CONSTRUCTION LOAN AGREEMENT

This Construction Loan Agreement (this “Agreement”) is made as of the 12th day of December, 2005, by and between ASF of Green Hills, LLC, a Tennessee non-profit limited liability company (“Borrower”), and American Retirement Corporation, a Tennessee corporation, its successors and assigns (collectively, the “Lender”).

Borrower has applied to Lender for a loan to finance certain costs related to the construction and development of improvements on real property in which Borrower has acquired or is acquiring an interest from Lender. Lender has agreed to make the portion of the loan evidenced by the Senior Note from the proceeds of a second loan being obtained by Lender from Bank of America, N.A. (the "Bank of America Loan"). This loan will be made and disbursed on the terms and conditions set forth in this Agreement and in the other documents evidencing and securing the loan, and will be pledged by Lender as collateral for the Bank of America Loan.

Now, therefore, in consideration of the premises, and in further consideration of the mutual covenants and agreements herein set forth and of the sum of Ten Dollars ($10.00) paid by each party to the other, receipt of which is hereby acknowledged, the parties covenant and agree as follows:

Section 1.1    Conditions to Closing .

Section 1.2    Schedules .

Section 1.3    Defined Terms .

Section 2.1    The Loan .

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

Section 2.2    Purpose; Reallocation; Revenues from Property .

The Loan shall be advanced by Lender in accordance with the terms of this Agreement to pay those expenses related to the Loan and the Property that are described in the Budget, but not, in the aggregate with respect to any line item set forth in the Budget, in excess of the amount of the Loan to be disbursed for such line item, as set forth in the Budget. Borrower will receive each advance in trust for the purpose of paying only those costs for which the advance is made and will utilize the funds advanced for no other purpose. With the prior approval of Lender, any cost savings, actual or estimated, affecting any approved line item within the Budget, other than the interest reserve, may be reallocated by Borrower to any other line item within the Budget. Upon completion of the Improvements and the payment of all costs in connection therewith, any undisbursed proceeds of the Loan shall be allocated to the interest reserve or to such other line item as Lender shall approve. Each disbursement from a contingency reserve shall be subject to approval by Lender as to the amount and purpose for which such disbursement will be used. If and when Available Revenues are sufficient to pay all or any portion of the interest on the Loan, Borrower shall apply the same to pay such interest in the order hereinafter set forth, and Lender, at its sole option, may restrict or prohibit future disbursements of the Loan for such purposes to the extent that Available Revenues are sufficient to pay such amounts. Subject to any applicable limitations set forth in the Note, Borrower shall apply Available Revenues to pay the following items in the following order: (a) Current Interest accrued in respect of the indebtedness evidenced by the Senior Note at the Base Rate, (b) Accumulated Interest accrued in respect of the indebtedness evidenced by the Senior Note at the Base Rate, (c) at Borrower's election, Restricted Payments permitted by Section 5.9(c) of this Agreement, (d) Current Interest accrued in respect of the indebtedness evidenced by the Senior Note at the Spread Rate, (e) Current Interest accrued in respect of the indebtedness evidenced by the Subordinated Note, (f) at Borrower's election, Restricted Payments permitted by Section 5.9(d) of this Agreement, (g) Accumulated Interest accrued in respect of the indebtedness evidenced by the Senior Note at the Spread Rate, and (h) Accumulated Interest accrued in respect of the indebtedness evidenced by the Subordinated Note.

Section 2.3    Draw Requests .

Advances shall be made not more frequently than monthly based on draw requests signed by an Authorized Signers in the form attached hereto as Schedule 2 and submitted to Bank of America, N.A. for funding to Lender's disbursement account. Each draw request for hard costs shall be set forth on AIA Forms G702 and G703, and shall be reviewed by the Construction Consultant, signed by the General Contractor and, if requested by Lender, approved by the Architect. Draw requests for hard costs shall show the percentage of completion of construction and shall set forth in trade breakdown form and in such detail as may be required by Lender the amounts expended and/or costs incurred for work done and materials incorporated in the Improvements. Retainage will be withheld and released in accordance with the terms of Schedule 5 . 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 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 Loan, as set forth in the Budget. Unless reasonably requested by Lender in any instance, Borrower will not be required to provide any individual invoice for an amount less than or equal to $5,000.00 in support of a draw request; provided, Borrower shall provide or cause to be provided with each draw request a complete listing of all payees and the amounts requested for payment by each.

