations; (c) transactions by or
with Borrower are not and will not be subject to state statutes applicable to
Borrower regulating investments of fiduciaries with respect to governmental
plans; and (d) Borrower will not engage in any transaction that would
cause any Obligation or any action taken or to be taken hereunder (or the
exercise by Lender of any of its rights under the Mortgages) or under any of
the other Senior Loan Documents, Junior Loan Documents or Subordinate Loan
Documents to be a non-exempt (under a statutory or administrative class
exemption) prohibited transaction under ERISA or Section 4975 of the Code.
Borrower agrees to deliver to Lender such reasonable certifications or other
evidence of compliance with the provisions of this Section as Lender may
from time to time request.

 

Section 3.9             Compliance with Zoning and Other
Requirements.

 

The anticipated use of the Property and
proposed Improvements comply with applicable zoning ordinances, regulations and
restrictive covenants affecting the Land. All use and other requirements of any
Governmental Authority having jurisdiction over the Property have been or will,
prior to completion of the Improvements, be satisfied. No material violation of
any Law will, upon completion of the Improvements, exist with respect to the
Property.

 

Section 3.10           Plans and Specifications.

 

The Plans and Specifications shall be
complete and adequate for the Construction of the Improvements. The Plans and
Specifications shall be approved by all Governmental Authorities having or
claiming jurisdiction over the Property and by the beneficiary of each
restrictive covenant affecting the Property whose approval is required. The Plans
and Specifications shall also be approved by the Design/Build Contractor. To
the best of Borrower’s knowledge, the 

 

10

 

Improvements to be
constructed pursuant to the Plans and Specifications, if constructed
substantially in accordance with the Plans and Specifications, will fully
comply with all applicable Laws (other than as set forth in the Installation
Specific Development Plans approved by the Army), including those Laws relating
to access and facilities for disabled persons. All construction, if any,
already performed by or on behalf of Borrower on the Improvements has been
performed on the Land in accordance with the Plans and Specifications approved
by the persons named above and with any restrictive covenants applicable
thereto and, to the knowledge of Borrower, there are no structural defects in
such existing portions of the Improvements to be constructed pursuant to the
Plans and Specifications or violations of any requirement of any Governmental
Authorities with respect thereto; the planned use of the Improvements complies
with applicable zoning ordinances, regulations and restrictive covenants
affecting the Land as well as all environmental, ecological, landmark, and
other applicable laws and regulations; and all requirements for such use have
been satisfied.

 

Section 3.11           Building Permits; Other Permits.

 

All building, construction and other permits
necessary or required in connection with the Construction of the Improvements
have been validly issued or will be issued in a timely manner by a date
sufficient to ensure commencement of construction and Completion of
Construction in a timely manner. All required fees have been or will be paid
and bonds and/or other security have been or will be posted in connection with
all permits that have been issued, and adequate amounts have been budgeted by
Borrower to pay all fees and the cost of all bonds and other security in
connection with permits to be issued in the future. Borrower will promptly
obtain all permits required from Governmental Authorities to construct the
Improvements to be constructed pursuant to the Plans and Specifications and,
upon written request from Lender, Borrower shall send copies thereof to Lender.
Following the issuance thereof, all permits will remain in full force and
effect as necessary to complete the Improvements to be constructed pursuant to
the Plans and Specifications.

 

Section 3.12           Utilities.

 

Subject to the terms and conditions of the
Municipal Agreement, all utility services necessary for the Construction of the
Improvements and the operation thereof for their intended purposes are
available at the boundaries of the Land (or will be available upon the
completion of work shown in the Plans and Specifications), including, as
applicable, telephone service, cable television, water supply, storm and
sanitary sewer facilities, natural gas and electric facilities, including
cabling for telephonic and data communication.

 

Section 3.13           Access; Roads.

 

All roads and other accesses necessary for
the Construction of the Improvements and utilization thereof for their intended
purposes have been or shall be completed or the necessary rights of way
therefor have either been or shall be provided by the Army or appropriate
Governmental Authority, or have been or shall be dedicated to public use and
accepted by the Army or such Governmental Authority.

 

11

 

Section 3.14           Other Liens.

 

Except for (a) contracts with
contractors for labor, materials and services furnished or to be furnished in
connection with the Construction of the Improvements, which contractors
Borrower shall pay or cause to be paid in accordance with the applicable
Subcontracts from the proceeds of the Junior Loan advanced hereunder, and (b) the
Senior Loan Documents, the Junior Loan Documents, the Subordinate Loan
Documents, the Debt Documents (as defined in the Lock Box Agreement), the Lock
Box Agreement and the Project Documents, Borrower has made no contract or
arrangement of any kind the performance of which by the other party thereto
would give rise to a lien on the Property, except with respect to encumbrances
of record existing as of the Closing and other encumbrances created by the Army
in accordance with the terms of the Lease.

 

Section 3.15           No Material Adverse Change.

 

No material adverse change which would result
in a Material Adverse Effect has occurred in the financial conditions reflected
in the financial statements of Borrower referred to in Section 3.7 since
the respective dates of such statements, and no material additional liabilities
have been incurred by Borrower since the dates of such statements other than
the borrowings contemplated herein, in the other Senior Loan Documents, in the
Junior Loan Documents, in the Subordinate Loan Documents or the Project
Documents or as approved in writing by Lender.

 

Section 3.16           Defaults.

 

There is (a) no default by Borrower
under any of the Junior Loan Documents, (b) no Default (as defined in the
PAL Lease) under the PAL Lease that cannot be cured before the end of any
applicable notice and cure period, (c) no Termination Default (as defined
in the PAL Lease) under the PAL Lease, (d) no default that cannot be cured
before the end of any applicable notice and cure period under any Project
Document (other than the PAL Lease), and (e) no “Event of Default” (as
defined therein) under any Senior Loan Document or under any Subordinate Loan
Document, unless in each instance waived in writing by Lender.

 

Section 3.17           Affirmation of Representations and
Warranties.

 

Each Draw Request and each receipt of the
funds requested thereby shall constitute an affirmation that (a) the
representations and warranties of Borrower contained in this Article III
are true and correct in all material respects as of the date of the Draw
Request (except for exclusions listed therein) and, unless Lender is notified
to the contrary prior to the disbursement of the Advance requested, will be so
on the date of the disbursement, (b) the work completed to the date of the
Draw Request is of quality and in all other respects consistent with the Plans
and Specifications, and (c) if applicable, construction of the
Improvements is proceeding in accordance with the Project Schedule.

 

Section 3.18           Governmental Authorities.

 

There are no actions, suits or proceedings
pending, or, to the knowledge of the Borrower, threatened, against or affecting
Borrower or the Property, the validity or enforceability of the Mortgages or
the priority of the lien thereof at law, in equity or before or by any
Governmental 

 

12

 

Authorities which, if
adversely determined, would result in a Material Adverse Effect; to Borrower’s
knowledge, it is not in default beyond any applicable notice and cure period
with respect to any material order, writ, injunction, decree or demand of any
court or Governmental Authorities.

 

Section 3.19           Prior Work.

 

Borrower has advised the title insurer in
writing prior to the issuance of the title policy insuring Lender whether any
survey, soils-testing, site-development, excavation or other work related to
construction of the Improvements was begun or done by or on behalf of Borrower
before each related Mortgage was recorded.

 

Section 3.20           Hazardous Materials; Related Claims.

 

To the best of Borrower’s knowledge, except
for those conditions listed in the Phase 1, Phase 2 and other
environmental reports, the Focused Feasibility Study for Fort Rucker and the
Army’s Environmental Condition of Property reports and the environmental
reports prepared and/or provided for Lender with respect to the Property, (i) the
Property and the Improvements thereon, if any, and the contiguous areas, are
not currently and have not been impacted by the presence of Hazardous Materials
or their effects; and (ii) there are no claims, litigation, administrative
or other proceedings, whether actual or threatened, or judgments or orders,
relating to any hazardous or toxic substances or wastes, discharges, emissions
or other forms of pollution relating in any way to the Land or the
Improvements, if any, thereon.

 

Section 3.21           Not an Investment Company.

 

Borrower is not an “investment company” or an
entity controlled by an “investment company” as such term is defined in the
Investment Company Act of 1940, as amended.

 

Section 3.22           Patriot Act.

 

Borrower is not now, nor has ever been (i) listed
on any Government Lists (as hereinafter defined), (ii) a Person who has been
determined by competent authority to be subject to the prohibitions contained
in Presidential Executive Order No. 13224 (September 23, 2001) or any
other similar prohibitions contained in the rules and regulations of OFAC
(as hereinafter defined) or in any enabling legislation or other Presidential
Executive Orders in respect thereof, (iii) indicted for or convicted of
any felony for any Patriot Act Offense, or (iv) under investigation by any
Governmental Authorities for alleged criminal activity. For purposes hereof,
the term “Patriot Act Offense”
means any violation of the criminal laws of the United States of America or of
any of the several states relating to terrorism or the laundering of monetary
instruments, including any offense under (A) the criminal laws against
terrorism; (B) the criminal laws against money laundering, (C) the
Bank Secrecy Act, as amended, (D) the Money Laundering Control Act of
1986, as amended, or (E) the Patriot Act. “Patriot Act Offense” also
includes the crimes of conspiracy to commit, or aiding and abetting another to
commit, a Patriot Act Offense. For purposes hereof, the term “Government Lists” means (1) the
specially designated nationals and blocked persons lists maintained by the
Office of Foreign Assets Control (“OFAC”),
(2) any other list of terrorists, terrorist organizations or narcotics
traffickers maintained pursuant to any of the rules and regulations of
OFAC that Lender notified Borrower 

 

13

 

in writing is now included
in “Government Lists,” or (3) any similar lists maintained by the United
States Department of State, the United States Department of Commerce or any
other Governmental Authorities or pursuant to any executive order of the
President of the United States of America that Lender notified Borrower in
writing is now included in “Government Lists.”

 

Section 3.23           Compliance with Laws and Project
Documents.

 

Borrower is in material compliance with (a) the
requirements of all Project Documents and all other agreements entered into by
Borrower as of the date hereof and (b) in all material respects, with the
requirements of all applicable Laws; provided, however in certain instances
Borrower may not be in compliance with all Project Documents or with all
applicable laws as of the date hereof; however, Borrower shall implement a cure
of any such non-compliance as required pursuant to Condition 9.h. of the
PAL Lease.

 

Article IV

Affirmative Covenants and
Agreements

 

Section 4.1             Commencement and Completion of Construction.

 

Borrower shall cause the initial Construction
of the Improvements (which are contemplated to be commenced on or before the
Commencement Date pursuant to the Design/Build Agreement) to be commenced and
prosecuted in a good and workmanlike manner on or before the Commencement Date
and shall cause the Construction of the Improvements to be completed in
accordance with the Design/Build Agreement and PAL Lease and substantially in
accordance with the Plans and Specifications in full on or before the Final
Project Completion Date.

 

Section 4.2             Approval of Construction.

 

(a)           No work associated with the Construction of any
component of the Improvements to be constructed by Borrower pursuant to the
Plans and Specifications shall be commenced or continued by Borrower unless and
until the applicable Plans and Specifications for such component (and any
changes thereto) have been approved by Lender to the extent Lender’s approval
is required in accordance with the terms of the Design/Build Agreement and this
Agreement. Lender agrees that, where Lender’s approval is required under the
Design/Build Agreement and this Agreement, such approval shall not be
unreasonably withheld, conditioned or delayed and shall be granted or denied in
no event later than ten (10) Business Days after the receipt of all
documentation by the Lender in connection with the request for approval. In
addition, no work associated with the Construction of any component of the
Improvements to be constructed by Borrower pursuant to the Plans and Specifications
shall be commenced or continued by Borrower unless and until the applicable
Plans and Specifications for such component (and any changes thereto) have been
approved by all Governmental Authorities having or claiming jurisdiction over
the Land and Improvements, by the beneficiary of any applicable restrictive
covenant whose approval is required, and by any other party whose approval is
required under applicable agreements, and unless and until 

 

14

 

all building,
construction and other permits necessary or required in connection with the
Construction of such component of the Improvements to be constructed by
Borrower pursuant to the Plans and Specifications have been validly issued and
all fees, bonds and any other security required in connection therewith have
been paid or posted.

 

(b)           The Construction Consultant shall receive copies of
all Change Orders in accordance with the Design/Build Agreement.

 

(c)           Except for Change Orders which do not
require Lender’s approval in accordance with the Design/Build Agreement,
Borrower will not amend or supplement the Design/Build Agreement without the
prior written consent of Lender (not to be unreasonably withheld conditioned or
delayed). Borrower will not enter into, authorize or permit any Change Order
under the Design/Build Agreement except in compliance with Section 8.6.2
thereof.

 

Section 4.3             Deposits.

 

Any amounts required under the Lock Box
Agreement to be deposited by the Borrower shall be deposited by Borrower in
accordance with the terms of the Lock Box Agreement.

 

Section 4.4             Compliance with Laws; Encroachments.

 

Subject to the provisions of Section 9 of the PAL Lease, the
Improvements shall be constructed, maintained and operated in accordance with
all applicable (whether present or future) Laws. The Improvements shall be
constructed entirely on the Land, including the land described in the support
leases and licenses in Schedule 14, and shall not encroach upon any
easement or right-of-way in a manner which would violate such easement or
right-of-way, or upon the land of others. Construction of the Improvements
shall occur wholly within all applicable building restriction lines and
set-backs, however established, and shall be in strict compliance with all
applicable use or other restrictions and the provisions of any prior
agreements, declarations, covenants, restrictions, easements and all applicable
zoning and subdivision ordinances and regulations. Borrower covenants and
agrees with Lender that it will at its expense use good faith efforts to
comply, subject to the provisions of Section 9 of the PAL Lease, promptly
with all laws, ordinances, orders, rules, statutes and regulations of any court
or any Governmental Authorities or it will timely and at its own expense
contest the validity of any such laws, ordinances, orders, rules, statutes and
regulations by appropriate legal proceedings and post a sufficient bond or
other security reasonably satisfactory to Lender in connection with such
contest in order to avoid the filing of a lien against the Property or any part
thereof, and upon written request (i) provide Lender with copies of all
filings and correspondence related thereto, (ii) promptly furnish Lender
with reports of any official searches made by Governmental Authorities and any
claims of violations thereof, (iii) promptly obtain all permits required
from Governmental Authorities and, within ten (10) days of receipt of such
permits, send copies thereof to Lender. Notwithstanding the foregoing, if any
delay in compliance with any Laws shall, in the reasonable judgment of Lender,
place all or any part of the Property in imminent danger of being forfeited or
lost, or if penalties, fines and/or interest shall accrue as a result thereof,
Borrower, shall upon notice from Lender, use best efforts to endeavor to comply
with such Law as soon as is reasonably practical. Borrower shall comply in all
material respects with 

 

15

 

all Laws and all orders, writs, injunctions, decrees
and demands of any court or any Governmental Authority affecting Borrower or
the Project, except as otherwise provided in accordance with Section 3.23
hereof. Borrower shall use all proceeds of the Junior Loan for business purposes
which are not in direct contravention of any Law, any Project Document, any Senior Loan Document, any Junior
Loan Document or any Subordinate Loan Document.

 

Section 4.5             Inspections; Cooperation.

 

Borrower shall permit representatives of
Lender and the Construction Consultant to enter upon the Land, to inspect the
Improvements and any and all materials to be used in connection with the
development of the Land and the construction of the Improvements, to examine
all detailed plans and shop drawings and similar materials as well as all of
Borrower’s records and books of account maintained by or on behalf of Borrower
relating thereto and to discuss the affairs, finances and accounts pertaining
to the Junior Loan and the Improvements with representatives of Borrower, subject
to Borrower’s security and the Army’s other rules and regulations.
Borrower shall at all times reasonably cooperate and cause the Design/Build
Contractor and each and every one of its subcontractors and material suppliers
to reasonably cooperate with the representatives of Lender and the Construction
Consultant in connection with, or in aid of, the performance of Lender’s
functions under this Agreement (it being acknowledged by Lender that this Section 4.5.
shall in no way be deemed to require Borrower to disclose or cause to be
disclosed financial documents relating to the Design/Build Contractor and any
subcontractor or material supplier). Except in the event of an emergency,
Lender shall give Borrower at least twenty-four (24) hours’ advance notice in
writing or by telephone in each instance before entering upon the Land and/or
exercising any other rights granted in this Section and shall use
reasonable efforts not to interfere with the Project and/or the operation of
Borrower’s and its agents’ and representatives’ business during any such
inspection.

 

Section 4.6             Contracts, Vouchers and Receipts.

 

Borrower shall furnish to Lender, promptly on
written demand, any contracts, subcontracts, bills of sale, statements,
receipted vouchers or other agreements of Borrower relating to the development
of the Land or the Construction of the Improvements, including any such items
pursuant to which Borrower has any claim of title to any materials, fixtures or
other articles delivered or to be delivered to the Land or incorporated or to
be incorporated into the Improvements.

 

Section 4.7             Payment and Performance of Contractual
Obligations.

 

Borrower shall perform in a timely manner all
of its obligations under the Design/Build Agreement and any and all other
Project Documents and Borrower will pay when due in accordance with applicable
agreements all bills for services or labor performed and materials supplied in
connection with the development of the Land and the construction of the
Improvements. Within thirty (30) days after the filing of any mechanic’s lien
or other lien or encumbrance against the Property, Borrower will promptly
discharge the same by payment or filing a bond or otherwise as permitted by
Law. So long as Lender’s security has been protected by the filing of a bond or
otherwise in a manner satisfactory to Lender in its reasonable discretion (i) Borrower
shall have the right to contest in good faith any claim, lien or 

 

16

 

encumbrance, provided that
Borrower does so diligently and without prejudice to Lender, and (ii) the
filing of such lien or encumbrance shall not be grounds for Lender to
disapprove any request for a subsequent advance.

 

(a)           Before entering into or terminating any Project
Documents (other than a termination, except for the Lease, upon an uncured
default thereunder), Borrower shall obtain the written consent of Lender (which
consent is deemed granted with respect to any such contract or agreement
received by Lender and effective at the Closing) and shall, if required by
Lender, provide Lender a consent, assignment, subordination and/or attornment
agreement executed by such persons as required by Lender in form and substance
satisfactory to Lender. Before entering into any amendment or supplement to a
Project Document, Borrower shall obtain the written consent of Lender (which
consent shall not be unreasonably withheld, conditioned or delayed).

 

Section 4.8             Correction of Construction Defects.

 

Promptly following any written demand by
Lender, Borrower shall correct or cause the correction of any structural
defects in the Improvements to be constructed in accordance with the Plans and
Specifications, any work that fails to comply with the requirements of Section 4.4
and any material departures or deviations from the Plans and Specifications.

 

Section 4.9             Insurance.

 

(a)           Borrower shall maintain the following insurance (in
addition to any insurance required by the Project Documents) at its sole cost
and expense:

 

(i)            Insurance against Casualty to the Property under a
policy or policies covering such risks as are presently included in “special
form” (also known as “all risk”) coverage, including such risks as are
ordinarily insured against by similar businesses, but in any event, including
wind, fire, lightning, windstorm, hail, explosion, riot, riot attending a
strike, civil commotion, damage from aircraft, smoke, vandalism, and malicious
mischief and acts of terrorism. Such insurance shall name Lender as mortgagee
and loss payee. Unless otherwise agreed in writing by Lender, such insurance
shall be for the full insurable value of the Property, except for Named
Windstorm, Earthquake and Flood. The insurance policy shall be written without
any co-insurance. Deductible amounts are to be commercially reasonable with
standard and customary catastrophe peril deductibles for property damage and
business interruption combined which shall be satisfactory to Lender. No such
property insurance as set forth in this Section shall be required with
respect to lodging units that are scheduled for demolition. No policy of
insurance shall be written such that the proceeds thereof will produce less
than the minimum coverage required by this Section by reason of
co-insurance provisions or otherwise. The term “full insurable value” means one
hundred percent (100%) of the actual replacement cost of the Property
(excluding foundation and excavation costs and costs of underground flues,
pipes, drains and other underground items). Notwithstanding the foregoing,
Named Windstorm and Earthquake Insurance limits will only be required in an
amount not less than the 

 

17

 

PML (Probable
Maximum Loss) on a blanket basis except full replacement coverage for Named
Windstorm will be provided if specific coverage is purchased unless full limits
are not commercially available at reasonable premiums). Such policies shall
name Lender as additional insured and loss payee.

