CONSTRUCTION LOAN ADDENDUM

CONSTRUCTION LOAN ADDENDUM





This Construction Loan Addendum is hereby incorporated into that certain Construction Loan Agreement dated March 28, 1997, between FIRST UNION NATIONAL BANK OF TENNESSEE ("Lender"), and FORT AUSTIN LIMITED PARTNERSHIP ("Borrower").





W I T N E S S E T H



WHEREAS, Lender has agreed to extend a construction loan to Borrower, on certain terms and conditions; and



WHEREAS, one condition to Lender's agreement to extend credit to Borrower is that Lender and Borrower must enter into a comprehensive agreement setting forth the terms and conditions of Borrower's construction loan;



NOW, THEREFORE, as an inducement to cause Lender to extend credit to Borrower, and for other valuable consideration, the receipt and sufficiency of which are acknowledged, it is agreed as follows:



ARTICLE I.



As used in this Agreement, in addition to the definitions contained in the Agreement, the following words have the definitions indicated below unless context clearly requires otherwise:



1.1. Appraisal means that Appraisal dated December 3, 1996, whereby Alan C. Plush, MAI, of Gulf/Atlantic Valuation Services, Inc. appraises the value of the Project, "as completed," as $11,100,000.00 and "future stabilized" as $13,200,000.00.



1.2. Architect means Earl Swensson Associates, Inc.



1.3. Architect Contract means that contract for architectural services relative to the construction of the Improvements dated February 20, 1997, between Borrower and the Architect.



1.4. Budget means a written schedule of the Construction Costs and the Non-construction costs as estimated by Borrower for completion of the Project.









1.5. Building Permit means all permits necessary for the completion of the Improvements according to the Plans and Specifications.



1.6. Business Day means any day on which Lender is open for business.



1.7. Completion Date means April 30, 1998.



1.8. Construction Contract means that contract for the construction of the Improvements on a "fixed price" basis (or "cost plus" basis with guaranteed maximum) dated _________________, 199_, between Borrower and the Contractor.



1.9. Construction Costs means all costs set forth in the Budget for construction labor, materials, fixtures and furnishings incurred and to be incurred in the development of the Project.



1.10. Construction Inspector means EMJ Construction Consultants, Inc.



1.11. Contractor means The Weitz Company, Inc.



1.12. Dual Obligee Performance Bond means that dual obligee bond issued by American Home Assurance Company in favor of Borrower and Lender insuring construction of the Improvements according to the Plans and Specifications.



1.13. Encumbrances means the liens of all real estate taxes, personal property taxes, and other taxes and assessments; deeds of trust; mortgages; judgment liens; restrictive covenants; easements; and other presently existing or hereafter created restrictions or other encumbrances.



1.14. GECC means General Electric Capital Corporation.



1.15. Improvements means a building of approximately 97,500 square feet to be constructed upon the Land according to the Plans and Specifications and all other improvements to the Land incident thereto.



1.16. Land means the real property described in Exhibit A hereto.



1.17. Non-Construction Costs means all costs set forth in the Budget for interest, architects fees, surveyors fees, attorneys fees, loan fees, costs for land acquisition or the release of prior encumbrances and other costs, other than Construction Costs, to be incurred in the development of the Project.



1.18. Plans means those plans dated November 20, 1996, with revisions dated January 14, 1997, prepared by the Architect.







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1.19. Project means the Land and the Improvements.



1.20. Project Manager means Knestrick Management, Inc. (KMI).



1.21. Specifications means those specifications dated November 20, 1996, prepared by the Architect.



1.22. Survey means that survey of the Land dated December 20, 1995, prepared by Ashby Survey & Drafting, Inc.



1.23. Title Company means First American Title Insurance Company.



1.24. Tri-Party Agreement means that agreement among Borrower, Lender, and GECC relating to the Project.





ARTICLE II.

LOAN DOCUMENTS



2.1. Security Documents. Concurrently with the execution of this Agreement, Borrower shall provide Lender with the following documents to evidence and secure the Construction Loan, in form and substance satisfactory to Lender:



(a) Promissory Note made by Borrower in the original principal amount

of Eleven Million Six Hundred Thousand Dollars ($11,600,000.00),

payable to the order of Lender.



(b) Deed of Trust, Assignment of Rents, Security Agreement and

Fixture Filing encumbering the Project in favor of Lender,

subject only to the Permitted Encumbrances.



(c) Collateral Assignment of Construction Contract granting Lender a

first priority security interest in the Construction Contract.



(d) Collateral Assignment of Architect Contract granting Lender a

first priority security interest in the Architect Contract.



(e) Collateral Assignment of Project Management Contract granting

lender a first priority security interest in the Project

Management Contract.



(f) U.C.C. Financing Statements for filing with the Arizona Secretary

of State and the Office of the County Recorder for Pima County,







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(g) Other Documents as Lender may require to evidence and secure the

Construction Loan.



2.2. Other Closing Documents. Concurrently with the execution of this Agreement, Borrower shall provide Lender with the following additional documents, in form and substance satisfactory to Lender:



(a) Certificate of Borrower's Good Standing under applicable law

issued by the Secretary of State within thirty (30) days of the

date hereof.



(b) Certified Copy of Resolution of Borrower's Board of Directors

executed by Borrower's Secretary authorizing a named officer or

officers of Borrower to enter into this Agreement and to execute

all related documents on Borrower's behalf, and including the

Secretary's certification of the incumbency of such officer or



(c) Closing Statement listing disbursements for all closing expenses

and for the initial draw under the Construction Loan.



