Exhibit 10.6
Prepared by:
Andrew S. Begun, Esq.
Alston & Bird, LLP
2801 Townsgate Road, Suite 215
Westlake Village, California 91361
(SIGNATURE) [g27170g2717002.gif]
Signature of Preparer
After recording mail to:
PNC Bank, National Association
10731 Treena Street, Suite 101
San Diego, CA 92131
Attention: Kelli A. Tyler
PNC Loan No. 310401108
Fannie Mae No. 864670
Principal place of business:
26901 Agoura Rd., Suite 200
Calabasas Hills, California 91301
MULTIFAMILY MORTGAGE,
ASSIGNMENT OF RENTS
AND SECURITY AGREEMENT

      FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT –
KENTUCKY   Form 4018       06/09     © 1998-2009 Fannie Mae

 

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TABLE OF CONTENTS

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

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

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

      FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT –
KENTUCKY   Form 4018       06/09       Page iii     © 1998-2009 Fannie Mae

 

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

      FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT –
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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 4th day of May, 2011, and effective as of
May 5, 2011, between SIR ARBOR POINTE, LLC, a limited liability company
organized and existing under the laws of Delaware, and whose office address is
18100 Von Karman Avenue, Suite 500, Irvine, Orange County, California 92612, as
mortgagor (“Borrower”), and PNC BANK, NATIONAL ASSOCIATION, a national banking
association, whose principal place of business is 26901 Agoura Rd., Suite 200,
Calabasas Hills, California 91301, as mortgagee (“Lender”).
     Borrower is indebted to Lender in the principal amount of $5,200,000.00, as
evidenced by Borrower’s Multifamily Note payable to Lender dated as of the date
of this Instrument, and maturing on June 1, 2018.
     TO SECURE TO LENDER the repayment of the Indebtedness, and all renewals,
extensions and modifications of the Indebtedness, and the performance of the
covenants and agreements of Borrower contained in the Loan Documents, Borrower
mortgages, warrants, grants, conveys and assigns to Lender, with power of sale,
the Mortgaged Property, including the Land located in Jefferson County, State of
Kentucky, and described in Exhibit A attached to this Instrument.
     Borrower represents and warrants that Borrower is lawfully seized of the
Mortgaged Property and has the right, power and authority to mortgage, grant,
convey and assign the Mortgaged Property, and that the Mortgaged Property is
unencumbered. Borrower covenants that Borrower will warrant and defend generally
the title to the Mortgaged Property against all claims and demands, subject to
any easements and restrictions listed in a schedule of exceptions to coverage in
any title insurance policy issued to Lender contemporaneously with the execution
and recordation of this Instrument and insuring Lender’s interest in the
Mortgaged Property.
Covenants. Borrower and Lender covenant and agree as follows:
     1. DEFINITIONS.
     The following terms, when used in this Instrument (including when used in
the above recitals), shall have the following meanings:
     (a) “Borrower” means all persons or entities identified as “Borrower” in
the first paragraph of this Instrument, together with their successors and
assigns.

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     (b) “Collateral Agreement” means any separate agreement between Borrower
and Lender for the purpose of establishing replacement reserves for the
Mortgaged Property, establishing a fund to assure completion of repairs or
improvements specified in that agreement, or assuring reduction of the
outstanding principal balance of the Indebtedness if the occupancy of or income
from the Mortgaged Property does not increase to a level specified in that
agreement, or any other agreement or agreements between Borrower and Lender
which provide for the establishment of any other fund, reserve or account.
     (c) “Environmental Permit” means any permit, license, or other
authorization issued under any Hazardous Materials Law with respect to any
activities or businesses conducted on or in relation to the Mortgaged Property.
     (d) “Event of Default” means the occurrence of any event listed in
Section 22.
     (e) “Fixtures” means all property which is so attached to the Land or the
Improvements as to constitute a fixture under applicable law, including:
machinery, equipment, engines, boilers, incinerators, installed building
materials; systems and equipment for the purpose of supplying or distributing
heating, cooling, electricity, gas, water, air, or light; antennas, cable,
wiring and conduits used in connection with radio, television, security, fire
prevention, or fire detection or otherwise used to carry electronic signals;
telephone systems and equipment; elevators and related machinery and equipment;
fire detection, prevention and extinguishing systems and apparatus; security and
access control systems and apparatus; plumbing systems; water heaters, ranges,
stoves, microwave ovens, refrigerators, dishwashers, garbage disposers, washers,
dryers and other appliances; light fixtures, awnings, storm windows and storm
doors; pictures, screens, blinds, shades, curtains and curtain rods; mirrors;
cabinets, paneling, rugs and floor and wall coverings; fences, trees and plants;
swimming pools; and exercise equipment.
     (f) “Governmental Authority” means any board, commission, department or
body of any municipal, county, state or federal governmental unit, or any
subdivision of any of them, that has or acquires jurisdiction over the Mortgaged
Property or the use, operation or improvement of the Mortgaged Property.
     (g) “Hazardous Materials” means petroleum and petroleum products and
compounds containing them, including gasoline, diesel fuel and oil; explosives;
flammable materials; radioactive materials; polychlorinated biphenyls (“PCBs”)
and compounds containing them; lead and lead-based paint; asbestos or
asbestos-containing materials in any form that is or could become friable;
underground or above-ground storage tanks, whether empty or containing any
substance; any substance the presence of which on the Mortgaged Property is
prohibited by any federal, state or local authority; any substance that requires
special handling; and any other material or substance now or in the future
defined as a “hazardous substance,” “hazardous material,” “hazardous waste,”
“toxic substance,” “toxic pollutant,” “contaminant,” or “pollutant” within the
meaning of any Hazardous Materials Law.

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     (h) “Hazardous Materials Laws” means all federal, state, and local laws,
ordinances and regulations and standards, rules, policies and other governmental
requirements, administrative rulings and court judgments and decrees in effect
now or in the future and including all amendments, that relate to Hazardous
Materials and apply to Borrower or to the Mortgaged Property. Hazardous
Materials Laws include, but are not limited to, the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. Section 9601, et seq., the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., the
Toxic Substance Control Act, 15 U.S.C. Section 2601, et seq., the Clean Water
Act, 33 U.S.C. Section 1251, et seq., and the Hazardous Materials Transportation
Act, 49 U.S.C. Section 5101, and their state analogs.
     (i) “Impositions” and “Imposition Deposits” are defined in Section 7(a).
     (j) “Improvements” means the buildings, structures, improvements, and
alterations now constructed or at any time in the future constructed or placed
upon the Land, including any future replacements and additions.
     (k) “Indebtedness” means the principal of, interest on, and all other
amounts due at any time under, the Note, this Instrument or any other Loan
Document, including prepayment premiums, late charges, default interest, and
advances as provided in Section 12 to protect the security of this Instrument.
     (l) [Intentionally omitted]
     (m) “Key Principal” means (A) the natural person(s) or entity identified as
such at the foot of this Instrument; (B) the natural person or entity who signed
either the Acknowledgement and Agreement of Key Principal to Personal Liability
for Exceptions to Non-Recourse Liability or the Exceptions to Non-Recourse
Guaranty (or is otherwise a guarantor on the Indebtedness); and (C) any person
or entity who becomes a Key Principal after the date of this Instrument and is
identified as such in an assumption agreement, or another amendment or
supplement to this Instrument or who otherwise signs either the Acknowledgement
and Agreement of Key Principal to Personal Liability for Exceptions to
Non-Recourse Liability or Exceptions to Non-Recourse Guaranty (or any other
guaranty of the Indebtedness).
     (n) “Land” means the land described in Exhibit A.
     (o) “Leases” means all present and future leases, subleases, licenses,
concessions or grants or other possessory interests now or hereafter in force,
whether oral or written, covering or affecting the Mortgaged Property, or any
portion of the Mortgaged Property (including proprietary leases or occupancy
agreements if Borrower is a cooperative housing corporation), and all
modifications, extensions or renewals.
     (p) “Lender” means the entity identified as “Lender” in the first paragraph
of this Instrument and its successors and assigns, or any subsequent holder of
the Note.

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     (q) “Loan Documents” means the Note, this Instrument, all guaranties, all
indemnity agreements, all Collateral Agreements, O&M Programs, and any other
documents now or in the future executed by Borrower, Key Principal, any
guarantor or any other person in connection with the loan evidenced by the Note,
as such documents may be amended from time to time.
     (r) “Loan Servicer” means the entity that from time to time is designated
by Lender to collect payments and deposits and receive notices under the Note,
this Instrument and any other Loan Document, and otherwise to service the loan
evidenced by the Note for the benefit of Lender. Unless Borrower receives notice
to the contrary, the Loan Servicer is the entity identified as “Lender” in the
first paragraph of this Instrument.
     (s) “Mortgaged Property” means all of Borrower’s present and future right,
title and interest in and to all of the following:

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

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

     (t) “Note” means the Multifamily Note described on page 1 of this
Instrument, including the Acknowledgment and Agreement of Key Principal to
Personal Liability for Exceptions to Non-Recourse Liability (if any), and all
schedules, riders, allonges and addenda, as such Multifamily Note may be amended
from time to time.
     (u) “O&M Program” is defined in Section 18(a).
     (v) “Personalty” means all equipment, inventory, general intangibles which
are used now or in the future in connection with the ownership, management or
operation of the Land or the Improvements or are located on the Land or in the
Improvements, including furniture, furnishings, machinery, building materials,
appliances, goods, supplies, tools, books, records (whether in written or
electronic form), computer equipment (hardware and software) and other tangible
personal

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property (other than Fixtures) which are used now or in the future in connection
with the ownership, management or operation of the Land or the Improvements or
are located on the Land or in the Improvements, and any operating agreements
relating to the Land or the Improvements, and any surveys, plans and
specifications and contracts for architectural, engineering and construction
services relating to the Land or the Improvements and all other intangible
property and rights relating to the operation of, or used in connection with,
the Land or the Improvements, including all governmental permits relating to any
activities on the Land.
     (w) “Property Jurisdiction” is defined in Section 30(a).
     (x) “Rents” means all rents (whether from residential or non-residential
space), revenues and other income of the Land or the Improvements, including
subsidy payments received from any sources (including, but not limited to
payments under any Housing Assistance Payments Contract), parking fees, laundry
and vending machine income and fees and charges for food, health care and other
services provided at the Mortgaged Property, whether now due, past due, or to
become due, and deposits forfeited by tenants.
     (y) “Taxes” means all taxes, assessments, vault rentals and other charges,
if any, general, special or otherwise, including all assessments for schools,
public betterments and general or local improvements, which are levied, assessed
or imposed by any public authority or quasi-public authority, and which, if not
paid, will become a lien, on the Land or the Improvements.
     (z) “Transfer” means (A) a sale, assignment, transfer, or other disposition
(whether voluntary, involuntary or by operation of law); (B) the grant,
creation, or attachment of a lien, encumbrance, or security interest (whether
voluntary, involuntary or by operation of law); (C) the issuance or other
creation of a direct or indirect ownership interest; or (D) the withdrawal,
retirement, removal or involuntary resignation of any owner or manager of a
legal entity.
     (aa) “Bankruptcy Event” means any one or more of the following: (i) the
commencement of a voluntary case under one or more of the Insolvency Laws by the
Borrower; (ii) the acknowledgment in writing by the Borrower that it is unable
to pay its debts generally as they mature; (iii) the making of a general
assignment for the benefit of creditors by the Borrower; (iv) an involuntary
case under one or more Insolvency Laws against the Borrower; (v) the appointment
of a receiver, liquidator, custodian, sequestrator, trustee or other similar
officer who exercises control over the Borrower or any substantial part of the
assets of the Borrower provided that any proceeding or case under (iv) or
(v) above is not dismissed within 90 days after filing.
     (bb) “Borrower Affiliate” means, as to either Borrower or Key Principal,
(i) any entity that directly or indirectly owns, controls, or holds with power
to vote, 20 percent or more of the outstanding voting securities of Borrower or
of Key Principal, (ii) any corporation 20 percent or more of whose outstanding
voting securities are directly or indirectly owned, controlled or held with
power to vote by Borrower or by Key Principal, (iii) any partner, shareholder
or, if a limited

