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reserve or deposit made with the FHA Lender or any other party as required by HUD in connection with
the FHA Loan Documents, or (C) FHA Lender Funds which have been deposited into the Collateral Fund
by or at the direction of the FHA Lender (collectively, “Non-Project Sources”), but provided further that
no prepayment of this Promissory Note is permitted prior to “placement in service” of the Project as such
term is used in Section 42 of the Internal Revenue Code of 1986, as amended. Payments due under this
Promissory Note may only be paid from Surplus Cash (but in no event greater than 75% of the total amount
of Surplus Cash) or from Non-Project Sources; provided that this restriction on payment shall not excuse
any default caused by the failure of the Borrower to pay the indebtedness evidenced by this Promissory
Note. In addition, (1) the indebtedness evidenced by this Promissory Note and all other documents
evidencing or securing this Promissory Note (collectively, the “Subordinate Loan Documents”) are and
shall be subordinated in right of payment, to the prior payment in full of the indebtedness evidenced by the
FHA Loan Documents, and (2) the Subordinate Loan Documents are and shall be subject and subordinate
in all respects to the liens, terms, covenants and conditions of the FHA Mortgage and the other FHA Loan
Documents and to all advances heretofore made or which may hereafter be made pursuant to the FHA
Mortgage and the other FHA Loan Documents (including but not limited to, all sums advanced for the
purposes of (a) protecting or further securing the lien of the FHA Mortgage, curing defaults by Borrower
under the FHA Loan Documents or for any other purpose expressly permitted by the FHA Mortgage, or
(b) constructing, rehabilitating, renovating, repairing, furnishing, fixturing, or equipping the Project).
In the event of any conflict between the provisions of (i) this Promissory Note or the Subordinate
Loan Documents and (ii) the provisions of the FHA Loan Documents or the Program Obligations (as
defined in the FHA Mortgage), the provisions of the FHA Loan Documents or the Program Obligations
shall control.
IN WITNESS WHEREOF, the Borrower has caused this Promissory Note to be executed in its
name as of the date first above written.
STUART GARDENS II HOUSING PARTNERS, LP,
a Virginia limited partnership
By: Stuart Gardens II Housing Management, LLC,
a Virginia limited liability company,
its General Partner
By: Vitus Development III, LLC,
a Delaware limited liability company,
its Member and Manager
By:________________________________
Name: Stephen R. Whyte
Title: President
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