Exhibit 10.30

 

REQUESTED BY

AND WHEN RECORDED MAIL TO:

 

Thomas A. Hauser, Esq.

Ballard Spahr, LLP

300 East Lombard Street, 18th Floor

Baltimore, Maryland 21202

 

MULTIFAMILY DEED OF TRUST,

ASSIGNMENT OF RENTS,

SECURITY AGREEMENT AND FIXTURE FILING

(CALIFORNIA)

 

ATTENTION COUNTY RECORDER:  THIS INSTRUMENT IS INTENDED TO BE EFFECTIVE AS A
FINANCING STATEMENT FILED AS A FIXTURE FILING PURSUANT TO SECTION 9502 OF THE
CALIFORNIA COMMERCIAL CODE.  PORTIONS OF THE GOODS COMPRISING A PART OF THE
MORTGAGED PROPERTY ARE OR ARE TO BECOME FIXTURES RELATED TO THE LAND DESCRIBED
IN EXHIBIT A HERETO.  THIS INSTRUMENT IS TO BE FILED FOR RECORD IN THE RECORDS
OF THE COUNTY WHERE DEEDS OF TRUST ON REAL PROPERTY ARE RECORDED AND SHOULD BE
INDEXED AS BOTH A DEED OF TRUST AND AS A FINANCING STATEMENT COVERING FIXTURES. 
THE ADDRESSES OF BORROWER (DEBTOR) AND LENDER (SECURED PARTY) ARE SPECIFIED IN
THE FIRST PARAGRAPH ON PAGE 1 OF THIS INSTRUMENT.

 

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TABLE OF CONTENTS

 

 

 

PAGE

 

 

 

1.

DEFINITIONS

2

 

 

 

2.

UNIFORM COMMERCIAL CODE SECURITY AGREEMENT

7

 

 

 

3.

ASSIGNMENT OF RENTS; APPOINTMENT OF RECEIVER; LENDER IN POSSESSION

8

 

 

 

4.

ASSIGNMENT OF LEASES; LEASES AFFECTING THE MORTGAGED PROPERTY

10

 

 

 

5.

PAYMENT OF INDEBTEDNESS; PERFORMANCE UNDER LOAN DOCUMENTS; PREPAYMENT PREMIUM

12

 

 

 

6.

EXCULPATION

12

 

 

 

7.

DEPOSITS FOR TAXES, INSURANCE AND OTHER CHARGES

13

 

 

 

8.

COLLATERAL AGREEMENTS

14

 

 

 

9.

APPLICATION OF PAYMENTS

14

 

 

 

10.

COMPLIANCE WITH LAWS

14

 

 

 

11.

USE OF PROPERTY

15

 

 

 

12.

PROTECTION OF LENDER’S SECURITY

15

 

 

 

13.

INSPECTION

16

 

 

 

14.

BOOKS AND RECORDS; FINANCIAL REPORTING

16

 

 

 

15.

TAXES; OPERATING EXPENSES

18

 

 

 

16.

LIENS; ENCUMBRANCES

19

 

 

 

17.

PRESERVATION, MANAGEMENT AND MAINTENANCE OF MORTGAGED PROPERTY

19

 

 

 

18.

ENVIRONMENTAL HAZARDS

20

 

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19.

PROPERTY AND LIABILITY INSURANCE

25

 

 

 

20.

CONDEMNATION

27

 

 

 

21.

TRANSFERS OF THE MORTGAGED PROPERTY OR INTERESTS IN BORROWER

28

 

 

 

22.

EVENTS OF DEFAULT

33

 

 

 

23.

REMEDIES CUMULATIVE

34

 

 

 

24.

FORBEARANCE

34

 

 

 

25.

LOAN CHARGES

35

 

 

 

26.

WAIVER OF STATUTE OF LIMITATIONS

35

 

 

 

27.

WAIVER OF MARSHALLING

35

 

 

 

28.

FURTHER ASSURANCES

36

 

 

 

29.

ESTOPPEL CERTIFICATE

36

 

 

 

30.

GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE

36

 

 

 

31.

NOTICE

37

 

 

 

32.

SALE OF NOTE; CHANGE IN SERVICER

37

 

 

 

33.

SINGLE ASSET BORROWER

37

 

 

 

34.

SUCCESSORS AND ASSIGNS BOUND

38

 

 

 

35.