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liability company, member of Borrower or Key Principal, or (iv) any other entity
that is related (to the third degree of consanguinity) by blood or marriage to
Borrower or Key Principal.
     (cc) “Insolvency Laws” means the United States Bankruptcy Code, 11 U.S.C. §
101, et seq., together with any other federal or state law affecting debtor and
creditor rights or relating to the bankruptcy, insolvency, reorganization,
arrangement, readjustment of debt, dissolution, liquidation or similar
proceeding, as amended from time to time, to the extent applicable to the
Borrower.
     2. UNIFORM COMMERCIAL CODE SECURITY AGREEMENT.
     This Instrument is also a security agreement under the Uniform Commercial
Code for any of the Mortgaged Property which, under applicable law, may be
subject to a security interest under the Uniform Commercial Code, whether
acquired now or in the future, and all products and cash and non-cash proceeds
thereof (collectively, “UCC Collateral”), and Borrower hereby grants to Lender a
security interest in the UCC Collateral. Borrower hereby authorizes Lender to
file financing statements, continuation statements and financing statement
amendments in such form as Lender may require to perfect or continue the
perfection of this security interest and Borrower agrees, if Lender so requests,
to execute and deliver to Lender such financing statements, continuation
statements and amendments. Borrower shall pay all filing costs and all costs and
expenses of any record searches for financing statements that Lender may
require. Without the prior written consent of Lender, Borrower shall not create
or permit to exist any other lien or security interest in any of the UCC
Collateral. If an Event of Default has occurred and is continuing, Lender shall
have the remedies of a secured party under the Uniform Commercial Code, in
addition to all remedies provided by this Instrument or existing under
applicable law. In exercising any remedies, Lender may exercise its remedies
against the UCC Collateral separately or together, and in any order, without in
any way affecting the availability of Lender’s other remedies. This Instrument
constitutes a financing statement with respect to any part of the Mortgaged
Property which is or may become a Fixture.
     3. ASSIGNMENT OF RENTS; APPOINTMENT OF RECEIVER; LENDER IN POSSESSION.
     (a) As part of the consideration for the Indebtedness, Borrower absolutely
and unconditionally assigns and transfers to Lender all Rents. It is the
intention of Borrower to establish a present, absolute and irrevocable transfer
and assignment to Lender of all Rents and to authorize and empower Lender to
collect and receive all Rents without the necessity of further action on the
part of Borrower. Promptly upon request by Lender, Borrower agrees to execute
and deliver such further assignments as Lender may from time to time require.
Borrower and Lender intend this assignment of Rents to be immediately effective
and to constitute an absolute present assignment and not an assignment for
additional security only. For purposes of giving effect to this absolute
assignment of Rents, and for no other purpose, Rents shall not be deemed to be a
part of the “Mortgaged Property,” as that term is defined in Section l(s).
However, if this present, absolute and unconditional assignment of Rents is not
enforceable by its terms under the laws of the

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Property Jurisdiction, then the Rents shall be included as a part of the
Mortgaged Property and it is the intention of the Borrower that in this
circumstance this Instrument create and perfect a lien on Rents in favor of
Lender, which lien shall be effective as of the date of this Instrument.
     (b) After the occurrence of an Event of Default, Borrower authorizes Lender
to collect, sue for and compromise Rents and directs each tenant of the
Mortgaged Property to pay all Rents to, or as directed by, Lender, and Borrower
shall, upon Borrower’s receipt of any Rents from any sources (including, but not
limited to subsidy payments under any Housing Assistance Payments Contract), pay
the total amount of such receipts to the Lender. However, until the occurrence
of an Event of Default, Lender hereby grants to Borrower a revocable license to
collect and receive all Rents, to hold all Rents in trust for the benefit of
Lender and to apply all Rents to pay the installments of interest and principal
then due and payable under the Note and the other amounts then due and payable
under the other Loan Documents, including Imposition Deposits, and to pay the
current costs and expenses of managing, operating and maintaining the Mortgaged
Property, including utilities, Taxes and insurance premiums (to the extent not
included in Imposition Deposits), tenant improvements and other capital
expenditures. So long as no Event of Default has occurred and is continuing, the
Rents remaining after application pursuant to the preceding sentence may be
retained by Borrower free and clear of, and released from, Lender’s rights with
respect to Rents under this Instrument. From and after the occurrence of an
Event of Default, and without the necessity of Lender entering upon and taking
and maintaining control of the Mortgaged Property directly, or by a receiver,
Borrower’s license to collect Rents shall automatically terminate and Lender
shall without notice be entitled to all Rents as they become due and payable,
including Rents then due and unpaid. Borrower shall pay to Lender upon demand
all Rents to which Lender is entitled. At any time on or after the date of
Lender’s demand for Rents, Lender may give, and Borrower hereby irrevocably
authorizes Lender to give, notice to all tenants of the Mortgaged Property
instructing them to pay all Rents to Lender, no tenant shall be obligated to
inquire further as to the occurrence or continuance of an Event of Default, and
no tenant shall be obligated to pay to Borrower any amounts which are actually
paid to Lender in response to such a notice. Any such notice by Lender shall be
delivered to each tenant personally, by mail or by delivering such demand to
each rental unit. Borrower shall not interfere with and shall cooperate with
Lender’s collection of such Rents.
     (c) Borrower represents and warrants to Lender that Borrower has not
executed any prior assignment of Rents (other than an assignment of Rents
securing indebtedness that will be paid off and discharged with the proceeds of
the loan evidenced by the Note), that Borrower has not performed, and Borrower
covenants and agrees that it will not perform, any acts and has not executed,
and shall not execute, any instrument which would prevent Lender from exercising
its rights under this Section 3, and that at the time of execution of this
Instrument there has been no anticipation or prepayment of any Rents for more
than two months prior to the due dates of such Rents. Borrower shall not collect
or accept payment of any Rents more than two months prior to the due dates of
such Rents.
     (d) If an Event of Default has occurred and is continuing, Lender may,
regardless of the adequacy of Lender’s security or the solvency of Borrower and
even in the absence of waste, enter

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upon and take and maintain full control of the Mortgaged Property in order to
perform all acts that Lender in its discretion determines to be necessary or
desirable for the operation and maintenance of the Mortgaged Property, including
the execution, cancellation or modification of Leases, the collection of all
Rents, the making of repairs to the Mortgaged Property and the execution or
termination of contracts providing for the management, operation or maintenance
of the Mortgaged Property, for the purposes of enforcing the assignment of Rents
pursuant to Section 3(a), protecting the Mortgaged Property or the security of
this Instrument, or for such other purposes as Lender in its discretion may deem
necessary or desirable. Alternatively, if an Event of Default has occurred and
is continuing, regardless of the adequacy of Lender’s security, without regard
to Borrower’s solvency and without the necessity of giving prior notice (oral or
written) to Borrower, Lender may apply to any court having jurisdiction for the
appointment of a receiver for the Mortgaged Property to take any or all of the
actions set forth in the preceding sentence. If Lender elects to seek the
appointment of a receiver for the Mortgaged Property at any time after an Event
of Default has occurred and is continuing, Borrower, by its execution of this
Instrument, expressly consents to the appointment of such receiver, including
the appointment of a receiver ex parte if permitted by applicable law. Lender or
the receiver, as the case may be, shall be entitled to receive a reasonable fee
for managing the Mortgaged Property. Immediately upon appointment of a receiver
or immediately upon the Lender’s entering upon and taking possession and control
of the Mortgaged Property, Borrower shall surrender possession of the Mortgaged
Property to Lender or the receiver, as the case may be, and shall deliver to
Lender or the receiver, as the case may be, all documents, records (including
records on electronic or magnetic media), accounts, surveys, plans, and
specifications relating to the Mortgaged Property and all security deposits and
prepaid Rents. In the event Lender takes possession and control of the Mortgaged
Property, Lender may exclude Borrower and its representatives from the Mortgaged
Property. Borrower acknowledges and agrees that the exercise by Lender of any of
the rights conferred under this Section 3 shall not be construed to make Lender
a mortgagee-in-possession of the Mortgaged Property so long as Lender has not
itself entered into actual possession of the Land and Improvements.
     (e) If Lender enters the Mortgaged Property, Lender shall be liable to
account only to Borrower and only for those Rents actually received. Lender
shall not be liable to Borrower, anyone claiming under or through Borrower or
anyone having an interest in the Mortgaged Property, by reason of any act or
omission of Lender under this Section 3, and Borrower hereby releases and
discharges Lender from any such liability to the fullest extent permitted by
law.
     (f) If the Rents are not sufficient to meet the costs of taking control of
and managing the Mortgaged Property and collecting the Rents, any funds expended
by Lender for such purposes shall become an additional part of the Indebtedness
as provided in Section 12.
     (g) Any entering upon and taking of control of the Mortgaged Property by
Lender or the receiver, as the case may be, and any application of Rents as
provided in this Instrument shall not cure or waive any Event of Default or
invalidate any other right or remedy of Lender under applicable law or provided
for in this Instrument.

