Document:

ex107601capmark7fredmacagmt.htm

    EX-10.76.01

     

    
 

    

     

    Tax
Parcel Number:  ED-05-076.07-01-26.02-000

     

    

     

    Prepared
by and return to:

     

    David J.
McPherson

    Troutman
Sanders LLP

    P.O. Box
1122

    Richmond,
Virginia  23218-1122

    

    

    

    

    

    

    

    MULTIFAMILY
MORTGAGE,

    ASSIGNMENT OF
RENTS

    AND SECURITY
AGREEMENT

    

    (DELAWARE
– REVISION DATE 05-11-2004)

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    FHLMC
Loan No. 504143255

     

    Green
Meadows at Dover

     

    MULTIFAMILY
MORTGAGE,

    ASSIGNMENT
OF RENTS

    AND
SECURITY AGREEMENT

    (DELAWARE
– REVISION DATE 05-11-2004)

     

    THIS
MULTIFAMILY MORTGAGE, ASSIGNMENT OF RENTS AND SECURITY AGREEMENT (the "Instrument") is made as of the
30th day of December, 2008 between EMERICHIP DOVER LLC, a limited
liability company organized and existing under the laws of Delaware, whose
address is c/o Emeritus Corporation, 3131 Elliott Avenue, Suite 500, Seattle,
Washington 98121, as mortgagor ("Borrower"), and CAPMARK BANK, an industrial
bank organized and existing under the laws of Utah, whose address is 6955 Union
Park Center, Suite 330, Midvale, Utah 84047, Attn:  President, with a
copy to Capmark Finance Inc., 116 Welsh Road, Horsham, Pennsylvania 19044,
Attn:  Servicing - Executive Vice President, as mortgagee ("Lender").  Borrower's
organizational identification number, if applicable, is 4384442.

     

    Borrower
is indebted to Lender in the principal amount of $4,275,000.00, as evidenced by
Borrower's Multifamily Note payable to Lender dated as of the date of this
Instrument, and maturing on January 1, 2019 (the "Maturity Date").

     

    TO SECURE
TO LENDER the repayment of the Indebtedness, and all renewals, extensions and
modifications of the Indebtedness, and the performance of the covenants and
agreements of Borrower contained in the Loan Documents, Borrower mortgages,
warrants, grants, conveys and assigns to Lender the Mortgaged Property,
including the Land located in the County of Kent, State of Delaware, and
described in Exhibit A attached to this Instrument.

     

    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:

     

    (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. 

     

    
      
         

      

      
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- 1

        
          

        

      

      
         

      

    

    (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, 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,

     

    
      
         

      

      
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- 2

        
          

        

      

      
         

      

    

    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.

     

    (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.

     

    
      
         

      

      
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- 3

        
          

        

      

      
         

      

    

    (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;

            

    

     

    
      	
              (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

            

    

     

    
      
         

      

      
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    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 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

            

    

     

    
      
         

      

      
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    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) "Property 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 lien 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, 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.

     

    
      
         

      

      
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    (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 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

     

    
      
         

      

      
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- 7

        
          

        

      

      
         

      

    

    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 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.

     

    
      
         

      

      
        PAGE
- 8

        
          

        

      

      
         

      

    

    (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 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

     

    
      
         

      

      
        PAGE
- 9

        
          

        

      

      
         

      

    

    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 execute such further
evidences of attornment 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:

     

    
      
         

      

      
        PAGE
- 10

        
          

        

      

      
         

      

    

    
      	
              (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 "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,

            

    

    [Collect]                      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

     

    
      
         

      

      
        PAGE
- 11

        
          

        

      

      
         

      

    

    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
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.

     

    
      
         

      

      
        PAGE
- 12

        
          

        

      

      
         

      

    

    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.

     

    (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

     

    
      
         

      

      
        PAGE
- 13

        
          

        

      

      
         

      

    

    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 Lender's 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.

     

    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.

     

    
      
         

      

      
        PAGE
- 14

        
          

        

      

      
         

      

    

    (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.

     

    (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;

            

    

     

    
      
         

      

      
        PAGE
- 15

        
          

        

      

      
         

      

    

    
      	
              (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.

            

    

     

    (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

     

    
      
         

      

      
        PAGE
- 16

        
          

        

      

      
         

      

    

    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 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

     

    
      
         

      

      
        PAGE
- 17

        
          

        

      

      
         

      

    

    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.

     

    (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,

     

    
      
         

      

      
        PAGE
- 18

        
          

        

      

      
         

      

    

    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).

            

    

     

    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

     

    
      
         

      

      
        PAGE
- 19

        
          

        

      

      
         

      

    

    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 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

            

    

     

    
      
         

      

      
        PAGE
- 20

        
          

        

      

      
         

      

    

    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 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

     

    
      
         

      

      
        PAGE
- 21

        
          

        

      

      
         

      

    

    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:

     

    
      	
              (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(l) so long as Lender approves such
action, which approval shall not be unreasonably withheld or
delayed.  Borrower shall reimburse Lender upon demand for
all

     

    
      
         

      

      
        PAGE
- 22

        
          

        

      

      
         

      

    

    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;

            

    

     

    
      	
              (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 judgment 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

     

    
      
         

      

      
        PAGE
- 23

        
          

        

      

      
         

      

    

    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, 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.  All 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.  All 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.

     

    
      
         

      

      
        PAGE
- 24

        
          

        

      

      
         

      

    

    (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.

     

    (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;

            

    

     

    
      
         

      

      
        PAGE
- 25

        
          

        

      

      
         

      

    

    
      	
              (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.

     

    (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

     

    
      
         

      

      
        PAGE
- 26

        
          

        

      

      
         

      

    

    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.  [NO RIGHT TO
TRANSFER].

     

    (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;

            

    

     

    
      	
              (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;

            

    

     

    
      
         

      

      
        PAGE
- 27

        
          

        

      

      
         

      

    

    
      	
              (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;
      and

            

    

     

    
      	
              (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.

            

    

     

    (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;

            

    

     

    
      	
              (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

            

    

     

    
      
         

      

      
        PAGE
- 28

        
          

        

      

      
         

      

    

    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 of 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
      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.

     

    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

     

    
      
         

      

      
        PAGE
- 29

        
          

        

      

      
         

      

    

    (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;

     

    (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.

     

    
      
         

      

      
        PAGE
- 30

        
          

        

      

      
         

      

    

    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
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

     

    
      
         

      

      
        PAGE
- 31

        
          

        

      

      
         

      

    

    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 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

     

    
      
         

      

      
        PAGE
- 32

        
          

        

      

      
         

      

    

    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.

     

    (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

     

    
      
         

      

      
        PAGE
- 33

        
          

        

      

      
         

      

    

    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 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

            

    

     

    
      
         

      

      
        PAGE
- 34

        
          

        

      

      
         

      

    

    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 Cap 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.  At any time during the existence of an Event of
Default, Lender, at Lender's option, may declare the Indebtedness to be
immediately due and payable without further demand, and may foreclose this
Instrument by judicial proceeding and may invoke any one or more other remedies
permitted by applicable law or provided in this Instrument or in any other Loan
Document.  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.  In the event of a
judicial foreclosure proceeding, Lender shall be entitled to collect all
expenses of foreclosure, including reasonable attorneys' fees of 5% of the
amount decreed for principal and interest, which fee shall be allowed and paid
as part of the decree of judgment in such proceeding.

     

    
      
         

      

      
        PAGE
- 35

        
          

        

      

      
         

      

    

    44. DEFEASANCE.  This
Instrument is made upon the express condition that, if Borrower pays to Lender
the entire amount of the Indebtedness in accordance with the provisions of the
Note and this Instrument, at the times and in the manner specified, without
deduction, fraud or delay, and Borrower performs and complies with all
agreements, conditions, covenants, provisions and stipulations contained in this
Instrument and in the other Loan Documents, then this Instrument and the estate
hereby granted shall cease and become void.

     

    45. 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 under seal or has caused this
Instrument to be signed and delivered by its duly authorized representative
under seal.

     

    

     

    

     

    [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]

     

    
      
         

      

      
        PAGE
- 36

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              EMERICHIP DOVER LLC, a
      Delaware limited liability company

            

    

    
       

    

    
      	
               
      

            	
              By:

            	
              Emeritus
      Corporation, a Washington corporation, its sole
  member

            

    

    

    

    

    By: /s/
Eric Mendelsohn (SEAL)

    Eric
Mendelsohn

    Senior
Vice President Corporate Development

    Sealed
and delivered in the

    presence
of:

    

    /s/
Shanda London

    Print
Name: Shanda London

    

    

    

    

    

    STATE OF
WASHINGTON, County of King, ss:

    

    BE IT
REMEMBERED That on this 26thday of December, 2008, personally came before me
Eric Mendelsohn, the individual named in this Instrument as the Senior Vice
President Corporate Development of Emeritus Corporation, a Washington
corporation, sole member of Emerichip Dover LLC, a limited liability company,
party to this Instrument, personally known to me to be such, and acknowledged
this Instrument to be the act and deed of said limited liability
company.

    

    Given
under my Hand and Seal of Office, the day and year aforesaid.

    

    

    

    /s/
Susannah M. Lynn

    Notary
Public

    

    My
commission expires:__1-9-11__

    

    
      
         

      

      
        PAGE
- 37

        
          

        

      

      
         

      

    

    EXHIBIT
A

     

    [DESCRIPTION
OF THE LAND]

     

    

     

    

     

    
      
         

      

      
        PAGE
A - 1

        
          

        

      

      
         

      

    

    EXHIBIT
B

     

    MODIFICATIONS
TO INSTRUMENT

     

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

    

    

    I.           COMMITMENT
MODIFICATIONS.

    

    
      	
              1.

            	
              Section
      1(y)(xv) is hereby deleted in its entirety and restated as
      follows:

            

    

    

    
      	
              “(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; provided however, that the name “Emeritus” and/or
      associated trademark rights are not assigned to Lender, subject to Section
      53 hereof.”

            

    

    

    
      	
              2.

            	
              The
      second sentence of Section 4(e) is hereby deleted in its entirety and
      restated as follows:

            

    

    

    “All
Leases for residential dwelling units shall be on forms approved by Lender,
shall not include options to purchase and shall be for initial terms of at least
one (1) month and not more than two (2) years.”

    

    
      	
              3.

            	
              Section
      4(f) is amended in its entirety to read as
  follows:

            

    

     

    “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 with the exception of any Operating Lease which
has previously been approved by Lender; provided, however, that Lender’s prior
written consent and prior written approval shall not be required with respect to
commercial leases for hair salons, physical therapy spaces, or other leases
covering floor space not exceeding 1,000 square feet, provided that the lessee
and its business and non-residential use of a portion of the Mortgaged Property
are consistent with similarly situated senior housing facilities (an “Immaterial
Commercial Lease”).  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; provided, however, no such consent shall be required with respect to any
modification, extension or termination of any Immaterial Commercial
Lease.  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 extension
of existing Leases, but specifically excluding all Immaterial Commercial Leases,
shall specifically provide that (1) such Leases are subordinate to the lien of
this Instrument (unless waived in writing by Lender); (2) 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; (3) the
tenant agrees to execute such further evidences of attornment as Lender or any
purchaser at a foreclosure sale may from time to time request; (4) the Lease
shall not be terminated by foreclosure or any other transfer of the Mortgaged
Property; (5) after a foreclosure sale of the Mortgaged Property, Lender or any
other purchasers at such foreclosure sale may, at Lender’s or such purchaser’s
option, accept or terminate such

     

    
      
         

      

      
        PAGE
B - 1

        
          

        

      

      
         

      

    

    Lease;
and (6) the tenant shall, upon receipt after the occurrence and during the
continuance of an Event of Default of a written request from Lender, pay all
Rents payable under the Lease to Lender.”

     

    4.           Section
14(d)(i) is amended to read as follows:

    

    
      	
               
      

            	
              "(i)

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

            

    

    

    
      	
              5.

            	
              Section
      15(b) is amended by (i) adding "and Section 15(d)" after "Section 15(c)"
      and (ii) by adding the phrase “or shall cause Operator to” after the words
      “Borrower shall” in the first line.

            

    

    

    
      	
              6.

            	
              Section
      17(e) is amended in its entirety to read as follows:  “Borrower
      shall provide for professional management of the Mortgaged Property by a
      residential rental property manager or operator satisfactory to Lender at
      all times under a contract or operating lease approved by the Lender in
      writing.”

            

    

    

    
      	
              7.

            	
              Section
      17(g) is amended by adding the phrase “or Operator’s” after the word
      “agent’s” in the fourth line of such
Section.

            

    

    

    8.           Section
18(j)(v) is hereby deleted in its entirety and the following is substituted
therefor:

    

    
      	
               
      

            	
              "(v)

            	
              the
      actual or alleged violation of any Hazardous Materials Law with respect to
      the Mortgaged Property."

            

    

    

    
      	
              9.

            	
              Section
      19(g) of the Instrument is hereby modified by:  (i) changing the
      number “$10,000” in Section 19(g)(i) to “$50,000” and (ii) changing the
      numbers “$10,000” and “$50,000” in Section 19(g)(ii) to “$50,000” and
      “$100,000” respectively.

