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Exhibit 10.66.05
 
Prepared by, and after recording return to:
Ballard Spahr Andrews & Ingersoll, LLP
300 East Lombard Street, 18th Floor
Baltimore, Maryland 21202
Attention:  Anna A. Mahaney, Esq.

MULTIFAMILY MORTGAGE,
ASSIGNMENT OF RENTS
AND SECURITY AGREEMENT

(NEW YORK)

 
THIS INSTRUMENT IS FOR USE
ONLY FOR MULTIFAMILY PROPERTIES
CONTAINING MORE THAN 6 RESIDENTIAL UNITS
 
 

 

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -
Form 4033
11/01
NEW YORK [Bassett Park Manor]
ã1997-2001 Fannie Mae
DMEAST #9859637 v1
 

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TABLE OF CONTENTS

   
Page
     
1.
DEFINITIONS
1
     
2.
UNIFORM COMMERCIAL CODE SECURITY AGREEMENT
6
     
3.
ASSIGNMENT OF RENTS; APPOINTMENT OF RECEIVER; LENDER IN POSSESSION
7
     
4.
ASSIGNMENT OF LEASES; LEASES AFFECTING THE MORTGAGED PROPERTY
9
     
5.
PAYMENT OF INDEBTEDNESS; PERFORMANCE UNDER LOAN DOCUMENTS; PREPAYMENT PREMIUM
11
     
6.
EXCULPATION
11
     
7.
DEPOSITS FOR TAXES, INSURANCE AND OTHER CHARGES
11
     
8.
COLLATERAL AGREEMENTS
12
     
9.
APPLICATION OF PAYMENTS
12
     
10.
COMPLIANCE WITH LAWS
13
     
11.
USE OF PROPERTY
13
     
12.
PROTECTION OF LENDER’S SECURITY
13
     
13.
INSPECTION
14
     
14.
BOOKS AND RECORDS; FINANCIAL REPORTING
14
     
15.
TAXES; OPERATING EXPENSES
16
     
16.
LIENS; ENCUMBRANCES
16
     
17.
PRESERVATION, MANAGEMENT AND MAINTENANCE OF MORTGAGED PROPERTY
17
     
18.
ENVIRONMENTAL HAZARDS
18
     
19.
PROPERTY AND LIABILITY INSURANCE
23
     
20.
CONDEMNATION
25

 
 
FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -
Form 4033
11/01
 
NEW YORK [Bassett Park Manor]
ã1997-2001 Fannie Mae
DMEAST #9859637 v1
 

Page i

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21.
TRANSFERS OF THE MORTGAGED PROPERTY OR INTERESTS IN BORROWER
25
     
22.
EVENTS OF DEFAULT
29
     
23.
REMEDIES CUMULATIVE
30
   
 
24.
FORBEARANCE
30
   
 
25.
LOAN CHARGES
30
     
26.
WAIVER OF STATUTE OF LIMITATIONS
31
   
 
27.
WAIVER OF MARSHALING
31
   
 
28.
FURTHER ASSURANCES
31
   
 
29.
ESTOPPEL CERTIFICATE
31
   
 
30.
GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE
32
   
 
31.
NOTICE
32
   
 
32.
SALE OF NOTE; CHANGE IN SERVICER
32
   
 
33.
SINGLE ASSET BORROWER
33
   
 
34.
SUCCESSORS AND ASSIGNS BOUND
33
   
 
35.
JOINT AND SEVERAL LIABILITY
33
   
 
36.
RELATIONSHIP OF PARTIES; NO THIRD PARTY BENEFICIARY
33
     
37.
SEVERABILITY; AMENDMENTS
33
   
 
38.
CONSTRUCTION
33
   
 
39.
LOAN SERVICING
34
   
 
40.
DISCLOSURE OF INFORMATION
34
   
 
41.
NO CHANGE IN FACTS OR CIRCUMSTANCES
34
     
42.
SUBROGATION
34
     
43.
ACCELERATION; REMEDIES
34
     
44.
SATISFACTION OF DEBT
35

 
FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -
Form 4033
11/01
 
NEW YORK [Bassett Park Manor]
ã1997-2001 Fannie Mae
DMEAST #9859637 v1
 

Page ii

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45.
LIEN LAW
35
     
46.
WAIVER OF TRIAL BY JURY
35

 
 
FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -
Form 4033
11/01
 
NEW YORK [Bassett Park Manor]
ã1997-2001 Fannie Mae
DMEAST #9859637 v1
 

Page iii

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MULTIFAMILY MORTGAGE,
ASSIGNMENT OF RENTS
AND SECURITY AGREEMENT

THIS MULTIFAMILY MORTGAGE, ASSIGNMENT OF RENTS AND SECURITY AGREEMENT (the
“Instrument”) is dated as of the 31st day of August, 2007, between
MERIWEG-WILLIAMSVILLE BPM, LLC, a limited liability company organized and
existing under the laws of Delaware, whose address is c/o Emeritus Corporation,
3131 Elliott Avenue, #500, Seattle, Washington 98121, as mortgagor (“Borrower”),
and RED MORTGAGE CAPITAL, INC., a corporation organized and existing under the
laws of Ohio, whose address is Two Miranova Place, 12th Floor, Columbus, Ohio
43215, as mortgagee (“Lender”).

Borrower is indebted to Lender in the principal amount of $8,328,200, as
evidenced by Borrower’s Multifamily Note payable to Lender, dated as of the date
of this Instrument, and maturing on September 1, 2014.

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

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

Covenants.  Borrower and Lender covenant and agree as follows:

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

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

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

 
FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -
Form 4033
11/01
 
NEW YORK [Bassett Park Manor]
ã1997-2001 Fannie Mae
DMEAST #9859637 v1
 

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

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

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

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

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

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

 
FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -
Form 4033
11/01
 
NEW YORK [Bassett Park Manor]
ã1997-2001 Fannie Mae
DMEAST #9859637 v1
 

Page 2

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

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

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

(l)             [Intentionally omitted.]

(m)           “Key Principal” means the natural person(s) or entity identified
as such at the foot of this Instrument, and any person or entity who becomes a
Key Principal after the date of this Instrument and is identified as such in an
amendment or supplement to this Instrument.

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

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

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

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

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

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

 
(1)
the Land;

 
(2)
the Improvements;

 
(3)
the Fixtures;

 
FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -
Form 4033
11/01
 
NEW YORK [Bassett Park Manor]
ã1997-2001 Fannie Mae
DMEAST #9859637 v1
 

Page 3

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(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;

 
(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);

 
FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -
Form 4033
11/01
 
NEW YORK [Bassett Park Manor]
ã1997-2001 Fannie Mae
DMEAST #9859637 v1
 

Page 4

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(14)
all tenant security deposits which have not been forfeited by any tenant under
any Lease; and

 
(15)
all names under or by which any of the above Mortgaged Property may be operated
or known, and all trademarks, trade names, and goodwill relating to any of the
Mortgaged Property.

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

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

(v)           “Personalty” means all equipment, inventory, general intangibles
which are used now or in the future in connection with the ownership, management
or operation of the Land or the Improvements or are located on the Land or in
the Improvements, including furniture, furnishings, machinery, building
materials, appliances, goods, supplies, tools, books, records (whether in
written or electronic form), computer equipment (hardware and software) and
other tangible personal property (other than Fixtures) which are used now or in
the future in connection with the ownership, management or operation of the Land
or the Improvements or are located on the Land or in the Improvements, and any
operating agreements relating to the Land or the Improvements, and any surveys,
plans and specifications and contracts for architectural, engineering and
construction services relating to the Land or the Improvements and all other
intangible property and rights relating to the operation of, or used in
connection with, the Land or the Improvements, including all governmental
permits relating to any activities on the Land.

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

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

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

(z)           “Transfer” means (A) a sale, assignment, transfer or other
disposition (whether voluntary, involuntary or by operation of law); (B) the
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.  “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.

 
FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -
Form 4033
11/01
 
NEW YORK [Bassett Park Manor]
ã1997-2001 Fannie Mae
DMEAST #9859637 v1
 

Page 5

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

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

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

 
FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -
Form 4033
11/01
 
NEW YORK [Bassett Park Manor]
ã1997-2001 Fannie Mae
DMEAST #9859637 v1
 

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

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

 
FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -
Form 4033
11/01
 
NEW YORK [Bassett Park Manor]
ã1997-2001 Fannie Mae
DMEAST #9859637 v1
 

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

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

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

 
FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -
Form 4033
11/01
 
NEW YORK [Bassett Park Manor]
ã1997-2001 Fannie Mae
DMEAST #9859637 v1
 

Page 8

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

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.

(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.

