Common use of Capital Improvements Reserve Clause in Contracts

Capital Improvements Reserve. On or before September __, 2009, Borrower shall deposit $282,000 into the Capital Improvements Account for the purpose of establishing and maintaining a reserve (the “Capital Improvements Reserve”) for the completion of the Required Capital Improvements as required by this Agreement. Subject to Section 5.12(C), the funds contained in the Capital Improvements Reserve shall be utilized by Borrower solely for the Required Capital Improvements. So long as no Default or Event of Default exists at the time of any requested distribution of funds from the Capital Improvements Reserve, Lender shall make funds in the Capital Improvements Reserve available to Borrower subject to satisfaction of each of the following terms and conditions: (a) all Capital Improvements Reserve funds released by Lender to Borrower shall be used to pay for or reimburse Borrower for the reasonable expenses actually incurred and paid by Borrower for Required Capital Improvements; (b) Borrower shall have given Lender a Request for Release satisfactory to Lender; (c) disbursements from the Capital Improvements Reserve shall not be made more frequently than once per Loan Month; (d) each request for a disbursement shall be in an amount of not less than $10,000.00; and (e) upon request of Lender, Borrower shall also provide Lender with additional evidence reasonably satisfactory to Lender that Borrower is the owner or lessee of any capital improvements or equipment for which reimbursement is sought, free of any Liens (other than the first priority security interest in favor of Lender). Lender shall make each disbursement of the Capital Improvements Reserve funds within fifteen (15) days after satisfaction of all the conditions to that disbursement. If an Event of Default exists, Lender may apply the Capital Improvements Reserve funds, together with any interest accrued thereon, to Borrower’s Obligations in such order and priority as Lender may determine. Lender shall not make any disbursements from the Capital Expenditure Reserve to or for the benefit of Borrower until (i) Lender has approved the expenditures proposed by Borrower, (ii) all conditions to such disbursement have been satisfied and (iii) Borrower has provided Lender with all invoices, receipts, lien waivers and other documentation reasonably requested by Lender. If at any time Lender determines, in its reasonable discretion, that the amount in the Capital Improvements Reserve is insufficient for Borrower to complete the requested Required Capital Improvements, then Borrower shall deposit any deficiency, based on Lender’s reasonable estimate, within fifteen (15) days following Lender’s written demand. If there are any funds remaining in the Capital Improvements Reserve on the date on which the Required Capital Improvements have been completed to Lender’s satisfaction (the “Completion Date”), then Lender shall promptly return such remaining funds to Borrower. If Borrower has prepaid the Loan pursuant to Section 2.4(C) before the Completion Date, then Lender shall promptly return any amount remaining in the Capital Improvements Reserve to Borrower.

Capital Improvements Reserve. CAPITAL IMPROVEMENTS RESERVE. On or before September __, 2009the date hereof and by the fifteenth (15th) day of each January hereafter, Borrower or Operating Lessee shall deposit $282,000 into the Capital Improvements Account for the purpose of establishing and maintaining a reserve with Lender the greater of (a) $352,400 ($400 times the number of units in the Projects subject to reduction of and as the number of units is reduced), or (b) such higher amount as may be recommended by Lender's consulting engineer (the “Capital Improvements Reserve”"CAPITAL IMPROVEMENTS RESERVE") for replacing or correcting damages or defects (as opposed to normal repairs and recurring expenses) to any Project, including but not limited to, roofing, foundation work, exterior painting, parking lot and structures, kitchen appliances, carpeting, furnishings, fixtures, equipment, vehicles, office equipment, landscaping, heating, ventilating and air-conditioning systems, plumbing, electrical and mechanical systems ("CAPITAL EXPENDITURES") as specified in a Capital Expenditures Budget (as hereinafter defined) or otherwise approved in advance by Lender; however, the completion amount of the Required Capital Improvements as required by this Agreement. Subject to Section 5.12(C), the funds contained in initial deposit into the Capital Improvements Reserve shall be utilized reduced by the amount of funds expended for capital improvements to the Projects approved by Lender in calendar year 2002. The Capital Improvements Reserve will be held by Lender in an interest-bearing reserve account controlled by Lender. The Capital Improvements Reserve shall be advanced by Lender to Borrower solely or Operating Lessee for Capital Expenditures. Operating Lessee grants to Lender a security interest in the Required Capital ImprovementsImprovements