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Home My WebLink AboutRDA Packet 2001/11/13 Notice is hereby given that the Chair of the Chula Vista Housing Authority has called and will convene a special meeting of the Housing Authority, Tuesday, November 13, 2001 at 6:00 p.m., immediately following the City Council meeting in the Council Chambers, located in the Public Services Building, 276 Fourth Avenue, Chula Vista, California to consider, deliberate and act upon the following: ShirleY~ ~~f? -.- - -'" - CllY OF CHUlA VISTA TUESDAY, NOVEMBER 13, 2001 COUNCIL CHAMBERS 6:00 P.M. PUBLIC SERVICES BUILDING (immediately following the City Council meeting) ADJOURNED JOINT MEETING OF THE REDEVELOPMENT AGENCY I CITY COUNCIL AND HOUSING AUTHORITY (SPECIAL MEETING) OF THE CITY OF CHULA VISTA CALL TO ORDER ROLL CALL Agency/Council/Authority Members Davis, Padilla, Rindone, Salas; Chair/Mayor Horton CONSENT CALENDAR The staff recommendations regarding the following item!s) listed under the Consent Calendar will be enacted by the Agency/Council by one motion without discussion unless an Agency/Council member, a member of the public or City staff requests that the item be pulled for discussion. If you wish to speak on one of these items, please fill out a "Request to Speak Form" available in the lobby and submit it to the Secretary of the Redevelopment Agency or the City Clerk prior to the meeting. Items pulled from the Consent Calendar will be discussed alter Action items. Items pulled by the public will be the first items of business. 1. APPROVAL OF MINUTES - Staff recommends that the Redevelopment Agency/City Council approve the minutes of October 9, 2001. 2. JOINT RESOLUTION OF THE REDEVELOPMENT AGENCY AND CITY COUNCIL OF THE CITY OF CHULA VISTA AMENDING THE STOREFRONT RENOVATION PROGRAM BY INCREASING REBATE AMOUNTS FOR ELIGIBLE PROJECTS IN THE TOWN CENTRE I REDEVELOPMENT PROJECT AREA AND EXPANDING THE PROGRAM TO ELIGIBLE PROJECTS IN THE H STREET CORRIDOR BETWEEN BROADWAY AVENUE AND INTERSTATE 5, TRANSFERRING FUNDS FOR THE PROGRAM FROM THE TOWN CENTRE I PROFESSIONAL SERVICES FUND TO THE COMMUNITY DEVELOPMENT SPECIAL PROJECTS FUND, AND AUTHORIZING THE COMMUNITY DEVELOPMENT DIRECTOR TO ENTER INTO AGREEMENTS WITH ELIGIBLE PARTICIPANTS - On 11/14/00, Agency/Council adopted a Storefront Renovation Program to benefit merchants and property owners in a targeted area of the Town Centre I Redevelopment Project Area. On 9/18/01, Council approved the H Street Beautification Project which is a comprehensive streetscape, art and landscaping program in the H Street corridor between Broadway Avenue and Interstate 5. Staff is recommending that the Agency/Council amend the Storefront Renovation Program by increasing rebate amounts in the Town Centre I Redevelopment Project Area and expanding the program to eligible projects in the H Street corridor between Broadway and 1-5. [Community Development Director] STAFF RECOMMENDATION: Agency/Council adopt the resolution 3. AGENCY RESOLUTION OF THE OF THE CITY OF CHULA VISTA ADOPTING NEGATIVE DECLARATION IS-OO-29 AND APPROVING OWNER PARTICIPATION AGREEMENT WITH MR. RICHARD MOORE FOR THE DEVELOPMENT OF AN INDUSTRIAL BUILDING LOCATED AT 694 MOSS STREET WITHIN THE SOUTHWEST REDEVELOPMENT PROJECT AREA - The owner of the property at 694 Moss Street is proposing to construct an 11,372 sq. ft. industrial building. The proposed structure will be used for the storage of telecommunications cable material and equipment. The project is being constructed on an underutilized and blighted lot, and includes the construction of a parking lot, landscaped areas, and street improvements. The site is located next to the San Diego Trolley line and within proximity of the north-bound entrance to Interstate 5 at L Street. The site is also located within the boundaries of the Southwest Redevelopment Project Area. [Community Development Director] STAFF RECOMMENDATION: Agency adopt the resolution 4. JOINT RESOLUTION OF THE OF THE CITY COUNCIL AND REDEVELOPMENT AGENCY OF THE CITY OF CHULA VISTA SUPPORTING THE CONCEPT OF RE-SITING THE DUKE ENERGY SOUTH BAY POWER PLANT TO THE LNG SITE, AND DIRECTING STAFF TO EXPLORE ALL ASSOCIATED DEVELOPMENT OPPORTUNITIES IN COOPERATION WITH THE SAN DIEGO UNIFIED PORT DISTRICT AND DUKE ENERGY OF NORTH AMERICA - In April 1999, the San Diego Unified Port District completed the Redevelopment Agency, November 13, 2001 Page 2 purchase of the South Bay Power Plan from SDG&E and leased the facility to Duke Energy of North America. The primary purpose of the agreement is to allow for the dismantling of the aging plant in its current location by November 2009, with an opportunity to re-site a new plant "off-site" thereby allowing for highest and best use development of the south Bayfront south of "J" Street. [Community Development Director] STAFF RECOMMENDATION: Agency/Council adopt the resolution ACTION ITEMS The items listed in this section of the agenda are expected to elicit substantial discussions and deliberations by the Agency/Authority, staff, or members of the general public. The items will be considered individually by the Agency/Authority and staff recommendation may in certain cases be presented in the alternative. Those who wish to speak, please fill out a Request to Speak form available in the lobby and submit it to the Secretary to the Redevelopment Agency or City Clerk prior to the meeting. 5. CONSIDERATION OF THE ISSUANCE OF MULTI-FAMILY HOUSING REVENUE BONDS AND APPROVAL AND EXECUTION OF THE NECESSARY DOCUMENTS AND APPROVAL OF THE AGENCY'S LOAN AND REGULATORY AGREEMENTS FOR THE HERITAGE TOWN CENTER MULTI- FAMILY RENTAL HOUSING DEVELOPMENT - On 5/29/01, the Housing Authority of the City of Chula Vista held a public hearing and approved a resolution expressing the Authority's intent to issue multi-family housing revenue bonds to finance a proposed 271 unit multi-family rental housing project for low and moderate income households within the Otay Ranch master planned community (Heritage Town Center). Additionally, the Agency/Council conditionally approved financial assistance in the form of a residual receipts loan from the Agency's Low and Moderate Income Housing fund in an amount not-to-exceed $4.4 million and a deferral and waiver of certain City fees. The developer has since received a commitment of 2001 private activity bonds for multi-family rental housing projects from the California Debt Limit Allocation Committee. At this time, the Authority is asked to approve a bond resolution authorizing the issuance of $15,400,000 in tax exempt bonds for the financing of the project and execution in substantial form and other related documents. As a condition of the Agency's financial assistance, the developer is to enter into a loan and regulatory agreement with the Agency and City specifying terms of the financial assistance and use of the project as an affordable housing development for low and moderate income households for a period of 55 years. [Community Development Director] 4/5THS VOTE REQUIRED a. RESOLUTION OF THE HOUSING AUTHORITY OF THE CITY OF CHULA VISTA AUTHORIZING THE ISSUANCE OF MULTI-FAMILY HOUSING REVENUE BONDS IN AN AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $ 1 5,400,000 FOR THE PURPOSE OF Redevelopment Agency, November 13, 2001 Page 3 FINANCING THE ACQUISITION AND CONSTRUCTION OF THE HERITAGE TOWN CENTER MULTI-FAMILY RENTAL HOUSING PROJECT, APPROVING AND AUTHORIZING THE EXECUTION AND DELIVERY OF ANY AND ALL DOCUMENTS NECESSARY TO ISSUE THE BONDS AND IMPLEMENT THIS RESOLUTION, AND RATIFYING AND APPROVING ANY ACTION HERETOFORE TAKEN IN CONNECTION WITH THE BONDS b. JOINT RESOLUTION OF THE CITY COUNCIL AND REDEVELOPMENT AGENCY OF THE CITY OF CHULA VISTA [AI APPROVING A LOAN AGREEMENT AND RELATED RESTRICTIVE COVENANTS AND THE AFFORDABLE HOUSING AGREEMENT BY AND BETWEEN THE REDEVELOPMENT AGENCY AND SOUTH BAY COMMUNITY VILLAS, L.P. AND AUTHORIZING THE CHAIRMAN OF THE REDEVELOPMENT AGENCY TO EXECUTE SAID AGREEMENTS; [BI APPROPRIATING $4,400,000 FROM THE UNAPPROPRIATED BALANCE IN THE LOW AND MODERATE INCOME HOUSING FUND FOR FINANCIAL ASSISTANCE TO SOUTH BAY COMMUNITY VILLAS, L.P.; [CI APPROVING A TEN YEAR DEFERRAL OF THE PUBLIC FACILITIES DEVELOPMENT IMPACT FEE AND WAIVER OF THE PARK FEE; AND [DI APPROVING A DEFERRAL AGREEMENT FOR THE PUBLIC FACILITIES DEVELOPMENT IMPACT FEE AND AUTHORIZING THE MAYOR TO EXECUTE SAID AGREEMENT FOR THE DEVELOPMENT AND OPERATION OF HERITAGE TOWN CENTER STAFF RECOMMENDATION: 5.a) Housing Authority adopt the resolution; 5.b) Council/Agency adopt the resolution. ORAL COMMUNICATIONS This is an opportunity for the general public to address the Redevelopment Agency on any subject matter within the Agency's jurisdiction that is not an itern on this agenda. (State law, however, generally prohibits the Redevelopment Agency from taking action on any issues not included on the posted agenda.) If you wish to address the Agency on such a subject, please complete the "Request to Speak Under Oral Communications Form" available in the lobby and submit it to the Secretary to the Redevelopment Agency or City Clerk prior to the meeting. Those who wish to speak, please give your name and address for record purposes and follow up action. OTHER BUSINESS 6. DIRECTOR'S REPORTlS) 7. CHAIR/MAYOR REPORTlS) 8. AGENCY/COUNCIL COMMENTS Redeveiopment Agency, November 13, 2001 Page 4 ADJOURNMENT The meeting will adjourn to a closed session and thence to the regular meeting of the Redevelopment Agency on November 20, 2001 at 6:00 p.m., immediately following the City Council meeting in the City Council Chambers. CLOSED SESSION Unless Agency Counsel, the Executive Director. City Councilor the Redevelopment Agency states otherwise at this time, the Agency/Council will discuss and deliberate on the following item!sl of business which are permitted by law to be the subject of a closed session discussion, and which the Agency/Council is advised should be discussed in closed session to best protect the interests of the City. The Agency/Council is required by law to return to open session, issue any reports of final action taken in closed session, and the votes taken. However, due to the typical length of time taken up by closed sessions, the videotaping will be terminated at this point in order to save costs so that the Agency/Council's return from closed session, reports of final action taken, and adjournment will not be videotaped. Nevertheless, announcements of actions taken in Closed Session shall be made by Noon on Wednesday following the meeting at the City Clerk's office in accordance with the Ralph Brown Act (Govt. Code § 54957.71 9. CONFERENCE WITH REAL PROPERTY NEGOTIATOR -- Pursuant to Government Code Section 54956.8 Property: Assessor Parcel Nos. 568-270-03; 568-270-11 (approximately 2.85 acres located at the southeast corner of Fourth Avenue and F Street) Negotiating Parties: City Council / Redevelopment Agency (Sid Morris/ Chris Salomone) and Various Tenant Interests Under Negotiations: Lease terms 10. CONFERENCE WITH LEGAL COUNSEL REGARDING ANTICIPATED LITIGATION -- Pursuant to Government Code Section 54956.9(b) One Case 11. CONFERENCE WITH REAL PROPERTY NEGOTIATOR - Pursuant to Government Code Section 54956.8 Property: Assessor Parcel Nos. 568-270-2200; 760-106- 9205 (31,673 sq. ft. at 320 Third Avenue) Negotiating Parties: Redevelopment Agency (Chris Salomone) and CinemaStar/Trigild (Bill Huffman) and/or Midland Loan Services/LaSalle Bank (Chris Cimino) Under Negotiations: Price and terms for acquisition **************** Redevelopment Agency, November 13, 2001 Page 5 AMERICANS WITH DISABILITIES ACT The City of Chula Vista, in complying with the Americans with Disabilities Act (ADA), request individuals who require special accommodates to access, attend, and/or participate in a City meeting, activity, or service request such accommodation at least 48 hours in advance for meetings and five days for scheduled services and activities. Please contact the Secretary to the Redevelopment Agency for specific information at 1619) 691-5047 or Telecommunications Devices for the Deaf (TDDI at 16191585-5647. California Relay Service is also available for the hearing impaired. Redevelopment Agency, November 13, 2001 Page 6 MINUTES OF ADJOURNED REGULAR MEETINGS OF THE CITY COUNCIL AND REDEVELOPMENT AGENCY OF THE CITY OF CHULA VISTA October 9,2001 6:00 p.m. Adjourned Regular Meetings of the City Council and Redevelopment Agency of the City of Chula Vista were called to order at 7:36 p.m. in the Council Chambers, located in the Public Services Building, 276 Fourth Avenue, Chula Vista, California. ROLL CALL PRESENT: Agency/Councilmembers: Davis, Padilla, Rindone, Salas and Chair/Mayor Horton ABSENT: Agency/Councilmembers: None ALSO PRESENT: Executive Director/City Manager Rowlands, City Attorney Kaheny, and City Clerk Bigelow CONSENT CALENDAR 1. APPROVAL OF MINUTES of September 18, September 25 and October 2,2001 Staff recommendation: The Redevelopment Agency/City Council approve the minutes. 