 

(ii)           Commercial general liability insurance on an “occurrence”
basis against claims for “personal injury” liability and liability for death,
bodily injury and damage to property, products and completed operations, in
limits of $35,000,000 with respect to any one occurrence and the aggregate of
all occurrences during any given annual policy period. Such insurance shall
name Lender as an additional insured.

 

(iii)          During any period of construction upon the Property,
Borrower shall maintain, or cause others to maintain, builder’s risk insurance
(non-reporting form) of the type customarily carried in the case of similar
construction for one hundred percent (100%) of the full replacement cost of
work in place and materials stored at or upon the Property. Such insurance may
contain sub limits for transit, materials stored off site, flood, earthquake,
named wind and debris removal.

 

(iv)          Workers’ compensation insurance for all employees of
Borrower in such amount as is required by Law and including employer’s
liability insurance, if required by Lender.

 

(v)           If at any time any portion of any structure on the
Property is insurable against Casualty by flood and is located in a Special
Flood Hazard Area under the Flood Disaster Protection Act of 1973, as amended,
a flood insurance policy in form and amount acceptable to Lender but in no
event less than the amount sufficient to meet the requirements of applicable
Law as such requirements may from time to time be in effect..

 

(vi)          Loss of rental value insurance or business
interruption insurance in an amount acceptable to Lender but in no event shall
the rental value or business interruption loss provision be in an amount less
than the semiannual rental income of the Project. Lender will be added as a
loss payee.

 

(vii)         Environmental Impairment Liability Insurance in such
amounts as required by Lender at or prior to the Closing.

 

(viii)        Such other and further insurance as may be required
from time to time by Lender in order to comply with regular requirements and
practices of Lender in similar transactions, so long as any such insurance is
generally available at commercially reasonable premiums as mutually agreed upon
by Lender and Borrower from time to time.

 

(b)           In addition to the foregoing, Borrower shall cause the
Design/Build Contractor to provide and maintain commercial general liability insurance and workers’ 

 

18

 

compensation
insurance for all employees of the Design/Build Contractor meeting,
respectively, the requirements of Subsections (a)(ii) and (iv),
above.

 

(c)           Each policy of insurance (i) shall
be issued by one or more insurance companies each of which must have an A.M.
Best Company financial and performance rating of A-IX or better or a minimum
S&P rating of “A-” and are qualified or authorized by the respective Laws
of the State in which the Property is located to assume the risks covered by
such policy, (ii) with respect to the insurance described under the
preceding Subsections (a)(i), (a)(iii), (a)(v) and (a)(vi), shall
have attached thereto standard non-contributing, non-reporting mortgagee
clauses in favor of and entitling Lender without contribution to collect any
and all proceeds payable under such insurance, either as sole payee or as joint
payee with Borrower and the Senior Lender and Subordinate Lender, (iii) shall
provide that such policy shall not be canceled or materially modified without
at least thirty (30) days prior written notice to Lender, but only ten (10) days
if such cancellation is due to non-payment of premiums, and (iv) shall
provide that any loss otherwise payable thereunder shall be payable
notwithstanding any act or negligence of Borrower which might, absent such
agreement, result in a forfeiture of all or a part of such insurance payment.
Borrower shall promptly pay all premiums when due on such insurance and, not
less than fifteen (15)  days prior to the expiration dates
of each such policy, Borrower will deliver to Lender acceptable evidence of
insurance, such as a certificate of insurance, a renewal policy or policies
marked “premium paid” or other evidence satisfactory to Lender reflecting that
all required insurance is current and in force. Borrower will promptly give
Notice to Lender of any cancellation of, or material change in, any insurance
policy. Lender shall not, because of accepting, rejecting, approving or
obtaining insurance, incur any liability for (x) the existence,
nonexistence, form or legal sufficiency thereof, (y) the solvency of any
insurer, or (z) the payment of losses. Borrower may satisfy any insurance
requirement hereunder by providing one or more “blanket” insurance policies
covering other projects, subject to Lender’s approval in each instance as to
limits, coverages, forms, deductibles, inception and expiration dates, and
cancellation provisions. During any period of construction, the Borrower may
provide the commercial general liability and workers’ compensation required in
Subsections (a)(ii) and (a)(iv) of this Section 4.9 through
the purchase of a wrap up contractor controlled insurance program sponsored by
the Design/Builder. This program shall provide coverage for the Borrower and
all parties engaged in construction or operations of the Project, subject to
Lender’s review and approval.

 

Section 4.10           Adjustment of Condemnation and Insurance
Claims.

 

Borrower shall give prompt Notice to Lender
of any Casualty or any Condemnation or threatened Condemnation which is
threatened in writing. Lender is authorized, at its sole and absolute option,
to commence, appear in and prosecute, in its own or Borrower’s name, any action
or proceeding relating to any Condemnation or Casualty, and to make proof of
loss for and to settle or compromise any Claim in connection therewith. In such
case, Lender shall, subject to the provisions of the Lease, have the right to
receive all Condemnation Awards and Insurance Proceeds, and may deduct
therefrom any or all of its Expenses. However, so long as no Event of Default
has occurred and is continuing and Borrower is diligently pursuing its rights
and remedies with respect to a Claim, Borrower will obtain Lender’s written
consent (which consent 

 

19

 

shall not be unreasonably
withheld, conditioned or delayed) before making proof of loss for or settling
or compromising each Claim if Lender is not exercising any of its rights
pursuant to this Section, except Borrower shall have the right to make proof of
loss for all covered property insurance claims without Lender’s written consent
if less than $2,000,000. Borrower agrees to diligently assert its rights and
remedies with respect to each Claim and to promptly pursue the settlement and
compromise of each Claim subject to Lender’s approval, which approval shall not
be unreasonably withheld, conditioned or delayed, except approval is granted
herein for covered property insurance claims less than $2,000,000. If, prior to
the receipt by Lender of any Condemnation Award or Insurance Proceeds, the
Property shall have been sold pursuant to the provisions of the applicable
Mortgage, Lender shall have the right to receive such funds (a) to the
extent of any deficiency found to be due upon such sale with interest thereon
(whether or not a deficiency judgment on the applicable Mortgage shall have
been sought or recovered or denied), and (b) to the extent necessary to
reimburse Lender for its Expenses. Notwithstanding anything herein to the
contrary, all Condemnation Awards and Casualty Proceeds shall be applied in
accordance with the Lease and the Lock Box Agreement. If any Condemnation
Awards or Casualty Proceeds are paid to Borrower, Borrower shall immediately
(and no later than ten (10) days after Borrower’s receipt thereof) deposit
the same in accordance with the Lock Box Agreement, except to the extent
already distributed to Borrower in accordance with the preceding sentence.
Notwithstanding anything contained in this Section to the contrary, so
long as any Obligations remain outstanding, no Condemnation Awards or Casualty
Proceeds shall be distributed to Borrower or on behalf of Borrower other than
pursuant to the provisions of the Lock Box Agreement if Borrower elects not to
repair, rebuild or restore the portion of the Project subject to any such
Casualty or Condemnation. Borrower agrees to execute and deliver from time to
time, upon the request of Lender, such further instruments or documents as may
be reasonably requested by Lender to confirm the grant and assignment to Lender
of any Condemnation Awards or Insurance Proceeds.

 

Section 4.11           Utilization of Net Award.

 

Net Award must be applied in accordance with
the Lock Box Agreement.

 

Section 4.12           Management.

 

(a)           Borrower at all times shall provide for the competent
and responsible maintenance, management and operation of the Property in
accordance with the requirements of the Lease. Borrower shall maintain
managerial and operational control of the Project at all times while the Junior
Loan is outstanding; provided, however, that Borrower may assign management,
maintenance and/or operation of the Project to affiliates of Actus and may
contract with InterContinental Hotel Group, Inc., or an affiliate thereof,
or another hotel manager reasonably acceptable to Lender to manage and operate
the Project hotels. Any management contract or contracts affecting the Property
must be approved in writing by Lender (not to be unreasonably withheld conditioned
or delayed) prior to the execution of the same and must be subordinate to the
Mortgages (provided that Lender provides such contractor with customary
non-disturbance rights which are in no event less expansive than the
non-disturbance rights offered to InterContinental Hotel Group, Inc., or
its affiliate, at the Closing). Any such management 

 

20

 

contract must be
collaterally assigned, by an instrument or instruments in form and substance
reasonably satisfactory to Lender, to Lender as security for the Junior Loan.

 

(b)           Borrower may assign the duties of management,
maintenance and/or operation of the Project upon prior written consent of
Lender, which consent shall not be unreasonably withheld, conditioned or
delayed. All management, maintenance and/or operation contracts with such
assignees must be approved in writing by Lender prior to the execution of the
same, which approval shall not be unreasonably withheld, conditioned or
delayed. All such contracts must be collaterally assigned by Borrower to
Lender. Notwithstanding the foregoing, Lender acknowledges that Borrower will
engage the Asset Manager, Hotel Operator and Development Manager to provide
certain asset management, business management, property management, hotel
management, development management and property maintenance services with
respect to the Project and hereby consents to Borrower’s agreements with such
Persons dated as of the date hereof.

 

(c)           No contract approved by Lender pursuant to this Section 4.12
may be amended in any material respect without the prior written consent of
Lender (not to be unreasonably withheld, conditioned or delayed).

 

Section 4.13           Books and Records; Financial Statements;
Tax Returns.

 

(a)           Borrower will keep and maintain (or cause to be
maintained) full and accurate books and records administered in accordance with
sound accounting principles, consistently applied, showing in detail the
earnings and expenses of the Property and the operation thereof. Borrower will
keep and maintain its books and records, including recorded data of any kind
and regardless of the medium of recording, at the place or places required
under the Lease. Borrower shall permit Lender, or any Person authorized by
Lender, to inspect and examine such books and records (regardless of where
maintained) and all supporting vouchers and data and to make copies and
extracts therefrom at all reasonable times and as often as may be reasonably
requested by Lender. Borrower will furnish or cause to be furnished to Lender
annual financial statements, including balance sheets and income statements,
for Borrower, and the Property, within one hundred twenty (120) days after each
fiscal year end of Borrower. In addition, Borrower will furnish or cause to be
furnished to Lender, with reasonable promptness, such interim financial
statements of Borrower and the Property, together with such additional
information, reports or statements in connection therewith, as Borrower is
required to provide to the Army under Condition 32.c of the PAL Lease. All financial
statements must be in form and detail acceptable to Lender and must be
certified as to accuracy by Borrower, and the annual financial statements must
be audited with an opinion satisfactory to Lender by an independent certified
public accountant satisfactory to Lender. Borrower shall provide, upon
Lender’s reasonable request, convenient facilities for the audit and
verification of any such statement.

 

(b)           Borrower shall provide Lender with certified quarterly
profit and loss statements related to Project operations (including, without
limitation, property operating statements of revenue and expenses and a balance
sheet prepared in accordance with 

 

21

 

GAAP and a
statement of liabilities), within sixty (60) days following the end of each
fiscal quarter of Borrower, in form and detail reasonably acceptable to Lender.
Borrower shall provide the monthly Project dashboard report that Borrower is
required to provide to the Army under Condition 32.a of the PAL Lease within
twenty-five (25) days following the end of each calendar month.

 

(c)           Within sixty (60) days of the end of each fiscal
quarter of Borrower, Borrower shall furnish to Lender with: (i) a
certification of compliance with Senior Lender’s loan covenants under the
Senior Loan Documents and the Subordinate Lender’s loan covenants under the
Subordinate Loan Documents with no existing or ongoing “Default” or “Event of
Default,” and (ii) to the extent available and subject to cancellation,
group reservations for next twelve-months.

 

(d)           All financial statements shall be prepared in
accordance with the Accounting Principles (as defined in the PAL Lease)
consistently applied and shall fairly present the financial condition of
Borrower as of the respective dates thereof. The Borrower shall provide, upon
the Lender’s reasonable request, facilities for the audit and verification of
any such statement. All certifications and signatures on behalf of
corporations, partnerships, limited liability companies and other entities
shall be by a representative of the reporting party satisfactory to Lender.

 

(e)           Upon request of Lender, Borrower will deliver, or
caused to be delivered, to Lender all reports and other information that
Borrower delivers, or causes to be delivered, to Senior Lender.

 

(f)            The information described in this Section to be
provided to Lender may be transmitted electronically, unless hard copies are
otherwise requested by Lender.

 

Section 4.14           Estoppel Certificates.

 

Within ten (10) days after any
reasonable request by Lender or a proposed assignee or purchaser of the Junior
Loan or any interest therein, Borrower shall certify in writing to Lender, or
to such proposed assignee or purchaser, the then unpaid balance of the Junior
Loan and whether Borrower claims any right of defense or setoff to the payment
or performance of any of the Obligations, and if Borrower claims any such right
of defense or setoff, Borrower shall give a detailed written description of such
claimed right.

 

Section 4.15           Taxes.

 

Borrower shall pay and discharge (or cause to
be paid and discharged) all Taxes prior to the date on which penalties are
attached thereto unless and to the extent only that such Taxes are contested in
accordance with the terms of the Mortgages. Borrower shall, at its sole cost
and expense, do, execute, acknowledge and deliver (or cause to be done,
executed, acknowledged and delivered) all and every such acts, information
reports, returns and withholding of monies as shall be necessary or appropriate
to comply fully, or to cause full compliance, with all applicable information
reporting and back-up withholding requirements of the Internal Revenue Code of
1986, as amended (including all regulations promulgated thereunder) in respect
of the Property, and all transactions related to the Property and shall at all
times provide Lender with reasonably 

 

22

 

satisfactory evidence of
such compliance and notify Lender of the information reported in connection
with such compliance.

 

Section 4.16           Lender’s Rights to Pay and Perform.

 

If, after any required notice, Borrower fails
to promptly pay or perform any of the Obligations within any applicable grace
or cure periods, Lender, without Notice to or demand upon Borrower, and without
waiving or releasing any Obligation or Default, may (but shall be under no
obligation to) at any time thereafter make such payment or perform such act for
the account and at the expense of Borrower. Upon the occurrence and during the
continuance of an Event of Default, Lender may enter upon the Property for that
purpose and take all action thereon as Lender reasonably considers necessary or
appropriate. At the option of Lender, following the occurrence and during the
continuance of an Event of Default, Lender may apply any undisbursed Junior
Loan proceeds to the satisfaction of such Event of Default. Without limiting
the generality of the foregoing, following the occurrence and during the
continuance of an Event of Default, Lender may pay directly from the
undisbursed proceeds of the Junior Loan all interest bills rendered by Lender
in connection with the Junior Loan, and make advances directly to the
Design/Build Contractor, the title insurance company, any subcontractor or
material supplier, the lessor under the Lease, any manager or supplier of the
Project, any provider of utility services, or to any of them jointly. The
execution hereof by Borrower shall, and hereby does, constitute an irrevocable
authorization so to advance the undisbursed proceeds of the Junior Loan
following the occurrence and during the continuance of an Event of Default. No
further direction or authorization from Borrower shall be necessary to warrant
such direct advances. Each Advance shall be secured by the Mortgages and shall
satisfy the obligations of Lender hereunder to the extent of the amount of the
advance.

 

Section 4.17           Reimbursement; Interest.

 

If Lender shall incur any Expenses or pay any
Claims by reason of the Junior Loan or the rights and remedies provided under
the Junior Loan Documents (regardless of whether or not any of the Junior Loan
Documents expressly provide for an indemnification by Borrower against such
Claims), Lender’s payment of such Expenses and Claims shall constitute advances
to Borrower which shall be paid by Borrower to Lender on demand, together with
interest thereon from the date incurred until paid in full at the rate of
interest then applicable to the Junior Loan under the terms of the Junior Note.
Each Advance shall be secured by the Mortgages and the other Junior Loan
Documents as fully as if made to Borrower, regardless of the disposition
thereof by the party or parties to whom such Advance is made. Notwithstanding
the foregoing, however, in any action or proceeding to foreclose the Mortgages
or to recover or collect the Obligations, the provisions of Law governing the
recovery of costs, disbursements and allowances shall prevail unaffected by
this Section.

 

Section 4.18           Notification by Borrower.

 

Borrower will promptly give Notice to Lender
of the occurrence of any Default or Event of Default hereunder or under any of
the other Junior Loan Documents or any event of default by Borrower after
applicable notice and cure periods under the Project Documents or any material
default under the Project Documents (except for the PAL Lease) and any Default
or Termination 

 

23

 

Default (as such capitalized
terms are defined in the PAL Lease) under the PAL Lease. Borrower shall
promptly provide notice to Lender of a “Default” and/or “Event of Default” (as
such terms are defined in the Subordinate Loan Documents and the Senior Loan
Documents) under the Subordinate Loan Documents or the Junior Loan Documents.

 

Section 4.19           Indemnification by Borrower.

 

Borrower agrees to release and to indemnify
the Indemnified Parties and to hold the Indemnified Parties harmless from and
against, and to defend Lender by counsel reasonably approved by Lender against,
any and all Claims directly or indirectly arising out of or resulting from any
transaction, act, omission, event or circumstance in any way connected with the
Property or the Junior Loan, including any Claim arising out of or resulting
from (a) construction of any Improvements, including any defective
workmanship or materials; (b) any failure by Borrower to comply with the
requirements of any Laws or to comply with any agreement that applies or
pertains to the Property, including any agreement with a broker or “finder” in
connection with the Junior Loan or other financing of the Property; (c) any
failure by Borrower to observe and perform any of the obligations imposed upon
the lessee under the Lease or Project Documents; (d) any other Default or
Event of Default hereunder or under any of the other Junior Loan Documents; (e) any
assertion or allegation that an Indemnified Party is liable for any act or
omission of Borrower or any other Person in connection with the ownership,
development, financing, leasing, operation or sale of the Property; (f) the
Claims of any broker or finder arising by reason of the execution hereof or the
making of the Junior Loan; (g) Environmental Matters; or (h) any
fraud or material misrepresentation by Borrower. The agreements and
indemnifications contained in this Section shall apply to Claims arising
both before and after the repayment of the Junior Loan and shall survive the
repayment of the Junior Loan, any foreclosure or deed, assignment or conveyance
in lieu thereof and any other action by Lender to enforce the rights and
remedies of Lender hereunder or under the other Junior Loan Documents. Borrower
shall employ suitable means to protect from theft or vandalism all portions of
the Improvements and all tools and building materials stored on the Land. Upon
demand by an Indemnified Party, Borrower shall diligently defend any
Environmental Claim which relates to the Project or is threatened or commenced
against such Indemnified Party, all at Borrower’s own cost and expense and by
counsel to be approved by Lender in the exercise of its reasonable judgment. In
the alternative, Lender may elect, at any time and for any reason, to conduct
its own defense through counsel selected by Lender and at the reasonable cost
and expense of Borrower. Notwithstanding the foregoing, in no event shall
Borrower be required to release, indemnify or hold harmless an Indemnified
Party for any Claims to the extent resulting from such Indemnified Party’s
gross negligence or willful misconduct.

 

Section 4.20           Fees and Expenses.

 

Borrower shall pay all reasonable and
documented fees, charges, costs and Expenses required to satisfy the conditions
of the Junior Loan Documents. Without limitation of the foregoing, (a) Borrower
will pay, when due, and if paid by Lender will reimburse Lender on demand for,
all reasonable and documented fees and expenses of the Construction Consultant,
the title insurer, environmental engineers, appraisers, surveyors and Lender’s
outside counsel in connection with the Closing and the administration, modification
or any “workout” of the Junior Loan, or the enforcement of Lender’s rights and
remedies under any of the Junior Loan 

 

24

 

Documents; and (b) Borrower
shall pay all filing, registration or recording fees, and all reasonable and
documented expenses incident to the execution, delivery, acknowledgment and
recording or filing, as applicable, of the Mortgages, any mortgage supplemental
thereto, any security instrument with respect to the Personalty, and any instrument
of further assurance, and any Expenses (including reasonable attorneys’ fees
and disbursements) and all federal, state, county and municipal stamp, mortgage
or recording taxes and other taxes, duties, impositions, imposes, fees, costs,
expenses, assessments and charges arising out of or in connection with the
execution and delivery of the Junior Note, the Mortgages or any mortgage
supplemental thereto, any security instrument with respect to the Personalty or
any instrument of further assurance.

 

Section 4.21           Appraisals.

