Loading...
HomeMy WebLinkAbout2007-09-25; City Council; 19183; Habitat for Humanity Roosevelt Garden projectHOUSING AND REDEVELOPMENT COMMISSION AND CITY COUNCIL AGENDA BILL 12 AB# MTG. DEPT. 19,183 09/25/07 H/RED APPROVAL OF DISPOSITION, DEVELOPMENT AND LOAN AGREEMENT AND RELATED ACTIONS FOR SAN DIEGO HABITAT FOR HUMANITYINC.'S ROOSEVELT GARDEN AFFORDABLE HOUSING PROJECT DEPT. HEAD CITY ATTY CITY RECOMMENDED ACTION: That the Housing and Redevelopment Commission hold a public hearing to accept comments and 1) ADOPT Resolution No. 444 AUTHORIZING the Executive Director of the Carlsbad Redevelopment Agency to execute a Disposition, Development and Loan Agreement (the "DDLA") and all related documents with San Diego Habitat for Humanity, Inc., in substantially the form submitted and subject to final approval by the City Attorney, providing for additional financial assistance in the amount of $258,677 and disposition of the property owned by the Carlsbad Redevelopment Agency located at 2578 Roosevelt Street (the "property") within the Village Redevelopment Area to San Diego Habitat for Humanity Inc. (the "developer" or "Habitat") at no cost for the development of eleven (11) condominiums to be sold at an affordable price to very low income households.; and, 2) ADOPT Resolution No. 445 APPROVING an increase in the affordable housing credit purchase price from $120,000 to $142,000 for the Roosevelt Condominiums to reflect the additional financial assistance for the project. That the City Council hold a public hearing to ADOPT Resolution No. 2007-255 AUTHORIZING the Finance Director to appropriate up to a maximum of $258,677 in HOME Investment Partnership funds to provide additional financial assistance in the form of a construction/permanent loan to Habitat, and authorize the Carlsbad Redevelopment Agency to administer the expenditure of said funds on behalf of the City for construction of an eleven (11) unit affordable housing (condominium) project on property owned by the Carlsbad Redevelopment Agency located at 2578 Roosevelt Street within the Village Redevelopment Area, and making findings in accordance with Health and Safety Code 33433. ITEM EXPLANATION: In March, 2003, the Carlsbad Redevelopment Agency (the "Agency") purchased the Property with the intent of developing an affordable housing project for very low income households. On May 16, 2006, the Housing and Redevelopment Commission approved an Exclusive Negotiating Rights Agreement (ENRA) and Predevelopment Loan Agreement (PLA) with the Developer for development of the subject very low income affordable housing project. DEPARTMENT CONTACT: Debbie Fountain 760-434-2815 dfoun@ci.carlsbad.ca.us FOR CITY CLERKS USE ONLY. COMMISSION APPROVED ACTION: DENIED CONTINUED WITHDRAWN AMENDED D D D D CONTINUED TO DATE D SPECIFIC CONTINUED TO DATE O UNKNOWN RETURNED TO STAFF D OTHER - SEE MINUTES D Page 2 With approval of the ENRA and PLA, the Commission agreed to negotiate exclusively with Habitat for fee conveyance of the Property, and to provide initial financial assistance for all predevelopment costs. The pre-development costs are estimated to amount to $608,244 total, including but not limited to permit and development fees (approx. $341,852) and architecture/engineering fees (approx. $221,793). With the predevelopment assistance, Habitat completed its efforts to prepare the appropriate plans and process the required Major Redevelopment Permit for the subject project. Habitat is now prepared to move forward with construction of the subject project. However, Habitat requires some additional financial assistance for construction of the units in the amount of approximately $258,677. This additional financial assistance was anticipated at the time the pre-development loan funds were approved in May, 2006. However, action was delayed on the additional financial assistance until such time as the DDLA was submitted for approval by the Carlsbad Redevelopment Agency. On April 17, 2007, the Housing and Redevelopment Commission approved a major redevelopment permit for construction of the project known as the Roosevelt Street Affordable Condominium Project on the noted .56 acre parcel located in the Village Redevelopment Area. With the permit approved and the project financial pro forma refined, Habitat has determined that additional financial assistance is required from the Agency/City. FINANCIAL ASSISTANCE FOR THE AFFORDABLE HOUSING PROJECT Habitat is requesting that the Agency/City provide additional financial assistance for construction of the subject affordable housing project in the total amount of $258,677. The City has previously provided assistance to this project through acquisition of the property at a total cost of $692,058, or $69,914 per unit, and provision of predevelopment loan funds of $608,244 total, or $55,295 per unit. With approval of the additional financial assistance, the total financial contribution from the Redevelopment Agency/City for the subject project will be $1,561,920, or $141,993 per unit, including the cost of the Property at its fair reuse value (as defined in Health and Safety Code Section 33433). The financial details of the subject project are provided below. USES AND SOURCES OF FUNDS The total cost of the Roosevelt Street Condominium Project is estimated to be $3.4 million, inclusive of the cost of the land. This amounts to a total per unit cost of $307,937. The following chart provides a breakdown of the project costs, or uses of funds. Based on a review of the costs, staff has found that the costs are high on a per unit basis for the project. However, when compared to other recently approved or pending projects in the Village Area, the costs appear to be reasonable with consideration of the very small size of the project (11 units) and the much higher cost of land in the Village Area. In the past, the "Developer Fee" has been a specific point for discussion. For this project, the proposed developer fee is $179,857, which represents 5% of total project costs, including land. The fee is lower in comparison to most other affordable housing projects which average anywhere between 7 to 10% of total project costs, including land. However, Habitat also serves as the general contractor for the project and will receive an additional contractor fee during project construction, which is currently estimated at approximately $452,100 (or 15% of total development costs). Page 3 USES OF FUNDS Expense Land* Permits & Fees Construction - Hard Costs Architectural/Engineering & other soft costs Contingency Developer Fee . .. ^^sfffl^^fv^- Total Amount $717,793 $341 ,852 $1,716,179 $221,793 $209,833 $179,857vuv..$$MH68f%r Per Unit Cost $65,254 $31,078 $156,016 $20,163 $19,076 $16,351 $:V*-X^.$WWSr- % of total Cost 21% 10% 51% 7% 6% 5% • & •'/•-X:106^1^SI^|| "includes estimated costs to convey property to Habitat for Humanity The following chart provides a breakdown of the sources of funds for the proposed development. Habitat is proposing to finance the project through the use of grant funds, in-kind donations, cash donations, sponsorships and assistance from the Agency/City. As noted previously, the Agency purchased the property and, if approved, will eventually convey it to Habitat at no cost pursuant to the DDLA. The Agency/City cash contribution to the project would be $866,920 total. The Agency/City contributions will amount to approximately 46% of the total projected cost of the project, including the cost of the land. SOURCES OF FUNDS Redevelopment Agency Land Transfer Redevelopment Agency Predevelopment Loan (CDBG & HOME Funds) Redevelopment Agency Construction Loan (HOME Funds) Grants In-Kind Donations Sponsorships and Cash Donations Total Sources of Funds Total Amount $695,000 $608,243 $258,677 $425,900 $160,500 $1,239,000 $3,387,320 Per Unit $63,181 $55,295 $23,516 $38,718 $14,591 $112,636 $307,937 The City's proposed contribution of $141,993 per unit is higher than that which has been previously approved for many similar projects. On average, the City has provided about $20,000 per unit for other affordable for-sale products. However, the City Council did previously approve a $70,000 per unit subsidy for the Laguna Pointe project which is across the street from the proposed project and also within the Village Redevelopment Area. It should be noted that the $70,000 per unit subsidy was for 3 units to be sold at a price affordable to low income households (approximately 80% or less of the Area Median Income). The proposed Roosevelt Condominium project will be more affordable than the Laguna Pointe project and provide units at a price affordable to very low income households (approximately 50% or less of the Area Median Income). Staff believes that the greater amount of assistance is warranted for several reasons. First, the project is being developed outside of the City- wide Inclusionary Housing Program but satisfies a portion of the Agency's Inclusionary requirement per State Law. Second, the project serves as a redevelopment project as well as an affordable housing project, and its construction represents the elimination of a condition of blight within the area. In addition, the project will provide for for-sale units affordable to very low income households. Page 4 SAN DIEGO HABITAT FOR HUMANITY Habitat will develop and sell the affordable units. The developer is an affiliate of Habitat for Humanity International, a non-profit organization that offers families in need a hand up, not a handout. They build homes and sell them to low income families with a 20 year, 0% interest mortgage. Habitat builds homes by using contributions of land, materials and money. Nearly all the labor on a project is performed by volunteers. Habitat requires 500 hours of labor ("sweat equity") from each family purchasing one of the homes they build. FINANCIAL ASSISTANCE DOCUMENTS In order for the project to receive the additional financial assistance, conveyance of the property and convert the predevelopment loan to a permanent loan for the subject project, Habitat is required to enter into a DDDLA and related documents. This agreement and related documents are attached for review. As one of the actions set forth within this report, the Housing and Redevelopment Commission is being asked to approve, in substantially the form presented, the DDLAt, Promissory Note, Deed of Trust and Grant Deed. These documents are explained below. 1. Disposition, Development and Loan Agreement states the terms and conditions relating to the Agency's loan, and the specific conditions to be satisfied prior to the Agency's conveyance of the property to the Developer. 2. Promissory Note is executed by the Developer and evidences their obligation to repay the loan. 3. Deed of Trust is executed by the Developer and recorded against the property to secure the Agency's interest in the subject improvements. 4. Grant Deed states the terms and conditions under which the property will be conveyed to the Developer. It is important to also note that the Agency will be required to subordinate the subject loan documents (other than the DDLA) to the senior lien holder, which will be Habitat for this project. If approved, the attached resolution authorizes the Agency Executive Director, or his/her designee, to execute subsequent subordination agreements. The Agency Executive Director may subordinate the Agency loan only after the finding required under Health and Safety Code Section 33334 has been made by the Agency. While the subordination documents will not return to the Agency for review, staff will take the necessary steps to insure that documents provide the Agency with adequate notice and cure ability. The subordination documents will be reviewed by, and be subject to final approval by the Agency General Counsel. HEALTH AND SAFETY CODE SECTION 33433 REPORT & PUBLIC HEARING Per California Health and Safety Code Section 33433 (Redevelopment Law), the Agency and City must hold a public hearing before taking any action to sell the subject property, which was purchased in part with Village Redevelopment Low and Moderate Income Housing Funds (tax increment funds). Page 5 The Agency must also provide a report (commonly referred to as the Section 33433 Report) which summarizes the terms of the proposed property disposition. The Section 33433 Report is attached for review, and was made available for public review during the required two week noticing period for this public hearing. As noted within the report, the Agency intends to transfer ownership of the subject Agency-owned property to Habitat at no cost which has been determined to be the reuse value of the property taking into account the use and the conditions, covenants, and development costs for the proposed project. Per the DDLA, Habitat is required to build eleven (11) housing units that will be sold to very low income households. The project is consistent with the Agency's 2004-2009 Implementation Plan for the Village Redevelopment Area. RISK ANALYSIS In its role as a lender to the project, the Agency is exposed to two risks inherent to real estate development. These risks generally include 1) predevelopment (project does not get to construction); and, 2) construction (project cannot be completed, cost overruns, contractor problems). Adding to this risk, Agency/City financial will be subordinated to the senior lien holder. Construction and operation risks are mitigated by a couple of factors. The Habitat for Humanity team has a strong track record with similar affordable housing projects and has been successful to date in all of its efforts to construct those projects in a financially sound manner. They are well-established and understand and are experienced in the affordable housing development business. Habitat will have no out-of-pocket expenses to purchase the land or finance the costs of pre-development activities. Therefore, Habitat will be able to focus all of its fundraising efforts specifically on construction of all of the on-site improvements. Habitat has a proven track record for obtaining in-kind donations and cash donations as well as sponsorships and ensuring that projects get built. Both the Redevelopment Agency and Habitat will closely monitor all costs related to the project. Additionally, under the DDLA the Agency will convey the Property to Habitat only after Habitat has satisfied specific conditions (such as obtaining a building permit and obtaining a specific amount of fundraising monies). These conditions insure that Habitat will only acquire the Property when Habitat is ready to commence construction. HOUSING CREDIT PURCHASE PRICE On December 20, 2005, the City Council designated the Roosevelt Gardens Condominium Project as a combined project under the City's Inclusionary Housing Ordinance, and authorized the Redevelopment Agency to sell credits in the subject project to assist other private housing developers in the Northwest Quadrant to meet their inclusionary obligations under said Ordinance. At that time, the Housing and Redevelopment Commission set the housing credit price at $120,000 based on the financial assistance contributed by the Redevelopment Agency/City as of that date. With Habitat's request for additional financial assistance ($258,677), and if that request is approved, the total financial contribution by the Agency/City will increase to $1,561,920 or $141,993 per unit. This increase in financial assistance results in a need to increase the housing credit price from $120,000 to $142,000 (rounded), if the Commission wishes to continue the policy of requiring the developers to compensate the Agency/City fully for its contributions if they receive credits for producing the required housing. To date, two developers have received approval to purchase four (4) housing credits within the project at the initial price of $120,000 each. A total of seven (7) credits remain available for purchase at the revised price of $142,000, if approved. Page 6 GOVERNMENT CODE SECTION 65402 REPORT Government Code Section 65402 requires that a proposed property disposition by a local agency be submitted to the planning commission for a report on conformity of the proposed property disposition with the community's general plan. This report was presented and the conformity determination was made when the Village Redevelopment Plan was originally adopted in 1981. The approved Plan, with the planning commission conformity finding, includes the authority for the Redevelopment Agency to buy and sell all properties within the boundaries of the Village Redevelopment Area, if such purchase or disposition is consistent with the land use controls and implementation activities of the Redevelopment Plan. The proposed disposition of the subject property is consistent with the adopted Village Redevelopment Plan because it implements the goals and objectives of the plan by 1) eliminating a blighting influence (underutilized property); 2) permitting a project which is consistent with all applicable land use regulations and controls; and, 3) is providing for affordable housing within the area. FISCAL IMPACT: A total of $608,244 in financial cash assistance was previously approved and appropriated for the project in the form of a predevelopment loan. This loan was financed with CDBG funds ($69,382.33) and HOME funds ($538,862.67). The current financial assistance in the amount of $258,677 for construction will be financed with additional HOME funds that were previously allocated to this project. A total of $1,021,855 in HOME funds has been previously allocated to this project. To date, $538,862.67 of these funds has been appropriated to the subject project for predevelopment costs. A balance of $482,992.33 remains within the previous HOME allocation for appropriation to the subject project. If the noted additional cash assistance is approved, there will be a remaining balance of $224,315 within the HOME fund for this project. If this balance is not required in the future for the subject project, it will be reallocated to another eligible project. Approval of the attached resolution will authorize the Finance Director to appropriate and provide the additional HOME funds to the Developer via the Carlsbad Redevelopment Agency. The Agency/City has previously provided assistance to this project through acquisition of the Property at a total cost of $692,058, or $69,914 per unit. Ownership of the land will be transferred from the Agency to Habitat at no cost, which has been determined to be the reuse value of the property considering the use and the conditions, covenants, and development costs required per the DDLA. With approval of the additional financial assistance, the total financial contribution from the Agency/City for the subject project will be $1,561,920, or $141,993 per unit, including the initial cost of the property to the Agency. If approved, the increase in the financial assistance to the project results in a need to also increase the purchase price for affordable housing credits within the project from $120,000 to $142,000. A total of four (4) housing credits have already been approved for purchase at the initial charge of $120,000 per credit. A total of seven (7) credits remain available for purchase at the new credit price, if approved. Page 7 ENVIRONMENTAL REVIEW Review under the National Environmental Protection Act (NEPA) Guidelines was previously completed for the affordable housing project as a result of the intended use of federal funds (CDBG and HOME) for financial assistance. City staff completed the NEPA review for the CDBG funds which resulted in a finding qf no significant impact. The City received the required Release of Funds authorization from the US Department of Housing and Urban Development (HUD) on October 28, 2002. County of San Diego Staff completed the NEPA review for the HOME funds which also resulted in a finding of no significant impact. HUD provided the required Release of Funds for the HOME funds in 2002 as well. The Planning Director conducted environmental review of the housing project pursuant to the Guidelines for Implementation of the California Environmental Quality Act and the Environmental Protection Ordinance of the City of Carlsbad. As a result of said review, the project was found to be exempt from environmental review pursuant to Section 15332 of the State CEQA Guidelines as an in- fill development project on a site of less than five acres in an urbanized area that has no habitat value and is served by adequate facilities. EXHIBITS: 1. Housing and Redevelopment Commission Resolution No. 444 authorizing the Finance Director to appropriate up to an additional $258,677 in HOME funds and to provide them in the form of a construction/permanent loan to San Diego Habitat for Humanity to assist in the financing of construction expenses for the proposed Roosevelt Street Affordable Condominium Project, and approving the related Disposition, Development and Loan agreement and related documents. 2. Housing and Redevelopment Commission Resolution No. 445 approving an increase in the affordable housing credit price for the Roosevelt Gardens Condominium project from $120,000 to $142,000. 3. City Council Resolution No. .2007-255 , to approve the appropriation and expenditure of the HOME Funds to provide construction financial assistance for the proposed Roosevelt Street Condominium Project, authorizing the Redevelopment Agency to administer the expenditure of those funds for the City, and making findings in accordance with Health and Safety Code Section 33433. 4. Proposed Project Site Map 5. Financing Proposal for the proposed Roosevelt Street Affordable Condominium Project. 6. Health and Safety Code Section 33433 Report 7. Disposition, Development and Loan Agreement and related documents. 1 HOUSING AND REDEVELOPMENT COMMISSION RESOLUTION NO. 444 2 A RESOLUTION OF THE HOUSING AND REDEVELOPMENT COMMISSION OF THE CITY OF CARLSBAD, CALIFORNIA, TO 3 APPROVE THE DISPOSITION, DEVELOPMENT AND LOAN AGREEMENT AND ALL RELATED DOCUMENTS WITH SAN DIEGO HABITAT FOR HUMANITY PROVIDING FOR ADDITIONAL 5 FINANCIAL ASSISTANCE IN THE AMOUNT OF $258,677 FUNDED WITH HOME INVESTMENT PARTNERSHIP FUNDS, AND 6 DISPOSITION OF THE PROPERTY OWNED BY THE CARLSBAD REDEVELOPMENT AGENCY LOCATED AT 2578 ROOSEVELT 7 STREET WITHIN THE VILLAGE REDEVELOPMENT AREA FOR THE DEVELOPMENT OF ELEVEN (11) CONDOMINIUMS TO BE 8 SOLD AT AN AFFORDABLE PRICE TO VERY LOW INCOME HOUSEHOLDS.9 APPLICANT: SAN DIEGO HABITAT FOR HUMANITY, INC. CASE NO: RP 04-04A11 - WHEREAS, San Diego Habitat for Humanity, Inc. (the "Developer") was selected by the Carlsbad Redevelopment Agency (the "Agency") to develop an eleven (11) unit condominium project 14 which shall be affordable to very low income households on property owned by the Agency and located at 2578 Roosevelt Street (the "Property") in the Northwest Quadrant of the City of Carlsbad, which is located within the boundaries of the Village Redevelopment Project Area; and 17 WHEREAS, the Agency intends to convey the Property to the Developer to develop said 1 8 affordable housing project, at no cost, which has been determined to be the total reuse value of said 19 property considering the use and the conditions, covenants, and development costs for the proposed 20 . , ,project; and 21 WHEREAS, the Agency and City of Carlsbad have previously appropriated $608,243 in financial 22 assistance to the Developer for predevelopment costs associated with said project; and 23 WHEREAS, the Developer has requested that the Agency and/or City of Carlsbad provide 24 additional financial assistance in the form of a construction and permanent loan in the total amount of 25 $258,677 to assist in the construction of said condominium units on said property; and 96 WHEREAS, the Agency is a Community Redevelopment Agency organized and existing under 27 the Community Redevelopment Law, Health and Safety Code Section 33000, etc.seq., hereinafter referred 28 to as the "Act", and desires to assist in the financing of said project to be developed by the Developer; and 8 1 2 3 4 5 6 7 26 WHEREAS, the Agency is authorized to implement the Redevelopment Plan for the Carlsbad Village Redevelopment Project Area; and WHEREAS, to carry out the purposes of increasing and improving the community's supply of low and moderate income housing, Section 33334.2(e) of the Act states that the Agency may exercise any or all of its powers, including without limitations, acquiring land or building sites, improving land or building sites with onsite or offsite improvements, donating land to private or public persons or entities, constructing buildings or structures, acquiring buildings or structures, providing subsidies to, or for the benefit of, very low income households, lower income households, or persons or families of low and moderate income, or other powers to carry out the purposes of the Act; and WHEREAS, the City Council and Housing and Redevelopment Commission did hold a joint public hearing on the date of this resolution to consider said request for City and Agency financial assistance for the construction of said eleven (11) affordable housing condominium units by the Developer, and Agency disposition of the Property for said project; and, WHEREAS, at said public hearing, upon hearing and considering all testimony, if any, of all persons desiring to be heard, said City Council and Housing and Redevelopment Commission considered all factors relating to the application and request for financial assistance and disposition of the Property for said project; and, WHEREAS, the Housing and Redevelopment Commission desires to approve the additional financial assistance in the amount of $258,677 and disposition of the Agency-owned Property at 2578 Roosevelt Street for said project at no cost, which is the reuse value of the Property. NOW, THEREFORE, BE IT HEREBY RESOLVED by the Housing and Redevelopment Commission of the City of Carlsbad, California, as follows: 1. The above recitations are true and correct. 2. The Agency previously selected the Developer as the developer of the subject affordable 3. The Developer's request for financial assistance is consistent with the goals and objectives of the City of Carlsbad's Housing Element and Consolidated Plan, the Carlsbad General Plan, and the Redevelopment Plan for the Village Redevelopment Project Area. 28 C-i 1 4. The request for Agency financial assistance will assist the affordable housing developer to 2 construct a total of eleven (11), one and two bedroom affordable condominium units affordable to very low income households. The project, therefore, has the ability to effectively 3 serve the City's housing needs and priorities as expressed in the Housing Element and the Consolidated Plan as well as meet the housing needs and inclusionary housing requirements 4 for the Village Redevelopment Project Area in the City of Carlsbad, in accordance with Section 33433 of the Act, the Housing and Redevelopment Commission hereby finds and 5 determines, based upon substantial evidence provided in the record before it (including the accompanying staff report and Section 33433 Summary Report, each of which are 6 incorporated herein by this reference), that the consideration for the conveyance of the Property as set forth in the Disposition Development and Loan Agreement (the "DDLA"), is 7 not less than the fair reuse value of the Property at the use and with the covenants and conditions and development costs authorized and required by the DDLA In accordance with 8 Section 33433 of the Act, the Housing and Redevelopment Commission hereby finds and determines that the development of the Property pursuant to the DDLA will provide housing 9 opportunities for very-low income persons, and is consistent with the implementation plan. 10 5. That the Housing and Redevelopment Commission authorizes the Agency's Executive Director or his/her designee to execute the DDLA and related documents to fund a 11 construction/permanent loan in the total amount of $258,677 to the Developer (for a total assistance of $1561,920), in substantially the form presented to the Commission and subject to 12 final approval by Agency's General Counsel. Said loan will be funded with HOME Investment Partnership Funds provided by the City of Carlsbad. 13 6. That the Housing and Redevelopment Commission authorizes the Agency's Executive 14 Director or his/her designee to execute all applicable documents, subject to final approval by Agency's General Counsel, to dispose of the Agency-owned property at 2578 Roosevelt Street l^ within the Village Redevelopment Project Area of the City of Carlsbad through a fee conveyance to the Developer. 16 7. That the Planning Commission has previously made the required General Plan conformity finding for disposition of property within the Village Redevelopment Project Area by the Agency, and a determination has been made that the disposition is consistent with the land use controls and implementation of activities of the Redevelopment Plan because it eliminates a blighting influence, permits a project which is consistent with all applicable land use regulations and controls, and is providing for affordable housing for very low income households within the project area. ~, 8. That the Housing and Redevelopment Commission authorizes the Agency's Executive Director or his/her designee to execute subsequent subordination agreement(s) subordinating 22 the Agency's Deed of Trust, to the Deed of Trust for construction and permanent lenders, as required, subject to review and approval by the Agency's General Counsel and subject to the ~T Executive Director's finding that no other financing that does not require subordination is reasonably available. 24 9. That the Housing and Redevelopment Commission authorizes the Finance Director to 25 appropriate and expend the funds set forth within this approval for the subject construction/permanent loan to the Developer for the subject affordable housing project, and 26 as set forth in the approved loan documents. 27 28 //// /o 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 10. That the Housing and Redevelopment Commission hereby accepts $258,677 in HOME Investment Partnership Funds to provide proceeds for the construction/permanent loan to be provided to the Developer for the subject affordable housing project. PASSED, APPROVED, AND ADOPTED at a Special meeting of the Housing and Redevelopment Commission of the City of Carlsbad, California, held on the _25tb day of September 2007, by the following vote, to wit: AYES: Commission Members Lewis NOES: None. ABSENT: None. ABSTAIN: None. Nygaard. CLAUDE A. LEWIS, Chairman ATTEST: RAYMOND R. PATCHETT, Secretary = * : M*\\ «7o /r 1 HOUSING AND REDEVELOPMENT COMMISSION RESOLUTION NO. 445 2 A RESOLUTION OF THE HOUSING AND REDEVELOPMENT COMMISSION OF THE CITY OF CARLSBAD, CALIFORNIA, TO INCREASE THE HOUSING CREDIT 3 PURCHASE PRICE FOR THE ROOSEVELT STREET AFFORDABLE CONDOMINIUM COMBINED PROJECT UNDER THE CITY OF CARLSBAD'S INCLUSIONARY 4 HOUSING ORDINANCE. 5 WHEREAS, in 1993, the City of Carlsbad adopted an Inclusionary Housing Ordinance, 6 Chapter 21.85 of the Carlsbad Municipal Code, which requires all housing developers to provide 7 at least 15% of the housing units they construct to be affordable to lower income households; and, 8 WHEREAS, pursuant to Chapter 21.85.080 of the Carlsbad Municipal Code, the City 9 Council has sole discretion to authorize a residential site to be designated as a combined 10 inclusionary housing project; and, 11 WHEREAS, the City Council also has sole discretion as to which housing developments 12 may satisfy their inclusionary housing obligations by financially participating in an off-site 13 combined project; and 14 WHEREAS, the Carlsbad Redevelopment Agency has partnered with Habitat for 15 Humanity to construct a total of eleven (11) for-sale condominium units affordable to very low 16 income households on property owned by the Agency and located at 2578 Roosevelt Street within 17 the Village Redevelopment Project Area and the Northwest Quadrant of the City of Carlsbad; and 18 WHEREAS, said units are excess units in that they will not be provided to meet the 19 inclusionary requirement of a specific master housing development under the City's Inclusionary 20 Housing ordinance, but may be used to do so if approved by the City Council; and 21 WHEREAS, the Carlsbad Redevelopment Agency expressed a desire to sell the excess 22 housing credits produced by said project, Roosevelt Street Condominiums, at 2578 Roosevelt 23 Street to housing developers with a small inclusionary housing requirement for a housing 24 development located within the Northwest Quadrant of the City; and 25 //// 26 //// 27 28 \1 1 WHERAS, the Carlsbad Redevelopment Agency received approval from the Carlsbad 2 City Council to designate the Roosevelt Street Condominiums at 2578 Roosevelt Street as a 3 combined housing project to assist small housing developers with projects located in the 4 Northwest Quadrant in their effort to satisfy their inclusionary housing requirements pursuant to 5 Chapter 21.85 of the Carlsbad Municipal Code; and 6 WHEREAS, the Carlsbad Redevelopment Agency is required to set the housing credit 7 purchase price for the Roosevelt Street Condominiums combined project; and 8 WHEREAS, the Carlsbad Redevelopment Agency originally set the housing credit 9 purchase price at $120,000 per credit on December 20, 2005 based on the financial assistance 10 proposed for the project at that time; and 11 WHEREAS, the project subsequently received approval of additional financial assistance 12 from the Carlsbad Redevelopment Agency in the amount of $258,677; and 13 WHEREAS, it is the policy of the Carlsbad Redevelopment Agency to receive full 14 reimbursement of its financial assistance when selling the housing credits to other developers, 15 which requires an increase in the credit price at this time. 16 NOW, THEREFORE , BE IT HEREBY RESOLVED by the Housing and 17 Redevelopment Commission of the City of Carlsbad, California, as follows: 18 l. The above recitations are true and correct. 1" 2. The Housing and Redevelopment Commission hereby reconfirms the designation of the eleven (11) unit Roosevelt Street Affordable Condominium development to ™ be constructed on Carlsbad Redevelopment Agency owned property located at 2578 Roosevelt Street as a combined housing project pursuant to Carlsbad 21 Municipal Code 21.85.080. 22 3. The Housing and Redevelopment Commission hereby acknowledges that the City Council has the authority to decide which private housing developments within the Northwest Quadrant will be permitted to satisfy their inclusionary housing obligations by financially participating in an off-site combined housing project such as the Roosevelt Street Condominiums. 25 4. The Housing and Redevelopment Commission hereby increases the Housing 26 Credit Purchase Price for the Roosevelt Street Affordable Condominiums from the initial price of $120,000 per unit/credit to $142,000 per unit/credit which 27 represents the full subsidy required from the Commission to ensure the affordability of the subject project.. This price was determined by calculating the 2g total per unit subsidy provided by both the Carlsbad Redevelopment Agency and the City of Carlsbad, including the cost of acquiring the property and providing 13 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 5. pre-development and construction funding to the developer. This fee shall be subject to increase on an annual basis to add interest, as approved by the Housing and Redevelopment Commission. The Housing Credit Purchase Price is not a development impact fee. Therefore, it is not subject to the requirements of California Government Code Sections 66001 and/or 66006. PASSED, APPROVED AND ADOPTED at a Speeialmeeting of the Housing and Redevelopment Commission of the City of Carlsbad, California, held on the 25tb day ofSeptenter ,2007, by the following vote, to wit: AYES Commission Members Lewis, Kulcbin, Hall, Packard and Nygaard. NOES: None. ABSENT: None. ABSTAIN: None. ATTEST RAYMOND R. PATCHETT, Secretary V'''•• ^ 4 1 CITY COUNCIL RESOLUTION NO. 2007-255 2 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, AUTHORIZING APPROPRIATION OF 3 $258,677 IN HOME INVESTMENT PARTNERHSIP FUNDS TO PROVIDE FINANCIAL ASSISTANCE TO SAN DIEGO HABITAT FOR HUMANITY, AND TO AUTHORIZE THE CARLSBAD 5 REDEVELOPMENT AGENCY TO ADMINISTER AND EXPEND SAID FUNDS TO FUND A LOAN WITH SAID DEVELOPER TO PROVIDE 6 FOR THE CONSTRUCTION OF ELEVEN (11) AFFORDABLE CONDOMINIUM UNITS WITHIN THE NORTHWEST QUADRANT 7 OF THE CITY OF CARLSBAD AND VILLAGE REDEVELOPMENT AREA AT 2578 ROOSEVELT STREET, AND MAKING SPECIFIED 8 FINDINGS IN CONNECTION WITH SUCH DEVELOPMENT. 9 APPLICANT; SAN DIEGO HABITAT FOR HUMANITY. INC. 10 WHEREAS, San Diego Habitat for Humanity, Inc. (the "Developer") has proposed to construct eleven (11) condominium units affordable to lower income households at 2578 Roosevelt Street (the "Property") in the Village Redevelopment Area and Northwest Quadrant of the City of Carlsbad; and WHEREAS, the Developer has requested that the City of Carlsbad (the "City") and Carlsbad 14 Redevelopment Agency (the "Agency") assist in providing additional funding to assist in the construction of said condominium units; and 16 WHEREAS, the City Council and Housing and Redevelopment Commission did both hold a public hearing on the date of this resolution to consider said request for City/Agency additional financial18 assistance in the amount of $258,677 for the construction of said eleven (11) affordable housing condominium units by the Developer; and WHEREAS, at said public hearing, upon hearing and considering all testimony, if any, of all persons desiring to be heard, said City Council considered all factors relating to the application and request for financial assistance: 23 NOW, THEREFORE, BE IT HEREBY RESOLVED by the City Council of the City of Carlsbad, California, as follows: 25 1. The above recitations are true and correct.26 2. The Developer's request for financial assistance is consistent with the goals and objectives 2' of the City of Carlsbad's Housing Element and Consolidated Plan, and the Carlsbad General Plan. 28 //// l 1 //// 2 3. The Developer's request for financial assistance will assist the affordable housing developer to construct a total of eleven (11), one and two bedroom affordable 3 condominium units. The project, therefore, has the ability to effectively serve the City's housing needs and priorities as expressed in the Housing Element and the Consolidated 4 Plan, In accordance with Section 33433 of Health and Safety Code., the City Council hereby finds and determines, based upon substantial evidence provided in the record 5 before it (including the accompanying staff report and Section 33433 Summary Report, each of which are incorporated herein by this reference), that the consideration for the 6 proposed conveyance of the Property by the Carlsbad Redevelopment Agency as set forth in the Disposition, Development and Loan Agreement (the "DDLA"), is not less than the 7 fair reuse value of the Property at the use and the covenants and [conditions and development costs] authorized and required by the DDLA. In accordance with Section 33433 of the Act, the City Council hereby finds and determines that the development of the Property pursuant to the DDLA will provide housing opportunities for very-low 9 income persons, and is consistent with the Village Redevelopment Implementation Plan. 10 4. That the City Council of the City of Carlsbad hereby APPROVES $258,677 in HOME Investment Partnership Funds to provide additional financial assistance in the form of a 11 construction/permanent loan to the Developer for construction of the proposed affordable housing project known as the Roosevelt Street Condominiums. 12 5. That the City Council authorizes the Carlsbad Redevelopment Agency to administer the 13 expenditure of the noted funds on behalf of the City and execute all appropriate loan and other documents related to provision of the City assistance, including but not limited to a 14 Disposition, Development and Loan Agreement, Promissory Note and Deed of Trust in substantially the form presented to the City Council, and subject to review and final 15 approval by the City Attorney and/or Agency Counsel. 16 6. That the City Council authorizes the City Manager, or his/her designee, to submit all applicable documents to the U.S Department of Housing and Urban Development and/or 17 County of San Diego to allow for appropriation and release of $258,677 in HOME Funds to provide proceeds for the subject construction/permanent loan for the subject affordable 18 housing project. 19 20 21 22 23 24 25 26 27 28 "" 1 2 3 4 5 6 7 CC Resolution No. 7. That the City Council authorizes the Finance Director to appropriate and provide said funds to the Carlsbad Redevelopment Agency to fund a construction/permanent loan in the total amount of $258,677 to San Diego Habitat for Humanity for the subject affordable housing project. PASSED, APPROVED, AND ADOPTED at a Special meeting of the City Council of the City of Carlsbad, California, held on the 25tb day ofSeptarfcg:2()07, by the following vote, to wit: 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 AYES: Council Members Lewis, Kulcbin, Hall, Packard and Nygaard. NOES: None. ABSENT: None. ABSTAIN: None. ATTEST: W0, City Clerk ll S/7E ROOSEVELT GARDEN CONDOMINIUMS RP 04-04A / CT 06-18 \bf-t" w o•o oU o (A I i-.oo to"Oc3u. 0 (A<D ^- oV) (ATJ C3u. "5 (A Source«* 0c (0 E (UQ^ Co t3 3 *•• J oO)•D GO U 's1 D. f^. 00CN ^-s^_" 0)D) CO O ^ lio T—arlsbadO 8 p; V)Land Acqusition^-v .-i COi oo 0in C3CO co CCO I Construction Cost0CN T—sT_ ^ CO — CO y. CDo"Z. CCM CO N.•* r-- CN CO oo" oo"o inCO CN tft to u>C.'-a>. C"0 D '</> U- -° >s^ iS1 CO O CO "OO < §§ CN 00_ CO 00 •* CN T— 69 69 ^O ^0) CO08f0)(Public ImprovemBuildingsoo0o" CM CN| Q. X 0)oZ y CO 1 X QCO CMm°°. c^ w I JLocal Processing/1 Impact Fees/Pei0o T— *± •Q CO £'oz ^3't O 0o oin o o" oCO O 4f) fe<> </> COi_ 'C O CD "CO 5 T3 "OC C ¥ ¥ ^ ^ CO r»-_ CM CN **Soft Costsooinin CM to c §O £ CO r-T CM" <& 'u) d ^o. "§ ^00 CO O)CO CN T— C^ r-Donatiorotf> x:c </>O CO c^° in 00 S 69 1Total DevelopmneDeveloper FeeCO CO 00o" 0 CM 69 I Contingencyr-.o n^j1 00 COco" V) $o oco_ 00to <o" ** 1 ^O(O_ fs« CO co" 1oK- SECTION 33433 REDEVELOPMENT REPORT SAN DIEGO HABITAT FOR HUMANITY, INC. AFFORDABLE HOUSING PROJECT FINANCIAL ASSISTANCE AND PROPERTY DISPOSITION SEPTEMBER, 2007 Disposition, Development and Loan Agreement - Executive Summary The Carlsbad Redevelopment Agency (the "Agency") shall transfer ownership of its vacant property at 2578 Roosevelt Street (the "Property") to San Diego Habitat for Humanity, Inc. ("Habitat" or the "Developer"), a non-profit affordable housing developer for the purpose of developing eleven (11) condominium units to be purchased by very low income households (the "Development" or the "Project"). In addition, the Agency will provide a total of $866,920 in cash assistance in the form of a loan for predevelopment and construction expenses related to the Project. The Agency's predevelopment loan ($608,243) was approved for this Project in a previous action by the City Council and Housing and Redevelopment Commission. The predevelopment loan agreement was executed on July 12, 2006. A copy of the proposed Disposition, Development and Loan Agreement between the Agency and Habitat (the "DDLA") is attached for public review. Fiscal Impacts This report has been prepared in accordance with the requirements of Health & Safety Code Section 33433. The cost of the DDLA to the Agency and the estimated value of the Property are outlined below for information purposes. 