**Exhibit 10.22**

 

RECORDINGREQUESTED BY AND WHEN RECORDED MAIL TO:

 

BerkshireMortgage Finance Limited Partnership7575 Irvine Center Drive, 2nd Flr. Irvine, CA 92618 

 

E#:2421-EH

FHLMC#: 002669129

 

**MULTIFAMILY DEED OF TRUST,**

**ASSIGNMENT OF RENTS,**

**SECURITYAGREEMENT AND FIXTURE FILING (CALIFORNIA — REVISION DATE 3-17-03)**

 

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

 

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**MULTIFAMILY DEED OF TRUST,ASSIGNMENT OF RENTS,SECURITY AGREEMENT ANDFIXTURE FILING(CALIFORNIA — REVISION DATE 3-17-03)**

 

THISMULTIFAMILY DEED OF TRUST, ASSIGNMENT OF RENTS, SECURITY AGREEMENT AND FIXTUREFILING (the **“Instrument”**) is made to beeffective this 1st****day of April 2004, by WaterfordPlace Apartments, LLC, a California limited liability company organized andexisting under the laws of CA, whose address is 655 Brea Canyon Road,Walnut, CA 91788-,as trustor (**“Borrower”**),****toFirst American Title Insurance Company, as trustee (**“Trustee”**),****for the benefit ofBerkshire Mortgage Finance Limited Partnership organized and existingunder the laws of Massachusetts, whose address is 7575 Irvine CenterDrive, Suite 200, Irvine, CA 92618, as beneficiary (**“Lender”**).****Borrower’sorganizational identification number, if applicable, is 95-4869325.

 

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

 

TOSECURE TO LENDER the repayment of the Indebtedness evidenced by Borrower’sMultifamily Note payable to Lender, dated as of the date of this Instrument,and maturing on May 01, 2014 (the **“MaturityDate”**),****in the principal amount of $52,000.000,and all renewals, extensions and modifications of the Indebtedness, the paymentof all sums advanced by or on behalf of Lender to protect the security of thisInstrument under Section 12, and the performance of the covenants andagreements of Borrower contained in the Loan Documents.

 

Borrowerrepresents and warrants that Borrower is lawfully seized of the MortgagedProperty and has the right, power and authority to grant, convey and assign theMortgaged Property, and that the Mortgaged Property is unencumbered, except asshown on the schedule of exceptions to coverage in the title policy issued toand accepted by Lender contemporaneously with the execution and recordation ofthis Instrument and insuring Lender’s interest in the Mortgaged Property (the **“Schedule of Title Exceptions”**).****Borrowercovenants that Borrower will warrant and defend generally the title to theMortgaged Property against all claims and demands, subject to any easements andrestrictions listed in the Schedule of Title Exceptions.

 

**Covenants.**In consideration of themutual promises set forth in this Instrument, Borrower and Lender covenant andagree as follows:

 

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

 

(a)**           “Attorneys’ Fees and Costs”**means(i) fees and out-of-pocket costs of Lender’s and Loan Servicer’sattorneys, as applicable, including costs of Lender’s and Loan Servicer’sin-house counsel, support staff costs, costs of preparing for litigation,computerized research, telephone and facsimile transmission expenses, mileage,deposition costs, postage, duplicating, process service, videotaping andsimilar costs and expenses; (ii) costs and fees of expert witnesses,including appraisers; and (iii) investigatory fees.

 

(b)**           “Borrower”**means allpersons or entities identified as “Borrower” in the first paragraph of thisInstrument, together with their successors and assigns.

 

(c)**           “Collateral Agreement”**means anyseparate agreement between Borrower and Lender for the purpose of establishingreplacement reserves for the Mortgaged Property, establishing a fund to assurethe completion of repairs or improvements specified in that agreement, orassuring reduction of the outstanding principal balance of the Indebtedness ifthe occupancy of or income from the Mortgaged Property does not increase to alevel specified in that agreement, or any other agreement or agreements betweenBorrower and Lender which provide for the establishment of any other fund,reserve or account.

 

(d)**           “Controlling Entity”**meansan entity****which owns,directly or indirectly through one or more intermediaries, (i) a generalpartnership interest or a Controlling Interest of the limited partnershipinterests in Borrower (if Borrower is a partnership or joint venture),(ii) a manager’s interest in Borrower or a Controlling Interest of theownership or membership interests in Borrower (if Borrower is a limitedliability company), (iii) a Controlling Interest of any class of votingstock of Borrower (if Borrower is a corporation), or (iv) a trustee’s interestor a Controlling Interest of the beneficial interests in Borrower.

 

(e)**           “Controlling Interest”**means(i) 51 percent or more of the ownership interests in an entity, or(ii) a percentage ownership interest in an entity of less than 51 percent,if the owner(s) of that interest actually direct(s) the business andaffairs of the entity without the requirement of consent of any other party.The Controlling Interest shall be deemed to be 51 percent unless otherwisestated in Exhibit B.

 

(f)**            “Environmental Permit”**means any permit,****license, orother authorization issued under any Hazardous Materials Law with respect toany activities or businesses conducted on or in relation to the MortgagedProperty.

 

(g)**           “Event of Default”**means theoccurrence of any event listed in Section 22.

 

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(h)             **“Fixtures”**-means all property owned by Borrower which is soattached to the Land or the Improvements as to constitute a fixture underapplicable law, including: machinery, equipment, engines, boilers,incinerators, installed building materials; systems and equipment for thepurpose of supplying or distributing heating, cooling, electricity, gas, water,air, or light; antennas, cable, wiring and conduits used in connection withradio, television, security, fire prevention, or fire detection or otherwiseused to carry electronic signals; telephone systems and equipment; elevatorsand related machinery and equipment; fire detection, prevention andextinguishing systems and apparatus; security and access control systems andapparatus; plumbing systems; water heaters, ranges, stoves, microwave ovens,refrigerators, dishwashers, garbage disposers, washers, dryers and otherappliances; light fixtures, awnings, storm windows and storm doors; pictures,screens, blinds, shades, curtains and curtain rods; mirrors; cabinets,paneling, rugs and floor and wall coverings; fences, trees and plants; swimmingpools; and exercise equipment.

 

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

 

(j)            **“Hazard Insurance”**is defined in Section 19.

 

(k)           **“Hazardous Materials”**means petroleum and petroleum products and compounds containing them,including gasoline, diesel fuel and oil; explosives; flammable materials;radioactive materials; polychlorinated biphenyls (“PCBs”) and compoundscontaining them; lead and lead-based paint; asbestos or asbestos-containingmaterials in any form that is or could become friable; underground orabove-ground storage tanks, whether- empty or containing any substance; anysubstance the presence of which on the Mortgaged Property is prohibited by anyfederal, state or local authority; any substance that requires special handlingand any other material or substance now or in the future that (i) isdefined as a “hazardous substande,” “hazardous material,” “hazardous waste,”“toxic substance,” “toxic pollutant,” “contaminant,” or “pollutant” by orwithin the meaning of any Hazardous Materials Law, or (ii) is regulated inany way by or within the meaning of any Hazardous Materials Law.

 

(l)            **“Hazardous Materials Laws”**means all federal, state, and local laws, ordinances and regulationsand standards, rules, policies and other governmental requirements,administrative rulings and court judgments and decrees in effect now or in thefuture and including all amendments, that relate to Hazardous Materials or theprotection of human health or the environment and apply to Borrower or to theMortgaged Property. Hazardous Materials Laws include, but are not limited to,the Comprehensive Environmental Response, Compensation and Liability Act, 42U.S.C. Section 9601, *et seq.,*the ResourceConservation and 

 

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RecoveryAct of 1976, 42 U.S.C. Section 6901, *et seq.,*the ToxicSubstance Control Act, 15 U.S.C. Section 2601, *etseq.,*the Clean Water Act, 33 U.S.C. Section 1251, *etseq.,*and the Hazardous Materials Transportation Act, 49 U.S.C.Section 5101 *et seq.,*and their stateanalogs.

 

(m)          **“Impositions”**and **“Imposition Deposits”** are defined inSection 7(a).

 

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

 

(o)           **“Indebtedness”**means the principal of, interest at the fixed or variable rate set forth in theNote on, and all other amounts due at any time under, the Note, this Instrumentor any other Loan Document, including prepayment premiums, late charges,default interest, and advances as provided in Section 12 to protect thesecurity of this Instrument.

 

(p)           **“Initial Owners”**means, with respect to Borrower or any other entity, the persons or entitiesthat (i) on the date of the Note, or (ii) on the date of a Transferto which Lender has consented, own in the aggregate 100 percent of theownership interests in Borrower or that entity.

 

(q)           **“Land”** meansthe land described in Exhibit A.

 

(r)            **“Leases”** meansall present and future leases, subleases, licenses, concessions or grants orother possessory interests now or hereafter in force, whether oral or written,covering or affecting the Mortgaged Property, or any portion of the MortgagedProperty (including proprietary leases or occupancy agreements if Borrower is acooperative housing corporation), and all modifications, extensions orrenewals.

 

(s)           **“Lender”**meansthe entity identified as “Lender” in the first paragraph of this Instrument, orany subsequent holder of the Note.

 

(t)            **“Loan Documents”**means the Note, this Instrument, all guaranties, all indemnity agreements, allCollateral Agreements, O&M Programs, and any other documents now or in thefuture executed by Borrower, any guarantor or any other person in connectionwith the loan evidenced by the Note, as such documents may be amended from timeto time.

 

(u)           **“Loan Servicer”**means the entity that from time to time is designated by Lender to collectpayments and deposits and receive Notices under the Note, this Instrument andany other Loan Document, and otherwise to service the loan evidenced by theNote 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.

 

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

 

(i)            the Land;

 

(ii)           theImprovements;

 

(iii)          the Fixtures;

 

(vi)          the Personalty;

 

(v)           all current andfuture rights, including air rights, development rights, zoning rights andother similar rights or interests, easements, tenements, rights-of-way, stripsand gores of land, streets, alleys, roads, sewer rights, waters, watercourses,and appurtenances related to or benefiting the Land or the Improvements, orboth, and all rights-of-way, streets, alleys and roads which may have been ormay in the future be vacated;

 

(vi)          all proceedspaid or to be paid by any insurer of the Land, the Improvements, the Fixtures,the Personalty or any other part of the Mortgaged Property, whether or notBorrower obtained the insurance pursuant to Lender’s requirement;

 

(vii)         all awards,payments and other compensation made or to be made by any municipal, state orfederal authority 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;

 

(viii)        all contracts,options and other agreements for the sale of the Land, the Improvements, theFixtures, the Personalty or any other part of the Mortgaged Property enteredinto by Borrower now or in the future, including cash or securities depositedto secure performance by parties of their obligations;

 

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(ix)           all proceedsfrom the conversion, voluntary or involuntary, of any of the above into cash orliquidated claims, and the right to collect such proceeds;

 

(x)            all Rents andLeases;

 

(xi)           all earnings,royalties, accounts receivable, issues and profits from the Land, theImprovements or any other part of the Mortgaged Property, and all undisbursedproceeds of the loan secured by this Instrument and, if Borrower is acooperative housing corporation, maintenance charges or assessments payable byshareholders or residents;

 

(xii)          all ImpositionDeposits;

 

(xiii)         all refunds orrebates of Impositions by any municipal, state or federal authority orinsurance company (other than refunds applicable to periods before the realproperty tax year in which this Instrument is dated);

 

(xiv)        all tenantsecurity deposits which have not been forfeited by any tenant under any Leaseand any bond or other security in lieu of such deposits; and

 

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

 

(w)**          “Note”**means theMultifamily Note described on page 1of this Instrument, including all schedules, riders, allonges andaddenda, as such Multifamily Note may be amended from time to time.

 

(x)**            “O&M Program”**is defined inSection 18(d).

 

(y)**           “Personalty”**means all

 

(i)                                     accounts (including depositaccounts);

 

(ii)                                  equipment and inventoryowned by Borrower, which are used now or in the future in connection with theownership, management or operation of the Land or Improvements or are locatedon the Land or Improvements, including furniture, furnishings, machinery,building materials, goods,

 

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supplies,tools, books, records (whether in written or electronic form), computerequipment (hardware and software);

 

(iii)                               other tangible personalproperty including ranges, stoves, microwave ovens, refrigerators, dishwashers,garbage disposers, washers, dryers and other appliances (other than Fixtures);

 

(iv)                              any operating agreementsrelating to the Land or the Improvements;

 

(v)                                 any surveys, plans andspecifications and contracts for architectural, engineering and constructionservices relating to the Land or the Improvements;

 

(vi)                              all other intangibleproperty, general intangibles and rights relating to the operation of, or usedin connection with, the Land or the Improvements, including all governmentalpermits relating to any activities on the Land and including subsidy or similarpayments received from any sources, including a governmental authority; and

 

(vii)                           any rights of Borrower in orunder letters of credit.

 

(z)                                   **“Property Jurisdiction”** is defined inSection 30(a).

 

(aa)         **“Rents”** meansall rents (whether from residential or non-residential space), revenues andother income of the Land or the Improvements, parking fees, laundry and vendingmachine income and fees and charges for food, health care and other servicesprovided at the Mortgaged Property, whether now due, past due, or to becomedue, and deposits forfeited by tenants.

 

(bb)        **“Taxes”**means all taxes, assessments, vault rentals and other charges, if any, whethergeneral, special or otherwise, including all assessments for schools, publicbetterments and general or local improvements, which are levied, assessed orimposed by any public authority or quasi-public authority, and which, if notpaid, will become a lien on the Land or the Improvements.

 

(cc)         **“Transfer”** isdefined in Section 21.

 

**2.             UNIFORM COMMERCIAL CODESECURITY AGREEMENT.**

 

(a)           This Instrument is also a securityagreement under the Uniform Commercial Code for any of the Mortgaged Propertywhich, under applicable law, may be subjected to a security

 

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interestunder the Uniform Commercial Code, whether such Mortgaged Property is owned nowor acquired in the future, and all products and cash and non-cash proceedsthereof (collectively, **“UCC Collateral”**),and Borrower hereby grants to Lender a security interest in the UCC Collateral.Borrower hereby authorizes Lender to prepare and file financing statements,continuation statements and financing statement amendments in such form asLender may require to perfect or continue the perfection of this securityinterest and Borrower agrees, if Lender so requests, to execute and deliver toLender such financing statements, continuation statements and amendments.Borrower shall pay all filing costs and all costs and expenses of any recordsearches for financing statements and/or amendments that Lender may require.Without the prior written consent of Lender, Borrower shall not create orpermit to exist any other lien or security interest in any of the UCCCollateral.