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     4. ASSIGNMENT OF LEASES; LEASES AFFECTING THE MORTGAGED PROPERTY.
     (a) As part of the consideration for the Indebtedness, Borrower absolutely
and unconditionally assigns and transfers to Lender all of Borrower’s right,
title and interest in, to and under the Leases, including Borrower’s right,
power and authority to modify the terms of any such Lease, or extend or
terminate any such Lease. It is the intention of Borrower to establish a
present, absolute and irrevocable transfer and assignment to Lender of all of
Borrower’s right, title and interest in, to and under the Leases. Borrower and
Lender intend this assignment of the Leases to be immediately effective and to
constitute an absolute present assignment and not an assignment for additional
security only. For purposes of giving effect to this absolute assignment of the
Leases, and for no other purpose, the Leases shall not be deemed to be a part of
the “Mortgaged Property,” as that term is defined in Section l(s). However, if
this present, absolute and unconditional assignment of the Leases is not
enforceable by its terms under the laws of the Property Jurisdiction, then the
Leases shall be included as a part of the Mortgaged Property and it is the
intention of the Borrower that in this circumstance this Instrument create and
perfect a lien on the Leases in favor of Lender, which lien shall be effective
as of the date of this Instrument.
     (b) Until Lender gives notice to Borrower of Lender’s exercise of its
rights under this Section 4, Borrower shall have all rights, power and authority
granted to Borrower under any Lease (except as otherwise limited by this Section
or any other provision of this Instrument), including the right, power and
authority to modify the terms of any Lease or extend or terminate any Lease.
Upon the occurrence of an Event of Default, the permission given to Borrower
pursuant to the preceding sentence to exercise all rights, power and authority
under Leases shall automatically terminate. Borrower shall comply with and
observe Borrower’s obligations under all Leases, including Borrower’s
obligations pertaining to the maintenance and disposition of tenant security
deposits.
     (c) Borrower acknowledges and agrees that the exercise by Lender, either
directly or by a receiver, of any of the rights conferred under this Section 4
shall not be construed to make Lender a mortgagee-in-possession of the Mortgaged
Property so long as Lender has not itself entered into actual possession of the
Land and the Improvements. The acceptance by Lender of the assignment of the
Leases pursuant to Section 4(a) shall not at any time or in any event obligate
Lender to take any action under this Instrument or to expend any money or to
incur any expenses. Lender shall not be liable in any way for any injury or
damage to person or property sustained by any person or persons, firm or
corporation in or about the Mortgaged Property. Prior to Lender’s actual entry
into and taking possession of the Mortgaged Property, Lender shall not (i) be
obligated to perform any of the terms, covenants and conditions contained in any
Lease (or otherwise have any obligation with respect to any Lease); (ii) be
obligated to appear in or defend any action or proceeding relating to the Lease
or the Mortgaged Property; or (iii) be responsible for the operation, control,
care, management or repair of the Mortgaged Property or any portion of the
Mortgaged Property. The execution of this Instrument by Borrower shall
constitute conclusive evidence that all responsibility for the operation,
control, care, management and repair of the Mortgaged Property is and shall be
that of Borrower, prior to such actual entry and taking of possession.

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     (d) Upon delivery of notice by Lender to Borrower of Lender’s exercise of
Lender’s rights under this Section 4 at any time after the occurrence of an
Event of Default, and without the necessity of Lender entering upon and taking
and maintaining control of the Mortgaged Property directly, by a receiver, or by
any other manner or proceeding permitted by the laws of the Property
Jurisdiction, Lender immediately shall have all rights, powers and authority
granted to Borrower under any Lease, including the right, power and authority to
modify the terms of any such Lease, or extend or terminate any such Lease.
     (e) Borrower shall, promptly upon Lender’s request, deliver to Lender an
executed copy of each residential Lease then in effect. All Leases for
residential dwelling units shall be on forms approved by Lender, shall be for
initial terms of at least six months and not more than two years, and shall not
include options to purchase. If customary in the applicable market, residential
Leases with terms of less than six months may be permitted with Lender’s prior
written consent.
     (f) Borrower shall not lease any portion of the Mortgaged Property for
non-residential use except with the prior written consent of Lender and Lender’s
prior written approval of the Lease agreement. Borrower shall not modify the
terms of, or extend or terminate, any Lease for non- residential use (including
any Lease in existence on the date of this Instrument) without the prior written
consent of Lender. Borrower shall, without request by Lender, deliver an
executed copy of each non-residential Lease to Lender promptly after such Lease
is signed. All non-residential Leases, including renewals or extensions of
existing Leases, shall specifically provide that (1) such Leases are subordinate
to the lien of this Instrument (unless waived in writing by Lender); (2) the
tenant shall attorn to Lender and any purchaser at a foreclosure sale, such
attornment to be self-executing and effective upon acquisition of title to the
Mortgaged Property by any purchaser at a foreclosure sale or by Lender in any
manner; (3) the tenant agrees to execute such further evidences of attornment as
Lender or any purchaser at a foreclosure sale may from time to time request;
(4) the Lease shall not be terminated by foreclosure or any other transfer of
the Mortgaged Property; (5) after a foreclosure sale of the Mortgaged Property,
Lender or any other purchaser at such foreclosure sale may, at Lender’s or such
purchaser’s option, accept or terminate such Lease; and (6) the tenant shall,
upon receipt after the occurrence of an Event of Default of a written request
from Lender, pay all Rents payable under the Lease to Lender.
     (g) Borrower shall not receive or accept Rent under any Lease (whether
residential or non-residential) for more than two months in advance.
     5. PAYMENT OF INDEBTEDNESS; PERFORMANCE UNDER LOAN DOCUMENTS; PREPAYMENT
PREMIUM.
     Borrower shall pay the Indebtedness when due in accordance with the terms
of the Note and the other Loan Documents and shall perform, observe and comply
with all other provisions of the Note and the other Loan Documents. Borrower
shall pay a prepayment premium in connection with certain prepayments of the
Indebtedness, including a payment made after Lender’s exercise of any right of
acceleration of the Indebtedness, as provided in the Note.

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     6. EXCULPATION.
     Borrower’s personal liability for payment of the Indebtedness and for
performance of the other obligations to be performed by it under this Instrument
is limited in the manner, and to the extent, provided in the Note.
     7. DEPOSITS FOR TAXES, INSURANCE AND OTHER CHARGES.
     (a) Borrower shall deposit with Lender on the day monthly installments of
principal or interest, or both, are due under the Note (or on another day
designated in writing by Lender), until the Indebtedness is paid in full, an
additional amount sufficient to accumulate with Lender the entire sum required
to pay, when due (1) any water and sewer charges which, if not paid, may result
in a lien on all or any part of the Mortgaged Property, (2) the premiums for
fire and other hazard insurance, rent loss insurance and such other insurance as
Lender may require under Section 19, (3) Taxes, and (4) amounts for other
charges and expenses which Lender at any time reasonably deems necessary to
protect the Mortgaged Property, to prevent the imposition of liens on the
Mortgaged Property, or otherwise to protect Lender’s interests, all as
reasonably estimated from time to time by Lender. The amounts deposited under
the preceding sentence are collectively referred to in this Instrument as the
“Imposition Deposits”. The obligations of Borrower for which the Imposition
Deposits are required are collectively referred to in this Instrument as
“Impositions”. The amount of the Imposition Deposits shall be sufficient to
enable Lender to pay each Imposition before the last date upon which such
payment may be made without any penalty or interest charge being added. Lender
shall maintain records indicating how much of the monthly Imposition Deposits
and how much of the aggregate Imposition Deposits held by Lender are held for
the purpose of paying Taxes, insurance premiums and each other obligation of
Borrower for which Imposition Deposits are required. Any waiver by Lender of the
requirement that Borrower remit Imposition Deposits to Lender may be revoked by
Lender, in Lender’s discretion, at any time upon notice to Borrower.
     (b) Imposition Deposits shall be held in an institution (which may be
Lender, if Lender is such an institution) whose deposits or accounts are insured
or guaranteed by a federal agency. Lender shall not be obligated to open
additional accounts or deposit Imposition Deposits in additional institutions
when the amount of the Imposition Deposits exceeds the maximum amount of the
federal deposit insurance or guaranty. Lender shall apply the Imposition
Deposits to pay Impositions so long as no Event of Default has occurred and is
continuing. Unless applicable law requires, Lender shall not be required to pay
Borrower any interest, earnings or profits on the Imposition Deposits. Borrower
hereby pledges and grants to Lender a security interest in the Imposition
Deposits as additional security for all of Borrower’s obligations under this
Instrument and the other Loan Documents. Any amounts deposited with Lender under
this Section 7 shall not be trust funds, nor shall they operate to reduce the
Indebtedness, unless applied by Lender for that purpose under Section 7(e).
     (c) If Lender receives a bill or invoice for an Imposition, Lender shall
pay the Imposition from the Imposition Deposits held by Lender. Lender shall
have no obligation to pay

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any Imposition to the extent it exceeds Imposition Deposits then held by Lender.
Lender may pay an Imposition according to any bill, statement or estimate from
the appropriate public office or insurance company without inquiring into the
accuracy of the bill, statement or estimate or into the validity of the
Imposition.
     (d) If at any time the amount of the Imposition Deposits held by Lender for
payment of a specific Imposition exceeds the amount reasonably deemed necessary
by Lender, the excess shall be credited against future installments of
Imposition Deposits. If at any time the amount of the Imposition Deposits held
by Lender for payment of a specific Imposition is less than the amount
reasonably estimated by Lender to be necessary, Borrower shall pay to Lender the
amount of the deficiency within 15 days after notice from Lender.
     (e) If an Event of Default has occurred and is continuing, Lender may apply
any Imposition Deposits, in any amounts and in any order as Lender determines,
in Lender’s discretion, to pay any Impositions or as a credit against the
Indebtedness. Upon payment in full of the Indebtedness, Lender shall refund to
Borrower any Imposition Deposits held by Lender.
     8. COLLATERAL AGREEMENTS.
     Borrower shall deposit with Lender such amounts as may be required by any
Collateral Agreement and shall perform all other obligations of Borrower under
each Collateral Agreement.
     9. APPLICATION OF PAYMENTS.
     If at any time Lender receives, from Borrower or otherwise, any amount
applicable to the Indebtedness which is less than all amounts due and payable at
such time, then Lender may apply that payment to amounts then due and payable in
any manner and in any order determined by Lender, in Lender’s discretion.
Neither Lender’s acceptance of an amount which is less than all amounts then due
and payable nor Lender’s application of such payment in the manner authorized
shall constitute or be deemed to constitute either a waiver of the unpaid
amounts or an accord and satisfaction. Notwithstanding the application of any
such amount to the Indebtedness, Borrower’s obligations under this Instrument
and the Note shall remain unchanged.
     10. COMPLIANCE WITH LAWS.
     Borrower shall comply with all laws, ordinances, regulations and
requirements of any Governmental Authority and all recorded lawful covenants and
agreements relating to or affecting the Mortgaged Property, including all laws,
ordinances, regulations, requirements and covenants pertaining to health and
safety, construction of improvements on the Mortgaged Property, fair housing,
zoning and land use, and Leases. Borrower also shall comply with all applicable
laws that pertain to the maintenance and disposition of tenant security
deposits. Borrower shall at all times maintain records sufficient to demonstrate
compliance with the provisions of this Section 10. Borrower shall take
appropriate measures to prevent, and shall not engage in or knowingly permit,
any illegal activities at the Mortgaged Property that could endanger tenants or
visitors, result in

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damage to the Mortgaged Property, result in forfeiture of the Mortgaged
Property, or otherwise materially impair the lien created by this Instrument or
Lender’s interest in the Mortgaged Property. Borrower represents and warrants to
Lender that no portion of the Mortgaged Property has been or will be purchased
with the proceeds of any illegal activity.
     11. USE OF PROPERTY.
     Unless required by applicable law, Borrower shall not (a) except for any
change in use approved by Lender, allow changes in the use for which all or any
part of the Mortgaged Property is being used at the time this Instrument was
executed, (b) convert any individual dwelling units or common areas to
commercial use, (c) initiate or acquiesce in a change in the zoning
classification of the Mortgaged Property, or (d) establish any condominium or
cooperative regime with respect to the Mortgaged Property.
     12. PROTECTION OF LENDER’S SECURITY.
     (a) If Borrower fails to perform any of its obligations under this
Instrument or any other Loan Document, or if any action or proceeding (including
a Bankruptcy Event) is commenced which purports to affect the Mortgaged
Property, Lender’s security or Lender’s rights under this Instrument, including
eminent domain, insolvency, code enforcement, civil or criminal forfeiture,
enforcement of Hazardous Materials Laws, fraudulent conveyance or
reorganizations or proceedings involving a bankrupt or decedent, then Lender at
Lender’s option may make such appearances, disburse such sums and take such
actions as Lender reasonably deems necessary to perform such obligations of
Borrower and to protect Lender’s interest, including (1) payment of fees and
out-of-pocket expenses of attorneys, accountants, inspectors and consultants,
(2) entry upon the Mortgaged Property to make repairs or secure the Mortgaged
Property, (3) procurement of the insurance required by Section 19, and
(4) payment of amounts which Borrower has failed to pay under Sections 15 and
17.
     (b) Any amounts disbursed by Lender under this Section 12, or under any
other provision of this Instrument that treats such disbursement as being made
under this Section 12, shall be added to, and become part of, the principal
component of the Indebtedness, shall be immediately due and payable and shall
bear interest from the date of disbursement until paid at the “Default Rate”, as
defined in the Note.
     (c) Nothing in this Section 12 shall require Lender to incur any expense or
take any action.
     13. INSPECTION.
     Lender, its agents, representatives, and designees may make or cause to be
made entries upon and inspections of the Mortgaged Property (including
environmental inspections and tests) during normal business hours, or at any
other reasonable time.

