LENDER PROMPT NOTICE OF SUCH CONTEST AND, UPON
REQUEST BY LENDER FROM TIME TO TIME, NOTICE OF THE STATUS OF SUCH CONTEST BY
BORROWER AND/OR INFORMATION OF THE CONTINUING SATISFACTION OF THE CONDITIONS SET
FORTH IN CLAUSES (A) THROUGH (E) OF THIS SECTION 3.05, (G) UPON A FINAL
DETERMINATION OF SUCH CONTEST, BORROWER SHALL PROMPTLY COMPLY WITH THE
REQUIREMENTS THEREOF, AND (H) PRIOR TO AND DURING SUCH CONTEST, IF REASONABLY
REQUIRED BY LENDER, BORROWER SHALL FURNISH TO LENDER SECURITY SATISFACTORY TO
LENDER, IN ITS REASONABLE DISCRETION, AGAINST LOSS OR INJURY BY REASON OF SUCH
CONTEST OR THE NON-COMPLIANCE WITH SUCH INSURANCE REQUIREMENT (AND IF SUCH
SECURITY IS CASH, LENDER SHALL DEPOSIT THE SAME IN AN INTEREST-BEARING ACCOUNT
AND INTEREST ACCRUED THEREON, IF ANY, SHALL BE DEEMED TO CONSTITUTE A PART OF
SUCH SECURITY FOR PURPOSES OF THIS SECURITY INSTRUMENT, BUT LENDER (I) MAKES NO
REPRESENTATION OR WARRANTY AS TO THE RATE OR AMOUNT OF INTEREST, IF ANY, WHICH
MAY ACCRUE THEREON AND SHALL HAVE NO LIABILITY IN CONNECTION THEREWITH AND (II)
SHALL NOT BE DEEMED TO BE A TRUSTEE OR FIDUCIARY WITH RESPECT TO ITS RECEIPT OF
ANY SUCH SECURITY AND ANY SUCH SECURITY MAY BE COMMINGLED WITH OTHER MONIES OF
LENDER). IF BORROWER SHALL USE THE PROPERTY OR ANY PORTION THEREOF IN ANY MANNER
WHICH COULD PERMIT THE INSURER TO CANCEL ANY INSURANCE REQUIRED TO BE PROVIDED
HEREUNDER, BORROWER IMMEDIATELY SHALL OBTAIN A SUBSTITUTE POLICY WHICH SHALL
SATISFY THE REQUIREMENTS OF THIS SECURITY INSTRUMENT AND WHICH SHALL BE
EFFECTIVE ON OR PRIOR TO THE DATE ON WHICH ANY SUCH OTHER INSURANCE POLICY SHALL
BE CANCELED. BORROWER SHALL NOT BY ANY ACTION OR OMISSION INVALIDATE ANY
INSURANCE POLICY REQUIRED TO BE CARRIED HEREUNDER UNLESS SUCH POLICY IS REPLACED
AS AFORESAID, OR MATERIALLY INCREASE THE PREMIUMS ON ANY SUCH POLICY ABOVE THE
NORMAL PREMIUM CHARGED FOR SUCH POLICY. BORROWER SHALL COOPERATE WITH LENDER IN
OBTAINING FOR LENDER THE BENEFITS OF ANY INSURANCE PROCEEDS LAWFULLY OR
EQUITABLY PAYABLE TO LENDER IN CONNECTION WITH THE TRANSACTION CONTEMPLATED
HEREBY.
SECTION 3.06. EVENT OF DEFAULT DURING RESTORATION. NOTWITHSTANDING ANYTHING TO
THE CONTRARY CONTAINED IN THIS SECURITY INSTRUMENT INCLUDING, WITHOUT
LIMITATION, THE PROVISIONS OF THIS ARTICLE III, IF, AT ANY TIME DURING ANY WORK,
OR AT ANY TIME THAT LENDER IS HOLDING OR IS ENTITLED TO RECEIVE ANY INSURANCE
PROCEEDS PURSUANT TO THIS SECURITY INSTRUMENT, A DEFAULT EXISTS AND IS
CONTINUING (WHETHER OR NOT IT CONSTITUTES AN EVENT OF DEFAULT), LENDER SHALL
THEN HAVE NO
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OBLIGATION TO DISBURSE SUCH PROCEEDS FOR WORK AND LENDER SHALL HAVE THE RIGHT
AND OPTION, TO BE EXERCISED IN ITS SOLE AND ABSOLUTE DISCRETION AND ELECTION,
WITH RESPECT TO THE INSURANCE PROCEEDS, EITHER TO RETAIN AND APPLY SUCH PROCEEDS
IN REIMBURSEMENT FOR THE ACTUAL COSTS, FEES AND EXPENSES INCURRED BY LENDER IN
ACCORDANCE WITH THE TERMS HEREOF IN CONNECTION WITH THE ADJUSTMENT OF THE LOSS
AND, IF SUCH DEFAULT BECOMES AN EVENT OF DEFAULT, ANY BALANCE TOWARD PAYMENT OF
THE DEBT (WITHOUT ANY PREPAYMENT FEE OR CHARGE OF ANY