 

(b)              Unless Borrowergives Notice to Lender within 30 days after the occurrence of any of thefollowing, and executes and delivers to Lender modifications or supplements ofthis Instrument (and any financing statement which may be filed in connectionwith this Instrument) as Lender may require, Borrower shall not (i) changeits name, identity, structure or jurisdiction of organization; (ii) change thelocation of its place of business (or chief executive office if more than oneplace of business); or (iii) add to or change any location at which any ofthe Mortgaged Property is stored, held or located.

 

(c)               If an Event ofDefault has occurred and is continuing, Lender shall have the remedies of asecured party under the Uniform Commercial Code, in addition to all remediesprovided by this Instrument or existing under applicable law. In exercising anyremedies, Lender may exercise its remedies against the UCC Collateralseparately or together, and in any order, without in any way affecting theavailability of Lender’s other remedies.

 

(d)              This Instrumentconstitutes a financing statement with respect to any part of the MortgagedProperty that is or may become a Fixture, if permitted by applicable law.

 

**3.             ASSIGNMENT OF RENTS; APPOINTMENT OFRECEIVER; LENDER IN POSSESSION.**

 

(a)           As part of the consideration for theIndebtedness, Borrower absolutely and unconditionally assigns and transfers toLender all Rents. It is the intention of Borrower to establish a present,absolute and irrevocable transfer and assignment to Lender of all Rents and toauthorize and empower Lender to collect and receive all Rents without thenecessity of further action on the part of Borrower. Promptly upon request byLender, Borrower agrees to execute and deliver such further assignments asLender may from time to time require. Borrower and Lender intend thisassignment of Rents to be immediately effective and to constitute an absolutepresent assignment and not an assignment for additional security only. Forpurposes of giving effect to this absolute assignment of Rents, and for noother purpose, Rents shall not be deemed

 

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tobe a part of the Mortgaged Property. However, if this present, absolute andunconditional 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. However, until the occurrence ofan Event of Default, Lender hereby grants to Borrower a revocable license tocollect and receive all Rents, to hold all Rents in trust for the benefit ofLender and to apply all Rents to pay the installments of interest and principalthen due and payable under the Note and the other amounts then due and payableunder the other Loan Documents, including Imposition Deposits, and to pay thecurrent costs and expenses of managing, operating and maintaining the MortgagedProperty, including utilities, Taxes and insurance premiums (to the extent notincluded in Imposition Deposits), tenant improvements and other capitalexpenditures. So long as no Event of Default has occurred and is continuing;the Rents remaining after application pursuant to the preceding sentence may beretained by Borrower free and clear of, and released from, Lender’s rights withrespect to Rents under this Instrument. From and after the occurrence of anEvent of Default, and without the necessity of Lender entering upon and takingand maintaining control of the Mortgaged Property directly, or by a receiver,Borrower’s license to collect Rents shall automatically terminate and Lendershall without Notice be entitled to all Rents as they become due and payable,including Rents then due and unpaid. Borrower shall pay to Lender upon demandall Rents to which Lender is entitled. At any time on or after the date ofLender’s demand for Rents, (i) Lender may give, and Borrower herebyirrevocably authorizes Lender to give, notice to all tenants of the MortgagedProperty instructing them to pay all Rents to Lender, (ii) no tenant shallbe obligated to inquire further as to the occurrence or continuance of an Eventof Default, and (iii) no tenant shall be obligated to pay to Borrower anyamounts which are 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 with and shall cooperate with Lender’scollection 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 any priorindebtedness that is being assigned to Lender, or paid off and discharged withthe proceeds of the loan evidenced by the Note), that Borrower has notperformed, and Borrower covenants and agrees that it will not perform, any actsand has not executed, and shall not execute, any instrument which would preventLender from exercising its rights under this Section 3, and that at thetime of execution of this Instrument there has been no anticipation orprepayment of any Rents for more than two months prior to the due dates of suchRents. Borrower shall not collect or accept payment of any Rents more than twomonths prior to the due dates of such Rents.

 

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(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 MortgagedProperty in order to perform all acts that Lender in its discretion determinesto be necessary 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 has occurred and is continuing,regardless of the adequacy of Lender’s security, without regard to Borrower’ssolvency and without the necessity of giving prior notice (oral or written) toBorrower, Lender may apply to any court having jurisdiction for the appointmentof a receiver for the Mortgaged Property to take any or all of the actions setforth 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*if permitted byapplicable law. Lender or the receiver, as the case may be, shall be entitledto receive a reasonable fee for managing the Mortgaged Property. Immediatelyupon appointment of a receiver or immediately upon the Lender’s entering uponand taking possession and control of the Mortgaged Property, Borrower shallsurrender possession of the Mortgaged Property to Lender or the receiver, as thecase may be, and shall deliver to Lender or the receiver, as the case may be,all documents, records (including records on electronic or magnetic media),accounts, surveys, plans, and specifications relating to the Mortgaged Propertyand all security deposits and prepaid Rents. In the event Lender takespossession and control of the Mortgaged Property, Lender may exclude Borrowerand its representatives from the Mortgaged Property. Borrower acknowledges andagrees that the exercise by Lender of any of the rights conferred under thisSection 3 shall not be construed to make Lender a mortgagee-in-possessionof the Mortgaged Property so long as Lender has not itself entered into actualpossession of the Land and Improvements.

 

(e)             If Lender entersthe Mortgaged Property, Lender shall be liable to account only to Borrower andonly for those Rents actually received. Except to the extent of Lender’s grossnegligence or willful misconduct, 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 underSection 3(d), and Borrower hereby releases and discharges Lender from anysuch liability to the fullest extent permitted by law.

 

(f)              If the Rents arenot 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.

 

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

 

**4.             ASSIGNMENT OF LEASES; LEASESAFFECTING THE MORTGAGED PROPERTY.**

 

(a)           As part of the consideration for theIndebtedness, Borrower absolutely and unconditionally assigns and transfers toLender all of Borrower’s right, title and interest in, to and under the Leases,including Borrower’s right, power and authority to modify the terms of any suchLease, or extend or terminate any such Lease. It is the intention of Borrowerto establish a present, absolute and irrevocable transfer and assignment toLender of all of Borrower’s right, title and interest in, to and under theLeases. Borrower and Lender intend this assignment of the Leases to beimmediately effective and to constitute an absolute present assignment and notan assignment for additional security only. For purposes of giving effect tothis absolute assignment of the Leases, and for no other purpose, the Leasesshall not be deemed to be a part of the Mortgaged Property. However, if thispresent, absolute and unconditional assignment of the Leases is not enforceableby its terms under the laws of the Property Jurisdiction, then the Leases shallbe included as a part of the Mortgaged Property and it is the intention of theBorrower that in this circumstance this Instrument create and perfect a lien onthe Leases in favor of Lender, which lien shall be effective as of the date ofthis Instrument.

 

(b)           Until Lender gives Notice to Borrowerof Lender’s exercise of its rights under this Section 4, Borrower shallhave all rights, power and authority granted to Borrower under any Lease(except as otherwise limited by this Section or any other provision ofthis Instrument), including the right, power and authority to modify the termsof any Lease or extend or terminate any Lease. 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 with and observe Borrower’s obligations underall Leases, including Borrower’s obligations pertaining to the maintenance anddisposition of tenant security deposits.

 

(c)           Borrower acknowledges and agrees thatthe exercise by Lender, either directly or by a receiver, of any of the rightsconferred under this Section 4 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 the Improvements. Theacceptance by Lender of the assignment of the Leases pursuant toSection 4(a) shall not at any time or in any event obligate Lender totake any action under this Instrument or to expend any money or to incur anyexpenses. Except to the extent of Lender’s gross negligence or willfulmisconduct, Lender shall not be liable in any way for any injury or damage toperson or property sustained by any person or persons, firm or corporation inor about the Mortgaged Property. Prior to Lender’s actual entry

 

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intoand taking possession of the Mortgaged Property, Lender shall not (i) beobligated to perform any of the terms, covenants and conditions contained in anyLease (or otherwise have any obligation with respect to any Lease);(ii) be obligated to appear in or defend any action or proceeding relatingto the Lease or the Mortgaged Property; or (iii) be responsible for theoperation, control, care, management or repair of the Mortgaged Property or anyportion of the Mortgaged Property. The execution of this Instrument by Borrowershall constitute conclusive evidence that all responsibility for the operation,control, care, management and repair of the Mortgaged Property is and shall bethat of Borrower, prior to such actual entry and taking of possession.

 

(d)           Upon delivery of Notice by Lender toBorrower of Lender’s exercise of Lender’s rights under this Section 4 atany time after the occurrence of an Event of Default, and without the necessityof Lender entering upon and taking and maintaining control of the MortgagedProperty directly, by a receiver, or by any other manner or proceedingpermitted by the laws of the Property Jurisdiction, Lender immediately shallhave all rights, powers and authority granted to Borrower under any Lease,including the right, power and authority to modify the terms of any such Lease,or extend or terminate any such Lease.

 

(e)               Borrower shall,promptly upon Lender’s request, deliver to Lender an executed copy of 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 years, and shall not include options topurchase. If Borrower is a cooperative housing corporation, association orother validly organized entity under municipal, county, state or federal law,notwithstanding anything to the contrary contained in this subsection, so longas Borrower is not in breach of any covenant of this Instrument, Lender herebyconsents to the execution of leases of apartments for a term in excess of twoyears from Borrower to a tenant shareholder of Borrower, to the surrender ortermination of such leases of apartments where the surrendered or terminatedlease is immediately replaced or where the Borrower makes its best efforts tosecure such immediate replacement by a newly executed lease of the sameapartment to a tenant shareholder of the Borrower. However, no consent ishereby given by Lender to any execution, surrender, termination or assignmentof a lease under terms that would waive or reduce the obligation of theresulting tenant shareholder under such lease to pay cooperative assessments infull when due or the obligation of the former tenant shareholder to pay anyunpaid portion of such assessments.

 

(f)            Borrower shall not lease any portionof the Mortgaged Property for non-residential use except with the prior writtenconsent of Lender and Lender’s prior written approval of the Lease agreement.Borrower shall not modify the terms of, or extend or terminate, any Lease fornon-residential use (including any Lease in existence on the date of thisInstrument) without the prior written consent of Lender. However, Lender’sconsent shall not be required for the modification or extension of anon-residential Lease if such modification or extension is on terms at least asfavorable to Borrower as those customary at that time in the applicable marketand the

 

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incomefrom the extended or modified Lease will not be less than the income receivedfrom the Lease as of the date of this-Instrument. Borrower shall, without request byLender, deliver an executed copy of each non-residential Lease to Lenderpromptly after such Lease is signed. All non-residential Leases, includingrenewals or extensions of existing Leases, shall specifically provide that(i) such Leases are subordinate to the lien of this Instrument; (ii) thetenant shall atom to Lender and any purchaser at a foreclosure sale, suchattornment to be self-executing and effective upon acquisition of title to theMortgaged Property by any purchaser at a foreclosure sale or by Lender in anymanner; (iii) the tenant agrees to execute such further evidences ofattornment as Lender or any purchaser at a foreclosure sale may from time totime request; (iv) the Lease shall not be terminated by foreclosure or anyother transfer of the Mortgaged Property; (v) after a foreclosure sale ofthe Mortgaged Property, Lender or any other purchaser at such foreclosure salemay, at Lender’s or such purchaser’s option, accept or terminate such Lease;and (vi) the tenant shall, upon receipt after the occurrence of an Eventof Default of a written request from Lender, pay all Rents payable under theLease to Lender.

 

(g)           Borrower shall not receive or acceptRent under any Lease (whether residential or non-residential) for more than twomonths in advance.

 

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

 

**6.             EXCULPATION.**Borrower’spersonal liability for payment of the Indebtedness and for performance of theother obligations to be performed by it under this Instrument is limited in themanner, and to the extent, provided in the Note.

 

**7.             DEPOSITS FOR TAXES, INSURANCE ANDOTHER CHARGES.**

 

(a)           Unless this requirement is waived inwriting by Lender, which waiver may be contained in this Section 7(a),Borrower shall deposit with Lender on the day monthly installments of principalor interest, or both, are due under the Note (or on another daydesignated in writing by Lender), until the Indebtedness is paid in full, anadditional amount sufficient to accumulate with Lender the entire sum requiredto pay, when due, the items marked “Collect” below. Lender will not require theBorrower to make Imposition Deposits with respect to the items marked“Deferred” below.

 

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| [Deferred]                                  |   | Hazard  Insurance premiums or other insurance premiums required by Lender under  Section 19, |
|---------------------------------------------|--------|---------------------------------------------------------------------------------------------------|
| [Deferred]                                  |   | Taxes,                                                                                            |
| [Deferred]                                  |   | water  and sewer charges (that could become a lien on the Mortgaged Property),                    |
| [N/A]    ground  rents, |
| [Deferred]                                  |   | assessments  or other charges (that could become a lien on the Mortgaged Property)                |

 

Theamounts deposited under the preceding sentence are collectively referred to inthis Instrument as the **“Imposition Deposits.”**The obligations of Borrower for which the Imposition Deposits are required arecollectively referred to in this Instrument as **“Impositions.”**The amount of the Imposition Deposits shall be sufficient to enable Lender topay each Imposition before the last date upon which such payment may be madewithout any penalty or interest charge being added. Lender shall maintainrecords indicating how much of the monthly Imposition Deposits and how much ofthe aggregate Imposition Deposits held by Lender are held for the purpose ofpaying Taxes, insurance premiums and each other Imposition.

 

(b)           Imposition Deposits shall be held inan institution (which may be Lender, if Lender is such an institution) whosedeposits or accounts are insured or guaranteed by a federal agency. Lendershall not be obligated to open additional accounts or deposit ImpositionDeposits in additional institutions when the amount of the Imposition Depositsexceeds the maximum amount of the federal deposit insurance or guaranty. Lendershall apply the Impositions Deposits to pay Impositions so long as no Event ofDefault has occurred and is continuing. Unless applicable law requires, Lendershall not be required to pay Borrower any interest, earnings or profits on theImposition Deposits. As additional security for all of Borrower’s obligationsunder this Instrument and the other Loan Documents, Borrower hereby pledges andgrants to Lender a security interest in the Imposition Deposits and allproceeds of, and all interest and dividends on, the Imposition Deposits. Anyamounts deposited with Lender under this Section 7 shall not be trustfunds, nor shall they operate to reduce the Indebtedness, unless applied by Lenderfor that purpose under Section 7(e).

