Agmt 2006 Allied Housing Program etc

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ARTICLE VII SECURITY FINANCING AND RIGHTS OF HOLDERS 7.1 No Encumbrances Except for Acquisition Purposes. Mortgages and deeds of trust, or any other reasonable security instrument are permitted to be placed upon the Property or the Improvements only for the purpose of securing loans or funds to be used by Owner for the acquisition of the Project and other expenditures reasonably necessary for acquisition of the Propeliy pursuant to this Agreement. Owner shall promptly notify Agency of any mortgage, deed of trust, sale and lease-back or other financing, conveyance, encumbrance, or lien that has been or will be created or attached to the Property or the Improvements. 7.1.1 Regulatorv Agreement to be Senior to Mortgages. Owner covenants and agrees, except as agreed upon by Agency in writing, the Regulatory Agreement shall be senior in priority to any mortgage, deed of trust, or other security instrument recorded agamst the Property, and that if any such instrument has been recorded against the Property prior to recordation of the or the Regulatory Agreement, Owner shall promptly secure execution of such subordination agreements as may be necessary to ensure that Agency's interests shall not be defeated as a result of foreclosure of any such instrument. 7.2 Holder Not Obligated to Construct. The holder of any mortgage, deed of trust or other security interest authorized by this Agreement is not obligated to construct or complete any of the Improvements or to guarantee such construction or completion. Nothing in this Agreement shall be deemed to permit or authOIizt: any such holder to devote the Property or any portion thereofto any uses, or to construct any improvements thereon, other than those uses or improvements provided for or authorized by this Agreement. 7.3 Notice of Default and Right to Cure. Whenever Agency delivers any notice of default hereunder, Agency shall concurrently deliver a copy of such notice to each holder of record of any mortgage, deed oftrust or other security instrument secured by the Property provided that Agency has been provided with the address for delivery of such notice. Agency shall have no liability to any such holder for any failure by the Agency to provide such notice to such holder. Each such holder shall have the right, but not the obligation, at its option, within sixty (60) days after the receipt of the notice, to cure or remedy any such default or breach. In the event that possession of the Property is required to effectuate such cure or remedy, the holder shall be deemed to have timely cured or remedied the default if it commences the proceedings necessary to obtain possession ofthe Property within sixty (60) days after receipt of the Agency's notice, diligently pursues such proceedings to completion, and after obtaining possession, diligently completes such cure or remedy. A holder who chooses to exercise its right to cure or remedy a default or breach shall first notify Agency of its intent to exercise such right prior to commencing to cure or remedy such default or breach. Nothing contained in this Agreement shall be deemed to permit or authorize such holder to undertake or continue the construction of the Project (beyond the extent necessary to conserve or protect the same) without first having expressly assumed in writing Owner's obligations to Agency under this Agreement. The holder in that event must agree to complete, in the manner provided in this Agreement, the Project and the Improvements and submit evidence reasonably satisfactory to Agency that it has the development capability on staff or retainer and the financial capacity necessary to perform 818642.2 13