2. WRITTEN COMMUNICATIONS A. Letter from the Assistant City Attorney stating that, to the best of her knowledge from observance of action taken in Closed Session on September 25, 2001 in which the Assistant City Attorney participated, there were no actions taken which are required under the Brown Act to be reported. Staff recommendation: The letter be received and filed. B. Letter from the City Attorney stating that, to the best of his knowledge from observance of actions taken in Closed Session on October 2, 2001 in which the City Attorney participated, there were no actions taken which are required under the Brown Act to be reported. Staff recommendation: The letter be received and filed. ACTION: Mayor Horton moved to amend the minutes of October 2, 2001 to indicate Agency/Councilmember Rindone's arrival at 4:54 p.m. and offered the Consent Calendar, headings read, texts waived. The motion carried 5-0. (-( ORAL COMMUNICATIONS There were none. OTHER BUSINESS 3. DIRECTOR'S REPORTS There were none. 4. CHAIR/MA YOR REPORTS There were none. 5. AGENCY/COUNCIL COMMENTS There were none. CLOSED SESSION 6. CONFERENCE WITH REAL PROPERTY NEGOTIATOR PURSUANT TO GOVERNMENT CODE SECTION 54956.8 Property: Assessor Parcel Nos. 568-270-03; 568-270-11 (approximately 2.85 acres located at the southeast corner of Fourth Avenue and F Street) Negotiating Parties: City CouncillRedevelopment Agency (Sid Morris/Chris Salomone) and various tenant interests Under Negotiation: Lease terms This item was not discussed. 7. CONFERENCE WITH LEGAL COUNSEL REGARDING ANTICIPATED LITIGATION PURSUANT TO GOVERNMENT CODE SECTION 54956.9(B) One Case This item was not discussed. ADJOURNMENT At 7:39 p.m., ChairlMayor Horton adjourned the meeting to an Adjourned Regular Meeting of the Redevelopment Agency on October 23,2001,2001 at 6:00 p.m., immediately following the City Council meeting. Respectfully submitted, ~ ~~c:(.J <S> Susan Bigelow, CMC/ AAE, City Clerk Page 2 Council/RDA Minutes ( - ¡)... 10/09/01 JOINT REDEVELOPMENT AGENCY / CITY COUNCIL AGENDA STATEMENT ITEM NO.: ;).- MEETING DATE: 11 /13/01 ITEM TITLE: JOINT RESOLUTION AMENDING THE STOREFRONT RENOVATION PROGRAM BY INCREASING REBATE AMOUNTS FOR ELIGIBLE PROJECTS IN THE TOWN CENTRE I REDEVELOPMENT PROJECT AREA AND EXPANDING THE PROGRAM TO ELIGIBLE PROJECTS IN THE H STREET CORRIDOR BETWEEN BROADWAY AVENUE AND INTERSTATE 5, TRANSFERRING FUNDS FOR THE PROGRAM FROM THE TOWN CENTRE I PROFESSIONAL SERVICES FUND TO THE COMMUNITY DEVELOPMENT SPECIAL PROJECTS FUND, AND AUTHORIZING THE COMMUNITY DEVELOPMENT DIRECTOR TO ENTER INTO AGREEMENTS WITH ELIGIBLE PARTICIPANTS SUBMITTED BY: COMMUNITY DEV~LOPMENT DIRECTOR ~.fì, c..> REVIEWED BY: CITY MANAGER ffG 4/5THS VOTE: YES D NO ~ BACKGROUND On November 14, 2000, the City Council and Redevelopmenf Agency of the City af Chulo Visto adopted a Storefront Renovation Program to benefit merchants and properly owners in a target area of the Town Centre I Redevelopment Project Area. The program was seen as a way of encouroging revitalization of the cultural center and historic core of the community. The program provided matching rebates of 50-percent up to $7,500 for full façade renovotions and rebates of 30-percent up fo $2,000 for new signs. The program also provided, free of charge to appliconts, up to five hours of professional design service and technical assisfance. On September 18, 2001, fhe City Council approved the H Sfreet Beautification Project. If is a comprehensive sfreetscape, art and landscaping program designed to improve the appeorance of one the of City's primary entryways on H Street between Broadway Avenue and Interstate 5. The proposed enhancements for the H Street project include widening its right of woy, causing reduced visibility ond the possible displacemenf of signs for some businesses. To assist business owners in the H Street corridor between Broadway and 1-5 with cosfs associated with constructing new signs, stoff recommends establishing a modified Storefronf Renovation Program targeted at the removal of pole signs and the construction of more attroctive monument signs. During City Council discussion of this suggestion, Council members expressed an interest in ;2 - I PAGE 2, ITEM NO.: MEETING DATE: 11/13/01 assisting the H Street corridor businesses with full façade improyements, in order to proyide an incentive for privafe property improvements in conjunction with the public project. This resolution seeks fo fulfill the interesfs expressed by the City Council in extending the Storefront Renovotion Program to H Street between Broadway Avenue and 1-5. It olso seeks fo enhonce the existing Town Centre I program to more accurately reflect morket conditions ond transfers existing Storefront Renovation Program funds fo an occount more oppropriate for that purpose. RECOMMENDATION It is recommended that the City Council and Redevelopment Agency adopt the resolution amending the Storefront Renovation Program by increasing rebate amounts in the Town Cenfre I Redevelopment Project Area and expanding the program, to eligible projects in the H Sfreet corridor between Broadway Avenue ond Interstate 5, transferring funds for the program from the Town Centre I Professional Services Fund to the Community Developmenf Speciol Projects Fund, and authorizing the Community Development Director to enter info agreements with eligible participants. BOARDS/COMMISSIONS RECOMMENDATION The Town Centre I Project Area Committee unanimously endorsed this item at its meeting of October 24, 2001. The Program was presented to the Broadway Business Association at ifs meeting of November 8,2001. DISCUSSION The Sforefronf Renovotion Program is among several tools being used by the City of Chula Vista to encourage a private sector response to public revitalization efforts. Rebates provided fo property owners ond merchants who improve their storefronts and signage allow private sector dollors to be leveroged as larger investments. Since the inception of the Program in January, 2001, 27 inquiries have been received from merchants in the torget area of Town Centre I. Two projects have been completed, including a full façade improvement and sidewalk café at laBelia Pizza and a sign for Dr. Medina's Cosmefic Denfistry. In both cases, the highest dollor omount allowed by the program was less than optimal given foday's construction and design costs. To ochieve 0 goal of providing a meoningful incenfive to target oreo property owners and merchants in Town Centre I and the H Street corridor between Broadway Avenue and 1-5, sfaff recommends the following changes to the program: . Provide a 50-percent matching rebate for eligible full façade improvements in both areas up to a maximum amount of $10,000 (up from $7,500) oZ-;}..... PAGE 3, ITEM NO.: MEETING DATE: 1 1/13/01 . Provide a 30-percent matching rebate for eligible storefront signage projects up ta a maximum amount of $4,000 (up from $2,000) . In the H Street corridor only, provide 50-percent matching rebates for businesses who replace pole signs with eligible monument signs, up to a maximum of $8,000 . Exclude pole signs from the program . Provide, free of charge, up to 5 hours of design assistance for eligible full façade improvements . Provide, free of charge, design guidance on eligible signage projects . Transfer existing Storefront Renovation Program funds from the Town Centre I professional services account to the Community Development Special Projects account . Authorize the Community Development Director to enfer info agreements wifh eligible porticipants to execute fhe program FISCAL IMPACT The Storefront Renovotion Program was funded at a level of $85,000 for the 2001-2002 fiscol year. No additional appropriation is requested at this time, however staff may need to return fo the Redevelopment Agency and City Council with a request for funding should the program funds be depleted before the end of fhe fiscal year. AnACHMENTS Map of Target Area in Town Centre I Map of Target Area in the H Street Corridor J:\COMMDEV\STAFF.REP\ 11-13-01\JOINT SRP AMENO.doç 2-3 AGENCY RESOLUTION NO. AND COUNCIL RESOLUTION NO. JOINT RESOLUTION OF THE CITY COUNCIL AND THE REDEVELOPMENT AGENCY OF THE CITY OF CHULA VISTA AMENDING THE STOREFRONT RENOVATION PROGRAM BY INCREASING REBATE AMOUNTS IN THE TOWN CENTRE I REDEVELOPMENT PROJECT AREA AND EXPANDING THE PROGRAM TO ELIGIBLE PROJECTS IN THE H STREET CORRIDOR BETWEEN BROADWAY AVENUE AND INTERSTATE 5, TRANSFERRING FUNDS FOR THE PROGRAM FROM THE TOWN CENTRE I PROFESSIONAL SERVICES FUND TO THE COMMUNITY DEVELOPMENT SPECIAL PROJECTS FUND, AND AUTHORIZING THE COMMUNITY DEVELOPMENT DIRECTOR TO ENTER INTO AGREEMENTS WITH ELIGIBLE PARTICIPANTS WHEREAS, the Storefront Renovation Program was established by Joint Resolution on November 14, 2000 establishing matching rebates for eligible façade and signage projects in a target area of the Town Centre I Redevelopment Project Area; and WHEREAS, City Council authorized the H Street Beautification Program by resolution on September 18, 2001, authorizing a beautification of a primary entryway to the City on H Street between Broadway Avenue and Interstate 5; and WHEREAS, City Council has determined to increase Storefront Renovation Program rebate amounts to more closely match current market conditions; and WHEREAS, City Council has determined to extend the Storefront Renovation Program to the H Street Beautification Project area between Broadway Avenue and Interstate 5 and to modify the program to suit needs in the H Street area; NOW, THEREFORE, BE IT RESOLVED the City Cbuncil and Redevelopment Agency of the City of Chula Vista do hereby amend the Storefront Renovation Program to: 1. Provide a 50-percent matching rebate for eligible full façade improvements in target areas up to a maximum amount of $10,000; 2. Provide a 30-percent matching rebate for eligible storefront sign projects up to a maximum amount of $4,000; 3. Provide 50-percent matching rebates for eligible monument sign projects in the H Street Corridor target area up to a maximum amount of $8,000; AND, FURTHER, BE IT RESOLVED the City Council and Redevelopment Agency of the City of Chula Vista do hereby authorize the transfer of program funds from the Town Centre I Professional Services Fund to the Community Development Special Projects Fund; AND, FURTHER, BE IT RESOLVED the City Council and Redevelopment Agency of the City of Chula Vista do hereby authorize the Community Development Director to enter into agreements with eligible participants. Presented by Approyed as to form by ~~ ~ Director of Community Deyelopment J:\COMMDEVIRESOS\JOINT SRP AMEND.doc ;¿-l(- ~Ie~ ~I 6~ E f! C) 0 I.. Q. c: 0 .- ...., ns > 0 ~ c: I CI) ã 0: ...., c: 0 I.. 