 

Lender may obtain from time to time an
appraisal of all or any part of the Property, prepared in accordance with
written instructions from Lender, from a third-party appraiser satisfactory to,
and engaged directly by, Lender. Notwithstanding the foregoing, the cost of
each such appraisal obtained by Lender shall be at Lender’s sole cost and
expense, except that, following the occurrence and during the continuance of an
Event of Default, or in the event of a request by Borrower for a renewal,
extension or modification of the Junior Loan, such cost of one such appraisal
per calendar year shall be borne by Borrower and shall be paid by Borrower on
demand. Borrower shall provide reasonable access to the Property to any such
appraiser as reasonably necessary to complete the appraisal; provided, however,
that in connection with any such access, such third-party appraiser shall use
reasonable efforts not to interfere with the Project and/or the operation of
Borrower’s and its agents’ and representatives’ business during any such
inspection.

 

Section 4.22           Yearly Budget Approvals.

 

Lender shall have the same right to review
and approve the Yearly Budget and each of its components as the Hotel Operator
has under the Hotel Operating Agreement. Borrower shall promptly provide to
Lender copies of the draft Yearly Budget that it receives from Hotel Operator.
Lender acknowledges that such review and approval shall be subject to the time
periods and dispute resolutions provisions set forth in the Hotel Operating
Agreement.

 

Section 4.23           [Reserved].

 

Section 4.24           Permanent Loan/Capital Markets
Transaction.

 

Borrower covenants that the proceeds of any
permanent loan or capital markets transaction entered into following the
Closing will be used first to repay the Senior Loan and then the Junior Loan,
net of financing costs.

 

25

 

Section 4.25           [Reserved].

 

Section 4.26           [Reserved].

 

Section 4.27           [Reserved].

 

Section 4.28           Organizational Documents.

 

Without limiting any other provisions hereof
that restrict the ability of Borrower to incur or extend any indebtedness,
Borrower shall comply with all of the provisions of its articles of organization and operating agreement and shall not
modify any of the provisions in Section 25, 26 or 27 of the Operating
Agreement (collectively, the “SPE Provisions”)
without Lender’s written consent (not to be unreasonably withheld, conditioned
or delayed.)

 

Section 4.29           Subordination.

 

Without limiting any other provisions hereof
that restrict the ability of Borrower to incur or extend any indebtedness,
Borrower covenants and agrees with Lender that it will subordinate to the lien
of the Mortgages any Loans made (a) by Borrower to any other entity owned
or controlled by the principals of Borrower or (b) by any entity owned or
controlled by the principals of Borrower to Borrower and to deliver to Lender
any and all agreements and or other documents reasonably requested by Lender
and Lender’s legal counsel in connection with such subordination which
documents and agreements shall be reasonably satisfactory in all material
respects to Lender and Lender’s legal counsel.

 

Section 4.30           Patriot Act.

 

Borrower shall comply in all respects with
the Patriot Act.

 

Section 4.31           Single Purpose Covenants.

 

Until the Obligations have been indefeasibly
paid to the Lender in cash and all obligations of the Borrower under this
Agreement and the other Junior Loan Documents have terminated, Borrower shall
observe and comply with the following covenants:

 

(a)           Borrower shall limit the nature, purpose and conduct
of its business to engage solely in the following activities:

 

(i)            To construct, own, hold, sell, assign, transfer,
operate, lease, mortgage, pledge and otherwise deal with the Property and the
Improvements as contemplated hereby; and

 

(ii)           To exercise all powers enumerated in the Limited
Liability Company Act or Business Corporation Law of the State of Delaware
necessary or convenient to the conduct, promotion or attainment of the business
or purposes otherwise set forth herein and for no other purpose.

 

26

 

(b)           The Borrower shall only incur indebtedness in an
amount necessary to (i) acquire, hold, own, manage, finance, re-finance,
operate, lease, maintain, design, develop, improve, demolish, rehabilitate,
renovate, alter and/or dispose of the Project (including additions thereto) in
accordance with the terms of the PAL Lease and the other Operative Documents, (ii) as
applicable, to acquire, hold, own, manage, finance, re-finance, operate, lease,
maintain, design, develop, improve, demolish, rehabilitate, renovate, alter and/or
dispose of additional property reasonably related to the purposes specified in
the preceding clause (i) at or in the vicinity of any Installation in
accordance with the terms of the PAL Lease and the other Operative Documents
and (iii) to engage in any or all lawful activities incidental to the
foregoing. For so long as the Obligations remain unpaid and the liens and
security interests of the Mortgages exist on any portion of the Property, the
Borrower shall not (i) incur, assume, or guaranty any other indebtedness,
other than (x) the Senior Loan, the Junior Loan, the Subordinate Loan and
the Swap Obligations, (y) trade payables or accrued expenses incurred in
the ordinary course of business of owning and operating the Property and due
and payable within thirty (30) days, and (z) financing for furniture,
fixture and equipment that has been approved by the Lender in advance, such
approval not to be unreasonably conditioned, withheld or delayed, (ii) grant
any lien(s) or security interest(s) in the Property other than to the
Lender or as specifically approved by Lender, (iii) dissolve or liquidate,
or consolidate or merge with or into any other entity, or convey or transfer
its properties and assets substantially as an entirety or transfer any of its
beneficial interests to any entity, (iv) voluntarily commence a case with
respect to itself, as debtor, under the Federal Bankruptcy Code or any similar
federal or state statute without the unanimous consent of all of the members of
the limited liability company, or (v) except with respect to such
amendments which are required to effectuate any action by Borrower which is
expressly permitted herein, make any material amendment to its articles of
organization or operating agreement without first notifying the Lender of such
amendment and obtaining the prior written approval of the Lender (which
approval will not be unreasonably withheld, conditioned or delayed).

 

(c)           Borrower shall observe and comply with the SPE
Provisions.

 

Section 4.32           Preservation of Rights.

 

Borrower shall obtain, preserve and maintain
(or cause to be obtained, preserved and maintained) in good standing, as
applicable, all rights, privileges and franchises necessary for the operation
of the Project and the conduct of Borrower’s business thereon or therefrom.

 

Section 4.33           Income from Project; Rents.

 

Rents and all other income derived from or in
relation to the Project shall be deposited and applied in accordance with the
Lock Box Agreement.

 

Section 4.34           Notice to Lender.

 

If, at any time, Borrower becomes aware, or
has reasonable cause to believe, that any Release or threatened Release of any
Hazardous Material has occurred after the date hereof or 

 

27

 

will occur at the Project,
or if Borrower identifies or otherwise becomes aware of any noncompliance or
alleged non-compliance with any Environmental Requirement by Borrower or at the
Project, any threatened or pending Environmental Claim related to the Project
or any event or condition which would reasonably be expected to result in an
Environmental Claim, Borrower shall notify Lender promptly in writing of such
circumstance and shall include a full description of all relevant information.
Borrower shall, upon receipt, promptly deliver to Lender a copy of any report,
audit, summary or investigation, of any kind or character, whether prepared by
or on behalf of Borrower or by any other Person, related to environmental
conditions at the Project or the compliance status of the Project with respect
to any Environmental Requirement.

 

Section 4.35           Site Assessments and Information.

 

If Lender shall ever have
reasonable cause to believe that any Release or threatened Release of a
Hazardous Material or any non-compliance with any Environmental Requirement has
occurred after the date hereof with respect to the Project, which Release would
reasonably be expected to result in an Environmental Claim related to the
Property which materially adversely affects the ability of Borrower to perform
the Obligations, then Borrower shall, within ninety (90) days of written
request by Lender and at Borrower’s expense, provide to Lender an environmental
site assessment or compliance audit of the Project which addresses such
conditions. Such environmental site assessment or compliance audit (or both)
shall be performed to the reasonable satisfaction of Lender, in accordance with
good environmental engineering practices and by a consulting firm reasonably
acceptable to Lender. Each report shall be addressed to Lender. A copy of each
report and all supporting documents (including, without limitation, any
reliance letters required by Lender) shall be promptly furnished to
Lender.  Simultaneously with the delivery
of such supplemental environmental reports, Borrower will provide an updated
reliance letter from Tetra Tech to the effect that Lender may rely upon the
supplemental environmental reports delivered to Lender after delivery of the
initial Phase I and Phase II environmental reports to at least the same extent
that Lender was entitled to rely on the initial Phase I and Phase II
environmental reports.

 

Section 4.36           Response to Releases, Non-Compliance and
Environmental Claims.

 

Except to the extent the responsibility for
such matters is retained by the Army pursuant the Lease, Borrower shall, in
compliance with all Environmental Requirements, promptly undertake and complete
any and all investigations, testing, or abatement, clean up, remediation,
response or other corrective action necessary to: (a) remove, remediate,
clean up or abate any Release or threatened Release of any Hazardous Material
at or from the Project; (b) correct any non-compliance with any
Environmental Requirement by Borrower or at the Project; (c) address any
unsafe or hazardous condition at the Project resulting from or related to any
Hazardous Material; or (d) make an appropriate response to any threatened
or pending Environmental Claim related to Borrower or the Project, in all cases
to the extent required by Environmental Laws. A copy of any such report or other
document (and all supporting documents) shall be promptly furnished to Lender.
Borrower shall use commercially reasonable efforts to enforce the obligations
of the Army under the Lease with respect to any Environmental Requirements.

 

28

 

Section 4.37           Delivery and Maintenance of Payment and
Performance Bond.

 

Borrower shall cause to be delivered prior to
the commencement of construction and maintained throughout the period required
in the Design/Build Agreement, payment and performance bonds or such other
instruments satisfying the requirements of Section 3.24.1 of the
Design/Build Agreement, including a dual oblige rider in favor of Lender.

 

Section 4.38           Intercreditor Agreement.

 

Borrower has read and consents to the
provisions of the Intercreditor Agreement (including, without limitation, Section 12(g) and
Exhibit E thereto).

 

Article V

Negative Covenants

 

Section 5.1             Conditional Sales.

 

Borrower shall not incorporate in the
Improvements any property acquired under a conditional sales contract or lease
or as to which the vendor retains title or a security interest, without the
prior written consent of Lender.

 

Section 5.2             Changes to Plans and Specifications.

 

Borrower shall not make or permit any changes
in the Plans and Specifications, including any such changes that alter,
diminish or add to the work to be performed or change the design of the
Improvements, without the prior written consent of Lender to the extent that
Lender’s consent is required under the Design/Build Agreement, including Section 8.6.2
thereof.

 

Section 5.3             Insurance Policies and Bonds.

 

Borrower shall not do or permit to be done
anything that would affect the coverage or indemnities provided for pursuant to
the provisions of any insurance policy, performance bond, labor and material
payment bond or any other bond, or the Construction Guaranty given in
connection with the development of the Land or the construction of the
Improvements.

 

Section 5.4             Commingling.

 

Borrower shall not commingle the funds and
other assets of Borrower with those of any affiliate or any other Person except
as otherwise permitted by the Lock Box Agreement.

 

Section 5.5             Additional Debt.

 

Borrower shall not incur any debt, secured or
unsecured, direct or contingent (including guaranteeing any obligation), other
than (a) the Senior Loan, (b) any Swap Obligations of Borrower under
any Swap Transaction permitted under the Senior Loan Agreement, (c) the
Junior Loan, (d) the Subordinate Loan and any other subordinated debt approved
by Lender in connection with the Closing, (e) its obligations under the
Project Documents, and (f) advances, leases or trade debt or accrued
expenses incurred in the ordinary course of business of operating, 

 

29

 

using, maintaining, managing
or leasing the Project. No debt other than the Junior Loan may be secured by
the Project, whether senior, subordinate or pari passu so
long as any Obligations remain outstanding, except for the Senior Loan, the Subordinate
Loan, any Swap Obligations of Borrower under any Swap Transaction permitted
under the Senior Loan Agreement, and any other secured subordinated debt
approved by Lender in connection with the Closing.

 

Section 5.6             Compliance with Environmental Requirements.

 

Borrower will not cause or commit, and will
not permit or allow any employee, contractor, or other agent of Borrower to
continue to cause or commit: (a) any non-compliance with any Environmental
Requirement by Borrower, by or with respect to the Project or any use of or
condition or activity at the Project; (b) the generation, storage or use
of any Hazardous Material at the Project, except for Hazardous Materials that
are legally used, stored or generated as a consequence of using the Project for
its permitted business purposes, but only so long as the use, storage or
generation of such Hazardous Materials is in compliance with all Environmental
Requirements; (c) the treatment, disposal or Release of any Hazardous
Material at the Project in any manner that violates an Environmental Law or
could reasonably be expected to result in a Environmental Claim; (d) except
as permitted by subsection (b) of this Section, the installation of
any below-ground storage tanks containing Hazardous Materials at the Project; (e) except
as permitted by subsection (b) of this Section, any other activity
which could create any unsafe or hazardous condition resulting from or related
to Hazardous Materials at the Project; or (f) the attachment of any
environmental lien to the Project. Borrower shall perform all reasonable
actions necessary to protect the fair market value of the Project from
impairment as a result of Hazardous Materials.

 

Section 5.7             Lease.

 

So long as any Obligations remain
outstanding, Borrower will not terminate the Lease, Borrower will comply with
all requirements of the Lease and Borrower will not amend or supplement the
Lease without the written consent of Lender (not to be unreasonably withheld,
conditioned or delayed).

 

Section 5.8             Swap Contracts.

 

Except as provided in the Senior Loan
Agreement and in accordance with the terms thereof, Borrower shall not incur
any Swap Obligations or enter into any Swap Contract without the prior written
consent of Lender (such consent to be not unreasonably withheld, provided that
such consent may be conditioned on intercreditor, security or lien issues).

 

Section 5.9             Construction.

 

Borrower covenants that no construction,
other than (i) such work as is necessary for Borrower to be in compliance
with the terms and conditions of the Lease (including, without limitation,
Conditions 21 and 22 of the PAL Lease), and (ii) the work which is
otherwise contemplated in the Closing documents (including, without limitation,
the Design/Build Agreement and Change Orders thereto), as the same may be
amended, will take place during the term of the Loan without Lender’s consent
(such consent not to be unreasonably withheld 

 

30

 

conditioned or delayed). The
parties agree and acknowledge that such work consists of the LSCR Phase of the
Project, as described in the Lease.

 

Section 5.10           Project Document Modifications.

 

Before entering into any amendment or
supplement to a Project Document, Borrower shall obtain the written consent of
Lender (which consent shall not be unreasonably withheld, conditioned or
delayed).

 

Article VI

Events of Default.

 

The occurrence or happening, from time to
time, of any one or more of the following shall constitute an Event of Default
under this Agreement:

 

Section 6.1             Payment Default.

 

Borrower fails to pay principal or interest
when due and payable under the Junior Note (without any notice or cure period),
or Borrower fails to pay any other Obligation due and payable under this
Agreement within thirty (30) days after its receipt of written notice from
Lender that such Obligation is then due and payable.

 

Section 6.2             Default Under Other Junior Loan Documents
and Project Documents.

 

An “event of default” (as defined therein) by
Borrower following all notice and cure periods occurs under the Junior Note,
any of the Mortgages or any of the other Junior Loan Documents or the Project
Documents, or Borrower fails to promptly pay, perform, observe or comply with
any term, obligation or agreement contained in any of the other Junior Loan
Documents or Project Documents (within any applicable grace or cure period).

 

Section 6.3             Accuracy of Information; Representations
and Warranties.

 

Any information contained in any financial
statement, schedule, report or any other document prepared by or on behalf of
the Borrower, Guarantor or an Affiliate and delivered to Lender in connection
with the Junior Loan proves at any time not to be in all material respects true
and accurate, or Borrower shall have failed to state any material fact or any
fact necessary to make such information not misleading, or any representation
or warranty contained in this Agreement or in any other Junior Loan Document or
other document, certificate or opinion delivered by Borrower or Guarantor to
Lender in connection with the Junior Loan, proves at any time to be incorrect
or misleading in any material respect either on the date when made or on the
date when reaffirmed pursuant to the terms of this Agreement.

 

Section 6.4             Deposits.

 

Borrower fails to deposit funds with Lender,
in the amount requested by Lender, pursuant to the provisions of Section 4.3
or Section 4.11, within ten (10) days from the effective date of a
Notice from Lender requesting such deposit and in accordance with the Lock Box
Agreement, or Borrower fails to deliver to Lender any Condemnation Awards or
Insurance Proceeds within the 

 

31

 

earlier of ten (10) days
after Borrower’s receipt thereof or five (5) days after notice from the
Lender requesting such deposit and in accordance with the Lock Box Agreement or
Borrower fails to deposit any other funds in accordance with the Lock Box
Agreement.

 

Section 6.5             Insurance Obligations.

 

Borrower fails to promptly perform or comply
with any of the covenants contained in the Junior Loan Documents with respect
to maintaining insurance, including the covenants contained in Section 4.9,
and such failure, other than a failure resulting from the termination of an
insurance policy (where written notice of such termination has been provided to
Borrower at least thirty (30) days prior to such termination), continues for a
period of fifteen (15) days after Notice thereof from Lender to Borrower.

 

Section 6.6             Other Obligations.

 

Borrower fails to promptly perform or comply
with any of the Obligations set forth in this Agreement (other than those
expressly described in other Sections of this Article VI), and such
failure continues uncured for a period of thirty (30) days after Notice from
Lender to Borrower, unless (a) such failure, by its nature, is not capable
of being cured within such period, and (b) within such period, Borrower
commences to cure such failure and thereafter diligently prosecutes the cure
thereof, and (c) Borrower causes such failure to be cured no later than
ninety (90) days after the date of such Notice from Lender (or such longer
period as the Lender approves in writing).

 

Section 6.7             Progress of Construction.

 

Construction of all or substantially all of
the Improvements is abandoned or is discontinued for a period of more than
twenty (20) consecutive days and such event impairs the amount of Revenues, as
defined in the Lock Box Agreement, to be paid into the Lock Box Account.

 

Section 6.8             Damage to Improvements.

 

All or substantially all of the Improvements
are damaged or destroyed by fire or other casualty and Lender determines that
the Improvements cannot be restored and completed in accordance with the terms
and provisions of this Agreement, the Lock Box Agreement and the Mortgages.

 

Section 6.9             Lapse of Permits or Approvals.

 

Any permit, license, certificate or approval
that Borrower is required to obtain with respect to the construction,
operation, development, leasing or maintenance of the Improvements or the
Property lapses or ceases to be in full force and effect.

 

Section 6.10           Completion of Construction.

 

Completion of Construction does not occur in
accordance with the Project Schedule or by Final Completion Date.

 

32

 

Section 6.11           Mechanic’s Lien.

 

A lien for the performance of work or the
supply of materials filed against the Property, or any stop notice served on
Borrower, the Design/Build Contractor or Lender, remains unsatisfied or
unbonded for a period of sixty (60) days after the date of filing or service.

 

Section 6.12           Survey Matters.

 

Any Survey required by Lender pursuant to Schedule 5
during the period of construction shows any matter which in Lender’s reasonable
judgment would interfere with the Construction of the Improvements or the
operation or use of the Property or would create an exception to the title
insurance policies insuring the Mortgages which is not acceptable to Lender,
and such matter is not removed within a period of sixty (60) days after Notice
thereof by Lender to Borrower, unless (a) such matter, by its nature, is
not capable of being cured within such period, and (b) within such period,
Borrower commences to cure such failure and thereafter diligently prosecutes
the cure thereof, and (c) Borrower causes such failure to be cured no
later than ninety (90) days after the date of such Notice from Lender (or such
longer period as the Lender approves in writing).

 

Section 6.13           Design/Build Contractor Default.

 

The Design/Build Contractor defaults under
the Design/Build Agreement in a manner which Lender reasonably deems to be
material, and, unless otherwise agreed in writing by Lender, Borrower fails
promptly to exercise its rights and remedies under the Design/Build Agreement
with respect to such default, or Borrower defaults under the Design/Build
Agreement.

 

Section 6.14           Senior Loan Default.

 

An Event of Default (as defined in the Senior
Loan Agreement) occurs and such Event of Default is not cured by Borrower prior
to any cure thereof by Lender (it being agreed that Lender shall be under no
obligation to undertake such cure).

 

Section 6.15           Bankruptcy.

 

Borrower or Guarantor files a bankruptcy
petition or makes a general assignment for the benefit of creditors or a
bankruptcy petition is filed against Borrower or Guarantor and such involuntary
bankruptcy petition continues undismissed for a period of sixty (60) days after
the filing thereof.

 

Section 6.16           Appointment of Receiver, Trustee,
Liquidator.

 

Borrower or Guarantor applies for or consents
in writing to the appointment of a receiver, trustee or liquidator of Borrower,
Guarantor, the Property or all or substantially all of the other assets of
Borrower, or Guarantor, or any member of the Borrower or an order, judgment or
decree is entered by any court of competent jurisdiction on the application of
a creditor appointing a receiver, trustee or liquidator of Borrower, Guarantor,
the Property or all or substantially all of the other assets of Borrower,
Guarantor, or any member of the Borrower.

