RD Instruction 2000-OOO

PART 2000 - GENERAL

Subpart OOO - Memorandum of Understanding between the United States

Secretary of Agriculture and the Federal Home

Loan Mortgage Corporation

§ 2000.3301 [General]{.underline}.

The United States Secretary of Agriculture (the \"Secretary\") has
entered into a Memorandum of Understanding (MOU) with the Federal Home
Loan Mortgage Corporation (Freddie Mac). The Secretary, through the
Rural Housing Service, administers the Guaranteed Rural Rental Housing
Program (GRRHP) pursuant to section 538 of the Housing Act of 1949 under
which the Secretary partially guarantees the obligations of borrowers
under mortgages financing multifamily housing located in rural areas.
Freddie Mac was created by Congress for the purposes, among others, of
providing stability in and ongoing assistance for the secondary market
in residential mortgages. In pursuit of those purposes, Freddie Mac is
in the business of purchasing mortgages on multifamily properties. In
order to make it possible for Freddie Mac to purchase mortgages
guaranteed by the Secretary under the GRRHP, the parties have set forth
in a MOU their understanding as to certain issues arising under the
Statute, Regulations and Handbook, and their understanding as to certain
other matters.

§ 2000.3302 [Implementation]{.underline}.

The MOU is attached as Exhibit A of this subpart.

§§ 2000.3303 - 2000.3350 \[Reserved\]

Attachment: Exhibit A

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DISTRIBUTION: WSDC Administration

General

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RD Instruction 2000-OOO

Exhibit A

Page 1

[MEMORANDUM OF UNDERSTANDING]{.underline}

THIS MEMORANDUM OF UNDERSTANDING is entered into as of

\_\_\_[June 21, 2001]{.underline} by and between the United States
Secretary of Agriculture (the \"Secretary\") and the Federal Home Loan
Mortgage Corporation, a corporation organized under the laws of the
United States (\"Freddie Mac\").

# PRELIMINARY STATEMENT

The Secretary administers a Guaranteed Rural Rental Housing Program (the
\"Program\") pursuant to section 538 of the Housing Act of 1949 as
amended by the Housing Opportunity Program Extension Act of 1996, 42
U.S.C. section 1490p-2 (\"Section 538\" or the \"Statute\"), under which
the Secretary partially guarantees the obligations of borrowers under
mortgages financing multifamily housing located in rural areas. The
Secretary has issued administrative guidance regarding the Program in
the form of regulations at 7 C.F.R. part 3565 (the \"Regulations\") and
the Guaranteed Rural Rental Housing Program Origination and Servicing
Handbook (the \"Handbook\").

Freddie Mac was created by Congress for the purposes, among others, of
providing stability in and ongoing assistance for the secondary market
in residential mortgages. In pursuit of those purposes, Freddie Mac is
in the business of purchasing mortgages on multifamily properties. In
order to make it possible for Freddie Mac to purchase mortgages
guaranteed by the Secretary under the Program, the parties wish to set
forth in this Memorandum of Understanding their understanding as to
certain issues arising under the Statute, Regulations and Handbook, and
their understanding as to certain other matters.

**NOW THEREFORE**, in consideration of the mutual promises set forth
below, the parties agree as follows:

**1. Definitions.** The following terms shall have the following
meanings when used in this Memorandum of Understanding:

\(a\) \"Program\", \"Section 538\", \"Regulations\" and \"Handbook\"
shall have the meanings assigned to them in the above Preliminary
Statement.

> \(b\) \"Claim Denial Standards\" shall have the meaning assigned to it
> in section 9(b).

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RD Instruction 2000-OOO

Exhibit A

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> \(c\) \"Foreclosure\" shall mean the judicial or non-judicial
> foreclosure of a mortgage, deed of trust or deed to secure debt, or
> the acceptance of a deed in lieu of foreclosure by the holder of a
> mortgage, deed of trust or deed to secure debt or by an affiliate of
> that holder.
>
> \(d\) \"Guaranteed Mortgage\" means a mortgage that has been
> guaranteed by the Secretary pursuant to the Program.
>
> \(e\) \"Lender\'s Agreement\" means the Lender\'s Agreement (Form RD
> 3565-3, Rev. 6‑99) entered into or to be entered into by Freddie Mac
> and the Secretary.
>
> \(f\) \"Loan Note Guarantee\" refers to the form of Loan Note
> Guarantee that the Secretary requires be executed to memorialize each
> guarantee of a Guaranteed Mortgage, presently Form RD 3565-4 (Rev.
> 6-99). References in this Memorandum of Understanding to specific
> provisions of the \"Loan Note Guaranty\" shall be construed as
> referring to comparable provisions of any other form that the
> Secretary in the future may employ for the same purposes.
>
> \(g\) \"RHS-Approved Lender\" means a lender which, under the Statute,
> the Regulations and the Handbook, is both eligible to participate in
> the Program and approved by the Secretary to do so.

\(h\) \"Subservicer\" means an RHS-approved Lender designated by Freddie
Mac under section 6 to subservice a Guaranteed Mortgage held by Freddie
Mac.

**2. Purposes.** Nothing in this Memorandum of Understanding shall
obligate Freddie Mac to purchase Guaranteed Mortgages. This Memorandum
of Understanding is intended to clarify the meaning of certain
provisions of the Loan Note Guarantee, the Lender\'s Agreement, the
Regulations and the Handbook and to clarify how those provisions will
apply to Guaranteed Mortgages that Freddie Mac chooses to purchase.

RD Instruction 2000-OOO

Exhibit A

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**3.** **Lender Approval.**

(a) Any lender that has been designated by Freddie Mac as a \"Program
    Plus\" multifamily seller/servicer and is authorized by Freddie Mac
    to sell multifamily mortgages to Freddie Mac automatically shall be
    an RHS-Approved Lender, unless RHS has notified Freddie Mac that
    that lender is not acceptable to RHS. The requirement of section
    538(e)(1)(B) of the Statute that a lender be approved by both
    Freddie Mac and Fannie Mae is regarded by the Secretary as a
    scrivener\'s error, which has been corrected by section 3565.102(b)
    of the Regulations.

> \(b\) The Secretary\'s execution of a Loan Note Guarantee with respect
> to a mortgage shall be conclusive evidence that the lender originating
> that mortgage is an RHS-Approved Lender.

4\. Transfer of Guaranteed Mortgages to Freddie Mac.

\(a\) The Secretary agrees that, as of the date of this Memorandum of
Understanding, Freddie Mac is an RHS-Approved Lender and may purchase
and own Guaranteed Mortgages.

> \(b\) The approval in Subsection (a) shall remain in effect until
> revoked by the Secretary by notice given to Freddie Mac in accordance
> with this Memorandum of Understanding. If the Secretary revokes the
> approval, Freddie Mac shall be permitted to consummate any purchases
> of Guaranteed Mortgages as to which it has already entered into
> purchase contracts or commitments, and shall not be required to divest
> itself of any Guaranteed Mortgages that it has previously purchased.

\(c\) The form of assignment of a mortgage set forth in Exhibit A to
this Memorandum of Understanding is hereby approved by the Secretary for
use for the purpose of transferring ownership of any Guaranteed Mortgage
from an RHS-Approved Lender to Freddie Mac.

\(d\) The Lender\'s Agreement that shall apply to Freddie Mac\'s
ownership and servicing of any Guaranteed Mortgage shall be the
Lender\'s Agreement entered into by and between Freddie Mac and the
Secretary. The Lender\'s Agreement between RHS and the RHS-

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RD Instruction 2000-OOO

Exhibit A

Page 4

Approved Lender from whom Freddie Mac purchases a Guaranteed Mortgage
shall have no force or effect as to either Freddie Mac or that
RHS-Approved Lender after Freddie Mac\'s acquisition of the Guaranteed
Mortgage. Nothing herein prevents the Secretary from proceeding against
such a Lender for fraud in the origination of the loan or in obtaining
the guarantee.

\(e\) It is Freddie Mac\'s general practice to require that the lender
from whom it purchases each mortgage make representations and warranties
to Freddie Mac concerning the characteristics of the mortgage, the
borrower and the property. Freddie Mac has the contractual right to
require the lender to repurchase the mortgage if a breach of any
representation or warranty later is identified. Recognizing that the
representations and warranties and the repurchase remedy are
indispensable to Freddie Mac\'s management of risk, the Secretary agrees
that, if Freddie Mac demands that a lender repurchase a Guaranteed
Mortgage, Freddie Mac may proceed with the repurchase transaction
without any prior transaction-specific approval by the Secretary, so
long as the repurchasing lender is still an RHS-Approved Lender at the
time of the repurchase. Within 30 days after the completion of any such
repurchase, Freddie Mac shall notify the Secretary that the repurchase
has taken place.

**5. Origination of Guaranteed Mortgages to be Purchased by Freddie
Mac.**

\(a\) The Secretary hereby approves the form of Regulatory Agreement set
forth in Exhibit A for use in connection with Guaranteed Mortgages
intended for sale to Freddie Mac. The form set forth in Exhibit A may be
modified as necessary to meet the requirements of local law in the state
where the property securing each Guaranteed Mortgage is located.

\(b\) The Secretary hereby confirms its understanding and intention
that, upon Foreclosure of a Guaranteed Mortgage, the applicable
Regulatory Agreement\'s requirements as to both (1) reservation of units
for occupancy by low and moderate income families and (2) rents that may
be charged for units will automatically lapse. After Foreclosure of a
Guaranteed Mortgage owned by Freddie Mac, the Secretary shall not seek
to enforce any such provision of the applicable Regulatory Agreement.

RD Instruction 2000-OOO

Exhibit A

Page 5

\(c\) The Secretary hereby approves the Freddie Mac standard forms of
mortgage note and mortgage, deed of trust, or deed to secure debt, as
appropriate to the applicable state (together, the \"Freddie Mac
Standard Documents\") for use in connection with Guaranteed Mortgages
intended to be sold to Freddie Mac. There are versions of the Freddie
Mac Standard Documents for every state. Specimens of the Freddie Mac
Standard Documents for one state are set forth in Exhibit A. The
standard form of mortgage, deed of trust or deed to secure debt (also
referred to as the \"security instrument\") may be modified as set forth
in Exhibit A.

> \(1\) Without limiting the generality of the foregoing, the Secretary
> agrees that the exceptions to exculpation of the borrower set forth in
> section 9 of the Freddie Mac standard form mortgage note are
> acceptable for all purposes, including without limitation for purposes
> of section 3.25(F) of the Handbook.
>
> \(2\) If in the future Freddie Mac updates the Freddie Mac Standard
> Documents for any state, the updated forms also shall be acceptable
> for use in connection with Guaranteed Mortgages, with modifications
> comparable to those set forth in Exhibit A.

\(d\) If an originating lender provides construction financing to a
Borrower and Freddie Mac does not purchase the related Guaranteed
Mortgage until construction has been substantially completed:

> \(1\) The originating lender may add to the Freddie Mac Standard
> Documents appropriate provisions concerning construction disbursements
> and the progress and monitoring of construction. Freddie Mac will not
> review or approve such provisions, and understands that the Secretary
> may do so.
>
> \(2\) The Secretary will rely solely on the originating lender to
> monitor construction of the property, even if Freddie Mac has
> committed to purchase the Guaranteed Mortgage upon completion. The
> Secretary may not withhold payment of a guarantee claim submitted by
> Freddie Mac after Freddie Mac\'s purchase of the Guaranteed Mortgage
> based solely upon the originating lender\'s noncompliance with the
> Secretary\'s

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RD Instruction 2000-OOO

Exhibit A

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> requirements as to monitoring of construction, unless the Secretary
> has given Freddie Mac written notice of such noncompliance prior to
> Freddie Mac\'s issuance of a commitment or entry into a purchase
> agreement for the purchase of the Guaranteed Mortgage.

\(e\) If the Notice of Fund Availability (NOFA) pursuant to which a
Guaranteed Mortgage will be guaranteed requires that the interest rate
of the Guaranteed Mortgage not exceed by more than a specified margin
the yield on treasury securities of a specified maturity, but is silent
as to the date as of which that test is to be applied, the test will be
applied using the yield on the specified treasury securities as of the
business day before the day on which the interest rate for the
Guaranteed Mortgage was locked.

**6. Subservicing Arrangement.**

\(a\) Freddie Mac will be primarily responsible for the servicing of any
Guaranteed Mortgage that it purchases. However, Freddie Mac may contract
with an RHS-Approved Lender to subservice any Guaranteed Mortgage.
Freddie Mac will remain primarily responsible for the servicing of each
Guaranteed Mortgage. The Secretary shall give Freddie Mac notice of any
failure to service a Guaranteed Mortgage in accordance with the
Secretary\'s requirements and a 90-day opportunity to cure the failure
(or cause the Subservicer to do so) before it takes any other action. If
any such failure cannot be cured within a 90-day period, the 90-day cure
period automatically shall be extended for as long as is necessary to
cure the failure, not to exceed an additional 270 days, so long as
Freddie Mac commences curative activities during the 90-day period and
diligently pursues such activities thereafter.

(b) The initial Subservicer of each Guaranteed Mortgage purchased by
    Freddie Mac will be the Program Plus seller/servicer or other
    RHS-Approved Lender from whom Freddie Mac purchases the Guaranteed
    Mortgage, unless and until Freddie Mac gives the Secretary notice to
    the contrary. Notice by Freddie Mac or the originating RHS-Approved
    Lender to the Secretary that Freddie Mac has purchased a Guaranteed
    Mortgage shall also be deemed notice to the Secretary that the
    primary responsibility for servicing that Guaranteed Mortgage has
    been transferred to Freddie Mac and that Freddie Mac has designated
    the RHS-Approved Lender from whom Freddie Mac purchased the
    Guaranteed Mortgage to be Subservicer of the Guaranteed Mortgage.
    The servicing plan and capital improvements

RD Instruction 2000-OOO

Exhibit A

Page 7

> plan submitted by the Subservicer prior to origination of the
> Guaranteed Mortgage shall continue to apply and will be deemed to
> satisfy the requirement of section IV of the Lender\'s Agreement that
> a servicing plan be designed and implemented. Notice by Freddie Mac to
> the Secretary under section 4(e) that an RHS-Approved Lender has
> repurchased a Guaranteed Mortgage shall be deemed notice to the
> Secretary that the primary responsibility for servicing that
> Guaranteed Mortgage has been transferred from Freddie Mac to the
> repurchasing RHS-Approved Lender.

\(c\) The Secretary may deal with and rely upon the Subservicer of each
Guaranteed Mortgage with respect to all servicing matters prior to the
Secretary\'s receipt from the Subservicer or Freddie Mac of notice that
a default has occurred under the Guaranteed Mortgage. Prior to the
Secretary\'s receipt of such notice, any notice with respect to a
Guaranteed Mortgage that is given by the Secretary to the applicable
Subservicer shall be deemed to have been given to Freddie Mac. Without
limiting the generality of the foregoing, with respect to each
Guaranteed Mortgage:

> \(1\) The Subservicer will pay the annual fee to RHS.
>
> \(2\) The Subservicer will prepare and file with the Secretary all
> required reports.
>
> \(3\) The Subservicer will perform all required physical inspections
> of the property securing the Guaranteed Mortgage and provide the
> Secretary with all required reports of such inspections.
>
> \(4\) The Subservicer will collect and process all monthly payments of
> principal and interest and all deposits to escrows for taxes,
> insurance, and other expenses for which Freddie Mac requires such
> escrows.
>
> \(5\) The Subservicer will pay all taxes, insurance premiums, and
> other expenses for which escrows are maintained.
>
> \(6\) The Secretary will pay any interest credit to the Subservicer.

