Document:

Exhibit 10.5

Exhibit 10.5

MidWestOne Financial Group, Inc.
Change of Control Agreement
This Change of Control Agreement is made and entered into as of January 1, 2013, by and between MidWestOne Financial Group, Inc. and James M. Cantrell.
RECITALS
A.The Executive is currently serving as an employee of the Company or one of its Affiliates.  
B.    The Company desires to continue to employ the Executive as an employee of the Company or one of its Affiliates and the Executive is willing to continue such employment.
C.    The Company recognizes that circumstances may arise in which a Change of Control may occur, thereby causing uncertainty of employment without regard to the competence or past contributions of the Executive, which uncertainty may result in the loss of valuable services of the Executive, and the Parties wish to provide reasonable security to the Executive against changes in the employment relationship in the event of a Change of Control.
AGREEMENTS
In consideration of the foregoing and the mutual promises and covenants of the Parties set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, hereby expressly covenant and agree as follows:
1.Term.  The term of this Agreement shall commence on the Effective Date and shall continue for a period of twelve (12) months (the “Term”).  This Agreement shall automatically extend for twelve (12) months on each anniversary of the Effective Date, unless terminated by either Party effective as of the last day of the then current Term by written notice to that effect delivered to the other not fewer than three (3) months prior to the last day of the then current Term; provided, however, that if timely notice of termination of this Agreement is given but a Change of Control occurs within six (6) months after the effective date of the termination of this Agreement provided in such notice, then such termination of this Agreement shall be considered ineffective.  Notwithstanding any provision of this Agreement to the contrary, if a Change of Control occurs during the Term (or within six (6) months after the end of the Term, as described above), this Agreement shall remain in effect for the twelve (12) months immediately following the Change of Control and shall then terminate.  
2.Payment of Severance Amount.  If the Executive incurs a Termination within the Covered Period, then the Company shall provide the Executive the following benefits:
(a)Commencing on the first Company payroll date that occurs on or following the sixtieth (60th) day following the Termination Date, the Executive shall receive the Severance Amount (less any amount described in Section 2(b)), with such amount to be paid in twelve (12) 

substantially equal monthly installments (subject to the remaining provisions of this paragraph), with each successive payment being due on the next monthly payroll date following the first installment, provided that any such monthly installments that would have been paid in the sixty (60)-day period following the Termination Date but for the Release requirement in Section 4 shall be paid on the first Company payroll date that occurs on or following the sixtieth (60th) day following the Termination Date, and the number of remaining substantially equal monthly installments to be made shall be reduced from twelve (12) by any such “catch-up” payments that are made.
(b)To the extent any portion of the Severance Amount exceeds the “safe harbor” amount described in Treasury Regulation Section 1.409A-1(b)(9)(iii)(A), the Executive shall receive such portion of the Severance Amount that exceeds the “safe harbor” amount in a single lump sum payment payable on the first Company payroll date that occurs on or following the sixtieth (60th) day following the Termination Date.
(c)Within five (5) days after the Executive's Termination, the Company shall pay the Executive a lump sum payment in an amount equal to the sum of all amounts earned or accrued through the Termination Date, including any annual salary, bonus or vacation pay, which has accrued but has not been paid or used.
(d)The Executive's rights following a termination of employment with the Company and its Affiliates for any reason with respect to any benefits, incentives or awards provided to the Executive pursuant to the terms of any plan, program or arrangement sponsored or maintained by the Company or an Affiliate, whether tax-qualified or not, which are not specifically addressed herein, shall be subject to the terms of such plan, program or arrangement, and this Agreement shall have no effect upon such terms except as specifically provided herein.
(e)Except as specifically provided herein, the Company shall have no further obligations to the Executive under this Agreement following the Executive's termination of employment for any reason.  
3.Medical, Dental and Vision Benefits.  If the Executive incurs a Termination within the Covered Period, then to the extent that the Executive or any of the Executive's dependents may be covered under the terms of any medical, dental or vision plans of the Company (or any Affiliate) for active employees immediately prior to the Termination, then, for as long as Executive is eligible for and elects coverage under the health care continuation rules of COBRA, the Company shall provide the Executive and those dependents with coverage equivalent to the coverage received while the Executive was employed with the Company, with the Executive required to pay the same amount as the Executive would pay if the Executive continued in employment with the Company during such period; provided, however, that such coverage shall be provided only to the extent that it does not result in any additional tax or other penalty being imposed on the Company or any Affiliate.  The coverages under this Section 3 may be procured directly by the Company (or any Affiliate, if appropriate) apart from and outside of the terms of the respective plans, provided that the Executive and the Executive's dependents comply with all of the terms of the substitute medical, dental or vision plans, and provided, further, that the cost to the Company shall not exceed the cost for continued COBRA coverage.  In the event the Executive or any of the Executive's dependents is or becomes eligible for coverage under the terms of any other medical and/or dental and/or vision plan of a subsequent employer with plan benefits that are comparable to Company (or any Affiliate) 

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plan benefits, the Company's obligations under this Section 3 shall cease with respect to the eligible Executive and/or dependents.  The Executive and the Executive's dependents must notify the Company (or any Affiliate) of any subsequent employment and provide information regarding medical and/or dental and/or vision coverage available.
4.Release.  Notwithstanding any provision of this Agreement to the contrary, no payments or benefits shall be owed to the Executive under Section 2 or 3 (except for payments and benefits described in Section 2(c) and 2(d)) unless the Executive executes and delivers to the Company a Release within forty-five (45) days following the Termination Date, and any applicable revocation period has expired prior to the sixtieth (60th) day following the Termination Date. 
5.Excise Tax Limitation.
(a)It is the intention of the Parties that no portion of any payment under this Agreement, or payments to or for the benefit of the Executive under any other agreement or plan, be deemed to be an Excess Parachute Payment.  The present value of payments to or for the benefit of the Executive in the nature of compensation, receipt of which is contingent on a Change of Control, and to which Code Section 280G applies (in the aggregate “Total Payments”) shall not exceed an amount equal to one dollar ($1.00) less than the maximum amount that the Company may pay without loss of deduction under Code Section 280G(a).  Present value for purposes of this Agreement shall be calculated in accordance with Code Section 280G(d)(4).  Within one hundred twenty (120) days following the earlier of (i) the giving of the notice of termination or (ii) the giving of notice by the Company to the Executive of its belief that there is a payment or benefit due the Executive that will result in an Excess Parachute Payment, the Parties, at the Company's expense, shall obtain the opinion of an Independent Advisor, which opinion need not be unqualified, which sets forth (A) the Executive's applicable “base amount” (as defined under Code Section 280G), (B) the present value of Total Payments and (C) the amount and present value of any Excess Parachute Payments.  In the event that such opinion determines that there would be an Excess Parachute Payment, the payment hereunder or any other payment determined by such Independent Advisor to be includable in Total Payments shall be modified, reduced or eliminated, in accordance with Code Section 409A, as specified by the Executive in writing delivered to the Company within ninety (90) days of the Executive's receipt of such opinions or, if the Executive fails to so notify the Company, then as the Company shall reasonably determine, so that under the bases of calculation set forth in such opinions there will be no Excess Parachute Payment.  The provisions of this Section 5, including the calculations, notices and opinion provided for herein, shall be based upon the conclusive presumption that (A) the compensation and benefits provided for under this Agreement and (B) any other compensation earned by the Executive pursuant to the Company's compensation programs that would have been paid in any event, are reasonable compensation for services rendered, even though the timing of such payment may be triggered by a Change of Control.
(b)The Parties hereby recognize that the restrictive covenants under Section 6 have value that is equivalent in amount to some or all of the Severance Amount (and potentially other termination benefits) and that such value shall be recognized in the Code Section 280G calculations contemplated hereunder.  The Independent Advisor shall make the determination of the actual fair market value of the restrictive covenants under Section 6 at the time of the Change of Control.

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6.Restrictive Covenants.  
(a)Confidential Information.  The Executive acknowledges that, during the course of the Executive's employment with the Company, the Executive may produce and have access to confidential and/or proprietary, non‐public information concerning the Company or its Affiliates, including marketing materials, financial and other information concerning customers and prospective customers, customer lists, records, data, trade secrets, proprietary business information, pricing and profitability information and policies, strategic planning, commitments, plans, procedures, litigation, pending litigation and other information not generally available to the public (collectively, “Confidential Information”).  The Executive shall not directly or indirectly use, disclose, copy or make lists of Confidential Information for the benefit of anyone other than the Company, either during or after the Executive's employment with the Company, except to the extent that such information is or thereafter becomes lawfully available from public sources, or such disclosure is authorized in writing by the Company, required by law or any competent administrative agency or judicial authority, or otherwise as reasonably necessary or appropriate in connection with the performance by the Executive of the Executive's duties to the Company or an Affiliate.  If the Executive receives a subpoena or other court order or is otherwise required by law to provide information to a governmental authority or other person concerning the activities of the Company or any of its Affiliates, or the Executive's activities in connection with the business of the Company or any of its Affiliates, the Executive shall immediately notify the Company of such subpoena, court order or other requirement and deliver forthwith to the Company a copy thereof and any attachments and non-privileged correspondence related thereto.  The Executive shall take reasonable precautions to protect against the inadvertent disclosure of Confidential Information.  The Executive shall abide by the Company's reasonable policies, as in effect from time to time, respecting avoidance of interests conflicting with those of the Company and its Affiliates.  In this regard, the Executive shall not directly or indirectly render services to any person or entity where the Executive's service would involve the use or disclosure of Confidential Information.  The Executive shall not use any Confidential Information to guide the Executive in searching publications or other publicly available information, selecting a series of items of knowledge from unconnected sources and fitting them together to claim that the Executive did not violate any agreements set forth in this Agreement.
(b)Documents and Property.  
(i)All records, files, documents and other materials or copies thereof relating to the business of the Company or its Affiliates that the Executive prepares, receives or uses shall be and remain the sole property of the Company and, other than in connection with the performance by the Executive of the Executive's duties to the Company or an Affiliate, shall not be removed from the premises of the Company or any of its Affiliates without the Company's prior written connect, and shall be promptly returned to the Company upon the Executive's termination of employment for any reason, together with all copies (including copies or recordings in electronic form), abstracts, notes or reproductions of any kind made from or about the records, files, documents or other materials.
(ii)The Executive acknowledges that the Executive's access to and permission to use the Company's and any Affiliate's computer systems, networks and equipment, 

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and all Company and Affiliate information contained therein, is restricted to legitimate business purposes on behalf of the Company.  Any other access to or use of such systems, network, equipment and information is without authorization and is prohibited.  The restrictions contained in this Section 6(b) extend to any personal computers or other electronic devices of the Executive that are used for business purposes relating to the Company or any Affiliate.  The Executive shall not transfer any Company or Affiliate information to any personal computer or other electronic device that is not otherwise used for any business purpose relating to the Company.  Upon the termination of the Executive's employment with the Company for any reason, the Executive's authorization to access and permission to use the Company's and any Affiliate's computer systems, networks and equipment, and any Company and Affiliate information contained therein, shall cease.
(c)Non-Competition and Non-Solicitation.  The Parties have jointly reviewed the operations of the Company and have agreed that the primary service area of the Company's lending and deposit taking functions in which the Executive will actively participate extends separately to an area that encompasses a twenty-five (25)-mile radius from each banking or other office location of the Company and its Affiliates where Executive has provided material services to the Company during the twelve (12)-month period immediately preceding the Termination Date (collectively, the “Restrictive Area”).  Therefore, as an essential ingredient of and in consideration of this Agreement and the Executive's employment with the Company and any Affiliate, the Executive shall not, during the Executive's employment with the Company and any Affiliate and for a period of twelve (12) months immediately following the termination of the Executive's employment for any reason (the “Restrictive Period”), whether such termination occurs during the Term or thereafter, shall not directly or indirectly do any of the following (all of which are collectively referred to in this Agreement as the “Restrictive Covenant”):
(i)Engage or invest in, own, manage, operate, finance, control, participate in the ownership, management, operation or control of, be employed by, associated with or in any manner connected with, serve as a director, officer or consultant to, lend the Executive's name or any similar name to, lend the Executive's credit to or render services or advice to, in each case in the capacity that the Executive provided services to the Company or any Affiliate, any person, firm, partnership, corporation or trust that owns, operates or is in the process of forming a Financial Institution with an office located, or to be located at an address identified in a filing with any regulatory authority, within the Restrictive Area; provided, however, that the ownership by the Executive of shares of the capital stock of any Financial Institution, which shares are listed on a securities exchange or quoted on the National Association of Securities Dealers Automated Quotation System and which do not represent more than five (5) percent (5%) of the institution's outstanding capital stock, shall not violate any terms of this Agreement;

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(ii)Either for the Executive or any Financial Institution: (A) induce or attempt to induce any employee of the Company or any of its Affiliates with whom the Executive had significant contact to leave the employ of the Company or any of its Affiliates; (B) in any way interfere with the relationship between the Company or any of its Affiliates and any employee of the Company or any of its Affiliates with whom the Executive had significant contact; or (C) induce or attempt to induce any customer, supplier, licensee or business relation of the Company or any of its Affiliates with whom the Executive had significant contact to cease doing business with the Company or any of its Affiliates or in any way interfere with the relationship between the Company or any of its Affiliates and their respective customers, suppliers, licensees or business relations with whom the Executive had significant contact;
(iii)Either for the Executive or any Financial Institution, solicit the business of any person or entity known to the Executive to be a customer of the Company or any of its Affiliates, where the Executive had significant contact with such person or entity, with respect to products, activities or services that compete in whole or in part with the products, activities or services of the Company or any of its Affiliates; or
(iv)Serve as the agent, broker or representative of, or otherwise assist, any person or entity in obtaining services or products from any Financial Institution within the Restrictive Area, with respect to products, activities or services that the Executive devoted time to on behalf of the Company or any of its Affiliates and that compete in whole or in part with the products, activities or services of the Company or any of its Affiliates.
(d)Works Made for Hire Provisions.  The Parties acknowledge that all work performed by the Executive for the Company or any of its Affiliates shall be deemed a “work made for hire.”  The Company shall at all times own and have exclusive right, title and interest in and to all Confidential Information and Inventions, and the Company shall retain the exclusive right to license, sell, transfer and otherwise use and dispose of the same.  Any and all enhancements of the technology of the Company or any of its Affiliates that are developed by the Executive shall be the exclusive property of the Company.  The Executive hereby assigns to the Company any right, title and interest in and to all Inventions that the Executive may have, by law or equity, without additional consideration of any kind whatsoever from the Company or any of its Affiliates.  The Executive shall execute and deliver any instruments or documents and do all other things (including the giving of testimony) requested by the Company (both during and after the termination of the Executive's employment with the Company) in order to vest more fully in the Company or any of its Affiliates all ownership rights in the Inventions (including obtaining patent, copyright or trademark protection therefore in the United States and/or foreign countries).
(e)Remedies for Breach of Restrictive Covenant.  The Executive has reviewed the provisions of this Agreement with legal counsel, or has been given adequate opportunity to seek such counsel, and the Executive acknowledges that the covenants contained in this Section 6 are reasonable with respect to their duration, geographical area and scope.  The Executive further acknowledges that the restrictions contained in this Section 6 are reasonable and necessary for the protection of the legitimate business interests of the Company, that they create no undue hardships, that any violation of these restrictions would cause substantial injury to the Company and such interests, and that such restrictions were a material inducement to the Company 

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to enter into this Agreement.  In the event of any violation or threatened violation of these restrictions, the Company, in addition to and not in limitation of, any other rights, remedies or damages available to the Company under this Agreement or otherwise at law or in equity, shall be entitled to preliminary and permanent injunctive relief to prevent or restrain any such violation by the Executive and any and all persons directly or indirectly acting for or with the Executive, as the case may be.  If the Executive violates the Restrictive Covenant and the Company brings legal action for injunctive or other relief, the Company shall not, as a result of the time involved in obtaining such relief, be deprived of the benefit of the full period of the Restrictive Covenant.  Accordingly, the Restrictive Covenant shall be deemed to have the duration specified herein computed from the date the relief is granted but reduced by the time between the period when the Restrictive Period began to run and the date of the first violation of the Restrictive Covenant by the Executive.
(f)Other Agreements.  In the event of the existence of another agreement between the Parties that (i) is in effect during the Restrictive Period, and (ii) contains restrictive covenants that conflict with any of the provisions of this Section 6, then the more restrictive of such provisions from the two (2) agreements shall control for the period during which both agreements would otherwise be in effect.
7.Notices.  Notices and all other communications under this Agreement shall be in writing and shall be deemed given when mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows:
If to the Company:
MidWestOne Financial Group, Inc.
Attention: MidWestOne Bank Senior Vice President and Director of Human Resources
102 South Clinton Street
Iowa City, Iowa  52240
If to the Executive: the Executive's address on file with the Company
or to such other address as either Party may furnish to the other in writing, except that notices of changes of address shall be effective only upon receipt.
8.Applicable Law.  All questions concerning the construction, validity and interpretation of this Agreement and the performance of the obligations imposed by this Agreement shall be governed by the internal laws of the State of Iowa applicable to agreements made and wholly to be performed in such state without regard to conflicts of law provisions of any jurisdiction, and any court action commenced to enforce this Agreement shall have as its sole and exclusive venue the County of Johnson, Iowa.
9.Entire Agreement.  This Agreement constitutes the entire agreement between the Parties concerning the subject matter hereof, and supersedes all prior negotiations, undertakings, agreements and arrangements with respect thereto, whether written or oral.  If a court of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable, then the invalidity or unenforceability of that provision shall not affect the validity or enforceability of any other provision of this Agreement and all other provisions shall remain in full force and effect.  The various covenants and provisions of this Agreement are intended to be severable and to constitute 

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independent and distinct binding obligations.  Without limiting the generality of the foregoing, if the scope of any covenant contained in this Agreement is too broad to permit enforcement to its full extent, such covenant shall be enforced to the maximum extent permitted by law, and such scope may be judicially modified accordingly.
10.Withholding of Taxes.  The Company may withhold from any benefits payable under this Agreement all federal, state, city and other taxes as may be required pursuant to any law, governmental regulation or ruling.
11.Not an Employment Agreement.  Nothing in this Agreement shall give the Executive any rights (or impose any obligations) to continued employment by the Company or any Affiliate, nor shall it give the Company any rights (or impose any obligations) for the continued performance of duties by the Executive for the Company or any Affiliate.
12.No Assignment.  The Executive's rights to receive benefits under this Agreement shall not be assignable or transferable whether by pledge, creation of a security interest or otherwise, other than a transfer by will or by the laws of descent or distribution.  In the event of any attempted assignment or transfer contrary to this Section 12, the Company shall have no liability to pay any amount so attempted to be assigned or transferred.  This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.
13.Successors.  This Agreement shall be binding upon and inure to the benefit of the Company, its successors and assigns.  The Company shall not effect the sale or other disposition of all or substantially all of its assets unless either (a) the person or entity acquiring the assets, or a substantial portion of the assets, expressly assumes by an instrument in writing all duties and obligations of the Company under this Agreement, or (b) the Company provides, through the establishment of a separate reserve, for the payment in full of all amounts that are or may reasonably be expected to become payable to the Executive under this Agreement.
14.Legal Fees.  All reasonable legal fees and related expenses (including the costs of experts, evidence and counsel) paid or incurred by the Executive pursuant to any dispute or question of interpretation relating to this Agreement shall be paid or reimbursed by the Company if the Executive is successful on the merits pursuant to a legal judgment or arbitration.
15.Amendment.  This Agreement may not be amended or modified except by written agreement signed by the Parties.
16.Code Section 409A.  
(a)To the extent any provision of this Agreement or action by the Company would subject the Executive to liability for interest or additional taxes under Code Section 409A, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Company.  It is intended that this Agreement will comply with Code Section 409A, and this Agreement shall be administered accordingly and interpreted and construed on a basis consistent with such intent.  Notwithstanding any provision of this Agreement to the contrary, no termination or similar payments or benefits shall be payable hereunder on account of the Executive's termination of employment unless such termination constitutes a “separation from service” within the meaning 