1. Cost to the Agency; The original land acquisition cost was approximately $695,000 (with fees and expenses) for the Property, which consists of an approximately .56 acre lot at 2578 Roosevelt Street. The cost was based on a fair market value of the Property at the time the Property was purchased in 2003, with a reduction due to a subsequent lot line adjustment which reduced the overall size of the Property. A combination of Redevelopment Low and Moderate Income Housing, CDBG and HOME funds were used to finance the acquisition of this Property. The Property was purchased with no threat of condemnation and with no requirements for relocation. On May 15, 2006, the Agency entered into an Exclusive Negotiating Rights Agreement (ENRA) with Habitat for development of the Project on the Property to provide home ownership opportunities for very low income households within the Village Redevelopment Area. Together with the ENRA, the Agency approved a loan to assist with predevelopment costs associated with development of the subject project. This loan, in the total amount of $608,243, was funded with CDBG and HOME funds. To complete financing for the project, which has a total estimated cost of $3,387,307, Habitat has requested an additional $258,677 in cash assistance for construction of the residential units. The Agency's total expected financial contribution, including transfer of the land, to Habitat is $1,561,920 (the "Agency Loan"). Additional financing of $20,000 in down payment assistance is also anticipated Section 33433 Redevelopment Report - Habitat for Humanity Project Page 2 for each very low income homebuyer within the Development through a separate funding program. 2. Estimated Value of the Interest to be Conveyed: At the time of purchase of the Property by the Agency (2003), the subject property was valued at $750,000 at its highest and best use of multi-family market rate residential development at a maximum of 11 units. This value was based on a site containing approximately 26,829 square feet (.616 acre) of property. The per square foot value was $27.96. During the due diligence period, it was discovered that there were several encroachments on the Property from adjacent single family homeowners which prevented full utilization of the Property. The Property owner decided to complete a lot line adjustment to allow the adjacent property owners to maintain their portion of the subject property. This reduced the Property size by approximately 2000 square feet and subsequently reduced the total value to approximately $690,000. The Agency believes that this is an appropriate continuing fair market value for the subject Property based on limited comparable sales data within the area. 3. Estimated Value of the Interest to be Conveyed with the Conditions of the Agreement; Under the DDLA, Habitat is obligated to construct and sell the 11 condominium units to very low income households (as more particularly defined in the DDLA). It is anticipated that the total cost for development of the Project is $2,669,514, excluding land costs. This equates to development costs of $242,683 per unit. The maximum revenue that will be obtained from the sale of the units is $1,451,200, or an average of $131,927 per unit. Thus, due to the requirements of the DDLA (specifically, Habitat's obligation to construct quality, new homes and then sell these units at prices affordable to very low income homebuyers) there is a financial gap of approximately $110,756 per unit. As a result, there is a negative residual land value because the costs of development far exceed the revenue generated from the sale of the residential units to very low income households as required by the DDLA. Thus, even without any land costs, the Developer will convey the homes for less than the cost to develop the Project. Requiring the Developer to pay the Agency a purchase price for the Property equal to the fair market value of the Property only impedes the redevelopment of the Property and would require additional Agency subsidy. To assist in making the Project feasible, the Agency must write down the cost of the Property to zero. Thus, the Property's fair reuse value considering the use and the covenants and conditions and development costs set forth in the DDLA is zero. To reflect the zero land value of the Property, the DDLA provides for the Agency to forgive the Agency Loan in the following manner. Under the DDLA, following the Developer's satisfaction of the specified conditions precedent, the Agency shall convey the Property to the Developer and the Developer will execute a promissory note in favor of the Agency in the amount of the Agency Loan. Following the completion of the Development, the Developer shall sell each individual home to an income-eligible household (the "Homebuyer") and the Homebuyer shall execute a promissory note in an amount no greater than $158,720, or such other amount necessary to make the home affordable to the Homebuyer. Following the conveyance of all 11 homes to the Section 33433 Redevelopment Report - Habitat for Humanity Project Page 3 Homebuyers, the Agency shall forgive the outstanding balance of the Agency Loan to Habitat. Thus, the Agency does not anticipate receiving any cash for the Property, and does not anticipate the Developer repaying the Agency Loan in full (as long as the Developer sells the homes to the Homebuyers in accordance with the DDLA). In effect, by forgiving the outstanding principal balance of the Agency Loan upon the sale of the final home, the Agency is transferring the Property to the Developer at no cost. As stated above, the Agency must forgive the Agency Loan as the Developer cannot repay the Agency Loan and sell the homes to the Homebuyers at affordable housing cost (as more particularly set forth in the DDLA). In sum, the Agency will convey the Property to Habitat for the Property's "fair reuse value". The Property's fair reuse value is zero dollars since the DDLA obligates Habitat to construct 11 homes on the Property and then sell each home to a Homebuyer at a price equal to "affordable housing cost" set forth in the Health & Safety Code and the DDLA. Affordable Housing Provision The Project will provide eleven (11) home ownership opportunities for very low income households (approximately 50% or less of the San Diego County Area Median Income) in the Village Redevelopment Area. The Project will assist in the elimination of blight with the Village Redevelopment Area by developing eleven (11) units of affordable housing on a vacant and under-utilized parcel. In addition, this Project will assist the Agency in its efforts to comply with the inclusionary housing requirements set forth for Redevelopment Areas within the State of California as well as provide much needed housing product within the Village Redevelopment Area. The Project is consistent with the Redevelopment Agency's 2005-2009 Implementation and Housing Plan for the Village Redevelopment Area. Summary The disposition of the Property to Habitat in accordance with the DDLA will result in the development of eleven (11) homeownership opportunities for very low income households. This population is currently underserved within the Village Redevelopment Area. The sales price for a one bedroom unit is estimated to be approximately $126,380 maximum, and a two bedroom will sell for approximately $146,720 maximum. Because there is a significant financial gap between the cost of development of the Project and the estimated revenue, the Redevelopment Agency intends to convey its property to Habitat at no cost, and also to provide financial assistance to the Project. The total estimated Agency contribution to the project is $1,561,920 (including the original land value). DISPOSITION, DEVELOPMENT, AND LOAN AGREEMENT BETWEEN CARLSBAD REDEVELOPMENT AGENCY AND SAN DIEGO HABITAT FOR HUMANITY, INC. Dated as of , 2007 1010\13\329336.4 TABLE OF CONTENTS ARTICLE 1. DEFINITIONS AND EXHIBITS 2 Section 1.1 Definitions 2 Section 1.2 Exhibits 8 ARTICLE 2. PREDISPOSITION REQUIREMENTS 8 Section 2.1 Conditions Precedent to Conveyance of Property 8 Section 2.2 Land Use Approvals 9 Section 2.3 Construction Plans 9 Section 2.4 Financing Plan 10 Section 2.5 Building Permit 11 Section 2.6 Financing 11 Section 2.7 Construction Contract 11 Section 2.8 Construction Bonds 12 Section 2.9 Insurance .....12 ARTICLE 3. DISPOSITION OF PROPERTY 13 Section 3.1 Purchase and Sale 13 Section 3.2 Purchase Price 13 Section 3.3 Opening Escrow 13 Section 3.4 Closing Date 13 Section 3.5 Condition of Title 14 Section 3.6 Condition of Property 15 Section 3.7 Costs of Escrow and Closing 17 ARTICLE 4. CONSTRUCTION OF IMPROVEMENTS 17 Section 4.1 Construction Pursuant to Plans 17 Section 4.2 Change in Construction of Improvements : 17 Section 4.3 Commencement of Improvements 18 Section 4.4 Completion of the Improvements 18 Section 4.5 Equal Opportunity 18 Section 4.6 Compliance with Applicable Law; Prevailing Wage Requirement 18 Section 4.7 Progress Report 19 Section 4.8 Construction Responsibilities 19 Section 4.9 Mechanics Liens, Stop Notices, and Notices of Completion 20 Section 4.10 Inspections 20 Section 4.11 Information 21 Section 4.12 Records 21 Section 4.13 Financing; Revisions to Plan 22 ARTICLE 5. AGENCY LOAN PROVISIONS 22 Section 5.1 Agency Loan 22 Section 5.2 Interest 22 Section 5.3 Use of Agency Loan 22 Section 5.4 Security 23 Section 5.5 Repayment Schedule of Agency Loan 23 1010\13\329336.4 TABLE OF CONTENTS Pas Section 5.6 Prepayment 24 Section 5.7 Conditions Precedent to Disbursement of Agency Loan 24 Section 5.8 Developer Fee 25 Section 5.9 Assumption 25 Section 5.10 Non-Recourse 25 ARTICLE 6. ONGOING DEVELOPER OBLIGATIONS 26 Section 6.1 Applicability 26 Section 6.2 Use 26 Section 6.3 Maintenance 26 Section 6.4 Taxes and Assessments 27 Section 6.5 Mandatory Language in All Subsequent Deeds, Leases and Contracts 27 Section 6.6 Hazardous Materials 29 Section 6.7 Insurance Requirements 31 Section 6.8 Audits 32 Section 6.9 CDBG and HOME Requirements 33 ARTICLE 7. MORTGAGE ASSISTANCE AND SALE OF HOMES 36 Section 7.1 Sale of Homes to Eligible Purchasers 36 Section 7.2 Agency Second Mortgage Assistance 37 Section 7.3 Conditions to Agency Second Mortgage Loans 37 Section 7.4 Developer First Mortgage Assistance and Other Eligible Purchaser Financing 38 Section 7.5 Eligible Purchaser Counseling 38 ARTICLE 8. ASSIGNMENT AND TRANSFERS .• 39 Section 8.1 Definitions 39 Section 8.2 Purpose of Restrictions on Transfer 39 Section 8.3 Prohibited Transfers 40 Section 8.4 Permitted Transfers 40 Section 8.5 Effectuation of Certain Permitted Transfers 40 Section 8.6 Special Remedy for Prohibited Transfer 41 ARTICLE 9. DEFAULT AND REMEDIES 41 Section 9.1 General Applicability 41 Section 9.2 No Fault of Parties 41 Section 9.3 Fault of Agency 42 Section 9.4 Fault of Developer 43 Section 9.5 Right of Reverter 45 Section 9.6 Acceleration of Note 45 Section 9.7 Right to Cure at Developer's Expense 45 Section 9.8 Construction Plans 46 Section 9.9 Rights of Mortgagees 46 Section 9.10 Remedies Cumulative 46 Section 9.11 Waiver of Terms and Conditions 46 1010\13\329336.4 11 7-5 TABLE OF CONTENTS age ARTICLE 10. SECURITY FINANCING AND RIGHTS OF HOLDERS 47 Section 10.1 No Encumbrances Except for Development Purposes 47 Section 10.2 Holder Not Obligated to Construct 47 Section 10.3 Notice of Default and Right to Cure 47 Section 10.4 Failure of Holder to Complete Improvements 48 Section 10.5 Right of Agency to Cure 48 Section 10.6 Right of Agency to Satisfy Other Liens 48 Section 10.7 Holder to be Notified 48 ARTICLE 11. GENERAL PROVISIONS 49 Section 11.1 Notices, Demands and Communications 49 Section 11.2 Non-Liability of Agency Officials, Employees and Agents; Non-Liability of Developer's Members 49 Section 11.3 Forced Delay 49 Section 11.4 Inspection of Books and Records 50 Section 11.5 Provision Not Merged with Agency Grant Deed 50 Section 11.6 Title of Parts and Sections 50 Section 11.7 General Indemnification. 50 Section 11.8 Applicable Law 51 Section 11.9 No Brokers 51 Section 11.10 Severability 51 Section 11.11 Legal Actions 51 Section 11.12 Binding Upon Successors 51 Section 11.13 Parties Not Co-Venturers 52 Section 11.14 Time ofthe Essence 52 Section 11.15 Action by the Agency 52 Section 11.16 Representations and Warranties of the Developer 52 Section 11.17 Complete Understanding of the Parties 54 Section 11.18 Multiple Originals; Counterparts 54 Exhibit A: Legal Description ofthe Property Exhibit B: Financial Proposal Exhibit C: Schedule of Performance Exhibit D: Form of Agency Grant Deed Exhibit E: Form of Agency Deed of Trust Exhibit F: Form of Agency Note Exhibit G: Form of Homebuyer Note Exhibit H: Form of Homebuyer Deed of Trust Exhibit I Form of Homebuyer Resale Restriction and Option to Purchase 1010\13\329336.4 111 DISPOSITION, DEVELOPMENT AND LOAN AGREEMENT This Disposition, Development and Loan Agreement (the "Agreement") is entered into as of , 2007 (the "Effective Date"), by and between the Carlsbad Redevelopment Agency, a public body, corporate and politic (the "Agency"), and San Diego Habitat for Humanity, Inc., a California nonprofit public benefit corporation (the "Developer"), with reference to the following facts, understandings and intentions of the parties: RECITALS A. These Recitals refer to and utilize certain capitalized terms that are defined in Article 1 of this Agreement. The Parties intend to refer to those definitions in connection with the use of capitalized terms in these Recitals. B. The City Council of the City of Carlsbad adopted the Redevelopment Plan establishing the Project Area. The Agency is responsible for implementing the Redevelopment Plan in the Project Area. The goals for the Redevelopment Plan include alleviation of blighting conditions and the stimulation of economic development and affordable housing activities in the Project Area. C. The Agency is the owner of the Property located in the Project Area. The Agency acquired the Property with funds it received from HUD under the CDBG Program, the HOME Program, and the Agency's Housing Fund. D. The Agency and the Developer desire for the Developer to develop an affordable housing development on the Property. To effectuate this purpose, the Agency will convey the Property to the Developer, subject to the terms and conditions of this Agreement. E. The Developer intends to finance the costs of development with the Agency Loan, as well as other construction and/or permanent financing. Exhibit B, attached hereto, provides the Developer's financial proposal for the anticipated financing of development costs. F. The Agency has determined that the Developer has the necessary expertise, skill and ability to carry out the commitments set forth in this Agreement and that this Agreement is in the best interests, and will materially contribute to the implementation of, the Redevelopment Plan. G. The Agency has conducted a public hearing pursuant to Health and Safety Code Section 33433 with respect to the conveyance of the Property to the Developer for development of the Improvements. H. The Developer's construction and operation of the Development are not financially feasible without the Agency's financial assistance. The Agency therefore desires to convey the Property to the Developer in accordance with the terms set forth in this Agreement 1010\13\329336.4 attached hereto and to provide the Developer with the Agency Loan to provide construction funding in consideration for the Developer's agreement to construct and operate the Development consistent with this Agreement, including (without limitation) the occupancy and affordability restrictions. The amount of the Agency Loan is One Million Five Hundred Sixty- One Thousand Nine Hundred Twenty Dollars ($1,561,920). The amount of Agency assistance provided pursuant to this Agreement does not exceed the amount of Agency assistance necessary to make the Developer's acquisition of the Property and the construction and operation of the Development, as restricted by this Agreement, financially feasible. I. Redevelopment of the Property pursuant to this Agreement will serve redevelopment plan goals and objectives by assisting in the stabilization of the economic base of the Project Area by enhancing the physical environment of the Project Area and emphasizing its favorable environmental characteristics, and by improving the supply of affordable housing. J. The Agency intends to apply the units to be developed pursuant to this Agreement toward satisfaction of the statutorily mandated housing production requirements for the Project Area under Health and Safety Code Section 33413(b)(2). K. Pursuant to the California Environmental Quality Act and its implementing guidelines ("CEQA"), the City (in its capacity as "lead agency"), and the Agency (in its capacity as a "responsible agency") have determined that the development of the Property is exempt from environmental review pursuant to section 15332 of the CEQA Guidelines. Additionally, the City and Agency have conducted the applicable review required pursuant to NEPA. L. In accordance with Section 2.1 of the ENRA, by execution of this Agreement, the ENRA is hereby terminated and of no further force or effect. THEREFORE, the Agency and the Developer agree as follows: ARTICLE 1. DEFINITIONS AND EXHIBITS Section 1.1 Definitions. In addition to the terms defined elsewhere in this Agreement, the following definitions shall apply throughout this Agreement. (a) "Acquisition Component" means the portion of the Agency Loan in the amount of Six Hundred Ninety-Five Thousand Dollars ($695,000) to be utilized by the Developer to acquire the Property. (b) "Affordable Housing Cost" means the total cost of ownership of a Home which shall not exceed a Monthly Housing Cost of thirty percent (30%) times fifty percent (50%) of the Area Median Income adjusted for household size. 1010\13\329336.4 23 (c) "Agency" means the Carlsbad Redevelopment Agency, a public body, corporate and politic. (d) "Agency Deed of Trust" means the deed of trust that will encumber the Developer's interest in the Property to secure repayment of the Agency Note, substantially in the form attached hereto as Exhibit E. (e) "Agency Documents" means, collectively, this Agreement, the Agency Grant Deed, the Agency Note, the Agency Deed of Trust, the Agency Financing Statement, and all other documents required to be executed by the Developer in connection with the transaction contemplated by this Agreement. (f) "Agency Event of Default" has the meaning set forth in Section 9.3 (g) "Agency Financing Statement" means the UCC-1 Financing Statement to be provided by the Agency and executed by the Developer and the Agency, granting the Agency a security interest in the personal property associated with the Improvements. (h) "Agency Grant Deed" means the grant deed that will convey the Property from the Agency to the Developer substantially in the form attached hereto as Exhibit D. (i) "Agency Loan" means the loan made from the Agency to the Developer pursuant to the terms set forth in Article 5 of this Agreement. (j) "Agency Note" means the promissory note that will evidence the Developer's obligation to repay the Agency Loan substantially in the form attached hereto as Exhibit E. (k) "Agency Second Mortgage Loan" shall be a loan made to an Eligible Purchaser of a Home pursuant to Sections 7.2 and 7.3. (1) "Agreement" means this Disposition, Development and Loan Agreement, including the attached Exhibits and all subsequent operating memoranda and amendments to this Agreement. (m) "Annual Income" means the total anticipated annual income of all persons in a household, as calculated in accordance with 25 California Code of Regulations Section 6914. (n) "Area Median Income" means the median gross yearly income, adjusted for household size, as determined by HUD (pursuant to Section 8 of the United States Housing Act of 1937) for the San Diego Standard Metropolitan Statistical Area, and as established by regulation of the State of California pursuant to Health & Safety Code Section 50093. In the event that such income determinations are no longer published, or are not updated for a period of at least eighteen (18) months, the Agency shall provide the Developer with other income 1010\13\329336.4 determinations which are reasonably similar with respect to methods of calculation to those previously published by the State. (o) "Buyer Disclosure Statement" means the Buyer Disclosure Statement in a form to be provided by the Agency, to be signed by each Eligible Purchaser as a condition to close of an Agency Second Mortgage Loan. (p) "CDBG Funds" means the portion of the Agency Loan consisting of funds from the CDBG Program. (q) "CDBG Program" means the Community Development Block Grant program of Title I of the Housing and Community Development Act of 1974, as amended (r) "City" means the City of Carlsbad, California. (s) "City Council" means the City Council of the City of Carlsbad. (t) "Closing" means the date mutually acceptable to the Parties within thirty (30) days following the date on which all conditions precedent to conveyance set forth in Article 2 have been satisfied, but in no event later than the date set forth in the Schedule of Performance, or such other date that the Parties agree upon in writing. (u) "Construction Component" means the portion of the Agency Loan in the amount of Two Hundred Fifty-Eight Thousand Six Hundred Seventy-Seven Dollars ($258,677) to be utilized by the Developer for eligible construction costs and expenses. (v) "Construction Plans" means all construction documentation upon which the Developer, and the Developer's several contractors, shall rely in building each and every part of the Improvements (including landscaping, parking, and common areas) and shall include, but not necessarily be limited to, final architectural drawings, landscaping plans and specifications, final elevations, building plans and specifications (also known as "working drawings") and a time schedule for construction. (w) "Conventional Loans" means a construction loan or loans from private lending institutions and/or public lenders, approved by the Agency in the Financing Plan. (x) "Developer" means San Diego Habitat for Humanity, Inc., a California nonprofit public benefit corporation. (y) "Developer Event of Default" has the meaning set forth in Section 9.4. (z) "Developer Fee" means that amount of fee paid to the Developer, or its affiliates, in the amount and for the purposes set forth in Section 5.8. (aa) "Development" means the Property and the Improvements. 1010\13\329336.4 (bb) "Eligible Purchaser" means a qualified Very Low Income Household that has been selected by the Developer and that also meets the condition set forth in Section 7.3(a)- (d). (cc) "ENRA" means that certain Exclusive Negotiating Rights Agreement dated July 12, 2006, by and between the Agency and the Developer. (dd) "Escrow" means the escrow established with the Title Company for the purpose of conveying the Property from the Agency to the Developer. (ee) "Financing Plan" means the Developer's plan for financing the acquisition of the Property and the development of the Improvements, approved by the Agency pursuant to Section 2.4. (ff) "Hazardous Materials" means any substance, material, or waste which is: (1) defined as a "hazardous waste", "hazardous material," "hazardous substance," "extremely hazardous waste," "restricted hazardous waste," "pollutant" or any other terms comparable to the foregoing terms under any provision of California law or federal law; (2) petroleum; (3) asbestos; (4) polychlorinated biphenyls; (5) radioactive materials; (6) mold; (7) MTBE; or (8) determined by California, federal or local government authority to be capable of posing a risk of injury to health, safety or property. Without limiting the foregoing, Hazardous Materials means and includes any substance or material defined or designated as hazardous or toxic waste, hazardous or toxic material, a hazardous, toxic or radioactive substance, or other similar term, by any Hazardous Materials Laws including any federal, state or local environmental statute, regulation or ordinance presently in effect that may be promulgated in the future, as such as statutes, regulations and ordinances may be amended from time to time. The term "Hazardous Materials" shall not include: (i) construction materials, gardening materials, household products, office supply products or janitorial supply products customarily used in the construction, maintenance, rehabilitation, or management of commercial properties, buildings and grounds, or typically used in office or residential activities, or (ii) certain substances which may contain chemicals listed by the State of California pursuant to California Health & Safety Code Section 25249.8 et seq., which substances are commonly used by a significant portion of the population living within the region of the Improvements, including, but not limited to, alcoholic beverages, aspirin, tobacco products, Nutrasweet and saccharine, so long as such materials and substances are stored, used and disposed of in compliance with all applicable Hazardous Materials Laws. (gg) "Hazardous Materials Laws" means all federal, state, and local laws, ordinances, regulations, orders and directives pertaining to Hazardous Materials in, on or under the Development or any portion thereof. (hh) "HOME Funds" means the portion of the Agency Loan consisting of funds from the HOME Program. 1010\13\329336.4 5 31 (ii) "HOME Program" means the HOME Investment Partnership Act Program pursuant to the Cranston-Gonzales National Housing Act of 1990, as amended. (jj) "Home" or "Homes" means one or all of the eleven (11) condominium units to be constructed on the Property pursuant to this Agreement. (kk) "Homebuyer Deed of Trust" means the deed of trust from the Eligible Purchaser to the Agency in the form shown in Exhibit H, securing the Homebuyer Promissory Note. The Agency reserves the right to revise this Exhibit after execution of this Agreement. (11) "Homebuyer Promissory Note" means the promissory note from the Eligible Purchaser to the Agency in the form shown in Exhibit G, evidencing the Eligible Purchaser's incremental share of the Agency Loan. The Agency reserves the right to revise this Exhibit after execution of this Agreement. (mm) "Homebuyer Resale Restriction and Option to Purchase" means the Homebuyer Resale Restriction and Option to Purchase Agreement between the Eligible Purchaser and the Agency in the form shown in Exhibit I, which places restrictions on the resale of the Homes to specified eligible purchasers at a restricted purchase price, and provides the Developer and the Agency each with an option to purchase the Home at a restricted price. The Homebuyer Resale Restriction and Option to Purchase Agreement will be recorded against each Home at the time of conveyance to an Eligible Purchaser. The Agency reserves the right to revise this Exhibit after execution of this Agreement. (nn) "Housing Fund" means the Agency's Low and Moderate Income Housing Program established in accordance with California Health & Safety Code Section 33334.2 et seq. (oo) "HUD" means the United States Department of Housing and Urban Development. (pp) "Improvements" means the Homes and appurtenant landscaping and other related improvements. (qq) "Monthly Housing Cost" shall include all of the following costs associated with owning a Home, excluding costs already paid by the Development's homeowner's association, if any: (i) Principal and interest on mortgage loans and any loan insurance fees associated therewith. (ii) Property taxes and assessments. (iii) Fire and casualty insurance covering replacement value of property improvements. (iv) Property maintenance and repairs. 1010\13\329336.4 5 32 (v) A reasonable allowance for utilities, including garbage collection, sewer, water, electricity, gas, and other heating, cooking, and refrigeration fuels. Utilities do not include telephone service. Such an allowance shall take into consideration the cost of an adequate level of service. (vi) Homeowner association fees, if any. Monthly housing cost of a purchaser shall be an average of estimated costs for the next twelve months. (rr) "NEPA" means The National Environmental Policy Act of 1969, 42 U.S.C. 4321-4347, as amended. (ss) "Parties" means the Agency and the Developer. (tt) "Predevelopment Component" means the portion of the Agency Loan in the amount of Six Hundred Eight Thousand Two Hundred Forty-Three Dollars ($608,243). (uu) "Predevelopment Loan Agreement" means that certain Predevelopment Loan Agreement dated July 12, 2006, by and between the Agency and the Developer. (w) "Project Area" means the Carlsbad Village Redevelopment Project Area. (ww) "Property" means the real property to be redeveloped by the Developer pursuant to this Agreement, which real property is more particularly described in Exhibit A. (xx) "Redevelopment Plan" means the Carlsbad Village Redevelopment Plan adopted by the City pursuant to Resolution No. 9591 on July 21, 1981, as amended from time to time. (yy) "Schedule of Performance" means the summary schedule of actions to be taken by the Parties pursuant to this Agreement to achieve disposition of the Property to the Developer and the development of the Improvements. The Schedule of Performance is attached to this Agreement as Exhibit C. (zz) "Security Financing Interest" has the meaning set forth in Section 10.1. (aaa) "Sponsorship" means the cash donations in the amount no less than One Million One Hundred Twenty-Five Thousand Dollars ($1,125,000) obtained by the Developer from third-parties to be used to pay for costs of developing the Improvements. (bbb) "Term" means the term of this Agreement, which shall commence on the date of this Agreement and shall continue until the date the Developer conveys the eleventh (11th) Home to an Eligible Purchaser pursuant to this Agreement. 1010\13\329336.4 (ccc) "Title Company" means the San Diego office of Commonwealth Land Title Company, located at 750 B Street, San Diego, CA 92101, or First American Title Company, unless modified pursuant to Section 3.3. (ddd) "Title Report" means the preliminary title report for the Property dated July 25, 2007, prepared by the Title Company. Property. (eee) "Transfer" has the meaning set forth in Section 8.1. (fff) "Unit" means one of the residential units to be constructed on the (ggg) "Very Low Income Household" means an Eligible Purchaser with an Annual Income that does not exceed the qualifying limits for very low income families as established and amended from time to time pursuant to Section 8 of the United States Housing Act of 1937, and as published by the State of California Department of Housing and Community Development pursuant to Title 25 of the California Code of Regulations, including but not limited to Section 6926 and 6932. Section 1.2 Exhibits. The following exhibits are attached to and incorporated in the Agreement: Exhibit A: Legal Description of the Property Exhibit B: Financial Proposal Exhibit C: Schedule of Performance Exhibit D: Form of Agency Grant Deed Exhibit E: Form of Agency Deed of Trust Exhibit F: Form of Agency Note Exhibit G: Form of Homebuyer Note Exhibit H: Form of Homebuyer Deed of Trust Exhibit I: Form of Homebuyer Resale Restriction and Option to Purchase ARTICLE 2. PREDISPOSITION REQUIREMENTS Section 2.1 Conditions Precedent to Conveyance of Property. 1010\13\329336.4 The requirements set forth in this Article are conditions precedent to the Agency's obligations to convey the Property to the Developer. The Agency's obligation to convey the Property to the Developer shall be subject to the satisfaction of all such conditions precedent prior to the date or dates set forth in the Schedule of Performance. In addition, as a condition precedent to the Agency conveying the Property to the Developer, the Developer must comply with the provisions set forth in Sections 3.4 and 5.7 of this Agreement, as more fully stated in those Sections. Section 2.2 Land Use Approvals. Prior to the Effective Date, the Housing and Redevelopment Commission approved Major Redevelopment Permit RP-04-04a for the Development. The Parties acknowledge that, as of the Effective Date, no other land use permits or approvals are necessary for the construction of the Improvements, other than a final map and a building permit. In the event that additional land use approvals or other entitlements are determined to be necessary for the development of the Development, then it shall be the Developer's obligation to obtain such additional necessary approvals prior to the Closing, and the Agency shall have no obligation to obtain such approvals or pay any cost or expense for such approval. The Developer acknowledges that execution of this Agreement by the Agency does not constitute approval by the City of any required permits, applications, or allocations, and in no way limits the discretion of the City in the permit allocation and approval process. Section 2.3 Construction Plans. The Developer shall submit its Construction Plans no later than the date set forth in the Schedule of Performance, and in sufficient time to allow adequate Agency review of the Construction Plans, possible resubmission of the Construction Plans and final Agency approval of the Constructions Plans by the Closing. The Agency shall approve or disapprove the Construction Plans in writing within fifteen (15) days following the Agency's receipt of the complete Construction Plans, which approval shall not be unreasonably denied. If the Construction Plans are disapproved by the Agency, the Agency shall deliver a written notice to the Developer setting forth, in reasonable detail, the reasons for such disapproval. The Developer shall have thirty (30) days following the receipt of such notice to submit revised Construction Plans. The provisions of this Section relating to time periods for approval, disapproval, and resubmission of new Construction Plans shall continue to apply until the final Construction Plans have been approved by the Agency; provided, however, that if Agency's reasonable approval of the final Construction Plans has not been obtained by the date set forth in the Schedule of Performance the Agency may terminate this Agreement pursuant to Article 9. The Developer acknowledges that approval of the final Construction Plans by the Agency does not constitute approval by the City as required for issuance of a building permit. 1010\13\329336.4 O 35 Section 2.4 Financing Plan. No later than the time set forth in the Schedule of Performance, the Developer shall submit for Agency approval evidence of the availability of the funds necessary to acquire the Property and redevelop the Property (the "Financing Plan"). The Financing Plan shall include: (a) An estimated operating proforma for the Development which shall show debt service on all loans (including but not limited to the Agency Loan); (b) An estimated sources and uses, including a cost breakdown for costs of constructing the Improvements and any donated funds, materials, or labor. The sources and uses shall include all assumptions for all debt and equity financing, shall show the timing of uses of each source of financing and shall break down which expenses each source of financing is funding. The sources and uses shall detail the amount of the Developer Fee, if any, which cannot exceed the amount set forth in Section 5.6, and shall provide a proposed schedule of payments of the fees paid to the Developer, if any, based on performance milestones as to be mutually agreed to by the Developer and the Agency; (c) A copy of the commitment or commitments obtained by the Developer for any loans and grants to assist in financing the construction of the Improvements, including but not limited to any Sponsorship or any in-kind contributions, certified by the Developer to be true and correct copies thereof. The Developer shall submit evidence of its efforts to receive competitive pricing on the Conventional Loans (if any); and (d) A certified financial statement or other financial statement in such form reasonably satisfactory to the Agency evidencing other sources of capital sufficient to demonstrate that the Developer has adequate funds available and is committing such funds to cover the difference, if any, between costs of development and construction of the Improvements and the amount available to the Developer from external sources. Upon receipt by the Agency of the proposed Financing Plan, the Agency shall promptly review the Financing Plan and shall approve or disapprove it within fifteen (15) days after submission if it conforms to the provisions of this Agreement. The Agency's review of the Financing Plan shall be limited to determining if the contemplated financing will be reasonably available, if the financing contemplated in the Financing Plan would provide sufficient funds to undertake and complete the development and construction of the Improvements and determining if it is consistent with the terms of this Agreement. If the Financing Plan is not approved by the Agency, the Agency shall notify the Developer in writing of the reasons therefore. The Developer shall thereafter resubmit a revised Financing Plan to the Agency for its approval within fifteen (15) days after the Agency's notification of disapproval. The Agency will either approve or disapprove the revised Financing Plan within fifteen (15) days after resubmission by the Developer, and if disapproved, this Agreement may be terminated pursuant to Article 9 below. Only upon the approval of the Financing Plan by the Agency shall this pre-disposition condition be met. 1010\13\329336.4 in1 V -.3° The Parties agree that notwithstanding the time requirements set forth in this Section for submission and resubmission to the Agency by the Developer of a proposed Financing Plan and review and approval of the Financing Plan by the Agency, the Developer is responsible for assuring that a Financing Plan in approvable form is submitted to the Agency in a timely manner such that the Agency may have the time permitted by this Section to review and approve a Financing Plan no later than the date set forth in the Schedule of Performance. Prior to the issuance of any Certificate of Completion for any of the Improvements, any material change, modification, revision or alteration of the approved Financing Plan must first be submitted to and approved by the Agency for conformity to the provisions of this Agreement. If not so approved, the approved Financing Plan shall continue to control. Section 2.5 Building Permit. No later than the date set forth in the Schedule of Performance, the Developer shall apply for a building permit allowing for the construction of the Improvements called for in the Construction Plans. After submitting an application for a building permit, the Developer shall diligently pursue and obtain a building permit for the Improvements, and no later than the date set forth in the Schedule of Performance, the Developer shall deliver evidence to the Agency that the Developer is entitled to issuance of a building permit for the Improvements upon payment of permit fees. Only upon delivery to the Agency of such evidence in a form reasonably satisfactory to the Agency shall the predisposition condition of this Section 2.5 be deemed met. If such evidence is not delivered by the date set forth in the Schedule of Performance, this Agreement may be terminated pursuant to Article 9. The Agency shall render all reasonable assistance (at no additional cost to the Agency) to the Developer to obtain the building permit. The Developer acknowledges that execution of this Agreement by the Agency does not constitute approval by the City of any required permits, applications, or allocations, and in no way limits the discretion of the City in the permit allocation and approval process. Section 2.6 Financing. The funds for the Sponsorship, in the amount as set forth in the Financing Plan, shall be closed by, or otherwise available to, the Developer prior to, or simultaneously with, the conveyance of the Property to the Developer by the Agency. The Developer shall also submit to the Agency evidence reasonably satisfactory to the Agency that any conditions to the release or expenditure of Sponsorship funds described in the approved Financing Plan as the sources of funds to pay the costs of constructing the Improvements have been met or will be met upon the close of Escrow and subject to the Developer's satisfaction of standard disbursement preconditions required to be satisfied on a periodic basis, for constructing the Improvements. Submission by the Developer, and approval by the Agency, of such evidence of funds availability shall be a condition precedent to the Agency's obligation to convey the Property to the Developer. Section 2.7 Construction Contract. 1010\13\329336.4 The Developer shall serve as the general contractor for the construction of the Improvements. No later than the date set forth in the Schedule of Performance, as well as prior to entering into any other construction contract for the Development after the Close of Escrow, the Developer shall submit to the Agency for its limited approval the proposed construction contract(s) for the Improvements (to the extent the Developer uses contract labor or for work not otherwise performed by volunteers). The Agency's review and approval shall be limited exclusively to a determination whether (a) the guaranteed maximum construction cost set forth in the construction contract is consistent with the approved Financing Plan; (b) the construction contract is with a contractor approved by the Agency; (c) the construction contract contains provisions consistent with Article 4 of this Agreement; (d) the construction contract requires a retention often percent (10%) of costs until completion of the Improvements (except for specified trades previously approved by the Agency in writing); and (e) the construction contract includes all applicable CDBG and HOME requirements as set forth in Section 6.10 below. The Agency's approval of the construction contract shall in no way be deemed to constitute approval of or concurrence with any other term or condition of the construction contract. Upon receipt by the Agency of the proposed construction contract and any other related documentation (collectively the "Construction Contract Documentation"), the Agency shall promptly review same and approve it within five (5) days if it satisfies the limited criteria set forth above. If the Construction Contract Documentation is not approved by the Agency, the Agency shall set forth in writing and notify the Developer of the Agency's reasons for withholding such approval. The Developer shall thereafter submit revised Construction Contract Documentation for Agency approval, which approval shall be granted or denied in five (5) days in accordance with the criteria and procedures set forth above. Failure of the Agency to respond within the five (5)-day period(s) set forth above shall be deemed approval by the Agency. Any construction contract executed by the Developer for the Improvements shall be in a form approved or deemed approved by the Agency. Section 2.8 Construction Bonds. No later than the date set forth in the Schedule of Performance, the Developer shall obtain, or shall cause the general contractor to obtain, one (1) labor and material bond and one (1) performance bond for construction of the Improvements, each in an amount equal to one hundred percent (100%) of the scheduled cost of construction (without reliance on volunteer labor). Each bond shall name the Agency as co-obligee and shall be issued by a reputable insurance company licensed to do business in California, reasonably acceptable to the Agency. The form of the labor and material bond and the performance bond shall be subject to the Agency's prior review and written approval, which shall not be unreasonably withheld. Section 2.9 Insurance. The Developer shall furnish to the Agency evidence of the insurance coverage meeting the requirements of Section 6.8 below, no later than the date set forth in the Schedule of Performance. 