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RD Instruction 2000-OOO

Exhibit A

Page 8

> \(7\) The Subservicer will approve Borrower requests for release of
> funds from reserve and escrow accounts, as referred to in section
> V(C)(2)(e) of the Lender\'s Agreement. Freddie Mac servicing
> guidelines will determine the extent to which the Subservicer must
> obtain Freddie Mac\'s consent before taking action and, where
> authority to make such decisions is delegated by Freddie Mac to the
> Subservicer, the standards the Subservicer must apply in making such
> decisions. In no case will Freddie Mac preclude the Subservicer\'s
> compliance with Program requirements.
>
> \(8\) The Subservicer will obtain from the borrower and forward to the
> Secretary the financial statements of the borrower and any guarantor
> that are required by section V(C)(5) and (9) of the Lender\'s
> Agreement.
>
> \(8\) The Subservicer will file the quarterly loan status reports with
> the Secretary as required by section VI(C)(10) of the Lender\'s
> Agreement and section 7.10 of the Handbook.
>
> \(9\) If a default occurs, either the Subservicer or Freddie Mac may
> file a default notice with the Secretary as described in section VI(A)
> of the Lender\'s Agreement, as determined by Freddie Mac.

\(d\) The inspection requirements contained in Chapter 34 of the Freddie
Mac *Multifamily Seller/Servicer Guide*, including any changes that
Freddie Mac may make in those requirements in the future, are accepted
by the Secretary as the standards for physical inspections required by
section 7.12(A)(1) of the Handbook.

\(e\) Freddie Mac typically does not use servicers to negotiate workout
arrangements and carry out Foreclosures, but instead performs such tasks
itself. Therefore, except to the extent that Freddie Mac notifies the
Secretary to the contrary, upon receipt of notice from Freddie Mac or
the Subservicer that a default has occurred under a Guaranteed Mortgage,
the Secretary shall cease dealing with the Subservicer with respect to
that Guaranteed Mortgage, and shall deal directly with Freddie Mac.
Until Freddie Mac identifies for the Secretary the individual employee
of Freddie Mac who will be responsible for special servicing of the
Guaranteed Mortgage, the Secretary may direct any communications to the
Freddie Mac notice address under section 13. Freddie Mac will provide
the special servicing plan required by section VI(C) of the Lender\'s
Agreement and any liquidation plan required by section VII(A) of the
Lender\'s Agreement and section 10.3 of the Handbook.

RD Instruction 2000-OOO

Exhibit A

Page 9

\(f\) Upon curing of any default, unless Freddie Mac notifies the
Secretary to the contrary, the Subservicer will resume subservicing of
the affected Guaranteed Mortgage.

**7. Servicing Requirements.**

\(a\) The Handbook requires the servicer of a Guaranteed Mortgage to
prepare an annual risk assessment using Freddie Mac Form 453. Freddie
Mac has discontinued use of Form 453 in the servicing of its
conventional mortgage portfolio, and now requires use of Freddie Mac
Form 506 instead. With respect to any Guaranteed Mortgaged owned by
Freddie Mac, the Secretary will accept Form 506 in lieu of Form 453. The
Subservicer of each Guaranteed Mortgage will prepare the annual risk
assessments.

\(b\) The rate at which a Guaranteed Mortgage bears interest may include
the annual fee payable to RHS.

\(c\) A Guaranteed Mortgage with respect to which RHS has agreed to pay
interest credit subsidies may provide for the benefit of those subsidies
to be passed through to the borrower by means of the following
mechanism:

> \(1\) At origination of the Guaranteed Mortgage, the borrower will
> deposit in escrow an amount equal to the first 13 months\' interest
> credit subsidy.
>
> \(2\) Each month\'s installment of principal and interest payable by
> the borrower will be reduced by the interest credit subsidy projected
> to be payable by RHS with respect to that installment. The Subservicer
> will withdraw the amount of the reduction from the escrow and remit it
> to Freddie Mac with the payment received from the borrower. so that
> the amount received by Freddie Mac is the same as if the Borrower had
> paid the full scheduled installment due under the Note.
>
> \(3\) When the annual interest credit subsidy payment is received from
> RHS each January, the Subservicer will use it to replenish the escrow.
>
> \(4\) Upon retirement of the Guaranteed Mortgage, any remaining
> balance in the escrow will be paid to the borrower.

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RD Instruction 2000-OOO

Exhibit A

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\(d\) Compliance with Freddie Mac\'s insurance requirements, as set
forth in chapter 25 of the Freddie Mac *Multifamily Seller/Servicer
Guide*, including any future amendments of those requirements, will be
deemed compliance with the Secretary\'s requirements for insurance of
properties securing Guaranteed Mortgages, including but not limited to
sections 9.3 though 9.8 of the Handbook and section V(C)(3) of the
Lender\'s Agreement.

\(e\) Section 3565.351 of the Regulations requires that the servicer of
a Guaranteed Mortgage \"certify annually to the Agency that the borrower
is in compliance with...program requirements with respect to all aspects
of project management.\" Condition 4 of the Loan Note Guarantee requires
that the holder of a Guaranteed Mortgage \"assure that the Borrower is
in compliance with Government Standards regarding property
management...\" Section 3565.351(d)(5) of the Regulations requires that
the servicer of a Guaranteed Mortgage \"certify that the property is in
good financial and physical condition\" prior to any distribution of
surplus cash to the owner of the property. Section 3565.402(h) of the
Regulations and section V(C)(2)(c) of the Lender\'s Agreement require
that the servicer of a Guaranteed Mortgage \"ensure that the property
securing the guaranteed loan remains in good physical and financial
condition.\" Freddie Mac will be deemed to have complied with all of the
foregoing requirements, and shall be deemed to have been diligent in
investigating the physical and financial condition of a property, if
Freddie Mac or the Subservicer of the Guaranteed Mortgage has taken all
of the following steps*:*

> \(1\) Completed an annual property inspection that includes, but is
> not limited to, inspection of:

\(A\) a sample of the occupied units ;

> \(B\) a sample of the vacant units;
>
> \(C\) a representative sample of unit types; and
>
> \(D\) if the Property has commercial space, each commercial space.
>
> \(2\) Analyzed the rent roll and income and expense data, estimated
> the property\'s Net Operating Income (NOI), and computed the
> property\'s Debt Coverage Ratio (DCR).

RD Instruction 2000-OOO

Exhibit A

Page 11

> \(3\) Analyzed the physical condition and management of the Property.
>
> \(4\) Performed an assessment of the Property's rental market,
> including but not limited to speaking to the property management staff
> about competing or comparable properties; a drive-through inspection
> of the Property's market area; and calling or visiting comparable
> properties
>
> \(5\) Examined the borrower's payment record.
>
> \(6\) Reviewed the adequacy of insurance coverage.

\(f\) Section 3565.351 of the Regulations requires that the servicer of
a Guaranteed Mortgage \"certify annually to the Agency that the Borrower
is in compliance with the Regulatory Agreement...\" Section
3565.351(d)(5) of the Regulations requires that the servicer of a
Guaranteed Mortgage \"certify that the property is ...in compliance with
the Regulatory Agreement\" prior to any distribution of surplus cash to
the owner of the property. Section 3565.402(h) of the Regulations
requires that the servicer of a Guaranteed Mortgage \"ensure that the
property securing the guaranteed loan remains in good physical and
financial condition.\" If Freddie Mac has taken the following steps at
least annually to evaluate Regulatory Agreement compliance, and such
steps have not revealed any instances of noncompliance that have not
been cured as of the date of the certification, Freddie Mac shall be
deemed to have complied with the foregoing requirements of section
3565.351, and any instance of noncompliance that was not revealed by the
following steps but is subsequently discovered to have existed shall not
be deemed to render inaccurate or incomplete any certification given by
Freddie Mac.

> \(1\) Freddie Mac will require that the Subservicer examine a rent
> roll to confirm that, in accordance with section 3565.203 of the
> Regulations:
>
> \(A\) The rent for each unit, including tenant-paid utilities, does
> not exceed 30% of 115% of area median income, adjusted for family
> size, and
>
> \(B\) The average per-unit rent for the property does not exceed 30%
> of 100% of area median income, adjusted for family size.

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RD Instruction 2000-OOO

Exhibit A

Page 12

\(2\) Freddie Mac will require that, for each occupied unit, the
Subservicer examine a borrower-provided copy of the income certification
signed by the tenant at the time of his or her initial occupancy, to
confirm that, at that time, the tenant\'s income was below 115% of area
median income, in accordance with section 3565.202 of the Regulations.

\(3\) Freddie Mac will require the Subservicer to certify annually to
Freddie Mac that the Subservicer has performed the examinations
described in paragraphs (1) and (2) above, that those examinations have
revealed no breaches of the Regulatory Agreement that remain uncured,
and that the Subservicer has no knowledge of any uncured breach of the
Regulatory Agreement.

\(g\) Section 3565.353 of the Regulations requires that the servicer of
a Guaranteed Mortgage \"ensure that the lender and the borrower are in
compliance with the Affirmative Fair Housing Marketing Plan.\" Freddie
Mac will be deemed to have complied with section 3565.353 with respect
to a borrower\'s compliance if Freddie Mac or the Subservicer of the
Guaranteed Mortgage:

> \(1\) annually obtains a certification of compliance executed by the
> Borrower indicating that the project meets any and all requirements as
> described in the Affirmative Fair Housing Marketing Plan;
>
> \(2\) if the Borrower fails to provide such a certification, gives the
> Borrower notice that if it fails to provide such a certification
> within 30 days it will be deemed to be in default; and
>
> \(3\) if the Borrower still fails to provide such a certification,
> informs the Secretary, recommends a course of enforcement action and
> requests instructions.

\(h\) Section 3565.354 of the Regulations requires that the servicer of
a Guaranteed Mortgage \"ensure that the borrower is in compliance with
the applicable fair housing laws in ... the selection of applicants for
housing and ongoing management.\" Freddie Mac will be deemed to have
complied with section 3565.354 if Freddie Mac or the Subservicer of the
Guaranteed Mortgage:

> \(1\) annually obtains a certification of compliance executed by the
> Borrower indicating that the property and the management of the
> property have been and are in compliance with any and all applicable
> state, federal and local housing laws;

RD Instruction 2000-OOO

Exhibit A

Page 13

> \(2\) if the Borrower fails to provide such a certification, gives the
> Borrower notice that if it fails to provide such a certification
> within 30 days it will be deemed to be in default; and
>
> \(3\) if the Borrower still fails to provide such a certification,
> informs the Secretary, recommends a course of enforcement action and
> requests instructions.

\(i\) Section 3565.403 of the Regulations requires that during any
period of \"special servicing\" the servicer of a Guaranteed Mortgage
\"make a special effort to ensure that maintenance of the property meets
Agency requirements and the tenants\' rights are protected.\" The
Secretary agrees that Freddie Mac will be deemed to have made such a
special effort if Freddie Mac or the Subservicer of the Guaranteed
Mortgage has completed an annual physical inspection of the Property as
described in section 7(e)(1) and an analysis of the property\'s physical
condition and management as described in section 7(e)(4) and, if a
default is known to have occurred and be continuing, Freddie Mac has
taken or is taking the steps listed in section 8(b) below***.***

\(j\) Section 11.7(b) of the Handbook requires that the servicer of a
Guaranteed Mortgage \"ensure\" compliance with section 306 of the Clean
Air Act and 40 CFR Part 15. Freddie Mac will be deemed to have complied
with section 11.7(b) if Freddie Mac or the Subservicer of the Guaranteed
Mortgage:

> \(1\) obtains a certification of compliance executed by the Borrower
> that the property is in compliance with section 306 of the Clean Air
> Act and 40 CFR section 15;
>
> \(2\) if the Borrower fails to provide such a certification, gives the
> Borrower notice that if it fails to provide such a certification
> within 30 days it will be deemed to be in default; and
>
> \(3\) if the Borrower still fails to provide such a certification,
> informs the Secretary, recommends a course of enforcement action and
> requests instructions.

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RD Instruction 2000-OOO

Exhibit A

Page 14

\(k\) Freddie Mac will obtain the Secretary\'s approval before
consenting to any transfer of ownership of the property that involves a
transfer of title to the property or a transfer of all ownership
interests in the borrower entity, which is the intended meaning of the
reference in section 7.8(C) of the Handbook to \"transfers that involve
the entire ownership entity.\" Freddie Mac may consent to other
transfers, including but not limited to any transfer of less than all
ownership interests in the borrower entity and any grant by the borrower
of a subordinate lien on the property, without seeking the approval of
or consulting with the Secretary.

**8. Servicing of Defaults.**

\(a\) Section 538(i)(4) of the Statute provides that, before payment may
be made under the Secretary\'s guarantee of a Guaranteed Mortgage, the
holder of the Guaranteed Mortgage \"shall exhaust all reasonable
possibilities of collection on the loan guaranteed." The Secretary shall
treat Freddie Mac as having satisfied this requirement if Freddie Mac or
the Subservicer of the Guaranteed Mortgage has done each of the
following based on information received from the Subservicer and the
borrower:

> \(1\) Evaluated the payment history of the Mortgage.
>
> \(2\) Evaluated the reasons for the default.
>
> \(3\) Discussed with the borrower or an authorized borrower
> representative the reasons for the default and steps necessary to cure
> the default.
>
> \(4\) If practicable, performed or had the Subservicer perform an
> on-site inspection to determine the condition of the property.
>
> \(5\) Sent the Borrower a letter demanding that the default be cured.

\(b\) Section 3565.451 of the Regulations provides that after a borrower
default and before filing a guarantee claim, the holder of a Guaranteed
Mortgage must \"make every reasonable and prudent effort to resolve the
default.\" Freddie Mac will be deemed to have made such efforts if
Freddie Mac or the Subservicer of the Guaranteed Mortgage has taken each
of the steps listed in section 8(a) and has done each of the following:

RD Instruction 2000-OOO

Exhibit A

Page 15

> \(1\) Pursued legal remedies while attempting to negotiate with the
> borrower an acceptable default resolution strategy.
>
> \(2\) Used its best efforts to develop a payment plan that will enable
> the borrower to cure the default over a specified term;
>
> \(3\) Analyzed the economics of the property to determine if a
> temporary modification of loan terms would enable the borrower to both
> cure the default and meet its future financial obligations;
>
> \(4\) Identified any improvements in management, any capital
> improvements to the property, and any other business strategies which
> would aid the borrower in operating the property at a level adequate
> to meet its financial obligations;
>
> \(5\) If efforts to cause the borrower to resolve the default have
> been unsuccessful or are deemed by Freddie Mac to be unlikely to
> succeed, petitioned a court for a receiver to operate the real
> property, if such a step is consistent with foreclosure practice in
> the jurisdiction where the property is located;
>
> \(6\) Pursue Foreclosure if other resolution strategies proved
> unsuccessful or were deemed by Freddie Mac to be unlikely to succeed.

\(c\) Section 3565.403 of the Regulations authorizes the Secretary, as a
condition to approval of a workout arrangement with respect to a
Guaranteed Mortgage, to require \"additional resources from the Lender\"
that holds the Guaranteed Mortgage. The parties agree that \"resources\"
in section 3565.403 is not intended to mean any financial contribution
by the lender to the payment of the Guaranteed Mortgage or to the
improvement, maintenance or operations of the property.

\(d\) If Freddie Mac acquires title to a property by Foreclosure,
Freddie Mac shall liquidate the Property in accordance with the
Regulations, the Handbook, the Lender\'s Agreement and this Memorandum
of Understanding.

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Page 16

\(e\) Section 3565.453(c) of the Regulations provides that the holder of
a Guaranteed Mortgage that is in default must \"make every effort to
liquidate the property in a manner that will yield the highest market
value consistent with the protections afforded to tenants contained in 7
CFR part 1944...\" Freddie Mac will be deemed to have made such efforts
if it has done all of the following:

> \(1\) Established through its internal valuation process a market
> value for the property prior to the foreclosure sale.
>
> \(2\) Obtained one or more broker price opinions from area real estate
> brokers who have had physical access to the property and have had
> access to current copies of rent rolls and property operating
> statements.
>
> \(3\) Selected a qualified real estate broker to market and sell the
> property.
>
> \(4\) Entered into a listing agreement with the selected broker.
>
> \(5\) Evaluated each prospective purchaser to confirm that the
> purchaser has a satisfactory track record as an owner and manager of
> multifamily properties and has sufficient financial resources to close
> a purchase.

