EXHIBIT 1.1

ACTIVE 247372163

$14,000,000.00September 17, 2019

FOR VALUE RECEIVED, Presidio Property Trust, Inc., a Maryland corporation (the “Borrower”), hereby promises to pay on the Maturity Date (as defined herein) to the order of Polar Multi-Strategy Master Fund, a Cayman Islands exempted company (and/or its successors and permitted assigns, collectively the “Lender”), in lawful money of the United States of America, the principal sum of FOURTEEN MILLION DOLLARS ($14,000,000.00), with interest on the unpaid principal balance at the Interest Rate (as defined below), all in accordance with the terms and provisions below.

RECITALS

WHEREAS, this Promissory Note (as amended, restated, supplemented or otherwise modified from time to time, collectively the “Note”) has been executed and delivered by the Borrower to the Lender in order to induce the Lender to loan the Borrower $14,000,000.00 on the date hereof (such loan, the “Loan”); and

WHEREAS, for good and valuable consideration, the Borrower and the Lender hereby agree as follows:

AGREEMENTS

NOW, THEREFORE, for and in consideration of the promises and covenants herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

1.Definitions. As used in this Note, the following terms have the meanings specified below:

“Agreement” means, the Agreement dated as of September 17, 2019, between the Borrower and the Lender.  

“Applicable Rate” means 8.00% per annum.

“Asset Disposition” means the sale, disposition, conveyance or other transfer for value by any party hereto to any Person of any real property (except for model homes owned by Model Home Subsidiaries) of such party (including, the loss, destruction or damage of any thereof or any actual or threatened (in writing to any party hereto) condemnation, confiscation, requisition, seizure or taking thereof).

“Audited Financial Statements” means the audited consolidated balance sheet of the Borrower and its Subsidiaries as of the last day of each of the three most recent fiscal years ended at least 90 days prior to the Closing Date and the related audited consolidated statements of income, comprehensive income, cash flows and stockholders’ equity of the Borrower and its Subsidiaries for each of the three most recent fiscal years ended at least 90 days prior to the Closing Date.

“Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the laws of, or are in fact closed in, New York.

“Change in Control” means an event or series of events by which (a) any person or group (within the meaning of Rule 13d-5 of the Securities Exchange Act of 1934 as in effect on the Closing Date) shall own directly or indirectly, beneficially or of record, shares representing more than 49% of the aggregate ordinary voting power or economic interests represented by the issued and outstanding equity interests of the Borrower on a fully diluted basis, (b) a majority of the seats (other than vacant seats) on the board of directors (or equivalent governing body) of the Borrower shall at any time be occupied by persons who were neither (i) nominated, approved or appointed by the board of directors (or equivalent governing body) of the Borrower nor (ii) nominated, approved or appointed by individuals so nominated, approved, or appointed or (c) the Borrower shall fail to own, directly or indirectly, free and clear of all liens or other encumbrances, 100% of the aggregate ordinary voting power and economic interests represented by the issued and outstanding equity interests of each of its Subsidiaries (or such lesser percentage as may be owned, directly or indirectly, as of the Closing Date or the later acquisition thereof) other than the Model Home Subsidiaries except where such failure is as a result of a transaction permitted by the Note Documents.

“Closing Date” means the date on which all conditions precedent set forth in Section 8 have been satisfied or waived by the Lender.

“Debtor Relief Laws” means the Bankruptcy Code of the United States of America, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar laws of the United States of America or other applicable jurisdictions from time to time in effect.

“GAAP” means generally accepted accounting principles in the United States of America, as in effect from time to time, set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants, in the statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions and comparable stature and authority within the accounting profession) that are applicable to the circumstances as of the date of determination.  

“Governmental Approval” means any license, permit or certificate of public convenience and necessity issued or required to be issued to the Borrower or any of its Subsidiaries by any Governmental Authority.

“Governmental Authority” means any United States federal, state, local or other political subdivision thereof and any United States or foreign entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

“Highest Lawful Rate” means, on any day, the maximum non-usurious rate of interest permitted for that day by applicable federal or state law stated as a rate per annum.

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“Indebtedness” of any Person means, without duplication, (a) all obligations of such Person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person upon which interest charges are customarily paid, (d) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (e) all obligations of such Person in respect of the deferred purchase price of property or services (excluding current accounts payable incurred in the ordinary course of business), (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed, (g) all guarantees by such Person of Indebtedness of others, (h) all capital lease obligations of such Person, (i) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty, (j) all obligations, contingent or otherwise, of such Person in respect of bankers’ acceptances and (k) all obligations of such Person under sale and leaseback transactions.  The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor.

“Lien” means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities.

“Material Adverse Effect” means (a) a material adverse effect on the business, assets, operations, liabilities, prospects or condition, financial or otherwise, of the Borrower and its Subsidiaries, taken as a whole, (b) the condition that results when the legality, validity or enforceability of any Note Document is affected in a manner that is material and adverse to the Lender, (c) the condition that results when the ability of the Borrower to perform any of its obligations under any Note Document is affected in a manner that is material and adverse to the Lender, or (d) the condition that results when the rights of or benefits available to the Lender under any Note Document is affected in a manner that is material and adverse.  In determining whether any individual event would result in a Material Adverse Effect, notwithstanding that such event in and of itself does not have such effect, a Material Adverse Effect shall be deemed to have occurred if the cumulative effect of such event and all other then existing events would result in a Material Adverse Effect.

“Model Home Subsidiaries” means Dubose Model Home Investors #202 LP, Dubose Model Home Investors #203 LP, Dubose Model Home Investors #204 LP, Dubose Model Home Investors #205 LP, NetREIT Dubose Model Home REIT, Inc., NetREIT Dubose Model Home REIT, LP, NetREIT Model Homes, Inc., Dubose Advisors, LLC, NetREIT Advisors, LLC, and any other similar Borrower subsidiaries and related entities primarily formed for the purpose of purchasing, leasing, selling, managing and/or investing in single-family model home properties.

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“Mortgage Loan” means each existing mortgage loan secured by the Properties.    

“Net Cash Proceeds” means, with respect to any Asset Disposition by any party hereto or Subsidiary thereof (other than Model Home Subsidiaries), the net proceeds (including cash proceeds received pursuant to policies of insurance or by way of deferred payment of principal pursuant to a note, installment receivable or otherwise, but only as and when received) received by any party hereto (including, without limitation, as the owner or beneficial owner of a Subsidiary) pursuant to such Asset Disposition due to the seller net of all escrow deductions; provided that the Borrower’s determination of net proceeds is reasonable.

“Note Documents” means this Note, the Agreement and all documents, instruments and agreements delivered in connection with the foregoing, all as amended, restated, amended and restated, supplemented and/or otherwise modified from time to time in accordance with the terms thereof.

“Note Obligations” means the payment and performance of the Loan and all advances to, and debts, liabilities, obligations, covenants and duties of, the Borrower under or pursuant to each of the Note Documents or otherwise with respect to any Loan and all costs and expenses incurred in connection with enforcement and collection of the foregoing, including the fees, charges and disbursements of counsel, in each case whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest, expenses and fees that accrue after the commencement by or against the Borrower or any affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest, expenses and fees are allowed claims in such proceeding.

“Permitted Short Term Borrowings” shall mean, solely to the extent on a pro forma basis, that the aggregate ITV Ratio (as defined in the Agreement) as determined by the Lender in its reasonable discretion is less than 0.75:1.00, borrowings under a debt or similar facility in an amount not to exceed $15,000,000 in the aggregate and otherwise subject to market terms and conditions, such debt or similar facility to be used solely for the acquisition of additional properties in accordance with the provisions of the Note Documents and the Mortgage Loans, such debt or similar facility to be replaced within ninety (90) days of the closing of the acquisition transaction with respect to the applicable property or properties.

“Person” means any individual, corporation (including not-for-profit), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, Governmental Authority or other entity of any kind or nature.

“Property” means each property acquired pursuant to the terms and conditions of this Note.

“Subsidiary” means any direct or indirect subsidiary of the Borrower.

“Transaction” means the initial extension of credit hereunder.

“Unaudited Financial Statements” means the unaudited consolidated balance sheets and related statements of operations, comprehensive income, changes in equity and cash flows of the

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Borrower and its Subsidiaries, covering any of the first three fiscal quarters that have ended after the most recent fiscal year covered by the Audited Financial Statements and at least forty five (45) days before the Closing Date.

2.The Loan.

(a)Subject to the satisfaction of the conditions set forth in Section 6, the Lender will make the Loan to the Borrower on the date of this Note.

(b)Interest on the outstanding principal balance of Loan shall accrue at a rate (the “Interest Rate”) equal to the Applicable Rate plus (ii) if an Event of Default has occurred, four percent (4.0%) per annum (the “Default Rate”), which default rate shall accrue on and after the date of such Event of Default (and shall continue to accrue until such Event of Default shall have been waived in writing by the Lender or cured by the Borrower).  Any other unpaid amounts due and payable hereunder shall also accrue interest at a rate equal to the Applicable Rate plus, if applicable, the Default Rate.

(c)All accrued and unpaid interest on the Loan and on other amounts payable hereunder shall be paid in arrears by the Borrower to the Lender on (i) the last Business Day of each month (such date a “Payment Date”), and (ii) the Maturity Date.  

3.Maturity.  The Borrower shall repay to the Lender the entire remaining principal amount of the Note Obligations including, without limitation, the Loan plus all unpaid accrued interest and all other amounts owing by the Borrower hereunder in cash on the earliest of the following dates (such earliest date, the “Maturity Date”): (i) October 1, 2020 or March 31, 2021 if extended pursuant to clause 4 below; and (ii) the acceleration of the Loan in accordance with the terms hereof.

4.Extension.  The Borrower may extend the Maturity Date one time for a period of six (6) months upon satisfaction of the following terms and conditions: (i) delivery by the Borrower of a written notice to the Lender (an “Extension Notice”) on a date that is on or between June 1, 2020 and September 1, 2020, which Extension Notice shall include a certification dated as of the date of such Extension Notice signed by a duly authorized signatory of the Borrower, stating, to the best of the certifying party’s knowledge, (x) all representations and warranties contained in this Note and in each of the other Note Documents, as applicable, are true and correct on and as of the date of such Extension Notice (except in those cases where such representation or warranty expressly relates to an earlier date and except for changes in factual circumstances not prohibited under the Note Documents), and (y) no Event of Default has occurred and is continuing; and (ii) the Borrower shall pay to Lender on or before October 1, 2020, a fee equal to 4.00% of the outstanding principal amount of the Loan on the date such Extension Notice is delivered. The Borrower’s delivery of each Extension Notice shall be irrevocable.