 
FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -
Form 4033
11/01
 
NEW YORK [Bassett Park Manor]
ã1997-2001 Fannie Mae
DMEAST #9859637 v1
 

Page 9

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

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

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

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

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

5.            PAYMENT OF INDEBTEDNESS; PERFORMANCE UNDER LOAN DOCUMENTS;
PREPAYMENT PREMIUM.  Borrower shall pay the Indebtedness when due in accordance
with the terms of the Note and the other Loan Documents and shall perform,
observe and comply with all other provisions of the Note and the other Loan
Documents.  Borrower shall pay a prepayment premium in connection with certain
prepayments of the Indebtedness, including a payment made after Lender’s
exercise of any right of acceleration of the Indebtedness, as provided in the
Note.

 
FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -
Form 4033
11/01
 
NEW YORK [Bassett Park Manor]
ã1997-2001 Fannie Mae
DMEAST #9859637 v1
 

Page 10

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

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

7.            DEPOSITS FOR TAXES, INSURANCE AND OTHER CHARGES.

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

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

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

 
FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -
Form 4033
11/01
 
NEW YORK [Bassett Park Manor]
ã1997-2001 Fannie Mae
DMEAST #9859637 v1
 

Page 11

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

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

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

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

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

10.           COMPLIANCE WITH LAWS.  Borrower shall comply with all laws,
ordinances, regulations and requirements of any Governmental Authority and all
recorded lawful covenants and agreements relating to or affecting the Mortgaged
Property, including all laws, ordinances, regulations, requirements and
covenants pertaining to health and safety, construction of improvements on the
Mortgaged Property, fair housing, zoning and land use, and Leases.  Borrower
also shall comply with all applicable laws that pertain to the maintenance and
disposition of tenant security deposits.  Borrower shall at all times maintain
records sufficient to demonstrate  compliance with the provisions of this
Section 10.  Borrower shall take appropriate measures to prevent, and shall not
engage in or knowingly permit, any illegal activities at the Mortgaged Property
that could endanger tenants or visitors, result in damage to the Mortgaged
Property, result in forfeiture of the Mortgaged Property, or otherwise
materially impair the lien created by this Instrument or Lender’s interest in
the Mortgaged Property.  Borrower represents and warrants to Lender that no
portion of the Mortgaged Property has been or will be purchased with the
proceeds of any illegal activity.

 
FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -
Form 4033
11/01
 
NEW YORK [Bassett Park Manor]
ã1997-2001 Fannie Mae
DMEAST #9859637 v1
 

Page 12

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

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.

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.

 
FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -
Form 4033
11/01
 
NEW YORK [Bassett Park Manor]
ã1997-2001 Fannie Mae
DMEAST #9859637 v1
 

Page 13

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

(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;

 
(4)
within 120 days after the end of each fiscal year of Borrower, and at any other
time upon Lender’s request, a statement that identifies all owners of any
interest in Borrower and the interest held by each, if Borrower is a
corporation, all officers and directors of Borrower, and if Borrower is a
limited liability company, all managers who are not members;

 
(5)
upon Lender’s request, a monthly property management report for the Mortgaged
Property, showing the number of inquiries made and rental applications received
from tenants or prospective tenants and deposits received from tenants and any
other information requested by Lender;

 
(6)
upon Lender’s request, a balance sheet, a statement of income and expenses for
Borrower and a statement of changes in financial position of Borrower for
Borrower’s most recent fiscal year; and

 
(7)
if required by Lender, a statement of income and expense for the Mortgaged
Property for the prior month or quarter.

(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.

 
FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -
Form 4033
11/01
 
NEW YORK [Bassett Park Manor]
ã1997-2001 Fannie Mae
DMEAST #9859637 v1
 

Page 14

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

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

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

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

(g)           If an Event of Default has occurred and Lender has not previously
required Borrower to furnish a quarterly statement of income and expense for the
Mortgaged Property, Lender may require Borrower to furnish such a statement
within 45 days after the end of each fiscal quarter of Borrower following such
Event of Default.

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.

 
FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -
Form 4033
11/01
 
NEW YORK [Bassett Park Manor]
ã1997-2001 Fannie Mae
DMEAST #9859637 v1
 

Page 15

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

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

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

17.          PRESERVATION, MANAGEMENT AND MAINTENANCE OF MORTGAGED PROPERTY.

(a)           Borrower (1) shall not commit waste or permit impairment or
deterioration of the Mortgaged Property, (2) shall not abandon the Mortgaged
Property, (3) shall restore or repair promptly, in a good and workmanlike
manner, any damaged part of the Mortgaged Property to the equivalent of its
original condition, or such other condition as Lender may approve in writing,
whether or not insurance proceeds or condemnation awards are available to cover
any costs of such restoration or repair, (4) shall keep the Mortgaged Property
in good repair, including the replacement of Personalty and Fixtures with items
of equal or better function and quality, (5) shall provide for professional
management of the Mortgaged Property by a residential rental property manager
satisfactory to Lender under a contract approved by Lender in writing, and (6)
shall give notice to Lender of and, unless otherwise directed in writing by
Lender, shall appear in and defend any action or proceeding purporting to affect
the Mortgaged Property, Lender’s security or Lender’s rights under this
Instrument.  Borrower shall not (and shall not permit any tenant or other person
to) remove, demolish or alter the Mortgaged Property or any part of the
Mortgaged Property except in connection with the replacement of tangible
Personalty.

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

 
FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -
Form 4033
11/01
 
NEW YORK [Bassett Park Manor]
ã1997-2001 Fannie Mae
DMEAST #9859637 v1
 

Page 16

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18.          ENVIRONMENTAL HAZARDS.

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

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

 
(2)
the transportation of any Hazardous Materials to, from, or across the Mortgaged
Property;

 
(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 or 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.

 
FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -
Form 4033
11/01
 
NEW YORK [Bassett Park Manor]
ã1997-2001 Fannie Mae
DMEAST #9859637 v1
 

Page 17

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

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

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

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

 
(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;

 
FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -
Form 4033
11/01
 
NEW YORK [Bassett Park Manor]
ã1997-2001 Fannie Mae
DMEAST #9859637 v1
 

Page 18

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

 
(5)
no event has occurred with respect to the Mortgaged Property that constitutes,
or with the passing of time or the giving of notice would constitute,
noncompliance with the terms of any Environmental Permit;

 
(6)
there are no actions, suits, claims or proceedings pending or, to the best of
Borrower’s knowledge after reasonable and diligent inquiry, threatened  that
involve the Mortgaged Property and allege, arise out of, or relate to any
Prohibited Activity or Condition; and

 
(7)
Borrower has not received any complaint, order, notice of violation or other
communication from any Governmental Authority with regard to air emissions,
water discharges, noise emissions or Hazardous Materials, or any other
environmental, health or safety matters affecting the Mortgaged Property or any
other property of Borrower that is adjacent to the Mortgaged Property.

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

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

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

 
(2)
Borrower’s receipt of or knowledge of any complaint, order, notice of violation
or other communication from any Governmental Authority or other person with
regard to present or future alleged Prohibited Activities or Conditions or any
other environmental, health or safety matters affecting the Mortgaged Property
or any other property of Borrower that is adjacent to the Mortgaged Property;
and

 
(3)
any representation or warranty in this Section 18 becomes untrue after the date
of this Agreement.

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

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

 
FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -
Form 4033
11/01
 
NEW YORK [Bassett Park Manor]
ã1997-2001 Fannie Mae
DMEAST #9859637 v1
 

Page 19

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

(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.

(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:

 
FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -
Form 4033
11/01
 
NEW YORK [Bassett Park Manor]
ã1997-2001 Fannie Mae
DMEAST #9859637 v1
 

Page 20

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

 
(1)
any breach of any representation or warranty of Borrower in this Section 18;

 
(2)
any failure by Borrower to perform any of its obligations under this Section 18;

 
(3)
the existence or alleged existence of any Prohibited Activity or Condition;

 
(4)
the presence or alleged presence of Hazardous Materials on or under the
Mortgaged Property or any property of Borrower that is adjacent to the Mortgaged
Property; and

 
(5)
the actual or alleged violation of any Hazardous Materials Law.

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

(l)           Borrower shall not, without the prior written consent of those
Indemnitees who are named as parties to a claim or legal or administrative
proceeding (a “Claim”), settle or compromise the Claim if the settlement (1)
results in the entry of any judgment that does not include as an unconditional
term the delivery by the claimant or plaintiff to Lender of a written release of
those Indemnitees, satisfactory in form and substance to Lender; or (2) may
materially and adversely affect Lender, as determined by Lender in its
discretion.

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

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

 
(1)
pay or satisfy any judgment or decree that may be entered against any Indemnitee
or Indemnitees in any legal or administrative proceeding incident to any matters
against which Indemnitees are entitled to be indemnified under this Section 18;

 
(2)
reimburse Indemnitees for any expenses paid or incurred in connection with any
matters against which Indemnitees are entitled to be indemnified under this
Section 18; and

 
(3)
reimburse Indemnitees for any and all expenses, including fees and out-of-pocket
expenses of attorneys and expert witnesses, paid or incurred in connection with
the enforcement by Indemnitees of their rights under this Section 18, or in
monitoring and participating in any legal or administrative proceeding.