JOINT AND SEVERAL LIABILITY

38

 

 

 

36.

RELATIONSHIP OF PARTIES; NO THIRD PARTY BENEFICIARY

38

 

 

 

37.

SEVERABILITY; AMENDMENTS

38

 

 

 

38.

CONSTRUCTION

38

 

 

 

39.

LOAN SERVICING

39

 

 

 

40.

DISCLOSURE OF INFORMATION

39

 

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41.

NO CHANGE IN FACTS OR CIRCUMSTANCES

39

 

 

 

42.

SUBROGATION

39

 

 

 

43.

ACCELERATION; REMEDIES

40

 

 

 

44.

RECONVEYANCE

41

 

 

 

45.

SUBSTITUTE TRUSTEE

41

 

 

 

46.

STATEMENT OF OBLIGATION

41

 

 

 

47.

SPOUSE’S SEPARATE PROPERTY

41

 

 

 

48.

FIXTURE FILING

42

 

 

 

49.

ADDITIONAL PROVISION REGARDING APPLICATION OF PAYMENTS

42

 

 

 

50.

WAIVER OF MARSHALLING; OTHER WAIVERS

42

 

 

 

51.

ADDITIONAL PROVISIONS CONCERNING ENVIRONMENTAL HAZARDS

42

 

 

 

52.

ADDITIONAL PROVISION REGARDING INSURANCE

44

 

 

 

53.

WAIVER OF TRIAL BY JURY

44

 

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MULTIFAMILY DEED OF TRUST,

ASSIGNMENT OF RENTS,

SECURITY AGREEMENT AND

FIXTURE FILING

 

THIS MULTIFAMILY DEED OF TRUST, ASSIGNMENT OF RENTS, SECURITY AGREEMENT AND
FIXTURE FILING (the “Instrument”) is dated as of the 28th day of October, 2009,
by BEHRINGER HARVARD NOHO, LLC, a limited liability company organized and
existing under the laws of Delaware, whose address is 15601 Dallas Parkway,
Suite 600, Addison, Texas 75001, as trustor (“Borrower”), to Chicago Title
Company, whose address is 700 S. Flower Street, Suite 800, Los Angeles, CA
90017, as trustee (“Trustee”), for the benefit of Red Mortgage Capital, Inc., a
corporation organized and existing under the laws of Ohio, whose address is Two
Miranova Place, 12th Floor, Columbus, Ohio 43215, as beneficiary (“Lender”).

 

Borrower, in consideration of the Indebtedness and the trust created by this
Instrument, irrevocably grants, conveys and assigns to Trustee, in trust, with
power of sale, the Mortgaged Property, including the Land located in Los Angeles
County, State of California and described in Exhibit A attached to this
Instrument.

 

TO SECURE TO LENDER the repayment of the Indebtedness evidenced by Borrower’s
Multifamily Note payable to Lender, dated as of the date of this Instrument, and
maturing on November 1, 2016, in the principal amount of $51,300,000.00, and all
renewals, extensions and modifications of the Indebtedness, the payment of all
sums advanced by or on behalf of Lender to protect the security of this
Instrument under Section 12, and the performance of the covenants and agreements
of Borrower contained in the Loan Documents.

 

Borrower represents and warrants that Borrower is lawfully seized of the
Mortgaged Property and has the right, power and authority to grant, convey and
assign the Mortgaged Property, and that the Mortgaged Property is unencumbered. 
Borrower covenants that Borrower will warrant and defend generally the title to
the Mortgaged Property against all claims and demands, subject to any easements
and restrictions listed in a schedule of exceptions 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:

 

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1.             DEFINITIONS.

 

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

 

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

 

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

 

(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.

 

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

 

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

 

(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

 

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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.

 

(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;

 

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(6)           all proceeds paid or to be paid by any insurer of the Land, the
Improvements, the Fixtures, the Personalty or any other part of the Mortgaged
Property, whether or not Borrower obtained the insurance pursuant to Lender’s
requirement;

 

(7)           all awards, payments and other compensation made or to be made by
any municipal, state or federal authority with respect to the Land, the
Improvements, the Fixtures, the Personalty or any other part of the Mortgaged
Property, including any awards or settlements resulting from condemnation
proceedings or the total or partial taking of the Land, the Improvements, the
Fixtures, the Personalty or any other part of the Mortgaged Property under the
power of eminent domain or otherwise and including any conveyance in lieu
thereof;