Section 2.4    Additional Terms Regarding Advances .

Advances of the Loan shall also be subject to the terms and conditions set forth in Schedule 5 .

Section 2.5    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 Loan proceeds or any part thereof and neither the General Contractor, Construction Consultant nor any subcontractor, laborer or material supplier shall have any right or claim against Lender under this Agreement or the other Loan Documents.

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

Borrower (a) is a non-profit 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 the state in which the Land 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, (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 Loan Documents, and (c) is wholly owned by American Seniors Foundation, Inc., an Ohio non-profit corporation. The Loan 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 Loan 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 Loan 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.

Section 3.2    Other Documents; Laws .

The execution and performance of the Loan 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 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 all Taxes which have become due pursuant to such returns or pursuant to any Tax assessments received by Borrower.

Section 3.4    Legal Actions .

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. 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.

Section 3.5    Nature of Loan .

Borrower is a business or commercial organization. The 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    Trade Names .

Borrower conducts its business solely under the name set forth in the Preamble to this Agreement and makes use of no trade names in connection therewith, unless such trade names have been previously disclosed to Lender in writing.

Section 3.7    Financial Statements .

The financial statements heretofore delivered by Borrower and each Guarantor to Lender and Bank of America, N.A. are true and correct in all respects, have been prepared in accordance with sound accounting principles consistently applied, and fairly present the respective financial conditions of the subjects thereof as of the respective dates thereof.

Section 3.8    ERISA and Prohibited Transactions .

As of the date hereof and throughout the term of the 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 Mortgage or any of the other 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 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 complies 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 satisfied. No violation of any Law exists with respect to the Property.

Section 3.10    Plans and Specifications .

The Plans and Specifications are complete and adequate for the Construction of the Improvements. The Plans and Specifications have been 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 have also been approved by any tenant and by any prospective purchaser of the Property or provider of permanent financing for the Property whose approval is required. To the best of Borrower’s knowledge, the Improvements, if constructed substantially in accordance with the Plans and Specifications, will fully comply with all applicable Laws, including those Laws relating to access and facilities for disabled persons.

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 accordance with the Project Schedule. All required fees have been paid and bonds and/or other security have been posted in connection with all permits that have been issued, and adequate amounts are included in the Budget to pay all fees and the cost of all bonds and other security in connection with permits to be issued in the future. Following the issuance thereof, all permits will remain in full force and effect.

Section 3.12    Utilities .

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 telephone service, cable television, water supply, storm and sanitary sewer facilities, natural gas and electric facilities, including cabling for telephonic and data communication, and the capacity to send and receive wireless communication.

Section 3.13    Access; Roads .

All roads and other accesses necessary for the Construction of the Improvements and full utilization thereof for their intended purposes have either been completed or the necessary rights of way therefor have either been acquired by the appropriate Governmental Authority, or have been dedicated to public use and accepted by such Governmental Authority and all necessary steps have been taken by Borrower or such Governmental Authority to assure the complete construction and installation thereof by a date sufficient to ensure the Completion of Construction of the Improvements in accordance with the Project Schedule.

Section 3.14    Other Liens .

Except for contracts for labor, materials and services furnished or to be furnished in connection with the Construction of the Improvements, 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.

Section 3.15    No Work Commenced .

Prior to the recordation of the Mortgage, except as disclosed to Lender in writing, no work of any kind (including destruction or removal of any existing improvements, site work, clearing, grading, grubbing, draining or fencing of the Land) has been or will be commenced or performed on the Land, no equipment or material has been or will be delivered to or placed upon the Land for any purpose whatsoever, and no contract (or memorandum or affidavit thereof) for the supplying of labor, materials, or services for the design or construction of the Improvements, or the surveying of the Land or Improvements, has been entered into which could cause a mechanic’s or materialman’s lien or similar lien to achieve priority over the Mortgage or the rights of Lender thereunder.

Section 3.16   No Material Adverse Change.

No material adverse change has occurred in the financial conditions reflected in the financial statements of Borrower or any Guarantor 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 or as approved in writing by Lender.

Section 3.17   Defaults.

There is no Default or Event of Default under any of the Loan Documents, and there is no default or event of default under any material contract, agreement or other document related to the Construction of the Improvements or the operation thereof.