 
FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -
Form 4033
11/01
 
NEW YORK [Bassett Park Manor]
ã1997-2001 Fannie Mae
DMEAST #9859637 v1
 

Page 21

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

 
(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.

(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.

 
FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -
Form 4033
11/01
 
NEW YORK [Bassett Park Manor]
ã1997-2001 Fannie Mae
DMEAST #9859637 v1
 

Page 22

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(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.

(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; (4) Lender determines, in its
discretion, that the Restoration will be completed before the earlier of (A) one
year before the maturity date of the Note or (B) one year after the date of the
loss or casualty; and (5) upon Lender’s request, Borrower provides Lender
evidence of the availability during and after the Restoration of the insurance
required to be maintained by Borrower pursuant to this Section 19.

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

 
FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -
Form 4033
11/01
 
NEW YORK [Bassett Park Manor]
ã1997-2001 Fannie Mae
DMEAST #9859637 v1
 

Page 23

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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 Lender
otherwise agrees in writing, any application of any awards or proceeds to the
Indebtedness shall not extend or postpone the due date of any monthly
installments referred to in the Note, Section 7 of this Instrument or any
Collateral Agreement, or change the amount of such installments.  Borrower
agrees to execute such further evidence of assignment of any awards or proceeds
as Lender may require.

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

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

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

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

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

 
(4)
a Transfer of all or any part of Key Principal’s ownership interests (other than
limited partnership interests) in Borrower, or in any other entity which owns,
directly or indirectly through one or more intermediate entities, an ownership
interest in Borrower;

 
FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -
Form 4033
11/01
 
NEW YORK [Bassett Park Manor]
ã1997-2001 Fannie Mae
DMEAST #9859637 v1
 

Page 24

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

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

 
(6)
if Borrower or Key Principal is a trust, the termination or revocation of such
trust; and

 
(7)
a conversion of Borrower from one type of legal entity into another type of
legal entity, whether or not there is a Transfer.

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 tax lien or a mechanic’s, materialman’s or judgment lien
against the Mortgaged Property which is bonded off, released of record or
otherwise remedied to Lender’s satisfaction within 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:

 
FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -
Form 4033
11/01
 
NEW YORK [Bassett Park Manor]
ã1997-2001 Fannie Mae
DMEAST #9859637 v1
 

Page 25

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

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

 
(2)
the absence of any Event of Default;

 
(3)
the transferee meets all of the eligibility, credit, management and other
standards (including any standards with respect to previous relationships
between Lender and the transferee and the organization of the transferee)
customarily applied by Lender at the time of the proposed Transfer to the
approval of borrowers in connection with the origination or purchase of similar
mortgages, deeds of trust or deeds to secure debt 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)
in the case of a Transfer of all or any part of the Mortgaged Property, or
direct or indirect ownership interests in Borrower or Key Principal (if an
entity), if transferor or any other person has obligations under any Loan
Document, the execution by the transferee or one or more individuals or entities
acceptable to Lender of an assumption agreement (including, if applicable, an
Acknowledgment and Agreement of Key Principal to Personal Liability for
Exceptions to Non-Recourse Liability) that is acceptable to Lender and that,
among other things, requires the transferee to perform all obligations of
transferor or such person set forth in such Loan Document, and may require that
the transferee comply with any provisions of this Instrument or any other Loan
Document which previously may have been waived by Lender;

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

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

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

 
(B)
In addition, Borrower shall be required to reimburse Lender for all of Lender’s
out-of-pocket costs (including reasonable attorneys’ fees) incurred in reviewing
the Transfer request, to the extent such expenses exceed $3,000.

 
FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -
Form 4033
11/01
 
NEW YORK [Bassett Park Manor]
ã1997-2001 Fannie Mae
DMEAST #9859637 v1
 

Page 26

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

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

 
(2)
A Transfer of a “Controlling Interest” shall mean, with respect to any entity,
the following:

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

 
(ii)
if such entity is a limited partnership, a Transfer of any general partnership
interest;

 
(iii)
if such entity is a limited liability company or a limited liability
partnership, a Transfer of any membership or other ownership interest which
would  cause the Initial Owners to own less than 51% of all membership or other
ownership interests in such entity;

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

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

 
(vi)
if such entity is a trust, the removal, appointment or substitution of a trustee
of such trust other than (A) in the case of a land trust, or (B) if the trustee
of such trust after such removal, appointment or substitution is a trustee
identified in the trust agreement approved by Lender.

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

 
FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -
Form 4033
11/01
 
NEW YORK [Bassett Park Manor]
ã1997-2001 Fannie Mae
DMEAST #9859637 v1
 

Page 27

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

(e)           any 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, but no such notice or grace period shall apply in
the case of any such failure which could, in Lender’s judgment, absent immediate
exercise by Lender of a right or remedy under this Instrument, result in harm to
Lender, impairment of the Note or this Instrument or any other security given
under any other Loan Document;

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

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

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

 
FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -
Form 4033
11/01
 
NEW YORK [Bassett Park Manor]
ã1997-2001 Fannie Mae
DMEAST #9859637 v1
 

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24.          FORBEARANCE.

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

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

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

 
FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -
Form 4033
11/01
 
NEW YORK [Bassett Park Manor]
ã1997-2001 Fannie Mae
DMEAST #9859637 v1
 

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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.

 
FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -
Form 4033
11/01
 
NEW YORK [Bassett Park Manor]
ã1997-2001 Fannie Mae
DMEAST #9859637 v1
 

Page 30

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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.

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.

 
FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -
Form 4033
11/01
 
NEW YORK [Bassett Park Manor]
ã1997-2001 Fannie Mae
DMEAST #9859637 v1
 

Page 31

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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.

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

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

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

 
FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -
Form 4033
11/01
 
NEW YORK [Bassett Park Manor]
ã1997-2001 Fannie Mae
DMEAST #9859637 v1
 

Page 32

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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.

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 foreclose this
Instrument by judicial proceeding, shall be entitled to the appointment of a
receiver, without notice, and may invoke any other remedies permitted by New
York law or provided in this Instrument or in any other Loan Document.  Lender
may, at Lender’s option, also foreclose this Instrument for any portion of the
Indebtedness which is then due and payable, subject to the continuing lien of
this Instrument for the balance of the Indebtedness.  Lender shall be entitled
to collect all costs and expenses allowed by New York law, including attorneys’
fees, costs of documentary evidence, abstracts, title reports statutory costs
and any additional allowance made pursuant to Section 8303 of the Civil Practice
Law and Rules.  The rights and remedies of Lender specified in this Instrument
shall be in addition to Lender’s rights and remedies under New York law,
specifically including Section 254 of the Real Property Law.  In the event of
any conflict between the provision of this Instrument and the provisions of
Section 254 of the Real Property Law, the provisions of this Instrument shall
control.

44.          SATISFACTION OF DEBT.  Upon payment of the Indebtedness, Lender
shall discharge this Instrument.  Borrower shall pay Lender’s reasonable costs
incurred in discharging this Instrument.

45.          LIEN LAW.  Borrower will receive advances under this Instrument
subject to the trust fund provisions of Section 13 of the Lien Law.

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

 
FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -
Form 4033
11/01
 
NEW YORK [Bassett Park Manor]
ã1997-2001 Fannie Mae
DMEAST #9859637 v1
 

Page 33

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ATTACHED EXHIBITS.  The following Exhibits are attached to this Instrument:
 
 
T
Exhibit A       Description of the Land (required).

 
T
Exhibit B-1     Modifications to Instrument (Seniors Housing)

 
T
Exhibit B-2     Modifications to Instrument (Cross-Default and
Cross-Collateralization)

 
T
Exhibit B-3     Modifications to Instrument (Borrower Requested Modifications)

 
T
Exhibit C         Borrowers’ Projects

 
 
FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -
Form 4033
11/01
 
NEW YORK [Bassett Park Manor]
ã1997-2001 Fannie Mae
DMEAST #9859637 v1
 

Page 34

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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.

 

 
BORROWER:
     
MERIWEG-WILLIAMSVILLE BPM, LLC,
 
a Delaware limited liability company
                 
By:
Emeritus Corporation, 
           
a Washington corporation 
                   
By:
/s/ Eric Mendelsohn
     
Eric Mendelsohn
     
Director of Real Estate
     
Business Legal Affairs

Fannie Mae Commitment Number:  851887

STATE OF  Washington  
)
     
) ss:
   
COUNTY OF  King
)

On this 29th day of August, 2007, before me, the undersigned, personally
appeared Eric Mendelsohn, personally known to me or proved to me on the basis of
satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed
to the within instrument and acknowledged to me that he/she/they executed the
same in his/her/their capacity(ies), and that by his/her/their signature(s) on
the instrument, the individual(s) or the person upon behalf of which the
individual(s) acted, executed the instrument.