            

    

    

    
      	
              10.

            	
              Section
      19(h) is amended by adding the following in the first line immediately
      after "option" and immediately before "to": "to require an ‘actual cash
      value’ settlement and/or".

            

    

    

    
      	
              11.

            	
              Section
      19 is hereby amended by adding the following new subsection (l) as
      follows:

            

    

    

    
      	
               
      

            	
              “(l)

            	
              Borrower
      or an operator of the Mortgaged Property must submit annually to Lender a
      claims history (“Claims
      History”) for the Mortgaged Property comprised of a detailed list
      of all claims made against Borrower’s or an operator of the Mortgaged
      Property’s general or professional liability insurance policies or the
      general or professional liability insurance policy of the management agent
      for the Mortgaged Property or any other entity if such management agent or
      other entity has procured general or professional liability insurance for
      the Mortgaged Property on behalf of Borrower, and a summary of any pending
      or settled actions, suits, claims or proceedings filed against the
      Borrower, an operator of the Mortgaged Property, the Mortgaged Property,
      or a Controlling Entity. The Claims History shall be submitted within
      thirty (30) days after the anniversary of the date of this Instrument for
      each year until the Indebtedness is paid in
  full.”

            

    

    

    
      
         

      

      
        PAGE
B - 2

        
          

        

      

      
         

      

    

    
      	
              12.

            	
              Section
      19 is hereby amended by adding the following new subsection (m) as
      follows:

            

    

    

    
      	
              “(m)

            	
              In
      addition to all other rights of Lender under this Section 19, Lender
      reserves the right to require Borrower to obtain and maintain conventional
      insurance (in lieu of its current captive insurer’s coverage) in the event
      the market improves for professional liability insurance or in the event
      Borrower’s current captive insurer (National Orion) suffers a material
      adverse change in its financial conditions or its credit rating, as
      determined by Lender in its sole
discretion.”

            

    

    

    13.           Section
21(c) of the Instrument is amended to include the new subsection (vii) as
follows:

     

    
      	
              “(vii)

            	
              The
      Transfer of any interest in Guarantor by such entities or individuals that
      hold as of the date of this Instrument less than a 20% interest in
      Guarantor”.

            

    

    

    
      	
              14.

            	
              Section
      22(l) is amended by deleting "is" and inserting "was" in its place and by
      adding "when made" after "respect" at the end of the
      subsection.

            

    

    

    15.           Section
31(a) is amended by changing "Notices" to "notices" in the first
line.

    

    
      	
              16.

            	
              Section
      40(a) is amended by (a) deleting the word "are" and inserting in its place
      the word "was" and (b) by adding after the word "respects" and before the
      semi-colon (;) the phrase "as of its
date".

            

    

    

    
      	
              17.

            	
              The
      following new Section is added to the Instrument after the last numbered
      Section and there are no Sections appearing between the last numbered
      Section and the numbered Section appearing
  below:

            

    

    

    
      	
              “53.

            	
              LENDER’S RIGHT TO USE TRADE
      NAME.  Notwithstanding anything contained herein,
      Borrower agrees that Lender shall have an irrevocable license, coupled
      with an interest and for which consideration has been paid and received,
      to use the name “Emeritus” and/or
      associated trademark rights and trade names relating to any of the
      Mortgaged Property for a period not to exceed 120 days after the date
      Lender acquires the Mortgaged Property by foreclosure or deed-in-lieu of
      foreclosure.”

            

    

    

    
      	
              18.

            	
              The
      following new Section is added to this
  Instrument:

            

    

    

    
      	
              “54.

            	
              MEDICARE AND
      MEDICAID.

            

    

    

    
      	
               
      

            	
              (a)

            	
              No
      more than 25% of the residents at the Mortgaged Property may participate
      in Medicare or Medicaid programs.

            

    

    

    
      	
               
      

            	
              (b)

            	
              If
      the covenant in section (a) above is violated, the Borrower must
      immediately fund a transition reserve with cash in an amount equal to the
      aggregate of six (6) months of principal and interest payments due under
      the terms of the Note for the next six (6) months.  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 Lender shall estimate the amount of the interest due
      during such six-month period.  The Borrower must also enter into
      a transition reserve agreement acceptable to Lender in form and
      content.

            

    

    
      
         

      

      
        PAGE
B - 3

        
          

        

      

      
         

      

    

    

    
      	
               
      

            	
              (c)

            	
              Borrower
      shall furnish to Lender, within ten (10) days after receipt by Borrower,
      any operator of the Mortgaged Property or any management agent for the
      Mortgaged Property, any and all notices from any Governmental Authority
      that the Medicare or Medicaid certification of the Mortgaged Property is
      being downgraded to a substandard category, revoked, or suspended, or that
      action is pending or being considered to downgrade any such
      certification.

            

    

    

    
      	
               
      

            	
              (d)

            	
              Borrower
      shall furnish to Lender, within ten (10) days after receipt by Borrower,
      any operator of the Mortgaged Property or any management agent for the
      Mortgaged Property, a copy of any survey, report or statement of
      deficiencies by any Governmental Authority administering Medicare or
      Medicaid funds or programs.  Within the time period specified by
      any such Governmental Authority for furnishing a plan of correction, the
      Borrower shall furnish to Lender a copy of the plan of
      correction.  Borrower shall correct or shall cause to be
      corrected any deficiency the curing of which is a condition of continued
      eligibility for Medicare or Medicaid payment or reimbursement, including
      full participation in Medicare and Medicaid for existing residents and for
      new residents to be admitted with Medicare or Medicaid coverage by the
      date required for cure by the Governmental
  Authority.

            

    

    

    
      	
               
      

            	
              (e)

            	
              Other
      than in the normal course of business, Borrower shall not, and shall not
      permit any operator of the Mortgaged Property or any management agent for
      the Mortgaged Property to, change the terms of any of the Medicaid,
      Medicare or other third party payor programs or its normal billing payment
      and reimbursement policies and procedures with respect thereto (including,
      without limitation, the amount and timing of finance charges, fees and
      write-offs).

            

    

    

    
      	
               
      

            	
              (f)

            	
              Borrower
      shall provide Lender within ten (10) days of the required filing of cost
      reports of the Mortgaged Property with the Medicaid agency or the date of
      actual filing of such cost report of the Mortgaged Property with such
      agency, whichever is earlier, with a complete and accurate copy of the
      annual Medicaid cost report of the Mortgaged Property, which will be
      prepared by an independent certified public accountant or by an
      experienced cost report preparer acceptable to Lender, and shall promptly
      furnish Lender any amendments filed with respect to such reports and all
      responses, audit reports or inquiries with respect to such
      reports.

            

    

    

    
      	
               
      

            	
              (g)

            	
              Borrower
      will permit and will cause any management agent for the Mortgaged Property
      or any operator of the Mortgaged Property to permit representatives
      appointed by Lender, including independent accountants, agents, attorneys,
      appraisers and any other persons, to visit and inspect during its normal
      business hours and at any other reasonable times any of the Mortgaged
      Property and to make photographs thereof, and to write down and record any
      information such representatives obtain, and shall permit Lender or its
      representatives to investigate and verify the accuracy of the information
      furnished to Lender under or in connection with this Security Instrument
      or any of the other Loan Documents and to discuss all such matters with
      its officers, employees and
representatives.

            

    

    
      
         

      

      
        PAGE
B - 4

        
          

        

      

      
         

      

    

    

    
      	
               
      

            	
              (h)

            	
              Borrower
      will furnish and will cause any management agent for the Mortgaged
      Property or any operator of the Mortgaged Property to furnish to Lender at
      Borrower’s expense all evidence, which Lender may from time to time
      reasonably request as to the accuracy and validity of or compliance with
      all representations and warranties made by Borrower in the Loan Documents
      and satisfaction of all conditions contained
  therein.

            

    

    

    
      	
               
      

            	
              (i)

            	
              Any
      inspection or audit of the Mortgaged Property or the books and records of
      Borrower, any management agent for the Mortgaged Property or any operator
      of the Mortgaged Property, or the procuring of documents and financial and
      other information, by or on behalf of Lender, shall be for Lender’s
      protection only, and shall not constitute any assumption of responsibility
      or liability by Lender to Borrower, any management agent for the Mortgaged
      Property or any operator of the Mortgaged Property or anyone else with
      regard to the condition, construction, maintenance or operation of the
      Mortgaged Property, nor Lender’s approval of any certification given to
      Lender nor relieve Borrower of any of Borrower’s obligations or a
      management agent or an operator of the Mortgaged Property of any of its
      obligations.

            

    

    

    
      	
               
      

            	
              (j)

            	
              Within
      120 days after the end of each fiscal quarter of Borrower, Borrower shall
      deliver or cause management agent for the Mortgaged Property or an
      operator of the Mortgaged Property to deliver to Lender information in
      sufficient detail, as determined by Lender, to show by patient-mix (i.e., private and
      Medicare and Medicaid (if applicable)) the average monthly census of the
      Mortgaged Property, occupancy rates and the amount of income attributed to
      reimbursements or payments from a Medicare or Medicaid
      program.

            

    

    

    
      	
               
      

            	
              (k)

            	
              After
      an Event of Default, Lender is authorized to give notice to all third
      party payors at Lender’s option, instructing them to pay all third party
      payments, including Medicare and Medicaid, which would be otherwise paid
      to Borrower or to an operator of the Mortgaged Property to Lender, to the
      extent permitted by law.

            

    

    

    (l)           Borrower
represents and warrants as follows:

             (1)           With
respect to Medicare, Medicaid or other third party payor programs:

                 (A)           The
Mortgaged Property is in compliance in all material respects with the
requirements for participation in the Medicare and Medicaid programs, including
without limitation, the Medicare and Medicaid Patient Protection Act of
1987.    

                 (B)           The
Mortgaged Property is in conformance in all material respects with all
insurance, reimbursement and cost reporting requirements, and has a current
provider agreement under Title XVIII and/or XIX of the Social

     

    
      
         

      

      
        PAGE
B - 5

        
          

        

      

      
         

      

    

                       Security Act
or any other applicable laws for reimbursement necessary for its Intended
Us

                         (C)           There
is no action pending or threatened to terminate the participation of the
Mortgaged Property in the Medicare or Medicaid program, or any other third party
payor program nor is there any decision not to renew any provider agreement
related to the Mortgaged Property, nor is there any action pending or threatened
to impose material intermediate or alternative sanctions with respect to the
Mortgaged Property.

                 (D)           All
Medicare, Medicaid, and private insurance cost reports and financial reports
submitted by Borrower, any operator of the Mortgaged Property or any management
agent for the Mortgaged Property are and will be materially accurate and
complete and have not been and will not be misleading in any material
respects.

                        (E)           No
cost reports for the Mortgaged Property remain “open” or unsettled, except as
otherwise disclosed to Lender.

                        (F)           The
Mortgaged Property has not received a “Level A” (or equivalent) violation, and
no statement of charges or deficiencies has been made or penalty enforcement
action has been undertaken against the Mortgaged Property, any management agent
or operator thereof or the Borrower (or any officer, director or stockholder of
any of the foregoing) during the last three (3) calendar years, and
there have been no violations over the past three (3) calendar years which have
threatened any certification of the Mortgaged Property, any management agent or
operator thereof or the Borrower for participation in Medicare, Medicaid or
other third party payor programs.

     

     (2)           There
are no resident care agreements with residents of the Mortgaged Property or with
any other persons or organizations which deviate in any material adverse respect
from the standard forms customarily used at a comparable first-class facility or
which conflict with any statutory or regulatory requirements.  All
resident records at the Mortgaged Property, including any resident trust fund
accounts, are true and correct in all material respects.

     (3)           Borrower
and the Mortgaged Property are not subject to any proceeding, suit or
investigation by any Governmental Authority and none of the Borrower, any
management agent or any operator of the Mortgaged Property has received any
notice from any Governmental Authority which may result in the imposition of a
fine or interim or final sanction or would result in a lower reimbursement rate
for services rendered to eligible residents which has not been provided for on
the financial statements provided to Lender.

     

    
      
         

      

      
        PAGE
B - 6

        
          

        

      

      
         

      

    

    (4)           Neither
the execution and delivery of the Note, this Instrument or any other Loan
Document, Borrower’s performance under the Loan Documents, the recordation of
this Instrument, nor the exercise of any remedies by Lender, will adversely
affect (A) Borrower, an operator of the Mortgaged Property or the Mortgaged
Property’s right to receive Medicare and/or Medicaid payments and reimbursements
with respect to the Mortgaged Property, nor materially reduce the Medicare
and/or Medicaid payments and reimbursements which Borrower or an operator of the
Mortgaged Property is receiving as of the date hereof, or (B) any of the
Licenses.

     (5)           If
any existing management agreement or operating lease is terminated or Lender
acquires the Mortgaged Property through foreclosure or otherwise, none of the
Borrower, Lender, any subsequent management agent, any subsequent operator of
the Mortgaged Property or any subsequent purchaser (through foreclosure or
otherwise) must obtain a certificate of need from any Governmental Authority
(other than giving of any notice required under the applicable state law or
regulation) prior to receiving certification to receive Medicare or Medicaid
payments (or any successor programs) for residents having coverage thereunder,
so long as neither the type of service nor any unit compliment is
changed.

