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premium payments to prevent cancellation, and shall provide that no act or negligence of <br />Mortgagor or of any occupant of the Mortgaged Property, and no occupancy or use of the <br />Mortgaged Property for purposes more hazardous than permitted by the terms of the <br />policy, will affect the validity or enforceability of such insurance as against Mortgagee. <br />In the event of loss under such insurance Mortgagor shall give prompt notice to the <br />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 />Subject to the rights of the mortgagee under the First Lien Mortgage <br />(c) <br />which has priority over this Mortgageandthe Third Lien Mortgagewhich does not have <br />priority over this Mortgage, Mortgagee is authorized and empowered to settle, collect and <br />receive all fire and hazard insurance proceeds, to apply such proceeds to all expenses <br />(including reasonable attorneys’fees) reasonably incurred by Mortgagee in collecting the <br />same and, at Mortgagee’s option and in its sole discretion, apply the balance of said <br />proceeds (“Net Proceeds”) to payment of the Obligations or make the Net Proceeds <br />available for the repair and restoration of the Mortgaged Property; provided, however, <br />Mortgagor may settle claims without Mortgagee’s consent if the loss is less than <br />$5,000.00 and no Event of Default exists at the time of settlement. Mortgagor shall apply <br />any such proceeds to the repairand restoration of the Mortgaged Property. So long as no <br />Event of Default exists, any settlement of a fire and hazard insurance claim of more than <br />$5,000.00 shall require the consent of Mortgagor, which consent will not be unreasonably <br />withheld. <br />If Mortgagee elects to applythe Net Proceeds to repair and restoration of <br />(d) <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 paidby Mortgagor, (ii) upon Mortgagee’s request prior to <br />disbursement of any Net Proceeds or thereafter, from time to time, Mortgagor will <br />deposit withMortgagee 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 thepayment 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 />6 <br />477340v3 EL185-40 <br /> <br />