'I- CI) I.. 0 ...., tn - co~ O)+-' .... c «0) +-,0 0) C C ~~ z~o wI- ~DD --- REDEVELOPMENT AGENCY AGENDA STATEMENT ITEM NO.: .3 MEETING DATE: 11 /1 3/01 ITEM TITLE: RESOLUTION ADOPTING NEGATIVE DECLARATION 15-00-29 AND APPROVING OWNER PARTICIPATION AGREEMENT WITH MR. RICHARD MOORE FOR THE DEVELOPMENT OF AN INDUSTRIAL BUILDING LOCATED AT 694 MOSS STREET WITHIN THE SOUTHWEST REDEVELOPMENT PROJECT AREA SUBMlnED BY: COMMUNITY DEVELOPMENT DIRECTOR uø-~ C-5 - REVIEWED BY: EXECUTIVE DIRECTOR ~ 4/5THS VOTE: YES D NO CD BACKGROUND The owner of the property ot 694 Moss Street, Mr. Richard Moore, is proposing to consfruct an 11,372 sq. ft. industrial building on the site. The proposed structure will be used for the storage of telecommunications cable moteriol ond equipment. The project is being constructed on an underutilized and blighted lot, and includes the construction of a parking lot, landscaped areas, and street improvements. The subject sife is located next to the San Diego Trolley line ond within proximity of the north-bound entrance to Interstafe I - 5 at L Street. The site is also located within the boundaries of the Southwest Redevelopment Project Area. The proposed land use is ollowed under the General Plan, Southwest Redevelopment Pion, and Zoning Ordinance. The Community Development Department's Environmental Review Monager reviewed the proposed project pursuant to the provisions of the Colifornio Environmental Quality Act and determined thot it would have no significant impacts and recommended odoption of Negative Declarafion IS-00-09. Since the proposed project is within the Southwest Redevelopment Project Area, the environmenfal documenf ond the Owner Participation Agreement (OPA), which includes the design plans and a list of conditions, ore being presented to the Redevelopment Agency for consideration and approval. RECOMMENDATION It is recommended thot the Redevelopment Agency approve the resolution adopting the Negative Declorotion ond approving the Owner Participation Agreement for the construction of on industrial building at 694 Moss Street, subject to the conditions listed in Exhibit B of the OPA. .3 -I PAGE 2, ITEM NO.: MEETING DATE: 1 1/13/01 BOARDS/COMMISSIONS RECOMMENDATION The Design Review Committee reviewed the proposed design plans on October 1, 2001 and recommended approval of the project as described in Exhibit A and subject to conditions listed in Exhibit B of the OPA. The Resource Conservation Commission (RCC) reviewed the Initial Study 00-29 on May 15, 2000, determined that it was adequafe and recommended that the associated Negative Declarotion for the Project be adopted. DISCUSSION Site Characteristics The site for the proposed project is located on Moss Sfreet east of its intersection with Industrial Boulevard and on the east side of the San Diego Trolley Line (see Locator Map attached as Exhibit B of the OPA). The project site consists of a vacant slightly uneven lot wifh an area of 0.77 of an acre. The lot has been utilized by the owner since 1999 for the storage of telecommunications cable and equipment under a Special Use Permit issued by the City's Zoning Administrator. This permit requires fhe owner to construct a building and store the material and equipment inside. The subject parcel is located in an urbonized area that has been developed with a variety of structures, some of which are in good condition while others ore in need of improvement or full redevelopment. Some of the uses surrounding the po reel ore: the former Solar Turbine facility located to the north; the Toys R Us shopping center across Industrial Boulevard to the west; industrial warehouses to the south; San Diego Pallets as well as multi-family dwellings are located to the east along Moss Street; ond a single-family neighborhood immediately southeast starting at Colorado Avenue. Project Description The project consists of the construction of an 11,372-square foot, decorative (split-face) block warehouse building that contains a first floor office storefront, an un-improved mezzanine obove the office spoce, and the large warehouse space. Three loading ramps leading to roll-up doors will be located on the east side of the building. The project also includes the construction of a 17-space parking lot, as well as landscoped areas that comprise approximately 30% of the site. The landscape plan is composed of grass turf, shrubs, and trees. A wrought-iron/concrete pilaster fencing will be located along the west side of the site, adjacent to the MTDB trolley right- of-way. The north and east sides of the property will be fenced with a 6-ft. black vinyl cooted chain- link fence. The enfrance to the property will be on the soufh side of fhe site on Moss Street ond will hove a metol gate. d-d-.. PAGE 3, ITEM NO.: MEETING DATE: 11 /13/01 Land Use Desianations The land use designation for the site and the surrounding parcels are as follows: GENERAL PLAN ZONING CURRENT LAND USE Site: Limited Industrial ILP Vacant Parcel with Open Storage North: Limited Industrial ILP Rail Spur/former Solar Turbines Soufh: Limifed Industrial ILP Industriol Park Eost: Limited Industriol ILP San Diego Pallets/multi-family dwellings West: Open Space UNZ MTDB Trolley Right-Of-Way As shown above, the subject site is designated Industriol-Research & Limited Manufocturing by the General Plan and is zoned Limited Industrial (I-L). These designations allow a voriety of light industriol and heavy commerciol activities and uses, including wholesale businesses, storage and warehousing. Since the proposed project is the construction of 0 worehouse building, it is 0 used included in the list of permitted uses by the City regulation. Based on this assessment, the proposed project is consistent with the General Plan, the Southwesf Redevelopment Plan, and the Zoning Ordinance. Conclusion It is staff's opinion that the construction of the proposed building will be beneficial for the City, because it will put a vacant and under-utilized parcel to a higher and better use and bring new development to the area. As such, the proposed project will contribute to the elimination of blighting influences, which furthers the goals and objectives of the Southwest Redevelopment Plan. FISCAL IMPACT The proposed project has an estimated valuation of $ . This will generate an annual tax- increment revenue of approximately $-, which will be distributed as follows: Twenty percent ($-1 for the Housing Set-Aside fund; of the remaining $-, fifty three percent ($-1 will be allocated to other taxing entities as part of fhe tax sharing pass-thru agreements; the rest ($-1 will accrue to the Southwest Redevelopment Project Area fund. ATTACHMENTS Attachment A - Negative Declaration IS-00-29 Attachment B - Owner Participation Agreement with the following: Exhibit A - Design Plans Exhibit B - Design Review and Agency Conditions of Approval Exhibit C - Locator Mop j:\COMMDEV\STAFF.REP\ 11-13-01\Dataçam Industrial Building Report.doç 3-3 RESOLUTION NO. - RESOLUTION OF THE REDEVELOPMENT AGENCY OF THE CITY OF CHULA VISTA ADOPTING NEGATIVE DECLARATION IS-00-29 AND APPROVING OWNER PARTICIPATION AGREEMENT WITH THE RICHARD MOORE FOR THE DEVELOPMENT OF AN INDUSTRIAL BUILDING LOCATED AT 694 MOSS STREET WITHIN THE SOUTHWEST REDEVELOPMENT PROJECT AREA WHEREAS, Mr. Richard Moore owns the property at 694 Moss Street, which is diagrammatically shown in the Locator Map attached to the Owner Participation Agreement and incorporated herein by reference; and, WHEREAS, Mr. Moore presented deyelopment plans for the construction of a 11,372-square foot industrial building and associated lot improvements ("Project"); and WHEREAS, the site for the proposed Project is located within the Southwest Re deyelopment Project Area under the jurisdiction and control of the Redevelopment Agency of the City of Chula Vista; and, WHEREAS, the Community Deyelopment Department's Enyironmental Reyiew Manager reyiewed the proposed Project and issued Negative Declaration IS-00-29 for the project in accordance with CEQA; and, WHEREAS, the Design Reyiew Committee reyiewed and recommended that the Redeyelopment Agency approye the proposed Project subject to the conditions listed in Exhibit B of the Owner Participatio n Agreement; and, WHEREAS, the Redevelopment Agency of the City of Chula Vista has been presented an Owner Participation Agreement, said agreement being on file in the Office of the Secretary to the Redevelopment Agency and known as document RACO 01-26, approYing the construction of a 11 ,372-square foot industrial building located at 694 Moss Street, depicted in Exhibit A and subject to conditions listed in Exhibit B of said agreement. NOW, THEREFORE, THE REDEVELOPMENT AGENCY OF THE CITY OF CHULA VISTA does hereby find, order, determine and resolve as follows: 1. The proposed project will not haye a significant impact on the enYironment; accordingly Negatiye declaration IS-00-29 was prepared and is hereby adopted in accordance with CEQA. 2. The proposed project is consistent with the Southwest Redeyelopment Plan and shall implement the purpose thereof. 3. The Redeyelopment Agency of the City of Chula Vista hereby approves the Owner Participation Agreement with Mr. Richard Moore for the construction of a 11,372-square foot industrial building at 694 Moss Street, in the form presented in accordance with plans attached thereto as Exhibit A and subject to conditions listed in Exhibits B of said agreement. 4. The Chairman of the Redeyelopment Agency is hereby authorized to execute the subject Owner Participation Agreement between the Redeyelopment Agency and Mr. Richard Moore. 5. The Secretary of the Redeyelopment Agency is authorized and directed to record said Owner Participation Agreement in the Office of the County Recorder of San Diego, California. 3-4 Resolution No. - Page 2 Presented by: Approved as to form by: (JL~ Chris Salomone Community Development Director 3-'5' ""'"' . -', .... ATTACHMENT A negative declaration - PROJECT NAME: MoSS' Office/W arehouse PROJECT LOCATION: 694 Moss Street, City ofChula Vista ASSESSOR'S PARCEL NO.: 618-010-290 PROJECT APPLICANT: Richard Moore CASE NO.: IS-00-29 DATE: May 5, 2000 A. Project Senin¡¡ The project site consists of a vacant near-level graded .77 àcre site located on 694 Mo~- Street east of the trolley raillinës and east ofIndustrial Boulevard in the City's Southwest Redevelopment Area. Surrounding uses and zoning are as follows: North: Industrial (pallet' Co.) lLP zone; East: Industrial (pallet Co.) ILP; South: Moss Street (industrial warehouse across Moss Street); West: SD&AZ rail r.O.w. ILP (Industrial Blvd. beyond RR LO.W.) The project site is fully disturbed and has been cleared of all vegetation and therefore does not represent viable habitat for any sensitive animal species. Moss Street is designated as a Class II Collector by the City's Circulation Element. B. Project Description The project proposes the construction of an 11,372 square foot concrete block building to be used as a warehouse and office building. The applicant is proposing to install one thirty-six foot driveway off of Moss Street near the easterly property line. The project will provide a total of 16 parking spaces on-sitè in accordance with the City's Zoning Ordinance parking standards for the proposed uses. New landscaped areas, will be provided es~entially along the perimeter of the project site with special emphasis along the westerly property line adjacent to the railroad r.O.W. The landscaped area will include grass turf, shrubs and trees. The total on-site and off-site landscaping area proposed is 5,265 square feet. The project \\ill require the granting of a discretionary pennit of approval from the City of Chula Vista Design Review Committee and the Redevelopment Agency. C. CompatibilitY with Zonin¡¡ and Plans The current zoning is ILP (Limited Industrial Precise Plan) and the site is designated as A:\lIb~inda\is9807.neg Page 1 3_fo ~~~ ::;:-~-:;; ~" ---., ... Limited Industrial use by the City's General Plan. The proposed project is in compliance with the Zoning designation and the adopted General Plan designation. D. Identification of Environmental 'Effects An InitiaJ Study conducted by the City of Chula Vista (including an attached Environmental Checklist form) determined that the proposed project \'oill not have a significant environmental effect, and the preparation of an Environmental Impact Report will not be required. This Negative Declaration has been prepared in accordance with Section 15070 of the State CEQA Guidelines. 