    

    
      	
               
      

            	
              (m)

            	
              In
      addition to the Events of Default listed in Sections 22 and 55, it also
      shall constitute an Event of Default if Borrower, an operator of the
      Mortgaged Property or the Mortgaged Property should be assessed fines or
      penalties in excess of $50,000.00 in the aggregate in any year by any
      state or any Medicare or Medicaid, health, reimbursement or licensing
      agency having jurisdiction over Borrower, an operator of the Mortgaged
      Property or the Mortgaged Property.

            

    

    

    

    II.           SENIOR
HOUSING MODIFICATIONS.

    

    1.           The
following new Section is added to this Instrument:

    

    “55.                      SENIOR HOUSING.

    

    
      	
               
      

            	
              (a)

            	
              Additions to
      Definitions.  The following terms, when used in this
      Instrument, shall have the following meanings or shall add to the
      definitions in the main body of this Instrument, as
      applicable:

            

    

    

    
      	
               
      

            	
              (1)

            	
              “Activities
      of Daily Living” shall mean personal care services that provide the frail
      elderly with assistance in eating, dressing, bathing, incontinence care
      and assistance in moving from one place to another (such as from a bed to
      a wheelchair).

            

    

    

    
      	
               
      

            	
              (2)

            	
              “Assisted
      Living Residences” shall mean residences that are designed to accommodate
      and provide 24-hour protective

            

    

    
      
         

      

      
        PAGE
B - 7

        
          

        

      

      
         

      

    

    oversight
and assistance for individuals with functional limitations, including meals in a
central location and assistance with Activities of Daily Living.

    

    
      	
               
      

            	
              (3)

            	
              “Continuing
      Care Retirement Community” (“CCRC”) shall mean a property designed to
      provide a continuum of care within a single community. The living
      accommodations and care provided within a CCRC are a combination of the
      accommodations and services provided by Seniors Apartments, Independent
      Living Units, Assisted Living Residences and Skilled Nursing
      Beds.

            

    

    

    
      	
               
      

            	
              (4)

            	
              “Contract”
      shall mean any contract for the provision of goods or services in
      connection with the operation or management of the Mortgaged Property
      (other than residential care agreements or residential lease
      contracts).

            

    

    

    
      	
               
      

            	
              (5)

            	
              “Governmental
      Authority” shall also include all applicable licensing or accreditation
      bodies or agencies (whether federal, state, county, district, municipal,
      city or otherwise, whether now or hereafter in existence) that have or
      acquire jurisdiction over the Mortgaged Property or the use, operation or
      improvement of the Mortgaged
Property.

            

    

    

    
      	
               
      

            	
              (6)

            	
              “Hazardous
      Materials” shall also include any medical products or devices, including,
      those materials defined as “medical waste” or “biological waste” under
      relevant statutes, ordinances or regulations pertaining to Hazardous
      Materials Law.

            

    

    

    
      	
               
      

            	
              (7)

            	
              “HIPAA”
      shall mean the Health Insurance Portability and Accountability Act of
      1996, as amended.

            

    

    

    
      	
               
      

            	
              (8)

            	
              “Independent
      Living Units” shall mean residential units that are accompanied by
      optional services designed to aid the residents’ independence, including,
      but not limited to, building security, optional meals, housekeeping,
      laundry, and at least some incidental services and activities not related
      to personal care, such as valet shopping, financial planning, unscheduled
      transportation, beautician services, recreational and social activities
      and 24-hour staff presence.

            

    

    

    
      	
               
      

            	
              (9)

            	
              “Lease”
      shall also include any occupancy agreements pertaining to occupants of the
      Mortgaged Property, including both residential and commercial agreements
      and patient admission or resident care
  agreements.

            

    

    
 

    
      	
                                                            
      (10)   

            	
              “License”
      shall mean any license, permit, certificate, approval, certificate of need
      or authorization, governmental or otherwise, necessary to use, occupy or
      operate the Mortgaged Property.

            

    

    

    
      
         

      

      
        PAGE
B - 8

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              (11)

            	
              “Material
      Contract” shall mean Contracts:

            

    

    

    
      	
              (A)  

            	
              for
      preparing or serving food (but do not include food supply
      Contracts);

            

    

    
      	
              (B)  

            	
              for
      medical services or healthcare provider
  agreements;

            

    

    
      	
              (C)  

            	
              the
      average annual consideration of which, directly or indirectly, is at least
      $20,000; or

            

    

    
      	
              (D)  

            	
              determined
      by Lender to be material to the operation of the Mortgaged
      Property.

            

    

    

    
      	
               
      

            	
              (12)

            	
              “Mortgaged
      Property” shall also include all of the
  following:

            

    

    

    
      	
               
      

            	
              (A)

            	
              All
      payments received from any sources, including entrance fees, application
      fees, processing fees, community fees and any other amounts or fees
      deposited by any resident or tenant, payment of second party charges added
      to base rental income, base and additional meal sales, payments received
      from commercial operations located on the Mortgaged Property or provided
      as a service to the occupants of the Mortgaged Property, rental from guest
      suites, seasonal lease charges, rental payments under furniture leases,
      income from laundry service, and income and fees from any and all other
      services provided to residents;

            

    

    

    
      	
               
      

            	
              (B)

            	
              All
      rights to payments from Medicare, Medicaid or TRICARE programs or similar
      federal, state or local programs or agencies and rights to payment from
      private insurers, arising from the operation of the Mortgaged
      Property;

            

    

    

    
      	
               
      

            	
              (C)

            	
              All
      Licenses, approvals, permits, accreditations, determinations of need,
      certificates of need and other
certificates;

            

    

    

    
      	
               
      

            	
              (D)

            	
              All
      Contracts, operating contracts, franchises, license agreements, healthcare
      services contracts, food service contracts and other contracts for
      services related to the operation of the Mortgaged Property;
      and

            

    

    

    
      	
               
      

            	
              (E)

            	
              All
      utility deposits.

            

    

    

    
      	
               
      

            	
              (13)

            	
              “Privacy
      Laws” shall mean federal, state and local laws and regulations applicable
      to resident and tenant privacy.  Privacy Laws include, but are
      not limited to, HIPAA.

            

    

    

    
      	
               
      

            	
              (14)

            	
              “Seniors
      Apartments” shall mean age-restricted apartments for senior residents who
      are able to function independently.  These residences are
      typically restricted to residents 55 and older (or 62 and
      older).  Seniors Apartments do not provide healthcare services,
      medication assistance, meal services or other third-party contract
      services.

            

    

    

    
      
         

      

      
        PAGE
B - 9

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              (15)

            	
              “Skilled
      Nursing Beds” shall mean a portion of a property that provides licensed
      skilled nursing care and related services for patients who require
      medical, nursing or rehabilitative
services.

            

    

    

    
      	
               
      

            	
              (b)

            	
              Intended
      Use.  The residential units in the Mortgaged Property
      will be allocated as follows (the “Intended
  Use”):

            

    

    

    
      	
               
      

            	
              1.

            	
              Independent
      Living Units 

            	
              _______%

            

    

    

    
      	
               
      

            	
              2.

            	
              Assisted
      Living Residences 

            	
              100%

            

    

    

    
      	
               
      

            	
              3.

            	
              Skilled
      Nursing Beds 

            	
              _______%

            

    

    

    
      	
               
      

            	
              4.

            	
              Continuing
      Care Retirement Community with the following percentages of
      use:

            

    

    

    a.           Seniors
Apartments _______%

    

    b.           Independent
Living Units _______%

    

    c.           Assisted
Living Residences _______%

    

    d.           Skilled
Nursing Beds _______%

    

    
      	
               
      

            	
              (c)

            	
              Additional
      Covenants.  In addition to those covenants contained in
      this Instrument, Borrower covenants to Lender as
  follows:

            

    

    

    
      	
               
      

            	
              (1)

            	
              Borrower
      shall, or shall cause any operator of the Mortgaged Property to, operate
      the Mortgaged Property for its Intended Use and shall, or shall cause any
      operator of the Mortgaged Property to, provide, to Lender’s reasonable
      satisfaction, all of the facilities, services, staff, equipment and
      supplies required or normally associated with a typical high quality
      property devoted to the Intended
Use.

            

    

    

    
      	
               
      

            	
              (2)

            	
              Borrower
      shall, or shall cause any operator of the Mortgaged Property to, operate
      the Mortgaged Property in a manner such that all applicable Licenses will
      remain in full force and effect.  Borrower shall not, and shall
      not allow any operator or management agent to, (A) transfer any License to
      any location other than the Mortgaged Property, (B) pledge any License as
      collateral security for any other loan or indebtedness; or (C) terminate
      or modify any License if doing so would have a material effect on the
      Mortgaged Property.

            

    

    

    
      	
               
      

            	
              (3)

            	
              Borrower
      shall furnish to Lender, within ten (10) days after receipt by Borrower,
      any operator of the Mortgaged Property, or any management agent for the
      Mortgaged Property, any and all notices from any Governmental Authority
      that (A) any License is being

            

    

    
      
         

      

      
        PAGE
B - 10

        
          

        

      

      
         

      

    

    downgraded
to a substandard category, revoked, or suspended, or that action is pending or
being considered to downgrade any such License, (B) any violation, fine,
finding, investigation or corrective action concerning any License is pending or
being considered or (C) any health or safety code violation or other deficiency
at the Mortgaged Property has been identified.

    

    
      	
               
      

            	
              (4)

            	
              Borrower
      shall furnish to Lender, within ten (10) days after receipt by Borrower,
      any operator of the Mortgaged Property, or any management agent for the
      Mortgaged Property, a copy of any survey, report or statement of
      deficiencies by any Governmental Authority.  Within the time
      period specified by the Governmental Authority for furnishing a plan of
      correction, the Borrower shall furnish or shall cause to be furnished to
      Lender a copy of the plan of correction.  Borrower shall correct
      or shall cause to be corrected any deficiency the curing of which is a
      condition of continued licensure, certification or operation by the date
      required for cure by the Governmental
Authority.

            

    

    

    
      	
               
      

            	
              (5)

            	
              Upon
      Lender’s request and subject to Privacy Laws, Borrower shall furnish to
      Lender true and correct copies of all Contracts and all occupancy
      agreements, admission agreements and resident care
    agreements.

            

    

    

    
      	
               
      

            	
              (6)

            	
              Without
      the prior written consent of Lender, which may be granted or withheld in
      Lender’s discretion, Borrower shall not, and shall not permit any operator
      of the Mortgaged Property or any management agent for the Mortgaged
      Property to, provide or contract for skilled nursing care for any of the
      residents other than that level of care which both (A) is consistent with
      the Intended Use and (B) is permissible for Borrower to provide under
      state or local statutes, regulations, ordinances, orders or
      standards.

            

    

    

    
      	
               
      

            	
              (7)

            	
              Borrower
      shall not, and shall not permit any operator of the Mortgaged Property or
      any management agent for the Mortgaged Property to, enter into any
      Material Contract, unless that Material Contract provides that it is
      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.

            

    

    

    
      	
               
      

            	
              (8)

            	
              Borrower
      shall not, and shall not allow any operator of the Mortgaged Property or
      any management agent for the Mortgaged Property to, pledge any receivables
      as collateral security for any other loan or
  indebtedness.

            

    

    

    
      	
               
      

            	
              (9)

            	
              Borrower
      shall fully perform all of its obligations under each Contract, and
      Borrower shall not amend, modify, assign or otherwise encumber its
      interest in any Material Contract without the prior written approval of
      Lender.  If Borrower enters into any Material Contract in the
      future, it shall, simultaneously with entering into the Material Contract,
      (A) assign its rights under and

            

    

    
      
         

      

      
        PAGE
B - 11

        
          

        

      

      
         

      

    

    interest
in the Material Contract to Lender as additional security for the Indebtedness
and (B) obtain and provide to Lender a consent to that assignment by the other
party(ies) to the Material Contract.  If in the future any operator of
the Mortgaged Property or any management agent for the Mortgaged Property enters
into a Material Contract, Borrower shall cause the operator or the management
agent to (i) assign its rights under and interest in the Material Contract to
Lender as additional security for the Indebtedness and (ii) obtain and provide
to Lender a consent to that assignment by the other party(ies) to the Material
Contract.  In either case, both the assignment and the consent shall
be in a form acceptable to Lender in its discretion.

    

    
      	
              (10)  

            	
              Borrower
      shall provide Lender with a copy of any License issued in the future by a
      Governmental Authority within thirty (30) days after its issuance or
      renewal.  To the extent that any such License is assignable,
      Borrower shall assign it to Lender as additional security for the
      Indebtedness, using a form of assignment acceptable to Lender in its
      discretion.  If any License is issued to an operator of the
      Mortgaged Property or management agent for the Mortgaged Property, to the
      extent such License is assignable, Borrower shall cause such operator or
      management agent to assign the License to Lender as additional security
      for the Indebtedness, using a form of assignment acceptable to Lender in
      its discretion.

