Document:

Exhibit 10.20

 

Freddie Mac Loan Number 002669129

 

MULTIFAMILY NOTE

MULTISTATE - FIXED TO FLOAT

(REVISION DATE 3-25-2004)

 

	
  US $52,000,000

  	
   

  	
  Effective Date: April 01,
  2004

  

 

FOR VALUE RECEIVED, the undersigned (together with such party’s or
parties’ successors and assigns, “Borrower”),
jointly and severally (if more than one) promises to pay to the
order of Berkshire Mortgage Finance Limited Partnership, the principal
sum of fifty-two million dollars (US $52,000,000), with interest
on the unpaid principal balance, as hereinafter provided.

 

1.        Defined
Terms.

 

(a)       As used in this Note:

 

“Adjustable Interest Rate” means the
variable annual interest rate calculated for each Interest Adjustment Period so
as to equal the Index Rate for such Interest Adjustment Period (truncated at
the fifth (5th) decimal
place if necessary) plus the Margin.

 

“Amortization Period” means a period of 360
full consecutive calendar months.

 

“Base Recourse” means a portion of the
Indebtedness equal to zero percent (0%) of the original principal
balance of this Note.

 

“Business Day” means any day other than a
Saturday, a Sunday or any other day on which Lender is not open for business.

 

“Default Rate” means (i) during the
Fixed Rate Period, an annual interest rate equal to four (4) percentage
points above the Fixed Interest Rate; and (ii) during the Extension
Period, a variable annual interest rate equal to four (4) percentage
points above the Adjustable Interest Rate in effect from time to time. However,
at no time will the Default Rate exceed the Maximum Interest Rate.

 

“Extended Maturity Date” means, if the
Extension Period becomes effective pursuant to this Note, the earlier of (i) May 01,
2014, and (ii) the date on which the unpaid principal balance of this
Note becomes due and payable by acceleration or

 

1

 

otherwise
pursuant to the Loan Documents or the exercise by Lender of any right or remedy
thereunder.

 

“Extension Period” means the twelve (12)
consecutive calendar months period commencing on the Scheduled Initial Maturity
Date.

 

“Fixed Interest Rate” means the annual
interest rate of four and sixty-seven percent (4.67%).

 

“Fixed Rate Period” means the period
beginning on the date of this Note and continuing through May 01, 2013.

 

“Index Rate” means, for any Interest
Adjustment Period, the Reference Bill® Index Rate for such Interest Adjustment
Period.

 

“Initial Maturity Date” means the earlier
of (i) May 01, 2013 (the “Scheduled
Initial Maturity Date”), and (ii) the date on which the unpaid
principal balance of this Note becomes due and payable by acceleration or
otherwise pursuant to the Loan Documents or the exercise by Lender of any right
or remedy thereunder.

 

“Installment Due Date” means, for any
monthly installment of interest only or principal and interest, the date on
which such monthly installment is due and payable pursuant to Section 3 of
this Note. The “First Installment Due Date” under
this Note is June 01, 2004.

 

“Interest Adjustment Period” means each
successive one calendar month period during the Extension Period and until the
entire Indebtedness is paid in full.

 

“Lender” means the holder from time to time
of this Note.

 

“LIBOR Index” means the British Bankers
Association’s (BBA) one (1) month LIBOR Rate for United States Dollar
deposits, as displayed on the LIBOR Index Page used to establish the LIBOR
Index Rate.

 

“LIBOR Index Rate” means, for any Interest
Adjustment Period after the first Interest Adjustment Period, the BBA’s LIBOR
Rate for the LIBOR Index released by the BBA most recently preceding the first
day of such Interest Adjustment Period, as such LIBOR Rate is displayed on the
LIBOR Index Page. The LIBOR Index Rate for the first Interest Adjustment Period
means the British Bankers Association’s (BBA) LIBOR Rate for the LIBOR Index
released by the BBA most recently preceding the first day of the month in which
the first Interest Adjustment Period begins, as such LIBOR Rate is displayed on
the LIBOR Index Page.

 

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“LIBOR Index Page” is the Bloomberg L.P., page “BBAM”,
or such other page for the LIBOR Index as may replace page BBAM on
that service, or at the option of Lender (i) the applicable page for
the LIBOR Index on another service which electronically transmits or displays
BBA LIBOR Rates, or (ii) any publication of LIBOR rates available from the
BBA. In the event the BBA ceases to set or publish a LIBOR rate/interest
settlement rate for the LIBOR Index, Lender will designate an alternative
index, and such alternative index shall constitute the LIBOR Index Rate.

 

“Loan” means the loan evidenced by this
Note.

 

“Margin” means two and one-half (2.5)
percentage points (250 basis points).

 

“Maturity Date” means the Extended Maturity
Date unless pursuant to Section 3(f) of this Note the Extension
Period does not or cannot become effective, in which case the Maturity Date
means the Initial Maturity Date.

 

“Maximum Interest Rate” means the rate of
interest that results in the maximum amount of interest allowed by applicable
law.

 

“Reference Bills®” means the unsecured
general obligations of the Federal Home Loan Mortgage Corporation (“Freddie Mac”) designated by Freddie Mac
as “Reference Bills®” and having original durations to maturity most comparable
to the term of the Reference Bill Index, and issued by Freddie Mac at regularly
scheduled auctions. In the event Freddie Mac shall at any time cease to
designate any unsecured general obligations of Freddie Mac as “Reference Bills”,
then at the option of Lender (i) Lender may select from time to time
another unsecured general obligation of Freddie Mac having original durations
to maturity most comparable to the term of the Reference Bill Index and issued
by Freddie Mac at regularly scheduled auctions, and the term “Reference Bills”
as used in this Note shall mean such other unsecured general obligations as
selected by Lender; or (ii) for any one or more Interest Adjustment
Periods, Lender may use the applicable LIBOR Index Rate as the Index Rate for
such Interest Adjustment Period(s).

 

“Reference Bill Index” means the one-month
Reference Bills. One-month reference bills have original durations to maturity
of approximately 30 days.

 

“Reference Bill Index Rate” means, for any
Interest Adjustment Period after the first Interest Adjustment Period, the
Money Market Yield for the Reference Bills as established by the Reference Bill
auction conducted by Freddie Mac most recently preceding the first day of such
Interest Adjustment Period, as displayed on the Reference Bill Index Page. The
Reference Bill Index Rate for the first

 

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Interest
Adjustment Period means the Money Market Yield for the Reference Bills as
established by the Reference Bill auction conducted by Freddie Mac most
recently preceding the first day of the month in which the first Interest
Adjustment Period begins, as displayed on the Reference Bill Index Page. The “Reference Bill Index Page” is the Freddie
Mac Debt Securities Web Page (accessed via the Freddie Mac internet site at
www.freddiemac.com), or at the option of Lender, any publication of Reference
Bills auction results available from Freddie Mac. However, if Freddie Mac has
not conducted a Reference Bill auction within the 60-calendar day period prior
to the first day of an Interest Adjustment Period, the Reference Bill Index
Rate for such Interest Adjustment Period will be the LIBOR Index Rate for such
Interest Adjustment Period.

 

“Remaining Amortization Period” means, at
any point in time, the number of consecutive calendar months equal to the
number of months in the Amortization Period minus the number of scheduled
monthly installments of principal and interest that have elapsed since
the date of this Note.

 

“Security Instrument” means the multifamily
mortgage, deed to secure debt or deed of trust effective as of the effective
date of this Note, from Borrower to or for the benefit of Lender and securing
this Note.

 

“Window Period” means the Extension Period.

 

“Yield Maintenance Period” means the period
from and including the date of this Note until but not including the Scheduled
Initial Maturity Date.

 

(b)       Other capitalized terms
used but not defined in this Note shall have the meanings given to such terms
in the Security Instrument.

 

2.        Address
for Payment. All payments due under this Note shall be
payable at Berkshire Mortgage Finance Limited Partnership, One Beacon
Street, 14th Floor, Boston, MA 02108, or such other
place as may be designated by Notice to Borrower from or on behalf of Lender.

 

3.        Payments.

 

(a)       During the Fixed Rate
Period, interest will accrue on the outstanding principal balance of this Note
at the Fixed Interest Rate, subject to the provisions of Section 8 of this
Note.

 

4

 

During the
Extension Period, interest will accrue on the outstanding principal balance of
this Note at the Adjustable Interest Rate, subject to the provisions of Section 8
of this Note.

 

(b)       Interest under this Note
shall be computed, payable and allocated on the basis of an actual/360 interest
calculation schedule (interest is payable for the actual number of days in each
month, and each month’s interest is calculated by multiplying the unpaid
principal amount of this Note as of the first day of the month for which
interest in being calculated by the Fixed Interest Rate (during the Fixed Rate
Period) or the applicable Adjustable Interest Rate (during the Extension
Period), dividing the product by 360, and multiplying the quotient by the
number of days in the month for which interest is being calculated). For
convenience in determining the amount of a monthly installment of principal and
interest under this Note, Lender will use a 30/360 interest calculation payment
schedule (each year is treated as consisting of twelve 30-day months). However,
as provided above, the portion of the monthly installment actually payable as
and allocated to interest will be based upon an actual/360 interest calculation
schedule, and the amount of each installment attributable to principal and the
amount attributable to interest will vary based upon the number of days in the
month for which such installment is paid. Each monthly payment of principal and
interest will first be applied to pay in full interest due, and the balance of
the monthly payment paid by Borrower will be credited to principal.

 

(c)       Unless disbursement of
principal is made by Lender to Borrower on the first day of a calendar month,
interest for the period beginning on the date of disbursement and ending on and
including the last day of such calendar month shall be payable by Borrower
simultaneously with the execution of this Note. If disbursement of principal is
made by Lender to Borrower on the first day of a calendar month, then no
payment will be due from Borrower at the time of the execution of this Note.
The Installment Due Date for the first monthly installment payment under Section 3(d) of
interest only or principal and interest, as applicable, will be the First
Installment Due Date set forth in Section l(a) of this Note. Except
as provided in this Section 3(c) and in Section 10, accrued
interest will be payable in arrears.

 

(d)       Beginning on the First
Installment Due Date, and continuing until and including the monthly
installment due on the Initial Maturity Date, principal and accrued interest
only shall be payable by Borrower in consecutive monthly installments due and
payable on the first day of each calendar month. The amount of the monthly
installment of principal and interest payable pursuant to this Section 3(d) on
an Installment Due Date shall be two hundred sixty-eight thousand seven
hundred fifty-four and 82/100 dollars ($268.754.82).

 

(e)       Except as otherwise
provided in this Section 3(e), all remaining Indebtedness, including all
principal and interest, shall be due and payable by Borrower on the Initial
Maturity Date. However, so long as (i) the Initial Maturity Date has not
occurred prior to the Scheduled Initial Maturity Date, and (ii) no Event
of Default or event or circumstance which, with the giving of notice or passage
of time or both, could constitute an Event of Default exists on the Scheduled
Initial Maturity Date, then the Extension Period automatically will become
effective and the date for full payment of the Indebtedness automatically shall
be extended until the

 

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Extended Maturity
Date. If the Extension Period becomes effective, monthly installments of
principal and interest or interest only will be payable during the Extension
Period as provided in Section 3(f). Anything in Section 21 of the
Security Instrument to the contrary notwithstanding, during the Extension
Period, Borrower will not request that Lender consent to, and Lender will not
consent to, a Transfer that, absent such consent, would constitute an Event of
Default.

 

(f)        If the Extension Period
becomes effective, beginning on June 01, 2013 and continuing until
and including the monthly installment due on the Extended Maturity Date,
principal and accrued interest shall be payable by Borrower in consecutive monthly
installments due and payable on the first day of each calendar month. The
amount of the monthly installment of principal and interest payable pursuant to
this Section 3(f) on an Installment Due Date shall be calculated so
as to equal the monthly payment amount which would be payable on the
Installment Due Date as if the unpaid principal balance of this Note as of the
first day of the Interest Adjustment Period immediately preceding the
Installment Due Date was to be fully amortized, together with interest thereon
at the Adjustable Interest Rate in effect for such Interest Adjustment Period,
in equal consecutive monthly payments paid on the first day of each calendar
month over the Remaining Amortization Period.

 

(g)       During the Extension
Period, Lender shall provide Borrower with notice, given in the manner
specified in the Security Instrument, of the amount of each monthly installment
due under this Note. However, if Lender has not provided Borrower with prior
notice of the monthly payment due on any Installment Due Date, then Borrower
shall pay on that Installment Due Date an amount equal to the monthly
installment payment for which Borrower last received notice. If Lender at any
time determines that Borrower has paid one or more monthly installments in an
incorrect amount because of the operation of the preceding sentence, or because
Lender has miscalculated the Adjustable Interest Rate or has otherwise
miscalculated the amount of any monthly installment, then Lender shall give
notice to Borrower of such determination. If such determination discloses that
Borrower has paid less than the full amount due for the period for which the
determination was made, Borrower, within 30 calendar days after receipt of the
notice from Lender, shall pay to Lender the full amount of the deficiency. If
such determination discloses that Borrower has paid more than the full amount
due for the period for which the determination was made, then the amount of the
overpayment shall be credited to the next installment(s) of interest only
or principal and interest, as applicable, due under this Note (or, if an Event
of Default has occurred and is continuing, such overpayment shall be credited
against any amount owing by Borrower to Lender).

 

(h)       All payments under this
Note shall be made in immediately available U.S. funds.

 

(i)        Any regularly scheduled
monthly installment of interest only or principal and interest payable pursuant
to this Section 3 that is received by Lender before the date it is due
shall be deemed to have been received on the due date for the purpose of
calculating interest due.

 

6

 

(j)        Any accrued interest
remaining past due for 30 days or more, at Lender’s discretion, may be added to
and become part of the unpaid principal balance of this Note and any reference
to “accrued interest” shall refer to accrued interest which has not become part
of the unpaid principal balance. Any amount added to principal pursuant to the
Loan Documents shall bear interest at the applicable rate or rates specified in
this Note and shall be payable with such interest upon demand by Lender and
absent such demand, as provided in this Note for the payment of principal and
interest.

 

(k)       In accordance with Section 14,
interest charged under this Note cannot exceed the Maximum Interest Rate. If
the Adjustable Interest Rate at any time exceeds the Maximum Interest Rate,
resulting in the charging of interest hereunder to be limited to the Maximum
Interest Rate, then any subsequent reduction in the Adjustable Interest Rate
shall not reduce the rate at which interest under this Note accrues below the
Maximum Interest Rate until the total amount of interest accrued hereunder
equals the amount of interest which would have accrued had the Adjustable Interest
Rate at all times been in effect.

 

4.        Application
of Payments. If at any time Lender receives, from Borrower or
otherwise, any amount applicable to the Indebtedness which is less than all
amounts due and payable at such time, Lender may apply the amount received to
amounts then due and payable in any manner and in any order determined by
Lender, in Lender’s discretion. Borrower agrees that neither Lender’s
acceptance of a payment from Borrower in an amount that is less than all
amounts then due and payable nor Lender’s application of such payment shall
constitute or be deemed to constitute either a waiver of the unpaid amounts or
an accord and satisfaction.

 

5.        Security.
The Indebtedness is secured by, among other things, the
Security Instrument, and reference is made to the Security Instrument for other
rights of Lender as to collateral for the Indebtedness.

 

6.        Acceleration.
If an Event of Default has occurred and is continuing, the
entire unpaid principal balance, any accrued interest, any prepayment premium
payable under Section 10, and all other amounts payable under this Note
and any other Loan Document, shall at once become due and payable, at the
option of Lender, without any prior notice to Borrower (except if notice is
required by applicable law, then after such notice). Lender may exercise this
option to accelerate regardless of any prior forbearance. For purposes of
exercising such option, Lender shall calculate the prepayment premium as if
prepayment occurred on the date of acceleration. If prepayment occurs
thereafter, lender shall recalculate the prepayment premium as of the actual
prepayment date.

 

7.        Late
Charge.

 

(a)       If any monthly
installment of interest or principal and interest or other amount payable under
this Note or under the Security Instrument or any other Loan Document is not

 

7

 

received in full
by Lender (i) during the Fixed Rate Period, within ten (10) days
after the installment or other amount is due, or (ii) during the Extension Period,
within five (5) days after the installment or other amount is due,
counting from and including the date such installment or other amount is due
(unless applicable law requires a longer period of time before a late charge
may be imposed, in which event such longer period shall be substituted),
Borrower shall pay to Lender, immediately and without demand by Lender, a late
charge equal to five percent (5%) of such installment or other amount due
(unless applicable law requires a lesser amount be charged, in which event such
lesser amount shall be substituted).

 

(b)       Borrower acknowledges
that its failure to make timely payments will cause Lender to incur additional
expenses in servicing and processing the Loan and that it is extremely
difficult and impractical to determine those additional expenses. Borrower
agrees that the late charge payable pursuant to this Section represents a
fair and reasonable estimate, taking into account all circumstances existing on
the date of this Note, of the additional expenses Lender will incur by reason
of such late payment. The late charge is payable in addition to, and not in
lieu of, any interest payable at the Default Rate pursuant to Section 8.