Section 3.18   Affirmation of Representations and Warranties.

Each draw request and each receipt of the funds requested thereby shall constitute an affirmation that (a) the foregoing representations and warranties of Borrower are true and correct as of the date of the draw request 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 4.1    Commencement and Completion of Construction .

Borrower shall cause the Construction of the Improvements to be commenced and prosecuted in a good and workmanlike manner and shall cause the same to be completed in accordance with the Project Schedule and substantially in accordance with the Plans and Specifications.

Section 4.2    Approval of Construction .

No work associated with the Construction of the Improvements shall be commenced by Borrower unless and until the Plans and Specifications have been approved by Lender, 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 all building, construction and other permits necessary or required in connection with the Construction of the Improvements have been validly issued and all fees, bonds and any other security required in connection therewith have been paid or posted.

Section 4.3    Deposits to Balance Loan .

If at any time Lender shall determine that (a) the proceeds of the Loan remaining to be advanced for any line item within the Budget, together with any anticipated Deferred Equity that Lender determines to its satisfaction is or will be available for such item, are not or will not be sufficient to pay, in a timely manner, the amount of such line item remaining to be paid, and (b) the deficiency cannot be remedied by a reallocation of budgeted amounts pursuant to Section 2.2 , then Borrower shall deposit with Lender, within ten (10) days from the effective date of a Notice from Lender requesting such deposit, funds in an amount equal to the deficiency. Such funds shall be held by Lender in a Borrower’s Deposit Account, which shall be an interest-bearing account at Bank of America, N.A., with all accrued interest to become part of Borrower’s deposit. Borrower agrees that it shall include all interest and earnings on any such deposit as its income (and, if Borrower is a partnership or other pass-through entity, the income of its partners, members or beneficiaries, as the case may be), and shall be the owner of all funds on deposit in the Borrower’s Deposit Account for federal and applicable state and local tax purposes. Lender shall have the exclusive right to manage and control all funds in the Borrower’s Deposit Account, but Lender shall have no fiduciary duty with respect to such funds. Advances of the deposited funds will be made from time to time for the payment of deficient line item amounts, prior to the advance of proceeds of the Loan for such amounts. Advances of the deposited funds will be subject to the terms of this Agreement regarding advances of the Loan. Any account fees and charges may be deducted from the balance, if any, in the Borrower’s Deposit Account. Borrower grants to Lender a security interest in the Borrower’s Deposit Account and all such deposited funds hereafter deposited to such deposit account, and any proceeds thereof, as security for the Obligations. Such security interest shall be governed by the Uniform Commercial Code of the State, and Lender shall have available to it all of the rights and remedies available to a secured party thereunder. The Borrower’s Deposit Account may be established and held in such name or names as Lender shall deem appropriate, including in the name of Lender. Borrower hereby constitutes and appoints Lender and any officer or agent of Lender (including Bank of America, N.A. and its officers as agents and attorneys-in-fact for Lender so long as the Bank of America Loan is outstanding) its true and lawful attorneys-in-fact with full power of substitution to open the Borrower’s Deposit Account and to do any and every act that Borrower might do on its own behalf to fulfill the terms of this Section 4.3 . To the extent permitted by Law, Borrower hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof. It is understood and agreed that this power of attorney, which shall be deemed to be a power coupled with an interest, cannot be revoked.

Section 4.4    Compliance with Laws; Encroachments .

The Improvements shall be constructed in accordance with all applicable (whether present or future) Laws. The Improvements shall be constructed entirely on the Land and shall not encroach upon any 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 and all applicable zoning and subdivision ordinances and regulations.

Section 4.5    Inspections; Cooperation .

Borrower shall permit representatives of Lender, Bank of America, N.A., 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 Construction of the Improvements, to examine all detailed plans and shop drawings and similar materials as well as all 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 Loan and the Improvements with representatives of Borrower. Borrower shall at all times cooperate and cause the General Contractor and each and every one of its subcontractors and material suppliers to 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. Except in the event of an emergency, Lender and/or Bank of America, N.A. shall give Borrower at least twenty-four hours’ notice by telephone in each instance before entering upon the Land and/or exercising any other rights granted in this Section.

Section 4.6    Contracts, Vouchers and Receipts .

