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HomeMy WebLinkAboutKimball and Morgan Tower Housing Associates L.P. - Recapitalization and Rehabilitation - DDA - 2018DISPOSITION AND DEVELOPMENT AGREEMENT By and Between the COMMUNITY DEVELOPMENT COMMISSION - HOUSING AUTHORITY OF THE CITY OF NATIONAL CITY and KIMBALL TOWER HOUSING ASSOCIATES, L.P. and MORGAN TOWER HOUSING ASSOCIATES, L.P. (Kimball and Morgan Towers) 1 DISPOSITION AND DEVELOPMENT AGREEMENT (Kimball and Morgan Towers) THIS DISPOSITION AND DEVELOPMENT AGREEMENT ("Agreement") is dated as of the day of , 2018 by and between the Community Development Commission -Housing Authority of the City of National City ("CDC -HA"), and MORGAN TOWER HOUSING ASSOCIATES, L.P., a California limited partnership ("Morgan Developer"), and KIMBALL TOWER HOUSING ASSOCIATES, L.P., a California limited partnership ("Kimball Developer"). The Morgan Developer and the Kimball Developer shall be referred to herein collectively as the "Developer." RECITALS A. The CDC -HA owns the improvements commonly known as the "Kimball Tower" and that certain real property located at 1317 D Avenue in the City of National City, which is more particularly defined and set forth on Exhibit A hereto (the "Kimball Property"). The CDC -HA also owns the improvements commonly known as the "Morgan Tower" and that certain real property located at 1415 D Avenue in the City of National City, which is more particularly defined and set forth on Exhibit B hereto (the "Morgan Property"). B. CDC -HA and Developer desire by this Agreement to establish conditions for: (i) the CDC -HA to ground lease the Kimball Property to the Kimball Developer; (ii) the CDC -HA to sell fee title to the Kimball Tower to the Kimball Developer; (iii) the Kimball Developer to recapitalize and rehabilitate the Kimball Tower; (iv) the CDC -HA to ground lease the Morgan Property to the Morgan Developer; (v) the CDC -HA to sell fee title to the Morgan Tower to, the Morgan Developer; and (vi) the Morgan Developer to recapitalize and rehabilitate the Morgan Tower. NOW, THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged, CDC -HA and Developer hereby agree as follows: 100. Definitions. "Affordable Units" means collectively, the one hundred fifty-one (151) rental dwelling units in the Morgan Tower and the one hundred forty-nine (149) rental dwelling units in the Kimball Tower whose occupancy is restricted to Very Low Income Households and whose monthly rental rates are restricted to the Maximum Rents pursuant to, and as set forth in more detail in, the Declaration. In addition, there will be one (1) manager's unit in the Morgan Tower and two (2) managers' units in the Kimball Tower. "Agreement" means this Disposition and Development Agreement between CDC -HA and Developer. "AHP Loan" has the meaning set forth in Section 307.2(ii). 2 "Area Median Income" shall mean the area median income defined by the Department of Housing and Urban Development (HUD), and published by the California Tax Credit Allocation Committee (TCAC), as the then current area median income for the San Diego -Carlsbad Metropolitan Statistical Area, established periodically by HUD and published in the Federal Register, as adjusted for family size. In the event HUD and/or TCAC ceases to publish an established area median income as aforesaid, CDC -HA may, in its sole discretion, use any other reasonably comparable method of computing area median income. "CDC -HA" means the Community Development Commission -Housing Authority of the City of National City. "City" means the City of National City, a California municipal corporation. "Closing" means with respect to each of the Kimball Tower and the Morgan Tower, the close of Escrow for the financing for rehabilitation of the Kimball Tower and the Morgan Tower respectively. "Closing Deadline for the Kimball Tower" means June 30, 2020. "Closing Deadline for the Morgan Tower" means June 30, 2020. "Construction Deed of Trust" means a deed of trust recorded against the Kimball Leasehold or the Morgan Leasehold, as applicable, for purposes of obtaining rehabilitation financing for the Kimball Tower or the Morgan Tower respectively. All deeds of trust, mortgages and other instruments securing or evidencing the loan secured by the Construction Deed of Trust shall be recorded against the Kimball Leasehold or the Morgan Leasehold only. Recordation of any deed of trust, mortgage or other instrument securing or evidencing the fee interest in the Property shall be a Default under this Agreement. "Declaration" shall mean each of the two (2) declarations of covenants, conditions and restrictions (one recorded against the Kimball Leasehold and another recorded against the Morgan Leasehold), in forms agreed to by the Developer and CDC -HA, to be executed by Developer and recorded against the Kimball Leasehold or the Morgan Leasehold, as applicable, at the Closings for each of the Kimball Tower and the Morgan Tower. "Default" means the failure of a party to perform any action or covenant required by this Agreement within the time periods provided herein following notice and opportunity to cure, as set forth in Section 501 hereof. "Developer" means the Kimball Developer and the Morgan Developer. Where the term Developer is used herein, such term shall include any permitted nominee, assignee or successor in interest as herein provided. In all instances hereunder, all rights, duties and obligations of the Kimball Developer hereunder with respect to the Kimball Property, Kimball Leasehold and Kimball Tower shall be the rights, duties and obligations solely of the Kimball Developer (and not of the Morgan Developer), and all rights, duties and obligations of the Morgan Developer hereunder with respect to the Morgan Property, Morgan Leasehold and Morgan Tower shall be 3 the rights, duties and obligations solely of the Morgan Developer (and not of the Kimball Developer), it being the intent of the parties hereto that the rights, duties and obligations of the Kimball Developer and the Morgan shall not be cross -defaulted. "Developer Deed of Trust" means each of the two (2) deeds of trust (one recorded against the Kimball Leasehold and another recorded against the Morgan Leasehold), in forms agreed to by the Developer and CDC -HA, to be executed by Developer and recorded against the Kimball Leasehold or the Morgan Leasehold, as applicable, at the Closings for each of the Kimball Tower and the Morgan Tower. Provided all conditions of this Agreement are satisfied by the Closing Deadline for the Kimball Tower or the Closing Deadline for the Morgan Tower, as applicable, each Developer Deed of Trust may be subordinated to the Construction Deed of Trust and Permanent Deed of Trust. Any such subordination shall be in a form acceptable to the CDC -HA in its reasonable discretion. "Environmental Indemnity" shall mean each of the two (2) unsecured environmental indemnity agreements (one for the Kimball Tower and another for the Morgan Tower), in forms agreed to by the Developer and CDC -HA, to be executed by Developer and the CDC -HA at the Closings for each of the Kimball Tower and the Morgan Tower. "Escrow" means the escrow depository and disbursement services to be performed by Escrow Agent pursuant to the provisions of this Agreement. "Escrow Agent" means Stewart Title Company or another title insurance company mutually selected by the parties hereto. "Escrow Instructions" shall mean each of the escrow instructions (one for the Kimball Leasehold and another for the Morgan Leasehold), Developer and CDC -HA, to be executed by Developer and the CDC -HA at the Closings for each of the Kimball Tower and the Morgan Tower. "Existing Over -Income Units" has the meaning set forth in Section 401. "Final Project Budget" has the meaning set forth in Section 307.2. "Governmental Requirements" means all laws, ordinances, statutes, codes, rules, regulations, orders and decrees of the United States, the state, the county, the City, or any other political subdivision in which the Property is located, and of any other political subdivision, agency or instrumentality exercising jurisdiction over CDC -HA, Developer or the Property. "Ground Lease" means each of the two (2) 99-year ground leases (one for the Kimball Property and another for the Morgan Property), in forms agreed to by the Developer and CDC - HA, to be executed by Developer and recorded against the Kimball Property or the Morgan Property, as applicable, at the Closings for each of the Kimball Tower and the Morgan Tower. "Hazardous Materials" means any hazardous or toxic substance, material or waste which is or becomes regulated by any local governmental authority, the State of California or the United State Government. Provided, however, the term "Hazardous Materials" shall not include 4 substances typically used in the ordinary course of developing, operating and maintaining apartment complexes in California or small amounts of chemicals, cleaning agents and the like commonly employed in routine household uses in a manner typical of occupants in other similar properties, provided that such substances are used in compliance with applicable laws. "Initial Project Budget" has the meaning set forth in Section 307.2. "Kimball Deed of Trust" has the meaning set forth in Section 200.1. "Kimball Developer" means Kimball Tower Housing Associates, L.P., a California limited partnership. Where the term Kimball Developer is used herein, such term shall include any permitted nominee, assignee or successor in interest as herein provided. "Kimball Developer Note" means the carryback promissory note, in a form agreed to by the Developer and CDC -HA, to be executed by the Kimball Developer at the Closing for the Kimball Tower. "Kimball Leasehold" means the ground lease interest in the Kimball Property created by the Ground Lease for the Kimball Property. "Kimball Property" means that certain real property generally located at 1317 D Avenue in the City of National City, which is more particularly described on Exhibit A attached hereto. "Kimball Tower" means the 151 unit residential building on the Kimball Property comprised of 149 Affordable Units and two manager's units. "Maximum Rents" shall mean the maximum amount of consideration, of any kind whatsoever, that the Developer may receive for any Affordable Unit, which monthly amount shall not exceed the product of one twelfth (1/12) of thirty percent (30%) times fifty percent (50%) of the then Area Median Income as adjusted for household size appropriate for the unit. "Morgan Commercial Space" means approximately 6,560 square feet on the ground floor of the Morgan Tower, which currently houses the George H. Waters Nutrition Center. "Morgan Deed of Trust" has the meaning set forth in Section 200.2. "Morgan Developer" means Morgan Tower Housing Associates, L.P., a California limited partnership. Where the term Morgan Developer is used herein, such term shall include any permitted nominee, assignee or successor in interest as herein provided. "Morgan Developer Note" means the carryback promissory note, in a form agreed to by the Developer and CDC -HA, to be executed by the Morgan Developer at the Closing for the Morgan Tower. "Morgan Leasehold" means the ground lease interest in the Morgan Property created by the Ground Lease for the Morgan Property. 5 "Morgan Property" means that certain real property generally located at 1415 D Avenue in the City of National City, which is more particularly described on Exhibit B attached hereto. "Morgan Tower" means the 152-unit residential building on the Morgan Property comprised of 151 Affordable Units and one manager's unit and the Morgan Commercial Space. "Permanent Deed of Trust" means a deed of trust recorded against the Kimball Leasehold or the Morgan Leasehold, as applicable, for purposes of obtaining permanently financing the Kimball Tower or the Morgan Tower respectively. All deeds of trust, mortgages and other instruments securing or evidencing the loan secured by the Permanent Deed of Trust shall be recorded against the Kimball Leasehold or the Morgan Leasehold only. Recordation of any deed of trust, mortgage or other instrument securing or evidencing the fee interest in the Property shall be a default under this Agreement. "Permitted Transfer" is defined in Section 603.2, below. "Property" means collectively the real property described on Exhibit A and Exhibit B hereto. "Project Budget"' means collectively the Kimball Project Budget and the Morgan Project Budget. "Purchase Price" shall mean collectively the price for the fee title interest in and to (i) the Kimball Tower set forth in Section 202.1 and (ii) the Morgan Tower set forth in Section 202.2. "Scope of Rehabilitation" means a scope setting forth all rehabilitation and construction work, including without limitation, landscaping, flatwork and similar work, to be done with respect to the Kimball Tower or the Morgan Tower respectively, which is approved by the CDC -HA, which approval shall not be unreasonably withheld, conditioned or delayed. "Security Agreement" shall mean each of the two (2) security agreements (one for the Kimball Tower and another for the Morgan Tower), in forms agreed to by the Developer and CDC - HA, to be executed by the Kimball Developer or the Morgan Developer, as applicable, and CDC - HA at the Closings for each of the Kimball Tower and the Morgan Tower. "TCAC Lease Rider" means the then current form of lease rider prepared by the California Tax Credit Allocation Committee at the time each of Kimball Developer and Morgan Developer enter into their respective Ground Lease. "Very Low Income Household" means persons and families whose income does not exceed fifty percent (50%) of the then current Area Median Income, provided that such persons or families meet the additional requirements set forth in Section 4 of the Agreement Affecting Real Property. 200. Transfer of the Property. 6 201. Ground Lease Terms. 201.1 Kimball Property. Subject to all of the terms and conditions of this Agreement, the CDC -HA shall ground lease the Kimball Property to the Kimball Developer for 99 years for $1.00 per year. CDC -HA acknowledges and agrees that the Kimball Developer will also sign and append the TCAC Lease Rider to the Ground Lease. 201.2 Morgan Property. Subject to all of the terms and conditions of this Agreement, the CDC -HA shall ground lease the Morgan Property to the Morgan Developer for 99 years for $1.00 per year. CDC -HA acknowledges and agrees that the Kimball Developer will also sign and append the TCAC Lease Rider to the Ground Lease. 202. Sale and Financing of the Improvements: Lease of Morgan Commercial Space. 202.1 Kimball Tower Acquisition Loan. CDC -HA has agreed to transfer the Kimball Tower to the Kimball Developer in exchange for a combination of cash and a promissory note ("Kimball Developer Note"). The Kimball Tower Developer previously obtained an appraisal of the Kimball Tower from Colliers International dated as of August 23, 2017 ("Original Kimball Tower Appraisal"). The Kimball Tower Developer has provided a copy of the Original Kimball Tower Appraisal to the CDC -HA. The Kimball Tower Developer shall cause Colliers International to update the Original Kimball Tower Appraisal ("Updated Kimball Tower Appraisal") not more than thirty (30) days prior to submitting the 4% low income housing tax credit application to the California Tax Credit Allocation Committee, using the same methodology which was used to generate the Original Kimball Tower Appraisal, but using updated figures based on interest rates, rental rates, expenses and other amounts known or reasonably estimated at such time. The purchase price ("Kimball Tower Purchase Price") payable from the Kimball Tower Developer to the CDC -HA shall equal the amount set forth in the Updated Kimball Tower Appraisal. The original principal amount of the Kimball Developer Note shall be agreed upon between the Kimball Tower Developer and the CDC -HA prior to the Kimball Tower Closing. The amount of cash payable by the Kimball Tower Developer to the CDC -HA at the Kimball Tower Closing shall equal the Kimball Tower Purchase Price minus the original principal amount of the Kimball Developer Note. The Kimball Developer Note shall be structured as a tax-exempt bond where the California Statewide Communities Development Authority is the issuer, the Kimball Tower Developer is the borrower and the CDC -HA is the bondholder. The Kimball Tower Developer shall make mandatory equal annual payments to the CDC -HA under the Kimball Developer Note, which annual amount shall be agreed upon between the Kimball Tower Developer and the CDC -HA prior to the Kimball Tower Closing. The Kimball Tower Developer, Morgan Tower Developer and the CDC -HA agree that the combined mandatory annual payments to the CDC -HA under the Kimball Developer Note and the Morgan Developer Note shall total $475,000.00. In addition, the Kimball Tower Developer shall make an additional annual payment to the CDC -HA under the Kimball Developer Note in an amount equal to 50% of the Kimball Developer's annual cash flow. The Kimball Tower Developer shall have the right to redeem the bond and refinance the Kimball Developer Note at any time, provided that the Executive Director of the CDC -HA has reasonably approved the same, the Kimball Tower Developer does not receive any cash as a result of the refinancing, the interest rate on the Kimball Developer Note does not 7 decrease and the original principal amount of the refinanced Kimball Developer Note does not exceed the principal amount of the Kimball Developer Note immediately before such refinancing. 202.2 Kimball Tower Limitation of Damages. Kimball Developer's Expenses means an amount equal to the actual and reasonable approved out-of-pocket expenses, including legal expenses, incurred by Kimball Developer with respect to its obligations hereunder ("Kimball Developer's Expenses"). In the event this Agreement is terminated as a result of an Event of Default by the CDC -HA, prior to completion of construction of the rehabilitation of the Kimball Tower, then CDC -HA shall reimburse the Kimball Developer's Expenses through project cash flow in complete satisfaction of all of the CDC-HA's obligations to the Kimball Developer; provided, however, that if the CDC -HA transfers the Kimball Property for a cash purchase price, then the CDC -HA shall use such sale proceeds to reimburse the Kimball Developer's Expenses. The Agency's payment of the Kimball Developer's Expenses shall be in consideration for the Kimball Developer's activities undertaken pursuant to this Agreement. For purposes hereof, Kimball Developer's Expenses shall include only its out-of-pocket costs paid to third parties for fees for financing and governmental applications and processing, appraisals, studies, title reports and related expenses associated with financing, attorneys' fees associated with review of this Agreement and tax credit structuring, and the Plans. Kimball Developer's Expenses shall not include any costs of Kimball Developer's staff, overhead, or other internal costs. The Kimball Developer shall furnish reports to the CDC -HA not less than quarterly summarizing the Kimball Developer's Expenses incurred to date, subject to the review and reasonable approval of the CDC - HA, which approval or disapproval shall be granted within thirty (30) days of the CDC-HA's receipt of such reports. The CDC -HA may request additional documentation from the Kimball Developer which the CDC -HA determines is necessary to complete CDC-HA's review. 202.3 Morgan Tower Acquisition Loan. CDC -HA has agreed to transfer the Morgan Tower to the Morgan Developer in exchange for a combination of cash and a promissory note ("Morgan Developer Note"). The Morgan Tower Developer previously obtained an appraisal of the Morgan Tower from Colliers International dated as of August 23, 2017 ("Original Morgan Tower Appraisal"). The Morgan Tower Developer has provided a copy of the Original Morgan Tower Appraisal to the CDC -HA. The Morgan Tower Developer shall cause Colliers International to update the Original Morgan Tower Appraisal ("Updated Morgan Tower Appraisal") not more than thirty (30) days prior to submitting the 4% low income housing tax credit application to the California Tax Credit Allocation Committee, using the same methodology which was used to generate the Original Morgan Tower Appraisal, but using updated figures based on interest rates, rental rates, expenses and other amounts known or reasonably estimated at such time. The purchase price ("Morgan Tower Purchase Price") payable from the Morgan Tower Developer to the CDC -HA shall equal the amount set forth in the Updated Morgan Tower Appraisal. The original principal amount of the Morgan Developer Note shall be agreed upon between the Morgan Tower Developer and the CDC -HA prior to the Morgan Tower Closing. The amount of cash payable by the Morgan Tower Developer to the CDC -HA at the Morgan Tower Closing shall equal the Morgan Tower Purchase Price minus the original principal amount of the Kimball Developer Note. The Morgan Tower Developer shall make mandatory equal annual payments to the CDC -HA under the Morgan Developer Note, which annual amount shall be agreed upon between the Morgan Tower Developer and the CDC -HA prior to the Morgan Tower Closing. The Kimball Tower Developer, Morgan Tower Developer and the CDC -HA agree that the 8 combined mandatory annual payments to the CDC -HA under the Kimball Developer Note and the Morgan Developer Note shall total $475,000.00. In addition, the Morgan Tower Developer shall make an additional annual payment to the CDC -HA under the Morgan Developer Note in an amount equal to 50% of the Morgan Developer's annual cash flow. 202.4 Morgan Tower Limitation on Damages. Kimball Developer's Expenses means an amount equal to the actual and reasonable approved out-of-pocket expenses, including legal expenses, incurred by Morgan Developer with respect to its obligations hereunder ("Morgan Developer's Expenses"). In the event this Agreement is terminated as a result of an Event of Default by the CDC -HA, prior to completion of construction of the rehabilitation of the Morgan Tower, then CDC -HA shall reimburse the Morgan Developer's Expenses through project cash flow in complete satisfaction of all of the CDC-HA's obligations to the Kimball Developer; provided, however, that if the CDC -HA transfers the Morgan Property for a cash purchase price, then the CDC -HA shall use such sale proceeds to reimburse the Morgan Developer's Expenses. The Agency's payment of the Morgan Developer's Expenses shall be in consideration for the Morgan Developer's activities undertaken pursuant to this Agreement. For purposes hereof, Morgan Developer's Expenses shall include only its out-of-pocket costs paid to third parties for fees for financing and governmental applications and processing, appraisals, studies, title reports and related expenses associated with financing, attorneys' fees associated with review of this Agreement and tax credit structuring, and the Plans. Morgan Developer's Expenses shall not include any costs of Morgan Developer's staff, overhead, or other internal costs. The Morgan Developer shall furnish reports to the CDC -HA not less than quarterly summarizing the Morgan Developer's Expenses incurred to date, subject to the review and reasonable approval of the CDC - HA, which approval or disapproval shall be granted within thirty (30) days of the CDC-HA's receipt of such reports. The CDC -HA may request additional documentation from the Morgan Developer which the CDC -HA determines is necessary to complete CDC-HA's review. 202.5 Morgan Tower Commercial Space. Following the purchase of the Morgan Tower, Morgan Developer will lease the Morgan Commercial Space to National City (the "Morgan Commercial Lease"). The Morgan Commercial Lease will be a triple net lease with a term of ninety-nine (99) years at a rental rate of one dollar ($1.00) per year 203. Escrow. 203.1 Kimball Tower. Prior to the Closing Deadline for the Kimball Tower, the Kimball Developer and the CDC -HA shall open the Escrow with Escrow Agent to facilitate the Closing for the Kimball Tower and the Ground Lease of the Kimball Property to the Kimball Developer and recordation of the various encumbrances on the Kimball Leasehold. The parties will execute the Escrow Instructions prior to the Closing for the Kimball Tower, which shall provide for the order of recordation, distribution of original documents and other provisions customarily contained in escrow instructions. The Kimball Developer shall pay all fees, charges, and costs which arise from Escrow, as well as all documentary transfer taxes due with respect to the Kimball Developer's acquisition of the Kimball Leasehold. 203.2 Morgan Tower. Prior to the Closing Deadline for the Morgan Tower, the Morgan Developer and the CDC -HA shall open the Escrow with Escrow Agent to facilitate the 9 Closing for the Morgan Tower and the Ground Lease of the Morgan Property to the Morgan Developer and recordation of the various encumbrances on the Morgan Leasehold. The parties will execute the Escrow Instructions prior to the Closing for the Morgan Tower, which shall provide for the order of recordation, distribution of original documents and other provisions customarily contained in escrow instructions. The Morgan Developer shall pay all fees, charges, and costs which arise from Escrow, as well as all documentary transfer taxes due with respect to the Morgan Developer's acquisition of the Morgan Leasehold. 204. Conditions to Closing. 204.1 Closing Conditions in Favor of Both Developer and CDC -HA. The Closing for the Kimball Tower and the Closing for the Morgan Tower are each individually conditioned upon satisfaction (or waiver) of each and all of the conditions set forth in this Section 204.1 on or before the Closing Deadline for the Kimball Tower or the Closing Deadline for the Morgan Tower, as applicable. In the event that one or more of the conditions set forth in this Section 204.1, are not satisfied with respect to the Kimball Tower on or before the Closing Deadline for the Kimball Tower, then this Agreement shall be terminated with respect to the Kimball Tower, unless the CDC -HA, the Kimball Tower Developer waive satisfaction of such condition or conditions in writing, in which event the Closing for the Kimball Tower, shall proceed and the parties waive any right to damages or compensation with respect to the unsatisfied condition. In the event the Closing for the Kimball Tower has occurred (or would occur concurrently with the Closing for the Morgan Tower), and then one or more of the conditions set forth in this Section 204.1, are not satisfied with respect to the Morgan Tower on or before the Closing Deadline for the Morgan Tower, then this Agreement shall be terminated with respect to the Morgan Tower, unless the CDC -HA and the Morgan Developer waive satisfaction of such condition or conditions in writing, in which event the Closing for the Morgan Tower, shall proceed and both parties waive any right to damages or compensation with respect to the unsatisfied condition, subject to any extensions which may be agreed upon pursuant to Section 602 herein. To the extent (i) all closing conditions have been met with respect to the Kimball Tower, and the parties have closed on the Kimball Tower, the failure to meet closing conditions on the Morgan Tower shall not be grounds for a termination of this Agreement with respect to the Kimball Tower or any other Agreement by and among Kimball Developer, National City and/or CDC -HA regarding the Kimball Tower; and (ii) all closing conditions have been met with respect to the Morgan Tower, and the parties have closed on the Morgan Tower, the failure to meet closing conditions on the Kimball Tower shall not be grounds for a termination of this Agreement with respect to the Morgan Tower or any other Agreement by and among Morgan Developer, National City and/or CDC -HA regarding the Morgan Tower. (a) Scope of Rehabilitation. Developer shall have obtained approval from the CDC -HA of the Scope of Rehabilitation for the Kimball Tower or the Morgan Tower, as applicable. (b) TCAC Award. (1) Kimball Tower. The Kimball Developer shall have obtained an allocation or reservation of 4% low income housing tax credits from the California Tax 10 Credit Allocation Committee for the Kimball Tower and an accompanying allocation of tax exempt bonds from the California Debt Limit Allocation Committee for the Kimball Tower. The allocation of tax exempt bonds shall be adequately sized to accommodate the Kimball Developer Note. (2) Morgan Tower. The Morgan Developer shall have obtained an allocation or reservation of 4% low income housing tax credits from the California Tax Credit Allocation Committee for the Morgan Tower and an accompanying allocation of tax exempt bonds from the California Debt Limit Allocation Committee for the Morgan Tower. The allocation of tax exempt bonds shall be adequately sized to accommodate the Morgan Developer Note. (c) Performance and Payment Bond. The Kimball Developer or the Morgan Developer, respectively, shall have caused its contractor to post security in the form of a performance and payment bond in an amount and in a form acceptable to the CDC -HA in its reasonable discretion, to assure the completion of the Scope of Rehabilitation. The performance and payment bond shall insure that completion of the Scope of Rehabilitation is timely accomplished, free and clear of mechanic's liens, stop notices and other encumbrances, concerning the provision of material, labor and supplies. Upon a failure of by the Kimball Developer or the Morgan Developer, as applicable, to timely perform its requirements under the terms of this Agreement, the CDC -HA may resort to the performance and payment bond to ensure performance of this Agreement, by either requiring the bonding company, or its designees, to comply with the terms of this Agreement, or at the election of the CDC -HA, by requiring the bonding company to pay all costs necessary for the CDC -HA, to take over and complete the Scope of Rehabilitation at the cost and expense of the bonding company. (d) Construction Contract. The construction contract for the Scope of Rehabilitation for the Kimball Tower or the Morgan Tower, as applicable, acceptable to the CDC -HA, shall have been executed by the Kimball Developer or the Morgan Developer, as applicable, and the general contractor who has been selected by the Kimball Developer or the Morgan Developer to do the work. (e) Entitlements. The Kimball Developer or the Morgan Developer, as applicable shall have secured any and all land use and other entitlements, permits and approvals which may be required for completion of the Scope of Rehabilitation for the Kimball Tower or the Morgan Tower, as applicable. The Kimball Developer or the Morgan Developer, as applicable, shall have paid any and all applicable fees (including, without limitation, communities facility district fees and public facilities fees imposed by the City or any other governmental agency having jurisdiction with respect to the same), or shall pay such fees concurrently with Closing for the Kimball Tower or the Morgan Tower, as applicable. The CDC -HA shall not be responsible in any way for, the processing of Developer's building permits or other permit applications with the City. The execution of this Agreement does not constitute the granting of or a commitment to obtain any required land use permits, entitlements or approvals. 11 (f) Title Policies. Escrow Agent is prepared and irrevocably obligated to cause to be issued: (i) a title policy insuring the Kimball Developer's interest in the Kimball Leasehold or the Morgan Developer's interest in the Morgan Leasehold, as applicable; and (ii) a title policy insuring the CDC -HA' s interest in the Developer Deed of Trust for the Kimball Tower or the Morgan Tower, as applicable. (g) Forms of Documents. The CDC -HA and the Kimball Developer or the Morgan Developer, as applicable, have agreed to the forms of the Ground Lease, Declaration, Developer Deed of Trust, Security Agreement, Environmental Indemnity and all other documents reasonably necessary to complete the Closing for the Kimball Tower or the Morgan Tower, as applicable. In addition, with respect to the Morgan Tower only, the CDC -HA and the Morgan Developer have agreed to the form of the Morgan Developer Note. (h) Financing. Concurrently with the Closing for the Kimball Tower or Closing for the Morgan Tower, as applicable, the Kimball Developer or the Morgan Developer, as applicable shall have obtained all financing and lender approvals necessary to acquire Kimball Tower or the Morgan Tower, as applicable, and complete the applicable Scope or Rehabilitation. 204.2 Closing Conditions for the Benefit of the CDC -HA. The CDC-HA's obligation to Close on each of the Kimball Tower and the Morgan Tower are conditioned upon satisfaction (or waiver) of each and all of the conditions set forth in this Section 204.2 on or before the Closing Deadline for the Kimball Tower or the Closing Deadline for the Morgan Tower, as applicable. Any such waiver shall be effective only if the same is (i) expressly waived in writing signed by the CDC -HA or by email from the CDC -HA, and (ii) delivered or emailed to the Developer and Escrow Agent. In the event that one or more of the conditions set forth in this Section 204.2 are not satisfied or expressly waived on or before the Closing Deadline for the Kimball Tower, the CDC -HA (provided the CDC -HA is not in default hereunder) may unilaterally terminate this Agreement by mailing or emailing notice of conditional termination to the Kimball Developer and Escrow Agent. In the event the Closing for the Kimball Tower has occurred (or would occur concurrently with the Closing for the Morgan Tower), and if one or more of the conditions set forth in this Section 204.2 are not satisfied or expressly waived on or before the Closing Deadline for the Morgan Tower, the CDC -HA (provided the CDC -HA is not in default hereunder) may unilaterally terminate this Agreement with respect to the Morgan Tower by mailing or emailing notice of conditional termination to the Morgan Developer and Escrow Agent. After receipt of any such notice of conditional termination, the Kimball Developer or the Morgan Developer, as applicable, shall have five (5) business days to cure any non -satisfaction of a condition or other default specified in the notice of conditional termination. If such matter is satisfied or cured prior to the expiration of such five (5) day period, then the Closing for the Kimball Tower or the Closing for the Morgan Tower, as applicable, shall proceed and the CDC - HA shall be deemed to have waived any right to damages or compensation with respect to the unsatisfied condition. If such matter remains unsatisfied or the default remains uncured after the expiration of such five (5) day period with respect to the Kimball Tower, then this Agreement shall terminate at the close of business on such fifth (5th) day. In the event the Closing for the Kimball Tower has occurred (or would occur concurrently with the Closing for the Morgan Tower), and 12 any such matter remains unsatisfied or the default remains uncured after the expiration of such five (5) day period with respect to the Morgan Tower, then this Agreement shall terminate with respect to the Morgan Tower at the close of business on such fifth (5th) day. Any such termination of this Agreement shall not release the Developer from liability under this Agreement. (a) No Default. The Kimball Developer or the Morgan Developer, as applicable, is not in default in any of its obligations under the terms of this Agreement and all representations and warranties made by the same to the CDC -HA contained herein shall be true and correct in all material respects. (b) Insurance. Developer shall have provided proof of insurance as required by the CDC -HA. (c) Attorneys' Fees. The Developer has paid prior to or will pay concurrently with the Closing for the Kimball Tower or the Closing for the Morgan Tower, as applicable, all attorneys' fees incurred by the CDC -HA with respect to the same. (d) Deposit of Documents. The Kimball Developer or the Morgan Developer, as applicable, has duly executed and (where necessary) caused to be notarized the Ground Lease, Declaration, Developer Deed of Trust, Security Agreement, Environmental Indemnity and all other documents reasonably required by the CDC -HA or reasonably necessary to complete the Closing for the Kimball Tower or the Morgan Tower, as applicable, and has deposited the same into Escrow. In addition, with respect to the Morgan Tower only, the Morgan Developer has duly executed the Morgan Developer Note and has deposited the same into Escrow. (c) Additional Documents. The deposit by the Kimball Developer or the Morgan Developer, as applicable, into Escrow of all other documents and instruments reasonably required by Escrow. 204.3 Closing Conditions for the Benefit of the Developer. The Developer's obligation to Close on each of the Kimball Tower and the Morgan Tower are conditioned upon satisfaction (or waiver) of each and all of the conditions set forth in this Section 204.3 on or before the Closing Deadline for the Kimball Tower or the Closing Deadline for the Morgan Tower, as applicable. Any such waiver shall be effective only if the same is (i) expressly waived in writing signed by, or by email from, the Kimball Developer or the Morgan Developer, as applicable, and (ii) delivered or emailed to the CDC -HA and Escrow Agent. In the event that one or more of the conditions set forth in this Section 204.3 are not satisfied or expressly waived on or before the Closing Deadline for the Kimball Tower, the Kimball Developer (provided the Kimball Developer is not in default hereunder) may unilaterally terminate this Agreement by mailing or emailing notice of conditional termination to the CDC -HA and Escrow Agent. In the event the Closing for the Kimball Tower has occurred (or would occur concurrently with the Closing for the Morgan Tower), and if one or more of the conditions set forth in this Section 204.3 are not satisfied or expressly waived on or before the Closing Deadline for the Morgan Tower, the Morgan Developer (provided the Morgan Developer is not in default hereunder) may unilaterally terminate this Agreement with respect to the Morgan Tower by mailing or emailing notice of conditional 13 termination to the CDC -HA and Escrow Agent. After receipt of such notice of conditional termination, the CDC -HA shall have five (5) business days to cure any non -satisfaction of a condition or other default specified in the notice of conditional termination. If such matter is satisfied or cured prior to the expiration of such five (5) day period, then the Closing for the Kimball Tower or the Closing for the Morgan Tower, as applicable, shall proceed and the Developer waives any right to damages or compensation with respect to the unsatisfied condition. If such matter remains unsatisfied or the default remains uncured after the expiration of such five (5) day period with respect to the Kimball Tower, then this Agreement shall terminate at the close of business on such fifth (5th) day. In the event the Closing for the Kimball Tower has occurred (or would occur concurrently with the Closing for the Morgan Tower), and any such matter remains unsatisfied or the default remains uncured after the expiration of such five (5) day period with respect to the Morgan Tower, then this Agreement shall terminate with respect to the Morgan Tower at the close of business on such fifth (5th) day. Any such termination of this Agreement shall not release the CDC -HA from liability under this Agreement. (a) No Default. The CDC -HA is not in default in any of its obligations under the terms of this Agreement and all representations and warranties of the CDC -HA contained herein shall be true and correct in all material respects. (b) Deposit of Documents. The CDC -HA has duly executed and (where necessary) caused to be notarized the Ground Lease, Declaration, Developer Deed of Trust, Security Agreement, Environmental Indemnity and all other documents reasonably required by the CDC -HA or reasonably necessary to complete the Closing for the Kimball Tower or the Morgan Tower, as applicable, and has deposited the same into Escrow. (c) Additional Documents. The deposit by the CDC -HA into Escrow of all other documents and instruments reasonably required by Escrow. (d) Kimball HAP Contract. Kimball Developer shall receive from CDC -HA and/or HUD (as applicable) a Section 8 Housing Assistance Payment Agreement with a minimum term of twenty (20) years to provide Section 8 Project Based Vouchers or Section 8 Project Based Rental Assistance for one hundred forty-nine (149) units at the Kimball Tower on terms acceptable to Kimball Developer in its sole and absolute discretion. (e) Morgan HAP Contract. Morgan Developer shall receive from HUD a Section 8 Housing Assistance Payment Agreement with a minimum term of twenty (20) years to provide Section 8 Project Based Housing Assistance Payment for one hundred fifty-one (151) units at the Morgan Tower on terms acceptable to Morgan Developer in its sole and absolute discretion. 205. Subsequent Financing. No secured loan, deed of trust, or encumbrance, except for the Construction Deed of Trust and Permanent Deed of Trust shall be placed upon any portion of the Kimball Leasehold or Morgan Leasehold, whether by refinancing or otherwise, without first obtaining the express written consent of the CDC -HA, except for any Permitted Transfer as defined in Section 603.2, below, which consent shall not be unreasonably delayed, conditioned or 14 withheld. Further, during any CDC -HA approved refinancing or subsequent encumbrance, the City and SHA shall be provided American Land Title Association ("ALTA") title insurance policy or endorsements acceptable to the CDC -HA, at the cost and expense of Developer. Said written consent shall be at the CDC-HA's sole discretion, failure to obtain such consent shall be a Default hereunder and such unconsented to financing or refinancing shall be void. Except for Permitted Transfers and refinancings allowed by this Section 205, if Developer refinances the Kimball Leasehold or Morgan Leasehold without previously obtaining the CDC-HA's prior written consent, the CDC -HA shall receive one hundred percent (100%) of the net amount of the refinancing. 206. Default. Notwithstanding Section 501, below, after the Closings for each of the Kimball Tower and the Morgan Tower and notwithstanding anything contained herein to the contrary, in the event of any Default, beyond any applicable cure period, in the performance of any of the terms, covenants and conditions contained in: (i) this Agreement (subject to a 30 days cure period); (ii) any document or instrument executed by the Developer in conjunction with this Agreement; (iii) any prior or junior note secured by an encumbrance on the Kimball Leasehold or the Morgan Leasehold, as applicable, or any portions of such leaseholds; (iv) any note or deed of trust given in conjunction herewith; (v) in the event of the filing of a bankruptcy proceeding by the Kimball Developer or the Morgan Developer; or (vi) in the event of the filing of a bankruptcy against the Kimball Developer or the Morgan Developer which is not dismissed within ninety (90) days of filing, then (a) all sums owing by the Kimball Developer or the Morgan Developer, respectively, to the CDC -HA with respect to the Kimball Tower or Morgan Tower, respectively, shall at the option of CDC -HA immediately become due and payable; (b) the CDC -HA shall have the right to foreclosure under the applicable Developer Deed of Trust; and (c) CDC -HA shall be released from any and all obligations to Developer under the terms of this Agreement to the Kimball Developer or the Morgan Developer, respectively. These remedies shall be in addition to any and all other rights and remedies available to CDC -HA, either at law or in equity. Further, default interest shall accrue on the principal balance of the Morgan Developer Note from the date of the Morgan Developer Note at the rate of ten percent (10%) simple interest per annum or the maximum rate than allowed by law, whichever is less. 207. Representations and Warranties. 207.1 CDC -HA Representations and Warranties. CDC -HA represents and warrants to Developer that the CDC -HA is a public body, corporate and politic, existing pursuant to the California Community Redevelopment Law (California Health and Safety Code Section 33000), which has been authorized to transact business pursuant to action of the City. CDC -HA has full right, power and lawful authority to ground lease the Kimball Property and the Morgan Property as provided herein and the execution, performance and delivery of this Agreement by CDC -HA has been fully authorized by all requisite actions on the part of CDC -HA. 207.2 Developer's Representations and Warranties. Each of the Kimball Developer and the Morgan Developer represents and warrants to CDC -HA as follows: (a) Authority. The Kimball Developer and the Morgan Developer is a California limited partnership. The persons executing this Agreement on behalf of each of 15 the Kimball Developer and the Morgan Developer have all necessary authority to execute this Agreement on behalf of Kimball Developer or the Morgan Developer, respectively, and this Agreement is a binding obligation of Developer. Copies of the Certificate of Limited Partnership and Partnership Agreement of each of the Kimball Developer and the Morgan Developer, will be delivered to CDC -HA within five (5) business days of final approval of the Agreement. These copies will be true, complete and fully -executed copies of the originals, as amended to the date of this Agreement. Each of the Kimball Developer and the Morgan Developer will have full right, power and lawful authority to enter into the applicable Ground Lease and undertake all obligations as provided in this Agreement. The execution, performance and delivery of this Agreement by each of the Kimball Developer and the Morgan Developer has been fully authorized by resolution of and all requisite actions on the part of the respective Developer. (b) No Conflict. Developer's execution, delivery and performance of its obligations under this Agreement will not constitute a default or a breach under any contract, agreement or order to which Developer is a party or by which it is bound. (c) No Bankruptcy. Developer is not the subject of a bankruptcy proceeding. (d) Rent and Occupancy Restrictions. Developer shall at all times after the Closing during the 55-year term comply with the requirements of the Declaration. 208. Studies and Reports. Prior to the Closing, representatives of Developer shall have the right of access to all portions of the Property for the purpose of obtaining data and making surveys and tests necessary to carry out this Agreement. Any preliminary work undertaken on the Property by Developer prior to the Closing shall be done at the sole risk and expense of Developer. Any preliminary work shall be undertaken only after securing all necessary permits from the appropriate governmental agencies. 209. Condition of the Property. 209.1 "As -Is," "Where -Is". The CDC -HA has not investigated and makes no representations or warranties whatsoever regarding the condition of the Property. Developer hereby agrees to take title to the Kimball Leasehold and the Morgan Leasehold "as -is." The Kimball Leasehold and the Morgan Leasehold shall be conveyed to the Developer in an "as -is" physical and environmental condition, with no warranty, express or implied, by the CDC -HA as to the condition of any existing improvements, the soil, its geology, the presence of known or unknown faults or Hazardous Materials or toxic substances, and it shall be the sole responsibility of the Developer at its expense to investigate and determine the physical and environmental conditions. The Developer shall have the right to engage its own environmental consultant (the "Environmental Consultant") and other consultants to make such investigations of the Property as the Developer deems necessary, including any soils, geotechnical and other testing of the Property, and the CDC -HA shall promptly be provided a copy of all reports and test results provided to the Developer by the Environmental Consultant (collectively, the `Environmental Reports"). The Developer shall reasonably approve or disapprove of the physical and environmental condition of the Property no later than forty-five (45) days from the date from the date this Agreement is 16 executed by the CDC -HA, provided that the Developer shall have the right to approve or disapprove any further environmental conditions (which are not created by the Developer) that first occur after such deadline for Developer's approval. The Developer's failure to deliver written notice of its disapproval within such time limit shall be deemed approval of the physical and environmental condition of the Property and a waiver of Developer's right to object to the physical and environmental condition of the Property. If the Developer approves or is deemed to approve the physical and environmental condition of the Property, then, as between Developer, City and CDC -HA, it shall be the sole responsibility and obligation of the Developer to take such action as may be necessary to place the physical and environmental conditions of the Property in a condition entirely suitable for the purposes set forth in this Agreement. 209.2 Developer Precautions After Closing. From and after the Closing for the Kimball Tower and the Closing for the Morgan Tower, respectively, Developer shall take all necessary precautions to prevent the release in, on or under the Property of any Hazardous Materials. Such precautions shall include compliance with all Governmental Requirements with respect to Hazardous Materials. In addition, Developer shall install and utilize such equipment and implement and adhere to such procedures as are consistent with commercially reasonable standards as respects the disclosure, storage, use, removal and disposal of Hazardous Materials. 209.3 Required Disclosures After Closing. From and after the Closing for the Kimball Tower and the Closing for the Morgan Tower, respectively, Developer shall notify CDC - HA, and provide the CDC -HA with a copy or copies, of all environmental permits, disclosures, applications, entitlements or inquiries relating to the Property, including notices of violation, notices to comply, citations, inquiries, clean-up or abatement orders, cease and desist orders, reports filed pursuant to self -reporting requirements and reports filed or applications made pursuant to any Governmental Requirements relating to Hazardous Materials and underground tanks. Developer shall report to the CDC -HA, as soon as possible after each incident, any unusual or potentially important incidents with respect to the environmental condition of the Property. In the event of a release of any Hazardous Materials into the environment, Developer shall, as soon as possible after the release, deliver to the CDC -HA a copy of any and all reports relating thereto and copies of all correspondence with governmental agencies relating to the release. Upon request, Developer shall deliver to the CDC -HA a copy or copies of any and all other environmental entitlements or inquiries relating to or affecting the Property including, but not limited to, all permit applications, permits and reports including, without limitation, those reports and other matters which may be characterized as confidential. 210. Developer Indemnity. From and after the Closing for the Kimball Tower and the Closing for the Morgan Tower, respectively, Developer agrees to indemnify, defend and hold CDC -HA harmless from and against any claim, action, suit, proceeding, loss, cost, damage, liability, deficiency, fine, penalty, punitive damage, or expense (including, without limitation, attorneys' fees), resulting from, arising out of, or based upon any of the following: (i) the presence, release, use, generation, discharge, storage or disposal of any Hazardous Materials on, under, in or about, or the transportation of any such Hazardous Materials to or from, the Property, or (ii) the violation, or alleged violation, of any statute, ordinance, order, rule, regulation, permit, judgment or license relating to the use, generation, release, discharge, storage, disposal or transportation of Hazardous Materials on, under, in or about, to or from, the Property. This indemnity shall include, 17 without limitation, any damage, liability, fine, penalty, parallel indemnity after closing cost or expense arising from or out of any claim, action, suit or proceeding for personal injury (including sickness, disease or death), tangible or intangible property damage, compensation for lost wages, business income, profits or other economic loss, damage to the natural resource or the environment, nuisance, contamination, leak, spill, release or other adverse effect on the environment. Provided, however, that this indemnity shall be limited to claims, actions, suits, proceedings, losses, costs, damages, liabilities, deficiencies, fines, penalties, punitive damages, or expenses due to conditions first occurring from and after the Closing for the Kimball Tower and the Closing for the Morgan Tower, respectively. This indemnity does not include any condition arising solely as a result of the negligence or willful misconduct of the CDC -HA or its employees, agents, representatives, successors or assigns. This Section 210 shall apply with respect to the Kimball Developer only with respect to the Kimball Property, Kimball Leasehold and Kimball Tower and shall apply with respect to the Morgan Developer only with respect to the Morgan Property, Morgan Leasehold and Morgan Tower, i.e., the Kimball Developer shall not have any obligations or liability with respect to the Morgan Property, Morgan Leasehold or Morgan Tower and the Morgan Developer shall not have any obligations or liability with respect to Kimball Property, Kimball Leasehold or Kimball Tower. 300. Scope of Rehabilitation. 301. CDC -HA Review and Approval of the Scope of Rehabilitation. Developer shall prepare and submit a Scope of Rehabilitation for each of the Kimball Tower and the Morgan Tower to the CDC -HA for review and approval. The CDC -HA shall have the right to review and approve or disapprove all aspects of the Scope of Rehabilitation for each of the Kimball Tower and the Morgan Tower. Developer acknowledges and agrees that the CDC -HA is entitled to approve or disapprove the Scope of Rehabilitation for each of the Kimball Tower and the Morgan Tower in order to satisfy the CDC-HA's obligation to promote the sound rehabilitation and redevelopment of the Project, to promote a high level of design which will impact the surrounding development, and to provide an environment for the social, economic and psychological growth and well-being of the citizens of the City, including but not limited to the residents of the Kimball Tower and the Morgan Tower. Developer shall not be entitled to any monetary damages or compensation as a result of the CDC-HA's disapproval or failure to approve or disapprove the Scope of Rehabilitation for the Kimball Tower or the Morgan Tower. 302. Standards for Disapproval. The CDC -HA shall have the right to disapprove in its reasonable discretion any of the Scope of Rehabilitation for each of the Kimball Tower and the Morgan Tower, as set forth in Section 301, above, including without limitation if the same do not conform to this Agreement or are otherwise incomplete. In the event the Scope of Rehabilitation for either the Kimball Tower and the Morgan Tower is not approved, the CDC -HA shall state in writing provided to the Developer the reasons for disapproval. Developer, upon receipt of notice of disapproval from the CDC -HA, shall revise such portions and resubmit the revised Scope of Rehabilitation to the CDC -HA for approval. The CDC -HA and Developer agree to work together in good faith to resolve any disagreements and disputes regarding the Scope of Rehabilitation. 303. Revisions. If Developer desires to propose any revisions to the CDC -HA -approved Scope of Rehabilitation after approval, the Developer shall submit such proposed changes to the 18 CDC -HA. If the Scope of Rehabilitation, as modified by the proposed changes, generally and substantially conforms to the requirements of the Scope of Rehabilitation and this Agreement, the CDC -HA shall review the proposed changes and notify Developer in writing within thirty (30) days after submission to the CDC -HA whether the proposed change is approved or disapproved. The CDC-HA's Executive Director is authorized to approve changes to the Scope of Rehabilitation. Provided, however, the CDC -HA shall have no obligation to approve any change from the basic use of the Property for anything other than a multifamily, affordable housing project. 304. Defects in Plans. The CDC -HA shall not be responsible or liable in any way, either to Developer or to any third parties, for any defects in the Scope of Rehabilitation, or for any structural or other defects in any work done according to the approved Scope of Rehabilitation, or for any delays caused by the review and approval processes established by this Section 300. Developer shall hold harmless and indemnify CDC -HA, the City and their officers, employees, agents and representatives from and against any and all claims, demands and suits for damages to property or injuries to persons arising out of or in any way relating to the Property, including without limitation any defects in the Scope of Rehabilitation, violation of any laws, and for defects in any work done according to the approved Scope of Rehabilitation or for defects in work performed by Developer or any contractor or subcontractor of Developer. 305. Land Use Approvals. Before commencement of the Scope of Rehabilitation work or any works of improvement at the Property, Developer shall, at Developer's sole expense, secure or cause to be secured any and all land use and other entitlements, permits and approvals which may be required for the Scope of Rehabilitation work by the City or any other governmental agency affected by such rehabilitation, construction or work. Neither CDC -HA, nor the City shall be responsible in any way for, the processing of Developer's building permits or other permit applications with the City and the execution of this Agreement does not constitute the granting of or a commitment to obtain any required land use permits, entitlements or approvals. 306. Deadline for Completion of the Scope of Rehabilitation. The Scope of Rehabilitation work for the Kimball Tower and the Scope of Rehabilitation work for the Morgan Tower shall be completed in accordance not later than twenty-four (24) months from the Closing for the Kimball Tower or the Closing for the Morgan Tower, as applicable. Failure to complete all of the Scope of Rehabilitation work for the Kimball Tower or the Scope of Rehabilitation work for the Morgan Tower, as applicable, shall, inter alia, be a default by the Morgan Developer or the Kimball Developer respectively, entitling the CDC -HA to exercise all of its rights and remedies, including without limitation foreclosure of the applicable Developer Deed of Trust. 307. Cost of Project. All costs of the Project whatsoever shall be borne by Developer, including without limitation the cost of planning, designing, developing and rehabilitating the Kimball Tower and the Morgan Tower in accordance with the applicable Scope of Rehabilitation. 307.1 Project Budget. The Developer has submitted the Initial Project Budget to CDC -HA. The Project Budget summarizes the current estimates of the sources and uses of funds for the complete rehabilitation of each of the Kimball Tower and the Morgan Tower. By its execution of this Agreement, CDC -HA has given its approval to the Initial Project Budget. While 19 the Initial Project Budget has been prepared based on the best, good faith estimate of the Developer of the costs which are likely to be incurred for the rehabilitation of the Kimball Tower and the Morgan Tower, the parties recognize that events and circumstances not currently contemplated, some of which are outside of the control of the parties, could result in changes in the costs of rehabilitating one or both Projects, necessitating changes in the Project Budget. Changes in the Scope of Rehabilitation could also be made during any public hearing or approval process which results in increased costs for the Project not contemplated in the Project Budget. Changes in costs could be occasioned by conditions found in the field which were not anticipated as of the date of execution of this Agreement, including changes (and delays which result from changes) as a result of onsite inspections. Due to the impact of other, competing demands for staff time, inspections themselves might be delayed. 307.2 Because of the specialized nature of the funding for the Scope of Rehabilitation, unanticipated material changes could constitute a challenge to the Project completion and may cause additional costs to the Project unanticipated in the Initial Project Budget. Should the Developer become aware of any such material fact or circumstance which will result in a material increase in the Scope of Rehabilitation (a cost or costs will constitute a "material increase" if (i) alone or cumulatively, such costs result in increased expenses in excess of $100,000, but which expenses might be absorbed out of contingency funds; or (ii) alone or cumulatively, such costs result in an increase for a Phase in excess of $250,000 which cannot be paid from sources of funds identified in the Project Budget), the Developer shall give written notice to CDC - HA, which notice shall identify the material change or changes, shall itemize the costs which the Developer anticipates will result therefrom and shall request that CDC -HA take one or more of the following actions: i. Agree to the transfer of amounts between line items within each Project Budget. At the request of either Developer, and subject to the approval of CDC -HA, which will not be unreasonably withheld, conditioned or delayed, funds reflected in one line item of a Project Budget which are unexpended at the substantial completion of the work delineated therein may be transferred to the account and line item for contingencies, or, with the consent of CDC -HA, not to be unreasonably withheld, transferred directly to another account of another line item in the Project Budget. ii. Approve modifications to the Scope of Rehabilitation reasonably necessary or required to deal with such changed circumstances and material increases. Such modifications might include phasing or deferral of Project amenities until additional funding is available or secured, downsizing or eliminating Project design items or amenities, etc. All financing for the Scope of Rehabilitation shall be subject to the review and approval of the CDC -HA, which review and approval shall not be unreasonably withheld, conditioned or delayed. The CDC -HA shall respond within fifteen (15) days of either Developer's submission of any proposed financing. Each Developer will be responsible for maximizing use of leveraged financing sources from other community development funding sources as available. The CDC-HA's approvals of any such modifications shall not be unreasonably withheld, conditioned or delayed. The CDC -HA acknowledges that the Kimball Developer has applied for an Affordable Housing Program Loan from a Federal Home Loan Bank member institution (the "AHP Loan"). The CDC- 20 HA and each Developer further acknowledge that each Developer has applied for an AHP Loan, and that if either Developer is not awarded an AHP Loan, such Developer will submit up to two additional applications for an AHP Loan. If either Developer has made three unsuccessful applications for an AHP Loan, then CDC -HA will increase the total amount of the either the Kimball Acquisition Loan or the Morgan Acquisition Loan in an amount sufficient to fill any gaps in the respective Project Budget due to the unavailability of an AHP Loan. iii. Agree to allow the Developer to obtain additional funding sufficient to pay such material increases. Such funding sources might, upon approval by CDC -HA, include CDC -HA support for applications for additional and/or new funding from additional or new governmental or private funding programs established for low and moderate income housing. Once the CDC -HA and each Developer has agreed upon a final sources and uses for the Scope of Rehabilitation, then the parties shall replace the Initial Project Budget with a final approved project budget (the "Final Project Budget"), which shall include development sources and uses and an operating budget. 308. Insurance Requirements. Developer shall take out and maintain during the terms of each of the Declarations and shall cause its contractor and subcontractors to take out and maintain until completion of the applicable Scope of Rehabilitation, a comprehensive general liability policy in the amount of not less than $4,000,000 combined single limit policy and not less than $1,000,000 combined single limit policy for subcontractors; provided that the use of umbrella / excess liability policies to achieve such limits will be acceptable, and a comprehensive automobile liability policy in the amount of $1,000,000 combined single limit, or such other policy limits as the CDC -HA may approve at its discretion, including contractual liability, as shall protect Developer, City and CDC -HA from claims for such damages. Such policy or policies shall be written on an occurrence form. Developer shall also furnish or cause to be furnished to the CDC - HA evidence satisfactory to the CDC -HA that Developer, and any contractor with whom it has contracted for the performance of work on the Property or otherwise pursuant to this Agreement, carries workers' compensation insurance as required by law. Developer shall furnish a certificate of insurance countersigned by an authorized agent of the insurance carrier on a form approved by the CDC -HA setting forth the general provisions of the insurance coverage. This countersigned certificate shall name the City and CDC -HA and their respective officers, agents, and employees as additionally insured parties under the policy, and the certificate shall be accompanied by a duly executed endorsement evidencing such additional insured status. The certificate and endorsement by the insurance carrier shall contain a statement of obligation on the part of the carrier to notify the City and CDC -HA of any material change, cancellation or termination of the coverage at least thirty (30) days in advance of the effective date of any such material change, cancellation or termination. Coverage provided hereunder by Developer shall be primary insurance and not be contributing with any insurance maintained by the City of CDC -HA, and the policy shall contain such an endorsement. The insurance policy or the endorsement shall contain a waiver of subrogation for the benefit of the City and CDC -HA. The required certificates shall be furnished 21 by Developer prior to the Closing for the Kimball Tower or the Closing for the Morgan Tower, as applicable. 309. Developer's Indemnity. The Developer shall be responsible for all injuries to persons and/or all damages to real or personal property of the City, CDC -HA or others, caused by or resulting from the negligence and/or breach of this Agreement, by the Developer, its employees, subcontractors and/or its agents during the term of this Agreement. The Developer shall defend and hold harmless and indemnify the City, CDC -HA and all of their 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 the Developer, Developer's directors, officers, partners, members, employees, subcontractors and/or its agents and assigns or any employee of Developer's directors, officers, partners, or members, 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 or CDC -HA. This Section 309 shall apply with respect to the Kimball Developer only with respect to the Kimball Property, Kimball Leasehold and Kimball Tower and shall apply with respect to the Morgan Developer only with respect to the Morgan Property, Morgan Leasehold and Morgan Tower, i.e., the Kimball Developer shall not have any obligations or liability with respect to the Morgan Property, Morgan Leasehold or Morgan Tower and the Morgan Developer shall not have any obligations or liability with respect to Kimball Property, Kimball Leasehold or Kimball Tower. 310. Rights of Access. The Developer agrees to allow the CDC -HA and its representatives to access the Property to review and inspect the Developer's activities under this Agreement as the CDC -HA shall require. The CDC -HA shall monitor the Developer's activities without liability for said inspection and review. 311. Compliance With Laws. The Developer represents and warrants that during the term of this Agreement that it will comply with all State and Federal Davis Bacon prevailing wage requirements to the extent the same are applicable to the work. The Developer shall carry out the design and completion of the Scope of Rehabilitation in conformity with all applicable laws, including all applicable state labor standards, the City zoning and development standards, building, plumbing, mechanical and electrical codes, and all other provisions of the Title 24 of the California Code of Regulations, and all applicable disabled and handicapped access requirements, including without limitation the Americans With Disabilities Act, 42 U.S.C. Section 12101, et seq., Government Code Section 4450, et seq., Government Code Section 11135, et seq., and the Unruh Civil Rights Act, Civil Code Section 51, et seq. The Developer hereby agrees to carry out development, rehabilitation, construction and operation of the Property, including, without limitation, any and all public works (as defined by applicable law), in conformity with all applicable local, state and federal laws, including, without limitation, all applicable federal and state labor laws (including, without limitation, any requirement to pay State prevailing wages or Federal Davis Bacon wages). Developer hereby expressly acknowledges and agrees that neither the City nor the CDC -HA has ever previously affirmatively represented to the Developer or its contractor(s) in writing or otherwise, in a call for bids or otherwise, that the work to be covered by the bid or contract is or is not a "public work," as defined in Section 1720 of the Labor Code. Developer hereby agrees that Developer shall have the obligation to provide any and all disclosures, representations, statements, rebidding, and/or identifications which may be required 22 by Labor Code Sections 1726 and 1781, as the same may be enacted, adopted or amended from time to time, or any other provision of law. Developer hereby agrees that Developer shall have the obligation to provide and maintain any and all bonds to secure the payment of contractors (including the payment of wages to workers performing any public work) which may be required by the Civil Code, Labor Code Section 1781, as the same may be enacted, adopted or amended from time to time, or any other provision of law. The Developer hereby agrees that the Developer shall have the obligation, at the Developer's sole cost, risk and expense, to obligate any party as may be required by Labor Code Sections 1726 and 1781, as the same may be enacted, adopted or amended from time to time, or any other provision of law. Developer shall indemnify, protect, defend and hold harmless the City, the CDC -HA and their respective officers, employees, contractors and agents, with counsel reasonably acceptable to the City and the CDC -HA, from and against any and all loss, liability, damage, claim, cost, expense, and/or "increased costs" (including labor costs, penalties, reasonable attorneys' fees, court and litigation costs, and fees of expert witnesses) which, in connection with the completion of the Scope of Rehabilitation, including, without limitation, any and all public works (as defined by applicable law), results or arises in any way from any of the following: (i) the noncompliance by Developer of any applicable local, state and/or federal law, including, without limitation, any applicable federal and/or state labor laws (including, without limitation, if applicable, the requirement to pay state prevailing wages); (ii) the implementation of Sections 1726 and 1781 of the Labor Code, as the same may be enacted, adopted or amended from time to time, or any other similar law; (iii) failure by Developer to provide any required disclosure, representation, statement, rebidding and/or identification which may be required by Labor Code Sections 1726 and 1781, as the same may be enacted, adopted or amended from time to time, or any other provision of law; (iv) failure by Developer to provide and maintain any and all bonds to secure the payment of contractors (including the payment of wages to workers performing any public work) which may be required by the Civil Code, Labor Code Section 1781, as the same may be enacted, adopted or amended from time to time, or any other provision of law; and/or (v) failure by the Developer to obligate any party as may be required by Labor Code Sections 1726 and 1781, as the same may be enacted, adopted or amended from time to time, or any other provision of law. It is agreed by the parties that, in connection with the development, rehabilitation, construction and operation of the Property, including, without limitation, any public work (as defined by applicable law), Developer shall bear all risks of payment or non-payment of state prevailing wages and/or the implementation of Labor Code Sections 1726 and 1781, as the same may be enacted, adopted or amended from time to time, and/or any other provision of law. "Increased costs" as used in this Section shall have the meaning ascribed to it in Labor Code Section 1781, as the same may be enacted, adopted or amended from time to time. The foregoing indemnity shall survive termination of this Agreement. This Section 311 shall apply with respect to the Kimball Developer only with respect to the Kimball Property and shall apply with respect to the Morgan Developer only with respect to the Morgan Property. 312. Nondiscrimination in Employment. Developer certifies and agrees that all persons employed or applying for employment by it, its affiliates, subsidiaries, or holding companies, and all subcontractors, bidders and vendors, are and will be treated equally by it without regard to, or because of race, color, religion, ancestry, national origin, sex, age, pregnancy, childbirth or related medical condition, medical condition (cancer related) or physical or mental disability, and in compliance with Title VII of the Civil Rights Act of 1964, 42 U.S.C. Section 2000, et seq., the Federal Equal Pay Act of 1963, 29 U.S.C. Section 206(d), the Age Discrimination in Employment 23 Act of 1967, 29 U.S.C. Section 621, et seq., the Immigration Reform and Control Act of 1986, 8 U.S.C. Section 1324b, et seq., 42 U.S.C. Section 1981, the California Fair Employment and Housing Act, Cal. Government Code Section 12900, et seq., the California Equal Pay Law, Cal. Labor Code Section 1197.5, Cal. Government Code Section 11135, the Americans with Disabilities Act, 42 U.S.C. Section 12101, et seq., and all other anti -discrimination laws and regulations of the United States and the State of California as they now exist or may hereafter be amended. Developer shall allow representatives of the CDC -HA access to its employment records related to this Agreement during regular business hours to verify compliance with these provisions when so requested by the CDC -HA. 313. Taxes and Assessments. After each Closing, the respective Developer shall pay prior to delinquency all ad valorem real estate taxes and assessments on the Kimball Leasehold or the Morgan Leasehold, respectively. Developer shall remove or have removed any levy or attachment made after the Closing on the Kimball Leasehold or the Morgan Leasehold, respectively, or any part thereof, or assure the satisfaction thereof within a reasonable time. 314. Liens and Stop Notices. Developer shall not allow to be placed on the Kimball Leasehold, the Morgan Leasehold or the Property or any part thereof any lien or stop notice. If a claim of a lien or stop notice is given or recorded affecting the Kimball Leasehold, the Morgan Leasehold or the Property, the respective Developer shall, within thirty (30) days of such recording or service or within five (5) days of the CDC-HA's demand, whichever last occurs: (a) pay and discharge the same; (b) effect the release thereof by recording and delivering to the CDC -HA a surety bond in sufficient form and amount as approved by the CDC -HA in its sole discretion; or (c) provide the CDC -HA with other assurance which the CDC -HA deems, in its sole discretion, to be satisfactory for the payment of such lien or bonded stop notice and for the full and continuous protection of the CDC -HA from the effect of such lien or bonded stop notice. 315. Financing of the Project. 315.1 No Encumbrances Except Mortgages or Deeds of Trust. Mortgages and deeds of trust may be permitted only with the CDC-HA's prior written approval, and only for the purpose of securing loans of funds to be used for financing the Scope of Rehabilitation work, and any other purposes deemed necessary and appropriate by the CDC -HA in connection with development under this Agreement. The Developer shall notify the CDC -HA in advance of the execution or recordation of any mortgage or deed of trust. The Developer shall not enter into any mortgage or deed of trust for financing without the prior written approval of the CDC -HA, which approval the CDC -HA agrees to give if any such mortgage or deed of trust for financing is given to a responsible financing lending institution or person or entity, as determined by the CDC -HA in its reasonable discretion. The CDC -HA agrees that the Developer Deed of Trust shall be 24 subordinated to any Construction Deed of Trust, such subordination shall be via a subordination agreement in a form acceptable to the CDC -HA in its reasonable discretion. 315.2 Right of CDC -HA to Cure Mortgage or Deed of Trust Default. In the event of a mortgage or deed of trust default or breach by the Developer, the Developer shall immediately deliver to the CDC -HA a copy of any mortgage holder's notice of default. The CDC -HA shall have the right but not the obligation to cure the default. In such event, the CDC -HA shall be entitled to reimbursement from the Developer of all costs and expenses incurred by the CDC -HA in curing such default, including without limitation attorneys' fees. 316. Occupancy Monitoring and Inspection Fees; Records and Reports. Each year during the terms of each of theDeclarations, the Developer shall pay to the CDC -HA an affordable housing occupancy monitoring and inspection fee of $201 per unit per year, escalating at 3.5% annually. The Developer shall supply CDC -HA, annually, on May 31', of each year during the term of this Agreement, for the immediately prior calendar year, with such records and reports as are required and are requested by the CDC -HA to aid it in complying with its reporting and record keeping requirements. The records and reports include, but are not limited to the following: (a) Amount of funds expended pursuant to this Agreement; (b) Eligible tenant information, including yearly income verifications; (c) On -site inspection results; (d) Housing payments charged to tenants; (e) Affirmative marketing records; (f) Insurance policies and notices; (g) Equal Employment Opportunity and Fair Housing records; (h) Labor costs and records; (i) Audited income and expense statement, balance sheet and statement of cash flows for the Developer; (j) Federal and State income tax returns for the calendar year, ending on the preceding December 31st; (k) Annual budget of reserves for repair and replacement; (1) Annual certification and representation regarding status of all loans, encumbrances and taxes; 25 (m) Such other and further information and records as the CDC -HA shall reasonably request in writing from the Developer. 317. Flood Insurance. Developer represents, warrants, and certifies that the Property is located within a community participating in the National Flood Insurance Program and Developer agrees to purchase and maintain flood insurance for the duration of the term of this Agreement. 318. Accessibility Standards. Developer represents and warrants that it will comply with all federal, state and local requirements and regulations concerning access to the units by the disabled and handicapped persons. 400. Covenants and Restrictions. 401. Affordable Units. Developer covenants and agrees for itself, its successors, assigns, and every successor in interest to the Kimball Leasehold or the Morgan Leasehold, respectively, or any part thereof, that upon the Closing and thereafter, Developer shall comply with the applicable Declaration for the period of time specified herein. The obligation of the CDC -HA to enter into each Ground Lease is conditioned upon the execution, and recordation of the Declaration against the Kimball Leasehold and the Morgan Leasehold. The Declaration for the Kimball Leasehold shall contain housing payment and income level restrictions for the one hundred forty- nine (149) Affordable Units in the Kimball Tower. The Declaration for the Morgan Leasehold shall contain housing payment and income level restrictions for the one hundred fifty-one (151) Affordable Units in the Morgan Tower. All of the Affordable Units shall be restricted to occupancy by Very Low Income Households with monthly rental rates restricted to the Maximum Rents as set forth in more detail in the Declaration. Provided, however, the CDC -HA acknowledges that there are currently several units at each of the Kimball Tower and Morgan Tower which are currently occupied by tenants whose incomes no longer qualify as Very Low Income Households (the "Existing Over -Income Units"), and the CDC -HA further agrees that the Existing Over -Income Units will continue to be treated as Very Low Income Households, so long as upon the vacancy of any Existing Over -Income Unit, such unit must then be rented to a qualifying Very Low Income Household. 402. Maintenance Covenants. The Developer represents and warrants that after completion of Scope of Rehabilitation, the Kimball Property, the Morgan Property and all of the Affordable Units shall continually be maintained in a decent, safe and sanitary condition, and in good repair as described in 24 C.F.R. §5.703, and in a manner which satisfies the Uniform Physical Conditions Standards promulgated by the Department of Housing and Urban Development (24 C.F.R. §5.705), as such standards are interpreted and enforced by the CDC -HA under its normal policies and procedures. The Developer warrants that all rehabilitation work shall meet or exceed the applicable local codes and construction standards, including zoning and building codes of the City of National City as well as the provisions of the Model Energy Code published by the Council of American Building Officials. The Developer hereby consents to periodic inspection by the CDC-HA's designated inspectors and/or designees during regular business hours, including the Code Enforcement Agents of the City, to assure compliance with all applicable zoning, building codes, regulations and property standards. 26 403. Obligation to Refrain from Discrimination. 403.1 State and Federal Requirements. The Developer shall, at all times during the term of this Agreement, comply with all of the affirmative marketing procedures adopted by the CDC -HA. The Developer shall maintain records to verify compliance with the applicable affirmative marketing procedures and compliance. Such records are subject to inspection by the CDC -HA during regular business hours upon five (5) days written notice. 404.2 Additional Requirements. Developer 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. 404.3 Fair Housing Laws. All activities carried out by the Developer and/or agents of the Developer 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 Fair Housing 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 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 Fair Housing 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 Fair Housing Act also provides protection for people with disabilities and proscribes those conditions under which senior citizen housing is exempt from the prohibitions based on familial status. The following State of California Laws also govern housing discrimination and shall be complied with by Developer: Fair Employment and Housing Act, Unruh Civil Rights Act of 1959, Ralph Civil Rights Act of 1976, and Civil Code Section 54.1. 405. Nondiscrimination Covenants. The Developer 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 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 in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Property, nor shall Developer 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 27 foregoing covenants shall run with the land. All such deeds, leases or contracts 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 Kimball Leasehold or the Morgan Leasehold: "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." 406. Effect of Violation of the Terms and Provisions of this Agreement. The CDC -HA is deemed the beneficiary of the terms and provisions of this Agreement and of the covenants running with the land, for and in its own right and for the purposes of protecting the interests of the community and other parties, public or private, in whose favor and for whose benefit this Agreement and the covenants running with the land have been provided, without regard to whether the CDC -HA has been, remains or is an owner of any land or interest therein in the Property. The CDC -HA shall have the right, if this Agreement or its covenants are breached, to exercise all rights and remedies, and to maintain any actions or suits at law or in equity or other proper proceedings to enforce the curing of such breaches to which it or any other beneficiaries of this Agreement and covenants may be entitled. 28 500. Defaults and Remedies. This Section 500, including without limitation the subsections set forth below, shall apply to the Kimball Developer only with respect to the Kimball Property, Kimball Leasehold and Kimball Tower and shall apply to the Morgan Developer only with respect to the Morgan Property, Morgan Leasehold and Morgan Tower, i.e., the Kimball Developer shall not have any obligations or liability with respect to the Morgan Property, Morgan Leasehold or Morgan Tower and the Morgan Developer shall not have any obligations or liability with respect to Kimball Property, Kimball Leasehold or Kimball Tower. 501. Default Generally. Subject to Section 603.2 of this Agreement, failure by the CDC - HA or the Developer to perform any action or covenant required by this Agreement within the time periods provided herein following notice and failure to cure as described hereafter, constitutes a "Default" under this Agreement. A party claiming a Default shall give written notice of Default to the other party specifying the alleged Default. Except as otherwise expressly provided in this Agreement, the claimant shall not institute any proceeding against any other party, and the other party shall not be in Default if: (i) such alleged Default is cured thirty (30) days from receipt of such written notice: or (ii) if the alleged Default is such that it is not capable of being cured within thirty (30) days, but corrective action is initiated within thirty (30) days and the allegedly defaulting party diligently and in good faith works to effect a cure as soon as possible. 501.1 Notwithstanding anything to the contrary contained in this Agreement, the CDC -HA, prior to any action to enforce this Agreement, shall give any Developer's limited partner and its successors and assigns (the "Tax Credit Partner") notice and opportunity to cure for a period of not less than (a) fifteen (15) days if a monetary default, and (b) thirty (30) days if a nonmonetary default; provided, however, if in order to cure such a default, Tax Credit Partner reasonably determines that it must remove the general partner of Developer, Tax Credit Partner shall so notify CDC -HA and so long as Tax Credit Partner is diligently and continuously attempting to so remove such general partner, Tax Credit Partner shall have until the date thirty (30) days after the effective date of the removal of the general partner or general partners to cure such default but in no event more than one (1) year. 502. Institution of Legal Actions. In addition to any other rights or remedies and subject to the restrictions otherwise set forth in this Agreement, either party may institute an action at law or equity to seek specific performance of the terms of this Agreement, or to cure, correct or remedy any Default, to recover damages for any Default, or to obtain any other remedy consistent with the purpose of this Agreement. Such legal actions must be instituted in the County of San Diego, State of California, downtown branch, or in the District of the United States District Court in the County of San Diego. 503. Entry and Vesting of Title in CDC -HA Prior to Completion of Rehabilitation. 503.1 Right of Reentry. In addition to all other rights and remedies the CDC -HA may have at law or in equity, the CDC -HA has the right, at its election, to enter and take possession of the Kimball Property or the Morgan Property, as applicable, and all improvements thereon, and terminate and revest the Kimball Leasehold or the Morgan Leasehold in the CDC -HA if after the applicable Closing, Developer: 29 (a) fails to start the Scope of Rehabilitation work as required by this Agreement for a period of thirty (30) days after written notice thereof from CDC -HA; or (b) abandons or substantially suspends the Scope of Rehabilitation work required by this Agreement for a period of thirty (30) days after written notice thereof from CDC -HA, subject to any extensions which may be agreed upon pursuant to Section 602 herein; or (c) transfers or suffers any involuntary transfer of the Kimball Leasehold or the Morgan Leasehold or any part thereof in violation of contrary to the provisions of this Agreement. 503.2 Limitations on Right of Entry. Such right to enter and vest shall be subject to and be limited by and shall not defeat, render invalid or limit any mortgage or deed of trust permitted by this Agreement that is senior to the Developer Deed of Trust. 503.3 Termination of Right of Entry. The CDC-HA's right to enter and take possession of the Kimball Property or the Morgan Property, as applicable, and all improvements thereon, and terminate and revest the Kimball Leasehold or the Morgan Leasehold in the CDC - HA, shall terminate upon the timely completion of the Scope of Rehabilitation work for the Kimball Property or the Morgan Property, as applicable. 504. Rights and Remedies are Cumulative. Except as otherwise expressly stated in this Agreement, the rights and remedies of the parties are cumulative, and the exercise by either party of one or more of such rights orremedies shall not preclude the exercise by it, at the same or different times, of any other rights or remedies for the same default or any other default by the other party. 505. Inaction Not a Waiver of Default. Any failures or delays by either party in asserting any of its rights and remedies as to any Default shall not operate as a waiver of any Default or of any such rights or remedies, or deprive either such party of its right to institute and maintain any actions or proceedings which it may deem necessary to protect, assert or enforce any such rights or remedies shall govern the interpretation and enforcement of this Agreement. 600. General Provisions. 601. Notices, Demands and Communications Between the Parties. All notices under this Agreement shall be in writing and sent (a) by certified or registered U.S. mail, return receipt requested, (b) overnight by a nationally recognized overnight courier such as UPS Overnight or FedEx, or (c) by personal delivery. All notices shall be effective upon receipt (or refusal to accept delivery). All notices shall be delivered to the following addresses or such other addresses as changed by any party from time to time by written notice to the other parties hereto. 30 To CDC -HA: To Developer: Community Development Commission - Housing Authority of the City of National City 1243 National City Boulevard National City, CA 91950 Attention: Executive Director MORGAN TOWER HOUSING ASSOCIATES, L.P. KIMBALL TOWER HOUSING ASSOCIATES, L.P. c/o Community HousingWorks 2815 Camino Del Rio South, Suite 350 San Diego, CA 92108 Attention: Susan M. Reynolds, President & CEO And c/o Mercy Housing California 1500 South Grand Avenue, Suite 100 Los Angeles, CA 90015 Attention: Ed Holder, Regional Vice President of Real Estate Development And with a copy to: Gubb & Barshay, LLP 505 14th Street, Suite 450 Oakland, CA 94612 Attention: Sarah C. Perez 602. Enforced Delay; Extension of Times of Performance. In addition to specific provisions of this Agreement, performance by either party hereunder shall not be deemed to be in Default, and all performance and other dates specified in this Agreement shall be extended, where delays or Defaults are due to: war; insurrection; strikes; lockouts; riots; floods; earthquakes; fires; casualties; acts of God; acts of the public enemy; epidemics; quarantine restrictions; freight embargoes; lack of transportation; governmental restrictions or priority; litigation; unusually severe weather; acts or omissions of the other party; or any other causes beyond the control and without the fault of the party claiming an extension of time to perform. Notwithstanding anything to the contrary in this Agreement, an extension of time for any such cause shall be for the period of the delay and shall commence to run from the time of the commencement of the cause, if notice by the party claiming such extension is sent to the other party within five (5) days of the commencement of the cause. Times of performance under this Agreement may also be extended in writing by the mutual agreement of Executive Director of the CDC -HA and Developer. 603. Transfers of Interest in Property or Agreement. 603.1 Prohibition. The qualifications and identity of Developer are of particular concern to the CDC -HA. It is because of those qualifications and identity that the CDC -HA has 31 entered into this Agreement with Developer. During the term of this Agreement and during the ninety-nine (99) year terms of the Ground Leases, no voluntary or involuntary successor in interest of Developer shall acquire any rights or powers under this Agreement, nor shall Developer make any total or partial sale, transfer, conveyance, assignment, subdivision, refinancing or lease of the whole or any part of the Property or the improvements thereon without prior written approval of the CDC -HA, except as expressly set forth herein. Any proposed total or partial sale, transfer, conveyance, assignment, subdivision, refinancing or lease of the whole or any part of the Property or the improvements thereon, other than those permitted in Section 603.2, will entitle CDC -HA to its right of reentry and reverting as set forth in Section 505 hereof. For the reasons cited above, Developer represents and agrees for itself, each partner and any successor in interest to itself that without the prior written approval of the CDC -HA, there shall be no significant change in the ownership of Developer or in the relative proportions thereof, or with respect to the identity of the parties in control of Developer or the degree thereof, by any method or means; provided, however, that a change in one or more constituent partners of Developer is permitted so long as Developer remains controlled as to day to day matters by one of the general partners of Developer as of the date of this Agreement. Developer shall promptly notify the CDC -HA of any and all changes whatsoever in the identity of the parties in control of Developer or the degree thereof, of which it or any of its officers have been notified or otherwise have knowledge or information. Any change (voluntary or involuntary) in the partnership composition, management or control of Developer shall be a Default. 603.2 Permitted Transfers. Notwithstanding any other provision of this Agreement to the contrary, the CDC -HA approval of an assignment of this Agreement or conveyance of the Kimball Leasehold, Morgan Leasehold or the improvements thereon, or any part thereof, will be granted in connection with any of the following, subject to the CDC -HA and Developer executing appropriate documents of transfer which contain any exceptions or reservation of rights permitted under this Agreement (each a "Permitted Transfer"): (a) the leasing of one or more Affordable Units to an occupant in compliance with the Declaration; (b) transfer of up to a Ninety -Nine and Ninety -Nine Hundredths Percent (99.99%) limited interest in the Kimball Developer or the Morgan Developer to a tax credit investor partner in connection with a tax credit syndication; (c) transfer by the tax credit investor partner of the Kimball Developer or the Morgan Developer of its interest in the Kimball Developer or the Morgan Developer to an entity in which the tax credit investor partner or its affiliate manages and controls, directly or indirectly, the management decisions of such entity in connection with the tax credit syndication; (d) The conveyance or dedication of any portion of the Kimball Leasehold or the Morgan Leasehold to the City or other appropriate governmental agency, or the granting of easements or permits to facilitate completion of the Scope of Rehabilitation. 32 (e) Any conveyance for financing purposes (subject to such financing being approved by the CDC -HA), including the grant of a deed of trust to secure the funds necessary for completion of the Scope of Rehabilitation. (f) any transfer directly resulting from the foreclosure of a deed of trust permitted under subsection (e), above; or (g) in the event all of general partners of the Developer are removed by the investor limited partner of the Developer for cause following default under the Developer's partnership agreement, the CDC -HA hereby approves the transfer of the general partners' interests to a 501(c)(3) tax exempt nonprofit corporation and/or an affiliate of the investor limited partner of the Developer selected by the investor limited partner of the Developer and approved by the CDC -HA, which approval shall not be unreasonably withheld, conditioned or delayed; or (i) Either (i) the exercise by a 501(c)(3) tax exempt nonprofit corporation affiliate of Kimball Developer of its option and right of first refusal to be granted by Kimball Developer upon the closing of a tax credit syndication, or (ii) the exercise by a 501(c)(3) tax exempt nonprofit corporation affiliate of Morgan Developer of its option and right of first refusal to be granted by Morgan Developer upon the closing of a tax credit syndication. 603.3 Successors and Assigns. All of the terms, covenants and conditions of this Agreement shall be binding upon Developer and its permitted successors and assigns. Whenever the term "Developer" is used in this Agreement, such term shall include any other permitted successors and assigns as herein provided. 603.4 Assignment by the CDC -HA. The CDC -HA may assign or transfer this Agreement in its entirety, or any of its rights or obligations hereunder. 604. Non -Liability of Officials and Employees 604.1 CDC -HA. No member, official or employee of the City or CDC -HA shall be personally liable to Developer, 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 Developer or its successors, or on any obligations under the terms of this Agreement. Kimball Developer. No member, official or employee of the Kimball Developer shall be personally liable to the City or CDC -HA, 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 the City or CDC - HA or its successors, or on any obligations under the terms of this Agreement. 604.3 Morgan Developer. No member, official or employee of the Morgan Developer shall be personally liable to the City or CDC -HA, 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 the City or CDC -HA or its successors, or on any obligations under the terms of this Agreement. 33 605. Relationship Between the CDC -HA and Developer. It is hereby acknowledged that the relationship between the CDC -HA and Developer is that of independent contractors and not that of a partnership or joint venture and that the CDC -HA and Developer shall not be deemed or construed for any purpose to be the agent of the other. Developer agrees to indemnify, hold harmless and defend the CDC -HA from any claim made against the CDC -HA arising from a claimed relationship of partnership or joint venture between the CDC -HA and Developer. 606. CDC -HA Approvals and Actions. Whenever a reference is made herein to an action or approval to be undertaken by the CDC -HA, the Executive Director of the CDC -HA or his or her designee is authorized to act on behalf of the CDC -HA unless specifically provided otherwise or the context should require otherwise. 607. Counterparts. This Agreement may be signed in multiple counterparts which, when signed by all parties, shall constitute a binding agreement. 608. Integration. This Agreement contains the entire understanding between the parties relating to the subject matter of this Agreement. All prior or contemporaneous agreements, understandings, representations and statements, oral and written, are merged in this Agreement and shall be of no further force or effect. Each party is entering this Agreement based solely upon the representations set forth herein and upon each party's own independent investigation of any and all facts such party deems material. 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. 609. No Real Estate Brokerage Commissions. The CDC -HA and Developer each represent and warrant to the other that no broker or finder is entitled to any commission or finder's fee in connection with Developer's acquisition of the Kimball Leasehold or the Morgan Leasehold from the CDC -HA. The parties agree to defend and hold harmless the other party from any claim to any such commission or fee from any broker, agent or finder with respect to this Agreement which is payable by such party. 610. Attorneys' Fees. 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 reasonable 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. 611. Titles and Captions. Titles and captions are for convenience of reference only and do not define, describe or limit the scope or the intent of this Agreement or of any of its terms. References to section numbers are to sections in this Agreement, unless expressly stated otherwise. 612. Interpretation. As used in this Agreement, masculine, feminine or neuter gender and the singular or plural number shall be deemed to include the others where and when the context 34 so dictates. The word "including" shall be construed as if followed by the words "without limitation." This Agreement shall be interpreted as though prepared jointly by both parties. 613. No Waiver. A waiver by either party of a breach of any of the covenants, conditions or agreements under this Agreement to be performed by the other party shall not be construed as a waiver of any succeeding breach of the same or other covenants, agreements, restrictions or conditions of this Agreement. 614. Modifications. Any amendment, alteration, change or modification of or to this Agreement, in order to become effective, shall be made in writing and in each instance signed on behalf of each party (any amendment, alteration, change or modification of this Agreement on behalf of the CDC -HA, including without limitation changes to the economic terms of this Agreement and its exhibits, shall be made on behalf of the CDC -HA by the Executive Director of the CDC -HA in such Executive Director's sole discretion). 615. Severability. If any term, provision, condition or covenant of this Agreement or its application to any party or circumstances shall be held, to any extent, invalid or unenforceable, the remainder of this Agreement, or the application of the term, provision, condition or covenant to persons or circumstances other than those as to whom or which it is held invalid or unenforceable, shall not be affected, and shall be valid and enforceable to the fullest extent permitted by law. 616. Computation of Time. The time in which any act is to be done under this Agreement is computed by excluding the first day (such as the day escrow opens), and including the last day, unless the last day is a holiday or Saturday or Sunday, and then that day is also excluded. The term "holiday" shall mean all holidays as specified in Section 6700 and 6701 of the California Government Code. If any act is to be done by a particular time during a day, that time shall be Pacific Time Zone time. 617. Legal Advice. Each party represents and warrants to the other the following: they have carefully read this Agreement, and in signing this Agreement, they do so with full knowledge of any right which they may have; they have received independent legal advice from their respective legal counsel as to the matters set forth in this Agreement, or have knowingly chosen not to consult legal counsel as to the matters set forth in this Agreement; and, they have freely signed this Agreement without any reliance upon any agreement, promise, statement or representation by or on behalf of the other party, or their respective agents, employees, or attorneys, except as specifically set forth in this Agreement, and without duress or coercion, whether economic or otherwise. 618. Time of Essence. Time is expressly made of the essence with respect to the performance by the CDC -HA and Developer of each and every obligation and condition of this Agreement. 619. Cooperation. Each party agrees to cooperate with the other in this transaction and, in that regard, to sign any and all documents which may be reasonably necessary, helpful, or appropriate to carry out the purposes and intent of this Agreement including, but not limited to, releases or additional agreements. 35 620. Conflicts of Interest. No member, official or employee of the City or the CDC -HA shall have any personal interest, direct or indirect, in this Agreement, nor shall any such member, official or employee participate in any decision relating to the Agreement which affects his personal interests or the interests of any corporation, partnership or association in which he is directly or indirectly interested. 621. 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. 622. Applicable Law. The laws of the State of California shall govern the interpretation and enforcement of this Agreement. 623. Authority to Sign. 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 CDC -HA 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 hereto have caused this Agreement to be executed as of the date first written above. CDC -HA: Community Development Commission -Housing Authority of the City of National City By Leslie Deese, Executive Director APPROVED AS TO FORM: Angil P Morris -Jones C-HA General Counsel By: Roberto Contreras Deputy CDC -HA General Counsel [SIGNATURES CONTINUED ON FOLLOWING PAGE] 36 MORGAN DEVELOPER: MORGAN TOWER HOUSING ASSOCIATES, L.P., a California limited partnership By: CHW Morgan Development LLC, Its: managing general partner By: Community HousingWorks Its: sole member and manager By: Print Nam Its: ilson Senior Vice President By: Mercy Morgan Development LLC Its administrative general partner By: Mercy Housing Calwest Its: sole member and manager By: Print Name: Ed Holder Its: Regional Vice President of Real Estate Development [SIGNATURES CONTINUED ON FOLLOWING PAGE] MORGAN DEVELOPER: MORGAN TOWER HOUSING ASSOCIATES, L.P., a California limited partnership By: CHW Morgan Development LLC, Its: managing general partner By: Community HousingWorks Its: sole member and manager By: Print Name: Anne B. Wilson Its: Senior Vice President By: Mercy Morgan Development LLC Its administrative general partner By: Mercy Housing Calwest Its: sole member and manager By: Print Name: Its: Regional Vice President of Real Estate Development [SIGNATURES CONTINUED ON FOLLOWING PAGE] KIMBALL DEVELOPER: KIMBALL TOWER HOUSING ASSOCIATES, L.P., a California limited partnership By: CHW Kimball Development LLC, Its: managing general partner By: Community HousingWorks Its: sole member manager By: Print Name: Its: . Wilson Senior Vice President By: Mercy Kimball Development LLC Its administrative general partner By: Mercy Housing Calwest Its: sole member and manager By: Print Name: Ed Holder Its: Regional Vice President of Real Estate Development KIMBALL DEVELOPER: KIMBALL TOWER HOUSING ASSOCIATES, L.P., a California limited partnership By: CHW Kimball Development LLC, Its: managing general partner By: Community HousingWorks Its: sole member and manager By: Print Name: Anne B. Wilson Its: Senior Vice President By: Mercy Kimball Development LLC Its administrative general partner By: Mercy Housing Calwest Its: sole member and manager By: Print Name: Ed Holder Its: Regional Vice President of Real Estate Development EXHIBIT A Kimball Property Legal Description The land referred to herein is situated in the State of California, County of San Diego and described as follows: Lot 2 of Center City Project, in the City of National City, County of San Diego, State of California, according to Map thereof No. 8807, filed in the Office of the County Recorder of San Diego County, February 24, 1978. APN: 560-410-05-00 39 EXHIBIT B Morgan Property Legal Description The land referred to herein is situated in the State of California, County of San Diego and described as follows: Lot 1 of Center City Project, in the City of National City, County of San Diego, State of California, according to Map thereof No. 8807, filed in the Office of the County Recorder of San Diego County, February 24, 1978. APN: 560-410-04-00 40 RESOLUTION NO. 2018 — 66 RESOLUTION OF THE COMMUNITY DEVELOPMENT COMMISSION -HOUSING AUTHORITY OF THE CITY OF NATIONAL CITY AUTHORIZING THE EXECUTIVE DIRECTOR TO EXECUTE A DISPOSITION AND DEVELOPMENT AGREEMENT WITH KIMBALL TOWER HOUSING ASSOCIATES, L.P., AND MORGAN TOWER HOUSING ASSOCIATES, L.P., FOR THE RECAPITALIZATION AND REHABILITATION OF A 151-UNIT AFFORDABLE SENIOR HOUSING TOWER, KNOWN AS KIMBALL TOWER, LOCATED AT 1317 "D" AVENUE, AND A 152-UNIT AFFORDABLE SENIOR HOUSING TOWER, KNOWN AS MORGAN TOWER, WHICH INCLUDES THE GEORGE H. WATERS NUTRITION CENTER, LOCATED AT 1415 "D" AVENUE IN NATIONAL CITY WHEREAS, the Community Development Commission -Housing Authority of the City of National City ("CDC -HA") owns the improvements commonly known as the "Kimball Tower" and that certain real property located at 1317 D Avenue (APN No. 560-410-05-00) in the City of National City (the "Kimball Property"); and WHEREAS, the CDC -HA also owns the improvements commonly known as the "Morgan Tower" and that certain real property located at 1415 "D" Avenue (APN No. 560-410- 04-00) in the City of National City (the "Morgan Property"); and WHEREAS, as the result of a competitive request for qualifications and request for proposals process, Community HousingWorks ("CHW"), a California nonprofit public benefit corporation, and Mercy Housing California ("Mercy"), a California nonprofit public benefit corporation entered into an Exclusive Negotiation Agreement on December 19, 2017 with the CDC -HA for the rehabilitation and recapitalization of the Kimball Property and the Morgan Property; and WHEREAS, CHW and Mercy have formed two limited partnerships named Morgan Tower Housing Associates, L.P., a California limited partnership ("Morgan Developer"), and Kimball Tower Housing Associates, L.P., a California limited partnership ("Kimball Developer") to legally execute the Disposition and Development Agreement (the "Agreement") in order to recapitalize and rehabilitate Morgan and Kimball Tower using Low -Income Housing Tax Credits; and WHEREAS, the CDC -HA , the Kimball Developer, and the Morgan Developer desire by the Agreement to establish conditions for: (i) the CDC -HA to ground lease the Kimball Property to the Kimball Developer; (ii) the CDC -HA to sell fee title to the Kimball Tower to the Kimball Developer; (iii) the Kimball Developer to recapitalize and rehabilitate the Kimball Tower; (iv) the CDC -HA to ground lease the Morgan Property to the Morgan Developer; (v) the CDC - HA to sell fee title to the Morgan Tower to the Morgan Developer; and (vi) the Morgan Developer to recapitalize and rehabilitate the Morgan Tower; and WHEREAS, the scope of the Agreement is categorically exempt from CEQA review by CCR Title 14 Section 15301 Existing Facilities; and WHEREAS as referenced in the Agreement, Kimball Developer shall receive from CDC -HA and/or H UD (as applicable) a Section 8 Housing Assistance Payment Agreement with a minimum term of twenty (20) years to provide Section 8 Project Based Vouchers or Section 8 Project Based Rental Assistance for one hundred forty-nine (149) units at the Kimball Tower on terms acceptable to the Kimball Developer in its sole and absolute discretion. Resolution No. 2018 — 66 Page Two WHEREAS, the CDC -HA will complete a NEPA Environmental Assessment for the U.S. Department of HUD before Section 8 Project -Based Vouchers are released by the CDC -HA and/or HUD (as applicable) to the Kimball Developer. NOW, THEREFORE, BE IT RESOLVED that the Community Development Commission -Housing Authority of the City of National City hereby authorizes the Executive Director to execute a Disposition and Development Agreement with Kimball Tower Housing Associates, L.P., and Morgan Tower Housing Associates, L.P., for the recapitalization and rehabilitation of a 151-unit affordable senior housing tower, known as Kimball Tower, located at 1317 "D" Avenue, and a 152-unit affordable senior housing tower, known as Morgan Tower, which includes the George H. Waters Nutrition Center, located at 1415 "D" Avenue in National City. Said Disposition and Development Agreement is on file in the office of the City Clerk. PASSED and ADOPTED this 19th day of June, 201 . on Morrison, Chairman ATTEST: Leslie Deese, Secretary APPROVED AS TO FORM: Morris -Jones ral Counsel Passed and adopted by the Community Development Commission -Housing Authority of the City of National City, California, on June 19, 2018 by the following vote, to -wit: Ayes: Commissioners Mendivil, Morrison, Rios, Sotelo-Solis. Nays: Cano. Absent: None. Abstain: None. AUTHENTICATED BY: RON MORRISON Chairman, Housing Authority fr...1,,'-__, Secretary, Housing Authority By: Deputy I HEREBY CERTIFY that the above and foregoing is a full, true and correct copy of RESOLUTION NO. 2017-66 of the Community Development Commission -Housing Authority of the City of National City, California, passed and adopted on June 19, 2018. Secretary, Housing Authority By: Deputy ( CITY OF NATIONAL CITY, CALIFORNIA COMMUNITY DEVELOPMENT COMMISSION -HOUSING AUTHORITY COUNCIL AGENDA STATEMENT EETING DATE: June 19, 2018 AGENDA ITEM NO. 47 ITEM TITLE: Resolution of the Community Development Commission -Housing Authority of the City of National City authorizing the Executive Director to execute a Disposition and Development Agreement with Kimball Tower Housing Associates, L.P., and Morgan Tower Housing Associates, L.P., for the recapitalization and rehabilitation of a 151-unit affordable senior housing tower, known as Kimball Tower, located at 1317 "D" Avenue; and a 152-unit affordable senior housing tower, known as Morgan Tower, which includes the George H. Waters Nutrition Center, located at 1415 "D" Avenue in National City. PREPARED BY: DEPARTMENT: Carlos Aguirre, Acting Director of Housing and Economic Development PHONE: 619-336-4391 EXPLANATION: See Attachment No. 1 for further explanation. APPROVED BY: Housing & Economic lopment FINANCIAL STATEMENT: ACCOUNT NO. See Attachment No. 1 for a financial statement. ENVIRONMENTAL REVIEW: APPROVED: ---(4'4 APPROVED: Finance MIS The Project is categorically exempt from CEQA review by CCR Title 14 Section 15301 Existing Facilities. The CDC -Housing Authority will complete a NEPA Environmental Assessment for the U.S. Department of HUD before Section 8 project -based voucher funds are released by HUD for Kimball Tower. ORDINANCE: INTRODUCTION: FINAL ADOPTION: STAFF RECOMMENDATION: Adopt the Resolution. BOARD / COMMISSION RECOMMENDATION: n/a kTTACHMENTS: 1. Staff Report 2. Disposition and Development Agreement 3. Financing Structure and Projections 4. KMA Analysis of Financing Structure and Projections 5. Resolution solurtrft -Po. 'id'- 4,4 14A Attachment No. 1 COMMUNITY DEVELOPMENT COMMISSION -HOUSING AUTHORITY OF THE CITY OF NATIONAL CITY STAFF REPORT June 19, 2018 Agenda Item Resolution of the Community Development Commission -Housing Authority of the City of National City authorizing the Executive Director to execute a Disposition and Development Agreement with Kimball Tower Housing Associates, L.P., and Morgan Tower Housing Associates, L.P., for the recapitalization and rehabilitation of a 151-unit affordable senior housing tower, known as Kimball Tower, located at 1317 "D" Avenue; and a 152-unit affordable senior housing tower, known as Morgan Tower, which includes the George H. Waters Nutrition Center, located at 1415 "D" Avenue in National City. Background Kimball and Morgan Senior Towers ("Towers") are located in central National City, within the Kimball Community. The two nine -story Towers are located on D Avenue between Kimball Way and 15th Street. Morgan Senior Tower is a 152-unit affordable senior residential property built in 1978. Kimball Senior Tower is a 151-unit affordable senior residential property completed in 1986. On March 24, 2016, the CDC- HA issued a Request for Qualifications ("RFQ") to consider qualified development teams for the recapitalization and rehabilitation of Kimball and Morgan Towers ("Project"). The RFQ incorporated a Selection Committee which gave the highest score to the development team composed of Community HousingWorks ("CHW") and Mercy Housing California ("Mercy"). The score was based on an evaluation of the proposal submitted and a presentation made to the Selection Committee by each development team that submitted a responsive proposal. On October 4, 2016, City staff provided a recommendation to the CDC -HA based on the scoring of the Selection Committee. However, the CDC -HA Board of Commissioners ("CDC -HA Board") requested the opportunity to also evaluate the verbal presentations given to the Selection Committee before making a final decision. Five development teams delivered presentations to the CDC -HA Board on October 25, 2016. City staff returned on December 6, 2016 and carried forward the recommendation made on October 4, 2016 to enter into an Exclusive Negotiation Agreement with CHW and Mercy. However, in consideration of the presentations made by all five development teams, the CDC -HA Board suggested further review of each development team's financial proposals to help make a final selection. City staff informed the CDC -HA Board that a more detailed financial review of the proposals would be a lengthy and expensive process, and could impact the CDC-HA's ability to capitalize on favorable interest rates and tax credit pricing available at the time. At the CDC -HA meeting on December 6, 2016, several of the development teams stated that they would be interested in funding their participation in a Request for Proposals ("REP") process that would allow for a fair comparison of their financial proposals. Based on the developers' interest to fund 1 Attachment No. 1 an RFP process, the CDC -HA Board directed City staff to provide approaches for implementing an RFP. On February 7, 2017, the CDC -HA Board compared several approaches to further evaluate the financial models proposed by each development team. The CDC -HA Board then directed City staff to have Keyser Marston and Associates ("KMA") implement the RFP. Four development teams agreed to participate in the RFP and equally divided the cost for KMA to fully implement the RFP. On June 30, 2017, KMA issued the RFP and, based on KMA's extensive analysis and key findings, City staff recommended the selection of the team composed of CHW and Mercy as the Developer ("Developer") for the Project. On December 5, 2017 the CDC -HA Board selected the Developer to enter into an Exclusive Negotiating Agreement ("ENA") to begin the due diligence necessary to negotiate a Disposition and Development Agreement ("DDA") with the CDC -HA for the Project. Exclusive Negotiations Since their receipt of the fully executed ENA on December 19, 2017, the Developer has made extensive progress on due diligence and estimating the actual cost of rehabilitation; has begun to secure the appropriate subsidies through the U.S. Department of Housing and Urban Development ("HUD") and develop a solid financing approach; has worked in hand in hand with the current property manager to ensure a smooth transition; and has conducted extensive resident outreach to duly inform residents of the proposed rehabilitation. Below is a summary of the progress made by the Developer during exclusive negotiations to move the Project forward: Due Diligence, Rehab Scope and Cost Estimates • Development team, architect, general contractor and their subcontractors walked every apartment, mechanical and maintenance areas, and common areas, January 24 - February 7, 2018. The condition of each component of the units was ranked on a score of 1-5, for consideration of what items are included in a proposed rehabilitation scope. ■ The following specialty reports were engaged; each consultant walked units or relevant areas of buildings: o Engaged mechanical engineer, plumbing engineer, electrical engineer, and structural and seismic engineer teams to assess the systems and seismic performance. o Engaged a Physical Needs Assessment ("PNA") by independent architect specializing in multifamily renovation. o Conducted consultant assessment and testing of plumbing and waste systems, including lab analysis of pipes, and review and testing of isolation valves for planning rehab. o Engaged elevator consultant review of the vertical transport system. o Engaged energy modeling by HERS rater/ energy consultant, including evaluation of window systems, HVAC systems, etc. o Reviewed utility bills for 12+ months regarding assessment of water and energy usage. o A design -build renewable energy (solar thermal) consultant/provider reviewed roof, gas usage, and provided a preliminary design and pricing for a roof -mounted solar thermal system to preheat hot water used in domestic water and hydronic space heating. 