 

(8)           all contracts, options and other agreements for the sale of the
Land, the Improvements, the Fixtures, the Personalty or any other part of the
Mortgaged Property entered into by Borrower now or in the future, including cash
or securities deposited to secure performance by parties of their obligations;

 

(9)           all proceeds from the conversion, voluntary or involuntary, of any
of the above into cash or liquidated claims, and the right to collect such
proceeds;

 

(10)         all Rents and Leases;

 

(11)         all earnings, royalties, accounts receivable, issues and profits
from the Land, the Improvements or any other part of the Mortgaged Property, and
all undisbursed proceeds of the loan secured by this Instrument and, if Borrower
is a cooperative housing corporation, maintenance charges or assessments payable
by shareholders or residents;

 

(12)         all Imposition Deposits;

 

(13)         all refunds or rebates of Impositions by any municipal, state or
federal authority or insurance company (other than refunds applicable to periods
before the real property tax year in which this Instrument is dated);

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(z)            “Transfer” means (A) a sale, assignment, transfer, or other
disposition (whether voluntary, involuntary or by operation of law); (B) the
grant, creation, or attachment of a lien, encumbrance, or security interest
(whether voluntary, involuntary or by operation of law); (C) the

 

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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 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

 

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the UCC Collateral.  If an Event of Default has occurred and is continuing,
Lender shall have the remedies of a secured party under the Uniform Commercial
Code, in addition to all remedies provided by this Instrument or existing under
applicable law.  In exercising any remedies, Lender may exercise its remedies
against the UCC Collateral separately or together, and in any order, without in
any way affecting the availability of Lender’s other remedies.  This Instrument
constitutes a financing statement with respect to any part of the Mortgaged
Property which is or may become a Fixture.

 

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

 

(a)           As part of the consideration for the Indebtedness, Borrower
absolutely and unconditionally assigns and transfers to Lender all Rents. It is
the intention of Borrower to establish a present, absolute and irrevocable
transfer and assignment to Lender of all Rents and to authorize and empower
Lender to collect and receive all Rents without the necessity of further action
on the part of Borrower.  Promptly upon request by Lender, Borrower agrees to
execute and deliver such further assignments as Lender may from time to time
require.  Borrower and Lender intend this assignment of Rents to be immediately
effective and to constitute an absolute present assignment and not an assignment
for additional security only.  For purposes of giving effect to this absolute
assignment of Rents, and for no other purpose, Rents shall not be deemed to be a
part of the “Mortgaged Property,” as that term is defined in Section 1(s). 
However, if this present, absolute and unconditional assignment of Rents is not
enforceable by its terms under the laws of the Property Jurisdiction, then the
Rents shall be included as a part of the Mortgaged Property and it is the
intention of the Borrower that in this circumstance this Instrument create and
perfect a lien on Rents in favor of Lender, which lien shall be effective as of
the date of this Instrument.

 

(b)           After the occurrence of an Event of Default, Borrower authorizes
Lender to collect, sue for and compromise Rents and directs each tenant of the
Mortgaged Property to pay all Rents to, or as directed by, Lender, 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

 

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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 after the occurrence of an
Event of Default, 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; provided, however, that the giving of any such
notice by Lender shall not affect, in any way, Lender’s entitlement to the Rents
as of the date on which the Event of Default occurs.  No tenant shall be
obligated to inquire further as to the occurrence or continuance of an Event of
Default, and no tenant shall be obligated to pay to Borrower any amounts which
are actually paid to Lender in response to such a notice.  Any such notice by
Lender shall be delivered to each tenant personally, by mail or by delivering
such demand to each rental unit.  Borrower shall not interfere with and shall
cooperate with Lender’s collection of such Rents.

 

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

 

(d)           If an Event of Default has occurred and is continuing, Lender may,
regardless of the adequacy of Lender’s security or the solvency of Borrower and
even in the absence of waste, enter upon and take and maintain full control of
the Mortgaged Property in order to perform all acts that Lender in its
discretion determines to be necessary or desirable for the operation and
maintenance of the Mortgaged Property, including the execution, cancellation or
modification of Leases, the collection of all Rents, the making of repairs 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

 

9

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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.