            

    

    

    
      	
              (11)  

            	
              Subject
      to Privacy Laws, Borrower will furnish and will cause any management agent
      for the Mortgaged Property or any operator of the Mortgaged Property to
      furnish to Lender at Borrower’s expense all evidence, which Lender may
      from time to time reasonably request as to the accuracy and validity of or
      compliance with all representations and warranties made by Borrower in the
      Loan Documents and satisfaction of all conditions contained
      therein.

            

    

    

    
      	
               
      

            	
              (d)

            	
              Additional Representations and
      Warranties.  In addition to those representations and
      warranties contained in this Instrument, Borrower represents and warrants
      to Lender as follows:

            

    

    

    
      	
               
      

            	
              (1)

            	
              Borrower
      has obtained or has caused any operator of the Mortgaged Property to
      obtain all Licenses necessary to use, occupy or operate the Mortgaged
      Property for its Intended Use (such Licenses being in its own name or in
      the name of the operator of the Mortgaged Property or the management agent
      for the Mortgaged Property, if any, and in any event in the names of the
      persons and entities required by the applicable Governmental Authorities),
      and all such Licenses are in full force and effect.  Borrower
      has provided Lender with complete and accurate copies of all
      Licenses.  The Intended Use of the Mortgaged Property is in
      conformity with all certificates of occupancy and Licenses and any other
      restrictions or covenants affecting the Mortgaged Property.  The
      Mortgaged Property contains all equipment, staff and
    supplies

            

    

    
      
         

      

      
        PAGE
B - 12

        
          

        

      

      
         

      

    

    necessary
to use and operate the Mortgaged Property for its Intended Use.

    

    
      	
               
      

            	
              (2)

            	
              Borrower
      and the Mortgaged Property (and its operation) are in compliance with the
      applicable provisions of all laws, regulations, ordinances, orders or
      standards of any Governmental Authority having jurisdiction over the
      operation of the Mortgaged Property, including:  (A) health care
      and fire safety codes; (B) laws regulating the preparation and serving of
      food; (C) laws regulating the handling and disposal of medical or
      biological waste; (D) the applicable provisions of all laws, rules,
      regulations and published interpretations of them to which the Borrower or
      the Mortgaged Property is subject by virtue of its Intended Use; and (E)
      all criteria established to classify the Mortgaged Property as housing for
      older persons under the Fair Housing Amendments Act of
    1988.

            

    

    

    
      	
               
      

            	
              (3)

            	
              Borrower
      and the Mortgaged Property are not subject to any proceeding, suit or
      investigation by any Governmental Authority and neither Borrower, any
      operator of the Mortgaged Property nor any management agent for the
      Mortgaged Property has received any notice from any Governmental Authority
      which may result in the imposition of a fine or interim or final sanction
      or would (i) have a material adverse effect on Borrower or the operation
      of the Mortgaged Property, (ii) result in the appointment of a receiver,
      (iii) affect Borrower’s or any operator of the Mortgaged Property’s
      ability to accept and retain residents, or (iv) result in the revocation,
      transfer, surrender, suspension or other impairment of any
      License.

            

    

    

    
      	
               
      

            	
              (4)

            	
              Neither
      the execution and delivery of the Note, this Instrument or any other Loan
      Document, Borrower’s performance under the Loan Documents, the recordation
      of this Instrument, nor the exercise of any remedies by Lender, will
      adversely affect the Licenses.

            

    

    

    
      	
               
      

            	
              (5)

            	
              Borrower
      is not a participant in any federal program under which any Governmental
      Authority may have the right to recover funds by reason of the advance of
      federal funds.

            

    

    

    
      	
               
      

            	
              (6)

            	
              Borrower
      has received no notice of, and is not aware of, any violation of
      applicable antitrust laws.

            

    

    

    
      	
               
      

            	
              (7)

            	
              If
      any existing management agreement or operating lease is terminated or
      Lender acquires the Mortgaged Property through foreclosure or otherwise,
      none of the Borrower, Lender, any subsequent operator or management agent,
      or any subsequent purchaser (through foreclosure or otherwise) must obtain
      a certificate of need from any Governmental Authority (other than giving
      of any notice required under the applicable state law or regulation) prior
      to applying for any License, so long as neither the type of service nor
      any unit compliment is changed.

            

    

     

    

    
      
         

      

      
        PAGE
B - 13

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              (8)

            	
              Exhibit C
      attached to this Instrument lists all Material Contracts now in
      effect.

            

    

    

    
      	
               
      

            	
              (9)

            	
              With
      regard to each Material Contract listed in Exhibit
      C:  (i) the Material Contract is assignable without the
      consent of the other party thereto or Borrower and any operator of the
      Mortgaged Property has obtained express written consent to the assignment
      from the other party thereto; (ii) no previous assignment of Borrower’s or
      any operator of the Mortgaged Property’s interest in the Material Contract
      has been made; (iii) the Material Contract is in full force and effect in
      accordance with its respective terms; and (iv) there is no default under
      the Material Contract.

            

    

    

    
      	
               
      

            	
              (10)

            	
              Each
      Material Contract listed in Exhibit C
      provides that it is 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.

            

    

    

    
      	
               
      

            	
              (11)

            	
              Except
      for termination statements and continuation statements, during the 45-day
      period prior to the date of this Instrument, there have been no UCC
      financing statements filed with respect to any of the UCC Collateral
      listing as debtor the Borrower, any operator of the Mortgaged Property,
      any management agent for the Mortgaged Property or the Mortgaged
      Property’s common name.

            

    

    

    
      	
               
      

            	
              (e)

            	
              Additional Events of
      Default.  In addition to the Events of Default listed in
      Section 22 of this Instrument, each of the following shall also constitute
      an Event of Default:

            

    

    

    
      	
               
      

            	
              (1)

            	
              Borrower’s
      or any operator of the Mortgaged Property’s failure within the time
      deadlines set by any Governmental Authority to correct any deficiency that
      may cause any action by such agency with respect to the Mortgaged Property
      to have a material adverse affect on the income or operation of the
      Mortgaged Property or on Borrower’s or any operator of the Mortgaged
      Property’s interest in the Mortgaged Property, including a termination,
      revocation or suspension of any applicable License, or a ban on new
      resident admissions.

            

    

    

    
      	
               
      

            	
              (2)

            	
              A
      default under any of the Material Contracts by Borrower, by any operator
      of the Mortgaged Property, or by any management agent for the Mortgaged
      Property, which continues beyond the expiration of any applicable cure
      period.

            

    

    

    
      	
               
      

            	
              (3)

            	
              Any
      representation or warranty made by Borrower in this Instrument or any
      other Loan Document was false or misleading in any material respect when
      made.

            

    

    

    
      	
               
      

            	
              (4)

            	
              The
      Mortgaged Property is no longer classified as housing for older persons
      pursuant to the Fair Housing Amendments Act of
  1988.

            

    

    

    
      
         

      

      
        PAGE
B - 14

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              (f)

            	
              Environmental
      Hazards.  In addition to the activities and conditions
      listed in Section 18(b), “Prohibited Activities or Conditions” shall not
      include the presence at the Mortgaged Property of medical products or
      devices or medical waste, so long as all of the foregoing are used,
      stored, handled, transported and disposed of in compliance with Hazardous
      Materials Laws.

            

    

    

    
      	
               
      

            	
              (g)

            	
              Financial Reporting [Assisted
      Living or Skilled Nursing Version].  Section 14(b) is
      deleted and replaced with the
following:

            

    

    

    Within
120 days after the end of each fiscal quarter of Borrower, Borrower shall
furnish to Lender a statement of income and expenses for the operation of the
Mortgaged Property for that fiscal quarter, a statement of changes in financial
position of Borrower relating to the Mortgaged Property for that fiscal quarter
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 quarter.  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.

    

    Section
14(d)(ii) is deleted in its entirety and Section 14(d)(iii) is renumbered as
14(d)(ii).

    

    
      	
               
      

            	
              (h)

            	
              Section
      21(c)(i) of this Instrument is deleted and replaced with the
      following:

            

    

    

    
      	
               
      

            	
              (i)

            	
              a
      Transfer to which Lender has consented in Lender’s sole discretion
      (without limiting Lender’s sole discretion, Lender will not consent to a
      Transfer while an Event of Default exists) so long as Lender has received
      (1) a $5,000 review fee as a condition of Lender’s considering any
      proposed Transfer, (2) a transfer fee in an amount equal to 1% of the
      unpaid principal balance of the Indebtedness immediately before the
      Transfer as a condition of Lender’s consent to the proposed Transfer, and
      (3) reimbursement for all of Lender’s out-of-pocket costs (including
      reasonable Attorney’s Fees and Costs) incurred in reviewing the proposed
      Transfer.

            

    

    

    2.           The
following new Section is added to this Instrument:

    

    “56.                      SENIOR HOUSING
OPERATOR.

    

    
      	
               
      

            	
              (a)

            	
              Additions to
      Definitions.  The following terms, when used in this
      Instrument, shall have the following meanings or shall add to the
      definitions in the main body of this Instrument, as
      applicable:

            

    

    

    
      	
              (1)  

            	
              The
      term “Lease” shall also include any master lease agreement or operating
      lease under which control of the use or operation of part or all of the
      Mortgaged Property has been granted to another
  entity.

            

    

    

    
      
         

      

      
        PAGE
B - 15

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              (2)

            	
              “Operating
      Lease” or “operating lease” shall mean that Lease, dated of even date
      herewith, entered into by and between Borrower, as landlord, and Operator,
      as tenant, leasing the Mortgaged
Property.

            

    

    

    
      	
               
      

            	
              (3)

            	
              “Operator”
      or “operator” shall mean Emeritus Corporation, a Washington corporation,
      the tenant of the Improvements under the Operating Lease, its successors
      and assigns.

            

    

    

    
      	
               
      

            	
              (b)

            	
              Additional
      Covenants.  In addition to those covenants contained in
      this Instrument, Borrower covenants to Lender as
  follows:

            

    

    

    
      	
               
      

            	
              (1)

            	
              Borrower
      shall furnish to Lender (i) within five (5) days after the receipt by
      Borrower from Operator, copies of any and all notices of Borrower’s
      default or failure to pay or perform an obligation under the Operating
      Lease, and/or (ii) immediately upon the issuance by Borrower to Operator
      of any and all notices of Operator’s default or failure to pay or perform
      an obligation under the Operating
Lease.

            

    

    

    
      	
               
      

            	
              (c)

            	
              Additional Representations and
      Warranties.  In addition to those representations and
      warranties contained in this Instrument, Borrower represents and warrants
      to Lender as follows:

            

    

    

    
      	
               
      

            	
              (1)

            	
              Any
      management or Operating Lease between Borrower and Operator or between
      Operator and any management agent are in full force and effect and there
      is no default, breach or violation existing under any management agreement
      or Operating Lease by any party thereto and no event (other than payments
      due but not yet delinquent) which, with the passage of time or with notice
      and the expiration of any grace or cure period, would constitute a
      default, breach or violation by any party under any management agreement
      or Operating Lease.

            

    

    

    
      	
               
      

            	
              (d)

            	
              Additional Events of
      Default.  In addition to the Events of Default listed in
      Section 22 of this Instrument, each of the following shall also constitute
      an Event of Default:

            

    

    

    
      	
               
      

            	
              (1)

            	
              With
      regard to the Operating Lease, (i) if the Borrower or Operator terminates
      the Operating Lease prior to the stated term of the Operating Lease or
      during any renewal period of the Operating Lease, or (ii) if Operator
      fails to exercise any or all renewal options contained in the Operating
      Lease or (iii) if Borrower and Operator amend, modify or revise in any way
      the Operating Lease without the prior written consent of Lender, which
      consent shall be given in Lender’s sole and exclusive
      discretion.  Notwithstanding the foregoing, it shall not be an
      Event of Default upon the occurrence of either (i) or (ii), if Borrower
      has entered into and executed a new operating lease for the Mortgaged
      Property, containing the same terms and conditions of the Operating Lease
      or including such other terms and conditions as Lender may have approved
      in writing, with a new operator for the Mortgaged Property which Lender
      has approved in writing prior to the execution of the new operating lease,
      which approval shall be given in Lender’s sole and exclusive
      discretion.

            

    

     

    
      
         

      

      
        PAGE
B - 16

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              (2)

            	
              Any
      change of the Operator of the Mortgaged Property or of any management
      agent of the Mortgaged Property as of the date of this Instrument without
      Lender’s prior written consent, which consent shall be given in Lender’s
      sole and exclusive discretion; provided, however, that Sections
      21(d)(i)-(iii) and 21(e)(ii)-(viii) and the definition of “Controlling
      Entity” shall apply to the Operator as modified solely for purposes of
      this subsection as follows:  the word “Borrower” used in these
      subsections shall be deleted and replaced with
  “Operator”.

            

    

     

    
      	
               
      

            	
              (3)

            	
              Any
      failure by Operator to perform any of its obligations as and when required
      under any Loan Document which continues beyond the applicable cure period,
      if any, specified in that Loan
Document.”