 

(c)           If Lender receives a bill or invoicefor an Imposition, Lender shall pay the Imposition from the Imposition Depositsheld by Lender. Lender shall have no obligation to pay any Imposition to theextent it exceeds Imposition Deposits then held by Lender. Lender may pay anImposition according to any bill, statement or estimate from the appropriatepublic office or insurance company without inquiring into the accuracy of thebill, statement or estimate or into the validity of the Imposition.

 

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(d)           If at any time the amount of theImposition Deposits held by Lender for payment of a specific Imposition exceedsthe amount reasonably deemed necessary by Lender, the excess shall be creditedagainst future installments of Imposition Deposits. If at any time the amountof the Imposition Deposits held by Lender for payment of a specific Impositionis less than the amount reasonably estimated by Lender to be necessary,Borrower shall pay to Lender the amount of the deficiency within 15 days afterNotice from Lender.

 

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

 

(f)            If Lender does not collect anImposition Deposit with respect to an Imposition either marked “Deferred” inSection 7(a) or pursuant to a separate written waiver by Lender, thenon or before the date each such Imposition is due, or on the date thisInstrument requires each such Imposition to be paid, Borrower must provideLender with proof of payment of each such Imposition for which Lender does notrequire collection of Imposition Deposits. Lender may revoke its deferral orwaiver and require Borrower to deposit with Lender any or all of the ImpositionDeposits listed in Section 7(a), regardless of whether any such item ismarked “Deferred” in such section, upon Notice to Borrower, (i) ifBorrower does not timely pay any of the Impositions, (ii) if Borrowerfails to provide timely proof to Lender of such payment, or (iii) at anytime during the existence of an Event of Default.

 

(g)           In the event of a Transfer prohibitedby or requiring Lender’s approval under Section 21, Lender’s waiver of thecollection of any Imposition Deposit in this Section 7 may be modified orrendered void by Lender at Lender’s option by Notice to Borrower and thetransferee(s) as a condition of Lender’s approval of such Transfer.

 

**8.             COLLATERAL AGREEMENTS.** Borrower shalldeposit with Lender such amounts as may be required by any Collateral Agreementand shall perform all other obligations of Borrower under each CollateralAgreement.

 

**9.             APPLICATION OF PAYMENTS.** If at any timeLender receives, from Borrower or otherwise, any amount applicable to theIndebtedness which is less than all amounts due and payable at such time, thenLender may apply that payment to amounts then due and payable in any manner andin any order determined by Lender, in Lender’s discretion. Neither Lender’sacceptance of an amount that is less than all amounts then due and payable norLender’s application of such payment in the manner authorized shall constituteor be deemed to constitute either a waiver of the unpaid amounts or an accordand satisfaction. Notwithstanding the application of any such amount to theIndebtedness, Borrower’s obligations under this Instrument and the Note shallremain unchanged.

 

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**10.          COMPLIANCE WITH LAWS.**Borrower shallcomply with all laws, ordinances, regulations and requirements of any GovernmentalAuthority and all recorded lawful covenants and agreements relating to oraffecting the Mortgaged Property, including all laws, ordinances, regulations,requirements and covenants pertaining to health and safety, construction ofimprovements on the Mortgaged Property, fair housing, disability accommodation,zoning and land use, and Leases. Borrower also shall comply with all applicablelaws that pertain to the maintenance and disposition of tenant securitydeposits. Borrower shall at all times maintain records sufficient todemonstrate compliance with the provisions of this Section 10. Borrowershall take appropriate measures to prevent, and shall not engage in orknowingly permit, any illegal activities at the Mortgaged Property that couldendanger tenants or visitors, result in damage to the Mortgaged Property,result in forfeiture of the Mortgaged Property, or otherwise materially impairthe lien created by this Instrument or Lender’s interest in the MortgagedProperty. 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 OF PROPERTY.**Unless requiredby applicable law, Borrower shall not (a) allow changes in the use for whichall or any part of the Mortgaged Property is being used at the time thisInstrument was executed, except for any change in use approved by Lender, (b) convertany individual dwelling units or common areas to commercial use,(c) initiate a change in the zoning classification of the MortgagedProperty or acquiesce without Notice to and consent of Lender in a change inthe zoning classification of the Mortgaged Property, (d) establish anycondominium or cooperative regime with respect to the Mortgaged Property, (e) combineall or any part of the Mortgaged Property with all or any part of a tax parcelwhich is not part of the Mortgaged Property, or (f) subdivide or otherwisesplit any tax parcel constituting all or any part of the Mortgaged Propertywithout the prior consent of Lender.

 

**12.          PROTECTION OF LENDER’S SECURITY;INSTRUMENT SECURES FUTURE ADVANCES.**

 

(a)           If Borrower fails to perform any ofits obligations under this Instrument or any other Loan Document, or if anyaction or proceeding is commenced which purports to affect the MortgagedProperty, Lender’s security or Lender’s rights under this Instrument, includingeminent domain, insolvency, code enforcement, civil or criminal forfeiture,enforcement of Hazardous Materials Laws, fraudulent conveyance or reorganizationsor proceedings involving a bankrupt or decedent, then Lender at Lender’s optionmay make such appearances, file such documents, disburse such sums and takesuch actions as Lender reasonably deems necessary to perform such obligationsof Borrower and to protect Lender’s interest, including (i) payment ofAttorneys’ Fees and Costs, (ii) payment of fees and out-of-pocket expensesof accountants, inspectors and consultants, (iii) entry upon the MortgagedProperty to make repairs or secure the Mortgaged

 

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Property,(iv) procurement of the insurance required by Section 19, and(v) payment of amounts which Borrower has failed to pay under Sections 15and 17.

 

(b)           Any amounts disbursed by Lender underthis Section 12, or under any other provision of this Instrument thattreats such disbursement as being made under this Section 12, shall besecured by this Instrument, shall be added to, and become part of, theprincipal component of the Indebtedness, shall be immediately due and payableand shall bear interest from the date of disbursement until paid at the **“DefaultRate,”**as defined in the Note.

 

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

 

**13.          INSPECTION.**Lender, itsagents, representatives, and designees may make or cause to be made entriesupon and inspections of the Mortgaged Property (including environmentalinspections and tests) during normal business hours, or at any other reasonabletime, upon reasonable notice to Borrower if the inspection is to includeoccupied residential units (which notice need not be in writing). Notice toBorrower shall not be required in the case of an emergency, as determined inLender’s discretion, or when an Event of Default has occurred and iscontinuing.

 

**14.          BOOKS AND RECORDS; FINANCIALREPORTING.**

 

(a)           Borrower shall keep and maintain atall times at the Mortgaged Property or the management agent’s office, and uponLender’s request shall make available at the Mortgaged Property (or, atBorrower’s option, at the management agent’s office), complete and accuratebooks of account and records (including copies of supporting bills andinvoices) adequate to reflect correctly the operation of the MortgagedProperty, and copies of all written contracts, Leases, and other instrumentswhich affect the Mortgaged Property. The books, records, contracts, Leases andother instruments shall be subject to examination and inspection by Lender atany reasonable time.

 

(b)           Within 120 days after the end of eachfiscal year of Borrower, Borrower shall furnish to Lender a statement of incomeand expenses for Borrower’s operation of the Mortgaged Property for that fiscalyear, a statement of changes in financial position of Borrower relating to theMortgaged Property for that fiscal year and, when requested by Lender, abalance sheet showing all assets and liabilities of Borrower relating to theMortgaged Property as of the end of that fiscal year. If Borrower’s fiscal yearis other than the calendar year, Borrower must also submit to Lender a year-endstatement of income and expenses within 120 days after the end of the calendaryear.

 

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(c)           Within 120 days after the end of eachcalendar year, and at any other time, upon Lender’s request, Borrower shallfurnish to Lender each of the following. However, Lender shall not require anyof the following more frequently than quarterly except when there has been anEvent of Default and such Event of Default is continuing, in which case Lendermay, upon written request to Borrower, require Borrower to furnish any of thefollowing more frequently:

 

(i)                                     a rent schedulefor the Mortgaged Property showing the name of each tenant, and for eachtenant, the space occupied, the lease expiration date, the rent payable for thecurrent month, the date through which rent has been paid, and any relatedinformation requested by Lender;

 

(ii)                                  an accountingof all security deposits held pursuant to all Leases, including the name of theinstitution (if any) and the names and identification numbers of the accounts(if any) in which such security deposits are held and the name of the person tocontact at such financial institution, along with any authority or releasenecessary for Lender to access information regarding such accounts; and

 

(iii)                               a statementthat identifies all owners of any interest in Borrower and any ControllingEntity and the interest held by each (unless Borrower or any Controlling Entityis a publicly-traded entity in which case such statement of ownership shall notbe required), if Borrower or a Controlling Entity is a corporation, allofficers and directors of Borrower and the Controlling Entity, and if Borroweror a Controlling Entity is a limited liability company, all managers who arenot members.

 

(d)            At any time upon Lender’s request,Borrower shall furnish to Lender each of the following. However, Lender shallnot require any of the following more frequently than quarterly except whenthere has been an Event of Default and such Event of Default is continuing, inwhich case Lender may require Borrower to furnish any of the following morefrequently:

 

(i)                                     a balancesheet, a statement of income and expenses for Borrower and a statement ofchanges in financial position of Borrower for Borrower’s most recent fiscalyear;

 

(ii)                                  a quarterly oryear-to-date income and expense statement for the Mortgaged Property; and

 

(iii)                               a monthlyproperty management report for the Mortgaged Property, showing the number ofinquiries made and rental applications received

 

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fromtenants or prospective tenants and deposits received from tenants and any otherinformation requested by Lender.

 

(e)           Upon Lender’s request at any timewhen an Event of Default has occurred and is continuing, Borrower shall furnishto Lender monthly income and expense statements and rent schedules for theMortgaged Property.

 

(f)            An individual having authority tobind Borrower shall certify each of the statements, schedules and reportsrequired by Sections 14(b) through 14(e) to be complete and accurate.Each of the statements, schedules and reports required by Sections 14(b) through14(e) shall be in such form and contain such detail as Lender mayreasonably require. Lender also may require that any of the statements,schedules or reports listed in Section 14(b) and 14(c)(i) and(ii) be audited at Borrower’s expense by independent certified publicaccountants acceptable to Lender, at any time when an Event of Default hasoccurred and is continuing or at any time that Lender, in its reasonablejudgment, determines that audited financial statements are required for anaccurate assessment of the financial condition of Borrower or of the MortgagedProperty.

 

(g)           If Borrower fails to provide in atimely manner the statements, schedules and reports required by Sections 14(b) through(e), Lender shall give Borrower Notice specifying the statements, schedules andreports required by Section 14(b) through (e) that Borrower has failedto provide. If Borrower has not provided the required statements, schedules andreports within 10 Business Days following such Notice, then Lender shall havethe right to have Borrower’s books and records audited, at Borrower’s expense,by independent certified public accountants selected by Lender in order toobtain such statements, schedules and reports, and all related costs andexpenses of Lender shall become immediately due and payable and shall become anadditional part of the Indebtedness as provided in Section 12. Notice toBorrower shall not be required in the case of an emergency, as determined inLender’s discretion, or when an Event of Default has occurred and iscontinuing.

 

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

 

(i)            Borrower authorizes Lender to obtaina credit report on Borrower at any time.

 

**15.          TAXES; OPERATING EXPENSES.**

 

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

 

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(b)           Subject to the provisions ofSection 15(c), Borrower shall (i) pay the expenses of operating,managing, maintaining and repairing the Mortgaged Property (includingutilities, repairs and replacements) before the last date upon which each suchpayment may be made without any penalty or interest charge being added, and(ii) pay insurance premiums at least 30 days prior to the expiration dateof each policy of insurance, unless applicable law specifies some lesserperiod.

 

(c)           If Lender is collecting ImpositionDeposits, to the extent that Lender holds sufficient Imposition Deposits forthe purpose of paying a specific Imposition, then Borrower shall not beobligated to pay such Imposition, so long as no Event of Default exists andBorrower has timely delivered to Lender any bills or premium notices that ithas received. If an Event of Default exists, Lender may exercise any rightsLender may have with respect to Imposition Deposits without regard to whetherImpositions are then due and payable. Lender shall have no liability toBorrower for failing to pay any Impositions to the extent that (i) anyEvent of Default has occurred and is continuing, (ii) insufficientImposition Deposits are held by Lender at the time an Imposition becomes dueand payable or (iii) Borrower has failed to provide Lender with bills andpremium notices as provided above.

 

(d)           Borrower, at its own expense, maycontest by appropriate legal proceedings, conducted diligently and in goodfaith, the amount or validity of any Imposition other than insurance premiums,if (i) Borrower notifies Lender of the commencement or expectedcommencement of such proceedings, (ii) the Mortgaged Property is not indanger of being sold or forfeited, (iii) if Borrower has not already paidthe Imposition, Borrower deposits with Lender reserves sufficient to pay thecontested Imposition, if requested by Lender, and (iv) Borrower furnisheswhatever additional security is required in the proceedings or is reasonablyrequested by Lender.

 

(e)           Borrower shall promptly deliver toLender a copy of all notices of, and invoices for, Impositions, and if Borrowerpays any Imposition directly, Borrower shall furnish to Lender receiptsevidencing such payments on or before the date this Instrument requires suchImpositions to be paid.

 

**16.          LIENS; ENCUMBRANCES.**Borroweracknowledges that, to the extent provided in Section 21, the grant,creation or existence of any mortgage, deed of trust, deed to secure debt,security interest or other lien or encumbrance (a **“Lien”**)on the Mortgaged Property (other than the lien of this Instrument) or 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”**which constitutes an Eventof Default and subjects Borrower to personal liability under the Note.

 

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**17.          PRESERVATION, MANAGEMENT ANDMAINTENANCE OF MORTGAGED PROPERTY.**

 

(a)           Borrower shall not commit waste orpermit impairment or deterioration of the Mortgaged Property.

 

(b)           Borrower shall not abandon theMortgaged Property.

 

(c)           Borrower shall restore or repairpromptly, in a good and workmanlike manner, any damaged part of the MortgagedProperty to the equivalent of its original condition, or such other conditionas Lender may approve in writing, whether or not insurance proceeds orcondemnation awards are available to cover any costs of such restoration orrepair; however, Borrower shall not be obligated to perform such restoration orrepair if (i) no Event of Default has occurred and is continuing, and(ii) Lender has elected to apply any available insurance proceeds and/orcondemnation awards to the payment of Indebtedness pursuant to Section 19(h)(ii),(iii), (iv) or (v), or pursuant to Section 20.