 

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

 

(a)           As part of the consideration for the Indebtedness, Borrower
absolutely and unconditionally assigns and transfers to Lender all of Borrower’s
right, title and interest in, to and under the Leases, including Borrower’s
right, power and authority to modify the terms of any such Lease, or extend or
terminate any such Lease.   It is the intention of Borrower to establish a
present, absolute and irrevocable transfer and assignment to Lender of all of
Borrower’s right, title and interest in, to and under the Leases.  Borrower and
Lender intend this assignment of the Leases to be immediately effective and to
constitute an absolute present assignment and not an assignment for additional
security only.  For purposes of giving effect to this absolute assignment of the
Leases, and for no other purpose, the Leases shall not be deemed to be a part of
the “Mortgaged Property,” as that term is defined in Section 1(s).  However, if
this present,

 

10

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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 the occurrence of an Event of Default, 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.

 

(d)           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, 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

 

11

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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.

 

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.

 

12

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7.                                      DEPOSITS FOR TAXES, INSURANCE AND OTHER
CHARGES.

 

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

 

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

 

(c)                                  If Lender receives a bill or invoice for an
Imposition, Lender shall pay the Imposition from the Imposition Deposits held by
Lender.  Lender shall have no obligation to pay any Imposition to the extent it
exceeds Imposition Deposits then held by Lender.  Lender may pay an Imposition
according to any bill, statement or estimate from the appropriate public office

 

13

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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

 

14

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Property, fair housing, zoning and land use, and Leases.  Borrower also shall
comply with all applicable laws that pertain to the maintenance and disposition
of tenant security deposits.  Borrower shall at all times maintain records
sufficient to demonstrate compliance with the provisions of this Section 10. 
Borrower shall take appropriate measures to prevent, and shall not engage in or
knowingly permit, any illegal activities at the Mortgaged Property that could
endanger tenants or visitors, result in damage to the Mortgaged Property, result
in forfeiture of the Mortgaged Property, or otherwise materially impair the lien
created by this Instrument or Lender’s interest in the Mortgaged Property. 
Borrower represents and warrants to Lender that no portion of the Mortgaged
Property has been or will be purchased with the proceeds of any illegal
activity.

 

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

 

15

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due and payable and shall bear interest from the date of disbursement until paid
at the “Default Rate”, as defined in the Note.

 

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

 

13.                               INSPECTION.

 

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

 

14.                               BOOKS AND RECORDS; FINANCIAL REPORTING.

 

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

 

(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

 

16

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for each tenant, the space occupied, the lease expiration date, the rent payable
for the current month, the date through which rent has been paid, and any
related information requested by Lender;

 

(3)                                  within 120 days after the end of each
fiscal year of Borrower, and at any other time upon Lender’s request, an
accounting of all security deposits held pursuant to all Leases, including the
name of the institution (if any) and the names and identification numbers of the
accounts (if any) in which such security deposits are held and the name of the
person to contact at such financial institution, along with any authority or
release necessary for Lender to access information regarding such accounts;

 

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

 

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

 

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

 

(7)                                  if required by Lender, 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.

 

17

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

 

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

 

15.                               TAXES; OPERATING EXPENSES.

 

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

 

(b)                                 Subject to the provisions of Section 15(c),
Borrower shall pay the expenses of operating, managing, maintaining and
repairing the Mortgaged Property (including insurance premiums, utilities,
repairs and replacements) before the last date upon which each such payment may
be made without any penalty or interest charge being added.

 

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

 

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

 

(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.

 

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16.                               LIENS; ENCUMBRANCES.

 

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

 

17.                               PRESERVATION, MANAGEMENT AND MAINTENANCE OF
MORTGAGED PROPERTY.

 

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

 

(b)  If, in connection with the making of the loan evidenced by the Note or at
any later date, Lender waives in writing the requirement of
Section 17(a)(5) above that Borrower enter into a written contract for
management of the Mortgaged Property and if, after the date of this Instrument,
Borrower intends to change the management of the Mortgaged Property, Lender
shall have the right to approve such new property manager and the written
contract for the management of the Mortgaged Property and require that Borrower
and such new property manager enter into an Assignment of Management Agreement
on a form approved by Lender.  If required by Lender (whether before or after an
Event of Default), Borrower will cause any Affiliate of Borrower to whom fees
are payable for the management of the Mortgaged Property to enter into an
agreement with Lender, in a form approved by Lender, providing for subordination
of those fees and such other provisions as Lender may require.  “Affiliate of

 

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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;

 

(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

 

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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;

 

(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.