Reserve. So long as no Default or While an Event of Default exists at the time or a Potential Default exists, Lender shall not be obligated to advance to Borrower or Operating Lessee any portion of any requested distribution of funds from the Capital Improvements Reserve, Lender shall make funds in the Capital Improvements Reserve available to Borrower subject to satisfaction of each of the following terms and conditions: (a) all Capital Improvements Reserve funds released by Lender to Borrower shall be used to pay for or reimburse Borrower for the reasonable expenses actually incurred and paid by Borrower for Required Capital Improvements; (b) Borrower shall have given Lender a Request for Release satisfactory to Lender; (c) disbursements from the Capital Improvements Reserve shall not be made more frequently than once per Loan Month; (d) each request for a disbursement shall be in an amount of not less than $10,000.00; and (e) upon request of Lender, Borrower shall also provide Lender with additional evidence reasonably satisfactory to Lender that Borrower is the owner or lessee of any capital improvements or equipment for which reimbursement is sought, free of any Liens (other than the first priority security interest in favor of Lender). Lender shall make each disbursement of the Capital Improvements Reserve funds within fifteen (15) days after satisfaction of all the conditions to that disbursement. If while an Event of Default exists, Lender may apply the Capital Improvements Reserve fundsshall be entitled, together with any interest accrued thereonwithout notice to Borrower or Operating Lessee, to Borrower’s Obligations in such order and priority as Lender may determine. Lender shall not make any disbursements from the Capital Expenditure Reserve to or for the benefit of Borrower until (i) Lender has approved the expenditures proposed by Borrower, (ii) all conditions to such disbursement have been satisfied and (iii) Borrower has provided Lender with all invoices, receipts, lien waivers and other documentation reasonably requested by Lender. If at any time Lender determines, in its reasonable discretion, that the amount in the Capital Improvements Reserve is insufficient for Borrower to complete the requested Required Capital Improvements, then Borrower shall deposit any deficiency, based on Lender’s reasonable estimate, within fifteen (15) days following Lender’s written demand. If there are apply any funds remaining in the Capital Improvements Reserve on the date on which the Required Capital Improvements have been completed to Lender’s satisfaction (the “Completion Date”), then Lender shall promptly return such remaining funds to Borrower. If Borrower has prepaid the Loan pursuant to Section 2.4(C) before the Completion Date, then Lender shall promptly return any amount remaining in the Capital Improvements Reserve to satisfy Borrower's obligations under the Loan Documents. Within thirty (30) days after the beginning of any calendar year Borrower or Operating Lessee shall submit to Lender a budget for Capital Expenditures for that calendar year (the "CAPITAL EXPENDITURES BUDGET"). The Capital Expenditures Budget shall be based on the previous year's experience and an assessment of anticipated future needs, and shall be subject to Lender's approval. The Capital Improvements Reserve shall be advanced in accordance with the conditions for advances under Schedule 2.1, Part C, and Lender's customary procedures for improvements advances.

Capital Improvements Reserve. On 2.5.1 During each Loan Year, Borrowers shall be obligated to spend with respect to the Projects, an amount (the “Required Amount”) equal to (a) for the period commencing on the Closing Date and ending on December 31, 2006 (the “Initial Capital Improvements Period”), the sum of $301.00 per rental unit at the Projects out of Operating Revenues; and (b) thereafter, for each twelve (12) month period during the Term commencing on January 1 and ending on December 31 of the each calendar year (each such twelve-month period, together with the Initial Capital Improvements Period, a “Capital Improvements Period”), $278.00 per rental unit at the Projects out of Operating Revenues. The Required Amount for each Capital Improvements Period shall be used to pay the costs of replacing furnishings, fixtures and equipment at the Projects and making such capital repairs and replacements to the Projects as are necessary to continue the present use thereof as a top quality apartment complex in good repair (excluding, however, the customary costs of ongoing maintenance at the Projects) (collectively, “Replacement Costs”). Expenditures for Replacement Costs shall be made subject to and in accordance with an annual budget prepared by Borrowers and reviewed and approved by Administrative Agent in accordance with this Agreement, or before September __shall otherwise be made only with the prior written approval of Administrative Agent in its sole discretion. Borrowers shall submit to Administrative Agent no later than the fifteenth (15th) day of the last calendar month of each Capital Improvements Period a list of Replacement Costs expended during such Capital Improvements Period, 2009together with reasonable supporting documentation therefor. 