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

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

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

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

     (c) Each of the statements, schedules and reports required by Section 14(b)
shall be certified to be complete and accurate by an individual having authority
to bind Borrower, and shall be in such form and contain such detail as Lender
may reasonably require. Lender also may require that any statements, schedules
or reports be audited at Borrower’s expense by independent certified public
accountants acceptable to Lender.
     (d) If Borrower fails to provide in a timely manner the statements,
schedules and reports required by Section 14(b), Lender shall have the right to
have Borrower’s books and records audited, at Borrower’s expense, by independent
certified public accountants selected by Lender in order to obtain such
statements, schedules and reports, and all related costs and expenses of Lender
shall become immediately due and payable and shall become an additional part of
the Indebtedness as provided in Section 12.
     (e) If an Event of Default has occurred and is continuing, Borrower shall
deliver to Lender upon written demand all books and records relating to the
Mortgaged Property or its operation.
     (f) Borrower authorizes Lender to obtain a credit report on Borrower at any
time.
     15. TAXES; OPERATING EXPENSES.
     (a) Subject to the provisions of Section 15(c) and Section 15(d), Borrower
shall pay, or cause to be paid, all Taxes when due and before the addition of
any interest, fine, penalty or cost for nonpayment.
     (b) Subject to the provisions of Section 15(c), Borrower shall pay the
expenses of operating, managing, maintaining and repairing the Mortgaged
Property (including insurance

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premiums, utilities, repairs and replacements) before the last date upon which
each such payment may be made without any penalty or interest charge being
added.
     (c) As long as no Event of Default exists and Borrower has timely delivered
to Lender any bills or premium notices that it has received, Borrower shall not
be obligated to pay Taxes, insurance premiums or any other individual Imposition
to the extent that sufficient Imposition Deposits are held by Lender for the
purpose of paying that specific Imposition. If an Event of Default exists,
Lender may exercise any rights Lender may have with respect to Imposition
Deposits without regard to whether Impositions are then due and payable. Lender
shall have no liability to Borrower for failing to pay any Impositions to the
extent that any Event of Default has occurred and is continuing, insufficient
Imposition Deposits are held by Lender at the time an Imposition becomes due and
payable or Borrower has failed to provide Lender with bills and premium notices
as provided above.
     (d) Borrower, at its own expense, may contest by appropriate legal
proceedings, conducted diligently and in good faith, the amount or validity of
any Imposition other than insurance premiums, if (1) Borrower notifies Lender of
the commencement or expected commencement of such proceedings, (2) the Mortgaged
Property is not in danger of being sold or forfeited, (3) Borrower deposits with
Lender reserves sufficient to pay the contested Imposition, if requested by
Lender, and (4) Borrower furnishes whatever additional security is required in
the proceedings or is reasonably requested by Lender, which may include the
delivery to Lender of the reserves established by Borrower to pay the contested
Imposition.
     (e) Borrower shall promptly deliver to Lender a copy of all notices of, and
invoices for, Impositions, and if Borrower pays any Imposition directly,
Borrower shall promptly furnish to Lender receipts evidencing such payments.
     16. LIENS; ENCUMBRANCES.
     Borrower acknowledges that, to the extent provided in Section 21, the
grant, creation or existence of any mortgage, deed of trust, deed to secure
debt, security interest or other lien or encumbrance (a “Lien”) on the Mortgaged
Property (other than the lien of this Instrument) or on certain ownership
interests in Borrower, whether voluntary, involuntary or by operation of law,
and whether or not such Lien has priority over the lien of this Instrument, is a
“Transfer” which constitutes an Event of Default.
     17. PRESERVATION, MANAGEMENT AND MAINTENANCE OF MORTGAGED PROPERTY.
     (a) Borrower (1) shall not commit waste or permit impairment or
deterioration of the Mortgaged Property, (2) shall not abandon the Mortgaged
Property, (3) shall restore or repair promptly, in a good and workmanlike
manner, any damaged part of the Mortgaged Property to the equivalent of its
original condition, or such other condition as Lender may approve in writing,
whether or not insurance proceeds or condemnation awards are available to cover
any costs of such

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restoration or repair, (4) shall keep the Mortgaged Property in good repair,
including the replacement of Personalty and Fixtures with items of equal or
better function and quality, (5) shall provide for professional management of
the Mortgaged Property by a residential rental property manager satisfactory to
Lender under a contract approved by Lender in writing, and (6) shall give notice
to Lender of and, unless otherwise directed in writing by Lender, shall appear
in and defend any action or proceeding purporting to affect the Mortgaged
Property, Lender’s security or Lender’s rights under this Instrument. Borrower
shall not (and shall not permit any tenant or other person to) remove, demolish
or alter the Mortgaged Property or any part of the Mortgaged Property except in
connection with the replacement of tangible Personalty.
     (b) If, in connection with the making of the loan evidenced by the Note or
at any later date, Lender waives in writing the requirement of Section 17(a)(5)
above that Borrower enter into a written contract for management of the
Mortgaged Property and if, after the date of this Instrument, Borrower intends
to change the management of the Mortgaged Property, Lender shall have the right
to approve such new property manager and the written contract for the management
of the Mortgaged Property and require that Borrower and such new property
manager enter into an Assignment of Management Agreement on a form approved by
Lender. If required by Lender (whether before or after an Event of Default),
Borrower will cause any Affiliate of Borrower to whom fees are payable for the
management of the Mortgaged Property to enter into an agreement with Lender, in
a form approved by Lender, providing for subordination of those fees and such
other provisions as Lender may require. “Affiliate of Borrower” means any
corporation, partnership, joint venture, limited liability company, limited
liability partnership, trust or individual controlled by, under common control
with, or which controls Borrower (the term “control” for these purposes shall
mean the ability, whether by the ownership of shares or other equity interests,
by contract or otherwise, to elect a majority of the directors of a corporation,
to make management decisions on behalf of, or independently to select the
managing partner of, a partnership, or otherwise to have the power independently
to remove and then select a majority of those individuals exercising managerial
authority over an entity, and control shall be conclusively presumed in the case
of the ownership of 50% or more of the equity interests).
     18. ENVIRONMENTAL HAZARDS.
     (a) Except for matters covered by a written program of operations and
maintenance approved in writing by Lender (an “O&M Program”) or matters
described in Section 18(b), Borrower shall not cause or permit any of the
following:

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

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

The matters described in clauses (1) through (4) above are referred to
collectively in this Section 18 as “Prohibited Activities or Conditions”.
     (b) Prohibited Activities and Conditions shall not include the safe and
lawful use and storage of quantities of (1) pre-packaged supplies, cleaning
materials and petroleum products customarily used in the operation and
maintenance of comparable multifamily properties, (2) cleaning materials,
personal grooming items and other items sold in pre-packaged containers for
consumer use and used by tenants and occupants of residential dwelling units in
the Mortgaged Property; and (3) petroleum products used in the operation and
maintenance of motor vehicles from time to time located on the Mortgaged
Property’s parking areas, so long as all of the foregoing are used, stored,
handled, transported and disposed of in compliance with Hazardous Materials
Laws.
     (c) Borrower shall take all commercially reasonable actions (including the
inclusion of appropriate provisions in any Leases executed after the date of
this Instrument) to prevent its employees, agents, and contractors, and all
tenants and other occupants from causing or permitting any Prohibited Activities
or Conditions. Borrower shall not lease or allow the sublease or use of all or
any portion of the Mortgaged Property to any tenant or subtenant for
nonresidential use by any user that, in the ordinary course of its business,
would cause or permit any Prohibited Activity or Condition.
     (d) If an O&M Program has been established with respect to Hazardous
Materials, Borrower shall comply in a timely manner with, and cause all
employees, agents, and contractors of Borrower and any other persons present on
the Mortgaged Property to comply with the O&M Program. All costs of performance
of Borrower’s obligations under any O&M Program shall be paid by Borrower, and
Lender’s out-of-pocket costs incurred in connection with the monitoring and
review of the O&M Program and Borrower’s performance shall be paid by Borrower
upon demand by Lender. Any such out-of-pocket costs of Lender which Borrower
fails to pay promptly shall become an additional part of the Indebtedness as
provided in Section 12.
     (e) Borrower represents and warrants to Lender that, except as previously
disclosed by Borrower to Lender in writing:

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

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

The representations and warranties in this Section 18 shall be continuing
representations and warranties that shall be deemed to be made by Borrower
throughout the term of the loan evidenced by the Note, until the Indebtedness
has been paid in full.
     (f) Borrower shall promptly notify Lender in writing upon the occurrence of
any of the following events:

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

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

Any such notice given by Borrower shall not relieve Borrower of, or result in a
waiver of, any obligation under this Instrument, the Note, or any other Loan
Document.
     (g) Borrower shall pay promptly the costs of any environmental inspections,
tests or audits (“Environmental Inspections”) required by Lender in connection
with any foreclosure or deed in lieu of foreclosure, or as a condition of
Lender’s consent to any Transfer under Section 21, or required by Lender
following a reasonable determination by Lender that Prohibited Activities or
Conditions may exist. Any such costs incurred by Lender (including the fees and
out-of-pocket costs of attorneys and technical consultants whether incurred in
connection with any judicial or administrative process or otherwise) which
Borrower fails to pay promptly shall become an additional part of the
Indebtedness as provided in Section 12. The results of all Environmental
Inspections made by Lender shall at all times remain the property of Lender and
Lender shall have no obligation to disclose or otherwise make available to
Borrower or any other party such results or any other information obtained by
Lender in connection with its Environmental Inspections. Lender hereby reserves
the right, and Borrower hereby expressly authorizes Lender, to make available to
any party, including any prospective bidder at a foreclosure sale of the
Mortgaged Property, the results of any Environmental Inspections made by Lender
with respect to the Mortgaged Property. Borrower consents to Lender notifying
any party (either as part of a notice of sale or otherwise) of the results of
any of Lender’s Environmental Inspections. Borrower acknowledges that Lender
cannot control or otherwise assure the truthfulness or accuracy of the results
of any of its Environmental Inspections and that the release of such results to
prospective bidders at a foreclosure sale of the Mortgaged Property may have a
material and adverse effect upon the amount which a party may bid at such sale.
Borrower agrees that Lender shall have no liability whatsoever as a result of
delivering the results of any of its Environmental Inspections to any third
party, and Borrower hereby releases and forever discharges Lender from any and
all claims, damages, or causes of action, arising out of, connected with or
incidental to the results of, the delivery of any of Lender’s Environmental
Inspections.
     (h) If any investigation, site monitoring, containment, clean-up,
restoration or other remedial work (“Remedial Work”) is necessary to comply with
any Hazardous Materials Law or order of any Governmental Authority that has or
acquires jurisdiction over the Mortgaged Property or the use, operation or
improvement of the Mortgaged Property under any Hazardous Materials Law,
Borrower shall, by the earlier of (1) the applicable deadline required by
Hazardous Materials

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Law or (2) 30 days after notice from Lender demanding such action, begin
performing the Remedial Work, and thereafter diligently prosecute it to
completion, and shall in any event complete the work by the time required by
applicable Hazardous Materials Law. If Borrower fails to begin on a timely basis
or diligently prosecute any required Remedial Work, Lender may, at its option,
cause the Remedial Work to be completed, in which case Borrower shall reimburse
Lender on demand for the cost of doing so. Any reimbursement due from Borrower
to Lender shall become part of the Indebtedness as provided in Section 12.
     (i) Borrower shall cooperate with any inquiry by any Governmental Authority
and shall comply with any governmental or judicial order which arises from any
alleged Prohibited Activity or Condition.
     (j) Borrower shall indemnify, hold harmless and defend (i) Lender, (ii) any
prior owner or holder of the Note, (iii) the Loan Servicer, (iv) any prior Loan
Servicer, (v) the officers, directors, shareholders, partners, employees and
trustees of any of the foregoing, and (vi) the heirs, legal representatives,
successors and assigns of each of the foregoing (collectively, the
“Indemnitees”) from and against all proceedings, claims, damages, penalties and
costs (whether initiated or sought by Governmental Authorities or private
parties), including fees and out-of-pocket expenses of attorneys and expert
witnesses, investigatory fees, and remediation costs, whether incurred in
connection with any judicial or administrative process or otherwise, arising
directly or indirectly from any of the following:

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

     (k) Counsel selected by Borrower to defend Indemnitees shall be subject to
the approval of those Indemnitees. However, any Indemnitee may elect to defend
any claim or legal or administrative proceeding at the Borrower’s expense.
     (l) Borrower shall not, without the prior written consent of those
Indemnitees who are named as parties to a claim or legal or administrative
proceeding (a “Claim”), settle or compromise the Claim if the settlement
(1) results in the entry of any judgment that does not include as an
unconditional term the delivery by the claimant or plaintiff to Lender of a
written release of those

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Indemnitees, satisfactory in form and substance to Lender; or (2) may materially
and adversely affect Lender, as determined by Lender in its discretion.
     (m) Lender agrees that the indemnity under this Section 18 shall be limited
to the assets of Borrower and Lender shall not seek to recover any deficiency
from any natural persons who are general partners of Borrower.
     (n) Borrower shall, at its own cost and expense, do all of the following:

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

     (o) In any circumstances in which the indemnity under this Section 18
applies, Lender may employ its own legal counsel and consultants to prosecute,
defend or negotiate any claim or legal or administrative proceeding and Lender,
with the prior written consent of Borrower (which shall not be unreasonably
withheld, delayed or conditioned), may settle or compromise any action or legal
or administrative proceeding. Borrower shall reimburse Lender upon demand for
all costs and expenses incurred by Lender, including all costs of settlements
entered into in good faith, and the fees and out-of-pocket expenses of such
attorneys and consultants.
     (p) The provisions of this Section 18 shall be in addition to any and all
other obligations and liabilities that Borrower may have under applicable law or
under other Loan Documents, and each Indemnitee shall be entitled to
indemnification under this Section 18 without regard to whether Lender or that
Indemnitee has exercised any rights against the Mortgaged Property or any other
security, pursued any rights against any guarantor, or pursued any other rights
available under the Loan Documents or applicable law. If Borrower consists of
more than one person or entity, the obligation of those persons or entities to
indemnify the Indemnitees under this Section 18 shall be joint and several. The
obligation of Borrower to indemnify the Indemnitees under this Section 18 shall
survive any repayment or discharge of the Indebtedness, any foreclosure
proceeding, any foreclosure sale, any delivery of any deed in lieu of
foreclosure, and any release of record of the lien of this Instrument.

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     19. PROPERTY AND LIABILITY INSURANCE.
     (a) Borrower shall keep the Improvements insured at all times against such
hazards as Lender may from time to time require, which insurance shall include
but not be limited to coverage against loss by fire and allied perils, general
boiler and machinery coverage, and business income coverage. Lender’s insurance
requirements may change from time to time throughout the term of the
Indebtedness. If Lender so requires, such insurance shall also include sinkhole
insurance, mine subsidence insurance, earthquake insurance, and, if the
Mortgaged Property does not conform to applicable zoning or land use laws,
building ordinance or law coverage. If any of the Improvements is located in an
area identified by the Federal Emergency Management Agency (or any successor to
that agency) as an area having special flood hazards, and if flood insurance is
available in that area, Borrower shall insure such Improvements against loss by
flood.
     (b) All premiums on insurance policies required under Section 19(a) shall
be paid in the manner provided in Section 7, unless Lender has designated in
writing another method of payment. All such policies shall also be in a form
approved by Lender. All policies of property damage insurance shall include a
non-contributing, non-reporting mortgage clause in favor of, and in a form
approved by, Lender. Lender shall have the right to hold the original policies
or duplicate original policies of all insurance required by Section 19(a).
Borrower shall promptly deliver to Lender a copy of all renewal and other
notices received by Borrower with respect to the policies and all receipts for
paid premiums. At least 30 days prior to the expiration date of a policy,
Borrower shall deliver to Lender the original (or a duplicate original) of a
renewal policy in form satisfactory to Lender.
     (c) Borrower shall maintain at all times commercial general liability
insurance, workers’ compensation insurance and such other liability, errors and
omissions and fidelity insurance coverages as Lender may from time to time
require.
     (d) All insurance policies and renewals of insurance policies required by
this Section 19 shall be in such amounts and for such periods as Lender may from
time to time require, and shall be issued by insurance companies satisfactory to
Lender.
     (e) Borrower shall comply with all insurance requirements and shall not
permit any condition to exist on the Mortgaged Property that would invalidate
any part of any insurance coverage that this Instrument requires Borrower to
maintain.
     (f) In the event of loss, Borrower shall give immediate written notice to
the insurance carrier and to Lender. Borrower hereby authorizes and appoints
Lender as attorney-in-fact for Borrower to make proof of loss, to adjust and
compromise any claims under policies of property damage insurance, to appear in
and prosecute any action arising from such property damage insurance policies,
to collect and receive the proceeds of property damage insurance, and to deduct
from such proceeds Lender’s expenses incurred in the collection of such
proceeds. This power of attorney is coupled with an interest and therefore is
irrevocable. However, nothing contained in this Section 19 shall require Lender
to incur any expense or take any action. Lender may, at Lender’s

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option, (1) hold the balance of such proceeds to be used to reimburse Borrower
for the cost of restoring and repairing the Mortgaged Property to the equivalent
of its original condition or to a condition approved by Lender (the
“Restoration”), or (2) apply the balance of such proceeds to the payment of the
Indebtedness, whether or not then due. To the extent Lender determines to apply
insurance proceeds to Restoration, Lender shall do so in accordance with
Lender’s then-current policies relating to the restoration of casualty damage on
similar multifamily properties.
     (g) Lender shall not exercise its option to apply insurance proceeds to the
payment of the Indebtedness if all of the following conditions are met: (1) no
Event of Default (or any event which, with the giving of notice or the passage
of time, or both, would constitute an Event of Default) has occurred and is
continuing; (2) Lender determines, in its discretion, that there will be
sufficient funds to complete the Restoration; (3) Lender determines, in its
discretion, that the net operating income generated by the Mortgaged Property
after completion of the Restoration will be sufficient to support a debt service
coverage ratio not less than the greater of (A) the debt service coverage ratio
as of the date of this Instrument (based on the final underwriting of the
Mortgaged Property) or (B) the debt service coverage ratio immediately prior to
the loss (in each case, Lender’s determination shall include all operating costs
and other expenses, Imposition Deposits, deposits to reserves and loan repayment
obligations relating to the Mortgaged Property); (4) Lender determines, in its
discretion, that the Restoration will be completed before the earlier of (A) one
year before the maturity date of the Note or (B) one year after the date of the
loss or casualty; and (5) upon Lender’s request, Borrower provides Lender
evidence of the availability during and after the Restoration of the insurance
required to be maintained by Borrower pursuant to this Section 19.
     (h) If the Mortgaged Property is sold at a foreclosure sale or Lender
acquires title to the Mortgaged Property, Lender shall automatically succeed to
all rights of Borrower in and to any insurance policies and unearned insurance
premiums and in and to the proceeds resulting from any damage to the Mortgaged
Property prior to such sale or acquisition.
     20. CONDEMNATION.
     (a) Borrower shall promptly notify Lender of any action or proceeding
relating to any condemnation or other taking, or conveyance in lieu thereof, of
all or any part of the Mortgaged Property, whether direct or indirect (a
“Condemnation”). Borrower shall appear in and prosecute or defend any action or
proceeding relating to any Condemnation unless otherwise directed by Lender in
writing. Borrower authorizes and appoints Lender as attorney-in-fact for
Borrower to commence, appear in and prosecute, in Lender’s or Borrower’s name,
any action or proceeding relating to any Condemnation and to settle or
compromise any claim in connection with any Condemnation. This power of attorney
is coupled with an interest and therefore is irrevocable. However, nothing
contained in this Section 20 shall require Lender to incur any expense or take
any action. Borrower hereby transfers and assigns to Lender all right, title and
interest of Borrower in and to any award or payment with respect to (i) any
Condemnation, or any conveyance in lieu of Condemnation, and (ii) any damage to
the Mortgaged Property caused by governmental action that does not result in a
Condemnation.