 
/s/ Megan M. Huffman
 
Notary Public

My Commission Expires:

5-19-11
 
 
FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -
Form 4033
11/01
 
NEW YORK [Bassett Park Manor]
ã1997-2001 Fannie Mae
DMEAST #9859637 v1
 

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

KEY PRINCIPAL

Key Principal

Name:
Emeritus Corporation

Address:
3131 Elliott Avenue, #500

 
Seattle, Washington 98121

 
 
FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -
Form 4033
11/01
 
NEW YORK [Bassett Park Manor]
ã1997-2001 Fannie Mae
DMEAST #9859637 v1
 

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

EXHIBIT A

[DESCRIPTION OF THE LAND]

[See attached]
 
 
FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -
Form 4033
11/01
 
NEW YORK [Bassett Park Manor]
ã1997-2001 Fannie Mae
DMEAST #9859637 v1
 

A-1

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

EXHIBIT B-1

MODIFICATIONS TO INSTRUMENT

(Seniors Housing)

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

1.           Section 1 of the Instrument is hereby amended to add the following
paragraphs the end thereof:

“(aa)  ‘Accounts’ means all money, funds, investment property, accounts, general
intangibles, deposit accounts, chattel paper, documents, instruments, judgments,
claims, settlements of claims, causes of action, refunds, rebates,
reimbursements, reserves, deposits, subsidies, proceeds, products, rents and
profits, now or hereafter arising, received or receivable, from or on account of
the Borrower's management and operation of the Mortgaged Property as a Seniors
Housing Facility.”

“(bb)  ‘Contract(s)’ means any contract or other agreement for the provision of
goods or services at or otherwise in connection with the operation, use or
management of the Mortgaged Property, including cash deposited to secure
performance by parties of their obligations.”

“(cc)  ‘Inventory’ means all right, title and interest of Borrower in and to
inventory of every type and description, now owned and hereafter acquired,
including, without limitation, raw materials, work in process, finished goods,
goods returned or repossessed or stopped in transit, goods used for
demonstration, promotion, marketing or similar purposes, property in, on or with
which any of the foregoing may be stored or maintained, all materials and
supplies usable or used or consumed at the Mortgaged Property, and all documents
and documents of title relating to any of the foregoing, together with all
present and future parts, additions, accessories, attachments, accessions,
replacements, replacement parts and substitutions therefor or thereto in any
form whatsoever.”

“(dd)  ‘License(s)’ means any operating licenses, certificates of occupancy,
health department licenses, food service licenses, certificates of need,
business licenses, permits, registrations, certificates, authorizations,
approvals, and similar documents required by applicable laws and regulations for
the operation of the Mortgaged Property as a Seniors Housing Facility, including
replacements and additions thereto.”

“(ee)  ‘Operating Lease’ means any master lease, operating agreement, operating
lease or similar document, preapproved by Lender, under which control of the
occupancy, use, operation, maintenance and administration of the Mortgaged
Property as a Seniors Housing Facility has been granted to any individual or
entity other than the Borrower.”

 
Senior Housing Modifications to Instrument
Form 4075
05-05
 
 [Bassett Park Manor]
ã2000-2005 Fannie Mae
DMEAST #9859637
 

Page B-1-1

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“(ff)  ‘Operator’ means any qualified and licensed (if so required by the
applicable laws of the Property Jurisdiction) individual or entity obligated
under the terms of an Operating Lease with the Borrower.”

“(gg)  ‘Seniors Housing Facility’ means a residential housing facility which
qualifies as ‘housing for older persons’ under the Fair Housing Amendments Act
of 1988 and the Housing for Older Persons Act of 1995 comprised of assisted
living units.”

“(hh)  ‘Third Party Payments’ means all payments and the rights to receive such
payments from Medicaid programs, or similar federal, state or local programs,
boards, bureaus or agencies, and from residents, private insurers or others.”

2.             Section 1(g) of the Instrument is hereby amended to add the
following sentence at the end thereof:

“The term ‘Hazardous Materials’ shall also include any medical products or
devices, including, but not limited to, those materials defined as ‘medical
waste’ or ‘biological waste’ under relevant statutes or regulations pertaining
to any Hazardous Materials Law.”

3.             Section 1(o) of the Instrument is hereby amended to add the
following sentence at the end thereof:

“The term ‘Leases’ shall also include any residency, occupancy, admission and
care agreements pertaining to residents of the Mortgaged Property and any
Operating Lease.”

4.             Section 1(s) of the Instrument is hereby amended:

A.           to revise subsection (14) to read as follows:

“(14)  all resident and tenant security deposits, entrance fees, application
fees, processing fees, community fees and any other amounts or fees deposited by
any resident or tenant upon execution of a Lease which have not been forfeited
by the resident or tenant; and”

and

B.           to add the following subsections (16), (17), (18), and (19) at the
end thereof:

“(16)  all payments due, or received, from residents, second party charges added
to base rental income, base and/or additional meal sales, commercial operations
located on the Mortgaged Property or provided as a service to the residents of
the Mortgaged Property, rental from guest suites, seasonal lease charges,
furniture leases, and laundry services, and any and all other services provided
to residents in connection with the Mortgaged Property, and any and all other
personal property on the Mortgaged Property, excluding personal property
belonging to residents of the Mortgaged Property (other than Personalty
belonging to Borrower);”
 

Senior Housing Modifications to Instrument
Form 4075
05-05
 
 [Bassett Park Manor]
ã2000-2005 Fannie Mae
DMEAST #9859637
 

 
Page B-1-2

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“(17)  subject to applicable law and regulations, all Licenses and Contracts
relating to the operation and authority to operate the Mortgaged Property as a
Seniors Housing Facility;”

“(18)  all Third Party Payments arising from the operation of the Mortgaged
Property as a Seniors Housing Facility, utility deposits, unearned premiums,
accrued, accruing or to accrue under insurance policies now or hereafter
obtained by the Borrower and all proceeds of any conversion of the Mortgaged
Property or any part thereof including, without limitation, proceeds of hazard,
property, flood and title insurance and all awards and compensation for the
taking by eminent domain, condemnation or otherwise, of all or any part of the
Mortgaged Property or any easement therein; and, ”

“(19)  all of Borrower’s Accounts and Inventory.”

5.             Section 1(v) of the Instrument is hereby amended to add the
following sentence at the end thereof:

“The term ‘Personalty’ shall also include all personal property currently owned
or acquired by Borrower after the date hereof used in connection with the
ownership and operation of the Mortgaged Property as a Seniors Housing Facility,
all kitchen or restaurant supplies and facilities, dining room supplies and
facilities, medical supplies and facilities, leasehold improvements, or related
furniture and equipment, together with all present and future parts, additions,
accessories, replacements, attachments, accessions, replacement parts and
substitutions thereof, and the proceeds thereof (cash and non-cash including
insurance proceeds) and any other equipment, supplies or furniture owned by
Borrower and  leased to any third party service provider or any Operator under
any Operating Lease, use, occupancy, or lease agreements, as well as all
Licenses, to the extent permitted by applicable law and regulations, including
replacements and additions thereto.”

6.             Section 1(x) of the Instrument is hereby amended to provide as
follows:

“‘Rents’ means all rents (whether from residential or non-residential space),
revenues and other income of the Land or the Improvements, including rent paid
under any Operating Lease, subsidy payments received from any sources (including
but not limited to payments under any Housing Assistance Payments Contract),
parking fees, laundry and vending machine income and fees and charges for food,
healthcare and other services provided at the Mortgaged Property, whether now
due, past due, or to become due, security deposits, entrance fees, application
fees, processing fees, community fees and any other amounts or fees forfeited by
any resident or tenant, together with and including all proceeds from any
private insurance for residents to cover rental charges and charges for services
at or in connection with the Mortgaged Property, and the right to Third Party
Payments due for the rents or services of residents at the Mortgaged
Property.  Each of the foregoing shall be considered ‘Rents’ for the purposes of
the actions and rights set forth in Section 3 of this Instrument.”
 

Senior Housing Modifications to Instrument
Form 4075
05-05
 
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ã2000-2005 Fannie Mae
DMEAST #9859637
 

 
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7.             Section 3(b) of the Instrument is hereby amended to add the
following sentence at the end thereof:

“After an Event of Default, Lender is further authorized to give notice to all
Third Party Payment payors (other than governmental entities) at Lender’s
option, instructing them to pay all Third Party Payments which would be
otherwise paid to Borrower to Lender, to the extent permitted by law.  In the
case of Third Party Payments from Third Party Payment payors which are
governmental entities, including Medicaid, Lender and Borrower have executed a
Depositary Agreement of even date herewith which establishes special procedures
for the receipt and disposition of the Third Party Payments.”

