Document:

exv10w5

Exhibit 10.5

MULTIFAMILY NOTE

			
	US $5,200,000.00
	 	May 4, 2011

     FOR
VALUE RECEIVED, the undersigned (“Borrower”) jointly and severally (if
more than one) promises to pay to the order of PNC BANK, NATIONAL ASSOCIATION, a national
banking association, the principal sum of Five Million Two Hundred Thousand and 00/100
Dollars (US $5,200,000.00), with interest accruing at the Interest Rate on the unpaid
principal balance from the Disbursement Date until fully paid.

         1. Defined Terms. In addition to defined terms found elsewhere in this Note, as used
in this Note, the following definitions shall apply:

	 	 	 	Amortization Period: 360 months.
	 
	 	 	 	Business Day: Any day other than a Saturday, Sunday or any other day on
which Lender is not open for business.
	 
	 	 	 	Debt Service Amounts: Amounts payable under this Note, the Security
Instrument or any other Loan Document.
	 
	 	 	 	Default Rate: A rate equal to the lesser of 4 percentage points above the
Interest Rate or the maximum interest rate which may be collected from
Borrower under applicable law.
	 
	 	 	 	Disbursement Date: The date of disbursement of Loan proceeds
hereunder.
	 
	 	 	 	First Payment Date: The first day of July, 2011.
	 
	 	 	 	Indebtedness: The principal of, interest on, or any other amounts due at any
time under, this Note, the Security Instrument or any other Loan Document,
including prepayment premiums, late charges, default interest, and advances
to protect the security of the Security Instrument under Section 12 of the
Security Instrument.
	 
	 	 	 	Interest Rate: The annual rate of four and eighty-six one-hundredths percent
(4.86%).
	 
	 	 	 	Lender: The holder of this Note.
	 
	 	 	 	Loan: The loan evidenced by this Note.
	 
	 	 	 	Loan Term: 84 months.
	 
	 	 	 	Maturity Date: The first day of June, 2018, or any earlier date on which
the unpaid principal balance of this Note becomes due and payable by
acceleration or otherwise.
	 
	 	 	 	Property Jurisdiction: The jurisdiction in which the Land is located.

	 	 	 	 	 

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	 	 	 	Security Instrument: A multifamily mortgage, deed to secure debt or
deed of trust dated as of the date of this Note.
	 
	 	 	 	Yield Maintenance Period Term or Prepayment Premium Period Term: 78 months.
	 
	 	 	 	Yield Maintenance Period End Date or Prepayment Premium Period End Date:
The last day of November, 2017.

Event of Default, Key Principal and other capitalized terms used but not defined in this
Note shall have the meanings given to such terms in the Security Instrument.

     2. Address for Payment. All payments due under this Note shall be payable at 26901
Calabasas Road, Suite 200, Calabasas Hills, California 91301, or such other place as
may be designated by written notice to Borrower from or on behalf of Lender.

     3. Payment of Principal and Interest. Principal and interest shall be paid as follows:

     (a) Short Month Interest. If disbursement of principal is made by Lender to Borrower
on any day other than the first day of the month, interest for the period beginning on
the Disbursement Date and ending on and including the last day of the month in which such disbursement is
made shall be payable simultaneously with the execution of this Note.

     (b) Interest Computation. Interest under this Note shall be computed on the basis
of (check one only):

	 	o	 	30/360. A 360-day year consisting of twelve 30-day months.
	 
	 	þ	 	Actual/360. A 360-day year. The amount of each
monthly payment made by Borrower pursuant to Paragraph 3(c) below
that is allocated to interest will be based on the actual number of
calendar days during such month and shall be calculated by
multiplying the unpaid principal balance of this Note by the per
annum Interest Rate, dividing the product by 360 and multiplying the
quotient by the actual number of days elapsed during the month.
Borrower understands that the amount allocated to interest for each
month will vary depending on the actual number of calendar days
during such month.

     (c) Monthly Installments. Consecutive monthly installments of principal and interest,
each in the amount of Twenty-Seven Thousand Four Hundred Seventy-One and 50/100
Dollars (US $27,471.50), shall be payable on the First Payment Date and on the first day of every
month thereafter, until the entire unpaid principal balance evidenced by this Note is fully paid. Any
remaining principal and interest shall be due and payable on the Maturity Date. The unpaid principal
balance shall continue to bear interest after the Maturity Date at the Default Rate set forth in this Note
until and including the date on which it is paid in full.

     (d) Payments Before Due Date. Any regularly scheduled monthly installment of
principal and interest that is received by Lender before the date it is due shall be deemed to
have been received on the due date solely for the purpose of calculating interest due.

	 	 	 	 	 

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     (e) Accrued Interest. Any accrued interest remaining past due for 30 days or more
shall be added to and become part of the unpaid principal balance and shall bear interest
at the rate or rates specified in this Note. Any reference herein to “accrued interest”
shall refer to accrued interest which has not become part of the unpaid principal balance.
Any amount added to principal pursuant to the Loan Documents shall bear interest at the
applicable rate or rates specified in this Note and shall be payable with such interest
upon demand by Lender and absent such demand, as provided in this Note for the payment of
principal and interest.

     4. Application of Payments. If at any time Lender receives, from Borrower or
otherwise, any amount applicable to the Indebtedness which is less than all amounts due and
payable at such time, Lender may apply that payment to amounts then due and payable in any manner and in any
order determined by Lender, in Lender’s discretion. Borrower agrees that neither Lender’s
acceptance of a payment from Borrower in an amount that is less than all amounts then due and payable
nor Lender’s application of such payment shall constitute or be deemed to constitute either a
waiver of the unpaid amounts or an accord and satisfaction.

     5. Security. The Indebtedness is secured, among other things, by the Security
Instrument, and reference is made to the Security Instrument for other rights of Lender concerning
the collateral for the Indebtedness.

     6. Acceleration. If an Event of Default has occurred and is continuing, the entire
unpaid principal balance, any accrued interest, the prepayment premium payable under
Paragraph 10, if any, and all other amounts payable under this Note and any other Loan Document shall at once
become due and payable, at the option of Lender, without any prior notice to Borrower. Lender may
exercise this option to accelerate regardless of any prior forbearance.

     7. Late Charge. If any monthly installment due hereunder is not received by Lender on
or before the 10th day of each month or if any other amount payable under this Note or
under the Security Instrument or any other Loan Document is not received by Lender within 10 days after
the date such amount is due, counting from and including the date such amount is due, Borrower shall
pay to Lender, immediately and without demand by Lender, a late charge equal to 5 percent of such
monthly installment or other amount due. Borrower acknowledges that its failure to make timely payments
will cause Lender to incur additional expenses in servicing and processing the Loan and that it is
extremely difficult and impractical to determine those additional expenses. Borrower agrees that the late
charge payable pursuant to this Paragraph represents a fair and reasonable estimate, taking into
account all circumstances existing on the date of this Note, of the additional expenses Lender will incur by
reason of such late payment. The late charge is payable in addition to, and not in lieu of, any interest
payable at the Default Rate pursuant to Paragraph 8.

     8. Default Rate. So long as any monthly installment or any other payment due under
this Note remains past due for 30 days or more, interest under this Note shall accrue on
the unpaid principal balance from the earlier of the due date of the first unpaid monthly installment or
other payment due, as applicable, at the Default Rate. If the unpaid principal balance and all accrued
interest are not paid in full on the Maturity Date, the unpaid principal balance and all accrued interest shall
bear interest from the Maturity Date at the Default Rate. Borrower also acknowledges that its failure
to make timely payments will cause Lender to incur additional expenses in servicing and processing
the Loan, that, during the time that any monthly installment or payment under this Note is delinquent
for more than 30 days, Lender will incur additional costs and expenses arising from its loss of the use
of the money due

	 	 	 	 	 

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and from the adverse impact on Lender’s ability to meet its other obligations
and to take advantage of other investment opportunities, and that it is extremely
difficult and impractical to determine those additional costs and expenses. Borrower
also acknowledges that, during the time that any monthly installment or other payment
due under this Note is delinquent for more than 30 days, Lender’s risk of nonpayment
of this Note will be materially increased and Lender is entitled to be compensated
for such increased risk. Borrower agrees that the increase in the rate of interest
payable under this Note to the Default Rate represents a fair and reasonable
estimate, taking into account all circumstances existing on the date of this Note, of
the additional costs and expenses Lender will incur by reason of the Borrower’s
delinquent payment and the additional compensation Lender is entitled to receive for
the increased risks of nonpayment associated with a delinquent loan.

     9. Limits on Personal Liability.

     (a) Except as otherwise provided in this Paragraph 9, Borrower shall have no
personal liability under this Note, the Security Instrument or any other Loan Document for
the repayment of the Indebtedness or for the performance of any other obligations of Borrower under the
Loan Documents, and Lender’s only recourse for the satisfaction of the Indebtedness and the
performance of such obligations shall be Lender’s exercise of its rights and remedies with respect to
the Mortgaged Property (as such term is defined in the Security Instrument) and any other collateral held
by Lender as security for the Indebtedness. This limitation on Borrower’s liability shall not
limit or impair Lender’s enforcement of its rights against any guarantor of the Indebtedness or any
guarantor of any obligations of Borrower.

     (b) Borrower shall be personally liable to Lender for the repayment of a portion of
the Indebtedness equal to any loss or damage suffered by Lender as a result of:

     (1) failure of Borrower to pay to Lender upon demand after an Event of
Default, all Rents to which Lender is entitled under Section 3(a) of the Security
Instrument and the amount of all security deposits collected by Borrower from tenants then in
residence;

     (2) failure of Borrower to apply all insurance proceeds and condemnation
proceeds as required by the Security Instrument;

     (3) failure of Borrower to comply with Section 14(d) or (e) of the Security
Instrument relating to the delivery of books and records, statements,
schedules and reports;

     (4) fraud or written material misrepresentation by Borrower, Key Principal or
any officer, director, partner, member or employee of Borrower in connection with
the application for or creation of the Indebtedness or any request for any action or consent by
Lender;

     (5) failure to apply Rents, first, to the payment of reasonable operating
expenses (other than Property management fees that are not currently payable pursuant
to the terms of an Assignment of Management Agreement or any other agreement with Lender
executed in connection with the Loan) and then to Debt Service Amounts, except that
Borrower will not be personally liable (i) to the extent that Borrower lacks the legal right to
direct the disbursement of such sums because of a bankruptcy, receivership or similar judicial
proceeding, or (ii) with respect to Rents that are distributed in any calendar year if Borrower has
paid all operating expenses and Debt Service Amounts for that calendar year; or

	 	 	 	 	 

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     (6) failure by Borrower to comply with the provisions of Section 17(a)
of the Security Instrument.

     (c) Borrower shall become personally liable to Lender for the repayment of all of the
Indebtedness upon the occurrence of any of the following Events of Default:

     (1) Borrower’s acquisition of any property or operation of any business not
permitted by Section 33 of the Security Instrument;

     (2) a Transfer that is an Event of Default under Section 21 of the Security
Instrument; or

     (3) the occurrence of a Bankruptcy Event (but only if the Bankruptcy Event
occurs with the consent, encouragement or active participation of Borrower, Key
Principal or any Borrower Affiliate).

     (d) To the extent that Borrower has personal liability under this Paragraph 9, Lender
may exercise its rights against Borrower personally without regard to whether Lender has
exercised any rights against the Mortgaged Property or any other security, or pursued any rights against
any guarantor, or pursued any other rights available to Lender under this Note, the Security
Instrument, any other Loan Document or applicable law. For purposes of this Paragraph 9, the term “Mortgaged
Property” shall not include any funds that (1) have been applied by Borrower as required or permitted by
the Security Instrument prior to the occurrence of an Event of Default, or (2) Borrower was unable
to apply as required or permitted by the Security Instrument because of a bankruptcy,
receivership, or similar judicial proceeding.

     10. Voluntary and Involuntary Prepayments.

     (a) A prepayment premium shall be payable in connection with any prepayment
made under this Note as provided below:

     (1) Borrower may voluntarily prepay all (but not less than all) of the
unpaid principal balance of this Note only on the last calendar day of a calendar
month (the “Last Day of the Month”) and only if Borrower has complied with all of
the following:

	 	(i)	 	Borrower must give Lender at least 30
days (if given via U.S. Postal Service) or 20 days (if given
via facsimile, email or overnight courier), but not more than
60 days, prior written notice of Borrower’s intention to make a
prepayment (the “Prepayment Notice”). The Prepayment Notice
shall be given in writing (via facsimile, email, U.S. Postal
Service or overnight courier) and addressed to Lender. The
Prepayment Notice shall include, at a minimum, the Business Day
upon which Borrower intends to make the prepayment (the
“Intended Prepayment Date”).
	 
	 	(ii)	 	Borrower acknowledges that the Lender
is not required to accept any voluntary prepayment of this Note
on any day other than the Last Day of the Month even (A) if
Borrower has given a Prepayment Notice with an Intended
Prepayment Date other than the Last Day of the Month or (B) if
the Last Day of the Month is not a Business Day. Therefore,
even if

	 	 	 	 	 

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	 	 	 	Lender accepts a voluntary prepayment on any day other
than the Last Day of the Month, for all purposes (including
the accrual of interest and the calculation of the prepayment
premium), any prepayment received by Lender on any day other
than the Last Day of the Month shall be deemed to have been
received by Lender on the Last Day of the Month and any
prepayment calculation will include interest to and including
the Last Day of the Month in which such prepayment occurs. If
the Last Day of the Month is not a Business Day, then the
Borrower must make the payment on the Business Day
immediately preceding the Last Day of the Month.
	 
	 	(iii)	 	Any prepayment shall be made by
paying (A) the amount of principal being prepaid, (B) all
accrued interest (calculated to the Last Day of the Month), (C)
all other sums due Lender at the time of such prepayment, and
(D) the prepayment premium calculated pursuant to Schedule A.
	 
	 	(iv)	 	If, for any reason, Borrower fails
to prepay this Note (A) within five (5) Business Days after the
Intended Prepayment Date or (B) if the prepayment occurs in a
month other than the month stated in the original Prepayment
Notice, then Lender shall have the right, but not the
obligation, to recalculate the prepayment premium based upon
the date that Borrower actually prepays this Note and to make
such calculation as described in Schedule A attached hereto.
For purposes of such recalculation, such new prepayment date
shall be deemed the “Intended Prepayment Date.”

     (2) Upon Lender’s exercise of any right of acceleration under this Note,
Borrower shall pay to Lender, in addition to the entire unpaid principal balance of
this Note outstanding at the time of the acceleration, (i) all accrued interest and all other sums due
Lender under this Note and the other Loan Documents, and (ii) the prepayment premium calculated
pursuant to Schedule A.

     (3) Any application by Lender of any collateral or other security to the
repayment of any portion of the unpaid principal balance of this Note prior to the
Maturity Date and in the absence of acceleration shall be deemed to be a partial prepayment by
Borrower, requiring the payment to Lender by Borrower of a prepayment premium.

     (b) Notwithstanding the provisions of Paragraph 10(a), no prepayment premium shall be
payable (1) with respect to any prepayment occurring as a result of the application
of any insurance proceeds or condemnation award under the Security Instrument, or (2) as provided in
subparagraph (c) of Schedule A.

     (c) Schedule A is hereby incorporated by reference into this Note.

     (d) Any required prepayment of less than the entire unpaid principal balance of this
Note shall not extend or postpone the due date of any subsequent monthly installments or
change the amount of such installments, unless Lender agrees otherwise in writing.

	 	 	 	 	 

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     (e) Borrower recognizes that any prepayment of the unpaid principal balance of
this Note, whether voluntary or involuntary or resulting from a default by Borrower, will
result in Lender’s incurring loss, including reinvestment loss, additional expense and
frustration or impairment of Lender’s ability to meet its commitments to third parties.
Borrower agrees to pay to Lender upon demand damages for the detriment caused by any
prepayment, and agrees that it is extremely difficult and impractical to ascertain the
extent of such damages. Borrower therefore acknowledges and agrees that the formula for
calculating prepayment premiums set forth on Schedule A represents a reasonable estimate of
the damages Lender will incur because of a prepayment.

     (f) Borrower further acknowledges that the prepayment premium provisions of this Note
are a material part of the consideration for the loan evidenced by this Note, and
acknowledges that the terms of this Note are in other respects more favorable to Borrower
as a result of the Borrower’s voluntary agreement to the prepayment premium provisions.

     11. Costs and Expenses. Borrower shall pay on demand all expenses and costs,
including fees and out-of-pocket expenses of attorneys and expert witnesses and costs of
investigation, incurred by Lender as a result of any default under this Note or in
connection with efforts to collect any amount due under this Note, or to enforce the
provisions of any of the other Loan Documents, including those incurred in post-judgment
collection efforts and in any bankruptcy proceeding (including any action for relief from
the automatic stay of any bankruptcy proceeding) or judicial or non-judicial foreclosure
proceeding.

     12. Forbearance. Any forbearance by Lender in exercising any right or remedy under
this Note, the Security Instrument, or any other Loan Document or otherwise afforded by
applicable law, shall not be a waiver of or preclude the exercise of that or any other
right or remedy. The acceptance by Lender of any payment after the due date of such
payment, or in an amount which is less than the required payment, shall not be a waiver of
Lender’s right to require prompt payment when due of all other payments or to exercise any
right or remedy with respect to any failure to make prompt payment. Enforcement by Lender
of any security for Borrower’s obligations under this Note shall not constitute an election
by Lender of remedies so as to preclude the exercise of any other right or remedy available
to Lender.

     13. Waivers. Presentment, demand, notice of dishonor, protest, notice of
acceleration, notice of intent to demand or accelerate payment or maturity, presentment for
payment, notice of nonpayment, grace, and diligence in collecting the Indebtedness are
waived by Borrower, Key Principal, and all endorsers and guarantors of this Note and all
other third party obligors.

     14. Loan Charges. Borrower agrees to pay an effective rate of interest equal to the
sum of the Interest Rate provided for in this Note and any additional rate of interest
resulting from any other charges of interest or in the nature of interest paid or to be
paid in connection with the loan evidenced by this Note and any other fees or amounts to be
paid by Borrower pursuant to any of the other Loan Documents. Neither this Note nor any
of the other Loan Documents shall be construed to create a contract for the use,
forbearance or detention of money requiring payment of interest at a rate greater than the
maximum interest rate permitted to be charged under applicable law. If any applicable law
limiting the amount of interest or other charges permitted to be collected from Borrower in
connection with the Loan is interpreted so that any interest or other charge provided for
in any Loan Document, whether considered separately or together with other charges provided
for in any other Loan Document, violates that law, and Borrower is entitled to the benefit
of that law, that interest or charge is hereby

	 	 	 	 	 

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reduced to the extent necessary to eliminate that violation. The amounts, if
any, previously paid to Lender in excess of the permitted amounts shall be applied by
Lender to reduce the unpaid principal balance of this Note. For the purpose of
determining whether any applicable law limiting the amount of interest or other
charges permitted to be collected from Borrower has been violated, all Indebtedness
that constitutes interest, as well as all other charges made in connection with the
Indebtedness that constitute interest, shall be deemed to be allocated and spread
ratably over the stated term of the Note. Unless otherwise required by applicable
law, such allocation and spreading shall be effected in such a manner that the rate
of interest so computed is uniform throughout the stated term of the Note.

     15. Commercial Purpose. Borrower represents that the Indebtedness is being
incurred by Borrower solely for the purpose of carrying on a business or commercial
enterprise, and not for personal, family or household purposes.

     16. Counting of Days. Except where otherwise specifically provided, any
reference in this Note to a period of “days” means calendar days, not Business Days.

     17. Governing Law. This Note shall be governed by the law of the jurisdiction in
which the Land is located.

     18. Captions. The captions of the paragraphs of this Note are for convenience
only and shall be disregarded in construing this Note.