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of Code Section 409A.  For purposes of Code Section 409A, all installment payments of deferred compensation made hereunder, or pursuant to another plan or arrangement, shall be deemed to be separate payments.  To the extent any reimbursements or in-kind benefit payments under this Agreement are subject to Code Section 409A, such reimbursements and in-kind benefit payments shall be made in accordance with Treasury Regulation Section 1.409A-3(i)(1)(iv).  This Agreement may be amended to the extent necessary (including retroactively) by the Company to avoid the application of taxes or interest under Code Section 409A, while maintaining to the maximum extent practicable the original intent of this Agreement.  This Section 16 shall not be construed as a guarantee of any particular tax effect for the Executive's benefits under this Agreement and the Company does not guarantee that any such benefits will satisfy the provisions of Code Section 409A or any other provision of the Code.
(b)Notwithstanding any provision of this Agreement to the contrary, if the Executive is determined to be a Specified Employee as of the Termination Date, then, to the extent required pursuant to Code Section 409A, payments due under this Agreement that are deemed to be deferred compensation shall be subject to a six (6)-month delay following the Termination Date; and all delayed payments shall be accumulated and paid in a lump-sum payment as of the first day of the seventh month following the Termination Date (or, if earlier, as of the Executive's death), with all such delayed payments being credited with interest (compounded monthly) for this period of delay equal to the prime rate in effect on the first day of such six (6)-month period.  Any portion of the benefits hereunder that were not otherwise due to be paid during the six (6)-month period following the Termination Date shall be paid to the Executive in accordance with the payment schedule established herein.
17.Deferral of Nondeductible Compensation.  If the Executive's aggregate compensation (including benefits that are deemed remuneration for purposes of Code Section 162(m)) from the Company and the Affiliates for any calendar year exceeds the maximum amount of compensation deductible by the Company or any Affiliate in any calendar year under Code Section 162(m) (for purposes of this paragraph, the “maximum allowable amount”), then any such amount in excess of the maximum allowable amount shall be mandatorily deferred with interest thereon at four percent (4%) per annum to a calendar year such that the amount to be paid to the Executive in such calendar year, including deferred amounts and interest thereon, does not exceed the maximum allowable amount.  Subject to the foregoing, deferred amounts, including interest thereon, shall be payable at the earliest time permissible, in accordance with Code Section 409A.
18.Construction.  In this Agreement, unless otherwise stated, the following uses apply: (a) references to a statute shall refer to the statute and any amendments and any successor statutes, and to all regulations promulgated under or implementing the statute, as amended, or its successors, as in effect at the relevant time; (b) in computing periods from a specified date to a later specified date, the words “from” and “commencing on” (and the like) mean “from and including, “ and the words “to,” “until” and “ending on” (and the like) mean “to, but excluding”; (c) references to a governmental or quasi-governmental agency, authority or instrumentality shall also refer to a regulatory body that succeeds to the functions of the agency, authority or instrumentality; (d) indications of time of day shall be based upon the time applicable to the location of the principal headquarters of the Company; (e) the words “include,” “includes” and “including” means “include, without limitation,” “includes, without limitation” and “including, without limitation,” respectively; 

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(f) all references to preambles, recitals, sections and exhibits are to preambles, recitals, sections and exhibits in or to this Agreement unless otherwise specified; (g) the words “hereof,” “herein,” “hereto,” “hereby,” “hereunder,” and other words of similar import refer to this Agreement as a whole (including exhibits); (h) any reference to a document or set of documents, and the rights and obligations of the parties under any such documents, means such document or documents as amended from time to time, and any and all modifications, extensions, renewals, substitutions or replacements thereof; (i) all words used shall be construed to be of such gender or number as the circumstances and context require; (j) the captions and headings of preambles, recitals, sections and exhibits appearing in or attached to this Agreement have been inserted solely for convenience of reference and shall not be considered a part of this Agreement, nor shall any of them affect the meaning or interpretation of this Agreement or any of its provisions; and (k) all accounting terms not specifically defined herein shall be construed in accordance with GAAP.
19.Definitions.  As used throughout this Agreement, the terms defined in this Section 19 have the meanings given below.
(a)“Affiliate” means each company, corporation, partnership, Financial Institution or other entity that, directly or indirectly, is controlled by, controls, or is under common control with, the Company, where “control” means (i) the ownership of fifty-one percent (51%) or more of the Voting Securities or other voting or equity interests of any corporation, partnership, joint venture or other business entity or (ii) the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such corporation, partnership, joint venture or other business entity.
(b)“Agreement” means this Change of Control Agreement, made and entered into as of the Effective Date, by and between the Parties.
(c)“Base Compensation” means the amount equal to the sum of (i) the greater of Executive's then-current annual salary or the Executive's annual salary as of the date one (1) day prior to the Change of Control and (ii) the amount of the annual performance bonus paid (or payable) to Executive for the most recently completed fiscal year of the Company.
(d)“Board” means the Board of Directors of the Company.
(e)“Change of Control” means:
(i)the consummation of the acquisition by any “person” (as such term is defined in Section 13(d) or 14(d) of the Securities Exchange Act of 1934) of “beneficial ownership” (within the meaning of Rule 13d-3 promulgated under such Act) of fifty percent (50%) or more of the combined voting power of the then outstanding Voting Securities of the Company;
(ii)the individuals who, as of the Effective Date, are members of the Board cease for any reason to constitute a majority of the Board, unless the election, or nomination for election by the shareholders, of any new director was approved by a vote of a majority of the Board, and such new director shall, for purposes of this Agreement, be considered as a member of the Board; or

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(iii)the consummation by the Company of: (A) a merger or consolidation if the shareholders immediately before such merger or consolidation do not, as a result of such merger or consolidation, own, directly or indirectly, more than fifty percent (50%) of the combined voting power of the then outstanding Voting Securities of the entity resulting from such merger or consolidation in substantially the same proportion as their ownership of the combined voting power of the Voting Securities of the Company outstanding immediately before such merger or consolidation; or (B) a complete liquidation or dissolution or an agreement for the sale or other disposition of all or substantially all of the assets of the Company.
Notwithstanding any provision in this definition to the contrary, a Change of Control shall not be deemed to occur solely because fifty percent (50%) or more of the combined voting power of the then outstanding securities of the Company are acquired by (A) a trustee or other fiduciary holding securities under one (1) or more employee benefit plans maintained for employees of the Company or an Affiliate or (B) any corporation that, immediately prior to such acquisition, is owned directly or indirectly by the shareholders in the same proportion as their ownership of stock immediately prior to such acquisition.
Further notwithstanding any provision in this definition to the contrary, in the event that any amount or benefit under this Agreement constitutes deferred compensation and the settlement of or distribution of such amount or benefit is to be triggered by a Change of Control, then such settlement or distribution shall be subject to the event constituting the Change of Control also constituting a “change in control event” under Code Section 409A.
(f)“COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985.
(g)“Code” means the Internal Revenue Code of 1986. 
(h)“Company” means MidWestOne Financial Group, Inc.
(i)“Confidential Information” has the meaning set forth in Section 6(a).
(j)“Covered Period” means the period beginning six (6) months prior to a Change of Control and ending twelve (12) months after the Change of Control. 
(k)“Effective Date” means January 1, 2013.
(l)“Excess Parachute Payment” has the meaning set forth in Code Section 280G.
(m)“Executive” means James M. Cantrell.
(n)“Financial Institution” means a bank, savings bank, savings and loan association, credit union or similar financial institution.

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(o)“Good Reason” means the occurrence of any one (1) of the following events, unless the Executive agrees in writing that such event shall not constitute Good Reason:
(i)an adverse change in the nature, scope or status of the Executive's position, authorities or duties from those in effect immediately prior to the Covered Period;
(ii)a reduction in the Executive's annual salary or bonus opportunity, or a material reduction in the Executive's aggregate benefits or other compensation plans in effect immediately prior to the Covered Period;
(iii)a relocation of the Executive's primary place of employment of more than twenty-five (25) miles from the Executive's primary place of employment immediately prior to the Covered Period or a requirement that the Executive engage in travel that is materially greater than immediately prior to the Covered Period;
(iv)failure by an acquirer to assume this Agreement at the time of the Change of Control; or
(v)a material breach by the Company of this Agreement.
Notwithstanding any provision in this definition to the contrary, prior to the Executive's Termination for Good Reason, the Executive must give the Company written notice of the existence of any condition set forth in clause (i) - (v) immediately above within ninety (90) days of its initial existence and the Company shall have thirty (30) days from the date of such notice in which to cure the condition giving rise to Good Reason, if curable.  If, during such thirty (30)-day period, the Company cures the condition giving rise to Good Reason, the condition shall not constitute Good Reason.  Further notwithstanding any provision in this definition to the contrary, in order to constitute a Termination for Good Reason, such Termination must occur within twenty-four (24) months of the initial existence of the applicable condition.
(p)“Independent Advisor” means an independent, nationally recognized accounting firm approved by the Parties, where such approval shall not be unreasonably withheld by either Party.
(q)“Inventions” means all systems, procedures, techniques, manuals, databases, plans, lists, inventions, trade secrets, copyrights, patents, trademarks, discoveries, innovations, concepts, ideas and software conceived, compiled or developed by the Executive in the course of the Executive's employment with the Company or any of its Affiliates and/or comprised, in whole or part, of Confidential Information.  Notwithstanding the foregoing sentence, Inventions shall not include:  (i) any inventions independently developed by the Executive and not derived, in whole or part, from any Confidential Information or (ii) any invention made by the Executive prior to the Executive's exposure to any Confidential Information.
(r)“Parties” means the Company and the Executive.

12

(s)“Release” means a general release and waiver substantially in the form attached hereto as Exhibit A.
(t)“Restrictive Area” has the meaning set forth in Section 6(c).
(u)“Restrictive Covenant” has the meaning set forth in Section 6(c).
(v)“Restrictive Period” has the meaning set forth in Section 6(c).
(w)“Severance Amount” means an amount equal to one hundred twenty-five percent (125%) of the Executive's Base Compensation.
(x)“Specified Employee” means any person who is a “key employee” (as defined in Code Section 416(i) without regard to paragraph (5) thereof), as determined by the Company based upon the twelve (12)-month period ending on each December 31st (such twelve (12)-month period is referred to below as the “identification period”).  If the Executive is determined to be a key employee, the Executive shall be treated as a Specified Employee for purposes of this Agreement during the twelve (12)-month period that begins on the April 1 following the close of the identification period.  For purposes of determining whether the Executive is a key employee, “compensation” means Executive's W-2 compensation as reported by the Company for a particular calendar year.
(y)“Term” has the meaning set forth in Section 1.
(z)“Termination” means termination of the Executive's employment with the Company and all of its Affiliates during the Term either:
(i)by the Company, other than a Termination for Cause or a termination as a result of the Executive's death or disability; or
(ii)by the Executive for Good Reason.
(aa)“Termination Date” means the date of termination of the Executive's employment with the Company and all of its Affiliates.
(bb)    “Termination for Cause” means only a termination by the Company as a result of: 
(i)the Executive's willful and continuing failure, that is not remedied within twenty (20) days after receipt of written notice of such failure from the Company, to perform the Executive's duties to the Company or an Affiliate; 
(ii)the Executive's conviction of, or pleading of nolo contendre to, a crime of embezzlement or fraud or a felony under the laws of the United States or any state thereof;
(iii)the Executive's breach of fiduciary responsibility; or

13

(iv)an act of dishonesty by the Executive which is materially injurious to the Company.
Any determination of Cause under this Agreement shall be made by resolution adopted by a vote of the Board at a meeting called and held for that purpose.  The Executive shall be provided with reasonable notice of such meeting and shall be given the opportunity to be heard, with the presence of counsel, prior to the vote being taken by the Board.
(cc)    “Total Payments” has the meaning set forth in Section 5(a).
(dd)    “Voting Securities” means any securities which ordinarily possess the power to vote in the election of directors without the happening of any precondition or contingency.
20.Survival.  If the Company elects not to extend the Term of this Agreement pursuant to Section 1, the provisions of Section 6 shall not survive the termination of this Agreement.  In the case of any other termination of this Agreement, the provisions of Section 6 shall survive the termination of this Agreement.

(remainder of page intentionally left blank)

14

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective Date.
		
	MIDWESTONE FINANCIAL GROUP, INC.
	James M. Cantrell, Senior Vice President &  Chief Risk Officer

	
				
	By:
	/s/ CHARLES N. FUNK
	 
	JAMES M. CANTRELL

	 
	 
	 
	(Signature)

	
				
	Name:
	Charles N. Funk
	 
	 

	 
	 
	 
	(Address)

	
				
	Its:
	President & Chief Executive Officer
	 
	 

	 
	 
	 
	(Address)

15

EXHIBIT A
General Release and Waiver
This General Release and Waiver (this “Release”) is made and entered into as of _________________________ (the “Release Date”), by and between MidWestOne Financial Group, Inc. (“Employer”) and _________________________ (“Executive,” and together with Employer, the “Parties”).  In consideration of the mutual covenants hereinafter set forth, the Parties hereby agree as follows:
1.    Separation.  Executive's employment with Employer shall end effective _________________________.
2.    Payment and Benefits.  In consideration of the promises made in this Release, Employer has agreed to pay Executive the benefits as provided in that certain change of control agreement made and entered into as of _________________________, by and between the Parties (the “Change of Control Agreement”).  Executive understands and acknowledges that the benefits described in this Section 2 constitute benefits in excess of those to which Executive would be entitled without entering into this Release.  Executive acknowledges that such benefits are being provided by Employer as consideration for Executive entering into this Release, including the release of claims and waiver of rights provided in Section 3 of this Release.
3.    Release of Claims and Waiver of Rights.  Executive, on Executive's own behalf and that of Executive's heirs, executors, attorneys, administrators, successors and assigns, fully releases and discharges Employer, its predecessors, successors, subsidiaries, affiliates and assigns, and its and their directors, officers, trustees, employees, and agents, in their individual and official capacities, and the current and former trustees and administrators of any retirement or other benefit plan applicable to the employees or former employees of Employer, in their individual and official capacities (the “Released Parties”), from any and all liability, claims, demands and actions through the Release Date, including liability, claims, demands and actions arising under Employer's policies and procedures, whether formal or informal; the United States or State of Iowa Constitutions; the Civil Rights Act of 1964; the Civil Rights Act of 1991; the Iowa Civil Rights Act; the Employee Retirement Income Security Act of 1974; the Age Discrimination in Employment Act; Executive Order 11246; and any other federal, state or local statute, ordinance or regulation with respect to employment, and in addition thereto, from any other liability, claims, demands and actions with respect to Executive's employment with Employer or other association with Employer through the Release Date, including the termination of Executive's employment with Employer, any right of payment for disability or any other statutory or contractual right of payment or any claim for relief on the basis of any alleged tort or breach of contract under the common law of the State of Iowa or any other state, including defamation, intentional or negligent infliction of emotional distress, breach of the covenant of good faith and fair dealing, promissory estoppel, and negligence.  Executive represents that Executive has not assigned or filed any claim, demand, action or charge against the Released Parties.  Executive further acknowledges that Executive is aware that statutes exist that render null and void releases and discharges of any claims, rights, demands, liabilities, actions and 

16

causes of action that are unknown to the releasing or discharging party at the time of execution of the release and discharge.  Executive hereby expressly waives, surrenders and agrees to forego any protection to which Executive would otherwise be entitled by virtue of the existence of any such statute in any jurisdiction, including the State of Iowa.
4.    Covenant Not to Sue.  Executive shall not bring, file, charge, claim, sue or cause, assist, or permit to be brought, filed, charged or claimed any action, cause of action, or proceeding regarding or in any way related to any of the claims described in Section 3 of this Release; Executive's release of claims and waiver of rights provided in Section 3 of this Release is, shall constitute and may be pleaded as, a bar to any such claim, action, cause of action or proceeding.  If any government agency or court assumes jurisdiction of any charge, complaint or cause of action covered by this Release, Executive shall not seek and shall not accept any personal equitable or monetary relief in connection with any investigation, civil action, suit or legal proceeding.
5.    Mutual Non-Disparagement.  At all times following the signing of this Release, neither Party shall engage in any vilification of the other, and each Party shall refrain from making any false, negative, critical or disparaging statements, implied or expressed, concerning the other, including management style, methods of doing business, the quality of products and services, role in the community, or treatment of employees.  Executive acknowledges that the only persons whose statements may be attributed to Employer for purposes of this covenant not to make disparaging statements shall be each member of the Board of Directors of Employer and the CEO of Employer.  The Parties shall do nothing that would damage the other's business reputation or good will.
6.    Representations by Executive.  Executive warrants that Executive is legally competent to execute this Release and that Executive has not relied on any statements or explanations made by Employer or its attorneys.  Moreover, Executive acknowledges that Executive has been afforded the opportunity to be advised by legal counsel regarding the terms of this Release, including the release of all claims and waiver of rights set forth in Section 3 of this Release.  Executive acknowledges that Executive has been offered _________________________ days to consider this Release.  After being so advised, and without coercion of any kind, Executive freely, knowingly and voluntarily enters into this Release.  Executive further acknowledges that Executive may revoke this Release within seven (7) days after Executive has signed this Release and further understands that this Release shall not become effective or enforceable until seven (7) days after Executive has signed this Release, as evidenced by the date set forth below Executive's signature on this Release.  Any revocation of this Release by Executive must be in writing and addressed to the principal headquarters of Employer, attention: _________________________.  If sent by mail, any revocation must be postmarked within the seven (7)-day period and sent by certified mail, return receipt requested.  In addition, Executive represents that Executive has returned all property of Employer that is in Executive's possession, custody or control, including all documents, records and tangible property that are not publicly available and reflect, refer or relate to Employer or Employer's business affairs, operations or customers, and all copies of the foregoing.
7.    No Admissions.  Employer denies that it or any of its employees or agents have taken any improper action against Executive.  This Release shall not be admissible in any proceeding as evidence of improper action by Employer or any of its employees or agents. 

17

8.    Non-Waiver.  Employer's waiver of a breach of this Release by Executive shall not be construed or operate as a waiver of any subsequent breach by Executive of the same or of any other provision of this Release.
9.    Restrictive Covenants.  Executive shall abide by the terms set forth in Section 6 of the Change of Control Agreement (entitled “Restrictive Covenants”).
10.    Construction.  The terms set forth in Sections 7 through 18 of the Change of Control Agreement shall apply to this Release, provided that the word “Release” shall take the place of the word “Agreement” in such Sections, where applicable.
IN WITNESS WHEREOF, the Parties have executed this Release as of dates set forth below their respective signatures below.
MIDWESTONE FINANCIAL GROUP, INC.        EXECUTIVE
	
				
	By:
	 
	 
	 

	 
	Charles N. Funk
	 
	James M. Cantrell

	 
	President & CEO
	 
	 

 
	
					
	Date:
	 
	 
	Date:
	

	 
	 
	 
	 
	 

18Ex 10.1 Forty 57 PSA

EXHIBIT 10.1

PURCHASE AND SALE AGREEMENT
AND JOINT ESCROW INSTRUCTIONS

by and between

RML Construction, LLP, a Kentucky limited liability partnership

(“Seller”)

as Owner of 100% of the Membership Interests in

Forty/57, LLC, a Kentucky limited liability company

(“Property Owner”)

and

STEADFAST ASSET HOLDINGS, INC., 
a California corporation

(“Buyer”)

WAS01_41891870v5

TABLE OF CONTENTS
Page No.
1.PURCHASE AND SALE.    1
1.1Property    1
1.2No Warranty    2
2.PURCHASE PRICE.    2
3.PAYMENT OF PURCHASE PRICE.    2
3.1Deposit    3
3.2Remainder of Purchase Price    3
3.3Buyer Default; Liquidated Damages    3
3.4Seller Default; Specific Performance    4
4.ESCROW INSTRUCTIONS.    4
4.1Opening of Escrow    4
4.2Conditions to Close    5
4.3Recordation and Transfer    6
5.CLOSING.    6
5.1Generally    6
5.2Extension Option    6
6.BUYER’S REVIEW.    6
6.1Delivery of Documents    6
6.2Access    7
6.3Title and Survey.    8
6.4Buyer’s Due Diligence    9
6.5Buyer’s Termination Right    9
6.6Contracts    9
6.7Radon Holdback    9
7.REPRESENTATIONS AND WARRANTIES.    10
7.1Seller’s Representations and Warranties    10
7.2Buyer’s Representations and Warranties    16
8.COVENANTS.    17
8.1Seller    17
8.2Buyer    20
9.ADJUSTMENTS AND PRORATIONS.    20
9.1Generally    21
9.2Rental Income    21
9.3Proration Period    21
9.4Rent Ready    21
10.CLOSING DOCUMENTS.    22
10.1Seller’s Deliveries    22
10.2Buyer’s Deliveries    23
10.3Other Closing Documents    23
10.4Closing Documents    23
11.COSTS    23

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WAS01_41891870v5

12.CASUALTY OR CONDEMNATION    24
13.ATTORNEYS’ FEES    24
14.ASSIGNMENT    24
15.WAIVER    24
16.GOVERNING LAW    25
17.NOTICES    25
18.ENTIRE AGREEMENT    25
19.COUNTERPARTS; COPIES    26
20.AUTHORITY    26
21.RECORD ACCESS AND RETENTION.    26
22.CONTRACT CONSIDERATION    27
23.JURY TRIAL WAIVER    27
24.COUNSEL    27
25.EQUAL PARTICIPATION    27
26.TAX-FREE EXCHANGE    27