1. Public Services Impact Fire The nearest fire station is located about 2 miles from the project site. The estimated response time is less than seven (7) minutes. The response time complies with the City Threshold Standards for fire and medical response'time. The Fire Department will review the building construction plans to ensure that the proposed construction complies with applicable CaJifomia Building and Fire Code regulations. Police The Police Department indicates that current levels of service and response time will be provided to the proposed land uses. 2. UtilitY and Service Svstems Soils The applicant will be required to prepare and submit a geotechnical/soils report with the first submittal of the grading/improvement plans. The applicant shall comply with the applicable recommendations as determined by the City engineer. Drainage On-site The project site is within a mapped SOO-year flood plain. The Engineering Division indicates that existing on-site drainage facilities consisting of two 60-inch concrete pipes with a 10' X 16' storm drain inlet will more than adequately convey storm drain waters including potentiaJ flood waters from a SOO-year event. A:IllbUindalis9807 .neg 3-1 -, . -, <; Off-site The Engineering Divisiõñstates that there is an existing double box culvert storm drain on Telegraph Canyon north of the project site. The Engineering Division indicates that these off-site facilities will more than adequately serve the proposed project. The developer is required to implement Best Management Practices to prevent pollution of storm drainage facilities per City of Chula Vista Municipal code 14.20. A National Pollutant Discharge Elimination System (NPDES) Permit is not required because the subject site is less than five acres. Sewer Sewage flows and volumes are currently being adequately maintained. A 15 inch sewer main is found in Industrial Boulevard and ten inch sewer line is found under Moss Street. The Engineering Division states that the applicant will prepare a sewer study to calculate the number ofEDU's that will be generated fÌ'om the proposed building, based on type of occupancy and industrial use. The applicant may be required to obtain an industrial permit or a waiver fÌ'om the wastewater section of the City of Chula Vista. StreetsfTraffic The 1l1reshold Standards Policy requires that all signalized arterial segments operate at a Level of Service (LOS) "C" or better, with the exception that Level of Service (LOS) "D" may occur during the peak two hours of the day at signalized intersections. No intersection may reach an LOS "F" during the average weekday peak hour. Intersections of arterials v.ith fÌ'eeway ramps are exempt fÌ'om this policy. The proposed project would comply with this 1l1reshold Policy for the immediately affected segment along Moss Street The Engineering Division estimates the project will generate a total of 84 one-way vehicular trips per day. Street dedications and improvements are required for Moss Street per City street standards. No mitigation will be required. 3. Noise Temporary construction noise would occur at the site, however, the short term nature of the noise, the proximity of a major arterial, railway lines and the industrial nature of the surrounding area results in less than significant impacts. The nearest residence is over 220 feet away from the project construction site. No mitigation will be required. A:\llbllindalis9807.neg Page 3 3~~ ~, . -- ... 4. Aesthetics The proposed project will be subject to review and approval by the Design Review CommÌttee (DRC). The-proposed site plan, architectural design, landscaping and lighting plans will be subject to review by the DRC to ensure the proposed project will complement surrounding development and comply with all applicable design and landscaping plans, policies and standards. 5. Air Qualitv The project is associated with a small increase in traffic. The site is currently unpaved and is currently being uses as a construction storage yard. The proposed project will help improve the present site conditions including the elimination of fugitive dust. No mitigation will be required. E Mitigation Necessarv to Avoid Significant Effects. NO MITIGATION WILL BE REOURED Name, Title Date F. Consultation 1. Indi"iduals and Organizations City of Chula Vista: Benjamin Guerrero, Community Development Frank Rivera, Engineering Muna Cuthbert, Engineering Majed Al-Ghafry, Engineering Ralph Leyva, Engineering Brad Kemp, Building Division Doug Perry, Fire Department Richard Preuss, Crime Prevention Chula Vista City School District: Dr. Lowell Billings Sweetwater Union High School District: Katy Wright Applicant's Agent: Richard & Richard Construction Co., Inc. A:~lb~inda\is9807 .neg Page 4 .,3-9 """ . ......... .; 2. Documents Chula Vista General PlañTI 989) and EIR (1989) Title 19, Chula Vista Municipal Code 3. Initial Studv This environmental determination is based on the attached Initial Study, any comments received on the Initial Study and any comments received during the public review period for this Negative Declaration. The report reflects the independent judgement of the City of Chula Vista. Further information regarding the environmental review of this project is available from the Chula Vista Planning Department, 276 Fourth Avenue, Chula Vista, CA 91910. 5~~ Date: t;.<-¡". 00 Brian Hunter Planning & Environmental Manager A:Ulbllindalis9807.neg Page 5 J-(O --"' . -, ... Case No. IS-00-29 ENVIRONMENTAL CHECKLIST FORM -- 1. Name of Proponent: Richard Moore 2. Lead Agency Name and Address: City ofChula Vista 276 Fourth Avenue Chula Vista, CA 91910 3. Address and Phone Number of Proponent: 2517 S. Santa Fe Vista, CA. 92083 (619)427-7121 4. Name of Proposal: Moss OfficelWarehouse 5. Date of Checklist: May 4, 2000 P,..n,;.n, p..~".n, S;,nifian' l~,h.n 5;,n;lIanl Unl~ 5;,nifianl " Imp." M;II,..", Imp." Imp." I. LAND USE AND PLANNING: Would the proposol: a) Conflict with general plan designation or 0 0 0 iii zoning? b) Conflict with applicable environmental plans or 0 0 0 iii policies adopted by agencies with jurisdiction over the project? c) Affect agricultural resources or operations (e.g., 0 0 0 iii impacts to soils or farmlands, or impacts from incompatible land uses)? d) Disrupt or divide the physical aITangement of 0 0 0 iii an established community (including a low- income or minority community)? Comments: The vacant site is zoned Limited Industrial Precise Plan (ILP) and designated for Limited Industrial use by the City's General Plan. The proposed project would require review by the Design Review Committee. No adverse impacts or conflicts with the zoning or General Plan are noted. A:\lIbllindalis9808ck.frm Page 1 .3 - (f """ . - , .... room",", room,;.", S;,n;fi,,", l.<u th.n S;,n;fi"n' Unl... S;,n;fi"n' .. Imp." Mi';,..", Imp." Imp", II. POPULATION AND HOUSING: Would the proposal: -- a) Cumulatively exceed official regional or local 0 0 0 III population projections? b) Induce substantial growth in an area either 0 0 0 III directly or indirectly (e.g., through projects in an undeveloped area or extension of major infrastructure)? c) Displace existing housing, especially affordable 0 0 0 III housing? Comments: Project implementation would not contribute to local population growth nor displacement of existing housing. No adverse impacts are noted. m. GEOPHYSICAL: Would the proposal result in or expose people to potential impacts involving: a) Unstable earth conditions or changes in 0 0 0 III geologic substructures? b) Disruptions, displacements, compaction or 0 0 0 III overcovering of the soil? c) Change in topography or ground surface relief 0 0 0 III features? d) The destruction, covering or modification of 0 0 0 III any unique geologic or physical features? e) Any increase in wind or water erosion of soils, 0 0 0 III either on or off the site? f) Changes in deposition or erosion of beach 0 0 0 III sands, or changes in siltation, deposition or erosion which may modify the channel of a river or stream or the bed of the ocean or any bay inlet or lake? g) Exposure of people or property to geologic 0 0 0 III hazards such as earthquakes, landslides, mud slides, ground failure, or similar hazards? Comments: The City Engineering Division states that as standard practice, the applicant will be required to submit a geotechnicallsoils study with the first submittal of the grading/improvement plans. The natural topography has been disturbed. The westerly portion of the lot is relatively flat and contains an existing concrete pad. No adverse A:UlbUindalis9808ck.frm Page 2 ..3-/2-- ----.., . \ 't- roomd.", r"m,',", Sópmun' """h.n Slanmunt [.Im Sla.mu", ,- Imp", "ida."" Imp", Imp", impacts regarding soils or geophysical conditions are noted. No mitigation will be required. IV. WATER: Would the proposal rl!S11ft ill: a) Changes in absorption rates, drainage patterns, 0 0 181 0 or the rate and amount of surface runoff? b) Exposure of people or property to water related 0 0 0 181 hazards such as flooding or tidal waves? c) Discharge into surface waters or other alteration 0 0 0 181 of surface water quality (e.g., temperature, dissolved oxygen or turbidity)? d) Changes in the amount of surface water in any 0 0 0 181 water body? e) Changes in currents, or the course of direction 0 0 0 181 of water movements, in either marine or fresh waters? t) Change in the quantity of ground waters, either 0 0 0 181 through direct additions or withdrawals, or through interception of an aquifer by cuts or excayations? g) Altered direction or rate of flow of 0 0 0 181 groundwater? h) Impacts to groundwater quality? 0 0 0 181 i) Alterations to the course or flow of flood 0 0 0 181 waters? j) Substantial reduction in the amount of water 0 0 0 181 otherwise available for public water supplies? Comments: The subject site is located in a SOD-year flood zone as designated by FEMA maps. The location of the existing concrete pad is about three feet above the existing grade along the westerly portion of the lot. The Engineering Division states that on-site drainage facilities consisting of two 60 inch concrete pipes with a transition inlet structure are more than adequate to serve drainage and any potential flood waters "om the project area. Existing off-site drainage facilities consist of a double box culvert located on Telegraph Canyon north of subject property. The City Engineering Division indicates that the off-site drainage facilities are also adequate to serve the project. No adverse impacts are noted. No mitigation will be required. A:~lb\linda\is9808ck.fnn Page 3 3 ~/3 """, ' -. .. P"..Ii,II, P",",~II, Sie.iOa., L<u..,. Sie.i"a., U.I~ Si",i"a., ,. Imp", ""ie"'" Imp", Imp", V. Am QUALITY: Would the proposal: a) Violate any air quality standard or contribute to 0 0 0 ¡ an existing or projected air qMtity violation? b) Expose sensitive receptors to pollutants? 0 0 0 I!I c) Alter air movement, moisture, or temperature, 0 0 0 ¡ or cause any change in climate, either locally or regionally? d) Create objectionable odors? 0 0 0 ¡ e) Create a substantial increase in stationary or 0 0 I!I 0 non-stationary sources of air emissions or the deterioration of ambient air quality? Comments: The project does not propose any operations that would violate air quality standards or contribute additional pollutants in the air. The proposed warehouse/office operations would not create objectionable odors nor deteriorate ambient air quality. The number of daily vehicle trips (84) attributed to the project would not cause a significant adverse impact on the areas air quality. No mitigation will be required. VI. TRANSPORTATION/CIRCULATION: Would the proposal result in: a) Increased vehicle trips or traffic congestion? 0 0 ¡ 0 b) Hazards to safety from design features (e.g., 0 0 0 181 sharp curves or dangerous intersections) or incompatible uses (e.g., fann equipment)? c) Inadequate emergency access or access to 0 0 0 ¡ nearby uses? d) Insufficient parking capacity on-site or off-site? 0 0 0 ¡ e) Hazards or barriers for pedestrians or 0 0 0 I!I bicyclists? f) Conflicts with adopted policies supporting 0 0 0 I!I alternative transportation (e.g. bus turnouts, bicycle racks)? g) Rail, waterborne or air traffic impacts? 