**Exhibit10.30**

 

REQUESTEDBY

ANDWHEN RECORDED MAIL TO:

 

ThomasA. Hauser, Esq.

BallardSpahr, LLP

300East Lombard Street, 18th Floor

Baltimore,Maryland 21202

 

**MULTIFAMILY DEED OF TRUST,**

**ASSIGNMENT OF RENTS,**

**SECURITY AGREEMENT AND FIXTUREFILING**

**(CALIFORNIA)**

 

**ATTENTION COUNTY RECORDER:  THISINSTRUMENT IS INTENDED TO BE EFFECTIVE AS A FINANCING STATEMENT FILED AS AFIXTURE FILING PURSUANT TO SECTION 9502 OF THE CALIFORNIA COMMERCIAL CODE.  PORTIONS OF THE GOODS COMPRISING A PART OFTHE MORTGAGED PROPERTY ARE OR ARE TO BECOME FIXTURES RELATED TO THE LANDDESCRIBED IN EXHIBIT A HERETO.  THISINSTRUMENT IS TO BE FILED FOR RECORD IN THE RECORDS OF THE COUNTY WHERE DEEDSOF TRUST ON REAL PROPERTY ARE RECORDED AND SHOULD BE INDEXED AS BOTH A DEED OFTRUST 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 THISINSTRUMENT.**

 

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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 AGREEMENTAND FIXTURE FILING (the “**Instrument**”) isdated as of the 28th day of October, 2009, by BEHRINGER HARVARD NOHO, LLC, alimited liability company organized and existing under the laws of Delaware,whose address is 15601 Dallas Parkway, Suite 600, Addison, Texas 75001, astrustor (“**Borrower**”), to Chicago Title Company,whose address is 700 S. Flower Street, Suite 800, Los Angeles, CA 90017, astrustee (“**Trustee**”), for the benefit of RedMortgage Capital, Inc., a corporation organized and existing under the laws ofOhio, whose address is Two Miranova Place, 12th Floor,Columbus, Ohio 43215, as beneficiary (“**Lender**”).

 

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

 

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

 

Borrower represents and warrants that Borrower is lawfully seized ofthe Mortgaged Property and has the right, power and authority to grant, conveyand assign the Mortgaged Property, and that the Mortgaged Property isunencumbered.  Borrower covenants thatBorrower will warrant and defend generally the title to the Mortgaged Propertyagainst all claims and demands, subject to any easements and restrictionslisted in a schedule of exceptions to coverage in any title insurance policyissued to Lender contemporaneously with the execution and recordation of thisInstrument and insuring Lender’s interest in the Mortgaged Property.

 

**Covenants.**  Borrower andLender covenant and agree as follows:

 

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# **1.****            ****DEFINITIONS.**

#  

Thefollowing terms, when used in this Instrument (including when used in the aboverecitals), 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 andassigns.

 

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

 

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

 

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

 

(e)           “**Fixtures**” means all property which is so attached to theLand or the Improvements as to constitute a fixture under applicable law,including: machinery, equipment, engines, boilers, incinerators, installedbuilding materials; systems and equipment for the purpose of supplying ordistributing 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 carryelectronic signals; telephone systems and equipment; elevators and relatedmachinery and equipment; fire detection, prevention and extinguishing systemsand apparatus; security and access control systems and apparatus; plumbingsystems; water heaters, ranges, stoves, microwave ovens, refrigerators,dishwashers, garbage disposers, washers, dryers and other appliances; lightfixtures, awnings, storm windows and storm doors; pictures, screens, blinds,shades, curtains and curtain rods; mirrors; cabinets, paneling, rugs and floorand wall coverings; fences, trees and plants; swimming pools; and exerciseequipment.

 

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

 

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

 

(h)           “**Hazardous Materials Laws**” means all federal, state, andlocal laws, ordinances and regulations and standards, rules, policies and othergovernmental requirements, administrative rulings and court judgments anddecrees in effect now or in the future and including all amendments, thatrelate to Hazardous Materials and apply to Borrower or to the MortgagedProperty. Hazardous Materials Laws include, but are not limited to, theComprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.Section 9601, *et seq.*, the ResourceConservation 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 orplaced upon the Land, including any future replacements and additions.

 

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

 

(l)            [Intentionallyomitted]

 

(m)          “**Key Principal**” means (A) the natural person(s) or entityidentified as such at the foot of this Instrument; (B) the natural person orentity who signed either the Acknowledgement and Agreement of Key Principal toPersonal Liability for Exceptions to Non-Recourse Liability or the Exceptionsto 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 thisInstrument and is identified as such in an assumption agreement, or anotheramendment or supplement to this Instrument or who otherwise signs either theAcknowledgement and Agreement of Key Principal to Personal Liability

 

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forExceptions to Non-Recourse Liability or Exceptions to Non-Recourse Guaranty (orany 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 hereafterin force, whether oral or written, covering or affecting the MortgagedProperty, or any portion of the Mortgaged Property (including proprietaryleases or occupancy agreements if Borrower is a cooperative housingcorporation), and all modifications, extensions or renewals.

 

(p)           “**Lender**” means the entity identified as “Lender” in the firstparagraph of this Instrument and its successors and assigns, or any subsequentholder of the Note.

 

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

 

(r)            “**Loan Servicer**” means the entity that from time to time isdesignated by Lender to collect payments and deposits and receive notices underthe Note, this Instrument and any other Loan Document, and otherwise to servicethe loan evidenced by the Note for the benefit of Lender.  Unless Borrower receives notice to thecontrary, the Loan Servicer is the entity identified as “Lender” in the firstparagraph of this Instrument.

 

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

 

(1)           the Land;

 

(2)           theImprovements;

 

(3)           the Fixtures;

 

(4)           the Personalty;

 

(5)           all current and futurerights, including air rights, development rights, zoning rights and othersimilar rights or interests, easements, tenements, rights-of-way, strips andgores of land, streets, alleys, roads, sewer rights, waters, watercourses, andappurtenances 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 inthe future be vacated;

 

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

 

(7)           all awards, payments andother compensation made or to be made by any municipal, state or federalauthority with respect to the Land, the Improvements, the Fixtures, thePersonalty or any other part of the Mortgaged Property, including any awards orsettlements resulting from condemnation proceedings or the total or partialtaking of the Land, the Improvements, the Fixtures, the Personalty or any otherpart of the Mortgaged Property under the power of eminent domain or otherwiseand including any conveyance in lieu thereof;

 

(8)           all contracts, options andother agreements for the sale of the Land, the Improvements, the Fixtures, thePersonalty or any other part of the Mortgaged Property entered into by Borrowernow or in the future, including cash or securities deposited to secureperformance by parties of their obligations;

 

(9)           all proceeds from theconversion, voluntary or involuntary, of any of the above into cash orliquidated 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 anyother part of the Mortgaged Property, and all undisbursed proceeds of the loansecured by this Instrument and, if Borrower is a cooperative housingcorporation, maintenance charges or assessments payable by shareholders orresidents;

 

(12)         all Imposition Deposits;

 

(13)         all refunds or rebates of Impositionsby any municipal, state or federal authority or insurance company (other thanrefunds applicable to periods before the real property tax year in which thisInstrument is dated);

 

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

 

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

 

(t)            “**Note**” means the Multifamily Note described on page 1 of thisInstrument, including the Acknowledgment and Agreement of Key Principal toPersonal Liability for Exceptions to Non-Recourse Liability (if any), and allschedules, riders, allonges and addenda, as such Multifamily Note may beamended 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 inthe future in connection with the ownership, management or operation of theLand 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 withthe ownership, management or operation of the Land or the Improvements or arelocated on the Land or in the Improvements, and any operating agreementsrelating to the Land or the Improvements, and any surveys, plans andspecifications and contracts for architectural, engineering and constructionservices relating to the Land or the Improvements and all other intangibleproperty and rights relating to the operation of, or used in connection with,the Land or the Improvements, including all governmental permits relating toany activities on the Land.

 

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

 

(x)            “**Rents**” means all rents (whether from residential ornon-residential space), revenues and other income of the Land or theImprovements, 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 nowdue, past due, or to become due, and deposits forfeited by tenants.

 

(y)           “**Taxes**” means all taxes, assessments, vault rentals and othercharges, if any, general, special or otherwise, including all assessments forschools, public betterments and general or local improvements, which arelevied, 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 otherdisposition (whether voluntary, involuntary or by operation of law); (B) thegrant, creation, or attachment of a lien, encumbrance, or security interest(whether voluntary, involuntary or by operation of law); (C) the

 

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issuanceor other creation of a direct or indirect ownership interest; or (D) thewithdrawal, retirement, removal or involuntary resignation of any owner ormanager of a legal entity.

 

(aa)         **“Bankruptcy Event”** means any one or more of the following: (i) thecommencement of a voluntary case under one or more of the Insolvency Laws bythe Borrower; (ii) the acknowledgment in writing by the Borrower that it isunable to pay its debts generally as they mature; (iii) the making of a generalassignment for the benefit of creditors by the Borrower; (iv) an involuntarycase under one or more Insolvency Laws against the Borrower; (v) theappointment of a receiver, liquidator, custodian, sequestrator, trustee orother similar officer who exercises control over the Borrower or anysubstantial part of the assets of the Borrower provided that any proceeding orcase under (iv) or (v) above is not dismissed within 90 days after filing.

 

(bb)         “**BorrowerAffiliate**” means, as to either Borrower or Key Principal, (i) anyentity 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 KeyPrincipal, (ii) any corporation 20 percent or more of whose outstanding votingsecurities are directly or indirectly owned, controlled or held with power tovote by Borrower or by Key Principal, (iii) any partner, shareholder or, if alimited liability company, member of Borrower or Key Principal, or (iv) anyother entity that is related (to the third degree of consanguinity) by blood ormarriage to Borrower or Key Principal.

 

(cc)         **“Insolvency Laws”** means the United States Bankruptcy Code, 11U.S.C. § 101, *et seq*., togetherwith any other federal or state law affecting debtor and creditor rights orrelating to the bankruptcy, insolvency, reorganization, arrangement,readjustment of debt, dissolution, liquidation or similar proceeding, asamended from time to time, to the extent applicable to the Borrower.