1010\13\329336.4 12 ARTICLE 3. DISPOSITION OF PROPERTY Section 3.1 Purchase and Sale. Provided the pre-disposition requirements set forth in Article 2 and the additional closing conditions set forth in Section 3.4 and Section 5.7 have been satisfied, the Agency shall sell the Property to the Developer and the Developer shall purchase the Property from the Agency, pursuant to the terms, covenants, and conditions of this Agreement. Section 3.2 Purchase Price. (a) The Purchase Price of the Property shall be Six Hundred Ninety-Five Thousand Dollars ($695,000). (b) The Developer shall pay the Agency the Purchase Price at close of Escrow by delivering to the Agency the Agency Promissory Note. In accordance with Section 1.6(a) of the Predevelopment Loan Agreement, following the Developer's execution of the Agency Promissory Note, the Agency shall mark the promissory note evidencing the Predevelopment Component as "cancelled" and shall return such promissory note to the Developer. Section 3.3 Opening Escrow. The Parties shall establish the Escrow with the Title Company. The Parties shall execute and deliver all written instructions to the Title Company to accomplish the terms hereof, which instructions shall be consistent with this Agreement. Upon request by the Developer, the Title Company may be changed to a company requested by the Developer, provided (a) the Developer makes the request prior to the opening of escrow, (b) the proposed title company is approved by the Agency, and (c) the Developer shall pay all title insurance and escrow costs of the new title company. Section 3.4 Closing Date. The Closing shall occur no later than the date set forth in the Schedule of Performance, and only in the event that all conditions precedent to conveyance set forth in Article 2 have been satisfied or waived by the Agency. In addition to the conditions precedent to execution of the Agency Grant Deed as set forth in Article 2 (including but not limited to the closing of the financing set forth in the approved Financing Plan), the following conditions shall be satisfied prior to or concurrently with, and as conditions of, execution of the Agency Grant Deed: (a) The Developer shall provide the Agency with a certified copy of a corporate authorizing resolution, approving this Agreement and the Agency Grant Deed and the conditions and covenants set forth in this Agreement and the Agency Documents. 1010\13\329336.4 13 (b) The Developer shall have executed and delivered to the Agency the Agency Documents and any other documents and instruments required to be executed and delivered, all in a form and substance satisfactory to the Agency. (c) The Agency Grant Deed, a memorandum of this Agreement (the "Memorandum of DDA"), and the Agency Deed of Trust, shall have been recorded against the Property as liens subject only to the exceptions authorized by the Agency. (d) The Developer shall have provided the Agency evidence that the Developer is entitled to the issuance of a building permit for construction of the Development as set forth in Section 2.5. (e) A title insurer reasonably acceptable to the Agency is unconditionally and irrevocably committed to issuing an ALTA Lender's Policy of insurance insuring the lien priority of the Agency Deed of Trust in the amount of the Agency Loan subject only to such liens approved by the Agency in the Financing Plan as prior to the lien of the Agency Deed of Trust and such exceptions and exclusions as may be reasonably acceptable to the Agency and containing such endorsements as the Agency may reasonably require. (f) There shall exist no condition, event or act which would constitute a breach or default under this Agreement. (g) All representations and warranties of the Developer contained in any part of this Agreement shall be true and correct. Section 3.5 Condition of Title. Upon the Closing Date, the Developer shall have insurable fee interest to the Property which shall be free and clear of all liens, encumbrances, clouds and conditions, rights of occupancy or possession, except: (a) applicable building and zoning laws and regulations; (b) the pro visions of the Redevelopment Plan; (c) the provisions of this Agreement; (as evidenced by the Memorandum of DDA); (d) the Agency Deed of Trust; (e) any lien for current taxes and assessments or taxes and assessments accruing subsequent to recordation of the Memorandum of DDA; (f) the liens of any loan approved by the Agency in the Financing Plan; and 1010\13\329336.4 14 (g) conditions, covenants, restrictions or easements currently of record or as otherwise approved by the Developer in its reasonable discretion; and (h) exceptions, 1 -7, inclusive, as shown in the Title Report. Section 3.6 Condition of Property. In fulfillment of the purposes of Health and Safety Code Section 25359.7(a), the Agency hereby represents and warrants that it has no knowledge, and has no specific reasonable cause to believe, that any release of Hazardous Materials or release of any Hazardous Materials has come to be located on or beneath the Property. (a) "AS IS"CQNVEYANCE. THE DEVELOPER SPECIFICALLY ACKNOWLEDGES AND AGREES THAT THE AGENCY IS CONVEYING AND THE DEVELOPER IS OBTAINING THE PROPERTY ON AN "AS IS WITH ALL FAULTS" BASIS AND THAT THE DEVELOPER IS NOT RELYING ON ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND WHATSOEVER, EXPRESS OR IMPLIED, FROM THE AGENCY AS TO ANY MATTERS CONCERNING THE PROPERTY, INCLUDING WITHOUT LIMITATION: (A) THE QUALITY, NATURE, ADEQUACY AND PHYSICAL CONDITION OF THE PROPERTY (INCLUDING, WITHOUT LIMITATION, TOPOGRAPHY, CLIMATE, AIR, WATER RIGHTS, WATER, GAS, ELECTRICITY, UTILITY SERVICES, GRADING, DRAINAGE, SEWERS, ACCESS TO PUBLIC ROADS AND RELATED CONDITIONS); (B) THE QUALITY, NATURE, ADEQUACY, AND PHYSICAL CONDITION OF SOILS, GEOLOGY AND GROUNDWATER, (C) THE EXISTENCE, QUALITY, NATURE, ADEQUACY AND PHYSICAL CONDITION OF UTILITIES SERVING THE PROPERTY, (D) THE DEVELOPMENT POTENTIAL OF THE PROPERTY, AND THE PROPERTY'S USE, HABIT ABILITY, MERCHANTABILITY, OR FITNESS, SUITABILITY, VALUE OR ADEQUACY OF THE PROPERTY FOR ANY PARTICULAR PURPOSE, (E) THE ZONING OR OTHER LEGAL STATUS OF THE PROPERTY OR ANY OTHER PUBLIC OR PRIVATE RESTRICTIONS ON THE USE OF THE PROPERTY, (F) THE COMPLIANCE OF THE PROPERTY OR ITS OPERATION WITH ANY APPLICABLE CODES, LAWS, REGULATIONS, STATUTES, ORDINANCES, COVENANTS, CONDITIONS AND RESTRICTIONS OF ANY GOVERNMENTAL OR QUASI-GOVERNMENTAL ENTITY OR OF ANY OTHER PERSON OR ENTITY, (G) THE PRESENCE OR ABSENCE OF HAZARDOUS MATERIALS ON, UNDER OR ABOUT THE PROPERTY OR THE ADJOINING OR NEIGHBORING PROPERTY, AND (H) THE CONDITION OF TITLE TO THE PROPERTY. THE DEVELOPER AFFIRMS THAT THE DEVELOPER HAS NOT RELIED ON THE SKILL OR JUDGMENT OF THE AGENCY OR ANY OF ITS RESPECTIVE AGENTS, EMPLOYEES OR CONTRACTORS TO SELECT OR FURNISH THE PROPERTY FOR ANY PARTICULAR PURPOSE, AND THAT THE AGENCY MAKES NO WARRANTY THAT THE PROPERTY IS FIT FOR ANY PARTICULAR PURPOSE. THE DEVELOPER ACKNOWLEDGES THAT IT SHALL USE ITS INDEPENDENT JUDGMENT AND MAKE ITS OWN DETERMINATION AS TO THE SCOPE AND BREADTH OF ITS DUE DILIGENCE INVESTIGATION WHICH IT SHALL MAKE RELATIVE TO THE PROPERTY AND SHALL RELY UPON ITS OWN INVESTIGATION OF THE PHYSICAL, ENVIRONMENTAL, 1010\13\329336.4 15 ECONOMIC AND LEGAL CONDITION OF THE PROPERTY (INCLUDING, WITHOUT LIMITATION, WHETHER THE PROPERTY IS LOCATED IN ANY AREA WHICH IS DESIGNATED AS A SPECIAL FLOOD HAZARD AREA, DAM FAILURE INUNDATION AREA, EARTHQUAKE FAULT ZONE, SEISMIC HAZARD ZONE, HIGH FIRE SEVERITY AREA OR WILDLAND FIRE AREA, BY ANY FEDERAL, STATE OR LOCAL AGENCY). THE DEVELOPER UNDERTAKES AND ASSUMES ALL RISKS ASSOCIATED WITH ALL MATTERS PERTAINING TO THE PROPERTY'S LOCATION IN ANY AREA DESIGNATED AS A SPECIAL FLOOD HAZARD AREA, DAM FAILURE INUNDATION AREA, EARTHQUAKE FAULT ZONE, SEISMIC HAZARD ZONE, HIGH FIRE SEVERITY AREA OR WILDLAND FIRE AREA, BY ANY FEDERAL, STATE OR LOCAL AGENCY. (b) Survival. The terms and conditions of this Section 3.6 shall expressly survive the Closing, shall not merge with the provisions of the Agency Grant Deed, or any other closing documents and shall be deemed to be incorporated by reference into the Agency Grant Deed. The Agency is not liable or bound in any manner by any oral or written statements, representations or information pertaining to the Property furnished by any contractor, agent, employee, servant or other person. The Developer acknowledges that the purchase price reflects the "as is" nature of this conveyance and any faults, liabilities, defects or other adverse matters that may be associated with the Property. The Developer has fully reviewed the disclaimers and waivers set forth in this Agreement with the Developer's counsel and understands the significance and effect thereof. (c) Acknowledgment. The Developer acknowledges and agrees that (i) to the extent required to be operative, the disclaimers of warranties contained in Section 3.6 hereof are "conspicuous" disclaimers for purposes of all applicable laws and other legal requirements, and (ii) the disclaimers and other agreements set forth in such sections are an integral part of this Agreement, that the purchase price has been adjusted to reflect the same and that the Agency would not have agreed to convey the Property to the Developer pursuant to this Agreement without the disclaimers and other agreements set forth in this Section. (d) Developer's Release of the Agency. The Developer, on behalf of itself and anyone claiming by, through or under the Developer hereby waives its right to recover from and fully and irrevocably releases the City, the Agency and their respective council members, board members, employees, officers, directors, representatives, and agents (the "Released Parties") from any and all claims, responsibility and/or liability that the Developer may have or hereafter acquire against any of the Released Parties for any costs, loss, liability, damage, expenses, demand, action or cause of action arising from or related to (i) the condition (including any construction defects, errors, omissions or other conditions, latent or otherwise), valuation, salability or utility of the Property, or its suitability for any purpose whatsoever, (ii) any presence of Hazardous Materials, and (iii) any information furnished by the Released Parties under or in connection with this Agreement. (e) Scope of Release. The release set forth in Section 3.6(d) hereof includes claims of which the Developer is presently unaware or which the Developer does not presently suspect to exist which, if known by the Developer, would materially affect the Developer's 1010\13\329336.4 Jg M release of the Released Parties. The Developer specifically waives the provision of any statute or principle of law that provides otherwise. In this connection and to the extent permitted by law, the Developer agrees, represents and warrants that the Developer realizes and acknowledges that factual matters now unknown to the Developer may have given or may hereafter give rise to causes of action, claims, demands, debts, controversies, damages, costs, losses and expenses which are presently unknown, unanticipated and unsuspected, and the Developer further agrees, represents and warrants that the waivers and releases herein have been negotiated and agreed upon in light of that realization and that the Developer nevertheless hereby intends to release, discharge and acquit the Agency from any such unknown causes of action, claims, demands, debts, controversies, damages, costs, losses and expenses. Accordingly, the Developer, on behalf of itself and anyone claiming by, through or under the Developer, hereby assumes the above-mentioned risks and hereby expressly waives any right the Developer and anyone claiming by, through or under the Developer, may have under Section 1542 of the California Civil Code, which reads as follows: "A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor." Developer's Initials: Notwithstanding the foregoing, this release shall not apply to, nor shall the Agency be released from, the Agency's actual fraud or misrepresentation. Section 3.7 Costs of Escrow and Closing. Ad valorem taxes, if any, shall be prorated as of the date of the recordation of the Agency Grant Deed. The Developer shall pay the cost of title insurance, transfer tax, Title Company document preparation, recordation fees and the escrow fees of the Title Company, if any, and any additional costs to close Escrow. The costs borne by the Developer are in addition to the purchase price and the repayment of the Agency Loan. ARTICLE 4. CONSTRUCTION OF IMPROVEMENTS Section 4.1 Construction Pursuant to Plans. Unless modified by operation of Section 4.2, the Improvements shall be constructed substantially in accordance with the Construction Plans and the terms and conditions of the land use permits and approvals and building permits, including any variances granted. Section 4.2 Change in Construction of Improvements. 1010\13\329336.4 17 If the Developer desires to make any material change in the Improvements which are not substantially consistent with the Construction Plans, the Developer shall submit the proposed change to the Agency for its approval. No change which is required for compliance with building codes or other government health and safety regulations shall be deemed material. If the Improvements, as modified by any such proposed change, will conform to the requirements of this Agreement, and the Construction Plans, the Agency shall approve the change by notifying the Developer in writing. Unless a proposed change is rejected by the Agency within ten (10) working days, it shall be deemed approved. If rejected within such time period, the previously approved Construction Plans shall continue to remain in full force and effect. If the Agency rejects a proposed change, it shall provide the Developer with the specific reasons therefore. The approval of changes in the Construction Plans by the Agency pursuant to this Section shall be in addition to any approvals required to be obtained from the City pursuant to building permit requirements. Approval of changes in the Construction Plans by the Agency shall not constitute approval by the City and shall in no way limit the City's discretion in approving changes to the Construction Plans. Section 4.3 Commencement of Improvements. The Developer shall commence construction of the Improvements no later than the date set forth in the Schedule of Performance. Section 4.4 Completion of the Improvements. The Developer shall diligently prosecute to completion the construction of the Improvements no later than the date set forth in the Schedule of Performance. Section 4.5 Equal Opportunity. During the construction of the Improvements there shall be no discrimination on the basis of race, color, creed, religion, sex, sexual orientation, marital status, national origin or ancestry in the hiring, firing, promoting or demoting of any person engaged in the construction work. Section 4.6 Compliance with Applicable Law; Prevailing Wage Requirement. (a) The Developer shall cause all construction to be performed in compliance with (a) all applicable laws, ordinances, rules and regulations of federal, state, county or municipal governments or agencies now in force or that may be enacted hereafter, and (b) all directions, rules and regulations of any fire marshal, health officer, building inspector, or other officer of every governmental agency now having or hereafter acquiring jurisdiction. The work shall proceed only after the payment of all applicable fees, procurement of each permit, license, or other authorization that may be required by any governmental agency having jurisdiction, and the Developer shall be responsible to the Agency for the procurement and maintenance thereof, as may be required of the Developer and all entities engaged in work on the Property. 1010\13\329336.4 (b) This Agreement has been prepared with the intention that the Agency provided assistance under this Agreement meets the exceptions set forth in Labor Code Section 1720(c)(6)(A) to the general requirement that state prevailing wages be paid in connection with construction work that is paid for in whole or in part out of public funds; provided, however, that nothing in this Agreement constitutes a representation or warranty by any party regarding the applicability of the provisions of Labor Code Section 1720 et seq. The Developer shall cause the Eligible Purchasers to perform no fewer than five hundred (500) hours of construction work associated with the Improvements and shall comply with any laws related to construction wages required to the extent applicable to the Development. To the extent required by applicable law, the Developer shall and shall cause the contractor and subcontractors to pay prevailing wages in the construction of the Improvements as those wages are determined pursuant to Labor Code Sections 1720 et seq., and the implementing regulations of the Department of Industrial Relations (the "DIR") and comply with the other applicable provisions of Labor Code Sections 1720 et seq., including but not limited to the hiring of apprentices as required by Labor Code Sections 1775 et seq., and the implementing regulations of the DIR. The Developer shall and shall cause the contractor and subcontractors to keep and retain such records as are necessary to determine if such prevailing wages have been paid as required pursuant to Labor Code Sections 1720 et seq, and that apprentices have been employed as required by Labor Code Section 1777.5 et seq. Copies of the currently applicable per diem prevailing wages are available from the DIR. During the construction of the Improvements the Developer shall or shall cause the contractor to post at the Property the applicable prevailing rates of per diem wages. The Developer shall indemnify, hold harmless and defend (with counsel reasonably selected by the Agency) the Agency and the City against any claim for damages, compensation, fines, penalties or other amounts arising out of the failure or alleged failure of any person or entity (including Developer, its contractor and subcontractors) to pay prevailing wages as determined pursuant to Labor Code Sections 1720 et seq., to hire apprentices in accordance with Labor Code Sections 1777.5 et seq., and the implementing regulations of the DIR or comply with the other applicable provisions of Labor Code Sections 1720 et seq., and the implementing regulations of the DIR in connection with construction of the Improvements or any other work undertaken or in connection with the Property. Section 4.7 Progress Report. Until such time as the Developer has completed construction of the Improvements, as evidenced by the Certificate of Completion from the Agency pursuant to Section 4.10, the Developer shall provide the Agency with quarterly progress reports regarding the status of the construction of the Development, including a certification that the actual construction costs to date conform to the Financing Plan. Section 4.8 Construction Responsibilities. (a) It shall be the responsibility of the Developer to coordinate and schedule the work to be performed so that commencement and completion of construction will take place in accordance with this Agreement. 1010\13\329336.4 19 (b) The Developer shall be solely responsible for all aspects of the Developer's conduct in connection with the Development, including (but not limited to) the quality and suitability of the plans and specifications, the supervision of construction work, and the qualifications, financial condition, and performance of all architects, engineers, contractors, subcontractors, suppliers, consultants, and volunteers. Any review or inspection undertaken by the Agency with reference to the Development is solely for the purpose of determining whether the Developer is properly discharging its obligations to the Agency, and should not be relied upon by the Developer or by any third parties as a warranty or representation by the Agency as to the quality of the design or construction of the Development. Section 4.9 Mechanics Liens, Stop Notices, and Notices of Completion. (a) If any claim of lien is filed against the Property or the Improvements or a stop notice affecting the Agency Loan is served on the Agency or any other lender or other third party in connection with the Development, then the Developer shall, within thirty (30) days after such filing or service, either pay and fully discharge the lien or stop notice, effect the release of such lien or stop notice by delivering to the Agency a surety bond from a surety acceptable to the Agency in sufficient form and amount, or provide the Agency with other assurance satisfactory to the Agency that the claim of lien or stop notice will be paid or discharged. (b) If the Developer fails to discharge any lien, encumbrance, charge, or claim in the manner required in this Section or obtain a surety bond, then in addition to any other right or remedy, the Agency may (but shall be under no obligation to) discharge such lien, encumbrance, charge, or claim at the Developer's expense. Alternatively, the Agency may require the Developer to immediately deposit with the Agency the amount necessary to satisfy such lien or claim and any costs, pending resolution thereof. The Agency may use such deposit to satisfy any claim or lien that is adversely determined against the Developer. (c) The Developer shall file a valid notice of cessation or notice of completion upon cessation of construction of the Development for a continuous period of thirty (30) days or more, and take all other reasonable steps to forestall the assertion of claims of lien against the Property and/or Improvements. The Developer authorizes the Agency, but without any obligation, to record any notices of completion or cessation of labor, or any other notice that the Agency deems necessary or desirable to protect its interest in the Development and Property. Section 4.10 Inspections. (a) Periodic Inspections. In addition to any normal inspections that may be performed by the City, the Agency shall have the right to make periodic inspections to determine if construction of the Improvements is being performed in accordance with the provisions of this Agreement. The Agency shall have the right to enter upon the Property for purposes of such inspections. The results of Agency inspections shall be incorporated in written reports which shall include any observed defects or deficiencies in the construction of the Improvements. The Agency shall send copies of such reports to the Developer within five (5) business days of each inspection. 1010\13\329336.4 20 (b) Final Inspection. The Developer shall notify the Agency in writing of the date when, in the Developer's opinion, the construction of the Improvements will reach completion. Unless the Agency has determined and so notifies the Developer that construction of the Improvements has not reached completion, the Agency shall promptly arrange for a joint final inspection by the Agency and the Developer. Such final inspection by the Agency and the Developer shall not constitute evidence of compliance with or satisfaction of any obligation of the Developer to any Holder of an Approved Security Interest, and shall not be deemed a final inspection required by any governmental agency or by the City. (c) Certificate of Completion. If the final inspection discloses that the construction of the Improvements has been completed in accordance with the requirements of this Agreement, the Agency shall provide the Developer with a certificate of completion in a form prepared by the Agency (the "Certificate of Completion"). Such Certificate of Completion shall be conclusive determination that the covenants in this Agreement with respect to the obligations of Developer to construct the Improvements have been met (other than the Developer's compliance with the requirements of Section 4.6). Such Certificate of Completion and determination shall not constitute evidence of compliance with or satisfaction of any obligation of Developer to any Holder of an Approved Security Interest, and shall not be deemed a notice of completion under the California Civil Code, or a certificate of occupancy from the City. The Agency agrees to issue partial Certificates of Completion with respect to the portion of the Property comprising individual Homes as is necessary to accommodate the transfer of individual Homes to the Eligible Purchasers over time. Upon issuance of the Certificate of Completion, this Agreement shall terminate, except for those provisions that expressly survive termination. Section 4.11 Information. The Developer shall provide any information reasonably requested by the Agency in connection with the Development. Section 4.12 Records. (a) The Developer shall maintain complete, accurate, and current records pertaining to the Development for a period of five (5) years after the creation of such records, and shall permit any duly authorized representative of the Agency to inspect and copy records upon reasonable notice to the Developer. Such records shall include all invoices, receipts, and other documents related to expenditures from the Agency Loan funds. Records must be kept accurate and current. (b) The Agency shall notify the Developer of any records it deems insufficient. The Developer shall have thirty (30) calendar days after the receipt of such a notice to correct any deficiency in the records specified by the Agency in such notice, or if a period longer than thirty (30) days is reasonably necessary to correct the deficiency, then the Developer shall begin to correct the deficiency within thirty (30) days and complete the correction of the deficiency as soon as reasonably possible. 1010\13\329336.4 21 Section 4.13 Financing; Revisions to Plan. As of the Effective Date, the Agency has approved the Financing Proposal set forth in Exhibit B. In accordance with Section 2.4, the Developer shall obtain the Agency's approval of the Financing Plan. The Developer shall submit any required amendments to the Financing Plan, including but not limited to and amendments or modifications to the development budget, or the commitment letter from any lender, to the Agency for approval within fifteen (15) days of the date the Developer receives information indicating that actual costs of the Development vary or will vary from the line item costs shown on the Financing Plan. Written consent of the Agency shall be required to amend the Financing Plan. ARTICLE 5. AGENCY LOAN PROVISIONS Section 5.1 Agency Loan. The Agency shall provide the Agency Loan to the Developer in the principal amount of One Million Five Hundred Sixty-One Thousand Nine Hundred Twenty Dollars ($1,561,920). The Developer's obligation to pay the Agency Loan shall be evidenced by the Agency Note. For the purposes of this Article 5 the principal amount of the Agency Loan shall be treated in three (3) separate components: (a) Predevelopment Component. The Predevelopment Component consists of Six Hundred Eight Thousand Two Hundred Forty-Three Dollars ($608,243). (b) Acquisition Component. The Acquisition Component consists of Six Hundred Ninety-Five Thousand Dollars ($695,000). (c) Construction Component. The Construction Component consists of Two Hundred Fifty-Eight Thousand Six Hundred Seventy-Seven Dollars ($258,677). Section 5.2 Interest. Simple interest at three percent (3%) per annum shall accrue on the principal amount of the Agency Loan except for a Developer Event of Default by the Developer, whereupon interest shall accrue from and after the date of the Note until paid at the then current rate imposed under California Civil Code Section 3289(b), or any similar or successor provision thereof. Section 5.3 Use of Agency Loan. Provided applicable predisposition requirements are met, the Agency Loan proceeds shall be disbursed for eligible project expenses, prior to the disbursement of other sources of funds. Each component of the Agency Loan shall be used exclusively for the purposes set forth in the Financing Plan and as set forth below: 1010\13\329336.4 22 (a) Predevelopment Component. The Predevelopment Component was utilized by the Developer for eligible predevelopment costs consistent with the Original Loan Agreement. The Predevelopment Component consisted of the CDBG Funds and HOME Funds. (b) Acquisition Component. The Acquisition Component shall be used by the Developer exclusively to pay the Purchase Price. The Acquisition Component consists of Housing Fund funds. (c) Construction Component. The Construction Component shall be used by the Developer exclusively to pay eligible development costs and expenses, in accordance with the Financing Plan. The Construction Component consists of HOME Funds and Housing Fund funds. Section 5.4 Security. The Developer shall secure its obligation to pay the Agency Loan, as evidenced by the Agency Note, by executing the Agency Deed of Trust, which shall be recorded as a lien against the Developer's interest in the Property, and executing the Agency Financing Statement. The Agency agrees to subordinate the Agency Deed of Trust to the lien(s) of the deed(s) of trust securing the Conventional Loans approved by the Agency in writing pursuant to the Financing Plan, provided the subordination documents are in a form reasonably acceptable to the Agency and provide the Agency with reasonably adequate notice and cure rights to enable the Agency to avoid foreclosure of a Conventional Loan, including, but not limited to providing the Agency no less than ninety (90) days to cure a default by Developer under the Conventional Loan. Section 5.5 Repayment Schedule of Agency Loan. (a) Upon each sale of a Home to an Eligible Purchaser, and the execution of the Homebuyer Promissory Note to the Agency and execution and recordation of the Homebuyer Deed of Trust and Homebuyer Resale Restriction and Option to Purchase Agreement against a Home (all as further set forth in Section 7.3 below), the Agency shall credit repayment of the Agency Loan in the amount set forth in each Homebuyer Promissory Note, and shall execute, and arrange for the recordation of a partial reconveyance of the Agency Deed of Trust and quitclaim of the Memorandum of DDA with respect to each such lot conveyed to an Eligible Purchaser. This Agreement and the Agency Deed of Trust shall remain in full force and effect against all other portions of the Property not previously released from such encumbrance and lien by the Agency. (b) All outstanding principal and interest, if any, on the Agency Loan shall be due in full on the earlier to occur of (i) the date of any Transfer of the Property or the Improvements other than a Transfer permitted or approved by the Agency as provided in Article 8; (ii) the occurrence and continuance of default beyond any applicable cure period for which the Agency exercises its right to cause the Agency Loan indebtedness to become immediately due and payable; or (iii) five (5) years following the Effective Date. Upon conveyance by the Developer of the last Home constructed on the Property pursuant to this Agreement, and 1010\13\329336.4 23 execution and recordation of the Homebuyer Deed of Trust and Homebuyer Resale Restriction and Option to Purchase Agreement against the Home, all principal and interest, if any, on the Agency Loan shall be forgiven. Section 5.6 Prepayment. The Developer shall have right to prepay the Agency Loan at any time without premium or penalty. Regardless of any prepayment, the Developer acknowledges that the provisions of this Agreement, including but not limited to the requirements of Article 7 that the Homes be sold at affordable prices to the Eligible Purchasers, will be applicable even though the Developer may have prepaid all or a portion of the Agency Loan amount. Section 5.7 Conditions Precedent to Disbursement of Agency Loan. The Agency shall not be obligated to make any disbursements of the Agency Loan proceeds unless the following conditions precedent are satisfied prior to each such disbursement of the Agency Loan: (a) The Agency has conveyed the Property to Developer, the Developer has executed and delivered to the Agency the Agency Note, the Agency Deed of Trust, the Agency Financing Statement, the Memorandum of DDA, and Agency Grant Deed and the Agency Deed of Trust, the Memorandum of DDA and Agency Grant Deed have been recorded against the Property; (b) There exists no Developer Event of Default nor any act, failure, omission or condition that would constitute a Developer Event of Default under this Agreement; (c) The Agency has received and approved the construction contract that the Developer has entered or proposed to enter for construction of the Development as required pursuant to Section 2.7 above, if any; (d) The Agency has reasonably approved: (i) the copy of the labor and material (payment) bond and (ii) the copy of the performance bond from the Developer, or the Developer's general contractor, previously approved by the Agency for the construction of the Improvements as required pursuant to Section 2.8 above; (e) The Developer has closed all construction financing for the Development and has provided evidence reasonably acceptable to the Agency that the Developer is prepared to commence construction of the Improvements no later than the date set forth in the Schedule of Performance; (f) All representations and warranties of the Developer or the Agency contained in any Agency Document shall be true and correct as of any disbursement of the Agency Loan; (g) The undisbursed proceeds of the Agency Loan, together with other funds or firm commitments for funds that the Developer has obtained in connection with the Development, are not less than the amount that the Agency determines is reasonably necessary to 1010\13\329336.4 24 pay for development of the Development and to satisfy all of the covenants contained in this Agreement. In making this determination the Agency shall take into consideration the status of the donations that the Developer has indicated it intends to receive; and (h) The Agency has received a written draw request from Developer, including certification that the condition set forth in Section 5.6(b) continues to be satisfied, and setting forth the proposed uses of funds consistent with the Financing Plan, the amount of funds needed, and, where applicable, a copy of the bill or invoice covering a cost incurred or to be incurred. When a disbursement is requested to pay any contractor in connection with the Improvements, the written request must be accompanied by (i) certification by Developer's architect reasonably acceptable to the Agency that the work for which disbursement is requested has been completed (although the Agency reserves the right to inspect the Development and make an independent evaluation); and (ii) lien releases and/or mechanics lien title insurance endorsements reasonably acceptable to the Agency. Section 5.8 Developer Fee. The amount and the terms of the Agency Loan, as provided in this Article 5, have been established by taking into account the anticipated costs of development, including a maximum Developer Fee to be paid for development and construction management services. In this regard, the Developer shall be entitled to a Developer Fee in an amount not to exceed Two Hundred Thousand Dollars ($200,000). Except for the Developer Fee, and reasonable payments to the Developer for services as general contractor for the Development, in an amount reasonably acceptable to, and approved by, the Agency, no compensation from any source shall be received by or be payable to the Developer, or any affiliate of the Developer in connection with the provision of development and construction management services for the acquisition and construction of the Development. Section 5.9 Assumption. The Agency Note shall not be assumable by successors and assigns of the Developer without the prior written consent of the Agency, which consent shall be granted or denied in the Agency's sole discretion. S ection 5.10 Non-Recourse. Following recordation of the Agency Deed of Trust, and except as provided below, the Developer shall not have any direct or indirect personal liability for payment of the principal of, or interest on, the Agency Loan or the performance of the covenants of the Developer under the Agency Deed of Trust. The sole recourse of the Agency with respect to the principal of, or interest on, the Agency Note and defaults by the Developer in the performance of its covenants under the Agency Deed of Trust shall be to the property described in the Agency Deed of Trust; provided, however, that nothing contained in the foregoing limitation of liability shall (a) limit or impair the enforcement against all such security for the Agency Note of all the rights and remedies of the Agency thereunder, or (b) be deemed in any way to impair the right of the Agency to assert the unpaid principal amount of the Agency Note as demand for money within 1010\13\329336.4 25 57 the meaning and intendment of Section 431.70 of the California Code of Civil Procedure or any successor provision thereto. The foregoing limitation of liability is intended to apply only to the obligation for the repayment of the principal of, and payment of interest on the Agency Note and the performance of the Developer's obligations under the Agency Deed of Trust, except as hereafter set forth; nothing contained herein is intended to relieve the Developer of its waiver of Agency liability in Section 3.6 and the Developer's obligation to indemnify the Agency under this Agreement, or liability for (i) fraud or willful misrepresentation; (ii) the failure to pay taxes, assessments or other charges which may create liens on the Developer's interest of the Property that are payable or applicable prior to any foreclosure under the Agency Deed of Trust (to the full extent of such taxes, assessments or other charges); (iii) the fair market value of any personal property or fixtures removed or disposed of by the Developer other than in accordance with the Agency Deed of Trust; and (iv) the misappropriation of any proceeds under any insurance policies or awards resulting from condemnation or the exercise of the power of eminent domain or by reason of damage, loss or destruction to any portion of the Development. ARTICLE 6. ONGOING DEVELOPER OBLIGATIONS Section 6.1 Applicability. The conditions and obligations set forth in this Article 6 shall apply throughout the Term, unless a different period of applicability is specified for a particular condition or obligation. Section 6.2 Use. The Developer hereby agrees that, for the entire Term, the Property will be used only for the development of the Improvements to be sold to Eligible Purchasers. Section 6.3 Maintenance. The Developer agrees, for the entire Term of this Agreement, to maintain all interior and exterior improvements, including landscaping, of the Development in first-class condition, repair and sanitary condition (and, as to landscaping, in a healthy condition), and all applicable laws, rules, ordinances, orders, and regulations of all federal, state, Agency, municipal, and other governmental agencies and bodies having or claiming jurisdiction and all their respective departments, bureaus, and officials. The Developer acknowledges the great emphasis the Agency places on quality maintenance to protect its investment and to provide quality low-income housing for area residents and to ensure that Agency-assisted affordable housing projects are not allowed to deteriorate due to deficient maintenance. In addition, the Developer shall keep the Development free from all graffiti and any accumulation of debris or waste material. The Developer shall promptly make all repairs and replacements necessary to keep the Development in first-class condition and repair and shall promptly eliminate all graffiti and replace dead and diseased plants and landscaping with comparable approved materials. 1010\13\329336.4 26 In the event that the Developer breaches any of the covenants contained in this Section 6.3 and such default continues for a period often (10) days after written notice from the Agency (with respect to graffiti, debris, waste material, and general maintenance) or thirty (30) days after written notice from the Agency, with respect to landscaping and building improvements (and subject to any stricter requirements included in any applicable City ordinance enacted prior to or after the Effective Date), then the Agency, in addition to whatever other remedy it may have under this Agreement, at law or in equity, shall have the right to enter upon the Development and perform or cause to be performed all such acts and work necessary to cure the default. Pursuant to such right of entry, the Agency shall be permitted (but is not required) to enter upon the Development and perform all acts and work necessary to protect, maintain and preserve the improvements and landscaped areas of the Property, and to attach a lien on the Developer's interest in the Property, or to assess the Developer's interest in the Property, in the amount of the expenditures arising from such acts and work of protection, maintenance, and preservation by the Agency and/or costs of such cure. The Developer shall promptly pay to the Agency, as applicable, the amount of the expenditure arising from such acts and work of protection, maintenance, and preservation by the Agency and/or costs of such cure, including a fifteen percent (15%) administrative charge. Section 6.4 Taxes and Assessments. To the extent applicable, the Developer shall apply for and shall thereafter use good faith efforts to obtain an exemption from local property taxes pursuant to Section 214 of the California Revenue and Taxation Code. The Developer shall pay all unabated real property taxes on the Development, personal property taxes, assessments and charges and all franchise, income, employment, old age benefit, withholding, sales, and other taxes assessed against it, or payable by it, at such times and in such manner as to prevent any penalty from accruing, or any lien or charge from attaching to the Property or the Developer's leasehold interest in the Property; provided, however, that the Developer shall have the right to contest in good faith any such taxes, assessments, or charges. In the event the Developer exercises its right to contest any tax, assessment, or charge against it, the Developer, on final determination of the proceeding or contest, shall immediately pay or discharge any decision or judgment rendered against it, together with all costs, charges and interest. Section 6.5 Mandatory Language in All Subsequent Deeds, Leases and Contracts. (a) Basic Requirement. The Developer covenants by and for itself, its successors and assigns that there shall be no discrimination against or segregation of a person or of a group of persons on account of race, color, creed, religion, sex, sexual orientation, marital status, national origin, ancestry or disability in the sale, lease, sublease transfer, use, occupancy, tenure or enjoyment of the Development nor shall the Developer or any person claiming under or through the Developer 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 Development. The foregoing covenant shall run with the land. 1010\13\329336.4 27 53 (b) Provisions In Conveyance Documents. All deeds, leases or contracts made or entered into by the Borrower, its successors or assigns, as to any portion of the Development shall contain therein the following language: (i) In Deeds: "(1) 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 any basis listed in subdivision (a) and (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, in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the property herein conveyed, nor shall the grantee or any person claiming under or through the grantee, establish or permit any 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 property herein conveyed. The foregoing covenant shall run with the land. (2) Notwithstanding paragraph (1), with respect to familial status, paragraph (1) shall not be construed to apply to housing for older persons, as defined in Section 12955.9 of the Government Code. With respect to familial status, nothing in paragraph (1) shall be construed to affect Sections 51.2, 51.3, 51.4, 51.10, 51.11, and 799.5 of the Civil Code, relating to housing for senior citizens. Subdivision (d) of Section 51 and Section 1360 of the Civil Code and subdivisions (n), (o), and (p) of Section 12955 of the Government Code shall apply to paragraph (1)." (ii) In Leases: "(1) Lessee 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 any basis listed in subdivision (a) and (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 in the leasing, subleasing, transferring, use, occupancy, tenure or enjoyment of the premises herein leased nor shall the lessee or any person claiming under or through the lessee, 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 premises herein leased. (2) Notwithstanding paragraph (1), with respect to familial status, paragraph (1) shall not be construed to apply to housing for older persons, as defined in Section 12955.9 of the Government Code. With respect to familial status, nothing in paragraph (1) shall be construed to affect Sections 51.2, 51.3, 51.4, 51.10, 51.11, and 799.5 of the Civil Code, relating to housing for senior citizens. Subdivision (d) of Section 51 and Section 1360 of the Civil Code and subdivisions (n), (o), and (p) of Section 12955 of the Government Code shall apply to paragraph (1)." 