2 Attachment No. 1 • Held 4 due diligence meetings with the entire design and construction team prior, during and at conclusion of due diligence walks, followed by a full design meeting on common area rehab for renovation and amenities. • Engaged civil engineer and surveyor to provide an ALTA survey with new topography and provide a review of the wet utility layout. • With architect and civil engineer, assessed parking layouts and possible revisions of the parking lots including trash enclosures, increased Americans with Disabilities Act ("ADA") spaces, etc. • Met with architect and landscape architect to discuss ground floor amenity spaces and landscape options. ■ Environmental consultants sample tested for asbestos containing materials and lead based paint in units, common areas, and systems to determine handling and disposal of such during rehab. ■ Architect and restaurant consultant met with manager of George H. Waters Nutrition Center ("Nutrition Center") on February 26, 2018 to assess restaurant needs. • Architect and development team met with City's Building and Fire Departments on March 6, 2018 regarding city requirements including ADA upgrades, etc. • Reviewed operating maintenance contracts, expenses, and rent roll of resident incomes and Section 8 voucher / contract status. ■ General contractor provided estimated costs of rehabilitation and the Developer reviewed the cost estimates with construction manager experienced in high rise multifamily renovation. • Development team prioritized potential scope into ABC priorities, and provided such scope and cost estimates to city staff on March 21, 2018. ■ Refined conceptual landscape design. • Consulted with energy consultant on window efficiency and potential for renewables with rebates. • Civil engineer completed an American Land Title Association ("ALTA") survey, ADA map, and trash enclosure circulation improvements. • Received ALTA which identified that both properties were in a flood zone requiring flood insurance. • Civil engineer met with City's storm water consultant on possible impacts on properties • Finalized rehab scope priorities and refined hard construction numbers with general contractor. Financing / HUD / Legal • Filed organization documents with the CA Secretary of State, created new legal entities (tax credit limited partnerships) for Kimball and Morgan Towers. • Morgan: Development team, together with their financial consultant, counsel for HUD and city staff, met with HUD project manager in Los Angeles on January 16, 2018 concerning new 20-year contract. Engaged Rent Comparability Study, prepared full HUD project -based Section 8 contract package request to HUD on February 5, 2018. Requested a HUD Comfort Letter. The Comfort Letter serves as a letter of intent to work with the Developer on a new project -based Section 8 contract. • Kimball: Worked with legal counsel, city staff and HUD to work to bring a HUD project - based rental subsidy contract for Kimball in order to facilitate more favorable financing long term. • AHP Applications on March 1, 2018: Prepared and submitted AHP (Federal Home Loan Bank program loan/grant) applications of $1.5 million each for Kimball and Morgan 3 Attachment No. 1 Towers. Scoring and award will not be known until late June 2018; if unsuccessful. the Developer would reapply in the March 2019 window. • Met with 5+ potential investors and lenders in addition to those providing letters in the RFP, received updated tax credit pricing and interest rates (i.e., post passage of the federal tax cuts). • Provided city staff outline term sheet consistent with the terms we provided in Response to RFP, for use by the CDC -HA in their drafting of the DDA. • Provided city staff updated pro forma with rehab cost estimates, updated interest rates, etc. on March 28, 2018 for discussion associated with DDA. • Received HUD Comfort Letter for Morgan for a 20-year HUD section 8 contract at rents higher than proposed in RFP. • Refined the HUD process for Kimball to obtain the project -based section 8 contract in April and submitted the notice to HUD for a PHA project -based section 8 contract for Kimball Tower. • Consulted with 5+ lenders and investors for updated market terms, fielded questions from AHP funding applications indicating that our scores are at least competitive enough for AHP's secondary review process and updated pro formas with new market financing terms in May. Property Management/ Operations • After being provided with Morgan's failing REAC inspection score due to physical condition of the property, CHW with a third party consultant, contested the report and had HUD adjust the score to passing grade. • Completed a 3rd party compliance review of select tenant files. • Obtained flood insurance quotes from insurance broker. Resident Outreach and Communication • The Developer sent an introduction letter of the development team to all residents of Kimball and Morgan in January. • Held a total of 10 introduction meetings with residents of Kimball and Morgan at the Nutrition Center and in the Kimball library on January 30-31, February 1, March 1, and March 22. Meetings in Nutrition Center included city staff; all meetings were facilitated with an interpreter and written bilingual Frequently Asked Questions (FAQ). • Set up a special call -in phone line for resident questions. • Held 4 listening sessions with residents in April at Kimball and Morgan Towers for resident ideas and questions on the proposed rehabilitation scope. The meetings are planned to continue periodically through close of financing for the rehabilitation with residents to obtain their ideas about the rehabilitation scope and vision for their community. Disposition and Development Agreement The proposed Disposition and Development Agreement ("DDA"), included as Attachment No. 2 of this staff report, comprehensively addresses all components of the Project including the transfer of property to the Developer and the terms of a 99-year ground lease, escrow and the conditions for closing and sale of the property, approvals for the scope of rehabilitation and financing structure, project budget, insurance and indemnification, project monitoring, and maintenance. 4 Attachment No. 1 and compliance with all applicable laws. The Developer has created two legal entities in the form of Limited Partnerships as required for tax credit financing. The Developer will enter the DDA under Kimball Tower Housing Associates, L.P. and Morgan Tower Housing Associates, L.P. Financing Proposal and Projections The financing proposal and projections for Kimball and Morgan Towers are included as Attachment No. 3 of this Staff Report. KMA will provide a verbal presentation explaining any variations between the Developer's response to the RFP and their current financial proposals for each Tower during the June 19, 2018 CDC -HA meeting. KMA's presentation slides are included as Attachment No. 4 of this staff report. Upon further consideration of current HUD rents and other current financing terms and conditions, the Developer determined that using 4% tax credits would yield a better return to the CDC -HA with all else being equal. A financing scenario using 9% tax credit financing has been included in Attachment No. 3 for comparison and is for reference only. Kimball Tower Financing Consistent with the RFP, the limited partnership will acquire a 99-year ground lease of the land to the Developer, and fee ownership of the improvements by the Developer. The sale of the improvements by the CDC -HA to the Developer would provide approximately $11,051,011 in cash to the CDC -HA at closing. The project is structured to utilize non-competitive (4%) tax credits, with additional bond proceeds, a General Partner contribution above $2.5 million in developer fee, and gap funding from the Affordable Housing Program ("AHP") and a seller carry -back note. The CDC -HA seller carry -back loan note in the amount of $24,914,733 that would be paid back from 50% of residual receipts from Kimball Tower with any outstanding principal and interest due in 55 years. The CDC -HA also plans to commit up to 149 Section 8 project -based voucher. Currently, the CDC -HA has committed 145 tenant -based vouchers to provide assistance to the tenant at Kimball Tower. Morgan Tower Financing Consistent with the RFP, the limited partnership will acquire a 99-year ground lease of the land, and a fee ownership of the improvements, including the Nutrition Center. The sale of the improvements by the CDC -HA to the Developer would provide approximately $17,460,353 in cash to the CDC -HA at closing. The project is structured to utilize non-competitive (4%) tax credits, with additional bond proceeds, a General Partner contribution above the $2.0 million in developer fee, and gap funding from AHP and a seller carry -back note. The CDC -HA seller carry -back loan note in the amount of $19,310,467 that would be paid back from 50% of residual receipts from Morgan Tower with any outstanding principal and interest due in 55 years. The property has an expiring FHA 231 loan that will be repaid at close and an existing project -based section 8 contract from HUD. The Developer submitted an application to HUD for a new 20-year contract under Mark Up to Market in February 2018 and received the Comfort Letter from HUD in April 2018. 5 Attachment No. 1 Nutrition Center Financial Support The financial plan includes a triple net lease of the Nutrition Center for $1 year by the City; and the City will continue to operate the Nutrition Center. The current financing proposal would provide a hard payment from both Towers to the City to offset the cost to operate the Nutrition Center. The total annual hard payment to the City for the Nutrition Center would be $475,000. Scope of Rehabilitation Kimball Tower Kimball Tower's scope of rehabilitation consists of upgrades to the common areas, replacements/upgrades to major systems include: elevators, fire safety system, roof replacement. window replacement, balcony waterproofing & railings, mailboxes to meet ADA accessibility standards, air handlers and exhaust fans, and energy and water efficiency retrofits. All units will undergo complete renovation of bathrooms and kitchens and 10% of the units will be retrofitted to ADA accessibility standards per California tax credit program requirements. The rehabilitation is subject to Davis Bacon commercial prevailing wage due to local housing authority project -based contract. Also, the property is in a flood zone, which requires flood insurance. Morgan Tower Morgan Tower's scope of rehabilitation consists of upgrades to the common areas, replacements/upgrades to major systems include: elevators, boilers, fire safety system, roof replacement, window replacement, balcony waterproofing & railings, mailboxes to meet ADA accessibility standards, air handlers and exhaust fans, and energy and water efficiency retrofits. All units will undergo complete renovation of bathrooms and kitchens and 10% of the units will be retrofitted to ADA accessibility standards per California tax credit program requirements. Also, the property is in a flood zone, which requires flood insurance. The scope includes a complete rehabilitation of the Nutrition Center facility. Staff Recommendation With the Housing Assistance Program Section 8 project -based Agreement ("HAP") that has provided the very -low income rent at Morgan Tower will expire on August 31, 2019 and given the need to address major capital needs for both Morgan and Kimball Towers and the Nutrition Center, the CDC -HA is presently facing a critical path for the recapitalization and rehabilitation of Morgan and Kimball Towers. In the last six months the Developer has been able to provide a well leveraged recapitalization plan and a comprehensive scope of rehabilitation that will ensure the physical and financial stability for the Towers and City -operated Nutrition Center and that also provides a financial return to the CDC -HA that can be leveraged on additional housing projects and housing -related programs. City staff fully recommends that the CDC -HA Board authorize the Executive Director to execute the proposed Disposition and Development Agreement with the Developer. 6 Attachment No. 2 DISPOSITION AND DEVELOPMENT AGREEMENT By and Between the COMMUNITY DEVELOPMENT COMMISSION - HOUSING AUTHORITY OF THE CITY OF NATIONAL CITY and KIMBALL TOWER HOUSING ASSOCIATES, L.P. and MORGAN TOWER HOUSING ASSOCIATES, L.P. (Kimball and Morgan Towers) 1 Attachment No 2 DISPOSITION AND DEVELOPMENT AGREEMENT (Kimball and Morgan Towers) THIS DISPOSITION AND DEVELOPMENT AGREEMENT ("Agreement") is dated as of the day of , 2018 by and between the Community Development Commission -Housing Authority of the City of National City ("CDC -HA"), and MORGAN TOWER HOUSING ASSOCIATES, L.P., a California limited partnership ("Morgan Developer"), and KIMBALL TOWER HOUSING ASSOCIATES, L.P., a California limited partnership ("Kimball Developer"). The Morgan Developer and the Kimball Developer shall be referred to herein collectively as the "Developer." RECITALS A. The CDC -HA owns the improvements commonly known as the "Kimball Tower" and that certain real property located at 1317 D Avenue in the City of National City, which is more particularly defined and set forth on Exhibit A hereto (the "Kimball Property"). The CDC -HA also owns the improvements commonly known as the "Morgan Tower" and that certain real property located at 1415 D Avenue in the City of National City, which is more particularly defined and set forth on Exhibit B hereto (the "Morgan Property"). B. CDC -HA and Developer desire by this Agreement to establish conditions for: (i) the CDC -HA to ground lease the Kimball Property to the Kimball Developer; (ii) the CDC -HA to sell fee title to the Kimball Tower to the Kimball Developer; (iii) the Kimball Developer to recapitalize and rehabilitate the Kimball Tower; (iv) the CDC -HA to ground lease the Morgan Property to the Morgan Developer; (v) the CDC -HA to sell fee title to the Morgan Tower to the Morgan Developer; and (vi) the Morgan Developer to recapitalize and rehabilitate the Morgan Tower. NOW, THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged, CDC -HA and Developer hereby agree as follows: 100. Definitions. "Affordable Units" means collectively, the one hundred fifty-one (151) rental dwelling units in the Morgan Tower and the one hundred forty-nine (149) rental dwelling units in the Kimball Tower whose occupancy is restricted to Very Low Income Households and whose monthly rental rates are restricted to the Maximum Rents pursuant to, and as set forth in more detail in, the Declaration. In addition, there will be one (1) manager's unit in the Morgan Tower and two (2) managers' units in the Kimball Tower. "Agreement" means this Disposition and Development Agreement between CDC -HA and Developer. "AHP Loan" has the meaning set forth in Section 307.2(ii). 2 Attachment No. 2 "Area Median Income" shall mean the area median income defined by the Department of Housing and Urban Development (HUD), and published by the California Tax Credit Allocation Committee (TCAC), as the then current area median income for the San Diego -Carlsbad Metropolitan Statistical Area, established periodically by HUD and published in the Federal Register, as adjusted for family size. In the event HUD and/or TCAC ceases to publish an established area median income as aforesaid, CDC -HA may, in its sole discretion, use any other reasonably comparable method of computing area median income. "CDC -HA" means the Community Development Commission -Housing Authority of the City of National City. "City" means the City of National City, a California municipal corporation. "Closing" means with respect to each of the Kimball Tower and the Morgan Tower, the close of Escrow for the financing for rehabilitation of the Kimball Tower and the Morgan Tower respectively. "Closing Deadline for the Kimball Tower" means June 30, 2020. "Closing Deadline for the Morgan Tower" means June 30, 2020. "Construction Deed of Trust" means a deed of trust recorded against the Kimball Leasehold or the Morgan Leasehold, as applicable, for purposes of obtaining rehabilitation financing for the Kimball Tower or the Morgan Tower respectively. All deeds of trust, mortgages and other instruments securing or evidencing the loan secured by the Construction Deed of Trust shall be recorded against the Kimball Leasehold or the Morgan Leasehold only. Recordation of any deed of trust, mortgage or other instrument securing or evidencing the fee interest in the Property shall be a Default under this Agreement. "Declaration" shall mean each of the two (2) declarations of covenants, conditions and restrictions (one recorded against the Kimball Leasehold and another recorded against the Morgan Leasehold), in forms agreed to by the Developer and CDC -HA, to be executed by Developer and recorded against the Kimball Leasehold or the Morgan Leasehold, as applicable, at the Closings for each of the Kimball Tower and the Morgan Tower. "Default" means the failure of a party to perform any action or covenant required by this Agreement within the time periods provided herein following notice and opportunity to cure, as set forth in Section 501 hereof. "Developer" means the Kimball Developer and the Morgan Developer. Where the term Developer is used herein, such term shall include any permitted nominee, assignee or successor in interest as herein provided. In all instances hereunder, all rights, duties and obligations of the Kimball Developer hereunder with respect to the Kimball Property, Kimball Leasehold and Kimball Tower shall be the rights, duties and obligations solely of the Kimball Developer (and not of the Morgan Developer), and all rights, duties and obligations of the Morgan Developer hereunder with respect to the Morgan Property, Morgan Leasehold and Morgan Tower shall be 3 Attachment No 2 the rights, duties and obligations solely of the Morgan Developer (and not of the Kimball Developer), it being the intent of the parties hereto that the rights, duties and obligations of the Kimball Developer and the Morgan shall not be cross -defaulted. "Developer Deed of Trust" means each of the two (2) deeds of trust (one recorded against the Kimball Leasehold and another recorded against the Morgan Leasehold), in forms agreed to by the Developer and CDC -HA, to be executed by Developer and recorded against the Kimball Leasehold or the Morgan Leasehold, as applicable, at the Closings for each of the Kimball Tower and the Morgan Tower. Provided all conditions of this Agreement are satisfied by the Closing Deadline for the Kimball Tower or the Closing Deadline for the Morgan Tower, as applicable, each Developer Deed of Trust may be subordinated to the Construction Deed of Trust and Permanent Deed of Trust. Any such subordination shall be in a form acceptable to the CDC -HA in its reasonable discretion. "Environmental Indemnity" shall mean each of the two (2) unsecured environmental indemnity agreements (one for the Kimball Tower and another for the Morgan Tower), in forms agreed to by the Developer and CDC -HA, to be executed by Developer and the CDC -HA at the Closings for each of the Kimball Tower and the Morgan Tower. "Escrow" means the escrow depository and disbursement services to be performed by Escrow Agent pursuant to the provisions of this Agreement. "Escrow Agent" means Stewart Title Company or another title insurance company mutually selected by the parties hereto. "Escrow Instructions" shall mean each of the escrow instructions (one for the Kimball Leasehold and another for the Morgan Leasehold), Developer and CDC -HA, to be executed by Developer and the CDC -HA at the Closings for each of the Kimball Tower and the Morgan Tower. "Existing Over -Income Units" has the meaning set forth in Section 401. "Final Project Budget" has the meaning set forth in Section 307.2. "Governmental Requirements" means all laws, ordinances, statutes, codes, rules, regulations, orders and decrees of the United States, the state, the county, the City, or any other political subdivision in which the Property is located, and of any other political subdivision, agency or instrumentality exercising jurisdiction over CDC -HA, Developer or the Property. "Ground Lease" means each of the two (2) 99-year ground leases (one for the Kimball Property and another for the Morgan Property), in forms agreed to by the Developer and CDC - HA, to be executed by Developer and recorded against the Kimball Property or the Morgan Property, as applicable, at the Closings for each of the Kimball Tower and the Morgan Tower. "Hazardous Materials" means any hazardous or toxic substance, material or waste which is or becomes regulated by any local governmental authority, the State of California or the United State Government. Provided, however, the term "Hazardous Materials" shall not include 4 Attachment No. 2 substances typically used in the ordinary course of developing, operating and maintaining apartment complexes in California or small amounts of chemicals, cleaning agents and the like commonly employed in routine household uses in a manner typical of occupants in other similar properties, provided that such substances are used in compliance with applicable laws. "Initial Project Budget" has the meaning set forth in Section 307.2. "Kimball Deed of Trust" has the meaning set forth in Section 200.1. "Kimball Developer" means Kimball Tower Housing Associates, L.P., a California limited partnership. Where the term Kimball Developer is used herein, such term shall include any permitted nominee, assignee or successor in interest as herein provided. "Kimball Developer Note" means the carryback promissory note, in a form agreed to by the Developer and CDC -HA, to be executed by the Kimball Developer at the Closing for the Kimball Tower. "Kimball Leasehold" means the ground lease interest in the Kimball Property created by the Ground Lease for the Kimball Property. "Kimball Property" means that certain real property generally located at 1317 D Avenue in the City of National City, which is more particularly described on Exhibit A attached hereto. "Kimball Tower" means the 151 unit residential building on the Kimball Property comprised of 149 Affordable Units and two manager's units. "Maximum Rents" shall mean the maximum amount of consideration, of any kind whatsoever, that the Developer may receive for any Affordable Unit, which monthly amount shall not exceed the product of one twelfth (1/12) of thirty percent (30%) times fifty percent (50%) of the then Area Median Income as adjusted for household size appropriate for the unit. "Morgan Commercial Space" means approximately 6,560 square feet on the ground floor of the Morgan Tower, which currently houses the George H. Waters Nutrition Center. "Morgan Deed of Trust" has the meaning set forth in Section 200.2. "Morgan Developer" means Morgan Tower Housing Associates, L.P., a California limited partnership. Where the term Morgan Developer is used herein, such term shall include any permitted nominee, assignee or successor in interest as herein provided. "Morgan Developer Note" means the carryback promissory note, in a form agreed to by the Developer and CDC -HA, to be executed by the Morgan Developer at the Closing for the Morgan Tower. "Morgan Leasehold" means the ground lease interest in the Morgan Property created by the Ground Lease for the Morgan Property. 5 Attachment No. 2 "Morgan Property" means that certain real property generally located at 1415 D Avenue in the City of National City, which is more particularly described on Exhibit B attached hereto. "Morgan Tower" means the 152-unit residential building on the Morgan Property comprised of 151 Affordable Units and one manager's unit and the Morgan Commercial Space. "Permanent Deed of Trust" means a deed of trust recorded against the Kimball Leasehold or the Morgan Leasehold, as applicable, for purposes of obtaining permanently financing the Kimball Tower or the Morgan Tower respectively. All deeds of trust, mortgages and other instruments securing or evidencing the loan secured by the Permanent Deed of Trust shall be recorded against the Kimball Leasehold or the Morgan Leasehold only. Recordation of any deed of trust, mortgage or other instrument securing or evidencing the fee interest in the Property shall be a default under this Agreement. "Permitted Transfer" is defined in Section 603.2, below. "Property" means collectively the real property described on Exhibit A and Exhibit B hereto. "Project Budget.' means collectively the Kimball Project Budget and the Morgan Project Budget. "Purchase Price" shall mean collectively the price for the fee title interest in and to (i) the Kimball Tower set forth in Section 202.1 and (ii) the Morgan Tower set forth in Section 202.2. "Scope of Rehabilitation" means a scope setting forth all rehabilitation and construction work, including without limitation, landscaping, flatwork and similar work, to be done with respect to the Kimball Tower or the Morgan Tower respectively, which is approved by the CDC -HA, which approval shall not be unreasonably withheld, conditioned or delayed. "Security Agreement" shall mean each of the two (2) security agreements (one for the Kimball Tower and another for the Morgan Tower), in forms agreed to by the Developer and CDC - HA, to be executed by the Kimball Developer or the Morgan Developer, as applicable, and CDC - HA at the Closings for each of the Kimball Tower and the Morgan Tower. "TCAC Lease Rider" means the then current form of lease rider prepared by the California Tax Credit Allocation Committee at the time each of Kimball Developer and Morgan Developer enter into their respective Ground Lease. "Very Low Income Household" means persons and families whose income does not exceed fifty percent (50%) of the then current Area Median Income, provided that such persons or families meet the additional requirements set forth in Section 4 of the Agreement Affecting Real Property. 200. Transfer of the Property. 6 Attachment No. 2 201. Ground Lease Terms. 201.1 Kimball Property. Subject to all of the terms and conditions of this Agreement, the CDC -HA shall ground lease the Kimball Property to the Kimball Developer for 99 years for $1.00 per year. CDC -HA acknowledges and agrees that the Kimball Developer will also sign and append the TCAC Lease Rider to the Ground Lease. 201.2 Morgan Property. Subject to all of the terms and conditions of this Agreement, the CDC -HA shall ground lease the Morgan Property to the Morgan Developer for 99 years for $1.00 per year. CDC -HA acknowledges and agrees that the Kimball Developer will also sign and append the TCAC Lease Rider to the Ground Lease. 202. Sale and Financing of the Improvements; Lease of Morgan Commercial Space. 202.1 Kimball Tower Acquisition Loan. CDC -HA has agreed to transfer the Kimball Tower to the Kimball Developer in exchange for a combination of cash and a promissory note ("Kimball Developer Note"). The Kimball Tower Developer previously obtained an appraisal of the Kimball Tower from Colliers International dated as of August 23, 2017 ("Original Kimball Tower Appraisal"). The Kimball Tower Developer has provided a copy of the Original Kimball Tower Appraisal to the CDC -HA. The Kimball Tower Developer shall cause Colliers International to update the Original Kimball Tower Appraisal ("Updated Kimball Tower Appraisal") not more than thirty (30) days prior to submitting the 4% low income housing tax credit application to the California Tax Credit Allocation Committee, using the same methodology which was used to generate the Original Kimball Tower Appraisal, but using updated figures based on interest rates, rental rates, expenses and other amounts known or reasonably estimated at such time. The purchase price ("Kimball Tower Purchase Price") payable from the Kimball Tower Developer to the CDC -HA shall equal the amount set forth in the Updated Kimball Tower Appraisal. The original principal amount of the Kimball Developer Note shall be agreed upon between the Kimball Tower Developer and the CDC -HA prior to the Kimball Tower Closing. The amount of cash payable by the Kimball Tower Developer to the CDC -HA at the Kimball Tower Closing shall equal the Kimball Tower Purchase Price minus the original principal amount of the Kimball Developer Note. The Kimball Developer Note shall be structured as a tax-exempt bond where the California Statewide Communities Development Authority is the issuer, the Kimball Tower Developer is the borrower and the CDC -HA is the bondholder. The Kimball Tower Developer shall make mandatory equal annual payments to the CDC -HA under the Kimball Developer Note, which annual amount shall be agreed upon between the Kimball Tower Developer and the CDC -HA prior to the Kimball Tower Closing. The Kimball Tower Developer, Morgan Tower Developer and the CDC -HA agree that the combined mandatory annual payments to the CDC -HA under the Kimball Developer Note and the Morgan Developer Note shall total $475,000.00. In addition, the Kimball Tower Developer shall make an additional annual payment to the CDC -HA under the Kimball Developer Note in an amount equal to 50% of the Kimball Developer's annual cash flow. The Kimball Tower Developer shall have the right to redeem the bond and refinance the Kimball Developer Note at any time, provided that the Executive Director of the CDC -HA has reasonably approved the same, the Kimball Tower Developer does not receive any cash as a result of the refinancing, the interest rate on the Kimball Developer Note does not 7 Attachment No. 2 decrease and the original principal amount of the refinanced Kimball Developer Note does not exceed the principal amount of the Kimball Developer Note immediately before such refinancing. 202.2 Kimball Tower Limitation of Damages. Kimball Developer's Expenses means an amount equal to the actual and reasonable approved out-of-pocket expenses, including legal expenses, incurred by Kimball Developer with respect to its obligations hereunder ("Kimball Developer's Expenses"). In the event this Agreement is terminated as a result of an Event of Default by the CDC -HA, prior to completion of construction of the rehabilitation of the Kimball Tower, then CDC -HA shall reimburse the Kimball Developer's Expenses through project cash flow in complete satisfaction of all of the CDC-HA's obligations to the Kimball Developer; provided, however, that if the CDC -HA transfers the Kimball Property for a cash purchase price, then the CDC -HA shall use such sale proceeds to reimburse the Kimball Developer's Expenses. The Agency's payment of the Kimball Developer's Expenses shall be in consideration for the Kimball Developer's activities undertaken pursuant to this Agreement. For purposes hereof, Kimball Developer's Expenses shall include only its out-of-pocket costs paid to third parties for fees for financing and governmental applications and processing, appraisals, studies, title reports and related expenses associated with financing, attorneys' fees associated with review of this Agreement and tax credit structuring, and the Plans. Kimball Developer's Expenses shall not include any costs of Kimball Developer's staff, overhead, or other internal costs. The Kimball Developer shall furnish reports to the CDC -HA not less than quarterly summarizing the Kimball Developer's Expenses incurred to date, subject to the review and reasonable approval of the CDC - HA, which approval or disapproval shall be granted within thirty (30) days of the CDC-HA's receipt of such reports. The CDC -HA may request additional documentation from the Kimball Developer which the CDC -HA determines is necessary to complete CDC-HA's review. 202.3 Morgan Tower Acquisition Loan. CDC -HA has agreed to transfer the Morgan Tower to the Morgan Developer in exchange for a combination of cash and a promissory note ("Morgan Developer Note"). The Morgan Tower Developer previously obtained an appraisal of the Morgan Tower from Colliers International dated as of August 23, 2017 ("Original Morgan Tower Appraisal"). The Morgan Tower Developer has provided a copy of the Original Morgan Tower Appraisal to the CDC -HA. The Morgan Tower Developer shall cause Colliers International to update the Original Morgan Tower Appraisal ("Updated Morgan Tower Appraisal") not more than thirty (30) days prior to submitting the 4% low income housing tax credit application to the California Tax Credit Allocation Committee, using the same methodology which was used to generate the Original Morgan Tower Appraisal, but using updated figures based on interest rates, rental rates, expenses and other amounts known or reasonably estimated at such time. The purchase price ("Morgan Tower Purchase Price") payable from the Morgan Tower Developer to the CDC -HA shall equal the amount set forth in the Updated Morgan Tower Appraisal. The original principal amount of the Morgan Developer Note shall be agreed upon between the Morgan Tower Developer and the CDC -HA prior to the Morgan Tower Closing. The amount of cash payable by the Morgan Tower Developer to the CDC -HA at the Morgan Tower Closing shall equal the Morgan Tower Purchase Price minus the original principal amount of the Kimball Developer Note. The Morgan Tower Developer shall make mandatory equal annual payments to the CDC -HA under the Morgan Developer Note, which annual amount shall be agreed upon between the Morgan Tower Developer and the CDC -HA prior to the Morgan Tower Closing. The Kimball Tower Developer, Morgan Tower Developer and the CDC -HA agree that the 8 Attachment No. 2 combined mandatory annual payments to the CDC -HA under the Kimball Developer Note and the Morgan Developer Note shall total $475,000.00. In addition, the Morgan Tower Developer shall make an additional annual payment to the CDC -HA under the Morgan Developer Note in an amount equal to 50% of the Morgan Developer's annual cash flow. 202.4 Morgan Tower Limitation on Damages. Kimball Developer's Expenses means an amount equal to the actual and reasonable approved out-of-pocket expenses, including legal expenses, incurred by Morgan Developer with respect to its obligations hereunder ("Morgan Developer's Expenses"). In the event this Agreement is terminated as a result of an Event of Default by the CDC -HA, prior to completion of construction of the rehabilitation of the Morgan Tower, then CDC -HA shall reimburse the Morgan Developer's Expenses through project cash flow in complete satisfaction of all of the CDC -HA' s obligations to the Kimball Developer; provided, however, that if the CDC -HA transfers the Morgan Property for a cash purchase price, then the CDC -HA shall use such sale proceeds to reimburse the Morgan Developer's Expenses. The Agency's payment of the Morgan Developer's Expenses shall be in consideration for the Morgan Developer's activities undertaken pursuant to this Agreement. For purposes hereof, Morgan Developer's Expenses shall include only its out-of-pocket costs paid to third parties for fees for financing and governmental applications and processing, appraisals, studies, title reports and related expenses associated with financing, attorneys' fees associated with review of this Agreement and tax credit structuring, and the Plans. Morgan Developer's Expenses shall not include any costs of Morgan Developer's staff, overhead, or other internal costs. The Morgan Developer shall furnish reports to the CDC -HA not less than quarterly summarizing the Morgan Developer's Expenses incurred to date, subject to the review and reasonable approval of the CDC - HA, which approval or disapproval shall be granted within thirty (30) days of the CDC-HA's receipt of such reports. The CDC -HA may request additional documentation from the Morgan Developer which the CDC -HA determines is necessary to complete CDC-HA's review. 202.5 Morgan Tower Commercial Space. Following the purchase of the Morgan Tower, Morgan Developer will lease the Morgan Commercial Space to National City (the "Morgan Commercial Lease"). The Morgan Commercial Lease will be a triple net lease with a term of ninety-nine (99) years at a rental rate of one dollar ($1.00) per year 203. Escrow. 203.1 Kimball Tower. Prior to the Closing Deadline for the Kimball Tower, the Kimball Developer and the CDC -HA shall open the Escrow with Escrow Agent to facilitate the Closing for the Kimball Tower and the Ground Lease of the Kimball Property to the Kimball Developer and recordation of the various encumbrances on the Kimball Leasehold. The parties will execute the Escrow Instructions prior to the Closing for the Kimball Tower, which shall provide for the order of recordation, distribution of original documents and other provisions customarily contained in escrow instructions. The Kimball Developer shall pay all fees, charges, and costs which arise from Escrow, as well as all documentary transfer taxes due with respect to the Kimball Developer's acquisition of the Kimball Leasehold. 203.2 Morgan Tower. Prior to the Closing Deadline for the Morgan Tower, the Morgan Developer and the CDC -HA shall open the Escrow with Escrow Agent to facilitate the 9 Attachment No. 2 Closing for the Morgan Tower and the Ground Lease of the Morgan Property to the Morgan Developer and recordation of the various encumbrances on the Morgan Leasehold. The parties will execute the Escrow Instructions prior to the Closing for the Morgan Tower, which shall provide for the order of recordation, distribution of original documents and other provisions customarily contained in escrow instructions. The Morgan Developer shall pay all fees, charges, and costs which arise from Escrow, as well as all documentary transfer taxes due with respect to the Morgan Developer's acquisition of the Morgan Leasehold. 204. Conditions to Closing. 204.1 Closing Conditions in Favor of Both Developer and CDC -HA. The Closing for the Kimball Tower and the Closing for the Morgan Tower are each individually conditioned upon satisfaction (or waiver) of each and all of the conditions set forth in this Section 204.1 on or before the Closing Deadline for the Kimball Tower or the Closing Deadline for the Morgan Tower, as applicable. In the event that one or more of the conditions set forth in this Section 204.1, are not satisfied with respect to the Kimball Tower on or before the Closing Deadline for the Kimball Tower, then this Agreement shall be terminated with respect to the Kimball Tower, unless the CDC -HA, the Kimball Tower Developer waive satisfaction of such condition or conditions in writing, in which event the Closing for the Kimball Tower, shall proceed and the parties waive any right to damages or compensation with respect to the unsatisfied condition. In the event the Closing for the Kimball Tower has occurred (or would occur concurrently with the Closing for the Morgan Tower), and then one or more of the conditions set forth in this Section 204.1, are not satisfied with respect to the Morgan Tower on or before the Closing Deadline for the Morgan Tower, then this Agreement shall be terminated with respect to the Morgan Tower, unless the CDC -HA and the Morgan Developer waive satisfaction of such condition or conditions in writing, in which event the Closing for the Morgan Tower, shall proceed and both parties waive any right to damages or compensation with respect to the unsatisfied condition, subject to any extensions which may be agreed upon pursuant to Section 602 herein. To the extent (i) all closing conditions have been met with respect to the Kimball Tower, and the parties have closed on the Kimball Tower, the failure to meet closing conditions on the Morgan Tower shall not be grounds for a termination of this Agreement with respect to the Kimball Tower or any other Agreement by and among Kimball Developer, National City and/or CDC -HA regarding the Kimball Tower; and (ii) all closing conditions have been met with respect to the Morgan Tower, and the parties have closed on the Morgan Tower, the failure to meet closing conditions on the Kimball Tower shall not be grounds for a termination of this Agreement with respect to the Morgan Tower or any other Agreement by and among Morgan Developer, National City and/or CDC -HA regarding the Morgan Tower. (a) Scope of Rehabilitation. Developer shall have obtained approval from the CDC -HA of the Scope of Rehabilitation for the Kimball Tower or the Morgan Tower, as applicable. (b) TCAC Award. (1) Kimball Tower. The Kimball Developer shall have obtained an allocation or reservation of 4% low income housing tax credits from the California Tax 10 Attachment No. 2 Credit Allocation Committee for the Kimball Tower and an accompanying allocation of tax exempt bonds from the California Debt Limit Allocation Committee for the Kimball Tower. The allocation of tax exempt bonds shall be adequately sized to accommodate the Kimball Developer Note. (2) Morgan Tower. The Morgan Developer shall have obtained an allocation or reservation of 4% low income housing tax credits from the California Tax Credit Allocation Committee for the Morgan Tower and an accompanying allocation of tax exempt bonds from the California Debt Limit Allocation Committee for the Morgan Tower. The allocation of tax exempt bonds shall be adequately sized to accommodate the Morgan Developer Note. (c) Performance and Payment Bond. The Kimball Developer or the Morgan Developer, respectively, shall have caused its contractor to post security in the form of a performance and payment bond in an amount and in a form acceptable to the CDC -HA in its reasonable discretion, to assure the completion of the Scope of Rehabilitation. The performance and payment bond shall insure that completion of the Scope of Rehabilitation is timely accomplished, free and clear of mechanic's liens, stop notices and other encumbrances, concerning the provision of material, labor and supplies. Upon a failure of by the Kimball Developer or the Morgan Developer, as applicable, to timely perform its requirements under the terms of this Agreement, the CDC -HA may resort to the performance and payment bond to ensure performance of this Agreement, by either requiring the bonding company, or its designees, to comply with the terms of this Agreement, or at the election of the CDC -HA, by requiring the bonding company to pay all costs necessary for the CDC -HA, to take over and complete the Scope of Rehabilitation at the cost and expense of the bonding company. (d) Construction Contract. The construction contract for the Scope of Rehabilitation for the Kimball Tower or the Morgan Tower, as applicable, acceptable to the CDC -HA, shall have been executed by the Kimball Developer or the Morgan Developer, as applicable, and the general contractor who has been selected by the Kimball Developer or the Morgan Developer to do the work. (e) Entitlements. The Kimball Developer or the Morgan Developer, as applicable shall have secured any and all land use and other entitlements, permits and approvals which may be required for completion of the Scope of Rehabilitation for the Kimball Tower or the Morgan Tower, as applicable. The Kimball Developer or the Morgan Developer, as applicable, shall have paid any and all applicable fees (including, without limitation, communities facility district fees and public facilities fees imposed by the City or any other governmental agency having jurisdiction with respect to the same), or shall pay such fees concurrently with Closing for the Kimball Tower or the Morgan Tower, as applicable. The CDC -HA shall not be responsible in any way for, the processing of Developer's building permits or other permit applications with the City. The execution of this Agreement does not constitute the granting of or a commitment to obtain any required land use permits, entitlements or approvals. 11 Attachment No. 2 (f) Title Policies. Escrow Agent is prepared and irrevocably obligated to cause to be issued: (i) a title policy insuring the Kimball Developer's interest in the Kimball Leasehold or the Morgan Developer's interest in the Morgan Leasehold, as applicable; and (ii) a title policy insuring the CDC-HA's interest in the Developer Deed of Trust for the Kimball Tower or the Morgan Tower, as applicable. (g) Forms of Documents. The CDC -HA and the Kimball Developer or the Morgan Developer, as applicable, have agreed to the forms of the Ground Lease, Declaration, Developer Deed of Trust, Security Agreement, Environmental Indemnity and all other documents reasonably necessary to complete the Closing for the Kimball Tower or the Morgan Tower, as applicable. In addition, with respect to the Morgan Tower only, the CDC -HA and the Morgan Developer have agreed to the form of the Morgan Developer Note. (h) Financing. Concurrently with the Closing for the Kimball Tower or Closing for the Morgan Tower, as applicable, the Kimball Developer or the Morgan Developer, as applicable shall have obtained all financing and lender approvals necessary to acquire Kimball Tower or the Morgan Tower, as applicable, and complete the applicable Scope or Rehabilitation. 204.2 Closing Conditions for the Benefit of the CDC -HA. The CDC-HA's obligation to Close on each of the Kimball Tower and the Morgan Tower are conditioned upon satisfaction (or waiver) of each and all of the conditions set forth in this Section 204.2 on or before the Closing Deadline for the Kimball Tower or the Closing Deadline for the Morgan Tower, as applicable. Any such waiver shall be effective only if the same is (i) expressly waived in writing signed by the CDC -HA or by email from the CDC -HA, and (ii) delivered or emailed to the Developer and Escrow Agent. In the event that one or more of the conditions set forth in this Section 204.2 are not satisfied or expressly waived on or before the Closing Deadline for the Kimball Tower, the CDC -HA (provided the CDC -HA is not in default hereunder) may unilaterally terminate this Agreement by mailing or emailing notice of conditional termination to the Kimball Developer and Escrow Agent. In the event the Closing for the Kimball Tower has occurred (or would occur concurrently with the Closing for the Morgan Tower), and if one or more of the conditions set forth in this Section 204.2 are not satisfied or expressly waived on or before the Closing Deadline for the Morgan Tower, the CDC -HA (provided the CDC -HA is not in default hereunder) may unilaterally terminate this Agreement with respect to the Morgan Tower by mailing or emailing notice of conditional termination to the Morgan Developer and Escrow Agent. After receipt of any such notice of conditional termination, the Kimball Developer or the Morgan Developer, as applicable, shall have five (5) business days to cure any non -satisfaction of a condition or other default specified in the notice of conditional termination. If such matter is satisfied or cured prior to the expiration of such five (5) day period, then the Closing for the Kimball Tower or the Closing for the Morgan Tower, as applicable, shall proceed and the CDC - HA shall be deemed to have waived any right to damages or compensation with respect to the unsatisfied condition. If such matter remains unsatisfied or the default remains uncured after the expiration of such five (5) day period with respect to the Kimball Tower, then this Agreement shall terminate at the close of business on such fifth (5th) day. In the event the Closing for the Kimball Tower has occurred (or would occur concurrently with the Closing for the Morgan Tower), and 12 Attachment No. 2 any such matter remains unsatisfied or the default remains uncured after the expiration of such five (5) day period with respect to the Morgan Tower, then this Agreement shall terminate with respect to the Morgan Tower at the close of business on such fifth (5th) day. Any such termination of this Agreement shall not release the Developer from liability under this Agreement. (a) No Default. The Kimball Developer or the Morgan Developer, as applicable, is not in default in any of its obligations under the terms of this Agreement and all representations and warranties made by the same to the CDC -HA contained herein shall be true and correct in all material respects. (b) Insurance. Developer shall have provided proof of insurance as required by the CDC -HA. (c) Attorneys' Fees. The Developer has paid prior to or will pay concurrently with the Closing for the Kimball Tower or the Closing for the Morgan Tower, as applicable, all attorneys' fees incurred by the CDC -HA with respect to the same. (d) Deposit of Documents. The Kimball Developer or the Morgan Developer, as applicable, has duly executed and (where necessary) caused to be notarized the Ground Lease, Declaration, Developer Deed of Trust, Security Agreement, Environmental Indemnity and all other documents reasonably required by the CDC -HA or reasonably necessary to complete the Closing for the Kimball Tower or the Morgan Tower, as applicable, and has deposited the same into Escrow. In addition, with respect to the Morgan Tower only, the Morgan Developer has duly executed the Morgan Developer Note and has deposited the same into Escrow. (c) Additional Documents. The deposit by the Kimball Developer or the Morgan Developer, as applicable, into Escrow of all other documents and instruments reasonably required by Escrow. 204.3 Closing Conditions for the Benefit of the Developer. The Developer's obligation to Close on each of the Kimball Tower and the Morgan Tower are conditioned upon satisfaction (or waiver) of each and all of the conditions set forth in this Section 204.3 on or before the Closing Deadline for the Kimball Tower or the Closing Deadline for the Morgan Tower, as applicable. Any such waiver shall be effective only if the same is (i) expressly waived in writing signed by, or by email from, the Kimball Developer or the Morgan Developer, as applicable, and (ii) delivered or emailed to the CDC -HA and Escrow Agent. In the event that one or more of the conditions set forth in this Section 204.3 are not satisfied or expressly waived on or before the Closing Deadline for the Kimball Tower, the Kimball Developer (provided the Kimball Developer is not in default hereunder) may unilaterally terminate this Agreement by mailing or emailing notice of conditional termination to the CDC -HA and Escrow Agent. In the event the Closing for the Kimball Tower has occurred (or would occur concurrently with the Closing for the Morgan Tower), and if one or more of the conditions set forth in this Section 204.3 are not satisfied or expressly waived on or before the Closing Deadline for the Morgan Tower, the Morgan Developer (provided the Morgan Developer is not in default hereunder) may unilaterally terminate this Agreement with respect to the Morgan Tower by mailing or emailing notice of conditional 13 Attachment No. 2 termination to the CDC -HA and Escrow Agent. After receipt of such notice of conditional termination, the CDC -HA shall have five (5) business days to cure any non -satisfaction of a condition or other default specified in the notice of conditional termination. If such matter is satisfied or cured prior to the expiration of such five (5) day period, then the Closing for the Kimball Tower or the Closing for the Morgan Tower, as applicable, shall proceed and the Developer waives any right to damages or compensation with respect to the unsatisfied condition. If such matter remains unsatisfied or the default remains uncured after the expiration of such five (5) day period with respect to the Kimball Tower, then this Agreement shall terminate at the close of business on such fifth (5th) day. In the event the Closing for the Kimball Tower has occurred (or would occur concurrently with the Closing for the Morgan Tower), and any such matter remains unsatisfied or the default remains uncured after the expiration of such five (5) day period with respect to the Morgan Tower, then this Agreement shall terminate with respect to the Morgan Tower at the close of business on such fifth (St'') day. Any such termination of this Agreement shall not release the CDC -HA from liability under this Agreement. (a) No Default. The CDC -HA is not in default in any of its obligations under the terms of this Agreement and all representations and warranties of the CDC -HA contained herein shall be true and correct in all material respects. (b) Deposit of Documents. The CDC -HA has duly executed and (where necessary) caused to be notarized the Ground Lease, Declaration, Developer Deed of Trust, Security Agreement, Environmental Indemnity and all other documents reasonably required by the CDC -HA or reasonably necessary to complete the Closing for the Kimball Tower or the Morgan Tower, as applicable, and has deposited the same into Escrow. (c) Additional Documents. The deposit by the CDC -HA into Escrow of all other documents and instruments reasonably required by Escrow. (d) Kimball HAP Contract. Kimball Developer shall receive from CDC -HA and/or HUD (as applicable) a Section 8 Housing Assistance Payment Agreement with a minimum term of twenty (20) years to provide Section 8 Project Based Vouchers or Section 8 Project Based Rental Assistance for one hundred forty-nine (149) units at the Kimball Tower on terms acceptable to Kimball Developer in its sole and absolute discretion. (e) Morgan HAP Contract. Morgan Developer shall receive from HUD a Section 8 Housing Assistance Payment Agreement with a minimum term of twenty (20) years to provide Section 8 Project Based Housing Assistance Payment for one hundred fifty-one (151) units at the Morgan Tower on terms acceptable to Morgan Developer in its sole and absolute discretion. 205. Subsequent Financing. No secured loan, deed of trust, or encumbrance, except for the Construction Deed of Trust and Permanent Deed of Trust shall be placed upon any portion of the Kimball Leasehold or Morgan Leasehold, whether by refinancing or otherwise, without first obtaining the express written consent of the CDC -HA, except for any Permitted Transfer as defined in Section 603.2, below, which consent shall not be unreasonably delayed, conditioned or 14 Attachment No. 2 withheld. Further, during any CDC -HA approved refinancing or subsequent encumbrance, the City and SHA shall be provided American Land Title Association ("ALTA") title insurance policy or endorsements acceptable to the CDC -HA, at the cost and expense of Developer. Said written consent shall be at the CDC-HA's sole discretion, failure to obtain such consent shall be a Default hereunder and such unconsented to financing or refinancing shall be void. Except for Permitted Transfers and refinancings allowed by this Section 205, if Developer refinances the Kimball Leasehold or Morgan Leasehold without previously obtaining the CDC-HA's prior written consent, the CDC -HA shall receive one hundred percent (100%) of the net amount of the refinancing. 206. Default. Notwithstanding Section 501, below, after the Closings for each of the Kimball Tower and the Morgan Tower and notwithstanding anything contained herein to the contrary, in the event of any Default, beyond any applicable cure period, in the performance of any of the terms, covenants and conditions contained in: (i) this Agreement (subject to a 30 days cure period); (ii) any document or instrument executed by the Developer in conjunction with this Agreement; (iii) any prior or junior note secured by an encumbrance on the Kimball Leasehold or the Morgan Leasehold, as applicable, or any portions of such leaseholds; (iv) any note or deed of trust given in conjunction herewith; (v) in the event of the filing of a bankruptcy proceeding by the Kimball Developer or the Morgan Developer; or (vi) in the event of the filing of a bankruptcy against the Kimball Developer or the Morgan Developer which is not dismissed within ninety (90) days of filing, then (a) all sums owing by the Kimball Developer or the Morgan Developer, respectively, to the CDC -HA with respect to the Kimball Tower or Morgan Tower, respectively, shall at the option of CDC -HA immediately become due and payable; (b) the CDC -HA shall have the right to foreclosure under the applicable Developer Deed of Trust; and (c) CDC -HA shall be released from any and all obligations to Developer under the terms of this Agreement to the Kimball Developer or the Morgan Developer, respectively. These remedies shall be in addition to any and all other rights and remedies available to CDC -HA, either at law or in equity. Further, default interest shall accrue on the principal balance of the Morgan Developer Note from the date of the Morgan Developer Note at the rate of ten percent (10%) simple interest per annum or the maximum rate than allowed by law, whichever is less. 207. Representations and Warranties. 207.1 CDC -HA Representations and Warranties. CDC -HA represents and warrants to Developer that the CDC -HA is a public body, corporate and politic, existing pursuant to the California Community Redevelopment Law (California Health and Safety Code Section 33000), which has been authorized to transact business pursuant to action of the City. CDC -HA has full right, power and lawful authority to ground lease the Kimball Property and the Morgan Property as provided herein and the execution, performance and delivery of this Agreement by CDC -HA has been fully authorized by all requisite actions on the part of CDC -HA. 207.2 Developer's Representations and Warranties. Each of the Kimball Developer and the Morgan Developer represents and warrants to CDC -HA as follows: (a) Authority. The Kimball Developer and the Morgan Developer is a California limited partnership. The persons executing this Agreement on behalf of each of 15 Attachment No. 2 the Kimball Developer and the Morgan Developer have all necessary authority to execute this Agreement on behalf of Kimball Developer or the Morgan Developer, respectively, and this Agreement is a binding obligation of Developer. Copies of the Certificate of Limited Partnership and Partnership Agreement of each of the Kimball Developer and the Morgan Developer, will be delivered to CDC -HA within five (5) business days of final approval of the Agreement. These copies will be true, complete and fully -executed copies of the originals, as amended to the date of this Agreement. Each of the Kimball Developer and the Morgan Developer will have full right, power and lawful authority to enter into the applicable Ground Lease and undertake all obligations as provided in this Agreement. The execution, performance and delivery of this Agreement by each of the Kimball Developer and the Morgan Developer has been fully authorized by resolution of and all requisite actions on the part of the respective Developer. (b) No Conflict. Developer's execution, delivery and performance of its obligations under this Agreement will not constitute a default or a breach under any contract, agreement or order to which Developer is a party or by which it is bound. (c) No Bankruptcy. Developer is not the subject of a bankruptcy proceeding. (d) Rent and Occupancy Restrictions. Developer shall at all times after the Closing during the 55-year term comply with the requirements of the Declaration. 208. Studies and Reports. Prior to the Closing, representatives of Developer shall have the right of access to all portions of the Property for the purpose of obtaining data and making surveys and tests necessary to carry out this Agreement. Any preliminary work undertaken on the Property by Developer prior to the Closing shall be done at the sole risk and expense of Developer. Any preliminary work shall be undertaken only after securing all necessary permits from the appropriate governmental agencies. 209. Condition of the Property. 209.1 "As -Is," "Where -Is". The CDC -HA has not investigated and makes no representations or warranties whatsoever regarding the condition of the Property. Developer hereby agrees to take title to the Kimball Leasehold and the Morgan Leasehold "as -is." The Kimball Leasehold and the Morgan Leasehold shall be conveyed to the Developer in an "as -is" physical and environmental condition, with no warranty, express or implied, by the CDC -HA as to the condition of any existing improvements, the soil, its geology, the presence of known or unknown faults or Hazardous Materials or toxic substances, and it shall be the sole responsibility of the Developer at its expense to investigate and determine the physical and environmental conditions. The Developer shall have the right to engage its own environmental consultant (the "Environmental Consultant") and other consultants to make such investigations of the Property as the Developer deems necessary, including any soils, geotechnical and other testing of the Property, and the CDC -HA shall promptly be provided a copy of all reports and test results provided to the Developer by the Environmental Consultant (collectively, the "Environmental Reports"). The Developer shall reasonably approve or disapprove of the physical and environmental condition of the Property no later than forty-five (45) days from the date from the date this Agreement is 16 Attachment No. 2 executed by the CDC -HA, provided that the Developer shall have the right to approve or disapprove any further environmental conditions (which are not created by the Developer) that first occur after such deadline for Developer's approval. The Developer's failure to deliver written notice of its disapproval within such time limit shall be deemed approval of the physical and environmental condition of the Property and a waiver of Developer's right to object to the physical and environmental condition of the Property. If the Developer approves or is deemed to approve the physical and environmental condition of the Property, then, as between Developer, City and CDC -HA, it shall be the sole responsibility and obligation of the Developer to take such action as may be necessary to place the physical and environmental conditions of the Property in a condition entirely suitable for the purposes set forth in this Agreement. 209.2 Developer Precautions After Closing. From and after the Closing for the Kimball Tower and the Closing for the Morgan Tower, respectively, Developer shall take all necessary precautions to prevent the release in, on or under the Property of any Hazardous Materials. Such precautions shall include compliance with all Governmental Requirements with respect to Hazardous Materials. In addition, Developer shall install and utilize such equipment and implement and adhere to such procedures as are consistent with commercially reasonable standards as respects the disclosure, storage, use, removal and disposal of Hazardous Materials. 209.3 Required Disclosures After Closing. From and after the Closing for the Kimball Tower and the Closing for the Morgan Tower, respectively, Developer shall notify CDC - HA, and provide the CDC -HA with a copy or copies, of all environmental permits, disclosures, applications, entitlements or inquiries relating to the Property, including notices of violation, notices to comply, citations, inquiries, clean-up or abatement orders, cease and desist orders, reports filed pursuant to self -reporting requirements and reports filed or applications made pursuant to any Governmental Requirements relating to Hazardous Materials and underground tanks. Developer shall report to the CDC -HA, as soon as possible after each incident, any unusual or potentially important incidents with respect to the environmental condition of the Property. In the event of a release of any Hazardous Materials into the environment, Developer shall, as soon as possible after the release, deliver to the CDC -HA a copy of any and all reports relating thereto and copies of all correspondence with governmental agencies relating to the release. Upon request, Developer shall deliver to the CDC -HA a copy or copies of any and all other environmental entitlements or inquiries relating to or affecting the Property including, but not limited to, all permit applications, permits and reports including, without limitation, those reports and other matters which may be characterized as confidential. 210. Developer Indemnity. From and after the Closing for the Kimball Tower and the Closing for the Morgan Tower, respectively, Developer agrees to indemnify, defend and hold CDC -HA harmless from and against any claim, action, suit, proceeding, loss, cost, damage, liability, deficiency, fine, penalty, punitive damage, or expense (including, without limitation, attorneys' fees), resulting from, arising out of, or based upon any of the following: (i) the presence, release, use, generation, discharge, storage or disposal of any Hazardous Materials on, under, in or about, or the transportation of any such Hazardous Materials to or from, the Property, or (ii) the violation, or alleged violation, of any statute, ordinance, order, rule, regulation, permit, judgment or license relating to the use, generation, release, discharge, storage, disposal or transportation of Hazardous Materials on, under, in or about, to or from, the Property. This indemnity shall include, 17 Attachment No. 2 without limitation, any damage, liability, fine, penalty, parallel indemnity after closing cost or expense arising from or out of any claim, action, suit or proceeding for personal injury (including sickness, disease or death), tangible or intangible property damage, compensation for lost wages, business income, profits or other economic loss, damage to the natural resource or the environment, nuisance, contamination, leak, spill, release or other adverse effect on the environment. Provided, however, that this indemnity shall be limited to claims, actions, suits, proceedings, losses, costs, damages, liabilities, deficiencies, fines, penalties, punitive damages, or expenses due to conditions first occurring from and after the Closing for the Kimball Tower and the Closing for the Morgan Tower, respectively. This indemnity does not include any condition arising solely as a result of the negligence or willful misconduct of the CDC -HA or its employees, agents, representatives, successors or assigns. This Section 210 shall apply with respect to the Kimball Developer only with respect to the Kimball Property, Kimball Leasehold and Kimball Tower and shall apply with respect to the Morgan Developer only with respect to the Morgan Property, Morgan Leasehold and Morgan Tower, i.e., the Kimball Developer shall not have any obligations or liability with respect to the Morgan Property, Morgan Leasehold or Morgan Tower and the Morgan Developer shall not have any obligations or liability with respect to Kimball Property, Kimball Leasehold or Kimball Tower. 300. Scope of Rehabilitation. 301. CDC -HA Review and Approval of the Scope of Rehabilitation. Developer shall prepare and submit a Scope of Rehabilitation for each of the Kimball Tower and the Morgan Tower to the CDC -HA for review and approval. The CDC -HA shall have the right to review and approve or disapprove all aspects of the Scope of Rehabilitation for each of the Kimball Tower and the Morgan Tower. Developer acknowledges and agrees that the CDC -HA is entitled to approve or disapprove the Scope of Rehabilitation for each of the Kimball Tower and the Morgan Tower in order to satisfy the CDC-HA's obligation to promote the sound rehabilitation and redevelopment of the Project, to promote a high level of design which will impact the surrounding development, and to provide an environment for the social, economic and psychological growth and well-being of the citizens of the City, including but not limited to the residents of the Kimball Tower and the Morgan Tower. Developer shall not be entitled to any monetary damages or compensation as a result of the CDC-HA's disapproval or failure to approve or disapprove the Scope of Rehabilitation for the Kimball Tower or the Morgan Tower. 302. Standards for Disapproval. The CDC -HA shall have the right to disapprove in its reasonable discretion any of the Scope of Rehabilitation for each of the Kimball Tower and the Morgan Tower, as set forth in Section 301, above, including without limitation if the same do not conform to this Agreement or are otherwise incomplete. In the event the Scope of Rehabilitation for either the Kimball Tower and the Morgan Tower is not approved, the CDC -HA shall state in writing provided to the Developer the reasons for disapproval. Developer, upon receipt of notice of disapproval from the CDC -HA, shall revise such portions and resubmit the revised Scope of Rehabilitation to the CDC -HA for approval. The CDC -HA and Developer agree to work together in good faith to resolve any disagreements and disputes regarding the Scope of Rehabilitation. 303. Revisions. If Developer desires to propose any revisions to the CDC -HA -approved Scope of Rehabilitation after approval, the Developer shall submit such proposed changes to the 18 Attachment No. 2 CDC -HA. If the Scope of Rehabilitation, as modified by the proposed changes, generally and substantially conforms to the requirements of the Scope of Rehabilitation and this Agreement, the CDC -HA shall review the proposed changes and notify Developer in writing within thirty (30) days after submission to the CDC -HA whether the proposed change is approved or disapproved. The CDC-HA's Executive Director is authorized to approve changes to the Scope of Rehabilitation. Provided, however, the CDC -HA shall have no obligation to approve any change from the basic use of the Property for anything other than a multifamily, affordable housing project. 304. Defects in Plans. The CDC -HA shall not be responsible or liable in any way, either to Developer or to any third parties, for any defects in the Scope of Rehabilitation, or for any structural or other defects in any work done according to the approved Scope of Rehabilitation, or for any delays caused by the review and approval processes established by this Section 300. Developer shall hold harmless and indemnify CDC -HA, the City and their officers, employees, agents and representatives from and against any and all claims, demands and suits for damages to property or injuries to persons arising out of or in any way relating to the Property, including without limitation any defects in the Scope of Rehabilitation, violation of any laws, and for defects in any work done according to the approved Scope of Rehabilitation or for defects in work performed by Developer or any contractor or subcontractor of Developer. 305. Land Use Approvals. Before commencement of the Scope of Rehabilitation work or any works of improvement at the Property, Developer shall, at Developer's sole expense, secure or cause to be secured any and all land use and other entitlements, permits and approvals which may be required for the Scope of Rehabilitation work by the City or any other governmental agency affected by such rehabilitation, construction or work. Neither CDC -HA, nor the City shall be responsible in any way for, the processing of Developer's building permits or other permit applications with the City and the execution of this Agreement does not constitute the granting of or a commitment to obtain any required land use permits, entitlements or approvals. 306. Deadline for Completion of the Scope of Rehabilitation. The Scope of Rehabilitation work for the Kimball Tower and the Scope of Rehabilitation work for the Morgan Tower shall be completed in accordance not later than twenty-four (24) months from the Closing for the Kimball Tower or the Closing for the Morgan Tower, as applicable. Failure to complete all of the Scope of Rehabilitation work for the Kimball Tower or the Scope of Rehabilitation work for the Morgan Tower, as applicable, shall, inter alia, be a default by the Morgan Developer or the Kimball Developer respectively, entitling the CDC -HA to exercise all of its rights and remedies, including without limitation foreclosure of the applicable Developer Deed of Trust. 307. Cost of Project. All costs of the Project whatsoever shall be borne by Developer, including without limitation the cost of planning, designing, developing and rehabilitating the Kimball Tower and the Morgan Tower in accordance with the applicable Scope of Rehabilitation. 307.1 Project Budget. The Developer has submitted the Initial Project Budget to CDC -HA. The Project Budget summarizes the current estimates of the sources and uses of funds for the complete rehabilitation of each of the Kimball Tower and the Morgan Tower. By its execution of this Agreement, CDC -HA has given its approval to the Initial Project Budget. While 19 Attachment No. 2 the Initial Project Budget has been prepared based on the best, good faith estimate of the Developer of the costs which are likely to be incurred for the rehabilitation of the Kimball Tower and the Morgan Tower, the parties recognize that events and circumstances not currently contemplated, some of which are outside of the control of the parties, could result in changes in the costs of rehabilitating one or both Projects, necessitating changes in the Project Budget. Changes in the Scope of Rehabilitation could also be made during any public hearing or approval process which results in increased costs for the Project not contemplated in the Project Budget. Changes in costs could be occasioned by conditions found in the field which were not anticipated as of the date of execution of this Agreement, including changes (and delays which result from changes) as a result of onsite inspections. Due to the impact of other, competing demands for staff time, inspections themselves might be delayed. 307.2 Because of the specialized nature of the funding for the Scope of Rehabilitation, unanticipated material changes could constitute a challenge to the Project completion and may cause additional costs to the Project unanticipated in the Initial Project Budget. Should the Developer become aware of any such material fact or circumstance which will result in a material increase in the Scope of Rehabilitation (a cost or costs will constitute a "material increase" if (i) alone or cumulatively, such costs result in increased expenses in excess of $100,000, but which expenses might be absorbed out of contingency funds; or (ii) alone or cumulatively, such costs result in an increase for a Phase in excess of $250,000 which cannot be paid from sources of funds identified in the Project Budget), the Developer shall give written notice to CDC - HA, which notice shall identify the material change or changes, shall itemize the costs which the Developer anticipates will result therefrom and shall request that CDC -HA take one or more of the following actions: i. Agree to the transfer of amounts between line items within each Project Budget. At the request of either Developer, and subject to the approval of CDC -HA, which will not be unreasonably withheld, conditioned or delayed, funds reflected in one line item of a Project Budget which are unexpended at the substantial completion of the work delineated therein may be transferred to the account and line item for contingencies, or, with the consent of CDC -HA, not to be unreasonably withheld, transferred directly to another account of another line item in the Project Budget. ii. Approve modifications to the Scope of Rehabilitation reasonably necessary or required to deal with such changed circumstances and material increases. Such modifications might include phasing or deferral of Project amenities until additional funding is available or secured, downsizing or eliminating Project design items or amenities, etc. All financing for the Scope of Rehabilitation shall be subject to the review and approval of the CDC -HA, which review and approval shall not be unreasonably withheld, conditioned or delayed. The CDC -HA shall respond within fifteen (15) days of either Developer's submission of any proposed financing. Each Developer will be responsible for maximizing use of leveraged financing sources from other community development funding sources as available. The CDC-HA's approvals of any such modifications shall not be unreasonably withheld, conditioned or delayed. The CDC -HA acknowledges that the Kimball Developer has applied for an Affordable Housing Program Loan from a Federal Home Loan Bank member institution (the "AHP Loan"). The CDC- 20 Attachment No. 2 HA and each Developer further acknowledge that each Developer has applied for an AHP Loan, and that if either Developer is not awarded an AHP Loan, such Developer will submit up to two additional applications for an AHP Loan. If either Developer has made three unsuccessful applications for an AHP Loan, then CDC -HA will increase the total amount of the either the Kimball Acquisition Loan or the Morgan Acquisition Loan in an amount sufficient to fill any gaps in the respective Project Budget due to the unavailability of an AHP Loan. iii. Agree to allow the Developer to obtain additional funding sufficient to pay such material increases. Such funding sources might, upon approval by CDC -HA, include CDC -HA support for applications for additional and/or new funding from additional or new governmental or private funding programs established for low and moderate income housing. Once the CDC -HA and each Developer has agreed upon a final sources and uses for the Scope of Rehabilitation, then the parties shall replace the Initial Project Budget with a final approved project budget (the "Final Project Budget"), which shall include development sources and uses and an operating budget. 308. Insurance Requirements. Developer shall take out and maintain during the terms of each of the Declarations and shall cause its contractor and subcontractors to take out and maintain until completion of the applicable Scope of Rehabilitation, a comprehensive general liability policy in the amount of not less than $4,000,000 combined single limit policy and not less than $1,000,000 combined single limit policy for subcontractors; provided that the use of umbrella / excess liability policies to achieve such limits will be acceptable, and a comprehensive automobile liability policy in the amount of $1,000,000 combined single limit, or such other policy limits as the CDC -HA may approve at its discretion, including contractual liability, as shall protect Developer, City and CDC -HA from claims for such damages. Such policy or policies shall be written on an occurrence form. Developer shall also furnish or cause to be furnished to the CDC - HA evidence satisfactory to the CDC -HA that Developer, and any contractor with whom it has contracted for the performance of work on the Property or otherwise pursuant to this Agreement, carries workers' compensation insurance as required by law. Developer shall furnish a certificate of insurance countersigned by an authorized agent of the insurance carrier on a form approved by the CDC -HA setting forth the general provisions of the insurance coverage. This countersigned certificate shall name the City and CDC -HA and their respective officers, agents, and employees as additionally insured parties under the policy, and the certificate shall be accompanied by a duly executed endorsement evidencing such additional insured status. The certificate and endorsement by the insurance carrier shall contain a statement of obligation on the part of the carrier to notify the City and CDC -HA of any material change, cancellation or termination of the coverage at least thirty (30) days in advance of the effective date of any such material change, cancellation or termination. Coverage provided hereunder by Developer shall be primary insurance and not be contributing with any insurance maintained by the City of CDC -HA, and the policy shall contain such an endorsement. The insurance policy or the endorsement shall contain a waiver of subrogation for the benefit of the City and CDC -HA. The required certificates shall be furnished 21 Attachment No. 2 by Developer prior to the Closing for the Kimball Tower or the Closing for the Morgan Tower, as applicable. 309. Developer's Indemnity. The Developer shall be responsible for all injuries to persons and/or all damages to real or personal property of the City, CDC -HA or others, caused by or resulting from the negligence and/or breach of this Agreement, by the Developer, its employees, subcontractors and/or its agents during the term of this Agreement. The Developer shall defend and hold harmless and indemnify the City, CDC -HA and all of their 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 the Developer, Developer's directors, officers, partners, members, employees, subcontractors and/or its agents and assigns or any employee of Developer's directors, officers, partners, or members, 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 or CDC -HA. This Section 309 shall apply with respect to the Kimball Developer only with respect to the Kimball Property, Kimball Leasehold and Kimball Tower and shall apply with respect to the Morgan Developer only with respect to the Morgan Property, Morgan Leasehold and Morgan Tower, i.e., the Kimball Developer shall not have any obligations or liability with respect to the Morgan Property, Morgan Leasehold or Morgan Tower and the Morgan Developer shall not have any obligations or liability with respect to Kimball Property, Kimball Leasehold or Kimball Tower. 310. Rights of Access. The Developer agrees to allow the CDC -HA and its representatives to access the Property to review and inspect the Developer's activities under this Agreement as the CDC -HA shall require. The CDC -HA shall monitor the Developer's activities without liability for said inspection and review. 311. Compliance With Laws. The Developer represents and warrants that during the term of this Agreement that it will comply with all State and Federal Davis Bacon prevailing wage requirements to the extent the same are applicable to the work. The Developer shall carry out the design and completion of the Scope of Rehabilitation in conformity with all applicable laws, including all applicable state labor standards, the City zoning and development standards, building, plumbing, mechanical and electrical codes, and all other provisions of the Title 24 of the California Code of Regulations, and all applicable disabled and handicapped access requirements, including without limitation the Americans With Disabilities Act, 42 U.S.C. Section 12101, et seq., Government Code Section 4450, et seq., Government Code Section 11135, et seq., and the Unruh Civil Rights Act, Civil Code Section 51, et seq. The Developer hereby agrees to carry out development, rehabilitation, construction and operation of the Property, including, without limitation, any and all public works (as defined by applicable law), in conformity with all applicable local, state and federal laws, including, without limitation, all applicable federal and state labor laws (including, without limitation, any requirement to pay State prevailing wages or Federal Davis Bacon wages). Developer hereby expressly acknowledges and agrees that neither the City nor the CDC -HA has ever previously affirmatively represented to the Developer or its contractor(s). in writing or otherwise, in a call for bids or otherwise, that the work to be covered by the bid or contract is or is not a "public work," as defined in Section 1720 of the Labor Code. Developer hereby agrees that Developer shall have the obligation to provide any and all disclosures, representations, statements, rebidding, and/or identifications which may be required 22 Attachment No. 2 by Labor Code Sections 1726 and 1781, as the same may be enacted, adopted or amended from time to time, or any other provision of law. Developer hereby agrees that Developer shall have the obligation to provide and maintain any and all bonds to secure the payment of contractors (including the payment of wages to workers performing any public work) which may be required by the Civil Code, Labor Code Section 1781, as the same may be enacted, adopted or amended from time to time, or any other provision of law. The Developer hereby agrees that the Developer shall have the obligation, at the Developer's sole cost, risk and expense, to obligate any party as may be required by Labor Code Sections 1726 and 1781, as the same may be enacted, adopted or amended from time to time, or any other provision of law. Developer shall indemnify, protect, defend and hold harmless the City, the CDC -HA and their respective officers, employees, contractors and agents, with counsel reasonably acceptable to the City and the CDC -HA, from and against any and all loss, liability, damage, claim, cost, expense, and/or "increased costs" (including labor costs, penalties, reasonable attorneys' fees, court and litigation costs, and fees of expert witnesses) which, in connection with the completion of the Scope of Rehabilitation, including, without limitation, any and all public works (as defined by applicable law), results or arises in any way from any of the following: (i) the noncompliance by Developer of any applicable local, state and/or federal law, including, without limitation, any applicable federal and/or state labor laws (including, without limitation, if applicable, the requirement to pay state prevailing wages); (ii) the implementation of Sections 1726 and 1781 of the Labor Code, as the same may be enacted, adopted or amended from time to time, or any other similar law; (iii) failure by Developer to provide any required disclosure, representation, statement, rebidding and/or identification which may be required by Labor Code Sections 1726 and 1781, as the same may be enacted, adopted or amended from time to time, or any other provision of law; (iv) failure by Developer to provide and maintain any and all bonds to secure the payment of contractors (including the payment of wages to workers performing any public work) which may be required by the Civil Code, Labor Code Section 1781, as the same may be enacted, adopted or amended from time to time, or any other provision of law; and/or (v) failure by the Developer to obligate any party as may be required by Labor Code Sections 1726 and 1781, as the same may be enacted, adopted or amended from time to time, or any other provision of law. It is agreed by the parties that, in connection with the development, rehabilitation, construction and operation of the Property, including, without limitation, any public work (as defined by applicable law), Developer shall bear all risks of payment or non-payment of state prevailing wages and/or the implementation of Labor Code Sections 1726 and 1781, as the same may be enacted, adopted or amended from time to time, and/or any other provision of law. "Increased costs" as used in this Section shall have the meaning ascribed to it in Labor Code Section 1781, as the same may be enacted, adopted or amended from time to time. The foregoing indemnity shall survive termination of this Agreement. This Section 311 shall apply with respect to the Kimball Developer only with respect to the Kimball Property and shall apply with respect to the Morgan Developer only with respect to the Morgan Property. 312. Nondiscrimination in Employment. Developer certifies and agrees that all persons employed or applying for employment by it, its affiliates, subsidiaries, or holding companies, and all subcontractors, bidders and vendors, are and will be treated equally by it without regard to, or because of race, color, religion, ancestry, national origin, sex, age, pregnancy, childbirth or related medical condition, medical condition (cancer related) or physical or mental disability, and in compliance with Title VII of the Civil Rights Act of 1964, 42 U.S.C. Section 2000, et seq., the Federal Equal Pay Act of 1963, 29 U.S.C. Section 206(d), the Age Discrimination in Employment 23 Attachment No. 2 Act of 1967, 29 U.S.C. Section 621, et seq., the Immigration Reform and Control Act of 1986, 8 U.S.C. Section 1324b, et seq., 42 U.S.C. Section 1981, the California Fair Employment and Housing Act, Cal. Government Code Section 12900, et seq., the California Equal Pay Law, Cal. Labor Code Section 1197.5, Cal. Government Code Section 11135, the Americans with Disabilities Act, 42 U.S.C. Section 12101, et seq., and all other anti -discrimination laws and regulations of the United States and the State of California as they now exist or may hereafter be amended. Developer shall allow representatives of the CDC -HA access to its employment records related to this Agreement during regular business hours to verify compliance with these provisions when so requested by the CDC -HA. 313. Taxes and Assessments. After each Closing, the respective Developer shall pay prior to delinquency all ad valorem real estate taxes and assessments on the Kimball Leasehold or the Morgan Leasehold, respectively. Developer shall remove or have removed any levy or attachment made after the Closing on the Kimball Leasehold or the Morgan Leasehold, respectively, or any part thereof, or assure the satisfaction thereof within a reasonable time. 314. Liens and Stop Notices. Developer shall not allow to be placed on the Kimball Leasehold, the Morgan Leasehold or the Property or any part thereof any lien or stop notice. If a claim of a lien or stop notice is given or recorded affecting the Kimball Leasehold, the Morgan Leasehold or the Property, the respective Developer shall, within thirty (30) days of such recording or service or within five (5) days of the CDC-HA's demand, whichever last occurs: (a) pay and discharge the same; (b) effect the release thereof by recording and delivering to the CDC -HA a surety bond in sufficient form and amount as approved by the CDC -HA in its sole discretion; or (c) provide the CDC -HA with other assurance which the CDC -HA deems, in its sole discretion, to be satisfactory for the payment of such lien or bonded stop notice and for the full and continuous protection of the CDC -HA from the effect of such lien or bonded stop notice. 315. Financing of the Project. 315.1 No Encumbrances Except Mortgages or Deeds of Trust. Mortgages and deeds of trust may be permitted only with the CDC-HA's prior written approval, and only for the purpose of securing loans of funds to be used for financing the Scope of Rehabilitation work, and any other purposes deemed necessary and appropriate by the CDC -HA in connection with development under this Agreement. The Developer shall notify the CDC -HA in advance of the execution or recordation of any mortgage or deed of trust. The Developer shall not enter into any mortgage or deed of trust for financing without the prior written approval of the CDC -HA, which approval the CDC -HA agrees to give if any such mortgage or deed of trust for financing is given to a responsible financing lending institution or person or entity, as determined by the CDC -HA in its reasonable discretion. The CDC -HA agrees that the Developer Deed of Trust shall be 24 Attachment No. 2 subordinated to any Construction Deed of Trust, such subordination shall be via a subordination agreement in a form acceptable to the CDC -HA in its reasonable discretion. 315.2 Right of CDC -HA to Cure Mortgage or Deed of Trust Default. In the event of a mortgage or deed of trust default or breach by the Developer, the Developer shall immediately deliver to the CDC -HA a copy of any mortgage holder's notice of default. The CDC -HA shall have the right but not the obligation to cure the default. In such event, the CDC -HA shall be entitled to reimbursement from the Developer of all costs and expenses incurred by the CDC -HA in curing such default, including without limitation attorneys' fees. 316. Occupancy Monitoring and Inspection Fees; Records and Reports. Each year during the terms of each of the Declarations, the Developer shall pay to the CDC -HA an affordable housing occupancy monitoring and inspection fee of $201 per unit per year, escalating at 3.5% annually. The Developer shall supply CDC -HA, annually, on May 31 st, of each year during the term of this Agreement, for the immediately prior calendar year, with such records and reports as are required and are requested by the CDC -HA to aid it in complying with its reporting and record keeping requirements. The records and reports include, but are not limited to the following: (a) Amount of funds expended pursuant to this Agreement; (b) Eligible tenant information, including yearly income verifications; (c) On -site inspection results; (d) Housing payments charged to tenants; (e) Affirmative marketing records; (0 Insurance policies and notices; (g) Equal Employment Opportunity and Fair Housing records; (h) Labor costs and records; (i) Audited income and expense statement, balance sheet and statement of cash flows for the Developer; (j) Federal and State income tax returns for the calendar year, ending on the preceding December 31 st; (k) Annual budget of reserves for repair and replacement; (1) Annual certification and representation regarding status of all loans, encumbrances and taxes; 25 Attachment No. 2 (m) Such other and further information and records as the CDC -HA shall reasonably request in writing from the Developer. 317. Flood Insurance. Developer represents, warrants, and certifies that the Property is located within a community participating in the National Flood Insurance Program and Developer agrees to purchase and maintain flood insurance for the duration of the term of this Agreement. 318. Accessibility Standards. Developer represents and warrants that it will comply with all federal, state and local requirements and regulations concerning access to the units by the disabled and handicapped persons. 400. Covenants and Restrictions. 401. Affordable Units. Developer covenants and agrees for itself, its successors, assigns, and every successor in interest to the Kimball Leasehold or the Morgan Leasehold, respectively, or any part thereof, that upon the Closing and thereafter, Developer shall comply with the applicable Declaration for the period of time specified herein. The obligation of the CDC -HA to enter into each Ground Lease is conditioned upon the execution, and recordation of the Declaration against the Kimball Leasehold and the Morgan Leasehold. The Declaration for the Kimball Leasehold shall contain housing payment and income level restrictions for the one hundred forty- nine (149) Affordable Units in the Kimball Tower. The Declaration for the Morgan Leasehold shall contain housing payment and income level restrictions for the one hundred fifty-one (151) Affordable Units in the Morgan Tower. All of the Affordable Units shall be restricted to occupancy by Very Low Income Households with monthly rental rates restricted to the Maximum Rents as set forth in more detail in the Declaration. Provided, however, the CDC -HA acknowledges that there are currently several units at each of the Kimball Tower and Morgan Tower which are currently occupied by tenants whose incomes no longer qualify as Very Low Income Households (the "Existing Over -Income Units"), and the CDC -HA further agrees that the Existing Over -Income Units will continue to be treated as Very Low Income Households, so long as upon the vacancy of any Existing Over -Income Unit, such unit must then be rented to a qualifying Very Low Income Household. 402. Maintenance Covenants. The Developer represent§ and warrants that after completion of Scope of Rehabilitation, the Kimball Property, the Morgan Property and all of the Affordable Units shall continually be maintained in a decent, safe and sanitary condition, and in good repair as described in 24 C.F.R. §5.703, and in a manner which satisfies the Uniform Physical Conditions Standards promulgated by the Department of Housing and Urban Development (24 C.F.R. §5.705), as such standards are interpreted and enforced by the CDC -HA under its normal policies and procedures. The Developer warrants that all rehabilitation work shall meet or exceed the applicable local codes and construction standards, including zoning and building codes of the City of National City as well as the provisions of the Model Energy Code published by the Council of American Building Officials. The Developer hereby consents to periodic inspection by the CDC-HA's designated inspectors and/or designees during regular business hours, including the Code Enforcement Agents of the City, to assure compliance with all applicable zoning, building codes, regulations and property standards. 26 Attachment No. 2 403. Obligation to Refrain from Discrimination. 403.1 State and Federal Requirements. The Developer shall, at all times during the term of this Agreement, comply with all of the affirmative marketing procedures adopted by the CDC -HA. The Developer shall maintain records to verify compliance with the applicable affirmative marketing procedures and compliance. Such records are subject to inspection by the CDC -HA during regular business hours upon five (5) days written notice. 404.2 Additional Requirements. Developer 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. 404.3 Fair Housing Laws. All activities carried out by the Developer and/or agents of the Developer 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 Fair Housing 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 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 Fair Housing 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 Fair Housing Act also provides protection for people with disabilities and proscribes those conditions under which senior citizen housing is exempt from the prohibitions based on familial status. The following State of California Laws also govern housing discrimination and shall be complied with by Developer: Fair Employment and Housing Act, Unruh Civil Rights Act of 1959, Ralph Civil Rights Act of 1976, and Civil Code Section 54.1. 405. Nondiscrimination Covenants. The Developer 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 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 in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Property, nor shall Developer 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 27 Attachment No. 2 foregoing covenants shall run with the land. All such deeds, leases or contracts 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 Kimball Leasehold or the Morgan Leasehold: "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." 406. Effect of Violation of the Terms and Provisions of this Agreement. The CDC -HA is deemed the beneficiary of the terms and provisions of this Agreement and of the covenants running with the land, for and in its own right and for the purposes of protecting the interests of the community and other parties, public or private, in whose favor and for whose benefit this Agreement and the covenants running with the land have been provided, without regard to whether the CDC -HA has been, remains or is an owner of any land or interest therein in the Property. The CDC -HA shall have the right, if this Agreement or its covenants are breached, to exercise all rights and remedies, and to maintain any actions or suits at law or in equity or other proper proceedings to enforce the curing of such breaches to which it or any other beneficiaries of this Agreement and covenants may be entitled. 28 Attachment No. 2 500. Defaults and Remedies. This Section 500, including without limitation the subsections set forth below, shall apply to the Kimball Developer only with respect to the Kimball Property, Kimball Leasehold and Kimball Tower and shall apply to the Morgan Developer only with respect to the Morgan Property, Morgan Leasehold and Morgan Tower, i.e., the Kimball Developer shall not have any obligations or liability with respect to the Morgan Property, Morgan Leasehold or Morgan Tower and the Morgan Developer shall not have any obligations or liability with respect to Kimball Property, Kimball Leasehold or Kimball Tower. 501. Default Generally. Subject to Section 603.2 of this Agreement, failure by the CDC - HA or the Developer to perform any action or covenant required by this Agreement within the time periods provided herein following notice and failure to cure as described hereafter, constitutes a "Default" under this Agreement. A party claiming a Default shall give written notice of Default to the other party specifying the alleged Default. Except as otherwise expressly provided in this Agreement, the claimant shall not institute any proceeding against any other party, and the other party shall not be in Default if: (i) such alleged Default is cured thirty (30) days from receipt of such written notice: or (ii) if the alleged Default is such that it is not capable of being cured within thirty (30) days, but corrective action is initiated within thirty (30) days and the allegedly defaulting party diligently and in good faith works to effect a cure as soon as possible. 501.1 Notwithstanding anything to the contrary contained in this Agreement, the CDC -HA, prior to any action to enforce this Agreement, shall give any Developer's limited partner and its successors and assigns (the "Tax Credit Partner") notice and opportunity to cure for a period of not less than (a) fifteen (15) days if a monetary default, and (b) thirty (30) days if a nonmonetary default; provided, however, if in order to cure such a default, Tax Credit Partner reasonably determines that it must remove the general partner of Developer, Tax Credit Partner shall so notify CDC -HA and so long as Tax Credit Partner is diligently and continuously attempting to so remove such general partner, Tax Credit Partner shall have until the date thirty (30) days after the effective date of the removal of the general partner or general partners to cure such default but in no event more than one (1) year. 502. Institution of Legal Actions. In addition to any other rights or remedies and subject to the restrictions otherwise set forth in this Agreement, either party may institute an action at law or equity to seek specific performance of the terms of this Agreement, or to cure, correct or remedy any Default, to recover damages for any Default, or to obtain any other remedy consistent with the purpose of this Agreement. Such legal actions must be instituted in the County of San Diego, State of California, downtown branch, or in the District of the United States District Court in the County of San Diego. 503. Entry and Vesting of Title in CDC -HA Prior to Completion of Rehabilitation. 503.1 Right of Reentry. In addition to all other rights and remedies the CDC -HA may have at law or in equity, the CDC -HA has the right, at its election, to enter and take possession of the Kimball Property or the Morgan Property, as applicable, and all improvements thereon, and terminate and revest the Kimball Leasehold or the Morgan Leasehold in the CDC -HA if after the applicable Closing, Developer: 29 Attachment No. 2 (a) fails to start the Scope of Rehabilitation work as required by this Agreement for a period of thirty (30) days after written notice thereof from CDC -HA; or (b) abandons or substantially suspends the Scope of Rehabilitation work required by this Agreement for a period of thirty (30) days after written notice thereof from CDC -HA, subject to any extensions which may be agreed upon pursuant to Section 602 herein; or (c) transfers or suffers any involuntary transfer of the Kimball Leasehold or the Morgan Leasehold or any part thereof in violation of contrary to the provisions of this Agreement. 503.2 Limitations on Right of Entry. Such right to enter and vest shall be subject to and be limited by and shall not defeat, render invalid or limit any mortgage or deed of trust permitted by this Agreement that is senior to the Developer Deed of Trust. 503.3 Termination of Right of Entry. The CDC-HA's right to enter and take possession of the Kimball Property or the Morgan Property, as applicable, and all improvements thereon, and terminate and revest the Kimball Leasehold or the Morgan Leasehold in the CDC - HA, shall terminate upon the timely completion of the Scope of Rehabilitation work for the Kimball Property or the Morgan Property, as applicable. 504. Rights and Remedies are Cumulative. Except as otherwise expressly stated in this Agreement, the rights and remedies of the parties are cumulative, and the exercise by either party of one or more of such rights or remedies shall not preclude the exercise by it, at the same or different times, of any other rights or remedies for the same default or any other default by the other party. 505. Inaction Not a Waiver of Default. Any failures or delays by either party in asserting any of its rights and remedies as to any Default shall not operate as a waiver of any Default or of any such rights or remedies, or deprive either such party of its right to institute and maintain any actions or proceedings which it may deem necessary to protect, assert or enforce any such rights or remedies shall govern the interpretation and enforcement of this Agreement. 600. General Provisions. 601. Notices, Demands and Communications Between the Parties. All notices under this Agreement shall be in writing and sent (a) by certified or registered U.S. mail, return receipt requested, (b) overnight by a nationally recognized overnight courier such as UPS Overnight or FedEx, or (c) by personal delivery. All notices shall be effective upon receipt (or refusal to accept delivery). All notices shall be delivered to the following addresses or such other addresses as changed by any party from time to time by written notice to the other parties hereto. 30 Attachment No. 2 To CDC -HA: To Developer: Community Development Commission - Housing Authority of the City of National City 1243 National City Boulevard National City, CA 91950 Attention: Executive Director MORGAN TOWER HOUSING ASSOCIATES, L.P. KIMBALL TOWER HOUSING ASSOCIATES, L.P. c/o Community HousingWorks 2815 Camino Del Rio South, Suite 350 San Diego, CA 92108 Attention: Susan M. Reynolds, President & CEO And c/o Mercy Housing California 1500 South Grand Avenue, Suite 100 Los Angeles, CA 90015 Attention: Ed Holder, Regional Vice President of Real Estate Development And with a copy to: Gubb & Barshay, LLP 505 14th Street, Suite 450 Oakland, CA 94612 Attention: Sarah C. Perez 602. Enforced Delay; Extension of Times of Performance. In addition to specific provisions of this Agreement, performance by either party hereunder shall not be deemed to be in Default, and all performance and other dates specified in this Agreement shall be extended, where delays or Defaults are due to: war; insurrection; strikes; lockouts; riots; floods; earthquakes; fires; casualties; acts of God; acts of the public enemy; epidemics; quarantine restrictions; freight embargoes; lack of transportation; governmental restrictions or priority; litigation; unusually severe weather; acts or omissions of the other party; or any other causes beyond the control and without the fault of the party claiming an extension of time to perform. Notwithstanding anything to the contrary in this Agreement, an extension of time for any such cause shall be for the period of the delay and shall commence to run from the time of the commencement of the cause, if notice by the party claiming such extension is sent to the other party within five (5) days of the commencement of the cause. Times of performance under this Agreement may also be extended in writing by the mutual agreement of Executive Director of the CDC -HA and Developer. 603. Transfers of Interest in Property or Agreement. 603.1 Prohibition. The qualifications and identity of Developer are of particular concern to the CDC -HA. It is because of those qualifications and identity that the CDC -HA has 31 Attachment No. 2 entered into this Agreement with Developer. During the term of this Agreement and during the ninety-nine (99) year terms of the Ground Leases, no voluntary or involuntary successor in interest. of Developer shall acquire any rights or powers under this Agreement, nor shall Developer make any total or partial sale, transfer, conveyance, assignment, subdivision, refinancing or lease of the whole or any part of the Property or the improvements thereon without prior written approval of the CDC -HA, except as expressly set forth herein. Any proposed total or partial sale, transfer, conveyance, assignment, subdivision, refinancing or lease of the whole or any part of the Property or the improvements thereon, other than those permitted in Section 603.2, will entitle CDC -HA to its right of reentry and revesting as set forth in Section 505 hereof. For the reasons cited above, Developer represents and agrees for itself, each partner and any successor in interest to itself that without the prior written approval of the CDC -HA, there shall be no significant change in the ownership of Developer or in the relative proportions thereof, or with respect to the identity of the parties in control of Developer or the degree thereof, by any method or means; provided, however, that a change in one or more constituent partners of Developer is permitted so long as Developer remains controlled as to day to day matters by one of the general partners of Developer as of the date of this Agreement. Developer shall promptly notify the CDC -HA of any and all changes whatsoever in the identity of the parties in control of Developer or the degree thereof, of which it or any of its officers have been notified or otherwise have knowledge or information. Any change (voluntary or involuntary) in the partnership composition, management or control of Developer shall be a Default. 603.2 Permitted Transfers. Notwithstanding any other provision of this Agreement to the contrary, the CDC -HA approval of an assignment of this Agreement or conveyance of the Kimball Leasehold, Morgan Leasehold or the improvements thereon, or any part thereof, will be granted in connection with any of the following, subject to the CDC -HA and Developer executing appropriate documents of transfer which contain any exceptions or reservation of rights permitted under this Agreement (each a "Permitted Transfer"): (a) the leasing of one or more Affordable Units to an occupant in compliance with the Declaration; (b) transfer of up to a Ninety -Nine and Ninety -Nine Hundredths Percent (99.99%) limited interest in the Kimball Developer or the Morgan Developer to a tax credit investor partner in connection with a tax credit syndication; (c) transfer by the tax credit investor partner of the Kimball Developer or the Morgan Developer of its interest in the Kimball Developer or the Morgan Developer to an entity in which the tax credit investor partner or its affiliate manages and controls, directly or indirectly, the management decisions of such entity in connection with the tax credit syndication; (d) The conveyance or dedication of any portion of the Kimball Leasehold or the Morgan Leasehold to the City or other appropriate governmental agency, or the granting of easements or permits to facilitate completion of the Scope of Rehabilitation. 32 Attachment No. 2 (e) Any conveyance for financing purposes (subject to such financing being approved by the CDC -HA), including the grant of a deed of trust to secure the funds necessary for completion of the Scope of Rehabilitation. (f) any transfer directly resulting from the foreclosure of a deed of trust permitted under subsection (e), above; or (g) in the event all of general partners of the Developer are removed by the investor limited partner of the Developer for cause following default under the Developer's partnership agreement, the CDC -HA hereby approves the transfer of the general partners' interests to a 501(c)(3) tax exempt nonprofit corporation and/or an affiliate of the investor limited partner of the Developer selected by the investor limited partner of the Developer and approved by the CDC -HA, which approval shall not be unreasonably withheld, conditioned or delayed; or (i) Either (i) the exercise by a 501(c)(3) tax exempt nonprofit corporation affiliate of Kimball Developer of its option and right of first refusal to be granted by Kimball Developer upon the closing of a tax credit syndication, or (ii) the exercise by a 501(c)(3) tax exempt nonprofit corporation affiliate of Morgan Developer of its option and right of first refusal to be granted by Morgan Developer upon the closing of a tax credit syndication. 603.3 Successors and Assigns. All of the terms, covenants and conditions of this Agreement shall be binding upon Developer and its permitted successors and assigns. Whenever the term "Developer" is used in this Agreement, such term shall include any other permitted successors and assigns as herein provided. 603.4 Assignment by the CDC -HA. The CDC -HA may assign or transfer this Agreement in its entirety, or any of its rights or obligations hereunder. 604. Non -Liability of Officials and Employees 604.1 CDC -HA. No member, official or employee of the City or CDC -HA shall be personally liable to Developer, 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 Developer or its successors, or on any obligations under the terms of this Agreement. Kimball Developer. No member, official or employee of the Kimball Developer shall be personally liable to the City or CDC -HA, 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 the City or CDC - HA or its successors, or on any obligations under the terms of this Agreement. 604.3 Morgan Developer. No member, official or employee of the Morgan Developer shall be personally liable to the City or CDC -HA, 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 the City or CDC -HA or its successors, or on any obligations under the terms of this Agreement. 33 Attachment No. 2 605. Relationship Between the CDC -HA and Developer. It is hereby acknowledged that the relationship between the CDC -HA and Developer is that of independent contractors and not that of a partnership or joint venture and that the CDC -HA and Developer shall not be deemed or construed for any purpose to be the agent of the other. Developer agrees to indemnify, hold harmless and defend the CDC -HA from any claim made against the CDC -HA arising from a claimed relationship of partnership or joint venture between the CDC -HA and Developer. 606. CDC -HA Approvals and Actions. Whenever a reference is made herein to an action or approval to be undertaken by the CDC -HA, the Executive Director of the CDC -HA or his or her designee is authorized to act on behalf of the CDC -HA unless specifically provided otherwise or the context should require otherwise. 607. Counterparts. This Agreement may be signed in multiple counterparts which, when signed by all parties, shall constitute a binding agreement. 608. Integration. This Agreement contains the entire understanding between the parties relating to the subject matter of this Agreement. All prior or contemporaneous agreements, understandings, representations and statements, oral and written, are merged in this Agreement and shall be of no further force or effect. Each party is entering this Agreement based solely upon the representations set forth herein and upon each parry's own independent investigation of any and all facts such party deems material. 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. 609. No Real Estate Brokerage Commissions. The CDC -HA and Developer each represent and warrant to the other that no broker or finder is entitled to any commission or finder's fee in connection with Developer's acquisition of the Kimball Leasehold or the Morgan Leasehold from the CDC -HA. The parties agree to defend and hold harmless the other party from any claim to any such commission or fee from any broker, agent or finder with respect to this Agreement which is payable by such party. 610. Attorneys' Fees. 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 reasonable 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. 611. Titles and Captions. Titles and captions are for convenience of reference only and do not define, describe or limit the scope or the intent of this Agreement or of any of its terms. References to section numbers are to sections in this Agreement, unless expressly stated otherwise. 612. Interpretation. As used in this Agreement, masculine, feminine or neuter gender and the singular or plural number shall be deemed to include the others where and when the context 34 Attachment No. 2 so dictates. The word "including" shall be construed as if followed by the words "without limitation." This Agreement shall be interpreted as though prepared jointly by both parties. 613. No Waiver. A waiver by either party of a breach of any of the covenants, conditions or agreements under this Agreement to be performed by the other party shall not be construed as a waiver of any succeeding breach of the same or other covenants, agreements, restrictions or conditions of this Agreement. 614. Modifications. Any amendment, alteration, change or modification of or to this Agreement, in order to become effective, shall be made in writing and in each instance signed on behalf of each party (any amendment, alteration, change or modification of this Agreement on behalf of the CDC -HA, including without limitation changes to the economic terms of this Agreement and its exhibits, shall be made on behalf of the CDC -HA by the Executive Director of the CDC -HA in such Executive Director's sole discretion). 615. Severability. If any term, provision, condition or covenant of this Agreement or its application to any party or circumstances shall be held, to any extent, invalid or unenforceable, the remainder of this Agreement, or the application of the term, provision, condition or covenant to persons or circumstances other than those as to whom or which it is held invalid or unenforceable, shall not be affected, and shall be valid and enforceable to the fullest extent permitted by law. 616. Computation of Time. The time in which any act is to be done under this Agreement is computed by excluding the first day (such as the day escrow opens), and including the last day, unless the last day is a holiday or Saturday or Sunday, and then that day is also excluded. The term "holiday" shall mean all holidays as specified in Section 6700 and 6701 of the California Government Code. If any act is to be done by a particular time during a day, that time shall be Pacific Time Zone time. 617. Legal Advice. Each party represents and warrants to the other the following: they have carefully read this Agreement, and in signing this Agreement, they do so with full knowledge of any right which they may have; they have received independent legal advice from their respective legal counsel as to the matters set forth in this Agreement, or have knowingly chosen not to consult legal counsel as to the matters set forth in this Agreement; and, they have freely signed this Agreement without any reliance upon any agreement, promise, statement or representation by or on behalf of the other party, or their respective agents, employees, or attorneys, except as specifically set forth in this Agreement, and without duress or coercion, whether economic or otherwise. 618. Time of Essence. Time is expressly made of the essence with respect to the performance by the CDC -HA and Developer of each and every obligation and condition of this Agreement. 619. Cooperation. Each party agrees to cooperate with the other in this transaction and, in that regard, to sign any and all documents which may be reasonably necessary, helpful, or appropriate to carry out the purposes and intent of this Agreement including, but not limited to, releases or additional agreements. 35 Attachment No. 2 620. Conflicts of Interest. No member, official or employee of the City or the CDC -HA shall have any personal interest, direct or indirect, in this Agreement, nor shall any such member, official or employee participate in any decision relating to the Agreement which affects his personal interests or the interests of any corporation, partnership or association in which he is directly or indirectly interested. 621. 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. 622. Applicable Law. The laws of the State of California shall govern the interpretation and enforcement of this Agreement. 623. Authority to Sign. 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 CDC -HA 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 hereto have caused this Agreement to be executed as of the date first written above. CDC -HA: Community Development Commission -Housing Authority of the City of National City By: Leslie Deese, Executive Director APPROVED AS TO FORM: By: Angil P Morris -Jones CDC -HA General Counsel [SIGNATURES CONTINUED ON FOLLOWING PAGE] 36 Attachment No. 2 MORGAN DEVELOPER: MORGAN TOWER HOUSING ASSOCIATES, L.P., a California limited partnership By: CHW Morgan Development LLC, Its: managing general partner By: Community HousingWorks Its: sole me, .e and manager By: Print Name: nne B. Wilson Its: Senior Vice President By: Mercy Morgan Development LLC Its administrative general partner By: Mercy Housing Calwest Its: sole member and manager By: Print Name: Ed Holder Its: Regional Vice President of Real Estate Development [SIGNATURES CONTINUED ON FOLLOWING PAGE] 37 Attachment No. 2 MORGAN DEVELOPER: MORGAN TOWER HOUSING ASSOCIATES, L.P., a California limited partnership By: CHW Morgan Development LLC, Its: managing general partner By: Community HousingWorks Its: sole member and manager By: Print Name: Anne B. Wilson Its: Senior Vice President By: Mercy Morgan Development LLC Its administrative general partner By: Mercy Housing Calwest Its: sole member and manager By: Print Name: Its: Ed Holder Regional Vice President of Real Estate Development [SIGNATURES CONTINUED ON FOLLOWING PAGE] 37 Attachment No. 2 KIMBALL DEVELOPER: KIMBALL TOWER HOUSING ASSOCIATES, L.P., a California limited partnership By: CHW Kimball Development L,LC, Its: managing general partner By: Community HousingWorks Its: sole member and manager By: Print Name: '-,e I3 Wilson Its: Senior Vice President By: Mercy Kimball Development LLC Its administrative general partner By: Mercy Housing Ca!west Its: sole member and manaccr By: Print Name: Ed Holder Its: Regional Vice President of Real Estate Development 38 Attachment No. 2 KIMBALL DEVELOPER: KIMBALL TOWER HOUSING ASSOCIATES, L.P., a California limited partnership By: CHW Kimball Development LLC, Its: managing general partner By: Community HousingWorks Its: sole member and manager By: Print Name: Anne B. Wilson Its: Senior Vice President By: Mercy Kimball Development LLC Its administrative general partner By: Mercy Housing Calwest Its: sole member and manager By: Print Name: Ed Holder Its: Regional Vice President of Real Estate Development 38 Attachment No. 2 EXHIBIT A Kimball Property Legal Description The land referred to herein is situated in the State of California, County of San Diego and described as follows: Lot 2 of Center City Project, in the City of National City, County of San Diego, State of California, according to Map thereof No. 8807, filed in the Office of the County Recorder of San Diego County, February 24, 1978. APN: 560-410-05-00 39 Attachment No. 2 EXHIBIT B Morgan Property Legal Description The land referred to herein is situated in the State of California, County of San Diego and described as follows: Lot 1 of Center City Project, in the City of National City, County of San Diego, State of California, according to Map thereof No. 8807, filed in the Office of the County Recorder of San Diego County, February 24, 1978. APN: 560-410-04-00 40 Attachment No. 3 Kimball Tower Prepared For. Prepared By: Version: Revised: File: Community HousingWorks California Housing Partnership Corporation DDA Submittal V1.3 (5 / 9 / 18 update: 151 units + hard cost revision) June 6, 2018 Macintosh 11D:Userv'Janelle:Dmpbox (CHPC):CI IPC CLIENTS:Community I InusingWorks (C1JW )Kimball T ower:Pngections:IKimball Towers (DI)A Submittal vl SOURCES OF FUNDS PAGE 1 PERMANENT TERM / AMOUNT INT RATE AMORT COMMENTS Perm Loan 9,944,000 5.850% 35 AHP 1,490,000 0.00% Income from Operations 1,188,036 Tax -Exempt Seller Carry -Back Note to City 23,424,733 3.04 % 55 Performance Deposit Refund 100,000 Capital Contributions General Partner Limited Partners 5,394,700 21,178,714 TOTAL SOURCES 62,720,182 Surplus/(Shortfall) 0 CONSTRUCTION AMOUNT INT RATE TERM (Mo.) Tax -Exempt Construction Loan 28,860,417 4.800% 18 Costs Deferred Until Stabilization* 6,727,033 Tax -Exempt Seller Carry -Back Note to City 24,914,733 Capital Contributions General Partner Limited Partners TOTAL SOURCES Surplus/(Shortfall) 0 2,118,000 62,720,182 (0) DISTRIBUTION OF SALES PROCEEDS Sales price Less: Seller Note Cash Proceeds to Seller at Construction Closing Est. Cash due to City from Liquidated Reserves (as of 6/30/2017) Seller Note Payment at AHP Award Funding Total Cash Proceeds to Seller 33,100,000 24,914,733 8,185,267 1,375,744 1,490,000 11,051,011 1 Attachment No. 3 Kimball Tower Uses of Funds PAGE 1-A ACQUISITION COSTS Acquisition: Building GENERAL DEVELOPMENT COSTS Residential Construction Site Work Contractor General Conditions Contractor O&P GC Bond & Insurance Prevailing WageMonitor Builder's Risk Construction Contingency TOTAL TOTAL RESIDENTIAL 100.00% 33,100,000 33,100,000 11,874,897 11,874,897 775,931 775,931 748,929 748,929 1,012,066 1,012,066 328,922 328,922 94,989 94,989 126,652 126,652 1,496,239 1,496,239 Arch/Engineering 740,000 740,000 Construction Interest Reserve 1,936,723 1,936,723 Legal 201,500 201,500 Reserves 504,385 504,385 Other Soft Cost 1,533,329 1,533,329 Developer Fee 7,894,700 7,894,700 Costs of Issuance 350,921 350,921 TOTAL DEVELOPMENT COSTS 62,720,182 62,720,182 2 Attachment No. 3 Kimball Tower Unit Mix & Rental Income PAGE 2 Version: DDA Submittal V1.3 (5/9/18 update. 1$ Revised: June 6, 2018 AVERAGE AFFORDABILITY FOR QUALIFIED UNITS (% AMI) UNIT MIX UTILITY ALLOWANCES 1 BR 151 $34 RESIDENTIAL INCOME TAX -CREDIT ELIGIBLE - TIER 1: 50% TCAC Percentage of Targeted Units: 100.0% UNIT TYPE NUMBER PER UNIT SQ FT TOTAL SQ FT % MEDIAN PER -UNIT INCOME MONTHLY AFFORDABLE GROSS RENT PER -UNIT MONTHLY NET RENT TOTAL MONTHLY NET RENT TOTAL ANNUAL NET RENT 1 BR 149 551 82,099 50.0% 853 819 122,031 1,464,372 TOTAL 149 82,099 122,031 1.464.372 MANAGER UNITS UNIT TYPE NUMBER PER UNIT SQ FT TOTAL SQ FT MEDIAN PER -UNIT INCOME MONTHLY AFFORDABLE GROSS RENT PER -UNIT MONTHLY NET RENT TOTAL MONTHLY NET RENT TOTAL ANNUAL NET RENT 1 BR 2 551 1,102 0.0% 0 0 0 0 TOTAL 2 1,102 0 0 SECTION 8 (PBVs) PER -UNIT PER UNIT INCOME MONTHLY SECTION 8 UNIT TYPE NUMBER TIER NET RENT NET RENT PER -UNIT MONTHLY S8 PREMIUM TOTAL MONTHLY SECTION 8 PREMIUM TOTAL ANNUAL S8 PREMIUM 1 BR 149 50% 819 1 176 357 53,193 638.316 TOTAL 149 53,193 638,316 SECTION 8 PREMIUM (annual Section 8 income less total annual base rents) 638.316 TOTAL - BASE RENT 175,224 2.102.688 TOTAL RESIDENTIAL INCOME TOTAL SQ FT - TAX CREDIT ELIGIBLE TOTAL SQ FT - NON -TAX CREDIT ELIGIBLE TOTAL RENTABLE SQ FT 82,099 0 82.099 TOTAL UNITS 151 TOTAL MONTHLY (Net) 175,224 TOTAL ANNUAL 2,102,688 MISCELLANEOUS INCOME Laundry/Vending Financial & Other Revenue PER -UNIT MONTHLY 4.47 3.97 TOTAL MONTHLY 675 600 TOTAL ANNUAL 8,100 7,200 3 Attachment No. 3 Kimball Tower Base Year Income & Expense PAGE 4 Version: DDA Submittal V1.3 (5/9/18 update: 151 units + hard c Revised: June 6, 2018 INCOME Scheduled Gross Income - Residential 1,464,372 Section 8 Premium 638,316 Misc. Income 15,300 Vacancy Loss - Residential 5.0% (73,984) Vacancy Loss - Section 8 Premium 5.0% (31,916) EFFECTIVE GROSS INCOME 2,012,089 EXPENSES - RESIDENTIAL Administrative 64,500 Management Fee 83,352 Utilities 186,000 Payroll/Payroll Taxes 213,985 Insurance (Hazard) 101,440 Property Taxes 13,348 Maintenance 119,440 Replacement Reserve 45,300 Other 119,351 TOTAL EXPENSES - RESIDENTIAL 946,716 Per Unit Per Year (incl. Reserves) 6,270 Per Unit Per Year (w/o Reser., Taxes, Tenant Serv.) 5,292 NET AVAILABLE INCOME 1,065,373 4 Attachment No. 3 Kimball Tower 15-Year Cash Flow Version: Revise0: PAGER DOA Submittal V1.3 (5/91, June 6, 2018 ASSUMPTIONS. Rent Increase: 250% Perm Loan-% Debt Svc Vr 1 0.00% Expenses Increase' 3.50% Perm Loan -% Debt Svc Yr 2 75.00% Reserve Increase. 