(d) Legal Opinion executed by Borrower's counsel addressing such

matters as Lender shall require.



(e) Evidence of Insurance as required by Article _____ hereof.



(f) Commitment of the Title Company to issue a mortgagee title

insurance policy naming Lender as the holder of a first lien on

the Project, subject only to the Permitted Encumbrances.



(g) Owner's Affidavit sufficient to induce the title company to

delete all standard exceptions from Lender's mortgagee title

insurance policy.



(h) Construction Inspector's Contract among Borrower, Lender, GECC,

and the Construction Inspector providing for inspections of the

Project by the Construction Inspector.



(i) Program Management Consultant Agreement between Borrower and

Project Manager providing for certain construction management



(j) Contractor's Acknowledgment of assignment of the Construction







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(k) Architect's Acknowledgment of assignment of the Architect



(l) The Plans.



(m) The Specifications.



(n) The Budget.



(o) The Construction Contract.



(p) The Architect Contract.



(q) The Appraisal.



(r) The Survey and Surveyor's Report sufficient to induce the Title

Insurance Company to delete any exception for matters

determinable by survey from Lender's mortgagee title insurance



(s) The Dual Obligee Performance Bond.



(t) Copies of all Building Permits.



(t) Unlimited Guaranties by each of the ARC Entities other than

Borrower and ARCLP-Charlotte, L.L.C. Such guaranties shall be

secured by all collateral currently securing obligations of such

entities to Lender.



(u) Tri-Party Agreement among Borrower, Lender and GECC.



(u) Other Documents as Lender may require in connection with the

closing of the Construction Loan.



2.3. Delivery of Closing Documents as Conditions Precedent to Advances. If any of the Loan Documents are not delivered to Lender concurrently with the execution hereof, the delivery of the remainder of the Loan Documents in form and substance acceptable to Lender shall be an express condition precedent to Lender's making of any advances under the Construction Loan. Lender may waive this condition as to an advance for closing costs or for any other advance by allowing the funding thereof; provided, however, Lender's making of any such advance(s) shall not be considered a waiver of this condition as to future advance requests, unless Lender specifically so agrees in writing.







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ARTICLE III.



3.1. Insurance During Construction. During construction of the Project, the following insurance policies shall be maintained in force:



(a) The Improvements and all related construction equipment, supplies

and materials shall be insured against "all risks of physical

loss," including collapse and transit coverage, under a builder's

risk insurance policy in "replacement cost" or "completed value"

form. The deductible under said policy shall not exceed

$1,000.00. The provisional value stated in said policy, if in

"completed value" form, shall not be less than the maximum

insurable value of the Project "as completed." Said policy shall

also contain the "permission to occupy upon completion of work"



(b) The employees of the contractor and all subcontractors employed

with respect to the Project shall be covered by worker's

compensation insurance in such amounts as the law requires.



(c) Public liability insurance shall be maintained covering the acts

of Borrower, the general contractor, subcontractors, and their

employees. Such policy shall insure against all claims for

personal injury and death on an occurrence basis in an amount not

less than $1,000,000 per occurrence.



3.2. Insurance After Construction. Borrower covenants to keep the following insurance policies in force upon the substantial completion of the Improvements:



(a) The Improvements shall be insured against fire and other hazards

included in coverage against "all risks of physical loss," under

a policy with a deductible of not more than $10,000.00 and with

the "replacement cost" endorsement.



(b) All employees of Borrower whose employment pertains to the

Project shall be covered by worker's compensation insurance in

such amounts as are required by law.



(c) Borrower shall be covered by a comprehensive public liability

insurance policy including coverage for elevators and escalators

and providing completed operations coverage. Such policy shall

insure against all claims for personal injury and death on an

occurrence basis in an amount not less than $1,000,000.00 per









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(d) Borrower shall maintain business interruption insurance and/or

"loss of rental value" insurance providing coverage for at least

a six (6) month period.



(e) Borrower shall insure all personalty on the Project against,

fire, theft, and other hazards as Lender may require.



(f) Borrower shall maintain such other insurance as Lender may

reasonably require.



3.3. Insured Mortgagee. All required policies of property insurance shall name Lender as insured first mortgagee under a noncontributing mortgagee clause acceptable to Lender. All liability policies shall name Lender as an additional insured. Said policies shall also provide that they will not be canceled or the coverage thereunder reduced or restricted in any way without Lender being given at least thirty (30) days prior written notice.



3.4. Delivery of Policies, Payment of Premiums. All required policies of insurance shall be issued by companies and in amounts, form and substance satisfactory to Lender. Borrower shall furnish Lender with the originals of all required insurance policies. At least thirty (30) days prior to the expiration of each such policy, Borrower shall furnish Lender with evidence satisfactory to Lender of the insurer's agreement to reissue said policy and of the payment of the premium for reissuance. If Borrower fails to maintain and furnish to Lender the policies of insurance required by this Article, Lender may obtain such insurance or single-interest insurance for such risks covering Lender's interest. All expenses incurred by Lender in obtaining such insurance shall be deemed additional advances for the benefit of Borrower under the Construction Loan.



3.5. Insurance Proceeds. Borrower agrees to give Lender prompt written notice of any casualty to the Project. The proceeds of any insurance policy pertaining to the Project shall be paid directly to Lender, but may be used by Borrower to restore the Project so long as no Event of Default has occurred and is continuing. If an Event of Default has occurred and is continuing, then Lender may apply said proceeds, in its sole discretion, (i) to the reduction of the Obligations, (ii) to the restoration of the Improvemen ...