 

8.        Default
Rate.

 

(a)       So long as (i) any
monthly installment under this Note remains past due for thirty (30) days or
more or (ii) any other Event of Default has occurred and is continuing,
then notwithstanding anything in Section 3 of this Note to the contrary,
interest under this Note shall accrue on the unpaid principal balance from the
Installment Due Date of the first such unpaid monthly installment or the
occurrence of such other Event of Default, as applicable, at the Default Rate.

 

(b)       From and after the
Maturity Date, the unpaid principal balance shall continue to bear interest at
the Default Rate until and including the date on which the entire principal
balance is paid in full.

 

(c)       Borrower acknowledges
that (i) its failure to make timely payments will cause Lender to incur
additional expenses in servicing and processing the Loan, (ii) during the
time that any monthly installment under this Note is delinquent for thirty (30)
days or more, Lender will incur additional costs and expenses arising from its
loss of the use of the money due and from the adverse impact on Lender’s
ability to meet its other obligations and to take advantage of other investment
opportunities; and (iii) it is extremely difficult and impractical to
determine those additional costs and expenses. Borrower also acknowledges that,
during the time that any monthly installment under this Note is delinquent for
thirty (30) days or more or any other Event of Default has occurred and is
continuing, Lender’s risk of nonpayment of this Note will be materially
increased and Lender is entitled to be compensated for such increased risk.
Borrower agrees that the increase in the rate of interest payable under this
Note to the Default Rate represents a fair and reasonable estimate, taking into
account all circumstances existing on the date of this Note, of the additional
costs and expenses Lender will incur by reason of the

 

8

 

Borrower’s
delinquent payment and the additional compensation Lender is entitled to
receive for the increased risks of nonpayment associated with a delinquent
loan.

 

9.        Limits
on Personal Liability.

 

(a)       Except as otherwise
provided in this Section 9, Borrower shall have no personal liability
under this Note, the Security Instrument or any other Loan Document for the
repayment of the Indebtedness or for the performance of any other obligations
of Borrower under the Loan Documents and Lender’s only recourse for the
satisfaction of the Indebtedness and the performance of such obligations shall
be Lender’s exercise of its rights and remedies with respect to the Mortgaged
Property and to any other collateral held by Lender as security for the
Indebtedness. This limitation on Borrower’s liability shall not limit or impair
Lender’s enforcement of its rights against any guarantor of the Indebtedness or
any guarantor of any other obligations of Borrower.

 

(b)       Borrower shall be
personally liable to Lender for the amount of the Base Recourse, plus any other
amounts for which Borrower has personal liability under this Section 9.

 

(c)       In addition to the Base
Recourse, Borrower shall be personally liable to Lender for the repayment of a
further portion of the Indebtedness equal to any loss or damage suffered by
Lender as a result of the occurrence of any of the following events:

 

(i)                        Borrower
fails to pay to Lender upon demand after an Event of Default all Rents to which
Lender is entitled under Section 3(a) of the Security Instrument and
the amount of all security deposits collected by Borrower from tenants then in
residence. However, Borrower will not be personally liable for any failure
described in this subsection (i) if Borrower is unable to pay to Lender
all Rents and security deposits as required by the Security Instrument because
of a valid order issued in a bankruptcy, receivership, or similar judicial
proceeding.

 

(ii)                     Borrower
fails to apply all insurance proceeds and condemnation proceeds as required by
the Security Instrument. However, Borrower will not be personally liable for
any failure described in this subsection (ii) if Borrower is unable to
apply insurance or condemnation proceeds as required by the Security Instrument
because of a valid order issued in a bankruptcy, receivership, or similar
judicial proceeding.

 

(iii)                  Borrower fails
to comply with Section 14(g) or (h) of the Security Instrument
relating to the delivery of books and records, statements, schedules and
reports.

 

9

 

(iv)                 Borrower fails to
pay when due in accordance with the terms of the Security Instrument the amount
of any item below marked “Deferred”; provided however, that if no item is
marked “Deferred”, this Section 9(c)(iv) shall be of no force or
effect.

 

[Deferred]      Hazard Insurance
premiums or other insurance premiums,

[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)

 

(d)       In addition to the Base
Recourse, Borrower shall be personally liable to Lender for:

 

(i)                        the
performance of all of Borrower’s obligations under Section 18 of the
Security Instrument (relating to environmental matters);

 

(ii)                     the costs of
any audit under Section 14(g) of the Security Instrument; and

 

(iii)                  any costs and
expenses incurred by Lender in connection with the collection of any amount for
which Borrower is personally liable under this Section 9, including
Attorneys’ Fees and Costs and the costs of conducting any independent audit of
Borrower’s books and records to determine the amount for which Borrower has
personal liability.

 

(e)       All payments made by
Borrower with respect to the Indebtedness and all amounts received by Lender
from the enforcement of its rights under the Security Instrument and the other
Loan Documents shall be applied first to the portion of the Indebtedness for
which Borrower has no personal liability.

 

(f)        Notwithstanding the
Base Recourse, Borrower shall become personally liable to Lender for the
repayment of all of the Indebtedness upon the occurrence of any of the
following Events of Default:

 

(i)                        Borrower’s
ownership of any property or operation of any business not permitted by Section 33
of the Security Instrument;

 

(ii)                     a Transfer
(including, but not limited to, a lien or encumbrance) that is an Event of
Default under Section 21 of the Security Instrument, other than a Transfer
consisting solely of the involuntary removal or involuntary withdrawal of a
general partner in a limited partnership or a manager in a limited liability
company; or

 

10

 

(iii)                  fraud or written
material misrepresentation by Borrower or any officer, director, partner,
member or employee of Borrower in connection with the application for or
creation of the Indebtedness or any request for any action or consent by
Lender.

 

(g)       To the extent that Borrower has personal
liability under this Section 9, Lender may exercise its rights against
Borrower personally without regard to whether Lender has exercised any rights
against the Mortgaged Property or any other security, or pursued any rights
against any guarantor, or pursued any other rights available to Lender under
this Note, the Security Instrument, any other Loan Document or applicable law.
To the fullest extent permitted by applicable law, in any action to enforce
Borrower’s personal liability under this Section 9, Borrower waives any
right to set off the value of the Mortgaged Property against such personal
liability.

 

10.      Voluntary and Involuntary Prepayments.

 

(a)       Any receipt by Lender of principal due
under this Note prior to the Scheduled Initial Maturity Date, other than
principal required to be paid in monthly installments pursuant to Section 3,
constitutes a prepayment of principal under this Note. Without limiting the
foregoing, any application by Lender, prior to the Scheduled Initial Maturity
Date, of any proceeds of collateral or other security to the repayment of any
portion of the unpaid principal balance of this Note constitutes a prepayment
under this Note.

 

(b)       Borrower may voluntarily prepay all of
the unpaid principal balance of this Note on a Business Day designated as the
date for such prepayment in a Notice from Borrower to Lender given at least 30
days prior to the date of such prepayment. Unless otherwise expressly provided
in the Loan Documents, Borrower may not voluntarily prepay less than all of the
unpaid principal balance of this Note.

 

(c)       Borrower acknowledges that Lender has
agreed that principal may be prepaid other than on the last calendar day of a
month only because, for the purposes of the accrual of interest, any prepayment
received by Lender on any day other than the last calendar day of the month
shall be deemed to have been received on the last calendar day of the month in
which the prepayment occurs.

 

(d)       In order to voluntarily prepay all or any
part of the principal of this Note, Borrower must also pay to Lender, together
with the amount of principal being prepaid, (i) all accrued and unpaid
interest due under this Note, plus (ii) all other sums due to Lender at
the time of such prepayment, plus (ii) any prepayment premium calculated
pursuant to Section 10(e).

 

(e)       Except as provided in Section 10(f),
a prepayment premium shall be due and payable by Borrower in connection with
any prepayment of principal under this Note during the

 

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Yield Maintenance Period.
The prepayment premium shall be whichever is the greater of subsections (A) and
(B) below:

 

(A)     1.0% of the amount of principal being
prepaid; or

 

(B)      the product obtained by multiplying:

 

(1)                     the amount of
principal being prepaid or accelerated, by

 

(2)                     the excess
(if any) of the Monthly Note Rate over the Assumed Reinvestment Rate, by

 

(3)                     the Present
Value Factor.

 

For purposes of
subsection (B), the following definitions shall apply:

 

Monthly
Note Rate: one-twelfth (1/12) of the Fixed Interest Rate,
expressed as a decimal calculated to five digits.

 

Prepayment
Date: in the case of a voluntary prepayment, the date on
which the prepayment is made; in the case of the application by Lender of
collateral or security to a portion of the principal balance, the date of such
application.

 

Assumed
Reinvestment Rate: one-twelfth (1/12) of the yield rate, as
of the date 5 Business Days before the Prepayment Date, on the 3.625%
U.S. Treasury Security due May 15, 2013, as reported in The Wall Street Journal, expressed as a
decimal calculated to five digits. In the event that no yield is published on
the applicable date for the Treasury Security used to determine the Assumed
Reinvestment Rate, Lender, in its discretion, shall select the non-callable
Treasury Security maturing in the same year as the Treasury Security specified
above with the lowest yield published in The
Wall Street Journal as of the applicable date. If the publication of
such yield rates in The Wall Street Journal is
discontinued for any reason, Lender shall select a security with a comparable
rate and term to the Treasury Security used to determine the Assumed
Reinvestment Rate. The selection of an alternate security pursuant to this Section shall
be made in Lender’s discretion.

 

Present
Value Factor: the factor that discounts to present value the
costs resulting to Lender from the difference in interest rates during the
months remaining in the Yield Maintenance Period, using the Assumed

 

12

 

Reinvestment Rate as the
discount rate, with monthly compounding, expressed numerically as follows:

 

	
   

  	
  

  

 

n =
number of months or partial months remaining in Yield Maintenance Period

 

ARR =
Assumed Reinvestment Rate

 

(f)        Notwithstanding any other provision of
this Section 10, no prepayment premium shall be payable with respect to (i) any
prepayment made during the Window Period, or (ii) any prepayment occurring
as a result of the application of any insurance proceeds or condemnation award
under the Security Instrument.

 

(g)       Unless Lender agrees otherwise in
writing, a permitted or required prepayment of less than the unpaid principal
balance of this Note shall not extend or postpone the due date of any
subsequent monthly installments or change the amount of such installments.

 

(h)       Borrower recognizes that any prepayment
of any of the unpaid principal balance of this Note, whether voluntary or
involuntary or resulting from an Event of Default by Borrower, will result in
Lender’s incurring loss, including reinvestment loss, additional expense and
frustration or impairment of Lender’s ability to meet its commitments to third
parties. Borrower agrees to pay to Lender upon demand damages for the detriment
caused by any prepayment, and agrees that it is extremely difficult and
impractical to ascertain the extent of such damages. Borrower therefore
acknowledges and agrees that the formula for calculating prepayment premiums
set forth in this Note represents a reasonable estimate of the damages Lender
will incur because of a prepayment. Borrower further acknowledges that any
lockout and the prepayment premium provisions of this Note are a material part
of the consideration for the Loan, and that the terms of this Note are in other
respects more favorable to Borrower as a result of the Borrower’s voluntary
agreement to the lockout and prepayment premium provisions.

 

11.      Costs and Expenses. To
the fullest extent allowed by applicable law, Borrower shall pay all expenses
and costs, including Attorneys’ Fees and Costs incurred by Lender as a result
of any default under this Note or in connection with efforts to collect any
amount due under this Note, or to enforce the provisions of any of the other
Loan Documents, including those incurred in post-judgment collection efforts
and in any bankruptcy proceeding (including any action for relief from the
automatic stay of any bankruptcy proceeding) or judicial or non-judicial
foreclosure proceeding.

 

13

 

12.      Forbearance.
Any forbearance by Lender in exercising any right or remedy under
this Note, the Security Instrument, or any other Loan Document or otherwise
afforded by applicable law, shall not be a waiver of or preclude the exercise
of that or any other right or remedy. The acceptance by Lender of any payment
after the due date of such payment, or in an amount which is less than the
required payment, shall not be a waiver of Lender’s right to require prompt
payment when due of all other payments or to exercise any right or remedy with
respect to any failure to make prompt payment. Enforcement by Lender of any
security for Borrower’s obligations under this Note shall not constitute an
election by Lender of remedies so as to preclude the exercise of any other
right or remedy available to Lender.

 

13.      Waivers. Borrower and
all endorsers and guarantors of this Note and all other third party obligors
waive presentment, demand, notice of dishonor, protest, notice of acceleration,
notice of intent to demand or accelerate payment or maturity, presentment for
payment, notice of nonpayment, grace, and diligence in collecting the
Indebtedness.

 

14.      Loan
Charges. Neither this Note nor any of the other Loan Documents shall
be construed to create a contract for the use, forbearance or detention of
money requiring payment of interest at a rate greater than the Maximum Interest
Rate. If any applicable law limiting the amount of interest or other charges
permitted to be collected from Borrower in connection with the Loan is
interpreted so that any interest or other charge provided for in any Loan
Document, whether considered separately or together with other charges provided
for in any other Loan Document, violates that law, and Borrower is entitled to
the benefit of that law, that interest or charge is hereby reduced to the
extent necessary to eliminate that violation. The amounts, if any, previously
paid to Lender, in excess of the permitted amounts shall be applied by Lender
to reduce the unpaid principal balance of this Note. For the purpose of
determining whether any applicable law limiting the amount of interest or other
charges permitted to be collected from Borrower has been violated, all
Indebtedness that constitutes interest, as well as all other charges made in
connection with the Indebtedness that constitute interest, shall be deemed to
be allocated and spread ratably over the stated term of this Note. Unless
otherwise required by applicable law, such allocation and spreading shall be
effected in such a manner that the rate of interest so computed is uniform
throughout the stated term of this Note.

 

15.      Commercial Purpose. Borrower
represents that Borrower is incurring the Indebtedness solely for the purpose
of carrying on a business or commercial enterprise, and not for personal,
family, household, or agricultural purposes.

 

16.      Counting of Days. Except
where otherwise specifically provided, any reference in this Note to a period
of “days” means calendar days, not Business Days.

 

17.      Governing
Law. This Note shall be governed by the law of the Property
Jurisdiction.

 

14

 

18.      Captions. The captions
of the Sections of this Note are for convenience only and shall be disregarded
in construing this Note.

 

19.      Notices; Written Modifications.

 

(a)       All Notices, demands and other
communications required or permitted to be given pursuant to this Note shall be
given in accordance with Section 31 of the Security Instrument.

 

(b)       Any modification or amendment to this
Note shall be ineffective unless in writing signed by the party sought to be
charged with such modification or amendment; provided, however, that in the
event of a Transfer under the terms of the Security Instrument that requires
Lender’s consent, any or some or all of the Modifications to Multifamily. Note
set forth in Exhibit A to this Note may be modified or rendered void by
Lender at Lender’s option, by Notice to Borrower and the transferee, as a
condition of Lender’s consent.

 

20.      Consent to Jurisdiction and Venue. Borrower
agrees that any controversy arising under or in relation to this Note may be
litigated in the Property Jurisdiction. The state and federal courts and
authorities with jurisdiction in the Property Jurisdiction shall have jurisdiction
over all controversies that shall arise under or in relation to this Note.
Borrower irrevocably consents to service, jurisdiction, and venue of such
courts for any such litigation and waives any other venue to which it might be
entitled by virtue of domicile, habitual residence or otherwise. However,
nothing in this Note is intended to limit any right that Lender may have to
bring any suit, action or proceeding relating to matters arising under this
Note in any court of any other jurisdiction.

 

21.      WAIVER OF TRIAL BY JURY. BORROWER AND
LENDER EACH (A) AGREES NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY
ISSUE ARISING OUT OF THIS NOTE OR THE RELATIONSHIP BETWEEN THE PARTIES AS
LENDER AND BORROWER THAT IS TRIABLE OF RIGHT BY A JURY AND (B) WAIVES ANY
RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE TO THE EXTENT THAT ANY SUCH
RIGHT EXISTS NOW OR IN THE FUTURE. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS
SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF
COMPETENT LEGAL COUNSEL.

 

22.      State-Specific Provisions.

 

A.                      If a
guarantor is liable for only a portion of the Indebtedness, Borrower hereby
waives its rights under California Civil Code Section 2822(a) to
designate the portion of the Indebtedness that shall be satisfied by Borrower’s
partial payment.

 

15

 

ATTACHED
EXHIBIT. The Exhibit noted below, if marked with an “X” in the space
provided, is attached to this Note:

 

x         Exhibit A   Modifications
to Multifamily Note

 

IN
WITNESS WHEREOF, and in consideration of the Lender’s
agreement to lend Borrower the principal amount set forth above, Borrower has
signed and delivered this Note under seal or has caused this Note to be signed
and delivered under seal by its duly authorized representative.