3.50% Perm Loan -%Debt Svc Yr 3 100.00% 1 2 3 4 S d 7 d 9 10 H 12 13 14 15 18 2414 2414 2424 2421 2422 2422 2424 2421 2924 2422 2421 2429 2424 2L21 2412 2422 GROSS POTENTIAL INCOME -RESIDENTIAL 1,220,310 1,494,880 1,532,252 1,570,558 1,609,822 1,650,068 1,691,319 1,733,602 1,776,902 1,821,366 1,866,900 1,913,572 1,961,412 2,010,447 2,060,708 2,112,226 Section 8 Premium 531.930 651,614 667,905 684,602 701,717 719,260 737,242 755,673 774,565 793,929 813,777 834,121 854,974 876,349 898,257 920,714 Misc. Income 12,750 15,619 16,009 16,409 18,820 17,240 17,671 18,113 18,566 19,030 19,506 19,993 20,493 21,005 21,531 22,069 Vacancy Loss -Residential 5.0% 0 (75,525) (77,413) (79,348) (81,332) (83,365) (85450) (87,586) (89,775) (92,020) (94,320) (96,678) (99.095) (101,573) (104,112) (106,715) Vacancy Loss -Section 8 Premium 5.0% 0 (32,581) (33,395) (34,230) (35,086) (35,983) (36.862) (37,784) (38,728) (39,696) (40,689) (41.706) (42,749) (43,817) (44,913) (46,036) Vacancy Loss -Rehab Period 7.0% (123,549) 0 GROSS EFFECTIVE INCOME 1,641,441 2,054,007 2,105,357 2,157,991 2.211,941 2,267,240 2,323,921 2,382,019 2,441,569 2.502,608 2.565.173 2,629.303 2695035 2,762,411 2,831,471 2,902,258 TOTAL OPERATING EXPENSES 740,057 913.741 945.722 978,822 1,013,081 1,048.539 1,085,238 1,123.221 1.162,534 1,203.222 1.245.335 1,288.922 1,334,034 1,380,725 1,429.051 1,479,068 RE Taxes 2% 13,348 13,570 13,842 14.119 14,401 14,889 14,983 15,283 15,588 15,900 16,218 16.542 16,873 17,211 17,555 17.906 NET OPERATING INCOME 888,036 1,126,696 1,145,793 1,165,050 1,184.459 1,204,012 1,223,700 1.243,515 1.263,447 1.283,486 1,303,620 1,323,838 1,344,128 1,364,475 1,384,866 1,405,285 REPLACEMENT RESERVE 0 33,975 45,300 46,886 48,526 50,225 51,983 53,802 55,685 57,634 59,851 61,739 63,900 66,137 68,451 70,847 NET INCOME AVAILABLE FOR DEBT SERVICE 888,036 1,092,721 1,100,493 1.118,165 1,135,932 1,153,787 1.171,717 1.189,713 1,207.762 1.225,852 1,243.969 1,262,099 1,280,228 1.298,339 1,316,414 1,334,438 CONSTRUCTION PERIOD INCOME PAID FROM OPERATIONS 888036 300,000 0 1 1aa 0w Penn Loan Annual Issuer Fee 0.050% 0 3.729 4,972 4,972 4,972 4,972 4,972 4.972 4,972 4.972 4,972 4,972 4,972 4,972 4,972 4.972 Interest Payment 0 451,586 575,377 569.786 563,858 557,575 550,914 543,852 536,367 528,431 520.019 511,101 501,647 491,625 481,001 469,738 Principal Payment 9 94.722 2,1.411 98 633 194.994 110.843 117 504 t24 5s6 132 067 139 987 148 444 157 314 199.771 176 793 167.418 198 68Q TOTAL DEBT SERVICE 0 505,043 673,390 673,390 673,390 673,390 673,390 673,390 673.390 673,390 673,390 673,390 673,390 673.390 673,390 673,390 Seller Note Hard Debt Payment 0 189,750 261,855 271,020 280,506 290,323 300,485 311,002 321,887 333,153 344,813 356,881 369,372 382,300 395,681 409.530 NET CASH FLOW (0) 97.928 165,248 173,754 182,036 190.073 197,842 205,321 212.485 219,309 225.765 231,827 237,465 242,648 247,343 251,517 Debt Service Coverage Ratio 0.00 1.14 1.18 1.18 1.19 1.20 1.20 1.21 1.21 122 1.22 1.23 1.23 1.23 1.23 1.23 DISTRIBUTION OF CASH FLOW LP Investor Services Fee - Current 10,000 0 10,250 10,558 10.874 11,200 11,536 11,883 12239 12,606 12,984 13,374 13,775 14,188 14,614 15,052 15.504 Partnership Management Fee 25,000 0 25,625 26.394 27,186 28,001 28,841 29,706 30.598 31,516 32,461 33,435 34,438 35,471 36,535 37,631 38,760 Tax -Exempt Seller Carly-8a6k Note to C 50.00% 0 28.860 64.148 67,847 71.417 74,848 78,127 81,242 84,182 86,932 89,478 91.807 93,903 95.749 97,330 98,627 Mercy 30.00% 0 8.058 19.245 20,354 21,425 22.454 23,438 24.373 25,254 26,079 26,843 27.542 28,171 28.725 29,199 29.588 CMV 70.00% 0 18,802 44.904 47,493 49.992 52,393 54,689 56,869 58,927 60,852 62,635 64.265 65,732 67.025 68,131 69,039 General Partner 0.01% (0) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Limited Partner 99.99% (0) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 5 Attachment No. 3 Morgan Tower Prepared Fon Prepared By: Version: Revised: File: Community HousingWorks California Housing Partnership Corporation DDA Submittal (5 / 1 / 18 revision) June 6, 2018 Macintosh HD:Users:Janelle:Dropbox (CHPCLCHPC CLIENrS:Community HousingWorks (CHW):Morgan Tower':Projections:MMorgan Towers (DDA Submittal vl SOURCES OF FUNDS PAGE 1 PERMANENT AMOUNT INT RATE TERM / AMORT COMMENTS Perm Loan 16.651,000 5.850% 35 AHP 1,500,000 0.00% Income from Operations 1,276,520 Seller Carry -Back Note to City 17,810,467 3.04°/ 55 Performance Deposit Refund 100,000 Capital Contributions General Partner 6,244,700 Limited Partners 22,096,819 TOTAL SOURCES Surplus/(ShoMall) 65,679,607 0 CONSTRUCTION Construction Loan Costs Deferred Until Stabilization" Seller Carry -Back Note to City Capital Contributions General Partner Limited Partners TOTAL SOURCES Surplus/(Shortfall) AMOUNT INT RATE TERM (Mo.) 36,462,257 7,597,783 19,310,467 0 2,209,000 66,679,607 (0) 4.800% 18 DISTRIBUTION OF SALES PROCEEDS Sales price Less: Existing Debt Pay-off (Est. as of 3/2019) Less: Seller Note Cash Proceeds to Seller at Construction Closing Est. Cash due to City from Liquidated Reserves (as of 6/30/2017) Seller Note Payment at AHP Award Funding 34,700,000 147,616 19,310,467 15,241,917 718,436 1,500,000 Total Cash Proceeds to Seller 17,460,353 6 Attachment No. 3 Morgan Tower Uses of Funds PAGE 1-A ACQUISITION COSTS Acquisition: Building GENERAL DEVELOPMENT COSTS Residential Construction Site Work Contractor General Conditions Contractor O&P GC Bond & Insurance Prevailing WageMonitor Construction Contingency TOTAL TOTAL RESIDENTIAL 100.00% 34,700,000 34,700,000 12,332,751 12,332,751 593,048 593,048 775,548 775,548 1,034,064 1,034,064 336,071 336,071 96,577 96,577 1,516,806 1,516,806 Arch/Engineering 719,342 719,342 Construction Interest Reserve 2,458,729 2,458,729 Legal 228,500 228,500 Reserves 613,574 613,574 Other Soft Cost 1,727,335 1,727,335 Developer Fee 8,242,600 8,242,600 Costs of Issuance 304,562 304,562 TOTAL DEVELOPMENT COSTS 65,679,507 65,679,507 7 Attachment No. 3 Morgan Tower Unit Mix & Rental Income PAGE 2 Version: DDA Submittal (5/1/18 revision) Revised: June 6, 2018 AVERAGE AFFORDABILITY FOR QUALIFIED UNITS (% AMI) UNIT MIX UTILITY ALLOWANCES 1 BR 152 $41 RESIDENTIAL INCOME TAX -CREDIT ELIGIBLE - TIER 1: 50% TCAC Percentage of Targeted Units: 100.0% % MEDIAN PER -UNIT PER -UNIT TOTAL TOTAL PER UNIT TOTAL INCOME MONTHLY MONTHLY MONTHLY ANNUAL UNIT TYPE NUMBER SQ FT SQ FT AFFORDABLE GROSS RENT NET RENT NET RENT NET RENT 1 BR 151 576 86,976 50.0% 853 812 122,612 1,471,344 TOTAL 151 86,976 122,612 1,471,344 MANAGER UNITS % MEDIAN PER -UNIT PER -UNIT TOTAL TOTAL PER UNIT TOTAL INCOME MONTHLY MONTHLY MONTHLY ANNUAL UNIT TYPE NUMBER SQ FT SQ FT AFFORDABLE GROSS RENT NET RENT NET RENT NET RENT 1 BR 1 576 576 0.0% 0 0 0 0 TOTAL 1 576 0 0 SECTION 8 (PBVs) PER -UNIT PER UNIT INCOME MONTHLY SECTION 8 UNIT TYPE NUMBER TIER NET RENT NET RENT PER -UNIT MONTHLY S8 PREMIUM TOTAL MONTHLY SECTION 8 PREMIUM TOTAL ANNUAL S8 PREMIUM 1 BR 151 50% 812 1,430 618 93,318 1,119,816 TOTAL 151 93,318 1,119,816 SECTION 8 PREMIUM (annual Section 8 income less total annual base rents) 1,119,816 TOTAL - BASE RENT 215,930 2,591,160 TOTAL RESIDENTIAL INCOME TOTAL SQ FT - TAX CREDIT ELIGIBLE 86,976 TOTAL SQ FT - NON -TAX CREDIT ELIGIBLE 0 TOTAL RENTABLE SQ FT 86,976 TOTAL UNITS 152 TOTAL MONTHLY (Net) 215,930 TOTAL ANNUAL 2,591,160 MISCELLANEOUS INCOME Laundry/Vending Financial & Other Revenue PER -UNIT MONTHLY 4.47 3.97 TOTAL MONTHLY 680 604 TOTAL ANNUAL 8,154 7,248 8 Attachment No. 3 Morgan Tower Base Year Income & Expense Version: DDA Submittal (5/1/18 revision) Revised: June 6. 2018 PAGE 4 INCOME Scheduled Gross Income - Residential 1,471,344 Section 8 Premium 1,119,816 Misc. Income 15,402 Vacancy Loss - Residential 5.0% (74,337) Vacancy Loss - Section 8 Premium 5.0% (55,991) EFFECTIVE GROSS INCOME 2,476,234 EXPENSES - RESIDENTIAL Administrative 66,286 Management Fee 83,904 Total Utilities 189,500 Payroll/Payroll Taxes 213,947 Insurance (Hazard) 72,840 Property Taxes 13,348 Maintenance 119,245 Replacement Reserve 45,600 Other 119,552 TOTAL EXPENSES - RESIDENTIAL 924,222 Per Unit Per Year (incl. Reserves) 6,080 Per Unit Per Year (w/o Reser., Taxes, Tenant Serv) 5,107 NET AVAILABLE INCOME 1,552,012 9 Attachment No. 3 Morgan Tower 15-Year Cash Flow Version: Revised: PAGE 8 DDA Submittal (5i1/18 re, June 6,2018 ASSUMPTIONS, Rent Increase: 2.50% Perm Loan - % Debt Svc Vr 1 0.00% Expenses Increase: 3.50% Perm Loan - %Debt Svc Yr 2 75.00% Reserve Increase: 3.50% Perm Loan - % Debt Svc Yr 3 100.00% 1 2 3 4 5 6 7 8 8 10 11 12 13 14 15 18 241a 24111 2424 2221 2122 2422 2424 242S 2422 2022 2121 2421 2414 2421 2412 2011 11. GROSS POTENTIAL INCOME -RESIDENTIAL 1,226,120 1.501.997 1,539,547 1,578.036 1.617,486 1,657,924 1,699,372 1,741,856 1,785,402 1,830,037 1,875,788 1,922,683 1,970,750 2,020,019 2,070,519 2,122,282 Section 8 Premium 661.380 1.143,146 1,171,724 1,201,017 1,231,043 1,261,819 1,293,364 1,325698 1,358,841 1,392,812 1,427,632 1.463.323 1,499,906 1,537,404 1,575,839 1,615,235 Misc. Income 12,835 15.723 16.116 16,519 16,932 17,355 17,789 18,234 16690 10157 19,636 20,127 20,630 21,146 21,674 22,216 Vacancy Loss - Residential 5.0% 0 (75,886) (77,783) (79,728) (81,721) (83,764) (85.858) (88,004) (90,205) (92,460) (94.771) (97.140) (99,569) (102,058) (104610) (107,225) Vacancy Loss -Section 8 Premium 5.0% 0 (57,157) (58,586) (60651) (61,552) (63,091) (64,668) (66,285) (67,942) (69,641) (71,382) (73,166) (74,995) (76,870) (78,792) (80,762) Vacancy Loss - Rehab Period 7.0% (133,023) 0 GROSS EFFECTIVE INCOME 1,767,312 2.527,822 2,591,018 2.655,793 2,722,188 2,790,243 2.859,999 2,931,499 3,004.786 3.079,906 3,156,903 3,235,826 3,316.722 3,399,640 3,484,631 3,571,746 TOTAL OPERATING EXPENSES 721,062 890,282 921,442 953,693 987,072 1,021,619 1,057,376 1,094,384 1,132,688 1,172,332 1,213,363 1,255,831 1.299,785 1,345,278 1,392,362 1,441,095 RE Taxes 2% 13.348 13,570 13,842 14.119 14,401 14,689 14.983 15,283 15,588 15,900 16,218 16,542 16,873 17.211 17555 17,906 NET OPERATING INCOME 1,032,902 1,623,969 1.655,734 1,687.982 1,720,715 1,753,934 1,787,640 1,821,832 1,856,510 1,891,674 1.927,322 1,963,453 2,000,063 2,037,152 2,074,714 2,112.746 REPLACEMENT RESERVE 0 34,200 45,600 47,196 48,848 50,558 52,327 54,158 56,054 58.016 60,046 62.148 64,323 66,575 68,905 71,316 NET INCOME AVAILABLE FOR DEBT SERVICE 1532,902 1,589,769 1,810,134 1,640,788 1,671,867 1,703.377 1,735,313 1.767,673 1,800,456 1,833,658 1,867,276 1.901.305 1.935,740 1,970,577 2,005,809 2,041,429 CONSTRUCTION PERIOD INTEREST PAID FROM OPERATIONS 1,032.902 243,618 0 1 278 520 Annual Issuer Fee 0.050% 0 6,244 8,326 8,326 8,326 8,326 8,326 8.326 8,326 8,326 8,326 8,326 8,326 8,326 8,326 8,326 Interest Payment 0 756,171 963,455 954,093 944,168 933,646 922,493 910,668 898.134 771 117 884,846 870,760 855,827 839,996 823,215 805,425 786,565 Principal Payment 4 111267 TOTAL DEBT SERVICE 0 845,683 155 794 1,127,577 165.158 1.127.577 17.1211 1.127,577 1115.242 1,127,577 339.3 $ 108 553 1,127,577 1,127,577 234 405 1,127,577 248 4e7 1.127,577 222.423 1,127,577 779 255 1,127.577 296.037 1,127,577 313 827 1,127,577 .332,4600 1,127.577 1,127,577 Seller Note (Hard Debt Payment) Mandatory Payment 0 166,500 229,770 237,812 246.135 254,750 263,666 272,895 282,446 292,332 302,563 313,153 324,113 335,457 347.198 359.350 NET CASH FLOW (0) 333,969 252,787 275,397 298,155 321,050 344,070 367,202 390,434 413,750 437,136 460,575 484,050 507,543 531,034 554,502 Debt Service Coverage Ratio 0.00 1.33 1.19 1.20 1.22 1.23 1.25 1,26 1.28 1.29 1.31 1.32 1.33 1.35 1.36 1.37 DISTRIBUTION OF CASH FLOW LP Investor Services Fee - Current 10,000 0 10,250 10,558 10,874 11,200 11,536 11,883 12,239 12,606 12,984 13,374 13,775 14,188 14,614 15,052 15,504 Partnership Management Fee 25,000 0 25525 26,394 27,186 28,001 28.841 29,706 30,598 31,516 32,461 33,435 34,438 35,471 36.535 37,631 38.760 Seller Carry -Back Note to City 50.00% 0 144,880 107,918 118.669 129,477 140.336 151,240 162,183 173,156 184,152 195,164 206,181 217,195 228,197 239,175 250,119 Mercy 30.00% 0 43,464 32.375 35,601 38,843 42,101 45,372 48,655 51,947 55,246 58,549 61,854 65,159 68,459 71,753 75,036 CHW 70.00% 0 101,416 75,543 83,068 90,634 98,235 105,868 113,528 121,209 128.907 136,614 144,327 152,037 159.738 167,423 175,083 General Partner 0.01% (0) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Limited Partner 99.99% (0) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 10 Attachment No. 3 Morgan Tower Prepared For: Prepared By: Version: Revised: File: Community HousingWorks California Housing Partnership Corporation DDA Submittal 9% (5 / 4/18 revision) June 6, 2018 Macintosh HD:Users:Janelle:Dropbox (CHPC):CHPC CLIENfS:Community ItousingWorks (CHW):Morgan Tower:Pmjections:IMorgan Towers (DDA Submittal U SOURCES OF FUNDS PAGE 1 PERMANENT AMOUNT INT RATE TERM / AMORT COMMENTS Perm Loan 15,037,000 6.800% AHP 1,500,000 0.00% Income from Operations 1,276,520 Seller Carry -Back Note to City 18,487,238 3.04% Capital Contributions General Partner 200,000 Limited Partners 23,086,083 TOTAL SOURCES 69,686,841 Surplus/(Shortfall) 0 35 55 CONSTRUCTION AMOUNT INT RATE TERM (Mo.) Construction Loan 37,237,995 5.080% 18 Costs Deferred Until Stabilization' 1,553,608 Seller Carry -Back Note to City 18,487,238 Capital Contributions General Partner Limited Partners TOTAL SOURCES Surplus/(Shortfall) 0 2,308.000 59,585,841 (0) DISTRIBUTION OF SALES PROCEEDS Sales price Less: Existing Debt Pay-off (Est. as of 3/2019) Less: Seller Note Cash Proceeds to Seller at Construction Closing Est. Cash due to City from Liquidated Reserves (as of 6/30/2017) Seller Note Payment at AHP Award Funding Total Cash Proceeds to Seller 34,700,000 147,616 19,987,238 14,565,146 718,436 1,500.000 16.783, 582 11 Attachment No. 3 Morgan Tower Uses of Funds PAGE 1-A ACQUISITION COSTS Acquisition: Building GENERAL DEVELOPMENT COSTS Residential Construction Site Work Contractor General Conditions Contractor O&P GC Bond & Insurance Prevailing WageMonitor Construction Contingency TOTAL RESIDENTIAL 100.00% 34,700,000 34,700,000 12,332,751 12,332,751 593,048 593,048 775,548 775,548 1,034,064 1,034,064 336,071 336,071 96,755 96,755 1,516,824 1,516,824 Arch/Engineering 719,342 719,342 Construction Interest Reserve 2,646,729 2,646,729 Legal 255,600 255,600 Reserves 613,574 613,574 Other Soft Cost 1,671,535 1,671,535 Developer Fee 2,200,000 2,200,000 Costs of Issuance 95,000 95,000 TOTAL DEVELOPMENT COSTS 59,586,841 59,586,841 12 Attachment No. 3 Morgan Tower Unit Mix & Rental Income PAGE 2 Version: DDA Submittal 9% (5/4/18 revision) Revised: June 6, 2018 AVERAGE AFFORDABILITY FOR QUALIFIED UNITS (% AMI) UNIT MIX UTILITY ALLOWANCES 1 BR 152 541 RESIDENTIAL INCOME TAX -CREDIT ELIGIBLE - TIER 1: 50% TCAC Percentage of Targeted Units: 100.0% UNIT TYPE NUMBER PER UNIT SQ FT TOTAL SQ FT % MEDIAN PER -UNIT INCOME MONTHLY AFFORDABLE GROSS RENT PER -UNIT MONTHLY NET RENT TOTAL MONTHLY NET RENT TOTAL ANNUAL NET RENT 1 BR _ 151 576 86,976 50.0% 853 812 122,612 1,471,344 TOTAL 151 86976 122,612 1.471.344 MANAGER UNITS UNIT TYPE NUMBER PER UNIT SO FT TOTAL SQ FT % MEDIAN PER -UNIT INCOME MONTHLY AFFORDABLE GROSS RENT PER -UNIT MONTHLY NET RENT TOTAL MONTHLY NET RENT TOTAL ANNUAL NET RENT 1 BR 1 576 576 0.0% 0 0 0 0 TOTAL 1 576 0 0 SECTION 8 (PBVs) PER -UNIT PER UNIT INCOME MONTHLY SECTION 8 UNIT TYPE NUMBER TIER NET RENT NET RENT PER -UNIT MONTHLY S8 PREMIUM TOTAL MONTHLY SECTION 8 PREMIUM TOTAL ANNUAL S8 PREMIUM 1 BR 151 50% 812 1 430' 618 93,318 1.119.816 TOTAL 151 93,318 1.119,816 SECTION 8 PREMIUM (annual Section 8 income less total annual base rents) 1.119 816 TOTAL - BASE RENT 215,930 2.591.160 TOTAL RESIDENTIAL INCOME TOTAL SQ FT - TAX CREDIT ELIGIBLE 86,976 TOTAL SQ FT - NON -TAX CREDIT ELIGIBLE 0 TOTAL RENTABLE SO FT 86.976 TOTAL UNITS 152 TOTAL MONTHLY (Net) 215,930 TOTAL ANNUAL 2,591,160 MISCELLANEOUS INCOME LaundryNending Financial & Other Revenue PER -UNIT MONTHLY 4.47 3.97 TOTAL MONTHLY 680 604 TOTAL ANNUAL 8,154 7,248 13 Attachment No. 3 Morgan Tower Base Year Income & Expense Version: DDA Submittal 9% (5/4/18 revision) Revised: June 6, 2018 PAGE 4 INCOME Scheduled Gross Income - Residential 1,471,344 Section 8 Premium 1,119,816 Misc. Income 15,402 Vacancy Loss - Residential 5.0% (74,337) Vacancy Loss - Section 8 Premium 5.0% (55,991) EFFECTIVE GROSS INCOME 2,476,234 EXPENSES - RESIDENTIAL Administrative Administrative 66,286 Management Fee 83,904 Utilities 189,500 Water/Sewer 95,500 Payroll/Payroll Taxes 213,947 Insurance (Hazard) 72,840 Property Taxes 13,348 Maintenance 119,245 Replacement Reserve 45,600 Other 119,552 TOTAL EXPENSES - RESIDENTIAL 924,222 Per Unit Per Year (incl. Reserves) 6,080 Per Unit Per Year (w/o Reser., Taxes, Tenant Serv.) 5,107 NET AVAILABLE INCOME 1,552,012 14 Attachment No. 3 Morgan Tower 15-Year Cash Flow Version: Revised: PAGE 8 DDA Submittal 9% (5/4/1E June 6, 2018 ASSUMPTIONS: Rent Increase'. 2.50% Perm Loan -% Debt Svc Yr 1 Expenses Increase: 3.50% Perm Loan - % Debt Svc Yr 2 Reserve Increase'. 3.50% Penn Loan-% Debt Svc Yr 3 0.00% 75.00% 100.00% 1 2 3 4 6 6 7 8 9 10 11 12 19 14 16 18 2414 2112 2424 2921 2422 2422 2424 2025 2025 2422 2421 2922 2424 2421 2E22 2422 11. GROSS POTENTIAL INCOME - RESIDENTIAL 1,226.120 1,501,997 1,539,547 1,578.036 1,617,486 1.657,924 1,699,372 1,741,856 1,785,402 1,830,037 1,875,788 1,922,683 1,970,750 2,020,019 2,070,519 2,122,282 Section 8 Premium 661,380 1,143,146 1,171,724 1,201,017 1.231,043 1,261,819 1.293,364 1,325,698 1,358,841 1,392,812 1,427,632 1,463,323 1,499,906 1,537,404 1,575,839 1,615,235 Misc. Income 12,835 15,723 16,116 16,519 16,932 17,355 17,789 18,234 18,690 19,157 19,636 20,127 20,630 21,146 21,674 22,216 Vacancy Loss -Residential 5.0% 0 (75,886) (77,783) (79,728) (81,721) (83,764) (85,858) (88,004) (90,205) (92,460) (94,771) (97,140) (99,569) (102,058) (104,610) (107,225) Vacancy Loss -Sections Premium 5.0% 0 (57,157) (58,586) (60,051) (61,552) (63,091) (64,668) (66,285) (67,942) (69,641) (71,382) (73,166) (74,995) (76,870) (78,792) (80,762) Vacancy Loss - Rehab Period 7.0% (133,023) 0 GROSS EFFECTIVE INCOME 1,767,312 2,527,822 2,591,018 2,655,793 2,722,188 2,790,243 2,859,999 2,931,499 3,004,786 3,079,906 3,156,903 3,235,826 3,316,722 3,399,640 3,484,631 3,571.746 TOTAL OPERATING EXPENSES 721,062 890,282 921,442 953,693 987,072 1,021,619 1,057,376 1,094,384 1,132.688 1,172,332 1,213,363 1,255,831 1,299,785 1,345,278 1,392,362 1,441,095 RE Taxes 2% 13,348 13,570 13.842 14,119 14,401 14,689 14,983 15,283 15,588 15,900 • 16,218 18,542 16,873 17,211 17,555 17,906 NET OPERATING INCOME 1,032,902 1,623,969 1,655,734 1.687,982 1,720,715 1,753,934 1,787,640 1,821,832 1,856,510 1,891,674 1,927,322 1,963,453 2,000,063 2,037,152 2,074,714 2,112,746 REPLACEMENT RESERVE 0 34,200 45,600 47,196 48,848 50,558 52,327 54,158 56,054 58,016 60,046 62,148 64,323 66,575 68,905 71,316 NET INCOME AVAILABLE FOR DEBT SERVICE 1,032,902 1,589,769 1,610,134 1,640,786 1,671,867 1,703,377 1,735,313 1,767,673 1,800.456 1.833,658 1,867,276 1,901,305 1,935,740 1,970,577 2,005.809 2,041,429 CONSTRUCTION PERIOD INTEREST PAID FROM OPERATIONS 1,032,902 243,618 0 1 276 520 Perm Loan Interest Payment 0 785,229 1,013,524 1,005,522 996,958 987,794 977,987 967,492 956,260 944,240 931,377 917,612 902,881 887,116 870,246 852,191 Principal Payment 4 69.4e4 114 054 122.1115 1211219 129 219 149 591 104.082 171 317 183 337 1220,255 25.5.820 224.596 240101 21L222 275 266 TOTAL DEBT SERVICE 0 845,683 1,127,577 1,127,577 1,127,577 1,127,577 1,127,577 1,127,577 1.127,577 1,127,577 1,127,577 1,127,577 1,127,577 1.127,577 1,127,577 1,127,577 Seller Note (Hard Debt Payment) Mandatory Payment 0 166,500 229.770 237,812 246.135 254750 263,686 272,895 282,446 292,332 302,563 313,153 324,113 335,457 347,198 359,350 NET CASH FLOW (0) 333,968 252,786 275,397 298,154 321,049 344,069 367,201 390,433 413,749 437,135 460,574 484,049 507,542 531,033 554,502 Debt Service Coverage Ratio 1.33 1.19 1.20 1.22 1.23 1.25 1.26 1.28 1.29 1.31 1.32 1.33 1.35 1.36 1.37 DISTRIBUTION OF CASH FLOW LP Investor Services Fee -Current 10,000 0 10,250 10,558 10,874 11,200 11,536 11,883 12,239 12,606 12,984 13,374 13,775 14,188 14,614 15,052 15,504 Partnership Management Fee 25,000 0 25,625 26,394 27,186 28,001 28,841 29,706 30.598 31,516 32,461 33,435 34,438 35,471 36.535 37,631 38,760 Seller Carry -Back Note to City 50.00% 0 144,880 107,918 118,668 129,476 140,336 151.240 162,182 173,156 184,152 195,163 206,181 217,195 228,197 239,175 250,119 Mercy 30.00% 0 43,464 32,375 35,601 38,843 42,101 45,372 48,655 51,947 55,246 58,549 61,854 65.159 68,459 71,752 75,036 CHW 70.00% 0 101.416 75,542 83,068 90,634 98,235 105,868 113,528 121,209 128,906 136,614 144,326 152,037 159,738 167,422 175,083 General Partner 0.01% (0) - 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Limited Partner 99.99% (0) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 15 Attachment No. 4 6/19/2018 Kimball and Morgan Towers Community Development Commission - Housing Authority (CDC -HA) Keyser Marston Associates, Inc. June 19, 2°18 Timeline May— December 2°17 KMA: • Prepared developer solicitation • Reviewed RFP responses • Evaluated developer financial pro formas • Presented KMA conclusions January —April 2018 CHW-Mercy: • Performed extensive due diligence Met with tenants Received "Comfort Letter" from HUD for new contract rents for Morgan Tower • Updated financial pro formas April — May 2018 KMA: • Analyzed CHW-Mercy updated financial pro formas and cash flow projections • Obtained clarification and substantiation from CHW-Mercy • Prepared independent financial models 1 1 Attachment No. 4 6/19/2018 CHW-Mercy Updated Financial Proposal 1 (2) Acquisition Price (before Seller Note) (2) Seller Note (3) Nutrition Center (4) Annual Cash Flow to CDC -HA Community HousingWorks August 2o27 RFP Kimball ® 4%Tax Credits Morgan ® g%Tax Credits $67.8 M $224,000/unit $24.1 M $47,000 /unit $475,000 /year as project operating expense 5o% of residual receipts • first applied to Seller Note • then pay as ground rent Figures shown are for Kimball and Morgan Towers combined. Subject to re -appraisal. May 2oi8 Kimball ® 4%Tax Credits Morgan ® 4% Tax Credits $67.8 M 2 $224,000/unit $42.2 M $236,000 /unit $475,000 /year hard debt service payment 5o% of residual receipts • first applied to Seller Note • then pay as ground rent 2 Stipulated Pro Forma Inputs from 2017 RFP Process Acquisition Costs Building Rehabilitation Costs Monthly Rent $200,000 per unit $55,0oo 1 per unit FMR of si,3oi per month i Assumed to include contractor overhead fee, general conditions, and contractor contingency. On -Sites/ Off -Sites, Remediation, and Parking estimated at so. Includes the payment of prevailing wages. 3 2 Attachment No. 4 6/19/2018 Key Changes to Financial Pro Formas (1) Rehabilitation Costs' (2) Fair Market Rents (3) Operating Expenses (4) Permanent Loan Interest Rates (5) Tax Credit Pricing CHW-Mercy August 2017 RFP $55,000 /unit 2 Kimball: $1,3012 Morgan: $1,342 2 $4,600/unit Kimball: 4.5% Morgan: 5.6% Kimball: $1.03 Morgan: $1.02 ' Reflects total per unit direct costs for Kimball and Morgan Towers combined. ' Stipulated pro forma inputs from RFP process. May 2018 $100,000 /unit Kimball: $1,176 Morgan: $1,430 $5,000 /unit Kimball: 5.9% Morgan: 5.9% Kimball: $0.96 Morgan: $0.96 4 Construction Cost Increase — Key Items 1 • Iron Balcony Railings $2.1 M • New Windows / Sliding Doors $3.7 M • Materials Lift $772 K • 15t Floor Upgrades $76o K • Plumbing Lines $3.1 M • ADA Units $1.2 M • Demolition $861 K Total $12.6 M Figures shown are for Kimball and Morgan Towers combined. 3 Attachment No. 4 6/19/2018 CHW-Mercy Pro Formas Purchase Price (Less) Seller Note (Less) Loan Balance CHW-Mercy - May 2018 Kimball ® 4%Tax Credits Morgan Qa 4%Tax Credits $67.8 M ($41.2 M) (so.1 M) Upfront Cash Reserves Annual Payments' Total Value to CDC -HA Nutrition Center Fees to City 3 $26.4M $2.1 M $3.1 M $31.6 M $9.1 M Figures shown are for Kimball and Morgan Towers combined. 1 Present value of annual Seller Note repayments and ground lease payments to the CDC -HA from residual receipts. 3 Present value of Seller Note hard debt service payments to be used toward Nutrition Center Fees. 6 KMA Adjusted Pro Formas Sources of Funds Development Costs K MA Adjusted December 2017 Kimball 4% Morgan g% Test #1 CHW-Mercy May 2018 • rehabilitation • acquisition • FMR $85.5 M $96.7 M ($96.7 M) Test #2 Test #1 CHW-Mercy May 2o18 • interest rate • tax credit pricing Test 3 Test #1+Test #2 CHW- May 2018 • Seller Note hard debt service payment CHW-Mercy May 2018 Kimball 4% Morgan g% $87.8 M ($224.7 M) ($124.7 M) $81.1 M $80.4 ($224.7 M) ($3.22.3 M) Seller Note ($11.2 M) ($28.1 M) ($36.9 M) (i) Figures shown are for Kimball and Morgan Towers combined. ($43.6 M) ($41.9 M) 7 4 Attachment No. 4 6/19/2018 KMA Adjusted Pro Formas1 KMA Adjusted December zo1z Kimball 4% Morgan 9% Purchase Price $60.6 M (Less) Seller Note ($11.2 M) (Less) Loan Balance ($0.o M) Upfront Cash $49.4 M Reserves $2.1 M Annual Payments$2.8 M Test #1 CHW-Mercy May 2018 • rehabilitation • acquisition • FMR $67.8 M ($34.4 M) (so.o M) Test#z Test CHW- Test #1 Test #1+Test #2 Mercy CHW-Mercy CHW- May 2018 May 2018 May 2018 • Seller Note hard • interest rate debt service Kimball 4% • tax credit payment Morgan 9% pricing $33.4 M $2.1 M $3.4 M $67.8 M ($42.4 M) (so.o M) $25.4 M $2.1 M $3.6 M $67.8 M ($43.6 M) (so.o M) $24.2 M $2.1 M $3.7 M $67.8 M ($41.9 M) ($0.2 M) $25.7 M $2.1 M $3.2 M Total Value to CDC -HA Nutrition Center Fees to City 3 1 Figures shown are for Kimball and Morgan Towers combined. Present value of annual Seller Note repaym nts and ground lease payments to the CDC -HA from residual receipt . 3 Present value of operating expense fee / Sell r Note hard debt service payments to be used toward Nutrition Center Fees $54.3 M $38.9 M $31.1 M $10.3 M $10.3 M $10.3 M $30.1 M $31.0 M $9.1 M $9.1 M 8 Kimball and Morgan Towers Community Development Commission -Housing Authority City of National City Keyser Marston Associates, Inc. June 19, 2°18 5 RESOLUTION NO. 2018 — RESOLUTION OF THE COMMUNITY DEVELOPMENT COMMISSION -HOUSING AUTHORITY OF THE CITY OF NATIONAL CITY AUTHORIZING THE EXECUTIVE DIRECTOR TO EXECUTE A DISPOSITION AND DEVELOPMENT AGREEMENT WITH KIMBALL TOWER HOUSING ASSOCIATES, L.P., AND MORGAN TOWER HOUSING ASSOCIATES, L.P., FOR THE RECAPITALIZATION AND REHABILITATION OF A 151-UNIT AFFORDABLE SENIOR HOUSING TOWER, KNOWN AS KIMBALL TOWER, LOCATED AT 1317 "D" AVENUE, AND A 152-UNIT AFFORDABLE SENIOR HOUSING TOWER, KNOWN AS MORGAN TOWER, WHICH INCLUDES THE GEORGE H. WATERS NUTRITION CENTER, LOCATED AT 1415 "D" AVENUE IN NATIONAL CITY WHEREAS, the Community Development Commission -Housing Authority of the City of National City ("CDC -HA") owns the improvements commonly known as the "Kimball Tower" and that certain real property located at 1317 D Avenue (APN No. 560-410-05-00) in the City of National City (the "Kimball Property"); and WHEREAS, the CDC -HA also owns the improvements commonly known as the "Morgan Tower" and that certain real property located at 1415 "D" Avenue (APN No. 560-410- 04-00) in the City of National City (the "Morgan Property"); and WHEREAS, as the result of a competitive request for qualifications and request for proposals process, Community HousingWorks ("CHW"), a California nonprofit public benefit corporation, and Mercy Housing California ("Mercy"), a California nonprofit public benefit corporation entered into an Exclusive Negotiation Agreement on December 19, 2017 with the CDC -HA for the rehabilitation and recapitalization of the Kimball Property and the Morgan Property; and WHEREAS, CHW and Mercy have formed two limited partnerships named Morgan Tower Housing Associates, L.P., a California limited partnership ("Morgan Developer"), and Kimball Tower Housing Associates, L.P., a California limited partnership ("Kimball Developer") to legally execute the Disposition and Development Agreement (the "Agreement") in order to recapitalize and rehabilitate Morgan and Kimball Tower using Low -Income Housing Tax Credits; and WHEREAS, the CDC -HA , the Kimball Developer, and the Morgan Developer desire by the Agreement to establish conditions for: (i) the CDC -HA to ground lease the Kimball Property to the Kimball Developer; (ii) the CDC -HA to sell fee title to the Kimball Tower to the Kimball Developer; (iii) the Kimball Developer to recapitalize and rehabilitate the Kimball Tower; (iv) the CDC -HA to ground lease the Morgan Property to the Morgan Developer; (v) the CDC - HA to sell fee title to the Morgan Tower to the Morgan Developer; and (vi) the Morgan Developer to recapitalize and rehabilitate the Morgan Tower; and WHEREAS, the scope of the Agreement is categorically exempt from CEQA review by CCR Title 14 Section 15301 Existing Facilities; and WHEREAS as referenced in the Agreement, Kimball Developer shall receive from CDC -HA and/or HUD (as applicable) a Section 8 Housing Assistance Payment Agreement with a minimum term of twenty (20) years to provide Section 8 Project Based Vouchers or Section 8 Project Based Rental Assistance for one hundred forty-nine (149) units at the Kimball Tower on terms acceptable to the Kimball Developer in its sole and absolute discretion. Resolution No. 2018 — Page Two WHEREAS, the CDC -HA will complete a NEPA Environmental Assessment for the U.S. Department of HUD before Section 8 Project -Based Vouchers are released by the CDC -HA and/or HUD (as applicable) to the Kimball Developer. NOW, THEREFORE, BE IT RESOLVED that the Community Development Commission -Housing Authority of the City of National City hereby authorizes the Executive Director to execute a Disposition and Development Agreement with Kimball Tower Housing Associates, L.P., and Morgan Tower Housing Associates, L.P., for the recapitalization and rehabilitation of a 151-unit affordable senior housing tower, known as Kimball Tower, located at 1317 "D" Avenue, and a 152-unit affordable senior housing tower, known as Morgan Tower, which includes the George H. Waters Nutrition Center, located at 1415 "D" Avenue in National City. Said Disposition and Development Agreement is on file in the office of the City Clerk. PASSED and ADOPTED this 19th day of June, 2018. Ron Morrison, Chairman ATTEST: Leslie Deese, Secretary APPROVED AS TO FORM: Angil P. Morris -Jones General Counsel is dot KIMBALL AND MORGAN To Disposition and Development Agreement (DDA) --- for Acquisition and Renovation Presentation to Community Development Commission - Housing Authority City of National City June 19, 2018 • Community miw_ _do& HousingWorks New- CHW 4" iffriffiretAA Ai mercy Nair HOUSING PARTNERS AND ROLES B Community HousingWorks (CHW) — Lead General Partner ■ Lead for Design, Construction, Finance ■ Asset Manager overseeing Property Management ■ Mercy Housing California (MHC) — Co -General Partner ■ Property Manager ■ Resident Services Provider Key Team Members — per RFP ■ General Contractor — MRFG-ICON (formerly ICON Builders) ■ Architect — Egan Simon Architecture ■ Legal (HUD -related Issues): Nixon Peabody LLC ■ Tax Credits / Financial Consultant: California Housing Partnership Corp. (CHPC) CHW Community HousingWorks. mercy HOUSING RFP RESPONSE: 4 GOALS Preserve and upgrade the physical asset • Continue the City's stewardship of providing affordable homes for current and future low income seniors • Through impactful resident services and effective property management, provide a safe and stimulating environment for residents EA Provide the CDC -HA with significant economic return by payment from sales proceeds, a stream of income from residual receipts, and guaranteed annual subsidy for George H. Waters Nutrition Center all Community Housing Works CHW a mercy HOUSING STATUS REPORT • Exclusive Negotiating Agreement (ENA) - Resolution adopted by Commission December 2017 • Team on schedule with ENA Deadlines and RFP Implementation Timeframes • Resident Engagement • Physical Renovation • Legal and Project Finance • "You did what you said you would do" tok CHW Community Housing Works. Ai mercy HOUSING RESIDENT ENGAGEMENT CHW Community HousingWorks AD mercy HOUSING RESIDENT ENGAGEMENT Commitment: Continuation of City's Prior Stewardship Goal Regarding Residents: Allay Concerns, Transparency, Elicit Input on Needed Rehab Introduction Letter — January in Meetings —14+ Meetings since January • FAQ (bilingual) provided, then at Front Desk E3 Location: George H. Waters Nutrition Center • Smaller Groups • Flyer Invitation • Very well attended • Translator/ Interpreter • Phone Line —Resident Call in questions (bilingual) tak CHW Community HousingWorks mercy HOUSING RESIDENT ENGAGEMENT Commitment: Continuation of City's Prior Stewardship ✓ Temporary Relocation ■ Mercy Relocation team — each resident has plan / options, meetings ■ "Concierge", assume 6 nights; longer for full ADA units (16 each building) • Input on Scope - "(Physical) assessments start with the current residents, obtaining their feedback on building performance, what works and what does not work, common area upgraders desired..." (RFP Response 8/31/17) Questions from Residents ■ Continued affordability, HUD and PHA rent subsidy ■ Comments on needed renovation, logistics of rehab • Goals for Residents ■ Resident Financial Stability (Project -Based Section 8 Contracts, Resident Services per RFP) ■ Resident comfort, engagement, healthy aging in place ilk Community Housing Works CHW AD mercy HOUSING PHYSICAL RENOVATION OfCommunity HousingWorks CHW mercy HOUSING PHYSICAL DUE DILIGENCE Ed Physical Assessment Team — Evaluations • Started January 24 • Walked all common areas, every apartment (301), roofs, mechanical / maintenance areas, grounds, George H. Waters Nutrition Center • "As directed in the RFP..., the proforma for each property includes a fixed amount of assumed renovation hard construction costs...Proposed scope and estimated costs will need to be confirmed after full due diligence." (RFP Response, 8/31/17, page 3) CHW-Mercy Team - including Development team, Asset, Property Management, Facilities, Resident Services teams Architect • Mechanical Engineer and Plumbing Engineer • Electrical Engineer • Landscape Architect F1 Structural Engineer (exterior), Seismic Assessment Environmental Team, sampling lead -based paint and asbestos containing materials Team during due diligence walks CHW Community Housing Works. IF mercy HOUSING PHYSICAL DUE DILIGENCE • Civil Engineer- ADA, stormwater compliance, circulation and trash enclosures Surveyor — Topographical, ALTA survey ■ Note: Both properties are in 100 year flood zone; Kimball building itself in flood zone; Paradise Creek is channelized in three 6' concrete pipes cut across the parcels • General Contractor ■ Walked with internal team, then samples of units with subcontractors • Specialty Consultants ■ Roof — protection of structure, safety of maintenance staff ■ Elevator ■ Fire Life Safety Systems ■ Energy Assessments - tax credit requirements, best operating efficiency, electrical calcs ■ Mechanical Engineers regarding Boilers — operating efficiency, safety ■ Plumbing - Isolation valves, invasive scope, sampling of lines (lab testing) CHW Community HousingWorks mercy HOUSING PHYSICAL DUE DILIGENCE • Restaurant Consultant for George H. Waters Nutrition Center • Met with Nutrition Center management • Engaged and accompanied by architect • Requirements, including providing a grease trap (currently none) • Last week, waste line issues — need replacement • ADA requirements for Nutrition Center as it is open to "public" and residents • City Building Official and Fire Marshall • Architect and development team met with City officials • City requirements regarding ADA upgrades • City's Stormwater Consultant (with Civil Engineer) F� PNA Report - Same firm that did the city's prior one • Role of Property Needs Assessment (PNA) vs consultants — broad brush • HUD Physical Inspection • HUD's annual physical inspection ("REAC") for Morgan in March 2018 — Failing Score Ilk Community HousingWorks CHW ,Iv mercy HOUSING PROCESS OF DETERMINING REHAB SCOPE Process of Data Review ■ Independent Scoring of all unit systems — Scale 1-5 ■ Scores reconciled among team (almost unanimous from independent reviews) • CHW "ABC" Scope Review ■ City staff input • Rehab Goals per the RFP Response ■ Extend the life of the asset ■ Reduce operating expenses for long term sustainability ■ Improve functionality for resident comfort and healthy active lives • Occupied Rehab Process different than New Construction Community Housing Works CHW mercy HOUSING REHAB COSTS Cost Estimates ■ General Contractor completed rehabs for 21k apartments and 21+ towers (423 units in towers currently under construction in San Diego) ■ Review ■ CHW and Team ■ Engaged independent construction manager (AMJ Construction Management) experienced in high rise construction in San Diego / Southern California ■ Impact of tariffs on materials (e.g. railings) ■ Impact of construction market costs Prevailing Wage —prevailing wages ■ Davis Bacon and state — Commercial rates (high rise construction) ■ Wage Rates ■ Local outreach efforts = local jobs ■ Shovel -ready 2019 Q1 — if proceed with DDA now CHW Community HousingWorks mercy HOUSING ELEMENTS OF REHAB SCOPE Major Building Systems Goal: preserve assets for 55+ years, reduce energy/water usage for sustainable operating costs, meet code I funding requirements ■ Roof ■ Elevators — safety, beyond useful life • Windows — dual pane for energy/comfort, beyond useful life • Balcony Repair, Waterproofing, Railings — City regarding ADA, preservation • Boilers (Morgan) — high efficiency • Plumbing — isolation valves (Kimball), relining of supply lines, cleaning/repairing waste lines • Life and Safety — alarm with strobe light, battery back-up, Co2 combos, 10 year smoke detectors • ADA— in apartments, common areas, site, including mailboxes, signage ® Emergency Pull Cords in Units — Resident safety is primary ■ Ineffective, answered by maintenance personnel who decide if call warrants medical attention, liability to owner ■ Abandon and replace with pendant system (Mercy's bulk contract) Ei Security- camera system • Exterior paint, monument • Exterior construction lifts alli Community HousingWorks. CHW ,1F mercy HOUSING ELEMENTS OF REHAB SCOPE Major Building Systems -Roof, Balconies, Windows � rrm siwt inttt im. innr 1 .J1f Alladiuminiamimmunii Alt rr;i11� r, Illl ! I I✓' :LL ... llrr•l,ril .I I is lam""" UMW Morgan existing roof drain Morgan roof Existing balcony railings and concrete Balconies Non-ADA compliant railing Balcony railings Existing windows/sliding doors CHW Community HousingWorks Ai mercy HOUSING ELEMENTS OF REHAB SCOPE Major Building Systems -Elevators Obsolete elevator control board Elevator exteriors Morgan car door operator Elevator cab interior Towers' typical car top ACommunity Housing works CHW AI mercy HOUSING ELEMENTS OF REHAB SCOPE Major Building Systems -Fire Life and Safety Kimball and Morgan Fire Panels Kimball Fire Alarm Battery Kimball Fire Alarm Speaker Kimball has no proper exterior fire notification system Kimball's fire system notification is tied into the stairway egress lighting glith Community HousingWorks CHW .mercy HOUSING ELEMENTS OF REHAB SCOPE Major Building Systems -Boiler Morgan outdated neat exchanger iviorgan gas -tired boiler rcimbaii mixing valve gal Community Housing Works CHW a mercy lr HOUSING ELEMENTS OF REHAB SCOPE Major Building Systems -Plumbing Cast iron pipe with evidence of deep graphitic corrosion on inner diameter Nutrition Center corroded waste cast iron drain piping — June 2018 u1111111111i12 i1 q1,i1uiIiis 1111111111111114111`111yltl lI ILI Cast iron pipe sample showing gross amounts of graphitic corrosion, with red arrow showing hole in pipe Copper piping sample showing inner diameter CHW Interior of cast iron piping Interior of copper piping Community Housing Works Ai mercy HOUSING ELEMENTS OF REHAB SCOPE Apartments Goal: Preserve asset, reduce operating costs, provide resident comfort and energy/water efficiency, "age in place" • Flooring — plank (maintenance, air quality, operating cost savings) Bathrooms — water conservation, fixtures • Kitchens — ADA re move refrigerator, new cabinets, counters extended for ADA • G F I —safety • Electrical panels i Appliances — energy, end of useful life Thermostats — comfort, reduce operating costs 16 full ADA apartments (each building) — larger bathrooms, structural changes, city requirement F Pendants to replace emergency pull chords Pull chord system Pedants CHW Community Housing Works mercy HOUSING ELEMENTS OF REHAB SCOPE Apartments -Current Interiors Kitchen needs ADA counter adjustments Standard living room Standard bathroom 1111111116 Unit outdated electric panel Thermostat and fan switch Bathroom light OrCommunity Housing Works CHW AD mercy Vr HOUSING ;-- CHW & MERCY TYPICAL INTERIORS Typical Interior I North Park Seniors Bedroom I North Park Seniors Kitchen I North Santa Fe Living Room & Dining Room I Manzanita CHW Community Housing Work ai mercy II HOUSING ELEMENTS OF REHAB SCOPE Common Areas Goal: Security, build and sustain community, engage residents for healthy productive lives, areas for resident services Amenity Areas - community rooms, etc. ADA requirements ■ Mailboxes ■ Restrooms near Nutrition Center ■ Exterior amenity areas Maximize use of current space Hard flooring - health, comfort, ease for walking, reduction of replacements of carpet in corridor and common spaces Corridor lighting, trash chute doors Typical Community Room — North Santa Fe Mercy resident health -check room Community Housing Works mercy HOUSING ELEMENTS OF REHAB SCOPE Current Common Areas Measuring ADA compliance Kimball Community Room Laundry Room Mailboxes at Kimball entrance CHW Community HousingWorks mercy HOUSING CHW & MERCY TYPICAL COMMON AREAS Computer and work area Conference room Community room kitchen North Park Seniors Elevator lobby Mailboxes 1014 Community HousingWorks CHW mercy HOUSING ELEMENTS OF REHAB SCOPE Kimball Ground Floor Conceptual Plan with Revised Community Areas CHW Community Housing Works. ji mercy IV HOUSING ELEMENTS OF REHAB SCOPE Current Morgan/Nutrition Center Entrance & Restrooms Morgan current entrance Morgan and Nutrition Center current entrance Location of Morgan future entrance Nutrition Center bathrooms CHW Community HousingWorks. Al mercy HOUSING ELEMENTS OF REHAB SCOPE New Morgan Entrance --- { ..j to ---4 New Nutrition Center Entrance --, Morgan Ground Floor Conceptual Plan with New Entrances, Restrooms CHW Community Housing Works. AD mercy HOUSING ELEMENTS OF REHAB SCOPE Site and Landscape Goal: Improve vehicular and pedestrian circulation, ADA requirements, stormwater requirements (including trash enclosures), create connections between 2 buildings, security, empower residents with amenities for healthy productive lives • ADA map of parking/sidewalk areas out of compliance • Trash enclosures - water quality requirements • Create connection and improved circulation • Traffic calming • Safer pedestrian pathways • Visual and psychological connection between the buildings • Provide amenities - including those that promote a healthy lifestyle CHW Community Housing Works. mercy HOUSING ELEMENTS OF REHAB SCOPE ADA Correction Areas & Trash Enclosures ci 41111/ c .. T., rad rm., 7 7trr -••4-----t- , P 0 r 0:11 1.4" . h k tk h 11 p4N : I. va 4-7 Otdtt tar tilf-ilt 22.111.121 I $t 4 d _ I ,I • •,-.... r :_saL • t _ --t-/ ., 41) , • -•-_71: J 7. „ . ! 44 • • 1 -; 14 iiA It1 Id q I I 7If 4 I - VIA' pi j--;-• • • • -3_ I I. TfL I 4 , Civil Engineer pIn of areas needing ADA correction Morgan and Nutrition Center have no existing trash enclosures; Kimball's not covered - . Typical trash enclosures Poway Villas CHW Community Housing Works. Ai mercy "gr HOUSING ELEMENTS OF REHAB SCOPE Site and Landscape A I KIMBALL TOWER 11 IQ a \ AEI WA VA ma Tt- FOURTEENTH STREET Current amenity areas are an island with vehicular traffic on each side E AVENUE MORGAN TOWER NUTRITION CENTER Conceptual Landscape /Amenity Plan with Pedestrian Connections Ai mercy HOUSING CHW Community HousingWorks • ELEMENTS OF REHAB SCOPE Landscape Amenities Conceptual: BBQ, Picnic Area Landscape Concepts Walking path I Poway Villas Seating area I Poway Villas *Community HousingWorks CHW AI mercy HOUSING ELEMENTS OF REHAB SCOPE Courtyard Concept to Activate ; Festoon lighting, active amenity I North Park Seniors Concept to activate spaces Courtyard I North Park Seniors Kimball current courtyard all Community Housing Works CHW mercy HOUSING ELEMENTS OF REHAB SCOPE Conceptual Theme for Building Exteriors CHW Community HousingWorks ja mercy HOUSING LEGAL AND PROJECT FINANCE fill ri Community HousingWorks CHW Al mercy HOUSING LEGAL AND PROJECT FINANCE Legal Entities - created in January. CHW/Mercy roles consistent with RFP - Due Diligence Operations • Mercy Management with CHW Asset reviewed maintenance contracts, utility bills, tenant compliance, etc. ■ 3 Changes from RFP in Operating Expenses ■ Flood insurance due to unknown location in flood zone, as required by lenders ■ Commission annual monitoring fee for compliance with regulatory agreements ■ Cost (w/ Mercy volume discount) for pendants, replacing unreliable pull cords Resident Services - no change from RFP F Subsidy to City: George H. Waters Nutrition Center ■ Maintains same payment of total $475k/year to city, as required in RFP 0111. Community HousingWorks. CHW mercy HOUSING LEGAL AND PROJECT FINANCE Morgan — HUD long-term project -based HUD contract • Met with HUD in LA on January 16 • Rent Comp Study — resulted in higher rents than in RFP Response • Submitted long term, Project -Based Section 8 Contract Request to H U D on Feb 5 (35 items in submittal package) • CHW received the HUD "Comfort Letter" (commitment) on April 26 (just 80 days) • Commitment specific to CHW/Mercy fiN yam.. SMUT may--. MIlar Wand. fAellawea roru••^ia .� _. +MF L_,.........._.............._...... LICMLLA I::1 Tpit-1 1 w�.� •• •� � Se.• Kimball — Housing Authority long-term project -based contract ■ Complicated process of contract ■ Almost all Kimball residents have individual vouchers, convert to project -based ■ PHA has subsidy rents less than applicants instructed to use in RFP — Kimball contract amounts are set by HUD and are geography -specific, not project -specific (like Morgan above) ■ HUD adjusted rents by area Community Housing Works. CHW mercy HOUSING LEGAL AND PROJECT FINANCE E AHP Grant —Kimball and Morgan ■ Submitted applications for $1.5 million each for Kimball and Morgan on February 28, per RFP Ground Lease — same as RFP E Permanent Mortgage — financing rates have risen beyond market projections at time of RFP (Federal Reserve) Tax Credit Pricing — markets had anticipated 25-27% corporate tax rate in proposed tax plan at time of REP. Markets were surprised by late 2017 tax cut with 21 % corporate tax rate ■ Tax credit pricing dropped due to federal tax action Cash to Seller and Seller Notes — affected by rents subsidies, operating costs, needed rehab, financial market changes re interest rates, tax credit pricing Negotiated and Executed CDC-HA's DDA Opt Community Housing Works CHW "� mercy HOUSING CONCLUSION • CHW and Mercy- Met our RFP Schedule and ENA Commitments ■ Eager to move forward to a DDA • Start new beginnings for residents of Kimball and Morgan Towers • Thank you Community Housing Works CHW mercy HOUSING 6/19/2018 Kimball and Morgan Towers Community Development Commission - Housing Authority (CDC -HA) Keyser Marston Associates, Inc. June 19, 2018 KUSCR MARSTON ASSOCIATI Timeline May — December 2017 KMA: • Prepared developer solicitation • Reviewed RFP responses • Evaluated developer financial pro formas Presented KMA conclusions January —April 2018 CHW-Mercy: • Performed extensive due diligence Met with tenants • Received "Comfort Letter" from HUD for new contract rents for Morgan Tower • Updated financial pro formas April — May 2o18 KMA: Analyzed CHW-Mercy updated financial pro formas and cash flow projections Obtained clarification and substantiation from CHW-Mercy Prepared independent financial models 1 1 6/19/2018 CHW-Mercy Updated Financial Proposal 1 (1) Acquisition Price (before Seller Note) (2) Seller Note (3) Nutrition Center (4) Annual Cash Flow to CDC -HA Community HousingWorks August 2017 RFP Kimball ® 4%Tax Credits Morgan ®a 9%Tax Credits $67.8 M $224,000/unit $14.3. M $47,000 /unit $475,000 /year as project operating expense 50% of residual receipts • first applied to Seller Note • then pay as ground rent Figures shown are for Kimball and Morgan Towers combined. Subject to re -appraisal. May 2,318 Kimball Cap 4%Tax Credits Morgan ® 4%Tax Credits $67.8 M 2 $224,000/unit $41.2 M $3.36,00O /unit $475,000 /year hard debt service payment 5o% of residual receipts • first applied to Seller Note • then pay as ground rent 2 Stipulated Pro Forma Inputs from 2017 RFP Process Acquisition Costs Building Rehabilitation Costs Monthly Rent $200,000 per unit $55,000 1 per unit FMR of $i,3o1 per month 1 Assumed to include contractor overhead fee, general conditions, and contractor contingency. On -Sites/ Off -Sites, Remediation, and Parking estimated at so. Includes the payment of prevailing wages. 3 2 6/19/2018 Key Changes to Financial Pro Formas (1) Rehabilitation Costsl (2) Fair Market Rents (3) Operating Expenses (4) Permanent Loan Interest Rates (5) Tax Credit Pricing CHW-Mercy August 2017 RFP $55,000 /unit 2 Kimball: $1,3012 Morgan: $1,342 2 $4,600/unit Kimball: 4.5% Morgan: 5.6% Kimball: $1.03 Morgan: $1.02 Reflects total per unit direct costs for Kimball and Morgan Towers combined. Stipulated pro forma inputs from RFP process. May 2018 $100,000 /unit Kimball: $1,176 Morgan: $1,430 $5,000 /unit Kimball: 5.9% Morgan: 5.9% Kimball: $0.96 Morgan: $0.96 4 Construction Cost Increase — Key Items 1 • Iron Balcony Railings • New Windows / Sliding Doors • Materials Lift • 15t Floor Upgrades • Plumbing Lines • ADA Units • Demolition $2.1 M $3.7 M $772 K $76o K $3.1 M $1.2 M $861 K Total Figures shown are for Kimball and Morgan Towers combined. $3.2.6 M 5 3 6/19/2018 CHW-Mercy Pro Formas Purchase Price (Less) Seller Note (Less) Loan Balance CHW-Mercy - May 2018 Kimball ® 4%Tax Credits Morgan @a 4%Tax Credits $67.8 M ($41.2 M) (so.i M) Upfront Cash Reserves Annual Payments' $26.4 M $2.1 M $3.1 M Total Value to CDC -HA Nutrition Center Fees to City 3 $31.6 M S9.i M Figures shown are for Kimball and Morgan Towers combined. 2 Present value of annual Seller Note repayments and ground lease payments to the CDC -HA from residual receipts. 3 Present value of Seller Note hard debt service payments to be used toward Nutrition Center Fees. 6 KMAAdjusted Pro Formas 1 Sources of Funds Development Costs KMA Test #1 Adjusted CHW-Mercy December May 2018 2017 • rehabilitation Kimball 4% • acquisition Morgan g% • FMR Test #2 Test #i CHW-Merry May 2o28 • interest rate • tax credit pricing Test #T Test #i+Test #2 CHW- May 2o28 • Seller Note hard debt service payment CHW-Mercy May 2028 Kimball 4% Morgan 9% $85.5 M $96.7 M $87.8 M ($96.7 M) ($224.7 M) ($224.7 M) $82.2 M $80.4 M ($124.7 M) ($122.3 M) Seller Note ($11.2 M) ($28.2 M) ($36.9 M) (i) Figures shown are for Kimball and Morgan Towers combined. ($43.6 M) ($41.9 M) 7 4 • 6/19/2018 KMA Adjusted Pro Formas 1 KMA Test#i Te #2 Test#3 CHW- Adjusted December CHW-Mercy Test#i Test #i+Test#2 Mercy May 2018 CHWMercy CHW- May 2o28 May 2028 Purchase Price (Less) Seller Note (Less) Loan Balance ?All. Kimball 4% Morgan 9% s6o.6 M ($11.2 M) (So.o M) • rehabilitation •acquisition • FMR s67.8 M ($34.4 M) (So.o M) May2°18 • interest rate •tax credit pricing s67.8 M ($42.4 M) (so.o M) • Seller Note hard debt service payment s67.8 M ($43.6 M) (So.o M) Kimball 4% Morgan 9% I s67.8 M ($41.9 M) ($0.2 M) Upfront Cash Reserves Annual Payments' $49-4 M S2.3 M $2.8 M $33.4 M $2.1 M $3.4 M s2S.4 M S2.3. M 43.6 M s24.2 M $2.1 M $3.7 M s25.7 M $2.1. M S3.2 M Total Value to CDC -HA Nutrition Center Fees to City 3 i Figures shown are for Kimball 2 Present value of annual 3 Present value of operating S54.3 M tio.3M and Morgan Towers Seller Note repayments expense fee /Seller 438.9 M tio.3M combined. and ground lease payments Note hard debt service $31.2 M sio.3M to the CDC -HA payments to be used $3o.s. M S32.0 M $9.]M I 89.1M from residual receipts. toward Nutrition Center Fees . 8 Kimball and Morgan Towers Community Development Commission -Housing Authority City of National City Keyser Marston Associates, Inc. June ig, 2018 5 KIMBALL AND MORGAN TOWERS Disposition and Development Agreement (DDA) for Acquisition and Renovation Presentation to Community Development Commission — Housing Authority City of National City June 19, 2018 HOusingW rks CHW AI mercy HOUSING PARTNERS AND ROLES • Community HousingWorks (CHW) — Lead General Partner • Lead for Design, Construction, Finance • Asset Manager overseeing Property Management • Mercy Housing California (MHC) — Co -General Partner • Property Manager • Resident Services Provider • Key Team Members — per RFP • General Contractor— MRFG-ICON (formerly ICON Builders) • Architect — Egan Simon Architecture • Legal (HUD -related Issues): Nixon Peabody LLC • Tax Credits / Financial Consultant: California Housing Partnership Corp. (CHPC) �,,,,, , mercy L�^�* HOUSING CHW RFP RESPONSE: 4 GOALS ■ Preserve and upgrade the physical asset ■ Continue the City's stewardship of providing affordable homes for current and future low income seniors ■ Through impactful resident services and effective property management, provide a safe and stimulating environment for residents ■ Provide the CDC -HA with significant economic return by payment from sales proceeds, a stream of income from residual receipts, and guaranteed annual subsidy for George H. Waters Nutrition Center CHW mercy HHoUS NG STATUS REPORT ■ Exclusive Negotiating Agreement (ENA) - Resolution adopted by Commission December 2017 ■ Team on schedule with ENA Deadlines and RFP Implementation Timeframes ■ Resident Engagement ■ Physical Renovation ■ Legal and Project Finance ■ "You did what you said you would do" *W- �„ , mercy nmwu.xs HOUSING CHW 2 RESIDENT ENGAGEMENT mercy CHW RESIDENT ENGAGEMENT Commitment: Continuation of City's Prior Stewardship Goal Regarding Residents: Allay Concerns, Transparency, Elicit Input on Needed Rehab • Introduction Letter — January • Meetings — 14+ Meetings since January • FAQ (bilingual) provided, then at Front Desk • Location: George H. Waters Nutrition Center • Smaller Groups • Flyer Invitation • Very well attended • Translator / Interpreter • Phone Line — Resident Call in questions (bilingual) AI mercy HOUSNG 3 RESIDENT ENGAGEMENT Commitment: Continuation of City's Prior Stewardship • Temporary Relocation • Mercy Relocation team — each resident has plan / options, meetings • "Concierge", assume 6 nights; longer for full ADA units (16 each building) • Input on Scope - "(Physical) assessments start with the current residents, obtaining their feedback on building performance, what works and what does not work, common area upgraders desired..." (RFP Response 8/31/17) • Questions from Residents • Continued affordability, HUD and PHA rent subsidy • Comments on needed renovation, logistics of rehab • Goals for Residents • Resident Financial Stability (Project -Based Section 8 Contracts, Resident Services per RFP) • Resident comfort, engagement, healthy aging in place c A, mercy HOUSNG PHYSICAL RENOVATION di a� .,�„aK, Al mercy HOUSING 4 PHYSICAL DUE DILIGENCE • Physical Assessment Team — Evaluations • Started January 24 • Walked all common areas, every apartment (301), roofs, mechanical / maintenance areas, grounds, George H. Waters Nutrition Center • "As directed in the RFP..., the proforma for each property includes a fixed amount of assumed renovation hard construction costs...Proposed scope and estimated costs will need to be confirmed after full due diligence." (RFP Response, 8/31/17, page 3) • CHW-Mercy Team - including Development team, Asset, Property Management, Facilities, Resident Services teams • Architect • Mechanical Engineer and Plumbing Engineer • Electrical Engineer • Landscape Architect • Structural Engineer (exterior), Seismic Assessment • Environmental Team, sampling lead -based paint and asbestos containing materials Team during due diligence walks Conuntraty mercy CHW HOUSING PHYSICAL DUE DILIGENCE • Civil Engineer- ADA, stormwater compliance, circulation and trash enclosures • Surveyor — Topographical, ALTA survey • Note: Both properties are in 100 year flood zone; Kimball building itself in flood zone; Paradise Creek is channelized in three 6' concrete pipes cut across the parcels • General Contractor • Walked with internal team, then samples of units with subcontractors • Specialty Consultants • Roof — protection of structure, safety of maintenance staff • Elevator • Fire Life Safety Systems • Energy Assessments - tax credit requirements, best operating efficiency, electrical calcs • Mechanical Engineers regarding Boilers — operating efficiency, safety • Plumbing - Isolation valves, invasive scope, sampling of lines (lab testing) CHW tat ♦ mercy �wwwa, HOUSING 5 PHYSICAL DUE DILIGENCE • Restaurant Consultant for George H. Waters Nutrition Center • Met with Nutrition Center management • Engaged and accompanied by architect • Requirements, including providing a grease trap (currently none) • Last week, waste line issues — need replacement • ADA requirements for Nutrition Center as it is open to "public" and residents • City Building Official and Fire Marshall • Architect and development team met with City officials • City requirements regarding ADA upgrades • City's Stormwater Consultant (with Civil Engineer) • PNA Report — Same firm that did the city's prior one • Role of Property Needs Assessment (PNA) vs consultants — broad brush • HUD Physical Inspection • HUD's annual physical inspection ("REAC") for Morgan in March 2018 — Failing Score k "" _ , mercy CHW "' HOUSNG PROCESS OF DETERMINING REHAB SCOPE • Process of Data Review • Independent Scoring of all unit systems — Scale 1-5 • Scores reconciled among team (almost unanimous from independent reviews) • CHW "ABC" Scope Review • City staff input ■ Rehab Goals per the RFP Response • Extend the life of the asset • Reduce operating expenses for long term sustainability • Improve functionality for resident comfort and healthy active lives • Occupied Rehab Process different than New Construction I mercy CHW HOUSING 6 REHAB COSTS • Cost Estimates ■ General Contractor completed rehabs for 21k apartments and 21+ towers (423 units in towers currently under construction in San Diego) • Review • CHW and Team • Engaged independent construction manager (AMJ Construction Management) experienced in high rise construction in San Diego / Southern California • Impact of tariffs on materials (e.g. railings) • Impact of construction market costs • Prevailing Wage —prevailing wages • Davis Bacon and state — Commercial rates (high rise construction) • Wage Rates ■ Local outreach efforts = local jobs • Shovel -ready 2019 Q1 — if proceed with DDA now , mercy CHW ovwt. HOUS'NG ELEMENTS OF REHAB SCOPE Major Building Systems Goal: preserve assets for 55+ years, reduce energy/water usage for sustainable operating costs, meet code / funding requirements • Roof • Elevators — safety, beyond useful life • Windows — dual pane for energy/comfort, beyond useful life • Balcony Repair, Waterproofing, Railings — City regarding ADA, preservation • Boilers (Morgan) — high efficiency • Plumbing — isolation valves (Kimball), relining of supply lines, cleaning/repairing waste lines • Life and Safety — alarm with strobe light, battery back-up, Co2 combos, 10 year smoke detectors • ADA — in apartments, common areas, site, including mailboxes, signage • Emergency Pull Cords in Units — Resident safety is primary • Ineffective, answered by maintenance personnel who decide if call warrants medical attention, liability to owner • Abandon and replace with pendant system (Mercy's bulk contract) • Security- camera system • Exterior paint, monument merc y • Exterior construction lifts 01= . W V youSING 7 ELEMENTS OF REHAB SCOPE Major Building Systems — Roof, Balconies, Windows Morgan existing roof drain Morgan roof Existing balcony railings and concrete wax mow, imiv71.3 IIMMPAT Balconies Non-ADA compliant railing Balcony railings Existing windows/sliding doors , mercy CHW wow we.. 0vS ELEMENTS OF REHAB SCOPE Major Building Systems - Elevators Obsolete elevator control board Elevator exteriors Morgan car door operator Elevator cab interior Towers typical car top 111111.---tr,, mercy HOUSING CHW 8 ELEMENTS OF REHAB SCOPE Major Building Systems — Fire Life and Safety Kimball and Morgan Fire Panels Kimball Fire Alarm Speaker Kimball has no proper exterior fire notification system Kimball's fire system notification is tied into the stairway egress lighting 'Ai mercy CHW HOUSING ELEMENTS OF REHAB SCOPE Major Building Systems — Boiler Morgan outdated heat exchanger Morgan gas -fired boiler Kimball mixing valve I mercy CHW HOUSING 9 ELEMENTS OF REHAB SCOPE Major Building Systems — Plumbing Cast iron pipe with evidence of deep graphitic corrosion on inner diameter Nutrition Center corroded waste cast iron drain piping — June 2018 Cast iron pipe sample showing gross amounts of graphitic corrosion, with red arrow showing hole in pipe Copper piping sample showing inner diameter Interior of cast iron piping Interior c'. i:nping A. CHW W row"n.rcy HW me eS ELEMENTS OF REHAB SCOPE Apartments Goal: Preserve asset, reduce operating costs, provide resident comfort and energy/water efficiency, "age in place" • Flooring — plank (maintenance, air quality, operating cost savings) • Bathrooms — water conservation, fixtures • Kitchens — ADA re move refrigerator, new cabinets, counters extended for ADA • GFI —safety • Electrical panels • Appliances — energy, end of useful life • Thermostats — comfort, reduce operating costs • 16 full ADA apartments (each building) — larger bathrooms, structural changes, city requirement • Pendants to replace emergency pull chords Pull chord system Pedants . mercy CHW,ww.' HOUSING 10 ELEMENTS OF REHAB SCOPE Apartments — Current Interiors Kitchen needs ADA ruunter adjustments �renrtiero<;rat rvni firer �.,v -1. Bathroom light CHW At mercy CHW & MERCY TYPICAL INTERIORS V .nor NJretc ark Senors Bedroom North Park Seniors Living Room 8 Dining Room Manzanita tak ��mn . mercy CHW �°� mwax, IOUS NG 11 ELEMENTS OF REHAB SCOPE Common Areas Goal: Security, build and sustain community, engage residents for healthy productive lives, areas for resident services • Amenity Areas — community rooms, etc. • ADA requirements • Mailboxes • Restrooms near Nutrition Center • Exterior amenity areas • Maximize use of current space • Hard flooring — health, comfort, ease for walking, reduction of replacements of carpet in corridor and common spaces • Corridor lighting, trash chute doors Typical Community Room — North Santa Fe Mercy resident health -check room mercy CHW HOUSING ELEMENTS OF REHAB SCOPE Current Common Areas Measuring ADA compliance Kimball Community Room Mailboxes at Kimball entrance ca.rikaaaar , mercy �.. LOUSING CHW 12 CHW & MERCY TYPICAL COMMON AREAS Combirter and work or oa I !I North Park Seniors Elevator lobby Ai mercy .w HOUSING CHW ELEMENTS OF REHAB SCOPE Kimball Ground Floor Conceptual Plan with Revised Community Areas CHW A; mercy -w HOUSING 13 ELEMENTS OF REHAB SCOPE Current Morgan/Nutrition Center Entrance & Restrooms Morgan current entrance Morgan and Nutrition Center current entrance Location of Morgan future entrance Nutrition Center bathrooms 101ca"mw.n ka„a.w,... CHW AD mercy HOUSING ELEMENTS OF REHAB SCOPE New Morgan Entrance New Nutrition Center Entrance Morgan Ground Floor Conceptual Plan with New Entrances, Restrooms °ay ' mercy ,way. HOUSING CHW 14 ELEMENTS OF REHAB SCOPE Site and Landscape Goal: Improve vehicular and pedestrian circulation, ADA requirements, stormwater requirements (including trash enclosures), create connections between 2 buildings, security, empower residents with amenities for healthy productive lives • ADA map of parking/sidewalk areas out of compliance • Trash enclosures — water quality requirements ■ Create connection and improved circulation • Traffic calming • Safer pedestrian pathways • Visual and psychological connection between the buildings • Provide amenities — including those that promote a healthy lifestyle gig e mercy rt. Hous NG CHW ELEMENTS OF REHAB SCOPE ADA Correction Areas & Trash Enclosures • -.= - s n a : 4 tar~. titam:. t to t to t Civil Engineer plan of ar as needing ADA correctio Morgan and Nutrition Center have no existing trash enclosures: Typical trash enclosures Kimball's not covered Poway Villas CHW aw or, mercy , HOUSING 15 ELEMENTS OF REHAB SCOPE Site and Landscape 400 -_ 1. 4r.,.,_...___to, dyan�n�o.aR..�at ■ w. ■t i Current amenity areas are an island with vehicular traffic on each side C CENTER Conceptual Landscape / Amenity Plan with Pedestrian Connections mercy CHW ELEMENTS OF REHAB SCOPE Landscape Amenities WHlkirg path Powuy Vill,is Seating area I Poway Villas 11114 _ , mercy CHW �av�wah' HOUSING 16 ELEMENTS OF REHAB SCOPE Courtyard Concept to Activate Festoon lighting, active amenity I North Park Seniors Concept to activate spaces Kimball current courtyard CHW a mercy ELEMENTS OF REHAB SCOPE Conceptual Theme for Building Exteriors CHW coouwa... , mercy HOUSING 17 LEGAL AND PROJECT FINANCE got« o e.. A, mercy CHW n,;S;N� LEGAL AND PROJECT FINANCE • Legal Entities — created in January. CHW/Mercy roles consistent with RFP • Due Diligence Operations • Mercy Management with CHW Asset reviewed maintenance contracts, utility bills, tenant compliance, etc. • 3 Changes from RFP in Operating Expenses ■ Flood insurance due to unknown location in flood zone, as required by lenders • Commission annual monitoring fee for compliance with regulatory agreements • Cost (w/ Mercy volume discount) for pendants, replacing unreliable pull cords • Resident Services — no change from RFP • Subsidy to City: George H. Waters Nutrition Center • Maintains same payment of total S475k/year to city, as required in RFP 114 m,., mercy u�w,,., �HOUSNG CHW 18 LEGAL AND PROJECT FINANCE • Morgan — HUD long-term project -based HUD contract ■ Met with HUD in LA on January 16 • Rent Comp Study — resulted in higher rents than in RFP Response • Submitted long term, Project -Based Section 8 Contract Request to HUD on Feb 5 (35 items in submittal package) • CHW received the HUD "Comfort Letter" (commitment) on April 26 (just 80 days) ■ Commitment specific to CHW/Mercy • Kimball — Housing Authority long-term project -based contract • Complicated process of contract • Almost all Kimball residents have individual vouchers, convert to project -based • PHA has subsidy rents less than applicants instructed to use in RFP — Kimball contract amounts are set by HUD and are geography -specific, not project -specific (like Morgan above) • HUD adjusted rents by area , mercy CHW HOUS'NG LEGAL AND PROJECT FINANCE • AHP Grant— Kimball and Morgan ■ Submitted applications for $1.5 million each for Kimball and Morgan on February 28, per RFP • Ground Lease — same as RFP • Permanent Mortgage — financing rates have risen beyond market projections at time of RFP (Federal Reserve) • Tax Credit Pricing — markets had anticipated 25-27% corporate tax rate in proposed tax plan at time of RFP. Markets were surprised by late 2017 tax cut with 21 % corporate tax rate • Tax credit pricing dropped due to federal tax action • Cash to Seller and Seller Notes — affected by rents subsidies, operating costs, needed rehab, financial market changes re interest rates, tax credit pricing • Negotiated and Executed CDC-HA's DDA `wqk` , mercy CHW `iOUS'NG 19 CONCLUSION • CHW and Mercy- Met our RFP Schedule and ENA Commitments • Eager to move forward to a DDA • Start new beginnings for residents of Kimball and Morgan Towers • Thank you w , mercy CHW HOU S NO 20 bH/1Uuwn.N11111N\\\ CITY OF NATIONAL CITY Office of the City Clerk 1243 National City Blvd., National City, California 91950-4397 619-336-4228 Michael R. Dalla, CMC - City Clerk KIMBALL TOWER HOUSING ASSOCIATES AND MORGAN TOWER HOUSING ASSOCIATES (Kimball and Morgan Towers) Disposition and Development Agreement Carlos Aguirre (Housing & Economic Development) forwarded two (2) fully executed duplicate original Agreements to Kimball Tower Housing Associates and Morgan Tower Housing Associates. RECORDING REQUESTED BY: Stewart Title Guaranty Co. #18000480843A AND WHEN RECORDED MAIL TO: City of National City Records Management Department 1243 National City Blvd National City, CA 91950 DOC# 2019-0114674 I II II III 111111 II I II III 11111111 III III 1111 I III 111 III Apr 02, 2019 08:00 AM OFFICIAL RECORDS Ernest J. Dronenburg, Jr., SAN DIEGO COUNTY RECORDER FEES: $0.00 (SB2 Atkins: $0.00) AGREEMENT TO TERMINATE AND NOTICE OF TERMINATION OF MEMORANDA OF OPTION AGREEMENTS (Please fill in document title(s) on this line) PAGES: 4 1 j Exempt from fee per GC27388.1 due to being recorded in connection with concurrent transfer that is subject to the imposition of documentary transfer tax, or, 2 Exempt from fee per GC27388.1 due to being recorded in connection with a transfer that was subject to documentary transfer tax which was paid on document recorded previously on .3- 2-9-/9 (date*) as document number Zo/9-//3 43,y of Official Records, or, 3 ❑ Exempt from fee per GC27388.1 due to the maximum fees being paid on documents in this transaction, or, 4 ❑ Exempt from fee per GC27388.1 due to the maximum fees having been paid on documents in the transaction(s) recorded previously on (date*) as document number(s) of Official Records, or, 5 ❑ Exempt from fee per GC27388.1, document transfers real property that is a residential dwelling to an owner -occupier, or, document is recorded in connection with concurrent transfer that is a residential dwelling to an owner -occupier, or, 6 ❑ Exempt from fee per GC27388.1 due to it being recorded in connection with a transfer of real property that is a residential dwelling to an owner -occupier. The recorded document transferring the dwelling to the owner -occupier was recorded on (date*) as document number(s) 7 ❑ Exempt from fee per GC27388.1 due to being executed or recorded by the federal government in accordance with the Uniform Federal Lien Registration Act, by the state, or any county, municipalityor other political subdivision of the state, or, 8 ❑ Exempt from the fee per GC 27388.1 (a) (1); Not related to real property, or, 9 ❑ Exempt from fee under GC27388.1 for the following reasons: THIS PAGE ADDED TO PROVIDE SENATE BILL2 EXEMPTION INFORMATION (Additional recordingfee applies) Rev 5/18 *The Prior Recording Reference must have been recorded within the last 60 days and is subject to review RECORDING REQUESTED BY: Stewart Title Guaranty Co. #18000480843A AND WHEN RECORDED MAIL TO: City of National City Records Management Department 1243 National City Blvd National City, CA 91950 AGREEMENT TO TERMINATE AND NOTICE OF TERMINATION OF MEMORANDA OF OPTION AGREEMENTS (Please fill in documenttitle(s) on this line) 1 Exempt from fee per GC27388.1 due to being recorded in connection with concurrent transfer that is subject to the imposition of documentary transfer tax, or, 2 Er Exempt from fee per GC27388.1 due to being recorded in connection with a transfer that was subject to documentary transfer tax which was paid on document recorded previously on ,�- 2-9 - /9 (date*) as document number Z6/Y-//33J of Official Records, or, 3 ❑ Exempt from fee per GC27388.1 due to the maximum fees being paid on documents in this transaction, or, 4 ❑ Exempt from fee per GC27388.1 due to the maximum fees having been paid on documents in the transaction(s) recorded previously on (date*) as document number(s) of Official Records, or, 5 ❑ Exempt from fee per GC27388.1, document transfers real property that is a residential dwelling to an owner -occupier, or, document is recorded in connection with concurrent transfer that is a residential dwelling to an owner -occupier, or, 6 ❑ Exempt from fee per GC27388.1 due to it being recorded in connection with a transfer of real property that is a residential dwelling to an owner -occupier. The recorded document transferring the dwelling to the owner -occupier was recorded on (date*) as document number(s) 7 ❑ Exempt from fee per GC27388.1 due to being executed or recorded by the federal government in accordance with the Uniform Federal Lien Registration Act, by the state, or any county, municipality or other political subdivision of the state, or, 8 ❑ Exempt from the fee per GC 27388.1 (a) (1); Not related to real property, or, 9 ❑ Exempt from fee under GC27388.1 for the following reasons: THIS PAGE ADDED TO PROVIDE SENATE BILL2 E (EMP11ON INFORMATION (Additional recordingfeeapplies) Rev 5/18 *The Prior Recording Reference must have been recorded within the last 60 days and is subject to review RECORDING REQUESTED BY: CITY OF NATIONAL CITY AND WHEN RECORDED RETURN TO: CITY OF NATIONAL CITY Records Management Department 1243 National City Blvd. National City, California 91950 This document is exempt from payment of a recording fee pursuant to Government Code Section 6103. AGREEMENT TO TERMINATE AND NOTICE OF TERMINATION OF MEMORANDA OF OPTION AGREEMENTS (Kimball and Morgan Towers) WHEREAS, the Community Development Commission -Housing Authority of the City of National City ("CDC -HA") and the City of National City ("City") are all of the current parties to (collectively the "Memoranda of Options"): (i) Memorandum of Option Agreement which was recorded in the Office of the Recorder of the County of San Diego on March 10, 2011, as Document No. 2011-0130768; (ii) Memorandum of Option Agreement which was recorded in the Office of the Recorder of the County of San Diego on March 10, 2011, as Document No. 2011-0130769; and (iii) Memorandum of Option Agreement which was recorded in the Office of the Recorder of the County of San Diego on March 10, 2011, as Document No. 2011-0130772. NOW THEREFORE, the CDC -HA and the City hereby: (i) terminate the Memoranda of Options, (ii) give notice that the Memoranda of Options are terminated; (iii) agree that the Memoranda of Options are no longer of any legal force or effect; and (iv) agree the Memoranda of Options no longer constitutes burdens and/or liens and/or encumbrances against the property described therein. CDC -HA: CITY: Community Development Commission- City of National City Housing Authority of the City of National City Leslie Deese, Executive Director APPROVED AS TO FORM: By: Angi APPR Chris By: Leslie Deese, City Manager Walter F. Spat II, y and CDC -HA Special Counsel ACKNOWLEDGMENT A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California County of San Diego On nUiCl/i ak) , 2019, before me, 1) • P1t4-eY , notary public, personally appeared Lie S t i >° Deese who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/ace 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 MB/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. Signature (Seal) D. PITCHER Commission # 2146777 6 4 Notary lCalifornia San Diego County °1 My Comm. Expires A r 1 b, 2020 ACKNOWLEDGMENT A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of Califp-Iia County of ��1(..) On vVI ala5 (3oi personally appeared before me, D. Pitcher, Notary Public (insert name and title of the officer) -Les\ who proved to me on the basis of satisfactory evidence to be the person(s) whose 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 byhis/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. z Signature (Seal) D. PITCHER Commission # 2146777 k Notary Public - California San Diego County My Comm. Expires Apr 15_2024.. GROUND LEASE (Morgan Tower) By and Between COMMUNITY DEVELOPMENT COMMISSION -HOUSING AUTHORITY OF THE CITY OF NATIONAL CITY "Landlord" and MORGAN TOWER HOUSING ASSOCIATES, L.P. "Tenant" Dated as of March 25, 2019 Page 1 GROUND LEASE THIS GROUND LEASE (the "Lease"), dated, for identification purposes only, as of the 25th day of March, 2019, is entered into by and between the COMMUNITY DEVELOPMENT COMMISSION -HOUSING AUTHORITY OF THE CITY OF NATIONAL CITY, a public body, corporate and politic ("Landlord" or "Commission"), and MORGAN TOWER HOUSING ASSOCIATES, L.P., a California limited partnership ("Tenant" or "Developer"). RECITALS A. WHEREAS, Commission is a California community development commission acting to implement the California Housing Authorities Law, Part 2 of Division 24 of the Health and Safety Code; B. WHEREAS, Developer is controlled by an experienced owner, developer and manager of affordable housing for very -low and low-income families; C. WHEREAS, Commission is the owner of certain real property situated in the City of National City, County of San Diego, State of California, and legally described in Exhibit "A" (the "Property"); D. WHEREAS, the Commission, Developer and Kimball Tower Housing Associates, L.P., a California limited partnership entered into that certain "Disposition and Development Agreement" dated as of June 18, 2018 (the "DDA"); E. WHEREAS, the DDA provided that upon the satisfaction of certain conditions, Commission would ground lease the Property to Developer; and F. WHEREAS, all conditions precedent to the parties entering into this Lease have been satisfied or waived. NOW, THEREFORE, for and in consideration of the mutual promises, covenants, and conditions herein contained, Commission and Developer agree as follows: ARTICLE 1. LEASE OF THE PROPERTY 1.1 Lease of the Property. Landlord leases to Tenant, and Tenant hires from Landlord, the Property on the terms and conditions as set forth in this Lease. 1.2 Purpose of Lease. The purpose of this Lease is to provide for the rehabilitation, maintenance, management and operation of a 152-unit (which includes one manager's unit), senior (62 years of age and over), multi -family, low-income rental housing project with approximately 6,560 rentable square feet of commercial space located on the first floor of the building. Tenant will not occupy or use the Property, or permit the Property to be used or occupied, nor do or permit anything to be done in or on the Property, in whole or in part, for any other purpose. The foregoing notwithstanding, after the foreclosure of a Mortgage, or Page 2 acceptance by a Mortgagee of an assignment or deed in lieu of foreclosure, the Property may be used for any lawful purpose. 1.3 Recorded Encumbrances. This Lease, the interests of Landlord and Tenant hereunder, and the Property, are in all respects subject to and bound by all of the covenants, conditions, restrictions, reservations, rights, rights -of -way and easements of record including, without limitation: those items shown as exceptions to title in that certain Preliminary Report dated as of July 26, 2018, issued by Stewart Title Company with respect to the Property. 1.4 Memorandum of Lease. A short form Memorandum of Lease referring to this Lease is being executed by Landlord and Tenant concurrently herewith, and recorded in the Official Records of the County of San Diego, California (the "Official Records"). 1.5 Assignment of Utility Rights. Landlord, by virtue of its fee title to the Property, may hold certain rights, entitlements or credits with respect to utility capacity, connections, etc. (the "Utility Rights"). Landlord hereby assigns said Utility Rights to Tenant as an incidence of its leasehold interest in the Property. ARTICLE 2. DEFINITIONS All capitalized terms used herein may be defined where first used in this Lease and/or as set forth in this Article 2. Unless otherwise defined herein, all capitalized terms shall have the same meanings ascribed to them in the DDA. For the purpose of supplying such definitions, the DDA, notwithstanding anything contained therein or herein to the contrary, shall not merge with this Lease. "Award" means any compensation or payment made or paid for the Total, Partial or Temporary Taking of all or any part of or interest in the Property and/or the Improvements, whether pursuant to judgment, agreement or otherwise. "Capital Improvements" means all work and improvements with respect to the Property for which costs and expenses may be capitalized in accordance with GAAP. "Commencement Date" has the meaning set forth in Article 3 of this Lease. "Compliance Period" has the meaning set forth in Section 42(i)(1) of the Internal Revenue Code of 1986, as amended. "Construction Loan" refers to the loan to the Tenant from the Senior Lender, the proceeds of which are used to rehabilitate the Project. "Construction Loan Closing" refers to the date upon which the deed of trust securing the Construction Loan is recorded in the Official Records of San Diego County. Page 3 "Conversion Date" means the date upon which the Construction Loan converts to an amortizing term loan in accordance with the terms of the Senior Loan Documents and Senior Loan Security Documents. "Environmental Law" means any federal, state or local environmental, health and/or safety -related law, rule, regulation, requirement, order, ordinance, directive, guideline, permit or permit condition, currently existing and as amended, enacted, issued or adopted in the future. The term Environmental Law includes, but is not limited to, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, and similar state or local laws. "Event of Default" has the meaning set forth in Article 21. "Executive Director" means the Executive Director of Landlord or his/her designee. "Hazardous Materials" means any chemical, substance, object, condition, material, waste, or controlled substance which is or may be hazardous to human health or safety or to the environment, due to its radioactivity, ignitability, corrosiveness, explosivity, flammability, reactivity, toxicity, infectiousness, or other harmful or potentially harmful properties or effects, including, without limitation, all chemicals, substances, materials, or wastes that are now or hereafter may be listed, defined, or regulated in any manner by any federal, state, or local government agency or entity, or under any federal, state, or local law, regulation, ordinance, rule, policy or procedure due to such properties or effects. "Impositions" means all taxes (including, without limitation, sales and use taxes); assessments (including, without limitation, all assessments for public improvements or benefits whether or not commenced or completed prior to the Commencement Date and whether or not to be completed within the Term); water, sewer or other rents, rates and charges; excises; levies; license fees; permit fees; inspection fees and other authorization fees and other charges; in each case whether general or special, ordinary or extraordinary, foreseen or unforeseen, of every character (including all interests and penalties thereon), which are attributable or applicable to any portion of the Term and may be assessed, levied, confirmed or imposed on or in respect of, or be a lien upon (a) the Property or the Improvements, or any part thereof, or any estate, right or interest therein, (b) any occupancy, use or possession of or activity conducted on the Property or the Improvements, or any part thereof, or (c) this Lease. The term "Impositions" shall also include any and all increases in the foregoing, whether foreseen or unforeseen, ordinary or extraordinary, including, without limitation, any increase in real property taxes resulting from a sale of the Property by Landlord. "Improvements" means all buildings, structures and other improvements, including the building fixtures thereon, now located on the Property or hereafter constructed on the Property; all landscaping, fencing, walls, paving, curbing, drainage facilities, lighting, parking areas, roadways and similar site improvements now located or hereafter placed upon the Property. Page 4 "Indemnitees" means Landlord, the City of National City, California ("City") and their employees, agents, members and officials. "Index" means the Consumer Price Index -Urban Wage Earners and Clerical Workers (San Diego, All Items, Base 1982-84 = 100) as published by the United States Department of Labor, Bureau of Labor Statistics. Should the Bureau discontinue the publication of the Index, or publish the same less frequently or on a different schedule, or alter the same in some other manner including, without limitation, changing the name of the Index or the geographic area covered by the Index, Landlord and Tenant shall adopt a substitute index or procedure which reasonably reflects and monitors consumer prices. "Insurance Requirements" means all terms of any insurance policy covering or applicable to the Property or the Improvements, or any part thereof, all requirements imposed by the issuer of any such policy, and all orders, rules, regulations and other requirements of the National Board of Fire Underwriters (or any other body exercising similar functions) applicable to or affecting the Property or the Improvements, or any part thereof, or any use or condition of the Property or the Improvements, or any part thereof. "Lease Year" means the year commencing on the first day of the first full calendar month following the Commencement Date, or anniversary thereof, and ending at midnight on the last day of the month in which an anniversary of the Commencement Date occurs. "Legal Requirements" means all laws, statutes, codes, acts, ordinances, orders, judgments, decrees, injunctions, rules, regulations, permits, licenses, authorizations, directions and requirements of and agreements with all governments, departments, commissions, boards, courts, authorities, agents, officials and officers, foreseen or unforeseen, ordinary or extraordinary, which now or at any time hereafter may be applicable to the Property or the Improvements, or any part thereof, or to any of the adjoining sidewalks, streets or ways, or to any use or condition of the Property or the Improvements, or any part thereof. "Memorandum of Lease" refers to the memorandum of lease which has been recorded as described in Section 1.4. "Mortgage" has the meaning set forth in Section 18.1.1 of this Lease. "Mortgagee" has the meaning set forth in Section 18.1.1 of this Lease. "Notice of Intended Taking" means any notice or notification on which a reasonably prudent person would rely and which said person would interpret as expressing an existing intention of Taking as distinguished from a mere preliminary inquiry or proposal. It includes, without limitation, the service of a condemnation summons and complaint on a party to this Lease. The notice is considered to have been received when a party to this Lease receives from the condemning agency or entity a notice of intent to take, in writing, containing a description or map of the taking which reasonably defines the extent of the taking. Page 5 "Official Records" means the Official Records of San Diego County, California. "Partial Taking" means any taking of the fee title of the Property and/or the Improvements that is not either a Total, Substantial or Temporary Taking. "Plans" means the plans and specifications for the Rehabilitation, a set of which, initialed by Tenant, are on file in the offices of Landlord. "Potential Default" means any condition or event which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. "Project" refers to the Property and the Improvements constructed and maintained thereon. "Property" has the meaning set forth in Recital "C," above. "Rehabilitation" means the initial rehabilitation of the Improvements and the Property pursuant to the Plans, which shall be completed within seventy hundred twenty (720) days following Construction Loan Closing. "Senior Lender" means MUFG Union Bank, N.A., a national banking association and its successors and assigns. "Substantial Taking" means the taking of so much of the Property and/or the Improvements that the portion of the Property and/or the Improvements not taken cannot be repaired or reconstructed, taking into consideration the amount of the Award available for repair or reconstruction, so as to constitute a complete, rentable structure, capable of producing a proportionately fair and reasonable net annual income after payment of all operating expenses, and all other charges payable under this Lease, and after performance of all covenants and conditions required by Tenant by law and under this Lease. "Taking" means a taking or damaging, including severance damage, by eminent domain or by inverse condemnation or for any public or quasi -public use under any statute. The taking may occur as a result of a transfer pursuant to the recording of a final order in condemnation, a voluntary transfer or conveyance to the taking authority under threat of condemnation, or a transfer while condemnation proceedings are pending. Unless otherwise provided, the taking shall be deemed to occur as of the earlier of (a) the date actual physical possession is taken by the condemnor, or (b) the date on which the right to compensation and damages accrues under the law applicable to the Property and/or the Improvements. A taking as used in this Lease does not include the voluntary dedication of any portion of the Property necessary to obtain building permits or to comply with any other applicable governmental rule, regulation or statute; nor does it include the enactment of any law, ordinance or regulation which may affect the use or value of the Property but which does not involve an actual taking of any portion thereof. Eminent domain actions filed by Landlord against owners of portions of the Property and pending as of the Commencement Date shall not be deemed, construed or interpreted as a Taking under this Lease. Page 6 "Tax Credit Partner" means U.S. Bancorp Community Development Corporation, a Minnesota corporation, and its successors and assigns. "Temporary Taking" means a taking of all or any part of the Property and/or the Improvements for a term certain which term is specified at the time of taking. Temporary Taking does not include a taking which is to last for an indefmite period or a taking which will terminate only upon the happening of a specified event unless it can be determined at the time of the taking substantially when such event will occur. If a taking for an indefinite term should take place, it shall be treated as a Total, Substantial or Partial Taking in accordance with the definitions set forth herein. "Term" has the meaning set forth in Article 3 of this Lease. "Total Taking" means the taking of the fee title to all of the Property. "Unit" means a dwelling unit on the Property. ARTICLE 3. TERM The term of this Lease (the "Term") shall commence on the date the Memorandum of Lease records in the Official Records (the "Commencement Date"), and shall continue thereafter until the ninety-ninth (99th) anniversary of the date on which a Notice of Completion records in the Official Records for the Rehabilitation. ARTICLE 4. RENTAL 4.1 in advance. Rent. The rent shall be the nominal sum of One Dollar ($1.00) per year payable 4.2 Right to Audit. Tenant shall keep full and accurate books of account, records and other pertinent data with respect to operations of the Project. Such books of account, records, and other pertinent data shall be kept for a period of three (3) years after the end of each Lease Year. Landlord shall be entitled within two (2) years after the end of each Lease Year to inspect and examine all Tenant's books of account, records, and other pertinent data. Tenant shall cooperate fully with Landlord in making the inspection. Landlord shall also be entitled, at the Landlord's sole cost and expense, also within two (2) years after the end of each Lease Year, to an independent audit of Tenant's books of account, records, and other pertinent data. 4.3 Utilities. Tenant shall be responsible for the payment of all water, gas, electricity and other utilities used by Tenant on the Property. 4.4 Taxes and Assessments. 4.4.1 Notice of Possessory Interest; Payment of Taxes and Assessments on Value of Entire Property. In accordance with California Revenue and Taxation Code Section 107.6(a), Landlord states that by entering into this Lease, a possessory interest subject to Page 7 property taxes may be created. Tenant or other party in whom the possessory interest is vested may be subject to the payment of property taxes levied on such interest. 4.4.2 Payment of Taxes. Subject to any applicable exemptions, Tenant shall pay the real property and/or possessory interest taxes applicable to the Property during the term of this Lease. All such payments shall be made prior to the delinquency date of such payment. Tenant shall promptly furnish Landlord with satisfactory evidence that such taxes have been paid or that an exemption from such taxes has been obtained. If any such taxes paid by Tenant shall cover any period of time prior to or after the expiration of the Term, Tenant's share of such taxes shall be equitably prorated to cover only the period of time within the tax fiscal year during which this Lease shall be in effect, and Landlord shall reimburse Tenant to the extent required. If Tenant shall fail to pay any such taxes, Landlord shall have the right to pay the same, in which case Tenant shall repay such amount to Landlord within ten (10) days after demand from Landlord together with interest at the rate set forth in Section 4.5. 4.4.3 Definition. As used herein, the term "real property tax" shall include any form of real estate tax or assessment (including, without limitation, on possessory interests), general, special, ordinary or extraordinary, and any license fee, commercial rental tax, improvement bond or bonds, levy or tax (other than inheritance, personal income, or estate taxes) imposed on the Property or any interest (including, without limitation, possessory interests) therein by any authority having the direct or indirect power to tax, including any city, state or federal government, or any school, agricultural, sanitary, fire, street, drainage or other improvement district thereof, as against any legal or equitable interest of Landlord or Tenant in the Property or in the real property of which the Property are a part, as against Landlord's right to rent or other income therefrom, and as against Landlord's business of leasing the Property. The term "real property tax" shall also include any tax, fee, levy, assessment or charge (i) in substitution of, partially or totally, any tax, fee, levy, assessment or charge hereinabove included within the definition of "real property tax," or (ii) the nature of which was hereinbefore included within the definition of "real property tax," or (iii) which is imposed as a result of a transfer, either partial or total, of Landlord's interest in the Property or which is added to a tax or charge hereinbefore included within the definition of real property tax by reason of such transfer, or (v) which is imposed by reason of this lease transaction, any modifications or changes hereto, or any transfers hereof. 4.4.4 Personal Property. Tenant shall pay prior to delinquency all taxes assessed against and levied upon trade fixtures, furnishings, equipment and all other personal property of Tenant contained in the Property or elsewhere. When possible, Tenant shall cause said trade fixtures, furnishings, equipment and all other personal property to be assessed and billed separately from the real property of Landlord. 4.4.6 Apportionment. If any of Tenant's said personal property shall be assessed with Landlord's real property, Tenant shall pay Landlord the taxes attributable to Tenant not later than the later of (a) ten (10) days after receipt of a written statement setting forth the taxes applicable to Tenant's property or (b) fifteen (15) days prior to the date said taxes are due and payable. Page 8 4.5 Overdue Interest. Any amount due to Landlord, if not paid when due and before expiration of the applicable grace period, if any, shall bear interest from the date due until paid at the lower of: (a) the reference or prime rate of Bank of America, N.T. & S.A., in effect from time to time plus three percent (3%); or (b) the highest rate of interest allowed under applicable usury law. ARTICLE 5. POSSESSION OF PROPERTY 5.1 Acceptance of Premises. Tenant hereby accepts the Property. 5.2 Ownership of Improvements. During the term of this Lease title to all Improvements, now existing or later made, on the Property are and shall be vested in Tenant. Tenant shall not, however, remove or demolish any Improvements from the Property except as permitted herein. Concurrently with recordation of the Memorandum of Lease, Landlord shall execute a grant deed conveying ownership of the Improvements to the Tenant. Upon termination of this Lease, ownership to the Improvements shall automatically revert back to the Landlord. At all times during the Term, Tenant alone shall be entitled to all of the tax attributes of ownership of the Improvements, including, without limitation, the right to claim depreciation and the right to claim the low-income housing tax credit described in Section 42 of the Internal Revenue Code, as well as all other benefits for income tax purposes. 5.3 Surrender of Property. 5.3.1 Upon Expiration. Tenant agrees that on expiration or termination of the Term, the Improvements on the Property shall become the property of Landlord, free from any liens or claims whatsoever, without any further compensation therefor from Landlord to Tenant or any other person. 5.3.2 Condition. On expiration or termination of the Term, Tenant shall peaceably and quietly leave and surrender the Property and the Improvements to Landlord in good order, condition and repair, reasonable wear and tear and obsolescence excepted. Tenant shall leave in place and in good order, condition and repair, all fixtures and machinery; except (if Tenant is not then in default under this Lease) Tenant shall have the right to remove only Tenant - owned appliances, other unattached equipment, furniture and merchandise that Tenant shall have installed, which removal must be done without damage to the Property or Improvements. Landlord shall have the right to have the Property and the Improvements inspected at Tenant's cost to determine whether the Property and the Improvements have been properly maintained, repaired and restored in accordance with the terms of this Lease. That notwithstanding, Tenant shall not be responsible for the interior condition of individual occupied apartments on the termination or expiration of this Lease. 5.3.3 Delivery of Documents. Contemporaneous with the expiration or termination of the Term, Tenant shall immediately deliver to Landlord the following: (a) Such documents, instruments and conveyances as Landlord may reasonably request to enable Landlord's ownership of the Property and the Improvements to be Page 9 reflected of record, including, without limitation, a quitclaim deed in recordable form to the Property and the Improvements. (b) If requested by Landlord, title insurance, surety bond, or other security reasonably acceptable to Landlord insuring against all claims and liens against the Property and the Improvements other than those incurred by Landlord or accepted by Landlord in writing. (c) All rehabilitation and construction plans, surveys, permits and other documents relating to the Improvements as may be in the possession of Tenant at the time and from time to time thereafter. (d) All documents and instruments required to be delivered by Tenant to Landlord pursuant to this Section shall be in form reasonably satisfactory to Landlord. 5.4 Abandonment. Tenant shall not abandon or vacate the Property or the Improvements at any time during the Term. If Tenant shall abandon, vacate or otherwise surrender the Property or the Improvements, or be dispossessed (other than dispossession as the result of a Substantial Taking or a Taking) thereof by process of law or otherwise, the same shall constitute a default under this Lease on the part of Tenant and, in addition to any other remedy available on the part of Landlord, any of Tenant's property left in, upon or about the Property or the Improvements (except for underground storage tanks) shall, at Landlord's option, be deemed to be abandoned and shall become the property of Landlord. The appointment of a receiver pursuant to a Mortgagee's exercise of its rights under a Mortgage, or the foreclosure of a Mortgage, shall not be a default under this Section. ARTICLE 6. REPRESENTATIONS AND WARRANTIES 6.1 Landlord's Representations. Landlord represents and warrants to Tenant that it owns the Property in fee simple and has the power and authority to enter into this Lease and perform all obligations and agreements incidental or pertinent to the Lease. Landlord makes no representation or warranty with respect to the condition of the Property or its fitness or availability for any particular use, and Landlord shall not be liable for any latent or patent defect therein. 6.2 Tenant's Representations. Tenant represents and warrants to Landlord that it has examined the Property and acknowledges that it hereby accepts possession of the Property in its "AS IS" condition, with all faults and defects, including, without limitation, infestation of or damage to the Property caused by wood -destroying pests or organisms. ARTICLE 7. DEVELOPMENT OF THE PROPERTY 7.1 Rehabilitation. Within thirty (30) days after the Construction Loan Closing, or such longer period as the Executive Director may approve, Tenant shall commence the Rehabilitation. All Improvements, together with any off -site improvements, shall be rehabilitated in a good and workmanlike manner using materials of good quality and in substantial compliance with the Plans as modified pursuant to this Article 7, and shall comply Page 10 with all applicable governmental permits, laws, ordinances and regulations. Any of the Plans, including, without limitation, landscaping plans, not approved by the Executive Director as of the Construction Loan Closing shall be subject to the prior approval of the Executive Director. 7.2 Rehabilitation Cost. Tenant shall bear the cost of the Rehabilitation, including all fees and mitigation measures. 7.3 Changes; Landlord Consent. Except as otherwise provided in this Lease, Tenant shall not make any changes in the Plans without the Executive Director's prior written consent if such change (a) constitutes a material change in the building material or in the architectural design, value or quality of any of the Improvements, or (b) would result in an increase in rehabilitation costs in excess of Seventy -Five Thousand Dollars ($75,000.00) for any single change or in excess of Three Hundred Thousand Dollars ($300,000.00) for all such changes. Without limiting the above, Landlord agrees that Tenant may make minor changes which do not change the Projects aesthetics without the Executive Director's prior written consent, provided that such changes do not violate any of the conditions specified herein. 7.3.1 Submission Requirement: Consent Process. Tenant shall submit any proposed material changes in the Plans to the Executive Director at least ten (10) days prior to the commencement of the Rehabilitation relating to such proposed material change. Requests for any material change which 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 Executive Director, signed by Tenant and, if required by the Executive Director, also by the Project architect. If a proposed change is approved, then Tenant shall be notified in writing within ten (10) days after submission. If the Executive Director fails to disapprove a proposed change within said ten (10)-day period, and state the reason(s) for such disapproval with reasonable particularity, then the proposed change shall be deemed approved. 7.4 Landlord's Review. Landlord does not have, and by this Lease expressly disclaims, the right to or duty for any review of the Plans for the purpose of determining compliance with building codes, safety features or standards or for the purpose of determining or approving engineering or structural design, sufficiency or integrity. Landlord's approval of a direction or request to change the plans, specifications or drawings submitted by Tenant is not and shall not be a review or approval of the quality, adequacy or suitability of such plans, specifications or drawings, nor of the labor, materials, services or equipment to be furnished or supplied in connection therewith. Landlord does not have and expressly disclaims any right of supervision or control over the architects, designers, engineers or other draft persons and professionals responsible for the drafting and formulation of the Plans, or any right of supervision or control of contractors, builders, trades and other persons engaged in constructing and fabricating the improvements pursuant to the Plans. Landlord further acknowledges that it shall not have any right to disapprove any plan, specification or drawing which logically evolves from any previously approved plan, specification or drawing or to request or require a change in any previously approved item. Page 11 7.5 Soil Conditions. Landlord makes no covenants or warranties respecting the condition of the soil or subsoil or any other condition of the Property, provided, however, that the foregoing shall not constitute a release of Landlord under any statute or common law theory. 7.6 Diligent Prosecution to Completion. Once the work is begun, Tenant shall, with reasonable diligence, prosecute the Rehabilitation to completion. The Rehabilitation shall be completed and ready for use not later than seven hundred twenty days (720) days after the Construction Loan Closing (subject to the right to notice and cure set forth in Section 21.1.4); provided, however, that the time for completion shall be extended for as long as Tenant shall be prevented from completing the Rehabilitation by delays beyond Tenant's control. Additionally, upon the written request of Tenant, the Executive Director may, at his sole and absolute discretion, grant one or more extensions of the date by which the Rehabilitation must be completed of, in the aggregate, not more than ninety (90) days. All work shall be performed in a good and workmanlike manner, shall substantially comply with the Plans, and shall comply with all applicable governmental permits, laws, ordinances, and regulations. 7.7 Right of Access. During normal construction hours, representatives of Landlord shall have the reasonable right of access to the Property without charges or fees for the purpose of inspecting the work of the Rehabilitation; provided, however, that such representatives shall present and identify themselves at Tenant's construction office, be accompanied by a representative of Tenant while on the Property and obey Tenant's, or its contractor's, safety rules and regulations. In addition, Landlord shall have the right to authorize the City and other public agencies to enter the Property, upon the same terms after reasonable prior written notice to Tenant, for the purpose of constructing, reconstructing, maintaining or repairing any public improvements or public facilities located on the Property. Landlord shall deliver written notice of the identity of its representatives to Tenant before such representatives enter the Property. Landlord hereby indemnifies and holds Tenant, and its contractors, subcontractors, agents, representatives and employees, and the Property, harmless from and against any loss, cost, damage or liability, including, without limitation, attorneys' fees, which results from the exercise by Landlord, or any party acting under Landlord's authority, of the rights granted by this Section. 7.8 Governmental Approvals. If requested by Landlord in writing, Tenant covenants and agrees to deliver to Landlord conformed copies (and certified copies of all recorded instruments) of all governmental approvals and permits obtained by Tenant for the Rehabilitation in accordance with the Plans. In no event shall Tenant commence Rehabilitation of any Improvements pursuant to the provisions of this Article 7 until such time as Tenant shall have obtained all necessary governmental approvals and permits to so construct such Improvements. 7.9 Landlord's Right to Discharge Lien. If Tenant does not cause to be recorded the bond described in California Civil Code Section 3143 or otherwise protect the Property under any alternative or successor statute, and a final judgment has been entered against Tenant by a court of competent jurisdiction for the foreclosure of a mechanic's, materialman's, contractor's, or subcontractor's lien claim, and if Tenant fails to stay the execution of the judgment by lawful means or to pay the judgment, Landlord shall have the right, but not the duty, subject to the notice and cure rights of Mortgagees and the Tax Credit Partner set forth elsewhere in this Lease, Page 12 to pay or otherwise discharge, stay, or prevent the execution of any such judgment or lien or both. Tenant shall reimburse Landlord for all sums paid by Landlord under this Section, together with all Landlord's reasonable attorneys' fees and costs, plus interest on those sums, fees, and costs from the date of payment until the date of reimbursement at the rate set forth in Section 4.5. 7.10 Force Maieure. All obligations of Tenant to promptly commence and thereafter diligently prosecute to completion the Rehabilitation shall be extended by such number of days as Tenant shall be delayed by reason of events of force majeure pursuant to Article 24. 7.11 Notice of Non -Responsibility. After the recordation of the Certificate of Completion for the Improvements in the Official Records, Tenant shall provide Landlord with prior written notice of not less than fifteen (15) days before commencing construction of any structural alteration of the Improvements, or any non-structural alteration which will cost more than Twenty -Five Thousand Dollars ($25,000.00), and shall permit Landlord to record and post appropriate notices of non -responsibility on the Property. The foregoing Twenty -Five Thousand Dollar ($25,000.00) limitation shall be increased each calendar year by the corresponding percentage increase in the Index. 7.12 Notice of Completion. On completion of Rehabilitation of the Improvements, Tenant shall file or cause to be filed a notice of completion. Tenant hereby appoints Landlord as Tenant's attorney -in -fact to file the notice of completion on Tenant's failure to do so after the Rehabilitation work has been substantially completed. 7.13 Subsequent Alterations. Following the Rehabilitation in substantial accordance with the Plans, Tenant may from time to time, at its sole expense, make improvements and other alterations to the Property which Tenant reasonably determines to be beneficial. Tenant shall not make any alteration or improvement to the Property the cost of which exceeds Fifty Thousand Dollars ($50,000.00) without Landlord's prior written consent, which consent shall not be unreasonably withheld or delayed. The foregoing dollar amount limitations shall be increased each calendar year by the corresponding increase in the Index. Tenant shall timely pay any obligation incurred by Tenant with respect to any such alterations or improvements that could become a lien against the Property and shall defend, indemnify and hold Landlord harmless in connection therewith. ARTICLE 8. USE OF THE PROPERTY, HAZARDOUS MATERIALS, AND NON- DISCRIMINATION 8.1 Definitions Applicable to this Article. All capitalized terms used in this Article 8 and not elsewhere defined shall have the following meanings: "Adjusted Income" means the adjusted income of a person (together with the adjusted income of all persons of the age of eighteen (18) years or older who intend to reside with such person in one residential unit) as calculated in the manner prescribed under Section 142(d)(2)(B) of the Code. Page 13 "Affordable Rent for 50% of Median Income Tenants" means monthly rent (including the Utility Allowance, and excluding any supplemental rental assistance from the State of California, the federal government or any other public agency) not in excess of thirty percent (30%) of one -twelfth (1/12th) of fifty percent (50%) of the Median Income for the Area adjusted for family size appropriate for the Unit, pursuant to California Health & Safety Code Section 33413, 50052.5 and 50053. "Certificate of Continuing Program Compliance" shall mean the Certificate to be filed annually (or quarterly at the written request of the Executive Director) by Tenant with the Executive Director which shall be substantially in the form attached to this Lease as Exhibit «C„ "Code" means the Internal Revenue Code of 1986, as amended, including the Regulations promulgated thereunder or under any predecessor statute. "50% of Median Income Tenants" means persons or families with Adjusted Income that does not exceed fifty percent (50%) of the Median Income for the Area, adjusted for household size. "Median Income for the Area" means the median income for the area as determined and published annually by the Secretary of Housing and Urban Development under Section 8 of the United States Housing Act of 1937, as amended, or if programs under Section 8 are terminated, median income for the Area determined under the method used by the Secretary of Housing and Urban Development prior to such termination. "Utility Allowance" means a monthly allowance for Utility Services based on a utility allowance schedule published annually by Landlord. "Utility Services" means all utility services included on the utility allowance schedule published annually by Landlord. 8.2 Affordable Housing. As hereinafter more particularly provided, Tenant shall use the Property and the Improvements as senior rental housing (age 62 and older) with certain commercial space and ancillary purposes. One hundred fifty-one (151) of the Units shall be leased to 50% of Median Income Tenants at Affordable Rent for 50% of Median Income Tenants. Except for such reasonable periods during which a Unit is, or Units are, being maintained, repaired or rehabilitated, Tenant shall actively market any vacant unit or units and lease it or them as soon as reasonably possible so as to satisfy the subleasing requirements immediately above. Provided, however, the Landlord acknowledges that there are currently several Units which are currently occupied by tenants whose incomes exceed 50% of Median Income (the "Existing Over -Income Units"), and the Landlord agrees that the Existing Over - Income Units will continue to be treated as eligible, so long as upon the vacancy of any Existing Over -Income Unit, such Unit must then be rented to and occupied by a qualifying household. In the selection of subtenants for occupancy of the Units, Tenant shall give priority to eligible persons displaced by Landlord or by the National City Redevelopment Agency. Any such priority shall be subject to the rules and regulations of the Tax Credit Program and to each such Page 14 subtenant meeting screening criteria (pursuant to the management plan delivered by Tenant to Landlord) approved by the Executive Director, which approval shall not be unreasonably withheld. Landlord acknowledges and agrees that it will execute and deliver the lease rider, in form and substance required by the California Tax Credit Allocation Committee, which rider will be recorded in the Official Records of San Diego County following recordation of the Memorandum of Lease. 8.3 Increase in Person's or Family's Income. For purposes of satisfying the obligation to rent the dwelling units as set forth in Section 8.2 above, a person or family who at the commencement of his, hers or its occupancy qualified as a 50% of Median Income Tenant shall continue to be treated as such Tenant irrespective of any later increase in his, her or their income. A Unit occupied by a 50% of Median Income Tenant shall be deemed, upon the termination of such person's or family's occupancy, to be continuously occupied by such 50% of Median Income Tenant until reoccupied, provided that Owner actively, diligently and continuously markets such Unit for occupancy by a Tenant of the same income classification. 8.4 Section 8 Certificate Holders. Tenant shall accept as Low -Income Tenants, on the same basis as all other prospective Low -Income Tenants, persons and families that are recipients of federal certificates for rent subsidies pursuant to the existing program under Section 8 of the United States Housing Act of 1937, as amended, or its successor, and shall not apply selection criteria to Section 8 certificate holders that are more burdensome than the criteria applied to all other prospective Low -Income Tenants. Tenant agrees to modify the subleases for the Units, as necessary, to allow the rental of Units to Section 8 certificate holders. 8.5 Rent Increases. Tenant may adjust the Affordable Rents in accordance with periodic revisions to the Median Income for the area by the U.S. Secretary of Housing and Urban Development; provided, however, that the Affordable Rent for any Unit may not be increased more often than one time per 12-month period, and only after at least thirty (30) days prior written notice to the affected Low -Income Tenant. 8.6 Initial Income Certification. Immediately prior to the initial occupancy of each new subtenant, and at least annually thereafter, Tenant shall obtain, in substantially the form set forth on Exhibit `B", current income certification statements for each subtenant. Tenant shall make a good faith effort to verify each income certification statement provided by an applicant for subtenancy or a subtenant by taking one or more of the following steps as part of the verification process: (a) obtain a pay stub for the most recent pay period, (b) obtain an income tax return for the most recent tax year, (c) conduct a credit check, criminal background check or similar search, (d) obtain an income verification form from the applicant's or subtenant's current employer, (e) obtain an income verification form from the Social Security Administration and/or the California Department of Social Services if the applicant receives assistance from either of such agencies, or (f) if the applicant is unemployed and has no such tax return, obtain another form of independent verification. Tenant shall maintain each such income certification statement on file for not less than three (3) years. 8.7 Annual Recertification. Not less than annually, Tenant shall obtain and maintain a file, again in substantially the form set forth in Exhibit `B", of current income Page 15 recertification statements for each subtenant. Tenant shall make a good faith effort to verify each income recertification statement in the manner described in Section 8.6. Tenant shall also maintain each such income recertification statement on file for not less than three (3) years. 8.8 Form of Sublease. The form of sublease or subrental agreement used by Tenant shall clearly notify subtenants that Tenant has relied on the income certification supplied by the subtenant, and will rely on the annual income recertification to be supplied by the subtenant, in determining qualification for occupancy at Affordable Rent, and that any material misstatement in such certification or recertification will be cause for immediate termination of such sublease or subrental agreement. 8.9 Low -Income Housing Tax Credit Program. Notwithstanding anything contained in this Lease to the contrary, if and when the Property is subject to the requirements of the Federal Low -Income Housing Tax Credit Program under the provisions of Section 42 of the Code (the "Tax Credit Program"), and there is a conflict between the requirements of the Tax Credit Program and the affordability provisions set forth in Sections 8.1 or 8.3 through 8.8 above, inclusive, the Tax Credit Program provisions shall prevail. 8.10 Access and Reporting. Tenant shall permit the representatives of Landlord at any time or from time to time, upon one business day's notice, to inspect, audit and copy all of its properties, books, records and accounts. Tenant shall maintain a system of accounting established and administered in accordance with sound business practices to permit preparation of financial statements which shall be in conformity with GAAP basis of accounting. Tenant shall furnish or cause to be furnished to Landlord the following: (a) Notice of Default. As soon as possible, and in any event not later than five (5) days after the occurrence of any Event of Default, a statement of an officer of Tenant describing the details of such Event of Default and any curative action Tenant proposes to take; (b) Annual Statements. As soon as available, and in any event not later than one hundred twenty (120) days after the close of each fiscal year of Tenant, fmancial statements of Tenant, including a profit and loss statement, reconciliation of capital accounts and a consolidated statement of changes in financial position of Tenant as at the close of and for such fiscal year, all in reasonable detail, certified as provided in clause (a) above by an officer or partner of Tenant and, upon request of Landlord, if total operating expenses for such year exceed the total amount set forth in the Pro Forma Budget by more than five percent (5%), accompanied by a compilation report prepared by a firm of certified public accountants, and in a format, each reasonably acceptable to the Executive Director; (c) Pro Forma Budget. As soon as available and in any event not later than December 15 of each calendar year beginning with the year in which Rehabilitation is completed, Tenant shall provide Landlord with a detailed projection of operating income and budgets of estimated operating expenses for the immediately succeeding calendar year (the "Pro Forma Budget") and a detailed cash flow projection for the next succeeding year. Tenant shall also submit to Landlord on request additional detail, information and assumptions used in the preparation of the Pro Forma Budget. Tenant shall use commercially reasonable efforts to operate the Property during such calendar year within the Pro Forma Budget; Page 16 (d) Tax Returns. As soon as available, and in any event not later than at the time of filing with the Internal Revenue Service, the federal tax returns (and supporting schedules, if any) of Tenant; (e) Certificate of Performance. Concurrently with delivery of each of the financial statements provided for in clause (b) above, a certificate of an officer or partner of Tenant stating that Tenant has, in all material respects, performed and observed each of its covenants contained in this Lease and that no Event of Default or Potential Default has occurred or, if any such event has occurred, specifying its nature; (f) Redevelopment Monitoring. Tenant shall submit to Landlord on an annual basis the annual report required by Section 33418 of the California Health and Safety Code. The annual report shall include for each dwelling unit the rental rate and the income and the family size of the occupants. (g) Rent Roll. As soon as possible and in any event not later than forty-five (45) days after the close of each calendar quarter, the rent roll as of the end of such calendar quarter setting forth such information, and in such format, as is reasonably acceptable to the Executive Director; (h) Audit Reports. Promptly upon receipt thereof, copies of all reports submitted to Tenant by independent certified public accountants in connection with each annual, interim or special audit of the financial statements of Tenant made by such accountants, including the comment letter submitted by such accountants to management in connection with their annual audit; (i) Notices, Certificates or Communications. Immediately upon giving or receipt thereof, copies of any notices, certificates or other communications given by or on behalf of Tenant or received by or on behalf of Tenant from lenders pursuant to or in connection with any of the loan documents, as well as any notices and other communications delivered to the Property or to Tenant naming Landlord or the "Construction Lender" as addressee, or which could reasonably be deemed to affect the Rehabilitation or the ability of Tenant to perform its obligations to Landlord; (j) Monthly Leasing Report. As soon as available and in no event later than the twenty fifty (25th) day of every calendar month, a monthly property analysis report for the Property indicating the current leasing status for the Property; (k) Monthly Operating Statements. As soon as available and in no event later than the twenty-fifth (25th) day of every calendar month, commencing with the first full calendar month following commencement of lease -up of the Property, a "Monthly Operating Statement" showing all operating income, operating expenses, and debt service the prior month, in a form reasonably satisfactory to the Executive Director; Page 17 (1) Certificate of Continuing Program Compliance. Tenant shall submit to Landlord on an annual basis the Certificate of Continuing Program Compliance. (m) Other Information. Such other documents and information relating to the affairs of Tenant and the Property as Landlord reasonably may request from time to time which Tenant can provide for a reasonable cost. 8.11 Onsite Manager. Tenant, through an onsite professional property manager or property management company, shall manage the Project or cause it to be managed. Any manager or management company retained to act as agent for Tenant in meeting the obligation of providing an onsite manager shall be subject to prior written approval of the Executive Director, which approval shall not be unreasonably withheld or delayed. Mercy Housing Management ("Mercy") is hereby approved by Landlord as the initial property manager. In exercising his/her approval rights hereunder, the Executive Director may require proof of ability and qualifications of the manager and/or management company based upon (i) prior experience, (ii) assets, and (iii) other factors determined by the Executive Director as necessary. The Executive Director can approve of property manager and/or management company upon submittal of one or more candidates proposed by Tenant. Furthermore, upon sixty (60) days prior written demand from Landlord with cause, Tenant shall remove and replace a property manager and/or property management company. In any agreement with a property manager or property management company ("Management Agreement"), Tenant shall expressly reserve the right to terminate such agreement upon written demand of Landlord with cause. That notwithstanding, Landlord agrees that Mercy shall be entitled to a thirty (30)-day notice of default and a reasonable opportunity to cure before any such termination. 8.12 No Use of Hazardous Materials on the Property. Tenant covenants and agrees that it shall not, and that it shall not permit any subtenant to, treat, use, store, dispose, release, handle or otherwise manage Hazardous Materials on the Property from and after the date hereof except in connection with any rehabilitation, operation, maintenance or repair of the Improvements or in the ordinary course of its business, and that such conduct shall be done in compliance with all applicable federal, state and local laws, including all Environmental Laws. Tenant's violation of the foregoing prohibition shall constitute a breach hereunder and Tenant shall indemnify, hold harmless and defend the Landlord for such violation as provided below. 8.13 Notice and Remediation by Tenant. Tenant shall promptly give the Landlord written notice of any significant release of any Hazardous Materials, and/or any notices, demands, claims or orders received by Tenant from any governmental agency pertaining to Hazardous Materials which may affect the Property. 