EXHIBITS
	
		
	Exhibit “A”
	Real Property Description

	Exhibit “B”
	Personal Property Description

	Exhibit “C”
	Due Diligence Documents

	Exhibit “D”
	Form of Membership Interests Assignment and Assumption

	Exhibit “E”
	Form of General Assignment

	Exhibit “F”
	Form of Bill of Sale

	Exhibit “G”
	Form of Non-Foreign Certificate

	Exhibit “H”
	Form of Tenant Notice

	Exhibit “I”
	Form of Deed

SCHEDULES
	
		
	Schedule 1
	Leases

	Schedule 2
	Contracts

	Schedule 3
	Approvals

	Schedule 4
	Rent Roll

	Schedule 5
	Organizational Documents

	Schedule 6
	Statement of Liabilities

ii
WAS01_41891870v5

    

iii
WAS01_41891870v5

LIST OF DEFINED TERMS
	
						
	Agreement
	1
	

	Approvals
	2
	

	Business Day
	3
	

	Buyer
	1
	

	Close of Escrow
	6
	

	Closing
	6
	

	Closing Date
	6
	

	Closing Documents
	23
	

	Contracts
	2
	

	Date of Closing
	6
	

	Deposit
	3
	

	Due Diligence Period
	9
	

	Environmental Laws
	7
	

	ERISA
	16
	

	Escrow
	4
	

	Escrow Holder
	3
	

	Executive Order
	16
	

	General Assignment
	22
	

	Hazardous Substances
	7
	

	Initial Deposit
	3
	

	Intangible Property
	2
	

	Leases
	2
	

	Lenders
	16
	

	Membership Interests
	1
	

	New Title Matter
	8
	

	Objections
	8
	

	OFAC
	16
	

	Opening of Escrow
	5
	

	Outside Closing Date
	6
	

	Permitted Exceptions
	8
	

	Personal Property
	2
	

	Property
	1
	

	Property Owner
	1
	

	Purchase Price
	2
	

	Real Property
	1
	

	Release
	7
	

	Seller
	1
	

	Seller Deliveries
	7
	

	Seller's Cure Period
	8
	

iv
WAS01_41891870v5

	
						
	Settlement Statement
	5
	

	Title Commitment
	8
	

	Title Objection Notice
	8
	

	Title Objection Period
	8
	

	Title Policy
	24
	

v
WAS01_41891870v5

vi
WAS01_41891870v5

PURCHASE AND SALE AGREEMENT
AND JOINT ESCROW INSTRUCTIONS

This PURCHASE AND SALE AGREEMENT AND JOINT ESCROW INSTRUCTIONS (“Agreement”) is made and entered into as of the 5th day of November, 2012, by and between RML Construction, LLP, a Kentucky limited liability partnership (“Seller”), and STEADFAST ASSET HOLDINGS, INC., a California corporation (“Buyer”), with reference to the following facts:
RECITALS:
A.Seller is the owner of 100% of the membership interests (“Membership Interests”), in Forty/57, LLC, a Kentucky limited liability company (“Property Owner”).
B.Property Owner is, or as of the Closing Date will be, the fee simple owner of that certain land with a multifamily residential project commonly known as Forty 57 at Glasford Apartments, consisting of 436 units situated thereon, located at 4057 Mooncoin Way, Lexington, KY, and more particularly described in Exhibit “A” attached hereto, together with all structures, improvements, machinery, fixtures and equipment affixed or attached to the land (collectively referred to herein as the “Real Property”).  
C.Seller desires to sell the Membership Interests and all rights pertaining thereto, along with certain related personal and intangible property, to Buyer, and Buyer desires to purchase such Membership Interests and related rights from Seller in accordance with the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties hereto mutually agree as follows:
1.PURCHASE AND SALE.
1.1    Property.  Subject to the terms and conditions of this Agreement, and for the consideration herein set forth, Seller agrees to sell and transfer, and Buyer agrees to purchase and acquire, the Membership Interests and all rights, title and privileges of Seller relating thereto.  After the Closing, Seller will have no right, title or interest in Property Owner or any of its assets or property (including, without limitation, the Property, as hereinafter defined).  Property Owner is, or as of the Closing Date will be, the owner of the following (collectively, the “Property”):  
1.1.1    The Real Property;
1.1.2    All easements, licenses, interests, rights, privileges, tenements, hereditaments and appurtenances on or in anywise appertaining to the Real Property;
1.1.3    All equipment, tools, machinery, materials, furniture, furnishings, supplies and other tangible personal property owned by Property Owner and located on or used in connection with or arising out of the ownership, management or operation of the Real Property as of the date hereof, as more particularly described in Exhibit “B” attached hereto (collectively, “Personal Property”); 

    
WAS01_41891870v5

1.1.4    All leases and occupancy agreements relating to the Property in effect on the Date of Closing (as hereinafter defined), including all amendments thereto (collectively, “Leases”) (the Leases in effect on the date of this Agreement are identified on Schedule 1 attached hereto);
1.1.5    Subject to Section 6.6 below, all service, maintenance, supply or other contracts relating to the operation of the Property in effect as of the date hereof (including without limitation all warranties and license agreements), which are identified on Schedule 2 attached hereto (collectively, “Contracts”); 
1.1.6    All licenses, permits, certificates of occupancy and governmental approvals relating to the Property, including without limitation those identified on Schedule 3 attached hereto (collectively, “Approvals”) and any plans, specifications, studies, reports or surveys relating to the Property; and
1.1.7    All entitlements and intangible personal property in connection with or arising out of the ownership of the Real Property, including, without limitation, all trade names and logos, and, unless otherwise expressly agreed to by Buyer, all web domains, websites, and internet addresses (the “Intangible Property”); provided, however that Seller shall retain a non-exclusive right (with Buyer, Property Owner, and affiliates of each) after the Closing Date to use the name "Glasford" with respect to property owned by Seller or an affiliate of Seller adjacent to the Real Property.
Included in the Property shall be any and all the foregoing items in which any affiliate of Property Owner (including Seller) has any right, title or interest, to the extent the same is used solely in connection with the Real Property unless otherwise expressly agreed to by Buyer; it being understood and agreed that Seller shall cause such affiliate to convey the same to Buyer at Closing.
1.2    No Warranty.  Subject to the representations, warranties and covenants of Seller set forth in this Agreement, Seller is selling and Buyer is purchasing the Membership Interests “AS IS WHERE IS” with all faults.
2.    PURCHASE PRICE.
The total purchase price (“Purchase Price”) to be paid by Buyer to Seller for the Property shall be FIFTY-THREE MILLION SIX HUNDRED THOUSAND AND 00/100 DOLLARS ($53,600,000.00), payable all in cash.
3.    PAYMENT OF PURCHASE PRICE.
The Purchase Price shall be paid as follows:

2
WAS01_41891870v5

3.1    Deposit.  As part of the Opening of Escrow (as defined below), Buyer shall deliver to Chicago Title Insurance Company (“Escrow Holder”), which has an address of 4041 MacArthur Blvd # 490, Newport Beach, CA 92660, Attn. Rick Fortunato, the sum of  FIVE HUNDRED THOUSAND AND 00/100 DOLLARS ($500,000.00) (“Initial Deposit”) in immediately available funds as a good faith deposit.  The Initial Deposit and all interest earned thereon shall be collectively referred to in this Agreement as the “Deposit“.  At Buyer’s discretion, Escrow Holder shall place the Deposit in one or more government insured interest-bearing accounts (at Buyer’s discretion) satisfactory to Seller and Buyer (which shall have no penalty for early withdrawal), and shall not commingle the Deposit with any funds of Escrow Holder or any other person or entity.  All interest earned on the Deposit shall be included within the meaning of the term “Deposit” in this Agreement.  If Closing occurs in accordance with this Agreement, the Deposit shall be applied against the Purchase Price.  The Deposit shall be returned to Buyer within one (1) Business Day if (y) Buyer elects to terminate this Agreement in accordance with Section 6.5 below or (z) Escrow fails to close due to (i) Seller’s breach of this Agreement, (ii) the failure of a condition to close under Section 4.2 (other than a failure of Buyer to deliver funds or instruments under Section 4.2.2 or a breach by Buyer under Section 4.2.4), or (iii) a casualty or condemnation event as described in Section 12 below occurs.  In the event of a termination of this Agreement by either Seller or Buyer for any reason other than pursuant to Section 6.5, Escrow Holder is authorized to deliver the Deposit to the party hereto entitled to same pursuant to the terms hereof on or before the tenth (10th) Business Day following receipt by Escrow Holder and the non-terminating party of written notice of such termination from the terminating party, unless the other party hereto notifies Escrow Holder that it disputes the right of the other party to receive the Deposit.  In such event, Escrow Holder may interplead the Deposit into a court of competent jurisdiction in the county in which the Deposit has been deposited.  All attorneys’ fees and costs and Escrow Holder’s costs and expenses incurred in connection with such interpleader shall be assessed against the party that is not awarded the Deposit, or if the Deposit is distributed in part to both parties, then in the inverse proportion of such distribution.  As used in this Agreement, “Business Day” means any day other than a Saturday or Sunday or a legal holiday on which commercial banks are authorized or required to be closed for business in the State of California.
3.2    Remainder of Purchase Price.  On or before the Closing Date, Buyer shall deposit into Escrow immediately available funds in an amount which, when added to the Deposit, will equal the Purchase Price plus any additional amounts necessary to cover costs and/or prorations under this Agreement.

3
WAS01_41891870v5

3.3    Buyer Default; Liquidated Damages.  SELLER AND BUYER AGREE THAT, IF THE PURCHASE AND SALE OF THE MEMBERSHIP INTERESTS IS NOT COMPLETED AND THIS AGREEMENT TERMINATES BECAUSE BUYER MATERIALLY DEFAULTS UNDER OR MATERIALLY BREACHES THIS AGREEMENT (AFTER WRITTEN NOTICE AND A REASONABLE OPPORTUNITY TO CURE), THE DEPOSIT SHALL BE PAID TO SELLER UPON TERMINATION OF THIS AGREEMENT AND RETAINED BY SELLER AS LIQUIDATED DAMAGES AND AS SELLER’S SOLE REMEDY AT LAW OR IN EQUITY.  SELLER AND BUYER AGREE THAT, UNDER THE CIRCUMSTANCES EXISTING AS OF THE DATE OF THIS AGREEMENT, ACTUAL DAMAGES MAY BE DIFFICULT TO ASCERTAIN AND THE DEPOSIT IS A REASONABLE ESTIMATE OF THE DAMAGES THAT WILL BE INCURRED BY SELLER IF BUYER MATERIALLY DEFAULTS UNDER OR MATERIALLY BREACHES THIS AGREEMENT AND FAILS TO PURCHASE THE MEMBERSHIP INTERESTS. 
	
					
	SELLER'S INITIALS:
	DRB
	 
	BUYER'S INITIALS:
	AMDR

4
WAS01_41891870v5

3.4    Seller Default; Specific Performance.  If Seller fails to consummate the sale of the Membership Interests and/or fails to transfer all the Property to Property Owner on or prior to the Closing Date pursuant to this Agreement or otherwise materially defaults on its obligations hereunder at or prior to Closing for any reason except failure by Buyer to perform hereunder, or if prior to Closing any one or more of Seller’s representations or warranties are breached in any material respect, and such default or breach is not cured by the earlier of the third (3rd) Business Day after written notice thereof from Buyer or the Closing Date (Buyer hereby agreeing to give such written notice to Seller within three (3) Business Day after Buyer first learns of any such default or breach by Seller, except no notice or cure period shall apply if Seller fails to consummate the sale of the Membership Interests hereunder), Buyer may elect to (a) terminate this Agreement by giving Seller timely written notice of such election prior to or at Closing and recover the Deposit and any and all costs incurred to date, (b) enforce specific performance to consummate the sale of the Membership Interests hereunder, (c) waive said failure or breach and proceed to Closing without any reduction in the Purchase Price, or (d) exercise any other remedies at law or in equity.  Notwithstanding anything herein to the contrary, Buyer shall be deemed to have elected to terminate this Agreement if Buyer fails to deliver to Seller written notice of its intent to file a claim or assert a cause of action for specific performance against Seller on or before ten (10) Business Days following the Outside Closing Date or, having given such notice, fails to file a lawsuit asserting such claim or cause of action in the county in which the Property is located within two months following the Outside Closing Date.  Buyer’s remedies shall be limited to those described in this Section 3.4 and Section 13.  In the event that Buyer elects to terminate this Agreement under subsection (a) above, then Seller's obligation to reimburse Buyer's costs incurred to date shall be capped at $150,000 plus any rate lock or commitment fees paid by Buyer to any potential lender unless such default or breach by Seller constitutes an Intentional Seller Default (as hereinafter defined.  For purposes of this Agreement, “Intentional Seller Default” means any one or more of the following: (a) intentional or grossly negligent breach by Seller of any of its obligations under this Agreement, (b) if Seller had actual knowledge that any representation or warranty was untrue when made, or Seller fraudulently made such representation or warranty, (c) failure to deliver (or cause to deliver) any of the documents required under Section 10 of this Agreement, or (d) any intentional act of Seller taken on or after the Effective Date that results in Purchaser’s inability to consummate the transaction contemplated in this Agreement.
4.    ESCROW INSTRUCTIONS.
4.1    Opening of Escrow.  Within three (3) Business Days after the mutual execution of this Agreement by Seller and Buyer, the parties shall open an escrow (“Escrow”) with Escrow Holder in order to consummate the purchase and sale in accordance with the terms and provisions hereof by (i) Buyer delivering to Escrow Holder the Initial Deposit and (ii) Buyer and Seller delivering to Escrow Holder their respective executed counterparts of this Agreement (collectively, the “Opening of Escrow”).  Escrow Holder shall deliver written confirmation of the date of the Opening of Escrow to the parties in the manner set forth in Section 17 of this Agreement.  This Agreement shall be countersigned by Escrow Holder and the provisions hereof shall constitute joint primary escrow instructions to Escrow Holder; provided, however, that the parties shall execute such additional instructions as requested by Escrow Holder not inconsistent with the provisions hereof.  

5
WAS01_41891870v5

4.2    Conditions to Close.  Escrow shall not close unless and until the following conditions precedent and contingencies have been satisfied or waived in writing by the party for whose benefit the conditions have been included:
4.2.1    All contingencies described in Section 6 below have either been satisfied or waived in writing by Buyer.
4.2.2    All funds and instruments described in Sections 3 and 10 have been delivered to Escrow Holder and Seller and Buyer have approved, executed and delivered a settlement statement reflecting the Purchase Price, all prorations, and all closing costs as required under this Agreement (the “Settlement Statement”), which shall include the mutually agreed amount of the Radon Holdback (as hereinafter defined) or credit as determined under Section 6.7 below.
4.2.3    Seller shall have caused the title department of Escrow Holder to have irrevocably committed to Buyer in writing to issue an ALTA extended owner’s policy of title insurance, in form and content acceptable to Buyer in its sole and absolute discretion, insuring Buyer’s fee simple title to the Real Property in an amount equal to the Purchase Price subject only to the Permitted Exceptions.
4.2.4    Seller and Buyer shall each have materially performed, observed and complied with all covenants, agreements and conditions required by this Agreement to be performed, observed and/or complied with by such party prior to, or as of, the Closing.
4.2.5    Seller’s representations and warranties contained herein shall be true and correct in all material respects as of the date hereof and as of the Closing Date, except for representations and warranties made as of, or limited by, a specific date, which will be true and correct in all material respects as of the specified date or as limited by the specified date.
4.2.6    There shall exist no pending or threatened actions, suits, arbitrations, claims, attachments, proceedings, assignments for the benefit of creditors, insolvency, bankruptcy, reorganization or other proceedings, against the other party that would materially and adversely affect that party’s ability to perform its obligations under this Agreement.
4.2.7    Unless otherwise approved by Buyer in its sole discretion, the stabilized physical occupancy of the Property shall average 90% or greater for the past 90 days of occupancy with rents under any Leases executed or extended from and after the date hereof being not less than the current rents set forth on the rent roll set forth on Schedule 4 attached hereto attached hereto and with no free rent periods or other economic concessions during said 90 day period.  
4.2.8    Buyer and Seller shall mutually agree to the terms of an easement agreement prior to the expiration of the Due Diligence Period for the access to and maintenance of the signage on the Real Property at the corner of Man O' War Boulevard and Osborn Way by Seller and, if Buyer fails to do so, the maintenance of the entrance island (from Man O' War Boulevard) and the banks adjacent thereto (the "Easement"), to be executed by Property Owner and the Glasford Homeowner's Association and recorded on the Closing Date in Fayette County, Kentucky. 

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4.2.9    Seller shall have conveyed all of the Property to Property Owner on the Closing Date.
4.3    Recordation and Transfer.  Upon satisfaction of the conditions set forth in Section 4.2 above, Escrow Holder shall transfer the Membership Interests as follows:
4.3.1    Intentionally omitted;
4.3.2    Deliver to the parties entitled thereto the other Closing Documents (as hereinafter defined); and
4.3.3    Disburse all funds deposited with Escrow Holder by Buyer in payment of the Purchase Price for the Membership Interests (subject to applicable prorations) to Seller or, for closing costs, to the party entitled thereto, all as set forth in the Settlement Statement.
5.    CLOSING.
5.1    Generally.  Escrow shall close upon the delivery and acceptance of the Assignment in accordance with the provisions of this Agreement (“Date of Closing“, “Closing Date“, “Closing“ or “Close of Escrow”).  The Close of Escrow shall occur on a date selected by Buyer, but in no event later December 31, 2012 (“Outside Closing Date”) at the office of Escrow Holder (or such other location as may be mutually agreed upon by Seller and Buyer), unless otherwise extended (i) by operation of Sections 6.3, 12 or 21 below, (ii) by Buyer pursuant to Section 5.2 below, or (iii) by written agreement between Buyer and Seller.  Time is of the essence with respect to the Outside Closing Date and all dates and time-periods set forth in this Agreement.
5.2    Extension Option.  Intentionally omitted.   
6.    BUYER’S REVIEW.
6.1    Delivery of Documents.  Within three (3) days after the Opening of Escrow, Seller shall, at the sole expense of Seller, deliver to Buyer or, solely with respect to the items that are difficult or costly to copy (due to size or volume), make available to Buyer at the Property, copies (which shall be in electronic format to the extent possible) all documents pertaining to the Property that have been prepared by, for or at the request of Seller or are in the possession or control of, or are reasonably available to, Seller, including, without limitation, the documents listed on Exhibit “C” attached hereto and all organizational documents of Property Owner, including without limitation any operating agreement, articles of organization, membership certificates or other similar documents, all of which are described on Schedule 5 attached hereto (collectively, the “Organizational Documents”, and collectively with the documents listed on Exhibit C, the “Seller Deliveries”).  Seller hereby acknowledges and agrees that the following are in the possession of or control of, or are reasonably available to, Seller and will be provided as required in the previous sentence:  monthly operating statements (year-to-date and 3-year historical); year-end financial statements, audited if available (past 3 years); general ledger (year-to-date and 3-year historical); and copies of all Leases.

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As used in this Agreement, the following definitions shall apply:  “Environmental Laws” shall mean all federal, state and local laws, ordinances, rules and regulations now or hereafter in force, as amended from time to time, in any way relating to or regulating human health or safety, or industrial hygiene or environmental conditions, or protection of the environment, or pollution or contamination of the air, soil, surface water or groundwater, and includes the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. § 9601, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. § 6901, et seq., the Clean Water Act, 33 U.S.C. § 1251, et seq., and the Hazardous Substance Account Act.  “Hazardous Substances” shall mean any substance or material that is described as a toxic or hazardous substance waste or material or a pollutant or contaminant, or words of similar import, in any of the Environmental Laws, and includes asbestos, petroleum (including crude oil or any fraction thereof, natural gas, natural gas liquids, liquefied natural gas, or synthetic gas usable for fuel, or any mixture thereof), petroleum products, polychlorinated biphenyls, urea formaldehyde, radon gas, radioactive matter, medical waste, and chemicals which may cause cancer or reproductive toxicity.  “Release” shall mean any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping or disposing into the environment, including continuing migration, of Hazardous Substances into or through soil, surface water or groundwater. 
6.2    Access.  Commencing upon the execution of this Agreement by Buyer and Seller, Seller shall allow (or cause to be allowed) Buyer or Buyer’s agents, employees, contractors, lenders or representatives access to the Property for purposes of any non-intrusive physical or environmental test, study or inspection of the Property and, to the extent copies are not provided to Buyer by Seller pursuant to Section 6.1, review and copying of Seller’s books and records relating to the Membership Interests and/or the Property and any of the documents described in Section 6.1 above, and other matters necessary in the discretion of Buyer to evaluate and analyze the feasibility of the Membership Interests and the Property for Buyer’s intended use thereof.  Buyer shall not conduct or authorize any physically intrusive testing of, on, or under the Property without first obtaining Seller’s consent as to the timing and scope of work to be performed, which consent shall not be unreasonably withheld, conditioned or delayed.  Seller hereby acknowledges and agrees that Buyer or Buyer’s representatives may communicate with any governmental authority or quasi-governmental authority for the purpose of gathering information in connection with the Membership Interests, the Property or the Seller, or the transaction contemplated by this Agreement.

