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HomeMy WebLinkAbout2011 CON T & T Community Properties - Apartment Complex 138 Norton AveACQUISITION, REHABILITATION AND PERMANENT FINANCING LOAN AGREEMENT Project No. THIS ACQUISITION, REHABILITATION AND PERMANENT FINANCING LOAN AGREEMENT ("Agreement") is dated as of the 28th day of July, 2011, by and between the City of National City ("City") and T & T Community Properties, LLC, a California limited liability company ("Borrower") as follows: RECITALS A. Borrower intends to acquire, rehabilitate and permanently finance that certain real property located at 138 Norton Avenue, National City, California ( "Property"), which is more particularly described in Exhibit "A," attached hereto and made a part hereof. Borrower intends to acquire, rehabilitate and permanently finance the Property using a loan from the City in the original principal amount of up to Seven Hundred Seventeen Thousand Five Hundred and No/100 Dollars ($717,500.00) ("City Loan"). The City Loan is comprised entirely of HUD HOME funds all of which shall be used for HOME eligible purposes. B. The City Loan shall be evidenced by the City Note, which shall bear interest at the rate of two percent (2.0%) simple interest per annum and will be repayable out of residual receipts on the terms and conditions set forth in the City Note. This Agreement and the City Note shall be secured by the Deed of Trust. C. As soon as is reasonably practicable after the Closing, and in no event later than fifteen (15) days after the Closing, Borrower shall begin rehabilitation of the Property. Borrower intends to rehabilitate all eight (8) of the dwelling units at the Property (collectively, the "Project"). Borrower shall rehabilitate and operate all eight (8) of those dwelling units on the Property as affordable housing units (the "Affordable Units") which shall be rent and occupancy restricted for 55-years, as provided herein. One (1) of the Affordable Units shall be a manager's unit and will be rent or occupancy restricted at eighty percent (80%) of area median income, as set forth in the Declaration. D. Borrower intends to finance the Project using: (i) the City Loan; (ii) a rehabilitation and permanent loan made by Clearinghouse CDF1 in the original principal amount of Five Hundred Sixty -Five Thousand and No/100 Dollars ($565,000.00) secured by the Property ("Clearinghouse Loan"); (iii) deferral of Fifty -Seven Thousand and No/100 Dollars ($57,000.00) of Borrower's developer fee ("Deferred Developer Fee"); and (iv) a Borrower capital contribution in the amount of S40,500.00. This Agreement is being executed in connection with, and the City's obligation to make the City Loan is contingent on Borrower closing on the Clearinghouse Loan and deferring the Deferred Developer Fee. E. The City Loan will be funded with HUD HOME Program Funds and shall be governed by all HUD HOME Program regulations whether or not specifically referenced in this Agreement and shall fund only project costs as set forth in 24 CFR 92.206. The eight (8) 1 Affordable Units shall all be two -bedroom units. The Affordable Units are to be operated as affordable housing. Seven (7) units shall be HOME Affordable Units and as set forth in the Declaration. All of the Affordable Units shall be restricted as set forth in the Declaration. All eight (8) Affordable Units shall be rent and occupancy restricted as set forth in the Declaration for fifty-five (55) years. The obligations of Borrower under the Declaration shall be independent of, and in addition to, Borrower's obligations under this Agreement, and repayment of the City Loan shall not terminate or otherwise affect the affordability restrictions set forth in the Declaration. The HOME assisted Affordable Units will be rent restricted under the provisions of the HOME requirements for a period of fifteen (15) years. During the remaining forty (40) years the Affordable Units that were restricted under the HOME Program requirements will continue to be rent and occupancy restricted under the Declaration. F. The initial rehabilitation of the Project shall be completed and the Affordable Units shall be 90% or more occupied on or before twelve (12) months after the Closing. Time is of the essence. Completion of the Project shall occur upon the issuance of a Certificate of Completion and the recordation of a Notice of Completion by the Borrower. Borrower shall provide the City with a copy of the recorded Notice of Completion for all units within the Project within five (5) days of Borrower's receipt of the same. G. The Project shall be rehabilitated in accordance with all applicable law, rules, regulations and conditions of approval from the U.S. Department of Housing & Urban Development ("HUD"), the City, the various lenders involved with the Project and the requirements of this Agreement. NOW, THEREFORE, in furtherance of the recitals stated above, the mutual covenants set forth below, the Parties agree, promise and declare as follows: DEFINITIONS The following terms shall have the meanings set forth below: "Affordable Units" shall have the meaning ascribed to it in Recital C. "Agreement" means this Acquisition. Rehabilitation and Permanent Financing Loan Agreement. "Borrower" means T & T Community Properties, LLC, a California limited liability company. Nothing contained herein shall prohibit Borrower from changing its name provided that there is no change in the composition and make up of Borrower, without the prior written consent of the City. "City" means the City of National City. 2 "City Loan" means the acquisition, rehabilitation and permanent financing loan from the City to Borrower in the original principal amount of Seven Hundred Seventeen Thousand Five Hundred and No/100 Dollars ($717,500.00). "City Note" means that certain promissory note to be executed by Borrower (concurrently with the Closing) in favor of the City evidencing the City Loan, in the form attached hereto as Exhibit "B". "Clearinghouse Loan" means the existing rehabilitation and permanent financing loan made by Clearinghouse CDFI to Borrower in the original principal amount of Five Hundred Sixty -Five Thousand and No/100 Dollars ($565,000.00) secured by the Property. "Closing" means the closing of the Escrow, which shall in no event be later than September 30, 2011. If Closing does not occur on or before September 30, 2011, then all rights and liabilities of the City and Borrower with respect to this Agreement shall immediately terminate. "Declaration' means the declaration of covenants, conditions and restrictions, in the form and format attached hereto as Exhibit "D", which shall be recorded as an encumbrance against the Property concurrently with the Closing. "Deed of Trust" means the deed of trust securing the Declaration and the City Loan, in the form and format attached hereto as Exhibit "C," which shall be recorded as an encumbrance against the Property concurrently with the Closing. "Defective Work" means all work, material, or equipment that is unsatisfactory, faulty, incomplete, or does not conform to industry standards, construction documents, or approved drawings. "Deferred Developer Fee" means Fifty -Seven Thousand and No/100 Dollars ($57,000.00) of the developer fee which is being deferred. "Environmental Laws" means any federal, state or local law, statute, ordinance or regulation pertaining to environmental regulation, contamination or cleanup of any Hazardous Materials, including, without limitation, (i) the California Hazardous Waste Control Act (California Health and Safety Code §25100 et seq.), (ii) the Carpenter -Presley -Tanner Hazardous Substance Account Act (California Health and Safety Code §25300 et seq.), (iii) the Hazardous Materials Release Response Plans and Inventory (California Health and Safety Code §25500 et seq.), (iv) Underground Storage of Hazardous Substances (California Health and Safety Code, §25280 et seq.), (v) Article 9 or Article 11 of Title 22 of the California Administrative Code, Division 4, Chapter 20, (vi) the Safe Drinking Water and Toxic Enforcement Act (California Health and Safety Code, §25249 et seq.), (vii) the Porter -cologne Water Quality Control Act (California Water Codc, §13000 et seq.), (viii) the Federal Water Pollution Control Act (33 U.S.C. §1271 et seq.), (ix) the Resource Conservation and Recovery Act (42 U.S.C. §6901 et seq.), (x) the Comprehensive Environmental Response, Compensation and Liability Act (42 3 U.S.C. §9601 et seq.), (xi) the Safe Drinking Water Act (14 U.S.C. §300f et seq.), (xii) the Hazardous Materials Transportation Act (49 U.S.C. §5101 et seq.), (xiii) the Toxic Substances Control Act (15 U.S.C. §2601 et seq.), (xiv) the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. §136, et seq.), (xv) the Clean Air Act, 42 U.S.C. (§7401 et seq.) or (xvi) any state or federal lien or "superlien" law, any environmental cleanup statute or regulation, or any permit, approval, authorization, license, variance or permission required by any governmental authority having jurisdiction. "Escrow" means the escrow depository and disbursement services to be performed by Escrow Agent pursuant to the provisions of this Agreement. "Escrow Agent" means First American Title Company located at 4380 La Jolla Village Drive, Suite 110, San Diego, CA 92122. "Hazardous Materials" means: (i) Those substances included within the definitions of "hazardous substance," "hazardous waste," "hazardous material," "toxic substance," "solid waste," "pollutant" or "contaminant" in the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C. §9601 et seq.); the Resource Conservation and Recovery Act (42 U.S.C. §6901 et seq.); the Clean Water Act (33 U.S.C. §2601 et seq.); the Toxic Substances Control Act (15 U.S.C. §9601 etseq.); the Hazardous Materials Transportation Act (49 U.S.C. §1801 etseq.); or under any other Environmental Laws; (ii) Those substances included within the definitions of "Extremely Hazardous Waste," -Hazardous Waste," or "Restricted Hazardous Waste," under §§25115, 25117 or 25122.7 of the California Health and Safety Code, or is listed or identified pursuant to §§25140 or 44321 of the California Health and Safety Code; (iii) Those substances included within the definitions of "Hazardous Material," "Hazardous Substance," "Hazardous Waste," "Toxic Air Contaminant" or "Medical Waste" under §§25281, 25316, 25501, 25501.1, 25023.2 or 39655 of the California Health and Safety Code; (iv) Those substances included within the definitions of "Oil" or a "Hazardous Substance" listed or identified pursuant to §311 of the Federal Water Pollution Control Act, 33 U.S.C. § 1321, as well as any other hydrocarbonic substance or by-product; (v) Those substances included within the definitions of "Hazardous Waste," Extremely Hazardous Waste" or an "Acutely Hazardous Waste" pursuant to Chapter 11 of Title 22 of the California Code of Regulations; (vi) Those substances listed by the State of California as a chemical known by the State to cause cancer or reproductive toxicity pursuant to §25249.9(a) of the California Health and Safety Code; 4 (vii) Any material which due to its characteristics or interaction with one or more other substances, chemical compounds, or mixtures, damages or threatens to damage, health, safety, or the environment, or is required by any law or public agency to be remediated, including remediation which such law or public agency requires in order for the property to he put to any lawful purpose; (viii) Any material whose presence would require remediation pursuant to the guidelines set forth in the State of California Leaking Underground Fuel Tank Field Manual, whether or not the presence of such material resulted from a leaking underground fuel tank; (ix) Pesticides regulated under the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. §136 et seq.; (x) Asbestos, PCBs, and other substances regulated under the Toxic Substances Control Act, 15 U.S.C. §2601 et seq.; (xi) Any radioactive material including, without limitation, any "source material," "special nuclear material," "by-product material," "low-level wastes," "high-level radioactive waste," "spent nuclear fuel" or "transuranic waste" and any other radioactive materials or radioactive wastes, however produced, regulated under the Atomic Energy Act, 42 U.S.C. §§2011 et seq., the Nuclear Waste Policy Act, 42 U.S.C. §§10101 et seq., or pursuant to the California Radiation Control Law, California Health and Safety Code § §25800 et seq.; (xii) Any material regulated under the Occupational Safety and Health Act, 29 U.S.C. §§651 et seq., or the California Occupational Safety and Health Act, California Labor Code §§6300 et seq.; (xiii) Any material regulated under the Clean Air Act, 42 U.S.C. §§7401 et seq. or pursuant to Division 26 of the California Health and Safety Code; (xiv) Those substances listed in the United States Department of Transportation Table (49 CFR Part 172.101), or by the Environmental Protection the City, or any successor agency, as hazardous substances (40 CFR Part 302); (xv) Other substances, materials, and wastes that are or become regulated or classified as hazardous or toxic under federal, state or local laws or regulations; and (xvi) Any material, waste or substance that is: (a) a petroleum or refined petroleum product; (b) asbestos; (c) polychlorinated biphenyl; 5 (d) designated as a hazardous substance pursuant to 33 U.S.C. §1321 or listed pursuant to 33 U.S.C. §1317; (e) a flammable explosive; or (f) a radioactive material. "HOME Affordable Units" means the seven (7) Affordable Units described in Recital E of this Agreement restricted under the HOME regulations. "Project" shall have the meaning ascribed to it in Recital C. "Property" shall have the meaning ascribed to it in Recital A. "Statement of Insurance Requirements" means the statement of insurance requirements, in the form and format attached hereto as Exhibit "E," which shall be executed and delivered by the Borrower and the City concurrently with the Closing as set forth in Section 1.7, below. "Security Agreement" means the security agreement in the form and format attached hereto as Exhibit "F," which shall be executed and delivered by the Borrower and the City concurrently with the Closing. "Unsecured Environmental Indemnity Agreement" means the unsecured environmental indemnity agreement, in the form and format attached hereto as Exhibit "G," which shall be executed and delivered by the Borrower and the City concurrently with the Closing. ARTICLE I Loan Provisions - General Section - 1.1 Acquisition, Rehabilitation and Permanent Financing Loan. The City will fund the City Loan to Borrower according to and upon the terms and conditions set forth below. The proceeds of the City Loan shall be used by Borrower solely for the purposes of acquiring, rehabilitating and permanently financing the Affordable Units, in accordance with all applicable HUD HOME regulations. (a) City Loan Amount. The amount of the City Loan shall not exceed Seven Hundred Seventeen Thousand Five Hundred and No/100 Dollars ($717,500.00). (b) Promissory Note. (1) The City Loan shall be evidenced by the City Note executed by Borrower, in favor of the City, in the original principal amount of Seven Hundred Seventeen Thousand Five Hundred and No/100 Dollars ($717,500.00). The City Loan and the City Note shall be fully to Borrower. 6 (2) The City Note shall bear simple interest at two percent (2.0%) per annum from the date of disbursement. (3) Interest shall accrue, however, no payments shall be due under the City Note until May 1, 2013. Beginning on May I, 2013, and annually on May 1 of each year during the term of the City Note, Borrower shall make payments to the City in the manner provided in the City Note, until fifty-five (55) years from the date of disbursement, at which time all principal and unpaid interest shall be due and payable. The principal and interest may be prepaid in whole or in part at any time and from time to time, without notice or penalty. Any prepayment shall be allocated first to unpaid interest and then to principal. Prepayment of the City Loan shall not in any manner affect any obligation or restriction related to maintaining the units as "Affordable Units" during the fifty-five (55) year term. (4) Should Borrower agree to or actually sell, convey, transfer, further encumber or dispose of the Property or any interest in it, without first obtaining the written consent of the holder of the City Note (i.e., the City), which consent shall be granted or withheld at the sole discretion of the holder of the City Note, then all obligations secured by the City Note may be declared due and payable at the option of the holder of the City Note. The consent to one transaction of this type will not constitute a waiver of the right to require consent to future or successive transactions. The resident tenant restrictions referenced in Section 1.5 of this Agreement shall remain in place whether or not the City approves or disapproves a successor -in - interest for the term of fifty-five (55) years from the date of completion of rehabilitation of the Project. (5) The parties acknowledge that the City Loan is not a purchase money mortgage as defined in Code of Civil Procedure Section 580b. Section 1.2 - Security. (a) Deed of Trust. Borrower shall execute, acknowledge, deliver and cause to be recorded at Closing, the Deed of Trust, as security for the City Loan and the Declaration, in a form and format set forth in Exhibit "C," attached to this Agreement and incorporated herein by this reference. A copy of this Agreement shall not be attached to and recorded as part of such Deed of Trust but any breach of or misrepresentation under this Agreement shall, upon the expiration of any applicable notice and cure period(s), constitute an event of default under such Deed of Trust. (b) Additional Security. Borrower shall execute and deliver to the City the Security Agreement, UCC-1 financing statements and such other separate consents or certificates, assignments and other documents or instruments as the City may require to properly reflect the security interests in the personalty used in connection with the operation of the Property as the City may require. In addition thereto, Borrower shall execute and deliver such security agreements, and the like, as required by the City in connection with the Deed of Trust. Specifically, Borrower agrees that any notice of default and/or copy of any notice of sale will be mailed to the City in compliance with Section 2924(b) of the California Civil Code. 7 Section 1.3 - Subsequent Financing. No further loan, deed of trust, or encumbrance, shall be placed by Borrower upon any portion of the Property or Project, whether by refinancing or otherwise, without first obtaining the express written consent of the City. Any such unconsented to financing or refinancing shall constitute a material beach of this Agreement. Further, during any the City approved refinancing or subsequent encumbrance, the City shall be provided ALTA title insurance or endorsements acceptable to the City, at the cost and expense of Borrower. Said written consent shall be at the City's sole discretion. Without the express written consent of the City such subsequent financing is void. Section 1.4 - Funding. The City's obligation to fund the City Loan shall be and is specifically conditioned upon Borrower closing on the Clearinghouse Loan, the City approving the preliminary title reports concerning the Property, payment of all taxes due and payable on the Property, issuance of an ALTA Lender's policy insuring the City Loan satisfactory to the City and its counsel, satisfaction of all conditions precedent to the City's obligation to fund the City Loan, and satisfaction of those conditions set forth in Section 1.16 of this Agreement. Section 1.5 - Declaration. The obligation of the City to make and fund the City Loan hereunder is subject to the execution and recordation against the Property of the Declaration. The Declaration shall contain housing payment and income level restrictions for the eight (8) Affordable Units for a period of fifty-five (55) years. Rents will provide affordable housing to households earning between fifty percent (50%) and eighty percent (80%) of area median income as referenced in the Declaration. The monthly rental rate shall be as set forth in the Declaration. The rents may be subject to modification annually as set forth in the Declaration. The Declaration shall be recorded in a position superior and prior to all encumbrances on the Property, except for the deed of trust and other instruments securing the Clearinghouse Loan. Section 1.6 - No Partnership or Joint Venture. The relationship between the City and Borrower created by this Agreement shall not be one of partnership or joint venture, but rather shall be one of secured lender and borrower. Section 1.7 - Insurance. Borrower, at its sole cost and expense, shall purchase and maintain public liability, auto liability and property damage insurance with limits of not less than $2,000,000.00 for injury to or death of one or more persons and/or property damage arising out of a single accident or occurrence, insuring against any and all liability of the City and its respective employees, Borrower, its contractors, employees, agents, subcontractors and its authorized representatives, arising out of or in connection with Borrower's activities under the Project. All public liability insurance and property damage insurance shall insure the performance of Borrower of the indemnity provisions set forth in this Agreement. Further, in all such insurance required to be purchased and maintained by Borrower: (i) the City shall be named as an additional insured, (ii) Borrower's coverage shall be primary, (iii) additional insured endorsement shall not exclude completed operations, (iv) the policy shall provide ten year extended reporting period, and (v) the policy shall contain cross -liability endorsements. Borrower further agrees to purchase and maintain in full force and effect such policies of worker's compensation insurance as may be required to cover all employees of Borrower during 8 the term of this Agreement, in a form and amount acceptable to the City. Further, Borrower shall maintain policies of insurance as referenced in the Statement of Insurance Requirements throughout the term of the City Loan and for the duration of the Declaration. Certificates of insurance acceptable to the City shall be filed with the City prior to funding of the City Loan. The insurance requirements contained in this section shall not be construed to limit the Borrower's obligations under this Agreement, including without limitation any indemnities. Section 1.8 - Assignability. (a) Borrower may not assign any interest in this Agreement and shall not transfer any interest in the same (whether by assignment or novation) without the prior written approval of the City. Any assignment without the prior written consent of the City shall be voidable, at the election of the City. The City shall have full right and authority to assign all or a part of its rights and delegate all or a part of its duties under this agreement. (b) Except to the extent that changes are permitted by Section 1.8(a) above, Borrower shall not amend or modify in any material respect or, restate, revoke or rescind its LLC-1 (Articles of Organization) or Operating Agreement without the prior written consent of the City, which consent shall not be unreasonably withheld, conditioned or delayed. Section 1.9 - General Contractor and Subcontracting. The guaranteed not to exceed construction contract(s), entered into by Borrower with the general contractor for the rehabilitation of the Project shall be entered into on or before the date first set forth above, and shall be subject to the prior written approval of the City. Borrower shall be fully responsible to the City for the acts and omissions of its subcontractors, and of persons either directly or indirectly employed by Borrower. Borrower shall insert in each subcontract appropriate provisions requiring compliance with the labor standard provisions of this Agreement, including without limitation the payment of Federal prevailing wages and State prevailing wages, if required. Notwithstanding the foregoing, the City has not imposed, and nothing in this agreement shall be construed as imposing, any independent prevailing wage requirements that are different from those imposed by applicable Federal or State law. Section 1.10 — Borrower Liability. Borrower shall be responsible for all injuries to persons and/or all damages to real or personal property of the City or others, caused by or resulting from the negligence and/or breach of this Agreement, of itself, its employees, subcontractors and/or its agents during the rehabilitation of or arising out of the rehabilitation of the Project and/or the breach of this Agreement. Borrower shall defend and hold harmless and indemnify the City, and all of its officers and employees from all costs, damages, judgments, expenses and claims to any third party resulting from the negligence and/or breach of this Agreement, by Borrower, its employees, subcontractors and/or its agents, arising out of the rehabilitation of the Project and/or the breach of this Agreement, except those arising from the sole negligence or willful misconduct of the City. Section 1.11 - Ownership of Materials and Documents. Any and all sketches, drawings, tracings, field survey notes, computations, plans, details and other materials and documents prepared by or 9 on behalf of Borrower pertaining to the Property shall be the property of the City upon default by Borrower (to the extent of Borrower's rights in such documents), and the expiration of all applicable cure period(s), and Borrower shall deliver such materials and documents to the City whenever requested to do so by the City. Subject to the rights of third parties that prepared such documents, the City shall have the right to have duplicate copies of such materials and documents for their file, at the cost and expense of the City, upon written request even if Borrower is not in default under the terms of this Agreement. Section 1.12 - Indemnification. (a) With respect to any liability, including but not limited to claims asserted, demands, causes of action, costs, expenses, losses, attorney fees, injuries, or payments for injury to any person or property, including injury to Borrower's employees, agents, or officer, caused or claimed to he caused by the acts or omissions of the Borrower, or the Borrower's employees, agents, and officers, arising out of, arising from, or related to the City Loan; the design, engineering, or rehabilitation of the Project; Borrower's ownership or operation of the Property and the Project; or any other work or obligations performed involving this Agreement, the Borrower agrees to defend, indemnify, protect, and hold harmless the City, their respective agents, officers, and employees from and against all liability, losses, damages, costs or claims, including, but not limited to, claims for injury or death to any person occurring on the Property and contracts executed by Borrower and any losses from the Property, including losses from negative cash flows. Also covered is liability arising from, connected with, caused hy, or claimed to be caused by the active or passive negligent acts or omissions of the City, its agents, officers, or employees that may be in combination with the active or passive negligent acts or omissions of the Borrower, its employees, agents or officers, or any third party. Borrower's duty to defend, indemnify, protect and hold harmless shall not include any claims or liabilities arising from the sole negligence or sole willful misconduct of the City, its agents, officers or employees. This indemnity provision shall survive the repayment of the City Loan and the term of this Agreement. (b) Borrower further agrees to defend, indemnify, and hold harmless, the City, their respective agents, officers and employees from and against any and all costs, damages, claims, and liabilities, including reasonable attorney fees, foreseeable or unforeseeable, directly or indirectly, arising from or related to Hazardous Materials located, used, released, or otherwise present or alleged to be present, used, or released on the Property, or any violation or alleged violation of Environmental Laws. This indemnity provision shall extend beyond the term of this Agreement and the termination of this Agreement. The City has no obligation or liability whatsoever regarding toxic contamination or Hazardous Materials on the Property. (c) The Borrower agrees to pay any and all costs the City incurs to enforce the indemnity and defense provisions set forth in Section 1.12. Section 1.13 - Termination. This Agreement and the relationship created herein shall terminate upon full satisfaction of all of Borrower's obligations, and those of Borrower's successors, if approved by the City, under this Agreement. The obligations of Borrower include, but are not 10 limited to, those obligations arising under the Declaration, the provisions of which shall survive repayment of the City Loan. Section 1.14 - Defective Work. (a) Correction, Removal, or Replacement. If during the term of this Agreement, or any duration as may be required by law or regulation, the Project are discovered to contain Defective Work, the Borrower shall promptly and in accordance with the City's written instructions and within the reasonable time limits stated therein, either correct the Defective Work, or if identified during rehabilitation of the Project, remove the Defective Work from the site and replace the Defective Work with non -defective and conforming work. (b) City Right to Correct. If circumstances warrant, including but not limited to an emergency or Borrower's failure to adhere to section 1.14(a), the City may correct, remove, or replace the Defective Work. In such circumstances, Borrower shall not recover costs associated with the Defective Work and shall reimburse the City for all costs incurred, whether direct or indirect, associated with the correction or removal and replacement. (c) No Limitation on Other Remedies. Exercise of the remedies for defects pursuant to this Section shall not limit the remedies the City may pursue under this Agreement or law. Section 1.15 - Default by Borrower. (a) In the event of a material default by Borrower in the performance of any of the terms, covenants and conditions contained in this Agreement, the City Note, the Decd of Trust, the Declaration, or the Security Agreement, the City shall give Borrower notice of such default. If the default is reasonably capable of being cured within thirty (30) calendar days after such notice is received or deemed received, Borrower shall have such period to effect a cure prior to exercise of remedies by the City under this Agreement, the Declaration and the Deed of Trust. If the default is such that it is not reasonably capable of being cured within thirty (30) days and Borrower, in the City's sole and absolute discretion, (i) initiates corrective action within said period, and (ii) diligently and in good faith works to effect a cure as soon as possible, then Borrower shall have such additional time (but not to exceed ninety (90) days) as is reasonably necessary to cure the default prior to exercise of any remedies by the City. if such default is not timely cured or in the event of any default under any prior or junior note secured by an encumbrance on the Property or any portion of it, or any note or deed of trust given in conjunction herewith, or in the event of the filing of a bankruptcy proceeding by or against Borrower, all sums disbursed or advanced by the City shall at the option of the City immediately become due and payable and the City shall have no obligation to disburse any further funds from said account, or otherwise, and the City shall be released from any and all obligations to Borrower under the terms of this Agreement. These remedies shall be in addition to any and all other rights and remedies available to the City, either at law or in equity. (b) If a non -monetary event of default occurs under the terms of this Agreement, the City Note, the Deed of Trust, the Declaration or the Security Agreement, prior to exercising any 11 remedies hereunder or thereunder, the City shall give Borrower notice of such default. If the default is reasonably capable of being cured within thirty (30) calendar days after such notice is received or deemed received, Borrower shall have such period to effect a cure prior to exercise of remedies by the City under this Agreement, the Declaration and the Deed of Trust. If the default is such that it is not reasonably capable of being cured within thirty (30) days and Borrower, in the City's sole and absolute discretion, (i) initiates corrective action within said period, and (ii) diligently and in good faith works to effect a cure as soon as possible, then Borrower shall have such additional time (but not to exceed ninety (90) days) as is reasonably necessary to cure the default prior to exercise of any remedies by the City. If such default is not timely cured, then the City may proceed with all or any of its rights and remedies available at law or in equity or as set forth herein, in the Declaration and/or the Deed of Trust. (c) In the event of any monetary default by Borrower under the terms of this Agreement, the City Note, the Deed of Trust, the Declaration or the Security Agreement. the City shall give Borrower a ten (10) day written notice of default, during which Borrower shall have the ability to cure the monetary default. If the default is not timely cured, the City may proceed with all rights and remedies under the terms of the City Loan or at law. (d) The default or defective performance by Borrower under the terms of this Agreement shall not relieve Borrower from any obligation to correct any incomplete, inaccurate, or Defective Work at no further cost to the City. Section 1.16 - Conditions to City Obligations. The obligation of the City to make and fund the City Loan is subject to the following conditions: (a) This Agreement, the City Note, Deed of Trust, Declaration, Escrow Instructions, Statement of Insurance Requirements, Security Agreement and Unsecured Environmental Indemnity Agreement, fully executed by Borrower, shall have been delivered to the City and/or its designee along with all other fully executed security documents and instruments provided for herein and/or as required by the City. Borrower has provided and delivered to the City at Borrower's sole expense a standard form ALTA Lender's Policy of Title Insurance, insuring the City's security interest in the Property under the Deed of Trust and in an amount equal to the original principal amount of the City Loan; (b) Borrower's certification at the close of escrow that: (i) the City Loan is wholly for the benefit of Borrower, (ii) Borrower is responsible for all obligations created by the City Loan including, without limitation, the repayment of all principal and interest now due and payable or which may become due and payable on the terms and conditions of this Agreement, the City Note, the Deed of Trust, and any other security documents and instruments provided for herein; (c) Borrower shall have strictly complied with, and performed, all terms and conditions of the documents executed by Borrower in connection with this Agreement and the City Loan; 12 (d) The City's approval of all financing documents, including without limitation the Clearinghouse Loan documents; (e) Borrower has paid an amount into escrow, which is sufficient to pay for all costs associated with such escrow, including without limitation title fees, escrow fees, closing costs and carrying costs and the City's legal fees; (f) Recordation of a grant deed vesting fee simple title to the Property in Borrower; (g) The guaranteed not to exceed construction contract for the work at the Project, acceptable to the City, shall have been executed by the Borrower and the general contractor who has been selected to do the work; and (h) Such other conditions as the City shall request. Section 1.17 - Borrower's Representations and Warranties. Borrower represents and warrants to the City as provided in this Section 1.17. Borrower shall, upon learning of any fact or condition, which would cause any warranties or representations herein not to be true in any material respect, immediately give written notice of such fact or condition to the City. (a) Borrower is a validly and lawfully formed California limited liability company, and is in good standing under California law and will remain such for the term of this Agreement. (b) Execution of this Agreement, the Deed of Trust, the Declaration and all other documents executed in conjunction herewith have been duly authorized by Borrower's board of directors, and such execution shall not result with the passage of time or the giving of notice or both in breach of or in acceleration of performance under any contract or document to which Borrower may be a party. (c) All required approvals have been obtained in connection with Borrower's execution of this Agreement, and all related agreements and documents to the effect that no breach of or acceleration of performance under any agreement or document to which Borrower is a party will result in such execution. (d) Funds advanced by the City pursuant to the City Loan are advanced wholly or in part for the benefit of Borrower. (e) The principal and interest due and payable under the City Loan are subject to the terms and conditions of this Agreement, any other security documents or instruments provided for herein. (f) Borrower agrees to use the City Loan funds solely for the acquisition, rehabilitation and permanent financing of the Project as set forth in the Recitals. 13 (g) Borrower shall comply with the terms of the Declaration at all times during the 55-year term of the Declaration. (h) Borrower shall at all times during the first 15 years of the term of the Declaration, comply with the HUD HOME regulations. (i) The defective performance by Borrower under the terms of this Agreement shall not relieve Borrower from any obligation to correct any incomplete, inaccurate, or defective work at no further cost to the City, when such inaccuracies, defects and incomplete work are due to Borrower's fault, including the fault of Borrower's subcontractors, agents, partners, joint venturers and employees. (j) To the best of Borrower's knowledge, there are no actions, suits, material claims, legal proceedings, or any other proceedings affecting the Borrower or any parties affiliated with the Borrower, at law or in equity before any court, tribunal, government agency, domestic or foreign, which, if adversely determined, would materially impair the right or ability of Borrower to execute or perform its obligations under this Agreement or any documents required hereby to be executed by Borrower, or which would materially adversely affect the financial condition of the Borrower or any parties affiliated with the Borrower. (k) To the best of Borrower's knowledge, Borrower's execution, delivery, and performance of its obligations under this Agreement will not constitute a default or breach or any contract, agreement, or order to which Borrower or any parties affiliated with Borrower is a party or by which it is bound. (1) No attachment, execution proceedings, assignments for the benefit of creditors, insolvency, bankruptcy, reorganization, receivership or other proceedings have been filed or are pending or threatened against the Borrower or any parties affiliated with Borrower, nor are any of such proceedings contemplated by Borrower or any parties affiliated with Borrower Section 1.18 Affordability Provision. (a) Execution of Declaration. Borrower agrees to execute the Declaration and to cause it to be recorded, assuring compliance with the affordability provisions of this Agreement. Borrower agrees to obtain any and all subordination agreements, if any, necessary to insure that the Declaration is an encumbrance on the Property prior to all other encumbrances and liens, other than taxes and the deed of trust and other documents securing the Clearinghouse Loan. Such subordinations shall be on terms and conditions acceptable to the City and its counsel in their sole discretions. The Declaration shall be binding and enforceable against all heirs, successors and assigns of Borrower. (b) Term of Affordability. Borrower agrees that the Property shall remain affordable and subject to the Declaration for not less than fifty-five (55) years from the effective date as referenced in the Declaration. 14 (c) Cross -Default With the Declaration. Borrower and its successors in interest to the Project and/or the Property shall strictly comply with all of the terms and conditions of the Declaration. Any default under the Declaration shall be a default under this Agreement, the City Note and the Deed of Trust. (d) No Conversion to Condominiums. Borrower agrees that Borrower shall not, and shall not allow any other person to, during the term of the Declaration, cause all or any portion of the Property and/or the Project to be converted to condominiums or to otherwise allow a condominium map or condominium plan to be recorded or filed against all or any portion of the Property and/or the Project. Borrower further agrees that the conversion of all or any portion of the Property or the Project to condominiums and/or the recordation or filing of a condominium map or condominium plan against all or any portion of the Property and/or the Project during the term of the Declaration, shall be a breach of this Agreement, the City Loan, the Declaration, the City Note and the Deed of Trust, entitling the City to immediately exercise any and all of its rights and remedies under this Agreement, the City Loan, the Declaration, the City Note and the Deed of Trust, including without limitation acceleration of the City Note and foreclosure under the Deed of Trust. Section 1.19 - City Approval of Property Manager. At all times during the term of the Declaration, if the City serves a thirty (30) day written notice of deficiencies in the property management for the Property, or default under the Declaration or any document executed in conjunction herewith, which deficiencies or default have not been rectified by Borrower, within the thirty (30) day period (unless such deficiency or default is not capable of being cured within such thirty (30) day period, then such amount of time as the City determines is needed, not to exceed ninety (90) days, provided Borrower commences cure within thirty (30) day period and continues to diligently pursue cure), then, the City shall have the right, but not the duty, in its sole discretion and upon such thirty (30) days written notice: (i) to require the retention of a professional property management firm to manage the Property; (ii) to approve, in advance and in writing, the retention of any such property management firm, including the terms of the contract governing such retention: and (iii) to require Borrower to terminate any such property management firm, provided that such termination shall comply with the termination provisions of the management contract in question. Borrower shall cooperate with the City to effectuate the City's rights. Section 1.20 - Usury. If a court of competent jurisdiction determines, by way of final unappealable order or judgment, that the interest rate charged under the City Note is usurious, then such rate shall automatically and retroactively be reduced to the maximum rate allowed under applicable law. Section 1.21 - Remedies. (a) Contract Governed by Laws of the State of California. This Agreement, its performance, and all suits and special proceedings under this Agreement, shall be constituted in accordance with the laws of the State of California and Federal law, to the extent applicable. In any action, special proceeding, or other proceeding that may be brought arising out of, under or 15 because of this Agreement, the laws of the State of California and the United States, to the extent applicable, shall govern to the exclusion of the law of any other forum, without regard to the jurisdiction in which the action or special proceeding may be instituted. (b) Standing, Equitable Remedies; Cumulative Remedies. Borrower expressly agrees and declares that the City or any successor or public agency shall be the proper party and shall have standing to initiate and pursue any and all actions or proceedings, at law or in equity, including but not limited to foreclosure under any security instrument securing performance hereunder, to enforce the provisions hereof and/or to recover damages for any default hereunder, notwithstanding the fact that such damages or the detriment arising from such a default may have actually been suffered by some other person or by the public at large. Further, Borrower expressly agrees that receivership, injunctive relief and specific performance are proper pre-trial and/or post -trial remedies hereunder, and that, upon any default, a receiver may be appointed by the court to take control of the Property and to assure compliance with this Agreement. Nothing in this subparagraph, and no recovery to the City, shall restrict or limit the rights or remedies of persons or entities other than the City, against Borrower in connection with the same or related acts by Borrower. The remedies set forth in this Section are cumulative and not mutually exclusive, except the extent that their award is specifically determined to be duplicative by final order of a court of competent jurisdiction. (c) Remedies at Law for Breach of Operating Restrictions. In the event of any default under this Agreement regarding restrictions on the operation and the transfer of the Property, the City shall be entitled to, in addition to any and all other remedies available at law or in equity: (i) declare the City Loan to be all due and payable; and (ii) recover compensatory damages. If the default in question involves the violation of Section 1.18, above, including without limitation a default under the Declaration, the amount of such compensatory damages shall be the product of multiplying (A) the number of months that the default in question has continued until the time of trial by (B) the result of subtracting the rents properly chargeable hereunder for the Affordable Unit(s) in question from the amount actually charged. Borrower and the City agree that it would be extremely difficult or impracticable to ascertain the precise amount of actual damages accruing to the City as a result of such a default and that the foregoing formula is a fair and reasonable method of approximating such damages. The City shall be entitled to seek and to recover damages in separate actions for successive, separate breaches which may occur. Further, interest shall accrue on the amount of such damages from the date of the breach in question at the rate of ten percent (10%) per annum or the maximum rate than allowed by law, whichever is less. Nothing in this section shall preclude the award of exemplary damages as allowed by law. (d) Expert Witness, Attorneys' Fees, and Costs. The parties agree that the prevailing party in litigation for the breach and/or interpretation and/or enforcement of the terms of this Agreement shall be entitled to their expert witness fees, if any, as part of their costs of suit, and attorneys' fees as may be awarded by the court, pursuant to California Code of Civil Procedure ("CCP") Section 1033.5 and any other applicable provisions of California law, including, without limitation, the provisions of CCP Section 998. 16 Section 1.22 — No Management Fee or Developer Fee. No management fee or developer fee concerning the Project shall be paid to Borrower or its affiliates until ninety percent (90%) of the Affordable Units have been leased. The amount of management fees shall be subject to the annual approval of the City. Section 1.23 - Replacement Reserves. Borrower shall, during the time of the term of the Declaration, maintain operating and replacement reserves approved by the City. Failure to maintain such reserves shall constitute a material default under the terms of this Agreement. Annually, beginning with the first year after the timely completion of rehabilitation of the Project and each year thereafter, not less than Three Thousand Four Hundred and No/100 Dollars ($3,400.00) set aside as a reserve for replacements (1/12`h of the foregoing amount may be set aside by Borrower each month). This replacement reserve amount is subject to revision upward as determined by the City, annually, based upon an increase in the consumer price index for the San Diego Metropolitan Area. The reserves shall be maintained in a separate account in anticipation of and as a contingency against unbudgeted and/or unforeseen expenses in the operation and maintenance of the Project. No disbursements from the operating reserve or replacement account(s) shall be made without the express written consent of the City, which consent shall not be unreasonably withheld or delayed. Borrower shall account to the City for any monies expended from the operating reserves and/or replacement account(s), in such form as approved by the City. Section 1.24 - Completion of Rehabilitation. All rehabilitation of the Project, as approved by the City pursuant to Section 2.1(d), hereof, and shall be completed by Borrower on or before August 31, 2012. Time is of the essence. Failure to comply with these requirements shall constitute a material default under the terms of this Agreement. Borrower shall provide the City with a copy of the recorded Notice of Completion for all units within the Project within five (5) days of Borrower's receipt of the same. Section 1.25 - Failure to Receive Funding. The failure of Borrower to close on the Clearinghouse Loan on or before the Closing, shall constitute a material default under the terms of the Agreement. Section 1.26 - Funding Mechanism. The Seven Hundred Seventeen Thousand Five Hundred and No/100 Dollars ($717,500.00) the City Loan shall be disbursed as set forth in this Section 1.26. (a) Disbursement at Closing. At Closing, the City shall disburse the amount set -forth in a City approved estimated settlement statement, such amount shall be used solely to acquire the Property. (b) Submission of Draw Requests. During rehabilitation of the Project, Borrower shall submit to the City written draw requests supported by such back up documentation as the City requires. (c) Approval of Draw Requests. The City shall inspect the work to determine its completion and shall thereafter approve, approve in part, or disapprove such draw request. 17 (d) Limit on Effect of Approval. Any the City review and/or approval of the work and disbursements of monies pursuant to draw requests shall be general review and/or approval only, and shall not relieve Borrower of the responsibility to design, engineer, and rehabilitate the Project in accordance with all applicable laws, codes, regulations, and good design, construction, and engineering practice. Any deficiencies or defects shall be corrected at Borrower's cost and expense and without any cost to the City. (e) Disbursements Conditioned on Lien Releases. Disbursements of approved draws shall be conditioned upon the City's receipt of evidence of conditional lien releases. (f) Final Disbursement. At the sole and absolute discretion of the City, up to $25,000.00 may be withheld and not be funded, regardless of expenditures and draw requests, unless and until a rehabilitation of the units has been completed. ARTICLE II Specific Loan Provisions Section 2.1 - Conditions to the City Obligations and Borrower Representations and Warranties. (a) Interest of Current or Former Members, Officers or Employees. Borrower represents and warrants that no member, officer, or employee of Borrower, no member of the governing body of the locality in which the City was activated, and no other public official of such locality or localities who exercises any functions or responsibilities with respect to this Agreement, shall, during his or her tenure, or for one year thereafter, have any interest direct or indirect, in this Agreement or the proceeds thereof. Any violation of this section may, at the option of the City, result in unilateral and immediate termination of this Agreement by the City. Further, the contractor, who rehabilitates the Project, agrees to comply with all of the Conflict of Interest provisions contained in 24 CFR 92.356. (b) Unsecured Environmental Indemnity. Concurrently with Closing, the Borrower and the City shall enter into the Unsecured Environmental Indemnity Agreement. Borrower shall name the City as an additional insured on its insurance policies. Said policies shall be acceptable to the City and shall insure against any and all losses which may occur as a result of problems, claims, work, and the like associated with rehabilitation of the Project. (c) Title Policy. Borrower, shall, at its sole cost and expense, obtain an ALTA lender's policy naming the City as a named insured, and insuring that the City's interest is subject to no superior liens, encumbrances, special assessments or taxes, except as provided for in the Recitals and except as approved by the City. (d) Construction Loan and Contract. The City shall be entitled to review, inspect and approve, without liability, the construction contract and all of the rehabilitation being performed pursuant to the terns of the construction contract. All rehabilitation shall be performed in 18 accordance with the plans and specifications approved by the City in accordance with Section 2.2 of this Agreement, without liability to the City for review and observation of the rehabilitation. The City approval shall be understood to be general approval only, and shall not relieve Borrower or contractor of the responsibility to design, engineer, and rehabilitation of the Project in accordance with all applicable laws, codes, regulations, and good design, construction, and engineering practice. Any deficiencies in rehabilitation of the Project shall be corrected by the contractor, and/or Borrower, upon written notice from the City to Borrower, prior to any additional funding of the City Loan, at Borrower's expense and at no cost to the City. (e) Housing Quality Standards. Borrower represents and warrants that Affordable Units shall be maintained, at all times during the term of the Agreement, in complete compliance with all housing quality standards contained within 24 CFR §92.251, regardless of whether such section would apply to the Property. Further, Borrower warrants that all construction shall meet or exceed the applicable local codes and construction standards, including zoning and building codes of the City as well as the provisions of the Model Energy Code published by the Council of American Building Officials. Borrower hereby consents to periodic inspection by the City's designated inspectors and/or designees during regular business hours, including the Code Enforcement Agents of the City, to assure compliance with said zoning, building codes, regulations, and housing quality standards. Borrower agrees to comply with the provisions of 24 CFR §92.251, whether or not contained in this Section. (f) Limitation of Use of Funds for Religious Purposes. Borrower represents and warrants that Borrower will fully comply with any and all requirements and limitations contained in 24 CFR 92.257, as amended, from time to time. Borrower further represents, warrants and agrees that Project funds will not be used for any purpose proscribed in 24 CFR 92.257, as amended. (g) Approval of the City Disclosure Statement. This Agreement is subject to approval by the City of the executed disclosure statements of Borrower. (h) Administrative Requirements. Borrower shall strictly comply with the administrative requirements that are applicable to Borrower contained within 24 CFR Section 92.505, including, but not limited to, the requirements of OMB Circular No. A-87 and the requirements of 24 CFR Part 85, Section 85.6, 85.12, 85.20, 85.22, 85.26, 85.35, 85.36, 85.44, 85.51, and 85.52. Further, Borrower covenants (if it is a nonprofit organization) to comply with the OMB Circular No. A-122 and the applicable provisions of OMB Circular No. A-110. Copies of said OMB Circulars are on file in the offices of the City and are available for inspection and copying by Borrower. Borrower further agrees that should the administrative requirements contained in Section 92.505 be amended and/or changed from time to time by HUD, that Borrower will comply with the terms and conditions of such changed and/or amended administrative requirements. (i) Records and Reports. Each year during the term of the Declaration, Borrower shall supply the City with: (i) a certified rent roll on January 15 for all tenants occupying the Affordable Units as of the immediately preceding December 31; and (ii) a certified rent roll on 19 July 15 for all tenants occupying the Affordable Units as of the immediately preceding June 30. Borrower shall supply the City, annually (after completion of rehabilitation of the Project) not later than July 1, for the immediately preceding calendar year, with such records and reports as are required and are requested by the City. The records and reports include, but are not limited to the following: (1) (2) (3) (4) (5) (6) (7) (8) (9) Amount of funds expended pursuant to this Agreement; Eligible Tenant information, including yearly income verifications; Housing payments charged to resident tenants, to the extent applicable; On -site inspection results; Affirmative marketing records; Insurance policies and notices; Equal Employment Opportunity and Fair Housing records; Labor costs and records; An audited income and expense statement and balance sheets for Borrower; (10) An audited income and expense statement and balance sheets for the Project; (11) A Management Plan for the calendar year in which the report is prepared showing anticipated rental income, other income, expenses, anticipated repairs and replacements to the Project, timing of such repairs and replacements, insurance maintained with respect to the Project, and such other matters as the City shall require, in its sole discretion; (12) Federal and State income tax returns for the calendar year, ending on the preceding December 31 st; (13) Annual analysis of reserves for repair and replacement; (14) Annual certification and representation regarding status of all loans, encumbrances and taxes; (15) Annual statement regarding condition of the Property and disclosing any known defects; 20 (16) An OMB A-133 financial audit if required by HUD; (17) A report or reports, certifying compliance with the terms and provisions of the Section 3 requirements, as set forth in Paragraph 2.1(t) of this Agreement and certifying compliance with the provisions of federal law as it relates to Section 3, whether or not specifically set forth in Paragraph 2.1 (t); and (18) Such other and further information and records as the City and/or HUD shall request in writing from Borrower. Time is of the essence in supplying each and every report required to be supplied to the City. The parties agree that a fee of $25.00 per day shall be paid by Borrower to the City for each day that each report is delinquent. The parties agree that multiple fees may be charged at any one time, depending upon the number of report(s) and/or information that is delinquent. The parties agree that a fee of $25.00 per day, per report and/or information is a reasonable estimation of the damages that will accrue to the City as a result of the failure of Borrower to timely submit the required information and/or reports and that said fees shall be treated as liquidated damages by the parties, in anticipation of the damages that will be incurred by the City as a result of a breach by Borrower. The parties further agree that it would be difficult, if not impossible, to determine the exact actual amount of damages suffered by the City in the event of a breach by Borrower in the reporting requirements of this Agreement. Notwithstanding the foregoing or anything to the contrary contained herein, the City shall give Borrower prior written notice of any report and/or information that Borrower has failed to provide the City pursuant to this Section 2.1(i) and Borrower shall have thirty (30) days to provide such report and/or information to the City prior to the assessment of any liquidated damages. (j) Monitoring of Project Activities. Borrower agrees to allow the City reasonable access to review and inspect Borrower's activities under this Agreement as the City shall require to perform its monitoring duties. The City shall monitor Borrower's activities without liability for said inspection and review. (k) Federal and State Requirements. Borrower represents, warrants and agrees that Borrower will fully comply, during the term of this Agreement, with any and all HOME requirements including, but not limited to the requirements of 24 CFR Part 92, 24 CFR Section 92.351 (Affirmative Marketing), 92.352 (Environmental Review), 92.353 (Displacement, Relocation and Acquisition Residential, Antidisplacement and Relocation Plan), 92.354 (Labor), 92.356 (Conflict of Interest) and 92.358 (Flood Insurance). Borrower further warrants, represents and agrees that should said Program requirements be changed by HUD, from time to time, that Borrower will comply with said changed and amended regulations. Borrower, the general contractor, and any and all subcontractors, shall pay prevailing wages for all work done with respect to the Project as required by Federal and California law. Notwithstanding the foregoing, the City has not imposed, and nothing in this agreement shall be construed as imposing, any independent prevailing wage requirements that are different from those imposed by applicable Federal or State law. 21 (1) Affirmative Marketing. Borrower shall, at all times during the term of this Agreement, comply with all of the provisions of Section 24 CFR 92.351 and the affirmative marketing procedures adopted by the City, including, but not limited to, all requirements and procedures referenced in said Section 24 CFR 92.351(h), amended from time to time. Borrower shall maintain records to verify compliance with the applicable affirmative marketing procedures and compliance. Such records are subject to inspection by the City during regular business hours upon five (5) days written notice. (m) Equal Opportunity and Fair Housing Programs. During the term of this Agreement, Borrower agrees as follows: (1) Borrower will not discriminate against any employee, person, or applicant for employment and/or housing because of race, age, sexual orientation, marital status, color, religion, sex, handicap, or national origin. Borrower will take affirmative action to ensure that applicants are employed and/or are housed, and that employees or applicants are treated during employment and/or housing, without regard to their race, age, sexual orientation, marital status, color, religion, sex, handicap, or national origin. Such action shall include, but is not limited to the following: employment, upgrading, demotion, or termination; rates of pay or other forms of compensation; and selection for training, including apprenticeship. Borrower agrees to post in conspicuous places, available to employees and applicants for employment, notices to be provided by the City setting forth the provisions of this nondiscrimination clause. (2) Borrower will, in all solicitations or advertisements for employees and housing placed by on or behalf of Borrower, state that all qualified applicants will receive consideration for employment without regard to race, age, sexual orientation, marital status, color, religion, sex, handicap, or national origin. (3) Borrower will cause the foregoing provisions to be inserted in all subcontracts for any work covered by this Agreement so that such provisions will be binding upon each subcontractor, provided that the foregoing provision shall not apply to contracts or subcontracts for standard commercial supplies of raw materials. (4) Borrower hereby agrees to comply with the Title VII of the Civil Rights Act of 1964, as amended, the California Fair Employment Practices Act, and any other applicable Federal and State laws and regulations. The City will provide technical assistance and copies of the referenced programs upon request. 