 

# **2.****            ****UNIFORMCOMMERCIAL CODE SECURITY AGREEMENT.**

#  

This Instrument is also a security agreement under the UniformCommercial 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-cashproceeds thereof (collectively, “**UCC Collateral**”),and Borrower hereby grants to Lender a security interest in the UCCCollateral.  Borrower hereby authorizesLender to file financing statements, continuation statements and financingstatement amendments in such form as Lender may require to perfect or continuethe perfection of this security interest and Borrower agrees, if Lender sorequests, 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 anyrecord 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 securityinterest in any of

 

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theUCC Collateral.  If an Event of Defaulthas occurred and is continuing, Lender shall have the remedies of a securedparty under the Uniform Commercial Code, in addition to all remedies providedby this Instrument or existing under applicable law.  In exercising any remedies, Lender mayexercise its remedies against the UCC Collateral separately or together, and inany order, without in any way affecting the availability of Lender’s otherremedies.  This Instrument constitutes afinancing statement with respect to any part of the Mortgaged Property which isor may become a Fixture.

 

# **3.****            ****ASSIGNMENTOF RENTS; APPOINTMENT OF RECEIVER; LENDER IN POSSESSION**.

#  

(a)           As part of theconsideration for the Indebtedness, Borrower absolutely and unconditionallyassigns and transfers to Lender all Rents. It is the intention of Borrower toestablish a present, absolute and irrevocable transfer and assignment to Lenderof all Rents and to authorize and empower Lender to collect and receive allRents without the necessity of further action on the part of Borrower.  Promptly upon request by Lender, Borroweragrees to execute and deliver such further assignments as Lender may from timeto time require.  Borrower and Lenderintend this assignment of Rents to be immediately effective and to constitutean absolute present assignment and not an assignment for additional securityonly.  For purposes of giving effect tothis absolute assignment of Rents, and for no other purpose, Rents shall not bedeemed to be a part of the “Mortgaged Property,” as that term is defined in Section1(s).  However, if this present, absoluteand unconditional assignment of Rents is not enforceable by its terms under thelaws of the Property Jurisdiction, then the Rents shall be included as a partof the Mortgaged Property and it is the intention of the Borrower that in thiscircumstance this Instrument create and perfect a lien on Rents in favor ofLender, which lien shall be effective as of the date of this Instrument.

 

(b)           After theoccurrence of an Event of Default, Borrower authorizes Lender to collect, suefor and compromise Rents and directs each tenant of the Mortgaged Property topay all Rents to, or as directed by, Lender, and Borrower shall, upon Borrower’sreceipt of any Rents from any sources (including, but not limited to subsidypayments under any Housing Assistance Payments Contract), pay the total amountof such receipts to the Lender.  However,until the occurrence of an Event of Default, Lender hereby grants to Borrower arevocable license to collect and receive all Rents, to hold all Rents in trustfor the benefit of Lender and to apply all Rents to pay the installments ofinterest and principal then due and payable under the Note and the other amountsthen due and payable under the other Loan Documents, including ImpositionDeposits, and to pay the current costs and expenses of managing, operating andmaintaining the Mortgaged Property, including utilities, Taxes and insurancepremiums (to the extent not included in Imposition Deposits), tenantimprovements and other capital expenditures. So long as no Event of Default has occurred and is continuing, the Rentsremaining after application pursuant to the preceding sentence may be retainedby Borrower free and clear of, and released from, Lender’s rights with respectto

 

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Rentsunder this Instrument.  From and afterthe occurrence of an Event of Default, and without the necessity of Lenderentering upon and taking and maintaining control of the Mortgaged Propertydirectly, or by a receiver, Borrower’s license to collect Rents shallautomatically terminate and Lender shall without notice be entitled to allRents as they become due and payable, including Rents then due and unpaid.  Borrower shall pay to Lender upon demand allRents to which Lender is entitled.  Atany time after the occurrence of an Event of Default, Lender may give, andBorrower hereby irrevocably authorizes Lender to give, notice to all tenants ofthe 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 anyway, Lender’s entitlement to the Rents as of the date on which the Event ofDefault occurs.  No tenant shall beobligated to inquire further as to the occurrence or continuance of an Event ofDefault, and no tenant shall be obligated to pay to Borrower any amounts whichare actually paid to Lender in response to such a notice.  Any such notice by Lender shall be deliveredto each tenant personally, by mail or by delivering such demand to each rentalunit.  Borrower shall not interfere withand shall cooperate with Lender’s collection of such Rents.

 

(c)           Borrowerrepresents and warrants to Lender that Borrower has not executed any priorassignment of Rents (other than an assignment of Rents securing indebtednessthat will be paid off and discharged with the proceeds of the loan evidenced bythe Note), that Borrower has not performed, and Borrower covenants and agreesthat 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 thisSection 3, and that at the time of execution of this Instrument there has beenno anticipation or prepayment of any Rents for more than two months prior tothe due dates of such Rents.  Borrowershall not collect or accept payment of any Rents more than two months prior tothe due dates of such Rents.

 

(d)           If an Event ofDefault has occurred and is continuing, Lender may, regardless of the adequacyof Lender’s security or the solvency of Borrower and even in the absence ofwaste, enter upon and take and maintain full control of the Mortgaged Propertyin order to perform all acts that Lender in its discretion determines to benecessary or desirable for the operation and maintenance of the MortgagedProperty, including the execution, cancellation or modification of Leases, thecollection of all Rents, the making of repairs to the Mortgaged Property andthe execution or termination of contracts providing for the management,operation or maintenance of the Mortgaged Property, for the purposes ofenforcing the assignment of Rents pursuant to Section 3(a), protecting theMortgaged Property or the security of this Instrument, or for such otherpurposes as Lender in its discretion may deem necessary or desirable.  Alternatively, if an Event of Default hasoccurred and is continuing, regardless of the adequacy of Lender’s security,without regard to Borrower’s solvency and without the necessity of giving priornotice (oral or written) to Borrower, Lender may apply to any court havingjurisdiction for the appointment of a receiver for the Mortgaged Property totake any or all of the actions set forth in the preceding sentence.  If Lender elects to seek the appointment of areceiver for the Mortgaged Property at any time after an Event of Default hasoccurred and is continuing, Borrower, by its execution of this Instrument,expressly consents to the appointment of such receiver, including theappointment of a receiver *ex parte* ifpermitted by applicable law.  Lender orthe receiver, as the

 

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casemay be, shall be entitled to receive a reasonable fee for managing theMortgaged Property.  Immediately uponappointment of a receiver or immediately upon the Lender’s entering upon andtaking possession and control of the Mortgaged Property, Borrower shallsurrender possession of the Mortgaged Property to Lender or the receiver, asthe case may be, and shall deliver to Lender or the receiver, as the case maybe, all documents, records (including records on electronic or magnetic media),accounts, surveys, plans, and specifications relating to the Mortgaged Propertyand all security deposits and prepaid Rents. In the event Lender takes possession and control of the MortgagedProperty, Lender may exclude Borrower and its representatives from theMortgaged Property.  Borroweracknowledges and agrees that the exercise by Lender of any of the rightsconferred under this Section 3 shall not be construed to make Lender amortgagee-in-possession of the Mortgaged Property so long as Lender has notitself entered into actual possession of the Land and Improvements.

 

(e)           If Lenderenters the Mortgaged Property, Lender shall be liable to account only toBorrower 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 theMortgaged Property, by reason of any act or omission of Lender under this Section3, and Borrower hereby releases and discharges Lender from any such liabilityto the fullest extent permitted by law.

 

(f)            If the Rentsare not sufficient to meet the costs of taking control of and managing theMortgaged Property and collecting the Rents, any funds expended by Lender forsuch purposes shall become an additional part of the Indebtedness as providedin Section 12.

 

(g)           Any enteringupon 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 Instrumentshall not cure or waive any Event of Default or invalidate any other right orremedy of Lender under applicable law or provided for in this Instrument.

 

# **4.****            ****ASSIGNMENTOF LEASES; LEASES AFFECTING THE MORTGAGED PROPERTY**.

#  

(a)           As part of theconsideration for the Indebtedness, Borrower absolutely and unconditionallyassigns 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 tomodify the terms of any such Lease, or extend or terminate any such Lease.   It is the intention of Borrower to establisha present, absolute and irrevocable transfer and assignment to Lender of all ofBorrower’s right, title and interest in, to and under the Leases.  Borrower and Lender intend this assignment ofthe Leases to be immediately effective and to constitute an absolute presentassignment and not an assignment for additional security only.  For purposes of giving effect to thisabsolute assignment of the Leases, and for no other purpose, the Leases shallnot be deemed to be a part of the “Mortgaged Property,” as that term is definedin Section 1(s).  However, if thispresent,

 

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absoluteand unconditional assignment of the Leases is not enforceable by its termsunder the laws of the Property Jurisdiction, then the Leases shall be includedas a part of the Mortgaged Property and it is the intention of the Borrowerthat in this circumstance this Instrument create and perfect a lien on theLeases in favor of Lender, which lien shall be effective as of the date of thisInstrument.

 

(b)           Until theoccurrence of an Event of Default, Borrower shall have all rights, power andauthority granted to Borrower under any Lease (except as otherwise limited bythis 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 anyLease.  Upon the occurrence of an Eventof Default, the permission given to Borrower pursuant to the preceding sentenceto exercise all rights, power and authority under Leases shall automaticallyterminate.  Borrower shall comply withand observe Borrower’s obligations under all Leases, including Borrower’sobligations pertaining to the maintenance and disposition of tenant securitydeposits.