Borrower shall furnish to Lender and Bank of America, N.A., promptly on demand, any contracts, subcontracts, bills of sale, statements, receipted vouchers or other agreements relating to 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. Borrower shall furnish to Lender and Bank of America, N.A., promptly on demand, a verified written statement, in such form and detail as Lender may require, setting forth the names and addresses of all contractors, subcontractors and suppliers furnishing labor or materials in the Construction of the Improvements and showing all amounts paid for labor and materials and all items of labor and materials furnished or to be furnished for which payment has not been made and the amounts to be paid therefor.

Section 4.7    Payment and Performance of Contractual Obligations .

Borrower shall perform in a timely manner all of its obligations under the Architect’s Contract, the Construction Contract and any and all other contracts and agreements related to the Construction of the Improvements or the operation thereof, and Borrower will pay when due all bills for services or labor performed and materials supplied in connection with 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 sole and absolute discretion, Borrower shall have the right to contest in good faith any claim, lien or encumbrance, provided that Borrower does so diligently and without prejudice to Lender or delay in completing Construction of the Improvements.

Section 4.8    Correction of Construction Defects .

Promptly following any demand by Lender, Borrower shall correct or cause the correction of any structural defects in the Improvements, any work that fails to comply with the requirements of Section 4.4 and any material departures or deviations from the Plans and Specifications not approved in writing by Lender.

Section 4.9    Insurance .

Borrower shall maintain the following insurance at its sole cost and expense:

(a)    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 fire, lightning, windstorm, hail, explosion, riot, riot attending a strike, civil commotion, damage from aircraft, smoke, vandalism, malicious mischief and acts of terrorism. Such insurance shall name both Lender and Bank of America, N.A. as mortgagees and loss payees. Unless otherwise agreed in writing by Lender, such insurance shall be for the full insurable value of the Property, with a deductible amount, if any, satisfactory to Lender. 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 uninsurable items).

(b)    Comprehensive (also known as 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 satisfactory to Lender with respect to any one occurrence and the aggregate of all occurrences during any given annual policy period. Such insurance shall name Lender and Bank of America, N.A. as an additional insured.

(c)    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.

(d)    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.

(e)    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 amount less than the amount sufficient to meet the requirements of applicable Law as such requirements may from time to time be in effect.

(f)    Loss of rental value insurance or business interruption insurance in an amount acceptable to Lender.

(g)    Such other and further insurance as may be required from time to time by Lender and/or Bank of America, N.A. in order to comply with regular requirements and practices of Lender and/or Bank of America, N.A. in similar transactions including, if required, wind insurance and earthquake insurance, so long as any such insurance is generally available at commercially reasonable premiums as determined by Lender and/or Bank of America, N.A. from time to time.

In addition to the foregoing, Borrower shall cause the General Contractor to provide and maintain comprehensive (commercial) general liability insurance and workers’ compensation insurance for all employees of the General Contractor meeting, respectively, the requirements of Subsections (b) and (c) , above.

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 and are qualified or authorized by the Laws of the State to assume the risks covered by such policy, (ii) with respect to the insurance described under the preceding Subsections (a), (d), (e) and (f) , 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, (iii) shall provide that such policy shall not be canceled or modified without at least thirty (30) days prior written notice to Lender, 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 thirty (30) days prior to the expiration dates of each such policy, Borrower will deliver to Lender acceptable evidence of insurance, such as 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 immediately give Notice to Lender and Bank of America, N.A. of any cancellation of, or change in, any insurance policy. Lender shall not, because of accepting, rejecting, approving or obtaining insurance, incur any liability for (A) the existence, nonexistence, form or legal sufficiency thereof, (B) the solvency of any insurer, or (C) the payment of losses. Borrower may satisfy any insurance requirement hereunder by providing one or more “blanket” insurance policies, subject to Lender’s approval in each instance as to limits, coverages, forms, deductibles, inception and expiration dates, and cancellation provisions.

Section 4.10    Adjustment of Condemnation and Insurance Claims .