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6.3    Title and Survey.
6.3.1    Within three (3) days after the Opening of Escrow, Seller shall cause Escrow Holder to issue to Buyer a current commitment for an owner’s policy of title insurance in the amount of the Purchase Price on an ALTA 2006 form (“Title Commitment”) together with copies of all documents of record reflected therein as exceptions to title at Seller’s sole cost and expense (as provided in Section 11 below).  Buyer shall have thirty (30) days following its receipt of the Title Commitment (“Title Objection Period”) in which to notify Seller in writing of any objections Buyer has, in Buyer’s sole and absolute discretion, to any matters shown on the Title Commitment (“Title Objection Notice”).  All objections raised by Buyer in the manner herein provided are hereafter called “Objections.”  Subject to the limitations set forth in the penultimate sentence of this Section 6.3.1, Seller shall make reasonable efforts to remedy or remove all Objections (or agree irrevocably in writing to remedy or remove all such Objections at or prior to Closing) within fifteen (15) days following Seller’s receipt of the Title Objection Notice (“Seller’s Cure Period”).  In the event Seller is unable to remedy or cause the removal of any Objections (or agree irrevocably to do so at or prior to Closing) within Seller’s Cure Period, then Buyer, within ten (10) days after the expiration of Seller’s Cure Period, shall deliver to Seller written notice electing, in Buyer’s sole and absolute discretion, to either (i) terminate this Agreement, or (ii) unconditionally waive any such Objections, failing which Buyer shall conclusively be deemed to have elected (i) above.  Any new title or survey information received by Seller or Buyer after the expiration of the Title Objection Period or Seller’s Cure Period, as applicable, from a supplemental title report, survey or other source which is not the result of the acts or omissions of Buyer or its agents, contractors or invitees (each, a “New Title Matter”) shall be subject to the same procedure provided in this Section 6.3 (and the Date of Closing shall be extended commensurately if the Closing would have occurred but for those procedures being implemented for a New Title Matter), except that the Buyer’s Title Objection Period and Seller’s Cure Period for any New Title Matters shall be five (5) Business Days each.  Close of Escrow shall be delayed as needed to accommodate such additional time periods.  Seller shall have no obligation to cure title objections except financing liens of an ascertainable amount created by, under or through Seller or Property Owner, which liens Seller shall cause to be released at or prior to Closing (with Seller having the right to apply the Purchase Price or a portion thereof for such purpose), and Seller shall deliver the Membership Interests and the Property free and clear of any such financing liens.  Seller further agrees to remove any exceptions or encumbrances to title which are voluntarily created by, under or through Seller or Property Owner after the date hereof without Buyer’s consent.  The term “Permitted Exceptions” shall mean: the specific exceptions (excluding exceptions that are part of the promulgated title insurance form) in the Title Commitment that Escrow Holder is not permitted to remove; other exceptions to which Buyer has not raised an Objection as provided herein or has subsequently waived such Objection in writing and that Seller is not required to remove as provided above; items shown on the Survey which have not been removed as of the end of the Due Diligence Period; real estate taxes not yet due and payable; and rights of tenants (as tenants only) under the Leases.

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6.3.2    Within three (3) days after the Opening of Escrow, Seller shall provide Buyer with a copy of any existing survey of the Property in Seller’s possession or control.  Buyer, at its sole cost and expense, may elect to obtain a new survey or revise, modify, or re-certify an existing survey of the Property as necessary in order for the title department of Escrow Holder to delete the survey exception from title or to otherwise satisfy Buyer’s objectives.
6.4    Buyer’s Due Diligence.  Subject to Section 21 below, Buyer shall have twenty-five (25) Business Days from and after the later to occur of (i) the Opening of Escrow and (ii) the date of delivery by Seller to Buyer of the Seller's Deliveries, the Title Commitment and related recorded exception documents, and any existing survey (“Due Diligence Period”) to evaluate and analyze the feasibility of the Membership Interests and the Property for Buyer’s intended use thereof, including, without limitation, the zoning of the Property, the physical, environmental and geotechnical condition of the Property and the economic feasibility of owning the Membership Interests and operating the Property.  If, during the Due Diligence Period, Buyer determines that the Membership Interests or the Property are not acceptable for any reason whatsoever in Buyer’s sole and absolute discretion, Buyer shall have the right, by giving written notice to Seller on or before the last day of the Due Diligence Period, to terminate this Agreement.  Buyer agrees to indemnify and hold Seller harmless and defend Seller from and against any claims, liabilities, liens, cause of action, expenses, costs, or damages (including reasonable attorneys’ fees and personal injury claims) resulting from the inspection of the Property prior to the Closing Date by Buyer or Buyer’s contractors, employees, representatives, or agents; provided, however, that Buyer shall not be responsible for any losses or expenses resulting from the discovery of adverse information regarding the Membership Interests or the Property.  In the event this Agreement is terminated for any reason, Buyer shall restore the Property to the extent of any physical change or damage made as a result of the conduct of any inspection or investigation of the Property by Buyer or Buyer’s agents, representatives or contractors to substantially the same condition that existed immediately prior to Buyer’s inspection and investigation.  Any provision to the contrary herein notwithstanding, the provisions of the previous two sentences shall survive termination of this Agreement for any reason for a period of three (3) months and control over any provisions to the contrary herein.
6.5    Buyer’s Termination Right.  If Buyer exercises the right to terminate this Agreement in accordance with Sections 6.3 (including without limitation for any New Title Matter) or 6.4 hereof, this Agreement shall terminate as of the date the termination notice is given by Buyer (except as to such matters that are expressly specified to survive the termination of this Agreement), and Escrow Holder shall return the Deposit to Buyer  If Buyer does not exercise the right to terminate this Agreement in accordance with Sections 6.3 or Section 6.4 hereof, this Agreement shall continue in full force and effect and the Deposit shall become non-refundable except as provided in Section 3.1 above. 
6.6    Contracts.  On or before the expiration of the Due Diligence Period, Buyer shall notify Seller in writing as to which of the Contracts Buyer elects to have continue after Closing, in Buyer’s sole and absolute discretion.  Seller shall notify the vendors under those Contract(s) which Buyer has not agreed to have continue after Closing and, provided that Closing occurs hereunder, such Contracts shall terminate effective as of the Date of Closing. 

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6.7    Radon Holdback.  On or before the expiration of the Due Diligence Period, Buyer and Seller shall mutually agree upon the amount of proceeds of the Purchase Price that will either (a) be held in escrow by Escrow Agent after Closing pending completion of additional long-term (i.e., 90-day) testing with respect to potential radon required by Buyer's lender (the "Radon Holdback") or (b) in the event that such additional long-term testing is not to be conducted, be credited against the Purchase Price for mitigation otherwise mutually agreed to be necessary.  Promptly after Opening of Escrow, Buyer or Buyer's lender, at Buyer's cost, shall obtain a third-party estimate of the costs of mitigation of the Potential Radon (as hereinafter defined).  In the event that the additional long-term testing is to be conducted, the Radon Holdback will be released (in whole or in part, as applicable): (i) to Seller if and to the extent such testing reveals mitigation is not required, or (ii) to Buyer if and to the extent such testing reveals mitigation is required. 
7.    REPRESENTATIONS AND WARRANTIES.
7.1    Seller’s Representations and Warranties.  The representations, warranties and covenants of Seller in this Section 7.1 are a material inducement for Buyer to enter into this Agreement.  Buyer would not purchase the Membership Interests without such representations, warranties and covenants of Seller.  Such representations, warranties and covenants shall survive the Closing for nine (9) months.  Seller represents, warrants and covenants to Buyer as of the date of this Agreement and as of the Closing Date as follows: 
7.1.1    Seller is a limited liability partnership duly organized and validly existing and in good standing under the laws of the State of Kentucky.  Seller has full power and authority to enter into this Agreement and to perform this Agreement, including, without limitation, all right, power and authority to assign, deliver and transfer the Membership Interests as provided by this Agreement.  The execution, delivery and performance of this Agreement by Seller have been duly and validly authorized by all necessary action on the part of Seller and all required consents and approvals have been duly obtained.  This Agreement is a legal, valid and binding obligation of Seller, enforceable against Seller in accordance with its terms.  There is no agreement to which Seller or Property Owner is a party or, to Seller’s knowledge, that is binding on Seller or Property Owner which is in conflict with this Agreement.  At Closing, Seller will convey good and valid title to the Membership Interests to Buyer.

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7.1.2    Seller is the record and beneficial owner of the Membership Interests.  Seller has not previously transferred or assigned or otherwise encumbered all or any portion of the Membership Interests and owns the Membership Interests free and clear of any right, claim, lien, encumbrance, pledge or hypothecation thereof or interest in favor of any other person.  Seller has not granted to any person other than Buyer any options, rights of first offer, rights of first refusal or any other agreement of any kind to purchase or otherwise acquire all or any portion of the Membership Interests.  Except for the Organizational Documents, Property Owner is not a party to, and no Seller is a party to, any voting agreement, voting trusts, proxies or any other agreements, instruments or understandings with respect to the voting of any of the Membership Interests, or any agreements with respect to the transferability of any of the Membership Interests.  The Membership Interests represent all of the rights, titles and interests Property Owner.  There are no subscriptions, warrants, options, conversion rights or other agreements of any kind to purchase or otherwise acquire or sell any membership or other ownership interest in Property Owner.  Property Owner has no subsidiaries.  
7.1.3    The Organizational Documents (i) constitute the entire agreement of Seller with respect to Property Owner, and (ii) have not been amended or otherwise modified except as described on Schedule 5.  Seller has delivered to Buyer prior to the date hereof true, correct and complete copies of the financial statements for Property Owner for the fiscal year ended December 31, 2011 and for the first two quarters of the fiscal year 2012, which includes all material assets and liabilities of Property Owner as of the date thereof, including, without limitation all material known contingent or potential liabilities (the “Financial Statements").  The Financial Statements (including the notes thereto) have been prepared in accordance with sound accounting practices, consistently applied, on a cash basis and present fairly and accurately the financial condition of Property Owner for such periods (including all liabilities and obligations of any kind whether accrued, absolute, fixed or contingent) and no other material liabilities have been or will be incurred for the period commencing April 1, 2012 and ending on the Closing Date other than as set forth in the Financial Statements and there has been and will be no adverse change in the financial condition as reflected therein since the dates of the Financial Statements.  It shall be a condition to Buyer's obligation to close hereunder that Seller deliver to Buyer at Closing updated Financial Statements certified by an officer of Seller and prepared in accordance with sound accounting practices, consistently applied, on a cash basis, dated as of (i) October 31, 2012 showing no material adverse change in the financial condition as reflected therein since the dates of the Financial Statements.  There are no liabilities or other obligations or contingent liabilities or other contingent obligations (together, “Obligations”) of Property Owner as of the Closing Date not set forth in the Financial Statements or attached hereto as Schedule 6 (the “Statement of Liabilities”) that arose, directly or indirectly, from any act of Seller or any of its affiliates.  There are no Obligations of Property Owner that arose prior to the Closing Date directly or indirectly from any act or failure to act of Seller.  Between the date that the most recent of the Financial Statements and the Closing Date, and other than as expressly approved or consented to by Buyer, Property Owner has not and will not incur any obligations, contingent or non-contingent liabilities or liabilities for any charges, long-term leases or unusual forward or long-term commitments. 

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7.1.4    All federal, state and other applicable tax returns required to be filed by or with respect to Property Owner have been filed and all taxes that are due and payable by Property Owner have been paid.  No deficiencies for federal, state or other applicable taxes have been claimed, assessed or proposed against Property Owner by any governmental authority.  There are no pending or, to the knowledge of Seller after due inquiry, threatened audits, investigations or claims for or relating to any liability in respect of federal, state or other applicable taxes, and there are no matters under discussion with any governmental authorities with respect to federal, state or other applicable taxes that could result in an assessment of federal, state or other applicable taxes against Property Owner.  Complete copies of all federal income tax schedules and reports relating to Property Owner and all reports received by Seller or Property Owner from any applicable governmental authority relating to examinations thereof have been (or will be as provided herein) delivered to Buyer.  Neither Seller, nor to its knowledge, any other party has taken any action, or failed to take any action, that would cause Property Owner to be treated as taxable as a corporation for income tax purposes.  
7.1.5    There are no outstanding debts or liabilities between Property Owner and Seller or affiliates of Seller.  Neither Seller nor any affiliate of Seller provides or causes to be provided to Property Owner any products, services, equipment, facilities, or similar items, other than management services (which will terminate at Closing), or has any agreement with Property Owner that will survive Closing.  Neither Property Owner nor any other person or entity has or may have any claims against Seller due to matters arising under the terms of the Organizational Documents or against Seller or Property Owner as a result of any act or omission of Seller with respect to Property Owner or its property, assets or business prior to the Closing (collectively, the “Residual Claims”); it being understood and agreed that such Residual Claims shall remain an obligation of Seller (provided however, that in no event shall Residual Claims include claims by Buyer against Seller relating to the physical or environmental condition of the Property except to the extent such claims arise under this Agreement as a result of a breach of a representation or warranty by Seller, a default by Seller or an indemnification obligation of Seller, each as and to the extent expressly provided in this Agreement).
7.1.6    Property Owner is a limited liability company duly organized and validly existing and in good standing under the laws of the State of Kentucky.  Seller currently has, and as of the Closing Date Property Owner will have, good and indefeasible title to the Real Property, free and clear of all liens, encumbrances, security interests and adverse claims of any kind or nature whatsoever other than the Permitted Encumbrances.  Property Owner has full power and authority to carry on the business it currently conducts and, Seller currently has, and as of the Closing Date Property Owner will have, full power and authority to own, market, sell, lease and use the Property.  

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7.1.7    All of the Personal Property is described in Exhibit “B” attached hereto, which is a materially accurate and materially complete list of all tangible and intangible personal property owned by Seller or Property Owner relating to the ownership, management, operation, maintenance or repair of the Real Property.  No tangible and intangible personal property relating to the ownership, management, operation, maintenance or repair of the Real Property is owned by Seller or any affiliate of Seller (other than Property Owner), other than intangible personal property owned by Seller or any affiliate of Seller (other than Property Owner) that (i) will be transferred or otherwise conveyed to Property Owner on the Closing Date or (ii) does not relate to the Real Property and/or Property Owner.  All of the Personal Property is located at the Real Property.  Except for the liens granted to Lenders (as hereinafter defined), which Seller shall cause to be removed from title at or before Closing pursuant to subsection 7.1.19 below, Seller currently has, and as of the Closing Date Property Owner will have, good title to the Personal Property, free and clear of all liens, encumbrances, security interests and adverse claims of any kind or nature whatsoever.
7.1.8    All of the Leases are described in Schedule 1 attached hereto, and there are no persons leasing, using or occupying the Real Property or any part thereof except the tenants under the Leases.  All of the Contracts are described in Schedule 2 attached hereto, which is an accurate and complete list of all presently effective contracts, agreements, warranties and guaranties relating to the leasing, advertising, promotion, design, construction, ownership, management, operation, maintenance or repair of the Real Property.  All of the Approvals are described in Schedule 3 attached hereto, which is an accurate and complete list of all presently effective building permits, certificates of occupancy, and other certificates, permits, licenses and approvals relating to the design, construction, ownership, occupancy, use, management, operation, maintenance or repair of the Real Property.  Except for the liens granted to Lenders (as hereinafter defined), which Seller shall cause to be removed from title at or before Closing pursuant to subsection 7.1.19 below, Seller currently has, and as of the Closing Date Property Owner will have, good title to the Leases, the Contracts and the Approvals, free and clear of all liens, encumbrances, security interests and adverse claims of any kind or nature whatsoever.  To Seller’s knowledge, all of the copies of the documents delivered to Buyer pursuant to Section 6.1 hereof are accurate and complete copies of all originals of the documents described in Section 6.1 hereof and fairly and accurately represent the financial, physical and environmental condition of the Membership Interests and the Property.

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7.1.9    All information provided to Buyer concerning the Leases is accurate and complete.  Except as disclosed to Buyer, to the knowledge of Seller, the Leases are in full force and effect and the full current rent is accruing thereunder.  The Leases have not been amended or modified except as disclosed in writing to Buyer.  No monthly rent has been paid more than one (1) month in advance (except as otherwise expressly permitted or required pursuant to the terms of the Lease) and no security deposit or prepaid rent has been paid except as otherwise disclosed in writing to Buyer.  No tenant under the Leases is entitled to interest on any security deposit.  The tenants have accepted possession of their respective premises under the Leases and all improvements and construction required to be performed by the landlord under the Leases have been completed.  Except as set forth on the rent roll delivered to Buyer, to the knowledge of Seller, there is no existing breach or default by the landlord or by any tenant under the Leases and, to Seller’s knowledge, the tenants have no defenses, claims or demands against the landlord, under the Leases or otherwise, which can be offset against rents or other charges due or to become due under the Leases.  To Seller’s knowledge, no event has occurred or condition exists which, with or without notice or the passage of time, or both, would constitute a breach or a default by the landlord or by any tenant under the Leases.  To Seller’s knowledge, Seller has received no notice from any tenant under the Leases claiming any breach or default by Seller under any of the Leases.  To the knowledge of Seller, no money is owed to any tenant for improvements or otherwise under the Leases and no improvement, moving, relocation or other payment or credit of any kind is presently owed, or will or could become due and payable, to any tenant under the Leases.  There are no leasing commissions or other commissions, fees or compensation presently owed or which will become due and payable with respect to any of the Leases or which could become due and payable in the future upon the exercise of any right or option contained in any of the Leases.  Except for liens granted to Lenders, which Seller shall cause to be removed from title at or before Closing pursuant to subsection 7.1.19 below, neither Seller nor Property Owner has assigned, transferred, pledged or encumbered in any manner any of the Leases or any rents or other amount payable by any tenant thereunder.  To Seller’s knowledge, the information contained in the rent roll attached hereto as Schedule 4 is true and complete in all material respects.
7.1.10    To Seller’s knowledge, there are no defects or deficiencies in the design, construction, fabrication, manufacture or installation of the improvements to the Real Property or any part thereof or any system, element or component thereof.  To Seller’s knowledge, all systems, elements and components of the Property (including all machinery, fixtures and equipment, the roof, foundation and structural elements, and the elevator, mechanical, electrical and life safety systems) are in good working order and repair and sound operating condition.  To Seller’s knowledge, the Approvals have been duly and validly issued, are in full force and effect, and are all of the certificates, permits, licenses and approvals that are required by law to own, operate, use and occupy the Real Property as it is presently owned, operated, used and occupied.  Seller and/or Property Owner has fully performed, satisfied and discharged all of the obligations, requirements and conditions imposed on the Real Property by the Approvals.

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7.1.11    Neither Seller nor Property Owner has received any written notice of any kind from any insurance broker, agent or underwriter that any noninsurable condition exists in, on or about the Real Property or any part thereof.  Neither Seller nor Property Owner has received any written notice that the Real Property is in violation of any applicable building, earthquake, zoning, land use, environmental, antipollution, health, fire, safety, access and accommodations for the physically handicapped, subdivision, energy and resource conservation and similar laws, statutes, rules, regulations and ordinances or any covenants, conditions and restrictions applicable to the Real Property.  
7.1.12    To Seller’s knowledge, except with respect to the potentially elevated levels of radon identified in the draft Phase I Environmental Site Assessment prepared by GRS Group for Buyer's lender on or about the date hereof (the "Potential Radon"), there are no Hazardous Substances present in, on or under the Real Property or any nearby real property which could migrate to the Real Property, and to Seller’s knowledge, there is no present Release or threatened Release of any Hazardous Substances in, on or under the Real Property in violation of applicable laws.  Neither Seller nor Property Owner has ever used the Real Property or any part thereof, or has ever permitted any person to use the Real Property or any part thereof, for the production, processing, manufacture, generation, treatment, handling, storage or disposal of Hazardous Substances in violation of applicable Environmental Laws.  To Seller’s knowledge, no underground storage tanks of any kind are located at the Real Property.  To Seller’s knowledge, except with respect to the Potential Radon, the Real Property and every part thereof, and all operations and activities therein and thereon and the use and occupancy thereof, comply with all applicable Environmental Laws, and neither Seller, Property Owner, nor any person using or occupying the Real Property or any part thereof is violating any Environmental Laws.  To Seller’s knowledge, Seller currently has, and as of the Closing Date Property Owner will have, all permits, licenses and approvals (which are included in the Approvals) required by all applicable Environmental Laws for the use and occupancy of, and all operations and activities in, the Real Property.  To Seller’s knowledge, Seller currently is, and as of the Closing Date Property Owner will be, in full compliance with all such permits, licenses and approvals, and to Seller’s knowledge, all such permits, licenses and approvals are in full force and effect.  No claim, demand, action or proceeding of any kind relating to any past or present Release or threatened Release of any Hazardous Substances in, on or under the Real Property or any past or present violation of any Environmental Laws at the Real Property has been made or commenced, or is pending, or to Seller’s knowledge is being threatened or contemplated by any person.  Seller shall not be deemed to have breached the foregoing representations and warranties with respect to the safe and lawful use and storage by Seller, Property Owner, any tenant or any other person of quantities of (i) pre-packaged supplies, cleaning materials and petroleum products customarily used in the operation and maintenance of comparable multifamily properties, (ii) cleaning materials, personal grooming items and other items sold in pre-packaged containers for consumer use and used by tenants and occupants of residential dwelling units in the Property, and (iii) petroleum products used in the operation and maintenance of motor vehicles from time to time located on the Property’s parking areas, so long as all of the foregoing are used, stored, handled, transported and disposed of in compliance with Environmental Laws (collectively, the "Lawful Substances").