8.             Section 3(c) of the Instrument is hereby amended to add the
following sentence at the end thereof:

“In order to induce Lender to lend funds hereunder, Borrower (together with any
Operator or manager of the Mortgaged Property) hereby agrees, upon the
occurrence of an Event of Default and at the option of Lender, that it shall
continue to provide all necessary services required under any Operating Lease or
applicable licensing or regulatory requirements and shall fully cooperate with
Lender and any receiver as may be appointed by a court in performing these
services and agrees to arrange for an orderly transition to a replacement
operator, manager or provider of the necessary services, and to execute promptly
all applications, assignments, consents and documents requested by Lender to
facilitate such transition.”

9.             The first sentence in Section 4(b) of the Instrument is hereby
amended to add the following at the end thereof:

“, with the exception of any Operating Lease.”

10.           The last sentence in Section 4(e) of the Instrument is hereby
amended to state as follows:

“If customary in the applicable market, residential Leases with a month-to-month
term or with terms of less than six months shall be permitted with Lender's
prior written consent.”

 

Senior Housing Modifications to Instrument
Form 4075
05-05
 
 [Bassett Park Manor]
ã2000-2005 Fannie Mae
DMEAST #9859637
 

 
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11.           The first sentence in Section 4(f) of the Instrument is hereby
amended to add the following at the end thereof:

“with the exception of any Operating Lease which has previously been approved by
Lender.”

12.           Section 4 of the Instrument is hereby amended to add the following
as Section 4(h):

“Any Operating Lease is and shall be subject and subordinate in all respects to
the liens, terms, covenants and conditions of the Instrument and the other Loan
Documents, and to all renewals, modifications, consolidations, replacements and
extensions thereof, and to all advances heretofore made or which may hereafter
be made pursuant to the Instrument (including all sums advanced for the purposes
of (x) protecting or further securing the lien of the Instrument, curing
defaults by Borrower under the Loan Documents or for any other purposes
expressly permitted by the Instrument, or (y) constructing, renovating,
repairing, furnishing, fixturing or equipping the Mortgaged Property.”

13.           Section 11 of the Instrument is hereby amended to add the
following sentences at the end thereof:

“Borrower acknowledges that as of the date of this Instrument, Borrower and the
Mortgaged Property are not certified to participate in the Medicaid assisted
living waiver program administered by the Property Jurisdiction
(“Program”).  Borrower covenants and agrees that it will notify Lender in
writing 30 days prior to Borrower’s submission of its request to participate in
the Program, and will provide Lender with copies of all correspondence and
documentation received from the Property Jurisdiction or any authorizing entity
concerning its submission.  In the event the Mortgaged Property or Borrower
becomes eligible to participate in the Program, Borrower agrees to execute
then-current Fannie Mae forms of Medicaid reserve agreement and depositary
agreement as Lender may require.”

“Borrower further covenants and agrees that it shall not permit more than 20% of
its effective gross income to be derived from units relying on Medicaid
payments.  If by reason of applicable law or regulation more than 20% of
effective gross income becomes derived from units relying on Medicaid payments,
the Borrower shall diligently and expeditiously take all reasonable steps
necessary to bring the Mortgaged Property into compliance with the preceding
sentence to the extent permissible by applicable law or regulation.  Borrower
further covenants and agrees that it shall limit the use and occupancy of the
Mortgaged Property to residents that meet the standards for independent living
or assisted living, and that it shall not accept residents that require skilled
nursing care or permit residents requiring skilled nursing care to remain at the
Mortgaged Property as a routine matter.”
 

Senior Housing Modifications to Instrument
Form 4075
05-05
 
 [Bassett Park Manor]
ã2000-2005 Fannie Mae
DMEAST #9859637
 

 
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14.           Section 12(a) of the Instrument is hereby amended to add the
following at the end thereof:

“and, (5) payments for any required licensing fees, permits, or other expenses
related to the operation of the Mortgaged Property as a Seniors Housing
Facility, any fines or penalties that may be assessed against the Mortgaged
Property, any costs incurred to bring the Mortgaged Property into full
compliance with applicable codes and regulatory requirements, and any fees or
costs related to Lender’s employment of any operator or service provider for the
Mortgaged Property.”

15.           Section 14(b) of the Instrument is hereby deleted in its entirety
and replaced with the following:

“(b)           Subject to federal, state and local laws and regulations
applicable to resident and tenant privacy, including but not limited to the
Health Insurance Portability and Accountability Act (“HIPAA”) (collectively, the
“Privacy Laws”), Borrower shall furnish to Lender all of the following:

 
(1)
within 30 days after the end of each fiscal quarter, a statement of income and
expenses for Borrower’s or any Operator’s operation of the Mortgaged Property
for that quarter, a statement of changes in financial position of Borrower
relating to the Mortgaged Property for that quarter and a balance sheet showing
all assets and liabilities of Borrower relating to the Mortgaged Property as of
the end of that quarter;

 
(2)
within 90 days after the end of each twelve consecutive month fiscal year, a
statement of income and expenses for Borrower’s or any Operator’s operation of
the Mortgaged Property for that fiscal year, prepared in accordance with
generally accepted accounting principles (“GAAP”), a statement of changes in
financial position of Borrower relating to the Mortgaged Property for that
fiscal year, and a balance sheet showing all assets and liabilities of Borrower
relating to the Mortgaged Property as of the end of that fiscal year;

 
(3)
within 30 days after the end of each quarter of Borrower, and at any other time
upon Lender's request, a rent schedule for the Mortgaged Property showing the
name of each resident and tenant, and for each resident and tenant, the space
occupied, the lease expiration date, the rent payable for the current month, the
date through which rent has been paid, any income attributable to additional
resident services, and any related information requested by Lender;

 
(4)
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;

 

Senior Housing Modifications to Instrument
Form 4075
05-05
 
 [Bassett Park Manor]
ã2000-2005 Fannie Mae
DMEAST #9859637
 

 
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(5)
within 120 days after the end of each fiscal year of Borrower, and at any other
time upon Lender's request, a statement that identifies all owners of any
interest in Borrower and the interest held by each, if Borrower is a
corporation, all officers and directors of Borrower, and if Borrower is a
limited liability company, all managers who are not members;

 
(6)
upon Lender's request, a monthly property management report for the Mortgaged
Property, showing the number of inquiries made and rental applications received
from residents or prospective residents and deposits received from residents and
any other information requested by Lender;

 
(7)
if required by Lender, a statement of income and expense for the Mortgaged
Property for the prior month or quarter;

 
(8)
within 10 days of Borrower’s receipt, copies of all inspection reports, surveys,
reviews, and certifications prepared by, for, or on behalf of any licensing or
regulatory authority relating to the Mortgaged Property and any legal actions,
orders, notices, or reports relating to the Mortgaged Property issued by the
applicable regulatory or licensing authorities;

 
(9)
upon the request of Lender, copies of all reports relating to the services and
operations of the Mortgaged Property, including, if applicable, Medicaid cost
reports and records relating to account balances due to or from Medicaid or any
private insurer; and

 
(10)
within 10 days of submission by Borrower, copies of all incident reports
submitted to any liability insurance carrier or any elderly affairs, regulatory
or licensing authority.”

16.           Section 17(a)(5) is hereby amended to state the following:

“shall provide for professional management of the Mortgaged Property as a
Seniors Housing Facility either by Borrower, an Operator under an Operating
Lease approved by Lender in writing, or a management company engaged either by
the Borrower or any Operator under a Contract approved by Lender in writing.”
 

Senior Housing Modifications to Instrument
Form 4075
05-05
 
 [Bassett Park Manor]
ã2000-2005 Fannie Mae
DMEAST #9859637
 

 
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17.           Section 17(a) of the Instrument is hereby amended to add the
following sentence at the end thereof:

“Borrower further covenants and agrees that it shall maintain and operate the
Mortgaged Property as a Seniors Housing Facility at all times in accordance with
the standards required by any applicable Licenses and as required by any
regulatory authority, that it shall maintain in good standing all Licenses, and
that it shall cause to renew and extend all such required Licenses, and shall
not fail to take any action necessary to keep all such Licenses in good standing
and full force and effect.  Borrower will immediately provide Lender with any
notice or order of a violation which may otherwise have an adverse impact on the
Mortgaged Property, its operations or its compliance with licensing and
regulatory requirements.”