\(f\) Section VII(L) of the Lender\'s Agreement requires the
Secretary\'s written authorization for all protective advances in excess
of \$5000. Paragraph 1(b) of the Loan Note Guarantee includes in its
definition of a guaranteed \"Loss\" \"principal and interest
indebtedness on secured protective advances for protection and
preservation of collateral made with USDA\'s authorization.\" The
Lender\'s Agreement shall govern with respect to protective advances,
prior authorization of the Secretary will not be required for any
protective advance of \$5000 or less, and a protective advance of \$5000
or less may not be excluded from the \"Loss\" covered by a guarantee
solely because it was made without the Secretary\'s prior authorization.

RD Instruction 2000-OOO

Exhibit A

Page 17

**9. Guarantee Claims.**

\(a\) The Secretary understands that, in order for Freddie Mac to
purchase Guaranteed Mortgages, the Secretary\'s guarantee must be
incontestable to an extent comparable to the incontestability of
contracts of full multifamily mortgage insurance entered into by the
Secretary of Housing and Urban Development under the National Housing
Act.

> \(b\) Condition 2 of RHS Form RD-3565-4, Loan Note Guarantee, reads as
> follows:

2.  This Agreement constitutes an obligation supported by full faith and
    credit of the United States and incontestable except for fraud or
    misrepresentation of which the Lender has actual knowledge at the
    time it becomes such lender or which the Lender participates in or
    condones...In addition, this Agreement will be unenforceable by the
    Lender to the extent any loss is occasioned by violation of usury
    laws, negligent servicing, or failure to obtain the required
    security regardless of the time at which the Government acquires
    knowledge of the foregoing. Any losses occasioned will be
    unenforceable by the Lender to the extent that loan funds are used
    for purposes other than those approved by the Government. See Form
    RD 3565‑2, \"Conditional Commitment.: Negligent servicing is defined
    as the failure to perform those services which a reasonably prudent
    lender would perform in servicing its own loan portfolio of loans
    that are not guaranteed. The term includes not only the concept of a
    failure to act, but also not acting in a timely manner or acting
    contrary to the manner in which a reasonably prudent lender would
    act up to the time of loan maturity or until a final loss is paid.

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> The parties agree that the foregoing is an exhaustive and exclusive
> list of the standards the violation of which may be cited by the
> Secretary as grounds for the Secretary\'s refusal to make payment
> under the guarantee with respect to a Loss that has in fact been
> occurred and has been calculated in accordance with the Regulations,
> the Handbook and the Lender\'s Agreement. 0 The grounds in the
> foregoing list are referred to in this Memorandum of Understanding as
> the \"Claim Denial Standards.\" A breach by Freddie Mac of the
> Regulations, the Handbook, the Lender\'s Agreement or this Memorandum
> of Understanding may be a basis upon which the Secretary may bar
> Freddie Mac from purchasing further Guaranteed Mortgages, but will not
> constitute grounds upon which the Secretary may cancel a guarantee or
> refuse to make a guarantee payment unless the breach also constitutes
> a breach of the Claim Denial Standards.
>
> \(c\) Without limiting the generality of Subsection (b), various
> sections of the Loan Note Guarantee, the Lender\'s Agreement, the
> Handbook and the Regulations call for the Lender to \"ensure\" or
> \"assure\" certain events or conditions. The Secretary agrees that the
> words \"ensure\" or \"assure\" are not intended to constitute an
> absolute guarantee by Freddie Mac that those events or conditions will
> occur, and that the failure of such an event or condition to occur
> with respect to a Guaranteed Mortgage will not be grounds upon which
> the Secretary may refuse to make payment under the related guarantee,
> unless the failure of the event or condition to occur also constitutes
> or results from a breach of one or more of the Claim Denial Standards.

\(d\) To the extent that the bases for denying a guarantee claim set
forth in section I.(B) of the Lender\'s Agreement to be executed by
Freddie Mac are inconsistent with the Claim Denial Standards, the Claim
Denial Standards shall apply.

\(e\) The rights of the Secretary to cancel or modify a guarantee based
on a breach of the Claim Denial Standards above may be exercised only if
(A) the Secretary has given Freddie Mac and the Subservicer notice of
the acts or omissions that it considers to constitute such grounds,
specifying the applicable provisions of the Statute, Handbook,
Regulations, Loan Note Guarantee, or Lender\'s Agreement (B) Freddie Mac
has not cured or caused the Subservicer to cure the acts or omissions
within 90 days after such notice and (C) the acts or omissions can
reasonably be expected to have a material adverse effect on the credit
quality of the Guaranteed Mortgage or the physical condition of the

RD Instruction 2000-OOO

Exhibit A

Page 19

> property securing the Guaranteed Mortgage. If any such acts or
> omissions cannot be cured within a 90-day period, the 90-day cure
> period automatically shall be extended for as long as is necessary to
> cure the act or omissions, but not to exceed an additional 270 days,
> so long as Freddie Mac commences curative activities during the 90-day
> period and diligently pursues such activities thereafter.

\(f\) The Secretary has the authority under Regulations section 3565.57
to modify, extend or reinstate a loan guarantee in order to protect its
interest or further the objectives of the Program. The Secretary
interprets section 3565.57 as intended to permit a unilateral
modification by the Secretary that has the effect of reducing the
principal amount of a guarantee or reducing the amount of interest or
the expenses that are covered by a guarantee only if the affected lender
has committed an act or omission that would permit the Secretary to
cancel the guarantee or refuse to make payment under the guarantee. In
the case of Freddie Mac, in accordance with this Memorandum of
Understanding, only a violation of the Claim Denial Standards would
permit such cancellation or refusal and, therefore, only a violation of
the Claim Denial Standards will permit a unilateral modification having
such an effect on a guarantee held by Freddie Mac.

\(f\) The Secretary shall remit all claim payments to Freddie Mac rather
than to the Subservicer.

**10. Interest Credit.** If Freddie Mac holds a Guaranteed Mortgage with
respect to which interest credits are payable by the Secretary and the
Secretary cancels such credits due to a borrower default, as provided in
section 4.10(E) of the Handbook, only interest credits related to
interest accruing after the date of the Secretary\'s notice to Freddie
Mac or the Subservicer of such cancellation will be deemed unearned.
Such a cancellation will not deprive Freddie Mac of the right to receive
interest credits with respect to interest accrued prior to the
cancellation, even if, because interest credits are paid less often than
monthly, the credits with respect to such accrued interest are not
payable to Freddie Mac until after the cancellation.

**11. No Obligation to Purchase.** Nothing in this Memorandum of
Understanding shall obligate Freddie Mac to purchase any Guaranteed
Mortgage. The sole purpose of this Memorandum of Understanding is to
establish and clarify the terms and conditions of the Secretary\'s
guarantee of, and the Secretary\'s requirements with regard to servicing
of, any Guaranteed Mortgage that Freddie Mac in its sole discretion
elects to purchase.

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Page 20

**12. Conflicts.** In the event of any conflict between this Memorandum
of Understanding and the terms of the Lender\'s Agreement, the Handbook
or the Loan Note Guarantee applicable to any Guaranteed Mortgage, this
Memorandum of Understanding shall govern. This Memorandum of
Understanding contains various RHS interpretations of the Regulations.
If Freddie Mac complies with the interpretation of a Regulation that is
set forth in this Memorandum of Understanding, Freddie Mac shall be
deemed in compliance with that Regulation.

**13. Notices.**

\(a\) All notices under or concerning this Memorandum of Understanding
shall be in writing. Each such notice shall be deemed given when
received by the addressee or delivered to Federal Express, Network
Courier or a comparable overnight courier service, addressed as provided
in this section and with charges for next business day delivery paid.

\(b\) Notices intended for the Secretary shall be addressed to:

> United States Department of Agriculture
>
> Rural Housing Service
>
> 1400 Independence Ave., S.W.
>
> Washington, D.C. 20250
>
> Attention: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\(c\) Notices intended for Freddie Mac shall be addressed to:

> Freddie Mac
>
> 8150 Jones Branch Drive
>
> McLean, VA 22102
>
> Attention: Vice President, Multifamily Loan Production

\(d\) Either party may change the address to which notices intended for
that party are to be directed by means of notice given to the other
party in accordance with this section.

**14. Termination.**

\(a\) Either party may terminate this Memorandum of Understanding by
giving at least 90 days\' advance written notice to the other party,
specifying the effective date of the termination.

RD Instruction 2000-OOO

Exhibit A

Page 21

\(b\) Despite any such termination:

> \(1\) this Memorandum of Understanding shall apply to Guaranteed
> Mortgages purchased by Freddie Mac after the effective date of the
> termination but pursuant to commitments issued or purchase agreements
> entered into by Freddie Mac before the effective date of the
> termination, and
>
> \(2\) this Memorandum of Understanding shall continue to apply to
> Guaranteed Mortgages purchased by Freddie Mac before the effective
> date of the termination.

**15. Prospective Changes in Standards.** The Secretary at any time may
notify Freddie Mac in writing that in the future Freddie Mac\'s
compliance with a specified Handbook or Regulation provision referred to
in any of sections 7(d) through (j) or sections 8(a), (b) and (e) of
this Memorandum of Understanding will be determined according to a new
standard different from those set forth in sections 7(d) through (j) and
sections 8(a), (b) and (e), which new standard will be stated by the
Secretary in the notice. In that event, the new standard will apply to
Guaranteed Mortgages purchased by Freddie Mac pursuant \[missing from
signed copy - \"\...to commitments issued or purchase agreements entered
into by Freddie Mac after its receipt of the notice. The standards set
forth in section 7(d) through (j) and sections\...\"\] 8(a), (b) and (e)
will continue to apply, in lieu of the new standard, to Guaranteed
Mortgage already owned by Freddie Mac on the date it receives the notice
or purchased by Freddie Mac after that date but pursuant to commitments
issued or purchase agreements entered into by Freddie Mac before that
date.

**16. Miscellaneous.**

(a) The captions assigned to provisions of this Memorandum of
    Understanding are for convenience only and shall be disregarded in
    construing this Memorandum of Understanding. Any reference in this
    Memorandum of Understanding to \"Section 538\" shall be construed as
    referring to section 538 of the Housing Act of 1949, 42 U.S.C.
    section 1490p-2. Any other reference in this Memorandum of
    Understanding to a \"section\", and any reference to a
    \"Subsection\", a \"Paragraph\" or an \"Exhibit\" shall, unless
    otherwise explicitly provided, be construed as referring,
    respectively, to a section of this Memorandum of Understanding, a
    subsection of the section of this Memorandum of Understanding in
    which the reference appears, a

(01-23-02) PN 340

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Exhibit A

Page 22

> paragraph of the subsection within this Memorandum of Understanding in
> which the reference appears, or an Exhibit attached to this Memorandum
> of Understanding. All Exhibits attached to or referred to in this
> Memorandum of Understanding are incorporated by reference into this
> Memorandum of Understanding. Any reference in this Memorandum of
> Understanding to a provision of a statute, a regulation or the
> Handbook shall be construed as referring to that provision as it has
> been amended.
>
> \(b\) Use of the singular in this Memorandum of Understanding includes
> the plural, use of the plural includes the singular, and use of one
> gender includes all other genders, as the context may require.
>
> \(c\) Except for Freddie Mac\'s employment of the Subservicer, neither
> party to this Memorandum of Understanding may assign its rights or
> delegate its obligations under this Memorandum of Understanding
> without the prior written consent of all other parties. This
> Memorandum of Understanding shall be binding upon and shall inure to
> the benefit of the parties and their respective heirs, successors, and
> permitted assigns.
>
> \(d\) The invalidity or unenforceability of any provision of this
> Memorandum of Understanding shall not affect the validity of any other
> provision, and all other provisions shall remain in full force and
> effect.

###  {#section-2 .Par.-no-sm.-hang .unnumbered}

\(e\) This instrument contains the entire agreement among the parties as
to the rights granted and the obligations assumed in this instrument.

\(f\) Any forbearance by a party to this Memorandum of Understanding in
exercising any right or remedy given under this Memorandum of
Understanding or existing at law or in equity shall not constitute a
waiver of or preclude the exercise of that or any other right or remedy.
Unless otherwise explicitly provided, no remedy under this Memorandum of
Understanding is intended to be exclusive of any other available remedy,
but each remedy shall be cumulative and shall be in addition to other
remedies given under this Memorandum of Understanding or existing at law
or in equity.

RD Instruction 2000-OOO

Exhibit A

Page 23

\(g\) A \"Business Day\" is any day other than a Saturday or Sunday, a
federal holiday, or a day on which banking institutions in the City of
Washington, D.C. are permitted or required by law to close. In computing
the number of days for purposes of this Memorandum of Understanding, all
days shall be counted, including days that are not Business days, unless
it is explicitly provided that only Business Days shall be counted.
However, if the final day of any time period falls on a day that is not
a Business Day, then the final day shall be deemed to be the next
Business Day.

\(h\) To the extent permitted by law, the parties shall, from time to
time, execute, acknowledge and deliver, or cause to be executed,
acknowledged and delivered, such supplements to this Memorandum of
Understanding and such further instruments as may reasonably be required
for carrying out the intention of or facilitating the performance of
this Memorandum of Understanding.

**IN WITNESS WHEREOF**, the Secretary and Freddie Mac have executed this
Memorandum of Understanding.

\[SIGNATURES APPEAR ON THE FOLLOWING PAGES\]

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Page 24

**MEMORANDUM OF UNDERSTANDING**

**SIGNATURE PAGE**

> **UNITED STATES SECRETARY**
>
> **OF AGRICULTURE**
>
> By: [/s/\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_]{.underline}
>
> James C. Alsop
>
> Acting Administrator
>
> Rural Housing Service
>
> Date: June 21, 2001
>
> RD Instruction 2000-OOO
>
> Exhibit A
>
> Page 25
>
> **FEDERAL HOME LOAN MORTGAGE CORPORATION**
>
> By: [/s/\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_]{.underline}
>
> Mitchell W. Kiffe
>
> Vice President,
>
> Loan Production
>
> Date: June 20, 2001

P:\\products\\Section 538 memo of understanding exec copy 2.DOC

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Page 26

**[EXHIBIT A]{.underline}**

**[FORMS OF MORTGAGE DOCUMENTS]{.underline}**

1.  Note \[pages 23 - 33\]

2.  Mortgage \[pages 34 - 80\]

3.  Replacement Reserve Agreement \[pages 81 - 93\]

4.  Regulatory Agreement \[pages 94 - 100\]

5.  Modifications to Note \[page 101\]

6.  Modifications to Mortgage \[pages 102 - 105\]

7.  Modifications to Replacement Reserve Agreement \[page 106\]

RD Instruction 2000-OOO

Exhibit A

Page 27

**[MULTIFAMILY NOTE]{.underline}**

**(MULTISTATE -- REVISION DATE 11-01-2000)**

  ---------------------------------------------------------- -----------------------------------
  US                                                         \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_,
  \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_   \_\_\_\_

  ---------------------------------------------------------- -----------------------------------

FOR VALUE RECEIVED, the undersigned (\"**Borrower**\") jointly and
severally (if more than one) promises to pay to the order of
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, a
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_,
the principal sum of
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Dollars
(US \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_), with interest on the
unpaid principal balance at the annual rate of
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ percent (\_\_\_\_%).

**1. Defined Terms.** As used in this Note, (i) the term \"**Lender**\"
means the holder of this Note, and (ii) the term \"**Indebtedness**\"
means the principal of, interest on, and 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. \"Event of Default\" 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
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_,
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:

\(a\) Unless disbursement of principal is made by Lender to Borrower on
the first day of the month, interest for the period beginning on the
date of disbursement 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. Interest under this Note shall be
computed on the basis of a 360-day year consisting of twelve 30-day
months.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

#### PAGE 1

***\[OR\]***

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Exhibit A

Page 28

***\[INSTRUCTIONS TO PREPARER -- SELECT CORRECT VERSION OF PARAGRAPH
3(b), AND DELETE THE INAPPLICABLE VERSIONS\]***

\(b\) Consecutive monthly installments of principal and interest, each
in the amount of
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
Dollars (US \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_),
shall be payable on the first day of each month beginning on
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, \_\_\_\_\_\_, until the entire unpaid
principal balance evidenced by this Note is fully paid.