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     (b) Lender may apply such awards or proceeds, after the deduction of
Lender’s expenses incurred in the collection of such amounts, at Lender’s
option, to the restoration or repair of the Mortgaged Property or to the payment
of the Indebtedness, with the balance, if any, to Borrower. Unless Lender
otherwise agrees in writing, any application of any awards or proceeds to the
Indebtedness shall not extend or postpone the due date of any monthly
installments referred to in the Note, Section 7 of this Instrument or any
Collateral Agreement, or change the amount of such installments. Borrower agrees
to execute such further evidence of assignment of any awards or proceeds as
Lender may require.
     21. TRANSFERS OF THE MORTGAGED PROPERTY OR INTERESTS IN BORROWER.
     (a) The occurrence of any of the following events shall constitute an Event
of Default under this Instrument:
     (1) a Transfer of all or any part of the Mortgaged Property or any interest
in the Mortgaged Property;
     (2) a Transfer of a Controlling Interest in Borrower;
     (3) a Transfer of a Controlling Interest in any entity which owns, directly
or indirectly through one or more intermediate entities, a Controlling Interest
in Borrower;
     (4) a Transfer of all or any part of a Key Principal’s ownership interests
in Borrower, or in any other entity which owns, directly or indirectly through
one or more intermediate entities, an ownership interest in Borrower (other than
a Transfer of an aggregate beneficial ownership interest in the Borrower of 49%
or less of such Key Principal’s original ownership interest in the Borrower and
which does not otherwise result in a Transfer of the Key Principal’s Controlling
Interest in such intermediate entities or in the Borrower);
     (5) if Key Principal is an entity, (A) a Transfer of a Controlling Interest
in Key Principal, or (B) a Transfer of a Controlling Interest in any entity
which owns, directly or indirectly through one or more intermediate entities, a
Controlling Interest in Key Principal;
     (6) if Borrower or Key Principal is a trust, the termination or revocation
of such trust; unless the trust is terminated as a result of the death of an
individual trustor, in which event Lender must be notified and such Borrower or
Key Principal must be replaced with an individual or entity acceptable to
Lender, in accordance with the provisions of Section 21(c) hereof, within
90 days of such death (provided however that no property inspection shall be
required and a 1% transfer fee will not be charged);
     (7) if Key Principal is a natural person, the death of such individual;
unless the Lender is notified and such individual is replaced with an individual
or entity acceptable to

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Lender, in accordance with the provisions of Section 21(c) hereof, within
90 days of such death (provided however that no property inspection shall be
required and a 1% transfer fee will not be charged);
     (8) the merger, dissolution, liquidation, or consolidation of (i) Borrower,
(ii) any Key Principal that is a legal entity, or (iii) any legal entity
holding, directly or indirectly, a Controlling Interest in the Borrower or in
any Key Principal that is an entity;
     (9) a conversion of Borrower from one type of legal entity into another
type of legal entity (including the conversion of a general partnership into a
limited partnership and the conversion of a limited partnership into a limited
liability company), whether or not there is a Transfer; if such conversion
results in a change in any assets, liabilities, legal rights or obligations of
Borrower (or of Key Principal, guarantor, or any general partner of Borrower, as
applicable), by operation of law or otherwise; and
     (10) a Transfer of the economic benefits or right to cash flows
attributable to the ownership interests in Borrower and/or, if Key Principal is
an entity, Key Principal, separate from the Transfer of the underlying ownership
interests, unless the Transfer of the underlying ownership interests would
otherwise not be prohibited by this Agreement
Lender shall not be required to demonstrate any actual impairment of its
security or any increased risk of default in order to exercise any of its
remedies with respect to an Event of Default under this Section 21.
     (b) The occurrence of any of the following events shall not constitute an
Event of Default under this Instrument, notwithstanding any provision of
Section 21(a) to the contrary:
     (1) a Transfer to which Lender has consented;
     (2) except as provided in Section 21(a)(6) and (7), a Transfer that occurs
by devise, descent, pursuant to the provisions of a trust, or by operation of
law upon the death of a natural person;
     (3) the grant of a leasehold interest in an individual dwelling unit for a
term of two years or less not containing an option to purchase;
     (4) a Transfer of obsolete or worn out Personalty or Fixtures that are
contemporaneously replaced by items of equal or better function and quality,
which are free of liens, encumbrances and security interests other than those
created by the Loan Documents or consented to by Lender;
     (5) the grant of an easement, servitude, or restrictive covenant if, before
the grant, Lender determines that the easement, servitude, or restrictive
covenant will not materially affect the operation or value of the Mortgaged
Property or Lender’s interest in the

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Mortgaged Property, and Borrower pays to Lender, upon demand, all costs and
expenses incurred by Lender in connection with reviewing Borrower’s request;
     (6) the creation of a tax lien or a mechanic’s, materialman’s, or judgment
lien against the Mortgaged Property which is bonded off, released of record, or
otherwise remedied to Lender’s satisfaction within 45 days after Borrower has
actual or constructive notice of the existence of such lien; and
     (7) the conveyance of the Mortgaged Property at a judicial or non-judicial
foreclosure sale under this Instrument.
     (c) Lender shall consent to a Transfer that would otherwise violate this
Section 21 if, prior to the Transfer, Borrower has satisfied each of the
following requirements:
     (1) the submission to Lender of all information required by Lender to make
the determination required by this Section 21(c);
     (2) the absence of any Event of Default;
     (3) the transferee meets all of the eligibility, credit, management, and
other standards (including any standards with respect to previous relationships
between Lender and the transferee and the organization of the transferee)
customarily applied by Lender at the time of the proposed Transfer to the
approval of borrowers in connection with the origination or purchase of similar
mortgage finance structures on similar multifamily properties, unless partially
waived by Lender in exchange for such additional conditions as Lender may
require;
     (4) the Mortgaged Property, at the time of the proposed Transfer, meets all
standards as to its physical condition that are customarily applied by Lender at
the time of the proposed Transfer to the approval of properties in connection
with the origination or purchase of similar mortgage finance structures on
similar multifamily properties, unless partially waived by Lender in exchange
for such additional conditions as Lender may require;
     (5) if transferor or any other person has obligations under any Loan
Document, the execution by the transferee or one or more individuals or entities
acceptable to Lender of an assumption agreement (including, if applicable, an
Acknowledgement and Agreement of Key Principal to Personal Liability for
Exceptions to Non-Recourse Liability) that is acceptable to Lender and that,
among other things, requires the transferee to perform all obligations of
transferor or such person set forth in such Loan Document, and may require that
the transferee comply with any provisions of this Instrument or any other Loan
Document which previously may have been waived by Lender;

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     (6) if a guaranty has been executed and delivered in connection with the
Note, this Instrument or any of the other Loan Documents, the Borrower causes
one or more individuals or entities acceptable to Lender to execute and deliver
to Lender a substitute guaranty in a form acceptable to Lender;
     (7) Lender’s receipt of all of the following:
(A) a non-refundable review fee in the amount of $3,000 and a transfer fee equal
to 1 percent of the outstanding Indebtedness immediately prior to the Transfer;
and
(B) Borrower’s reimbursement of all of Lender’s out-of-pocket costs (including
reasonable attorneys’ fees) incurred in reviewing the Transfer request, to the
extent such expenses exceed $3,000; and
     (8) Borrower has agreed to Lender’s conditions to approve such Transfer,
which may include, but are not limited to (A) providing additional collateral,
guaranties, or other credit support to mitigate any risks concerning the
proposed transferee or the performance or condition of the Mortgaged Property,
and (B) amending the Loan Documents to (i) delete any specially negotiated terms
or provisions previously granted for the exclusive benefit of transferor and
(ii) restore to original provisions of the standard Fannie Mae form multifamily
loan documents, to the extent such provisions were previously modified.
     (d) For purposes of this Section, the following terms shall have the
meanings set forth below:
     (1) “Initial Owners” means, with respect to Borrower or any other entity,
the persons or entities who on the date of the Note, directly or indirectly, own
in the aggregate 100% of the ownership interests in Borrower or that entity.
     (2) A Transfer of a “Controlling Interest” shall mean:
(A) with respect to any entity, the following:
     (i) if such entity is a general partnership or a joint venture, a Transfer
of any general partnership interest or joint venture interest which would cause
the Initial Owners to own less than 51% of all general partnership or joint
venture interests in such entity;
     (ii) if such entity is a limited partnership, (A) a Transfer of any general
partnership interest, or (B) a Transfer of any partnership interests which would
cause the Initial Owners to own less than 51% of all limited partnership
interests in such entity;

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     (iii) if such entity is a limited liability company or a limited liability
partnership, (A) a Transfer of any membership or other ownership interest which
would cause the Initial Owners to own less than 51% of all membership or other
ownership interests in such entity, (B) a Transfer of any membership, or other
interest of a manager, in such entity that results in a change of manager, or
(C) a change of the non-member manager;
     (iv) if such entity is a corporation (other than a Publicly-Held
Corporation) with only one class of voting stock, a Transfer of any voting stock
which would cause the Initial Owners to own less than 51% of voting stock in
such corporation;
     (v) if such entity is a corporation (other than a Publicly-Held
Corporation) with more than one class of voting stock, a Transfer of any voting
stock which would cause the Initial Owners to own less than a sufficient number
of shares of voting stock having the power to elect the majority of directors of
such corporation; and
     (vi) if such entity is a trust (other than a Publicly-Held Trust), the
removal, appointment or substitution of a trustee of such trust other than
(A) in the case of a land trust, or (B) if the trustee of such trust after such
removal, appointment, or substitution is a trustee identified in the trust
agreement approved by Lender; and/or
     (B) any agreement (including provisions contained in the organizational
and/or governing documents of Borrower or Key Principal) or Transfer not
specified in clause (A), the effect of which, either immediately or after the
passage of time or occurrence of a specified event or condition, including the
failure of a specified event or condition to occur or be satisfied, would
(i) cause a change in or replacement of the Person that controls the management
and operations of the Borrower or Key Principal or (ii) limit or otherwise
modify the extent of such Person’s control over the management and operations of
Borrower or Key Principal.
     (3) “Publicly-Held Corporation” shall mean a corporation the outstanding
voting stock of which is registered under Section 12(b) or 12(g) of the
Securities and Exchange Act of 1934, as amended.
     (4) “Publicly-Held Trust” shall mean a real estate investment trust the
outstanding voting shares or beneficial interests of which are registered under
Section 12 (b) or 12 (g) of the Securities Exchange Act of 1934, as amended.