 

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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;

 

(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.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(1)                                  pay or satisfy any judgment or decree that
may be entered against any Indemnitee or Indemnitees in any legal or
administrative proceeding

 

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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.

 

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

 

25

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

 

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(g)                                 Lender shall not exercise its option to
apply insurance proceeds to the payment of the Indebtedness if all of the
following conditions are met:  (1) no Event of Default (or any event which, with
the giving of notice or the passage of time, or both, would constitute an Event
of Default) has occurred and is continuing; (2) Lender determines, in its
discretion, that there will be sufficient funds to complete the Restoration;
(3) Lender determines, in its discretion, that the 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.

 

(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,

 

27

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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

 

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materially affect the operation or value of the Mortgaged Property or Lender’s
interest in the Mortgaged Property, and Borrower pays to Lender, upon demand,
all costs and expenses incurred by Lender in connection with reviewing
Borrower’s request;

 

(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

 

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that the transferee comply with any provisions of this Instrument or any other
Loan Document which previously may have been waived by Lender;

 

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

 

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(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;

 

(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.

 

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(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.

 

(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,

 

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impairment of the Note or this Instrument or any other security given under any
other Loan Document;

 

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

 

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

 

23.          REMEDIES CUMULATIVE.

 

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

 

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

 

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exercise of any other right available to Lender.  Lender’s receipt of any awards
or proceeds under Sections 19 and 20 shall not operate to cure or waive any
Event of Default.

 

25.          LOAN CHARGES.

 

If any applicable law limiting the amount of interest or other charges permitted
to be collected from Borrower is interpreted so that any charge provided for in
any Loan Document, whether considered separately or together with other charges
levied in connection with any other Loan Document, violates that law, and
Borrower is entitled to the benefit of that law, that charge is hereby reduced
to the extent necessary to eliminate that violation.  The amounts, if any,
previously paid to Lender in excess of the permitted amounts shall be applied by
Lender to reduce the principal of the Indebtedness.  For the purpose of
determining whether any applicable law limiting the amount of interest or other
charges permitted to be collected from Borrower has been violated, all
Indebtedness which constitutes interest, as well as all other charges levied in
connection with the Indebtedness which constitute interest, shall be deemed to
be allocated and spread over the stated term of the Note.  Unless otherwise
required by applicable law, such allocation and spreading shall be effected in
such a manner that the rate of interest so computed is uniform throughout the
stated term of the Note.

 

26.          WAIVER OF STATUTE OF LIMITATIONS.

 

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

 

27.          WAIVER OF MARSHALLING.

 

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

 

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28.          FURTHER ASSURANCES.

 

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

 

29.          ESTOPPEL CERTIFICATE.

 

Within 10 days after a request from Lender, Borrower shall deliver to Lender a
written statement, signed and acknowledged by Borrower, certifying to Lender or
any person designated by Lender, as of the date of such statement, (i) that the
Loan Documents are unmodified and in full force and effect (or, if there have
been modifications, that the Loan Documents are in full force and effect as
modified and setting forth such modifications); (ii) the unpaid principal
balance of the Note; (iii) the date to which interest under the Note has been
paid; (iv) that Borrower is not in default in paying the Indebtedness or in
performing or observing any of the covenants or agreements contained in this
Instrument or any of the other Loan Documents (or, if the Borrower is in
default, describing such default in reasonable detail); (v) whether or not there
are then existing any setoffs or defenses known to Borrower against the
enforcement of any right or remedy of Lender under the Loan Documents; and
(vi) any additional facts requested by Lender.

 

30.          GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE.

 

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

 

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

 

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31.          NOTICE.

 

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

 

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

 

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

 

32.          SALE OF NOTE; CHANGE IN SERVICER.

 

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

 

33.          SINGLE ASSET BORROWER.

 

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

 

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34.          SUCCESSORS AND ASSIGNS BOUND.

 

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

 

35.          JOINT AND SEVERAL LIABILITY.

 

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

 

36.          RELATIONSHIP OF PARTIES; NO THIRD PARTY BENEFICIARY.

 

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

 

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

 

37.          SEVERABILITY; AMENDMENTS.

 

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

 

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

 

 

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“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.

 

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

 

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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.