1010\13\329336.4 28 (iii) In Contracts: "(1) There shall be no discrimination against or segregation of, any person or group of persons on account of any basis listed in subdivision (a) and (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 in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the property nor shall the transferee or any person claiming under or through the transferee 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. (2) Notwithstanding paragraph (1), with respect to familial status, paragraph (1) shall not be construed to apply to housing for older persons, as defined in Section 12955.9 of the Government Code. With respect to familial status, nothing in paragraph (1) shall be construed to affect Sections 51.2, 51.3, 51.4, 51.10, 51.11, and 799.5 of the Civil Code, relating to housing for senior citizens. Subdivision (d) of Section 51 and Section 1360 of the Civil Code and subdivisions (n), (o), and (p) of Section 12955 of the Government Code shall apply to paragraph (1)." Section 6.6 Hazardous Materials. (a) Covenants. (i) No Hazardous Materials Activities. The Developer hereby represents and warrants to the Agency that, at all times from and after the Closing, the Developer shall not cause or permit the Property, or the Improvements thereon to be used as a site for the use, generation, manufacture, storage, treatment, release, discharge, disposal, transportation or presence of any Hazardous Materials. (ii) Hazardous Materials Laws. The Developer hereby represents and warrants to the Agency that, at all times from and after the Closing, the Developer shall comply and cause the Property, and the Improvements thereon to comply with Hazardous Materials Laws, including without limitation, those relating to soil and groundwater conditions. (iii) Notices. The Developer hereby represents and warrants to the Agency that, at all times from and after the Closing, the Developer shall immediately notify the Agency in writing of: (i) the discovery of any Hazardous Materials on or under the Property; (ii) any knowledge by the Developer that the Property does not comply with any Hazardous Materials Laws; (iii) any claims or actions pending or threatened against the Developer, the Property, or the Improvements by any governmental entity or agency or any other person or entity relating to Hazardous Materials or pursuant to any Hazardous Materials Laws (collectively "Hazardous Materials Claims"); and (iv) the discovery of any occurrence or condition on any real property adjoining or in the vicinity of the Property, that could cause the Property, or any part thereof to be designated as "border zone property" under the provisions of California Health 1010\13\329336.4 29 and Safety Code Sections 25220, et seq., or any regulation adopted in accordance therewith, or to be otherwise subject to any restrictions on the ownership, occupancy, transferability or use of the Development under any Hazardous Materials Laws. The Agency shall have the right to join and participate in, as a party if it so elects, any legal proceedings or actions initiated in connection with any Hazardous Materials Claims and to have its reasonable attorney's fees in connection therewith paid by the Developer. (b) Remedial Action. Without the Agency's prior written consent, which shall not be unreasonably withheld, Developer shall not take any remedial action in response to the presence of any Hazardous Materials on, under or about the Property, nor enter into any settlement agreement, consent decree, or other compromise in respect to any Hazardous Material Claims, which remedial action, settlement, consent decree or compromise might, in the Agency's reasonable judgment, impair the value of the Agency's security hereunder; provided, however, that the Agency's prior consent shall not be necessary in the event that the presence of Hazardous Materials on, under, or about the Property either poses an immediate threat to the health, safety or welfare of any individual or is of such a nature that an immediate remedial response is necessary and it is not reasonably possible to obtain the Agency's consent before taking such action, provided that in such event Developer shall notify the Agency as soon as practicable of any action so taken. The Agency agrees not to withhold its consent, where such consent is required hereunder, if either (i) a particular remedial action is ordered by a court of competent jurisdiction, (ii) Developer will or may be subjected to civil or criminal sanctions or penalties if it fails to take a required action; (iii) Developer establishes to the reasonable satisfaction of the Agency that there is no reasonable alternative to such remedial action which would result in less impairment of the Agency's security hereunder; or (iv) the action has been agreed to by the Agency. (c) Developer Acknowledgement. The Developer hereby acknowledges and agrees that (i) this Section is intended as the Agency's written request for information (and Developer's response) concerning the environmental condition of the Property as required by California Code of Civil Procedure Section 726.5, and (ii) each representation and warranty in this Agreement (together with any indemnity obligation applicable to a breach of any such representation and warranty) with respect to the environmental condition of the Property is intended by the Parties to be an "environmental provision" for purposes of California Code of Civil Procedure Section 736. (d) Indemnity. Without limiting the generality of the indemnification set forth in Section 11.7 below, the Developer hereby agrees to indemnify, protect, hold harmless and defend (by counsel reasonably satisfactory to the Agency) the Agency, the City, their respective board and council members, officers, and employees from and against any and all claims, losses, damages, liabilities, fines, penalties, charges, administrative and judicial proceedings and orders, judgments, remedial action requirements, enforcement actions of any kind, and all costs and expenses incurred in connection therewith (including, but not limited to, reasonable attorney's fees and expenses), arising directly or indirectly, in whole or in part, out of: (1) the failure of the Developer or any other person or entity to comply with any Hazardous Materials Law relating in any way whatsoever to the handling, treatment, presence, removal, storage, decontamination, cleanup, transportation or disposal of Hazardous Materials into, on, under or from the 1010\13\329336.4 30 Development on or after the date of conveyance of the Property to the Developer; (2) the presence in, on or under the Development of any Hazardous Materials or any releases or discharges of any Hazardous Materials into, on, under or from the Development to the extent it arises on or after the date of conveyance of the Property to the Developer; or (3) any activity carried on or undertaken on or off the Development, subsequent to the conveyance of the Property to the Developer, and whether by the Developer or any successor in title or any employees, agents, contractors or subcontractors of the Developer or any successor in title, or any third persons at any time occupying or present on the Development, in connection with the handling, treatment, removal, storage, decontamination, cleanup, transport or disposal of any Hazardous Materials at any time located or present on or under the Development. The foregoing indemnity shall further apply to any residual contamination on or under the Development, or affecting any natural resources, and to any contamination of any property or natural resources arising in connection with the generation, use, handling, treatment, storage, transport or disposal of any such Hazardous Materials, and irrespective of whether any of such activities were or will be undertaken in accordance with Hazardous Materials Laws. The provisions of this subsection shall survive expiration of the Term or other termination of this Agreement, and shall remain in full force and effect. (e) No Limitation. The Developer hereby acknowledges and agrees that the Developer's duties, obligations and liabilities under this Agreement, including, without limitation, under subsection (d) above, are in no way limited or otherwise affected by any information the Agency may have concerning the Development and/or the presence within the Development of any Hazardous Materials, whether the Agency obtained such information from the Developer or from its own investigations. Section 6.7 Insurance Requirements. (a) Required Coverage. The Developer shall maintain and keep in force, at the Developer's sole cost and expense, the following insurance applicable to the Development: (i) To the extent required by law, Worker's Compensation insurance, including Employer's Liability coverage, with limits not less than required by applicable law. (ii) Comprehensive or Commercial General Liability insurance with limits not less than One Million Dollars ($1,000,000) each occurrence combined single limit for Bodily Injury and Property Damage, including coverages for Contractual Liability, Personal Injury, Broadform Property Damage, Products and Completed Operations. (iii) Comprehensive Automobile Liability insurance with limits not less than One Million Dollars ($1,000,000) each occurrence combined single limit for Bodily Injury and Property Damage, including coverages for owned, non-owned and hired vehicles, as applicable; provided, however, that if the Developer does not own or lease vehicles for purposes of this Agreement, then no automobile insurance shall be required and both parties to this Agreement shall initial this provision signifying same. 1010\13\329336.4 31 (iv) Property insurance covering the Development covering all risks of loss, including earthquake (but only if it is commercially affordable at a reasonable price and with a reasonable deductible, in Agency's reasonable opinion, and if Agency requests in writing that such coverage be carried) and flood, if the Property is located in a flood zone, for one hundred percent (100%) of the replacement value, with deductible, if any, acceptable to the Agency, naming the Agency as a Loss Payee, as its interest may appear. (b) Contractor's Insurance. The Developer shall cause any general contractor or agent working on the Development under direct contract with the Developer (including, but not limited to, the Developer's architect) to maintain insurance of the types and in at least the minimum amounts described in subsections (a)(l), (a)(2), and (a)(3) above, and shall require that such insurance shall meet all of the general requirements of subsection (c) below. Subcontractors working on the Development under indirect contract with the Developer shall be required to maintain the insurance described in subsections (a)(l), (a)(2) and (a)(3) above. Liability and Comprehensive Automobile Liability insurance to be maintained by such contractors and agents pursuant to this subsection shall name as additional insureds the Agency, the City, their board members, officers, agents, and employees. (c) General Requirements. The required insurance shall be provided under an occurrence form, and the Developer shall maintain such coverage continuously throughout the Term. Should any of the required insurance be provided under a form of coverage that includes an annual aggregate limit or provides that claims investigation or legal defense costs be included in such annual aggregate limit, such annual aggregate limit shall be three times the occurrence limits specified above. Comprehensive General Liability, Comprehensive Automobile Liability and Property insurance policies shall be endorsed to name as additional insureds the Agency and its board members, officers, agents, and employees. All policies and bonds shall contain (a) the agreement of the insurer to give the Agency at least thirty (30) days' notice prior to cancellation (including, without limitation, for non payment of premium) or any material change in said policies; (b) an agreement that such policies are primary and non contributing with any insurance that may be carried by the Agency; (c) a provision that no act or omission of the Developer shall affect or limit the obligation of the insurance carrier to pay the amount of any loss sustained; and (d) a waiver by the insurer of all rights of subrogation against the Agency and its authorized parties in connection with any loss or damage thereby insured against. (d) Certificates of Insurance. Upon the Agency's request at any time during the term of this Agreement, the Developer shall provide certificates of insurance, in form and with insurers reasonable acceptable to the Agency, evidencing compliance with the requirements of this Section, and shall provide complete copies of such insurance policies, including a separate endorsement naming the Agency as additional insured, if requested by the Agency. Section 6.8 Audits. The Developer shall make available for examination at reasonable intervals and during normal business hours to Agency all books, accounts, reports, files, and other papers or property with respect to all matters covered by this Agreement, and shall permit 1010\13\329336.4 Agency to audit, examine, and make excerpts or transcripts from such records. Agency may make audits of any conditions relating to this Agreement. Section 6.9 CDBG and HOME Requirements. (a) Developer shall comply with all applicable laws and regulations governing the use of the HOME Funds as set forth in 24 CFR 92 et seq., and the use of the CDBG Funds as set forth in 24 CFR 570 et seq. In the event of any conflict between this Agreement and applicable laws and regulations governing the use of the Agency Loan funds, the applicable laws and regulations shall govern. During the first twenty (20) years of the Term, these requirements shall be federal requirements, implemented by the Agency; thereafter, these requirements shall be deemed local Agency requirements. (b) The laws and regulations governing the use of the HOME Funds and CDBG Funds include (but are not limited to) the following: (i) Environmental and Historic Preservation. 24 C.F.R. Part 58, which prescribe procedures for compliance with the National Environmental Policy Act of 1969 (42 U.S.C. 4321-4361), and the additional laws and authorities listed at 24 C.F.R. 58.5. (ii) Applicability of OMB Circulars. The applicable policies, guidelines, and requirements of OMB Circulars Nos. A-87, A-102, Revised, A-l 10, A-122, and A-133. (iii) Debarred, Suspended or Ineligible Contractors. The use of debarred, suspended, or ineligible contractors set forth in 24 C.F.R. Part 24. (iv) Civil Rights, Housing and Community Development, and Age Discrimination Acts. The Fair Housing Act (42 U.S.C. 3601 et seq.) and implementing regulations at 24 C.F.R. 100 et seq.: Title VI of the Civil Rights Act of 1964 as amended; Title VIII of the Civil Rights Act of 1968 as amended; Section 104(b) and Section 109 of Title I of the Housing and Community Development Act of 1974 as amended; Section 504 of the Rehabilitation Act of 1973; the Age Discrimination Act of 1975; Executive Order 11063 as amended by Executive Order 12259 and implementing regulations at 24 C.F.R. 107; Executive Order 11246 as amended by Executive Orders 11375, 12086, 11478, 12107; Executive Order 11625 as amended by Executive Order 12007; Executive Order 12432; Executive Order 12138 as amended by executive Order 12608. (v) Lead-Based Paint. The requirement of the Lead-Based Paint Poisoning Prevention Act, as amended (42 U.S.C. 4821 et seg.), the Residential Lead-Based Paint Hazard Reduction Act (42 U.S.C. 4851 et sec[.), and implementing regulations at 24 C.F.R. Part 35. (vi) Relocation. The requirements of the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970, and state relocation laws. If and to the extent that development of the Development results in the permanent or temporary displacement of residential tenants, homeowners, or businesses, then Developer shall comply with all applicable local, state, and federal statutes and regulations with respect to relocation planning, advisory assistance, and payment of monetary benefits. Developer shall prepare and submit a relocation 1010\13\329336.4 33 plan to the Agency for approval. Developer shall be solely responsible for payment of any relocation benefits to any displaced persons and any other obligations associated with complying with such relocation laws. The Developer shall indemnify, defend (with counsel reasonably chosen by the Agency), and hold harmless the Agency against all claims which arise out of relocation law obligations to residential tenants, homeowners, or businesses permanently or temporarily displaced by the Development. In addition, the Developer shall comply with all the relocation requirements set forth in 24 C.F.R. 92.353. (vii) Discrimination against the Disabled. The requirements of Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794), and federal regulations issued pursuant thereto, which prohibit discrimination against the disabled in any federally assisted program, the requirements of the Architectural Barriers Act of 1968 (42 U.S.C. 4151-4157) and the applicable requirements of Title II and/or Title III of the Americans with Disabilities Act of 1990 (42 U.S.C. 12131 et seq.X and federal regulations issued pursuant thereto. (viii) Clean Air and Water Acts. The Clean Air Act, as amended, 42 U.S.C. 7401 et seq., the Federal Water Pollution Control Act, as amended, 33 U.S.C. 1251 et seq., and the regulations of the Environmental Protection Agency with respect thereto, at 40 C.F.R. Part 1500, as amended from time to time. (ix) HOME Uniform Administrative Requirements. The requirements of 24 C.F.R. 92.505 regarding cost and auditing requirements. (x) CDBG Uniform Administrative Requirements. The requirements of 24 C.F.R. 92.505 regarding cost and auditing requirements. (xi) Training Opportunities. The requirements of Section 3 of the Housing and Urban Development Act of 1968, as amended, 12 U.S.C. 1701(u) ("Section 3"), requiring that to the greatest extent feasible opportunities for training and employment be given to lower income residents of the project area and agreements for work in connection with the project be awarded to business concerns which are located in, or owned in substantial part by persons residing in, the areas of the project. Developer agrees to include the following language in all subcontracts executed under this Agreement: 1. The work to be performed under this contract is subject to the requirements of Section 3 of the Housing and Urban Development Act of 1968, as amended, 12 U.S.C. 1701u. The purpose of Section 3 is to ensure that employment and other economic opportunities generated by HUD assistance or HUD-assisted projects covered by Section 3, shall, to the greatest extent feasible, be directed to low- and very low-income persons, particularly persons who are recipients of HUD assistance for housing. 2. The parties to this contract agree to comply with HUD's regulations in 24 CFR Part 135, which implement Section 3. As evidenced by their execution of this contract, the parties to this contract certify that they are under no contractual or other impediment that would prevent them from complying with the Part 135 regulations. 1010\13\329336.4 34 3. The contractor agrees to send to each labor organization or representative of workers with which the contractor has a collective bargaining agreement or other understanding, if any, a notice advising the labor organization or workers' representative of the contractor's commitments under this Section 3 clause; and will post copies of the notice in conspicuous places at the work site where both employees and applicants for training and employment positions can see the notice. The notice shall describe the Section 3 preference; shall set forth minimum number and job titles subject to hire; availability of apprenticeship and training positions; the qualifications for each; the name and location of the person(s) taking applications for each of the positions; and the anticipated date the work shall begin. 4. The contractor agrees to include this Section 3 clause in every subcontract subject to compliance with regulations in 24 CFR Part 135, and agrees to take appropriate action, as provided in an applicable provision of the subcontract or in this Section 3 clause, upon a finding that the subcontractor is in violation of the regulations in 24 CFR Part 135. The contractor will not subcontract with any subcontractor where the contractor has notice or knowledge that the subcontractor has been found in violation of the regulations in 24 CFR Part 135. 5. The contractor will certify that any vacant employment positions, including training positions, that are filled (1) after the contractor is selected but before the contract is executed, and (2) with persons other than those to whom the regulations of 24 CFR Part 135 require employment opportunities to be directed, were not filled to circumvent the contractor's obligations under 24 CFR Part 135. 6. Noncompliance with HUD's regulations in 24 CFR Part 135 may result in sanctions, termination of this contract for default, and debarment or suspension from future HUD assisted contracts. 7. With respect to work performed in connection with Section 3 covered Indian housing assistance, section 7(b) of the Indian Self-Determination and Education Assistance Act (25 U.S.C. 450e) also applies to the work to be performed under this contract. Section 7(b) requires that to the greatest extent feasible (i) preference and opportunities for training and employment shall be given to Indians, and (ii) preference in the award of contracts and subcontracts shall be given to Indian organizations and Indian-owned Economic Enterprises. Parties to this contract that are subject to the provisions of Section 3 and section 7(b) agree to comply with Section 3 to the maximum extent feasible, but not in derogation of compliance with section 7(b). (xii) Labor Standards. The Developer shall comply with applicable labor requirements set forth in 24 C.F.R. Section 92.354. The prevailing wage requirements of the Davis-Bacon Act and implementing rules and regulations (40 U.S.C. 276a-276a-5); the Copeland "Anti-Kickback" Act (40 U.S.C. 276(c)) which requires that workers be paid at least once a week without any deductions or rebates except permissible deductions; the Contract Work Hours and Safety Standards Act - CWHSSA (40 U.S.C. 327-333) which requires that workers receive "overtime" compensation at a rate of 1-1/2 times their regular hourly wage after they have worked forty (40) hours in one (1) week; and Title 29, Code of Federal Regulations, Subtitle A, 1010\13\329336.4 35 Parts 1, 3 and 5 are the regulations and procedures issued by the Secretary of Labor for the administration and enforcement of the Davis-Bacon Act, as amended. (xiii) Drug Free Workplace. The requirements of the Drug Free Workplace Act of 1988 (P.L. 100-690) and implementing regulations at 24 C.F.R. Part 24. (xiv) Anti-Lobbving; Disclosure Requirements. The disclosure requirements and prohibitions of 31 U.S.C. 1352 and implementing regulations at 24 C.F.R. Part 87. (xv) Historic Preservation. The Developer shall comply with the historic preservation requirements set forth in the National Historic Preservation Act of 1966, as amended (16 U.S.C. Section 470) and the procedures set forth in 36 C.F.R. Part 800. (xvi) HUD Regulations. Any other HUD regulations present or as may be amended, added, or waived in the future pertaining to the Loan funds, including but not limited to HUD regulations as may be promulgated regarding subrecipients. (xvii) Religious Organizations. If Developer is a religious organization, as defined by the CDBG requirements, Developer shall comply with all conditions prescribed by HUD for the use of CDBG Funds by religious organizations, including the First Amendment of the United States Constitution regarding church/state principles and the applicable constitutional prohibitions set forth in 24 C.F.R. Section 570.2000). ARTICLE 7. MORTGAGE ASSISTANCE AND SALE OF HOMES Section 7.1 Sale of Homes to Eligible Purchasers. As a condition to the issuance of the Certificate of Completion by the Agency, the Developer shall sell all of the Homes to Eligible Purchasers. The purchase price shall not be greater than the amount set forth in the Financing Plan approved by the Agency, unless the Agency has agreed to an increase in the purchase prices pursuant to an implementation agreement in accordance with Section 11.18, but in no event shall the purchase price for any Home exceed the fair market value of the Home. The Eligible Purchaser shall not pay under the terms and conditions of the purchase of the Home, more than that amount allowed in order to meet Affordable Housing Cost. Each of the Eligible Purchasers of the Homes shall receive Agency Second Mortgage Loan assistance pursuant to Section 7.2 below. As a condition of purchase of the Homes and the issuance of the Certificate of Completion, each Eligible Purchaser shall be required to, and the Developer shall cause each Eligible Purchaser to execute a Homebuyer Promissory Note and to execute and record against the Home a Homebuyer Deed of Trust and a Homebuyer Resale Restriction and Option to Purchase Agreement, in the forms shown in Exhibits G, H and I, respectively. 1010\13\329336.4 35 Section 7.2 Agency Second Mortgage Assistance. (a) To assist Eligible Purchasers in acquiring the Homes, the Agency shall convert up to the total principal amount of the Agency Loan to Agency Second Mortgage Loans. Each Agency Second Mortgage Loan made to an Eligible Purchaser shall be in an amount not to exceed the difference between the approved purchase price for the Home minus the First Mortgage Assistance amount and shall in no event exceed One Hundred Fifty-Eight Thousand Seven Hundred Twenty Dollars ($158,720). In no event shall the total of all Agency contributions to Agency Second Mortgage Loans, when aggregated, exceed the outstanding principal amount of the Agency Loan. Section 7.3 Conditions to Agency Second Mortgage Loans. (a) As a condition precedent to an Eligible Purchaser receiving an Agency Second Mortgage Loan, the Developer shall obtain from the Eligible Purchaser certifications that financial and other information provided by the Eligible Purchaser are true and correct and certification of household income and household size in a form to be provided by the Agency (the "Income Certification") to ensure that the proposed homebuyer is a Very Low Income Household. The Developer shall obtain the Income Certifications at the time the Developer selects the Eligible Purchaser, which selection is completed prior to the commencement of actual construction of the Improvements in order to allow the Eligible Purchaser to complete their "sweat equity" construction requirement required by the Developer, or at such other time as mutually acceptable to the Parties as set forth in an implementation agreement pursuant to Section 11.18; provided, however, the Developer shall make every effort to obtain the Income Certifications as close to the time of commencement of actual construction as is reasonably possible. Income Certification shall include one or more of the following steps as a part of the verification process: (i) a pay stub for the most recent pay period; (ii) an income tax return for the three most recent tax years; (iii) a credit agency or similar search; (iv) an income verification form from the Eligible Purchaser's current employer; (v) an income verification form from the Social Security Administration and/or the California Department of Social Services if the Eligible Purchaser receives assistance from either of such agencies; or (vi) if the Eligible Purchaser is unemployed and has no such tax return, another form of independent verification. (b) As a condition precedent to an Eligible Purchaser receiving an Agency Second Mortgage Loan, an Eligible Purchaser shall certify that he or she will occupy the Home as a principal place of residence and shall agree in no event to lease the Home, utilizing a form of certification to be provided by the Agency (the "Owner Occupancy Certification"). (c) As a condition precedent to an Eligible Purchaser receiving an Agency Second Mortgage Loan, an Eligible Purchaser shall certify that he or she is a First Time Homebuyer. A "First Time Homebuyer" is defined as an individual who has not had any ownership interest such as fee simple, joint tenancy, tenancy in common, life estate, shareholder in a cooperative, or interest held in trust for the applicant that would constitute an ownership interest if held by the applicant, in their primary residence, in the past three years as of the date of application. All applicants and co-owners/co-borrowers must meet the First Time Homebuyer requirement. 1010\13\329336.4 37 In addition, an individual who is divorced or legally separated from his or her spouse is also considered a First Time Homebuyer if the individual, while married, owned a home with his or her spouse but no longer has ownership interest in the home as a result of a court approved dissolution proceeding or property settlement. (d) As a condition precedent to an Eligible Purchaser receiving an Agency Second Mortgage Loan, an Eligible Purchaser shall: (i) execute a Homebuyer Promissory Note in the amount of the Agency Second Mortgage Loan in a form to be provided by the Agency; and (ii) execute and record against the Home a Homebuyer Deed of Trust securing the Eligible Purchaser's obligations under the Homebuyer Promissory Note, in a form to be provided by the Agency; (iii) execute and record against the Home a Homebuyer Resale Restriction and Option to Purchase Agreement in a form to be provided by the Agency; and (iv) execute a Buyer's Disclosure Statement in a form to be provided by the Agency, and such other documents required by the Agency in its reasonable discretion. The Agency acknowledges that the Developer will be recording Covenants, Conditions and Restrictions that include restrictions on the resale of the Home. The Agency shall cooperate with the Developer to resolve any inconsistencies between the Agency Homebuyer Resale Restriction and Option to Purchase Agreement and the Developer's Covenants, Conditions and Restrictions; provided, however, at all times the Homebuyer Resale Restriction and Option to Purchase Agreement shall satisfy the requirements of the California Community Redevelopment Law and the Agency's First-Time Homebuyer Program. (e) For each Eligible Purchaser receiving an Agency Second Mortgage Loan, Developer shall transmit to the Agency the Eligible Purchaser's Income Certification (with attached required documentation), Owner Occupancy Certification, and Buyer's Disclosure Statement, all executed by the Eligible Purchaser, at least ten (10) working days prior to the sale of the Home to the Eligible Purchaser. The Agency shall review these documents, and submit the executed Homebuyer Promissory Note and Homebuyer Deed of Trust into escrow with escrow instructions. Section 7.4 Developer First Mortgage Assistance and Other Eligible Purchaser Financing. The Developer shall submit to the Agency for pre-approval the terms of the Homebuyer First Mortgage Assistance to be provided to Eligible Purchasers by the Developer or by Habitat for Humanity International, or by any other loan provider. If the Agency disapproves the terms of the Homebuyer First Mortgage Assistance, the Agency shall give specific reasons for disapproval. If the Homebuyer First Mortgage Assistance is disapproved by the Agency, the Developer shall, within ten (10) calendar days of disapproval, resubmit such revisions as the Developer may propose. Approval by the Agency of the Homebuyer First Mortgage Assistance and other homebuyer financial assistance shall be a condition precedent to the Agency's obligation to provide an Agency Second Mortgage Loan to Eligible Purchasers. Section 7.5 Eligible Purchaser Counseling. As a condition of purchase of a Home, each Eligible Purchaser shall be required to attend a minimum of eight (8) hours of pre-purchase homeownership counseling (including one-on-one 1010\13\329336.4 38 sessions) and a minimum of six (6) months of post-purchase homeownership counseling, conducted by a qualified provider of such counseling services. ARTICLE 8. ASSIGNMENT AND TRANSFERS Section 8.1 Definitions. As used in this Article, the term "Transfer" means: (a) Any total or partial sale, assignment or conveyance, or any trust or power, or any transfer in any other mode or form, of or with respect to this Agreement or of the Development or any part thereof or any interest therein or any contract or agreement to do any of the same; or (b) Any total or partial sale, assignment or conveyance, or any trust or power, or any transfer in any other mode or form, of or with respect to any ownership interest in Developer or any contract or agreement to do any of the same; or (c) Any merger, consolidation, sale or lease of all or substantially all of the assets of Developer; or (d) The leasing of part or all of the Property or the Improvements thereon; provided, however, that the sale of the Homes in accordance with this Agreement shall not be deemed a "Transfer" for purposes of this Article. Section 8.2 Purpose of Restrictions on Transfer. This Agreement is entered into solely for the purpose of development and operation of the Development and its subsequent use in accordance with the terms hereof. The Developer recognizes that the qualifications and identity of the Developer are of particular concern to the Agency, in view of: (a) The importance of the development of the Property to the general welfare of the community; and (b) The land acquisition assistance and other public aids that have been made available by law and by the government for the purpose of making such development possible; and (c) The reliance by the Agency upon the unique qualifications and ability of the Developer to serve as the catalyst for development of the Property and upon the continuing interest which the Developer will have in the Property to assure the quality of the use, operation and maintenance deemed critical by the Agency in the development of the Property; and 1010\13\329336.4 39 (d) The fact that a change in ownership or control of the owner of the Property, or of a substantial part thereof, or any other act or transaction involving or resulting in a significant change in ownership or with respect to the identity of the parties in control of the Developer or the degree thereof is for practical purposes a transfer or disposition of the Property; and (e) The fact that the Property is not to be acquired or used for speculation, but only for development and operation by the Developer in accordance with the Agreement; and (f) The importance to the Agency and the community of the standards of use, operation and maintenance of the Property. (g) The Developer further recognizes that it is because of such qualifications and identity that the Agency is entering into this Agreement with the Developer and that Transfers are permitted only as provided in this Agreement. Section 8.3 Prohibited Transfers. The limitations on Transfers set forth in this Article 8 shall apply until the initial sale of each Home to an Eligible Purchaser. Except as expressly permitted in this Agreement, the Developer represents and agrees that the Developer has not made or created, and will not make or create or suffer to be made or created, any Transfer, either voluntarily or by operation of law without the prior written approval of the Agency. Any Transfer made in contravention of this Section 8.3 shall be void and shall be deemed to be a default under this Agreement whether or not the Developer knew of or participated in such Transfer. Section 8.4 Permitted Transfers. Notwithstanding the provisions of Section 8.3, the following Transfers shall be permitted and are hereby approved by the Agency. (a) Any Transfer creating a Security Financing Interest permitted pursuant to the approved Financing Plan; (b) Any Transfer directly resulting from the foreclosure of a Security Financing Interest or the granting of a deed in lieu of foreclosure of a Security Financing Interest or as otherwise permitted under Article 8. Section 8.5 Effectuation of Certain Permitted Transfers. The Agency may, in its sole discretion, approve in writing other Transfers as requested by the Developer. In connection with such request, there shall be submitted to the Agency for review all instruments and other legal documents proposed to effect any such Transfer. If a requested Transfer is approved by the Agency such approval shall be indicated to the Developer 1010\13\329336.4 40 or in writing. Such approval shall be granted or denied by the Agency within thirty (30) days of receipt by the Agency of Developer's request for approval of a Transfer. No Transfer of this Agreement permitted pursuant to this Section 8.5 shall be effective unless, at the time of the Transfer, the person or entity to which such Transfer is made, by an instrument in writing reasonably satisfactory to the Agency and in form recordable among the land records, shall expressly assume the obligations of the Developer under this Agreement and agree to be subject to the conditions and restrictions to which the Developer is subject arising during this Agreement, to the fullest extent that such obligations are applicable to the particular portion of or interest in the Development conveyed in such Transfer. The holder of an Approved Security Interest whose interest shall have been acquired by, through or under an Approved Security Interest or shall have been derived immediately from any holder thereof shall not be required to give to Agency such written assumption until such holder or other person is in possession of the Property or entitled to possession thereof pursuant to enforcement of the Approved Security Interest. In the absence of specific written agreement by the Agency, no such Transfer, assignment vi approval by the Agency shall be deemed to relieve the Developer or any other party from any obligations under this Agreement. Section 8.6 Special Remedy for Prohibited Transfer. In the event that, in violation of the provisions of this Agreement, the Developer undertakes a prohibited Transfer, the Agency shall be entitled to increase the purchase price paid by the Developer for the Property previously conveyed from the Agency to Developer. The amount of the increase shall be in the amount that the consideration payable for such assignment or transfer is in excess of the sum of (a) the purchase price paid by the Developer to Agency for the Property and (b) the costs of subsequent improvements and development, including carrying charges, interests and fees, transfer taxes, real estate taxes, assessments and commissions, escrow fees and costs related thereto. The consideration payable for such assignment or transfer to the extent it is in excess of the amount so authorized, shall belong and be paid to the Agency and until so paid, the Agency shall have a lien on the Property for such amount. The rights and protections of holders of Approved Security Interests set forth in Article 10 shall also apply to this Section 8.6. ARTICLE 9. DEFAULT AND REMEDIES Section 9.1 General Applicability. The provisions of this Article shall govern the Parties' remedies for breach or failure of this Agreement. Section 9.2 No Fault of Parties. 1010\13\329336.4 41 The following events constitute a basis for a party to terminate this Agreement without the fault of the other: (a) The Developer, despite good faith and diligent efforts, is unable to satisfy all of the conditions precedent to the Agency's obligation to convey the Property set forth in Article 2 by no later than the dates set forth in the Schedule of Performance; or (b) The Agency, despite good faith and diligent efforts, is unable to execute the Agency Grant Deed and convey the Property to the Developer and the Developer is otherwise entitled to the conveyance of the Property. Upon the happening of any of the above-described events, and at the election of either party, this Agreement may be terminated by written notice to the other party. After termination, neither party shall have any rights against or liability to the other under this Agreement, except that the waiver and indemnification provisions of this Agreement shall survive such termination and remain in full force and effect. Section 9.3 Fault of Agency. Except as to events constituting a basis for termination under Section 9.2, the following events each constitute an Agency Event of Default and a basis for the Developer to take action against the Agency: (a) The Agency, without good cause, fails to convey the Property to the Developer within the time and in the manner set forth in Article 3 and the Developer is otherwise entitled by this Agreement to such conveyance; or (b) The Agency, without good cause, fails to disburse the proceeds of the Agency Loan when Developer is entitled to such disbursement pursuant to the provisions of this Agreement. (c) The Agency breaches any other material provision of this Agreement. Upon the happening of any of the above-described events, the Developer shall first notify the Agency in writing of its purported breach or failure, giving the Agency forty-five (45) days from receipt of such notice to cure or, if cure cannot be accomplished within forty-five (45) days, to commence to cure such breach, failure, or act. In the event the Agency does not then so cure within said forty-five (45) days, or if the breach or failure is of such a nature that it cannot be cured within forty-five (45) days, the Agency fails to commence to cure within such forty-five (45) days and thereafter diligently complete such cure within a reasonable time thereafter but in no event later than one hundred twenty (120) days, then the Developer shall be afforded all of its rights at law or in equity, by taking all or any of the following remedies: (1) terminating in writing this Agreement (provided, however, that the indemnification provisions of this Agreement shall survive such termination) and the Ground Lease; and (2) prosecuting an action for damages or specific performance. 