24 CFR Section 92.350. (5) All activities carried out by Borrower and/or agents of Borrower shall be in accordance with the requirements of the Federal Fair Housing Act. The Fair Housing Amendments Act of 1988 became effective on March 12, 1989. The Fair Housing Amendments Act of 1988 and Title VIII of the Civil Rights Act of 1968, taken together, constitute The Fair Housing Act. The Act provides protection against the following discriminatory housing practices if they are based on race, sex, religion, color, handicap, familial status, or national origin: denying or refusing to rent housing, denying or refusing to sell housing, treating 22 differently applicants for housing, treating residents differently in connection with terms and conditions, advertising a discriminatory housing preference or limitation, providing false information about the availability of housing, harassing, coercing or intimidating people from enjoying or exercising their rights under the Act, blockbusting for profit, persuading owner to sell or rent housing by telling them that people of a particular race, religion, etc. are moving into the neighborhood, imposing different terms for loans for purchasing, constructing, improving, repairing, or maintaining a home, or loans secured by housing; denying use or participation in real estate services, e.g., brokers' organizations, multiple listing services, etc. The Fair Housing Act gives HUD the authority to hold administrative hearings unless one of the parties elects to have the case heard in U.S. District Court and to issue subpoenas. Both civil and criminal penalties are provided. The Act also provides protection for people with disabilities. The following State of California Laws also govern housing discrimination: Fair Employment and Housing Act, Unruh Civil Rights Act of 1959, Ralph Civil Rights Act of 1976, and Civil Code Section 54.1. (n) Labor Requirements. Borrower represents and warrants that during the term of this Agreement that Borrower will comply with each and every provision and requirement contained within CFR 92.354, as amended from time to time, to the extent applicable, and will pay not less than the wages prevailing in the locality, as predetermined by the Secretary of Labor pursuant to the Davis -Bacon Act (40 U.S.C. 276a-276a-5), to all laborers and mechanics employed in the development of any part of the Project in accordance with the terms and provisions of CFR 92.354 and will comply with the overtime provisions, as applicable, of the Contract Work Hours and Safety Standards Act (40 U.S.C. 327-332). Prevailing wages need not be paid to "Volunteers" or for "Sweat Equity" as defined in 24 CFR 92.354(b) and (c). Furthermore, Borrower, the general contractor, and any and all subcontractors, shall pay prevailing wages for all work done with respect to the Project as required by Federal and California law. (o) Lead Based Paint. Borrower represents and warrants that during the term of the Agreement that Borrower will comply with each and every provision and requirement contained within CFR 92.355, as amended from time to time, to the extent applicable. (p) Certification Concerning Debarment and Suspension. Borrower represents, warrants and hereby certifies, pursuant to 24 CFR 92.357, that Borrower will not use a contractor that has been debarred and or suspended, nor that is proposed for debarment, declared ineligible or voluntarily excluded from participation in the Project, which is the subject matter of this Agreement. Borrower agrees to execute such further certification(s) required by the City and/or HUD including, if necessary, that certification included as Appendix B of CFR Part 24, to verify the certification made in this Section 2.1(p). (q) Flood Insurance. Borrower represents, warrants, and certifies, pursuant to 24 CFR 92.358, that no Real Property which is the subject of this Agreement, is located within a 23 Flood Plain or Flood Hazard Zone or Area, as indicated on a FEMA Map; or that the Real Property is located within a community participating in the National Flood Insurance Program and Borrower agrees to purchase and maintain flood insurance for the duration of the terns of this Agreement concerning such Real Property. (r) Fire Protection and Safety. Borrower represents and warrants that Borrower will comply with all requirements and regulations of the Fire Administration Act of 1992 and the Federal Fire and Prevention Control Act. Borrower will use and install all fire and safety related equipment pursuant to the National Fire Protection Association standards. (s) Accessibility Standards. Borrower represents and warrants that Borrower will comply with all federal, state and local requirements and regulations concerning access to the units by the disabled and handicapped persons, including, but not limited to, those requirements of the HOME Program. (t) Section 3 Requirements. Borrower shall comply with the following requirements during the term of the City Loan: (i) The work to be performed under this Agreement is subject to the requirements of section 3 of the Housing and Urban Development Act of 1968, as amended, 12 U.S.C. §1701u (section 3). The purpose of section 3 is to ensure that employment and other economic opportunities generated by HUD assistance or HUD -assisted projects covered by section 3, shall, to the greatest extent feasible, be directed to low- and very low-income persons, particularly persons who are recipients of HUD assistance for housing. (ii) The parties to this Agreement agree to comply with HUD's regulations in 24 CFR part 135, which implement section 3. As evidenced by their execution of this Agreement, the parties to this Agreement certify that they are under no contractual or other impediment that would prevent them from complying with the part 135 regulations. (iii) Borrower agrees to send to each labor organization or representative of workers with which Borrower has a collective bargaining agreement or other understanding, if any, a notice advising the labor organization or workers' representative of Borrower's commitments under this section 3 clause, and will post copies of the notice in conspicuous places at the work site where both employees and applicants for training and employment positions can see the notice. The notice shall describe the section 3 preference, shall set forth minimum number and job titles subject to hire, availability of apprenticeship and training positions, and qualifications for each; and the name and location of the person(s) taking applications for each of the positions; and the anticipated date the work shall begin. (iv) Borrower agrees to include this section 3 clause in every subcontract subject to compliance with regulations in 24 CFR part 135, and agrees to take appropriate action, as provided in an applicable provision of the subcontract or in this section 3 clause, upon a finding that the subcontractor is in violation of the regulations in 24 CFR part 135. Borrower 24 will not subcontract with any subcontractor where Borrower has notice or knowledge that the subcontractor has been found in violation of the regulations in 24 CFR part 135. (v) Borrower will certify that any vacant employment positions, including training positions, that are filled (1) after Borrower is selected but before the contract is executed, and (2) with persons other than those to whom the regulations of 24 CFR part 135 require employment opportunities to be directed, were not filled to circumvent Borrower's obligations under 24 CFR part 135. (vi) Noncompliance with HUD's regulations in 24 CFR part 135 may result in sanctions, termination of this Agreement for default, and debarment or suspension from future HUD assisted contracts. (u) Drug Free Workplace. Borrower shall comply with all applicable State and Federal rules, laws and regulations to ensure a drug free workplace at all times during the term of this Agreement. Further, Borrower shall incorporate such federal provisions as are required in each contract or subcontract that Borrower enters into in connection with the Project. (v) Lobbying Prohibition. Borrower hereby certifies to the City, under penalty of perjury, under the terms of applicable federal law, that at all applicable times before, during and after the term of the Agreement, that: (i) No Federal appropriated funds have been paid or will be paid, by or on behalf of Borrower, to any person for influencing or attempting to influence an officer or employee of Congress, or an employee of a Member of Congress in connection with the awarding of any Federal contract, the making of any Federal grant, the making of any Federal loan, the entering into of any cooperative agreement, and the extension, continuation, renewal, amendment, or modification of any Federal contract, grant, loan or cooperative agreement; (ii) If any funds other than Federal appropriated funds have been paid to any person for influencing or attempting to influence an officer or employee of any agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection with this Federal contract, grant, loan or cooperative agreement, Borrower will complete and submit Standard Form-LLL, "Disclosure Form to Report Lobbying," in accordance with its instructions; (iii) Borrower will require that the above stated language be included in the award documents for all subawards at all tiers, including subcontracts, subgrants, loans, contracts, and cooperative agreements concerning the subject matter of this Agreement; and (iv) Further, Borrower and all subrecipients, at all times, shall certify compliance with the provisions of 31 U.S.C. §1352 and any and all terms and conditions of the Byrd Anti -Lobbying Amendment, as amended from time to time. 25 Section 2.2 - Commencement of Rehabilitation and Compliance with Plans and Specifications. (a) Completion Deadline. Borrower shall continue rehabilitation of the Project diligently and without delay, in a good and workmanlike manner. Borrower will complete rehabilitation of the Project in accordance with the plans and specifications approved by the City ("Plans and Specifications"), including any additional specifications prescribed by the City, and in compliance with all requirements of governmental authorities having or asserting jurisdiction. Rehabilitation of the Project shall be completed on or before August 31, 2012, as referenced in Section 1.24 of this Agreement. (b) No Material Changes. No material change shall be made in the plans and specifications approved by the City, including any additional specifications prescribed by the City, without its written consent. For purposes of this Section, "material change" means changes which, in aggregate, increases or decreases the rehabilitation costs by Ten Thousand Dollars ($10,000.00) or more or affect the Project quality or safety established during the City review and approval process. Notwithstanding the foregoing, no changes to the budget, which in the aggregate exceed One Hundred Thousand Dollars ($100,000.00), regardless of any increase of decrease in the overall rehabilitation costs, may be made without the written consent and approval of the City. (c) Submission of Documents Related to Changes. Borrower shall submit any proposed change to the Plans and Specifications to the City at least ten (10) days prior to the commencement of construction relating to such proposed change whether or not such change is subject to the City's consent. Requests for any change that requires consent shall be accompanied by working drawings and a written description of the proposed change, submitted on a change order form acceptable to the City, signed by Borrower and, if required by the City, also signed by the architect and the contractor. Section 2.3 - No Purchase Under Conditional Sales Agreements, Etc. Except for leased laundry equipment, no supplies, materials, equipment, fixtures, carpets, appliances, or any part of said improvements shall be purchased or installed under any conditional sales agreement, lease or under any other arrangement wherein the right is reserved or accrues to anyone to remove or to repossess any such items. It is expressly agreed that all such items shall be part of the Property. Section 2.4 - Security Agreement. Borrower hereby grants to the City a security interest in all supplies, materials, fixtures, carpets, appliances, furniture or equipment now or hereafter located on said Property, together with all proceeds thereof, including insurance proceeds paid or payable as the result of any loss, injury or damage of the foregoing collateral, whether or not the City is named beneficiary under any such insurance. Upon request, from time to time, Borrower will furnish the City with an inventory of such collateral. Nothing contained in this Section 2.4 shall affect the provisions of Section 2.5. Section 2.5 - Stoppage of Work by the City. The City or its agents shall have the right to enter upon the Property and the Project during the period of rehabilitation of the Project. If in the 26 opinion of the City, the rehabilitation is not in material conformance with the plans and specifications, the City shall have the right to order the replacement of any unsatisfactory work theretofore incorporated into rehabilitation of the Project, and to withhold all disbursements from the accounts until it is satisfied with the work. If the work is not made satisfactory to the City, in its sole discretion, within fifteen (15) calendar days from the date of stoppage by the City, such shall constitute a default hereunder. If any unsatisfactory work is such that it is not reasonably capable of being cured within fifteen (15) calendar days and Borrower, in the City's sole discretion, (i) initiates corrective action within said period, and (ii) diligently and in good faith works to correct the unsatisfactory work as soon as possible, then Borrower shall have such additional time as the City determines, in its sole discretion, is reasonably necessary to cure the unsatisfactory work prior to exercise of any remedies by the City. Section 2.6 - Cessation of Work, Completion by the City. Should the work of rehabilitating of the Project cease, and continues for a period of thirty (30) consecutive days, or should said work for any reason whatsoever not progress continuously in a manner satisfactory to the City, in its sole discretion, then the City may, at its option and without notice, declare Borrower to be in default hereunder, and the City may thereupon, should it so elect, take possession of said property and let contracts for the completion of rehabilitation of the Project and pay the cost thereof, plus a fee of fifteen percent (15%) for supervision of construction, disbursing all or any part of the loan for such purposes; and should the cost of completing rehabilitation of the Project plus such fee exceed the undisbursed balance of the loan, then the amount of such excess may be expended by the City, in which event such amount shall be considered an additional loan to Borrower, and the repayment thereof, together with interest thereon at the rate provided in the City Note, shall be secured by the Deed of Trust and shall be repaid within ten (10) days after the completion of rehabilitation of the Project, and Borrower agrees to pay the same; Borrower further authorizes the City at its option at any time, upon a default by any contractor under any contract in connection with rehabilitation of the Project which is not cured within ten (10) days following notice to Borrower, either in its own name or in the name of Borrower, to do any act or thing necessary or expedient in the opinion of the City to .secure the performance of construction contracts and assure the completion of rehabilitation of the Project substantially in accordance with the plans and specifications, disbursing all or any part of the loan funds for such purposes. In addition to the specific rights and remedies hereinabove mentioned, the City shall have the right to avail itself of any other rights or remedies to which it may he entitled under any existing law or laws. Section 2.7 - Mechanic's Liens and Notices to Withhold. Borrower shall use its best efforts to prevent any lien or stop notice from being place on the Property or Project. If a claim of lien or stop work notice is given or recorded affecting the Property or Project, the Borrower shall within ten (10) calendar days of such recording or service: (i) pay and discharge same; (ii) effect a release thereof by recording and delivering to the City a surety bond in sufficient form and amount; or (iii) provide the City with indemnification from a title insurance company reasonably acceptable to the City against such lien or other assurance which the City, in its sole discretion, deems to be satisfactory for the payment of such lien or stop notice and for the full and continuous protection of the City from the effect of such lien or notice. In the event of the filing with the City of a notice to withhold or the recording of a mechanic's lien pursuant to Division 3, 27 Part 4, Title 15 of the Civil Code of the State of California, the City may summarily refuse to honor any requests for payment pursuant to this Agreement. In the event Borrower fails to furnish the City with a bond causing such notice or lien to be released (or alternatively issuance of a title policy or endorsement in the full amount of the City Loan, which title policy or endorsement excludes such lien as an exception to title) within thirty (30) days after the filing or recording thereof, such failure shall at the option of the City constitute a default under the terms of this Agreement. Section 2.8 - Involvement of the City in Legal Proceedings. The City shall have the right to commence, to appear in, or to defend any action or proceeding purporting to affect the rights or duties of the parties hereunder or the payment of any funds in connection with this the City Loan and to pay out of funds not yet disbursed, necessary expenses, employ counsel and pay its fees, all of which the undersigned, jointly and severally, agree to repay to the City upon demand. Provided, however, such costs and expenses shall not be due and owing to the City, if they are incurred as a result of the breach of the Agreement by the City or its negligence or willful misconduct. Section 2.9 - Books and Records. Borrower shall require that the general contractor maintain complete and accurate books and records showing all of the income and disbursements made in connection with the rehabilitation of the Project and such books and records shall be available for inspection and copy by the City upon request and during regular business hours. Section 2.10 - Waiver and Amendment. No provision of this Agreement, or breach of any provision, can be waived except in writing. Waiver of any provision or breach shall not be deemed to be a waiver of any other provision, or of any subsequent breach of the same or other provision. Except as otherwise provided herein, this Agreement may be amended, modified or rescinded only in writing signed by Borrower and the Executive Director of the City. ARTICLE III Miscellaneous Provisions Section 3.1 - Governmental Requirements Superior. All provisions of this Agreement and all the other documents relating to the City Loan shall be subject and subordinate to any and all applicable federal, state and local statutes, regulations and ordinances and shall be subject to modification to comply therewith. Section 3.2 - Notices. All notices under this Agreement shall be in writing and sent by (a) certified or registered mail, return receipt requested, in which case notice shall be deemed delivered seven (7) business days after deposit, postage prepaid in the United States Mail, (b) by a nationally recognized overnight courier such as UPS Overnight or Federal Express, in which case notice shall be deemed delivered one (1) business day after deposit with that courier, or (c) by personal delivery, in which case notice shall be deemed delivered upon the actual date of delivery. All notices shall be delivered to the following addresses, provided, however the addresses may be changed by any party by written notice to all other parties. 28 City: Borrower: City of National City 1243 National City Boulevard National City, CA 91950-4397 T & T Community Properties, LLC 760 Arroyo Court Chula Vista, CA 91910 Section 3.3 - Severability. If any provision of this Agreement is deemed to be invalid or unenforceable by a court of competent jurisdiction, that provision shall be severed from the rest of this Agreement and the remaining provisions shall continue in full force and effect. Section 3.4 - Nonwaiver of the City's Rights. No right, remedy, or power of the City in this Agreement shall be deemed to have been waived by any act or conduct on the part of the City or by any failure to exercise or delay in exercising such right, remedy, or power. Every such right, remedy or power of the City shall continue in full force and effect until specifically waived or released by an instrument in writing executed by the City. Section 3.5 - Entire Agreement. This Agreement contains the entire understanding between the Parties concerning the subject matter contained herein. There are no representations, agreements, arrangements or understandings, oral or written, between or among the parties hereto, relating to the subject matter of this Agreement, which are not fully expressed and/or referred to herein. Section 3.6 - Exhibits and Recitals Incorporated. All exhibits referred to in this Agreement are hereby incorporated in this Agreement by this reference, regardless of whether or not the exhibits are actually attached to this Agreement. The Recitals to this Agreement are hereby incorporated in this Agreement by this reference. Section 3.7 - Construction of the Agreement. The provisions contained in this Agreement shall not be construed in favor of or against either party but shall be construed as if both parties contributed equally to its preparation. This Agreement shall be construed in accordance with the laws of the State of California. Section 3.8 - City's Reliance on Statements and Disclosures of Borrower. Borrower has made certain statements in order to induce the City to make said loan and enter into this Agreement, and in the event Borrower has made material misrepresentations or failed to disclose any material fact, the City may treat such misrepresentation or omission as a breach of this Agreement, and the act of doing so shall not affect any remedies the City may have under the deed of trust securing said loan for such misrepresentation or concealment. Section 3.9 - City Not Liable for Acts of Omissions of Borrower or Others. City shall in no way be liable for any acts or omissions of Borrower, any agent or contractor employed by Borrower, or any person furnishing labor and/or materials used in or related to the rehabilitation of the Project. 29 Section 3.10 - Time of the Essence. Time is of the essence of this Agreement and of each and every provision hereof. The waiver by the City of any breach or breaches hereof shall not be deemed, nor shall the same constitute, a waiver of any subsequent breach or breaches. Section 3.11 - Integration. This Agreement represents the entire agreement between the Parties of the subject matter of this Agreement and supersedes any other agreements, promises, or representations oral or written pertaining to such subject matter, including without limitation, any and all agreements, promissory notes, and deeds of trust, along with any amendments and modifications to such agreements, promissory notes and deeds of trust entered into by and between the City and Borrower. Section 3.12 - Participation. At the request of the City, Borrower shall cause the fact that the City has provided funds to be referenced in any advertisements, press releases, brochures or information sheets where funding for the Project is discussed, and on all project designation placards placed on the Property or other sites, as approved in advance, by the City. The design, content and format of the press releases, brochures, information sheets, and all project designation placards containing a reference to the City are subject to the written approval of the City with respect to all references to the City. The City, at its sole option, reserves the right to request, in writing, that the references to the participation of the City not be included in any, or all, advertisements, press releases, brochures, information sheets, and/or project designation placards. Section 3.13 - Approvals, Consents and Other Determinations. Unless otherwise provided, in any approval, consent, or other determination by the City or Borrower required under this Agreement or any of the other loan documents evidencing and/or securing the City Loan, the City and Borrower shall act in good faith and without delay. Section 3.14 - Counterparts. This Agreement may be executed in any number of counterparts and, as so executed, the counterparts shall constitute one and the same Agreement. The parties agree that each such counterpart is an original and shall be binding upon all the parties, even though all of the parties are not signatories to the same counterpart. Section 3.15 - Consents and Approvals. Any approval required under this Agreement shall be in writing and executed by an authorized representative of the party granting the approval. Section 3.16 - Non -Liability of Officials and Employees of the City. No member, official or employee of the City shall be personally liable to Borrower, or any successor in interest, in the event of any default or breach of this Agreement or for any amount which may become due to Borrower or its successors, or on any obligations under the terms of this Agreement. Section 3.17 - Capacity and Authority. All individuals signing this Agreement for a party which is a corporation, limited liability company, partnership or other legal entity, or signing under a power of attorney, or as a trustee, guardian, conservator, or in any other legal capacity, covenant 30 to the City that they have the necessary capacity and authority to act for, sign and bind the respective entity or principal on whose behalf they are signing. IN WITNESS WHEREOF, the parties have executed this Agreement on the date first set forth above. BORROWER: T & T Community Properties, LLC, aalifornia limited liability company By: Print Name: Mitchel . Thompso Its: Managing Member City: City of National City By: Morrison, Mayor APPROVED AS TO FORM: Christensen & Spath LLP, Special Counsel to the City 31 Exhibit "A" Property Description All that certain real property situated in the County of San Diego, State of California, described as follows: All of Lot 34 and that portion of Lot 36, Block 3 Paradena Park, in the City of National City, County of San Diego, State of California, according to Map thereof No. 1404, filed in the Office of the County Recorder of San Diego County, February 16, 1912, lying southerly of a line described as follows: Beginning at a point on the easterly line of said Lot 36 distant thereon 50.00 feet southerly from the most northerly corner thereof; thence westerly in a straight line to an intersection with the westerly line of said Lot 36 at a point which is a distant thereon 25.00 feet southerly from the northwesterly corner thereof. Excepting from said Lot 34 the southerly 65.00 feet measured at right angles to the southerly line. APN: 554-013-16-00 32 Exhibit "B" City Note 33 DO NOT DESTROY THIS NOTE: WHEN PAID, THIS NOTE AND THE DEED OF TRUST SECURING IT MUST BE SURRENDERED TO TRUSTEE FOR CANCELLATION BEFORE RECONVEYANCE WILL BE MADE. PROMISSORY NOTE ("Note") National City, California , 2011 ] . Principal and Interest. For value received and in consideration of the Acquisition, Rehabilitation and Permanent Financing Loan Agreement dated as of July , 2011 ("City Loan Agreement"), by and between the City of National City ("City") and T & T Community Properties, LLC, a California limited liability company ("Maker"), Maker promises to pay to City, or order, at 1243 National City Boulevard, National City, California 91950-4397, or such other place as the holder may from time to time designate by written notice to Maker, the principal sum of Seven Hundred Seventeen Thousand Five Hundred and No/100 Dollars ($717,500.00), or so much as is advanced, together with accrued interest at the rate of two percent (2%) simple interest per annum. This Note is issued pursuant to: (i) the City Loan Agreement; (ii) the Deed of Trust ("Deed of Trust") being executed concurrently herewith by Maker in favor of the City, to be recorded in the office of the County Recorder of San Diego County; and (iii) the Declaration of Covenants, Conditions and Restrictions (Tenant Restrictions), being executed concurrently herewith by Maker in favor of the City, to be recorded in the office of the County Recorder of San Diego County ("Declaration"). All capitalized terms which are not defined herein shall have the meaning ascribed to them in the City Loan Agreement. 2. Term of Loan, Due Date and Right of Prepayment. Payments shall be due and payable as follows: (a) On May 1, 2013, and annually on May 1 of each year thereafter during the term of this Note, Maker shall calculate its Residual Receipts for the immediately previous calendar year, as defined herein, and pay to the City thirty percent (30%) of such Residual Receipts. (b) Fifty-five (55) years from the date first set forth above, when all principal and accrued interest shall be due and payable. (c) Concurrently with the refinancing of any loan or other obligation secured all or in part by the Property, as defined in the City Loan Agreement. (d) Acceleration of this Note pursuant to the provisions of Paragraph 4 of this Note, when all principal and accrued interest shall be due and payable. 1 (e) Any sale, transfer, conveyance or further encumbrance of all or any part of the Property. "Residual Receipts" shall mean Gross Income less Operating Expenses, calculated on a calendar year basis, as provided herein and on a form approved by the City. All calculations of Residual Receipts shall be subject to verification and approval by the City. "Gross Income" shall mean all gross income actually collected from all residential and non- residential components of the Property. "Operating Expenses" shall mean actual, reasonable and customary costs, fees and expenses directly attributable to the operation, maintenance, taxes and management of the Property, to the extent approved by the City in Maker's annual operating budget. Maker shall annually provide to the City, on May 1st, each year during the term of this Note, a Residual Receipts report, which provides the basis for Maker's calculation of the payment or nonpayment of Residual Receipts to the City. This Note may be prepaid in whole or in part at any time and, from time to time, without notice or penalty. Any prepayment shall be allocated first to unpaid interest and then to principal. Should the undersigned sell, convey, transfer, further encumber, or dispose of the Property described in the Deed of Trust securing this Note, or any part of it, or any interest in it, then all obligations secured by this Note shall be due and payable immediately. 3. Security for Note. This Note is secured by the Deed of Trust of even date herewith executed by Maker, which creates a lien on that certain real property described therein and by the Security Agreement of even date herewith. 4. Acceleration Upon Default. Notwithstanding Section 2, above, or anything contained herein to the contrary, in the event of any default in the performance of any of the terms, covenants and conditions contained in: (i) this Note, the City Loan Agreement, Declaration or Deed of Trust, in each case after the expiration of applicable cure periods, including without limitation the failure by Maker to rehabilitate the Project, as defined in the City Loan Agreement, on or before April 30, 2010; (ii) any other instrument executed by the Maker in conjunction with this Note after the expiration of applicable cure periods; (iii) any prior or junior note secured by an encumbrance on the Property or any portion of it after the expiration of applicable cure periods; or (iv) in the event of the filing of a Bankruptcy proceeding by or against Maker, then (x) all sums owing by Maker to the City shall at the option of the City immediately become due and payable; (y) the City shall have no obligation to disburse any further funds to Maker or any other person: and (z) the City shall be released from any and all obligations to Maker under the terms of this Note. These remedies shall be in addition to any and all other rights and remedies available to the City, either at law or in equity. Further, default interest shall accrue on the principal balance of this Note from the date of this Note at the rate of ten percent (10%) simple interest per annum or the maximum rate than allowed by law, whichever is Less. Failure to exercise such option shall not constitute a waiver of the right to exercise it in the event of any subsequent default. 2 5. Costs Paid by Maker. Maker agrees to pay the following costs, expenses, and reasonable attorneys' fees paid or incurred by the holder of this Note, or adjudged by a court: (a) reasonable costs of collection, costs, and expenses, and attorneys' fees paid or incurred in connection with the collection or enforcement of this Note, whether or not suit is filed; and (b) costs of suit and such sum as the court may adjudge as attorneys' fees in any action to enforce payment of this Note or any part of it. 6. Payment and Interest Calculation. Principal and interest shall be payable in lawful money of the United States of America. Interest shall be computed based on a 360-day year and 30-day month and the actual number of days elapsed. Payments shall be applied to interest first and then to any unpaid principal balance. 7. Incorporation of Documents. The provisions of the City Loan Agreement, Declaration and Deed of Trust are expressly incorporated in this Note by this reference. 8. Waiver. Maker hereby waives diligence, presentment, protest and demand, notice of protest, dishonor and nonpayment of this Note, and expressly agrees that, without in any way affecting the liability of Maker hereunder, the City may extend any maturity date or the time for payment of any installment due hereunder, accept additional security, release any party liable hereunder and release any security now or hereafter securing this Note. Maker further waives, to the full extent permitted by law, the right to plead any and all statutes of limitations as a defense to any demand on this Note, or on any deed of trust, security agreement, guaranty or other agreement now or hereafter securing this Note. 9. Recourse During Rehabilitation and Indemnity. (a) Prior to the timely completion of rehabilitation of the Project, in any action brought to enforce the obligations of Maker under this Note or the Loan Documents, the judgment or decree shall be enforceable against Maker, in addition to any collateral security for the payment of this Note, and the City may seek any deficiency judgment against Maker. Upon such recordation of a proper and timely Notice of Completion, this Note shall become non -recourse to both Maker and the recourse provisions of this Paragraph 9(a) shall no longer be operative. Provided, however, nothing contained herein shall apply to defeat any cause of action against Maker that accrues prior to timely completion of rehabilitation of the Project. (b) Maker shall indemnify, defend, protect and hold the City harmless from and against any and all loss, damage, liability, action, cause of action, cost or expense (including, without limitation, reasonable attorneys' fees and expenses) incurred by the City as a result of any (i) fraud or material misrepresentation under or in connection with the Loan or any Loan Document; (ii) intentional bad faith waste of the Property; (iii) losses resulting from Maker's failure to maintain insurance as required under the Deed of Trust; and (iv) misapplication of any rents, security deposits, insurance proceeds, condemnation awards or any other proceeds derived from the collateral security in a manner prohibited by the City Loan Agreement, Deed of Trust or Declaration. The City shall promptly provide Maker with written notice of any event for which Maker has an indemnification obligation as provided in this Paragraph 9(b). 3 (c) Notwithstanding anything to the contrary contained herein, Maker's obligation to indemnify the City as aforesaid shall be personal, recourse obligations of Maker and in the event of any breach of such obligations, the City shall have the right to proceed directly against Maker to recover any and all losses, damages, liabilities, actions, causes of action, costs and expenses (including, without limitation, reasonable attorneys' fees and expenses) resulting from such breach and the right to bring any action and to institute any proceedings to obtain a deficiency judgment in or following after foreclosure for any and all losses, damages, liabilities, actions, causes of action, costs and expenses (including without limitation reasonable attorneys' fees and expenses) resulting from such breach. 10. Late Charge. In addition to the foregoing, if any installment due hereunder, is not paid within fifteen (15) days from the date due, Maker promises to pay a "late charge" of five percent (5%) of the installment so overdue to defray the expense incident to handling any such delinquent payment or payments. 11. Severability. If any provision of this Note is determined to be void by court of competent jurisdiction, such determination shall not affect any other provision of this Note, and such other provisions shall remain in full force and effect. 12. Non -Waiver. No delay in demanding or failure to demand performance hereunder shall constitute a waiver by holding of its right to subsequently demand such performance or to exercise any remedies for any default hereunder. Further, in order to be effective, any waiver of any of the City's rights and remedies hereunder shall be expressed in a writing signed by the City. Further waiver by the City of any right hereunder shall not constitute a waiver of any other right, including but not limited to the right to exercise any and all remedies for a different or subsequent event of default hereunder. 13. Replacement Note. The undersigned agrees that, in the event that this Note shall become lost or stolen, upon request of the City, the undersigned shall execute a replacement Note incorporating the terms hereof, provided that the City shall furnish a written agreement to indemnify the undersigned against all losses, costs, and damages arising from a duplicative demand for payment under this Note. 14. Interpretation. This Note shall be governed and interpreted in accordance with applicable California law. Maker: T & T Community Properties, LLC, a California limited liability company By: Print Name: Its: 4 Exhibit "C" Deed of Trust 34 NO CHARGE ON THIS DOCUMENT PER CALIFORNIA GOVERNMENT CODE SECTION 6103 Recording Requested By And When Recorded Mail To: City of National City 1243 National City Boulevard National City, CA 91950-4397 DEED OF TRUST THIS DEED OF TRUST is made as of this day of , 2011, by T & T Community Properties, LLC, a California limited liability company ("Trustor"), whose address is , and First American Title Company ("Trustee") and the City of National City ("Beneficiary"), whose address is 1243 National City Boulevard, National City, California, 91950- 4397. TRUSTOR HEREBY irrevocably grants, transfers, and assigns to Trustee, in trust, with power of sale, all that property in the City of National City, County of San Diego, State of California, described as: (See Legal Description - Exhibit "A") FOR THE PURPOSE OF SECURING: (1) Payment of the indebtedness evidenced by a Promissory Note of even date herewith executed by Trustor, in the principal sum of Seven Hundred Seventeen Thousand Five Hundred and No/100 Dollars ($717,500.00), and any renewal, extension, or modification of the promissory note (the "Note"); (2) Any additional sums and interest that may hereafter be loaned to the then record owner of the Property by Beneficiary, when evidenced by another note or notes reciting that it or they are so secured; (3) The performance of each agreement contained in this Deed of Trust; (4) The performance of each agreement of Trustor under that certain Acquisition, Rehabilitation and Permanent Financing Loan Agreement ("Loan Agreement") dated as of July _, 2011, by and between Trustor and Beneficiary on file in the Office of Beneficiary; and (5) The performance of each agreement and covenant of Trustor under that certain Declaration of Covenants, Conditions and Restrictions ("Restrictions") of even date herewith and recorded concurrently herewith affecting the Property. 1 A. TO PROTECT THE SECURITY OF THIS DEED OF TRUST, TRUSTOR AGREES: Maintenance and Repair (1) To keep the Property in good condition and repair; not to remove or demolish any buildings on the Property; to complete or restore promptly and in good and workmanlike manner any building that may be constructed, damaged, or destroyed on the Property; to pay when due all claims for labor performed and materials furnished for the Property; to comply with all laws affecting the Property or requiring any alterations or improvements to be made on the Property; not to commit or permit waste of the Property; not to commit, suffer, or permit any act upon the Property in violation of law; and to cultivate, irrigate, fertilize, fumigate, prune, and do all other acts that from the character or use of the Property may be reasonably necessary. Fire Insurance (2) To provide, maintain, and deliver to Beneficiary fire insurance satisfactory to and with loss payable to Beneficiary as its interest may appear. Subject to the rights of any senior lenders, the amount collected under any fire or other insurance policy may be applied by Beneficiary upon any indebtedness secured by this Deed of Trust and in any order determined by Beneficiary, or at the option of Beneficiary the entire amount so collected or any part of that amount may be released to Trustor. This application or release shall not cure or waive any default or notice of default under this Deed of Trust or invalidate any act done pursuant to such a notice. Notwithstanding the foregoing, in the event of any fire or other casualty to the Property, Trustor shall have the right to rebuild the Property, and to use all available insurance proceeds therefor, provided that (a) such proceeds are sufficient to rebuild the Property in a manner that provides adequate security to Beneficiary for repayment of the indebtedness secured hereby or if such proceeds are insufficient then Trustor shall have funded any deficiency, (b) Beneficiary shall have the right to approve (which shall not be unreasonably withheld or delayed) plans and specifications for any major rebuilding and the right to approve (which shall not be unreasonably withheld or delayed) disbursements of insurance proceeds for rebuilding under a construction escrow or similar arrangement, and (c) no material default then exists hereunder or under the Note. If the casualty affects only part of the Property and total rebuilding is not feasible, then proceeds may be used for partial rebuilding and partial repayment of the indebtedness secured hereby in a manner that provides adequate security to Beneficiary for repayment of the remaining indebtedness secured hereby. Defense of Security (3) To appear in and defend any action or proceeding purporting to affect the security of this Deed of Trust or the rights or powers of Beneficiary, or Trustee; and to pay all costs and expenses, including cost of evidence of title and attorneys' fees in a reasonable sum, in any such action or proceeding in which Beneficiary or Trustee may appear, and in any suit brought by Beneficiary to foreclose this Deed of Trust. Payment of Liens and Taxes 2 (4) To pay, at least ten (10) days before delinquency, all taxes and assessments affecting the Property, including assessments on appurtenant water stock, all encumbrances, charges, and liens, with interest, on the Property or any part of the Property, which appear to be prior or superior to this Deed of Trust; and all costs, fees, and expenses of this Trust. If Trustor fails to make any payment or to do any act as provided in this Deed of Trust, then Beneficiary or Trustee may (but is not obligated to) make the payment or do the act in the required manner and to the extent deemed necessary by Beneficiary or Trustee to protect the security of this Deed of Trust. The performance by Beneficiary or Trustee of such an act shall not require notice to or demand upon Trustor and shall not release Trustor from any obligation under this Deed of Trust. Beneficiary or Trustee shall also have the following related rights and powers: to enter upon the Property for the foregoing purposes; to appear in and defend any action or proceeding purporting to affect the security of this Deed of Trust or the rights or powers of Beneficiary or Trustee; to pay, purchase, contest, or compromise any encumbrance, charge, or lien that in the judgment of either appears to be prior or superior to this Deed of Trust; to employ counsel; and to pay necessary expenses and costs, including reasonable attorneys' fees. Reimbursement of Costs (5) To pay immediately and without demand all sums expended by Beneficiary or Trustee pursuant to this Deed of Trust, with interest from date of expenditure at the amount allowed by law in effect at the date of this Deed of Trust, and to pay any amount demanded by Beneficiary (up to the maximum allowed by law at the time of the demand) for any statement regarding the obligation secured by this Deed of Trust. (6) That it will pay the Note at the time and in the manner provided therein. (7) That it will not permit or suffer the use of any of the Property for any purpose other than the use for which the same was intended at the time this Deed of Trust was executed. (8) That the Note, the Loan Agreement, and the Restrictions are incorporated herein by reference and made a part of this Deed of Trust, although not attached. Copies are on file in the office of the Beneficiary. (9) To perform, in a timely manner, each agreement and covenant by and between Trustor on any and all notes, loans and deeds of trust that are senior and/or junior to this Deed of Trust. A default in any of these obligations and the expiration of any applicable notice or cure period shall constitute a default under this Deed of Trust. 3 B. THE PARTIES AGREE THAT: Condemnation Award (10) Any award of damages in connection with any taking or condemnation, or for injury to the Property by reason of public use, or for damages for private trespass or injury to the Property, is hereby assigned and shall be paid to Beneficiary (subject to the rights of any senior lenders), as its interest may appear as further security for all obligations secured by this Deed of Trust. Upon receipt of such proceeds, Beneficiary may hold the proceeds as further security, or apply or release them in the same manner and with the same effect as provided in Section 2 of this Deed of Trust for the disposition of proceeds of fire or other insurance. Waiver of Late Payments (11) By accepting payment of any sum secured by this Deed of Trust after its due date, Beneficiary does not waive its right either to require prompt payment when due of all other sums so secured or to declare default for failure to pay any indebtedness secured by this Deed of Trust. Trustee's Powers (12) Upon written request of Beneficiary and presentation of this Deed of Trust and the Note for endorsement, Trustee may (a) reconvey all or any part of the Property; (b) consent to the making and recording, or either, of any map or plat of all or any part of the Property; (c) join in granting any easement on the Property; or (d) join in or consent to any extension agreement or any agreement subordinating the lien, encumbrance, or charge of this Deed of Trust. Trustee need not provide Trustor with notice before taking any of the foregoing actions, and shall not be liable for the proper performance of the act. The exercise by Trustee of any of the foregoing powers shall not affect the personal liability of any person for payment of the indebtedness secured by this Deed of Trust, or the lien of this Deed of Trust on the remaining property as security for the repayment of the full amount secured by this Deed of Trust. Full Reconveyance (13) Upon written request of Beneficiary stating that all sums secured by this Deed of Trust have been paid, surrender of this Deed of Trust, the Note, and any other notes secured by this Deed of Trust to Trustee for cancellation and retention, and payment of Trustee's fees and charges, Trustee shall reconvey, without warranty, the Property then subject to this Deed of Trust. The recitals in the reconveyance shall be conclusive proof of the truthfulness of the recitals. The grantee in the recon- veyance may be described as "the person or persons legally entitled thereto." Five years after issuance of the full reconveyance, Trustee may destroy the Note and this Deed of Trust, unless directed in the request to retain them. 4 Assignment of Rents (14) As additional security, Trustor hereby gives to and confers upon Beneficiary the right, power, and authority during the continuance of these Trusts, to collect the rents, issues, and profits of the Property, but reserves the right, prior to any default, which shall continue beyond any applicable notice and cure periods, to collect and retain these rents, issues, and profits as they become due and payable. Upon any such default, Beneficiary may, without notice and without regard to the adequacy of the security for the indebtedness secured by this Deed of Trust, either per- sonally or by agent or court -appointed receiver, do the following: enter upon and take possession of the Property or any part of the Property; sue for or otherwise collect all rents, issues, and profits, including those past due and unpaid; and apply these rents, issues, and profits, less costs and expenses of operation and collection (including reasonable attorneys' fees), upon any indebtedness secured by this Deed of Trust, in any order determined by Beneficiary. The exercise of the foregoing rights by Beneficiary shall not cure or waive any default or notice of default under this Deed of Trust or invalidate any act done pursuant to such a notice. Default in Foreclosure (15) Upon default by Trustor in the payment of any indebtedness secured by this Deed of Trust or in the performance of any material obligation under this Deed of Trust, and the expiration of any and all applicable notice or cure periods, Beneficiary may declare all sums secured by this Deed of Trust immediately due and payable by delivering to Trustee a written declaration of default and demand for sale and a written notice of default and election to sell the Property. Trustee shall cause the notice of default and election to sell to be recorded. Beneficiary also shall deposit with Trustee this Deed of Trust, the Note, and all documents evidencing any additional expenditures secured by this Deed of Trust. After the required time period has lapsed following the recordation of the notice of default, and after notice of sale has been given as required by law, Trustee, without demand on Trustor, shall sell the Property at the time and place specified in the notice of sale, either as a whole or in separate parcels, and in any order determined by Trustee, at public auction to the highest bidder for cash in lawful money of the United States, payable at the time of sale. Trustee may postpone sale of all or any portion of the Property by public announcement at the time and place of sale, and from time to time thereafter may postpone the sale by public announcement at the time fixed by the preceding postponement. Trustee shall deliver to the purchaser at the auction its deed conveying the Property sold, but without any covenant or warranty, express or implied. The recital in the deed of any matter or fact shall be conclusive proof of the truthfulness of the recital. Any person, including Trustor, Trustee, or Beneficiary, may purchase at the sale. After deducting all costs, fees, and expenses of Trustee and Beneficiary under this paragraph, including costs of procuring evidence of title incurred in connection with sale, Trustee shall apply the proceeds of sale to payment of: all sums expended under the terms of this Deed of Trust, not then repaid, with accrued interest at the amount allowed by law in effect at the date of this Deed of Trust; all other sums then secured by this Deed of Trust; and the remainder, if any, to the person or persons legally entitled to the remaining proceeds. 5 (16) Should the undersigned agree to or actually sell, convey, transfer, or dispose of, or further encumber the real property described in this deed of trust securing the Promissory Note, or any part of it, or any interest in it, without first obtaining the written consent of the Holder of the Note, then all obligations secured by the Note and trust deed may be declared due and payable, at the option of the Holder. Consent to one transaction of this type will not constitute a waiver of the right to require consent to future or successive transactions. General Provisions (17) This Deed applies to, inures to the benefit of, and binds all parties to this Deed of Trust and their heirs, legatees, devisees, administrators, executors, successors, and assigns. The term "Beneficiary" shall mean the holder and owner, including pledgee, of the Note secured by this Deed of Trust, whether or not named as a beneficiary in this Deed of Trust, and the heirs, legatees, devisees, administrators, executors, and assigns of any such person. In this Deed, whenever the context so requires, the masculine gender includes the feminine and/or neuter, and the singular number includes the plural. Acceptance by Trustee (18) Trustee accepts this Trust when this Deed, duly executed and acknowledged, is made a public record as provided by law. Trustee is not obligated to notify any party to this Deed of Trust of pending sale under any other deed of trust or of any action or proceeding in which Trustor, Beneficiary, or Trustee shall be a party unless brought by Trustee. Substitution of Trustees (19) Beneficiary, or any successor in ownership of any indebtedness secured by this Deed of Trust, may from time to time, by written instrument, substitute a successor or successors to any Trustee named in or acting under this Deed of Trust. The substitution instrument shall contain the name of the original Trustor, Trustee, and Beneficiary under this Deed of Trust, the book and page where this Deed is recorded, and the name and address of the new Trustee. When executed by Beneficiary and duly acknowledged and recorded in the office of the recorder of the county or counties where the Property is situated, the substitution instrument shall be conclusive proof of proper substitution of the successor Trustee or Trustees. Any successor Trustee or Trustees shall, without conveyance from the predecessor Trustee, succeed to all its title, estate, rights, powers, and duties. Cumulative Powers and Remedies (20) The powers and remedies conferred in this Deed of Trust are concurrent and cumulative to all other rights and remedies provided in this Deed of Trust or given by law. These powers and remedies may be exercised singly, successively, or together, and as often as deemed necessary. 6 Conclusiveness of Recitals (21) The recitals contained in any reconveyance, trustee's deed, or any other instrument executed by Trustee from time to time under the authority of this Deed of Trust or in the exercise of its powers or the performance of its duties under this Deed of Trust, shall be conclusive evidence of their truth, whether stated as specific and particular facts, or in general statements or conclusions. Further, the recitals shall be binding and conclusive upon Trustor, its heirs, executors, adminis- trators, successors, and assigns, and all other persons. Attorneys' Fees (22) If any action is brought for the foreclosure of this Deed of Trust or for the enforcement of any provision of this Deed of Trust (whether or not suit is filed), Trustor agrees to pay all costs and expenses of Beneficiary and Trustee, including reasonable attorneys' fees; and these sums shall be secured by this Deed of Trust. Co -trustees (23) If two or more persons are designated as Trustee in this Deed of Trust, any, or all, power granted in this Deed of Trust to Trustee may be exercised by any of those persons, if the other person or persons are unable, for any reason, to act. Any recital of this inability in any instrument executed by any of those persons shall be conclusive against Trustor and Trustor's heirs and assigns. Request for Notices of Default and Sale (24) In accordance with Section 2924b of the California Civil Code, request is hereby made that a copy of any Notice of Default and a copy of any Notice of Sale under any Deeds of Trust executed by Trustor, and recorded in the Official Records of San Diego County, California, in which Beneficiary, is named as beneficiary, be mailed to: City of National City 1243 National City Boulevard National City, CA 91950-4397 NOTICE: A copy of any notice of default and of any notice of sale will be sent only to the address contained in this recorded request. If your address changes, a new request must be recorded. The undersigned Trustor requests that a copy of any notice of default and of any notice of sale under this Deed of Trust be mailed to Trustor at the address of Trustor set forth above. (25) Trustor shall permit Beneficiary and its agents or representatives, to inspect the Property at any and all reasonable times, upon prior written notice (unless Trustor is in default under any of the Loan Documents). Inspections shall be conducted so as not to interfere with the tenants' use and enjoyment of the Property and the general operation of the Property. 