 

33

 

Section 6.17           Inability to Pay Debts; Judgment.

 

Borrower or Guarantor becomes unable or
admits in writing its inability or fails generally to pay its debts as they
become due, or a final non-appealable judgment for the payment of money
including more than $100,000 is entered against Borrower or Guarantor, and Borrower or Guarantor fails to
discharge the same, or causes it to be discharged or bonded off to Lender’s
satisfaction, within sixty (60) days from the date of the entry of such
judgment.

 

Section 6.18           Dissolution; Change in Business Status.

 

Unless the written consent of Lender is
previously obtained, all or substantially all of the business assets of
Borrower or Guarantor are sold, Borrower or Guarantor is dissolved, or there occurs
any change in the form of business entity through which Borrower or Guarantor
presently conducts its business or any merger or consolidation involving
Borrower or Guarantor.

 

Section 6.19           Default Under Other Indebtedness.

 

Borrower fails to pay any indebtedness (other
than the Junior Loan) owed by Borrower to Lender when and as due and payable
(whether by acceleration or otherwise).

 

Section 6.20           Liens.

 

Any lien granted under the Lock Box Agreement
in favor of Lender on any Collateral is not perfected or is released or becomes
unperfected and, after Notice thereof from Lender, Borrower does not take
reasonable action directed by Lender which is necessary to cause such liens to
become perfected within thirty (30) days after such lien becomes unperfected
or is released.

 

Section 6.21           Change in Controlling Interest.

 

Without the prior written consent of Lender,
at any time (a) less than 51% of the membership interests of Borrower are
owned by RE-MM and/or the Army or (b) RE-MM and/or the Army ceases to be
the managing member of Borrower.

 

Section 6.22           Material Adverse Change.

 

In the reasonable opinion of Lender, the
prospect of payment or performance of all or any part of the Obligations has
been impaired because of a material adverse change in the financial condition,
results of operations, business or properties of Borrower, Guarantor, any other
Person liable for the payment or performance of any of the Obligations and such
change has a Material Adverse Effect.

 

Section 6.23           Termination of Lease or other Project
Documents.

 

The Lease is terminated for any reason
whatsoever or the other Project Documents are terminated (without the written
consent of the Lender) for any reason whatsoever.

 

34

 

Section 6.24           Default Under Guaranty.

 

Guarantor defaults in any of its obligations
under the Guaranty, after the expiration of any applicable notice and cure
period.

 

Article VII

Remedies on Default

 

Section 7.1             Remedies on Default.

 

If an Event of Default shall occur and be
continuing, Lender shall have the right, in addition to any other rights or
remedies available to Lender under the Mortgages or any of the other Junior
Loan Documents or under applicable Law, to exercise any one or more of the
following rights and remedies:

 

(a)           Lender may terminate its obligation to advance any
further principal of the Junior Loan pursuant to this Agreement by Notice to
Borrower.

 

(b)           Lender may accelerate all of Borrower’s Obligations
under the Junior Loan Documents, whether or not matured and regardless of the
adequacy of any other collateral securing the Junior Loan, whereupon such
Obligations shall become immediately due and payable, without notice of
default, acceleration or intention to accelerate, presentment or demand for payment,
protest or notice of nonpayment or dishonor, or notices or demands of any kind
or character (all of which are hereby waived by Borrower); it being
acknowledged and agreed by Lender that any such acceleration shall be without
the imposition of any prepayment fee or prepayment penalty of any kind.

 

(c)           Lender may apply to any court of competent
jurisdiction for, and obtain appointment of, a receiver for the Property.

 

(d)           Subject to the terms of the Lock Box Agreement, Lender
may set off the amounts due Lender under the Junior Loan Documents against any
and all accounts, credits, money, securities or other property of Borrower now
or hereafter on deposit with, held by or in the possession of Lender to the
credit or for the account of Borrower, without notice to or the consent of
Borrower, and any and all funds in the funds and accounts established under the
Lock Box Agreement will be applied to the payment of the Junior Loan pursuant
to the terms and conditions of the Lock Box Agreement.

 

(e)           Lender may make Protective Advances and any such
Protective Advances shall bear interest at the Past Due Rate under the Junior
Note.

 

(f)            Lender may enter into possession of the Property and
perform any and all work and labor necessary to complete the development of the
Land and the Construction of the Improvements (whether or not in accordance
with the Plans and Specifications) and to employ watchmen to protect the
Property and the Improvements. All sums expended by Lender for such purposes
shall be deemed to have been advanced to Borrower under the Junior Note and
shall be secured by the Mortgages. For this purpose, Borrower hereby
constitutes and appoints Lender its true and lawful attorney-in-fact with 

 

35

 

full power of
substitution, which power is coupled with an interest, to complete the work in
the name of Borrower, and hereby empowers said attorney or attorneys, in the
name of Borrower or Lender:

 

(i)            To use any funds of Borrower including any balance
which may be held by Lender and any funds which may remain unadvanced hereunder
for the purpose of completing the development of the Land and the construction
of the Improvements, whether or not in the manner called for in the Plans and
Specifications;

 

(ii)           To make such additions and changes and corrections to
the Plans and Specifications as shall be necessary or desirable in the judgment
of Lender to complete the development of the Land and the construction of the
Improvements;

 

(iii)          To employ such contractors, subcontractors, agents,
architects and inspectors as shall be necessary or desirable for said purpose;

 

(iv)          To pay, settle or compromise all existing bills and
claims which are or may be liens against the Property, or may be necessary or
desirable for the completion of the work or the clearance of title to the
Property;

 

(v)           To execute all applications and certificates which may
be required in the name of Borrower;

 

(vi)          To enter into, enforce, modify or cancel the Lease and
to fix or modify Rents on such terms as Lender may consider proper;

 

(vii)         To file for record, at Borrower’s cost and expense and
in Borrower’s name, any notices of completion, notices of cessation of labor,
or any other notices that Lender in its sole and absolute discretion may
consider necessary or desirable to protect its security; and

 

(viii)        To do any and every act with respect to the
development of the Land and the construction of the Improvements which Borrower
may do in its own behalf.

 

(g)           It is understood and agreed that this power of
attorney shall be deemed to be a power coupled with an interest which cannot be
revoked. Said attorney-in-fact shall also have the power to prosecute and
defend all actions or proceedings in connection with the development of the
Land and the construction of the Improvements and to take such actions and to
require such performance as Lender may deem reasonably necessary.

 

(h)           Borrower hereby constitutes and appoints Lender its
true and lawful attorney-in-fact with full power of substitution, which power
is coupled with an interest, and hereby empowers said attorney or attorneys, in
the name of Borrower or Lender, to exercise any remedies available to Lender
under the Collateral Assignment; provided, however, such power of attorney
shall be exercisable only during the continuation of an Event of Default.

 

36

 

Section 7.2             No Release or Waiver; Remedies Cumulative
and Concurrent.

 

Borrower shall not be relieved of any
Obligation by reason of the failure of Lender to comply with any request of
Borrower or of any other Person to take action to foreclose on the Property
under the Mortgages or otherwise to enforce any provision of the Junior Loan
Documents, or by reason of the release, regardless of consideration, of all or
any part of the Property. No delay or omission of Lender to exercise any right,
power or remedy accruing upon the happening of an Event of Default shall impair
any such right, power or remedy or shall be construed to be a waiver of any
such Event of Default or any acquiescence therein. No delay or omission on the
part of Lender to exercise any option for acceleration of the maturity of the
Obligations, or for foreclosure of any of the Mortgages following any Event of
Default as aforesaid, or any other option granted to Lender hereunder in any
one or more instances, or the acceptance by Lender of any partial payment on
account of the Obligations shall constitute a waiver of any such Event of
Default and each such option shall remain continuously in full force and
effect. No remedy herein conferred upon or reserved to Lender is intended to be
exclusive of any other remedies provided for in the Junior Loan Documents, and
each and every such remedy shall be cumulative, and shall be in addition to
every other remedy given hereunder, or under the Junior Loan Documents, or now
or hereafter existing at Law or in equity or by statute. Every right, power and
remedy given by the Junior Loan Documents to Lender shall be concurrent and may
be pursued separately, successively or together against Borrower or the
Property or any part thereof, and every right, power and remedy given by the
Junior Loan Documents may be exercised from time to time as often as may be
deemed expedient by Lender.

 

Article VIII

Miscellaneous

 

Section 8.1             Further Assurances; Authorization to File
Documents.

 

At any time, and from time to time, upon
request by Lender, Borrower will, at Borrower’s expense, (a) correct any
defect, error or omission which may be discovered in the form or content of any
of the Junior Loan Documents, and (b) make, execute, deliver and record,
or cause to be made, executed, delivered and recorded, any and all further
instruments, certificates and other documents as may, in the opinion of Lender,
be reasonably necessary or desirable in order to complete, perfect or continue
and preserve the lien of the Mortgages; provided, however, that the foregoing
shall in no event be deemed to require Borrower to take any action that would
increase its obligations or decrease its rights under this Agreement and the
Junior Loan Documents. Upon any failure by Borrower to do so, Lender may make,
execute and record any and all such instruments, certificates and other
documents for and in the name of Borrower, all at the sole expense of Borrower,
and Borrower hereby appoints Lender the agent and attorney-in-fact of Borrower
to do so, this appointment being coupled with an interest and being
irrevocable. Without limitation of the foregoing, Borrower irrevocably
authorizes Lender at any time and from time to time to file any initial
financing statements, amendments thereto and continuation statements reasonably
deemed necessary or desirable by Lender to establish or maintain the validity,
perfection and priority of the security interests granted in the Mortgages, and
Borrower ratifies any such filings made by Lender prior to the date hereof. In
addition, at any time, and from time to time, upon reasonable request by
Lender, Borrower will, at Borrower’s expense, provide any and all further instruments,
certificates and other documents as 

 

37

 

may, in the reasonable
opinion of Lender, be necessary or desirable in order to verify the Borrower’s
identity and background in a manner satisfactory to Lender.

 

Section 8.2             No Warranty by Lender.

 

By accepting or approving anything required
to be observed, performed or fulfilled by Borrower or to be given to Lender
pursuant to this Agreement, including any certificate, Survey, receipt,
appraisal or insurance policy, Lender shall not be deemed to have warranted or
represented the sufficiency, legality, effectiveness or legal effect of the
same, or of any term, provision or condition thereof and any such acceptance or
approval thereof shall not be or constitute any warranty or representation with
respect thereto by Lender.

 

Section 8.3             Standard of Conduct of Lender.

 

Unless otherwise set forth in this Agreement
or any other Junior Loan Document or Project Document, nothing contained in
this Agreement or any other Junior Loan Document shall limit the right of
Lender to exercise its business judgment or to act, in the context of the
granting or withholding of any Advance or consent under this Agreement or any
other Junior Loan Document or Project Document, in a subjective manner, whether
or not objectively reasonable under the circumstances, so long as Lender’s
exercise of its business judgment or action is made or undertaken reasonably
and in good faith. Borrower and Lender intend by the foregoing to set forth and
affirm their entire understanding with respect to the standard pursuant to
which Lender’s duties and obligations are to be judged and the parameters
within which Lender’s discretion may be exercised hereunder and under the other
Junior Loan Documents and Project Documents, except as otherwise set forth
therein. As used herein, “good faith” means honesty in fact in the conduct and
transaction concerned.

 

Section 8.4             No Partnership.

 

Nothing contained in this Agreement shall be
construed in a manner to create any relationship between Borrower and Lender
other than the relationship of borrower and lender and Borrower and Lender
shall not be considered partners or co-venturers for any purpose on account of
this Agreement.

 

Section 8.5             Severability.

 

In the event any one or more of the
provisions of this Agreement or any of the other Junior Loan Documents shall
for any reason be held to be invalid, illegal or unenforceable, in whole or in
part or in any other respect, or in the event any one or more of the provisions
of any of the Junior Loan Documents operates or would prospectively operate to
invalidate this Agreement or any of the other Junior Loan Documents, then and
in either of those events, at the option of Lender, such provision or
provisions only shall be deemed null and void and shall not affect the validity
of the remaining Obligations, and the remaining provisions of the Junior Loan
Documents shall remain operative and in full force and effect and shall in no
way be affected, prejudiced or disturbed thereby.

 

38

 

Section 8.6             Notices.

 

All Notices required or which any party
desires to give hereunder or under any other Junior Loan Document shall be in
writing and, unless otherwise specifically provided in such other Junior Loan
Document, shall be deemed sufficiently given or furnished if delivered by
personal delivery, by nationally recognized overnight courier service or by
certified United States mail, postage prepaid, return receipt requested,
addressed to the party to whom directed at the applicable address set forth
below (unless changed by similar notice in writing given by the particular
party whose address is to be changed) or by facsimile. Any Notice shall be
deemed to have been given either at the time of personal delivery or, in the
case of courier or mail, as of the date of first attempted delivery at the
address and in the manner provided herein, or, in the case of facsimile, upon
receipt; provided that service of a Notice required by any applicable statute
shall be considered complete when the requirements of that statute are met.
Notwithstanding the foregoing, no notice of change of address shall be
effective except upon actual receipt. This Section shall not be construed
in any way to affect or impair any waiver of notice or demand provided in this
Agreement or in any other Junior Loan Document or to require giving of notice
or demand to or upon any Person in any situation or for any reason.

 

The address and fax number
of Borrower are:

 

Rest Easy LLC

c/o Actus Lend Lease LLC

1801 West End Avenue

Suite 1700

Nashville, TN 37203

Attention: Dale Connor, Managing Director

Fax: (615) 324-5220

 

With copies to:

 

Rest Easy LLC

c/o Actus Lend Lease LLC

700 Lanidex Plaza

Parsippany, NJ 07054

Attention: General Counsel

Fax: (973) 503-5730

 

Lowenstein Sandler PC

65 Livingston Avenue

Roseland, NJ 07068

Attention: Edward J. Hunter, Esq.

Fax: (973) 597-2591

 

39

 

The address and fax number
of Lender are:

 

Behringer Harvard PAL I, LLC

15601 Dallas Parkway, Suite 600

Addison, TX 75001

Attn: Mr. Andrew Bruce

Fax: (214) 655-1610

 

With copies to:

 

Behringer Harvard PAL I, LLC

15601 Dallas Parkway, Suite 600

Addison, TX 75001

Attention: Chief Legal Officer

Fax: (214) 655-1610

 

and

 

Powell Coleman &
Arnold LLP

8080 North Central Expressway, Suite 1380

Dallas, Texas 75206

Attention: Pat Arnold, Esq.

Fax: (214) 373-8768

 

Section 8.7             Permitted Successors and Assigns;
Disclosure of Information.

 

(a)           Each and every one of the covenants, terms, provisions
and conditions of this Agreement and the Junior Loan Documents shall apply to,
bind and inure to the benefit of Borrower, its successors and those assigns of
Borrower consented to in writing by Lender, and shall apply to, bind and inure
to the benefit of Lender and the endorsees, transferees, successors and assigns
of Lender, and all Persons claiming under or through any of them.

 

(b)           Borrower agrees not to transfer, assign, pledge or
hypothecate any right or interest in any payment or advance due pursuant to
this Agreement, or any of the other benefits of this Agreement, without the
prior written consent of Lender, which consent may be withheld by Lender in its
sole and absolute discretion. Any such transfer, assignment, pledge or
hypothecation made or attempted by Borrower without the prior written consent
of Lender shall be void and of no effect. No consent by Lender to an assignment
shall be deemed to be a waiver of the requirement of prior written consent by
Lender with respect to each and every further assignment and as a condition precedent
to the effectiveness of such assignment.

 

(c)           Lender may sell or offer to sell the Junior Loan or
interests therein to one or more assignees or participants. Borrower shall
execute, acknowledge and deliver any and all instruments reasonably requested
by Lender in connection therewith, and to the 

 

40

 

extent, if any,
specified in any such assignment or participation, such assignee(s) or
participant(s) shall have the same rights and benefits with respect to the
Junior Loan Documents as such Person(s) would have if such Person(s) were
Lender hereunder. Lender may disseminate any information it now has or
hereafter obtains pertaining to the Junior Loan, including any security for the
Junior Loan, any credit or other information on the Property (including
environmental reports and assessments), Borrower or any of Borrower’s
principals, to any actual or prospective assignee or participant, to Lender’s
Affiliates, to any regulatory body having jurisdiction over Lender, to any
actual or prospective counterparty (or its advisors) to any swap or derivative
transaction relating to Borrower and the Junior Loan, or to any other party as necessary or appropriate in Lender’s reasonable
judgment, provided all such parties (other than regulatory bodies) agree to use
best efforts to keep any such information so provided confidential (subject to
any requirements to disclose such information to governmental or regulatory
authorities and subject to the ability to provide such information to their
respective legal counsel or accountants).

 

Section 8.8             Amendment; Modification; Waiver.

 

None of the terms or provisions of this
Agreement may be amended, changed, waived, modified, discharged or terminated
except by instrument in writing executed by the party or parties against whom
enforcement of the amendment, change, waiver, modification, discharge or
termination is asserted. None of the terms or provisions of this Agreement
shall be deemed to have been abrogated or waived by reason of any failure or
failures to enforce the same. No failure or delay by Lender in exercising any
right or privilege hereunder or under any other instrument contemplated hereby
shall operate as a waiver thereof, nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege.

 

Section 8.9             Third Parties; Benefit.

 

All conditions to the obligation of Lender to
make advances hereunder are imposed solely and exclusively for the benefit of
Lender and its assigns and no other Persons shall have standing to require
satisfaction of such conditions in accordance with their terms or be entitled
to assume that Lender will refuse to make advances in the absence of strict
compliance with any or all thereof and no other Person shall, under any
circumstances, be deemed to be the beneficiary of such conditions, any or all
of which may be freely waived in whole or in part by Lender at any time in the
sole and absolute exercise of its discretion. The terms and provisions of this
Agreement are for the benefit of the parties hereto and, except as herein
specifically provided, no other Person shall have any right or cause of action
on account thereof.

 

Section 8.10           Rules of Construction.

 

The words “hereof,” “herein,” “hereunder,” “hereto,”
and other words of similar import refer to this Agreement in its entirety. The
terms “agree” and “agreements” mean and include “covenant” and “covenants.” The
words “include” and “including” shall be interpreted as if followed by the
words “without limitation.” The captions and headings contained in this
Agreement are included herein for convenience of reference only and shall not
be considered a 

 

41

 

part hereof and are not in
any way intended to define, limit or enlarge the terms hereof. All references (a) made
in the neuter, masculine or feminine gender shall be deemed to have been made
in all such genders, (b) made in the singular or plural number shall be deemed
to have been made, respectively, in the plural or singular number as well, (c) to
the Junior Loan Documents are to the same as extended, amended, restated,
supplemented or otherwise modified from time to time unless expressly indicated
otherwise, (d) to the Land, the Improvements or the Property shall mean
all or any portion of each of the foregoing, respectively, and (e) to
Articles, Sections and Schedules are to the respective Articles, Sections and
Schedules contained in this Agreement unless expressly indicated otherwise.

 

Section 8.11           Counterparts.

 

This Agreement may be executed in any number
of counterparts, each of which shall be considered an original for all
purposes; provided, however, that all such counterparts shall together
constitute one and the same instrument.

 

Section 8.12           Signs; Publicity.

 

Subject to the terms and provisions of the
Lease, at Lender’s request and sole cost and expense, Borrower shall place a sign at a
location on the Property satisfactory to Lender, which sign shall recite, among
other things, that Lender is financing the development of the Land and the
construction of the Improvements. Borrower expressly authorizes Lender to
prepare and to furnish to the news media for publication from time to time news
releases with respect to the Property which are approved by Borrower and the
Army in their sole and absolute discretion, specifically to include releases
detailing Lender’s involvement with the financing of the Property.

 

Section 8.13           Governing Law.

 

This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York,
without giving effect to the principles of conflicts of law. It is the intent
and purpose of the parties hereto that the provisions of Section 5-1401 of
the General Obligations Law of the State of New York shall apply to this
Agreement. Notwithstanding anything to the contrary provided in the foregoing,
it is acknowledged and agreed that as to matters which relate to the creation,
perfection and enforcement of security interests created under the Junior Loan
Documents, the same shall be construed in accordance with the laws of the State
in which the applicable Collateral shall be located.