     19. Notices. All notices, demands and other communications required or
permitted to be given by Lender to Borrower pursuant to this Note shall be given in
accordance with Section 31 of the Security Instrument.

     20. Consent to Jurisdiction and Venue. Borrower and Key Principal each agrees
that any controversy arising under or in relation to this Note shall be litigated
exclusively in the Property Jurisdiction. The state and federal courts and
authorities with jurisdiction in the Property Jurisdiction shall have exclusive
jurisdiction over all controversies which shall arise under or in relation to this
Note.

Borrower and Key Principal each irrevocably consents to service, jurisdiction, and
venue of such courts for any such litigation and waives any other venue to which it
might be entitled by virtue of domicile, habitual residence or otherwise.

     21. WAIVER OF TRIAL BY JURY. BORROWER, KEY PRINCIPAL AND
LENDER EACH (A) AGREES NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING
OUT OF THIS NOTE OR THE RELATIONSHIP BETWEEN THE PARTIES AS LENDER, KEY PRINCIPAL AND
BORROWER THAT IS TRIABLE OF RIGHT BY A JURY AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY
WITH RESPECT TO SUCH ISSUE TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE
FUTURE. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY,
KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL.

	 	 	 	 	 

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     ATTACHED SCHEDULES. The following Schedules are attached to this Note and
incorporated herein by reference:

	 	þ	 	Schedule A Prepayment Premium (required)
	 
	 	þ	 	Schedule B-1 Modifications to Acknowledgment and Agreement of Key Principal
	 
	 	þ	 	Schedule B-2 Modification to Multifamily Note (Waste)

[CONTINUED ON FOLLOWING PAGE]

	 	 	 	 	 
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	 	 	     IN WITNESS WHEREOF, Borrower has signed and delivered this Note or has
caused this Note to be signed and delivered by its duly authorized
representative.

	 	 	 	 	 	 	 	 	 
	 	 	SIR ARBOR POINTE, LLC,	 	 
	 	 	a Delaware limited liability company	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	Steadfast Income Advisor, LLC,	 	 
	 	 	 	 	a Delaware limited liability company,	 	 
	 	 	Its:	 	Manager	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:

Name:
	 	/s/ Ana Marie del Rio
 

Ana Marie del Rio
	 	 
	 

	 	 	 	Title:
	 	Secretary	 	 

PNC Loan No. 310401108

Fannie Mae Commitment No. 864670     

	 	 	 	 	 

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PAY TO THE ORDER OF

FANNIE MAE

WITHOUT RECOURSE

	 	 	 	 	 

	PNC BANK, NATIONAL ASSOCIATION,	 	 
	a national banking association	 	 
	 
	 	 	 	 
	By:

	 	/s/ Kelli A. Tyler
 

	 	 
	Name:

	 	Kelli A. Tyler	 	 
	Title:

	 	Vice President	 	 

	 	 	 	 	 
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ACKNOWLEDGMENT AND AGREEMENT OF KEY PRINCIPAL TO

PERSONAL LIABILITY FOR EXCEPTIONS TO NON-RECOURSE LIABILITY

     Key Principal, who has an economic interest in SIR Arbor Pointe, LLC, a
Delaware limited liability company (“Borrower”), or who will otherwise obtain a material
financial benefit from the Loan, hereby absolutely, unconditionally and irrevocably
agrees to pay to Lender, or its assigns, on demand, all amounts for which Borrower is
personally liable under Paragraph 9 of the Multifamily Note dated May 4, 2011 in the
amount of $5,200,000.00 to which this Acknowledgment is attached (the
“Note”). The
obligations of Key Principal shall survive any foreclosure proceeding, any foreclosure
sale, any delivery of any deed in lieu of foreclosure, and any release of record of the
Security Instrument. Lender may pursue its remedies against Key Principal without first
exhausting its remedies against the Borrower or the Mortgaged Property. All capitalized
terms used but not defined in this Acknowledgment shall have the meanings given to such
terms in the Security Instrument. As used in this Acknowledgment, the term “Key
Principal” (each if more than one) shall mean only those individuals or entities that
execute this Acknowledgment.

     The obligations of Key Principal shall be performed without demand by Lender and
shall be unconditional irrespective of the genuineness, validity, or enforceability of
the Note, or any other Loan Document, and without regard to any other circumstance which
might otherwise constitute a legal or equitable discharge of a surety or a guarantor.
Key Principal hereby waives the benefit of all principles or provisions of law, which
are or might be in conflict with the terms of this Acknowledgment, and agrees that Key
Principal’s obligations shall not be affected by any circumstances which might otherwise
constitute a legal or equitable discharge of a surety or a guarantor. Key Principal
hereby waives the benefits of any right of discharge and all other rights under any and
all statutes or other laws relating to guarantors or sureties, to the fullest extent
permitted by law, diligence in collecting the Indebtedness, presentment, demand for
payment, protest, all notices with respect to the Note including this Acknowledgment,
which may be required by statute, rule of law or otherwise to preserve Lender’s rights
against Key Principal under this Acknowledgment, including notice of acceptance, notice
of any amendment of the Loan Documents, notice of the occurrence of any default or Event
of Default, notice of intent to accelerate, notice of acceleration, notice of dishonor,
notice of foreclosure, notice of protest, notice of the incurring by Borrower of any
obligation or indebtedness and all rights to require Lender to (a) proceed against
Borrower, (b) proceed against any general partner of Borrower, (c) proceed against or
exhaust any collateral held by Lender to secure the repayment of the Indebtedness, or
(d) if Borrower is a partnership, pursue any other remedy it may have against Borrower,
or any general partner of Borrower.

     At any time without notice to Key Principal, and without affecting the liability of
Key Principal hereunder, (a) the time for payment of the principal of or interest on the
Indebtedness may be extended or the Indebtedness may be renewed in whole or in part; (b)
the time for Borrower’s performance of or compliance with any covenant or agreement
contained in the Note, or any other Loan Document, whether presently existing or
hereinafter entered into, may be extended or such performance or compliance may be
waived; (c) the maturity of the Indebtedness may be accelerated as provided in the Note
or any other Loan Document; (d) the Note or any other Loan Document may be modified or
amended by Lender and Borrower in any respect, including an increase in the principal
amount; and (e) any security for the Indebtedness may be modified, exchanged,
surrendered or otherwise dealt with or additional security may be pledged or mortgaged
for the Indebtedness.

	 	 	 	 	 

	Multifamily Non-Recourse Fixed Rate Note – Kentucky

	 	Form 4118
	 	Page 12
	Fannie Mae

	 	08-09
	 	© 1997-2009 Fannie Mae

 

 

     Key Principal acknowledges that Key Principal has received a copy of the
Note and all other Loan Documents. Neither this Acknowledgment nor any of its
provisions may be waived, modified, amended, discharged, or terminated except by an
agreement in writing signed by the party against which the enforcement of the
waiver, modification, amendment, discharge, or termination is sought, and then only
to the extent set forth in that agreement. Key Principal agrees to notify Lender (in
the manner for giving notices provided in Section 31 of the Security Instrument) of
any change of Key Principal’s address within 10 Business Days after such change of
address occurs. Any notices to Key Principal shall be given in the manner provided
in Section 31 of the Security Instrument. Key Principal agrees to be bound by
Paragraphs 20 and 21 of the Note.

     CONFESSION OF JUDGMENT. Key Principal hereby irrevocably authorizes any
attorney-at-law, including an attorney employed by or retained by Lender, to appear
in any court of record in or of the Commonwealth of Kentucky, or in any other state
or territory of the United States or the District of Columbia, at any time after all
amounts under Paragraph 9 of this Note become due, whether by acceleration or
otherwise, to waive the issuing and service of process and to confess a judgment
against Key Principal in favor of Lender, for all amounts due and owing by Key
Principal to Lender under this Acknowledgment, together with costs of suit and
thereupon to release all errors and waive all right of appeal or stays of execution
in any court of record. Key Principal hereby expressly acknowledges that an
attorney-at-law employed or retained by Lender may confess judgment against Key
Principal, and further expressly consents to Lender’s payment of the legal fees of
such attorney-at-law.

WARNING. BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF
YOU DO NOT PAY ON TIME, A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR
KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF
ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS, FAULTY
GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY OTHER CAUSE.

     THIS ACKNOWLEDGMENT IS AN INSTRUMENT SEPARATE FROM, AND NOT A PART OF, THE
NOTE. BY SIGNING THIS ACKNOWLEDGMENT, KEY PRINCIPAL DOES NOT INTEND TO BECOME AN
ACCOMMODATION PARTY TO, OR AN ENDORSER OF, THE NOTE.

[CONTINUED ON FOLLOWING PAGE]

	 	 	 	 	 
	Multifamily Non-Recourse Fixed Rate Note – Kentucky

	 	Form 4118
	 	Page 13
	Fannie Mae

	 	08-09
	 	© 1997-2009 Fannie Mae

 

 

     IN WITNESS WHEREOF, Key Principal has signed and delivered this
Acknowledgment or has caused this Acknowledgment to be signed and delivered by its duly
authorized representative.

	 	 	 	 	 	 	 

	 	 	KEY PRINCIPAL	 	 
	 
	 	 	 	 	 	 
	 	 	STEADFAST INCOME REIT, INC.,	 	 
	 	 	a Maryland corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Ana Marie del Rio	 	 
	 

	 	 	 	 

	 	 
	 

	 	Name:
	 	Ana Marie del Rio	 	 
	 

	 	Title:
	 	Secretary	 	 
	 
	 	 	 	 	 	 
	 

	 	Address:
	 	  18100 Von Karman Avenue, Suite 500	 	 
	 

	 	 	 	  Irvine, California 92612	 	 

	 	 	 	 	 

	Multifamily Non-Recourse Fixed Rate Note – Kentucky

	 	Form 4118
	 	Page 14
	Fannie Mae

	 	08-09
	 	© 1997-2009 Fannie Mae

 

 

SCHEDULE A

PREPAYMENT PREMIUM

Any prepayment premium payable under Paragraph 10 of this Note shall be computed as follows:

	 	(a)	 	If the prepayment is made at any time after the date of this
Note and before the Yield Maintenance Period End Date, the prepayment
premium shall be the greater of:

	 	(i)	 	1% of the amount of principal being prepaid; or
	 
	 	(ii)	 	The product obtained by multiplying:

	 	(A)	 	the amount of principal being
prepaid,
	 
	 	by	 	
	 
	 	(B)	 	the difference obtained by subtracting
from the Interest Rate on this Note the Yield Rate (as defined
below), on the twenty-fifth Business Day preceding (x) the
Intended Prepayment Date, or (y) the date Lender accelerates the
Loan or otherwise accepts a prepayment pursuant to Paragraph
10(a)(3) of this Note,
	 
	 	by	 	
	 
	 	(C)	 	the present value factor calculated using the following formula:

	 	 	 	
	 
	 	[r = 	 	Yield Rate
	 
	 	n = 	 	the number of months
remaining between (1) either of the following: (x) in
the case of a voluntary prepayment, the Last Day of the
Month during which the prepayment is made, or (y) in
any other case, the date on which Lender accelerates
the unpaid principal balance of this Note and (2) the
Yield Maintenance Period End Date.

	 	 	 	 	 

	Multifamily Non-Recourse Fixed Rate Note – Kentucky

	 	Form 4118
	 	Page A-1
	Fannie Mae

	 	08-09
	 	© 1997-2009 Fannie Mae

 

 

	 	 	 	For purposes of this clause (ii), the “Yield Rate”
means the yield calculated by interpolating the yields
for the immediately shorter and longer term U.S.
“Treasury constant maturities” (as reported in the
Federal Reserve Statistical Release H.15 Selected
Interest Rates (the “Fed Release”) under the heading
“U.S. government securities”) closest to the remaining
term of the Yield Maintenance Period Term, as follows
(rounded to three decimal places):

	 	a = 	 	the yield for the longer U.S. Treasury constant
maturity
	 
	 	b = 	 	the yield for the shorter U.S. Treasury
constant maturity
	 
	 	x =	 	 the term of the longer U.S.
Treasury constant maturity
	 
	 	y = 	 	 the term of the shorter
U.S. Treasury constant maturity
	 
	 	z =	 	“n” (as defined in
the present value factor calculation above) divided by 12.

	 	 	 	Notwithstanding any provision to the contrary, if “z”
equals a term reported under the U.S. “Treasury constant
maturities” subheading in the Fed Release, the yield for
such term shall be used, and interpolation shall not be
necessary. If publication of the Fed Release is
discontinued by the Federal Reserve Board, Lender shall
determine the Yield Rate from another source selected by
Lender. Any determination of the Yield Rate by Lender will
be binding absent manifest error.]

	 	(b)	 	If the prepayment is made on or after the Yield Maintenance
Period End Date but before the last calendar day of the 4th month prior to
the month in which the Maturity Date occurs, the prepayment premium shall be
1% of the amount of principal being prepaid.
	 
	 	(c)	 	Notwithstanding the provisions of Paragraph 10(a) of this
Note, no prepayment premium shall be payable with respect to any prepayment
made on or after the last calendar day of the 4th month prior to the month
in which the Maturity Date occurs.

/s/ Ana Marie del Rio            
      

Borrower Initials

	 	 	 	 	 
	Multifamily Non-Recourse Fixed Rate Note – Kentucky

	 	Form 4118
	 	Page A-2
	Fannie Mae

	 	08-09
	 	© 1997-2009 Fannie Mae

 

 

SCHEDULE B-l

MODIFICATIONS TO ACKNOWLEGEMENT AND AGREEMENT

OF KEY PRINCIPAL

(Non-Standard Modifications)

     The following modifications are made to the text of the Acknowledgement and
Agreement of Key Principal to Personal Liability for Exceptions to Non-Recourse
Liability (the “Acknowledgement and Agreement”) that precedes this Exhibit:

	1.	 	The second sentence of the first paragraph is amended and restated in its entirety
as follows:

	 	 	 	“The obligations of Key Principal shall survive any foreclosure proceeding,
any foreclosure sale, any delivery of any deed in lieu of foreclosure, and
any release of record of the Security Instrument; provided, however, that
notwithstanding anything to the contrary herein, Key Principal’s liability
to Lender shall not include any loss, liability or expense arising or
occurring from and after the date of the foreclosure or deed in lieu of
foreclosure which relates to actions or omissions of Lender or any future
assignee or holder of the Note occurring after such foreclosure or deed in
lieu of foreclosure.”

	2.	 	The following text is added (i) at the beginning of the first and second
sentences of the paragraph entitled “Confession of Judgment” on the second page of the
Acknowledgement and Agreement, and (ii) immediately prior to the words “BY SIGNING THIS
PAPER . . .” in the immediately following paragraph entitled “Warning”.
	 
	 	 	“To the extent permitted by applicable law,”

	 	 	 	 	 
	 

	 	Schedule B-l
	 	Page B-1-1
	Non-Standard Rider to Acknowledgment
	 	 	 	 
	and Agreement of Key Principal
	 	 	 	 
	 
	 	 	 	 
		 	 	 	 

 

 

	3.	 	All capitalized terms used in this Exhibit not specifically
defined herein shall have the meanings set forth in the text of the
Acknowledgement and Agreement that precedes this Exhibit.

	 	 	 

	 

	 	BORROWER’S INITIALS:
	 
	 	 
	 

	 	/s/ Ana Marie del Rio
	 

	 	 

	 	 	 
	Non-Standard Rider to Acknowledgment

	 	Signature Page
	and Agreement of Key Principal
	 	 
	 
	 	 
	
	 	 

 

 

SCHEDULE B—2

MODIFICATIONS TO MULTIFAMILY NOTE

(Waste)

     The following modification is made to the text of the Multifamily Note that
precedes this Schedule:

     1. Paragraph 9(b) of the Note is hereby modified by deleting clause (6) in
its entirety and inserting the following in lieu thereof:

          “(6) waste or abandonment of the Mortgaged Property by Borrower.”

     All capitalized terms used but not defined in the Note (including this
Schedule B) shall have the meanings given to such terms in the Security
Instrument (as that term is defined in this Note).

/s/ Ana Marie del Rio          
     

Borrower Initials

	 	 	 	 	 
	Schedule B — Waste

	 	Form 4199
	 	Page B-2
	Fannie Mae

	 	11-09
	 	© 2008-2009 Fannie Maeexv10w6

Exhibit 10.6

Prepared by:

Andrew S. Begun, Esq.

Alston & Bird, LLP

2801 Townsgate Road, Suite 215

Westlake Village, California 91361

Signature of Preparer

After recording mail to:

PNC Bank, National Association

10731 Treena Street, Suite 101

San Diego, CA 92131

Attention: Kelli A. Tyler

PNC Loan No. 310401108

Fannie Mae No. 864670

Principal place of business:

26901 Agoura Rd., Suite 200

Calabasas Hills, California 91301

MULTIFAMILY MORTGAGE,

ASSIGNMENT OF RENTS

AND SECURITY AGREEMENT

			
	 	 	 
	FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT –

KENTUCKY
	 	Form 4018       06/09
	 
	 	© 1998-2009 Fannie Mae

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page
	1. DEFINITIONS
	 	 	1	 
	 
	2. UNIFORM COMMERCIAL CODE SECURITY AGREEMENT
	 	 	7	 
	 
	3. ASSIGNMENT OF RENTS; APPOINTMENT OF RECEIVER; LENDER IN POSSESSION 
	 	 	7	 
	 
	4. ASSIGNMENT OF LEASES; LEASES AFFECTING THE MORTGAGED PROPERTY
	 	 	10	 
	 
	5. PAYMENT OF INDEBTEDNESS; PERFORMANCE UNDER LOAN DOCUMENTS; PREPAYMENT PREMIUM
	 	 	11	 
	 
	6. EXCULPATION
	 	 	12	 
	 
	7. DEPOSITS FOR TAXES, INSURANCE AND OTHER CHARGES
	 	 	12	 
	 
	8. COLLATERAL AGREEMENTS
	 	 	13	 
	 
	9. APPLICATION OF PAYMENTS
	 	 	13	 
	 
	10. COMPLIANCE WITH LAWS
	 	 	13	 
	 
	11. USE OF PROPERTY
	 	 	14	 
	 
	12. PROTECTION OF LENDER’S SECURITY
	 	 	14	 

			
	 	 	 
	FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT –

KENTUCKY
	 	Form 4018       06/09       Page i
	 
	 	© 1998-2009 Fannie Mae

 

 

	 	 	 	 	 
	 	 	Page
	13. INSPECTION
	 	 	14	 
	 
	14. BOOKS AND RECORDS; FINANCIAL REPORTING
	 	 	15	 
	 
	15. TAXES; OPERATING EXPENSES
	 	 	16	 
	 
	16. LIENS; ENCUMBRANCES
	 	 	17	 
	 
	17. PRESERVATION, MANAGEMENT AND MAINTENANCE OF MORTGAGED PROPERTY 
	 	 	17	 
	 
	18. ENVIRONMENTAL HAZARDS
	 	 	18	 
	 
	19. PROPERTY AND LIABILITY INSURANCE
	 	 	24	 
	 
	20. CONDEMNATION
	 	 	25	 
	 
	21. TRANSFERS OF THE MORTGAGED PROPERTY OR INTERESTS IN
BORROWER
	 	 	26	 
	 
	22. EVENTS OF DEFAULT
	 	 	31	 
	 
	23. REMEDIES CUMULATIVE
	 	 	32	 
	 
	24. FORBEARANCE
	 	 	32	 
	 
	25. LOAN CHARGES
	 	 	32	 
	 
	26. WAIVER OF STATUTE OF LIMITATIONS
	 	 	33	 
	 
	27. WAIVER OF MARSHALLING
	 	 	33	 

			
	 	 	 
	FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT –

KENTUCKY
	 	Form 4018       06/09       Page ii
	 
	 	© 1998-2009 Fannie Mae

 

 

	 	 	 	 	 
	 	 	Page
	28. FURTHER ASSURANCES
	 	 	33	 
	 
	29. ESTOPPEL CERTIFICATE
	 	 	33	 
	 
	30. GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE
	 	 	34	 
	 
	31. NOTICE
	 	 	34	 
	 
	32. SALE OF NOTE; CHANGE IN SERVICER
	 	 	35	 
	 
	33. SINGLE ASSET BORROWER
	 	 	35	 
	 
	34. SUCCESSORS AND ASSIGNS BOUND
	 	 	35	 
	 
	35. JOINT AND SEVERAL LIABILITY
	 	 	35	 
	 
	36. RELATIONSHIP OF PARTIES; NO THIRD PARTY BENEFICIARY
	 	 	35	 
	 
	37. SEVERABILITY; AMENDMENTS
	 	 	36	 
	 
	38. CONSTRUCTION
	 	 	36	 
	 
	39. LOAN SERVICING
	 	 	36	 
	 
	40. DISCLOSURE OF INFORMATION
	 	 	36	 
	 
	41. NO CHANGE IN FACTS OR CIRCUMSTANCES
	 	 	36	 
	 
	42. SUBROGATION
	 	 	37	 

			
	 	 	 
	FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT –

KENTUCKY
	 	Form 4018       06/09       Page iii
	 
	 	© 1998-2009 Fannie Mae

 

 

	 	 	 	 	 
	 	 	Page
	43. ACCELERATION; REMEDIES
	 	 	37	 
	 
	44. RELEASE
	 	 	37	 
	 
	45. WAIVER OF HOMESTEAD
	 	 	37	 
	 
	46. WAIVER OF CERTAIN OTHER LAWS
	 	 	37	 
	 
	47. FUTURE ADVANCES
	 	 	38	 
	 
	48. WAIVER OF TRIAL BY JURY
	 	 	38	 

			
	 	 	 
	FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT –

KENTUCKY
	 	Form 4018       06/09       Page iv
	 
	 	© 1998-2009 Fannie Mae

 

 

MULTIFAMILY MORTGAGE,

ASSIGNMENT OF RENTS 

AND SECURITY AGREEMENT

     THIS MULTIFAMILY MORTGAGE, ASSIGNMENT OF RENTS AND SECURITY AGREEMENT (the “Instrument”) is
dated as of the 4th day of May, 2011, and effective as of May 5, 2011, between SIR ARBOR POINTE,
LLC, a limited liability company organized and existing under the laws of Delaware, and whose
office address is 18100 Von Karman Avenue, Suite 500, Irvine, Orange County, California 92612, as
mortgagor (“Borrower”), and PNC BANK, NATIONAL ASSOCIATION, a national banking association, whose
principal place of business is 26901 Agoura Rd., Suite 200, Calabasas Hills, California 91301, as
mortgagee (“Lender”).