7 (26) The Property shall be subject to the restrictions set forth in the Loan Agreement and Restrictions and Trustor hereby consents to such restrictions and agrees to be bound thereby. Such restrictions shall be in addition to and not in limitation of the rights of Beneficiary expressly set forth in this Deed of Trust. (27) For purposes of this Deed of Trust, "Hazardous Materials" mean and include any hazardous, toxic or dangerous waste, substance or material including, without limitation, flammable explosives, radioactive materials, asbestos, hazardous wastes, toxic substances and any materials or substances defined as hazardous materials, hazardous substances or toxic substances in (or for purposes of) the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), as amended (42 U.S.C. §9601, et seq.), the Hazardous Materials Transportation Act (49 U.S.C. § 1801, et seq.), the Resource Conservation and Recovery Act (42 U.S.C. §6901, et seq.), and those substances defined as hazardous wastes in §25117 of the California Health and Safety Code or as hazardous substances in §25316 of the California Health and Safety Code or in any regulations promulgated under either such law, any so-called "Superfund" or "Superlien" law, or any other federal, state or local statute, law, ordinance, code, rule, regulation, order or decree regulating, relating to, or imposing liability or standards of conduct concerning, any hazardous, toxic or dangerous waste, substance or material, as now or at any time hereafter in effect. (28) In addition to the general and specific representations, covenants and warranties set forth in the Deed of Trust or otherwise, Trustor represents, covenants and warrants, with respect to Hazardous Materials, as follows: (a) Neither Trustor nor, to the best knowledge of Trustor, any other person, has ever caused or permitted any Hazardous Materials to be manufactured, placed, held, located or disposed of on, under or at the Property or any part thereof, and neither the Property nor any part thereof, or any property adjacent thereto, has ever been used (whether by Trustor or, to the best knowledge of Trustor, by any other person) as a manufacturing site, dump site or storage site (whether permanent or temporary) for any Hazardous Materials. "Hazardous Materials" for purposes of this Paragraph 28(a) shall not include substances typically used in the ordinary course of developing, operating and maintaining apartment complexes, provided that such substances are used in accordance with all applicable laws. (b) Trustor hereby agrees to indemnify Beneficiary, its officers, employees, contractors and agents, and hold Beneficiary, its officers, employees, contractors and agents harmless from and against any and all losses, liabilities, damages, injuries, costs, expenses and claims of any and every kind whatsoever paid, incurred or suffered by, or asserted against Beneficiary, its officers, employees, contractors or agents for, with respect to, or as a direct or indirect result of, the presence or use, generation, storage, release, threatened release or disposal of Hazardous Materials on or under the Property or the escape, seepage, leakage, spillage, discharge, emission or release of any Hazardous Materials from the Property (including, without limitation, any losses, liabilities, damages, injuries, costs, expenses or claims asserted or arising under CERCLA, any so-called "Superfund" or "Superlien" law, or any other federal, state or local statute, law, ordinance, code, rule, regulation, order or decree regulating, relating to or imposing liability or standards of conduct concerning any Hazardous Materials) regardless of whether or not caused by or within the control of Trustor. The foregoing indemnification shall not apply to any liability resulting from (i) an event 8 that occurs after a transfer of the Property due to any foreclosure sale (judicial or nonjudicial) or a deed in lieu of foreclosure, or (ii) acts or omissions of Beneficiary or its agents. (c) Trustor has not received any notice of (i) the happening of any event involving the use, spillage, discharge, or cleanup of any Hazardous Materials ("Hazardous Discharge") affecting Trustor or the Property or (ii) any complaint, order, citation or notice with regard to air emissions, water discharges, noise emissions or any other environmental, health or safety matter affecting Trustor or the Property ("Environmental Complaint") from any person or entity, including, without limitation, the United States Environmental Protection Agency ("EPA"). If Trustor receives any such notice after the date hereof, then Trustor will give, within seven (7) business days thereafter, oral and written notice of same to Beneficiary. (d) Without limitation of Beneficiary's rights under this Deed of Trust, Beneficiary shall have the right, but not the obligation, to enter onto the Property or to take such other actions as it deems necessary or advisable to clean up, remove, resolve or minimize the impact of, or otherwise deal with, any such Hazardous Materials or Environmental Complaint upon its receipt of any notice from any person or entity, including without limitation, the EPA, asserting the existence of any Hazardous Materials or an Environmental Complaint on or pertaining to the Property which, if true, could result in an order, suit or other action against Trustor affecting any part of the Property by any governmental agency or otherwise which, in the sole opinion of Beneficiary, could jeopardize its security under this Deed of Trust. All reasonable costs and expenses incurred by Beneficiary in the exercise of any such rights shall be secured by this Deed of Trust and shall be payable by Trustor upon demand together with interest thereon at a rate equal to the highest rate payable under the note secured hereby. (e) The foregoing representation, covenants, indemnities and warranties shall be continuing and shall be true and correct for the period from the date hereof to the release of this Deed of Trust (whether by payment of the indebtedness secured hereby or foreclosure or action in lieu thereof), and these representations, covenants, indemnities and warranties shall survive such release. (29) Each successor owner of an interest in the Property other than through foreclosure or deed in lieu of foreclosure of an interest superior to this Deed of Trust, shall take its interest subject to this Deed of Trust. (30) This Deed of Trust shall be governed by and construed in accordance with the laws of the State of California. (31) Trustor covenants by and for itself and any successors in interest that there shall be no discrimination against or segregation of, any person or group of persons on account of race, color, creed, religion, sex, sexual orientation, marital status, national origin, ancestry, familial status, source of income or disability in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Property, nor shall Trustor or any person claiming under or through it establish or permit any such practice or practices of discrimination or segregation of any person or group of persons on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of 9 subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees of the Property. The foregoing covenants shall run with the land. (32) Trustor shall refrain from restricting the rental, lease and sale of the Property and any dwelling unit thereon on the basis of race, color, creed, religion, sex, sexual orientation, marital status, national origin, ancestry, familial status, source of income or disability of any person. All such deeds, leases or contracts for the rental, lease or sale of the Property or any dwelling unit, shall contain or be subject to substantially the following nondiscrimination or nonsegregation clauses: (a) Deeds. In deeds "The grantee herein covenants by and for itself, its successors and assigns, and all persons claiming under or through them, that there shall be no discrimination against or segregation of, any person or group of persons on account of race, color, religion, sex, sexual orientation, disability, medical condition, familial status, source of income, marital status, national origin or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the land herein conveyed, nor shall the grantee itself or any person claiming under or through it, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees in the land herein conveyed. The foregoing covenants shall run with the land." (b) Leases. In leases "The lessee herein covenants by and for itself, its successors and assigns, and all persons claiming under or through them, and this lease is made and accepted upon and subject to the following conditions: That there shall be no discrimination against or segregation of any person or group of persons, on account of race, color, religion, sex, sexual orientation, disability, medical condition, familial status, source of income, marital status, national origin or ancestry in the leasing, subleasing, renting, transferring, use, occupancy, tenure or enjoyment of the land herein leased, nor shall lessee itself, or any person claiming under or through it, establish or permit such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, sublessees, subtenants or vendees in the land herein leased." (c) Contracts. In contracts for the rental, lease or sale of the Property or any dwelling unit "There shall be no discrimination against or segregation of any person or group of persons on account of race, color, religion, sex, sexual orientation, disability, medical condition, familial status, source of income, marital status, national origin or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the land, nor shall the transferee itself or any person claiming under or through it, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees of the land." (33) All individuals signing this Deed of Trust for a party which is a corporation, limited liability company, partnership or other legal entity, or signing under a power of attorney, or as a trustee, guardian, conservator, or in any other legal capacity, covenant to the Beneficiary that they have the 10 necessary capacity and authority to act for, sign and bind the respective entity or principal on whose behalf they are signing. TRUSTOR: T & T Community Properties, LLC, a California limited liability company By: Print Name: Its: 11 Exhibit "D" Declaration of Covenants, Conditions and Restrictions 35 NO CHARGE ON THIS DOCUMENT PER CALIFORNIA GOVERNMENT CODE SECTION 6103 Recording Requested By And When Recorded Mail To: the City of National the City 1243 National the City Boulevard National the City, CA 91950-4397 DECLARATION OF COVENANTS, CONDITIONS AND RESTRICTIONS (TENANT RESTRICTIONS) THIS DECLARATION OF COVENANTS, CONDITIONS AND RESTRICTIONS ("Declaration") is dated as of the _ day of , 2011, by T & T Community Properties, LLC, a California limited liability company ("Declarant") in connection with that certain parcel of real property ("Property") located in the City of National the City, County of San Diego, California, described in Exhibit "A" attached hereto and incorporated herein by reference. RECITALS A. Concurrently with the recordation of this Declaration, the City of National City ("City") is funding a loan ("Loan") secured by a deed of trust ("Deed of Trust") on the Property, as described in that certain Acquisition, Rehabilitation and Permanent Financing Loan Agreement dated as of July , 2011 ("Agreement"). B. The Agreement and Deed of Trust were conditioned by the City in part upon the recordation of a document setting forth certain restrictions upon the use and sale of the Property. Declarant shall rehabilitate the entire eight (8) dwelling unit affordable housing project (the "Project"). One of the eight (8) units will be occupied as a manager's unit, but will be rent and occupancy restricted as set forth herein. NOW, THEREFORE, Declarant hereby declares that the Property shall be subject to the covenants, conditions and restrictions set forth below: 1. Restrictive Covenants. Declarant agrees and covenants on behalf of itself and its successors and assigns, and each successor in interest to the Property, that at all times during the term of this Declaration set forth herein eight (8) residential units at the Project shall be set aside and reserved as "Affordable Units." As used herein the term "Affordable Units" shall refer to the eight (8) residential units in the Project which are owned or held available strictly in accordance with the terms and conditions set forth below. (a) Affordable Unit and HOME Unit Restrictions. The following restrictions shall apply to the eight (8) Affordable Units, including the seven (7) floating Affordable HOME Units ("HOME 1 Units") restricted pursuant to the HOME Program, shall be restricted as set forth herein. The restrictions set forth in the Table below shall establish the maximum rental rate, from which a utility allowance as approved by the City shall be deducted: Number of Affordable Units (Column 1); Unit Type (Column 2); Maximum Rents as Percentage of AMI (Column 3); Number of HOME Units (Column 4); Limit in Income of Eligible Tenants based upon percentage of the Median Area Income (Column 5); Years of Restriction (Column 6): TABLE OF RENT AND INCOME RESTRICTION CRITERIA 1 2 3 4 5 6 NUMBER OF AFFORDABLE UNITS UNIT TYPE MAXIMUM RENTS AS %AGE OF AMI NUMBER OF HOME UNITS MAXIMUM % OF AREA MEDIAN INCOME OF ELIGIBLE TENANTS YEARS OF RENT RESTRICTION 3 2-Bedroom 30% of50% 3*** 50% 55*** 4 2-Bedroom 30% of 60% 4*** 60% 55*** 1* 2-Bedroom 30% of80% 0*** 80% 55*** TOTAL AFFORDABLE UNITS TOTAL HOME UNITS _.. 8 7*** * Manager's Unit * * * The HOME Units will be restricted for fifteen (15) years under the HOME -Program. From year 16 through year 55, the Affordable Units that were previously restricted as HOME Units will continue to be subject to the restrictions set forth herein. (b) "Eligible Tenants" are those tenants whose aggregate gross annual income does not exceed the respective percentages set forth in the table above of annual median income, as adjusted for family size. For purposes of this Declaration, the current annual median income shall be the median income defined by the Department of Housing and Urban Development ("HUD") as the then current median income for the San Diego Standard Metropolitan Statistical Area, established periodically by HUD and published in the Federal Register, as adjusted for family size. The rents and the occupancy restrictions shall be deemed adjusted, from time to time, in accordance with any adjustments that are authorized by HUD or any successor agency. In the event HUD ceases to publish an established median income as aforesaid, the City may, in its sole discretion, use any other reasonably comparable method of computing adjustments in median income or HOME Program rents. Notwithstanding anything contained herein to the contrary, to the extent any other restrictions applicable to the Property limit the rent and/or occupancy of the Property, the most restrictive shall apply. (c) An adjustment of rents may be performed annually in accordance with the rents contained in the applicable the City or HUD rent schedules published by the City based upon the HUD determined median income for the San Diego Standard Metropolitan Statistical Area for the affected unit type and updated from time to time. However, in no event shall the rents, as adjusted, 2 exceed the maximum HOME rents for HOME Affordable Units. Further, the rents charged shall be further limited as set forth in Section 14, hereof. 2. Affordable Marketing Plan Compliance. Eligible Tenants shall be described in Declarant's approved Affirmative Marketing Plan and Declarant shall comply with the terms of its approved Affirmative Marketing Plan, renting to those person(s) referenced in said approved plan, as may be amended from time to time. Provided, however, nothing herein shall restrict Declarant from screening tenants through the application of criteria which is lawful and customary in apartment management in San Diego County and otherwise consistent with federal, state and local regulations and restrictions related to the financing for the Property. 3. Determination; Annual Requalification. On the July 1 immediately following the calendar year in which rehabilitation of the Affordable Units is completed, and annually on July 1 of each year thereafter during the term of this Declaration, Declarant shall certify to the City under penalty of perjury, utilizing such forms and providing such backup documentation as the City may require, that Declarant is complying with all provisions of this Declaration. Failure to complete the annual certification process described in this Section 3 within fifteen (15) days of receipt of written notice from the City shall constitute a material default under this Declaration. the City may resort to the remedies set forth herein upon such material default, as well as any and all other remedies available at law or in equity or contained in the Agreement or Deed of Trust. 4. Relationship with Declarant. The term "Eligible Tenant" shall not include Declarant or any individuals who are partners or shareholders in Declarant or in any entity having an interest in Declarant or in the Property, or officer, employee, agent or consultant of the owner, developer or sponsor. 5. No Student Dependents. No Affordable Unit shall be occupied or leased to any person who is a full-time student, or a household comprised exclusively of persons who are full-time students, unless such persons are married and eligible to file a joint federal income tax return. The term "full- time student" shall be defined as any person who will be or has been a full-time student during five calendar months of the calendar year in question at an educational institution (other than a correspondence school) with regular faculty and students and or a student dependent as defined in the U.S. Internal Revenue Code, unless the taxpayer (upon whom the student in question is dependent) resides in the same dwelling unit. 6. Income of Co -Tenants. The income of all co -tenants and/or non-dependent occupants shall be taken into account in determining whether a household is an Eligible Tenant hereunder. 7. Over Income Tenants. In the event that a tenant who was properly certified as an Eligible Tenant at the commencement of such tenant's occupancy ceases to be eligible, for any reason other than the tenant being over income, Tenant shall give sixty (60) days written notice to such tenant to vacate the Affordable Unit. The vacated Affordable Unit shall thereafter be rented to an Eligible Tenant. Notwithstanding anything to the contrary in this Declaration, no occupant of a HOME Program Affordable Unit or Affordable Unit who previously and properly qualified as an Eligible Tenant shall be evicted by Declarant because such occupant fails to requalify as an Eligible Tenant, because such occupant exceeds the income limits set forth above, as in the case of increased income, 3 except as provided for in Section 92.252 of the Code of Federal Regulations, as amended from time to time. Rather, the next available unit shall be designated as a HOME Program Affordable Unit or Affordable Unit to replace the Unit of the occupant in question. Further, subject to the fair market limitations set forth in HOME Regulation 92.252, such occupant shall commence paying rent equal to 30% of such occupant's adjusted income, effective from and after the date of such failure to requalify. The over -income tenant shall continue to be considered an Eligible Tenant until evicted, provided this continued occupancy complies with the applicable regulations as referenced below, depending upon the sources of funds involved: (a) Non -HOME Funds. A tenant who occupies an Affordable Unit that is not a HOME Affordable Unit and who becomes over income at the time of recertification shall be given one hundred eighty (180) days notice to vacate the affordable unit, effective from and after the date of such failure to requalify (i.e., the recertification date, provided the tenant was properly certified originally). During the time the over -income tenant resides in the Affordable Unit, the tenant shall continue to pay the restricted rent. The tenant shall continue to be considered an "Eligible Tenant" until evicted, provided this continued occupancy complies with this Declaration. (b) HOME Program Funds. When a HOME Eligible Tenant's gross income exceeds the "low income" definition as defined in CFR 92.252(i), then the tenant shall commence paying rent equivalent to thirty percent (30%) of the tenant's adjusted income, subject to the fair market rent ceiling as set forth in HOME Regulation 92.252(i) and the next available comparable sized and configured unit shall be designated as a HOME Affordable Unit. The tenant shall continue to be considered an Eligible Tenant, provided this continued occupancy otherwise complies with all applicable HOME Program requirements. 8. Physical Condition of Affordable Units. After completion of rehabilitation of the Project, Declarant shall continually maintain the Affordable Units in a condition which satisfies the Housing Quality Standards promulgated by HUD under its Section 8 Program, as such standards are interpreted and enforced by the City under its normal policies and procedures. the City shall have the right to inspect the Affordable Units from time to time, on reasonable notice and at reasonable times, in order to verify compliance with the foregoing maintenance covenant. Further, each Affordable Unit shall be requalified annually, as to the foregoing maintenance covenant, as part of the annual tenant requalification process described in Section 3, above. Any deficiencies in the physical condition of an Affordable Unit shall be corrected by Declarant at Declarant's expense within thirty (30) days of the identification of such deficiency by the City and delivery of written notice of the same to Declarant. 9. City Monitoring Functions. It is contemplated that, during the term of this Declaration, the City will perform the following monitoring functions: (a) preparing and making available to Declarant any general information that the City possesses regarding income limitations and restrictions which are applicable to the Affordable Units; (b) reviewing the documentation submitted by Declarant in connection with the annual certification process for Eligible Tenants described in Section 3, above; and (c) inspecting the Affordable Units to verify that they are being maintained in accordance with Section 8, above. Notwithstanding the foregoing description of the City's functions, Declarant shall have no claim or right of action against the City based on any alleged 4 failure to perform such function, except that Declarant may reasonably rely upon the City's tenant eligibility determination. 10. Designation of Affordable HOME Units. The HOME Units will be designated prior to initial occupancy at the discretion of the City. Such designations may be changed by Declarant, provided that the units before and after the change in designation are of the same unit types, size, features and otherwise comply with the terms of 24 C.F.R. §92.252(j). 11. Compliance with HOME Regulations. Declarant shall comply with all regulations, policies and procedures promulgated by HUD, or by the City in connection with the HOME Program, under which the Loan is being made to Declarant. Declarant's failure to so comply shall constitute a material default hereunder, entitling the City to the remedies set forth in Section 23, below. 12. Lease Provisions. Declarant agrees that it will include in all of its leases and cause its successors in interest to include in all of their leases, all provisions required under the terms of the HOME Program, including the following provisions: (a) Additional Lease Provisions/Annual Income Verification. Lessee agrees, upon written request from the landlord or the City of National the City ("the City"), to certify under penalty of perjury the accuracy of all information provided in connection with the examination or reexamination of annual income of the tenant's household. Further, tenant agrees that the annual income and other eligibility requirements are substantial and material obligations of the tenancy and that the tenant will comply promptly with all requests for information with respect to the tenancy from the landlord and/or the City. Further, tenant acknowledges that tenant's failure to provide accurate information regarding such requirements (regardless of whether such inaccuracy is intentional or unintentional) or the refusal to comply with the request for information with respect thereto, shall be deemed a violation of this lease provision, and a material breach of the tenancy and shall constitute cause for immediate termination of the tenancy. (b) Term of Lease for HOME Program Restricted Units. LESSEE has been made aware by Landlord that the unit being leased was assisted with HOME funds. Under the provisions of 24 C.F.R. §92.253, a lease must be for a period of not less than one (1) year unless the parties agree by mutual agreement that the term of the lease be less. The Lessee acknowledges by initialing in the space below that it has been made aware of the provisions of 24 C.F.R. §92.253. 13. Successors Bound. Declarant covenants, for itself and its successors and assigns, not to sell, transfer, assign or otherwise dispose of ownership of the Property, without the express written consent of the City. Any prospective purchaser, transferee or assignee shall expressly promise in writing to be bound by all of the provisions hereof, including the covenant in this Section 13 to require successors to expressly assume the obligations herein. It is expressly acknowledged that the covenants and restrictions set forth herein shall survive any repayment of the Loan. Further, the obligations of Declarant hereunder shall be deemed independent of Declarant's obligations under the Loan. 5 14. Maximum Rent To Be Collected by Declarant. In no event, shall all of the rent paid by the Eligible Tenant for any rent restricted unit exceed the amount of rent set forth in the table in Section 1(a), above. Should Declarant receive rent from a tenant in excess of the allowable maximum rent set forth in the table in Section 1(a), above, Declarant agrees to immediately notify the City and reimburse the City for any such overpayment. Acceptance by Declarant or its successors in interest, of rent in excess of the maximum rent set forth in the table in Section 1(a), above, shall constitute a material breach of this Declaration and the Agreement. 15. Cross Default; Occupancy Schedule for Affordable Units. A default under the Agreement, including without limitation failure to make the annual loan payments to the City as set forth in the Agreement, shall be a material default under this Declaration. The Affordable Units shall be rehabilitated and receive final inspection approval and shall be occupied by Eligible Tenants no later than six (6) months after the Closing, as defined in the Agreement. Time is of the essence in the rehabilitation and occupancy of the Affordable Units. 16. Term. This Declaration and the covenants and restrictions contained herein shall be effective upon the completion of the rehabilitation of the Project and shall remain in full force and effect for a period of fifty-five (55) years from their effective date. 17. Covenant Against Discrimination. Declarant covenants on behalf of itself and its successors and assigns, and each successor in interest to the Property, not to discriminate against any purchaser or prospective purchaser of any Affordable Unit on the basis of their race, age, sexual orientation, marital status, color, religion, sex, handicap, or national origin, as referenced in all applicable state, local and federal law. 18. Enforcement. Declarant expressly agrees and declares that the City or any successor public agency is a proper party and shall have standing to initiate and pursue any and all actions or proceedings, at law or in equity to enforce the provisions hereof and/or to recover damages for any default hereunder, notwithstanding the fact that such damages or the detriment arising from such default may have actually been suffered by some other person or the public at large. Further, the City or any successor public agency shall be the proper party to waive, relinquish, release or modify the rights, covenants, obligations or restrictions contained in or arising under this Declaration. 19. Attorneys' Fees. In the event that any litigation for the enforcement or interpretation of this Declaration, whether an action at law or arbitration or any manner of non judicial dispute resolution to this Declaration by reason of the breach of any condition or covenant, representation or warranty in this Declaration, or otherwise arising out of this Declaration, the prevailing party in such action shall be entitled to recover from the other reasonable attorneys' fees to be fixed by the court which shall render a judgment, as well as the costs of suit. 20. Severability. In the event that any provision or covenant of this Declaration is held by a court of competent jurisdiction to be invalid or unenforceable, then it shall be severed from the remaining portions of this Declaration which shall remain in full force and effect. 6 21. Covenants to Run With the Land. The covenants contained herein shall constitute "covenants running with the land", and shall bind the Property and every person having an interest therein during the term of this Declaration. Declarant agrees for itself and its successors that, in the event that, for any reason whatsoever, a court of competent jurisdiction determines that the foregoing covenants do not run with the land, such covenants shall be enforced as equitable servitudes against the Property. 22. Recordation; Waiver and Amendment. This Declaration shall be recorded in the Office of County Recorder of San Diego, California. No provision of this Declaration, or breach of any provision, can be waived except in writing. Waiver of any provision or breach shall not be deemed to be a waiver of any other provision, or of any subsequent breach of the same or other provision. Except as otherwise provided herein, this Declaration may be amended, modified or rescinded only in writing signed by Declarant and the City. 23. Remedies. (a) Contract Governed by Laws of State of California. This Declaration, its performance, and all suits and special proceedings under this Declaration, shall be constituted in accordance with the laws of the State of California and Federal law, to the extent applicable. In any action, special proceeding, or other proceeding that may be brought arising out of, under or because of this Declaration, the laws of the State of California and the United States, to the extent applicable, shall govern to the exclusion of the law of any other forum, without regard to the jurisdiction in which the action or special proceeding may be instituted. (b) Standing, Equitable Remedies; Cumulative Remedies. Declarant expressly agrees and declares that the City or any successor or public agency shall be the proper party and shall have standing to initiate and pursue any and all actions or proceedings, at law or in equity, to enforce the provisions hereof and/or to recover damages for any default hereunder, notwithstanding the fact that such damages or the detriment arising from such a default may have actually been suffered by some other person or by the public at large. Further, Declarant expressly agrees that receivership, injunctive relief and specific performance are proper pre-trial and/or post -trial remedies hereunder, and that, upon any default, and to assure compliance with this Declaration. Nothing in this subparagraph, and no recovery to the City, shall restrict or limit the rights or remedies of persons or entities other than the City, against Declarant in connection with the same or related acts by Declarant. The remedies set forth in this Section are cumulative and not mutually exclusive, except the extent that their award is specifically determined to be duplicative by final order of a court of competent jurisdiction. (c) Remedies at Law for Breach of Tenant Restrictions. In the event of any material default under Sections 1 through 22 hereof regarding restrictions on the operation and the transfer of the Property and the expiration of any applicable cure period provided under the Agreement, the City shall be entitled to, in addition to any and all other remedies available at law or in equity: (i) declare the Loan to be all due and repayable; and (ii) recover compensatory damages. If the default in question involves the collection of rents in excess of the rents permitted hereunder, the amount of •such compensatory damages shall be the product of multiplying: (a) the number of months that the default in question has continued until the time of trial by (b) the result of subtracting the rents 7 properly chargeable hereunder for the Affordable Units in question from the amount actually charged for those Affordable Units. Declarant and the City agree that it would be extremely difficult or impracticable to ascertain the precise amount of actual damages accruing to the City as a result of such a default and that the foregoing formula is a fair and reasonable method of approximating such damages. the City shall be entitled to seek and to recover damages in separate actions for successive and separate breaches which may occur. Further, interest shall accrue on the amount of such damages from the date of the breach in question at the rate of ten percent (10%) per annum or the maximum rate than allowed by law, whichever is less. Nothing in this section shall preclude the award of exemplary damages as allowed by law. (d) Expert Witness, Attorneys' Fees, and Costs. The parties agree that the prevailing party in litigation for the breach and/or interpretation and/or enforcement of the terms of this Declaration and/or the Agreement shall be entitled to their expert witness fees, if any, as part of their costs of suit, and reasonable attorneys' fees as may be awarded by the court, pursuant to California Code of Civil Procedure ("CCP") § 1033.5 and any other applicable provisions of California law, including, without limitation, the provisions of CCP §998. 24. Mortgagees Protection. No violation or breach of the covenants, conditions, restrictions, provisions or limitations contained in this Declaration shall defeat or render invalid or in any way impair the lien or charge of any permitted deed of trust recorded on the Property provided, however, that any subsequent owner of the Property shall be bound by the covenants, conditions, restrictions, limitations and provisions of this Declaration, whether such owner's title was acquired by foreclosure, deed in lieu of foreclosure, trustee's sale or otherwise. 25. City Approval of Property Manager. At all times that this Declaration is in force and effect, and the City has served a thirty (30) day written notice of deficiencies in the property management for the Property which do not conform to the standards of property management of a professional property manager operating similar properties in San Diego County and which deficiencies have not been rectified by Declarant, within the thirty (30) day period (unless such deficiency is not reasonably capable of being cured within such thirty (30) day period, then such reasonable amount of time as is needed not to exceed ninety (90) days, provided Declarant commences cure within such thirty (30) day period and continues to diligently pursue cure), then, the City shall have the right, in its reasonable discretion, and upon thirty (30) days written notice: (i) to require the retention of a professional property management firm to manage the Property; (ii) to approve, in advance and in writing, the retention of any such property management firm, including the terms of the contract governing such retention; and (iii) to require Declarant to terminate any such property management firm, provided that such termination shall comply with the termination provisions of the management contract in question. Declarant shall cooperate with the City to effectuate the City's rights. 26. Declarant Required to Pay Monitoring Fees. Declarant shall pay the City a set-up fee (the "Set -Up Fee") in the amount of Five Hundred Dollars ($500.00) which shall be paid by Declarant to the City at closing of the Loan. Declarant shall pay to the City an annual monitoring fee, as determined by the City in schedules printed by the City from time to time. Said fee shall be subject to revision annually, based upon the increase in the Consumer Price Index for the San Diego Metropolitan Area. Each year the Monitoring Fees shall be increased based upon the percentage of 8 increase in the Cost of Living as referenced in the Consumer Price Index for the San Diego Metropolitan Area. In no event, shall the monitoring fees decrease, however. The schedule of monitoring fees may be requested from the City. No fees shall be due and payable for any of the HOME Units, however. Annual Monitoring Fees shall be paid to the City annually within ten (10) days after the City provides a written invoice for the same. Failure to timely pay such fees shall constitute a material default under the terms and conditions of the Agreement and this Declaration. Both the Set -Up Fee and the Loan Monitoring Fee shall be paid to the City as a consideration for the lending of funds by the City to Declarant. 27. No Conversion to Condominiums. Declarant agrees during the term of this Declaration, that Declarant shall not, and shall not allow any other person to, cause all or any portion of the Property to be converted to condominiums or to otherwise allow a condominium map or condominium plan to be recorded or filed against all or any portion of the Property. Declarant further agrees that the conversion of all or any portion of the Property to condominiums and/or the recordation or filing of a condominium map or condominium plan against all or any portion of the Property during the term of this Declaration, shall be a breach of this Declaration, the Agreement, the Note, as defined in the Agreement, and the Deed of Trust, entitling the City to immediately exercise any and all of its rights and remedies under this Declaration, the Agreement, Note and Deed of Trust, including without limitation acceleration of the Note and foreclosure under the Deed of Trust. 28. Noticing Requirements Prior to Termination. Prior to termination of this Declaration, Declarant shall comply with any and all noticing requirements required under any applicable laws or regulations, including without limitation, the requirements of California Government Code Sections 65863.10 and 65863.11. 29. No Further Encumbrance. Should Declarant agree to or actually sell, convey, transfer, further encumber or dispose of the Property or any interest in it (or obtain any other funds with respect to the Property or Declarant's activities at the Property, regardless of whether the source), without first obtaining the written consent of the City, shall be a material breach of this Declaration. The consent to one transaction of this type will not constitute a waiver of the right to require consent to future or successive transactions. This Declaration shall remain in effect for its fifty-five (55) year term, whether or not the City approves or disapproves a successor -in -interest or further encumbrance. 30. Indemnity. Declarant shall be responsible for all injuries to persons and/or all damages to real or personal property of the City or others, caused by or resulting from the sale, rental, ownership or operation of the Property, the negligence and/or breach of this Declaration, of itself, its employees, subcontractors and/or its agents during or arising out of rehabilitation of the Affordable Units. Declarant shall defend and hold harmless and indemnify the City, and all of its officers and employees from and against all claims, liens, claims of lien, losses, damages, judgments, costs, and expenses, whether direct or indirect, arising in any way from (i) the sale, rental, ownership or operation of the Property, including without limitation the Affordable Units; (ii) Declarant's negligence; (iii) breach of this Declaration, by Declarant, its employees, subcontractors and/or its agents; and/or (iv) arising out of the rehabilitation of the Affordable Units, except those arising from the sole negligence or willful misconduct of the City. 9 31. Signature Authority. All individuals signing this Declaration for a party which is a corporation, limited liability company, partnership or other legal entity, or signing under a power of attorney, or as a trustee, guardian, conservator, or in any other legal capacity, covenant to the City that they have the necessary capacity and authority to act for, sign and bind the respective entity or principal on whose behalf they are signing. DECLARANT: T & T Community Properties, LLC, a California limited liability company By: Print Name: Its: 10 Exhibit "E" Statement of Insurance Requirements 36 STATEMENT OF INSURANCE REQUIREMENTS (Including All Successors and Assigns of Borrower) Borrower acknowledges the receipt of these insurance requirements and agrees to maintain in full force and effect, the following policies at Borrower's sole cost and expense during the term of the Declaration of Covenants, Conditions and Restrictions being made by Borrower with respect to a loan from the City of National City ("City"). All insurance policies shall contain a provision requiring thirty (30) days advance written notice to the City of cancellation. Borrower agrees to maintain the following insurance coverages: 1. Required Insurance. To at all times provide, maintain and keep in force at Borrower's sole expense the following policies of insurance: (a) Insurance against loss or damage to the Improvements by fire and any of the risks covered by insurance of the type now known as "fire and extended coverage" including endorsement designating City as a Loss Payee, in an amount no less than the original amount of the Note plus any senior Liens or encumbrances or the full replacement cost of the Improvements, including the cost of debris removal (exclusive of the cost of excavations, foundations and footings below the lowest basement floor), whichever is greater, and with not more than One Thousand Dollars ($1,000.00) deductible from the loss payable for any casualty. The policies of insurance carried in accordance with this subparagraph (a) shall contain the "Replacement Cost Endorsements"; (b) Business interruption insurance and/or loss of "rental value" insurance in such amounts as are satisfactory to the City; (c) Auto liability and comprehensive general public liability insurance, including coverage for elevators and escalators, if any, on the Property insuring against claims for "personal injury", including, without limitation, bodily injury, death or property damage occurring on, in or about the Property and the adjoining streets, sidewalks and passageways, such insurance to afford immediate minimum protection to a limit of not less than a project specific One Million Dollars ($1,000,000.00) Per Occurrence, Combined Single Limit with Two Million Dollar ($2,000,000.00) Aggregate Limit, with respect to personal injury or death to any one or more persons or damage to property (as that amount may be increased from time to time by the City in its reasonable discretion). General Liability policy must endorse and designate City and the City of National City as Additional Insureds. Liability Additional Insured Endorsement must be primary, must not exclude Completed Operations, and must be endorsed to include a Ten (10) year extended reporting period; 1 (d) Workers' compensation insurance (including employer's liability insurance, if requested by the City) for all employees of Borrower engaged on or with respect to the Property in such amount as is reasonably satisfactory to the City, or if such limits are established by law, in such amounts; (e) During the course of any construction or repair of Improvements on the Property, builder's completed value risk insurance against "all risks of physical loss", including collapse and transit coverage, during construction of such Improvements, with deductibles not to exceed Ten Thousand Dollars ($10,000.00), in non -reporting form, covering the total value of work performed and equipment, supplies and materials furnished. The City shall be endorsed as a Loss Payees. Said policy of insurance shall contain the "permission to occupy upon completion of work or occupancy" endorsement; (f) Boiler and machinery insurance covering pressure vessels, air tanks, boilers, machinery, pressure piping, heating, air conditioning, and elevator equipment and escalator equipment provided the Improvements contain equipment of such nature, and insurance against loss of occupancy or use arising from breakdown of any of the items referred to in this subparagraph (f), in such amounts as are reasonably satisfactory to the City; (g) Insurance against flood damage, including surface waters, if the Property is located in an area considered a flood risk by the United State Department of Housing and Urban Development; (h) Insurance against loss or damage to the Personal Property by fire and other risks covered by insurance of the type now known as "fire and extended coverage"; and (i) Such other insurance (including, but not limited to, earthquake insurance), and in such amounts, as may from time to time be required by the City against the same or other hazards, provided such additional insurance is available at commercially reasonable rates. (j) Pollution Liability insurance — project specific limits (k) Excess Liability Insurance (1) Professional Liability / E&O (design professionals, etc) — project specific limits All policies of insurance required by the terms of the Deed of Trust shall contain an endorsement or agreement by the insurer that any loss shall be payable in accordance with the terms of such policy, notwithstanding any act or negligence of Borrower which might otherwise result in forfeiture of said insurance, and the further agreement of the insurer waiving all rights of setoff, counterclaim or deductions against Borrower. 2 2. Delivery of Policies, Payment of Premiums. All policies of insurance shall be issued by companies admitted to issue insurance policies in the State of California, and rated AV or better by AM Best, and in amounts in each company satisfactory to the City. All policies of insurance shall have attached thereto a lender's loss payable endorsement for the benefit of the holder of the first priority deeds of trust on the property and improvements, and then for the benefit of the City in form satisfactory to the City. Borrower shall furnish the City with an original copy of all policies of required insurance. At Least thirty (30) days prior to the expiration of each such policy, Borrower shall furnish the City with evidence satisfactory to the City of the payment of premium and the re - issuance of a policy continuing insurance in force as required by the Deed of Trust. All such policies shall contain a provision that such policies will not be canceled or materially amended, which terms shall include any reduction in the scope of limits of coverage, without at least thirty (30) days prior written notice to the City. In the event Borrower fails to provide the policies of insurance required by the Deed of Trust, the City may procure such insurance or single -interest insurance for such risks covering the City's interest, and Borrower will pay all premiums thereon promptly upon demand by the City, and until such payment is made by Borrower the amount of all such premiums, together with interest thereon at the rate of ten percent (10%) per annum or the maximum rate allowed by law, whichever is less. In the event any lender, who has a secured interest in the Property, requires additional insurance and/or insurance with greater coverages than that required by this Statement of Insurance Requirements, Borrower agrees to provide to and name the City on such policies providing greater and additional coverages. Borrower, by execution of this Statement of Insurance Requirements, agrees to provide the required insurance during the term of the loan and to require all successors in interest to agree to provide such coverages for the benefit of the City. Borrower acknowledges that performance of the covenants contained herein are a material inducement to making the loan to Borrower. 3. Signature Authority. All individuals signing this Statement of Insurance Requirements for a party which is a corporation, limited liability company, partnership or other legal entity, or signing under a power of attorney, or as a trustee, guardian, conservator, or in any other legal capacity, covenant to the City that they have the necessary capacity and authority to act for, sign and bind the respective entity or principal on whose behalf they are signing. Dated as of the day of , 2011. Borrower: T & T Community Properties, LLC, a California limited liability company By: Print Name: Its: 3 Exhibit "F" Security Agreement 37 SECURITY AGREEMENT THIS SECURITY AGREEMENT ("Agreement") is dated as of the day of , 2011, by and between T & T Community Properties, LLC, a California limited liability company ("Borrower") and the City of National City ("City"). City and Borrower are collectively referred to as the "Parties." RECITALS: A. The City has agreed to loan up to Seven Hundred Seventeen Thousand Five Hundred and No/100 Dollars ($717,500.00) to Borrower ("Loan") pursuant to that certain "Acquisition, Rehabilitation and Permanent Financing Loan Agreement" dated as of July , 2011 (the "Loan Agreement"). The Loan is secured by a deed of trust ("Deed of Trust") on certain real property (the "Property") owned by Borrower more particularly described in the Loan Agreement. The Loan is evidenced by that certain Promissory Note Secured by Deed of Trust ("Note") of even date herewith, executed by Borrower in favor of the City. The Loan Agreement, Note, Deed of Trust and this Agreement may be referred to collectively herein as the "Loan Documents." B. The Parties desire that the Loan and the Note should be further secured by certain personal property owned by Borrower and the Property. AGREEMENT NOW, THEREFORE, for valid consideration, the Parties agree, pledge and covenant as follows: 1. Grant of Security Interest. Borrower hereby grants to the City a security interest, in the following described personal property ("Collateral"): SEE EXHIBIT "1" ATTACHED HERETO FOR DESCRIPTION OF COLLATERAL 2. Attachment of Security Interest. The security interest hereby created shall attach immediately upon execution of this Agreement by Borrower and shall secure the payment of the Loan according to the terms of the Loan Agreement. 3. Proceeds Included. Borrower also hereby grants to the City a security interest in and to any and all additions and modifications to, replacements and substitutions for, and products, proceeds, and interest from the Collateral on any sale, transfer, exchange or other disposition thereof. How- ever, nothing in this Paragraph 3 shall be deemed to constitute a grant of authority to Borrower to sell, transfer, exchange or otherwise dispose of the Collateral without the prior written consent of the City. 1 4. Warranties of Borrower. Borrower represents and warrants to the City that: (a) Borrower is or will be the full legal owner of the Collateral and no other person or entity has or will have any right, title, interest or claim in or to the Collateral or any part thereof, except for the security interest created herein, or created pursuant to those certain deeds of trust recorded as encumbrances against the property that are senior to the City's deed of trust and that were duly approved by the City, and/or security interests in the Collateral granted by Borrower with the knowledge and approval of the City, in its reasonable discretion. (b) Some or all of the Collateral is or will be located at the Property, and once so located, it will not, during the continuance of this Agreement, be removed from the Property without the prior written consent of the City. If the Collateral is moved or upon any default, which continues beyond any applicable notice and cure periods, of this Agreement by Borrower, at the City's written request, at its own cost and expense, shall assemble the Collateral wherever in San Diego County the City requests the Collateral to be assembled. 5. Duty to Maintain. Borrower shall maintain the Collateral, and each part or item thereof, in good order and repair at Borrower's own cost and expense, and shall not use the Collateral or allow the Collateral to be used in a manner which is likely to result in deterioration of the Collateral to a degree beyond that associated with normal usage and ordinary "wear and tear." 6. Insurance. Borrower shall keep the Collateral, and all parts and items thereof, insured, at Borrower's own cost and expense, in an amount equal to the full replacement cost new value of the Collateral, as such replacement value may vary from time to time. Such insurance policy shall cover all insurable risks to which the Collateral might foreseeably be exposed, and shall be issued by an insurance carrier acceptable to the City, and shall provide that the loss payable thereunder shall be paid to Borrower, the City and to any senior secured party, as their respective interests may appear. Notwithstanding the foregoing, this Paragraph 6 shall not be deemed to require a separate insurance policy covering the Collateral, if equivalent coverage first satisfactory to the City is provided as part of the insurance maintained by Borrower with respect to the Property as a whole. 7. Taxes. Borrower shall be solely liable for any taxes or assessments which are levied or assessed against the Collateral and shall ensure the prompt payment of same. 8. Disposition of Collateral. Borrower shall not (without the prior written consent of the City), sell, transfer, encumber, hypothecate, exchange or otherwise dispose of the Collateral until the Loan secured hereby is fully and finally paid, except Borrower may replace items of collateral in the ordinary course of business with items of equal or greater value. 9. Right to Inspect. The City, through its agents or employees, shall have the right, upon reasonable notice, to enter the Property at reasonable times and intervals to inspect and take inventory of the Collateral, provided the same does not unnecessarily infringe upon the operation of the Property. 2 10. Right to Make Payments. The City shall be entitled, but not obligated, to pay, on behalf of Borrower, after giving written notice to Borrower and ten (10) days from receipt of the notice in which to make payment, any costs or expenses reasonably necessary to keep the Collateral fully insured, properly repaired or maintained, and lien free, which costs or expenses Borrower should have paid pursuant to this Agreement but failed to do so. Similarly, the City shall have the right to enter the Property, upon reasonable notice to Borrower and its Eligible Tenants and at reasonable times, and to perform such acts as it may deem necessary for the maintenance or protection of the Collateral. Any monies expended or expenses incurred under this Paragraph 10 shall be secured by the security interest created by this Agreement, and shall be due and payable to the City by Borrower, together with interest thereon at the lesser of ten percent (10%) per annum or the maximum rate permitted by law, on demand. 11. Assignment by City. The City may assign its rights hereunder and its security interest created herein. In the event of such an assignment, the City's assignee shall be entitled, upon written notice to Borrower of such assignment, to all performance required of Borrower under this Agreement, and to all payments and monies secured by this Agreement. 12. Default. If Borrower fails to perform any obligation provided for in this Agreement or to pay any obligation secured by this Agreement as such obligation comes due, after any notice or cure periods provided herein or in any unexpired Loan Documents, then Borrower shall be in default of this Agreement, and the City shall be entitled to all of the rights and remedies afforded secured parties under applicable provisions of Division 9 of the California Commercial Code on the date of this Agreement, excluding the right to any deficiency judgment against Borrower. Further, the City may also: (a) Enter the Property to take possession of the Collateral, provided that the Collateral shall not be removed from the Real Property unless such removal is reasonably necessary to protect the Collateral from destruction or unauthorized removal by Borrower or some third party; or (b) Enter the Property and dispose of the Collateral, in the manner provided by the California Commercial Code; and, (c) Apply the proceeds of any such disposition of the Collateral, in addition to the items specified in Division 9 of the California Commercial Code, to the payment of reasonable attorneys' fees and legal expenses incurred by the City as a result of Borrower's default. Before exercising any of the foregoing rights, the City shall first give written notice of such default to Borrower, and Borrower shall have thirty (30) days from receipt of the notice to cure any such default before the City exercises its rights. 13. Financing Statement. Immediately upon executing this Agreement, the Parties shall execute any Financing Statement(s) necessary to perfect the security interest created by this Agreement. Such Financing Statement(s) shall be on a form or forms approved by the California Secretary of State, and the City shall pay the fees associated with filing such documents. 3 14. No Waiver. Neither the acceptance of any partial or delinquent payment by the City nor the City's failure to exercise any of its rights or remedies upon the occurrence of a default by Borrower shall constitute a waiver of such default, a modification of this Agreement or of Borrower's obligations under this Agreement, or a waiver of any subsequent default by Borrower. 15. Term. This Agreement shall continue in effect until each and every obligation of Borrower under the Loan Agreement has been satisfied (except any obligations that survive repayment of the Loan, foreclosure of the Property or termination of the Loan Agreement), or until the Loan Agreement has terminated by virtue of a foreclosure of a senior lienholder. 16. Time of Essence. Time is hereby expressly declared to be of the essence of this Agreement. 17. Notice. Notice hereunder shall be deemed given upon actual personal delivery to the notified Party or upon the expiration of three (3) days from the insertion of the notice in a United States Mail depository within California, or upon the expiration of seven (7) days from the insertion of the notice, properly addressed and certified mail, return receipt requested, postage prepaid, in a United States Mail depository outside of California. Notices shall be sent to the addresses of the Parties as set forth below, or as changed by either party from time to time by written notice to the other Party. City: City of National City 1243 National City Boulevard National City, CA 91950-4397 Borrower: T & T Community Properties, LLC 18. Certain Requirements Superior. All provisions of this Agreement shall be subject and subordinate to: (a) Any and all federal, state and local statutes and regulations applicable to the Property, the Collateral or the Loan; (b) The provisions of the Loan Agreement secured by this Agreement, to the extent of any inconsistency between it and this Agreement; and 19. Attorneys' Fees. If either party initiates legal proceedings for the enforcement or interpretation of this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees and costs of suit, in addition to any other relief to which such Party may be entitled. 20. Severability. If any provision of this Agreement is held to be invalid or unenforceable by a court of competent jurisdiction, then such provision shall be severed from the rest of this Agreement and the remaining provisions shall remain in full force and effect. 4 21. Construction of Agreement. The provisions contained in this Agreement shall not be construed in favor of or against either party, but shall be construed as if both Parties prepared this Agreement. This Agreement shall be construed in accordance with the laws of the State of California. 22. Counterparts. This Agreement may be executed in any number of counterparts and, as so executed, the counterparts shall constitute one and the same Agreement. The parties agree that each such counterpart is an original and shall be binding upon all the parties, even though all of the parties are not signatories to the same counterpart. 23. Exhibits and Recitals Incorporated. All exhibits referred to in this Agreement are hereby incorporated in this Agreement by this reference, regardless of whether or not the exhibits are actually attached to this Agreement. The Recitals to this Agreement are hereby incorporated in this Agreement by this reference. 24. Signature Authority. All individuals signing this Agreement for a party which is a corporation, limited liability company, partnership or other legal entity, or signing under a power of attorney, or as a trustee, guardian, conservator, or in any other legal capacity, covenant to the City that they have the necessary capacity and authority to act for, sign and bind the respective entity or principal on whose behalf they are signing. BORROWER: T & T Community Properties, LLC, a California limited liability company By: Print Name: Its: City: City of National City By: Ron Morrison, Mayor APPROVED AS TO FORM: Christensen & Spath LLP, Special Counsel to the City By: Print Name: Its: 5 Exhibit "G" Unsecured Environmental Indemnity Agreement 38 UNSECURED ENVIRONMENTAL INDEMNITY AGREEMENT THIS UNSECURED ENVIRONMENTAL INDEMNITY AGREEMENT ("Indemnity") is dated as of the _ day of , 2011, by T & T Community Properties, LLC, a California limited liability company ("Indemnitor"), to and for the benefit of the City of National City ("City"), its successors and assigns and, to the extent not otherwise referenced, the Indemnified Parties (as hereinafter defined). RECITALS A. The City has agreed to make a loan ("City Loan") to Indemnitor as described in that certain Acquisition, Rehabilitation and Permanent Financing Loan Agreement between the City and Indemnitor, dated as of July , 2011 ("City Loan Agreement") and that certain Promissory Note made by Indemnitor in favor of the City, of even date herewith ("Promissory Note"), which City Loan is secured by, among other things, a Deed of Trust executed by Indemnitor in favor of the City ("Deed of Trust"). The Deed of Trust encumbers the real property described on Exhibit A attached hereto (the "Property"). B. It is a condition of the City making the City Loan that this Indemnity be executed and delivered by Indemnitor. The City is making the City Loan in reliance upon this Indemnity. C. This Indemnity is unsecured and is separate from the security and other collateral being delivered by Indemnitor in connection with the making of the City Loan. AGREEMENT NOW, THEREFORE, in consideration of the foregoing and of the City making the City Loan, and other valuable consideration, the receipt of which is hereby acknowledged, Indemnitor agrees as follows: 1. Indemnity. (a) Subject to Sections 2, 3 and 4 below, Indemnitor hereby agrees to defend, protect, indemnify and hold harmless the City, the City's affiliates, directors, officers, shareholders, agents and employees, and the City's participants, successors and assigns specified in Section 4 hereof (hereinafter, collectively, the "Indemnified Parties"), from and against, and shall reimburse the Indemnified Parties for, any and all actual out-of-pocket costs (including, without limitation, attorneys' fees, expenses and court costs), expenses or losses arising from any claim, liability, damage, injunctive relief, injury to person, property or natural resources, fine, penalty, action or cause of action (collectively, "Costs and Liabilities"), incurred by or asserted against any Indemnified Party and arising directly or indirectly, in whole or in part, out of the release, discharge, deposit or presence, or alleged or suspected release, discharge, deposit or presence, of any Hazardous Materials at, on, within, under, about or from the Property, or in or adjacent to any part of the Property, or in the soil, groundwater or soil vapor on or under the Property, or elsewhere in 1 connection with the transportation of Hazardous Materials to or from the Property in violation of any Hazardous Materials Laws, whether or not known to Indemnitor or Indemnified Parties, whether foreseeable or unforeseeable, regardless of the source of such release, discharge, deposit or presence or, except as expressly provided to the contrary in Sections 2 and 4 hereof, regardless of when such release, discharge, deposit or presence occurred or is discovered. Without limiting the generality of the foregoing indemnity, such Costs and Liabilities shall include, without limitation, all actual out- of-pocket costs incurred by Indemnified Parties in connection with (i) determining whether the Property is in compliance with this Indemnity and with all applicable Hazardous Materials Laws or the amount of money required to remediate any environmental contamination, and causing the Property to be or become in compliance, with all applicable Hazardous Materials Laws, (ii) any removal or remediation of any kind and disposal of any Hazardous Materials present at, on, under or within the Property or released from the Property to the extent required by applicable Hazardous Materials Laws in effect at the time of such removal, remediation or disposal, and (iii) repair of any damage to the Property or any other property caused by any removal, remediation or disposal. (b) Upon demand by any Indemnified Party, Indemnitor shall defend any investigation, action or proceeding in connection with any claim or liability, or alleged claim or liability, that would, if determined adversely to such Indemnified Party, be covered by the foregoing indemnification provisions, such defense to be at Indemnitor's sole cost and expense and by counsel reasonably approved by such Indemnified Party, which counsel may, without limiting the rights of an Indemnified Party pursuant to the next succeeding sentence of this Section 1(b), also represent Indemnitor in such investigation, action or proceeding. If any Indemnified Party determines reasonably and in good faith that its defense by Indemnitor is being conducted in a manner which is prejudicial to its interests, such Indemnified Party may elect to conduct its own defense through counsel of its own choosing and at the expense of Indemnitor. (c) As used herein, the term "Hazardous Materials" means and includes any flammable, explosive, or radioactive materials or hazardous, toxic or dangerous wastes, substances or related materials or any other chemicals, materials or substances, exposure to which is prohibited, limited or regulated by any federal, state, county, regional or local authority or which, even if not so regulated, may or could pose a hazard to the health and safety of the occupants of the Property or of property adjacent to the Property, including, but not limited to, asbestos, PCBs, petroleum products and byproducts, substances defined or listed as "hazardous substances" or "toxic substances" or similarly identified in, pursuant to, or for purposes of, the California Solid Waste Management, Resource Recovery and Recycling Act (California Government Code §66700 et seq.), the Comprehensive Environmental Response, Compensation, and Liability Act, as amended (42 U. S.C. §9601, et seg.), the Hazardous Materials Transportation Act (49 U. S.C. § 1801, et seq.), the Resource Conservation and Recovery Act (42 U.S.C. §6901, et seq.), Section 25117 or Section 25316 of the California Health & Safety Code; and any so-called "Superfund" or "Superlien" law, or any other federal, state or local statute, law, ordinance, code, rule, regulation, order or decree regulating, relating to or imposing liability or standards of conduct concerning any hazardous, toxic or dangerous waste, substance or material; or any substances or mixture regulated under the Toxic Substance Control Act of 1976, as now or hereafter amended (15 U.S.C. §2601 et sec .); and any "toxic pollutant" under the Clean Water Act, as now or hereafter amended (33 U.S.C. § 1251 et seq.); and any hazardous air pollutant under the Clean Air Act, as now or hereafter amended (42 U.S.C. §7901 et seq.). Notwithstanding the above, the term "Hazardous Materials" shall not include small amounts of 2 chemicals, cleaning agents and the like commonly employed in routine household uses in a manner typical of occupants in other similar residential properties provided they are used in compliance with applicable laws. The term "Hazardous Materials Laws" means any federal, state or local law, code, statute, ordinance, rule, regulation, rule of common law or guideline relating to Hazardous Materials now or hereafter enacted or promulgated (collectively, and including, without limitation, any such laws which require notice of the use, presence, storage, generation, disposal or release of any Hazardous Materials to be provided to any party). 