1010\13\329336.4 42 Section 9.4 Fault of Developer. Except as to events constituting a basis for termination under Section 9.2, the following events each constitute a Developer Event of Default and a basis for the Agency to take action against the Developer: (a) The Developer fails to exercise good faith and diligent efforts to satisfy, within the time set forth in the Schedule of Performance, one or more of the conditions precedent to the Agency's obligation to convey the Property to the Developer; or (b) The Developer refuses to execute the Agency Grant Deed or otherwise refuses to accept the conveyance of the Property within the time set forth in the Schedule of Performance and under the terms set forth in Article 3; or (c) The Developer constructs or attempts to construct the Improvements in violation of Article 4; or (d) The Developer has not satisfied all preconditions set forth in this Agreement to commencement of construction of the Improvements by the date set forth in the Schedule of Performance, or fails to commence or complete construction of the Improvements within the times set forth in the Schedule of Performance, or abandons or suspends construction of the Improvements prior to completion of all construction for a period of sixty (60) days after written notice by the Agency of such abandonment or suspension; (e) The Developer fails to comply with any obligation or requirement set forth in Articles 5 or 6; or (f) The Developer fails to sell the Homes to Eligible Purchasers pursuant to Article 7; (g) A Transfer occurs, either voluntarily or involuntarily, in violation of Article 8; (h) Any representation or warranty contained in this Agreement or in any application, financial statement, certificate or report submitted to the Agency in connection with this Agreement proves to have been incorrect in any material and adverse respect when made. (i) An Event of Default occurs under any of the Agency Documents. (j) A court having jurisdiction shall have made or entered any decree or order (1) adjudging the Developer to be bankrupt or insolvent, (2) approving as properly filed a petition seeking reorganization of the Developer or seeking any arrangement for the Developer under the bankruptcy law or any other applicable debtor's relief law or statute of the United States or any state or other jurisdiction, (3) appointing a receiver, trustee, liquidator, or assignee of the Developer in bankruptcy or insolvency or for any of their properties, or (4) directing the winding up or liquidation of the Developer, if any such decree or order described in clauses (1) 1010\13\329336.4 43 to (4), inclusive, shall have continued unstayed or undischarged for a period of ninety (90) days unless a lesser time period is permitted for cure under any other mortgage on the Property, in which event such lesser time period will apply under this subsection (i) as well; or the Developer shall have admitted in writing its inability to pay its debts as they fall due or shall have voluntarily submitted to or filed a petition seeking any decree or order of the nature described in clauses (1) to (4), inclusive. (k) The Developer shall have assigned its assets for the benefit of its creditors or suffered a sequestration or attachment of or execution on any substantial part of its property, unless the property so assigned, sequestered, attached or executed upon shall have been returned or released within ninety (90) days after such event (unless a lesser time period is permitted for cure under any other mortgage on the Property, in which event such lesser time period shall apply under this subsection (i) as well) or prior to sooner sale pursuant to such sequestration, attachment, or execution. In the event that the Developer is diligently working to obtain a return or release of the property, as determined in the Agency's reasonable business judgment, and the Agency's interests under the Agreement are not immediately threatened, in the Agency's reasonable business judgment, the Agency shall not declare a default under this subsection; or (1) The Developer shall have voluntarily suspended its business; or (m) There shall occur any default declared by any lender under any loan document related to any loans, secured by a deed of trust on the Development after the expiration of all applicable cure periods; or (n) The Developer breaches any other material provision of this Agreement. Upon the happening of any of the above-described events, the Agency shall first notify the Developer in writing of its purported breach, failure or act above described, giving the Developer in writing forty-five (45) days from receipt of such notice to cure, or, if cure cannot be accomplished within said forty-five (45) days, to commence to cure such breach, failure, or act. In the event the Developer fails to cure within said forty-five (45) days, or if such breach is of a nature that it cannot be cured within forty-five (45) days, Developer fails to commence to cure within said forty-five (45) days and diligently complete such cure within a reasonable time thereafter but in no event later than one hundred twenty (120) days, then the Agency shall be afforded all of its rights at law or in equity by taking any or all of the following remedies: (i) Termination of this Agreement by written notice to the Developer; provided, however, that the Agency's remedies pursuant to this Article 9 or any other Agency Document and the indemnification provisions of this Agreement shall survive such termination. (ii) Prosecuting an action for damages or specific performance; and (iii) Any of the remedies specified in this Article 9. (iv) Acceleration of the Agency Loan as set forth in Section 9.6, below. 1010\13\329336.4 44 Section 9.5 Right of Reverter. In the event that following the Closing this Agreement is terminated pursuant to Section 9.4 and such termination occurs prior to issuance of the Certificate of Completion, then the Agency shall have the right to reenter and take possession of the portion of the Property for which a Certificate of Completion has not been issued and all improvements thereon. The Developer shall execute any document necessary to convey its interest in the Property and the Improvements to the Agency, pursuant to the terms of this Section 9.5. The Agency shall promptly use its best efforts to sell the Property and the Improvements consistent with the purpose of the Agreement and its obligations under state law. Upon sale the proceeds shall be applied as follows: (a) First, to reimburse the Agency, or the City, for any reasonable costs it incurs in selling or managing the Property, or in connection with the completion of the construction of the Improvements, including but not limited to amounts to discharge, or to prevent liens or encumbrances arising from any acts or omissions of the Developer; (b) Second, to the Agency to reimburse the Agency for damages to which it is entitled under the Agreement by reason of the Developer's default; (c) Third, to the Agency to repay the Agency Loan; (d) Fourth, to the Developer up to the reasonable cost of the Improvements the Developer has placed on the Property and such other reasonable costs the Developer has incurred directly in connection with the development of the Property that were not financed with the Agency Loan; and (e) Fifth, any balance to the Agency. Section 9.6 Acceleration of Note. Following occurrence of a default by the Developer under Section 9.4 above, after expiration of applicable notice and cure periods, if any, the Agency shall have the right to cause all indebtedness of the Developer to the Agency under this Agreement and the Agency Promissory Note, together with any accrued interest thereon, to become immediately due and payable. The Developer waives all right to presentment, demand, protest or notice of protest or dishonor. The Agency may proceed to enforce payment of the indebtedness and to exercise any or all rights afforded to the Agency as a creditor and secured party under the law including the Uniform Commercial Code, including foreclosure under the Agency Deed of Trust. The Developer shall be liable to pay the Agency on demand all expenses, costs and fees (including, without limitation, attorney's fees and expenses) paid or incurred by the Agency in connection with the collection of the Agency Loan and the preservation, maintenance, protection, sale, or other disposition of the security given for the Agency Loan. Section 9.7 Right to Cure at Developer's Expense. 1010\13\329336.4 45 The Agency shall have the right to cure any monetary default by the Developer under a loan in connection with the Development, if any, and the amount due under the Agency Promissory Note. However, if the Developer is in good faith contesting a claim of default under a loan other than the Agency Loan, and the Agency's interest under this Agreement is not imminently threatened by such default, in the Agency's sole judgment, the Agency shall not have the right to cure such default. The Developer agrees to reimburse the Agency for any funds advanced by the Agency to cure a monetary default by the Developer upon demand therefor, together with interest thereon at the lesser of the rate often percent (10%) per annum or the maximum rate permitted by law from the date of expenditure until the date of reimbursement. Section 9.8 Construction Plans. If this Agreement is terminated pursuant to Section 9.2 or Section 9.4, then the Developer shall promptly deliver to the Agency, within ten (10) days of such termination, copies of all plans and specifications for the Development, all permits and approvals obtained in connection with the Development, and all applications for permits and approvals not yet obtained but needed in connection with the Development (collectively, the "Section 9.8 Documents"). The delivery of the Section 9.8 Documents shall be accompanied by an assignment, in form reasonably satisfactory to the Agency, of the Developer's right, title and interest in the Section 9.8 Documents; provided however, that any use of the Section 9.8 Documents by the Agency or any other person shall be without liability of any kind to the Developer and without any representation or warranty of the Developer or its employees, as to the quality, validity, or usability of the Section 9.8 Documents. Section 9.9 Rights of Mortgagees. Any rights of the Agency under this Article shall not defeat, limit or render invalid any Security Financing Interest permitted by this Agreement or any rights provided for in this Agreement for the protection of holders of Security Financing Interests. Section 9.10 Remedies Cumulative. No right, power, or remedy given by the terms of this Agreement is intended to be exclusive of any other right, power, or remedy; and each and every such right, power, or remedy shall be cumulative and in addition to every other right, power, or remedy given by the terms of any such instrument, or by any statute or otherwise. Neither the failure nor any delay to exercise any such rights and remedies shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or remedy preclude any other or further exercise of such right or remedy, or any other right or remedy. Section 9.11 Waiver of Terms and Conditions. No waiver of any default or breach by the Developer hereunder shall be implied from any omission by the Agency to take action on account of such default if such default persists or is repeated, and no express waiver shall affect any default other than the default specified in the 1010\13\329336.4 46 waiver, and such waiver shall be operative only for the time and to the extent therein stated. Waivers of any covenant, term, or condition contained herein shall not be construed as a waiver of any subsequent breach of the same covenant, term, or condition. The consent or approval by the Agency to or of any act by the Developer requiring further consent or approval shall not be deemed to waive or render unnecessary the consent or approval to or of any subsequent similar act. The exercise of any right, power, or remedy shall in no event constitute a cure or a waiver of any default under the Agency Documents, nor shall it invalidate any act done pursuant to notice of default, or prejudice the Agency in the exercise of any right, power, or remedy hereunder or under this Agreement, unless in the exercise of any such right, power, or remedy all obligations of the Developer to the Agency are paid and discharged in full. ARTICLE 10. SECURITY FINANCING AND RIGHTS OF HOLDERS Section 10.1 No Encumbrances Except for Development Purposes. Notwithstanding any other provision of this Agreement, mortgages and deeds of trust, or any other reasonable method of security are permitted to be placed upon the Developer's interest in the Property but only for the purpose of securing loans approved by the Agency pursuant to the approved Financing Plan. Mortgages, deeds of trust, or other reasonable security instruments securing loans approved by the Agency pursuant to the approved Financing Plan are each referred to as a "Security Financing Interest." The words "mortgage" and "deed of trust" as used in this Agreement include all other appropriate modes of financing real estate acquisition, construction, and land development. Section 10.2 Holder Not Obligated to Construct. The holder of any Security Financing Interest authorized by this Agreement is not obligated to construct or complete any improvements or to guarantee such construction or completion; nor shall any covenant or any other provision in the Agency Documents be construed so to obligate such holder. However, nothing in this Agreement shall be deemed to permit or authorize any such holder to devote the Property or any portion thereof to any uses, or to construct any improvements thereon, other than those uses of improvements provided for or authorized by this Agreement. Section 10.3 Notice of Default and Right to Cure. Whenever the Agency pursuant to its rights set forth in Article 9 of this Agreement delivers any notice or demand to the Developer with respect to the commencement, completion, or cessation of the construction of the Improvements, the Agency shall at the same time deliver to each holder of record of any Security Financing Interest creating a lien upon the Developer's interest in the Property or any portion thereof a copy of such notice or demand. Each such holder shall (insofar as the rights of the Agency are concerned) have the right, but not the obligation, at its option, within ninety (90) days after the receipt of the notice, to cure or remedy or commence to cure or remedy any such default or breach affecting the Property which is 1010\13\329336.4 47 subject to the lien of the Security Financing Interest held by such holder and to add the cost thereof to the security interest debt and the lien on its security interest. Nothing contained in this Agreement shall be deemed to permit or authorize such holder to undertake or continue the construction or completion of the Improvements (beyond the extent necessary to conserve or protect such improvements or construction already made) without first having expressly assumed in writing the Developer's obligations to the Agency relating to such Improvements under this Agreement. The holder in that event must agree to complete, in the manner provided in this Agreement, the Improvements to which the lien or title of such holder relates. Any such holder properly completing such Improvements pursuant to this paragraph shall assume all rights and obligations of Developer under this Agreement and shall be entitled, upon completion and written request made to the Agency, to a Certificate of Completion from the Agency, in a form acceptable by the Agency. Section 10.4 Failure of Holder to Complete Improvements. In any case where six (6) months after default by the Developer in completion of construction of the Improvements under this Agreement, the holder of record of any Security Financing Interest, having first exercised its option to construct, has not proceeded diligently with construction of the Improvements, the Agency shall be afforded those rights against such holder it would otherwise have against Developer under this Agreement. Section 10.5 Right of Agency to Cure. In the event of a default or breach by the Developer of a Security Financing Interest prior to the completion of development, and the holder has not exercised its option to complete the development called for on the Property, the Agency may cure the default, prior to the completion of any foreclosure. In such event the Agency shall be entitled to reimbursement from the Developer of all costs and expenses incurred by the Agency in curing the default. The Agency shall also be entitled to a lien upon the Developer's interest in the Property or any portion thereof to the extent of such costs and disbursements. The Agency agrees that such lien shall be subordinate to any Security Financing Interest, and the Agency shall execute from time to time any and all documentation reasonably requested by Developer to effect such subordination. Section 10.6 Right of Agency to Satisfy Other Liens. After the conveyance of the Property or any portion thereof and after the Developer has had a reasonable time to challenge, cure or satisfy any liens or encumbrances on the Property or any portion thereof, the Agency shall have the right to satisfy any such lien or encumbrances; provided, however, that nothing in this Agreement shall require the Developer to pay or make provision for the payment of any tax, assessment, lien or charge so long as the Developer in good faith shall contest the validity or amount therein and so long as such delay in payment shall not subject the Property or any portion thereof to forfeiture or sale. Section 10.7 Holder to be Notified. 1010\13\329336.4 48 The provisions of this Article shall be incorporated into the relevant deed of trust or mortgage evidencing each Security Financing Interest to the extent deemed necessary by, and in form and substance reasonably satisfactorily to the Agency, or shall be acknowledged by the holder of a Security Financing Interest prior to its coming into any security right or interest in the Property. ARTICLE 11. GENERAL PROVISIONS Section 11.1 Notices, Demands and Communications. Formal notices, demands, and communications between the Agency and the Developer shall be sufficiently given if and shall not be deemed given unless dispatched by registered or certified mail, postage prepaid, return receipt requested, by reputable overnight delivery service, or delivered personally, to the principal office of the Agency and the Developer as follows: Agency: Carlsbad Redevelopment Agency 2965 Roosevelt Street, Suite B Carlsbad, CA 92008 Attn: Executive Director Developer: San Diego Habitat for Humanity, Inc. 10222 San Diego Mission Road San Diego, CA 92108 Attn: Executive Director Such written notices, demands and communications may be sent in the same manner to such other addresses as the affected party may from time to time designate by mail as provided in this Section. Section 11.2 Non-Liability of Agency Officials, Employees and Agents: Non-Liability of Developer's Members. No member, official, employee or agent of the Agency or the City shall be personally liable to the Developer, or any successor in interest, in the event of any default or breach by the Agency or for any amount which may become due to the Developer or successor or on any obligation under the terms of this Agreement. Section 11.3 Forced Delay. In addition to specific provisions of this Agreement, performance by either party 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; acts of the public enemy; epidemics; quarantine restrictions; freight embargoes; governmental restrictions or priority; litigation (including suits filed by third parties concerning or arising out of this Agreement); weather or soils conditions which, in the opinion of the Developer's 1010\13\329336.4 49 contractor, will necessitate delays; inability to secure necessary labor, materials or tools; acts of the other party; acts or failure to act of any public or governmental agency or entity (other than the acts or failure to act of the Agency); or any other causes (other than Developer's inability to obtain financing for the Improvements) beyond the control or without the fault of the party claiming an extension of time to perform. An extension of time for any cause will be deemed granted if notice by the party claiming such extension is sent to the other within ten (10) days from the date the party seeking the extension first discovered the cause and such extension of time is not rejected in writing by the other party within ten (10) days after receipt of the notice. Times of performance under this Agreement may also be extended in writing by the Agency and the Developer. In no event shall the cumulative delays exceed one hundred eighty (180) days, unless otherwise agree to by the Parties in writing. Section 11.4 Inspection of Books and Records. Upon request, the Developer shall permit the Agency to inspect at reasonable times and on a confidential basis those books, records and all other documents of the Developer necessary to determine Developer's compliance with the terms of this Agreement. The Developer also has the right at all reasonable times to inspect the books, records and all other documentation of the Agency pertaining to its obligations under this Agreement. Section 11.5 Provision Not Merged with Agency Grant Deed. None of the provisions of this Agreement are intended to or shall be merged by the Agency Grant Deed transferring title to any real property which is the subject of this Agreement from Agency to Developer or any successor in interest, and any such grant deed shall not be deemed to affect or impair the provisions and covenants of this Agreement. Section 11.6 Title of Parts and Sections. Any titles of the articles, sections or subsections of this Agreement are inserted for convenience of reference only and shall be disregarded in construing or interpreting any part of its provision. Section 11.7 General Indemnification. The Developer agrees to indemnify, protect, hold harmless and defend (by counsel reasonably satisfactory to the Agency) the City, the Agency, and their board members, officers and employees, from all suits, actions, claims, causes of action, costs, demands, judgments and liens arising out of: (i) the Developer's performance or non-performance under this Agreement, or any other agreement executed pursuant to this Agreement; (ii) the acts or omissions of the Developer or any of Developer's contractors, subcontractors, volunteers, or persons claiming under any of the aforesaid, or (iii) the Developer's breach of this Agreement, except as directly caused by the Agency's willful misconduct of gross negligence. The provisions of this section shall survive expiration of the Term or other termination of this Agreement, and shall remain in full force and effect. 1010\13\329336.4 50 Section 11.8 Applicable Law. This Agreement shall be interpreted under and pursuant to the laws of the State of California. Section 11.9 No Brokers. Each party represents to the other that it has not had any contact or dealings regarding the Property, or any communication in connection with the subject matter of this transaction, through any real estate broker or other person who can claim a right to a commission or finder's fee except as agreed to in writing by the Agency and Developer. If any broker or finder makes a claim for a commission or finder's fee based upon a contact, dealings, or communications, the party through whom the broker or finder makes this claim shall indemnify, defend with counsel of the indemnified party's choice, and hold the indemnified party harmless from all expense, loss, damage and claims, including the indemnified party's attorneys' fees, if necessary, arising out of the broker's or finder's claim. The provisions of this section shall survive expiration of the Term or other termination of this Agreement, and shall remain in full force and effect. Section 11.10 Severability. If any term, provision, covenant or condition of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the provisions shall continue in full force and effect unless the rights and obligations of the parties have been materially altered or abridged by such invalidation, voiding or unenforceability. The parties to this Agreement, and their counsel, have read and reviewed this Agreement and agree that any rule of construction to the effect that ambiguities are to be resolved against the drafting party (including but not limited to Civil Code Section 1654) shall not apply to this Agreement. Section 11.11 Legal Actions. In the event any legal action is commenced to interpret or to enforce the terms of this Agreement or to collect damages as a result of any breach thereof, the venue for such action shall be the Superior Court of the County of San Diego. Section 11.12 Binding Upon Successors. This Agreement shall be binding upon and inure to the benefit of the heirs, administrators, executors, successors in interest and assigns of each of the Parties hereto except that there shall be no Transfer of any interest by any of the parties hereto except pursuant to the terms of this Agreement. Any reference in this Agreement to a specifically named party shall be deemed to apply to any successor, heir, administrator, executor or assign of such party who has acquired an interest in compliance with the terms of this Agreement, or under law. The covenants and restrictions set forth in this Agreement shall run with the land, and shall bind all successors in title to the Property. However, on the termination of this Agreement, such covenants and restrictions shall expire. Each and every contract, deed, or other instrument 1010\13\329336.4 51 hereafter executed covering or conveying the Property shall be held conclusively to have been executed, delivered, and accepted subject to such covenants and restrictions, regardless of whether such covenants or restrictions are set forth in such contract, deed, or other instrument, unless the Agency expressly releases the Property from the requirements of this Agreement. Section 11.13 Parties Not Co-Venturers. Nothing in this Agreement is intended to or does establish the Parties as partners, co- venturers, or principal and agent with one another. Section 11.14 Time of the Essence. In all matters under this Agreement, the Parties agree that time is of the essence. Section 11.15 Action by the Agency. Except as may be otherwise specifically provided in this Agreement or another Agency Document, whenever any approval, notice, direction, finding, consent, request, waiver, or other action by the Agency is required or permitted under this Agreement or another Agency Document, such action may be given, made, or taken by the Agency, or by any person who shall have been designated in writing to the Developer by the Agency, without further approval by the Agency Board. Any such action shall be in writing. Section 11.16 Representations and Warranties of the Developer. The Developer hereby represents and warrants to the Agency as follows: (a) Organization. The Developer is a duly organized, validly existing California nonprofit public benefit corporation, and is in good standing under the laws of the State of California and has the power and authority to own its property and carry on its business as now being conducted. (b) Authority of Developer. The Developer has full power and authority to execute and deliver this Agreement, and the other Agency Documents to be executed and delivered pursuant to this Agreement, and to perform and observe the terms and provisions of all of the above. (c) Authority of Persons Executing Documents. This Agreement and all other documents or instruments executed and delivered, or to be executed and delivered, pursuant to this Agreement have been executed and delivered by persons who are duly authorized to execute and deliver the same for and on behalf of the Developer, and all actions required under the Developer's organizational documents and applicable governing law for the authorization, execution, delivery and performance of this Agreement and all other documents or instruments executed and delivered, or to be executed and delivered, pursuant to this Agreement, have been duly taken. 1010\13\329336.4 52 73 (d) Valid Binding Agreements. This Agreement and all other documents or instruments which have been executed and delivered pursuant to or in connection with this Agreement constitute or, if not yet executed or delivered, will when so executed and delivered constitute, legal, valid and binding obligations of the Developer enforceable against it in accordance with their respective terms. (e) No Breach of Law or Agreement. Neither the execution nor delivery of this Agreement or of any other documents or instruments executed and delivered, or to be executed or delivered, pursuant to this Agreement, nor the performance of any provision, condition, covenant or other term hereof or thereof, will conflict with or result in a breach of any statute, rule or regulation, or any judgment, decree or order of any court, board, commission or agency whatsoever binding on the Developer, or any provision of the organizational documents of the Developer, or will conflict with or constitute a breach of or a default under any agreement to which the Developer is a party, or will result in the creation or imposition of any lien upon any assets or property of the Developer, other than liens established pursuant hereto. (f) Compliance With Laws; Consents and Approvals. The construction of the Improvements will comply with all applicable laws, ordinances, rules and regulations of federal, state and local governments and agencies and with all applicable directions, rules and regulations of the fire marshal, health officer, building inspector and other officers of any such government or agency. (g) Pending Proceedings. The Developer is not in default under any law or regulation or under any order of any court, board, commission or agency whatsoever, and there are no claims, actions, suits or proceedings pending or, to the knowledge of the Developer, threatened against or affecting the Developer, at law or in equity, before or by any court, board, commission or agency whatsoever which might, if determined adversely to the Developer, materially affect the Developer's ability to develop the Improvements. (h) Title to Property. Upon the recordation of the Agency Grant Deed, the Developer will have good and marketable title to the Property and there will exist thereon or with respect thereto no mortgage, lien, pledge or other encumbrance of any character whatsoever other than those liens approved by the Agency, liens for current real property taxes and assessments not yet due and payable, and liens in favor of the Agency or approved in writing by the Agency. (i) Financial Statements. The financial statements of the Developer and other financial data and information furnished by the Developer to the Agency fairly present the information contained therein. As of the Effective Date, there has not been any adverse, material change in the financial condition of the Developer from that shown by such financial statements and other data and information. (j) Sufficient Funds. The Developer holds sufficient funds or binding commitments for sufficient funds to obtain the Property, and complete the construction of the Improvements in accordance with this Agreement. 1010\13\329336.4 53 Section 11.17 Complete Understanding of the Parties. This Agreement and the attached exhibits constitute the entire understanding and agreement of the Parties with respect to the matters set forth in this Agreement. Section 11.18 Operating Memoranda; Implementation Agreements. The Parties acknowledge that the provisions of this Agreement require a close degree of cooperation and that new information and future events may demonstrate that changes are appropriate with respect to the details of performance of the Parties under this Agreement. The Parties desire, therefore, to retain a certain degree of flexibility with respect to the details of performance for those items covered in general terms under this Agreement. If and when, from time to time, the Parties find that refinements or adjustments are desirable, such refinements or adjustments shall be accomplished through operating memoranda or implementation agreements approved by the Parties which, after execution shall be attached to this Agreement as addenda and become a part hereof. This Agreement describes some, but not all, of the circumstances in which the preparation and execution of operating memoranda or implementation agreements may be appropriate. Operating memoranda or implementation agreements may be executed on the Agency's behalf by the Executive Director, or his or her designee. In the event a particular subject requires notice or hearing, such notice or hearing shall be appropriately given. Any significant modification to the terms of performance under this Agreement, including but not limited to amendments or modifications to the purchase price (or the terms for the payment of the purchase price) shall be processed as an amendment of this Agreement in accordance with Section 11.19 and must be approved by the Agency Board. Section 11.19 Amendments. The Parties can amend this Agreement only by means of a writing signed by both Parties. Section 11.20 Multiple Originals: Counterparts. This Agreement may be executed in multiple originals, each of which is deemed to be an original, and may be signed in counterparts. Remainder of Page Left Intentionally Blank 1010\13\329336.4 54 IN WITNESS WHEREOF, the Agency and the Developer have executed this Agreement in triplicate on or as of the date first above written. DEVELOPER: SAN DIEGO HABITAT FOR HUMANITY, INC., a California nonprofit public benefit corporation By: Name: Its: APPROVED AS TO FORM: By: Ronald Ball, Agency General Counsel AGENCY: CARLSBAD REDEVELOPMENT AGENCY, a public body, corporate and politic By: Name: Its: 1010\13\329336.4 55 EXHIBIT A Legal Description of the Property 1010\13\329336.3 EXHIBIT B Financial Proposal 1010\13\329336.3 R 1 EXHIBIT C Schedule of Performance 1010\13\329336.3 p 1 EXHIBIT B SCHEDULE OF PERFORMANCE This Schedule of Performance summarizes the schedule for various activities under the Disposition, Development, and Loan Agreement (the "Agreement") to which this exhibit is attached. The description of items in this Schedule of Performance is meant to be descriptive only, and shall not be deemed to modify in any way the provisions of the Agreement to which such items relate. Section references herein to the Agreement are intended merely as an aid in relating this Schedule of Performance to other provisions of the Agreement and shall not be deemed to have any substantive effect. Whenever this Schedule of Performance requires the submission of plans or other documents at a specific time, such plans or other documents, as submitted, shall be complete and adequate for review by the Agency or other applicable governmental entity no later than the time set forth herein. Prior to the time set forth for each particular submission, the Developer shall consult with Agency staff informally as necessary concerning such submission in order to assure that such submission will be complete and in a proper form no later than the time for submission set forth herein. Action Date Land Use Approvals - Applications. The Developer shall apply for all governmental approvals necessary for the construction of the Improvements. [Agreement § 2.2] No later than _, 2007. Construction Plans-Submission. The Developer shall submit its Construction Plans to the Agency for the Agency's review and approval. [Agreement § 2.3] No later than _, 2007. Financing Plan - Submission. The Developer shall submit evidence of financing for acquisition of the Property and development of Improvements. [Agreement § 2.4] No later than , 2007. Construction Plans- Approval. The Developer shall obtain the Agency's approval of the Construction Plans. [Agreement § 2.3] No later than _, 2007. Financing Plan - Approval. The Developer shall obtain the Agency's approval of the proposed Financing Plan [Agreement § 2.4] No later than _, 2007. 1010\13\473251.1 Action 6. Construction Contract. The Developer shall submit for Agency approval the construction contract for the construction of the Improvements. [Agreement § 2.7] Date No later than _, 2007. 7. Performance and Payment Bonds. The Developer shall deliver copies of the payment and performance bonds to the Agency and obtain Agency approval of such bonds. [Agreement § 2.8] No later than 5 days prior to the Closing. 8. Insurance. The Developer shall submit evidence of insurance to the Agency. [Agreement § 2.9] No later than 5 days prior to the Closing. 9. Evidence of Availability of Funds. The Developer shall submit evidence to the Agency of the closing of the Sponsorship and the availability of funds for the construction of the Improvements. [Agreement § 2.5] Prior to, or simultaneously with, the Closing. 10. Building Permit-Issuance. The Developer shall obtain the building permit and all other governmental approvals. [Agreement § 2.5] Prior to, or simultaneously with, the Closing. 11. Closing. The Developer shall obtain the Property from the Agency. [Agreement § 3.1] No later than _, 2007; provided that the Developer has satisfied all conditions precedent as set forth in the Agreement. 12. Commencement of Construction. The Developer shall commence, or cause the commencement of construction, of the Improvements. [Agreement § 4.3] No later than 30 days after the Closing, or , 2007, whichever is earlier. 13. Completion of Construction. The Developer shall complete, or cause the completion of construction, of the Improvements. [Agreement §4.4] No later than 12 months following the Closing, or , 2007, whichever is earlier. 1010\13\473251.1 EXHIBIT D Form of Agency Grant Deed 1010\13\329336.3 RECORDING REQUESTED BY AND WHEN RECORDED RETURN TO: Carlsbad Redevelopment Agency 2965 Roosevelt Street, Suite B Carlsbad, CA 92008 Attn: Executive Director NO FEE FOR RECORDING PURSUANT TO GOVERNMENT CODE SECTION 27383 GRANT DEED For valuable consideration, the receipt of which is hereby acknowledged, THE CARLSBAD REDEVELOPMENT AGENCY, a public body, corporate and politic (the "Grantor"), acting to carry out redevelopment purposes pursuant to the Community Redevelopment Law of the State of California, hereby grants to SAN DIEGO HABITAT FOR HUMANITY, INC., a California nonprofit public benefit corporation (the "Grantee"), the real property (the "Property") described in Exhibit A attached hereto and incorporated in this Grant Deed by this reference. 1. The Property is conveyed subject to the Disposition, Development, and Loan Agreement (the "Agreement") entered into by and between Grantor and Grantee and dated as of , 2007. 2. The Grantee hereby covenants and agrees, for itself and its successors and assigns, that the Grantee and such successors and assigns shall promptly begin and diligently prosecute to completion the redevelopment of the Property through the installation of the improvements required pursuant to the Agreement (the "Improvements"), and that such installation shall be commenced and completed within the times provided in the Agreement. Promptly after completion of the installation of improvements on the Property in accordance with the provisions of the Agreement, the Grantor will furnish the Grantee with an appropriate instrument so certifying (a "Certificate of Completion"). Such Certificate of Completion by the Grantor shall be a conclusive determination of satisfaction and termination of the agreements and covenants in the Agreement and in this Grant Deed with respect to the obligations of the Grantee and its successors and assigns to install the Improvements and the dates for the beginning and completion of such installation. 3. The Grantee hereby covenants and agrees, for itself and its successors and assigns, that during installation and thereafter, the Grantee shall devote the Property only to the uses specified in the Agreement, including, but not limited to the provisions of Article 6 and Article 7 of the Agreement which are incorporated into this Grant Deed by this reference. 773\70\416256.1 4. The Grantee hereby covenants and agrees, for itself and its successors and assigns, that during installation and thereafter, the Grantee shall operate and maintain the Property and Improvements thereon in compliance with all requirements for operation and maintenance set forth in the Agreement. 5. The Grantee covenants and agrees, for itself and its successors and assigns, that there shall be no discrimination against or segregation of any person or group of persons on account of race, color, creed, religion, sex, sexual orientation, age, marital status, national origin, or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Property, 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 Property and the Improvements thereon. All deeds, leases or contracts made relative to the Property and the Improvements thereon or any part thereof, shall contain or be subject to substantially the following non-discrimination clauses: a. In Deeds: "(1) 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 any basis listed in subdivision (a) and (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, in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the property herein conveyed, nor shall the grantee or any person claiming under or through the grantee, establish or permit any 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 property herein conveyed. The foregoing covenant shall run with the land. (2) Notwithstanding paragraph (1), with respect to familial status, paragraph (1) shall not be construed to apply to housing for older persons, as defined in Section 12955.9 of the Government Code. With respect to familial status, nothing in paragraph (1) shall be construed to affect Sections 51.2, 51.3, 51.4, 51.10, 51.11, and 799.5 of the Civil Code, relating to housing for senior citizens. Subdivision (d) of Section 51 and Section 1360 of the Civil Code and subdivisions (n), (o), and (p) of Section 12955 of the Government Code shall apply to paragraph (1)." b. In Leases: "(1) Lessee 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 any basis listed in subdivision (a) 773\70\416256.1 and (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 in the leasing, subleasing, transferring, use, occupancy, tenure or enjoyment of the premises herein leased nor shall the lessee or any person claiming under or through the lessee, 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 premises herein leased. (2) Notwithstanding paragraph (1), with respect to familial status, paragraph (1) shall not be construed to apply to housing for older persons, as defined in Section 12955.9 of the Government Code. With respect to familial status, nothing in paragraph (1) shall be construed to affect Sections 51.2, 51.3, 51.4, 51.10, 51.11, and 799.5 of the Civil Code, relating to housing for senior citizens. Subdivision (d) of Section 51 and Section 1360 of the Civil Code and subdivisions (n), (o), and (p) of Section 12955 of the Government Code shall apply to paragraph (D." c. In Contracts: "(1) There shall be no discrimination against or segregation of, any person or group of persons on account of any basis listed in subdivision (a) and (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 in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the property nor shall the transferee or any person claiming under or through the transferee 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. (2) Notwithstanding paragraph (1), with respect to familial status, paragraph (1) shall not be construed to apply to housing for older persons, as defined in Section 12955.9 of the Government Code. With respect to familial status, nothing in paragraph (1) shall be construed to affect Sections 51.2, 51.3, 51.4, 51.10, 51.11, and 799.5 of the Civil Code, relating to housing for senior citizens. Subdivision (d) of Section 51 and Section 1360 of the Civil Code and subdivisions (n), (o), and (p) of Section 12955 of the Government Code shall apply to paragraph (1)." 