 

(d)           Borrower shall keep the MortgagedProperty in good repair, including the replacement of Personalty and Fixtureswith items of equal or better function and quality.

 

(e)           Borrower shall provide for professionalmanagement of the Mortgaged Property by a residential rental property managersatisfactory to Lender at all times under a contract approved by Lender inwriting, which contract must be terminable upon not more than 30 days noticewithout the necessity of establishing cause and without payment of a penalty ortermination fee by Borrower or its successors.

 

(f)            Borrower shall give Notice to Lenderof and, unless otherwise directed in writing by Lender, shall appear in anddefend any action or proceeding purporting to affect the Mortgaged Property,Lender’s security or Lender’s rights under this Instrument. Borrower shall not(and shall not permit any tenant or other person to) remove, demolish or alterthe Mortgaged Property or any part of the Mortgaged Property, including anyremoval, demolition or alteration occurring in connection with a rehabilitationof all or part of the Mortgaged Property, except (i) in connection withthe replacement of tangible Personalty, (ii) if Borrower is a cooperativehousing corporation, to the extent permitted with respect to individualdwelling units under the form of proprietary lease or occupancy agreement and(iii) repairs and replacements in connection with making an individualunit ready for a new occupant.

 

**18.          ENVIRONMENTAL HAZARDS.**

 

(a)           Except for matters described inSection 18(b), Borrower shall not cause orpermit any of the following:

 

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(i)            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;

 

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

 

(iii)          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;

 

(iv)          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;

 

(v)           any violationor noncompliance with the terms of any O&M Program as defined in subsection(d).

 

Thematters described in clauses (i) through (v) above, except asotherwise provided in Section 18(b), are referred to collectively in thisSection 18 as **“Prohibited Activities or Conditions.”**

 

(b)           Prohibited Activities and Conditionsshall not include lawful conditions permitted by an O&M Program or the safeand lawful use and storage of quantities of (i) pre-packaged supplies,cleaning materials and petroleum products customarily used in the operation andmaintenance of comparable multifamily properties, (ii) cleaning materials,personal grooming items and other items sold in pre-packaged containers forconsumer use and used by tenants and occupants of residential dwelling units inthe Mortgaged Property; and (iii) petroleum products used in the operationand maintenance of motor vehicles from time to time located on the MortgagedProperty’s parking areas, so long as all of the foregoing are used, stored,handled, transported and disposed of in compliance with Hazardous MaterialsLaws.

 

(c)           Borrower shall take all commerciallyreasonable actions (including the inclusion of appropriate provisions in anyLeases executed after the date of this Instrument) to prevent its employees,agents, and contractors, and all tenants and other occupants from causing orpermitting any Prohibited Activities or Conditions. Borrower shall not lease orallow the sublease or use of all or any portion of the Mortgaged Property toany tenant or subtenant for 

 

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nonresidentialuse by any user that, in the ordinary course of its business, would cause orpermit any Prohibited Activity or Condition.

 

(d)           As required by Lender, Borrower shallalso have established a written operations and maintenance program with respectto certain Hazardous Materials. Each such operations and maintenance programand any additional or revised operations and maintenance programs establishedfor the Mortgaged Property pursuant to Section 18(h) must be approvedby Lender and shall be referred to herein as an **“O&MProgram.”**Borrower shall comply in a timely mannerwith, and cause all employees, agents, and contractors of Borrower and anyother persons present on the Mortgaged Property to comply with each O&MProgram. Borrower shall pay all costs of performance of Borrower’s obligationsunder any O&M Program, and Lender’s out-of-pocket costs incurred inconnection with the monitoring and review of each O&M Program and Borrower’sperformance shall be paid by Borrower upon demand by Lender. Any suchout-of-pocket costs of Lender that Borrower fails to pay promptly shall becomean additional part of the Indebtedness as provided in Section 12.

 

(e)           Borrower represents and warrants toLender that, except as previously disclosed by Borrower to Lender in writing(which written disclosure may be in certain environmental assessments and otherwritten reports accepted by Lender in connection with the funding of theIndebtedness and dated prior to the date of this Instrument):

 

(i)              Borrower hasnot at any time engaged in, caused or permitted any Prohibited Activities orConditions on the Mortgaged Property;

 

(ii)             to the best ofBorrower’s knowledge after reasonable and diligent inquiry, no Prohibited Activitiesor Conditions exist or have existed on the Mortgaged Property;

 

(iii)            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 thereis an underground storage tank located on the Mortgaged Property that has beenpreviously disclosed by Borrower to Lender in writing, that tank complies withall requirements of Hazardous Materials Laws;

 

(iv)            to the best ofBorrower’s knowledge after reasonable and diligent inquiry, Borrower hascomplied with all Hazardous Materials Laws, including all requirements fornotification regarding releases of Hazardous Materials. Without limiting thegenerality of the foregoing, Borrower has obtained all Environmental Permitsrequired for the operation of the Mortgaged

 

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Propertyin accordance with Hazardous Materials Laws now in effect and all suchEnvironmental Permits are in full force and effect;

 

(v)           to the best ofBorrower’s knowledge after reasonable and diligent inquiry, 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;

 

(vi)          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;

 

(vii)         Borrower has notreceived any written complaint, order, notice of violation or othercommunication from any Governmental Authority with regard to air emissions,water discharges, noise emissions or Hazardous Materials, or any otherenvironmental, health or safety matters affecting the Mortgaged Property or anyother property of Borrower that is adjacent to the Mortgaged Property; and

 

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

 

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

 

(ii)           Borrower’sreceipt of or knowledge of any written complaint, order, notice of violation orother communication from any tenant, management agent, Governmental Authorityor other person with regard to present or future alleged Prohibited Activitiesor Conditions, or any other environmental, health or safety matters affectingthe Mortgaged Property or any other property of Borrower that is adjacent tothe Mortgaged Property;

 

(iii)          Borrower’sbreach of any of its obligations under this Section 18.

 

Anysuch notice given by Borrower shall not relieve Borrower of, or result in awaiver of, any obligation under this Instrument, the Note, or any other LoanDocument.

 

(g)           Borrower shall pay promptly the costsof any environmental inspections, tests or audits, a purpose of which is toidentify the extent or cause of or potential for a Prohibited Activity or Condition(**“Environmental Inspections”**), requiredby Lender in connection with any foreclosure or deed in lieu of foreclosure, oras a condition of Lender’s consent to any Transfer under Section 21, orrequired by Lender following a reasonable determination by Lender

 

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thatProhibited Activities or Conditions may exist. Any such costs incurred byLender (including Attorneys’ Fees and Costs and the costs of technicalconsultants whether incurred in connection with any judicial or administrativeprocess or otherwise) that Borrower fails to pay promptly shall become anadditional part of the Indebtedness as provided in Section 12. As long as(i) no Event of Default has occurred and is continuing, (ii) Borrowerhas actually paid for or reimbursed Lender for all costs of any suchEnvironmental Inspections performed or required by Lender, and(iii) Lender is not prohibited by law, contract or otherwise from doingso, Lender shall make available to Borrower, without representation of anykind, copies of Environmental Inspections prepared by third parties anddelivered to Lender. Lender hereby reserves the right, and Borrower herebyexpressly authorizes Lender, to make available to any party, including anyprospective bidder at a foreclosure sale of the Mortgaged Property, the resultsof any Environmental Inspections made by or for Lender with respect to theMortgaged Property. Borrower consents to Lender notifying any party (either aspart of a notice of sale or otherwise) of the results of any EnvironmentalInspections made by or for Lender. Borrower acknowledges that Lender cannotcontrol or otherwise assure the truthfulness or accuracy of the results of anyEnvironmental Inspections and that the release of such results to prospectivebidders at a foreclosure sale of the Mortgaged Property may have a material andadverse effect upon the amount that a party may bid at such sale. Borroweragrees that Lender shall have no liability whatsoever as a result of deliveringthe results to any third party of any Environmental Inspections made by or forLender, and Borrower hereby releases and forever discharges Lender from any andall claims, damages, or causes of action, arising out of, connected with orincidental to the results of, the delivery of any of Environmental Inspectionsmade by or for Lender.

 

(h)           If any investigation, sitemonitoring, containment, clean-up, restoration or other remedial work (**“RemedialWork”**) is necessary to comply with any Hazardous Materials Law or order of anyGovernmental Authority that has or acquires jurisdiction over the MortgagedProperty or the use, operation or improvement of the Mortgaged Property, or isotherwise required by Lender as a consequence of any Prohibited Activity orCondition or to prevent the occurrence of a Prohibited Activity or Condition,Borrower shall, by the earlier of (i) the applicable deadline required byHazardous Materials Law or (ii) 30 days after Notice from Lender demandingsuch action, begin performing the Remedial Work, and thereafter diligentlyprosecute it to completion, and shall in any event complete the work by thetime required by applicable Hazardous Materials Law. If Borrower fails to beginon a timely basis or diligently prosecute any required Remedial Work, Lendermay, at its option, cause the Remedial Work to be completed, in which caseBorrower shall reimburse Lender on demand for the cost of doing so. Anyreimbursement due from Borrower to Lender shall become part of the Indebtednessas provided in Section 12.

 

(i)            Borrower shall comply with allHazardous Materials Laws applicable to the Mortgaged Property. Without limitingthe generality of the previous sentence, Borrower shall (i) obtain andmaintain all Environmental Permits required by Hazardous Materials Laws and

 

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complywith all conditions of such Environmental Permits; (ii) cooperate with anyinquiry by any Governmental Authority; and (iii) comply with any governmentalor judicial order that arises from any alleged Prohibited Activity orCondition.

 

(j)            Borrower shall indemnify, holdharmless and defend (i) Lender, (ii) any prior owner or holder of theNote, (iii) the Loan Servicer, (iv) any prior Loan Servicer,(v) the officers, directors, shareholders, partners, employees andtrustees 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 Attorneys’ Fees andCosts and remediation costs, whether incurred in connection with any judicialor administrative process or otherwise, arising directly or indirectly from anyof the following:

 

(i)            any breach ofany representation or warranty of Borrower in thisSection 18;

 

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

 

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

 

(iv)          the presence oralleged presence of Hazardous Materials on or under the Mortgaged Property orin any of the Improvements or on or under any property of Borrower that isadjacent to the Mortgaged Property; and

 

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

 

(k)           Counsel selected by Borrower todefend Indemnitees shall be subject to the approval of those Indemnitees. Inany circumstances in which the indemnity under this Section 18 applies,Lender may employ its own legal counsel and consultants to prosecute, defend ornegotiate any claim or legal or administrative proceeding and Lender, with theprior written consent of Borrower (which shall not be unreasonably withheld,delayed or conditioned) may settle or compromise any action or legal oradministrative proceeding. However, unless an Event of Default has occurred andis continuing, or the interests of Borrower and Lender are in conflict, asdetermined by Lender in its discretion, Lender shall permit Borrower toundertake the actions referenced in this Section in accordance with thisSection and Section 18(1) so long as Lender approves suchaction, which approval shall not be unreasonably withheld or delayed. Borrowershall reimburse Lender upon demand for all costs and expenses incurred byLender, including all costs of settlements entered into in good faith,consultants’ fees and Attorneys’ Fees and Costs.

 

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(l)            Borrower shall not, without theprior written consent of those Indemnitees who are named as parties to a claimor legal or administrative proceeding (a **“Claim”**), settle orcompromise the Claim if the settlement (i) results in the entry of anyjudgment that does not include as an unconditional term the delivery by theclaimant or plaintiff to Lender of a written release of those Indemnitees,satisfactory in form and substance to Lender; or (ii) may materially andadversely affect Lender, as determined by Lender in its discretion.

 

(m)          Borrower’s obligation to indemnify theIndemnitees shall not be limited or impaired by any of the following, or by anyfailure of Borrower or any guarantor to receive notice of or consideration forany of the following:

 

(i)            any amendmentor modification of any Loan Document;

 

(ii)           any extensions oftime for performance required by any Loan Document;

 

(iii)          any provisionin any of the Loan Documents limiting Lender’s recourse to property securingthe Indebtedness, or limiting the personal liability of Borrower or any otherparty for payment of all or any part of the Indebtedness;

 

(iv)          the accuracy orinaccuracy of any representations and warranties made by Borrower under thisInstrument or any other Loan Document;

 

(v)           the release ofBorrower or any other person, by Lender or by operation of law, fromperformance of any obligation under any Loan Document;

 

(vi)          the release orsubstitution in whole or in part of any security for the Indebtedness; and

 

(vii)         Lender’sfailure to properly perfect any lien or security interest given as security forthe Indebtedness.

 

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

 

(i)            pay or satisfyany judgment or decree that may be entered against any Indemnitee orIndemnitees in any legal or administrative proceeding incident to any mattersagainst which Indemnitees are entitled to be indemnified under thisSection 18;

 

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

 

(iii)          reimburseIndemnitees for any and all expenses, including Attorneys’ Fees and Costs, paidor incurred in connection with the enforcement by Indemnitees of their rightsunder this Section 18, or in monitoring and participating in any legal oradministrative proceeding.

 

(o)           The provisions of thisSection 18 shall be in addition to any and all other obligations andliabilities that Borrower may have under applicable law or under other LoanDocuments, and each Indemnitee shall be entitled to indemnification under thisSection 18 without regard to whether Lender or that Indemnitee hasexercised any rights against the Mortgaged Property or any other security,pursued any rights against any guarantor, or pursued any other rights availableunder the Loan Documents or applicable law. If Borrower consists of more thanone person or entity, the obligation of those persons or entities to indemnifythe Indemnitees 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.Notwithstanding the foregoing, if Lender has never been amortgagee-in-possession of, or held title to, the Mortgaged Property, Borrowershall have no obligation to indemnify the Indemnitees under thisSection 18 after the date of the release of record of the lien of thisInstrument by payment in full at the Maturity Date or by voluntary prepaymentin full.