 

In addition, it is hereby further
acknowledged and agreed that ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION
WITH THIS AGREEMENT SHALL BE TRIED AND LITIGATED IN STATE OR FEDERAL COURTS
LOCATED IN THE STATE AND COUNTY OF NEW YORK AND EACH PARTY TO THIS AGREEMENT
HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND
IRREVOCABLY CONSENTS TO THE JURISDICTION OF ANY OF THE AFOREMENTIONED COURTS IN
ANY SUCH ACTION OR PROCEEDING. THE PARTIES HERETO EACH HEREBY IRREVOCABLY WAIVE
ANY OBJECTION WHICH THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE
OF ANY OF THE 

 

42

 

AFORESAID ACTIONS OR
PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT BROUGHT IN THE
COURTS REFERRED TO ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT
TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT
IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM OR LACKS
JURISDICTION OVER SUCH PARTY. IT IS THE INTENT AND PURPOSE OF THE PARTIES
HERETO THAT THE PROVISIONS OF SECTION 5-1402 OF THE GENERAL OBLIGATIONS
LAW OF THE STATE OF NEW YORK SHALL APPLY TO THIS AGREEMENT.

 

Section 8.14           Time of Essence.

 

Time shall be of the essence for each and
every provision of this Agreement of which time is an element.

 

Section 8.15           Electronic Transmission of Data.

 

Lender and Borrower agree that certain data
related to the Junior Loan (including confidential information, documents,
applications and reports) may be transmitted electronically, including
transmission over the Internet. This data may be transmitted to, received from
or circulated among agents and representatives of Borrower and/or Lender and
their Affiliates and other Persons involved with the subject matter of this
Agreement, including any servicer of the Junior Loan. Borrower and Lender
acknowledge and agree that (a) there are risks associated with the use of
electronic transmission and that neither Borrower nor Lender controls the
method of transmittal or service providers, (b) Borrower and Lender have
no obligation or responsibility whatsoever and assume no duty or obligation for
the security, receipt or third-party interception of any such transmission, and
(c) Borrower and Lender will release, hold harmless and indemnify each other
from any claim, damage or loss, including that arising in whole or part from
strict liability or sole, comparative or contributory negligence, which is
related to the electronic transmission of data.

 

Section 8.16           Dispute Resolution.

 

(a)           Arbitration. Except to the extent expressly provided below, any
Dispute shall, upon the request of either party, be determined by binding
arbitration in accordance with the Federal Arbitration Act, Title 9, United
States Code (or if not applicable, the applicable state law), the then-current rules for
arbitration of financial services disputes of AAA and the “Special Rules” set
forth below. In the event of any inconsistency, the Special Rules shall
control. The filing of a court action is not intended to constitute a waiver of
the right of Borrower or Lender, including the suing party, thereafter to
require submittal of the Dispute to arbitration. Any party to this Agreement
may bring an action, including a summary or expedited proceeding, to compel
arbitration of any Dispute in any court having jurisdiction over such action.
For the purposes of this Dispute Resolution Section only, the terms “party”
and “parties” shall include any
parent corporation, subsidiary or Affiliate of Lender involved in the
servicing, management or administration of any obligation described in or
evidenced by this Agreement, together with the officers, employees, successors
and assigns of each of the foregoing.

 

43

 

(b)           Special Rules.

 

(i)            If the arbitration relates to collateral, the
arbitration shall be conducted in any U.S. state where real or tangible
personal property collateral is located or, if it does not relate to
collateral, in the State of New York.

 

(ii)           The arbitration shall be administered by AAA, who will
appoint an arbitrator; if AAA is unwilling or unable to administer the
arbitration, or if AAA is unwilling or unable to enforce or legally precluded
from enforcing any and all provisions of this Dispute Resolution Section, then
any party to this Agreement may substitute another arbitration organization
that has similar procedures to AAA and that will observe and enforce any and
all provisions of this Dispute Resolution Section. All Disputes shall be
determined by one arbitrator; however, if the amount in controversy in a
Dispute exceeds Five Million Dollars ($5,000,000), upon the request of any
party, the Dispute shall be decided by three arbitrators (for purposes of this
Agreement, referred to collectively as the “arbitrator”).

 

(iii)          All arbitration hearings will be commenced within
ninety (90) days of the demand for arbitration and completed within ninety (90)
days from the date of commencement; provided, however, that upon a showing of
good cause, the arbitrator shall be permitted to extend the commencement of
such hearing for up to an additional sixty (60) days.

 

(iv)          The judgment and the award, if any, of the arbitrator
shall be issued within thirty (30) days of the close of the hearing. The
arbitrator shall provide a concise written statement setting forth the reasons
for the judgment and for the award, if any. The arbitration award, if any, may
be submitted to any court having jurisdiction to be confirmed and enforced, and
such confirmation and enforcement shall not be subject to arbitration.

 

(v)           The arbitrator will give effect to statutes of
limitations and any waivers thereof in determining the disposition of any
Dispute and may dismiss one or more claims in the arbitration on the basis that
such claim or claims is or are barred. For purposes of the application of the
statute of limitations, the service on AAA under applicable AAA rules of a
notice of Dispute is the equivalent of the filing of a lawsuit.

 

(vi)          Any dispute concerning this arbitration provision,
including any such dispute as to the validity or enforceability of this
provision, or whether a Dispute is arbitrable, shall be determined by the
arbitrator; provided, however, that the arbitrator shall not be permitted to
vary the express provisions of these Special Rules or the Reservations of
Rights in subsection (c) below.

 

(vii)         The arbitrator shall have the power to award legal
fees and costs pursuant to the terms of this Agreement.

 

44

 

(viii)        The arbitration will take place on an individual basis
with reference to, resort to, or consideration of any form of class or class
action.

 

(c)           Reservations of Rights. Nothing in this Agreement shall be deemed to (i) limit
the applicability of any otherwise applicable statutes of limitation and any
waivers contained in this Agreement, or (ii) apply to or limit the right
of Lender upon the occurrence and during the continuation of an Event of
Default (A) to exercise self help remedies such as (but not limited to)
setoff, or (B) to foreclose judicially or nonjudicially against any real
or personal property collateral, or to exercise judicial or nonjudicial power
of sale rights in any jurisdiction in which the Collateral, or any part
thereof, is located, (C) to obtain from a court provisional or ancillary
remedies such as (but not limited to) injunctive relief, writ of possession,
prejudgment attachment, or the appointment of a receiver, or (D) to pursue
rights against a party to this Agreement in a third-party proceeding in any
action brought against Lender in a state, federal or international court,
tribunal or hearing body (including actions in specialty courts, such as
bankruptcy and patent courts). Lender may exercise the rights set forth in
clauses (A) through (D), inclusive, before, during or after the pendency
of any arbitration proceeding brought pursuant to this Agreement. Neither the
exercise of self help remedies nor the institution or maintenance of an action
for foreclosure or provisional or ancillary remedies shall constitute a waiver
of the right of any party, including the claimant in any such action, to
arbitrate the merits of the Dispute occasioning resort to such remedies. No
provision in the Junior Loan Documents regarding submission to jurisdiction
and/or venue in any court is intended or shall be construed to be in derogation
of the provisions in any Junior Loan Document for arbitration of any Dispute.

 

(d)           Conflicting Provisions for Dispute Resolution. If there is any conflict between the
terms, conditions and provisions of this Section and those of any other
provision or agreement for arbitration or dispute resolution, the terms,
conditions and provisions of this Section shall prevail as to any Dispute
arising out of or relating to (i) this Agreement, (ii) any other Junior
Loan Document, (iii) any related agreements or instruments, or (iv) the
transaction contemplated herein or therein (including any claim based on or
arising from an alleged personal injury or business tort). In any other
situation, if the resolution of a given Dispute is specifically governed by
another provision or agreement for arbitration or dispute resolution, the other
provision or agreement shall prevail with respect to said Dispute.

 

(e)           Jury Trial Waiver in Arbitration. By agreeing to this Section, the
parties irrevocably and voluntarily waive any right they may have to a trial by
jury in respect of any Dispute.

 

Section 8.17           Nature of Obligations.

 

Except as provided in that the Guaranty of
even date herewith executed by Guarantor, the obligations of Borrower hereunder
to pay and perform the Obligations (including, without limitation, such
Obligations as are evidenced by the Junior Note) shall be without recourse to
Borrower’ members, shareholders, officers, affiliates, directors, partners,
agents, employees or consultants, or any affiliate of any such person, or to
the property or assets of any such person. 

 

45

 

Notwithstanding
anything to the contrary herein, nothing herein shall be deemed to be a waiver
of any right which Lender may have under Sections 506(a), 506(b), 1111(b) or
any other provision of the Federal Bankruptcy Code or any similar federal or
state statute to file a claim for the full amount of the Obligations secured
hereby or to require that all Collateral shall continue to secure all
Obligations owing to Lender in accordance with the Junior Note, this Agreement
and the other Junior Loan Documents. The foregoing will in no way limit Lender’s
recourse to the Collateral following an Event of Default or limit the liability
under any Contract to which any Affiliate of Borrower is a party and which has
been assigned to Junior Lender as Collateral for the Junior Loan, including but
not limited to the Construction Guaranty of even date herewith and any Contract
assigned as Collateral under the Assignment of Contracts, Permits and Approvals
of even date herewith executed by Borrower and the other parties thereto and
the Collateral Assignment of Lodging Management Agreement also of even date herewith
executed by Borrower and the other parties thereto.

 

Section 8.18           Waiver of Jury Trial.

 

WITHOUT INTENDING IN ANY WAY TO
LIMIT THE PARTIES’ AGREEMENT TO ARBITRATE ANY “DISPUTE” (FOR PURPOSES OF THIS
SECTION, AS DEFINED IN SCHEDULE 1) AS SET FORTH IN THIS AGREEMENT, TO
THE EXTENT ANY “DISPUTE” IS NOT SUBMITTED TO ARBITRATION OR IS DEEMED BY THE
ARBITRATOR OR BY ANY COURT WITH JURISDICTION TO BE NOT ARBITRABLE OR NOT
REQUIRED TO BE ARBITRATED, BORROWER AND LENDER WAIVE TRIAL BY JURY IN RESPECT
OF ANY SUCH “DISPUTE” AND ANY ACTION ON SUCH “DISPUTE.” THIS WAIVER IS
KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY BORROWER AND LENDER, AND BORROWER
AND LENDER HEREBY REPRESENT THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE
BEEN MADE BY ANY PERSON OR ENTITY TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO
IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE PARTIES ENTERING INTO THE JUNIOR LOAN DOCUMENTS. BORROWER
AND LENDER ARE EACH HEREBY AUTHORIZED TO FILE A COPY OF THIS SECTION IN
ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER OF JURY TRIAL. BORROWER
FURTHER REPRESENTS AND WARRANTS THAT IT HAS BEEN REPRESENTED IN THE SIGNING OF
THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL,
OR HAS HAD THE OPPORTUNITY TO BE REPRESENTED BY INDEPENDENT LEGAL COUNSEL
SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS
THIS WAIVER WITH COUNSEL.

 

Section 8.19           Additional Waivers.

 

BORROWER FURTHER HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES, IN CONNECTION WITH ANY SUIT, ACTION OR
PROCEEDING BROUGHT BY OR ON BEHALF OF LENDER WITH RESPECT TO THIS AGREEMENT,
THE JUNIOR NOTE OR OTHERWISE IN RESPECT OF THE JUNIOR LOAN, ANY AND EVERY RIGHT
BORROWER MAY HAVE TO (X) INJUNCTIVE RELIEF, (Y) INTERPOSE ANY
COUNTERCLAIM THEREIN, OTHER THAN A 

 

46

 

COMPULSORY COUNTERCLAIM,
AND (Z) HAVE THE SAME CONSOLIDATED WITH ANY OTHER OR SEPARATE SUIT, ACTION
OR PROCEEDING. NOTHING CONTAINED IN THE IMMEDIATELY PRECEDING SENTENCE SHALL
PREVENT OR PROHIBIT BORROWER FROM INSTITUTING OR MAINTAINING A SEPARATE ACTION
AGAINST LENDER WITH RESPECT TO ANY ASSERTED CLAIM. NOTWITHSTANDING ANY
PROVISION TO THE CONTRARY IN ANY JUNIOR LOAN DOCUMENT, TO THE EXTENT PERMITTED
BY APPLICABLE LAW, BORROWER AND LENDER SHALL NOT ASSERT, AND EACH HEREBY
WAIVES, ANY CLAIM AGAINST THE OTHER ON ANY THEORY OF LIABILITY FOR SPECIAL,
INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES (AS OPPOSED TO DIRECT OR ACTUAL
DAMAGES) ARISING OUT OF, IN CONNECTION WITH, OR AS A RESULT OF, ANY JUNIOR LOAN
DOCUMENT OR ANY AGREEMENT OR INSTRUMENT CONTEMPLATED THEREBY, THE JUNIOR LOAN
OR THE USE OF THE PROCEEDS THEREOF.

 

Section 8.20           Limitation on Liability.

 

Borrower waives any right to assert or make
any claim against Lender (or to sue Lender upon any claim for) any special,
indirect, incidental, punitive or consequential damages in respect of any
breach or wrongful conduct (whether the claim is based on contract, tort or
duty imposed by law) in connection with, arising out of or in any way related
to this Agreement, the other Junior Loan Documents or the transactions
contemplated hereby and/or thereby, or any act, omission or event in connection
therewith.

 

Section 8.21           Entire Agreement.

 

The Junior Loan Documents constitute the
entire understanding and agreement between Borrower and Lender with respect to
the transactions arising in connection with the Junior Loan, and supersede all
prior written or oral understandings and agreements between Borrower and Lender
with respect to the matters addressed in the Junior Loan Documents. In
particular, and without limitation, the terms of the Letter of Intent and any
commitment by Lender to make the Junior Loan are merged into the Junior Loan
Documents. Except as incorporated in writing into the Junior Loan Documents,
there are no representations, understandings, stipulations, agreements or
promises, oral or written, with respect to the matters addressed in the Junior
Loan Documents.

 

Section 8.22           Lost Junior Note.

 

Upon receipt of an affidavit of an officer of
Lender as to the loss, theft, destruction or mutilation of the Junior Note or
any other security document which is not of public record, and, in the case of
any such loss, theft, destruction or mutilation, upon cancellation of the Junior
Note or other security document, Borrower will, at Lender’s sole cost and
expense, issue, in lieu thereof, a replacement note or other security document
in the same principal amount thereof and otherwise of like tenor.

 

47

 

Section 8.23           Method of Payment.

 

All payments due hereunder and/or under the
Junior Note shall be made by Borrower to Lender at the address and in the
manner provided in the Junior Note or such other place as Lender may from time
to time specify in writing in lawful currency of the United States of America
in immediately available funds, without counterclaim or setoff and free and
clear of, and without any deduction or withholding for, any taxes or other
payments.

 

Section 8.24           Pledge to the Federal Reserve.

 

Lender may at any time pledge or assign all
or any portion of its rights under the Junior Loan Documents which evidence
and/or secure the Junior Loan to any of the twelve (12) Federal Reserve Banks
organized under Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341.
No such pledge or assignment or enforcement thereof shall release Lender from
its obligations under any of the Junior Loan Documents (including, without
limitation, the obligation to fund future advances of the Junior Loan) which
evidence and/or secure the Junior Loan.

 

Section 8.25           Right of Setoff.

 

Borrower hereby grants to Lender, a continuing lien, security interest
and right of setoff as security for all liabilities and obligations to Lender
whether now existing or hereafter arising, upon and against all deposits,
credits, collateral and property, now or hereafter in the possession, custody,
safekeeping or control of Lender or any entity under the control of Bank of
America Corporation and its successors and/or assigns or in transit to any of
them. At any time, without demand or notice (any such notice being expressly
waived by Borrower), Lender may setoff the same or any part thereof and apply
the same to any liability or obligation of Borrower even though unmatured and
regardless of the adequacy of any other collateral security for the Junior
Loan. ANY AND ALL RIGHTS TO REQUIRE LENDER TO EXERCISE
ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE
JUNIOR LOAN, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH
DEPOSITS, CREDITS OR OTHER PROPERTY OF THE BORROWER, ARE HEREBY KNOWINGLY,
VOLUNTARILY AND IRREVOCABLY WAIVED.

 

Section 8.26           Usury.

 

All agreements between Borrower and Lender
are hereby expressly limited so that in no contingency or event whatsoever,
whether by reason of acceleration of maturity of the indebtedness to be
advanced hereby or otherwise, shall the amount paid or agreed to be paid to
Lender for the use or the forbearance of the indebtedness evidenced hereby
exceed the maximum permissible under applicable law and shall be subject to Section 18
of the Junior Note. The provisions of Section 18 of the Junior Note shall
control every other provision of all agreements between Borrower and Lender.

 

Section 8.27           Application of Payments.

 

All payments received by Lender hereunder
shall be applied first to the payment of all fees, expenses and other amounts
due to Lender (excluding principal and interest), then to 

 

48

 

accrued interest, and the
balance on account of outstanding principal; provided, however, that after an
Event of Default hereunder, payments will be applied to the obligations of
Borrower to Lender as Lender determines in its sole discretion.

 

Section 8.28           Payment Date Adjustment for Non-Business
Days.

 

If any payment under the Junior Note becomes
due on a day which is not a Business Day (as defined below), the due date of
the Junior Note or payment shall be extended to the next succeeding Business
Day, and such extension of time shall be included in computing interest and
fees in connection with such payment. As used herein, “Business Day” shall mean
any day other than (i) a Saturday or a Sunday, [(ii) a day on which
commercial banks in the city in which the Lock Box Account (as such capitalized
term is defined in the Lock Box Agreement) are located, are authorized or
obligated by law, government decree or executive order to be closed,] (iii) a
day observed as a holiday by the federal government, or (iv) a day on
which the New York Stock Exchange is closed.

 

Section 8.29           Payment of Fees and Expenses.

 

Borrower shall pay within thirty (30) days
following receipt of written demand therefor (together with reasonable evidence
substantiating such expenditures by Lender), all Expenses of Lender in
connection with the preparation, administration, default, collection, waiver or
amendment of Loan terms, or in connection with Lender’s exercise, preservation
or enforcement of any of its rights, remedies or options hereunder, including,
without limitation, reasonable fees of outside legal counsel, accounting,
consulting, brokerage or other similar professional fees or expenses, and any
reasonable fees or expenses associated with travel or other reasonable costs
relating to any appraisals (subject to the terms and conditions set forth in
this Agreement) or examinations conducted in connection with the Loan or any
collateral therefor, and the amount of all such expenses shall, until paid,
bear interest at the rate applicable to principal hereunder (including any
default rate) and be an obligation secured by any collateral.

 

Section 8.30           [Reserved].

 

Section 8.31           Capital Adequacy.

 

If at any time Lender is a regulated
financial institution such that the applicable regulatory authority may impose capital
adequacy requirements, in the event the Lender shall have determined that any
requirement of any law of the United States of America, any regulation, order,
interpretation, ruling, official directive or guideline (whether or not having
the force of law) of the Board of Governors of the Federal Reserve System, the
Comptroller of the Currency, the Federal Deposit Insurance Corporation or any
other board or governmental or administrative agency of the United States of
America which shall impose, increase, modify or make applicable to the Junior
Note or this Agreement or cause the Junior Note or this Agreement to be
included in any reserve, special deposit, calculation used in the computation
of regulatory capital standards, assessment or other requirement which imposes
on the Lender any cost that is attributable to the maintenance thereof, then,
and in each such event, the Borrower shall promptly pay the Lender, upon its
demand, such amount as will compensate the Lender for any such cost, which
determination may be based upon the Lender’s reasonable allocation of the
aggregate of such 

 

49

 

costs resulting from such
events. In the event any such cost is a continuing cost, a fee payable to the
Lender may be imposed upon the Borrower periodically for so long as any such
cost is deemed applicable by the Lender, in an amount determined by the Lender
to be necessary to compensate the Lender for any such cost, which determination
may be based upon the Lender’s reasonable allocation of the aggregate of such
costs resulting from such events. The determination by the Lender of the
existence and amount of any such costs shall, in the absence of manifest error,
be conclusive. This section shall be available to Lender regardless of any
possible contention of invalidity or inapplicability of the law, regulation or
condition which shall have been imposed.

 

Section 8.32           Right to Sell Junior Loan to Participant.

 

Lender shall have the unrestricted right at
any time and from time to time, and without the consent of or notice to
Borrower, to grant to one or more banks or other financial institutions (each,
a “Participant”) participating
interests in Lender’s obligation to lend hereunder and/or any or all of the
Junior Loan, provided that no such participation shall increase the obligations
or decrease the rights of Borrower under any of the Junior Loan Documents. In
the event of any such grant by Lender of a participating interest to a
Participant, whether or not upon notice to Borrower, Lender shall remain
responsible for the performance of its obligations hereunder (including,
without limitation, the obligation to make future advances) and Borrower shall
continue to deal solely and directly with Lender in connection with Lender’s
rights and obligations hereunder. Lender may furnish any information concerning
Borrower in its possession from time to time to prospective Participants,
provided such Participants agree to keep such information confidential.