     Borrower is indebted to Lender in the principal amount of $5,200,000.00, as evidenced by
Borrower’s Multifamily Note payable to Lender dated as of the date of this Instrument, and
maturing on June 1, 2018.

     TO SECURE TO LENDER the repayment of the Indebtedness, and all renewals, extensions and
modifications of the Indebtedness, and the performance of the covenants and agreements of Borrower
contained in the Loan Documents, Borrower mortgages, warrants, grants, conveys and assigns to
Lender, with power of sale, the Mortgaged Property, including the Land located in Jefferson
County, State of Kentucky, and described in Exhibit A attached to this Instrument.

     Borrower represents and warrants that Borrower is lawfully seized of the Mortgaged Property
and has the right, power and authority to mortgage, grant, convey and assign the Mortgaged
Property, and that the Mortgaged Property is unencumbered. Borrower covenants that Borrower will
warrant and defend generally the title to the Mortgaged Property against all claims and demands,
subject to any easements and restrictions listed in a schedule of exceptions to coverage in any
title insurance policy issued to Lender contemporaneously with the execution and recordation of
this Instrument and insuring Lender’s interest in the Mortgaged Property.

Covenants. Borrower and Lender covenant and agree as follows:

     1. DEFINITIONS.

     The following terms, when used in this Instrument (including when used in the above
recitals), shall have the following meanings:

     (a) “Borrower” means all persons or entities identified as “Borrower” in the first paragraph
of this Instrument, together with their successors and assigns.

			
	 	 	 
	FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT –

KENTUCKY
	 	Form 4018       06/09       Page 1
	 
	 	© 1998-2009 Fannie Mae

 

 

     (b) “Collateral Agreement” means any separate agreement between Borrower and Lender for
the purpose of establishing replacement reserves for the Mortgaged Property, establishing a fund to
assure completion of repairs or improvements specified in that agreement, or assuring reduction of
the outstanding principal balance of the Indebtedness if the occupancy of or income from the
Mortgaged Property does not increase to a level specified in that agreement, or any other agreement
or agreements between Borrower and Lender which provide for the establishment of any other fund,
reserve or account.

     (c) “Environmental Permit” means any permit, license, or other authorization issued under any
Hazardous Materials Law with respect to any activities or businesses conducted on or in relation to
the Mortgaged Property.

     (d) “Event of Default” means the occurrence of any event listed in Section 22.

     (e) “Fixtures” means all property which is so attached to the Land or the Improvements as to
constitute a fixture under applicable law, including: machinery, equipment, engines, boilers,
incinerators, installed building materials; systems and equipment for the purpose of supplying or
distributing heating, cooling, electricity, gas, water, air, or light; antennas, cable, wiring and
conduits used in connection with radio, television, security, fire prevention, or fire detection or
otherwise used to carry electronic signals; telephone systems and equipment; elevators and related
machinery and equipment; fire detection, prevention and extinguishing systems and apparatus;
security and access control systems and apparatus; plumbing systems; water heaters, ranges, stoves,
microwave ovens, refrigerators, dishwashers, garbage disposers, washers, dryers and other
appliances; light fixtures, awnings, storm windows and storm doors; pictures, screens, blinds,
shades, curtains and curtain rods; mirrors; cabinets, paneling, rugs and floor and wall coverings;
fences, trees and plants; swimming pools; and exercise equipment.

     (f) “Governmental Authority” means any board, commission, department or body of any municipal,
county, state or federal governmental unit, or any subdivision of any of them, that has or acquires
jurisdiction over the Mortgaged Property or the use, operation or improvement of the Mortgaged
Property.

     (g) “Hazardous Materials” means petroleum and petroleum products and compounds containing
them, including gasoline, diesel fuel and oil; explosives; flammable materials; radioactive
materials; polychlorinated biphenyls (“PCBs”) and compounds containing them; lead and lead-based
paint; asbestos or asbestos-containing materials in any form that is or could become friable;
underground or above-ground storage tanks, whether empty or containing any substance; any substance
the presence of which on the Mortgaged Property is prohibited by any federal, state or local
authority; any substance that requires special handling; and any other material or substance now or
in the future defined as a “hazardous substance,” “hazardous material,” “hazardous waste,” “toxic
substance,” “toxic pollutant,” “contaminant,” or “pollutant” within the meaning of any Hazardous
Materials Law.

			
	 	 	 
	FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT –

KENTUCKY
	 	Form 4018       06/09       Page 2
	 
	 	© 1998-2009 Fannie Mae

 

 

     (h) “Hazardous Materials Laws” means all federal, state, and local laws, ordinances and
regulations and standards, rules, policies and other governmental requirements, administrative
rulings and court judgments and decrees in effect now or in the future and including all
amendments, that relate to Hazardous Materials and apply to Borrower or to the Mortgaged Property.
Hazardous Materials Laws include, but are not limited to, the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Section 9601, et seq., the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901, et seq., the Toxic Substance Control Act, 15 U.S.C. Section
2601, et seq., the Clean Water Act, 33 U.S.C. Section 1251, et seq., and the Hazardous Materials
Transportation Act, 49 U.S.C. Section 5101, and their state analogs.

     (i) “Impositions” and “Imposition Deposits” are defined in Section 7(a).

     (j) “Improvements” means the buildings, structures, improvements, and alterations now
constructed or at any time in the future constructed or placed upon the Land, including any future
replacements and additions.

     (k) “Indebtedness” means the principal of, interest on, and all other amounts due at any time
under, the Note, this Instrument or any other Loan Document, including prepayment premiums, late
charges, default interest, and advances as provided in Section 12 to protect the security of this
Instrument.

     (l) [Intentionally omitted]

     (m) “Key Principal” means (A) the natural person(s) or entity identified as such at the foot
of this Instrument; (B) the natural person or entity who signed either the Acknowledgement and
Agreement of Key Principal to Personal Liability for Exceptions to Non-Recourse Liability or the
Exceptions to Non-Recourse Guaranty (or is otherwise a guarantor on the Indebtedness); and (C) any
person or entity who becomes a Key Principal after the date of this Instrument and is identified
as such in an assumption agreement, or another amendment or supplement to this Instrument or who
otherwise signs either the Acknowledgement and Agreement of Key Principal to Personal Liability
for Exceptions to Non-Recourse Liability or Exceptions to Non-Recourse Guaranty (or any other
guaranty of the Indebtedness).

     (n) “Land” means the land described in Exhibit A.

     (o) “Leases” means all present and future leases, subleases, licenses, concessions or grants
or other possessory interests now or hereafter in force, whether oral or written, covering or
affecting the Mortgaged Property, or any portion of the Mortgaged Property (including proprietary
leases or occupancy agreements if Borrower is a cooperative housing corporation), and all
modifications, extensions or renewals.

     (p) “Lender” means the entity identified as “Lender” in the first paragraph of this
Instrument and its successors and assigns, or any subsequent holder of the Note.

			
	 	 	 
	FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT –

KENTUCKY
	 	Form 4018       06/09       Page 3
	 
	 	© 1998-2009 Fannie Mae

 

 

     (q) “Loan Documents” means the Note, this Instrument, all guaranties, all indemnity
agreements, all Collateral Agreements, O&M Programs, and any other documents now or in the future
executed by Borrower, Key Principal, any guarantor or any other person in connection with the loan
evidenced by the Note, as such documents may be amended from time to time.

     (r) “Loan Servicer” means the entity that from time to time is designated by Lender to collect
payments and deposits and receive notices under the Note, this Instrument and any other Loan
Document, and otherwise to service the loan evidenced by the Note for the benefit of Lender. Unless
Borrower receives notice to the contrary, the Loan Servicer is the entity identified as “Lender” in
the first paragraph of this Instrument.

     (s) “Mortgaged Property” means all of Borrower’s present and future right, title and interest
in and to all of the following:

	 	(1)	 	the Land;
	 
	 	(2)	 	the Improvements;
	 
	 	(3)	 	the Fixtures;
	 
	 	(4)	 	the Personalty;
	 
	 	(5)	 	all current and future rights, including air rights,
development rights, zoning rights and other similar rights or interests,
easements, tenements, rights-of-way, strips and gores of land, streets, alleys,
roads, sewer rights, waters, watercourses, and appurtenances related to or
benefitting the Land or the Improvements, or both, and all rights-of-way,
streets, alleys and roads which may have been or may in the future be vacated;
	 
	 	(6)	 	all proceeds paid or to be paid by any insurer of the Land, the
Improvements, the Fixtures, the Personalty or any other part of the Mortgaged
Property, whether or not Borrower obtained the insurance pursuant to Lender’s
requirement;
	 
	 	(7)	 	all awards, payments and other compensation made or to be made
by any municipal, state or federal authority with respect to the Land, the
Improvements, the Fixtures, the Personalty or any other part of the Mortgaged
Property, including any awards or settlements resulting from condemnation
proceedings or the total or partial taking of the Land, the Improvements, the
Fixtures, the Personalty or any other part of the Mortgaged Property under the
power of eminent domain or otherwise and including any conveyance in lieu
thereof;

			
	 	 	 
	FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT –

KENTUCKY
	 	Form 4018       06/09       Page 4
	 
	 	© 1998-2009 Fannie Mae

 

 

	 	(8)	 	all contracts, options and other agreements for the sale of the Land,
the Improvements, the Fixtures, the Personalty or any other part of the
Mortgaged Property entered into by Borrower now or in the future, including
cash or securities deposited to secure performance by parties of their
obligations;
	 
	 	(9)	 	all proceeds from the conversion, voluntary or involuntary, of
any of the above into cash or liquidated claims, and the right to collect such
proceeds;
	 
	 	(10)	 	all Rents and Leases;
	 
	 	(11)	 	all earnings, royalties, accounts receivable, issues and
profits from the Land, the Improvements or any other part of the Mortgaged
Property, and all undisbursed proceeds of the loan secured by this Instrument
and, if Borrower is a cooperative housing corporation, maintenance charges or
assessments payable by shareholders or residents;
	 
	 	(12)	 	all Imposition Deposits;
	 
	 	(13)	 	all refunds or rebates of Impositions by any municipal, state
or federal authority or insurance company (other than refunds applicable to
periods before the real property tax year in which this Instrument is dated);
	 
	 	(14)	 	all tenant security deposits which have not been forfeited by
any tenant under any Lease; and
	 
	 	(15)	 	all names under or by which any of the above Mortgaged Property
may be operated or known, and all trademarks, trade names, and goodwill
relating to any of the Mortgaged Property.

     (t) “Note” means the Multifamily Note described on page 1 of this Instrument, including the
Acknowledgment and Agreement of Key Principal to Personal Liability for Exceptions to Non-Recourse
Liability (if any), and all schedules, riders, allonges and addenda, as such Multifamily Note may
be amended from time to time.

     (u) “O&M Program” is defined in Section 18(a).

     (v) “Personalty” means all equipment, inventory, general intangibles which are used now or
in the future in connection with the ownership, management or operation of the Land or the
Improvements or are located on the Land or in the Improvements, including furniture, furnishings,
machinery, building materials, appliances, goods, supplies, tools, books, records (whether in
written or electronic form), computer equipment (hardware and software) and other tangible
personal

			
	 	 	 
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property (other than Fixtures) which are used now or in the future in connection with the
ownership, management or operation of the Land or the Improvements or are located on the Land or
in the Improvements, and any operating agreements relating to the Land or the Improvements, and
any surveys, plans and specifications and contracts for architectural, engineering and
construction services relating to the Land or the Improvements and all other intangible property
and rights relating to the operation of, or used in connection with, the Land or the
Improvements, including all governmental permits relating to any activities on the Land.

     (w) “Property Jurisdiction” is defined in Section 30(a).

     (x) “Rents” means all rents (whether from residential or non-residential space), revenues and
other income of the Land or the Improvements, including subsidy payments received from any sources
(including, but not limited to payments under any Housing Assistance Payments Contract), parking
fees, laundry and vending machine income and fees and charges for food, health care and other
services provided at the Mortgaged Property, whether now due, past due, or to become due, and
deposits forfeited by tenants.

     (y) “Taxes” means all taxes, assessments, vault rentals and other charges, if any, general,
special or otherwise, including all assessments for schools, public betterments and general or
local improvements, which are levied, assessed or imposed by any public authority or quasi-public
authority, and which, if not paid, will become a lien, on the Land or the Improvements.

     (z) “Transfer” means (A) a sale, assignment, transfer, or other disposition (whether
voluntary, involuntary or by operation of law); (B) the grant, creation, or attachment of a lien,
encumbrance, or security interest (whether voluntary, involuntary or by operation of law); (C) the
issuance or other creation of a direct or indirect ownership interest; or (D) the withdrawal,
retirement, removal or involuntary resignation of any owner or manager of a legal entity.

     (aa) “Bankruptcy Event” means any one or more of the following: (i) the commencement of a
voluntary case under one or more of the Insolvency Laws by the Borrower; (ii) the acknowledgment
in writing by the Borrower that it is unable to pay its debts generally as they mature; (iii) the
making of a general assignment for the benefit of creditors by the Borrower; (iv) an involuntary
case under one or more Insolvency Laws against the Borrower; (v) the appointment of a receiver,
liquidator, custodian, sequestrator, trustee or other similar officer who exercises control over
the Borrower or any substantial part of the assets of the Borrower provided that any proceeding or
case under (iv) or (v) above is not dismissed within 90 days after filing.

     (bb) “Borrower Affiliate” means, as to either Borrower or Key Principal, (i) any entity that
directly or indirectly owns, controls, or holds with power to vote, 20 percent or more of the
outstanding voting securities of Borrower or of Key Principal, (ii) any corporation 20 percent or
more of whose outstanding voting securities are directly or indirectly owned, controlled or held
with power to vote by Borrower or by Key Principal, (iii) any partner, shareholder or, if a
limited

			
	 	 	 
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liability company, member of Borrower or Key Principal, or (iv) any other entity that is
related (to the third degree of consanguinity) by blood or marriage to Borrower or Key Principal.

     (cc) “Insolvency Laws” means the United States Bankruptcy Code, 11 U.S.C. § 101, et seq.,
together with any other federal or state law affecting debtor and creditor rights or relating to
the bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, dissolution,
liquidation or similar proceeding, as amended from time to time, to the extent applicable to the
Borrower.

     2. UNIFORM COMMERCIAL CODE SECURITY AGREEMENT.

     This Instrument is also a security agreement under the Uniform Commercial Code for any of
the Mortgaged Property which, under applicable law, may be subject to a security interest under the
Uniform Commercial Code, whether acquired now or in the future, and all products and cash and
non-cash proceeds thereof (collectively, “UCC Collateral”), and Borrower hereby grants to Lender a
security interest in the UCC Collateral. Borrower hereby authorizes Lender to file financing
statements, continuation statements and financing statement amendments in such form as Lender may
require to perfect or continue the perfection of this security interest and Borrower agrees, if
Lender so requests, to execute and deliver to Lender such financing statements, continuation
statements and amendments. Borrower shall pay all filing costs and all costs and expenses of any
record searches for financing statements that Lender may require. Without the prior written consent
of Lender, Borrower shall not create or permit to exist any other lien or security interest in any
of the UCC Collateral. If an Event of Default has occurred and is continuing, Lender shall have the
remedies of a secured party under the Uniform Commercial Code, in addition to all remedies provided
by this Instrument or existing under applicable law. In exercising any remedies, Lender may
exercise its remedies against the UCC Collateral separately or together, and in any order, without
in any way affecting the availability of Lender’s other remedies. This Instrument constitutes a
financing statement with respect to any part of the Mortgaged Property which is or may become a
Fixture.

     3. ASSIGNMENT OF RENTS; APPOINTMENT OF RECEIVER; LENDER IN POSSESSION.

     (a) As part of the consideration for the Indebtedness, Borrower absolutely and
unconditionally assigns and transfers to Lender all Rents. It is the intention of Borrower to
establish a present, absolute and irrevocable transfer and assignment to Lender of all Rents and
to authorize and empower Lender to collect and receive all Rents without the necessity of further
action on the part of Borrower. Promptly upon request by Lender, Borrower agrees to execute and
deliver such further assignments as Lender may from time to time require. Borrower and Lender
intend this assignment of Rents to be immediately effective and to constitute an absolute present
assignment and not an assignment for additional security only. For purposes of giving effect to
this absolute assignment of Rents, and for no other purpose, Rents shall not be deemed to be a
part of the “Mortgaged Property,” as that term is defined in Section l(s). However, if this
present, absolute and unconditional assignment of Rents is not enforceable by its terms under the
laws of the

			
	 	 	 
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Property Jurisdiction, then the Rents shall be included as a part of the Mortgaged Property
and it is the intention of the Borrower that in this circumstance this Instrument create and
perfect a lien on Rents in favor of Lender, which lien shall be effective as of the date of this
Instrument.