 

If an Event of Default has occurred and is continuing,  Lender, at Lender’s
option, may declare the Indebtedness to be immediately due and payable without
further demand, and may invoke the power of sale and any other remedies
permitted by California law or provided in this Instrument or in any other Loan
Document.  Borrower acknowledges that the power of sale granted in this
Instrument may be exercised by Lender without prior judicial hearing.  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.

 

If the power of sale is invoked, Lender shall execute a written notice of the
occurrence of an Event of Default and of Lender’s election to cause the
Mortgaged Property to be sold and shall cause the notice to be recorded in each
county in which the Mortgaged Property or some part of the Mortgaged Property is
located.  Trustee shall give notice of default and notice of sale and shall sell
the Mortgaged Property according to California law.  Trustee may sell the
Mortgaged Property at the time and place and under the terms designated in the
notice of sale in one or more parcels and in such order as Trustee may
determine.  Trustee may postpone the sale of all or any part of the Mortgaged
Property by public announcement at the time and place of any previously
scheduled sale.  Lender or Lender’s designee may purchase the Mortgaged Property
at any sale.

 

At the sale, Lender shall be entitled to credit bid, or to instruct Trustee, on
behalf of Lender to credit bid, up to and including the entire amount of the
Indebtedness plus Trustee’s fees and expenses.  Trustee shall deliver to the
purchaser at the sale, within a reasonable time, but in any event within 10
calendar days, after the sale, a deed conveying the Mortgaged Property so sold
without any express or implied covenant or warranty.  The recitals in Trustee’s
deed shall be prima facie evidence of the truth of the statements made in those
recitals.  Trustee shall apply the proceeds of the sale in the following order: 
(a) to all costs and expenses of exercising the power of sale, including the
payment of Trustee’s fees and attorneys’ fees and costs of title evidence;
(b) to the Indebtedness in such order as Lender, in Lender’s discretion,
directs; and (c) the excess, if any, to the person or persons legally entitled
to the excess.

 

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44.          RECONVEYANCE.

 

Upon payment of the Indebtedness, Lender shall request Trustee to reconvey the
Mortgaged Property and shall surrender this Instrument and the Note to Trustee. 
Trustee shall reconvey the Mortgaged Property without warranty to the person or
persons legally entitled to the Mortgaged Property.  Such person or persons
shall pay Trustee’s reasonable costs incurred in so reconveying the Mortgaged
Property.

 

45.          SUBSTITUTE TRUSTEE.

 

Lender, at Lender’s option, may from time to time, by a written instrument,
appoint a successor trustee, which instrument, when executed and acknowledged by
Lender and recorded in the office of the Recorder of the county or counties
where the Mortgaged Property is situated, shall be conclusive proof of proper
substitution of the successor trustee.  The successor trustee shall, without
conveyance of the Mortgaged Property, succeed to all the title, authority,
powers and duties conferred upon the Trustee in this Instrument and by
California law.  The instrument of substitution shall contain the name of the
original Lender, Trustee and Borrower under this Instrument, the book and
page where this Instrument is recorded, and the name and address of the
successor trustee.  If notice of default has been recorded, this power of
substitution cannot be exercised until after the costs, fees and expenses of the
then acting Trustee have been paid to such Trustee, who shall endorse receipt of
those costs, fees and expenses upon the instrument of substitution.  The
procedure provided for substitution of trustee in this Instrument shall govern
to the exclusion of all other provisions for substitution, statutory or
otherwise.

 

46.          STATEMENT OF OBLIGATION.

 

Lender may collect a fee not to exceed the maximum allowed by applicable law for
furnishing the statement of obligation as provided in Section 2943 of the Civil
Code of California.

 

47.          SPOUSE’S SEPARATE PROPERTY.

 

Each Borrower who is a married person expressly agrees that recourse may be had
against his or her community property and separate property.

 

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48.          FIXTURE FILING.

 

This Instrument is also a fixture filing under the Uniform Commercial Code of
California.

 

49.          ADDITIONAL PROVISION REGARDING APPLICATION OF PAYMENTS.

 

In addition to the provisions of Section 9, Borrower further agrees that, if
Lender accepts a guaranty of only a portion of the Indebtedness, Borrower waives
its right under California Civil Code Section 2822(a), to designate the portion
of the Indebtedness which shall be satisfied by a guarantor’s partial payment.

 

50.          WAIVER OF MARSHALLING; OTHER WAIVERS.

 

To the extent permitted by law, Borrower waives (i) the benefit of all present
or future laws providing for any appraisement before sale of any portion of the
Mortgaged Property, (ii) all rights of redemption, valuation, appraisement, stay
of execution, notice of election to mature or declare due the whole of the
Indebtedness and marshalling in the event of foreclosure of the lien created by
this Instrument, (iii) all rights and remedies which Borrower may have or be
able to assert by reason of the laws of the State of California pertaining to
the rights and remedies of sureties, (iv) 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 the Note or any other obligation secured by this
Instrument, and (v) any rights, legal or equitable, to require marshalling of
assets or to require upon foreclosure sales in a particular order, including any
rights under California Civil Code Sections 2899 and 3433.  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 by this Instrument.  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 the
remedies provided by this Instrument.  By signing this Instrument, Borrower does
not waive its rights under Section 2924c of the California Civil Code.

 

51.          ADDITIONAL PROVISIONS CONCERNING ENVIRONMENTAL HAZARDS.

 

In addition to the provisions of Section 18:

 

(a)           Except for matters covered by an O&M Program or matters described
in Section 18(b), Borrower shall not cause or permit any lien (whether or not
such lien has priority over the

 

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lien created by this Instrument) upon the Mortgaged Property imposed pursuant to
any Hazardous Materials Laws.  Any such lien shall be considered a Prohibited
Activity or Condition.

 

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

 

(1)                                  at the time of acquiring the Mortgaged
Property, Borrower undertook all appropriate inquiry into the previous ownership
and uses of the Mortgaged Property consistent with good commercial or customary
practice and no evidence or indication came to light which would suggest that
the Mortgaged Property has been or is now being used for any Prohibited
Activities or Conditions; and

 

(2)                                  the Mortgaged Property has not been
designated as “hazardous waste property” or “border zone property” pursuant to
Section 25220, et seq., of the California Health and Safety Code.

 

The representations and warranties in this Section 51(b) 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.

 

(c)           Without limiting any of the remedies provided in this Instrument,
Borrower acknowledges and agrees that each of the provisions in Section 18 and
in this Section 51 is an environmental provision (as defined in
Section 736(f)(2) of the California Code of Civil Procedure) made by Borrower
relating to the real property security (the “Environmental Provisions”), and
that Borrower’s failure to comply with any of the Environmental Provisions will
be a breach of contract that will entitle Lender to pursue the remedies provided
by Section 736 of the California Code of Civil Procedure (“Section 736”) for the
recovery of damages and for the enforcement of the Environmental Provisions. 
Pursuant to Section 736, Lender’s action for recovery of damages or enforcement
of the Environmental Provisions shall not constitute an action within the
meaning of Section 726(a) of the California Code of Civil Procedure or
constitute a money judgment for a deficiency or a deficiency judgment within the
meaning of Sections 580a, 580b, 580d, or 726(b) of the California Code of Civil
Procedure.

 

(d)           Any reference in this Instrument or in any other Loan Document to
Section 18 of this Instrument shall be construed as referring together to
Section 18 and this Section 51.

 

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52.          ADDITIONAL PROVISION REGARDING INSURANCE.

 

In addition to the provisions of Section 19, Borrower further agrees that to the
extent that Borrower obtains any form of property damage insurance for the
Mortgaged Property or any portion thereof that insures perils not required to be
insured against by Lender, such policy of property damage insurance shall
include a standard mortgagee clause and shall name Lender as loss payee and,
within 10 days following Borrower’s purchase of such additional insurance,
Borrower shall cause to be delivered to Lender a duplicate original policy of
insurance with respect to such policy.  Any insurance proceeds payable to
Borrower under such policy shall be additional security for the Indebtedness and
Lender shall have the same rights to such policy and proceeds as it has with
respect to insurance policies required by Lender pursuant to Section 19 (except
that Lender shall not require that the premium for such additional insurance be
included among the Imposition Deposits).

 

53.          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.

 

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

 

x Exhibit A   Description of the Land (Required).

 

x Exhibit B   Modifications to Instrument (Borrower Requested).