2.5.2 If any Borrower expends less than the Required Amount for Replacement Costs in any Capital Improvements Period (a “Capital Improvements Shortfall”), then in such event such Borrower shall be obligated to deposit $282,000 into the such Capital Improvements Account for the purpose of establishing and maintaining a reserve Shortfall into an account held by Administrative Agent (the “Capital Improvements Reserve”) for no later than the completion fifteenth (15th) day of the Required next Capital Improvements as required by this AgreementPeriod. Subject to Section 5.12(C)To the extent any Borrower, in any Capital Improvements Period, pays the Required Amount for Replacement Costs and thereafter incurs additional Replacement Costs, it may use funds contained in the Capital Improvements Reserve, if any, to pay for such additional Replacement Costs. The Capital Improvements Reserve shall be utilized an interest bearing account held by Borrower solely for Administrative Agent (on behalf of the Required Lenders) and may be commingled with Administrative Agent’s own funds. Borrowers hereby grant to Administrative Agent (on behalf of the Lenders) a security interest in the Capital ImprovementsImprovements Reserve. So long as no Default or While an Event of Default exists at the time or a Potential Default exists, Administrative Agent shall not be obligated to permit advances to Borrowers of any requested distribution of funds from the Capital Improvements Reserve, Lender and while an Event of Default exists, Administrative Agent shall make be entitled, without notice to Borrowers, to apply any funds in the Capital Improvements Reserve available to Borrower subject to satisfaction of each of satisfy Borrowers’ obligations under the following terms and conditions: (a) all Capital Improvements Reserve funds released by Lender to Borrower shall be used to pay for or reimburse Borrower for the reasonable expenses actually incurred and paid by Borrower for Required Capital Improvements; (b) Borrower shall have given Lender a Request for Release satisfactory to Lender; (c) disbursements from the Loan Documents. The Capital Improvements Reserve shall not be advanced to Borrowers to reimburse Borrowers for Replacement Costs incurred by Borrowers during the applicable Capital Improvements Period in accordance with the budget reviewed and approved by Administrative Agent as described in the preceding clause (a) or in accordance with the provisions of Schedule 2.1 Part D, attached hereto and made more frequently than once per Loan Month; (d) each request a part hereof, or as otherwise approved by Administrative Agent, but only after Borrowers have expended the Required Amount for a disbursement shall be in an amount of not less than $10,000.00; and (e) upon request of Lender, Borrower shall also provide Lender with additional evidence reasonably satisfactory to Lender that Borrower is the owner or lessee of any capital improvements or equipment for which reimbursement is sought, free of any Liens (other than the first priority security interest in favor of Lender)such Capital Improvements Period from their own funds. Lender shall make each disbursement of the The Capital Improvements Reserve funds within fifteen (15) days after satisfaction shall be advanced in accordance with the provisions of all the conditions to that disbursement. If an Event of Default existsSchedule 2.1 Parts C and D, Lender may apply the Capital Improvements Reserve fundsattached hereto, together with any interest accrued thereon, to Borrower’s Obligations in such order and priority as Lender may determine. Lender shall not make in any disbursements from the Capital Expenditure Reserve to or event be disbursed for the benefit financing of Borrower until (i) Lender has approved the expenditures proposed by Borrower, (ii) all conditions to such disbursement have been satisfied and (iii) Borrower has provided Lender with all invoices, receipts, lien waivers and other documentation reasonably requested by Lender. If at any time Lender determines, in its reasonable discretion, that the amount in the Capital Improvements Reserve is insufficient for Borrower to complete the requested Required Capital Improvements, then Borrower shall deposit any deficiency, based on Lender’s reasonable estimate, within fifteen (15) days following Lender’s written demand. If there are any funds remaining in the Capital Improvements Reserve on the date on which of the Required Capital Improvements have been completed to Lender’s satisfaction (the “Completion Date”), then Lender shall promptly return such remaining funds to Borrower. If Borrower has prepaid the Loan pursuant to Section 2.4(C) before the Completion Date, then Lender shall promptly return any amount remaining in the Capital Improvements Reserve to BorrowerRepairs.