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7.1.13    There is no litigation, arbitration or other legal or administrative suit, action, proceeding or investigation of any kind pending (including, without limitation, involving the federal Department of Housing and Urban Development) or to Seller’s knowledge threatened or being contemplated against or involving Seller or Property Owner relating to the Membership Interests, the Property or any part thereof and, to Seller’s knowledge, there is no valid basis for any such litigation, arbitration or other legal or administrative suit, action, proceeding or investigation (including, without limitation, involving the federal Department of Housing and Urban Development).  To Seller’s knowledge, there is no general plan, land use or zoning action or proceeding of any kind, or general or special assessment action or proceeding of any kind, or condemnation or eminent domain action or proceeding of any kind pending or threatened or being contemplated with respect to the Membership Interests, the Real Property or any part thereof.  There is no legal or administrative action or proceeding pending to contest or appeal the amount of real property taxes or assessments levied against the Real Property or any part thereof or the assessed value of the Real Property or any part thereof for real property tax purposes.  To Seller’s knowledge, no supplemental real property taxes have been or will be levied against or assessed with respect to the Real Property or any part thereof based on any change in ownership or new construction or other event or occurrence relating to the Real Property before the date of this Agreement, except any such supplemental real property taxes as have been paid in full and discharged.  
7.1.14    To Seller’s knowledge, all water, sewer, electric, telephone and drainage facilities and all other utilities required by law or reasonably necessary or proper and usual for the full operation, use and occupancy of the Real Property are installed to the boundary lines of the Real Property, are connected with valid permits, if required, and are adequate to service the Real Property and to allow full compliance with all applicable laws, and the cost of installation and connection of all such utilities to the Property has been fully paid. 
7.1.15    Seller is not “foreign person” as defined in Section 1445 of the Internal Revenue Code of 1986, as amended, and the Income Tax Regulations thereunder. 
7.1.16    No withholding of tax or reporting will be required with respect to the sale of the Membership Interests by Seller. 
7.1.17    Neither Seller nor Property Owner has made a general assignment for the benefit of its creditors, or admitted in writing its inability to pay its debts as they become due, nor has Seller or Property Owner filed, nor does it contemplate the filing of, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or any other proceeding for the relief of debts in general, nor has any such proceeding been instituted by or against Seller or Property Owner.
7.1.18    Except for ARA/Midwest, Seller has not dealt with any investment adviser, real estate broker or finder, or incurred any liability for any commission or fee to any investment adviser, real estate broker or finder, in connection with the sale of the Membership Interests to Buyer or this Agreement.

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7.1.19    Any loans with lenders with liens affecting the Membership Interests and/or the Property, including, without limitation, BB&T (collectively, “Lenders”), are currently in good standing and not in default, and Seller shall cause all lenders, including, without limitation, Lenders, to reconvey or release such liens at the Close of Escrow.
7.1.20    The transaction contemplated by this Agreement (and any underlying obligations contemplated by this Agreement) does not and shall not constitute a non-exempt prohibited transaction under the Employee Retirement Income Security Act of 1974 (“ERISA”) or a comparable violation of state law.
7.1.21    Neither Seller nor Property Owner is any of the following:  (i) a person or entity that is listed in the annex to, or is otherwise subject to the provisions of, Executive Order No. 13224 on Terrorist Financing (effective September 24, 2001) (herein called the “Executive Order”); (ii) a person or entity owned or controlled by, or acting for or on behalf of any person or entity that is listed in the Annex to, or is otherwise subject to the provisions of, the Executive Order; (iii) a person or entity that is named as a “specifically designated national” or “blocked person” on the most current list published by the U.S. Treasury Department’s Office of Foreign Assets Control (herein called “OFAC”) at its official website, http://www.treas.gov/offices/enforcement/ofac; (iv) a person or entity that is otherwise the target of any economic sanctions program currently administered by OFAC; or  (v) a person or entity that is affiliated with any person or entity identified in the foregoing clauses (i), (ii), (iii), or (iv).
7.1.22    Property Owner owns no real property or personal property except, as of the Closing Date, the Property.  As of the Closing Date, Seller will own no real or personal property located on or used in connection with the Property.
7.1.23    To Seller’s knowledge, all of the Seller Deliveries provided to Buyer are true and complete copies of such documents.  To Seller’s knowledge, Seller has used commercially reasonable efforts to disclose to Buyer, in writing (which disclosure may be by delivery of the Seller Deliveries), all material information, knowledge and findings relating to the Membership Interests and the Property and its operations in Seller’s possession or control.
7.1.24    All employees of Seller or Property Owner or any property manager employed at or in connection with the Property have been paid their respective salaries and any fringe benefits (including vacation and sick-leave) accruing through the date hereof and will be paid in full as of the Closing Date. 
7.2    Buyer’s Representations and Warranties.  Buyer represents and warrants to Seller as follows:
7.2.3    Buyer is a corporation, duly formed, validly existing, and in good standing under the laws of the State of California.

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7.2.4    Buyer has all requisite power and authority to execute and deliver this Agreement and to carry out its obligations hereunder and the transactions contemplated hereby.  This Agreement has been, and the documents contemplated hereby will be, duly executed and delivered by Buyer and constitute its legal, valid, and binding obligation enforceable against it in accordance with its terms.  
7.2.5    Except for ARA/Midwest, Buyer has not dealt with any investment adviser, real estate broker or finder, or incurred any liability for any commission or fee to any investment adviser, real estate broker or finder, in connection with the purchase of the Membership Interests or this Agreement.
8.    COVENANTS.
8.1    Seller.  Seller covenants and agrees with Buyer as follows:
8.1.6    Between the date of this Agreement and the Closing Date, neither Seller nor Property Owner shall execute any additional lease affecting the Real Property or amend, modify, renew, extend or terminate any of the Leases, the Contracts or the Approvals in any respect without the prior approval of Buyer, which approval may not be unreasonably withheld by Buyer; provided, however, that any Leases which are either executed or renewed on a month-to-month basis or which are consistent with the current leasing practices of Seller, including, without limitation, current rental rates, shall be deemed to be automatically approved by Buyer, and provided further that any Contracts that are not terminable upon no more than thirty (30) days notice may be disapproved by Buyer in its sole and absolute discretion.  Further, Buyer shall be deemed to have approved a proposed Lease if Buyer has not made an objection to such contract within two (2) Business Days of a receipt of a written request for approval.  Further, Seller, in emergency situations or in situations that are critical to the operation of the Property, may enter into Contracts for goods and services without the approval of Buyer, provided that such Contracts must be terminable upon no more than thirty (30) days notice without payment of any penalty or fee.  Between the date of this Agreement and the Closing Date, neither Seller nor Property Owner shall consent to any assignment or sublease requested by any tenant under any of the Leases without the prior approval of Buyer, which approval shall not be unreasonably withheld or delayed.  Between the date of this Agreement and the Closing Date, Seller shall manage, operate, maintain and repair the Real Property and the Personal Property in the ordinary course of business in accordance with Seller's existing practices (including, without limitation, maintenance of substantially the same advertising and marketing programs for the Real Property in effect as of the date of this Agreement), comply with the Approvals and all covenants, conditions, restrictions, laws, statutes, rules, regulations and ordinances applicable to the Real Property or the Personal Property, keep the Leases, the Contracts and the Approvals in force, immediately give Buyer copies of all notices received by Seller and/or Property Owner asserting any breach or default under the Leases or the Contracts or any violation of the Approvals or any covenants, conditions, restrictions, laws, statutes, rules, regulations or ordinances applicable to the Membership Interests, the Real Property or the Personal Property, and perform when due all of Seller's obligations under the Leases, the Contracts and the Approvals in accordance with the Leases, the Contracts and the Approvals and all applicable laws.  Neither Seller nor Property Owner shall (i) create or agree to any easements, liens, mortgages, encumbrances or 

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other interests that would affect the Membership Interests or the Property or Seller’s ability to comply with this Agreement; (ii) initiate or consent to, approve or otherwise take any action with respect to zoning or any other governmental rules or regulations presently applicable to all or any part of the Real Property; (iii) fail to pay when due and payable all taxes and other public charges assessed against the Membership Interests, the Real Property, Property Owner or Seller; (iv) fail to keep current and free from monetary or material non-monetary default any and all secured financing against the Membership Interests or the Property; or (v) fail to pay in a timely fashion all proper bills for labor or services for work performed for or on behalf of Seller or Property Owner with respect to the Membership Interests or the Property.  Between the date of this Agreement and the Closing Date, Seller and/or Property Owner shall keep in force property insurance covering all buildings, structures, improvements, machinery, fixtures and equipment included in the Real Property insuring against all risks of physical loss or damage, subject to standard exclusions, in an amount equal to the actual replacement cost (without deduction for depreciation) of such buildings, structures, improvements, machinery, fixtures and equipment.
8.1.7    Between the date of this Agreement and the Closing Date, neither Seller nor Property Owner shall use, produce, process, manufacture, generate, treat, handle, store or dispose of any Hazardous Substances in violation of applicable laws in, on or under the Real Property, or use the Real Property for any such purposes, or, except for the Potential Radon, Release any Hazardous Substances in violation of applicable laws, into any air, soil, surface water or groundwater comprising the Real Property, or permit any person using or occupying the Real Property or any part thereof to do any of the foregoing.  Between the date of this Agreement and the Closing Date, Seller and Property Owner shall comply, and shall cause all persons using or occupying the Real Property or any part thereof to comply, with all Environmental Laws applicable to the Real Property, or the use or occupancy thereof, or any operations or activities therein or thereon.  Between the date of this Agreement and the Closing Date, Seller and/or Property Owner shall duly obtain all permits, licenses and approvals required by all applicable Environmental Laws for the use and occupancy of, and all operations and activities in, the Real Property, comply fully with all such permits, licenses and approvals, and keep all such permits, licenses and approvals in full force and effect.  Immediately after Seller or Property Owner obtains any information indicating that any Hazardous Substances other than the Potential Radon may be present or any Release or threatened Release of Hazardous Substances may have occurred in, on or under the Real Property (or any nearby real property which could migrate to the Real Property) or that any violation of any Environmental Laws may have occurred at the Real Property, Seller shall give written notice thereof to Buyer with a reasonably detailed description of the event, occurrence or condition in question.  Seller shall immediately furnish to Buyer copies of all written communications received by Seller or Property Owner from any person (including notices, complaints, claims or citations that any Release or threatened Release of any Hazardous Substances or any violation of any Environmental Laws has actually or allegedly occurred) or given by Seller or Property Owner to any person concerning any past or present Release or threatened Release of any Hazardous Substances in, on or under the Real Property (or any nearby real property which could migrate to the Real Property) or any past or present violation of any Environmental Laws at the Real Property.  Seller shall not be deemed to have breached the foregoing covenants with respect to Lawful Substances.

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8.1.8    Seller shall use commercially reasonable efforts, in good faith and with diligence, to cause all of the representations and warranties made by Seller in Section 7.1 hereof to be true and correct on and as of the Closing Date.  
8.1.9    Seller shall promptly notify Buyer in writing of any litigation, arbitration, condemnation or administrative hearing before any court or governmental agency concerning Seller, Property Owner, the Membership Interests or the Property which is instituted after the date hereof, other than eviction or unlawful detainer actions that will be completed prior to Closing.
8.1.10    Seller shall indemnify and defend Buyer against and hold Buyer harmless from all claims, demands, liabilities, losses, damages, costs and expenses, including reasonable attorneys’ fees and disbursements, (i) that may be suffered or incurred by Buyer if any representation or warranty made by Seller in Section 7.1 hereof was untrue or incorrect in any material respect when made or on the Closing Date, or that may be caused by any material breach by Seller of any such representation or warranty, (ii) that may be suffered or incurred by Buyer or Property Owner as a result of (a) fraud or misappropriation or misapplication of funds of Property Owner committed by Seller or any of its affiliates, (b) entering into, terminating or otherwise modifying any material contract to which Property Owner is a party by Seller or any of its affiliates in violation of the Organizational Documents, (c) theft, embezzlement, intentional destruction or committing waste to the Property by Seller or any of its affiliates, (d) gross negligence of Seller or any of its affiliates, (e) any other intentional misconduct, breach of a fiduciary duty or illegal acts not set forth above, or (f) any Residual Claims, and (iii) arising from or based on any condition, event or circumstance relating to the Membership Interests that existed or occurred before the Closing Date, or any personal injury occurring in, on or about the Real Property before the Closing Date.  Any claim of Buyer in connection with said indemnities shall be made within nine (9) months after the Closing or shall automatically be null, void and of no force or effect whatsoever, and Buyer’s remedies for any such claim shall be limited to recovery of damages not to exceed ONE MILLION AND 00/100 DOLLARS ($1,000,000.00); provided, however, that there shall be no such monetary limitation on Buyer’s damages in connection with any third party personal injury claims or claims by made by tenants for breach of a Lease; provided, however, that said ONE MILLION DOLLAR cap shall be reduced to Buyer's actual third-party costs and damages (not to exceed $500,000 in the aggregate) with respect to a loss under subsection (i) hereof if such failure or breach by Seller does not constitute an Intentional Seller Default.
8.1.11    Between the date of this Agreement and the Closing Date, except as required under Section 8.1.10, neither Seller nor Property Owner shall in any manner sell, convey, assign, transfer, encumber or otherwise dispose of the Membership Interests, the Property or any part thereof or interest therein.
8.1.12    Between the date of this Agreement and the Closing Date, and other than as expressly approved or consented to by Buyer, Property Owner will not incur any obligations, or liabilities (contingent or non-contingent) for any long-term leases or unusual forward or long-term commitments.

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8.1.13    Seller shall pay all commissions, fees and expenses due to ARA/Midwest, in respect of the sale of the Membership Interests to Buyer or this Agreement.  Seller hereby agrees to indemnify and hold Buyer harmless from and against any and all claims for brokerage or finder’s fees or other similar commissions or compensation made by any and all other brokers or finders claiming to have dealt with Seller in connection with this Agreement or the consummation of the transaction contemplated hereby.  The indemnification obligations of Seller set forth in this Section 8.1.6 shall survive the Closing or the termination of this Agreement for any reason for a period of nine (9) months.
8.1.14    Seller shall not dissolve its existing entity and shall remain validly existing and in good standing under the laws of the State of Kentucky during the period commencing on the date of this Agreement and ending on the date that is nine (9) months after the Closing Date; provided, however, that if Buyer gives Seller written notice of a claim under this Agreement on or before the expiration of such period, such covenant shall extend until the later to occur of (a) the date that is eighteen (18) months after the Closing Date, or (b) the date such claim has been satisfactorily resolved as determined by the mutual agreement of Seller and Buyer or by a court of competent jurisdiction. 
8.1.15    On the Closing Date, but immediately prior to Closing, Seller shall convey, assign, or otherwise transfer all of the Property to Property Owner.
8.2    Buyer.  Buyer covenants and agrees with Seller as follows:
8.2.1    All representations and warranties made by Buyer in Section 7.2 hereof shall survive the Closing for a period of nine (9) months.  Buyer shall use commercially reasonable efforts, in good faith and with diligence, to cause all of the representations and warranties made by Buyer in Section 7.2 hereof to be true and correct on and as of the Closing Date.  Buyer shall indemnify and defend Seller against and hold Seller harmless from all claims, demands, liabilities, losses, damages, costs and expenses, including reasonable attorneys’ fees and disbursements, that may be suffered or incurred by Seller if any representation or warranty made by Buyer in Section 7.2 hereof was untrue or incorrect in any material respect when made or that may be caused by any breach by Buyer of any such representation or warranty. 
8.2.2    Subject to Seller’s representations, warranties and covenants set forth in Section 7.1 above, Buyer shall indemnify and defend Seller against and hold Seller harmless from all claims, demands, liabilities, losses, damages, costs and expenses, including reasonable attorneys’ fees and disbursements, arising from or based on any failure by Buyer to perform all obligations of Buyer in accordance with the Leases or the Contracts arising or accruing on or after the Closing Date and during Buyer’s ownership of the Membership Interests or any breach, default or violation by Buyer (or any event by Buyer or condition which, after notice or the passage of time, or both, would constitute a breach, default or violation by Buyer) under the Leases or the Contracts that occurs on or after the Closing Date and during Buyer’s ownership of the Membership Interests, except to the extent that such claims, demands, liabilities, losses, damages, costs and expenses arise out of or relate to any Residual Claim.  

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9.    ADJUSTMENTS AND PRORATIONS.
9.1    Generally.  All taxes (including, without limitation, real estate taxes and personal property taxes), collected rents, laundry income, parking income, furniture rental, charges for utilities (including water, sewer, and fuel oil) and for utility services, maintenance services, maintenance and service contracts, all operating costs and expenses, and all other income, costs, and charges of every kind which in any manner relate to the operation of the Property (but not including insurance premiums) shall be prorated as of 11:59 pm the day prior to the Date of Closing.  If the amount of said taxes, assessments, rents, income, costs, charges, etc. is not known at such time, they shall be apportioned on the basis of the amounts for the preceding year, with a reapportionment as soon as the new amounts can be ascertained.  Any deposits on utilities paid by Seller shall be returned to Seller.  On the Date of Closing, Seller shall deliver to Buyer all inventories of supplies on hand at the Property owned by Seller or Property Owner, if any, at no additional cost to Buyer.  All cash that Property Owner has on-hand as of 11:59 pm the day prior to the Closing Date will be paid to Seller at the Closing.  Seller’s insurance policies will not be assigned to Buyer; it being understood that Seller will have no responsibility for maintaining any insurance policies with respect to the Property and Property Owner for any period from and after the Closing.
9.2    Rental Income.  Rental income from the Property shall be prorated as of 11:59 pm the day prior to the Closing Date.  Non-delinquent rents shall be prorated as of 11:59 pm the day prior to the Closing Date.  Rents delinquent as of such time, but collected later, shall be prorated as of 11:59 pm the day prior to the Closing Date when collected. Rents collected after the Closing Date from tenants whose rental was delinquent at the Closing Date shall be deemed to apply first to the current rental due at the time of payment and second to rentals which were delinquent at the Closing Date.  Rents collected after the Closing Date to which Seller is entitled shall be promptly paid to Seller.  For a period of sixty (60) days after the Closing Date, Buyer shall use reasonable efforts to collect all rents which are delinquent as of the Closing Date with no obligation to incur any expenses or commence litigation to collect such rents.  Commencing as of sixty one (61) days after the Closing Date, Seller may use reasonable efforts, including litigation, to collect any rents delinquent as of the Closing Date which are still uncollected; provided, however, in exercising its remedies against tenants as outlined in this Section, Seller shall not evict any tenant of the Property or otherwise unreasonably interfere with Buyer’s or Property Owner's operation of the Property.  With respect to security deposits, if any, made by tenants at the Property, Buyer shall receive credit therefor at Closing.  Any leasing commissions with respect to the Leases shall be the sole responsibility of Seller, and shall be paid or discharged fully at or prior to Closing.  
9.3    Proration Period.  If any of the items subject to proration hereunder cannot be prorated because the information necessary to compute such proration is unavailable, or if any errors or omissions in computing prorations at the Close of Escrow are discovered subsequent to the Close of Escrow, then such item shall be reapportioned and such errors and omissions corrected as soon as practicable after the Close of Escrow and the proper party reimbursed. 

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9.4    Rent Ready.  Not more than forty-eight (48) hours prior to the Closing Date, a representative of Buyer and a representative of Seller shall conduct an onsite walk-through of the then unoccupied rental units on the Property to determine whether any of such unoccupied rental units are in “rent ready” condition.  With respect to any rental unit which is vacated on or before five (5) days prior to Closing, Seller shall, at Seller’s option, either (i) make such unoccupied rental unit into a “rent ready” condition, or (ii) provide Buyer with a credit against the Purchase Price due at Closing in the amount of One Thousand Five Hundred Dollars ($1,500.00) per such unoccupied rental unit.  With respect to any rental unit that is vacated later than five (5) days prior to Closing, Seller shall have no responsibility or liability to put such unoccupied rental unit into a “rent ready” condition, and Seller shall not have to compensate Buyer if such unit is not “rent ready” as of the Closing Date.  “Rent ready” condition shall mean the Seller's current practice of placing units in “rent ready” condition.
10.    CLOSING DOCUMENTS.
10.1    Seller’s Deliveries.  Conditioned upon performance by Buyer hereunder, Seller shall execute and/or deliver, as applicable, to Escrow Holder or Buyer prior to Closing the following documents and other deliveries:
10.1.1    Assignment.  An assignment and assumption of Membership Interests executed by Seller and Buyer in the form of attached Exhibit “D” (the “Assignment”);
10.1.2    Assignment and Assumption of Leases, Contracts and Approvals.  An assignment of all of Seller’s right, title and interest in and to the Leases, Contracts and Approvals to Property Owner in the form of attached Exhibit “E” (“General Assignment”);
10.1.3    Bill of Sale.  A bill of sale in the form of attached Exhibit “F”, assigning and transferring to Property Owner all of the right, title, and interest of Seller in and to the Personal Property;  
10.1.4    Non-Foreign Certificates.  Certifications that Seller is not a non-resident aliens (a foreign corporation, partnership, trust, or estate as defined in the Internal Revenue Code and Treasury Regulations promulgated thereunder), in favor of Property Owner and Buyer, each in the form of attached Exhibit “G”; and
10.1.5    Tenant Notices.  Notices to the tenants under all Leases in the form of attached Exhibit “H”.
10.1.6    Deed.  A warranty deed in favor of Property Owner with respect to the Real Property, executed by Seller in the form of attached Exhibit “I” (the “Deed”), subject only to the Permitted Exceptions; 

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10.1.7    Affidavit(s).  An affidavit(s) as to construction, debts, liens and parties in possession in the form customarily used by Escrow Holder, certified to Property Owner, Buyer and Escrow Holder, identifying no construction, debts, liens or parties in possession (other than residential tenants disclosed to Buyer) that may affect the Membership Interests and/or the Property after the Closing Date.
10.1.8    Possession.  Sole possession of the Membership Interests and the Property, subject to rights of tenants in possession as tenants only under the Leases, and of all books and records of Property Owner and any other property and assets of Property Owner in the possession or under the control of Seller.  
10.1.9    Accounts.  If requested by Buyer, notices closing all existing bank accounts.
10.1.10    Application to Change EIN/754 Election.  A completed application for change of the Employer Identification Number of Property Owner and, if requested by Buyer, any necessary tax elections under Section 754 of the Internal Revenue Code. 
10.1.11    Financial Statements.  Financial statements for the period between January 1, 2012 and the most recent month ending at least 30 days prior to Closing, prepared in a manner substantially consistent with the preparation of the Financial Statements.
10.1.12    Waiver of Rights Under Organizational Documents.  If requested by Buyer in writing, an executed waiver by Seller of any options, rights of offer, rights of first refusal or any other right of any kind to purchase or otherwise acquire all or any portion of the Membership Interests that is contained with the Organizational Documents.
10.1.13    Updated Rent Roll.  A current rent roll for the Property in the form of the rent roll attached as Schedule 4.  
10.2    Buyer’s Deliveries.  Conditioned upon performance by Seller hereunder, Buyer shall execute and deliver to Escrow Holder prior to Closing the Assignment.
10.3    Other Closing Documents.  Each party shall deliver to the other party or Escrow Holder such duly executed and acknowledged or verified certificates, affidavits, and other usual and customary closing documents respecting the power and authority to perform the obligations hereunder and as to the due authorization thereof by the appropriate corporate, partnership, or other representatives acting for it, as counsel for the other party or Escrow Holder may reasonably request, and such conveyancing or transfer tax forms or returns, if any, as are required to be delivered by Seller or Buyer under applicable state or local law in connection with the conveyance of the Membership Interests.  Each party shall deliver any additional documents that the other party or Escrow Holder may reasonably require for the proper consummation of the transaction contemplated by this Agreement; provided, however, no such additional document shall expand any obligation, covenant, representation or warranty of such party or result in any new or additional obligation, covenant, representation or warranty of such party under this Agreement beyond those expressly set forth in this Agreement.