2. Time Limits on Claims. Notwithstanding the foregoing provisions: (a) No claim shall be made hereunder by any Indemnified Party unless and until any one of the following events shall have occurred: (i) repayment in full of the City Loan (as evidenced by the release and reconveyance of the Deed of Trust); or (ii) vesting of title to the Property in the City or any Indemnified Party through judicial or non judicial foreclosure or acceptance of a deed in lieu thereof. (b) Indemnitor shall not have any obligation under this Indemnity to an Indemnified Party with respect to any Costs and Liabilities that, prior to the first to occur of the events described in Section 2(a)(i) or (ii) above: (i) were actually known to the City; (ii) were liquidated in amount, or were otherwise readily determinable in amount without undue delay; and (iii) would have been lawfully and properly includable as part of the secured indebtedness under the Deed of Trust in an action for a deficiency judgment following a judicial foreclosure sale of the Property. (c) If any Indemnified Party or any affiliate of any Indemnified Party has acquired ownership of the Property through foreclosure or deed in lieu of foreclosure, the obligations of Indemnitor hereunder shall apply, without limitation, to all Costs and Liabilities that arise out of or are attributable to, whether directly or indirectly, ownership of the Property or any part thereof by any Indemnified Party or any such affiliate, or to the position of such Indemnified Party or such affiliate as an owner in the chain of title to the Property or any part thereof. (d) If the City Loan has been repaid in full, whether by voluntary payment or by foreclosure or deed in lieu of foreclosure, the obligations of Indemnitor hereunder shall continue to apply, without limitation, to all Costs and Liabilities that arise out of or are attributable to, whether directly or indirectly, any claim or allegation against an Indemnified Party relating to any act or omission of such Indemnified Party in respect of the City Loan or the Property, or in connection with any exercise of such Indemnified Party's rights under any of the City Loan Documents. 3 3. Acts of Indemnified Parties. (a) Notwithstanding anything to the contrary herein, Indenmitor shall not be liable hereunder to an Indemnified Party to the extent of that portion of any Costs and Liabilities which Indemnitor establishes is attributable to an affirmative act of such Indemnified Party, its agent or any successor in interest of an Indemnified Party at the Property which causes (i) the release, discharge, deposit or presence, or alleged or suspected release, discharge, deposit or presence of a Hazardous Material at the Property, or (ii) material aggravation of a then existing Hazardous Material condition or occurrence at the Property, if and only if, in either such case referred to in (i) or (ii) above, such act was in violation of any Hazardous Materials Laws or was carried out without reasonable care under the circumstances. (b) In addition, Indemnitor shall not be liable hereunder for that portion of any Costs and Liabilities which Indemnitor establishes is attributable to the introduction and initial release, discharge or deposit, or alleged or suspected introduction, initial release, discharge or deposit of a Hazardous Material at the Property by any party, other than Indemnitor or an affiliate of Indemnitor, at any time after Indemnitor's ownership interest in the Property terminates. Notwithstanding the foregoing, but subject to Sections 2 and 3(a) above and Section 4 below, the liability of Indemnitor hereunder shall otherwise remain in full force and effect after the City or such affiliate of the City so acquires title to the Property, including without limitation with respect to any Hazardous Materials which are discovered at the Property after the date the City or such affiliate of the City acquires title but which were actually introduced to the Property prior to the date of such acquisition. 4. Indemnified Parties. This Indemnity and Indemnitor's obligations hereunder shall inure to the benefit of and be enforceable only by (a) the City, the City's directors, officers, shareholders, agents and employees, (b) any person or entities to which any the City participates, assigns or sells all or any portion of its interest in the City Loan, or which otherwise succeeds to the interest of the City under the Deed of Trust, whether by purchase or otherwise, and (c) any affiliate of the City which acquires title to the Property at a foreclosure sale or by deed in lieu of foreclosure. 5. Unsecured Obligations. The obligations of Indemnitor hereunder are unsecured. This Indemnity is not intended to be, nor shall it be, secured by the Deed of Trust or any other instrument or agreement executed by Indemnitor or any other entity or person in favor of the City or any Indem- nified Party relating to the City Loan (except for any guaranty) (such documents together with the Deed of Trust being referred to collectively herein as the "City Loan Documents"). The obligations of Indemnitor under this Indemnity are independent of any indemnification or other obligations of Indemnitor under the City Loan Documents with respect to any Hazardous Materials. The rights and remedies of the Indemnified Parties under this Indemnity shall be in addition to any other rights and remedies of such Indemnified Parties under the City Loan Documents. In no event shall any provision of this Indemnity be deemed to be waiver of or to be in lieu of any right or claim, including without limitation any right of contribution or other right of recovery, that any person entitled to enforce this Indemnity might otherwise have against Indemnitor under any Hazardous Materials Laws. Any sums payable hereunder shall not be deemed to be based upon any diminution in or other impairment of the value of any collateral held by the City to secure the City Loan. 4 6. Interest on Unpaid Amounts. Any amount claimed hereunder by an Indemnified Party not paid by Indemnitor within thirty (30) days after written demand made by such Indemnified Party and accompanied by a reasonable summary of the amounts claimed, shall bear interest at the rate of ten percent (10%) per annum or the highest interest rate permitted by law, whichever is less. 7. Limitations on Liability. The liability of Indemnitor under this Indemnity shall in no way be limited or impaired by (a) any amendment or modification of the provisions of any of the City Loan Documents; (b) except as set forth in Sections 2, 3 and 4, any participation in or sale or assignment of the City Loan Documents or any sale or transfer of all or part of the Property; (c) the release of Indemnitor or any person or entity from performance or observance of any of the agreements, covenants, terms, or conditions contained in any of the City Loan Documents by operation of law; and, in any such case, whether with or without notice to Indemnitor and with or without consideration. Except as provided in Sections 2, 3 and 4, Indemnitor's obligations hereunder shall in no way be impaired, reduced or released by reason of (i) an Indemnified Party's omission or delay in exercising any right described herein or (ii) any act or omission of an Indemnified Party in connection with any notice, demand, warning, or claim regarding violations of codes, laws or ordinances governing the Property. 8. Recourse Obligations. Notwithstanding anything to the contrary in the City Loan Documents, Indemnitor shall be personally liable on a recourse basis for the obligations of Indemnitor set forth herein. 9. Successors and Assigns. This Indemnity shall be continuing, irrevocable and binding upon each of the persons and entities comprising Indemnitor and their respective heirs, successors, and assigns. 10. Inconsistencies. In the event of any inconsistencies or conflicts between the terms of this Indemnity and the terms of the other City Loan Documents (including any exculpatory language contained therein), the terms of this Indemnity shall control. 11. Separate Causes of Action. A separate right of action hereunder shall arise each time an Indemnified Party acquires knowledge of any matter described herein. Separate and successive actions may be brought hereunder to enforce any of the provisions hereof at any time and from time to time. No action hereunder shall preclude any subsequent action. 12. Severability. If any provision of this Indemnity shall be determined to be unenforceable in any circumstances by a court of competent jurisdiction, then the balance of this Indemnity never- theless shall be enforceable, and the subject provision shall be enforceable in all other circumstan- ces. 13. Attorneys' Fees. In any action or proceeding brought by the Indemnified Parties to enforce any rights under this Indemnity, the prevailing party shall be entitled to all reasonable attorneys' fees and all costs, expenses and disbursements in connection with such action. 5 14. Notices. Any notice, demand, request or other communication which any party hereto may be required or may desire to give hereunder shall be in writing and will be effectively served upon personal delivery or, if mailed, no later than 48 hours after deposit in first class or certified United States mail, postage prepaid, sent to: City: City of National City 1243 National City Boulevard National City, CA 91950-4397 Developer: T & T Community Properties, LLC which addresses may be changed by written notice. 15. Governing Law. This Indemnity shall be governed by and construed in accordance with the laws of the State of California. 16. Counterparts. This Indemnity may be executed in any number of counterparts and, as so executed, the counterparts shall constitute one and the same agreement. The parties agree that each such counterpart is an original and shall be binding upon all the parties, even though all of the parties are not signatories to the same counterpart. 17. Exhibits and Recitals Incorporated. All exhibits referred to in this Indemnity, if any, are hereby incorporated in this Indemnity by this reference, regardless of whether or not the exhibits are actually attached to this Indemnity. The Recitals to this Indemnity are hereby incorporated in this Indemnity by this reference. 18. Signature Authority. All individuals signing this Indemnity for a party which is a corporation, limited liability company, partnership or other legal entity, or signing under a power of attorney, or as a trustee, guardian, conservator, or in any other legal capacity, covenant to the City that they have the necessary capacity and authority to act for, sign and bind the respective entity or principal on whose behalf they are signing. IN WITNESS WHEREOF, this Indemnity is executed as of the day and year above written. [SIGNATURE PAGES FOLLOW] 6 City: City of National City By: Ron Morrison, Mayor APPROVED AS TO FORM: Christensen & Spath LLP, Special Counsel to the City By: Print Name: Its: INDEMNITOR: T & T Community Properties, LLC, a California limited liability company By: Print Name: Its: RESOLUTION NO. 2011 — 159 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NATIONAL CITY APPROVING A RESIDUAL RECEIPTS LOAN OF $717,500 FROM HOME INVESTMENT PARTNERSHIPS PROGRAM FUNDS TO T&T COMMUNITY PROPERTIES, LLC, FOR THE ACQUISITION AND REHABILITATION OF AN EIGHT -UNIT APARTMENT COMPLEX LOCATED AT 138 NORTON AVE, NATIONAL CITY AND REQUIRING AFFORDABLE RENT RESTRICTIONS ON SEVEN UNITS FOR A PERIOD OF 55 YEARS WHEREAS, the City of National City administers the HOME Investment Partnerships (HOME) Program; and WHEREAS, the City has established a need for affordable housing, and has established the rehabilitation of the City's housing stock as a priority; and WHEREAS, the City has identified $717,500 of HOME funds to finance affordable housing from FY2005-2006 and FY 2010-2011 that are available for allocation; and WHEREAS, on May 11, 2011, T & T Community Properties, LLC, entered into a contract to purchase said property for $810,500; and WHEREAS, T & T Community Properties, LLC, will obtain a new loan of $565,000 from Clearinghouse CDFI and requires the City's loan to complete the purchase of said property, and finance $305,300 in rehabilitation hard costs, a deferred developer fee of $57,000 and other costs; and WHEREAS, three housing units of said property willrestrictedbe to rents affordable to households at or below 50% of the Area Median Income (AMI) for a period of 15 years; and WHEREAS, four housing units of said property will be restricted to rents affordable to households at or below 60% AMI for a period of 55 years. WHEREAS, one housing unit of said property will be restricted to rents affordable to households at or below 80% AMI for a period of 55 years. NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of National City hereby y approves gap financing through a HOME Program loan in the amount of $717,500, utilizing HOME Investment Partnership Program funds. BE IT FURTHER RESOLVED that the Mayor is hereby authorized to execute any necessary documents for the financing of the project, including loan agreements, amendments thereto, deeds and subordination agreements, subject to review by legal counsel. --- Signature Page to Fallow --- Resolution No. 2011 — 159 Page Two PASSED and ADOPTED this 19th day of July, 2011 Rbh Morrison, Mayor ATTEST: 1,-)Atiteha Michael R. Dalla, ity Clerk A • • ROVED AS TO FORM: Passed and adopted by the Council of the City of National City, California, on July 19, 2011 by the following vote, to -wit: Ayes: Councilmembers Morrison, Natividad, Rios, Sotelo-Solis, Zarate. Nays: None. Absent: None. Abstain: None. AUTHENTICATED BY: RON MORRISON Mayor of the City of National City, California City CIek of the City of/gational City, California By: Deputy I HEREBY CERTIFY that the above and foregoing is a full, true and correct copy of RESOLUTION NO. 2011-159 of the City of National City, California, passed and adopted by the Council of said City on July 19, 2011. City Clerk of the City of National City, California By: Deputy CITY OF NATIONAL CITY, CALIFORNIA COUNCIL AGENDA STATEMENT "FETING DATE: July 19, 2011 AGENDA ITEM NO. 17 ITEM TITLE: Resolution of the City of National City approving a residual receipts loan of $717,500 from HOME Investment Partnerships Program funds to T&T Community Properties, LLC for the acquisition and rehabilitation of an 8-unit apartment complex at 138 Norton Ave, National City and requiring affordable rent restrictions on 8 units for a period of 55 years PREPARED BY: Alfredo Ybarr PHONE: (619) 336-4279 DEPARTMENT: Administrative Services APPROVED BY. EXPLANATION: This action authorizes the allocation of $717,500 in federal HOME Investment Partnerships Program (HOME) funds to acquire and rehabilitate an eight unit rental housing project located at 138 Norton Avenue, National City. In exchange for the $717,500 loan, T & T Community Properties LLC, will maintain affordable rents on eight units for 55 years for very low and low income families earning at or below 50 percent, 60 percent and 80 percent of the area median income (AMI). The total sources of financing for the property purchase and substantial rehabilitation include the $717,500 loan from the City of National City, a new first mortgage of $565,000, deferred developer fee of $57,000, and other equity of $31,850. The total acquisition and rehabilitation cost is $1,371,350. FINANCIAL STATEMENT: APPROVED: mance ACCOUNT NO. APPROVED: I"" MIS The project will be funded with $572,500.0o allocated by City Council Resolution 2011-98 to the HOME Housing Develc% ment Fund that includes $75,167 in Program income and $145,000.00 of $537,963.0o allocated by City Resolution 2oo6-56 to Asst. Production -Affordable Housing. ENVIRONMENTAL REVIEW: The Aloha Terrace Apartment Project located at 138 Norton Avenue, National City, CA is exempt from National Environmental Policy Act (NEPA) requirements per Section 58.34(a) (12). ORDINANCE: INTRODUCTION: FINAL ADOPTION: STAFF RECOMMENDATION: Adopt resolution BOARD / COMMISSION RECOMMENDATION: TTACHMENTS: 1. Background 2. Loan Agreement RESOLUTION NO. 2011 — RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NATIONAL CITY APPROVING A RESIDUAL RECEIPTS LOAN OF $717,500 FROM HOME INVESTMENT PARTNERSHIPS PROGRAM FUNDS TO T&T COMMUNITY PROPERTIES, LLC, FOR THE ACQUISITION AND REHABILITATION OF AN EIGHT -UNIT APARTMENT COMPLEX LOCATED AT 138 NORTON AVE, NATIONAL CITY AND REQUIRING AFFORDABLE RENT RESTRICTIONS ON SEVEN UNITS FOR A PERIOD OF 15 YEARS WHEREAS, the City of National City administers the HOME Investment Partnerships (HOME) Program; and WHEREAS, the City has established a need for affordable housing, and has established the rehabilitation of the City's housing stock as a priority; and WHEREAS, the City has identified $717,500 of HOME funds to finance affordable housing from FY2005-2006 and FY 2010-2011 that are available for allocation; and WHEREAS, on May 11, 2011, T & T Community Properties, LLC, entered into a contract to purchase said property for $810,500; and WHEREAS, T & T Community Properties, LLC, will obtain a new loan of $565,000 from Clearinghouse CDFI and requires the City's loan to complete the purchase of said property, and finance $305,300 in rehabilitation hard costs, a deferred developer fee of $57,000 and other costs; and WHEREAS, three housing units of said property will be restricted to rents affordable to households at or below 50% of the Area Median Income (AMI) for a period of 15 years; and WHEREAS, four housing units of said property will be restricted to rents affordable to households at or below 60% AMI for a period of 15 years. WHEREAS, one housing unit of said property will be restricted to rents affordable to households at or below 80% AMI for a period of 15 years. NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of National City hereby y approves gap financing through a HOME Program loan in the amount of $717,500, utilizing HOME Investment Partnership Program funds. BE IT FURTHER RESOLVED that the Mayor is hereby authorized to execute any necessary documents for the financing of the project, including loan agreements, amendments thereto, deeds and subordination agreements, subject to review by legal counsel. --- Signature Page to Follow --- • • Resolution No. 2011 — Page Two PASSED and ADOPTED this 19th day of July, 2011. ATTEST: Michael R. Dalla, City Clerk APPROVED AS TO FORM: Claudia G. Silva City Attorney Ron Morrison, Mayor Attachment 1 BACKGROUND The City of National City has received a loan request from T & T Community Properties LLC (T & T) for $717,500 to assist with the acquisition and rehabilitation of an eight -unit rental housing project located at 138 Norton Avenue, National City. T & T would buy the 8 two -bedroom unit property for approximately $101,000 per unit (not to exceed appraised value). The goal is to significantly enhance the curb appeal of the property as a catalyst for improvements by other nearby property owners. Constructed in 1960, the building on the property consist of eight 2-bedroom units located at 138 Norton Avenue in a residential pocket just northwest of the corner of Palm and 4th in National City. The vicinity is a mix of single-family and multi -family housing with the long-term quality of the area tied to how well the multi -family is cared for and managed. The health and desirability of the single-family homes as owner - occupied housing is directly tied to the multi -family housing nearby. It is imperative that the multi -family be kept up in order to maintain the quality of the neighborhood. All residents appear to be income eligible and no permanent displacement is anticipated. Rehabilitation The proposed HOME loan of $717,500 will be used to acquire and rehabilitate the property. Funds, totaling $305,300, will be used for the rehabilitation of individual unit interiors and exterior building improvements. The cost of rehabilitation improvements per unit is $38,163. The contemplated rehabilitation includes: 1. New Roof covering, roof insulation to R-21 or higher, roof drains/gutters 2. Improved water quality control, permanent BMPS 3. Installation of new windows and doors with high performance glazing. 4. Improved window shading 5. Code compliant balcony railings and stair handrails 6. Balcony surface refinish. 7. Installation of high efficiency lighting. 8. New stucco including exterior acrylic finish for water intrusion protection. 9. Appropriate landscaping for solar heating and shading, low water usage and visual enhancement. 10. Interior improvements to include, in most units as needed: heaters, plumbing fixtures, flooring, bath and kitchen cabinets, tub enclosures, countertops, painting, light fixtures, and drywall damage repair & asbestos abatement. 11. Electrical safety improvements, smoke detection, and make up air for interior gas appliances. 12. Functional common area improvements for usable outdoor areas for residents, a new entry treatment. 13. Re-routing exterior plumbing supply lines to inside the walls, new common water heater. Page 1 of 2 Financing and Loan Terms The total sources of financing for the property purchase and substantial rehabilitation include the $717,500 loan from the City of National City, a new first amortized loan of $565,000 from Clearinghouse, deferred developer fee of $57,000, and other equity of $31,850. The total acquisition and rehabilitation costs are $1,371,350. The City loan will be a two (2%) percent simple interest loan with residual receipt payments at 30% of cash flow beginning on the following November after the closing date. Any unpaid balance will be due at the end of the 55 year term. Unit Affordability In exchange for the $717,500 loan, T & T will acquire, improve, and rehabilitate the units to a safe and decent standard and maintain affordable rents for 55 years for the benefit of low-income families earning at or below 50 percent and 60 percent of the area median income (AMI). Three - 2 bedroom units will be restricted for families at or below 50 percent of the area median income (AMI), four- 2 bedroom units for families at or below 60 percent of the AMI and one- 2 bedroom unit for families at 80% AMI. The restricted unit at 80% will be utilized for an on -site manager. Area Median Income (AMI) No. of units Maximum income (family of four) Estimated Unit Rents 50% AMI 3 $41,200 $898 60% AMI 4 $49,440 $1,000 80% AMI 1 $54,250 $1,000 The current market rent for an unrestricted two bedroom unit in National City is approximately $1,150 per month. Linkage to the National City Strategic Plan The acquisition and rehabilitation of the subject property supports the City's "Develop Affordable Housing by Leveraging 20% Set Aside, Home Funds, and Other Affordable Housing Finance Programs" strategic initiative to help residents find safe and affordable housing. Approval of this proposal will create affordable housing for low-income families in the region. Approval of the resolution by the City Council will allow staff to enter into a loan agreement and proceed with contract negotiations, and upon completion of the negotiations, execute all loan documents with T & T Community Partners, LLC. • • • Page 2 of 2 Attachment 2 • ACQUISITION, REHABILITATION AND PERMANENT FINANCING LOAN AGREEMENT Project No. THIS ACQUISITION, REHABILITATION AND PERMANENT FINANCING LOAN AGREEMENT ("Agreement") is dated as of the day of July, 2011, by and between the City of National City ("City") and T & T Community Properties, LLC, a California limited liability company ("Borrower") as follows: RECITALS A. Borrower intends to acquire, rehabilitate and permanently finance that certain real property located at 138 Norton Avenue, National City, California ( "Property"), which is more particularly described in Exhibit "A," attached hereto and made a part hereof. Borrower intends to acquire, rehabilitate and permanently finance the Property using a loan from the City in the original principal amount of up to Seven Hundred Seventeen Thousand Five Hundred and No/100 Dollars ($717,500.00) ("City Loan"). The City Loan is comprised entirely of HUD HOME funds all of which shall be used for HOME eligible purposes. B. The City Loan shall be evidenced by the City Note, which shall bear interest at the rate of two percent (2.0%) simple interest per annum and will be repayable out of residual receipts on the terms and conditions set forth in the City Note. This Agreement and the City Note shall be secured by the Deed of Trust. C. As soon as is reasonably practicable after the Closing, and in no event later than fifteen (15) days after the Closing, Borrower shall begin rehabilitation of the Property. Borrower intends to rehabilitate all eight (8) of the dwelling units at the Property (collectively, the "Project"). Borrower shall rehabilitate and operate all eight (8) of those dwelling units on the Property as affordable housing units (the "Affordable Units") which shall be rent and occupancy restricted for 55-years, as provided herein. One (1) of the Affordable Units shall be a manager's unit and will be rent or occupancy restricted at eighty percent (80%) of area median income, as set forth in the Declaration. D. Borrower intends to finance the Project using: (i) the City Loan; (ii) a rehabilitation and permanent loan made by Clearinghouse CDFI in the original principal amount of Five Hundred Sixty -Five Thousand and No/100 Dollars ($565,000.00) secured by the Property ("Clearinghouse Loan"); and (iii) deferral of Fifty -Seven Thousand and No/100 Dollars ($57,000.00) of Borrower's developer fee ("Deferred Developer Fee"). This Agreement is being executed in connection with, and the City's obligation to make the City Loan is contingent on Borrower closing on the Clearinghouse Loan and deferring the Deferred Developer Fee. E. The City Loan will be funded with HUD HOME Program Funds and shall be governed by all HUD HOME Program regulations whether or not specifically referenced in this Agreement and shall fund only project costs as set forth in 24 CFR 92.206. The eight (8) Affordable Units shall all be two -bedroom units. The Affordable Units are to be operated as 1 affordable housing. Seven (7) units shall be HOME Affordable Units and as set forth in the Declaration. All of the Affordable Units shall be restricted as set forth in the Declaration. All eight (8) Affordable Units shall be rent and occupancy restricted as set forth in the Declaration for fifty-five (55) years. The obligations of Borrower under the Declaration shall be independent of, and in addition to, Borrower's obligations under this Agreement, and repayment of the City Loan shall not terminate or otherwise affect the affordability restrictions set forth in the Declaration. The HOME assisted Affordable Units will be rent restricted under the provisions of the HOME requirements for a period of fifteen (15) years. During the remaining forty (40) years the Affordable Units that were restricted under the HOME Program requirements will continue to be rent and occupancy restricted under the Declaration. F. The initial rehabilitation of the Project shall be completed and the Affordable Units shall be 90% or more occupied on or before twelve (12) months after the Closing. Time is of the essence. Completion of the Project shall occur upon the issuance of a Certificate of Completion and the recordation of a Notice of Completion by the Borrower. Borrower shall provide the City with a copy of the recorded Notice of Completion for all units within the Project within five (5) days of Borrower's receipt of the same. G. The Project shall be rehabilitated in accordance with all applicable law, rules, regulations and conditions of approval from the U.S. Department of Housing & Urban Development ("HUD"), the City, the various lenders involved with the Project and the requirements of this Agreement. NOW, THEREFORE, in furtherance of the recitals stated above, the mutual covenants set forth below, the Parties agree, promise and declare as follows: DEFINITIONS The following terms shall have the meanings set forth below: "Affordable Units" shall have the meaning ascribed to it in Recital C. "Agreement" means this Acquisition, Rehabilitation and Permanent Financing Loan Agreement. "Borrower" means T & T Community Properties, LLC, a California limited liability company. Nothing contained herein shall prohibit Borrower from changing its name provided that there is no change in the composition and make up of Borrower, without the prior written consent of the City. "City" means the City of National City. "City Loan" means the acquisition, rehabilitation and permanent financing loan from the City to Borrower in the original principal amount of Seven Hundred Seventeen Thousand Five Hundred and No/100 Dollars ($717,500.00). • • • 2 • • • "City Note" means that certain promissory note to be executed by Borrower (concurrently with the Closing) in favor of the City evidencing the City Loan, in the form attached hereto as Exhibit "B". "Clearinghouse Loan" means the existing rehabilitation and permanent financing loan made by Clearinghouse CDFI to Borrower in the original principal amount of Five Hundred Sixty -Five Thousand and No/100 Dollars ($565,000.00) secured by the Property. "Closing" means the closing of the Escrow, which shall in no event be later than September 30, 2011. If Closing does not occur on or before September 30, 2011, then all rights and liabilities of the City and Borrower with respect to this Agreement shall immediately terminate. "Declaration" means the declaration of covenants, conditions and restrictions, in the form and format attached hereto as Exhibit "D", which shall be recorded as an encumbrance against the Property concurrently with the Closing. "Deed of Trust" means the deed of trust securing the Declaration and the City Loan, in the form and format attached hereto as Exhibit "C," which shall be recorded as an encumbrance against the Property concurrently with the Closing. "Defective Work" means all work, material, or equipment that is unsatisfactory, faulty, incomplete, or does not conform to industry standards, construction documents, or approved drawings. "Deferred Developer Fee" means Fifty -Seven Thousand and No/100 Dollars ($57,000.00) of the developer fee which is being deferred. "Environmental Laws" means any federal, state or local law, statute, ordinance or regulation pertaining to environmental regulation, contamination or cleanup of any Hazardous Materials, including, without limitation, (i) the California Hazardous Waste Control Act (California Health and Safety Code §25100 et seq.), (ii) the Carpenter -Presley -Tanner Hazardous Substance Account Act (California Health and Safety Code §25300 et seq.), (iii) the Hazardous Materials Release Response Plans and Inventory (California Health and Safety Code §25500 et seq.), (iv) Underground Storage of Hazardous Substances (California Health and Safety Code, §25280 et seq.), (v) Article 9 or Article 11 of Title 22 of the California Administrative Code, Division 4, Chapter 20, (vi) the Safe Drinking Water and Toxic Enforcement Act (California Health and Safety Code, §25249 et seq.), (vii) the Porter -cologne Water Quality Control Act (California Water Code, §13000 et seq.), (viii) the Federal Water Pollution Control Act (33 U.S.C. § 1271 et seq.), (ix) the Resource Conservation and Recovery Act (42 U.S.C. §6901 et seq.), (x) the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. §9601 et seq.), (xi) the Safe Drinking Water Act (14 U.S.C. §300f et seq.), (xii) the Hazardous Materials Transportation Act (49 U.S.C. §5101 et seq.), (xiii) the Toxic Substances Control Act (15 U.S.C. §2601 et seq.), (xiv) the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. § 136, et seq.), (xv) the Clean Air Act, 42 U.S.C. (§7401 et seq.) or (xvi) any state or federal lien or "superlien" law, any environmental cleanup statute or regulation, or any permit, approval, authorization, license, variance or permission required by any governmental authority having jurisdiction. "Escrow" means the escrow depository and disbursement services to be performed by Escrow Agent pursuant to the provisions of this Agreement. "Escrow Agent" means First American Title Company located at 4380 La Jolla Village Drive, Suite 110, San Diego, CA 92122. "Hazardous Materials" means: (i) Those substances included within the definitions of "hazardous substance," "hazardous waste," "hazardous material," "toxic substance," "solid waste," "pollutant" or "contaminant" in the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C. §9601 et seq.); the Resource Conservation and Recovery Act (42 U.S.C. §6901 et seq.); the Clean Water Act (33 U.S.C. §2601 et seq.); the Toxic Substances Control Act (15 U.S.C. §9601 et seq.); the Hazardous Materials Transportation Act (49 U.S.C. § 1801 et seq.); or under any other Environmental Laws; (ii) Those substances included within the definitions of "Extremely Hazardous Waste," "Hazardous Waste," or "Restricted Hazardous Waste," under §§25115, 25117 or 25122.7 of the California Health and Safety Code, or is listed or identified pursuant to §§25140 or 44321 of the California Health and Safety Code; (iii) Those substances included within the definitions of "Hazardous Material," "Hazardous Substance," "Hazardous Waste," "Toxic Air Contaminant" or "Medical Waste" under §§25281, 25316, 25501, 25501.1, 25023.2 or 39655 of the California Health and Safety Code; (iv) Those substances included within the definitions of "Oil" or a "Hazardous Substance" listed or identified pursuant to §311 of the Federal Water Pollution Control Act, 33 U.S.C. § 1321, as well as any other hydrocarbonic substance or by-product; (v) Those substances included within the definitions of "Hazardous Waste," Extremely Hazardous Waste" or an "Acutely IIazardous Waste" pursuant to Chapter 11 of Title 22 of the California Code of Regulations; (vi) Those substances listed by the State of California as a chemical known by the State to cause cancer or reproductive toxicity pursuant to §25249.9(a) of the California Health and Safety Code; (vii) Any material which due to its characteristics or interaction with one or more other substances, chemical compounds, or mixtures, damages or threatens to damage, health, safety, or 4 the environment, or is required by any law or public agency to be remediated, including remediation which such law or public agency requires in order for the property to be put to any lawful purpose; (viii) Any material whose presence would require remediation pursuant to the guidelines set forth in the State of California Leaking Underground Fuel Tank Field Manual, whether or not the presence of such material resulted from a leaking underground fuel tank; (ix) Pesticides regulated under the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. §136 et seq.; (x) Asbestos, PCBs, and other substances regulated under the Toxic Substances Control Act, 15 U.S.C. §2601 et seq.; (xi) Any radioactive material including, without limitation, any "source material," "special nuclear material," "by-product material," "low-level wastes," "high-level radioactive waste," "spent nuclear fuel" or "transuranic waste" and any other radioactive materials or radioactive wastes, however produced, regulated under the Atomic Energy Act, 42 U.S.C. §§2011 et seq., the Nuclear Waste Policy Act, 42 U.S.C. §§10101 et seq., or pursuant to the California Radiation Control Law, California Health and Safety Code §§25800 et seq.; (xii) Any material regulated under the Occupational Safety and Health Act, 29 U.S.C. §§651 et seq., or the California Occupational Safety and Health Act, California Labor Code §§6300 et seq.; (xiii) Any material regulated under the Clean Air Act, 42 U.S.C. §§7401 et seq. or pursuant to Division 26 of the California Health and Safety Code; (xiv) Those substances listed in the United States Department of Transportation Table (49 CFR Part 172.101), or by the Environmental Protection the City, or any successor agency, as hazardous substances (40 CFR Part 302); (xv) Other substances, materials, and wastes that are or become regulated or classified as hazardous or toxic under federal, state or local laws or regulations; and (xvi) Any material, waste or substance that is: a petroleum or refined petroleum product; asbestos; polychlorinated biphenyl; designated as a hazardous substance pursuant to 33 U.S.C. §1321 or listed pursuant to 33 U.S.C. §1317; 5 (e) a flammable explosive; or (f) a radioactive material. "HOME Affordable Units" means the seven (7) Affordable Units described in Recital E of this Agreement restricted under the HOME regulations. "Project" shall have the meaning ascribed to it in Recital C. "Property" shall have the meaning ascribed to it in Recital A. "Statement of Insurance Requirements" means the statement of insurance requirements, in the form and format attached hereto as Exhibit "E," which shall be executed and delivered by the Borrower and the City concurrently with the Closing as set forth in Section 1.7, below. "Security Agreement" means the security agreement in the form and format attached hereto as Exhibit "F," which shall be executed and delivered by the Borrower and the City concurrently with the Closing. "Unsecured Environmental Indemnity Agreement" means the unsecured environmental indemnity agreement, in the form and format attached hereto as Exhibit "G," which shall be executed and delivered by the Borrower and the City concurrently with the Closing. ARTICLE I Loan Provisions - General Section - 1.1 Acquisition, Rehabilitation and Permanent Financing Loan. the City will fund the City Loan to Borrower according to and upon the terms and conditions set forth below. The proceeds of the City Loan shall be used by Borrower solely for the purposes of acquiring, rehabilitating and permanently financing the Affordable Units, in accordance with all applicable HUD HOME regulations. (a) City Loan Amount. The amount of the City Loan shall not exceed Seven Hundred Seventeen Thousand Five Hundred and No/100 Dollars ($717,500.00). (b) Promissory Note. (1) The City Loan shall be evidenced by the City Note executed by Borrower, in favor of the City, in the original principal amount of Seven Hundred Seventeen Thousand Five Hundred and No/100 Dollars ($717,500.00). The City Loan and the City Note shall be fully to Borrower. 6 (2) The City Note shall bear simple interest at two percent (2.0%) per annum from the date of disbursement. (3) Interest shall accrue, however, no payments shall be due under the City Note until May 1, 2013. Beginning on May 1, 2013, and annually on May 1 of each year during the term of the City Note, Borrower shall make payments to the City in the manner provided in the City Note, until fifty-five (55) years from the date of disbursement, at which time all principal and unpaid interest shall be due and payable. The principal and interest may be prepaid in whole or in part at any time and from time to time, without notice or penalty. Any prepayment shall be allocated first to unpaid interest and then to principal. Prepayment of the City Loan shall not in any manner affect any obligation or restriction related to maintaining the units as "Affordable Units" during the fifty-five (55) year term. (4) Should Borrower agree to or actually sell, convey, transfer, further encumber or dispose of the Property or any interest in it, without first obtaining the written consent of the holder of the City Note (i.e., the City), which consent shall be granted or withheld at the sole discretion of the holder of the City Note, then all obligations secured by the City Note may be declared due and payable at the option of the holder of the City Note. The consent to one transaction of this type will not constitute a waiver of the right to require consent to future or successive transactions. The resident tenant restrictions referenced in Section 1.5 of this Agreement shall remain in place whether or not the City approves or disapproves a successor -in - interest for the term of fifty-five (55) years from the date of completion of rehabilitation of the Proj ect. (5) The parties acknowledge that the City Loan is not a purchase money mortgage as defined in Code of Civil Procedure Section 580b. Section 1.2 - Security. (a) Deed of Trust. Borrower shall execute, acknowledge, deliver and cause to be recorded at Closing, the Deed of Trust, as security for the City Loan and the Declaration, in a form and format set forth in Exhibit "C," attached to this Agreement and incorporated herein by this reference. A copy of this Agreement shall not be attached to and recorded as part of such Deed of Trust but any breach of or misrepresentation under this Agreement shall, upon the expiration of any applicable notice and cure period(s), constitute an event of default under such Deed of Trust. (b) Additional Security. Borrower shall execute and deliver to the City the Security Agreement, UCC-1 financing statements and such other separate consents or certificates, assignments and other documents or instruments as the City may require to properly reflect the security interests in the personalty used in connection with the operation of the Property as the City may require. In addition thereto, Borrower shall execute and deliver such security agreements, and the like, as required by the City in connection with the Deed of Trust. Specifically, Borrower agrees that any notice of default and/or copy of any notice of sale will be mailed to the City in compliance with Section 2924(b) of the California Civil Code. 7 Section 1.3 - Subsequent Financing. No further loan, deed of trust, or encumbrance, shall be placed by Borrower upon any portion of the Property or Project, whether by refinancing or otherwise, without first obtaining the express written consent of the City. Any such unconsented to financing or refinancing shall constitute a material beach of this Agreement. Further, during any the City approved refinancing or subsequent encumbrance, the City shall be provided ALTA title insurance or endorsements acceptable to the City, at the cost and expense of Borrower. Said written consent shall be at the City's sole discretion. Without the express written consent of the City such subsequent financing is void. Section 1.4 - Funding. the City's obligation to fund the City Loan shall be and is specifically conditioned upon Borrower closing on the Clearinghouse Loan, the City approving the preliminary title reports concerning the Property, payment of all taxes due and payable on the Property, issuance of an ALTA Lender's policy insuring the City Loan satisfactory to the City and its counsel, satisfaction of all conditions precedent to the City's obligation to fund the City Loan, and satisfaction of those conditions set forth in Section 1.16 of this Agreement. Section 1.5 - Declaration. The obligation of the City to make and fund the City Loan hereunder is subject to the execution and recordation against the Property of the Declaration. The Declaration shall contain housing payment and income level restrictions for the eight (8) Affordable Units for a period of fifty-five (55) years. Rents will provide affordable housing to households earning between fifty percent (50%) and eighty percent (80%) of area median income as referenced in the Declaration. The monthly rental rate shall be as set forth in the Declaration. The rents may be subject to modification annually as set forth in the Declaration. The Declaration shall be recorded in a position superior and prior to all encumbrances on the Property, except for the deed of trust and other instruments securing the Clearinghouse Loan. Section 1.6 - No Partnership or Joint Venture. The relationship between the City and Borrower created by this Agreement shall not be one of partnership or joint venture, but rather shall be one of secured lender and borrower. Section 1.7 - Insurance. Borrower, at its sole cost and expense, shall purchase and maintain public liability, auto liability and property damage insurance with limits of not less than $2,000,000.00 for injury to or death of one or more persons and/or property damage arising out of a single accident or occurrence, insuring against any and all liability of the City and its respective employees, Borrower, its contractors, employees, agents, subcontractors and its authorized representatives, arising out of or in connection with Borrower's activities under the Project. All public liability insurance and property damage insurance shall insure the performance of Borrower of the indemnity provisions set forth in this Agreement. Further, in all such insurance required to be purchased and maintained by Borrower: (i) the City shall be named as an additional insured, (ii) Borrower's coverage shall be primary, (iii) additional insured endorsement shall not exclude completed operations, (iv) the policy shall provide ten year extended reporting period, and (v) the policy shall contain cross -liability endorsements. Borrower further agrees to purchase and maintain in full force and effect such policies of worker's compensation insurance as may be required to cover all employees of Borrower during 8 the term of this Agreement, in a form and amount acceptable to the City. Further, Borrower shall maintain policies of insurance as referenced in the Statement of Insurance Requirements throughout the term of the City Loan and for the duration of the Declaration. Certificates of insurance acceptable to the City shall be filed with the City prior to funding of the City Loan. The insurance requirements contained in this section shall not be construed to limit the Borrower's obligations under this Agreement, including without limitation any indemnities. Section 1.8 - Assignability. (a) Borrower may not assign any interest in this Agreement and shall not transfer any interest in the same (whether by assignment or novation) without the prior written approval of the City. Any assignment without the prior written consent of the City shall be voidable, at the election of the City. The City shall have full right and authority to assign all or a part of its rights and delegate all or a part of its duties under this agreement. (b) Except to the extent that changes are permitted by Section 1.8(a) above, Borrower shall not amend or modify in any material respect or, restate, revoke or rescind its LLC-1 (Articles of Organization) or Operating Agreement without the prior written consent of the City, which consent shall not be unreasonably withheld, conditioned or delayed. Section 1.9 - General Contractor and Subcontracting. The guaranteed not to exceed construction contract(s), entered into by Borrower with the general contractor for the rehabilitation of the Project shall be entered into on or before the date first set forth above, and shall be subject to the prior written approval of the City. Borrower shall be fully responsible to the City for the acts and omissions of its subcontractors, and of persons either directly or indirectly employed by Borrower. Borrower shall insert in each subcontract appropriate provisions requiring compliance with the labor standard provisions of this Agreement, including without limitation the payment of Federal prevailing wages and State prevailing wages, if required. Notwithstanding the foregoing, the City has not imposed, and nothing in this agreement shall be construed as imposing, any independent prevailing wage requirements that are different from those imposed by applicable Federal or State law. Section 1.10 — Borrower Liability. Borrower shall be responsible for all injuries to persons and/or all damages to real or personal property of the City or others, caused by or resulting from the negligence and/or breach of this Agreement, of itself, its employees, subcontractors and/or its agents during the rehabilitation of or arising out of the rehabilitation of the Project and/or the breach of this Agreement. Borrower shall defend and hold harmless and indemnify the City, and all of its officers and employees from all costs, damages, judgments, expenses and claims to any third party resulting from the negligence and/or breach of this Agreement, by Borrower, its employees, subcontractors and/or its agents, arising out of the rehabilitation of the Project and/or the breach of this Agreement, except those arising from the sole negligence or willful misconduct of the City. Section 1.11 - Ownership of Materials and Documents. Any and all sketches, drawings, tracings, field survey notes, computations, plans, details and other materials and documents prepared by or 9 on behalf of Borrower pertaining to the Property shall be the property of the City upon default by Borrower (to the extent of Bon-ower's rights in such documents), and the expiration of all applicable cure period(s), and Borrower shall deliver such materials and documents to the City whenever requested to do so by the City. Subject to the rights of third parties that prepared such documents, the City shall have the right to have duplicate copies of such materials and documents for their file, at the cost and expense of the City, upon written request even if Borrower is not in default under the terms of this Agreement. Section 1.12 - Indemnification. (a) With respect to any liability, including but not limited to claims asserted, demands, causes of action, costs, expenses, losses, attorney fees, injuries, or payments for injury to any person or property, including injury to Borrower's employees, agents, or officer, caused or claimed to be caused by the acts or omissions of the Borrower, or the Borrower's employees, agents, and officers, arising out of, arising from, or related to the City Loan; the design, engineering, or rehabilitation of the Project; Borrower's ownership or operation of the Property and the Project; or any other work or obligations performed involving this Agreement, the Borrower agrees to defend, indemnify, protect, and hold harmless the City, their respective agents, officers, and employees from and against all liability, losses, damages, costs or claims, including, but not limited to, claims for injury or death to any person occurring on the Property and contracts executed by Borrower and any losses from the Property, including losses from negative cash flows. Also covered is liability arising from, connected with, caused by, or claimed to be caused by the active or passive negligent acts or omissions of the City, its agents, officers, or employees that may be in combination with the active or passive negligent acts or omissions of the Borrower, its employees, agents or officers, or any third party. Borrower's duty to defend, indemnify, protect and hold harmless shall not include any claims or liabilities arising from the sole negligence or sole willful misconduct of the City, its agents, officers or employees. This indemnity provision shall survive the repayment of the City Loan and the term of this Agreement. (b) Borrower further agrees to defend, indemnify, and hold harmless, the City, their respective agents, officers and employees from and against any and all costs, damages, claims, and liabilities, including reasonable attorney fees, foreseeable or unforeseeable, directly or indirectly, arising from or related to Hazardous Materials located, used, released, or otherwise present or alleged to be present, used, or released on the Property, or any violation or alleged violation of Environmental Laws. This indemnity provision shall extend beyond the term of this Agreement and the termination of this Agreement. The City has no obligation or liability whatsoever regarding toxic contamination or Hazardous Materials on the Property. (c) The Borrower agrees to pay any and all costs the City incurs to enforce the indemnity and defense provisions set forth in Section 1.12. Section 1.13 - Termination. This Agreement and the relationship created herein shall terminate upon full satisfaction of all of Borrower's obligations, and those of Borrower's successors, if approved by the City, under this Agreement. The obligations of Borrower include, but are not 10 limited to, those obligations arising under the Declaration, the provisions of which shall survive repayment of the City Loan. Section 1.14 - Defective Work. (a) Correction, Removal, or Replacement. If during the term of this Agreement, or any duration as may be required by law or regulation, the Project are discovered to contain Defective Work, the Borrower shall promptly and in accordance with the City's written instructions and within the reasonable time limits stated therein, either correct the Defective Work, or if identified during rehabilitation of the Project, remove the Defective Work from the site and replace the Defective Work with non -defective and conforming work. (b) the City Right to Correct. If circumstances warrant, including but not limited to an emergency or Borrower's failure to adhere to section 1.14(a), the City may correct, remove, or replace the Defective Work. In such circumstances, Borrower shall not recover costs associated with the Defective Work and shall reimburse the City for all costs incurred, whether direct or indirect, associated with the correction or removal and replacement. (c) No Limitation on other Remedies. Exercise of the remedies for defects pursuant to this Section shall not limit the remedies the City may pursue under this Agreement or law. Section 1.15 - Default by Borrower. (a) In the event of a material default by Borrower in the performance of any of the terms, covenants and conditions contained in this Agreement, the City Note, the Deed of Trust Amendment, the Declaration, or the Security Agreement, the City shall give Borrower notice of such default. If the default is reasonably capable of being cured within thirty (30) calendar days after such notice is received or deemed received, Borrower shall have such period to effect a cure prior to exercise of remedies by the City under this Agreement, the Declaration and the Deed of Trust Amendment. If the default is such that it is not reasonably capable of being cured within thirty (30) days and Borrower, in the City's sole and absolute discretion, (i) initiates corrective action within said period, and (ii) diligently and in good faith works to effect a cure as soon as possible, then Borrower shall have such additional time (but not to exceed ninety (90) days) as is reasonably necessary to cure the default prior to exercise of any remedies by the City. If such default is not timely cured or in the event of any default under any prior or junior note secured by an encumbrance on the Property or any portion of it, or any note or deed of trust given in conjunction herewith, or in the event of the filing of a bankruptcy proceeding by or against Borrower, all sums disbursed or advanced by the City shall at the option of the City immediately become due and payable and the City shall have no obligation to disburse any further funds from said account, or otherwise, and the City shall be released from any and all obligations to Borrower under the terms of this Agreement. These remedies shall be in addition to any and all other rights and remedies available to the City, either at law or in equity. (b) If a non -monetary event of default occurs under the terms of this Agreement, the City Note, the Deed of Trust Amendment, the Declaration or the Security Agreement, prior to 11 exercising any remedies hereunder or thereunder, the City shall give Borrower notice of such default. If the default is reasonably capable of being cured within thirty (30) calendar days after such notice is received or deemed received, Borrower shall have such period to effect a cure prior to exercise of remedies by the City under this Agreement, the Declaration and the Deed of Trust Amendment. If the default is such that it is not reasonably capable of being cured within thirty (30) days and Borrower, in the City's sole and absolute discretion, (i) initiates corrective action within said period, and (ii) diligently and in good faith works to effect a cure as soon as possible, then Borrower shall have such additional lime (but not to exceed ninety (90) days) as is reasonably necessary to cure the default prior to exercise of any remedies by the City. If such default is not timely cured, then the City may proceed with all or any of its rights and remedies available at law or in equity or as set forth herein, in the Declaration and/or the Deed of Trust Amendment. (c) Li the event of any monetary default by Borrower under the terms of this Agreement, the City Note, the Deed of Trust Amendment, the Declaration or the Security Agreement, the City shall give Borrower a ten (10) day written notice of default, during which Borrower shall have the ability to cure the monetary default. If the default is not timely cured, the City may proceed with all rights and remedies under the terms of the City Loan or at law. (d) The default or defective performance by Borrower under the terms of this Agreement shall not relieve Borrower from any obligation to correct any incomplete, inaccurate, or Defective Work at no further cost to the City. Section 1.16 - Conditions to the City Obligations. The obligation of the City to make and fund the City Loan is subject to the following conditions: (a) This Agreement, the City Note, Deed of Trust, Declaration, Escrow Instructions, Statement of Insurance Requirements, Security Agreement and Unsecured Environmental Indemnity Agreement, fully executed by Borrower, shall have been delivered to the City and/or its designee along with all other fully executed security documents and instruments provided for herein and/or as required by the City. Borrower has provided and delivered to the City at Borrower's sole expense a standard form ALTA Lender's Policy of Title Insurance, insuring the City's security interest in the Property under the Deed of Trust and in an amount equal to the original principal amount of the City Loan; (b) Borrower's certification at the close of escrow that: (i) the City Loan is wholly for the benefit of Borrower, (ii) Borrower is responsible for all obligations created by the City Loan including, without limitation, the repayment of all principal and interest now due and payable or which may become due and payable on the terms and conditions of this Agreement, the City Note, the Deed of Trust, and any other security documents and instruments provided for herein; (c) Borrower shall have strictly complied with, and performed, all terms and conditions of the documents executed by Borrower in connection with this Agreement and the City Loan; 12 (d) the City's approval of all financing documents, including without limitation the Clearinghouse Loan documents; (e) Borrower has paid an amount into escrow, which is sufficient to pay for all costs associated with such escrow, including without limitation title fees, escrow fees, closing costs and carrying costs and the City's legal fees; (0 Recordation of a grant deed vesting fee simple title to the Property in Borrower; (g) The guaranteed not to exceed construction contract for the work at the Project, acceptable to the City, shall have been executed by the Borrower and the general contractor who has been selected to do the work; and (h) Such other conditions as the City shall request. Section 1.17 - Borrower's Representations and Warranties. Borrower represents and warrants to the City as provided in this Section 1.17. Borrower shall, upon learning of any fact or condition, which would cause any warranties or representations herein not to be true in any material respect, immediately give written notice of such fact or condition to the City. (a) Borrower is a validly and lawfully formed California limited liability company, and is in good standing under California law and will remain such for the term of this Agreement. (b) Execution of this Agreement, the Deed of Trust, the Declaration and all other documents executed in conjunction herewith have been duly authorized by Borrower's board of directors, and such execution shall not result with the passage of time or the giving of notice or both in breach of or in acceleration of performance under any contract or document to which Borrower may be a party. (c) All required approvals have been obtained in connection with Borrower's execution of this Agreement, and all related agreements and documents to the effect that no breach of or acceleration of performance under any agreement or document to which Borrower is a party will result in such execution. (d) Funds advanced by the City pursuant to the City Loan are advanced wholly or in part for the benefit of Borrower. (e) The principal and interest due and payable under the City Loan are subject to the terms and conditions of this Agreement, any other security documents or instruments provided for herein. (0 Borrower agrees to use the City Loan funds solely for the acquisition, rehabilitation and permanent financing of the Project as set forth in the Recitals. 