     (b) After the occurrence of an Event of Default, Borrower authorizes Lender to collect, sue
for and compromise Rents and directs each tenant of the Mortgaged Property to pay all Rents to, or
as directed by, Lender, and Borrower shall, upon Borrower’s receipt of any Rents from any sources
(including, but not limited to subsidy payments under any Housing Assistance Payments Contract),
pay the total amount of such receipts to the Lender. However, until the occurrence of an Event of
Default, Lender hereby grants to Borrower a revocable license to collect and receive all Rents, to
hold all Rents in trust for the benefit of Lender and to apply all Rents to pay the installments of
interest and principal then due and payable under the Note and the other amounts then due and
payable under the other Loan Documents, including Imposition Deposits, and to pay the current costs
and expenses of managing, operating and maintaining the Mortgaged Property, including utilities,
Taxes and insurance premiums (to the extent not included in Imposition Deposits), tenant
improvements and other capital expenditures. So long as no Event of Default has occurred and is
continuing, the Rents remaining after application pursuant to the preceding sentence may be
retained by Borrower free and clear of, and released from, Lender’s rights with respect to Rents
under this Instrument. From and after the occurrence of an Event of Default, and without the
necessity of Lender entering upon and taking and maintaining control of the Mortgaged Property
directly, or by a receiver, Borrower’s license to collect Rents shall automatically terminate and
Lender shall without notice be entitled to all Rents as they become due and payable, including
Rents then due and unpaid. Borrower shall pay to Lender upon demand all Rents to which Lender is
entitled. At any time on or after the date of Lender’s demand for Rents, Lender may give, and
Borrower hereby irrevocably authorizes Lender to give, notice to all tenants of the Mortgaged
Property instructing them to pay all Rents to Lender, no tenant shall be obligated to inquire
further as to the occurrence or continuance of an Event of Default, and no tenant shall be
obligated to pay to Borrower any amounts which are actually paid to Lender in response to such a
notice. Any such notice by Lender shall be delivered to each tenant personally, by mail or by
delivering such demand to each rental unit. Borrower shall not interfere with and shall cooperate
with Lender’s collection of such Rents.

     (c) Borrower represents and warrants to Lender that Borrower has not executed any prior
assignment of Rents (other than an assignment of Rents securing indebtedness that will be paid off
and discharged with the proceeds of the loan evidenced by the Note), that Borrower has not
performed, and Borrower covenants and agrees that it will not perform, any acts and has not
executed, and shall not execute, any instrument which would prevent Lender from exercising its
rights under this Section 3, and that at the time of execution of this Instrument there has been no
anticipation or prepayment of any Rents for more than two months prior to the due dates of such
Rents. Borrower shall not collect or accept payment of any Rents more than two months prior to the
due dates of such Rents.

     (d) If an Event of Default has occurred and is continuing, Lender may, regardless of the
adequacy of Lender’s security or the solvency of Borrower and even in the absence of waste, enter

			
	 	 	 
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upon and take and maintain full control of the Mortgaged Property in order to perform all acts that
Lender in its discretion determines to be necessary or desirable for the operation and maintenance
of the Mortgaged Property, including the execution, cancellation or modification of Leases, the
collection of all Rents, the making of repairs to the Mortgaged Property and the execution or
termination of contracts providing for the management, operation or maintenance of the Mortgaged
Property, for the purposes of enforcing the assignment of Rents pursuant to Section 3(a),
protecting the Mortgaged Property or the security of this Instrument, or for such other purposes as
Lender in its discretion may deem necessary or desirable. Alternatively, if an Event of Default has
occurred and is continuing, regardless of the adequacy of Lender’s security, without regard to
Borrower’s solvency and without the necessity of giving prior notice (oral or written) to Borrower,
Lender may apply to any court having jurisdiction for the appointment of a receiver for the
Mortgaged Property to take any or all of the actions set forth in the preceding sentence. If Lender
elects to seek the appointment of a receiver for the Mortgaged Property at any time after an Event
of Default has occurred and is continuing, Borrower, by its execution of this Instrument, expressly
consents to the appointment of such receiver, including the appointment of a receiver ex parte if
permitted by applicable law. Lender or the receiver, as the case may be, shall be entitled to
receive a reasonable fee for managing the Mortgaged Property. Immediately upon appointment of a
receiver or immediately upon the Lender’s entering upon and taking possession and control of the
Mortgaged Property, Borrower shall surrender possession of the Mortgaged Property to Lender or the
receiver, as the case may be, and shall deliver to Lender or the receiver, as the case may be, all
documents, records (including records on electronic or magnetic media), accounts, surveys, plans,
and specifications relating to the Mortgaged Property and all security deposits and prepaid Rents.
In the event Lender takes possession and control of the Mortgaged Property, Lender may exclude
Borrower and its representatives from the Mortgaged Property. Borrower acknowledges and agrees that
the exercise by Lender of any of the rights conferred under this Section 3 shall not be construed
to make Lender a mortgagee-in-possession of the Mortgaged Property so long as Lender has not itself
entered into actual possession of the Land and Improvements.

     (e) If Lender enters the Mortgaged Property, Lender shall be liable to account only to
Borrower and only for those Rents actually received. Lender shall not be liable to Borrower, anyone
claiming under or through Borrower or anyone having an interest in the Mortgaged Property, by
reason of any act or omission of Lender under this Section 3, and Borrower hereby releases and
discharges Lender from any such liability to the fullest extent permitted by law.

     (f) If the Rents are not sufficient to meet the costs of taking control of and managing the
Mortgaged Property and collecting the Rents, any funds expended by Lender for such purposes shall
become an additional part of the Indebtedness as provided in Section 12.

     (g) Any entering upon and taking of control of the Mortgaged Property by Lender or the
receiver, as the case may be, and any application of Rents as provided in this Instrument shall not
cure or waive any Event of Default or invalidate any other right or remedy of Lender under
applicable law or provided for in this Instrument.

			
	 	 	 
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     4. ASSIGNMENT OF LEASES; LEASES AFFECTING THE MORTGAGED PROPERTY.

     (a) As part of the consideration for the Indebtedness, Borrower absolutely and
unconditionally assigns and transfers to Lender all of Borrower’s right, title and interest in, to
and under the Leases, including Borrower’s right, power and authority to modify the terms of any
such Lease, or extend or terminate any such Lease. It is the intention of Borrower to establish a
present, absolute and irrevocable transfer and assignment to Lender of all of Borrower’s right,
title and interest in, to and under the Leases. Borrower and Lender intend this assignment of the
Leases to be immediately effective and to constitute an absolute present assignment and not an
assignment for additional security only. For purposes of giving effect to this absolute assignment
of the Leases, and for no other purpose, the Leases shall not be deemed to be a part of the
“Mortgaged Property,” as that term is defined in Section l(s). However, if this present, absolute
and unconditional assignment of the Leases is not enforceable by its terms under the laws of the
Property Jurisdiction, then the Leases shall be included as a part of the Mortgaged Property and it
is the intention of the Borrower that in this circumstance this Instrument create and perfect a
lien on the Leases in favor of Lender, which lien shall be effective as of the date of this
Instrument.

     (b) Until Lender gives notice to Borrower of Lender’s exercise of its rights under this
Section 4, Borrower shall have all rights, power and authority granted to Borrower under any Lease
(except as otherwise limited by this Section or any other provision of this Instrument), including
the right, power and authority to modify the terms of any Lease or extend or terminate any Lease.
Upon the occurrence of an Event of Default, the permission given to Borrower pursuant to the
preceding sentence to exercise all rights, power and authority under Leases shall automatically
terminate. Borrower shall comply with and observe Borrower’s obligations under all Leases,
including Borrower’s obligations pertaining to the maintenance and disposition of tenant security
deposits.

     (c) Borrower acknowledges and agrees that the exercise by Lender, either directly or by a
receiver, of any of the rights conferred under this Section 4 shall not be construed to make Lender
a mortgagee-in-possession of the Mortgaged Property so long as Lender has not itself entered into
actual possession of the Land and the Improvements. The acceptance by Lender of the assignment of
the Leases pursuant to Section 4(a) shall not at any time or in any event obligate Lender to take
any action under this Instrument or to expend any money or to incur any expenses. Lender shall not
be liable in any way for any injury or damage to person or property sustained by any person or
persons, firm or corporation in or about the Mortgaged Property. Prior to Lender’s actual entry
into and taking possession of the Mortgaged Property, Lender shall not (i) be obligated to perform
any of the terms, covenants and conditions contained in any Lease (or otherwise have any obligation
with respect to any Lease); (ii) be obligated to appear in or defend any action or proceeding
relating to the Lease or the Mortgaged Property; or (iii) be responsible for the operation,
control, care, management or repair of the Mortgaged Property or any portion of the Mortgaged
Property. The execution of this Instrument by Borrower shall constitute conclusive evidence that
all responsibility for the operation, control, care, management and repair of the Mortgaged
Property is and shall be that of Borrower, prior to such actual entry and taking of possession.

			
	 	 	 
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     (d) Upon delivery of notice by Lender to Borrower of Lender’s exercise of Lender’s rights
under this Section 4 at any time after the occurrence of an Event of Default, and without the
necessity of Lender entering upon and taking and maintaining control of the Mortgaged Property
directly, by a receiver, or by any other manner or proceeding permitted by the laws of the Property
Jurisdiction, Lender immediately shall have all rights, powers and authority granted to Borrower
under any Lease, including the right, power and authority to modify the terms of any such Lease, or
extend or terminate any such Lease.

     (e) Borrower shall, promptly upon Lender’s request, deliver to Lender an executed copy of each
residential Lease then in effect. All Leases for residential dwelling units shall be on forms
approved by Lender, shall be for initial terms of at least six months and not more than two years,
and shall not include options to purchase. If customary in the applicable market, residential
Leases with terms of less than six months may be permitted with Lender’s prior written consent.

     (f) Borrower shall not lease any portion of the Mortgaged Property for non-residential use
except with the prior written consent of Lender and Lender’s prior written approval of the Lease
agreement. Borrower shall not modify the terms of, or extend or terminate, any Lease for non-
residential use (including any Lease in existence on the date of this Instrument) without the prior
written consent of Lender. Borrower shall, without request by Lender, deliver an executed copy of
each non-residential Lease to Lender promptly after such Lease is signed. All non-residential
Leases, including renewals or extensions of existing Leases, shall specifically provide that (1)
such Leases are subordinate to the lien of this Instrument (unless waived in writing by Lender);
(2) the tenant shall attorn to Lender and any purchaser at a foreclosure sale, such attornment to
be self-executing and effective upon acquisition of title to the Mortgaged Property by any
purchaser at a foreclosure sale or by Lender in any manner; (3) the tenant agrees to execute such
further evidences of attornment as Lender or any purchaser at a foreclosure sale may from time to
time request; (4) the Lease shall not be terminated by foreclosure or any other transfer of the
Mortgaged Property; (5) after a foreclosure sale of the Mortgaged Property, Lender or any other
purchaser at such foreclosure sale may, at Lender’s or such purchaser’s option, accept or terminate
such Lease; and (6) the tenant shall, upon receipt after the occurrence of an Event of Default of a
written request from Lender, pay all Rents payable under the Lease to Lender.

     (g) Borrower shall not receive or accept Rent under any Lease (whether residential or
non-residential) for more than two months in advance.

     5. PAYMENT OF INDEBTEDNESS; PERFORMANCE UNDER LOAN DOCUMENTS; PREPAYMENT PREMIUM.

     Borrower shall pay the Indebtedness when due in accordance with the terms of the Note
and the other Loan Documents and shall perform, observe and comply with all other provisions of
the Note and the other Loan Documents. Borrower shall pay a prepayment premium in connection with
certain prepayments of the Indebtedness, including a payment made after Lender’s exercise of any
right of acceleration of the Indebtedness, as provided in the Note.

			
	 	 	 
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     6. EXCULPATION.

     Borrower’s personal liability for payment of the Indebtedness and for performance of the other
obligations to be performed by it under this Instrument is limited in the manner, and to the
extent, provided in the Note.

     7. DEPOSITS FOR TAXES, INSURANCE AND OTHER CHARGES.

     (a) Borrower shall deposit with Lender on the day monthly installments of principal or
interest, or both, are due under the Note (or on another day designated in writing by Lender),
until the Indebtedness is paid in full, an additional amount sufficient to accumulate with Lender
the entire sum required to pay, when due (1) any water and sewer charges which, if not paid, may
result in a lien on all or any part of the Mortgaged Property, (2) the premiums for fire and other
hazard insurance, rent loss insurance and such other insurance as Lender may require under Section
19, (3) Taxes, and (4) amounts for other charges and expenses which Lender at any time reasonably
deems necessary to protect the Mortgaged Property, to prevent the imposition of liens on the
Mortgaged Property, or otherwise to protect Lender’s interests, all as reasonably estimated from
time to time by Lender. The amounts deposited under the preceding sentence are collectively
referred to in this Instrument as the “Imposition Deposits”. The obligations of Borrower for which
the Imposition Deposits are required are collectively referred to in this Instrument as
“Impositions”. The amount of the Imposition Deposits shall be sufficient to enable Lender to pay
each Imposition before the last date upon which such payment may be made without any penalty or
interest charge being added. Lender shall maintain records indicating how much of the monthly
Imposition Deposits and how much of the aggregate Imposition Deposits held by Lender are held for
the purpose of paying Taxes, insurance premiums and each other obligation of Borrower for which
Imposition Deposits are required. Any waiver by Lender of the requirement that Borrower remit
Imposition Deposits to Lender may be revoked by Lender, in Lender’s discretion, at any time upon
notice to Borrower.

     (b) Imposition Deposits shall be held in an institution (which may be Lender, if Lender is
such an institution) whose deposits or accounts are insured or guaranteed by a federal agency.
Lender shall not be obligated to open additional accounts or deposit Imposition Deposits in
additional institutions when the amount of the Imposition Deposits exceeds the maximum amount of
the federal deposit insurance or guaranty. Lender shall apply the Imposition Deposits to pay
Impositions so long as no Event of Default has occurred and is continuing. Unless applicable law
requires, Lender shall not be required to pay Borrower any interest, earnings or profits on the
Imposition Deposits. Borrower hereby pledges and grants to Lender a security interest in the
Imposition Deposits as additional security for all of Borrower’s obligations under this Instrument
and the other Loan Documents. Any amounts deposited with Lender under this Section 7 shall not be
trust funds, nor shall they operate to reduce the Indebtedness, unless applied by Lender for that
purpose under Section 7(e).

     (c) If Lender receives a bill or invoice for an Imposition, Lender shall pay the Imposition
from the Imposition Deposits held by Lender. Lender shall have no obligation to pay

			
	 	 	 
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any Imposition to the extent it exceeds Imposition Deposits then held by Lender. Lender may pay an
Imposition according to any bill, statement or estimate from the appropriate public office or
insurance company without inquiring into the accuracy of the bill, statement or estimate or into
the validity of the Imposition.

     (d) If at any time the amount of the Imposition Deposits held by Lender for payment of a
specific Imposition exceeds the amount reasonably deemed necessary by Lender, the excess shall be
credited against future installments of Imposition Deposits. If at any time the amount of the
Imposition Deposits held by Lender for payment of a specific Imposition is less than the amount
reasonably estimated by Lender to be necessary, Borrower shall pay to Lender the amount of the
deficiency within 15 days after notice from Lender.

     (e) If an Event of Default has occurred and is continuing, Lender may apply any Imposition
Deposits, in any amounts and in any order as Lender determines, in Lender’s discretion, to pay any
Impositions or as a credit against the Indebtedness. Upon payment in full of the Indebtedness,
Lender shall refund to Borrower any Imposition Deposits held by Lender.

     8. COLLATERAL AGREEMENTS.

     Borrower shall deposit with Lender such amounts as may be required by any Collateral
Agreement and shall perform all other obligations of Borrower under each Collateral Agreement.

     9. APPLICATION OF PAYMENTS.

     If at any time Lender receives, from Borrower or otherwise, any amount applicable to the
Indebtedness which is less than all amounts due and payable at such time, then Lender may apply
that payment to amounts then due and payable in any manner and in any order determined by Lender,
in Lender’s discretion. Neither Lender’s acceptance of an amount which is less than all amounts
then due and payable nor Lender’s application of such payment in the manner authorized shall
constitute or be deemed to constitute either a waiver of the unpaid amounts or an accord and
satisfaction. Notwithstanding the application of any such amount to the Indebtedness, Borrower’s
obligations under this Instrument and the Note shall remain unchanged.

     10. COMPLIANCE WITH LAWS.

     Borrower shall comply with all laws, ordinances, regulations and requirements of any
Governmental Authority and all recorded lawful covenants and agreements relating to or affecting
the Mortgaged Property, including all laws, ordinances, regulations, requirements and covenants
pertaining to health and safety, construction of improvements on the Mortgaged Property, fair
housing, zoning and land use, and Leases. Borrower also shall comply with all applicable laws that
pertain to the maintenance and disposition of tenant security deposits. Borrower shall at all
times maintain records sufficient to demonstrate compliance with the provisions of this Section
10. Borrower shall take appropriate measures to prevent, and shall not engage in or knowingly
permit, any illegal activities at the Mortgaged Property that could endanger tenants or visitors,
result in

			
	 	 	 
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	 	Form 4018       06/09       Page 13
	 
	 	© 1998-2009 Fannie Mae

 

 

damage to the Mortgaged Property, result in forfeiture of the Mortgaged Property, or otherwise
materially impair the lien created by this Instrument or Lender’s interest in the Mortgaged
Property. Borrower represents and warrants to Lender that no portion of the Mortgaged Property has
been or will be purchased with the proceeds of any illegal activity.

     11. USE OF PROPERTY.

     Unless required by applicable law, Borrower shall not (a) except for any change in use
approved by Lender, allow changes in the use for which all or any part of the Mortgaged Property
is being used at the time this Instrument was executed, (b) convert any individual dwelling units
or common areas to commercial use, (c) initiate or acquiesce in a change in the zoning
classification of the Mortgaged Property, or (d) establish any condominium or cooperative regime
with respect to the Mortgaged Property.

     12. PROTECTION OF LENDER’S SECURITY.

     (a) If Borrower fails to perform any of its obligations under this Instrument or any other
Loan Document, or if any action or proceeding (including a Bankruptcy Event) is commenced which
purports to affect the Mortgaged Property, Lender’s security or Lender’s rights under this
Instrument, including eminent domain, insolvency, code enforcement, civil or criminal forfeiture,
enforcement of Hazardous Materials Laws, fraudulent conveyance or reorganizations or proceedings
involving a bankrupt or decedent, then Lender at Lender’s option may make such appearances,
disburse such sums and take such actions as Lender reasonably deems necessary to perform such
obligations of Borrower and to protect Lender’s interest, including (1) payment of fees and
out-of-pocket expenses of attorneys, accountants, inspectors and consultants, (2) entry upon the
Mortgaged Property to make repairs or secure the Mortgaged Property, (3) procurement of the
insurance required by Section 19, and (4) payment of amounts which Borrower has failed to pay under
Sections 15 and 17.

     (b) Any amounts disbursed by Lender under this Section 12, or under any other provision of
this Instrument that treats such disbursement as being made under this Section 12, shall be added
to, and become part of, the principal component of the Indebtedness, shall be immediately due and
payable and shall bear interest from the date of disbursement until paid at the “Default Rate”, as
defined in the Note.

     (c) Nothing in this Section 12 shall require Lender to incur any expense or take any action.

     13. INSPECTION.

     Lender, its agents, representatives, and designees may make or cause to be made entries upon
and inspections of the Mortgaged Property (including environmental inspections and tests) during
normal business hours, or at any other reasonable time.

			
	 	 	 
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     14. BOOKS AND RECORDS; FINANCIAL REPORTING.