6. The Grantee represents and agrees that the Property will be used for the purposes of timely redevelopment as set forth in the Agreement and not for speculation in landholding. The Grantee further recognizes that in view of the following factors, the qualifications of the Grantee are of particular concern to the community and the Grantor: a. The importance of the redevelopment of the Property to the general welfare of the community; and b. The land acquisition assistance and other public aid that have been made available by law and by the government for the purpose of making such redevelopment possible; and 773\70\416256.1 c. The reliance by the Grantor upon the unique qualifications and ability of the Grantee to serve as the catalyst for development of the Property and upon the continuing interest which the Grantee will have in the Property to assure the quality of the use, operation and maintenance deemed critical by the Grantor in the development of the Property; and d. The fact that a change in ownership or control of the owner of the Property, or of a substantial part thereof, or any other act or transaction involving or resulting in a significant change in ownership or with respect to the identity of the parties in control of the Grantee or the degree thereof is for practical purposes a transfer or disposition of the Property; and e. The fact that the Property is not to be acquired or used for speculation, but only for development and operation by the Grantee in accordance with the Agreement; and f. The importance to the Grantor and the community of the standards of use, operation and maintenance of the Property. The Grantee further recognizes that it is because of such qualifications and identity that the Grantor has entered into the Agreement and has conveyed the Property to the Grantee. For the reasons stated above, the Grantee covenants, for itself and its successors and assigns, that there shall be no sale, transfer, assignment, conveyance, lease, pledge or encumbrance of the Agreement, or the Property and the Improvements thereon or any part thereof, or of other ownership interest in the Grantee in violation of the Agreement. No voluntary or involuntary successor in interest of the Grantee shall acquire any rights or powers under this Grant Deed or the Agreement except as expressly set forth in this Grant Deed or the Agreement. 7. The covenants contained in Sections 2, 3, 4, and 6 regarding installation, use, operation and maintenance, and transfers of interests, shall remain in effect for the term of the Agreement. The covenants contained in Section 5 regarding non-discrimination shall remain in effect in perpetuity. 8. No violation or breach of the covenants, conditions, restrictions, provisions or limitations contained in this Grant Deed shall defeat or render invalid or in any way impair the lien or charge of any mortgage, deed of trust or other financing or security instrument permitted by the Agreement or otherwise approved by the Agency; provided, however, that any successor of Grantee to the Property shall be bound by such covenants, conditions, restrictions, limitations and provisions, whether such successor's title was acquired by foreclosure, deed in lieu of foreclosure, trustee's sale or otherwise. 9. The covenants contained in Sections 2, 3, 4, 5 and 6 of this Grant Deed shall, without regard to technical classification or designation, legal or otherwise specifically provided in this Grant Deed, be, to the fullest extent permitted by law and equity, binding for the benefit and in favor of and enforceable by the Grantor, its successors and assigns, the City of Pittsburg 773\70\416256.1 and any successor in interest to the Property or any part thereof, and such covenants shall run in favor of the Grantor and such aforementioned parties for the entire period during which such covenants shall be in force and effect, without regard to whether the Grantor is or remains an owner of any land or interest therein to which such covenants relate. In the event of any breach of any of such covenants, the Grantor and such aforementioned parties shall have the right to exercise all of the rights and remedies, and to maintain any actions at law or suits in equity or other property proceedings to enforce the curing of such breach. The covenants contained in this Grant Deed shall be for the benefit of and shall be enforceable only by the Grantor, its successors and such aforementioned parties. 10. Only the Grantor, its successors and assigns, and the Grantee and the successors and assigns of the Grantee in and to all or any part of the fee title to the Property shall have the rights to consent and agree to changes or to eliminate in whole or in part any of the covenants contained in this Grant Deed or to subject the Property to additional covenants, easements, or other restrictions. For purposes of this Section, successors and assigns of the Grantee shall be defined to include only those parties who hold all or any part of the Property in fee title, and not to include a tenant, lessee, easement holder, licensee, mortgagee, trustee, beneficiary under deed of trust, or any other person or entity having an interest less than a fee in the Property. 11. If the Agreement is terminated pursuant to Section 9.4 thereof following the close of escrow and prior to the issuance of the Certificate of Completion for the Improvements, then the Grantor may, in addition to other rights granted in the Agreement, re-enter and take possession of the Property for which a Certificate of Completion has not been issued with all improvements thereon, and revest in the Grantor the estate theretofore conveyed to the Grantee. The interest created pursuant to this Section 11 shall be a "power of termination" as defined in California Civil Code Section 885.010. Upon revesting in the Grantor of title to the Property or any portion thereof as provided in this Section 11, the Grantor shall, pursuant to its responsibilities under State law, use its best efforts to resell the Property as soon as possible, in a commercially reasonable manner and consistent with the objectives of such law and of the Redevelopment Plan. The Property shall be sold at a price that the Grantor determines is not less than the value of the Property given the covenants, conditions and requirements the Grantor is imposing on the purchaser. Upon such resale of the Property or any portion thereof the proceeds thereof shall be applied as follows: a. First, to reimburse the Grantor, or the City, for any reasonable costs it incurs in selling or managing the Property, or in connection with the completion of the construction of the Improvements, including but not limited to amounts to discharge, or to prevent liens or encumbrances arising from any acts or omissions of Grantee; b. Second, to the Grantor to reimburse the Grantor for damages to which it is entitled under the Agreement by reason of the Grantee's default; c. Third, to the Grantor to repay the Agency Loan (as defined in the Agreement); 773\70\416256.1 d. Fourth, to the Grantee up to the reasonable cost of the Improvements the Grantee has placed on the Property and such other reasonable costs the Grantee has incurred directly in connection with the development of the Property that were not financed with the Agency Loan; and e. Fifth, any balance to the Agency. 12. In the event there is a conflict between the provisions of this Grant Deed and the Agreement, it is the intent of the parties hereto and their successors in interest that the Agreement shall control. 13. This Grant Deed may be executed in multiple originals, each of which is deemed to be an original, and may be signed in counterparts. Remainder of Page Left Intentionally Blank 773\70\416256.1 IN WITNESS WHEREOF, the parties hereto have executed this Grant Deed as of this APPROVED AS TO FORM: Ronald Ball, Agency General Counsel GRANTOR: CARLSBAD REDEVELOPMENT AGENCY, a public body corporate and politic By: Name: Its: GRANTEE: SAN DIEGO HABITAT FOR HUMANITY, INC., a California nonprofit public benefit corporation By: Name: Its: 773\70\416256.1 EXHIBIT A PROPERTY DESCRIPTION 773\70\416256.1 A-l STATE OF CALIFORNIA ) ) COUNTY OF ) On , 20 before me, Notary Public, personally appeared personally known to me (or 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. WITNESS my hand and official seal. Signature (Seal) STATE OF CALIFORNIA ) ) COUNTY OF ) On , 20 before me, Notary Public, personally appeared personally known to me (or 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. WITNESS my hand and official seal. Signature (Seal) 773\70\416256.1 EXHIBIT E Form of Agency Deed of Trust 1010\13\329336.3 J7-1 RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: Carlsbad Redevelopment Agency 2965 Roosevelt Street, Suite B Carlsbad, CA 92008 Attn: Executive Director No fee for recording pursuant to Government Code Section 27383 DEED OF TRUST WITH ASSIGNMENT OF RENTS AND SECURITY AGREEMENT (San Diego Habitat for Humanity, Inc.) THIS DEED OF TRUST WITH ASSIGNMENT OF RENTS AND SECURITY AGREEMENT ("Deed of Trust") is made as of , 2007, by and among San Diego Habitat for Humanity, Inc., a California nonprofit public benefit corporation ("Trustor"), , a California corporation ("Trustee"), and the Carlsbad Redevelopment Agency, a public body, corporate, and politic ("Beneficiary"). FOR GOOD AND VALUABLE CONSIDERATION, including the indebtedness herein recited and the trust herein created, the receipt of which is hereby acknowledged, Trustor hereby irrevocably grants, transfers, conveys and assigns to Trustee, IN TRUST, WITH POWER OF SALE, for the benefit and security of Beneficiary, under and subject to the terms and conditions hereinafter set forth, Trustor's fee interest in the property located in the City of Carlsbad, County of San Diego, State of California, that is described in the attached Exhibit A, incorporated herein by this reference (the "Property"). TOGETHER WITH all interest, estates or other claims, both in law and in equity which Trustor now has or may hereafter acquire in the Property and the rents; TOGETHER WITH all easements, rights-of-way and rights used in connection therewith or as a means of access thereto, including (without limiting the generality of the foregoing) all tenements, hereditaments and appurtenances thereof and thereto; TOGETHER WITH any and all buildings and improvements of every kind and description now or hereafter erected thereon, and all property of the Trustor now or hereafter affixed to or placed upon the Property; TOGETHER WITH all building materials and equipment now or hereafter delivered to said property and intended to be installed therein; TOGETHER WITH all right, title and interest of Trustor, now owned or hereafter acquired, in and to any land lying within the right-of-way of any street, open or proposed, adjoining the Property, and any and all sidewalks, alleys and strips and areas of land adjacent to or used in connection with the Property; 1010\20\406821.1 ^ £ TOGETHER WITH all estate, interest, right, title, other claim or demand, of every nature, in and to such property, including the Property, both in law and in equity, including, but not limited to, all deposits made with or other security given by Trustor to utility companies, the proceeds from any or all of such property, including the Property, claims or demands with respect to the proceeds of insurance in effect with respect thereto, which Trustor now has or may hereafter acquire, any and all awards made for the taking by eminent domain or by any proceeding or purchase in lieu thereof of the whole or any part of such property, including without limitation, any awards resulting from a change of grade of streets and awards for severance damages to the extent Beneficiary has an interest in such awards for taking as provided in Paragraph 4.1 herein; TOGETHER WITH all of Trustor's interest in all articles of personal property or fixtures 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 complete 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; and TOGETHER WITH all of Trustor's interest in all building materials, fixtures, equipment, work in process and other personal property to be incorporated into the Property; all goods, materials, supplies, fixtures, equipment, machinery, furniture and furnishings, signs and other personal property now or hereafter appropriated for use on the Property, whether stored on the Property or elsewhere, and used or to be used in connection with the Property; all rents, issues and profits, and all inventory, accounts, accounts receivable, contract rights, general intangibles, chattel paper, instruments, documents, notes drafts, letters of credit, insurance policies, insurance and condemnation awards and proceeds, trade names, trademarks and service marks arising from or related to the Property and any business conducted thereon by Trustor; all replacements, additions, accessions and proceeds; and all books, records and files relating to any of the foregoing. All of the foregoing, together with the Property, is herein referred to as the "Security." To have and to hold the Security together with acquittances to the Trustee, its successors and assigns forever. FOR THE PURPOSE OF SECURING: (a) Payment of just indebtedness of Trustor to Beneficiary as set forth in the Note (defined in Article 1 below) until paid or cancelled. Said principal and other payments shall be due and payable as provided in the Note. Said Note and all its terms are incorporated herein by reference, and this conveyance shall secure any and all extensions thereof, however evidenced; and (b) Payment of any sums advanced by Beneficiary to protect the Security pursuant to the terms and provisions of this Deed of Trust following a breach of Trustor's obligation to 1010\20\406821.1 advance said sums and the expiration of any applicable cure period, with interest thereon as provided herein; and (c) Performance of every obligation, covenant or agreement of Trustor contained herein and in the Loan Documents (defined in Section 1.2 below). AND TO PROTECT THE SECURITY OF THIS DEED OF TRUST, TRUSTOR COVENANTS AND AGREES: ARTICLE 1 DEFINITIONS In addition to the terms defined elsewhere in this Deed of Trust, the following terms shall have the following meanings in this Deed of Trust: Section 1.1 The term "Loan Agreement" means that certain Disposition, Development, and Loan Agreement between Trustor and Beneficiary, dated of even date herewith providing for the Beneficiary to loan to the Trustor an amount not to exceed One Million Five Hundred Twenty-Five Thousand Nine Hundred Twenty Dollars ($1,525,920) for the development of the Property. Section 1.2 The term "Loan Documents" means this Deed of Trust, the Note, the Loan Agreement, and any other debt, loan or security instruments between Trustor and the Beneficiary relating to the Property. Section 1.3 The term "Note" means the promissory note in the principal amount of One Million Five Hundred Twenty-Five Thousand Nine Hundred Twenty Dollars ($1,525,920) dated of even date herewith executed by the Trustor in favor of the Beneficiary, the payment of which is secured by this Deed of Trust. (A copy of the Note is on file with the Beneficiary and terms and provisions of the Note are incorporated herein by reference.). Section 1.4 The term "Principal" means the amount required to be paid under the Note. ARTICLE 2 MAINTENANCE AND MODIFICATION OF THE PROPERTY AND SECURITY Section 2.1 Maintenance and Modification of the Property by Trustor. The Trustor agrees that at all times prior to full payment of the sum owed under the Note, the Trustor will, at the Trustor's own expense, maintain, preserve and keep the Security or cause the Security to be maintained and preserved in good condition. The Trustor will from time to time make or cause to be made all repairs, replacements and renewals deemed proper and necessary by it. The Beneficiary shall have no responsibility in any of these matters or for the making of improvements or additions to the Security. 1010\20\406821.1 /DO Trustor agrees to pay fully and discharge (or cause to be paid fully and discharged) all claims for labor done and for material and services furnished in connection with the Security, diligently to file or procure the filing of a valid notice of cessation upon the event of a cessation of labor on the work or construction on the Security for a continuous period of thirty (30) days or more, and to take all other reasonable steps to forestall the assertion of claims of lien against the Security of any part thereof. Trustor irrevocably appoints, designates and authorizes Beneficiary as its agent (said agency being coupled with an interest) with the authority, but without any obligation, to file for record any notices of completion or cessation of labor or any other notice that Beneficiary deems necessary or desirable to protect its interest in and to the Security or the Loan Documents; provided, however, that Beneficiary shall exercise its rights as agent of Trustor only in the event that Trustor shall fail to take, or shall fail to diligently continue to take, those actions as hereinbefore provided. Upon demand by Beneficiary, Trustor shall make or cause to be made such demands or claims as Beneficiary shall specify upon laborers, materialmen, subcontractors or other persons who have furnished or claim to have furnished labor, services or materials in connection with the Security. Nothing herein contained shall require Trustor to pay any claims for labor, materials or services which Trustor in good faith disputes and is diligently contesting provided that Trustor, upon written request of the Beneficiary, shall, within thirty (30) days after the filing of any claim of lien, record in the Office of the Recorder of San Diego County, a surety bond in an amount 1 and 1/2 times the amount of such claim item to protect against a claim of lien. Section 2.2 Granting of Easements. Trustor may not grant easements, licenses, rights-of-way or other rights or privileges in the nature of easements with respect to any property or rights included in the Security except those required or desirable for installation and maintenance of public utilities including, without limitation, water, gas, electricity, sewer, telephone and telegraph, or those required by law and as approved, in writing, by Beneficiary. Section 2.3 Assignment of Rents. As part of the consideration for the indebtedness evidenced by the Note, Trustor hereby absolutely and unconditionally assigns and transfers to Beneficiary all the rents and revenues of the Property including those now due, past due, or to become due by virtue of any lease or other agreement for the occupancy or use of all or any part of the Property, regardless of to whom the rents and revenues of the Property are payable. Trustor hereby authorizes Beneficiary or Beneficiary's agents to collect the aforesaid rents and revenues and hereby directs each tenant of the Property to pay such rents to Beneficiary or Beneficiary's agents; provided, however, that prior to written notice given by Beneficiary to Trustor of the breach by Trustor of any covenant or agreement of Trustor in the Loan Documents, Trustor shall collect and receive all rents and revenues of the Property as trustee for the benefit of Beneficiary and Trustor to apply the rents and revenues so collected to the sums secured by this Deed of Trust with the balance, so long as no such breach has occurred, to the account of Trustor, it being intended by Trustor and Beneficiary that this assignment of rents constitutes an absolute assignment and not an assignment for additional security only. Upon delivery of written notice by Beneficiary to Trustor of the breach by Trustor of any covenant or agreement of Trustor in the Loan Documents, and without the necessity of Beneficiary entering upon and taking and maintaining 1010\20\406821.1 (0' full control of the Property in person, by agent or by a court-appointed receiver, Beneficiary shall immediately be entitled to possession of all rents and revenues of the Property as specified in this Section 2.3 as the same becomes due and payable, including but not limited to rents then due and unpaid, and all such rents shall immediately upon delivery of such notice be held by Trustor as trustee for the benefit of Beneficiary only; provided, however, that the written notice by Beneficiary to Trustor of the breach by Trustor shall contain a statement that Beneficiary exercises its rights to such rents. Trustor agrees that commencing upon delivery of such written notice of Trustor's breach by Beneficiary to Trustor, each tenant of the Property shall make such rents payable to and pay such rents to Beneficiary or Beneficiary's agents on Beneficiary's written demand to each tenant therefor, delivered to each tenant personally, by mail or by delivering such demand to each rental unit, without any liability on the part of said tenant to inquire further as to the existence of a default by Trustor. Except as previously approved by the Beneficiary as set forth in the Loan Agreement, Trustor hereby covenants that Trustor has not executed any prior assignment of said rents, that Trustor has not performed, and will not perform, any acts or has not executed and will not execute, any instrument which would prevent Beneficiary from exercising its rights under this Section 2.3, and that at the time of execution of this Deed of Trust, there has been no anticipation or prepayment of any of the rents of the Property for more than two (2) months prior to the due dates of such rents. Trustor covenants that Trustor will not hereafter collect or accept payment of any rents of the Property more than two (2) months prior to the due dates of such rents. Trustor further covenant that Trustor will execute and deliver to Beneficiary such further assignments of rents and revenues of the Property as Beneficiary may from time to time request. Upon Trustor's breach of any covenant or agreement of Trustor in the Loan Documents, Beneficiary may in person, by agent or by a court-appointed receiver, regardless of the adequacy of Beneficiary's security, enter upon and take and maintain full control of the Property in order to perform all acts necessary and appropriate for the operation and maintenance thereof including, but not limited to, the execution, cancellation or modification of leases, the collection of all rents and revenues of the Property, the making of repairs to the Property and the execution or termination of contracts providing for the management or maintenance of the Property, all on such terms as are deemed best to protect the security of this Deed of Trust. In the event Beneficiary elects to seek the appointment of a receiver for the Property upon Trustor's breach of any covenant or agreement of Trustor in this Deed of Trust, Trustor hereby expressly consents to the appointment of such receiver. Beneficiary or the receiver shall be entitled to receive a reasonable fee for so managing the Property. All rents and revenues collected subsequent to delivery of written notice by Beneficiary to Trustor of the breach by Trustor of any covenant or agreement of Trustor in the Loan Documents shall be applied first to the costs, if any, of taking control of and managing the Property and collecting the rents, including, but not limited to, attorney's fees, receiver's fees, premiums on receiver's bonds, costs of repairs to the Property, premiums on insurance policies, taxes, assessments and other charges on the Property, and the costs of discharging any obligation or liability of Trustor as lessor or landlord of the Property and then to the sums secured by this Deed of Trust. Beneficiary or the receiver shall have access to the books and records used in the operation and maintenance of the Property and shall be liable to account only for those rents actually received. Beneficiary shall not be liable to Trustor, anyone claiming under or through 1010\20\406821.1 (Ot Trustor or anyone having an interest in the Property by reason of anything done or left undone by Beneficiary under this Section 2.3. If the rents of the Property are not sufficient to meet the costs, if any, of taking control of and managing the Property and collecting the rents, any funds expended by Beneficiary for such purposes shall become indebtedness of Trustor to Beneficiary secured by this Deed of Trust pursuant to Section 3.3 hereof. Unless Beneficiary and Trustor agree in writing to other terms of payment, such amounts shall be payable upon notice from Beneficiary to Trustor requesting payment thereof and shall bear interest from the date of disbursement at the rate stated in Section 3.3. Any entering upon and taking and maintaining of control of the Property by Beneficiary or the receiver and any application of rents as provided herein shall not cure or waive any default hereunder or invalidate any other right or remedy of Beneficiary under applicable law or provided herein. This assignment of rents of the Property shall terminate at such time as this Deed of Trust ceases to secure indebtedness held by Beneficiary. ARTICLE 3 TAXES AND INSURANCE; ADVANCES Section 3.1 Taxes, Other Governmental Charges and Utility Charges. Trustor shall pay, or cause to be paid, at least fifteen (15) days prior to the date of delinquency, all taxes, assessments, charges and levies imposed by any public authority or utility company which are or may become a lien affecting the Security or any part thereof; provided, however, that Trustor shall not be required to pay and discharge any such tax, assessment, charge or levy so long as (a) the legality thereof shall be promptly and actively contested in good faith and by appropriate proceedings, and (b) Trustor maintains reserves adequate to pay any liabilities contested pursuant to this Section 3.1. With respect to taxes, special assessments or other similar governmental charges, Trustor shall pay such amount in full prior to the attachment of any lien therefor on any part of the Security; provided, however, if such taxes, assessments or charges may be paid in installments, Trustor may pay in such installments. Except as provided in clause (b) of the first sentence of this paragraph, the provisions of this Section 3.1 shall not be construed to require that Trustor maintain a reserve account, escrow account, impound account or other similar account for the payment of future taxes, assessments, charges and levies. In the event that Trustor shall fail to pay any of the foregoing items required by this Section to be paid by Trustor, Beneficiary may (but shall be under no obligation to) pay the same, after the Beneficiary has notified the Trustor of such failure to pay and the Trustor fails to fully pay such items within seven (7) business days after receipt of such notice. Any amount so advanced therefor by Beneficiary, together with interest thereon from the date of such advance at the maximum rate permitted by law, shall become an additional obligation of Trustor to the Beneficiary and shall be secured hereby, and Trustor agrees to pay all such amounts. 1010\20\406821.1 Section 3.2 Provisions Respecting Insurance. Trustor agrees to provide insurance conforming in all respects to that required under the Loan Documents during the course of construction and following completion, and at all times until all amounts secured by this Deed of Trust have been paid and all other obligations secured hereunder fulfilled, and this Deed of Trust reconveyed. All such insurance policies and coverages shall be maintained at Trustor's sole cost and expense. Certificates of insurance for all of the above insurance policies, showing the same to be in full force and effect, shall be delivered to the Beneficiary upon demand therefor at any time prior to the Beneficiary's receipt of the entire Principal and all amounts secured by this Deed of Trust. Trustee is aware that California Civil Code Section 2955.5(a) provides as follows: No lender shall require a borrower, as a condition of receiving or maintaining a loan secured by real property, to provide hazard insurance coverage against risks to the improvements on that real property in an amount exceeding the replacement value of the improvements on the property. Section 3.3 Advances. In the event the Trustor shall fail to maintain the full insurance coverage required by this Deed of Trust or shall fail to keep the Security in accordance with the Loan Documents, the Beneficiary, after at least seven (7) days prior notice to Beneficiary, may (but shall be under no obligation to) take out the required policies of insurance and pay the premiums on the same or may make such repairs or replacements as are necessary and provide for payment thereof; and all amounts so advanced therefor by the Beneficiary shall become an additional obligation of the Trustor to the Beneficiary (together with interest as set forth below) and shall be secured hereby, which amounts the Trustor agrees to pay on the demand of the Beneficiary, and if not so paid, shall bear interest from the date of the advance at the lesser of eight percent (8%) per annum or the maximum rate permitted by law. ARTICLE 4 DAMAGE, DESTRUCTION OR CONDEMNATION Section 4.1 Awards and Damages. All judgments, awards of damages, settlements and compensation made in connection with or in lieu of (1) taking of all or any part of or any interest in the Property by or under assertion of the power of eminent domain, (2) any damage to or destruction of the Property or in any part thereof by insured casualty, and (3) any other injury or damage to all or any part of the Property ("Funds") are hereby assigned to and shall be paid to the Beneficiary by a check made payable to the Beneficiary. The Beneficiary is authorized and empowered (but not required) to collect and receive any funds and is authorized to apply them in whole or in part upon any indebtedness or obligation secured hereby, in such order and manner as the Beneficiary shall determine at its sole option. The Beneficiary shall be entitled to settle and adjust all claims under insurance policies provided under this Deed of Trust and may deduct and retain from the proceeds of such insurance the amount of all expenses incurred by it in connection with any such settlement or adjustment. All or any part of the amounts so collected and recovered by the Beneficiary may be released to Trustor upon such conditions as the Beneficiary may impose for 1010\20\406821.1 its disposition, and Beneficiary agrees to release Funds to Trustor to rebuild the Project on the Property provided Trustor demonstrates to Beneficiary that such rebuilding is economically feasible. Application of all or any part of the Funds collected and received by the Beneficiary or the release thereof shall not cure or waive any default under this Deed of Trust. ARTICLE 5 AGREEMENTS AFFECTING THE PROPERTY; FURTHER ASSURANCES; PAYMENT OF PRINCIPAL AND INTEREST Section 5.1 Other Agreements Affecting Property. The Trustor shall duly and punctually perform all terms, covenants, conditions and agreements binding upon it under the Loan Documents and any other agreement of any nature whatsoever now or hereafter involving or affecting the Security or any part thereof. Section 5.2 Agreement to Pay Attorneys' Fees and Expenses. In the event of any Event of Default (as defined below) hereunder, and if the Beneficiary should employ attorneys or incur other expenses for the collection of amounts due or the enforcement of performance or observance of an obligation or agreement on the part of the Trustor in this Deed of Trust, the Trustor agrees that it will, on demand therefor, pay to the Beneficiary the reasonable fees of such attorneys and such other reasonable expenses so incurred by the Beneficiary; and any such amounts paid by the Beneficiary shall be added to the indebtedness secured by the lien of this Deed of Trust, and shall bear interest from the date such expenses are incurred at the lesser often percent (10%) per annum or the maximum rate permitted by law. Section 5.3 Payment of the Principal. The Trustor shall pay to the Beneficiary the Principal and any other payments as set forth in the Note in the amounts and by the times set out therein. Section 5.4 Personal Property. To the maximum extent permitted by law, the personal property subject to this Deed of Trust shall be deemed to be fixtures and part of the real property and this Deed of Trust shall constitute a fixtures filing under the California Commercial Code. As to any personal property not deemed or permitted to be fixtures, this Deed of Trust shall constitute a security agreement under the California Commercial Code. The Trustor hereby grants the Beneficiary a security interest in such items. Section 5.5 Financing Statement. The Trustor shall execute and deliver to the Beneficiary such financing statements pursuant to the appropriate statutes, and any other documents or instruments as are required to convey to the Beneficiary a valid perfected security interest in the Security. The Trustor agrees to perform all acts which the Beneficiary may reasonably request so as to enable the Beneficiary to maintain such valid perfected security interest in the Security in order to secure the payment of o 1010\20\406821.1 /6S the Note in accordance with their terms. The Beneficiary is authorized to file a copy of any such financing statement in any jurisdiction(s) as it shall deem appropriate from time to time in order to protect the security interest established pursuant to this instrument. Trustor shall pay all costs of filing such financing statements and any extensions, renewals, amendments, and releases thereof, and shall pay all reasonable costs and expenses of any record searches for financing statements, and releases thereof, as the Beneficiary may reasonably require. Without the prior written consent of the Beneficiary, Trustor shall not create or suffer to be created pursuant to the California Commercial Code any other security interest in the Security, including replacements and additions thereto. Section 5.6 Operation of the Security. The Trustor shall operate the Security (and, in case of a transfer of a portion of the Security subject to this Deed of Trust, the transferee shall operate such portion of the Security) in full compliance with the Loan Documents. Section 5.7 Inspection of the Security. At any and all reasonable times upon seventy-two (72) hours' notice, the Beneficiary and its duly authorized agents, attorneys, experts, engineers, accountants and representatives, shall have the right, without payment of charges or fees, to inspect the Security. Section 5.8 Nondiscrimination. (1) There shall be no discrimination against or segregation of, any person or group of persons on account of any basis listed in subdivision (a) and (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 in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the property nor shall the transferee or any person claiming under or through the transferee 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. (2) Notwithstanding paragraph (1), with respect to familial status, paragraph (1) shall not be construed to apply to housing for older persons, as defined in Section 12955.9 of the Government Code. With respect to familial status, nothing in paragraph (1) shall be construed to affect Sections 51.2, 51.3, 51.4, 51.10, 51.11, and 799.5 of the Civil Code, relating to housing for senior citizens. Subdivision (d) of Section 51 and Section 1360 of the Civil Code and subdivisions (n), (o), and (p) of Section 12955 of the Government Code shall apply to paragraph (1). ARTICLE 6 HAZARDOUS WASTE Trustor shall keep and maintain the Property in compliance with, and shall not cause or permit the Property to be in violation of any federal, state or local laws, ordinances or regulations relating to industrial hygiene or to the environmental conditions on, under or about the Property 1010\20\406821.1 including, but not limited to, soil and ground water conditions. Trustor shall not use, generate, manufacture, store or dispose of on, under, or about the Property or transport to or from the Property any flammable explosives, radioactive materials, hazardous wastes, toxic substances or related materials, including without limitation, any substances defined as or included in the definition of "hazardous substances," hazardous wastes," "hazardous materials," or "toxic substances" under any applicable federal or state laws or regulations (collectively referred to hereinafter as "Hazardous Materials") except such of the foregoing as may be customarily kept and used in and about multifamily residential property. Trustor shall immediately advise Beneficiary in writing if at any time it receives written notice of (i) any and all enforcement, cleanup, removal or other governmental or regulatory actions instituted, completed or threatened against Trustor or the Property pursuant to any applicable federal, state or local laws, ordinances, or regulations relating to any Hazardous Materials, ("Hazardous Materials Law"); (ii) all claims made or threatened by any third party against Trustor or the Property relating to damage, contribution, cost recovery compensation, loss or injury resulting from any Hazardous Materials (the matters set forth in clauses (i) and (ii) above hereinafter referred to a "Hazardous Materials Claims"); and (iii) Trustor's discovery of any occurrence or condition on any real property adjoining or in the vicinity of the Property that could cause the Property or any part thereof to be classified as "border-zone property" under the provision of California Health and Safety Code, Sections 25220 et seq., or any regulation adopted in accordance therewith, or to be otherwise subject to any restrictions on the ownership, occupancy, transferability or use of the Property under any Hazardous Materials Law. Beneficiary shall have the right to join and participate in, as a party if it so elects, any legal proceedings or actions initiated in connection with any Hazardous Materials Claims and to have its reasonable attorneys' fees in connection therewith paid by Trustor. Trustor shall indemnify and hold harmless Beneficiary and its boardmembers, supervisors, directors, officers, employees, agents, successors and assigns from and against any loss, damage, cost, expense or liability directly or indirectly arising out of or attributable to the use, generation, storage, release, threatened release, discharge, disposal, or presence of Hazardous Materials on, under, or about the Property including without limitation: (a) all foreseeable consequential damages; (b) the costs of any required or necessary repair, cleanup or detoxification of the Property and the preparation and implementation of any closure, remedial or other required plans; and (c) all reasonable costs and expenses incurred by Beneficiary in connection with clauses (a) and (b), including but not limited to reasonable attorneys' fees. Without Beneficiary's prior written consent, which shall not be unreasonably withheld, Trustor shall not take any remedial action in response to the presence of any Hazardous Materials on, under or about the Property, nor enter into any settlement agreement, consent decree, or other compromise in respect to any Hazardous Material Claims, which remedial action, settlement, consent decree or compromise might, in Beneficiary's reasonable judgement, impair the value of the Beneficiary's security hereunder; provided, however, that Beneficiary's prior consent shall not be necessary in the event that the presence of Hazardous Materials on, under, or about the Property either poses an immediate threat to the health, safety or welfare of any individual or is of such a nature that an immediate remedial response is necessary and it is not reasonably possible to obtain Beneficiary's consent before taking such action, provided that in such event Trustor shall notify Beneficiary as soon as practicable of any action so taken. Beneficiary agrees not to withhold its consent, where such consent is required hereunder, if 101010\20\406821.1 either (i) a particular remedial action is ordered by a court of competent jurisdiction, (ii) Trustor will or may be subjected to civil or criminal sanctions or penalties if it fails to take a required action; (iii) Trustor establishes to the reasonable satisfaction of Beneficiary that there is no reasonable alternative to such remedial action which would result in less impairment of Beneficiary's security hereunder; or (iv) the action has been agreed to by Beneficiary. The Trustor hereby acknowledges and agrees that (i) this Article is intended as the Beneficiary's written request for information (and the Trustor's response) concerning the environmental condition of the Property as required by California Code of Civil Procedure Section 726.5, and (ii) each representation and warranty in this Deed of Trust or any of the other Loan Documents (together with any indemnity applicable to a breach of any such representation and warranty) with respect to the environmental condition of the property is intended by the Beneficiary and the Trustor to be an "environmental provision" for purposes of California Code of Civil Procedure Section 736. In the event that any portion of the Property is determined to be "environmentally impaired" (as that term is defined in California Code of Civil Procedure Section 726.5(e)(3)) or to be an "affected parcel" (as that term is defined in California Code of Civil Procedure Section 726.5(e)(l)), then, without otherwise limiting or in any way affecting the Beneficiary's or the Trustee's rights and remedies under this Deed of Trust, the Beneficiary may elect to exercise its rights under California Code of Civil Procedure Section 726.5(a) to (1) waive its lien on such environmentally impaired or affected portion of the Property and (2) exercise (a) the rights and remedies of an unsecured creditor, including reduction of its claim against the Trustor to judgment, and (b) any other rights and remedies permitted by law. For purposes of determining the Beneficiary's right to proceed as an unsecured creditor under California Code of Civil Procedure Section 726.5(a), the Trustor shall be deemed to have willfully permitted or acquiesced in a release or threatened release of hazardous materials, within the meaning