5.Prepayments.  

(a)Voluntary Prepayments.  The Borrower may from time to time voluntarily prepay the Loan in whole or in part; provided that the Borrower shall give Lender notice of any such prepayment not later than 10:00 A.M. New York time, on the day of such

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prepayment (which must be a Business Day), specifying the amount of such prepayment.  All prepayments under this Section 5 shall be accompanied by payment of (a) all accrued interest on the Loan (or portion thereof) being prepaid, and (b) if such voluntary prepayment is made before the Payment Date occurring on December 31, 2019, a fee equal to a make-whole amount calculated by (i) (A) the number of days from the date the voluntary prepayment is effected to and including December 31, 2019,multiplied by (B) the Interest Rate, multiplied by (C) the amount of such prepayment, divided by (ii) 360 (such fee, the “Optional Redemption Fee”).  

(b)Mandatory Prepayments.  The Borrower shall make a prepayment of the Loan until paid in full upon the occurrence of any and within five (5) Business Days of the receipt by the Borrower of any Net Cash Proceeds from any Asset Disposition, in an amount equal to 80% of such Net Cash Proceeds, such prepayment made pursuant to this Section 5(b) shall not incur any Optional Redemption Fee.

(c)Manner and Application of Prepayments.  All prepayments of the Loan under Section 5 shall be accompanied by payment of (i) all accrued interest on the Loan (or portion thereof) being prepaid, and (ii) any Optional Redemption Fee due with respect to the Loan (or portion thereof) being prepaid pursuant to Section 5(a).  

6.Refinancing. In the event that the Borrower or its affiliates intends to incur Indebtedness for borrowed money (such indebtedness, “Refinancing Indebtedness”) or issue equity interests or otherwise receive a capital contribution (such equity issuance capital contribution, “Refinancing Equity”), in each case the proceeds of which are used to refinance in whole or in part the Loan with any person other than the Lender (an “Other Refinancing Source”), then the Borrower shall provide written notice (“Other Refinancing Notice”) thereof to the Lender at least 10 Business Days prior to the proposed consummation date for such Refinancing Indebtedness or Refinancing Equity, which notice shall include the aggregate principal amount of such contemplated Refinancing Indebtedness or Refinancing Equity, the proposed terms and conditions (the “Proposed Terms”) of the contemplated Refinancing Indebtedness or Refinancing Equity and the contemplated funding or issuing date and consummation date for such Refinancing Indebtedness or Refinancing Equity.  Such notice shall constitute a request by the Borrower to the Lender that the Lender provide such Refinancing Indebtedness or Refinancing Equity.  The Lender shall have the right, but not the obligation, to provide written notice (the “Exercise Notice”) to the Borrower that that the Lender shall offer to act as the financing source for such Refinancing Indebtedness or investing source for such Refinancing Equity together with a commitment letter to the Borrower in respect of such Refinancing Indebtedness or Refinancing Equity on terms which are substantially the same as or no less favorable than the relevant Proposed Terms (subject to the satisfaction of customary conditions, including the execution and delivery of customary loan documentation or equity documentation).  If the Lender delivers such Exercise Notice on or prior to 10 Business Days (the “Exercise Deadline Date”) after the Lender’s receipt of the Other Refinancing Notice, neither the Borrower nor any of its affiliates shall accept any offer by any Other Refinancing Source with respect to, or enter into such Refinancing Indebtedness or Refinancing Equity with any person other than the Lender, without the written consent of the Lender, unless the Lender and Borrower fail to enter into a binding agreement for Refinancing Indebtedness or Refinancing Equity within 30 days of delivery of the Exercise Notice.

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7.Application of Payments.  Payments made by the Borrower pursuant to the terms of this Note shall be applied as follows:  first, to the payment of any amounts owing hereunder by the Borrower other than interest or principal on the Loan, second, to any unpaid accrued interest on the Loan, third, to the principal balance of the Loan and fourth to any other Note Obligations.  All payments made by the Borrower hereunder shall be made in immediately available U.S. Dollars, free and clear of any set-off, counterclaim or deduction for any reason whatsoever.  If any payment of principal or interest under this Note is due on a day that is not a Business Day, such payment shall be due on the next succeeding Business Day.  All payments to be made by or on behalf of the Borrower with respect to this Note shall be made without set-off, counterclaim or other defense.

8.Conditions Precedent.  The obligation of the Lender to make the Loan is subject to the following conditions precedent, each of which shall be satisfactory in all respects to the Lender:

(a)a signature page to this Note duly executed by the Borrower;

(b)receipt of a written opinion of the Borrower’s counsel in form and substance acceptable to the Lender;

(c)the Borrower’s (i) charter (or similar formation document), certified by the appropriate governmental authority, (ii) good standing certificates in its state of incorporation (or formation), (iii) bylaws (or similar governing document), (iv) resolutions of its board of directors (or similar governing body) approving and authorizing such Borrower’s execution, delivery and performance of the Note Documents to which it is party and the Transaction, and (v) signature and incumbency certificates of its officers executing any of the Note Documents, all certified by its secretary or an assistant secretary (or similar officer) as being in full force and effect without modification;

(d)a certificate by the chief financial officer of the Borrower certifying, that before and after giving effect to the Transaction on the Closing Date, (i) the Borrower and each subsidiary thereof is each solvent; (ii) all representations and warranties of the Borrower under the Note Documents shall to be true in all respects; (iii) no Event of Default has occurred and is continuing;

(e)copies of uniform commercial code search reports listing all effective financing statements filed against the Borrower, with copies of such financing statements;

(f)the Lender shall have received financial statements of the Borrower;

(g)all governmental and third party approvals necessary or, in the discretion of the Lender, advisable in connection with the Transaction and the continuing operations of the Borrower and its Subsidiaries shall have been obtained and be in full force and effect; and

(h)the Lender shall have determined that there has been no material adverse change of the financial condition of the Borrower and its Subsidiaries, taken as a whole.  

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9.Representations and Warranties.  The Borrower represents and warrants to the Lender on the date hereof that:

(a)The Borrower is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, and has full legal power and authority to own, lease and operate its properties and assets and to carry on its business as presently conducted.

(b)The Borrower has all necessary legal power to enter into, and has taken all necessary corporate action to authorize the execution, delivery and performance of, this Note and all of the other Note Documents.  

(c)This Note has been duly executed and delivered by the Borrower and constitutes the legal, valid and binding obligations of the Borrower, enforceable against it in accordance with their respective terms, except as may be limited by (i) the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally, and (ii) the application of general principles of equity (regardless of whether applied in a proceeding in equity or at law).

(d)The execution or delivery of this Note, the performance of or compliance with the terms and conditions hereof or thereof or the consummation of the Transaction (i) do not require any consent or approval of, registration or filing with, or any other action by, any governmental authority, except such as have been obtained or made and are in full force and effect, (ii) do not contravene any applicable law or any governmental approvals applicable to the Borrower, (iii) will not violate or result in a default under any indenture, agreement or other instrument binding upon the Borrower or the assets of the Borrower, or give rise to a right thereunder to require any payment to be made by the Borrower, (iv) do not constitute a default under or result in the violation of the provisions of any organizational document of the Borrower or (v) will not result in the creation or imposition of any lien on any asset of the Borrower.

(e)The Borrower is not and, after giving effect to the Transaction, will not be required to register as an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

(f)After giving effect to the Transaction, the assets of the Borrower and its Subsidiaries, taken on a consolidated basis, will exceed its debts and the Borrower and its Subsidiaries, on a consolidated basis, will not have or will have incurred and does not intend to incur, and does not believe that it will incur, debts beyond its ability to pay such debts as such debts mature.  The Borrower is not contemplating the commencement of insolvency, bankruptcy, liquidation or consolidation proceedings or the appointment of a receiver, liquidator, conservator, trustee or similar official in respect of the Borrower.

(g)The Borrower is in compliance with all applicable laws and governmental approvals, except where non-compliance would not reasonably be expected to result in a Material Adverse Effect on the business or operations of the Borrower.

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(h)The Audited Financial Statements and the Unaudited Financial Statements, copies of each of which have been delivered pursuant hereto, were prepared in accordance with GAAP (subject, in the case of such unaudited statements, to the absence of footnotes and to normal year-end adjustments, and to Borrower’s historical accounting practices with respect to its calculation of funds from operations (“FFO”), modified FFO and adjusted modified FFO) and present fairly in all material respects the consolidated financial condition of such persons as at such dates and the results of their operations for the periods then ended.

(i)Since June 30, 2019, there has been no material adverse change in the financial condition, operations, assets, business or properties of the Borrower.

(j)The Borrower and, to the knowledge of the Borrower, each other party to the Note Documents, has duly taken all necessary organizational action to authorize the execution, delivery and performance of the Note Documents and the consummation of transactions contemplated thereby.

10.Covenants.

(a)Incurrence of Indebtedness.  So long as this Note is outstanding, the Borrower shall not, directly or indirectly, incur, create, assume, prepay or otherwise become liable for any Indebtedness, other than (i) the Indebtedness evidenced by this Note, (ii) mortgage loans secured by to be acquired Properties which shall not contain any non-market terms or conditions, (iii) non material debt incurred in the ordinary course of business, consistent with past practice, (iv) in the case of each Property owner only, trade payables in the ordinary course, (v) debt incurred to refinance the Mortgage Loans as otherwise permitted under the Agreement, (vi) guarantee Indebtedness of Model Home Subsidiaries; provided that the balance of guarantee Indebtedness of Model Home Subsidiaries shall not increase by more than (A) $10,000,000 plus (B) any principal amount paid during the term of this Note and (vii) Permitted Short Term Borrowings.

(b)Restricted Payments.  The Borrower shall not, directly or indirectly, redeem, defease, repurchase, repay or make any payments in respect of, by the payment of cash or cash equivalents (in whole or in part, whether by way of open market purchases, tender offers, private transactions or otherwise), all or any portion of any Indebtedness described in clauses (ii) through (vii) of Section 10(a), whether by way of payment in respect of principal of (or premium, if any) or interest on, such Indebtedness if at the time such payment is due or is otherwise made or, after giving effect to such payment, an Event of Default has occurred and is continuing or would result therefrom. For as long as the Loan is outstanding, the Borrower shall not pay any common stock dividend greater than $0.06 per share, per fiscal quarter (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the common stock of the Borrower (the “Permitted Dividends”).  