\(b\) Consecutive monthly installments of interest only, each in the
amount of
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
Dollars (US \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_),
shall be payable on the first day of each month beginning on
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, \_\_\_\_\_\_, until the entire unpaid
principal balance evidenced by this Note is fully paid.

***\[OR\]***

\(b\) Consecutive monthly installments of interest only, each in the
amount of
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
Dollars (US \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_),
shall be payable on the first day of each month beginning on
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, \_\_\_\_\_\_, through and including
the monthly installment payable on the first day of
\_\_\_\_\_\_\_\_\_\_\_\_\_\_, \_\_\_\_\_\_. Consecutive monthly
installments of principal and interest, each in the amount of
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
Dollars (US \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_),
shall be payable on the first day of each month beginning on
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, \_\_\_\_\_\_, until the entire unpaid
principal balance evidenced by this Note is fully paid.

\(c\) Any accrued interest remaining past due for 30 days or more may,
at Lender's discretion, be added to and become part of the unpaid
principal balance and shall bear interest at the rate or rates specified
in this Note, and any reference below to \"accrued interest\" shall
refer to accrued interest which has not become part of the unpaid
principal balance. Any remaining principal and interest shall be due and
payable on
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
or on any earlier date on which the unpaid principal balance of this
Note becomes due and payable, by acceleration or otherwise (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.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

**PAGE 2**

RD Instruction 2000-OOO

Exhibit A

Page 29

\(d\) 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.

**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 a
multifamily mortgage, deed to secure debt or deed of trust dated as of
the date of this Note (the \"**Security**

**Instrument**\"), and reference is made to the Security Instrument for
other rights of Lender as to 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 (except if notice is required by applicable law, then
after such notice). Lender may exercise this option to accelerate
regardless of any prior forbearance.

**7. Late Charge.** If any monthly amount payable under this Note or
under the Security Instrument or any other Loan Document is not received
by Lender within ten (10) days after the amount is due (unless
applicable law requires a longer period of time before a late charge may
be imposed, in which event such longer period shall be substituted),
Borrower shall pay to Lender, immediately and without demand by Lender,
a late charge equal to five percent (5%) of such amount (unless
applicable law requires a lesser amount be charged, in which event such
lesser amount shall be substituted). Borrower acknowledges that its
failure to make timely payments will cause Lender to incur additional
expenses in servicing and processing the loan evidenced by this Note
(the "**Loan**"), and that it is extremely difficult and impractical to

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

**PAGE 3**

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Exhibit A

Page 30

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 (a) any monthly installment under this
Note remains past due for thirty (30) days or more, or (b) any other
Event of Default has occurred and is continuing, 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 the occurrence
of such other Event of Default, as applicable, at a rate (the
\"**Default Rate**\") equal to the lesser of four (4) percentage points
above the rate stated in the first paragraph of this Note and the
maximum interest rate which may be collected from Borrower under
applicable law. 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 under this Note is delinquent for more than thirty
(30) days, Lender will incur additional costs and expenses arising from
its loss of the use of the money due 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
under this Note is delinquent for more than thirty (30) days or any
other Event of Default has occurred and is continuing, 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.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

**PAGE 4**

RD Instruction 2000-OOO

Exhibit A

Page 31

**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 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
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ percent (\_\_\_\_\_%)
of the
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
principal balance of this Note, plus any other amounts for which
Borrower has personal liability under this Paragraph 9.

\(c\) In addition to Borrower's personal liability under Paragraph 9(b),
Borrower shall be personally liable to Lender for the repayment of a
further 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; or (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.

\(d\) For purposes of determining Borrower\'s personal liability under
Paragraph 9(b) and Paragraph 9(c), all payments made by Borrower or any
guarantor of this Note with respect to the Indebtedness and all amounts
received by Lender from the enforcement of its rights under the Security
Instrument shall be applied first to the portion of the Indebtedness for
which Borrower has no personal liability.

\(e\) 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

(01-23-02) PN 340

RD Instruction 2000-OOO

Exhibit A

Page 32

Security Instrument; (2) a Transfer (including, but not limited to, a
lien or encumbrance) that is an Event of Default under Section 21 of the
Security Instrument, other than a Transfer consisting solely of the
involuntary removal or involuntary withdrawal of a general partner in a
limited partnership or a manager in a limited liability company; or (3)
fraud or written material misrepresentation by Borrower 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.

\(f\) In addition to any personal liability for the Indebtedness,
Borrower shall be personally liable to Lender for (1) the performance of
all of Borrower's obligations under Section 18 of the Security
Instrument (relating to environmental matters); (2) the costs of any
audit under Section 14(d) of the Security Instrument; and (3) any costs
and expenses incurred by Lender in connection with the collection of any
amount for which Borrower is personally liable under this Paragraph 9,
including fees and out of pocket expenses of attorneys and expert
witnesses and the costs of conducting any independent audit of
Borrower\'s books and records to determine the amount for which Borrower
has personal liability.

\(g\) 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. To the fullest
extent permitted by applicable law, in any action to enforce Borrower's
personal liability under this Paragraph 9, Borrower waives any right to
set off the value of the Mortgaged Property against such personal
liability.

**10. Voluntary and Involuntary Prepayments.**

\(a\) A prepayment premium shall be payable in connection with any
prepayment (any receipt by Lender of principal, other than principal
required to be paid in monthly installments pursuant to Paragraph 3(b),
prior to the scheduled Maturity Date set forth in Paragraph 3(c)) under
this Note as provided below:

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

**PAGE 5**

RD Instruction 2000-OOO

Exhibit A

Page 33

\(1\) Borrower may voluntarily prepay all of the unpaid principal
balance of this Note on a Business Day designated as the date for such
prepayment in a written notice from Borrower to Lender given at least 30
days prior to the date of such prepayment. Such prepayment shall be made
by paying (A) the amount of principal being prepaid, (B) all accrued
interest, (C) all other sums due Lender at the time of such prepayment,
and (D) the prepayment premium calculated pursuant to Paragraph 10(c).
For all purposes including the accrual of interest, any prepayment
received by Lender on any day other than the last calendar day of the
month shall be deemed to have been received on the last calendar day of
such month. For purposes of this Note, a \"**Business Day**\" means any
day other than a Saturday, Sunday or any other day on which Lender is
not open for business. Unless expressly provided for in the Loan
Documents, Borrower shall not have the option to voluntarily prepay less
than all of the unpaid principal balance. However, if a partial
prepayment is provided for in the Loan Documents or is accepted by
Lender in Lender's discretion, a prepayment premium calculated pursuant
to Paragraph 10(c) shall be due and payable by Borrower.

\(2\) 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, (A) all accrued interest and all other sums due Lender,
and (B) the prepayment premium calculated pursuant to Paragraph 10(c).

\(3\) 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 with respect to (A) any prepayment made during
the period from \_\_\_\_\_\_\_ (\_\_) days before the scheduled Maturity
Date to the scheduled Maturity Date, or (B) any prepayment occurring as
a result of the application of any insurance proceeds or condemnation
award under the Security Instrument.

\(c\) Any prepayment premium payable under this Note shall be computed
as follows:

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

**PAGE 6**

(01-23-02) PN 340

RD Instruction 2000-OOO

Exhibit A

Page 34

\(1\) If the prepayment is made between the date of this Note and the
date that is \_\_\_\_\_\_ months after the first day of the first
calendar month following the date of this Note (the \"**Yield
Maintenance Period**\"), the prepayment premium shall be whichever is
the greater of subparagraphs (i) and (ii) below:

\(i\) 1.0% of the unpaid principal balance of this Note; or

\(ii\) the product obtained by multiplying:

\(A\) the amount of principal being prepaid,

*by*

\(B\) the excess (if any) of the Monthly Note Rate over the Assumed
Reinvestment Rate,

*by*

\(C\) the Present Value Factor.

> For purposes of subparagraph (ii), the following definitions shall
> apply:
>
> **Monthly Note Rate:** one-twelfth (1/12) of the annual interest rate
> of this Note, expressed as a decimal calculated to five digits.

**Prepayment Date:** in the case of a voluntary prepayment, the date on
which the prepayment is made; in the case of the application by Lender
of collateral or security to a portion of the principal balance, the
date of such application; and in any other case, the date on which
Lender accelerates the unpaid principal balance of this Note.

**Assumed Reinvestment Rate:** one-twelfth (1/12) of the yield rate as
of the date 5 Business Days before the Prepayment Date, on\
the \_\_\_\_\_\_% U.S. Treasury Security due
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_,\
as reported in *The Wall Street Journal*, expressed as a decimal
calculated to five digits. In the event that no yield is published on
the applicable date for the Treasury Security used to determine the
Assumed Reinvestment Rate, Lender, in its discretion, shall select the
non-callable Treasury Security maturing in the same year as the Treasury
Security specified above with the lowest yield published in *The Wall
Street Journal* as of the applicable date. If the publication of such
yield rates in *The Wall Street Journal* is discontinued for any reason,
Lender shall select a security with a comparable rate and term to the
Treasury Security used to determine the Assumed Reinvestment Rate. The
selection of an alternate security pursuant to this Paragraph shall be
made in Lender's discretion.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

**PAGE 7**

RD Instruction 2000-OOO

Exhibit A

Page 35

**Present Value Factor:** the factor that discounts to present value the
costs resulting to Lender from the difference in interest rates during
the months remaining in the Yield Maintenance Period, using the Assumed
Reinvestment Rate as the discount rate, with monthly compounding,
expressed numerically as follows:

1 --\_\_[1]{.underline}\_\_\_\_

[1 + ARR]{.underline}

##### ARR

**n** = number of months remaining in Yield Maintenance Period

**ARR** = Assumed Reinvestment Rate

\(2\) If the prepayment is made after the expiration of the Yield
Maintenance Period but before the period set forth in Paragraph 10(b)(A)
above, the prepayment premium shall be 1.0% of the unpaid principal
balance of this Note.

\(d\) Any permitted or required prepayment of less than the 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.

\(e\) 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 in this Note 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, 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.

#### PAGE 8

(01-23-02) PN 340

RD Instruction 2000-OOO

Exhibit A

Page 36

**11. Costs and Expenses.** To the fullest extent allowed by applicable
law, Borrower shall pay all expenses and costs, including fees and
out‑of‑pocket expenses of attorneys (including Lender's in-house
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 and all
endorsers and guarantors of this Note and all other third party
obligors.

**14. Loan Charges.** 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 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

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

**PAGE 9**

RD Instruction 2000-OOO

Exhibit A

Page 37

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,
household, or agricultural 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; Written Modifications.** 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. Any modification or amendment to this Note
shall be ineffective unless in writing signed by the party sought to be
charged with such modification or amendment; provided, however, that in
the event of a Transfer under the terms of the Security Instrument, any
or some or all of the Modifications to

Multifamily Note may be modified or rendered void by Lender at Lender's
option by notice to Borrower/transferee.

**20. Consent to Jurisdiction and Venue.** Borrower agrees that any
controversy arising under or in relation to this Note shall be litigated
exclusively in the jurisdiction in which the Land is located (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 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.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

**PAGE 10**

(01-23-02) PN 340

RD Instruction 2000-OOO

Exhibit A

Page 38

**21. WAIVER OF TRIAL BY JURY. BORROWER 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 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.**

**ATTACHED EXHBIT. The following Exhibit is attached to this Note:**

**[\|]{.underline} \| Exhibit A Modifications to Multifamily Note**

**IN WITNESS WHEREOF**, Borrower has signed and delivered this Note
under seal or has caused this Note to be signed and delivered under seal
by its duly authorized representative. Borrower intends that this Note
shall be deemed to be signed and delivered as a sealed instrument.

**\[SIGNATURES, SEALS, WITNESSES (IF REQUIRED)\]**

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Borrower\'s Social Security/Employer ID Number

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

**PAGE 11**

RD Instruction 2000-OOO

Exhibit A

Page 39

**EXHIBIT A**

**MODIFICATIONS TO MULTIFAMILY NOTE**

**PAGE A-1**

(01-23-02) PN 340

RD Instruction 2000-OOO

Exhibit A

Page 40

Prepared by, and after recording

return to:

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

**[MULTIFAMILY DEED OF TRUST,]{.underline}**

**[ASSIGNMENT OF RENTS]{.underline}**

**[AND SECURITY AGREEMENT]{.underline}**

**(VIRGINIA -- REVISION DATE 11-01-2000)**

RD Instruction 2000-OOO

Exhibit A

Page 41

**MULTIFAMILY DEED OF TRUST,**

**ASSIGNMENT OF RENTS AND**

**SECURITY AGREEMENT**

**(VIRGINIA -- REVISION DATE 11-01-2000)**

THIS MULTIFAMILY DEED OF TRUST, ASSIGNMENT OF RENTS AND SECURITY
AGREEMENT (the "**Instrument**") is made this \_\_\_\_\_ day
of\_\_\_\_\_\_\_\_\_\_\_\_\_\_, \_\_\_\_\_\_, by
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
a \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
organized and existing under the laws of
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_,
whose address is \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_,
as grantor ("**Borrower**"), to
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_,
a resident of the City/County of
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_,
Virginia, as trustee ("**Trustee**"), for the benefit of
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_,

a
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
organized and existing under the laws of
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_,
whose address is \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, as beneficiary
("**Lender**").

Borrower, in consideration of the Indebtedness and the trust created by
this Instrument, irrevocably grants, conveys and assigns to Trustee, in
trust, with power of sale, the Mortgaged Property, including the Land
located in \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ City/County,
Commonwealth of Virginia and described in Exhibit A attached to this
Instrument.

TO SECURE TO LENDER the repayment of the Indebtedness evidenced by
Borrower's Multifamily Note payable to Lender, dated as of the date of
this Instrument, and maturing on , , the principal amount of \$ , 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 represents and warrants that Borrower is lawfully seized of the
Mortgaged Property, has the right, power and authority to 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

(01-23-02) PN 340

RD Instruction 2000-OOO

Exhibit A

Page 42

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.

\(b\) \"**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 the 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.

\(c\) \"**Controlling Entity**\" means an entity which owns, directly or
indirectly through one or more intermediaries, (A) a general partnership
interest or more than 50% of the limited partnership interests in
Borrower (if Borrower is a partnership or joint venture), (B) a
manager\'s interest in Borrower or more than 50% of the ownership or
membership interests in Borrower (if Borrower is a limited liability
company), or (C) more than 50% of any class of voting stock of Borrower
(if Borrower is a corporation).

\(d\) \"**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.

\(e\) \"**Event of Default**\" means the occurrence of any event listed
in Section 22.

\(f\) \"**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,

RD Instruction 2000-OOO

Exhibit A

Page 43

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.

\(g\) \"**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.

\(h\) \"**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.

\(i\) \"**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.

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\(j\) \"**Impositions**\" and \"**Imposition Deposits**\" are defined in
Section 7(a).

\(k\) \"**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.

\(l\) \"**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.

\(m\) \"**Initial Owners**\" means, with respect to Borrower or any
other entity, the persons or entities who on the date of the Note own in
the aggregate 100% of the ownership interests in Borrower or that
entity.

\(n\) \"**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, or any subsequent holder of the
Note.

\(q\) \"**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, 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.

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\(s\) \"**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;

\(8\) 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;

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\(10\) 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 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 furniture, furnishings, equipment,
machinery, building materials, appliances, goods, supplies, tools,
books, records (whether in written or electronic form), computer
equipment (hardware and software) and other tangible personal 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.

RD Instruction 2000-OOO

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\(w\) **"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 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 granting, creating or attachment of a lien, encumbrance or security
interest (whether voluntary, involuntary or by operation of law); (C)
the issuance or other creation of an ownership interest in a legal
entity, including a partnership interest, interest in a limited
liability company or corporate stock; (D) the withdrawal, retirement,
removal or involuntary resignation of a partner in a partnership or a
member or manager in a limited liability company; or (E) the merger,
dissolution, liquidation, or consolidation of a legal entity or the
reconstitution of one type of legal entity into another type of legal
entity. \"Transfer\" does not include (i) a conveyance of the Mortgaged
Property at a judicial or non-judicial foreclosure sale under this
Instrument or (ii) the Mortgaged Property becoming part of a bankruptcy
estate by operation of law under the United States Bankruptcy Code. For
purposes of defining the term \"Transfer,\" the term \"partnership\"
shall mean a general partnership, a limited partnership, a joint venture
and a limited liability partnership, and the term \"partner\" shall mean
a general partner, a limited partner and a joint venturer.

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 shall execute and deliver to
Lender, upon Lender\'s request, financing statements, continuation
statements and amendments, in such form as Lender may require to perfect
or continue the perfection of this security interest. Borrower shall pay
all

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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 1(s). However, if this present, absolute and unconditional
assignment of Rents is not enforceable by its terms under the laws of
the 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. 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,

RD Instruction 2000-OOO

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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 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

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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.

RD Instruction 2000-OOO

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\(g\) 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.

**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 1(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.

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\(c\) 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.

\(d\) 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.

\(f\) 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

RD Instruction 2000-OOO

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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; (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.

**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

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of liens on the Mortgaged Property, or otherwise to protect Lender\'s
interests, all as reasonably estimated from time to time by Lender, plus
one-sixth of such estimate. 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 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.

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\(d\) 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 plus one-sixth of such estimate,
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 plus one-sixth of such
estimate, 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
damage to the Mortgaged Property, result in forfeiture of the Mortgaged

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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 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 all of the following:

\(1\) within 120 days after the end of each fiscal year of Borrower, a
statement of income and expenses for Borrower\'s operation of the
Mortgaged Property for that fiscal year, a statement of changes in
financial position of Borrower relating to the Mortgaged Property for
that fiscal year and, when requested by Lender, a balance sheet showing
all assets and liabilities of Borrower relating to the Mortgaged
Property as of the end of that fiscal year;

\(2\) 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;

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\(4\) 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 any Controlling Entity and
the interest held by each, if Borrower or a Controlling Entity is a
corporation, all officers and directors of Borrower and the Controlling
Entity, and if Borrower or a Controlling Entity is a limited liability
company, all managers who are not members;

\(5\) upon Lender\'s request, quarterly income and expense statements
for the Mortgaged Property;

\(6\) upon Lender\'s request at any time when an Event of Default has
occurred and is continuing, monthly income and expense statements for
the Mortgaged Property;

\(7\) 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; and

\(8\) 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.

\(c\) 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.

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\(e\) 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 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.

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\(e\) 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 and subjects
Borrower to personal liability under the Note.

**17. PRESERVATION, MANAGEMENT AND MAINTENANCE OF MORTGAGED PROPERTY.**
Borrower (a) shall not commit waste or permit impairment or
deterioration of the Mortgaged Property, (b) shall not abandon the
Mortgaged Property, (c) 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 restoration
or repair, (d) shall keep the Mortgaged Property in good repair,
including the replacement of Personalty and Fixtures with items of equal
or better function and quality, (e) 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 (f) 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.

**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:

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\(1\) 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;

\(3\) 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.

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\(d\) 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;

\(2\) 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;

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\(6\) 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;

\(2\) 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

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(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 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.

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\(j\) 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 the0 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 Indemnitees,
satisfactory in form and substance to Lender; or (2) may materially and
adversely affect Lender, as determined by Lender in its discretion.

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\(m\) Borrower's obligation to indemnify the Indemnitees shall not be
limited or impaired by any of the following, or by any failure of
Borrower or any guarantor to receive notice of or consideration for any
of the following:

\(1\) any amendment or modification of any Loan Document;

\(2\) any extensions of time for performance required by any Loan
Document;

\(3\) any provision in any of the Loan Documents limiting Lender's
recourse to property securing the Indebtedness, or limiting the personal
liability of Borrower or any other party for payment of all or any part
of the Indebtedness;

\(4\) the accuracy or inaccuracy of any representations and warranties
made by Borrower under this Instrument or any other Loan Document;

\(5\) the release of Borrower or any other person, by Lender or by
operation of law, from performance of any obligation under any Loan
Document;

\(6\) the release or substitution in whole or in part of any security
for the Indebtedness; and

\(7\) Lender's failure to properly perfect any lien or security interest
given as security for the Indebtedness.

\(n\) 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.

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\(o\) 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.

**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.

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\(b\) 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 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.

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\(g\) 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 rental
income from the Mortgaged Property after completion of the Restoration
will be sufficient to meet all operating costs and other expenses,
Imposition Deposits, deposits to reserves and loan repayment obligations
relating to the Mortgaged Property; and (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.

\(h\) 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.

\(b\) 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

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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. \[NO
RIGHT TO TRANSFER\].**

\(a\) 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;
>
> \(2\) if Borrower is a limited partnership, a Transfer of (A) any
> general partnership interest, or (B) limited partnership interests in
> Borrower that would cause the Initial Owners of Borrower to own less
> than 51% of all limited partnership interests in Borrower;
>
> \(3\) if Borrower is a general partnership or a joint venture, a
> Transfer of any general partnership or joint venture interest in
> Borrower;
>
> \(4\) if Borrower is a limited liability company, a Transfer of (A)
> any membership interest in Borrower which would cause the Initial
> Owners to own less than 51% of all the membership interests in
> Borrower, or (B) any membership or other interest of a manager in
> Borrower;
>
> \(5\) if Borrower is a corporation, (A) the Transfer of any voting
> stock in Borrower which would cause the Initial Owners to own less
> than 51% of any class of voting stock in Borrower or (B) if the
> outstanding voting stock in Borrower is held by 100 or more
> shareholders, one or more transfers by a single transferor within a
> 12-month period affecting an aggregate of 5% or more of that stock;
>
> \(6\) if Borrower is a trust, (A) a Transfer of any beneficial
> interest in Borrower which would cause the Initial Owners to own less
> than 51% of all the beneficial interests in Borrower, or (B) the
> termination or revocation of the trust, or (C) the removal,
> appointment or substitution of a trustee of Borrower; and

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> \(7\) a Transfer of any interest in a Controlling Entity which, if
> such Controlling Entity were Borrower, would result in an Event of
> Default under any of Sections 21(a)(1) through (6) above.

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;
>
> \(2\) a Transfer that occurs by devise, descent, 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, if before the grant Lender determines
> that the easement will not materially affect the operation or value of
> the Mortgaged Property or Lender\'s interest in the Mortgaged
> Property, and Borrower pays to Lender, upon demand, all costs and
> expenses incurred by Lender in connection with reviewing Borrower\'s
> request; and
>
> \(6\) the creation of a mechanic\'s, materialman\'s, or judgment lien
> against the Mortgaged Property which is released of record or
> otherwise remedied to Lender\'s satisfaction within 30 days of the
> date of creation.

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

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> \(1\) the submission to Lender of all information required by Lender
> to make the determination required by this Section 21(c);
>
> \(2\) the Mortgaged Property and the transferee meet all of the
> eligibility, credit, management and other standards (including but not
> limited to any standards with respect to previous relationships
> between Lender and the transferee and the organization of the
> transferee) customarily applied by Lender to the approval of borrowers
> and properties in connection with the origination or purchase of
> similar mortgages on multifamily properties;
>
> \(3\) the absence of any Event of Default;
>
> \(4\) the execution of an assumption agreement that is acceptable to
> Lender and that, among other things, requires the transferee to
> perform all obligations of Borrower set forth in the Note, this
> Instrument and any other Loan Documents, 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; and
>
> \(5\) Lender\'s receipt of all of the following:
>
> \(A\) a review fee in the amount of
> \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_;
>
> \(B\) a transfer fee in an amount equal to \_\_\_\_\_% of the unpaid
> principal balance of the Indebtedness immediately before the Transfer;
> and
>
> \(C\) the amount of Lender\'s out‑of‑pocket costs (including
> reasonable attorneys\' fees) incurred in reviewing the Transfer
> request.

21\. TRANSFERS OF THE MORTGAGED PROPERTY OR INTERESTS IN BORROWER.
\[RIGHT TO ONE TRANSFER ONLY \-- WITH LENDER APPROVAL\].

\(a\) 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;

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> \(2\) if Borrower is a limited partnership, a Transfer of (A) any
> general partnership interest, or (B) limited partnership interests in
> Borrower that would cause the Initial Owners of Borrower to own less
> than 51% of all limited partnership interests in Borrower;
>
> \(3\) if Borrower is a general partnership or a joint venture, a
> Transfer of any general partnership or joint venture interest in
> Borrower;
>
> \(4\) if Borrower is a limited liability company, a Transfer of (A)
> any membership interest in Borrower which would cause the Initial
> Owners to own less than 51% of all the membership interests in
> Borrower, or (B) any membership or other interest of a manager in
> Borrower;
>
> \(5\) if Borrower is a corporation, (A) the Transfer of any voting
> stock in Borrower which would cause the Initial Owners to own less
> than 51% of any class of voting stock in Borrower or (B) if the
> outstanding voting stock in Borrower is held by 100 or more
> shareholders, one or more transfers by a single transferor within a
> 12-month period affecting an aggregate of 5% or more of that stock;
>
> \(6\) if Borrower is a trust, (A) a Transfer of any beneficial
> interest in Borrower which would cause the Initial Owners to own less
> than 51% of all the beneficial interests in Borrower, or (B) the
> termination or revocation of the trust, or (C) the removal,
> appointment or substitution of a trustee of Borrower; and
>
> \(7\) a Transfer of any interest in a Controlling Entity which, if
> such Controlling Entity were Borrower, would result in an Event of
> Default under any of Sections 21(a)(1) through (6) above.

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:

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(1) a Transfer to which Lender has consented;

\(2\) a Transfer that occurs by devise, descent, 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, if before the grant Lender determines
> that the easement will not materially affect the operation or value of
> the Mortgaged Property or Lender\'s interest in the Mortgaged
> Property, and Borrower pays to Lender, upon demand, all costs and
> expenses incurred by Lender in connection with reviewing Borrower\'s
> request; and
>
> \(6\) the creation of a mechanic\'s, materialman\'s, or judgment lien
> against the Mortgaged Property which is released of record or
> otherwise remedied to Lender\'s satisfaction within 30 days of the
> date of creation.

\(c\) Lender shall consent, *one time only* and without any adjustment
to the rate at which the Indebtedness secured by this Instrument bears
interest, 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;

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> \(3\) the transferee meets all of the eligibility, credit, management
> and other standards (including but not limited to 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 mortgages on
> multifamily properties;
>
> \(4\) 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 mortgages on multifamily properties;
>
> \(5\) the loan to value ratio at the time of the proposed Transfer is
> 70% or less (\"loan to value ratio\" means the ratio of (A) the
> outstanding principal balance of the Indebtedness to (B) the value of
> the Mortgaged Property, as determined by Lender, expressed as a
> percentage);
>
> \(6\) the debt service coverage ratio for the last twelve full months
> preceding the proposed Transfer was 1.35 or more (\"debt service
> coverage ratio\" means the ratio of (A) the annual net operating
> income from the Mortgaged Property\'s operations during that month
> which is available for repayment of debt, after deducting operating
> expenses, to (B) the annual principal and interest payable under the
> Note); and

(7) in the case of a Transfer of all or any part of the Mortgaged
    Property, (A) the execution by the transferee of an assumption
    agreement that is acceptable to Lender and that, among other things,
    requires the transferee to perform all obligations of Borrower set
    forth in the Note, this Instrument and any other Loan Documents, 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, and (B) if a guaranty has been

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> executed and delivered in connection with the Note, this Instrument or
> any of the other Loan Documents, the transferee causes one or more
> individuals or entities acceptable to Lender to execute and deliver to
> Lender a guaranty in a form acceptable to Lender;
>
> \(8\) in the case of a Transfer of any interest in a Controlling
> Entity, 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 guaranty in a form
> acceptable to Lender; and
>
> \(9\) Lender\'s receipt of all of the following:
>
> \(A\) a review fee in the amount of \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_;
>
> \(B\) a transfer fee in an amount equal to \_\_\_\_\_% of the unpaid
> principal balance of the Indebtedness immediately before the
> applicable Transfer; and
>
> \(C\) the amount of Lender\'s out‑of‑pocket costs (including
> reasonable attorneys\' fees) incurred in reviewing the Transfer
> request.

21\. TRANSFERS OF THE MORTGAGED PROPERTY OR INTERESTS IN BORROWER.
\[RIGHT TO UNLIMITED TRANSFERS \-- WITH LENDER APPROVAL\].

\(a\) 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;
>
> \(2\) if Borrower is a limited partnership, a Transfer of (A) any
> general partnership interest, or (B) limited partnership interests in
> Borrower that would cause the Initial Owners of Borrower to own less
> than 51% of all limited partnership interests in Borrower;
>
> \(3\) if Borrower is a general partnership or a joint venture, a
> Transfer of any general partnership or joint venture interest in
> Borrower;

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> \(4\) if Borrower is a limited liability company, a Transfer of (A)
> any membership interest in Borrower which would cause the Initial
> Owners to own less than 51% of all the membership interests in
> Borrower, or (B) any membership or other interest of a manager in
> Borrower;
>
> \(5\) if Borrower is a corporation, (A) the Transfer of any voting
> stock in Borrower which would cause the Initial Owners to own less
> than 51% of any class of voting stock in Borrower or (B) if the
> outstanding voting stock in Borrower is held by 100 or more
> shareholders, one or more transfers by a single transferor within a
> 12-month period affecting an aggregate of 5% or more of that stock;
>
> \(6\) if Borrower is a trust, (A) a Transfer of any beneficial
> interest in Borrower which would cause the Initial Owners to own less
> than 51% of all the beneficial interests in Borrower, or (B) the
> termination or revocation of the trust, or (C) the removal,
> appointment or substitution of a trustee of Borrower; and
>
> \(7\) a Transfer of any interest in a Controlling Entity which, if
> such Controlling Entity were Borrower, would result in an Event of
> Default under any of Sections 21(a)(1) through (6) above.

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;
>
> \(2\) a Transfer that occurs by devise, descent, 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;

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> \(4\) 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, if before the grant Lender determines
> that the easement will not materially affect the operation or value of
> the Mortgaged Property or Lender\'s interest in the Mortgaged
> Property, and Borrower pays to Lender, upon demand, all costs and
> expenses incurred by Lender in connection with reviewing Borrower\'s
> request; and
>
> \(6\) the creation of a mechanic\'s, materialman\'s, or judgment lien
> against the Mortgaged Property which is released of record or
> otherwise remedied to Lender\'s satisfaction within 30 days of the
> date of creation.

\(c\) Lender shall consent, without any adjustment to the rate at which
the Indebtedness secured by this Instrument bears interest or to any
other economic terms of the Indebtedness, 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 but not limited to 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 mortgages on
> multifamily properties;

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> \(4\) 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 mortgages on multifamily properties;
>
> \(5\) in the case of a Transfer of all or any part of the Mortgaged
> Property, (A) the execution by the transferee of an assumption
> agreement that is acceptable to Lender and that, among other things,
> requires the transferee to perform all obligations of Borrower set
> forth in the Note, this Instrument and any other Loan Documents, 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, and (B) if a guaranty has been executed and
> delivered in connection with the Note, this Instrument or any of the
> other Loan Documents, the transferee causes one or more individuals or
> entities acceptable to Lender to execute and deliver to Lender a
> guaranty in a form acceptable to Lender;
>
> \(6\) in the case of a Transfer of any interest in a Controlling
> Entity, 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 guaranty in a form
> acceptable to Lender; and
>
> \(7\) Lender\'s receipt of all of the following:
>
> \(A\) a review fee in the amount of \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_;
>
> \(B\) a transfer fee in an amount equal to \_\_\_\_\_% of the unpaid
> principal balance of the Indebtedness immediately before the
> applicable Transfer; and

\(C\) the amount of Lender\'s out‑of‑pocket costs (including reasonable
attorneys\' fees) incurred in reviewing the Transfer request.

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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, any of its officers, directors, trustees, general partners or
managers 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 Event of Default under Section 21;

\(f\) 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. However, 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;

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\(i\) any exercise by the holder of any 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; and

\(j\) Borrower voluntarily files for bankruptcy protection under the
United States Bankruptcy Code or voluntarily becomes subject to any
reorganization, receivership, insolvency proceeding or other similar
proceeding pursuant to any other federal or state law affecting debtor
and creditor rights, or an involuntary case is commenced against
Borrower by any creditor (other than Lender) of Borrower pursuant to the
United States Bankruptcy Code or other federal or state law affecting
debtor and creditor rights and is not dismissed or discharged within 60
days after filing.

**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 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

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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 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.

RD Instruction 2000-OOO

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**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 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.

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RD Instruction 2000-OOO

Exhibit A

Page 84

**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.

**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.

RD Instruction 2000-OOO

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**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.

**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; provided, however, that in the event of a
Transfer, any or some or all of the Modifications to Instrument set
forth in Exhibit B (if any) may be modified or rendered void by Lender
at Lender's option by notice to Borrower/transferee.

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Exhibit A

Page 86

**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 but not limited to 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 but not limited to 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.

RD Instruction 2000-OOO

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Page 87

**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 invoke the power of sale and any other remedies permitted by
Virginia law or provided in this Instrument or in any other Loan
Document. Borrower acknowledges that the power of sale granted by this
Instrument may be exercised by Lender without prior judicial hearing.
Borrower has the right to bring an action to assert that an Event of
Default does not exist or to raise any other defense Borrower may have
to acceleration and sale. Lender shall be entitled to collect all costs
and expenses incurred in pursuing such remedies, including attorneys'
fees and costs of documentary evidence, abstracts and title reports.

If Lender invokes the power of sale, Lender or Trustee shall deliver a
copy of a notice of sale to Borrower in the manner prescribed by
Virginia law. Trustee shall give public notice of the sale in the manner
prescribed by Virginia law and shall sell the Mortgaged Property in
accordance with Virginia law. Trustee, without demand on Borrower, shall
sell the Mortgaged Property at public auction to the highest bidder at
the time and place and under the terms designated in the notice of sale
in one or more parcels and in such order as Trustee may determine.
Trustee may postpone the sale of all or any part of the Mortgaged
Property by public announcement at the time and place of any previously
scheduled sale or by advertising in accordance with Virginia law. Lender
or Lender's designee may purchase the Mortgaged Property at any sale.

Trustee shall deliver to the purchaser at the sale, within a reasonable
time after the sale, a deed conveying the Mortgaged Property so sold
with special warranty of title. The recitals in Trustee's deed shall be
prima facie evidence of the truth of the statements made in the
recitals. Trustee shall apply the proceeds of the sale in the following
order: (a) to all costs and expenses of the sale, including Trustee's
fees not to exceed 5% of the gross sale price, attorneys' fees and costs
of title evidence; (b) to the discharge of all Taxes, if any, as
provided by Virginia law; (c) to the

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RD Instruction 2000-OOO

Exhibit A

Page 88

Indebtedness in such order as Lender, in Lender's discretion, directs;
and (d) the excess, if any, to the person or persons legally entitled to
the excess, including, if any, the holders of liens inferior to this
Instrument in the order of their priority, provided that Trustee has
actual notice of such liens. Trustee shall not be required to take
possession of the Mortgaged Property before the sale or to deliver
possession of the Mortgaged Property to the purchaser at the sale.

**44. RELEASE.** Upon payment of the Indebtedness, Lender shall request
Trustee to release this Instrument and shall deliver the Note to
Trustee. Trustee shall release this Instrument. Borrower shall pay
Trustee's reasonable costs incurred in releasing this Instrument.

**45. SUBSTITUTE TRUSTEE.** Lender may from time to time, in Lender's
discretion, remove Trustee and appoint a successor trustee to any
Trustee appointed under this Instrument. Without conveyance of the
Mortgaged Property, the successor trustee shall succeed to all the
title, power and duties conferred upon the predecessor Trustee and by
applicable law.

**46. STATUTORY PROVISIONS.** The following provisions of Section 55-60,
Code of Virginia (1950), as amended, are made applicable to this
Instrument:

Exemptions waived

Subject to all upon default

Renewal or extension permitted

Substitution of trustee permitted

Any trustee may act

**47. [WAIVER OF TRIAL BY JURY]{.underline}**. **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]{.underline}\| Exhibit A Description of the Land (required).

\| \| Exhibit B Modifications to Instrument

RD Instruction 2000-OOO

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Page 89

**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.

\[SIGNATURES AND ACKNOWLEDGMENTS\]

RD Instruction 2000-OOO

Exhibit A

Page 90

**EXHIBIT A**

\[DESCRIPTION OF THE LAND\]

RD Instruction 2000-OOO

Exhibit A

Page 91

**EXHIBIT B**

MODIFICATIONS TO INSTRUMENT

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

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RD Instruction 2000-OOO

Exhibit A

Page 92

###### REPLACEMENT RESERVE AGREEMENT

**(REVISION DATE 11-01-2000)**

This REPLACEMENT RESERVE AGREEMENT (\"Agreement\") is made and entered
into as of , , by and between , a (\"Borrower\"), and (\"Lender\") and
its successors and assigns.

[W I T N E S S E T H]{.underline}:

WHEREAS, Lender has agreed to make and Borrower has agreed to accept the
Loan, which is to be evidenced by the Note and secured by the Security
Instrument encumbering the Property described on [Exhibit
\"A\"]{.underline} attached to, and incorporated into, this Agreement by
reference;

WHEREAS, as a condition to the closing of the Loan, Lender has required
Borrower to establish the Replacement Reserve Fund at the time of
closing for the funding of Capital Replacements throughout the Loan
term; and

WHEREAS, Lender and Borrower are desirous of reducing to writing all of
their agreements regarding the Replacement Reserve Fund.

NOW, THEREFORE, for and in consideration of the Loan, the mutual
promises and covenants herein contained, and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, Lender and Borrower agree as follows:

1\. [Definitions]{.underline}. The following terms used in this
Agreement shall have the meanings set forth below in this Paragraph 1:

\(a\) \"Capital Replacement\" means the replacement of those items
listed on [Exhibit \"B\"]{.underline} of this Agreement and such other
replacements as may be approved in writing or required by Lender.

\(b\) \"Disbursement Period\" means the interval between disbursements
from the Replacement Reserve Fund, which interval shall be no shorter
than once a

***\[select applicable period and initial beside selected period\]***

***[Lender and Borrower initials]{.underline}:***

month [/]{.underline}

quarter. [/]{.underline}

RD Instruction 2000-OOO

Exhibit A

Page 93

\(c\) \"Jurisdiction\" means the State in which the Property is located.

\(d\) \"Loan\" means the loan from Lender to Borrower in the original
principal amount of Dollars
(\$[                                  ]{.underline}), as evidenced by
the Note and secured by the Security Instrument.

\(e\) \"Loan Documents\" means, collectively, the Note, Security
Instrument and all other instruments and documents executed in
connection with the Loan.

\(f\) \"Minimum Disbursement Request Amount\" means Dollars (\$ ).

\(g\) \"Note\" means the promissory note from Borrower to Lender
evidencing the Loan.

\(h\) \"Property\" means the real property described on [Exhibit
\"A\"]{.underline} of this Agreement.

\(i\) \"Replacement Reserve Deposit\" means the initial deposit in the
amount of Dollars (\$ ) made as of the date of this Agreement, together
with the sum of Dollars (\$ ) per month to be deposited into the
Replacement Reserve Fund, as such monthly deposit amount may increase
from time to time in accordance with the schedule attached to this
Agreement as [Exhibit \"C\"]{.underline}.

\(j\) \"Replacement Reserve Fund\" means the account established
pursuant to this Agreement to defray the costs of Capital Replacements.

\(k\) \"Security Instrument\" means the mortgage, deed of trust, deed to
secure debt, or other similar security instrument encumbering the
Property and securing Borrower\'s performance of its Loan obligations.

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RD Instruction 2000-OOO

Exhibit A

Page 94

2\. [Replacement Reserve Fund]{.underline}.

\(a\) [Establishment; Funding]{.underline}. Upon the closing of the
Loan, the parties shall establish the Replacement Reserve Fund and, if
required by Lender, Borrower shall pay to Lender for deposit into the
Replacement Reserve Fund, the amount of the initial Replacement Reserve
Deposit. Commencing on the date the first installment of principal
and/or interest is due under the Note and continuing on the same day of
each successive month during the Loan term, Borrower shall pay to Lender
for deposit into the Replacement Reserve Fund the monthly Replacement
Reserve Deposit, together with its regular monthly payments of principal
and interest as required by the Note and Security Instrument. The
Replacement Reserve Fund shall be maintained and governed in accordance
with this Agreement.

\(b\) [Investment of Deposits]{.underline}. Borrower and Lender agree
that all moneys deposited into the Replacement Reserve Fund shall be
held by Lender in an interest bearing account, and any interest earned
on such moneys shall be added to the principal balance of the
Replacement Reserve Fund and disbursed in accordance with the provisions
of this Agreement. Lender shall not be responsible for any losses
resulting from investment of moneys in the Replacement Reserve Fund or
for obtaining any specific level or percentage of earnings on such
investment. Lender shall be entitled to deduct from the Replacement
Reserve Fund a one time fee for establishing the Replacement Reserve
Fund in an amount not to exceed \$ .

\(c\) [Use]{.underline}. Subject to the pledge and security interest and
other rights of Lender set forth in this Agreement, the Replacement
Reserve Fund shall be maintained for the payment of the costs of the
Capital Replacements identified on [Exhibit B]{.underline} attached to
this Agreement.

***\[delete the following subsection (d) if the Commitment requires
immediate monthly deposits to the Replacement Reserve Fund\]***

\(d\) [Deferral of Deposits]{.underline}. Notwithstanding
subsections 2(a) through (c) above, Lender defers its right to require
Borrower to make the monthly Replacement Reserve Deposit. Lender,
however, reserves the right to require, in its reasonable discretion and
upon written notice to Borrower, at any time and from time to time, that
Borrower begin making the monthly Replacement Reserve Deposit upon the
occurrence of any of the following events:

RD Instruction 2000-OOO

Exhibit A

Page 95

\(1\) Borrower's default under the Note, Security Instrument, or any
other document delivered in connection with the Loan, or

\(2\) the occurrence of a Transfer which is prohibited under the terms
of the Security Instrument or which requires Lender's consent, or

\(3\) Borrower's failure to maintain the Property in a satisfactory
manner and/or in accordance with the requirements of the Security
Instrument.

3\. [Disbursements]{.underline}.

\(a\) [Requests for Disbursement]{.underline}. Lender shall disburse
funds from the Replacement Reserve Fund, in its sole discretion, as
follows:

\(i\) [Borrower\'s Request]{.underline}. If Borrower determines, at any
time or from time to time, that a Capital Replacement is necessary or
desirable, Borrower shall perform such Capital Replacement and request
from Lender, in writing, reimbursement for such Capital Replacement.
Borrower\'s request for reimbursement shall include (A) a detailed
description of the Capital Replacement performed, together with
evidence, satisfactory to Lender, that the cost of such Capital
Replacement has been paid and (B) lien waivers from each contractor and
material supplier supplying labor or materials for such Capital
Replacement, if required by Lender.

\(ii\) [Lender\'s Request]{.underline}. If Lender shall determine, at
any time or from time to time, that Capital Replacements are necessary
or desirable, it shall so notify Borrower, in writing, requesting that
Borrower obtain and submit to Lender bids for all labor and materials
required in connection with such Capital Replacement. Borrower shall
submit such bids and a time schedule for completing each Capital
Replacement to Lender within thirty (30) days after Borrower\'s receipt
of Lender\'s notice.

\(b\) [Conditions Precedent]{.underline}. Disbursement from the
Replacement Reserve Fund shall be made no more frequently than once
every Disbursement Period and, except for the final disbursement, no
disbursement shall be made in an amount less than the Minimum
Disbursement Request Amount. Disbursements shall be made only if the
following conditions precedent have been satisfied, as reasonably
determined by Lender:

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Exhibit A

Page 96

\(i\) [Payment for Capital Replacement]{.underline}. The Capital
Replacement has been performed and/or installed on the Property in a
good and workmanlike manner with suitable materials (or in the case of a
partial disbursement, performed and/or installed on the Property to an
acceptable stage) and paid for by Borrower as evidenced by copies of all
applicable paid invoices or bills submitted to Lender by Borrower at the
time Borrower requests disbursement from the Replacement Reserve Fund.

\(ii\) [No Default]{.underline}. There shall exist no condition, event
or act which would constitute a default (with or without notice and/or
lapse of time) under this Agreement or any other Loan Document.

\(iii\) [Representations and Warranties]{.underline}. All
representations and warranties of Borrower set forth in this Agreement
and in the Loan Documents are true.

\(iv\) [Continuing Compliance]{.underline}. Borrower shall be in full
compliance with the provisions of this Agreement, the other Loan
Documents and any request or demand by Lender permitted hereby.

\(v\) [No Lien Claim]{.underline}. No lien or claim based on furnishing
labor or materials has been filed or asserted against the Property or
the Improvements, unless Borrower has properly provided bond or other
security against loss in accordance with applicable law.

\(vi\) [Approvals]{.underline}. All licenses, permits, and approvals of
governmental authorities required for the Capital Replacement as
completed to the applicable stage have been obtained.

\(vii\) [Legal Compliance]{.underline}. The Capital Replacement as
completed to the applicable stage does not violate any laws, ordinance,
rules or regulations, or building lines or restrictions applicable to
the Property.

4\. [Right to Complete Capital Replacements]{.underline}. If Borrower
abandons or fails to proceed diligently with and complete any Capital
Replacement in a timely fashion or is otherwise in default under this
Agreement, Lender shall have the right (but not the obligation) to enter
upon the Property and take over and cause the completion of such Capital
Replacement. Any contracts entered into or indebtedness incurred upon
the exercise of such right may be in the name of Borrower, and Lender is
hereby irrevocably appointed the attorney in fact of Borrower, such
appointment being coupled with an interest, to enter into such
contracts, incur such obligations, enforce any contracts or agreements
made by or on behalf of

RD Instruction 2000-OOO

Exhibit A

Page 97

Borrower (including the prosecution and defense of all actions and
proceedings in connection with the Capital Replacement and the payment,
settlement or compromise of all bills and claims for materials and work
performed in connection with the Capital Replacement) and do any and all
things necessary or proper to complete any Capital Replacement including
signing Borrower\'s name to any contracts and documents as may be deemed
necessary by Lender. In no event shall Lender be required to expend its
own funds to complete any Capital Replacement, but Lender may, in its
sole discretion, advance such funds. Any funds advanced shall be added
to the outstanding balance of the Loan, secured by the Security
Instrument and payable to Lender by Borrower in accordance with the
provisions of the Security Instrument pertaining to the protection of
Lender\'s security and advances made by Lender. Borrower waives any and
all claims it may have against Lender for materials used, work performed
or resultant damage to the Property.

5\. [Inspection]{.underline}. Lender or any representative of Lender may
periodically inspect any Capital Replacement in process and upon
completion during normal business hours or at any other reasonable time.
Lender shall be entitled to deduct from the Replacement Reserve Fund
reasonable fees for performing any such inspection, which fee shall not
exceed \$ per inspection. If Lender, in its sole discretion, retains a
professional inspection engineer or other qualified third party to
inspect any Capital Replacement, Lender also shall be entitled to deduct
from the Replacement Reserve Fund an amount sufficient to pay all
reasonable fees and expenses charged by such third party inspector.