0 0 0 I!I h) A "large project" under the Congestion 0 0 0 I!I Management Program? (An equivalent of2400 or more average daily vehicle trips or 200 or more peak-hour vehicle trips.) A:IlIbUindalis9808ck.frm Page" ..3 -Ic.f ---- . -'\ ~ p....'ian, p....'ian, SI",mu.' [""th,. ,I",mu., V.lm Slc.l"a.' N, Imp", MIIIC"'" Imp'~ Imp,,' Comments: The Engineering Division estimates that the combined warehouse/office uses will generate approximately 84 one-way vehicular trips per day. Moss Street will provide the primary access to the project site. Moss Street is classified by the City's Circulation Element as a Class II Collector. Bâs-;d on Engineering analysis Moss Street presently has the capacity to handle traffic generated by the proposed project and maintain a Level of Service "C", thus meeting the City's Traffic Threshold Standards. No mitigation will be required. VII. BIOLOGICAL RESOURCES: Would the proposal result in impacts to: a) Endangered, sensitive species, species of 0 0 I!II 0 concern or species that are candidates for listing? b) Locally designated species (e.g., heritage 0 0 0 I!II trees)? c) Locally designated natural communities (e.g, 0 0 D' I!II oak forest, coastal habitat, etc.)? d) Wetland habitat (e.g., marsh, riparian and 0 0 0 I!II vernal pool)? e) Wildlife dispersal or migration corridors? 0 0 0 I!II f) Affect regional habitat preservation planning 0 0 0 I!II efforts? Comments: The project site is located in an urbanized area. The site is fully disturbed and cleared of all vegetation. There are presently no native plants or sensitive animal species on-site. VIII. ENERGY Al'm MINERAL RESOURCES: Would the proposal: a) Conflict with adopted energy conservation 0 0 0 I!II plans? b) Use non-renewable resources in a wasteful and 0 0 0 I!II inefficient manner? c) If the site is designated for mineral resource 0 0 0 I!II protection, will this project impact this protection? Comments: No impacts to non-renewable resources are noted. IX. HAZARDS: Would the proposal involve: A:\llbllind.alis9808ck.fnn Pag' 5 ..3 -/~ .--..., . -" ,.. .".."'11, ."..Ii.II, s;...r~" ......... S;..;II~., ,"."" S;..;II~", ,. Imp." M;tip"" Imp." Imp." a) A risk of accidental explosion or release of 0 0 0 18> hazardous substances (including, but not limited to: petroleum products, pestiç,i~s, chemicals or radiation)? b) Possible interference with an emergency 0 0 0 18> response plan or emergency evacuation plan? c) The creation of any health hazard or potential 0 0 0 18> health hazard? d) Exposure of people to existing sources of 0 0 18> 0 potential health hazards? e) Increased fire hazard in areas with flammable 0 0 0 Ii brush, grass, or trees? Comments: The proposed project shall comply with all applicable required pennining processes administered by local, state and federal agencies. No adverse impacts are noted. No mitigation will be required. X. NOISE: Would the proposal result in: a) Increases in existing noise levels? 0 0 Ii 0 b) Exposure of people to severe noise levels? 0 0 0 18> Comments: Temporary construction noise would occur at the site, however, the short tenn nature of the noise, the proximity of a major arterial and railway lines, the industrial nature of the surrounding area results in less than significant impacts. The nearest residence is located oyer 220 feet fTom the proposed project construction area. No adverse impacts are noted. No mitigation will be required. XI. PUBLIC SERVICES: Would the proposal have an effect upon, or result in a needfor new or altered government services in any of the following areas: a) Fire protection? 0 0 0 Ii b) Police protection? 0 0 0 Ii c) Schools? 0 0 0 Ii d) Maintenance of public facilities, including 0 0 0 Ii roads? e) Other governmental services? 0 0 0 Ii Comments: No new Governmental services will be required to serve the project. No adverse impacts A:\lIbllindaIís9808ck.frm Page 6 ....3 - (c. ---., -, . ~ po".lion, P""'.;olly S;...;o"., l<ulho. S;'.;o"., U.I... S;,.;o".. ,. Impo" ";1;,..04 Impo" Imp". are noted. Fire and police protection can adequately be provided. Appropriate school fees will be paid. The Engineering Division indicates that street dedication and improvements along Moss Street will be made in accordance with City Standards. No mitigation will be required:- 0 0 0 18 XII. THRESHOLDS: Will the proposal adversely impact the City's Threshold Standards? As described below, the proposed project does not adversely impact any of the seen Threshoid Standards. a) Fire/EMS 0 0 0 18 The Threshold Standards requires that fi~e and medical units must be able to respond to calls within 7 minutes or less in 85% of the cases and within 5 minutes or less in 75% of the cases. The City of Chula Vista has indicated that this threshold standard will be met, since the nearest fire station is about two miles away and would be associated with a 6-minute response time. The proposed project will comply with this Threshold Standard. Comments: The Fire Department indicates that nearest fire station is located within 2 miles and adequate fire service and protection can be provided to the proposed project site. b) Police 0 0 0 18 The Threshold Standards require that police units must respond to 84% of Priority I calls within 7 minutes or less and maintain an average response time to all Priority 1 calls of 4.5 minutes or less. Police units must respond to 62.10% of Priority 2 calls within 7 minutes or less and maintain an average response time to all Priority 2 calls of 7 minutes or less. The proposed project is located in an area where police ART data for priority 1 and Priority 2 calls is currently unavailable. Comments: The Police Department indicates that current police service can continue to be provided to the area where the subject site is located. Crime Prevention personnel are available to assist the applicant with security recommendations. No significant adverse impacts to Police service are noted. No mitigation will be required. c) Traffic 0 0 0 18 The Threshold Standards require that all signalized arterial segments operate at a Level of Service (LOS) "C" or better, with the exception that Level of Service (LOS) "D" may occur during the peak two hours of the day at signalized intersections. Intersections west ofl-80S are not to operate at a LOS below their 1987 LOS. No intersection may reach LOS "E" or "F" during the average weekday peak hour. Intersections of arterials with freeway ramps are exempted fÌ'om this Standard. The proposed project will comply with this Threshold Standard. Comments: The Engineering Division has determined that the current Level-of- Service (LOS) "C" enjoyed by Moss Street, a class II collector, would remain the same with approval of the A:\llbllindalis9808ck.frm Page 7 ..3-11 -..,. -\ ,.,. POl,.,;oll, POIm,;oll, S;..'fi"., Lou Iho. S;,.'fi,,", U.I~ Si..ifi"., N. Imp", M;,;,..... Imp", Impo" proposed project. No mitigation will be required. d) ParkslRecreation -- 0 0 0 I!II The Threshold Standard for Parks and Recreation is 3 acres/] ,000 population. This standard does not apply to the proposed project. Comments: No adverse impacts to parks or recreational opportunities are noted. e) Drainage 0 0 0 I!II The Threshold Standards require that storm water flows and volumes not exceed City Engineering Standards. Individual projects will provide necessary improvements consistent with the Drainage Master Planes) and City Engineering Standards. The proposed project will comply with this Threshold Standard. Comments: The Engineering Division indicates that existing off-site drainage facilities are adequate to serve the project. The developer is required to implement Best Management practices per existing City Municipal code regulations to prevent pollution of storm drains during and after construction. The applicant will not be required to file a National Pollution Discharge Elimination System (NPDES) due to the size of the subject parcel. f) Sewer 0 0 I!II 0 The Threshold Standards require that sewage flows and volumes not exceed City Engineering Standards. Individual projects will provide necessary improvements consistent with Sewer Master Planes) and City Engineering Standards. The proposed project will comply with this Threshold Standard. Comments: The capacity of the existing adjacent 15 inch sewer line found in Industrial Boulevard and the ten inch line found under Moss Street will be evaluated by the Engineering Division through the preparation of a sewer study by the applicant. No mitigation is required. g) Water 0 0 0 I!II The Threshold Standards require that adequate storage, treatment, and transmission facilities are constructed concurrently with planned growth and that water quality standards are not jeopardized during growth and construction. The proposed project will comply with this Threshold Standard. Applicants may also be required to participate in whatever water conservation or fee off- set program the City ofChula Vista has in effect at the time of building permit issuance. Comments: Water quality standards would not be affected through project implementation. XIII UTILITIES AND SERVICE SYSTEMS: Would A:\lIb~inda\is9808ck.fnn Page 8 ..3-r? .~ . .- .... P..,..i,IIy P"""'"y sic.m".. ......... sic.m".. V.I... Si,.i""., ,. Imp", MitiC"'" Imp", Imp", the proposal result in a need for new systems, or substantial alterations to the following utilities: a) Power or natural gas? -- 0 0 0 iii b) Communications systems? 0 0 0 I! c) Local or regional water treatment or distribution 0 0 0 iii facilities? d) Sewer or septic tanks? 0 0 0 iii e) Storm water drainage? 0 0 0 iii f) Solid waste disposal? 0 0 0 iii Comments: The proposed office/warehouse uses will not generate a need for new systems or cause alteration to the aforementioned utilities. The existing sewer line capacity along Moss Street and Industrial Boulevard will be evaluated by the Engineering Division with the preparation and submittal of a sewer study by the applicant. A National Pollutant Discharge Elimination System Permit is not presently required, but an industrial permit may be required. Chula Vista Municipal Code Section 14.20.120 requires the incorporation of Best Management Practices to prevent pollution of storm drainage systems during and after construction. No mitigation will be required, since these would become standard conditions of project of approval once a determination is made that these will be required. XIV AESTHETICS: Would the proposal: a) Obstruct any scenic vista or view open to the 0 0 0 iii public or will the proposal result in the creation of an aesthetically offensive site open to public view? b) Cause the destruction or modification of a 0 0 0 iii scenic route? c) Have a demonstrable negative aesthetic effect? 0 0 0 iii d) Create added light or glare sources that could 0 0 0 iii increase the level of sky glow in an area or cause this project to fail to comply with Section 19.66.100 of the Chula Vista Municipal Code, Title 19? e) Reduce an additional amount of spill light? 0 0 0 iii Comments: Approval of the project design and landscaping.is subject to a discretionary Design Review process. No mitigation will be required. A:\lIb~inda\is9808ck.frm Page 9 J - (9 ..-...., . ~ P..m.i,"y P""""'y Si",m",", "",.h,. Si,.m",", U.I= Si,.m",", No Imp", Mhi"". Imp'" Imp". XV CULTURAL RESOURCES: Would the proposal: a) Will the proposal result in the alteration of or 0 0 0 181 the destruction or a prehistoric-or- historic archaeological site? b) Will the proposal result in adverse physical or 0 0 0 181 aesthetic effects to a prehistoric or historic building, structure or object? c) Does the proposal have the potential to cause a 0 0 0 181 physical change which would affect unique ethnic cultural values? d) Will the proposal restrict existing religious or 0 0 0 181 sacred uses within the potential impact area? e) Is the area identified on the City's General Plan 0 0 0 181 EIR as an area of high potential for archeological resources? Comments: There are no identified cultural resources within the project area. XVI PALEONTOLOGICAL RESOURCES: Will the 0 0 0 181 proposal result in the alteration of or the destruction of paleontological resources? Comments: There are no identified paleontological resources within the project area. XVII RECREATION: Would the proposal: a) Increase the demand for neighborhood or 0 0 0 181 regional parks or other recreational facilities? b) Affect existing recreational opportunities? 