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insurance carrier and Mortgagee; Mortgagor shall duly make proof of loss, and shall <br /> immediately furnish to Mortgagee a copy of such proof of loss. <br /> (c) Subject to the rights of the mortgagee under the First Lien Mortgage <br /> which has priority over this Mortgage, Mortgagee is authorized and empowered to settle, <br /> collect and receive all fire and hazard insurance proceeds, to apply such proceeds to all <br /> expenses (including reasonable attorneys' fees) reasonably incurred by Mortgagee in <br /> collecting the same and, at Mortgagee's option and in its sole discretion, apply the <br /> balance of said proceeds ("Net Proceeds") to payment of the Obligations or make the Net <br /> Proceeds available for the repair and restoration of the Mortgaged Property; provided, <br /> however, Mortgagor may settle claims without Mortgagee's consent if the loss is less <br /> than $5,000.00 and no Event of Default exists at the time of settlement. Mortgagor shall <br /> apply any such proceeds to the repair and restoration of the Mortgaged Property. So long <br /> as no Event of Default exists, any settlement of a fire and hazard insurance claim of more <br /> than $5,000.00 shall require the consent of Mortgagor, which consent will not be <br /> unreasonably withheld. <br /> (d) If Mortgagee elects to apply the Net Proceeds to repair and restoration of <br /> the Mortgaged Property (i) the Net Proceeds shall be held by Mortgagee and at <br /> Mortgagee's election may be disbursed either by Mortgagee or a disbursing agent <br /> selected by Mortgagee and paid by Mortgagor, (ii) upon Mortgagee's request prior to <br /> disbursement of any Net Proceeds or thereafter, from time to time, Mortgagor will <br /> deposit with Mortgagee such amounts in excess of remaining Net Proceeds as Mortgagee <br /> reasonably determines is required to complete the repair and restoration, (iii) the Net <br /> Proceeds and any funds deposited by Mortgagor shall be held and disbursed in <br /> accordance with sound construction loan disbursement practices, including, but not <br /> limited to, approval of the plans and specifications, appraisal, its other conditions for <br /> disbursement of draw requests and inspection of the work, and such other reasonable <br /> conditions as Mortgagee may impose and (iv) any Net Proceeds not so applied to repair <br /> and restoration shall be applied to the payment of the Obligations. If an Event of Default <br /> occurs prior to full disbursement, any undisbursed portion of the Net Proceeds and any <br /> funds deposited by Mortgagor with Mortgagee may at Mortgagee's option be applied to <br /> the Obligations. <br /> 1.7. Inspection. Mortgagee, or its agents, shall have the right to enter upon the <br /> Mortgaged Property during ordinary business hours for the purposes of inspecting the Mortgaged <br /> Property or any part thereof. Mortgagee shall have no duty, however, to make such inspection. <br /> Mortgagee, or its agents, shall also have the right during ordinary business hours to examine the <br /> books and records of Mortgagor pertaining to the Mortgaged Property and to make extracts <br /> therefrom and copies thereof. The parties agree that Mortgagee's right to inspect the books and <br /> records of Mortgagor, as described in this provision,relates solely to the Mortgaged Property. <br /> 1.8. Protection of Mortgagee's Security. If Mortgagor fails to perform any of the <br /> covenants and agreements contained in this Mortgage and such failure shall continue beyond any <br /> applicable notice and cure period contained in Article Two hereof or if any action or proceeding <br /> is commenced which does or may adversely affect the Mortgaged Property or the interest of <br /> 6 <br /> 464431v2 EL185-33 <br />