of California Code of Civil Procedure Section 726.5(d)(l), if the release or threatened release of hazardous materials was knowingly or negligently caused or contributed to by any lessee, occupant, or user of any portion of the Property and the Trustor knew or should have known of the activity by such lessee, occupant, or user which caused or contributed to the release or threatened release. All costs and expenses, including (but not limited to) attorneys' fees, incurred by the Beneficiary in connection with any action commenced under this paragraph, including any action required by California Code of Civil Procedure Section 726.5(b) to determine the degree to which the Property is environmentally impaired, plus interest thereon at the rate specified in the Note until paid, shall be added to the indebtedness secured by this Deed of Trust and shall be due and payable to the Beneficiary upon its demand made at any time following the conclusion of such action. ARTICLE 7 EVENTS OF DEFAULT AND REMEDIES Section 7.1 Events of Default. The following shall constitute Events of Default following the expiration of any applicable notice and cure periods: (1) failure to make any payment to be paid by Trustor under the Loan Documents; (2) failure to observe or perform any of Trustor's other covenants, 1010\20\406821.1 agreements or obligations under the Loan Documents, including, without limitation, the provisions concerning discrimination; or (3) failure to make any payment or perform any of Trustor's other covenants, agreements, or obligations under any other debt instruments or regulatory agreement secured by the Property, which default shall not be cured within the times and in the manner provided therein. Section 7.2 Acceleration of Maturity. If an Event of Default shall have occurred and be continuing, then at the option of the Beneficiary, the amount of any payment related to the Event of Default and the unpaid Principal of the Note shall immediately become due and payable, upon written notice by the Beneficiary to the Trustor (or automatically where so specified in the Loan Documents), and no omission on the part of the Beneficiary to exercise such option when entitled to do so shall be construed as a waiver of such right. Section 7.3 The Beneficiary's Right to Enter and Take Possession. If an Event of Default shall have occurred and be continuing, the Beneficiary may: (a) Either in person or by agent, with or without bringing any action or proceeding, or by a receiver appointed by a court, and without regard to the adequacy of its security, enter upon the Security and take possession thereof (or any part thereof) and of any of the Security, in its own name or in the name of Trustee, and do any acts which it deems necessary or desirable to preserve the value or marketability of the Property, or part thereof or interest therein, increase the income therefrom or protect the security thereof. The entering upon and taking possession of the Security shall not cure or waive any Event of Default or Notice of Default (as defined below) hereunder or invalidate any act done in response to such Default or pursuant to such Notice of Default and, notwithstanding the continuance in possession of the Security, Beneficiary shall be entitled to exercise every right provided for in this Deed of Trust, or by law upon occurrence of any Event of Default, including the right to exercise the power of sale; (b) Commence an action to foreclose this Deed of Trust as a mortgage, appoint a receiver, or specifically enforce any of the covenants hereof; (c) Deliver to Trustee a written declaration of default and demand for sale, and a written notice of default and election to cause Trustor's interest in the Security to be sold ("Notice of Default and Election to Sell"), which notice Trustee or Beneficiary shall cause to be duly filed for record in the Official Records of San Diego County; or (d) Exercise all other rights and remedies provided herein, in the instruments by which the Trustor acquires title to any Security, or in any other document or agreement now or hereafter evidencing, creating or securing all or any portion of the obligations secured hereby, or provided by law. 121010\20\406821.1 Section 7.4 Foreclosure By Power of Sale. Should the Beneficiary elect to foreclose by exercise of the power of sale herein contained, the Beneficiary shall give the Notice of Default and Election to Sell to the Trustee and shall deposit with Trustee this Deed of Trust which is secured hereby (and the deposit of which shall be deemed to constitute evidence that the unpaid principal amount of the Note is immediately due and payable), and such receipts and evidence of any expenditures made that are additionally secured hereby as Trustee may require. (a) Upon receipt of such notice from the Beneficiary, Trustee shall cause to be recorded, published and delivered to Trustor such Notice of Default and Election to Sell as then required by law and by this Deed of Trust. Trustee shall, without demand on Trustor, after lapse of such time as may then be required by law and after recordation of such Notice of Default and Election to Sell and after Notice of Sale having been given as required by law, sell the Security, at the time and place of sale fixed by it in said Notice of Default and Election to Sell, whether as a whole or in separate lots or parcels or items as Trustee shall deem expedient and in such order as it may determine unless specified otherwise by the Trustor according to California Civil Code Section 2924g(b), at public auction to the highest bidder, for cash in lawful money of the United States payable at the time of sale. Trustee shall deliver to such purchaser or purchasers thereof its good and sufficient deed or deeds conveying the property so sold, but without any covenant or warranty, express or implied. The recitals in such deed or any matters of facts shall be conclusive proof of the truthfulness thereof. Any person, including, without limitation, Trustor, Trustee or Beneficiary, may purchase at such sale, and Trustor hereby covenants to warrant and defend the title of such purchaser or purchasers. (b) After deducting all reasonable costs, fees and expenses of Trustee, including costs of evidence of title in connection with such sale, Trustee shall apply the proceeds of sale to payment of: (i) the unpaid Principal amount of the Note; (ii) all other amounts owed to Beneficiary under the Loan Documents; (iii) all other sums then secured hereby; and (iv) the remainder, if any, to Trustor. (c) Trustee may postpone sale of all or any portion of the Property by public announcement at such time and place of sale, and from time to time thereafter, and without further notice make such sale at the time fixed by the last postponement, or may, in its discretion, give a new Notice of Default and Election to Sell. Section 7.5 Receiver. If an Event of Default shall have occurred and be continuing, Beneficiary, as a matter of right and without further notice to Trustor or anyone claiming under the Security, and without regard to the then value of the Security or the interest of Trustor therein, shall have the right to apply to any court having jurisdiction to appoint a receiver or receivers of the Security (or a part thereof), and Trustor hereby irrevocably consents to such appointment and waives further notice of any application therefor. Any such receiver or receivers shall have all the usual powers and duties of receivers in like or similar cases, and all the powers and duties of Beneficiary in case of entry as provided herein, and shall continue as such and exercise all such powers until the date of confirmation of sale of the Security, unless such receivership is sooner terminated. 1010\20\406821.1 Section 7.6 Remedies Cumulative. No right, power or remedy conferred upon or reserved to the Beneficiary by this Deed of Trust is intended to be exclusive of any other right, power or remedy, but each and every such right, power and remedy shall be cumulative and concurrent and shall be in addition to any other right, power and remedy given hereunder or now or hereafter existing at law or in equity. Section 7.7 No Waiver. (a) No delay or omission of the Beneficiary to exercise any right, power or remedy accruing upon any Event of Default shall exhaust or impair any such right, power or remedy, or shall be construed to be a waiver of any such Event of Default or acquiescence therein; and every right, power and remedy given by this Deed of Trust to the Beneficiary may be exercised from time to time and as often as may be deemed expeditious by the Beneficiary. Beneficiary's expressed or implied consent to a breach by Trustor, or a waiver of any obligation of Trustor hereunder shall not be deemed or construed to be a consent to any subsequent breach, or further waiver, of such obligation or of any other obligations of the Trustor hereunder. Failure on the part of the Beneficiary to complain of any act or failure to act or to declare an Event of Default, irrespective of how long such failure continues, shall not constitute a waiver by the Beneficiary of its right hereunder or impair any rights, power or remedies consequent on any Event of Default by the Trustor. (b) If the Beneficiary (i) grants forbearance or an extension of time for the payment of any sums secured hereby, (ii) takes other or additional security or the payment of any sums secured hereby, (iii) waives or does not exercise any right granted in the Loan Documents, (iv) releases any part of the Security from the lien of this Deed of Trust, or otherwise changes any of the terms, covenants, conditions or agreements in the Loan Documents, (v) consents to the granting of any easement or other right affecting the Security, or (iv) makes or consents to any agreement subordinating the lien hereof, any such act or omission shall not release, discharge, modify, change or affect the original liability under this Deed of Trust, or any other obligation of the Trustor or any subsequent purchaser of the Security or any part thereof, or any maker, co- signer, endorser, surety or guarantor (unless expressly released); nor shall any such act or omission preclude the Beneficiary from exercising any right, power or privilege herein granted or intended to be granted in any Event of Default then made or of any subsequent Event of Default, nor, except as otherwise expressly provided in an instrument or instruments executed by the Beneficiary shall the lien of this Deed of Trust be altered thereby. Section 7.8 Suits to Protect the Security. The Beneficiary shall have power to (a) institute and maintain such suits and proceedings as it may deem expedient to prevent any impairment of the Security and the rights of the Beneficiary as may be unlawful or any violation of this Deed of Trust, (b) preserve or protect its interest (as described in this Deed of Trust) in the Security, and (c) restrain the enforcement of or compliance with any legislation or other governmental enactment, rule or order that may be unconstitutional or otherwise invalid, if the enforcement for compliance with such enactment, rule or order would impair the Security thereunder or be prejudicial to the interest of the Beneficiary. 1010\20\406821.1 Section 7.9 Trustee May File Proofs of Claim. In the case of any receivership, insolvency, bankruptcy, reorganization, arrangement, adjustment, composition or other proceedings affecting the Trustor, its creditors or its property, the Trustee, to the extent permitted by law, shall be entitled to file such proofs of claim and other documents as may be necessary or advisable in order to have the claims of the Beneficiary allowed in such proceedings and for any additional amount which may become due and payable by the Trustor hereunder after such date. Section 7.10 Waiver. The Trustor waives presentment, demand for payment, notice of dishonor, notice of protest and nonpayment, protest, notice of interest on interest and late charges, and diligence in taking any action to collect any sums owing under the Note or in proceedings against the Security, in connection with the delivery, acceptance, performance, default, endorsement or guaranty of this Deed of Trust. ARTICLE 8 MISCELLANEOUS S ection 8.1 Amendments. This instrument cannot be waived, changed, discharged or terminated orally, but only by an instrument in writing signed by Beneficiary and Trustor. Section 8.2 Reconveyance by Trustee. Upon written request of Beneficiary stating that all sums secured hereby have been paid or forgiven, that all obligations to be performed by the Trustee under the Loan Documents (including, but not limited to, the operation of the Property in accordance with, and for the entire term of, the Loan Agreement), and upon surrender of this Deed of Trust to Trustee for cancellation and retention, and upon payment by Trustor of Trustee's reasonable fees, Trustee shall reconvey the Security to Trustor, or to the person or persons legally entitled thereto. Section 8.3 Notices. If at any time after the execution of this Deed of Trust it shall become necessary or convenient for one of the parties hereto to serve any notice, demand or communication upon the other party, such notice, demand or communication shall be in writing and shall be served personally, by reputable overnight delivery service, or by depositing the same in the registered United States mail, return receipt requested, postage prepaid and (1) if intended for Beneficiary shall be addressed to: Carlsbad Redevelopment Agency 2965 Roosevelt Street, Suite B Carlsbad, CA 92008 Attn: Executive Director 1010\20\406821.1 and (2) if intended for Trustor shall be addressed to: San Diego Habitat for Humanity, Inc. 10222 San Diego Mission Road San Diego, CA 92108 Attn: Executive Director Any notice, demand or communication shall be deemed given, received, made or communicated on the date personal delivery is effected or, if mailed in the manner herein specified, on the delivery date or date delivery is refused by the addressee, as shown on the return receipt. Either party may change its address at any time by giving written notice of such change to Beneficiary or Trustor as the case may be, in the manner provided herein, at least ten (10) days prior to the date such change is desired to be effective. Section 8.4 Successors and Joint Trustors. Where an obligation is created herein binding upon Trustor, the obligation shall also apply to and bind any transferee or successors in interest. Where the terms of the Deed of Trust have the effect of creating an obligation of the Trustor and a transferee, such obligation shall be deemed to be a joint and several obligation of the Trustor and such transferee. Where Trustor is more than one entity or person, all obligations of Trustor shall be deemed to be a joint and several obligation of each and every entity and person comprising Trustor. Section 8.5 Captions. The captions or headings at the beginning of each Section hereof are for the convenience of the parties and are not a part of this Deed of Trust. Section 8.6 Invalidity of Certain Provisions. Every provision of this Deed of Trust is intended to be severable. In the event any term or provision hereof is declared to be illegal or invalid for any reason whatsoever by a court or other body of competent jurisdiction, such illegality or invalidity shall not affect the balance of the terms and provisions hereof, which terms and provisions shall remain binding and enforceable. If the lien of this Deed of Trust is invalid or unenforceable as to any part of the debt, or if the lien is invalid or unenforceable as to any part of the Security, the unsecured or partially secured portion of the debt, and all payments made on the debt, whether voluntary or under foreclosure or other enforcement action or procedure, shall be considered to have been first paid or applied to the full payment of that portion of the debt which is not secured or partially secured by the lien of this Deed of Trust. Section 8.7 Governing Law. This Deed of Trust shall be governed by and construed in accordance with the laws of the State of California. 1010\20\406821.1 Section 8.8 Gender and Number. In this Deed of Trust the singular shall include the plural and the masculine shall include the feminine and neuter and vice versa, if the context so requires. Section 8.9 Deed of Trust, Mortgage. Any reference in this Deed of Trust to a mortgage shall also refer to a deed of trust and any reference to a deed of trust shall also refer to a mortgage. Section 8.10 Actions. Trustor agrees to appear in and defend any action or proceeding purporting to affect the Security. Section 8.11 Substitution of Trustee. Beneficiary may from time to time substitute a successor or successors to any Trustee named herein or acting hereunder to execute this 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. Section 8.12 Statute of Limitations. 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. Section 8.13 Acceptance by Trustee. 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 the Trustee is not obligated to notify any party hereto of pending sale under this Deed of Trust or of any action of proceeding in which Trustor, Beneficiary, or Trustee shall be a party unless brought by Trustee. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 1010\20\406821.1 IN WITNESS WHEREOF, Trustor has executed this Deed of Trust as of the day and year first above written. TRUSTOR: SAN DIEGO HABITAT FOR HUMANITY, INC., a California nonprofit public benefit corporation By: f Name: Its: 1010\20\406821.1 18 STATE OF CALIFORNIA ) ) COUNTY OF ) On , 20 before me, , Notary Public, personally appeared , personally known to me (or 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. WITNESS my hand and official seal. Signature (Seal) 1010\20\406821.1 EXHIBIT A (Legal Description) The land is situated in the City of Carlsbad, County of San Diego, State of California, and is described as follows: A-l1010\20\406821.1 EXHIBIT F Form of Agency Note 1010\13\329336.3 Exhibit F Form of Agency Note $1,525,920 Carlsbad, California , 2007 FOR VALUE RECEIVED, San Diego Habitat for Humanity, Inc., a California nonprofit public benefit corporation, or its successor or assign approved by the Agency (the "Developer"), promises to pay to the Carlsbad Redevelopment Agency (the "Agency"), or order, the principal sum of up to One Million Five Hundred Twenty-Five Thousand Nine Hundred Twenty Dollars ($1,525,920), with interest as provided below. 1. Disposition and Development Agreement. This promissory note (the "Note") is made pursuant to the terms of the Disposition, Development, and Loan Agreement between Developer and the Agency, executed as of , 2007 (the "DDLA"). All capitalized terms used but not defined in this Note shall have the meanings set forth in the DDLA. 2. Interest; Repayment Terms. The outstanding principal amount due hereunder shall bear simple interest at the rate of three percent (3%) per annum commencing on the date of the initial disbursement of any portion of the Agency Loan and shall be due and payable at the times and in the manner set forth in the DDLA. All amounts of principal and interest hereunder shall be due in full on the earlier to occur of (i) an Event of Default under the DDLA; (ii) a Transfer not approved by the Agency pursuant to the DDLA; (iii) five (5) years following the Effective Date of the DDLA. As more particularly set forth in Section 5.5 of the DDLA, upon the sale of the last Home in accordance with the requirements of the DDLA, the Agency shall forgive the remaining principal and interest, if any, of the Agency Loan. In the event of a default by Developer under the Agency Documents, which default is not cured within the applicable notice cure periods, interest shall accrue, commencing on the date of default, at the default rate equal to the lesser often percent (10%) per annum or the maximum rate permitted by law. 3. Prepayment. As more fully set forth in Section 5.6 of the DDLA, the Developer shall have the right to prepay all or a portion of the principal and interest due under this Note without any charge or penalty being made therefor. 4. Agency Deed of Trust. This Note is secured by the Agency Deed of Trust of even date herewith recorded against the Property. 5. Acceleration. As more fully set forth in Sections 9.6 of the DDLA, upon the occurrence of an Event of Default by Developer, the Agency shall have the right to declare all of the unpaid 1010\13\174659.2 principal and accrued interest immediately due and payable. Neither acceptance by the Agency of the payments provided for herein nor any failure by the Agency to pursue its legal and equitable remedies upon default shall constitute a waiver of the Agency's right to require prompt payments when due of all principal and interest owing or to declare a default and exercise all of its rights under this Note, the Agency Deed of Trust, the DDLA, and the other Agency Documents. 6. No Offset. The Developer hereby waives any rights of offset it now has or may hereafter have against the Agency, its successors and assigns, and agrees to make the payments called for herein in accordance with the terms of this Note. 7. Waiver; Attorneys' Fees. The Developer and any endorsers or guarantors of this Note, for themselves, their heirs, legal representatives, successors and assigns, respectively, severally waive diligence, presentment, protest, and demand, and notice of protest, dishonor and non- payment of this Note, and expressly waive any rights to be released by reason of any extension of time or change in terms of payment, or change, alteration or release of any security given for the payments hereof, and expressly waive the right to plead any and all statutes of limitations as a defense to any demand on this Note or agreement to pay the same, and jointly and severally agree to pay all costs of collection when incurred, including reasonable attorneys' fees. If an action is instituted on this Note, the undersigned promises to pay, in addition to the costs and disbursements allowed by law, such sum as a court may adjudge reasonable as attorneys' fees in such action. 8. Manner and Place of Payment. All payments of principal and interest and any late charge due under this Note, as well as any additional payments set forth in the Agency Deed of Trust, shall be payable in lawful money of the United States of America at the office of the Agency as set forth in Section 11.1 of the DDLA or at such other address as the Agency may provide to the Developer by notice in accordance with Section 11.1 of the DDLA. 9. Nonrecourse Obligation. Repayment of this Note shall be nonrecourse to Developer as set forth in Section 5.10 of the DDLA. 10. Assignment. The Agency's rights under this Note may be assigned by the Agency in its discretion. F 1010\13\174659.2 11. Conflict. If any term or provision of this Note conflicts with any term or provision of the DDLA, the term or provision of the DDLA shall control to the extent of such conflict. SAN DIEGO HABITAT FOR HUMANITY, INC., a California nonprofit public benefit corporation By:_ Name: Its: F1010\13\174659.2 EXHIBIT G Form of Homebuyer Note 1010\13\329336.3 Q-l EXHIBIT H Form of Homebuyer Deed of Trust 1010\13\329336.3 EXHIBIT I Form of Homebuyer Resale Restriction and Option to Purchase 1010\13\329336.3 NOTICE OF PUBLIC HEARING HOUSING AND REDEVELOPMENT COMMISSION AND CITY COUNCIL OF THE CITY OF CARLBAD DISPOSITION, DEVELOPMENT AND LOAN AGREEMENT AND RELATED ACTIONS FOR SAN DIEGO HABITAT FOR HUMANITY INC. ROOSEVELT GARDEN AFFORDABLE HOUSING DEVELOPMENT WITHIN THE VILLAGE REDEVELOPMENT PROJECT AREA NOTICE IS HEREBY GIVEN that a joint public hearing will be held by the Housing and Redevelopment Commission ("Commission") and City Council ("Council") of the City of Carlsbad at the Council Chambers of the City of Carlsbad, 1200 Carlsbad Village Drive, Carlsbad, California, on Tuesday, September , 2007, at 6:00 p.m., or as soon as possible thereafter, to consider the proposed Disposition, Development and Loan Agreement ("DDLA") between the Commission and San Diego Habitat for Humanity, Inc. ("Habitat") for the development of eleven (11) residential units to be sold at a price affordable to very low income households. The DDLA will provide for additional financial assistance to Habitat in the amount of $258,677 for construction of the project, and disposition of the property owned by the Carlsbad Redevelopment Agency located at 2578 Roosevelt Street to Habitat at no cost to Habitat (or, in other words, for a reuse value of zero). Pursuant to California Health and Safety Code Section 33433 (Redevelopment Law), a report (commonly referred to as the Section 33433 Report) has been prepared which summarizes the terms of the proposed property disposition and the financial assistance for the project. A copy of the staff report to the Commission/Council, the Section 33433 Report and the proposed DDLA are available for public review from the Housing and Redevelopment Department located at 2965 Roosevelt Street, Suite B in Carlsbad during regular business hours which are 7:30am to 5:30pm, Monday through Thursday, and 8:00am to 5:00pm on Friday. At the public hearing, the Commission will consider all evidence and testimony for and against the proposed DDLA and/or Section 33433 Report. All persons having any objections to the proposed DDLA, its related documents and/or its terms may appear before the Commission/Council and show cause why the proposed DDLA together with the Section 33433 Report should not be approved. If unable to attend the public hearing, written comments on any aspect of the proposed DDLA, related documents and/or Section 33433 Report are invited and should be addressed to Debbie Fountain, Director of the Carlsbad Housing and Redevelopment Department, 2965 Roosevelt St., Suite B, Carlsbad, CA 92008-2389. You may also visit the Carlsbad Housing and Redevelopment Development at the same address noted above, telephone at (760) 434-2810 or e-mail dfoun@ci.carlsbad.ca.us. If you plan to attend the public hearing and need a special accommodation because of a sensory or mobility impairment/disability, please contact the City Clerk's office at (760) 434- 2808 to arrange for those accommodations. Lorraine Wood, City Clerk Published: day and day, September, 2007, and in the North County Times PROOF OF PUBLICATION (2010& 2011 C.C.P.) This space is for the County Clerk's Filing Stamp STATE OF CALIFORNIA County of San Diego I am a citizen of the United States and a resident of the County aforesaid: I am over the age of eighteen years and not a party to or interested in the above-entitled matter. I am the principal clerk of the printer of North County Times Formerly known as the Blade-Citizen and The Times-Advocate and which newspapers have been adjudicated newspapers of general circulation by the Superior Court of the County of San Diego, State of California, for the City of Oceanside and the City of Escondido, Court Decree number 171349, for the County of San Diego, that the notice of which the annexed is a printed copy (set in type not smaller than nonpariel), has been published in each regular and entire issue of said newspaper and not in any supplement thereof on the following dates, to-wit: September 12»h & 16th, 2007 I certify (or declare) under penalty of perjury that the foregoing is true and correct. Dated at SAN MARCOS California This 1 7th, day of September, 20QZ. Proof of Publication of HOUSIN OF PUBLIC HEARINGAND REDEVELOPMENTCOMMISSION AND CITY COUNCILOF THE CITY OF CARLBAD-,NDLOAN FOR SANINC.ROOSEVELT GARDEN AFFORDABLE HOUSINGDEVELOPMENT WITHIN THE VILLAGEREDEVELOPMENT PROJECT AREA NOTICE IS HEREBY GIVEN that a joint public hear-ing will be held by the Housing and RedevelopmentCommission ("Commissiorr') and City Councilf Council") of the City of Carlsbad at the CouncilChambers of the City of Carlsbad, 1200 Carlsbad Vil- lage Drive, Carlsbad, California, on Tuesday, Sep-tember 25, 2007, at 6:00 p.m., or as soon as possibfethereafter, to consider the proposed Disposition, De-velopment and Loan Agreement ("DDLA") betweenthe Commission and San Diego Habitat for HumanityInc. ("Habitat") for the development of eleven (11)residential units to be sold at a price affordable to verylow income households. The DDLA will provide foradditional financial assistance to Habitat in theamount of $258,677 for construction of the projectand disposition of the property owned by the CarlsbadRedevelopment Agency located at 2578 RooseveltStreet to Habitat at no cost to Habitat (or, in otherwords, for a reuse value of zero). Pursuant to Cali-fornia Health and Safety Code Section 33433 (Rede-velopment Law), a report (commonly referred to asthe Section 33433 Report) has been prepared whichsummarizes the terms of the proposed property dis-position and the financial assistance for the project. Acopy of the staff report to the Commission/Council,the Section 33433 Report and the proposed DDLAare available for public review from the Housing andRedevelopment Department located at 2965 Roos-evelt Street, Suite Bin Carlsbad during regular busi-ness hours which are 7:30am to 5:3Tjpm, Mondaythrough Thursday, and 8:00am to 5:00pm on Friday. At the public hearing, the Commission will consider allevidence and testimony for and against the proposedDDLA and/or Section 33433 Report. All persons hav-ing any objections to the proposed DDLA, its relateddocuments and/or its terms may appear before theCommission/Council and show cause why the pro-posed DDLA together with the Section 33433 Reportshould not be approved. If unable to attend the publichearing, written comments on any aspect of the pro-posea DDLA, related documents and/or Section33433 Report are invited and should be addressed, toDebbie Fountain, Director of the Carlsbad Housingand Redevelopment Department 2965 RooseveltSt.,Suite B, Carlsbad, CA 92008-23^9. You may also visit the Carlsbad Housing and Rede-velopment Development at the same address notedabove, telephone at (760) 434-2810 or e-maidfoun@ci.carlsbad.ca.us. If you plan to attend the public hearing and need aspecial accommodation because of a sensory or mo-bility impairment/disability, please contact the CityClerk's office at (760) 434-2808 to arrange for thoseaccommodations. Publish: 12th day and 16th day, September, 2007,in the North County Times NCT 2088993 CITY OF CARLSBADCITY COUNCIL AND HOUSING AN!REDEVELOPMENT COMMISSION Signature Jane Allshouse NORTH COUNTY TIMES Legal Advertising Roosevelt Garden CondominiumsHousing and Redevelopment Commission and City CouncilJoint Public Hearing – September 25, 2007 Previous Actions♦March, 2003 – Redevelopment Agency acquired the property (approx. $695,000)♦May, 2006 – Exclusive Negotiating Agreement and Pre-Development Loan Approved for Habitat for Humanity ($608,244)♦April, 2007 – Commission approved Major Redevelopment Permit – Condo Project Project Description♦.56 acre site ♦2578 Roosevelt Street♦11 condominium units ♦8 one-bedroom and 3 two bedroom units♦674sf (1 bdr) and 894sf (2bdr)♦Affordable to households at 50% or below the Area Median Income ($28,100 or $31,600 or less for a family of 2 or 4, respectively) Condo Project CostsExpense Total Per Unit Cost% of Total CostLand$717,793 $65,254 21%Permits & Fees $341,852 $31,078 10%Construction $1,716,179 $156,016 51%Soft Costs $221,793 $20,163 7%Contingency $209,833 $19,076 6%Developer Fee $179,857 $16,351 5%Total $3,387,307 $307,937 100% Project FinancingSourceTotal Amount Per UnitLand Purchase/Transfer (Agency) $695,000 $63,181Predevelopment Loan (Agency)$608,243 $55,295Construction Loan (Agency) $258,677 $23,516Grants$ 425,900 $38,718In-Kind Donations$160,500 $14,591Sponsorships/Cash Donations$1,239,000 $112,636Total $3,387,320 $307,937 DDLA & Related Documents♦Conveyance of property to Habitat for Humanity at no cost.♦Predevelopment Loan $608,244 becomes part of permanent financing for project.♦Additional financial assistance for construction of $258,677.♦Habitat will develop and sell the affordable units. San Diego Habitat for Humanity♦Affiliate of Habitat for Humanity International♦Non-profit organization♦Offers a hand up, not a hand out♦Provide 20 year, 0% interest mortgage♦Builds homes by using contributions of land, materials & money♦Nearly all labor is performed by volunteers♦Each family must provide 500 hours of labor (sweat equity) Funding for Project♦Land acquisition was financed with CDBG, HOME and Redevelopment Low/Mod funds (approx. $695,000)♦Predevelopment Loan funded with CDBG and HOME funds ($608,243)♦Construction Loan recommended to be funded with HOME funds ($258,677)♦Funds must be used for housing purposes. Land Transfer♦No cost = reuse value (Section 33433 Redevelopment Report)– Avg. $242,683/unit in development costs– Avg. $131,927/unit in revenue– Avg. $110,756 gap per unit (excl. land costs)– Negative residual land value♦Habitat must be ready to commence construction for land transfer– Building Permit– Specific amount of non-city funding Eligibility & Sales Price♦Households must go through Habitat’s intense selection process.♦Households must not exceed maximum income for bedroom size– 1 bedroom (2 persons) = $28,100– 2 bedroom (3 persons) = $31,600♦Households may not expend more than 30% on total housing costs♦1 bedroom = approx. $126,380 (max)♦2 bedroom = approx. $146,720 (max) Resale of Units♦45 year affordability restriction♦Must sell to another very low income household at very low income affordable price for period of mortgage (i.e., 30 years); 45 year restriction restarts on each new sale.♦After mortgage period, Habitat has first right of refusal to purchase unit and sell to another low income person; City has 2ndright of refusal.♦If unit is sold to a non-low income person, City recaptures its subsidy and contingent interest. Project Benefits♦Use funding which would be lost if not utilized for housing purposes.♦Assist in meeting Housing Element fair share goals.♦Meet redevelopment obligation to provide 11 units of housing for very low income within the Village Area.♦Provide a combined project for other small developers of housing in NW Quadrant.♦Create an exciting community volunteer opportunity (help build homes for others)♦Provide opportunity for 11 very low income families to own their own home. Housing Credits♦December, 2005 – project designated as a combined project for inclusionary housing♦Credit price set at $120,000 based on financial assistance anticipated at that time.♦4 credits purchased to date (2 projects)♦Increase in assistance results in need to increase credit price from $120,000 to $142,000.♦7 credits remain available for purchase. Commission/Council Actions♦Hold a public hearing to accept public comments.♦Authorize execution of the DDLA.♦Authorize the appropriation of $258,677 in HOME funds to provide additional financial assistance to the project.♦Approve increase in housing credit price from $120,000 to $142,000. RECORDING REQUESTED gy STEWART TITLE OF CALIFORNIA DOC# 2008-0381414 AND WHEN RECORDED MAIL TO: Carlsbad Redevelopment Agency x?ji 2965 Roosevelt Street, Suite B I >' Carlsbad, CA 92008 Attn: Executive Director No fee for recording pursuant to Government Code Section 27383 5309 JUL16, 2008 1:18 PM OFFICIAL RECORDS SAN DIEGO COUNTY RECORDER'S OFFICE G R E G 0 RY J. S MIT H. CO LJ N TY R E CO R D E R FEES: 0.00 WAYS: 3 DA: 1 PAGES: DEED OF TRUST WITH ASSIGNMENT OF RENTS AND SECURITY AGREEMENT (San Diego Habitat for Humanity, Inc.) THIS DEED OF TRUST WITH ASSIGNMENT OF RENTS AND SECURITY AGREEMENT ("Deed of Trust") is made as of .inly 14, ?nnft , 2007, by and among San Diego Habitat for Humanity, Inc., a California nonprofit public benefit corporation ("Trustor"), Stewart Title Company a California corporation ("Trustee"), and the Carlsbad Redevelopment Agency, a public body, corporate, and politic ("Beneficiary"). FOR GOOD AND VALUABLE CONSIDERATION, including the indebtedness herein recited and the trust herein created, the receipt of which is hereby acknowledged, Trustor hereby irrevocably grants, transfers, conveys and assigns to Trustee, IN TRUST, WITH POWER OF SALE, for the benefit and security of Beneficiary, under and subject to the terms and conditions hereinafter set forth, Trustor's fee interest in the property located in the City of Carlsbad, County of San Diego, State of California, that is described in the attached Exhibit A, incorporated herein by this reference (the "Property"). TOGETHER WITH all interest, estates or other claims, both in law and in equity which Trustor now has or may hereafter acquire in the Property and the rents; TOGETHER WITH all easements, rights-of-way and rights used in connection therewith or as a means of access thereto, including (without limiting the generality of the foregoing) all tenements, hereditaments and appurtenances thereof and thereto; TOGETHER WITH any and all buildings and improvements of every kind and description now or hereafter erected thereon, and all property of the Trustor now or hereafter affixed to or placed upon the Property; TOGETHER WITH all building materials and equipment now or hereafter delivered to said property and intended to be installed therein; TOGETHER WITH all right, title and interest of Trustor, now owned or hereafter acquired, in and to any land lying within the right-of-way of any street, open or proposed, adjoining the Property, and any and all sidewalks, alleys and strips and areas of land adjacent to or used in connection with the Property; 1010\20\406821.1 20 5310 TOGETHER WITH all estate, interest, right, title, other claim or demand, of every nature, in and to such property, including the Property, both in law and in equity, including, but not limited to, all deposits made with or other security given by Trustor to utility companies, the proceeds from any or all of such property, including the Property, claims or demands with respect to the proceeds of insurance in effect with respect thereto, which Trustor now has or may hereafter acquire, any and all awards made for the taking by eminent domain or by any proceeding or purchase in lieu thereof of the whole or any part of such property, including without limitation, any awards resulting from a change of grade of streets and awards for severance damages to the extent Beneficiary has an interest in such awards for taking as provided in Paragraph 4.1 herein; TOGETHER WITH all of Trustor's interest in all articles of personal property or fixtures 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 complete 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; and TOGETHER WITH all of Trustor's interest in all building materials, fixtures, equipment, work in process and other personal property to be incorporated into the Property; all goods, materials, supplies, fixtures, equipment, machinery, furniture and furnishings, signs and other personal property now or hereafter appropriated for use on the Property, whether stored on the Property or elsewhere, and used or to be used in connection with the Property; all rents, issues and profits, and all inventory, accounts, accounts receivable, contract rights, general intangibles, chattel paper, instruments, documents, notes drafts, letters of credit, insurance policies, insurance and condemnation awards and proceeds, trade names, trademarks and service marks arising from or related to the Property and any business conducted thereon by Trustor; all replacements, additions, accessions and proceeds; and all books, records and files relating to any of the foregoing. All of the foregoing, together with the Property, is herein referred to as the "Security." To have and to hold the Security together with acquittances to the Trustee, its successors and assigns forever. FOR THE PURPOSE OF SECURING: (a) Payment of just indebtedness of Trustor to Beneficiary as set forth in the Note (defined in Article 1 below) until paid or cancelled. Said principal and other payments shall be due and payable as provided in the Note. Said Note and all its terms are incorporated herein by reference, and this conveyance shall secure any and all extensions thereof, however evidenced; and (b) Payment of any sums advanced by Beneficiary to protect the Security pursuant to the terms and provisions of this Deed of Trust following a breach of Trustor's obligation to 1010\20\406821.1 5311 advance said sums and the expiration of any applicable cure period, with interest thereon as provided herein; and (c) Performance of every obligation, covenant or agreement of Trustor contained herein and in the Loan Documents (defined in Section 1.2 below). AND TO PROTECT THE SECURITY OF THIS DEED OF TRUST, TRUSTOR COVENANTS AND AGREES: ARTICLE 1 DEFINITIONS In addition to the terms defined elsewhere in this Deed of Trust, the following terms shall have the following meanings in this Deed of Trust: Section 1.1 The term "Loan Agreement" means that certain Disposition, Development, and Loan Agreement between Trustor and Beneficiary, dated of even date herewith providing for the Beneficiary to loan to the Trustor an amount not to exceed One Million Five Hundred Twenty-Five Thousand Nine Hundred Twenty Dollars ($1,525,920) for the development of the Property. Section 1.2 The term "Loan Documents" means this Deed of Trust, the Note, the Loan Agreement, and any other debt, loan or security instruments between Trustor and the Beneficiary relating to the Property. Section 1.3 The term "Note" means the promissory note in the principal amount of One Million Five Hundred Twenty-Five Thousand Nine Hundred Twenty Dollars ($1,525,920) dated of even date herewith executed by the Trustor in favor of the Beneficiary, the payment of which is secured by this Deed of Trust. (A copy of the Note is on file with the Beneficiary and terms and provisions of the Note are incorporated herein by reference.). Section 1.4 The term "Principal" means the amount required to be paid under the Note. ARTICLE 2 MAINTENANCE AND MODIFICATION OF THE PROPERTY AND SECURITY Section 2.1 Maintenance and Modification of the Property by Trustor. The Trustor agrees that at all times prior to full payment of the sum owed under the Note, the Trustor will, at the Trustor's own expense, maintain, preserve and keep the Security or cause the Security to be maintained and preserved in good condition. The Trustor will from time to time make or cause to be made all repairs, replacements and renewals deemed proper and necessary by it. The Beneficiary shall have no responsibility in any of these matters or for the making of improvements or additions to the Security. 