8.14 Environmental Indemnity. Tenant agrees to indemnify, protect, hold harmless, and defend (with counsel reasonably satisfactory to Landlord) the Indemnitees from and against any and all losses, costs, claims, expenses, damages (including, without limitation, foreseeable or unforeseeable consequential damages), and liabilities directly or indirectly arising out of or in any way connected with (a) Tenant's breach or violation of any covenant, prohibition or warranty in this Lease concerning Hazardous Materials, or (b) the activities, acts or omissions of Tenant, its employees, contractors or agents on or affecting the Property from and after the Page 18 Commencement Date, including but not limited to the release of any Hazardous Materials or other kinds of contamination or pollutants of any kind into the air, soil, groundwater or surface water on, in, under or from the Property. This indemnification supplements and in no way limits the scope of the indemnification set forth in Article 13. 8.15 Termination; Subtenants. The agreements and obligations of Tenant under this Article 8 with regard to indemnification of Landlord shall survive the scheduled termination or sooner expiration of the Term for any reason, for five (5) years and all claims relating thereto must be delivered in writing to Tenant within such period. That notwithstanding, the extension of time within which to deliver a claim to Tenant shall not extend, beyond the date of expiration or termination of this Lease, the period in which Claims may arise. No action by any subtenant in violation of its sublease shall constitute a cause to terminate this Lease provided that Tenant diligently pursues its available remedies against such subtenant. 8.16 Nondiscrimination. There shall be no discrimination against or segregation of any person or group of persons, on account of race, color, creed, religion, sex, marital status, national origin, or ancestry, in the leasing, subleasing, transferring, use, occupancy, tenure, or enjoyment of the Property nor shall the Tenant itself, or any person claiming under or through Tenant, 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, sublessees, subtenants, or vendees in the Property. 8.17 Form of Nondiscrimination and Nonsegregation Clauses. Tenant covenants and agrees for itself, its successors, its assigns and every successor in interest to the Property or any part thereof, that it shall refrain from restricting the lease, sublease, rental, transfer, use, occupancy, tenure, or enjoyment of the Property (or any part thereof) on the basis of sex, marital status, race, color, religion, creed, ancestry or national origin of any person. All such leases, or contracts pertaining thereto shall contain or be subject to substantially the following nondiscrimination or nonsegregation clauses: 8.17.1 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 sex, marital status, race, color, religion, creed, 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, or occupancy of tenants, lessees, sublessees, tenants, or vendees in the land herein leased." 8.17.2 In contracts: "There shall be no discrimination against or segregation of, any person or group of persons on account of sex, marital status, race, color, religion, creed, national origin or ancestry in the sale, lease, sublease, rental, 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 Page 19 to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees of the land." 8.18 Resident Services. From not later than six (6) months after the date of issuance of a temporary certificate of occupancy for the Project until expiration of the Term, Tenant shall provide, or cause to be provided by a reasonably qualified person or firm, services to the residents of the Project in accordance with the plan therefor attached hereto as Exhibit "D". Mercy Housing California is hereby approved by Landlord as the initial provider of such resident services. In the event Tenant desires to replace the resident services provider for any reason, the Executive Director shall have the authority to approve such a change in his or her reasonable discretion upon submittal of one or more candidates proposed by the Tenant. 8.19 Effect and Duration of Covenants. Subject to Section 8.21 below, the covenants established in this Article shall, without regard to technical classification and designation, be binding on Tenant and any successor in interest to the Property, or Tenant's leasehold interest therein, or any part thereof, for the benefit and in favor of the Landlord, its successors and assigns, and the City until the expiration of the Term, except to the extent said covenant expressly provides that it shall survive the expiration of the Term. 8.20 Indemnification. Tenant hereby saves, defends, indemnifies and holds the Indemnitees harmless from and against any and all losses, costs, damages or liabilities, including, without limitation, reasonable attorneys' fees and costs, which result from the breach of any representations and warranties contained in this Article 8. 8.21 Terminable Upon Foreclosure. Notwithstanding anything contained in this Lease to the contrary, upon foreclosure of a Mortgage, or acceptance by a Mortgagee of an assignment or deed in lieu of foreclosure, Section 8.1 through Section 8.16, inclusive, Section 8.18 and Section 8.20 of this Lease shall be terminable by the purchaser at the foreclosure sale, or the assignee or grantee of a deed in lieu of foreclosure, by notice to Landlord. Termination of such Sections pursuant to this provision shall not affect the validity of the remaining provisions of this Lease and Tenant's rights hereunder. ARTICLE 9. INSURANCE 9.1 Landlord Not Liable. Except as the result of the sole or willful negligence or intentional acts or omissions by Landlord or its representatives, employees or agents, or as otherwise expressly set forth herein, Landlord shall not be liable for injury to Tenant's business or any loss of income therefrom or for any damage or liability of any kind or for any injury to or death of persons or damage to property of Tenant, or to Tenant's agents, employees, servants, contractors, subtenants, licensees, concessionaires, customers or business invitees or any other person which occurs on the Property during the Term. 9.2 Indemnification. Except as the result of the sole or willful negligence or intentional acts or omissions by Landlord or its representatives, employees or agents, Tenant shall indemnify, defend and hold the Indemnitees harmless from and against all liability, loss, damage, cost or expense (including reasonable attorneys' fees and court costs) arising from or as Page 20 a result of the death of any person or any accident, injury, loss or damage whatsoever caused to any person or to the property of any person caused by Tenant's performance of its obligations under this Lease or any errors or omissions of Tenant, whether such performance, errors or omissions of Tenant be made by Tenant, its contractors or subcontractors, or anyone directly or indirectly employed by Tenant, and whether such damage shall accrue or be discovered before or after the termination of this Lease. This indemnification provision supplements and in no way limits the scope of the indemnifications in Article 13. The indemnity obligation of Tenant under this Article shall survive the expiration or termination, for any reason, of this Lease. This Section notwithstanding, indemnification with respect to Hazardous Materials shall be governed by Section 8.14. 9.3 Insurance. From and after the Commencement Date until the termination of this Lease, Tenant shall take out and maintain the following types of insurance in the forms and amounts (as may be increased each calendar year by the corresponding increase in the Index) set forth below, at Tenant's sole expense. Notwithstanding the amounts of insurance set forth below, the Executive Director shall have the right, but not the obligation, to reduce the amounts required from time to time. 9.3.1 Comprehensive General Liability in an amount not less than Two Million Dollars ($2,000,000.00) combined single limit for each occurrence or Four Million Dollars ($4,000,000.00) general aggregate for bodily injury, personal injury and property damage including contractual liability, which limits may be achieved through the use of an umbrella/excess liability policy(ies). The limits of this insurance shall be increased to an amount not less than Five Million Dollars ($5,000,000.00) combined single limit (which limits may be achieved through the use of an umbrella/excess liability policy(ies)) upon the recordation of the Certificate of Completion for any of the Improvements in the Official Records. The Indemnitees shall be covered as additional insureds with respect to liability arising out of activities by or on behalf of Tenant or in connection with the use or occupancy of the Property. Coverage shall be in a form acceptable to the City Risk Manager and shall be primary and non-contributing with any insurance or self-insurance maintained by City or Commission. 9.3.2 Automobile Liability in an amount not less than One Million Dollars ($1,000,000.00) combined single limit per accident for bodily injury and property damage covering owned, non -owned and hired vehicles. 9.3.3 Workers' Compensation as required by the Labor Code of the State of California and Employers' Liability insurance in an amount not less than One Million Dollars ($1,000,000.00). 9.3.4 "All Risk" or "Special Form" property including builder's risk protection during the course of Rehabilitation, covering the full replacement value of the Improvements constructed on or about the Property by Tenant. Said insurance shall include debris removal, and, if typically carried upon similar affordable housing projects in San Diego County, California, coverage for flood if this protection is required by the Senior Lender. Landlord shall be named as loss payee under a standard loss payable endorsement. Page 21 9.4 Other Insurance. Tenant shall also obtain and maintain such other insurance in forms and amounts reasonably required from time to time by Landlord or the City Risk Manager for protection against the same or other insurable hazards which are then typically insured against by similar properties in San Diego County, California, provided that such coverage is available at commercially reasonable rates. 9.5 Contractors. All contractors employed by Tenant with contracts of Fifty Thousand Dollars ($50,000.00) or more shall be required to furnish evidence of Comprehensive General Liability insurance subject to all the requirements stated herein with limits of not less than One Million Dollars ($1,000,000.00) combined single limit each occurrence. The Indemnitees shall have the right to receive evidence of compliance with the foregoing by contractors at any time upon written request therefor. 9.6 Acceptable Terms of Coverage. Acceptable insurance coverage shall be placed with carriers admitted to write insurance in California, or carriers with a rating of or equivalent to A-:VIII by A.M. Best & Company. Any deviation from this rule shall require specific approval in writing from the City's Risk Manager. Any deductibles in excess of Twenty -Five Thousand Dollars ($25,000.00) per occurrence or self -insured retentions must be declared to and approved by the City Risk Manager. At the option of the City Risk Manager, Tenant may be required to reduce or eliminate such deductibles or self -insured retentions or to procure a bond guaranteeing payment of losses and related investigations, claim administration and defense costs. In the event such insurance provides for deductibles or self -insured retention, Tenant agrees that it will fully protect the Indemnitees in the same manner as those interests would have been protected had the policy or policies not contained a deductible or retention. Coverage under each policy shall not be suspended, avoided or canceled by either party except after thirty (30) days' prior written notice to Landlord. Tenant shall furnish the Indemnitees with certificates of insurance and with original endorsements effecting coverage as required under this Article. The certificates and endorsements for each insurance policy shall be signed by a person authorized by the insurer to bind coverage on its behalf. The Indemnitees reserve the right to require complete certified copies of all insurance policies not previously provided at any time. 9.7 Blanket Coverage. Notwithstanding anything to the contrary set forth in this Article 9, Tenant's obligations to carry the insurance provided for herein may be brought within the coverage of a so-called blanket policy or policies of insurance carried and maintained by Tenant; provided, however, (i) that the Indemnitees and other parties in interest to it shall be named as additional insureds as their interests may appear, and (ii) that the coverage afforded the Indemnitees will not be reduced or diminished by reason of the use of such blanket policy of insurance, and (iii) that the requirements set forth in this Article 9, are otherwise satisfied. 9.8 Waiver of Subrogation. Each policy of insurance procured pursuant to Article 9 shall contain, if obtainable upon commercially reasonable terms, either (i) a waiver by the insurer of the right of subrogation against either party hereto for negligence of such party, or (ii) a statement that the insurance shall not be invalidated should any insured waive in writing prior to a loss any or all right of recovery against any party for loss accruing to the property described in the insurance policy. Each of the parties hereto waives any and all rights of recovery against the other, or against the officers, employees, agents and representatives of such other party, for loss Page 22 or damage to such waiving party or its property or the property of others under its control, arising from any cause insured against under the form of insurance policies required to be carried pursuant to Article 9 of this Lease or under any other policy of insurance carried by such waiving ply ARTICLE 10. MAINTENANCE; REPAIRS; ALTERATIONS; RECONSTRUCTION 10.1 General Maintenance. Throughout the Term, Tenant shall, at Tenant's sole cost and expense, maintain the Property and the Improvements in good condition and repair, ordinary wear and tear excepted, and in accordance with all applicable federal, state and local laws, ordinances and regulations of (a) governmental agencies and bodies having or claiming jurisdiction and all their respective departments, bureaus, and officials, (b) insurance underwriting boards or insurance inspection bureaus having or claiming jurisdiction, and (c) all insurance companies insuring all or any part of the Property or the Improvements, or both. 10.2 Program Maintenance. In addition to the routine maintenance and repair required pursuant to Section 10.1, Tenant shall perform the following programmed maintenance on the Improvements: (a) Tenant shall maintain the Improvements, including all common areas, all interior and exterior facades, and all exterior project site areas, in a safe and sanitary fashion suitable for a high quality, rental housing project. The Tenant agrees to provide administrative services, supplies, contract services, maintenance, maintenance reserves, and management for the entire project including interior tenant spaces, common area spaces and exterior common areas. (b) Clean-up maintenance shall include, but not be limited to: maintenance of all private paths, parking areas, driveways and other paved areas in clean and weed -free condition; maintenance of all such areas clear of dirt, mud, trash, debris or other matter which is unsafe or unsightly; removal of all trash, litter and other debris from improvements and landscaping prior to mowing; clearance and cleaning of all areas maintained prior to the end of the day on which the maintenance operations are performed to ensure that all cuttings, weeds, leaves and other debris are properly disposed of by maintenance workers. (c) Landscape maintenance shall include, but not be limited to: watering/irrigation; fertilization; mowing, edging, and trimming of grass; tree and shrub pruning; trimming and shaping of trees and shrubs to maintain a healthy, natural appearance and safe road conditions and visibility, and optimum irrigation coverage; replacement, as needed, of all plant materials; control of weeds in all planters, shrubs, lawns, ground covers, or other planted areas; and staking for support of trees. All maintenance work shall conform to all applicable federal and state Occupational Safety and Health Act standards and regulations for the performance of maintenance. Upon the request of Tenant, the Executive Director, at his sole and absolute discretion, may grant a waiver or deferral of any program maintenance requirement. Tenant shall keep such records of maintenance and repair as are necessary to prove performance of the program maintenance requirements. Page 23 ARTICLE 11. OWNERSHIP OF AND RESPONSIBILITY FOR IMPROVEMENTS 11.1 Ownership During Term. 11.1.1 Improvements. All Improvements on the Property as permitted or required by this Lease shall, during the Term, be and remain the property of Tenant, and Landlord shall not have title thereto. Tenant shall not, however, demolish or remove any Improvements from the Property except as permitted herein. 11.1.2 Personal Property. All personal property, furnishings, fixtures and equipment, including, without limitation, Tenant -owned appliances, which are not so affixed to the Property or the buildings thereon as to require substantial damage to the buildings upon removal thereof shall constitute personal property including, but not limited to: (a) functional items related to the everyday operations of the Property; (b) personal property furnishings, fixtures and equipment of the nature or type deemed by law as permanently resting upon or attached to the buildings or land by any means, including, without limitation, cement, plaster, nails, bolts or screws, or essential to the ordinary and convenient use of the Property and the Improvements. At any time during the Term and at termination thereof, Tenant shall have the right to remove any and all such personal property, furnishings, fixtures and equipment; provided, that Tenant repairs any damage to the Property or the Improvements caused by such removal. 11.1.3 Basic Building Systems. For purposes of this Lease, the personal property, furnishings, fixtures and equipment described in this Section 11.1 shall not include those major building components or fixtures necessary for operation of the basic building systems such as, but not limited to, the elevators, plumbing, sanitary fixtures, heating and central air-cooling system. 11.2 Ownership at Expiration or Termination. 11.2.1 Property of Landlord. At the expiration or earlier termination of the Term, except as provided in Section 11.2.2, all Improvements which constitute or are a part of the Property shall become (without the payment of compensation to Tenant or others) the property of Landlord free and clear of all claims and encumbrances on such Improvements by Tenant, and anyone claiming under or through Tenant, except for such title exceptions permitted or required during the Term. Tenant shall then quitclaim to Landlord any and all rights, interests and claims to the Improvements. Tenant agrees to and shall defend, indemnify and hold Landlord harmless from and against all liability and loss which may arise from the assertion of any such claims and any encumbrances on such Improvements (except claims arising due to Landlord's actions) and except for such title exceptions permitted or required during the Term. 11.2.2 Removal by Tenant. Tenant shall not be required or permitted to remove the Improvements, or any of them, at the expiration or sooner termination of the Term; provided, however, that, within thirty (30) days following the expiration or sooner termination of the Term, Tenant may remove all personal property, furniture, and equipment. Page 24 11.2.3 Unremoved Property. Any personal property, furnishings or equipment not removed by Tenant within thirty (30) days after the expiration or sooner termination of the Term, shall, without compensation to Tenant, become Landlords' property, free and clear of all claims to or against them by Tenant or any third person, firm or entity arising by, through or under Tenant. 11.2.4 Maintenance and Repair of Improvements. Subject to the provisions of this Lease concerning condemnation, alterations and damage and destruction, Tenant agrees to assume full responsibility for the operation and maintenance of the Property and the Improvements and all fixtures and furnishings thereon or therein throughout the Term hereof without expense to Landlord, and to perform all repairs and replacements necessary to maintain and preserve the Property, the Improvements, fixtures and furnishings in a decent, safe and sanitary condition consistent with good practices and in compliance with all applicable laws. Tenant agrees that Landlord shall not be required to perform any maintenance, repairs or services, or to assume any expense not specifically assumed herein in connection with the Property and the Improvements thereon unless specifically required under the terms of this Lease. Except as otherwise provided in this Section 11.2 and in Section 11.4, the condition of the Improvements required to be maintained hereunder upon completion of the work of maintenance or repair shall be equal in value, quality and use to the condition of such Improvements before the event giving rise to the work. 11.3 Waste. Subject to the alteration rights of Tenant and damage and destruction or condemnation of the Property or any part thereof, Tenant shall not commit or suffer to be committed any waste of the Property or the Improvements, or any part thereof. Tenant agrees to keep the Property and the Improvements clean and clear of refuse and obstructions, and to dispose properly of all garbage, trash and rubbish. 11.4 Alteration of Improvements. Except as provided in Section 7.1, Tenant shall not make or permit to be made any material, exterior alteration of, addition to or change in, the Improvements which would materially affect the exterior elevations (including materials selection and color) or the size, bulk and scale of the Property, other than routine maintenance and repairs, nor demolish all or any part of the Improvements, without the prior written consent of Landlord. Nothing herein shall prohibit interior alterations or decorations, or the removal and replacement of interior improvements consistent with the specified use of the Property. In requesting consent for such exterior improvements as required by the foregoing, Tenant shall submit to Landlord detailed plans and specifications of the proposed work and an explanation of the need and reasons thereof. Tenant may make such other improvements, alterations, additions or changes to the Improvements which do not materially affect the exterior elevations (including materials selection and color) or the size, bulk and scale thereof without Landlord's prior written consent. Notwithstanding the prohibition in this Section 11.4, Tenant may make such changes, repairs, alterations, improvements, renewals or replacements to the exterior elevations, materials, size, bulk or scale of the Improvements as are required (a) by reason of any law, ordinance, regulation or order of a competent government authority, (b) for the continued safe and orderly operation of the Property, or (c) to continue to receive the Low Income Housing Tax Credit. Page 25 ARTICLE 12. SIGNS Tenant shall not place or suffer to be placed on the Property or upon the roof or any exterior door or wall or on the exterior or interior of any window of the Improvements, any sign, awning, canopy, marquee, advertising matter, decoration, lettering or other thing of any kind (exclusive of the signs, awnings and canopies, if any, which may be provided for in the Plans) without the written consent of the Executive Director first had and obtained. ARTICLE 13. INDEMNIFICATION Tenant will protect, indemnify and save the Indemnitees harmless from and against all liabilities, obligations, claims, damages, penalties, causes of action, judgments, costs and expenses (including, without limitation, reasonable attorneys' fees and expenses) imposed upon or incurred by or asserted against Landlord, or the Property or the Improvements during the Term, unless caused solely by the willful act or gross negligence of Landlord, by reason of (a) any accident or injury to or death of persons or loss of or damage to property occurring on or about the Property or the Improvements, (b) any failure on the part of Tenant to perform or comply with any of the terms of this Lease, or (c) any negligence or tortious act on the part of Tenant or any of its agents, employees, contractors, subtenants, licensees or invitees. In the event that any action, suit or proceeding is brought against the Indemnitees by reason of any such occurrence, Tenant, upon Landlord's request, will, at Tenant's expense, defend such action, suit or proceeding with counsel approved by Landlord. This Section notwithstanding, indemnification with respect to Hazardous Materials shall be governed by Section 8.14. ARTICLE 14. DAMAGE OR DESTRUCTION OF PROPERTY OR IMPROVEMENTS 14.1 Tenant's Repair Obligation. 14.1.1 In case of damage to or destruction of the Property or the Improvements, or any part thereof, by fire or other cause at any time during the Term of this Lease, Tenant, if and to the extent insurance proceeds are available, shall restore the same as nearly as possible to their value, condition and character immediately prior to such damage or destruction. Such restoration shall be commenced with due diligence and in good faith, and prosecuted with due diligence and in good faith, unavoidable delays excepted. 14.1.2 In case of damage to or destruction of the Improvements by fire or other cause resulting in a loss exceeding in the aggregate Ten Thousand Dollars ($10,000), Tenant shall promptly give written notice thereof to Landlord. Page 26 14.2 Tenant's Restoration of Premises. 14.2.1 If, during the Term, the Improvements are damaged or destroyed, and the total amount of loss does not exceed thirty-three percent (33%) of the replacement value of the Improvements, Tenant shall make the loss adjustment with the insurance company insuring the loss, with the approval of Landlord, which approval shall not be unreasonably withheld or delayed. The proceeds shall be paid directly to a Mortgagee, if any, and if there is not a Mortgagee, to Landlord and Tenant for the sole purpose of making the restoration of the Improvements in accordance with this Article 14. 14.2.2 If, during the Term, the Improvements are damaged or destroyed, and the total amount of loss exceeds thirty-three percent (33%) of the replacement value of the Improvements, Tenant shall make the loss adjustment with the insurance company insuring the loss, with the approval of Landlord, which approval shall not be unreasonably withheld or delayed, and the insurance company shall immediately pay the proceeds to a bank or trust company designated by Landlord and approved by Tenant ("Insurance Trustee"), which approval shall not be unreasonably withheld or delayed. Any leasehold mortgagee shall be an acceptable Insurance Trustee. All sums deposited with the Insurance Trustee shall be held for the following purposes and the Insurance Trustee shall have the following powers and duties: (a) The sums shall be paid in installments by the Insurance Trustee to the contractor retained by Tenant and approved by Landlord as construction progresses, for payment of the cost of restoration. A ten percent (10%) retention fund shall be established that will be paid to the contractor on completion of restoration, payment of all costs, expiration of all applicable lien periods, and proof that the Property and the Improvements are free of all mechanics' liens and lienable claims; (b) Payments shall be made on presentation of certificates or vouchers from the architect or engineer retained by Tenant and approved by Landlord (which approval shall not be unreasonably withheld or delayed) showing the amount due. If the Insurance Trustee, in its reasonable discretion, determines that the certificates or vouchers are being improperly approved by the architect or engineer retained by Tenant, the Insurance Trustee shall have the right to appoint an architect or an engineer to supervise construction and to make payments on certificates or vouchers approved by the architect or engineer retained by the Insurance Trustee. The reasonable expenses and charges of the architect or engineer retained by the Insurance Trustee shall be paid by the Insurance Trustee out of the trust fund; (c) If, after the work of restoration has commenced, the sums held by the Insurance Trustee are not sufficient to pay the actual cost of restoration, Tenant shall deposit the amount of the deficiency with the Insurance Trustee within ten (10) days after receipt of request for payment of such amount from the Insurance Trustee, which request shall be made by the Insurance Trustee promptly after it is determined there will be a deficiency; (d) If the Insurance Trustee has received notice from Landlord that the Tenant is in default under this Lease, then, subject to the lien of a Mortgagee's Mortgage and the Page 27 Mortgagee's prior written consent, the Insurance Trustee shall pay to Landlord an amount sufficient to cure such default as specified in Landlord's notice to the Insurance Trustee; (e) Any amounts remaining after making the payments hereinabove referred to in clauses (a), (b) and (d), and after paying the reasonable costs and expenses of the Insurance Trustee, shall be paid to any leasehold Mortgagee to the extent (a) required by any Mortgage and (b) such leasehold Mortgagee makes written demand therefor to the Insurance Trustee; (f) Any undisbursed funds remaining after compliance with all of the provisions of this Section 14.2 shall, if and to the extent required by any Mortgage, be delivered to the Mortgagee, and if there is no leasehold Mortgagee, to Tenant; and (g) All actual costs and charges of the Insurance Trustee shall be paid by Tenant. If the Insurance Trustee resigns or for any reason is unwilling to act or continue to act, Landlord shall substitute a new Insurance Trustee in the manner described in this Section. 14.2.3 Both parties shall promptly execute all documents and perform all acts reasonably required by the Insurance Trustee to perform its obligations under this Section 14.2. 14.3 Procedure for RestorinE Improvements. 14.3.1 If and to the extent Tenant is obligated to restore the Improvements pursuant to this Article 14, Tenant shall restore the Improvements substantially in accordance with the Plans. Within forty-five (45) days after the date of such damage or destruction (as such time may be reasonably extended at the written request of Tenant), Tenant, at its cost, shall prepare and deliver to Landlord final plans and specifications and working drawings complying with applicable laws that will be necessary for such restoration. Such plans and specifications shall specify differences from the Plans. The plans and specifications and working drawings are subject to the approval of Landlord only insofar as they vary from the Plans. Landlord shall have twenty (20) days after receipt of the plans and specifications and working drawings to either approve or disapprove the plans and specifications and working drawings and return them to Tenant. If Landlord disapproves the plans and specifications and working drawings, Landlord shall notify Tenant of its objections in writing, specifying the objections clearly and stating what modifications are required for Landlord's approval. Tenant acknowledges that the plans and specifications and working drawings shall be subject to approval of the appropriate government bodies and that they will be prepared in such a manner as to obtain that approval. 14.3.2 The restoration shall be accomplished as follows: (a) Tenant shall complete the restoration within fifteen (15) months (or such longer time as is necessary in the Landlord's discretion) after fmal plans and specifications and working drawings have been approved by the appropriate government bodies and all required permits have been obtained. (b) Tenant shall retain a licensed contractor that is bondable. The contractor shall be required to carry public liability and property damage insurance, builders risk insurance, Page 28 standard fire and extended coverage insurance, with vandalism and malicious mischief endorsements, during the period of construction in accordance with Article 9. Such insurance shall contain waiver of subrogation clauses in favor of Landlord and Tenant in accordance with the provisions of and to the extent required by Section 9.8. (c) Tenant shall notify Landlord of the date of commencement of the restoration not later than ten (10) days before commencement of the restoration to enable Landlord to post and record notices of nonresponsibility. The contractor retained by Tenant shall not commence construction until a completion bond and a labor and materials bond have been delivered to Landlord to insure completion of the construction. (d) Tenant shall accomplish the restoration in a manner that will cause the least inconvenience, annoyance, and disruption to the Property and the Improvements. (e) On completion of the restoration Tenant shall immediately record a notice of completion. (f) If Section 14.2.2 is applicable, the restoration shall not be commenced until sums sufficient to cover the cost of restoration are placed with the Insurance Trustee as provided in said Section 14.2.2. 14.4 Mortgagee Protection. The following provisions are for the protection of a Mortgagee and shall, notwithstanding anything contained in this Lease to the contrary, control: 14.4.1 Insurance. Any insurance proceeds payable from any policy of insurance (other than liability insurance) required by the Lease shall be paid to the Mortgagee, if any, to the extent required by the Mortgage. The Mortgagee, if any, shall have the right to participate in all adjustments, settlements, negotiations or actions with the insurance company regarding the amount and allocation of any such insurance proceeds. Any insurance policies permitted or required by this Lease shall name the Mortgagee, if any, as an additional insured or loss payee, as appropriate, if required by such Mortgage. 14.4.2 Restoration. Tenant shall have no obligation to restore or repair the Improvements following the occurrence of any casualty for which insurance is not required under this Lease. The Mortgagee, if any and if it exercises any of its remedies set forth in this Lease, shall have no obligation to restore or repair damage to the Improvements that cost in excess of available insurance proceeds. Tenant shall have no obligation to restore or repair damage to the Improvements if the casualty occurs during the last five (5) years of the Lease term. In the event such a loss occurs in the last five (5) years, then, at the election of Tenant, with the prior written consent of the Mortgagee, if any, insurance proceeds shall be used, first, to clear the Property of the damaged Improvements and any debris, and second, to reduce or pay in full the Mortgage, with any excess being payable as provided in this Lease. Page 29 Article 15. EMINENT DOMAIN 15.1 Notice. The party receiving any notice of the kind specified in this Section 15.1 shall promptly give the other party notice of the receipt, contents and date of the notice received. For purposes of this Article 15, the term "Notice" shall include: (a) Notice of Intended Taking; (b) Service of any legal process relating to condemnation of the Property or the Improvements; (c) Notice in connection with any proceedings or negotiations with respect to such condemnation; or (d) Notice of intent or willingness to make or negotiate a private purchase, sale or transfer in lieu of condemnation. 15.2 Representation in Proceedings or Negotiations. Landlord and Tenant shall each have the right to represent their respective interests in each proceeding or negotiation with respect to a Taking or intended Taking and to make full proof of their claims. No agreements or settlement with or sale or transfer to the condemning authority shall be made without the consent of Landlord, but, as to its reversionary interest only, Landlord may enter into such agreement, settlement, sale or transfer without the consent of Tenant. Landlord and Tenant each agree to execute and deliver to the other any instruments which may be required to effectuate or facilitate the provisions of this Lease relating to condemnation. 15.3 Total Taking. 15.3.1 In the event of a Total Taking, this Lease shall terminate as of the date of the Taking. 15.3.2 If this Lease is terminated pursuant to this Section 15.3, and separate Awards are not made to Landlord and Tenant for their respective fee and leasehold interests, the Award for such Taking shall be apportioned and distributed as follows: 15.3.2.1 First, to the Mortgagee, if any, to the extent of the Mortgage; 15.3.2.2 Second, to Landlord, a sum equal to the fair market value of the Property (subject to the remaining Term and the Rent reserved) on the date immediately preceding the Taking as determined by the appraisal method set forth in Article 16 and determined as if there were no taking nor threat of condemnation. The parties shall commence said appraisal by the earlier of ten (10) days after Tenant's receipt of a copy of a Notice of Intended Taking or ten (10) days after the date of the Taking; Page 30 15.3.2.3 Third, to Tenant, a sum equal to the fair market value of the Improvements made by Tenant on the date immediately preceding the Taking as determined by the appraisal method set forth in Article 16 and determined as if there were no Taking, nor threat of condemnation; plus the residual value of the Term, subject to the Rent reserved; plus any part of the Award attributable to the Low Income Housing Tax Credit; and 15.3.2.4 Fourth, to Landlord, the remainder, if any. 15.4 Substantial Taking. 15.4.1 In the event of a Taking which, in Tenant's reasonable judgment is substantial, Tenant may, subject to the rights of the Mortgagee, if any, terminate this Lease. If Tenant elects to terminate this Lease under this provision, Tenant shall give written notice of its election to do so to Landlord within forty-five (45) days after receipt of a copy of a Notice of Intended Taking. In the event Landlord disputes the right of Tenant to terminate this Lease under this provision, Landlord shall give Tenant notice of this fact within forty-five (45) days after receiving the notice of Tenant's election to terminate, and the parties shall either raise this issue in the eminent domain proceeding, if any, as an issue with respect to the apportionment of the Award between Landlord and Tenant or, if there is no eminent domain proceeding, submit the issue to arbitration as provided in Article 23. In the event it is determined that Tenant does not have the right to terminate this Lease, the apportionment of the Award for such Taking and the obligations of Tenant to restore shall be governed by the terms of Section 15.6 or Section 15.8, whichever is applicable. 15.4.2 In the event it is determined that Tenant has the right to terminate this Lease, or in the event Landlord does not dispute Tenant's right to terminate this Lease, such termination shall be as of the time when the Taking entity takes possession of the portion of the Property and the Improvements taken. In such event, the Award for such Substantial Taking (including any award for severance, consequential or other damages which will accrue to the portion of the Property and/or the Improvements not taken) shall be apportioned and distributed as follows: (a) First, to the Mortgagee, if any, to the extent of the Mortgage; (b) Second, to Landlord, a sum equal to the fair market value of the Property taken (subject to the remaining Term and the Rent reserved) immediately preceding the date of the Taking as determined by the appraisal process provided for in Article 16, commenced as provided in Section 15.3.2, and as modified by Section 15.6.3; (c) Third, to Landlord, an amount equal to the portion of the award for severance, consequential or other damages which accrued to the portion of the Property and/or Improvements not taken; (d) Fourth, to Tenant a sum equal to the fair market value of the Improvements made by Tenant taken immediately preceding the date of the Taking as determined by the appraisal process provided for in Article 16, commenced as provided in Page 31 Section 15.3.2, and as modified by Section 15.6.3; plus the residual value of the Term, subject to the Rent reserved; plus any part of the Award attributable to the Low Income Housing Tax Credit; and (e) Fifth, to Landlord, the remainder, if any. 15.5 Tenant's Right to Revoke Notice of Termination. Notwithstanding anything to the contrary contained in Section 15.4, if Tenant has elected to terminate this Lease, and the taking authority abandons or revises the Taking, Tenant shall have forty-five (45) days from receipt of written notice of such abandonment or revision to revoke its notice of termination of this Lease. 15.6 Partial Taking. 15.6.1 In the event of a Partial Taking, this Lease shall continue in full force and effect and Landlord and Tenant shall agree upon an equitable reduction in the Annual Rent. If the parties fail to agree upon such reduction within sixty (60) days from the date Tenant is required to give up such occupancy, use or access, whichever is earlier, Landlord and Tenant shall each choose one arbitrator and the two arbitrators so chosen shall choose a third arbitrator. The decision of any two of the arbitrators concerning the reduction in Annual Rent, if any, shall be binding on the Landlord and Tenant and any expense of the arbitrators only shall be divided equally between Landlord and Tenant (each party shall be liable for any and all costs incurred by such party, including without limitation attorneys' fees and expert fees). 15.6.2 The Award for such Partial Taking shall be apportioned and distributed first to the Mortgagee, if any, to the extent of the Mortgage, then to Landlord and Tenant in proportion to the fair market value of their respective interests in the Property and Improvements, as such interests existed immediately prior to such Partial Taking. Tenant's only interest in the Property and the Improvements for purposes of this Section 15.6.2 is in those Improvements rehabilitated by Tenant. Notwithstanding anything contained herein to the contrary, any part of the Award attributable to the Low Income Housing Tax Credit shall belong to Tenant. 15.6.3 The fair market value of the parties' respective interests in the Property and the Improvements shall be determined by the appraisal process provided in Article 16, except that the assumptions listed in such Article shall not apply. Rather, the appraisal shall be based on the value of the Property as improved and encumbered by this Lease and on the value of the Improvements as they stand, but without regard to any Taking or threat of condemnation. 15.6.4 Any Award for severance, consequential or other damages which accrues by reason of the Partial Taking to the portion of the Property or the Improvements not taken shall be distributed first to the Mortgagee, if any, to the extent of the Mortgage, then shall be apportioned between Landlord and Tenant in accordance with the diminution in value of their respective interests. Page 32 15.7 Obligation to Repair on Partial Taking. Promptly after any Partial Taking and regardless of the amount of the Award for such Taking, Tenant shall, to the extent of the Award received by Tenant and in the manner specified in the provisions of this Lease, repair, alter, modify or reconstruct the Improvements and/or other improvements on the Property so as to make them usable for the designated purpose and capable of producing a fair and reasonable net income. 15.8 Temporary Taking. 15.8.1 In the event of a Temporary Taking of the whole or any part of the Property and/or Improvements, the Term shall not be reduced or affected in any way and Tenant shall continue to pay in full any sum or sums of money and charges herein reserved and provided to be paid by Tenant, and, subject to the other provisions of this Section 15.8, Tenant shall be entitled to any Award or payment for the temporary use of the Property and/or Improvements prior to the termination of this Lease, and Landlord shall be entitled to any Award or payment for such use after the termination of this Lease. 15.8.2 If, following such Temporary Taking, possession of the Property and/or Improvements shall revert to Tenant prior to the expiration of the Term, Tenant shall, unless at such time there remains less than five (5) years in the Term, restore the Property and/or Improve- ments whether or not the Taking authority has made any Award or payment for such restoration and regardless of the amount of any award or payment and in all other respects indemnify and hold Landlord harmless from the effects of such Taking so that the Property and/or Improvements in every respect shall upon completion of such restoration be in the same condition as they were prior to the taking thereof. 15.8.3 If, following such Temporary Taking, possession of the Property shall revert to Landlord after expiration of the Term, any sums deposited pursuant to this Section 15.8 shall be paid over to Landlord in their entirety and without apportionment and Tenant shall be excused from its obligation to restore the Property and/or Improvements. 15.8.4 Any Award or payment for damages or cost of restoration made on or after the termination of this Lease shall be paid first to the Mortgagee, if any, to the extent of the Mortgage, then to Landlord absolutely, together with the remaining balance of any other funds paid to Tenant for such damages or cost of restoration and Tenant shall thereupon be excused from any obligation to restore the Property and/or Improvements upon the termination of such Temporary Taking except that any obligation that may have accrued for Tenant to restore the Property and/or Improvements prior to the commencement of said Temporary Taking shall continue to be the obligation of Tenant. 15.9 Mortgagee Protection. Notwithstanding anything contained in this Lease to the contrary, any and all condemnation proceeds shall be paid first to the Mortgagee, if any, to be applied to reduce the Mortgage if required by the mortgage documents. Page 33 ARTICLE 16. APPRAISAL Whenever an appraisal of the Property is called for under the terms of this Lease, the parties shall use the following procedure: 16.1 Appointment of Appraiser. Within ten (10) days after notice from Landlord to Tenant, Landlord and Tenant shall each appoint an MAI appraiser to participate in the appraisal process provided for in this Article 16 and shall give written notice thereof to the other party. Upon the failure of either party so to appoint, the nondefaulting party shall have the right to apply to the Superior Court of the County of San Diego, California, to appoint an appraiser to represent the defaulting party. Within ten (10) days of the parties' appointment, the two (2) appraisers shall jointly appoint a third MAI appraiser and give written notice thereof to Landlord and Tenant, or if within ten (10) days of the appointment of said appraisers the two (2) appraisers shall fail to appoint a third, then either party hereto shall have the right to make application to said Superior Court to appoint such third appraiser. 16.2 Determination of Fair Market Value. 16.2.1 Within thirty (30) days after the appointment of the third appraiser, the appraisers shall determine the fair market value of the Property and the Improvements in accordance with the provisions hereof, and shall execute and acknowledge their determination of fair market value in writing and cause a copy thereof to be delivered to each of the parties hereto. 16.2.2 The appraisers shall determine the fair market value of the Property and the Improvements as of the date of Landlord's notice referred to in Section 16.1 above, based on sales of comparable property in the area in which the Property is located. If, however, in the judgment of a majority of the appraisers, no such comparable sales are available, then the appraisal shall be based on the following assumptions: (i) that the Property is free and clear of this Lease, the Improvements and all other improvements, and all easements and encumbrances; and (ii) that the Property is available for immediate sale and development for the purposes and at the density and intensity of development permitted under the zoning, subdivision and land use planning ordinances and regulations applicable to the Property in effect on the Commencement Date of this Lease, and any changes or amendments thereto or modification or variance from the provisions thereof or conditional use permits which could reasonably be anticipated to have been granted or approved as of the date of this Lease. Notwithstanding anything contained herein to the contrary, if the appraisal, for the particular purposes for which it is being done, should reasonably reflect the rent restrictions imposed on the Property pursuant to Article 8 of this Lease, and such other covenants, conditions and restrictions to which the Property is subject pursuant to this Lease or to other documents recorded against the Property in the Official Records of the County of San Diego, California, then such covenants, conditions and restrictions shall be taken into consideration by the appraisers. 16.2.3 If a majority of the appraisers are unable to agree on fair market value within thirty (30) days of the appointment of the third appraiser, the three (3) appraisals shall be added together and their total divided by three (3). The resulting quotient shall be the fair market value of the Property and the Improvements. If, however, the low appraisal and/or high appraisal Page 34 is or are more than ten percent (10%) lower and/or higher than the middle appraisal, the low and/or high appraisal shall be disregarded. If only one appraisal is disregarded, the remaining two appraisals shall be added together and their total divided by two (2). The resulting quotient shall be the fair market value of the Property and the Improvements. If both the low and high appraisals are disregarded, the middle appraisal shall be the fair market value of the Property. 16.4 Payment of Fees. Each of the parties hereto shall (a) pay for the services of its appointee, (b) pay one-half (1/2) of the fee charged by the appraiser selected by their appointees, and (c) pay one-half (1/2) of all other proper costs of the appraisal. ARTICLE 17. ASSIGNMENT/TRANSFER 17.1 Prohibition Against Transfer. 17.1.1 Prior to Recordation of the Certificate of Completion. Prior to recordation of the Certificate of Completion, but subject to Article 19 pursuant to which Tenant is permitted to sublease the Units for residential occupancy and to sublease the approximately 6,560 rentable square feet of commercial space located on the first floor of the building, Tenant shall not assign or attempt to assign this Lease or any right herein (other than to a general or limited partnership of which Tenant is the managing general partner) without the prior written consent of Landlord, which consent may be withheld in Landlord's absolute discretion. 17.1.2 Following Recordation of the Certificate of Completion. Following recordation of the Certificate of Completion, but subject to Article 19 pursuant to which Tenant is permitted to sublease the Units for residential occupancy and to sublease the approximately 6,560 rentable square feet of commercial space located on the first floor of the building, Tenant shall not assign or attempt to assign this Lease or any right herein, nor make any total or partial sublease, sale, transfer, conveyance or assignment of the whole or any part of the Property or the Improvements thereon, without the prior written consent of Landlord, which consent shall not be unreasonably withheld. In the absence of specific written agreement by Landlord, no unauthorized sublease, sale, transfer, conveyance or assignment of the Property, or any portion thereof, or approval thereof by Landlord shall be deemed to relieve Tenant or any other party from any obligations under this Lease. Notwithstanding anything to the contrary contained herein, Tenant shall be permitted to assign the Lease to an affiliate of the managing general partner of Tenant in accordance with the option and right of first refusal granted under Tenant's partnership documents. 17.1.3 Qualifications of Tenant. In connection with the above prohibition and limitation on assignments, Tenant acknowledges that the qualifications, expertise and identities of Tenant are of particular concern to Landlord, and that Landlord continues to rely on such expertise to ensure the satisfactory completion of the Rehabilitation and operation of the Improvements on the Property. Tenant further recognizes that it is because of such qualifications and identities that Landlord is entering into this Lease with Tenant. No voluntary or involuntary successor in interest of Tenant shall acquire any rights or powers under this Lease except as expressly set forth in the Lease. Page 35 17.1.4 Conditions. Tenant's right to make an assignment after the recordation of the Certificate of Completion shall be subject to compliance with the following further conditions: (a) No Default. At the time of such assignment, this Lease shall be in full force and effect and either no Event of Default (as defined in Section 21.1) then exists or no Event of Default will exist upon consummation of the assignment. (b) Assumption. The assignee shall have executed an express assumption of the obligations and liabilities of Tenant under this Lease from and after the date of delivery and recording of the assignment and there shall have been delivered to Landlord at the time of the request for such assignment a conformed copy of such assumption. (c) Net Worth of Assignee. The assignee shall have a Net Worth equal to at least One Million Dollars ($1,000,000.00) ("Net Worth Minimum"), which Net Worth Minimum shall be increased on the date that is five (5) years after the first day of the first calendar year following the Commencement Date, and on the same date every fifth (5th) year thereafter ("Net Worth Adjustment Date"), by an amount equal to the percentage change in construction industry costs, from the first day of the calendar year following the Commencement Date until the applicable Net Worth Adjustment Date, as published by the Engineering News Record, or such similar construction industry index as the parties shall agree in the event such information is not available in the Engineering News Record or such publication is no longer published. Net Worth is to be evidenced by a statement of fmancial condition as of a date not more than three hundred sixty (360) days prior to the date of assignment which is accompanied either by an opinion of a certified or a chartered public accountant or by a certificate by the chief fmancial or accounting officer of the assignee that it fairly represents the financial condition of the assignee. In the event Tenant agrees to remain liable under this Lease from and after the effective date of such assignment and to guaranty the obligations of the assignee under this Lease, the Net Worth Minimum standard set forth in this Section 17.1 shall not apply to such assignee. Notwithstanding the foregoing, the Executive Director, at her sole and absolute discretion, shall be permitted to waive the Net Worth Minimum standard for a proposed assignee that is (a) a California nonprofit, public benefit corporation, and (b) has demonstrated experience and ability in owning, operating and managing similar affordable housing projects in the State of California. Any assignee pursuant to the option or right of first refusal granted under Tenant's partnership documents shall not be subject to the Net Worth Minimum requirement. 17.1.5 Assignment Agreement. No assignment of any interest in the Lease made with Landlord's consent or as herein otherwise permitted shall be effective unless and until there shall have been delivered to Landlord an executed counterpart of such assignment or other transfer document containing an agreement, in recordable form, executed by the assignor and the proposed assignee, wherein and whereby such assignee assumes due performance of the obligations on the assignor's part to be performed under this Lease from the effective date of the assignment to the end of the Term. Page 36 17.1.6 Further Assignments. The consent by Landlord to an assignment shall not in any way be construed to relieve Tenant from obtaining the express consent in writing of Landlord to any further assignment if required by the terms of this Lease. 17.2 Terminable Upon Foreclosure. Notwithstanding anything contained in this Lease to the contrary, upon foreclosure of a Mortgage, or acceptance by a Mortgagee of an assignment or deed in lieu of foreclosure, Article 17 of this Lease shall be terminable by the purchaser at the foreclosure sale, or the assignee or grantee of a deed in lieu of foreclosure, by notice to Landlord. 17.3 Other Rights of Mortgagees. Landlord agrees that none of the restrictions or limitations on assignment or transfer by Tenant set forth in this Article 17 shall be construed to limit or abrogate the rights of a Mortgagee to (a) seek the appointment of a receiver, or (b) delegate or assign its rights under this Lease to any third party in connection with the exercise of said Mortgagee's rights and remedies under its Mortgage. 17.4 Limitation on Transfer by Landlord. Landlord agrees, during the Compliance Period, not to transfer its interest in the Property or under this Lease without the prior written approval of the Tax Credit Partner; provided, however, no such approval shall be required for such a transfer to another public body. 17.5 Transfer by Tax Credit Partner. Notwithstanding the foregoing limitations on transfer and assignment, nothing herein shall limit or condition a transfer, sale, assignment or other conveyance of all or a portion of the limited partner interests of the Tax Credit Partner to any affiliate of the Tax Credit Partner, and the interests of the Tax Credit Partner shall be freely transferable to any affiliate of the Tax Credit Partner without the consent or approval of but only with prior, written notice to Landlord; provided however that in the event of non-payment of capital contribution obligations by the transferee pursuant to the terms and conditions of the Tenant's Partnership Agreement, the Tax Credit Partner shall remain liable for the amount of such unpaid capital contribution obligations. After all required capital contributions of the Tax Credit Partner have been made to the Tenant, no consent shall be required for the transfer of all or a portion of the interest of the Tax Credit Partner to any person or entity. ARTICLE 18. MORTGAGES 18.1 Leasehold Mortgages 18.1.1 General Provisions. At all times during the Term, Tenant shall have the right to mortgage, pledge, deed in trust, assign rents, issues and profits and/or collaterally (or absolutely for purposes of security if required by any lender) assign its interest in this Lease, or otherwise encumber this Lease, and/or the interest of Tenant hereunder, in whole or in part, and any interests or rights appurtenant to this Lease, and to assign or pledge the same as security for any debt (the holder of any such mortgage, pledge or other encumbrance, and the beneficiary of any such deed of trust being hereafter referred to as "Mortgagee" and the mortgage, pledge, deed of trust or other instrument hereafter referred to as "Mortgage"), upon and subject to each and all of the following terms and conditions: Page 37 (a) Prior to the issuance of a Certificate of Completion, Mortgages entered into by Tenant shall be limited in purpose to and shall not exceed the amount necessary and appropriate to develop the Improvements, and to acquire and install equipment and fixtures thereon. Said amount shall include all hard and soft costs of acquisition, development, Rehabilitation, lease -up and operation of the Improvements. After the recordation of the Certificate of Completion, the limitation contained in this subsection shall no longer apply. (b) Any permitted Mortgages entered into by Tenant are to be originated only by lenders approved in writing by Landlord, which approval will not be unreasonably withheld. Landlord shall state the reasons for any such disapproval. Notwithstanding the forgoing, Landlord shall be deemed to have automatically approved (i) a commercial or savings bank, a trust company, an insurance company, a savings and loan association, a building and loan association, an educational institution, a pension, retirement or welfare fund, or other fund authorized to make loans in the State of California; (ii) any other entity having a net worth of $50,000,000 or more whether or not a so-called institution, or any division, subsidiary, parent or affiliate owned or controlled by, owning or in control of or in common control or ownership with any entities described in (i) or (ii); or (iii) a lender regularly engaged in business in an office or location in the State of California, or who has a registered agent for service of process in California. In addition, any lender must be duly licensed or registered with any regulatory agency having jurisdiction over its operation, if any; and any lender must not be under any order or judgment of any court or administrative agency restricting or impairing its operation as a lender where the restriction or impairment would be directly related to the proposed loan to Tenant. Notwithstanding anything to the contrary contained herein, Landlord hereby approves the Senior Lender as the lender of the Construction Loan and Pacific Premier Bank as the lender of the Affordable Housing Project loan. If the lender is other than as set forth in the immediately preceding sentence or a lender deemed automatically approved pursuant to subdivisions (i), (ii) or (iii) of this Section, then upon the reasonable request of Landlord, the beneficial owners of lender must be disclosed to Landlord. (c) All rights acquired by said Mortgagee shall be subject to each and all of the covenants, conditions and restrictions set forth in this Lease, and to all rights of Landlord thereunder, none of which covenants, conditions and restrictions is or shall be waived by Landlord by reason of the giving of such Mortgage. If Tenant encumbers its leasehold estate by way of a Mortgage as permitted herein, and should Landlord be advised in writing of the name and address of the Mortgagee, then this Lease shall not be terminated or canceled on account of any Event of Default by Tenant in the performance of the terms, covenants or conditions hereof until Landlord shall have complied with the provisions of Section 18.2 as to the Mortgagee's rights to cure and to obtain a new lease. 18.1.2 Consent of Mortgagee Required. No cancellation, surrender, termination, or modification of this Lease shall be effective without the written consent of the holder of any Mortgage. Page 38 18.2 Rights and Obligations of Leasehold Mortgagees. If Tenant or Tenant's successors or assigns shall mortgage the leasehold interest herein demised, then, as long as any such Mortgage shall remain unsatisfied of record, the following provisions shall apply: 18.2.1 No Cancellation. Landlord will not cancel, accept a surrender of, terminate or modify this Lease in the absence of a default by Tenant without the prior consent in writing of the Mortgagee. 18.2.2 Notice of Defaults. Landlord agrees to give each Mortgagee immediate notice of all defaults by Tenant under the Lease, and to simultaneously give to each Mortgagee a written copy of all notices and demands that Landlord gives to Tenant. No notice or demand under the Lease shall be effective until after notice is received by Mortgagee. Any notices of default given by Landlord under the Lease shall describe the default(s) with reasonable detail. Each Mortgagee shall have the right to cure any breach or default within the time periods given below. 18.2.3 Mortgagee's Cure Rights. (a) Notice and Cure. After receipt by Tenant of a notice of default under the Lease and the expiration of any applicable period of cure given to Tenant under the Lease, Landlord shall deliver an additional notice ("Mortgagee's Notice") to each Mortgagee specifying the default and stating that Tenant's period of cure has expired. Each Mortgagee shall thereupon have the additional periods of time to cure any uncured default, as set forth below, without payment of default charges, fees, late charges or interest that might otherwise be payable by Tenant. Landlord shall not terminate the Lease or exercise its other remedies under the Lease if: (i) Within ninety (90) days after Mortgagee's receipt of the Mortgagee's Notice, any Mortgagee (i) cures the default, or (ii) if the default reasonably requires more than ninety (90) days to cure, commences to cure said default within such ninety (90)-day period and thereafter diligently prosecutes the same to completion; or (ii) Where the default cannot be cured by payment or expenditure of money or without possession of the Property or otherwise, Mortgagee initiates foreclosure or other appropriate proceedings within ninety (90) days after receipt of the Mortgagee's Notice, thereafter cures all other defaults reasonably capable of cure by the payment of money to Landlord, and thereafter continues to pay all rents, real property taxes and assessments, and insurance premiums to be paid by Tenant under the Lease. Mortgagee shall then have ninety (90) days following the later to occur of (i) the date of execution and delivery of a new lease of the Property pursuant to Section 18.2.4 of the Lease (a "New Lease"), or (ii) the date on which Mortgagee or its nominee is able to occupy the Property following foreclosure under such Mortgage and the eviction of or vacating by Tenant of the leased premises, to cure such default; provided, however, that if any such default, by its nature, is such that it cannot practicably be cured within ninety (90) days, then Mortgagee shall have such additional time as shall be reasonably necessary to cure the default provided that Mortgagee commences such cure within such ninety (90)-day period and thereafter diligently prosecutes the cure to completion. Page 39 (b) Cure by Mortgagee. Landlord agrees to accept performance by Mortgagee of all cures, conditions and covenants as though performed by Tenant, and agrees to permit Mortgagee access to the Property to take all such actions as may be necessary or useful to perform any condition or covenants of the Lease or to cure any default of Tenant. Mortgagee shall not be required to perform any act or cure any default which is not reasonably susceptible to performance or cure by Mortgagee. (c) Mortgagee Acquisition and Cure. If Mortgagee elects any of the above -mentioned options, then upon Mortgagee's acquisition of the Lease by foreclosure, whether by power of sale or otherwise or by deed or assignment in lieu of foreclosure, or if a receiver be appointed, the Lease shall continue in full force and effect, provided that, if Mortgagee elects the option provided in Section 18.2.3(a)(ii) above, then upon Mortgagee's acquisition of the Lease, Mortgagee shall cure all prior defaults of Tenant under the Lease that are reasonably capable of being cured by Mortgagee within the time set forth in said Section, and Landlord shall treat Mortgagee as Tenant under the Lease. If Mortgagee commences an action as set forth in Section 18.2.3(a)(ii) above, and thereafter Tenant cures such defaults (which cure Landlord shall be obligated to accept) and Mortgagee then terminates all proceedings under the option in said Section, then the Lease shall remain in full force and effect between Landlord and Tenant. 18.2.4 New Lease. In the event the Lease is terminated for any reason prior to the end of the Lease Term, Landlord shall promptly give Mortgagee written notice of such termination and shall enter into a new lease ("New Lease") with Mortgagee or Mortgagee's nominee covering the Property, provided that Mortgagee (a) requests such New Lease by written notice to Landlord within sixty (60) days after Mortgagee's receipt of written notice by Landlord of termination of the Lease, and (b) cures all prior defaults of Tenant that are reasonably capable of being cured by Mortgagee. The New Lease shall be for the remainder of the Lease Term, effective at the date of such termination, and shall only include all the rents and all the covenants, agreements, conditions, provisions, restrictions and limitations contained in the Lease, except as otherwise provided in the Lease. In connection with a New Lease, Landlord shall assign to Mortgagee or its nominee all of Landlord's interest in all existing subleases of all or any part of the Property and all attomments given by the sublessees. Landlord shall not terminate or agree to terminate any sublease or enter into any new lease or sublease for all or any portion of the Property without Mortgagee's prior written consent, unless Mortgagee fails to deliver its request for a New Lease under this Section. In connection with any such New Lease, Landlord shall, by grant deed, convey to Mortgagee or its nominee title to the Improvements, if any, which become vested in Landlord as a result of termination of the Lease. Landlord shall allow to the tenant under the New Lease a credit against rent equal to the net income derived by Landlord from the Property during the period from the date of termination of the Lease until the date of execution of the New Lease under this Section. 18.2.5 Security Deposits. Mortgagee or any other purchaser at a foreclosure sale of the Mortgage (or Mortgagee or its nominee if one of them enters into a New Lease with Landlord) shall succeed to all the interest of Tenant in any security or other deposits or other impound payments paid by Tenant to Landlord. Page 40 18.2.6 Permitted Delays. So long as Mortgagee is prevented by any process or injunction issued by any court or by any statutory stay, or by reason of any action by any court having jurisdiction of any bankruptcy or insolvency proceeding involving Tenant or any other person, from commencing or prosecuting foreclosure or other appropriate proceedings in the nature thereof, Mortgagee shall not be deemed for that reason to have failed to commence such proceedings or to have failed to diligently prosecute such proceedings, provided that Mortgagee uses reasonable efforts to contest and appeal the issuance or continuance of any such process, stay or injunction. 18.2.7 Defaults Deemed Cured. On transfer of the Lease at any foreclosure sale under the Mortgage or by deed or assignment in lieu of foreclosure, or upon creation of a New Lease, any or all of the following defaults relating to the prior owner of the Lease shall be deemed cured: (a) Attachment, execution or other judicial levy upon the Lease; (b) the prior Tenant; the Lease; Assignment of the Lease for the direct or indirect benefit of creditors of (c) Judicial appointment of a receiver or similar officer to take possession of (d) Filing any petition by, for or against Tenant under any chapter of the federal Bankruptcy Act or any federal or state debtor relief statute, as amended; (e) Any failure by Tenant to make a disclosure of a hazardous substance release as required by the California Health and Safety Code, the Lease or otherwise; and (f) Any other defaults personal to Tenant and/or not otherwise reasonably curable by Mortgagee. 18.2.8 Mortgagee Priority. Anything herein contained to the contrary notwithstanding, the provisions of this Section shall inure only to the benefit of the holders of Mortgages. If the holders of more than one such Mortgage shall make written requests upon Landlord in accordance with this Lease, the new lease (as provided for in subsection 18.2.4 above) shall be entered into pursuant to the request of the holder whose Mortgage shall be prior in lien thereto and thereupon the written requests for a new lease of each holder of a Mortgage junior in lien shall be and be deemed to be void and of no force or effect. 18.3 Landlord's Forbearance and Right to Cure Defaults on Leasehold Mortgages 18.3.1 Notice. Landlord will give to Mortgagee, at such address as is specified by the Mortgagee in accordance with Section 26.1 hereof, a copy of each notice or other communication with respect to any claim that a default exists or is about to exist from Landlord to Tenant hereunder at the time of giving such notice or communication to Tenant, and Landlord will give to Mortgagee a copy of each notice of any rejection of this Lease by any trustee in Page 41 bankruptcy of Tenant. Landlord will not exercise any right, power or remedy with respect to any Event of Default hereunder, and no notice to Tenant of any such Event of Default and no termination of this Lease in connection therewith shall be effective, unless Landlord has given to Mortgagee written notice or a copy of its notice to Tenant of such Event of Default or any such termination, as the case may be. 18.3.2 Mortgagee's Transferees, Etc. In the event the leasehold estate hereunder shall be acquired by foreclosure, trustee's sale or deed or assignment in lieu of foreclosure of a Mortgage, the purchaser at such sale or the transferee by such assignment and its successors as holders of the leasehold estate hereunder shall not be liable for any Rent, if any, or other obligations accruing after its or their subsequent sale or transfer of such leasehold estate and such purchaser or transferee and its successors shall be entitled to transfer such estate or interest without consent or approval of Landlord; provided that, the purchaser or transferee or successor as holder of the leasehold estate hereunder shall be liable for the payment of all Rent, if any, becoming due with respect to the period during which such purchaser, transferee or other successor is the holder of the leasehold estate hereunder. This Section shall also apply to the rights of a Mortgagee in connection with the entry into a new lease under Section 18.2.4 and to the appointment of a receiver on behalf of a Mortgagee. 18.3.3 Insurance and Condemnation. In the event of any casualty to, or condemnation of, all or any part of the leased premises or any improvements now or hereafter located thereon, the provisions of the Mortgages relating thereto shall prevail over any provisions of this Lease relating thereto. 18.4 No Liability of Mortgagee for Prior Indemnified Acts. A Mortgagee shall not be obligated to assume the liability of Tenant for any indemnities arising for a period prior to Mortgagee's acquiring the right to possession of the Property under this Lease. 18.5 Landlord Cooperation. Landlord covenants and agrees that it will act and fully cooperate with Tenant in connection with Tenant's right to grant leasehold mortgages as hereinabove provided. At the request of Tenant or any proposed or existing Mortgagee, Landlord shall promptly execute and deliver (i) any documents or instruments reasonably requested to evidence, acknowledge and/or perfect the rights of Mortgagees as herein provided; and (ii) an estoppel certificate certifying the status of this Lease and Tenant's interest herein and such matters as are reasonably requested by Tenant or such Mortgagees. Such estoppel certificate shall include, but not be limited to, certification by Landlord that (a) this Lease is unmodified and in full force and effect (or, if modified, state the nature of such modification and certify that this Lease, as so modified, is in full force and effect), (b) all rents currently due under the Lease have been paid, (c) there are not, to Landlord's knowledge, any uncured Events of Default on the part of Tenant under the Lease or facts, acts or omissions which with the giving of notice or passing of time, or both, would constitute an Event of Default. Any such estoppel certificate may be conclusively relied upon by any proposed or existing leasehold Mortgagee or assignee of Tenant's interest in this Lease. 18.6 Priority. The Lease, and any extensions, renewals or replacements thereof, and any sublease entered into by Tenant as sublessor, and any Mortgage or other encumbrance Page 42 recorded by any Mortgagee shall be superior to any mortgages, deeds of trust or similar encumbrances placed by Landlord on the Property and to any lien right, if any, of Landlord on the buildings, and any furniture, fixtures, equipment or other personal property of Tenant upon the Property or any interest of Landlord in sublease rentals or similar agreements. 18.7 Claims. Landlord and Tenant shall deliver to Mortgagee notice of any litigation or arbitration proceedings between the parties or involving the Property or the Lease. Mortgagee shall have the right, at its option, to intervene and become a party to any such proceedings. If Mortgagee elects not to intervene or become a party, Landlord shall deliver to Mortgagee prompt notice of and a copy of any award, decision or settlement agreement made in connection with any such proceeding. 18.8 Further Amendments. Landlord and Tenant shall cooperate in including in the Lease by suitable amendment from time to time any provision which may be reasonably requested by any proposed Mortgagee for the purpose of implementing the mortgagee protection provisions contained in this Lease and allowing that Mortgagee reasonable means to protect or preserve the lien of its Mortgage upon the occurrence of a default under the terms of the Lease. Landlord and Tenant each agree to execute and deliver (and to acknowledge for recording purposes, if necessary) any agreement required to effect any such amendment. ARTICLE 19. SUBLEASING 19.1 Subleasing of Property. All subleases ("Subleases") made by Tenant shall be subject to the following provisions and restrictions: 19.1.1 Tenant may, without the consent of Landlord, let individual units of the Improvements to any person who qualifies and sublease the approximately 6,560 rentable square feet of commercial space located on the first floor of the building. 19.1.2 Each Sublease shall contain a provision, satisfactory to Landlord, requiring the Subtenant to attorn to Landlord upon (a) an Event of Default by Tenant under this Lease, and (b) receipt by such Subtenant of written notice of such Event of Default and instructions to make such Subtenant's rental payments to Landlord. 19.1.3 On any termination of this Lease prior to the expiration of the Term, all of Tenant's interest as sublessor under any and all existing valid and enforceable Subleases for which Landlord has issued a non -disturbance agreement shall be deemed automatically assigned, transferred and conveyed to Landlord and subtenants under such Subleases shall be deemed to have attorned to Landlord. Landlord shall thereafter be bound on such Subleases to the same extent Tenant, as sublessor, was bound thereunder and Landlord shall have all the rights under such Subleases that Tenant, as sublessor, had under such Subleases; provided, however, that any amendments to any such Sublease made after the issuance of a non -disturbance agreement to a subtenant shall not be binding on Landlord. 19.1.4 Any subtenant qualifying shall, upon written request, receive a non - disturbance agreement from Landlord. Page 43 19.1.5 Not later than thirty (30) days after each anniversary of the date of commencement of the term of this Lease, Tenant shall deliver to Landlord a current list of the name and mailing address of each Subtenant. 19.1.6 Tenant shall not accept, directly or indirectly, more than two (2) months prepaid rent plus a reasonable security deposit from any subtenant. 19.1.7 Each Sublease shall expressly provide that it is subject to each and all of the covenants, conditions, restrictions and provisions of this Lease. 19.2 Rights of Mortgagees. Notwithstanding anything contained in this Lease to the contrary, all attornment provisions applicable to the Landlord shall also be applicable to a Mortgagee and, as between Landlord and Mortgagee, the Mortgagee shall have priority in any attornment situation. ARTICLE 20. PERFORMANCE OF TENANT'S COVENANTS 20.1 Right of Performance. If Tenant shall at any time fail to pay any Imposition or other charge in accordance with Article 4 hereof, within the time period therein permitted, or shall fail to pay for or maintain any of the insurance policies provided for in Article 9 hereof, within the time therein permitted, or to make any other payment or perform any other act on its part to be made or performed hereunder, within the time permitted by this Lease, then Landlord, after thirty (30) days' written notice to Tenant (or, in case of an emergency, on such notice, or without notice, as may be reasonable under the circumstances) and without waiving or releasing Tenant from any obligation of Tenant hereunder, may (but shall not be required to): (a) pay such Imposition or other charge payable by Tenant pursuant to the provisions of Article 4 hereof, or (b) pay for and maintain such insurance policies provided for in Article 9 hereof, or (c) make such other payment or perform such other act on Tenant's part to be made or performed as in this Lease provided. 20.1.1 Rights of Mortgagees. Notwithstanding anything contained in this Lease to the contrary, all of the performance rights available to Landlord under Section 20.1 shall also be available to Mortgagee and, as between Landlord and Mortgagee, the rights of the Mortgagee shall take precedence over the rights of Landlord. 20.2 Reimbursement and Damages. All sums so paid by Landlord and all costs and expenses incurred by Landlord in connection with the performance of any such act, together with interest thereon at the rate provided in Section 4.5 from the respective dates of Landlord's making of each such payment or incurring of each such cost or expense, shall be paid by Tenant to Landlord on demand. Landlord shall not be limited in the proof of any damages which Page 44 Landlord may claim against Tenant arising out of or by reason of Tenant's failure to provide and keep in force insurance as aforesaid, to the amount of the insurance premium or premiums not paid or incurred by Tenant and which would have been payable upon such insurance, but Landlord shall also be entitled to recover as damages for such breach, the uninsured amount of any loss (to the extent of any deficiency in the insurance required by the provisions of this Lease), damages, costs and expenses of suit, including attorneys' fees, suffered or incurred by reason of damage to, or destruction of, the Improvements, occurring during any period in which Tenant shall have failed or neglected to provide insurance as aforesaid. ARTICLE 21. EVENTS OF DEFAULT; REMEDIES 21.2 Events of Default. Any one or all of the following events shall constitute an Event of Default hereunder: 21.1.1. If Tenant shall default in the payment of any Rent when and as the same becomes due and payable and such default shall continue for more than ten (10) days after Landlord shall have given written notice thereof to Tenant; or 21.1.2 The abandonment or vacation of the Property by Tenant for a period of thirty (30) days; or 21.1.3 The entry of any decree or order for relief by any court with respect to Tenant, or any assignee or transferee of Tenant (hereinafter "Assignee"), in any involuntary case under the Federal Bankruptcy Code or any other applicable federal or state law; or the appointment of or taking possession by any receiver, liquidator, assignee, trustee, sequestrator or other similar official of Tenant or any Assignee (unless such appointment is in connection with a Mortgagee's exercise of its remedies under its Mortgage), or of any substantial part of the property of Tenant or such Assignee, or the ordering or winding up or liquidating of the affairs of Tenant or any Assignee and the continuance of such decree or order unstayed and in effect for a period of ninety (90) days or more (whether or not consecutive); or the commencement by Tenant or any such Assignee of a voluntary proceeding under the Federal Bankruptcy Code or any other applicable state or federal law or consent by Tenant or any such Assignee to the entry of any order for relief in an involuntary case under any such law, or consent by Tenant or any such Assignee to the appointment of or taking of possession by a receiver, liquidator, assignee, trustee, sequestrator or other similar official of Tenant or any such Assignee, or of any substantial property of any of the foregoing, or the making by Tenant or any such Assignee of any general assignment for the benefit of creditors; or Tenant or any such Assignee takes any other voluntary action related to the business of Tenant or any such Assignee or the winding up of the affairs of any of the foregoing. 21.1.4 If Tenant shall default in the performance of or compliance with any other term, covenant or condition of this Lease (other than as set forth in Paragraph 21.1.1 of this Section 21.1) and such default shall continue for more than thirty (30) days after Landlord shall have given written notice thereof to Tenant, provided, however, if cure of such default reasonably requires more than thirty (30) days, then, provided that Tenant commences to cure Page 45 within such thirty (30) day period and thereafter diligently and continuously prosecutes the cure to completion, Tenant shall not be in default during the cure period. 21.2 Remedies. 21.2.1 If an Event of Default shall occur and continue as aforesaid, then in addition to any other remedies available to Landlord at law or in equity, Landlord shall have the immediate option to terminate this Lease and bring suit against Tenant or submit the issue of Tenant's default to arbitration as provided in Article 23 and recover as an award in such suit or arbitration proceeding the following: (a) the worth at the time of award of the unpaid rent and all other sums due hereunder which had been earned at the time of termination; (b) the worth at the time of award of the amount by which the unpaid rent and all other sums due hereunder which would have been earned after termination until the time of award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided; (c) the worth at the time of award of the amount by which the unpaid rent and all other sums due hereunder for the balance of the Term after the time of award exceeds the amount of such rental loss that Tenant proves could be reasonably avoided; (d) any other amount necessary to compensate Landlord for all the detriment proximately caused by the Tenant's failure to perform its obligations under this Lease or which in the ordinary course of things could be likely to result therefrom; and (e) such amounts in addition to or in lieu of the foregoing as may be permitted from time to time by applicable California law. 21.2.2 The "worth at the time of the award" of the amounts referred to in Subparagraphs 21.2.1(a) and 21.2.1(b) above shall be computed by allowing interest at the rate provided in Section 4.5 as of the date of the award. The "worth at the time of award" of the amount referred to in subparagraph 21.2.1(c) above shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1%). 21.2.3 If an Event of Default occurs, Landlord shall also have the right, with or without terminating this Lease, but subject to any nondisturbance agreements entered into with Subtenants, to reenter the Property and remove all persons and property from the Property; such property may be removed and stored in a public warehouse or elsewhere at the cost of and for the account of Tenant. 21.2.4 If an Event of Default occurs, Landlord shall also have the right, with or without terminating this Lease, to relet the Property. If Landlord so elects to exercise its right to relet the Property but without terminating this Lease, then rentals received by Landlord from Page 46 such reletting shall be applied: First, to the payment of any indebtedness other than rent due hereunder from Tenant to Landlord; Second, to the payment of any cost of such reletting; Third, to the payment of the cost of any alterations and repairs to the Property; Fourth, to the payment of rent due and unpaid hereunder; and Fifth, the residue, if any, shall be held by Landlord and applied in payment of future rent as the same may become due and payable hereunder. Should the amount of rental received from such reletting during any month which is applied to the payment of rent hereunder be less than that agreed to be paid during that month by Tenant hereunder, then Tenant shall pay such deficiency to Landlord immediately upon demand therefor by Landlord. Such deficiency shall be calculated and paid monthly. Tenant shall also pay to Landlord, as soon as ascertained, any costs and expenses incurred by Landlord in such reletting or in making alterations and repairs not covered by the rentals received from such reletting. 21.2.5 No reentry or taking possession of the Property by Landlord pursuant to Paragraphs 21.2.3 or 21.2.4 shall be construed as an election to terminate this Lease unless a written notice of such intention is given to Tenant or unless the termination thereof is decreed by a court of competent jurisdiction. Notwithstanding any reletting without termination by Tenant because of any default by Tenant, Landlord may at any time after such reletting elect to terminate this Lease for any such default. 21.3 Receipt of Rent, No Waiver of Default. The receipt by Landlord of the rents or any other charges due to Landlord, with knowledge of any breach of this Lease by Tenant or of any default on the part of Tenant in the observance or performance of any of the conditions or covenants of this Lease, shall not be deemed to be a waiver of any provisions of this Lease. No acceptance by Landlord of a lesser sum than the rents or any other charges then due shall be deemed to be other than on account of the earliest installment of the rents or other charges due, nor shall any endorsement or statement on any check or any letter accompanying any check or payment of rent or charges due be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord's right to recover the balance of such installment or pursue any other remedy provided in this Lease. The receipt by Landlord of any rent or any other sum of money or any other consideration paid by Tenant after the termination of this Lease, or after giving by Landlord of any notice hereunder to effect such termination, shall not, except as otherwise expressly set forth in this Lease, reinstate, continue, or extend the term of this Lease, or destroy, or in any manner impair the efficacy of any such notice of termination as may have been given hereunder by Landlord to Tenant prior to the receipt of any such sum of money or other consideration, unless so agreed to in writing and signed by Landlord. Neither acceptance of the keys nor any other act or thing done by Landlord or by its agents or employees during the Term shall be deemed to be an acceptance of a surrender of the Property or the Improvements, excepting only an agreement in writing signed by Landlord accepting or agreeing to accept such a surrender. 21.4 Effect on Indemnification. Notwithstanding the foregoing, nothing contained in this Article 21 shall be construed to limit the Indemnitees' right to indemnification as otherwise provided in this Lease. Page 47 21.5 Limited Waiver of Right to Terminate Lease. Landlord hereby waives it right to terminate this Lease during the Compliance Period for a default by Tenant other than the failure to pay Annual Rent. That notwithstanding, Landlord, during the Compliance Period, shall retain all other rights and remedies available hereunder or by law for such a non -monetary default, including, without limitation, an action to compel performance of the covenant or condition that is the subject of the alleged default. ARTICLE 22. PERMITTED CONTESTS Tenant, at no cost or expense to Landlord, may contest (after prior written notice to Landlord), by appropriate legal proceedings conducted with due diligence, the amount or validity or application, in whole or in part, of any Imposition or lien or any Legal Requirement or Insurance Requirement, provided that (a) in the case of liens of mechanics, materialmen, suppliers or vendors, or Impositions or liens therefor, such proceedings shall suspend the collection thereof from Landlord, and shall suspend a foreclosure against the Property and/or the Improvements, or any interest therein, or any Rent, if any, (b) neither the Property or the Improvements, nor any part thereof or interest therein, or the Rent, if any, or any portion thereof, would be in any danger of being sold, forfeited or lost by reason of such proceedings, (c) in the case of a Legal Requirement, Landlord would not be in any danger of any criminal liability or, unless Tenant shall have furnished a bond or other security therefor satisfactory to Landlord, any additional civil liability for failure to comply therewith and the Property and the Improvements would not be subject to the imposition of any lien as a result of such failure, and (d) Tenant shall have furnished to Landlord, if requested, a bond or other security, satisfactory to Landlord. If Tenant shall fail to contest any such matters, or to give Landlord security as hereinabove provided, Landlord may, but shall not be obligated to, contest the matter or settle or compromise the same without inquiring into the validity or the reasonableness thereof. Landlord, at the sole cost and expense of Tenant, will cooperate with Tenant and execute any documents or pleadings legally required for any such contest. ARTICLE 23. ARBITRATION OF DISPUTES 23.1 Matters Subject to Arbitration. All disputes arising under this Lease shall be submitted to arbitration prior to either party bringing suit based on such disputes, except that any dispute relating to the following rights and obligations shall not be subject to arbitration: or other liens: 23.1.1 Tenant's obligation to: (a) pay Rent, if any, and other charges due under this Lease; (b) indemnify Landlord as provided herein; and (c) keep the Property and the Improvements free and clear of any mechanics' Page 48 23.1.2 Landlord's right to: (a) pursue any of the remedies defined in Article 21; and (b) assign, transfer, sell or encumber its interest in the Property or this Lease; 23.1.3 Any right or obligation the exercise or performance of which is dependent on Landlord's approval, if the issue is the reasonableness of Landlord's action. 23.1.4 Any right of the Mortgagee to exercise its remedies under its Mortgage or in connection with the bankruptcy of the Tenant or Landlord. 23.2 Arbitration Process. Either party may refer a dispute subject to arbitration for settlement by arbitration in National City, California, in accordance with the Commercial Arbitration Rules of the American Arbitration Association, and judgment upon the award rendered by the Arbitrator(s) may be entered in any Court having jurisdiction. NOTICE: BY INITIALING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY CALIFORNIA LAW AND YOU ARE GIVING UP ANY RIGHTS YOU MAY POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL. BY INITIALING IN THE SPACE BELOW YOU ARE GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS SUCH RIGHTS ARE SPECIFICALLY INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION. IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY. WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION TO NEUTRAL ARBITRATION. ex), Tenant's Initials Landlord's Initials ARTICLE 24. FORCE MAJEURE 24.1 Subject to Paragraph 24.2 below, any prevention, delay, nonperformance or stoppage by Tenant due to any of the following causes shall be excused: any regulation, order, act, restriction or requirement or limitation imposed by any federal, state, municipal or foreign government or any department or agency thereof, or civil or military authority; acts of God; acts Page 49 23.1.2 Landlord's right to: (a) pursue any of the remedies defined in Article 21; and (b) assign, transfer, sell or encumber its interest in the Property or this Lease; 23.1.3 Any right or obligation the exercise or performance of which is dependent on Landlord's approval, if the issue is the reasonableness of Landlord's action. 23.1.4 Any right of the Mortgagee to exercise its remedies under its Mortgage or in connection with the bankruptcy of the Tenant or Landlord. 23.2 Arbitration Process. Either party may refer a dispute subject to arbitration for settlement by arbitration in National City, California, in accordance with the Commercial Arbitration Rules of the American Arbitration Association, and judgment upon the award rendered by the Arbitrator(s) may be entered in any Court having jurisdiction. NOTICE: BY INITIALING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY CALIFORNIA LAW AND YOU ARE GIVING UP ANY RIGHTS YOU MAY POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL. BY INITIALING IN THE SPACE BELOW YOU ARE GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS SUCH RIGHTS ARE SPECIFICALLY INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION. IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY. WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION TO NEUTRAL ARBITRATION. Tenant's Initials Landlord's Initials ARTICLE 24. FORCE MAJEURE 24.1 Subject to Paragraph 24.2 below, any prevention, delay, nonperformance or stoppage by Tenant due to any of the following causes shall be excused: any regulation, order, act, restriction or requirement or limitation imposed by any federal, state, municipal or foreign government or any department or agency thereof, or civil or military authority; acts of God; acts Page 49 25.1.2 Any notice to Tenant shall be given to: Kimball Tower Housing Associates, L.P. do Community HousingWorks 3111 Camino Del Rio North, Suite 800 San Diego, CA 92108 Attention: Susan M. Reynolds, President & CEO and to: Kimball Tower Housing Associates, L.P. do Mercy Housing California 1500 South Grand Avenue, Suite 100 Los Angeles, CA 90015 Attention: Ed Holder, Regional Vice President of Real Estate Development With a copy to: Gubb & Barshay, LLP 505 14th Street, Suite 450 Oakland, CA 94612 Attention: Evan Gross And to: U.S. Bancorp Community Development Corporation 1307 Washington Avenue, Suite 300 Mail Code: SL MO RMCD St. Louis, MO 63103USB Project No: 25982 Attn.: LIHTC Asset Management Any party may, by virtue of written notice in compliance with this Section 25.1, alter or change the address or the identity of the person to whom any notice, or copy thereof, is to be sent. 25.2 Certificates. Landlord or Tenant, as the case may be, shall execute, acknowledge and deliver to the other, promptly upon request, a Certificate of Landlord or Tenant, as the case may be, certifying (a) that this Lease is unmodified and in full force and effect (or, if there have been modifications, that the Lease is in full force and effect, as modified, and stating the date of each instrument so modifying the Lease), (b) the date, if any, through which the Rent, if any, has been paid, (c) whether there are then existing any offsets or defenses against the enforcement of any term hereof on the part of Tenant to be performed or complied with (and, if so, specifying the same), and (d) whether any default exists hereunder and, if any such default exists, specifying the nature and period of existence thereof and what action Landlord or Tenant, as the case may be, is taking or proposes to take with respect thereto and whether notice thereof has been given to the party in default. Any Certificate may be relied upon by any prospective purchaser, transferee, Tax Page 50 and to: Morgan Tower Housing Associates, L.P. do Mercy Housing California 1500 South Grand Avenue, Suite 100 Los Angeles, CA 90015 Attention: Ed Holder, Regional Vice President of Real Estate Development With a copy to: Gubb & Barshay, LLP 505 14th Street, Suite 450 Oakland, CA 94612 Attention: Evan Gross And to: U.S. Bancorp Community Development Corporation 1307 Washington Avenue, Suite 300 Mail Code: SL MO RMCD St. Louis, MO 63103 USB Project No: 25982 Attn.: LIHTC Asset Management Any party may, by virtue of written notice in compliance with this Section 25.1, alter or change the address or the identity of the person to whom any notice, or copy thereof, is to be sent. 25.2 Certificates. Landlord or Tenant, as the case may be, shall execute, acknowledge and deliver to the other, promptly upon request, a Certificate of Landlord or Tenant, as the case may be, certifying (a) that this Lease is unmodified and in full force and effect (or, if there have been modifications, that the Lease is in full force and effect, as modified, and stating the date of each instrument so modifying the Lease), (b) the date, if any, through which the Rent, if any, has been paid, (c) whether there are then existing any offsets or defenses against the enforcement of any term hereof on the part of Tenant to be performed or complied with (and, if so, specifying the same), and (d) whether any default exists hereunder and, if any such default exists, specifying the nature and period of existence thereof and what action Landlord or Tenant, as the case may be, is taking or proposes to take with respect thereto and whether notice thereof has been given to the party in default. Any Certificate may be relied upon by any prospective purchaser, transferee, Tax Credit Partner, mortgagee or trustee under a deed of trust of the fee or leasehold estate in the Property or any part thereof or of Landlord's or Tenant's interest under this Lease. Tenant will also deliver to Landlord, promptly upon request, such information with respect to the Property or any part thereof as from time to time may reasonably be requested. Page 51 25.3 No Merger of Title. There shall be no merger of this Lease or the leasehold estate created by this Lease with any other estate in the Property or any part thereof by reason of the fact that the same person, firm, corporation or other entity may acquire or own or hold, directly or indirectly: (a) this Lease or the leasehold estate created by this Lease or any interest in this Lease or in any such leasehold estate, and (b) any other estate in the Property and the Improvements or any part thereof or any interest in such estate, and no such merger shall occur unless and until all persons, corporations, firms and other entities, including any leasehold mortgagee or leasehold mortgagees, having any interest (including a security interest) in (i) this Lease or the leasehold estate created by this Lease, and (ii) any other estate in the Property or the Improvements or any part thereof shall join in a written instrument effecting such merger and shall duly record the same. 25.4 Utility Services. Tenant shall pay or cause to be paid all charges for all public or private utility services and all sprinkler systems and protective services at any time rendered to or in connection with the Property or the Improvements, or any part thereof, and shall comply with all contracts existing on the date hereof or subsequently executed by Tenant relating to any such services, and will do all other things required for the maintenance and continuance of all such services. 25.5 Ouiet Enjoyment. Tenant, upon paying the Rent, if any, and other charges herein provided for and upon performing and complying with all covenants, agreements, terms and conditions of this Lease to be performed or complied with by it, shall lawfully and quietly hold, occupy and enjoy the Property during the term of this Lease without hindrance or molestation by Landlord, or any person or persons claiming through Landlord. 25.6 No Claims Against Landlord. Nothing contained in this Lease shall constitute any consent or request by Landlord, express or implied, for the performance of any labor or services or the furnishing of any materials or other property in respect of the Property or any part thereof, nor as giving Tenant any right, power or authority to contract for or permit the performance of any labor or services or the furnishing of any materials or other property in such fashion as would permit the making of any claim against Landlord or its interest in the Property in respect thereof. 25.7 Inspection. Landlord and its authorized representatives may enter the Property or any part thereof at all reasonable times for the purpose of inspecting, servicing or posting notices, protecting the Property or the Improvements, or for any other lawful purposes. That notwithstanding, Landlord may only enter residential units after giving Tenant three (3) days prior written notice. 25.8 No Waiver by Landlord. To the extent permitted by applicable law, no failure by Landlord to insist upon the strict performance of any term hereof or to exercise any right, power or remedy consequent upon a default under this Lease, and no acceptance of rent during the continuance of any such default, shall constitute a waiver of any such default or of any such term. No waiver of any default shall affect or alter this Lease, which shall continue in full force and effect, or the rights of Landlord with respect to any other then existing or subsequent default. Page 52 25.9 Holding Over. In the event Tenant shall hold over or remain in possession of the Property or the Improvements with the consent of Landlord after the expiration of the Term, such holding over or continued possession shall create a tenancy for month to month only, upon the same terms and conditions as are herein set forth so far as the same are applicable. 25.10 Exculpation of Certain Personal Liability. Notwithstanding anything to the contrary provided in this Lease, including, without limitation, the remedies provisions set forth in Section 21.2 above, it is specifically understood and agreed that except as to: (a) the obligation to pay Annual Rent pursuant to Section 4.1; (b) the obligation to pay any and all Impositions; (c) acts of fraud and/or criminal misconduct; (d) acts of gross negligence and/or willful misconduct; (e) any and all legal costs and expenses reasonably incurred by Landlord in the enforcement of this Lease; and/or (f) liability for risks required to be covered by insurance under this Lease but for which Tenant fails to maintain such coverage; there shall be no personal liability or obligation on the part of any partner in Tenant or any assignee or successor in interest of any such partner with respect to the provisions of this Lease; provided, that, in no event shall the Tax Credit Partner have any personal liability with respect to the provisions of this Lease. 25.11 No Partnership. Anything contained herein to the contrary notwithstanding, Landlord does not in any way or for any purpose become a partner of Tenant in the conduct of its business, or otherwise, or a joint venturer or member of a joint enterprise with Tenant hereunder. 25.12 Remedies Cumulative. The various rights, options, elections and remedies of Landlord and Tenant, respectively, contained in this Lease shall be cumulative and no one of them shall be construed as exclusive of any other, or of any right, priority or remedy allowed or provided for by law and not expressly waived in this Lease. 25.13 Attornev's Fees. In the event of a dispute between the parties arising out of or in connection with this Lease, whether or not such dispute results in arbitration or litigation, the prevailing party (whether resulting from settlement before or after arbitration or litigation is commenced) shall be entitled to have and recover from the losing party reasonable attorneys' fees and costs of suit incurred by the prevailing party. 25.14 Time Is Of The Essence. Time is of the essence of this Lease and all of the terms, provisions, covenants and conditions hereof. Page 53 25.15 Survival of Representations, Warranties and Covenants. The respective representations, warranties and covenants contained herein shall survive the Commencement Date and continue throughout the Term. 25.16 Construction of Agreement. This Lease shall be construed in accordance with the substantive laws of the State of California, without regard to the choice of law rules thereof. The rule of construction that a document be construed strictly against its drafter shall have no application to this Lease. 25.17 Severability. If one or more of the provisions of this Lease shall be held to be illegal or otherwise void or invalid, the remainder of this Lease shall not be affected thereby and shall remain in full force and effect to the maximum extent permitted under applicable laws and regulations. 25.18 Entire Agreement: Modification. This Lease contains the entire agreement of the parties with respect to the matters discussed herein. This Lease may be amended only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification, extensions or discharge is sought. 25.19 Binding Effect and Benefits. This Lease shall inure to the benefit of and be binding on the parties hereto and their respective successors and assigns. Except as otherwise set forth herein, nothing in this Lease, expressed or implied, is intended to confer on any person other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Lease. 25.20 Further Assurances. Each party hereto will promptly execute and deliver without further consideration such additional agreement, assignments, endorsements and other documents as the other party hereto may reasonably request to carry out the purposes of this Lease. 25.21 Counterparts. This Lease may be executed simultaneously in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same Lease. 25.22 Number and Gender. Whenever the singular number is used in this Lease and required by the context, the same shall include the plural, and the masculine gender shall include the feminine and neuter genders. 25.23 Incorporation by Reference. Every Exhibit attached to this Lease and referred to herein is hereby incorporated by reference. 25.24 Tax Credit Partner Rights. Notwithstanding anything to the contrary contained in this Lease, Landlord, prior to any action to enforce this Lease, shall give the Tax Credit Partner notice and opportunity to cure for a period of not less than (a) fifteen (15) days if a monetary default, and (b) thirty (30) days if a nonmonetary default; provided, however, if in order to cure such a default Tax Credit Partner reasonably determines that it must remove the Page 54 general partner of Tenant, Tax Credit Partner shall so notify Lender and so long as Tax Credit Partner is diligently and continuously attempting to so remove such general partner, Tax Credit Partner shall have until the date thirty (30) days after the effective date of the removal of the general partner or general partners to cure such default but in no event more than one (1) year. IN WITNESS WHEREOF, the undersigned have executed this Lease as of the date first above written. "Landlord" COMMUNITY DEVELOPMENT COMMISSION - HOUSING AUTHORITY OF THE CITY OF NATIONAL CITY, a public body, corporate and politic B Leslie Deese, Executive Director APPROVED AS TO FORM: APP OVED AS TO FORM: Christensen & Spath LLP Landlord Special Counsel [SIGNATURES CONTINUED ON FOLLOWING PAGE] Page 55 "Tenant" MORGAN TOWER HOUSING ASSOCIATES, L.P., a California limited partnership By: CHW Morgan Development LLC, Its: managing general partner By: Community HousingWorks Its: By sole member and manager san M. Reynolds, ' esident : 1EO By: Mercy Morgan Development LLC Its administrative general partner By: Mercy Housing Calwest Its: sole member and manager By: Erika Villablanca, Vice President Page 56 EXHIBIT "A" LEGAL DESCRIPTION OF THE PROPERTY Real property in the City of National City, County of San Diego, State of California, described as follows: Lot 1 of Center City Project, in the City of National City, County of San Diego, State of California according to Map thereof No. 8807, filed in the Office of the County Recorder of San Diego on February 24, 1978, which buildings and improvements are and shall remain real property. Page 57 EXHIBIT `B" INCOME COMPUTATION AND CERTIFICATION NOTE TO APARTMENT OWNER: This form is designed to assist you in computing Annual Income in accordance with the method set forth in the Department of Housing and Urban Development ("HUD") Regulations (24 CFR 813). You should make certain that this form is at all times up to date with the HUD Regulations. Re: Morgan Tower, National City, California I/We, the undersigned state that I/we have read and answered fully, frankly and personally each of the following questions for all persons who are to occupy the unit being applied for in the above apartment project. Listed below are the names of all persons who intend to reside in the unit: 1. Names of Members of Household 2. Relationship to Head of Household 3. Age 4. Social Security Number 5. Place/Source of Employment 6. Monthly Gross Income Amount (before deductions) HEAD SPOUSE Income Computation 6. The total anticipated income, calculated in accordance with the provisions of this paragraph 6, of all persons over the age of 18 years listed above for the 12-month period beginning the date that I/we plan to move into a unit is $ Included in the total anticipated income listed above are: EXHIBIT `B" Page 1 (a) all wages and salaries, overtime pay, commissions, fees, tips and bonuses and other compensation for personal services, before payroll deductions; (b) the net income from the operation of a business or profession or from the rental of real or personal property (without deducting expenditures for business expansion or amortization of capital indebtedness or any allowance for depreciation of capital assets), (c) interest and dividends (including income from assets excluded below); (d) ,the full amount of periodic payments received from social security, annuities, insurance policies, retirement funds, pensions, disability or death benefits and other similar types of periodic receipts, including any lump sum payment for the delayed start of a periodic payment; (e) payments in lieu of earnings, such as unemployment and disability compensation, worker's compensation and severance pay; (f) the maximum amount of public assistance available to the above persons other than the amount of any assistance specifically designated for shelter and utilities; (g) periodic and determinable allowances, such as alimony and child support payments and regular contributions and gifts received from persons not residing in the dwelling; (h) all regular pay, special pay and allowances of a member of the Armed Forces (whether or not living in the dwelling) who is the head of the household or spouse; and (i) any earned income tax credit to the extent that it exceeds income tax liability. Excluded from such anticipated income are: (a) casual, sporadic or irregular gifts; (b) amounts which are specifically for or in reimbursement of medical expenses; (c) lump sum additions to family assets, such as inheritances, insurance payments (including payments under health and accident insurance and workmen' s compensation), capital gains and settlement for personal or property losses; (d) amounts of educational scholarships paid directly to the student or the educational institution, and amounts paid by the government to a veteran for use in meeting the costs of tuition, fees, books and equipment. Any amounts of such scholarships or payments to veterans not used for the above purposes are to be included in income; EXHIBIT "B" Page 2 (e) special pay to a household member who is away from home and exposed to hostile fire; (f) relocation payments under Title II of the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970; (g) foster child care payments; (h) the value of coupon allotments for the purchase of foods pursuant to the Food Stamp Act of 1977; (i) payments to volunteers under the Domestic Volunteer Service Act of 1973; (j) payments received under the Alaska Native Claims Settlement Act; (k) income derived from certain submarginal land of the United States that is held in trust for certain Indian tribes; (1) payments or allowances made under the Department of Health and Human Services' Low -Income Home Energy Assistance Program; (m) payments received from the Job Training Partnership Act; (n) income derived from the disposition of funds of the Grand River Band of Ottawa Indians; and (o) the first $2,000.00 of per capita shares received from judgment funds awarded by the Indian Claims Commission or the Court of Claims. 7. Do the persons whose income or contributions are included in item 6 above: (a) have savings, stocks, bonds, equity in real property or other form of capital investment (excluding the values of necessary items of personal property such as furniture and automobiles and Yes interests in Indian trust land); or (b) have they disposed of any assets (other than at a foreclosure or Credit Bankruptcy sale) during the last two years at Yes less than fair market value? No (c) If the answer to (a) or (b) above is yes, does the combined total value of all such assets owned or disposed of by all Yes No such persons total more than $5,000? EXHIBIT "B" Page 3 (d) If the answer to (c) above is yes, state: (1) the amount of income expected to be derived from such assets in the 12-month period beginning on the date of $ initial occupancy in the unit that you propose to rent: (2) the amount of such income, if any, that was $ included in item 6 above: 8. (a) Are all of the individuals who propose to Yes No reside in the unit full-time students*? * A full-time student is an individual enrolled as a full-time student during each of 5 calendar months during the calendar year in which occupancy of the unit begins at an educational organization which normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of students in attendance and is not an individual pursuing a full- time course of institutional or farm training under the supervision of an accredited agent of such an educational organization or of a state or political subdivision thereof. (b) If the answer to 8(a) is yes, is at least 1 of the proposed occupants of the unit a husband and wife entitled to file a joint federal income tax return? Yes No 9. Neither myself nor any other occupant of the unit I/we propose to rent is the owner of the rental housing project in which the unit is located (hereinafter the "Owner"), has any family relationship to the Owner, or owns directly or indirectly any interest in the Owner. For purposes of this paragraph, indirect ownership by an individual shall mean ownership by a family member, ownership by a corporation, partnership, estate or trust in proportion to the ownership or beneficial interest in such corporation, partnership, estate or trustee held by the individual or a family member; and ownership, direct or indirect, by a partner of the individual. 10. This certificate is made with the knowledge that it will be relied upon by the Owner to determine maximum income for eligibility to occupy the unit, and I/we declare that all information set forth herein is true, correct and complete and based upon information I/we deem reliable and that the statement of total anticipated income contained in paragraph 6 is reasonable and based upon such investigation as the undersigned deemed necessary. 11. Uwe will assist the Owner in obtaining any information or documents required to verify the statements made herein, including either an income verification from my/our present employer(s) or copies of federal tax returns for the immediately preceding calendar year. 12. I/we acknowledge that I/we have been advised that the making of any misrepresentation or misstatement in this declaration will constitute a material breach of my/our agreement with the Owner to lease the unit and will entitle the Owner to prevent or terminate my/our occupancy of the unit by institution of an action for ejection or other appropriate proceedings. EXHIBIT "B" Page 4 13. Housing Commission Statistical Information (Optional - will be used for reporting purposes only). Hispanic Race (Head of Household) White Black Native American Other Asian Physical Disability: Yes No Uwe declare under penalty of perjury that the foregoing is true and correct. Executed this day of in the County of California. Applicant Applicant [Signatures of all persons over the age of 18 years listed in number 2 above required.] EXHIBIT "B" Page 5 FOR COMPLETION BY APARTMENT OWNER ONLY: 1. Calculation of eligible income: a. Enter amount entered for entire household in 6 above: $ b. (1) If answer to 7(c) above is yes, enter the total amount entered in 7(d)(1), subtract from that figure the amount entered in 7(d)(2) and enter the remaining balance ($ ) (2) Multiply the amount entered in 7(c) times the current passbook savings rate to determine what the total annual earnings on the amount in 7(c) would be if invested in passbook savings ($ ), subtract from that figure the amount entered in 7(d)(2) and enter the remaining balance ($ ) (3) Enter at right the greater of the amount calculated under (1) and (2) above: $ c. TOTAL ELIGIBLE INCOME (line l.a plus line 1.b(3)): $ 2. The amount entered in l.c: Qualifies the applicant(s) as a Very Low -Income Tenant(s). Does not qualify the applicant(s) as a Very Low -Income Tenant(s). 3. Number of apartment unit assigned: Bedroom Size: Rent: $ Tenant -Paid Utilities: Water Gas Electric Trash Other (list Type) 4. Was this apartment unit last occupied for a period of 31 consecutive days by persons whose aggregate anticipated annual income as certified in the above manner upon their initial occupancy of the apartment unit qualified Yes No them as Very Low -Income Tenants? EXHIBIT "B" Page 6 5. Method used to verify applicant(s) income: Employer income verification. Social Security Administration verification Department of Social Services verification Copies of tax returns Other: ( ) Manager EXHIBIT "B" Page 7 Wages: Title: Article I. INCOME VERIFICATION (For Employed Persons) The undersigned employee has applied for a rental unit located in a project financed under the Multifamily Housing Program for persons of low income. Every income statement of a prospective tenant must be stringently verified. Please indicate below the employee' s current annual income from wages, overtime, bonuses, commissions or any other form of compensation received on a regular basis. Overtime: Bonuses: Commissions: Total Current Income: I hereby certify that the statements above are true and complete to the best of my knowledge. Signature I hereby grant you permission to disclose my income to in order that they may determine my income eligibility for rental of an apartment located in their project which has been financed under Multifamily Housing Program. Signature Please send form to: EXHIBIT "B" Page 8 INCOME VERIFICATION (For Social Security Recipients) TO: SOCIAL SECURITY ADMINISTRATION Ladies and Gentlemen: I have applied for a rental unit located in a project financed under the Multifamily Housing Program for persons of low income. Every income statement of a prospective tenant must be stringently verified. In connection with my application for a rental unit, I hereby give my consent to release to the specific information requested below. Signature Social Security No.: Name (Print): Address (Print): Monthly Benefits Began/Will Begin: Social Security Benefit Amount: $ Other Benefit(s): Amount: $ Medicare Deduction: $ Are benefits expected to change? Yes No If yes, please state date and amount Date: of change: Amount: If recipient is not receiving full benefit amount, please indicate reason and date recipient will ' start receiving full benefit amount: Reason: Date of Resumption: Amount: $ Signature Telephone: Name (Print): Title: Please send form to: EXHIBIT "B" Page 9 INCOME VERIFICATION (For Department of Social Services Aid Recipients) TO: CALIFORNIA DEPARTMENT OF SOCIAL SERVICES Ladies and Gentlemen: I am receiving assistance through your office. I have applied for a rental unit located in a project fmanced under the Multifamily Housing Program for persons of very low income. Every income statement of a prospective tenant must be stringently verified. In connection with my application for a rental unit, I hereby authorize the Department of Social Services to release to the specific information requested below. Signature Caseload Number: Case Number: 1. Number of persons included in budget: Total monthly budget: Name (Print): Case Worker: a. Amount of grant: $ Date aid last began: b. Other income and source: c. Is other income included in total budget? Yes No 3. Please specify type of aid (AFDC, FR, Food Stamps, ANB, Medical, etc.) 4. If recipient is not receiving full grant, please indicate reason: Overpayment due to client's failure to report other income Computation error Other EXHIBIT "B" Page 10 Date when full grant will resume: Case Worker's Signature Telephone: District Office Your very early response will be appreciated. Please return form to: EXHIBIT "B" Page 11 INCOME VERIFICATION (For Self -Employed Persons) I hereby attach copies of my individual federal and state income tax returns for the immediately preceding calendar year and certify that the information shown in such income tax returns is true and complete to the best of my knowledge. Signature EXHIBIT "B" Page 12 EXHIBIT "C" CERTIFICATE OF CONTINUING PROGRAM COMPLIANCE [Morgan Tower] With reference to that certain Lease Agreement by and between MORGAN TOWER HOUSING ASSOCIATES ("Tenant") and the COMMUNITY DEVELOPMENT COMMISSION - HOUSING AUTHORITY OF THE CITY OF NATIONAL CITY, dated as of , 2019 (the "Lease Agreement"), Tenant hereby certifies, as of , 2_, the following percentages of units at the Morgan Tower, National City, California are occupied or being held vacant for low-income tenants: 1. Occupied by 50% of Median Income Tenants: %; Unit Nos. The undersigned hereby certifies that the information contained in this Certificate is true and complete and that Tenant is not in default under the Ground Lease. MORGAN TOWER HOUSING ASSOCIATES, L.P., a California limited partnership By: CHW Morgan Development LLC, Its: managing general partner By: Community HousingWorks Its: sole member and manager By: Susan M. Reynolds, President & CEO By: Mercy Morgan Development LLC Its administrative general partner By: Mercy Housing Calwest Its: sole member and manager By: Erika Villablanca, Vice President EXHIBIT "B" Page 13 • EXHIBIT "D" PLAN FOR RESIDENT SERVICES Mercy Housing California and/or an approved resident service provider will provide outcome - based, result -oriented services and programs for residents starting no later than six (6) months after the completion of rehabilitation of the Morgan Tower until expiration of the Term. The services will be administered by on -site resident services' provider staff. Programs will be tailored to the needs of the community and for the household. The services will include, but not be limited to: Health and Wellness —The program focuses on and evaluation of the inextricable linkage between healthcare and housing. Services include basic health & needs assessments, ADL support & screening, health benefit acquisition, health education & risk reduction, physical activities, access to food, wellbeing checks, transition planning, and linkages to preventative and behavioral health care. In addition to annual assessments, periodically monitor residents for change in risk factors and service needs, formalized screenings, and on -site health risk reduction activities such as disease management groups, fall prevention, and social support opportunities. Economic Development/Housing Stability — This program creates households with safe and stable housing and where renters are in good standing. Services include eviction prevention coaching, lease education, housing options, housing inspection, linkages with fmancial resources, and referrals. Education/Community Participation — This program ties closely to health and wellness and economic development/housing stability. Services include nutrition and exercise resources, financial stability seminars, financial benefit acquisition, employment and job readiness support, and technology literacy. Community participation activities for residents such as, community projects & events, volunteer opportunities, voter registration, leaderships programming, community safety initiatives, and family reconciliation. EXHIBIT "E" Page 1 WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION TO NEUTRAL ARBITRATION. Tenant's Initials Landlord's Initials ARTICLE 24. FORCE MAJEURE 24.1 Subject to Paragraph 24.2 below, any prevention, delay, nonperformance or stoppage by Tenant due to any of the following causes shall be excused: any regulation, order, act, restriction or requirement or limitation imposed by any federal, state, municipal or foreign government or any department or agency thereof, or civil or military authority; acts of God; acts or omissions of Landlord or its agents or employees; fire; explosion; floods and/or earthquakes; strikes, walkouts or inability to obtain materials; war, riots, sabotage or civil insurrection; or any other causes beyond the reasonable control of Tenant. 