18.           Section 17 of the Instrument is hereby amended to add the
following as subsection (c):

“Borrower has entered into the Contracts previously identified to Lender for the
provision of goods or services, at or otherwise in connection with the
operation, use or management of the Mortgaged Property.  Borrower may in the
future enter into Contracts for the provision of additional goods or services at
or otherwise in connection with the operation, use or management of the
Mortgaged Property.  Until Lender gives notice to Borrower of Lender's exercise
of its rights under this Instrument, Borrower shall have all rights, power and
authority granted to Borrower under any Contract (except as otherwise limited by
this subsection or any other provision of this Instrument), including the right,
power and authority to modify the terms of any Contract, or extend or terminate
any Contract, with the exception of any Operating Lease.  Upon the occurrence of
an Event of Default and at the option of Lender, the permission given to
Borrower pursuant to the preceding sentence to exercise all rights, power and
authority under Contracts shall terminate.  Upon Lender's delivery of notice to
Borrower of an Event of Default, Lender shall immediately have all rights,
powers and authority granted to Borrower under any Contract, including the
right, power and authority to modify the terms of, extend or terminate any such
Contract.  Borrower hereby represents and warrants and agrees with Lender
that:  (1) the Contracts are assignable and no previous assignment of Borrower's
interest in the Contracts has been made; (2) the Contracts are in full force and
effect in accordance with their respective terms and there are no defaults
thereunder; (3) Borrower shall fully perform all of its obligations under the
Contracts, and Borrower agrees not to amend, modify, assign, sell, pledge,
transfer, mortgage or otherwise encumber its interests in any of the Contracts
so long as this Instrument is in effect, or consent to any transfer, assignment
or other disposition thereof without the written approval of Lender; and (4)
each Contract entered into by Borrower subsequent to the date hereof, the
average annual consideration of which, directly or indirectly, is at least
$20,000, shall provide:  (i) that it shall be terminable for cause; and (ii)
that it shall be terminable, at Lender's option, upon the occurrence of an Event
of Default.”
 

Senior Housing Modifications to Instrument
Form 4075
05-05
 
 [Bassett Park Manor]
ã2000-2005 Fannie Mae
DMEAST #9859637
 

 
Page B-1-8

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19.           Section 18(b) of the Instrument is hereby amended to add the
following sentence at the end thereof:

“Prohibited Activities and Conditions also shall not include the safe and lawful
use and storage of medical products and devices customarily used in the
operation of a Seniors Housing Facility.”

20.           Section 19(c) is hereby amended to provide as follows:

“Borrower shall maintain or cause any Operator to maintain at all times
commercial professional liability and general liability insurance, workers'
compensation insurance and such other insurance as Lender may require from time
to time.”
 
21.           Section 21(a) of the Instrument is hereby amended to add the
following Sections (8) and (9) at the end thereof:
 
“(8)          a Transfer or change in the holder of the Licenses authorizing the
Mortgaged Property to operate as a Seniors Housing Facility; and

(9)            a Transfer of the Borrower’s or any Operator’s respective
interest(s) in any Operating Lease.”

22.           Section 22 of the Instrument is hereby amended to add the
following as Sections (g), (h), (i) and (j):

“(g)          any failure by Borrower, Operator or any manager (as applicable)
to comply with the use and licensing requirements set forth in Sections 10 and
11;

(h)            any loss by Borrower, Operator or any manager (as applicable) of
any License or other legal authority necessary to operate the Mortgaged Property
as a Seniors Housing Facility, or any failure by Borrower, Operator or any
manager (as applicable) to comply strictly with any consent order or decree or
to correct, within the time deadlines set by any federal, state or local
licensing agency, any deficiency where such failure results, or under applicable
laws and regulations is reasonably likely to result, in an action by such agency
with respect to the Mortgaged Property that may have a material adverse effect
on the income and operations of the Mortgaged Property or Borrower’s interest in
the Mortgaged Property, including, without limitation, a termination, revocation
or suspension of any applicable Licenses necessary for the operation of the
Mortgaged Property as a Seniors Housing Facility;

(i)           if, without the consent of Lender, Borrower, Operator or any
manager (as applicable):

 
(i)
ceases to operate the Mortgaged Property as a Seniors Housing Facility;

 

Senior Housing Modifications to Instrument
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05-05
 
 [Bassett Park Manor]
ã2000-2005 Fannie Mae
DMEAST #9859637
 

 
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(ii)
ceases to provide such kitchens, separate bathrooms, and areas for eating,
sitting and sleeping in each independent living or assisted living unit or at a
minimum, central bathing facilities for Alzheimer’s/dementia care, as are
provided as of the date of this Instrument;

 
(iii)
ceases to provide other facilities and services normally associated with
independent living or assisted living units, including, without limitation, (A)
central dining services providing up to three meals per day, (B) periodic
housekeeping, (C) laundry services, (D) customary transportation services, and
(E) social activities;

 
(iv)
provides or contracts for skilled nursing care for any of the units;

 
(v)
leases or holds available for lease to commercial tenants non-residential space
(i.e., space other than the units, dining areas, activity rooms, lobby, parlors,
kitchen, mailroom, marketing/management offices) exceeding ten percent (10%) of
the net rental area; or,

 
(vi)
takes any action or permits to exist any condition that causes the Mortgaged
Property to be no longer classified as housing for older persons pursuant to the
Fair Housing Amendments Act of 1988 and the Housing for Older Persons Act of
1995; and

(j)            a default under any Operating Lease or under the Subordination,
Assignment and Security Agreement executed by Borrower, Operator and Lender in
connection with this Loan which continues beyond any applicable cure period, or
the termination of any Operating Lease without Lender's prior written approval.”
 
23.           The former Sections 22 (g), (h) and (i) are hereby amended to be
Sections 22 (k), (l), and (m), respectively and are amended to read as follows:

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

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

Senior Housing Modifications to Instrument
Form 4075
05-05
 
 [Bassett Park Manor]
ã2000-2005 Fannie Mae
DMEAST #9859637
 

 
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(m)           any exercise by the holder of any other debt instrument secured by
a mortgage, deed of trust or deed to secure debt on the Mortgaged Property of a
right to declare all amounts due under that debt instrument immediately due and
payable.”
 
24.           Section 43 of the Instrument is hereby amended to add the
following sentences at the end thereof:

“In addition to the remedies set forth herein and elsewhere in this Instrument,
upon an Event of Default Lender shall be entitled to mandate the use of a
lockbox bank account or other depositary account, to be maintained under the
control and supervision of Lender,  for all income of the Mortgaged Property,
including, but not limited to, Rents, service charges, insurance payments, and
Third Party Payments.  Lender may, upon an Event of Default, cause the removal
of Borrower, Operator or any manager (as applicable) from any Mortgaged Property
operations.  Until such time as Lender has located a replacement Operator,
Borrower, the acting Operator or manager shall continue to provide all required
services to maintain the Mortgaged Property in full compliance with all
licensing and regulatory requirements as a Seniors Housing Facility.  Borrower
acknowledges that its failure to perform or to cause the performance of this
service shall constitute a form of waste of the Mortgaged Property, causing
irreparable harm to Lender and the Mortgaged Property, and shall constitute
sufficient cause for the appointment of a receiver.”

25.           The following new Section is added to the Instrument after the
last numbered Section:

“47.         BORROWER’S REPRESENTATIONS AND WARRANTIES.  In addition to any
other representations and warranties contained in this Instrument, Borrower
hereby represents and warrants to Lender as follows:

(a)            The Mortgaged Property is duly licensed as a Private Proprietary
Adult Home and is in all respects otherwise legally authorized to operate as a
Seniors Housing Facility, under the applicable laws of the Property
Jurisdiction;

(b)           Borrower and the Mortgaged Property (and the operation thereof)
are in compliance in all material respects with the applicable provisions of all
laws, statutes, regulations, ordinances, orders, standards, restrictions and
rules of any federal, state or local government or quasi-government body,
agency, board or authority having jurisdiction over the operation of the
Mortgaged Property, including, without limitation: (i) health care and fire
safety codes; (ii) design and construction requirements, (iii) laws regulating
the handling and disposal of medical or biological waste; (iv) the applicable
provisions of Seniors Housing Facility laws, rules, regulations and published
interpretations thereof to which the Borrower or the Mortgaged Property is
subject; (v) privacy, security and billing standards such as those set forth in
HIPAA; and (vi) all criteria established to classify the Mortgaged Property as
housing for older persons under the Fair Housing Amendments Act of 1988 and the
Housing for Older Persons Act of 1995;
 

Senior Housing Modifications to Instrument
Form 4075
05-05
 
 [Bassett Park Manor]
ã2000-2005 Fannie Mae
DMEAST #9859637
 

 
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(c)           If required, Borrower has a current provider agreement under any
and all applicable federal, state and local laws for reimbursement: (a) to a
Seniors Housing Facility; or (b) for other type of care provided at such
facility.  There is no decision not to renew any provider agreement related to
the Mortgaged Property, nor is there any action pending or threatened to impose
alternative, interim or final sanctions with respect to the Mortgaged Property;

(d)           Borrower and the Mortgaged Property are not subject to any
proceeding, suit or investigation by any federal, state or local government or
quasi-government body, agency, board authority or any other administrative or
investigative body which may result in the imposition of a fine or an
alternative, interim or final sanction, or which would have a material adverse
effect on Borrower or the operation of the Mortgaged Property, or which would
result in the appointment of a receiver or manager or would result in the
revocation, transfer, surrender, suspension or other impairment of the Licenses
for the Mortgaged Property to operate as a Seniors Housing Facility;