 

**19.          PROPERTY AND LIABILITY INSURANCE.**

 

(a)           Borrower shall keep the Improvementsinsured at all times against such hazards as Lender may from time to timerequire, which insurance shall include but not be limited to coverage againstloss by fire and allied perils, general boiler and machinery coverage, rentloss insurance and business income coverage. If Lender so requires, suchinsurance shall also include sinkhole insurance, mine subsidence insurance,earthquake insurance, and, if the Mortgaged Property does not conform toapplicable zoning or land use laws, building ordinance or law coverage.Borrower acknowledges and agrees that Lender’s insurance requirements maychange from time to time throughout the term of the Indebtedness. If any of theImprovements is located in an area identified by the Federal EmergencyManagement Agency (or any successor to that agency) as an area having specialflood hazards, and if flood insurance is available in that area, Borrower shallinsure such Improvements against loss by flood. All insurance required pursuantto this Section 19(a) shall be referred to as **“HazardInsurance.”**

 

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(b)           All premiums on Hazard Insurancepolicies required under Section 19(a) shall be paid in the mannerprovided in Section 7, unless Lender has designated in writing anothermethod of payment. All such policies shall also be in a form approved byLender. All policies of property damage insurance shall include anon-contributing, non-reporting mortgage clause in favor of, and in a formapproved by, Lender. Lender shall have the right to hold the original policiesor duplicate original policies of all Hazard Insurance required bySection 19(a). Borrower shall promptly deliver to Lender a copy of allrenewal and other notices received by Borrower with respect to the policies andall receipts for paid premiums. Borrower shall deliver to Lender the original(or a duplicate original) of a renewal policy in form satisfactory to Lender atleast 30 days prior to the expiration date of a policy, unless applicable lawspecifies some lesser period.

 

(c)           Borrower shall maintain at all timescommercial general liability insurance, workers’ compensation insurance andsuch other liability, errors and omissions and fidelity insurance coverages asLender may from time to time require.

 

(d)           All insurance policies and renewalsof insurance policies required by this Section 19 shall be in such amountsand for such periods as Lender may from time to time require, and shall beissued by insurance companies satisfactory to Lender.

 

(e)           Borrower shall comply with allinsurance requirements and shall not permit any condition to exist on theMortgaged Property that would invalidate any part of any insurance coveragethat this Instrument requires Borrower to maintain.

 

(f)            In the event of loss, Borrower shallgive immediate written notice to the insurance carrier and to Lender. Borrowerhereby authorizes and appoints Lender as attorney-in-fact for Borrower to makeproof of loss, to adjust and compromise any claims under policies of HazardInsurance, to appear in and prosecute any action arising from such HazardInsurance policies, to collect and receive the proceeds of Hazard Insurance,and to deduct from such proceeds Lender’s expenses incurred in the collectionof such proceeds. This power of attorney is coupled with an interest andtherefore is irrevocable. However, nothing contained in this Section 19shall require Lender to incur any expense or take any action. Lender may, atLender’s option, (i) hold the balance of such proceeds to be used toreimburse Borrower for the cost of restoring and repairing the MortgagedProperty to the equivalent of its original condition or to a condition approvedby Lender (the **“Restoration”**), or(ii) apply the balance of such proceeds to the payment of theIndebtedness, whether or not then due. To the extent Lender determines to applyinsurance proceeds to Restoration, Lender shall apply the proceeds inaccordance with Lender’s then-current policies relating to the restoration ofcasualty damage on similar multifamily properties.

 

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(g)                                 Notwithstandingany provision to the contrary in this Section 19, as long as no Event ofDefault, or any event which, with the giving of Notice or the passage of time,or both, would constitute an Event of Default, has occurred and is continuing,

 

(i)            inthe event of a casualty resulting in damage to the Mortgaged Property whichwill cost $10,000 or less to repair, the Borrower shall have the sole right tomake proof of loss, adjust and compromise the claim and collect and receive anyproceeds directly without the approval or prior consent of the Lender so longas the insurance proceeds are used solely for the Restoration of the MortgagedProperty; and

 

(ii)           inthe event of a casualty resulting in damage to the Mortgage Property which willcost more than $10,000 but less than $50,000 to repair, the Borrower isauthorized to make proof of loss and adjust and compromise the claim withoutthe prior consent of Lender, and Lender shall hold the applicable insuranceproceeds to be used to reimburse Borrower for the cost of Restoration of theMortgaged Property and shall not apply such proceeds to the payment of sums dueunder this Instrument.

 

(h)                                 Lenderwill have the right to exercise its option to apply insurance proceeds to the paymentof the Indebtedness only if Lender determines that at least one of thefollowing conditions is met:

 

(i)            anEvent of Default (or any event which, with the giving of Notice or the passageof time, or both, would constitute an Event of Default) has occurred and iscontinuing;

 

(ii)           Lenderdetermines, in its discretion, that there will not be sufficient funds frominsurance proceeds, anticipated contributions of Borrower of its own funds orother sources acceptable to Lender to complete the Restoration;

 

(iii)          Lenderdetermines, in its discretion, that the rental income from the MortgagedProperty after completion of the Restoration will not be sufficient to meet alloperating costs and other expenses, Imposition Deposits, deposits to reservesand loan repayment obligations relating to the Mortgaged Property; or

 

(iv)          Lenderdetermines, in its discretion, that the Restoration will not be completed atleast one year before the Maturity Date (or six months before the Maturity Dateif Lender determines in its discretion that re-leasing of the MortgagedProperty will be completed within such six-month period); or

 

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(v)                                 Lenderdetermines that the Restoration will not be completed within one year after thedate of the loss or casualty.

 

(i)                                     Ifthe Mortgaged Property is sold at a foreclosure sale or Lender acquires titleto the 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.

 

(j)                                     UnlessLender otherwise agrees in writing, any application of any insurance proceedsto the Indebtedness shall not extend or postpone the due date of any monthlyinstallments referred to in the Note, Section 7 of this Instrument or anyCollateral Agreement, or change the amount of such installments.

 

(k)                                  Borroweragrees to execute such further evidence of assignment of any insurance proceedsas Lender may require.

 

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

 

(a)                                  Borrowershall promptly notify Lender in writing of any action or proceeding or noticerelating to any proposed or actual condemnation or other taking, or conveyancein lieu thereof, of all or any part of the Mortgaged Property, whether director indirect (a **“Condemnation”**). Borrower shallappear in and prosecute or defend any action or proceeding relating to anyCondemnation unless otherwise directed 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, after consultation with Borrower and consistentwith commercially reasonable standards of a prudent lender. This power ofattorney is coupled with an interest and therefore is irrevocable. However,nothing contained in this Section 20 shall require Lender to incur anyexpense or take any action. Borrower hereby transfers and assigns to Lender allright, title and interest of Borrower in and to any award or payment withrespect to (i) any Condemnation, or any conveyance in lieu of Condemnation, and(ii) any damage to the Mortgaged Property caused by governmental actionthat does not result in a Condemnation.

 

(b)           Lendermay apply such awards or proceeds, after the deduction of Lender’s expensesincurred in the collection of such amounts (including Attorneys’ Fees andCosts) at Lender’s option, to the restoration or repair of the MortgagedProperty or to the payment of the Indebtedness, with the balance, if any, toBorrower. Unless Lender otherwise agrees in writing, any application of anyawards or proceeds to the Indebtedness shall not extend or postpone the duedate of any monthly installments referred to in the Note, Section 7 ofthis Instrument or any

 

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Collateral Agreement, or change the amount of such installments.Borrower agrees to execute such further evidence of assignment of any awards orproceeds as Lender may require.

 

**21.****                               TRANSFERSOF THE MORTGAGED PROPERTY OR INTERESTS IN BORROWER. [RIGHT TO UNLIMITEDTRANSFERS — WITH LENDER APPROVAL].**

 

(a)                                  “**Transfer**” means

 

(i)            asale, assignment, transfer or other disposition (whether voluntary, involuntaryor by operation of law);

 

(ii)           thegranting, creating or attachment of a lien, encumbrance or security interest(whether voluntary, involuntary or by operation of law);

 

(iii)          theissuance or other creation of an ownership interest in a legal entity,including a partnership interest, interest in a limited liability company orcorporate stock;

 

(iv)          thewithdrawal, retirement, removal or involuntary resignation of a partner in apartnership or a member or manager in a limited liability company; or

 

(v)           themerger, dissolution, liquidation, or consolidation of a legal entity or thereconstitution of one type of legal entity into another type of legal entity.

 

For purposes of defining the term “Transfer,” the term “partnership”shall mean a general partnership, a limited partnership, a joint venture and alimited liability partnership, and the term “partner” shall mean a generalpartner, a limited partner and a joint venturer.

 

(b)                                 “Transfer”does not include

 

(i)            aconveyance of the Mortgaged Property at a judicial or non-judicial foreclosuresale under this Instrument,

 

(ii)           theMortgaged Property becoming part of a bankruptcy estate by operation of lawunder the United States Bankruptcy Code, or

 

(iii)          alien against the Mortgaged Property for local taxes and/or assessments not thendue and payable.

 

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(c)                                  The occurrence of any of the followingTransfers shall not constitute an Event of Default under this Instrument, notwithstanding any provision of Section 21(e) to the contrary:

 

(i)            a Transfer to which Lender has consented;

 

(ii)           a Transfer that occurs in accordance with Section 21(d);

 

(iii)          the grant of a leasehold interest in anindividual dwelling unit for a term of two years or less not containing anoption to purchase;

 

(iv)          a Transfer of obsolete or worn out Personaltyor Fixtures that are contemporaneously replaced by items of equal or betterfunction and quality, which are free of liens, encumbrances and securityinterests other than those created by the Loan Documents or consented to byLender;

 

(v)           the creation of a mechanic’s, materialman’s,or judgment lien against the Mortgaged Property which is released of record orotherwise remedied to Lender’s satisfaction within 60 days of the date ofcreation;

 

(vi)          if Borrower is a housing cooperative, anyTransfer of the shares in the housing cooperative or any assignment of theoccupancy agreements or leases relating thereto by tenant shareholders of thehousing cooperative; and

 

(vii)         any Transfer of an interest in Borrower orany interest in a Controlling Entity (which, if such Controlling Entity wereBorrower, would result in an Event of Default) listed in (A) through (F) below(a **“Preapproved Transfer”**), underthe terms and conditions listed as items (1) through (7) below:

 

(A)          a sale or transfer to one or more of thetransferor’s immediate family members; or

 

(B)           a sale or transfer to any trust having as itssole beneficiaries the transferor and/or one or more of the transferor’simmediate family members; or

 

(C)           a sale or transfer from a trust to any one ormore of its beneficiaries who are immediate family members of Borrower or aControlling Entity; or

 

(D)          the substitution or replacement of thetrustee of any trust with a trustee who is an immediate family member of thetransferor; or

 

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(E)                                 a sale or transfer to an entity owned andcontrolled by the transferor or the transferor’s immediate family members; or

 

(F)                                 a sale or transfer to an individual or entitythat has an existing interest in the Borrower or in a Controlling Entity.

 

(1)                    Borrower shall provide Lender with prior written Notice of the proposedPreapproved Transfer; which Notice must be accompanied by anon-refundable review fee in the amount of $3,000.

 

(2)                    For the purposes of these Preapproved Transfers, a transferor’simmediate family members will be deemed to include a spouse, parent, child orgrandchild of such transferor.

 

(3)                    Either directly or indirectly, N/Ashall retain at all times not less than a N/A percent interest in theBorrower and a managing interest in the Borrower.

 

(4)                    At the time of the proposed PreapprovedTransfer, no Event of Default shall have occurred and be continuing and noevent or condition shall have occurred and be continuing that, with the givingof Notice or the passage of time, or both, would become an Event of Default.

 

(5)                    Lender shall be entitled to collect allcosts, including the cost of all title searches, title insurance and recordingcosts, and all Attorneys’ Fees and Costs.

 

(6)                    Lender shall not be entitled to collect atransfer fee as a result of these Preapproved Transfers.

 

(7)                    In the event of a Transfer prohibited by orrequiring Lender’s approval under this Section 21, this Section (c)(vii) may be modified orrendered void by Lender at Lender’s option by Notice to Borrower and thetransferee(s), as a condition of Lender’s consent.

 

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(d)                                 Theoccurrence of any of the following Transfers shall not constitute an Event of Defaultunder this Instrument, provided that Borrower has notified Lender in writingwithin 30 days following the occurrence of any of the following, and suchTransfer does not constitute an Event of Default under any other Section ofthis Instrument:

 

(i)            achange of the Borrower’s name, provided that UCC financing statements and/oramendments sufficient to continue the perfection of Lender’s security interesthave been properly filed and copies have been delivered to Lender;

 

(ii)           achange of the form of the Borrower not involving a transfer of the Borrower’sassets and not resulting in any change in liability of any Initial Owner,provided that UCC financing statements and/or amendments sufficient to continuethe perfection of Lender’s security interest have been properly filed andcopies have been delivered to Lender;

 

(iii)          themerger of the Borrower with another entity when the Borrowing entity is thesurviving entity

 

(iv)          aTransfer that occurs by devise, descent, or by operation of law upon the deathof a natural person; and

 

(v)           thegrant of an easement, if before the grant Lender determines that the easementwill not 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, including Attorneys’ Fees and Costs, incurredby Lender in connection with reviewing Borrower’s request.

 

(e)                                  Theoccurrence of any of the following Transfers shall constitute an Event of Defaultunder this Instrument:

 

(i)            aTransfer of all or any part of the Mortgaged Property or any interest in theMortgaged Property;

 

(ii)           ifBorrower is a limited partnership, a Transfer of (A) any generalpartnership interest, or (B) limited partnership interests in Borrowerthat would cause the Initial Owners of Borrower to own less than a ControllingInterest of all limited partnership interests in Borrower;

 

(iii)          ifBorrower is a general partnership or a joint venture, a Transfer of any generalpartnership or joint venture interest in Borrower;

 

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(iv)          ifBorrower is a limited liability company, (A) a Transfer of any membershipinterest in Borrower which would cause the Initial Owners to own less than aControlling Interest of all the membership interests in Borrower, (B) aTransfer of any membership or other interest of a manager in Borrower thatresults in a change of manager or (C) a change in a nonmember manager;

 

(v)           ifBorrower is a corporation (A) the Transfer of any voting stock in Borrowerwhich would cause the Initial Owners to own less than a Controlling Interest ofany class of voting stock in Borrower or (B) if the outstanding votingstock in Borrower is held by 100 or more shareholders, one or more Transfers bya single transferor within a 12-month period affecting an aggregate of 5percent or more of that stock;

 

(vi)          ifBorrower is a trust, (A) a Transfer of any beneficial interest in Borrowerwhich would cause the Initial Owners to own less than a Controlling Interest ofall the beneficial interests in Borrower, (B) the termination orrevocation of the trust, or (C) the removal, appointment or substitutionof a trustee of Borrower;

 

(vii)         aTransfer of any interest in a Controlling Entity which, if such ControllingEntity were Borrower, would result in an Event of Default under any of Sections21(e)(i) through (vi) above.

 

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.

