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<br />ARTICLE VIII. <br /> <br />SECURITY FINANCING AND RIGHTS OF MORTGAGEES <br />8.1 Mortgages and Deeds of Trust for Development. Mortgages and deeds of trust, or <br />any other reasonable security instrument are permitted to be placed upon the Property only for <br />the purpose of securing loans approved pursuant to the approved Financing Plan for the purpose <br />of financing the acquisition of the Property, the design and construction of the Improvements, <br />other expenditures reasonably necessary for development of the Property pursuant to this <br />Agreement, and the rehabilitation and/or refinancing of the Project. Developer shall not enter <br />into any conveyance for such financing without the prior written approval of the City Manager or <br />his or her designee. As used herein, the terms “mortgage” and “deed of trust” shall mean any <br />security instrument used in financing real estate acquisition, construction and land development. <br />(a) Memorandum and Regulatory Agreement to be Senior to Mortgages. City <br />agrees that pursuant to Health and Safety Code Section 33334.14(a)(4), City will not withhold <br />consent to reasonable requests for subordination of the Leasehold Deed of Trust and Regulatory <br />Agreement to deeds of trust provided for the benefit of lenders identified in the Financing Plan as <br />it may be updated with City approval, provided that the instruments effecting such subordination <br />include reasonable protections to the City in the event of default consistent with the requirement <br />of Health and Safety Code Section 33334.14(a)(4). <br />8.2 Holder Not Obligated to Construct. The holder of any mortgage, deed of trust <br />authorized by this Agreement shall not be obligated to construct or complete the Improvements <br />or to guarantee such construction or completion. Nothing in this Agreement shall be deemed to <br />permit or authorize any such holder to devote the Property or any portion thereof to any uses, or <br />to construct any improvements thereon, other than those uses or improvements provided for or <br />authorized by this Agreement. <br />8.3 Notice of Default and Right to Cure. Whenever City delivers any notice of <br />default hereunder, City shall concurrently deliver a copy of such notice to each holder of record <br />of any mortgage or deed of trust secured by the Property and each investor limited partner of <br />Developer (or Developer's successor) provided that City has been provided with the address for <br />delivery of such notice. City shall have no liability to any such holder for any failure by the City <br />to provide such notice to such holder. Each such holder shall have the right, but not the <br />obligation, at its option, to cure or remedy any such default or breach within the time periods set <br />forth in Section 10.1 below. <br />Without limiting the foregoing, no Mortgagee (including any Mortgagee who obtains title <br />to Developer’s interest in the Property or any part thereof as a result of foreclosure proceedings <br />or transfer in lieu of foreclosure) shall be obligated by the provisions of this Agreement to <br />construct the Project unless Mortgagee expressly assumes such obligation by written notice to <br />City. Whether or not a Mortgagee elects to assume Developer’s obligation to construct the <br />Project, nothing in this Agreement shall be construed to permit such Mortgagee to construct any <br />improvements other than the Project authorized under this Agreement. If the Mortgagee elects to <br />144\259\1892880.4 <br />24