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5 <br />1.3 SECURITY. As security for repayment of the Note, Borrower shall execute <br />the Deed of Trust in favor of Lender as beneficiary pursuant to which Lender shall be <br />provided a lien against Borrower’s interest in the Property. The Deed of Trust shall be <br />dated as of the Effective Date, shall be substantially in the form attached hereto as <br />Exhibit C, and shall be recorded in the Official Records of Alameda County (“Official <br />Records”). The Deed of Trust may be subordinated to only such liens and <br />encumbrances as Lender shall approve in writing. Notwithstanding the foregoing, the <br />Deed of Trust may be subordinated to a deed of trust or other security filing arising from <br />the refinancing of any loan(s) secured by a deed of trust senior to the Deed of Trust, as <br />long as the principal amount secured as a result of such refinanced loans does not <br />exceed two million five hundred thousand dollars ($2,500,000). <br />1.4 PREPAYMENT; ACCELERATION. <br />(a) Prepayment. Borrower may, without premium or penalty, at any time and <br />from time to time, prepay all or any portion of the outstanding principal balance due on <br />the Loan under this Agreement provided that each such payment is accompanied by <br />accrued interest on the amount of principal prepaid calculated to the date of such <br />payment. Prepayments shall be applied first to any unpaid late charges and other costs <br />and fees then due, then to accrued but unpaid interest, and then to principal. <br />(b) Due on Transfer. Unless Lender agrees otherwise in writing, the entire <br />unpaid principal balance and all interest and other sums accrued on the Loan under this <br />Agreement shall be due and payable upon the Transfer, absent the prior written consent <br />of Lender, of all or any part or interest in the Property. “Transfer” shall include any <br />assignment, sale, or other conveyance of the Property, but shall exclude encumbrances <br />junior to the Deed of Trust and leases of the Property. <br />ARTICLE II <br />USE AND DISBURSEMENT OF PROCEEDS <br />2.1 USE OF PROCEEDS. The proceeds of the Loan (“Loan Proceeds”) shall <br />be used solely to repay Borrower the Litigation Costs. Borrower and Lender <br />acknowledge and agree that the Lender has already paid, or will pay, the full amount of <br />the Litigation Costs, and that no portion of the Loan Proceeds shall be disbursed to <br />Borrower, and that Borrower will have no direct possession or control over the Loan <br />Proceeds. <br /> <br />2.2 CONDITIONS PRECEDENT TO DISBURSEMENT OF PROCEEDS. <br />Lender’s obligation to fund the Loan is conditioned upon the satisfaction of all of <br />the following conditions: <br />(a) Borrower’s execution and delivery to Lender of this Agreement, the <br />Note, and the Deed of Trust;