 

(f)                                    Lendershall consent, without any adjustment to the rate at which the Indebtedness securedby this Instrument bears interest or to any other economic terms of theIndebtedness set forth in the Note, to a Transfer that would otherwise violatethis Section 21 if, prior to the Transfer, Borrower has satisfied each ofthe following requirements:

 

(i)            thesubmission to Lender of all information required by Lender to make thedetermination required by this Section 21(f);

 

(ii)           theabsence of any Event of Default;

 

(iii)          thetransferee meets all of the eligibility, credit, management and other standards(including but not limited to any standards with respect to previousrelationships between Lender and the transferee) customarily

 

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applied by Lender at the time of the proposedTransfer to the approval of borrowers in connection with the origination orpurchase of similar mortgages on multifamily properties;

 

(iv)                              thetransferee’s organization, credit and experience in the management of similarproperties are deemed by the Lender, in its discretion, to be appropriate tothe overall structure and documentation of the existing financing;

 

(v)                                 theMortgaged Property, at the time of the proposed Transfer, meets all standardsas to its physical condition, occupancy, net operating income and thecollection of reserves that are customarily applied by Lender at the time ofthe proposed Transfer to the approval of properties in connection with theorigination or purchase of similar mortgages on multifamily properties;

 

(vi)                              inthe case of a Transfer of all or any part of the Mortgaged Property, (A) theexecution by the transferee of Lender’s then-standard assumption agreementthat, among other things, requires the transferee to perform all obligations ofBorrower set forth in the Note, this Instrument and any other Loan Documents,and may require that the transferee comply with any provisions of thisInstrument or any other Loan Document which previously may have been waived ormodified by Lender, (B) if Lender requires, the transferee causes one ormore individuals or entities acceptable to Lender to execute and deliver toLender a guaranty in a form acceptable to Lender, and (C) the transfereeexecutes such additional Collateral Agreements as Lender may require;

 

(vi)                              inthe case of a Transfer of any interest in a Controlling Entity, 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 guaranty in aform acceptable to Lender; and

 

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

 

(A)          areview fee in the amount of $3,000;

 

(B)           atransfer fee in an amount equal to 1 percent of the unpaid principalbalance of the Indebtedness immediately before the applicable Transfer; and

 

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(C)                                theamount of Lender’s out-of-pocket costs (including reasonable Attorneys’ Feesand Costs) incurred in reviewing the Transfer request.

 

**22.          EVENTSOF DEFAULT.** The occurrence of any one or more of thefollowing shall constitute an Event of Default under this Instrument:

 

(a)           anyfailure by Borrower to pay or deposit when due any amount required by the Note,this Instrument or any other Loan Document;

 

(b)           anyfailure by Borrower to maintain the insurance coverage required by Section 19;

 

(c)           anyfailure by Borrower to comply with the provisions of Section 33;

 

(d)           fraudor material misrepresentation or material omission by Borrower, any of itsofficers, directors, trustees, general partners or managers or any guarantor inconnection with (i) the application for or creation of the Indebtedness, (ii) anyfinancial statement, rent schedule, or other report or information provided toLender during the term of the Indebtedness, or (iii) any request forLender’s consent to any proposed action, including a request for disbursementof funds under any Collateral Agreement;

 

(e)           anyfailure to comply with the provisions of Section 20;

 

(f)            anyEvent of Default under Section 21;

 

(g)           thecommencement of a forfeiture action or proceeding, whether civil or criminal,which, in Lender’s reasonable judgment, could result in a forfeiture of theMortgaged Property or otherwise materially impair the lien created by thisInstrument or Lender’s interest in the Mortgaged Property;

 

(h)           anyfailure by Borrower to perform any of its obligations under this Instrument(other than those specified in Sections 22(a) through (g)), as and whenrequired, which continues for a period of 30 days after Notice of such failureby Lender to Borrower. However, if Borrower’s failure to perform itsobligations as described in this Section 22(h) is of the nature thatit cannot be cured within the 30 day grace period but reasonably could be curedwithin 90 days, then Borrower shall have additional time as determined byLender in its discretion, not to exceed an additional 60 days, in which to curesuch default, provided that Borrower has diligently commenced to cure suchdefault during the 30-day grace period and diligently pursues the cure of suchdefault. However, no such Notice or grace periods shall apply in the case ofany such failure which could, in Lender’s judgment, absent immediate exerciseby Lender of a right

 

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or remedy under this Instrument, result in harm to Lender, impairmentof the Note or this Instrument or any other security given under any other LoanDocument;

 

(i)            anyfailure by Borrower to perform any of its obligations as and when required underany Loan Document other than this Instrument which continues beyond theapplicable cure period, if any, specified in that Loan Document;

 

(j)            anyexercise by the holder of any other debt instrument secured by a mortgage, deedof trust or deed to secure debt on the Mortgaged Property of a right to declareall amounts due under that debt instrument immediately due and payable;

 

(k)           Borrowervoluntarily files for bankruptcy protection under the United States BankruptcyCode or voluntarily becomes subject to any reorganization, receivership,insolvency proceeding or other similar proceeding pursuant to any other federalor state law affecting debtor and creditor rights, or an involuntary case iscommenced against Borrower by any creditor (other than Lender) of Borrowerpursuant to the United States Bankruptcy Code or other federal or state lawaffecting debtor and creditor rights and is not dismissed or discharged within90 days after filing; and

 

(l)            anyof Borrower’s representations and warranties in this Instrument is false ormisleading in any material respect.

 

**23.          REMEDIES CUMULATIVE.** Each right and remedy provided inthis Instrument is distinct from all other rights or remedies under thisInstrument or any other Loan Document or afforded by applicable law, and eachshall be cumulative and may be exercised concurrently, independently, orsuccessively, in any order.

 

**24.          FORBEARANCE.**

 

(a)           Lendermay (but shall not be obligated to) agree with Borrower, from time to time, andwithout giving notice to, or obtaining the consent of, or having any effectupon the obligations of, any guarantor or other third party obligor, to takeany of the following actions: extend the time for payment of all or any part ofthe Indebtedness; reduce the payments due under this Instrument, the Note, orany other Loan Document; release anyone liable for the payment of any amountsunder this Instrument, the Note, or any other Loan Document; accept a renewalof the Note; modify the terms and time of payment of the Indebtedness; join inany extension or subordination agreement; release any Mortgaged Property; takeor release other or additional security; modify the rate of interest or periodof amortization of the Note or change the amount of the monthly installmentspayable under the Note; and otherwise modify this Instrument, the Note, or anyother Loan Document.

 

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

 

**25.          LOAN CHARGES.** If any applicable law limiting theamount of interest or other charges permitted to be collected from Borrower isinterpreted so that any charge provided for in any Loan Document, whetherconsidered separately or together with other charges levied in connection withany other Loan Document, violates that law, and Borrower is entitled to thebenefit of that law, that charge ishereby reduced to the extent necessary to eliminate that violation. Theamounts, if any, previously paid to Lender in excess of the permitted amountsshall be applied by Lender to reduce the principal of the Indebtedness. For thepurpose 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 the Note.Unless otherwise required by applicable law, such allocation and spreadingshall be effected in such a manner that the rate of interest so computed isuniform throughout the stated term of the Note.

 

**26.          WAIVER OF STATUTE OFLIMITATIONS.** Borrowerhereby waives the right to assert any statute of limitations as a bar to the enforcementof the lien of this Instrument or to any action brought to enforce any LoanDocument.

 

**27.          WAIVER OFMARSHALLING.** Notwithstandingthe existence of any other security interests in the Mortgaged Property held byLender or by any other party, Lender shall have the right to determine theorder in which any or all of the Mortgaged Property shall be subjected to theremedies provided in this Instrument, the Note, any other Loan Document orapplicable law. Lender shall have the right to determine the order in which anyor all portions of the Indebtedness are satisfied from the proceeds realizedupon the exercise of such remedies. Borrower and any party who now or in thefuture acquires a security interest in the Mortgaged Property and who hasactual or constructive notice of this Instrument waives any and all right torequire 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

 

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entirety in connection with the exercise of any of the remediespermitted by applicable law or provided in this Instrument.

 

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

 

**29.          ESTOPPELCERTIFICATE.** Within 10 days after a request fromLender, Borrower shall deliver to Lender a written statement, signed and acknowledgedby Borrower, certifying to Lender or any person designated by Lender, as of thedate of such statement, (i) that the Loan Documents are unmodified and infull force and effect (or, if there have been modifications, that the LoanDocuments are in full force and effect as modified and setting forth suchmodifications); (ii) the unpaid principal balance of the Note; (iii) thedate to which interest under the Note has been paid; (iv) that Borrower isnot in default in paying the Indebtedness or in performing or observing any ofthe covenants or agreements contained in this Instrument or any of the otherLoan Documents (or, if the Borrower is in default, describing such default inreasonable detail); (v) whether or not there are then existing any setoffsor defenses known to Borrower against the enforcement of any right or remedy ofLender under the Loan Documents; and (vi) any additional facts requestedby Lender.

 

**30.          GOVERNINGLAW; CONSENT TO JURISDICTION AND VENUE.**

 

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

 

(b)           Borrower agrees that any controversyarising under or in relation to the Note, this Instrument, or any other LoanDocument may be litigated in the Property Jurisdiction. The state and federalcourts and authorities with jurisdiction in the Property Jurisdiction shallhave jurisdiction over all controversies that shall arise under or in relationto the Note, any security for the Indebtedness, or any other Loan Document.Borrower irrevocably consents to service, jurisdiction, and venue of suchcourts for any such litigation and waives any other venue to which it might beentitled by virtue of domicile, habitual residence or-otherwise. However, nothing in this Section 30is intended to limit Lender’s right to bring any suit, action or proceedingrelating to matters under this Instrument in any court of any other jurisdiction.

 

**31.          NOTICE.**

 

(a)           AllNotices, demands and other communications (**“Notice”**) underor concerning this Instrument shall be in writing. Each Notice shall beaddressed to the intended recipient at its

 

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address set forth in this Instrument, and shall be deemed given on theearliest to occur of (i) the date when the Notice is received by theaddressee; (ii) the first Business Day after the Notice is delivered to arecognized overnight courier service, with arrangements made for payment ofcharges for next Business Day delivery; or (iii) the third Business Dayafter the Notice is deposited in the United States mail with postage prepaid,certified mail, return receipt requested. As used in this Section 31, theterm **“Business Day”** means any day other thana Saturday, a Sunday or any other day on which Lender is not open for business.

 

(b)           Anyparty to this Instrument may change the address to which Notices intended forit are to be directed by means of Notice given to the other party in accordancewith this Section 31. Each party agrees that it will not refuse or rejectdelivery of any Notice given in accordance with this Section 31, that itwill acknowledge, in writing, the receipt of any Notice upon request by theother party and that any Notice rejected or refused by it shall be deemed forpurposes of this Section 31 to have been received by the rejecting partyon the date so refused or rejected, as conclusively established by the recordsof the U.S. Postal Service or the courier service.

 

(c)           AnyNotice under the Note and any other Loan Document that does not specify howNotices are to be given shall be given in accordance with this Section 31.

 

**32.          SALEOF NOTE; CHANGE IN SERVICER; LOAN SERVICING.** The Note ora partial interest in the Note (together with this Instrument and the otherLoan Documents) may be sold one or more times without prior Notice to Borrower.A sale may result in a change of the Loan Servicer. There also may be one ormore changes of the Loan Servicer unrelated to a sale of the Note. If there isa change of the Loan Servicer, Borrower will be given Notice of the change. Allactions regarding the servicing of the loan evidenced by the Note, includingthe collection of payments, the giving and receipt of Notice, inspections ofthe 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 Borrower receives conflicting Notices regarding theidentity of the Loan Servicer or any other subject, any such Notice from Lendershall govern.

 

**33.          SINGLEASSET BORROWER.** Until the Indebtedness is paid infull, Borrower (a) shall not own any real or personal property other thanthe Mortgaged Property and personal property related to the operation andmaintenance of the Mortgaged Property; (b) shall not operate any businessother than the management and operation of the Mortgaged Property; and (c) shallnot maintain its assets in a way difficult to segregate and identify.

 

**34.          SUCCESSORSAND ASSIGNS BOUND.** This Instrument shall bind, and therights granted by this Instrument shall inure to, the respective successors andassigns of Lender and Borrower. However, a Transfer not permitted by Section 21shall be an Event of Default.

 

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**35.         ****JOINT****AND SEVERAL LIABILITY.**If more than one person or entitysigns this Instrument as Borrower, the obligations of such persons and entitiesshall be joint and several.

 

**36.          RELATIONSHIPOF PARTIES; NO THIRD PARTY BENEFICIARY.**

 

(a)           Therelationship between Lender and Borrower shall be solely that of creditor anddebtor, respectively, and nothing contained in this Instrument shall create anyother relationship between Lender and Borrower.

 

(b)           Nocreditor of any party to this Instrument and no other person shall be a thirdparty beneficiary of this Instrument or any other Loan Document. Withoutlimiting the generality of the preceding sentence, (i) any arrangement (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, (ii)Borrower shall not be a third party beneficiary of any Servicing Arrangement,and (iii) no payment by the Loan Servicer under any Servicing Arrangementwill reduce the amount of the Indebtedness.

 

**37.      SEVERABILITY; AMENDMENTS.**Theinvalidity or unenforceability of any provision of this Instrument shall notaffect the validity or enforceability of any other provision, and all otherprovisions shall remain in full force and effect. This Instrument contains theentire agreement among the parties as to the rights granted and the obligationsassumed in this Instrument. This Instrument may not be amended or modifiedexcept by a writing signed by the party against whom enforcement is sought;provided, however, that in the event of a Transfer prohibited by or requiringLender’s approval under Section 21, any or some or all of theModifications to Instrument set forth in Exhibit B (if any) may be modified or renderedvoid by Lender at Lender’s option by Notice to Borrower and the transferee(s).

 

**38.          CONSTRUCTION.**The captions and headings of the Sections of this Instrumentare for convenience only and shall be disregarded in construing thisInstrument. Any reference in this Instrument to an “Exhibit” or a “Section”shall, unless otherwise explicitly provided, be construed as referring,respectively, to an Exhibit attached to this Instrument or to a Section ofthis Instrument. All Exhibits attached to or referred to in this Instrument areincorporated by reference into this Instrument. Any, reference in thisInstrument to a statute or regulation shall be construed as referring to thatstatute or regulation as amended from time to time. Use of the singular in thisAgreement includes the plural and use of the plural includes the singular. Asused in thisInstrument, the term “including” means “including, but not limited to.”