24.2 No prevention, delay, or stoppage of performance shall be excused unless: 24.2.1 Tenant notifies Landlord within thirty (30) days of such prevention, delay or stoppage that it is claiming excuse of its obligations under this Article 24; and 24.2.2 Tenant diligently proceeds within thirty (30) days of the conclusion of such prevention, delay or stoppage to cure the condition causing the prevention, delay or stoppage; and 24.2.3 Tenant effects such cure within a reasonable time. ARTICLE 25. GENERAL PROVISIONS 25.1 Notices. All notices or demands shall be in writing and shall be served personally, by overnight courier, or by express or certified mail. Service shall be deemed conclusively made at the time of service if personally served; the next business day if sent by overnight courier and receipt is confirmed by the signature of an agent or employee of the party served; the next business day after deposit in the United States mail, properly addressed and postage prepaid, return receipt requested, if served by express mail; and three (3) days after deposit thereof in the United States mail, properly addressed and postage prepaid, return receipt requested, if served by certified mail. 25.1.1 Any notice to Landlord shall be given to: Community Development Commission - Housing Authority of the City of National City 1243 National City Blvd. National City, California 91950 Attn: Executive Director Page 49 "Tenant" KIMBALL TOWER HOUSING ASSOCIATES, L.P., a California limited partnership By: CHW Kimball Development LLC, Its: managing general partner By: Community HousingWorks Its: sole member and manager By: Susan M. Reynolds, President & CEO By: Mercy Kimball Development LLC Its administrative general partner By: Mercy Housing Calwest Its: sole member and manager By: Erika Villablanca, Vice President Page 55 SECURITY AGREEMENT (Morgan Tower) THIS SECURITY AGREEMENT ("Agreement") is dated as of the 25th day of March, 2019, by and between Morgan Tower Housing Associates, L.P., a California limited partnership ("Borrower") and the Community Development Commission -Housing Authority of the City of National City ("Lender"). RECITALS A. Lender has agreed to make a loan in the original principal amount of $15,106,284.00 ("Loan") to Borrower as described in: (i) that certain Disposition and Development Agreement (Kimball and Morgan Towers) ("DDA") dated as of June 19, 2018 by and between the Borrower, Lender and Kimball Tower Housing Associates, L.P.; and (ii) that certain Promissory Note (Morgan Tower) of even date herewith made by Borrower in favor of the Lender ("Note"). All capitalized terms used but not defined herein have the definitions set forth in the DDA. The Loan is secured by, among other things, a Deed of Trust executed by Borrower in favor of Lender. The DDA, Promissory Note (Morgan Tower), Deed of Trust and this Agreement maybe referred to collectively herein as the "Loan Documents." B. Borrower and the Lender 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, Borrower and the Lender agree, pledge and covenant as follows: 1. Grant of Security Interest. Borrower hereby grants to the Lender 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 Promissory Note. 3. Proceeds Included. Borrower also hereby grants to the Lender 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. However, nothing in this Section 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 Lender. 1 4. Warranties of Borrower. Borrower represents and warrants to Lender that: (a) Borrower is or will be the full legal owner of the Collateral and except for any senior lenders (including, without limitation, Senior Lender [as defined in the Note]), 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 and security agreements securing loans to Borrower that are senior to the Loan and that were duly approved by the Lender, and/or security interests in the Collateral granted by Borrower with the knowledge and approval of Lender, 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 Lender, except obsolete items. If the Collateral is moved or upon any default, which continues beyond any applicable notice and cure periods, of this Agreement by Borrower, at Lender's written request, at its own cost and expense, shall assemble the Collateral wherever in San Diego County the Lender 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, ordinary wear and tear excepted, 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 value of the Collateral. 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 Lender, and shall provide that the loss payable thereunder shall be paid to Borrower, Lender and to any senior secured party, as their respective interests may appear. Notwithstanding the foregoing, this Section 6 shall not be deemed to require a separate insurance policy covering the Collateral, if equivalent coverage first satisfactory to Lender is provided as part of the insurance maintained by Borrower with respect to the Morgan Property (as defined in the DDA). 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. Except for personal property in the ordinary course of business or as otherwise allowed by the Loan Documents, the Borrower shall not (without the prior written consent of Lender), 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. Lender, through its agents or employees, shall have the right to enter the Morgan Tower (as defined in the DDA) at normal business hours upon reasonable advance notice 2 and intervals to inspect and take inventory of the Collateral, provided the same does not unnecessarily infringe upon the operation of the Morgan Tower. 10. Right to Make Payments. Lender 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. The Lender shall have the right to enter the Morgan Tower at normal business hours upon reasonable advance notice and intervals, 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 Section 10 shall be secured by the security interest created by this Agreement, and shall be due and payable to Lender 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 Lender. With prior notice to the Borrower, the Lender may assign its rights hereunder and its security interest created herein. In the event of such an assignment, Lender'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 Lender 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, Lender may also: (a) Enter the Morgan Tower to take possession of the Collateral, provided that the Collateral shall not be removed from the Morgan Tower 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 Morgan Tower 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 Lender as a result of Borrower's default. Before exercising any of the foregoing rights, Lender shall first give written notice of such default to Borrower and its limited partner and Borrower shall have thirty (30) days from receipt of the notice to cure any such default before Lender exercises its rights. Notwithstanding anything to the contrary contained herein, the Lender hereby agrees that any cure of any default made or tender 3 by the Borrower's limited partner shall be deemed to be a cure by the Borrower and shall be accepted or rejected on the same basis as if made or tendered by the Borrower. 13. Financing Statement. Borrower authorizes the Lender to file 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 Lender shall pay the fees associated with filing such documents. 14. No Waiver. Neither the acceptance of any partial or delinquent payment by Lender nor Lender'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 Documents has been satisfied (except any obligations that survive repayment of the Loan, foreclosure of the Property or termination of the Loan Documents), or until the Deed of Trust 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. Notices. All notices under this Agreement shall be in writing and sent (a) by certified or registered U.S. mail, return receipt requested, (b) overnight by a nationally recognized overnight courier such as UPS Overnight or FedEx, or (c) by personal delivery. All notices shall be effective upon receipt (or refusal to accept delivery). All notices shall be delivered to the following addresses (which addresses may be changed by written notice): Lender: Borrower: And to: Community Development Commission - Housing Authority of the City of National City 1243 National City Blvd. National City, CA 91950 Attn: Executive Director Morgan Tower Housing Associates, L.P. do Community HousingWorks 2815 Camino Del Rio South, Suite 350 San Diego, CA 92108 Attention: Susan M. Reynolds, President & CEO Morgan Tower Housing Associates, L.P. do Mercy Housing California 1500 South Grand Avenue, Suite 100 Los Angeles, CA 90015 Attention: Ed Holder, Regional Vice President of Real Estate Development 4 Copy to: Gubb & Barshay, LLP 505 14th Street, Suite 450 Oakland, CA 94612 Attention: Evan Gross And to: U.S. Bancorp Community Development Corporation 1307 Washington Avenue, Suite 300 Mail Code: SL MO RMCD St. Louis, MO 63103 USB Project No: 25982 Attn.: LIHTC Asset Management 18. Certain Requirements Superior. All provisions of this Agreement shall be subject and subordinate to: (a) The rights of Senior Lender under the documents evidencing the Construction Loan (as defined in the Note). (b) Any and all federal, state and local statutes and regulations applicable to the Morgan Tower, the Collateral or the Loan; and (c) The provisions of the Note secured by this Agreement, to the extent of any inconsis- tency between it and this Agreement. 19. Attorneys' Fees. If Borrower or the Lender 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 the prevailing 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. 21. Construction of Agreement. The provisions contained in this Agreement shall not be construed in favor of or against either Borrower or the Lender, 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 maybe executed in any number of counterparts and, as so executed, the counterparts shall constitute one and the same Agreement. Borrower and the Lender agree that each such counterpart is an original and shall be binding upon all of the parties, even though all of the parties are not signatories to the same counterpart. 5 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 one another 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: MORGAN TOWER HOUSING ASSOCIATES, L.P., a California limited partnership By: CHW Morgan Development LLC, Its: managing general partner By: Its: sole member and manager Community HousingWorks By: n M. Reynolds, Presi By: Mercy Morgan Development LLC Its administrative general partner By: Mercy Housing Calwest Its: sole member and manager By: cw U.04.86.4Aco.. Erika Villablanca, Vice President [SIGNATURES CONTINUED ON FOLLOWING PAGE] 6 LENDER: COMMUNITY DEVELOPMENT COMMISSION - HOUSING AUTHORITY OF THE CITY OF NATIONAL CITY, a public body, corporate and politic Leslie Deese, Executive Director APPROVED AS TO FORM: By: 1'" Angil P,.' orris -Jones, ity Attorney APPROVED AS TO FORM: Christensen & Spath LLP Lender Special Counsel By: EXHIBIT "1" TO SECURITY AGREEMENT BORROWER: Morgan Tower Housing Associates, L.P. LENDER: Community Development Commission -Housing Authority of the 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") described in the Security Agreement. (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, but excluding equipment owner by third parties and located on the property, such as cable television equipment, laundry equipment and solar power equipment. (b) General Intangibles. All general intangibles relating to design, development, operation, management and use of the Property and construction 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), as such may be modified, amended or supplemented from time to time, concerning the design, construction, management, operation, occupancy, use, and/or disposition of any portion of or all of the Property. 8 (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 permits to rehabilitate the Morgan Tower, as defined in the DDA, environmental reports and similar materials relating to any portion of or all of the Property and all modifications, supplements and amendments thereto. (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 made by the Lender to the Borrower and any commitment by any lender to extend permanent or additional construction financing to the Borrower relating to the Property and all tax credits for the Morgan Property. (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 the Lender. (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. (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. 9 (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. 10 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 one another 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: MORGAN TOWER HOUSING ASSOCIATES, L.P., a California limited partnership By: CHW Morgan Development LLC, Its: managing general partner By: Community HousingWorks Its: sole member and manager By: n M. Reynolds,l�rekident & CEO By: Mercy Morgan Development LLC Its administrative general partner By: Mercy Housing Calwest Its: sole member and manager By: rn Erika Villablanca, Vice President [SIGNATURES CONTINUED ON FOLLOWING PAGE] 6 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 one another 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: MORGAN TOWER HOUSING ASSOCIATES, L.P., a California limited partnership By: CHW Morgan Development LLC, Its: managing general partner By: Community HousingWorks Its: Bv: sole member and manager . Reynolds, Pt & CEO By: Mercy Morgan Development LLC Its administrative general partner By: Mercy Housing Calwest Its: sole member and manager By: &;talkj 00- ACIAAC,' Erika Villablanca, Vice President [SIGNATURES CONTINUED ON FOLLOWING PAGE] 6 UNSECURED ENVIRONMENTAL INDEMNITY AGREEMENT (Morgan Tower) THIS UNSECURED ENVIRONMENTAL INDEMNITY AGREEMENT ("Indemnity") is dated as of the 25t' day of March, 2019, by and between Morgan Tower Housing Associates, L.P., a California limited partnership ("Indemnitor"), to and for the benefit of the Community Development Commission -Housing Authority of the City of National City ("Lender"), its successors and assigns and, to the extent not otherwise referenced, the Indemnified Parties (as hereinafter defined). RECITALS A. Lender has agreed to make a loan in the original principal amount of $15,106,284.00 ("Loan") to Indemnitor as described in: (i) that certain Disposition and Development Agreement (Kimball and Morgan Towers) dated as of June 19, 2018 by and between the Indemnitor, Lender and Kimball Tower Housing Associates, L.P.; and (ii) that certain Promissory Note (Morgan Tower) of even date herewith made by Indemnitor in favor of the Lender. All capitalized terms used but not defined herein have the definitions set forth in the aforementioned Disposition and Development Agreement (Kimball and Morgan Towers). The Loan is secured by, among other things, a Deed of Trust and a Security Agreement executed by Indemnitor in favor of Lender. The Deed of Trust encumbers that certain real property described on Exhibit A attached hereto (such property along with any other property encumbered by the Deed of Trust, now or at any time in the future, shall be referred to herein as the "Property"). B. The execution and delivery of this Indemnity by the Indemnitor to the Lender is a condition to Lender making the Loan. Lender is making the 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 Loan. AGREEMENT NOW, THEREFORE, in consideration of the foregoing and of Lender making the 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 Lender, Lender's affiliates, directors, officers, shareholders, agents and employees, and Lender'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 cost (including, without limitation, attorneys' fees, expenses and court costs), expense or loss arising from any claim, liability, damage, injunctive relief, injury to person, property or natural resources, fine, penalty, action, and cause of 1 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 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 semc .), 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 sue.), the Resource Conservation and Recovery act (42 U.S.C. §6901, et sec .), 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 2 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 semc .); 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 se ). Notwithstanding the above, the term "Hazardous Materials" shall not include small amounts of chemicals, cleaning agents and the like commonly employed in routine residential apartment uses in a manner typical of occupants or owners in other similar residential properties, provided that such substances 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 Loan (as evidenced by the release and reconveyance of the Deed of Trust); or (ii) vesting of title to the Property in Lender 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 Lender; (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 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 Loan or the Property, or in connection with any exercise of such Indemnified Parry's rights under any of the Loan Documents. 3 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 the gross negligence or 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 Lender or such affiliate of Lender so acquires title to the Property, including without limitation with respect to any Hazardous Materials which are discovered at the Property after the date Lender or such affiliate of Lender 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) Lender, Lender's directors, officers, agents and employees, (b) any person or entities to which any Lender participates, assigns or sells all or any portion of its interest in the Loan, or which otherwise succeeds to the interest of Lender under the Deed of Trust, whether by purchase or otherwise, and (c) any affiliate of Lender 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 Lender or any Indem- nified Party relating to the Loan (except for any guaranty) (such documents together with the Deed of Trust being referred to collectively herein as the "Loan Documents"). The obligations of Indemnitor under this Indemnity are independent of any indemnification or other obligations of Indemnitor under the 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 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 Lender to secure the 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. 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 Loan Documents; (b) except as set forth in Sections 2, 3 and 4, any participation in or sale or assignment of the 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 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 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 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 circumstances. 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. 14. Notices. All notices under this Indemnity shall be in writing and sent by (a) certified or registered mail, return receipt requested, (b) by a nationally recognized overnight courier such as 5 UPS or FedEx, or (c) by personal delivery. All notices shall be delivered to the following addresses (which addresses may be changed by written notice): Lender: Indemnitor: And to: Copy to: And to: Community Development Commission - Housing Authority of the City of National City 1243 National City Blvd. National City, CA 91950 Attn: Executive Director Morgan Tower Housing Associates, L.P. do Community HousingWorks 3111 Camino Del Rio North, Suite 800 San Diego, CA 92108 Attention: Susan M. Reynolds, President & CEO Morgan Tower Housing Associates, L.P. c/o Mercy Housing California 1500 South Grand Avenue, Suite 100 Los Angeles, CA 90015 Attention: Ed Holder, Regional Vice President of Real Estate Development Gubb & Barshay, LLP 505 14th Street, Suite 450 Oakland, CA 94612 Attention: Evan Gross U.S. Bancorp Community Development Corporation 1307 Washington Avenue, Suite 300 Mail Code: SL MO RMCD St. Louis, MO 63103 USB Project No: 25982 Attn.: LIHTC Asset Management 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 6 actually attached to this Indemnity. The Recitals to this Indemnity are hereby incorporated in this Agreement 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 Lender 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. INDEMNITOR: MORGAN TOWER HOUSING ASSOCIATES, L.P., a California limited partnership By: CHW Morgan Development LLC, Its: managing general partner By: Community HousingWorks Its: sole member and manager By: �^�- M. Reynolds, President By: Mercy Morgan Development LLC Its administrative general partner By: Mercy Housing Calwest Its: sole member and manager By: UtOS_te- Erika Villablanca, Vice President [SIGNATURES CONTINUED ON FOLLOWING PAGE] 7 LENDER: COMMUNITY DEVELOPMENT COMMISSION - HOUSING AUTHORITY OF THE CITY OF NATIONAL CITY, a public body, corporate and politic Bycr.a)1` Leslie Deese, Executive Director APPROVED AS TO FORM: r By: ///f Anger City Attorney APPROVED AS TO FORM: Christensen & Spath LLP Lender Special Counsel Exhibit "A" Property Description That certain leasehold interest in real property situated in the City of National City, County of San Diego, State of California, described as follows: Lot 1 of Center City Project, in the City of National City, County of San Diego, State of California according to Map thereof No. 8807, filed in the Office of the County Recorder of San Diego on February 24, 1978, which buildings and improvements are and shall remain real property. 9 actually attached to this Indemnity. The Recitals to this Indemnity are hereby incorporated in this Agreement 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 Lender 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. INDEMNITOR: MORGAN TOWER HOUSING ASSOCIATES, L.P., a California limited partnership By: CHW Morgan Development LLC, Its: managing general partner By: Community HousingWorks Its: sole member and manager san M. Reynolds, Pre By: Mercy Morgan Development LLC Its administrative general partner By: Mercy Housing Calwest Its: sole member and manager & CEO By: C4A1Ce"s Erika Villablanca, Vice President [SIGNATURES CONTINUED ON FOLLOWING PAGE] 7 actually attached to this Indemnity. The Recitals to this Indemnity are hereby incorporated in this Agreement 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 Lender 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. INDEMNITOR: MORGAN TOWER HOUSING ASSOCIATES, L.P., a California limited partnership By: CHW Morgan Development LLC, Its: managing general partner By: Community HousingWorks Its: sole member and manager . Reynolds, President By: Mercy Morgan Development LLC Its administrative general partner By: Mercy Housing Calwest Its: sole member and manager By: cow Erika Villablanca, Vice President [SIGNATURES CONTINUED ON FOLLOWING PAGE] 7 ESTOPPEL CERTIFICATE MUFG UNION BANK, N.A. Commercial Credit Loan Administration 3151 East Imperial Highway, 1st Floor Brea, CA 92821 Attention: Manager MUFG UNION BANK, N.A. 200 Pringle Ave., Suite 355 Walnut Creek, CA 94596 Attention: CDF Head RE: Disposition and Development Agreement dated June 19, 2018 ("DDA") among the Community Development Commission -Housing Authority of the City of National City (the "Commission"), Morgan Tower Housing Associates, L.P., a California limited partnership ("Morgan") and Kimball Tower Housing Associates, L.P., a California limited partnership ("Developer"), and Ground Lease dated March 1, 2019 (the "Lease") between the Commission, as lessor, and Developer, as lessee, relating to the real property located in the City of National City, County of San Diego, State of California (the "Real Property"), and more particularly described on Exhibit "A" attached hereto. Terms not otherwise defined herein shall be given the meanings in the Lease. The Commission has been advised by Developer that Developer has applied to the California Statewide Communities Development Authority ("Governmental Lender") for a loan in the amount of [$32,180,700] [CHECK] (the "Loan"), which shall be evidenced by that certain Construction and Permanent Loan Agreement (Multifamily Housing Back to Back Loan Program) dated of even date herewith by and among MUFG Union Bank, N.A. ("Bank"), Developer and Governmental Lender (the "Loan Agreement"), and which shall be secured by, among other things, a Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing in favor of Governmental Lender and Bank encumbering Developer's leasehold interest under the Lease and in and to the Real Property and all improvements now or hereafter situated on the Real Property (the "Deed of Trust"). All right, title and interest of Governmental Lender with respect to the Loan and the loan documents evidencing the Loan have been assigned to Bank. Lessor has been advised that Governmental Lender and Bank are relying upon this Estoppel Certificate (this "Estoppel Certificate") in making the Loan. For purposes of this Estoppel Certificate, to the fullest extent the context so permits, (i) the term "Transfer" shall mean any transfer of Developer's interest in the Real Property by judicial or nonjudicial foreclosure, trustee's sale or any other action or proceeding for the enforcement of the Deed of Trust, by Bank's exercise of its rights under the assignment of rents and leases contained in the Deed of Trust or any of the other Loan documents, or by deed in lieu of foreclosure; and (ii) the term "Bank" shall mean Bank, its successors and assigns and/or the purchaser through or following a Transfer of the Real Property. 2773/014742-1191 13485864 With such understanding, the Commission hereby states, declares, represents, warrants and certifies for the benefit of Governmental Lender and Bank, that as of the date hereof: 1. DDA and Ground Lease. Attached hereto as Exhibit "B" is a true, correct and complete copy of the DDA and all amendments thereto (collectively, the "DDA") and attached hereto as Exhibit "C" is a true and correct and complete copy of the Lease and all amendments thereto (collectively, the "Lease"). The DDA and the Lease have been duly authorized, executed and delivered by the Commission and are in full force and effect. The DDA, the Lease and the documents attached as exhibits thereto, constitute the entire agreement between the Commission and Developer pertaining to the Real Property (including, without limitation, all amendments, assignments and subordination or nondisturbance agreements). Neither the DDA nor the Lease shall be amended, supplemented or modified except as described above and attached hereto. There are no other agreements, whether oral or written, between Developer and the Commission concerning the Real Property. 2. Conditions Precedent. Each and every covenant, condition and obligation contained in the DDA required to be performed or satisfied as of the date hereof, including, without limitation, the conditions precedent specified in Sections 204.1 and 204.2 of the DDA have been performed or satisfied by Developer or waived by the Commission. 3. Default under Morgan Property. Substantially concurrently with the execution of the Lease with respect to the Real Property, the Commission shall enter into a separate ground lease with Morgan with respect to the Morgan Property (as defined in the DDA). The Commission acknowledges and agrees that from and after the date of this Estoppel Certificate, in the event of a default or a failure of a condition precedent contained in the DDA related to the Morgan Property, the Commission shall not terminate the DDA as to the Real Property and the Commission shall not exercise any right or remedy under the DDA or any related agreement with respect to the Real Property or the Developer of the Real Property. 4. Approvals of Commission. The Commission has approved of the Scope of Rehabilitation (as defined in the DDA) pursuant to Section 301 of the DDA and the Initial Project Budget (as defined in the DDA) pursuant to Section 307.1 of the DDA. 5. Priority of Ground Lease. The Commission currently holds all of the right, title and interest of the "Commission" or "Landlord" under the Lease and has not assigned, hypothecated, encumbered, mortgaged, pledged or subordinated any of its interest under the Lease or any of its interest in the Real Property (or otherwise leased or encumbered any of the Real Property except pursuant to the Lease) in whole or in part. The Commission agrees that any mortgage, deed of trust or other encumbrance on the fee estate in the Real Property shall be junior and subordinate to the Lease, the Deed of Trust, and any other leasehold mortgage, and the Commission agrees to execute, acknowledge (if appropriate) and deliver any additional documents reasonably requested by Bank to confirm the foregoing. The Commission recognizes Developer identified above as the holder of the leasehold interest in the Real Property and the "Developer" under the Lease. 6. Lease Term. The Lease term shall commence as of the date the memorandum of the Lease records in the Official Records of the County of San Diego, State of California (the 2773/014742-1191 13485864 -2- "Commencement Date") and the Lease term shall expire on the ninety-ninth (99th) anniversary of the date on which a notice of completion with respect to the improvements constructed on the Real Property records in the Official Records of the County of San Diego, State of California (the "Termination Date") unless sooner terminated pursuant to the terms of the Lease. 7. Rent. Developer shall make all of its rent and other payments directly to Commission under the Lease (and not to any receiver, assignee, property management company or other person or entity). The annual rent under the Lease is $1.00 and is not subject to increase. No additional rent or charge (including, without limitation, as applicable, taxes, maintenance, operating expenses or otherwise) that has been billed to Developer by the Commission or, to Commission's knowledge, by any other party, is overdue. 8. Security Deposit. No amounts have been paid by Developer to or for the account of Commission by way of any deposit as security or for any other purpose, the return of which Developer would be entitled. 9. No Defaults. No default, or any event or condition which, with the passing of time or giving of notice or both, would constitute a default, on the part of the Commission, or, to the Commission's knowledge, on the part of Developer, exists under the DDA or the Lease in the performance of the terms, covenants and conditions of the DDA or the Lease required to be performed on the part of Developer and Commission and no event has occurred which authorizes, or with the lapse of time or with the giving of notice or both, will authorize either Commission or Developer to terminate the DDA or the Lease. The Commission has no existing defenses as to its obligations under the DDA or the Lease and claims no offsets against enforcement of the Lease by Developer or counterclaim against Developer. To the Commission's actual knowledge, Developer has no defense, set -offs, basis for withholding rent, claims or counterclaims against Commission for any failure of performance of any of the terms of the DDA or the Lease. 10. Mortgagee Protections. The Commission agrees that Bank shall constitute a "Mortgagee" and the Deed of Trust shall constitute a "Mortgage" within the meaning of the Lease, including, without limitation, Section 18 of the Lease, such rights being incorporated herein by reference for the benefit of Bank as if fully set forth, and, to the extent such consent is required under the Lease and/or the DDA, the Commission hereby consents to the Deed of Trust and the other security interests to be given to Bank, including, without limitation, an assignment of Developer's interest in rents, issues and profits of the Real Property. The execution and delivery by Developer of the Deed of Trust in favor of Bank, or any subsequent modification thereof, will constitute neither a breach of Developer's obligations as Developer under the Lease and/or the DDA nor an event of default thereunder. Foreclosure of the Deed of Trust or any sale thereunder, whether by judicial proceedings or by virtue of any power of sale contained in the Deed of Trust, or any conveyance of the leasehold interest under the Lease from Developer to Bank by virtue of any deed in lieu of foreclosure or other appropriate proceedings in the nature thereof, or the conveyance by Bank to a third -party purchaser following a foreclosure (or deed -in -lieu thereof), shall not require the consent of the Commission or constitute of breach of any provision or of a default under the Lease and/or the DDA. The Commission shall recognize Bank as Developer under the Lease following any Transfer, subject to the obligations of Bank to comply with the Lease and cure any defaults which are reasonably susceptible of cure by Bank as provided in Section 18 of the Lease. 2773/014742-1191 13485864 -3- 11. Inconsistencies Between DDA and Lease. In the event of any inconsistency between the terms and provisions of Sections 205, 315 and/or 603 of the DDA and Articles 17 and 18 of the Lease, the applicable terms and provisions of the Lease shall control. 12. No Merger. No merger of Developer's interest in the Real Property into the Commission's interest in the Real Property shall result or be deemed to result by reason of ownership of Developer's interest and the Commission's interest by the same party or by reason of any other circumstances, without the prior written consent of Bank. 13. No Termination or Amendment. During the term of the Loan and until reconveyance of the Deed of Trust, the Commission will not terminate or enter into any agreement with any other party to terminate, cancel, surrender, amend, alter, modify or extend the Lease or any interest of Developer thereunder without prior written consent of Bank and any such purported agreement shall not be valid or effective without the prior written consent of Bank. Without limiting the generality of the foregoing, Bank's prior written consent shall be required prior to Developer being permitted to terminate the Lease following occurrence of damage, destruction, a taking or abandonment of the Lease. 14. No Other Agreements. Except as otherwise provided in the Lease, the Commission has no right or option to acquire any of Developer's right, title or interest in or to the Real Property or any improvements or personal property located thereon. There are no provisions for, and the Commission has no rights with respect to, terminating the Lease or increasing the rent payable thereunder, except as expressly set forth in the Lease. 15. Bank to Act as Insurance Trustee. During the term of the Loan and until reconveyance of the Deed of Trust, the Commission agrees that the Bank shall be designated as the Insurance Trustee under the Lease. 16. No Liability. The Commission agrees that by acceptance of this Estoppel Certificate or by acceptance of the Deed of Trust or other encumbrance of the Lease, Bank has not become liable under the terms of the Lease. Developer and the Commission agree that Bank shall be so liable only if Bank acquires ownership of the leasehold interest in the Real Property pursuant to a Transfer, and then only for such period of time as Bank holds such leasehold interest. The Commission further agrees that Bank's personal liability shall be limited to Bank's interest in the Real Property, notwithstanding any assumption of the Lease or entering into a new lease by Bank. 17. No Litigation. There are no actions, whether voluntary or otherwise, pending against the Commission under any insolvency, bankruptcy or other debtor relief laws of the United States or any state. The Commission has not received written notice of any pending eminent domain proceedings or other governmental actions or any judicial actions of any kind against the Commission's interest in the Real Property. The Commission has not received written notice that it or Developer is in violation of any governmental law or regulation applicable to the Real Property, the interests therein or the operation thereon, including, without limitation, any environmental laws or the Americans with Disabilities Act, and has no reason to believe that there are grounds for any claim of any such violation. 2773/014742-1191 13485864 -4- 18. Notice of Termination. In the event of a foreclosure of the Deed of Trust or assignment in lieu thereof, Bank elects to terminate the provisions of the Lease referenced in Sections 8.21 and 17.2 of the Lease. 19. Insurance. Bank may be named as additional insured and loss payee under insurance coverages carried by Developer and may participate in any settlement of proceeds therefrom. 20. No Liability. The Commission agrees that Bank has not become liable under the terms of the Lease by acceptance of this Certificate or by acceptance of the Deed of Trust or other encumbrance of the Real Property. 21. Representations. The Commission represents and warrants that: (i) the Commission is duly organized and existing; (ii) the persons executing this Estoppel Certificate are duly authorized to execute and deliver the same on behalf of the Commission; (iii) the Commission has taken such formal action of its governing body as may be required by law to bind Commission, if any, and that the Commission is formally bound to the provisions of this Estoppel Certificate; and (iv) entering into this Estoppel Certificate does not violate any provision of any other agreement to which the Commission is bound. 22. Notices. The Commission agrees to deliver to Bank copies of all notices which the Commission delivers to Developer substantially concurrently with the giving of such notice to Developer and this Estoppel Certificate constitutes written request by Developer to the Commission to deliver to Bank copies of all such notices at the following addresses for Bank: MUFG UNION BANK, N.A. Commercial Credit Loan Administration 3151 East Imperial Highway, 1 St Floor Brea, CA 92821 Facsimile: (949) 553-7123 Attn: Manager Reference: Kimball Tower Apartments With a Copy to: MUFG UNION BANK, N.A. 1901 Avenue of the Stars, Suite 600 Los Angeles, CA 90067 Attn: CDF Manager Reference: Kimball Tower Apartments And: MUFG UNION BANK, N.A. 200 Pringle Ave., Suite 355 Walnut Creek, CA 94596 Attention: CDF Head 2773/014742-1191 13485864 -5- 23. Successors. This Estoppel Certificate shall inure to the benefit of the successors and assigns of Bank. 24. Reliance. The Commission has executed this Estoppel Certificate for the benefit and protection of Governmental Lender and Bank with full knowledge that Governmental Lender and Bank are relying on this Estoppel Certificate in making the Loan to Developer. Upon the request of Bank, but no more often than twice in any calendar year, the Commission and Developer agree to execute and deliver to Governmental Lender and Bank an estoppel certificate setting forth the substance of the provisions set forth in this Estoppel Certificate. In addition, the Commission hereby agrees to consent to the encumbrance of the Real Property and to execute estoppel certificates substantially similar to this Estoppel Certificate in favor of any other lender whose loan is secured by a mortgage or deed of trust encumbering the Real Property. 25. Estoppel. This Estoppel Certificate constitutes, as against the Commission and for the benefit of Governmental Lender and Bank and their respective successors and assigns, an estoppel as to the information contained herein and a waiver of any right of the Commission to disaffirm or contest the accuracy of such information. To the extent inconsistent with the Lease, this Estoppel Certificate shall constitute an amendment to the Lease. 2773/014742-1191 13485864 [Signature Page Follows] -6- IN WITNESS WHEREOF, the Commission has executed this Estoppel Certificate as of March 1, 2019. COMMISSION: COMMUNITY DEVELOPMENT COMMISSION - HOUSING AUTHORITY OF THE CITY OF NATIONAL CITY, a public body, corporate and politic By: �hL Name: Leslie Deese Title: Executive Director APPROVED AS TO FORM: Ara Ir o is- on , City Atto CHRISTENSEN & SPATH LLP, Commission Special Counsel By: altp'th III, Esq. 2773/014742-1191 13485864 -7- EXHIBIT "A" LEGAL DESCRIPTION Real property in the City of National City, County of San Diego, State of California, described as follows: Lot 2 of Center City Project, in the City of National City, County of San Diego, State of California, according to Map thereof No. 8807, filed in the Office of the County Recorder of San Diego County, February 24, 1978. APN: 560-410-05-00 2773/014742-1191 13485864 EXHIBIT "B" DDA (See Attached) 2773/014742-1191 13485864 EXHIBIT "C" GROUND LEASE (See Attached) 2773/014742-1191 13485864 RECORDING REQUESTED BY: Stewart Title Guaranty Co. #18000480843A AND WHEN RECORDED MAIL TO: Community Development Commission of the City of National City Records Management Department 1243 National City Blvd National City, CA 91950 DOC# 2019-0113632 IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII IIIII IIIIIIIIIIIIIIIII Mar 29, 2019 03:22 PM OFFICIAL RECORDS Ernest J. Dronenburg, Jr., SAN DIEGO COUNTY RECORDER FEES: $52.00 (SB2 Atkins: $0.00) PCOR: AFNF PAGES: 7 MEMORANDUM OF GROUND LEASE (Please fill in document title(s) on this line) 1 IZI Exempt from fee per GC27388.1 due to being recorded in connection with concurrent transfer that is subject to the imposition of documentary transfer tax, or, 2 0 Exempt from fee per GC27388.1 due to being recorded in connection with a transfer that was subject to documentary transfer tax which was paid on document recorded previously on (date*) as document number of Official Records, or, 3 ❑ Exempt from fee per GC27388.1 due to the maximum fees being paid on documents in this transaction, or, 4 ❑ 5 ❑ 6 ❑ Exempt from fee per GC27388.1 due to the maximum fees having been paid on documents in the transaction(s) recorded previously on (date*) as document number(s) of Official Records, or, Exempt from fee per GC27388.1, document transfers real property that is a residential dwelling to an owner -occupier, or, document is recorded in connection with concurrent transfer that is a residential dwelling to an owner -occupier, or, Exempt from fee per GC27388.1 due to it being recorded in connection with a transfer of real property that is a residential dwelling to an owner -occupier. The recorded document transferring the dwelling to the owner -occupier was recorded on (date*) as document number(s) 7 ❑ Exempt from fee per GC27388.1 due to being executed or recorded by the federal government in accordance with the Uniform Federal Lien Registration Act, by the state, or any county, municipality or other political subdivision of the state, or, 8 ❑ Exempt from the fee per GC 27388.1 (a) (1); Not related to real property, or, 9 ❑ Exempt from fee under GC27388.1 for the following reasons: THIS PAGE A DD E D TO PROVIDE SENATE BILL2 EXEMPTION INFORMATION (Additional record ingfee applies) Rev 5/18 *The Prior Recording Reference must have been recorded within the last 60 days and is subject to review - .Fao apt fie uw_ Ct• RECORDING REQUESTED BY: ' e. AND WHEN RECORDED RETURN TO: COMMUNITY DEVELOPMENT COMMISSION - HOUSING AUTHORITY OF THE CITY OF NATIONAL CITY Records Management Department 1243 National City Blvd. National City, California 91950 APN: 560-410-04-00 MEMORANDUM OF GROUND LEASE (Morgan Tower) Transfer Tax $0 X Value under $100 THIS MEMORANDUM OF GROUND LEASE is executed in connection with that certain GROUND LEASE [Morgan Tower], dated as of March 25, 2019 ("Ground Lease"), between the Community Development Commission -Housing Authority of the City of National City ("Housing Authority"), and Morgan Tower Housing Associates, L.P., a California limited partnership ("Tenant"), relating to the real property ("Property") located in the City of National City, California, more particularly described in the attached Exhibit "A," which is incorporated herein by this reference. Pursuant to the Ground Lease, the Housing Authority has leased the Property to the Tenant for a period commencing on the date this Memorandum of Ground Lease is recorded, and continuing thereafter until the ninety-ninth (99th) anniversary of the date on which a notice of completion for the construction of the project described in the Ground Lease is recorded in the Official Records. This Memorandum of Ground Lease is being recorded in order to give notice of the Ground Lease. This Memorandum of Ground Lease is not a complete summary of the terms and conditions of the Ground Lease and is subject to, and shall not be used to interpret or modify, the Ground Lease. Landlord: Community Development Commission -Housing Authority of the City of National City By: Leslie Deese, Executive Director APPROVED AS TO FORM: B L'✓/ • gil : ►torn -Jo es, City Atto APPROVED AS TO FORM: Christ. sen : Spath LLP By: Housing Autho ty Special Counsel [SIGNATURES CONTINUED ON FOLLOW! 1 PAGE] personally appeared, ,e`65 `e ACKNOWLEDGMENT A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California County of San Diego On I r COU A , 2019 before me, D• f (frt`e( , notary public, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/art 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 on 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. Signature 3 (Seal) D. PITCHER Commission # 2143777 Notary Public - California z San Diego County My Comm. Expires Apr 15, 2020 P TENANT: MORGAN TOWER HOUSING ASSOCIATES, L.P., a California limited partnership By: CHW Morgan Development LLC, Its: managing general partner By: Its: sole member and mana By: Community HousingWorks Reynolds, President €EO By: Mercy Morgan Development LLC Its administrative general partner By: Mercy Housing Calwest Its: sole member and manager By: Odswizi,v,,, Erika Villablanca, Vice President 2 A Notary Public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California County of Orange On March 25, 2019, before me, A. McLean, Notary Public, personally appeared Susan M. Reynolds, who proved to me on the basis of satisfactory evidence to be the person(s) whose 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. Signature 6 (Seal) A. MCLEAN Notary Public — California Z Orange County Commission # 2227349 My Comm. Expires Jan 30 2022 A Notary Public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California County of Orange On March 25, 2019, before me, A. McLean, Notary Public, personally appeared Erika Villablanca, who proved to me on the basis of satisfactory evidence to be the person(s) whose 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. Signature (Seal) r.m.a4b4‘641*"11 A. MCLEAN L Notary Punic - Califomia Orange County Commission # 2227349 My Comm. Expires Jan 30.2022 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: Lot 1 of Center City Project, in the City of National City, county of San Diego, State of California, according to Map thereof No. 8807, filed in the Office of the County Recorder of San Diego on February 24, 1978, which buildings and improvements shall remain real property. (Morgan Tower) RECORDING REQUESTED BY: Stewart Title Guaranty Co. #18000480843A AND WHEN RECORDED MAIL TO: Community Development Commission of the City of National City Records Management Department 1243 National City Blvd National City, CA 91950 DOC# 2019-0114669 II II II I II II llll l(I IIII I IIIII II II I i l l l l l I III Ill Apr 02, 2019 08:00 AM OFFICIAL RECORDS Ernest J. Dronenburg, Jr., SAN DIEGO COUNTY RECORDER FEES: $79.00 (SB2 Atkins: $0.00) PCOR: N/A PAGES: 17 1 DEED OF TRUST WITH ASSIGNMENT OF RENTS (Please fill in documenttitle(s) on this line) Exempt from fee per GC27388.1 due to being recorded in connection with concurrent transfer that is subject to the imposition of documentary transfer tax, or, 2 Er Exempt from fee per GC27388.1 due to being recorded in connection with a transfer that was subject to documentary transfer tax which was paid on document recorded previously on -3 - 2-9 --/9 (date*) as document number 20/ 9-//.3633 of Official Records, or, 3 ❑ Exempt from fee per GC27388.1 due to the maximum fees being paid on documents in this transaction, or, 4 0 Exempt from fee per GC27388.1 due to the maximum fees having been paid on documents in the transaction(s) recorded previously on (date*) as document number(s) ' of Official Records, or, 5 ❑ Exempt from fee per GC27388.1, document transfers real property(that is a residential dwelling to an owner -occupier, or, document is recorded in connection with concurrent transfer that is a residential dwelling to an owner -occupier, or, 6 ❑ Exempt from fee per GC27388.1 due to it being recorded in connection with a transfer of real property that is a residential dwelling to an owner -occupier. The recorded document transferring the dwelling to the owner -occupier was recorded on (date*) as document number(s) 7 ❑ Exempt from fee per GC27388.1 due to being executed or recorded by the federal government in accordance with the Uniform Federal Lien Registration Act, by the state, or any county, municipality or other political subdivision of the state, or, 8 ❑ Exempt from the fee per GC 27388.1 (a) (1); Not related to real property, or, 9 ❑ Exempt from fee under GC27388.1 for the following reasons: THIS PAGE ADDED TO PROVIDE SENATE BILL2 EXEMPTION INFORMATION (Additional recording feeapplies) Rev 5/18 *The Prior Recording Reference must have been recorded within the last 60 days and is subject to review RECORDING REQUESTED BY: Stewart Title Guaranty Co. #18000480843A AND WHEN RECORDED MAIL TO: Community Development Commission of the City of National City Records Management Department 1243 National City Blvd National City, CA 91950 DEED OF TRUST WITH ASSIGNMENT OF RENTS (Please fill in document title(s) on this line) 1 J Exempt from fee per GC27388.1 due to being recorded in connection with concurrent transfer that is subject to the imposition of documentary transfer tax, or, 2 IR Exempt from fee per GC27388.1 due to being recorded in connection with a transfer that was subject to documentary transfer tax which was paid on document recorded previously on „3- 2.9 -if (date*) as document number Zo/ of Official Records, or, 3 D Exempt from fee per GC27388.1 due to the maximum fees being paid on documents in this transaction, or, 4 ❑ Exempt from fee per GC27388.1 due to the maximum fees having been paid on documents in the transaction(s) recorded previously on (date*) as document number(s) of Official Records, or, 5 ❑ Exempt from fee per GC27388.1, document transfers real property that is a residential dwelling to an owner -occupier, or, document is recorded in connection with concurrent transfer that is a residential dwelling to an owner -occupier, or, 6 ❑ Exempt from fee per GC27388.1 due to it being recorded in connection with a transfer of real property that is a residential dwelling to an owner -occupier. The recorded document transferring the dwelling to the owner -occupier was recorded on (date*) as document number(s) 7 ❑ Exempt from fee per GC27388.1 due to being executed or recorded by the federal government in accordance with the Uniform Federal Lien Registration Act, by the state, or any county, municipality or other political subdivision of the state, or, 8 ❑ Exempt from the fee per GC 27388.1 (a) (1); Not related to real property, or, 9 0 Exempt from fee under GC27388.1 for the following reasons: THIS PAGE A D D E D TO PROVIDE SENATE BILL2 EXEMPTION INFORMATION (Additional recordingfee applies) Rev 5/18 *The Prior Recording Reference must have been recorded within the last 60 days and is subject to review RECORDING REQUESTED BY: COMMUNITY DEVELOPMENT COMMISSION OF THE CITY OF NATIONAL CITY AND WHEN RECORDED RETURN TO: COMMUNITY DEVELOPMENT COMMISSION OF THE CITY OF NATIONAL CITY Records Management Department 1243 National City Blvd. National City, California 91950 [Free Recording Requested Government Code § 6103] DEED OF TRUST WITH ASSIGNMENT OF RENTS [Morgan Tower] This DEED OF TRUST is made as of March 25th, 2019, by and between MORGAN TOWER HOUSING ASSOCIATES, L.P., a California limited partnership ("Trustor"), STEWART TITLE GUARANTY COMPANY ("Trustee"), and COMMUNITY DEVELOPMENT COMMISSION -HOUSING AUTHORITY OF THE CITY OF NATIONAL CITY, a public body, corporate and politic ("Beneficiary"). Trustor grants, transfers and assigns to Trustee in trust, upon the trusts, covenants, conditions and agreements and for the uses and purposes hereinafter contained, with power of sale, and right of entry and possession, all of its ground leasehold title and interest in that real property (the "Property") in the City of National City, County of San Diego, State of California, described in Exhibit A attached hereto and incorporated herein by this reference. Together with Beneficiary's interest in all buildings, structures and improvements of every nature whatsoever now or hereafter situated on the Property; and Together with the rents, issues and profits thereof; and together with all buildings and improvements of every kind and description now or hereafter erected or placed thereon, and all fixtures, including but not limited to all gas and electric fixtures, engines and machinery, radiators, heaters, furnaces, heating equipment, laundry equipment, steam and hot-water boilers, stoves, ranges, elevators and motors, bathtubs, sinks, water closets, basins, pipes, faucets and other plumbing and heating fixtures, mantles, cabinets, refrigerating plant and refrigerators, whether mechanical or otherwise, cooking apparatus and appurtenances, and all shades, awnings, screens, blinds and other furnishings, it being hereby agreed that all such fixtures and furnishings shall to the extent permitted by law be deemed to be permanently affixed to and a part of the realty; and Page 1 Together with all building materials and equipment now or hereafter delivered to said premises and intended to be installed therein; and Together with all plans, drawings, specifications, and articles of personal property now or hereafter attached to or used in and about the building or buildings now erected or hereafter to be erected on the Property which are necessary to the completion and comfortable use and occupancy of such building or buildings for the purposes for which they were or are to be erected, including all other goods and chattels and personal property as are ever used or furnished in operating a building, or the activities conducted therein, similar to the one herein described and referred to, and all renewals or replacements thereof or articles in substitution therefor, whether or not the same are, or shall be attached to said building or buildings in any manner. To have and to hold the property hereinbefore described (including the Property and all appurtenances), all such property being referred to collectively herein as the "Property," to Trustee, its successors and assigns forever. FOR THE PURPOSE of securing (1) payment of indebtedness of Trustor to the Beneficiary in the principal sum of $15,106,284.00 (the "Commission Loan"), evidenced by a promissory note of even date herewith between Trustor and Beneficiary (the "Commission Loan Note"), together with all sums due thereunder including interest and other charges; and (2) the performance of each agreement of Trustor in this Deed of Trust and the Commission Loan Note. Said Commission Loan Note and all of its terms are incorporated herein by reference and this conveyance shall secure any and all extensions, amendments, modifications or renewals thereof however evidenced, and additional advances of the Commission Loan evidenced by any note reciting that it is secured hereby. AND TO PROTECT THE SECURITY OF THIS DEED OF TRUST, TRUSTOR COVENANTS AND AGREES: 1. That it will pay the Commission Loan Note at the time and in the manner provided therein; 2. 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, namely, as affordable rental housing; 3. That the Commission Loan Note is incorporated herein and made a part of this Deed of Trust. Upon default under the Commission Loan Note or this Deed of Trust (after expiration of any applicable cure rights), Beneficiary, at its option, may declare the whole of the indebtedness secured hereby to be due and payable; 4. That all rents, profits and income from the Property covered by this Deed of Trust are hereby assigned to Beneficiary for the purpose of discharging the debt hereby secured. Permission is hereby given to Trustor so long as no default exists hereunder, to collect such rents, profits and income; Page 2 5. That upon default hereunder (after expiration of any applicable cure rights), Beneficiary shall be entitled to the appointment of a receiver by any court having jurisdiction, without notice, to take possession and protect the Property described herein and operate same and collect the rents, profits and income therefrom; 6. That Trustor will keep the improvements now existing or hereafter erected on the Property insured against loss by fire and such other hazards, casualties and contingencies as may be required in writing from time to time by Beneficiary, and all such insurance shall be evidenced by standard fire and extended coverage insurance policy or policies, in the amount of the replacement value of the improvements. Such policies shall be endorsed with a standard mortgage clause with loss payable to Beneficiary subordinate to the rights and interest of the beneficiary of the Senior Loan Deed of Trust described in paragraph 31, below) and certificates thereof together with copies of original policies shall be deposited with Beneficiary; 7. To pay, before delinquency, any taxes and assessments affecting said Property when due, all encumbrances, charges and liens, with interest, on said Property or any part thereof which appear to be prior or superior hereto, all costs, fees and expenses of this Trust; 8. To keep said Property in good condition and repair, not to remove or demolish any buildings thereon; to complete or restore promptly and in good and workmanlike manner any building which may be constructed, damaged, or destroyed thereon and to pay when due all claims for labor performed and materials furnished therefor (unless contested in good faith if Trustor provides security satisfactory to Beneficiary that any amounts found to be due will be paid and no sale of the Property or other impairment of the security hereunder will occur); to comply with all laws affecting said Property or requiring any alterations or improvements to be made thereon; not to commit or permit waste thereof; not to commit, suffer or permit any act upon said Property in violation of law and/or covenants, conditions and/or restrictions affecting said Property; not to permit or suffer any alteration of or addition to the buildings or improvements hereafter constructed in or upon said Property without the consent of Beneficiary; 9. To appear in and defend any action or proceeding purporting to affect the security hereof 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; 10. Should Trustor fail to make any payment or do any act as herein provided, then Beneficiary or Trustee, but without obligation so to do and without notice to or demand upon Trustor and without releasing Trustor from any obligation hereof, may make or do the same in such manner and to such extent as either may deem necessary to protect the security hereof. Beneficiary or Trustee, being authorized to enter upon said Property for such purposes, may commence, appear in and/or defend any action or proceeding purporting to affect the security hereof or the rights or powers of Beneficiary or Trustee; may pay, purchase, contest or compromise any encumbrance, charge, or lien which in the judgment of either appears to be prior or superior hereto; and, in exercising any such powers, may pay necessary expenses, employ counsel, and pay counsel's reasonable fees; Page 3 11. Beneficiary shall have the right to pay fire and other property insurance premiums when due should Trustor fail to make any required premium payments. All such payments made by Beneficiary shall be added to the principal sum secured hereby; 12. To pay immediately and without demand all sums so expended by Beneficiary or Trustee, under permission given under this Deed of Trust, with interest from date of expenditure at the rate specified in the Commission Loan Note; 13. That the Commission Loan advanced hereunder is to be used in the development of the Property; and upon the failure of Trustor to keep and perform such covenants, the principal sum and all arrears of interest, and other charges provided for in the Commission Loan Note shall, at the option of Beneficiary, become due and payable, anything contained herein to the contrary notwithstanding; 14. Trustor further covenants that it will not voluntarily create, suffer or permit to be created against the Property, subject to this Deed of Trust, any lien or liens except as authorized by Beneficiary and further that it will keep and maintain the Property free from the claims of all persons supplying labor or materials which will enter into the construction of any and all buildings now being erected or to be erected on the Property; 15. That any and all improvements made or about to be made upon the Property, and all plans and specifications, comply with all applicable municipal ordinances and regulations and all other regulations made or promulgated, now or hereafter, by lawful authority, and that the same will upon completion comply with all such municipal ordinances and regulations and with the rules of the applicable fire rating or inspection organization, bureau, association or office; 16. Trustor herein agrees to pay to Beneficiary or to the authorized loan servicing representative of Beneficiary a charge not to exceed that permitted by law for providing a statement regarding the obligation secured by this Deed of Trust as provided by Section 2954, Article 2, Chapter 2, Title 14, Division 3 of the California Civil Code. IT IS MUTUALLY AGREED THAT: 17. Subject to the additional cure rights in Section 17 of the Commission Loan Note, if the construction of any improvements as herein referred to shall not be carried on with reasonable diligence, or shall be discontinued at any time for any reason other than events of Force Majeure pursuant to Paragraph 36 hereof, Beneficiary, after due notice to Trustor or any subsequent owner and the failure by same to exercise any cure rights, is hereby invested with full and complete authority to enter upon the Property, employ watchmen to protect such improvements from depredation or injury and to preserve and protect the personal property therein, and to continue any and all outstanding contracts for the erection and completion of said building or buildings, to make and enter into any contracts and obligations wherever necessary, either in its own name or in the name of Trustor, and to pay and discharge all debts, obligations and liabilities incurred thereby. All such sums so advanced by Beneficiary (exclusive of advances of the principal of the indebtedness secured hereby) shall be added to the principal of the indebtedness secured hereby and shall be secured by this Deed of Trust and shall be due and payable on demand; Page 4 18. In the event of any fire or other casualty to the Project or eminent domain proceedings resulting in condemnation of the Project or any part thereof, Trustor shall have the right to rebuild the Project, and to use all available insurance or condemnation proceeds therefor, provided that (a) such proceeds are sufficient to rebuild the Project in a manner that provides adequate security to Beneficiary for repayment of the Commission Loan or if such proceeds are insufficient then Trustor shall have funded any deficiency, (b) Beneficiary shall have the right to approve plans and specifications for any major rebuilding and the right to approve disbursements of insurance or condemnation proceeds for rebuilding under a construction escrow or similar arrangement, and (c) no uncured material default then exists under the Commission Loan Note or this Deed of Trust. If the casualty or condemnation affects only part of the Project and total rebuilding is infeasible, then proceeds may be used for partial rebuilding and partial repayment of the Commission Loan in a manner that provides adequate security for repayment of the remaining balance of the Commission Loan. The rights of the Beneficiary to any insurance proceeds or condemnation awards pursuant to this paragraph 18 are and shall be subject to the prior right to any insurance proceeds or condemnation awards of the beneficiary of the Senior Loan Deed of Trust described in paragraph 31; 19. Upon default by Trustor in making any payments provided for herein or in the Commission Loan Note secured hereby, and if such default is not made good within fifteen (15) days after notice from Beneficiary, or if Trustor shall fail to perform any covenant or agreement in this Deed of Trust within thirty (30) days after written demand therefor by Beneficiary (or, in the event that more than thirty (30) days is reasonably required to cure such default, should Trustor fail to promptly commence such cure, and diligently prosecute same to completion), Beneficiary may declare all sums secured hereby immediately due and payable by delivery to Trustee of written declaration of default and demand for sale, and of written notice of default and of election to cause the Property to be sold, which notice Trustee shall cause to be duly filed for record and Beneficiary may foreclose this Deed of Trust. Beneficiary shall also deposit with Trustee this Deed of Trust, the Commission Loan Note and all documents evidencing expenditures secured hereby; 20. After the lapse of such time as may then be required by law following the recordation of said notice of default, and notice of sale having been given as then required by law, Trustee, without demand on Trustor, shall sell said Property at the time and place fixed by it in said notice of sale, either as a whole or in separate parcels, and in such order as it may determine at public auction to the highest bidder for cash in lawful money of the United States, payable at time of sale. Trustee may postpone sale of all or any portion of said 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 its deed conveying the property so sold, but without any covenant or warranty, express or implied. The recitals in the deed of any matters or facts shall be conclusive proof of the truthfulness thereof. Any person, including Trustor, Trustee or Beneficiary, may purchase at the sale. Trustee shall apply the proceeds of sale to payment of (1) the expenses of such sale, together with the reasonable expenses of this trust including therein reasonable Trustee's fees or attorneys' fees for conducting the sale, and the actual cost of publishing, recording, mailing and posting notice of the sale; (2) the cost of any search and/or other evidence of title procured in connection with such sale and revenue stamps on Trustee's deed; (3) all sums expended under the terms hereof, not then repaid, with accrued interest at the Page 5 rate specified in the Commission Loan Note; (4) all other sums then secured hereby; and (5) the remainder, if any, to the person or persons legally entitled thereto; 21. Beneficiary may from time to time substitute a successor or successors to any Trustee named herein or acting hereunder to execute this Deed of Trust. Upon such appointment, and without conveyance to the successor trustee, the latter shall be vested with all title, powers, and duties conferred upon any Trustee herein named or acting hereunder. Each such appointment and substitution shall be made by written instrument executed by Beneficiary, containing reference to this Deed of Trust and its place of record, which, when duly recorded in the proper office of the county or counties in which the property is situated, shall be conclusive proof of proper appointment of the successor trustee; 22. The pleading of any statute of limitations as a defense to any and all obligations secured by this Deed of Trust is hereby waived to the full extent permissible by law; 23. Upon written request of Beneficiary stating that all sums secured hereby have been paid, and upon surrender of this Deed of Trust and the Commission Loan Note to Trustee for cancellation and retention and upon payment of its fees, Trustee shall reconvey, without warranty, the property then held hereunder. The recitals in such reconveyance of any matters of fact shall be conclusive proof of the truthfulness thereof. The grantee in such reconveyance may be described as "the person or persons legally entitled thereto"; 24. The trust created hereby is irrevocable by Trustor; 25. This Deed of Trust applies to, inures to the benefit of, and binds all parties hereto, their heirs, legatees, devisees, administrators, executors, successors, and assigns. The term "Beneficiary" shall include not only the original Beneficiary hereunder but also any future owner and holder including pledgees, of the Commission Loan Note secured hereby. In this Deed of Trust, whenever the context so requires, the masculine gender includes the feminine and/or neuter, and the singular number includes the plural. All obligations of each Trustor hereunder are joint and several; 26. Trustee accepts this trust when this Deed of Trust, duly executed and acknowledged, is made public record as provided by law. Except as otherwise provided by law, Trustee is not obligated to notify any party hereto of pending sale under this Deed of Trust or of any action or proceeding in which Trustor, Beneficiary, or Trustee shall be a party unless brought by Trustee; 27. The undersigned Trustor requests that copies of any notice of default and of any notice of sale hereunder be mailed to it at: Morgan Tower Housing Associates, L.P. Community HousingWorks 3111 Camino Del Rio North, Suite 800 San Diego, California 92108 Attn. Susan M. Reynolds Page 6 And to: With a copy to: With a copy to: Morgan Tower Housing Associates, L.P. do Mercy Housing California 1500 South Grand Avenue, Suite 100 Los Angeles, CA 90015 Attention: Ed Holder, Regional Vice President of Real Estate Development Gubb & Barshay, LLP 505 14th Street, Suite 450 Oakland, CA 94612 Attention: Evan Gross U.S. Bancorp Community Development Corporation 1307 Washington Avenue, Suite 300 Mail Code: SL MO RMCD St. Louis, MO 63103 USB Project No: 25982 Attn.: LIHTC Asset Management 28. Trustor agrees at any time and from time to time upon receipt of a written request from Beneficiary, to furnish to Beneficiary a detailed statement in writing of income, rents, profits, and operating expenses of the premises, and the names of the occupants and tenants in possession, together with the expiration dates of their leases and full information regarding all rental and occupancy agreements, and the rents provided for by such leases and rental and occupancy agreements, and such other information regarding the Property and their use as may be requested by Beneficiary. 29. The full principal amount outstanding plus accrued but unpaid interest thereon, shall be due and payable on the earlier to occur of the following: (a) As more particularly provided in the Commission Loan Note, sale, transfer, assignment or refinancing of the Property as provided further in this paragraph 29; unless: (i) in the case of a sale in which the sale proceeds are insufficient to repay in full the Commission Loan, the Beneficiary approves such sale and the purchaser assumes the balance of the Commission Loan in accordance with the terms of the Commission Loan Note; or (ii) in the case of a refinancing in which the refinancing proceeds are insufficient to repay in full the Commission Loan, the Beneficiary approves such refinancing and the Borrower remains obligated pursuant to the terms of the Note. Notwithstanding anything to the contrary contained in the Loan Documents, (i) Trustor may refinance the Senior Loan without the prior consent of the Beneficiary (the "Refinanced Indebtedness"), and the Beneficiary hereby agrees to subordinate the Commission Loan and all documents securing or evidencing the Commission Loan, including, but not limited to, this Deed of Trust, to the Refinanced Indebtedness and the lien of any deed of trust or mortgage securing the Refinanced Indebtedness, provided that the principal balance of the Refinanced Indebtedness does not exceed the then outstanding principal balance of the Senior Loan plus the costs of refinancing the Senior Loan, and (ii) the foregoing refmance shall not constitute a "refinance" for purposes of this Section 29. Page 7 (b) In order to induce Beneficiary to make the loan evidenced hereby, Trustor agrees that in the event of any transfer of the Property without the prior written consent of Beneficiary (other than a transfer resulting from a foreclosure, or conveyance by deed in lieu of foreclosure, by the holder of the Senior Loan Deed of Trust), Beneficiary shall have the absolute right at its option, without prior demand or notice, to declare all sums secured hereby immediately due and payable. Consent to one such transaction shall not be deemed to be a waiver of the right to require consent to future or successive transactions. Beneficiary may grant or deny such consent in its sole discretion and, if consent should be given, any such transfer shall be subject to this paragraph 29, and any such transferee shall assume all obligations hereunder and agree to be bound by all provisions contained herein. Such assumption shall not, however, release Trustor from any liability thereunder without the prior written consent of Beneficiary. (c) As used herein, "transfer" includes the sale, agreement to sell, transfer or conveyance of the Property, or any portion thereof or interest therein, whether voluntary, involuntary, by operation of law or otherwise, the execution of any installment land sale contract or similar instrument affecting all or a portion of the Property, or the lease of all or substantially all of the Property. "Transfer" shall not include the leasing of individual residential units or the commercial space on the Property. (d) The term "Sale" means any transfer, assignment, conveyance or lease (other than to a tenant for occupancy) of the Property and/or the improvements thereon, or any portion thereof, or any interest therein by the Trustor, and (if Trustor is a partnership) includes any transfer, assignment or sale of any partnership interest in the Trustor (other than the removal of the general partner by a limited partner in Trustor in accordance with Trustor's partnership agreement) by an individual or entity which is a general partner in the Trustor, or any interest by any individual or entity which holds an interest in any such general or limited partner in the Trustor, which brings the cumulative total of all such direct and indirect transfers, assignments and sales during the term of this Deed of Trust to more than thirty-five percent (35%) of the ownership interests in the Trustor, and any such transfer, assignment or sale of a direct or indirect partnership interest thereafter. Sale includes a sale in condemnation or under threat thereof other than by Beneficiary. Sale does not include dedications and grants of easements to public and private utility companies of the kind customary in real estate development. Notwithstanding anything to the contrary contained in this Deed of Trust, Trustor, prior to any action to enforce this Deed of Trust, shall give U.S. Bancorp Community Development Corporation, and its successors and assigns (the "Tax Credit Partner") notice and opportunity to cure for a period of not less than (a) fifteen (15) days to cure a monetary default, and (b) thirty (30) days to cure a nonmonetary default; provided, however, if in order to cure such a default Tax Credit Partner reasonably determines that it must remove the general partner of Borrower, Tax Credit Partner shall so notify Trustor and so long as Tax Credit Partner is diligently and continuously attempting to so remove such general partner, Tax Credit Partner shall have until the date thirty (30) days after the effective date of the removal of the general partner or general partners to cure such default but in no event more than one (1) year. Notwithstanding the foregoing, the following shall not constitute a "Sale" under this Deed of Trust: (a) a Sale made pursuant to an option granted to a general partner of Trustor on or before the date of recordation of this Deed of Trust in the Official Records of San Page 8 Diego County, California, or (b) (i) prior to the payment in full of all required capital contributions to Trustor, any assignment of an interest as limited partner of Trustor by the Tax Credit Partner to an entity whose general partner or managing member is controlled by the Tax Credit Partner or is under common control with the Tax Credit Partner, (ii) after the payment in full of all required capital contributions to Trustor, any assignment or transfer of an interest as limited partner of Trustor by its Tax Credit Partner to any person or entity, which assignments shall not require the consent of Beneficiary, provided that the Tax Credit Partner, shall give written notice to Beneficiary of such assignment; or (c) the Tax Credit Partner's removal of the general partner of Trustor as general partner, and substitution of the Tax Credit Partner or an affiliate of the Tax Credit Partner as a general partner of Trustor, which removal shall not require Beneficiary approval, provided that the Tax Credit Partner shall give notice to Beneficiary of its intent to so remove such general partner not less than ten (10) days prior to such removal. Any proposed replacement of the general partner with an entity other than the Tax Credit Partner or an affiliate of the Tax Credit Partner will be subject to Beneficiary's prior reasonable approval. 30. Trustor shall permit Beneficiary and its agents or representatives, to inspect the Property at any and all reasonable times, with or without advance notice. Inspections shall be conducted so as not to interfere with the tenants' use and enjoyment of the Property. 31. It is hereby expressly agreed and acknowledged by Trustor and Beneficiary that this Deed of Trust is a second and subordinate deed of trust, and that the Commission Loan secured hereby, and the Commission Loan Note are subject and subordinate only to the deed of trust securing a loan to Trustor in which MUFG Union Bank, N.A., a national banking association ("Senior Lender") is the Beneficiary, including any loan that refinances the balance of the Senior Loan or an assignment of the Senior Loan (collectively referred to as the "Senior Loan"). 32. 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 1380 ("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. Hazardous Materials expressly exclude substances typically used in the construction, development, operation and maintenance of an apartment complex provided such substances are used in accordance with all applicable laws. 33. 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: Page 9 (a) Other than as expressly disclosed to Trustor by Beneficiary, 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 the Trustor or, to the best knowledge of the Trustor, by any other person) as a manufacturing site, dump site or storage site (whether permanent or temporary) for any Hazardous Materials; (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), caused by Trustor. (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, but only to the extent Trustor is not effectuating a remediation of the Property, 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 Commission Loan Note secured hereby. Page 10 34. The following shall be an Event of Default: (a) Failure of Trustor to pay, when due, principal and interest and any other sums or charges on the Commission Loan Note, in accordance with the provisions set forth in the Commission Loan Note; (b) A violation of the terms, conditions or covenants of the Commission Loan Note or this Deed of Trust; or (c) A default (after expiration of any cure period provided therein) under the Senior Loan Deed of Trust to which the lien of this Deed of Trust is subordinate. 35. Subject to the extensions of time set forth in paragraph 36, and subject to the further provisions of this paragraph 35 and of paragraph 37, failure or delay by the Trustor to perform any term or provision of this Deed of Trust constitutes a default under this Deed of Trust. The Trustor must immediately commence to cure, correct, or remedy such failure or delay and shall complete such cure, correction or remedy with reasonable diligence. (a) The Beneficiary shall give written notice of default to the Trustor, specifying the default complained of by the Beneficiary. Delay in giving such notice shall not constitute a waiver of any default nor shall it change the time of default. (b) The Trustor shall not be in default so long as it endeavors to complete such cure, correction or remedy with reasonable diligence, provided such cure, correction or remedy is completed within thirty (30) days after receipt of written notice (or such additional time as may be deemed by the Beneficiary to be reasonably necessary to correct the cause). (c) Any failures or delays by the Beneficiary in asserting any of its rights and remedies as to any default shall not operate as a waiver of any default or of any such rights or remedies. Delays by the Beneficiary in asserting any of its rights and remedies shall not deprive the Beneficiary of its right to institute and maintain any actions or proceedings which it may deem necessary to protect, assert, or enforce any such rights or remedies. 36. Notwithstanding specific provisions of this Deed of Trust, performance hereunder shall not be deemed to be in default where delays or defaults are due to: war; insurrection; strikes; lock -outs; riots; floods; earthquakes; fires; casualties; acts of God or other deities; acts of the public enemy; epidemics; quarantine restrictions; freight embargoes; lack of transportation; governmental restrictions or priority; litigation; unusually severe weather; inability to secure necessary labor, materials or tools; delays of any contractor or supplier; acts of the other party; acts or failure to act of the Beneficiary, or any other public or governmental agency or entity (except that any act or failure to act of Beneficiary shall, not excuse performance by Beneficiary); or any other causes beyond the reasonable control or without the fault of the party claiming an extension of time to perform. An extension of time for any such cause shall be for the period of the enforced delay and shall commence to run from the time the party claiming such extension gives notice to the other party, provided notice by the party claiming such extension is given Page 11 within thirty (30) days after the commencement of the cause. Times of performance under this Deed of Trust may also be extended in writing by the Beneficiary and Trustor. 37. If a monetary event of default occurs under the terms of the Commission Loan Note or this Deed of Trust, prior to exercising any remedies thereunder Beneficiary shall give Trustor written notice of such default. Trustor shall have a period of fifteen (15) days after such notice is given within which to cure the default prior to exercise of remedies by Beneficiary under the Commission Loan Note and this Deed of Trust. 38. If a non -monetary event of default occurs under the terms of the Commission Loan Note or this Deed of Trust, prior to exercising any remedies thereunder, Beneficiary shall give Trustor notice of such default. If the default is reasonably capable of being cured within thirty (30) days, Trustor shall have such period to effect a cure prior to exercise of remedies by the Beneficiary under the Commission Loan Note and this Deed of Trust. If the default is such that it is not reasonably capable of being cured within thirty (30) days, and Trustor (a) initiates corrective action within said period, and (b) diligently, continually, and in good faith works to effect a cure as soon as possible, then Trustor shall have such additional time as is reasonably necessary to cure the default prior to exercise of any remedies by Beneficiary. In no event shall Beneficiary be precluded from exercising remedies if its security becomes or is about to become materially jeopardized by any failure to cure a default or the default is not cured within one hundred eighty (180) days after the first notice of default is given. 39. Upon the occurrence of an Event of Default as described in paragraph 34, Trustor shall be obligated to repay the Commission Loan and, subject to the nonrecourse provision of the Commission Loan Note, Beneficiary may seek to enforce payment of any and all amounts due by Trustor pursuant to the terms of the Commission Loan Note. 40. All expenses (including reasonable attorneys' fees and costs and allowances) incurred in connection with an action to foreclose, or the exercise of any other remedy provided by this Deed of Trust, including the curing of any Event of Default, shall be the responsibility of Trustor. 41. Notwithstanding anything to the contrary contained herein or in any documents secured by this Deed of Trust or contained in any subordination agreement, the Beneficiary acknowledges and agrees that in the event of a foreclosure or deed -in -lieu of foreclosure (collectively, "Foreclosure") with respect to the Property encumbered by this Deed of Trust, the following rule contained in Section 42(h)(6)(E)(ii) of the Internal Revenue Code of 1986 (26 U.S.C. Section 42 (h)(6)(E)(ii)), as amended, shall apply: For a period of three (3) years from the date of Foreclosure, with respect to any unit that had been regulated by the Regulatory Agreement with the California Tax Credit Allocation Committee, (i) none of the tenants occupying those units at the time of Foreclosure may be evicted or their tenancy terminated (other than for good cause), (ii) nor may any rent be increased except as otherwise permitted under Section 42 of the Code. Page 12 Except as provided in paragraph 31, each successor owner of an interest in the Property, other than through foreclosure, deed in lieu of foreclosure or an owner who takes an interest in the Property after a foreclosure has occurred, shall take its interest subject to this Deed of Trust. "Trustor" MORGAN TOWER HOUSING ASSOCIATES, L.P., a California limited partnership By: CHW Morgan Development LLC, Its: managing general partner By: Community HousingWorks Its: By: sole member and manager . Reynolds, President & r EO By: Mercy Morgan Development LLC Its administrative general partner By: Mercy Housing Calwest Its: sole member and manager By: Erika Villablanca, Vice President Page 13 A Notary Public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California County of Orange On March 25, 2019, before me, A. McLean, Notary Public, personally appeared Susan M. Reynolds, who proved to me on the basis of satisfactory evidence to be the person(s) whose 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. Signature (Seal) A. MCLEAN Notary Public - California Z Orange County Commission # 2227349 My Comm. Expires Jan 30.2022 A Notary Public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California County of Orange On March 25, 2019, before me, A. McLean, Notary Public, personally appeared Erika Villablanca, who proved to me on the basis of satisfactory evidence to be the person(s) whose 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. Signature (Seal) ii-ii-Y-.11,1-41,416.ati A. MCLEAN Notary Public — California Orange County Commission # 2227349 My Comm. Expires Jan 30.2022 EXHIBIT A DESCRIPTION OF REAL PROPERTY That certain real property located in the County of San Diego, State of California, more particularly described as follows: PARCEL A: Lot 1 of Center City Project, in the City of National City, County of San Diego, State of California, according to Map thereof No. 8807, filed in the Office of the County Recorder of San Diego County, February 24, 1978. PARCEL B: Easement for pedestrian and vehicular access for ingress and egress as conveyed by the Reciprocal Easement Agreement recorded March 29, 2019 as Instrument No. 2019-0114030 of Official Records of San Diego County. Assessor Parcel Number 560-410-04-00 RECORDING REQUESTED BY: Stewart Title Guaranty Co. #18000480843A AND WHEN RECORDED MAIL TO: City of National City Records Management Department 1243 National City Blvd National City, CA 91950 DOC# 2019-0114675 I II II II I11111 II I11 I1111 I11111 IIIIIIII 1I 1I1 I1111I I II Apr 02, 2019 08:00 AM OFFICIAL RECORDS Ernest J. Dronenburg, Jr., SAN DIEGO COUNTY RECORDER FEES: $38.00 (SB2 Atkins: $0.00) PCOR: N/A PAGES: 3 SUBSTITUTION OF TRUSTEE AND FULL RECONVEYANCE OF DEED OF TRUST (Please fill in document title(s) on this line) 1 ❑ Exempt from fee per GC27388.1 due to being recorded in connection with concurrent transfer that is subject to the imposition of documentary transfer tax, or, 2 0 Exempt from fee per GC27388.1 due to being recorded in connection with a transfer that was subject to documentary transfer tax which was paid on document recorded previously on (date*) as document number of Official Records, or, 3 Exempt from fee per GC27388.1 due to the maximum fees being paid on documents in this transaction, or, 4 [] Exempt from fee per GC27388.1 due to the maximum fees having been paid on documents in the transaction(s) recorded previously on (date*) as document number(s) of Official Records, or, 5 ❑ Exempt from fee per GC27388.1, document transfers real property that is a residential dwelling to an owner -occupier, or, document is recorded in connection with concurrent transfer that is a residential dwelling to an owner -occupier, or, 6 ❑ Exempt from fee per GC27388.1 due to it being recorded in connection with a transfer of real property that is a residential dwelling to an owner -occupier. The recorded document transferring the dwelling to the owner -occupier was recorded on (date*) as document number(s) 7 ® Exempt from fee per GC27388.1 due to being executed or recorded by the federal government in accordance with the Uniform Federal Lien Registration Act, by the state, or any county, municipality or other political subdivision of the state, or, 8 ❑ Exempt from the fee per GC 27388.1 (a) (1); Not related to real property, or, 9 D Exempt from fee under GC27388.1 for the following reasons: THIS PAGE ADDED TO PROVIDE SENATE BILL2 EXEMPTION INFORMATION (Additional recordingfeeapplies) Rev 5/18 *The Prior Recording Reference must have been recorded within the last 60 days and is subject to review RECORDING REQUESTED BY: Stewart Title Guaranty Co. #18000480843A AND WHEN RECORDED MAIL TO: City of National City Records Management Department 1243 National City Blvd National City, CA 91950 SUBSTITUTION OF TRUSTEE AND FULL RECONVEYANCE OF DEED OF TRUST (Please fill in documenttitle(s) on this line) 1 ❑ Exempt from fee per GC27388.1 due to being recorded in connection with concurrent transfer that is subject to the imposition of documentary transfer tax, or, 2 ❑ Exempt from fee per GC27388.1 due to being recorded in connection with a transfer that was subject to documentary transfer tax which was paid on document recorded previously on (date*) as document number of Official Records, or, 3 ❑ Exempt from fee per GC27388.1 due to the maximum fees being paid on documents in this transaction, or, 4 ❑ Exempt from fee per GC27388.1 due to the maximum fees having been paid on documents in the transaction(s) recorded previously on (date*) as document number(s) of Official Records, or, 5 ❑ Exempt from fee per GC27388.1, document transfers real property that is a residential dwelling to an owner -occupier, or, document is recorded in connection with concurrent transfer that is a residential dwelling to an owner -occupier, or, 6 ❑ Exempt from fee per GC27388.1 due to it being recorded in connection with a transfer of real property that is a residential dwelling to an owner -occupier. The recorded document transferring the dwelling to the owner -occupier was recorded on (date*) as document number(s) 7 ® Exempt from fee per GC27388.1 due to being executed or recorded by the federal government in accordance with the Uniform Federal Lien Registration Act, by the state, or any county, municipality or other political subdivision of the state, or, 8 ❑ Exempt from the fee per GC 27388.1 (a) (1); Not related to real property, or, 9 ❑ Exempt from fee under GC27388.1 for the following reasons: THIS PAGE A D D E D TO PROVIDE SENATE BILL 2 EXEMP11ON INFORMATION (Additional record ing fee a pplies) Rev 5/18 *The Prior Recording Reference must have been recorded within the last 60 days and is subject to review RECORDING REQUESTED BY: CITY OF NATIONAL CITY AND WHEN RECORDED RETURN TO: CITY OF NATIONAL CITY Records Management Department 1243 National City Blvd. National City, California 91950 This document is exempt from payment of a recording fee pursuant to Government Code Section 6103. SUBSTITUTION OF TRUSTEE AND FULL RECONVEYANCE OF DEED OF TRUST (Morgan Tower) Community Development Commission of the City of National City is the trustor, Stewart Title Company is the original trustee, and the City of National City ("Beneficiary") is the beneficiary under the that certain Deed of Trust, Security Agreement and Fixture Filing (With Assignment of Rents), recorded against the property described therein, in the Office of the Recorder of the County of San Diego on March 10, 2011, as Document 2011-0130705 ("Deed of Trust"). 1. Substitution of Trustee. The undersigned, as the sole present Beneficiary under the Deed of Trust, hereby substitutes the City of National City, whose address is 1243 National City Blvd. National City, CA 91950, as trustee in the place of said original trustee. 2. Full Reconveyance of Deed of Trust. The City of National City, as Trustee, hereby reconveys to the person(s) legally entitled thereto, without warranty, all of the estate, title and interest acquired by the Trustee under the Deed of Trust in and to that real property described in the Deed of Trust. CITY OF NATIONAL CITY (Substituted Trustee and Beneficiary) By. Leslie Deese, City Manager APPROVED AS TO FORM: By APPROVED AS TO FORM: Christensen & Spath LLP City and CDC -HA Special Counsel B ACKNOWLEDGMENT A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California County of San Diego On YroTan a6 , 2019, before me, D- PI-irke( , notary public, personally appeared 1,.eSLre DSe who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/ace 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 higher/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. Signature (Seal) D. PITCHER Commission # 2145777 Notary Public - California San Diego County My Comm. Expires Apr 15, 2020 DOC# 2019-0142997 When Recorded Return To: COMMUNITY DEVELOPMENT COMMISSION PO Box 7070 Pasadena, CA 91109 Recording Requested By: BCM-LIEN SOLUTIONS LAKEISHA WALL Phone #: 800-833-5778 PIN: 5604100400 II II II II II II Apr 19, 2019 11:49 AM OFFICIAL RECORDS Ernest J. Dronenburg. Jr., SAN DIEGO COUNTY RECORDER FEES: $187.00 (SB2 Atkins: $150.00) PCOR: N/A PAGES: 2 SUBSTITUTION OF TRUSTEE AND FULL RECONVEYANCE WHEREAS, COMMUNITY DEVELOPMENT COMMISSION OF THE CITY OF NATIONAL CITY was the Original Trustor, UNITED CALIFORNIA BANK, A CALIFORNIA CORPORATION, the Original Trustee, and, UNITED CALIFORNIA BANK, A CALIFORNIA CORPORATION, the Original Beneficiary, under that certain Deed of Trust dated 03/03/1978 and recorded 03/03/1978 as Instrument No: 1978-0085823, Official Records of San Diego County, State of California and Property Address: 14th to 15th St B, National City, CA, 91950 Loan Amount: $5,125,000.00 WHEREAS, the undersigned present beneficiary desires to substitute a new Trustee under said Deed of Trust in place and instead of UNITED CALIFORNIA BANK, A CALIFORNIA CORPORATION. Now therefore, the undersigned hereby substitutes himself/herself/themselves as Trustee under said Deed of Trust and does hereby reconvey, without warranty, to the person or persons legally entitled hereto, the Estate now held by him thereunder. Whenever the context hereof so requires, the masculine gender includes the feminine and/or neuter, and the singular numbers includes the plural. The undersigned hereby accepts said appointment as trustee under the above deed of trust, and as successor trustee, and pursuant to the request of said owner and holder and in accordance with the provisions of said deed of trust, does hereby RECONVEY WITHOUT WARRANT, TO THE PERSONS LEGALLY ENTITLED THERETO, all the estate now held by it under said deed of trust. Dated: Arr.) ,a, , .()1�, BENEFICIARY / NEW TRUSTEE Wells Fargo Bank, N.A., successor by merger to United California Bank, a California corporation c'J By: Kevin E. Smith, Officer Its: Page # 1 69,40580 RPY Ref# 2291854 21041 CA073 San Diego Co 984203885 COMMUNITY DEVELOPMENT COMMISSION STATE OF C- On A 9Y` I ' as 2.0 k before me, the undersigned, a notary public in and for said state, personally appeared Kevin E. Smith, Officer of Wells Fargo Bank, N.A., successor by merger to United California Bank, a California corporation personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he/she executed the same in his/her capacity, and that by his/her signature on the instrument, the individual, or the person upon behalf of which the individual acted, executed the instrument. Notary Public Wanda Anderson NOTARY PUBLIC Stokes County, NC My Commission Expires July 2, 2023 Page # 2 69240580 RPY Ref# 2291854 21041 CA073 San Diego Co 984203885 COMMUNITY DEVELOPMENT COMMISSION RESOLUTION NO. 78-16 A RESOLUTION AUTHORIZING THE ISSUANCE OF A DEED OF TRUST NOTE IN THE AGGREGATE PRINCIPAL AMOUNT OF $5,125,000 OF THE COMMUNITY DEVELOPMENT COMMISSION OF THE CITY OF NATIONAL CITY FOR THE PURPOSE OF PROVIDING INTERIM CONSTRUCTION AND PERMANENT FINANCING OF THE COST OF ACQUIRING, CONSTRUCTING AND EQUIPPING A 151-UNIT HOUSING PROJECT FOR OCCUPANCY BY ELDERLY PERSONS OF LOW INCOME, AUTHORIZING THE EXECUTION OF RELATED, SUPPORTING DOCUMENTATION, AND PRESCRIBING CERTAIN OTHER MATTERS RELATING THERETO. WHEREAS, a shortage of decent, safe and sanitary dwelling accommodations exists in the City of National City, California, for elderly persons of low income; and WHEREAS, the Issuer is authorized under the provisions of the Housing Authorities Law of the State of California (Part 2 of Division 24 of the Health and Safety Code) (the "Act") to provide for the construction of housing projects to provide safe and sanitary dwelling accommodations for persons of low income at rents which persons of low income can afford; and WHEREAS, the Issuer is further authorized under the provisions of the Act to issue notes, bonds, interim certificates or other obligations for any of its corporate purposes which may be secured by a pledge of any revenues or a mortgage or deed of trust encumbering any housing project or other property of the Issuer; and WHEREAS, the Issuer proposes to acquire, construct and equip a 151-unit housing project to be known as Kimball Plaza (the "Project") for leasing dwelling units to elderly persons of low income; and WHEREAS, the Issuer will enter into an agreement with ROEL CONSTRUCTION COMPANY, INC., 3455 Hancock, P. O. Box 80216, San Diego, California (the "Contractor"), providing for the construction and equipping of the Project by the Contractor for an aggregate contract price of $4,510,000.00; and WHEREAS, pursuant to the provisions and requirements of Section 8 of the United States Housing Act of 1937, as amended, the Issuer proposes to enter into an Agreement to Enter into Housing Assistance Payments Contract (the "HAP Agreement") with the United States of America, acting through the Department of Housing and Urban Development ("HUD"), providing for the execution of a Housing Assistance Payments Contract (the "HAP Contract") upon the completion of the Project and its acceptance by HUD; and WHEREAS, under the HAP Contract HUD agrees to pay to the Issuer housing assistance payments on behalf of eligible tenants occupying dwelling units in the Project; and WHEREAS, in order to obtain funds with which to provide for the interim construction financing and the permanent financing of the Project, the Issuer proposes to issue its Deed of Trust Note in the aggregate principal amount of $5,125,000 to be secured by a Deed of Trust of even date to United California Bank of Pasadena, California (the "Lender"); and WHEREAS, in order to provide for the further security of the Deed of Trust Note and to prescribe the terms and conditions upon which the loan is being made and the Project constructed, operated, managed and maintained, the Issuer proposes to execute additional documents and instruments including a Deed of Trust,Regulatory Agreement, Construction Contract and Building Loan Agreement on forms as prescribed and approved by HUD; and WHEREAS, the Executive Director of the Issuer has caused to be prepared and presented to this meeting the following instruments which are attached hereto: (1) The form of Deed of Trust Note; (2) 'The form of the HAP Agreement, including the form of HAP Contract attached thereto; (3) Form of Request for Offers to Commit To Fund a Housing Loan with respect to the Deed of Trust Note; (4) The form of Deed of Trust; (5) The form of Regulatory Agreement; (6) The form of Construction Contract; (7) The form of Building Loan Agreement; and (8) Various other related, supporting exhibits, documents, certifications, assurances, oaths, and agreements. WHEREAS, it appears that each of the documents and instruments above referred to which are now before this meeting is in appropriate form and is an appropriate instrument to be executed and delivered for the purposes intended: NOW, THEREFORE, Be It and .It Is Hereby Resolved by the Commissioners of the Community Development Commission of the City of National City, as follows: Section 1. Findings and Determinations. It is hereby found and determined that it is necessary and desirable for the Issuer to acquire, construct and equip the Project and to provide for the interim and permanent financing thereof through the issuance and sale of its Deed of Trust Note in order to provide safe and sanitary housing in the City of National City at rents which elderly persons of low income can afford and to bring long range benefits to the City of National City. Section 2. Authorization of the Note. For the purpose of providing interim and permanent financing for the acquisition, construction and equipping of the Project, including necessary expenses incidental to the issuance of the Deed of Trust Note, the Issuer hereby determines to issue its Deed of Trust Note in the aggregate principal amount of $5,125,000 (Kimball Plaza Project), dated , 1978, maturing on , 2018, and bearing interest at the rate of 6-1/2% per annum, payable monthly. Level monthly installments of principal, interest and mortgage insurance premium shall be in the approximate amount of $38,568. The Chairman and the Secretary of the Issuer are hereby authorized and directed to execute, attest, acknowledge and deliver the Deed of Trust Note in substantially the form presented to this meeting or with such changes therein as may be approved by the officers of the Issuer executing the same, their execution thereof to constitute conclusive evidence of their approval of all changes from the form of Deed of Trust Note presented to this meeting, which form of Deed of Trust Note is hereby in all respects approved and incorporated by reference and made a part hereof. The Deed of Trust Note shall be payable as to principal and interest and the obligations of the Issuer under the Deed of Trust Note shall be paid and satisfied solely from the assets and revenues of the Issuer pledged therefor under the Deed of Trust Note, the Deed of Trust, and the Regulatory Agreement. The Note shall not be a debt of the City of National City, the State of California, or any of the State's political subdivisions, or an indebtedness within the meaning of any constitutional or statutory debt limitation. Principal of, interest on, and the mortgage insurance premium with respect to the Deed of Trust Note shall be payable in lawful money of the United States of America at the principal office of the Lender. Section 3. Execution and Delivery of Deed of Trust Note. The Deed of Trust Note shall be executed in the name of the Issuer with the manual signature of the Chairman and attested with the manual signature of the Secretary and the SEAL of the Issuer shall be impressed thereon. The Chairman or any other officer of the Issuer shall cause the Deed of Trust Note, as so executed and attested, to be delivered to the Lender. Section 4. Approval of Deed of Trust, Regulatory Agreement, Construction Contract and Building Loan Agreement. To provide for the details of and to prescribe the terms and conditions upon which the Deed of Trust Note is to be secured, the construction and equipping of the Project is to be accomplished, and the operation, management and maintenance of the Project is to be performed and regulated, the Chairman and Secretary of the Issuer are hereby authorized and directed to execute, attest, acknowledge and deliver the Deed of Trust, Regulatory Agreement, Construction Contract and Building Loan Agreement in substantially the forms presented to this meeting or with such changes therein as may be approved by the officers of the Issuer executing the same, their execution thereof to constitute conclusive evidence of their approval of all changes from the forms of the above -identified instruments presented to this meeting, which forms are hereby in all respects approved and incorporated by reference and made a part hereof. Section 5. Approval of HAP Agreement. The form of HAP ' Agreement presented to this meeting is hereby approved; and the Chairman and the Secretary of the Issuer are hereby authorized and directed to execute and deliver the HAP Agreement in the name of and on behalf of the Issuer in substantially the form of HAP Agreement presented to this meeting or with such insertions, additions and Exhibits as may be approved by the officers of the Issuer executing the same, their execution thereof to constitute conclusive evidence of their approval of all insertions into the form of HAP Agreement presented to this meeting. Section 6. Approval of Request for Offers to Commit to Fund a Housing Loan. The form of Request for Offers to Commit to Fund a Housing Loan Presented to this meeting is hereby approved and its prior utilization is hereby authorized, ratified and confirmed. Section 7. Ratification of Actions. The actions of the Chairman or any other officer of the Issuer in doing any and all acts necessary in connection with the acquisition, construction and equipping of the Project and the issuance of the Deed of Trust Note are hereby ratified and confirmed. Section 8. Further Actions Authorized. The proper officers, agents and employees of the Issuer are hereby authorized, empowered and directed to do all such acts and things and to execute all such certifications, financing statements, assignments, documents, oaths, agreements and other instruments as may be necessary in connection with the acquisition, construction and equipping of the Project and the issuance of the Deed of Trust Note. Section 9. Severability. If any section, paragraph or provision of this resolution shall be held to be invalid or unenforceable for any reason, the invalidity or unenforceability of such section, paragraph or provision shall not affect any of the remaining provisions of this resolution. Section 10. Repeal of Conflicting Resolutions; Effective Date. All resolutions or parts thereof in conflict herewith are, to the extent of such conflict, hereby repealed and this resolution shall take effect from and after its adoption. ADOPTED and APPROVED this 21st day of February, 1978. Kile Morgan, Q?Sairman ATTEST: rnnld A. Petersnn. Secretary NOES: None Chairman Morgan declared the motion approved and adopted. Resolution No. 78-16(Srs.Hsing) MOTION: * * * * * * * * * * * * * * At the request of the Executive Director Chairman Morgan added Resolution No. 78-16(Srs. Hsing) to the Agenda. The Executive Director read the following: "Resolution No. 78-16(Srs. Hsing) A RESOLUTION AUTHORIZING THE ISSUANCE OF A DEED OF TRUST NOTE IN THE AGGREGATE PRINCIPAL AMOUNT OF $5,125,000 OF THE COMMUNITY DEVELOPMENT COMMISSION OF THE CITY`OF NATIONAL CITY FOR THE PURPOSE OF PROVIDING INTERIM CONSTRUCTION AND PERMANENT FINANCING OF THE COST OF ACQUIRING, CONSTRUCTING AND EQUIPPING A 151-UNIT HOUSING PROJECT FOR OCCUPANCY BY ELDERLY PERSONS OF LOW INCOME, AUTHORIZING THE EXECUTION OF RELATED, SUPPORTING DOCUMENTATION, AND PRESCRIBING CERTAIN OTHER MATTERS RELATING THERETO." Mr. Reid made a motion to adopt Resolution No. 78-16. Mr. Van Deventer seconded the motion. On Roll Call the Members voted as follows: AYES: Camacho, Morgan, Reid, and Van Deventer NOES: None ABSTAINED:Dalla Chairman Morgan declared the motion approved and adopted. 5'7"9 RECORDING RF:OUESTED BY When Recorded Mad tot Cnited California Bank ATTENTION: Mike Clancy 245 South Loa kobles Pasadena, CA 91109 FHA FORM NO 410440 (CORPORATE) , Re.. Oec.Tlsr (97)) 78=085823 . x. LJi3 ��ppRLcLE f:J REQUEST OF Zs? Ada .J A43. MAR 3 1124 AM'18 OFFICIAL RECOROS SAN CALIF. HARLEY B Y P LOOM RECORDER $6.00 srACP ABOVE THIS LINE FOR RECORDER'S USE CONSTRUCTION AND PERMANENT DEED OF TRUST W'ilh Aaaigmmmt of Rents TIIISDM) OFTRUST. Made this tat day of Mar oh , 14 78,byandbetween Community Development Commission of the City of National Cityheremcalled Truster, andCnited California Bank, A California Corporation .rniUnited California Bank, A California Corporation , herein called TruslcclsI. .herein called Beneficiary. WI I -NI SSLTII That Truster grants, transfers, and assigns to 'Trustee in trust, upon the trusts, covenants, conditions and agreements and for the Oct and purposes hereinafter contained, with power of sale, all that real property situate, lying and being mCity of National City, San Diego ('aunty, State of California. described as follows Lot #1 of Center City project in the City of National City, County of San Diego, State of California according to map thereof #8807 filed in the office of the county recorder of San Diego County on February24,1978. Logcthe' with the rents. Issue., and profits thereof. SUBJECT. HOWEVER, to the right, power. and authority hereinafter given to and conferred upon Beneficiary to collect and apply such rents, Issues, and profits, and together with all buildings and improvements of every kind and description now or hereafter erected or placed thereon, and ell fixtures. Including but not Invited to all gas and electric fixtures. engines and machinery. radiators, heaters, furnace., heating equipment, laundry equipment, steam and hot-water writers. stoves, ranges, elevators and motors, bath tubs, sinks, water closet., basin', pipes, faucets and other plumbing and heating fixtures. mantels, cabinets, refrigerating plant and refrigerators, whether Inechunlcst or otherwise. cooking apparatus and appurtenances, and all shades, awnings, screens, blinds and other furnishings, it being hereby agreed that all such fixtures and I urnulungs shall to the extent permitted by law he deemed to bit permanently affixed to and a part of the realty. and together with all building melons!, and equipment now or hereafter delivered to said premises and intended to be installed therein, and Together with all articles sal personal property now or hereafter attached to or used in and about the building or buildings now erected or hereafter to he erected on the lands described which are necessary to the complete and comfortable use and occupancy it such building or buildings for the purposes for which they were or are to he erected, including all other goods and chattels and personal property as are ever used or furnished in operating a building, or the activities conducted therein, similar to the one herein described and referred to, and all renewals or replacements thereof or article. in substitution therefor, whether or nut the same are. to shall he attached to said building or buildings in any manner, and said Trustor agrees to execute a chattel mortgage covering the afureseid fixtures and articles of personal property, at the time of placing such personel property or any part thereof in the building or buildings to be erected on the lands herein deacnbed in the manner and form required by law, at its expense and satistactory to the Beneficiary. To have and to hold the property hereinbefore described together with appurtenances to the 'Trustee. its or his successors and assigns forever. FOR THE PURPOSE of securing performance of each agreement of Tru.lur herein and payment of a Just Indebtedness of the Irustt,r to the Beneficiary in the pnncipal auto irfFive Million One Hundred Twenty—five Thousand PollanpISS 5 , 125 , 000--- I, evidenced by Its nolo of even date herewith, bearing interest from date sin outstanding balance.. all 4Rhalf percent ( 6_1/2_1') per annum, said principal and interest being payable in monthly installments a. provided in said note with a final maturity of let of August 2019 which note is identified as being secured hereby by a certificate thereon. Said note and all of its terns are incorporated herein by reference and this conveyance shall secure any and all extensions thereof, however evidenced. f y'rll l* i I 1 I lob 5131) AND to PROTF.cTTllti SI cURI'IY OF THIS OHFD OF TRUST, TRUSTOR COVENANTS AND AGRI'FS: I . That it will pay the Note at the timer and in the manner provided therein; 2. That it will not permit or suffer the use of any of the properly fur any purpose other than the use for which the same was intended at the time this Deed of Trust was executed; ?. that the Regulatory Agreement. if any, executed by the Traitor and the Secretary of Housing and Urban Development, acting h) and through the Federal Housing Commissioner, which in being recorded aintultaneously herewith, is incorporated in and made a part of this Deed of Trust. Upon default under the Regulatory Agreement end upon the request of the Secretary of Mousing and l'rhan Development, acting by and through the Federal Housing Commnlsaioner, the Beneficiary. at its option, may declare the whole of the indebtedness secured hereby to be due end payable; 4. That all rents. profits and income from the property covered by Ole Deed of Trust are hereby assigned to the Beneficiary for the purpose of discharging the debt hereby secured. Permission is hereby given to Trustor so long as no default exists hereunder, t,r collect such rents, profits and income for use in accordance with the provisions of the Regulatory Aareemen I. 5. That upon default hereunder Beneficiary shall be entitled to the appointment of a receiver by uny court having Jurisdiction. without notice. to take possession and protect the property described herein and operate same and collect the rents, profits and income therefrom, h. That at the option of the Trustor the principal balance secured hereby may be reatmortteed on terms acceptable to the Secretary of !lousing and Urban Development. acting by and through the Federal housing ('omm�isuioner if a partial prepayment cults front an award in condemnation in accordance with provisions of Paragraph 21 herein, or (ram an insurance payment made in accordance with provisions of Paragraph 7 herein, where there is a resulting loss of project income; 7. I hat the Trustor will keep the improvements now existing ur hereafter erected on the deeded property insured against loss by lire and such other hazards, caxualtiex, and contingencies. as may he stipulated by the Secretary of Housing and Urban Development. acting h) and through the Federal Mousing ('onunixsioner upon the insurance of the Deed of Trust and other hazards as may be required front time to time by the Beneficiary, and all such insurance shall be evidenced by standard fire and extended cover- age insurance policy or policies, in amounts not leas than necessary to comply with the applicable Coinsurance Clause percentage. lint in no event shall the amounts of coverage be less than RO percent of the Insurable Values or not less than the unpaid balance of the insured Deed of Trust. whichever is the leaser, and in default thereof the Beneficiary shall have the right to effect insurance. Such policies shall he endorsed with standard Mortgagee clause with loss payable to the Beneficiary and the Secretary of Ilousina and Urban Development as interest may appear, and shall be deposited with the Beneficiary; that if the premises covered hereby, or any part thereof, shall be damaged by fire or other hazard against which insurance is held as herein -Move provided, the amounts paid by any insurance company in pursuance of the contract of insurance to the extent of the indebtedness then remaining unpaid, shall he paid to the Beneficiary, and, at its option, may be applied to the debt or released for the repairing or rebuilding of the premises. Any unexpired insurance shall inure to the benefit of, and pass to, the purchaser of the pniperty covered thereby at any trustee's sole held hereunder, x, ti,gether with and in addition to the monthly payments of interest or of principal and interest payable under the terms of said mote. to pay to Beneficiary monthly until said note is fully paid, beginning on the Hest day of the first month after the date hereof, the following sums'. tar An amount sufficient to provide the Beneficiary with funds to pay the next mortgage insurance premium if this instrument and the note secured hereby are insured. or a monthly service charge, if they are held by the Secretary of Housing and Urban Development, as follows it) If and so lung as said note of even date and and this instrument are insured or are reinsured under the provisions of the National Housing Act, an amount sufficient to accumulate in the hands of the Beneficiary one month prior to its due date the annual mortgage insurance premium. In order to provide such Beneficiary with funds to pay such premium to the Secretary of !lousing and Urban Development, pursuant to the National housing Act, as amended. and applicable Regulations thereunder, or I Ill Beginning with the first day of the month following an assignment of this instrument and the note secured hereby to the Secretary of blousing and Urban Development, a monthly service charge which shall be an amount equal to one -twelfth of one-half percent (I /12 of I/2%) of the average outstanding principal balance due on the note computed for each successive year beginning with the first of the month following such assignment. without taking into account delinquencies or prepayments. in) A sum equal to the ground rents, if any, next due, plus the premiums that will next become due and payable on policies of fire and other property insurance covering the premises covered hereby. plus water rates, taxes and assessments next due on the premises covered hereby loll as estimated by the Beneficiary) less all sums already paid therefor divided by the number of months to elapse before one month prior to the date when such ground rents. premiums, water rates. taxes and assessments will become delinquent, such sums to be held by Beneficiary in trust to pay said ground rents, premiums, water rates, tuxes, and special assessments. r All payments mentioned in the two preceding subsections of this paragraph and all payments to be made under the note secured hereby shall be added together and the aggregate amount thereof shell he paid each month in a single payment to be applied by Beneficiary to the following items in the order set forth: (t) premium charges under the Contract of Insurance with the Secretary of flouting and Urban Development, acting by and through the Federal Housing Commissioner ur service charge; 1I1) ground rents, taxes, special asaesumenta, water rates, fire and other property insurance premiums; (III) interest on the note secured hereby; (IV) amortization of the principal of said note, ii. Any excess funds accumulated under paragraph (b) above remaining after payment of the items therein mentioned, shall he . redited to subsequent monthly payments of the acme nature required there-ndyr, but if any such item shall exceed the estimate therefor. the Trustor shall without demand Iortliwith nuke good the deficient y. Failure to du so before the due dale of such item shall be a default hereunder. In case of termination of the Contract of Mortgage Insurance by prepayment of the mortgage in full. or otherwise (except as hereinafter provided). accumulations under paragraph In) above not required to meet payments due under the i ontract of Mortgage Insurance, shall be credited to the Trustor. If the property is sold under foreclosure or is otherwise acquired by the Beneficiary after default. any remaining balance of the accumulations under paragraph lb) above shall be credited to the pnncipal of the debt as of the date of commencement of foreclosure proceedings or as of the date the property is otherwise .t.oto.aid Ind ass uniulattuns under paragraph (a) above shall he landlady applied unless required to pay sums due to the Sects y and l'rhan Development. acting by and through the Federal housing Commissioner under the Contract of Mortgage Ire • I O. to keep said property in good condition and repair, nut to remove ur demolish any buildings thereon. tit sire promptly and in good and workmanlike manner any building which may be constructed, damaged, or destruyei ray when due all clams for labor performed end materials furnished therefor, to comply with all laws affecting said; ins any alteration. or improvements to he made thereon, nut to commit in permit waste thereof. nut to cninnmt, suf act upon said property in violation of law and/or covenants, conditions and/or restrictions affecting said property; n Ter any alteration of or addition to the buddinp or improvements hereafter constructed in or upon said property w (' ▪ of the Beneficiary; I I to appear in and defend any action or proceeding purporting to affect the security hereof or the sal Beneficiary or Trustee, and to pay ell costs and expenses, including cost of evidence of title and attorney's fee en, in any such action or proceeding in which Beneficiary ur trustee may appear; 12. Should Trustor fail to make any payment or do soy act as herein provided, then Beneficiary or Trustee, but without obligation so to do and without notice to or demand upon Truatur and without releasing Traitor from any obligation hereof, may nuke or do the same in such manner and to such extent as either may deem necessary to protect the security hereof, Beneficiary or • 'a' t I • L • • i Iruxtre being authorized to enter upon said property for such purposes; may commence, appear In and/or defend any action or •eding purporting to stied the security hereof or the rights or powers of Beneficiary or Truster; may pay. purchase, contest. or nniprouuse any encumbrance, charge, or lien which In the judgment of either appears to be prior or superior hereto; and, in exercising ,rip such powers, may pay necessary expenses, employ counsel. and pay his reasonable fees; 13. The Beneficiary %hall have the right to pay mortgage usurance premiums or tire and other property insurance premiums when due to the extent that monthly payments mule hereunder for the purpose of meeting %air ere Insufficient. All such payments made by the Beneficiary shall he added to the principal sum secured hereby; la to pay immediately and without deetund all sums sit expended by Beneficiary or Trustee, under permission given under this [seed of trust, with interest from date of expenditure al the rate specified In said note; I S. 