1010\20\406821.1 5312 Trustor agrees to pay fully and discharge (or cause to be paid fully and discharged) all claims for labor done and for material and services furnished in connection with the Security, diligently to file or procure the filing of a valid notice of cessation upon the event of a cessation of labor on the work or construction on the Security for a continuous period of thirty (30) days or more, and to take all other reasonable steps to forestall the assertion of claims of lien against the Security of any part thereof. Trustor irrevocably appoints, designates and authorizes Beneficiary as its agent (said agency being coupled with an interest) with the authority, but without any obligation, to file for record any notices of completion or cessation of labor or any other notice that Beneficiary deems necessary or desirable to protect its interest in and to the Security or the Loan Documents; provided, however, that Beneficiary shall exercise its rights as agent of Trustor only in the event that Trustor shall fail to take, or shall fail to diligently continue to take, those actions as hereinbefore provided. Upon demand by Beneficiary, Trustor shall make or cause to be made such demands or claims as Beneficiary shall specify upon laborers, materialmen, subcontractors or other persons who have furnished or claim to have furnished labor, services or materials in connection with the Security. Nothing herein contained shall require Trustor to pay any claims for labor, materials or services which Trustor in good faith disputes and is diligently contesting provided that Trustor, upon written request of the Beneficiary, shall, within thirty (30) days after the filing of any claim of lien, record in the Office of the Recorder of San Diego County, a surety bond in an amount 1 and 1/2 times the amount of such claim item to protect against a claim of lien. Section 2.2 Granting of Easements. Trustor may not grant easements, licenses, rights-of-way or other rights or privileges in the nature of easements with respect to any property or rights included in the Security except those required or desirable for installation and maintenance of public utilities including, without limitation, water, gas, electricity, sewer, telephone and telegraph, or those required by law and as approved, in writing, by Beneficiary. Section 2.3 Assignment of Rents. As part of the consideration for the indebtedness evidenced by the Note, Trustor hereby absolutely and unconditionally assigns and transfers to Beneficiary all the rents and revenues of the Property including those now due, past due, or to become due by virtue of any lease or other agreement for the occupancy or use of all or any part of the Property, regardless of to whom the rents and revenues of the Property are payable. Trustor hereby authorizes Beneficiary or Beneficiary's agents to collect the aforesaid rents and revenues and hereby directs each tenant of the Property to pay such rents to Beneficiary or Beneficiary's agents; provided, however, that prior to written notice given by Beneficiary to Trustor of the breach by Trustor of any covenant or agreement of Trustor in the Loan Documents, Trustor shall collect and receive all rents and revenues of the Property as trustee for the benefit of Beneficiary and Trustor to apply the rents and revenues so collected to the sums secured by this Deed of Trust with the balance, so long as no such breach has occurred, to the account of Trustor, it being intended by Trustor and Beneficiary that this assignment of rents constitutes an absolute assignment and not an assignment for additional security only. Upon delivery of written notice by Beneficiary to Trustor of the breach by Trustor of any covenant or agreement of Trustor in the Loan Documents, and without the necessity of Beneficiary entering upon and taking and maintaining 41010\20\406821.1 5313 full control of the Property in person, by agent or by a court-appointed receiver, Beneficiary shall immediately be entitled to possession of all rents and revenues of the Property as specified in this Section 2.3 as the same becomes due and payable, including but not limited to rents then due and unpaid, and all such rents shall immediately upon delivery of such notice be held by Trustor as trustee for the benefit of Beneficiary only; provided, however, that the written notice by Beneficiary to Trustor of the breach by Trustor shall contain a statement that Beneficiary exercises its rights to such rents. Trustor agrees that commencing upon delivery of such written notice of Trustor's breach by Beneficiary to Trustor, each tenant of the Property shall make such rents payable to and pay such rents to Beneficiary or Beneficiary's agents on Beneficiary's written demand to each tenant therefor, delivered to each tenant personally, by mail or by delivering such demand to each rental unit, without any liability on the part of said tenant to inquire further as to the existence of a default by Trustor. Except as previously approved by the Beneficiary as set forth in the Loan Agreement, Trustor hereby covenants that Trustor has not executed any prior assignment of said rents, that Trustor has not performed, and will not perform, any acts or has not executed and will not execute, any instrument which would prevent Beneficiary from exercising its rights under this Section 2.3, and that at the time of execution of this Deed of Trust, there has been no anticipation or prepayment of any of the rents of the Property for more than two (2) months prior to the due dates of such rents. Trustor covenants that Trustor will not hereafter collect or accept payment of any rents of the Property more than two (2) months prior to the due dates of such rents. Trustor further covenant that Trustor will execute and deliver to Beneficiary such further assignments of rents and revenues of the Property as Beneficiary may from time to time request. Upon Trustor's breach of any covenant or agreement of Trustor in the Loan Documents, Beneficiary may in person, by agent or by a court-appointed receiver, regardless of the adequacy of Beneficiary's security, enter upon and take and maintain full control of the Property in order to perform all acts necessary and appropriate for the operation and maintenance thereof including, but not limited to, the execution, cancellation or modification of leases, the collection of all rents and revenues of the Property, the making of repairs to the Property and the execution or termination of contracts providing for the management or maintenance of the Property, all on such terms as are deemed best to protect the security of this Deed of Trust. In the event: Beneficiary elects to seek the appointment of a receiver for the Property upon Trustor's breach of any covenant or agreement of Trustor in this Deed of Trust, Trustor hereby expressly consents to the appointment of such receiver. Beneficiary or the receiver shall be entitled to receive a reasonable fee for so managing the Property. All rents and revenues collected subsequent to delivery of written notice by Beneficiary to Trustor of the breach by Trustor of any covenant or agreement of Trustor in the Loan Documents shall be applied first to the costs, if any, of taking control of and managing the Property and collecting the rents, including, but not limited to, attorney's fees, receiver's fees, premiums on receiver's bonds, costs of repairs to the Property, premiums on insurance policies, taxes, assessments and other charges on the Property, and the costs of discharging any obligation or liability of Trustor as lessor or landlord of the Property and then to the sums secured by this Deed of Trust. Beneficiary or the receiver shall have access to the books and records used in the operation and maintenance of the Property and shall be liable to account only for those rents actually received. Beneficiary shall not be liable to Trustor, anyone claiming under or through 1010\20\406821.1 5314 Trustor or anyone having an interest in the Property by reason of anything done or left undone by Beneficiary under this Section 2.3. If the rents of the Property are not sufficient to meet the costs, if any, of taking control of and managing the Property and collecting the rents, any funds expended by Beneficiary for such purposes shall become indebtedness of Trustor to Beneficiary secured by this Deed of Trust pursuant to Section 3.3 hereof. Unless Beneficiary and Trustor agree in writing to other terms of payment, such amounts shall be payable upon notice from Beneficiary to Trustor requesting payment thereof and shall bear interest from the date of disbursement at the rate stated in Section 3.3. Any entering upon and taking and maintaining of control of the Property by Beneficiary or the receiver and any application of rents as provided herein shall not cure or waive any default hereunder or invalidate any other right or remedy of Beneficiary under applicable law or provided herein. This assignment of rents of the Property shall terminate at such time as this Deed of Trust ceases to secure indebtedness held by Beneficiary. ARTICLE 3 TAXES AND INSURANCE; ADVANCES Section 3.1 Taxes, Other Governmental Charges and Utility Charges. Trustor shall pay, or cause to be paid, at least fifteen (15) days prior to the date of delinquency, all taxes, assessments, charges and levies imposed by any public authority or utility company which are or may become a lien affecting the Security or any part thereof; provided, however, that Trustor shall not be required to pay and discharge any such tax, assessment, charge or levy so long as (a) the legality thereof shall be promptly and actively contested in good faith and by appropriate proceedings, and (b) Trustor maintains reserves adequate to pay any liabilities contested pursuant to this Section 3.1. With respect to taxes, special assessments or other similar governmental charges, Trustor shall pay such amount in full prior to the attachment of any lien therefor on any part of the Security; provided, however, if such taxes, assessments or charges may be paid in installments, Trustor may pay in such installments. Except as provided in clause (b) of the first sentence of this paragraph, the provisions of this Section 3.1 shall not be construed to require that Trustor maintain a reserve account, escrow account, impound account or other similar account for the payment of future taxes, assessments, charges and levies. In the event that Trustor shall fail to pay any of the foregoing items required by this Section to be paid by Trustor, Beneficiary may (but shall be under no obligation to) pay the same, after the Beneficiary has notified the Trustor of such failure to pay and the Trustor fails to fully pay such items within seven (7) business days after receipt of such notice. Any amount so advanced therefor by Beneficiary, together with interest thereon from the date of such advance at the maximum rate permitted by law, shall become an additional obligation of Trustor to the Beneficiary and shall be secured hereby, and Trustor agrees to pay all such amounts. 1010\20\406821.1 5315 Section 3.2 Provisions Respecting Insurance. Trustor agrees to provide insurance conforming in all respects to that required under the Loan Documents during the course of construction and following completion, and at all times until all amounts secured by this Deed of Trust have been paid and all other obligations secured hereunder fulfilled, and this Deed of Trust reconveyed. All such insurance policies and coverages shall be maintained at Trustor's sole cost and expense. Certificates of insurance for all of the above insurance policies, showing the same to be in full force and effect, shall be delivered to the Beneficiary upon demand therefor at any time prior to the Beneficiary's receipt of the entire Principal and all amounts secured by this Deed of Trust. Trustee is aware that California Civil Code Section 2955.5(a) provides as follows: No lender shall require a borrower, as a condition of receiving or maintaining a loan secured by real property, to provide hazard insurance coverage against risks to the improvements on that real property in an amount exceeding the replacement value of the improvements on the property. Section 3.3 Advances. In the event the Trustor shall fail to maintain the full insurance coverage required by this Deed of Trust or shall fail to keep the Security in accordance with the Loan Documents, the Beneficiary, after at least seven (7) days prior notice to Beneficiary, may (but shall be under no obligation to) take out the required policies of insurance and pay the premiums on the same or may make such repairs or replacements as are necessary and provide for payment thereof; and all amounts so advanced therefor by the Beneficiary shall become an additional obligation of the Trustor to the Beneficiary (together with interest as set forth below) and shall be secured hereby, which amounts the Trustor agrees to pay on the demand of the Beneficiary, and if not so paid, shall bear interest from the date of the advance at the lesser of eight percent (8%) per annum or the maximum rate permitted by law. ARTICLE 4 DAMAGE, DESTRUCTION OR CONDEMNATION Section 4.1 Awards and Damages. All judgments, awards of damages, settlements and compensation made in connection with or in lieu of (1) taking of all or any part of or any interest in the Property by or under assertion of the power of eminent domain, (2) any damage to or destruction of the Property or in any part thereof by insured casualty, and (3) any other injury or damage to all or any part of the Property ("Funds") are hereby assigned to and shall be paid to the Beneficiary by a check made payable to the Beneficiary. The Beneficiary is authorized and empowered (but not required) to collect and receive any funds and is authorized to apply them in whole or in part upon any indebtedness or obligation secured hereby, in such order and manner as the Beneficiary shall determine at its sole option. The Beneficiary shall be entitled to settle and adjust all claims under insurance policies provided under this Deed of Trust and may deduct and retain from the proceeds of such insurance the amount of all expenses incurred by it in connection with any such settlement or adjustment. All or any part of the amounts so collected and recovered by the Beneficiary may be released to Trustor upon such conditions as the Beneficiary may impose for 1010\20\406821.1 5316 its disposition, and Beneficiary agrees to release Funds to Trustor to rebuild the Project on the Property provided Trustor demonstrates to Beneficiary that such rebuilding is economically feasible. Application of all or any part of the Funds collected and received by the Beneficiary or the release thereof shall not cure or waive any default under this Deed of Trust. ARTICLE 5 AGREEMENTS AFFECTING THE PROPERTY; FURTHER ASSURANCES; PAYMENT OF PRINCIPAL AND INTEREST Section 5.1 Other Agreements Affecting Property. The Trustor shall duly and punctually perform all terms, covenants, conditions and agreements binding upon it under the Loan Documents and any other agreement of any nature whatsoever now or hereafter involving or affecting the Security or any part thereof. Section 5.2 Agreement to Pay Attorneys' Fees and Expenses. In the event of any Event of Default (as defined below) hereunder, and if the Beneficiary should employ attorneys or incur other expenses for the collection of amounts due or the enforcement of performance or observance of an obligation or agreement on the part of the Trustor in this Deed of Trust, the Trustor agrees that it will, on demand therefor, pay to the Beneficiary the reasonable fees of such attorneys and such other reasonable expenses so. incurred by the Beneficiary; and any such amounts paid by the Beneficiary shall be added to the indebtedness secured by the lien of this Deed of Trust, and shall bear interest from the date such expenses are incurred at the lesser often percent (10%) per annum or the maximum rate permitted by law. Section 5.3 Payment of the Principal. The Trustor shall pay to the Beneficiary the Principal and any other payments as set forth in the Note in the amounts and by the times set out therein. Section 5.4 Personal Property. To the maximum extent permitted by law, the personal property subject to this Deed of Trust shall be deemed to be fixtures and part of the real property and this Deed of Trust shall constitute a fixtures filing under the California Commercial Code. As to any personal property not deemed or permitted to be fixtures, this Deed of Trust shall constitute a security agreement under the California Commercial Code. The Trustor hereby grants the Beneficiary a security interest in such items. Section 5.5 Financing Statement. The Trustor shall execute and deliver to the Beneficiary such financing statements pursuant to the appropriate statutes, and any other documents or instruments as are required to convey to the Beneficiary a valid perfected security interest in the Security. The Trustor agrees to perform all acts which the Beneficiary may reasonably request so as to enable the Beneficiary to maintain such valid perfected security interest in the Security in order to secure the payment of •81010\20\406821.1 5317 the Note in accordance with their terms. The Beneficiary is authorized to file a copy of any such financing statement in any jurisdiction(s) as it shall deem appropriate from time to time in order to protect the security interest established pursuant to this instrument. Trustor shall pay all costs of filing such financing statements and any extensions, renewals, amendments, and releases thereof, and shall pay all reasonable costs and expenses of any record searches for financing statements, and releases thereof, as the Beneficiary may reasonably require. Without the prior written consent of the Beneficiary, Trustor shall not create or suffer to be created pursuant to the California Commercial Code any other security interest in the Security, including replacements and additions thereto. Section 5.6 Operation of the Security. The Trustor shall operate the Security (and, in case of a transfer of a portion of the Security subject to this Deed of Trust, the transferee shall operate such portion of the Security) in full compliance with the Loan Documents. Section 5.7 Inspection of the Security. At any and all reasonable times upon seventy-two (72) hours' notice, the Beneficiary and its duly authorized agents, attorneys, experts, engineers, accountants and representatives, shall have the right, without payment of charges or fees, to inspect the Security. Section 5.8 Nondiscrimination. (1) There shall be no discrimination against or segregation of, any person or group of persons on account of any basis listed in subdivision (a) and (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 in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the property nor shall the transferee or any person claiming under or through the transferee 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. (2) Notwithstanding paragraph (1), with respect to familial status, paragraph (1) shall not be construed to apply to housing for older persons, as defined in Section 12955.9 of the Government Code. With respect to familial status, nothing in paragraph (1) shall be construed to affect Sections 51.2, 51.3, 51.4, 51.10, 51.11, and 799.5 of the Civil Code, relating to housing for senior citizens. Subdivision (d) of Section 51 and Section 1360 of the Civil Code and subdivisions (n), (o), and (p) of Section 12955 of the Government Code shall apply to paragraph d). ARTICLE 6 HAZARDOUS WASTE Trustor shall keep and maintain the Property in compliance with, and shall not cause or permit the Property to be in violation of any federal, state or local laws, ordinances or regulations relating to industrial hygiene or to the environmental conditions on, under or about the Property 1010\20\406821.1 5318 including, but not limited to, soil and ground water conditions. Trustor shall not use, generate, manufacture, store or dispose of on, under, or about the Property or transport to or from the Property any flammable explosives, radioactive materials, hazardous wastes, toxic substances or related materials, including without limitation, any substances defined as or included in the definition of "hazardous substances," hazardous wastes," "hazardous materials," or "toxic substances" under any applicable federal or state laws or regulations (collectively referred to hereinafter as "Hazardous Materials") except such of the foregoing as may be customarily kept and used in and about multifamily residential property. Trustor shall immediately advise Beneficiary in writing if at any time it receives written notice of (i) any and all enforcement, cleanup, removal or other governmental or regulatory actions instituted, completed or threatened against Trustor or the Property pursuant to any applicable federal, state or local laws, ordinances, or regulations relating to any Hazardous Materials, ("Hazardous Materials Law"); (ii) all claims made or threatened by any third party against Trustor or the Property relating to damage, contribution, cost recovery compensation, loss or injury resulting from any Hazardous Materials (the matters set forth in clauses (i) and (ii) above hereinafter referred to a "Hazardous Materials Claims"); and (iii) Trustor's discovery of any occurrence or condition on any real property adjoining or in the vicinity of the Property that could cause the Property or any part thereof to be classified as "border-zone property" under the provision of California Health and Safety Code, Sections 25220 et seq., or any regulation adopted in accordance therewith, or to be otherwise subject to any restrictions on the ownership, occupancy, transferability or use of the Property under any Hazardous Materials Law. Beneficiary shall have the right to join and participate in, as a party if it so elects, any legal proceedings or actions initiated in connection with any Hazardous Materials Claims and to have its reasonable attorneys' fees in connection therewith paid by Trustor. Trustor shall indemnify and hold harmless Beneficiary and its boardmembers, supervisors, directors, officers, employees, agents, successors and assigns from and against any loss, damage, cost, expense or liability directly or indirectly arising out of or attributable to the use, generation, storage, release, threatened release, discharge, disposal, or presence of Hazardous Materials on, under, or about the Property including without limitation: (a) all foreseeable consequential damages; (b) the costs of any required or necessary repair, cleanup or detoxification of the Property and the preparation and implementation of any closure, remedial or other required plans; and (c) all reasonable costs and expenses incurred by Beneficiary in connection with clauses (a) and (b), including but not limited to reasonable attorneys' fees. Without Beneficiary's prior written consent, which shall not be unreasonably withheld, Trustor shall not take any remedial action in response to the presence of any Hazardous Materials on, under or about the Property, nor enter into any settlement agreement, consent decree, or other compromise in respect to any Hazardous Material Claims, which remedial action, settlement, consent decree or compromise might, in Beneficiary's reasonable judgement, impair the value of the Beneficiary's security hereunder; provided, however, that Beneficiary's prior consent shall not be necessary in the event that the presence of Hazardous Materials on, under, or about the Property either poses an immediate threat to the health, safety or welfare of any individual or is of such a nature that an immediate remedial response is necessary and it is not reasonably possible to obtain Beneficiary's consent before taking such action, provided that in such event Trustor shall notify Beneficiary as soon as practicable of any action so taken. Beneficiary agrees not to withhold its consent, where such consent is required hereunder, if 1010\20\406821.1 5319 either (i) a particular remedial action is ordered by a court of competent jurisdiction, (ii) Trustor will or may be subjected to civil or criminal sanctions or penalties if it fails to take a required action; (iii) Trustor establishes to the reasonable satisfaction of Beneficiary that there is no reasonable alternative to such remedial action which would result in less impairment of Beneficiary's security hereunder; or (iv) the action has been agreed to by Beneficiary. The Trustor hereby acknowledges and agrees that (i) this Article is intended as the Beneficiary's written request for information (and the Trustor's response) concerning the environmental condition of the Property as required by California Code of Civil Procedure Section 726.5, and (ii) each representation and warranty in this Deed of Trust or any of the other Loan Documents (together with any indemnity applicable to a breach of any such representation and warranty) with respect to the environmental condition of the property is intended by the Beneficiary and the Trustor to be an "environmental provision" for purposes of California Code of Civil Procedure Section 736. In the event that any portion of the Property is determined to be "environmentally impaired" (as that term is defined in California Code of Civil Procedure Section 726.5(e)(3)) or to be an "affected parcel" (as that term is defined in California Code of Civil Procedure Section 726.5(e)(l)), then, without otherwise limiting or in any way affecting the Beneficiary's or the Trustee's rights and remedies under this Deed of Trust, the Beneficiary may elect to exercise its rights under California Code of Civil Procedure Section 726.5(a) to (1) waive its lien on such environmentally impaired or affected portion of the Property and (2) exercise (a) the rights and remedies of an unsecured creditor, including reduction of its claim against the Trustor to judgment, and (b) any other rights and remedies permitted by law. For purposes of determining the Beneficiary's right to proceed as an unsecured creditor under California Code of Civil Procedure Section 726.5(a), the Trustor shall be deemed to have willfully permitted or acquiesced in a release or threatened release of hazardous materials, within the meaning of California Code of Civil Procedure Section 726.5(d)(l), if the release or threatened release of hazardous materials was knowingly or negligently caused or contributed to by any lessee, occupant, or user of any portion of the Property and the Trustor knew or should have known of the activity by such lessee, occupant, or user which caused or contributed to the release or threatened release. All costs and expenses, including (but not limited to) attorneys' fees, incurred by the Beneficiary in connection with any action commenced under this paragraph, including any action required by California Code of Civil Procedure Section 726.5(b) to determine the degree to which the Property is environmentally impaired, plus interest thereon at the rate specified in the Note until paid, shall be added to the indebtedness secured by this Deed of Trust and shall be due and payable to the Beneficiary upon its demand made at any time following the conclusion of such action. ARTICLE 7 EVENTS OF DEFAULT AND REMEDIES Section 7.1 Events of Default. The following shall constitute Events of Default following the expiration of any applicable notice and cure periods: (1) failure to make any payment to be paid by Trustor under the Loan Documents; (2) failure to observe or perform any of Trustor's other covenants, I010\20\406821.1 5320 agreements or obligations under the Loan Documents, including, without limitation, the provisions concerning discrimination; or (3) failure to make any payment or perform any of Trustor's other covenants, agreements, or obligations under any other debt instruments or regulatory agreement secured by the Property, which default shall not be cured within the times and in the manner provided therein. Section 7.2 Acceleration of Maturity. If an Event of Default shall have occurred and be continuing, then at the option of the Beneficiary, the amount of any payment related to the Event of Default and the unpaid Principal of the Note shall immediately become due and payable, upon written notice by the Beneficiary to the Trustor (or automatically where so specified in the Loan Documents), and no omission on the part of the Beneficiary to exercise such option when entitled to do so shall be construed as a waiver of such right. Section 7.3 The Beneficiary's Right to Enter and Take Possession. If an Event of Default shall have occurred and be continuing, the Beneficiary may: (a) Either in person or by agent, with or without bringing any action or proceeding, or by a receiver appointed by a court, and without regard to the adequacy of its security, enter upon the Security and take possession thereof (or any part thereof) and of any of the Security, in its own name or in the name of Trustee, and do any acts which it deems necessary or desirable to preserve the value or marketability of the Property, or part thereof or interest therein, increase the income therefrom or protect the security thereof. The entering upon and taking possession of the Security shall not cure or waive any Event of Default or Notice of Default (as defined below) hereunder or invalidate any act done in response to such Default or pursuant to such Notice of Default and, notwithstanding the continuance in possession of the Security, Beneficiary shall be entitled to exercise every right provided for in this Deed of Trust, or by law upon occurrence of any Event of Default, including the right to exercise the power of sale; (b) Commence an action to foreclose this Deed of Trust as a mortgage, appoint a receiver, or specifically enforce any of the covenants hereof; (c) Deliver to Trustee a written declaration of default and demand for sale, and a written notice of default and election to cause Trustor's interest in the Security to be sold ("Notice of Default and Election to Sell"), which notice Trustee or Beneficiary shall cause to be duly filed for record in the Official Records of San Diego County; or (d) Exercise all other rights and remedies provided herein, in the instruments by which the Trustor acquires title to any Security, or in any other document or agreement now or hereafter evidencing, creating or securing all or any portion of the obligations secured hereby, or provided by law. 1010\20\406821.1 5321 Section 7.4 Foreclosure By Power of Sale. Should the Beneficiary elect to foreclose by exercise of the power of sale herein contained, the Beneficiary shall give the Notice of Default and Election to Sell to the Trustee and shall deposit with Trustee this Deed of Trust which is secured hereby (and the deposit of which shall be deemed to constitute evidence that the unpaid principal amount of the Note is immediately due and payable), and such receipts and evidence of any expenditures made that are additionally secured hereby as Trustee may require. (a) Upon receipt of such notice from the Beneficiary, Trustee shall cause to be recorded, published and delivered to Trustor such Notice of Default and Election to Sell as then required by law and by this Deed of Trust. Trustee shall, without demand on Trustor, after lapse of such time as may then be required by law and after recordation of such Notice of Default and Election to Sell and after Notice of Sale having been given as required by law, sell the Security, at the time and place of sale fixed by it in said Notice of Default and Election to Sell, whether as a whole or in separate lots or parcels or items as Trustee shall deem expedient and in such order as it may determine unless specified otherwise by the Trustor according to California Civil Code Section 2924g(b), at public auction to the highest bidder, for cash in lawful money of the United States payable at the time of sale. Trustee shall deliver to such purchaser or purchasers thereof its good and sufficient deed or deeds conveying the property so sold, but without any covenant or warranty, express or implied. The recitals in such deed or any matters of facts shall be conclusive proof of the truthfulness thereof. Any person, including, without limitation, Trustor, Trustee or Beneficiary, may purchase at such sale, and Trustor hereby covenants to warrant and defend the title of such purchaser or purchasers. (b) After deducting all reasonable costs, fees and expenses of Trustee, including costs of evidence of title in connection with such sale, Trustee shall apply the proceeds of sale to payment of: (i) the unpaid Principal amount of the Note; (ii) all other amounts owed to Beneficiary under the Loan Documents; (iii) all other sums then secured hereby; and (iv) the remainder, if any, to Trustor. (c) Trustee may postpone sale of all or any portion of the Property by public announcement at such time and place of sale, and from time to time thereafter, and without further notice make such sale at the time fixed by the last postponement, or may, in its discretion, give a new Notice of Default and Election to Sell. Section 7.5 Receiver. If an Event of Default shall have occurred and be continuing, Beneficiary, as a matter of right and without further notice to Trustor or anyone claiming under the Security, and without regard to the then value of the Security or the interest of Trustor therein, shall have the right to apply to any court having jurisdiction to appoint a receiver or receivers of the Security (or a part thereof), and Trustor hereby irrevocably consents to such appointment and waives further notice of any application therefor. Any such receiver or receivers shall have all the usual powers and duties of receivers in like or similar cases, and all the powers and duties of Beneficiary in case of entry as provided herein, and shall continue as such and exercise all such powers until the date of confirmation of sale of the Security, unless such receivership is sooner terminated. 1010\20\406821.1 5322 Section 7.6 Remedies Cumulative. No right, power or remedy conferred upon or reserved to the Beneficiary by this Deed of Trust is intended to be exclusive of any other right, power or remedy, but each and every such right, power and remedy shall be cumulative and concurrent and shall be in addition to any other right, power and remedy given hereunder or now or hereafter existing at law or in equity. Section 7.7 No Waiver. (a) No delay or omission of the Beneficiary to exercise any right, power or remedy accruing upon any Event of Default shall exhaust or impair any such right, power or remedy, or shall be construed to be a waiver of any such Event of Default or acquiescence therein; and every right, power and remedy given by this Deed of Trust to the Beneficiary may be exercised from time to time and as often as may be deemed expeditious by the Beneficiary. Beneficiary's expressed or implied consent to a breach by Trustor, or a waiver of any obligation of Trustor hereunder shall not be deemed or construed to be a consent to any subsequent breach, or further waiver, of such obligation or of any other obligations of the Trustor hereunder. Failure on the part of the Beneficiary to complain of any act or failure to act or to declare an Event of Default, irrespective of how long such failure continues, shall not constitute a waiver by the Beneficiary of its right hereunder or impair any rights, power or remedies consequent on any Event of Default by the Trustor. (b) If the Beneficiary (i) grants forbearance or an extension of time for the payment of any sums secured hereby, (ii) takes other or additional security or the payment of any sums secured hereby, (iii) waives or does not exercise any right granted in the Loan Documents, (iv) releases any part of the Security from the lien of this Deed of Trust, or otherwise changes any of the terms, covenants, conditions or agreements in the Loan Documents, (v) consents to the granting of any easement or other right affecting the Security, or (iv) makes or consents to any agreement subordinating the lien hereof, any such act or omission shall not release, discharge, modify, change or affect the original liability under this Deed of Trust, or any other obligation of the Trustor or any subsequent purchaser of the Security or any part thereof, or any maker, co- signer, endorser, surety or guarantor (unless expressly released); nor shall any such act or omission preclude the Beneficiary from exercising any right, power or privilege herein granted or intended to be granted in any Event of Default then made or of any subsequent Event of Default, nor, except as otherwise expressly provided in an instrument or instruments executed by the Beneficiary shall the lien of this Deed of Trust be altered thereby. Section 7.8 Suits to Protect the Security. The Beneficiary shall have power to (a) institute and maintain such suits and proceedings as it may deem expedient to prevent any impairment of the Security and the rights of the Beneficiary as may be unlawful or any violation of this Deed of Trust, (b) preserve or protect its interest (as described in this Deed of Trust) in the Security, and (c) restrain the enforcement of or compliance with any legislation or other governmental enactment, rule or order that may be unconstitutional or otherwise invalid, if the enforcement for compliance with such enactment, rule or order would impair the Security thereunder or be prejudicial to the interest of the Beneficiary. 1010\20\406821.1 Section 7.9 Trustee May File Proofs of Claim.5323 In the case of any receivership, insolvency, bankruptcy, reorganization, arrangement, adjustment, composition or other proceedings affecting the Trustor, its creditors or its property, the Trustee, to the extent permitted by law, shall be entitled to file such proofs of claim and other documents as may be necessary or advisable in order to have the claims of the Beneficiary allowed in such proceedings and for any additional amount which may become due and payable by the Trustor hereunder after such date. Section 7.10 Waiver. The Trustor waives presentment, demand for payment, notice of dishonor, notice of protest and nonpayment, protest, notice of interest on interest and late charges, and diligence in taking any action to collect any sums owing under the Note or in proceedings against the Security, in connection with the delivery, acceptance, performance, default, endorsement or guaranty of this Deed of Trust. ARTICLE 8 MISCELLANEOUS Section 8.1 Amendments. This instrument cannot be waived, changed, discharged or terminated orally, but only by an instrument in writing signed by Beneficiary and Trustor. Section 8.2 Reconveyance by Trustee. Upon written request of Beneficiary stating that all sums secured hereby have been paid or forgiven, that all obligations to be performed by the Trustee under the Loan Documents (including, but not limited to, the operation of the Property in accordance with, and for the entire term of, the Loan Agreement), and upon surrender of this Deed of Trust to Trustee for cancellation and retention, and upon payment by Trustor of Trustee's reasonable fees, Trustee shall reconvey the Security to Trustor, or to the person or persons legally entitled thereto. Section 8.3 Notices. If at any time after the execution of this Deed of Trust it shall become necessary or convenient for one of the parties hereto to serve any notice, demand or communication upon the other party, such notice, demand or communication shall be in writing and shall be served personally, by reputable overnight delivery service, or by depositing the same in the registered United States mail, return receipt requested, postage prepaid and (1) if intended for Beneficiary shall be addressed to: Carlsbad Redevelopment Agency 2965 Roosevelt Street, Suite B Carlsbad, CA 92008 Attn: Executive Director 1010\20\406821.1 5324and (2) if intended for Trustor shall be addressed to: San Diego Habitat for Humanity, Inc. 10222 San Diego Mission Road San Diego, CA 92108 Attn: Executive Director Any notice, demand or communication shall be deemed given, received, made or communicated on the date personal delivery is effected or, if mailed in the manner herein specified, on the delivery date or date delivery is refused by the addressee, as shown on the return receipt. Either party may change its address at any time by giving written notice of such change to Beneficiary or Trustor as the case may be, in the manner provided herein, at least ten (10) days prior to the date such change is desired to be effective. Section 8.4 Successors and Joint Trustors. Where an obligation is created herein binding upon Trustor, the obligation shall also apply to and bind any transferee or successors in interest. Where the terms of the Deed of Trust have the effect of creating an obligation of the Trustor and a transferee, such obligation shall be deemed to be a joint and several obligation of the Trustor and such transferee. Where Trustor is more than one entity or person, all obligations of Trustor shall be deemed to be a joint and several obligation of each and every entity and person comprising Trustor. Section 8.5 Captions. The captions or headings at the beginning of each Section hereof are for the convenience of the parties and are not a part of this Deed of Trust. Section 8.6 Invalidity of Certain Provisions. Every provision of this Deed of Trust is intended to be severable. In the event any term or provision hereof is declared to be illegal or invalid for any reason whatsoever by a court or other body of competent jurisdiction, such illegality or invalidity shall not affect the balance of the terms and provisions hereof, which terms and provisions shall remain binding and enforceable. If the lien of this Deed of Trust is invalid or unenforceable as to any part of the debt, or if the lien is invalid or unenforceable as to any part of the Security, the unsecured or partially secured portion of the debt, and all payments made on the debt, whether voluntary or under foreclosure or other enforcement action or procedure, shall be considered to have been first paid or applied to the full payment of that portion of the debt which is not secured or partially secured by the lien of this Deed of Trust. Section 8.7 Governing Law. This Deed of Trust shall be governed by and construed in accordance with the laws of the State of California. 1010\20\406821.1 Section 8.8 Gender and Number.5325 In this Deed of Trust the singular shall include the plural and the masculine shall include the feminine and neuter and vice versa, if the context so requires. Section 8.9 Deed of Trust, Mortgage. Any reference in this Deed of Trust to a mortgage shall also refer to a deed of trust and any reference to a deed of trust shall also refer to a mortgage. Section 8.10 Actions. Trustor agrees to appear in and defend any action or proceeding purporting to affect the Security. Section 8.11 Substitution of Trustee. Beneficiary may from time to time substitute a successor or successors to any Trustee named herein or acting hereunder to execute this 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. Section 8.12 Statute of Limitations. 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. Section 8.13 Acceptance by Trustee. 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 the Trustee is not obligated to notify any party hereto of pending sale under this Deed of Trust or of any action of proceeding in which Trustor, Beneficiary, or Trustee shall be a party unless brought by Trustee. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 171010\20\406821.1 5326 IN WITNESS WHEREOF, Trustor has executed this Deed of Trust as of the day and year first above written. TRUSTOR: SAN DIEGO HABITAT FOR HUMANITY, INC., a California nonprofit public benefit corporation 1010\20\406821.1 STATE OF CALIFORNIA 5327 COUNTY OF San Diego ) 2006 before me,CP><3QugN B>Q>-t-KA.fvr^ , Notary Public, personally kaown to me (er p appeared , personalry-_ _ roved to me on the basis of satisfactory evidence) to be the person^ whose subscribed to the within instrument and acknowledged to me that he(sB^they executed the same in his^^/their authorized capacity^fc&^and that by his/fjier^heir signature's) on the instrument the personfo), or the entity upon behalf of which the persorifo^ 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. CMOtVN JANf ftOUMAN • 177*907 1010\20\406821.1 5328 EXHIBIT "A" LEGAL DESCRIPTION ORDER NO.: 93374 ESCROW NO.: The land referred to herein is situated in the State of California County of San Diego, City of Carlsbad, and described as follows: Lot 1 of City of Carlsbad Tract No. 06-18, Roosevelt Garden Condominiums, in the City of Carlsbad, County of San Diego, State of California, according to Map thereof No. 15635, filed in the office of the county recorder of said San Diego County, October 29, 2007.