 

Section 8.33           Junior Loan Assignment.

 

Lender shall have the unrestricted right from
time to time, and without Borrower’s or anyone else’s consent, to assign all or
any portion of its rights and obligations hereunder to one or more banks or
other financial institutions (each, an “Assignee”),
which is an Eligible Assignee, and Borrower agrees that it shall, at Lender’s
sole cost and expense, execute or cause to be executed, such documents,
including without limitation, amendments to this Agreement and to any other
documents, instruments and agreements executed in connection herewith as Lender
shall reasonably deem necessary to effect the foregoing. In addition, at the
request of Lender and any such Assignee, Borrower shall, at Lender’s sole cost
and expense, issue one or more new promissory notes, as applicable, to any such
Assignee, and if Lender has retained any of its rights and obligations
hereunder following such assignment, to Lender, which new promissory notes
shall be issued in replacement of, but not in discharge of, the liability
evidenced by the promissory note held by Lender prior to such assignment and
shall reflect the amount of the respective commitments and Loans held by such
Assignee and Lender after giving effect to such assignment. Upon the execution
and delivery of appropriate assignment documentation, amendments and any other
documentation required by Lender in connection with such assignment, and the
payment by Assignee of the purchase price agreed to by Lender and such
Assignee, such Assignee shall be a party to this Agreement and shall have all
of the rights and obligations of Lender hereunder (and under any and all other
guaranties, documents, instruments and agreements executed in connection
herewith) to the extent that such rights and obligations have been assigned by
Lender pursuant to the assignment documentation between 

 

50

 

Lender and such Assignee,
and Lender shall be released from its obligations hereunder and thereunder to a
corresponding extent. Borrower may furnish any information concerning Borrower
in its possession from time to time to prospective Assignees, provided that
Lender shall require any such prospective Assignees to agree in writing to
maintain the confidentiality of such information.

 

Section 8.34           [Reserved].

 

Section 8.35           Integration.

 

This Agreement is intended by the parties as
the final, complete and exclusive statement of the transactions evidenced by
this Agreement. All prior or contemporaneous promises, agreements and
understandings, whether oral or written, are deemed to be superseded by this
Agreement, and no party is relying on any promise, agreement or understanding
not set forth in this Agreement. This Agreement may not be amended or modified
except by a written instrument describing such amendment or modification
executed by Borrower and Lender.

 

Section 8.36           Use of Proceeds.

 

No portion of the proceeds of the Junior Loan
shall be used, in whole or in part, for the purpose of purchasing or carrying
any “margin stock” as such term is defined in Regulation U of the Board of
Governors of the Federal Reserve System.

 

Section 8.37           [Reserved].

 

Section 8.38           [Reserved].

 

Section 8.39           [Reserved].

 

Section 8.40           Administrative Agent.

 

(a)           In connection with any assignment pursuant to Section 8.33
hereof, the Lender shall have the right to appoint, designate and authorize, or
act as, an administrative agent (“Administrative Agent”) to take such action on
its behalf and on behalf of any Assignees under the provisions of this
Agreement and each other Junior Loan Document and to exercise such powers and
perform such duties as are expressly delegated to it by the terms of this
Agreement, any other Junior Loan Document or any agreement with respect to such
assignment, together with such powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary contained elsewhere herein or in
any other Junior Loan Document, Administrative Agent shall not have any duties
or responsibilities, except those expressly set forth in writing by the Lender,
nor shall Administrative Agent have or be deemed to have any fiduciary
relationship with the Lender or any Assignee, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall be read
into this Agreement or any other Junior Loan Document or otherwise exist
against Administrative Agent. Without limiting the generality of the foregoing
sentence, the use of the term “agent” herein and in the other Junior Loan
Documents with reference to Administrative Agent is not intended to connote any
fiduciary or other implied (or express) obligations arising under agency 

 

51

 

doctrine of any
applicable Law. Instead, such term is used merely as a matter of market custom,
and is intended to create or reflect only an administrative relationship
between independent contracting parties.

 

(b)           Lender shall be the initial Administrative Agent, if
an Administrative Agent is deemed necessary or desirable by the Lender
hereunder. Lender or any subsequent Administrative Agent may resign as
Administrative Agent upon 30 days’ notice to Assignees and Borrower subject to
the prior written consent of the Borrower (unless Borrower is in Default, in
which case consent of the Borrower is not required), which consent shall not be
unreasonably withheld, conditioned or delayed (unless the Lender shall retain
25% or less of the Junior Loan or during the existence and continuation of a
Default, in which case Borrower consent shall not be required). If Administrative
Agent resigns under this Agreement, the Lender shall appoint from among Lender
and Assignees a successor administrative agent, which successor administrative
agent shall be consented to by Borrower at all times other than during the
existence of a Default (which consent of Borrower shall not be unreasonably
withheld, conditioned or delayed). If no successor administrative agent is
appointed prior to the effective date of the resignation of Administrative
Agent, subject to Borrower’s prior written consent (such consent not to be
required if a Default is in existence and continuing), which consent shall not
be unreasonably withheld, delayed or conditioned, Administrative Agent may
appoint, after consulting with Lender, Assignees and Borrower, a successor
administrative agent from among Assignees and the Lender. Upon the acceptance
of its appointment as successor administrative agent hereunder, such successor
administrative agent shall succeed to all the rights, powers and duties of the
retiring Administrative Agent and the respective
term “Administrative Agent” shall mean such successor administrative agent, and
the retiring Administrative Agent’s appointment, powers and duties as
Administrative Agent shall be terminated. After any retiring Administrative
Agent’s resignation hereunder as Administrative Agent, the provisions of this
Agreement shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Administrative Agent Issuer under this Agreement. If no successor administrative agent
has accepted appointment as Administrative Agent by the date which is 30 days
following a retiring Administrative Agent’s notice of resignation, the retiring
Administrative Agent’s resignation shall nevertheless thereupon become
effective and Lender shall perform all of the duties of Administrative Agent
hereunder until such time, if any, as the Lender or the Assignees appoint a
successor agent acceptable to Borrower as provided for above.

 

(c)           No Administrative Agent shall (i) be liable for
any action taken or omitted to be taken by it under or in connection with this
Agreement or any other Junior Loan Document or the transactions contemplated
hereby (except for its own gross negligence or willful misconduct), or (ii) be
responsible in any manner to any of Lender, Assignees or Borrower for any
recital, statement, representation or warranty made by Borrower or any
subsidiary or Affiliate of Borrower, or any officer thereof, contained herein
or in any other Junior Loan Document, or in any certificate, report, statement
or other document referred to or provided for in, or received by Administrative
Agent under or in connection with, this Agreement or any other Junior Loan
Document, or the validity, effectiveness, genuineness, enforceability or sufficiency
of this Agreement or any other Junior Loan 

 

52

 

Document, or for
any failure of Borrower or any other party to any Junior Loan Document to
perform its obligations hereunder or thereunder. No Administrative Agent shall
be under any obligation to the Lender, any Assignee or Borrower to ascertain or
to inquire as to the observance or performance of any of the agreements
contained in, or conditions of, this Agreement or any other Junior Loan
Document, or to inspect the properties, books or records of Borrower or any of
its Affiliates.

 

(d)           Without limiting the Junior Loan Documents and to the
extent not prohibited by applicable Laws, Borrower shall pay when due, shall
reimburse to Administrative Agent for the benefit of itself, the Lender and any
Assignee on demand and shall indemnify (i) Administrative Agent, the
Lender and any Assignee from, all reasonable and documented out-of-pocket fees,
costs, and expenses paid or incurred by Administrative Agent in connection with
the negotiation, preparation and execution of this Agreement and the other
Junior Loan Documents (and any amendments, approvals, consents, waivers and
releases requested, required, proposed or done from time to time), and (ii) Administrative
Agent, the Lender and any Assignee in connection with the disbursement,
administration or collection of the Junior Loan or the enforcement of the
obligations of Borrower or the exercise of any right or remedy of
Administrative Agent, including (a) all fees and expenses of
Administrative Agent’s legal counsel; (b) fees and charges of each
Construction Consultant, inspector and engineer; (c) appraisal,
re-appraisal obtained in accordance with Section 8.41 hereof, and survey
costs; (d) title insurance charges and premiums; (e) title search or
examination costs, including abstracts, abstractors’ certificates and uniform
commercial code searches; (f) judgment and tax lien searches for Borrower;
(g) escrow fees; (h) fees and costs of environmental investigations,
site assessments and remediations; (i) recordation taxes, documentary
taxes, transfer taxes and mortgage taxes; (j) filing and recording fees;
and (k) loan brokerage fees for which Borrower has specifically agreed to
pay. Borrower shall pay all costs and expenses incurred by Administrative
Agent, including attorneys’ fees, if the obligations or any part thereof are
sought to be collected by or through an attorney at Law, whether or not
involving probate, appellate, administrative or bankruptcy proceedings.
Borrower shall pay all costs and expenses of complying with the Junior Loan
Documents, whether or not such costs and expenses are included in the Component
Budget. Borrower’s obligations under this Section shall survive the
delivery of the Junior Loan Documents, the making of Advances, the payment in
full of the Obligations, the release or reconveyance of any of the Junior Loan
Documents, the foreclosure of the Mortgages or conveyance in lieu of
foreclosure, any bankruptcy or other debtor relief proceeding, and any other
event whatsoever (other than an enforceable waiver of Borrower’s obligations
under this Section by Administrative Agent).

 

Section 8.41           Appraisal.

 

Lender may obtain from time to time an
appraisal of all or any part of the Property prepared in accordance with
written instructions from Lender by a third-party appraiser engaged directly by
Lender (i) after the occurrence and during the continuation of a Default; (ii) if
a Governmental Authority requests, or a governmental regulation requires, an
appraisal; (iii) upon any action under the Junior Loan Documents or
Project Documents which would affect the Obligations; and (iv) if Lender
has received written confirmation from the Construction 

 

53

 

Consultant confirming that
an event has occurred or condition exists at the Property which is reasonably
likely to have a Material Adverse Effect. Each such appraiser and appraisal
shall be satisfactory to Lender (including satisfaction of applicable regulatory
requirements). The reasonable cost of any such appraisal shall be borne by
Borrower. Such cost is due and payable by the Borrower on demand and shall be
secured by the Junior Loan Documents. Lender shall provide a copy of such
appraisal to the Borrower upon receipt.

 

Section 8.42           USA Patriot Act Notice.

 

Lender hereby notifies Borrower that pursuant
to the requirements of the Act, Lender is required to obtain, verify and record
information that identifies Borrower, which information includes the name and
address of Borrower and other information that will allow Lender to identify
Borrower in accordance with the Act.

 

Section 8.43           [Reserved]

 

Section 8.44           Confidentiality.

 

Notwithstanding anything to the contrary
contained in this Agreement or any other Junior Loan Document to the contrary,
any information disclosed by Borrower or its Affiliates to Lender in connection
with the Junior Loan (including any data, plans, specifications, proposals,
financial projections and other financial information, material and information
regarding the Property, the Project, Borrower, its members, their affiliates,
and their respective businesses), the terms and any insurance policies required
or otherwise maintained pursuant hereto or thereto, and any other information provided
by Borrower or its Affiliates designated in writing to Lender as confidential
(collectively, the “Information”), shall be regarded by such parties as
confidential, shall not be used or disseminated for any purpose other than in
connection with providing banking, lending and other financial services for
Borrower or in administering, enforcing, managing and disposing of the Junior
Loan and the rights and interest of Lender in the Collateral, and shall not be
disclosed to a third party (other than to the limited extent permitted by the
express provisions of this Agreement), except for such disclosures of
Information:

 

(a)           to Lender, the Cash Management Agent, the Construction
Consultant, proposed transferees or assignees of Lender and the respective investors,
auditors, agents, attorneys, consultants, legal representatives, successors and
assigns of the foregoing to the extent commercially reasonable in connection
with Lender providing banking, lending and other financial services for
Borrower or with respect to administration, enforcement, management and
disposition of the Junior Loan and the rights and interest of Lender in the
Collateral;

 

(b)           made with the prior agreement of Borrower;

 

(c)           to the extent such Information is otherwise already
available in the public domain other than as a result of a disclosure by others
in violation of this Section;

 

(d)           to the extent required to be disclosed by court order
in a legal proceeding or by applicable laws; provided, however, that if
possible, before such disclosure, the Person so required to disclose the
Information shall give Borrower prompt written notice 

 

54

 

of such order or
legal requirement, so as not to limit Borrower’s right to seek to obtain a
protective order or other appropriate remedy;

 

(e)           that were known to Lender or any of its affiliates at
the time of its initial receipt;

 

(f)            were independently developed by Lender or any of its
affiliates;

 

(g)           become known to Lender or any of its affiliates from
an independent source without breach of this provision by Lender or any
affiliates, officer, director, employee or consultant of Lender;

 

(h)           are disclosed pursuant to regulatory reviews and
investigations;

 

(i)            are disclosed to present or prospective, direct or
indirect, holders of equity in the Lender or any present or prospective lender
to the Lender;

 

(j)            are disclosed to Lender’s attorneys, accountants, tax
advisors, investment advisors and manager, and other consultants engaged to
assist Lender in connection with the Loan or in the performance of its
obligations or exercise of its rights hereunder or connection with regulatory,
tax and any other compliance required under applicable law; or

 

(k)           as may be required by Law upon the advice of legal
counsel in order to comply with all financial reporting, securities laws and
other legal requirements applicable to Lender, including any required
disclosures to the Securities and Exchange Commission, any applicable state
agency involved in securities regulation and the Financial Industry
Regulatory Authority.

 

Section 8.45           Termination.

 

The terms, provisions and undertakings in
this Agreement and all other Junior Loan Documents shall terminate and cease to
be effective upon the indefeasible payment in full of the Junior Loan and the
full and final discharge of any other Obligations and except for any
indemnification provisions that expressly survive the payment in full of the
Loan. Lender agrees, at Borrower’s reasonable expense, to take such actions as
may be necessary to evidence such termination and the release of any liens
created hereunder or under any other Junior Loan Document, including (without
limitation) the filing of Uniform Commercial Code termination statements,
releases of mortgages/deeds of trust and other lien releases. Borrower may
request in writing an extension of the maturity date of the Junior Loan from
Lender in accordance with the Junior Note.

 

Section 8.46           Documents, etc. to be Satisfactory.

 

All instruments and documents required hereby
or affecting the Property, or relating to Borrower’s capacity and authority to
borrow the Junior Loan and to execute the Loan documents and such other
documents, instruments, opinions and assurances as Lender may request and all
procedures in connection herewith shall be subject to the approval, as to form
and substance, of 

 

55

 

Lender and its counsel. All
persons or entities responsible for the preparation and/or execution of the
instruments specifically required hereby and all obligors thereunder shall be
reasonably satisfactory to Lender.

 

Section 8.47           Factual Matters.

 

Any condition of this Agreement which
requires the submission of evidence of the existence or non-existence of a
specified fact or facts implies as a condition of the existence or
non-existence, as the case may be, of such fact or facts that Lender shall, at
all times, be free independently to establish to its satisfaction and in its
absolute discretion such existence or non-existence.

 

Section 8.48           Modification of Junior Loan in Accordance
With Lease.

 

Lender agrees, subject to the satisfaction of
the requirements of this Section 8.48 and any other applicable
requirements of the Debt Documents, as defined in the Lock Box Agreement, to
consent to the amendment of the PAL Lease to reflect the inclusion of Parcel C
at Fort Shafter and Parcel B at TAMC (collectively, the “Hawaii Parcels”) in
the Site (as defined in the PAL Lease) and the conveyance of the improvements
thereon to the Borrower in accordance with Section 1.e. and 1.f. of the
PAL Lease. The Lender’s obligation to provide any such consent, however, is
conditioned on (i) execution, delivery and/or recordation of such
documents as are reasonably required by the Lender to confirm and/or provide a
second priority leasehold mortgage lien for the benefit of the Lender on the
Hawaii Parcels, including, without limitation, such additional real estate,
environmental, title insurance and survey documents, reports and materials as
are customarily required by the Lender for real estate transactions of the type
contemplated hereby and such consents and estoppels from the Government as are
required or authorized under the PAL Lease, (ii) execution and delivery by
the Borrower of such other modifications to the Debt Documents as reasonably
required by the Lender to reflect the addition of the Hawaii Parcels to the PAL
Lease, and (iii) delivery to the Lender of such legal opinions relating to
documents executed by the Borrower in connection with the amendment of the PAL
Lease and any related amendments to the Debt Documents as the Lender shall
reasonably request.

 

Section 8.49           Not Government Obligations.

 

The obligations of Borrower under this
Agreement are not obligations of the U.S Government.

 

Section 8.50           Refinancing of Senior Loan.

 

Notwithstanding anything to the contrary
contained in this Agreement, Borrower agrees that if the Senior Loan is
refinanced with a new loan secured by the Collateral or any part thereof (a “Replacement
Senior Loan”), it is the intent of such parties that the lender of the
Replacement Senior Loan shall not be subrogated to the rights or priority of
the Senior Lender and that the Replacement Senior Loan (including, without
limitation, all mortgages, liens, assignments, security interests and
obligations created by the documents evidencing and securing the Replacement
Senior Loan) will in all respects be subordinate and inferior to the Junior
Loan (including, without limitation, all mortgages, liens, assignments,
security interests and 

 

56

 

obligations created by the
documents evidencing and securing the Junior Loan) and the Junior Loan
Documents, unless Junior Lender executes a written instrument to the contrary.
Accordingly, in the event a Replacement Senior Loan is obtained, Borrower shall
execute, and shall cause the lender of the Replacement Senior Loan to execute,
such documents as Junior Lender may reasonably require in order to evidence the
subordination of the Replacement Senior Loan to the Junior Loan.

 

Section 8.51           Guarantor Controlled Person.

 

Subordinate Lender is executing this
Agreement for the sole purpose of acknowledging and agreeing that it is a
Guarantor Controlled Person.

 

Section 8.52           New York Contacts.

 

As stated in Section 8.13 above, Lender
and Borrower have agreed that the laws of the State of New York shall govern
this Agreement. This Agreement is being entered into as part of a transaction
whereby, among other things, the Army is granting a leasehold estate in the
Property to Borrower and concurrently therewith Borrower is obtaining the
Junior Loan, the Senior Loan and the Subordinate Loan to perform improvements
on the Property. Borrower and Lender acknowledge and agree that their selection
of the laws of the State of New York to govern this Agreement is appropriate
because, among other things: (a) Senior Lender has multiple offices in New
York; (b) the title company that is a party to the transaction of which
the Senior Loan, the Junior Loan and the Subordinate Loan are a part has its
chief executive office in New York; (d) substantive negotiations regarding
the transaction occurred in New York; (e) the Junior Lender, the Senior
Lender and the Subordinate Lender will fund the initial advances of their
respective loans through the offices of the title insurer and escrow agent in
New York; (f) one or more of the agreements relating to the transaction
have been signed in New York and (g) all of
the Closing documents related to this transaction have been delivered
into escrow with the title insurer at its office in New York.

 

Section 8.53           Payment at Maturity.

 

Borrower acknowledges and agrees that the
Minimum Monthly Payment and all payments due and payable hereunder and under
the Junior Loan on the Maturity Date must be paid regardless of the sufficiency
of Revenue (as defined in the Lock Box Agreement.

 

Section 8.54           Payment in Full of Senior Loan/Purchase
of Senior Loan.

 

Notwithstanding anything
to the contrary set forth in the Project Documents or any other document,
Borrower agrees that at such time as all obligations owed to Senior Lender
under the Senior Loan Documents have been paid in full, Lender shall
automatically succeed to all approval, consent, participation, and similar
rights of Senior Lender set forth in the Project Documents and all rights of
Senior Lender to receive notices, reports and other information pursuant to the
Project Documents, as if such rights were validly assigned by Senior Lender to
Lender prior to payment of the obligations owed to the Senior Lender under the
Senior Loan Documents; provided, however that Lender shall have the right to
reject such assignment in whole or in part by sending written notice to
Borrower. Borrower agrees to use reasonable efforts to cooperate with Lender in
causing any third party to recognize the transfer of rights from 

 

57

 

Senior Lender to Lender
described in the preceding sentence. 
Borrower shall not purchase, or allow any Affiliate of Borrower to
purchase the Senior Loan, unless (i) concurrently therewith, the Junior
Loan is sold to the same party on terms acceptable to the Junior Lender in its
sole discretion, or (ii) the prior written consent of Junior Lender is
obtained (which consent may be given or withheld in the sole discretion of
Junior Lender).