(c)Fundamental Changes and Dispositions.  Without the prior written consent of the Lender, the Borrower shall not (i) enter into any merger or consolidation (other than any merger or consolidation solely involving one or more affiliates of the Borrower in

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which the surviving Person is the Borrower), or liquidate, wind up or dissolve itself, or (ii) dispose of any material amount of its property, except for (A) dispositions of obsolete or worn out property in the ordinary course of business, (B) dispositions of inventory in the ordinary course of business, and (C) the sale or issuance of the capital stock of any Subsidiary of the Borrower to the Borrower or any of its affiliates or in connection with any transaction that does not result in a Change in Control in respect of the Borrower.

(d)Post-Closing Obligations.  The Borrower will redeem 100% of its outstanding Series B Preferred Stock within two (2) Business Days of the later of (i) the execution of this Note and (ii) the receipt of the Loan proceeds.

11.Events of Default.  If any one or more of the following events shall occur, it shall be an “Event of Default” under this Note:

(a)the Borrower fails to make any payment of principal, interest or any other amount payable under this Note within three (3) Business Days after being due, whether at maturity or by acceleration or otherwise;

(b)the Borrower shall fail to pay any principal of any Indebtedness owed by the Borrower (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure continues after the applicable grace period, if any, specified in the agreement or instrument relating to such Indebtedness; any other event occurs or condition exists under any agreement or instrument relating to any such Indebtedness and continues after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such Indebtedness; or any such Indebtedness is declared to be due and payable or is required to be prepaid, redeemed, purchased or defeased (other than by a regularly scheduled required prepayment, redemption, purchase or defeasance), or an offer to prepay, redeem, purchase or defease such Indebtedness is required to be made, in each case before the stated maturity thereof;

(c)any representation or warranty of the Borrower in Section 9 is materially false or misleading at any time;

(d)any default occurs under the Agreement or the Borrower fails to observe or perform shall fail to observe or perform any covenant, condition or agreement contained in the Agreement or any other Note Document and such default or failure shall continue for a period of thirty (30) days after the earlier of (i) the Lender’s delivery of written notice thereof to the Borrower and (ii) the Borrower having obtained knowledge therefor;

(e)any Note Document ceases to be in full force and effect, or the Borrower contests in any manner the validity, binding nature, or enforceability of any Note Document;

(f)any court, government or governmental agency shall condemn, seize or take control of, all or any material portion of the real property of any of the Borrower or its Subsidiaries;

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(g)a judgment or order for the payment of money which causes the aggregate amount of all such judgments or orders (net of any amounts paid or fully covered by independent third party insurance as to which the relevant insurance company does not dispute coverage) in excess of $500,000 shall be entered against the Borrower or any of its Subsidiaries by any court and such judgment or order shall continue without having been discharged, vacated or stayed for a period of sixty (60) consecutive days after the entry thereof;

(h)a proceeding under any bankruptcy, reorganization, arrangement of debts, insolvency, receivership law or other liquidation proceedings (collectively, “Bankruptcy Law”) is filed by or against the Borrower or any of its Subsidiaries, or the Borrower or any of its Subsidiary takes any action to authorize any of the foregoing matters, and in the case of any such proceeding instituted against the Borrower or any of its Subsidiaries (but not instituted the Borrower or any of its Subsidiaries), either such proceeding shall remain undismissed or unstayed for a period of sixty (60) days or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee or other similar official for the Borrower or any of its Subsidiaries or any substantial part of its property) shall be granted or shall occur; the institution of any bankruptcy, reorganization, arrangement, insolvency or other liquidation proceedings by or against the Borrower or any of its Subsidiaries;

(i)any Change in Control; or

(j)any of the Governmental Approvals or any other consent or approval necessary for the continuing operation of the Borrower or any of its Subsidiaries shall cease to be in full force and effect.

12.Rights Upon an Event of Default.  

(a)Upon the occurrence of an Event of Default, (x) except in the case of the events described in paragraph (i) above, the Lender may, by written notice to the Borrower, accelerate the maturity of this Note whereupon the entire amount of principal, together with all accrued and unpaid interest and fees thereon and all other obligations of the Borrower hereunder, shall become due and payable immediately and (y) with respect to an Event of Default described in paragraph (i) above, this Note, and all such principal, interest, fees and other obligations of the Borrower hereunder shall automatically become due and payable without presentment, demand, notice of nonperformance, protest, notice of protest or notice of dishonor, all of which are expressly waived by the Borrower.  In addition to the foregoing, the Lender may exercise all or any other remedies available at law or equity.

(b)Demand, presentment, protest and notices of nonpayment, protest, dishonor and acceptance are hereby waived by the Borrower to the extent not prohibited by applicable law.  To the extent not prohibited by applicable law, the Borrower also waives the benefit of all valuation, appraisal and exemption laws and the posting of any bond required of the Lender in connection with any judicial process to enforce any judgment or other court order entered in favor of the Lender or to enforce by specific performance, temporary restraining order, or preliminary or permanent injunction, in respect of this Note.

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(c)In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, upon the occurrence and during the continuance of any Event of Default, the Lender is hereby authorized at any time or from time to time, without notice to the Borrower or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and to apply any and all balances held by it at any of its offices for the account of the Borrower (regardless of whether such balances are then due to the Borrower) and any other properties or assets any time held or owing by the Borrower to or for the credit or for the account of the Borrower against and on account of any of the Borrower’s obligations hereunder then due.  The Borrower hereby agrees that the foregoing provisions are intended to be construed so as to satisfy the requirements of Section 553 of the Federal Bankruptcy Code or amendments thereto (including any requirement of mutuality of obligations therein).

13.Power of Attorney.  The Borrower irrevocably appoint the Lender as its attorney-in-fact for the purpose of executing on behalf of the Borrower, whenever an Event of Default exists, documents related to the enforcement of the Lender’s rights and remedies under this Note.  This power of attorney is a right coupled with an interest and will be irrevocable for as long as any of the obligations under this Note remain outstanding.

14.Indemnification.  The Borrower hereby agrees to indemnify and agrees to protect, defend and hold harmless the Lender, its affiliates and their respective officers, employees, agents and directors (each an “Indemnified Party”) against (and will reimburse each Indemnified Party as the same are incurred for) any and all losses, claims, damages, costs, reasonable expenses (including the reasonable and documented fees, time charges and out-of-pocket expenses of attorneys for the Indemnified Parties, which attorneys may be employees of the Indemnified Parties) or liabilities of every kind whatsoever (collectively, the “Indemnified Obligations”) to which each of the Indemnified Parties may become subject in connection in any way with the Transaction, including, without limitation, reasonable expenses incurred in connection with investigating or defending against any liability or action (whether or not such Indemnified Party is a party thereto), except that the Borrower shall not be liable for any Indemnified Obligations of any Indemnified Party to the extent any of the foregoing is found in a final judgment by a court of competent jurisdiction to have arisen from such Indemnified Party's gross negligence or willful misconduct.  No party hereto shall be liable under this Note or in respect of any act, omission or event relating to the transaction contemplated hereby or thereby, on any theory of liability, for any special, indirect, consequential or punitive damages; provided that nothing contained in this sentence shall limit the Borrower’s indemnity obligations to the extent set forth in this paragraph.

15.Set-Off.  At any time and from time to time following the occurrence and during the continuance of an Event of Default, the Lender or any affiliate may, without notice or demand, set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other Indebtedness at any time owing by the Lender or such affiliate to or for the credit of the Borrower against any or all of the Borrower’s obligations under this Note.

16.Further Assurances.  The Borrower shall execute and deliver, or cause to be executed and delivered, such further documents and instruments, in form and substance reasonably satisfactory to the Lender, that are necessary, to perfect, maintain, and receive this Note, at such time or times as the Lender shall reasonably request.

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17.Costs and Expenses.  The Borrower shall pay all reasonable out-of-pocket costs, fees and expenses, including, without limitation, any and all court or collection costs and reasonable attorneys’ fees whether any suit is filed (i) in connection with the preparation of the Note Documents in an amount up to $175,000.00, (ii) in enforcing this Note and/or any agreement executed in connection herewith, (iii) in collecting amounts due under this Note, or (iv) in preserving any of its rights under this Note or any other related document.

18.Waiver; Extensions.  The Borrower waives presentment, demand, protest, notice of protest and notice of dishonor, waives all exemptions, whether homestead or otherwise, as to the obligations evidenced by this Note and all other exemptions provided the Borrower.  To the extent permitted by applicable law, the Borrower further waives all rights and benefits of any moratorium, reinstatement, forbearance, valuation, stay, extension, redemption and appraisement now provided or which may hereafter be provided by law, both as to itself and in and to all of its property, real and personal, against the enforcement and collection of the Indebtedness evidenced hereby.  Except as otherwise provided herein, the Lender shall not be deemed to have waived any of the Lender’s rights or remedies hereunder unless such waiver is express and in writing, and no delay or omission by the Lender in exercising, or failure by the Lender on any one or more occasions to exercise, any of the Lender’s rights hereunder or at law or in equity (including, without limitation, the right of acceleration hereunder) shall be construed as a novation of this Note or shall operate as a waiver or prevent the subsequent exercise of any or all of such rights.  Acceptance by the Lender of all or any portion of any sum payable hereunder whether before, on or after the due date of such payment shall not be a waiver of the Lender’s right either to require prompt payment when due of all other sums payable hereunder or to exercise any of the Lender’s rights, powers or remedies hereunder.  A waiver of any right on one occasion shall not be construed as a waiver of the Lender’s right to insist thereafter upon strict compliance with the terms hereof without previous notice of such intention being given to the Borrower, and no exercise of any right by the Lender shall constitute or be deemed to constitute an election of remedies by the Lender precluding the subsequent exercise by the Lender of any or all of the rights, powers and remedies available to it hereunder or at law or in equity.  The Borrower expressly waives the benefit of any statute or rule of law or equity now provided, or which may hereafter be provided, which would produce a result contrary to, or in conflict with, the foregoing.