 

95-4869325

Borrower’s Social
Security/Employer ID Number

 

 

	
  Waterford Place
  Apartments, LLC, 

  a California limited liability company

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  Shea Properties
  Management Company, Inc.

  a Delaware corporation 

  Its Manage

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Authorized
  Signatory

  	
   

  	
   

  
	
   

  	
  Its:

  	
  Treasurer

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  PAY TO
  THE ORDER OF

  
	
   

  	
   

  	
   

  	
                                                                                          
  WITHOUT RECOURSE THIS
                                  
  OF                         
  20         

  INTEREST ON THIS WITHIN NOTE TO ACCRUE FROM

  
	
   

  	
  By:

  	
  /s/ Authorized
  Signatory

  	
   

  
	
   

  	
  Its:

  	
  Vice President

  	
   

  
	
   

  	
   

  	
   

  	
                                                                                       ,
  20           

  
	
   

  	
   

  	
   

  	
  BERKSHIRE
  MORTGAGE FINANCE LIMITED PARTNERSHIP

  BY: BRF CORPORATION, ITS GENERAL PARTNER

  
	
   

  	
   

  	
   

  	
  BY:

  	
  /s/ Authorized
  Signatory

  
	
   

  	
   

  	
   

  	
   

  	
  SUE
  NELSON, SENIOR VICE PRESIDENT-IRVINE

  

 

16

 

EXHIBIT A

 

MODIFICATIONS TO MULTIFAMILY NOTE

 

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

 

1.                         After the
word “prepayment” in the last sentence of Paragraph 10(e), insert the
following: “, and such prepayment premium shall be the only amount payable by
Borrower with respect to any damages Lender may incur because of a prepayment.”

 

2.                         After the
second reference to “Lender” in the third sentence of Paragraph 14, insert the
following: “.without prepayment premium or penalty,”.

 

3.                         The
Modifications set forth in this Exhibit A shall become ineffective upon a
Transfer under the Security Instrument that requires Lender’s consent or upon
any Transfer that constitutes an Event of Default under Section 21(a) of
the Security Instrument. .

 

 

	
   

  	
   

  	
  INITIAL:

  	
  /s/ Authorized
  Signatory

  

 

A-1Exhibit 10.21

 

	
  RECORDING REQUESTED BY

  FIDELITY TITLE COMPANY

  	
   

  
	
  725112095 / 1149582

  	
   

  
	
   

  	
   

  
	
  RECORDING
  REQUESTED BY

  AND WHEN RECORDED MAIL TO:

  	
   

  
	
   

  	
  [SEAL]

  
	
  L.
  Anthony Beall, Esquire

  Troutman Sanders LLP

  P.O. Box 1122

  Richmond, Virginia 23218-1122

  	
  [BARCODE]

  

 

MULTIFAMILY
DEED OF TRUST,

ASSIGNMENT
OF RENTS,

SECURITY
AGREEMENT AND FIXTURE FILING

(CALIFORNIA
— REVISION DATE 05-11-2004)

 

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

 

 

FHLMC Loan No. 487798287

Waterford Place Apartments

 

MULTIFAMILY
DEED OF TRUST,

ASSIGNMENT
OF RENTS,

SECURITY
AGREEMENT AND

FIXTURE
FILING

(CALIFORNIA
- REVISION DATE 05-11-2004)

 

THIS MULTIFAMILY DEED OF TRUST, ASSIGNMENT OF RENTS, SECURITY AGREEMENT
AND FIXTURE FILING (the “Instrument”)
is made to be effective as of this 31st day of March, 2008, by WATERFORD PLACE APARTMENTS, LLC, a limited
liability company organized and existing under the laws of California, whose
address is c/o J. F. Shea Co., Inc., 655 Brea Canyon Road, Walnut,
California 91789, as trustor (“Borrower”),  to FIRST
AMERICAN TITLE INSURANCE COMPANY, as trustee (“Trustee”), for the benefit of DEUTSCHE BANK BERKSHIRE MORTGAGE, INC., a
corporation organized and existing under the laws of Delaware, whose address is
One Beacon Street, 14th Floor, Boston, Massachusetts 02108, as beneficiary (“Lender”). Borrower’s organizational
identification number, if applicable, is 200405510066.

 

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

 

TO SECURE TO LENDER the repayment of the Indebtedness evidenced by
Borrower’s Multifamily Note payable to Lender, dated as of the date of this
Instrument, and maturing on May 1, 2014 (the “Maturity Date”), in the principal amount of $13,245,000.00,
and all renewals, extensions and modifications of the Indebtedness, the payment
of all sums advanced by or on behalf of Lender to protect the security of this
Instrument under Section 12, and the performance of the covenants and
agreements of Borrower contained in the Loan Documents.

 

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

 

UNIFORM COVENANTS

REVISION
DATE 02-15-2008

 

Covenants. In consideration of the mutual promises set forth in this Instrument,
Borrower and Lender covenant and agree as follows:

 

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

 

1

 

(a)                     “Attorneys’ Fees and Costs” means (i) fees and out-of-pocket costs
of Lender’s and Loan Servicer’s attorneys, as applicable, including costs of
Lender’s and Loan Servicer’s in-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 and similar costs and expenses; (ii) costs and fees
of expert witnesses, including appraisers; and (iii) investigatory fees.

 

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

 

(c)                     “Business Day” means any day other than a Saturday, a Sunday
or any other day on which Lender or the national banking associations are not
open for business.

 

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

 

(e)                     “Controlling Entity” means an entity which owns, directly or
indirectly through one or more intermediaries, (i) a general partnership
interest or a Controlling Interest of the limited partnership interests in
Borrower (if Borrower is a partnership or joint venture), (ii) a manager’s
interest in Borrower or a Controlling Interest of the ownership or membership
interests in Borrower (if Borrower is a limited liability company), (iii) a
Controlling Interest of any class of voting stock of Borrower (if Borrower is a
corporation), (iv) a trustee’s interest or a Controlling Interest of the
beneficial interests in Borrower (if Borrower is a trust), or (v) a
managing partner’s interest or a Controlling Interest of the partnership
interests in Borrower (if Borrower is a limited liability partnership).

 

(f)                       “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 and affairs of the entity without the requirement of consent of any
other party. The Controlling Interest shall be deemed to be 51 percent unless
otherwise stated in Exhibit B.

 

(g)                    “Environmental Permit” means any permit, license, or other
authorization issued under any Hazardous Materials Law with respect to any
activities or businesses conducted on or in relation to the Mortgaged Property.

 

(h)                    “Event of Default” means the occurrence of any event listed in Section 22.

 

(i)                        “Fixtures” means all property owned by Borrower which
is so attached to the Land or the Improvements as to constitute a fixture under
applicable law, including: machinery, equipment, engines, boilers, incinerators,
installed building materials; systems and equipment for the purpose of
supplying or distributing heating, cooling, electricity, gas, water, air, or
light; antennas, cable, wiring and conduits used in connection with radio,
television, security, fire prevention, or fire detection or otherwise used to
carry electronic signals; telephone systems and equipment; elevators and
related machinery and equipment; fire detection, prevention and extinguishing
systems and apparatus; security and access control systems and apparatus;
plumbing systems; water heaters, ranges, stoves, microwave ovens,
refrigerators, dishwashers,

 

2

 

garbage disposers,
washers, dryers and other appliances; light fixtures, awnings, storm windows
and storm doors; pictures, screens, blinds, shades, curtains and curtain rods;
mirrors; cabinets, paneling, rugs and floor and wall coverings; fences, trees
and plants; swimming pools; and exercise equipment.

 

(j)                        “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 or over the Borrower.

 

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

 

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

 

(m)                  “Hazardous Materials Laws” means all
federal, state, and local laws, ordinances and regulations and standards,
rules, policies and other governmental requirements, administrative rulings and
court judgments and decrees in effect now or in the future and including all
amendments, that relate to Hazardous Materials or the protection of human
health or the environment and apply to Borrower or to the Mortgaged Property.
Hazardous Materials Laws include, but are not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601,
et seq., the Resource
Conservation and Recovery Act of 1976, 42 U.S.C. Section 6901, et seq., the Toxic Substance Control Act,
15 U.S.C. Section 2601, et seq., the
Clean Water Act, 33 U.S.C. Section 1251, et
seq., and the Hazardous Materials Transportation Act, 49 U.S.C. Section 5101
et seq., and their state analogs.

 

(n)                    “Impositions” and “Imposition Deposits” are defined in Section 7(a).

 

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

 

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

 

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

 

(r)                       “Land” means the land described in Exhibit A.

 

3

 

(s)                     “Leases” means all present and future
leases, subleases, licenses, concessions or grants or other possessory
interests now or hereafter in force, whether oral or written, covering or
affecting the Mortgaged Property, or any portion of the Mortgaged Property
(including proprietary leases or occupancy agreements if Borrower is a cooperative
housing corporation), and all modifications, extensions or renewals.

 

(t)                       “Lender” means the entity identified as “Lender”
in the first paragraph of this Instrument, or any subsequent holder of the
Note.

 

(u)                    “Loan Documents” means the Note, this
Instrument, all guaranties, all indemnity agreements, all Collateral
Agreements, O&M Programs, the MMP and any other documents now or in the
future executed by Borrower, any guarantor or any other person in connection
with the loan evidenced by the Note, as such documents may be amended from time
to time.

 

(v)                    “Loan Servicer” means the entity that from
time to time is designated by Lender to collect payments and deposits and
receive Notices under the Note, this Instrument and any other Loan Document,
and otherwise to service the loan evidenced by the Note for the benefit of
Lender. Unless Borrower receives Notice to the contrary, the Loan Servicer is
the entity identified as “Lender” in the first paragraph of this Instrument.

 

(w)                  “MMP” means a moisture management plan to
control water intrusion and prevent the development of Mold or moisture at the
Mortgaged Property throughout the term of this Instrument. At a minimum, the
MMP must contain a provision for (i) staff training, (ii) information
to be provided to tenants, (iii) documentation of the plan, (iv) the
appropriate protocol for incident response and remediation and (v) routine,
scheduled inspections of common space and unit interiors.

 

(x)                      “Mold” means mold, fungus, microbial
contamination or pathogenic organisms.

 

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

 

	
  (i)

  	
  the
  Land;

  
	
   

  	
   

  
	
  (ii)

  	
  the
  Improvements;

  
	
   

  	
   

  
	
  (iii)

  	
  the
  Fixtures;

  
	
   

  	
   

  
	
  (iv)

  	
  the
  Personalty;

  
	
   

  	
   

  
	
  (v)

  	
  all
  current and future rights, including air rights, development rights, zoning
  rights and other similar rights or interests, easements, tenements,
  rights-of-way, strips and gores of land, streets, alleys, roads, sewer
  rights, waters, watercourses, and appurtenances related to or benefiting the
  Land or the Improvements, or both, and all rights-of-way, streets, alleys and
  roads which may have been or may in the future be vacated;

  
	
   

  	
   

  
	
  (vi)

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

  

 

4

 

	
  (vii)

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

  
	
   

  	
   

  
	
  (viii)

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

  
	
   

  	
   

  
	
  (ix)

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

  
	
   

  	
   

  
	
  (x)

  	
  all
  Rents and Leases;

  
	
   

  	
   

  
	
  (xi)

  	
  all
  earnings, royalties, accounts receivable, issues and profits from the Land,
  the Improvements or any other part of the Mortgaged Property, and all
  undisbursed proceeds of the loan secured by this Instrument;

  
	
   

  	
   

  
	
  (xii)

  	
  all
  Imposition Deposits;

  
	
   

  	
   

  
	
  (xiii)

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

  
	
   

  	
   

  
	
  (xiv)

  	
  all
  tenant security deposits which have not been forfeited by any tenant under
  any Lease and any bond or other security in lieu of such deposits; and

  
	
   

  	
   

  
	
  (xv)

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

  

 

(z)                      “Note” means the Multifamily Note described
on page 1 of this Instrument, including all schedules, riders, allonges
and addenda, as such Multifamily Note may be amended from time to time.

 

(aa)               “O&M Program” is defined in Section 18(d).

 

(bb)             “Personalty” means all:

 

	
  (i)

  	
  accounts
  (including deposit accounts) of Borrower related to the Mortgaged Property;

  
	
   

  	
   

  
	
  (ii)

  	
  equipment and inventory
  owned by Borrower, which are used now or in the future in connection with the
  ownership, management or operation of

  

 

5

 

	
   

  	
  the
  Land or Improvements or are located on the Land or Improvements, including
  furniture, furnishings, machinery, building materials, goods, supplies,
  tools, books, records (whether in written or electronic form), and computer
  equipment (hardware and software);

  
	
   

  	
   

  
	
  (iii)

  	
  other
  tangible personal property owned by Borrower which is used now or in the
  future in connection with the ownership, management or operation of the Land
  or Improvements or is located on the Land or in the Improvements, including
  ranges, stoves, microwave ovens, refrigerators, dishwashers, garbage
  disposers, washers, dryers and other appliances (other than Fixtures);

  
	
   

  	
   

  
	
  (iv)

  	
  any
  operating agreements relating to the Land or the Improvements;

  
	
   

  	
   

  
	
  (v)

  	
  any
  surveys, plans and specifications and contracts for architectural,
  engineering and construction services relating to the Land or the
  Improvements;

  
	
   

  	
   

  
	
  (vi)

  	
  all
  other intangible property, general intangibles and rights relating to the
  operation of, or used in connection with, the Land or the Improvements,
  including all governmental permits relating to any activities on the Land and
  including subsidy or similar payments received from any sources, including a
  governmental authority; and

  
	
   

  	
   

  
	
  (vii)

  	
  any rights of Borrower in
  or under letters of credit.

  

 

(cc)               “Properly Jurisdiction” is defined in Section 30(a).

 

(dd)             “Rents” means all rents (whether from residential or
non-residential space), revenues and other income of the Land or the
Improvements, parking fees, laundry and vending machine income and fees and
charges for food, health care and other services provided at the Mortgaged
Property, whether now due, past due, or to become due, and deposits forfeited
by tenants, and, if Borrower is a cooperative housing corporation or
association, maintenance fees, charges or assessments payable by shareholders
or residents under proprietary leases or occupancy agreements, whether now due,
past due, or to become due.

 

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

 

(ff)                   “Transfer” is defined in Section 21.

 

2.                         UNIFORM COMMERCIAL CODE
SECURITY AGREEMENT.

 

(a)                     This Instrument is also a security agreement
under the Uniform Commercial Code for any of the Mortgaged Property which,
under applicable law, may be subjected to a security interest under the Uniform
Commercial Code, whether such Mortgaged Property is owned now or acquired in
the future, and all products and cash and non-cash proceeds thereof
(collectively, “UCC Collateral”),
and Borrower hereby grants to Lender a security interest in the UCC Collateral.
Borrower hereby authorizes Lender to prepare and file financing statements,

 

6

 

continuation
statements and financing statement amendments in such form as Lender may
require to perfect or continue the perfection of this security interest and
Borrower agrees, if Lender so requests, to execute and deliver to Lender such
financing statements, continuation statements and amendments. Borrower shall
pay all filing costs and all costs and expenses of any record searches for
financing statements and/or amendments that Lender may require. Without the
prior written consent of Lender, Borrower shall not create or permit to exist
any other lien or security interest in any of the UCC Collateral.

 

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

 

(c)                     If an Event of Default has occurred and is
continuing, Lender shall have the remedies of a secured party under the Uniform
Commercial Code, in addition to all remedies provided by this Instrument or
existing under applicable law. In exercising any remedies, Lender may exercise
its remedies against the UCC Collateral separately or together, and in any
order, without in any way affecting the availability of Lender’s other
remedies.

 

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

 

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

 

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

 

(b)                    After the
occurrence of an Event of Default, Borrower authorizes Lender to collect, sue
for and compromise Rents and directs each tenant of the Mortgaged Property to
pay all Rents to, or as directed by, Lender. However, until the occurrence of
an Event of Default, Lender hereby grants to Borrower a revocable license to
collect and receive all Rents, to hold all Rents in trust for the benefit of
Lender and to apply all Rents to pay the installments of interest and principal
then due and payable under the Note and the other amounts then due and payable
under the other Loan Documents, including Imposition Deposits, and to pay the
current costs and expenses of managing, operating and maintaining the Mortgaged
Property, including utilities, Taxes and insurance premiums (to the extent not
included in Imposition Deposits), tenant

 

7

 

improvements
and other capital expenditures. So long as no Event of Default has occurred and
is continuing, the Rents remaining after application pursuant to the preceding
sentence may be retained by Borrower free and clear of, and released from,
Lender’s rights with respect to Rents under this Instrument. From and after the
occurrence of an Event of Default, and without the necessity of Lender entering
upon and taking and maintaining control of the Mortgaged Property directly, or
by a receiver, Borrower’s license to collect Rents shall automatically
terminate and Lender shall without Notice be entitled to all Rents as they
become due and payable, including Rents then due and unpaid. Borrower shall pay
to Lender upon demand all Rents to which Lender is entitled. At any time on or
after the date of Lender’s demand for Rents, (i) Lender may give, and
Borrower hereby irrevocably authorizes Lender to give, notice to all tenants of
the Mortgaged Property instructing them to pay all Rents to Lender, (ii) no
tenant shall be obligated to inquire further as to the occurrence or
continuance of an Event of Default, and (iii) no tenant shall be obligated
to pay to Borrower any amounts which are actually paid to Lender in response to
such a notice. Any such notice by Lender shall be delivered to each tenant
personally, by mail or by delivering such demand to each rental unit. Borrower
shall not interfere with and shall cooperate with Lender’s collection of such
Rents.