'that the funds to be advanced hereunder are to he used in the eunstruction of certain mnptiivements on the lands herein des.nhrd in accordance with a certain building loan agreement made by and between the Trustor and the Beneficiary dated 1 a L 2iarclt . Iq 715 which said building loan agreement (except suclt part or parts thereof as iris) he inconsistent herewith) is' incorporated herein by reference to the same extent and effect as if fully set forth herein, and made a part of this Deed of Trust. and on the tailor of the Truster to keep and per ornt all the covenants, conditions, and agreements of said building loan agreement. thereupon, the principal sum and all arrears itf in terext, and other charges provided for herein shall at the option of the Be net iciary of this Deed of Trust become due and payable. anything contained herein to the contrary notwithstanding. This covenant shall he terminated upon the completion of the building or buildings to the satisfaction of the Beneficary and the nuking of the final advance as proudi d in said building 11.4111 agreement; lira the 'rust or further covenants that it will not voluntarily create, suffer, or permit to he created against the properly suh)ect t,• this Deed of trust any lien or liens inferior or superior to the Lien of this Deed of Trust and further that it will keep and maintain the vnt. tree from the cluing of all persons supplying labor or mu teriuts which will enter into the construction of any and all buildings now being erected or lit bw. erected on said premises; 1 7, that the improvements about to he made upon the premixes, covered by the Deed of Trust, and all plans and specifications comply with sill municipal ordinances and regulations and all of other regulations made or promulgated, now or hereafter, by lawful ant hunt), and that the same will upon completion comply with all such municipal urdilianees and regulations and with the rules of the apph. able fire rating or inspection orga nica eon, bureau, assuctatton or office; t b. That so long as this Deed of Trust and the said note secured hereby are insured under the provisions of the National homing Act. or held by the Secretary of Ile .rising and Urban Develop tine nt, it will not execute or file for record any instrument which imposes a restriction upon the sale or occupancy of the mortgaged property on the busts of race. color, or creed, I q. Truster herein agrees to pay to Beneficiary or to the euthorited loan servicing representative of the Beneficiary a charge not to exceed Si 5 for providing a statement regarding the obligation secured by this Deed of Trust as provided by Section 21)54, Article 2. Chapter 2, Talc 14. Part 4. Division 3, of the Civil ('ode of the State of ('ulifornis, It IS MUTUALLY AGREI'I) THAT. 20 That if the construction of the improvements herein referred to shall not he carried on with reasonable diligence, or shall he discontinued at any time tor any reason other than strikes or lockouts. the Beneficiary, after due notice to the Trustor or any subsequent owner, is hereby invested with full and complete authority to enter upon the said premises, employ watchmen to protect such improvements from depredation or injury and to preserve and protect the personal property therein, and to carom lie any and all outstanding contracts for the erection and completion of said building or buildings, to make and enter into any contracts and obligations wherever necessary, either in its own name ur In the name of the Trustor, and to pay and discharge all debts. obligations and liabilities incurred thereby. All such sums so advanced by the Beneficiary (exclusive of advances of the principal of the indebtedness secured hereby) shall be added to the principal of the indebtedness secured hereby arid shall be secured by this Deed of I rust and shall he due and payable on demand with interest at the rate specified in said note, but nu such advances shall be insured unless same are specifically approved by the Secretary of Housing and Urban Development, netting by and through the Federal )lousing (-umurisooner prior to the making thereof; 21 Should the property or any part thereof he taken or damaged by reason of any public unprovenent or condemnation po•.eeding, or damaged by fire, or earthquake, or in any other manner, the Beneficiary shell be entitled to all compensation, awards. and utter payments or relief therefor, and shall he entitled at its option to commence, appear in and prosecute in its own name, any action or proceedinp, or to make any compromise or settlement. In connection with such taking or danmage. All such compensation, awards. damages. rights of action and proceeds, including the proceeds of any policies of fire and other insurance affecting said property, are hereby assigned to the Beneficiary. After deducting therefrom all its expenses. Including attorney's feet, the balance of the proceeds shall be applied lit the amount due under the Note 'secured hereby in (I) amounts equal to the next mat unng installment or installment■ of principal and 121 with any balance to he credited to the next payment due under the Note. Nu amount applied to the reduction of the principal amount due in accordance with (I) shall be considered an optional prepayment as the Tenn is used in this Deed of Trust and the Note secured thereby, nor relieve the truster from making regular monthly payment's commencing on the first month following the date of receipt of the award; 22. Upon default by Trustor m [nuking any monthly payment provided for herein or In the note secured hereby, and if such default is not made goind pour to the due dale of the next much installment, or if Trustor shall fail to perform any covenant or agreement in this Deed of Trutt, the Beneficiary rimy declare all suns secured hereby immediately due and payable by delivery to I rumen: of written declaration of default and demand fur sale, and of wr'ttrn notice of default and of election to cause the properly to he sold, which notice Trustee. shall cause to be duly filed for record and the Beneficiary may !'unclose this teed of 'frusl Beneficiary shall suit deposit with'irustee this Deed, the role and all documents evidencing expenditures secured hereby; 23. Alter the lapse of such time as may then be required by law following the recordation of said notice of defaults, and notice of sale having been given as then required by law, 'Muster, without demand tin Trustor, shall sell said property at the time and place fixed by it in said notice of sale, either as a whole or in separate parcels. and in such order as it may determine at public auction to the highest bidder for cash in lawful money of the United States. payable at time sal sale. Trustee may postpone sale of all or any portion of said property by public announcement at the time and place of sale, and from time to time thereafter may postpone the sale by public announcement al the time fixed by the preceding postponement. Trustee shall deliver to the purchaser to Deed conveying the property so sold, but without any convenunt or warranty, express or implied. 'the recitals in the Deed of any matters or facts shall he conclusive proof of the truthfulness thereof, Any person, including truster, Trustee, or Benultclury. may purchase at the sale. the trustee shall apply the proceeds of sale to payment of I I) the expenses of audi sale, together with the reasonable expenses of this trust including therein reasonable Trustee's fees or attorney's fees fur conducting the sale, and the actual cost of publishing, recording. mailing and posting notice of the sale; 121 the cost of any search and/or other evidence of Mlle procured in eunneclion with such sale and revenue stamps on invitees' Deed; 13) all sum% expended under the terms hereof, nut then repaid, with accrued interest at the rate specified in said note; (4) all other sums then secured hereby, and 15) ihu remainder, If any, to the person or persons legally entitled thereto; 24, Beneficiary may from Itme to time substitute a successor ur successors to any 'trustee named herein or acting hereunder to execute this Trust, Upon such appointment, end without conveyance to the successor trustee, the latter shall be }} .with all title, powers, and duties conferred upon any Trustee herein named or acting hereunder. Each such appointment and made by written instrument executed by Beneficiary, containing reference to this Deed and its place of recur recorded in the proper office of the county ur counties In which the property is situated, shall he cunclu 0 Cr appointment of the successor trustee; I) 25 'I he pleading of any statute of Ilntitations a% a defense to any and all obligations secured by this bred rir the lull extent permissible by law; b Cif N ad of Cu onto, ��af the 2.b. Upon written request of Benefleiary stating that all autos secured hereby have been paid, and upon s trust and said note to Trustee for cancellation and retention and upon payment of its fees, Trustee shall reed the property then held hereunder. The melts). in such reconveyance of any matters or fact shell he truthfulness thereof, The grantee in such reconveyance may be described is. "the person or persons legally en 27, '-he trust created hereby Is irrevocable by Trustor; Ay 582 ]S. This Deed of Trust applies to, inures to the benefit of, and hinds all parties hereto. their heirs, legatees. devisees, administrators, executors, successors, and assigns. The term "Bend Uciary" shall include not only the original Beneficiary hereunder hot a No any future owner and holder including pledgees, of the note secured hereby. In this Deed, whenever the context so requires, the masculine gender includes the feminine and/or neuter, and the aingular number includes the plural. All obligations of each Truxlor hereunder are joint and several; .u. Trustee accepts this Trust when this Deed of Trust. duly executed and acknowledged, Is made public record as provided by law. I•xcept as otherwise provided by law the Trustee is not obligated to notify any party hereto of pending sale under this Deed of I rust or of any action of proceeding in which Truxlor, Beneficiary, or Trustee shall be a party unless brought by Trustee', 30. The Undersigned TRUSTOR RIQUI STS that a copy of any notice of default and of any notice of sale hereunder he mailed to hint at the mailing address opposite his name hereto. Failure to Insert such address shall he deemed a waiver of any request hereunder fur a copy of such notices. Surer old .�'innl,rr 1243 National Avenue .11,10l,t( Address for Nnllr rt N r I rt,rinr COY arta Srute Communityr evulopment Com- National City, CA 92050 miaeion of the City of National City IN WITAthSS -1(QIf. HL.OF the Truxlor has caused ill name to he hereunto s scrth its duly authorized officers and is et 'n'tu seal ufflged the day and year herein first above written. COIRnunit "^ '.Il ORINIHATY SF Al j By By COl• fission of the City of National City Chairman Srrrerarr. Si.A fif•OP'CALIIOR NIA, (OUNTY OF Si n On this / �•-r- .2) day of /%%d r a. fs . A.D. I'Oe, before no, �.'• / , a Notary Public in and fur said County and State. coat to • /i.- residing therein, duly cuiffinisxioned and sworn, personally appeared A-,/f /s +.ram+♦ •./ .Ir•s+/✓ ,I. /+*rr�.• known to me to he the sear.. t J r y of the corporation that executed the within instrument and acknowledged to me that much corporation executed the same. IN WITNESS w ell l e❑ 101AI.I : MAL SEAL DAVID L. SHELDON NOTARy eu.LIC CALIFORNIA PRINCIPAL OFFICE IN hAN Di100 COUNTY My Commission Wirt/ Aug. 22, 1* and affixed my official seal the day and year tr this Certificate first above My xunnnlmaton ex pima .''N,w+T 2 7 ,IY•Ere a O .•1 N Y, ,6 0 u 1 U L) • ^ d .U1 a u O a O 0 .r A •.1 co ba m br LL o .a • o s .5i 44 d 0.L O M Ir L 0 m O N T 4+ U G u •.1 •.I .r N Dx U N ai 4.6 U .a IV M CS .a 0 O 7 u d 41 • . • • 1 4... I.-u•I O O d 01 u :.2 U CALIFORNIA RECORDER'S INSTRUCTIONS California d to a Motor /5,hlle In and for Will County Crud Stale 9 tit 0 a o to •� IS 0 0 U California O ` O` a a c E 8 O A a r I County. California. • Li/ GROUND LEASE (Kimball Tower) By and Between COMMUNITY DEVELOPMENT COMMISSION -HOUSING AUTHORITY OF THE CITY OF NATIONAL CITY "Landlord" and KIMBALL TOWER HOUSING ASSOCIATES, L.P. "Tenant" Dated as of March 25, 2019 Page 1 GROUND LEASE THIS GROUND LEASE (the "Lease"), dated, for identification purposes only, as of the 25th day of March, 2019, is entered into by and between the COMMUNITY DEVELOPMENT COMMISSION -HOUSING AUTHORITY OF THE CITY OF NATIONAL CITY, a public body, corporate and politic ("Landlord" or "Commission"), and KIMBALL TOWER HOUSING ASSOCIATES, L.P., a California limited partnership ("Tenant" or "Developer"). RECITALS A. WHEREAS, Commission is a California community development commission acting to implement the California Housing Authorities Law, Part 2 of Division 24 of the Health and Safety Code; B. WHEREAS, Developer is controlled by an experienced owner, developer and manager of affordable housing for very -low and low-income families; C. WHEREAS, Commission is the owner of certain real property situated in the City of National City, County of San Diego, State of California, and legally described in Exhibit "A" (the "Property"); D. WHEREAS, Commission desires to grant and convey an easement for ingress, egress and parking, over that portion of the adjacent property ("Lot 6") owned by the Commission and legally described in Exhibit "E" (the `Basement Area") and to reserve from the lease of the Property a nonexclusive easement for vehicular and pedestrian ingress and egress over that portion of the Property depicted on Exhibit "F"; E. WHEREAS, the Commission, Developer and Morgan Tower Housing Associates, L.P., a California limited partnership entered into that certain "Disposition and Development Agreement" dated as of June 18, 2018 (the "DDA"); F. WHEREAS, the DDA provided that upon the satisfaction of certain conditions, Commission would ground lease the Property to Developer; and G. WHEREAS, all conditions precedent to the parties entering into this Lease have been satisfied or waived. NOW, THEREFORE, for and in consideration of the mutual promises, covenants, and conditions herein contained, Commission and Developer agree as follows: ARTICLE 1. LEASE OF THE PROPERTY 1.1 Lease of the Property. Landlord leases to Tenant, and Tenant hires from Landlord, the Property on the terms and conditions as set forth in this Lease, reserving therefrom a nonexclusive, appurtenant easement for vehicular and pedestrian ingress and egress for Landlord Page 2 and guests, invitees, employees, and contractors of Lot 6 over that portion of the Property depicted on Exhibit "F" attached hereto. 1.2 Purpose of Lease. The purpose of this Lease is to provide for the rehabilitation, maintenance, management and operation of a 151-unit (which includes two managers' units), multi -family, low-income rental housing project. Tenant will not occupy or use the Property, or permit the Property to be used or occupied, nor do or permit anything to be done in or on the Property, in whole or in part, for any other purpose. The foregoing notwithstanding, after the foreclosure of a Mortgage, or acceptance by a Mortgagee of an assignment or deed in lieu of foreclosure, the Property may be used for any lawful purpose. 1.3 Recorded Encumbrances. This Lease, the interests of Landlord and Tenant hereunder, and the Property, are in all respects subject to and bound by all of the covenants, conditions, restrictions, reservations, rights, rights -of -way and easements of record including, without limitation: those items shown as exceptions to title in that certain Preliminary Report dated as of July 26, 2018, issued by Stewart Title Company with respect to the Property. 1.4 Memorandum of Lease. A short form Memorandum of Lease referring to this Lease is being executed by Landlord and Tenant concurrently herewith, and recorded in the Official Records of the County of San Diego, California (the "Official Records"). 1.5 Assignment of Utility Rights. Landlord, by virtue of its fee title to the Property, may hold certain rights, entitlements or credits with respect to utility capacity, connections, etc. (the "Utility Rights"). Landlord hereby assigns said Utility Rights to Tenant as an incidence of its leasehold interest in the Property. 1.6 Grant of Easement. Landlord hereby grants and conveys to Tenant an easement for access and parking (the "Easement") over the Easement Area, which easement shall be (i) for vehicular and pedestrian use only, as applicable; (ii) exclusive, (iii) appurtenant and perpetual and irrevocable by the Landlord; and (iv) for the benefit of Tenant and its tenants, employees, contractors, guests and invitees ("Permitted Users"). The Easement Area is depicted on Exhibit "F" attached hereto. Tenant shall be responsible for the cost and performance of any maintenance, replacement and/or repair of the Easement Area so as to keep such areas in good condition and repair and in compliance with all applicable governmental requirements and the terms of this Lease. In addition, Tenant shall maintain insurance covering the Easement Area in the amounts and subject to the requirements set forth in this Lease. Landlord and Tenant agree that, if either Landlord or Tenant so desires, Landlord and Tenant shall cooperate in good faith in effectuating a lot line adjustment whereby the northern boundary of the Property will be moved to encompass the Easement Area, subject to the requirements and consent of any lender and the limited partner of Tenant. ARTICLE 2. DEFINITIONS All capitalized terms used herein may be defined where first used in this Lease and/or as set forth in this Article 2. Unless otherwise defined herein, all capitalized terms shall have the same meanings ascribed to them in the DDA. For the purpose of supplying such definitions, the Page 3 DDA, notwithstanding anything contained therein or herein to the contrary, shall not merge with this Lease. "Award" means any compensation or payment made or paid for the Total, Partial or Temporary Taking of all or any part of or interest in the Property and/or the Improvements, whether pursuant to judgment, agreement or otherwise. "Capital Improvements" means all work and improvements with respect to the Property for which costs and expenses may be capitalized in accordance with GAAP. "Commencement Date" has the meaning set forth in Article 3 of this Lease. "Compliance Period" has the meaning set forth in Section 42(i)(1) of the Internal Revenue Code of 1986, as amended. "Construction Loan" refers to the loan to the Tenant from the Senior Lender, the proceeds of which are used to rehabilitate the Project. "Conversion Date" means the date upon which the Construction Loan converts to an amortizing term loan in accordance with the terms of the Senior Loan Documents and Senior Loan Security Documents. "Easement" has the meaning set forth in Section 1.6. "Easement Area" has the meaning set forth in Recital "D". "Environmental Law" means any federal, state or local environmental, health and/or safety -related law, rule, regulation, requirement, order, ordinance, directive, guideline, permit or permit condition, currently existing and as amended, enacted, issued or adopted in the future. The term Environmental Law includes, but is not limited to, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, and similar state or local laws. "Event of Default" has the meaning set forth in Article 21. "Executive Director" means the Executive Director of Landlord or his/her designee. "Hazardous Materials" means any chemical, substance, object, condition, material, waste, or controlled substance which is or may be hazardous to human health or safety or to the environment, due to its radioactivity, ignitability, corrosiveness, explosivity, flammability, reactivity, toxicity, infectiousness, or other harmful or potentially harmful properties or effects, including, without limitation, all chemicals, substances, materials, or wastes that are now or hereafter may be listed, defined, or regulated in any manner by any federal, state, or local government agency or entity, or under any federal, state, or local law, regulation, ordinance, rule, policy or procedure due to such properties or effects. Page 4 "Impositions" means all taxes (including, without limitation, sales and use taxes); assessments (including, without limitation, all assessments for public improvements or benefits whether or not commenced or completed prior to the Commencement Date and whether or not to be completed within the Term); water, sewer or other rents, rates and charges; excises; levies; license fees; permit fees; inspection fees and other authorization fees and other charges; in each case whether general or special, ordinary or extraordinary, foreseen or unforeseen, of every character (including all interests and penalties thereon), which are attributable or applicable to any portion of the Term and may be assessed, levied, confirmed or imposed on or in respect of, or be a lien upon (a) the Property or the Improvements, or any part thereof, or any estate, right or interest therein, (b) any occupancy, use or possession of or activity conducted on the Property or the Improvements, or any part thereof, or (c) this Lease. The term "Impositions" shall also include any and all increases in the foregoing, whether foreseen or unforeseen, ordinary or extraordinary, including, without limitation, any increase in real property taxes resulting from a sale of the Property by Landlord. "Improvements" means all buildings, structures and other improvements, including the building fixtures thereon, now located on the Property or hereafter constructed on the Property; all landscaping, fencing, walls, paving, curbing, drainage facilities, lighting, parking areas, roadways and similar site improvements now located or hereafter placed upon the Property. "Indemnitees" means Landlord, the City of National City, California ("City") and their employees, agents, members and officials. "Index" means the Consumer Price Index -Urban Wage Earners and Clerical Workers (San Diego, All Items, Base 1982-84 = 100) as published by the United States Department of Labor, Bureau of Labor Statistics. Should the Bureau discontinue the publication of the Index, or publish the same less frequently or on a different schedule, or alter the same in some other manner including, without limitation, changing the name of the Index or the geographic area covered by the Index, Landlord and Tenant shall adopt a substitute index or procedure which reasonably reflects and monitors consumer prices. "Insurance Requirements" means all terms of any insurance policy covering or applicable to the Property or the Improvements, or any part thereof, all requirements imposed by the issuer of any such policy, and all orders, rules, regulations and other requirements of the National Board of Fire Underwriters (or any other body exercising similar functions) applicable to or affecting the Property or the Improvements, or any part thereof, or any use or condition of the Property or the Improvements, or any part thereof. "Lease Year" means the year commencing on the first day of the first full calendar month following the Commencement Date, or anniversary thereof, and ending at midnight on the last day of the month in which an anniversary of the Commencement Date occurs. "Legal Requirements" means all laws, statutes, codes, acts, ordinances, orders, judgments, decrees, injunctions, rules, regulations, permits, licenses, authorizations, directions and requirements of and agreements with all governments, departments, commissions, boards, courts, authorities, agents, officials and officers, foreseen or unforeseen, ordinary or extraordinary, which Page 5 now or at any time hereafter may be applicable to the Property or the Improvements, or any part thereof, or to any of the adjoining sidewalks, streets or ways, or to any use or condition of the Property or the Improvements, or any part thereof. "Memorandum of Lease" refers to the memorandum of lease which has been recorded as described in Section 1.4. "Mortgage" has the meaning set forth in Section 18.1.1 of this Lease. "Mortgagee" has the meaning set forth in Section 18.1.1 of this Lease. "Notice of Intended Taking" means any notice or notification on which a reasonably prudent person would rely and which said person would interpret as expressing an existing intention of Taking as distinguished from a mere preliminary inquiry or proposal. It includes, without limitation, the service of a condemnation summons and complaint on a party to this Lease. The notice is considered to have been received when a party to this Lease receives from the condemning agency or entity a notice of intent to take, in writing, containing a description or map of the taking which reasonably defines the extent of the taking. "Official Records" means the Official Records of San Diego County, California. "Partial Taking" means any taking of the fee title of the Property and/or the Improvements that is not either a Total, Substantial or Temporary Taking. "Plans" means the plans and specifications for the Rehabilitation, a set of which, initialed by Tenant, are on file in the offices of Landlord. "Potential Default" means any condition or event which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. "Project" refers to the Property and the Improvements constructed and maintained thereon. "Property" has the meaning set forth in Recital "C," above. "Rehabilitation" means rehabilitation of the Improvement and the Property pursuant to the Plans. "Senior Lender" means MUFG Union Bank, N.A., a national banking association and its successors and assigns. "Substantial Taking" means the taking of so much of the Property and/or the Improvements that the portion of the Property and/or the Improvements not taken cannot be repaired or reconstructed, taking into consideration the amount of the Award available for repair or reconstruction, so as to constitute a complete, rentable structure, capable of producing a proportionately fair and reasonable net annual income after payment of all operating expenses, and Page 6 all other charges payable under this Lease, and after performance of all covenants and conditions required by Tenant by law and under this Lease. "Taking" means a taking or damaging, including severance damage, by eminent domain or by inverse condemnation or for any public or quasi -public use under any statute. The taking may occur as a result of a transfer pursuant to the recording of a final order in condemnation, a voluntary transfer or conveyance to the taking authority under threat of condemnation, or a transfer while condemnation proceedings are pending. Unless otherwise provided, the taking shall be deemed to occur as of the earlier of (a) the date actual physical possession is taken by the condemnor, or (b) the date on which the right to compensation and damages accrues under the law applicable to the Property and/or the Improvements. A taking as used in this Lease does not include the voluntary dedication of any portion of the Property necessary to obtain building permits or to comply with any other applicable governmental rule, regulation or statute; nor does it include the enactment of any law, ordinance or regulation which may affect the use or value of the Property but which does not involve an actual taking of any portion thereof. Eminent domain actions filed by Landlord against owners of portions of the Property and pending as of the Commencement Date shall not be deemed, construed or interpreted as a Taking under this Lease. "Tax Credit Partner" means U.S. Bancorp Community Development Corporation, a Minnesota corporation,and its successors and assigns. "Temporary Taking" means a taking of all or any part of the Property and/or the Improvements for a term certain which term is specified at the time of taking. Temporary Taking does not include a taking which is to last for an indefinite period or a taking which will terminate only upon the happening of a specified event unless it can be determined at the time of the taking substantially when such event will occur. If a taking for an indefinite term should take place, it shall be treated as a Total, Substantial or Partial Taking in accordance with the definitions set forth herein. "Term" has the meaning set forth in Article 3 of this Lease. "Total Taking" means the taking of the fee title to all of the Property. "Unit" means a dwelling unit on the Property. ARTICLE 3. TERM The term of this Lease (the "Term") shall commence on the date the Memorandum of Lease records in the Official Records (the "Commencement Date"), and shall continue thereafter until the ninety-ninth (90) anniversary of the date on which a Notice of Completion records in the Official Records for the Rehabilitation. ARTICLE 4. RENTAL 4.1 advance. Rent. The rent shall be the nominal sum of One Dollar ($1.00) per year payable in Page 7 4.2 Right to Audit. Tenant shall keep full and accurate books of account, records and other pertinent data with respect to operations of the Project. Such books of account, records, and other pertinent data shall be kept for a period of three (3) years after the end of each Lease Year. Landlord shall be entitled within two (2) years after the end of each Lease Year to inspect and examine all Tenant's books of account, records, and other pertinent data. Tenant shall cooperate fully with Landlord in making the inspection. Landlord shall also be entitled, at the Landlord's sole cost and expense, also within two (2) years after the end of each Lease Year, to an independent audit of Tenant's books of account, records, and other pertinent data. 4.3 Utilities. Tenant shall be responsible for the payment of all water, gas, electricity and other utilities used by Tenant on the Property. 4.4 Taxes and Assessments. 4.4.1 Notice of Possessory Interest; Payment of Taxes and Assessments on Value of Entire Property. In accordance with California Revenue and Taxation Code Section 107.6(a), Landlord states that by entering into this Lease, a possessory interest subject to property taxes may be created. Tenant or other party in whom the possessory interest is vested may be subject to the payment of property taxes levied on such interest. 4.4.2 Payment of Taxes. Subject to any applicable exemptions, Tenant shall pay the real property and/or possessory interest taxes applicable to the Property during the term of this Lease. All such payments shall be made prior to the delinquency date of such payment. Tenant shall promptly furnish Landlord with satisfactory evidence that such taxes have been paid or that an exemption from such taxes has been obtained. If any such taxes paid by Tenant shall cover any period of time prior to or after the expiration of the Term, Tenant's share of such taxes shall be equitably prorated to cover only the period of time within the tax fiscal year during which this Lease shall be in effect, and Landlord shall reimburse Tenant to the extent required. If Tenant shall fail to pay any such taxes, Landlord shall have the right to pay the same, in which case Tenant shall repay such amount to Landlord within ten (10) days after demand from Landlord together with interest at the rate set forth in Section 4.5. 4.4.3 Definition. As used herein, the term "real property tax" shall include any form of real estate tax or assessment (including, without limitation, on possessory interests), general, special, ordinary or extraordinary, and any license fee, commercial rental tax, improvement bond or bonds, levy or tax (other than inheritance, personal income, or estate taxes) imposed on the Property or any interest (including, without limitation, possessory interests) therein by any authority having the direct or indirect power to tax, including any city, state or federal government, or any school, agricultural, sanitary, fire, street, drainage or other improvement district thereof, as against any legal or equitable interest of Landlord or Tenant in the Property or in the real property of which the Property are a part, as against Landlord's right to rent or other income therefrom, and as against Landlord's business of leasing the Property. The term "real property tax" shall also include any tax, fee, levy, assessment or charge (i) in substitution of, partially or totally, any tax, fee, levy, assessment or charge hereinabove included within the definition of "real property tax," or (ii) the nature of which was hereinbefore included within the Page 8 definition of "real property tax," or (iii) which is imposed as a result of a transfer, either partial or total, of Landlord's interest in the Property or which is added to a tax or charge hereinbefore included within the definition of real property tax by reason of such transfer, or (v) which is imposed by reason of this lease transaction, any modifications or changes hereto, or any transfers hereof. 4.4.4 Personal Property. Tenant shall pay prior to delinquency all taxes assessed against and levied upon trade fixtures, furnishings, equipment and all other personal property of Tenant contained in the Property or elsewhere. When possible, Tenant shall cause said trade fixtures, furnishings, equipment and all other personal property to be assessed and billed separately from the real property of Landlord. 4.4.6 Apportionment. If any of Tenant's said personal property shall be assessed with Landlord's real property, Tenant shall pay Landlord the taxes attributable to Tenant not later than the later of (a) ten (10) days after receipt of a written statement setting forth the taxes applicable to Tenant's property or (b) fifteen (15) days prior to the date said taxes are due and payable. 4.5 Overdue Interest. Any amount due to Landlord, if not paid when due and before expiration of the applicable grace period, if any, shall bear interest from the date due until paid at the lower of: (a) the reference or prime rate of Bank of America, N.T. & S.A., in effect from time to time plus three percent (3%); or (b) the highest rate of interest allowed under applicable usury law. ARTICLE 5. POSSESSION OF PROPERTY 5.1 Acceptance of Premises. Tenant hereby accepts the Property. 5.2 Ownership of Improvements. During the term of this Lease title to all Improvements, now existing or later made, on the Property are and shall be vested in Tenant. Tenant shall not, however, remove or demolish any Improvements from the Property except as permitted herein. Concurrently with recordation of the Memorandum of Lease, Landlord shall execute a grant deed conveying ownership of the Improvements to the Tenant. Upon termination of this Lease, ownership to the Improvements shall automatically revert back to the Landlord. At all times during the Term, Tenant alone shall be entitled to all of the tax attributes of ownership of the Improvements, including, without limitation, the right to claim depreciation and the right to claim the low-income housing tax credit described in Section 42 of the Internal Revenue Code, as well as all other benefits for income tax purposes. 5.3 Surrender of Property. 5.3.1 Upon Expiration. Tenant agrees that on expiration or termination of the Term, the Improvements on the Property shall become the property of Landlord, free from any liens or claims whatsoever, without any further compensation therefor from Landlord to Tenant or any other person. Page 9 5.3.2 Condition. On expiration or termination of the Term, Tenant shall peaceably and quietly leave and surrender the Property and the Improvements to Landlord in good order, condition and repair, reasonable wear and tear and obsolescence excepted. Tenant shall leave in place and in good order, condition and repair, all fixtures and machinery; except (if Tenant is not then in default under this Lease) Tenant shall have the right to remove only Tenant -owned appliances, other unattached equipment, furniture and merchandise that Tenant shall have installed, which removal must be done without damage to the Property or Improvements. Landlord shall have the right to have the Property and the Improvements inspected at Tenant's cost to determine whether the Property and the Improvements have been properly maintained, repaired and restored in accordance with the terms of this Lease. That notwithstanding, Tenant shall not be responsible for the interior condition of individual occupied apartments on the termination or expiration of this Lease. 5.3.3 Delivery of Documents. Contemporaneous with the expiration or termination of the Term, Tenant shall immediately deliver to Landlord the following: (a) Such documents, instruments and conveyances as Landlord may reasonably request to enable Landlord's ownership of the Property and the Improvements to be reflected of record, including, without limitation, a quitclaim deed in recordable form to the Property and the Improvements. (b) If requested by Landlord, title insurance, surety bond, or other security reasonably acceptable to Landlord insuring against all claims and liens against the Property and the Improvements other than those incurred by Landlord or accepted by Landlord in writing. (c) All rehabilitation and construction plans, surveys, permits and other documents relating to the Improvements as may be in the possession of Tenant at the time and from time to time thereafter. (d) All documents and instruments required to be delivered by Tenant to Landlord pursuant to this Section shall be in form reasonably satisfactory to Landlord. 5.4 Abandonment. Tenant shall not abandon or vacate the Property or the Improvements at any time during the Term. If Tenant shall abandon, vacate or otherwise surrender the Property or the Improvements, or be dispossessed (other than dispossession as the result of a Substantial Taking or a Taking) thereof by process of law or otherwise, the same shall constitute a default under this Lease on the part of Tenant and, in addition to any other remedy available on the part of Landlord, any of Tenant's property left in, upon or about the Property or the Improvements (except for underground storage tanks) shall, at Landlord's option, be deemed to be abandoned and shall become the property of Landlord. The appointment of a receiver pursuant to a Mortgagee's exercise of its rights under a Mortgage, or the foreclosure of a Mortgage, shall not be a default under this Section. ARTICLE 6. REPRESENTATIONS AND WARRANTIES Page 10 6.1 Landlord's Representations. Landlord represents and warrants to Tenant that it owns the Property in fee simple and has the power and authority to enter into this Lease and perform all obligations and agreements incidental or pertinent to the Lease. Landlord makes no representation or warranty with respect to the condition of the Property or its fitness or availability for any particular use, and Landlord shall not be liable for any latent or patent defect therein. 6.2 Tenant's Representations. Tenant represents and warrants to Landlord that it has examined the Property and acknowledges that it hereby accepts possession of the Property in its "AS IS" condition, with all faults and defects, including, without limitation, infestation of or damage to the Property caused by wood -destroying pests or organisms. ARTICLE 7. DEVELOPMENT OF THE PROPERTY 7.1 Rehabilitation. Within thirty (30) days after the Construction Loan Closing, or such longer period as the Executive Director may approve, Tenant shall commence the Rehabilitation. All Improvements, together with any off -site improvements, shall be rehabilitated in a good and workmanlike manner using materials of good quality and in substantial compliance with the Plans as modified pursuant to this Article 7, and shall comply with all applicable governmental permits, laws, ordinances and regulations. Any of the Plans, including, without limitation, landscaping plans, not approved by the Executive Director as of the Construction Loan Closing shall be subject to the prior approval of the Executive Director. 7.2 Rehabilitation Cost. Tenant shall bear the cost of the Rehabilitation, including all fees and mitigation measures. 7.3 Changes; Landlord Consent. Except as otherwise provided in this Lease, Tenant shall not make any changes in the Plans without the Executive Director's prior written consent if such change (a) constitutes a material change in the building material or in the architectural design, value or quality of any of the Improvements, or (b) would result in an increase in rehabilitation costs in excess of Seventy -Five Thousand Dollars ($75,000.00) for any single change or in excess of Three Hundred Thousand Dollars ($300,000.00) for all such changes. Without limiting the above, Landlord agrees that Tenant may make minor changes which do not change the Projects aesthetics without the Executive Director's prior written consent, provided that such changes do not violate any of the conditions specified herein. 7.3.1 Submission Requirement; Consent Process. Tenant shall submit any proposed material changes in the Plans to the Executive Director at least ten (10) days prior to the commencement of the Rehabilitation relating to such proposed material change. Requests for any material change which 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 Executive Director, signed by Tenant and, if required by the Executive Director, also by the Project architect. If a proposed change is approved, then Tenant shall be notified in writing within ten (10) days after submission. If the Executive Director fails to disapprove a proposed change within said ten (10)- day period, and state the reason(s) for such disapproval with reasonable particularity, then the proposed change shall be deemed approved. Page 11 7.4 Landlord's Review. Landlord does not have, and by this Lease expressly disclaims, the right to or duty for any review of the Plans for the purpose of determining compliance with building codes, safety features or standards or for the purpose of determining or approving engineering or structural design, sufficiency or integrity. Landlord's approval of a direction or request to change the plans, specifications or drawings submitted by Tenant is not and shall not be a review or approval of the quality, adequacy or suitability of such plans, specifications or drawings, nor of the labor, materials, services or equipment to be furnished or supplied in connection therewith. Landlord does not have and expressly disclaims any right of supervision or control over the architects, designers, engineers or other draft persons and professionals responsible for the drafting and formulation of the Plans, or any right of supervision or control of contractors, builders, trades and other persons engaged in constructing and fabricating the improvements pursuant to the Plans. Landlord further acknowledges that it shall not have any right to disapprove any plan, specification or drawing which logically evolves from any previously approved plan, specification or drawing or to request or require a change in any previously approved item. 7.5 Soil Conditions. Landlord makes no covenants or warranties respecting the condition of the soil or subsoil or any other condition of the Property, provided, however, that the foregoing shall not constitute a release of Landlord under any statute or common law theory. 7.6 Diligent Prosecution to Completion. Once the work is begun, Tenant shall, with reasonable diligence, prosecute the Rehabilitation to completion. The Rehabilitation shall be com- pleted and ready for use not later than seven hundred twenty days (720) days after the Construction Loan Closing (subject to the right to notice and cure set forth in Section 21.1.4); provided, however, that the time for completion shall be extended for as long as Tenant shall be prevented from completing the Rehabilitation by delays beyond Tenant's control. Additionally, upon the written request of Tenant, the Executive Director may, at his sole and absolute discretion, grant one or more extensions of the date by which the Rehabilitation must be completed of, in the aggregate, not more than ninety (90) days. All work shall be performed in a good and workmanlike manner, shall substantially comply with the Plans, and shall comply with all applicable governmental permits, laws, ordinances, and regulations. 7.7 Right of Access. During normal construction hours, representatives of Landlord shall have the reasonable right of access to the Property without charges or fees for the purpose of inspecting the work of the Rehabilitation; provided, however, that such representatives shall present and identify themselves at Tenant's construction office, be accompanied by a representative of Tenant while on the Property and obey Tenant's, or its contractor's, safety rules and regulations. In addition, Landlord shall have the right to authorize the City and other public agencies to enter the Property, upon the same terms after reasonable prior written notice to Tenant, for the purpose of constructing, reconstructing, maintaining or repairing any public improvements or public facilities located on the Property. Landlord shall deliver written notice of the identity of its representatives to Tenant before such representatives enter the Property. Landlord hereby indemnifies and holds Tenant, and its contractors, subcontractors, agents, representatives and employees, and the Property, harmless from and against any loss, cost, damage or liability, including, without limitation, attorneys' fees, which results from the exercise by Landlord, or any party acting under Landlord's authority, of the rights granted by this Section. Page 12 7.8 Governmental Approvals. If requested by Landlord in writing, Tenant covenants and agrees to deliver to Landlord conformed copies (and certified copies of all recorded instruments) of all governmental approvals and permits obtained by Tenant for the Rehabilitation in accordance with the Plans. In no event shall Tenant commence Rehabilitation of any Improvements pursuant to the provisions of this Article 7 until such time as Tenant shall have obtained all necessary governmental approvals and permits to so construct such Improvements. 7.9 Landlord's Right to Discharge Lien. If Tenant does not cause to be recorded the bond described in California Civil Code Section 3143 or otherwise protect the Property under any alternative or successor statute, and a final judgment has been entered against Tenant by a court of competent jurisdiction for the foreclosure of a mechanic's, materialman's, contractor's, or subcontractor's lien claim, and if Tenant fails to stay the execution of the judgment by lawful means or to pay the judgment, Landlord shall have the right, but not the duty, subject to the notice and cure rights of Mortgagees and the Tax Credit Partner set forth elsewhere in this Lease, to pay or otherwise discharge, stay, or prevent the execution of any such judgment or lien or both. Tenant shall reimburse Landlord for all sums paid by Landlord under this Section, together with all Landlord's reasonable attorneys' fees and costs, plus interest on those sums, fees, and costs from the date of payment until the date of reimbursement at the rate set forth in Section 4.5. 7.10 Force Maieure. All obligations of Tenant to promptly commence and thereafter diligently prosecute to completion the Rehabilitation shall be extended by such number of days as Tenant shall be delayed by reason of events of force majeure pursuant to Article 24. 7.11 Notice of Non -Responsibility. After the recordation of the Certificate of Completion for the Improvements in the Official Records, Tenant shall provide Landlord with prior written notice of not less than fifteen (15) days before commencing construction of any structural alteration of the Improvements, or any non-structural alteration which will cost more than Twenty -Five Thousand Dollars ($25,000.00), and shall permit Landlord to record and post appropriate notices of non -responsibility on the Property. The foregoing Twenty -Five Thousand Dollar ($25,000.00) limitation shall be increased each calendar year by the corresponding percentage increase in the Index. 7.12 Notice of Completion. On completion of Rehabilitation of the Improvements, Tenant shall file or cause to be filed a notice of completion. Tenant hereby appoints Landlord as Tenant's attorney -in -fact to file the notice of completion on Tenant's failure to do so after the Rehabilitation work has been substantially completed. 7.13 Subsequent Alterations. Following the Rehabilitation in substantial accordance with the Plans, Tenant may from time to time, at its sole expense, make improvements and other alterations to the Property which Tenant reasonably determines to be beneficial. Tenant shall not make any alteration or improvement to the Property the cost of which exceeds Fifty Thousand Dollars ($50,000.00) without Landlord's prior written consent, which consent shall not be unreasonably withheld or delayed. The foregoing dollar amount limitations shall be increased each calendar year by the corresponding increase in the Index. Tenant shall timely pay any obligation incurred by Tenant with respect to any such alterations or improvements that could Page 13 become a lien against the Property and shall defend, indemnify and hold Landlord harmless in connection therewith. ARTICLE 8. USE OF THE PROPERTY, HAZARDOUS MATERIALS, AND NON- DISCRIMINATION 8.1 Definitions Applicable to this Article. All capitalized terms used in this Article 8 and not elsewhere defined shall have the following meanings: "Adjusted Income" means the adjusted income of a person (together with the adjusted income of all persons of the age of eighteen (18) years or older who intend to reside with such person in one residential unit) as calculated in the manner prescribed under Section 142(d)(2)(B) of the Code. "Affordable Rent for 50% of Median Income Tenants" means monthly rent (including the Utility Allowance, and excluding any supplemental rental assistance from the State of California, the federal government or any other public agency) not in excess of thirty percent (30%) of one -twelfth (1/12th) of fifty percent (50%) of the Median Income for the Area adjusted for family size appropriate for the Unit, pursuant to California Health & Safety Code Section 33413, 50052.5 and 50053. "Certificate of Continuing Program Compliance" shall mean the Certificate to be filed annually (or quarterly at the written request of the Executive Director) by Tenant with the Executive Director which shall be substantially in the form attached to this Lease as Exhibit "C". "Code" means the Internal Revenue Code of 1986, as amended, including the Regulations promulgated thereunder or under any predecessor statute. "50% of Median Income Tenants" means persons or families with Adjusted Income that does not exceed fifty percent (50%) of the Median Income for the Area, adjusted for household size. "Median Income for the Area" means the median income for the area as determined and published annually by the Secretary of Housing and Urban Development under Section 8 of the United States Housing Act of 1937, as amended, or if programs under Section 8 are terminated, median income for the Area determined under the method used by the Secretary of Housing and Urban Development prior to such termination. "Utility Allowance" means a monthly allowance for Utility Services based on a utility allowance schedule published annually by Landlord. "Utility Services" means all utility services included on the utility allowance schedule published annually by Landlord. 8.2 Affordable Housing. As hereinafter more particularly provided, Tenant shall use the Property and the Improvements as multi -family rental housing with certain ancillary purposes. Page 14 One hundred forty-nine (149) of the Units shall be leased to 50% of Median Income Tenants at Affordable Rent for 50% of Median Income Tenants. Except for such reasonable periods during which a Unit is, or Units are, being maintained, repaired or rehabilitated, Tenant shall actively market any vacant unit or units and lease it or them as soon as reasonably possible so as to satisfy the subleasing requirements immediately above. Provided, however, the Landlord acknowledges that there are currently several Units which are currently occupied by tenants whose incomes exceed 50% of Median Income (the "Existing Over -Income Units"), and the Landlord agrees that the Existing Over -Income Units will continue to be treated as eligible, so long as upon the vacancy of any Existing Over -Income Unit, such Unit must then be rented to and occupied by a qualifying household. In the selection of subtenants for occupancy of the Units, Tenant shall give priority to eligible persons and families displaced by Landlord or by the National City Redevelopment Agency. Any such priority shall be subject to the rules and regulations of the Tax Credit Program and to each such subtenant meeting screening criteria (pursuant to the management plan delivered by Tenant to Landlord) approved by the Executive Director, which approval shall not be unreasonably withheld. 8.3 Increase in Person's or Family's Income. For purposes of satisfying the obligation to rent the dwelling units as set forth in Section 8.2 above, a person or family who at the commencement of his, hers or its occupancy qualified as a 50% of Median Income Tenant shall continue to be treated as such Tenant irrespective of any later increase in his, her or their income. A Unit occupied by a 50% of Median Income Tenant shall be deemed, upon the termination of such person's or family's occupancy, to be continuously occupied by such 50% of Median Income Tenant until reoccupied, provided that Owner actively, diligently and continuously markets such Unit for occupancy by a Tenant of the same income classification. 8.4 Section 8 Certificate Holders. Tenant shall accept as Low -Income Tenants, on the same basis as all other prospective Low -Income Tenants, persons and families that are recipients of federal certificates for rent subsidies pursuant to the existing program under Section 8 of the United States Housing Act of 1937, as amended, or its successor, and shall not apply selection criteria to Section 8 certificate holders that are more burdensome than the criteria applied to all other prospective Low -Income Tenants. Tenant agrees to modify the subleases for the Units, as necessary, to allow the rental of Units to Section 8 certificate holders. 8.5 Rent Increases. Tenant may adjust the Affordable Rents in accordance with periodic revisions to the Median Income for the area by the U.S. Secretary of Housing and Urban Development; provided, however, that the Affordable Rent for any Unit may not be increased more often than one time per 12-month period, and only after at least thirty (30) days prior written notice to the affected Low -Income Tenant. 8.6 Initial Income Certification. Immediately prior to the initial occupancy of each new subtenant, and at least annually thereafter, Tenant shall obtain, in substantially the form set forth on Exhibit "B", current income certification statements for each subtenant. Tenant shall make a good faith effort to verify each income certification statement provided by an applicant for subtenancy or a subtenant by taking one or more of the following steps as part of the verification process: (a) obtain a pay stub for the most recent pay period, (b) obtain an income tax return for the most recent tax year, (c) conduct a credit check, criminal background check or similar search, Page 15 (d) obtain an income verification form from the applicant's or subtenant's current employer, (e) obtain an income verification form from the Social Security Administration and/or the California Department of Social Services if the applicant receives assistance from either of such agencies, or (f) if the applicant is unemployed and has no such tax return, obtain another form of independent verification. Tenant shall maintain each such income certification statement on file for not less than three (3) years. 8.7 Annual Recertification. Not less than annually, Tenant shall obtain and maintain a file, again in substantially the form set forth in Exhibit "B", of current income recertification statements for each subtenant. Tenant shall make a good faith effort to verify each income recertification statement in the manner described in Section 8.6. Tenant shall also maintain each such income recertification statement on file for not less than three (3) years. 8.8 Form of Sublease. The form of sublease or subrental agreement used by Tenant shall clearly notify subtenants that Tenant has relied on the income certification supplied by the subtenant, and will rely on the annual income recertification to be supplied by the subtenant, in determining qualification for occupancy at Affordable Rent, and that any material misstatement in such certification or recertification will be cause for immediate termination of such sublease or subrental agreement. 8.9 Low -Income Housing Tax Credit Program. Notwithstanding anything contained in this Lease to the contrary, if and when the Property is subject to the requirements of the Federal Low -Income Housing Tax Credit Program under the provisions of Section 42 of the Code (the "Tax Credit Program"), and there is a conflict between the requirements of the Tax Credit Program and the affordability provisions set forth in Sections 8.1 or 8.3 through 8.8 above, inclusive, the Tax Credit Program provisions shall prevail. 8.10 Access and Reporting. Tenant shall permit the representatives of Landlord at any time or from time to time, upon one business day's notice, to inspect, audit and copy all of its properties, books, records and accounts. Tenant shall maintain a system of accounting established and administered in accordance with sound business practices to permit preparation of financial statements which shall be in conformity with GAAP basis of accounting. Tenant shall furnish or cause to be furnished to Landlord the following: (a) Notice of Default. As soon as possible, and in any event not later than five (5) days after the occurrence of any Event of Default, a statement of an officer of Tenant describing the details of such Event of Default and any curative action Tenant proposes to take; (b) Annual Statements. As soon as available, and in any event not later than one hundred twenty (120) days after the close of each fiscal year of Tenant, financial statements of Tenant, including a profit and loss statement, reconciliation of capital accounts and a consolidated statement of changes in financial position of Tenant as at the close of and for such fiscal year, all in reasonable detail, certified as provided in clause (a) above by an officer or partner of Tenant and, upon request of Landlord, if total operating expenses for such year exceed the total amount set forth in the Pro Forma Budget by more than five percent (5%), accompanied by a compilation report prepared by a firm of certified public accountants, and in a format, each reasonably acceptable to the Executive Director; Page 16 (c) Pro Forma Budget. As soon as available and in any event not later than December 15 of each calendar year beginning with the year in which Rehabilitation is completed, Tenant shall provide Landlord with a detailed projection of operating income and budgets of estimated operating expenses for the immediately succeeding calendar year (the "Pro Forma Budget") and a detailed cash flow projection for the next succeeding year. Tenant shall also submit to Landlord on request additional detail, information and assumptions used in the preparation of the Pro Forma Budget. Tenant shall use commercially reasonable efforts to operate the Property during such calendar year within the Pro Forma Budget; (d) Tax Returns. As soon as available, and in any event not later than at the time of filing with the Internal Revenue Service, the federal tax returns (and supporting schedules, if any) of Tenant; (e) Certificate of Performance. Concurrently with delivery of each of the financial statements provided for in clause (b) above, a certificate of an officer or partner of Tenant stating that Tenant has, in all material respects, performed and observed each of its covenants contained in this Lease and that no Event of Default or Potential Default has occurred or, if any such event has occurred, specifying its nature; (f) Redevelopment Monitoring. Tenant shall submit to Landlord on an annual basis the annual report required by Section 33418 of the California Health and Safety Code. The annual report shall include for each dwelling unit the rental rate and the income and the family size of the occupants. (g) Rent Roll. As soon as possible and in any event not later than forty-five (45) days after the close of each calendar quarter, the rent roll as of the end of such calendar quarter setting forth such information, and in such format, as is reasonably acceptable to the Executive Director; (h) Audit Reports. Promptly upon receipt thereof, copies of all reports submitted to Tenant by independent certified public accountants in connection with each annual, interim or special audit of the financial statements of Tenant made by such accountants, including the comment letter submitted by such accountants to management in connection with their annual audit; (i) Notices, Certificates or Communications. Immediately upon giving or receipt thereof, copies of any notices, certificates or other communications given by or on behalf of Tenant or received by or on behalf of Tenant from lenders pursuant to or in connection with any of the loan documents, as well as any notices and other communications delivered to the Property or to Tenant naming Landlord or the "Construction Lender" as addressee, or which could reasonably be deemed to affect the Rehabilitation or the ability of Tenant to perform its obligations to Landlord; (j) Monthly Leasing Report. As soon as available and in no event later than the twenty fifty (25th) day of every calendar month, a monthly property analysis report for the Property indicating the current leasing status for the Property; Page 17 (k) Monthly Operating Statements. As soon as available and in no event later than the twenty-fifth (25th) day of every calendar month, commencing with the first full calendar month following commencement of lease -up of the Property, a "Monthly Operating Statement" showing all operating income, operating expenses, and debt service the prior month, in a form reasonably satisfactory to the Executive Director; (1) Certificate of Continuing Program Compliance. Tenant shall submit to Landlord on an annual basis the Certificate of Continuing Program Compliance. (m) Other Information. Such other documents and information relating to the affairs of Tenant and the Property as Landlord reasonably may request from time to time which Tenant can provide for a reasonable cost. 8.11 Onsite Manager. Tenant, through an onsite professional property manager or property management company, shall manage the Project or cause it to be managed. Any manager or management company retained to act as agent for Tenant in meeting the obligation of providing an onsite manager shall be subject to prior written approval of the Executive Director, which approval shall not be unreasonably withheld or delayed. Mercy Housing Management ("Mercy") is hereby approved by Landlord as the initial property manager. In exercising his/her approval rights hereunder, the Executive Director may require proof of ability and qualifications of the manager and/or management company based upon (i) prior experience, (ii) assets, and (iii) other factors determined by the Executive Director as necessary. The Executive Director can approve of property manager and/or management company upon submittal of one or more candidates proposed by Tenant. Furthermore, upon sixty (60) days prior written demand from Landlord with cause, Tenant shall remove and replace a property manager and/or property management company. In any agreement with a property manager or property management company ("Management Agreement"), Tenant shall expressly reserve the right to terminate such agreement upon written demand of Landlord with cause. That notwithstanding, Landlord agrees that Mercy shall be entitled to a thirty (30)-day notice of default and a reasonable opportunity to cure before any such termination. 8.12 No Use of Hazardous Materials on the Property. Tenant covenants and agrees that it shall not, and that it shall not permit any subtenant to, treat, use, store, dispose, release, handle or otherwise manage Hazardous Materials on the Property from and after the date hereof except in connection with any rehabilitation, operation, maintenance or repair of the Improvements or in the ordinary course of its business, and that such conduct shall be done in compliance with all applicable federal, state and local laws, including all Environmental Laws. Tenant's violation of the foregoing prohibition shall constitute a breach hereunder and Tenant shall indemnify, hold harmless and defend the Landlord for such violation as provided below. 8.13 Notice and Remediation by Tenant. Tenant shall promptly give the Landlord written notice of any significant release of any Hazardous Materials, and/or any notices, demands, claims or orders received by Tenant from any governmental agency pertaining to Hazardous Materials which may affect the Property. Page 18 8.14 Environmental Indemnity. Tenant agrees to indemnify, protect, hold harmless, and defend (with counsel reasonably satisfactory to Landlord) the Indemnitees from and against any and all losses, costs, claims, expenses, damages (including, without limitation, foreseeable or unforeseeable consequential damages), and liabilities directly or indirectly arising out of or in any way connected with (a) Tenant's breach or violation of any covenant, prohibition or warranty in this Lease concerning Hazardous Materials, or (b) the activities, acts or omissions of Tenant, its employees, contractors or agents on or affecting the Property from and after the Commencement Date, including but not limited to the release of any Hazardous Materials or other kinds of contamination or pollutants of any kind into the air, soil, groundwater or surface water on, in, under or from the Property. This indemnification supplements and in no way limits the scope of the indemnification set forth in Article 13. 8.15 Termination; Subtenants. The agreements and obligations of Tenant under this Article 8 with regard to indemnification of Landlord shall survive the scheduled termination or sooner expiration of the Term for any reason, for five (5) years and all claims relating thereto must be delivered in writing to Tenant within such period. That notwithstanding, the extension of time within which to deliver a claim to Tenant shall not extend, beyond the date of expiration or termination of this Lease, the period in which Claims may arise. No action by any subtenant in violation of its sublease shall constitute a cause to terminate this Lease provided that Tenant diligently pursues its available remedies against such subtenant. 8.16 Nondiscrimination. There shall be no discrimination against or segregation of any person or group of persons, on account of race, color, creed, religion, sex, marital status, national origin, or ancestry, in the leasing, subleasing, transferring, use, occupancy, tenure, or enjoyment of the Property nor shall the Tenant itself, or any person claiming under or through Tenant, 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, sublessees, subtenants, or vendees in the Property. 8.17 Form of Nondiscrimination and Nonsegregation Clauses. Tenant covenants and agrees for itself, its successors, its assigns and every successor in interest to the Property or any part thereof, that it shall refrain from restricting the lease, sublease, rental, transfer, use, occupancy, tenure, or enjoyment of the Property (or any part thereof) on the basis of sex, marital status, race, color, religion, creed, ancestry or national origin of any person. All such leases, or contracts pertaining thereto shall contain or be subject to substantially the following nondiscrimination or nonsegregation clauses: 8.17.1 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 sex, marital status, race, color, religion, creed, 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, or occupancy of tenants, lessees, sublessees, tenants, or vendees in the land herein leased." Page 19 8.17.2 In contracts: "There shall be no discrimination against or segregation of, any person or group of persons on account of sex, marital status, race, color, religion, creed, national origin or ancestry in the sale, lease, sublease, rental, 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." 8.18 Resident Services. From not later than six (6) months after the date of issuance of a temporary certificate of occupancy for the Project until expiration of the Term, Tenant shall provide, or cause to be provided by a reasonably qualified person or firm, services to the residents of the Project in accordance with the plan therefor attached hereto as Exhibit "D". Mercy Housing California is hereby approved by Landlord as the initial provider of such resident services. The Executive Director shall have approval of resident service provider provide upon submittal of one or more candidates proposed by the Tenant. 8.19 Effect and Duration of Covenants. Subject to Section 8.21 below, the covenants established in this Article shall, without regard to technical classification and designation, be binding on Tenant and any successor in interest to the Property, or Tenant's leasehold interest therein, or any part thereof, for the benefit and in favor of the Landlord, its successors and assigns, and the City until the expiration of the Term, except to the extent said covenant expressly provides that it shall survive the expiration of the Term. 8.20 Indemnification. Tenant hereby saves, defends, indemnifies and holds the Indemnitees harmless from and against any and all losses, costs, damages or liabilities, including, without limitation, reasonable attorneys' fees and costs, which result from the breach of any representations and warranties contained in this Article 8. 8.21 Terminable Upon Foreclosure. Notwithstanding anything contained in this Lease to the contrary, upon foreclosure of a Mortgage, or acceptance by a Mortgagee of an assignment or deed in lieu of foreclosure, Section 8.1 through Section 8.16, inclusive, Section 8.18 and Section 8.20 of this Lease shall be terminable by the purchaser at the foreclosure sale, or the assignee or grantee of a deed in lieu of foreclosure, by notice to Landlord. Termination of such Sections pursuant to this provision shall not affect the validity of the remaining provisions of this Lease and Tenant's rights hereunder. ARTICLE 9. INSURANCE 9.1 Landlord Not Liable. Except as the result of the sole or willful negligence or intentional acts or omissions by Landlord or its representatives, employees or agents, or as otherwise expressly set forth herein, Landlord shall not be liable for injury to Tenant's business or any loss of income therefrom or for any damage or liability of any kind or for any injury to or death of persons or damage to property of Tenant, or to Tenant's agents, employees, servants, contractors, subtenants, licensees, concessionaires, customers or business invitees or any other person which occurs on the Property during the Term. Page 20 9.2 Indemnification. Except as the result of the sole or willful negligence or intentional acts or omissions by Landlord or its representatives, employees or agents, Tenant shall indemnify, defend and hold the Indemnitees harmless from and against all liability, loss, damage, cost or expense (including reasonable attorneys' fees and court costs) arising from or as a result of the death of any person or any accident, injury, loss or damage whatsoever caused to any person or to the property of any person caused by Tenant's performance of its obligations under this Lease or any errors or omissions of Tenant, whether such performance, errors or omissions of Tenant be made by Tenant, its contractors or subcontractors, or anyone directly or indirectly employed by Tenant, and whether such damage shall accrue or be discovered before or after the termination of this Lease. This indemnification provision supplements and in no way limits the scope of the indemnifications in Article 13. The indemnity obligation of Tenant under this Article shall survive the expiration or termination, for any reason, of this Lease. This Section notwithstanding, indemnification with respect to Hazardous Materials shall be governed by Section 8.14. 9.3 Insurance. From and after the Commencement Date until the termination of this Lease, Tenant shall take out and maintain the following types of insurance in the forms and amounts (as may be increased each calendar year by the corresponding increase in the Index) set forth below, at Tenant's sole expense. Notwithstanding the amounts of insurance set forth below, the Executive Director shall have the right, but not the obligation, to reduce the amounts required from time to time. 9.3.1 Comprehensive General Liability in an amount not less than Two Million Dollars ($2,000,000.00) combined single limit for each occurrence or Four Million Dollars ($4,000,000.00) general aggregate for bodily injury, personal injury and property damage including contractual liability, which limits maybe achieved through the use of an umbrella/excess liability policy(ies). The limits of this insurance shall be increased to an amount not less than Five Million Dollars ($5,000,000.00) combined single limit (which limits may be achieved through the use of an umbrella/excess liability policy(ies)) upon the recordation of the Certificate of Completion for any of the Improvements in the Official Records. The Indemnitees shall be covered as additional insureds with respect to liability arising out of activities by or on behalf of Tenant or in connection with the use or occupancy of the Property and the Easement Area. Coverage shall be in a form acceptable to the City Risk Manager and shall be primary and non-contributing with any insurance or self-insurance maintained by City or Commission. 9.3.2 Automobile Liability in an amount not less than One Million Dollars ($1,000,000.00) combined single limit per accident for bodily injury and property damage covering owned, non -owned and hired vehicles. 9.3.3 Workers' Compensation as required by the Labor Code of the State of California and Employers' Liability insurance in an amount not less than One Million Dollars ($1,000,000.00). 9.3.4 "All Risk" or "Special Form" property including builder's risk protection during the course of Rehabilitation, covering the full replacement value of the Improvements constructed on or about the Property by Tenant. Said insurance shall include debris removal, and, Page 21 if typically carried upon similar affordable housing projects in San Diego County, California, coverage for flood if this protection is required by the Senior Lender. Landlord shall be named as loss payee under a standard loss payable endorsement. 9.4 Other Insurance. Tenant shall also obtain and maintain such other insurance in forms and amounts reasonably required from time to time by Landlord or the City Risk Manager for protection against the same or other insurable hazards which are then typically insured against by similar properties in San Diego County, California, provided that such coverage is available at commercially reasonable rates. 9.5 Contractors. All contractors employed by Tenant with contracts of Fifty Thousand Dollars ($50,000.00) or more shall be required to furnish evidence of Comprehensive General Liability insurance subject to all the requirements stated herein with limits of not less than One Million Dollars ($1,000,000.00) combined single limit each occurrence. The Indemnitees shall have the right to receive evidence of compliance with the foregoing by contractors at any time upon written request therefor. 9.6 Acceptable Terms of Coverage. Acceptable insurance coverage shall be placed with carriers admitted to write insurance in California, or carriers with a rating of or equivalent to A-:VIII by A.M. Best & Company. Any deviation from this rule shall require specific approval in writing from the City's Risk Manager. Any deductibles in excess of Twenty -Five Thousand Dollars ($25,000.00) per occurrence or self -insured retentions must be declared to and approved by the City Risk Manager. At the option of the City Risk Manager, Tenant may be required to reduce or eliminate such deductibles or self -insured retentions or to procure a bond guaranteeing payment of losses and related investigations, claim administration and defense costs. In the event such insurance provides for deductibles or self -insured retention, Tenant agrees that it will fully protect the Indemnitees in the same manner as those interests would have been protected had the policy or policies not contained a deductible or retention. Coverage under each policy shall not be suspended, avoided or canceled by either party except after thirty (30) days' prior written notice to Landlord. Tenant shall furnish the Indemnitees with certificates of insurance and with original endorsements effecting coverage as required under this Article. The certificates and endorsements for each insurance policy shall be signed by a person authorized by the insurer to bind coverage on its behalf. The Indemnitees reserve the right to require complete certified copies of all insurance policies not previously provided at any time. 9.7 Blanket Coverage. Notwithstanding anything to the contrary set forth in this Article 9, Tenant's obligations to carry the insurance provided for herein may be brought within the coverage of a so-called blanket policy or policies of insurance carried and maintained by Tenant; provided, however, (i) that the Indemnitees and other parties in interest to it shall be named as additional insureds as their interests may appear, and (ii) that the coverage afforded the Indemnitees will not be reduced or diminished by reason of the use of such blanket policy of insurance, and (iii) that the requirements set forth in this Article 9, are otherwise satisfied. 9.8 Waiver of Subrogation. Each policy of insurance procured pursuant to Article 9 shall contain, if obtainable upon commercially reasonable terms, either (i) a waiver by the insurer of the right of subrogation against either party hereto for negligence of such party, or (ii) a Page 22 statement that the insurance shall not be invalidated should any insured waive in writing prior to a loss any or all right of recovery against any party for loss accruing to the property described in the insurance policy. Each of the parties hereto waives any and all rights of recovery against the other, or against the officers, employees, agents and representatives of such other party, for loss or damage to such waiving party or its property or the property of others under its control, arising from any cause insured against under the form of insurance policies required to be carried pursuant to Article 9 of this Lease or under any other policy of insurance carried by such waiving party. ARTICLE 10. MAINTENANCE; REPAIRS; ALTERATIONS; RECONSTRUCTION 10.1 General Maintenance. Throughout the Term, Tenant shall, at Tenant's sole cost and expense, maintain the Property and the Improvements and the Easement Area in good condition and repair, ordinary wear and tear excepted, and in accordance with all applicable federal, state and local laws, ordinances and regulations of (a) governmental agencies and bodies having or claiming jurisdiction and all their respective departments, bureaus, and officials, (b) insurance underwriting boards or insurance inspection bureaus having or claiming jurisdiction, and (c) all insurance companies insuring all or any part of the Property or the Improvements, or both. 10.2 Program Maintenance. In addition to the routine maintenance and repair required pursuant to Section 10.1, Tenant shall perform the following programmed maintenance on the Improvements: (a) Tenant shall maintain the Improvements, including all common areas, all interior and exterior facades, and all exterior project site areas, in a safe and sanitary fashion suitable for a high quality, rental housing project. The Tenant agrees to provide administrative services, supplies, contract services, maintenance, maintenance reserves, and management for the entire project including interior tenant spaces, common area spaces and exterior common areas. (b) Clean-up maintenance shall include, but not be limited to: maintenance of all private paths, parking areas, driveways, the Easement Area, and other paved areas in clean and weed -free condition; maintenance of all such areas clear of dirt, mud, trash, debris or other matter which is unsafe or unsightly; removal of all trash, litter and other debris from improvements and landscaping prior to mowing; clearance and cleaning of all areas maintained prior to the end of the day on which the maintenance operations are performed to ensure that all cuttings, weeds, leaves and other debris are properly disposed of by maintenance workers. (c) Landscape maintenance shall include, but not be limited to: watering/irrigation; fertilization; mowing, edging, and trimming of grass; tree and shrub pruning; trimming and shaping of trees and shrubs to maintain a healthy, natural appearance and safe road conditions and visibility, and optimum irrigation coverage; replacement, as needed, of all plant materials; control of weeds in all planters, shrubs, lawns, ground covers, or other planted areas; and staking for support of trees. All maintenance work shall conform to all applicable federal and state Occupational Safety and Health Act standards and regulations for the performance of maintenance. Upon the request of Tenant, the Executive Director, at his sole and absolute discretion, may grant a waiver or deferral Page 23 of any program maintenance requirement. Tenant shall keep such records of maintenance and repair as are necessary to prove performance of the program maintenance requirements. ARTICLE 11. OWNERSHIP OF AND RESPONSIBILITY FOR IMPROVEMENTS 1 1.1 Ownership During Term. 11.1.1 Improvements. All Improvements on the Property as permitted or required by this Lease shall, during the Term, be and remain the property of Tenant, and Landlord shall not have title thereto. Tenant shall not, however, demolish or remove any Improvements from the Property except as permitted herein. 11.1.2 Personal Property. All personal property, furnishings, fixtures and equipment, including, without limitation, Tenant -owned appliances, which are not so affixed to the Property or the buildings thereon as to require substantial damage to the buildings upon removal thereof shall constitute personal property including, but not limited to: (a) functional items related to the everyday operations of the Property; (b) personal property furnishings, fixtures and equipment of the nature or type deemed by law as permanently resting upon or attached to the buildings or land by any means, including, without limitation, cement, plaster, nails, bolts or screws, or essential to the ordinary and convenient use of the Property and the Improvements. At any time during the Term and at termination thereof, Tenant shall have the right to remove any and all such personal property, furnishings, fixtures and equipment; provided, that Tenant repairs any damage to the Property or the Improvements caused by such removal. 11.1.3 Basic Building Systems. For purposes of this Lease, the personal property, furnishings, fixtures and equipment described in this Section 11.1 shall not include those major building components or fixtures necessary for operation of the basic building systems such as, but not limited to, the elevators, plumbing, sanitary fixtures, heating and central air-cooling system. 11.2 Ownership at Expiration or Termination. 11.2.1 Property of Landlord. At the expiration or earlier termination of the Term, except as provided in Section 11.2.2, all Improvements which constitute or are a part of the Property shall become (without the payment of compensation to Tenant or others) the property of Landlord free and clear of all claims and encumbrances on such Improvements by Tenant, and anyone claiming under or through Tenant, except for such title exceptions permitted or required during the Term. Tenant shall then quitclaim to Landlord any and all rights, interests and claims to the Improvements. Tenant agrees to and shall defend, indemnify and hold Landlord harmless from and against all liability and loss which may arise from the assertion of any such claims and any encumbrances on such Improvements (except claims arising due to Landlord's actions) and except for such title exceptions permitted or required during the Term. 11.2.2 Removal by Tenant. Tenant shall not be required or permitted to remove the Improvements, or any of them, at the expiration or sooner termination of the Term; provided, however, that, within thirty (30) days following the expiration or sooner termination of the Term, Tenant may remove all personal property, furniture, and equipment. Page 24 11.2.3 Unremoved Property. Any personal property, furnishings or equipment not removed by Tenant within thirty (30) days after the expiration or sooner termination of the Term, shall, without compensation to Tenant, become Landlords' property, free and clear of all claims to or against them by Tenant or any third person, firm or entity arising by, through or under Tenant. 11.2.4 Maintenance and Repair of Improvements. Subject to the provisions of this Lease concerning condemnation, alterations and damage and destruction, Tenant agrees to assume full responsibility for the operation and maintenance of the Property and the Improvements and all fixtures and furnishings thereon or therein throughout the Term hereof without expense to Landlord, and to perform all repairs and replacements necessary to maintain and preserve the Property, the Improvements, fixtures and furnishings in a decent, safe and sanitary condition consistent with good practices and in compliance with all applicable laws. Tenant agrees that Landlord shall not be required to perform any maintenance, repairs or services, or to assume any expense not specifically assumed herein in connection with the Property and the Improvements thereon unless specifically required under the terms of this Lease. Except as otherwise provided in this Section 11.2 and in Section 11.4, the condition of the Improvements required to be maintained hereunder upon completion of the work of maintenance or repair shall be equal in value, quality and use to the condition of such Improvements before the event giving rise to the work. 11.3 Waste. Subject to the alteration rights of Tenant and damage and destruction or condemnation of the Property or any part thereof, Tenant shall not commit or suffer to be committed any waste of the Property or the Improvements, or any part thereof. Tenant agrees to keep the Property and the Improvements clean and clear of refuse and obstructions, and to dispose properly of all garbage, trash and rubbish. 11.4 Alteration of Improvements. Except as provided in Section 7.1, Tenant shall not make or permit to be made any material, exterior alteration of, addition to or change in, the Improvements which would materially affect the exterior elevations (including materials selection and color) or the size, bulk and scale of the Property, other than routine maintenance and repairs, nor demolish all or any part of the Improvements, without the prior written consent of Landlord. Nothing herein shall prohibit interior alterations or decorations, or the removal and replacement of interior improvements consistent with the specified use of the Property. In requesting consent for such exterior improvements as required by the foregoing, Tenant shall submit to Landlord detailed plans and specifications of the proposed work and an explanation of the need and reasons thereof. Tenant may make such other improvements, alterations, additions or changes to the Improvements which do not materially affect the exterior elevations (including materials selection and color) or the size, bulk and scale thereof without Landlord's prior written consent. Notwithstanding the prohibition in this Section 11.4, Tenant may make such changes, repairs, alterations, improvements, renewals or replacements to the exterior elevations, materials, size, bulk or scale of the Improvements as are required (a) by reason of any law, ordinance, regulation or order of a competent government authority, (b) for the continued safe and orderly operation of the Property, or (c) to continue to receive the Low Income Housing Tax Credit. Page 25 ARTICLE 12. SIGNS Tenant shall not place or suffer to be placed on the Property or upon the roof or any exterior door or wall or on the exterior or interior of any window of the Improvements, any sign, awning, canopy, marquee, advertising matter, decoration, lettering or other thing of any kind (exclusive of the signs, awnings and canopies, if any, which may be provided for in the Plans) without the written consent of the Executive Director first had and obtained. ARTICLE 13. INDEMNIFICATION Tenant will protect, indemnify and save the Indemnitees harmless from and against all liabilities, obligations, claims, damages, penalties, causes of action, judgments, costs and expenses (including, without limitation, reasonable attorneys' fees and expenses) imposed upon or incurred by or asserted against Landlord, or the Property or the Improvements during the Term, unless caused solely by the willful act or gross negligence of Landlord, by reason of (a) any accident or injury to or death of persons or loss of or damage to property occurring on or about the Property or the Improvements, (b) any failure on the part of Tenant to perform or comply with any of the terms of this Lease, or (c) any negligence or tortious act on the part of Tenant or any of its agents, employees, contractors, subtenants, licensees or invitees. In the event that any action, suit or proceeding is brought against the Indemnitees by reason of any such occurrence, Tenant, upon Landlord's request, will, at Tenant's expense, defend such action, suit or proceeding with counsel approved by Landlord. This Section notwithstanding, indemnification with respect to Hazardous Materials shall be governed by Section 8.14. ARTICLE 14. DAMAGE OR DESTRUCTION OF PROPERTY OR IMPROVEMENTS 14.1 Tenant's Repair Obligation. 14.1.1 In case of damage to or destruction of the Property or the Improvements, or any part thereof, by fire or other cause at any time during the Term of this Lease, Tenant, if and to the extent insurance proceeds are available, shall restore the same as nearly as possible to their value, condition and character immediately prior to such damage or destruction. Such restoration shall be commenced with due diligence and in good faith, and prosecuted with due diligence and in good faith, unavoidable delays excepted. 14.1.2 In case of damage to or destruction of the Improvements by fire or other cause resulting in a loss exceeding in the aggregate Ten Thousand Dollars ($10,000), Tenant shall promptly give written notice thereof to Landlord. 14.2 Tenant's Restoration of Premises. 14.2.1 If, during the Term, the Improvements are damaged or destroyed, and the total amount of loss does not exceed thirty-three percent (33%) of the replacement value of the Improvements, Tenant shall make the loss adjustment with the insurance company insuring the Page 26 loss, with the approval of Landlord, which approval shall not be unreasonably withheld or delayed. The proceeds shall be paid directly to a Mortgagee, if any, and if there is not a Mortgagee, to Landlord and Tenant for the sole purpose of making the restoration of the Improvements in accordance with this Article 14. 14.2.2 If, during the Term, the Improvements are damaged or destroyed, and the total amount of loss exceeds thirty-three percent (33%) of the replacement value of the Improvements, Tenant shall make the loss adjustment with the insurance company insuring the loss, with the approval of Landlord, which approval shall not be unreasonably withheld or delayed, and the insurance company shall immediately pay the proceeds to a bank or trust company designated by Landlord and approved by Tenant ("Insurance Trustee"), which approval shall not be unreasonably withheld or delayed. Any leasehold mortgagee shall be an acceptable Insurance Trustee. All sums deposited with the Insurance Trustee shall be held for the following purposes and the Insurance Trustee shall have the following powers and duties: (a) The sums shall be paid in installments by the Insurance Trustee to the contractor retained by Tenant and approved by Landlord as construction progresses, for payment of the cost of restoration. A ten percent (10%) retention fund shall be established that will be paid to the contractor on completion of restoration, payment of all costs, expiration of all applicable lien periods, and proof that the Property and the Improvements are free of all mechanics' liens and lienable claims; (b) Payments shall be made on presentation of certificates or vouchers from the architect or engineer retained by Tenant and approved by Landlord (which approval shall not be unreasonably withheld or delayed) showing the amount due. If the Insurance Trustee, in its reasonable discretion, determines that the certificates or vouchers are being improperly approved by the architect or engineer retained by Tenant, the Insurance Trustee shall have the right to appoint an architect or an engineer to supervise construction and to make payments on certificates or vouchers approved by the architect or engineer retained by the Insurance Trustee. The reasonable expenses and charges of the architect or engineer retained by the Insurance Trustee shall be paid by the Insurance Trustee out of the trust fund; (c) If, after the work of restoration has commenced, the sums held by the Insurance Trustee are not sufficient to pay the actual cost of restoration, Tenant shall deposit the amount of the deficiency with the Insurance Trustee within ten (10) days after receipt of request for payment of such amount from the Insurance Trustee, which request shall be made by the Insurance Trustee promptly after it is determined there will be a deficiency; (d) If the Insurance Trustee has received notice from Landlord that the Tenant is in default under this Lease, then, subject to the lien of a Mortgagee's Mortgage and the Mortgagee's prior written consent, the Insurance Trustee shall pay to Landlord an amount sufficient to cure such default as specified in Landlord's notice to the Insurance Trustee; (e) Any amounts remaining after making the payments hereinabove referred to in clauses (a), (b) and (d), and after paying the reasonable costs and expenses of the Insurance Page 27 Trustee, shall be paid to any leasehold Mortgagee to the extent (a) required by any Mortgage and (b) such leasehold Mortgagee makes written demand therefor to the Insurance Trustee; (f) Any undisbursed funds remaining after compliance with all of the provisions of this Section 14.2 shall, if and to the extent required by any Mortgage, be delivered to the Mortgagee, and if there is no leasehold Mortgagee, to Tenant; and (g) All actual costs and charges of the Insurance Trustee shall be paid by Tenant. If the Insurance Trustee resigns or for any reason is unwilling to act or continue to act, Landlord shall substitute a new Insurance Trustee in the manner described in this Section. 14.2.3 Both parties shall promptly execute all documents and perform all acts reasonably required by the Insurance Trustee to perform its obligations under this Section 14.2. 14.3 Procedure for Restoring Improvements. 14.3.1 If and to the extent Tenant is obligated to restore the Improvements pursuant to this Article 14, Tenant shall restore the Improvements substantially in accordance with the Plans. Within forty-five (45) days after the date of such damage or destruction (as such time may be reasonably extended at the written request of Tenant), Tenant, at its cost, shall prepare and deliver to Landlord final plans and specifications and working drawings complying with applicable laws that will be necessary for such restoration. Such plans and specifications shall specify differences from the Plans. The plans and specifications and working drawings are subject to the approval of Landlord only insofar as they vary from the Plans. Landlord shall have twenty (20) days after receipt of the plans and specifications and working drawings to either approve or disapprove the plans and specifications and working drawings and return them to Tenant. If Landlord disapproves the plans and specifications and working drawings, Landlord shall notify Tenant of its objections in writing, specifying the objections clearly and stating what modifications are required for Landlord's approval. Tenant acknowledges that the plans and specifications and working drawings shall be subject to approval of the appropriate government bodies and that they will be prepared in such a manner as to obtain that approval. 14.3.2 The restoration shall be accomplished as follows: (a) Tenant shall complete the restoration within fifteen (15) months (or such longer time as is necessary in the Landlord's discretion) after final plans and specifications and working drawings have been approved by the appropriate government bodies and all required permits have been obtained. (b) Tenant shall retain a licensed contractor that is bondable. The contractor shall be required to carry public liability and property damage insurance, builders risk insurance, standard fire and extended coverage insurance, with vandalism and malicious mischief endorsements, during the period of construction in accordance with Article 9. Such insurance shall contain waiver of subrogation clauses in favor of Landlord and Tenant in accordance with the provisions of and to the extent required by Section 9.8. Page 28 (c) Tenant shall notify Landlord of the date of commencement of the restoration not later than ten (10) days before commencement of the restoration to enable Landlord to post and record notices of nonresponsibility. The contractor retained by Tenant shall not commence construction until a completion bond and a labor and materials bond have been delivered to Landlord to insure completion of the construction. (d) Tenant shall accomplish the restoration in a manner that will cause the least inconvenience, annoyance, and disruption to the Property and the Improvements. (e) On completion of the restoration Tenant shall immediately record a notice of completion. (f) If Section 14.2.2 is applicable, the restoration shall not be commenced until sums sufficient to cover the cost of restoration are placed with the Insurance Trustee as provided in said Section 14.2.2. 14.4 Mortgagee Protection. The following provisions are for the protection of a Mortgagee and shall, notwithstanding anything contained in this Lease to the contrary, control: 14.4.1 Insurance. Any insurance proceeds payable from any policy of insurance (other than liability insurance) required by the Lease shall be paid to the Mortgagee, if any, to the extent required by the Mortgage. The Mortgagee, if any, shall have the right to participate in all adjustments, settlements, negotiations or actions with the insurance company regarding the amount and allocation of any such insurance proceeds. Any insurance policies permitted or required by this Lease shall name the Mortgagee, if any, as an additional insured or loss payee, as appropriate, if required by such Mortgage. 14.4.2 Restoration. Tenant shall have no obligation to restore or repair the Improvements following the occurrence of any casualty for which insurance is not required under this Lease. The Mortgagee, if any and if it exercises any of its remedies set forth in this Lease, shall have no obligation to restore or repair damage to the Improvements that cost in excess of available insurance proceeds. Tenant shall have no obligation to restore or repair damage to the Improvements if the casualty occurs during the last five (5) years of the Lease term. In the event such a loss occurs in the last five (5) years, then, at the election of Tenant, with the prior written consent of the Mortgagee, if any, insurance proceeds shall be used, first, to clear the Property of the damaged Improvements and any debris, and second, to reduce or pay in full the Mortgage, with any excess being payable as provided in this Lease. Article 15. EMINENT DOMAIN 15.1 Notice. The party receiving any notice of the kind specified in this Section 15.1 shall promptly give the other party notice of the receipt, contents and date of the notice received. For purposes of this Article 15, the term "Notice" shall include: (a) Notice of Intended Taking; Page 29 (b) Service of any legal process relating to condemnation of the Property or the Improvements; (c) Notice in connection with any proceedings or negotiations with respect to such condemnation; or (d) Notice of intent or willingness to make or negotiate a private purchase, sale or transfer in lieu of condemnation. 15.2 Representation in Proceedings or Negotiations. Landlord and Tenant shall each have the right to represent their respective interests in each proceeding or negotiation with respect to a Taking or intended Taking and to make full proof of their claims. No agreements or settlement with or sale or transfer to the condemning authority shall be made without the consent of Landlord, but, as to its reversionary interest only, Landlord may enter into such agreement, settlement, sale or transfer without the consent of Tenant. Landlord and Tenant each agree to execute and deliver to the other any instruments which may be required to effectuate or facilitate the provisions of this Lease relating to condemnation. 15.3 Total Taking. 15.3.1 In the event of a Total Taking, this Lease shall terminate as of the date of the Taking. 15.3.2 If this Lease is terminated pursuant to this Section 15.3, and separate Awards are not made to Landlord and Tenant for their respective fee and leasehold interests, the Award for such Taking shall be apportioned and distributed as follows: 15.3.2.1 First, to the Mortgagee, if any, to the extent of the Mortgage; 15.3.2.2 Second, to Landlord, a sum equal to the fair market value of the Property (subject to the remaining Term and the Rent reserved) on the date immediately preceding the Taking as determined by the appraisal method set forth in Article 16 and determined as if there were no taking nor threat of condemnation. The parties shall commence said appraisal by the earlier of ten (10) days after Tenant's receipt of a copy of a Notice of Intended Taking or ten (10) days after the date of the Taking; 15.3.2.3 Third, to Tenant, a sum equal to the fair market value of the Improvements made by Tenant on the date immediately preceding the Taking as determined by the appraisal method set forth in Article 16 and determined as if there were no Taking, nor threat of condemnation; plus the residual value of the Term, subject to the Rent reserved; plus any part of the Award attributable to the Low Income Housing Tax Credit; and 15.3.2.4 Fourth, to Landlord, the remainder, if any. 15.4 Substantial Taking. Page 30 15.4.1 In the event of a Taking which, in Tenant's reasonable judgment is substantial, Tenant may, subject to the rights of the Mortgagee, if any, terminate this Lease. If Tenant elects to terminate this Lease under this provision, Tenant shall give written notice of its election to do so to Landlord within forty-five (45) days after receipt of a copy of a Notice of Intended Taking. In the event Landlord disputes the right of Tenant to terminate this Lease under this provision, Landlord shall give Tenant notice of this fact within forty-five (45) days after receiving the notice of Tenant's election to terminate, and the parties shall either raise this issue in the eminent domain proceeding, if any, as an issue with respect to the apportionment of the Award between Landlord and Tenant or, if there is no eminent domain proceeding, submit the issue to arbitration as provided in Article 23. In the event it is determined that Tenant does not have the right to terminate this Lease, the apportionment of the Award for such Taking and the obligations of Tenant to restore shall be governed by the terms of Section 15.6 or Section 15.8, whichever is applicable. 15.4.2 In the event it is determined that Tenant has the right to terminate this Lease, or in the event Landlord does not dispute Tenant's right to terminate this Lease, such termination shall be as of the time when the Taking entity takes possession of the portion of the Property and the Improvements taken. In such event, the Award for such Substantial Taking (including any award for severance, consequential or other damages which will accrue to the portion of the Property and/or the Improvements not taken) shall be apportioned and distributed as follows: (a) First, to the Mortgagee, if any, to the extent of the Mortgage; (b) Second, to Landlord, a sum equal to the fair market value of the Property taken (subject to the remaining Term and the Rent reserved) immediately preceding the date of the Taking as determined by the appraisal process provided for in Article 16, commenced as provided in Section 15.3.2, and as modified by Section 15.6.3; (c) Third, to Landlord, an amount equal to the portion of the award for severance, consequential or other damages which accrued to the portion of the Property and/or Improvements not taken; (d) Fourth, to Tenant a sum equal to the fair market value of the Improvements made by Tenant taken immediately preceding the date of the Taking as determined by the appraisal process provided for in Article 16, commenced as provided in Section 15.3.2, and as modified by Section 15.6.3; plus the residual value of the Term, subject to the Rent reserved; plus any part of the Award attributable to the Low Income Housing Tax Credit; and (e) Fifth, to Landlord, the remainder, if any. 15.5 Tenant's Right to Revoke Notice of Termination. Notwithstanding anything to the contrary contained in Section 15.4, if Tenant has elected to terminate this Lease, and the taking authority abandons or revises the Taking, Tenant shall have forty-five (45) days from receipt of written notice of such abandonment or revision to revoke its notice of termination of this Lease. 15.6 Partial Taking. Page 31 15.6.1 In the event of a Partial Taking, this Lease shall continue in full force and effect and Landlord and Tenant shall agree upon an equitable reduction in the Annual Rent. If the parties fail to agree upon such reduction within sixty (60) days from the date Tenant is required to give up such occupancy, use or access, whichever is earlier, Landlord and Tenant shall each choose one arbitrator and the two arbitrators so chosen shall choose a third arbitrator. The decision of any two of the arbitrators concerning the reduction in Annual Rent, if any, shall be binding on the Landlord and Tenant and any expense of the arbitrators only shall be divided equally between Landlord and Tenant (each party shall be liable for any and all costs incurred by such party, including without limitation attorneys' fees and expert fees). 15.6.2 The Award for such Partial Taking shall be apportioned and distributed first to the Mortgagee, if any, to the extent of the Mortgage, then to Landlord and Tenant in proportion to the fair market value of their respective interests in the Property and Improvements, as such interests existed immediately prior to such Partial Taking. Tenant's only interest in the Property and the Improvements for purposes of this Section 15.6.2 is in those Improvements rehabilitated by Tenant. Notwithstanding anything contained herein to the contrary, any part of the Award attributable to the Low Income Housing Tax Credit shall belong to Tenant. 15.6.3 The fair market value of the parties' respective interests in the Property and the Improvements shall be determined by the appraisal process provided in Article 16, except that the assumptions listed in such Article shall not apply. Rather, the appraisal shall be based on the value of the Property as improved and encumbered by this Lease and on the value of the Improvements as they stand, but without regard to any Taking or threat of condemnation. 15.6.4 Any Award for severance, consequential or other damages which accrues by reason of the Partial Taking to the portion of the Property or the Improvements not taken shall be distributed first to the Mortgagee, if any, to the extent of the Mortgage, then shall be apportioned between Landlord and Tenant in accordance with the diminution in value of their respective interests. 15.7 Obligation to Repair on Partial Taking. Promptly after any Partial Taking and regardless of the amount of the Award for such Taking, Tenant shall, to the extent of the Award received by Tenant and in the manner specified in the provisions of this Lease, repair, alter, modify or reconstruct the Improvements and/or other improvements on the Property so as to make them usable for the designated purpose and capable of producing a fair and reasonable net income. 15.8 Temporary Taking. 15.8.1 In the event of a Temporary Taking of the whole or any part of the Property and/or Improvements, the Term shall not be reduced or affected in any way and Tenant shall continue to pay in full any sum or sums of money and charges herein reserved and provided to be paid by Tenant, and, subject to the other provisions of this Section 15.8, Tenant shall be entitled to any Award or payment for the temporary use of the Property and/or Improvements prior to the termination of this Lease, and Landlord shall be entitled to any Award or payment for such use after the termination of this Lease. Page 32 15.8.2 If, following such Temporary Taking, possession of the Property and/or Improvements shall revert to Tenant prior to the expiration of the Term, Tenant shall, unless at such time there remains less than five (5) years in the Term, restore the Property and/or Improve- ments whether or not the Taking authority has made any Award or payment for such restoration and regardless of the amount of any award or payment and in all other respects indemnify and hold Landlord harmless from the effects of such Taking so that the Property and/or Improvements in every respect shall upon completion of such restoration be in the same condition as they were prior to the taking thereof. 15.8.3 If, following such Temporary Taking, possession of the Property shall revert to Landlord after expiration of the Term, any sums deposited pursuant to this Section 15.8 shall be paid over to Landlord in their entirety and without apportionment and Tenant shall be excused from its obligation to restore the Property and/or Improvements. 15.8.4 Any Award or payment for damages or cost of restoration made on or after the termination of this Lease shall be paid first to the Mortgagee, if any, to the extent of the Mortgage, then to Landlord absolutely, together with the remaining balance of any other funds paid to Tenant for such damages or cost of restoration and Tenant shall thereupon be excused from any obligation to restore the Property and/or Improvements upon the termination of such Temporary Taking except that any obligation that may have accrued for Tenant to restore the Property and/or Improvements prior to the commencement of said Temporary Taking shall continue to be the obligation of Tenant. 15.9 Mortgagee Protection. Notwithstanding anything contained in this Lease to the contrary, any and all condemnation proceeds shall be paid first to the Mortgagee, if any, to be applied to reduce the Mortgage if required by the mortgage documents. ARTICLE 16. APPRAISAL Whenever an appraisal of the Property is called for under the terms of this Lease, the parties shall use the following procedure: 16.1 Appointment of Appraiser. Within ten (10) days after notice from Landlord to Tenant, Landlord and Tenant shall each appoint an MAI appraiser to participate in the appraisal process provided for in this Article 16 and shall give written notice thereof to the other party. Upon the failure of either party so to appoint, the nondefaulting party shall have the right to apply to the Superior Court of the County of San Diego, California, to appoint an appraiser to represent the defaulting party. Within ten (10) days of the parties' appointment, the two (2) appraisers shall jointly appoint a third MAI appraiser and give written notice thereof to Landlord and Tenant, or if within ten (10) days of the appointment of said appraisers the two (2) appraisers shall fail to appoint a third, then either party hereto shall have the right to make application to said Superior Court to appoint such third appraiser. 16.2 Determination of Fair Market Value. Page 33 16.2.1 Within thirty (30) days after the appointment of the third appraiser, the appraisers shall determine the fair market value of the Property and the Improvements in accordance with the provisions hereof, and shall execute and acknowledge their determination of fair market value in writing and cause a copy thereof to be delivered to each of the parties hereto. 16.2.2 The appraisers shall determine the fair market value of the Property and the Improvements as of the date of Landlord's notice referred to in Section 16.1 above, based on sales of comparable property in the area in which the Property is located. If, however, in the judgment of a majority of the appraisers, no such comparable sales are available, then the appraisal shall be based on the following assumptions: (i) that the Property is free and clear of this Lease, the Improvements and all other improvements, and all easements and encumbrances; and (ii) that the Property is available for immediate sale and development for the purposes and at the density and intensity of development permitted under the zoning, subdivision and land use planning ordinances and regulations applicable to the Property in effect on the Commencement Date of this Lease, and any changes or amendments thereto or modification or variance from the provisions thereof or conditional use permits which could reasonably be anticipated to have been granted or approved as of the date of this Lease. Notwithstanding anything contained herein to the contrary, if the appraisal, for the particular purposes for which it is being done, should reasonably reflect the rent restrictions imposed on the Property pursuant to Article 8 of this Lease, and such other covenants, conditions and restrictions to which the Property is subject pursuant to this Lease or to other documents recorded against the Property in the Official Records of the County of San Diego, California, then such covenants, conditions and restrictions shall be taken into consideration by the appraisers. 16.2.3 If a majority of the appraisers are unable to agree on fair market value within thirty (30) days of the appointment of the third appraiser, the three (3) appraisals shall be added together and their total divided by three (3). The resulting quotient shall be the fair market value of the Property and the Improvements. If, however, the low appraisal and/or high appraisal is or are more than ten percent (10%) lower and/or higher than the middle appraisal, the low and/or high appraisal shall be disregarded. If only one appraisal is disregarded, the remaining two appraisals shall be added together and their total divided by two (2). The resulting quotient shall be the fair market value of the Property and the Improvements. If both the low and high appraisals are disregarded, the middle appraisal shall be the fair market value of the Property. 16.4 Payment of Fees. Each of the parties hereto shall (a) pay for the services of its appointee, (b) pay one-half (1/2) of the fee charged by the appraiser selected by their appointees, and (c) pay one-half (1/2) of all other proper costs of the appraisal. ARTICLE 17. ASSIGNMENT/TRANSFER 17.1 Prohibition Against Transfer. 17.1.1 Prior to Recordation of the Certificate of Completion. Prior to recordation of the Certificate of Completion, but subject to Article 19 pursuant to which Tenant is permitted to sublease the Units for residential occupancy, Tenant shall not assign or attempt to assign this Lease or any right herein (other than to a general or limited partnership of which Tenant Page 34 is the managing general partner) without the prior written consent of Landlord, which consent may be withheld in Landlord's absolute discretion. 17.1.2 Following Recordation of the Certificate of Completion. Following recordation of the Certificate of Completion, but subject to Article 19 pursuant to which Tenant is permitted to sublease the Units for residential occupancy, Tenant shall not assign or attempt to assign this Lease or any right herein, nor make any total or partial sublease, sale, transfer, conveyance or assignment of the whole or any part of the Property or the Improvements thereon, without the prior written consent of Landlord, which consent shall not be unreasonably withheld. In the absence of specific written agreement by Landlord, no unauthorized sublease, sale, transfer, conveyance or assignment of the Property, or any portion thereof, or approval thereof by Landlord shall be deemed to relieve Tenant or any other party from any obligations under this Lease. Notwithstanding anything to the contrary contained herein, Tenant shall be permitted to assign the Lease to an affiliate of the managing general partner of Tenant in accordance with the option and right of first refusal granted under Tenant's partnership documents. 17.1.3 Qualifications of Tenant. In connection with the above prohibition and limitation on assignments, Tenant acknowledges that the qualifications, expertise and identities of Tenant are of particular concern to Landlord, and that Landlord continues to rely on such expertise to ensure the satisfactory completion of the Rehabilitation and operation of the Improvements on the Property. Tenant further recognizes that it is because of such qualifications and identities that Landlord is entering into this Lease with Tenant. No voluntary or involuntary successor in interest of Tenant shall acquire any rights or powers under this Lease except as expressly set forth in the Lease. 17.1.4 Conditions. Tenant's right to make an assignment after the recordation of the Certificate of Completion shall be subject to compliance with the following further conditions: (a) No Default. At the time of such assignment, this Lease shall be in full force and effect and either no Event of Default (as defined in Section 21.1) then exists or no Event of Default will exist upon consummation of the assignment. (b) Assumption. The assignee shall have executed an express assumption of the obligations and liabilities of Tenant under this Lease from and after the date of delivery and recording of the assignment and there shall have been delivered to Landlord at the time of the request for such assignment a conformed copy of such assumption. (c) Net Worth of Assignee. The assignee shall have a Net Worth equal to at least One Million Dollars ($1,000,000.00) ("Net Worth Minimum"), which Net Worth Minimum shall be increased on the date that is five (5) years after the first day of the first calendar year following the Commencement Date, and on the same date every fifth (5th) year thereafter ("Net Worth Adjustment Date"), by an amount equal to the percentage change in construction industry costs, from the first day of the calendar year following the Commencement Date until the applicable Net Worth Adjustment Date, as published by the Engineering News Record, or such similar construction industry index as the parties shall agree in the event such information is not available in the Engineering News Record or such publication is no longer published. Net Worth Page 35 is to be evidenced by a statement of financial condition as of a date not more than three hundred sixty (360) days prior to the date of assignment which is accompanied either by an opinion of a certified or a chartered public accountant or by a certificate by the chief financial or accounting officer of the assignee that it fairly represents the financial condition of the assignee. In the event Tenant agrees to remain liable under this Lease from and after the effective date of such assignment and to guaranty the obligations of the assignee under this Lease, the Net Worth Minimum standard set forth in this Section 17.1 shall not apply to such assignee. Notwithstanding the foregoing, the Executive Director, at her sole and absolute discretion, shall be permitted to waive the Net Worth Minimum standard for a proposed assignee that is (a) a California nonprofit, public benefit corporation, and (b) has demonstrated experience and ability in owning, operating and managing similar affordable housing projects in the State of California. Any assignee pursuant to the option or right of first refusal granted under Tenant's partnership documents shall not be subject to the Net Worth Minimum requirement. 17.1.5 Assignment Agreement. No assignment of any interest in the Lease made with Landlord's consent or as herein otherwise permitted shall be effective unless and until there shall have been delivered to Landlord an executed counterpart of such assignment or other transfer document containing an agreement, in recordable form, executed by the assignor and the proposed assignee, wherein and whereby such assignee assumes due performance of the obligations on the assignor's part to be performed under this Lease from the effective date of the assignment to the end of the Term. 17.1.6 Further Assignments. The consent by Landlord to an assignment shall not in any way be construed to relieve Tenant from obtaining the express consent in writing of Landlord to any further assignment if required by the terms of this Lease. 17.2 Terminable Upon Foreclosure. Notwithstanding anything contained in this Lease to the contrary, upon foreclosure of a Mortgage, or acceptance by a Mortgagee of an assignment or deed in lieu of foreclosure, Article 17 of this Lease shall be terminable by the purchaser at the foreclosure sale, or the assignee or grantee of a deed in lieu of foreclosure, by notice to Landlord. 17.3 Other Rights of Mortgagees. Landlord agrees that none of the restrictions or limitations on assignment or transfer by Tenant set forth in this Article 17 shall be construed to limit or abrogate the rights of a Mortgagee to (a) seek the appointment of a receiver, or (b) delegate or assign its rights under this Lease to any third party in connection with the exercise of said Mortgagee's rights and remedies under its Mortgage. 17.4 Limitation on Transfer by Landlord. Landlord agrees, during the Compliance Period, not to transfer its interest in the Property or under this Lease without the prior written approval of the Tax Credit Partner; provided, however, no such approval shall be required for such a transfer to another public body. 17.5 Transfer by Tax Credit Partner. Notwithstanding the foregoing limitations on transfer and assignment, nothing herein shall limit or condition a transfer, sale, assignment or other conveyance of all or a portion of the limited partner interests of the Tax Credit Partner to any Page 36 affiliate of the Tax Credit Partner, and the interests of the Tax Credit Partner shall be freely transferable to any affiliate of the Tax Credit Partner without the consent or approval of but only with prior, written notice to Landlord; provided however that in the event of non-payment of capital contribution obligations by the transferee pursuant to the terms and conditions of the Tenant's Partnership Agreement, the Tax Credit Partner shall remain liable for the amount of such unpaid capital contribution obligations. After all required capital contributions of the Tax Credit Partner have been made to the Tenant, no consent shall be required for the transfer of all or a portion of the interest of the Tax Credit Partner to any person or entity. ARTICLE 18. MORTGAGES 18.1 Leasehold Mortgages 18.1.1 General Provisions. At all times during the Term, Tenant shall have the right to mortgage, pledge, deed in trust, assign rents, issues and profits and/or collaterally (or absolutely for purposes of security if required by any lender) assign its interest in this Lease, or otherwise encumber this Lease, and/or the interest of Tenant hereunder, in whole or in part, and any interests or rights appurtenant to this Lease, and to assign or pledge the same as security for any debt (the holder of any such mortgage, pledge or other encumbrance, and the beneficiary of any such deed of trust being hereafter referred to as "Mortgagee" and the mortgage, pledge, deed of trust or other instrument hereafter referred to as "Mortgage"), upon and subject to each and all of the following terms and conditions: (a) Prior to the issuance of a Certificate of Completion, Mortgages entered into by Tenant shall be limited in purpose to and shall not exceed the amount necessary and appropriate to develop the Improvements, and to acquire and install equipment and fixtures thereon. Said amount shall include all hard and soft costs of acquisition, development, Rehabilitation, lease -up and operation of the Improvements. After the recordation of the Certificate of Completion, the limitation contained in this subsection shall no longer apply. (b) Any permitted Mortgages entered into by Tenant are to be originated only by lenders approved in writing by Landlord, which approval will not be unreasonably withheld. Landlord shall state the reasons for any such disapproval. Notwithstanding the forgoing, Landlord shall be deemed to have automatically approved (i) a commercial or savings bank, a trust company, an insurance company, a savings and loan association, a building and loan association, an educational institution, a pension, retirement or welfare fund, or other fund authorized to make loans in the State of California; (ii) any other entity having a net worth of $50,000,000 or more whether or not a so-called institution, or any division, subsidiary, parent or affiliate owned or controlled by, owning or in control of or in common control or ownership with any entities described in (i) or (ii); or (iii) a lender regularly engaged in business in an office or location in the State of California, or who has a registered agent for service of process in California. In addition, any lender must be duly licensed or registered with any regulatory agency having jurisdiction over its operation, if any; and any lender must not be under any order or judgment of any court or administrative agency restricting or impairing its operation as a lender where the restriction or impairment would be directly related to the proposed loan to Tenant. Notwithstanding anything to the contrary contained herein, Landlord hereby approves the Senior Lender as the lender of the Page 37 Construction Loan and Pacific Premier Bank as the lender of the Affordable Housing Project loan. If the lender is other than as set forth in the immediately preceding sentence or a lender deemed automatically approved pursuant to subdivisions (i), (ii) or (iii) of this Section, then upon the reasonable request of Landlord, the beneficial owners of lender must be disclosed to Landlord. (c) All rights acquired by said Mortgagee shall be subject to each and all of the covenants, conditions and restrictions set forth in this Lease, and to all rights of Landlord thereunder, none of which covenants, conditions and restrictions is or shall be waived by Landlord by reason of the giving of such Mortgage. If Tenant encumbers its leasehold estate by way of a Mortgage as permitted herein, and should Landlord be advised in writing of the name and address of the Mortgagee, then this Lease shall not be terminated or canceled on account of any Event of Default by Tenant in the performance of the terms, covenants or conditions hereof until Landlord shall have complied with the provisions of Section 18.2 as to the Mortgagee's rights to cure and to obtain a new lease. 