19.Severability and Amendments.  Any provision of this Note which is prohibited or unenforceable shall be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Note.  No amendment, modification, termination, or waiver of any provision of this Note nor consent to any departure by the Borrower from any term of this Note, shall in any event be effective unless it is in writing and signed by the Lender, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which it is given.

20.Notices.  Any notice to the Borrower or the Lender shall be conclusively deemed to have been received by either party and be effective (a) on the day on which delivered personally to such party at the address set forth below (or at such other address as such party shall specify to the other party in writing), (b) if sent by registered or certified United States mail, postage prepaid, on the third Business Day on which it was mailed to such party at such address, (c) if sent by a nationally recognized courier service, on the second Business Day after the day on which it was

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sent to such party at such address or (d) if delivered by email or pdf prior to 5:30 p.m. (Eastern time) on the day of transmission:

Presidio Property Trust, Inc.
4995 Murphy Canyon Road, Suite 300

San Diego, CA 92123

Attention: Jack Heilbron
Email: jheilbron@presidiopt.com

With a copy to:

Attention: Ann Nguyen

Email: anguyen@presidiopt.com

Polar Multi-Strategy Master Fund

c/o Polar Asset Management Partners Inc.

401 Bay Street, Suite 1900, PO Box 19

Toronto, ON M5H 2Y4

Attention: Carlo Perri; Pouya Minazad; Legal

Email: cperri@polaramp.com; pminazad@polaramp.com; legal@polaramp.com

21.Limitation on Interest.  The Borrower and the Lender intend to strictly comply with all applicable laws, including applicable usury laws.  Accordingly, the provisions of this Section 21 shall govern and control over every other provision of this Note or any other Note Document which conflicts or is inconsistent with this Section 21, even if such provision declares that it controls.  As used in this Section 21, the term “interest” includes the aggregate of all charges, fees, benefits or other compensation which constitute interest under applicable law, provided that, to the maximum extent permitted by applicable law, (a) any non-principal payment shall be characterized as an expense or as compensation for something other than the use, forbearance or detention of money and not as interest, and (b) all interest at any time contracted for, reserved, charged or received shall be amortized, prorated, allocated and spread, in equal parts during the full term of the obligations under the Note Documents.  In no event shall the Borrower or any other person be obligated to pay, or the Lender have any right or privilege to reserve, receive or retain, (a) any interest in excess of the maximum amount of nonusurious interest permitted under the applicable laws (if any) of the United States of America or of any applicable state, or (b) total interest in excess of the amount which such Lender could lawfully have contracted for, reserved, received, retained or charged had the interest been calculated for the full term of the obligations hereunder at the Highest Lawful Rate.  On each day, if any, that the interest rate (the “Stated Rate”) called for under this Note or any other Note Document exceeds the Highest Lawful Rate, the rate at which interest shall accrue shall automatically be fixed by operation of this sentence at the Highest Lawful Rate for that day, and shall remain fixed at the Highest Lawful Rate for each day thereafter until the total amount of interest accrued equals the total amount of interest which would have

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accrued if there were no such ceiling rate as is imposed by this sentence.  Thereafter, interest shall accrue at the Stated Rate unless and until the Stated Rate again exceeds the Highest Lawful Rate when the provisions of the immediately preceding sentence shall again automatically operate to limit the interest accrual rate.  The daily interest rates to be used in calculating interest at the Highest Lawful Rate shall be determined by dividing the applicable Highest Lawful Rate per annum by the number of days in the calendar year for which such calculation is being made.  None of the terms and provisions contained in this Note or in any other Note Document which directly or indirectly relate to interest shall ever be construed without reference to this Section 21, or be construed to create a contract to pay for the use, forbearance or detention of money at an interest rate in excess of the Highest Lawful Rate.  If the term of any obligation under any Note Document is shortened by reason of acceleration of maturity as a result of any Event of Default or by any other cause, or by reason of any required or permitted prepayment, and if for that (or any other) reason the Lender at any time, including but not limited to, the stated maturity, is owed or receives (and/or has received) interest in excess of interest calculated at the Highest Lawful Rate, then and in any such event all of any such excess interest shall be canceled automatically as of the date of such acceleration, prepayment or other event which produces the excess, and, if such excess interest has been paid to such Lender, it shall be credited pro tanto against the then-outstanding principal balance of the Borrower’s obligations to the Lender, effective as of the date or dates when the event occurs which causes it to be excess interest, until such excess is exhausted or all of such principal has been fully paid and satisfied, whichever occurs first, and any remaining balance of such excess shall be promptly refunded to its payor.

22.Successors and Assigns; Continuing Security Interest.  The Borrower may not assign this Note or any of its rights or obligations hereunder or thereunder without the prior written consent of the Lender.  The Lender may assign this Note and/or the Lender’s rights and obligations hereunder.

23.Counterparts.  This Note may be executed in any number of counterparts and by the different parties on separate counterparts.  Each such counterpart will be deemed to be an original, but all such counterparts will together constitute but one and the same Note.  Receipt of an executed signature page to this Note by facsimile or other electronic transmission will constitute effective delivery thereof.  Electronic records of executed Note Documents maintained by the Lender will be deemed to be originals.

24.Entire Agreement.  This Note, together with the other Note Documents, embodies the entire agreement and understanding among the parties to this Note and supersedes all prior or contemporaneous agreements and understandings of all such Persons, verbal or written, relating to the subject matter hereof and thereof and any prior arrangements made with respect to the payment by the parties hereto of (or any indemnification for) any fees, costs, or expenses payable to or incurred (or to be incurred) by or on behalf of the Lender.

25.Captions.  The captions in this Note are used for means of reference only and shall not affect in any way the interpretation or construction of this Note.

26.Governing Law; Venue.  THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO

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PRINCIPLES OF CONFLICTS OF LAWS (OTHER THAN SECTIONS 5-1401 AND 5‑1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW).  ALL LEGAL ACTIONS BETWEEN OR AMONG THE PARTIES REGARDING THIS NOTE, INCLUDING, WITHOUT LIMITATION, LEGAL ACTIONS TO ENFORCE THIS NOTE OR BECAUSE OF A DISPUTE, BREACH OR DEFAULT OF THIS NOTE, SHALL BE BROUGHT IN THE FEDERAL OR STATE COURTS LOCATED IN NEW YORK COUNTY, NEW YORK, WHICH COURTS SHALL HAVE SOLE AND EXCLUSIVE IN PERSONAM, SUBJECT MATTER AND OTHER JURISDICTION IN CONNECTION WITH SUCH LEGAL ACTIONS.  THE PARTIES HERETO IRREVOCABLY CONSENT AND AGREE THAT VENUE IN SUCH COURTS SHALL BE CONVENIENT AND APPROPRIATE FOR ALL PURPOSES AND, TO THE EXTENT PERMITTED BY LAW, WAIVE ANY OBJECTION THAT THEY MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME.

27.WAIVER OF JURY TRIAL.  EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING BETWEEN THE PARTIES HERETO ARISING OUT OF OR RELATING TO THIS NOTE OR THE TRANSACTIONS CONTEMPLATED HEREBY.

[signature page follows]

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

PRESIDIO PROPERTY TRUST, INC., as Borrower

By:/s/  Jack K. Heilbron
Name:Jack K. Heilbron
Title:CEO and President

POLAR MULTI-STRATEGY MASTER FUND, as Lender

By: POLAR ASSET MANAGEMENT PARTNERS INC., its investment advisor


By:/s/ Herman Gill / Ryan Hickey
Name:Herman Gill / Ryan Hickey
Title:CFO / Senior Legal Counsel

EXHIBIT 1.2

AGREEMENT


Dated as of September 17, 2019


By and Between



POLAR MULTI-STRATEGY MASTER FUND

and

PRESIDIO PROPERTY TRUST, INC.

Table of Contents

Page

AGREEMENT

AGREEMENT, dated as of September 17, 2019 (this “Agreement”), by and between PRESIDIO PROPERTY TRUST, INC., a Maryland corporation (the “Company”), and POLAR MULTI-STRATEGY MASTER FUND, a Cayman Islands exempted company (and/or its successors and permitted assigns, collectively “POLAR”).

W I T N E S S E T H:

WHEREAS, in connection with the transactions contemplated by the Promissory Note, dated as of the date hereof (the “Note”), by and between the Company and POLAR, POLAR is lending $14,000,000 to the Company (the “Loan”);

WHEREAS, the Company is the direct owner of 100% of the properties described on Exhibit A attached hereto, and is the general partner or owner of 100% of the equity interests of each of the entities more particularly set forth on Exhibit B attached hereto, which such Subsidiaries own all or, via a joint venture with unaffiliated third parties (“JVs”; and any agreements with such JVs with respect to the applicable property or properties, “JV Agreements”), a portion of each of the properties described on Exhibit B attached hereto (together with the properties described on Exhibit A and any additional properties to be acquired pursuant to the terms and conditions of the Note, the “Properties”, and each, a “Property”); and

WHEREAS, all direct and indirect Subsidiaries of the Company have no assets or liabilities other than its direct or indirect ownership of the Properties, the existing mortgage loans secured by the Properties (each, a “Mortgage Loan” and collectively, the “Mortgage Loans”) described on Exhibit C attached hereto, nonmaterial debt incurred in the ordinary course and, in the case of each Property owner only, trade payables in the ordinary course.

NOW, THEREFORE, in consideration of the mutual covenants and obligations set forth in this Agreement, the parties hereto agree as follows:

Definitions

.  For purposes of this Agreement, the following terms have the indicated meanings:

“Affiliate” means, with respect to any specified Person, any other Person who, directly or indirectly, controls, is controlled by, or is under common control with such Person, including without limitation any general partner, managing member, officer or director of such Person or any venture capital fund now or hereafter existing that is controlled by one or more general partners or managing members of, or shares the same management company with, such Person.

“Bankruptcy Code” means title 11 of the United States Code, as in effect from time to time.

“Board of Directors” means the board of directors of the Company.

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

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“Common Stock” means the common stock of the Company, par value $0.01 per share.

“Company” is defined in the preamble to this Agreement.

“Confidential Information” means any confidential or non-public information with regard to the Company disclosed or communicated by the Company, its equityholders or any of their respective Affiliates on or after the date hereof, whether oral or written, and regardless of the manner or form in which it is furnished and, including, for the avoidance of doubt, the existence and the terms of this Agreement, in each case for so long as such information remains confidential and non-public.