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     (e) Lender shall be provided with written notice of all Transfers under
this Section 21, whether or not such Transfers are permitted under
Section 21(b) or approved by Lender under Section 21(c), no later than 10 days
prior to the date of the Transfer.”
     22. EVENTS OF DEFAULT.
     The occurrence of any one or more of the following shall constitute an
Event of Default under this Instrument:
     (a) any failure by Borrower to pay or deposit when due any amount required
by the Note, this Instrument or any other Loan Document;
     (b) any failure by Borrower to maintain the insurance coverage required by
Section 19;
     (c) any failure by Borrower to comply with the provisions of Section 33;
     (d) fraud or material misrepresentation or material omission by Borrower,
or any of its officers, directors, trustees, general partners or managers, Key
Principal or any guarantor in connection with (A) the application for or
creation of the Indebtedness, (B) any financial statement, rent roll, or other
report or information provided to Lender during the term of the Indebtedness, or
(C) any request for Lender’s consent to any proposed action, including a request
for disbursement of funds under any Collateral Agreement;
     (e) any (i) Event of Default under Section 21 and/or (ii) occurrence of a
Bankruptcy Event;
     (f) the commencement of a forfeiture action or proceeding, whether civil or
criminal, which, in Lender’s reasonable judgment, could result in a forfeiture
of the Mortgaged Property or otherwise materially impair the lien created by
this Instrument or Lender’s interest in the Mortgaged Property;
     (g) any failure by Borrower to perform any of its obligations under this
Instrument (other than those specified in Sections 22(a) through (f)), as and
when required, which continues for a period of 30 days after notice of such
failure by Lender to Borrower, but no such notice or grace period shall apply in
the case of any such failure which could, in Lender’s judgment, absent immediate
exercise by Lender of a right or remedy under this Instrument, result in harm to
Lender, impairment of the Note or this Instrument or any other security given
under any other Loan Document;
     (h) any failure by Borrower to perform any of its obligations as and when
required under any Loan Document other than this Instrument which continues
beyond the applicable cure period, if any, specified in that Loan Document; and

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     (i) any exercise by the holder of any other debt instrument secured by a
mortgage, deed of trust or deed to secure debt on the Mortgaged Property of a
right to declare all amounts due under that debt instrument immediately due and
payable.
     23. REMEDIES CUMULATIVE.
     Each right and remedy provided in this Instrument is distinct from all
other rights or remedies under this Instrument or any other Loan Document or
afforded by applicable law, and each shall be cumulative and may be exercised
concurrently, independently, or successively, in any order.
     24. FORBEARANCE.
     (a) Lender may (but shall not be obligated to) agree with Borrower, from
time to time, and without giving notice to, or obtaining the consent of, or
having any effect upon the obligations of, any guarantor or other third party
obligor, to take any of the following actions: extend the time for payment of
all or any part of the Indebtedness; reduce the payments due under this
Instrument, the Note, or any other Loan Document; release anyone liable for the
payment of any amounts under this Instrument, the Note, or any other Loan
Document; accept a renewal of the Note; modify the terms and time of payment of
the Indebtedness; join in any extension or subordination agreement; release any
Mortgaged Property; take or release other or additional security; modify the
rate of interest or period of amortization of the Note or change the amount of
the monthly installments payable under the Note; and otherwise modify this
Instrument, the Note, or any other Loan Document.
     (b) Any forbearance by Lender in exercising any right or remedy under the
Note, this Instrument, or any other Loan Document or otherwise afforded by
applicable law, shall not be a waiver of or preclude the exercise of any other
right or remedy. The acceptance by Lender of payment of all or any part of the
Indebtedness after the due date of such payment, or in an amount which is less
than the required payment, shall not be a waiver of Lender’s right to require
prompt payment when due of all other payments on account of the Indebtedness or
to exercise any remedies for any failure to make prompt payment. Enforcement by
Lender of any security for the Indebtedness shall not constitute an election by
Lender of remedies so as to preclude the exercise of any other right available
to Lender. Lender’s receipt of any awards or proceeds under Sections 19 and 20
shall not operate to cure or waive any Event of Default.
     25. LOAN CHARGES.
     If any applicable law limiting the amount of interest or other charges
permitted to be collected from Borrower is interpreted so that any charge
provided for in any Loan Document, whether considered separately or together
with other charges levied in connection with any other Loan Document, violates
that law, and Borrower is entitled to the benefit of that law, that charge is
hereby reduced to the extent necessary to eliminate that violation. The amounts,
if any, previously paid to Lender in excess of the permitted amounts shall be
applied by Lender to reduce the principal

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of the Indebtedness. For the purpose of determining whether any applicable law
limiting the amount of interest or other charges permitted to be collected from
Borrower has been violated, all Indebtedness which constitutes interest, as well
as all other charges levied in connection with the Indebtedness which constitute
interest, shall be deemed to be allocated and spread over the stated term of the
Note. Unless otherwise required by applicable law, such allocation and spreading
shall be effected in such a manner that the rate of interest so computed is
uniform throughout the stated term of the Note.
     26. WAIVER OF STATUTE OF LIMITATIONS.
     Borrower hereby waives the right to assert any statute of limitations as a
bar to the enforcement of the lien of this Instrument or to any action brought
to enforce any Loan Document.
     27. WAIVER OF MARSHALLING.
     Notwithstanding the existence of any other security interests in the
Mortgaged Property held by Lender or by any other party, Lender shall have the
right to determine the order in which any or all of the Mortgaged Property shall
be subjected to the remedies provided in this Instrument, the Note, any other
Loan Document or applicable law. Lender shall have the right to determine the
order in which any or all portions of the Indebtedness are satisfied from the
proceeds realized upon the exercise of such remedies. Borrower and any party who
now or in the future acquires a security interest in the Mortgaged Property and
who has actual or constructive notice of this Instrument waives any and all
right to require the marshalling of assets or to require that any of the
Mortgaged Property be sold in the inverse order of alienation or that any of the
Mortgaged Property be sold in parcels or as an entirety in connection with the
exercise of any of the remedies permitted by applicable law or provided in this
Instrument.
     28. FURTHER ASSURANCES.
     Borrower shall execute, acknowledge, and deliver, at its sole cost and
expense, all further acts, deeds, conveyances, assignments, estoppel
certificates, financing statements, transfers and assurances as Lender may
require from time to time in order to better assure, grant, and convey to Lender
the rights intended to be granted, now or in the future, to Lender under this
Instrument and the Loan Documents.
     29. ESTOPPEL CERTIFICATE.
     Within 10 days after a request from Lender, Borrower shall deliver to
Lender a written statement, signed and acknowledged by Borrower, certifying to
Lender or any person designated by Lender, as of the date of such statement,
(i) that the Loan Documents are unmodified and in full force and effect (or, if
there have been modifications, that the Loan Documents are in full force and
effect as modified and setting forth such modifications); (ii) the unpaid
principal balance of the Note; (iii) the date to which interest under the Note
has been paid; (iv) that Borrower is not in

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default in paying the Indebtedness or in performing or observing any of the
covenants or agreements contained in this Instrument or any of the other Loan
Documents (or, if the Borrower is in default, describing such default in
reasonable detail); (v) whether or not there are then existing any setoffs or
defenses known to Borrower against the enforcement of any right or remedy of
Lender under the Loan Documents; and (vi) any additional facts requested by
Lender.
     30. GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE.
     (a) This Instrument, and any Loan Document which does not itself expressly
identify the law that is to apply to it, shall be governed by the laws of the
jurisdiction in which the Land is located (the “Property Jurisdiction”).
     (b) Borrower agrees that any controversy arising under or in relation to
the Note, this Instrument, or any other Loan Document shall be litigated
exclusively in the Property Jurisdiction. The state and federal courts and
authorities with jurisdiction in the Property Jurisdiction shall have exclusive
jurisdiction over all controversies which shall arise under or in relation to
the Note, any security for the Indebtedness, or any other Loan Document.
Borrower irrevocably consents to service, jurisdiction, and venue of such courts
for any such litigation and waives any other venue to which it might be entitled
by virtue of domicile, habitual residence or otherwise.
     31. NOTICE.
     (a) All notices, demands and other communications (“notice”) under or
concerning this Instrument shall be in writing. Each notice shall be addressed
to the intended recipient at its address set forth in this Instrument, and shall
be deemed given on the earliest to occur of (1) the date when the notice is
received by the addressee; (2) the first Business Day after the notice is
delivered to a recognized overnight courier service, with arrangements made for
payment of charges for next Business Day delivery; or (3) the third Business Day
after the notice is deposited in the United States mail with postage prepaid,
certified mail, return receipt requested. As used in this Section 31, the term
“Business Day” means any day other than a Saturday, a Sunday or any other day on
which Lender is not open for business.
     (b) Any party to this Instrument may change the address to which notices
intended for it are to be directed by means of notice given to the other party
in accordance with this Section 31. Each party agrees that it will not refuse or
reject delivery of any notice given in accordance with this Section 31, that it
will acknowledge, in writing, the receipt of any notice upon request by the
other party and that any notice rejected or refused by it shall be deemed for
purposes of this Section 31 to have been received by the rejecting party on the
date so refused or rejected, as conclusively established by the records of the
U.S. Postal Service or the courier service.
     (c) Any notice under the Note and any other Loan Document which does not
specify how notices are to be given shall be given in accordance with this
Section 31.

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     32. SALE OF NOTE; CHANGE IN SERVICER.
     The Note or a partial interest in the Note (together with this Instrument
and the other Loan Documents) may be sold one or more times without prior notice
to Borrower. A sale may result in a change of the Loan Servicer. There also may
be one or more changes of the Loan Servicer unrelated to a sale of the Note. If
there is a change of the Loan Servicer, Borrower will be given notice of the
change.
     33. SINGLE ASSET BORROWER.
     Until the Indebtedness is paid in full, Borrower (a) shall not acquire any
real or personal property other than the Mortgaged Property and personal
property related to the operation and maintenance of the Mortgaged Property;
(b) shall not operate any business other than the management and operation of
the Mortgaged Property; and (c) shall not maintain its assets in a way difficult
to segregate and identify.
     34. SUCCESSORS AND ASSIGNS BOUND.
     This Instrument shall bind, and the rights granted by this Instrument shall
inure to, the respective successors and assigns of Lender and Borrower. However,
a Transfer not permitted by Section 21 shall be an Event of Default.
     35. JOINT AND SEVERAL LIABILITY.
     If more than one person or entity signs this Instrument as Borrower, the
obligations of such persons and entities shall be joint and several.
     36. RELATIONSHIP OF PARTIES; NO THIRD PARTY BENEFICIARY.
     (a) The relationship between Lender and Borrower shall be solely that of
creditor and debtor, respectively, and nothing contained in this Instrument
shall create any other relationship between Lender and Borrower.
     (b) No creditor of any party to this Instrument and no other person shall
be a third party beneficiary of this Instrument or any other Loan Document.
Without limiting the generality of the preceding sentence, (1) any arrangement
(a “Servicing Arrangement”) between the Lender and any Loan Servicer for loss
sharing or interim advancement of funds shall constitute a contractual
obligation of such Loan Servicer that is independent of the obligation of
Borrower for the payment of the Indebtedness, (2) Borrower shall not be a third
party beneficiary of any Servicing Arrangement, and (3) no payment by the Loan
Servicer under any Servicing Arrangement will reduce the amount of the
Indebtedness.