 

Section 8.55           Refinance of Subordinate Loan.

 

Borrower agrees that Borrower will not
refinance the Subordinate Loan without the prior written consent of Lender,
which consent shall not be unreasonably withheld, conditioned or delayed. If
Borrower desires to refinance the Subordinate Loan, Borrower shall send written
notice to Lender describing the identity of the person or entity providing such
refinancing, certifying that such refinancing will not result in any amendment
of any of the Special Modification Terms of Subordinate Loan Documents, as such
term is defined in the Intercreditor Agreement, and requesting Lender’s
approval thereof. Within fifteen (15) days after delivery of such notice,
Lender shall respond to Borrower with a notice either approving or disapproving
the contemplated refinancing. If Lender fails to respond to a notice sent by
Borrower requesting Junior Lender’s approval of a refinancing within
fifteen (15) days after delivery, then Junior Lender shall be deemed to have
approved such refinancing. Any refinancing made in violation of this Section shall
be deemed void.  Notwithstanding the
foregoing, Lender’s consent shall not be required with respect to a refinancing
by an Affiliate of Borrower, provided that Borrower provides Lender with prior
written notice of the refinancing and the identity of the Affiliate, and the
Affiliate provides a certification to Lender on or before the closing of the
refinancing certifying that such refinancing does not result in any amendment
of any of the Special Modification Terms of Subordinate Loan Documents,
acknowledging that such Affiliate is a Guarantor Controlled person as provided
in Section 8.52 hereof, and that such Affiliate agrees to be bound by all
of the terms and conditions of the Intercreditor Agreement binding on
Subordinate Lender.

 

[Signature
pages to follow]

 

58

 

[Signature page to
Junior Loan Agreement]

 

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

 

 

	
   

  	
  BORROWER:

  
	
   

  	
   

  
	
   

  	
  REST EASY LLC,

  
	
   

  	
  a Delaware Limited
  liability company

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  RE Managing Member LLC,

  
	
   

  	
   

  	
  its managing member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Actus Lend Lease
  Holdings LLC,

  
	
   

  	
   

  	
   

  	
  its sole member

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/
  Marc Sierra

  
	
   

  	
   

  	
   

  	
   

  	
  Marc
  Sierra

  
	
   

  	
   

  	
   

  	
   

  	
  Executive
  Vice President

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  LENDER:

  
	
   

  	
   

  
	
   

  	
  BEHRINGER
  HARVARD PAL I, LLC,

  
	
   

  	
  a
  Delaware limited liability company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Gerald J. Reihsen, III

  
	
   

  	
   

  	
  Gerald
  J. Reihsen, III

  
	
   

  	
   

  	
  Executive
  Vice President —

  
	
   

  	
   

  	
  Corporate
  Development & Legal

  

 

59

 

[Signature page to
Junior Loan Agreement]

 

Subordinate Lender is executing this
Agreement solely to evidence its agreement to Section 8.51

 

 

	
   

  	
  SUBORDINATE LENDER:

  
	
   

  	
   

  
	
   

  	
  LEND LEASE (US) CAPITAL
  INC.,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Kevin M. Davis

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Kevin
  M. Davis

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Assistant
  Secretary

  

 

60

 

Schedule 1

 

Definitions

 

Unless the context otherwise specifies or
requires, the following terms shall have the meanings herein specified, such
definitions to be applicable equally to the singular and the plural forms of
such terms and to all genders:

 

“AAA” means the American Arbitration
Association, or any successor thereof.

 

“Act” means the USA Patriot Act (Title
III of Pub. L. 107-56 (signed into law October 26, 2001)).

 

“Actus” means Actus Lend Lease LLC, a
Delaware limited liability company.

 

“Advance” means any advance of Junior
Loan proceeds by Lender made in accordance with the terms and conditions hereof
(inclusive of the Initial Advance).

 

“Affiliate” with respect to any
specified Person means (i) any Person directly or indirectly Controlling,
Controlled by or under common Control with, the specified Person and shall
include, if such Person is an individual, members of the Family of such Person
and trusts for the benefit of such individual or Family members; (ii) any
director, officer or trustee of the specified Person; and (iii) any Person
directly, indirectly or beneficially owning or Controlling more than fifty
percent (50%) of any class of voting securities of the specified Person. Without
limiting the foregoing, a limited partnership, the limited partners of which
are trusts for the benefit of Family members of a Person and the general
partners of which are beneficiaries or Family members of the beneficiaries of
such trusts, corporations or partnerships owned by any of the foregoing, shall
be an Affiliate of such trusts.

 

“Ancillary Lease” means a lease or
license between the Army, as lessor and licensor, as applicable, and the
Borrower, as lessee or licensee, as applicable, regarding the demise or license
of property which is not demised, licensed or conveyed to the Borrower under
the PAL Lease, as such lease or license may be extended, amended, restated,
supplemented, superseded or otherwise modified from time to time in accordance with
the terms thereof.

 

“Army” means The United States of
America, by the Secretary of the Army.

 

“Asset and Property Management Agreement”
means the agreement of that name by and between Borrower and the Asset Manager
with respect to the Project, as amended and supplemented from time to time.

 

“Asset Manager” means the manager
engaged by the Borrower from time to time under the Asset and Property
Management Agreement or any substitute or replacement asset management
agreement with the Company. The initial Asset Manager is RE Asset Management
LLC, a Delaware limited liability company.

 

“Assignment of Rents and Leases” means
each Junior Assignment of Rents and Leases by the Borrower in favor of the
Lender, as amended and supplemented from time to time.

 

1

 

“Authorized Signer” means any
representative of Borrower duly designated and authorized by Borrower to sign
Draw Requests in a writing addressed to Lender, which writing may include a
Draw Request in the form attached hereto as Schedule 2.

 

“Banking Day” means any day that is
not a Saturday, Sunday or banking holiday in the State.

 

“Bill of Sale” has the meaning set
forth in Appendix A to the Lock Box Agreement.

 

“Business Days” shall have the meaning
as set forth in Section 8.28.

 

“Cash Management Agent” means Bank of
America, N.A. as “Cash Management Agent” under the Lock Box Agreement.

 

“Casualty” means an event of damage or
destruction to the Project by fire or other casualty.

 

“Casualty Proceeds” means the
insurance claims under and the proceeds of any and all policies of insurance
covering the Project or any part thereof, including all returned and unearned
premiums with respect to any insurance relating to such Project, in each case
whether now or hereafter existing or arising, and all other amounts payable as
a result of, or in connection with, any Casualty.

 

“Change Order” has the meaning set
forth in the Design/Build Agreement.

 

“Claims” means any and all
liabilities, obligations, damages, losses, demands, penalties, fines, claims,
actions, suits, judgments, settlements, costs, expenses and disbursements
(including, reasonable, actually incurred legal fees, expenses and costs of
investigation) of any kind and nature whatsoever.

 

“Closing” means the date of execution
of this Junior Loan Agreement and the Junior Note, which shall be August 14,
2009.

 

“Code” means the Internal Revenue Code
of 1986, as amended.

 

“Collateral” means any and all real
and personal property, both tangible and intangible, that secures any of the
Obligations, including any after-acquired Collateral.

 

“Collateral Assignment” means the
Assignment of Contracts, Permits and Approvals and acknowledgements and
consents thereto, as amended and supplemented from time to time.

 

“Collateral Assignment of Lodging
Management Agreement” means the Collateral Assignment of Lodging Management
Agreement between the Borrower and the Lender, as amended and supplemented from
time to time.

 

“Commencement Date” means the date of
commencement of the construction of the Improvements, as determined by the
Construction Consultant. Subject to extension for Force Majeure and Excusable
Delay, Commencement Date shall occur no later than the earlier of: (i) 

 

2

 

February 1, 2010, or (ii) the
first Advance after the Initial Advance under the Senior Loan Agreement.

 

“Completion of Construction” means,
with respect to the construction of the Improvements or any component thereof,
the satisfaction of all of the conditions of Section 5 of Schedule 5.

 

“Component” has the meaning set forth
in the Design/Build Agreement.

 

“Component Budget” has the meaning set
forth in the Design/Build Agreement and is subject to modification in
accordance with the terms and conditions set forth in the Design/Build
Agreement.

 

“Component Scope” has the meaning set
forth in the Design/Build Agreement and is subject to modification in
accordance with the terms and conditions set forth in the Design/Build
Agreement.

 

“Condemnation” means the condemnation,
requisition or other taking or sale of the use, occupancy or title to the
Project or any part thereof in, by or on account of any eminent domain
proceeding or other action by any Governmental Authority or other Person under
the power of eminent domain or otherwise or any transfer in lieu of or in
anticipation thereof.

 

“Condemnation Awards” means any and
all judgments, awards of damages (including severance and consequential
damages), payments, proceeds, settlements, amounts paid for a taking in lieu of
Condemnation, or other compensation heretofore or hereafter made, including
interest thereon, and the right to receive the same, as a result of, or in
connection with, any Condemnation or threatened Condemnation.

 

“Consent of Lessor” means the Consent
of Lessor among the Army, Borrower, the Junior Lender, the Junior Lender and
the Subordinate Lender, as amended and supplemented from time to time.

 

“Construction Consultant” means a
person or firm appointed or designated as provided by the Lease from time to
time to inspect the progress of the development of the Land, the Construction
of the Improvements and the conformity of construction with the Plans and
Specifications, and the Design/Build Agreement in accordance with an agreement
between the Borrower, Lender, Army and Construction Consultant.

 

“Construction Escrow Reserve Subaccount”
has the meaning set forth in the Lock Box Agreement.

 

“Construction Guaranty” means the
Construction Guaranty made by Lend Lease Corporation Limited in favor of the
Borrower with respect to the Project, as the same may be extended, amended,
restated, supplemented, superseded or otherwise modified from time to time in
accordance with the terms thereof.

 

3

 

“Construction of the Improvements” or “construction
of Improvements” means the development of the Land and/or the construction
of the Improvements described as the LSCR Phase in the PAL Lease.

 

“Control” (and the co-relative terms “Controlling,”
“Controlled by” and “under common Control with”) means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of outstanding securities, equity or other beneficial ownership interests,
by contract or otherwise.

 

“Control Agreement” means,
collectively, the Deposit Account Control Agreements of even date herewith
among Borrower, the Senior Lender, the Junior Lender, Subordinate Lender and
Bank of America, N.A., as amended and supplemented from time to time.

 

“Default” means an event or
circumstance that, with the giving of Notice or lapse of time, or both, would
constitute an Event of Default under the provisions of this Agreement.

 

“Design/Build Agreement” means the (i) Design/Build
Agreement dated as of August 14, 2009, by and between Borrower, as owner,
and the Design/Build Contractor, as general contractor, (ii) any other
contract for the development of the Land and/or the Construction of the
Improvements between Borrower and a contractor, and approved in writing by
Lender, as the same may be amended from time to time with the prior written
approval of Lender; and (iii) any purchase orders for the acquisition
and/or installation of budgeted FF&E and OS&E in connection with the
operation of the Project in accordance with Schedule 12.

 

“Design/Build Contractor” means Actus
Lend Lease LLC, a Delaware limited liability company, its successors and
permitted assigns and any other contractor pursuant to a Design/Build
Agreement.

 

“Development Manager” means the
development manager, from time to time, under the Development Services
Agreement. The initial Development Manager will be RE Development Management
LLC, a Delaware limited liability company.

 

“Development Management Services Agreement”
means that certain Development Management Services Agreement, dated as of the
Effective Date, by and between the Company and Development Manager, as the same
may be extended, amended, restated, supplemented, superseded or otherwise
modified from time to time in accordance with the terms thereof.

 

“Direct Costs” means the aggregate of
all design build costs and expenses under the Design/Build Agreement, labor,
materials, equipment, and fixtures necessary for completion of construction of
the Improvements.

 

“Direct Costs Statement” means a
statement in form reasonably approved by Lender of Direct Costs incurred and to
be incurred, trade by trade, to be prepared by the Design/Build Contractor,
including the Direct Cost contingencies amount.

 

“Dispute” means any controversy, claim
or dispute between or among the parties to this Agreement, including any such
controversy, claim or dispute arising out of or relating to (a) this
Agreement, (b) any other Junior Loan Document, (c) any related
agreements or instruments, or 

 

4

 

(d) the transaction
contemplated herein or therein (including any claim based on or arising from an
alleged personal injury or business tort).

 

“Draw Request” means a statement
prepared by the Borrower in form and substance similar to Schedule 2
attached hereto and made a part hereof satisfactory to Lender setting forth the
amount of the Junior Loan advance requested in each instance with respect to
the Improvements and including, if requested by Lender (i) the Direct Cost
Statement and Indirect Cost Statement; (ii) a
cost certification executed by the Design/Build Contractor in form approved in
writing by Lender and the Construction Consultant; (iii) payment
receipts from all Subcontractors in a form approved in writing by Lender and
Construction Consultant; (iv) proof of payment
of all Direct and Indirect Costs covered by all previous Draw Requests; and (v) at
the time of the Draw Request, a conditional “Lien Waiver” in Proper Form from
the Design/Build Contractor and a conditional “Lien Waiver” in Proper Form,
from all Subcontractors or suppliers for all sums in excess of $250,000 per
Subcontractor or supplier advanced up to and including the previous Draw
Request and within the earlier of (i) thirty (30) days after the prior
Draw Request and (ii) the date of Draw Request next following the Draw
Request related to such payment, an unconditional waiver from the Design/Build
Contractor.

 

“Effective Date” shall mean August 14,
2009.

 

“Eligible Assignee” means: (a) Senior
Lender or Subordinate Lender; (b) an Affiliate of the Borrower; (c) an
Affiliate of the Lender, the Senior Lender or the Subordinate Lender or an
entity or an Affiliate of an entity that administers or manages the Lender, the
Senior Lender or the Subordinate Lender; (d) any person (other than a
natural person) that is (or will be) engaged in making, purchasing, holding or
otherwise investing in commercial real estate loans and similar extensions of
credit in the ordinary course of its business and is able, after giving effect
to the purchase of the Junior Loan, to assume the Lender’s obligations
hereunder; (e) any entity approved by the Borrower (such approval not to
be unreasonably withheld, conditioned or delayed); or (f) such entity as
the Lender shall be required to transfer or assign its rights and obligations
hereunder pursuant to any order of Governmental Authority.

 

“Environmental Agreement” means the
Agreement of Environmental Indemnification of even date herewith by and between
Borrower and Lender pertaining to the Property, as the same may from time to
time be extended, amended, restated or otherwise modified.

 

“Environmental Claim” means any
complaint, action, notice, order, claim, investigation, judicial or
administrative proceeding or action, or other similar claims or communications
from any Person (defined below) involving or alleging any non-compliance with
any Environmental Requirement (defined below) or the existence of any unsafe or
hazardous condition resulting from or related to the Release (defined below) of
any Hazardous Material (defined below).

 

“Environmental Law” means any and all
applicable federal, state or local laws, statutes, ordinances, rules,
regulations, orders, principles of common law, judgments, permits, licenses or
other determinations of any judicial or regulatory authority, now or hereafter
in effect, imposing liability, establishing standards of conduct or otherwise
relating to protection of the environment (including natural resources, surface
water, groundwater, soils, and indoor and ambient air), 

 

5

 

health and safety, land use
matters or the presence, generation, treatment, storage, disposal, Release or
threatened Release, transport or handling of any Hazardous Material.

 

“Environmental Matters” means (a) the
presence, Release or threatened Release of any Hazardous Material at or from
the Project, on or before the Closing; (b) the breach of any
representation, warranty, covenant or agreement contained in this Agreement
with respect to any Environmental Requirement because of any act, omission,
event or condition existing or occurring on or before the Closing; (c) any
violation, on or before the Transition Date, of any Environmental Requirement
in effect on or before the Closing, regardless of whether any act, omission,
event or circumstance giving rise to the violation constituted a violation at
the time of the occurrence or inception of such act, omission, event or
circumstance; (d) any Environmental Claim related to any, act, omission,
event or condition existing or occurring in connection with the use or
occupancy of the Project at any time on or before the Closing; (e) the
filing or imposition of any environmental lien against the Project; and regardless
of whether any matter set forth in the foregoing subsections (a) through
(e) was caused by Borrower, a prior owner of the Project, or any other
Person whatsoever.

 

“Environmental Requirement” means any
Environmental Law, or any other applicable agreement or restriction (including
any condition or requirement imposed by any third party or insurance or surety
company), now or hereafter in effect, which relates to any matters addressed by
any Environmental Law, Hazardous Material, or the prevention of any unsafe or
hazardous condition resulting from or related to the Release of any Hazardous
Material.

 

“ERISA” means the Employee Retirement
Income Security Act of 1974, as amended.

 

“Event of Default” means any event or
circumstance specified in Article VI and the continuance of such
event or circumstance beyond the applicable grace and/or cure periods therefor,
if any, set forth in Article VI.

 

“Excusable Delay” shall have the
meaning set forth in the Design/Build Agreement as of the date hereof, provided
that such definition shall not be amended without Lender’s consent.

 

“Expenses” means all reasonable,
actual and documented fees, charges, costs and expenses of any nature
whatsoever incurred at any time and from time to time (whether before or after
an Event of Default) by Lender in making, funding, administering or modifying
the Junior Loan, in negotiating or entering into any “workout” of the Junior
Loan, or in exercising or enforcing any rights, powers and remedies provided in
the Mortgages or any of the other Junior Loan Documents, including reasonable
outside attorneys’ fees, court costs, receiver’s fees, management fees and
reasonable costs incurred in the repair, maintenance and operation of, or
taking possession of, or selling, the Property up and to the time that Lender
accepts title to the Property (through foreclosure, power of sale or the
acceptance of a deed in lieu of foreclosure).

 

“FF&E” means all furniture,
furnishings and equipment (excepting which is deemed to be OS&E (as
hereinafter defined) now or hereafter located and installed in or about the
hotels which are used in the operation thereof as hotels in accordance with the
standards set forth in the Hotel Operating Agreement, including, without
limitation, (i) office furnishings and equipment; (ii) specialized
hotel equipment necessary for the operation of any portion of the 

 

6

 

Improvements as hotels,
including equipment for kitchens, laundries, dry cleaning facilities, bars,
restaurants, public rooms, commercial space, parking areas, and recreational
facilities; and (iii) all other furnishings and equipment hereafter
located and installed in or about the Improvements which are used in the
operation of the Improvements as hotels in accordance with the standards
set forth in the Hotel Operating Agreement.

 

“Final Project Completion Date” means
the date by which Borrower shall cause to occur the completion of the
Guaranteed Scope of Work, in accordance with the Design/Build Agreement and PAL
Lease but no later than the earlier of (i) subject to extension for Force
majeure and Excusable Delay, the day prior to the thirty-seventh (37th) month anniversary of the
date of this Agreement; provided, however, that such date shall be extended
every month thereafter (but in no event beyond September 1, 2013) by
Borrower, so long as cash flow derived from the Project and paid in accordance
with the Lock Box Agreement is sufficient to satisfy Borrower’s payment
obligations under the Senior Note and Junior Note as determined by Lender in
its sole discretion; and (ii) September 1, 2013.

 

“Force Majeure” or “Force Majeure
Event” means an act of God, fire, earthquake, hurricane, cyclone, volcanic
eruption, tsunami, flood, war, invasion, terrorist action, acts of public
enemies, civil commotion, civil disorder, riot, mob violence, insurrection,
sabotage, embargos, blockade, epidemics, quarantines, inability to procure or a
general shortage of labor, equipment, facilities, materials or supplies in the
open market, impediment or delay in transportation, utilities, computers,
equipment, communication and other facilities, strike, lockout, action of labor
unions, a taking by eminent domain, acts of any Governmental Authorities, or of
civil or military authorities (other than actions of the Army under the
Operative Documents), ionizing radiation or contamination by radioactivity from
any nuclear weapons, nuclear fuel or from any nuclear waste or from the
combustion of nuclear material or nuclear fuel, previously unknown environmental
or archaeological conditions, or any other cause whether similar or dissimilar
to the foregoing, not within the reasonable control of any relevant Person,
including reasonable delays for adjustments of insurance; provided, however,
that (a) Borrower must give Notice to Lender within ten (10) days
after the occurrence of an event which it believes to constitute Force Majeure,
(b) in no event shall Force Majeure extend the time for the performance of
an Obligation by more than ninety (90) days, and (c) circumstances that
can be remedied or mitigated through the payment of money shall not constitute
Force Majeure hereunder to the extent such remedy or mitigation is deemed
reasonable by Lender in its sole discretion.