13 (g) Borrower shall comply with the terms of the Declaration at all times during the 55-year term of the Declaration. (h) Borrower shall at all times during the first 15 years of the term of the Declaration, comply with the HUD HOME regulations. (i) The defective performance by Borrower under the terms of this Agreement shall not relieve Borrower from any obligation to correct any incomplete, inaccurate, or defective work at no further cost to the City, when such inaccuracies, defects and incomplete work are due to Borrower's fault, including the fault of Borrower's subcontractors, agents, partners, joint venturers and employees. (j) To the best of Borrower's knowledge, there are no actions, suits, material claims, legal proceedings, or any other proceedings affecting the Borrower or any parties affiliated with the Borrower, at law or in equity before any court, tribunal, government agency, domestic or foreign, which, if adversely determined, would materially impair the right or ability of Borrower to execute or perform its obligations under this Agreement or any documents required hereby to be executed by Borrower, or which would materially adversely affect the financial condition of the Borrower or any parties affiliated with the Borrower. (k) To the best of Borrower's knowledge, Borrower's execution, delivery, and performance of its obligations under this Agreement will not constitute a default or breach or any contract, agreement, or order to which Borrower or any parties affiliated with Borrower is a party or by which it is bound. (1) No attachment, execution proceedings, assignments for the benefit of creditors, insolvency, bankruptcy, reorganization, receivership or other proceedings have been filed or are pending or threatened against the Borrower or any parties affiliated with Borrower, nor are any of such proceedings contemplated by Borrower or any parties affiliated with Borrower Section 1.18 Affordability Provision. (a) Execution of Declaration. Borrower agrees to execute the Declaration and to cause it to be recorded, assuring compliance with the affordability provisions of this Agreement. Borrower agrees to obtain any and all subordination agreements, if any, necessary to insure that the Declaration is an encumbrance on the Property prior to all other encumbrances and liens, other than taxes and the deed of trust and other documents securing the Clearinghouse Loan. Such subordinations shall be on terms and conditions acceptable to the City and its counsel in their sole discretions. The Declaration shall be binding and enforceable against all heirs, successors and assigns of Borrower. (b) Term of Affordability. Borrower agrees that the Property shall remain affordable and subject to the Declaration for not less than fifty-five (55) years from the effective date as referenced in the Declaration. 14 (c) Cross -Default With the Declaration. Borrower and its successors in interest to the Project and/or the Property shall strictly comply with all of the terms and conditions of the Declaration. Any default under the Declaration shall be a default under this Agreement, the City Note and the Deed of Trust. (d) No Conversion to Condominiums. Borrower agrees that Borrower shall not, and shall not allow any other person to, during the term of the Declaration, cause all or any portion of the Property and/or the Project to be converted to condominiums or to otherwise allow a condominium map or condominium plan to be recorded or filed against all or any portion of the Property and/or the Project. Borrower further agrees that the conversion of all or any portion of the Property or the Project to condominiums and/or the recordation or filing of a condominium map or condominium plan against all or any portion of the Property and/or the Project during the term of the Declaration, shall be a breach of this Agreement, the City Loan, the Declaration, the City Note and the Deed of Trust, entitling the City to immediately exercise any and all of its rights and remedies under this Agreement, the City Loan, the Declaration, the City Note and the Deed of Trust, including without limitation acceleration of the City Note and foreclosure under the Deed of Trust. Section 1.19 - City Approval of Property Manager. At all times during the term of the Declaration, if the City serves a thirty (30) day written notice of deficiencies in the property management for the Property, or default under the Declaration or any document executed in conjunction herewith, which deficiencies or default have not been rectified by Borrower, within the thirty (30) day period (unless such deficiency or default is not capable of being cured within such thirty (30) day period, then such amount of time as the City determines is needed, not to exceed ninety (90) days, provided Borrower commences cure within thirty (30) day period and continues to diligently pursue cure), then, the City shall have the right, but not the duty, in its sole discretion and upon such thirty (30) days written notice: (i) to require the retention of a professional property management firm to manage the Property; (ii) to approve, in advance and in writing, the retention of any such property management firm, including the terms of the contract governing such retention; and (iii) to require Borrower to terminate any such property management firm, provided that such termination shall comply with the termination provisions of the management contract in question. Borrower shall cooperate with the City to effectuate the City's rights. Section 1.20 - Usury. If a court of competent jurisdiction determines, by way of final unappealable order or judgment, that the interest rate charged under the City Note is usurious, then such rate shall automatically and retroactively be reduced to the maximum rate allowed under applicable law. Section 1.21 - Remedies. (a) Contract Governed by Laws of the State of California. This Agreement, its performance, and all suits and special proceedings under this Agreement, shall be constituted in accordance with the laws of the State of California and Federal law, to the extent applicable. In any action, special proceeding, or other proceeding that may be brought arising out of, under or 15 because of this Agreement, the laws of the State of California and the United States, to the extent applicable, shall govern to the exclusion of the law of any other forum, without regard to the jurisdiction in which the action or special proceeding may be instituted. (b) Standing, Equitable Remedies; Cumulative Remedies. Borrower expressly agrees and declares that the City or any successor or public agency shall be the proper party and shall have standing to initiate and pursue any and all actions or proceedings, at law or in equity, including but not limited to foreclosure under any security instrument securing performance hereunder, to enforce the provisions hereof and/or to recover damages for any default hereunder, notwithstanding the fact that such damages or the detriment arising from such a default may have actually been suffered by some other person or by the public at large. Further, Borrower expressly agrees that receivership, injunctive relief and specific performance are proper pre-trial and/or post -trial remedies hereunder, and that, upon any default, a receiver may be appointed by the court to take control of the Property and to assure compliance with this Agreement. Nothing in this subparagraph, and no recovery to the City, shall restrict or limit the rights or remedies of persons or entities other than the City, against Borrower in connection with the same or related acts by Borrower. The remedies set forth in this Section are cumulative and not mutually exclusive, except the extent that their award is specifically determined to be duplicative by final order of a court of competent jurisdiction. (c) Remedies at Law for Breach of Operating Restrictions. In the event of any default under this Agreement regarding restrictions on the operation and the transfer of the Property, the City shall be entitled to, in addition to any and all other remedies available at law or in equity: (i) declare the City Loan to be all due and payable; and (ii) recover compensatory damages. If the default in question involves the violation of Section 1.18, above, including without limitation a default under the Declaration, the amount of such compensatory damages shall be the product of multiplying (A) the number of months that the default in question has continued until the time of trial by (B) the result of subtracting the rents properly chargeable hereunder for the Affordable Unit(s) in question from the amount actually charged. Borrower and the City agree that it would be extremely difficult or impracticable to ascertain the precise amount of actual damages accruing to the City as a result of such a default and that the foregoing formula is a fair and reasonable method of approximating such damages. the City shall be entitled to seek and to recover damages in separate actions for successive, separate breaches which may occur. Further, interest shall accrue on the amount of such damages from the date of the breach in question at the rate of ten percent (10%) per annum or the maximum rate than allowed by law, whichever is less. Nothing in this section shall preclude the award of exemplary damages as allowed by law. (d) Expert Witness, Attorneys' Fees, and Costs. The parties agree that the prevailing party in litigation for the breach and/or interpretation and/or enforcement of the terms of this Agreement shall be entitled to their expert witness fees, if any, as part of their costs of suit, and attorneys' fees as may be awarded by the court, pursuant to California Code of Civil Procedure ("CCP") Section 1033.5 and any other applicable provisions of California law, including, without limitation, the provisions of CCP Section 998. 16 Section 1.22 — No Management Fee or Developer Fee. No management fee or developer fee concerning the Project shall be paid to Borrower or its affiliates until ninety percent (90%) of the Affordable Units have been leased. The amount of management fees shall be subject to the annual approval of the City. Section 1.23 - Replacement Reserves. Borrower shall, during the time of the term of the Declaration, maintain operating and replacement reserves approved by the City. Failure to maintain such reserves shall constitute a material default under the terms of this Agreement. Annually, beginning with the first year after the timely completion of rehabilitation of the Project and each year thereafter, not less than Three Thousand Four Hundred and No/100 Dollars ($3,400.00) set aside as a reserve for replacements (1/12th of the foregoing amount may be set aside by Borrower each month). This replacement reserve amount is subject to revision upward as determined by the City, annually, based upon an increase in the consumer price index for the San Diego Metropolitan Area. The reserves shall be maintained in a separate account in anticipation of and as a contingency against unbudgeted and/or unforeseen expenses in the operation and maintenance of the Project. No disbursements from the operating reserve or replacement account(s) shall be made without the express written consent of the City, which consent shall not be unreasonably withheld or delayed. Borrower shall account to the City for any monies expended from the operating reserves and/or replacement account(s), in such form as approved by the City. Section 1.24 - Completion of Rehabilitation. All rehabilitation of the Project, as approved by the City pursuant to Section 2.1(d), hereof, and shall be completed by Borrower on or before August 31, 2012. Time is of the essence. Failure to comply with these requirements shall constitute a material default under the terms of this Agreement. Borrower shall provide the City with a copy of the recorded Notice of Completion for all units within the Project within five (5) days of Borrower's receipt of the same. Section 1.25 - Failure to Receive Funding. The failure of Borrower to close on the Clearinghouse Loan on or before the Closing, shall constitute a material default under the terms of the Agreement. Section 1.26 - Funding Mechanism. The Seven Hundred Seventeen Thousand Five Hundred and No/100 Dollars ($717,500.00) the City Loan shall be disbursed as set forth in this Section 1.26. (a) Disbursement at Closing. At Closing, the City shall disburse up to $ such amount shall be used solely to acquire the Property. (b) Submission of Draw Requests. During rehabilitation of the Project, Borrower shall submit to the City written draw requests supported by such back up documentation as the City requires. (c) Approval of Draw Requests. The City shall inspect the work to determine its completion and shall thereafter approve, approve in part, or disapprove such draw request. 17 (d) Limit on Effect of Approval. Any the City review and/or approval of the work and disbursements of monies pursuant to draw requests shall be general review and/or approval only, and shall not relieve Borrower of the responsibility to design, engineer, and rehabilitate the Project in accordance with all applicable laws, codes, regulations, and good design, construction, and engineering practice. Any deficiencies or defects shall be corrected at Borrower's cost and expense and without any cost to the City. (e) Disbursements Conditioned on Lien Releases. Disbursements of approved draws shall be conditioned upon the City's receipt of evidence of conditional lien releases. (f) Final Disbursement. At the sole and absolute discretion of the City, up to $25,000.00 may be withheld and not be funded, regardless of expenditures and draw requests, unless and until a rehabilitation of the units has been completed. ARTICLE II Specific Loan Provisions Section 2.1 - Conditions to the City Obligations and Borrower Representations and Warranties. (a) Interest of Current or Former Members, Officers or Employees. Borrower represents and warrants that no member, officer, or employee of Borrower, no member of the governing body of the locality in which the City was activated, and no other public official of such locality or localities who exercises any functions or responsibilities with respect to this Agreement, shall, during his or her tenure, or for one year thereafter, have any interest direct or indirect, in this Agreement or the proceeds thereof. Any violation of this section may, at the option of the City, result in unilateral and immediate termination of this Agreement by the City. Further, the contractor, who rehabilitates the Project, agrees to comply with all of the Conflict of Interest provisions contained in 24 CFR 92.356. (b) Unsecured Environmental Indemnity. Concurrently with Closing, the Borrower and the City shall enter into the Unsecured Environmental Indemnity Agreement. Borrower shall name the City as an additional insured on its insurance policies. Said policies shall be acceptable to the City and shall insure against any and all losses which may occur as a result of problems, claims, work, and the like associated with rehabilitation of the Project. (c) Title Policy. Borrower, shall, at its sole cost and expense, obtain an ALTA lender's policy naming the City as a named insured, and insuring that the City's interest is subject to no superior liens, encumbrances, special assessments or taxes, except as provided for in the Recitals and except as approved by the City. (d) Construction Loan and Contract. The City shall be entitled to review, inspect and approve, without liability, the construction contract and all of the rehabilitation being performed pursuant to the terms of the construction contract. All rehabilitation shall be performed in accordance with the plans and specifications approved by the City in accordance with Section 18 2.2 of this Agreement, without liability to the City for review and observation of the rehabilitation. The City approval shall be understood to be general approval only, and shall not relieve Borrower or contractor of the responsibility to design, engineer, and rehabilitation of the Project in accordance with all applicable laws, codes, regulations, and good design, construction, and engineering practice. Any deficiencies in rehabilitation of the Project shall be corrected by the contractor, and/or Borrower, upon written notice from the City to Borrower, prior to any additional funding of the City Loan, at Borrower's expense and at no cost to the City. (e) Housing Quality Standards. Borrower represents and warrants that Affordable Units shall be maintained, at all times during the term of the Agreement, in complete compliance with all housing quality standards contained within 24 CFR §92.251, regardless of whether such section would apply to the Property. Further, Borrower warrants that all construction shall meet or exceed the applicable local codes and construction standards, including zoning and building codes of the City as well as the provisions of the Model Energy Code published by the Council of American Building Officials. Borrower hereby consents to periodic inspection by the City's designated inspectors and/or designees during regular business hours, including the Code Enforcement Agents of the City, to assure compliance with said zoning, building codes, regulations, and housing quality standards. Borrower agrees to comply with the provisions of 24 CFR §92.251, whether or not contained in this Section. (f) Limitation of Use of Funds for Religious Purposes. Borrower represents and warrants that Borrower will fully comply with any and all requirements and limitations contained in 24 CFR 92.257, as amended, from time to time. Borrower further represents, warrants and agrees that Project funds will not be used for any purpose proscribed in 24 CFR 92.257, as amended. (g) Approval of the City Disclosure Statement. This Agreement is subject to approval by the City of the executed disclosure statements of Borrower. (h) Administrative Requirements. Borrower shall strictly comply with the administrative requirements that are applicable to Borrower contained within 24 CFR Section 92.505, including, but not limited to, the requirements of OMB Circular No. A-87 and the requirements of 24 CFR Part 85, Section 85.6, 85.12, 85.20, 85.22, 85.26, 85.35, 85.36, 85.44, 85.51, and 85.52. Further, Borrower covenants (if it is a nonprofit organization) to comply with the OMB Circular No. A-122 and the applicable provisions of OMB Circular No. A-110. Copies of said OMB Circulars are on file in the offices of the City and are available for inspection and copying by Borrower. Borrower further agrees that should the administrative requirements contained in Section 92.505 be amended and/or changed from time to time by HUD, that Borrower will comply with the terms and conditions of such changed and/or amended administrative requirements. (i) Records and Reports. Each year during the term of the Declaration, Borrower shall supply the City with: (i) a certified rent roll on January 15 for all tenants occupying the Affordable Units as of the immediately preceding December 31; and (ii) a certified rent roll on July 15 for all tenants occupying the Affordable Units as of the immediately preceding June 30. 19 Borrower shall supply the City, annually (after completion of rehabilitation of the Project) not later than July 1, for the immediately preceding calendar year, with such records and reports as are required and are requested by the City. The records and reports include, but are not limited to the following: (1) (2) (3) (4) (5) (6) (7) (8) (9) Amount of funds expended pursuant to this Agreement; Eligible Tenant information, including yearly income verifications; Housing payments charged to resident tenants, to the extent applicable; On -site inspection results; Affirmative marketing records; Insurance policies and notices; Equal Employment Opportunity and Fair Housing records; Labor costs and records; An audited income and expense statement and balance sheets for Borrower; (10) An audited income and expense statement and balance sheets for the Project; (11) A Management Plan for the calendar year in which the report is prepared showing anticipated rental income, other income, expenses, anticipated repairs and replacements to the Project, timing of such repairs and replacements, insurance maintained with respect to the Project, and such other matters as the City shall require, in its sole discretion; (12) Federal and State income tax returns for the calendar year, ending on the preceding December 31st; (13) Annual analysis of reserves for repair and replacement; (14) Annual certification and representation regarding status of all loans, encumbrances and taxes; (15) Annual statement regarding condition of the Property and disclosing any known defects; (16) An OMB A-133 financial audit if required by HUD; 20 (17) A report or reports, certifying compliance with the terms and provisions of the Section 3 requirements, as set forth in Paragraph 2.1(t) of this Agreement and certifying compliance with the provisions of federal law as it relates to Section 3, whether or not specifically set forth in Paragraph 2.1 (t); and (18) Such other and further information and records as the City and/or HUD shall request in writing from Borrower. Time is of the essence in supplying each and every report required to be supplied to the City. The parties agree that a fee of $25.00 per day shall be paid by Borrower to the City for each day that each report is delinquent. The parties agree that multiple fees may be charged at any one time, depending upon the number of report(s) and/or information that is delinquent. The parties agree that a fee of $25.00 per day, per report and/or information is a reasonable estimation of the damages that will accrue to the City as a result of the failure of Borrower to timely submit the required information and/or reports and that said fees shall be treated as liquidated damages by the parties, in anticipation of the damages that will be incurred by the City as a result of a breach by Borrower. The parties further agree that it would be difficult, if not impossible, to determine the exact actual amount of damages suffered by the City in the event of a breach by Borrower in the reporting requirements of this Agreement. Notwithstanding the foregoing or anything to the contrary contained herein, the City shall give Borrower prior written notice of any report and/or information that Borrower has failed to provide the City pursuant to this Section 2.1(i) and Borrower shall have thirty (30) days to provide such report and/or information to the City prior to the assessment of any liquidated damages. (j) Monitoring of Project Activities. Borrower agrees to allow the City reasonable access to review and inspect Borrower's activities under this Agreement as the City shall require to perform its monitoring duties. The City shall monitor Borrower's activities without liability for said inspection and review. (k) Federal and State Requirements. Borrower represents, warrants and agrees that Borrower will fully comply, during the term of this Agreement, with any and all HOME requirements including, but not limited to the requirements of 24 CFR Part 92, 24 CFR Section 92.351 (Affirmative Marketing), 92.352 (Environmental Review), 92.353 (Displacement, Relocation and Acquisition Residential, Antidisplacement and Relocation Plan), 92.354 (Labor), 92.356 (Conflict of Interest) and 92.358 (Flood Insurance). Borrower further warrants, represents and agrees that should said Program requirements be changed by HUD, from time to time, that Borrower will comply with said changed and amended regulations. Borrower, the general contractor, and any and all subcontractors, shall pay prevailing wages for all work done with respect to the Project as required by Federal and California law. Notwithstanding the foregoing, the City has not imposed, and nothing in this agreement shall be construed as imposing, any independent prevailing wage requirements that are different from those imposed by applicable Federal or State law. 21 (1) Affirmative Marketing. Borrower shall, at all times during the term of this Agreement, comply with all of the provisions of Section 24 CFR 92.351 and the affirmative marketing procedures adopted by the City, including, but not limited to, all requirements and procedures referenced in said Section 24 CFR 92.351(b), amended from time to time. Borrower shall maintain records to verify compliance with the applicable affirmative marketing procedures and compliance. Such records are subject to inspection by the City during regular business hours upon five (5) days written notice. (m) Equal Opportunity and Fair Housing Programs. During the tern of this Agreement, Borrower agrees as follows: (1) Borrower will not discriminate against any employee, person, or applicant for employment and/or housing because of race, age, sexual orientation, marital status, color, religion, sex, handicap, or national origin. Borrower will take affirmative action to ensure that applicants are employed and/or are housed, and that employees or applicants are treated during employment and/or housing, without regard to their race, age, sexual orientation, marital status, color, religion, sex, handicap, or national origin. Such action shall include, but is not limited to the following: employment, upgrading, demotion, or termination; rates of pay or other forms of compensation; and selection for training, including apprenticeship. Borrower agrees to post in conspicuous places, available to employees and applicants for employment, notices to be provided by the City setting forth the provisions of this nondiscrimination clause. (2) Borrower will, in all solicitations or advertisements for employees and housing placed by on or behalf of Borrower, state that all qualified applicants will receive consideration for employment without regard to race, age, sexual orientation, marital status, color, religion, sex, handicap, or national origin. (3) Borrower will cause the foregoing provisions to be inserted in all subcontracts for any work covered by this Agreement so that such provisions will be binding upon each subcontractor, provided that the foregoing provision shall not apply to contracts or subcontracts for standard commercial supplies of raw materials. (4) Borrower hereby agrees to comply with the Title VII of the Civil Rights Act of 1964, as amended, the California Fair Employment Practices Act, and any other applicable Federal and State laws and regulations. the City will provide technical assistance and copies of the referenced programs upon request. 24 CFR Section 92.350. (5) All activities carried out by Borrower and/or agents of Borrower shall be in accordance with the requirements of the Federal Fair Housing Act. The Fair Housing Amendments Act of 1988 became effective on March 12, 1989. The Fair Housing Amendments Act of 1988 and Title VIII of the Civil Rights Act of 1968, taken together, constitute The Fair Housing Act. The Act provides protection against the following discriminatory housing practices if they are based on race, sex, religion, color, handicap, familial status, or national origin: denying or refusing to rent housing, denying or refusing to sell housing, treating differently applicants for housing, treating residents differently in connection with terms and 22 conditions, advertising a discriminatory housing preference or limitation, providing false information about the availability of housing, harassing, coercing or intimidating people from enjoying or exercising their rights under the Act, blockbusting for profit, persuading owner to sell or rent housing by telling them that people of a particular race, religion, etc. are moving into the neighborhood, imposing different terms for loans for purchasing, constructing, improving, repairing, or maintaining a home, or loans secured by housing; denying use or participation in real estate services, e.g., brokers' organizations, multiple listing services, etc. The Fair Housing Act gives HUD the authority to hold administrative hearings unless one of the parties elects to have the case heard in U.S. District Court and to issue subpoenas. Both civil and criminal penalties are provided. The Act also provides protection for people with disabilities. The following State of California Laws also govern housing discrimination: Fair Employment and Housing Act, Unruh Civil Rights Act of 1959, Ralph Civil Rights Act of 1976, and Civil Code Section 54.1. (n) Labor Requirements. Borrower represents and warrants that during the term of this Agreement that Borrower will comply with each and every provision and requirement contained within CFR 92.354, as amended from time to time, to the extent applicable, and will pay not less than the wages prevailing in the locality, as predetermined by the Secretary of Labor pursuant to the Davis -Bacon Act (40 U.S.C. 276a-276a-5), to all laborers and mechanics employed in the development of any part of the Project in accordance with the terms and provisions of CFR 92.354 and will comply with the overtime provisions, as applicable, of the Contract Work Hours and Safety Standards Act (40 U.S.C. 327-332). Prevailing wages need not be paid to "Volunteers" or for "Sweat Equity" as defined in 24 CFR 92.354(b) and (c). Furthermore, Borrower, the general contractor, and any and all subcontractors, shall pay prevailing wages for all work done with respect to the Project as required by Federal and California law. (o) Lead Based Paint. Borrower represents and warrants that during the term of the Agreement that Borrower will comply with each and every provision and requirement contained within CFR 92.355, as amended from time to time, to the extent applicable. (p) Certification Concerning Debarment and Suspension. Borrower represents, warrants and hereby certifies, pursuant to 24 CFR 92.357, that Borrower will not use a contractor that has been debarred and or suspended, nor that is proposed for debarment, declared ineligible or voluntarily excluded from participation in the Project, which is the subject matter of this Agreement. Borrower agrees to execute such further certification(s) required by the City and/or HUD including, if necessary, that certification included as Appendix B of CFR Part 24, to verify the certification made in this Section 2.1(p). (q) Flood Insurance. Borrower represents, warrants, and certifies, pursuant to 24 CFR 92.358, that no Real Property which is the subject of this Agreement, is located within a Flood Plain or Flood Hazard Zone or Area, as indicated on a FEMA Map; or that the Real 23 Property is located within a community participating in the National Flood Insurance Program and Borrower agrees to purchase and maintain flood insurance for the duration of the term of this Agreement concerning such Real Property. (r) Fire Protection and Safety. Borrower represents and warrants that Borrower will comply with all requirements and regulations of the Fire Administration Act of 1992 and the Federal Fire and Prevention Control Act. Borrower will use and install all fire and safety related equipment pursuant to the National Fire Protection Association standards. (s) Accessibility Standards. Borrower represents and warrants that Borrower will comply with all federal, state and local requirements and regulations concerning access to the units by the disabled and handicapped persons, including, but not limited to, those requirements of the HOME Program. (t) Section 3 Requirements. Borrower shall comply with the following requirements during the term of the City Loan: (i) The work to be performed under this Agreement is subject to the requirements of section 3 of the Housing and Urban Development Act of 1968, as amended, 12 U.S.C. §1701u (section 3). The purpose of section 3 is to ensure that employment and other economic opportunities generated by HUD assistance or HUD -assisted projects covered by section 3, shall, to the greatest extent feasible, be directed to low- and very low-income persons, particularly persons who are recipients of HUD assistance for housing. (ii) The parties to this Agreement agree to comply with HUD's regulations in 24 CFR part 135, which implement section 3. As evidenced by their execution of this Agreement, the parties to this Agreement certify that they are under no contractual or other impediment that would prevent them from complying with the part 135 regulations. (iii) Borrower agrees to send to each labor organization or representative of workers with which Borrowcr has a collective bargaining agreement or other understanding, if any, a notice advising the labor organization or workers' representative of Borrower's commitments under this section 3 clause, and will post copies of the notice in conspicuous places at the work site where both employees and applicants for training and employment positions can see the notice. The notice shall describe the section 3 preference, shall set forth minimum number and job titles subject to hire, availability of apprenticeship and training positions, and qualifications for each; and the name and location of the person(s) taking applications for each of the positions; and the anticipated date the work shall begin. (iv) Borrower agrees to include this section 3 clause in every subcontract subject to compliance with regulations in 24 CFR part 135, and agrees to take appropriate action, as provided in an applicable provision of the subcontract or in this section 3 clause, upon a finding that the subcontractor is in violation of the regulations in 24 CFR part 135. Borrower will not subcontract with any subcontractor where Borrower has notice or knowledge that the subcontractor has been found in violation of the regulations in 24 CFR part 135. 24 • • • (v) Borrower will certify that any vacant employment positions, including training positions, that are filled (1) after Borrower is selected but before the contract is executed, and (2) with persons other than those to whom the regulations of 24 CFR part 135 require employment opportunities to be directed, were not filled to circumvent Borrower's obligations under 24 CFR part 135. (vi) Noncompliance with HUD's regulations in 24 CFR part 135 may result in sanctions, termination of this Agreement for default, and debarment or suspension from future HUD assisted contracts. (u) Drug Free Workplace. Borrower shall comply with all applicable State and Federal rules, laws and regulations to ensure a drug free workplace at all times during the term of this Agreement. Further, Borrower shall incorporate such federal provisions as are required in each contract or subcontract that Borrower enters into in connection with the Project. (v) Lobbying Prohibition. Borrower hereby certifies to the City, under penalty of perjury, under the terms of applicable federal law, that at all applicable times before, during and after the term of the Agreement, that: (i) No Federal appropriated funds have been paid or will be paid, by or on behalf of Borrower, to any person for influencing or attempting to influence an officer or employee of Congress, or an employee of a Member of Congress in connection with the awarding of any Federal contract, the making of any Federal grant, the making of any Federal loan, the entering into of any cooperative agreement, and the extension, continuation, renewal, amendment, or modification of any Federal contract, grant, loan or cooperative agreement; (ii) If any funds other than Federal appropriated funds have been paid to any person for influencing or attempting to influence an officer or employee of any agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection with this Federal contract, grant, loan or cooperative agreement, Borrower will complete and submit Standard Form-LLL, "Disclosure Form to Report Lobbying," in accordance with its instructions; (iii) Borrower will require that the above stated language be included in the award documents for all subawards at all tiers, including subcontracts, subgrants, loans, contracts, and cooperative agreements concerning the subject matter of this Agreement; and (iv) Further, Borrower and all subrecipients, at all times, shall certify compliance with the provisions of 31 U.S.C. §1352 and any and all terms and conditions of the Byrd Anti -Lobbying Amendment, as amended from time to time. Section 2.2 - Commencement of Rehabilitation and Compliance with Plans and Specifications. 25 (a) Completion Deadline. Borrower shall continue rehabilitation of the Project diligently and without delay, in a good and workmanlike manner. Borrower will complete rehabilitation of the Project in accordance with the plans and specifications approved by the City ("Plans and Specifications"), including any additional specifications prescribed by the City, and in compliance with all requirements of governmental authorities having or asserting jurisdiction. Rehabilitation of the Project shall be completed on or before August 31, 2012, as referenced in Section 1.24 of this Agreement. (b) No Material Changes. No material change shall be made in the plans and specifications approved by the City, including any additional specifications prescribed by the City, without its written consent. For purposes of this Section, "material change" means changes which, in aggregate, increases or decreases the rehabilitation costs by Ten Thousand Dollars ($10,000.00) or more or affect the Project quality or safety established during the City review and approval process. Notwithstanding the foregoing, no changes to the budget, which in the aggregate exceed One Hundred Thousand Dollars ($100,000.00), regardless of any increase of decrease in the overall rehabilitation costs, may be made without the written consent and approval of the City. (c) Submission of Documents Related to Changes. Borrower shall submit any proposed change to the Plans and Specifications to the City at least ten (10) days prior to the commencement of construction relating to such proposed change whether or not such change is subject to the City's consent. Requests for any change that requires consent shall be accompanied by working drawings and a written description of the proposed change, submitted on a change order form acceptable to the City, signed by Borrower and, if required by the City, also signed by the architect and the contractor. Section 2.3 - No Purchase Under Conditional Sales Agreements, Etc. Except for leased laundry equipment, no supplies, materials, equipment, fixtures, carpets, appliances, or any part of said improvements shall be purchased or installed under any conditional sales agreement, lease or under any other arrangement wherein the right is reserved or accrues to anyone to remove or to repossess any such items. It is expressly agreed that all such items shall be part of the Property. Section 2.4 - Security Agreement. Borrower hereby grants to the City a security interest in all supplies, materials, fixtures, carpets, appliances, furniture or equipment now or hereafter located on said Property, together with all proceeds thereof, including insurance proceeds paid or payable as the result of any loss, injury or damage of the foregoing collateral, whether or not the City is named beneficiary under any such insurance. Upon request, from time to time, Borrower will furnish the City with an inventory of such collateral. Nothing contained in this Section 2.4 shall affect the provisions of Section 2.5. Section 2.5 - Stoppage of Work by the City. the City or its agents shall have the right to enter upon the Property and the Project during the period of rehabilitation of the Project. If in the opinion of the City, the rehabilitation is not in material conformance with the plans and specifications, the City shall have the right to order the replacement of any unsatisfactory work 26 theretofore incorporated into rehabilitation of the Project, and to withhold all disbursements from the accounts until it is satisfied with the work. If the work is not made satisfactory to the City, in its sole discretion, within fifteen (15) calendar days from the date of stoppage by the City, such shall constitute a default hereunder. If any unsatisfactory work is such that it is not reasonably capable of being cured within fifteen (15) calendar days and Borrower, in the City's sole discretion, (i) initiates corrective action within said period, and (ii) diligently and in good faith works to correct the unsatisfactory work as soon as possible, then Borrower shall have such additional time as the City determines, in its sole discretion, is reasonably necessary to cure the unsatisfactory work prior to exercise of any remedies by the City. Section 2.6 - Cessation of Work, Completion by the City. Should the work of rehabilitating of the Project cease, and continues for a period of thirty (30) consecutive days, or should said work for any reason whatsoever not progress continuously in a manner satisfactory to the City, in its sole discretion, then the City may, at its option and without notice, declare Borrower to be in default hereunder, and the City may thereupon, should it so elect, take possession of said property and let contracts for the completion of rehabilitation of the Project and pay the cost thereof, plus a fee of fifteen percent (15%) for supervision of construction, disbursing all or any part of the loan for such purposes; and should the cost of completing rehabilitation of the Project plus such fee exceed the undisbursed balance of the loan, then the amount of such excess may be expended by the City, in which event such amount shall be considered an additional loan to Borrower, and the repayment thereof, together with interest thereon at the rate provided in the City Note, shall be secured by the Deed of Trust Amendment and shall be repaid within ten (10) days after the completion of rehabilitation of the Project, and Borrower agrees to pay the same; Borrower further authorizes the City at its option at any time, upon a default by any contractor under any contract in connection with rehabilitation of the Project which is not cured within ten (10) days following notice to Borrower, either in its own name or in the name of Borrower, to do any act or thing necessary or expedient in the opinion of the City to secure the performance of construction contracts and assure the completion of rehabilitation of the Project substantially in accordance with the plans and specifications, disbursing all or any part of the loan funds for such purposes. In addition to the specific rights and remedies hereinabove mentioned, the City shall have the right to avail itself of any other rights or remedies to which it may be entitled under any existing law or laws. Section 2.7 - Mechanic's Liens and Notices to Withhold. Borrower shall use its best efforts to prevent any lien or stop notice from being place on the Property or Project. If a claim of lien or stop work notice is given or recorded affecting the Property or Project, the Borrower shall within ten (10) calendar days of such recording or service: (i) pay and discharge same; (ii) effect a release thereof by recording and delivering to the City a surety bond in sufficient form and amount; or (iii) provide the City with indemnification from a title insurance company reasonably acceptable to the City against such lien or other assurance which the City, in its sole discretion, deems to be satisfactory for the payment of such lien or stop notice and for the full and continuous protection of the City from the effect of such lien or notice. In the event of the filing with the City of a notice to withhold or the recording of a mechanic's lien pursuant to Division 3, Part 4, Title 15 of the Civil Code of the State of California, the City may summarily refuse to honor any requests for payment pursuant to this Agreement. In the event Borrower fails to 27 furnish the City with a bond causing such notice or lien to be released (or alternatively issuance of a title policy or endorsement in the full amount of the City Loan, which title policy or endorsement excludes such lien as an exception to title) within thirty (30) days after the filing or recording thereof, such failure shall at the option of the City constitute a default under the terms of this Agreement. Section 2.8 - Involvement of the City in Legal Proceedings. the City shall have the right to commence, to appear in, or to defend any action or proceeding purporting to affect the rights or duties of the parties hereunder or the payment of any funds in connection with this the City Loan and to pay out of funds not yet disbursed, necessary expenses, employ counsel and pay its fees, all of which the undersigned, jointly and severally, agree to repay to the City upon demand. Provided, however, such costs and expenses shall not be due and owing to the City, if they are incurred as a result of the breach of the Agreement by the City or its negligence or willful misconduct. Section 2.9 - Books and Records. Borrower shall require that the general contractor maintain complete and accurate books and records showing all of the income and disbursements made in connection with the rehabilitation of the Project and such books and records shall be available for inspection and copy by the City upon request and during regular business hours. Section 2.10 - Waiver and Amendment. No provision of this Agreement, or breach of any provision, can be waived except in writing. Waiver of any provision or breach shall not be deemed to be a waiver of any other provision, or of any subsequent breach of the same or other provision. Except as otherwise provided herein, this Agreement may be amended, modified or rescinded only in writing signed by Borrower and the Executive Director of the City. ARTICLE III Miscellaneous Provisions Section 3.1 - Governmental Requirements Superior. All provisions of this Agreement and all the other documents relating to the City Loan shall be subject and subordinate to any and all applicable federal, state and local statutes, regulations and ordinances and shall be subject to modification to comply therewith. Section 3.2 - Notices. All notices under this Agreement shall be in writing and sent by (a) certified or registered mail, return receipt requested, in which case notice shall be deemed delivered seven (7) business days after deposit, postage prepaid in the United States Mail, (b) by a nationally recognized overnight courier such as UPS Overnight or Federal Express, in which case notice shall be deemed delivered one (1) business day after deposit with that courier, or (c) by personal delivery, in which case notice shall be deemed delivered upon the actual date of delivery. All notices shall be delivered to the following addresses, provided, however the addresses may be changed by any party by written notice to all other parties. City: City of National City 28 Borrower: 1243 National City Boulevard National City, CA, 91950-4397 T & T Community Properties, LLC 760 Arroyo Ct. Chula Vista, CA 91910 Section 3.3 - Severability. If any provision of this Agreement is deemed to be invalid or unenforceable by a court of competent jurisdiction, that provision shall be severed from the rest of this Agreement and the remaining provisions shall continue in full force and effect. Section 3.4 - Nonwaiver of the City's Rights. No right, remedy, or power of the City in this Agreement shall be deemed to have been waived by any act or conduct on the part of the City or by any failure to exercise or delay in exercising such right, remedy, or power. Every such right, remedy or power of the City shall continue in full force and effect until specifically waived or released by an instrument in writing executed by the City. Section 3.5 - Entire Agreement. This Agreement contains the entire understanding between the Parties concerning the subject matter contained herein. There are no representations, agreements, arrangements or understandings, oral or written, between or among the parties hereto, relating to the subject matter of this Agreement, which are not fully expressed and/or referred to herein. Section 3.6 - Exhibits and Recitals Incorporated. All exhibits referred to in this Agreement are hereby incorporated in this Agreement by this reference, regardless of whether or not the exhibits are actually attached to this Agreement. The Recitals to this Agreement are hereby incorporated in this Agreement by this reference. Section 3.7 - Construction of the Agreement. The provisions contained in this Agreement shall not be construed in favor of or against either party but shall be construed as if both parties contributed equally to its preparation. This Agreement shall be construed in accordance with the laws of the State of California. Section 3.8 - City's Reliance on Statements and Disclosures of Borrower. Borrower has made certain statements in order to induce the City to make said loan and enter into this Agreement, and in the event Borrower has made material misrepresentations or failed to disclose any material fact, the City may treat such misrepresentation or omission as a breach of this Agreement, and the act of doing so shall not affect any remedies the City may have under the deed of trust securing said loan for such misrepresentation or concealment. Section 3.9 - City Not Liable for Acts of Omissions of Borrower or Others. City shall in no way be liable for any acts or omissions of Borrower, any agent or contractor employed by Borrower, or any person furnishing labor and/or materials used in or related to the rehabilitation of the Project. 29 Section 3.10 - Time of the Essence. Time is of the essence of this Agreement and of each and every provision hereof. The waiver by the City of any breach or breaches hereof shall not be deemed, nor shall the same constitute, a waiver of any subsequent breach or breaches. Section 3.11 - Integration. This Agreement represents the entire agreement between the Parties of the subject matter of this Agreement and supersedes any other agreements, promises, or representations oral or written pertaining to such subject matter, including without limitation, any and all agreements, promissory notes, and deeds of trust, along with any amendments and modifications to such agreements, promissory notes and deeds of trust entered into by and between the City and Borrower. Section 3.12 - Participation. At the request of the City, Borrower shall cause the fact that the City has provided funds to be referenced in any advertisements, press releases, brochures or information sheets where funding for the Project is discussed, and on all project designation placards placed on the Property or other sites, as approved in advance, by the City. The design, content and format of the press releases, brochures, information sheets, and all project designation placards containing a reference to the City are subject to the written approval of the City with respect to all references to the City. the City, at its sole option, reserves the right to request, in writing, that the references to the participation of the City not be included in any, or all, advertisements, press releases, brochures, information sheets, and/or project designation placards. Section 3.13 - Approvals, Consents and Other Determinations. Unless otherwise provided, in any approval, consent, or other determination by the City or Borrower required under this Agreement or any of the other loan documents evidencing and/or securing the City Loan, the City and Borrower shall act in good faith and without delay. Section 3.14 - Counterparts. This Agreement may be executed in any number of counterparts and, as so executed, the counterparts shall constitute one and the same Agreement. The parties agree that each such counterpart is an original and shall be binding upon all the parties, even though all of the parties are not signatories to the same counterpart. Section 3.15 - Consents and Approvals. Any approval required under this Agreement shall be in writing and executed by an authorized representative of the party granting the approval. Section 3.16 - Non -Liability of Officials and Employees of the City. No member, official or employee of the City shall be personally liable to Borrower, or any successor in interest, in the event of any default or breach of this Agreement or for any amount which may become due to Borrower or its successors, or on any obligations under the terms of this Agreement. Section 3.17 - Capacity and Authority. All individuals signing this Agreement for a party which is a corporation, limited liability company, partnership or other legal entity, or signing under a power of attorney, or as a trustee, guardian, conservator, or in any other legal capacity, covenant 30 • • to the City that they have the necessary capacity and authority to act for, sign and bind the respective entity or principal on whose behalf they are signing. IN WITNESS WHEREOF, the parties have executed this Agreement on the date first set forth above. BORROWER: T & T Community Properties, LLC, a alifornia limited liability company By: Print Name: Mitchel? L. Thompso Its: Managing Member City: City of National City By: Ron Morrison, Mayor APPROVED AS TO FORM: Christensen & Spath LLP, Special Counsel to the City By: Walter F. Spath III, Esq. 31 Exhibit "A" Property Description All that certain real property situated in the County of San Diego, State of California, described as follows: All of Lot 34 and that portion of Lot 36, Block 3 Paradena Park, in the City of National City, County of San Diego, State of California, according to Map thereof No. 1404, filed in the Office of the County Recorder of San Diego County, February 16, 1912, lying southerly of a line described as follows: Beginning at a point on the easterly line of said Lot 36 distant thereon 50.00 feet southerly from the most northerly corner thereof; thence westerly in a straight line to an intersection with the westerly line of said Lot 36 at a point which is a distant thereon 25.00 feet southerly from the northwesterly corner thereof. Excepting from said Lot 34 the southerly 65.00 feet measured at right angles to the southerly line. APN: 554-013-16-00 32 Exhibit "B" City Note 33 DO NOT DESTROY THIS NOTE: WHEN PAID, THIS NOTE AND THE DEED OF TRUST SECURING IT MUST BE SURRENDERED TO TRUSTEE FOR CANCELLATION BEFORE RECONVEYANCE WILL BE MADE. PROMISSORY NOTE ("Note") National City, California , 2011 1. Principal and Interest. For value received and in consideration of the Acquisition, Rehabilitation and Permanent Financing Loan Agreement dated as of July , 2011 ("City Loan Agreement"), by and between the City of National City ("City") and T & T Community Properties, LLC, a California limited liability company ("Maker"), Maker promises to pay to City, or order, at 1243 National City Boulevard, National City, California 91950-4397, or such other place as the holder may from time to time designate by written notice to Maker, the principal sum of Seven Hundred Seventeen Thousand Five Hundred and No/100 Dollars ($717,500.00), or so much as is advanced, together with accrued interest at the rate of two percent (2%) simple interest per annum. This Note is issued pursuant to: (i) the City Loan Agreement; (ii) the Deed of Trust ("Deed of Trust") being executed concurrently herewith by Maker in favor of the City, to be recorded in the office of the County Recorder of San Diego County; and (iii) the Declaration of Covenants, Conditions and Restrictions (Tenant Restrictions), being executed concurrently herewith by Maker in favor of the City, to be recorded in the office of the County Recorder of San Diego County ("Declaration"). All capitalized terms which are not defined herein shall have the meaning ascribed to them in the City Loan Agreement. 2. Term of Loan, Due Date and Right of Prepayment. Payments shall be due and payable as follows: (a) On May 1, 2013, and annually on May 1 of each year thereafter during the term of this Note, Maker shall calculate its Residual Receipts for the immediately previous calendar year, as defined herein, and pay to the City thirty percent (30%) of such Residual Receipts. (b) Fifty-five (55) years from the date first set forth above, when all principal and accrued interest shall be due and payable. (c) Concurrently with the refinancing of any loan or other obligation secured all or in part by the Property, as defined in the City Loan Agreement. (d) Acceleration of this Note pursuant to the provisions of Paragraph 4 of this Note, when all principal and accrued interest shall be due and payable. 1 • • • (e) Any sale, transfer, conveyance or further encumbrance of all or any part of the Property. "Residual Receipts" shall mean Gross Income less Operating Expenses, calculated on a calendar year basis, as provided herein and on a form approved by the City. All calculations of Residual Receipts shall be subject to verification and approval by the City. "Gross Income" shall mean all gross income actually collected from all residential and non- residential components of the Property. "Operating Expenses" shall mean actual, reasonable and customary costs, fees and expenses directly attributable to the operation, maintenance, taxes and management of the Property, to the extent approved by the City in Maker's annual operating budget. Maker shall annually provide to the City, on May 1st, each year during the term of this Note, a Residual Receipts report, which provides the basis for Maker's calculation of the payment or nonpayment of Residual Receipts to the City. This Note may be prepaid in whole or in part at any time and, from time to time, without notice or penalty. Any prepayment shall be allocated first to unpaid interest and then to principal. Should the undersigned sell, convey, transfer, further encumber, or dispose of the Property described in the Deed of Trust securing this Note, or any part of it, or any interest in it, then all obligations secured by this Note shall be due and payable immediately. 3. Security for Note. This Note is secured by the Deed of Trust of even date herewith executed by Maker, which creates a lien on that certain real property described therein and by the Security Agreement of even date herewith. 4. Acceleration Upon Default. Notwithstanding Section 2, above, or anything contained herein to the contrary, in the event of any default in the performance of any of the terms, covenants and conditions contained in: (i) this Note, the City Loan Agreement, Declaration or Deed of Trust, in each case after the expiration of applicable cure periods, including without limitation the failure by Maker to rehabilitate the Project, as defined in the City Loan Agreement, on or before April 30, 2010; (ii) any other instrument executed by the Maker in conjunction with this Note after the expiration of applicable cure periods; (iii) any prior or junior note secured by an encumbrance on the Property or any portion of it after the expiration of applicable cure periods; or (iv) in the event of the filing of a Bankruptcy proceeding by or against Maker, then (x) all sums owing by Maker to the City shall at the option of the City immediately become due and payable; (y) the City shall have no obligation to disburse any further funds to Maker or any other person: and (z) the City shall be released from any and all obligations to Maker under the terms of this Note. These remedies shall be in addition to any and all other rights and remedies available to the City, either at law or in equity. Further, default interest shall accrue on the principal balance of this Note from the date of this Note at the rate of ten percent (10%) simple interest per annum or the maximum rate than allowed by law, whichever is less. Failure to exercise such option shall not constitute a waiver of the right to exercise it in the event of any subsequent default. 5. Costs Paid by Maker. Maker agrees to pay the following costs, expenses, and reasonable attorneys' fees paid or incurred by the holder of this Note, or adjudged by a court: (a) reasonable costs of collection, costs, and expenses, and attorneys' fees paid or incurred in connection with the collection or enforcement of this Note, whether or not suit is filed; and (b) costs of suit and such sum as the court may adjudge as attorneys' fees in any action to enforce payment of this Note or any part of it. 6. Payment and Interest Calculation. Principal and interest shall be payable in lawful money of the United States of America. Interest shall be computed based on a 360-day year and 30-day month and the actual number of days elapsed. Payments shall be applied to interest first and then to any unpaid principal balance. 7. Incorporation of Documents. The provisions of the City Loan Agreement, Declaration and Deed of Trust are expressly incorporated in this Note by this reference. 8. Waiver. Maker hereby waives diligence, presentment, protest and demand, notice of protest, dishonor and nonpayment of this Note, and expressly agrees that, without in any way affecting the liability of Maker hereunder, the City may extend any maturity date or the time for payment of any installment due hereunder, accept additional security, release any party liable hereunder and release any security now or hereafter securing this Note. Maker further waives, to the full extent permitted by law, the right to plead any and all statutes of limitations as a defense to any demand on this Note, or on any deed of trust, security agreement, guaranty or other agreement now or hereafter securing this Note. 9. Recourse During Rehabilitation and Indemnity. (a) Prior to the timely completion of rehabilitation of the Project, in any action brought to enforce the obligations of Maker under this Note or the Loan Documents, the judgment or decree shall be enforceable against Maker, in addition to any collateral security for the payment of this Note, and the City may seek any deficiency judgment against Maker. Upon such recordation of a proper and timely Notice of Completion, this Note shall become non -recourse to both Maker and the recourse provisions of this Paragraph 9(a) shall no longer be operative. Provided, however, nothing contained herein shall apply to defeat any cause of action against Maker that accrues prior to timely completion of rehabilitation of the Project. (b) Maker shall indemnify, defend, protect and hold the City harmless from and against any and all loss, damage, liability, action, cause of action, cost or expense (including, without limitation, reasonable attorneys' fees and expenses) incurred by the City as a result of any (i) fraud or material misrepresentation under or in connection with the Loan or any Loan Document; (ii) intentional bad faith waste of the Property; (iii) losses resulting from Maker's failure to maintain insurance as required under the Deed of Trust; and (iv) misapplication of any rents, security deposits, insurance proceeds, condemnation awards or any other proceeds derived from the collateral security in a manner prohibited by the City Loan Agreement, Deed of Trust or Declaration. The City shall promptly provide Maker with written notice of any event for which Maker has an indemnification obligation as provided in this Paragraph 9(b). 3 • • • (c) Notwithstanding anything to the contrary contained herein, Maker's obligation to indemnify the City as aforesaid shall be personal, recourse obligations of Maker and in the event of any breach of such obligations, the City shall have the right to proceed directly against Maker to recover any and all losses, damages, liabilities, actions, causes of action, costs and expenses (including, without limitation, reasonable attorneys' fees and expenses) resulting from such breach and the right to bring any action and to institute any proceedings to obtain a deficiency judgment in or following after foreclosure for any and all losses, damages, liabilities, actions, causes of action, costs and expenses (including without limitation reasonable attorneys' fees and expenses) resulting from such breach. 