18.1.2 Consent of Mortgagee Required. No cancellation, surrender, termination, or modification of this Lease shall be effective without the written consent of the holder of any Mortgage. 18.2 Rights and Obligations of Leasehold Mortgagees. If Tenant or Tenant's successors or assigns shall mortgage the leasehold interest herein demised, then, as long as any such Mortgage shall remain unsatisfied of record, the following provisions shall apply: 18.2.1 No Cancellation. Landlord will not cancel, accept a surrender of, terminate or modify this Lease in the absence of a default by Tenant without the prior consent in writing of the Mortgagee. 18.2.2 Notice of Defaults. Landlord agrees to give each Mortgagee immediate notice of all defaults by Tenant under the Lease, and to simultaneously give to each Mortgagee a written copy of all notices and demands that Landlord gives to Tenant. No notice or demand under the Lease shall be effective until after notice is received by Mortgagee. Any notices of default given by Landlord under the Lease shall describe the default(s) with reasonable detail. Each Mortgagee shall have the right to cure any breach or default within the time periods given below. 18.2.3 Mortgagee's Cure Rights. (a) Notice and Cure. After receipt by Tenant of a notice of default under the Lease and the expiration of any applicable period of cure given to Tenant under the Lease, Landlord shall deliver an additional notice ("Mortgagee's Notice") to each Mortgagee specifying the default and stating that Tenant's period of cure has expired. Each Mortgagee shall thereupon have the additional periods of time to cure any uncured default, as set forth below, without payment of default charges, fees, late charges or interest that might otherwise be payable by Tenant. Landlord shall not terminate the Lease or exercise its other remedies under the Lease if: Page 38 (i) Within ninety (90) days after Mortgagee's receipt of the Mortgagee's Notice, any Mortgagee (i) cures the default, or (ii) if the default reasonably requires more than ninety (90) days to cure, commences to cure said default within such ninety (90)-day period and thereafter diligently prosecutes the same to completion; or (ii) Where the default cannot be cured by payment or expenditure of money or without possession of the Property or otherwise, Mortgagee initiates foreclosure or other appropriate proceedings within ninety (90) days after receipt of the Mortgagee's Notice, thereafter cures all other defaults reasonably capable of cure by the payment of money to Landlord, and thereafter continues to pay all rents, real property taxes and assessments, and insurance premiums to be paid by Tenant under the Lease. Mortgagee shall then have ninety (90) days following the later to occur of (i) the date of execution and delivery of a new lease of the Property pursuant to Section 18.2.4 of the Lease (a "New Lease"), or (ii) the date on which Mortgagee or its nominee is able to occupy the Property following foreclosure under such Mortgage and the eviction of or vacating by Tenant of the leased premises, to cure such default; provided, however, that if any such default, by its nature, is such that it cannot practicably be cured within ninety (90) days, then Mortgagee shall have such additional time as shall be reasonably necessary to cure the default provided that Mortgagee commences such cure within such ninety (90)-day period and thereafter diligently prosecutes the cure to completion. (b) Cure by Mortgagee. Landlord agrees to accept performance by Mortgagee of all cures, conditions and covenants as though performed by Tenant, and agrees to permit Mortgagee access to the Property to take all such actions as may be necessary or useful to perform any condition or covenants of the Lease or to cure any default of Tenant. Mortgagee shall not be required to perform any act or cure any default which is not reasonably susceptible to performance or cure by Mortgagee. (c) Mortgagee Acquisition and Cure. If Mortgagee elects any of the above -mentioned options, then upon Mortgagee's acquisition of the Lease by foreclosure, whether by power of sale or otherwise or by deed or assignment in lieu of foreclosure, or if a receiver be appointed, the Lease shall continue in full force and effect, provided that, if Mortgagee elects the option provided in Section 18.2.3(a)(ii) above, then upon Mortgagee's acquisition of the Lease, Mortgagee shall cure all prior defaults of Tenant under the Lease that are reasonably capable of being cured by Mortgagee within the time set forth in said Section, and Landlord shall treat Mortgagee as Tenant under the Lease. If Mortgagee commences an action as set forth in Section 18.2.3(a)(ii) above, and thereafter Tenant cures such defaults (which cure Landlord shall be obligated to accept) and Mortgagee then terminates all proceedings under the option in said Section, then the Lease shall remain in full force and effect between Landlord and Tenant. 18.2.4 New Lease. In the event the Lease is terminated for any reason prior to the end of the Lease Term, Landlord shall promptly give Mortgagee written notice of such termination and shall enter into a new lease ("New Lease") with Mortgagee or Mortgagee's nominee covering the Property, provided that Mortgagee (a) requests such New Lease by written notice to Landlord within sixty (60) days after Mortgagee's receipt of written notice by Landlord of termination of the Lease, and (b) cures all prior defaults of Tenant that are reasonably capable of being cured by Mortgagee. The New Lease shall be for the remainder of the Lease Term, effective at the date of Page 39 such termination, and shall only include all the rents and all the covenants, agreements, conditions, provisions, restrictions and limitations contained in the Lease, except as otherwise provided in the Lease. In connection with a New Lease, Landlord shall assign to Mortgagee or its nominee all of Landlord's interest in all existing subleases of all or any part of the Property and all attornments given by the sublessees. Landlord shall not terminate or agree to terminate any sublease or enter into any new lease or sublease for all or any portion of the Property without Mortgagee's prior written consent, unless Mortgagee fails to deliver its request for a New Lease under this Section. In connection with any such New Lease, Landlord shall, by grant deed, convey to Mortgagee or its nominee title to the Improvements, if any, which become vested in Landlord as a result of termination of the Lease. Landlord shall allow to the tenant under the New Lease a credit against rent equal to the net income derived by Landlord from the Property during the period from the date of termination of the Lease until the date of execution of the New Lease under this Section. 18.2.5 Security Deposits. Mortgagee or any other purchaser at a foreclosure sale of the Mortgage (or Mortgagee or its nominee if one of them enters into a New Lease with Landlord) shall succeed to all the interest of Tenant in any security or other deposits or other impound payments paid by Tenant to Landlord. 18.2.6 Permitted Delays. So long as Mortgagee is prevented by any process or injunction issued by any court or by any statutory stay, or by reason of any action by any court having jurisdiction of any bankruptcy or insolvency proceeding involving Tenant or any other person, from commencing or prosecuting foreclosure or other appropriate proceedings in the nature thereof, Mortgagee shall not be deemed for that reason to have failed to commence such proceedings or to have failed to diligently prosecute such proceedings, provided that Mortgagee uses reasonable efforts to contest and appeal the issuance or continuance of any such process, stay or injunction. 18.2.7 Defaults Deemed Cured. On transfer of the Lease at any foreclosure sale under the Mortgage or by deed or assignment in lieu of foreclosure, or upon creation of a New Lease, any or all of the following defaults relating to the prior owner of the Lease shall be deemed cured: (a) Attachment, execution or other judicial levy upon the Lease; (b) Assignment of the Lease for the direct or indirect benefit of creditors of the prior Tenant; (c) Judicial appointment of a receiver or similar officer to take possession of the Lease; (d) Filing any petition by, for or against Tenant under any chapter of the federal Bankruptcy Act or any federal or state debtor relief statute, as amended; (e) Any failure by Tenant to make a disclosure of a hazardous substance release as required by the California Health and Safety Code, the Lease or otherwise; and Page 40 (f) Any other defaults personal to Tenant and/or not otherwise reasonably curable by Mortgagee. 18.2.8 Mortgagee Priority. Anything herein contained to the contrary notwithstanding, the provisions of this Section shall inure only to the benefit of the holders of Mortgages. If the holders of more than one such Mortgage shall make written requests upon Landlord in accordance with this Lease, the new lease (as provided for in subsection 18.2.4 above) shall be entered into pursuant to the request of the holder whose Mortgage shall be prior in lien thereto and thereupon the written requests for a new lease of each holder of a Mortgage junior in lien shall be and be deemed to be void and of no force or effect. 18.3 Landlord's Forbearance and Right to Cure Defaults on Leasehold Mortgages 18.3.1 Notice. Landlord will give to Mortgagee, at such address as is specified by the Mortgagee in accordance with Section 26.1 hereof, a copy of each notice or other communication with respect to any claim that a default exists or is about to exist from Landlord to Tenant hereunder at the time of giving such notice or communication to Tenant, and Landlord will give to Mortgagee a copy of each notice of any rejection of this Lease by any trustee in bankruptcy of Tenant. Landlord will not exercise any right, power or remedy with respect to any Event of Default hereunder, and no notice to Tenant of any such Event of Default and no termination of this Lease in connection therewith shall be effective, unless Landlord has given to Mortgagee written notice or a copy of its notice to Tenant of such Event of Default or any such termination, as the case may be. 18.3.2 Mortgagee's Transferees, Etc. In the event the leasehold estate hereunder shall be acquired by foreclosure, trustee's sale or deed or assignment in lieu of foreclosure of a Mortgage, the purchaser at such sale or the transferee by such assignment and its successors as holders of the leasehold estate hereunder shall not be liable for any Rent, if any, or other obligations accruing after its or their subsequent sale or transfer of such leasehold estate and such purchaser or transferee and its successors shall be entitled to transfer such estate or interest without consent or approval of Landlord; provided that, the purchaser or transferee or successor as holder of the leasehold estate hereunder shall be liable for the payment of all Rent, if any, becoming due with respect to the period during which such purchaser, transferee or other successor is the holder of the leasehold estate hereunder. This Section shall also apply to the rights of a Mortgagee in connection with the entry into a new lease under Section 18.2.4 and to the appointment of a receiver on behalf of a Mortgagee. 18.3.3 Insurance and Condemnation. In the event of any casualty to, or condemnation of, all or any part of the leased premises or any improvements now or hereafter located thereon, the provisions of the Mortgages relating thereto shall prevail over any provisions of this Lease relating thereto. 18.4 No Liability of Mortgagee for Prior Indemnified Acts. A Mortgagee shall not be obligated to assume the liability of Tenant for any indemnities arising for a period prior to Mortgagee's acquiring the right to possession of the Property under this Lease. Page 41 18.5 Landlord Cooperation. Landlord covenants and agrees that it will act and fully cooperate with Tenant in connection with Tenant's right to grant leasehold mortgages as hereinabove provided. At the request of Tenant or any proposed or existing Mortgagee, Landlord shall promptly execute and deliver (i) any documents or instruments reasonably requested to evidence, acknowledge and/or perfect the rights of Mortgagees as herein provided; and (ii) an estoppel certificate certifying the status of this Lease and Tenant's interest herein and such matters as are reasonably requested by Tenant or such Mortgagees. Such estoppel certificate shall include, but not be limited to, certification by Landlord that (a) this Lease is unmodified and in full force and effect (or, if modified, state the nature of such modification and certify that this Lease, as so modified, is in full force and effect), (b) all rents currently due under the Lease have been paid, (c) there are not, to Landlord's knowledge, any uncured Events of Default on the part of Tenant under the Lease or facts, acts or omissions which with the giving of notice or passing of time, or both, would constitute an Event of Default. Any such estoppel certificate may be conclusively relied upon by any proposed or existing leasehold Mortgagee or assignee of Tenant's interest in this Lease. 18.6 Priority. The Lease, and any extensions, renewals or replacements thereof, and any sublease entered into by Tenant as sublessor, and any Mortgage or other encumbrance recorded by any Mortgagee shall be superior to any mortgages, deeds of trust or similar encumbrances placed by Landlord on the Property and to any lien right, if any, of Landlord on the buildings, and any furniture, fixtures, equipment or other personal property of Tenant upon the Property or any interest of Landlord in sublease rentals or similar agreements. 18.7 Claims. Landlord and Tenant shall deliver to Mortgagee notice of any litigation or arbitration proceedings between the parties or involving the Property or the Lease. Mortgagee shall have the right, at its option, to intervene and become a party to any such proceedings. If Mortgagee elects not to intervene or become a party, Landlord shall deliver to Mortgagee prompt notice of and a copy of any award, decision or settlement agreement made in connection with any such proceeding. 18.8 Further Amendments. Landlord and Tenant shall cooperate in including in the Lease by suitable amendment from time to time any provision which may be reasonably requested by any proposed Mortgagee for the purpose of implementing the mortgagee protection provisions contained in this Lease and allowing that Mortgagee reasonable means to protect or preserve the lien of its Mortgage upon the occurrence of a default under the terms of the Lease. Landlord and Tenant each agree to execute and deliver (and to acknowledge for recording purposes, if necessary) any agreement required to effect any such amendment. ARTICLE 19. SUBLEASING 19.1 Subleasing of Property. All subleases ("Subleases") made by Tenant shall be subject to the following provisions and restrictions: 19.1.1 Tenant may, without the consent of Landlord, let individual units of the Improvements to any person who qualifies. Page 42 19.1.2 Each Sublease shall contain a provision, satisfactory to Landlord, requiring the Subtenant to attorn to Landlord upon (a) an Event of Default by Tenant under this Lease, and (b) receipt by such Subtenant of written notice of such Event of Default and instructions to make such Subtenant's rental payments to Landlord. 19.1.3 On any termination of this Lease prior to the expiration of the Term, all of Tenant's interest as sublessor under any and all existing valid and enforceable Subleases for which Landlord has issued a non -disturbance agreement shall be deemed automatically assigned, transferred and conveyed to Landlord and subtenants under such Subleases shall be deemed to have attorned to Landlord. Landlord shall thereafter be bound on such Subleases to the same extent Tenant, as sublessor, was bound thereunder and Landlord shall have all the rights under such Subleases that Tenant, as sublessor, had under such Subleases; provided, however, that any amendments to any such Sublease made after the issuance of a non -disturbance agreement to a subtenant shall not be binding on Landlord. 19.1.4 Any subtenant qualifying shall, upon written request, receive a non - disturbance agreement from Landlord. 19.1.5 Not later than thirty (30) days after each anniversary of the date of commencement of the term of this Lease, Tenant shall deliver to Landlord a current list of the name and mailing address of each Subtenant. 19.1.6 Tenant shall not accept, directly or indirectly, more than two (2) months prepaid rent plus a reasonable security deposit from any subtenant. 19.1.7 Each Sublease shall expressly provide that it is subject to each and all of the covenants, conditions, restrictions and provisions of this Lease. 19.2 Rights of Mortgagees. Notwithstanding anything contained in this Lease to the contrary, all attornment provisions applicable to the Landlord shall also be applicable to a Mortgagee and, as between Landlord and Mortgagee, the Mortgagee shall have priority in any attornment situation. ARTICLE 20. PERFORMANCE OF TENANT'S COVENANTS 20.1 Right of Performance. If Tenant shall at any time fail to pay any Imposition or other charge in accordance with Article 4 hereof, within the time period therein permitted, or shall fail to pay for or maintain any of the insurance policies provided for in Article 9 hereof, within the time therein permitted, or to make any other payment or perform any other act on its part to be made or performed hereunder, within the time permitted by this Lease, then Landlord, after thirty (30) days' written notice to Tenant (or, in case of an emergency, on such notice, or without notice, as may be reasonable under the circumstances) and without waiving or releasing Tenant from any obligation of Tenant hereunder, may (but shall not be required to): (a) pay such Imposition or other charge payable by Tenant pursuant to the provisions of Article 4 hereof, or Page 43 (b) pay for and maintain such insurance policies provided for in Article 9 hereof, or (c) make such other payment or perform such other act on Tenant's part to be made or performed as in this Lease provided. 20.1.1 Rights of Mortgagees. Notwithstanding anything contained in this Lease to the contrary, all of the performance rights available to Landlord under Section 20.1 shall also be available to Mortgagee and, as between Landlord and Mortgagee, the rights of the Mortgagee shall take precedence over the rights of Landlord. 20.2 Reimbursement and Damages. All sums so paid by Landlord and all costs and expenses incurred by Landlord in connection with the performance of any such act, together with interest thereon at the rate provided in Section 4.5 from the respective dates of Landlord's making of each such payment or incurring of each such cost or expense, shall be paid by Tenant to Landlord on demand. Landlord shall not be limited in the proof of any damages which Landlord may claim against Tenant arising out of or by reason of Tenant's failure to provide and keep in force insurance as aforesaid, to the amount of the insurance premium or premiums not paid or incurred by Tenant and which would have been payable upon such insurance, but Landlord shall also be entitled to recover as damages for such breach, the uninsured amount of any loss (to the extent of any deficiency in the insurance required by the provisions of this Lease), damages, costs and expenses of suit, including attorneys' fees, suffered or incurred by reason of damage to, or destruction of, the Improvements, occurring during any period in which Tenant shall have failed or neglected to provide insurance as aforesaid. ARTICLE 21. EVENTS OF DEFAULT; REMEDIES 21.2 Events of Default. Any one or all of the following events shall constitute an Event of Default hereunder: 21.1.1. If Tenant shall default in the payment of any Rent when and as the same becomes due and payable and such default shall continue for more than ten (10) days after Landlord shall have given written notice thereof to Tenant; or 21.1.2 The abandonment or vacation of the Property by Tenant for a period of thirty (30) days; or 21.1.3 The entry of any decree or order for relief by any court with respect to Tenant, or any assignee or transferee of Tenant (hereinafter "Assignee"), in any involuntary case under the Federal Bankruptcy Code or any other applicable federal or state law; or the appointment of or taking possession by any receiver, liquidator, assignee, trustee, sequestrator or other similar official of Tenant or any Assignee (unless such appointment is in connection with a Mortgagee's exercise of its remedies under its Mortgage), or of any substantial part of the property of Tenant or such Assignee, or the ordering or winding up or liquidating of the affairs of Tenant or any Page 44 Assignee and the continuance of such decree or order unstayed and in effect for a period of ninety (90) days or more (whether or not consecutive); or the commencement by Tenant or any such Assignee of a voluntary proceeding under the Federal Bankruptcy Code or any other applicable state or federal law or consent by Tenant or any such Assignee to the entry of any order for relief in an involuntary case under any such law, or consent by Tenant or any such Assignee to the appointment of or taking of possession by a receiver, liquidator, assignee, trustee, sequestrator or other similar official of Tenant or any such Assignee, or of any substantial property of any of the foregoing, or the making by Tenant or any such Assignee of any general assignment for the benefit of creditors; or Tenant or any such Assignee takes any other voluntary action related to the business of Tenant or any such Assignee or the winding up of the affairs of any of the foregoing. 21.1.4 If Tenant shall default in the performance of or compliance with any other term, covenant or condition of this Lease (other than as set forth in Paragraph 21.1.1 of this Section 21.1) and such default shall continue for more than thirty (30) days after Landlord shall have given written notice thereof to Tenant, provided, however, if cure of such default reasonably requires more than thirty (30) days, then, provided that Tenant commences to cure within such thirty (30) day period and thereafter diligently and continuously prosecutes the cure to completion, Tenant shall not be in default during the cure period. 21.2 Remedies. 21.2.1 If an Event of Default shall occur and continue as aforesaid, then in addition to any other remedies available to Landlord at law or in equity, Landlord shall have the immediate option to terminate this Lease and bring suit against Tenant or submit the issue of Tenant's default to arbitration as provided in Article 23 and recover as an award in such suit or arbitration proceeding the following: (a) the worth at the time of award of the unpaid rent and all other sums due hereunder which had been earned at the time of termination; (b) the worth at the time of award of the amount by which the unpaid rent and all other sums due hereunder which would have been earned after termination until the time of award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided; (c) the worth at the time of award of the amount by which the unpaid rent and all other sums due hereunder for the balance of the Term after the time of award exceeds the amount of such rental loss that Tenant proves could be reasonably avoided; (d) any other amount necessary to compensate Landlord for all the detriment proximately caused by the Tenant's failure to perform its obligations under this Lease or which in the ordinary course of things could be likely to result therefrom; and (e) such amounts in addition to or in lieu of the foregoing as may be permitted from time to time by applicable California law. Page 45 21.2.2 The "worth at the time of the award" of the amounts referred to in Subparagraphs 21.2.1(a) and 21.2.1(b) above shall be computed by allowing interest at the rate provided in Section 4.5 as of the date of the award. The "worth at the time of award" of the amount referred to in subparagraph 21.2.1(c) above shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1%). 21.2.3 If an Event of Default occurs, Landlord shall also have the right, with or without terminating this Lease, but subject to any nondisturbance agreements entered into with Subtenants, to reenter the Property and remove all persons and property from the Property; such property may be removed and stored in a public warehouse or elsewhere at the cost of and for the account of Tenant. 21.2.4 If an Event of Default occurs, Landlord shall also have the right, with or without terminating this Lease, to relet the Property. If Landlord so elects to exercise its right to relet the Property but without terminating this Lease, then rentals received by Landlord from such reletting shall be applied: First, to the payment of any indebtedness other than rent due hereunder from Tenant to Landlord; Second, to the payment of any cost of such reletting; Third, to the payment of the cost of any alterations and repairs to the Property; Fourth, to the payment of rent due and unpaid hereunder; and Fifth, the residue, if any, shall be held by Landlord and applied in payment of future rent as the same may become due and payable hereunder. Should the amount of rental received from such reletting during any month which is applied to the payment of rent hereunder be less than that agreed to be paid during that month by Tenant hereunder, then Tenant shall pay such deficiency to Landlord immediately upon demand therefor by Landlord. Such deficiency shall be calculated and paid monthly. Tenant shall also pay to Landlord, as soon as ascertained, any costs and expenses incurred by Landlord in such reletting or in making alterations and repairs not covered by the rentals received from such reletting. 21.2.5 No reentry or taking possession of the Property by Landlord pursuant to Paragraphs 21.2.3 or 21.2.4 shall be construed as an election to terminate this Lease unless a written notice of such intention is given to Tenant or unless the termination thereof is decreed by a court of competent jurisdiction. Notwithstanding any reletting without termination by Tenant because of any default by Tenant, Landlord may at any time after such reletting elect to terminate this Lease for any such default. 21.3 Receipt of Rent, No Waiver of Default. The receipt by Landlord of the rents or any other charges due to Landlord, with knowledge of any breach of this Lease by Tenant or of any default on the part of Tenant in the observance or performance of any of the conditions or covenants of this Lease, shall not be deemed to be a waiver of any provisions of this Lease. No acceptance by Landlord of a lesser sum than the rents or any other charges then due shall be deemed to be other than on account of the earliest installment of the rents or other charges due, nor shall any endorsement or statement on any check or any letter accompanying any check or payment of rent or charges due be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord's right to recover the balance of such installment or pursue any other remedy provided in this Lease. The receipt by Landlord of any rent or any other sum of money or any other consideration paid by Tenant after the termination of Page 46 this Lease, or after giving by Landlord of any notice hereunder to effect such termination, shall not, except as otherwise expressly set forth in this Lease, reinstate, continue, or extend the term of this Lease, or destroy, or in any manner impair the efficacy of any such notice of termination as may have been given hereunder by Landlord to Tenant prior to the receipt of any such sum of money or other consideration, unless so agreed to in writing and signed by Landlord. Neither acceptance of the keys nor any other act or thing done by Landlord or by its agents or employees during the Term shall be deemed to be an acceptance of a surrender of the Property or the Improvements, excepting only an agreement in writing signed by Landlord accepting or agreeing to accept such a surrender. 21.4 Effect on Indemnification. Notwithstanding the foregoing, nothing contained in this Article 21 shall be construed to limit the Indemnitees' right to indemnification as otherwise provided in this Lease. 21.5 Limited Waiver of Right to Terminate Lease. Landlord hereby waives it right to terminate this Lease during the Compliance Period for a default by Tenant other than the failure to pay Annual Rent. That notwithstanding, Landlord, during the Compliance Period, shall retain all other rights and remedies available hereunder or by law for such a non -monetary default, including, without limitation, an action to compel performance of the covenant or condition that is the subject of the alleged default. ARTICLE 22. PERMITTED CONTESTS Tenant, at no cost or expense to Landlord, may contest (after prior written notice to Landlord), by appropriate legal proceedings conducted with due diligence, the amount or validity or application, in whole or in part, of any Imposition or lien or any Legal Requirement or Insurance Requirement, provided that (a) in the case of liens of mechanics, materialmen, suppliers or vendors, or Impositions or liens therefor, such proceedings shall suspend the collection thereof from Landlord, and shall suspend a foreclosure against the Property and/or the Improvements, or any interest therein, or any Rent, if any, (b) neither the Property or the Improvements, nor any part thereof or interest therein, or the Rent, if any, or any portion thereof, would be in any danger of being sold, forfeited or lost by reason of such proceedings, (c) in the case of a Legal Requirement, Landlord would not be in any danger of any criminal liability or, unless Tenant shall have furnished a bond or other security therefor satisfactory to Landlord, any additional civil liability for failure to comply therewith and the Property and the Improvements would not be subject to the imposition of any lien as a result of such failure, and (d) Tenant shall have furnished to Landlord, if requested, a bond or other security, satisfactory to Landlord. If Tenant shall fail to contest any such matters, or to give Landlord security as hereinabove provided, Landlord may, but shall not be obligated to, contest the matter or settle or compromise the same without inquiring into the validity or the reasonableness thereof. Landlord, at the sole cost and expense of Tenant, will cooperate with Tenant and execute any documents or pleadings legally required for any such contest. ARTICLE 23. ARBITRATION OF DISPUTES Page 47 23.1 Matters Subiect to Arbitration. All disputes arising under this Lease shall be submitted to arbitration prior to either party bringing suit based on such disputes, except that any dispute relating to the following rights and obligations shall not be subject to arbitration: 23.1.1 Tenant's obligation to: (a) pay Rent, if any, and other charges due under this Lease; (b) indemnify Landlord as provided herein; and (c) keep the Property and the Improvements free and clear of any mechanics' or other liens: 23.1.2 Landlord's right to: (a) pursue any of the remedies defined in Article 21; and (b) assign, transfer, sell or encumber its interest in the Property or this Lease; 23.1.3 Any right or obligation the exercise or performance of which is dependent on Landlord's approval, if the issue is the reasonableness of Landlord's action. 23.1.4 Any right of the Mortgagee to exercise its remedies under its Mortgage or in connection with the bankruptcy of the Tenant or Landlord. 23.2 Arbitration Process. Either party may refer a dispute subject to arbitration for settlement by arbitration in National City, California, in accordance with the Commercial Arbitration Rules of the American Arbitration Association, and judgment upon the award rendered by the Arbitrator(s) may be entered in any Court having jurisdiction. NOTICE: BY INITIALING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY CALIFORNIA LAW AND YOU ARE GIVING UP ANY RIGHTS YOU MAY POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL. BY INITIALING IN THE SPACE BELOW YOU ARE GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS SUCH RIGHTS ARE SPECIFICALLY INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION. IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY. Page 48 MAY POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL. BY INITIALING IN THE SPACE BELOW YOU ARE GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS SUCH RIGHTS ARE SPECIFICALLY INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION. IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY. WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION TO NEUTRAL ARBITRATION. Tenant's Initials Landlord's Initials ARTICLE 24. FORCE MAJEURE 24.1 Subject to Paragraph 24.2 below, any prevention, delay, nonperformance or stoppage by Tenant due to any of the following causes shall be excused: any regulation, order, act, restriction or requirement or limitation imposed by any federal, state, municipal or foreign government or any department or agency thereof, or civil or military authority; acts of God; acts or omissions of Landlord or its agents or employees; fire; explosion; floods and/or earthquakes; strikes, walkouts or inability to obtain materials; war, riots, sabotage or civil insurrection; or any other causes beyond the reasonable control of Tenant. 24.2 No prevention, delay, or stoppage of performance shall be excused unless: 24.2.1 Tenant notifies Landlord within thirty (30) days of such prevention, delay or stoppage that it is claiming excuse of its obligations under this Article 24; and 24.2.2 Tenant diligently proceeds within thirty (30) days of the conclusion of such prevention, delay or stoppage to cure the condition causing the prevention, delay or stoppage; and 24.2.3 Tenant effects such cure within a reasonable time. ARTICLE 25. GENERAL PROVISIONS 25.1 Notices. All notices or demands shall be in writing and shall be served personally, by overnight courier, or by express or certified mail. Service shall be deemed conclusively made at the time of service if personally served; the next business day if sent by overnight courier and receipt is confirmed by the signature of an agent or employee of the party served; the next business day after deposit in the United States mail, properly addressed and postage prepaid, return receipt requested, if served by express mail; and three (3) days after Page 49 MAY POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL. BY INITIALING IN THE SPACE BELOW YOU ARE GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS SUCH RIGHTS ARE SPECIFICALLY INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION. IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY. WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION TO NEUTRAL ARBITRATION. Tenant's Initials Landlord's Initials ARTICLE 24. FORCE MAJEURE 24.1 Subject to Paragraph 24.2 below, any prevention, delay, nonperformance or stoppage by Tenant due to any of the following causes shall be excused: any regulation, order, act, restriction or requirement or limitation imposed by any federal, state, municipal or foreign government or any department or agency thereof, or civil or military authority; acts of God; acts or omissions of Landlord or its agents or employees; fire; explosion; floods and/or earthquakes; strikes, walkouts or inability to obtain materials; war, riots, sabotage or civil insurrection; or any other causes beyond the reasonable control of Tenant. 24.2 No prevention, delay, or stoppage of performance shall be excused unless: 24.2.1 Tenant notifies Landlord within thirty (30) days of such prevention, delay or stoppage that it is claiming excuse of its obligations under this Article 24; and 24.2.2 Tenant diligently proceeds within thirty (30) days of the conclusion of such prevention, delay or stoppage to cure the condition causing the prevention, delay or stoppage; and 24.2.3 Tenant effects such cure within a reasonable time. ARTICLE 25. GENERAL PROVISIONS 25.1 Notices. All notices or demands shall be in writing and shall be served personally, by overnight courier, or by express or certified mail. Service shall be deemed conclusively made at the time of service if personally served; the next business day if sent by overnight courier and receipt is confirmed by the signature of an agent or employee of the party served; the next business day after deposit in the United States mail, properly addressed and postage prepaid, return receipt requested, if served by express mail; and three (3) days after Page 49 or omissions of Landlord or its agents or employees; fire; explosion; floods and/or earthquakes; strikes, walkouts or inability to obtain materials; war, riots, sabotage or civil insurrection; or any other causes beyond the reasonable control of Tenant. 24.2 No prevention, delay, or stoppage of performance shall be excused unless: 24.2.1 Tenant notifies Landlord within thirty (30) days of such prevention, delay or stoppage that it is claiming excuse of its obligations under this Article 24; and 24.2.2 Tenant diligently proceeds within thirty (30) days of the conclusion of such prevention, delay or stoppage to cure the condition causing the prevention, delay or stoppage; and 24.2.3 Tenant effects such cure within a reasonable time. ARTICLE 25. GENERAL PROVISIONS 25.1 Notices. All notices or demands shall be in writing and shall be served personally, by overnight courier, or by express or certified mail. Service shall be deemed conclusively made at the time of service if personally served; the next business day if sent by overnight courier and receipt is confirmed by the signature of an agent or employee of the party served; the next business day after deposit in the United States mail, properly addressed and postage prepaid, return receipt requested, if served by express mail; and three (3) days after deposit thereof in the United States mail, properly addressed and postage prepaid, return receipt requested, if served by certified mail. 25.1.1 Any notice to Landlord shall be given to: Community Development Commission - Housing Authority of the City of National City 1243 National City Blvd. National City, California 91950 Attn: Executive Director 25.1.2 Any notice to Tenant shall be given to: Morgan Tower Housing Associates, L.P. do Community HousingWorks 3111 Camino Del Rio North, Suite 800 San Diego, CA 92108 Attention: Susan M. Reynolds, President & CEO Page 50 Credit Partner, mortgagee or trustee under a deed of trust of the fee or leasehold estate in the Property or any part thereof or of Landlord's or Tenant's interest under this Lease. Tenant will also deliver to Landlord, promptly upon request, such information with respect to the Property or any part thereof as from time to time may reasonably be requested. 25.3 No Merger of Title. There shall be no merger of this Lease or the leasehold estate created by this Lease with any other estate in the Property or any part thereof by reason of the fact that the same person, firm, corporation or other entity may acquire or own or hold, directly or indirectly: (a) this Lease or the leasehold estate created by this Lease or any interest in this Lease or in any such leasehold estate, and (b) any other estate in the Property and the Improvements or any part thereof or any interest in such estate, and no such merger shall occur unless and until all persons, corporations, firms and other entities, including any leasehold mortgagee or leasehold mortgagees, having any interest (including a security interest) in (i) this Lease or the leasehold estate created by this Lease, and (ii) any other estate in the Property or the Improvements or any part thereof shall join in a written instrument effecting such merger and shall duly record the same. 25.4 Utility Services. Tenant shall pay or cause to be paid all charges for all public or private utility services and all sprinkler systems and protective services at any time rendered to or in connection with the Property or the Improvements, or any part thereof, and shall comply with all contracts existing on the date hereof or subsequently executed by Tenant relating to any such services, and will do all other things required for the maintenance and continuance of all such services. 25.5 Quiet Enjoyment. Tenant, upon paying the Rent, if any, and other charges herein provided for and upon performing and complying with all covenants, agreements, terms and conditions of this Lease to be performed or complied with by it, shall lawfully and quietly hold, occupy and enjoy the Property during the term of this Lease without hindrance or molestation by Landlord, or any person or persons claiming through Landlord. 25.6 No Claims Against Landlord. Nothing contained in this Lease shall constitute any consent or request by Landlord, express or implied, for the performance of any labor or services or the furnishing of any materials or other property in respect of the Property or any part thereof, nor as giving Tenant any right, power or authority to contract for or permit the performance of any labor or services or the furnishing of any materials or other property in such fashion as would permit the making of any claim against Landlord or its interest in the Property in respect thereof. 25.7 Inspection. Landlord and its authorized representatives may enter the Property or any part thereof at all reasonable times for the purpose of inspecting, servicing or posting notices, protecting the Property or the Improvements, or for any other lawful purposes. That notwithstanding, Landlord may only enter residential units after giving Tenant three (3) days prior written notice. 25.8 No Waiver by Landlord. To the extent permitted by applicable law, no failure by Landlord to insist upon the strict performance of any term hereof or to exercise any right, power or remedy consequent upon a default under this Lease, and no acceptance of rent during the Page 51 continuance of any such default, shall constitute a waiver of any such default or of any such term. No waiver of any default shall affect or alter this Lease, which shall continue in full force and effect, or the rights of Landlord with respect to any other then existing or subsequent default. 25.9 Holding Over. In the event Tenant shall hold over or remain in possession of the Property or the Improvements with the consent of Landlord after the expiration of the Term, such holding over or continued possession shall create a tenancy for month to month only, upon the same terms and conditions as are herein set forth so far as the same are applicable. 25.10 Exculpation of Certain Personal Liability. Notwithstanding anything to the contrary provided in this Lease, including, without limitation, the remedies provisions set forth in Section 21.2 above, it is specifically understood and agreed that except as to: (a) the obligation to pay Annual Rent pursuant to Section 4.1; (b) the obligation to pay any and all Impositions; (c) acts of fraud and/or criminal misconduct; (d) acts of gross negligence and/or willful misconduct; (e) any and all legal costs and expenses reasonably incurred by Landlord in the enforcement of this Lease; and/or (f) liability for risks required to be covered by insurance under this Lease but for which Tenant fails to maintain such coverage; there shall be no personal liability or obligation on the part of any partner in Tenant or any assignee or successor in interest of any such partner with respect to the provisions of this Lease; provided, that, in no event shall the Tax Credit Partner have any personal liability with respect to the provisions of this Lease. 25.11 No Partnership. Anything contained herein to the contrary notwithstanding, Landlord does not in any way or for any purpose become a partner of Tenant in the conduct of its business, or otherwise, or a joint venturer or member of a joint enterprise with Tenant hereunder. 25.12 Remedies Cumulative. The various rights, options, elections and remedies of Landlord and Tenant, respectively, contained in this Lease shall be cumulative and no one of them shall be construed as exclusive of any other, or of any right, priority or remedy allowed or provided for by law and not expressly waived in this Lease. 25.13 Attorney's Fees. In the event of a dispute between the parties arising out of or in connection with this Lease, whether or not such dispute results in arbitration or litigation, the prevailing party (whether resulting from settlement before or after arbitration or litigation is commenced) shall be entitled to have and recover from the losing party reasonable attorneys' fees and costs of suit incurred by the prevailing party. Page 52 25.14 Time Is Of The Essence. Time is of the essence of this Lease and all of the terms, provisions, covenants and conditions hereof. 25.15 Survival of Representations, Warranties and Covenants. The respective representations, warranties and covenants contained herein shall survive the Commencement Date and continue throughout the Term. 25.16 Construction of Agreement. This Lease shall be construed in accordance with the substantive laws of the State of California, without regard to the choice of law rules thereof. The rule of construction that a document be construed strictly against its drafter shall have no application to this Lease. 25.17 Severability. If one or more of the provisions of this Lease shall be held to be illegal or otherwise void or invalid, the remainder of this Lease shall not be affected thereby and shall remain in full force and effect to the maximum extent permitted under applicable laws and regulations. 25.18 Entire Agreement: Modification. This Lease contains the entire agreement of the parties with respect to the matters discussed herein. This Lease may be amended only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification, extensions or discharge is sought. 25.19 Binding Effect and Benefits. This Lease shall inure to the benefit of and be binding on the parties hereto and their respective successors and assigns. Except as otherwise set forth herein, nothing in this Lease, expressed or implied, is intended to confer on any person other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Lease. 25.20 Further Assurances. Each party hereto will promptly execute and deliver without further consideration such additional agreement, assignments, endorsements and other documents as the other party hereto may reasonably request to carry out the purposes of this Lease. 25.21 Counterparts. This Lease may be executed simultaneously in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same Lease. 25.22 Number and Gender. Whenever the singular number is used in this Lease and required by the context, the same shall include the plural, and the masculine gender shall include the feminine and neuter genders. 25.23 Incorporation by Reference. Every Exhibit attached to this Lease and referred to herein is hereby incorporated by reference. 25.24 Tax Credit Partner Rights. Notwithstanding anything to the contrary contained in this Lease, Landlord, prior to any action to enforce this Lease, shall give the Tax Credit Partner Page 53 notice and opportunity to cure for a period of not less than (a) fifteen (15) days if a monetary default, and (b) thirty (30) days if a nonmonetary default; provided, however, if in order to cure such a default Tax Credit Partner reasonably determines that it must remove the general partner of Tenant, Tax Credit Partner shall so notify Lender and so long as Tax Credit Partner is diligently and continuously attempting to so remove such general partner, Tax Credit Partner shall have until the date thirty (30) days after the effective date of the removal of the general partner or general partners to cure such default but in no event more than one (1) year. [SIGNATURES ON FOLLOWING PAGE] Page 54 IN WITNESS WHEREOF, the undersigned have executed this Lease as of the date first above written. "Landlord" COMMUNITY DEVELOPMENT COMMISSION - HOUSING AUTHORITY OF THE CITY OF NATIONAL CITY, a public body, corporate and politic ) Leslie Deese, Executive Director APPROVED AS TO FORM: By: AP ' OVED AS TO FOR : Christensen & Spath LLP Landl s rd ' pecial Counsel By: [SIGNATURES CONTINUED ON FOLLOWING PAGE] Page 55 "Tenant" KIMBALL TOWER HOUSING ASSOCIATES, L.P., a California limited partnership By: CHW Kimball Development LLC, Its: managing general partner By: Community HousingWorks Its: sole member and manager By: S - M. Reynolds, ' res' ' ent & CEO By: Mercy Kimball Development LLC Its administrative general partner By: Mercy Housing Calwest Its: sole member and manager By: Oil e Erika Villablanca, Vice President Page 56 EXHIBIT "A" LEGAL DESCRIPTION OF THE PROPERTY Real property in the City of National City, County of San Diego, State of California, described as follows: Lot 2 of Center City Project, in the City of National City, County of San Diego, State of California according to Map thereof No. 8807, filed in the Office of the County Recorder of San Diego on February 24, 1978, which buildings and improvements are and shall remain real property. Page 56 EXHIBIT `B" INCOME COMPUTATION AND CERTIFICATION NOTE TO APARTMENT OWNER: This form is designed to assist you in computing Annual Income in accordance with the method set forth in the Department of Housing and Urban Development ("HUD") Regulations (24 CFR 813). You should make certain that this form is at all times up to date with the HUD Regulations. Re: Morgan Tower, National City, California I/We, the undersigned state that Uwe have read and answered fully, frankly and personally each of the following questions for all persons who are to occupy the unit being applied for in the above apartment project. Listed below are the names of all persons who intend to reside in the unit: 1. Names of Members of Household 2. Relationship to Head of Household 3. Age 4. Social Security Number 5. Place/Source of Employment 6. Monthly Gross Income Amount (before deductions) HEAD SPOUSE Income Computation 6. The total anticipated income, calculated in accordance with the provisions of this paragraph 6, of all persons over the age of 18 years listed above for the 12-month period beginning the date that I/we plan to move into a unit is $ Included in the total anticipated income listed above are: EXHIBIT `B" Page 1 (a) all wages and salaries, overtime pay, commissions, fees, tips and bonuses and other compensation for personal services, before payroll deductions; (b) the net income from the operation of a business or profession or from the rental of real or personal property (without deducting expenditures for business expansion or amortization of capital indebtedness or any allowance for depreciation of capital assets), (c) interest and dividends (including income from assets excluded below); (d) the full amount of periodic payments received from social security, annuities, insurance policies, retirement funds, pensions, disability or death benefits and other similar types of periodic receipts, including any lump sum payment for the delayed start of a periodic payment; (e) payments in lieu of earnings, such as unemployment and disability compensation, worker's compensation and severance pay; (f) the maximum amount of public assistance available to the above persons other than the amount of any assistance specifically designated for shelter and utilities; (g) periodic and determinable allowances, such as alimony and child support payments and regular contributions and gifts received from persons not residing in the dwelling; (h) all regular pay, special pay and allowances of a member of the Armed Forces (whether or not living in the dwelling) who is the head of the household or spouse; and (i) any earned income tax credit to the extent that it exceeds income tax liability. Excluded from such anticipated income are: (a) casual, sporadic or irregular gifts; (b) amounts which are specifically for or in reimbursement of medical expenses; (c) lump sum additions to family assets, such as inheritances, insurance payments (including payments under health and accident insurance and workmen' s compensation), capital gains and settlement for personal or property losses; (d) amounts of educational scholarships paid directly to the student or the educational institution, and amounts paid by the government to a veteran for use in meeting the costs of tuition, fees, books and equipment. Any amounts of such scholarships or payments to veterans not used for the above purposes are to be included in income; fire; (e) special pay to a household member who is away from home and exposed to hostile EXHIBIT "B" Page 2 (f) relocation payments under Title II of the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970; (g) foster child care payments; (h) the value of coupon allotments for the purchase of foods pursuant to the Food Stamp Act of 1977; (i) payments to volunteers under the Domestic Volunteer Service Act of 1973; (j) payments received under the Alaska Native Claims Settlement Act; (k) income derived from certain submarginal land of the United States that is held in trust for certain Indian tribes; (1) payments or allowances made under the Department of Health and Human Services' Low -Income Home Energy Assistance Program; (m) payments received from the Job Training Partnership Act; (n) income derived from the disposition of funds of the Grand River Band of Ottawa Indians; and (o) the first $2,000.00 of per capita shares received from judgment funds awarded by the Indian Claims Commission or the Court of Claims. 7. Do the persons whose income or contributions are included in item 6 above: (a) have savings, stocks, bonds, equity in real property or other form of capital investment (excluding the values of necessary items of personal property such as furniture and automobiles and Yes No interests in Indian trust land); or (b) have they disposed of any assets (other than at a foreclosure or Credit Bankruptcy sale) during the last two years at less Yes No than fair market value? (c) If the answer to (a) or (b) above is yes, does the combined total value of all such assets owned or disposed of by all Yes No such persons total more than $5,000? EXHIBIT "B" Page 3 (d) If the answer to (c) above is yes, state: (1) the amount of income expected to be derived from such assets in the 12-month period beginning on the date of initial $ occupancy in the unit that you propose to rent: (2) the amount of such income, if any, that was $ included in item 6 above: 8. (a) Are all of the individuals who propose to reside Yes No in the unit full-time students*? * A full-time student is an individual enrolled as a full-time student during each of 5 calendar months during the calendar year in which occupancy of the unit begins at an educational organization which normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of students in attendance and is not an individual pursuing a full-time course of institutional or farm training under the supervision of an accredited agent of such an educational organization or of a state or political subdivision thereof. (b) If the answer to 8(a) is yes, is at least 1 of the proposed occupants of the unit a husband and wife entitled to file a joint federal income tax return? Yes No 9. Neither myself nor any other occupant of the unit I/we propose to rent is the owner of the rental housing project in which the unit is located (hereinafter the "Owner"), has any family relationship to the Owner, or owns directly or indirectly any interest in the Owner. For purposes of this paragraph, indirect ownership by an individual shall mean ownership by a family member, ownership by a corporation, partnership, estate or trust in proportion to the ownership or beneficial interest in such corporation, partnership, estate or trustee held by the individual or a family member; and ownership, direct or indirect, by a partner of the individual. 10. This certificate is made with the knowledge that it will be relied upon by the Owner to determine maximum income for eligibility to occupy the unit, and I/we declare that all information set forth herein is true, correct and complete and based upon information I/we deem reliable and that the statement of total anticipated income contained in paragraph 6 is reasonable and based upon such investigation as the undersigned deemed necessary. 11. I/we will assist the Owner in obtaining any information or documents required to verify the statements made herein, including either an income verification from my/our present employer(s) or copies of federal tax returns for the immediately preceding calendar year. 12. I/we acknowledge that I/we have been advised that the making of any misrepresentation or misstatement in this declaration will constitute a material breach of my/our EXHIBIT "B" Page 4 agreement with the Owner to lease the unit and will entitle the Owner to prevent or terminate my/our occupancy of the unit by institution of an action for ejection or other appropriate proceedings. 13. Housing Commission Statistical Information (Optional - will be used for reporting purposes only). Hispanic Race (Head of Household) White Black Native American Other Physical Disability: Yes No Asian I/we declare under penalty of perjury that the foregoing is true and correct. Executed this day of in the County of California. Applicant Applicant [Signatures of all persons over the age of 18 years listed in number 2 above required.] EXHIBIT "B" Page 5 FOR COMPLETION BY APARTMENT OWNER ONLY: 1. Calculation of eligible income: a. Enter amount entered for entire household in 6 above: b. (1) If answer to 7(c) above is yes, enter the total amount entered in 7(d)(1), subtract from that figure the amount entered in 7(d)(2) and enter the remaining balance ($ ) (2) Multiply the amount entered in 7(c) times the current passbook savings rate to determine what the total annual earnings on the amount in 7(c) would be if invested in passbook savings ($ ), subtract from that figure the amount entered in 7(d)(2) and enter the remaining balance ($ ) (3) Enter at right the greater of the amount calculated under (1) and (2) above: $ c. TOTAL ELIGIBLE INCOME (line l .a plus line 1.b(3)): $ 2. The amount entered in 1.c: Qualifies the applicant(s) as a Very Low -Income Tenant(s). Does not qualify the applicant(s) as a Very Low -Income Tenant(s). 3. Number of apartment unit assigned: Bedroom Size: Rent: $ Tenant -Paid Utilities: Water Gas Electric Trash Other (list Type) 4. Was this apartment unit last occupied for a period of 31 consecutive days by persons whose aggregate anticipated annual income as certified in the above manner upon their initial occupancy of the apartment unit qualified them as Yes No Very Low -Income Tenants? EXHIBIT "B" Page 6 5. Method used to verify applicant(s) income: Employer income verification. Social Security Administration verification Department of Social Services verification Copies of tax returns Other: ( ) Manager EXHIBIT "B" Page 7 'ages: Title: Article I. INCOME VERIFICATION (For Employed Persons) The undersigned employee has applied for a rental unit located in a project financed under the Multifamily Housing Program for persons of low income. Every income statement of a prospective tenant must be stringently verified. Please indicate below the employee' s current annual income from wages, overtime, bonuses, commissions or any other form of compensation received on a regular basis. Overtime: Bonuses: Commissions: Total Current Income: I hereby certify that the statements above are true and complete to the best of my knowledge. Signature I hereby grant you permission to disclose my income to in order that they may determine my income eligibility for rental of an apartment located in their project which has been financed under Multifamily Housing Program. Signature Please send form to: EXHIBIT "B" Page 8 INCOME VERIFICATION (For Social Security Recipients) TO: SOCIAL SECURITY ADMINISTRATION Ladies and Gentlemen: I have applied for a rental unit located in a project financed under the Multifamily Housing Program for persons of low income. Every income statement of a prospective tenant must be stringently verified. In connection with my application for a rental unit, I hereby give my consent to release to the specific information requested below. Signature Social Security No.: Name (Print): Address (Print): Monthly Benefits Began/Will Begin: Social Security Benefit Amount: $ Other Benefit(s): Amount: $ Medicare Deduction: $ Are benefits expected to change? Yes No If yes, please state date and amount Date: of change: Amount: If recipient is not receiving full benefit amount, please indicate reason and date recipient will start receiving full benefit amount: Reason: Signature Date of Resumption: Amount: $ Telephone: Name (Print): Title: Please send form to: EXHIBIT "B" Page 9 INCOME VERIFICATION (For Department of Social Services Aid Recipients) TO: CALIFORNIA DEPARTMENT OF SOCIAL SERVICES Ladies and Gentlemen: I am receiving assistance through your office. I have applied for a rental unit located in a project financed under the Multifamily Housing Program for persons of very low income. Every income statement of a prospective tenant must be stringently verified. In connection with my application for a rental unit, I hereby authorize the Department of Social Services to release to the specific information requested below. Signature Caseload Number: Case Number: 1. Number of persons included in budget: Total monthly budget: Name (Print): Case Worker: a. Amount of grant: $ Date aid last began: b. Other income and source: c. Is other income included in total budget? Yes No 3. Please specify type of aid (AFDC, FR, Food Stamps, ANB, MediCal, etc.) 4. If recipient is not receiving full grant, please indicate reason: Overpayment due to client's failure to report other income Computation error Other EXHIBIT "B" Page 10 Date when full grant will resume: Case Worker's Signature Telephone: District Office Your very early response will be appreciated. Please return form to: EXHIBIT "B" Page 11 INCOME VERIFICATION (For Self -Employed Persons) I hereby attach copies of my individual federal and state income tax returns for the immediately preceding calendar year and certify that the information shown in such income tax returns is true and complete to the best of my knowledge. Signature EXHIBIT "B" Page 12 EXHIBIT "C" CERTIFICATE OF CONTINUING PROGRAM COMPLIANCE [Kimball Tower] With reference to that certain Lease Agreement by and between KIMBALL TOWER HOUSING ASSOCIATES ("Tenant") and the COMMUNITY DEVELOPMENT COMMISSION -HOUSING AUTHORITY OF THE CITY OF NATIONAL CITY, dated as of , 2019 (the "Lease Agreement"), Tenant hereby certifies, as of , 2 , the following percentages of units at the Kimball Tower, National City, California are occupied or being held vacant for low-income tenants: 1. Occupied by 50% of Median Income Tenants: %; Unit Nos. The undersigned hereby certifies that the information contained in this Certificate is true and complete and that Tenant is not in default under the Ground Lease. KIMBALL TOWER HOUSING ASSOCIATES, L.P., a California limited partnership By: CHW Kimball Development LLC, Its: managing general partner By: Community HousingWorks Its: sole member and manager By: Susan M. Reynolds, President & CEO By: Mercy Kimball Development LLC Its administrative general partner By: Mercy Housing Calwest Its: sole member and manager By: Erika Villablanca, Vice President EXHIBIT "B" Page 13 EXHIBIT "D" PLAN FOR RESIDENT SERVICES Mercy Housing California and/or an approved resident service provider will provide outcome - based, result -oriented services and programs for residents starting no later than six (6) months after the completion of rehabilitation of the Kimball Tower until expiration of the Term. The services will be administered by on -site resident services' provider staff. Programs will be tailored to the needs of the community and for the household. The services will include, but not be limited to: Health and Wellness —The program focuses on and evaluation of the inextricable linkage between healthcare and housing. Services include basic health & needs assessments, ADL support & screening, health benefit acquisition, health education & risk reduction, physical activities, access to food, wellbeing checks, transition planning, and linkages to preventative and behavioral health care. In addition to annual assessments, periodically monitor residents for change in risk factors and service needs, formalized screenings, and on -site health risk reduction activities such as disease management groups, fall prevention, and social support opportunities. Economic Development/Housing Stability — This program creates households with safe and stable housing and where renters are in good standing. Services include eviction prevention coaching, lease education, housing options, housing inspection, linkages with financial resources, and referrals. Education/Community Participation — This program ties closely to health and wellness and economic development/housing stability. Services include nutrition and exercise resources, financial stability seminars, financial benefit acquisition, employment and job readiness support, and technology literacy. Community participation activities for residents such as, community projects & events, volunteer opportunities, voter registration, leaderships programming, community safety initiatives, and family reconciliation EXHIBIT "E" Page 1 EXHIBIT "E" Easement Area Legal Description EXHIBIT "E" Page 2 PORTION OF LOT 6 OF CENTER CITY PROJECT, IN THE CITY OF NATIONAL CITY, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF NO. 8807, RECORDED JANUARY 4, 1978, AS FILE NO. 78-075321, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY. COMMENCING AT THE EASTERLY CORNER SAID LOT 6 AND ALSO BEING ON THE WESTERLY 30 FOOT RIGHT-OF-WAY OF KIMBALL WAY; THENCE SOUTHERLY ALONG SAID EASTERLY LINE SOUTH 17°47'19" EAST (SOUTH 17°47'52" EAST, RECORD PER MAP 8807) A DISTANCE OF 66.48 FEET TO THE TRUE POINT OF BEGINNING; THENCE CONTINUING ALONG SAID EASTERLY LINE SOUTH 17°47'19" EAST (SOUTH 17°47'52" EAST) A DISTANCE OF 52.66 FEET TO THE SOUTHERLY LINE OF SAID LOT 6; THENCE WESTERLY ALONG SAID SOUTHERLY LINE, SOUTH 72°04'42" WEST (SOUTH 72°04'09" WEST) A DISTANCE OF 290.53 (290.70) FEET TO THE WESTERLY LINE OF SAID LOT 6 AND ALSO BEING ON THE EASTERLY 40 FOOT RIGHT-OF-WAY OF D AVENUE; THENCE NORTHERLY ALONG SAID WESTERLY LINE NORTH 17°46'21" WEST (NORTH 17°46'54" WEST) A DISTANCE OF 50.22 FEET; THENCE LEAVING SAID WESTERLY LINE NORTH 72°45'57" EAST A DISTANCE OF 175.92 FEET; THENCE NORTH 17°12'20" WEST A DISTANCE OF 5.01 FEET; THENCE NORTH 72° 18' 17" EAST A DISTANCE OF 114.56 FEET TO THE TRUE POINT OF BEGINNING. CONTAINING 0.34 ACRES OR 14709.33 SQUARE FEET MORE OR LESS. EXHIBIT "F" Easement Area and Landlord Reservation of Easement RESERVATION OF EASEMENT FROM PARCEL A: Reserving from the lease of the property a non-exclusive easement for vehicular and pedestrian ingress and egress over that portion of the property more fully described as follows: PORTION OF LOT 2 OF CENTER CITY PROJECT, IN THE CITY OF NATIONAL CITY, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF NO. 8807, RECORDED JANUARY 4, 1978, AS FILE NO. 78-075321, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY. BEGINNING AT THE EASTERLY CORNER SAID LOT 6 AND ALSO BEING ON THE WESTERLY 30 FOOT RIGHT-OF-WAY OF KIMBALL WAY; THENCE SOUTHERLY ALONG SAID EASTERLY LINE SOUTH 17°47'19" EAST (SOUTH 17°47'52" EAST, RECORD PER MAP 8807) A DISTANCE OF 66.48 FEET; THENCE LEAVING SAID EASTERLY LINE, NORTH 72°18'17" EAST A DISTANCE OF 38.83 FEET TO THE BEGINNING OF A 780.00 FOOT RADIUS CURVE CONCAVE NORTHEASTERLY, A RADIAL TO SAID CURVE BEING SOUTH 39°07'04" WEST AND ALSO BEING ON SAID WESTERLY 30 FOOT RIGHT-OF-WAY OF KIMBALL WAY; THENCE NORTHWESTERLY ALONG THE ARC OF SAID CURVE THROUGH A CENTRAL ANGLE OF 05°39'41", AN ARC LENGTH OF 77.07 FEET TO THE POINT OF BEGINNING. CONTAINING 0.03 ACRES OR 1241.62 SQUARE FEET MORE OR LESS. PARCEL C (EASEMENT AREA): An easement for pedestrian and vehicular access for ingress and egress and vehicular parking as conveyed by the Ground Lease disclosed by the Memorandum of Ground Lease recorded , 2019 as Instrument No. 2019- of Official Records, more fully described as follows: PORTION OF LOT 6 OF CENTER CITY PROJECT, IN THE CITY OF NATIONAL CITY, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF NO. 8807, RECORDED JANUARY 4, 1978, AS FILE NO. 78-075321, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY. COMMENCING AT THE EASTERLY CORNER SAID LOT 6 AND ALSO BEING ON THE WESTERLY 30 FOOT RIGHT-OF-WAY OF KIMBALL WAY; THENCE SOUTHERLY ALONG SAID EASTERLY LINE SOUTH 17°47'19" EAST (SOUTH 17°47'52" EAST, RECORD PER MAP 8807) A DISTANCE OF 66.48 FEET TO THE TRUE POINT OF BEGINNING; THENCE CONTINUING ALONG SAID EASTERLY LINE SOUTH 17°47'19" EAST (SOUTH 17°47'52" EAST) A DISTANCE OF 52.66 FEET TO THE SOUTHERLY LINE OF SAID LOT 6; THENCE WESTERLY ALONG SAID SOUTHERLY LINE, SOUTH 72°04'42" WEST (SOUTH 72°04'09" WEST) A DISTANCE OF 290.53 (290.70) FEET TO THE WESTERLY LINE OF SAID LOT 6 AND ALSO BEING ON THE EASTERLY 40 FOOT RIGHT-OF-WAY OF D AVENUE; THENCE NORTHERLY ALONG SAID WESTERLY LINE NORTH 17°46'21" WEST (NORTH 17°46'54" WEST) A DISTANCE OF 50.22 FEET; THENCE LEAVING SAID WESTERLY LINE NORTH 72°45'57" EAST A DISTANCE OF 175.92 FEET; THENCE NORTH 17°12'20" WEST A DISTANCE OF 5.01 FEET; THENCE NORTH 72°18'17" EAST A DISTANCE OF 114.56 FEET TO THE TRUE POINT OF BEGINNING. CONTAINING 0.34 ACRES OR 14709.33 SQUARE FEET MORE OR LESS. JDEPICTION OF EASEMENT AREA AND RESERVATION OF EASEMENT ATTACHED1 EXHIBIT "E" Page 4 /r Car/ -; III s MAP 8807 LOT6 NON-EXCLUSIVE EASEMENT FROM LOT 2 TO LOT 6 FOR VEHICULAR ND PEDESTRIAN ACCESS EASEMENT FRIM LOT 6 TO L I 2 FOR INGRESS, EGRESS, AND PARKING\ MAP 8807 ❑ L! 2 / X r A I Ti REC%PROAL ACCESSJ"EASEM NT (COMMON AREAS, PARK/NG, & DRIVEWAYS) BETWEEN LOTS 1 AND 2 \\\:„: E 14THISTREET EXCEL ENGINEERING LAM PLANK •RIGKEDIG 440 STALE RAC& ESLYNDV6 G 92029 01(769)745-1118 a (1 »145 1SO U.S. Department Of Housing and Urban Development Office of Public and Indian Housing SECTION 8 PROJECT -BASED VOUCHER PROGRAM PBV HOUSING ASSISTANCE PAYMENTS CONTRACT EXISTING HOUSING PART 1 OF HAP CONTRACT 1. CONTRACT INFORMATION a. Parties This housing assistance payments (HAP) contract is entered into between: Community Development Commission -Housing Authority of the City of National City ( PHA) and Kimball Tower Housing Associates, L.P. (owner). b. Contents of contract The HAP contract consists of Part 1, Part 2 and the contract exhibits listed in paragraph c. c. Contract exhibits The HAP contract includes the following exhibits: EXHIBIT A: TOTAL NUMBER OF UNITS IN PROJECT COVERED BY THIS HAP CONTRACT; INITIAL RENT TO OWNER; AND THE NUMBER AND DESCRIPTION OF THE CONTRACT UNITS. (See 24 CFR 983.203 for required items.) Previous editions are obsolete Project -based Voucher Program HAP Contract for Existing Housing HUD 52530B Page - 1 - of Part 1 (04/2015) EXHIBIT B: SERVICES, MAINTENANCE AND EQUIPMENT TO BE PROVIDED BY THE OWNER WITHOUT CHARGES IN ADDITION TO RENT TO OWNER EXHIBIT C: UTILITIES AVAILABLE IN THE CONTRACT UNITS, INCLUDING A LISTING OF UTILITIY SERVICES TO BE PAID BY THE OWNER (WITHOUT CHARGES IN ADDITION TO RENT TO OWNER) AND UTILITIES TO BE PAID BY THE TENANTS EXHIBIT D: FEATURES PROVIDED TO COMPLY WITH PROGRAM ACCESSIBILITY FEATURES OF SECTION 504 OF THE REHABILITATION ACT OF 1973 ADDITIONAL EXHIBITS d. Effective date and term of HAP contract 1. Effective date a. The PHA may not enter into a HAP contract for any contract unit until the PHA has determined that the unit complies with the housing quality standards. b For all contract units, the effective date of the HAP contract is: April 1, 2019 c The term of the HAP contract begins on the effective date. 2. Length of initial term a. Subject to paragraph 2.b, the initial term of the HAP contract for all contract units is: 20 years b. The initial term of the HAP contract may not be less than one year, nor more than fifteen years. 3. Extension of term The PHA and owner may agree to enter into an extension of the HAP contract at Previous editions are obsolete Project -based Voucher Program HAP Contract for Existing Housing HUD 52530B Page - 2 - of Part 1 (04/2015) the time of initial HAP contract execution or any time prior to expiration of the contract. Any extension, including the term of such extension, must be in accordance with HUD requirements. A PHA must determine that any extension is appropriate to achieve long-term affordability of the housing or expand housing opportunities. 4. Requirement for sufficient appropriated funding a. The length of the initial term and any extension term shall be subject to availability, as determined by HUD, or by the PHA in accordance with HUD requirements, of sufficient appropriated funding (budget authority), as provided in appropriations acts and in the PHA's annual contributions contract (ACC) with HUD, to make full payment of housing assistance payments due to the owner for any contract year in accordance with the HAP contract. b. The availability of sufficient funding must be determined by HUD or by the PHA in accordance with HUD requirements. If it is determined that there may not be sufficient funding to continue housing assistance payments for all contract units and for the full term of the HAP contract, the PHA has the right to terminate the HAP contract by notice to the owner for all or any of the contract units. Such action by the PHA shall be implemented in accordance with HUD requirements. e. Occupancy and payment 1. Payment for occupied unit During the term of the HAP contract, the PHA shall make housing assistance payments to the owner for the months during which a contract unit is leased to and occupied by an eligible family. If an assisted family moves out of a contract unit, the owner may keep the housing assistance payment for the calendar month when the family moves out ("move -out month"). However, the owner may not keep the payment if the PHA determines that the vacancy is the owner's fault. 2. Vacancy payment THE PHA HAS DISCRETION WHETHER TO INCLUDE THE VACANCY PAYMENT PROVISION (PARAGRAPH e.2), OR TO STRIKE THIS PROVISION FROM THE HAP CONTRACT FORM. a. If an assisted family moves out of a contract unit, the PHA may provide vacancy Previous editions are obsolete Project -based Voucher Program HAP Contract for Existing Housing HUD 52530B Page - 3 - of Part 1 (04/2015) payments to the owner for a PHA -determined vacancy period extending from the beginning of the first calendar month after the move -out month for a period not exceeding two full months following the move -out month. b. The vacancy payment to the owner for each month of the maximum two -month period will be determined by the PHA, and cannot exceed the monthly rent to owner under the assisted lease, minus any portion of the rental payment received by the owner (including amounts available from the tenant's security deposit). Any vacancy payment may only cover the period the unit remains vacant. c. The PHA may only make vacancy payments to the owner if: 1. The owner gives the PHA prompt, written notice certifying that the family has vacated the unit and the date when the family moved out (to the best of the owner's knowledge and belief); 2. The owner certifies that the vacancy is not the fault of the owner and that the unit was vacant during the period for which payment is claimed; 3. The owner certifies that it has taken every reasonable action to minimize the likelihood and length of vacancy; and 4. The owner provides any additional information required and requested by the PHA to verify that the owner is entitled to the vacancy payment. d. The PHA must take every reasonable action to minimize the likelihood and length of vacancy. e. The owner may refer families to the PHA, and recommend selection of such families from the PHA waiting list for occupancy of vacant units. f. The owner must submit a request for vacancy payments in the form and manner required by the PHA and must provide any information or substantiation required by the PHA to determine the amount of any vacancy payments. 3. PHA is not responsible for family damage or debt to owner Except as provided in this paragraph e (Occupancy and Payment), the PHA will not make any other payment to the owner under the HAP contract. The PHA will not make any payment to owner for any damages to the unit, or for any other Previous editions are obsolete Project -based Voucher Program HAP Contract for Existing Housing HUD 52530B Page - 4 - of Part 1 (04/2015) amounts owed by a family under the family's lease. f. Income -mix ing requirement 1. Except as provided in paragraphs f.2 and 3, the PHA will not make housing assistance payments under the HAP contract for more than 25 percent of the total number of dwelling units (assisted or unassisted) in any project. The term "project" means a single building, multiple contiguous buildings, or multiple buildings on contiguous parcels of land assisted under this HAP contract. 2. The limitation in paragraph f.1 does not apply to single-family buildings. 3. In referring eligible families to the owner for admission to the number of contract units in any project exceeding the 25 percent limitation under paragraph f.1, the PHA shall give preference to elderly or disabled families, or to families receiving supportive services, for the number of contract units designated for occupancy by such families. The owner shall rent the designated number of contract units to such families referred by the PHA from the PHA waiting list. 4. The PHA and owner must comply with all HUD requirements regarding income mixing. 5. The following specifies the number of contract units (if any): a. Designated for occupancy by disabled families; b Designated for occupancy by elderly families; c. Designated for occupancy by elderly or disabled families; or d. Designated for occupancy by families receiving supportive services. ❑ Check this box if any contract units are designated for disabled families. The following number of contract units shall be rented to disabled families: Previous editions are obsolete Project -based Voucher Program HAP Contract for Existing Housing HUD 52530B Page - 5 - of Part 1 (04/2015) ii Check this box if any contract units are designated for elderly families. The following number of contract units shall be rented to elderly families: 149 El Check this box if any contract units are designated for elderly or disabled families. The following number of contract units shall be rented to elderly or disabled families: ❑ Check this box if any contract units are designated for families receiving supportive services. The following number of contract units shall be rented to families receiving supportive services: Previous editions are obsolete Project -based Voucher Program HAP Contract for Existing Housing H l I D 52530B Page - 6- of Part 1 (04/2015) EXECUTION OF HAP CONTRACT FOR EXISTING HOUSING PUBLIC HOUSING AGENCY (PHA) Name of PHA (Print) Community Development Commission -Housing Authority of the City of National City By_l,,,_ Signature of authorized representative Name and official title (Print) Leslie Deese, Executive Director 3Lash19 Date OWNER Name of Owner (Print) Kimball Tower Housing Associates, L.P. By: Signature of authorized representative Name and title (Print) Susan M. Reynolds President & CEO Date Previous editions are obsolete Project -based Voucher Program HAP Contract for Existing Housing HUD 52530B Page - 7 - of Part 1 (04/2015) U.S. Department Of Housing and Urban Development Office of Public and Indian Housing SECTION 8 PROJECT -BASED VOUCHER PROGRAM PBV HOUSING ASSISTANCE PAYMENTS CONTRACT EXISTING HOUSING PART 2 OF HAP CONTRACT 2. DEFINITIONS Contract units. The housing units covered by this HAP contract. The contract units are described in Exhibit A. Existing housing. Housing units that already exist on the proposal selection date and that substantially comply with the housing quality standards on that date. The units must fully comply with the housing quality standards before execution of the HAP contract. Family. The persons approved by the PHA to reside in a contract unit with assistance under the program. HAP contract. This housing assistance payments contract between the PHA and the owner. The contract consists of Part 1, Part 2, and the contract exhibits (listed in section 1.c of the HAP contract). Housing assistance payment. The monthly assistance payment by the PHA for a contract unit, which includes: (1) a payment to the owner for rent to the owner under the family's lease minus the tenant rent; and (2) an additional payment to or on behalf of the family if the utility allowance exceeds total tenant payment. Household. The family and any PHA -approved live-in aide. Housing quality standards (HQS). The HUD minimum quality standards for dwelling units occupied by families receiving project -based voucher program assistance. Previous editions are obsolete Project -based Voucher Program HAP Contract for Existing Housing HUD 52530B Page - 1 - of Part 2 (04/2015) HUD. U.S. Department of Housing and Urban Development. HUD requirements. HUD requirements which apply to the project -based voucher program. HUD requirements are issued by HUD headquarters, as regulations, Federal Register notices or other binding program directives. Owner. Any person or entity who has the legal right to lease or sublease a unit to a participant. Premises. The building or complex in which a contract unit is located, including common areas or grounds. Principal or interested party. This term includes a management agent and other persons or entities participating in project management, and the officers and principal members, shareholders, investors, and other parties having a substantial interest in the HAP contract, or in any proceeds or benefits arising from the HAP contract. Program. The project -based voucher program (see authorization for project -based assistance at 42 U.S.C. 1437f(o)(13)). PHA. Public Housing Agency. The agency that has entered into the HAP contract with the owner. The agency is a public housing agency as defined in the United States Housing Act of 1937 (42 U.S.C. 1437a(b)(6)). Proposal selection date. The date the PHA gives written notice of proposal selection to the owner whose proposal is selected in accordance with the criteria established in the PHA's administrative plan. Rent to owner. The total monthly rent payable to the owner under the lease for a contract unit. Rent to owner includes payment for any housing services, maintenance and utilities to be provided by the owner in accordance with the lease. Tenant. The person or persons (other than a live-in aide) who executes the lease as a lessee of the dwelling unit. Tenant rent. The portion of the rent to owner payable by the family, as determined by the PHA in accordance with HUD requirements. The PHA is not responsible for paying any part of the tenant rent. 3. PURPOSE a. This is a HAP contract between the PHA and the owner. Previous editions are obsolete Project -based Voucher Program HAP Contract for Existing Housing HUD 52530B Page - 2 - of Part 2 (04/2015) b. The purpose of the HAP contract is to provide housing assistance payments for eligible families who lease contract units that comply with the HUD HQS from the owner. c. The PHA must make housing assistance payments to the owner in accordance with the HAP contract for contract units leased and occupied by eligible families during the HAP contract term. HUD provides funds to the PHA to make housing assistance payments to owners for eligible families. 4. RENT TO OWNER; HOUSING ASSISTANCE PAYMENTS a. Amount of initial rent to owner The initial rent to owner for each contract unit is stated in Exhibit A, which is attached to and made a part of the HAP contract. At the beginning of the HAP contract term, and until rent to owner is adjusted in accordance with section 5 of the HAP contract, the rent to owner for each bedroom size (number of bedrooms) shall be the initial rent to owner amount listed in Exhibit A. b. HUD rent requirements Notwithstanding any other provision of the HAP contract, the rent to owner may in no event exceed the amount authorized in accordance with HUD requirements. The PHA has the right to reduce the rent to owner, at any time, to correct any errors in establishing or adjusting the rent to owner in accordance with HUD requirements. The PHA may recover any overpayment from the owner. c. PHA payment to owner 1. Each month the PHA must make a housing assistance payment to the owner for a unit under lease to and occupied by an eligible family in accordance with the HAP contract. 2. The monthly housing assistance payment to the owner for a contract unit is equal to the amount by which the rent to owner exceeds the tenant rent. 3. Payment of the tenant rent is the responsibility of the family. The PHA is not responsible for paying any part of the tenant rent, or for paying any other claim by the owner against a family. The PHA is only responsible for making housing assistance payments to the owner on behalf of a family in accordance with the HAP contract. Previous editions are obsolete Project -based Voucher Program HAP Contract for Existing Housing HUD 52530B Page - 3 - of Part 2 (04/2015) 4. The owner will be paid the housing assistance payment under the HAP contract on or about the first day of the month for which payment is due, unless the owner and the PHA agree on a later date. 5. To receive housing assistance payments in accordance with the HAP contract, the owner must comply with all the provisions of the HAP contract. Unless the owner complies with all the provisions of the HAP contract, the owner does not have a right to receive housing assistance payments. 6. If the PHA determines that the owner is not entitled to the payment or any part of it, the PHA, in addition to other remedies, may deduct the amount of the overpayment from any amounts due the owner, including amounts due under any other housing assistance payments contract. 7. The owner will notify the PHA promptly of any change of circumstances that would affect the amount of the monthly housing assistance payment, and will return any payment that does not conform to the changed circumstances. d. Termination of assistance for family The PHA may terminate housing assistance for a family under the HAP contract in accordance with HUD requirements. The PHA must notify the owner in writing of its decision to terminate housing assistance for the family in such case. 5. ADJUSTMENT OF RENT TO OWNER a. PHA determination of adjusted rent 1. At each annual anniversary during the term of the HAP contract, the PHA shall adjust the amount of rent to owner, upon request to the PHA by the owner, in accordance with law and HUD requirements. In addition, the PHA shall adjust the rent to owner when there is a five percent or greater decrease in the published, applicable Fair Market Rent in accordance with 24 CFR 983.302. 2. The adjustment of rent to owner shall always be determined in accordance with all HUD requirements. The amount of the rent to owner may be adjusted up or down, in the amount defined by the PHA in accordance with HUD requirements. Previous editions are obsolete Project -based Voucher Program HAP Contract for Existing Housing HUD 52530B Page - 4 - of Part 2 (04/2015) b. Reasonable rent The rent to owner for each contract unit, as adjusted by the PHA in accordance with 24 CFR 983.303, may at no time exceed the reasonable rent charged for comparable units in the private unassisted market. The reasonable rent shall be determined by the PHA in accordance with HUD requirements. c. No special adjustments The PHA will not make any special adjustments of the rent to owner. d. Owner compliance with HAP contract The PHA shall not approve, and the owner shall not receive, any increase of rent to owner unless all contract units are in accordance with the HQS, and the owner has complied with the terms of the assisted leases and the HAP contract. e. Notice of rent adjustment Rent to owner shall be adjusted by written notice by the PHA to the owner in accordance with this section. Such notice constitutes an amendment of the rents specified in Exhibit A. 6. OWNER RESPONSIBILITY The owner is responsible for: a. Performing all management and rental functions for the contract units. b. Maintaining the units in accordance with HQS. c. Complying with equal opportunity requirements. d. Enforcing tenant obligations under the lease. e. Paying for utilities and housing services (unless paid by the family under the lease). f. Collecting from the tenant: 1. Any security deposit; Previous editions are obsolete Project -based Voucher Program HAP Contract for Existing Housing HUD 52530B Page - 5 - of Part 2 (04/2015) 2. The tenant rent; and 3. Any charge for unit damage by the family. 7. OWNER CERTIFICATION The owner certifies that at all times during the term of the HAP contract: a. All contract units are in good and tenantable condition. The owner is maintaining the premises and all contract units in accordance with the HQS. b. The owner is providing all the services, maintenance and utilities as agreed to under the HAP contract and the leases with assisted families. c. Each contract unit for which the owner is receiving housing assistance payments is leased to an eligible family referred by the PHA, and the lease is in accordance with the HAP contract and HUD requirements. d. To the best of the owner's knowledge, the members of the family reside in each contract unit for which the owner is receiving housing assistance payments, and the unit is the family's only residence. e. The owner (including a principal or other interested party) is not the parent, child, grandparent, grandchild, sister, or brother of any member of a family residing in a contract unit. f. The amount of the housing assistance payment is the correct amount due under the HAP contract. g. The rent to owner for each contract unit does not exceed rents charged by the owner for other comparable unassisted units. h. Except for the housing assistance payment and the tenant rent as provided under the HAP contract, the owner has not received and will not receive any payments or other consideration (from the family, the PHA, HUD, or any other public or private source) for rental of the contract unit. i. The family does not own, or have any interest in the contract unit. If the owner is a cooperative, the family may be a member of the cooperative. Previous editions are obsolete Project -based Voucher Program HAP Contract for Existing Housing HUD 52530B Page - 6 - of Part 2 (04/2015) 8. CONDITION OF UNITS a. Owner maintenance and operation The owner must maintain and operate the contract units and premises to provide decent, safe and sanitary housing in accordance with the HQS, including performance of ordinary and extraordinary maintenance. The owner must provide all the services, maintenance and utilities set forth in Exhibits B and C, and in the lease with each assisted family. b. PHA inspections 1. The PHA must inspect each contract unit before execution of the HAP contract. The PHA may not enter into a HAP contract covering a unit until the unit fully complies with the HQS. 2. Before providing assistance to a new family in a contract unit, the PHA must inspect the unit. The PHA may not provide assistance on behalf of the family until the unit fully complies with the HQS. 3. At least annually during the term of the HAP contract, the PHA must inspect a random sample, consisting of at least 20 percent of the contract units in each building, to determine if the contract units and the premises are maintained in accordance with the HQS. Turnover inspections pursuant to paragraph 2 of this section are not counted towards meeting this annual inspection requirement. 4. If more than 20 percent of the annual sample of inspected contract units in a building fail the initial inspection, the PHA must reinspect 100 percent of the contract units in the building. 5. The PHA must inspect contract units whenever needed to determine that the contract units comply with the HQS and that the owner is providing maintenance, utilities, and other services in accordance with the HAP contract. The PHA must take into account complaints and any other information that comes to its attention in scheduling inspections. c. Violation of the housing quality standards 1. If the PHA determines a contract unit is not in accordance with the HQS, the PHA may exercise any of its remedies under the HAP contract for all Previous editions are obsolete Project -based Voucher Program HAP Contract for Existing Housing HUD 52530B Page - 7 - of Part 2 (04/2015) or any contract units. Such remedies include termination, suspension or reduction of housing assistance payments, and termination of the HAP contract. 2. The PHA may exercise any such contractual remedy respecting a contract unit even if the family continues to occupy the unit. 3. The PHA shall not make any housing assistance for a dwelling unit that fails to meet the HQS, unless the owner corrects the defect within the period specified by the PHA and the PHA verifies the correction. If a defect is life threatening, the owner must correct the defect within no more than 24 hours. For other defects, the owner must correct the defect within no more than 30 calendar days (or any PHA -approved extension). d. Maintenance and replacement —owner's standard practice Maintenance and replacement (including redecoration) must be in accordance with the standard practice for the building concerned as established by the owner. 9. LEASING CONTRACT UNITS a. Selection of tenants 1. During the term of the HAP contract, the owner must lease all contract units to eligible families selected and referred by the PHA from the PHA waiting list. (See 24 CFR 983.251.) 2. The owner is responsible for adopting written tenant selection procedures that are consistent with the purpose of improving housing opportunities for very low-income families and reasonably related to program eligibility and an applicant's ability to perform the lease obligations. 3. Consistent with HUD requirements, the owner may apply its own admission procedures in determining whether to admit a family referred by the PHA for occupancy of a contract unit. The owner may refer families to the PHA, and recommend selection of such families from the PHA waiting list for occupancy of vacant units. 4. The owner must promptly notify in writing any rejected applicant of the grounds for rejection. 5. The PHA must determine family eligibility in accordance with HUD Previous editions are obsolete Project -based Voucher Program HAP Contract for Existing Housing HUD 52530B Page - 8 - of Part 2 (04/2015) requirements. 6. The contract unit leased to each family must be appropriate for the size of the family under the PHA's subsidy standards. 7. If a contract unit was occupied by an eligible family at the time the unit was selected by the PHA, or is so occupied on the effective date of the HAP contract, the owner must offer the family the opportunity to lease the same or another appropriately -sized contract unit with assistance under the HAP contract. 8. The owner is responsible for screening and selecting tenants from the families referred by the PHA from its waiting list. b. Vacancies 1. The owner must promptly notify the PHA of any vacancy in a contract unit. After receiving the owner notice, the PHA shall make every reasonable effort to refer a sufficient number of families for owner to fill the vacancy. 2. The owner must rent vacant contract units to eligible families on the PHA waiting list referred by the PHA. 3. The PHA and the owner must make reasonable good faith efforts to minimize the likelihood and length of any vacancy. 4. If any contract units have been vacant for a period of 120 or more days since owner notice of vacancy (and notwithstanding the reasonable good faith efforts of the PHA to fill such vacancies), the PHA may give notice to the owner amending the HAP contract to reduce the number of contract units by subtracting the number of contract units (by number of bedrooms) that have been vacant for such period. 10. TENANCY a. Lease The lease between the owner and each assisted family must be in accordance with HUD requirements. In all cases, the lease must include the HUD -required tenancy addendum. The tenancy addendum must include, word-for-word, all provisions required by HUD. Previous editions are obsolete Project -based Voucher Program HAP Contract for Existing Housing HUD 52530B Page - 9 - of Part 2 (04/2015) b. Termination of tenancy 1. The owner may only terminate a tenancy in accordance with the lease and HUD requirements. 2. The owner must give the PHA a copy of any owner eviction notice to the tenant at the same time that the owner gives notice to the tenant. Owner eviction notice means a notice to vacate, or a complaint or other initial pleading used to commence an eviction action under State or local law. c. Family payment 1. The portion of the monthly rent to owner payable by the family ("tenant rent") will be determined by the PHA in accordance with HUD requirements. The amount of the tenant rent is subject to change during the term of the HAP contract. Any changes in the amount of the tenant rent will be effective on the date stated in a notice by the PHA to the family and the owner. 2. The amount of the tenant rent as determined by the PHA is the maximum amount the owner may charge the family for rent of a contract unit, including all housing services, maintenance and utilities to be provided by the owner in accordance with the HAP contract and the lease. 3. The owner may not demand or accept any rent payment from the tenant in excess of the tenant rent as determined by the PHA. The owner must immediately return any excess rent payment to the tenant. 4. The family is not responsible for payment of the portion of the contract rent covered by the housing assistance payment under the HAP contract. The owner may not terminate the tenancy of an assisted family for nonpayment of the PHA housing assistance payment. 5. The PHA is only responsible for making the housing assistance payments to the owner on behalf of the family in accordance with the HAP contract. The PHA is not responsible for paying the tenant rent, or any other claim by the owner. d. Other owner charges 1. Except as provided in paragraph 2, the owner may not require the tenant or Previous editions are obsolete Project -based Voucher Program HAP Contract for Existing Housing HUD 52530B Page - 10 - of Part 2 (04/2015) family members to pay charges for meals or supportive services. Nonpayment of such charges is not grounds for termination of tenancy. 2. In assisted living developments receiving project -based voucher assistance, owners may charge tenants, family members, or both for meals or supportive services. These charges may not be included in the rent to owner, nor may the value of meals and supportive services be included in the calculation of reasonable rent. Non-payment of such charges is grounds for termination of the lease by the owner in an assisted living development. 3. The owner may not charge the tenant or family members extra amounts for items customarily included in rent in the locality or provided at no additional cost to the unsubsidized tenant in the premises. e. Security deposit 1. The owner may collect a security deposit from the family. 2. The owner must comply with HUD and PHA requirements, which may change from time to time, regarding security deposits from a tenant. 3. The PHA may prohibit security deposits in excess of private market practice, or in excess of amounts charged by the owner to unassisted families. 4. When the family moves out of the contract unit, the owner, subject to State and local law, may use the security deposit, including any interest on the deposit, in accordance with the lease, as reimbursement for any unpaid tenant rent, damages to the unit or other amounts which the family owes under the lease. The owner must give the family a written list of all items charged against the security deposit and the amount of each item. After deducting the amount used as reimbursement to the owner, the owner must promptly refund the full amount of the balance to the family. 5. If the security deposit is not sufficient to cover amounts the family owes under the lease, the owner may seek to collect the balance from the family. However, the PHA has no liability or responsibility for payment of any amount owed by the family to the owner. Previous editions are obsolete Project -based Voucher Program HAP Contract for Existing Housing HUD 52530B Page - 11 - of Part 2 (04/2015) 11. FAMILY RIGHT TO MOVE a. The family may terminate its lease at any time after the first year of occupancy. The family must give the owner advance written notice of intent to vacate (with a copy to the PHA) in accordance with the lease. If the family has elected to terminate the lease in this manner, the PHA must offer the family the opportunity for tenant -based rental assistance in accordance with HUD requirements. b. Before providing notice to terminate the lease under paragraph a, the family must first contact the PHA to request tenant -based rental assistance if the family wishes to move with continued assistance. If tenant -based rental assistance is not immediately available upon lease termination, the PHA shall give the family priority to receive the next available opportunity for tenant -based rental assistance. 12. OVERCROWDED, UNDER -OCCUPIED, AND ACCESSIBLE UNITS The PHA subsidy standards determine the appropriate unit size for the family size and composition. The PHA and owner must comply with the requirements in 24 CFR 983.259. 13. PROHIBITION OF DISCRIMINATION a. The owner may not refuse to lease contract units to, or otherwise discriminate against any person or family in leasing of a contract unit, because of race, color, religion, sex, national origin, disability, age or familial status. b. The owner must comply with the following requirements: The Fair Housing Act (42 U.S.C. 3601-19) and implementing regulations at 24 CFR part 100 et seq. ; Executive Order 11063, as amended by Executive Order 12259 (3 CFR, 1959- 1963 Comp., p. 652 and 3 CFR, 1980 Comp., p. 307) (Equal Opportunity in Housing Programs) and implementing regulations at 24 CFR part 107; title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d-2000d-4) (Nondiscrimination in Federally Assisted Programs) and implementing regulations at 24 CFR part 1; the Age Discrimination Act of 1975 (42 U.S.C. 6101-6107) and implementing regulations at 24 CFR part 146; section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794) and implementing regulations at part 8 of this title; title II of the Americans with Disabilities Act, 42 U.S.C. 12101 et seq. ; 24 CFR part 8; section 3 of the Housing and Urban Development Act of 1968 (12 U.S.C. 1701u) and implementing regulations at 24 CFR part 135; Executive Order 11246, as Previous editions are obsolete Project -based Voucher Program HAP Contract for Existing Housing HUD 52530B Page - 12 - of Part 2 (04/2015) amended by Executive Orders 11375, 11478, 12086, and 12107 (3 CFR, 1964- 1965 Comp., p. 339; 3 CFR, 1966-1970 Comp., p. 684; 3 CFR, 1966-1970 Comp., p. 803; 3 CFR, 1978 Comp., p. 230; and 3 CFR, 1978 Comp., p. 264, respectively) (Equal Employment Opportunity Programs) and implementing regulations at 41 CFR chapter 60; Executive Order 11625, as amended by Executive Order 12007 (3 CFR, 1971-1975 Comp., p. 616 and 3 CFR, 1977 Comp., p. 139) (Minority Business Enterprises); Executive Order 12432 (3 CFR, 1983 Comp., p. 198) (Minority Business Enterprise Development); and Executive Order 12138, as amended by Executive Order 12608 (3 CFR, 1977 Comp., p. 393 and 3 CFR, 1987 Comp., p. 245) (Women's Business Enterprise). c. The PHA and the owner must cooperate with HUD in the conducting of compliance reviews and complaint investigations pursuant to all applicable civil rights statutes, Executive Orders, and all related rules and regulations. 14. PHA DEFAULT AND HUD REMEDIES If HUD determines that the PHA has failed to comply with the HAP contract, or has failed to take appropriate action to HUD's satisfaction or as directed by HUD, for enforcement of the PHA's rights under the HAP contract, HUD may assume the PHA's rights and obligations under the HAP contract, and may perform the obligations and enforce the rights of the PHA under the HAP contract. 15. OWNER DEFAULT AND PHA REMEDIES a. Owner default Any of the following is a default by the owner under the HAP contract: 1. The owner has failed to comply with any obligation under the HAP contract, including the owner's obligations to maintain all contract units in accordance with the housing quality standards. 2. The owner has violated any obligation under any other housing assistance payments contract under Section 8 of the United States Housing Act of 1937 (42 U.S.C. 14370. 3. The owner has committed any fraud or made any false statement to the PHA or HUD in connection with the HAP contract. 4. The owner has committed fraud, bribery or any other corrupt or criminal act in connection with any Federal housing assistance program. Previous editions are obsolete Project -based Voucher Program HAP Contract for Existing Housing HUD 52530B Page - 13 - of Part 2 (04/2015) 5. If the property where the contract units are located is subject to a lien or security interest securing a HUD loan or a mortgage insured by HUD and: A. The owner has failed to comply with the regulations for the applicable mortgage insurance or loan program, with the mortgage or mortgage note, or with the regulatory agreement; or B. The owner has committed fraud, bribery or any other corrupt or criminal act in connection with the HUD loan or HUD -insured mortgage. 6. The owner has engaged in any drug -related criminal activity or any violent criminal activity. b. PHA remedies 1. If the PHA determines that a breach has occurred, the PHA may exercise any of its rights or remedies under the HAP contract. 2. The PHA must notify the owner in writing of such determination. The notice by the PHA to the owner may require the owner to take corrective action (as verified by the PHA) by a time prescribed in the notice. 3. The PHA's rights and remedies under the HAP contract include recovery of overpayments, termination or reduction of housing assistance payments, and termination of the HAP contract. c. PHA remedy is not waived The PHA's exercise or non -exercise of any remedy for owner breach of the HAP contract is not a waiver of the right to exercise that remedy or any other right or remedy at any time. 16. @QIIIRD@ BY 'IIQYDRIX IIHR INFORMATION AND ACCESS a. Required information The owner must prepare and furnish any information pertinent to the HAP contract as may reasonably be required from time to time by the PHA or HUD. The owner shall furnish such information in the form and manner required by the Previous editions are obsolete Project -based Voucher Program HAP Contract for Existing Housing HUD 52530B Page - 14 - of Part 2 (04/2015) PHA or HUD. b. PHA and HUD access to premises The owner must permit the PHA or HUD or any of their authorized representatives to have access to the premises during normal business hours and, for the purpose of audit and examination, to have access to any books, documents, papers and records of the owner to the extent necessary to determine compliance with the HAP contract, including the verification of information pertinent to the housing assistance payments or the HAP contract. 17. PHA AND OWNER RELATION TO THIRD PARTIES a. Injury because of owner action or failure to act The PHA has no responsibility for or liability to any person injured as a result of the owner's action or failure to act in connection with the implementation of the HAP contract, or as a result of any other action or failure to act by the owner. b. Legal relationship The owner is not the agent of the PHA. The HAP contract does not create or affect any relationship between the PHA and any lender to the owner or any suppliers, employees, contractors or subcontractors used by the owner in connection with the implementation of the HAP contract. c. Exclusion of third party claims Nothing in the HAP contract shall be construed as creating any right of a family or other third party (other than HUD) to enforce any provision of the HAP contract, or to assert any claim against HUD, the PHA or the owner under the HAP contract. d. Exclusion of owner claims against HUD Nothing in the HAP contract shall be construed as creating any right of the owner to assert any claim against HUD. Previous editions are obsolete Project -based Voucher Program HAP Contract for Existing Housing HUD 52530B Page - 15 - of Part 2 (04/2015) 18. PHA -OWNED UNITS Notwithstanding Section 17 of this HAP contract, a PHA may own units assisted under the project -based voucher program, subject to the special requirements in 24 CFR 983.59 regarding PHA -owned units. 19. CONFLICT OF INTEREST a. Interest of members, officers, or employees of PHA, members of local governing body, or other public officials 1. No present or former member or officer of the PHA (except tenant - commissioners), no employee of the PHA who formulates policy or influences decisions with respect to the housing choice voucher program or project -based voucher program, and no public official or member of a governing body or State or local legislator who exercises functions or responsibilities with respect to these programs, shall have any direct or indirect interest, during his or her tenure or for one year thereafter, or in the HAP contract. 2. HUD may waive this provision for good cause. b. Disclosure The owner has disclosed to the PHA any interest that would be a violation of the HAP contract. The owner must fully and promptly update such disclosures. c. Interest of member of or delegate to Congress No member of or delegate to the Congress of the United States of America or resident -commissioner shall be admitted to any share or part of this HAP Contract or to any benefits arising from the contract. 20. EXCLUSION FROM FEDERAL PROGRAMS a. Federal requirements The owner must comply with and is subject to requirements of 2 CFR part 2424. b. Disclosure Previous editions are obsolete Project -based Voucher Program HAP Contract for Existing Housing HUD 52530B Page - 16 - of Part 2 (04/2015) The owner certifies that: 1. The owner has disclosed to the PHA the identity of the owner and any principal or interested party. 2. Neither the owner nor any principal or interested party is listed on the U.S. General Services Administration list of parties excluded from Federal procurement and nonprocurement programs; and none of such parties are debarred, suspended, subject to a limited denial of participation or otherwise excluded under 2 CFR part 2424. 21. TRANSFER OF THE CONTRACT OR PROPERTY a. When consent is required 1. The owner agrees that neither the HAP contract nor the property may be transferred without the advance written consent of the PHA in accordance with HUD requirements. 2. "Transfer" includes: A. Any sale or assignment or other transfer of ownership, in any form, of the HAP contract or the property; B. The transfer of any right to receive housing assistance payments that may be payable pursuant to the HAP contract; C. The creation of a security interest in the HAP contract or the property; D. Foreclosure or other execution on a security interest; or E. A creditor's lien, or transfer in bankruptcy. 3. If the owner is a corporation, partnership, trust or joint venture, the owner is not required to obtain advance consent of the PHA pursuant to paragraph a for transfer of a passive and non -controlling interest in the ownership entity (such as a stock transfer or transfer of the interest of a limited partner), if any interests so transferred cumulatively represent less than half the beneficial interest in the HAP contract or the property. The owner must obtain advance consent pursuant to paragraph a for transfer of any interest of a general partner. Previous editions are obsolete Project -based Voucher Program HAP Contract for Existing Housing HUD 52530B Page - 17 - of Part 2 (04/2015) b Transferee assumption of HAP contract No transferee (including the holder of a security interest, the security holder's transferee or successor in interest, or the transferee upon exercise of a security interest) shall have any right to receive any payment of housing assistance payments pursuant to the HAP contract, or to exercise any rights or remedies under the HAP contract, unless the PHA has consented in advance, in writing to such transfer, and the transferee has agreed in writing, in a form acceptable to the PHA in accordance with HUD requirements, to assume the obligations of the owner under the HAP contract, and to comply with all the terms of the HAP contract. c. Effect of consent to transfer 1. The creation or transfer of any security interest in the HAP contract is limited to amounts payable under the HAP contract in accordance with the terms of the HAP contract. 2. The PHA's consent to transfer of the HAP contract or the property does not to change the terms of the HAP contract in any way, and does not change the rights or obligations of the PHA or the owner under the HAP contract. 3. The PHA's consent to transfer of the HAP contract or the property to any transferee does not constitute consent to any further transfers of the HAP contract or the property, including further transfers to any successors or assigns of an approved transferee. d. When transfer is prohibited The PHA will not consent to the transfer if any transferee, or any principal or interested party is debarred, suspended subject to a limited denial of participation, or otherwise excluded under 2 CFR part 2424, or is listed on the U.S. General Services Administration list of parties excluded from Federal procurement or nonprocurement programs. 2+2sidMIlayeBlYglrATIEURINQ required for existing housing projects. Previous editions are obsolete Project -based Voucher Program HAP Contract for Existing Housing HUD 52530B Page - 18 - of Part 2 (04/2015) 23. OWNER LOBBYING CERTIFICATIONS a. The owner certifies, to the best of owner's knowledge and belief, that: 1. No Federally appropriated funds have been paid or will be paid, by or on behalf of the owner, 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 the awarding of the HAP contract, or the extension, continuation, renewal, amendment, or modification of the HAP contract. 2. If any funds other than Federally appropriated funds have been paid or will be 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 the HAP contract, the owner must complete and submit Standard Form-LLL, "Disclosure Form to Report Lobbying," in accordance with its instructions. b. This certification by the owner is a prerequisite for making or entering into this transaction imposed by 31 U.S.C. 1352. 24. TERMINATION OF HAP CONTRACT FOR WRONGFUL SELECTION OF CONTRACT UNITS The HAP contract may be terminated upon at least 30 days notice to the owner by the PHA or HUD if the PHA or HUD determines that the contract units were not eligible for selection in conformity with HUD requirements. 25. NOTICES AND OWNER CERTIFICATIONS a. Where the owner is required to give any notice to the PHA pursuant to the HAP contract or any other provision of law, such notice must be in writing and must be given in the form and manner required by the PHA. b. Any certification or warranty by the owner pursuant to the HAP contract shall be deemed a material representation of fact upon which reliance was placed when this transaction was made or entered into. Previous editions are obsolete Project -based Voucher Program HAP Contract for Existing Housing HUD 52530B Page - 19 - of Part 2 (04/2015) 26. ENTIRE AGREEMENT; INTERPRETATION a. The HAP contract, including the exhibits, is the entire agreement between the PHA and the owner. b. The HAP contract must be interpreted and implemented in accordance with all statutory requirements, and with all HUD requirements, including amendments or changes in HUD requirements during the term of the HAP contract. The owner agrees to comply with all such laws and HUD requirements. Previous editions are obsolete Project -based Voucher Program HAP Contract for Existing Housing HUD 52530B Page - 20 - of Part 2 (04/2015) Exhibit A Total Number of Units in the Project Covered by this Section 8 PBV Contract: Initial Rent to Owner and the Number and Description of the Contracted Units Total Number of Units Receiving Project Based Assistance: 149 Unit Type Total Number of Units under PBV Contract Approx. NSF Gross Rent Utility Allowance Net Contract Rent to Owner 1BR/IBA 149 555 Sq Ft $1,209 $34 $1,175 2BR/IBA 0 n/a n/a n/a n/a 3BR/1BA 0 n/a n/a n/a n/a Exhibit A Listing of units to be included under this PBV Contract: Kimball Unit No. Postal Address BR Type 102 1315 D Avenue, National City, CA 91950 1 103 1315 D Avenue, National City, CA 91950 1 104 1315 D Avenue, National City, CA 91950 1 105 1315 D Avenue, National City, CA 91950 1 106 1315 D Avenue, National City, CA 91950 1 107 1315 D Avenue, National City, CA 91950 1 108 1315 D Avenue, National City, CA 91950 1 109 1315 D Avenue, National City, CA 91950 1 110 1315 D Avenue, National City, CA 91950 1 111 1315 D Avenue, National City, CA 91950 1 112 1315 D Avenue, National City, CA 91950 1 113 1315 D Avenue, National City, CA 91950 1 114 1315 D Avenue, National City, CA 91950 1 115 1315 D Avenue, National City, CA 91950 1 201 1315 D Avenue, National City, CA 91950 1 202 1315 D Avenue, National City, CA 91950 1 203 1315 D Avenue, National City, CA 91950 1 Exhibit A 204 1315 D Avenue, National City, CA 91950 1 205 1315 D Avenue, National City, CA 91950 1 206 1315 D Avenue, National City, CA 91950 1 207 1315 D Avenue, National City, CA 91950 1 208 1315 D Avenue, National City, CA 91950 1 209 1315 D Avenue, National City, CA 91950 1 210 1315 D Avenue, National City, CA 91950 1 211 1315 D Avenue, National City, CA 91950 1 212 1315 D Avenue, National City, CA 91950 1 213 1315 D Avenue, National City, CA 91950 1 214 1315 D Avenue, National City, CA 91950 1 215 1315 D Avenue, National City, CA 91950 1 216 1315 D Avenue, National City, CA 91950 1 217 1315 D Avenue, National City, CA 91950 1 301 1315 D Avenue, National City, CA 91950 1 302 1315 D Avenue, National City, CA 91950 1 303 1315 D Avenue, National City, CA 91950 1 304 1315 D Avenue, National City, CA 91950 1 Exhibit A 305 1315 D Avenue, National City, CA 91950 1 306 1315 D Avenue, National City, CA 91950 1 307 1315 D Avenue, National City, CA 91950 1 308 1315 D Avenue, National City, CA 91950 1 309 1315 D Avenue, National City, CA 91950 1 310 1315 D Avenue, National City, CA 91950 1 311 1315 D Avenue, National City, CA 91950 1 312 1315 D Avenue, National City, CA 91950 1 313 1315 D Avenue, National City, CA 91950 1 314 1315 D Avenue, National City, CA 91950 1 315 1315 D Avenue, National City, CA 91950 1 316 1315 D Avenue, National City, CA 91950 1 317 1315 D Avenue, National City, CA 91950 1 401 1315 D Avenue, National City, CA 91950 1 402 1315 D Avenue, National City, CA 91950 1 403 1315 D Avenue, National City, CA 91950 1 404 1315 D Avenue, National City, CA 91950 1 405 1315 D Avenue, National City, CA 91950 1 Exhibit A 406 1315 D Avenue, National City, CA 91950 1 407 1315 D Avenue, National City, CA 91950 1 408 1315 D Avenue, National City, CA 91950 1 409 1315 D Avenue, National City, CA 91950 1 410 1315 D Avenue, National City, CA 91950 1 411 1315 D Avenue, National City, CA 91950 1 412 1315 D Avenue, National City, CA 91950 1 413 1315 D Avenue, National City, CA 91950 1 414 1315 D Avenue, National City, CA 91950 1 415 1315 D Avenue, National City, CA 91950 1 416 1315 D Avenue, National City, CA 91950 1 417 1315 D Avenue, National City, CA 91950 1 501 1315 D Avenue, National City, CA 91950 1 502 1315 D Avenue, National City, CA 91950 1 503 1315 D Avenue, National City, CA 91950 1 504 1315 D Avenue, National City, CA 91950 1 505 1315 D Avenue, National City, CA 91950 1 506 1315 D Avenue, National City, CA 91950 1 Exhibit A 507 1315 D Avenue, National City, CA 91950 1 508 1315 D Avenue, National City, CA 91950 1 509 1315 D Avenue, National City, CA 91950 1 510 1315 D Avenue, National City, CA 91950 1 511 1315 D Avenue, National City, CA 91950 1 512 1315 D Avenue, National City, CA 91950 1 513 1315 D Avenue, National City, CA 91950 1 514 1315 D Avenue, National City, CA 91950 1 515 1315 D Avenue, National City, CA 91950 1 516 1315 D Avenue, National City, CA 91950 1 517 1315 D Avenue, National City, CA 91950 1 601 1315 D Avenue, National City, CA 91950 1 602 1315 D Avenue, National City, CA 91950 1 603 1315 D Avenue, National City, CA 91950 1 604 1315 D Avenue, National City, CA 91950 1 605 1315 D Avenue, National City, CA 91950 1 606 1315 D Avenue, National City, CA 91950 1 607 1315 D Avenue, National City, CA 91950 1 Exhibit A 608 1315 D Avenue, National City, CA 91950 1 609 1315 D Avenue, National City, CA 91950 1 610 1315 D Avenue, National City, CA 91950 1 611 1315 D Avenue, National City, CA 91950 1 612 1315 D Avenue, National City, CA 91950 1 613 1315 D Avenue, National City, CA 91950 1 614 1315 D Avenue, National City, CA 91950 1 615 1315 D Avenue, National City, CA 91950 1 616 1315 D Avenue, National City, CA 91950 1 617 1315 D Avenue, National City, CA 91950 1 701 1315 D Avenue, National City, CA 91950 1 702 1315 D Avenue, National City, CA 91950 1 703 1315 D Avenue, National City, CA 91950 1 704 1315 D Avenue, National City, CA 91950 1 705 1315 D Avenue, National City, CA 91950 1 706 1315 D Avenue, National City, CA 91950 1 707 1315 D Avenue, National City, CA 91950 1 708 1315 D Avenue, National City, CA 91950 1 Exhibit A 709 1315 D Avenue, National City, CA 91950 1 710 1315 D Avenue, National City, CA 91950 1 711 1315 D Avenue, National City, CA 91950 1 712 1315 D Avenue, National City, CA 91950 1 713 1315 D Avenue, National City, CA 91950 1 714 1315 D Avenue, National City, CA 91950 1 715 1315 D Avenue, National City, CA 91950 1 716 1315 D Avenue, National City, CA 91950 1 717 1315 D Avenue, National City, CA 91950 1 801 1315 D Avenue, National City, CA 91950 1 802 1315 D Avenue, National City, CA 91950 1 803 1315 D Avenue, National City, CA 91950 1 804 1315 D Avenue, National City, CA 91950 1 804 1315 D Avenue, National City, CA 91950 1 806 1315 D Avenue, National City, CA 91950 1 807 1315 D Avenue, National City, CA 91950 1 808 1315 D Avenue, National City, CA 91950 1 809 1315 D Avenue, National City, CA 91950 1 Exhibit A 810 1315 D Avenue, National City, CA 91950 1 811 1315 D Avenue, National City, CA 91950 1 812 1315 D Avenue, National City, CA 91950 1 813 1315 D Avenue, National City, CA 91950 1 814 1315 D Avenue, National City, CA 91950 1 815 1315 D Avenue, National City, CA 91950 1 816 1315 D Avenue, National City, CA 91950 1 817 1315 D Avenue, National City, CA 91950 1 902 1315 D Avenue, National City, CA 91950 1 903 1315 D Avenue, National City, CA 91950 1 904 1315 D Avenue, National City, CA 91950 1 905 1315 D Avenue, National City, CA 91950 1 906 1315 D Avenue, National City, CA 91950 1 907 1315 D Avenue, National City, CA 91950 1 908 1315 D Avenue, National City, CA 91950 1 909 1315 D Avenue, National City, CA 91950 1 910 1315 D Avenue, National City, CA 91950 1 911 1315 D Avenue, National City, CA 91950 1 Exhibit A 912 1315 D Avenue, National City, CA 91950 1 913 1315 D Avenue, National City, CA 91950 1 914 1315 D Avenue, National City, CA 91950 1 915 1315 D Avenue, National City, CA 91950 1 916 1315 D Avenue, National City, CA 91950 1 917 1315 D Avenue, National City, CA 91950 1 Exhibit A Exhibit B Services, maintenance and equipment to be provided by the Owner without charges in addition to rent to owner: Kimball Tower Housing Associates, L.P., will provided the following services, maintenance and/or equipment to the residence without additional charge: Services Mercy Housing California, as service provider, will oversee outcome -based, result -oriented services and programs for residents in the community building, starting no later than six (6) months after the completion of rehabilitation of the Kimball Tower until expiration of the Term. The services will be administered by on -site staff. Programs will be tailored to the needs of the community and age -appropriate for the entire family. The services will include, but not be limited to: ■ Health and Wellness —The program focuses on and evaluation of the inextricable linkage between healthcare and housing. Services include basic health & needs assessments, ADL support & screening, health benefit acquisition, health education & risk reduction, physical activities, access to food, wellbeing checks, transition planning, and linkages to preventative and behavioral health care. In addition to annual assessments, periodically monitor residents for change in risk factors and service needs, formalized screenings, and on -site health risk reduction activities such as disease management groups, fall prevention, and social support opportunities. ■ Economic Development/Housing Stability — This program creates households with safe and stable housing and where renters are in good standing. Services include eviction prevention coaching, lease education, housing options, housing inspection, linkages with financial resources, and referrals. ■ Education/Community Participation — This program ties closely to health and wellness and economic development/housing stability. Services include nutrition and exercise resources, financial stability seminars, financial benefit acquisition, employment and job readiness support, and technology literacy. Community participation activities for residents such as, community projects & events, volunteer opportunities, voter registration, leaderships programming, community safety initiatives, and family reconciliation Maintenance Mercy Housing Property Management will oversee upkeep and maintenance of the property, at no cost to residents. Onsite management, repairs, landscaping, etc., are all paid for by the partnership. Equipment/Furnishings As part of the development scope, the partnership will provide indoor and outdoor common area furnishings and mechanical equipment will be either replaced or repaired at no additional cost to residents. Exhibit C Utilities available in the contract units including a listing of utility services to be paid by the owner (without charges in addition to rent to owner) and utilities to be paid by the tenants. Item Heating Fuel Type Electric Provided by SDG&E Paid by Tenant Cooking Electric SDG&E Tenant Hot Water Gas SDG&E Owner Other Electric Electric SDG&E Tenant Water N/A Sweetwater Authority Owner Sewer N/A City of National City Owner Trash Collection N/A EDCO Owner Air Conditioning N/A N/A N/A Refrigerator/Microwave Electric Owner (Refrigerator only) Owner (Refrigerator only Range Electric Owner N/A Utility Allowance: $34/unit. Exhibit E This exhibit contains the following: • Davis Bacon Labor Standards Addendum [Attached] Addendum to the HAP Contract —Labor Standards This addendum is used for both the Project -Based Voucher HAP Contract ("PBV") and the Project -Based Rental Assistance ("PBRA") HAP Contract under the Rental Assistance Demonstration and is applicable for all construction or repair work on projects that are initiated within eighteen (18) months after the effective date of the HAP contract. For PBRA HAP Contracts, it is "Exhibit 4" to the HAP Contract. 