Capital Improvements Reserve. On or before September __January 15, 20091997 and by the fifteenth (15th) day of each January thereafter, Borrower shall deposit $282,000 into a reserve with Lender (the Capital Improvements Account "CAPITAL IMPROVEMENTS RESERVE") an amount equal to the positive difference between (1) three percent (3%) of Operating Revenues for the purpose immediately preceding calendar year, and (2) the sum of establishing and maintaining a reserve (the “Capital Improvements Reserve”) for the completion of the Required Capital Improvements as required by this Agreement. Subject to Section 5.12(C), the funds contained in the Capital Improvements Reserve shall be utilized all expenditures by Borrower solely for capital improvements and replacements to the Required Projects during the preceding calendar year which were specified in a Capital Improvements. So long Expenditures Budget (as no Default hereinafter defined) or Event of Default exists at the time of any requested distribution of funds otherwise approved in advance by Lender and not paid with disbursements from the Capital Improvements Reserve, Lender shall make funds in the . The Capital Improvements Reserve available to Borrower subject to satisfaction of each of the following terms will be held by Lender without interest and conditions: (a) all may be commingled with Lender's own funds. The Capital Improvements Improvement Reserve funds released shall be advanced by Lender to Borrower shall be used for capital improvements and capital repairs to pay for or reimburse Borrower for the reasonable expenses actually incurred and paid Projects, as approved by Borrower for Required Capital Improvements; (b) Borrower shall have given Lender a Request for Release satisfactory to Lender; (c) disbursements from however, funds in the Capital Improvements Reserve shall not be made more frequently than once per Loan Month; (d) each request available for a disbursement shall be in an amount financing any of not less than $10,000.00; and (e) upon request of Lender, the improvements for which capital improvements advances are contemplated by the Budget. Borrower shall also provide Lender with additional evidence reasonably satisfactory grants to Lender that Borrower is the owner or lessee of any capital improvements or equipment for which reimbursement is sought, free of any Liens (other than the first priority a security interest in favor the Capital Improvements Reserve. While an Event of Lender). Default or a Potential Default exists, Lender shall make each disbursement not be obligated to advance to Borrower any portion of the Capital Improvements Reserve funds within fifteen (15) days after satisfaction of all the conditions to that disbursement. If Reserve, and while an Event of Default exists, Lender may apply the Capital Improvements Reserve fundsshall be entitled, together with any interest accrued thereonwithout notice to Borrower, to Borrower’s Obligations in such order and priority as Lender may determine. Lender shall not make any disbursements from the Capital Expenditure Reserve to or for the benefit of Borrower until (i) Lender has approved the expenditures proposed by Borrower, (ii) all conditions to such disbursement have been satisfied and (iii) Borrower has provided Lender with all invoices, receipts, lien waivers and other documentation reasonably requested by Lender. If at any time Lender determines, in its reasonable discretion, that the amount in the Capital Improvements Reserve is insufficient for Borrower to complete the requested Required Capital Improvements, then Borrower shall deposit any deficiency, based on Lender’s reasonable estimate, within fifteen (15) days following Lender’s written demand. If there are apply any funds remaining in the Capital Improvements Reserve on the date on which the Required Capital Improvements have been completed to Lender’s satisfaction (the “Completion Date”), then Lender shall promptly return such remaining funds to Borrower. If Borrower has prepaid the Loan pursuant to Section 2.4(C) before the Completion Date, then Lender shall promptly return any amount remaining in the Capital Improvements Reserve to satisfy Borrower.'s obligations under the Loan Documents. Borrower and Lender shall meet annually on a date selected by Lender to establish monthly, quarterly, and annual budgets for capital expenditures for the Projects for the succeeding calendar year (the "CAPITAL EXPENDITURES BUDGET"). The Capital Expenditures Budget shall be based on the previous year's experience and an assessment of anticipated future needs, and shall be subject to Lender's approval. The Capital Improvements Reserve shall be advanced in accordance with the conditions for improvements advances under Schedule 2.1. Schedule 2.4(2) - 1 66 LIST OF DEFINED TERMS