10. Late Charge. In addition to the foregoing, if any installment due hereunder, is not paid within fifteen (15) days from the date due, Maker promises to pay a "late charge" of five percent (5%) of the installment so overdue to defray the expense incident to handling any such delinquent payment or payments. 11. Severability. if any provision of this Note is determined to be void by court of competent jurisdiction, such determination shall not affect any other provision of this Note, and such other provisions shall remain in full force and effect. 12. Non -Waiver. No delay in demanding or failure to demand performance hereunder shall constitute a waiver by holding of its right to subsequently demand such performance or to exercise any remedies for any default hereunder. Further, in order to be effective, any waiver of any of the City's rights and remedies hereunder shall be expressed in a writing signed by the City. Further waiver by the City of any right hereunder shall not constitute a waiver of any other right, including but not limited to the right to exercise any and all remedies for a different or subsequent event of default hereunder. 13. Replacement Note. The undersigned agrees that, in the event that this Note shall become lost or stolen, upon request of the City, the undersigned shall execute a replacement Note incorporating the terms hereof, provided that the City shall furnish a written agreement to indemnify the undersigned against all losses, costs, and damages arising from a duplicative demand for payment under this Note. 14. Interpretation. This Note shall be governed and interpreted in accordance with applicable California law. Maker: T & T Community Properties, LLC, a California limited liability company By: Print Name: Its: Exhibit "C" Deed of Trust 34 • • • NO CHARGE ON THIS DOCUMENT PER CALIFORNIA GOVERNMENT CODE SECTION 6103 Recording Requested By And When Recorded Mail To: City of National City 1243 National City Boulevard National City, CA 91950-4397 DEED OF TRUST THIS DEED OF TRUST is made as of this day of , 2011, by T & T Community Properties, LLC, a California limited liability company ("Trustor"), whose address is , and First American Title Company ("Trustee") and the City of National City ("Beneficiary"), whose address is 1243 National City Boulevard, National City, California, 91950- 4397. TRUSTOR HEREBY irrevocably grants, transfers, and assigns to Trustee, in trust, with power of sale, all that property in the City of National City, County of San Diego, State of California, described as: (See Legal Description - Exhibit "A") FOR THE PURPOSE OF SECURING: (1) Payment of the indebtedness evidenced by a Promissory Note of even date herewith executed by Trustor, in the principal sum of Seven Hundred Seventeen Thousand Five Hundred and No/100 Dollars ($717,500.00), and any renewal, extension, or modification of the promissory note (the "Note"); (2) Any additional sums and interest that may hereafter be loaned to the then record owner of the Property by Beneficiary, when evidenced by another note or notes reciting that it or they are so secured; (3) The performance of each agreement contained in this Deed of Trust; (4) The performance of each agreement of Trustor under that certain Acquisition, Rehabilitation and Permanent Financing Loan Agreement ("Loan Agreement") dated as of July _, 2011, by and between Trustor and Beneficiary on file in the Office of Beneficiary; and (5) The performance of each agreement and covenant of Trustor under that certain Declaration of Covenants, Conditions and Restrictions ("Restrictions") of even date herewith and recorded concurrently herewith affecting the Property. A. TO PROTECT THE SECURITY OF THIS DEED OF TRUST, TRUSTOR AGREES: Maintenance and Repair (1) To keep the Property in good condition and repair; not to remove or demolish any buildings on the Property; to complete or restore promptly and in good and workmanlike manner any building that may be constructed, damaged, or destroyed on the Property; to pay when due all claims for labor performed and materials furnished for the Property; to comply with all laws affecting the Property or requiring any alterations or improvements to be made on the Property; not to commit or permit waste of the Property; not to commit, suffer, or permit any act upon the Property in violation of law; and to cultivate, irrigate, fertilize, fumigate, prune, and do all other acts that from the character or use of the Property may be reasonably necessary. Fire Insurance (2) To provide, maintain, and deliver to Beneficiary fire insurance satisfactory to and with loss payable to Beneficiary as its interest may appear. Subject to the rights of any senior lenders, the amount collected under any fire or other insurance policy may be applied by Beneficiary upon any indebtedness secured by this Deed of Trust and in any order determined by Beneficiary, or at the option of Beneficiary the entire amount so collected or any part of that amount may be released to Trustor. This application or release shall not cure or waive any default or notice of default under this Deed of Trust or invalidate any act done pursuant to such a notice. Notwithstanding the foregoing, in the event of any fire or other casualty to the Property, Trustor shall have the right to rebuild the Property, and to use all available insurance proceeds therefor, provided that (a) such proceeds are sufficient to rebuild the Property in a manner that provides adequate security to Beneficiary for repayment of the indebtedness secured hereby or if such proceeds are insufficient then Trustor shall have funded any deficiency, (b) Beneficiary shall have the right to approve (which shall not be unreasonably withheld or delayed) plans and specifications for any major rebuilding and the right to approve (which shall not be unreasonably withheld or delayed) disbursements of insurance proceeds for rebuilding under a construction escrow or similar arrangement, and (c) no material default then exists hereunder or under the Note. If the casualty affects only part of the Property and total rebuilding is not feasible, then proceeds may be used for partial rebuilding and partial repayment of the indebtedness secured hereby in a manner that provides adequate security to Beneficiary for repayment of the remaining indebtedness secured hereby. Defense of Security (3) To appear in and defend any action or proceeding purporting to affect the security of this Deed of Trust or the rights or powers of Beneficiary, or Trustee; and to pay all costs and expenses, including cost of evidence of title and attorneys' fees in a reasonable sum, in any such action or proceeding in which Beneficiary or Trustee may appear, and in any suit brought by Beneficiary to foreclose this Deed of Trust. Payment of Liens and Taxes 2 • • • (4) To pay, at least ten (10) days before delinquency, all taxes and assessments affecting the Property, including assessments on appurtenant water stock, all encumbrances, charges, and liens, with interest, on the Property or any part of the Property, which appear to be prior or superior to this Deed of Trust; and all costs, fees, and expenses of this Trust. If Trustor fails to make any payment or to do any act as provided in this Deed of Trust, then Beneficiary or Trustee may (but is not obligated to) make the payment or do the act in the required manner and to the extent deemed necessary by Beneficiary or Trustee to protect the security of this Deed of Trust. The performance by Beneficiary or Trustee of such an act shall not require notice to or demand upon Trustor and shall not release Trustor from any obligation under this Deed of Trust. Beneficiary or Trustee shall also have the following related rights and powers: to enter upon the Property for the foregoing purposes; to appear in and defend any action or proceeding purporting to affect the security of this Deed of Trust or the rights or powers of Beneficiary or Trustee; to pay, purchase, contest, or compromise any encumbrance, charge, or lien that in the judgment of either appears to be prior or superior to this Deed of Trust; to employ counsel; and to pay necessary expenses and costs, including reasonable attorneys' fees. Reimbursement of Costs (5) To pay immediately and without demand all sums expended by Beneficiary or Trustee pursuant to this Deed of Trust, with interest from date of expenditure at the amount allowed by law in effect at the date of this Deed of Trust, and to pay any amount demanded by Beneficiary (up to the maximum allowed by law at the time of the demand) for any statement regarding the obligation secured by this Deed of Trust. (6) That it will pay the Note at the time and in the manner provided therein. (7) That it will not permit or suffer the use of any of the Property for any purpose other than the use for which the same was intended at the time this Deed of Trust was executed. (8) That the Note, the Loan Agreement, and the Restrictions are incorporated herein by reference and made a part of this Deed of Trust, although not attached. Copies are on file in the office of the Beneficiary. (9) To perform, in a timely manner, each agreement and covenant by and between Trustor on any and all notes, loans and deeds of trust that are senior and/or junior to this Deed of Trust. A default in any of these obligations and the expiration of any applicable notice or cure period shall constitute a default under this Deed of Trust. B. THE PARTIES AGREE THAT: Condemnation Award (10) Any award of damages in connection with any taking or condemnation, or for injury to the Property by reason of public use, or for damages for private trespass or injury to the Property, is hereby assigned and shall be paid to Beneficiary (subject to the rights of any senior lenders), as its interest may appear as further security for all obligations secured by this Deed of Trust. Upon receipt of such proceeds, Beneficiary may hold the proceeds as further security, or apply or release them in the same manner and with the same effect as provided in Section 2 of this Deed of Trust for the disposition of proceeds of fire or other insurance. Waiver of Late Payments (11) By accepting payment of any sum secured by this Deed of Trust after its due date, Beneficiary does not waive its right either to require prompt payment when due of all other sums so secured or to declare default for failure to pay any indebtedness secured by this Deed of Trust. Trustee's Powers (12) Upon written request of Beneficiary and presentation of this Deed of Trust and the Note for endorsement, Trustee may (a) reconvey all or any part of the Property; (b) consent to the making and recording, or either, of any map or plat of all or any part of the Property; (c) join in granting any easement on the Property; or (d) join in or consent to any extension agreement or any agreement subordinating the lien, encumbrance, or charge of this Deed of Trust. Trustee need not provide Trustor with notice before taking any of the foregoing actions, and shall not be liable for the proper performance of the act. The exercise by Trustee of any of the foregoing powers shall not affect the personal liability of any person for payment of the indebtedness secured by this Deed of Trust, or the lien of this Deed of Trust on the remaining property as security for the repayment of the full amount secured by this Deed of Trust. Full Reconveyance (13) Upon written request of Beneficiary stating that all sums secured by this Deed of Trust have been paid, surrender of this Deed of Trust, the Note, and any other notes secured by this Deed of Trust to Trustee for cancellation and retention, and payment of Trustee's fees and charges, Trustee shall reconvey, without warranty, the Property then subject to this Deed of Trust. The recitals in the reconveyance shall be conclusive proof of the truthfulness of the recitals. The grantee in the recon- veyance may be described as "the person or persons legally entitled thereto." Five years after issuance of the full reconveyance, Trustee may destroy the Note and this Deed of Trust, unless directed in the request to retain them. 4 • • Assignment of Rents (14) As additional security, Trustor hereby gives to and confers upon Beneficiary the right, power, and authority during the continuance of these Trusts, to collect the rents, issues, and profits of the Property, but reserves the right, prior to any default, which shall continue beyond any applicable notice and cure periods, to collect and retain these rents, issues, and profits as they become due and payable. Upon any such default, Beneficiary may, without notice and without regard to the adequacy of the security for the indebtedness secured by this Deed of Trust, either per- sonally or by agent or court -appointed receiver, do the following: enter upon and take possession of the Property or any part of the Property; sue for or otherwise collect all rents, issues, and profits, including those past due and unpaid; and apply these rents, issues, and profits, less costs and expenses of operation and collection (including reasonable attorneys' fees), upon any indebtedness secured by this Deed of Trust, in any order determined by Beneficiary. The exercise of the foregoing rights by Beneficiary shall not cure or waive any default or notice of default under this Deed of Trust or invalidate any act done pursuant to such a notice. Default in Foreclosure (15) Upon default by Trustor in the payment of any indebtedness secured by this Deed of Trust or in the performance of any material obligation under this Deed of Trust, and the expiration of any and all applicable notice or cure periods, Beneficiary may declare all sums secured by this Deed of Trust immediately due and payable by delivering to Trustee a written declaration of default and demand for sale and a written notice of default and election to sell the Property. Trustee shall cause the notice of default and election to sell to be recorded. Beneficiary also shall deposit with Trustee this Deed of Trust, the Note, and all documents evidencing any additional expenditures secured by this Deed of Trust. After the required time period has lapsed following the recordation of the notice of default, and after notice of sale has been given as required by law, Trustee, without demand on Trustor, shall sell the Property at the time and place specified in the notice of sale, either as a whole or in separate parcels, and in any order determined by Trustee, at public auction to the highest bidder for cash in lawful money of the United States, payable at the time of sale. Trustee may postpone sale of all or any portion of the Property by public announcement at the time and place of sale, and from time to time thereafter may postpone the sale by public announcement at the time fixed by the preceding postponement. Trustee shall deliver to the purchaser at the auction its deed conveying the Property sold, but without any covenant or warranty, express or implied. The recital in the deed of any matter or fact shall be conclusive proof of the truthfulness of the recital. Any person, including Trustor, Trustee, or Beneficiary, may purchase at the sale. After deducting all costs, fees, and expenses of Trustee and Beneficiary under this paragraph, including costs of procuring evidence of title incurred in connection with sale, Trustee shall apply the proceeds of sale to payment of: all sums expended under the terms of this Deed of Trust, not then repaid, with accrued interest at the amount allowed by law in effect at the date of this Deed of Trust; all other sums then secured by this Deed of Trust; and the remainder, if any, to the person or persons legally entitled to the remaining proceeds. 5 (16) Should the undersigned agree to or actually sell, convey, transfer, or dispose of, or further encumber the real property described in this deed of trust securing the Promissory Note, or any part of it, or any interest in it, without first obtaining the written consent of the Holder of the Note, then all obligations secured by the Note and trust deed may be declared due and payable, at the option of the Holder. Consent to one transaction of this type will not constitute a waiver of the right to require consent to future or successive transactions. General Provisions (17) This Deed applies to, inures to the benefit of, and binds all parties to this Deed of Trust and their heirs, legatees, devisees, administrators, executors, successors, and assigns. The term "Beneficiary" shall mean the holder and owner, including pledgee, of the Note secured by this Deed of Trust, whether or not named as a beneficiary in this Deed of Trust, and the heirs, legatees, devisees, administrators, executors, and assigns of any such person. In this Deed, whenever the context so requires, the masculine gender includes the feminine and/or neuter, and the singular number includes the plural. Acceptance by Trustee (18) Trustee accepts this Trust when this Deed, duly executed and acknowledged, is made a public record as provided by law. Trustee is not obligated to notify any party to this Deed of Trust of pending sale under any other deed of trust or of any action or proceeding in which Trustor, Beneficiary, or Trustee shall be a party unless brought by Trustee. Substitution of Trustees (19) Beneficiary, or any successor in ownership of any indebtedness secured by this Deed of Trust, may from time to time, by written instrument, substitute a successor or successors to any Trustee named in or acting under this Deed of Trust. The substitution instrument shall contain the name of the original Trustor, Trustee, and Beneficiary under this Deed of Trust, the book and page where this Deed is recorded, and the name and address of the new Trustee. When executed by Beneficiary and duly acknowledged and recorded in the office of the recorder of the county or counties where the Property is situated, the substitution instrument shall be conclusive proof of proper substitution of the successor Trustee or Trustees. Any successor Trustee or Trustees shall, without conveyance from the predecessor Trustee, succeed to all its title, estate, rights, powers, and duties. Cumulative Powers and Remedies (20) The powers and remedies conferred in this Deed of Trust arc concurrent and cumulative to all other rights and remedies provided in this Deed of Trust or given by law. These powers and remedies may be exercised singly, successively, or together, and as often as deemed necessary. 6 Conclusiveness of Recitals (21) The recitals contained in any reconveyance, trustee's deed, or any other instrument executed by Trustee from time to time under the authority of this Deed of Trust or in the exercise of its powers or the performance of its duties under this Deed of Trust, shall be conclusive evidence of their truth, whether stated as specific and particular facts, or in general statements or conclusions. Further, the recitals shall be binding and conclusive upon Trustor, its heirs, executors, adminis- trators, successors, and assigns, and all other persons. Attorneys' Fees (22) If any action is brought for the foreclosure of this Deed of Trust or for the enforcement of any provision of this Deed of Trust (whether or not suit is filed), Trustor agrees to pay all costs and expenses of Beneficiary and Trustee, including reasonable attorneys' fees; and these sums shall be secured by this Deed of Trust. Co -trustees (23) If two or more persons are designated as Trustee in this Deed of Trust, any, or all, power granted in this Deed of Trust to Trustee may be exercised by any of those persons, if the other person or persons are unable, for any reason, to act. Any recital of this inability in any instrument executed by any of those persons shall be conclusive against Trustor and Trustor's heirs and assigns. Request for Notices of Default and Sale (24) In accordance with Section 2924b of the California Civil Code, request is hereby made that a copy of any Notice of Default and a copy of any Notice of Sale under any Deeds of Trust executed by Trustor, and recorded in the Official Records of San Diego County, California, in which Beneficiary, is named as beneficiary, be mailed to: City of National City 1 243 National City Boulevard National City, CA 91950-4397 NOTICE: A copy of any notice of default and of any notice of sale will be sent only to the address contained in this recorded request. If your address changes, a new request must be recorded. The undersigned Trustor requests that a copy of any notice of default and of any notice of sale under this Deed of Trust be mailed to Trustor at the address of Trustor set forth above. (25) Trustor shall permit Beneficiary and its agents or representatives, to inspect the Property at any and all reasonable times, upon prior written notice (unless Trustor is in default under any of the Loan Documents). Inspections shall be conducted so as not to interfere with the tenants' use and enjoyment of the Property and the general operation of the Property. 7 (26) The Property shall be subject to the restrictions set forth in the Loan Agreement and Restrictions and Trustor hereby consents to such restrictions and agrees to be bound thereby. Such restrictions shall be in addition to and not in limitation of the rights of Beneficiary expressly set forth in this Deed of Trust. (27) For purposes of this Deed of Trust, "Hazardous Materials" mean and include any hazardous, toxic or dangerous waste, substance or material including, without limitation, flammable explosives, radioactive materials, asbestos, hazardous wastes, toxic substances and any materials or substances defined as hazardous materials, hazardous substances or toxic substances in (or for purposes of) the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), as amended (42 U.S.C. §9601, et seq.), the Hazardous Materials Transportation Act (49 U.S.C. § 1801, et seq.), the Resource Conservation and Recovery Act (42 U.S.C. §6901, et seq.), and those substances defined as hazardous wastes in §25117 of the California Health and Safety Code or as hazardous substances in §25316 of the California Health and Safety Code or in any regulations promulgated under either such law, any so-called "Superfund" or "Superlien" law, or any other federal, state or local statute, law, ordinance, code, rule, regulation, order or decree regulating, relating to, or imposing liability or standards of conduct concerning, any hazardous, toxic or dangerous waste, substance or material, as now or at any time hereafter in effect. (28) In addition to the general and specific representations, covenants and warranties set forth in the Deed of Trust or otherwise, Trustor represents, covenants and warrants, with respect to Hazardous Materials, as follows: (a) Neither Trustor nor, to the best knowledge of Trustor, any other person, has ever caused or permitted any Hazardous Materials to be manufactured, placed, held, located or disposed of on, under or at the Property or any part thereof, and neither the Property nor any part thereof, or any property adjacent thereto, has ever been used (whether by Trustor or, to the hest knowledge of Trustor, by any other person) as a manufacturing site, dump site or storage site (whether permanent or temporary) for any Hazardous Materials. "Hazardous Materials" for purposes of this Paragraph 28(a) shall not include substances typically used in the ordinary course of developing, operating and maintaining apartment complexes, provided that such substances are used in accordance with all applicable laws. (b) Trustor hereby agrees to indemnify Beneficiary, its officers, employees, contractors and agents, and hold Beneficiary, its officers, employees, contractors and agents harmless from and against any and all losses, liabilities, damages, injuries, costs, expenses and claims of any and every kind whatsoever paid, incurred or suffered by, or asserted against Beneficiary, its officers, employees, contractors or agents for, with respect to, or as a direct or indirect result of, the presence or use, generation, storage, release, threatened release or disposal of Hazardous Materials on or under the Property or the escape, seepage, leakage, spillage, discharge, emission or release of any Hazardous Materials from the Property (including, without limitation, any losses, liabilities, damages, injuries, costs, expenses or claims asserted or arising under CERCLA, any so-called "Superfund" or "Superlien" law, or any other federal, state or local statute, law, ordinance, code, rule, regulation, order or decree regulating, relating to or imposing liability or standards of conduct concerning any Hazardous Materials) regardless of whether or not caused by or within the control of Trustor. The foregoing indemnification shall not apply to any liability resulting from (i) an event 8 • • • that occurs after a transfer of the Property due to any foreclosure sale (judicial or nonjudicial) or a deed in lieu of foreclosure, or (ii) acts or omissions of Beneficiary or its agents. (c) Trustor has not received any notice of (i) the happening of any event involving the use, spillage, discharge, or cleanup of any Hazardous Materials ("Hazardous Discharge") affecting Trustor or the Property or (ii) any complaint, order, citation or notice with regard to air emissions, water discharges, noise emissions or any other environmental, health or safety matter affecting Trustor or the Property ("Environmental Complaint") from any person or entity, including, without limitation, the United States Environmental Protection Agency ("EPA"). If Trustor receives any such notice after the date hereof, then Trustor will give, within seven (7) business days thereafter, oral and written notice of same to Beneficiary. (d) Without limitation of Beneficiary's rights under this Deed of Trust, Beneficiary shall have the right, but not the obligation, to enter onto the Property or to take such other actions as it deems necessary or advisable to clean up, remove, resolve or minimize the impact of, or otherwise deal with, any such Hazardous Materials or Environmental Complaint upon its receipt of any notice from any person or entity, including without limitation, the EPA, asserting the existence of any Hazardous Materials or an Environmental Complaint on or pertaining to the Property which, if true, could result in an order, suit or other action against Trustor affecting any part of the Property by any governmental agency or otherwise which, in the sole opinion of Beneficiary, could jeopardize its security under this Deed of Trust. All reasonable costs and expenses incurred by Beneficiary in the exercise of any such rights shall be secured by this Deed of Trust and shall be payable by Trustor upon demand together with interest thereon at a rate equal to the highest rate payable under the note secured hereby. (e) The foregoing representation, covenants, indemnities and warranties shall be continuing and shall be true and correct for the period from the date hereof to the release of this Deed of Trust (whether by payment of the indebtedness secured hereby or foreclosure or action in lieu thereof), and these representations, covenants, indemnities and warranties shall survive such rel ease. (29) Each successor owner of an interest in the Property other than through foreclosure or deed in lieu of foreclosure of an interest superior to this Deed of Trust, shall take its interest subject to this Deed of Trust. (30) This Deed of Trust shall be governed by and construed in accordance with the laws of the State of California. (31) Trustor covenants by and for itself and any successors in interest that there shall be no discrimination against or segregation of, any person or group of persons on account of race, color, creed, religion, sex, sexual orientation, marital status, national origin, ancestry, familial status, source of income or disability in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Property, nor shall Trustor or any person claiming under or through it establish or permit any such practice or practices of discrimination or segregation of any person or group of persons on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees of the Property. The foregoing covenants shall run with the land. (32) Trustor shall refrain from restricting the rental, lease and sale of the Property and any dwelling unit thereon on the basis of race, color, creed, religion, sex, sexual orientation, marital status, national origin, ancestry, familial status, source of income or disability of any person. All such deeds, leases or contracts for the rental, lease or sale of the Property or any dwelling unit, shall contain or be subject to substantially the following nondiscrimination or nonsegregation clauses: (a) Deeds. In deeds "The grantee herein covenants by and for itself, its successors and assigns, and all persons claiming under or through them, that there shall be no discrimination against or segregation of, any person or group of persons on account of race, color, religion, sex, sexual orientation, disability, medical condition, familial status, source of income, marital status, national origin or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the land herein conveyed, nor shall the grantee itself or any person claiming under or through it, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees in the land herein conveyed. The foregoing covenants shall run with the land." (b) Leases. In leases "The lessee herein covenants by and for itself, its successors and assigns, and all persons claiming under or through them, and this lease is made and accepted upon and subject to the following conditions: That there shall be no discrimination against or segregation of any person or group of persons, on account of race, color, religion, sex, sexual orientation, disability, medical condition, familial status, source of income, marital status, national origin or ancestry in the leasing, subleasing, renting, transferring, use, occupancy, tenure or enjoyment of the land herein leased, nor shall lessee itself, or any person claiming under or through it, establish or permit such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, sublessees, subtenants or vendees in the land herein leased." (c) Contracts. In contracts for the rental, lease or sale of the Property or any dwelling unit "There shall be no discrimination against or segregation of any person or group of persons on account of race, color, religion, sex, sexual orientation, disability, medical condition, familial status, source of income, marital status, national origin or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the land, nor shall the transferee itself or any person claiming under or through it, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees of the land." (33) All individuals signing this Deed of Trust for a party which is a corporation, limited liability company, partnership or other legal entity, or signing under a power of attorney, or as a trustee, guardian, conservator, or in any other legal capacity, covenant to the Beneficiary that they have the 10 necessary capacity and authority to act for, sign and bind the respective entity or principal on whose behalf they are signing. TRUSTOR: T & T Community Properties, LLC, a California limited liability company By: Print Name: Its: 11 Exhibit "D" Declaration of Covenants, Conditions and Restrictions 35 NO CHARGE ON THIS DOCUMENT PER CALIFORNIA GOVERNMENT CODE SECTION 6103 Recording Requested By And When Recorded Mail To: the City of National the City 1243 National the City Boulevard National the City, CA 91950-4397 DECLARATION OF COVENANTS, CONDITIONS AND RESTRICTIONS (TENANT RESTRICTIONS) THIS DECLARATION OF COVENANTS, CONDITIONS AND RESTRICTIONS ("Declaration") is dated as of the day of , 2011, by T & T Community Properties, LLC, a California limited liability company ("Declarant") in connection with that certain parcel of real property ("Property") located in the City of National the City, County of San Diego, California, described in Exhibit "A" attached hereto and incorporated herein by reference. RECITALS A. Concurrently with the recordation of this Declaration, the City of National City ("City") is funding a loan ("Loan") secured by a deed of trust ("Deed of Trust") on the Property, as described in that certain Acquisition, Rehabilitation and Permanent Financing Loan Agreement dated as of July , 2011 ("Agreement"). B. The Agreement and Deed of Trust were conditioned by the City in part upon the recordation of a document setting forth certain restrictions upon the use and sale of the Property. Declarant shall rehabilitate the entire eight (8) dwelling unit affordable housing project (the "Project"). One of the eight (8) units will be occupied as a manager's unit, but will be rent and occupancy restricted as set forth herein. NOW, THEREFORE, Declarant hereby declares that the Property shall be subject to the covenants, conditions and restrictions set forth below: 1. Restrictive Covenants. Declarant agrees and covenants on behalf of itself and its successors and assigns, and each successor in interest to the Property, that at all times during the term of this Declaration set forth herein eight (8) residential units at the Project shall be set aside and reserved as "Affordable Units." As used herein the term "Affordable Units" shall refer to the eight (8) residential units in the Project which are owned or held available strictly in accordance with the terms and conditions set forth below. (a) Affordable Unit and HOME Unit Restrictions. The following restrictions shall apply to the eight (8) Affordable Units, including the seven (7) floating Affordable HOME Units ("HOME 1 Units") restricted pursuant to the HOME Program, shall be restricted as set forth herein. The restrictions set forth in the Table below shall establish the maximum rental rate, from which a utility allowance as approved by the City shall be deducted: Number of Affordable Units (Column 1); Unit Type (Column 2); Maximum Rents as Percentage of AMI (Column 3); Number of HOME Units (Column 4); Limit in Income of Eligible Tenants based upon percentage of the Median Area Income (Column 5); Years of Restriction (Column 6): STRICTION CRITERIA 1 2 3 4 5 6 NUMBER OF AFFORDABLE UNITS UNIT TYPE MAXIMUM RENTS AS %AGE OF AMI NUMBER OF HOME (NITS MAXIMUM % OF AREA MEDIAN INCOME OF ELIGIBLE TENANTS YEARS OF RENT RESTRICTION 3 2-Bedroom 30%of50% 3*** 50% 55*** 4 2-Bedroom 30% of 60%, 4*** 60% 55*** 1* 2-Bedroom 30%of80% 0*** 80% 55*** TOTAL AFFORDABLE UNITS TOTAL HOME UNITS 8 7*** * Manager's Unit *** The HOME Units will be restricted for fifteen (15) years under the HOME -Program. From year 16 through year 55, the Affordable Units that were previously restricted as HOME Units will continue to be subject to the restrictions set forth herein. (b) "Eligible Tenants" are those tenants whose aggregate gross annual income does not exceed the respective percentages set forth in the table above of annual median income, as adjusted for family size. For purposes of this Declaration, the current annual median income shall be the median income defined by the Department of Housing and Urban Development ("HUD") as the then current median income for the San Diego Standard Metropolitan Statistical Area, established periodically by HUD and published in the Federal Register, as adjusted for family size. The rents and the occupancy restrictions shall be deemed adjusted, from time to time, in accordance with any adjustments that are authorized by HUD or any successor agency. In the event HUD ceases to publish an established median income as aforesaid, the City may, in its sole discretion, use any other reasonably comparable method of computing adjustments in median income or HOME Program rents. Notwithstanding anything contained herein to the contrary, to the extent any other restrictions applicable to the Property limit the rent and/or occupancy of the Property, the most restrictive shall apply. (c) An adjustment of rents may be performed annually in accordance with the rents contained in the applicable the City or HUD rent schedules published by the City based upon the HUD determined median income for the San Diego Standard Metropolitan Statistical Area for the affected unit type and updated from time to time. However, in no event shall the rents, as adjusted, 2 exceed the maximum HOME rents for HOME Affordable Units. Further, the rents charged shall be further limited as set forth in Section 14, hereof. 2. Affordable Marketing Plan Compliance. Eligible Tenants shall be described in Declarant's approved Affirmative Marketing Plan and Declarant shall comply with the terms of its approved Affirmative Marketing Plan, renting to those person(s) referenced in said approved plan, as may be amended from time to time. Provided, however, nothing herein shall restrict Declarant from screening tenants through the application of criteria which is lawful and customary in apartment management in San Diego County and otherwise consistent with federal, state and local regulations and restrictions related to the financing for the Property. 3. Determination; Annual Requalification. On the July 1 immediately following the calendar year in which rehabilitation of the Affordable Units is completed, and annually on July 1 of each year thereafter during the tern of this Declaration, Declarant shall certify to the City under penalty of perjury, utilizing such forms and providing such backup documentation as the City may require, that Declarant is complying with all provisions of this Declaration. Failure to complete the annual certification process described in this Section 3 within fifteen (15) days of receipt of written notice from the City shall constitute a material default under this Declaration. the City may resort to the remedies set forth herein upon such material default, as well as any and all other remedies available at law or in equity or contained in the Agreement or Deed of Trust. 4. Relationship with Declarant. The term "Eligible Tenant" shall not include Declarant or any individuals who are partners or shareholders in Declarant or in any entity having an interest in Declarant or in the Property, or officer, employee, agent or consultant of the owner, developer or sponsor. 5. No Student Dependents. No Affordable Unit shall be occupied or leased to any person who is a full-time student, or a household comprised exclusively of persons who are full-time students, unless such persons are married and eligible to file a joint federal income tax return. The term "full- time student" shall be defined as any person who will be or has been a full-time student during five calendar months of the calendar year in question at an educational institution (other than a correspondence school) with regular faculty and students and or a student dependent as defined in the U.S. Internal Revenue Code, unless the taxpayer (upon whom the student in question is dependent) resides in the same dwelling unit. 6. Income of Co -Tenants. The income of all co -tenants and/or non-dependent occupants shall be taken into account in determining whether a household is an Eligible Tenant hereunder. 7. Over Income Tenants. In the event that a tenant who was properly certified as an Eligible Tenant at the commencement of such tenant's occupancy ceases to be eligible, for any reason other than the tenant being over income, Tenant shall give sixty (60) days written notice to such tenant to vacate the Affordable Unit. The vacated Affordable Unit shall thereafter be rented to an Eligible Tenant. Notwithstanding anything to the contrary in this Declaration, no occupant of a HOME Program Affordable Unit or Affordable Unit who previously and properly qualified as an Eligible Tenant shall be evicted by Declarant because such occupant fails to requalify as an Eligible Tenant, because such occupant exceeds the income limits set forth above, as in the case of increased income, 3 except as provided for in Section 92.252 of the Code of Federal Regulations, as amended from time to time. Rather, the next available unit shall be designated as a HOME Program Affordable Unit or Affordable Unit to replace the Unit of the occupant in question. Further, subject to the fair market limitations set forth in HOME Regulation 92.252, such occupant shall commence paying rent equal to 30% of such occupant's adjusted income, effective from and after the date of such failure to requalify. The over -income tenant shall continue to be considered an Eligible Tenant until evicted, provided this continued occupancy complies with the applicable regulations as referenced below, depending upon the sources of funds involved: (a) Non -HOME Funds. A tenant who occupies an Affordable Unit that is not a HOME Affordable Unit and who becomes over income at the time of recertification shall be given one hundred eighty (180) days notice to vacate the affordable unit, effective from and after the date of such failure to requalify (i.e., the recertification date, provided the tenant was properly certified originally). During the time the over -income tenant resides in the Affordable Unit, the tenant shall continue to pay the restricted rent. The tenant shall continue to be considered an "Eligible Tenant" until evicted, provided this continued occupancy complies with this Declaration. (b) HOME Program Funds. When a HOME Eligible Tenant's gross income exceeds the "low income" definition as defined in CFR 92.252(i), then the tenant shall commence paying rent equivalent to thirty percent (30%) of the tenant's adjusted income, subject to the fair market rent ceiling as set forth in HOME Regulation 92.252(i) and the next available comparable sized and configured unit shall be designated as a HOME Affordable Unit. The tenant shall continue to be considered an Eligible Tenant, provided this continued occupancy otherwise complies with all applicable HOME Program requirements. 8. Physical Condition of Affordable Units. After completion of rehabilitation of the Project, Declarant shall continually maintain the Affordable Units in a condition which satisfies the Housing Quality Standards promulgated by HUD under its Section 8 Program, as such standards are interpreted and enforced by the City under its normal policies and procedures. the City shall have the right to inspect the Affordable Units from time to time, on reasonable notice and at reasonable times, in order to verify compliance with the foregoing maintenance covenant. Further, each Affordable Unit shall be requalified annually, as to the foregoing maintenance covenant, as part of the annual tenant requalification process described in Section 3, above. Any deficiencies in the physical condition of an Affordable Unit shall be corrected by Declarant at Declarant's expense within thirty (30) days of the identification of such deficiency by the City and delivery of written notice of the same to Declarant. 9. City Monitoring Functions. It is contemplated that, during the term of this Declaration, the City will perform the following monitoring functions: (a) preparing and making available to Declarant any general information that the City possesses regarding income limitations and restrictions which are applicable to the Affordable Units; (b) reviewing the documentation submitted by Declarant in connection with the annual certification process for Eligible Tenants described in Section 3, above; and (c) inspecting the Affordable Units to verify that they are being maintained in accordance with Section 8, above. Notwithstanding the foregoing description of the City's functions, Declarant shall have no claim or right of action against the City based on any alleged 4 failure to perform such function, except that Declarant may reasonably rely upon the City's tenant eligibility determination. 10. Designation of Affordable HOME Units. The HOME Units will be designated prior to initial occupancy at the discretion of the City. Such designations may be changed by Declarant, provided that the units before and after the change in designation are of the same unit types, size, features and otherwise comply with the terms of 24 C.F.R. §92.252(j). 1 1 . Compliance with HOME Regulations. Declarant shall comply with all regulations, policies and procedures promulgated by HUD, or by the City in connection with the HOME Program, under which the Loan is being made to Declarant. Declarant's failure to so comply shall constitute a material default hereunder, entitling the City to the remedies set forth in Section 23, below. 12. Lease Provisions. Declarant agrees that it will include in all of its leases and cause its successors in interest to include in all of their leases, all provisions required under the terms of the HOME Program, including the following provisions: (a) Additional Lease Provisions/Annual Income Verification. Lessee agrees, upon written request from the landlord or the City of National the City ("the City"), to certify under penalty of perjury the accuracy of all information provided in connection with the examination or reexamination of annual income of the tenant's household. Further, tenant agrees that the annual income and other eligibility requirements are substantial and material obligations of the tenancy and that the tenant will comply promptly with all requests for information with respect to the tenancy from the landlord and/or the City. Further, tenant acknowledges that tenant's failure to provide accurate information regarding such requirements (regardless of whether such inaccuracy is intentional or unintentional) or the refusal to comply with the request for information with respect thereto, shall be deemed a violation of this lease provision, and a material breach of the tenancy and shall constitute cause for immediate termination of the tenancy. (b) Term of Lease for HOME Program Restricted Units. LESSEE has been made aware by Landlord that the unit being leased was assisted with HOME funds. Under the provisions of 24 C.F.R. §92.253, a lease must be for a period of not less than one (1) year unless the parties agree by mutual agreement that the term of the lease be less. The Lessee acknowledges by initialing in the space below that it has been made aware of the provisions of 24 C.F.R. §92.253. 13. Successors Bound. Declarant covenants, for itself and its successors and assigns, not to sell, transfer, assign or otherwise dispose of ownership of the Property, without the express written consent of the City. Any prospective purchaser, transferee or assignee shall expressly promise in writing to be bound by all of the provisions hereof, including the covenant in this Section 13 to require successors to expressly assume the obligations herein. It is expressly acknowledged that the covenants and restrictions set forth herein shall survive any repayment of the Loan. Further, the obligations of Declarant hereunder shall be deemed independent of Declarant's obligations under the Loan. 5 14. Maximum Rent To Be Collected by Declarant. In no event, shall all of the rent paid by the Eligible Tenant for any rent restricted unit exceed the amount of rent set forth in the table in Section 1(a), above. Should Declarant receive rent from a tenant in excess of the allowable maximum rent set forth in the table in Section 1(a), above, Declarant agrees to immediately notify the City and reimburse the City for any such overpayment. Acceptance by Declarant or its successors in interest, of rent in excess of the maximum rent set forth in the table in Section 1(a), above, shall constitute a material breach of this Declaration and the Agreement. 15. Cross Default; Occupancy Schedule for Affordable Units. A default under the Agreement, including without limitation failure to make the annual loan payments to the City as set forth in the Agreement, shall be a material default under this Declaration. The Affordable Units shall be rehabilitated and receive final inspection approval and shall be occupied by Eligible Tenants no later than six (6) months after the Closing, as defined in the Agreement. Time is of the essence in the rehabilitation and occupancy of the Affordable Units. 16. Term. This Declaration and the covenants and restrictions contained herein shall be effective upon the completion of the rehabilitation of the Project and shall remain in full force and effect for a period of fifty-five (55) years from their effective date. 17. Covenant Against Discrimination. Declarant covenants on behalf of itself and its successors and assigns, and each successor in interest to the Property, not to discriminate against any purchaser or prospective purchaser of any Affordable Unit on the basis of their race, age, sexual orientation, marital status, color, religion, sex, handicap, or national origin, as referenced in all applicable state, local and federal law. 18. Enforcement. Declarant expressly agrees and declares that the City or any successor public agency is a proper party and shall have standing to initiate and pursue any and all actions or proceedings, at law or in equity to enforce the provisions hereof and/or to recover damages for any default hereunder, notwithstanding the fact that such damages or the detriment arising from such default may have actually been suffered by some other person or the public at large. Further, the City or any successor public agency shall be the proper party to waive, relinquish, release or modify the rights, covenants, obligations or restrictions contained in or arising under this Declaration. 19. Attorneys' Fees. In the event that any litigation for the enforcement or interpretation of this Declaration, whether an action at law or arbitration or any manner of non judicial dispute resolution to this Declaration by reason of the breach of any condition or covenant, representation or warranty in this Declaration, or otherwise arising out of this Declaration, the prevailing party in such action shall be entitled to recover from the other reasonable attorneys' fees to be fixed by the court which shall render a judgment, as well as the costs of suit. 20. Severability. In the event that any provision or covenant of this Declaration is held by a court of competent jurisdiction to be invalid or unenforceable, then it shall be severed from the remaining portions of this Declaration which shall remain in full force and effect. 6 21. Covenants to Run With the Land. The covenants contained herein shall constitute "covenants running with the land", and shall bind the Property and every person having an interest therein during the term of this Declaration. Declarant agrees for itself and its successors that, in the event that, for any reason whatsoever, a court of competent jurisdiction determines that the foregoing covenants do not run with the land, such covenants shall be enforced as equitable servitudes against the Property. 22. Recordation; Waiver and Amendment. This Declaration shall be recorded in the Office of County Recorder of San Diego, California. No provision of this Declaration, or breach of any provision, can be waived except in writing. Waiver of any provision or breach shall not be deemed to be a waiver of any other provision, or of any subsequent breach of the same or other provision. Except as otherwise provided herein, this Declaration may be amended, modified or rescinded only in writing signed by Declarant and the City. 23. Remedies. (a) Contract Governed by Laws of State of California. This Declaration, its performance, and all suits and special proceedings under this Declaration, shall be constituted in accordance with the laws of the State of California and Federal law, to the extent applicable. In any action, special proceeding, or other proceeding that may be brought arising out of, under or because of this Declaration, the laws of the State of California and the United States, to the extent applicable, shall govern to the exclusion of the law of any other forum, without regard to the jurisdiction in which the action or special proceeding may be instituted. (b) Standing, Equitable Remedies; Cumulative Remedies. Declarant expressly agrees and declares that the City or any successor or public agency shall be the proper party and shall have standing to initiate and pursue any and all actions or proceedings, at law or in equity, to enforce the provisions hereof and/or to recover damages for any default hereunder, notwithstanding the fact that such damages or the detriment arising from such a default may have actually been suffered by some other person or by the public at large. Further, Declarant expressly agrees that receivership, injunctive relief and specific performance are proper pre-trial and/or post -trial remedies hereunder, and that, upon any default, and to assure compliance with this Declaration. Nothing in this subparagraph, and no recovery to the City, shall restrict or limit the rights or remedies of persons or entities other than the City, against Declarant in connection with the same or related acts by Declarant. The remedies set forth in this Section are cumulative and not mutually exclusive, except the extent that their award is specifically determined to be duplicative by final order of a court of competent jurisdiction. (c) Remedies at Law for Breach of Tenant Restrictions. In the event of any material default under Sections 1 through 22 hereof regarding restrictions on the operation and the transfer of the Property and the expiration of any applicable cure period provided under the Agreement, the City shall be entitled to, in addition to any and all other remedies available at law or in equity: (i) declare the Loan to be all due and repayable; and (ii) recover compensatory damages. If the default in question involves the collection of rents in excess of the rents permitted hereunder, the amount of such compensatory damages shall be the product of multiplying: (a) the number of months that the default in question has continued until the time of trial by (b) the result of subtracting the rents 7 properly chargeable hereunder for the Affordable Units in question from the amount actually charged for those Affordable Units. Declarant and the City agree that it would be extremely difficult or impracticable to ascertain the precise amount of actual damages accruing to the City as a result of such a default and that the foregoing formula is a fair and reasonable method of approximating such damages. the City shall be entitled to seek and to recover damages in separate actions for successive and separate breaches which may occur. Further, interest shall accrue on the amount of such damages from the date of the breach in question at the rate of ten percent (10%) per annum or the maximum rate than allowed by law, whichever is less. Nothing in this section shall preclude the award of exemplary damages as allowed by law. (d) Expert Witness, Attorneys' Fees, and Costs. The parties agree that the prevailing party in litigation for the breach and/or interpretation and/or enforcement of the terms of this Declaration and/or the Agreement shall be entitled to their expert witness fees, if any, as part of their costs of suit, and reasonable attorneys' fees as may be awarded by the court, pursuant to California Code of Civil Procedure ("CCP") § 1033.5 and any other applicable provisions of California law, including, without limitation, the provisions of CCP §998. 24. Mortgagees Protection. No violation or breach of the covenants, conditions, restrictions, provisions or limitations contained in this Declaration shall defeat or render invalid or in any way impair the lien or charge of any permitted deed of trust recorded on the Property provided, however, that any subsequent owner of the Property shall be bound by the covenants, conditions, restrictions, limitations and provisions of this Declaration, whether such owner's title was acquired by foreclosure, deed in lieu of foreclosure, trustee's sale or otherwise. 25. City Approval of Property Manager. At all times that this Declaration is in force and effect, and the City has served a thirty (30) day written notice of deficiencies in the property management for the Property which do not conform to the standards of property management of a professional property manager operating similar properties in San Diego County and which deficiencies have not been rectified by Declarant, within the thirty (30) day period (unless such deficiency is not reasonably capable of being cured within such thirty (30) day period, then such reasonable amount of time as is needed not to exceed ninety (90) days, provided Declarant commences cure within such thirty (30) day period and continues to diligently pursue cure), then, the City shall have the right, in its reasonable discretion, and upon thirty (30) days written notice: (i) to require the retention of a professional property management firm to manage the Property; (ii) to approve, in advance and in writing, the retention of any such property management firm, including the terms of the contract governing such retention; and (iii) to require Declarant to terminate any such property management firm, provided that such termination shall comply with the termination provisions of the management contract in question. Declarant shall cooperate with the City to effectuate the City's rights. 26. Declarant Required to Pay Monitoring Fees. Declarant shall pay the City a set-up fee (the "Set -Up Fee") in the amount of Five Hundred Dollars ($500.00) which shall be paid by Declarant to the City at closing of the Loan. Declarant shall pay to the City an annual monitoring fee, as determined by the City in schedules printed by the City from time to time. Said fee shall be subject to revision annually, based upon the increase in the Consumer Price Index for the San Diego Metropolitan Area. Each year the Monitoring Fees shall be increased based upon the percentage of 8 • • • increase in the Cost of Living as referenced in the Consumer Price Index for the San Diego Metropolitan Area. In no event, shall the monitoring fees decrease, however. The schedule of monitoring fees may be requested from the City. No fees shall be due and payable for any of the HOME Units, however. Annual Monitoring Fees shall be paid to the City annually within ten (10) days after the City provides a written invoice for the same. Failure to timely pay such fees shall constitute a material default under the terms and conditions of the Agreement and this Declaration. Both the Set -Up Fee and the Loan Monitoring Fee shall be paid to the City as a consideration for the lending of funds by the City to Declarant. 27. No Conversion to Condominiums. Declarant agrees during the term of this Declaration, that Declarant shall not, and shall not allow any other person to, cause all or any portion of the Property to be converted to condominiums or to otherwise allow a condominium map or condominium plan to be recorded or filed against all or any portion of the Property. Declarant further agrees that the conversion of all or any portion of the Property to condominiums and/or the recordation or tiling of a condominium map or condominium plan against all or any portion of the Property during the term of this Declaration, shall be a breach of this Declaration, the Agreement, the Note, as defined in the Agreement, and the Deed of Trust, entitling the City to immediately exercise any and all of its rights and remedies under this Declaration, the Agreement, Note and Deed of Trust, including without limitation acceleration of the Note and foreclosure under the Deed of Trust. 28. Noticing Requirements Prior to Termination. Prior to termination of this Declaration, Declarant shall comply with any and all noticing requirements required under any applicable laws or regulations, including without limitation, the requirements of California Government Code Sections 65863.10 and 65863.11. 29. No Further Encumbrance. Should Declarant agree to or actually sell, convey, transfer, further encumber or dispose of the Property or any interest in it (or obtain any other funds with respect to the Property or Declarant's activities at the Property, regardless of whether the source), without first obtaining the written consent of the City, shall be a material breach of this Declaration. The consent to one transaction of this type will not constitute a waiver of the right to require consent to future or successive transactions. This Declaration shall remain in effect for its fifty-five (55) year term, whether or not the City approves or disapproves a successor -in -interest or further encumbrance. 