     (a) Borrower shall keep and maintain at all times at the Mortgaged Property or the management
agent’s offices, and upon Lender’s request shall make available at the Mortgaged Property, complete
and accurate books of account and records (including copies of supporting bills and invoices)
adequate to reflect correctly the operation of the Mortgaged Property, and copies of all written
contracts, Leases, and other instruments which affect the Mortgaged Property. The books, records,
contracts, Leases and other instruments shall be subject to examination and inspection at any
reasonable time by Lender.

     (b) Borrower shall furnish to Lender:

	 	(1)	 	(i) except as provided in clause (ii) below, within 45 days after
the end of each fiscal quarter of Borrower, a statement of income and expenses
for Borrower’s operation of the Mortgaged Property on a year-to-date basis as of
the end of each fiscal quarter, (ii) within 120 days after the end of each
fiscal year of Borrower, (A) a statement of income and expenses for Borrower’s
operation of the Mortgaged Property for such fiscal year, (B) a statement of
changes in financial position of Borrower relating to the Mortgaged Property for
such fiscal year, and (C) when requested by Lender, a balance sheet showing all
assets and liabilities of Borrower relating to the Mortgaged Property as of the
end of such fiscal year; and (iii) any of the foregoing at any other time upon
Lender’s request;
	 
	 	(2)	 	(i) except as provided in clause (ii) below, within 45 days after
the end of each fiscal quarter of Borrower, and (ii) within 120 days after the
end of each fiscal year of Borrower, and at any other time upon Lender’s
request, a rent schedule for the Mortgaged Property showing the name of each
tenant, and for each tenant, the space occupied, the lease expiration date, the
rent payable for the current month, the date through which rent has been paid,
and any related information requested by Lender;
	 
	 	(3)	 	within 120 days after the end of each fiscal year of Borrower,
and at any other time upon Lender’s request, an accounting of all security
deposits held pursuant to all Leases, including the name of the institution (if
any) and the names and identification numbers of the accounts (if any) in which
such security deposits are held and the name of the person to contact at such
financial institution, along with any authority or release necessary for Lender
to access information regarding such accounts;
	 
	 	(4)	 	within 120 days after the end of each fiscal year of Borrower,
and at any other time upon Lender’s request, a statement that identifies all
owners of any interest in Borrower and the interest held by each, if Borrower is
a

			
	 	 	 
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corporation, all officers and directors of Borrower, and if Borrower is a
limited liability company, all managers who are not members;

	 	(5)	 	upon Lender’s request, a monthly property management report for
the Mortgaged Property, showing the number of inquiries made and rental
applications received from tenants or prospective tenants and deposits received
from tenants and any other information requested by Lender;
	 
	 	(6)	 	upon Lender’s request, a balance sheet, a statement of income
and expenses for Borrower and a statement of changes in financial position of
Borrower for Borrower’s most recent fiscal year; and
	 
	 	(7)	 	if required by Lender, within 30 days of the end of each
calendar month, a monthly statement of income and expenses for such calendar
month on a year-to-date basis for Borrower’s operation of the Mortgaged
Property.

     (c) Each of the statements, schedules and reports required by Section 14(b) shall be certified
to be complete and accurate by an individual having authority to bind Borrower, and shall be in
such form and contain such detail as Lender may reasonably require. Lender also may require that
any statements, schedules or reports be audited at Borrower’s expense by independent certified
public accountants acceptable to Lender.

     (d) If Borrower fails to provide in a timely manner the statements, schedules and reports
required by Section 14(b), Lender shall have the right to have Borrower’s books and records
audited, at Borrower’s expense, by independent certified public accountants selected by Lender in
order to obtain such statements, schedules and reports, and all related costs and expenses of
Lender shall become immediately due and payable and shall become an additional part of the
Indebtedness as provided in Section 12.

     (e) If an Event of Default has occurred and is continuing, Borrower shall deliver to Lender
upon written demand all books and records relating to the Mortgaged Property or its operation.

     (f) Borrower authorizes Lender to obtain a credit report on Borrower at any time.

     15. TAXES; OPERATING EXPENSES.

     (a) Subject to the provisions of Section 15(c) and Section 15(d), Borrower shall pay,
or cause to be paid, all Taxes when due and before the addition of any interest, fine, penalty or
cost for nonpayment.

     (b) Subject to the provisions of Section 15(c), Borrower shall pay the expenses of operating,
managing, maintaining and repairing the Mortgaged Property (including insurance

			
	 	 	 
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premiums, utilities, repairs and replacements) before the last date upon which each such payment
may be made without any penalty or interest charge being added.

     (c) As long as no Event of Default exists and Borrower has timely delivered to Lender any
bills or premium notices that it has received, Borrower shall not be obligated to pay Taxes,
insurance premiums or any other individual Imposition to the extent that sufficient Imposition
Deposits are held by Lender for the purpose of paying that specific Imposition. If an Event of
Default exists, Lender may exercise any rights Lender may have with respect to Imposition Deposits
without regard to whether Impositions are then due and payable. Lender shall have no liability to
Borrower for failing to pay any Impositions to the extent that any Event of Default has occurred
and is continuing, insufficient Imposition Deposits are held by Lender at the time an Imposition
becomes due and payable or Borrower has failed to provide Lender with bills and premium notices as
provided above.

     (d) Borrower, at its own expense, may contest by appropriate legal proceedings, conducted
diligently and in good faith, the amount or validity of any Imposition other than insurance
premiums, if (1) Borrower notifies Lender of the commencement or expected commencement of such
proceedings, (2) the Mortgaged Property is not in danger of being sold or forfeited, (3) Borrower
deposits with Lender reserves sufficient to pay the contested Imposition, if requested by Lender,
and (4) Borrower furnishes whatever additional security is required in the proceedings or is
reasonably requested by Lender, which may include the delivery to Lender of the reserves
established by Borrower to pay the contested Imposition.

     (e) Borrower shall promptly deliver to Lender a copy of all notices of, and invoices for,
Impositions, and if Borrower pays any Imposition directly, Borrower shall promptly furnish to
Lender receipts evidencing such payments.

     16. LIENS; ENCUMBRANCES.

     Borrower acknowledges that, to the extent provided in Section 21, the grant, creation or
existence of any mortgage, deed of trust, deed to secure debt, security interest or other lien or
encumbrance (a “Lien”) on the Mortgaged Property (other than the lien of this Instrument) or on
certain ownership interests in Borrower, whether voluntary, involuntary or by operation of law,
and whether or not such Lien has priority over the lien of this Instrument, is a “Transfer” which
constitutes an Event of Default.

     17. PRESERVATION, MANAGEMENT AND MAINTENANCE OF MORTGAGED PROPERTY.

     (a) Borrower (1) shall not commit waste or permit impairment or deterioration of the
Mortgaged Property, (2) shall not abandon the Mortgaged Property, (3) shall restore or repair
promptly, in a good and workmanlike manner, any damaged part of the Mortgaged Property to the
equivalent of its original condition, or such other condition as Lender may approve in writing,
whether or not insurance proceeds or condemnation awards are available to cover any costs of such

			
	 	 	 
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restoration or repair, (4) shall keep the Mortgaged Property in good repair, including the
replacement of Personalty and Fixtures with items of equal or better function and quality, (5)
shall provide for professional management of the Mortgaged Property by a residential rental
property manager satisfactory to Lender under a contract approved by Lender in writing, and (6)
shall give notice to Lender of and, unless otherwise directed in writing by Lender, shall appear
in and defend any action or proceeding purporting to affect the Mortgaged Property, Lender’s
security or Lender’s rights under this Instrument. Borrower shall not (and shall not permit any
tenant or other person to) remove, demolish or alter the Mortgaged Property or any part of the
Mortgaged Property except in connection with the replacement of tangible Personalty.

     (b) If, in connection with the making of the loan evidenced by the Note or at any later date,
Lender waives in writing the requirement of Section 17(a)(5) above that Borrower enter into a
written contract for management of the Mortgaged Property and if, after the date of this
Instrument, Borrower intends to change the management of the Mortgaged Property, Lender shall have
the right to approve such new property manager and the written contract for the management of the
Mortgaged Property and require that Borrower and such new property manager enter into an Assignment
of Management Agreement on a form approved by Lender. If required by Lender (whether before or
after an Event of Default), Borrower will cause any Affiliate of Borrower to whom fees are payable
for the management of the Mortgaged Property to enter into an agreement with Lender, in a form
approved by Lender, providing for subordination of those fees and such other provisions as Lender
may require. “Affiliate of Borrower” means any corporation, partnership, joint venture, limited
liability company, limited liability partnership, trust or individual controlled by, under common
control with, or which controls Borrower (the term “control” for these purposes shall mean the
ability, whether by the ownership of shares or other equity interests, by contract or otherwise, to
elect a majority of the directors of a corporation, to make management decisions on behalf of, or
independently to select the managing partner of, a partnership, or otherwise to have the power
independently to remove and then select a majority of those individuals exercising managerial
authority over an entity, and control shall be conclusively presumed in the case of the ownership
of 50% or more of the equity interests).

     18. ENVIRONMENTAL HAZARDS.

     (a) Except for matters covered by a written program of operations and maintenance approved in
writing by Lender (an “O&M Program”) or matters described in Section 18(b), Borrower shall not
cause or permit any of the following:

	 	(1)	 	the presence, use, generation, release, treatment, processing,
storage (including storage in above ground and underground storage tanks),
handling, or disposal of any Hazardous Materials on or under the Mortgaged
Property or any other property of Borrower that is adjacent to the Mortgaged
Property;
	 
	 	(2)	 	the transportation of any Hazardous Materials to, from, or
across the Mortgaged Property;

			
	 	 	 
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	 	(3)	 	any occurrence or condition on the Mortgaged Property or any other
property of Borrower that is adjacent to the Mortgaged Property, which
occurrence or condition is or may be in violation of Hazardous Materials
Laws; or
	 
	 	(4)	 	any violation of or noncompliance with the terms of any
Environmental Permit with respect to the Mortgaged Property or any property of
Borrower that is adjacent to the Mortgaged Property.

The matters described in clauses (1) through (4) above are referred to collectively in this Section
18 as “Prohibited Activities or Conditions”.

     (b) Prohibited Activities and Conditions shall not include the safe and lawful use and storage
of quantities of (1) pre-packaged supplies, cleaning materials and petroleum products customarily
used in the operation and maintenance of comparable multifamily properties, (2) 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 Mortgaged Property; and (3) petroleum
products used in the operation and maintenance of motor vehicles from time to time located on the
Mortgaged Property’s parking areas, so long as all of the foregoing are used, stored, handled,
transported and disposed of in compliance with Hazardous Materials Laws.

     (c) Borrower shall take all commercially reasonable actions (including the inclusion of
appropriate provisions in any Leases executed after the date of this Instrument) to prevent its
employees, agents, and contractors, and all tenants and other occupants from causing or permitting
any Prohibited Activities or Conditions. Borrower shall not lease or allow the sublease or use of
all or any portion of the Mortgaged Property to any tenant or subtenant for nonresidential use by
any user that, in the ordinary course of its business, would cause or permit any Prohibited
Activity or Condition.

     (d) If an O&M Program has been established with respect to Hazardous Materials, Borrower shall
comply in a timely manner with, and cause all employees, agents, and contractors of Borrower and
any other persons present on the Mortgaged Property to comply with the O&M Program. All costs of
performance of Borrower’s obligations under any O&M Program shall be paid by Borrower, and Lender’s
out-of-pocket costs incurred in connection with the monitoring and review of the O&M Program and
Borrower’s performance shall be paid by Borrower upon demand by Lender. Any such out-of-pocket
costs of Lender which Borrower fails to pay promptly shall become an additional part of the
Indebtedness as provided in Section 12.

     (e) Borrower represents and warrants to Lender that, except as previously disclosed by
Borrower to Lender in writing:

	 	(1)	 	Borrower has not at any time engaged in, caused or permitted
any Prohibited Activities or Conditions;

			
	 	 	 
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	 	(2)	 	to the best of Borrower’s knowledge after reasonable and diligent
inquiry, no Prohibited Activities or Conditions exist or have existed;
	 
	 	(3)	 	except to the extent previously disclosed by Borrower to Lender
in writing, the Mortgaged Property does not now contain any underground storage
tanks, and, to the best of Borrower’s knowledge after reasonable and diligent
inquiry, the Mortgaged Property has not contained any underground storage tanks
in the past. If there is an underground storage tank located on the Property
which has been previously disclosed by Borrower to Lender in writing, that tank
complies with all requirements of Hazardous Materials Laws;
	 
	 	(4)	 	Borrower has complied with all Hazardous Materials Laws,
including all requirements for notification regarding releases of Hazardous
Materials. Without limiting the generality of the foregoing, Borrower has
obtained all Environmental Permits required for the operation of the Mortgaged
Property in accordance with Hazardous Materials Laws now in effect and all such
Environmental Permits are in full force and effect;
	 
	 	(5)	 	no event has occurred with respect to the Mortgaged Property
that constitutes, or with the passing of time or the giving of notice would
constitute, noncompliance with the terms of any Environmental Permit;
	 
	 	(6)	 	there are no actions, suits, claims or proceedings pending or,
to the best of Borrower’s knowledge after reasonable and diligent inquiry,
threatened that involve the Mortgaged Property and allege, arise out of, or
relate to any Prohibited Activity or Condition; and
	 
	 	(7)	 	Borrower has not received any complaint, order, notice of
violation or other communication from any Governmental Authority with regard to
air emissions, water discharges, noise emissions or Hazardous Materials, or any
other environmental, health or safety matters affecting the Mortgaged Property
or any other property of Borrower that is adjacent to the Mortgaged Property.

The representations and warranties in this Section 18 shall be continuing representations and
warranties that shall be deemed to be made by Borrower throughout the term of the loan evidenced
by the Note, until the Indebtedness has been paid in full.

     (f) Borrower shall promptly notify Lender in writing upon the occurrence of any of the
following events:

	 	(1)	 	Borrower’s discovery of any Prohibited Activity or Condition;

			
	 	 	 
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	 	(2)	 	Borrower’s receipt of or knowledge of any complaint, order, notice of
violation or other communication from any Governmental Authority or other
person with regard to present or future alleged Prohibited Activities or
Conditions or any other environmental, health or safety matters affecting
the Mortgaged Property or any other property of Borrower that is adjacent to
the Mortgaged Property; and
	 
	 	(3)	 	any representation or warranty in this Section 18 becomes
untrue after the date of this Agreement.

Any such notice given by Borrower shall not relieve Borrower of, or result in a waiver of, any
obligation under this Instrument, the Note, or any other Loan Document.

     (g) Borrower shall pay promptly the costs of any environmental inspections, tests or audits
(“Environmental Inspections”) required by Lender in connection with any foreclosure or deed in
lieu of foreclosure, or as a condition of Lender’s consent to any Transfer under Section 21, or
required by Lender following a reasonable determination by Lender that Prohibited Activities or
Conditions may exist. Any such costs incurred by Lender (including the fees and out-of-pocket
costs of attorneys and technical consultants whether incurred in connection with any judicial or
administrative process or otherwise) which Borrower fails to pay promptly shall become an
additional part of the Indebtedness as provided in Section 12. The results of all Environmental
Inspections made by Lender shall at all times remain the property of Lender and Lender shall have
no obligation to disclose or otherwise make available to Borrower or any other party such results
or any other information obtained by Lender in connection with its Environmental Inspections.
Lender hereby reserves the right, and Borrower hereby expressly authorizes Lender, to make
available to any party, including any prospective bidder at a foreclosure sale of the Mortgaged
Property, the results of any Environmental Inspections made by Lender with respect to the
Mortgaged Property. Borrower consents to Lender notifying any party (either as part of a notice of
sale or otherwise) of the results of any of Lender’s Environmental Inspections. Borrower
acknowledges that Lender cannot control or otherwise assure the truthfulness or accuracy of the
results of any of its Environmental Inspections and that the release of such results to
prospective bidders at a foreclosure sale of the Mortgaged Property may have a material and
adverse effect upon the amount which a party may bid at such sale. Borrower agrees that Lender
shall have no liability whatsoever as a result of delivering the results of any of its
Environmental Inspections to any third party, and Borrower hereby releases and forever discharges
Lender from any and all claims, damages, or causes of action, arising out of, connected with or
incidental to the results of, the delivery of any of Lender’s Environmental Inspections.

     (h) If any investigation, site monitoring, containment, clean-up, restoration or other
remedial work (“Remedial Work”) is necessary to comply with any Hazardous Materials Law or order
of any Governmental Authority that has or acquires jurisdiction over the Mortgaged Property or the
use, operation or improvement of the Mortgaged Property under any Hazardous Materials Law,
Borrower shall, by the earlier of (1) the applicable deadline required by Hazardous Materials

			
	 	 	 
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Law or (2) 30 days after notice from Lender demanding such action, begin performing the Remedial
Work, and thereafter diligently prosecute it to completion, and shall in any event complete the
work by the time required by applicable Hazardous Materials Law. If Borrower fails to begin on a
timely basis or diligently prosecute any required Remedial Work, Lender may, at its option, cause
the Remedial Work to be completed, in which case Borrower shall reimburse Lender on demand for the
cost of doing so. Any reimbursement due from Borrower to Lender shall become part of the
Indebtedness as provided in Section 12.

     (i) Borrower shall cooperate with any inquiry by any Governmental Authority and shall comply
with any governmental or judicial order which arises from any alleged Prohibited Activity or
Condition.

     (j) Borrower shall indemnify, hold harmless and defend (i) Lender, (ii) any prior owner or
holder of the Note, (iii) the Loan Servicer, (iv) any prior Loan Servicer, (v) the officers,
directors, shareholders, partners, employees and trustees of any of the foregoing, and (vi) the
heirs, legal representatives, successors and assigns of each of the foregoing (collectively, the
“Indemnitees”) from and against all proceedings, claims, damages, penalties and costs (whether
initiated or sought by Governmental Authorities or private parties), including fees and
out-of-pocket expenses of attorneys and expert witnesses, investigatory fees, and remediation
costs, whether incurred in connection with any judicial or administrative process or otherwise,
arising directly or indirectly from any of the following:

	 	(1)	 	any breach of any representation or warranty of Borrower in this Section 18;
	 
	 	(2)	 	any failure by Borrower to perform any of its obligations under
this Section 18;
	 
	 	(3)	 	the existence or alleged existence of any Prohibited Activity or Condition;
	 
	 	(4)	 	the presence or alleged presence of Hazardous Materials on or
under the Mortgaged Property or any property of Borrower that is adjacent to
the Mortgaged Property; and
	 
	 	(5)	 	the actual or alleged violation of any Hazardous Materials Law.

     (k) Counsel selected by Borrower to defend Indemnitees shall be subject to the approval of
those Indemnitees. However, any Indemnitee may elect to defend any claim or legal or
administrative proceeding at the Borrower’s expense.

     (l) Borrower shall not, without the prior written consent of those Indemnitees who are named
as parties to a claim or legal or administrative proceeding (a
“Claim”), settle or compromise the
Claim if the settlement (1) results in the entry of any judgment that does not include as an
unconditional term the delivery by the claimant or plaintiff to Lender of a written release of
those

			
	 	 	 
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Indemnitees, satisfactory in form and substance to Lender; or (2) may materially and adversely
affect Lender, as determined by Lender in its discretion.

     (m) Lender agrees that the indemnity under this Section 18 shall be limited to the assets of
Borrower and Lender shall not seek to recover any deficiency from any natural persons who are
general partners of Borrower.

     (n) Borrower shall, at its own cost and expense, do all of the following:

	 	(1)	 	pay or satisfy any judgment or decree that may be entered
against any Indemnitee or Indemnitees in any legal or administrative proceeding
incident to any matters against which Indemnitees are entitled to be
indemnified under this Section 18;
	 
	 	(2)	 	reimburse Indemnitees for any expenses paid or incurred in
connection with any matters against which Indemnitees are entitled to be
indemnified under this Section 18; and
	 
	 	(3)	 	reimburse Indemnitees for any and all expenses, including fees
and out-of- pocket expenses of attorneys and expert witnesses, paid or incurred
in connection with the enforcement by Indemnitees of their rights under this
Section 18, or in monitoring and participating in any legal or administrative
proceeding.