            

    

     

    

    

    
      
         

      

      
        PAGE
B - 17exh101.htm

    Exhibit
10.1

    

    

    STOCK
PURCHASE AND SALE AGREEMENT

    

    THIS STOCK PURCHASE AND SALE
AGREEMENT (the "Agreement") is made and entered into as of June 30th,
2007 (the "Effective Date"), jointly and severally by and among UNITED MINE SERVICES, INC., an
Idaho Corporation of 1044 NORTHWEST BOULEVARD,STE. D, COEURD D'ALENE, IDAHO
83814, and (hereinafter the "Buyer"), and GREG S. STEWART and JENNY L. STEWART, husband and
wife of P.O. Box 1275 Pinehurst, Idaho, 83850 (hereinafter collectively the
"Seller").

    

    RECITALS

    

    WHEREAS, Seller owns all of
the issued and outstanding shares of capital stock in Stewart Contracting Inc.,
an Idaho corporation ("Company"); and

    

    WHEREAS, Buyers desire to
purchase from the Sellers, and the Sellers desire to sell to Buyers, all of the
outstanding capital stock of the Company (the “Company Stock”), in consideration
of the Purchase Price (hereinafter defined), upon the terms and subject to the
contingencies and conditions set forth herein; and

    

    WHEREAS, upon closing of this
Stock Purchase and Sale Agreement, Seller shall provide Buyers with a one (1)
year Lease to the real property presently used by the Company. Real property is
located at 202 S. Division Street in Pinehurst Idaho. Lease will begin on
November 1, 2007

    

    NOW, THEREFORE, in consideration of the
respective representations, warranties, agreements, and conditions hereinafter
set forth, and other good and valuable consideration, the sufficiency of which
is hereby acknowledged, the parties hereto hereby agree as follows:

    

    1.           Purchase and Sale of
Shares.

    

    
      	
              1.1       
      

            	
              Purchase
      and Sale.
      On or before June 30th, 2007 (the "Closing Date") and upon the terms and
      subject to the conditions of this Agreement, the Sellers shall sell to
      Buyers, and Buyers shall purchase from the Sellers, all of the issued and
      outstanding shares of Company Stock (the "Shares"), free and clear of all
      liens and encumbrances.

            

    

    

    
      	
              1.2       
      

            	
              Purchase
      Price for Stock.
      The aggregate purchase price payable by Buyers to the Sellers in
      consideration for the sale of the Shares shall be Two and one half Million
      Dollars ($2,500,000.00) (the "Stock Purchase Price"). Purchase will be in
      the form of a stock for stock transaction. Seller will receive from Buyer
      Five Million (5,000,000 Shares)

            

    

    
      	
               
      

            	
              valued
      at $0.25 per share of United Mine Services, Inc. and an additional
      $1,250,000 payable in stock or cash at the discretion of the Buyer in
      exchange for 100% of the shares of Stewart Contracting Inc. (1,000
      Shares). Remaining balance will accrue interest at a rate of 6% APR until
      paid off. Buyer shall make minimum monthly payments to Seller in the
      amount of 10,000 US until balance is paid. If additional payments are made
      in stock, the share price will be based on the average traded closed share
      price for the 90 days prior to the issuance of stock. The time period to
      pay off the balance owed is 36 months from the date of this agreement. The
      parties acknowledge that Buyer has deposited with Sellers stock in the
      amount of Two Hundred and Fifty Thousand Shares (250,000 Shares), as a
      non-refundable earnest money ("Earnest Money") to be applied as a down
      payment to the Purchase Price at Closing. If all contingencies are
      satisfied and this transaction proceeds to the Closing Date, the remaining
      balance of Four Million Seven Hundred and Fifty Thousand Shares
      (4,750,000) shall be paid at the Closing Date. In the event that this
      transaction shall not close for any reason, Seller's shall retain the full
      Earnest Money and without obligation to refund any portion thereof to
      Buyers.

            

    

     

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    2.           Purchase and Sale of Real
Property.

    

    
      	
              2.1      
      

            	
              Lease. Upon the Closing Date
      hereof Sellers lease the Real Property to Buyers on the terms and
      conditions of that Lease, attached hereto as Exhibit “A” which Lease shall
      contain among its provisions, a provision providing Buyer with an option
      for the sole and exclusive right to purchase at the end of the Lease term
      Sellers' Real Property, should the Sellers choose to sell, free and clear
      of all liens and encumbrances.

            

    

    

    3.           Representations
and Warranties of Buyers. Buyers hereby represent and
warrant to the Sellers as follows:

    

    
      	
              3.1      
      

            	
              Organization,
      Standing and Corporate Power. The Buyers, severally,
      are corporations duly organized, validly existing and in good standing in
      the State of Idaho, and have sufficient assets and sources of funds from
      which will be paid the Purchase Price for the
  Shares.

            

    

    

    
      	
              3.2      
      

            	
              Compliance
      with Applicable Laws. Buyers, jointly and
      severally, are in compliance with all laws, regulations, rules and
      governmental orders applicable to
it.

            

    

    

    
      	
              3.3      
      

            	
              Litigation. Buyers, severally, are
      not subject to any judgment, injunction, order or arbitration decision,
      and there is no litigation or administrative proceeding pending or
      threatened against the Buyers.

            

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              3.4      
      

            	
              Investment. The Buyers are
      acquiring the Shares for investment for its own account, and not as a
      nominee or agent, and not with a view to, or for resale in connection with
      any distribution thereof. The Buyers understand the Shares have not been,
      and will not be, registered under the Federal and State Securities Acts by
      reason of a specific exemption or exemptions from the registration
      provisions of the Securities Acts which depend upon, among other things,
      the bona fide nature of the purchaser's investment intent and the accuracy
      of the purchaser's representations as expressed herein. The Buyers further
      understand that no public market now exists for any of the Shares issued
      by the Company.

            

    

    

     
3.5      Taxes. Upon the Closing Date, the
parties shall elect to end the then current tax year of the Company pursuant to
§1377(a)(2) of the Internal Revenue Code of 1986, as amended ("IRC"), to the
extent the Company will have two (2) tax years for 2007. Buyers shall be solely
responsible for the timely filing of any and all Federal and/or State tax
returns pertaining to fiscal year ending December 31, 2007, and due following
the Closing Date, which shall be filed in a timely manner. Except as provided
for herein, Buyers shall indemnify and hold harmless Sellers from all claims by
all taxing authorities with respect to the operations of the Business after the
date of Closing.

    

     
3.6      S
Corporate Status.
Buyers represent and acknowledge that it, as Corporations, are not
qualified shares and can no longer continue to the S Corporation status of the
Company for Federal income purposes, and that the fiscal tax year for the
Company pursuant to IRC §1377(a)(2) will close the tax year for the Company as
of the date of Closing, with the Sellers being solely responsible for the
payment of any Federal or State Income taxes accruing on operations prior to the
date of Closing.

    

      3.7      Stock
Purchase. The
Buyers do hereby represent and acknowledge and agree that following the Closing,
it will not make, nor attempt to make, any election under IRC §338 to have the
acquisition of the Shares herein treated as an asset acquisition. Buyers
acknowledge that the Sellers are relying on this representation with respect to
their tax planning, and would not enter into this transaction but for this
representation of the Buyers. An election of the Buyers under §338 to treat this
stock acquisition as an asset acquisition would have the likely effect of
liquidating the Corporation for Federal and State income tax purposes causing
there to be additional Federal and State income taxes payable by the Seller.
Buyers further acknowledge and agree that the Sellers would have increased the
purchase price by an amount in excess of the additional Federal and State taxes
they would have to pay if the Buyers were to purchase the assets of the Company,
or to make an election under IRC §338.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              3.8 
           

            	
              Employee
      Retention.
      Upon Closing, the Buyers will extend an offer of employment to each
      of the existing employees of the Company and use its best efforts to
      continue to employ all such employees for a period of at least one (1)
      year following the Closing, provided that such employees perform within
      the reasonable expectations, guidelines and policies of management.
      Sellers are relying on this representation of Buyers and that no notices
      have been given of pending layoff or employment terminations, nor need to
      be given.

            

    

    

                
a.           Key
Employees.   In addition
to the foregoing, on or before ten (10) days from the execution of this
Agreement, Buyer shall notify Sellers of the key personnel of the Company, Greg
Stewart, with which the Buyers interest is in negotiating a one (1) year
employment contract. In the event that the Buyers are unable to negotiate an
employment contract with such individual, it shall be regarded as a matter of
due diligence under Paragraph 5.2 herein. In the event that this transaction
shall fail to close, for whatever reason, the Buyers do hereby jointly and
severally agree not to employ, or to offer employment directly or indirectly,
for a period of five (5) years commencing on the date hereof.

    

    4.           Representations
and Warranties of the Sellers. The Sellers, jointly and
severally, hereby represent and warrant to Buyers as follows:

    

     
4.1       Organization,
Standing and Corporate Power. Stewart Contracting Inc., is
a corporation duly organized, validly existing and in good standing in the State
of Idaho.

    

     
4.2       Capital
Structure. The
authorized capital stock of the Company consists of one thousand (1,000) shares
of One Dollars ($1.00) par value voting common stock. There are no shares of
common stock issued and outstanding and no shares of common stock are held by
the Business in its treasury. No shares of capital stock are reserved for
issuance for any other purpose. All the issued and outstanding shares of capital
stock are duly authorized, validly issued, fully paid and nonassessable and have
not been issued in violation of any preemptive or similar rights. There are no
outstanding contractual obligations of the Business to repurchase, redeem, or
otherwise acquire any shares of common stock. The Business has two subsidiary
businesses. They are listed and described below.

    

    1.
Stewart Contracting Inc. doing business as Castlegrade Fine Masonry. This is an
active masonry company established in December 2005.

    

    2.
Stewart Contracting Inc. doing business as Jet-Black Sealcoating and Repair.
This business is currently inactive.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              4.3      
      

            	
              Ownership
      of Shares.
      As of the date hereof, Greg S. Stewart is the sole Shareholder of
      record equally owning all shares of stock currently issued and
      outstanding, free and clear of all liens and
  encumbrances.

            

    

    

     
4.4       Capacity;
Authority. The
Seller has full legal capacity to execute the Sellers' Agreements and consummate
the transactions contemplated hereby and thereby. No person other than the
Seller has any interest in any of the assets of the Company.

    

     
4.5       Compliance
with Applicable Laws.
The Company is in compliance with all laws, regulations, rules and
governmental orders applicable to it.

    

     
4.6       Litigation. The Company is not subject
to any judgment, injunction, order or arbitration decision and there is no
litigation or administrative proceeding pending or threatened against the
Company.

    

     
4.7       Assets. The Company has, and, except
as otherwise provided herein, following the Closing will have, good and
marketable title to the Real Property described in the Lease attached as Exhibit
“A”.  Except as may be agreed upon between the parties hereto prior to
Closing and specified in the financial statements, all assets of the Corporation
shall be free and clear of all encumbrances.

    

     
4.8       Financial
Statements.
Sellers have provided to Buyers a complete listing of its assets and
liabilities as of December 31, 2006, which Buyers have reviewed to its
satisfaction. Prior to Closing and except for open purchase orders to its
vendors, Sellers will either cause all of its liabilities to be paid in full, or
that the Company, at Closing, will have accounts receivable in excess of its
accounts payable.

    

     
4.9       Taxes. Sellers have timely filed or
will timely file all federal, state, and county tax returns of every nature
which have due dates or will have due dates preceding Closing. All taxes and
interestlpenalties, if any, which were due prior to closing, shall be paid by
Shareholders. Except as provided for herein, Sellers shall indemnify and hold
harmless Buyers from all claims by all taxing authorities with respect to the
Business operations prior to the date hereof.

    

    5.           Contingencies
of Closing. This
sale is subject to the Buyers' investigation in accordance with the following
contingencies:

    

     
5.1       Independent
Investigation and Inspection. Buyers do hereby reconfirm
its Confidentiality Agreement dated March 19, 2007. At

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    all times
after the Effective Date, and upon five (5) days written notice to Sellers,
Buyers shall have supervised access to the Real Property and the Stewart
Contracting Inc. business operations for purposes of viewing and inspecting the
equipment, structures and status of current activities of Stewart Contracting
Inc. (the "Business") to learn and understand the operations
of the Business.

    

     
5.2       Due
Diligence. Seller
shall, within ten (10) business days from written request of the Buyers, provide
to the Buyers all reasonably requested Corporate documents (i.e., articles,
bylaws, minutes), including, but not limited to copies of leases, financial
statements and 2006 tax returns, copies of property statements, copies of
assessments, copies of any employee policy/benefit manuals and employment files,
and copies of 2006 utilities, repairs and maintenance invoices. Buyers shall
have until June 20th, 2007 to review and ask questions regarding such documents
and the operations of the Business. Unless extended in writing by the parties on
or before June 20th, 2007, Buyers shall be deemed to have either accepted or
waived all remaining contingencies to its Closing that pertain to its
investigation of the Business.

    

     
5.3       Operation
of Business Prior to Closing. Seller shall have operated
the Business in the normal and ordinary course of business and shall not have
make any sale of assets other than in the ordinary course of business without
the prior written consent of the Buyers. The parties acknowledge and agree that
cash balance amount of $317,878.78 shown on the year end reviewed financial
statement ending December 31, 2006 will be disbursed to the Sellers by December
15th, 2007
and the personal items belonging to the Sellers, all as listed on Exhibit "B"
attached hereto. All accounts receivable existing on the date of Closing shall
remain with the Business. At Closing, the Sellers shall make a list of all
accounts receivables and list of all vendors with outstanding invoices. To the
extent that the amounts owing to vendors exceeds the aggregate of the accounts
receivable at Closing, the Purchase Price payable herein shall be reduced,
dollar for dollar, for each dollar of excess liability. At Closing, Seller shall
provide Buyer with a list of any open purchase orders.