 

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

 

(d)                    If an Event of Default has occurred and is
continuing, Lender may, regardless of the adequacy of Lender’s security or the
solvency of Borrower and even in the absence of waste, enter upon and take and
maintain full control of the Mortgaged Property in order to perform all acts
that Lender in its discretion determines to be necessary or desirable for the
operation and maintenance of the Mortgaged Property, including the execution,
cancellation or modification of Leases, the collection of all Rents, the making
of repairs to the Mortgaged Property and the execution or termination of
contracts providing for the management, operation or maintenance of the
Mortgaged Property, for the purposes of enforcing the assignment of Rents
pursuant to Section 3(a), protecting the Mortgaged Property or the
security of this Instrument, or for such other purposes as Lender in its
discretion may deem necessary or desirable. Alternatively, if an Event of
Default has occurred and is continuing, regardless of the adequacy of Lender’s
security, without regard to Borrower’s solvency and without the necessity of
giving prior notice (oral or written) to Borrower, Lender may apply to any
court having jurisdiction for the appointment of a receiver for the Mortgaged
Property to take any or all of the actions set forth in the preceding sentence.
If Lender elects to seek the appointment of a receiver for the Mortgaged
Property at any time after an Event of Default has occurred and is continuing,
Borrower, by its execution of this Instrument, expressly consents to the
appointment of such receiver, including the appointment of a receiver ex parte if permitted by applicable law.
If Borrower is a housing cooperative corporation or association, Borrower
hereby agrees that if a receiver is appointed, the order appointing the
receiver may contain a provision requiring the receiver to pay the installments
of interest and principal then due and payable under the Note and the other
amounts then due and payable under the other Loan Documents, including
Imposition Deposits, it being acknowledged and agreed that the Indebtedness is
an obligation of the Borrower and must be paid out of maintenance charges
payable by the Borrower’s tenant shareholders under their proprietary leases or
occupancy agreements. Lender or the receiver, as the case may be, shall be

 

8

 

entitled
to receive a reasonable fee for managing the Mortgaged Property. Immediately
upon appointment of a receiver or immediately upon the Lender’s entering upon
and taking possession and control of the Mortgaged Property, Borrower shall
surrender possession of the Mortgaged Property to Lender or the receiver, as
the case may be, and shall deliver to Lender or the receiver, as the case may
be, all documents, records (including records on electronic or magnetic media),
accounts, surveys, plans, and specifications relating to the Mortgaged Property
and all security deposits and prepaid Rents. In the event Lender takes
possession and control of the Mortgaged Property, Lender may exclude Borrower
and its representatives from the Mortgaged Property. Borrower acknowledges and
agrees that the exercise by Lender of any of the rights conferred under this Section 3
shall not be construed to make Lender a mortgagee-in-possession of the
Mortgaged Property so long as Lender has not itself entered into actual
possession of the Land and Improvements.

 

(e)                     If Lender enters the Mortgaged Property,
Lender shall be liable to account only to Borrower and only for those Rents
actually received. Except to the extent of Lender’s gross negligence or willful
misconduct, Lender shall not be liable to Borrower, anyone claiming under or
through Borrower or anyone having an interest in the Mortgaged Property, by
reason of any act or omission of Lender under Section 3(d), and Borrower
hereby releases and discharges Lender from any such liability to the fullest
extent permitted by law.

 

(f)                       If the Rents are not sufficient to meet the
costs of taking control of and managing the Mortgaged Property and collecting
the Rents, any funds expended by Lender for such purposes shall become an
additional part of the Indebtedness as provided in Section 12.

 

(g)                    Any entering upon and taking of control of
the Mortgaged Property by Lender or the receiver, as the case may be, and any
application of Rents as provided in this Instrument shall not cure or waive any
Event of Default or invalidate any other right or remedy of Lender under
applicable law or provided for in this Instrument

 

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

 

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

 

(b)                    Until Lender gives Notice to Borrower of
Lender’s exercise of its rights under this Section 4, Borrower shall have
all rights, power and authority granted to Borrower under any Lease (except as
otherwise limited by this Section or any other provision of this
Instrument), including the right, power and authority to modify the terms of
any Lease or extend or terminate any Lease. Upon the occurrence of an Event of
Default, the permission given to Borrower

 

9

 

pursuant
to the preceding sentence to exercise all rights, power and authority under
Leases shall automatically terminate. Borrower shall comply with and observe
Borrower’s obligations under all Leases, including Borrower’s obligations
pertaining to the maintenance and disposition of tenant security deposits.

 

(c)                     Borrower acknowledges and agrees that the
exercise by Lender, either directly or by a receiver, of any of the rights
conferred under this Section 4 shall not be construed to make Lender a
mortgagee-in-possession of the Mortgaged Property so long as Lender has not
itself entered into actual possession of the Land and the Improvements. The
acceptance by Lender of the assignment of the Leases pursuant to Section 4(a) shall
not at any time or in any event obligate Lender to take any action under this
Instrument or to expend any money or to incur any expenses. Except to the
extent of Lender’s gross negligence or willful misconduct, Lender shall not be
liable in any way for any injury or damage to person or property sustained by
any person or persons, firm or corporation in or about the Mortgaged Property.
Prior to Lender’s actual entry into and taking possession of the Mortgaged
Property, Lender shall not (i) be obligated to perform any of the terms,
covenants and conditions contained in any Lease (or otherwise have any
obligation with respect to any Lease); (ii) be obligated to appear in or
defend any action or proceeding relating to the Lease or the Mortgaged
Property; or (iii) be responsible for the operation, control, care, management
or repair of the Mortgaged Property or any portion of the Mortgaged Property.
The execution of this Instrument by Borrower shall constitute conclusive
evidence that all responsibility for the operation, control, care, management
and repair of the Mortgaged Property is and shall be that of Borrower, prior to
such actual entry and taking of possession.

 

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

 

(e)                     Borrower shall, promptly upon Lender’s
request, deliver to Lender an executed copy of each residential Lease then in
effect. All Leases for residential dwelling units shall be on forms approved by
Lender, shall be for initial terms of at least six months and not more than two
years, and shall not include options to purchase.

 

(f)                       Borrower shall not lease any portion of the
Mortgaged Property for non-residential use except with the prior written
consent of Lender and Lender’s prior written approval of the Lease agreement.
Borrower shall not modify the terms of, or extend or terminate, any Lease for
non-residential use (including any Lease in existence on the date of this
Instrument) without the prior written consent of Lender. However, Lender’s
consent shall not be required for the modification or extension of a
non-residential Lease if such modification or extension is on terms at least as
favorable to Borrower as those customary at that time in the applicable market
and the income from the extended or modified Lease will not be less than the
income received from the Lease as of the date of this Instrument. Borrower
shall, without request by Lender, deliver an executed copy of each
non-residential Lease to Lender promptly after such Lease is signed. All
non-residential Leases, including renewals or extensions of existing Leases,
shall specifically provide that (i) such Leases are subordinate to the
lien of this Instrument; (ii) the tenant shall attorn to Lender and any
purchaser at a foreclosure sale, such attornment to be self-executing and
effective upon acquisition of title to the Mortgaged Property by any purchaser
at a foreclosure sale or by Lender in any manner; (iii) the tenant agrees
to

 

10

 

execute
such further evidences of attainment as Lender or any purchaser at a
foreclosure sale may from time to time request; (iv) the Lease shall not
be terminated by foreclosure or any other transfer of the Mortgaged Property; (v) after
a foreclosure sale of the Mortgaged Property, Lender or any other purchaser at
such foreclosure sale may, at Lender’s or such purchaser’s option, accept or
terminate such Lease; and (vi) the tenant shall, upon receipt after the
occurrence of an Event of Default of a written request from Lender, pay all
Rents payable under the Lease to Lender.

 

(g)                    Borrower shall not receive or accept Rent
under any Lease (whether residential or non-residential) for more than two
months in advance.

 

(h)                    If Borrower is a cooperative housing
corporation or association, notwithstanding anything to the contrary contained
in this subsection or in Section 21, so long as Borrower remains a
cooperative housing corporation or association and is not in breach of any
covenant of this Instrument, Lender hereby consents to:

 

	
  (i)

  	
  the
  execution of leases of apartments for a term in excess of two years from
  Borrower to a tenant shareholder of Borrower, so long as such leases,
  including proprietary leases, are and will remain subordinate to the lien of
  this Instrument; and

  
	
   

  	
   

  
	
  (ii)

  	
  the surrender or termination of such leases of
  apartments where the surrendered or terminated lease is immediately replaced
  or where the Borrower makes its best efforts to secure such immediate
  replacement by a newly executed lease of the same apartment to a tenant
  shareholder of the Borrower. However, no consent is hereby given by Lender to
  any execution, surrender, termination or assignment of a lease under terms
  that would waive or reduce the obligation of the resulting tenant shareholder
  under such lease to pay cooperative assessments in full when due or the
  obligation of the former tenant shareholder to pay any unpaid portion of such
  assessments.

  

 

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

 

6.                         EXCULPATION. Borrower’s personal liability for payment of
the Indebtedness and for performance of the other obligations to be performed
by it under this Instrument is limited in the manner, and to the extent,
provided in the Note.

 

7.                         DEPOSITS FOR TAXES,
INSURANCE AND OTHER CHARGES.

 

(a)                     Unless this requirement is waived in writing
by Lender, which waiver may be contained in this Section 7(a), Borrower
shall deposit with Lender on the day monthly installments of principal or
interest, or both, are due under the Note (or on another day designated in
writing by Lender), until the Indebtedness is paid in full, an additional
amount sufficient to accumulate with Lender the entire sum required to pay,
when due, the items marked

 

11

 

“Collect”
below. Lender will not require the Borrower to make Imposition Deposits with
respect to the items marked “Deferred” below.

 

	
  [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)

  

 

The
amounts deposited under the preceding sentence are collectively referred to in
this Instrument as the “Imposition Deposits.”
The obligations of Borrower for which the Imposition Deposits are
required are collectively referred to in this Instrument as “Impositions.” The amount of the Imposition
Deposits shall be sufficient to enable Lender to pay each Imposition before the
last date upon which such payment may be made without any penalty or interest
charge being added. Lender shall maintain records indicating how much of the
monthly Imposition Deposits and how much of the aggregate Imposition Deposits
held by Lender are held for the purpose of paying Taxes, insurance premiums and
each other Imposition.

 

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

 

(c)                     If Lender receives a bill or invoice for an
Imposition, Lender shall pay the Imposition from the Imposition Deposits held
by Lender. Lender shall have no obligation to pay any Imposition to the extent
it exceeds Imposition Deposits then held by Lender. Lender may pay an
Imposition according to any bill, statement or estimate from the appropriate
public office or insurance company without inquiring into the accuracy of the
bill, statement or estimate or into the validity of the Imposition.

 

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

 

(e)                     If an Event of Default has occurred and is
continuing, Lender may apply any Imposition Deposits, in any amounts and in any
order as Lender determines, in Lender’s

 

12

 

discretion,
to pay any Impositions or as a credit against the Indebtedness. Upon payment in
full of the Indebtedness, Lender shall refund to Borrower any Imposition
Deposits held by Lender.

 

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

 

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

 

8.                         COLLATERAL AGREEMENTS. Borrower shall deposit with Lender such
amounts as may be required by any Collateral Agreement and shall perform all
other obligations of Borrower under each Collateral Agreement.

 

9.                         APPLICATION OF PAYMENTS. If at any time Lender receives, from
Borrower or otherwise, any amount applicable to the Indebtedness which is less
than all amounts due and payable at such time, then Lender may apply that
payment to amounts then due and payable in any manner and in any order
determined by Lender, in Lender’s discretion. Neither Lender’s acceptance of an
amount that is less than all amounts then due and payable nor Lender’s
application of such payment in the manner authorized shall constitute or be
deemed to constitute either a waiver of the unpaid amounts or an accord and
satisfaction. Notwithstanding the application of any such amount to the
Indebtedness, Borrower’s obligations under this Instrument and the Note shall
remain unchanged.

 

10.                  COMPLIANCE WITH LAWS AND ORGANIZATIONAL
DOCUMENTS.

 

(a)                     Borrower shall comply with all laws,
ordinances, regulations and requirements of any Governmental Authority and all
recorded lawful covenants and agreements relating to or affecting the Mortgaged
Property, including all laws, ordinances, regulations, requirements and
covenants pertaining to health and safety, construction of improvements on the
Mortgaged Property, fair housing, disability accommodation, zoning and land
use, and Leases. Borrower also shall comply with all applicable laws that
pertain to the maintenance and disposition of tenant security deposits.

 

(b)                    Borrower shall at all times maintain records
sufficient to demonstrate compliance with the provisions of this Section 10.

 

(c)                     Borrower shall take appropriate measures to
prevent, and shall not engage in or knowingly permit, any illegal activities at
the Mortgaged Property that could endanger tenants or visitors, result in
damage to the Mortgaged Property, result in forfeiture of the Mortgaged
Property, or otherwise materially impair the lien created by this Instrument or
Lender’s interest in the Mortgaged Property. Borrower represents and warrants
to Lender that no portion of the Mortgaged Property has been or will be
purchased with the proceeds of any illegal activity.

 

13

 

(d)                    Borrower shall at all times comply with all
laws, regulations and requirements of any Governmental Authority relating to
Borrower’s formation, continued existence and good standing in the Property
Jurisdiction. Borrower shall at all times comply with its organizational
documents, including but not limited to its partnership agreement (if Borrower
is a partnership), its by-laws (if Borrower is a corporation or housing
cooperative corporation or association) or its operating agreement (if Borrower
is an limited liability company, joint venture or tenancy-in-common). If
Borrower is a housing cooperative corporation or association, Borrower shall at
all times maintain its status as a “cooperative housing corporation” as such
term is defined in Section 216(b) of the Internal revenue Code of
1986, as amended, or any successor statute thereto.

 

11.                  USE  OF
PROPERTY. Unless required by applicable law, Borrower shall not (a) allow
changes in the use for which all or any part of the Mortgaged Property is being
used at the time this Instrument was executed, except for any change in use
approved by Lender, (b) convert any individual dwelling units or common
areas to commercial use, (c) initiate a change in the zoning
classification of the Mortgaged Property or acquiesce without Notice to and
consent of Lender in a change in the zoning classification of the Mortgaged
Property, (d) establish any condominium or cooperative regime with respect
to the Mortgaged Property, (e) combine all or any part of the Mortgaged
Property with all or any part of a tax parcel which is not part of the
Mortgaged Property, or (f) subdivide or otherwise split any tax parcel
constituting all or any part of the Mortgaged Property without the prior
consent of Lender. Notwithstanding anything contained in this Section to
the contrary, if Borrower is a housing cooperative corporation or association,
Lender acknowledges and consents to Borrower’s use of the Mortgaged Property as
a housing cooperative.

 

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

 

(a)                     If Borrower fails to perform any of its
obligations under this Instrument or any other Loan Document, or if any action
or proceeding is commenced which purports to affect the Mortgaged Property,
Lender’s security or Lenders rights under this Instrument, including eminent
domain, insolvency, code enforcement, civil or criminal forfeiture, enforcement
of Hazardous Materials Laws, fraudulent conveyance or reorganizations or proceedings
involving a bankrupt or decedent, then Lender at Lender’s option may make such
appearances, file such documents, disburse such sums and take such actions as
Lender reasonably deems necessary to perform such obligations of Borrower and
to protect Lender’s interest, including (i) payment of Attorneys’ Fees and
Costs, (ii) payment of fees and out-of-pocket expenses of accountants,
inspectors and consultants, (iii) entry upon the Mortgaged Property to
make repairs or secure the Mortgaged Property, (iv) procurement of the
insurance required by Section 19, (v) payment of amounts which
Borrower has failed to pay under Sections 15 and 17, and (vi) advances
made by Lender to pay, satisfy or discharge any obligation of Borrower for the
payment of money that is secured by a pre-existing mortgage, deed of trust or
other lien encumbering the Mortgaged Property (a “Prior Lien”).

 

(b)                    Any amounts disbursed by Lender under this Section 12,
or under any other provision of this Instrument that treats such disbursement
as being made under this Section 12, shall be secured by this Instrument,
shall be added to, and become part of, the principal component of the
Indebtedness, shall be immediately due and payable and shall bear interest from
the date of disbursement until paid at the “Default
Rate,” as defined in the Note.

 

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

 

14

 

13.                  INSPECTION.

 

(a)                     Lender, its agents, representatives, and
designees may make or cause to be made entries upon and inspections of the
Mortgaged Property (including environmental inspections and tests) during
normal business hours, or at any other reasonable time, upon reasonable notice
to Borrower if the inspection is to include occupied residential units (which
notice need not be in writing). Notice to Borrower shall not be required in the
case of an emergency, as determined in Lender’s discretion, or when an Event of
Default has occurred and is continuing.

 

(b)                    If Lender determines that Mold has developed
as a result of a water intrusion event or leak, Lender, at Lender’s discretion,
may require that a professional inspector inspect the Mortgaged Property as
frequently as Lender determines is necessary until any issue with Mold and its
cause(s) are resolved to Lender’s satisfaction. Such inspection shall be
limited to a visual and olfactory inspection of the area that has experienced
the Mold, water intrusion event or leak. Borrower shall be responsible for the
cost of such professional inspection and any remediation deemed to be necessary
as a result of the professional inspection. After any issue with Mold, water
intrusion or leaks is remedied to Lender’s satisfaction, Lender shall not
require a professional inspection any more frequently than once every three
years unless Lender is otherwise aware of Mold as a result of a subsequent
water intrusion event or leak.