     (o) In any circumstances in which the indemnity under this Section 18 applies, Lender may
employ its own legal counsel and consultants to prosecute, defend or negotiate any claim or legal
or administrative proceeding and Lender, with the prior written consent of Borrower (which shall
not be unreasonably withheld, delayed or conditioned), may settle or compromise any action or
legal or administrative proceeding. Borrower shall reimburse Lender upon demand for all costs and
expenses incurred by Lender, including all costs of settlements entered into in good faith, and
the fees and out-of-pocket expenses of such attorneys and consultants.

     (p) The provisions of this Section 18 shall be in addition to any and all other obligations
and liabilities that Borrower may have under applicable law or under other Loan Documents, and
each Indemnitee shall be entitled to indemnification under this Section 18 without regard to
whether Lender or that Indemnitee has exercised any rights against the Mortgaged Property or any
other security, pursued any rights against any guarantor, or pursued any other rights available
under the Loan Documents or applicable law. If Borrower consists of more than one person or
entity, the obligation of those persons or entities to indemnify the Indemnitees under this
Section 18 shall be joint and several. The obligation of Borrower to indemnify the Indemnitees
under this Section 18 shall survive any repayment or discharge of the Indebtedness, any
foreclosure proceeding, any foreclosure sale, any delivery of any deed in lieu of foreclosure, and
any release of record of the lien of this Instrument.

			
	 	 	 
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     19. PROPERTY AND LIABILITY INSURANCE.

     (a) Borrower shall keep the Improvements insured at all times against such hazards as
Lender may from time to time require, which insurance shall include but not be limited to coverage
against loss by fire and allied perils, general boiler and machinery coverage, and business income
coverage. Lender’s insurance requirements may change from time to time throughout the term of the
Indebtedness. If Lender so requires, such insurance shall also include sinkhole insurance, mine
subsidence insurance, earthquake insurance, and, if the Mortgaged Property does not conform to
applicable zoning or land use laws, building ordinance or law coverage. If any of the Improvements
is located in an area identified by the Federal Emergency Management Agency (or any successor to
that agency) as an area having special flood hazards, and if flood insurance is available in that
area, Borrower shall insure such Improvements against loss by flood.

     (b) All premiums on insurance policies required under Section 19(a) shall be paid in the
manner provided in Section 7, unless Lender has designated in writing another method of payment.
All such policies shall also be in a form approved by Lender. All policies of property damage
insurance shall include a non-contributing, non-reporting mortgage clause in favor of, and in a
form approved by, Lender. Lender shall have the right to hold the original policies or duplicate
original policies of all insurance required by Section 19(a). Borrower shall promptly deliver to
Lender a copy of all renewal and other notices received by Borrower with respect to the policies
and all receipts for paid premiums. At least 30 days prior to the expiration date of a policy,
Borrower shall deliver to Lender the original (or a duplicate original) of a renewal policy in form
satisfactory to Lender.

     (c) Borrower shall maintain at all times commercial general liability insurance, workers’
compensation insurance and such other liability, errors and omissions and fidelity insurance
coverages as Lender may from time to time require.

     (d) All insurance policies and renewals of insurance policies required by this Section 19
shall be in such amounts and for such periods as Lender may from time to time require, and shall be
issued by insurance companies satisfactory to Lender.

     (e) Borrower shall comply with all insurance requirements and shall not permit any condition
to exist on the Mortgaged Property that would invalidate any part of any insurance coverage that
this Instrument requires Borrower to maintain.

     (f) In the event of loss, Borrower shall give immediate written notice to the insurance
carrier and to Lender. Borrower hereby authorizes and appoints Lender as attorney-in-fact for
Borrower to make proof of loss, to adjust and compromise any claims under policies of property
damage insurance, to appear in and prosecute any action arising from such property damage
insurance policies, to collect and receive the proceeds of property damage insurance, and to
deduct from such proceeds Lender’s expenses incurred in the collection of such proceeds. This
power of attorney is coupled with an interest and therefore is irrevocable. However, nothing
contained in this Section 19 shall require Lender to incur any expense or take any action. Lender
may, at Lender’s

			
	 	 	 
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option, (1) hold the balance of such proceeds to be used to reimburse Borrower for the cost of
restoring and repairing the Mortgaged Property to the equivalent of its original condition or to a
condition approved by Lender (the “Restoration”), or (2) apply the balance of such proceeds to the
payment of the Indebtedness, whether or not then due. To the extent Lender determines to apply
insurance proceeds to Restoration, Lender shall do so in accordance with Lender’s then-current
policies relating to the restoration of casualty damage on similar multifamily properties.

     (g) Lender shall not exercise its option to apply insurance proceeds to the payment of the
Indebtedness if all of the following conditions are met: (1) no Event of Default (or any event
which, with the giving of notice or the passage of time, or both, would constitute an Event of
Default) has occurred and is continuing; (2) Lender determines, in its discretion, that there will
be sufficient funds to complete the Restoration; (3) Lender determines, in its discretion, that the
net operating income generated by the Mortgaged Property after completion of the Restoration will
be sufficient to support a debt service coverage ratio not less than the greater of (A) the debt
service coverage ratio as of the date of this Instrument (based on the final underwriting of the
Mortgaged Property) or (B) the debt service coverage ratio immediately prior to the loss (in each
case, Lender’s determination shall include all operating costs and other expenses, Imposition
Deposits, deposits to reserves and loan repayment obligations relating to the Mortgaged Property);
(4) Lender determines, in its discretion, that the Restoration will be completed before the earlier
of (A) one year before the maturity date of the Note or (B) one year after the date of the loss or
casualty; and (5) upon Lender’s request, Borrower provides Lender evidence of the availability
during and after the Restoration of the insurance required to be maintained by Borrower pursuant to
this Section 19.

     (h) If the Mortgaged Property is sold at a foreclosure sale or Lender acquires title to the
Mortgaged Property, Lender shall automatically succeed to all rights of Borrower in and to any
insurance policies and unearned insurance premiums and in and to the proceeds resulting from any
damage to the Mortgaged Property prior to such sale or acquisition.

     20. CONDEMNATION.

     (a) Borrower shall promptly notify Lender of any action or proceeding relating to any
condemnation or other taking, or conveyance in lieu thereof, of all or any part of the Mortgaged
Property, whether direct or indirect (a “Condemnation”). Borrower shall appear in and prosecute or
defend any action or proceeding relating to any Condemnation unless otherwise directed by Lender
in writing. Borrower authorizes and appoints Lender as attorney-in-fact for Borrower to commence,
appear in and prosecute, in Lender’s or Borrower’s name, any action or proceeding relating to any
Condemnation and to settle or compromise any claim in connection with any Condemnation. This power
of attorney is coupled with an interest and therefore is irrevocable. However, nothing contained
in this Section 20 shall require Lender to incur any expense or take any action. Borrower hereby
transfers and assigns to Lender all right, title and interest of Borrower in and to any award or
payment with respect to (i) any Condemnation, or any conveyance in lieu of Condemnation, and (ii)
any damage to the Mortgaged Property caused by governmental action that does not result in a
Condemnation.

			
	 	 	 
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     (b) Lender may apply such awards or proceeds, after the deduction of Lender’s expenses
incurred in the collection of such amounts, at Lender’s option, to the restoration or repair of the
Mortgaged Property or to the payment of the Indebtedness, with the balance, if any, to Borrower.
Unless Lender otherwise agrees in writing, any application of any awards or proceeds to the
Indebtedness shall not extend or postpone the due date of any monthly installments referred to in
the Note, Section 7 of this Instrument or any Collateral Agreement, or change the amount of such
installments. Borrower agrees to execute such further evidence of assignment of any awards or
proceeds as Lender may require.

     21. TRANSFERS OF THE MORTGAGED PROPERTY OR INTERESTS IN BORROWER.

     (a) The occurrence of any of the following events shall constitute an Event of Default
under this Instrument:

     (1) a Transfer of all or any part of the Mortgaged Property or any interest in the
Mortgaged Property;

     (2) a Transfer of a Controlling Interest in Borrower;

     (3) a Transfer of a Controlling Interest in any entity which owns, directly or
indirectly through one or more intermediate entities, a Controlling Interest in Borrower;

     (4) a Transfer of all or any part of a Key Principal’s ownership interests in
Borrower, or in any other entity which owns, directly or indirectly through one or more
intermediate entities, an ownership interest in Borrower (other than a Transfer of an
aggregate beneficial ownership interest in the Borrower of 49% or less of such Key
Principal’s original ownership interest in the Borrower and which does not otherwise result
in a Transfer of the Key Principal’s Controlling Interest in such intermediate entities or
in the Borrower);

     (5) if Key Principal is an entity, (A) a Transfer of a Controlling Interest in Key
Principal, or (B) a Transfer of a Controlling Interest in any entity which owns, directly or
indirectly through one or more intermediate entities, a Controlling Interest in Key
Principal;

     (6) if Borrower or Key Principal is a trust, the termination or revocation of such
trust; unless the trust is terminated as a result of the death of an individual trustor, in
which event Lender must be notified and such Borrower or Key Principal must be replaced with
an individual or entity acceptable to Lender, in accordance with the provisions of Section
21(c) hereof, within 90 days of such death (provided however that no property inspection
shall be required and a 1% transfer fee will not be charged);

     (7) if Key Principal is a natural person, the death of such individual; unless the
Lender is notified and such individual is replaced with an individual or entity acceptable
to

			
	 	 	 
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Lender, in accordance with the provisions of Section 21(c) hereof, within 90 days of such
death (provided however that no property inspection shall be required and a 1% transfer fee
will not be charged);

     (8) the merger, dissolution, liquidation, or consolidation of (i) Borrower, (ii) any
Key Principal that is a legal entity, or (iii) any legal entity holding, directly or
indirectly, a Controlling Interest in the Borrower or in any Key Principal that is an
entity;

     (9) a conversion of Borrower from one type of legal entity into another type of legal
entity (including the conversion of a general partnership into a limited partnership and the
conversion of a limited partnership into a limited liability company), whether or not there
is a Transfer; if such conversion results in a change in any assets, liabilities, legal
rights or obligations of Borrower (or of Key Principal, guarantor, or any general partner of
Borrower, as applicable), by operation of law or otherwise; and

     (10) a Transfer of the economic benefits or right to cash flows attributable to the
ownership interests in Borrower and/or, if Key Principal is an entity, Key Principal,
separate from the Transfer of the underlying ownership interests, unless the Transfer of the
underlying ownership interests would otherwise not be prohibited by this Agreement

Lender shall not be required to demonstrate any actual impairment of its security or any
increased risk of default in order to exercise any of its remedies with respect to an Event
of Default under this Section 21.

     (b) The occurrence of any of the following events shall not constitute an Event of Default
under this Instrument, notwithstanding any provision of Section 21(a) to the contrary:

     (1) a Transfer to which Lender has consented;

     (2) except as provided in Section 21(a)(6) and (7), a Transfer that occurs by devise,
descent, pursuant to the provisions of a trust, or by operation of law upon the death of a
natural person;

     (3) the grant of a leasehold interest in an individual dwelling unit for a term of two
years or less not containing an option to purchase;

     (4) a Transfer of obsolete or worn out Personalty or Fixtures that are
contemporaneously replaced by items of equal or better function and quality, which are free
of liens, encumbrances and security interests other than those created by the Loan Documents
or consented to by Lender;

     (5) the grant of an easement, servitude, or restrictive covenant if, before the grant,
Lender determines that the easement, servitude, or restrictive covenant will not materially
affect the operation or value of the Mortgaged Property or Lender’s interest in the

			
	 	 	 
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Mortgaged Property, and Borrower pays to Lender, upon demand, all costs and expenses
incurred by Lender in connection with reviewing Borrower’s request;

     (6) the creation of a tax lien or a mechanic’s, materialman’s, or judgment lien against
the Mortgaged Property which is bonded off, released of record, or otherwise remedied to
Lender’s satisfaction within 45 days after Borrower has actual or constructive notice of
the existence of such lien; and

     (7) the conveyance of the Mortgaged Property at a judicial or non-judicial foreclosure
sale under this Instrument.

     (c) Lender shall consent to a Transfer that would otherwise violate this Section 21 if, prior
to the Transfer, Borrower has satisfied each of the following requirements:

     (1) the submission to Lender of all information required by Lender to make the
determination required by this Section 21(c);

     (2) the absence of any Event of Default;

     (3) the transferee meets all of the eligibility, credit, management, and other
standards (including any standards with respect to previous relationships between Lender and
the transferee and the organization of the transferee) customarily applied by Lender at the
time of the proposed Transfer to the approval of borrowers in connection with the
origination or purchase of similar mortgage finance structures on similar multifamily
properties, unless partially waived by Lender in exchange for such additional conditions as
Lender may require;

     (4) the Mortgaged Property, at the time of the proposed Transfer, meets all standards
as to its physical condition that are customarily applied by Lender at the time of the
proposed Transfer to the approval of properties in connection with the origination or
purchase of similar mortgage finance structures on similar multifamily properties, unless
partially waived by Lender in exchange for such additional conditions as Lender may require;

     (5) if transferor or any other person has obligations under any Loan Document, the
execution by the transferee or one or more individuals or entities acceptable to Lender of
an assumption agreement (including, if applicable, an Acknowledgement and Agreement of Key
Principal to Personal Liability for Exceptions to Non-Recourse Liability) that is acceptable
to Lender and that, among other things, requires the transferee to perform all obligations
of transferor or such person set forth in such Loan Document, and may require that the
transferee comply with any provisions of this Instrument or any other Loan Document which
previously may have been waived by Lender;

			
	 	 	 
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     (6) if a guaranty has been executed and delivered in connection with the Note, this
Instrument or any of the other Loan Documents, the Borrower causes one or more individuals
or entities acceptable to Lender to execute and deliver to Lender a substitute guaranty in a
form acceptable to Lender;

     (7) Lender’s receipt of all of the following:

(A) a non-refundable review fee in the amount of $3,000 and a transfer fee
equal to 1 percent of the outstanding Indebtedness immediately prior to the
Transfer; and

(B) Borrower’s reimbursement of all of Lender’s out-of-pocket costs
(including reasonable attorneys’ fees) incurred in reviewing the Transfer
request, to the extent such expenses exceed $3,000; and

     (8) Borrower has agreed to Lender’s conditions to approve such Transfer, which may
include, but are not limited to (A) providing additional collateral, guaranties, or other
credit support to mitigate any risks concerning the proposed transferee or the performance
or condition of the Mortgaged Property, and (B) amending the Loan Documents to (i) delete
any specially negotiated terms or provisions previously granted for the exclusive benefit of
transferor and (ii) restore to original provisions of the standard Fannie Mae form
multifamily loan documents, to the extent such provisions were previously modified.

     (d) For purposes of this Section, the following terms shall have the meanings set forth below:

     (1) “Initial Owners” means, with respect to Borrower or any other entity, the persons
or entities who on the date of the Note, directly or indirectly, own in the aggregate 100%
of the ownership interests in Borrower or that entity.

     (2) A Transfer of a “Controlling Interest” shall mean:

(A) with respect to any entity, the following:

     (i) if such entity is a general partnership or a joint venture, a
Transfer of any general partnership interest or joint venture interest which
would cause the Initial Owners to own less than 51% of all general
partnership or joint venture interests in such entity;

     (ii) if such entity is a limited partnership, (A) a Transfer of any
general partnership interest, or (B) a Transfer of any partnership interests
which would cause the Initial Owners to own less than 51% of all limited
partnership interests in such entity;

			
	 	 	 
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     (iii) if such entity is a limited liability company or a limited
liability partnership, (A) a Transfer of any membership or other ownership interest
which would cause the Initial Owners to own less than 51% of all membership or
other ownership interests in such entity, (B) a Transfer of any membership, or
other interest of a manager, in such entity that results in a change of manager, or
(C) a change of the non-member manager;

     (iv) if such entity is a corporation (other than a Publicly-Held Corporation)
with only one class of voting stock, a Transfer of any voting stock which would
cause the Initial Owners to own less than 51% of voting stock in such corporation;

     (v) if such entity is a corporation (other than a Publicly-Held Corporation)
with more than one class of voting stock, a Transfer of any voting stock which
would cause the Initial Owners to own less than a sufficient number of shares of
voting stock having the power to elect the majority of directors of such
corporation; and

     (vi) if such entity is a trust (other than a Publicly-Held Trust), the
removal, appointment or substitution of a trustee of such trust other than (A) in
the case of a land trust, or (B) if the trustee of such trust after such removal,
appointment, or substitution is a trustee identified in the trust agreement
approved by Lender; and/or

     (B) any agreement (including provisions contained in the organizational and/or
governing documents of Borrower or Key Principal) or Transfer not specified in clause (A),
the effect of which, either immediately or after the passage of time or occurrence of a
specified event or condition, including the failure of a specified event or condition to
occur or be satisfied, would (i) cause a change in or replacement of the Person that
controls the management and operations of the Borrower or Key Principal or (ii) limit or
otherwise modify the extent of such Person’s control over the management and operations of
Borrower or Key Principal.

     (3) “Publicly-Held Corporation” shall mean a corporation the outstanding voting stock of which
is registered under Section 12(b) or 12(g) of the Securities and Exchange Act of 1934, as amended.

     (4) “Publicly-Held Trust” shall mean a real estate investment trust the outstanding voting
shares or beneficial interests of which are registered under Section 12 (b) or 12 (g) of the
Securities Exchange Act of 1934, as amended.

			
	 	 	 
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     (e) Lender shall be provided with written notice of all Transfers under this Section 21,
whether or not such Transfers are permitted under Section 21(b) or approved by Lender under
Section 21(c), no later than 10 days prior to the date of
the Transfer.”

     22. EVENTS OF DEFAULT.

     The occurrence of any one or more of the following shall constitute an Event of Default under
this Instrument:

     (a) any failure by Borrower to pay or deposit when due any amount required by the Note, this
Instrument or any other Loan Document;

     (b) any failure by Borrower to maintain the insurance coverage required by Section 19;

     (c) any failure by Borrower to comply with the provisions of Section 33;

     (d) fraud or material misrepresentation or material omission by Borrower, or any of its
officers, directors, trustees, general partners or managers, Key Principal or any guarantor in
connection with (A) the application for or creation of the Indebtedness, (B) any financial
statement, rent roll, or other report or information provided to Lender during the term of the
Indebtedness, or (C) any request for Lender’s consent to any proposed action, including a request
for disbursement of funds under any Collateral Agreement;

     (e) any (i) Event of Default under Section 21 and/or (ii) occurrence of a Bankruptcy Event;

     (f) the commencement of a forfeiture action or proceeding, whether civil or criminal, which,
in Lender’s reasonable judgment, could result in a forfeiture of the Mortgaged Property or
otherwise materially impair the lien created by this Instrument or Lender’s interest in the
Mortgaged Property;

     (g) any failure by Borrower to perform any of its obligations under this Instrument (other
than those specified in Sections 22(a) through (f)), as and when required, which continues for a
period of 30 days after notice of such failure by Lender to Borrower, but no such notice or grace
period shall apply in the case of any such failure which could, in Lender’s judgment, absent
immediate exercise by Lender of a right or remedy under this Instrument, result in harm to Lender,
impairment of the Note or this Instrument or any other security given under any other Loan
Document;

     (h) any failure by Borrower to perform any of its obligations as and when required under any
Loan Document other than this Instrument which continues beyond the applicable cure period, if
any, specified in that Loan Document; and

			
	 	 	 
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     (i) any exercise by the holder of any other debt instrument secured by a mortgage, deed of
trust or deed to secure debt on the Mortgaged Property of a right to declare all amounts due under
that debt instrument immediately due and payable.