    

    6.           Source of
Funds.

    

    7.           Actions to Occur At
Closing.

    

     
7.1      Seller's
Deliveries. On
the Closing Date, the Sellers shall execute for delivery, as provided below, the
following:

    

    a.           Share
Certificates.
Endorsed stock certificates (with executed stock powers) transferring
ownership of certificates to the Buyers representing all of the outstanding
Shares.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    b.           Lease
Aqreement. A
Lease Agreement with Buyers for the lease of Sellers' Real Property in the form
attached as Exhibit "A.

    

    c.           Corporate
Records. The
complete stock books, Bylaws, minute books, corporate seals, and any and all
other corporate records or documents of the Company.

    

    d.           Other
Documentation.
Any and all further documentation necessary to complete this stock sale
transaction.

    

     
7.2     Buyer's
Deliveries. On
the Closing Date, the Buyers will execute for delivery or perform the
following:

    

    a.           Unanimous
Consent. A
unanimous Consent of Shareholders and Directors for the election of new Officers
and Directors of the Company, effective immediately upon the Resignations as
provided in Paragraph 7.1 (b) above.

    

    b.           Lease
Agreement. A
Lease Agreement with Seller for the lease of Sellers' Real Property in the form
attached as Exhibit " A.

    

    c.           Other
Documentation.
Any and all further documentation necessary to complete this stock sale
transaction.

    

    d.           Release. The release of Sellers from
any and all personal guaranties to suppliers or vendors to the Business,
effective upon Closing.

    

     
7.3     Proration
of Expenses. As
part of the Closing, the Buyers shall pay at Closing and as an addition to the
Purchase Price, Buyer's prorata share of real estate taxes, prepaid insurance
premiums, other prepaid expenses and any closing costs.

    

    8.           Indemnification

    

     
8.1     Indemnification
by the Sellers.
The Seller hereby agrees to indemnify, hold harmless, protect, and defend
Buyers from and against any and all claims, causes of action, liabilities,
losses, costs, taxes, damages, whether foreseeable or unforeseeable, arising out
of this sale of stock and prior to the date of this Agreement. The Sellers shall
indemnify the Buyers in respect of, and hold the Buyers harmless against damages
incurred or suffered by the Buyers or any affiliate thereof resulting from,
relating to or constituting:

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    a.           any
breach, as of the date of this Agreement or as of the Effective Date, of any
representation or warranty of the Sellers contained in this Agreement, or any
other agreement or instrument furnished by the Sellers to the Buyers pursuant to
this Agreement; or

    

    b.           any
failure to perform any covenant or agreement of the Sellers contained in this
Agreement, or any agreement or instrument furnished by the Sellers to the Buyers
pursuant to this Agreement.

    

     
8.2     Indemnification
by the Buyers.
The Buyers hereby agree to indemnify, hold harmless, protect, and defend
the Sellers, their agents, representatives, attorney's, officers and directors
from and against any and all claims, causes of action, liabilities, losses,
costs, taxes, damages, whether foreseeable or unforeseeable, arising out of this
sale of stock and after the date of this Agreement. The Buyers shall further
indemnify the Sellers in respect of, and hold it harmless against, any and all
damages incurred or suffered by the Sellers resulting from, relating to or
constituting:

    

    a.           any
breach, as of the date of this Agreement or as of the Closing Date, of any
representation or warranty of the Buyers contained in this Agreement or any
other agreement or instrument furnished by the Purchasers to the Sellers
pursuant to this Agreement;

    

    b.           any
failure to perform any covenant or agreement of the Buyers contained in this
Agreement or any other agreement or instrument furnished by the Buyers to the
Sellers pursuant to this Agreement.

    

    9.           Cooperation. Buyers, the Seller and
the Company agree to cooperate fully with one another in taking any actions
necessary or helpful to accomplish the transactions contemplated
hereby.

    

    10.         Costs and
Expenses. Buyers
are responsible for their own Attorney fees and other related costs. Seller is
responsible for its own Attorney fees and other related costs including, but not
limited to, any Federal or State income taxes which may be due as a result of
this transaction. No cost shall be paid by the other party without proper notice
and proper acceptance. Costs of any Closing Agent employed to close this stock
sale transaction shall be paid equally by the parties.

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    11.         Parties
in Interest; Assignment.
This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors, assigns and transferees. No
party may voluntarily or involuntarily assign its or their interest under this
Agreement without the prior written consent of the other party
hereto.

    

    12.         Amendment. No amendment, waiver of
compliance with any provision or condition hereof or consent pursuant to this
Agreement shall be effective unless evidenced by an instrument in writing signed
by the party against whom enforcement of any waiver, amendment or consent is
sought.

    

    13.         Governing
Law. This
Agreement shall be construed in accordance with and governed by the internal law
of the State of Idaho (without reference to its rules as to conflicts of
law).

    

    14.         Notice. All notices, requests,
consents, waivers and other communications required or permitted to be given
hereunder shall be in writing and shall be deemed to have been given if
transmitted by facsimile, upon acknowledgment of receipt thereof in writing by
facsimile or otherwise; if personally delivered, upon delivery or refusal of
delivery; if mailed by registered or certified United States mail, return
receipt requested, postage prepaid, upon delivery or refusal of delivery; or if
sent by a nationally recognized overnight delivery service, upon delivery or
refusal of delivery. All notices, consents, waivers or other communications
required or permitted to be given hereunder shall be addressed to the respective
party to whom such notice, consent, waiver or other communication relates at the
following addresses:

    

    
      	
               
      

            	
              To
      Sellers:

            	
              Greg
      Stewart

            

    

    Stewart Contracting Inc.

    Post Office Box 1275

    Pinehurst, ID 83850

    

     
With a copy to:

    

    
      	
               
      

            	
              To
      Buyers:

            	
              United
      Mine Services, Inc.

            

    

    Attn. Michael E. Reagan

    1044 NW Blvd. Suite D

    Coeur d'Alene, ID 83814

    

    15.         Counterparts. This Agreement may be
executed in one or more counterparts, each of which will be deemed an original
and all of which together will constitute one and the same
instrument.

    

    16.         Entire
Agreement. This
Agreement and the exhibits hereto embody the entire agreement and understanding
of the parties hereto and supersede
any and all prior agreements, arrangements and understandings relating to the
matters provided for herein.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    17.         Legal
Representation.

    

    18.         Further
Actions. After
the Effective Date, the Sellers shall execute and deliver such other
certificates, agreements, conveyances, and other documents, and take such other
action, as may be reasonably requested by Buyers in order to transfer and assign
to, and vest in, Buyers the Shares pursuant to the terms of this Agreement or to
permit Buyers to control the Company and its assets.

    

    19.         Attorney's
Fees. In the
event of any breach of this Agreement, the party responsible for the breach
agrees to pay reasonable attorney's fees and costs, including, but not limited
to the costs of service of notices incurred by the other party. The prevailing
party in any suit instituted arising out of this Agreement shall be entitled to
receive reasonable attorney's fees and costs incurred in such suit or
proceedings.

    

    20.         Arbitration
of Disputes. Any
controversy or claim arising out of or relating to this Agreement, or the actual
or alleged breach hereof, or arising out of or relating to the rights or duties
or obligations of the parties inter se in any capacity
respecting any matter that could be asserted in a dispute by way of
cross-complaint or counterclaim, shall be settled by exclusive and binding
arbitration, by a single arbitrator conducted in a Seller designated location in
accordance with, and by an arbitrator appointed pursuant to, the Rules of the
American Arbitration Association applicable to the type of dispute in question
in effect at the time, and judgment upon the award rendered pursuant thereto may
be entered in any court having jurisdiction thereof, and all rights or remedies
of the parties, or any of them, to the contrary are hereby expressly waived
except the right to obtain preliminary injunctive relief pending the
commencement of arbitration of the disputed matters. Notwithstanding any
provision of the aforesaid Rules or Statutes to the contrary, the refusal or
failure of any party to appear at or participate in any hearing or other portion
of any arbitration proceeding pursuant to this paragraph shall not prevent any
such hearing or proceeding from going forward, and the Arbitrator is empowered
to make a decision or render an award, or both, ex parte, which shall be binding
on such party as fully as though such party had fully participated in such
hearing or proceeding. As provided in Paragraph 19, the prevailing party in any
arbitration proceeding pursuant to this paragraph shall be entitled to an award
for such

    party's
expenses and attorneys' fees in connection therewith, and the cost of conducting
the arbitration proceeding shall be borne by the losing party.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    IN WITNESS WHEREOF, Buyers,
each Seller and the Company have caused this Agreement to be signed, all as of
the date first written above.

    

    
      	
              BUYERS:

            	 
      	 
      	
              SELLERS:

            
	 
      	 
      	 
      	 
      
	
              United
      Mine Services, Inc

            	 
      	 
      	
              Greg
      S. and Jenny L. Stewart

            
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	
              KURT
      HOFFMAN

            	 
      	 
      	
              GREG S.
      STEWART

            
	
              Kurt
      Hoffman

            	 
      	 
      	
              Greg
      S. Stewart

            
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	
              JENNY L.
      STEWART

            
	 
      	 
      	 
      	
              Jenny
      L. Stewart

            
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	
              COMPANY;

            
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	
              GREG S.
      STEWART

            
	 
      	 
      	 
      	
              Greg
      S. Stewart, President

            

    

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    (EXHIBIT
"A" TO STOCK PURCHASE AND SALE AGREEMENT)

    

    LEASE
AGREEMENT

    

    THIS LEASE AGREEMENT is
entered into this 1st
day of November
, 2007 ("Effective Date"), jointly and severally by and between UNITED MINE SERVICES, INC., an
Idaho Corporation and (hereinafter collectively the "Lessee"), and Greg And
Jenny Stewart, husband and wife, (hereinafter collectively the
"Lessor")

    

    RECITALS:

    

    WHEREAS, Lessee herein and on
the Effective Date did purchase all of the shares of capital stock in Stewart
Contracting, Inc., an Idaho Corporation ("Company") from the Lessors;
and

    

    WHEREAS, as a condition to the
closing of such sale and purchase of shares, the Lessee desires to enter into
this Lease Agreement for the Real Property on which the Company has historically
been operated and Lessor desires to lease to the Lessee such Real Property all
on the terms and conditions as contained herein.

    

    IN WITNESS WHEREOF, the
parties have set their hands as of the Effective Date.

    

    1.           Premises. Lessor hereby leases to
Lessee for the term, at the rental, and upon all of the conditions set forth
herein, certain real property generally located at 202 S. Division Street in
Pinehurst Idaho, as more legally described on the Exhibit "A" attached hereto.
Said real property leased hereunder, including the land and all fixtures and all
other improvements existing thereon, are herein called the
"Premises".

    

    2.           Term. The term of this Lease shall
be for approximately twelve (12) months, beginning the Effective Date, and
ending on June 30, 2008 ("Term"). Any renewal options shall be mutually agreed
upon between Lessor and Lessee.

    

    3.           Rent. Lessee, jointly and
severally, shall pay to Lessor as rent for the Premises the amounts stipulated
hereinafter. All rent shall be paid in lawful money of the United States to
Lessor at P.O. Box 1275, Pinehurst, Idaho 83850, or to such party or place as
may be designated in writing hereafter by Lessor.

    

     
3.1           Base
Rent. During the Term of the lease, and in addition to insurance and
other charges required to be paid hereunder by Lessee, Lessee, shall pay to
Lessor, with respect to the Premises, a base monthly rental in the sum of Seven
Fifteen Hundred Dollars ($1,500.00) ("Base Rent"). Such Base Rent shall be
payable monthly and in advance on the first (1ST) day of
each month during the term hereof. The first months rent shall be prorated based
on the number of calendar days in the month of commencement, and paid on the
basis of Fifty Dollars ($50) per day and payable to Lessor on the Effective
Date.

    1

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

     
3.2           Late
Payment Charge.
In the event any payment of rent or other charge is delivered by Lessee
to Lessor more than ten (10) days after its due date, the Lessor shall be
further paid a $200 late payment charge.

    

    4.           Use. The Premises shall be used
only for commercial purposes, and only that relate to the operations of the
Company. The Premises shall not be used for any illegal purposes.

    

    Lessee hereby accepts the Premises in
its condition existing as of the Lease commencement date hereof, subject to all
applicable zoning, municipal, county, and state laws, ordinances, and
regulations governing and regulating the use of the Premises, and any covenants
or restrictions of record. and requirements in effect during the term or any act
of the term hereof, regulating the use by Lessee of the premises. Lessee shall
not use or permit the use of the Premises in any manner that will tend to create
waste or a nuisance.