 

(c)                     If Lender or Loan Servicer determines not to
conduct an annual inspection of the Mortgaged Property, and in lieu thereof
Lender requests a certification, Borrower shall be prepared to provide and must
actually provide to Lender a factually correct certification each year that the
annual inspection is waived to the following effect:

 

Borrower
has not received any written complaint, notice, letter or other written
communication from tenants, management agent or governmental authorities
regarding mold, fungus, microbial contamination or pathogenic organisms (“Mold”)
or any activity, condition, event or omission that causes or facilitates the
growth of Mold on or in any part of the Mortgaged Property or if Borrower has
received any such written complaint, notice, letter or other written
communication that Borrower has investigated and determined that no Mold
activity, condition or event exists or alternatively has fully and properly
remediated such activity, condition, event or omission in compliance with the
Moisture Management Plan for the Mortgaged Property.

 

If Borrower is unwilling or unable to provide such certification,
Lender may require a professional inspection of the Mortgaged Property at
Borrower’s expense.

 

14.                  BOOKS AND RECORDS; FINANCIAL
REPORTING.

 

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

 

15

 

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

 

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

 

	
  (i)

  	
  a
  rent schedule for the Mortgaged Property showing the name of each tenant, and
  for each tenant, the space occupied, the lease expiration date, the rent
  payable for the current month, the date through which rent has been paid, and
  any related information requested by Lender;

  
	
   

  	
   

  
	
  (ii)

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

  
	
   

  	
   

  
	
  (iii)

  	
  a statement that identifies all owners of any
  interest in Borrower and any Controlling Entity and the interest held by each
  (unless Borrower or any Controlling Entity, is a publicly-traded entity in
  which case such statement of ownership shall not be required), if Borrower or
  a Controlling Entity is a corporation, all officers and directors of Borrower
  and the Controlling Entity, and if Borrower or a Controlling Entity is a
  limited liability company, all managers who are not members.

  

 

(d)                    At any time upon Lender’s request, Borrower
shall furnish to Lender each of the following. However, Lender shall not
require any of the following more frequently than quarterly except when there
has been an Event of Default and such Event of Default is continuing, in which
case Lender may require Borrower to furnish any of the following more
frequently:

 

	
  (i)

  	
  a
  balance sheet, a statement of income and expenses for Borrower and a
  statement of changes in financial position of Borrower for Borrower’s most
  recent fiscal year;

  
	
   

  	
   

  
	
  (ii)

  	
  a
  quarterly or year-to-date income and expense statement for the Mortgaged
  Property; and

  
	
   

  	
   

  
	
  (iii)

  	
  a monthly property
  management report for the Mortgaged Property, showing the number of inquiries
  made and rental applications received from tenants or prospective tenants and
  deposits received from tenants and any other information requested by Lender.

  

 

16

 

(e)                     Upon Lender’s request at any time when an
Event of Default has occurred and is continuing, Borrower shall furnish to
Lender monthly income and expense statements and rent schedules for the
Mortgaged Property.

 

(f)                       An individual having authority to bind
Borrower shall certify each of the statements, schedules and reports required
by Sections 14(b) through 14(e) to be complete and accurate. Each of
the statements, schedules and reports required by Sections 14(b) through
14(e) shall be in such form and contain such detail as Lender may
reasonably 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 public accountants
acceptable to Lender, at any time when an Event of Default has occurred and is
continuing or at any time that Lender, in its reasonable judgment, determines
that audited financial statements are required for an accurate assessment of
the financial condition of Borrower or of the Mortgaged Property.

 

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

 

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

 

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

 

15.                  TAXES; OPERATING EXPENSES.

 

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

 

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

 

(c)                     If Lender is collecting Imposition Deposits,
to the extent that Lender holds sufficient Imposition Deposits for the purpose
of paying a specific Imposition, then Borrower shall not be obligated to pay
such Imposition, so long as no Event of Default exists and Borrower has timely
delivered to Lender any bills or premium notices that it has received. If an
Event of Default exists, Lender may exercise any rights Lender may have with
respect to Imposition Deposits without regard to whether Impositions are then
due and payable. Lender shall have no

 

17

 

liability
to Borrower for failing to pay any Impositions to the extent that (i) any
Event of Default has occurred and is continuing, (ii) insufficient
Imposition Deposits are held by Lender at the time an Imposition becomes due
and payable or (iii) Borrower has failed to provide Lender with bills and
premium notices as provided above.

 

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

 

(e)                     Borrower shall promptly deliver to Lender a
copy of all notices of, and invoices for, Impositions, and if Borrower pays any
Imposition directly, Borrower shall furnish to Lender on or before the date
this Instrument requires such Impositions to be paid, receipts evidencing that
such payments were made.

 

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

 

17.                  PRESERVATION, MANAGEMENT AND
MAINTENANCE OF MORTGAGED PROPERTY.

 

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

 

(b)                    Borrower shall not abandon the Mortgaged
Property.

 

(c)                     Borrower shall restore or repair promptly, in
a good and workmanlike manner, any damaged part of the Mortgaged Property to
the equivalent of its original condition, or such other condition as Lender may
approve in writing, whether or not insurance proceeds or condemnation awards
are available to cover any costs of such restoration or repair; however,
Borrower shall not be obligated to perform such restoration or repair if (i) no
Event of Default has occurred and is continuing, and (ii) Lender has
elected to apply any available insurance proceeds and/or condemnation 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 Mortgaged Property in
good repair, including the replacement of Personalty and Fixtures with items of
equal or better function and quality.

 

(e)                     Borrower shall provide for professional
management of the Mortgaged Property by a residential rental property manager
satisfactory to Lender at all times under a contract approved by Lender in
writing, which contract must be terminable upon not more than 30 days notice
without the necessity of establishing cause and without payment of a penalty or
termination fee by Borrower or its successors.

 

18

 

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

 

(g)                    Unless otherwise waived by Lender in writing,
Borrower must have or must establish and must adhere to the MMP. If the
Borrower is required to have an MMP, the Borrower must keep all MMP documentation
at the Mortgaged Property or at the management agent’s office and available for
the Lender or the Loan Servicer to review during any annual assessment or other
inspection of the Mortgaged Property that is required by Lender.

 

(h)                    If Borrower is a housing cooperative
corporation or association, until the Indebtedness is paid in full Borrower
shall not reduce the maintenance fees, charges or assessments payable by
shareholders or residents under proprietary leases or occupancy agreements
below a level which is sufficient to pay all expenses of the Borrower,
including, without limitation, all operating and other expenses for the
Mortgaged Property and all payments due pursuant to the terms of the Note and
any Loan Documents.

 

18.                  ENVIRONMENTAL HAZARDS.

 

(a)                     Except for matters described in Section 18(b),
Borrower shall not cause or permit any of the following:

 

	
  (i)

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

  
	
   

  	
   

  
	
  (ii)

  	
  the
  transportation of any Hazardous Materials to, from, or across the Mortgaged
  Property;

  
	
   

  	
   

  
	
  (iii)

  	
  any
  occurrence or condition on the Mortgaged Property or any other property of
  Borrower that is adjacent to the Mortgaged Property, which occurrence or
  condition is or may be in violation of Hazardous Materials Laws;

  
	
   

  	
   

  
	
  (iv)

  	
  any
  violation of or noncompliance with the terms of any Environmental Permit with
  respect to the Mortgaged Property or any property of Borrower that is
  adjacent to the Mortgaged Property; or

  
	
   

  	
   

  
	
  (v)

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

  

 

19

 

The
matters described in clauses (i) through (v) above, except as
otherwise provided in Section 18(b), are referred to collectively in this Section 18
as “Prohibited Activities or Conditions.”

 

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

 

(c)                     Borrower shall take all commercially
reasonable actions (including the inclusion of appropriate provisions in any
Leases executed after the date of this Instrument) to prevent its employees,
agents, and contractors, and all tenants and other occupants from causing or
permitting any Prohibited Activities or Conditions. Borrower shall not lease or
allow the sublease or use of all or any portion of the Mortgaged Property to
any tenant or subtenant for nonresidential use by any user that, in the
ordinary course of its business, would cause or permit any Prohibited Activity
or Condition.

 

(d)                    As required by Lender, Borrower shall also
have established a written operations and maintenance program with respect to certain
Hazardous Materials. Each such operations and maintenance program and any
additional or revised operations and maintenance programs established for the
Mortgaged Property pursuant to this Section 18 must be approved by Lender
and shall be referred to herein as an “O&M
Program.” Borrower shall comply in a timely manner with, and cause
all employees, agents, and contractors of Borrower and any other persons
present on the Mortgaged Property to comply with each O&M Program. Borrower
shall pay all costs of performance of Borrower’s obligations under any O&M
Program, and Lender’s out-of-pocket costs incurred in connection with the
monitoring and review of each O&M Program and Borrower’s performance shall
be paid by Borrower upon demand by Lender. Any such out-of-pocket costs of
Lender that Borrower fails to pay promptly shall become an additional part of
the Indebtedness as provided in Section 12.

 

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

 

	
  (i)

  	
  Borrower
  has not at any time engaged in, caused or permitted any Prohibited Activities
  or Conditions on the Mortgaged Property;

  
	
   

  	
   

  
	
  (ii)

  	
  to
  the best of Borrower’s knowledge after reasonable and diligent inquiry, no
  Prohibited Activities or Conditions exist or have existed on the Mortgaged
  Property;

  
	
   

  	
   

  
	
  (iii)

  	
  the Mortgaged Property
  does not now contain any underground storage tanks, and, to the best of
  Borrower’s knowledge after reasonable and diligent inquiry, the Mortgaged
  Property has not contained any underground storage tanks in the past. If
  there is an underground storage tank located on the Mortgaged Property that
  has been previously disclosed

  

 

20

 

	
   

  	
  by
  Borrower to Lender in writing, that tank complies with all requirements of
  Hazardous Materials Laws;

  
	
   

  	
   

  
	
  (iv)

  	
  to
  the best of Borrower’s knowledge after reasonable and diligent inquiry,
  Borrower has complied with all Hazardous Materials Laws, including all
  requirements for notification regarding releases of Hazardous Materials.
  Without limiting the generality of the foregoing, Borrower has obtained all
  Environmental Permits required for the operation of the Mortgaged Property in
  accordance with Hazardous Materials Laws now in effect and all such
  Environmental Permits are in full force and effect;

  
	
   

  	
   

  
	
  (v)

  	
  to
  the best of Borrower’s knowledge after reasonable and diligent inquiry, no
  event has occurred with respect to the Mortgaged Property that constitutes,
  or with the passing of time or the giving of notice would constitute,
  noncompliance with the terms of any Environmental Permit;

  
	
   

  	
   

  
	
  (vi)

  	
  there
  are no actions, suits, claims or proceedings pending or, to the best of
  Borrower’s knowledge after reasonable and diligent inquiry, threatened that
  involve the Mortgaged Property and allege, arise out of, or relate to any
  Prohibited Activity or Condition; and

  
	
   

  	
   

  
	
  (vii)

  	
  Borrower has not received any written complaint,
  order, notice of violation or other communication from any Governmental
  Authority with regard to air emissions, water discharges, noise emissions or
  Hazardous Materials, or any other environmental, health or safety matters
  affecting the Mortgaged Property or any other property of Borrower that is
  adjacent to the Mortgaged Property.

  

 

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

 

	
  (i)

  	
  Borrower’s
  discovery of any Prohibited Activity or Condition;

  
	
   

  	
   

  
	
  (ii)

  	
  Borrower’s
  receipt of or knowledge of any written complaint, order, notice of violation
  or other communication from any tenant, management agent, Governmental
  Authority or other person with regard to present or future alleged Prohibited
  Activities or Conditions, or any other environmental, health or safety
  matters affecting the Mortgaged Property or any other property of Borrower that
  is adjacent to the Mortgaged Property; or

  
	
   

  	
   

  
	
  (iii)

  	
  Borrower’s breach of any of its obligations under
  this Section 18.

  

 

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

 

(g)                    Borrower shall pay promptly the costs of any
environmental inspections, tests or audits, a purpose of which is to identify
the extent or cause of or potential for a Prohibited Activity or Condition (“Environmental Inspections”), required by
Lender in connection with any foreclosure or deed in lieu of foreclosure, or as
a condition of Lender’s consent to any Transfer under Section 21, or
required by Lender following a reasonable determination by Lender that
Prohibited Activities or Conditions may exist. Any such costs incurred by
Lender (including Attorneys’ Fees and Costs and the costs of technical
consultants whether incurred in

 

21

 

connection
with any judicial or administrative process or otherwise) that Borrower fails
to pay promptly shall become an additional part of the Indebtedness as provided
in Section 12. As long as (i) no Event of Default has occurred and is
continuing, (ii) Borrower has actually paid for or reimbursed Lender for
all costs of any such Environmental Inspections performed or required by
Lender, and (iii) Lender is not prohibited by law, contract or otherwise
from doing so, Lender shall make available to Borrower, without representation
of any kind, copies of Environmental Inspections prepared by third parties and
delivered to Lender. Lender hereby reserves the right, and Borrower hereby
expressly authorizes Lender, to make available to any party, including any
prospective bidder at a foreclosure sale of the Mortgaged Property, the results
of any Environmental Inspections made by or for Lender with respect to the
Mortgaged Property. Borrower consents to Lender notifying any party (either as
part of a notice of sale or otherwise) of the results of any Environmental
Inspections made by or for Lender. Borrower acknowledges that Lender cannot
control or otherwise assure the truthfulness or accuracy of the results of any
Environmental Inspections and that the release of such results to prospective
bidders at a foreclosure sale of the Mortgaged Property may have a material and
adverse effect upon the amount that a party may bid at such sale. Borrower
agrees that Lender shall have no liability whatsoever as a result of delivering
the results to any third party of any Environmental Inspections made by or for
Lender, and Borrower hereby releases and forever discharges Lender from any and
all claims, damages, or causes of action, arising out of, connected with or
incidental to the results of, the delivery of any of Environmental Inspections
made by or for Lender.

 

(h)                    If any investigation, site monitoring,
containment, clean-up, restoration or other remedial work (“Remedial Work”) is necessary to comply
with any Hazardous Materials Law or order of any Governmental Authority that
has or acquires jurisdiction over the Mortgaged Property or the use, operation
or improvement of the Mortgaged Property, or is otherwise required by Lender as
a consequence of any Prohibited Activity or Condition or to prevent the occurrence
of a Prohibited Activity or Condition, Borrower shall, by the earlier of (i) the
applicable deadline required by Hazardous Materials Law or (ii) 30 days
after Notice from Lender demanding such action, begin performing the Remedial
Work, and thereafter diligently prosecute it to completion, and shall in any
event complete the work by the time required by applicable Hazardous Materials
Law. If Borrower fails to begin on a timely basis or diligently prosecute any
required Remedial Work, Lender may, at its option, cause the Remedial Work to
be completed, in which case Borrower shall reimburse Lender on demand for the
cost of doing so. Any reimbursement due from Borrower to Lender shall become
part of the Indebtedness as provided in Section 12.

 

(i)                        Borrower shall comply with all Hazardous
Materials Laws applicable to the Mortgaged Property. Without limiting the
generality of the previous sentence, Borrower shall (i) obtain and
maintain all Environmental Permits required by Hazardous Materials Laws and
comply with all conditions of such Environmental Permits; (ii) cooperate
with any inquiry by any Governmental Authority; and (iii) comply with any
governmental or judicial order that arises from any alleged Prohibited Activity
or Condition.

 

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

 

22

 

	
  (i)

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

  
	
   

  	
   

  
	
  (ii)

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

  
	
   

  	
   

  
	
  (iii)

  	
  the
  existence or alleged existence of any Prohibited Activity or Condition;

  
	
   

  	
   

  
	
  (iv)

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

  
	
   

  	
   

  
	
  (v)

  	
  the actual or alleged violation of any Hazardous
  Materials Law.

  

 

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

 

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

 

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

 

	
  (i)

  	
  any
  amendment or modification of any Loan Document;

  
	
   

  	
   

  
	
  (ii)

  	
  any
  extensions of time for performance required by any Loan Document;

  
	
   

  	
   

  
	
  (iii)

  	
  any
  provision in any of the Loan Documents limiting Lender’s recourse to property
  securing the Indebtedness, or limiting the personal liability of Borrower or
  any other party for payment of all or any part of the Indebtedness;

  
	
   

  	
   

  
	
  (iv)

  	
  the accuracy or inaccuracy
  of any representations and warranties made by Borrower under this Instrument
  or any other Loan Document;

  

 

23

 

	
  (v)

  	
  the
  release of Borrower or any other person, by Lender or by operation of law,
  from performance of any obligation under any Loan Document;

  
	
   

  	
   

  
	
  (vi)

  	
  the
  release or substitution in whole or in part of any security for the
  Indebtedness; and

  
	
   

  	
   

  
	
  (vii)

  	
  Lender’s failure to properly perfect any lien or security
  interest given as security for the Indebtedness.

  

 

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

 

	
  (i)

  	
  pay
  or satisfy any judgement or decree that may be entered against any Indemnitee
  or Indemnitees in any legal or administrative proceeding incident to any
  matters against which Indemnitees are entitled to be indemnified under this
  Section 18;

  
	
   

  	
   

  
	
  (ii)

  	
  reimburse
  Indemnitees for any expenses paid or incurred in connection with any matters
  against which Indemnitees are entitled to be indemnified under this
  Section 18; and

  
	
   

  	
   

  
	
  (iii)

  	
  reimburse Indemnitees for any and all expenses,
  including Attorneys’ Fees and Costs, paid or incurred in connection with the
  enforcement by Indemnitees of their rights under this Section 18, or in
  monitoring and participating in any legal or administrative proceeding.