Capital Improvements Reserve. On or before September __, 2009Commencing one month after the Conversion Date, Borrower shall be required to deposit into a custodial account held with Lender, or other national bank as approved by Lender, in the amount of $282,000 into 10,417 per month from Project EBITDA (or other amount available after the required deposit has been made to the Debt Service Reserve), up to a maximum of $125,000.00 (the “Reserve Cap”). If at any time the Capital Improvements Account Reserve falls below the Reserve Cap, the Borrower shall replace such deficiency through monthly deposits as required above until the Capital Improvements Reserve is fully replenished up to the Reserve Cap. At Lender’s option, following the Conversion Date, disbursements from the Capital Improvements Reserve wxxx be disbursed to Borrower (or paid directly by Lender) for capital improvements, including but not limited to repairs, replacements and other capital improvements to the Project plant and equipment. Lender shall have no obligation to disburse from the Capital Improvements Reserve (i) if an Event of Default has occurred and is continuing hereunder, or (ii) for any other purpose or to any other person other than for which the Capital Improvements Reserve was established; provided that if an Event of establishing and maintaining Default has occurred, the Lender may disburse from the Capital Improvements Reserve in its sole discretion to the repayment of the Loan or to any of the Project Costs as it may determine in its discretion. Borrower hereby grants to Lender a reserve (first security interest in the “Capital Improvements Reserve”) for the completion of the Required Capital Improvements as required by this Agreement. Subject to Section 5.12(C), the funds contained Amounts held in the Capital Improvements Reserve shall be utilized by Borrower solely disbursed from time to time as required in increments as needed to satisfy the item for the Required Capital Improvements. So long as no Default or Event of Default exists at the time of any requested distribution of funds from the Capital Improvements Reserve, Lender shall make funds in which the Capital Improvements Reserve available has been established. Such requests shall be made not more often than monthly, in writing, addressed to Borrower subject the Lender certifying the amount to satisfaction of each of the following terms be disbursed and conditions: accompanied by: (a) An Application for Payment signed by the Borrower identifying the repairs completed and/or labor and materials involved in completing the capital expenditures and certifying that such work has been completed, and accompanied by all Capital Improvements Reserve funds released by Lender to Borrower shall be used to pay bills for or reimburse Borrower labor and material incurred, and/or receipts for the reasonable expenses actually incurred purchase of furniture fixtures and paid by Borrower for Required Capital Improvements; equipment. (b) Borrower shall have given If Lender requires, an inspection report from its retained inspector verifying the work has been completed and installed as the case may be, in a Request for Release satisfactory to Lender; good and workmanlike manner and in compliance with all construction, use, building zoning and other governing laws, rules and regulations and the Americans With Disabilities Act. (c) disbursements from Such approval of the Capital Improvements Reserve shall not work done and/or final certificates of occupancy as may be made more frequently than once per Loan Month; required by the municipality or governmental agency having jurisdiction over the Project evidencing compliance with the applicable building codes and ordinances governing the work. (d) each request for a disbursement shall be in an amount of not less than $10,000.00; Lien waiver from all laborers and (e) upon request of Lender, Borrower shall also provide Lender with additional evidence reasonably satisfactory to Lender that Borrower is the owner or lessee of any capital improvements or equipment materialmen performing work for which reimbursement an Application For Payment is sought, free of any Liens (other than the first priority security interest in favor of Lender)submitted. Lender shall make each disbursement may require that the Title Company issue a downdate endorsement to the policy dated as of the Capital Improvements Reserve funds within fifteen (15) days after satisfaction of all disbursement date assuring no change in the insuring conditions and no further exceptions to that disbursementthe policy. If an Event of Default existsLender is satisfied that the requirements are satisfied, Lender shall, within ten (10) business days thereafter, disburse the amount requested in the Application for Payment. At its option, Lender may apply the Capital Improvements Reserve funds, together with any interest accrued thereon, to Borrower’s Obligations in such order and priority as Lender may determine. Lender shall not make any disbursements from the Capital Expenditure Reserve to or for the benefit of Borrower until (i) Lender has approved the expenditures proposed by Borrower, (ii) all conditions to such disbursement have been satisfied and (iii) Borrower has provided Lender with all invoices, receipts, lien waivers and other documentation reasonably requested directly to the persons or entities supplying the materials for or performing the repairs or to the Title Company for disbursement by Lender. If at any time Lender determines, in its reasonable discretion, that the amount in Title Company to the Capital Improvements Reserve is insufficient for Borrower to complete the requested Required Capital Improvements, then Borrower shall deposit any deficiency, based on Lender’s reasonable estimate, within fifteen (15) days following Lender’s written demand. If there are any funds remaining in the Capital Improvements Reserve on the date on which the Required Capital Improvements have been completed to Lender’s satisfaction (the “Completion Date”), then Lender shall promptly return such remaining funds to Borrower. If Borrower has prepaid the Loan pursuant to Section 2.4(C) before the Completion Date, then Lender shall promptly return any amount remaining in the Capital Improvements Reserve to Borrowerpayees.