1. HUD -FEDERAL LABOR STANDARDS PROVISIONS The owner is responsible for inserting the entire text of section 1 of this Addendum in all construction contracts for construction or repair work on the project that is initiated within eighteen (18) months of the effective date of the HAP contract and, if the owner performs any rehabilitation work on the project, the owner must comply with all provisions of section 1. (Note: Sections 1(b) and (c) apply only when the amount of the prime contract exceeds $ 100,000.) (a)(1)(i) Minimum Wages. All laborers and mechanics employed or working upon the site of the work (or under the United States Housing Act of 1937 or under the Housing Act of 1949 in the construction or development of the project) will be paid unconditionally and not less often than once a week, and without subsequent deduction or rebate on any account (except such payroll deductions as are permitted by regulations issued by the Secretary of Labor under the Copeland Act (29 CFR part 3)), the full amount of wages and bona fide fringe benefits (or cash equivalents thereof) due at time of payment computed at rates not less than those contained in the wage determination of the Secretary of Labor which is attached hereto and made part hereof regardless of any contractual relationship which may be alleged to exist between the contractor and such laborers and mechanics. Contributions made or costs reasonably anticipated for bona fide fringe benefits under section 1(b)(2) of the Davis -Bacon Act on behalf of laborers or mechanics are considered wages paid to such laborers or mechanics, subject to the provisions of 29 CFR 5.5(a)(1)(iv); also, regular contributions made or costs incurred for more than a weekly period (but not less often than quarterly) under plans, funds, or programs, which cover the particular weekly period, are deemed to be constructively made or incurred during such weekly period. Such laborers and mechanics shall be paid the appropriate wage rate and fringe benefits on the wage determination for the classification of work actually performed, without regard to skill, except as provided in 29 CFR 5.5(a)(4). Laborers or mechanics performing work in more than one classification may be compensated at the rate specified for each classification for the time actually worked therein: Provided, That the employer's [12514] payroll records accurately set forth the time spent in each classification in which work is performed. The wage determination (including any additional classification and wage rates conformed under 29 CFR 5.5(a)(1)(ii) and the Davis -Bacon poster (WH-1321)) shall be posted at all times by the contractor and its subcontractors at the site of the work in a prominent and accessible place where it can be easily seen by the workers. (ii)(A) Any class of laborers or mechanics which is not listed in the wage determination and which is to be employed under the contract shall be classified in conformance with the wage determination. HUD shall approve an additional classification and wage rate and fringe benefits therefor only when the following criteria have been met: (1) The work to be performed by the classification requested is not performed by a classification in the wage determination; (2) The classification is utilized in the area by the construction industry; and (3) The proposed wage rate, including any bona fide fringe benefits, bears a reasonable relationship to the wage rates contained in the wage determination. (B) If the contractor and the laborers and mechanics to be employed in the classification (if known), or their representatives, and HUD or its designee agree on the classification and wage rate (including the amount designated for fringe benefits where appropriate), a report of the action taken shall be sent by HUD or its designee to the Administrator of the Wage and Hour Division, Employment Standards Administration, U.S. Department of Labor, Washington, DC 20210. The Administrator, or an authorized representative, will approve, modify, or disapprove every additional classification action within 30 days of receipt and so advise HUD or its designee or will notify HUD or its designee within the 30-day period that additional time is necessary. (C) In the event the contractor, the laborers or mechanics to be employed in the classification or their representatives, and HUD or its designee do not agree on the proposed classification and wage rate (including the amount designated for fringe benefits, where appropriate), HUD or its designee shall refer the questions, including the views of all interested parties and the recommendation of HUD or its designee, to the Administrator for determination. The Administrator, or an authorized representative, will issue a determination within 30 days of receipt and so advise HUD or its designee or will notify HUD or its designee within the 30-day period that additional time is necessary. (D) The wage rate (including fringe benefits where appropriate) determined pursuant to subparagraphs (a)(1)(ii)(B) or (C) of this paragraph, shall be paid to all workers performing work in the classification under this contract from the first day on which work is performed in the classification. (iii) Whenever the minimum wage rate prescribed in the contract for a class of laborers or mechanics includes a fringe benefit which is not expressed as an hourly rate, the contractor shall either pay the benefit as stated in the wage determinations or shall pay another bona fide fringe benefit or an hourly cash equivalent thereof. (iv) If the contractor does not make payments to a trustee or other third person, the contractor may consider as part of the wages of any laborer or mechanic the amount of any costs reasonably anticipated in providing bona fide fringe benefits under a plan or program: Provided, That the Secretary of Labor has found, upon the written request of the contractor, that the applicable standards of the Davis -Bacon Act have been met. The Secretary of Labor may require the contractor to set aside in a separate account assets for the meeting of obligations under the plan or program. (2) Withholding. HUD or its designee shall upon its own action or upon written request of an authorized representative of the Department of Labor withhold or cause to be withheld from the contractors under this contract or any other Federal contract with the same prime contractor, or any other Federally -assisted contract subject to Davis -Bacon prevailing wage requirements, which is held by the same prime contractor, so much of the accrued payments or advances as may be considered necessary to pay laborers and mechanics, including apprentices, trainees and helpers, employed by the contractor or any subcontractor the full amount of wages required by the contract. In the event of failure to pay any laborer or mechanic, including any apprentice, trainee or helper, employed or working on the site of the work (or under the United States Housing Act of 1937 or under the Housing Act of 1949 in the construction or development of the project), all or part of the wages required by the contract, HUD or its designee may, after written notice to the contractor, sponsor, applicant, or owner, take such action as may be necessary to cause the suspension of any further payment, advance, or guarantee of funds until such violations have ceased. HUD or its designee may, after written notice to the contractor, disburse such amounts withheld for and on account of the contractor or subcontractor to the respective employees to whom they are due. (3)(i) Payrolls and Basic Records. Payrolls and basic records relating thereto shall be maintained by the contractor during the course of the work and preserved for a period of three years thereafter for all laborers and mechanics working at the site of the work (or under the United States Housing Act of 1937, or under the Housing Act of 1949, in the construction or development of the project). Such records shall contain the name, address, and social security number of each such worker, his or her correct classification, hourly rates of wages paid (including rates of contributions or costs anticipated for bona fide fringe benefits or cash equivalents thereof of the types described in section 1(b)(2)(B) of the Davis - Bacon Act), daily and weekly number of hours worked, deductions made and actual wages paid. Whenever the Secretary of Labor has found under 29 CFR 5.5 (a)(1)(iv) that the wages of any laborer or mechanic include the amount of any costs reasonably anticipated in providing benefits under a plan or program described in section 1(b)(2)(B) of the Davis -Bacon Act, the contractor shall maintain records which show that the commitment to provide such benefits is enforceable, that the plan or program is financially responsible, and that the plan or program has been communicated in writing to the laborers or mechanics affected, and records which show the costs anticipated or the actual cost incurred in providing such benefits. Contractors employing apprentices or trainees under approved programs shall maintain written evidence of the registration of apprenticeship programs and certification of trainee programs, the registration of the apprentices and trainees, and the ratios and wage rates prescribed in the applicable programs. (ii)(A) The contractor shall submit weekly for each week in which any contract work is performed a copy of all payrolls to HUD or its designee if the agency is a party to the contract, but if the agency is not such a party, the contractor will submit the payrolls to the applicant, sponsor, or owner, as the case may be, for transmission to HUD or its designee. The payrolls submitted shall set out accurately and completely all of the information required to be maintained under 29 CFR 5.5(a)(3)(i), except that full social security numbers and home addresses shall not be included on weekly transmittals. Instead the payrolls shall only need to include an individually identifying number for each employee (e.g., the last four digits of the employee's social security number). The required weekly payroll information may be submitted in any form desired. Optional Form WH-347 is available for this purpose from the Wage and Hour Division Web site at http://www.dol.gov/esa/whd/forms/wh347instr.htm or its successor site. The prime contractor is responsible for the submission of copies of payrolls by all subcontractors. Contractors and subcontractors shall maintain the full social security number and current address of each covered worker, and shall provide them upon request to HUD or its designee if the agency is a party to the contract, but if the agency is not such a party, the contractor will submit them to the applicant, sponsor, or owner, as the case may be, for transmission to HUD or its designee, the contractor, or the Wage and Hour Division of the Department of Labor for purposes of an investigation or audit of compliance with prevailing wage requirements. It is not a violation of this section for a prime contractor to require a subcontractor to provide addresses and social security numbers to the prime contractor for its own records, without weekly submission to the sponsoring government agency (or the applicant, sponsor, or owner). (B) Each payroll submitted shall be accompanied by a "Statement of compliance," signed by the contractor or subcontractor or his or her agent who pays or supervises the payment of the persons employed under the contract and shall certify the following: (1) That the payroll for the payroll period contains the information required to be provided under 29 CFR 5.5(a)(3)(ii), the appropriate information is being maintained under 29 CFR 5.5 (a)(3)(i), and that such information is correct and complete; (2) That each laborer or mechanic (including each helper, apprentice, and trainee) employed on the contract during the [12515] payroll period has been paid the full weekly wages earned, without rebate, either directly or indirectly, and that no deductions have been made either directly or indirectly from the full wages earned, other than permissible deductions as set forth in 29 CFR part 3; (3) That each laborer or mechanic has been paid not less than the applicable wage rates and fringe benefits or cash equivalents for the classification of work performed, as specified in the applicable wage determination incorporated into the contract. (C) The weekly submission of a properly executed certification set forth on the reverse side of Optional Form WH-347 shall satisfy the requirement for submission of the "Statement of Compliance" required by paragraph (a)(3)(ii)(B) of this section. (D) The falsification of any of the above certifications may subject the contractor or subcontractor to civil or criminal prosecution under section 1001 of Title 18 and section 3801 et seq. of Title 31 of the United States Code. (iii) The contractor or subcontractor shall make the records required under paragraph (a)(3)(i) of this section available for inspection, copying, or transcription by authorized representatives of HUD or its designee or the Department of Labor, and shall permit such representatives to interview employees during working hours on the job. If the contractor or subcontractor fails to submit the required records or to make them available, HUD or its designee may, after written notice to the contractor, sponsor, applicant, or owner, take such action as may be necessary to cause the suspension of any further payment, advance, or guarantee of funds. Furthermore, failure to submit the required records upon request or to make such records available may be grounds for debarment action pursuant to 29,CFR 5.12. (4)(i) Apprentices and Trainees. Apprentices. Apprentices will be permitted to work at less than the predetermined rate for the work they performed when they are employed pursuant to and individually registered in a bona fide apprenticeship program registered with the U.S. Department of Labor, Employment and Training Administration, Office of Apprenticeship Training, Employer and Labor Services or with a State Apprenticeship Agency recognized by the Office, or if a person is employed in his or her first 90 days of probationary employment as an apprentice in such an apprenticeship program, who is not individually registered in the program, but who has been certified by the Office of Apprenticeship Training, Employer and Labor Services or a State Apprenticeship Agency (where appropriate) to be eligible for probationary employment as an apprentice. The allowable ratio of apprentices to journeymen on the job site in any craft classification shall not be greater than the ratio permitted to the contractor as to the entire work force under the registered program. Any worker listed on a payroll at an apprentice wage rate, who is not registered or otherwise employed as stated above, shall be paid not less than the applicable wage rate on the wage determination for the classification of work actually performed. In addition, any apprentice performing work on the job site in excess of the ratio permitted under the registered program shall be paid not less than the applicable wage rate on the wage determination for the work actually performed. Where a contractor is performing construction on a project in a locality other than that in which its program is registered, the ratios and wage rates (expressed in percentages of the journeyman's hourly rate) specified in the contractor's or subcontractor's registered program shall be observed. Every apprentice must be paid at not less than the rate specified in the registered program for the apprentice's level of progress, expressed as a percentage of the journeymen hourly rate specified in the applicable wage determination. Apprentices shall be paid fringe benefits in accordance with the provisions of the apprenticeship program. If the apprenticeship program does not specify fringe benefits, apprentices must be paid the full amount of fringe benefits listed on the wage determination for the applicable classification. If the Administrator determines that a different practice prevails for the applicable apprentice classification, fringes shall be paid in accordance with that determination. In the event the Office of Apprenticeship Training, Employer and Labor Services, or a State Apprenticeship Agency recognized by the Office, withdraws approval of an apprenticeship program, the contractor will no longer be permitted to utilize apprentices at less than the applicable predetermined rate for the work performed until an acceptable program is approved. (ii) Trainees. Except as provided in 29 CFR 5.16, trainees will not be permitted to work at less than the predetermined rate for the work performed unless they are employed pursuant to and individually registered in a program which has received prior approval, evidenced by formal certification by the U.S. Department of Labor, Employment and Training Administration. The ratio of trainees to journeymen on the job site shall not be greater than permitted under the plan approved by the Employment and Training Administration. Every trainee must be paid at not less than the rate specified in the approved program for the trainee's level of progress, expressed as a percentage of the journeyman hourly rate specified in the applicable wage determination. Trainees shall be paid fringe benefits in accordance with the provisions of the trainee program. If the trainee program does not mention fringe benefits, trainees shall be paid the full amount of fringe benefits listed on the wage determination unless the Administrator of the Wage and Hour Division determines that there is an apprenticeship program associated with the corresponding journeyman wage rate on the wage determination which provides for less than full fringe benefits for apprentices. Any employee listed on the payroll at a trainee rate who is not registered and participating in a training plan approved by the Employment and Training Administration shall be paid not less than the applicable wage rate on the wage determination for the classification of work actually performed. In addition, any trainee performing work on the job site in excess of the ratio permitted under the registered program shall be paid not less than the applicable wage rate on the wage determination for the work actually performed. In the event the Employment and Training Administration withdraws approval of a program, the contractor will no longer be permitted to utilize trainees at less than the applicable predetermined rate for the work performed until an acceptable program is approved. (iii) Equal Employment Opportunity. The utilization of apprentices, trainees and journeymen under this part shall be in conformity with the equal employment opportunity requirements of Executive Order 11246, as amended, and 29 CFR part 30. (5) Compliance with Copeland Act Requirements. The contractor shall comply with the requirements of 29 CFR part 3 which are incorporated by reference in this Addendum. (6) Subcontracts. The contractor or subcontractor will insert in any subcontracts the clauses contained in section 1(a)(1) through (11) and such other clauses as HUD or its designee may by appropriate instructions require, and also a clause requiring the subcontractors to include these clauses in any lower tier subcontracts. The prime contractor shall be responsible for the compliance by any subcontractor or lower tier subcontractor with all the contract clauses in this section 1(a). (7) Contract Terminations; Debarment. A breach of the contract clauses in 29 CFR 5.5 may be grounds for termination of the contract, and for debarment as a contractor and a subcontractor as provided in 29 CFR 5.12. (8) Compliance with Davis -Bacon and Related Act Requirements. All rulings and interpretations of the Davis -Bacon and related Acts contained in 29 CFR parts 1, 3, and 5 are herein incorporated by reference in this contract. (9) Disputes Concerning Labor Standards. Disputes arising out of the labor standards provisions of this contract shall not be subject to the general disputes clause of this contract. Such disputes shall be resolved in accordance with the procedures of the Department of Labor set forth in 29 CFR parts 5, 6, and 7. Disputes within the meaning of this clause include disputes between the contractor (or any of its subcontractors) and HUD or its designee, the U.S. Department of Labor, or the employees or their representatives. (10)(i) Certification of Eligibility. By entering into this Addendum, the contractor certifies that neither it (nor he or she) nor any person or firm who has an interest in the contractor's firm is a person or firm ineligible to be awarded Government contracts by virtue of section 3(a) of the Davis -Bacon Act or 29 CFR 5.12(a)(1) or to be awarded HUD contracts or participate in HUD programs pursuant to 24 CFR part 24. (ii) No part of this Contract shall be subcontracted to any person or firm ineligible for award of a Government contract by virtue of section 3(a) of the Davis -Bacon Act or 29 CFR 5.12(a)(1) or to be awarded HUD contracts or participate in HUD programs pursuant to 24 CFR part 24. [12516] (iii) The penalty for making false statements is prescribed in the U.S. Criminal Code, 18 U.S.C. 1001. 11. Complaints, Proceedings, or Testimony by Employees. No laborer or mechanic to whom the wage, salary, or other labor standards provisions of this Addendum are applicable shall be discharged or in any other manner discriminated against by the Contractor or any subcontractor because such employee has filed any complaint or instituted or caused to be instituted any proceeding or has testified or is about to testify in any proceeding under or relating to the labor standards applicable under this Addendum to his employer. (b) Contract Work Hours and Safety Standards Act. The provisions of this paragraph (b) are applicable only where the amount of the prime contract exceeds $ 100,000. As used in this paragraph, the terms "laborers" and "mechanics" include watchmen and guards. (1) Overtime Requirements. No contractor or subcontractor contracting for any part of the contract work which may require or involve the employment of laborers or mechanics shall require or permit any such laborer or mechanic in any workweek in which he or she is employed on such work to work in excess of forty hours in such workweek unless such laborer or mechanic receives compensation at a rate not less than one and one-half times the basic rate of pay for all hours worked in excess of forty hours in such workweek. (2) Violation; Liability for Unpaid Wages; Liquidated Damages. In the event of any violation of the clause set forth in subparagraph (1) of this paragraph, the contractor and any subcontractor responsible therefor shall be liable for the unpaid wages. In addition, such contractor and subcontractor shall be liable to the United States (in the case of work done under contract for the District of Columbia or a territory, to such District or to such territory), for liquidated damages. Such liquidated damages shall be computed with respect to each individual laborer or mechanic, including watchmen and guards, employed in violation of the clause set forth in subparagraph (1) of this paragraph, in the sum of $ 10 for each calendar day on which such individual was required or permitted to work in excess of the standard workweek of forty hours without payment of the overtime wages required by the clause set forth in subparagraph (1) of this paragraph. (3) Withholding for Unpaid Wages and Liquidated Damages. HUD or its designee shall upon its own action or upon written request of an authorized representative of the Department of Labor withhold or cause to be withheld, from any monies payable on account of work performed by the contractor or subcontractor under any such contract or any other Federal contract with the same prime contractor, or any other Federally -assisted contract subject to the Contract Work Hours and Safety Standards Act, which is held by the same prime contractor, such sums as may be determined to be necessary to satisfy any liabilities of such contractor or subcontractor for unpaid wages and liquidated damages as provided in the clause set forth in subparagraph (2) of this paragraph. (4) Subcontracts. The contractor or subcontractor shall insert in any subcontracts the clauses set forth in subparagraphs (1) through (4) of this paragraph and also a clause requiring the subcontractors to include these clauses in any lower tier subcontracts. The prime contractor shall be responsible for compliance by any subcontractor or lower tier subcontractor with the clauses set forth in subparagraphs (1) through (4) of this paragraph. (c) Health and Safety. The provisions of this paragraph (c) are applicable only where the amount of the prime contract exceeds $ 100,000. (1) No laborer or mechanic shall be required to work in surroundings or under working conditions which are unsanitary, hazardous or dangerous to his or her health and safety as determined under construction safety and health standards promulgated by the Secretary of Labor by regulation. (2) The contractor shall comply with all regulations issued by the Secretary of Labor pursuant to 29 CFR part 1926, and failure to comply may result in imposition of sanctions pursuant to the Contract Work Hours and Safety Standards Act, 40 U.S.C. 3701 et seq. (3) The contractor shall include the provisions of this paragraph in every subcontract so that such provisions will be binding on each subcontractor. The contractor shall take such action with respect to any subcontract as the Secretary of Housing and Urban Development or the Secretary of Labor shall direct as a means of enforcing such provisions. 2. WAGE AND CLAIMS ADJUSTMENTS The owner shall be responsible for the correction of all violations under section 1 of this Addendum, including violations committed by other contractors. In cases where there is evidence of underpayment of salaries or wages to any laborers or mechanics (including apprentices and trainees) by the owner or other contractor or a failure by the owner or other contractor to submit payrolls and related reports, the owner shall be required to place an amount in escrow, as determined by HUD sufficient to pay persons employed on the work covered by the Addendum the difference between the salaries or wages actually paid such employees for the total number of hours worked and the full amount of wages required under this Addendum, as well as an amount determined by HUD to be sufficient to satisfy any liability of the owner or other contractor for liquidated damages pursuant to section 1 of this Addendum. The amounts withheld may be disbursed by HUD for and on account of the owner or other contractor to the respective employees to whom they are due, and to the Federal Government in satisfaction of liquidated damages under section 1. 3. EVIDENCE OF UNIT(S) COMPLETION; ESCROW (a) The owner shall evidence the completion of the unit(s) by furnishing the Contract Administrator a certification of compliance with the provisions of sections 1 and 2 of this Addendum, and that to the best of the owner's knowledge and belief there are no claims of underpayment to laborers or mechanics in alleged violation of these provisions of the Addendum. In the event there are any such pending claims to the knowledge of the owner, the Contract Administrator, or HUD, the owner will place a sufficient amount in escrow, as directed by the Contract Administrator or HUD, to assure such payments. (b) The escrows required under this section and section 2 of this Addendum shall be paid to HUD, as escrowee, or to an escrowee designated by HUD, and the conditions and manner of releasing and approving such escrows shall be approved by HUD. ESTOPPEL CERTIFICATE MUFG UNION BANK, N.A. Commercial Credit Loan Administration 3151 East Imperial Highway, 1St Floor Brea, CA 92821 Attention: Manager MUFG UNION BANK, N.A. 200 Pringle Ave., Suite 355 Walnut Creek, CA 94596 Attention: CDF Head RE: Disposition and Development Agreement dated June 19, 2018 ("DDA") among the Community Development Commission -Housing Authority of the City of National City (the "Commission"), Morgan Tower Housing Associates, L.P., a California limited partnership ("Developer") and Kimball Tower Housing Associates, L.P., a California limited partnership ("Kimball"), and Ground Lease dated March 1, 2019 (the "Lease") between the Commission, as lessor, and Developer, as lessee, relating to the real property located in the City of National City, County of San Diego, State of California (the "Real Property"), and more particularly described on Exhibit "A" attached hereto. Terms not otherwise defined herein shall be given the meanings in the Lease. The Commission has been advised by Developer that Developer has applied to the California Statewide Communities Development Authority ("Governmental Lender") for a loan in the amount of [$42,606,000] [CHECK] (the "Loan"), which shall be evidenced by that certain Construction and Permanent Loan Agreement (Multifamily Housing Back to Back Loan Program) dated of even date herewith by and among MUFG Union Bank, N.A. ("Bank"), Developer and Governmental Lender (the "Loan Agreement"), and which shall be secured by, among other things, a Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing in favor of Governmental Lender and Bank encumbering Developer's leasehold interest under the Lease and in and to the Real Property and all improvements now or hereafter situated on the Real Property (the "Deed of Trust"). All right, title and interest of Governmental Lender with respect to the Loan and the loan documents evidencing the Loan have been assigned to Bank. Lessor has been advised that Governmental Lender and Bank are relying upon this Estoppel Certificate (this "Estoppel Certificate") in making the Loan. For purposes of this Estoppel Certificate, to the fullest extent the context so permits, (i) the term "Transfer" shall mean any transfer of Developer's interest in the Real Property by judicial or nonjudicial foreclosure, trustee's sale or any other action or proceeding for the enforcement of the Deed of Trust, by Bank's exercise of its rights under the assignment of rents and leases contained in the Deed of Trust or any of the other Loan documents, or by deed in lieu of foreclosure; and (ii) the term "Bank" shall mean Bank, its successors and assigns and/or the purchaser through or following a Transfer of the Real Property. 2773/014742-1192 13046856 With such understanding, the Commission hereby states, declares, represents, warrants and certifies for the benefit of Governmental Lender and Bank, that as of the date hereof: 1. DDA and Ground Lease. Attached hereto as Exhibit "B" is a true, correct and complete copy of the DDA and all amendments thereto (collectively, the "DDA") and attached hereto as Exhibit "C" is a true and correct and complete copy of the Lease and all amendments thereto (collectively, the "Lease"). The DDA and the Lease have been duly authorized, executed and delivered by the Commission and are in full force and effect. The DDA, the Lease and the documents attached as exhibits thereto, constitute the entire agreement between the Commission and Developer pertaining to the Real Property (including, without limitation, all amendments, assignments and subordination or nondisturbance agreements). Neither the DDA nor the Lease shall be amended, supplemented or modified except as described above and attached hereto. There are no other agreements, whether oral or written, between Developer and the Commission concerning the Real Property. 2. Conditions Precedent. Each and every covenant, condition and obligation contained in the DDA required to be performed or satisfied as of the date hereof, including, without limitation, the conditions precedent specified in Sections 204.1 and 204.2 of the DDA have been performed or satisfied by Developer or waived by the Commission. 3. Default under Kimball Property. Substantially concurrently with the execution of the Lease with respect to the Real Property, the Commission shall enter into a separate ground lease with Kimball with respect to the Kimball Property (as defined in the DDA). The Commission acknowledges and agrees that from and after the date of this Estoppel Certificate, in the event of a default or a failure of a condition precedent contained in the DDA related to the Kimball Property, the Commission shall not terminate the DDA as to the Real Property and the Commission shall not exercise any right or remedy under the DDA or any related agreement with respect to the Real Property or the Developer of the Real Property. 4. Approvals of Commission. The Commission has approved of the Scope of Rehabilitation (as defined in the DDA) pursuant to Section 301 of the DDA and the Initial Project Budget (as defined in the DDA) pursuant to Section 307.1 of the DDA. 5. Priority of Ground Lease. The Commission currently holds all of the right, title and interest of the "Commission" or "Landlord" under the Lease and has not assigned, hypothecated, encumbered, mortgaged, pledged or subordinated any of its interest under the Lease or any of its interest in the Real Property (or otherwise leased or encumbered any of the Real Property except pursuant to the Lease) in whole or in part. The Commission agrees that any mortgage, deed of trust or other encumbrance on the fee estate in the Real Property shall be junior and subordinate to the Lease, the Deed of Trust, and any other leasehold mortgage, and the Commission agrees to execute, acknowledge (if appropriate) and deliver any additional documents reasonably requested by Bank to confirm the foregoing. The Commission recognizes Developer identified above as the holder of the leasehold interest in the Real Property and the "Developer" under the Lease. 6. Lease Term. The Lease term shall commence as of the date the memorandum of the Lease records in the Official Records of the County of San Diego, State of California (the 2773/014742-1192 13046856 -2- "Commencement Date") and the Lease term shall expire on the ninety-ninth (99th) anniversary of the date on which a notice of completion with respect to the improvements constructed on the Real Property records in the Official Records of the County of San Diego, State of California (the "Termination Date") unless sooner terminated pursuant to the terms of the Lease. 7. Rent. Developer shall make all of its rent and other payments directly to Commission under the Lease (and not to any receiver, assignee, property management company or other person or entity). The annual rent under the Lease is $1.00 and is not subject to increase. No additional rent or charge (including, without limitation, as applicable, taxes, maintenance, operating expenses or otherwise) that has been billed to Developer by the Commission or, to Commission's knowledge, by any other party, is overdue. 8. Security Deposit. No amounts have been paid by Developer to or for the account of Commission by way of any deposit as security or for any other purpose, the return of which Developer would be entitled. 9. No Defaults. No default, or any event or condition which, with the passing of time or giving of notice or both, would constitute a default, on the part of the Commission, or, to the Commission's knowledge, on the part of Developer, exists under the DDA or the Lease in the performance of the terms, covenants and conditions of the DDA or the Lease required to be performed on the part of Developer and Commission and no event has occurred which authorizes, or with the lapse of time or with the giving of notice or both, will authorize either Commission or Developer to terminate the DDA or the Lease. The Commission has no existing defenses as to its obligations under the DDA or the Lease and claims no offsets against enforcement of the Lease by Developer or counterclaim against Developer. To the Commission's actual knowledge, Developer has no defense, set -offs, basis for withholding rent, claims or counterclaims against Commission for any failure of performance of any of the terms of the DDA or the Lease. 10. Mortgagee Protections. The Commission agrees that Bank shall constitute a "Mortgagee" and the Deed of Trust shall constitute a "Mortgage" within the meaning of the Lease, including, without limitation, Section 18 of the Lease, such rights being incorporated herein by reference for the benefit of Bank as if fully set forth, and, to the extent such consent is required under the Lease and/or the DDA, the Commission hereby consents to the Deed of Trust and the other security interests to be given to Bank, including, without limitation, an assignment of Developer's interest in rents, issues and profits of the Real Property. The execution and delivery by Developer of the Deed of Trust in favor of Bank, or any subsequent modification thereof, will constitute neither a breach of Developer's obligations as Developer under the Lease and/or the DDA nor an event of default thereunder. Foreclosure of the Deed of Trust or any sale thereunder, whether by judicial proceedings or by virtue of any power of sale contained in the Deed of Trust, or any conveyance of the leasehold interest under the Lease from Developer to Bank by virtue of any deed in lieu of foreclosure or other appropriate proceedings in the nature thereof, or the conveyance by Bank to a third -party purchaser following a foreclosure (or deed -in -lieu thereof), shall not require the consent of the Commission or constitute of breach of any provision or of a default under the Lease and/or the DDA. The Commission shall recognize Bank as Developer under the Lease following any Transfer, subject to the obligations of Bank to comply with the Lease and cure any defaults which are reasonably susceptible of cure by Bank as provided in Section 18 of the Lease. 2773/014742-1192 13046856 -3- 11. Inconsistencies Between DDA and Lease. In the event of any inconsistency between the terms and provisions of Sections 205, 315 and/or 603 of the DDA and Articles 17 and 18 of the Lease, the applicable terms and provisions of the Lease shall control. 12. No Merger. No merger of Developer's interest in the Real Property into the Commission's interest in the Real Property shall result or be deemed to result by reason of ownership of Developer's interest and the Commission's interest by the same party or by reason of any other circumstances, without the prior written consent of Bank. 13. No Termination or Amendment. During the term of the Loan and until reconveyance of the Deed of Trust, the Commission will not terminate or enter into any agreement with any other party to terminate, cancel, surrender, amend, alter, modify or extend the Lease or any interest of Developer thereunder without prior written consent of Bank and any such purported agreement shall not be valid or effective without the prior written consent of Bank. Without limiting the generality of the foregoing, Bank's prior written consent shall be required prior to Developer being permitted to terminate the Lease following occurrence of damage, destruction, a taking or abandonment of the Lease. 14. No Other Agreements. Except as otherwise provided in the Lease, the Commission has no right or option to acquire any of Developer's right, title or interest in or to the Real Property or any improvements or personal property located thereon. There are no provisions for, and the Commission has no rights with respect to, terminating the Lease or increasing the rent payable thereunder, except as expressly set forth in the Lease. 15. Bank to Act as Insurance Trustee. During the term of the Loan and until reconveyance of the Deed of Trust, the Commission agrees that the Bank shall be designated as the Insurance Trustee under the Lease. 16. No Liability. The Commission agrees that by acceptance of this Estoppel Certificate or by acceptance of the Deed of Trust or other encumbrance of the Lease, Bank has not become liable under the terms of the Lease. Developer and the Commission agree that Bank shall be so liable only if Bank acquires ownership of the leasehold interest in the Real Property pursuant to a Transfer, and then only for such period of time as Bank holds such leasehold interest. The Commission further agrees that Bank's personal liability shall be limited to Bank's interest in the Real Property, notwithstanding any assumption of the Lease or entering into a new lease by Bank. 17. No Litigation. There are no actions, whether voluntary or otherwise, pending against the Commission under any insolvency, bankruptcy or other debtor relief laws of the United States or any state. The Commission has not received written notice of any pending eminent domain proceedings or other governmental actions or any judicial actions of any kind against the Commission's interest in the Real Property. The Commission has not received written notice that it or Developer is in violation of any governmental law or regulation applicable to the Real Property, the interests therein or the operation thereon, including, without limitation, any environmental laws or the Americans with Disabilities Act, and has no reason to believe that there are grounds for any claim of any such violation. 2773/014742-1192 13046856 -4- 18. Notice of Termination. In the event of a foreclosure of the Deed of Trust or assignment in lieu thereof, Bank elects to terminate the provisions of the Lease referenced in Sections 8.21 and 17.2 of the Lease. 19. Insurance. Bank may be named as additional insured and loss payee under insurance coverages carried by Developer and may participate in any settlement of proceeds therefrom. 20. No Liability. The Commission agrees that Bank has not become liable under the terms of the Lease by acceptance of this Certificate or by acceptance of the Deed of Trust or other encumbrance of the Real Property. 21. Representations. The Commission represents and warrants that: (i) the Commission is duly organized and existing; (ii) the persons executing this Estoppel Certificate are duly authorized to execute and deliver the same on behalf of the Commission; (iii) the Commission has taken such formal action of its governing body as may be required by law to bind Commission, if any, and that the Commission is formally bound to the provisions of this Estoppel Certificate; and (iv) entering into this Estoppel Certificate does not violate any provision of any other agreement to which the Commission is bound. 22. Notices. The Commission agrees to deliver to Bank copies of all notices which the Commission delivers to Developer substantially concurrently with the giving of such notice to Developer and this Estoppel Certificate constitutes written request by Developer to the Commission to deliver to Bank copies of all such notices at the following addresses for Bank: MUFG UNION BANK, N.A. Commercial Credit Loan Administration 3151 East Imperial Highway, 1st Floor Brea, CA 92821 Facsimile: (949) 553-7123 Attn: Manager Reference: Morgan Tower Apartments With a Copy to: MUFG UNION BANK, N.A. 1901 Avenue of the Stars, Suite 600 Los Angeles, CA 90067 Attn: CDF Manager Reference: Morgan Tower Apartments And: MUFG UNION BANK, N.A. 200 Pringle Ave., Suite 355 Walnut Creek, CA 94596 Attention: CDF Head 2773/014742-1192 13046856 -5- 23. Successors. This Estoppel Certificate shall inure to the benefit of the successors and assigns of Bank. 24. Reliance. The Commission has executed this Estoppel Certificate for the benefit and protection of Governmental Lender and Bank with full knowledge that Governmental Lender and Bank are relying on this Estoppel Certificate in making the Loan to Developer. Upon the request of Bank, but no more often than twice in any calendar year, the Commission and Developer agree to execute and deliver to Governmental Lender and Bank an estoppel certificate setting forth the substance of the provisions set forth in this Estoppel Certificate. In addition, the Commission hereby agrees to consent to the encumbrance of the Real Property and to execute estoppel certificates substantially similar to this Estoppel Certificate in favor of any other lender whose loan is secured by a mortgage or deed of trust encumbering the Real Property. 25. Estoppel. This Estoppel Certificate constitutes, as against the Commission and for the benefit of Governmental Lender and Bank and their respective successors and assigns, an estoppel as to the information contained herein and a waiver of any right of the Commission to disaffirm or contest the accuracy of such information. To the extent inconsistent with the Lease, this Estoppel Certificate shall constitute an amendment to the Lease. 2773/014742-1192 13046856 [Signature Page Follows] -6- IN WITNESS WHEREOF, the Commission has executed this Estoppel Certificate as of March 1, 2019. APPROVED AS TO FORM: CHRISTENSEN & SPATH LLP, Commiss'on Special Counsel By: W. ter F. S. h III, Esq. 2773/014742-1192 13046856 COMMISSION: COMMUNITY DEVELOPMENT COMMISSION - HOUSING AUTHORITY OF THE CITY OF NATIONAL CITY, a public body, corporate and politic By: Name: Leslie Deese Title: Executive Director -7- EXHIBIT "A" LEGAL DESCRIPTION Real property in the City of National City, County of San Diego, State of California, described as follows: Lot 1 of Center City Project, in the City of National City, County of San Diego, State of California, according to Map thereof No. 8807, filed in the Office of the County Recorder of San Diego County, February 24, 1978. APN: 560-410-04-00 2773/014742-1192 13046856 EXHIBIT "B" DDA (See Attached) 2773/014742-1192 13046856 EXHIBIT "C" GROUND LEASE (See Attached) 2773/014742-1192 13046856 UNSECURED ENVIRONMENTAL INDEMNITY AGREEMENT (Kimball Tower) THIS UNSECURED ENVIRONMENTAL INDEMNITY AGREEMENT ("Indemnity") is dated as of the 25th day of March, 2019, by and between Kimball Tower Housing Associates, L.P., a California limited partnership ("Indemnitor"), to and for the benefit of the Community Development Commission -Housing Authority of the City of National City ("Lender"), its successors and assigns and, to the extent not otherwise referenced, the Indemnified Parties (as hereinafter defined). RECITALS A. Lender has agreed to make a loan in the original principal amount of $19,374,337.00 ("Loan") to Indemnitor as described in: (i) that certain Disposition and Development Agreement (Kimball and Morgan Towers) dated as of June 19, 2018 by and between the Indemnitor, Lender and Kimball Tower Housing Associates, L.P.; and (ii) that certain Promissory Note (Kimball Tower) of even date herewith made by Indemnitor in favor of the Lender. All capitalized terms used but not defined herein have the definitions set forth in the aforementioned Disposition and Development Agreement (Kimball and Morgan Towers). The Loan is secured by, among other things, a Deed of Trust and a Security Agreement executed by Indemnitor in favor of Lender. The Deed of Trust encumbers that certain real property described on Exhibit A attached hereto (such property along with any other property encumbered by the Deed of Trust, now or at any time in the future, shall be referred to herein as the "Property"). B. The execution and delivery of this Indemnity by the Indemnitor to the Lender is a condition to Lender making the Loan. Lender is making the 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 Loan. AGREEMENT NOW, THEREFORE, in consideration of the foregoing and of Lender making the 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 Lender, Lender's affiliates, directors, officers, shareholders, agents and employees, and Lender'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 cost (including, without limitation, attorneys' fees, expenses and court costs), expense or loss arising from any claim, liability, damage, injunctive relief, injury to person, property or natural resources, fine, penalty, action, and cause of 1 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 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 semc .), the Hazardous Materials Transportation Act (49 U.S.C. § 1801, et sue.), the Resource Conservation and Recovery act (42 U.S.C. §6901, et semc .), 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 2 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 seq.); 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 sea.). Notwithstanding the above, the term "Hazardous Materials" shall not include small amounts of chemicals, cleaning agents and the like commonly employed in routine residential apartment uses in a manner typical of occupants or owners in other similar residential properties, provided that such substances 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 Loan (as evidenced by the release and reconveyance of the Deed of Trust); or (ii) vesting of title to the Property in Lender 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 Lender; (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 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 Loan or the Property, or in connection with any exercise of such Indemnified Party's rights under any of the Loan Documents. 3 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 the gross negligence or 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 Lender or such affiliate of Lender so acquires title to the Property, including without limitation with respect to any Hazardous Materials which are discovered at the Property after the date Lender or such affiliate of Lender 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) Lender, Lender's directors, officers, agents and employees, (b) any person or entities to which any Lender participates, assigns or sells all or any portion of its interest in the Loan, or which otherwise succeeds to the interest of Lender under the Deed of Trust, whether by purchase or otherwise, and (c) any affiliate of Lender 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 Lender or any Indem- nified Party relating to the Loan (except for any guaranty) (such documents together with the Deed of Trust being referred to collectively herein as the "Loan Documents"). The obligations of Indemnitor under this Indemnity are independent of any indemnification or other obligations of Indemnitor under the 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 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 Lender to secure the 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. 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 Loan Documents; (b) except as set forth in Sections 2, 3 and 4, any participation in or sale or assignment of the 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 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 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 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 circumstances. 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. 14. Notices. All notices under this Indemnity shall be in writing and sent by (a) certified or registered mail, return receipt requested, (b) by a nationally recognized overnight courier such as 5 UPS or FedEx, or (c) by personal delivery. All notices shall be delivered to the following addresses (which addresses may be changed by written notice): Lender: Indemnitor: And to: Copy to: And to: Community Development Commission - Housing Authority of the City of National City 1243 National City Blvd. National City, CA 91950 Attn: Executive Director Kimball Tower Housing Associates, L.P. do Community HousingWorks 3111 Camino Del Rio North, Suite 800 San Diego, CA 92108 Attention: Susan M. Reynolds, President & CEO Kimball Tower Housing Associates, L.P. do Mercy Housing California 1500 South Grand Avenue, Suite 100 Los Angeles, CA 90015 Attention: Ed Holder, Regional Vice President of Real Estate Development Gubb & Barshay, LLP 505 14th Street, Suite 450 Oakland, CA 94612 Attention: Evan Gross U.S. Bancorp Community Development Corporation 1307 Washington Avenue, Suite 300 Mail Code: SL MO RMCD St. Louis, MO 63103 USB Project No: 25983 Attn.: LIHTC Asset Management 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 6 actually attached to this Indemnity. The Recitals to this Indemnity are hereby incorporated in this Agreement 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 Lender 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. INDEMNITOR: KIMBALL TOWER HOUSING ASSOCIATES, L.P., a California limited partnership By: CHW Kimball Development LLC, Its: managing general partner By: Community HousingWorks Its: sole member and manager B M. Reynolds, President CEO By: Mercy Kimball Development LLC Its administrative general partner By: Mercy Housing Calwest Its: sole member and manager By: yr OLSLQ.4ectivc.o• Erika Villablanca, Vice President [SIGNATURES CONTINUED ON FOLLOWING PAGE] 7 LENDER: COMMUNITY DEVELOPMENT COMMISSION - HOUSING AUTHORITY OF THE CITY OF NATIONAL CITY, a public body, corporate and politic By: Leslie Deese, Executive Director APPROVED AS TO FORM: PROVED AS TO FORM: Christensen & Spath LLP Lender Spec'a1 Counsel Bv: meter F. Seat 10 SECURITY AGREEMENT (Kimball Tower) THIS SECURITY AGREEMENT ("Agreement") is dated as of the 25th day of March, 2019, by and between Kimball Tower Housing Associates, L.P., a California limited partnership ("Borrower") and the Community Development Commission -Housing Authority of the City of National City ("Lender"). RECITALS A. Lender has agreed to make a loan in the original principal amount of $19,374,337.00 ("Loan") to Borrower as described in: (i) that certain Disposition and Development Agreement (Kimball and Morgan Towers) ("DDA") dated as of June 19, 2018 by and between the Borrower, Lender and Kimball Tower Housing Associates, L.P.; and (ii) that certain Promissory Note (Kimball Tower) of even date herewith made by Borrower in favor of the Lender ("Note"). All capitalized terms used but not defined herein have the definitions set forth in the DDA. The Loan is secured by, among other things, a Deed of Trust executed by Borrower in favor of Lender. The DDA, Promissory Note (Kimball Tower), Deed of Trust and this Agreement maybe referred to collectively herein as the "Loan Documents." B. Borrower and the Lender 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, Borrower and the Lender agree, pledge and covenant as follows: 1. Grant of Security Interest. Borrower hereby grants to the Lender 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 Promissory Note. 3. Proceeds Included. Borrower also hereby grants to the Lender 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. However, nothing in this Section 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 Lender. 1 4. Warranties of Borrower. Borrower represents and warrants to Lender that: (a) Borrower is or will be the full legal owner of the Collateral and except for any senior lenders (including, without limitation, Senior Lender [as defined in the Note]), 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 and security agreements securing loans to Borrower that are senior to the Loan and that were duly approved by the Lender, and/or security interests in the Collateral granted by Borrower with the knowledge and approval of Lender, 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 Lender, except obsolete items. If the Collateral is moved or upon any default, which continues beyond any applicable notice and cure periods, of this Agreement by Borrower, at Lender's written request, at its own cost and expense, shall assemble the Collateral wherever in San Diego County the Lender 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, ordinary wear and tear excepted, 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 value of the Collateral. 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 Lender, and shall provide that the loss payable thereunder shall be paid to Borrower, Lender and to any senior secured party, as their respective interests may appear. Notwithstanding the foregoing, this Section 6 shall not be deemed to require a separate insurance policy covering the Collateral, if equivalent coverage first satisfactory to Lender is provided as part of the insurance maintained by Borrower with respect to the Kimball Property (as defined in the DDA). 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. Except for personal property in the ordinary course of business or as otherwise allowed by the Loan Documents, the Borrower shall not (without the prior written consent of Lender), 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. Lender, through its agents or employees, shall have the right to enter the Kimball Tower (as defined in the DDA) at normal business hours upon reasonable advance notice 2 and intervals to inspect and take inventory of the Collateral, provided the same does not unnecessarily infringe upon the operation of the Kimball Tower. 10. Right to Make Payments. Lender 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. The Lender shall have the right to enter the Kimball Tower at normal business hours upon reasonable advance notice and intervals, 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 Section 10 shall be secured by the security interest created by this Agreement, and shall be due and payable to Lender 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 Lender. With prior notice to the Borrower, the Lender may assign its rights hereunder and its security interest created herein. In the event of such an assignment, Lender'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 Lender 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, Lender may also: (a) Enter the Kimball Tower to take possession of the Collateral, provided that the Collateral shall not be removed from the Kimball Tower 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 Kimball Tower 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 Lender as a result of Borrower's default. Before exercising any of the foregoing rights, Lender shall first give written notice of such default to Borrower and its limited partner and Borrower shall have thirty (30) days from receipt of the notice to cure any such default before Lender exercises its rights. Notwithstanding anything to the contrary contained herein, the Lender hereby agrees that any cure of any default made or tender 3 by the Borrower's limited partner shall be deemed to be a cure by the Borrower and shall be accepted or rejected on the same basis as if made or tendered by the Borrower. 13. Financing Statement. Borrower authorizes the Lender to file 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 Lender shall pay the fees associated with filing such documents. 14. No Waiver. Neither the acceptance of any partial or delinquent payment by Lender nor Lender'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 Documents has been satisfied (except any obligations that survive repayment of the Loan, foreclosure of the Property or termination of the Loan Documents), or until the Deed of Trust 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. Notices. All notices under this Agreement shall be in writing and sent (a) by certified or registered U.S. mail, return receipt requested, (b) overnight by a nationally recognized overnight courier such as UPS Overnight or FedEx, or (c) by personal delivery. All notices shall be effective upon receipt (or refusal to accept delivery). All notices shall be delivered to the following addresses (which addresses may be changed by written notice): Lender: Borrower: And to: Community Development Commission - Housing Authority of the City of National City 1243 National City Blvd. National City, CA 91950 Attn: Executive Director Kimball Tower Housing Associates, L.P. c/o Community HousingWorks 2815 Camino Del Rio South, Suite 350 San Diego, CA 92108 Attention: Susan M. Reynolds, President & CEO Kimball Tower Housing Associates, L.P. do Mercy Housing California 1500 South Grand Avenue, Suite 100 Los Angeles, CA 90015 Attention: Ed Holder, Regional Vice President of Real Estate Development 4 Copy to: Gubb & Barshay, LLP 505 14th Street, Suite 450 Oakland, CA 94612 Attention: Evan Gross And to: U.S. Bancorp Community Development Corporation 1307 Washington Avenue, Suite 300 Mail Code: SL MO RMCD St. Louis, MO 63103 USB Project No: 25983 Attn.: LIHTC Asset Management 18. Certain Requirements Superior. All provisions of this Agreement shall be subject and subordinate to: (a) The rights of Senior Lender under the documents evidencing the Construction Loan (as defined in the Note). (b) Any and all federal, state and local statutes and regulations applicable to the Kimball Tower, the Collateral or the Loan; and (c) The provisions of the Note secured by this Agreement, to the extent of any inconsis- tency between it and this Agreement. 19. Attorneys' Fees. If Borrower or the Lender 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 the prevailing 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. 21. Construction of Agreement. The provisions contained in this Agreement shall not be construed in favor of or against either Borrower or the Lender, 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. Borrower and the Lender agree that each such counterpart is an original and shall be binding upon all of the parties, even though all of the parties are not signatories to the same counterpart. 5 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 one another 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: KIMBALL TOWER HOUSING ASSOCIATES, L.P., a California limited partnership By: CHW Kimball Development LLC, Its: managing general partner By: Community HousingWorks Its: ,.sole member and manag By: TL . Reynolds, President & T 0 By: Mercy Kimball Development LLC Its administrative general partner By: Mercy Housing Calwest Its: sole member and manager By: Erika Villablanca, Vice President [SIGNATURES CONTINUED ON FOLLOWING PAGE] 6 LENDER: COMMUNITY DEVELOPMENT COMMISSION - HOUSING AUTHORITY OF THE CITY OF NATIONAL CITY, a public body, corporate and politic Byr 4 _k.L Leslie Deese, Executive Director APPROVED AS TO FORM: B orris -Jones, ity At orney, APVED AS TO FORM: Christensen & Spath LLP Lender Special Counsel By: EXHIBIT "1" TO SECURITY AGREEMENT BORROWER: Kimball Tower Housing Associates, L.P. LENDER: Community Development Commission -Housing Authority of the 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") described in the Security Agreement. (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, but excluding equipment owner by third parties and located on the property, such as cable television equipment, laundry equipment and solar power equipment. (b) General Intangibles. All general intangibles relating to design, development, operation, management and use of the Property and construction 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), as such may be modified, amended or supplemented from time to time, concerning the design, construction, management, operation, occupancy, use, and/or disposition of any portion of or all of the Property. 8 (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 permits to rehabilitate the Kimball Tower, as defined in the DDA, environmental reports and similar materials relating to any portion of or all of the Property and all modifications, supplements and amendments thereto. (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 made by the Lender to the Borrower and any commitment by any lender to extend permanent or additional construction financing to the Borrower relating to the Property and all tax credits for the Kimball Property. (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 the Lender. (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. (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. 9 (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. 10 RECORDING REQUESTED BY: Stewart Title Guaranty Co. #18000480842A AND WHEN RECORDED MAIL TO: Community Development Commission of the City of National City Records Management Dept 1243 National City Blvd National City, CA 91950 DOC# 2019-0113613 11111111111111111111111111111111111111111111111111111111 Mar 29, 2019 03:17 PM OFFICIAL RECORDS Ernest J. Dronenburg, Jr., SAN DIEGO COUNTY RECORDER FEES: $52.00 (SB2 Atkins: $0.00) PCOR: AFNF PAGES: 7 Memorandum of Ground Lease (Please fill in document title(s) on this line) 1 Exempt from fee per GC27388.1 due to being recorded in connection with concurrent transfer that is subject to the imposition of documentary transfer tax, or, 2 ❑ Exempt from fee per GC27388.1 due to being recorded in connection with a transfer that was subject to documentary transfer tax which was paid on document recorded previously on (date*) as document number of Official Records, or, 3 ❑ Exempt from fee per GC27388.1 due to the maximum fees being paid on documents in this transaction, or, 4 ❑ Exempt from fee per GC27388.1 due to the maximum fees having been paid on documents in the transaction(s) recorded previously on (date*) as document number(s) of Official Records, or, 5 ❑ Exempt from fee per GC27388.1, document transfers real property that is a residential dwelling to an owner -occupier, or, document is recorded in connection with concurrent transfer that is a residential dwelling to an owner -occupier, or, 6 ❑ Exempt from fee per GC27388.1 due to it being recorded in connection with a transfer of real property that is a residential dwelling to an owner -occupier. The recorded document transferring the dwelling to the owner -occupier was recorded on (date*) as document number(s) 7 ❑ Exempt from fee per GC27388.1 due to being executed or recorded by the federal government in accordance with the Uniform Federal Lien Registration Act, by the state, or any county, municipality or other political subdivision of the state, or, 8 ❑ Exempt from the fee per GC 27388.1 (a) (1); Not related to real property, or, 9 ❑ Exempt from fee under GC27388.1 for the following reasons: THIS PAGE ADDED TO PROVIDE SENATE BILL2 EXEMPTION INFORMATION (Additional recordingfeeapplies) Rev 5/18 *The Prior Recording Reference must have been recorded within the last 60 days and Is subject to review RECORDING REQUESTED B`t STEWART TITLE GUARANTY COMPANY Prt Pa re.1 R BY: COMMUNITY DEVELOPMENT COMMISSION -HOUSING AUTHORITY OF THE CITY OF NATIONAL CITY AND WHEN RECORDED RETURN TO: COMMUNITY DEVELOPMENT COMMISSION - HOUSING AUTHORITY OF THE CITY OF NATIONAL CITY Records Management Department 1243 National City Blvd. National City, California 91950 MEMORANDUM OF GROUND LEASE (Kimball Tower) Transfer Tax $0 -value under $100 THIS MEMORANDUM OF GROUND LEASE is executed in connection with that certain GROUND LEASE [Kimball Tower], dated as of March 25, 2019 ("Ground Lease"), between the Community Development Commission -Housing Authority of the City of National City ("Housing Authority"), and Kimball Tower Housing Associates, L.P., a California limited partnership ("Tenant"), relating to the real property ("Property") located in the City of National City, California, more particularly described in the attached Exhibit "A," which is incorporated herein by this reference. Pursuant to the Ground Lease, the Housing Authority has leased the Property to the Tenant for a period commencing on the date this Memorandum of Ground Lease is recorded, and continuing thereafter until the ninety-ninth (99th) anniversary of the date on which a notice of completion for the construction of the project described in the Ground Lease is recorded in the Official Records. This Memorandum of Ground Lease is being recorded in order to give notice of the Ground Lease. This Memorandum of Ground Lease is not a complete summary of the terms and conditions of the Ground Lease and is subject to, and shall not be used to interpret or modify, the Ground Lease. Landlord: Community Development Commission -Housing Authority of the City of National City Byc—o2 �C Leslie Deese, Executive Director APPROVED AS TO FORM: — APPROVED AS TO FORM: Christense & Spath LLP B o s- on ter `'..th III Housing ority Special Counsel [SIGN TU' . : ONTINUED ON FOLLOWING PAGE] 1 ACKNOWLEDGMENT A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California County of San Diego On a✓d1» 019, before me, D. Pi)T11 `e W , notarypublic, personally appeared, L P (i -e �-Pwho proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are—subscribed to the within instrument and acknowledged to me that -lam/she/they executed the same in his/her/their authorized capacity(ies), and that bylris/her/thhi r-signature(s) on the instrument the person(s), or the entity on 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. Signature 3 (Seal) D. PITCHER Commission # 2146777 Notary Public - California San Diego County My Comm. Expires A r 15, 2020 TENANT: KIMBALL TOWER HOUSING ASSOCIATES, L.P., a California limited partnership By: CHW Kimball Development LLC, Its: managing general partner By: Community HousingWorks Its: sole member and manager By: S . Reynolds, Presiden EO By: Mercy Kimball Development LLC Its administrative general partner By: Mercy Housing Calwest Its: sole member and manager By: Co•. U` Erika Villablanca, Vice President 2 A Notary Public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California County of Orange On March 25, 2019, before me, A. McLean, Notary Public, personally appeared Susan M. Reynolds, who proved to me on the basis of satisfactory evidence to be the person(s) whose 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. Signature (Seal) A. MCLEAN i •: _ i�i` Notary Public — California 5 Orange County Commission # 2227349 My Comm. Expires Jan 30.2022 A Notary Public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California County of Orange On March 25, 2019, before me, A. McLean, Notary Public, personally appeared Erika Villablanca, who proved to me on the basis of satisfactory evidence to be the person(s) whose 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. Signature (Seal) A. MCLEAN public - California t 4 Notary Orange County z -J ' Commission t? 222734g My ExpiresJan Comm.. Expires EXHIBIT A Lot 2 of Center City Project, in the City of National City, County of San Diego, State of California, according to Map thereof No. 8807, filed in the Office of the County Recorder of San Diego County, February 24, 1978. Reserving from the lease of the property a non-exclusive easement for vehicular and pedestrian ingress and egress over that portion of the property more fully described as follows: PORTION OF LOT 2 OF CENTER CITY PROJECT, IN THE CITY OF NATIONAL CITY, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF NO. 8807, RECORDED JANUARY 4, 1978, AS FILE NO. 78-075321, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY. BEGINNING AT THE EASTERLY CORNER SAID LOT 2 AND ALSO BEING ON THE WESTERLY 30 FOOT RIGHT-OF-WAY OF KIMBALL WAY; THENCE SOUTHERLY ALONG SAID EASTERLY LINE SOUTH 17°47'19" EAST (SOUTH 17°47'52" EAST, RECORD PER MAP 8807) A DISTANCE OF 66.48 FEET; THENCE LEAVING SAID EASTERLY LINE, NORTH 72°18'17" EAST A DISTANCE OF 38.83 FEET TO THE BEGINNING OF A 780.00 FOOT RADIUS CURVE CONCAVE NORTHEASTERLY, A RADIAL TO SAID CURVE BEING SOUTH 39°07'04" WEST AND ALSO BEING ON SAID WESTERLY 30 FOOT RIGHT-OF-WAY OF KIMBALL WAY; THENCE NORTHWESTERLY ALONG THE ARC OF SAID CURVE THROUGH A CENTRAL ANGLE OF 05°39'41", AN ARC LENGTH OF 77.07 FEET TO THE POINT OF BEGINNING. CONTAINING 0.03 ACRES OR 1241.62 SQUARE FEET MORE OR LESS. Together with: An easement for pedestrian and vehicular access for ingress and egress and vehicular parking as disclosed by the unrecorded ground lease, more fully described as follows: PORTION OF LOT 6 OF CENTER CITY PROJECT, IN THE CITY OF NATIONAL CITY, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF NO. 8807, RECORDED JANUARY 4, 1978, AS FILE NO. 78-075321, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY. COMMENCING AT THE EASTERLY CORNER SAID LOT 6 AND ALSO BEING ON THE WESTERLY 30 FOOT RIGHT-OF-WAY OF KIMBALL WAY; THENCE SOUTHERLY ALONG SAID EASTERLY LINE SOUTH 17°47'19" EAST (SOUTH 17°47'52" EAST, RECORD PER MAP 8807) A DISTANCE OF 66.48 FEET TO THE TRUE POINT OF BEGINNING; THENCE CONTINUING ALONG SAID EASTERLY LINE SOUTH 17°47'19" EAST (SOUTH 17°47'52" EAST) A DISTANCE OF 52.66 FEET TO THE SOUTHERLY LINE OF SAID LOT 6; THENCE WESTERLY ALONG SAID SOUTHERLY LINE, SOUTH 72°04'42" WEST (SOUTH 72°04'09" WEST) A DISTANCE OF 290.53 (290.70) FEET TO THE WESTERLY LINE OF SAID LOT 6 AND ALSO BEING ON THE EASTERLY 40 FOOT RIGHT-OF-WAY OF D AVENUE; THENCE NORTHERLY ALONG SAID WESTERLY LINE NORTH 17°46'21" WEST (NORTH 17°46'54" WEST) A DISTANCE OF 50.22 FEET; THENCE LEAVING SAID WESTERLY LINE NORTH 72°45'57" EAST A DISTANCE OF 175.92 FEET; THENCE NORTH 17°12'20" WEST A DISTANCE OF 5.01 FEET; THENCE NORTH 72°18'17" EAST A DISTANCE OF 114.56 FEET TO THE TRUE POINT OF BEGINNING. CONTAINING 0.34 ACRES OR 14709.33 SQUARE FEET MORE OR LESS. Assessor Parcel Number 560-410-05-00 RECORDING REQUESTED BY: Stewart Title Guaranty Co. #18000480842A AND WHEN RECORDED MAIL TO: Community Development Commission of the City of National City Records Management Department 1243 National City Blvd National City, CA 91950 DOC# 2019-0114522 11111111111111111111111111111111111111111113111111111 Apr 02, 2019 08:00 AM OFFICIAL RECORDS Ernest J. Dronenburg, Jr., SAN DIEGO COUNTY RECORDER FEES: $82.00 (SB2 Atkins: $0.00) PCOR: N/A PAGES: 18 DEED OF TRUST WITH ASSIGNMENT OF RENTS (Please fill in document title(s) on this line) 1 r- Exempt from fee per GC27388.1 due to being recorded in connection with concurrent transfer that is subject to the imposition of documentary transfer tax, or, 2 [ "Exempt from fee per GC27388.1 due to being recorded in connection with a transfer that was subject to documentary transfer tax which was paid on document recorded previously on 2 9 - (date*) as document numberL0l 9 - 0/131519 Records, or, of Official 3 ❑ Exempt from fee per GC27388.1 due to the maximum fees being paid on documents in this transaction, or, 4 ❑ Exempt from fee per GC27388.1 due to the maximum fees having been paid on documents in the transaction(s) recorded previously on (date*) as document number(s) of Official Records, or, 5 ❑ 6 ❑ Exempt from fee per GC27388.1, document transfers real property that is a residential dwelling to an owner -occupier, or, document is recorded in connection with concurrent transfer that is a residential dwelling to an owner -occupier, or, Exempt from fee per GC27388.1 due to it being recorded in connection with a transfer of real property that is a residential dwelling to an owner -occupier. The recorded document transferring the dwelling to the owner -occupier was recorded on (date*) as document number(s) 7 ❑ Exempt from fee per GC27388.1 due to being executed or recorded by the federal government in accordance with the Uniform Federal Lien Registration Act, by the state, or any county, municipality or other political subdivision of the state, or, 8 ❑ Exempt from the fee per GC 27388.1 (a) (1); Not related to real property, or, 9 ❑ Exempt from fee under GC27388.1 for the following reasons: THIS PAGE ADDED TO PROVIDE SENATE BILL2 EXEMPTION INFORMATION (Additional recordingfeeapplies) Rev 5/18 *The Prior Recording Reference must have been recorded within the last 60 days and is subject to review RECORDING REQUESTED BY: Stewart Title Guaranty Co. #18000480842A AND WHEN RECORDED MAIL TO: Community Development Commission of the City of National City Records Management Department 1243 National City Blvd National City, CA 91950 DEED OF TRUST WITH ASSIGNMENT OF RENTS (Please fill in document title(s) on this line) 1 Exempt from fee per GC27388.1 due to being recorded in connection with concurrent transfer that is subject to the imposition of documentary transfer tax, or, 2 [{Exempt from fee per GC27388.1 due to being recorded in connection with a transfer that was subject to documentary transfer tax which was paid on document recorded previously on -2 Q ' /9 (date*) as document number) 9 - a//3to)y of Official Records, or, 3 ❑ Exempt from fee per GC27388.1 due to the maximum fees being paid on documents in this transaction, or, 4 ❑ Exempt from fee per GC27388.1 due to the maximum fees having been paid on documents in the transaction(s) recorded previously on (date*) as document number(s) of Official Records, or, 5 ❑ Exempt from fee per GC27388.1, document transfers real property that is a residential dwelling to an owner -occupier, or, document is recorded in connection with concurrent transfer that is a residential dwelling to an owner -occupier, or, 6 ❑ Exempt from fee per GC27388.1 due to it being recorded in connection with a transfer of real property that is a residential dwelling to an owner -occupier. The recorded document transferring the dwelling to the owner -occupier was recorded on (date*) as document number(s) 7 ❑ Exempt from fee per GC27388.1 due to being executed or recorded by the federal government in accordance with the Uniform Federal Lien Registration Act, by the state, or any county, municipality or other political subdivision of the state, or, 8 ❑ Exempt from the fee per GC 27388.1 (a) (1); Not related to real property, or, 9 ❑ Exempt from fee under GC27388.1 for the following reasons: THIS PAGE ADDED TO PROVIDE SENATE BILL2 EXEMPTION INFORMATION (Additional recordingfeeapplies) Rev 5/18 *The Prior Recording Reference must have been recorded within the last 60 days and is subject to review RECORDING REQUESTED BY: COMMUNITY DEVELOPMENT COMMISSION OF THE CITY OF NATIONAL CITY AND WHEN RECORDED RETURN TO: COMMUNITY DEVELOPMENT COMMISSION OF THE CITY OF NATIONAL CITY Records Management Department 1243 National City Blvd. National City, California 91950 [Free Recording Requested Government Code § 6103] DEED OF TRUST WITH ASSIGNMENT OF RENTS [Kimball Tower] This DEED OF TRUST is made as of March 25th, 2019, by and between KIMBALL TOWER HOUSING ASSOCIATES, L.P., a California limited partnership ("Trustor"), STEWART TITLE GUARANTY COMPANY ("Trustee"), and COMMUNITY DEVELOPMENT COMMISSION -HOUSING AUTHORITY OF THE CITY OF NATIONAL CITY, a public body, corporate and politic ("Beneficiary"). Trustor grants, transfers and assigns to Trustee in trust, upon the trusts, covenants, conditions and agreements and for the uses and purposes hereinafter contained, with power of sale, and right of entry and possession, all of its ground leasehold title and interest in that real property (the "Property") in the City of National City, County of San Diego, State of California, described in Exhibit A attached hereto and incorporated herein by this reference. Together with Beneficiary's interest in all buildings, structures and improvements of every nature whatsoever now or hereafter situated on the Property; and Together with the rents, issues and profits thereof; and together with all buildings and improvements of every kind and description now or hereafter erected or placed thereon, and all fixtures, including but not limited to all gas and electric fixtures, engines and machinery, radiators, heaters, furnaces, heating equipment, laundry equipment, steam and hot-water boilers, stoves, ranges, elevators and motors, bathtubs, sinks, water closets, basins, pipes, faucets and other plumbing and heating fixtures, mantles, cabinets, refrigerating plant and refrigerators, whether mechanical or otherwise, cooking apparatus and appurtenances, and all shades, awnings, screens, blinds and other furnishings, it being hereby agreed that all such fixtures and furnishings shall to the extent permitted by law be deemed to be permanently affixed to and a part of the realty; and Page 1 Together with all building materials and equipment now or hereafter delivered to said premises and intended to be installed therein; and Together with all plans, drawings, specifications, and articles of personal property now or hereafter attached to or used in and about the building or buildings now erected or hereafter to be erected on the Property which are necessary to the completion and comfortable use and occupancy of such building or buildings for the purposes for which they were or are to be erected, including all other goods and chattels and personal property as are ever used or furnished in operating a building, or the activities conducted therein, similar to the one herein described and referred to, and all renewals or replacements thereof or articles in substitution therefor, whether or not the same are, or shall be attached to said building or buildings in any manner. To have and to hold the property hereinbefore described (including the Property and all appurtenances), all such property being referred to collectively herein as the "Property," to Trustee, its successors and assigns forever. FOR THE PURPOSE of securing (1) payment of indebtedness of Trustor to the Beneficiary in the principal sum of $19,374,337.00 (the "Commission Loan"), evidenced by a promissory note of even date herewith between Trustor and Beneficiary (the "Commission Loan Note"), together with all sums due thereunder including interest and other charges; and (2) the performance of each agreement of Trustor in this Deed of Trust and the Commission Loan Note. Said Commission Loan Note and all of its terms are incorporated herein by reference and this conveyance shall secure any and all extensions, amendments, modifications or renewals thereof however evidenced, and additional advances of the Commission Loan evidenced by any note reciting that it is secured hereby. AND TO PROTECT THE SECURITY OF THIS DEED OF TRUST, TRUSTOR COVENANTS AND AGREES: 1. That it will pay the Commission Loan Note at the time and in the manner provided therein; 2. 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, namely, as affordable rental housing; 3. That the Commission Loan Note is incorporated herein and made a part of this Deed of Trust. Upon default under the Commission Loan Note or this Deed of Trust (after expiration of any applicable cure rights), Beneficiary, at its option, may declare the whole of the indebtedness secured hereby to be due and payable; 4. That all rents, profits and income from the Property covered by this Deed of Trust are hereby assigned to Beneficiary for the purpose of discharging the debt hereby secured. Permission is hereby given to Trustor so long as no default exists hereunder, to collect such rents, profits and income; Page 2 5. That upon default hereunder (after expiration of any applicable cure rights), Beneficiary shall be entitled to the appointment of a receiver by any court having jurisdiction, without notice, to take possession and protect the Property described herein and operate same and collect the rents, profits and income therefrom; 6. That Trustor will keep the improvements now existing or hereafter erected on the Property insured against loss by fire and such other hazards, casualties and contingencies as may be required in writing from time to time by Beneficiary, and all such insurance shall be evidenced by standard fire and extended coverage insurance policy or policies, in the amount of the replacement value of the improvements. Such policies shall be endorsed with a standard mortgage clause with loss payable to Beneficiary subordinate to the rights and interest of the beneficiary of the Senior Loan Deed of Trust described in paragraph 31, below) and certificates thereof together with copies of original policies shall be deposited with Beneficiary; 7. To pay, before delinquency, any taxes and assessments affecting said Property when due, all encumbrances, charges and liens, with interest, on said Property or any part thereof which appear to be prior or superior hereto, all costs, fees and expenses of this Trust; 8. To keep said Property in good condition and repair, not to remove or demolish any buildings thereon; to complete or restore promptly and in good and workmanlike manner any building which may be constructed, damaged, or destroyed thereon and to pay when due all claims for labor performed and materials furnished therefor (unless contested in good faith if Trustor provides security satisfactory to Beneficiary that any amounts found to be due will be paid and no sale of the Property or other impairment of the security hereunder will occur); to comply with all laws affecting said Property or requiring any alterations or improvements to be made thereon; not to commit or permit waste thereof; not to commit, suffer or permit any act upon said Property in violation of law and/or covenants, conditions and/or restrictions affecting said Property; not to permit or suffer any alteration of or addition to the buildings or improvements hereafter constructed in or upon said Property without the consent of Beneficiary; 9. To appear in and defend any action or proceeding purporting to affect the security hereof 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; 10. Should Trustor fail to make any payment or do any act as herein provided, then Beneficiary or Trustee, but without obligation so to do and without notice to or demand upon Trustor and without releasing Trustor from any obligation hereof, may make or do the same in such manner and to such extent as either may deem necessary to protect the security hereof. Beneficiary or Trustee, being authorized to enter upon said Property for such purposes, may commence, appear in and/or defend any action or proceeding purporting to affect the security hereof or the rights or powers of Beneficiary or Trustee; may pay, purchase, contest or compromise any encumbrance, charge, or lien which in the judgment of either appears to be prior or superior hereto; and, in exercising any such powers, may pay necessary expenses, employ counsel, and pay counsel's reasonable fees; Page 3 11. Beneficiary shall have the right to pay fire and other property insurance premiums when due should Trustor fail to make any required premium payments. All such payments made by Beneficiary shall be added to the principal sum secured hereby; 12. To pay immediately and without demand all sums so expended by Beneficiary or Trustee, under permission given under this Deed of Trust, with interest from date of expenditure at the rate specified in the Commission Loan Note; 13. That the Commission Loan advanced hereunder is to be used in the development of the Property; and upon the failure of Trustor to keep and perform such covenants, the principal sum and all arrears of interest, and other charges provided for in the Commission Loan Note shall, at the option of Beneficiary, become due and payable, anything contained herein to the contrary notwithstanding; 14. Trustor further covenants that it will not voluntarily create, suffer or permit to be created against the Property, subject to this Deed of Trust, any lien or liens except as authorized by Beneficiary and further that it will keep and maintain the Property free from the claims of all persons supplying labor or materials which will enter into the construction of any and all buildings now being erected or to be erected on the Property; 15. That any and all improvements made or about to be made upon the Property, and all plans and specifications, comply with all applicable municipal ordinances and regulations and all other regulations made or promulgated, now or hereafter, by lawful authority, and that the same will upon completion comply with all such municipal ordinances and regulations and with the rules of the applicable fire rating or inspection organization, bureau, association or office; 16. Trustor herein agrees to pay to Beneficiary or to the authorized loan servicing representative of Beneficiary a charge not to exceed that permitted by law for providing a statement regarding the obligation secured by this Deed of Trust as provided by Section 2954, Article 2, Chapter 2, Title 14, Division 3 of the California Civil Code. IT IS MUTUALLY AGREED THAT: 17. Subject to the additional cure rights in Section 17 of the Commission Loan Note, if the construction of any improvements as herein referred to shall not be carried on with reasonable diligence, or shall be discontinued at any time for any reason other than events of Force Majeure pursuant to Paragraph 36 hereof, Beneficiary, after due notice to Trustor or any subsequent owner and the failure by same to exercise any cure rights, is hereby invested with full and complete authority to enter upon the Property, employ watchmen to protect such improvements from depredation or injury and to preserve and protect the personal property therein, and to continue any and all outstanding contracts for the erection and completion of said building or buildings, to make and enter into any contracts and obligations wherever necessary, either in its own name or in the name of Trustor, and to pay and discharge all debts, obligations and liabilities incurred thereby. All such sums so advanced by Beneficiary (exclusive of advances of the principal of the indebtedness secured hereby) shall be added to the principal of the indebtedness secured hereby and shall be secured by this Deed of Trust and shall be due and payable on demand; Page 4 18. In the event of any fire or other casualty to the Project or eminent domain proceedings resulting in condemnation of the Project or any part thereof, Trustor shall have the right to rebuild the Project, and to use all available insurance or condemnation proceeds therefor, provided that (a) such proceeds are sufficient to rebuild the Project in a manner that provides adequate security to Beneficiary for repayment of the Commission Loan or if such proceeds are insufficient then Trustor shall have funded any deficiency, (b) Beneficiary shall have the right to approve plans and specifications for any major rebuilding and the right to approve disbursements of insurance or condemnation proceeds for rebuilding under a construction escrow or similar arrangement, and (c) no uncured material default then exists under the Commission Loan Note or this Deed of Trust. If the casualty or condemnation affects only part of the Project and total rebuilding is infeasible, then proceeds may be used for partial rebuilding and partial repayment of the Commission Loan in a manner that provides adequate security for repayment of the remaining balance of the Commission Loan. The rights of the Beneficiary to any insurance proceeds or condemnation awards pursuant to this paragraph 18 are and shall be subject to the prior right to any insurance proceeds or condemnation awards of the beneficiary of the Senior Loan Deed of Trust described in paragraph 31; 19. Upon default by Trustor in making any payments provided for herein or in the Commission Loan Note secured hereby, and if such default is not made good within fifteen (15) days after notice from Beneficiary, or if Trustor shall fail to perform any covenant or agreement in this Deed of Trust within thirty (30) days after written demand therefor by Beneficiary (or, in the event that more than thirty (30) days is reasonably required to cure such default, should Trustor fail to promptly commence such cure, and diligently prosecute same to completion), Beneficiary may declare all sums secured hereby immediately due and payable by delivery to Trustee of written declaration of default and demand for sale, and of written notice of default and of election to cause the Property to be sold, which notice Trustee shall cause to be duly filed for record and Beneficiary may foreclose this Deed of Trust. Beneficiary shall also deposit with Trustee this Deed of Trust, the Commission Loan Note and all documents evidencing expenditures secured hereby; 20. After the lapse of such time as may then be required by law following the recordation of said notice of default, and notice of sale having been given as then required by law, Trustee, without demand on Trustor, shall sell said Property at the time and place fixed by it in said notice of sale, either as a whole or in separate parcels, and in such order as it may determine at public auction to the highest bidder for cash in lawful money of the United States, payable at time of sale. Trustee may postpone sale of all or any portion of said 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 its deed conveying the property so sold, but without any covenant or warranty, express or implied. The recitals in the deed of any matters or facts shall be conclusive proof of the truthfulness thereof. Any person, including Trustor, Trustee or Beneficiary, may purchase at the sale. Trustee shall apply the proceeds of sale to payment of (1) the expenses of such sale, together with the reasonable expenses of this trust including therein reasonable Trustee's fees or attorneys' fees for conducting the sale, and the actual cost of publishing, recording, mailing and posting notice of the sale; (2) the cost of any search and/or other evidence of title procured in connection with such sale and revenue stamps on Trustee's deed; (3) all sums expended under the terms hereof, not then repaid, with accrued interest at the Page 5 rate specified in the Commission Loan Note; (4) all other sums then secured hereby; and (5) the remainder, if any, to the person or persons legally entitled thereto; 21. Beneficiary may from time to time substitute a successor or successors to any Trustee named herein or acting hereunder to execute this Deed of Trust. Upon such appointment, and without conveyance to the successor trustee, the latter shall be vested with all title, powers, and duties conferred upon any Trustee herein named or acting hereunder. Each such appointment and substitution shall be made by written instrument executed by Beneficiary, containing reference to this Deed of Trust and its place of record, which, when duly recorded in the proper office of the county or counties in which the property is situated, shall be conclusive proof of proper appointment of the successor trustee; 22. The pleading of any statute of limitations as a defense to any and all obligations secured by this Deed of Trust is hereby waived to the full extent permissible by law; 23. Upon written request of Beneficiary stating that all sums secured hereby have been paid, and upon surrender of this Deed of Trust and the Commission Loan Note to Trustee for cancellation and retention and upon payment of its fees, Trustee shall reconvey, without warranty, the property then held hereunder. The recitals in such reconveyance of any matters of fact shall be conclusive proof of the truthfulness thereof. The grantee in such reconveyance may be described as "the person or persons legally entitled thereto"; 24. • The trust created hereby is irrevocable by Trustor; 25. This Deed of Trust applies to, inures to the benefit of, and binds all parties hereto, their heirs, legatees, devisees, administrators, executors, successors, and assigns. The term `Beneficiary" shall include not only the original Beneficiary hereunder but also any future owner and holder including pledgees, of the Commission Loan Note secured hereby. In this Deed of Trust, whenever the context so requires, the masculine gender includes the feminine and/or neuter, and the singular number includes the plural. All obligations of each Trustor hereunder are joint and several; 26. Trustee accepts this trust when this Deed of Trust, duly executed and acknowledged, is made public record as provided by law. Except as otherwise provided by law, Trustee is not obligated to notify any party hereto of pending sale under this Deed of Trust or of any action or proceeding in which Trustor, Beneficiary, or Trustee shall be a party unless brought by Trustee; 27. The undersigned Trustor requests that copies of any notice of default and of any notice of sale hereunder be mailed to it at: Kimball Tower Housing Associates, L.P. Community HousingWorks 3111 Camino Del Rio North, Suite 800 San Diego, California 92108 Attn. Susan M. Reynolds Page 6 And to: Kimball Tower Housing Associates, L.P. c/o Mercy Housing California 1500 South Grand Avenue, Suite 100 Los Angeles, CA 90015 Attention: Ed Holder, Regional Vice President of Real Estate Development With a copy to: Gubb & Barshay, LLP 505 14th Street, Suite 450 Oakland, CA 94612 Attention: Evan Gross With a copy to: U.S. Bancorp Community Development Corporation 1307 Washington Avenue, Suite 300 Mail Code: SL MO RMCD St. Louis, MO 63103 USB Project No: 25983 Attn.: LIHTC Asset Management 28. Trustor agrees at any time and from time to time upon receipt of a written request from Beneficiary, to furnish to Beneficiary a detailed statement in writing of income, rents, profits, and operating expenses of the premises, and the names of the occupants and tenants in possession, together with the expiration dates of their leases and full information regarding all rental and occupancy agreements, and the rents provided for by such leases and rental and occupancy agreements, and such other information regarding the Property and their use as may be requested by Beneficiary. 29. The full principal amount outstanding plus accrued but unpaid interest thereon, shall be due and payable on the earlier to occur of the following: (a) As more particularly provided in the Commission Loan Note, sale, transfer, assignment or refinancing of the Property as provided further in this paragraph 29; unless: (i) in the case of a sale in which the sale proceeds are insufficient to repay in full the Commission Loan, the Beneficiary approves such sale and the purchaser assumes the balance of the Commission Loan in accordance with the terms of the Commission Loan Note; or (ii) in the case of a refinancing in which the refinancing proceeds are insufficient to repay in full the Commission Loan, the Beneficiary approves such refinancing and the Borrower remains obligated pursuant to the terms of the Note. Notwithstanding anything to the contrary contained in the Loan Documents, (i) Trustor may refmance the Senior Loan without the prior consent of the Beneficiary (the "Refinanced Indebtedness"), and the Beneficiary hereby agrees to subordinate the Commission Loan and all documents securing or evidencing the Commission Loan, including, but not limited to, this Deed of Trust, to the Refinanced Indebtedness and the lien of any deed of trust or mortgage securing the Refinanced Indebtedness, provided that the principal balance of the Refinanced Indebtedness does not exceed the then outstanding principal balance of the Senior Loan plus the costs of refinancing the Senior Loan, and (ii) the foregoing refinance shall not constitute a "refinance" for purposes of this Section 29. Page 7 (b) In order to induce Beneficiary to make the loan evidenced hereby, Trustor agrees that in the event of any transfer of the Property without the prior written consent of Beneficiary (other than a transfer resulting from a foreclosure, or conveyance by deed in lieu of foreclosure, by the holder of the Senior Loan Deed of Trust), Beneficiary shall have the absolute right at its option, without prior demand or notice, to declare all sums secured hereby immediately due and payable. Consent to one such transaction shall not be deemed to be a waiver of the right to require consent to future or successive transactions. Beneficiary may grant or deny such consent in its sole discretion and, if consent should be given, any such transfer shall be subject to this paragraph 29, and any such transferee shall assume all obligations hereunder and agree to be bound by all provisions contained herein. Such assumption shall not, however, release Trustor from any liability thereunder without the prior written consent of Beneficiary. (c) As used herein, "transfer" includes the sale, agreement to sell, transfer or conveyance of the Property, or any portion thereof or interest therein, whether voluntary, involuntary, by operation of law or otherwise, the execution of any installment land sale contract or similar instrument affecting all or a portion of the Property, or the lease of all or substantially all of the Property. "Transfer" shall not include the leasing of individual residential units or the commercial space on the Property. (d) The term "Sale" means any transfer, assignment, conveyance or lease (other than to a tenant for occupancy) of the Property and/or the improvements thereon, or any portion thereof, or any interest therein by the Trustor, and (if Trustor is a partnership) includes any transfer, assignment or sale of any partnership interest in the Trustor (other than the removal of the general partner by a limited partner in Trustor in accordance with Trustor's partnership agreement) by an individual or entity which is a general partner in the Trustor, or any interest by any individual or entity which holds an interest in any such general or limited partner in the Trustor, which brings the cumulative total of all such direct and indirect transfers, assignments and sales during the term of this Deed of Trust to more than thirty-five percent (35%) of the ownership interests in the Trustor, and any such transfer, assignment or sale of a direct or indirect partnership interest thereafter. Sale includes a sale in condemnation or under threat thereof other than by Beneficiary. Sale does not include dedications and grants of easements to public and private utility companies of the kind customary in real estate development. Notwithstanding anything to the contrary contained in this Deed of Trust, Trustor, prior to any action to enforce this Deed of Trust, shall give U.S. Bancorp Community Development Corporation, and its successors and assigns (the "Tax Credit Partner") notice and opportunity to cure for a period of not less than (a) fifteen (15) days to cure a monetary default, and (b) thirty (30) days to cure a nonmonetary default; provided, however, if in order to cure such a default Tax Credit Partner reasonably determines that it must remove the general partner of Borrower, Tax Credit Partner shall so notify Trustor and so long as Tax Credit Partner is diligently and continuously attempting to so remove such general partner, Tax Credit Partner shall have until the date thirty (30) days after the effective date of the removal of the general partner or general partners to cure such default but in no event more than one (1) year. Notwithstanding the foregoing, the following shall not constitute a "Sale" under this Deed of Trust: (a) a Sale made pursuant to an option granted to a general partner of Trustor on or before the date of recordation of this Deed of Trust in the Official Records of San Page 8 Diego County, California, or (b) (i) prior to the payment in full of all required capital contributions to Trustor, any assignment of an interest as limited partner of Trustor by the Tax Credit Partner to an entity whose general partner or managing member is controlled by the Tax Credit Partner or is under common control with the Tax Credit Partner, (ii) after the payment in full of all required capital contributions to Trustor, any assignment or transfer of an interest as limited partner of Trustor by its Tax Credit Partner to any person or entity, which assignments shall not require the consent of Beneficiary, provided that the Tax Credit Partner, shall give written notice to Beneficiary of such assignment; or (c) the Tax Credit Partner's removal of the general partner of Trustor as general partner, and substitution of the Tax Credit Partner or an affiliate of the Tax Credit Partner as a general partner of Trustor, which removal shall not require Beneficiary approval, provided that the Tax Credit Partner shall give notice to Beneficiary of its intent to so remove such general partner not less than ten (10) days prior to such removal. Any proposed replacement of the general partner with an entity other than the Tax Credit Partner or an affiliate of the Tax Credit Partner will be subject to Beneficiary's prior reasonable approval. 30. Trustor shall permit Beneficiary and its agents or representatives, to inspect the Property at any and all reasonable times, with or without advance notice. Inspections shall be conducted so as not to interfere with the tenants' use and enjoyment of the Property. 31. It is hereby expressly agreed and acknowledged by Trustor and Beneficiary that this Deed of Trust is a second and subordinate deed of trust, and that the Commission Loan secured hereby, and the Commission Loan Note are subject and subordinate only to the deed of trust securing a loan to Trustor in which MUFG Union Bank, N.A., a national banking association ("Senior Lender") is the Beneficiary, including any loan that refinances the balance of the Senior Loan or an assignment of the Senior Loan (collectively referred to as the "Senior Loan"). 32. 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 1380 ("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. Hazardous Materials expressly exclude substances typically used in the construction, development, operation and maintenance of an apartment complex provided such substances are used in accordance with all applicable laws. 33. 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: Page 9 (a) Other than as expressly disclosed to Trustor by Beneficiary, 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 the Trustor or, to the best knowledge of the Trustor, by any other person) as a manufacturing site, dump site or storage site (whether permanent or temporary) for any Hazardous Materials; (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), caused by Trustor. (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, but only to the extent Trustor is not effectuating a remediation of the Property, 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 Commission Loan Note secured hereby. Page 10 34. The following shall be an Event of Default: (a) Failure of Trustor to pay, when due, principal and interest and any other sums or charges on the Commission Loan Note, in accordance with the provisions set forth in the Commission Loan Note; (b) A violation of the terms, conditions or covenants of the Commission Loan Note or this Deed of Trust; or (c) A default (after expiration of any cure period provided therein) under the Senior Loan Deed of Trust to which the lien of this Deed of Trust is subordinate. 35. Subject to the extensions of time set forth in paragraph 36, and subject to the further provisions of this paragraph 35 and of paragraph 37, failure or delay by the Trustor to perform any term or provision of this Deed of Trust constitutes a default under this Deed of Trust. The Trustor must immediately commence to cure, correct, or remedy such failure or delay and shall complete such cure, correction or remedy with reasonable diligence. (a) The Beneficiary shall give written notice of default to the Trustor, specifying the default complained of by the Beneficiary. Delay in giving such notice shall not constitute a waiver of any default nor shall it change the time of default. (b) The Trustor shall not be in default so long as it endeavors to complete such cure, correction or remedy with reasonable diligence, provided such cure, correction or remedy is completed within thirty (30) days after receipt of written notice (or such additional time as may be deemed by the Beneficiary to be reasonably necessary to correct the cause). (c) Any failures or delays by the Beneficiary in asserting any of its rights and remedies as to any default shall not operate as a waiver of any default or of any such rights or remedies. Delays by the Beneficiary in asserting any of its rights and remedies shall not deprive the Beneficiary of its right to institute and maintain any actions or proceedings which it may deem necessary to protect, assert, or enforce any such rights or remedies. 36. Notwithstanding specific provisions of this Deed of Trust, performance hereunder shall not be deemed to be in default where delays or defaults are due to: war; insurrection; strikes; lock -outs; riots; floods; earthquakes; fires; casualties; acts of God or other deities; acts of the public enemy; epidemics; quarantine restrictions; freight embargoes; lack of transportation; governmental restrictions or priority; litigation; unusually severe weather; inability to secure necessary labor, materials or tools; delays of any contractor or supplier; acts of the other party; acts or failure to act of the Beneficiary, or any other public or governmental agency or entity (except that any act or failure to act of Beneficiary shall not excuse performance by Beneficiary); or any other causes beyond the reasonable control or without the fault of the party claiming an extension of time to perform. An extension of time for any such cause shall be for the period of the enforced delay and shall commence to run from the time the party claiming such extension gives notice to the other party, provided notice by the party claiming such extension is given Page 11 within thirty (30) days after the commencement of the cause. Times of performance under this Deed of Trust may also be extended in writing by the Beneficiary and Trustor. 37. If a monetary event of default occurs under the terms of the Commission Loan Note or this Deed of Trust, prior to exercising any remedies thereunder Beneficiary shall give Trustor written notice of such default. Trustor shall have a period of fifteen (15) days after such notice is given within which to cure the default prior to exercise of remedies by Beneficiary under the Commission Loan Note and this Deed of Trust. 38. If a non -monetary event of default occurs under the terms of the Commission Loan Note or this Deed of Trust, prior to exercising any remedies thereunder, Beneficiary shall give Trustor notice of such default. If the default is reasonably capable of being cured within thirty (30) days, Trustor shall have such period to effect a cure prior to exercise of remedies by the Beneficiary under the Commission Loan Note and this Deed of Trust. If the default is such that it is not reasonably capable of being cured within thirty (30) days, and Trustor (a) initiates corrective action within said period, and (b) diligently, continually, and in good faith works to effect a cure as soon as possible, then Trustor shall have such additional time as is reasonably necessary to cure the default prior to exercise of any remedies by Beneficiary. In no event shall Beneficiary be precluded from exercising remedies if its security becomes or is about to become materially jeopardized by any failure to cure a default or the default is not cured within one hundred eighty (180) days after the first notice of default is given. 39. Upon the occurrence of an Event of Default as described in paragraph 34, Trustor shall be obligated to repay the Commission Loan and, subject to the nonrecourse provision of the Commission Loan Note, Beneficiary may seek to enforce payment of any and all amounts due by Trustor pursuant to the terms of the Commission Loan Note. 40. All expenses (including reasonable attorneys' fees and costs and allowances) incurred in connection with an action to foreclose, or the exercise of any other remedy provided by this Deed of Trust, including the curing of any Event of Default, shall be the responsibility of Trustor. 41. Notwithstanding anything to the contrary contained herein or in any documents secured by this Deed of Trust or contained in any subordination agreement, the Beneficiary acknowledges and agrees that in the event of a foreclosure or deed -in -lieu of foreclosure (collectively, "Foreclosure") with respect to the Property encumbered by this Deed of Trust, the following rule contained in Section 42(h)(6)(E)(ii) of the Internal Revenue Code of 1986 (26 U.S.C. Section 42 (h)(6)(E)(ii)), as amended, shall apply: For a period of three (3) years from the date of Foreclosure, with respect to any unit that had been regulated by the Regulatory Agreement with the California Tax Credit Allocation Committee, (i) none of the tenants occupying those units at the time of Foreclosure may be evicted or their tenancy terminated (other than for good cause), (ii) nor may any rent be increased except as otherwise permitted under Section 42 of the Code. Page 12 Except as provided in paragraph 31, each successor owner of an interest in the Property, other than through foreclosure, deed in lieu of foreclosure or an owner who takes an interest in the Property after a foreclosure has occurred, shall take its interest subject to this Deed of Trust. "Trustor" KIMBALL TOWER HOUSING ASSOCIATES, L.P., a California limited partnership By: CHW Kimball Development LLC, Its: managing general partner By: Community HousingWorks Its: sole member and manager By: S ' . Reynolds, President & C 0 By: Mercy Kimball Development LLC Its administrative general partner By: Mercy Housing Calwest Its: sole member and manager By: &.lJc.► VL12.4624A440% Erika Villablanca, Vice President Page 13 A Notary Public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California County of Orange On March 25, 2019, before me, A. McLean, Notary Public, personally appeared Susan M. Reynolds, who proved to me on the basis of satisfactory evidence to be the person(s) whose 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. Signature��fl ; C Q (Seal) A. MCLEAN Notary Public — California Orange County Commission # 2227349 My Comm. Expires Jan 30.2022 A Notary Public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California County of Orange On March 25, 2019, before me, A. McLean, Notary Public, personally appeared Erika Villablanca, who proved to me on the basis of satisfactory evidence to be the person(s) whose 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. Signature (Seal) A. MCLEAN Notary Public - California Orange County Commission >?2227349 My Comm. Expires Jan 30.2022 EXHIBIT A DESCRIPTION OF REAL PROPERTY PARCEL A: LOT 2 OF CENTER CITY PROJECT, IN THE CITY OF NATIONAL CITY, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF NO. 8807, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, FEBRUARY 24, 1978. RESERVING FROM THE LEASE OF THE PROPERTY A NON-EXCLUSIVE EASEMENT FOR VEHICULAR AND PEDESTRIAN INGRESS AND EGRESS OVER THAT PORTION OF THE PROPERTY MORE FULLY DESCRIBED AS FOLLOWS. PORTION OF LOT 2 OF CENTER CITY PROJECT, IN THE CITY OF NATIONAL CITY, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF NO. 8807, RECORDED JANUARY 4, 1978, AS FILE NO. 78-075321, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY. BEGINNING AT THE EASTERLY CORNER SAID LOT 2 AND ALSO BEING ON THE WESTERLY 30 FOOT RIGHT-OF-WAY OF KIMBALL WAY; THENCE SOUTHERLY ALONG SAID EASTERLY LINE SOUTH 17°47'19" EAST (SOUTH 17°47'52" EAST, RECORD PER MAP 8807) A DISTANCE OF 66.48 FEET; THENCE LEAVING SAID EASTERLY LINE, NORTH 72°18'17" EAST A DISTANCE OF 38.83 FEET TO THE BEGINNING OF A 780.00 FOOT RADIUS CURVE CONCAVE NORTHEASTERLY, A RADIAL TO SAID CURVE BEING SOUTH 39°07'04" WEST AND ALSO BEING ON SAID WESTERLY 30 FOOT RIGHT-OF-WAY OF KIMBALL WAY; THENCE NORTHWESTERLY ALONG THE ARC OF SAID CURVE THROUGH A CENTRAL ANGLE OF 05°39'41", AN ARC LENGTH OF 77.07 FEET TO THE POINT OF BEGINNING. CONTAINING 0.03 ACRES OR 1241.62 SQUARE FEET MORE OR LESS. PARCEL B: EASEMENT FOR PEDESTRIAN AND VEHICULAR ACCESS FOR INGRESS AND EGRESS AS CONVEYED BY THE RECIPROCAL EASEMENT AGREEMENT DATED MARCH 29, 2019 RECORDED AS INSTRUMENT NO. 2019-0114010 OF OFFICIAL RECORDS. PARCEL C. AN EASEMENT FOR PEDESTRIAN AND VEHICULAR ACCESS FOR INGRESS AND EGRESS AND VEHICULAR PARKING AS CONVEYED BY THE GROUND LEASE DISCLOSED BY THE MEMORANDUM OF GROUND LEASE RECORDED MARCH 29, 2019 AS INSTRUMENT NO. 2019- 0113613 OF OFFICIAL RECORDS, MORE FULLY DESCRIBED AS FOLLOWS: PORTION OF LOT 6 OF CENTER CITY PROJECT, IN THE CITY OF NATIONAL CITY, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF NO. 8807, RECORDED JANUARY 4, 1978, AS FILE NO. 78-075321, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY. COMMENCING AT THE EASTERLY CORNER SAID LOT 6 AND ALSO BEING ON THE WESTERLY 30 FOOT RIGHT-OF-WAY OF KIMBALL WAY; THENCE SOUTHERLY ALONG SAID EASTERLY LINE SOUTH 17°47'19" EAST (SOUTH 17°47'52" EAST, RECORD PER MAP 8807) A DISTANCE OF 66.48 FEET TO THE TRUE POINT OF BEGINNING; THENCE CONTINUING ALONG SAID EASTERLY LINE SOUTH 17°47'19" EAST (SOUTH 17°47'52" EAST) A DISTANCE OF 52.66 FEET TO THE SOUTHERLY LINE OF SAID LOT 6; THENCE WESTERLY ALONG SAID SOUTHERLY LINE, SOUTH 72°04'42" WEST (SOUTH 72°04'09" WEST) A DISTANCE OF 290.53 (290.70) FEET TO THE WESTERLY LINE OF SAID LOT 6 AND ALSO BEING ON THE EASTERLY 40 FOOT RIGHT-OF-WAY OF D AVENUE; THENCE NORTHERLY ALONG SAID WESTERLY LINE NORTH 17°46'21" WEST (NORTH 17°46'54" WEST) A DISTANCE OF 50.22 FEET; THENCE LEAVING SAID WESTERLY LINE NORTH 72°45'57" EAST A DISTANCE OF 175.92 FEET; THENCE NORTH 17°12'20" WEST A DISTANCE OF 5.01 FEET; THENCE NORTH 72°18'17" EAST A DISTANCE OF 114.56 FEET TO THE TRUE POINT OF BEGINNING. CONTAINING 0.34 ACRES OR 14709.33 SQUARE FEET MORE OR LESS. Assessor Parcel Number 560-410-05-00 • RECORDING REQUESTED BY: Stewart Title Guaranty Co. #18000480842A AND WHEN RECORDED MAIL TO: City of National City Records Management Dept 1243 National City Blvd National City, CA 91950 DOC# 2019-0114527 III (111111 II IIII II I III 11I11 III IIII fill I I 1111 III Apr 02, 2019 08:00 AM OFFICIAL RECORDS Ernest J. Dronenburg, Jr., SAN DIEGO COUNTY RECORDER FEES: $40.00 (SB2 Atkins: $0.00) PCOR: N/A PAGES: 3 Substitution of Trustee and Full Reconveyance of Deed of Trust (Please fill in document title(s) on this line) 1 ❑ Exempt from fee per GC27388.1 due to being recorded in connection with concurrent transfer that is subject to the imposition of documentary transfer tax, or, 2 ❑ Exempt from fee per GC27388.1 due to being recorded in connection with a transfer that was subject to documentary transfer tax which was paid on document recorded previously on (date*) as document number of Official Records, or, 3 ❑ Exempt from fee per GC27388.1 due to the maximum fees being paid on documents in this transaction, or, .1 ❑ Exempt from fee per GC27388.1 due to the maximum fees having been paid on documents in the transaction(s) recorded previously on (date*) as document number(s) of Official Records, or, 5 ❑ 6 ❑ Exempt from fee per GC27388.1, document transfers real property that is a residential dwelling to an owner -occupier, or, document is recorded in connection with concurrent transfer that is a residential dwelling to an owner -occupier, or, Exempt from fee per GC27388.1 due to it being recorded in connection with a transfer of real property that is a residential dwelling to an owner -occupier. The recorded document transferring the dwelling to the owner -occupier was recorded on (date*) as document number(s) 7 Exempt from fee per GC27388.1 due to being executed or recorded by the federal government in accordance with the Uniform Federal Lien Registration Act, by the state, or any county, municipalityor other political subdivision of the state, or, 8 ❑ Exempt from the fee per GC 27388.1 (a) (1); Not related to real property, or, 9 ❑ Exempt from fee under GC27388.1 for the following reasons: THIS PAGE A DD E D TO PROVIDE SENATE BILL2 EXEMPTION INFORMATION (Additional recordingfee applies) Rev 5/18 *The Prior Recording Reference must have been recorded within the last 60 days and is subject to review RECORDING REQUESTED BY: Stewart Title Guaranty Co. #18000480842A AND WHEN RECORDED MAIL TO: City of National City Records Management Dept 1243 National City Blvd National City, CA 91950 Substitution of Trustee and Full Reconveyance of Deed of Trust (Please fill in document title(s) on this line) 1 ❑ Exempt from fee per GC27388.1 due to being recorded in connection with concurrent transfer that is subject to the imposition of documentary transfer tax, or, 2 D Exempt from fee per GC27388.1 due to being recorded in connection with a transfer that was subject to documentary transfer tax which was paid on document recorded previously on (date*) as document number of Official Records, or, 3 ❑ Exempt from fee per GC27388.1 due to the maximum fees being paid on documents in this transaction, or, 4 ❑ Exempt from fee per GC27388.1 due to the maximum fees having been paid on documents in the transaction(s) recorded previously on (date*) as document number(s) of Official Records, or, 5 ❑ Exempt from fee per GC27388.1, document transfers real property that is a residential dwelling to an owner -occupier, or, document is recorded in connection with concurrent transfer that is a residential dwelling to an owner -occupier, or, 6 ❑ Exempt from fee per GC27388.1 due to it being recorded in connection with a transfer of real property that is a residential dwelling to an owner -occupier. The recorded document transferring the dwelling to the owner -occupier was recorded on (date*) as document number(s) 7 ® Exempt from fee per GC27388.1 due to being executed or recorded by the federal government in accordance with the Uniform Federal Lien Registration Act, by the state, or any county, municipality or other political subdivision of the state, or, 8 ❑ Exempt from the fee per GC 27388.1 (a) (1); Not related to real property, or, 9 ❑ Exempt from fee under GC27388.1 for the following reasons: THIS PAGE ADDED TO PROVIDE SENATE BILL 2 EXEMPTION INFORMATION (Additional recordingfeeapplies) Rev 5/18 *The Prior Recording Reference must have been recorded within the last 60 days and is subject to review RECORDING REQUESTED BY: CITY OF NATIONAL CITY AND WHEN RECORDED RETURN TO: CITY OF NATIONAL CITY Records Management Department 1243 National City Blvd. National City, California 91950 This document is exempt from payment of a recording fee pursuant to Government Code Section 6103. SUBSTITUTION OF TRUSTEE AND FULL RECONVEYANCE OF DEED OF TRUST (Kimball Tower) Community Development Commission of the City of National City is the trustor, Stewart Title Company is the original trustee, and the City of National City ("Beneficiary") is the beneficiary under the that certain Deed of Trust, Security Agreement and Fixture Filing (With Assignment of Rents), recorded against the property described therein, in the Office of the Recorder of the County of San Diego on March 10, 2011, as Document 2011-0130706 ("Deed of Trust"). 1. Substitution of Trustee. The undersigned, as the sole present Beneficiary under the Deed of Trust, hereby substitutes the City of National City, whose address is 1243 National City Blvd. National City, CA 91950, as trustee in the place of said original trustee. 2. Full Reconveyance of Deed of Trust. The City of National City, as Trustee, hereby reconveys to the person(s) legally entitled thereto, without warranty, all of the estate, title and interest acquired by the Trustee under the Deed of Trust in and to that real property described in the Deed of Trust. CITY OF NATIONAL CITY Leslie Deese, City Manager APPROVED AS TO FORM: By: Morris -Jones, ity At AP ' ' OVED AS TO FORM: Christensen & Spath LLP City and CDC -HA Special Counsel ACKNOWLEDGMENT A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California County of San Diego OnW 6. V i 2'J' l., 2019, before me D pl-1---ckey- ,1notary public, personally appeared )t J I �`P. C who proved to me on the basis of satisfactory evidence to be the person(s) whose 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. Signature (Seal) D. PITCHER Commission # 2146777 a Notary Public - California Z San Diego County ""` ' My Comm. Expires Apr 15, 2020