 

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**39.          DISCLOSUREOF INFORMATION.**Lender may furnish informationregarding Borrower or theMortgagedProperty to third parties with an existing or prospective interest in theservicing, enforcement, evaluation, performance, purchase or securitization ofthe Indebtedness, including but not limited to trustees, master servicers,special servicers, rating agencies, and organizations maintaining databases onthe underwriting and performance of multifamily mortgage loans. Borrowerirrevocably waives any and all rights it may have under. applicable law to prohibit such disclosure,including but not limited to any right of privacy.

 

**40.          NOCHANGE IN FACTS OR CIRCUMSTANCES.**Borrower warrantsthat (a) all information in the application for the loan submitted toLender (the **“Loan Application”**) and in all financial statements,rent schedules, reports, certificates and other documents submitted in connectionwith the Loan Application are complete and accurate in all material respects;and (b) there has been no material adverse change in any fact orcircumstance that would make any such information incomplete or inaccurate.

 

**41.          SUBROGATION.**If, and****to the extent that, the proceeds ofthe loan evidenced by the Note are used to pay, satisfy or discharge anyobligation of Borrower for the payment of money that is secured by apre-existing mortgage, deed of trust or other lien encumbering the MortgagedProperty (a **“Prior Lien”**), such loan proceeds shall be deemedto have been advanced by Lender at Borrower’s request, and Lender shallautomatically, and without further action on its part, be subrogated to therights, including lien priority, of the owner or holder of the obligationsecured by the Prior Lien, whether or not the Prior Lien is released.

 

**42.          ADJUSTABLERATE MORTGAGE - THIRD PARTY CAP AGREEMENT “CAP COLLATERAL.”**

 

(a)           Ifthe Note provides for interest to accrue at an adjustable or variable interestrate (other than during the “Extension Period,” as defined in the Note, ifapplicable), then the definition of “Mortgaged Property” shall include the **“Cap Collateral.”**The “Cap Collateral”shall mean

 

(i)**           **anyinterest rate cap agreement, interest rate swap agreement, or other interestrate hedging contract or agreement obtained by Borrower as a requirement of anyLoan Document or as a condition of Lender’s making the Loan (a **“Cap Agreement”**);

 

(ii)           anyand all moneys (collectively, **“Cap Payments”**) payable pursuant****to any Cap Agreement by the interest rate cap provideror other counterparty to a Cap Agreement or any guarantor of the obligations ofany such cap provider or counterparty (a **“CapProvider”**);

 

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(iii)          allrights of Borrower under any Cap Agreement and all rights of Borrower to allCap Payments, including contract rights and general intangibles, whetherexisting now or arising after the date of this Instrument;

 

(iv)          allrights, liens and security interests or guaranties granted by a Cap Provider orany other person to secure or guaranty payment of any Cap Payment whetherexisting now or granted after the date of this Instrument;

 

(v)           alldocuments, writings, books, files, records and other documents arising from orrelating to any of the foregoing, whether existing now or created after thedate of this Instrument; and

 

(vi)          allcash and non-cash proceeds and products of (ii) – (v) above.

 

 

(b)           Asadditional security for Borrower’s obligation under the Loan Documents,Borrower hereby assigns and pledges to Lender all of Borrower’s right, titleand interest in and to the Cap Collateral. Borrower has instructed and willinstruct each Cap Provider and any guarantor of a Cap Provider’s obligations tomake Cap Payments directly to Lender or to Loan Servicer on behalf of Lender.

 

(c)           Solong as there is no Event of Default, Lender or Loan Servicer will remit toBorrower each Cap Payment received by Lender or Loan Servicer with respect toany month for which Borrower has paid in full the monthly installment ofprincipal and interest or interest only, as applicable, due under the Note.Alternatively, at Lender’s option so long as there is no Event of Default,Lender may apply a Cap Payment received by Lender or Loan Servicer with respectto any month to the applicable monthly payment of accrued interest due underthe Note if Borrower has paid in full the remaining portion of such monthlypayment of principal and interest or interest only, as applicable.

 

(d)           Followingan Event of Default, in addition to any other rights and remedies Lender mayhave, Lender may retain any Cap Payments and apply them to the Indebtedness insuch order and amounts as Lender determines. Neither the existence of a CapAgreement nor anything in this Instrument shall relieve Borrower of its primaryobligation to timely pay in full all amounts due under the Note and otherwisedue on account of the Indebtedness.

 

(e)           Ifthe Note does not provide for interest to accrue at an adjustable or variableinterest rate (other than during the Extension Period) then this Section 42shall be of no force or effect.

 

**43.          ACCELERATION;REMEDIES.** If an Event of Default has occurred and iscontinuing, Lender, at Lender’s option, may declare the Indebtedness to be immediatelydue and payable without further demand, and may invoke the power of sale andany other remedies

 

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permitted by California law or provided in this Instrument or in anyother Loan Document. Borrower acknowledges that the power of sale granted inthis Instrument may be exercised by Lender without prior judicial hearing.Lender shall be entitled to collect all costs and expenses incurred in pursuingsuch remedies, including attorneys’ fees, costs of documentary evidence,abstracts and title reports.

 

If the power of sale is invoked, Lender shallexecute a written notice of the occurrence of an Event of Default and ofLender’s election to cause the Mortgaged Property to be sold and shall causethe notice to be recorded in each county in which the Mortgaged Property orsome part of the Mortgaged Property is located. Trustee shall give notice ofdefault and notice of sale and shall sell the Mortgaged Property according toCalifornia law. Trustee may sell the Mortgaged Property at the time and placeand under the terms designated in the notice of sale in one or more parcels andin such order as Trustee may determine. Trustee may postpone the sale of all orany part ofthe Mortgaged Property by public announcement at the time and place of anypreviously scheduled sale. Lender or Lender’s designee may purchase theMortgaged Property at any sale.

 

Trustee shall deliver to the purchaser at thesale, within a reasonable time after the sale, a deed conveying the MortgagedProperty so sold without any express or 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 salein the following order: (a) to all costs and expenses of the sale,including Trustee’s fees not to exceed 5% of the gross sales price, attorneys’fees and costs of title evidence; (b) to the Indebtedness in such order asLender, in Lender’s discretion, directs; and (c) the excess, if any, tothe person or persons legally entitled to the excess.

 

**44.          RECONVEYANCE.** Upon payment of the Indebtedness,Lender shall request Trustee to reconvey the Mortgaged Property and shallsurrender this Instrument and the Note to Trustee. Trustee shall reconvey theMortgaged Property without warranty to the person or persons legally entitledto the Mortgaged Property. Such person or persons shall pay Trustee’sreasonable costs incurred in so reconveying the Mortgaged Property.

 

**45.          SUBSTITUTE TRUSTEE.** Lender, at Lender’s option, may fromtime to time, by a written instrument, appoint a successor trustee, whichinstrument, when executed and acknowledged by Lender and recorded in the officeof the Recorder of the county or counties where the Mortgaged Property issituated, shall be conclusive proof of proper substitution of the successortrustee. The successor trustee shall, without conveyance of the Mortgaged Property, succeed to all the title,power and duties conferred upon the Trustee in this Instrument and byCalifornia law. The instrument of substitution shall contain the name of theoriginal Lender, Trustee and Borrower under this Instrument, the book and page wherethis Instrument is recorded, and the name and address of the successor trustee.If notice of default has been recorded, this power of substitution cannot beexercised until after the costs, fees and expenses of

 

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the then acting Trustee have been paid to such Trustee, who shall endorsereceipt of those costs, fees and expenses upon the instrument of substitution.The procedure provided for substitution of trustee in this Instrument shallgovern to the exclusion of all other provisions for substitution, statutory orotherwise.

 

**46.           STATEMENTOF OBLIGATION.**Lender may collect a fee not to exceed themaximum allowed by applicable law for furnishing the statement of obligation asprovided in Section 2943 of the Civil Code of California.

 

**47.           SPOUSE’SSEPARATE PROPERTY.**Each Borrower who is a married personexpressly agrees that recourse may be had against his or her separate property.

 

**48.           FIXTUREFILING.**This Instrument is also a fixture filing under theUniform Commercial Code of California.

 

**49.           ADDITIONALPROVISION REGARDING APPLICATION OF PAYMENTS.**In addition tothe provisions of Section 9, Borrower further agrees that, if Lenderaccepts a guaranty of only a portion of the Indebtedness, Borrower waives itsright under California Civil Code Section 2822(a), to designate theportion of the Indebtedness which shall be satisfied by a guarantor’s partialpayment.

 

**50.          ****WAIVER OF MARSHALLING; OTHER WAIVERS.**To the extentpermitted by law, Borrower waives (i) the benefit of all present or futurelaws providing for any appraisement before sale of any portion of the MortgagedProperty, (ii) all rights of redemption, valuation, appraisement, stay ofexecution, notice of election to mature or declare due the whole of theIndebtedness and marshalling in the event of foreclosure of the lien created bythis Instrument, (iii) all rights and remedies which Borrower may have orbe able to assert by reason of the laws of the State of California pertainingto the rights and remedies of sureties, (iv) the right to assert anystatute of limitations as a bar to the enforcement of the lien of thisInstrument or to any action brought to enforce the Note or any other obligationsecured by this Instrument, and (v) any rights, legal or equitable, torequire marshalling of assets or to require upon foreclosure sales in aparticular order, including any rights under California Civil Code Sections2899 and 3433. Lender shall have the right to determine the order in which anyor all of the Mortgaged Property shall be subjected to the remedies provided bythis Instrument. Lender shall have the right to determine the order in whichany or all portions of the Indebtedness are satisfied from the proceedsrealized upon the exercise of the remedies provided by this Instrument. Bysigning this Instrument, Borrower does not waive its rights under Section 2924cof the California Civil Code.

 

**51.           ADDITIONALPROVISIONS CONCERNING ENVIRONMENTAL HAZARDS.**In addition tothe provisions of Section 18:

 

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(a)                                  Exceptfor matters covered by an O&M Program or matters described in Section 18(b),Borrower shall not cause or permit any lien (whether or not such lien haspriority over the lien created by this Instrument) upon the Mortgaged Propertyimposed pursuant to any Hazardous Materials Laws. Any such lien shall beconsidered a Prohibited Activity or Condition.

 

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

 

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

 

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

 

The representations and warranties in this Section 51(b) 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)                                  Withoutlimiting any of the remedies provided in this Instrument, Borrower acknowledgesand agrees that each of the provisions in Section 18 and in this Section 51is an 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 or enforcement of the EnvironmentalProvisions shall not constitute an action within the meaning of Section 726(a) ofthe California Code of Civil Procedure or constitute a money judgment for adeficiency or a deficiency judgment within the meaning of Sections 580a, 580b,580d, or 726(b) of the California Code of Civil Procedure.

 

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

 

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**52.          WAIVER OFTRIAL BY JURY.****BORROWER AND LENDER EACH (A) COVENANTS AND AGREES NOT TO ELECT A TRIAL BYJURY 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. THISWAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLYAND VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL.**

 

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

 
| x      | Exhibit A | Description  of the Land (required). |
|--------|----------------|--------------------------------------|
|   |           |                                 |
| x      | Exhibit B | Modifications  to Instrument         |

 

 

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

 
| Waterford  Place Apartments, LLC,       |                                           |
|-----------------------------------------|------------------------------------------------|
| a  California limited liability company |                                           |
|                                    |                                           |
| By:                                     | Shea  Properties Management Company, Inc. |   |
|                                    | a  Delaware corporation                        |   |
|                                    | Its  Manager                                   |   |
|                                    |                                           |   |
|                                    |                                           |   |
|                                    | By:                                            | /s/ Authorized Signatory |   |
|                                    | Its:                                           | Treasurer |   |
|                                    |                                           |   |   |
|                                    |                                           |   |   |
|                                    | By:                                            | /s/ Authorized Signatory |   |
|                                    | Its:                                           | Vice President |   |

 

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STATE OF CALIFORNIACOUNTY OF Los Angeles

 

On April 7, 2004,**beforeme, Norma Y. Gutierrez personally appeared Robert R. O’Dell and James G.Shontere

 

x personally known to me

o proved to me on thebasis of satisfactory evidence

 

to be the person(s) whose name are subscribed to the withininstrument and acknowledged to me that they executed the same in theirauthorized capacity(ies), and that by their signature on the instrument, theperson(s) or the entity(ies) upon behalf of which the person(s) acted, executedthe instrument.

 

 
| Witness my hand and official seal. |                   |
|------------------------------------|------------------------|
|                               |                   |
| Signature                          | /s/ Norma Y. Gutierrez |  |
|                               |                        |

 

(This area for official notarial seal)

 

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**EXHIBIT B**

 

**MODIFICATIONS TO INSTRUMENT**

 

The followingmodifications are made to the text of the Instrument that precedes thisExhibit:

 

1.                                       Deleteclause (ii) of Section 2(b).

 

2.                                       Changethe reference in Section 4(e) from “six months” to “three months” andadd at the end of the Section “provided, however, that not more than 2.5%of the total units in the Mortgaged Property at any one time may be leased on amonth-to-month basis as corporate units.”

 

3.                                       Paragraph7 of the Security Instrument is amended to add the following subparagraph:

 

(f)                                    Notwithstanding theprovisions of Subparagraph 7(a), the Lender will not require Borrower todeposit with Lender amounts sufficient to accumulate with Lender the entire sumrequired to pay the water and sewer charges, Taxes, fire, hazard or otherinsurance premiums. At least annually, the Borrower must provide Lender withproof of payment of all such Impositions for which Lender is not collectingImposition Deposits. In the event that Borrower does not timely pay any of theImpositions, or fails to provide Lender with proof of such payment, or at anyother time in Lender’s discretion, Lender may require Borrower to deposit withLender the Imposition Deposits as provided in Section 7(a).

 

4.                                       Deletethe third sentence of Section 10.

 

5.                                       Inthe first sentence of Section 12(a), after the words “then Lender atLender’s option”, insert the following: “with concurrent notice to Borrower,”.

 

6.                                       Atthe end of Section 13, insert the following: “Lender shall use good faithefforts to minimize interference with tenants of the Improvements whileconducting any environmental inspections and tests.”

 

B-1

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7.                                       Inthe first sentence of Section 14(a), after the words “management agent’soffices”, insert “or at the corporate offices of Shea Properties”.