Capital Improvements Reserve. On or before September __, 2009Commencing one month after the Conversion Date, Borrower shall be required to deposit into a custodial account held with Lender, or other national bank as approved by Lender, in the amount of $282,000 into 10,417 per month from Project EBITDA (or other amount available after the required deposit has been made to the Debt Service Reserve), up to a maximum of $125,000.00 (the “Reserve Cap”). If at any time the Capital Improvements Account Reserve falls below the Reserve Cap, the Borrower shall replace such deficiency through monthly deposits as required above until the Capital Improvements Reserve is fully replenished up to the Reserve Cap. At Lender’s option, following the Conversion Date, disbursements from the Capital Improvements Reserve will be disbursed to Borrower (or paid directly by Lender) for capital improvements, including but not limited to repairs, replacements and other capital improvements to the Project plant and equipment. Lender shall have no obligation to disburse from the Capital Improvements Reserve (i) if an Event of Default has occurred and is continuing hereunder, or (ii) for any other purpose or to any other person other than for which the Capital Improvements Reserve was established; provided that if an Event of establishing and maintaining Default has occurred, the Lender may disburse from the Capital Improvements Reserve in its sole discretion to the repayment of the Loan or to any of the Project Costs as it may determine in its discretion. Borrower hereby grants to Lender a reserve (first security interest in the “Capital Improvements Reserve”) for the completion of the Required Capital Improvements as required by this Agreement. Subject to Section 5.12(C), the funds contained Amounts held in the Capital Improvements Reserve shall be utilized by Borrower solely disbursed from time to time as required in increments as needed to satisfy the item for the Required Capital Improvements. So long as no Default or Event of Default exists at the time of any requested distribution of funds from the Capital Improvements Reserve, Lender shall make funds in which the Capital Improvements Reserve available has been established. Such requests shall be made not more often than monthly, in writing, addressed to Borrower subject the Lender certifying the amount to satisfaction of each of the following terms be disbursed and conditions: accompanied by: (a) An Application for Payment signed by the Borrower identifying the repairs completed and/or labor and materials involved in completing the capital expenditures and certifying that such work has been completed, and accompanied by all Capital Improvements Reserve funds released by Lender to Borrower shall be used to pay bills for or reimburse Borrower labor and material incurred, and/or receipts for the reasonable expenses actually incurred purchase of furniture fixtures and paid by Borrower for Required Capital Improvements; equipment. (b) Borrower shall have given If Lender requires, an inspection report from its retained inspector verifying the work has been completed and installed as the case may be, in a Request for Release satisfactory to Lender; good and workmanlike manner and in compliance with all construction, use, building zoning and other governing laws, rules and regulations and the Americans With Disabilities Act. (c) disbursements from Such approval of the Capital Improvements Reserve shall not work done and/or final certificates of occupancy as may be made more frequently than once per Loan Month; required by the municipality or governmental agency having jurisdiction over the Project evidencing compliance with the applicable building codes and ordinances governing the work. (d) each request for a disbursement shall be in an amount of not less than $10,000.00; Lien waiver from all laborers and (e) upon request of Lender, Borrower shall also provide Lender with additional evidence reasonably satisfactory to Lender that Borrower is the owner or lessee of any capital improvements or equipment materialmen performing work for which reimbursement an Application For Payment is sought, free of any Liens (other than the first priority security interest in favor of Lender)submitted. Lender shall make each disbursement may require that the Title Company issue a downdate endorsement to the policy dated as of the Capital Improvements Reserve funds within fifteen (15) days after satisfaction of all disbursement date assuring no change in the insuring conditions and no further exceptions to that disbursementthe policy. If an Event of Default existsLender is satisfied that the requirements are satisfied, Lender shall, within ten (10) business days thereafter, disburse the amount requested in the Application for Payment. At its option, Lender may apply the Capital Improvements Reserve funds, together with any interest accrued thereon, to Borrower’s Obligations in such order and priority as Lender may determine. Lender shall not make any disbursements from the Capital Expenditure Reserve to or for the benefit of Borrower until (i) Lender has approved the expenditures proposed by Borrower, (ii) all conditions to such disbursement have been satisfied and (iii) Borrower has provided Lender with all invoices, receipts, lien waivers and other documentation reasonably requested directly to the persons or entities supplying the materials for or performing the repairs or to the Title Company for disbursement by Lender. If at any time Lender determines, in its reasonable discretion, that the amount in Title Company to the Capital Improvements Reserve is insufficient for Borrower to complete the requested Required Capital Improvements, then Borrower shall deposit any deficiency, based on Lender’s reasonable estimate, within fifteen (15) days following Lender’s written demand. If there are any funds remaining in the Capital Improvements Reserve on the date on which the Required Capital Improvements have been completed to Lender’s satisfaction (the “Completion Date”), then Lender shall promptly return such remaining funds to Borrower. If Borrower has prepaid the Loan pursuant to Section 2.4(C) before the Completion Date, then Lender shall promptly return any amount remaining in the Capital Improvements Reserve to Borrowerpayees.