 

(c)           Borroweracknowledges and agrees that the exercise by Lender, either directly or by areceiver, of any of the rights conferred under this Section 4 shall not beconstrued to make Lender a mortgagee-in-possession of the Mortgaged Property solong as Lender has not itself entered into actual possession of the Land andthe Improvements.  The acceptance byLender of the assignment of the Leases pursuant to Section 4(a) shall not atany time or in any event obligate Lender to take any action under thisInstrument or to expend any money or to incur any expenses.  Lender shall not be liable in any way for anyinjury or damage to person or property sustained by any person or persons, firmor corporation in or about the Mortgaged Property.  Prior to Lender’s actual entry into andtaking possession of the Mortgaged Property, Lender shall not (i) be obligatedto perform any of the terms, covenants and conditions contained in any Lease(or otherwise have any obligation with respect to any Lease); (ii) be obligatedto appear in or defend any action or proceeding relating to the Lease or the MortgagedProperty; or (iii) be responsible for the operation, control, care, managementor repair of the Mortgaged Property or any portion of the MortgagedProperty.  The execution of thisInstrument by Borrower shall constitute conclusive evidence that allresponsibility for the operation, control, care, management and repair of theMortgaged Property is and shall be that of Borrower, prior to such actual entryand taking of possession.

 

(d)           From and afterthe occurrence of an Event of Default, and without the necessity of Lenderentering upon and taking and maintaining control of the Mortgaged Propertydirectly, by a receiver, or by any other manner or proceeding permitted by thelaws 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 orterminate any such Lease.

 

(e)           Borrower shall,promptly upon Lender’s request, deliver to Lender an executed copy of eachresidential Lease then in effect. All Leases for residential dwelling unitsshall be on forms approved by Lender, shall be for initial terms of at leastsix months and not more than two

 

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years,and shall not include options to purchase. If customary in the applicable market, residential Leases with terms ofless than six months may be permitted with Lender’s prior written consent.

 

(f)            Borrower shallnot lease any portion of the Mortgaged Property for non-residential use exceptwith the prior written consent of Lender and Lender’s prior written approval ofthe Lease agreement.  Borrower shall notmodify 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 theprior written consent of Lender. Borrower shall, without request by Lender, deliver an executed copy ofeach non-residential Lease to Lender promptly after such Lease is signed.   All non-residential Leases, includingrenewals or extensions of existing Leases, shall specifically provide that (1) suchLeases are subordinate to the lien of this Instrument (unless waived in writingby Lender); (2) the tenant shall attorn to Lender and any purchaser at aforeclosure sale, such attornment to be self-executing and effective uponacquisition of title to the Mortgaged Property by any purchaser at aforeclosure sale or by Lender in any manner; (3) the tenant agrees to executesuch further evidences of attornment as Lender or any purchaser at aforeclosure sale may from time to time request; (4) the Lease shall not beterminated by foreclosure or any other transfer of the Mortgaged Property; (5) aftera foreclosure sale of the Mortgaged Property, Lender or any other purchaser atsuch foreclosure sale may, at Lender’s or such purchaser’s option, accept orterminate such Lease; and (6) the tenant shall, upon receipt after theoccurrence of an Event of Default of a written request from Lender, pay allRents payable under the Lease to Lender.

 

(g)           Borrower shallnot receive or accept Rent under any Lease (whether residential ornon-residential) for more than two months in advance.

 

# **5.****            ****PAYMENTOF INDEBTEDNESS; PERFORMANCE UNDER LOAN DOCUMENTS; PREPAYMENT PREMIUM.**

#  

Borrower shall pay the Indebtedness when due in accordance with theterms of the Note and the other Loan Documents and shall perform, observe andcomply with all other provisions of the Note and the other Loan Documents.  Borrower shall pay a prepayment premium inconnection with certain prepayments of the Indebtedness, including a paymentmade 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 forperformance of the other obligations to be performed by it under thisInstrument is limited in the manner, and to the extent, provided in the Note.

 

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#  

# **7.****                                     ****DEPOSITSFOR TAXES, INSURANCE AND OTHER CHARGES.**

#  

(a)                                  Borrower shalldeposit 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 byLender), until the Indebtedness is paid in full, an additional amountsufficient to accumulate with Lender the entire sum required to pay, when due (1) anywater and sewer charges which, if not paid, may result in a lien on all or anypart of the Mortgaged Property, (2) the premiums for fire and other hazardinsurance, rent loss insurance and such other insurance as Lender may requireunder Section 19, (3) Taxes, and (4) amounts for other chargesand expenses which Lender at any time reasonably deems necessary to protect theMortgaged Property, to prevent the imposition of liens on the MortgagedProperty, or otherwise to protect Lender’s interests, all as reasonablyestimated from time to time by Lender. The amounts deposited under the preceding sentence are collectivelyreferred to in this Instrument as the “**Imposition Deposits**”.  The obligations of Borrower for which theImposition Deposits are required are collectively referred to in thisInstrument as **“Impositions”**.  The amount of the Imposition Deposits shallbe sufficient to enable Lender to pay each Imposition before the last date uponwhich such payment may be made without any penalty or interest charge beingadded.  Lender shall maintain recordsindicating how much of the monthly Imposition Deposits and how much of theaggregate Imposition Deposits held by Lender are held for the purpose of payingTaxes, insurance premiums and each other obligation of Borrower for whichImposition Deposits are required.  Anywaiver by Lender of the requirement that Borrower remit Imposition Deposits toLender may be revoked by Lender, in Lender’s discretion, at any time uponnotice to Borrower.

 

(b)                                 ImpositionDeposits shall be held in an institution (which may be Lender, if Lender issuch an institution) whose deposits or accounts are insured or guaranteed by afederal agency.  Lender shall not beobligated to open additional accounts or deposit Imposition Deposits inadditional institutions when the amount of the Imposition Deposits exceeds themaximum amount of the federal deposit insurance or guaranty.  Lender shall apply the Imposition Deposits topay Impositions so long as no Event of Default has occurred and iscontinuing.  Unless applicable lawrequires, Lender shall not be required to pay Borrower any interest, earningsor profits on the Imposition Deposits. Borrower hereby pledges and grants to Lender a security interest in theImposition Deposits as additional security for all of Borrower’s obligationsunder this Instrument and the other Loan Documents.  Any amounts deposited with Lender under this Section 7shall 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 Lenderreceives a bill or invoice for an Imposition, Lender shall pay the Impositionfrom the Imposition Deposits held by Lender. Lender shall have no obligation to pay any Imposition to the extent itexceeds Imposition Deposits then held by Lender.  Lender may pay an Imposition according to anybill, statement or estimate from the appropriate public office

 

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orinsurance company without inquiring into the accuracy of the bill, statement orestimate or into the validity of the Imposition.

 

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

 

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

 

# **8.****                                     ****COLLATERALAGREEMENTS.**

#  

Borrower shall deposit with Lender such amounts as may be required byany Collateral Agreement and shall perform all other obligations of Borrowerunder each Collateral Agreement.

 

# **9.****                                     ****APPLICATIONOF PAYMENTS.**

#  

If at any time Lender receives, from Borrower or otherwise, any amountapplicable to the Indebtedness which is less than all amounts due and payableat such time, then Lender may apply that payment to amounts then due andpayable in any manner and in any order determined by Lender, in Lender’sdiscretion.  Neither Lender’s acceptanceof an amount which is less than all amounts then due and payable nor Lender’sapplication of such payment in the manner authorized shall constitute or bedeemed to constitute either a waiver of the unpaid amounts or an accord andsatisfaction.  Notwithstanding theapplication of any such amount to the Indebtedness,  Borrower’s obligations under this Instrumentand the Note shall remain unchanged.

 

# **10.****                              ****COMPLIANCEWITH LAWS.**

#  

Borrower shall comply with all laws, ordinances, regulations andrequirements of any Governmental Authority and all recorded lawful covenantsand agreements relating to or affecting the Mortgaged Property, including alllaws, ordinances, regulations, requirements and covenants pertaining to healthand safety, construction of improvements on the Mortgaged

 

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

 

# **11.****                              ****USE OFPROPERTY.**

#  

Unless required by applicable law, Borrower shall not (a) exceptfor any change in use approved by Lender, allow changes in the use for whichall or any part of the Mortgaged Property is being used at the time thisInstrument was executed, (b) convert any individual dwelling units orcommon areas to commercial use, (c) initiate or acquiesce in a change inthe zoning classification of the Mortgaged Property, or (d) establish anycondominium or cooperative regime with respect to the Mortgaged Property.

 

# **12.****                              ****PROTECTIONOF LENDER’S SECURITY.**

#  

(a)                                  If Borrowerfails to perform any of its obligations under this Instrument or any other LoanDocument, or if any action or proceeding (including a Bankruptcy Event) iscommenced which purports to affect the Mortgaged Property, Lender’s security orLender’s rights under this Instrument, including eminent domain, insolvency,code enforcement, civil or criminal forfeiture, enforcement of HazardousMaterials Laws, fraudulent conveyance or reorganizations or proceedingsinvolving a bankrupt or decedent, then Lender at Lender’s option may make suchappearances, disburse such sums and take such actions as Lender reasonablydeems necessary to perform such obligations of Borrower and to protect Lender’sinterest, including (1) payment of fees and out-of-pocket expenses ofattorneys, accountants, inspectors and consultants, (2) entry upon theMortgaged Property to make repairs or secure the Mortgaged Property, (3) procurementof the insurance required by Section 19, and (4) payment of amountswhich Borrower has failed to pay under Sections 15 and 17.

 

(b)                                 Any amountsdisbursed by Lender under this Section 12, or under any other provision ofthis Instrument that treats such disbursement as being made under this Section 12,shall be added to, and become part of, the principal component of theIndebtedness, shall be immediately

 

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

 

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

 

# **13.****                              ****INSPECTION.**

#  

Lender, its agents, representatives, and designees may make or cause tobe made entries upon and inspections of the Mortgaged Property (includingenvironmental inspections and tests) during normal business hours, or at anyother reasonable time.

 

# **14.****                              ****BOOKSAND RECORDS; FINANCIAL REPORTING.**

#  

(a)                                  Borrower shallkeep and maintain at all times at the Mortgaged Property or the managementagent’s offices, and upon Lender’s request shall make available at theMortgaged Property, complete and accurate books of account and records(including copies of supporting bills and invoices) adequate to reflectcorrectly the operation of the Mortgaged Property, and copies of all writtencontracts, Leases, and other instruments which affect the MortgagedProperty.  The books, records, contracts,Leases and other instruments shall be subject to examination and inspection atany reasonable time by Lender.

 

(b)                                 Borrower shallfurnish to Lender:

 

(1)                                  (i) exceptas provided in clause (ii) below, within 45 days after the end of eachfiscal quarter of Borrower, a statement of income and expenses for Borrower’soperation of the Mortgaged Property on a year-to-date basis as of the end ofeach fiscal quarter, (ii) within 120 days after the end of each fiscalyear of Borrower, (A) a statement of income and expenses for Borrower’soperation of the Mortgaged Property for such fiscal year, (B) a statementof changes in financial position of Borrower relating to the Mortgaged Propertyfor such fiscal year, and (C) when requested by Lender, a balance sheetshowing all assets and liabilities of Borrower relating to the MortgagedProperty as of the end of such fiscal year; and (iii) any of the foregoingat any other time upon Lender’s request;

 

(2)                                  (i) exceptas provided in clause (ii) below, within 45 days after the end of eachfiscal quarter of Borrower, and (ii) within 120 days after the end of eachfiscal year of Borrower, and at any other time upon Lender’s request, a rentschedule for the Mortgaged Property showing the name of each tenant, and

 

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

 

(3)                                  within 120 daysafter the end of each fiscal year of Borrower, and at any other time uponLender’s request, an accounting of all security deposits held pursuant to allLeases, including the name of the institution (if any) and the names andidentification numbers of the accounts (if any) in which such security depositsare held and the name of the person to contact at such financial institution,along with any authority or release necessary for Lender to access informationregarding such accounts;

 

(4)                                  within 120 daysafter the end of each fiscal year of Borrower, and at any other time uponLender’s request, a statement that identifies all owners of any interest inBorrower and the interest held by each, if Borrower is a corporation, allofficers and directors of Borrower, and if Borrower is a limited liabilitycompany, all managers who are not members;

 

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

 

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

 

(7)                                  if required byLender, within 30 days of the end of each calendar month, a monthly statementof income and expenses for such calendar month on a year-to-date basis forBorrower’s operation of the Mortgaged Property.

 

(c)                                  Each of thestatements, schedules and reports required by Section 14(b) shall becertified to be complete and accurate by an individual having authority to bindBorrower, and shall be in such form and contain such detail as Lender mayreasonably require.  Lender also mayrequire that any statements, schedules or reports be audited at Borrower’sexpense by independent certified public accountants acceptable to Lender.

 

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

 

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(e)                                  If an Event ofDefault has occurred and is continuing, Borrower shall deliver to Lender uponwritten demand all books and records relating to the Mortgaged Property or itsoperation.

 

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

 

# **15.****                              ****TAXES;OPERATING EXPENSES.**

#  

(a)                                  Subject to theprovisions of Section 15(c) and Section 15(d), Borrower shallpay, or cause to be paid, all Taxes when due and before the addition of anyinterest, fine, penalty or cost for nonpayment.

 

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

 

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

 

(d)                                 Borrower, atits own expense, may contest by appropriate legal proceedings, conducteddiligently and in good faith, the amount or validity of any Imposition otherthan insurance premiums, if (1) Borrower notifies Lender of thecommencement or expected commencement of such proceedings, (2) theMortgaged Property is not in danger of being sold or forfeited, (3) Borrowerdeposits with Lender reserves sufficient to pay the contested Imposition, ifrequested by Lender, and (4) Borrower furnishes whatever additionalsecurity is required in the proceedings or is reasonably requested by Lender,which may include the delivery to Lender of the reserves established byBorrower to pay the contested Imposition.

 

(e)                                  Borrower shallpromptly deliver to Lender a copy of all notices of, and invoices for,Impositions, and if Borrower pays any Imposition directly, Borrower shallpromptly 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 securedebt, security interest or other lien or encumbrance (a “**Lien**”)on the Mortgaged Property (other than the lien of this Instrument) or oncertain ownership interests in Borrower, whether voluntary, involuntary or byoperation of law, and whether or not such Lien has priority over the lien ofthis Instrument, is a “**Transfer**” whichconstitutes an Event of Default.

 

# **17.****                              ****PRESERVATION,MANAGEMENT AND MAINTENANCE OF MORTGAGED PROPERTY.**

#  

(a)  Borrower (1) shall not commit waste or permit impairmentor deterioration of the Mortgaged Property, (2) shall not abandon theMortgaged Property, (3) shall restore or repair promptly, in a good andworkmanlike manner, any damaged part of the Mortgaged Property to theequivalent of its original condition, or such other condition as Lender mayapprove in writing, whether or not insurance proceeds or condemnation awardsare available to cover any costs of such restoration or repair, (4) shallkeep the Mortgaged Property in good repair, including the replacement ofPersonalty and Fixtures with items of equal or better function and quality, (5) shallprovide for professional management of the Mortgaged Property by a residentialrental property manager satisfactory to Lender under a contract approved byLender in writing, and (6) shall give notice to Lender of and, unlessotherwise directed in writing by Lender, shall appear in and defend any actionor proceeding purporting to affect the Mortgaged Property, Lender’s security orLender’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 MortgagedProperty except in connection with the replacement of tangible Personalty.

 

(b)  If, in connection with the making of the loan evidenced bythe Note or at any later date, Lender waives in writing the requirement of Section 17(a)(5) abovethat Borrower enter into a written contract for management of the MortgagedProperty and if, after the date of this Instrument, Borrower intends to changethe management of the Mortgaged Property, Lender shall have the right toapprove such new property manager and the written contract for the managementof the Mortgaged Property and require that Borrower and such new propertymanager enter into an Assignment of Management Agreement on a form approved byLender.  If required by Lender (whetherbefore or after an Event of Default), Borrower will cause any Affiliate ofBorrower to whom fees are payable for the management of the Mortgaged Propertyto enter into an agreement with Lender, in a form approved by Lender, providingfor subordination of those fees and such other provisions as Lender mayrequire.  “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 commoncontrol with, or which controls Borrower (the term “control” for these purposesshall mean the ability, whether by the ownership of shares or other equityinterests, by contract or otherwise, to elect a majority of the directors of acorporation, to make management decisions on behalf of, or independently toselect the managing partner of, a partnership, or otherwise to have the powerindependently to remove and then select a majority of those individualsexercising managerial authority over an entity, and control shall beconclusively presumed in the case of the ownership of 50% or more of the equityinterests).

 

# **18.****                              ****ENVIRONMENTALHAZARDS.**

#  

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

 

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

 

(2)                                  thetransportation of any Hazardous Materials to, from, or across the MortgagedProperty;

 

(3)                                  any occurrenceor condition on the Mortgaged Property or any other property of Borrower thatis adjacent to the Mortgaged Property, which occurrence or condition is or maybe in violation of Hazardous Materials Laws; or

 

(4)                                  any violationof or noncompliance with the terms of any Environmental Permit with respect tothe Mortgaged Property or any property of Borrower that is adjacent to theMortgaged Property.

 

The matters described in clauses (1) through (4) above arereferred to collectively in this Section 18 as “**ProhibitedActivities or Conditions**”.

 

(b)                                 ProhibitedActivities and Conditions shall not include the safe and lawful use and storageof quantities of (1) pre-packaged supplies, cleaning materials andpetroleum products customarily used in the operation and maintenance ofcomparable multifamily properties, (2) cleaning materials, personalgrooming items and other items sold in pre-packaged containers for

 

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consumeruse and used by tenants and occupants of residential dwelling units in theMortgaged Property; and (3) petroleum products used in the operation and maintenanceof motor vehicles from time to time located on the Mortgaged Property’s parkingareas, so long as all of the foregoing are used, stored, handled, transportedand disposed of in compliance with Hazardous Materials Laws.

 

(c)                                  Borrower shalltake all commercially reasonable actions (including the inclusion ofappropriate provisions in any Leases executed after the date of thisInstrument) to prevent its employees, agents, and contractors, and all tenantsand other occupants from causing or permitting any Prohibited Activities orConditions.  Borrower shall not lease orallow the sublease or use of all or any portion of the Mortgaged Property toany tenant or subtenant for nonresidential use by any user that, in theordinary course of its business, would cause or permit any Prohibited Activityor Condition.

 

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

 

(e)                                  Borrowerrepresents and warrants to Lender that, except as previously disclosed byBorrower to Lender in writing:

 

(1)                                  Borrower hasnot at any time engaged in, caused or permitted any Prohibited Activities orConditions;

 

(2)                                  to the best ofBorrower’s knowledge after reasonable and diligent inquiry, no ProhibitedActivities or Conditions exist or have existed;

 

(3)                                  except to theextent previously disclosed by Borrower to Lender in writing, the MortgagedProperty does not now contain any underground storage tanks, and, to the bestof Borrower’s knowledge after reasonable and diligent inquiry, the MortgagedProperty has not contained any underground storage tanks in the past.  If there is an underground storage tanklocated on the Property which has been previously disclosed by Borrower toLender in writing, that tank complies with all requirements of HazardousMaterials Laws;

 

(4)                                  Borrower hascomplied with all Hazardous Materials Laws, including all requirements fornotification regarding releases of Hazardous Materials.

 

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Without limiting the generality of the foregoing, Borrower has obtainedall Environmental Permits required for the operation of the Mortgaged Propertyin accordance with Hazardous Materials Laws now in effect and all suchEnvironmental Permits are in full force and effect;

 

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

 

(6)                                  there are noactions, suits, claims or proceedings pending or, to the best of Borrower’sknowledge after reasonable and diligent inquiry, threatened that involve theMortgaged Property and allege, arise out of, or relate to any ProhibitedActivity or Condition; and

 

(7)                                  Borrower hasnot received any complaint, order, notice of violation or other communicationfrom any Governmental Authority with regard to air emissions, water discharges,noise emissions or Hazardous Materials, or any other environmental, health orsafety matters affecting the Mortgaged Property or any other property ofBorrower that is adjacent to the Mortgaged Property.

 

The representations and warranties in this Section 18 shall be continuingrepresentations and warranties that shall be deemed to be made by Borrowerthroughout the term of the loan evidenced by the Note, until the Indebtednesshas been paid in full.

 

(f)                                    Borrower shallpromptly notify Lender in writing upon the occurrence of any of the followingevents:

 

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

 

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

 

(3)                                  anyrepresentation or warranty in this Section 18 becomes untrue after thedate of this Agreement.

 

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

 

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(g)                                 Borrower shallpay promptly the costs of any environmental inspections, tests or audits (“**Environmental Inspections**”) required by Lender in connectionwith any foreclosure or deed in lieu of foreclosure, or as a condition ofLender’s consent to any Transfer under Section 21, or required by Lenderfollowing a reasonable determination by Lender that Prohibited Activities orConditions may exist.  Any such costsincurred by Lender (including the fees and out-of-pocket costs of attorneys andtechnical consultants whether incurred in connection with any judicial oradministrative process or otherwise) which Borrower fails to pay promptly shallbecome an additional part of the Indebtedness as provided in Section 12.  The results of all Environmental Inspectionsmade by Lender shall at all times remain the property of Lender and Lendershall have no obligation to disclose or otherwise make available to Borrower orany other party such results or any other information obtained by Lender inconnection with its Environmental Inspections. Lender hereby reserves the right, and Borrower hereby expresslyauthorizes Lender, to make available to any party, including any prospectivebidder at a foreclosure sale of the Mortgaged Property, the results of anyEnvironmental Inspections made by Lender with respect to the MortgagedProperty.  Borrower consents to Lendernotifying any party (either as part of a notice of sale or otherwise) of theresults of any of Lender’s Environmental Inspections.  Borrower acknowledges that Lender cannotcontrol or otherwise assure the truthfulness or accuracy of the results of anyof its Environmental Inspections and that the release of such results toprospective bidders at a foreclosure sale of the Mortgaged Property may have amaterial and adverse effect upon the amount which a party may bid at suchsale.  Borrower agrees that Lender shallhave no liability whatsoever as a result of delivering the results of any ofits Environmental Inspections to any third party, and Borrower hereby releasesand forever discharges Lender from any and all claims, damages, or causes ofaction, arising out of, connected with or incidental to the results of, thedelivery of any of Lender’s Environmental Inspections.

 

(h)                                 If anyinvestigation, site monitoring, containment, clean-up, restoration or otherremedial work (“**Remedial Work**”) is necessary tocomply with any Hazardous Materials Law or order of any Governmental Authoritythat has or acquires jurisdiction over the Mortgaged Property or the use,operation or improvement of the Mortgaged Property under any HazardousMaterials Law, Borrower shall, by the earlier of (1) the applicabledeadline required by Hazardous Materials Law or (2) 30 days after noticefrom Lender demanding such action, begin performing the Remedial Work, andthereafter diligently prosecute it to completion, and shall in any eventcomplete the work by the time required by applicable Hazardous MaterialsLaw.  If Borrower fails to begin on atimely basis or diligently prosecute any required Remedial Work, Lender may, atits option, cause the Remedial Work to be completed, in which case Borrowershall reimburse Lender on demand for the cost of doing so.  Any reimbursement due from Borrower to Lendershall become part of the Indebtedness as provided in Section 12.

 

(i)                                     Borrower shallcooperate with any inquiry by any Governmental Authority and shall comply withany governmental or judicial order which arises from any alleged ProhibitedActivity or Condition.

 

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(j)                                     Borrower shallindemnify, hold harmless and defend (i) Lender, (ii) any prior owneror holder of the Note, (iii) the Loan Servicer, (iv) any prior LoanServicer, (v) the officers, directors, shareholders, partners, employeesand trustees of any of the foregoing, and (vi) the heirs, legalrepresentatives, successors and assigns of each of the foregoing (collectively,the “**Indemnitees**”) from and against allproceedings, claims, damages, penalties and costs (whether initiated or soughtby Governmental Authorities or private parties), including fees andout-of-pocket expenses of attorneys and expert witnesses, investigatory fees,and remediation costs, whether incurred in connection with any judicial oradministrative process or otherwise, arising directly or indirectly from any ofthe following:

 

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

 

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

 

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

 

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

 

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

 

(k)                                  Counselselected by Borrower to defend Indemnitees shall be subject to the approval ofthose Indemnitees.  However, anyIndemnitee may elect to defend any claim or legal or administrative proceedingat the Borrower’s expense.

 

(l)                                     Borrower shallnot, without the prior written consent of those Indemnitees who are named asparties to a claim or legal or administrative proceeding (a “**Claim**”), settle or compromise the Claim if the settlement (1) resultsin the entry of any judgment that does not include as an unconditional term thedelivery by the claimant or plaintiff to Lender of a written release of thoseIndemnitees, satisfactory in form and substance to Lender; or (2) maymaterially and adversely affect Lender, as determined by Lender in itsdiscretion.

 

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

 

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

 

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

 

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incident to any matters against which Indemnitees are entitled to beindemnified under this Section 18;

 

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

 

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

 

(o)                                 In anycircumstances in which the indemnity under this Section 18 applies, Lendermay employ its own legal counsel and consultants to prosecute, defend or negotiateany claim or legal or administrative proceeding and Lender, with the priorwritten consent of Borrower (which shall not be unreasonably withheld, delayedor conditioned), may settle or compromise any action or legal or administrativeproceeding.  Borrower shall reimburseLender upon demand for all costs and expenses incurred by Lender, including allcosts of settlements entered into in good faith, and the fees and out-of-pocketexpenses of such attorneys and consultants.

 

(p)                                 The provisionsof this Section 18 shall be in addition to any and all other obligationsand liabilities that Borrower may have under applicable law or under other LoanDocuments, and each Indemnitee shall be entitled to indemnification under this Section 18without regard to whether Lender or that Indemnitee has exercised any rightsagainst the Mortgaged Property or any other security, pursued any rightsagainst any guarantor, or pursued any other rights available under the LoanDocuments or applicable law. If Borrower consists of more than one person orentity, the obligation of those persons or entities to indemnify theIndemnitees under this Section 18 shall be joint and several. Theobligation of Borrower to indemnify the Indemnitees under this Section 18shall survive any repayment or discharge of the Indebtedness, any foreclosureproceeding, any foreclosure sale, any delivery of any deed in lieu offoreclosure, and any release of record of the lien of this Instrument.

 

# **19.****                              ****PROPERTYAND LIABILITY INSURANCE.**

#  

(a)                                  Borrower shallkeep the Improvements insured at all times against such hazards as Lender mayfrom time to time require, which insurance shall include but not be limited tocoverage against loss by fire and allied perils, general boiler and machinerycoverage, and business income coverage. Lender’s insurance requirements may change from time to time throughoutthe term of the Indebtedness.  If Lenderso requires, such insurance shall also include sinkhole insurance, mine

 

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subsidenceinsurance, earthquake insurance, and, if the Mortgaged Property does notconform to applicable zoning or land use laws, building ordinance or lawcoverage.  If any of the Improvements islocated in an area identified by the Federal Emergency Management Agency (orany successor to that agency) as an area having special flood hazards, and ifflood insurance is available in that area, Borrower shall insure suchImprovements against loss by flood.

 

(b)                                 All premiums oninsurance policies required under Section 19(a) shall be paid in themanner provided in Section 7, unless Lender has designated in writinganother method of payment.  All suchpolicies shall also be in a form approved by Lender.  All policies of property damage insurance shallinclude a non-contributing, non-reporting mortgage clause in favor of, and in aform approved by, Lender.  Lender shallhave the right to hold the original policies or duplicate original policies ofall insurance required by Section 19(a). Borrower shall promptly deliver to Lender a copy of all renewal andother notices received by Borrower with respect to the policies and allreceipts for paid premiums.  At least 30days prior to the expiration date of a policy, Borrower shall deliver to Lenderthe original (or a duplicate original) of a renewal policy in form satisfactoryto Lender.

 

(c)                                  Borrower shallmaintain at all times commercial general liability insurance, workers’compensation insurance and such other liability, errors and omissions andfidelity insurance coverages as Lender may from time to time require.

 

(d)                                 All insurancepolicies and renewals of insurance policies required by this Section 19shall be in such amounts and for such periods as Lender may from time to timerequire, and shall be issued by insurance companies satisfactory to Lender.

 

(e)                                  Borrower shallcomply with all insurance requirements and shall not permit any condition toexist on the Mortgaged Property that would invalidate any part of any insurancecoverage that this Instrument requires Borrower to maintain.

 

(f)                                    In the event ofloss, Borrower shall give immediate written notice to the insurance carrier andto Lender.  Borrower hereby authorizesand appoints Lender as attorney-in-fact for Borrower to make proof of loss, toadjust and compromise any claims under policies of property damage insurance,to appear in and prosecute any action arising from such property damageinsurance policies, to collect and receive the proceeds of property damageinsurance, and to deduct from such proceeds Lender’s expenses incurred in thecollection of such proceeds.  This powerof attorney is coupled with an interest and therefore is irrevocable.  However, nothing contained in this Section 19shall require Lender to incur any expense or take any action.  Lender may, at Lender’s option, (1) holdthe balance of such proceeds to be used to reimburse Borrower for the cost ofrestoring and repairing the Mortgaged Property to the equivalent of itsoriginal condition or to a condition approved by Lender (the “**Restoration**”), or (2) apply the balance of suchproceeds to the payment of the Indebtedness, whether or not then due. To theextent Lender determines to apply insurance proceeds to Restoration, Lendershall do so in accordance with Lender’s then-current policies relating to therestoration of casualty damage on similar multifamily properties.

 

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(g)                                 Lender shallnot exercise its option to apply insurance proceeds to the payment of theIndebtedness if all of the following conditions are met:  (1) no Event of Default (or any eventwhich, with the giving of notice or the passage of time, or both, wouldconstitute an Event of Default) has occurred and is continuing; (2) Lenderdetermines, in its discretion, that there will be sufficient funds to completethe Restoration; (3) Lender determines, in its discretion, that the netoperating income generated by the Mortgaged Property after completion of theRestoration will be sufficient to support a debt service coverage ratio notless than the greater of (A) the debt service coverage ratio as of thedate of this Instrument (based on the final underwriting of the MortgagedProperty) or (B) the debt service coverage ratio immediately prior to theloss (in each case, Lender’s determination shall include all operating costsand other expenses, Imposition Deposits, deposits to reserves and loanrepayment obligations relating to the Mortgaged Property); (4) Lenderdetermines, in its discretion, that the Restoration will be completed beforethe earlier of (A) one year before the maturity date of the Note or (B) oneyear after the date of the loss or casualty; and (5) upon Lender’srequest, Borrower provides Lender evidence of the availability during and afterthe Restoration of the insurance required to be maintained by Borrower pursuantto this Section 19.

 

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

 

# **20.****                              ****CONDEMNATION.**

#  

(a)                                  Borrower shallpromptly notify Lender of any action or proceeding relating to any condemnationor other taking, or conveyance in lieu thereof, of all or any part of theMortgaged Property, whether direct or indirect (a “**Condemnation**”).  Borrower shall appear in and prosecute ordefend any action or proceeding relating to any Condemnation unless otherwisedirected by Lender in writing.  Borrowerauthorizes and appoints Lender as attorney-in-fact for Borrower to commence,appear in and prosecute, in Lender’s or Borrower’s name, any action orproceeding relating to any Condemnation and to settle or compromise any claimin connection with any Condemnation. This power of attorney is coupled with an interest and therefore isirrevocable.  However, nothing containedin this Section 20 shall require Lender to incur any expense or take anyaction.  Borrower hereby transfers andassigns to Lender all right, title and interest of Borrower in and to any awardor payment with respect to (i) any Condemnation, or any conveyance in lieuof Condemnation, and (ii) any damage to the Mortgaged Property caused bygovernmental action that does not result in a Condemnation.

 

(b)                                 Lender mayapply such awards or proceeds, after the deduction of Lender’s expensesincurred in the collection of such amounts, at Lender’s option, to the restorationor repair of the Mortgaged Property or to the payment of the Indebtedness, withthe balance, if any,

 

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toBorrower.  Unless Lender otherwise agreesin writing, any application of any awards or proceeds to the Indebtedness shallnot extend or postpone the due date of any monthly installments referred to inthe Note, Section 7 of this Instrument or any Collateral Agreement, orchange the amount of such installments. Borrower agrees to execute such further evidence of assignment of anyawards or proceeds as Lender may require.

 

# **21.****                              ****TRANSFERSOF THE MORTGAGED PROPERTY OR INTERESTS IN BORROWER.**

#  

(a)                                  The occurrenceof any of the following events shall constitute an Event of Default under thisInstrument:

 

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

 

(2)                                  a Transfer of aControlling Interest in Borrower;

 

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

 

(4)                                  a Transfer ofall or any part of a Key Principal’s ownership interests in Borrower, or in anyother entity which owns, directly or indirectly through one or moreintermediate entities, an ownership interest in Borrower (other than a Transferof an aggregate beneficial ownership interest in the Borrower of 49% or less ofsuch Key Principal’s original ownership interest in the Borrower and which doesnot otherwise result in a Transfer of the Key Principal’s Controlling Interestin such intermediate entities or in the Borrower);

 

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

 

(6)                                  if Borrower orKey Principal is a trust, the termination or revocation of such trust; unlessthe trust is terminated as a result of the death of an individual trustor, inwhich event Lender must be notified and such Borrower or Key Principal must bereplaced with an individual or entity acceptable to Lender, in accordance withthe 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 KeyPrincipal is a natural person, the death of such individual; unless the Lenderis notified and such individual is replaced with an individual or entityacceptable 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 inspectionshall be required and a 1% transfer fee will not be charged);

 

(8)                                  the merger,dissolution, liquidation, or consolidation of (i) Borrower, (ii) anyKey Principal that is a legal entity, or (iii) any legal entity holding,directly or indirectly, a Controlling Interest in the Borrower or in any KeyPrincipal that is an entity;

 

(9)          a conversion of Borrowerfrom one type of legal entity into another type of legal entity (including theconversion of a general partnership into a limited partnership and theconversion of a limited partnership into a limited liability company), whetheror not there is a Transfer; if such conversion results in a change in anyassets, liabilities, legal rights or obligations of Borrower (or of KeyPrincipal, guarantor, or any general partner of Borrower, as applicable), byoperation of law or otherwise; and

 

(10)                            a Transfer ofthe economic benefits or right to cash flows attributable to the ownershipinterests in Borrower and/or, if Key Principal is an entity, Key Principal,separate from the Transfer of the underlying ownership interests, unless theTransfer of the underlying ownership interests would otherwise not beprohibited by this Agreement

 

Lender shall not be required to demonstrate any actual impairment ofits security or any increased risk of default in order to exercise any of itsremedies with respect to an Event of Default under this Section 21.

 

(b)                                 The occurrenceof any of the following events shall not constitute an Event of Default underthis Instrument, notwithstanding any provision of Section 21(a) tothe contrary:

 

(1)                                  a Transfer towhich Lender has consented;

 

(2)                                  except asprovided in Section 21(a)(6) and (7), a Transfer that occurs bydevise, descent, pursuant to the provisions of a trust, or by operation of lawupon the death of a natural person;

 

(3)                                  the grant of aleasehold interest in an individual dwelling unit for a term of two years orless not containing an option to purchase;

 

(4)                                  a Transfer ofobsolete or worn out Personalty or Fixtures that are contemporaneously replacedby items of equal or better function and quality, which are free of liens,encumbrances and security interests other than those created by the LoanDocuments or consented to by Lender;

 

(5)                                  the grant of aneasement, servitude, or restrictive covenant if, before the grant, Lenderdetermines that the easement, servitude, or restrictive covenant will not

 

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

 

(6)                                  the creation ofa tax lien or a mechanic’s, materialman’s, or judgment lien against theMortgaged Property which is bonded off, released of record, or otherwiseremedied to Lender’s satisfaction within 45 days after Borrower has actual orconstructive notice of the existence of such lien; and

 

(7)                                  the conveyanceof the Mortgaged Property at a judicial or non-judicial foreclosure sale underthis Instrument.

 

(c)                                  Lender shallconsent to a Transfer that would otherwise violate this Section 21 if,prior to the Transfer, Borrower has satisfied each of the followingrequirements:

 

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

 

(2)                                  the absence ofany Event of Default;

 

(3)                                  the transfereemeets all of the eligibility, credit, management, and other standards(including any standards with respect to previous relationships between Lenderand the transferee and the organization of the transferee) customarily appliedby Lender at the time of the proposed Transfer to the approval of borrowers inconnection with the origination or purchase of similar mortgage financestructures on similar multifamily properties, unless partially waived by Lenderin exchange for such additional conditions as Lender may require;

 

(4)                                  the MortgagedProperty, at the time of the proposed Transfer, meets all standards as to itsphysical condition that are customarily applied by Lender at the time of theproposed Transfer to the approval of properties in connection with theorigination or purchase of similar mortgage finance structures on similarmultifamily properties, unless partially waived by Lender in exchange for suchadditional conditions as Lender may require;

 

(5)                                  if transferoror any other person has obligations under any Loan Document, the execution bythe transferee or one or more individuals or entities acceptable to Lender ofan assumption agreement (including, if applicable, an Acknowledgement andAgreement of Key Principal to Personal Liability for Exceptions to Non-RecourseLiability) that is acceptable to Lender and that, among other things, requiresthe transferee to perform all obligations of transferor or such person setforth in such Loan Document, and may require

 

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

 

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

 

(7)                                  Lender’sreceipt of all of the following:

 

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

 

(B)        Borrower’s reimbursement ofall 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 hasagreed to Lender’s conditions to approve such Transfer, which may include, butare not limited to (A) providing additional collateral, guaranties, orother credit support to mitigate any risks concerning the proposed transfereeor the performance or condition of the Mortgaged Property, and (B) amendingthe Loan Documents to (i) delete any specially negotiated terms orprovisions previously granted for the exclusive benefit of transferor and (ii) restoreto original provisions of the standard Fannie Mae form multifamily loandocuments, to the extent such provisions were previously modified.

 

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

 

(1)**                                 ****“InitialOwners”** means, with respect to Borrower or any other entity, the persons orentities who on the date of the Note, directly or indirectly, own in theaggregate 100% of the ownership interests in Borrower or that entity.

 

(2)                                  A Transfer of a**“Controlling Interest”** shall mean:

 

(A)                              with respect toany entity, the following:

 

(i)                                     if such entityis a general partnership or a joint venture, a Transfer of any generalpartnership interest or joint venture interest which would cause the InitialOwners to own less than 51% of all general partnership or joint ventureinterests in such entity;

 

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(ii)                                  if such entityis a limited partnership, (A) a Transfer of any general partnershipinterest, or (B) a Transfer of any partnership interests which would causethe Initial Owners to own less than 51% of all limited partnership interests insuch entity;

 

(iii)                               if such entityis a limited liability company or a limited liability partnership, (A) aTransfer of any membership or other ownership interest which would cause theInitial Owners to own less than 51% of all membership or other ownershipinterests in such entity, (B) a Transfer of any membership, or otherinterest of a manager, in such entity that results in a change of manager, or (C) achange of the non-member manager;

 

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

 

(v)                                 if such entityis a corporation (other than a Publicly-Held Corporation) with more than oneclass of voting stock, a Transfer of any voting stock which would cause theInitial Owners to own less than a sufficient number of shares of voting stockhaving the power to elect the majority of directors of such corporation; and

 

(vi)                              if such entityis a trust (other than a Publicly-Held Trust), the removal, appointment orsubstitution of a trustee of such trust other than (A) in the case of aland trust, or (B) if the trustee of such trust after such removal,appointment, or substitution is a trustee identified in the trust agreementapproved by Lender; and/or

 

(B)                                any agreement(including provisions contained in the organizational and/or governingdocuments of Borrower or Key Principal) or Transfer not specified in clause(A), the effect of which, either immediately or after the passage of time oroccurrence of a specified event or condition, including the failure of aspecified event or condition to occur or be satisfied, would (i) cause achange in or replacement of the Person that controls the management andoperations of the Borrower or Key Principal or (ii) limit or otherwisemodify the extent of such Person’s control over the management and operationsof Borrower or Key Principal.

 

(3)**                                 ****“Publicly-HeldCorporation”** shall mean a corporation the outstanding votingstock of which is registered under Section 12(b) or 12(g) of theSecurities and Exchange Act of 1934, as amended.

 

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(4)           **“Publicly-Held Trust”**shall mean a real estate investment trust theoutstanding voting shares or beneficial interests of which are registered underSection 12 (b) or 12 (g) of the Securities Exchange Act of 1934,as amended.

 

(e)           Lender shall beprovided with written notice of all Transfers under this Section 21,whether or not such Transfers are permitted under Section 21(b) orapproved by Lender under Section 21(c), no later than 10 days prior to thedate of the Transfer.”

 

# **22.          EVENTS OF DEFAULT.**

#  

The occurrence of any one or more of the following shall constitute anEvent of Default under this Instrument:

 

(a)           any failure byBorrower to pay or deposit when due any amount required by the Note, thisInstrument or any other Loan Document;

 

(b)           any failure byBorrower to maintain the insurance coverage required by Section 19;

 

(c)           any failure byBorrower to comply with the provisions of Section 33;

 

(d)           fraud or materialmisrepresentation or material omission by Borrower, or any of its officers,directors, trustees, general partners or managers, Key Principal or anyguarantor in connection with (A) the application for or creation of theIndebtedness, (B) any financial statement, rent roll, or other report orinformation provided to Lender during the term of the Indebtedness, or (C) anyrequest for Lender’s consent to any proposed action, including a request fordisbursement of funds under any Collateral Agreement;

 

(e)           any (i) Eventof Default under Section 21 and/or (ii) occurrence of a BankruptcyEvent;

 

(f)            the commencement ofa forfeiture action or proceeding, whether civil or criminal, which, in Lender’sreasonable judgment, could result in a forfeiture of the Mortgaged Property orotherwise materially impair the lien created by this Instrument or Lender’sinterest in the Mortgaged Property;

 

(g)           any failure byBorrower to perform any of its obligations under this Instrument (other thanthose 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 Lenderto Borrower, but no such notice or grace period shall apply in the case of anysuch failure which could, in Lender’s judgment, absent immediate exercise byLender of a right or remedy under this Instrument, result in harm to Lender,

 

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impairmentof the Note or this Instrument or any other security given under any other LoanDocument;

 

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

 

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

 

# **23.          REMEDIES CUMULATIVE.**

#  

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

 

# **24.          FORBEARANCE.**

#  

(a)           Lender may (butshall not be obligated to) agree with Borrower, from time to time, and withoutgiving notice to, or obtaining the consent of, or having any effect upon theobligations of, any guarantor or other third party obligor, to take any of thefollowing actions:  extend the time forpayment of all or any part of the Indebtedness; reduce the payments due underthis Instrument, the Note, or any other Loan Document; release anyone liablefor the payment of any amounts under this Instrument, the Note, or any otherLoan Document; accept a renewal of the Note; modify the terms and time ofpayment 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 theamount of the monthly installments payable under the Note; and otherwise modifythis Instrument, the Note, or any other Loan Document.

 

(b)           Any forbearance byLender in exercising any right or remedy under the Note, this Instrument, orany other Loan Document or otherwise afforded by applicable law, shall not be awaiver of or preclude the exercise of any other right or remedy.  The acceptance by Lender of payment of all orany part of the Indebtedness after the due date of such payment, or in anamount which is less than the required payment, shall not be a waiver of Lender’sright to require prompt payment when due of all other payments on account ofthe Indebtedness or to exercise any remedies for any failure to make promptpayment. Enforcement by Lender of any security for the Indebtedness shall notconstitute an election by Lender of remedies so as to preclude the

 

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

 

# **25.          LOAN CHARGES.**

#  

If any applicable law limiting the amount of interest or other chargespermitted to be collected from Borrower is interpreted so that any chargeprovided for in any Loan Document, whether considered separately or togetherwith other charges levied in connection with any other Loan Document, violatesthat law, and Borrower is entitled to the benefit of that law, that charge ishereby reduced to the extent necessary to eliminate that violation.  The amounts, if any, previously paid toLender in excess of the permitted amounts shall be applied by Lender to reducethe principal of the Indebtedness.  Forthe purpose of determining whether any applicable law limiting the amount ofinterest or other charges permitted to be collected from Borrower has beenviolated, all Indebtedness which constitutes interest, as well as all othercharges levied in connection with the Indebtedness which constitute interest,shall be deemed to be allocated and spread over the stated term of theNote.  Unless otherwise required byapplicable law, such allocation and spreading shall be effected in such amanner that the rate of interest so computed is uniform throughout the statedterm of the Note.

 

# **26.          WAIVER OF STATUTE OFLIMITATIONS.**

#  

Borrower hereby waives the right to assert any statute of limitationsas a bar to the enforcement of the lien of this Instrument or to any actionbrought to enforce any Loan Document.

 

# **27.          WAIVER OFMARSHALLING.**

#  

Notwithstanding the existence of any other security interests in theMortgaged Property held by Lender or by any other party, Lender shall have theright to determine the order in which any or all of the Mortgaged Property shallbe subjected to the remedies provided in this Instrument, the Note, any otherLoan Document or applicable law.  Lendershall have the right to determine the order in which any or all portions of theIndebtedness are satisfied from the proceeds realized upon the exercise of suchremedies.  Borrower and any party who nowor in the future acquires a security interest in the Mortgaged Property and whohas actual or constructive notice of this Instrument waives any and all rightto require the marshalling of assets or to require that any of the MortgagedProperty be sold in the inverse order of alienation or that any of theMortgaged Property be sold in parcels or as an entirety in connection with theexercise of any of the remedies permitted by applicable law or provided in thisInstrument.

#  

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# **28.          FURTHER ASSURANCES.**

#  

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

 

# **29.          ESTOPPEL CERTIFICATE.**

#  

Within 10 days after a request from Lender, Borrower shall deliver toLender a written statement, signed and acknowledged by Borrower, certifying toLender or any person designated by Lender, as of the date of such statement, (i) thatthe Loan Documents are unmodified and in full force and effect (or, if therehave been modifications, that the Loan Documents are in full force and effectas modified and setting forth such modifications); (ii) the unpaidprincipal balance of the Note; (iii) the date to which interest under theNote has been paid; (iv) that Borrower is not in default in paying theIndebtedness or in performing or observing any of the covenants or agreementscontained in this Instrument or any of the other Loan Documents (or, if theBorrower is in default, describing such default in reasonable detail); (v) whetheror not there are then existing any setoffs or defenses known to Borroweragainst 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, andany Loan Document which does not itself expressly identify the law that is toapply to it, shall be governed by the laws of the jurisdiction in which theLand is located (the “**Property Jurisdiction**”).

 

(b)           Borrower agrees thatany controversy arising under or in relation to the Note, this Instrument, orany other Loan Document shall be litigated exclusively in the PropertyJurisdiction.  The state and federalcourts and authorities with jurisdiction in the Property Jurisdiction shallhave exclusive jurisdiction over all controversies which shall arise under orin relation to the Note, any security for the Indebtedness, or any other LoanDocument.  Borrower irrevocably consentsto service, jurisdiction, and venue of such courts for any such litigation andwaives 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, demandsand other communications (“**notice**”) underor concerning this Instrument shall be in writing.  Each notice shall be addressed to theintended recipient at its address set forth in this Instrument, and shall bedeemed given on the earliest to occur of (1) the date when the notice isreceived by the addressee; (2) the first Business Day after the notice isdelivered to a recognized overnight courier service, with arrangements made forpayment of charges for next Business Day delivery; or (3) the thirdBusiness Day after the notice is deposited in the United States mail withpostage prepaid, certified mail, return receipt requested.  As used in this Section 31, the term “BusinessDay” means any day other than a Saturday, a Sunday or any other day on whichLender is not open for business.

 

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

 

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

 

# **32.          SALE OF NOTE; CHANGEIN SERVICER.**

#  

The Note or a partial interest in the Note (together with thisInstrument and the other Loan Documents) may be sold one or more times withoutprior notice to Borrower.  A sale mayresult in a change of the Loan Servicer. There also may be one or more changes of the Loan Servicer unrelated toa sale of the Note.  If there is a changeof the Loan Servicer, Borrower will be given notice of the change.

 

# **33.          SINGLE ASSETBORROWER.**

#  

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

#  

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#  

# **34.          SUCCESSORS ANDASSIGNS BOUND.**

#  

This Instrument shall bind, and the rights granted by this Instrumentshall inure to, the respective successors and assigns of Lender andBorrower.  However, a Transfer notpermitted by Section 21 shall be an Event of Default.

 

# **35.          JOINT AND SEVERALLIABILITY.**

#  

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 OFPARTIES; NO THIRD PARTY BENEFICIARY.**

#  

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

 

(b)           No creditor of anyparty to this Instrument and no other person shall be a third party beneficiaryof this Instrument or any other Loan Document. Without limiting the generality of the preceding sentence, (1) anyarrangement (a “**Servicing Arrangement**”) betweenthe Lender and any Loan Servicer for loss sharing or interim advancement offunds shall constitute a contractual obligation of such Loan Servicer that isindependent of the obligation of Borrower for the payment of the Indebtedness, (2) Borrowershall not be a third party beneficiary of any Servicing Arrangement, and (3) nopayment by the Loan Servicer under any Servicing Arrangement will reduce theamount of the Indebtedness.

 

# **37.          SEVERABILITY;AMENDMENTS.**

#  

The invalidity or unenforceability of any provision of this Instrumentshall not affect the validity or enforceability of any other provision, and allother provisions shall remain in full force and effect.  This Instrument contains the entire agreementamong the parties as to the rights granted and the obligations assumed in thisInstrument.  This Instrument may not beamended or modified except by a writing signed by the party against whomenforcement is sought.

 

# **38.          CONSTRUCTION.**

#  

The captions and headings of the sections of this Instrument are forconvenience 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 asreferring, respectively, to an Exhibit attached to this Instrument or to aSection of this Instrument.  AllExhibits attached to or referred to in this Instrument are incorporated byreference into this Instrument.  Anyreference in this Instrument to a statute or regulation shall be construed asreferring to that statute or regulation as amended from time to time.  Use of the singular in this Agreementincludes 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, inspectionsof the Property, inspections of books and records, and the granting of consentsand approvals, may be taken by the Loan Servicer unless Borrower receivesnotice to the contrary.  If Borrowerreceives conflicting notices regarding the identity of the Loan Servicer or anyother subject, any such notice from Lender shall govern.

 

# **40.          DISCLOSURE OFINFORMATION.**

#  

Lender may furnish information regarding Borrower or the MortgagedProperty to third parties with an existing or prospective interest in the servicing,enforcement, evaluation, performance, purchase or securitization of theIndebtedness, including trustees, master servicers, special servicers, ratingagencies, and organizations maintaining databases on the underwriting andperformance of multifamily mortgage loans. Borrower irrevocably waives any and all rights it may have underapplicable law to prohibit such disclosure, including any right of privacy.

 

# **41.          NO CHANGE IN FACTS ORCIRCUMSTANCES.**

#  

All information in the application for the loan submitted to Lender(the “**Loan Application**”) and in all financialstatements, rent rolls, reports, certificates and other documents submitted inconnection with the Loan Application are complete and accurate in all materialrespects.  There has been no materialadverse change in any fact or circumstance that would make any such informationincomplete or inaccurate.

 

# **42.          SUBROGATION.**

#  

If, and to the extent that, the proceeds of the loan evidenced by theNote are used to pay, satisfy or discharge any obligation of Borrower for thepayment of money that is secured by a

 

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pre-existingmortgage, deed of trust or other lien encumbering the Mortgaged Property (a “**Prior Lien**”), such loan proceeds shall be deemed to havebeen advanced by Lender at Borrower’s request, and Lender shall automatically,and without further action on its part, be subrogated to the rights, includinglien priority, of the owner or holder of the obligation secured by the PriorLien, 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 theIndebtedness to be immediately due and payable without further demand, and mayinvoke the power of sale and any other remedies permitted by California law orprovided in this Instrument or in any other Loan Document.  Borrower acknowledges that the power of salegranted in this Instrument may be exercised by Lender without prior judicialhearing.  Lender shall be entitled tocollect all costs and expenses incurred in pursuing such remedies, includingattorneys’ fees, costs of documentary evidence, abstracts and title reports.

 

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

 

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

 

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# **44.          RECONVEYANCE.**

#  

Uponpayment of the Indebtedness, Lender shall request Trustee to reconvey theMortgaged Property and shall surrender this Instrument and the Note toTrustee.  Trustee shall reconvey theMortgaged Property without warranty to the person or persons legally entitledto the Mortgaged Property.  Such personor persons shall pay Trustee’s reasonable costs incurred in so reconveying theMortgaged 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 acknowledgedby Lender and recorded in the office of the Recorder of the county or countieswhere the Mortgaged Property is situated, shall be conclusive proof of propersubstitution of the successor trustee. The successor trustee shall, without conveyance of the MortgagedProperty, succeed to all the title, authority, powers and duties conferred uponthe Trustee in this Instrument and by California law.  The instrument of substitution shall containthe name of the original Lender, Trustee and Borrower under this Instrument,the book and page where this Instrument is recorded, and the name andaddress of the successor trustee.  Ifnotice of default has been recorded, this power of substitution cannot beexercised until after the costs, fees and expenses of the then acting Trusteehave been paid to such Trustee, who shall endorse receipt of those costs, feesand expenses upon the instrument of substitution.  The procedure provided for substitution oftrustee in this Instrument shall govern to the exclusion of all otherprovisions for substitution, statutory or otherwise.

 

# **46.          STATEMENT OFOBLIGATION.**

#  

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

 

# **47.          SPOUSE’S SEPARATEPROPERTY.**

#  

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

 

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# **48.          FIXTURE FILING.**

#  

ThisInstrument is also a fixture filing under the Uniform Commercial Code ofCalifornia.

 

# **49.          ADDITIONAL PROVISIONREGARDING APPLICATION OF PAYMENTS.**

#  

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

 

# **50.          WAIVER OF MARSHALLING;OTHER WAIVERS.**

#  

To the extent permitted by law, Borrower waives (i) the benefit ofall present or future laws providing for any appraisement before sale of anyportion of the Mortgaged Property, (ii) all rights of redemption,valuation, appraisement, stay of execution, notice of election to mature ordeclare due the whole of the Indebtedness and marshalling in the event offoreclosure of the lien created by this Instrument, (iii) all rights andremedies which Borrower may have or be able to assert by reason of the laws ofthe State of California pertaining to the rights and remedies of sureties, (iv) theright to assert any statute of limitations as a bar to the enforcement of thelien of this Instrument or to any action brought to enforce the Note or anyother obligation secured by this Instrument, and (v) any rights, legal orequitable, to require marshalling of assets or to require upon foreclosuresales in a particular order, including any rights under California Civil CodeSections 2899 and 3433.  Lender shallhave the right to determine the order in which any or all of the MortgagedProperty shall be subjected to the remedies provided by this Instrument.  Lender shall have the right to determine theorder in which any or all portions of the Indebtedness are satisfied from theproceeds realized upon the exercise of the remedies provided by thisInstrument.  By signing this Instrument,Borrower does not waive its rights under Section 2924c of the CaliforniaCivil Code.

 

# **51.          ADDITIONAL PROVISIONSCONCERNING ENVIRONMENTAL HAZARDS.**

#  

In addition to the provisions of Section 18:

 

(a)           Except for matterscovered 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 haspriority over the

 

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liencreated by this Instrument) upon the Mortgaged Property imposed pursuant to anyHazardous Materials Laws.  Any such lienshall be considered a Prohibited Activity or Condition.

 

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

 

(1)                                  at the time ofacquiring the Mortgaged Property, Borrower undertook all appropriate inquiryinto the previous ownership and uses of the Mortgaged Property consistent withgood commercial or customary practice and no evidence or indication came tolight which would suggest that the Mortgaged Property has been or is now beingused for any Prohibited Activities or Conditions; and

 

(2)                                  the MortgagedProperty has not been designated as “hazardous waste property” or “border zoneproperty” pursuant to Section 25220, *et seq.*, of theCalifornia Health and Safety Code.

 

The representations and warranties in this Section 51(b) shallbe continuing representations and warranties that shall be deemed to be made byBorrower throughout the term of the loan evidenced by the Note, until theIndebtedness has been paid in full.

 

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

 

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

 

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#  

# **52.          ADDITIONAL PROVISION REGARDINGINSURANCE.**

#  

Inaddition to the provisions of Section 19, Borrower further agrees that tothe extent that Borrower obtains any form of property damage insurance for theMortgaged Property or any portion thereof that insures perils not required tobe insured against by Lender, such policy of property damage insurance shallinclude 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 ofinsurance with respect to such policy. Any insurance proceeds payable to Borrower under such policy shall beadditional security for the Indebtedness and Lender shall have the same rightsto such policy and proceeds as it has with respect to insurance policiesrequired by Lender pursuant to Section 19 (except that Lender shall notrequire that the premium for such additional insurance be included among theImposition Deposits).

 

# **53.          WAIVER OF TRIAL BYJURY.**

#  

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

 

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**ATTACHED EXHIBITS.**  The following Exhibits are attached to thisInstrument:

 

x Exhibit A   Descriptionof the Land (Required).

 

x Exhibit B   Modificationsto Instrument (Borrower Requested).

 

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**IN WITNESS WHEREOF**, Borrower has signed anddelivered this Instrument or has caused this Instrument to be signed anddelivered 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

 

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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 Delawarelimited liability company, on behalf of said limited liability company.

 

 
|   | /s/ Catherine E. Mea | (SEAL  |
|--------|----------------------|--------|
|   | Signature of Officer |   |
|   |                 |   |
|   |                 |   |
|   | Notary Public        | (SEAL  |
|   | Title of Officer     |   |

 

MyCommission Expires:**July 26, 2012**

 

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**KEY PRINCIPAL**

 

**Key Principal**

 
| **Name:**    | ** ** | BEHRINGER HARVARD  MULTIFAMILY REIT I, INC. |
|--------------|------------|---------------------------------------------|
|         |       |                                        |
| **Address:** |       | 15601 Dallas Parkway,  Suite 600       |
|         |       |                                        |
|         |       | Addison, Texas 75001                        |

 

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EXHIBIT B

 

**MODIFICATIONSTO INSTRUMENT**

**(BorrowerRequested)**

 

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

 

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

 

“Notwithstanding any provision to thecontrary in this Section 19(f), as long as no Event of Default, or anyevent which, with the giving of Notice or the passage of time, or both, wouldconstitute an Event of Default, has occurred and is continuing, in the event ofa 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 proofof loss, adjust and compromise the claim and collect and receive any proceedsdirectly without the approval or prior consent of the Lender so long as theinsurance proceeds are used solely for the Restoration of the MortgagedProperty.”

 

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

 

“Notwithstanding any provision to thecontrary in this Section 20(a), as long as no Event of Default, or anyevent which, with the giving of Notice or the passage of time, or both, wouldconstitute an Event of Default, has occurred and is continuing, in the event ofa 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 inand prosecute or defend any action or proceeding relating to any Condemnation,and to settle or compromise any claim, collect and receive any proceeds inconnection with any Condemnation directly without the approval or prior consentof the Lender so long as the Condemnation proceeds are used solely for theRestoration of the Mortgaged Property (provided; however, that this provisionshall not apply if such Condemnation in any way affects access to the MortgagedProperty).”

 

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

 

“(f)                              Therequirement to pay a 1% transfer fee as provided in Section 21(c)(7)(A) shallnot apply to Transfers of the Mortgaged Property or of ownership interests heldby any person or entity to (i) one or more Key Principals or (ii) anyentity or entities in which a Key Principal has a direct or indirectControlling Interest (“Affiliated Entities”), including but not limited to thefollowing Affiliated Entities:  BehringerHarvard Multifamily OP I LP.  However,such Transfers to Affiliated Entities shall be subject to all other requirementsof Section 21(c) herein.”

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

7.                                       All capitalizedterms used in this Exhibit not specifically defined herein shall have themeanings set forth in the text of the Instrument that precedes this Exhibit.

 

[BORROWER INITIALS ON THE FOLLOWING PAGE]

 

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|   | Borrower’s Initials: |
|--------|---------------------------|
|   |                      |
|   |                      |
|   | /s/ GJR                   |

 

B-3

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