(e)           Upon Lender’s request and subject to Privacy Laws, copies of
resident care agreements and resident occupancy agreements shall be provided to
Lender.  All resident records at the Mortgaged Property are true and correct in
all material respects;

(f)           Neither the execution and delivery of the Note, the Instrument or
the Loan Documents, Borrower’s performance thereunder, nor the recordation of
the Instrument will adversely affect the Licenses necessary for the operation of
the Mortgaged Property as a Seniors Housing Facility in the Property
Jurisdiction;

(g)           Borrower is not a participant in any federal program whereby any
federal, state or local governmental or quasi-governmental body, agency, board
or other authority may have the right to recover funds by reason of the advance
of federal funds.  Borrower has received no notice, and is not aware of any
violation of applicable antitrust laws of any federal, state or local,
government or quasi-government body, agency, board or other authority; and,

(h)           Except as otherwise specifically disclosed to the Lender in
writing, in the event any existing Operating Lease or management agreement is
terminated or Lender acquires the Mortgaged Property through foreclosure or
otherwise, neither Borrower, Lender, any subsequent Operator or manager, nor any
subsequent purchaser (through foreclosure or otherwise) must obtain a
certificate of need from any applicable state health care regulatory authority
or agency (other than giving such notice required under the applicable state law
or regulation) prior to applying for any applicable License necessary for the
operation of the Mortgaged Property as a Seniors Housing Facility, provided that
no service or unit complement is changed.”

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

Senior Housing Modifications to Instrument
Form 4075
05-05
 
 [Bassett Park Manor]
ã2000-2005 Fannie Mae
DMEAST #9859637
 

 
Page B-1-12

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BORROWER’S INITIALS:      /s/ EM          
 

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Form 4075
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 [Bassett Park Manor]
ã2000-2005 Fannie Mae
DMEAST #9859637
 

 
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EXHIBIT B-2

MODIFICATIONS TO INSTRUMENT

(Cross-Default and Cross-Collateralization)
 
 
The following modifications are made to the text of the Instrument that precedes
this Exhibit:

1.           The following new Sections are added to the Instrument after the
last numbered Section:

“48.        CROSS-DEFAULT AND CROSS COLLATERALIZATION.

(a)           The Borrower and the affiliates of Borrower acknowledging and
agreeing to the terms of this Exhibit B-2, and identified on Exhibit C to this
Instrument (collectively, with the Borrower, the “Borrowers”), each own their
respective multifamily property described on Exhibit C to this Instrument.  All
of the properties described on Exhibit C, which includes the Mortgaged Property,
are referred to herein individually as a “Borrower’s Project” and collectively
as the “Borrowers’ Projects.”  Contemporaneous with the closing and funding of
the loan to the Borrower evidenced by the Note, the Lender has extended
additional loans to the other Borrowers, each loan being secured by a
Multifamily Mortgage, Assignment of Rents and Security Instrument (a “Security
Instrument”) against each of the Borrowers’ Projects, respectively, each such
Security Instrument containing cross-collateralization and cross-default
provisions in form and substance identical to this Exhibit B-2.

(b)           The Borrowers acknowledge that the Lender is unwilling to extend
the loan evidenced by the Note to the Borrower unless the Borrowers agree that
all of the Borrowers’ Projects will be treated as a single project through the
imposition of cross-collateralization, cross-default and release provisions.

(c)           The Borrowers hereby respectively agree and consent that as
additional security to the Lender, each of the Borrowers’ Projects shall be
subject to the lien of the Lender’s Security Instrument for each of the
Borrowers’ Projects, and that each of the respective Borrowers’ Projects shall
collateralize the other Borrowers’ Projects as follows: all Mortgaged Property
(as defined in the respective Security Instrument) for each of the Borrowers’
Projects shall be considered part of the “Mortgaged Property” under this
Instrument, and shall be collateral under this Instrument and the Loan
Documents.

(d)           The Borrowers hereby agree and consent that if an Event of Default
occurs under the Security Instrument securing one of the Borrowers’ Projects,
then an Event of Default shall exist under all of the Security Instruments with
respect to the other Borrowers’ Projects.  No notice shall be required to be
given to the Borrowers in connection with such Event of Default.  In the event
of an Event of Default under the Security Instrument with respect to any one of
the Borrowers’ Projects, the Lender shall have the right, in its sole and
absolute discretion, to exercise and perfect any and all rights in and under the
Loan Documents with regard to any or all of the other Borrowers’ Projects,
including, but not limited to, an acceleration of one or all of the Notes and
the sale of one or all of the Borrowers’ Projects in accordance with the terms
of the respective Security Instruments.  No notice, except as may be required by
the respective Security Instruments, shall be required to be given to the
Borrowers in connection with the Lender’s exercise of any and all of its rights
after an Event of Default has occurred.
 
 

CROSS-DEFAULT AND CROSS-COLLATERALIZATION Form 4068
11-01
  MODIFICATION TO INSTRUMENT (MULTI-PROJECT/MULTI-NOTE) [MODIFIED] [Bassett Park
Manor] DMEAST #9859637 © 1997-2001 Fannie Mae

 
B-2-1

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(e)           The Borrowers may request that Lender make a determination whether
any of the Borrowers’ Projects may be released from the cross-default and
cross-collateral provisions of this Section if (i) one of the Borrowers proposes
to pay off its respective loan held by Lender and secured by the Borrowers’
Projects, or (ii) one of the Borrowers proposes to sell its respective
Borrower’s Project and have such Borrower’s loan on that project assumed by a
buyer acceptable to Lender.  Upon such request from the Borrowers, Lender shall
consent to the release of the respective Borrower’s Project from the
cross-default and cross-collateral provisions of this Section, provided:

(1)           The remaining loans to the Borrowers secured by the remaining
Borrowers’ Projects that are not requested to be released have, in the
aggregate, a minimum overall 1.45 debt service coverage, based on the remaining
respective Borrowers’ Projects’ collective Net Operating Income for the
12 months of operation immediately prior to the Borrowers’ request for such
release; and

(2)           If one of the Borrowers’ loans is to be assumed by a buyer
acceptable to and approved by Lender, the assumed loan must also have a minimum
1.45 debt service coverage, based on that project’s Net Operating Income for the
12 months of operation immediately prior to the Borrowers’ request for such
release.

For purposes of (1) and (2) of this paragraph (e), “Net Operating Income” is
defined as:

(i)           the lesser of the actual rents collected for the 12 month period
(net of any concession) or 90% of the gross potential rental income for the 12
month period; plus

(ii)           the actual laundry income (coin operated machines), cable and
alarm fees, application fees, level of care (ancillary services) charges, late
fees and forfeited deposits for the 12 month period; less
 
 

CROSS-DEFAULT AND CROSS-COLLATERALIZATION Form 4068
11-01
  MODIFICATION TO INSTRUMENT (MULTI-PROJECT/MULTI-NOTE) [MODIFIED] [Bassett Park
Manor] DMEAST #9859637 © 1997-2001 Fannie Mae

B-2-2

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(iii)           the greater of the actual operating expenses for the 12 month
period (including the required Replacement Reserves funding for the period) or
the operating expenses used by Lender in its final underwriting (including
Replacement Reserves), increased at the rate of 3% per annum.

(f)           Notwithstanding any provision of this Section to the contrary, the
Borrowers shall not be permitted to request a release of any of the Borrowers’
Projects from the cross-default and cross-collateral provisions of this Section
if, at the time of such request, a default or Event of Default exists under any
of the loans held by Lender on any of the Borrowers’ Projects.  No release of
any of the Borrowers’ Projects from the cross-default and cross-collateral
provisions of this Section shall be permitted by Lender unless the Borrowers
have paid all costs and expenses of Lender incurred in connection with its
processing of the requested release, including, without limitation, all title
endorsement premiums, recording fees, inspection fees, and attorney fees.

49.           EXHIBIT C.  Exhibit C is attached to this Instrument.”

 
BORROWER’S INITIALS:       /s/ EM    
 
 

CROSS-DEFAULT AND CROSS-COLLATERALIZATION Form 4068
11-01
  MODIFICATION TO INSTRUMENT (MULTI-PROJECT/MULTI-NOTE) [MODIFIED] [Bassett Park
Manor] DMEAST #9859637 © 1997-2001 Fannie Mae

 
B-2-3

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ACKNOWLEDGED AND AGREED:
BORROWERS: 
             
MERIWEG-FAIRPORT, LLC, a Delaware limited liability company 
             
By:
Emeritus Corporation,
   
a Washington corporation
               
By:  /s/ Eric Mendelsohn
   
Eric Mendelsohn
   
Director of Real Estate
   
Business Legal Affairs
       
MERIWEG-FAYETTEVILLE, LLC, a Delaware limited liability company 
             
By:
Emeritus Corporation,
   
a Washington corporation
             
By:
/s/ Eric Mendelsohn
   
Eric Mendelsohn
   
Director of Real Estate
   
Business Legal Affairs
       
MERIWEG-LATHAM, LLC, a Delaware limited liability company 
             
By:
Emeritus Corporation,
   
a Washington corporation
             
By:
/s/ Eric Mendelsohn
   
Eric Mendelsohn
   
Director of Real Estate
   
Business Legal Affairs

 
 

CROSS-DEFAULT AND CROSS-COLLATERALIZATION Form 4068
11-01
  MODIFICATION TO INSTRUMENT (MULTI-PROJECT/MULTI-NOTE) [MODIFIED] [Bassett Park
Manor] DMEAST #9859637 © 1997-2001 Fannie Mae

 
B-2-4

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MERIWEG-LIVERPOOL, LLC, a Delaware limited liability company 
             
By:
Emeritus Corporation,
   
a Washington corporation
             
By:
/s/ Eric Mendelsohn
   
Eric Mendelsohn
   
Director of Real Estate
   
Business Legal Affairs
       
MERIWEG-ROCHESTER, LLC, a Delaware limited liability company 
             
By:
Emeritus Corporation,
   
a Washington corporation
             
By:
/s/ Eric Mendelsohn
   
Eric Mendelsohn
   
Director of Real Estate
   
Business Legal Affairs
       
MERIWEG-SYRACUSE, LLC, a Delaware limited liability company 
             
By:
Emeritus Corporation,
   
a Washington corporation
             
By:
/s/ Eric Mendelsohn
   
Eric Mendelsohn
   
Director of Real Estate
   
Business Legal Affairs

 
 

CROSS-DEFAULT AND CROSS-COLLATERALIZATION Form 4068
11-01
  MODIFICATION TO INSTRUMENT (MULTI-PROJECT/MULTI-NOTE) [MODIFIED] [Bassett Park
Manor] DMEAST #9859637 © 1997-2001 Fannie Mae

 
B-2-5

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MERIWEG-WILLIAMSVILLE BM, LLC, a Delaware limited liability company 
             
By:
Emeritus Corporation,
   
a Washington corporation
             
By:
/s/ Eric Mendelsohn
   
Eric Mendelsohn
   
Director of Real Estate
   
Business Legal Affairs
       
MERIWEG-WILLIAMSVILLE BPM, LLC, a Delaware limited liability company 
             
By:
Emeritus Corporation,
   
a Washington corporation
             
By:
/s/ Eric Mendelsohn
   
Eric Mendelsohn
   
Director of Real Estate
   
Business Legal Affairs
       
MERIWEG-VESTAL, LLC, a Delaware limited liability company 
             
By:
Emeritus Corporation,
   
a Washington corporation
             
By:
/s/ Eric Mendelsohn
   
Eric Mendelsohn
   
Director of Real Estate
   
Business Legal Affairs

 
 

CROSS-DEFAULT AND CROSS-COLLATERALIZATION Form 4068
11-01
  MODIFICATION TO INSTRUMENT (MULTI-PROJECT/MULTI-NOTE) [MODIFIED] [Bassett Park
Manor] DMEAST #9859637 © 1997-2001 Fannie Mae

 
B-2-6

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EXHIBIT B-3

MODIFICATIONS TO INSTRUMENT

(Borrower Requested Modifications)

The following modifications are made to the text of the Instrument that precedes
this Exhibit:
 
1.            Section 1(v), as amended pursuant to Exhibit B-1, is hereby
further amended by adding the following sentence to the end thereof:
 
   “Personalty shall not include any computer software or hardware owned by the
Operator that is not specifically and exclusively used for the operation of the
Improvements.”

2.            The first sentence of Section 4(f) is amended by adding the clause
“other than for use as a hair salon or physical therapy office” following the
words “non-residential use”.

3.            Section 7 is amended to add the following paragraph as Section
7(f):

“(f)           Notwithstanding the foregoing, Borrower may, in lieu of making
Imposition Deposits on a monthly basis as provided above, deposit with Lender on
the day that the initial monthly installment of principal or interest, or both,
is due under the Note (the “Initial Note Payment Date”) an amount equal to the
estimated amount of Imposition Deposits due in the twelve month period following
the Initial Note Payment Date.  If Borrower so elects, then Borrower shall pay
the Impositions directly to the appropriate public office or insurance company,
as applicable, and shall provide to Lender, at least fifteen (15) days prior to
the last date on which such payment may be made without any penalty or interest
charge being added, evidence of such payment.  Lender shall continue to hold the
Imposition Deposits.  Not fewer than ninety (90) days prior to each anniversary
of the Initial Note Payment Date during the term of the Note, Lender shall
notify Borrower of any additional amounts Borrower must deposit so that the
amount held by Lender as Imposition Deposits will cover the reasonably estimated
cost of the Impositions due in the next twelve month period following the
Initial Note Payment Date anniversary.  During the last twelve month period of
the term, Borrower may withdraw funds each month to pay the Impositions.  Should
any Imposition Deposits remain held by Lender at the end of the term of the
Note, Lender shall immediately release such funds to Borrower.  Provided,
however, the foregoing option of Borrower to make annual Imposition Deposits
rather than making Imposition Deposits on a monthly basis may be revoked by
Lender, in Lender’s sole but reasonable discretion, at any time upon notice to
Borrower.”
 
 

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MODIFICATION TO INSTRUMENT (Borrower Requested Modifications)
[Bassett Park Manor]
DMEAST #9859637

B-3-1

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4.            In Sub-Sections 14(b)(1) and 14(b)(3), the words, “30 days”, shall
be replaced with the words, “45 days”.

5.            The second sentence of Section 18(d) is amended by inserting the
word “reasonable” prior to the words “out-of-pocket costs”.

6.            The first sentence of Section 18(g) is amended by inserting the
word “reasonable” prior to the word “costs”.

7.            The second sentence of Section 18(h) is amended by inserting the
word “reasonable” prior to the word “cost”.

8.            The third sentence of Section 18(g) is amended by deleting “have
no obligation to” and adding the word “promptly”.  The fourth sentence of
Section 18(g) is amended by adding the following provisions to the end thereof:
 
“;provided, however, so long as no Event of Default exists under the Loan
Documents, Lender's right to make such information available to any party other
than third party consultants or professionals engaged by Lender, shall be
subject to Borrower’s prior written approval, which approval may be withheld by
Borrower in its sole discretion.”

9.            Section 18(m) is amended by inserting the words “or members”
following the words “general partners”.

10.           Section 18(n)(2) is amended by inserting the word “reasonable”
prior to the word “expenses”.

11.           The first clause of Section 18(n)(3) is amended by inserting the
word “reasonable” prior to the word “expenses”.

12.           The final sentence of Section 18(o) is amended by inserting the
word “reasonable” prior to the word “costs” in each instance that it appears and
inserting the word “reasonable” prior to the word “fees”.

13.           The first sentence of Section 20(b) is amended by inserting the
word “reasonable” prior to the word “expenses”.

14.           Section 10 of Exhibit B-1, which amends Section 4(e) of the
Instrument, is hereby deleted.  Section 4(e) is amended by adding the following
sentence to the end thereof:
 
 

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MODIFICATION TO INSTRUMENT (Borrower Requested Modifications)
[Bassett Park Manor]
DMEAST #9859637

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“Notwithstanding the foregoing, Leases also may be on a month-to-month basis.”

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

BORROWER'S INITIALS:            /s/ EM    

 

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MODIFICATION TO INSTRUMENT (Borrower Requested Modifications)
[Bassett Park Manor]
DMEAST #9859637

B-3-3

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EXHIBIT C

BORROWERS’ PROJECTS

Property
 
Owner
     
1.
Colonie Manor
Meriweg-Latham, LLC
 
Latham, New York
       
2.
West Side Manor - Rochester
Meriweg-Rochester, LLC
 
Rochester, New York
       
3.
Bellevue Manor
Meriweg-Syracuse, LLC
 
Syracuse, New York
       
4.
Bassett Park Manor
Meriweg-Williamsville BPM, LLC
 
Buffalo, New York
       
5.
Woodland Manor
Meriweg-Vestal, LLC
 
Vestal, New York
       
6.
East Side Manor
Meriweg-Fayetteville, LLC
 
Fayetteville, New York
       
7.
West Side Manor - Liverpool
Meriweg-Liverpool, LLC
 
Liverpool, New York
       
8.
Perinton Park Manor
Meriweg-Fairport, LLC
 
Fairport, New York
       
9.
Bassett Manor
Meriweg-Williamsville BM, LLC
 
Buffalo, New York
 

 
 

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MODIFICATION TO INSTRUMENT (Borrower Requested Modifications)
[Bassett Park Manor]
DMEAST #9859637
 
 
C-1

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