Capital Improvements Reserve. On A. Lender, in its discretion, may at any time or before September __from time to time, 2009require Borrower to pay to Lender, Borrower shall deposit $282,000 into together with each monthly payment due under the Capital Improvements Account for the purpose of establishing and maintaining Note, an amount (a “CIR Payment”) to be held as a reserve for capital improvements at the Properties. The CIR Payments shall be held by Lender in an interest-bearing escrow (the “Capital Improvements ReserveCIR Escrow”) ). The escrow balance may be drawn on by Borrower not more often than monthly for capital improvement expenditures in connection with the completion Properties which have been approved by Lender or are required to be made by applicable Laws or are required to be made by any of the Required Capital Improvements as Senior Lenders or are required to be made under Leases previously approved by this AgreementLender, but in all cases pursuant to the provisions of subparagraph 4.2(B). Subject The CIR Payments shall be set, from time to Section 5.12(C)time, at a level reasonably determined by Lender based on Borrower’s capital improvement plans, the funds contained in condition of the Capital Improvements Reserve shall Properties, Lender’s inspection of the Properties and then-current architectural and engineering reports. Borrower shall, upon Lender’s request, promptly provide to Lender then-current architectural and engineering reports prepared by firms reasonably acceptable to Lender. To the extent that and for as long as Borrower maintains a fully-funded capital expenditure escrow with each of the Senior Lenders pursuant to the provisions of the Senior Loan Documents, a duplicative CIR Escrow with Lender will not be utilized by Borrower solely for the Required Capital Improvements. required. B. So long as no Default or Event of Default exists at has occurred and is continuing, Borrower, subject to the time following provisions of any requested distribution this subparagraph (B) and upon ten (10) days’ prior written notice to Lender (which notice shall include a brief statement of funds from the Capital Improvements Reservepurpose for which the advance is to be used), shall be entitled to request a draw on the balance then held by Lender shall make funds in the Capital Improvements Reserve available to Borrower subject to satisfaction CIR Escrow solely for the payment of approved (by Lender and, if required by the Senior Loan Documents, also by each of the following terms Senior Lenders) or required capital improvement expenditures for one or more of the Properties. Borrower may not make any drawing on the CIR Escrow without the prior consent of Lender. Lender reserves the right to require such information as Lender may reasonably require, and conditions: (a) all Capital Improvements Reserve funds released by to withhold consent in the event that Lender deems it necessary or appropriate to Borrower shall be used to pay for or reimburse Borrower for do so. Without limiting the reasonable expenses actually incurred and paid foregoing, Lender may require, in connection with a request by Borrower for Required Capital Improvements; (b) a drawing on the CIR Escrow, that Borrower shall have given Lender a Request for Release satisfactory to Lender; (c) disbursements from the Capital Improvements Reserve shall not be made more frequently than once per Loan Month; (d) each request for a disbursement shall be in an amount of not less than $10,000.00; and (e) upon request of Lender, Borrower shall also provide Lender with additional furnish written evidence reasonably satisfactory to Lender that the amount requested by Borrower is for work performed, services or materials furnished, and bills paid or payable with respect to the owner approved capital improvement expenditures (including, but not limited to, contracts and invoices for work performed or lessee of any capital improvements materials supplied, contractor’s and owner’s sworn affidavits, and mechanic’s and materialmen’s lien releases and waivers from such parties performing such work or equipment for which reimbursement is sought, free of any Liens (other than supplying such materials and mechanic’s lien endorsements to the first priority security interest in favor of LenderTitle Policy). Lender shall make each disbursement of the Capital Improvements Reserve funds within fifteen (15) days after satisfaction of all the conditions to that disbursement. If Upon a Default or an Event of Default existsDefault, Lender may apply make any disbursement from the Capital Improvements Reserve fundsCIR Escrow directly to the Person performing any work or supplying any materials and Lender shall have no liability of any kind to Borrower or any other Person in respect thereof. In the event Lender makes a direct disbursement, together with any interest accrued thereon, Lender shall be entitled to charge Borrower a processing fee for administering and reviewing Borrower’s Obligations in draw requests or other documentation related to such order and priority as Lender may determinedisbursement. In addition, Lender shall not make be reimbursed by Borrower for any disbursements costs incurred by Lender in inspecting the affected Property or Properties in connection with processing, administering and funding draw requests. Any such processing fees and inspection costs shall be deducted by Lender from the Capital Expenditure Reserve to or for the benefit of Borrower until (i) Lender has approved the expenditures proposed by BorrowerCIR Escrow balance or, (ii) all conditions to such disbursement have been satisfied and (iii) Borrower has provided Lender with all invoices, receipts, lien waivers and other documentation reasonably requested by Lender. If at any time Lender determines, in its reasonable discretion, that the amount in the Capital Improvements Reserve is insufficient for Borrower to complete the requested Required Capital Improvements, then Borrower shall deposit any deficiency, based on Lender’s reasonable estimateoption, shall be paid to Lender by Borrower within fifteen ten (1510) days following of Lender’s written demand. If there . C. The CIR Escrow and all funds therein are any funds remaining in the Capital Improvements Reserve on the date on which the Required Capital Improvements have been completed hereby pledged to Lender’s satisfaction (, and Borrower grants to Lender a security interest therein, as additional security for the “Completion Date”), then Lender shall promptly return such remaining funds to Borrower. If Borrower has prepaid payment and performance of the Loan pursuant to Section 2.4(C) before the Completion Date, then Lender shall promptly return any amount remaining in the Capital Improvements Reserve to BorrowerObligations.