 

8.                                       Section 14(c)(iii) isdeleted in its entirety and replaced with the following:

 

(iii)          astatement that identifies all owners of any interest in Borrower, if Borroweror a Controlling Entity is a corporation, all officers and directors of Borrowerand the Controlling Entity, and if Borrower or a Controlling Entity is alimited liability company, all managers who are not members;

 

9.                                       Addthe following to the end of clause (i) of Section 14(d);“Notwithstanding the foregoing provision of this subsection (i), so long asthere is no Event of Default Lender shall not require financial statementsother than an annual balance sheet and income statement for the Borrower whichare combined with the balance sheet and income statement of J. F. Shea Co., Inc.,which financial statements shall be delivered to Lender, without the necessityof a request by Lender, within 120 days following the end of each fiscal yearof Borrower.”

 

10.                                 InSection 15(a), replace the words “when due” with the words “prior to delinquency”.

 

11.                                 Atthe end of Section 17, after the word “Personalty”, insert “, and exceptthat without the consent of Lender, Borrower may make alterations and additionsto the Improvements provided that such alterations and additions are completedin a lien-free and good and workmanlike manner in accordance with applicablelaws, that neither the performance nor completion of the alterations oradditions adversely affects the structural integrity of the Improvements or theoccupancy of the Improvements, and the aggregate costs of all such alterationsand additions does not exceed $1,500,000.”

 

12.                                 InSection 18(e)(iv), insert the words “in all material respects” followingand word “complied” in the first sentence.

 

13.                                 InSection 18(f)(ii), delete the words “or other person”.

 

14.                                 Section 18(g) ismodified to provide that with respect to any Environmental Inspection requiredby Lender as a condition of Lender’s consent to any Transfer under Section 21,Lender shall (x) provide to Borrower reasonable notice of theEnvironmental Inspection, (y) to the extent reasonable, not interfere withthe

 

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rights of tenants in possession, and (z) shall cause anycontractor, consultant or other entity-conducting such Environmental Inspectionto have insurance coverage for damages to the Property caused by suchcontractor, consultant or other entity as a result of such EnvironmentalInspection.

 

15.                                 InSection 18(h), replace the words “on a timely basis” appearing in the secondsentence with the words “prior to the applicable deadline required by HazardousMaterials Laws”.

 

16.                                 InSection 18(i), insert the words “in all material respects” following andword “comply” in the first sentence.

 

17.                                 Insertthe following provision after the words “any of the following” in the firstsentence of Section 18(j):

 

except to the extent that any of the foregoing are conclusivelydetermined to have first arisen as a result of acts or occurrences which firstoccurred after such time as Borrower has sold, transferred or assigned all ofits right, title and interest and into the Mortgaged Property to Lender, or asuccessor or assign of Lender pursuant to a foreclosure or deed-in-lieu offoreclosure.

 

18.                                 InSection 19(b), in the last sentence, change “30 days” to “15 days”.

 

19.                                 InSection 19(f), after the third sentence, add the following: “However, ifno Event of Default has occurred, (i) if the cost of a “Restoration”(hereinafter defined) is reasonably estimated to be $1,500,000 or less, Borrowershall have the exclusive right to adjust or compromise claims under policies ofinsurance for payment of the costs associated with such Restoration, providedthat any such adjustment or compromise shall be subject to Lender’s priorwritten approval; and (ii) in all other instances, Lender shall consultwith and allow the participation of Borrower in connection with any adjustmentor compromise of claims under policies of property insurance, but Lender’sdeterminations in connection with any adjustment or compromise shall control.”

 

20.                                 Atthe end of Section 20(b), insert the following: “The foregoingnotwithstanding, Lender shall. notexercise its option to apply Condemnation awards or proceeds to the payment of Indebtedness if the conditions setforth in Section 19(h) for the application of insurance proceeds tothe Restoration are satisfied in connection with the restoration of the Mortgaged Property followingthe Condemnation.” For

 

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the purposes of the preceding sentence, references in Section 19(h) to“the date of the loss or casualty” shall mean the date of the Condemnation.

 

21.                                 Section 21(c) issupplemented and modified by adding the following provision:

 

(viii)                        A Transfer to any of thefollowing (“a Pre-Approved Entity”) under the terms and conditions set forth initems (i)-(viii) below:

 

A)           aTransfer of all or any part of the Property or any interest in the Property toa Shea Family Member (as hereinafter defined), or a Shea Controlled Entity (ashereinafter defined);

 

B)            aTransfer of interests in the Borrower, provided that after giving effect to theTransfer, the condition set forth in item (iii) below is satisfied;

 

C)            aTransfer of interests in a Controlling Entity, provided that after givingeffect to the Transfer, the condition set forth in item (iii) below issatisfied;

 

D)            aTransfer of all or part of the interests of any general partner of Borrower,provided that after giving effect to the Transfer, the condition set forth initem (iii) below is satisfied.

 

E)            Borrowerdelivers written notice of the Transfer to Lender not less than ten (10) BusinessDays’ prior to a Transfer of the Property, and not more than ten (10) BusinessDays’ following any other Transfer.

 

(i)            Lenderreceives copies of the Transfer documents for a Transfer of the Property, andcopies of any modifications to the organizational documents of Borrower or anyControlling Entity or general partner resulting from any other Transfer.

 

(ii)           Uponthe Transfer, one or more Shea Family Members (other than Claire Shea) and/or

 

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one or more Shea Controlled Entities (other than one solely controlledby Claire Shea or her spouse, issue or any trust established by or for their benefit)shall own, collectively, not less than 50.1% of the ownership interests in eachof (w) the Property and (x) Borrower or a corporation, partnership,limited liability company, joint venture, or trust which is a ControllingEntity in Borrower.

 

(iii)                               Lenderapproves the Transfer, which approval shall be granted if the Transfer meetsthe terms and conditions of this Section 21(b)(7).

 

(iv)                              Withrespect to a transfer of the Property, (x) the transferee executes anassumption agreement that is acceptable to Lender and which requires thetransferee to perform all obligations of Borrower set forth in the Note,subject to the provisions of section 9 of the Note, this Instrument and in anyother Loan Document, (y) the Borrower either agrees to remain primarilyliable for all obligations of Borrower under the Note or, executes and deliversa limitedguaranty in form and substance satisfactory to Lender, and (z) uponLender’s approval of the Transfer, the assumption agreement is recorded in theLand Records of the Properly Jurisdiction.

 

(v)                                 Withrespect to a Transfer of the Property, Borrower pays the cost of all titlesearches, title insurance and recording costs, and all fees and out of pocketcosts of Lender’s legal counsel related to the Transfer.

 

(vi)                              Lendershall not collect a transfer fee of 1% of the unpaid principal balance in

 

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connection with the Transfer to the Pre-Approved Entity. In the case ofa Transfer of an interest in the Property, or in the case of a Transfer of aninterest in Borrower, or any general partner of Borrower which is accompaniedby a material change in the organizational documents of any such entity,Borrower shall pay a review fee in the amount of $2,000.

 

(vii)         Atthe time of the Transfer, there exists no Event of Default under thisInstrument.

 

For the purposes of this Section 21(c)(viii), the following termsshall have the following meanings:

 

“Shea Family Member” means John Shea, Peter Shea, Edmund Shea, ClaireShea and their respective spouses and issue, and trusts established by or forthe benefit of any of the foregoing.

 

“Shea Controlled Entity” means any corporation, partnership, limitedliability company, or joint venture, at least 50.1% of the ownership interestsin which are held by one or more Shea Family Members or another Shea ControlledEntity.

 

22.                                 DeleteSection 21(f)(iv).

 

23.                                 DeleteSection 22(e).

 

25.                                 InSection 22(h), in the second sentence, change “90 days” to “120 days”, andchange “60 days” to “90 days”.

 

26.                                 Clause(ii) of Section 29 to read as follows: “confirmation of Lender’scalculation of the unpaid principal balance of the Note;”.

 

27.                                 Section 19is modified by adding a new Subsection (1) as follows:

 

(1)                                  Onthe date of this Instrument, Borrower maintains property insurance that failsto meet Lender’s current (as of the date

 

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of this Instrument) insurance requirements for Borrower and-the Mortgaged Property (the“Insurance Deficiency”) in that such insurance is for an “agreed amount” andnot for “full replacement” value.

 

28.                                 Notwithstandingthe provisions of Section 37, the modifications set forth in this Exhibit Bshall become ineffective upon a Transfer that requires Lender’s consent or uponany Transfer that constitutes an Event of Default under Section 21(a) ofthis Instrument.

 

29.                                 Newsection is added to the instrument that precedes this Exhibit:

 

**53.****                               CONDOMINIUMPROVISIONS.**

 

(a)                                  Borrowerrepresents and warrants that, to the best of its knowledge, the MortgagedProperty is a condominium (the “Condominium”) and constitutes all of Unit 1 (asdefined in the Condominium Instruments”) and a 97% tenancy-in-common interestin the common elements comprising the Waterford Place Condominiums, aCondominium, as established under the applicable Condominium Act codified inCalifornia Civil Code Sections 1350 et seq., as from time to time amended (the“Condominium Act”). The Declaration, as recorded in the official records ofAlameda County, State of California as Document No. 2003653881, Bylaws andPlats establishing and describing the Condominium, are collectively referred tobelow as the “Condominium Instruments.”

 

(b)                                 Borrowerhereby agrees that the Condominium Instruments will not be modified or amendedwithout the prior written consent of Lender until the Indebtedness has beenpaid in full.

 

(c)                                  Borrowerrepresents and warrants that none of the units in Unit 1 and its 97%tenancy-in-common interest in the common elements comprising the Condominiumhave been sold, conveyed or encumbered or are subject to any agreement toconvey or encumber. Borrower agrees that it will not in any way pledge, sell,convey or encumber or enter into a contract or agreement to pledge, sell,convey or encumber any unit in Unit 1 or any of its 97% tenancy-in-commoninterest in the common elements of the Condominium unless expressly agreed toin writing by Lender.

 

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(d)                                 Borroweragrees that it shall own, operate and maintain the Mortgaged Property inaccordance with the terms of this Instrument and operate the Mortgaged Propertysolely as a rental apartment project.

 

(e)                                  TheMortgaged Property granted, conveyed and assigned to Lender hereunder shallinclude all rights, easements, rights of way, reservations and powers of theBorrower under the Condominium Act and the Condominium Instruments inBorrower’s capacity as owner of the Mortgaged Property and as Declarant as wellas any rights that Borrower may have, in any capacity, under the CondominiumAct and the Condominium Instruments in addition to Borrower’s rights as ownerof any of the units or the Condominium, specifically including but not limitedto all rights to approve any amendments to the Condominium Instruments and allrights to expand the Condominium.

 

(f)                                    Borrowerhereby irrevocably constitutes and appoints Lender as Borrower’s proxy andattorney-in-fact (which appointment shall be deemed coupled with an interest)for and in its behalf to perform all of the obligations of Borrower and toexercise all of the rights and powers of Borrower under the CondominiumInstruments without any liability therefor or thereunder (except for grossnegligence or willful misconduct). Borrower hereby instructs and grants andgives to Lender full power and authority to do and perform all and every actand thing whatsoever authorized, permitted, requisite or necessary to be doneby Borrower under the provisions of the Condominium Instruments to all intentsand purposes the same as Borrower might do, hereby ratifying and confirming allsuch attorney shall lawfully do or choose to do or be done by virtue hereof, itbeing understood and agreed that the aforesaid provisions impose no burden orobligation on the Lender to do or perform any act whatsoever. It shall be adefault under this Instrument if (i) Borrower terminates or revokes orattempts to terminate or revoke the aforesaid appointment of Lender as Borrower’sproxy or attorney-in-fact either permanently or as to any election in theCondominium Act or Condominium Instruments or (ii) Borrower attempts tomodify the terms of the Condominium Instruments without the prior writtenconsent of Lender. Notwithstanding anything in this paragraph to the contrary,the rights and powers of Borrower granted in this

 

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paragraph may not be exercised by Lender prior to the occurrence of anEvent of Default.

 

(g)                                 Borrowerhereby agrees that it shall maintain insurance in accordance with Lender’srequirements on all of the Mortgaged Property, including any common areas.

 

(h)                                 Nothingcontained herein is intended to or shall be construed to constitute Lender asthe “Declarant” under the Condominium Act and/or the Condominium Instruments oras owner of the Condominium, a partner or joint venturer of Borrower.

 

(i)                                     Borrowerhereby agrees to indemnify and hold Lender harmless from and against any andall losses, cost, liabilities, or damages (including attorney’s fees anddisbursements) arising out of (i) the failure of the Borrower to complywith any state or local law, ordinance, statute, or regulation by anygovernmental authority covering the condominium at the Mortgaged Property; or (ii) anyclaim of any unit owner or tenant of any unit owner as a result of any violation,breach, misrepresentation, fraud, act, or omission of any obligation ofBorrower as set forth in the Condominium Instruments.

 

30.                                 Section 21(c) (vii) isdeleted in its entirety.

 

31.                                 Newsection is added to the Security Instrument as follows:

 

**54.**       Borrowermust promptly notify Lender in writing if there is a significant waterintrusion event or if mold, fungus, microbial contamination or pathogenicorganisms (collectively “Mold”) are detected at the Mortgaged Property at anytime during the term of this Instrument.

 

At any time, Lender, in its discretion, may require that a professionalinspector inspect the Mortgaged Property for Mold and Borrower shall beresponsible for the cost of any such inspection. Lender shall not require such professionalinspection any more frequently than once every three years unless Mold isdetected at the Mortgaged Property or if there is a significant water intrusionevent. If Mold is detected at the Mortgaged Property or if there is asignificant water intrusion event, Lender, at Lender’s discretion, may requirethat a professional inspector inspect the Mortgaged Property as frequently asLender determines is necessary until any issue with Mold or water intrusion isresolved to

 

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Lender’s satisfaction. Borrower shall be responsible for the cost ofall such professional inspections.

 

Borrower must keep all moisture management plan documentation at theMortgaged Property or the management agent’s office and available for the LoanServicer to review during the Mortgaged Property annual assessment inspection.

 

If Lender determines that the Property qualifies to have the annualinspection waived, Borrower must execute the following certification each yearthat the inspection is waived.

 

Borrower has not received any written complaint, notice, letter orother written communication from tenants, management agent or governmentalauthorities regarding odors, indoor air quality, mold, fungus, microbialcontamination or pathogenic organisms (“Mold”) or any activity, condition,event or omission that causes or facilitates the growth of Mold on or in anypart of the Property or that Borrower has investigated and fully and properlyremediated such activity, condition, event or omission in compliance with theMoisture Management Plan for the Property.

 

 
|   | INITIAL: | /s/ Authorized Signatory |
|--------|----------|--------------------------|

 

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