0 0 0 181 c) Interfere with recreation parks & recreation 0 0 0 181 plans or programs? Comments: There are no recreational facilities that will be adversely affected by the proposed office/warehouse operations. XVIII MANDATORY FINDINGS OF SIGNIFICANCE: See Negative Declarationfor mandatory findings of significance. If an EIR is needed, this section should be completed. a) Does the project have the potential to degrade 0 0 0 181 A:~lb\linda\is9808ck.fnn Page to .3 -2-0 """ . ~, ~ P..m.i.n, ".m.,.n, Si,niO",", Lou"'.n S"niO~' Unl", "&ni.",", ,. Imp." M"',..'" Imp." Imp", the quality of the environment, substantially reduce the habitat of a fish or wildlife species, cause a fish or wildlife population to drop below self-sustaining levels, threaten to eliminate a plant or animal community, reduce the number or restrict the range of a rare or endangered plant or animal or eliminate important examples of the major periods or California history or prehistory? Comments: The site is presently vacant and cleared and graded of all plant materials. The site lies within a fully urbanized area and does not represent viable habitat for any sensitive animal species. b) Does the project have the potential to achieve 0 0 0 I! short-tenD, to the disadvantage of long-tenD, environmental goals? Comments: The scope and nature of the project would not result in the curtailment of any long-tenD environmental goals. c) Does the project have impacts that are 0 0 0 I! individually limited, but cumulatively considerable? ("Cumulatively considerable" means that the incremental effects of a project are considerable when viewed in connection with the effects of past projects, the effects of other current projects, and the effects of probable future projects.) Comments: There are no incremental impacts associated with the project. d) Does the project have environmental effect 0 0 0 I! which will cause substantial adverse effects on human beings, either directly or indirectly? Comments: No adverse effects to human beings is anticipated from project approval. A:lllbllindalis9808ck.fnn Page 11 3-;¿/ ~ . .. XIX. PROJECT REVISIONS OR MITIGATION MEASURES: -- NO MlTIGA TION WILL BE REQUIRED XX. ENVIRONMENTAL FACTORS POTENTIALLY AFFECTED: NONE The environmental factors checked below would be potentially affected by this project, involving at least one impact that is a "Potentially Significant Impact" or "Potentially Significant Unless Mitigated," as indicated by the checklist on the following pages. 0 Land Use and Planning 0 Transportation/Circulation 0 Public Services 0 Population and Housing 0 Biological Resources 0 Utilities and Service Systems 0 Geophysical 0 Energy and Mineral Resources 0 Aesthetics 0 Water 0 Hazards 0 Cultural Resources 0 Air Quality 0 Noise 0 Recreation 0 Mandatory Findings of Significance ^,UlbUindalis9808ck.frm Page 12 ..3 -.2.~ ", . \ ... XXI. DETERMINATION: On the basis of this initial evaluation: I find that the proposed project COULD NG=f have a significant effect on the ~ environment, and a NEGATIVE DECLARATION will be prepared. I find that although the proposed project could have a significant effect on the 0 environment, there will not be a significant effect in this case because the mitigation measures described on an attached sheet have been added to the project. A MITIGATED NEGATIVE DECLARATION will be prepared. I find that the proposed project MAY have a significant effect on the environment, and an 0 ENVIRONMENTAL IMPACT REPORT is required. I find that the proposed project MAY have a significant effect(s) on the environment, but 0 at least one effect: 1) has been adequately analyzed in an earlier document pursuant to applicable legal standards, and 2) has been addressed by mitigation measures based on the earlier analysis as described on attached sheets, if the effect is a "potentially significant impacts" or "potentially significant unless mitigated." An ENVIRONMENTAL IMPACT REPORT is required, but it must analyze only the effects that remain to be addressed. 1 find that although the proposed project could have a significant effect on the 0 environment, there WILL NOT be a significant effect in this case because all potentially significant effects (a) have been analyzed adequately in an earlier EIR pursuant to applicable standards and (b) have been avoided or mitigated pursuant to that earlier EIR, including revisions or mitigation measures that are imposed upon the proposed project. An addendum has been prepared to provide a record of this detennination. £~~ Mav 4.2000 Date Planning & Environmental Manager City ofChula Vista A:~lb~inda\js9808ck.frm Page 13 .3 - 23 ..-... --- ... ~"\ \, ~\, \~~,~,\"'.,'~,\'W,,lø"¡¡&B,\B:~~,,~,,-,¡,\\~ \ ~ ~\~;;:;6? \ ,..~' ',',..r U~--\tŸ.~ ~~' í\C, ~~' ,~\'l \, \ \V ~ r I - ~u i" I ~\ \...v- . 1,.1'-"'"1\ I "c.----, " ~,.", "" I' --<~ I' .. \ I " S '" \ I \ 1(:\ó,Y' , ,-----~ . 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II \ ~\,\ ----- .. \ _----ì.. ------- ----L '-- ' '--.; \.~'b--- \ \---,---"'---- \ "~ CHULA VISTA PLANNING AND BUILDING DEPARTMENT LOCATOR PROJECT RICHARD MOORE PROJECT DESCRIPTION: C) APPUCAN1: INITIAL STUDY PROJECT 694 Moss Street ADDRESS: Request Proposed construction of a (2) story 11,375 sq.ft. I block buDding for office and warehouse use. SCALE: ALE NUMBER: , I NORTH No Scale IS - 00-29 .3 - 2...., h:\home\planning\hectOrllocators\isO029.cdr 03/29/00 ATTACHMENT B Recording Requested By: CHULA VISTA REDEVELOPMENT AGENCY 276 Fourth Ayenue Chula Vista, CA 91910 When Recorded Mail To: CHULA VISTA REDEVELOPMENT AGENCY 276 Fourth Avenue Chula Vista, CA 91910 Attn: Judi Bell (Space Above This Line For Recorder) APN: 618-010-29 OWNER PARTICIPATION AGREEMENT Mr. Richard Moore 694 Moss Street THIS AGREEMENT is entered into by the REDEVELOPMENT AGENCY OF THE CITY OF CHULA VISTA, a public body corporate and politic (hereinafter referred to as "AGENCY"), and Mr. Richard Moore, Subject Property Owner hereinafter referred to as "DEVELOPER") effective as of November 13,2001. WHEREAS, the DEVELOPER desires to develop real property within the SOUTHWEST REDEVELOPMENT PROJECT AREA ("Project Area") which is subject to the jurisdiction and control of the AGENCY; and, WHEREAS, the DEVELOPER has presented plans for deyelopment to the Design Review Committee for the construction of an 11 ,372-square foot industrial warehouse building and associated on-site and on-street improyements (the "Project"); and, WHEREAS, said plans for development haye been recommended for approval subject to conditions by said committee; and, WHEREAS, the AGENCY has considered the Design Review Committee's recommendation and has approyed the Project and design plans subject to certain terms and conditions; and, WHEREAS, the AGENCY desires that said Project be implemented and completed as soon as it is practicable in accordance with the terms of this Agreement. NOW, THEREFORE, the AGENCY and the DEVELOPER agree as follows: 1. The property to be deyeloped is described as Assessor's Parcel Number618-010-29 located al694 Moss Street, Chula Vista, CA., shown on locator map attached hereto and by this reference incorporated herein ("Property"). 2. The DEVELOPER coyenants and agrees by and for himseif, his heirs, executors, administrators and assigns and all persons claiming under or through them the following: A. DEVELOPER shall deyelop the Property with the Project in accordance with the AGENCY approyed development proposal attached hereto as Exhibit "A". B. DEVELOPER shall obtain all necessary federal/state and local goyernmental permits and approyals and abide by all applicable federal, state and local laws, regulations, policies and approyals in connection with the development of the Project. DEVELOPER further agrees J- .2S' that this Agreement is contingent upon DEVELOPER securing said permits and approvals. DEVELOPER shall pay all applicable deyelopment impact and processing fees. C. DEVELOPER shall obtain building permits within one year from the date of this Agreement and shall actually deyelop the Property with the Project within one year from the date of issuance of the building permits. In the eyent DEVELOPER fails to meet these deadlines, the Agency's approval of DEVELOPER's development proposals shall be yoid and this Agreement shall have no further force or effect. D. In all deeds granting or conveying an interest in the Property, the following language shall appear: "The grantee herein covenants by and for himse/~ his heirs, executors, administrators and assigns, and all persons claiming under or through them, that there shall be no discrimination against or segregation o~ any person or group of persons on account of race, color, creed, national origin or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the premises herein conveyed, nor shall the grantee himself or any persons claiming under or through him establish or permit any such practice of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenant lessees, or vendees in the premises herein conveyed. The foregoing covenants shall run with the land. " E. In all leases demising an interest in all or any part of the Property, the following language shall appear: "The lessee herein covenants by and for himse/~ his heirs, executors, administrators and assigns, and all persons claiming under or through him, and this lease is made and accepted upon and subject to the following conditions: That there shall be no discrimination against or segregation o~ any person or group of persons, on account of race, color, creed, national origin, or ancestry,.in the leasing, subleasing, transfe"ing use, occupancy, tenure, or enjoyment of the premises herein leased, nor shall the lessee himself or any persons claiming under or through him, establish or permit any such practices of discrimination or segregation with reference to the selection, location, number or use, or occupancy of tenants, lessees, sublessees, subtenants, or vendees in the premises herein leased.' 3. The Property shall be developed subject to the conditions imposed by the Design Review Committee and the AGENCY as described in Exhibit "8" attached hereto and incorporated herein by this reference. DEVELOPER acknowledges the validity of and agrees to accept such conditions. 4. DEVELOPER shall maintain the premises in FIRST CLASS CONDITION. A DUTY TO MAINTAIN FIRST CLASS CONDiTION. Throughout the term of this Agreement, DEVELOPER shall, at DEVELOPER's sole cost and expense, maintain the Property which includes all improvements thereon in first class condition and repair, and in accordance with all applicable laws, permits, licenses and other governmental authorizations, rules, ordinances, orders, decrees and reguiations now or hereafter enacted, issued or promulgated by federal, state, county, municipal, and other goyernmental agencies, bodies and courts having or claiming jurisdiction and all their respective departments, bureaus, and officials. ..3-.2G, If the DEVELOPER fails to maintain the Property in a "first class condition", the Redeyelopment Agency of the City of Chula Vista or its agents shall haye the right to go on the Property and perform the necessary maintenance and the cost of said maintenance shall become a lien against the Property. The Agency shall haye the right to enforce this lien either by foreclosing on the Property or by forwarding the amount to be collected to the Tax Assessor who shall make it part of the tax bill. B. DEVELOPER shall promptly and diligently repair, restore, alter, add to, remoye, and replace, as required, the Property and all improyements to maintain or comply as above, or to remedy all damage to or destruction of all or any part of the improvements. Any repair, restoration, alteration, addition, remoyal, maintenance, replacement and other act of compliance under this Paragraph (hereafter coliectiYely referred to as "Restoration") shall be completed by DEVELOPER whether or not funds are ayailable from insurance proceeds or subtenant contributions. C. In order to enforce all aboye maintenance proYisions, the parties agree that the Community Deyelopment Director is empowered to make reasonable determinations as to whether the Property is in a first class condition. If he determines it is not, he (1) will notify the DEVELOPER in writing and (2) extend a reasonable time to cure. If a cure or substantial progress to cure has not been made within that time, the Director is authorized to effectuate the cure by City forces or otherwise, the cost of which will be promptly reimbursed by the DEVELOPER. D. FIRST CLASS CONDITION DEFINED. First class condition and repair, means an efficient and attractiye condition, at least substantially equal in quality to the condition which exists when the Project has been completed in accordance with all applicable laws and conditions. 