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10.4    Closing Documents.  All documents to be delivered to Escrow Holder pursuant to this Section 10 shall hereinafter be referred to as “Closing Documents”.
11.    COSTS.  Seller shall pay all real estate transfer taxes and documentary stamps and the costs of any endorsements to the Title Policy (as hereinafter defined) to the extent that such endorsements are necessary to cure any Title Objections that Seller agreed or was required to cure, and the cost of preparation of Seller’s Closing Documents.  Buyer shall pay the cost of the Title Commitment and any updates thereto, the cost of a standard ALTA Owner’s Policy of Title Insurance (the “Title Policy”, the cost for any extended ALTA title insurance coverage, if desired, the cost of any endorsements to the Title Policy (if requested by Buyer other than those required to be paid by Seller), the cost of preparation of Buyer’s Closing Documents, and the cost of any updated survey, if desired.  Seller and Buyer shall each pay one-half (1/2) of (i) Escrow Holder’s escrow fee in an amount not to exceed $6,000.00 (excluding charges assessed by Escrow Holder for special services, which shall be paid by the party requesting or using such special services), (ii) recording fees for the Deed, and (iii) other closing costs.  Each party shall pay its own attorney’s fees.  
12.    CASUALTY OR CONDEMNATION.  During the period from the Opening of Escrow through Closing, all risk of loss from fire or other casualty or condemnation shall be borne by Seller.  If, before the Closing Date, (i) the improvements on the Real Property are materially damaged by any casualty, as reasonably determined by Buyer, or (ii) proceedings are commenced for the taking by exercise of the power of eminent domain of all or a material part of the Property, as reasonably determined by Buyer, Buyer shall have the right, by giving notice to Seller within twenty (20) days after Seller gives written notice of the casualty or condemnation to Buyer, to terminate this Agreement, in which event this Agreement shall automatically terminate and the Deposit shall be returned to Buyer.  If, before the Closing Date, (a) the improvements on the Real Property are damaged by any casualty, but not in a material manner,  (b) proceedings are commenced for the taking by exercise of the power of eminent domain of less than such a material part of the Property, or (c) Buyer has the right to terminate this Agreement pursuant to the preceding sentence but Buyer does not exercise such right, then this Agreement shall remain in full force and effect and, on the Closing Date, one of the following shall occur, as applicable: (1) the full repair and restoration cost, as mutually determined by Buyer and Seller, shall be a credit to Buyer against the total Purchase Price for the Membership Interests, or (2) the condemnation award (or, if not theretofore received, the right to receive such award) payable on account of the taking shall be transferred to Buyer.  Seller shall give notice to Buyer immediately after the occurrence of any damage to the improvements on the Real Property by any casualty or the commencement of any eminent domain proceedings.  Buyer shall have a period of twenty (20) days after Seller has given the notice to Buyer required by this Section 12 to make the determination as to whether to terminate this Agreement.  If necessary, the Closing Date shall be postponed until Seller has given the notice to Buyer required by this Section 12 and the period of twenty (20) days described in this Section 12 has expired.
13.    ATTORNEYS’ FEES.  In any action to enforce or interpret the provisions of this Agreement, the prevailing party shall be entitled to an award of its attorneys’ fees and costs.

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14.    ASSIGNMENT.  Buyer shall have the right, by giving notice to Seller before the Closing Date, to assign this Agreement or to have Seller convey, assign and transfer the Membership Interests at the Closing in accordance with this Agreement to any person or entity designated by Buyer in such notice.  
15.    WAIVER.  No waiver of any breach of any agreement or provision contained herein shall be deemed a waiver of any preceding or succeeding breach of any other agreement or provision herein contained.  No extension of time for the performance of any obligation or act shall be deemed an extension of time for the performance of any other obligation or act.
16.    GOVERNING LAW.  This Agreement shall be construed under the laws of the State of Kentucky (without regard to the principles thereof governing conflicts of laws).

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17.    NOTICES.  All notices required or permitted to be given hereunder shall be in writing and sent by overnight delivery service (such as Federal Express), in which case notice shall be deemed given on the day after the date sent, or by personal delivery, in which case notice shall be deemed given on the date received, or by certified mail, in which case notice shall be deemed given three (3) days after the date sent, or by electronic mail (with copy by overnight delivery service), in which case notice shall be deemed given on the date sent, to the appropriate address set forth below or at such other place or places as either Buyer or Seller may, from time to time, respectively, designate in a written notice given to the other in the manner described above.
	
		
	To Seller:

With Copy To:

	Ball Homes
3609 Walden Drive 
Lexington, KY  40517 
Attn:  D. Ray Ball, Jr. 
E-mail: rball@ballhomes.com                           Telephone No.:  859-268-1192

Ball Homes
3609 Walden Drive 
Lexington, KY  40517 
Attn:  Jonathan Norris, General Counsel
E-mail: jrnorris@ballhomes.com            Telephone No.:  859-514-3427 

	

To Buyer:
	

Steadfast Asset Holdings, Inc.
18100 Von Karman, Suite 500
Irvine, California  92612   
Attn: Ana Marie del Rio, Esq.
E-mail: adelrio@SteadfastCompanies.com 
Telephone No.:  (949) 852-0700

	With Copy To:
	Katten Muchin Rosenman LLP
2900 K Street, NW
North Tower – Suite 200
Washington, DC 20007
Attn: Virginia A. Davis, Esq.
E-mail: virginia.davis@kattenlaw.com                                            Telephone No.: (202) 625-3602

28
WAS01_41891870v5

18.    ENTIRE AGREEMENT.  This instrument, executed in duplicate, sets forth the entire agreement between the parties and may not be canceled, modified, or amended except by a written instrument executed by both Seller and Buyer.
19.    COUNTERPARTS; COPIES.  This Agreement may be executed and delivered in any number of counterparts, each of which so executed and delivered shall be deemed to be an original and all of which shall constitute one and the same instrument.  Electronic, photocopy and facsimile copies of signatures may be used in place and stead of original signatures with the same force and effect as originals.
20.    AUTHORITY.  The individual(s) executing this Agreement on behalf of each party hereto hereby represent and warrant that he/she has the capacity, with full power and authority, to bind such party to the terms and provisions of this Agreement.
21.    RECORD ACCESS AND RETENTION.
21.1.  Seller shall provide to Buyer (at Buyer’s expense) copies of, or shall provide Buyer reasonable access to, such factual information as may be reasonably requested by Buyer, and in the possession or control of Seller, Property Owner or its property manager or accountants, to enable Buyer’s auditor to conduct an audit, in accordance with Rule 3-14 of Securities and Exchange Commission Regulation S-X, of the income statements of the Property for the year to date of the year in which Closing occurs plus one (1) prior calendar year (provided, however, such audit shall not include an audit of asset management fees internally allocated by Seller (as opposed to paid to a thirty party) or interest expenses attributable to the Seller).  Buyer shall be responsible for all out-of-pocket costs associated with this audit.  Seller shall reasonably cooperate (at no cost to Seller) with Buyer’s auditor in the conduct of such audit.  In addition, Seller agrees to provide to Buyer or any affiliate of Buyer, if requested by such auditor, historical financial statements for the Membership Interests and/or the Property, including (without limitation) income and balance sheet data for the Property, whether required before or after Closing.  Without limiting the foregoing, (i) Buyer or its designated independent or other auditor may audit Property Owner's operating statements of the Property or Seller's statements of the Membership Interests, at Buyer’s expense, and Seller shall provide such documentation as Buyer or its auditor may reasonably request in order to complete such audit, and (ii) Seller shall furnish to Buyer such financial and other information as may be reasonably required by Buyer or any affiliate of Buyer to make any required filings with the Securities and Exchange Commission or other governmental authority.  Seller’s obligation to maintain its records for use under this Section 21.1 shall be an on-going condition to Buyer’s obligation to close Escrow, and Seller shall maintain its records for use under this Section 21.1 for a period of not less than one (1) year after the Closing Date.  The provisions of this Section shall survive Closing. 

29
WAS01_41891870v5

21.2    As requested from time to time by Buyer in writing during the Due Diligence Period, in addition to the items delivered pursuant to Section 6.1, Seller promptly shall provide to Buyer access to or copies of all such requested documents and information in the possession of Seller, Property Owner or its property manager(s) respecting the Membership Interests and/or the physical condition, operation, leasing, management, maintenance or repair of the Real Property, and the right at the cost and expense of Buyer to inspect the same and make copies thereof, it being acknowledged that such rights of access and inspection and right to receive or make copies is given without any express or implied representation or warranty made by Seller in any respect except as otherwise provided in Section 7 of this Agreement.  
22.    CONTRACT CONSIDERATION.  The parties have bargained for and expressly agree that the rights and obligations of each party contained in this Agreement, including, without limitation, Buyer’s obligation to deliver the Initial Deposit to Escrow Holder, constitute sufficient consideration for the other party’s execution, delivery and obligations under this Agreement, including without limitation, Buyer’s exclusive right to inspect and purchase the Membership Interests pursuant to this Agreement and all contingencies and conditions of Closing for the benefit of Buyer set forth in this Agreement.  
23.    JURY TRIAL WAIVER.  EACH OF THE PARTIES HEREBY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH SELLER AND/OR BUYER MAY BE PARTIES ARISING OUT OF, IN CONNECTION WITH, OR IN ANY WAY PERTAINING TO, THIS AGREEMENT.  THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY THE PARTIES AND EACH HEREBY REPRESENTS AND WARRANTS TO THE OTHER THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT.  EACH PARTY FURTHER REPRESENTS AND WARRANTS TO THE OTHER THAT IT HAS BEEN REPRESENTED IN THE SIGNING OF THIS AGREEMENT AND THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, OF ITS OWN FREE WILL, AND HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.  THE PROVISIONS OF THIS SECTION SHALL SURVIVE CLOSING OR THE TERMINATION OF THIS AGREEMENT.
24.    COUNSEL.  EACH PARTY HERETO WARRANTS AND REPRESENTS THAT EACH PARTY HAS BEEN AFFORDED THE OPPORTUNITY TO BE REPRESENTED BY COUNSEL OF ITS CHOICE IN CONNECTION WITH THE EXECUTION OF THIS AGREEMENT AND HAS HAD AMPLE OPPORTUNITY TO READ, REVIEW, AND UNDERSTAND THE PROVISIONS OF THIS AGREEMENT.
25.    EQUAL PARTICIPATION.  SELLER AND BUYER HAVE PARTICIPATED EQUALLY IN THE PREPARATION OF THIS AGREEMENT, AND, THEREFORE, THIS AGREEMENT AND EACH PROVISION THEREOF SHALL NOT BE CONSTRUED IN FAVOR OF OR AGAINST ANY PARTY TO THIS AGREEMENT BY REASON OF ONE PARTY’S BEING DEEMED TO PREPARED THIS AGREEMENT OR IMPOSED SUCH PROVISION.

30
WAS01_41891870v5

26.    TAX-FREE EXCHANGE.  Should Seller intend to complete a like-kind exchange in accordance with Section 1031 of the Internal Revenue Code (“like-kind exchange”), Seller may enter into a like-kind exchange agreement with a third party exchange accommodation titleholder or qualified intermediary and, in connection therewith, assign its rights under this Agreement to said third party provided that said Agreement shall be binding upon the assignee in all respects as to the obligations to the Buyer.  Buyer hereby agrees to reasonably cooperate with Seller in the like-kind exchange without any cost, expense or liability to Buyer and without reduction or alteration of the rights of Buyer under this Agreement and with respect to Seller; provided, however that Buyer shall not be required to undertake any liability or obligation and provided further that such like-kind exchange does not extend the Closing Date or be a condition to Closing.  As part of such like-kind exchange, Seller shall convey the Membership Interests directly to Buyer and Buyer shall not be obligated to acquire any other property or interests as part of such like-kind exchange.  Seller shall indemnify and hold Buyer harmless and defend Buyer from any and all claims, demands, causes of action, liabilities, losses, costs, damages and expenses (including reasonable attorneys’ fees and expenses and court costs) of any kind and nature in connection with Buyer’s cooperation with Seller to accomplish the like-kind exchange for benefit of Seller.  Nothing herein shall release Seller of any of the obligations or liabilities under this Agreement.  The terms of this Section 26 shall survive Closing or any earlier termination of this Agreement.

[SIGNATURES APPEAR ON FOLLOWING PAGE]

31
WAS01_41891870v5

IN WITNESS WHEREOF, the parties hereto have caused these presents to be executed the day and year first above written.

SELLER:

RML Construction, LLP, a Kentucky limited liability partnership

    	
		
	By:
	/s/ D. Ray Ball, Jr.

	Name:
	D. Ray Ball, Jr.

	Its:
	Partner

BUYER:

STEADFAST ASSET HOLDINGS, INC., 
a California corporation

	
		
	By:
	/s/ Ana Marie del Rio

	Name:
	Ana Marie del Rio

	Its:
	Vice President and Secretary

ACKNOWLEDGED AND AGREED:

Forty/57, LLC, a Kentucky limited liability company

        	
		
	By:
	/s/ D. Ray Ball, Jr.

	Name:
	D. Ray Ball, Jr., as a Partner of RML

	Its:
	Construction, LLP, in its capacity as the sole manager of Forty 57, LLC

    
WAS01_41891870v5

THE UNDERSIGNED HEREBY ACCEPTS THE FOREGOING PURCHASE AND SALE AGREEMENT AS OF NOVEMBER 5, 2012, AND AGREES TO ACT AS ESCROW HOLDER IN ACCORDANCE THEREWITH. Escrow to be governed under the laws of the State of California.

Escrow No. 749-M19

	
		
	CHICAGO TITLE INSURANCE COMPANY

	By:
	/s/ Lorri Beasley 

	

	Escrow Officer

WAS01_41891870v5

EXHIBIT “A”
Description of Property

Being all of Lots 1a and 1b as shown on the 2nd Amended Final Record Plat of Mahan Property, 4057 Mooncoin Way and 4161 & 4205 Victoria Way, Lexington, Fayette County, Kentucky, of record in Plat Cabinet N, Slide 681, in the Fayette County Clerk’s office.  

Being the same property conveyed to Grantor by Deed dated _____________, 2012, of record in Deed Book ____, Page ____, in the Fayette County Clerk’s office.

EXHIBIT “A”
Page 1 of 1
WAS01_41891870v5

EXHIBIT “B”

Personal Property Description
[Attached]

EXHIBIT “B”
Page 1 of 1
WAS01_41891870v5

EXHIBIT “C”
Due Diligence Documents
	
		
	 
	CONSTRUCTION / REHABILITATION

	1
	Plans & Specifications: Site plan and most current civil, landscape, architectural, structural mechanical, electrical and fire protection plans, including elevations

	2
	Construction contracts, if any

	3
	Current capital improvements with schedule (past 3 years) and Capital expenditure budget for next 3 years

	4
	Warranties in effect, if any (construction, roof, mechanical equipment, etc.)

	5
	Copies of all licenses and permits, including business license (with expiration date & annual costs) and building permits (showing placed in service dates)

	6
	Certificate(s) of Occupancy for all buildings

	7
	List and description of tenant work in progress, if any

	8
	Copies of all governmental correspondence or notices pertaining to the property, including but not limited to building code, health code, zoning and fire code

	9
	Maintenance records/work orders, including water intrusion log, for past 12 months

	10
	Operation & Maintenance (O&M) Manuals, if any, for maintenance of equipment

	 
	FINANCIAL

	1
	Monthly operating statements, YTD & 3-year historical (cash flow and income statements, balance sheets)

	2
	Year-end financial statements: Trailing-12 and audited statements, past 3 years

	3
	Operating budget, current year and/or next available

	4
	Property tax bills and Assessment, current and past 3 years, with proof of payment (including special assessments or districts and appeals)

	5
	Utility bills for any master-metered utility expenses and any resident unit utilities paid by the Property, monthly YTD and past calendar year

	6
	List of utilities paid by Owner/Residents and list of account numbers

	7
	List of meters and required deposits (if any / typically for gas, electric, water, phone)

	8
	Security deposit/resident ledgers, current

	9
	Name and version of accounting software

	10
	Tax returns, past 3 years - For company purchases only

	11
	Loan documents (full closing binder) - For loan assumptions only

	12
	REIT Property Services Questionnaire (form for completion attached hereto at end of Exhibit C)

	13
	General Ledger, prior year, most recent quarter-end and YTD (in Excel format)

	14
	Trial Balance, prior year, most recent quarter-end and YTD (in Excel format)

	15
	Bank Statements and Reconciliations, prior year, most recent quarter-end and YTD (monthly)

	16
	Cash Disbursement Journal, prior year, most recent quarter-end and YTD

	17
	Check Register, prior year, most recent quarter-end and YTD

	18
	Accounts Payable Aging Detail, prior year, most recent quarter-end and YTD

	19
	Aged Delinquency Report (showing total rent outstanding) with status of any files placed for eviction or collection

	20
	Rent and expense selections, prior year, most recent quarter-end and YTD (25 respective selections to be made by Buyer’s independent REIT 3-14 auditors based upon items received for #12-16 above)

	21
	Payroll selections, prior year, most recent quarter-end and YTD (2-months of selections with detailed support to be made by Buyer’s independent REIT 3-14 auditors; detailed support to be requested may include inputs, timecards, reimbursement calculations, agreements or contracts as necessary, to support and recalculate the payroll amounts shown in the financial statements)

	 
	MANAGEMENT/LEASING/OPERATIONS

EXHIBIT “C”
Page 1 of 19
WAS01_41891870v5

	
		
	1
	Monthly rent rolls, prior year and YTD, in Excel (format should include unit square footage, monthly rent, deposits, financial concessions, other concessions, lease term, extension options, defaults (financial or otherwise), and such other information as Buyer may require)

	2
	Market rent survey (comparison of subject w/other properties)

	3
	Occupancy history, monthly for past 3 years and current YTD

	4
	Current leases for all tenants with all available tenant correspondence files (including amendments/letters/agreements/default notices given or received)

	5
	Current or former lease selections, as the case may be, with copies of back-up for rents received (for both resident and any housing authority portion paid, as applicable), prior year and YTD (25 selections to be made by Buyer’s independent REIT 3-14 auditors)

	6
	Current form of lease with all addenda

	7
	List of leases under negotiation or currently out for signature

	8
	Current tenant contact sheet (name, address, phone number)

	9
	Current staff list (names, titles, hire dates, salary, unit information)

	10
	Inventory of personal property on site, including items such as furniture, supplies, appliances

	11
	Property brochure

	12
	Current list of all vendors utilized at the property (name, function, contact information)

	13
	Copies of all operating and management service contracts, including but not limited to:

	 
	a. Advertising

	 
	b. Alarm monitoring

	 
	c. Cable/TV (if none, please indicate so in writing)

	 
	d. Copier and any other equipment leases

	 
	e. Elevator

	 
	f. Equipment leases (such as copier, etc.)

	 
	g. Fire extinguisher

	 
	h. Furniture rental

	 
	i. HVAC

	 
	j. Janitorial services

	 
	k. Landscaping

	 
	l. Laundry

	 
	m. Pest control

	 
	n. Phone (landlines, cell phones, pagers)

	 
	o. Pool

	 
	p. Property management agreement; indicate whether entity is related party for disclosure purposes

	 
	q. Security

	 
	r. Trash

	 
	PHYSICAL ITEMS

	1
	Property information, including number of pools, spas, dumpsters (with size), buildings, storage units, laundry rooms

	2
	Marketing photos, including aerial photos if available

	3
	Parking: indicate carport, garages, or open spaces and how many of each

	4
	Unit floor plans with sq. footage

	5
	List of model units, if any (apt. #, bedrooms, rent loss)

	6
	List of fire safety equipment, such as smoke sensors, suppression devices, etc. (including system type, rating, map of locations, etc.)