“Event of Default” means the occurrence of any of the following events:  

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“Fair Market Value” means, as of any particular date with respect to any particular Property, the fair market value of such Property as determined jointly by the Company and POLAR; provided however, that if the Company and POLAR are unable to agree on the fair market value of such Property in a reasonable period of time, such fair market value shall be determined by a nationally recognized valuation firm jointly selected by the Company and POLAR, provided, further, however, that for purposes of determining compliance with Section 9(a) hereof, such nationally recognized valuation firm shall be selected solely by POLAR in its reasonable discretion.  The determination of such firm shall be final and conclusive, and the reasonable fees and expenses of such valuation firm shall be borne by the Company.

“Insolvency Proceeding” means any proceeding commenced by or against any Person under any provision of the Bankruptcy Code or under any other state or federal bankruptcy or insolvency law, assignments for the benefit of creditors, receiverships, formal or informal

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moratoria, compositions, extensions generally with creditors, or proceedings seeking reorganization, arrangement, or other similar relief.

“Loan Documents” means, collectively, this Agreement and the Note.

“ITV Ratio” shall mean a fraction, (i) the numerator of which is the sum of (x) the then principal balance of the Note, plus (y) the aggregate amount of outstanding principal due and payable under the Mortgage Loans for all of the Properties (in the case of Mortgage Loans in respect of JVs, the pro rata portion of such aggregate amount based upon the portion of such JV owned by the Company and/or any of its Subsidiaries), and (ii) the denominator of which is the aggregate Fair Market Value of all of the Properties (in the case of Properties in respect of JVs, the pro rata portion of such Fair Market Value of such Property based upon the portion of such JV owned by the Company and/or any of its Subsidiaries).

“Lease” means any leases heretofore or hereafter entered into affecting the use, enjoyment or occupancy of, or the conduct of any activity upon or in, any Property.

“Major Contract” means (i) any management, brokerage or leasing agreement (other than a Property Management Agreement) or (ii) any cleaning, maintenance, service or other contract or agreement of any kind (other than Leases) of a material nature (materiality for these purposes to include, without limitation, contracts which extend beyond one year (unless cancelable on thirty (30) days or less notice without requiring the payment of termination fees or payments of any kind)), in either case relating to the ownership, leasing, management, use, operation, maintenance, repair or restoration of a Property, whether written or oral; provided, however, that contracts and agreements that require payments or include obligations of less than $100,000 per year shall be excluded from the definition of Material Contract.  

“Material Lease” means all Leases which (A) individually or in the aggregate with respect to the same tenant and its Affiliates (i) cover more than five percent (5%) of the rentable square footage of any Property, (B) provide the tenant thereunder with an option or other preferential right to purchase all or any portion of a Property, or (C) are entered into with a tenant who is an Affiliate of the Company or any of its Subsidiaries.

“Model Home Subsidiaries” means Dubose Model Home Investors #202 LP, Dubose Model Home Investors #203 LP, Dubose Model Home Investors #204 LP, Dubose Model Home Investors #205 LP, NetREIT Dubose Model Home REIT, Inc., NetREIT Dubose Model Home REIT, LP, NetREIT Model Homes, Inc., Dubose Advisors, LLC, NetREIT Advisors, LLC, and any other similar Borrower subsidiaries and related entities primarily formed for the purpose of purchasing, leasing, selling, managing and/or investing in single-family model home properties.

“Note” is defined in the recitals to this Agreement.

“Permitted Short Term Borrowings” shall mean borrowings under a debt or similar facility in an amount not to exceed $15,000,000 in the aggregate and otherwise subject to market terms and conditions, such debt or similar facility to be used solely for the acquisition

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of additional properties in accordance with the provisions of the Loan Documents and the Mortgage Loans, such debt or similar facility to be replaced within ninety (90) days of the closing of the acquisition transaction with respect to the applicable property or properties, subject to compliance with the ITV Ratio covenant set forth in Section 9(a).

“Person” means any individual, corporation, limited liability company, partnership, trust, joint stock company, business trust, unincorporated association, joint venture, governmental authority or other legal entity of any nature whatsoever.

“POLAR” is defined in the preamble to this Agreement.

“Property Management Agreement” means a property management agreement between Company or any of its Subsidiaries and a Property Manager, pursuant to which such Property Manager is to manage any Property.

“Property Manager” means the property manager under the Property Management Agreement and any successor thereto acceptable to POLAR, in its reasonable discretion, under and pursuant to the applicable Property Management Agreement.

“REIT” means a “real estate investment trust” within the meaning of Section 856 of the Code.

“Subsidiary” means, with respect to any Person, any other Person of which more than fifty percent (50%) of the outstanding capital stock or other ownership interests having ordinary voting power to elect a majority of board of directors or comparable managers of such other Person is at the time owned by or the management is otherwise controlled by such Person (irrespective of whether, at such time, capital stock or other ownership interests of any other class of such other Person shall have or might have voting power by reason of the happening of any contingency).  In addition, in the case of the Company, Subsidiary shall also include each JV.  Unless otherwise qualified, references to “Subsidiary” or “Subsidiaries” herein shall refer to those of the Company.

“Transfer” means a transfer, sale, assignment, pledge, hypothecation or other disposition (including, without limitation, by operation of law), whether directly or indirectly pursuant to the creation of a derivative security, the grant of an option or other right.

Capitalized terms used and not defined herein shall have the meanings as defined in the Note.

POLAR Consent Rights

.

(a)General.  POLAR shall be entitled to the consent rights and other rights and remedies in this Agreement.  Except as set forth in Section 2(b) below, and subject to POLAR’s rights and remedies set forth under any of the Loan Documents and the requirements of any other organizational documents of the Company, the management of the Company will be responsible for the day-to-day operations of the Company and the Properties.

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(b)Major Decisions.  Subject to any limitations on the rights of the Company under any JV Agreements and, with respect to clauses (x) and (xi) below, the Mortgage Loan Documents, the Company hereby covenants and agrees that for so long as the Loan remains outstanding, the Company shall not take, and shall cause its Affiliates and Subsidiaries not to take, any of the following actions (any such action, a “Major Decision”) without obtaining the prior written consent from POLAR, such consent not to be unreasonably withheld, conditioned or delayed (except that, with respect to each of (a) clauses (vi) and (vii), in the event that POLAR reasonably determines that the taking of any such actions set forth in such clauses could cause the ITV Ratio covenant set forth in Section 9(a) to fail to be satisfied, and (b) clauses (xviii) and (xxvi) below, POLAR may, in its sole and absolute discretion, withhold its consent to the taking of such actions):

(i)waive, release, assign, settle or compromise any claim, action or proceeding (including any suit, action, claim, proceeding or investigation relating to this Agreement or the transactions contemplated hereby), for which the monetary damages being sought is in excess of $250,000 individually or in the aggregate;

(ii)approve the Annual Budget (as defined in Section 6(b)(iii) hereof) for any Property or Properties and the Company;

(iii)(x) commence an Insolvency Proceeding involving the Company or any of its Subsidiaries; (y) propose a written agreement of composition or extension of the debts of the Company or any of its Subsidiaries; or (z) make a general assignment for the benefit of the creditors of the Company and/or any of its Subsidiaries, or the filing or any other action in furtherance of an Insolvency Proceeding of the Company or any of its Subsidiaries;

(iv)except with respect to the Model Home Subsidiaries, adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization with respect to the Company or any of its Subsidiaries;

(v)enter into any transaction for the purchase or acquisition of any additional Property or Properties, or acquire, including by merger, consolidation, acquisition of stock or assets, or any other form of business combination, any corporation, partnership, limited liability company, other business organization or any division thereof;

(vi)enter into any transaction involving the sale, conveyance, alienation, encumbrance, mortgage, pledge or other disposition of all or any portion  of (x) any commercial Property (or any portion thereof or interest therein) or (y) any model home pursuant to an agreement that is not on arms’-length terms or which provides for non-market terms or conditions (e.g., the payment of a purchase price that is below the Fair Market Value of the applicable Property or bulk sales of any Property or Properties);

(vii)enter into any financing or refinancing transaction involving any

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Property or Properties and the terms of any such financing or refinancing (including any mezzanine financing secured by a direct or indirect interest in the owner of a Property) that (x) would violate the aggregate ITV Ratio covenant set forth in Section 9(a) of this Agreement with respect to either the individual Property or the Company and its Subsidiaries, taken as a whole, (y) would violate the provisions of any of the Mortgage Loans or any agreements, instruments or similar documents in respect of such Mortgage Loans (collectively, the “Mortgage Loan Documents”) or (z) that contains any non-market terms and conditions;

(viii)make or incur any capital expenditures or other discretionary expenditures that are not included in the Annual Budget or are in excess of ten percent (10%) of the budgeted amount in the Annual Budget for such expenditures, provided that the deviation from the budgeted amount is in excess of $100,000 for such expenditures, other than expenditures which are made by the Company or any of its Subsidiaries in respect of matters involving safety concerns or emergency maintenance or repairs with respect to a Property;

(ix)enter into any material amendment, modification, waiver or termination of any of the Mortgage Loans or the terms thereof that could reasonably be expected to have an adverse effect (economic or otherwise) on any of the Properties, POLAR, the Note or the Company’s (or any applicable Subsidiary’s or Subsidiaries’) investment in any of the Properties;

(x)enter into, modify or terminate, or waive any material rights or release any material claims or grant any consents or approvals under, a Property Management Agreement;

(xi)the selection or replacement of a Property Manager;

(xii)enter into, modify or terminate, or waive any material rights or release any material claims or grant any consents or approvals under, a Major Contract;

(xiii)enter into any transaction with any Subsidiary of the Company or any Affiliate of the Company or an Affiliate any of its Subsidiaries or the payment by the Company of any fee to any Affiliate of the Company or any of its Subsidiaries except pursuant to a written property management, asset management or leasing agreement or other contract approved in writing by POLAR;

(xiv)enter into any new, or amend or modify any Material Lease (except to the extent in accordance with leasing parameters which have been previously approved by POLAR with respect to the applicable Property or Properties);

(xv)except for issuances of Common Stock or securities convertible into or exchangeable for Common Stock which would rank lower in priority of payment than the Note, authorize for issuance, issue, grant, sell, pledge, dispose of or propose to issue, grant, sell, pledge or dispose of any of shares of its capital stock or any options, warrants, commitments, subscriptions or rights of any kind to acquire or sell any shares of its capital stock or other securities or equity interests, including any

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securities convertible into or exchangeable for any of its capital stock;

(xvi)except with respect to issuances of equity that is fully subordinated to the equity interests held by the Company and its Subsidiaries, admit any new member or substitute any new member into any JV Agreement or redeem or repurchase any member’s interest in any JV, except for any mandatory redemptions as may be required pursuant to an applicable JV Agreement;

(xvii)enter into any merger, consolidation, recapitalization or other business combination to which the Company or any of its Subsidiaries is a party, or effectuate a sale of all or substantially all of its assets;

(xviii)amend, waive or otherwise modify, in any respect, any of its organizational documents;

(xix)take any action that would constitute a default under, or which would involve a breach or violation of the terms under, any Mortgage Loans or any Mortgage Loan Documents;

(xx)except to the extent permitted pursuant to Section 9(b) hereof, the Note and any applicable Mortgage Loan Documents, incur, create, assume, prepay or otherwise become liable for any indebtedness (directly, contingently or otherwise);

(xxi)take any action in respect of the enforcement of the Company’s or any Subsidiary’s rights under any of the Mortgage Loans or any of the Mortgage Loan Documents (other than requesting and receiving loan advances or disbursements in accordance with the terms of the Mortgage Loan Documents);

(xxii)settle, adjust or compromise any insurance claim or condemnation action relating to any Property with respect to any amount that is in excess of four percent (4%) of the Fair Market Value of such Property or which settlement, adjustment or compromise would require the consent of any lender under the applicable Mortgage Loan;

(xxiii)change the size of the Board of Directors;

(xxiv)remove or replace any of the Company’s officers or other senior management personnel;

(xxv)directly or indirectly redeem, purchase or otherwise acquire or offer to acquire any of its capital equity or other securities or equity interests, or declare or pay any dividend or other distribution to equityholders of the Company or any of its Subsidiaries except to the extent required pursuant to any of the Loan Documents, any applicable organizational documents of the Company and its Subsidiaries, or the Code as a condition to REIT status; provided, however, that the Company and/or its Subsidiaries may (x) make redemptions of equity interests held by third parties (i.e., excluding redemptions from Affiliates, officers, managers or directors) in its reasonable discretion which involve an aggregate amount that is less than $100,000

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per annum, and (y) declare and pay dividends to equityholders of the Company and its Subsidiaries which are consistent with the Company’s past practice (i.e., the Company may not increase the amounts of its dividend distributions), including as to the portion of such dividends that constitute cash (i.e., the Company may not increase the cash portion of its dividend distributions);

(xxvi)amend or modify any provision of any of the Loan Documents;

(xxvii)make or rescind any material election relating to income taxes, settle any claim, action, suit, litigation, proceeding, arbitration, investigation, audit or controversy relating to income taxes, file any amended tax return or claim for refund, or make any material change in its accounting or tax policies or procedures, in each case except as required by applicable law or in compliance with GAAP;

(xxviii) make any change in accounting methods, principles or practices, except as required by applicable law or in compliance with GAAP;

(xxix)engage any accountants to work on behalf of the Company, other than Squar, Milner, Peterson, Miranda & Williamson, LLP; or

(xxx) authorize or agree to take any of the foregoing actions.

(c)For clarity, in the event that the consent right of POLAR with respect to Major Decisions under Section 2(b) above is limited as a result of any provision set forth in a JV Agreement or, with respect to clauses 2(b)(x) and (xi) above, a Mortgage Loan Document, the rights of POLAR under such section shall be interpreted and enforced so as to give the greatest effect to POLAR’s rights, and such rights shall be limited only to the extent necessary to give effect to the rights of the applicable JV partner.

Transfer Restrictions

.  

(a)Except with respect to the Model Home Subsidiaries, neither the Company nor any of its Subsidiaries shall Transfer, directly or indirectly, any equity interests that it owns in any Person that holds any interests in Properties, including any JV.  In furtherance of the foregoing, neither the Company nor any of its Subsidiaries shall, without the prior written consent of POLAR, (i) except for issuances of Common Stock or securities convertible into or exchangeable for Common Stock which would rank lower in priority of payment than the Note, authorize for issuance, issue, grant, sell, pledge, dispose of or propose to issue, grant, sell, pledge or dispose of any of shares of its capital stock or any options, warrants, commitments, subscriptions or rights of any kind to acquire or sell any shares of its capital stock or other securities or equity interests, including any securities convertible into or exchangeable for any of its capital stock; (ii) declare or pay any dividend or other distribution to equityholders of the Company or any of its Subsidiaries except to the extent permitted pursuant to any of the Loan Documents; or (iii) enter into any agreement or arrangement with, or grant rights to (whether pursuant to any agreement or otherwise), any Person which would provide such Person with the right to exercise control over, approve of or consent to, any action which would constitute a Major Decision pursuant to the provisions of this Agreement; provided, however, that the Company and/or its Subsidiaries may (x) make

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redemptions of equity interests held by third parties (i.e., excluding redemptions from Affiliates, officers, managers or directors) in its reasonable discretion which involve an aggregate amount that is less than $100,000 per annum, and (y) declare and pay dividends to equityholders of the Company and its Subsidiaries which are consistent with the Company’s past practice (i.e., the Company may not increase the amounts of its dividend distributions), including as to the portion of such dividends that constitute cash (i.e., the Company may not increase the cash portion of its dividend distributions).

Board of Directors Observer Right

.  For so long as  the Note remains outstanding, the Company shall invite a representative of POLAR, who may be any individual identified by POLAR from time-to-time, to attend all meetings of the Board of Directors in a nonvoting observer capacity and, in this respect, shall give such representative copies of all notices, minutes, consents, and other materials that it provides to its directors at the same time and in the same manner as provided to such directors; provided, however, that such representative shall agree to hold in confidence all information so provided.

Indemnification for Transfer Taxes

.  

(a)All transfer, documentary, sales, use, stamp, registration, value added and other such taxes and fees (including any penalties and interest) incurred in connection with any of the Loan Documents or in connection with the issuance of the Note to POLAR (or any reduction in principal thereof or any default thereunder) shall be borne by and paid by the Company when due, and the Company shall, at its own expense, file all necessary tax returns and other documentation with respect to all such taxes and fees.

(b)The Company will indemnify and hold POLAR harmless against any claims for taxes and fees (including any penalties and interest) the payment of which is the responsibility of the Company pursuant to Section 5(a) above (but not for any other taxes unless indemnified pursuant to Section 7(g) below).

Information and Inspection Rights

.  

(a)For so long as the Note remains outstanding, the Company, at the Company’s sole cost and expense, shall furnish or cause to be promptly (but in any event within ten (10) business days of filing) furnished to POLAR all documents which it publicly files, together with such documents and information as it provides to the lenders under the Mortgage Loans, such documents and information to be provided in such manner and in accordance with the delivery times as are set forth in the Mortgage Loan Documents.

(b)For so long as the Note remains outstanding, the Company, at the Company’s sole cost and expense, shall furnish or cause to be furnished to POLAR such financial information regarding the Company and its Subsidiaries as POLAR may reasonably request from time to time, including, without limitation:  

(i)as soon as practicable, but in any event within ninety (90) days after the end of each fiscal year of the Company (A) an audited balance sheet as of the end of such year, (B) audited statements of income and of cash flows for such year, and a comparison between (x) the actual amounts as of and for such fiscal year and (y) the

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comparable amounts for the prior year and as included in the Annual Budget for such year, an explanation of any variances from the Annual Budget of more than five percent (5%) in the aggregate from the amount set forth therein, together with a schedule as to the sources and applications of funds for such year, (C) an audited statement of stockholders’ equity as of the end of such year, all such audited financial statements prepared and certified by independent public accountants of regionally recognized standing selected by the Board of Directors, and (D) all information necessary for the preparation of POLAR’s federal, state and other income tax returns, including the federal, state and other income tax returns of the Company and its Subsidiaries;

(ii)as soon as practicable, but in any event within fifteen (15) days after the end of each quarter of each fiscal year of the Company, unaudited statements of income and cash flows for such fiscal quarter, and an unaudited balance sheet and a statement of stockholders’ equity as of the end of such fiscal quarter, all prepared in accordance with GAAP (except that such financial statements may (A) be subject to normal year-end audit adjustments; and (B) not contain all notes thereto that may be required in accordance with GAAP);

(iii)as soon as practicable, but in any event not later than thirty (30) days before the end of each fiscal year, a proposed budget for the next fiscal year, prepared both on a Property-by-Property basis and for the Company as a whole (collectively, the “Annual Budget”), such proposed Annual Budget having been approved by the Board of Directors and subject to the approval of POLAR as a Major Decision pursuant to the provisions of Section 2.2;

(iv)with respect to the financial statements called for in Section 6(b)(i) and Section 6(b)(ii), a certificate executed by the chief financial officer and chief executive officer of the Company certifying that such financial statements were prepared in accordance with GAAP consistently applied with prior practice for earlier periods (except as otherwise set forth in Section 6(b)(ii)) and fairly present in all material respects the financial condition of the Company and its results of operation for the periods specified therein; and

(c)All financial statements delivered by the Company pursuant to Section 6(a) and 6(b) above shall be consolidated and consolidating financial statements of the Company and all of its Subsidiaries.

(d)In addition, for so long as the Note remains outstanding, the Company shall promptly (but in any event within ten (10) business days of filing in the case of clause (i) below, or delivery in the case of clause (ii) below) furnish to POLAR copies of (i) all amendments to the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or other organizational document (including any certificate of designations) and (ii) all notices or correspondence sent or received by the Company or any of its Subsidiaries relating to any material matter or adverse claim affecting the Company or any of its Subsidiaries, including, without limitation, notices or correspondence relating to any defaults or events of default with respect to any Mortgage Loan, any claims, acts or proceedings brought by or against the Company or any of its Subsidiaries, any claims, acts or proceedings with respect to any Property, or any pending or threatened audits, hearings, investigations,

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litigations or other similar inquiries involving the Company, any Subsidiary or any Property.

(e)The Company shall permit POLAR, at POLAR’s expense and upon reasonable advance written request during normal business hours, to visit and inspect the Company’s properties, examine its books of account and records, and discuss the Company’s affairs, finances, and accounts with its officers.

Remedies; Indemnity

.  

(a)Upon the occurrence of an Event of Default, subject to the rights of the Company’s partners under any JV Agreement or, in the case of clauses (i), (ii) and (iv) below, with lenders under the Mortgage Loan Documents or Property Managers, POLAR may, unilaterally take any of the following actions or cause the Company and/or its Subsidiaries to do so (and the Company will fully cooperate with same):

(i)replace any Property Managers and/or leasing agents with Persons as may be designated by POLAR;

(ii)terminate any contracts by and between the Company and/or any of its Subsidiaries on the one hand, and any Affiliate of the Company on the other, to the extent that any such contracts relate to the ownership, leasing, management, use, operation, maintenance, repair or restoration of a Property;

(iii)replace, or cause the replacement of, any managing member or general partner under any JV Agreement with Persons as may be designated by POLAR;

(iv)sell and dispose of any Property on such terms and conditions as POLAR shall approve in the exercise of its sole and absolute discretion, provided that if the consent or vote of any other class or series of Common Stock or preferred stock is required under the Maryland General Corporation Law, then such consent or vote shall be required and the Company shall use its best efforts to obtain such consent or vote;

(v)implement all Major Decisions without the consent of the Company, provided that if any shareholder consent or specific consent by the Board of Directors to such action is required under the Maryland General Corporation Law, then such consent shall be required;

(vi)refinance any of the Mortgage Loans on such terms and conditions as POLAR may determine in its sole discretion, including by entering into any amendments, supplements or modifications to the Mortgage Loan Documents as POLAR may determine in its sole discretion;

(vii)cure any default under any of the Mortgage Loans or any of the Mortgage Loan Documents; and

(viii)repay or prepay any amounts payable in respect of the Mortgage Loans or pursuant to the Mortgage Loan Documents.  

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(b)Additionally, immediately following the occurrence and during the continuation of an Event of Default, and without any further action on the part of the Company, the Board of Directors or any shareholder, POLAR shall be entitled to replace six (6) current members of the Board of Directors with directors designated at its sole discretion. POLAR shall be entitled to appoint such members at any time following the occurrence of an Event of Default, and shall also be entitled to remove and/or replace any of such six (6) designated members of the Board of Directors at any time without any further action on the part of the Company, the Board of Directors or any shareholder, with or without cause; provided, that any such directors appointed or replaced by POLAR, shall meet the qualifications of a member of the Board of Directors as set forth in the Company's organizational documents and committee charters, as well as federal law and administrative agency requirements.¹

(c)The Company shall be obligated to provide any such POLAR designated members of the Board of Directors with the benefit of any insurance policies (including any director and officer liability insurance policies), indemnification arrangements, rights to reimbursement of expenses and other similar arrangements that it makes available to any other member of the Board of Directors, shall maintain such arrangements for so long as POLAR is entitled to designate members of the Board of Directors, and shall not amend, modify, cancel or terminate any such policies or arrangements without the prior written consent of POLAR.

(d)For clarity, in the event that the rights of POLAR under Section 7(a) above are limited as a result of any provision set forth in a JV Agreement, or, in the case of clauses (i), (ii) and (iv) of Section 7(a) and 7(b), with lenders under the Mortgage Loan Documents or Property Managers, the rights of POLAR under such section shall be interpreted and enforced so as to give the greatest effect to POLAR’s rights, and such rights shall be limited only to the extent necessary to give effect to the rights of the applicable JV partner, lender or Property Manager.

(e)The Company shall take, or cause to be taken, all reasonable actions, and do, or cause to be done, all things reasonably necessary, proper or advisable to provide POLAR with all power and authority as POLAR shall reasonably require in order to effectuate its rights and remedies as are set forth in this Section 7, including the execution and delivery to POLAR, and causing of its Subsidiaries to execute and deliver to POLAR, of all agreements, instruments and other documents, as POLAR may reasonably require in order to effectuate such rights and remedies, all such agreements, instruments and other documents to be in form and substance satisfactory to POLAR.  In furtherance of the foregoing, the Company shall make any and all such filings, endorsements and deliveries (including, without limitation, any deeds of trust, mortgages or other documents necessary for the conveyance or Transfer of any Properties), and cause its Subsidiaries to make such filings, endorsements and deliveries, as POLAR may reasonably require in order to effectuate its rights and remedies under this Section 7 with respect to Properties, such filings, endorsements and deliveries to be in form and substance satisfactory to POLAR.  In addition, the Company shall cooperate

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with, and cause its Subsidiaries to cooperate with, POLAR, in connection with any requests that POLAR may make of the Company and its Subsidiaries in furtherance of effectuating the rights and remedies set forth in this Section 7.

(f)In addition, in order to enable POLAR to effectuate its remedies under this Section 7, the Company, on behalf of itself and each of its Subsidiaries, hereby appoints POLAR as their lawful proxies and attorney-in-fact, with full power of substitution, to take those actions set forth in this Section 7 on behalf of the Company and its Subsidiaries.  POLAR may, subject to any limitations set forth in this Agreement, exercise the irrevocable proxy granted to it hereunder at any time there is an occurrence of an Event of Default.  The proxies and powers granted by the Company and its Subsidiaries pursuant to this Section 7(f) are coupled with an interest and are given to secure the performance of their obligations under this Agreement.  Such proxies and powers will be irrevocable for the term of this Agreement.

(g)The Company and its Subsidiaries shall indemnify, defend and hold harmless POLAR, its Subsidiaries and Affiliates, and their respective successors and assigns and their respective directors, managers, officers and employees (collectively, “POLAR Indemnified Parties” and each individually, an “POLAR Indemnified Party”) from and against any and all liabilities, claims, obligations, damages, losses, costs and expenses (including reasonable attorneys’ fees and costs reasonably incurred) sustained or incurred by any such Person in connection with, resulting from or relating to any demands, claims, suits, causes of action, assessments, proceedings, investigations or other similar actions of any kind or nature that may be brought against any POLAR Indemnified Party in respect of any of the Properties (including, without limitation, any actions in respect of environmental matters) or the conduct of the business of the Company and the Subsidiaries.  

Recourse Guaranty

.  

(a)Notwithstanding anything to the contrary contained in any Loan Document, for so long as the Note remains outstanding, the Company hereby agrees to indemnify, defend and hold harmless POLAR Indemnified Parties from and against, any and all liabilities, claims, obligations, damages, losses, costs and expenses suffered or incurred by POLAR Indemnified Party (including reasonable attorneys’ fees and costs reasonably incurred) to the extent arising out of or resulting directly or indirectly from any of the following (the “Company Recourse Indemnity Obligations”):

(i)fraud, willful misconduct, misrepresentation or failure to disclose a material fact by or on behalf of the Company, any of its Subsidiaries, or any of their respective agents or representatives in connection with obtaining any loan from POLAR to the Company;

(ii)the forfeiture by the Company or any of its Subsidiaries of any Property, or any portion thereof, because of the conduct or purported conduct of criminal activity by the Company, any of its Subsidiaries, or any of their respective agents or representatives in connection therewith;

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(iii)physical waste of any Property or any portion thereof, or after an event of default under any of the Loan Documents or any Mortgage Loan Documents the removal or disposal of any portion of any applicable Property;

(iv)any proceeds of any casualty or condemnation paid to the Company or any of its Subsidiaries or any other sums or payments attributable to any Property and paid to the Company or any of its Subsidiaries and not applied in accordance with the provisions of the Mortgage Loan Documents or the Note (except to the extent that the Company and/or any applicable Subsidiaries did not have the legal right, because of a bankruptcy, receivership or similar judicial proceeding, to direct disbursement of such sums or payments);

(v)all revenue of any Property received or collected by or on behalf of the Company or any of its Subsidiaries and not applied to payment of obligations under the applicable Mortgage Loan Documents, to the payment of operating expenses and capital expenses of such Property in accordance with the provisions of the Loan Documents, or to make payments in accordance with the provisions of the Note (except to the extent that such application of such funds is prevented by bankruptcy, receivership, or similar judicial proceeding in which the Company and/or any applicable Subsidiaries is legally prevented from directing the disbursement of such sums);

(vi)misappropriation of tenant security deposits and rents collected in advance, or of funds held by the Company or any of its Subsidiaries for the benefit of another party, or misappropriation of any funds of the Company or any of its Subsidiaries;

(vii)the failure to pay real estate taxes and assessments relating to any Property, except to the extent funds to pay such amounts are available in any tax subaccount under the applicable Mortgage Loan Documents, if any, and the applicable lender thereunder failed to pay same;

(viii)failure to pay charges for labor or materials or other charges that result in a lien or liens on any portion of any Property;

(ix)the breach of any environmental representation, warranty, covenant or indemnification in any Loan Document or Mortgage Loan Document;

(x)any cost or expense incurred by POLAR in connection with the enforcement of its rights and remedies hereunder; or

(xi)any breach by the Company of Section 2(b) of this Agreement with respect to a Major Decision.

(b)Notwithstanding anything to the contrary contained in any Loan Document, in the event that an Event of Default shall have occurred and the Company shall have failed to cooperate with POLAR in accordance with the provisions of Section 7(a), which failure to cooperate remains uncured for a period of (5) days following delivery of notice by POLAR

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to the Company advising the Company of such failure, all amounts payable pursuant to the Loan Documents (including any amounts payable pursuant to the Note following a “Event of Default” as such term is defined therein) shall become immediately due and payable.

Covenants

.  For so long as the Note remains outstanding, the Company shall:

(a)Maintain an aggregate ITV Ratio as determined by POLAR in its reasonable discretion of less than 0.75.

(b)Not incur, create, assume, prepay or otherwise become liable for any indebtedness (directly, contingently or otherwise), other than (i) indebtedness in respect of the Mortgage Loans, (ii) mortgage loans secured by to be acquired Properties which shall not contain any non-market terms or conditions, (iii) non material debt incurred in the ordinary course of business, consistent with past practice, (iv) in the case of each Property owner only, trade payables in the ordinary course, (v) debt incurred to refinance the Mortgage Loans as otherwise permitted under this Agreement and (vi) Permitted Short Term Borrowings.