5. AGENCY and DEVELOPER agree that the COyenants of the DEVELOPER expressed herein shall run with the land. DEVELOPER shall haye the right, without prior approval of AGENCY, to assign its rights and delegate its duties under this Agreement. 6. AGENCY and DEVELOPER agree that the coyenants of the DEVELOPER expressed herein are for the express benefit of the AGENCY and for all owners of real property within the boundaries of the PROJECT AREA as the same now exists or may be hereafter amended. AGENCY and DEVELOPER agree that the proYisions of this Agreement may be specifically enforced in any court of competent jurisdiction by the AGENCY on its own behalf or on behalf of any owner of real property within the boundaries of the PROJECT AREA. 1. AGENCY and DEVELOPER agree that this Agreement may be recorded by the AGENCY in the Office of the County Recorder of San Diego County, California. 8. DEVELOPER shall and does hereby agree to indemnify, protect, defend and hold harmiess AGENCY and the City of Chula Vista, and their respectiye Council members, officers, employees, agents and representatives, from and against any and all liabilities, losses, damages, demands, claims and costs, including court costs and reasonable attorneys' fees (collectiyely, "liabilities") incurred by the AGENCY arising, directly or indirectly, from (a) AGENCY's approval of this Agreement, (b) AGENCY's or City's approval or issuance of any other permit or action, whether discretionary or non-discretionary, in connection with the Project contemplated herein, and (c) DEVELOPER's construcUon and operation of the Project permitted hereby. 9. In the eyent of any dispute between the parties with respect to the obligations under this AGREEMENT that results in litigation, the preyailing party shall be entitled to recover its reasonable attorney's fees and court costs from the non-prevailing party. ....3 -;¿ 7 10. Time is of the essence for each and eyery obligation hereunder. 11. If DEVELOPER fails to fulfill its obligations hereunder after due notice and reasonable opportunity to cure, DEVELOPER shall be in default hereunder, and in addition to any and all other rights and remedies AGENCY may haye, at law or in equity, AGENCY shall haye the right to terminate its approval of the Project and this Agreement. Signature Page Follows ...3 - .2.. f Nov 06 01 04:41p RR Construction 7606301378 p.2 Signature Page IN WITNESS WHEREOF THE PARTIES HAVE ENTERED INTO THiS AGREEMENT EFFECTIVE AS OF THE DATE FIRST WRITTEN ABOVE. REDEVELOPMENT AGENCY OF THE CITY OF CHULA ViSTA "AGENCY" DATED: By: Shirley Horton, Chairman "DEVELOPER" By~5..' ~ DATED: Richard Moore, Owner NOTARY: Please attach acknowledgment card. APPROVED AS TO FORM BY: John M. Kaheny, Agency Attorney [F~e:J:\Commde,\Tapia\Opa,\Dataoom Industrial Building OPA.doc (No"mber 2.200111:40 AMI! .3 -29 _n Nov 06 01 04:41p RR Construction 7606301378 p.3 , CALIFORNIA ALL.PURPOSE ACKNOWLEDGMENT State of California. } County of ~\'ì Û1£D (') ss. , On fOOO~;,:OO \ ,beforeme, LYYL~':?'fŒ9.;;¿.I~M:~'NOI""P"b"ol personally appeared K\ c-'ì\ 0..\ è\ \..{'} moo, r.- N.mø('1 01 s~o.~'1 0 personally known 10 me ~ 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 II C.M. MOR-GAÑS--li acknowledged to me that he/sh~lthey exec~ted COMM. # 1257828 m the same In his/her/their authorized ~ 'OTA~r:~~~6C GcfU",;:~ORNI' g capacity(ies), and that by his/her/their II My Comm. Expires M". 13, 2004 II slgnature(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. ~ 0- 'YY\ 'y(l (~ C'A- ~ PI... No""" s.. Aba.. S;.~I",. 01 No"""f°bl~ OPTIONAL Though the information below is nol required by law, it may p'ove valuable 10 pe,.ons 'elying on the document and could prevent fraudulenl removal and reaffachment of this form to anolher document. I- Description of Attached Document I~.: Title or Type or Document: I , Document Date: Number of Pages: . Signer(s) Other Than Named Above: . Capacity(ies) Claimed by Signer .J Signer's Name: ., 0 Individual Top 01 Ihomb h". I 0 Corporate Officer - Tille(s): . 0 Partner - 0 Limited 0 General 0 Atlorney in Fact 0 Trustee 0 Guardian or Conservator 0 Other: Signer 15 Representing: I '" ---- ---- ----- '" C 1997 "'tio,," No""" ^"oc~tioo . 9350 Do Sol".... P.o. ." 2402 . C"~~"h. CA 91313-"" Plod. No. 5901 R~d" C,II TolI-FI" 1.'00-81""" .3 - 30 EXHIBIT A Design Plans Owner Participation Agreement Mr. Richard Moore 694 Moos Street Chula Vista, CA Exhibit A Reduced Copies of Design Plans J-3( Nov 08 01 10: 24a RR Construct. lon 7606301378 .'-- H ~r '" ___n - _U - - ----- \l~ -_____~NDUSTRIAL BLVD -- \" -..-.-----------' ----- I __m I i loS' ,...1 " ..' ¡,. .. .;i?' \ r .0 I¡~ ,. ':~!;:~ i . ."U .;.3,( 0 é U) "..'H...'.".". ...-' -. ,{--¡c;.m --ld.'!":.'.." ! ~ . co,', Û"I ,i ¡' H. -'/-J( \ 0' {.f)"""". Ii ',',', ,,', "..,',,",' ,.,WI'."""..".,.,,'------,,, ."}g',','.",,, I ~ . Sk,.,y~~~:7Y--?¿<~}èt:blfj( I e, ',' yy,V;1,1 W- ;y~.< /-<F'l i -~~_""';;i-" J /~:./(~~~LÚ/ I -, m¡ . ,~ n//// ,~~ ,'-' "", /,ro" , ' r' "".' "I I ! "I;; / ¡¡Hi , < r ),' ,," ¡¡1~,~7~~~'" v, '. " \ ¡¡ ¡ d .~ .i Ii ' : .~ II ,""~'~ '~;;;CS"'.~'.5' '/c. I !II !I I! II : ¡ .I!~ ~- -~ '~ "in" , I " ,p\ " i¡¡ll! \' ¡¡ ",:,,':'~,;' 1 , I èo' i - I' en .' - -l- i \.y ,I . :~I:;"'¡i"""""""- . 'I ! 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' ; , , , , , ..- , - i i .~ ;"'¡'¡~;~~~ i- , ", ~ . - - J --3 S- EXHIBIT B Conditions of Approval Owner Participation Agreement Mr. Richard Moore 694 Moss Street Chula Vista, CA CONDITIONS OF APPROVAL Prior to the issuance of any permits required by the City of Chula Vista for the use of the subject property in reliance on this approval, the applicant shall satisfy the following requirements: Planning and Building Department Conditions: 1. Provide revised building elevations and site plan incorporating all conditions of approval. A revised façade treatment of the west elevation shall be provided, incorporating articulation to add visual interest to this high profile elevation. In addition, a direct sidewalk access from the front door to the new sidewalk to be installed along Moss Street shall be provided and shown on a revised site plan. The revised west elevation façade treatment and site plan shall be submitted for review and approval by the Director of Planning and Building prior to issuance of building permit. 2. Provide revised planting and irrigation plans incorporating all conditions of approval. The applicant shall incorporate the Boston ivy or another more preferred vine treatment planting along the edge of the new fencing that will be utilized to protect and maintain the planting and irrigation of the 1 O-ft.landscape area west of the building and block wall within the MTDB railroad easement. In addition, the two existing palm trees on-site shall be maintained and preserved as part of the landscape plans. The revised landscape plan shall be submitted for review and approval by the Landscape Planner prior to issuance of building permit. 3. A Water Management Plan shall be required in conjunction with the conceptual landscape plan for review and approval by the landscape Planner prior to issuance of building permit. 4. A Fencing Plan shall be provided indicating all perimeter fencing to be provided, including the block wall with pilasters parallel to the western building façade, the black-vinyl chain-link along the north and east property lines, and the wrought.iron security gate at the driveway entrance. The plans shall also include a 6-ft. high wrought. iron with pilasters 15.ft. on-center fence along the westerly property line from the north property line to the corner of the building facing Moss Street, and an access control gate shall be installed at that point for maintenance and security purposes, and to prevent vandalism. The fencing plan shall be required in conjunction with the planting and irrigation plans for review and approval by the landscape Planner prior to the issuance of building permit. 5. lighting for the facility shown on the site plan shall be in conformance with Section 17.28.020 of the Municipal Code. A lighting plan shall be provided that includes details showing that the proposed lighting shall be shielded to remove any glare from adjacent properties, and shall be reviewed and approved to the satisfaction of the Planning and Building Oirector. 6. A graffiti resistant treatment shall be specified for all wall and building surfaces. This shall be noted on any building and wall plans and shall be reviewed and approved by the Planning Director prior to issuance of building permits. Additionally, the project shall conform to Sections 9.20.055 and 9.20.035 of the Chula Vista Municipal Code regarding graffiti control. 7. All building permit plans shall be reviewed for conformance with this Oesign Review permit. Building Plans shall comply with 1998 Building, Mechanical, Plumbing, and Electrical Codes. Building shall comply with handicapped accessibility requirements and Title 24 energy requirements. Fire Department Conditions: 8. Obtain the necessary permits from the Fire Department. The building must be include a fire sprinkler system. Sprinkler J -U EXHIBIT B Conditions 01 Approval Owner Participation Agreement Mr. Richard Moore 694 Moss Street Chula Vista, CA system plans must be approved prior to installation. A lire alarm is needed and must be approved prior to installation. A lire II ow 01 3, 000 gallons per minute lor a three (3) hour duration must be provided. Fire hydrants are required, and three (3) lire hydrants at 300-1t. spacing are required. Any storage racks used 8-1t. in height shall be submitted lor building plan review. Any storage racks 12.1t. in height with an area of 500-sq. It. shall be required to have a high piled storage permit. High piled combustible storage must comply with UFC Article 81. The mezzanine must comply with UBC Chapter 5, Section 507. A technical report is required lor commodity classilication. Provide a lire extinguishers per 3,OOO.sq. It. or every 75-1t. of travel distance, with a minimum rating of 2A.1 OBC. Provide a Knox box for the entrance to the building. Automated gates are required to have an Opticom and Knox key switch. Fire lanes are to have an unobstructed width 01 not less than 20-ft. width and 13-1I2-ft. vertical clearance. The Fire Oepartment connection shall not be located with the back flow preventor. A one.way check valve between the post indicator valve and the Fire Department connection is required. The back flow preventor shall be screened from view. Public Works Department Conditions: 9. All requirements of the Public Works Department shall be met at the building permit stage. The Engineering Division will require the applicant to guarantee and install missing street improvements along Moss Street, including the widening of Moss Street to provide a half-street width of 26.ft. from centerline to face of curb, new curb, gutter and sidewalk along Moss Street, and a driveway approach per Chula Vista Construction Standard No. 1. Install one streetlight 1250,wattl on Moss Street at the easterly property line. A temporary asphalt berm shall be provided within the street widening at the appropriate location to taper traffic towards the MTDB trolley right.ol.way crossing. 