 

“Governmental Authority” means any
federal, state, county, municipal or other governmental or regulatory
authority, agency, board, body, commission, instrumentality, court or
quasi-governmental authority with jurisdiction over the Project or the Person
in question; provided, however, that the term “Governmental Authority” shall
not include, nor shall it be deemed to include, the Army in any of its
capacities as a party under the Operative Documents, as defined in the Lock Box
Agreement.

 

“Guarantor” means Actus Lend Lease
LLC, a Delaware limited liability company, its successors and permitted
assigns, and any other Person executing a Guaranty in connection with the
Junior Loan.

 

7

 

“Guarantor Controlled Person” has the
meaning given in the Guaranty.

 

“Guaranty” means the Guaranty and
Indemnity to be executed by Guarantor at Closing in the form attached hereto as
Schedule 6.

 

“Guaranteed Maximum Price” shall have
the meaning set forth in the Design/Build Agreement as of the date hereof,
provided that such definition shall not be amended without the Lender’s
consent.

 

“Guaranteed Scope of Work” shall have
the meaning set forth in the Design/Build Agreement as of the date hereof,
provided that such definition shall not be amended without the Lender’s
consent.

 

“Hazardous Material” means petroleum
and petroleum products or byproducts or components or wastes and compounds
containing them, including, without limitation, gasoline, diesel fuel and oil;
explosives; flammable materials; radioactive materials; polychlorinated
biphenyls (“PCBs”) and compounds, equipment or materials containing them; lead
and lead-based paint; asbestos or asbestos-containing materials in any form;
mold or fungus or similar substances; urea formaldehyde foam; underground or
aboveground storage tanks, whether empty or containing any substance;
infectious material; unexploded or discharged ordnance; pesticide or pesticide
residues; noise; any substance the manufacture, possession, presence, use,
generation, storage, release, treatment, processing, transport, emission,
disposal, abatement, cleanup, removal, remediation, handling or discharge of
which is prohibited, limited or regulated by, or that may give rise to
liability or damages under, any Environmental Law; any material or substance
that is subject to the requirements of any Environmental Law; any material or
substance that may reasonably be expected to constitute or contribute to a
risk, danger or hazard to public health, safety or welfare or to the
environment; and any other material or substance (whether or not naturally
occurring) now or in the future defined as a “hazardous substance,” “hazardous
material,” “hazardous waste,” “toxic substance,” “toxic pollutant,” “solid
waste,” “pesticide, contaminant,” “toxic” or “pollutant” or words of similar
meaning or otherwise classified as hazardous, radioactive or toxic within the
meaning of any Environmental Law.

 

“Hotel Operator” means the hotel
operator or lodging manager engaged by the Company from time to time under the
Hotel Operating Agreement. The initial Hotel Operator is PML Services LLC, an
affiliate of InterContinental Hotels Group Resources, Inc.

 

“Hotel Operating Agreement” means (i) that
certain Lodging Management Agreement, by and between the Company and Hotel
Operator, dated as of August 14, 2009, as extended, amended, restated,
supplemented, superseded or otherwise modified from time to time in accordance
with the terms thereof, or (ii) any replacement or successor hotel
operating agreement or lodging management agreement between the Company and a
successor Hotel Operator, as the same shall be extended, amended, restated,
supplemented, superseded or otherwise modified from time to time in accordance
with the terms thereof.

 

“Improvements” shall mean,
collectively (i) the “Improvements” as defined in the PAL Lease (expressly
excluding the Excluded Improvements, as defined in the Lock Box Agreement), as
such definition shall be amended from time to time in accordance with the PAL
Lease, and 

 

8

 

(ii) any building or
other improvement (or portion thereof) which is demised or licensed under any
Ancillary Lease, as such portion of the demised or licensed premises under such
Ancillary Lease shall be amended from time to time in accordance with the
applicable Ancillary Lease.

 

“Indemnified Party” means and includes
Lender, any Persons owned or controlled by, owning or controlling, or under
common control or directly affiliated with Lender, any participants in the
Junior Loan, the directors, officers, partners, employees and agents of Lender
and/or such Persons, and the successors and assigns of each of the foregoing
Persons.

 

“Independent Construction Consulting
Agreement” has the meaning set forth in Appendix A to the Lock Box Agreement.

 

“Indirect Costs” means certain costs
(other than Direct Costs) of completion of the Improvements, including but not
limited to, architects’, engineers’ and Lender’s counsel’s fees, filing fees,
ground rents, interest on and recording taxes and title charges in respect of
Mortgages, real estate taxes, water and sewer rents, survey costs, Loan
commitment fees and insurance and bond premiums to the extent not Direct Costs,
FF&E, OS&E, costs and expenses incurred by Developer Manager and fees
paid to the Developer Manager under the Development Management Services
Agreement, but not design build costs and expenses under the Design/Build
Agreement.

 

“Initial Advance” means the first
Advance of the Junior Loan proceeds to be made hereunder in the amount of
$12,756,086.68.

 

“Information” shall have the meaning
as set forth in Section 8.42.

 

“Insurance Proceeds” means the
insurance claims under and the proceeds of any and all policies of insurance
covering the Property or any part thereof, including all returned and unearned
premiums with respect to any insurance relating to such Property, in each case
whether now or hereafter existing or arising.

 

“Intercreditor Agreement” means the
Intercreditor and Subordination Agreement among the Junior Lender, Junior Lender
and Subordinate Lender, as amended and supplemented, and each Memorandum of
Intercreditor Agreement with respect thereto.

 

“Junior Lender” means Behringer
Harvard PAL I, LLC.

 

“Junior Loan” means that certain loan
from the Junior Lender to the Borrower in the amount of $25,000,000 pursuant to
the Junior Loan Agreement, which indebtedness is evidenced by the Junior Note.

 

“Junior Loan Agreement” means this
Agreement, as the same may be extended, amended, restated, supplemented,
superseded or otherwise modified from time to time in accordance with the terms
thereof.

 

“Junior Loan Documents” means this
Agreement, the Junior Note, the Mortgages, the Guaranty, the Environmental
Agreement, Consent of Lessor, the Lock Box Agreement, the Control Agreement,
the Collateral Assignment, the Assignment of Rents and Leases, Independent 

 

9

 

Construction Consultant
Agreement, and the Collateral Assignment of Lodging Management Agreement and
any and all other documents which Borrower, or any other party or parties, have
executed and delivered, or may hereafter execute and deliver, to evidence,
secure or guarantee the Obligations, or any part thereof, as the same may from
time to time be extended, amended, restated, supplemented or otherwise
modified.

 

“Junior Note” shall mean that certain
promissory note, dated as of the Effective Date, made by the Borrower in favor
of the Junior Lender in the original principal balance of up to $25,000,000, as
the same may be extended, amended, restated, supplemented, superseded or
otherwise modified from time to time in accordance with the terms thereof.

 

“Land” means the land described in and
encumbered by the Mortgages and land conveyed to the Borrower under Ancillary
Leases.

 

“Laws” means all federal, state and
local laws, statutes, rules, ordinances, regulations, codes, licenses,
authorizations, decisions, injunctions, interpretations, orders or decrees of
any court or other Governmental Authority having jurisdiction as may be in
effect from time to time.

 

“Lease” means, collectively, (i) PAL
Lease and (ii) Ancillary Leases.

 

“Letter of Intent” means that certain
letter of interest from Behringer Harvard Opportunity REIT II, Inc.,
Lender’s ultimate parent, dated June 25, 2009 and accepted by Borrower and
Actus Lend Lease Holdings LLC.

 

“Lien Waiver” means the lien waiver in
the applicable form set forth in Schedule 11 attached hereto and
made a part hereof, or in such other form approved by Lender in writing.

 

“Lock Box Account” means the account
of such name, including the Restricted Subaccounts, described in Article II
of the Lock Box Agreement.

 

“Lock Box Agreement” means that
certain Lock Box, Cash Management and Disbursement Agreement, by and among the
Borrower, the Lenders and the Cash Management Agent, dated as of the Effective
Date, as the same may be extended, amended, restated, supplemented, superseded
or otherwise modified from time to time in accordance with the terms thereof.

 

“LSCR Phase” has the meaning ascribed
thereto in the PAL Lease.

 

“Maturity Date,” with respect to the
Junior Note, means the earlier of (i) September 1, 2016 or (ii) such
earlier maturity date as provided in the Junior Note.

 

“Material Adverse Effect” means (1) a
material adverse effect upon (a) the business or financial position or
results of operation of Borrower, (b) the ability of Borrower to perform
any material obligations and/or undertakings as set forth in the Junior Loan
Documents or (c) the value of the Property and/or (2) such event or
action would not lessen, impair, diminish or limit, in each case to a material
extent, any of Lender’s rights or remedies under any of the Junior Loan
Documents or result in a default or event of default under any of the Project
Documents (or a Termination Default, as such term is defined under the PAL
Lease).

 

10

 

“Minimum Monthly Payment” has the
meaning ascribed thereto in the Junior Note.

 

“Mortgage” means each certain Junior
Construction Leasehold Mortgage or Leasehold Deed of Trust, Assignment,
Security Agreement and Fixture Filing from the Borrower for the benefit of the
Lender with respect to the Obligations, as amended and supplemented from time
to time.

 

“Municipal Agreement” means that
certain Municipal Services and Utility Support Agreement, by and between the
Army and the Borrower, dated as of the Effective Date, as the same may be
extended, amended, restated, supplemented, superseded or otherwise modified
from time to time in accordance with the terms thereof.

 

“Net Award,” when used with respect to
any Condemnation Awards or Insurance Proceeds, means the entire award,
compensation, insurance proceeds and/or other payment, if any, on account of
any Condemnation or Casualty, excluding proceeds of business interruption
and/or use and occupancy insurance and less any reasonable expenses (including
reasonable attorneys’ fees and expenses) actually incurred by the Entitled
Person, as defined in the Lock Box Agreement, in collecting such award,
compensation, insurance proceeds or other payment.

 

“Notice” means a notice, request,
consent, demand or other communication given in accordance with the provisions
of Section 8.6 of this Agreement.

 

“Obligations” means all present and
future debts, obligations and liabilities of Borrower to Lender arising
pursuant to the provisions of this Agreement, the Junior Note or any of the
other Junior Loan Documents, including the obligations: (a) to pay all
principal, interest, late charges and other amounts due at any time under the
Junior Note; (b) to pay all Expenses, indemnification payments, reasonable
fees and other amounts due at any time under the Mortgages or any of the other
Junior Loan Documents, together with interest thereon as provided in the
Mortgages or such Junior Loan Document; and (c) to perform, observe and
comply with all of the terms, covenants and conditions, expressed or implied,
which Borrower is required to perform, observe or comply with pursuant to the
terms of the Mortgages or any of the other Junior Loan Documents or any of the
Project Documents. Notwithstanding any language contained in the Junior Loan Documents,
the Obligations of Borrower to pay and perform under the Environmental
Agreement are unsecured.

 

“Operating Agreement” means the
Amended and Restated Limited Liability Company Operating Agreement of Borrower,
as originally executed or as the same may be amended from time to time in
accordance with its terms and the terms of this Agreement.

 

“OS&E” means (i) any supply
items required for the operation of the Project, including, without limitation,
chinaware, glassware, silverware, utensils, miscellaneous serving equipment,
lines, towels, uniforms and similar items of personal property; and (ii) food
and beverages and other consumable items used in the operation of a hotel, such
as fuel, soap, cleaning materials, matches, stationary, brochures, folios and
all other items used in the routine operations of a hotel which are consumable
by nature.

 

“PAL Lease” means that certain
Department of the Army Lease and Conveyance of Improvements, Privatization of
Army Lodging (PAL) Group A, by and between the Army, as 

 

11

 

lessor, and the Borrower, as
lessee, dated as of the Effective Date, as the same may be extended, amended,
restated, supplemented, superseded or otherwise modified from time to time in
accordance with the terms thereof (including, without limitation, any lease
which is intended to replace the PAL Lease, in whole or in part, that is
entered into in accordance with the terms of the PAL Lease).

 

“Patriot Act” means the Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism Act (USA PATRIOT ACT) of 2001, as the same may be amended
from time to time, and corresponding provisions of future laws.

 

“Patriot Act Offense” shall have the
meaning set forth in Section 3.22 hereof.

 

“Payment Certificate” means those certain certificates delivered
from time to time by the Construction Consultant (in connection with any Draw
Request) in accordance with Section 9.2.2 of the Design/Build Agreement.

 

“Payment Date” means the 1st day of
each calendar month, commencing on October 1, 2009 and the Maturity Date
of the Junior Note.

 

“Person” means an individual, a
corporation, a partnership, a joint venture, a limited liability company, a
trust, an unincorporated association, any Governmental Authority or any other
entity.

 

“Plans and Specifications” means any
and all plans and specifications prepared in connection with the development of
the Land and the Construction of the Improvements in accordance with the Design/Build
Agreement and, to the extent required in the Design/Build Agreement, approved
in writing by Lender, as the same may from time to time be amended in
accordance with the Design/Build Agreement.

 

“Prepayment Premium” shall have the
meaning given in the Junior Note.

 

“Project” means, collectively, the
Site, as defined in the Lock Box Agreement, the Improvements and the Personal
Property, as defined in the Lock Box Agreement.

 

“Project Costs” means, collectively,
all costs and expenses relating to the Improvements being paid from the Junior
Loan that are not evidenced by the Junior Note as are approved by Lender.

 

“Project Documents” means the Lease,
the Design/Build Agreement (and each other Construction Contract as defined in
Appendix A to the Lock Box Agreement), the Asset and Property Management
Agreement, the Construction Guaranty, the Development Management Services
Agreement, the Municipal Agreement, the Hotel Operating Agreement, Bill of Sale
and all other material agreements entered into by Borrower other than Junior
Loan Documents relating to Borrower’s use, development, construction,
renovation or occupancy of the Project other than the Debt Documents (as
defined in the Lock Box Agreement).

 

12

 

“Project Schedule” means the schedule
for commencement and completion of the development of the land and Construction
of the Improvements attached hereto as Schedule 4, as the same may
be revised from time to time with the written approval of Lender.

 

“Proper Form” means in form and
substance reasonably satisfactory to Lender.

 

“Protective Advances”
means any and all sums advanced or expended by Junior Lender which Junior
Lender deems necessary or appropriate (a) to advance or complete
construction of the Project and any Improvements and market the Property, (b) to
repair, maintain or otherwise protect the Project and any Improvements or to
prevent waste or destruction or to pay or prevent liens or to defend Borrower’s
title or Junior Lender’s lien priority, (c) to pay taxes, assessments or
insurance premiums in respect of the Project or any Improvements or to
otherwise protect Junior Lender’s security interest in the Project, any
Improvements and any other Collateral, or (d) in connection with Junior
Lender’s protection or exercise of its rights or remedies under the this
Agreement and the other Junior Loan Documents.

 

“Property” means the real and personal
property conveyed and encumbered by the Mortgages.

 

“Release” means any spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting, dumping or
disposing of any Hazardous Material (including the abandonment or discarding of
barrels, drums, tanks, and other similar containers, containing any Hazardous
Material) into the indoor or outdoor environment.

 

“RE-MM” means RE Managing
Member LLC, a Delaware limited liability company.

 

“Rents” means all of the rents,
royalties, issues, profits, revenues, earnings, income and other benefits of
the Property or any part thereof, or arising from the use or enjoyment of the
Property or any part thereof, including all such amounts paid under or arising
from any of the Leases and all fees, charges, accounts or other payments for
the use or occupancy of rooms or other public facilities within the Property or
any part thereof.

 

“Revenue” has the meaning ascribed
thereto in the Lock Box Agreement.

 

“Senior Lender” means Bank of America,
N.A.

 

“Senior Loan” means the Senior Loan
from Lender to Borrower in the aggregate maximum amount of $35,000,000, which
is evidenced by the Senior Note and secured by the Senior Mortgages.

 

“Senior Loan Amount” means an amount
not to exceed Thirty-five Million and No/100 Dollars ($35,000,000).

 

“Senior Loan Agreement” means that
certain Senior Loan Agreement, dated as of the Effective Date between the
Borrower and the Senior Lender, as the same may be extended, amended, restated,
supplemented, superseded or otherwise modified from time to time in accordance
with the terms thereof.

 

13

 

“Senior Loan Documents” means the
documents evidencing and securing the Senior Loan.

 

“Senior Loan Note” means the Senior
Loan Note of even date herewith, in a principal amount equal to the Senior Loan
Amount, made by Borrower to the order of Lender, as the same may from time to
time be extended, amended, restated, supplemented or otherwise modified.

 

“SPE Provisions” shall have the
meaning set forth in Section 4.28 herein.

 

“State” means the State of New York.

 

“Stored Materials” means building
materials or furnishings that have not yet been incorporated into the
Improvements.

 

“Subcontractors”; “Subcontract” means
any Person engaged by the Borrower who has performed work and/or supplied any
labor and/or materials with respect to the Improvements other than the
Design/Build Contractor; any such contract or work order.

 

“Subordinate Lender” means Lend Lease
(US) Capital Inc.

 

“Subordinate Loan” means the loan in
the amount of $21,500,000 from the Subordinate Lender to the Borrower pursuant
to the Subordinate Loan Agreement, which indebtedness is evidenced by the
Subordinate Loan Note, which is subordinate to the Junior Loan and the Junior
Loan.

 

“Subordinate Loan Agreement” means
that certain loan agreement, dated as of the Effective Date, by and between the
Borrower and the Subordinate Lender, as the same may be extended, amended,
restated, supplemented, superseded or otherwise modified from time to time in
accordance with the terms thereof.

 

“Subordinate Loan Documents” means the
documents evidencing and securing the Subordinate Loan.

 

“Subordinate Loan Note” means that
certain promissory note, dated as of the Effective Date, made by the Borrower
in favor of the Subordinate Lender in the original principal balance of up to
$21,500,000, as the same may be extended, amended, restated, supplemented,
superseded or otherwise modified from time to time in accordance with the terms
thereof.

 

“Subordination,
Non-Disturbance and Attornment Agreement” means the agreement of that
name, among the Lender, Borrower and PML Services LLC, dated as of the
Effective Date, as it may be amended and supplemented.

 

“Survey” means a map or plat of survey
of the Land which conforms with “Minimum Standard Detail Requirements for
ALTA/ACSM Land Title Surveys,” jointly established and adopted by ALTA and NSPS
in 2005 (excluding requirements 5(c), 5(g) and 5(i) thereof) and
includes items 2, 3, 4, 10, 11(a) and 15 of Table A thereof.

 

14

 

“Swap Contract” means any agreement,
whether or not in writing, relating to any Swap Transaction, including, unless
the context otherwise clearly requires, any form of master agreement (the “Master
Agreement”) published by the International Swaps and Derivatives
Association, Inc., or any other master agreement, entered into prior to
the date hereof or any time after the date hereof, between Swap Counterparty
and Borrower (or its Affiliate), together with any related schedule and
confirmation, as amended, supplemented, superseded or replaced from time to
time.

 

“Swap Counterparty” means Senior
Lender, an Affiliate of Senior Lender, or such other party as may be permitted
under the Senior Loan Agreement, in its capacity as the counterparty under any
Swap Contract.

 

“Swap Obligations” means, with respect
to any Person, the net liabilities of such Person under any Swap Transaction.

 

“Swap Transaction” means any
transaction that is a rate swap, basis swap, forward rate transaction,
commodity swap, commodity option, equity or equity index swap or option, bond
option, note or bill option, interest rate option, forward foreign exchange
transaction, cap transaction, collar transaction, floor transaction, currency
swap transaction, cross-currency rate swap transaction, swap option, currency
option, credit swap or default transaction, T-lock, or any other similar
transaction (including any option to enter into the foregoing) or any
combination of the foregoing, entered into prior to the date hereof or any time
after the date hereof, between Swap Counterparty and Borrower (or its
Affiliate).

 

“Taxes” means all taxes and
assessments whether general or special, ordinary or extraordinary, or foreseen
or unforeseen, which at any time may be assessed, levied, confirmed or imposed
by any Governmental Authority or any communities facilities or other private
district on Borrower or on any of its properties or assets or any part thereof
or in respect of any of its franchises, businesses, income or profits.

 

“Yearly Budget” has the meaning set
forth in the Hotel Operating Agreement.

 

15

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