30. Indemnity. Declarant shall be responsible for all injuries to persons and/or all damages to real or personal property of the City or others, caused by or resulting from the sale, rental, ownership or operation of the Property, the negligence and/or breach of this Declaration, of itself, its employees, subcontractors and/or its agents during or arising out of rehabilitation of the Affordable Units. Declarant shall defend and hold harmless and indemnify the City, and all of its officers and employees from and against all claims, liens, claims of lien, losses, damages, judgments, costs, and expenses, whether direct or indirect, arising in any way from (i) the sale, rental, ownership or operation of the Property, including without limitation the Affordable Units; (ii) Declarant's negligence; (iii) breach of this Declaration, by Declarant, its employees, subcontractors and/or its agents; and/or (iv) arising out of the rehabilitation of the Affordable Units, except those arising from the sole negligence or willful misconduct of the City. 31. Signature Authority. All individuals signing this Declaration for a party which is a corporation, limited liability company, partnership or other legal entity, or signing under a power of attorney, or as a trustee, guardian, conservator, or in any other legal capacity, covenant to the City that they have the necessary capacity and authority to act for, sign and bind the respective entity or principal on whose behalf they are signing. DECLARANT: T & T Community Properties, LLC, a California limited liability company By: Print Name: Its: 10 Exhibit "E" Statement of Insurance Requirements 36 STATEMENT OF INSURANCE REQUIREMENTS (Including All Successors and Assigns of Borrower) Borrower acknowledges the receipt of these insurance requirements and agrees to maintain in full force and effect, the following policies at Borrower's sole cost and expense during the term of the Declaration of Covenants, Conditions and Restrictions being made by Borrower with respect to a loan from the City of National City ("City"). All insurance policies shall contain a provision requiring thirty (30) days advance written notice to the City of cancellation. Borrower agrees to maintain the following insurance coverages: 1. Required Insurance. To at all times provide, maintain and keep in force at Borrower's sole expense the following policies of insurance: (a) Insurance against loss or damage to the Improvements by fire and any of the risks covered by insurance of the type now known as "fire and extended coverage" including endorsement designating City as a Loss Payee, in an amount no less than the original amount of the Note plus any senior liens or encumbrances or the full replacement cost of the Improvements, including the cost of debris removal (exclusive of the cost of excavations, foundations and footings below the lowest basement floor), whichever is greater, and with not more than One Thousand Dollars ($1,000.00) deductible from the loss payable for any casualty. The policies of insurance carried in accordance with this subparagraph (a) shall contain the "Replacement Cost Endorsements"; (b) Business interruption insurance and/or loss of "rental value" insurance in such amounts as are satisfactory to the City; (c) Auto liability and comprehensive general public liability insurance, including coverage for elevators and escalators, if any, on the Property insuring against claims for "personal injury", including, without limitation, bodily injury, death or property damage occurring on, in or about the Property and the adjoining streets, sidewalks and passageways, such insurance to afford immediate minimum protection to a limit of not less than a project specific One Million Dollars ($1,000,000.00) Per Occurrence, Combined Single Limit with Two Million Dollar ($2,000,000.00) Aggregate Limit, with respect to personal injury or death to any one or more persons or damage to property (as that amount may be increased from time to time by the City in its reasonable discretion). General Liability policy must endorse and designate City and the City of National City as Additional Insureds. Liability Additional Insured Endorsement must be primary, must not exclude Completed Operations, and must be endorsed to include a Ten (10) year extended reporting period; 1 (d) Workers' compensation insurance (including employer's liability insurance, if requested by the City) for all employees of Borrower engaged on or with respect to the Property in such amount as is reasonably satisfactory to the City, or if such limits are established by law, in such amounts; (e) During the course of any construction or repair of Improvements on the Property, builder's completed value risk insurance against "all risks of physical loss", including collapse and transit coverage, during construction of such Improvements, with deductibles not to exceed Ten Thousand Dollars ($10,000.00), in non -reporting form, covering the total value of work performed and equipment, supplies and materials furnished. The City shall be endorsed as a Loss Payees. Said policy of insurance shall contain the "permission to occupy upon completion of work or occupancy" endorsement; (f) Boiler and machinery insurance covering pressure vessels, air tanks, boilers, machinery, pressure piping, heating, air conditioning, and elevator equipment and escalator equipment provided the Improvements contain equipment of such nature, and insurance against loss of occupancy or use arising from breakdown of any of the items referred to in this subparagraph (f), in such amounts as are reasonably satisfactory to the City; (g) Insurance against flood damage, including surface waters, if the Property is located in an area considered a flood risk by the United State Department of Housing and Urban Development; (h) Insurance against loss or damage to the Personal Property by fire and other risks covered by insurance of the type now known as "fire and extended coverage"; and (i) Such other insurance (including, but not limited to, earthquake insurance), and in such amounts, as may from time to time be required by the City against the same or other hazards, provided such additional insurance is available at commercially reasonable rates. (j) Pollution Liability insurance — project specific limits (k) Excess Liability Insurance (1) Professional Liability / E&O (design professionals, etc) — project specific limits All policies of insurance required by the terms of the Deed of Trust shall contain an endorsement or agreement by the insurer that any loss shall be payable in accordance with the terms of such policy, notwithstanding any act or negligence of Borrower which might otherwise result in forfeiture of said insurance, and the further agreement of the insurer waiving all rights of setoff, counterclaim or deductions against Borrower. 2 2. Delivery of Policies, Payment of Premiums. All policies of insurance shall be issued by companies admitted to issue insurance policies in the State of California, and rated AV or better by AM Best, and in amounts in each company satisfactory to the City. All policies of insurance shall have attached thereto a lender's loss payable endorsement for the benefit of the holder of the first priority deeds of trust on the property and improvements, and then for the benefit of the City in form satisfactory to the City. Borrower shall furnish the City with an original copy of all policies of required insurance. At least thirty (30) days prior to the expiration of each such policy, Borrower shall furnish the City with evidence satisfactory to the City of the payment of premium and the re - issuance of a policy continuing insurance in force as required by the Deed of Trust. All such policies shall contain a provision that such policies will not be canceled or materially amended, which terms shall include any reduction in the scope of limits of coverage, without at least thirty (30) days prior written notice to the City. In the event Borrower fails to provide the policies of insurance required by the Deed of Trust, the City may procure such insurance or single -interest insurance for such risks covering the City's interest, and Borrower will pay all premiums thereon promptly upon demand by the City, and until such payment is made by Borrower the amount of all such premiums, together with interest thereon at the rate of ten percent (10%) per annum or the maximum rate allowed by law, whichever is less. In the event any lender, who has a secured interest in the Property, requires additional insurance and/or insurance with greater coverages than that required by this Statement of Insurance Requirements, Borrower agrees to provide to and name the City on such policies providing greater and additional coverages. Borrower, by execution of this Statement of Insurance Requirements, agrees to provide the required insurance during the term of the loan and to require all successors in interest to agree to provide such coverages for the benefit of the City. Borrower acknowledges that performance of the covenants contained herein are a material inducement to making the loan to Borrower. 3. Signature Authority. All individuals signing this Statement of Insurance Requirements for a party which is a corporation, limited liability company, partnership or other legal entity, or signing under a power of attorney, or as a trustee, guardian, conservator, or in any other legal capacity, covenant to the City that they have the necessary capacity and authority to act for, sign and bind the respective entity or principal on whose behalf they are signing. Dated as of the day of ,2011. Borrower: T & T Community Properties, LLC, a California limited liability company By: Print Name: Its: 3 Exhibit "F" Security Agreement 37 SECURITY AGREEMENT THIS SECURITY AGREEMENT ("Agreement") is dated as of the day of , 2011, by and between T & T Community Properties, LLC, a California limited liability company ("Borrower") and the City of National City ("City"). City and Borrower are collectively referred to as the "Parties." RECITALS: A. The City has agreed to loan up to Seven Hundred Seventeen Thousand Five Hundred and No/100 Dollars ($717,500.00) to Borrower ("Loan") pursuant to that certain "Acquisition, Rehabilitation and Permanent Financing Loan Agreement" dated as of July , 201 1 (the "Loan Agreement"). The Loan is secured by a deed of trust ("Deed of Trust") on certain real property (the "Property") owned by Borrower more particularly described in the Loan Agreement. The Loan is evidenced by that certain Promissory Note Secured by Deed of Trust ("Note") of even date herewith, executed by Borrower in favor of the City. The Loan Agreement, Note, Deed of Trust and this Agreement may be referred to collectively herein as the "Loan Documents." B. The Parties desire that the Loan and the Note should be further secured by certain personal property owned by Borrower and the Property. AGREEMENT NOW, THEREFORE, for valid consideration, the Parties agree, pledge and covenant as follows: 1. Grant of Security Interest. Borrower hereby grants to the City a security interest, in the following described personal property ("Collateral"): SEE EXHIBIT "1" ATTACHED HERETO FOR DESCRIPTION OF COLLATERAL 2. Attachment of Security Interest. The security interest hereby created shall attach immediately upon execution of this Agreement by Borrower and shall secure the payment of the Loan according to the terms of the Loan Agreement. 3. Proceeds Included. Borrower also hereby grants to the City a security interest in and to any and all additions and modifications to, replacements and substitutions for, and products, proceeds, and interest from the Collateral on any sale, transfer, exchange or other disposition thereof. How- ever, nothing in this Paragraph 3 shall be deemed to constitute a grant of authority to Borrower to sell, transfer, exchange or otherwise dispose of the Collateral without the prior written consent of the City. 1 4. Warranties of Borrower. Borrower represents and warrants to the City that: (a) Borrower is or will be the full legal owner of the Collateral and no other person or entity has or will have any right, title, interest or claim in or to the Collateral or any part thereof, except for the security interest created herein, or created pursuant to those certain deeds of trust recorded as encumbrances against the property that are senior to the City's deed of trust and that were duly approved by the City, and/or security interests in the Collateral granted by Borrower with the knowledge and approval of the City, in its reasonable discretion. (b) Some or all of the Collateral is or will be located at the Property, and once so located, it will not, during the continuance of this Agreement, be removed from the Property without the prior written consent of the City. If the Collateral is moved or upon any default, which continues beyond any applicable notice and cure periods, of this Agreement by Borrower, at the City's written request, at its own cost and expense, shall assemble the Collateral wherever in San Diego County the City requests the Collateral to be assembled. 5. Duty to Maintain. Borrower shall maintain the Collateral, and each part or item thereof, in good order and repair at Borrower's own cost and expense, and shall not use the Collateral or allow the Collateral to be used in a manner which is likely to result in deterioration of the Collateral to a degree beyond that associated with normal usage and ordinary "wear and tear." 6. Insurance. Borrower shall keep the Collateral, and all parts and items thereof, insured, at Borrower's own cost and expense, in an amount equal to the full replacement cost new value of the Collateral, as such replacement value may vary from time to time. Such insurance policy shall cover all insurable risks to which the Collateral might foreseeably be exposed, and shall be issued by an insurance carrier acceptable to the City, and shall provide that the loss payable thereunder shall be paid to Borrower, the City and to any senior secured party, as their respective interests may appear. Notwithstanding the foregoing, this Paragraph 6 shall not be deemed to require a separate insurance policy covering the Collateral, if equivalent coverage first satisfactory to the City is provided as part of the insurance maintained by Borrower with respect to the Property as a whole. 7. Taxes. Borrower shall be solely liable for any taxes or assessments which are levied or assessed against the Collateral and shall ensure the prompt payment of same. 8. Disposition of Collateral. Borrower shall not (without the prior written consent of the City), sell, transfer, encumber, hypothecate, exchange or otherwise dispose of the Collateral until the Loan secured hereby is fully and finally paid, except Borrower may replace items of collateral in the ordinary course of business with items of equal or greater value. 9. Right to Inspect. The City, through its agents or employees, shall have the right, upon reasonable notice, to enter the Property at reasonable times and intervals to inspect and take inventory of the Collateral, provided the same does not unnecessarily infringe upon the operation of the Property. 2 10. Right to Make Payments. The City shall be entitled, but not obligated, to pay, on behalf of Borrower, after giving written notice to Borrower and ten (10) days from receipt of the notice in which to make payment, any costs or expenses reasonably necessary to keep the Collateral fully insured, properly repaired or maintained, and lien free, which costs or expenses Borrower should have paid pursuant to this Agreement but failed to do so. Similarly, the City shall have the right to enter the Property, upon reasonable notice to Borrower and its Eligible Tenants and at reasonable times, and to perform such acts as it may deem necessary for the maintenance or protection of the Collateral. Any monies expended or expenses incurred under this Paragraph 10 shall be secured by the security interest created by this Agreement, and shall be due and payable to the City by Borrower, together with interest thereon at the lesser of ten percent (10%) per annum or the maximum rate permitted by law, on demand. 11. Assignment by City. The City may assign its rights hereunder and its security interest created herein. In the event of such an assignment, the City's assignee shall be entitled, upon written notice to Borrower of such assignment, to all performance required of Borrower under this Agreement, and to all payments and monies secured by this Agreement. 12. Default. If Borrower fails to perform any obligation provided for in this Agreement or to pay any obligation secured by this Agreement as such obligation comes due, after any notice or cure periods provided herein or in any unexpired Loan Documents, then Borrower shall be in default of this Agreement, and the City shall be entitled to all of the rights and remedies afforded secured parties under applicable provisions of Division 9 of the California Commercial Code on the date of this Agreement, excluding the right to any deficiency judgment against Borrower. Further, the City may also: (a) Enter the Property to take possession of the Collateral, provided that the Collateral shall not be removed from the Real Property unless such removal is reasonably necessary to protect the Collateral from destruction or unauthorized removal by Borrower or some third party; or (b) Enter the Property and dispose of the Collateral, in the manner provided by the California Commercial Code; and, (c) Apply the proceeds of any such disposition of the Collateral, in addition to the items specified in Division 9 of the California Commercial Code, to the payment of reasonable attorneys' fees and legal expenses incurred by the City as a result of Borrower's default. Before exercising any of the foregoing rights, the City shall first give written notice of such default to Borrower, and Borrower shall have thirty (30) days from receipt of the notice to cure any such default before the City exercises its rights. 13. Financing Statement. Immediately upon executing this Agreement, the Parties shall execute any Financing Statement(s) necessary to perfect the security interest created by this Agreement. Such Financing Statement(s) shall be on a form or forms approved by the California Secretary of State, and the City shall pay the fees associated with filing such documents. 3 14. No Waiver. Neither the acceptance of any partial or delinquent payment by the City nor the City's failure to exercise any of its rights or remedies upon the occurrence of a default by Borrower shall constitute a waiver of such default, a modification of this Agreement or of Borrower's obligations under this Agreement, or a waiver of any subsequent default by Borrower. 15. Term. This Agreement shall continue in effect until each and every obligation of Borrower under the Loan Agreement has been satisfied (except any obligations that survive repayment of the Loan, foreclosure of the Property or termination of the Loan Agreement), or until the Loan Agreement has terminated by virtue of a foreclosure of a senior lienholder. 16. Time of Essence. Time is hereby expressly declared to be of the essence of this Agreement. 17. Notice. Notice hereunder shall be deemed given upon actual personal delivery to the notified Party or upon the expiration of three (3) days from the insertion of the notice in a United States Mail depository within California, or upon the expiration of seven (7) days from the insertion of the notice, properly addressed and certified mail, return receipt requested, postage prepaid, in a United States Mail depository outside of California. Notices shall be sent to the addresses of the Parties as set forth below, or as changed by either party from time to time by written notice to the other Party. City: City of National City 1243 National City Boulevard National City, CA 91950-4397 Borrower: T & T Community Properties, LLC 18. Certain Requirements Superior. All provisions of this Agreement shall be subject and subordinate to: (a) Any and all federal, state and local statutes and regulations applicable to the Property, the Collateral or the Loan; (b) The provisions of the Loan Agreement secured by this Agreement, to the extent of any inconsistency between it and this Agreement; and 19. Attorneys' Fees. If either party initiates legal proceedings for the enforcement or interpretation of this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees and costs of suit, in addition to any other relief to which such Party may be entitled. 20. Severability. If any provision of this Agreement is held to be invalid or unenforceable by a court of competent jurisdiction, then such provision shall be severed from the rest of this Agreement and the remaining provisions shall remain in full force and effect. 4 21. Construction of Agreement. The provisions contained in this Agreement shall not be construed in favor of or against either party, but shall be construed as if both Parties prepared this Agreement. This Agreement shall be construed in accordance with the laws of the State of California. 22. Counterparts. This Agreement may be executed in any number of counterparts and, as so executed, the counterparts shall constitute one and the same Agreement. The parties agree that each such counterpart is an original and shall be binding upon all the parties, even though all of the parties are not signatories to the same counterpart. 23. Exhibits and Recitals Incorporated. All exhibits referred to in this Agreement are hereby incorporated in this Agreement by this reference, regardless of whether or not the exhibits are actually attached to this Agreement. The Recitals to this Agreement are hereby incorporated in this Agreement by this reference. 24. Signature Authority. All individuals signing this Agreement for a party which is a corporation, limited liability company, partnership or other legal entity, or signing under a power of attorney, or as a trustee, guardian, conservator, or in any other legal capacity, covenant to the City that they have the necessary capacity and authority to act for, sign and bind the respective entity or principal on whose behalf they are signing. BORROWER: T & T Community Properties, LLC, a California limited liability company By: Print Name: Its: City: City of National City By: Ron Morrison, Mayor APPROVED AS TO FORM: Christensen & Spath LLP, Special Counsel to the City By: Print Name: Its: 5 Exhibit "G" Unsecured Environmental Indemnity Agreement 38 UNSECURED ENVIRONMENTAL INDEMNITY AGREEMENT THIS UNSECURED ENVIRONMENTAL INDEMNITY AGREEMENT ("Indemnity") is dated as of the day of , 2011, by T & T Community Properties, LLC, a California limited liability company ("Indemnitor"), to and for the benefit of the City of National City ("City"), its successors and assigns and, to the extent not otherwise referenced, the Indemnified Parties (as hereinafter defined). RECITALS A. The City has agreed to make a loan ("City Loan") to Indemnitor as described in that certain Acquisition, Rehabilitation and Permanent Financing Loan Agreement between the City and Indemnitor, dated as of July , 2011 ("City Loan Agreement") and that certain Promissory Note made by Indemnitor in favor of the City, of even date herewith ("Promissory Note"), which City Loan is secured by, among other things, a Deed of Trust executed by Indemnitor in favor of the City ("Deed of Trust"). The Deed of Trust encumbers the real property described on Exhibit A attached hereto (the "Property"). B. It is a condition of the City making the City Loan that this Indemnity be executed and delivered by Indemnitor. The City is making the City Loan in reliance upon this Indemnity. C. This Indemnity is unsecured and is separate from the security and other collateral being delivered by Indemnitor in connection with the making of the City Loan. AGREEMENT NOW, THEREFORE, in consideration of the foregoing and of the City making the City Loan, and other valuable consideration, the receipt of which is hereby acknowledged, Indemnitor agrees as follows: 1. Indemnity. (a) Subject to Sections 2, 3 and 4 below, Indemnitor hereby agrees to defend, protect, indemnify and hold harmless the City, the City's affiliates, directors, officers, shareholders, agents and employees, and the City's participants, successors and assigns specified in Section 4 hereof (hereinafter, collectively, the "Indemnified Parties"), from and against, and shall reimburse the Indemnified Parties for, any and all actual out-of-pocket costs (including, without limitation, attorneys' fees, expenses and court costs), expenses or losses arising from any claim, liability, damage, injunctive relief, injury to person, property or natural resources, fine, penalty, action or cause of action (collectively, "Costs and Liabilities"), incurred by or asserted against any Indemnified Party and arising directly or indirectly, in whole or in part, out of the release, discharge, deposit or presence, or alleged or suspected release, discharge, deposit or presence, of any Hazardous Materials at, on, within, under, about or from the Property, or in or adjacent to any part of the Property, or in the soil, groundwater or soil vapor on or under the Property, or elsewhere in 1 connection with the transportation of Hazardous Materials to or from the Property in violation of any Hazardous Materials Laws, whether or not known to Indemnitor or Indemnified Parties, whether foreseeable or unforeseeable, regardless of the source of such release, discharge, deposit or presence or, except as expressly provided to the contrary in Sections 2 and 4 hereof, regardless of when such release, discharge, deposit or presence occurred or is discovered. Without limiting the generality of the foregoing indemnity, such Costs and Liabilities shall include, without limitation, all actual out- of-pocket costs incurred by Indemnified Parties in connection with (i) determining whether the Property is in compliance with this Indemnity and with all applicable Hazardous Materials Laws or the amount of money required to remediate any environmental contamination, and causing the Property to be or become in compliance, with all applicable Hazardous Materials Laws, (ii) any removal or remediation of any kind and disposal of any Hazardous Materials present at, on, under or within the Property or released from the Property to the extent required by applicable Hazardous Materials Laws in effect at the time of such removal, remediation or disposal, and (iii) repair of any damage to the Property or any other property caused by any removal, remediation or disposal. (b) Upon demand by any Indemnified Party, Indemnitor shall defend any investigation, action or proceeding in connection with any claim or liability, or alleged claim or liability, that would, if determined adversely to such Indemnified Party, be covered by the foregoing indemnification provisions, such defense to be at Indemnitor's sole cost and expense and by counsel reasonably approved by such Indemnified Party, which counsel may, without limiting the rights of an Indemnified Party pursuant to the next succeeding sentence of this Section 1(b), also represent Indemnitor in such investigation, action or proceeding. If any Indemnified Party determines reasonably and in good faith that its defense by Indemnitor is being conducted in a manner which is prejudicial to its interests, such Indemnified Party may elect to conduct its own defense through counsel of its own choosing and at the expense of Indemnitor. (c) As used herein, the term "Hazardous Materials" means and includes any flammable, explosive, or radioactive materials or hazardous, toxic or dangerous wastes, substances or related materials or any other chemicals, materials or substances, exposure to which is prohibited, limited or regulated by any federal, state, county, regional or local authority or which, even if not so regulated, may or could pose a hazard to the health and safety of the occupants of the Property or of property adjacent to the Property, including, but not limited to, asbestos, PCBs, petroleum products and byproducts, substances defined or listed as "hazardous substances" or "toxic substances" or similarly identified in, pursuant to, or for purposes of, the California Solid Waste Management, Resource Recovery and Recycling Act (California Government Code §66700 et seq.), the Comprehensive Environmental Response, Compensation, and Liability Act, as amended (42 U.S.C. §9601, et seq.), the Hazardous Materials Transportation Act (49 U.S.C. § 1801, et seq.), the Resource Conservation and Recovery Act (42 U.S.C. §6901, et seq.), Section 25117 or Section 25316 of the California Health & Safety Code; and any so-called "Superfund" or "Superlien" law, or any other federal, state or local statute, law, ordinance, code, rule, regulation, order or decree regulating, relating to or imposing liability or standards of conduct concerning any hazardous, toxic or dangerous waste, substance or material; or any substances or mixture regulated under the Toxic Substance Control Act of 1976, as now or hereafter amended (15 U.S.C. §2601 et se .); and any "toxic pollutant" under the Clean Water Act, as now or hereafter amended (33 U.S.C. §1251 et seq.); and any hazardous air pollutant under the Clean Air Act, as now or hereafter amended (42 U.S.C. §7901 et seq.). Notwithstanding the above, the term "Hazardous Materials" shall not include small amounts of 2 chemicals, cleaning agents and the like commonly employed in routine household uses in a manner typical of occupants in other similar residential properties provided they are used in compliance with applicable laws. The term "Hazardous Materials Laws" means any federal, state or local law, code, statute, ordinance, rule, regulation, rule of common law or guideline relating to Hazardous Materials now or hereafter enacted or promulgated (collectively, and including, without limitation, any such laws which require notice of the use, presence, storage, generation, disposal or release of any Hazardous Materials to be provided to any party). 2. Time Limits on Claims. Notwithstanding the foregoing provisions: (a) No claim shall be made hereunder by any Indemnified Party unless and until any one of the following events shall have occurred: (i) repayment in full of the City Loan (as evidenced by the release and reconveyance of the Deed of Trust); or (ii) vesting of title to the Property in the City or any Indemnified Party through judicial or non judicial foreclosure or acceptance of a deed in lieu thereof. (b) Indemnitor shall not have any obligation under this Indemnity to an Indemnified Party with respect to any Costs and Liabilities that, prior to the first to occur of the events described in Section 2(a)(i) or (ii) above: (i) were actually known to the City; (ii) were liquidated in amount, or were otherwise readily determinable in amount without undue delay; and (iii) would have been lawfully and properly includable as part of the secured indebtedness under the Deed of Trust in an action for a deficiency judgment following a judicial foreclosure sale of the Property. (c) If any Indemnified Party or any affiliate of any Indemnified Party has acquired ownership of the Property through foreclosure or deed in lieu of foreclosure, the obligations of Indemnitor hereunder shall apply, without limitation, to all Costs and Liabilities that arise out of or are attributable to, whether directly or indirectly, ownership of the Property or any part thereof by any Indemnified Party or any such affiliate, or to the position of such Indemnified Party or such affiliate as an owner in the chain of title to the Property or any part thereof. (d) If the City Loan has been repaid in full, whether by voluntary payment or by foreclosure or deed in lieu of foreclosure, the obligations of Indemnitor hereunder shall continue to apply, without limitation, to all Costs and Liabilities that arise out of or are attributable to, whether directly or indirectly, any claim or allegation against an Indemnified Party relating to any act or omission of such Indemnified Party in respect of the City Loan or the Property, or in connection with any exercise of such Indemnified Party's rights under any of the City Loan Documents. 3 Acts of Indemnified Parties. (a) Notwithstanding anything to the contrary herein, Indemnitor shall not be liable hereunder to an Indemnified Party to the extent of that portion of any Costs and Liabilities which Indemnitor establishes is attributable to an affirmative act of such Indemnified Party, its agent or any successor in interest of an Indemnified Party at the Property which causes (i) the release, discharge, deposit or presence, or alleged or suspected release, discharge, deposit or presence of a Hazardous Material at the Property, or (ii) material aggravation of a then existing Hazardous Material condition or occurrence at the Property, if and only if, in either such case referred to in (i) or (ii) above, such act was in violation of any Hazardous Materials Laws or was carried out without reasonable care under the circumstances. (b) In addition, Indemnitor shall not be liable hereunder for that portion of any Costs and Liabilities which Indemnitor establishes is attributable to the introduction and initial release, discharge or deposit, or alleged or suspected introduction, initial release, discharge or deposit of a Hazardous Material at the Property by any party, other than Indemnitor or an affiliate of Indemnitor, at any time after Indemnitor's ownership interest in the Property terminates. Notwithstanding the foregoing, but subject to Sections 2 and 3(a) above and Section 4 below, the liability of Indemnitor hereunder shall otherwise remain in full force and effect after the City or such affiliate of the City so acquires title to the Property, including without limitation with respect to any Hazardous Materials which are discovered at the Property after the date the City or such affiliate of the City acquires title but which were actually introduced to the Property prior to the date of such acquisition. 4. Indemnified Parties. This Indemnity and Indemnitor's obligations hereunder shall inure to the benefit of and be enforceable only by (a) the City, the City's directors, officers, shareholders, agents and employees, (b) any person or entities to which any the City participates, assigns or sells all or any portion of its interest in the City Loan, or which otherwise succeeds to the interest of the City under the Deed of Trust, whether by purchase or otherwise, and (c) any affiliate of the City which acquires title to the Property at a foreclosure sale or by deed in lieu of foreclosure. 5. Unsecured Obligations. The obligations of Indemnitor hereunder are unsecured. This Indemnity is not intended to be, nor shall it be, secured by the Deed of Trust or any other instrument or agreement executed by Indemnitor or any other entity or person in favor of the City or any Indem- nified Party relating to the City Loan (except for any guaranty) (such documents together with the Deed of Trust being referred to collectively herein as the "City Loan Documents"). The obligations of Indemnitor under this Indemnity are independent of any indemnification or other obligations of Indemnitor under the City Loan Documents with respect to any Hazardous Materials. The rights and remedies of the Indemnified Parties under this Indemnity shall be in addition to any other rights and remedies of such Indemnified Parties under the City Loan Documents. In no event shall any provision of this Indemnity be deemed to be waiver of or to be in lieu of any right or claim, including without limitation any right of contribution or other right of recovery, that any person entitled to enforce this Indemnity might otherwise have against Indemnitor under any Hazardous Materials Laws. Any sums payable hereunder shall not be deemed to be based upon any diminution in or other impairment of the value of any collateral held by the City to secure the City Loan. 4 6. Interest on Unpaid Amounts. Any amount claimed hereunder by an Indemnified Party not paid by Indemnitor within thirty (30) days after written demand made by such Indemnified Party and accompanied by a reasonable summary of the amounts claimed, shall bear interest at the rate of ten percent (10%) per annum or the highest interest rate permitted by law, whichever is less. 7. Limitations on Liability. The liability of Indemnitor under this Indemnity shall in no way be limited or impaired by (a) any amendment or modification of the provisions of any of the City Loan Documents; (b) except as set forth in Sections 2, 3 and 4, any participation in or sale or assignment of the City Loan Documents or any sale or transfer of all or part of the Property; (c) the release of Indemnitor or any person or entity from performance or observance of any of the agreements, covenants, terms, or conditions contained in any of the City Loan Documents by operation of law; and, in any such case, whether with or without notice to Indemnitor and with or without consideration. Except as provided in Sections 2, 3 and 4, Indemnitor's obligations hereunder shall in no way be impaired, reduced or released by reason of (i) an Indemnified Party's omission or delay in exercising any right described herein or (ii) any act or omission of an Indemnified Party in connection with any notice, demand, warning, or claim regarding violations of codes, laws or ordinances governing the Property. 8. Recourse Obligations. Notwithstanding anything to the contrary in the City Loan Documents, Indemnitor shall be personally liable on a recourse basis for the obligations of Indemnitor set forth herein. 9. Successors and Assigns. This Indemnity shall be continuing, irrevocable and binding upon each of the persons and entities comprising Indemnitor and their respective heirs, successors, and assigns. 10. Inconsistencies. In the event of any inconsistencies or conflicts between the terms of this Indemnity and the terms of the other City Loan Documents (including any exculpatory language contained therein), the terms of this Indemnity shall control. 11. Separate Causes of Action. A separate right of action hereunder shall arise each time an Indemnified Party acquires knowledge of any matter described herein. Separate and successive actions may be brought hereunder to enforce any of the provisions hereof at any time and from time to time. No action hereunder shall preclude any subsequent action. 12. Severability. If any provision of this Indemnity shall be determined to be unenforceable in any circumstances by a court of competent jurisdiction, then the balance of this Indemnity never- theless shall be enforceable, and the subject provision shall be enforceable in all other circumstan- ces. 13. Attorneys' Fees. In any action or proceeding brought by the Indemnified Parties to enforce any rights under this Indemnity, the prevailing party shall be entitled to all reasonable attorneys' fees and all costs, expenses and disbursements in connection with such action. 5 14. Notices. Any notice, demand, request or other communication which any party hereto may be required or may desire to give hereunder shall be in writing and will be effectively served upon personal delivery or, if mailed, no later than 48 hours after deposit in first class or certified United States mail, postage prepaid, sent to: City: City of National City 1243 National City Boulevard National City, CA 91950-4397 Developer: T & T Community Properties, LLC which addresses may be changed by written notice. 15. Governing Law. This Indemnity shall be governed by and construed in accordance with the laws of the State of California. 16. Counterparts. This Indemnity may be executed in any number of counterparts and, as so executed, the counterparts shall constitute one and the same agreement. The parties agree that each such counterpart is an original and shall be binding upon all the parties, even though all of the parties are not signatories to the same counterpart. 17. Exhibits and Recitals Incorporated. All exhibits referred to in this Indemnity, if any, are hereby incorporated in this Indemnity by this reference, regardless of whether or not the exhibits are actually attached to this Indemnity. The Recitals to this Indemnity are hereby incorporated in this Indemnity by this reference. 18. Signature Authority. All individuals signing this Indemnity for a party which is a corporation, limited liability company, partnership or other legal entity, or signing under a power of attorney, or as a trustee, guardian, conservator, or in any other legal capacity, covenant to the City that they have the necessary capacity and authority to act for, sign and bind the respective entity or principal on whose behalf they are signing. IN WITNESS WHEREOF, this Indemnity is executed as of the day and year above written. [SIGNATURE PAGES FOLLOW] 6 City: City of National City By: Ron Morrison, Mayor APPROVED AS TO FORM: Christensen & Spath LLP, Special Counsel to the City By: Print Name: Its: INDEMNITOR: T & T Community Properties, LLC, a California limited liability company By: Print Name: Its: OFFICE OF THE CITY CLERK 1243 National City Blvd. National City, California 91950 hl COR ,011ter Michael R. Dalla, CMC City Clerk 619-336-4228 phone / 619-336-4229 fax July 25, 2011 Mr. Walter Spath Managing Partner Christensen & Spath LLP 550 West C Street, Suite 1660 San Diego, CA 92101 Dear Mr. Spath, We are enclosing one partially executed original Acquisition, Rehabilitation and Permanent Financing Loan and Agreement (Agreement) by and between the City of National City and T & T Community Properties, LLC. We have also enclosed the signature page for the other partially executed original Agreement. Please sign and return (a) one fully executed original Agreement and (b) one fully executed original signature page to our office. Please contact our office should you have any questions or need additional information. Sincerely, Michael R. Dalia, CMC City Clerk OFFICE OF THE CITY CLERK 1243 National City Blvd. National City, California 91950 Michael R. Dalla, CMC - City Clerk 619-336-4228 phone / 619-336-4229 fax August 11, 2011 Mr. Mitchell Thompson T & T Community Properties, LLC 760 Arroyo Court Chula Vista, CA 91910 Dear Mr. Thompson, On July 19th, 2011, Resolution No. 2011-159 was passed and adopted by the City Council of the City of National City, approving a residual receipts loan to T & T Community Properties, LLC. We are enclosing for your records a certified copy of the above Resolution and a fully executed copy of the Acquisition, Rehabilitation and Permanent Financing Loan Agreement. Michael R Dalla, CMC City Clerk Enclosures cc: Community Development Commission -PP.- CALIFORNIA NATIONAL CITY ZHCo oR ATRP The City of National City MEMORANDUM DATE: September 22, 2011 TO: Michael Dalla, City Clerk FROM: Alfredo Ybarra, Housing and Grants Manag SUBJECT: Recorded documents and loan agreement for T & T Community Properties 1. Enclosed are the recorded legal documents and loan agreement for a $717,500 loan to T&T Community Properties, LLC. 2. These documents are being forwarded to the City Clerk for your records. 3. This acquisition and rehabilitation project was approved by the City Council on July 19, 2011 (2011-159) 4. If you have questions or require additional information, please contact me at #4279 or email me at your convenience. 5. Thank you for your assistance AY/ay Attachments: 1. Acquisition, Rehabilitation, and Permanent Financing Loan Agreement 2. Recorded Deed of Trust 3. Recorded UCC Financing Statement 4. Declaration of Covenants, Conditions and Restrictions 1243 National City Blvd; National City, California 91950 RECORDING REQUESTED BY FIRST AMERICAN TITLE National Commercial Services NO CHARGE ON THIS DOCUMENT PER CALIFORNIA GOVERNMENT CODE SECTION 6103 And When Recorded Mail To: Christensen & Spath LLP 550 West C Street, Suite 1660 San Diego, CA 92101 122. D O C it 2O11-O43218 11111111101111111111111101111110111111111111111111111 AUG 23, 2011 8:00 AM OFFICIAL RECORDS SAN DIEGO COUNTY RECORDER'S OFFICE Ernest J. Dronenburg, Jr., COUNTY RECORDER FEES: 0.00 PAGES: 12 �IIHI IIIII IIIII IIIII IIIII �IIH IIIII IIIII IIIII IIIII IIIII IIIII IIIII IIIII IIIII IIII IIII DECLARATION OF COVENANTS, CONDITIONS AND RESTRICTIONS (TENANT RESTRICTIONS) THIS DECLARATION OF COVENANTS, CONDITIONS AND RESTRICTIONS ("Declaration") is dated as of the 15th day of August, 2011, by T & T Community Properties, LLC, a California limited liability company ("Declarant") in connection with that certain parcel of real property ("Property") located in the City of National the City, County of San Diego, California, described in Exhibit "A" attached hereto and incorporated herein by reference. RECITALS A. Concurrently with the recordation of this Declaration, the City of National City ("City") is funding a loan ("Loan") secured by a deed of trust ("Deed of Trust'') on the Property, as described in that certain Acquisition, Rehabilitation and Permanent Financing Loan Agreement dated as of July 28, 2011 ("Agreement"). B. The Agreement and Deed of Trust were conditioned by the City in part upon the recordation of a document setting forth certain restrictions upon the use and sale of the Property. Declarant shall rehabilitate the entire eight (8) dwelling unit affordable housing project (the "Project"). One of the eight (8) units will be occupied as a manager's unit, but will be rent and occupancy restricted as set forth herein. NOW, THEREFORE, Declarant hereby declares that the Property shall be subject to the covenants, conditions and restrictions set forth below: 1. Restrictive Covenants. Declarant agrees and covenants on behalf of itself and its successors and assigns, and each successor in interest to the Property, that at all times during the term of this Declaration set forth herein eight (8) residential units at the Project shall be set aside and reserved as "Affordable Units." As used herein the term "Affordable Units" shall refer to the eight (8) residential units in the Project which are owned or held available strictly in accordance with the terms and conditions set forth below. 1 1123 (a) Affordable Unit and HOME Unit Restrictions. The following restrictions shall apply to the eight (8) Affordable Units, including the five (5) floating Affordable HOME Units ("HOME Units") restricted pursuant to the HOME Program, shall be restricted as set forth herein. The restrictions set forth in the Table below shall establish the maximum rental rate, from which a utility allowance as approved by the City shall be deducted: Number of Affordable Units (Column 1); Unit Type (Column 2); Maximum Rents as Percentage of AMI (Column 3); Number of HOME Units (Column 4); Limit in Income of Eligible Tenants based upon percentage of the Median Area Income (Column 5); Years of Restriction (Column 6): TABLE OF RENT AND INCOME RESTRICTION CRITERIA 1 2 3 4 5 6 NUMBER OF AFFORDABLE UNITS (UNIT TYPE MAXIMUM RENTS AS %AGE OF AMI NUMBER OF HOME UNITS MAXIMUM % OF AREA MEDIAN INCOME OF ELIGIBLE TENANTS YEARS OF RENT RESTRICTION 3 2-Bedroom 30%of50% 2*** 50% 55*** 4 2-Bedroom 30%of60% ;*** 60% 55*** 1* 2-Bedroom 30%of80% 0*** 80% 55*** TOTAL AFFORDABLE UNITS TOTAL HOME UNITS 8 5*** * Manager's Unit *** The HOME Units will be restricted for fifteen (15) years under the HOME -Program. From year 16 through year 55, the Affordable Units that were previously restricted as HOME Units will continue to be subject to the restrictions set forth herein. (b) "Eligible Tenants" are those tenants whose aggregate gross annual income does not exceed the respective percentages set forth in the table above of annual median income, as adjusted for family size. For purposes of this Declaration, the current annual median income shall be the median income defined by the Department of Housing and Urban Development ("HUD") as the then current median income for the San Diego Standard Metropolitan Statistical Area, established periodically by HUD and published in the Federal Register, as adjusted for family size. The rents and the occupancy restrictions shall be deemed adjusted, from time to time, in accordance with any adjustments that are authorized by HUD or any successor agency. In the event HUD ceases to publish an established median income as aforesaid, the City may, in its sole discretion, use any other reasonably comparable method of computing adjustments in median income or HOME Program rents. Notwithstanding anything contained herein to the contrary, to the extent any other restrictions applicable to the Property limit the rent and/or occupancy of the Property, the most restrictive shall apply. (c) An adjustment of rents may be performed annually in accordance with the rents contained in the applicable the City or HUD rent schedules published by the City based upon the HUD determined median income for the San Diego Standard Metropolitan Statistical Area for the 2 1124 affected unit type and updated from time to time. However, in no event shall the rents, as adjusted, exceed the maximum HOME rents for HOME Affordable Units. Further, the rents charged shall be further limited as set forth in Section 14, hereof. 2. Affordable Marketing Plan Compliance. Eligible Tenants shall be described in Declarant's approved Affirmative Marketing Plan and Declarant shall comply with the terms of its approved Affirmative Marketing Plan, renting to those person(s) referenced in said approved plan, as may be amended from time to time. Provided, however, nothing herein shall restrict Declarant from screening tenants through the application of criteria which is lawful and customary in apartment management in San Diego County and otherwise consistent with federal, state and local regulations and restrictions related to the financing for the Property. 3. Determination; Annual Requalification. On the July 1 immediately following the calendar year in which rehabilitation of the Affordable Units is completed, and annually on July 1 of each year thereafter during the term of this Declaration, Declarant shall certify to the City under penalty of perjury, utilizing such forms and providing such backup documentation as the City may require, that Declarant is complying with all provisions of this Declaration. Failure to complete the annual certification process described in this Section 3 within fifteen (15) days of receipt of written notice from the City shall constitute a material default under this Declaration. the City may resort to the remedies set forth herein upon such material default, as well as any and all other remedies available at law or in equity or contained in the Agreement or Deed of Trust. 4. Relationship with Declarant. The term `Eligible Tenant" shall not include Declarant or any individuals who are partners or shareholders in Declarant or in any entity having an interest in Declarant or in the Property, or officer, employee, agent or consultant of the owner, developer or sponsor. 5. No Student Dependents. No Affordable Unit shall be occupied or leased to any person who is a full-time student, or a household comprised exclusively of persons who are full-time students, unless such persons are married and eligible to file a joint federal income tax return. The term "full- time student" shall be defined as any person who will be or has been a full-time student during five calendar months of the calendar year in question at an educational institution (other than a correspondence school) with regular faculty and students and or a student dependent as defined in the U.S. Internal Revenue Code, unless the taxpayer (upon whom the student in question is dependent) resides in the same dwelling unit. 6. Income of Co -Tenants. The income of all co -tenants and/or non-dependent occupants shall be taken into account in determining whether a household is an Eligible Tenant hereunder. 7. Over Income Tenants. In the event that a tenant who was properly certified as an Eligible Tenant at the commencement of such tenant's occupancy ceases to be eligible, for any reason other than the tenant being over income, Tenant shall give sixty (60) days written notice to such tenant to vacate the Affordable Unit. The vacated Affordable Unit shall thereafter be rented to an Eligible Tenant. Notwithstanding anything to the contrary in this Declaration, no occupant of a HOME Program Affordable Unit or Affordable Unit who previously and properly qualified as an Eligible 3 1125 Tenant shall be evicted by Declarant because such occupant fails to requalify as an Eligible Tenant, because such occupant exceeds the income limits set forth above, as in the case of increased income, except as provided for in Section 92.252 of the Code of Federal Regulations, as amended from time to time. Rather, the next available unit shall be designated as a HOME Program Affordable Unit or Affordable Unit to replace the Unit of the occupant in question. Further, subject to the fair market limitations set forth in HOME Regulation 92.252, such occupant shall commence paying rent equal to 30% of such occupant' s adjusted income, effective from and after the date of such failure to requalify. The over -income tenant shall continue to be considered an Eligible Tenant until evicted, provided this continued occupancy complies with the applicable regulations as referenced below, depending upon the sources of funds involved: (a) Non -HOME Funds. A tenant who occupies an Affordable Unit that is not a HOME Affordable Unit and who becomes over income at the time of recertification shall be given one hundred eighty (180) days notice to vacate the affordable unit, effective from and after the date of such failure to requalify (i.e., the recertification date, provided the tenant was properly certified originally). During the time the over -income tenant resides in the Affordable Unit, the tenant shall continue to pay the restricted rent. The tenant shall continue to be considered an "Eligible Tenant" until evicted, provided this continued occupancy complies with this Declaration. (b) HOME Program Funds. When a HOME Eligible Tenant's gross income exceeds the "low income" definition as defined in CFR 92.252(i), then the tenant shall commence paying rent equivalent to thirty percent (30%) of the tenant's adjusted income, subject to the fair market rent ceiling as set forth in HOME Regulation 92.252(i) and the next available comparable sized and configured unit shall be designated as a HOME Affordable Unit. The tenant shall continue to be considered an Eligible Tenant, provided this continued occupancy otherwise complies with all applicable HOME Program requirements. 8. Physical Condition of Affordable Units. After completion of rehabilitation of the Project, Declarant shall continually maintain the Affordable Units in a condition which satisfies the Housing Quality Standards promulgated by HUD under its Section 8 Program, as such standards are interpreted and enforced by the City under its normal policies and procedures. the City shall have the right to inspect the Affordable Units from time to time, on reasonable notice and at reasonable times, in order to verify compliance with the foregoing maintenance covenant. Further, each Affordable Unit shall be requalified annually, as to the foregoing maintenance covenant, as part of the annual tenant requalification process described in Section 3, above. Any deficiencies in the physical condition of an Affordable Unit shall be corrected by Declarant at Declarant's expense within thirty (30) days of the identification of such deficiency by the City and delivery of written notice of the same to Declarant. 9. City Monitoring Functions. It is contemplated that, during the term of this Declaration, the City will perform the following monitoring functions: (a) preparing and making available to Declarant any general information that the City possesses regarding income limitations and restrictions which are applicable to the Affordable Units; (b) reviewing the documentation submitted by Declarant in connection with the annual certification process for Eligible Tenants described in Section 3, above; and (c) inspecting the Affordable Units to verify that they are being maintained in 4 1126 accordance with Section 8, above. Notwithstanding the foregoing description of the City's functions, Declarant shall have no claim or right of action against the City based on any alleged failure to perform such function, except that Declarant may reasonably rely upon the City's tenant eligibility determination. 10. Designation of Affordable HOME Units. The HOME Units will be designated prior to initial occupancy at the discretion of the City. Such designations may be changed by Declarant, provided that the units before and after the change in designation are of the same unit types, size, features and otherwise comply with the terms of 24 C.F.R. §92.252(j). 11. Compliance with HOME Regulations. Declarant shall comply with all regulations, policies and procedures promulgated by HUD, or by the City in connection with the HOME Program, under which the Loan is being made to Declarant. Declarant's failure to so comply shall constitute a material default hereunder, entitling the City to the remedies set forth in Section 23, below. 12. Lease Provisions. Declarant agrees that it will include in all of its leases and cause its successors in interest to include in all of their leases, all provisions required under the terms of the HOME Program, including the following provisions: (a) Additional Lease Provisions/Annual Income Verification. Lessee agrees, upon written request from the landlord or the City of National the City ("the City"), to certify under penalty of perjury the accuracy of all information provided in connection with the examination or reexamination of annual income of the tenant's household. Further, tenant agrees that the annual income and other eligibility requirements are substantial and material obligations of the tenancy and that the tenant will comply promptly with all requests for information with respect to the tenancy from the landlord and/or the City. Further, tenant acknowledges that tenant's failure to provide accurate information regarding such requirements (regardless of whether such inaccuracy is intentional or unintentional) or the refusal to comply with the request for information with respect thereto, shall be deemed a violation of this lease provision, and a material breach of the tenancy and shall constitute cause for immediate termination of the tenancy. (b) Term of Lease for HOME Program Restricted Units. LESSEE has been made aware by Landlord that the unit being leased was assisted with HOME funds. Under the provisions of 24 C.F.R. §92.253, a lease must be for a period of not less than one (1) year unless the parties agree by mutual agreement that the term of the lease be less. The Lessee acknowledges by initialing in the space below that it has been made aware of the provisions of 24 C.F.R. §92.253. 13. Successors Bound. Declarant covenants, for itself and its successors and assigns, not to sell, transfer, assign or otherwise dispose of ownership of the Property, without the express written consent of the City. Any prospective purchaser, transferee or assignee shall expressly promise in writing to be bound by all of the provisions hereof, including the covenant in this Section 13 to require successors to expressly assume the obligations herein. It is expressly acknowledged that the 5 1127 covenants and restrictions set forth herein shall survive any repayment of the Loan. Further, the obligations of Declarant hereunder shall be deemed independent of Declarant's obligations under the Loan. 14. Maximum Rent To Be Collected by Declarant. In no event, shall all of the rent paid by the Eligible Tenant for any rent restricted unit exceed the amount of rent set forth in the table in Section 1(a), above. Should Declarant receive rent from a tenant in excess of the allowable maximum rent set forth in the table in Section 1(a), above, Declarant agrees to immediately notify the City and reimburse the City for any such overpayment. Acceptance by Declarant or its successors in interest, of rent in excess of the maximum rent set forth in the table in Section 1(a), above, shall constitute a material breach of this Declaration and the Agreement. 15. Cross Default; Occupancy Schedule for Affordable Units. A default under the Agreement, including without limitation failure to make the annual loan payments to the City as set forth in the Agreement, shall be a material default under this Declaration. The Affordable Units shall be rehabilitated and receive final inspection approval and shall be occupied by Eligible Tenants no later than six (6) months after the Closing, as defined in the Agreement. Time is of the essence in the rehabilitation and occupancy of the Affordable Units. 16. Term. This Declaration and the covenants and restrictions contained herein shall be effective upon the completion of the rehabilitation of the Project and shall remain in full force and effect for a period of fifty-five (55) years from their effective date. 17. Covenant Against Discrimination. Declarant covenants on behalf of itself and its successors and assigns, and each successor in interest to the Property, not to discriminate against any purchaser or prospective purchaser of any Affordable Unit on the basis of their race, age, sexual orientation, marital status, color, religion, sex, handicap, or national origin, as referenced in all applicable state, local and federal law. 18. Enforcement. Declarant expressly agrees and declares that the City or any successor public agency is a proper party and shall have standing to initiate and pursue any and all actions or proceedings, at law or in equity to enforce the provisions hereof and/or to recover damages for any default hereunder, notwithstanding the fact that such damages or the detriment arising from such default may have actually been suffered by some other person or the public at large. Further, the City or any successor public agency shall be the proper party to waive, relinquish, release or modify the rights, covenants, obligations or restrictions contained in or arising under this Declaration. 19. Attorneys' Fees. In the event that any litigation for the enforcement or interpretation of this Declaration, whether an action at law or arbitration or any manner of non -judicial dispute resolution to this Declaration by reason of the breach of any condition or covenant, representation or warranty in this Declaration, or otherwise arising out of this Declaration, the prevailing party in such action shall be entitled to recover from the other reasonable attorneys' fees to be fixed by the court which shall render a judgment, as well as the costs of suit. 6 1128 20. Severability. In the event that any provision or covenant of this Declaration is held by a court of competent jurisdiction to be invalid or unenforceable, then it shall be severed from the remaining portions of this Declaration which shall remain in full force and effect. 21. Covenants to Run With the Land. The covenants contained herein shall constitute "covenants running with the land", and shall bind the Property and every person having an interest therein during the term of this Declaration. Declarant agrees for itself and its successors that, in the event that, for any reason whatsoever, a court of competent jurisdiction determines that the foregoing covenants do not run with the land, such covenants shall be enforced as equitable servitudes against the Property. 22. Recordation; Waiver and Amendment. This Declaration shall be recorded in the Office of County Recorder of San Diego, California. No provision of this Declaration, or breach of any provision, can be waived except in writing. Waiver of any provision or breach shall not be deemed to be a waiver of any other provision, or of any subsequent breach of the same or other provision. Except as otherwise provided herein, this Declaration may be amended, modified or rescinded only in writing signed by Declarant and the City. 23. Remedies. (a) Contract Governed by Laws of State of California. This Declaration, its performance, and all suits and special proceedings under this Declaration, shall be constituted in accordance with the laws of the State of California and Federal law, to the extent applicable. In any action, special proceeding, or other proceeding that may be brought arising out of, under or because of this Declaration, the laws of the State of California and the United States, to the extent applicable, shall govern to the exclusion of the law of any other forum, without regard to the jurisdiction in which the action or special proceeding may be instituted. (b) Standing, Equitable Remedies; Cumulative Remedies. Declarant expressly agrees and declares that the City or any successor or public agency shall be the proper party and shall have standing to initiate and pursue any and all actions or proceedings, at law or in equity, to enforce the provisions hereof and/or to recover damages for any default hereunder, notwithstanding the fact that such damages or the detriment arising from such a default may have actually been suffered by some other person or by the public at large. Further, Declarant expressly agrees that receivership, injunctive relief and specific performance are proper pre-trial and/or post -trial remedies hereunder, and that, upon any default, and to assure compliance with this Declaration. Nothing in this subparagraph, and no recovery to the City, shall restrict or limit the rights or remedies of persons or entities other than the City, against Declarant in connection with the same or related acts by Declarant. The remedies set forth in this Section are cumulative and not mutually exclusive, except the extent that their award is specifically determined to be duplicative by final order of a court of competent jurisdiction. (c) Remedies at Law for Breach of Tenant Restrictions. In the event of any material default under Sections 1 through 22 hereof regarding restrictions on the operation and the transfer of the Property and the expiration of any applicable cure period provided under the Agreement, the City 7 1129 shall be entitled to, in addition to any and all other remedies available at law or in equity: (i) declare the Loan to be all due and repayable; and (ii) recover compensatory damages. If the default in question involves the collection of rents in excess of the rents permitted hereunder, the amount of such compensatory damages shall be the product of multiplying: (a) the number of months that the default in question has continued until the time of trial by (b) the result of subtracting the rents properly chargeable hereunder for the Affordable Units in question from the amount actually charged for those Affordable Units. Declarant and the City agree that it would be extremely difficult or impracticable to ascertain the precise amount of actual damages accruing to the City as a result of such a default and that the foregoing formula is a fair and reasonable method of approximating such damages. The City shall be entitled to seek and to recover damages in separate actions for successive and separate breaches which may occur. Further, interest shall accrue on the amount of such damages from the date of the breach in question at the rate of ten percent (10%) per annum or the maximum rate than allowed by law, whichever is less. Nothing in this section shall preclude the award of exemplary damages as allowed by law. (d) Expert Witness, Attorneys' Fees, and Costs. The parties agree that the prevailing party in litigation for the breach and/or interpretation and/or enforcement of the terms of this Declaration and/or the Agreement shall he entitled to their expert witness fees, if any, as part of their costs of suit, and reasonable attorneys' fees as may be awarded by the court, pursuant to California Code of Civil Procedure ("CCP") §1033.5 and any other applicable provisions of California law, including, without limitation, the provisions of CCP §998. 