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     37. SEVERABILITY; AMENDMENTS.
     The invalidity or unenforceability of any provision of this Instrument
shall not affect the validity or enforceability of any other provision, and all
other provisions shall remain in full force and effect. This Instrument contains
the entire agreement among the parties as to the rights granted and the
obligations assumed in this Instrument. This Instrument may not be amended or
modified except by a writing signed by the party against whom enforcement is
sought.
     38. CONSTRUCTION.
     The captions and headings of the sections of this Instrument are for
convenience only and shall be disregarded in construing this Instrument. Any
reference in this Instrument to an “Exhibit” or a “Section” shall, unless
otherwise explicitly provided, be construed as referring, respectively, to an
Exhibit attached to this Instrument or to a Section of this Instrument. All
Exhibits attached to or referred to in this Instrument are incorporated by
reference into this Instrument. Any reference in this Instrument to a statute or
regulation shall be construed as referring to that statute or regulation as
amended from time to time. Use of the singular in this Agreement includes the
plural and use of the plural includes the singular. As used in this Instrument,
the term “including” means “including, but not limited to.”
     39. LOAN SERVICING.
     All actions regarding the servicing of the loan evidenced by the Note,
including the collection of payments, the giving and receipt of notice,
inspections of the Property, inspections of books and records, and the granting
of consents and approvals, may be taken by the Loan Servicer unless Borrower
receives notice to the contrary. If Borrower receives conflicting notices
regarding the identity of the Loan Servicer or any other subject, any such
notice from Lender shall govern.
     40. DISCLOSURE OF INFORMATION.
     Lender may furnish information regarding Borrower or the Mortgaged Property
to third parties with an existing or prospective interest in the servicing,
enforcement, evaluation, performance, purchase or securitization of the
Indebtedness, including trustees, master servicers, special servicers, rating
agencies, and organizations maintaining databases on the underwriting and
performance of multifamily mortgage loans. Borrower irrevocably waives any and
all rights it may have under applicable law to prohibit such disclosure,
including any right of privacy.
     41. NO CHANGE IN FACTS OR CIRCUMSTANCES.
     All information in the application for the loan submitted to Lender (the
“Loan Application”) and in all financial statements, rent rolls, reports,
certificates and other documents submitted in connection with the Loan
Application are complete and accurate in all material respects. There has been
no material adverse change in any fact or circumstance that would make any such
information incomplete or inaccurate.

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     42. SUBROGATION.
     If, and to the extent that, the proceeds of the loan evidenced by the Note
are used to pay, satisfy or discharge any obligation of Borrower for the payment
of money that is secured by a pre-existing mortgage, deed of trust or other lien
encumbering the Mortgaged Property (a “Prior Lien”), such loan proceeds shall be
deemed to have been advanced by Lender at Borrower’s request, and Lender shall
automatically, and without further action on its part, be subrogated to the
rights, including lien priority, of the owner or holder of the obligation
secured by the Prior Lien, whether or not the Prior Lien is released.
     43. ACCELERATION; REMEDIES.
     At any time during the existence of an Event of Default, Lender, at
Lender’s option, may declare the Indebtedness to be immediately due and payable
without further demand, and may enforce the lien of this Instrument by judicial
proceeding and may invoke any one or more other remedies permitted by applicable
law or provided in this Instrument or in any other Loan Document. Lender shall
be entitled to collect all costs and expenses incurred in pursuing such
remedies, including attorneys’ fees, costs of documentary evidence, abstracts
and title reports.
     44. RELEASE.
     Upon payment of the Indebtedness, Lender shall release this Instrument.
Borrower shall pay Lender’s reasonable costs incurred in releasing this
Instrument.
     45. WAIVER OF HOMESTEAD.
     Borrower waives all right of homestead exemption in the Mortgaged Property.
     46. WAIVER OF CERTAIN OTHER LAWS.
     Borrower further waives the benefit of all laws now existing or that
hereafter may be enacted (a) providing for any appraisement before sale of any
portion of the Mortgaged Property, and (b) extending in any way the time of
enforcement of the collection of the Note or the Indebtedness or creating or
extending beyond any statutory time a period of redemption from any sale made in
collecting the Indebtedness. To the full extent Borrower may do so, Borrower
agrees that Borrower will not at any time insist upon, plead, claim or take the
benefit or advantage of any law now or hereafter in force providing for
appraisement, valuation, stay, extension or redemption, and Borrower, for
Borrower, and its representatives, successors and assigns, and for any and all
persons ever claiming any interest in the Mortgaged Property, to the extent
permitted by law, hereby waives and releases all rights of redemption,
valuation, appraisement, stay of execution, notice of election to mature or
declare due the whole of the Indebtedness in the event of foreclosure of the
lien created by this Instrument.

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     47. FUTURE ADVANCES.
     Upon request of Borrower, Lender, at Lender’s sole option and discretion
prior to discharge of this Instrument, may make Future Advances to Borrower.
Such Future Advances, with interest thereon, shall be secured by this Instrument
regardless of whether the advance is designated as being secured hereby. At no
time shall the principal amount of the Indebtedness, not including sums advanced
in accordance with this Instrument to protect the security of this Instrument,
exceed 200% of the original principal amount of the Note. The preceding sentence
shall not limit the amount secured by this Instrument if such amount is
increased by accrued interest, advances made by Lender pursuant to Section 12 to
protect the security or costs of collection and foreclosure.
     48. WAIVER OF TRIAL BY JURY.
     BORROWER AND LENDER EACH (A) COVENANTS AND AGREES NOT TO ELECT A TRIAL BY
JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS INSTRUMENT OR THE
RELATIONSHIP BETWEEN THE PARTIES AS BORROWER AND LENDER THAT IS TRIABLE OF RIGHT
BY A JURY AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE
TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE. THIS WAIVER OF
RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND
VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL.
     ATTACHED EXHIBITS. The following Exhibits are attached to this Instrument:

         
[X]
  Exhibit A   Description of the Land (required).
 
       
[X]
  Exhibit B-1   Modifications to Instrument (Tax Credit Rider)
 
       
[X]
  Exhibit B-2   Modifications to Instrument (Non-Standard Modifications)

[CONTINUED ON FOLLOWING PAGE]

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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.

                      SIR ARBOR POINTE, LLC,         a Delaware limited
liability company    
 
                    By:   Steadfast Income Advisor, LLC,             a Delaware
limited liability company,         Its:   Manager    
 
               
 
      By:   /s/ Ana Marie del Rio
 
   
 
      Name:   Ana Marie del Rio    
 
      Title:   Secretary    

      FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT –
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ACKNOWLEDGMENT

                 
STATE OF CALIFORNIA
    )          
 
    )     SS.    
COUNTY OF ORANGE
    )          

     On April 29th, 2011 before me Debra A. Parks, a Notary Public, personally
appeared Ana Marie del Rio, who proved to me on the basis of satisfactory
evidence to be the person whose name is subscribed to the within instrument and
acknowledged to me that he/she executed the same in his/her authorized capacity,
and that by his/her signature on the instrument the person, or the entity upon
behalf of which the person acted, executed the instrument.
     I certify under penalty of perjury under the laws of the State of
California that the foregoing paragraph is true and correct.
     WITNESS my hand and official seal.

         
 
  /s/ Debra A. Parks
 
   
 
  Notary Public    

[Seal]
(SEAL LOGO) [g27170g2717003.gif]

      FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT –
KENTUCKY   Form 4018     06/09               

© 1998-2009 Fannie Mae

 

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KEY PRINCIPAL
Key Principal

      Name:  
Steadfast Income REIT, Inc.
   
 
Address:  
181 Von Karman Avenue, Suite 500
Irvine, California 92312

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EXHIBIT A
DESCRIPTION OF THE LAND
Real property located in the County of Jefferson, Commonwealth of Kentucky,
described as follows:
Being all of Residual Tract “13R” as shown on approved Minor Subdivision Plat
bearing Docket #126-93 attached to and made a part of instrument recorded in
Deed Book 6330, page 761, in the Office of the Clerk of Jefferson County,
Kentucky.
Being the same property conveyed to Arbor Pointe Limited Partnership, an Ohio
limited partnership, by Deed dated December 7, 1993, recorded in Book 6391, Page
693, in the Office of the Clerk of Jefferson County, Kentucky.
Tax Parcel No. 22-0038-0770-0000

      FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT –
KENTUCKY   Form 4018     06/09     Page A-1

© 1998-2009 Fannie Mae

 

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EXHIBIT B-1
MODIFICATIONS TO INSTRUMENT
(Tax Credit Properties)
The following sections are added to the text of the Instrument that precedes
this Exhibit:
     49. EXTENDED LOW-INCOME HOUSING COMMITMENT. Lender agrees that the lien of
this Instrument shall be subordinate to any extended low-income housing
commitment (as such term is defined in Section 42(h)(6)(B) of the Internal
Revenue Code) (the “Extended Use Agreement”) recorded against the Mortgaged
Property; provided that such Extended Use Agreement, by its terms, must
terminate upon foreclosure under this Instrument or upon a transfer of the
Mortgaged Property by instrument in lieu of foreclosure, in accordance with
Section 42(h)(6)(E) of the Internal Revenue Code.
     50. ANNUAL LIHTC REPORTING REQUIREMENTS. Borrower must submit to Lender,
each year at the time of annual submission of Borrower’s financial analysis of
operations, a copy of the following sections of Borrower’s federal tax return
(if such sections are required to be filed): Internal Revenue Forms 1065, 8586,
8609 and Form 8609, Schedule A, which must reflect the total low-income housing
tax credits (“LIHTCs”) allocated to the Mortgaged Property and the LIHTCs
claimed for the Mortgaged Property in the preceding year.
     51. CROSS-DEFAULT. Borrower acknowledges and agrees that any default, event
of default, or breach (however such terms may be defined) after the expiration
of any applicable notice and/or cure periods under the Extended Use Agreement
shall be an Event of Default under this Instrument and that any costs, damages
or other amounts, including reasonable attorney’s fees incurred by the Lender as
a result of such an Event of Default by Borrower, including amounts paid to cure
any default or event of default, under the Extended Use Agreement shall be an
obligation of Borrower and become a part of the Indebtedness secured by this
Instrument.
     52. ANNUAL COMPLIANCE. Borrower shall submit to Lender on an annual basis,
evidence that the Mortgaged Property is in ongoing compliance with all income,
occupancy and rent restrictions under the Extended Use Agreement relating to the
Mortgaged Property. Such submissions shall be made contemporaneously with
Borrower’s reports required to be made to the regulator under the Extended Use
Agreement.”
[CONTINUED ON FOLLOWING PAGE]

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

© 1997-2000 Fannie Mae

 

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EXHIBIT B-1
2. All capitalized terms used in this Exhibit not specifically defined herein
shall have the meanings set forth in the text of the Instrument that precedes
this Exhibit.
BORROWER’S INITIALS: /s/ Ana Marie del Rio               

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

© 1997-2000 Fannie Mae

 

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EXHIBIT B-2
MODIFICATIONS TO INSTRUMENT
(Non-Standard Modifications)
         The following modifications are made to the text of the Instrument that
precedes this Exhibit:

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

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

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

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

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

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

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

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

 

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

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

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

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

 

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

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

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

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

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

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

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

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

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

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

 

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

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

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

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

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

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

 

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

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

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

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

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

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

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

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

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

 

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

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

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

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

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

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

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

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

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

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

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

 

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

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

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

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

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

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

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

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

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

 

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“(d) Lender shall endeavor to give Borrower’s counsel a courtesy copy of any
notice given to Borrower by Lender, at the address set forth below; provided,
however, failure to provide such courtesy copy notice shall not affect the
validity or sufficiency of any notice to Borrower, shall not affect Lender’s
rights and remedies hereunder or under any other Loan Documents, nor subject
Lender to any claims by or liability to Borrower.
Katten Muchin Rosenman LLP
2900 K Street NW, Suite 200
Washington, D.C. 2007
Attn: Virginia A. Davis”

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

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

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

 

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

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

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