Capital Improvements Reserve. On or before September __January 15, 20092012, and by the fifteenth (15th) day of each January thereafter, Borrower shall deposit $282,000 into the Capital Improvements Account for the purpose of establishing and maintaining a reserve with Lender (the “Capital Improvements Reserve”) an amount equal to the positive difference between (1) the greater of (a) the product obtained by multiplying the greater of $0.15 by the existing number of rentable square feet in the Project and (b) the annual capital reserve amount determined by Lender from time to time, and (2) the sum of all expenditures by Borrower for capital improvements and replacements to the completion of Project during the Required Capital Improvements as required preceding calendar year which were approved in advance by this Agreement. Subject to Section 5.12(C), the funds contained in Lender and not paid with disbursements from the Capital Improvements Reserve (provided that for the calendar year in which the Closing Date occurs, such amount shall be utilized by Borrower solely for pro-rated to reflect the Required Capital Improvementsportion of the calendar year during which the Loans are outstanding). So long as no Default or Event of Default exists at the time of any requested distribution of funds from the Capital Improvements Reserve, Lender shall make funds in the The Capital Improvements Reserve available to Borrower subject to satisfaction of each of the following terms will be held by Lender without interest and conditions: (a) all may be commingled with Lender’s own funds. The Capital Improvements Improvement Reserve funds released shall be advanced by Lender to Borrower shall be used for capital improvements and capital repairs to pay for or reimburse Borrower for the reasonable expenses actually incurred and paid Project, as approved by Borrower for Required Capital Improvements; (b) Borrower shall have given Lender a Request for Release satisfactory to Lender; (c) disbursements from however, funds in the Capital Improvements Reserve shall not be made more frequently than once per Loan Month; (d) each request available for a disbursement shall be in an amount financing any of not less than $10,000.00; and (e) upon request of Lender, the improvements for which capital improvements advances are contemplated by the Budget. Borrower shall also provide Lender with additional evidence reasonably satisfactory grants to Lender that Borrower is the owner or lessee of any capital improvements or equipment for which reimbursement is sought, free of any Liens (other than the first priority a security interest in favor the Capital Improvements Reserve. While an Event of Lender). Default or a Potential Default exists, Lender shall make each disbursement not be obligated to advance to Borrower any portion of the Capital Improvements Reserve funds within fifteen (15) days after satisfaction of all the conditions to that disbursement. If Reserve, and while an Event of Default exists, Lender may apply the Capital Improvements Reserve fundsshall be entitled, together with any interest accrued thereonwithout notice to Borrower, to Borrower’s Obligations in such order and priority as Lender may determine. Lender shall not make any disbursements from the Capital Expenditure Reserve to or for the benefit of Borrower until (i) Lender has approved the expenditures proposed by Borrower, (ii) all conditions to such disbursement have been satisfied and (iii) Borrower has provided Lender with all invoices, receipts, lien waivers and other documentation reasonably requested by Lender. If at any time Lender determines, in its reasonable discretion, that the amount in the Capital Improvements Reserve is insufficient for Borrower to complete the requested Required Capital Improvements, then Borrower shall deposit any deficiency, based on Lender’s reasonable estimate, within fifteen (15) days following Lender’s written demand. If there are apply any funds remaining in the Capital Improvements Reserve on the date on which the Required Capital Improvements have been completed to Lender’s satisfaction (the “Completion Date”), then Lender shall promptly return such remaining funds to Borrower. If Borrower has prepaid the Loan pursuant to Section 2.4(C) before the Completion Date, then Lender shall promptly return any amount remaining in the Capital Improvements Reserve to satisfy Borrower.’s obligations under the Loan Documents. Borrower and Lender shall meet annually on a date selected by Lender to establish monthly, quarterly, and annual budgets for capital expenditures for the Project for the succeeding calendar year (the “Capital Expenditures Budget”). The Capital Expenditures Budget shall be based on the previous year’s experience and an assessment of anticipated future needs, and shall be subject to Lender’s approval. Each advance of the Capital Improvements Reserve shall be subject to Lender’s receipt, review, approval and/or confirmation of the following, each in form and content satisfactory to Lender in its sole discretion: