Participating Convertible Loan Agreement

a. In the event that the Lender shall give notice of its intention to exercise such right to purchase, those persons who constitute the Borrower shall make provision for the reconstitution of their interests in the Borrower into three classes, the Class A general partnership interests, the Class A limited partnership interests, and the Class B partnership interests, so as to enable those persons who constitute the Borrower to retain their partnership interests in the Borrower to the extent of the Class A general partnership interests and the Class A limited partnership interests (such persons hereinafter respectively called the "Class A General Partners" and the "Class A Limited Partners" and hereinafter collectively  called the "Class A Partners") and the Lender (hereinafter called the "Class B Partner") to purchase all of the Class B partnership interests in the Borrower, with all of the rights and preferences described in this Article. (Hereinafter, the Class A Partners and the Class B Partner shall be called collectively the "Partners" and, individually, a "Partner.")

b. The Class B Partner shall own its interest in the Borrower, as reconstituted (Partnership), as a limited partner. The Class A Partners shall own their interests in the Partnership in the following manner: [name] and [name]  shall own their interests in the Partnership in part (to the extent of not less than [percent], as to each, of the total partnership interests) as general partners (General Partners) and in part as limited partners and the remaining Class A Partners shall own their interests in the Partnership as limited partners.

c. Contemporaneously with the purchase by the Class B Partner of its interest in the Partnership, the Class A Partners shall cause the Borrower's agreement of limited partnership to be amended to reflect the reconstitution of the interests in the Borrower and the admission of the Class B Partner as a Partner in the Partnership. The amended partnership agreement (Partnership Agreement) shall include the provisions set forth in this Article and shall otherwise be in form and substance acceptable to the Class B Partner. Contemporaneously with the execution of the Partnership Agreement, the Partners shall execute and the General Partners shall, within three business days thereafter, file and record (or cause to be filed and recorded) an amendment to the Partnership's certificate of limited partnership as required by and in conformance with Section [number] of the Code.

The Borrower agrees that the equity interest in the Borrower (a real estate partnership), which the Lender has the option to purchase pursuant to Paragraph 1, is unique and that the Lender's failure to effectuate the provisions of this Article cannot be adequately compensated by damages and that these provisions shall be specifically enforceable, time being of the essence. d. Simultaneous with the admission of the Class B Partner into the Partnership, the General Partners shall furnish to the Partnership a title insurance policy of a title insurance company acceptable to the Class B Partner insuring the fee simple title of the Partnership in the Premises (or an endorsement to the Partnership's existing fee title insurance policy updating such policy to date of the amendment to the Borrower's agreement of limited partnership), said policy (or endorsement) to be in an amount and otherwise in form and substance satisfactory to the Class B Partner.

2. Partnership Interests. The Class A Partners shall be entitled to a [percent] interest in the Partnership's taxable income and, subject to the stated priority distributions in Paragraphs 4(c) and 4(f), to [percent] of all cash distributions of every nature. The Class B Partner shall be entitled to a [percent] preferred cumulative annual return on the Class B Partner's Investment Amount and, subject to the priority distributions stated in Paragraphs 4(c) and 4(f), to [percent] of all cash distributions of every nature.

3. Deemed Termination of Partnership Upon Purchase by Class B Partner. The Borrower and the Lender agree that: (1) the purchase by the Class B Partner of its interest in the Partnership will affect a termination of the Partnership for federal income tax purposes pursuant to Section 708(b)(1)(B) of the Internal Revenue Code of 1954, as amended (Code); (2) this will result in a deemed distribution of the Partnership's assets to the Partners, and a deemed contribution of said assets to the Partnership; and (3) the Class B Partner will be deemed to have contributed property to the Partnership in an amount equal to the Class B Partner's Investment Amount and will be entitled to a basis equal to such amount for determining its share of depreciation, gain, and loss.

4. Terms of Partnership. The Partnership Agreement shall include, among other provisions, the following:

a. The Partners agree that depreciation, gain, and loss with respect to the Premises shall be allocated among them to reflect the difference between (1) each Partner's adjusted tax basis in its interest in the Premises at the time of the deemed contribution to the Partnership (as described in Paragraph 3) and (2) each Partner's pro rata share of the fair market value of the Premises at such time, in accordance with Sections 704(a) and 704(c)(2) of the Code.

b. For purposes of determining each Partner's "profits" interest to determine its share of nonrecourse Partnership liabilities in order to compute such Partner's basis for its Partnership interest pursuant to Section 752 of the Code, the parties hereto agree that the profits interest of each Partner shall be determined as follows: The Class B Partner's share of Partnership profits in any fiscal year shall equal a  fraction the numerator of which shall be the sum of (1) the amount of the Class B Partner's [percent] preferred cumulative annual return for such year, and (2) [percent] of the Partnership's cash flow remaining after payment of the Class B Partner's [percent] preferred cumulative annual return, if any, and the denominator of which shall be the Partnership's total cash flow for such year; and the Class A Partner's share of Partnership profits in any year shall equal a fraction the numerator of which shall be [percent] of the Partnership's cash flow remaining after payment of the Class B Partner's [percent] preferred cumulative annual return, if any, and the denominator of which shall be the Partnership's total cash flow for such year.

c. Cash Flow for each fiscal year shall be distributed to the Partners in the following manner and order of priority: (1) to the Class B Partner, until it shall have received distributions which are, in the aggregate, on a cumulative basis, equal to a [percent] annual return on the Class B Partner's Investment Amount; and (2) the balance, if any [percent] to the Class A Partners and [percent] to the Class B Partner. Cash Flow shall be distributed as aforesaid to the Partners, in cash, quarterly, within fifteen days after the end of each calendar quarter, with such quarterly distribution of Cash Flow being made solely from Cash Flow for the quarter then ended; provided, however, that prior to making any such quarterly distribution as previously provided, the General Partners shall make a good faith determination as to whether sufficient Cash Flow will be generated during the next succeeding quarter so as to allow for the distribution to the Class B Partner. Cash Flow shall be distributed as aforesaid to the Partners, in cash, generated, then a reserve shall be established for the payment of such distribution. The final determination of each Partner's respective share of Cash Flow shall be made after the end of each fiscal year, at which time any necessary adjustments (including any repayments to the Partnership or distributions to a Partner) shall be made promptly. The term "Cash Flow" shall mean an amount equal to the cash receipts of the Partnership (excluding the net proceeds from a sale or refinancing of the Premises or other capital transaction, hereinafter called a "Capital Item"), minus the sum of (1) principal and interest payments on all mortgage loans and other secured and unsecured indebtedness of the Partnership, (2) property and other taxes, (3) any reserves of the Partnership set forth in a budget that has been submitted to and approved by the Lender, and (4) any other cash payments (except distributions to the Partners, cash payments or escrows funded by borrowings, and distributions to the extent they are taken out of reserves of the Partnership) required in connection with Partnership operations or administration. As used in this Paragraph 4(c), the term "net proceeds from a sale or refinancing of the Premises" shall mean the gross proceeds from the sale or refinancing of the Premises less the entire unpaid principal balance of the First Mortgage and all other reasonable costs and expenses incurred by the Partnership in connection with such sale or refinancing.

d. Except as provided in Paragraph 4(e), taxable income or loss of the Partnership for a taxable year, computed without deduction for depreciation and exclusive of income recognized in a Capital Item transaction, shall be allocated in the same manner as Cash Flow was distributed to the Partners for such taxable year pursuant to Paragraph 4(c). Except as otherwise set forth in this Article, any allocation of a pro rata share of an amount equal to the Partnership's taxable income or loss (computed without deduction for depreciation and exclusive of income recognized in a Capital Item transaction) shall be considered an allocation to such Partner of the same pro rata share of each item of income, gain, loss, expense, deduction, receipt, or tax preference that was utilized in computing the amount of such taxable income or loss.