    

    5.           Repairs.

    

     
5.1           Maintenance. Lessee shall, at
Lessee's own cost and expense repair or replace any damage or injury done to the
Premises, or any part thereof caused by Lessee or Lessee's agents, employees,
invitees, or visitors; provided, however, if Lessee fails to make such repairs
or replacements promptly, Lessor may, at its option, make such repairs and
replacements, and Lessee shall repay the reasonable cost thereof to the Lessor
on demand. In addition, at Lessee's own cost and expense, Lessee will (i) keep
all drainage pipes free and open; (ii) protect the water, heating and other
pipes so that they will not freeze or become clogged; and (iii) repair all leaks
and all damages caused by leaks or by reason of Lessee's failure to protect and
keep free, open and unfrozen any of the pipes and plumbing on said Premises.
Lessee shall be liable for the removal of ice and snow from the sidewalks in
front of and about said Premises and parking lot.

    

     
5.2           Improvements
or Repairs.
Lessor shall not be called upon to make any improvement or repair of any
kind upon said Premises. Lessee shall keep and maintain the Premises, including
all utilities. Said Premises shall at all times be kept and used in accordance
with the laws of the state, city or county where the Premises are located, and
ordinances of the appropriate jurisdictions, and in accordance with all
directions, rules and regulations of health officers, fire marshals, building
inspectors, or other proper officers of the City where the Premises are located,
at the sole cost and expense of said Lessee. Lessee will permit no waste, damage
or injury to the Premises.

    

     
5.3           Failure
to Perform. If
Lessee fails to perform Lessee's obligations under this Paragraph 5 or under any
other paragraph of this Lease, Lessor may, at Lessor's option, enter upon the
Premises after thirty (30) days' prior written notice to Lessee (except in the
case of emergency, in which case no notice shall be required), perform such
obligations on Lessee's behalf and put the Premises

    

    2

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    in good
order, condition, and repair, and the reasonable cost shall be due and payable
as additional rent to Lessor together with Lessee's next rental
installment.

    

     
5.4           Surrender
Premises. On the
last day of the term hereof, or on any sooner termination, Lessee shall
surrender the Premises to Lessor in the same condition as received, ordinary
wear and tear excepted, clean and free of debris. Lessee shall repair any damage
to the Premises occasioned by the installation or removal of its trade fixtures,
furnishings and equipment. Notwithstanding anything to the contrary otherwise
stated in this Lease, Lessee shall leave the power panels, electrical
distribution systems, lighting fixtures, space heaters, plumbing and fencing on
the Premises in good operating condition.

    

    6.           Alterations. Upon the prior written
consent of Lessor, the Lessee may make alternations to the Premises. All
alterations, additions, and improvements which shall be made shall be at the
sole cost and expense of Lessee without lien against the Premises, and shall
become the property of Lessor at the termination of this Lease without
reimbursement to Lessee, and shall remain in and be surrendered with the
Premises as a part thereof at the termination of this Lease, without
disturbance, molestation or injury. Lessee agrees to comply with all laws,
ordinances, rules, and regulations of the City of Pinehurst and County of
Shoshone, or any other authorized public authority. Lessee further agrees to
save Lessor free and harmless from damage, loss, or arising out of said
work.

    

    7.           Utilities. Lessee hereby covenants and
agrees to pay all charges for heat, garbage, light, and water, and for all other
public utilities which shall be used in or charged against the entire building
during the full term of this Lease. All items, directly attributable to the
operation of Lessee's business on the Premises, including all license fees and
governmental charges levied on the operation of Lessee's business on the
premises will be paid directly by Lessee.

    

    8.           Insurance:
Indemnity.

    

     
8.1           Liability
Insurance -
Lessee. Lessee shall, at Lessee's
expense, obtain and keep in force during the term of this Lease a policy of
Combined Single Limit Bodily Injury and Property Damage Insurance insuring
Lessee and Lessor against any liability arising out of the use, occupancy or
maintenance of the Premises and all other areas appurtenant thereto. Such
insurance shall be in an amount not less One Million Dollars ($1,000,000) per
occurrence.

    

     
8.2           Property
Insurance. Lessee
shall obtain and keep in force with Lessor as the insured  or
beneficiary during the term of this Lease a policy or policies of insurance
covering loss or damage to the Premises, including covering Lessee's fixtures,
equipment and tenant improvements, in an amount  not less than the
full replacement value thereof, as the same may exist from time to time,
providing protection against all perils included within the classification
of

    

    

    3

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    fire,
extended coverage, vandalism, malicious mischief, and "all risk" as such term is
used in the insurance industry but not plate glass insurance. The Lessor shall
be listed as a co-insured on such policy. A certificate of such insurance shall
be delivered to Lessor on or before the date hereof.

    

     
8.3           Payment
of Premiums.
Lessee shall pay the cost of all insurance required under Paragraphs 8.1
and 8.2 herein.

    

     
8.4           Waiver of
Subrogation.
Lessee and Lessor each hereby release and relieve the other, and waive
their entire right of recovery against the other for loss or damage arising out
of or incident to the perils insured against under Paragraph 8.2 which perils
occur in, on or about the Premises, whether due to the negligence of Lessor or
Lessee or their agents, employees, contractors and/or invitees. Lessee and
Lessor shall, upon obtaining the policies of insurance required hereunder, give
notice to the insurance carrier or carriers that the foregoing mutual waiver of
subrogation is contained in this Lease.

    

     
8.5           Indemnity. Lessee shall indemnify and
hold harmless Lessor from and against any and all claims arising from Lessee's
use of the Premises, or from the conduct of Lessee's business or from any
activity, work or things done, permitted or suffered by Lessee in or about the
Premises or elsewhere and shall further indemnify and hold harmless Lessor from
and against any and all claims arising from any breach or default in the
performance of any obligation on Lessee's part to be performed under the terms
this Lease, or arising from any negligence of the Lessee, or any of Lessee's
agents, contractors, or employees, and from and against all costs, attorney's
fees, expenses and liabilities incurred in the defense of any such claim or any
such action proceeding brought thereon. In case any action or proceeding be
brought against Lessor by reason of any such claim, Lessee, upon notice from
Lessor, shall defend the same at Lessee's expense by counsel satisfactory to
Lessor. Lessee, as a material part of the consideration to Lessor, hereby
assumes all risk of damage to property or injury to persons, in, upon or about
the Premises arising from any cause and Lessee hereby waives all claims in
respect thereof against Lessor.

    

     
8.6           Exemption
of Lessor from Liability. Lessee hereby agrees that
Lessor shall not be liable for injury to Lessee's business or any loss of income
therefrom or for damage to the goods, wares, merchandise or other property of
Lessee, Lessee's employees, invitees, customers, or any other person in or about
the Premises, nor shall Lessor be liable for injury to the person of Lessee,
Lessee's employees, agents or contractors, whether such damage or injury is
caused by or results from fire, steam, electricity, gas, water or rain, or from
the breakage, leakage, obstruction or other defects of pipes, sprinklers, wires,
appliances, plumbing, air conditioning or lighting fixtures, or from any other
cause, whether the said damage or injury results from conditions arising upon
the Premises.

    

    

    4

    

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    9.           Damage or
Destruction.

    

    
      	
               
      

            	
              9.1

            	
              Definitions.

            

    

    

    (a)           "Premises
Partial Damage" shall herein mean damage or destruction to the Premises to the
extent that the cost of repair is less than fifty percent (50%) of the fair
market value of the Premises immediately prior to such damage or destruction.
"Premises Building Partial Damage" shall herein mean damage or destruction to
the building of which the Premises are a part to the extent that the cost or
repair is less than fifty percent (50%) of the fair market value of such
building as a whole immediately prior to such damage or
destruction.

    

    (b)           "Premises
Total Destruction" shall herein mean damage or destruction to the Premises to
the extent that the cost of repair is fifty percent (50%) or more to the fair
market value of the Premises immediately prior to such damage or destruction.
"Premises Building Total Destruction" shall herein mean damage or destruction to
the building of which the Premises are a part of the extent that the cost of
repair is fifty percent (50%) or more of the fair market value of such building
as a whole immediately prior to such damage or destruction.

    

    (c)           "Insured
Loss" shall herein mean damage or destruction which was caused by an event
required to be covered by the insurance described in Paragraph 8.

    

     
9.2           Partial
Damage - Insured Loss.
Subject to the provisions' of Paragraphs 9.4, 9.5, and 9.6, if at any
time during the term of this Lease there is damage which is an Insured Loss and
which falls into the classifications of Premises Partial Damage or Premises
Building Partial Damage, then Lessor shall, up to limits of insurance proceeds,
repair such damage, including Lessee's fixtures, equipment or tenant
improvements, as soon as reasonably possible and this Lease shall continue in
full force and effect subject to Paragraphs 9.6(a) and (b).

    

     
9.3           Partial
Damage - Uninsured Loss.
Subject to the provisions, of Paragraphs 9.4, 9.5, and 9.6, if at any
time during the term of this Lease there is damage which is not an Insured Loss
and which falls within the classification of Premises Partial Damage or Premises
Building Partial Damage, unless caused by a negligent or willful act of Lessee
(in which event Lessee shall make the repairs at Lessee's expense), Lessor may
at Lessor's option either (i) repair such damage as soon as reasonably possible
at Lessor's expense, in which event this Lease shall continue in full force and
effect, or (ii) give written notice to Lessee within thirty (30) days after the
date of the occurrence of such damage of Lessor's intention to cancel and
terminate the Lease as of the date of the occurrence of such damage. In the
event Lessor elects to give such notice of

    

    5

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    Lessor's
intention to cancel and terminate this Lease, Lessee shall have the right,
within ten (10) days after the receipt of such notice, to give written notice to
Lessor of Lessee's intention to repair such damage at Lessee's expense, without
reimbursement from Lessor, in which event this Lease shall continue in full
force and effect, and Lessee shall proceed to make such repairs as soon as
reasonably possible. If Lessee does not give such notice within such ten (10)
day period, this Lease shall be canceled and terminated as of the date of the
occurrence of such damage.

    

     
9.4           Total
Destruction. If
at any time during the term of this Lease there is damage, whether or not an
Insured Loss, (including destruction required by any authorized public
authority), which falls into the classification of Premises Total Destruction or
Premises Building Total Destruction, this Lease shall automatically terminate as
of the date of such total destruction.

    

     
9.5           Damage Near End of
Term.

    

    (a)           If
at any time during the Term of this Lease there is damage, whether or not an
Insured Loss, which falls within the classification of Premises Partial Damage,
Lessor may at Lessor's option cancel and terminate this Lease as of the date of
occurrence of such damage by giving written notice to Lessee of Lessor's
election to do so within thirty (30) days after the date of occurrence of such
damage.

    

     
9.6           Abatement of Rent: Lessee's
Remedies.

    

    (a)           In
the event of damage described in Paragraph 9.2 or 9.3, and Lessor or Lessee
repairs or restores the Premises pursuant to the provisions of this Paragraph 9,
the rent payable hereunder for the period during which such damage, repair or
restoration continues shall be abated in proportion to the degree to which
Lessee's use of the Premises is impaired. Except for abatement of rent, if any,
Lessee shall have no claim against Lessor for any damage suffered by reason of
any such damage, destruction, repair or restoration.

    

    (b)           If
Lessor shall be obligated to repair or restore the Premises under the provisions
of Paragraph 9 and shall not commence such repair or restoration within ninety
(90) days after such obligations shall accrue, Lessee may, at Lessee's option,
cancel and terminate this Lease by giving Lessor written notice of Lessee's
election to do so at any time prior to the commencement of such repair or
restoration. In such event, this Lease shall terminate as of the date of such
notice.

    

     
9.7           Waiver. Lessor and Lessee waive the
provisions of any statutes which relate to termination of leases when leased
property is destroyed and agree that such event shall be governed by the terms
of this Lease.

    

    6

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

     
9.8           Hazardous
Waste. Lessor
hereby acknowledges that to the best of Lessor's knowledge there is no hazardous
waste or evidence of toxic materials on the Premises. Lessee hereby agrees to
comply with all federal, state and local regulations regarding hazardous waste
and toxic material disposal and agrees to hold Lessor harmless from any and all
loss, damage, or claims arising out of any violation of said regulations,
including attorney's fees caused by Lessee's noncompliance. In the event Lessee
disposes of any hazardous waste or toxic materials on the Property or the
Premises, in violation of any federal, state or local regulations is shall be
Lessee's sole responsibility to pay to clean up and remove the hazardous waste
and/or toxic material caused by Lessee. This provision shall survive the
termination of the Lease.

    

    10.         Taxes and
Assessments.

    

     
10.1           Real
Property Taxes and Assessments. Lessee shall pay the cost of
all real property taxes, and other assessments applicable to the
Premises.

     

     
10.2           Personal
Property Taxes.
Lessee shall pay, prior to delinquency all taxes assessed against and
levied upon trade fixtures, furnishings, equipment, and all other personal
property of Lessee contained in the- premises or elsewhere. When possible,
Lessee shall cause said trade fixtures, furnishings, equipment, and all other
personal property to be assessed and billed separately from the real property of
Lessor.