6\. [Insufficient Account]{.underline}. If Borrower requests
disbursement from the Replacement Reserve Fund for a Capital Replacement
in accordance with this Agreement in an amount which exceeds the amount
on deposit in the Replacement Reserve Fund, Lender shall disburse to
Borrower only the amount on deposit in the Replacement Reserve Fund. All
additional amounts required in connection with any such Capital
Replacement shall be paid by Borrower from Borrower\'s own funds.

7\. [Security Agreement]{.underline}. Borrower hereby conveys, pledges,
transfers and grants to Lender a security interest pursuant to the
Uniform Commercial Code of the Jurisdiction or any other applicable law
in and to all money in the Replacement Reserve Fund, as same may
increase or decrease from time to time, for the purpose of securing
Borrower\'s obligations under this Agreement and to further secure
Borrower\'s obligations under the Note, Security Instrument and other
Loan Documents.

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RD Instruction 2000-OOO

Exhibit A

Page 98

8\. [Post Default]{.underline}. If Borrower defaults in the performance
of its obligations under this Agreement or under the Note, Security
Instrument or any other Loan Document, Lender and its successors and
assigns shall have all remedies available to them under Article 9 of the
Uniform Commercial Code of the Jurisdiction and under any other
applicable law and, in addition, may retain all money in the Replacement
Reserve Fund, including interest, and in Lender\'s discretion, may apply
such amounts, without restriction and without any specific order of
priority, to the payment of any and all indebtedness or obligations of
Borrower set forth in the Note, Security Instrument or any other Loan
Document, including, but not limited to, principal, interest, taxes,
insurance, reasonable attorneys\' fees actually incurred and/or repairs
to the Property.

9\. [Termination]{.underline}. If not sooner terminated by written
concurrence of the parties, this Agreement shall terminate upon the
payment in full of the Loan and all indebtedness incurred in connection
therewith and upon such termination, Lender shall pay to Borrower all
funds remaining in the Replacement Reserve Fund.

10\. [No Amendment]{.underline}. Nothing contained in this Agreement
shall be construed to amend, modify, alter, change or supersede the
terms and provisions of the Note, Security Instrument or any other Loan
Document; and, if there is a conflict between the terms and provisions
of this Agreement and those of the Note, Security Instrument, or any
other Loan Document then the terms and provisions of the Note, Security
Instrument or such other Loan Document shall control.

11\. [Release; Indemnity]{.underline}.

\(a\) [Release]{.underline}. Borrower covenants and agrees that, in
performing any of its duties under this Agreement, neither Lender nor
its successors and assigns shall be liable for any losses, costs or
damages which may be incurred by any of them as a result of such
performance, except for any losses, costs or damages arising out of the
willful misconduct or gross negligence of such party.

\(b\) [Indemnity]{.underline}. Borrower hereby agrees to indemnify and
hold harmless Lender and its successors and assigns from and against any
and all losses, claims, damages, liabilities and expenses including,
without limitation, reasonable attorneys\' fees and disbursements, which
may be imposed or incurred by any of them in connection with this
Agreement.

RD Instruction 2000-OOO

Exhibit A

Page 99

12\. [Choice of Law]{.underline}. This Agreement shall be construed and
enforced in accordance with the laws of the Jurisdiction.

13\. [Successors and Assigns]{.underline}. Borrower acknowledges and
agrees that Lender, at its option, may assign or otherwise transfer the
Loan and any or all Loan Documents including, but not limited to, this
Agreement, to other parties subsequent to the execution of this
Agreement. This Agreement shall be binding upon the respective
successors and assigns of Borrower and Lender. Borrower may not assign
its rights, interests or obligations under this Agreement without first
obtaining Lender\'s prior written consent.

14\. [Attorneys\' Fees]{.underline}. In the event that Lender or its
successors or assigns shall engage the services of an attorney at law to
enforce the provisions of this Agreement against Borrower, then Borrower
shall pay all costs of such enforcement, including any reasonable
attorneys\' fees actually incurred.

15\. [Compliance with Laws; Insurance Requirements]{.underline}.

\(a\) [Compliance with Laws]{.underline}. All Capital Replacements shall
comply with all applicable laws, ordinances, rules and regulations of
all governmental authorities having jurisdiction over the Property and
applicable insurance requirements including, without limitation,
applicable building codes, special use permits, environmental
regulations, and requirements of insurance underwriters.

\(b\) [Insurance Requirements]{.underline}. In addition to any insurance
required under the Loan Documents, Borrower shall provide or cause to be
provided workers\' compensation, builder\'s risk (if required by
Lender), and public liability insurance and other insurance required
under applicable law in connection with any of the Capital Replacements.
All such policies which can be endorsed with standard mortgage clauses
making losses payable to Lender or its assigns shall be so endorsed. The
originals of such policies shall be deposited with Lender.

16\. [Remedies Cumulative]{.underline}. In the event of Borrower\'s
default under this Agreement, Lender may exercise all or any one or more
of its rights and remedies available under this Agreement, at law or in
equity. Such rights and remedies shall be cumulative and concurrent, and
may be enforced separately, successively or together, and Lender\'s
exercise of any particular right or remedy shall not in any way prevent
Lender from exercising any other right or remedy available to Lender.
Lender may exercise any such remedies from time to time as often as may
be deemed necessary by Lender.

(01-23-02) PN 340

RD Instruction 2000-OOO

Exhibit A

Page 100

17\. [Determinations by Lender]{.underline}. In any instance where the
consent or approval of Lender may be given or is required, or where any
determination, judgment or decision is to be rendered by Lender under
this Agreement, the granting, withholding or denial of such consent or
approval and the rendering of such determination, judgment or decision
shall be made or exercised by Lender (or its designated representative)
at its sole and exclusive option and in its sole and absolute
discretion.

18\. [Completion of Capital Replacements]{.underline}. Lender\'s
disbursement of moneys from the Replacement Reserve Fund or other
acknowledgment of completion of any Capital Replacement in a manner
satisfactory to Lender shall not be deemed a certification by Lender
that the Capital Replacement has been completed in accordance with
applicable building, zoning or other codes, ordinances, statutes, laws,
regulations or requirements of any governmental authority or agency.
Borrower shall at all times have the sole responsibility for insuring
that all Capital Replacements are completed in accordance with all such
governmental requirements.

19\. [No Agency or Partnership]{.underline}. Nothing contained in this
Agreement shall constitute Lender as a joint venturer, partner or agent
of Borrower, or render Lender liable for any debts, obligations, acts,
omissions, representations or contracts of Borrower.

20\. [Entire Agreement]{.underline}. This writing, together with
references to this Agreement contained in the Security Instrument,
constitutes the entire agreement of the parties relative to the
Replacement Reserve Fund. Any modification or amendment of this
Agreement shall be ineffective unless in writing and signed by Lender
and Borrower; provided, however, that in the event of a Transfer under
the terms of the Security Instrument, any or some or all of the
Modifications to Agreement set forth in Exhibit D (if any) may be
modified or rendered void by Lender at Lender's option by notice to
Borrower/transferee.

RD Instruction 2000-OOO

Exhibit A

Page 101

**ATTACHED EXHIBITS.** The following Exhibits are attached to this
Agreement:

\|[X]{.underline} \| Exhibit A Property Description (required)

\|[X]{.underline} \| Exhibit B Capital Replacements (required)

\|[X]{.underline} \| Exhibit C Replacement Reserve Deposit (required)

\| \| Exhibit D Modifications to Agreement

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first above written.

BORROWER:

Borrower\'s Social Security

or Taxpayer Identification No. By:

Name:

Title:

LENDER:

[\_]{.underline}

By:

Name:

Title:

(01-23-02) PN 340

RD Instruction 2000-OOO

Exhibit A

Page 102

**[EXHIBIT A]{.underline}**

[Property Description]{.underline}

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

**PAGE A-1**

RD Instruction 2000-OOO

Exhibit A

Page 103

**[EXHIBIT B]{.underline}**

####### Capital Replacements

[\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_]{.underline}

**PAGE B-1**

(01-23-02) PN 340

RD Instruction 2000-OOO

Exhibit A

Page 104

**[EXHIBIT C]{.underline}**

[Replacement Reserve Deposit]{.underline}

The following amounts shall be paid to Lender by Borrower each month in
accordance with the provisions of Paragraph 2(a) for deposit into the
Replacement Reserve Fund ***\[delete the following if the Commitment
requires immediate funding of the Replacement Reserve:*** subject to the
provisions of Paragraph 2(d)***\]***:

From: to , \$

***\[complete the following only if the amount of the Replacement
Reserve Deposit will change during the loan term\]***

From: [\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_]{.underline}, to , \$

From: , to , \$

From: [\_\_\_]{.underline} , to , \$

From: , to , \$

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

**PAGE C-1**

RD Instruction 2000-OOO

Exhibit A

Page 105

**[EXHIBIT D]{.underline}**

[Modifications to Agreement]{.underline}

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

**PAGE D-1**

(01-23-02) PN 340

RD Instruction 2000-OOO

Exhibit A

Page 106

**[REGULATORY AGREEMENT]{.underline}**

THIS AGREEMENT (\"Agreement\") is executed as of
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, 20\_\_\_ by and between
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, a
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ organized under the laws of the
State of \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
(\"Borrower\") and
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, a
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ organized under the laws of the
State of \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
(\"Lender\")

**[PRELIMINARY STATEMENT]{.underline}**

Borrower has requested that Lender make a loan to Borrower in the amount
of \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_(the \"Loan\") for the construction of
the \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_Apartments to be located
in\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, on a site more
particularly described in Exhibit A. (the \"Property\"). The Loan will
be evidenced by a Multifamily Note dated as of
\_\_\_\_\_\_\_\_\_\_\_\_\_\_, 20\_\_, executed by Borrower and payable
to Lender (the \"Note\") and will be secured by, among other things, a
Multifamily **\[Mortgage\] \[Deed of Trust\] \[Deed to Secure Debt\]**,
Assignment of Rents and Security Agreement dated as of
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, 20\_\_\_ (the \"Security
Instrument\"), to be recorded in the land records of
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_. Borrower and Lender also
will enter into a Replacement Reserve Agreement (the \"Replacement
Reserve Agreement\") dated as of \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, 20
\_\_\_ relating to the establishment and funding of a reserve for future
repairs to and replacement of components of the Property.

Lender is agreeable to making the Loan if the Loan is the subject of a
90% guarantee from the United States Secretary of Agriculture, acting
through the United States Department of Agriculture, Rural Housing
Service (\"RHS\") under section 538 of the Housing Act of 1949, 12
U.S.C. section 1490p-2 (the \"RHS Guarantee\"). As a condition precedent
to providing the Guarantee, RHS requires that Borrower enter into this
Agreement.

**NOW, THEREFORE,** in consideration of Lender making the Loan, and of
the mutual undertakings set forth below, Lender and Borrower agree as
follows:

1\. **Definitions.** As used in this Agreement, \"**Lender**\" means the
entity identified as \"Lender\" in the first paragraph of this
Instrument, or any subsequent holder of the Note. Any other capitalized
terms that are used in this Agreement but not defined n this Agreement
shall have the meanings assigned to them by the Security Instrument.

2\. **Covenants of Borrower.**

RD Instruction 2000-OOO

Exhibit A

Page 107

(Revision 1)

Borrower shall do all of the following:

> \(a\) Make all payments due under the Note, all deposits to escrows
> required for Impositions and annual RHS guarantee fees as required by
> the Security Instrument and all deposits to the replacement reserve
> required by the Replacement Reserve Agreement of
>
> \(b\) Maintain the Property in good physical and financial condition
> at all times.
>
> \(c\) Maintain a complete set of books and financial records for the
> Property, as required by Section 12 of the Security Instrument.
>
> \(d\) Provide Lender audited financial statements for each fiscal year
> of Borrower as required by Section 12 of the Security Instrument, and
> simultaneously provide RHS a copy of such statements.
>
> \(e\) Make the Property\'s books and financial records available for
> review by the United States Department of Agriculture Inspector
> General, RHS and the General Accounting office or their
> representatives, upon appropriate notification.
>
> \(f\) Comply with the Affirmative Fair Housing Marketing Plan provided
> to Lender in conjunction with the Loan and with all other applicable
> federal, state and local laws regarding fair housing, including but
> not limited to provisions of such laws that are applicable to
> federally assisted multifamily housing.
>
> \(g\) Comply with 7 CFR part 3560, Subparts (C) and (D), with regard
> to (i) fair housing and equal opportunities, (ii) lease and grievance
> procedures, (iii) tenant appeals of adverse actions and (iv) informing
> tenants of such procedures. (Revised 02-24-05, SPECIAL PN.)
>
> \(h\) Comply with all other applicable federal, state and local laws.
>
> \(i\) Maintain the Property, and all Personalty associated with it, as
> its sole asset.

\(j\) Manage the Property in a manner that complies with the Security
Instrument and is satisfactory to RHS, including but not limited to
compliance with the Management Plan submitted to Lender in conjunction
with the Loan.

(01-23-02) PN 340

RD Instruction 2000-OOO

Exhibit A

Page 108

(Revision 1)

> \(k\) Give written notice to Lender of any violation of Borrower\'s
> obligations under this Agreement within five (5) days after first
> discovering any such violation,

**2. Covenants of Borrower regarding Occupancy.** Borrower shall do all
of the following:

\(a\) Maintain the Property in accordance with 7 C.F.R. Section
3565.352.

### (b) Without limiting the generality of Subsection (a), make the Property available for occupancy only by families or individuals whose incomes at the time of initial occupancy do not exceed one hundred fifteen percent (115%) of the area median income. After initial occupancy, a tenant\'s income may exceed these limits.  {#b-without-limiting-the-generality-of-subsection-a-make-the-property-available-for-occupancy-only-by-families-or-individuals-whose-incomes-at-the-time-of-initial-occupancy-do-not-exceed-one-hundred-fifteen-percent-115-of-the-area-median-income.-after-initial-occupancy-a-tenants-income-may-exceed-these-limits. .Par.-no-sm.-hang .unnumbered}

###  {#section-3 .Par.-no-sm.-hang .unnumbered}

### (c) Lease each dwelling unit in the Property for a rental that does not exceed 30% of 115% of area median income, adjusted for family size.  {#c-lease-each-dwelling-unit-in-the-property-for-a-rental-that-does-not-exceed-30-of-115-of-area-median-income-adjusted-for-family-size. .Par.-no-sm.-hang .unnumbered}

###  {#section-4 .Par.-no-sm.-hang .unnumbered}

### (d) Establish rents for dwelling units in the Property so that, on an annual basis, the average rent for dwelling units in the Property does not exceed 30% of 100% of area median income, adjusted for family size.  {#d-establish-rents-for-dwelling-units-in-the-property-so-that-on-an-annual-basis-the-average-rent-for-dwelling-units-in-the-property-does-not-exceed-30-of-100-of-area-median-income-adjusted-for-family-size. .Par.-no-sm.-hang .unnumbered}

###  {#section-5 .Par.-no-sm.-hang .unnumbered}

### (c) Lease dwelling units only to tenants who are United States citizens or a non‑citizens who is a qualified alien as defined in \[7 C.F.R. Section 3565.3.\] {#c-lease-dwelling-units-only-to-tenants-who-are-united-states-citizens-or-a-noncitizens-who-is-a-qualified-alien-as-defined-in-7-c.f.r.-section-3565.3. .Par.-no-sm.-hang .unnumbered}

\"Area median income\" shall be determined and adjusted for family size
in accordance with guidance on the subject issued by RHS. To the extent
utilities are paid by the tenant, \"rent\" or \"rental\" shall consist
of the rent for the dwelling unit payable under the lease plus an
allowance for utilities determined in accordance with administrative
guidance issued by RHS.

3**. Income Verification.** Borrower will obtain, complete, and maintain
on file a certification by each prospective tenant of its income, using
a form acceptable to Lender. Borrower shall make a good faith effort to
verify that the income information provided by a prospective tenant is
accurate by taking one or more of the following steps as a part of the
verification process: (1) obtain a pay stub for the most recent pay
period, (2) obtain an income tax

RD Instruction 2000-OOO

Exhibit A

Page 109

return for the most recent tax year, (3) conduct a credit report or
similar search, (4) obtain an income verification from the applicant\'s
current employer, (5) obtain an income verification from the Social
Security Administration if the applicant receives assistance from either
of such agencies, or (6) if the applicant is unemployed and does not
have an income tax return, obtain another form of independent
verification.

**4. Covenants to Run With the Land.** Borrower hereby subjects the
Property to the covenants, reservations and restrictions set forth in
this Agreement. Lender and Borrower hereby declare their express intent
that the covenants, reservations and restrictions set forth in this
Agreement shall be deemed covenants running with the land and shall pass
to and be binding upon the Owner\'s successors in title to the Property,
until the termination of this Agreement under Section 6. Every contract,
deed or other instrument hereafter executed covering or conveying the
Property or any portion of the Property shall be deemed to have been
executed, delivered and accepted subject to such covenants, reservations
and restrictions, regardless of whether such covenants, reservations and
restrictions are set forth in that contract, deed or other instrument.

**5. Burden and Benefit.** Borrower and Lender intend that the burdens
of the covenants set forth in this Agreement touch and concern the land
in that Borrower\'s interest in the Property is rendered less valuable
as a result of them. Borrower and Lender intend that the benefits of the
covenants touch and concern the land by enhancing and increasing the
enjoyment and use of the Property by tenants whose incomes are below the
levels set forth in Section 3, who are the intended beneficiaries of the
covenants.

**6. Term of Agreement.** This Agreement shall remain in effect until
the first of the following to occur, at which time this Agreement shall
automatically terminate:

> \(a\) The Loan and all related amounts owed to Lender by Borrower have
> been paid in full.

\(b\) A Foreclosure.

**7. Event of Default.** Any failure by Borrower to perform any of its
obligations under this Agreement as and when required, which continues
for a period of 30 days after notice of such failure by Lender to
Borrower, shall constitute an Event of Default under this Agreement.
However:

(01-23-02) PN 340

RD Instruction 2000-OOO

Exhibit A

Page 110

\(a\) If the Security Instrument imposes the same obligation and
provides for a shorter cure period or no cure period for breach of that
obligation, then Borrower, in lieu of the above-specified 30-day cure
period, shall be allowed, respectively, the same cure period provided
for in the Security Instrument or no cure period; and

\(b\) No such notice or cure 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 Agreement, result in harm to
Lender, impairment of this Agreement or the RHS guarantee.

**8. Remedies of Lender.** If an Event of Default under this Agreement
has occurred and is continuing, either Lender may, at its option, take
any one or more of the following steps, in addition to all other
remedies provided at law or in equity:

\(a\) By mandamus or other proceeding at law or in equity, including but
not limited to an action seeking injunctive relief or a declaratory
judgment, require Borrower to perform its obligations under this
Agreement or enjoin any acts which may be unlawful or in violation of
this Agreement.

\(b\) Declare that an Event of Default has occurred and is continuing
under the Security Instrument, as authorized by Section 22 of the
Security Instrument, and exercise any and all remedies available to
Lender under the Security Instrument and any of the other Loan
Documents.

\(c\) Take such other action at law or in equity as may appear necessary
or desirable to enforce the obligations of Borrower under this
Agreement.

**9. Remedies of RHS.** If an Event of Default under this Agreement has
occurred and is continuing, RHS, as a third party beneficiary of this
Agreement, may by mandamus or other proceeding at law or in equity,
including but not limited to an action seeking injunctive relief or a
declaratory judgment, require Borrower to perform its obligations under
this Agreement or enjoin any acts which may be unlawful or in violation
of this Agreement.

RD Instruction 2000-OOO

Exhibit A

Page 111

**10. Release.** Upon termination of this Agreement, Lender shall
execute such instruments as Borrower may reasonably request to evidence
such termination, so long as such instruments are prepared, delivered
and recorded at no expense to Lender.

**11. Notices.**

\(a\) All notices under or concerning this Agreement shall be in
writing. Each such notice shall be deemed given when received by the
addressee or delivered to Federal Express, Network Courier or a
comparable overnight courier service, addressed as provided in this
Section and with charges for next business day delivery paid.

\(b\) Notices intended for Borrower shall be addressed to:

\(c\) Notices intended for Lender shall be addressed to the Loan
Servicer as defined in the Security Instrument.

\(d\) Either party may change the address to which notices intended for
that party are to be directed by means of notice given to all other
parties in accordance with this Section.

**12. Governing Law.** This Agreement shall be governed by and construed
in accordance with the laws of the state in which the Property is
located.

**13. Captions, Cross References and Exhibits.** The captions assigned
to provisions of this Agreement are for convenience only and shall be
disregarded in construing this Agreement. Any reference in this
Agreement to an \"Exhibit\", a \"Section\", a \"Subsection\" or a
\"Paragraph\" shall, unless otherwise explicitly provided, be construed
as referring, respectively, to an Exhibit attached to this Agreement, a
section of this Agreement, a subsection of the section of this Agreement
in which the reference appears and a paragraph of the subsection within
this Agreement in which the reference appears. All Exhibits attached to
or referred to in this Agreement are incorporated by reference into this
Agreement.

**14. Number and Gender.** Use of the singular in this Agreement
includes the plural, use of the plural includes the singular, and use of
one gender includes all other genders, as the context may require.

**15. Statutes and Regulations.** Any reference in this Agreement to a
statute or regulation shall include all amendments to and successors to
such statute or regulation, whether adopted before or after the date of
this Agreement.

(01-23-02) PN 340

RD Instruction 2000-OOO

Exhibit A

Page 112

**16. No Partnership.** This Agreement is not intended to, and shall
not, create a partnership or joint venture among the parties, and no
party to this Agreement shall have the power or authority to bind any
other party except as explicitly provided in this Agreement.

**17. Successors and Assigns.** No party to this Agreement may assign
its rights or delegate its obligations under this Agreement without the
prior written consent of all other parties. This Agreement shall be
binding upon and shall inure to the benefit of the parties and their
respective heirs, successors, and permitted assigns.

**18. Severability.** The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity of any other
provision, and all other provisions shall remain in full force and
effect.

**19. Integration.** This Agreement represents the final agreement
between the parties with respect to the matters addressed in this
Agreement, and may not be contradicted by evidence of prior,
contemporaneous or subsequent oral agreements. There are no unwritten
oral agreements between the parties. All prior or contemporaneous
agreements, understandings, representations, and statements, oral or
written, are merged into this Agreement.

**20. Waiver; No Remedy Exclusive.** Any forbearance by a party to this
Agreement in exercising any right or remedy given under this Agreement
or existing at law or in equity shall not constitute a waiver of or
preclude the exercise of that or any other right or remedy. Unless
otherwise explicitly provided, no remedy under this Agreement is
intended to be exclusive of any other available remedy, but each remedy
shall be cumulative and shall be in addition to other remedies given
under this Agreement or existing at law or in equity.

**21. Third Party Beneficiaries.** Except for RHS, which the parties
intend to be a third party beneficiary, neither any creditor of any
party to this Agreement, nor any other person, is intended to be a third
party beneficiary of this Agreement.

**22. Further Assurances and Corrective Instruments.** To the extent
permitted by law, the parties shall, from time to time, execute,
acknowledge and deliver, or cause to be executed, acknowledged and
delivered, such supplements to this Agreement and such further
instruments as may reasonably be required for carrying out the intention
of or facilitating the performance of this Agreement. Without limiting
the generality of the foregoing, Borrower shall executed such amendments
to this Agreement as may be required by RHS in order to ensure the
validity of the RHS Guarantee.

RD Instruction 2000-OOO

Exhibit A

Page 113

**23. Attorneys\' Fees.** If either party to this Agreement brings suit
against the other as a result of any alleged breach of this Agreement by
the other or failure by the other to perform its obligations under this
Agreement or under any other instrument delivered pursuant to this
Agreement, or to seek declaratory relief as to the rights or obligations
of either party to this Agreement, then the prevailing party in such
action, in addition to any other relief which may be granted in such
action, shall be entitled to judgment for reasonable attorneys\' fees
incurred by reason of such action and all costs of such action
(including but not limited to reasonable fees of expert witnesses) and
costs incurred in preparation of such action, at both trial and
appellate levels.

**24. No Party Deemed Drafter.** No party shall be deemed the drafter of
this Agreement, and this Agreement shall not be construed against either
party as the drafter of the Agreement.

-   \[ADD SIGNATURES, ACKNOWLEDGMENTS AND PROPERTY DESCRIPTION\]

(01-23-02) PN 340

RD Instruction 2000-OOO

Exhibit A

Page 114

**MODIFICATIONS TO MULTIFAMILY NOTE,**

# [SECURITY INSTRUMENT AND]{.underline}

**[REPLACEMENT RESERVE AGREEMENT]{.underline}**

MODIFICATIONS TO NOTE:

A. The following is added at the end of Paragraph 3(b):

> Notwithstanding the foregoing, the interest component of each monthly
> installment shall be reduced by the amount of the interest credit
> subsidy with respect to that installment that is projected by Lender
> to be payable by the United States Department of Agriculture, Rural
> Housing Service (\"RHS\"), but only to the extent that Lender has on
> deposit in the Interest Credit Escrow established under the Security
> Instrument (the \"Interest Credit Escrow\") funds deposited in escrow
> by Maker or received from RHS in the form of past years\' interest
> credit subsidy payments that are sufficient to cover such reduction.
> The Lender\'s projection of interest credit subsidies shall be made in
> its sole discretion and shall be conclusive.

B. A second subparagraph is added to Paragraph 9(c) of the Note, as
follows:

> In addition, Borrower shall be personally liable for the amount of the
> interest credit subsidy with respect to any monthly installment that
> is projected by Lender to be payable by RHS, to the extent such
> projected amount exceeds the balance on deposit in the Interest Credit
> Escrow.

C. Any prepayment premium shall be calculated under Paragraph 10 based
on the full annual interest rate of this Note, without regard to the
reduction of monthly installment payments by the amount of projected
interest credit subsidies under Paragraph 3(b).

RD Instruction 2000-OOO

Exhibit A

Page 115

***MODIFICATIONS TO SECURITY INSTRUMENT***:

A. The following new section is added:

\_\_ \_\_. FEDERAL GUARANTEE.

> \(a\) It is the intention of the parties that the Indebtedness be
> guaranteed (the \"RHS Guarantee\") by the United States Secretary of
> Agriculture, acting through the United States Department of
> Agriculture, Rural Housing Service (\"RHS)\" under 12 U.S.C. Section
> 1490p-2. This section sets forth additional obligations of Borrower
> that relate to the RHS Guarantee.
>
> \(b\) The financial statements required by Section 14(b)(1) shall be
> prepared in accordance with Generally Accepted Government Audit
> Standards and shall be delivered by Borrower to both Lender and RHS.
>
> \(c\) Lender will establish an Interest Credit Escrow in which it will
> deposit and hold all interest credit subsidies received from RHS, for
> application in accordance with Paragraph 3(b) of the Note. The
> Interest Credit Escrow shall be part of the Mortgaged Property. If an
> Event of Default has occurred and is continuing, Lender may apply any
> balance in the Interest Credit Escrow in any amounts and in any order
> as Lender determines, in Lender\'s discretion, as a credit against the
> Indebtedness. Upon payment in full of the Indebtedness, Lender shall
> remit to Borrower any balance in the Interest Credit Escrow.
>
> \(d\) Borrower shall not withdraw from the Mortgaged Property\'s
> operating accounts or distribute to the partners, members,
> shareholders or holders of beneficial interests in borrower any income
> of any kind of the Mortgaged Property, without the prior written
> approval of Lender, except for surplus cash. No such withdrawal or
> distribution shall be made from borrowed funds or when there has
> occurred and is continuing any Event of Default or any event that,
> with the giving of notice or the passage of time or both, will become
> an Event of Default. \"Surplus Cash\" means any cash remaining after­
> the payment of:

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RD Instruction 2000-OOO

Exhibit A

Page 116

> \(i\) all sums due or currently required to be paid under the Note,
> this Instrument or any other Loan Document;
>
> \(ii\) all amounts required to be deposited in the Replacement
> Reserve;
>
> \(iii\) all obligations with respect to the Mortgaged Property other
> than the Indebtedness unless funds for payment are set aside or
> deferral of payment has been approved by the RHS and Lender; and the
> segregation of:
>
> \(iv\) an amount equal to the aggregate of all special funds required
> to be maintained for the Mortgaged Property and all tenant security
> deposits.
>
> At the end of each fiscal year of the Mortgaged Property, the
> Mortgagor may request Lender\'s consent to withdraw or distribute
> surplus cash. The following shall be conditions precedent to any such
> consent:
>
> \(1\) Borrower must have submitted the annual audited financial
> statements required by Section 14(b)(1) (as modified above) and the
> content of such statements and the financial condition of the
> Mortgaged Property must be satisfactory to Lender in its discretion.
>
> \(2\) Borrower must submit to Lender with its consent request a
> certification that:
>
> \(A\) Borrower is in full compliance with the Regulatory Agreement;
>
> \(B\) Tenants have been informed of their rights with respect to
> grievance procedures and tenant appeals of adverse actions, as
> required by Section 1(g);

RD Instruction 2000-OOO

Exhibit A

Page 117

> \(C\) The property manager will conduct its activities without regard
> to race, color, religion, sex, familial status, national origin or
> disability;
>
> \(D\) The Borrower is in full compliance with the Affirmative Fair
> Housing Marketing Plan provided to Lender in conjunction with the Loan
> and with all other applicable federal, state and local laws regarding
> fair housing, including but not limited to provisions of such laws
> that are applicable to federally assisted multifamily housing; and
>
> \(E\) The Borrower is in full compliance with Section 306 of the Clean
> Air Act and 40 C.F.R. Section 15.
>
> \(e\) Borrower shall submit both of the following to Lender, with the
> audited financial statements under Section 14(b)(1):
>
> \(i\) A report regarding Borrower\'s compliance with fair housing laws
> and regulations, which shall include the information required by
> Section 7.13 of the RHS Guaranteed Rural Rental Housing Program
> Origination and Servicing Handbook (or any future replacement of that
> Handbook) and shall include a certification by Borrower that it is in
> compliance with all such laws except for any instances of
> noncompliance that are set forth in the report.
>
> \(ii\) A certification that Borrower is in full compliance with the
> Regulatory Agreement.

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RD Instruction 2000-OOO

Exhibit A

Page 118

> \(f\) Borrower shall apply the proceeds of the Indebtedness only to
> uses listed in 7 C.F.R. Section 3565.205 and, without limiting the
> generality of the foregoing, shall not apply any proceeds of the
> Indebtedness to any use prohibited by 7 C.F.R. Section 3565.206.

B. Section 21(a)(2) is modified to read as follows:

> \(2\) if Borrower is a limited partnership, a Transfer of (A) any
> general partnership interest, or (B) any limited partnership interest
> exceeding 10%;
>
> C. Lender will consent pursuant to Section 21(c) to a Transfer of all
> or any part of the Mortgaged Property or any interest in the Mortgaged
> Property or a Transfer of 100% of the ownership interests in Borrower
> only if it receives RHS\'s written approval of the proposed Transfer.

D. Each of the following shall be an Event of Default, in addition to
the Events of Default listed in Section 22:

> \(1\) An Event of Default as defined in the Regulatory Agreement.
>
> \(2\) A material inaccuracy or omission in any report submitted to
> Lender by Borrower.

RD Instruction 2000-OOO

Exhibit A

Page 119

***MODIFICATIONS TO REPLACEMENT RESERVE AGREEMENT*:**

A new Paragraph (viii) is added to Section 3(b), as follows:

> \(viii\) If the total cost of the Capital Replacement exceeds
> \$10,000, Borrower must have submitted to Lender evidence satisfactory
> to Lender that Borrower has obtained at least three bids from
> independent contractors for the performance of the Capital Replacement
> and, if the bid accepted by Borrower was not the lowest bid, Borrower
> shall have provided Lender a justification, satisfactory to Lender,
> for Borrower\'s acceptance of that bid.

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