e. The parties hereto agree that any taxable income that must be recognized by the Partnership on the cancellation of the Note shall be allocated entirely to the Class A Partners. If the Partnership files a consent to reduce its basis in Partnership assets pursuant to Section 1017 of the Code, rather than recognize such cancellation of indebtedness income, such basis reduction shall be allocated entirely to the Class A Partners' share of the basis reduction shall be allocated entirely to the Class A Partners' share of the basis in the Premises. The Class A Partners agree that if such basis reduction exceeds their allocable share of the Partnership's basis in the Premises, the Partnership shall file a consent to apply Section 1017 of the Code only to the extent of their share of the basis in the Premises and any cancellation of indebtedness income in the amount of the excess that is recognized by the Partnership shall be allocated to the Class A Partners.

f. Capital Items shall be distributed in the following manner:

i. If the transaction giving rise to the Capital Item shall occur on or before [date] (ten years less one day from the date of this Agreement), such Capital Item shall be distributed as follows: (1) to the Class B Partner until it shall have received an amount equal to any accrued and unpaid [percent] preferred cumulative annual return on the Class B Partner's Investment Amount; (2) to the Class B Partner until it shall have received an amount equal to the Class B Partner's Investment Amount, less all prior distributions to the Class B Partner in payment of such amount; and (3) the balance, if any, [percent] to the Class a Partners and [percent] to the Class B Partner.

ii. If the transaction giving rise to the Capital Item shall occur at any time on or after [date] (ten years from the date of this Agreement), such capital item shall be distributed as follows: (1) to the Class B Partner until it shall have received an amount equal to any accrued and unpaid [percent] preferred cumulative annual return on the Class B Partner's Investment Amount; (2) to the Class B Partner until it shall have received an amount equal to the Class B Partner's Investment Amount, less all prior distributions to the Class B Partner in payment of such amount; (3) to the Class A Partners until they shall, in the aggregate, have received an amount equal to [$ amount], less all prior distributions to the Class A Partners in payment of said amount; and (4) the balance, of any, [percent] to the Class A Partners and [percent] to the Class B Partner.

g. Taxable income recognized in a Capital Item transaction shall be allocated among the Partners as follows: (1) taxable income, or gain, up to an amount equal to the excess of the fair market value of the Premises at the time of its deemed contribution to the Partnership over the Partnership's adjusted tax basis in the Premises at such time shall be allocated to the Class A Partners in accordance with Sections 704(a) and 704(c)(2) of the Code; (2) if a consent to reduce the basis in Partnership assets is filed pursuant to Section 1017 of the Code, taxable income, or gain, in an amount equal to such reduction in basis, shall be allocated to the Class A Partners; and (3) the balance, if any, among the Partners in the same manner and to the extent that the Capital Item with respect to such transaction was distributable in accordance with Paragraph 4(f).

h. Any taxable income or gain recognized by the Partnership upon the sale of the Partnership interest to the Class B Partner shall be allocated solely to the Class A Partners. Any ordinary income recognized upon the sale, transfer, or other disposition of Partnership assets as provided in Sections 751.1245 or 751.1250 of the Code, or any investment credit recapture recognized as provided in Section 47 of the Code (Ordinary Income Items) shall be allocated as follows: (1) all Ordinary Income Items that existed in respect of assets deemed contributed to the Partnership (as described in Paragraph 3) at the time of such deemed contribution shall be allocated entirely to the Class A Partners and (2) any Ordinary Income Items that are not allocated pursuant to clause (i) shall be allocated in the same proportion as gain is allocated under Paragraph 4(g)(iii).

i. Taxable loss recognized in a Capital Item transaction shall be allocated among the partners as follows:

i. An amount of taxable loss shall be allocated to each Partner, but not exceeding the difference between (a) the sum of (1) the adjusted tax basis of the property deemed contributed to the Partnership by such Partner, and (2) such Partner's  percentage interest in any additions to such basis, and (b) the sum of (1) depreciation allocated to such Partner with respect to such property and (2) such Partner's interest in the amount realized in the Capital Item transaction;

ii. If a consent to reduce the basis in Partnership assets is filed pursuant to Section 1017 of the Code, taxable loss, in an amount equal to such reduction in basis, shall be allocated to the Class B Partner; and

iii. The balance, if any, [percent] to the Class A Partners and [percent] to the Class B Partner. In no event shall the amount of loss allocated to any Partner with respect to a Capital Item transaction exceed the amount of loss recognized by the Partnership with respect to such transaction.