     23. REMEDIES CUMULATIVE.

     Each right and remedy provided in this Instrument is distinct from all other rights or
remedies under this Instrument or any other Loan Document or afforded by applicable law, and each
shall be cumulative and may be exercised concurrently, independently, or successively, in any
order.

     24. FORBEARANCE.

     (a) Lender may (but shall not be obligated to) agree with Borrower, from time to time, and
without giving notice to, or obtaining the consent of, or having any effect upon the obligations
of, any guarantor or other third party obligor, to take any of the following actions: extend the
time for payment of all or any part of the Indebtedness; reduce the payments due under this
Instrument, the Note, or any other Loan Document; release anyone liable for the payment of any
amounts under this Instrument, the Note, or any other Loan Document; accept a renewal of the Note;
modify the terms and time of payment of the Indebtedness; join in any extension or subordination
agreement; release any Mortgaged Property; take or release other or additional security; modify the
rate of interest or period of amortization of the Note or change the amount of the monthly
installments payable under the Note; and otherwise modify this Instrument, the Note, or any other
Loan Document.

     (b) Any forbearance by Lender in exercising any right or remedy under the Note, this
Instrument, or any other Loan Document or otherwise afforded by applicable law, shall not be a
waiver of or preclude the exercise of any other right or remedy. The acceptance by Lender of
payment of all or any part of the Indebtedness after the due date of such payment, or in an amount
which is less than the required payment, shall not be a waiver of Lender’s right to require prompt
payment when due of all other payments on account of the Indebtedness or to exercise any remedies
for any failure to make prompt payment. Enforcement by Lender of any security for the Indebtedness
shall not constitute an election by Lender of remedies so as to preclude the exercise of any other
right available to Lender. Lender’s receipt of any awards or proceeds under Sections 19 and 20
shall not operate to cure or waive any Event of Default.

     25. LOAN CHARGES.

     If any applicable law limiting the amount of interest or other charges permitted to be
collected from Borrower is interpreted so that any charge provided for in any Loan Document,
whether considered separately or together with other charges levied in connection with any other
Loan Document, violates that law, and Borrower is entitled to the benefit of that law, that charge
is hereby reduced to the extent necessary to eliminate that violation. The amounts, if any,
previously paid to Lender in excess of the permitted amounts shall be applied by Lender to reduce
the principal

			
	 	 	 
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of the Indebtedness. For the purpose of determining whether any applicable law limiting the amount
of interest or other charges permitted to be collected from Borrower has been violated, all
Indebtedness which constitutes interest, as well as all other charges levied in connection with
the Indebtedness which constitute interest, shall be deemed to be allocated and spread over the
stated term of the Note. Unless otherwise required by applicable law, such allocation and
spreading shall be effected in such a manner that the rate of interest so computed is uniform
throughout the stated term of the Note.

     26. WAIVER OF STATUTE OF LIMITATIONS.

     Borrower hereby waives the right to assert any statute of limitations as a bar to the
enforcement of the lien of this Instrument or to any action brought to enforce any Loan Document.

     27. WAIVER OF MARSHALLING.

     Notwithstanding the existence of any other security interests in the Mortgaged Property held
by Lender or by any other party, Lender shall have the right to determine the order in which any
or all of the Mortgaged Property shall be subjected to the remedies provided in this Instrument,
the Note, any other Loan Document or applicable law. Lender shall have the right to determine the
order in which any or all portions of the Indebtedness are satisfied from the proceeds realized
upon the exercise of such remedies. Borrower and any party who now or in the future acquires a
security interest in the Mortgaged Property and who has actual or constructive notice of this
Instrument waives any and all right to require the marshalling of assets or to require that any of
the Mortgaged Property be sold in the inverse order of alienation or that any of the Mortgaged
Property be sold in parcels or as an entirety in connection with the exercise of any of the
remedies permitted by applicable law or provided in this Instrument.

     28. FURTHER ASSURANCES.

     Borrower shall execute, acknowledge, and deliver, at its sole cost and expense, all further
acts, deeds, conveyances, assignments, estoppel certificates, financing statements, transfers and
assurances as Lender may require from time to time in order to better assure, grant, and convey to
Lender the rights intended to be granted, now or in the future, to Lender under this Instrument
and the Loan Documents.

     29. ESTOPPEL CERTIFICATE.

     Within 10 days after a request from Lender, Borrower shall deliver to Lender a written
statement, signed and acknowledged by Borrower, certifying to Lender or any person designated by
Lender, as of the date of such statement, (i) that the Loan Documents are unmodified and in full
force and effect (or, if there have been modifications, that the Loan Documents are in full force
and effect as modified and setting forth such modifications); (ii) the unpaid principal balance of
the Note; (iii) the date to which interest under the Note has been paid; (iv) that Borrower is not
in

			
	 	 	 
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default in paying the Indebtedness or in performing or observing any of the covenants or agreements
contained in this Instrument or any of the other Loan Documents (or, if the Borrower is in default,
describing such default in reasonable detail); (v) whether or not there are then existing any
setoffs or defenses known to Borrower against the enforcement of any right or remedy of Lender
under the Loan Documents; and (vi) any additional facts requested by Lender.

     30. GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE.

     (a) This Instrument, and any Loan Document which does not itself expressly identify the law
that is to apply to it, shall be governed by the laws of the jurisdiction in which the Land is
located (the “Property Jurisdiction”).

     (b) Borrower agrees that any controversy arising under or in relation to the Note, this
Instrument, or any other Loan Document shall be litigated exclusively in the Property Jurisdiction.
The state and federal courts and authorities with jurisdiction in the Property Jurisdiction shall
have exclusive jurisdiction over all controversies which shall arise under or in relation to the
Note, any security for the Indebtedness, or any other Loan Document. Borrower irrevocably
consents to service, jurisdiction, and venue of such courts for any such litigation and waives any
other venue to which it might be entitled by virtue of domicile, habitual residence or otherwise.

     31. NOTICE.

     (a) All notices, demands and other communications (“notice”) under or concerning this
Instrument shall be in writing. Each notice shall be addressed to the intended recipient at its
address set forth in this Instrument, and shall be deemed given on
the earliest to occur of (1) the
date when the notice is received by the addressee; (2) the first Business Day after the notice is
delivered to a recognized overnight courier service, with arrangements made for payment of charges
for next Business Day delivery; or (3) the third Business Day after the notice is deposited in the
United States mail with postage prepaid, certified mail, return receipt requested. As used in this
Section 31, the term “Business Day” means any day other than a Saturday, a Sunday or any other day
on which Lender is not open for business.

     (b) Any party to this Instrument may change the address to which notices intended for it are
to be directed by means of notice given to the other party in
accordance with this Section 31. Each
party agrees that it will not refuse or reject delivery of any notice given in accordance with this
Section 31, that it will acknowledge, in writing, the receipt of any notice upon request by the
other party and that any notice rejected or refused by it shall be deemed for purposes of this
Section 31 to have been received by the rejecting party on the date so refused or rejected, as
conclusively established by the records of the U.S. Postal Service or the courier service.

     (c) Any notice under the Note and any other Loan Document which does not specify how notices
are to be given shall be given in accordance with this Section 31.

			
	 	 	 
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     32. SALE OF NOTE; CHANGE IN SERVICER.

     The Note or a partial interest in the Note (together with this Instrument and the other Loan
Documents) may be sold one or more times without prior notice to Borrower. A sale may result in a
change of the Loan Servicer. There also may be one or more changes of the Loan Servicer unrelated
to a sale of the Note. If there is a change of the Loan Servicer, Borrower will be given notice of
the change.

     33. SINGLE ASSET BORROWER.

     Until the Indebtedness is paid in full, Borrower (a) shall not acquire any real or personal
property other than the Mortgaged Property and personal property related to the operation and
maintenance of the Mortgaged Property; (b) shall not operate any business other than the management
and operation of the Mortgaged Property; and (c) shall not maintain its assets in a way difficult
to segregate and identify.

     34. SUCCESSORS AND ASSIGNS BOUND.

     This Instrument shall bind, and the rights granted by this Instrument shall inure to, the
respective successors and assigns of Lender and Borrower. However, a Transfer not permitted by
Section 21 shall be an Event of Default.

     35. JOINT AND SEVERAL LIABILITY.

     If more than one person or entity signs this Instrument as Borrower, the obligations of such
persons and entities shall be joint and several.

     36. RELATIONSHIP OF PARTIES; NO THIRD PARTY BENEFICIARY.

     (a) The relationship between Lender and Borrower shall be solely that of creditor and debtor,
respectively, and nothing contained in this Instrument shall create any other relationship between
Lender and Borrower.

     (b) No creditor of any party to this Instrument and no other person shall be a third party
beneficiary of this Instrument or any other Loan Document. Without limiting the generality of the
preceding sentence, (1) any arrangement (a “Servicing Arrangement”) between the Lender and any Loan
Servicer for loss sharing or interim advancement of funds shall constitute a contractual obligation
of such Loan Servicer that is independent of the obligation of Borrower for the payment of the
Indebtedness, (2) Borrower shall not be a third party beneficiary of any Servicing Arrangement,
and (3) no payment by the Loan Servicer under any Servicing Arrangement will reduce the amount
of the Indebtedness.

			
	 	 	 
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     37. SEVERABILITY; AMENDMENTS.

     The invalidity or unenforceability of any provision of this Instrument shall not affect the
validity or enforceability of any other provision, and all other provisions shall remain in full
force and effect. This Instrument contains the entire agreement among the parties as to the rights
granted and the obligations assumed in this Instrument. This Instrument may not be amended or
modified except by a writing signed by the party against whom enforcement is sought.

     38. CONSTRUCTION.

     The captions and headings of the sections of this Instrument are for convenience only and
shall be disregarded in construing this Instrument. Any reference in this Instrument to an
“Exhibit” or a “Section” shall, unless otherwise explicitly provided, be construed as referring,
respectively, to an Exhibit attached to this Instrument or to a Section of this Instrument. All
Exhibits attached to or referred to in this Instrument are incorporated by reference into this
Instrument. Any reference in this Instrument to a statute or regulation shall be construed as
referring to that statute or regulation as amended from time to time. Use of the singular in this
Agreement includes the plural and use of the plural includes the singular. As used in this
Instrument, the term “including” means “including, but
not limited to.”

     39. LOAN SERVICING.

     All actions regarding the servicing of the loan evidenced by the Note, including the
collection of payments, the giving and receipt of notice, inspections of the Property, inspections
of books and records, and the granting of consents and approvals, may be taken by the Loan Servicer
unless Borrower receives notice to the contrary. If Borrower receives conflicting notices regarding
the identity of the Loan Servicer or any other subject, any such notice from Lender shall govern.

     40. DISCLOSURE OF INFORMATION.

     Lender may furnish information regarding Borrower or the Mortgaged Property to third parties
with an existing or prospective interest in the servicing, enforcement, evaluation, performance,
purchase or securitization of the Indebtedness, including trustees, master servicers, special
servicers, rating agencies, and organizations maintaining databases on the underwriting and
performance of multifamily mortgage loans. Borrower irrevocably waives any and all rights it may
have under applicable law to prohibit such disclosure, including any right of privacy.

     41. NO CHANGE IN FACTS OR CIRCUMSTANCES.

     All information in the application for the loan submitted to Lender (the “Loan Application”)
and in all financial statements, rent rolls, reports, certificates and other documents submitted
in connection with the Loan Application are complete and accurate in all material respects. There
has been no material adverse change in any fact or circumstance that would make any such
information incomplete or inaccurate.

			
	 	 	 
	FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT –

KENTUCKY
	 	Form 4018     06/09     Page 36

© 1998-2009 Fannie Mae

 

 

     42. SUBROGATION.

     If, and to the extent that, the proceeds of the loan evidenced by the Note are used to pay,
satisfy or discharge any obligation of Borrower for the payment of money that is secured by a
pre-existing mortgage, deed of trust or other lien encumbering the Mortgaged Property (a “Prior
Lien”), such loan proceeds shall be deemed to have been advanced by Lender at Borrower’s request,
and Lender shall automatically, and without further action on its part, be subrogated to the
rights, including lien priority, of the owner or holder of the obligation secured by the Prior
Lien, whether or not the Prior Lien is released.

     43. ACCELERATION; REMEDIES.

     At any time during the existence of an Event of Default, Lender, at Lender’s option, may
declare the Indebtedness to be immediately due and payable without further demand, and may enforce
the lien of this Instrument by judicial proceeding and may invoke any one or more other remedies
permitted by applicable law or provided in this Instrument or in any other Loan Document. Lender
shall be entitled to collect all costs and expenses incurred in pursuing such remedies, including
attorneys’ fees, costs of documentary evidence, abstracts and title reports.

     44. RELEASE.

     Upon payment of the Indebtedness, Lender shall release this Instrument. Borrower shall pay
Lender’s reasonable costs incurred in releasing this Instrument.

     45. WAIVER OF HOMESTEAD.

     Borrower waives all right of homestead exemption in the Mortgaged Property.

     46. WAIVER OF CERTAIN OTHER LAWS.

     Borrower further waives the benefit of all laws now existing or that hereafter may be enacted
(a) providing for any appraisement before sale of any portion of the Mortgaged Property, and (b)
extending in any way the time of enforcement of the collection of the Note or the Indebtedness or
creating or extending beyond any statutory time a period of redemption from any sale made in
collecting the Indebtedness. To the full extent Borrower may do so, Borrower agrees that Borrower
will not at any time insist upon, plead, claim or take the benefit or advantage of any law now or
hereafter in force providing for appraisement, valuation, stay, extension or redemption, and
Borrower, for Borrower, and its representatives, successors and assigns, and for any and all
persons ever claiming any interest in the Mortgaged Property, to the extent permitted by law,
hereby waives and releases all rights of redemption, valuation, appraisement, stay of execution,
notice of election to mature or declare due the whole of the Indebtedness in the event of
foreclosure of the lien created by this Instrument.

			
	 	 	 
	FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT –

KENTUCKY
	 	Form 4018     06/09     Page 37

© 1998-2009 Fannie Mae

 

 

     47. FUTURE ADVANCES.

     Upon request of Borrower, Lender, at Lender’s sole option and discretion prior to discharge
of this Instrument, may make Future Advances to Borrower. Such Future Advances, with interest
thereon, shall be secured by this Instrument regardless of whether the advance is designated as
being secured hereby. At no time shall the principal amount of the Indebtedness, not including
sums advanced in accordance with this Instrument to protect the security of this Instrument,
exceed 200% of the original principal amount of the Note. The preceding sentence shall not limit
the amount secured by this Instrument if such amount is increased by accrued interest, advances
made by Lender pursuant to Section 12 to protect the security or costs of collection and
foreclosure.

     48. WAIVER OF TRIAL BY JURY.

     BORROWER AND LENDER EACH (A) COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY WITH RESPECT
TO ANY ISSUE ARISING OUT OF THIS INSTRUMENT OR THE RELATIONSHIP BETWEEN THE PARTIES AS BORROWER
AND LENDER THAT IS TRIABLE OF RIGHT BY A JURY AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY WITH
RESPECT TO SUCH ISSUE TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE. THIS WAIVER
OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND VOLUNTARILY WITH THE
BENEFIT OF COMPETENT LEGAL COUNSEL.

     ATTACHED EXHIBITS. The following Exhibits are attached to this Instrument:

	 	 	 	 	 

	[X]

	 	Exhibit A
	 	Description of the Land (required).
	 
	 	 	 	 
	[X]

	 	Exhibit B-1
	 	Modifications to Instrument (Tax Credit Rider)
	 
	 	 	 	 
	[X]

	 	Exhibit B-2
	 	Modifications to Instrument (Non-Standard
Modifications)

[CONTINUED ON FOLLOWING PAGE]

			
	 	 	 
	FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT –

KENTUCKY
	 	Form 4018     06/09     Page 38

© 1998-2009 Fannie Mae

 

 

     IN WITNESS WHEREOF, Borrower has signed and delivered this Instrument or has caused this
Instrument to be signed and delivered by its duly authorized representative.

	 	 	 	 	 	 	 	 	 

	 	 	SIR ARBOR POINTE, LLC,	 	 
	 	 	a Delaware limited liability company	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	Steadfast Income Advisor, LLC,	 	 
	 	 	 	 	a Delaware limited liability company,	 	 
	 	 	Its:	 	Manager	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:
	 	/s/ Ana Marie del Rio
 

	 	 
	 

	 	 	 	Name:
	 	Ana Marie del Rio	 	 
	 

	 	 	 	Title:
	 	Secretary	 	 

			
	 	 	 
	FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT –

KENTUCKY
	 	Form 4018     06/09     Page 39

© 1998-2009 Fannie Mae

 

 

ACKNOWLEDGMENT

	 	 	 	 	 	 	 	 	 

	STATE OF CALIFORNIA

	 	 	)	 	 	 	 	 
	 

	 	 	)	 	 	SS.	 	 
	COUNTY
OF ORANGE

	 	 	)	 	 	 	 	 

     On
April 29th, 2011  before me Debra A. Parks, a Notary Public,
personally appeared Ana Marie del Rio,
who proved to me on the basis of satisfactory evidence to be the person whose name is subscribed
to the within instrument and acknowledged to me that he/she executed the same in his/her
authorized capacity, and that by his/her signature on the instrument the person, or the entity
upon behalf of which the person acted, executed the instrument.

     I certify under penalty of perjury under the laws of the State of California that the
foregoing paragraph is true and correct.

     WITNESS my hand and official seal.

	 	 	 	 	 

	 

	 	/s/ Debra A. Parks
 

	 	 
	 

	 	Notary Public	 	 

[Seal]

			
	 	 	 
	FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT –

KENTUCKY
	 	Form 4018     06/09               

© 1998-2009 Fannie Mae

 

 

KEY PRINCIPAL

Key Principal

	 	 	 

	Name:
	 	Steadfast Income REIT, Inc.

	 	 	 

	Address:
	 	181 Von Karman Avenue, Suite 500 

Irvine, California 92312

			
	 	 	 
	FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT –

KENTUCKY
	 	Form 4018     06/09     Page 40

© 1998-2009 Fannie Mae

 

 

EXHIBIT A

DESCRIPTION OF THE LAND

Real property located in the County of Jefferson, Commonwealth of Kentucky, described as
follows:

Being all of Residual Tract “13R” as shown on approved Minor Subdivision Plat bearing Docket
#126-93 attached to and made a part of instrument recorded in Deed Book 6330, page 761, in the
Office of the Clerk of Jefferson County, Kentucky.

Being the same property conveyed to Arbor Pointe Limited Partnership, an Ohio limited partnership,
by Deed dated December 7, 1993, recorded in Book 6391, Page 693, in the Office of the Clerk of
Jefferson County, Kentucky.

Tax Parcel No. 22-0038-0770-0000

			
	 	 	 
	FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT –

KENTUCKY
	 	Form 4018     06/09     Page A-1

© 1998-2009 Fannie Mae

 

 

EXHIBIT B-1

MODIFICATIONS TO INSTRUMENT

(Tax Credit Properties)

The following sections are added to the text of the Instrument that precedes this Exhibit:

     49. EXTENDED LOW-INCOME HOUSING COMMITMENT. Lender agrees that the lien of this
Instrument shall be subordinate to any extended low-income housing commitment (as such
term is defined in Section 42(h)(6)(B) of the Internal Revenue Code) (the “Extended Use
Agreement”) recorded against the Mortgaged Property; provided that such Extended Use
Agreement, by its terms, must terminate upon foreclosure under this Instrument or upon a
transfer of the Mortgaged Property by instrument in lieu of foreclosure, in accordance with
Section 42(h)(6)(E) of the Internal Revenue Code.