Borrower shall give prompt Notice to both Lender and Bank of America, N.A. of any Casualty or any Condemnation or threatened Condemnation. Lender, and/or Bank of America, N.A. so long as the Bank of America Loan is outstanding, is authorized, at their sole and absolute option, to commence, appear in and prosecute, in their own respective names or in 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 and/or Bank of America, N.A. shall have the right to receive all Condemnation Awards and Insurance Proceeds, and may deduct therefrom any or all of their respective Expenses. However, so long as no Event of Default has occurred and Borrower is diligently pursuing its rights and remedies with respect to a Claim, Lender will obtain Borrower’s written consent (which consent shall not be unreasonably withheld or delayed) before making proof of loss for or settling or compromising such Claim. 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 or delayed. 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 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 Mortgage shall have been sought or recovered or denied), and (b) to the extent necessary to reimburse Lender for its Expenses. If any Condemnation Awards or Insurance Proceeds are paid to Borrower, Borrower shall receive the same in trust for Lender. Within ten (10) days after Borrower’s receipt of any Condemnation Awards or Insurance Proceeds, Borrower shall deliver such awards or proceeds to Lender in the form in which they were received, together with any endorsements or documents that may be necessary to effectively negotiate or transfer the same to Lender. Borrower agrees to execute and deliver from time to time, upon the request of Lender and/or Bank of America, N.A., such further instruments or documents as may be requested by either of them to confirm the grant and assignment of any Condemnation Awards or Insurance Proceeds.

Section 4.11    Utilization of Net Proceeds .

(a)    Net Proceeds must be utilized either for payment of the Obligations or for the restoration of the Property. Net Proceeds may be utilized for the restoration of the Property only if no Default shall exist and only if in the reasonable judgment of Lender (i) there has been no material adverse change in the financial viability of the construction or operation of the Improvements, (ii) the Net Proceeds, together with other funds deposited with Lender and/or Bank of America, N.A. for that purpose, are sufficient to pay the cost of the restoration pursuant to a budget and plans and specifications approved by Lender and Bank of America, N.A., and (iii) the restoration can be completed prior to the maturity of the Senior Note. Otherwise, Net Proceeds shall be utilized for payment of the Obligations.

(b)    If Net Proceeds are to be utilized for the restoration of the Property, the Net Proceeds, together with any other funds deposited with Lender for that purpose, must be deposited in an interest-bearing account with Lender at Bank of America, N.A., which account will be assigned to Lender as additional security for the Loan (and reassigned by Lender to Bank of America, N.A. as additional security for its loan). The account will be opened, managed and controlled in a manner consistent with, and subject to, the provisions of Section 4.3 governing a Borrower’s Deposit Account, including those provisions permitting Lender to require Borrower to deposit funds in the event of a deficiency in the funds available to complete restoration as herein contemplated. Disbursements of funds from the account will be made in a manner consistent with, and subject to, the requirements for the closing and funding of the Loan and the terms of this Agreement regarding the disbursement of Loan proceeds.

Section 4.12    Management .

Borrower at all times shall provide for the competent and responsible management and operation of the Property. Any management contract or contracts affecting the Property must be approved in writing by Lender prior to the execution of the same.

Section 4.13    Books and Records; Financial Statements .

(a)   Borrower will keep and maintain 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 address of Borrower set forth in Section 8.6 . Borrower shall permit Lender, or any Person authorized by Lender and specifically including officers and/or agents of Bank of America, N.A. so long as the Bank of America Loan is outstanding, 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 requested by Lender. Borrower will furnish or cause to be furnished to Lender quarter-annual financial statements, including balance sheets, income statements, and cash flow statements for the Borrower, the Guarantor and the Property, within forty-five (45) days after each fiscal quarter-end for the respective reporting party, including the December 31 fiscal quarter end, and shall also furnish or cause to be furnished to Lender consolidated and consolidating annual financial statements including balance sheets, income statements, and cash flow statements for Guarantor and the Borrower within one hundred twenty (120) days after each fiscal year. In addition, Borrower will furnish or cause to be furnished to Lender, with reasonable promptness, such interim financial statements of Borrower, the Guarantor and the Property, together with such additional information, reports or statements in connection therewith, as Lender may from time to time request. All financial statements must be in form and detail acceptable to Lender and must be certified as to accuracy by Borrower or the respective Guarantor, as the case may be. The consolidated and consolidating year-end statements of the Guarantor and Borrower must be audited with an unqualified opinion by an independent certified public accountant satisfactory to Lender and Bank of America, N.A. Borrower shall provide, upon Lender’s request, convenient 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.