	7
	Current insurance certificates: Evidence of Commercial Property Insurance and Certificate of Insurance

	8
	Insurance loss run history, past 3 years and YTD

EXHIBIT “C”
Page 2 of 19
WAS01_41891870v5

	
		
	9
	Copies of insurance policies, past 3 years

	10
	All existing third party reports, including, but not limited to:

	 
	a. Certified, as-built ALTA Survey

	 
	b. Appraisal (if dated w/n 24 months)

	 
	c. Asbestos

	 
	d. Engineering study or inspection (structural or otherwise)

	 
	e. Lead Based Paint report

	 
	f. Mold

	 
	g. Phase I Environmental

	 
	h. Physical Needs Assessment

	 
	i. Operations & Maintenance (O&M) Plans, if any

	 
	j. Radon

	 
	k. Soils/Geotechnical

	 
	l. Termite

	 
	TITLE AND AGREEMENTS

	1
	Title Insurance Commitment and all recorded documents referenced therein

	2
	Zoning: any reports, compliance letters, maps, ordinances, amendments, CC&R’s, special use permits, etc.

	3
	Pending litigation information, if applicable

	4
	Any agreements impacting the property: city or county development agreements, bonds, etc.

	5
	Condo / Association documents, if applicable (articles of incorporation, bylaws, CC&R’s, Declaration of Horizontal Regime, etc.)

	 
	OTHER DOCUMENTS SPECIFIC TO MEMBERSHIP INTERESTS TRANSFER

	 
	Resolutions of the members of Seller authorizing the transaction and from any general partner (if applicable)

	 
	Incumbency certificates for the officers authorized to execute certain documents

	 
	Any minutes of meetings of the members (with any actions/resolutions) or written consents/actions/resolutions in lieu of such meetings

	 
	Any letters from legal counsel delivered to auditors or any auditors reports

	 
	Confirmation that no changes in the accounting methods throughout the history of Seller have occurred

	 
	Any outstanding Power of Attorneys

	 
	Any governmental agency inquiry or reports, including, without limitation, from the EEOC, OSHA, or EPA.

	 
	List of all bank accounts

	 
	Copies of any municipal tax returns

	 
	Copies of all reports to members/stockholders

	 
	All Organizational Documents listed on Schedule 5 and amendments thereto

	 
	Current good standing certificate for Property Owner (state of formation and property location)

	 
	All stockholder/member agreements regarding voting or other matters

REIT Property Services Questionnaire follows. 

EXHIBIT “C”
Page 3 of 19
WAS01_41891870v5

REIT PROPERTY SERVICES QUESTIONNAIRE
MULTI-FAMILY APARTMENT PROPERTY  

Property Information
Name of the property: ___________________________________________________
Location of the property: _________________________________________________
Description of the property: _______________________________________________ ______________________________________________________________________
______________________________________________________________________
______________________________________________________________________

Are the on-site employees employed by the owner or by the property manager? ______
______________________________________________________________________

Property Manager Information    
Name of property management company: ____________________________________
Name of person completing this checklist and telephone and e-mail contact: _________
______________________________________________________________________

		
	1.
	Is the amount of any rent received under any lease of space in the property based or determined in full, or in part, on the “net” income or profits of the tenant or any other person?  [Note: rents based on a fixed percentage or percentages of gross receipts or sales are not based on “net” income or profits.]  

YES o     NO o
If “yes”, please describe. __________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________

EXHIBIT “C”
Page 4 of 19
WAS01_41891870v5

		
	2.
	Are there any leases where the FMV of the leased personal property (e.g., furniture, equipment, appliances, etc.) represents more than 15% of the total fair market value of both the real property and personal property that is leased under the lease? 

YES o     NO o
If “yes”, please describe. __________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________

		
	3.
	Are there any leases in which the property owner owns, directly or indirectly, 10% or more of the ownership interests in the tenant?

YES o     NO o
If “yes”, please describe. __________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________

EXHIBIT “C”
Page 5 of 19
WAS01_41891870v5

		
	4.
	Please indicate whether the property owner provides any of the following services to its tenants by checking the “Service Provided” box.  Check the “Customary” box if the service is usually and customarily offered or provided to tenants of similar class properties in the same geographic market in which the property is located.  Also indicate (by checking “D” or “IK”) whether the owner provides the service directly through its employees (D) or indirectly by contracting with an independent contractor (IK) to provide the service.  Check the “Separate Charge” box, if the owner separately bills and collects a charge for the service.

                
Service                Separate
Provided    Customary    D    IK    Charge

		
	a.
	Utilities (electricity, gas, water, sewer)     o    o    o    o    o

		
	b.
	Air conditioning, heating, lighting     o    o    o    o    o

		
	c.
	Telecommunication services (e.g.,      o    o    o    o    o

telephone, internet, cable, etc.)
		
	d.
	Repair and maintenance of building     o    o    o    o    o

and building systems
		
	e.
	Repair and maintenance of individual units    o    o    o    o    o

HVAC, ceiling, floors, walls, appliances 
		
	f.
	Security of building common areas,     o    o    o    o    o

including security guards
		
	g.
	Fire protection and sprinkler systems     o    o    o    o    o

		
	h.
	Key and security card replacements     o    o    o    o    o

		
	i.
	Lock-out, lock changing service, rekeying    o    o    o    o    o

		
	j.
	Grounds maintenance and landscaping     o    o    o    o    o

		
	k.
	Janitorial/cleaning and maintenance    o    o    o    o    o

of common areas
		
	l.
	Trash removal from designated locations    o    o    o    o    o

		
	m.
	Washing exterior windows    o    o    o    o    o

		
	n.
	Pest control    o    o    o    o    o

		
	o.
	Provision of parking spaces    o    o    o    o    o

		
	p.
	Organizing social activities    o    o    o    o    o

EXHIBIT “C”
Page 6 of 19
WAS01_41891870v5

		
	5.
	Please indicate whether the property owner provides any of the following amenities to its tenants by checking the “Amenity Provided” box.  Check the “Customary” box if the amenity is usually and customarily offered or provided to tenants of similar class properties in the same geographic market in which the property is located.

Amenity                
Provided    Customary    

		
	a.
	Fitness center, health club     o    o

		
	b.
	Locker facilities, showers    o    o

		
	c.
	Towels    o    o

		
	d.
	Other recreational facilities    o    o    

		
	e.
	Business center    o    o    

		
	f.
	Clubhouse, party room    o    o

		
	g.
	Car wash area    o    o

		
	h. 
	Coin-operated laundry machines (through    o    o

a lease/license with a vendor)    
		
	i.
	Coin-operated vending machines (through     o    o    

a lease/license with a vendor)
		
	j.
	ATM (through     o    o    

a lease/license with a vendor)
		
	k.
	Pay telephone (through     o    o    

a lease/license with a vendor)
		
	l.
	Shoe shine booth (through     o    o    

a lease/license with a vendor)
		
	m.
	Mail and express mail drop boxes    o    o

		
	n.
	Loading dock    o    o

		
	o.
	Dry cleaning drop-off & pick-up location    o    o

		
	p.
	CPR training, blood drives    o    o

		
	q.
	Seasonal/holiday parties, events, displays    o    o

EXHIBIT “C”
Page 7 of 19
WAS01_41891870v5

If any services are provided in connection with the amenities (other than electricity and general maintenance and cleaning of the area where an amenity is located), please explain.  For example, explain the duties of any attendants involved with the business center.  Also indicate whether these services are usually and customarily offered or provided to tenants of similar class properties in the same geographic market in which the property is located.  (Note: fitness centers and other recreational facilities are addressed in more detail in a following question.) ______________________________
____________________________________________________________________________________________________________________________________________________________________
______________________________________________________________________

6.    Please indicate whether the property owner provides any of the following courtesies to its tenants by checking the “Courtesy Provided” box.  Check the “Customary” box if the courtesy is usually and customarily offered or provided to tenants of similar class properties in the same geographic market in which the property is located.

Courtesy                
Provided    Customary    

		
	a.
	Fax, copier    o    o

		
	b.
	Loaning jumper cables, tools    o    o    

		
	c.
	Loaning vacuum cleaner, sports equipment    o    o

		
	d. 
	Accepting tenant’s packages, flowers    o    o

		
	e.
	Notary public    o    o    

		
	f.
	Distribution of promotional materials    o    o

for third party

If any special services are provided in connection with the courtesies, please explain.  Also indicate whether any special services are usually and customarily offered or provided to tenants of similar class properties in the same geographic market in which the property is located. ___________________________________________________ ______________________________________________________________________
____________________________________________________________________________________________________________________________________________________________________

		
	7.
	Does the property owner provide maid service within any apartment unit (other than “corporate” or “guest” units which are addressed in the following question)?  

EXHIBIT “C”
Page 8 of 19
WAS01_41891870v5

YES o     NO o  (If yes, answer the remaining questions)
If “yes”, please explain who provides the maid service, and explain the contractual relationship pursuant to which the maid services is provided – e.g., whether the property owner or tenant contracts with the maid company. _____________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________

Are the maid services that are provided of a kind that are usually and customarily offered or provided to tenants of similar class properties in the same geographic market in which the property is located?  YES o     NO o

Please provide (i) the estimated annual amount of income received or earned by the property owner that is attributable to the maid service (e.g., any separate charge received by the property owner for the service, or the amount of rents received by the property owner that is attributable to such service) and (ii) the estimated annual amount of direct costs incurred by the property owner in providing the maid service.  Also provide the estimated annual gross revenue derived at the property. ________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________

		
	8.
	Does the property owner lease “guest units” or “corporate units” where maid service, linen service and other services are provided within fully furnished units?  

YES o     NO o  (If yes, answer the remaining questions)
If “yes”, please explain who provides the maid service and linen service, and explain the contractual relationship pursuant to which the maid and linen services are provided.  Also identify all services provided that differ from services that are provided to a tenant of a regular unit._________________________________________________________
______________________________________________________________________
______________________________________________________________________

Are each of the maid and linen services and other services that are provided of a kind that are usually and customarily offered or provided to tenants of similar class properties in the same geographic market in which the property is located?  
YES o     NO o

EXHIBIT “C”
Page 9 of 19
WAS01_41891870v5

Please provide (i) the estimated annual amount of income received or earned by the property owner that is attributable to the maid, linen and other services provided (e.g., any separate charge received by the property owner for such services, or the amount of rents received by the property owner that is attributable to such services) and (ii) the estimated annual amount of direct costs incurred by the property owner in providing the services. _______________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________

		
	9.
	Does the property owner provide security services at the property?  

YES o     NO o  (If yes, answer the remaining questions)
Are the security services (including duties of the security personnel) of a kind that are usually and customarily offered or provided to tenants of similar class properties in the same geographic market in which the property is located?  YES o     NO o  

Are the security services provided for the general property, and not include specialized security services for a particular tenant?  YES o     NO o

		
	10.
	Does the property owner provide parking spaces to its tenants (other than by net leasing the parking facilities to an unrelated person, who in turn, operates the parking facilities as part of its own business)?

YES o     NO o  (If “yes”, answer the remaining questions)
Check the box or boxes that describe the parking facilities (check more than one box if applicable):
		
	•
	Open lot or garage (circle one) with no gated entry

		
	•
	Open lot or garage (circle one) with gated entry

		
	•
	Open lot or garage (circle one) with gated entry and cashier / parking attendant on duty

		
	•
	Reserved parking

		
	•
	Public parking available for a hourly, daily or monthly charge

Are the parking facilities located in or adjacent to the property, and are the parking facilities appropriate in size for the number of tenants and their guests, customers, and subtenants who are expected to use the facilities?  YES o     NO o 

Does the property owner provide any services in connection with the parking facilities (other than maintenance, repair, and lighting of the facilities)?  YES o     NO o

If “yes”, please explain. __________________________________________________
______________________________________________________________________
______________________________________________________________________

EXHIBIT “C”
Page 10 of 19
WAS01_41891870v5

______________________________________________________________________

Are the services provided in connection with the parking facilities of a kind that are usually and customarily offered or provided to tenants of similar class properties in the same geographic market in which the property is located?  YES o     NO o

Do tenants make separate payments for the use of parking spaces?  YES o     NO o

Are certain parking spaces reserved for use by particular tenants?  YES o     NO o

If “yes”, are recurring functions unique to the reserved parking spaces (other than assigning and marking such spaces), such as towing illegally parked cars, performed by an independent contractor?  YES o     NO o

Are parking attendants provided at the parking facilities to facilitate parking by the general public for a parking fee?  YES o     NO o

If “yes”, are the parking attendants employed by an independent contractor who operates the parking facilities under a management agreement with the property owner?  
YES o     NO o

Are the services provided by the independent contractor usually and customarily offered or provided to tenants of similar class properties in the same geographic market in which the property is located?  YES o     NO o

If the independent contractor provides any services (other than maintenance, repairs, and cleaning of the parking facilities; collecting parking fees; parking cars to achieve the maximum capacity of the parking facility or for reasons of safety or security) please describe (e.g., indicate if the independent contractor provides or arranges for automobile detailing, washing, oil changes and repairs etc.). ________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________

Are these additional services provided by the independent contractor usually and customarily offered or provided to tenants of similar class properties in the same geographic market in which the property is located?  YES o     NO o

		
	11.
	Are all repair and maintenance services provided within the individual units (e.g., repairs and maintenance of HVAC, plumbing, walls, ceilings, doors, floors, and appliances) of a kind that are usually and customarily offered or provided to tenants of similar class properties in the same geographic market in which the property is located?

YES o     NO o  (answer the remaining questions)

EXHIBIT “C”
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Are there any other services provided within a unit (excluding repair and maintenance services described above and maid and other services addressed in the preceding two questions)?
 
If “yes”, please describe the additional services provided. ________________________
______________________________________________________________________
______________________________________________________________________

Are each of these additional services provided of a kind that are usually and customarily offered or provided to tenants of similar class properties in the same geographic market in which the property is located?  YES o     NO o

		
	12.
	Does the property owner provide coin-operated laundry machines and vending machines?

YES o     NO o  (If yes, answer the remaining questions)
Does the property owner lease/license space to the owner of the laundry and vending machines and receive rental/license fees that are not based on “net” income?  
YES o     NO o

Does the property owner provide any services other than electricity and cleaning and maintenance of the area where the equipment is located?  YES o     NO o

If “yes”, please describe the additional services provided. ________________________ 
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________

Are each of these additional services provided of a kind that are usually and customarily offered or provided to tenants of similar class properties in the same geographic market in which the property is located?  YES o     NO o

Does the property owner own any of the laundry or vending machines?  
YES o     NO o

If “yes”, please provide details of what is owned. ______________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________

		
	13.
	Has the property owner entered into agreements (generally a license or lease agreement) with telecommunication providers that permit the providers to wire the building and provide telecommunication services (e.g., telephone, cable, internet, data transmission, etc.) to 

EXHIBIT “C”
Page 12 of 19
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tenants pursuant to which the property owner receives fees, or does the owner otherwise directly provide telecommunication services (specify which applies)?
YES o     NO o  (If “yes”, answer the remaining questions)
If the owner directly provides telecommunication services to its tenants, please explain the arrangement. ________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________

Are the telecommunications services offered to the tenants of the type usually and customarily offered or provided to tenants of similar class properties located in the same geographic market in which the property is located?  
YES o     NO o

		
	14.
	Does the property owner provide any “concierge” services (e.g., ordering food, running errands, making restaurant reservations, ordering theatre tickets, picking up dry cleaning, etc.) to the tenants? 

YES o    NO o
If “yes”, please describe the type of concierge services provided and by whom (employees or independent contractor). ______________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________

Are each of the concierge services of the type usually and customarily offered or provided to tenants of similar class properties located in the same geographic market in which the property is located?  YES o     NO o

Please provide (i) the estimated annual amount of income received or earned by the property owner that is attributable to the concierge services provided (e.g., any separate charge received by the owner for such service, or the amount of rents received by the property owner that is attributable to such service) and (ii) the estimated annual amount of direct costs incurred by the property owner in providing the concierge services. ____
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________

		
	15.
	Does the property owner provide a fitness center or other recreational facilities at the property? 

EXHIBIT “C”
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YES o      NO o 
If “yes”, please describe the type of fitness center or other recreational facilities provided at the property (e.g., fitness center, gym, basketball court, swimming pool, etc.). __________________________________________________________________ 
______________________________________________________________________
______________________________________________________________________
Are the recreational facilities and equipment provided therein of the type usually and customarily offered or provided to tenants of similar class properties located in the same geographic market in which the property is located?  YES o     NO o
Do tenants pay a fee to use any facility or is any facility open to non-tenants for a fee?  YES o     NO o

If “yes”, please describe. __________________________________________________
______________________________________________________________________
______________________________________________________________________

Does the property owner provide any services in connection with the facilities (other than electricity, lighting, and cleaning and maintenance) including for example, any attendants on site proving fitness instruction or other services?  YES o     NO o

If “yes”, please describe. __________________________________________________
______________________________________________________________________
______________________________________________________________________
 
Are these additional services of a type usually and customarily offered or provided to tenants of similar office properties located in the same geographic markets where the properties are located?  YES o     NO o

Please provide (i) the estimated annual amount of income received or earned by the property owner that is attributable to these additional services provided (e.g., any separate charge received by the owner for such service, or the amount of rents received by the property owner that is attributable to such service) and (ii) the estimated annual amount of direct costs incurred by the property owner in providing these additional services. _______________________________________________________________
______________________________________________________________________
______________________________________________________________________

		
	16.
	Are there any services, amenities, or courtesies provided to tenants that are not of a kind usually and customarily offered or provided to tenants of similar class properties in the same 

EXHIBIT “C”
Page 14 of 19
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geographic market in which the property is located (“noncustomary services”) and that have not been identified in previous questions.  
YES o     NO o
If “yes”, please describe. __________________________________________________ ______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
For each noncustomary service, please provide (i) the estimated annual amount of income received or earned by the property owner that is attributable to the noncustomary service (e.g., any separate charge received by the owner for such service, or the amount of rents received by the property owner that is attributable to such service) and (ii) the estimated annual amount of direct costs incurred by the property owner in providing the noncustomary service.  Also provide the estimated annual gross revenue derived at the property. ____________________________________________ ______________________________________________________________________
______________________________________________________________________

		
	17.
	Does the property owner provide any of the services listed below? 

YES o     NO o  (If “yes”, please circle the services provided.)
		
	•
	Provision of food service (e.g., including a cafeteria) either directly or through a management agreement with a food service provider

		
	•
	Transportation services, shuttle bus

		
	•
	Day care or health care services

		
	•
	Full service conference center services

		
	•
	Secretarial services

		
	•
	Real estate brokerage

		
	•
	Pick-up, shipping of goods, logistics

		
	•
	Interior design & decorating

		
	•
	Plant care/watering within tenant’s space

		
	•
	Assisting tenant in move-in/move-out

		
	•
	Coffee butler services

		
	•
	Automobile detailing, washing

		
	•
	Automobile oil change, repairs

If the property owner provides any of these services, and the services have not been reported as “noncustomary” services in Question #16, please describe details associated with the service, and provide (i) the estimated annual amount of income received or earned by the property owner that is attributable to the noncustomary service (e.g., the separate charge received by the owner for such service, or the amount of rents received by the property owner that is attributable to such service) 

EXHIBIT “C”
Page 15 of 19
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and (ii) the estimated annual amount of direct costs incurred by the property owner in providing the noncustomary service.  Also provide the estimated annual gross revenue derived at the property. ____
______________________________________________________________________
____________________________________________________________________________________________________________________________________________________________________

		
	18.
	Are there any other services, amenities, or courtesies offered or provided to tenants which have not been covered or identified in the previous questions?

YES o     NO o
If “yes”, please describe and indicate whether each service, amenity, or courtesy is usually and customarily offered or provided to tenants of similar class properties in the same geographic market in which the property is located. ________________________
______________________________________________________________________ 
______________________________________________________________________
______________________________________________________________________

		
	19.
	Does the property owner have a below fair market lease with any tenant (e.g., a restaurant, cafeteria, or health club tenant) at the property that is intended to subsidize the provision of that tenant’s services to other tenants at the property, or does the owner actually pay any subsidy to a tenant? 

YES o     NO o
If “yes”, please describe. __________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
		
	20.
	Are there any leases/licenses of property involving a term of less than 30 days?

YES o     NO o
If “yes”, please describe. __________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________

		
	21.
	Are you aware of any lease agreement with terms that are not usual, ordinary, and customary? 

YES o     NO o

EXHIBIT “C”
Page 16 of 19
WAS01_41891870v5

If “yes”, please describe. __________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________

		
	22.
	In cases where the property owner offers or provides any services by contracting with an independent contractor to provide such services, does the property owner receive or derive any income from the independent contractor – e.g., through the receipt of interest from a loan to such independent contractor, dividends from an investment in such contractor, rents from leasing space to such contractor, etc.?  [Please consider whether a parking company that has been engaged to operate a parking facility is paying rents to the owner under a lease of a parking facility or other space at another property.]