  

 

(o)                    The provisions of this Section 18 shall
be in addition to any and all other obligations and liabilities that Borrower
may have under applicable law or under other Loan Documents, and each
Indemnitee shall be entitled to indemnification under this Section 18
without regard to whether Lender or that Indemnitee has exercised any rights
against the Mortgaged Property or any other security, pursued any rights
against any guarantor, or pursued any other rights available under the Loan
Documents or applicable law. If Borrower consists of more than one person or
entity, the obligation of those persons or entities to indemnify the
Indemnitees under this Section 18 shall be joint and several. The
obligation of Borrower to indemnify the Indemnitees under this Section 18
shall survive any repayment or discharge of the Indebtedness, any foreclosure
proceeding, any foreclosure sale, any delivery of any deed in lieu of
foreclosure, and any release of record of the lien of this Instrument.
Notwithstanding the foregoing, if Lender has never been a
mortgagee-in-possession of, or held title to, the Mortgaged Property, Borrower
shall have no obligation to indemnify the Indemnitees under this Section 18
after the date of the release of record of the lien of this Instrument by
payment in full at the Maturity Date or by voluntary prepayment in full.

 

19.                  PROPERTY AND LIABILITY
INSURANCE.

 

(a)                     Borrower shall keep the Improvements insured
at all times against such hazards as Lender may from time to time require,
which insurance shall include but not be limited to coverage against loss by
fire, windstorm and allied perils, general boiler and machinery coverage, and
business interruption including loss of rental value insurance for the
Mortgaged Property with extra expense insurance. If Lender so requires, such
insurance shall also include sinkhole insurance, mine subsidence insurance,
earthquake insurance, and, if the Mortgaged Property does not conform to applicable
zoning or land use laws, building ordinance or law coverage. In the event any
updated reports or other documentation are reasonably required by Lender in
order to determine whether such additional insurance is necessary or prudent,

 

24

 

Borrower
shall pay for all such documentation at its sole cost and expense. Borrower
acknowledges and agrees that Lender’s insurance requirements may change from
time to time throughout the term of the Indebtedness. If any of the
Improvements is located in an area identified by the Federal Emergency
Management Agency (or any successor to that agency) as an area having special
flood hazards, Borrower shall insure such Improvements against loss by flood.
All insurance required pursuant to this Section 19(a) shall be
referred to as “Hazard Insurance.” All
policies of Hazard Insurance must include a non-contributing, non-reporting
mortgagee clause in favor of, and in a form approved by, Lender.

 

(b)                    All premiums on insurance policies required
under this Section 19 shall be paid in the manner provided in Section 7,
unless Lender has designated in writing another method of payment. AH such
policies shall also be in a form approved by Lender. Borrower shall deliver to
Lender a legible copy of each insurance policy (or duplicate original) and
Borrower shall promptly deliver to Lender a copy of all renewal and other
notices received by Borrower with respect to the policies and all receipts for
paid premiums. At least 5 days prior to the expiration date of any insurance
policy, Borrower shall deliver to Lender evidence acceptable to Lender that the
policy has been renewed. If Borrower has not delivered a legible copy of each
renewal policy (or a duplicate original) prior to the expiration date of any
insurance policy, Borrower shall deliver a legible copy of each renewal policy
(or a duplicate original) in a form satisfactory to Lender within 120 days
after the expiration date of the original policy.

 

(c)                     Borrower shall maintain at all times
commercial general liability insurance, workers’ compensation insurance and
such other liability, errors and omissions and fidelity insurance coverages as
Lender may from time to time require. AH policies for general liability
insurance must contain a standard additional insured provision, in favor of,
and in a form approved by, Lender.

 

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

 

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

 

(f)                       In the event of loss, Borrower shall give
immediate written notice to the insurance carrier and to Lender. Borrower
hereby authorizes and appoints Lender as attorney-in-fact for Borrower to make
proof of loss, to adjust and compromise any claims under policies of Hazard
Insurance, to appear in and prosecute any action arising from such Hazard
Insurance policies, to collect and receive the proceeds of Hazard Insurance,
and to deduct from such proceeds Lender’s expenses incurred in the collection
of such proceeds. This power of attorney is coupled with an interest and
therefore is irrevocable. However, nothing contained in this Section 19
shall require Lender to incur any expense or take any action. Lender may, at
Lender’s option, (i) require a “repair or replacement” settlement, in
which case the proceeds will be used to reimburse Borrower for the cost of
restoring and repairing the Mortgaged Property to the equivalent of its
original condition or to a condition approved by Lender (the “Restoration”), or (ii) require an “actual
cash value” settlement in which case the proceeds may be applied to the payment
of the Indebtedness, whether or not then due. To the extent Lender determines
to require a repair or replacement settlement and apply insurance proceeds to
Restoration, Lender shall apply the proceeds in accordance with Lender’s
then-current policies relating to the restoration of casualty damage on similar
multifamily properties.

 

25

 

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

 

	
  (i)

  	
  in
  the event of a casualty resulting in damage to the Mortgaged Property which
  will cost $10,000 or less to repair, the Borrower shall have the sole right
  to make proof of loss, adjust and compromise the claim and collect and
  receive any proceeds directly without the approval or prior consent of the
  Lender so long as the insurance proceeds are used solely for the Restoration
  of the Mortgaged Property; and

  
	
   

  	
   

  
	
  (ii)

  	
  in the event of a casualty resulting in damage to
  the Mortgaged Property which will cost more than $10,000 but less than
  $50,000 to repair, the Borrower is authorized to make proof of loss and
  adjust and compromise the claim without the prior consent of Lender, and
  Lender shall hold the applicable insurance proceeds to be used to reimburse
  Borrower for the cost of Restoration of the Mortgaged Property and shall not
  apply such proceeds to the payment of sums due under this Instrument.

  

 

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

 

	
  (i)

  	
  an
  Event of Default (or any event, which, with the giving of Notice or the
  passage of time, or both, would constitute an Event of Default) has occurred
  and is continuing;

  
	
   

  	
   

  
	
  (ii)

  	
  Lender
  determines, in its discretion, that there will not be sufficient funds from
  insurance proceeds, anticipated contributions of Borrower of its own funds or
  other sources acceptable to Lender to complete the Restoration;

  
	
   

  	
   

  
	
  (iii)

  	
  Lender
  determines, in its discretion, that the rental income from the Mortgaged
  Property after completion of the Restoration will not be sufficient to meet
  all operating costs and other expenses, Imposition Deposits, deposits to reserves
  and loan repayment obligations relating to the Mortgaged Property;

  
	
   

  	
   

  
	
  (iv)

  	
  Lender
  determines, in its discretion, that the Restoration will not be completed at
  least one year before the Maturity Date (or six months before the Maturity
  Date if Lender determines in its discretion that re-leasing of the Mortgaged
  Property will be completed within such six-month period); or

  
	
   

  	
   

  
	
  (v)

  	
  Lender determines that the Restoration will not be
  completed within one year after the date of the loss or casualty.

  

 

(i)                        If the Mortgaged Property is sold at a
foreclosure sale or Lender acquires title to the Mortgaged Property, Lender
shall automatically succeed to all rights of Borrower in and to any insurance
policies and unearned insurance premiums and in and to the proceeds resulting
from any damage to the Mortgaged Property prior to such sale or acquisition.

 

26

 

(j)        Unless Lender otherwise agrees in writing,
any application of any insurance proceeds to the Indebtedness shall not extend
or postpone the due date of any monthly installments referred to in the Note, Section 7
of this Instrument or any Collateral Agreement, or change the amount of such
installments.

 

(k)       Borrower agrees to execute such further
evidence of assignment of any insurance proceeds as Lender may require.

 

20.      CONDEMNATION.

 

(a)       Borrower shall promptly notify Lender in
writing of any action or proceeding or notice relating to any proposed or
actual condemnation or other taking, or conveyance in lieu thereof, of all or
any part of the Mortgaged Property, whether direct or indirect (a “Condemnation”). Borrower shall appear in
and prosecute or defend any action or proceeding relating to any Condemnation
unless otherwise directed by Lender in writing. Borrower authorizes and
appoints Lender as attorney-in-fact for Borrower to commence, appear in and
prosecute, in Lender’s or Borrower’s name, any action or proceeding relating to
any Condemnation and to settle or compromise any claim in connection with any
Condemnation, after consultation with Borrower and consistent with commercially
reasonable standards of a prudent lender. This power of attorney is coupled
with an interest and therefore is irrevocable. However, nothing contained in
this Section 20 shall require Lender to incur any expense or take any
action. Borrower hereby transfers and assigns to Lender all right, title and
interest of Borrower in and to any award or payment with respect to (i) any
Condemnation, or any conveyance in lieu of Condemnation, and (ii) any
damage to the Mortgaged Property caused by governmental action that does not
result in a Condemnation.

 

(b)       Lender may apply such awards or proceeds,
after the deduction of Lender’s expenses incurred in the collection of such
amounts (including Attorneys’ Fees and Costs) at Lender’s option, to the
restoration or repair of the Mortgaged Property or to the payment of the
Indebtedness, with the balance, if any, to Borrower. Unless Lender otherwise
agrees in writing, any application of any awards or proceeds to the
Indebtedness shall not extend or postpone the due date of any monthly
installments referred to in the Note, Section 7 of this Instrument or any
Collateral Agreement, or change the amount of such installments. Borrower
agrees to execute such further evidence of assignment of any awards or proceeds
as Lender may require.

 

21.      TRANSFERS OF THE MORTGAGED PROPERTY OR INTERESTS IN
BORROWER. [RIGHT TO UNLIMITED TRANSFERS – WITH LENDER APPROVAL].

 

(a)       “Transfer” means

 

(i)                        a sale,
assignment, transfer or other disposition (whether voluntary, involuntary or by
operation of law);

 

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

 

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

 

27

 

(iv)                 the withdrawal,
retirement, removal or involuntary resignation of a partner in a partnership or
a member or manager in a limited liability company; or

 

(v)                    the merger,
dissolution, liquidation, or consolidation of a legal entity or the
reconstitution 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 a limited
liability partnership, and the term “partner” shall mean a general partner, a
limited partner and a joint venturer.

 

(b)       “Transfer” does not include

 

(i)                        a
conveyance of the Mortgaged Property at a judicial or non-judicial foreclosure sale
under this Instrument,

 

(ii)                     the Mortgaged
Property becoming part of a bankruptcy estate by operation of law under the
United States Bankruptcy Code, or

 

(iii)                  a lien against
the Mortgaged Property for local taxes and/or assessments not then due and payable.

 

(c)       The occurrence of any of the following
Transfers 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 an individual dwelling unit for a term of two years or
less not containing an option to purchase;

 

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

 

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

 

(vi)                 if Borrower is a
housing cooperative corporation or association, the Transfer of more than 49
percent of the shares in the housing cooperative or the assignment of more than
49 percent of the occupancy agreements or leases relating thereto by tenant
shareholders of the housing cooperative or association to other tenant
shareholders; and

 

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

 

28

 

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

 

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

 

(C)                  a sale or
transfer from a trust to any one or more of its beneficiaries who are immediate
family members of the transferor; or

 

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

 

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

 

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

 

(1)                     Borrower
shall provide Lender with prior written Notice of the proposed Preapproved
Transfer, which Notice must be accompanied by a non-refundable review fee in
the amount of $3,000.00.

 

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

 

(3)                     Either
directly or indirectly, [See Exhibit A] shall retain at all times a
managing interest in the Borrower.

 

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

 

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

 

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

 

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

 

29

 

(d)       The occurrence of any of the following
Transfers shall not constitute an Event of Default under this Instrument,
provided that Borrower has notified Lender in writing within 30 days following
the occurrence of any of the following, and such Transfer does not constitute
an Event of Default under any other Section of this Instrument:

 

(i)                        a change
of the Borrower’s name, provided that UCC financing statements and/or
amendments sufficient to continue the perfection of Lender’s security interest
have been properly filed and copies have been delivered to Lender;

 

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

 

(iii)                  the merger of
the Borrower with another entity when the Borrower is the surviving entity;

 

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

 

(v)                    the grant of
an easement, if before the grant Lender determines that the easement will not
materially affect the operation or value of the Mortgaged Property or Lender’s
interest in the Mortgaged Property, and Borrower pays to Lender, upon demand,
all costs and expenses, including Attorneys’ Fees and Costs, incurred by Lender
in connection with reviewing Borrower’s request.

 

(e)       The occurrence of any of the following
Transfers shall constitute an Event of Default under this Instrument:

 

(i)                        a Transfer
of all or any part of the Mortgaged Property or any interest in the Mortgaged
Property;

 

(ii)                     if Borrower
is a limited partnership, a Transfer of (A) any general partnership
interest, or (B) limited partnership interests in Borrower that would
cause the Initial Owners of Borrower to own less than a Controlling Interest of
all limited partnership interests in Borrower;

 

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

 

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

 

(v)                    if Borrower is
a corporation (A) the Transfer of any voting stock in Borrower which would
cause the Initial Owners to own less than a

 

30

 

Controlling
Interest of any class of voting stock in Borrower or (B) if the
outstanding voting stock in Borrower is held by 100 or more shareholders, one
or more Transfers by a single transferor within a 12-month period affecting an
aggregate of 5 percent or more of that stock;

 

(vi)                 if Borrower is a
trust, (A) a Transfer of any beneficial interest in Borrower which would
cause the Initial Owners to own less than a Controlling Interest of all the
beneficial interests in Borrower, (B) the termination or revocation of the
trust, or (C) the removal, appointment or substitution of a trustee of
Borrower;

 

(vii)              if
Borrower is a limited liability partnership, (A) a Transfer of any
partnership interest in Borrower which would cause the Initial Owners to own
less than a Controlling Interest of all partnership interests in Borrower, or (B) a
transfer of any partnership or other interest of a managing partner in Borrower
that results in a change of manager; and

 

(viii)           a Transfer of any
interest in a Controlling Entity which, if such Controlling Entity were
Borrower, would result in an Event of Default under any of Sections 21(e)(i) through
(vii) above.

 

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

 

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

 

(i)                        the
submission to Lender of all information required by Lender to make the
determination required by this Section 21(f);

 

(ii)                     the absence
of any Event of Default;

 

(iii)                  the transferee
meets all of the eligibility, credit, management and other standards (including
but not limited to any standards with respect to previous relationships between
Lender and the transferee) customarily applied by Lender at the time of the
proposed Transfer to the approval of borrowers in connection with the origination
or purchase of similar mortgages on multifamily properties;

 

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

 

(v)                    the Mortgaged
Property, at the time of the proposed Transfer, meets all standards as to its
physical condition, occupancy, net operating income and the collection of
reserves that are customarily applied by Lender at the time of the proposed
Transfer to the approval of properties in connection

 

31

 

with
the origination or purchase of similar mortgages on multifamily properties;

 

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

 

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

 

(viii)           Lender’s receipt of all
of the following:

 

(A)                a review fee in
the amount of $3,000.00;

 

(B)                  a transfer fee
in an amount equal to one (1) percent of the unpaid principal balance of
the Indebtedness immediately before the applicable Transfer; and

 

(C)                  the amount of
Lender’s out-of-pocket costs (including reasonable Attorneys’ Fees and Costs)
incurred in reviewing the Transfer request

 

22.      EVENTS OF DEFAULT. The occurrence of any one or more of the following shall constitute an
Event of Default under this Instrument:

 

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

 

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

 

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

 

(d)       fraud or material misrepresentation or
material omission by Borrower, any of its officers, directors, trustees,
general partners or managers or any guarantor in connection with (i) the
application for or creation of the Indebtedness, (ii) any financial
statement, rent schedule, or other report or information provided to Lender
during the term of the Indebtedness, or (iii) any request for Lender’s
consent to any proposed action, including a request for disbursement of funds
under any Collateral Agreement;

 

(e)       any failure by Borrower to comply with the
provisions of Section 20;

 

32

 

(f)        any Event of Default under Section 21;

 

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

 

(h)       any failure by Borrower to perform any of its
obligations under this Instrument (other than those specified in Sections 22(a) through
(g)), as and when required, which continues for a period of 30 days after
Notice of such failure by Lender to Borrower, However, if Borrower’s failure to
perform its obligations as described in this Section 22(h) is of the
nature that it cannot be cured within the 30 day grace period but reasonably could
be cured within 90 days, then Borrower shall have additional time as determined
by Lender in its discretion, not to exceed an additional 60 days, in which to
cure such default, provided that Borrower has diligently commenced to cure such
default during the 30-day grace period and diligently pursues the cure of such
default. However, no such Notice or grace periods shall apply in the case of
any such failure which could, in Lender’s judgment, absent immediate exercise
by Lender of a right or remedy under this Instrument, result in harm to Lender,
impairment of the Note or this Instrument or any other security given under any
other Loan Document;

 

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

 

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

 

(k)       any voluntary filing by Borrower for
bankruptcy protection under the United States Bankruptcy Code or any
reorganization, receivership, insolvency proceeding or other similar proceeding
pursuant to any other federal or state law affecting debtor and creditor rights
to which Borrower voluntarily becomes subject, or the commencement of any
involuntary case against Borrower by any creditor (other than Lender) of
Borrower pursuant to the United States Bankruptcy Code or other federal or
state law affecting debtor and creditor rights which case is not dismissed or
discharged within 90 days after filing; and

 

(l)        any representations and warranties by Borrower
in this Instrument which is false or misleading in any material respect.