(b)   Contemporaneously with each quarter annual and fiscal year-end financial report required by the foregoing paragraph (a), a certificate of the president or chief manager of the Borrower stating that: (i) such officer has individually reviewed the provisions of this Agreement; (ii) a review of the activities of the Borrower during such year or quarter-annual period, as the case may be, has been made by such officer or under such officer’s supervision, with a view to determining whether the Borrower has fulfilled all its obligations under this Agreement; and (iii) to the best of such officer’s knowledge, the Borrower has observed and performed each undertaking contained in this Agreement and is not in default in the observance or performance of any of the provisions hereof or, if the Borrower shall be so in default, specifying all such defaults and events of which such officer may have knowledge. Such certificate shall further set forth the calculations of the financial ratios and covenants set forth in Section 5.8, including without limitation any antecedent calculations and the source of any information that was used in such calculations.

Section 4.14    Estoppel Certificates .

Within ten (10) days after any request by Lender or a proposed assignee or purchaser of the 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 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 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 Mortgage.

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. Lender may enter upon the Property for that purpose and take all action thereon as Lender considers necessary or appropriate. At the option of Lender, following the occurrence of an Event of Default, Lender may apply any undisbursed Loan proceeds to the satisfaction of the conditions of the Loan Documents, irrespective of the allocation of such Loan proceeds in the Budget. Without limiting the generality of the foregoing, Lender may pay directly from the proceeds of the Loan all interest bills rendered by Lender in connection with the Loan, and following the occurrence of an Event of Default may make advances directly to the General Contractor, the title insurance company, any subcontractor or material supplier, or to any of them jointly. The execution hereof by Borrower shall, and hereby does, constitute an irrevocable authorization so to advance the proceeds of the Loan. No further direction or authorization from Borrower shall be necessary to warrant such direct advances. Each advance shall be secured by the Mortgage and shall satisfy the obligations of Lender hereunder to the extent of the amount of the advance. All of the foregoing provisions in favor of Lender shall also apply to Bank of America, N.A. or any other holder form time to time of the Bank of America Loan so long as the Bank of America Loan is outstanding.

Section 4.17    Reimbursement; Interest .

If Lender or Bank of America, N.A. on Lender's behalf shall incur any Expenses or pay any Claims by reason of the Loan or the rights and remedies provided under the Loan Documents (regardless of whether or not any of the Loan Documents expressly provide for an indemnification by Borrower against such Claims), the 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 Loan under the terms of the Note. Each advance shall be secured by the Mortgage and the other 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 Mortgage 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 (and also to Bank of America, N.A. so long as the Bank of America Loan is outstanding) of the occurrence of any Default or Event of Default hereunder or under any of the other Loan Documents. Borrower will also promptly give Notice to Lender (and also to Bank of America, N.A. so long as the Bank of America Loan is outstanding) of any claim of a default by Borrower, or any claim by Borrower of a default by any other party, under the Architect’s Contract, the Construction Contract or any Lease.

Section 4.19    Indemnification by Borrower .

Borrower agrees to indemnify Lender and to hold Lender harmless from and against, and to defend Lender by counsel 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 Loan, including any Claim arising out of or resulting from (a) Construction of the 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 Loan or other financing of the Property; (c) any failure by Borrower to observe and perform any of the obligations imposed upon the landlord under the Leases; (d) any other Default or Event of Default hereunder or under any of the other Loan Documents; or (e) any assertion or allegation that Lender 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; provided,   however, that Borrower shall not be obligated to indemnify Lender with respect to any Claim arising solely from the gross negligence or willful misconduct of Lender. The agreements and indemnifications contained in this Section shall apply to Claims arising both before and after the repayment of the Loan and shall survive the repayment of the 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 Loan Documents.

Section 4.20    Fees and Expenses .

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

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 and/or Bank of America, N.A.. The cost of one such appraisal obtained by Lender in each calendar year and the cost of each such appraisal obtained by Lender following the occurrence of an Event of Default shall by borne by Borrower and shall be paid by Borrower on demand. Notwithstanding anything to the contrary contained in this Section 4.21, Lender shall not require an appraisal unless required by Bank of America, N.A.

Section 4.22    Leasing and Tenant Matters .

Borrower shall comply with the terms and conditions of Schedule 6 in connection with the leasing of space within the Improvements.

Section 4.23    Principal Depository .

