BE SUFFICIENT TO PAY THE ITEMS SET FORTH IN (I) AND (II), THEN BORROWER
SHALL PROMPTLY PAY TO LENDER, UPON DEMAND, AN AMOUNT WHICH LENDER SHALL ESTIMATE
AS SUFFICIENT TO MAKE UP THE DEFICIENCY. NOTWITHSTANDING THE FOREGOING, IF
INSURANCE COVERAGE REQUIRED PURSUANT TO SECTION 7.1 HEREOF IS PROVIDED THROUGH A
BLANKET INSURANCE POLICY, BORROWER SHALL NOT BE OBLIGATED TO MAKE MONTHLY ESCROW
PAYMENTS ON ACCOUNT OF THE APPLICABLE INSURANCE PREMIUMS SO LONG AS BORROWER
MAINTAINS THE INSURANCE COVERAGE REQUIRED BY SECTION 7.1 IN FULL FORCE AND
EFFECT AND BORROWER MAINTAINS ON DEPOSIT IN THE TAX AND INSURANCE SUBACCOUNT, IN
ADDITION TO THE AMOUNTS ESCROWED FOR TAXES, AN AMOUNT EQUAL TO ONE-QUARTER OF
THE ANNUAL INSURANCE PREMIUM ESTIMATED BY LENDER TO BE PAYABLE FOR A REPLACEMENT
POLICY PROVIDING THE COVERAGE REQUIRED BY SECTION 7.1 HEREOF WITH RESPECT TO THE
PROPERTY. PROVIDED THAT NO MONETARY EVENT OF DEFAULT OR MATERIAL NON-MONETARY
EVENT OF DEFAULT HAS OCCURRED AND IS CONTINUING, LENDER WILL (A) APPLY FUNDS IN
THE TAX AND INSURANCE SUBACCOUNT TO PAYMENTS OF TAXES AND (UNLESS THE PROPERTY
IS INSURED UNDER A BLANKET INSURANCE POLICY) INSURANCE PREMIUMS REQUIRED TO BE
MADE BY BORROWER PURSUANT TO SECTION 5.2 HEREOF AND SECTION 7.1 HEREOF, PROVIDED
THAT BORROWER HAS PROMPTLY SUPPLIED LENDER WITH NOTICES OF ALL TAXES AND
INSURANCE PREMIUMS DUE AND PAID ANY DEFICIENCY BETWEEN THE AMOUNTS HELD IN THE
TAX AND INSURANCE SUBACCOUNT AND THE AMOUNTS DUE WITH RESPECT TO SUCH TAXES AND
INSURANCE PREMIUMS, OR (B) REIMBURSE BORROWER FOR SUCH AMOUNTS UPON PRESENTATION
OF EVIDENCE OF PAYMENT; SUBJECT, HOWEVER, TO BORROWER'S RIGHT TO CONTEST TAXES
IN ACCORDANCE WITH SECTION 5.2 HEREOF. IN MAKING ANY PAYMENT RELATING TO TAXES
AND INSURANCE PREMIUMS, LENDER MAY DO SO ACCORDING TO ANY BILL, STATEMENT OR
ESTIMATE PROCURED FROM THE APPROPRIATE PUBLIC OFFICE (WITH RESPECT TO TAXES) OR
INSURER OR AGENT (WITH RESPECT TO INSURANCE PREMIUMS), WITHOUT INQUIRY INTO THE
ACCURACY OF SUCH BILL, STATEMENT OR ESTIMATE OR INTO THE VALIDITY OF ANY TAX,
ASSESSMENT, SALE, FORFEITURE, TAX LIEN OR TITLE OR CLAIM THEREOF.
3.4
CAPITAL EXPENSE RESERVES.
3.4.1
RESERVE DEPOSITS. BORROWER SHALL PAY TO LENDER $7,602.33 (THE
"MONTHLY CAPITAL RESERVE DEPOSIT AMOUNT") ON EACH PAYMENT DATE (SUCH DEPOSITS,
THE "MONTHLY CAPITAL RESERVE DEPOSITS"). LENDER WILL TRANSFER SUCH AMOUNTS INTO
A SUBACCOUNT (THE "CAPITAL RESERVE SUBACCOUNT"). ADDITIONALLY, UPON THIRTY (30)
DAYS' PRIOR NOTICE TO BORROWER, LENDER MAY REASSESS THE AMOUNT OF THE MONTHLY
PAYMENT REQUIRED UNDER THIS SECTION 3.4 FROM TIME TO TIME IN ITS REASONABLE
DISCRETION (BASED UPON ITS THEN CURRENT UNDERWRITING STANDARDS). PROVIDED THAT
NO EVENT OF DEFAULT HAS OCCURRED AND IS CONTINUING, LENDER SHALL DISBURSE FUNDS
HELD IN THE CAPITAL RESERVE SUBACCOUNT TO BORROWER, WITHIN FIFTEEN (15) DAYS
AFTER THE DELIVERY BY BORROWER TO LENDER OF A REQUEST THEREFOR (BUT NOT MORE
OFTEN THAN ONCE PER MONTH), IN MINIMUM AMOUNTS OF AT LEAST $5,000 PROVIDED THAT
(I) SUCH DISBURSEMENT IS FOR AN APPROVED CAPITAL EXPENSE; (II) LENDER SHALL HAVE
(IF IT DESIRES) VERIFIED (BY AN INSPECTION CONDUCTED AT BORROWER'S EXPENSE (WITH
RESPECT TO ANY