Right to Conduct Activities

.  The Company acknowledges that POLAR (together with its Affiliates) is a professional investment fund, and as such invests in numerous portfolio companies, some of which may be deemed competitive with the Company’s and its Subsidiaries’ respective businesses (as currently conducted or as currently proposed to be conducted).  As such, the Company hereby agrees that, to the extent permitted under applicable law, POLAR and its Affiliates:  (i) may engage or invest in, independently or with others, any business activity of any type or description, including those that might be the same as or similar to the business of the Company and its Subsidiaries, and which from time to time compete, directly or indirectly, with the Company and its Subsidiaries and (ii) may in their sole discretion pursue such competing business without disclosure of such competition to the Company or any of its Subsidiaries.  Neither the Company nor any of its Subsidiaries shall have any right in or to any such activities as POLAR or any of its Affiliates may take or to receive or share in any income or proceeds derived therefrom, and POLAR and its Affiliates shall not be liable to the Company or any of its Subsidiaries in respect of any such activities.  Notwithstanding the foregoing, the Company and its Subsidiaries do not renounce any right to be offered to participate in any business opportunity offered or presented to a director nominated by POLAR as a direct result of his or her capacity as a director, officer or employee of the Company or any of its Subsidiaries.   POLAR shall maintain reasonable policies and processes to mitigate the risk of the Company’s Confidential Information being used to the Company’s detriment in connection with any such activities.

Notices

.  All notices, requests, demands, waivers and other communications required or permitted to be given under this Agreement shall be in writing and mailed (by first class registered or certified mail, postage prepaid, return receipt requested), sent by hand delivery, express overnight courier service or facsimile or email transmission, or delivered to the applicable party hereto at the address indicated on the signature pages hereof, or at such other address or to the attention of such other person as such party has specified in writing to the other parties hereto.  All such notices, requests,

17

demands and other communications shall be deemed to have been validly served, given or delivered (a) upon the earlier of actual receipt and two business days after deposit in the United States mail, registered or certified mail, return receipt requested, with proper postage paid, (b) upon receipt of transmission, when sent by telecopy, facsimile or email transmission and followed by overnight courier, (c) one business day after deposit with a reputable overnight courier with all charges prepaid, or (d) when delivered, if hand delivered by messenger.

Termination

.  This Agreement shall be effective as of the date hereof and shall terminate on the date on which the Note is irrevocably and indefeasibly paid in full. Notwithstanding the immediately preceding sentence, this Agreement shall not terminate, or shall be reinstated in full force and effect if it has previously terminated, at any time any payment previously made in respect of the Note is invalidated, declared to be a fraudulent transfer or preference, set aside or required to be repaid under the Bankruptcy Code or any other bankruptcy or insolvency law, other law or equitable principle.

Section 15.

Governing Law, Jurisdiction; Waiver of Jury Trial; Severability; Equitable Remedies

.

(a)Governing Law.  This Agreement and the rights and obligations of the parties hereunder and the persons subject hereto shall be governed by and construed and interpreted in accordance with the laws of the State of New York, without giving effect to its conflict of laws principles or rules that would require the application of the laws of another jurisdiction (other than to the extent such principles or rules are mandatorily applicable).

(b)Submission to Jurisdiction.  EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE COURTS OF THE STATE OF NEW YORK AND THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA LOCATED IN NEW YORK, NEW YORK SOLELY IN RESPECT OF THE INTERPRETATION AND ENFORCEMENT OF THE PROVISIONS OF THIS AGREEMENT AND OF THE DOCUMENTS REFERRED TO IN THIS AGREEMENT, AND IN RESPECT OF THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY.  EACH PARTY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF THE INTERPRETATION AND ENFORCEMENT OF THE PROVISIONS OF THIS AGREEMENT AND OF THE DOCUMENTS REFERRED TO IN THIS AGREEMENT, AND IN RESPECT OF THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY, OR WITH RESPECT TO ANY SUCH ACTION OR PROCEEDING, SHALL BE HEARD AND DETERMINED IN SUCH STATE OR FEDERAL COURTS, AND THAT SUCH JURISDICTION OF SUCH COURTS WITH RESPECT THERETO SHALL BE EXCLUSIVE, EXCEPT SOLELY TO THE EXTENT THAT ALL SUCH COURTS SHALL LAWFULLY DECLINE TO EXERCISE SUCH JURISDICTION.  EACH PARTY HEREBY WAIVES, AND AGREE NOT TO ASSERT, AS A DEFENSE IN ANY ACTION, SUIT OR PROCEEDING FOR THE INTERPRETATION OR ENFORCEMENT HEREOF OR OF ANY SUCH DOCUMENT OR IN RESPECT OF ANY SUCH TRANSACTION, THAT IT IS NOT SUBJECT TO SUCH JURISDICTION.  EACH PARTY HEREBY WAIVES, AND AGREES NOT TO ASSERT, TO THE MAXIMUM EXTENT PERMITTED BY LAW, AS A DEFENSE IN

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ANY ACTION, SUIT OR PROCEEDING FOR THE INTERPRETATION OR ENFORCEMENT HEREOF OR OF ANY SUCH DOCUMENT OR IN RESPECT OF ANY SUCH TRANSACTION, THAT SUCH ACTION, SUIT OR PROCEEDING MAY NOT BE BROUGHT OR IS NOT MAINTAINABLE IN SUCH COURTS OR THAT THE VENUE THEREOF MAY NOT BE APPROPRIATE OR THAT THIS AGREEMENT OR ANY SUCH DOCUMENT MAY NOT BE ENFORCED IN OR BY SUCH COURTS.  EACH PARTY CONSENTS TO AND GRANTS ANY SUCH COURT JURISDICTION OVER THE PERSON OF SUCH PARTIES IN CONNECTION WITH, AND OVER THE SUBJECT MATTER OF, ANY SUCH DISPUTE AND AGREES, TO THE MAXIMUM EXTENT PERMITTED BY LAW, THAT MAILING OF PROCESS OR OTHER PAPERS IN CONNECTION WITH ANY SUCH ACTION OR PROCEEDING IN THE MANNER PROVIDED IN SECTION 11 OF THIS AGREEMENT OR IN SUCH OTHER MANNER AS MAY BE PERMITTED BY LAW, SHALL BE VALID AND SUFFICIENT SERVICE THEREOF.

(c)Waiver of Jury Trial.  EACH PARTY TO THIS AGREEMENT ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE BREACH, TERMINATION OR VALIDITY OF THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.  EACH SUCH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 13.

(d)Severability.  If any provision of this Agreement is held by a court of competent jurisdiction to be invalid or unenforceable in any jurisdiction, such holding shall not affect the validity or enforceability of the remainder of this Agreement in such jurisdiction or the validity or enforceability of this Agreement, including such provision, in any other jurisdiction, and such provision shall be interpreted, revised or applied in a manner that renders it valid and enforceable to the fullest extent possible.

(e)Equitable Remedies.  The parties hereto agree that money damages or other remedies at law would not be a sufficient or adequate remedy for any breach or violation of, or a default under, this Agreement by them and that, in addition to all other remedies available to them, each of them shall be entitled to an injunction restraining such breach, violation or default or threatened breach, violation or default and to any other equitable relief, including without limitation specific performance, without bond or other security being

19

required and without the necessity of showing actual damages or that monetary damages are an inadequate remedy. Nothing contained herein shall be construed as prohibiting either party hereto from pursuing any other remedies available to it for any such breach, violation or default or threatened breach, violation or default.

Entire Agreement; Amendment and Waiver

.  

(a)Entire Agreement.  This Agreement (together with the other Loan Documents) constitutes the entire agreement and understanding of the parties hereto with respect to the matters referred to herein and supersede all prior agreements, understandings or representations, written or oral, among the parties with respect to such matters.  In the event of any conflict between this Agreement and the Note, the terms and conditions of the Note shall govern.

(b)Amendment and Waiver.  Except as otherwise provided herein, no amendment, alteration or modification of this Agreement or waiver of any provision of this Agreement shall be effective against the Company or POLAR unless and until such amendment, alteration, modification or waiver has been approved in writing by the Company and POLAR.  

(c)Delays or Omissions.  No delay or omission to exercise any right, power, or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power, or remedy of such non-breaching or non-defaulting party, nor shall it be construed to be a waiver of or acquiescence to any such breach or default, or to any similar breach or default thereafter occurring, nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring.  All remedies, whether under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.

Successors and Assigns; No Third Party Beneficiaries.

(a)Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the successors, permitted assigns and transferees of the parties hereto.  This Agreement may not be assigned by the Company without the express prior written consent of POLAR, and any attempted assignment, without such consent, will be null and void.  Except as otherwise provided herein, POLAR may assign this Agreement or its rights and obligations hereunder to any transferee of the Note held by POLAR.

(b)No Third-Party Beneficiaries.  Except as expressly set forth herein (including with respect to the POLAR Indemnified Parties), nothing in this Agreement is intended to confer upon any party other than the parties hereto or their respective successors and permitted assignees any rights, benefits, remedies, obligations or liabilities under or by reason of this Agreement.

Confidentiality

.  POLAR agrees that it will keep confidential and will not disclose, divulge, or use for any purpose (other than to monitor the Loan) any Confidential Information obtained from the Company pursuant to the terms of this Agreement unless such Confidential Information:  (i) is known or becomes known to the

20

public in general (other than as a result of a breach of this Section 16 by POLAR), (ii) is or has been independently developed or conceived by POLAR without use of the Company’s Confidential Information, or (iii) is or has been made known or disclosed to POLAR by a third party who, to the best knowledge of POLAR, is not in breach of any obligation of confidentiality such third party may have to the Company; provided, however, that POLAR may disclose Confidential Information (A) to its attorneys, accountants, consultants, and other professionals to the extent necessary to obtain their services in connection with the Loan, the Loan Documents or any related matter; (B) to any prospective purchaser of the Note from POLAR, if such prospective purchaser agrees to be bound by the provisions of this Section 16; (C) to any existing or prospective Affiliate, partner, member, stockholder, or wholly owned Subsidiary of POLAR in the ordinary course of business, provided that POLAR informs such Person that such information is confidential and directs such Person to maintain the confidentiality of such information; or (D) as may otherwise be required by applicable law, legal requirement, regulation or regulatory request, provided that, to the extent permitted by law, POLAR promptly notifies the Company of such disclosure and takes reasonable steps to minimize the extent of any such required disclosure.

Headings

.  The headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.

Counterparts

.  This Agreement may be executed in one (1) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  Counterparts may be delivered via facsimile, electronic mail (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.