 

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

 

24.      FORBEARANCE.

 

(a)       Lender may (but shall not be obligated to)
agree with Borrower, from time to time, and without giving notice to, or
obtaining the consent of, or having any effect upon the obligations of, any
guarantor or other third party obligor, to take any of the following actions:
extend the time for payment of all or any part of the Indebtedness; reduce the
payments due under this Instrument, the Note, or any other Loan Document;
release anyone liable for the payment of any amounts under this Instrument, the
Note, or any other Loan Document; accept a

 

33

 

renewal
of the Note; modify the terms and time of payment of the Indebtedness; join in
any extension or subordination agreement; release any Mortgaged Property; take
or release other or additional security; modify the rate of interest or period
of amortization of the Note or change the amount of the monthly installments
payable under the Note; and otherwise modify this Instrument, the Note, or any
other Loan Document.

 

(b)       Any forbearance by Lender in exercising any
right or remedy under the Note, this Instrument, or any other Loan Document or
otherwise afforded by applicable law, shall not be a waiver of or preclude the
exercise of any other right or remedy, or the subsequent exercise of any right
or remedy. The acceptance by Lender of payment of all or any part of the Indebtedness
after the due date of such payment, or in an amount which is less than the
required payment, shall not be a waiver of Lender’s right to require prompt
payment when due of all other payments on account of the Indebtedness or to
exercise any remedies for any failure to make prompt payment. Enforcement by
Lender of any security for the Indebtedness shall not constitute an election by
Lender of remedies so as to preclude the exercise of any other right available
to Lender. Lender’s receipt of any awards or proceeds under Sections 19 and 20
shall not operate to cure or waive any Event of Default.

 

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

 

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

 

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

 

28.      FURTHER ASSURANCES. Borrower shall execute, acknowledge, and deliver, at its sole cost and
expense, all further acts, deeds, conveyances, assignments, estoppel
certificates, financing statements or amendments, transfers and assurances as
Lender may require

 

34

 

from
time to time in order to better assure, grant, and convey to Lender the rights
intended to be granted, now or in the future, to Lender under this Instrument
and the Loan Documents.

 

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

 

30.      GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE.

 

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

 

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

 

31.      NOTICE

 

(a)       All Notices, demands and other communications
(“Notice”) under or concerning this Instrument shall be in writing. Each Notice
shall be addressed to the intended recipient at its address set forth in this
Instrument, and shall be deemed given on the earliest to occur of (i) the
date when the Notice is received by the addressee; (ii) the first Business
Day after the Notice is delivered to a recognized overnight courier service,
with arrangements made for payment of charges for next Business Day delivery;
or (iii) the third Business Day after the Notice is deposited in the
United States mail with postage prepaid, certified mail, return receipt
requested.

 

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

 

35

 

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

 

32.      SALE OF NOTE; CHANGE IN SERVICER; LOAN SERVICING. The Note or a partial interest in the Note
(together with this Instrument and the other Loan Documents) may be sold one or
more times without prior Notice to Borrower. A sale may result in a change of
the Loan Servicer. There also may be one or more changes of the Loan Servicer
unrelated to a sale of the Note. If there is a change of the Loan Servicer,
Borrower will be given Notice of the change. All actions regarding the
servicing of the loan evidenced by the Note, including the collection of
payments, the giving and receipt of Notice, inspections of the Mortgaged
Property, inspections of books and records, and the granting of consents and
approvals, may be taken by the Loan Servicer unless Borrower receives Notice to
the contrary. If Borrower receives conflicting Notices regarding the identity of
the Loan Servicer or any other subject, any such Notice from Lender shall
govern.

 

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

 

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

 

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

 

36.      RELATIONSHIP OF PARTIES; NO THIRD PARTY BENEFICIARY.

 

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

 

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

 

37.      SEVERABILITY; AMENDMENTS. The invalidity or unenforceability of any
provision of this Instrument shall not affect the validity or enforceability of
any other provision, and all other provisions shall remain in full force and
effect This Instrument contains the entire agreement among the parties as to
the rights granted and the obligations assumed in this Instrument. This
Instrument may not be amended or modified except by a writing signed by the
party against whom enforcement is sought; provided, however, that in the event
of a Transfer prohibited by or requiring Lender’s approval under Section 21,
any or some or all of the

 

36

 

Modifications to
Instrument set forth in Exhibit B (if any) may be modified or rendered
void 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 Instrument are for convenience only and shall be
disregarded in construing this Instrument. 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 of this Instrument. All Exhibits attached to or
referred to in this Instrument are incorporated by reference into this
Instrument. Any reference in this Instrument to a statute or regulation shall
be construed as referring to that statute or regulation as amended from time to
time. Use of the singular in this Agreement includes the plural and use of the
plural includes the singular. As used in this Instrument, the term “including”
means “including, but not limited to.”

 

39.      DISCLOSURE OF INFORMATION. Lender may
furnish information regarding Borrower or the Mortgaged Property to third
parties with an existing or prospective interest in the servicing, enforcement,
evaluation, performance, purchase or securitization of the Indebtedness,
including but not limited to trustees, master servicers, special servicers,
rating agencies, and organizations maintaining databases on the underwriting
and performance of multifamily mortgage loans, as well as governmental
regulatory agencies having regulatory authority over Lender. Borrower
irrevocably 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.      NO CHANGE IN FACTS OR CIRCUMSTANCES. Borrower
warrants that (a) all information in the application for the loan
submitted to Lender (the “Loan Application”)
and in all financial statements, rent schedules, reports, certificates and
other documents submitted in connection with the Loan Application are complete
and accurate in all material respects; and (b) there has been no material
adverse change in any fact or circumstance that would make any such information
incomplete or inaccurate.

 

41.      SUBROGATION. If, and to the extent that,
the proceeds of the loan evidenced by the Note, or subsequent advances under Section 12,
are used to pay, satisfy or discharge a Prior Lien, such loan proceeds or
advances shall be deemed to have been advanced by Lender at Borrower’s request,
and Lender shall automatically, and without further action on its part, be
subrogated to the rights, including lien priority, of the owner or holder of
the obligation secured by the Prior Lien, whether or not the Prior Lien is
released.

 

42.      ADJUSTABLE RATE MORTGAGE - THIRD PARTY CAP AGREEMENT “CAP
COLLATERAL.”

 

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

 

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

 

(ii)                     any and all
moneys (collectively, “Cap Payments”)
payable pursuant to any Cap Agreement by the interest rate cap provider or
other counterparty

 

37

 

to a Cap Agreement or any
guarantor of the obligations of any such cap provider or counterparty (a “Cap Provider”);

 

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

 

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

 

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

 

(vi)                 all cash and
non-cash proceeds and products of (ii) — (v) above.

 

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

 

(c)       So long as there is no Event
of Default, Lender or Loan Servicer will remit to Borrower each Cap Payment
received by Lender or Loan Servicer with respect to any month for which
Borrower has paid in full the monthly installment of principal 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 respect to any month to the applicable
monthly payment of accrued interest due under the Note if Borrower has paid in
full the remaining portion of such monthly payment of principal and interest or
interest only, as applicable.

 

(d)       Following an Event of
Default, in addition to any other rights and remedies Lender may have, Lender
may retain any Gap Payments and apply them to the Indebtedness in such order
and amounts as Lender determines. Neither the existence of a Cap Agreement nor
anything in this Instrument shall relieve Borrower of its primary obligation to
timely pay in full all amounts due under the Note and otherwise due on account
of the Indebtedness.

 

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

 

43.      ACCELERATION; REMEDIES. If an Event of
Default has occurred and is continuing. Lender, at Lender’s option, may declare
the Indebtedness to be immediately due and payable without further demand, and
may invoke the power of sale and any other remedies permitted by California law
or provided in this Instrument or in any other Loan Document. Borrower
acknowledges that the power of sale granted in this Instrument may be exercised
by Lender without prior judicial hearing. Lender shall be entitled to collect
all costs and expenses incurred in pursuing such remedies, including attorneys’
fees, costs of documentary evidence, abstracts and title reports.

 

38

 

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

 

Trustee shall
deliver to the purchaser at the sale, within a reasonable time after the sale,
a deed conveying the Mortgaged Property so sold without any express or implied
covenant or warranty. The recitals in Trustee’s deed shall be prima facie
evidence of the truth of the statements made in those recitals. Trustee shall
apply the proceeds of the sale in the following order: (a) to all costs
and expenses of 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 as Lender, in Lender’s discretion, directs; and (c) the
excess, if any, to the 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 shall surrender this Instrument and the Note to Trustee. Trustee shall
reconvey the Mortgaged Property without warranty to the person or persons
legally entitled to the Mortgaged Property. Such person or persons shall pay
Trustee’s reasonable costs incurred in so reconveying the Mortgaged Property.

 

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

 

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

 

47.      SPOUSE’S SEPARATE PROPERTY. Each Borrower
who is a married person expressly agrees that recourse may be had against his
or her separate property.

 

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

 

39

 

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

 

50.      WAIVER OF MARSHALLING; OTHER WAIVERS. To the extent permitted by law, Borrower
waives (i) the benefit of all present or future laws providing for any
appraisement before sale of any portion of the Mortgaged Property, (ii) all
rights of redemption, valuation, appraisement, stay of execution, notice of
election to mature or declare due the whole of the Indebtedness and marshalling
in the event of foreclosure of the lien created by this Instrument, (iii) all
rights and remedies which Borrower may have or be able to assert by reason of
the laws of the State of California pertaining to the rights and remedies of
sureties, (iv) the right to assert any statute of limitations as a bar to
the enforcement of the lien of this Instrument or to any action brought to
enforce the Note or any other obligation secured by this Instrument, and (v) any
rights, legal or equitable, to require marshalling of assets or to require upon
foreclosure sales in a particular order, including any rights under California
Civil Code Sections 2899 and 3433. Lender shall have the right to determine the
order in which any or all of the Mortgaged Property shall be subjected to the
remedies provided by this Instrument. Lender shall have the right to determine
the order in which any or all portions of the Indebtedness are satisfied from
the proceeds realized upon the exercise of the remedies provided by this
Instrument. By signing this Instrument, Borrower does not waive its rights
under Section 2924c of the California Civil Code.

 

51.      ADDITIONAL PROVISIONS CONCERNING ENVIRONMENTAL
HAZARDS. In addition to the
provisions of Section 18:

 

(a)       Except for matters covered by an O&M
Program or matters described in Section 18(b), Borrower shall not cause or
permit any lien (whether or not such lien has priority over the lien created by
this Instrument) upon the Mortgaged Property imposed pursuant to any Hazardous
Materials Laws. Any such lien shall be considered a Prohibited Activity or
Condition.

 

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

 

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

 

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

 

The
representations and warranties in this Section 5l(b) shall be
continuing representations and warranties that shall be deemed to be made by
Borrower throughout the term of the loan evidenced by the Note, until the
Indebtedness has been paid in full.

 

40

 

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

 

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

 

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

 

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 this Instrument to be signed and delivered by its duly
authorized representative.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

41

 

	
   

  	
   

  	
  WATERFORD PLACE APARTMENTS, LLC,

  
	
   

  	
   

  	
  a California limited liability company

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Shea
  Properties Management Company, Inc.,

  
	
   

  	
   

  	
   

  	
  a
  Delaware corporation, its manager

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/
  James G. Shontere

  
	
   

  	
   

  	
   

  	
   

  	
  James
  G. Shontere

  
	
   

  	
   

  	
   

  	
   

  	
  Secretary

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/
  Robert R. O’Dell

  
	
   

  	
   

  	
   

  	
   

  	
  Robert
  R. O’Dell

  
	
   

  	
   

  	
   

  	
   

  	
  Treasurer

  

 

42

 

CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT

 

	
  State
  of California

  
	
   

  
	
  County
  of Los Angeles

  

 

	
  On March 27, 2008 before me, Winnie L. Yee

  	
  ,

  
	
            DATE                              NAME,
  TITLE OF OFFICER - E.G., “JANE DOE, NOTARY PUBLIC”

  	
   

  

 

	
  personally
  appeared

  	
  James G. Shontere &
  Robert R. O’Dell

  	
                                                                          ,

  
	
   

  	
  NAME(S) OF SIGNER(S)

  	
   

  

 

who
proved to me on the basis of satisfactory evidence to be the person(s) whose
name(s) is/are subscribed to the within instrument and acknowledged to me
that they executed the same in their authorized capacity(ies), and that by
their signature(s) on the instrument the person(s), or the entity upon
behalf of which the person(s) acted, executed the instrument.

 

I
certify under PENALTY OF PERJURY under the laws of the State of California that
the foregoing paragraph is true and correct.

 

WITNESS
my hand and official seal.

 

	
  [SEAL]

  	
   

  	
   

  	
  /s/
  Winnie L. Yee

  
	
   

  	
   

  	
   

  	
  Signature
  of Notary

  

 

OPTIONAL

 

Though
the data below is not required by law, it may prove valuable to persons relying
on the document and could prevent fraudulent reattachment of this form.

 

	
   

  	
  CAPACITY CLAIMED BY SIGNER

  	
   

  	
  DESCRIPTION OF ATTACHED DOCUMENT

  
	
   

  	
   

  	
   

  	
   

  
	
  o

  	
  INDIVIDUAL

  	
   

  	
   

  
	
  o

  	
  CORPORATE
  OFFICER:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  TITLE OR TYPE OF DOCUMENT

  
	
   

  	
  TITLE(S)

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  o

  	
  PARTNER(S):

  	
  o    LIMITED

  	
   

  	
   

  
	
  o

  	
   

  	
  o    GENERAL

  	
   

  	
   

  
	
  o

  	
  ATTORNEY-IN-FACT

  	
   

  	
   

  
	
  o

  	
  TRUSTEE(S)

  	
   

  	
  NUMBER OF PAGES

  
	
  o

  	
  GUARDIAN/CONSERVATOR

  	
   

  	
   

  
	
  o

  	
  OTHER:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  DATE OF DOCUMENT

  
	
   

  	
   

  	
   

  	
   

  
	
  SIGNER IS REPRESENTING:

  	
   

  	
   

  
	
  NAME
  OF PERSONS OR ENTITY(IES)

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  SIGNER(S) OTHER THAN NAMED ABOVE

  

 

43

 

CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT

 

State
of                               

 

County
of                              

 

	
  On
                                      
  before me, 

  	
   

  	
  ,

  
	
  DATE

  	
  NAME, TITLE OF OFFICER - E.G., “JANE DOE, NOTARY
  PUBLIC”

  
	
  personally
  appeared

  	
                                                                                                                                                          ,

  
	
   

  	
  NAME(S) OF SIGNER(S)

  
				

 

who
proved to me on the basis of satisfactory evidence to be the person(s) whose
name(s) is/are subscribed to the within instrument and acknowledged to me
that he/she/they executed the same in his/her/their authorized capacity(ies),
and that by their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.

 

I
certify under PENALTY OF PERJURY under the laws of the State of California that
the foregoing paragraph is true and correct.

 

WITNESS
my hand and official seal.

 

	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Signature
  of Notary

  

 

OPTIONAL

 

Though
the data below is not required by law, it may prove valuable to persons relying
on the document and could prevent fraudulent reattachment of this form.

 

	
   

  	
  CAPACITY CLAIMED BY SIGNER

  	
   

  	
  DESCRIPTION OF ATTACHED DOCUMENT

  
	
   

  	
   

  	
   

  	
   

  
	
  o

  	
  INDIVIDUAL

  	
   

  	
   

  
	
  o

  	
  CORPORATE
  OFFICER:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  TITLE OR TYPE OF DOCUMENT

  
	
   

  	
  TITLE(S)

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  o

  	
  PARTNER(S):

  	
  o    LIMITED

  	
   

  	
   

  
	
  o

  	
   

  	
  o    GENERAL

  	
   

  	
   

  
	
  o

  	
  ATTORNEY-IN-FACT

  	
   

  	
   

  
	
  o

  	
  TRUSTEE(S)

  	
   

  	
  NUMBER OF PAGES

  
	
  o

  	
  GUARDIAN/CONSERVATOR

  	
   

  	
   

  
	
  o

  	
  OTHER:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  DATE OF DOCUMENT

  
	
   

  	
   

  	
   

  	
   

  
	
  SIGNER IS REPRESENTING:

  	
   

  	
   

  
	
  NAME
  OF PERSONS OR ENTITY(IES)

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  SIGNER(S) OTHER THAN NAMED ABOVE

  

 

44

 

EXHIBIT B

 

MODIFICATIONS TO INSTRUMENT

 

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

 

1.                          Delete
clause (ii) of Section 2(b).

 

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

 

3.                          Section 7
of the Security Instrument is amended to add the following subsection:

 

“(h)             At least annually,
the Borrower must provide Lender with proof of payment of all such Impositions
for which Lender is not collecting Imposition Deposits.”