    

    11.         Assignment. Lessee shall not let or
sublet the whole or any part of the Premises, nor assign this Lease or any par
thereof without the written consent of the Lessor, or Lessor's agents, which
consent may be unreasonably withheld. This Lease shall not be assignable by
operation of law. If consent is once given by Lessor to the assignment of this
Lease, or any interest therein, Lessor shall not be barred from afterwards
refusing to consent to any further assignment.

    

    12.         Defaults:
Remedies.

    

     
12.1           Defaults. The occurrence of any one or
more of the following events shall constitute a material default and breach of
this Lease by Lessee:

    

    (a)           The
vacating or abandonment of the Premises by Lessee

    

    (b)           The
failure by Lessee to make any payment of rent or any other payment required to
be made by Lessee hereunder, as and when due, where such failure shall continue
for a period of three (3) days after written notice thereof from Lessor to
Lessee. In the event that Lessor serves Lessee with Notice to Pay Rent or Quit
pursuant to applicable Unlawful Detainer statutes, such Notice to Pay Rent or
Quit shall also constitute the notice required by this
subparagraph.

    

    

    7

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    (c)           The
failure by Lessee to observe or perform any of the covenants, conditions or
provisions of this Lease to be observed or performed by Lessee, other than
described in subparagraph (b) above, where such failure shall continue for a
period of thirty (30) days after written notice hereof from Lessor to Lessee;
provided, however, that if the nature of Lessee's default is such that more than
thirty (30) days are reasonably required for its cure, then Lessee shall not be
deemed to be in default if Lessee commenced such cure within said thirty (30)
day period and thereafter diligently prosecutes such cure to
completion.

    

    (d)           (i)
The making by Lessee of any general arrangement or assignment for the benefit of
creditors; (ii) Lessee becomes a "debtor" as defined in 11 U.S.C. §101 or any
successor statute thereto (unless, in the ease of a petition filed against
Lessee, the same is dismissed within sixty [60j days); (iii) the appointment of
a trustee or receiver to take possession of substantially all of Lessee's assets
located at the Premises or of Lessee's interest in this Lease, where possession
is not restored to Lessee within thirty (30) days; or (iv) the attachment,
execution or other judicial seizure of substantially all of Lessee's assets
located at the Premises or of Lessee's interest in this Lease, where such
seizure is not discharged within thirty (30) days. Provided, however, in the
event that any provision of this Paragraph 12.1(d) is contrary to any applicable
law, such provision shall be of no force or effect.

    

    12.2           Remedies. In the event of any such
material default or breach by Lessee, Lessor may at any time thereafter, with or
without notice or demand and without limiting Lessor in the exercise of any
right or remedy which Lessor may have by reason of such default or
breach:

    

    (a)           Terminate
Lessee's right of possession of the Premises by any lawful means, in which case
this Lease shall terminate and Lessee shall immediately surrender possession of
the Premises to Lessor. In such event, Lessor shall, be entitled to recover from
Lessee all damages incurred by Lessor by reason of Lessee's default including,
but not limited to, (i) the cost of recovering possession of the Premises; (ii)
expenses of reletting, including necessary renovation and alteration of the
Premises,including reasonable

    attorney's fees, and any real estate
commission actually paid.

    

    (b)           Maintain
Lessee's right to possession, in which case this Lease shall continue in effect
whether or not Lessee shall have abandoned the Premises. In such event Lessor
shall be entitled to enforce all of Lessor's rights and remedies under this
Lease including the right to recover the rent as it becomes due
hereunder.

    

    

    

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    (c)           Pursue
any other remedy now or hereafter available to Lessor under the laws or judicial
decisions of the state wherein the Premises are located. Unpaid installments of
rent and other unpaid monetary obligations of Lessee under the terms of this
Lease shall bear interest from the date due at twelve percent (12%) per
annum.

    

    13.         Condemnation. If the whole of the Premises
shall be taken by the city or state or other public authority for any public
use, then the tenancy hereby granted shall cease on the day prior to the vesting
of title in such authority and rent due hereunder shall be paid and adjusted as
of that day. If a portion of said demised Premises shall be taken and as a
result thereof, there shall be such a major change in the character of the
Premises as to prevent Lessee from using the same in substantially the same
manner as therefore used, then and in that event the Lessee may either cancel
and terminate this Lease as to the specific project location only as of the date
when the part of the Premises so taken shall be required for such public purpose
or said Lessee may continue to occupy the remaining portion; provided, however,
the Lessee shall give written notice to the Lessor within fifteen (15) days
after the date of such vesting of title of its election. In the event Lessee
shall remain in possession and occupation of the remaining portion, all the
terms and conditions of this Lease shall remain in full force and effect with
respect to such remaining portion, except that the rent reserved to be paid
hereunder shall be equitably adjusted according to the amount and value of the
remaining space. Lessee agrees to make such repairs or improvements as shall be
necessary to make the remaining portion of the Premises useful. The entire award
of damages or compensation for the Premises taken or the amount taken pursuant
to private purchase in lieu thereof, whether such condemnation or sale be total
or partial, shall belong to and be the property of Lessor, provided, however,
nothing herein contained shall be deemed or construed to prevent Lessee from
interposing and prosecuting in any condemnation proceeding a claim for the value
of any trade fixture installed in the demised Premises by Lessee. In case of a
partial condemnation of the demised Premises, Lessor shall reimburse Lessee from
any award for the cost, loss or damages sustained by Lessee as a result of any
alterations, modifications or repairs which may be reasonably required of Lessee
in order to place the remaining portion of the demised Premises not so condemned
in a suitable condition for Lessee's further occupancy.

    

    14.         Option to
Purchase. At any
time during the Term of this Lease, and provided Lessee is not in default in any
of the terms herein, and provided the Lessor has decided to sell the property,
Lessee shall have the exclusive option to purchase the Premises for a mutually
agreed upon price. The terms of said purchase shall include full payment of the
purchase price in cash, of lawful money of the United States of America in
currency or certified check thereof, unless agreed otherwise between the
parties. Marketable title shall be conveyed by Warranty Deed free of all
encumbrances except rights of ways and easements of record. Further, Lessor
shall supply title insurance insuring marketable title in Lessee as buyers free
of encumbrances except those delineated above. If this option is exercised, the
sale shall be closed at such

    

    

    

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    place as
the parties may mutually agree, provided that such closing occurs not later than
the date of expiration of the Term of this Lease.

    

    15.         Severability. The invalidity of any
provision of this Lease as determined by a court of competent jurisdiction,
shall in no way affect the validity of any other provision hereof.

    

    16.         Time of
Essence. Time is of the
essence.

    

    17.         Additional
Rent. Any
monetary obligations of Lessee to Lessor under the terms of this Lease shall be
deemed to be rent.

    

    18.         Incorporation
of Prior Agreements: Amendments. This Lease contains all
agreements of the parties with respect to any matter mentioned herein. No prior
agreement or understanding pertaining to any such matter shall be effective.
This Lease may be modified in writing only, signed by the parties in the
interest at the time of the modification. Lessee assumes all responsibility
regarding the Occupational Safety Health Act, the legal use and adaptability of
the Premises and the compliance thereof with all applicable laws and regulations
in effect during the term of this Lease except as otherwise specifically stated
in this Lease.

    

    19.         Notices. Any notice required or
permitted to be given hereunder shall be in writing and may be given by personal
delivery or by certified mail, and if given personally or by mail, shall be
deemed sufficiently given if addressed to Lessee or to Lessor at the address
noted below the signature of the respective parties, as the case may be. Either
party may by notice to the other specify a different address for notice purposes
except that upon Lessee's taking possession of the Premises, the Premises shall
constitute Lessee's address for notice purposes. A copy of all notices required
or permitted to be given to Lessor hereunder shall be concurrently transmitted
to such party or parties at such addresses as Lessor may from time to time
hereafter designate.

    

    20.         Waivers. No waiver by Lessor or any
provision hereof shall be deemed a waiver of any other provision hereof or of
any subsequent breach by Lessee of the same or any other provision. Lessor's
consent to, or approval of any act, shall not be deemed to render unnecessary
the obtaining of Lessor's consent to or approval of any subsequent act by
Lessee. The acceptance of rent hereunder by Lessor shall not be a waiver of any
preceding breach by Lessee of any provision hereof, other than the failure of
Lessee to pay the particular rent so accepted, regardless of Lessor's knowledge
of such breach at the time of acceptance of such rent.

    

    21.         Recording. Either Lessor or Lessee
shall, upon request of the other, execute, acknowledge and deliver to the other
a "short-form" memorandum of this Lease for recording purposes.

    

    22.         Holding
Over. If Lessee,
with Lessor's consent, remains in possession of the Premises or any part thereof
after the expiration of the term hereof, such occupancy

    

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    shall be
a tenancy from month to month upon all the provisions of this Lease pertaining
to the obligations of Lessee, but all options and rights of first refusal, if
any, granted under the terms of this Lease shall be deemed terminated and be of
no further effect during said month-to-month tenancy.

    

    23.         Cumulative
Remedies. No
remedy or election hereunder shall be deemed exclusive but shall, wherever
possible, be cumulative with all other remedies at law or in
equity.

    

    24.         Covenants
and Conditions.
Each provision of this Lease performable by Lessee shall be deemed both a
covenant and a condition.

    

    25.         Binding
Effect: Choice of Law.
This Lease shall bind the parties, their personal representatives,
successors and assigns. This Lease shall be governed by the laws of the state of
Idaho, wherein the Premises are located.

    

    26.         Subordination.

    

     
26.1           Lessor's
Option. This
Lease, at Lessor's option, shall be subordinate to any ground lease, mortgage,
deed of trust, or any other hypothecation or security now or hereafter placed
upon the real property of which the Premises are a part and to any and all
advances made on the security thereof and to all renewals, modifications,
consolidations, replacements and extensions thereof. Notwithstanding such
subordination, Lessee's right to quiet possession of the Premises shall not be
disturbed if Lessee is not in default and so long as Lessee shall pay the rent
and observe and perform all of the provisions of this Lease. If any mortgagee,
trustee or ground lessor shall elect to have this Lease prior to the lien of its
mortgage, deed of trust or ground lease, and shall give written notice thereof
to Lessee, this Lease shall be deemed prior is to such mortgage, deed of trust,
or ground lease, whether this Lease is dated prior or subsequent to the date of
said mortgage, deed of trust or ground lease, or the date of recording
thereof.

    

     
26.2           Lessee's
Obligation.
Lessee agrees to execute any documents required to effectuate an
attornment, a subordination or to make this Lease prior to the lien of any
mortgage, deed of trust or ground lease, as the case may be. Lessee's failure to
execute such documents within ten (10) days after written demand shall
constitute a material default by Lessee hereunder, or, at Lessor's option,
Lessor shall execute such documents on behalf of Lessee as Lessee's
attorney-in-fact. Lessee does hereby make, constitute and irrevocably appoint
Lessor as Lessee's attorney-in-fact and in Lessee's name, place and stead, to
execute such documents in accordance with this Paragraph 26.2.

    

    27.         Attorney's
Fees. If any
party named herein brings an action to enforce the terms hereof or declare
rights hereunder, the prevailing party in such action, on trial or appeal, shall
be entitled to its reasonable attorney's fees to be paid by the
losing.

    

    

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    party as
fixed by the court. The provisions of this paragraph shall inure to the benefit
of the party
named herein who seeks to enforce a right hereunder.

    

    28.         Lessor's
Access. Lessor
and Lessor's agents shall have the right to enter the Premises at reasonable
times for the purpose of inspecting the same, showing the same to prospective
Buyers, lenders, or lessees, and making such alterations, repairs, improvements
or additions to the Premises or to the building of which they are a part as
Lessor may deem necessary or desirable. Lessor may at any time place on or about
the Premises any ordinary "For Sale" signs and Lessor may at any time during the
last thirty (30) days of the term hereof place on or about the Premises any
ordinary "For Lease" signs, all without rebate of rent or liability to
Lessee.

    

    29.         Signs. Lessee shall not place any
sign upon the Premises, without Lessor's prior consent, which consent shall not
be unreasonably withheld. Approval is hereby given by Lessor for the
installation of such identification, subject only to the Lessor's written
approval of the exact location, size and type of display desired.

    

    30.         Merger. The voluntary or other
surrender of this Lease by Lessee, or a mutual cancellation thereof, or a
termination by Lessor, shall not work a merger, and shall, at the option of
Lessor, terminate all or any existing sub-tenancies or may, at the option of
Lessor, operate as an assignment to Lessor of any or all of such
subtenancies.

    

    31.         Consents. Except as otherwise
provided, wherever in this Lease the consent of one party is required to an act
of the other party, such consent shall not be unreasonably
withheld.

    

    IN WITNESS WHEREOF, the
parties hereto have executed this Lease on the date first written
above.

    

    
      	
              LESSEE:

            	
              LESSOR:

            
	 
      	 
      
	
              UNITED
      MINE SERVICES, INC.

            	
              GREG
      AND JENNY STEWART

            
	 
      	 
      
	 
      	 
      
	
              KURT
      HOFFMAN

            	
              GREG
      STEWART

            
	
              Kurt
      Hoffman, President

            	
              Greg
      Stewart

            
	 
      	 
      
	 
      	
              JENNY
      STEWART

            
	 
      	
              Jenny
      Stewart

            

    

    

    

    

    

    

    

    

    12

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