 

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

 

 

 

BORROWER:

 

 

 

BEHRINGER HARVARD NOHO, LLC,

 

a Delaware limited liability company

 

 

 

 

 

By:

/s/ Gerald J. Reihsen, III

 

 

Name:

Gerald J. Reihsen, III

 

 

Title:

Executive Vice President

 

Fannie Mae Commitment Number: 860574

 

46

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STATE OF TEXAS

 

COUNTY OF DALLAS

 

This instrument was acknowledged before me on October 21, 2009 by Gerald J.
Reihsen, III of BEHRINGER HARVARD NOHO, LLC, a Delaware limited liability
company, on behalf of said limited liability company.

 

 

 

/s/ Catherine E. Mea

(SEAL

 

Signature of Officer

 

 

 

 

 

 

 

 

Notary Public

(SEAL

 

Title of Officer

 

 

My Commission Expires: July 26, 2012

 

47

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KEY PRINCIPAL

 

Key Principal

 

Name:

 

BEHRINGER HARVARD MULTIFAMILY REIT I, INC.

 

 

 

Address:

 

15601 Dallas Parkway, Suite 600

 

 

 

 

 

Addison, Texas 75001

 

48

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EXHIBIT B

 

MODIFICATIONS TO INSTRUMENT

(Borrower Requested)

 

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

 

1.                                       Section 19(f) is modified by adding the
following at the end of the Section:

 

“Notwithstanding any provision to the contrary in this Section 19(f), as long as
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, in the event of a casualty resulting in damage to the Mortgaged
Property which will cost $50,000 or less to repair, the Borrower shall have the
sole right to make proof of loss, adjust and compromise the claim and collect
and receive any proceeds directly without the approval or prior consent of the
Lender so long as the insurance proceeds are used solely for the Restoration of
the Mortgaged Property.”

 

2.                                       Section 20(a) is modified by adding the
following at the end of the Section:

 

“Notwithstanding any provision to the contrary in this Section 20(a), as long as
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, in the event of a Condemnation resulting in damage to the
Mortgaged Property which will cost $50,000 or less to repair, the Borrower shall
have the sole right to appear in and prosecute or defend any action or
proceeding relating to any Condemnation, and to settle or compromise any claim,
collect and receive any proceeds in connection with any Condemnation directly
without the approval or prior consent of the Lender so long as the Condemnation
proceeds are used solely for the Restoration of the Mortgaged Property
(provided; however, that this provision shall not apply if such Condemnation in
any way affects access to the Mortgaged Property).”

 

3.                                       Section 21 is modified to add new
Section 21(f) as follows:

 

“(f)                              The requirement to pay a 1% transfer fee as
provided in Section 21(c)(7)(A) shall not apply to Transfers of the Mortgaged
Property or of ownership interests held by any person or entity to (i) one or
more Key Principals or (ii) any entity or entities in which a Key Principal has
a direct or indirect Controlling Interest (“Affiliated Entities”), including but
not limited to the following Affiliated Entities:  Behringer Harvard Multifamily
OP I LP.  However, such Transfers to Affiliated Entities shall be subject to all
other requirements of Section 21(c) herein.”

 

4.                                       Section 21(b) is modified to delete the
period at the end of Section 21(b)(7) and substitute “; and” therefor and to add
a new Section 21(b)(8):

 

“(8)                            a Transfer of the Mortgaged Property to an
entity or entities in which the Key Principal has a direct or indirect
Controlling Interest; provided, however, that such Transfer of ownership
interests will not cause a change in the management and control of Borrower (or
other intermediate entity), and after which Transfer,

 

B-1

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the transferor Key Principal shall maintain the same right and ability to manage
and control Borrower (or other intermediate entity) as existed prior to the
Transfer; and”

 

5.                                       Section 21(b) is modified to add new
Section 21(b)(9) as follows:

 

“(9)                            a Transfer of (i) a Controlling Interest in any
entity which owns, directly or indirectly through one or more intermediate
entities, a Controlling Interest in Borrower, or (ii) all or any part of the Key
Principal’s ownership interest in Borrower, or in any other entity which owns,
directly or indirectly through one of more intermediate entities, an ownership
interest in Borrower; provided however, that following such Transfer, Key
Principal will hold a Controlling Interest, either directly or indirectly, in
Borrower.”

 

6.                                       Section 21(b) is modified to add new
Section 21(b)(9) as follows:

 

“(10)                      a Transfer of any stock in any Publicly-Held
Corporation.”

 

7.                                       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 INITIALS ON THE FOLLOWING PAGE]

 

B-2

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Borrower’s Initials:

 

 

 

 

 

/s/ GJR

 

B-3

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