     50. ANNUAL LIHTC REPORTING REQUIREMENTS. Borrower must submit to Lender, each year at the time
of annual submission of Borrower’s financial analysis of operations, a copy of the
following sections of Borrower’s federal tax return (if such sections are required to be
filed): Internal Revenue Forms 1065, 8586, 8609 and Form 8609, Schedule A, which must
reflect the total low-income housing tax credits (“LIHTCs”) allocated to the Mortgaged
Property and the LIHTCs claimed for the Mortgaged Property in the preceding year.

     51. CROSS-DEFAULT. Borrower acknowledges and agrees that any default, event of
default, or breach (however such terms may be defined) after the expiration of any
applicable notice and/or cure periods under the Extended Use Agreement shall be an Event of
Default under this Instrument and that any costs, damages or other amounts, including
reasonable attorney’s fees incurred by the Lender as a result of such an Event of Default
by Borrower, including amounts paid to cure any default or event of default, under the
Extended Use Agreement shall be an obligation of Borrower and become a part of the
Indebtedness secured by this Instrument.

     52. ANNUAL COMPLIANCE. Borrower shall submit to Lender on an annual basis, evidence
that the Mortgaged Property is in ongoing compliance with all income, occupancy and rent
restrictions under the Extended Use Agreement relating to the
Mortgaged Property. Such
submissions shall be made contemporaneously with Borrower’s reports required to be made to
the regulator under the Extended Use Agreement.”

[CONTINUED ON FOLLOWING PAGE]

			
	 	 	 
	Tax Credit Modifications to Instrument
	 	Form 4065     04/00     Page B-1-1

©
1997-2000 Fannie Mae

 

 

EXHIBIT B-1

2. All capitalized terms used in this Exhibit not specifically defined herein shall have
the
meanings set forth in the text of the Instrument that precedes this Exhibit.

BORROWER’S
INITIALS:  /s/ Ana Marie del Rio               

			
	 	 	 
	Tax Credit Modifications to Instrument
	 	Form 4065     04/00     Signature Page

©
1997-2000 Fannie Mae

 

 

EXHIBIT B-2

MODIFICATIONS TO INSTRUMENT

(Non-Standard Modifications)

         The following modifications are made to the text of the Instrument that precedes this
Exhibit:

	1.	 	The fourth paragraph on page 1 of Instrument is amended and restated in its entirety as follows:

“Borrower represents and warrants that Borrower is lawfully seized of the Mortgaged
Property and has the right, power and authority to mortgage, grant, convey and
assign the Mortgaged Property, and that the Mortgaged Property is not encumbered by
any Lien (as defined in Section 16 of this Security Instrument) other than Permitted
Encumbrances (as defined below). Borrower covenants that Borrower will warrant and
defend generally the title to the Mortgaged Property against all claims and demands
other than the Permitted Encumbrances. “Permitted Encumbrances” shall mean the
easements and restrictions listed in a schedule of exceptions to coverage in any
title insurance policy issued to Lender contemporaneously with the execution and
recordation of this Instrument and insuring Lender’s interest in the Mortgaged
Property.”

	2.	 	Section 1(s)(15) is amended by adding the following text at the end thereof:

“, excluding therefrom, however, the names “SIR” and “Steadfast” (or any derivation
of either such name) and/or trademark rights associated with such names or
derivations thereof.”

	3.	 	Section 1(z) is amended and restated in its entirety as follows:

“(z) “Transfer” means (A) a sale, assignment, transfer, or other disposition
(whether voluntary, involuntary or by operation of law (other than a condemnation,
which is governed by Section 20 below)); (B) the grant, creation, or attachment of
a lien, encumbrance, or security interest (whether voluntary, involuntary or by
operation of law); (C) the issuance or other creation of a direct or indirect
ownership interest; or (D) the withdrawal, retirement, removal or involuntary
resignation of any owner or manager of a legal entity.”

	4.	 	Section 3(b) is amended and restated in its entirety as
follows:

					
	 	 	 	 	 
	Non-Standard Rider to Mortgage
	 	Exhibit B-2
	 	Page B-2-1

 

 

“(b) During the continuance of an Event of Default, Borrower authorizes Lender to
collect, sue for and compromise Rents and directs each tenant of the Mortgaged
Property to pay all Rents to, or as directed by, Lender, and Borrower shall, upon
(i) Borrower’s receipt of any Rents from any sources (including, but not limited to
subsidy payments under any Housing Assistance Payments Contract), and (ii) such
direction from Lender, pay the total amount of such receipts to the Lender. However,
until the occurrence of an Event of Default, Lender hereby grants to Borrower a
revocable license to collect and receive all Rents, to hold all Rents in trust for
the benefit of Lender and to apply all Rents to pay the installments of interest and
principal then due and payable under the Note and the other amounts then due and
payable under the other Loan Documents, including Imposition Deposits, and to pay
the current costs and expenses of managing, operating and maintaining the Mortgaged
Property, including utilities, Taxes and insurance premiums (to the extent not
included in Imposition Deposits), tenant improvements and other capital
expenditures. So long as no Event of Default has occurred and is continuing, the
Rents remaining after application pursuant to the preceding sentence may be retained
by Borrower free and clear of, and released from, Lender’s rights with respect to
Rents under this Instrument. During the continuance of an Event of Default, and
without the necessity of Lender entering upon and taking and maintaining control of
the Mortgaged Property directly, or by a receiver, Borrower’s license to collect
Rents shall automatically terminate and Lender shall without notice be entitled to
all Rents as they become due and payable, including Rents then due and unpaid. Upon
the direction of Lender during the continuance of an Event of Default, Borrower
shall pay to Lender upon demand all Rents actually received by Borrower or its agent
to which Lender is entitled. At any time on or after the date of Lender’s demand for
Rents, Lender may give, and Borrower hereby irrevocably authorizes Lender to give,
notice to all tenants of the Mortgaged Property instructing them to pay all Rents to
Lender, no tenant shall be obligated to inquire further as to the occurrence or
continuance of an Event of Default, and no tenant shall be obligated to pay to
Borrower any amounts which are actually paid to Lender in response to such a notice.
Any such notice by Lender shall be delivered to each tenant personally, by mail or
by delivering such demand to each rental unit. Borrower shall not interfere with and
shall cooperate with Lender’s collection of such Rents.”

	5.	 	The third sentence of Section 3(e) is amended by adding the following text at the
beginning thereof:

“Except to the extent caused by the gross negligence or willful misconduct of
Lender.”

					
	 	 	 	 	 
	Non-Standard Rider to Mortgage
	 	Exhibit B-2
	 	Page B-2-2

 

 

	6.	 	The second sentence of Section 4(b) is amended by deleting the words “Upon the
occurrence” at the beginning of said sentence and replacing them with the words “During the
continuance”.
	 
	7.	 	The second sentence of Section 4(c) is amended by adding the following text at the beginning
thereof:

“Except to the extent caused by the gross negligence or willful misconduct of
Lender,”

	8.	 	The first sentence of Section 4(d) is amended by deleting the words “Upon the occurrence” at
the beginning of said sentence and replacing them with the words “During the
continuance”.
	 
	9.	 	Section 13 is amended and restated in its entirety as follows:

“Lender, its agents, representatives, and designees may make or cause to be made
entries upon and inspections of the Mortgaged Property (including environmental
inspections and tests) during normal business hours, or at any other reasonable
time upon prior written notice, except in the event of an emergency in which event
such entry may occur at any time and without prior written notice.”

	10.	 	The last sentence of Section 14(a) is amended and restated in its entirety as follows:

“The books, records, contracts, Leases and other instruments shall be subject to
examination and inspection at any reasonable time by Lender upon prior written
notice.”

	11.	 	The following text is hereby added as a new paragraph immediately following Section 14(b)(7)
and immediately preceding Section 14(c):

“Notwithstanding the foregoing, with respect to any item in this subsection 14(b)
that Lender may request at any time or from time to time, Lender agrees that,
provided no Event of Default exists, it shall not request such item more frequently
than quarterly. Additionally, Lender hereby agrees that, for so long as Key
Principal is a regulated public company, nothing herein or in any other Loan
Document shall be deemed to require Borrower or Key Principal to deliver any
information in violation of applicable law or any non-public information unless
Lender has provided a customary non-disclosure agreement.”

	12.	 	Section 14(c) is amended and restated in its entirety as follows:

					
	 	 	 	 	 
	Non-Standard Rider to Mortgage
	 	Exhibit B-2
	 	Page B-2-3

 

 

“(c) Each of the statements, schedules and reports required by Section 14(b) shall
be certified to be complete and accurate in all material respects as of the date
made by an individual having authority to bind Borrower, and shall be in such form
and contain such detail as Lender may reasonably require. Lender also may require
that any statements, schedules or reports be audited at Borrower’s expense by
independent certified public accountants acceptable to Lender if an Event of
Default exists or Lender otherwise has a reasonable basis to believe that such
audit is necessary for an accurate assessment of the financial information
provided.”

	13.	 	Section 14(d) is amended and restated in its entirety as follows:

“(d) If Borrower fails to provide in a timely manner the statements, schedules
and reports required by Section 14(b) after written notice to Borrower and a
reasonable amount of time thereafter to cure as determined by Lender in its sole
discretion (unless an Event of Default shall then exist, in which event no such
notice and cure period shall be required or provided), Lender shall have the right
to have Borrower’s books and records audited, at Borrower’s expense, by independent
certified public accountants selected by Lender in order to obtain such statements,
schedules and reports, and all related costs and expenses of Lender shall become
immediately due and payable and shall become an additional part of the Indebtedness
as provided in Section 12.”

	14.	 	Section 17(a) is amended and restated in its entirety as follows:

“(a) Borrower (1) shall not commit waste or permit impairment or deterioration of
the Mortgaged Property except for ordinary and reasonable wear and tear, (2) shall
not abandon the Mortgaged Property, (3) shall restore or repair promptly, in a good
and workmanlike manner, any damaged part of the Mortgaged Property to the equivalent
of its original condition as of the date of this Instrument, or such other condition
as Lender may approve in writing, whether or not insurance proceeds or condemnation
awards are available to cover any costs of such restoration or repair, unless Lender
has elected to apply such proceeds to the Indebtedness in which event Borrower’s
failure to make the restoration and/or repair(s) related to such insurance and/or
condemnation proceeds shall not constitute a violation of the requirements of this
Section 17(a), (4) shall keep the Mortgaged Property in good repair, including the
replacement of Personalty and Fixtures with items of equal or better function and
quality, (5) shall provide for professional management of the Mortgaged Property by
a residential rental property manager satisfactory to Lender under a contract
approved by Lender in writing, and (6) shall give notice to
Lender of and, unless
otherwise directed in writing by Lender, shall appear in and defend any action or
proceeding purporting to affect the Mortgaged Property, Lender’s security or
Lender’s rights under this Instrument. Borrower shall not (and shall not permit any
tenant or other person to) remove, demolish or alter the Mortgaged Property or any
part of the Mortgaged Property except in connection with the replacement of tangible
Personalty and making individual apartment units within the Mortgaged Property ready
for occupancy by new tenants.”

					
	 	 	 	 	 
	Non-Standard Rider to Mortgage
	 	Exhibit B-2
	 	Page B-2-4

 

 

	15.	 	Section 18(e)(3) is amended and restated in its entirety as follows:

“(3) except to the extent previously disclosed by Borrower to Lender in writing,
the Mortgaged Property does not now contain any underground storage tanks, and, to
the best of Borrower’s knowledge after reasonable and diligent inquiry, the
Mortgaged Property has not contained any underground storage tanks in the past
which have not been removed and remediated in accordance with all applicable
Hazardous Materials Laws. If there is an underground storage tank located on the
Property which has been previously disclosed by Borrower to Lender in writing,
that tank complies with all requirements of Hazardous Materials Laws;”

	16.	 	Section 18(e)(5) is amended and restated in its entirety as follows:

“(5) to the best of Borrower’s knowledge after reasonable and diligent inquiry, no
event has occurred with respect to the Mortgaged Property that constitutes, or with
the passing of time or the giving of notice would constitute, noncompliance with
the terms of any Environmental Permit;”

	17.	 	The third sentence of Section 18(g) is amended and restated in its entirety as follows:

“The results of all Environmental Inspections made by Lender shall at all times
remain the property of Lender and Lender shall have no obligation to disclose or
otherwise make available to Borrower or any other party such results or any other
information obtained by Lender in connection with its Environmental Inspections
unless Borrower paid or reimbursed Lender for such Environmental Inspection and no
Event of Default has occurred and is continuing.”

	18.	 	Section 18(j) is amended and restated in its entirety as follows:

“Borrower shall indemnify, hold harmless and defend (i) Lender, (ii) any prior owner
or holder of the Note, (iii) the Loan Servicer, (iv) any prior Loan Servicer, (v)
the officers, directors, shareholders, partners, employees and trustees of any of
the foregoing, and (vi) the heirs, legal representatives, successors and assigns of
each of the foregoing (collectively, the “Indemnitees”) from and against all
proceedings, claims, damages, penalties and costs (whether initiated or sought by
Governmental Authorities or private parties), including fees and out-of-pocket
expenses of attorneys and expert witnesses, investigatory fees, and remediation
costs, whether incurred in connection with any judicial or administrative process or
otherwise, arising directly or indirectly from any of the following; provided,
however, that nothing in this Section 18(j) shall require Borrower to indemnify any
Indemnitee for such costs or claims to the extent caused by the gross negligence or
willful misconduct of such Indemnitee.”

					
	 	 	 	 	 
	Non-Standard Rider to Mortgage
	 	Exhibit B-2
	 	Page B-2-5

 

 

	19.	 	Section 18(m) is amended and restated in its entirety as follows:

“Lender agrees that the indemnity under this Section 18 shall be limited to the
assets of Borrower and Lender shall not seek to recover any deficiency from any
natural persons who are general partners or members or managers of Borrower.”

	20.	 	The following text is added as a new Section 21(a)(11):

“Lender acknowledges and agrees that (i) as of the date hereof, Key Principal is a
non-traded public real estate investment company which is not currently a
Publicly-Held Trust but is expected to become a Publicly-Held Trust during the term
of the Loan, and (ii) neither (x) the registration of the outstanding voting shares
or beneficial interests of Key Principal under Section 12(b) or 12(g) of the
Securities Exchange Act of 1934, as amended, nor (y) the sale or transfer of shares
in Key Principal (provided that Key Principal continues to be a non-traded public
real estate investment company or a Publicly-Held Trust), nor (z) the conversion of
Key Principal from a non-traded public real estate investment company to a traded
public real estate investment company, shall be considered a Transfer or shall
constitute a default or Event of Default, and no fees under Section 21(c)(7) below
or otherwise shall be due or payable to Lender in connection therewith.”

	21.	 	The following text is added as a new Section 21(b)(8):

“any Transfer of shares of a non-traded public real estate investment company or
Publicly-Held Trust.”

	22.	 	Section 21(c)(7)(A) is amended and restated in its entirety as follows:

“(A) a non-refundable review fee in the amount of $3,000 and a transfer fee equal
to 1 percent of the outstanding Indebtedness immediately prior to the Transfer
(provided, however, that such 1 percent fee shall not be due in connection with a
merger or consolidation of Key Principal with another public real estate investment
company); and”

	23.	 	Section 21(d)(2)(B) is amended and restated in its entirety as follows (to delete all
references therein to the Key Principal):

“(B) any agreement (including provisions contained in the organizational and/or
governing documents of Borrower) or Transfer not specified in clause (A), the
effect of which, either immediately or after the passage of time or occurrence of a
specified event or condition, including the failure of a specified event or
condition to occur or be satisfied, would (i) cause a change in or replacement of
the Person that controls

					
	 	 	 	 	 
	Non-Standard Rider to Mortgage
	 	Exhibit B-2
	 	Page B-2-6

 

 

the management and operations of the Borrower or (ii) limit or otherwise modify the
extent of such Person’s control over the management and
operations of Borrower.”

	24.	 	Section 21(e) is amended and restated in its entirety as follows:

“(e) Lender shall be provided with written notice of all Transfers under this
Section 21, whether or not such Transfers are permitted under Section 21(b) or
approved by Lender under Section 21(c), no later than 10 days prior to the date of
the Transfer; provided, however that such prior written notice shall not be
required for any involuntary Transfer, it being understood and agreed that Borrower
may provide written notice of any involuntary Transfer promptly after becoming
aware thereof.”

	25.	 	Section 22(f) is amended and restated in its entirety as follows:

“(f) the commencement of a forfeiture action or proceeding, whether civil or
criminal, which, in Lender’s reasonable judgment, could result in a forfeiture of
the Mortgaged Property or otherwise materially impair the lien created by this
Instrument or Lender’s interest in the Mortgaged Property, and such action or
proceeding is not dismissed or otherwise bonded over or insured in a manner
reasonably acceptable to Lender within thirty (30) days of commencement; provided,
however, that no such notice or grace period shall apply in the case of any such
failure which could, in Lender’s sole and absolute judgment, absent immediate
exercise by Lender of a right or remedy under this Instrument, result in harm to
Lender, impairment of the Note or this Instrument or any other security given under
any other Loan Document;”

	26.	 	Section 22(g) is amended and restated in its entirety as follows:

“(g) any failure by Borrower to perform any of its obligations under this Instrument
(other than those specified in Sections 22(a) through (f)), as and when required,
which continues for a period of 30 days after notice of such failure by Lender to
Borrower, but no such notice or grace period shall apply in the case of any such
failure which could, in Lender’s judgment, absent immediate exercise by Lender of a
right or remedy under this Instrument, result in harm to Lender, impairment of the
Note or this Instrument or any other security given under any other Loan Document;
further provided, however, that the 30-day grace period noted above (to the extent
applicable) may be extended by 60 additional days (for a total grace period of 90
days) if (i) Borrower requests such extension in writing, (ii) Lender determines, in
its sole discretion, that the nature of such default reasonably requires such
additional time to cure, and (iii) Borrower has diligently commenced to cure such
default during the 30-day grace period noted above and diligently pursues such cure
at all times thereafter;”

	27.	 	The following text is added as a new Section 31(d):

					
	 	 	 	 	 
	Non-Standard Rider to Mortgage
	 	Exhibit B-2
	 	Page B-2-7

 

 

“(d) Lender shall endeavor to give Borrower’s counsel a courtesy copy of any notice
given to Borrower by Lender, at the address set forth below; provided, however,
failure to provide such courtesy copy notice shall not affect the validity or
sufficiency of any notice to Borrower, shall not affect Lender’s rights and
remedies hereunder or under any other Loan Documents, nor subject Lender to any
claims by or liability to Borrower.

Katten Muchin Rosenman LLP 
2900
K Street NW, Suite 200

Washington, D.C. 2007 
Attn:
Virginia A. Davis”

	28.	 	Section 41 is amended and restated in its entirety as follows:

“All information in the application for the loan submitted to Lender (the “Loan
Application”) and in all financial statements, rent rolls, reports, certificates and
other documents submitted in connection with the Loan Application are complete and
accurate in all material respects in each case as of the date thereof. There has
been no material adverse change in any fact or circumstance that would make any such
information incomplete or inaccurate.”

[CONTINUED ON FOLLOWING PAGE]

					
	 	 	 	 	 
	Non-Standard Rider to Mortgage
	 	Exhibit B-2
	 	Page B-2-8

 

 

	29.	 	All capitalized terms used in this Exhibit not specifically defined herein shall
have the meanings set forth in the text of the Instrument that precedes this Exhibit.

	 	 	 	 	 

	 

	 	BORROWER’S INITIALS:	 	 
	 
	 

	 	/s/ Ana Marie del Rio
 

	 	 

					
	 	 	 	 	 
	Non-Standard Rider to Mortgage
	 	Exhibit B-2
	 	Signature Page

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