j. The Class B Partner shall have the right to approve all accounting decisions and elections made or permitted to be made by the Partnership for federal tax purposes; provided, however, that it is specifically agreed by the parties hereto that, for federal income tax purposes, the Partnership shall use the straight-line method of depreciation, with its basis in the Premises allocated on a component basis.

k. At the request of the Class B Partner (or any transferee of the Class B Partner), the Partnership shall file an election under Section 754 of the Code and in such event or in the event that a Section 732(d) election is made by a Partner, the Partnership Agreement shall be amended, to the extent required, to provide a special allocation of such increased basis to the transferee or to the Partner making the Section 732(d) election, as the case may be, for purposes of computing depreciation, gain, and loss.

l. In the event that there is a deadlock between the Partners as to whether to sell or refinance the Premises, or as to the terms of such sale or refinancing, as the case may be, or as to any other major business decision of the Partnership, either the Class A Partners, on the one hand, or the Class B Partners, on the other hand, may cause the dissolution of the Partnership by giving thirty days' written notice to the other class of partners (Offeree). The class giving such notice (Offeror) shall offer both to sell the Offeror's entire interest in the Partnership and to buy the Offeree's entire interest in the Partnership at a price to sell and a price to buy to be determined as follows: The Offeror shall determine and set forth in the offer a price for the Premises (as then encumbered) (Option Price) and the price to sell shall be the amount that would have been received by the Offeror and the price to buy shall be the amount that would have been received by the Offeree as if the Premises were sold outright to a third party at the Option Price and the proceeds were distributed in the manner as provided in Paragraph 4(f). The option offer shall be irrevocable for a period of sixty days after receipt of notice of the offer, and the Offeree may, on or before the end of said sixty-day period, either accept the offer to sell or the offer to buy set forth in the option offer (but not both) and upon acceptance the Offeror shall be  required to sell or buy, as the case may be. If theOfferee fails within said sixty-day period to accept
either offer, the option offer shall automatically expire. Following the expiration of the option offer, the Offeror shall have the right, exercisable by written notice given on or before the fifteenth day after the expiration of said sixty-day period, to buy the entire interest of the Offeree at the appraised value and if the Offeror exercises such right, the Offeree shall be required to sell its entire interest.

m. The General Partners shall be responsible for the management of the Premises and shall either contract on an independent contractor basis to provide such services themselves, or contract on an independent contractor basis with an "Affiliate" of such General Partners or a non-Affiliate thereof to provide such services (in either case, subject to the approval of the Class B Partner, which approval shall not be unreasonably withheld) pursuant to a management agreement in form and substance satisfactory to the Class B Partner. The fee provided for in any such management agreement shall be subject to the approval of the Class B Partner (which approval shall not be unreasonably withheld) and shall not be greater than the average fee paid to managers of similar properties in the area where the Premises is located. In the event that the General Partners contract with any such Affiliate or non-Affiliate to perform such management services, the General Partners (or either of  them) shall not be entitled to any additional fee. As used herein, the term "Affiliate" shall mean any entity or person directly or indirectly controlling, controlled by, or under common control with, the General Partners (or either of them).

n. The Class B Partner shall have rights of approval with respect to the management of the Premises and actions to be taken and/or performed by the General Partners, the same as the rights of approval given to the Lender under the Loan Agreement, the Note, the Deed of Trust, and all other loan documents entered into in connection therewith. In addition, insurance requirements under the Partnership Agreement and provisions for financial statements and reports (including proposed budgets), with respect to the income and expense of the Premises and with respect to the partnership, shall be the same as those provided for under the Loan Agreement, the Note, the Deed of Trust, and all other loan documents entered into in connection therewith, and in the form of management agreement referred to in Paragraph 4(m).