Borrower shall maintain Bank of America, N.A. as its principal depository bank, including for the maintenance of business, cash management, operating and administrative deposit accounts so long as the Bank of America Loan is outstanding. Borrower acknowledges and agrees that (a) if Bank of America, N.A. determines that it is not Lender's principal depository bank, the interest rate charged on the Bank of America Loan shall be increased by forty-two and one half (42.5) basis points per annum upon five (5) days' prior written notice from Bank of America, N.A. to Lender, and (b) upon such notice from Bank of America, N.A. to Lender, the Base Rate shall automatically increase by forty-two and one half (42.5) basis points at the same time the interest rate charged on the Bank of America Loan is increased.

Section 4.24    Existence; Name. 

Borrower shall maintain its limited liability company existence and good standing in the state of its organization, and its qualification and good standing in each jurisdiction in which a failure to be so qualified would have a Material Adverse Effect. Borrower shall not change its name without giving Lender thirty (30) days prior written notice.

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 and under such reasonable conditions as Lender may establish. Lender’s prior written consent shall not be required, however, as to any change order which (a) individually does not cause the fixed or guaranteed maximum price of the Construction Contract to be increased or decreased by more than Fifty Thousand Dollars ($50,000.00) and, when added to all previous change orders, does not cause such price to be increased or decreased by more than Five Hundred Thousand Dollars ($500,000.00) in the aggregate, (b) does not result in a material change to the design of the Improvements, and (c) has been approved in writing by the Architect and any Governmental Authority, tenant or other party whose approval is required.

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 given in connection with the Construction of the Improvements.

Section 5.4    Transfer of Assets .

Borrower shall not sell, lease, transfer, assign or otherwise dispose of any assets, except used equipment in the ordinary course of business, or enter into any merger or consolidation, or transfer control or ownership of Borrower or form or acquire any subsidiary.

Section 5.5    Liens .

Borrower shall not grant, suffer or permit any contractual or non-contractual lien on or security interest in its assets other than to Lender, or fail to promptly pay when due all lawful claims, whether for labor, materials, or otherwise, except for mechanics liens which are bonded over or discharged as and when required by the terms of the Mortgage, and except for Liens securing Purchase Money Debt and/or Indebtedness arising under Capitalized Leases.

Section 5.6    Extensions of Credit .

Borrower shall not make any loan or advance to any individual, partnership, limited liability company, corporation or other entity.

Section 5.7    Borrowings .

Borrower shall not create, incur, assume or suffer to exist, any Indebtedness, except:

(a)    Indebtedness of Borrower under or pursuant to this Agreement, the Note and the other Loan Documents and Indebtedness of Borrower set forth in the Budget;

(b)    Contingent Obligations consisting of the indorsement by Borrower of negotiable instruments payable to such Person for deposit or collection in the ordinary course of business;

(c)    Contingent Obligations consisting of the indemnification by Borrower of (1) the officers, directors, employees and agents of Borrower, to the extent permissible under the limited liability company law of the jurisdiction in which Borrower is organized, (2) commercial banks, investment bankers and other independent consultants or professional advisors pursuant to agreements relating to the underwriting of Borrower's securities or the rendering of banking or professional services to Borrower and (3) landlords, licensors, licensees and other parties pursuant to agreements entered into in the ordinary course of business by Borrower;

(d)    Indebtedness with respect to financed insurance premiums not past due;

(e)    Indebtedness with respect to any state or federal taxes not delinquent or that are being contested by Borrower in good faith; and

(f)    Purchase Money Debt and Capitalized Lease Obligations in an aggregate amount not to exceed $100,000.00   outstanding at any one time.

Section 5.8    Debt Service Coverage Ratio .

[Intentionally Deleted].  

Section 5.9    Restricted Payments; Preemptive Rights. 

Borrower shall not declare, pay or make, any Restricted Payments or grant any preemptive rights with respect to its ownership interest of Borrower, except:

(a)   Borrower may declare and deliver dividends and make distributions payable solely in the ownership interests in Borrower;

(b)   Borrower may purchase or otherwise acquire ownership interests in Borrower by exchange for or out of the proceeds received from a substantially concurrent issue of new ownership interests;

(c)   Beginning on the first (1 ^st ) day of the thirty-first (31 ^st ) month following the date of this Agreement and continuing thereafter until the date that Borrower first achieves a Debt Service Coverage Ratio greater than or equal to 1.1 to 1.0, Borrower may make distributions to its member with respect to the member's ownership interest in Borrower in an amount not to exceed $4,000.00 in any given month, provided that