 

4.                          Delete Section 10(b).

 

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

 

6.                          At the
end of Section 13(a), insert the following: “Lender shall use good faith
efforts to minimize interference with tenants of the Improvements while
conducting any environmental inspections and tests.”

 

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

 

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

 

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

 

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

 

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

 

11.                    At the end of
the second sentence of Section 17(f) after clause (i), after the word
“Personality”, insert “, and except that without the consent of Lender,
Borrower may make alterations and additions to the Improvements provided that
such alterations and additions

 

B-1

 

are completed in a
lien-free and good and workmanlike manner in accordance with applicable laws,
that neither the performance nor completion of the alterations or additions
adversely affects the structural integrity of the Improvements or the occupancy
of the Improvements, and the aggregate costs of all such alterations and
additions does not exceed $1,500,000.”

 

12.                    In Section 18(e)(iv),
insert the words “in all material respects” following and word “complied” in
the first sentence.

 

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

 

14.                    Section 18(g) is
modified to provide that with respect to any Environmental Inspection required
by Lender as a condition of Lender’s consent to any Transfer under Section 21,
Lender shall (x) provide to Borrower reasonable notice of the
Environmental Inspection, (y) to the extent reasonable, not interfere with
the rights of tenants in possession, and (z) shall cause any contractor,
consultant or other entity conducting such Environmental Inspection to have
insurance coverage for damages to the Property caused by such contractor,
consultant or other entity as a result of such Environmental Inspection.

 

15.                    In Section 18(h),
replace the words “on a timely basis” appearing in the second sentence with the
words “prior to the applicable deadline required by Hazardous Materials Laws”.

 

16.                    In Section 18(i),
insert the words “in all material respects” following and word “comply” in the
first sentence.

 

17.                    Insert the following
provision after the words “any of the following” in the first sentence of Section 18(j):

 

“except to the extent
that any of the foregoing are conclusively determined to have first arisen as a
result of acts or occurrences which first occurred after such time as Borrower
has sold, transferred or assigned all of its right, title and interest and into
the Mortgaged Property to Lender, or a successor or assign of Lender pursuant
to a foreclosure or deed-in-lieu of foreclosure.”

 

18.                    In Section 19(f),
after the third sentence, add the following: “However, if no Event of Default
has occurred, (i) if the cost of a “Restoration” (hereinafter defined) is
reasonably estimated to be $1,500,000 or less, Borrower shall have the
exclusive right to adjust or compromise claims under policies of insurance for
payment of the costs associated with such Restoration, provided that any such
adjustment or compromise shall be subject to Lender’s prior written approval;
and (ii) in all other instances, Lender shall consult with and allow the
participation of Borrower in connection with any adjustment or compromise of
claims under policies of property insurance, but Lender’s determinations in
connection with any adjustment or compromise shall control.”

 

19.                    At the end of Section 20(b),
insert the following: “The foregoing notwithstanding, Lender shall not exercise
its option to apply Condemnation awards or proceeds to the payment of
Indebtedness if the conditions set forth in Section 19(h) for the
application of insurance proceeds to the Restoration are satisfied in
connection with the restoration of the Mortgaged Property following the
Condemnation.” For 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.

 

B-2

 

20.                    Section 21(c)(vii) is
hereby deleted in its entirety.

 

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

 

“(viii)    A Transfer to any of the
following (“a Pre-Approved Entity”) under the terms and conditions set forth in
items (1)-(7) below:

 

A)                     a Transfer of
all or any part of the Property or any interest in the Property to a Shea
Family Member (as hereinafter defined), or a Shea Controlled Entity (as
hereinafter defined);”

 

B)                       a Transfer
of interests in Borrower or a change in the manager of Borrower or the manager
of a Controlling Entity, provided that after giving effect to the Transfer or
the change in the manager, the condition set forth in item (3) below is
satisfied;

 

C)                       a Transfer
of interests in a Controlling Entity, provided that after giving effect to the
Transfer, the condition set forth in item (3) below is satisfied;

 

D)                      a Transfer
of all or part of the interests of any general partner in Borrower, provided
that after giving effect to the Transfer, the condition set forth in item (3) below
is satisfied.

 

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

 

(1)                    Lender
receives copies of the Transfer documents for a Transfer of the Property, and
copies of any modifications to the organizational documents of Borrower or any
Controlling Entity or general partner resulting from any other Transfer.

 

(2)                    Upon the
Transfer, one or more Shea Family Members (other than Claire Shea) and/or one
or more Shea Controlled Entities (other than one solely controlled by Claire
Shea or her spouse, issue or any trust established by or for their benefit)
shall own, collectively, not less than 50% of the ownership interests in each
of (w) the Property and (x) Borrower or a corporation, partnership,
limited liability company, joint venture, or trust which is a Controlling
Entity in Borrower.

 

(3)                    Lender
approves the Transfer, which approval shall be granted if the Transfer meets
the terms and conditions of this Section 2l(c)(viii).

 

(4)                    With respect
to a transfer of the Property, (x) the transferee executes an assumption
agreement that is acceptable to Lender and which requires the transferee 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 any other Loan
Document, (y)

 

B-3

 

each Guarantor (if
applicable) reaffirms in writing its respective obligations under any Guaranty
and acknowledges and confirms that the Guaranty remains in full force and
effect and that each Guarantor guarantees the Pre-Approved Entity’s obligations
under the Note, this Instrument and the other Loan Documents, and (z) upon
Lender’s approval of the Transfer, the assumption agreement is recorded in the
Land Records of the Property Jurisdiction.

 

(5)                    With respect
to a Transfer of the Property, Borrower pays the cost of all title searches,
title insurance and recording costs, and all fees and out of pocket costs of
Lender’s legal counsel related to the Transfer.

 

(6)                    Lender shall
not collect a transfer fee of 1% of the unpaid principal balance in connection
with the Transfer to the Pre-Approved Entity. In the case of a Transfer of an
interest in the Property, or in the case of a Transfer of an interest in
Borrower, or any general partner of Borrower which is accompanied by a material
change in the organizational documents of any such entity, Borrower shall pay a
review fee in the amount of $2,000.

 

(7)                    At the time of
the Transfer, there exists no Event of Default under this Instrument.

 

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

 

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

 

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

 

22.                    Delete Section 21(f)(iv).

 

23.                    Delete Section 22(f).

 

24.                    In Section 22(h),
in the second sentence, change “90 days” to “120 days”, and change “60 days” to
“90 days”.

 

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

 

26.                    Notwithstanding
the provisions of Section 37, the modifications set forth in this Exhibit B
shall become ineffective upon a Transfer that requires Lender’s consent or upon
any Transfer that constitutes an Event of Default under Section 21(e) of
this Instrument.

 

B-4

 

27.                    A new Section 53
is hereby added as follows:

 

“53.    SUPPLEMENTAL LIEN PROVISIONS.

 

(a)       Definitions. For purposes of this Section only, the
following terms have the meanings set forth below:

 

i.                            Event of Default means an Event of Default
described in this Instrument and the Senior Instrument and if the Senior
Instrument is documented on the FNMA/FHLMC Uniform Instrument dated 1/77, any
breach by Borrower of any covenant or agreement in the Senior Instrument,
Senior Note or any other Senior Loan Document after the expiration of any
applicable cure period.

 

ii.                         Supplemental Instrument means the
Instrument to which this Exhibit B is attached.

 

iii.                      Supplemental Loan Documents means all
documents relating to the loan evidenced by the Supplemental Note.

 

iv.                     Supplemental Note means the Multifamily
Note secured by the Supplemental Instrument.

 

v.                        Supplemental Lender means the Lender named
in this Supplemental Instrument and its successors, assigns and transferees.

 

(b)       Subordination of Lien. Notwithstanding any provisions of this
Supplemental Instrument or the Supplemental Loan Documents to the contrary, it
is understood and agreed that the lien, terms, covenants and conditions of this
Supplemental Instrument are and shall be subordinate in all respects, including
right of payment, to the indebtedness (“Senior
Indebtedness”) evidenced by a Multifamily Note dated April 1,
2004, in the original principal amount of $52,000,000.00 (as modified or
amended the “Senior Note”) made by
or assumed by the Borrower and secured by a Multifamily Deed of Trust,
Assignment of Rents, Security Agreement and Fixture Filing, dated April 1,
2004 (the “Senior Instrument”) to
or for the benefit of Berkshire Mortgage Finance Limited Partnership, a
Massachusetts limited partnership, which was recorded on April 15, 2004 in
the Office of Alameda County, California as Document No. 2004-159476 and
was assigned to the Federal Home Loan Mortgage Corporation (together with its
successors, assigns and transferees, the “Senior
Lender”) by assignment dated April 15, 2004 and recorded on April 15,
2004 in the Office of Alameda County, California as Document No. 2004-159477.

 

(c)       Default Under Other Liens. If there is an Event of Default
under (i) the Senior Note, the Senior Instrument or any other loan
document executed in connection with the Senior Indebtedness (the “Senior Loan Documents”); or (ii) any
loan document related to another loan in connection with the Mortgaged Property
(regardless of whether Borrower has obtained Supplemental Lender’s approval of
the placement of such lien on the Mortgaged Property), then such Event of
Default shall be an Event of Default under this Supplemental Instrument and
shall entitle Supplemental Lender to invoke any and all

 

B-5

 

remedies permitted to
Supplemental Lender by applicable law, the Supplemental Note, this Supplemental
Instrument or any other Supplemental Loan Documents.

 

(d)       Cross Default of Senior Instrument with Supplemental Instrument.
..As Borrower under both this Supplemental Instrument and the Senior Instrument,
Borrower hereby acknowledges and agrees that if there is an Event of Default
under the Supplemental Note, this Supplemental Instrument or any other
Supplemental Loan Document, such Event of Default shall be an Event of Default
under the terms of the Senior Instrument and shall entitle Senior Lender to
invoke any and all remedies permitted to Senior Lender by applicable law, the
Senior Note, the Senior Instrument or any of the other Senior Loan Documents.

 

(e)       No Merger.

 

(i)                       It is the
intent of Borrower and Supplemental Lender that if Supplemental Lender obtains
title to the Mortgaged Property (by virtue of a foreclosure sale, a deed in
lieu of foreclosure or otherwise) and Supplemental Lender is also or
subsequently becomes the holder of the Senior Note and Senior Instrument,
Supplemental Lender’s title interest and Lien interest shall not automatically
merge so as to effect an extinguishment of the Senior Instrument by operation
of the doctrine of merger.

 

(ii)                    It is the
intent of Borrower and Supplemental Lender that if Senior Lender obtains title
to the Mortgaged Property (by virtue of a foreclosure sale, a deed in lieu of
foreclosure or otherwise) and Senior Lender is also or subsequently becomes the
holder of the Supplemental Note and Supplemental Instrument, Senior Lender’s
title interest and lien interest shall not automatically merge so as to effect
an extinguishment of this Supplemental Instrument by operation of the doctrine
of merger.

 

(iii)                 Borrower
acknowledges and agrees that no course of conduct by Borrower, Supplemental
Lender or Senior Lender subsequent to the date of this Supplemental Instrument
shall be used to demonstrate any intent contrary to the express intent stated
in this Section. Borrower further agrees that the holder of the Senior Note is
a third party beneficiary of the provisions of this Section and that no
amendments, modifications, waivers or other limitations of this Section shall
be effective without the prior written agreement of the holder of the Senior
Note.

 

(f)        Collection of Escrows for Impositions and Replacement Reserves.

 

(i)                       For so long
as the same person or entity is both Senior Lender and Supplemental Lender,
monthly payments made by Borrower under the Senior Instrument from and after
the effective date of this Supplemental Instrument as deposits for the payment
of any Impositions shall be credited to the monthly deposits for the payment of
such Impositions under this Supplemental Instrument.

 

B-6

 

(ii)                     For so long
as the same person or entity is both Senior Lender and Supplemental Lender,
monthly payments made by Borrower from and after the effective date of this
Supplemental Instrument pursuant to the Replacement Reserve Agreement executed
in connection with the Senior Note (“Senior
Replacement Reserve Agreement”) shall be credited to the monthly
amounts due by Borrower in connection with the Replacement Reserve Agreement
executed in connection with the Supplemental Indebtedness (“Supplemental Replacement Reserve Agreement”).

 

(g)       Additional Collateral.

 

(i)                        Subject to
Senior Lender’s interest, Borrower hereby assigns and grants to Supplemental
Lender a security interest in all Imposition Deposits, all amounts in the
Replacement Reserve Fund (as such term is defined in  the Senior Replacement Reserve Agreement) and any amount in
any repair escrow in connection with the Senior Indebtedness as additional
security for all of the Borrower’s obligations under the Supplemental Note.

 

(ii)                     In addition,
Borrower hereby assigns and grants to Senior Lender a security interest in all
Imposition Deposits, all amounts in the Replacement Reserve Fund (as such term
is defined in the Supplemental Replacement Reserve Agreement) and any amount in
any repair escrow in connection with the Supplemental Indebtedness as
additional security for all of the Borrower’s obligations under the Senior
Note.

 

(iii)                  It is the
intention of Borrower that so long as the same person or entity is both Senior
Lender and Supplemental Lender, that all amounts deposited by Borrower in
connection with either the Senior Loan Documents, the Supplemental Loan Documents
or both, constitute collateral for the Indebtedness secured by the Supplemental
Instrument and the Senior Indebtedness secured by the Senior Instrument, with
the application of such amounts to such Senior Indebtedness or Indebtedness to
be at the discretion of Senior Lender and Supplemental Lender.”

 

28.       A new Section 54 is hereby added as follows:

 

“54.    CONDOMINIUM PROVISIONS.

 

(a) Borrower represents and warrants that, to
the best of its knowledge, the Mortgaged Property is a condominium (the “Condominium”)
and constitutes all of Unit 1 (as defined in the Condominium Instruments”) and
a 97% tenancy-in-common interest in the common elements comprising the
Waterford Place Condominiums, a Condominium, as established under the
applicable Condominium Act codified in California Civil Code Sections 1350 et
seq., as from time to time amended (the “Condominium Act”). The Declaration, as
recorded in the official records of Alameda County, State of California as
Document No. 2003653881, Bylaws and Plats establishing and describing the

 

B-7

 

Condominium,
arc collectively referred to below as the “Condominium Instruments.”

 

(b)       Borrower
hereby agrees that the Condominium Instruments will not be modified or amended
without the prior written consent of Lender until the Indebtedness has been
paid in full.

 

(c)       Borrower
represents and warrants that none of the units in Unit 1 and its 97%
tenancy-in-common interest in the common elements comprising the Condominium
have been sold, conveyed or encumbered or are subject to any agreement to
convey 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 I or any of its 97% tenancy-in-common
interest in the common elements of the Condominium unless expressly agreed to
in writing by Lender.

 

(d)       Borrower
agrees that it shall own, operate and maintain the Mortgaged Properly in
accordance with the terms of this Instrument and operate the Mortgaged Property
solely as a rental apartment project.

 

(e)       The
Mortgaged Property granted, conveyed and assigned to Lender hereunder shall
include all rights, easements, rights of way, reservations and powers of the
Borrower under the Condominium Act and the Condominium Instruments in Borrower’s
capacity as owner of the Mortgaged Property and as Declarant as well as any
rights that Borrower may have, in any capacity, under the Condominium Act and
the Condominium Instruments in addition to Borrower’s rights as owner of any of
the units or the Condominium, specifically including but not limited to all
rights to approve any amendments to the Condominium Instruments and all rights
to expand the Condominium.

 

(f)        Borrower
hereby irrevocably constitutes and appoints Lender as Borrower’s proxy and
attorney-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 to
exercise all of the rights and powers of Borrower under the Condominium
Instruments without any liability therefor or thereunder (except for gross
negligence or willful misconduct). Borrower hereby instructs and grants and
gives to Lender full power and authority to do and perform all and every act
and thing whatsoever authorized, permitted, requisite or necessary to be done
by Borrower under the provisions of the Condominium Instruments to all intents
and purposes the same as Borrower might do, hereby ratifying and confirming all
such attorney shall lawfully do or choose to do or be done by virtue hereof, it
being understood and agreed that the aforesaid provisions impose no burden or
obligation on the Lender to do or perform any act whatsoever. It shall be a
default under this Instrument if (i) Borrower terminates or revokes or
attempts to terminate or revoke the aforesaid appointment of Lender as Borrower’s
proxy or attorney-in-fact either permanently or as to any election in the
Condominium Act or Condominium Instruments or (ii) Borrower attempts to
modify the terms of the Condominium Instruments without the prior written
consent of Lender. Notwithstanding anything in this paragraph to the contrary,
the rights and powers of Borrower granted in this paragraph may not be
exercised by Lender prior to the occurrence of an Event of Default

 

B-8

 

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

 

(h)       Nothing
contained herein is intended to or shall be construed to constitute Lender as
the “Declarant” under the Condominium Act and/or the Condominium Instruments or
as owner of the Condominium, a partner or joint venturer of Borrower.

 

(i)        Borrower
hereby agrees to indemnify and hold Lender harmless from and against any and
all losses, cost, liabilities, or damages (including attorney’s fees and
disbursements) arising out of (i) the failure of the Borrower to comply
with any state or local law, ordinance, statute, or regulation by any
governmental authority covering the condominium at the Mortgaged Property; or (ii) any
claim 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
of Borrower as set forth in the Condominium Instruments.

 

B-9

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