o. Subject to the right of first offer referred to in Paragraph 4(q), neither of the General Partners may transfer, assign, sell, pledge, or hypothecate any part of its interest as a general partner in the Partnership, or assign or delegate any of its obligations with respect to the partnership, without the prior written consent of the Class B Partner. Subject to the right of first offer referred to in Paragraph 4(q), none of the Class A Partners may transfer, sell, pledge, or hypothecate any part of its interest in the Partnership, without the prior written consent of the Class B Partner; provided, however, that any of the Class A Partners may transfer its interest as a limited partner in the Partnership solely to such transferor's spouse, and/or lineal ancestors and/or descendants without the prior written consent of the Class B Partner. Any person or entity who acquires, whether by specific consent of the Class B Partner or as a permitted transferee under this Paragraph, any interest in the Partnership from a Class A Partner shall not thereby become a Partner under any of the provisions of the Partnership Agreement unless such person or entity shall expressly assume and agree to be bound by all of the terms and conditions of the Partnership Agreement. Upon compliance with all provisions of this paragraph, all remaining partners agree to execute and deliver such amendments to the Partnership Agreement as are necessary to constitute such person or entity a new partner in the Partnership as a Class A Partner. If any of the Class A Partners is a partnership, neither the general partner(s) nor the limited partner(s) of such partnership may transfer, sell, or hypothecate any of its interest in such partnership without the prior written consent of the Class B Partner; provided, however, that any of the limited partners of such partnership may transfer its interest in such partnership to such person's spouse and/or lineal ancestors and/or descendants without such prior written consent. The partnership agreement of any such partnership shall contain the restrictions on transfer provided in the Section. Such agreement shall not be modified without the prior written consent of the Class B Partner and shall state that the Class B Partner is a third-party beneficiary with respect to said transfer restrictions.

p. Subject to the right of first offer referred to in Paragraph 4(q), the Class B Partner may transfer all or any part of its interest in the Partnership without restriction.

q. If the Class B Partner or all of the Class A Partners wish to sell, assign, pledge, or hypothecate or otherwise transfer for consideration its entire interest in the Partnership, the Partner(s) so wishing to sell its interest must first offer to sell such interest at a stated price to the Class A Partners or the Class B Partner, as the case may be, who, within thirty days after receipt of written notice of such offer, may accept such offer by giving written notice to such selling Partner (or Partners), together with a nonrefundable deposit, in cash or by good certified check, of [$ amount] ([percent] of the stated offering price) and within sixty days thereafter purchase the interest of such selling Partner (or Partners) in the Partnership by paying to such selling Partner (or Partners), in cash or by good certified check, the balance of the stated offering price. In the event that the remaining Partner (or Partners) does not accept the offer of the selling Partner (or Partners) within such thirty-day period, the selling Partner (or Partners) may sell its entire interest within 120 days after the giving of such offer to a third party of consideration in cash or cash equivalent and on terms having a present cash value not less than that offered to the remaining Partner (or Partners).

r. The Class A Partners shall represent and warrant to and with the Partnership and the Class B Partner that (1) there are no suits, actions, or proceedings pending or to their knowledge threatened against the Partnership or the Premises, or to which the Partnership or the Premises is or might become a party, and that there are no liabilities, either secured or unsecured, to which the Partnership (or the Premises) is subject, other than those liabilities that are set forth on the books and records of the Partnership as of the date of the amendment of the Borrower's agreement of limited partnership; and (2) all representations and warranties made by the Borrower to the Lender under the Deed of  Trust, the Loan Agreement, and all other documents executed in connection therewith are true and correct as  if same were made on the date of the amendment of the Borrower's agreement of limited partnership. The Class A Partners shall indemnify and hold harmless the Class B Partner and its stockholder(s) against all fees, costs, and expenses arising out of the breach of these warranties  and representations, including, without limitation, all legal fees and costs incurred in defending against any claim or liability or protecting itself or the Partnership from, or lessening the effect of, any such breach.

5. Additional Right of Lender to Purchase. In addition to the Lender's right to convert to an equity interest in the Borrower by purchasing such interest as  provided in Paragraph 1, the Lender shall have the right, upon thirty days' prior written notice to the Borrower, to convert to an equity interest in the Borrower, with the same stated rights and preferences set forth in Paragraphs 4(c) and 4(f), in the event of a sale or refinancing of the Premises or upon the occurrence of an event of default under this Agreement and, in the event of a sale, if the Lender exercises such conversion right, execution of a formal amendment to the Borrower's agreement of limited partnership, as reconstituted, shall not be required.

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