YES o     NO o

EXHIBIT “C”
Page 17 of 19
WAS01_41891870v5

If “yes”, please describe __________________________________________________
______________________________________________________________________
______________________________________________________________________

		
	23.
	In cases where the property owner offers or provides any services by contracting with an independent contractor to provide such service, does the property owner have any ownership interest in such independent contractor, or does the independent contractor have an ownership interest in the property owner, or are you aware of any other related-party ownership between the property owner and the independent contractor? 

YES o     NO o
If “yes”, please describe. __________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________

		
	24.
	Does the property owner receive a fee, commission, incentive payments, or any other type of payment from any independent contractor that is providing services to the tenants? 

YES o     NO o
If “yes”, please describe. __________________________________________________
______________________________________________________________________
______________________________________________________________________

Are the services that are provided by the independent contractor of a kind that are usually and customarily offered or provided to tenants of similar class properties in the same geographic market in which the property is located?  YES o     NO o
                        
		
	25.
	Does the property owner receive any amounts for selling any goods or services (other than tenant services addressed in the preceding questions) to its tenants or other parties?

YES o     NO o
If “yes”, please describe. __________________________________________________
______________________________________________________________________
______________________________________________________________________

		
	26.
	Does the property owner receive management fees for providing services to properties that are not owned by the property owner or properties that are only partially owned (e.g., through a partnership) by the property owner? 

YES o     NO o
If “yes”, please describe. __________________________________________________
______________________________________________________________________

EXHIBIT “C”
Page 18 of 19
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______________________________________________________________________
                                                                                                    
		
	27.
	Are you aware of any other sources of property income not identified through the previous questions (e.g., referral fees from 3rd parties, advertising income, etc.)?    

YES o     NO o
If “yes”, please describe. __________________________________________________
______________________________________________________________________
______________________________________________________________________

		
	28.
	Has the property owner made any loans to a tenant, vendor, or other parties or otherwise received a promissory note?    

YES o     NO o
If “yes”, please describe __________________________________________________
______________________________________________________________________
______________________________________________________________________

    

EXHIBIT “C”
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EXHIBIT “D”
Form of Assignment
MEMBERSHIP INTERESTS ASSIGNMENT AND ASSUMPTION
THIS MEMBERSHIP INTERESTS ASSIGNMENT AND ASSUMPTION (this “Assignment”) is made and entered into effective for all purposes and in all respects as of the ___ day of _______, 2012, by and between RML Construction, LLP, a Kentucky limited liability partnership (“Assignor”), and ______________, a ___________ (“Assignee”).

RECITALS:

A.    Assignor is the owner of 100% of the membership interests (“Membership Interests”) in Forty/57, LLC, a Kentucky limited liability company (the “Company”), the fee simple property owner of that certain land with a multifamily residential project commonly known as Forty 57 at Glasford Apartments, consisting of 436 units situated thereon, located at 4057 Mooncoin Way, Lexington, Kentucky.  The Company exists as of the date hereof as a Kentucky limited liability company pursuant to that certain Articles of Organization filed with the Secretary of State of the State of Kentucky on March 8, 2011 and is governed by that certain Operating Agreement dated as of March 8, 2011 (the “Operating Agreement”).

B.    Assignor is the sole member of the Company and owns all of the limited liability company interests in the Company.
C.     Assignor is conveying various assets to Assignee on even date herewith (including, without limitation, the “Assigned Interest” (as hereinafter defined)) pursuant to that certain Purchase and Sale Agreement and Joint Escrow Instructions, dated as of November 5, 2012, by and between Assignor and Assignee (as may be amended from time to time, the “Purchase Agreement”). 
D.    In connection with the transactions described above and in the Purchase Agreement, Assignor desires to transfer and assign to Assignee the Assigned Interest effective as of the date hereof, and Assignee desires to accept the transfer and assignment of the Assigned Interest upon the terms and conditions provided herein.
NOW, THEREFORE, in consideration of the foregoing, of the mutual promises set forth herein, and other good and valuable consideration, the receipt and sufficiency of which hereby is acknowledged, it is hereby agreed as follows:
Section 1.Definitions.  As used herein, the term “Assigned Interest” means all of the Membership Interests in the Company held by Assignor, and all rights, title and privileges of Assignor relating thereto, which also constitutes 100% of the “Interests” and "Manager Interests" (as such term is defined in the Operating Agreement), including, without limitation, all rights to all capital, profits, losses, allocations and distributions, and rights to vote and grant or withhold consents 

EXHIBIT “D”
Page 1 of 4
    
WAS01_41891870v5

and other rights and privileges under the Operating Agreement and the Ohio Limited Liability Company Act appurtenant to Assignor's Membership Interests assigned hereby.  
Section 2.Assignment and Acceptance.  Assignor does hereby transfer, assign and deliver unto Assignee, and Assignee does hereby accept the transfer, assignment and delivery of, the Assigned Interest.  Assignee hereby accepts the Assigned Interest and hereby assumes all obligations and liabilities arising or accruing in connection with the Assigned Interest from and after the date hereof.
Section 3.Joinder to Operating Agreement.  By execution of this Assignment, Assignee shall be deemed joined as a party to the Operating Agreement and shall be bound by all of the terms and conditions thereof as if Assignee had executed the Operating Agreement.  It is the intention of the parties that immediately after giving effect to the consummation of the transactions contemplated by this Assignment that Assignee shall be the sole member of the Company. 
Section 4.Survival; Representations.    This Assignment is being delivered by Assignor and Assignee pursuant to Section 10.1.1 and 10.2 of the Purchase Agreement, respectively, and is given in accordance with the requirements of the Purchase Agreement. The obligations of the parties thereunder, including any representations and warranties made by the parties therein, shall survive the closing of the transaction of the Purchase Agreement as provided therein. 
Section 5.Incorporation of Recitals.  The recitals set forth herein are hereby incorporated by reference and made a part of this Assignment.
Section 6.Further Assurances.  Each of the parties agrees to and shall execute and deliver further assurances of the transfer, assignment and delivery of the Assigned Interest, and the acceptance and assignment of the same, as the other party shall reasonably request to effectuate the terms of this Assignment.
Section 7.Interpretation.  This Assignment shall be governed and construed in accordance with the internal laws of the State of Kentucky, without regard to conflicts of interest considerations.
Section 8.Miscellaneous.  The captions in this Assignment are inserted for convenience only, and do not define, describe or limit the scope or intent of this Assignment or the provisions hereof.  Assignor and Assignee agree that this Assignment shall be interpreted and construed in accordance with its plain meaning and without reliance upon, or implication, inference or assumption arising from, the fact that this Assignment may have been drafted, in whole or in part, for or on behalf of any party hereto.  This Assignment represents the parties’ entire understanding with respect to its subject matter and supersedes all prior communications, understandings and agreements with respect thereto.  This Assignment may be executed in one or more counterparts, each of which shall be deemed to be an original, and all of which together shall constitute one and the same instrument.  This Assignment shall be binding upon and inure to the benefit of Assignor and Assignee and their respective successors and assigns.  If any term or provision of this Assignment or the application thereof to any persons or circumstances shall, to any extent, be invalid or unenforceable, the remainder of this Assignment or the application of such term or provision to the persons or 

EXHIBIT “D”
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WAS01_41891870v5

circumstances other than those as to which are held invalid or unenforceable shall not be affected thereby, and each term and provision of this Assignment shall be valid and enforceable to the fullest extent permitted by law. 

[SIGNATURES APPEAR ON FOLLOWING PAGE]

EXHIBIT “D”
Page 3 of 4
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IN WITNESS WHEREOF, the parties have executed this Assignment effective as of the date first written above.

ASSIGNOR

RML Construction, LLP, a Kentucky limited liability partnership

By: ________________________________
Name: ______________________________
Its: _________________________________

ASSIGNEE

[__________________]

By: ________________________________
Name: ______________________________
Its: _________________________________

EXHIBIT “D”
Page 4 of 4
WAS01_41891870v5

EXHIBIT “E”
Form of Assignment of Leases
ASSIGNMENT AND ASSUMPTION 
OF LEASES, CONTRACTS AND APPROVALS 

THIS ASSIGNMENT AND ASSUMPTION OF LEASES, CONTRACTS AND APPROVALS (this “Assignment”) is made as of the _____ day of __________________, 2012, by and between RML Construction, LLP, a Kentucky limited liability partnership (“Assignor”), and Forty/57, LLC, a Kentucky limited liability company (“Assignee”).
W I T N E S S E T H:
For good and valuable consideration, receipt and sufficiency of which are hereby acknowledged, Assignor and Assignee hereby agree as follows:
1.    Assignor hereby sells, transfers, assigns and conveys to Assignee the following:
(a)    All right, title and interest of Assignor in and to those certain leases described on Exhibit A attached hereto and made a part hereof (collectively, the “Leases”), relating to the leasing of space in or on that certain land and improvements located in the County of Fayette, State of Kentucky, more particularly described in Exhibit B attached hereto, and all of the rights, interests, benefits and privileges of the lessor thereunder, and all prepaid rents and security or other deposits held by Assignor under the Leases and not credited to Assignee under the Purchase Agreement (defined below) or credited or returned to tenants; but subject to all terms, conditions, reservations and limitations set forth in the Leases.
(b)    To the extent assignable and without costs to Seller, all right, title and interest of Assignor in and to those certain contracts set forth on Exhibit C attached hereto and made a part hereof, and all warranties, guaranties, indemnities and claims (including, without limitation, for workmanship, materials and performance) and which exist or may hereafter exist against any contractor, subcontractor, manufacturer or supplier or laborer or other services relating thereto (collectively, the “Contracts”).
(c)    To the extent assignable, all right, title and interest of Assignor in and to those certain licenses, permits, certificates of occupancy and governmental approvals relating to the Property, including without limitation those identified on Exhibit D attached hereto and made a part hereof (collectively, the “Approvals”) and any plans, specifications, studies, reports or surveys relating to the Property.
2.    This Assignment is given pursuant to that certain Purchase and Sale Agreement and Joint Escrow Instructions (as amended, the “Purchase Agreement”) dated as of November 5, 2012, between Assignor and STEADFAST ASSET HOLDINGS, INC., a California corporation, providing for, among other things, the conveyance of the Leases, the Contracts and the Approvals to Assignee. 

EXHIBIT “E”
Page 1 of 3
WAS01_41891870v5

3.    Assignee hereby accepts the assignment of the Leases, the Contracts and the Approvals and agrees to assume and discharge, in accordance with the terms thereof, all of the obligations thereunder arising from and after the date hereof.  
4.    Assignor agrees to indemnify, defend and hold harmless Assignee from and against any and all claims, damages, liabilities, losses, costs and expenses (including, without limitation, reasonable attorneys’ fees and expenses) asserted against or suffered or incurred by Assignee as a result of or in connection with any liabilities or obligations under the Leases, the Contracts or the Approvals relating to periods prior to the date hereof if and to the extent and for the period provided in the Purchase Agreement.

5.    In any action to enforce the provisions of this Assignment, the prevailing party shall be entitled to an award of its attorneys’ fees and costs.  This Assignment may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same Assignment.  The terms, covenants and conditions hereof shall inure to the benefit of and be binding upon the respective parties hereto, their heirs, executors, administrators, successors and assigns.  Any alteration, change or modification of or to this Assignment, in order to become effective, must be made in writing and in each instance signed on behalf of each party to be charged.  No provision of this Assignment that is held to be inoperative, unenforceable or invalid shall affect the remaining provisions, and to this end all provisions of this Agreement shall be severable.  This Assignment shall be governed by the laws of the State of Kentucky.

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

	 

	RML Construction, LLP, a Kentucky limited liability partnership

	 
	 

	By:
	 

	Name:
	 

	Its:
	 

                	
		
	ASSIGNEE:

	 

	Forty/57, LLC, a Kentucky limited liability company

	 
	 

	By:
	 

	Name:
	 

	Title:
	 

EXHIBIT “E”
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Exhibit A    Leases 
Exhibit B    Description of the Property
Exhibit C    Contracts
Exhibit D    Approvals

EXHIBIT “E”
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WAS01_41891870v5

EXHIBIT “F”
Form of Bill of Sale
BILL OF SALE
Know all men by these presents, that RML Construction, LLP, a Kentucky limited liability partnership (“Grantor”), for and in consideration of the sum of ten dollars and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, does bargain, sell, grant, transfer, assign, and convey to Forty/57, LLC, a Kentucky limited liability company (“Grantee”) all of its right, title, and interest, if any, in and to any and all tangible personal property owned by Grantor and now at, in or upon or used in connection with the property commonly known as Forty 57 at Glasford Apartments, located in the City of Lexington, County of Fayette and State of Kentucky (“Property”), and more particularly described on Exhibit A attached hereto.  
Grantor is selling and Grantee is purchasing the Property “AS IS WHERE IS” with all faults except as provided in that certain Purchase and Sale Agreement and Joint Escrow Instructions dated as of November 5, 2012 between Grantor and STEADFAST ASSET HOLDINGS, INC., a California corporation.
IN WITNESS WHEREOF, Grantor has executed this Bill of Sale as of the ____ day of ___________________, 2012.

RML Construction, LLP, a Kentucky limited liability partnership

By: _____________________________________
Name: ___________________________________
Its: ______________________________________

EXHIBITS:
A - Legal Description

EXHIBIT “F”
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Exhibit A
Legal Description
Being all of Lots 1a and 1b as shown on the 2nd Amended Final Record Plat of Mahan Property, 4057 Mooncoin Way and 4161 & 4205 Victoria Way, Lexington, Fayette County, Kentucky, of record in Plat Cabinet N, Slide 681, in the Fayette County Clerk’s office.  

Being the same property conveyed to Grantor by Deed dated _____________, 2012, of record in Deed Book ____, Page ____, in the Fayette County Clerk’s office.

EXHIBIT “F”
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WAS01_41891870v5

EXHIBIT “G”
Form of Non-Foreign Certificate
[ONE TO PROPERTY OWNER AND ONE TO BUYER AT CLOSING]
CERTIFICATE OF NON-FOREIGN STATUS
Section 1445 of the Internal Revenue Code provides that a transferee of a U.S. real property interest must withhold tax if the transferor is a foreign person.  To inform _________________________ (“Transferee”), that withholding of tax is not required upon the disposition of a U.S. real property interest by RML Construction, LLP, a Kentucky limited liability partnership (“Transferor”), the undersigned hereby certifies to Transferee the following on behalf of Transferor:

1.    Transferor is not a foreign corporation, foreign partnership, foreign trust, or foreign estate (as those terms are defined in the Internal Revenue Code and Income Tax Regulations);
2.    Transferor’s U.S. employer identification number is _____________; and
3.    Transferor’s office address is _________________________________________.
Transferor understands that this certification may be disclosed to the Internal Revenue Service by Transferee and that any false statement contained herein could be punished by fine, imprisonment, or both.
Under penalties of perjury, the undersigned declares that the undersigned has examined this certification and to the best of the undersigned’s knowledge and belief it is true, correct and complete, and the undersigned further declares that the undersigned has authority to sign this document on behalf of Transferor.
Dated as of ____________________, 20__.
                        	
		
	RML Construction, LLP, a Kentucky limited liability partnership

	 
	 

	By:
	 

	Name:
	 

	Title:
	 

EXHIBIT “G”
Page 1 of 1
WAS01_41891870v5

EXHIBIT “H”
Form of Tenant Notice

[**DATE**]

	
		
	TO:
	All Valued Residents of [**COMMUNITY NAME**]

Re:    Notice of Change of Address

This letter is to notify you of a change with respect to the property commonly known as Forty 57 at Glasford Apartments, 4057 Mooncoin Way, Lexington, KY (“Property”).  All of the interest of the lessor/landlord under your lease of space in the Property, together with your security deposit, have been transferred to Forty/57, LLC, a Kentucky limited liability company. 

You are hereby notified that from and after the date hereof and until further notice, all future payments under your lease should be made payable to Forty 57 at Glasford Apartments and mailed to [**COMMUNITY LEASING OFFICE ADDRESS**].  In addition, all questions or other matters regarding your lease should be directed to the property manager at [**COMMUNITY LEASING OFFICE PHONE NUMBER**].

Thank you for your cooperation.

                	
		
	RML Construction, LLP, a Kentucky limited liability partnership

	 
	 

	By:
	 

	Name:
	 

	Its:
	 

                	
		
	Forty/57, LLC, a Kentucky limited liability company

	 
	 

	By:
	 

	Name:
	 

	Its:
	 

EXHIBIT “H”
WAS01_41891870v5

EXHIBIT “I”

Form of Deed

SPECIAL WARRANTY DEED

THIS SPECIAL WARRANTY DEED is made as of ____________ ___, 2012, between 

___________________________________
____________________
____________________
____________________                             (the “Grantor”)
    
and
___________________________________
____________________
____________________
____________________                            (the “Grantee”)

W I T N E S S E T H:

For good and valuable consideration, the receipt of which is hereby acknowledged by Grantor, Grantor does hereby grant and convey unto Grantee in fee simple and with covenant of Special Warranty all of Grantor’s right, title and interest in and to the real property, together with all improvements thereon and appurtenances thereto, located in Fayette County, Kentucky and more fully described as follows (the “Property”):

Being all of Lots 1a and 1b as shown on the 2nd Amended Final Record Plat of Mahan Property, 4057 Mooncoin Way and 4161 & 4205 Victoria Way, Lexington, Fayette County, Kentucky, of record in Plat Cabinet N, Slide 681, in the Fayette County Clerk’s office.  

Being the same property conveyed to Grantor by Deed dated _____________, 2012, of record in Deed Book ____, Page ____, in the Fayette County Clerk’s office.

Grantor covenants lawful seisin of the estate hereby conveyed, full right and power to convey same and that said estate is free of encumbrances except liens for real property taxes and assessments due and payable in 2012, and thereafter, which Grantee assumes and agrees to pay; however, this conveyance is made subject to easements, covenants, restrictions and stipulations of record and governmental laws and regulations affecting the Property herein conveyed.

EXHIBIT “H”
WAS01_41891870v5

To have and to hold the Property together with all of the rights, privileges, appurtenances and improvements thereunto belonging unto the Grantee, and its successors and assigns forever, with covenant of special warranty of title.

TRANSFER YEAR PROPERTY TAX BILL TO BE ADDRESSED IN CARE OF THE GRANTEE, __________________________________________________________________________.

GRANTOR:                         

___________________________________,
____________________

By:_________________________________________
          
Title:______________________________________
        
Date: ____________ ___, 2012

(the “Grantor”)

Consideration Certificate

For purposes of KRS Chapter 382.135, Grantor and Grantee, by execution of this Special Warranty Deed swear and affirm, under penalty of perjury that the Property herein conveyed is transferred for the full, accurate and true consideration _______________________________ Dollars ($____________).

EXHIBIT “H”
WAS01_41891870v5

GRANTOR:                         GRANTEE:

___________________________________,        ___________________________________,
____________________                ____________________

By:________________________________        By:________________________________    

Title:_______________________________      Title:_______________________________  
                            
Date:  ____________ ___, 2012            Date:  ____________ ___, 2012

COMMONWEALTH OF KENTUCKY     )
) SS:
COUNTY OF FAYETTE            )

The Special Warranty Deed and foregoing consideration statement were subscribed, sworn to and acknowledged before me this ___ day of ____________, 2012, by ____________________ who acknowledged himself to be the ____________________ of ___________________________________, a ____________________, and the within named Grantor, to be the free act and voluntary deed of said company and to be his free act and voluntary deed as its officer aforesaid.

My commission expires:  _________________________.

________________________________________
NOTARY PUBLIC

COMMONWEALTH OF KENTUCKY     )
) SS:
COUNTY OF FAYETTE            )

The Special Warranty Deed and foregoing consideration statement were subscribed, sworn to and acknowledged before me this ___ day of ____________, 2012, by ____________________ who acknowledged himself to be the ____________________ of ___________________________________, a ____________________, and the within named Grantee, to be the free act and voluntary deed of said company and to be his free act and voluntary deed as its officer aforesaid.

EXHIBIT “I”
Page 1 of 2
WAS01_41891870v5

My commission expires:  _________________________.

________________________________________
NOTARY PUBLIC

THIS INSTRUMENT PREPARED BY:

__________________________________

EXHIBIT “I”
Page 2 of 2
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SCHEDULE 1

LEASES

See Schedule 4 (Rent Roll)

SCHEDULE 1
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SCHEDULE 2

CONTRACTS

[Attached]

[INTENTIONALLY OMITTED]

SCHEDULE 2
WAS01_41891870v5

SCHEDULE 4

RENT ROLL

[Attached]

[INTENTIONALLY OMITTED]

WAS01_41891870v5

SCHEDULE 5

ORGANIZATIONAL DOCUMENTS

Articles of Organization filed with the Secretary of State of the State of Kentucky on March 8, 2011 

Operating Agreement dated as of March 8, 2011

WAS01_41891870v5

SCHEDULE 6

STATEMENT OF LIABILITIES

NONE

WAS01_41891870v5

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