24. Mortgagees Protection. No violation or breach of the covenants, conditions, restrictions, provisions or limitations contained in this Declaration shall defeat or render invalid or in any way impair the lien or charge of any permitted deed of trust recorded on the Property provided, however, that any subsequent owner of the Property shall be bound by the covenants, conditions, restrictions, limitations and provisions of this Declaration, whether such owner's title was acquired by foreclosure, deed in lieu of foreclosure. trustee's sale or otherwise. 25. City Approval of Property Manager. At all times that this Declaration is in force and effect, and the City has served a thirty (30) day written notice of deficiencies in the property management for the Property which do not conform to the standards of property management of a professional property manager operating similar properties in San Diego County and which deficiencies have not been rectified by Declarant, within the thirty (30) day period (unless such deficiency is not reasonably capable of being cured within such thirty (30) day period, then such reasonable amount of time as is needed not to exceed ninety (90) days, provided Declarant commences cure within such thirty (30) day period and continues to diligently pursue cure), then, the City shall have the right, in its reasonable discretion, and upon thirty (30) days written notice: (i) to require the retention of a professional property management firm to manage the Property; (ii) to approve, in advance and in writing, the retention of any such property management firm, including the teens of the contract governing such retention; and (iii) to require Declarant to terminate any such property management firm, provided that such termination shall comply with the termination provisions of the management contract in question. Declarant shall cooperate with the City to effectuate the City's rights. 8 1130 26. Declarant Required to Pay Monitoring Fees. Declarant shall pay the City a set-up fee (the "Set -Up Fee") in the amount of Five Hundred Dollars ($500.00) which shall be paid by Declarant to the City at closing of the Loan. Declarant shall pay to the City an annual monitoring fee, as determined by the City in schedules printed by the City from time to time. Said fee shall be subject to revision annually, based upon the increase in the Consumer Price Index for the San Diego Metropolitan Area. Each year the Monitoring Fees shall be increased based upon the percentage of increase in the Cost of Living as referenced in the Consumer Price Index for the San Diego Metropolitan Area. In no event, shall the monitoring fees decrease, however. The schedule of monitoring fees may be requested from the City. No fees shall be due and payable for any of the HOME Units, however. Annual Monitoring Fees shall be paid to the City annually within ten (10) days after the City provides a written invoice for the same. Failure to timely pay such fees shall constitute a material default under the terms and conditions of the Agreement and this Declaration. Both the Set -Up Fee and the Loan Monitoring Fee shall be paid to the City as a consideration for the lending of funds by the City to Declarant. 27. No Conversion to Condominiums. Declarant agrees during the term of this Declaration, that Declarant shall not, and shall not allow any other person to, cause all or any portion of the Property to be converted to condominiums or to otherwise allow a condominium map or condominium plan to be recorded or filed against all or any portion of the Property. Declarant further agrees that the conversion of all or any portion of the Property to condominiums and/or the recordation or filing of a condominium map or condominium plan against all or any portion of the Property during the term of this Declaration. shall be a breach of this Declaration, the Agreement, the Note, as defined in the Agreement, and the Deed of Trust, entitling the City to immediately exercise any and all of its rights and remedies under this Declaration, the Agreement, Note and Deed of Trust, including without limitation acceleration of the Note and foreclosure under the Deed of Trust. 28. Noticing Requirements Prior to Termination. Prior to termination of this Declaration, Declarant shall comply with any and all noticing requirements required under any applicable laws or regulations, including without limitation, the requirements of California Government Code Sections 65863.10 and 65863.11. 29. No Further Encumbrance. Should Declarant agree to or actually sell, convey, transfer, further encumber or dispose of the Property or any interest in it (or obtain any other funds with respect to the Property or Declarant's activities at the Property, regardless of whether the source), without first obtaining the written consent of the City, shall be a material breach of this Declaration. The consent to one transaction of this type will not constitute a waiver of the right to require consent to future or successive transactions. This Declaration shall remain in effect for its fifty-five (55) year term, whether or not the City approves or disapproves a successor -in -interest or further encumbrance. 30. Indemnity. Declarant shall be responsible for all injuries to persons and/or all damages to real or personal property of the City or others, caused by or resulting from the sale, rental, ownership or operation of the Property, the negligence and/or breach of this Declaration, of itself, its employees, subcontractors and/or its agents during or arising out of rehabilitation of the Affordable Units. Declarant shall defend and hold harmless and indemnify the City, and all of its officers and employees from and against all claims, liens, claims of lien, losses, damages, judgments, costs, and 9 1131 expenses, whether direct or indirect, arising in any way from (i) the sale, rental, ownership or operation of the Property, including without limitation the Affordable Units; (ii) Declarant's negligence; (iii) breach of this Declaration, by Declarant, its employees, subcontractors and/or its agents; and/or (iv) arising out of the rehabilitation of the Affordable Units, except those arising from the sole negligence or willful misconduct of the City. 31. Signature Authority. All individuals signing this Declaration for a party which is a corporation, limited liability company, partnership or other legal entity, or signing under a power of attorney, or as a trustee, guardian, conservator, or in any other legal capacity, covenant to the City that they have the necessary capacity and authority to act for, sign and bind the respective entity or principal on whose behalf they are signing. DECLARANT: T & T Community Properties, LLC, a California limited liability company By: Mitchell L. Thomps.n, Managing Member 10 ACKNOWLEDGMENT Statc of California County of San Diego 1132 On 2 /15 /26ii ,.. 8811"bef re e,,��� ' I , notary public, personally appearedGt� �- tc� yj who proved to me on the basis of satisfactory evidence to be the person(s) whose ame(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. 1 certify under penalty of perjury under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signatu' (Seal) AMY BOYD COMM. # 1805792 E NOTARY PUBLIC - CALIFORNIAE SAN DIEGO COUNTY My Comm. Expires July 3, 2012 11 Exhibit "A" Property Description That certain real property situated in the City of National City, County of San Diego, State of California, described as follows: 1133 All of Lot 34 and that portion of Lot 36, Block 3 Paradena Park, in the City of National City, County of San Diego, State of California, according to Map thereof No. 1404, filed in the Office of the County Recorder of San Diego County Februrary 16, 1912, lying Southerly of a line described as follows: Beginning at a point on the Easterly line of said Lot 36 distant thereon 50.00 feet Southerly from the most Northly corner thereof; thence Westerly in a straight line to an intersection with the Westerly line of said Lot 36 at a point which is a distant thereon 25.00 feet Southerly from the Northwesterly corner thereof. Excepting from said Lot 34 the Southerly 65.00 feet measured at right angles to the Southerly line. APN: 554-013-16-00 12 q RECORDING REQUESTED BY FIRST AMERICAN TITLE `National Commercial Services NO CHARGE ON THIS DOCUMENT PER CALIFORNIA GOVERNMENT CODE SECTION 6103 And When Recorded Mail To: Christensen & Spath LLP 550 West C Street, Suite 1660 San Diego, CA 92101 aoc # 207 i -oaaz7 ss IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII IIIIIIIIIIIIIIII AUG 23, 2011 8:00 AM OFFICIAL RECORDS SAN DIEGO COUNTY RECORDERS OFFICE Ernest J. Dronenburg, Jr.. COUNTY RECORDER FEES: 0.00 DA: 1 PAGES. 13 IIIIII IIIII IIIII IIIII IIIII IIIII IIIII IIIII IIIII IIIII IIIII IIIII IIIII IIIII IIIII IIII IIII DEED OF TRUST THIS DEED OF TRUST is made as of this 15th day of August, 2011, by T & T Community Properties, LLC, a California limited liability company ("Trustor"), whose address is 760 Arroyo Court, Chula Vista, California 91910, and First American Title Company ("Trustee") and the City of National City ("Beneficiary"), whose address is 1243 National City Boulevard, National City, California, 91950-4397. TRUSTOR HEREBY irrevocably grants, transfers, and assigns to Trustee, in trust, with power of sale, all that property in the City of National City, County of San Diego, State of California, described as: (See Legal Description - Exhibit "A") FOR THE PURPOSE OF SECURING: (1) Payment of the indebtedness evidenced by a Promissory Note of even date herewith executed by Trustor, in the principal sum of Seven Hundred Seventeen Thousand Five Hundred and No/100 Dollars ($717,500.00), and any renewal, extension, or modification of the promissory note (the "Note"); (2) Any additional sums and interest that may hereafter be loaned to the then record owner of the Property by Beneficiary, when evidenced by another note or notes reciting that it or they arc so secured; (3) The performance of each agreement contained in this Deed of Trust; (4) The performance of each agreement of Trustor under that certain Acquisition, Rehabilitation and Permanent Financing Loan Agreement ("Loan Agreement") dated as of July 28, 2011, by and between Trustor and Beneficiary on file in the Office of Beneficiary; and (5) The performance of each agreement and covenant of Trustor under that certain Declaration of Covenants, Conditions and Restrictions ("Restrictions") of even date herewith and recorded concurrently herewith affecting the Property. 1 1135 A. TO PROTECT THE SECURITY OF THIS DEED OF TRUST, TRUSTOR AGREES: Maintenance and Repair (1) To keep the Property in good condition and repair; not to remove or demolish any buildings on the Property; to complete or restore promptly and in good and workmanlike manner any building that may be constructed, damaged, or destroyed on the Property; to pay when due all claims for labor performed and materials furnished for the Property; to comply with all laws affecting the Property or requiring any alterations or improvements to be made on the Property; not to commit or permit waste of the Property; not to commit, suffer, or permit any act upon the Property in violation of law; and to cultivate, irrigate, fertilize, fumigate, prune, and do all other acts that from the character or use of the Property may be reasonably necessary. Fire Insurance (2) To provide, maintain, and deliver to Beneficiary fire insurance satisfactory to and with loss payable to Beneficiary as its interest may appear. Subject to the rights of any senior lenders, the amount collected under any fire or other insurance policy may be applied by Beneficiary upon any indebtedness secured by this Deed of Trust and in any order determined by Beneficiary, or at the option of Beneficiary the entire amount so collected or any part of that amount may be released to Trustor. This application or release shall not cure or waive any default or notice of default under this Deed of Trust or invalidate any act done pursuant to such a notice. Notwithstanding the foregoing, in the event of any fire or other casualty to the Property, Trustor shall have the right to rebuild the Property, and to use all available insurance proceeds therefor, provided that (a) such proceeds are sufficient to rebuild the Property in a manner that provides adequate security to Beneficiary for repayment of the indebtedness secured hereby or if such proceeds are insufficient then Trustor shall have funded any deficiency, (b) Beneficiary shall have the right to approve (which shall not be unreasonably withheld or delayed) plans and specifications for any major rebuilding and the right to approve (which shall not be unreasonably withheld or delayed) disbursements of insurance proceeds for rebuilding under a construction escrow or similar arrangement, and (c) no material default then exists hereunder or under the Note. If the casualty affects only part of the Property and total rebuilding is not feasible, then proceeds may be used for partial rebuilding and partial repayment of the indebtedness secured hereby in a manner that provides adequate security to Beneficiary for repayment of the remaining indebtedness secured hereby. Defense of Security (3) To appear in and defend any action or proceeding purporting to affect the security of this Deed of Trust or the rights or powers of Beneficiary, or Trustee; and to pay all costs and expenses, including cost of evidence of title and attorneys" fees in a reasonable sum, in any such action or proceeding in which Beneficiary or Trustee may appear, and in any suit brought by Beneficiary to foreclose this Deed of Trust. 2 1136 Payment of Liens and Taxes (4) To pay, at least ten (10) days before delinquency, all taxes and assessments affecting the Property, including assessments on appurtenant water stock, all encumbrances, charges, and liens, with interest, on the Property or any part of the Property, which appear to be prior or superior to this Deed of Trust; and all costs, fees, and expenses of this Trust. If Trustor fails to make any payment or to do any act as provided in this Deed of Trust, then Beneficiary or Trustee may (but is not obligated to) make the payment or do the act in the required manner and to the extent deemed necessary by Beneficiary or Trustee to protect the security of this Deed of Trust. The performance by Beneficiary or Trustee of such an act shall not require notice to or demand upon Trustor and shall not release Trustor from any obligation under this Deed of Trust. Beneficiary or Trustee shall also have the following related rights and powers: to enter upon the Property for the foregoing purposes; to appear in and defend any action or proceeding purporting to affect the security of this Deed of Trust or the rights or powers of Beneficiary or Trustee; to pay, purchase, contest, or compromise any encumbrance, charge, or lien that in the judgment of either appears to be prior or superior to this Deed of Trust; to employ counsel; and to pay necessary expenses and costs, including reasonable attorneys' fees. Reimbursement of Costs (5) To pay immediately and without demand all sums expended by Beneficiary or Trustee pursuant to this Deed of Trust, with interest from date of expenditure at the amount allowed by law in effect at the date of this Deed of Trust, and to pay any amount demanded by Beneficiary (up to the maximum allowed by law at the time of the demand) for any statement regarding the obligation secured by this Deed of Trust. (6) That it will pay the Note at the time and in the manner provided therein. (7) That it will not permit or suffer the use of any of the Property for any purpose other than the use for which the same was intended at the time this Deed of Trust was executed. (8) That the Note, the Loan Agreement, and the Restrictions are incorporated herein by reference and made a part of this Deed of Trust, although not attached. Copies are on file in the office of the Beneficiary. (9) To perform, in a timely manner, each agreement and covenant by and between Trustor on any and all notes, loans and deeds of trust that are senior and/or junior to this Deed of Trust. A default in any of these obligations and the expiration of any applicable notice or cure period shall constitute a default under this Deed of Trust. 3 1137 B. THE PARTIES AGREE THAT: Condemnation Award (10) Any award of damages in connection with any taking or condemnation, or for injury to the Property by reason of public use, or for damages for private trespass or injury to the Property, is hereby assigned and shall be paid to Beneficiary (subject to the rights of any senior lenders), as its interest may appear as further security for all obligations secured by this Deed of Trust. Upon receipt of such proceeds, Beneficiary may hold the proceeds as further security, or apply or release them in the same manner and with the same effect as provided in Section 2 of this Deed of Trust for the disposition of proceeds of fire or other insurance. Waiver of Late Payments (11) By accepting payment of any sum secured by this Deed of Trust after its due date, Beneficiary does not waive its right either to require prompt payment when due of all other sums so secured or to declare default for failure to pay any indebtedness secured by this Deed of Trust. Trustee's Powers (12) Upon written request of Beneficiary and presentation of this Deed of Trust and the Note for endorsement, Trustee may (a) reconvey all or any part of the Property; (b) consent to the making and recording, or either, of any map or plat of all or any part of the Property; (c) join in granting any easement on the Property; or (d) join in or consent to any extension agreement or any agreement subordinating the lien, encumbrance, or charge of this Deed of Trust. Trustee need not provide Trustor with notice before taking any of the foregoing actions, and shall not be liable for the proper performance of the act. The exercise by Trustee of any of the foregoing powers shall not affect the personal liability of any person for payment of the indebtedness secured by this Deed of Trust, or the lien of this Deed of Trust on the remaining property as security for the repayment of the full amount secured by this Deed of Trust. Full Reconveyance (13) Upon written request of Beneficiary stating that all sums secured by this Deed of Trust have been paid, surrender of this Deed of Trust, the Note, and any other notes secured by this Deed of Trust to Trustee for cancellation and retention, and payment of Trustee's fees and charges, Trustee shall reconvey, without warranty, the Property then subject to this Deed of Trust. The recitals in the reconveyance shall be conclusive proof of the truthfulness of the recitals. The grantee in the recon- veyance may be described as "the person or persons legally entitled thereto." Five years after issuance of the full reconveyance, Trustee may destroy the Note and this Deed of Trust, unless directed in the request to retain them. 4 1138 Assignment of Rents (14) As additional security, Trustor hereby gives to and confers upon Beneficiary the right, power, and authority during the continuance of these Trusts, to collect the rents, issues, and profits of the Property, but reserves the right, prior to any default, which shall continue beyond any applicable notice and cure periods, to collect and retain these rents, issues, and profits as they become due and payable. Upon any such default, Beneficiary may, without notice and without regard to the adequacy of the security for the indebtedness secured by this Deed of Trust, either personally or by agent or court -appointed receiver, do the following: enter upon and take possession of the Property or any part of the Property; sue for or otherwise collect all rents, issues, and profits, including those past due and unpaid; and apply these rents, issues, and profits, less costs and expenses of operation and collection (including reasonable attorneys' fees), upon any indebtedness secured by this Deed of Trust, in any order determined by Beneficiary. The exercise of the foregoing rights by Beneficiary shall not cure or waive any default or notice of default under this Deed of Trust or invalidate any act done pursuant to such a notice. Default in Foreclosure (15) Upon default by Trustor in the payment of any indebtedness secured by this Deed of Trust or in the performance of any material obligation under this Deed of Trust, and the expiration of any and all applicable notice or cure periods, Beneficiary may declare all sums secured by this Deed of Trust immediately due and payable by delivering to Trustee a written declaration of default and demand for sale and a written notice of default and election to sell the Property. Trustee shall cause the notice of default and election to sell to be recorded. Beneficiary also shall deposit with Trustee this Deed of Trust, the Note, and all documents evidencing any additional expenditures secured by this Deed of Trust. After the required time period has lapsed following the recordation of the notice of default, and after notice of sale has been given as required by law, Trustee, without demand on Trustor, shall sell the Property at the time and place specified in the notice of sale, either as a whole or in separate parcels, and in any order determined by Trustee, at public auction to the highest bidder for cash in lawful money of the United States, payable at the time of sale. Trustee may postpone sale of all or any portion of the Property by public announcement at the time and place of sale, and from time to time thereafter may postpone the sale by public announcement at the time fixed by the preceding postponement. Trustee shall deliver to the purchaser at the auction its deed conveying the Property sold, but without any covenant or warranty, express or implied. The recital in the deed of any matter or fact shall be conclusive proof of the truthfulness of the recital. Any person, including Trustor, Trustee, or Beneficiary, may purchase at the sale. After deducting all costs, fees, and expenses of Trustee and Beneficiary under this paragraph, including costs of procuring evidence of title incurred in connection with sale, Trustee shall apply the proceeds of sale to payment of: all sums expended under the terms of this Deed of Trust, not then repaid, with accrued interest at the amount allowed by law in effect at the date of this Deed of Trust; all other sums then secured by this Deed of Trust; and the remainder, if any, to the person or persons legally entitled to the remaining proceeds. 5 1139 (16) Should the undersigned agree to or actually sell, convey, transfer, or dispose of, or further encumber the real property described in this deed of trust securing the Promissory Note, or any part of it, or any interest in it, without first obtaining the written consent of the Holder of the Note, then all obligations secured by the Note and trust deed may be declared due and payable, at the option of the Holder. Consent to one transaction of this type will not constitute a waiver of the right to require consent to future or successive transactions. General Provisions (17) This Deed applies to, inures to the benefit of, and binds all parties to this Deed of Trust and their heirs, legatees, devisees, administrators, executors, successors, and assigns. The term `Beneficiary- shall mean the holder and owner. including pledgee, of the Note secured by this Deed of Trust, whether or not named as a beneficiary in this Deed of Trust, and the heirs, legatees, devisees, administrators, executors, and assigns of any such person. In this Deed, whenever the context so requires, the masculine gender includes the feminine and/or neuter, and the singular number includes the plural. Acceptance by Trustee (18) Trustee accepts this Trust when this Deed, duly executed and acknowledged, is made a public record as provided by law. Trustee is not obligated to notify any party to this Deed of Trust of pending sale under any other deed of trust or of any action or proceeding in which Trustor, Beneficiary, or Trustee shall be a party unless brought by Trustee. Substitution of Trustees (19) Beneficiary, or any successor in ownership of any indebtedness secured by this Deed of Trust, may from time to time, by written instrument, substitute a successor or successors to any Trustee named in or acting under this Deed of Trust. The substitution instrument shall contain the name of the original Trustor, Trustee, and Beneficiary under this Deed of Trust, the hook and page where this Deed is recorded, and the name and address of the new Trustee. When executed by Beneficiary and duly acknowledged and recorded in the office of the recorder of the county or counties where the Property is situated, the substitution instrument shall be conclusive proof of proper substitution of the successor Trustee or Trustees. Any successor Trustee or Trustees shall, without conveyance from the predecessor Trustee, succeed to all its title, estate, rights, powers, and duties. Cumulative Powers and Remedies (20) The powers and remedies conferred in this Deed of Trust are concurrent and cumulative to all other rights and remedies provided in this Deed of Trust or given by law. These powers and remedies may be exercised singly, successively, or together, and as often as deemed necessary. 6 1140 Conclusiveness of Recitals (21) The recitals contained in any reconveyance, trustee's deed, or any other instrument executed by Trustee from time to time under the authority of this Deed of Trust or in the exercise of its powers or the performance of its duties under this Deed of Trust, shall be conclusive evidence of their truth, whether stated as specific and particular facts, or in general statements or conclusions. Further, the recitals shall be binding and conclusive upon Trustor, its heirs, executors, administrators, successors, and assigns, and all other persons. Attorneys' Fees (22) If any action is brought for the foreclosure of this Deed of Trust or for the enforcement of any provision of this Deed of Trust (whether or not suit is filed), Trustor agrees to pay all costs and expenses of Beneficiary and Trustee, including reasonable attorneys' fees; and these sums shall be secured by this Deed of Trust. Co -trustees (23) If two or more persons are designated as Trustee in this Deed of Trust, any, or all, power granted in this Deed of Trust to Trustee may be exercised by any of those persons, if the other person or persons are unable, for any reason, to act. Any recital of this inability in any instrument executed by any of those persons shall be conclusive against Trustor and Trustor's heirs and assigns. Request for Notices of Default and Sale (24) In accordance with Section 2924b of the California Civil Code, request is hereby made that a copy of any Notice of Default and a copy of any Notice of Sale under any Deeds of Trust executed by Trustor, and recorded in the Official Records of San Diego County, California, in which Beneficiary, is named as beneficiary, be mailed to: City of National City 1243 National City Boulevard National City, CA 91950-4397 NOTICE: A copy of any notice of default and of any notice of sale will be sent only to the address contained in this recorded request. If your address changes, a new request must be recorded. The undersigned Trustor requests that a copy of any notice of default and of any notice of sale under this Deed of Trust be mailed to Trustor at the address of Trustor set forth above. In the event of a default by the Trustor with respect to this Deed of Trust, the Note, the Loan Agreement or the Restrictions, the Beneficiary agrees deliver copies of all notices of events of default to Clearinghouse CDFI at 23861 El Toro Road, Suite 401, Lake Forest, California 92630, concurrently with delivery of such notices to the Trustor. Clearinghouse CDFI shall have the right, 7 1141 but not the obligation to cure any default by the Trustor during the period of time that Trustor has the right to cure such default. The Beneficiary agrees to accept performance by Clearinghouse CDFI of any cure of any default as though such cure had been performed by the Trustor, and the Beneficiary agrees to permit Clearinghouse CDFI access to the Property to take all such actions as may be necessary or useful to cure any default of the Trustor. (25) Trustor shall permit Beneficiary and its agents or representatives, to inspect the Property at any and all reasonable times, upon prior written notice (unless Trustor is in default under any of the Loan Documents). Inspections shall be conducted so as not to interfere with the tenants' use and enjoyment of the Property and the general operation of the Property. (26) The Property shall be subject to the restrictions set forth in the Loan Agreement and Restrictions and Trustor hereby consents to such restrictions and agrees to be bound thereby. Such restrictions shall be in addition to and not in limitation of the rights of Beneficiary expressly set forth in this Deed of Trust. (27) For purposes of this Deed of Trust, "Hazardous Materials" mean and include any hazardous, toxic or dangerous waste, substance or material including, without limitation, flammable explosives, radioactive materials, asbestos, hazardous wastes, toxic substances and any materials or substances defined as hazardous materials, hazardous substances or toxic substances in (or for purposes of) the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), as amended (42 U.S.C. §9601, et seq.), the Hazardous Materials Transportation Act (49 U.S.C. § 1801, et seq.), the Resource Conservation and Recovery Act (42 U.S.C. §6901, et seq.), and those substances defined as hazardous wastes in §25117 of the California Health and Safety Code or as hazardous substances in §25316 of the California Health and Safety Code or in any regulations promulgated under either such law, any so-called "Superfund" or "Superlien" law, or any other federal, state or local statute, law, ordinance, code, rule, regulation, order or decree regulating, relating to, or imposing liability or standards of conduct concerning, any hazardous, toxic or dangerous waste, substance or material, as now or at any time hereafter in effect. (28) In addition to the general and specific representations, covenants and warranties set forth in the Deed of Trust or otherwise, Trustor represents, covenants and warrants, with respect to Hazardous Materials, as follows: (a) Neither Trustor nor, to the best knowledge of Trustor, any other person, has ever caused or permitted any Hazardous Materials to be manufactured, placed, held, located or disposed of on, under or at the Property or any part thereof, and neither the Property nor any part thereof, or any property adjacent thereto, has ever been used (whether by Trustor or, to the best knowledge of Trustor, by any other person) as a manufacturing site, dump site or storage site (whether permanent or temporary) for any Hazardous Materials. "Hazardous Materials" for purposes of this Paragraph 28(a) shall not include substances typically used in the ordinary course of developing, operating and maintaining apartment complexes, provided that such substances are used in accordance with all applicable laws. 8 1142 (b) Trustor hereby agrees to indemnify Beneficiary, its officers, employees, contractors and agents, and hold Beneficiary, its officers, employees, contractors and agents harmless from and against any and all losses, liabilities, damages, injuries, costs, expenses and claims of any and every kind whatsoever paid, incurred or suffered by, or asserted against Beneficiary, its officers, employees, contractors or agents for, with respect to, or as a direct or indirect result of, the presence or use, generation, storage, release, threatened release or disposal of Hazardous Materials on or under the Property or the escape, seepage, leakage, spillage, discharge, emission or release of any Hazardous Materials from the Property (including, without limitation, any losses, liabilities, damages, injuries, costs, expenses or claims asserted or arising under CERCLA, any so-called "Superfund" or "Superlien" law, or any other federal, state or local statute, law, ordinance, code. rule, regulation, order or decree regulating, relating to or imposing liability or standards of conduct concerning any Hazardous Materials) regardless of whether or not caused by or within the control of Trustor. The foregoing indemnification shall not apply to any liability resulting from (i) an event that occurs after a transfer of the Property due to any foreclosure sale (judicial or nonjudicial) or a deed in lieu of foreclosure, or (ii) acts or omissions of Beneficiary or its agents. (e) Trustor has not received any notice of (i) the happening of any event involving the use, spillage, discharge, or cleanup of any Hazardous Materials ("Hazardous Discharge") affecting Trustor or the Property or (ii) any complaint, order, citation or notice with regard to air emissions, water discharges, noise emissions or any other environmental, health or safety matter affecting Trustor or the Property ("Environmental Complaint") from any person or entity, including, without limitation, the United States Environmental Protection Agency ("EPA"). If Trustor receives any such notice after the date hereof, then Trustor will give, within seven (7) business days thereafter, oral and written notice of same to Beneficiary. (d) Without limitation of Beneficiary's rights under this Deed of Trust, Beneficiary shall have the right, but not the obligation, to enter onto the Property or to take such other actions as it deems necessary or advisable to clean up, remove, resolve or minimize the impact of, or otherwise deal with, any such Hazardous Materials or Environmental Complaint upon its receipt of any notice from any person or entity, including without limitation, the EPA, asserting the existence of any Hazardous Materials or an Environmental Complaint on or pertaining to the Propertywhich, if true, could result in an order, suit or other action against Trustor affecting any part of the Property by any governmental agency or otherwise which, in the sole opinion of Beneficiary, could jeopardize its security under this Deed of Trust. All reasonable costs and expenses incurred by Beneficiary in the exercise of any such rights shall be secured by this Deed of Trust and shall be payable by Trustor upon demand together with interest thereon at a rate equal to the highest rate payable under the note secured hereby. (e) The foregoing representation, covenants, indemnities and warranties shall be continuing and shall be true and correct for the period from the date hereof to the release of this Deed of Trust (whether by payment of the indebtedness secured hereby or foreclosure or action in lieu thereof), and these representations, covenants, indemnities and warranties shall survive such release. 9 1143 (29) Each successor owner of an interest in the Property other than through foreclosure or deed in lieu of foreclosure of an interest superior to this Deed of Trust, shall take its interest subject to this Deed of Trust. (30) This Deed of Trust shall be governed by and construed in accordance with the laws of the State of California. (31) Trustor covenants by and for itself and any successors in interest that there shall be no discrimination against or segregation of, any person or group of persons on account of race, color, creed, religion, sex, sexual orientation, marital status, national origin, ancestry, familial status, source of income or disability in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Property, nor shall Trustor or any person claiming under or through it establish or permit any such practice or practices of discrimination or segregation of any person or group of persons on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees of the Property. The foregoing covenants shall run with the land. (32) Trustor shall refrain from restricting the rental, lease and sale of the Property and any dwelling unit thereon on the basis of race, color, creed, religion, sex, sexual orientation, marital status, national origin, ancestry, familial status, source of income or disability of any person. All such deeds, leases or contracts for the rental, lease or sale of the Property or any dwelling unit, shall contain or be subject to substantially the following nondiscrimination or nonscgregation clauses: (a) Deeds. In deeds "The grantee herein covenants by and for itself, its successors and assigns, and all persons claiming under or through them, that there shall be no discrimination against or segregation of, any person or group of persons on account of race, color, religion, sex, sexual orientation, disability, medical condition, familial status, source of income, marital status, national origin or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the land herein conveyed, nor shall the grantee itself or any person claiming under or through it, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees in the land herein conveyed. The foregoing covenants shall run with the land." (b) Leases. In leases "The lessee herein covenants by and for itself, its successors and assigns, and all persons claiming under or through them, and this lease is made and accepted upon and subject to the following conditions: That there shall be no discrimination against or segregation of any person or group of persons, on account of race, color, religion, sex, sexual orientation, disability, medical condition, familial status, source of income, marital status, national origin or ancestry in the leasing, subleasing, renting, transferring, use, occupancy, tenure or enjoyment of the land herein leased, nor shall lessee itself, or any person claiming under or through it, establish or permit such practice or practices of discrimination or 10 1144 segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, sublessees, subtenants or vendees in the land herein leased." (c) Contracts. In contracts for the rental, lease or sale of the Property or any dwelling unit "There shall be no discrimination against or segregation of any person or group of persons on account of race, color, religion, sex, sexual orientation, disability, medical condition, familial status, source of income, marital status, national origin or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the land, nor shall the transferee itself or any person claiming under or through it, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees of the land." (33) All individuals signing this Deed of Trust for a party which is a corporation, limited liability company, partnership or other legal entity, or signing under a power of attorney, or as a trustee, guardian, conservator, or in any other legal capacity, covenant to the Beneficiary that they have the necessary capacity and authority to act for, sign and bind the respective entity or principal on whose behalf they are signing. TRUSTOR: T & T Community Properties, LLC, a California limited liability company By: itchell L. Thompson,,Managing Member 11 ACKNOWLEDGMENT State of California County of San Diego 1145 On 8 f l $ f 2D 11 , , before me, cl , notary public, personally appeared "Mau L . I ! who proved to me on the basis of satisfactory evidence to be the person(s) ose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under penalty of perjury under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signatuk AMY BOYD �.p�'?>� COMM. # 1805792 Z (Seal) Z4i-4,1 NOTARY PUBLIC - CALIFORNIA 3 'C► SAN DIEGO COUNTY cin My Comm. Expires July 3, 2012 12 1146 Exhibit "A" Property Description That certain real property situated in the City of National City, County of San Diego, State of California, described as follows: All of Lot 34 and that portion of Lot 36, Block 3 Paradena Park, in the City of National City, County of San Diego, State of California, according to Map thereof No. 1404, filed in the Office of the County Recorder of San Diego County Februrary 16, 1912, lying Southerly of a line described as follows: Beginning at a point on the Easterly line of said Lot 36 distant thereon 50.00 feet Southerly from the most Northly corner thereof; thence Westerly in a straight line to an intersection with the Westerly line of said Lot 36 at a point which is a distant thereon 25.00 feet Southerly from the Northwesterly corner thereof. Excepting from said Lot 34 the Southerly 65.00 feet measured at right angles to the Southerly line. APN: 554-013-16-00 13 RECORDING REQUESTED BY: FIRST AMERICAN TITLE UCC FINANCING STATEMENT FOLLOW INSTRUCTIONS (front and back) CAREFULLY A. NAME & PHONE OF CONTACT AT FILER [optional] B. SEND ACKNOWLEDGEMENT TO: (Name and Address) I Christensen & Spath LLP 550 West C Street, Suite 1660 San Diego, CA 92101 D O C # 2011-0432187 1111III III11111HillIIIIIIIIII1111111II0111I1111I1011111I111 AUG 23, 2011 8:00 AM OFFICIAL RECORDS SAN DIEGO COUNTY RECORDER'S OFFICE Ernest J. Dronenburg, Jr., COUNTY RECORDER FEES: 0.00 PAGES 5 1IIIIII IIIII IIIII IIIII IIIII IIIII IIIII IIII IIIII IIIII IIII IIIII IIIII IIIII IIIII IIII IIII THE ABOVE SPACE IS FOR FILING OFFICE USE ONLY 1. DEBTOR'S EXACT FULL LEGAL NAME - insert only one debtor name (1a or lb) — do not abbreviate or combine names OR In. ORGANIZATIONS NAME T & T Community Properties, LLC ib- INDIVIDUALS LAST NAME FIRST NAME MIDDLE NAME SUFFIX lc. MAILING ADDRESS 760 Arroyo Court CITY Chula Vista STATE CA POSTAL CODE 91910 COUNTRY ADD'L INFO RE ORGANIZATION DEBTOR le. TYPE OF ORGANIZATION LLC If. JURISDICTION OF ORGANIZATION California 1g. ORGANIZATIONAL IDq, rf any 201116610246 ['NONE 2. ADDITIONAL DEBTOR'S EXACT FULL LEGAL NAME — insert only one debtor name (2a or 2b) — do not abbreviate or combine names OR 2a. ORGANIZATIONS NAME 2b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX 2c. MAILING ADDRESS CITY STATE POSTAL CODE COUNTRY e. ORGANIZATION DEBTOR 9. (JKUANILA I IVNAL IUN, n any NONE 3. SECURED PARTY'S NAME (or NAME of TOTAL ASSIGNEE of ASSIGNOR S/P) — insert only one secured party name (3a or 3b) OR 3a. ORGANIZATIONS NAME City of National City 3b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX • 3c. MAILING ADDRESS 1243 National City Boulevard CITY National City STATE CA POSTAL CODE 91950-4397 COUNTRY 4. This FINANCING STATEMENT covers the following collateral: See Attached Exhibit "1" 5. ALTERNATIVE DESIGNATION [if applicable]:❑LESSEE/LESSOR ❑CONSIGNEE/CONSIGNOR ❑BAILEEIBAILOR ❑SELLERJBUYER LAG. LIEN ❑NON-UCC FILING 8 ❑X This FINANCING STATEMENT is to be filed [for record] (or recorded) in the REAL ESTATE RECORDS. Attach Addendum [if applicable] 8. OPTIONAL FILER REFERENCE DATA 7. Check to REQUEST SEARCH REPORT(S) on Debtor(s) [ADDITIONAL FEE] [optional] ❑AII Debtors ❑Debtor 1 Debtor 2 FILING OFFICE COPY - NATIONAL UCC FINANCING STATEMENT (FORM UCC1)— CALIFORNIA (REV. 01/01/08) 1148 EXHIBIT "1" TO UCC-1 FINANCING STATEMENT BORROWER: T & T Community Properties, LLC SECURED PARTY: City of National City The following described property and any and all proceeds thereof, whether Borrower now or hereafter has any right, title or interest in, on, about or concerning the real property (the "Property") hereinafter described in Exhibit A: (a) Tangible Property. All existing and future goods and tangible personal property located on the Property or whenever located and used or useable in connection with the use, operation or occupancy of the Property or in construction of any improvements now or hereafter located on the Property ("Improvements"), including, but not limited to, all appliances, furniture and furnishings, fittings, materials, supplies, equipment and fixtures, and all building material, supplies, and equipment now or hereafter delivered to the Property and installed or used or intended to be installed or used therein whether stored on the Property or elsewhere; and all renewals or replacements thereof or articles in substitution thereof; (b) General Intangibles. All general intangibles relating to design, development, operation, management and use of the Property and construction and rehabilitation of the improvements, including, but not limited to, (i) all names under which or by which the Property of the improvements may at any time be operated or known, all rights to carry on business under any such names or any variant thereof, and all goodwill in any way relating to the Property, (ii) all permits, licenses, authorizations, variances, land use entitlement, approvals and consents issued or obtained in connection with the construction of the Improvements, (iii) all permits, licenses, approvals, consents, authorizations, franchises and agreements issued or obtained in connection with the use, occupancy or operation of the Property, (iv) all rights as a declarant (or its equivalent) under any covenants, conditions and restrictions or other matters now or hereafter of record affecting the Property, (v) all materials prepared for filing or filed with any governmental agency, (vi) all rights under any contract in connection with the development, design, use, operation, management and construction of the Property, and (vii) all books and records prepared and kept in connection with the acquisition, construction, operation and occupancy of the Property and the Improvements; (c) Contracts. All construction, service, engineering, consulting, leasing, architectural, design and other similar contracts of any nature (including, without limitation, those of any general contractors, subcontractors and materialmen, if applicable), as such may be modified, amended or supplemented from time to time, concerning the design, construction, rehabilitation, management, operation, occupancy, use, and/or disposition of any portion of or all of the Property; (d) Plans and Reports. All architectural, design and engineering drawings, plans, specifications, working drawings, shop drawings, general conditions, addenda, soil tests and reports feasibility studies, appraisals, engineering reports, building permits, grading permits, and other 1 1149 permits to construct the Project, as defined in the Loan Agreement, environmental reports and similar materials relating to any portion of or all of the Property and all modifications, supplements and amendments thereto, including without imitation, those more specifically described in the Loan Agreement between Borrower and Secured Party; (e) Sureties. All payment and performance bonds or guarantees and any and all modifications and extensions thereof relating to the Property; (f) Payments. All reserves, deferred payments, deposits, refunds, cost savings, letters of credit and payments of any kind relating to the construction, design, development, operation, occupancy, use and disposition of all or any portion of the Property, including, without limitation, any property tax rebates now owing or hereafter payable to Borrower, or reimbursement or other payments now or hereafter payable to Borrower on account of prepayments or overpayments of fees or payment of costs of infrastructure improvements that benefit real property other than the Property; (g) Financing Commitments. All proceeds of the loan granted by Secured Party to Borrowcr and any commitment by any lender to extend permanent or additional construction financing to Borrower relating to the Property, and all tax credits for the Project. Notwithstanding anything to the contrary contained herein, Lender acknowledges and agrees that no remedies may be exercised hereunder with respect to the low income housing tax credits unless and until the Lender has foreclosed upon the Property (and all applicable redemption periods have expired), or the Property has otherwise been transferred to Lender or its designee, or that such remedies may only be exercised simultaneously with the foreclosure of the Property or a transfer in lieu of such foreclosure; (h) Claims. All proceeds and claims arising on account of any damage to or taking of the Property or any part thereof, and all causes of action and recoveries for any loss of diminution in the value of the Property; (i) Insurance. All policies of, and proceeds resulting from, insurance relating to the Property or any of the above collateral, and any and all riders, amendments, extensions, renewals, supplements, or extensions thereof, and all proceeds thereof, whether or not the proceeds are from policies of insurance required by Beneficiary; (j) Deposits. All deposits made with or other security given to utility companies by Borrower with respect to the Property and the improvements, and all advance payments of insurance premiums made by Borrower with respect thereto and claims or demands relating to insurance and all deposit accounts whenever located; (k) Stock. All shares of stock or other evidence of ownership of any part of the Property that is owned by Borrower in common with others, including all water stock relating to the Property, if any, and all documents or rights of membership in any owners' or members' association or similar group having responsibility for managing or operating any part of the Property, and all the general partnership interests in Borrower; 2 1150 (I) Proceeds. All proceeds, whether cash, promissory notes, contract rights or otherwise, of the sale or other disposition of all or any part of the estate of Borrower in the Property now or hereafter existing thereon; (m) Sale Contracts. All sales contracts. escrow agreements and broker's agreements concerning the sale of any or all of the Property, and all amendments thereto and all amounts deposited into escrow for payment to Borrower. (n) Leases and Rents. All the leases, income, rents, issues, deposits, receipts, profits and proceeds, and accounts receivable generated from the leasing, use and operation, of the Property and the Collateral to which Borrower may be entitled, whether now due, past due, or to become due; (o) Other. Without limiting the above items, all Goods, Accounts, Documents, Instruments, Money, Financial Assets, Investment Properties, Chattel Paper and General Intangibles, as those terms are defined in the Uniform Commercial Code from time to time in effect in the State of California. 3 • 1151 Exhibit "A" Property Description That certain real property situated in the City of National City, County of San Diego, State of California, described as follows: All of Lot 34 and that portion of Lot 36, Block 3 Paradena Park, in the City of National City, County of San Diego, State of California, according to Map thereof No. 1404, filed in the Office of the County Recorder of San Diego County Februrary 16, 1912, lying Southerly of a line described as follows: Beginning at a point on the Easterly line of said Lot 36 distant thereon 50.00 feet Southerly from the most Northly corner thereof thence Westerly in a straight line to an intersection with the Westerly line of said Lot 36 at a point which is a distant thereon 25.00 feet Southerly from the Northwesterly corner thereof Excepting from said Lot 34 the Southerly 65.00 feet measured at right angles to the Southerly line. APN: 554-013-16-00 4 RECORDING REQUESTED BY: FIRST AMERICAN TITLE UCC FINANCING STATEMENT FOLLOW INSTRUCTIONS (front and back) CAREFULLY A. NAME & PHONE OF CONTACT AT FILER [optional] B. SEND ACKNOWLEDGEMENT TO: (Name and Address) I Christensen & Spath LLP 550 West C Street, Suite 1660 San Diego, CA 92101 , D O C # 201 1-0432187 11111011111111111111111111111111011111113111111111 AUG 23, 2011 8:00 AM OFFICIAL RECORDS SAN DIEGO COUNTY RECORDER'S OFFICE Ernest J. Dronenburg, Jr., COUNTY RECORDER FEES: 0.00 PAGES: 5 11IIIII IIIII IIIII IIIII IIIII IIIII IIIII IIIII IIIII IIIII IIIII IIIII IIIII IIIII IIIII IIII IIII THE ABOVE SPACE IS FOR FILING OFFICE USE ONLY 1. DEBTOR'S EXACT FULL LEGAL NAME - insert only one debtor name (la or lb) - do not abbreviate or combine names oR la ORGANIZATION'S NAME T & T Community Properties, LLC 1b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX lc. MAILING ADDRESS 760 Arroyo Court CITY Chula Vista STATE CA POSTAL CODE 91910 COUNTRY ADD INFO RE le. TYPE OF ORGANIZATION ORGANIZATION DEBTOR LLC If. JURISDICTION OF ORGANIZATION California 1g. ORGANIZATIONAL ID#. ,f any 201116610246 ❑NONE 2. ADDITIONAL DEBTOR'S EXACT FULL LEGAL NAME - insert only one debtor name (2a or 2b) - do not abbreviate or combine names OR 2a. ORGANIZATION'S NAME 2b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX 2c, MAILING ADDRESS CITY STATE POSTAL CODE COUNTRY e. ORGANIZATION DEBTOR g. VKGANIZA IUNAL ILNt. 1 any NONE 3. SECURED PARTY'S NAME (or NAME of TOTAL ASSIGNEE of ASSIGNOR S/P) - insert only one secured party name (3a or 3b) OR 3a. ORGANIZATION'S NAME City of National City 3b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX 3c. MAILING ADDRESS r 1243 National City Boulevard CITY National City STATE CA POSTAL CODE 91950-4397 COUNTRY 4. This FINANCING STATEMENT covers the following collateral: See Attached Exhibit "1" 5. ALTERNATIVE DESIGNATION [if applicable]:❑LESSEE/LESSOR ❑CONSIGNEEICONSIGNOR ❑BAILEE)BAILOR ❑SELLER/BUYER ❑AG. LIEN ❑NON-UCC FILING This FINANCING STATEMENT is to be filed [for record] (or recorded) in 7. Check to REQUEST SEARCH REPORT(S) on Debtor(s) 1-1 ❑Debtor 1 ['Debtor 2 6. x the REAL ESTATE RECORDS. Attach Addendum [if applicable] [ADDITIONAL FEE] [optional] All Debtors 8. OPTIONAL FILER REFERENCE DATA FILING OFFICE COPY- NATIONAL UCC FINANCING STATEMENT (FORM UCC1)-CALIFORNIA (REV. 01/01/08) 1148 EXHIBIT "1" TO UCC-1 FINANCING STATEMENT BORROWER: T & T Community Properties, LLC SECURED PARTY: City of National City The following described property and any and all proceeds thereof, whether Borrower now or hereafter has any right, title or interest in, on, about or concerning the real property (the "Property") hereinafter described in Exhibit A: (a) Tangible Property. All existing and future goods and tangible personal property located on the Property or whenever located and used or useable in connection with the use, operation or occupancy of the Property or in construction of any improvements now or hereafter located on the Property ("Improvements"), including, but not limited to, all appliances, furniture and furnishings, fittings, materials, supplies, equipment and fixtures, and all building material, supplies, and equipment now or hereafter delivered to the Property and installed or used or intended to be installed or used therein whether stored on the Property or elsewhere; and all renewals or replacements thereof or articles in substitution thereof; (b) General Intangibles. All general intangibles relating to design, development, operation, management and use of the Property and construction and rehabilitation of the improvements, including, but not limited to, (i) all names under which or by which the Property of the improvements may at any time be operated or known, all rights to carry on business under any such names or any variant thereof, and all goodwill in any way relating to the Property, (ii) all permits, licenses. authorizations, variances, land use entitlement, approvals and consents issued or obtained in connection with the construction of the Improvements, (iii) all permits, licenses, approvals, consents, authorizations, franchises and agreements issued or obtained in connection with the use, occupancy or operation of the Property, (iv) all rights as a declarant (or its equivalent) under any covenants, conditions and restrictions or other matters now or hereafter of record affecting the Property, (v) all materials prepared for filing or filed with any governmental agency, (vi) all rights under any contract in connection with the development, design, use, operation, management and construction of the Property, and (vii) all hooks and records prepared and kept in connection with the acquisition, construction, operation and occupancy of the Property and the Improvements; (c) Contracts. All construction, service, engineering, consulting, leasing, architectural, design and other similar contracts of any nature (including, without limitation, those of any general contractors, subcontractors and materialmen, if applicable), as such may be modified, amended or supplemented from time to time, concerning the design, construction, rehabilitation, management, operation, occupancy, use, and/or disposition of any portion of or all of the Property; (d) Plans and Reports. All architectural, design and engineering drawings, plans, specifications, working drawings, shop drawings, general conditions, addenda, soil tests and reports feasibility studies, appraisals, engineering reports, building permits, grading permits, and other 1 1149 permits to construct the Project, as defined in the Loan Agreement, environmental reports and similar materials relating to any portion of or all of the Property and all modifications, supplements and amendments thereto, including without imitation, those more specifically described in the Loan Agreement between Borrower and Secured Party; (e) Sureties. All payment and performance bonds or guarantees and any and all modifications and extensions thereof relating to the Property; (f) Payments. All reserves, deferred payments, deposits, refunds, cost savings, letters of credit and payments of any kind relating to the construction, design, development, operation, occupancy, use and disposition of all or any portion of the Property, including, without limitation, any property tax rebates now owing or hereafter payable to Borrower, or reimbursement or other payments now or hereafter payable to Borrower on account of prepayments or overpayments of fees or payment of costs of infrastructure improvements that benefit real property other than the Property; (g) Financing Commitments. All proceeds of the loan granted by Secured Party to Borrower and any commitment by any lender to extend permanent or additional construction financing to Borrower relating to the Property, and all tax credits for the Project. Notwithstanding anything to the contrary contained herein, Lender acknowledges and agrees that no remedies maybe exercised hereunder with respect to the low income housing tax credits unless and until the Lender has foreclosed upon the Property (and all applicable redemption periods have expired), or the Property has otherwise been transferred to Lender or its designee, or that such remedies may only be exercised simultaneously with the foreclosure of the Property or a transfer in lieu of such foreclosure; (h) Claims. All proceeds and claims arising on account of any damage to or taking of the Property or any part thereof, and all causes of action and recoveries for any loss of diminution in the value of the Property; (i) Insurance. All policies of, and proceeds resulting from, insurance relating to the Property or any of the above collateral, and any and all riders, amendments, extensions, renewals, supplements, or extensions thereof, and all proceeds thereof, whether or not the proceeds are from policies of insurance required by Beneficiary; (j) Deposits. All deposits made with or other security given to utility companies by Borrower with respect to the Property and the improvements, and all advance payments of insurance premiums made by Borrower with respect thereto and claims or demands relating to insurance and all deposit accounts whenever located; (k) Stock. All shares of stock or other evidence of ownership of any part of the Property that is owned by Borrower in common with others, including all water stock relating to the Property, if any, and all documents or rights of membership in any owners' or members' association or similar group having responsibility for managing or operating any part of the Property, and all the general partnership interests in Borrower; 2 1150 (1) Proceeds. All proceeds, whether cash, promissory notes, contract rights or otherwise, of the sale or other disposition of all or any part of the estate of Borrower in the Property now or hereafter existing thereon; (m) Sale Contracts. All sales contracts, escrow agreements and broker's agreements concerning the sale of any or all of the Property, and all amendments thereto and all amounts deposited into escrow for payment to Borrower. (n) Leases and Rents. All the leases, income, rents, issues, deposits, receipts, profits and proceeds, and accounts receivable generated from the leasing, use and operation, of the Property and the Collateral to which Borrower may be entitled, whether now due, past due, or to become due; (o) Other. Without limiting the above items, all Goods, Accounts, Documents, Instruments, Money, Financial Assets, Investment Properties, Chattel Paper and General Intangibles, as those terms are defined in the Uniform Commercial Code from time to time in effect in the State of California. 3 1151 Exhihit "A" Property Description That certain real property situated in the City of National City, County of San Diego, State of California, described as follows: All of Lot 34 and that portion of Lot 36, Block 3 Paradena Park, in the City of National City, County of San Diego, State of California, according to Map thereof No. 1404, filed in the Office of the County Recorder of San Diego County Februrary 16, 1912, lying Southerly of a line described as follows: Beginning at a point on the Easterly line of said Lot 36 distant thereon 50.00 feet Southerly from the most Northly corner thereof; thence Westerly in a straight line to an intersection with the Westerly line of said Lot 36 at a point which is a distant thereon 25.00 feet Southerly from the Northwesterly corner thereof. Excepting from said Lot 34 the Southerly 65.00 feet measured at right angles to the Southerly line. APN: 554-013-16-00 4