10. The Public Works Department Engineering Division will require fees for sewer capacity and connections, development impact for public facilities, and traffic signal fees as defined in the development checklist for the warehouse building as part of the building permit application. 11. A grading permit may be required prior to issuance of a building permit. All existing public drainage lacilities on the site shall remain unobstructed. Any construction within a public drainage easement shall be allowed only alter approval of an encroachment permit. 12. The grading and improvement plans shall include temporary and permanent erosion control and pollution prevention components, as well as all drainage lacilities. A geotechnical/soils study will be required with the grading and improvement plans. 13. A National Pollutant Discharge Elimination System (NPDES) permit for general industrial uses may be required. Contact the San Diego Regional Water Quality Control Board at (858) 467.2971 to insure compliance with the relevant laws and regulations. 14. The NPDES Municipal Permit Order No. 2001.01 requires compliance with Standard Urban Storm Water Mitigation Plans (SUSMP) requirements, and numeric sizing criteria. Police Department Conditions: 15. Obtain a security survey from the Crime Prevention Unit of the Police Department. Specific recommendations shall be provided for access control, surveillance detection, and police response. In addition, training of management and employees in 3-37 EXHIBIT B Conditions of Approval Owner Participation Agreement Mr. Richard Moore 694 Moss Street Chula Vista, CA security procedures and crime prevention shall coincide with the commencement of operations. The Crime Prevention Unit should be contacted at 691.5127 for more information. Other Conditions: 16. The applicant shall contact the Sweetwater Authority Water District for availability of water for operational and fire protection purposes. The 3,000.galion per minute fire flow at 20 pounds per square inch residual pressure for a 2.hour duration as required by the Chula Vista Fire Department is available to serve the project. All fees and deposits shall be provided at the building permit stage. 17. The applicant shall contact the Sweetwater Union High School District and the Chula Vista Elementary School District to determine the school fees that shall be paid as part of the building permit. Prior to use or occupancy of the property in reliance on this approval, the following requirements shall be met: 18. The site shall be developed and maintained in accordance with the approved plans which include site plans, architectural elevations, exterior materials and colors, landscaping, sign program and grading on file in the Planning Division, the conditions contained herein, Title 19, and the Montgomery Specific Plan. 19. Prior to any use of the project site or business activity being commenced thereon, all Conditions of Approval shall be completed to the satisfaction of the Planning Director. 20. All landscape and hardscape improvements shall be installed in accordance with the approved landscape plan and the comments of the City landscape Planner. 21. All ground.mounted utility appurtenances such as transformers, AC condensers, etc., shall be located out of public view and adequately screened through the use of a combination of concrete or masonry walls, berming, and/or landscaping to the satisfaction of the Planning Director. 22. All roof appurtenances, including air conditioners and other roof mounted equipment and/or projections, shall be shielded from view and the sound buffered from adjacent properties and streets as required by the Planning Director. Such screening shall be architecturally integrated with the building design and constructed to the satisfaction of the Planning Director. Details shall be included in building plans. 23. The Design Review approval shall expire if building permits are not issued or the approved use has not commenced within one year from the date of this approval, unless a written request for an extension is received prior to the expiration date. The following on-going condition shall apply to the subject property as long as it relies upon this approval. 24. Approval of this request shall not waive compliance with all sections of Title 19 of the Municipal Code, and all other applicable City Ordinances in effect at the time of building permit issuance. 25. This Design Review permit shall be subject to any and all new, modified or deleted conditions imposed after approval of this permit to advance a legitimate governmental interest related to health, safety or welfare which the City shall impose after 3-3g EXHIBIT B Conditions of Approval Owner Participation Agreement Mr. Richard Moore 694 Moss Street Chula Vista, CA advance written notice to the Permittee and after the City has given to the Permittee the right to be heard with regard thereto. However, the City, in exercising this reserved right/condition, may not impose a substantial expense or deprive Permit tee of a substantial revenue source which the Permittee cannot, in the normal operation of the use permitted, be expected to economically recover. 26. Buildings and Landscaping shall be maintained according to the approved plans unless modifications are approved by the City of Chula Vista. End of Conditions of Approval 3-39 ----. . - '" - - EXHIBIT C SAN DIEGO PALLETS TOYS R' US PARKING LOT KIDS OUTLET C HULA VISTA PLANNING AND BUILDING DEPARTMENT LOCATOR Ä~~~'&k RICHARD MOORE PROJECT DESCRIPTION: C) DESIGN REVIEW. PROJECT 694 MOSS STREET Request: Proposal to revIse plans for 9,872 sq. ft. ADDRESS: omcelwarehouse to 11,372 sq. ft. total to Include SCALE: I FILE NUMBER: 18 parking spaces. NORTH No Scale DRC-O0-56 Related Case: 18-00-29 h:lhome\planning\carlos\locators\drcO056.cdr 4.11.01 ---:3 -40 JOINT CITY COUNCIL/REDEVELOPMENT AGENCY AGENDA STATEMENT ITEM NO.: 4 MEETING DATE: 1 1 11 3/01 ITEM TITLE: RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA AND THE CHULA VISTA REDEVELOPMENT AGENCY SUPPORTING THE CONCEPT OF RE-SITING THE DUKE ENERGY SOUTH BAY POWER PLANT TO THE LNG SITE, AND DIRECTING STAFF TO EXPLORE ALL ASSOCIATED DEVELOPMENT OPPORTUNITIES IN COOPERATION WITH THE SAN DIEGO UNIFIED PORT DISTRICT AND DUKE ENERGY OF NORTH AMERICA SUBMITTED BY: COMMUNITY DEVELOPMENT DIRECTOR ~.+ù'\ e"S - REVIEWED BY: EXECUTIVE DIRECTOR ~ 4/5THS VOTE: YES c=J NO 0 BACKGROUND In April 1999 the Son Diego Unified Port District completed the purchose of the South Boy Power Plant from SDG&E and leased the facility to Duke Energy of North America. The primary purpose of fhe agreement is to allow for the dismantling of the aging plant in its current locafion by November 2009, with on opportunity to re-site a new plonf "off-site" thereby allowing for highest ond best use development of the south Bayfront south of "J" Street. Foiling that, on-site or other Port properties could be pursued for the new plant if agreed to by the Port District. Duke Energy, working in cooperation with Port and City stoff, all support the concept of siting the new plant on the LNG parcel immediately to the south of its' existing location. The purpose of this brief report, is to receive Council/Agency conceptual support of this approach and direction to pursue all associated development opportunities in cooperation with the Port District and Duke Energy. RECOMMENDATION It is recommended that the City Council and Redevelopment Agency odopt the resolution supporting the concept of re-siting the Duke Energy South Boy Power Plant to the LNG property locoted on the south Bayfront in the Southwest Redevelopment Project Area, and directing stoff to explore all associoted development opportunities in cooperotion with the Son Diego Unified Port District ond Duke Energy of North America. 4-1 PAGE 2, ITEM NO.: MEETING DATE: "/13/01 BOARDS/COMMISSIONS RECOMMENDATION Nof Applicable DISCUSSION The Port District purchased the South Bay Power Plant from SDG&E and leased if to Duke Energy in April 1999. As long as the facility is designated by the State's Independent System Operator (ISO) as a "must-run" facility, Duke is obligated by the ferms of the agreement to use reasonable efforts to site and develop a replacement plant and decommission the existing plant prior to the expiration of fhe Lease Agreement (November 1, 2009). The ogreements have set the stage for the aging 706 MW facility to be replaced by a modern stote-of-the-ort combined cycle plant designed to increase generation capacity (currently contemplafed to be 900+ MW) and lower emissions. When the modernization is complefed, the new South Bay plant will produce more power for the San Diego regional load cenfer, with lower emissions in the air basin on a smaller development foofprinf. Duke Energy, in cooperation with the Port District and the City, has been analyzing alternatives for the new power plant. Based upon their due diligence, it appears that at this point, the most beneficial, logical and cost-effective sife for the new plant is on the LNG properly just north of the Bayside Commerce Center just north of "L" Street. Additionally, as Council may recall, a provision in the Settlemenf Agreement between fhe City and SDG&E in response to the sale of the power planf, prohibits the installation of power generating equipment on the northern approximately 45 acres (Attachment A). The Settlement Agreement was incorporafed as part of the Port lease with Duke Energy and is a recorded covenanf on the properly. The re-siting of the plant to the LNG parcel will push the development as for south os possible on fhe Bayfront in an crea already impacted by that type of development. One of the major objectives and positive benefits of this approach is that a lower emission generating and more fuel efficient power plant will be developed in an area fhot has historicolly been impacted by fhis type of land use. "is onticipafed that the plant would occupy between 25 to 30 acres, thereby potentially freeing up approximotely 70+ acres of properly along the Bayfront south of "J" Street for highest ond besf use development. Additionolly, by keeping the power plant within 0 redevelopment project crea, the Agency has fhe potential to receive substantial properly fax increment revenue from the new plant. " should be noted however, that current State Board of Equalization (BOE) rule changes to be effective in January 2003, (if not changed by pending State legislafion) will result in fhe properly taxes from power plants being allocated by each County through fhe "pooled" unitory roll thereby allocating "shares" of the revenue for each jurisdiction in the County. Stoff is working diligently on this matter in conjunction with other affected local jurisdictions to challenge the BOE ruling as well as lobby for passoge of legislation (AB 81 - Migden) thot will maintain the currenf "Situs" allocation method. 4- .2- PAGE 3, ITEM NO.: MEETING DATE: 11/13/01 Although fhe replanning of the South Bay Power Plant is still in fhe early concepfual sfages, it is important for the Council fa take a preliminary policy posifion and direct staff appropriately. While this in no way commits the City to the new plont on the LNG site, it will initiate from the City/Agency stondpoint, a more focused analysis of such a proposal. Final approval would remain subject to fufure Port Disfrict and California Energy Commission (CFC) action with substantial input from the City/Agency. As directed by Council, sfaff will keep Council apprised os significanf developmenfs occur. FISCAL IMPACT There is no fiscal impact associated with this specific oction. Preliminary due diligence analysis expenditures, if any at fhis time, will be absorbed within fhe exisfing Redevelopmenf Agency budget. Sfaff will retUrn to Council for further outhorization in fhe evenf fhaf becomes necessary. ATTACHMENTS Locafor Map nCOMMDEV\STAFF.REP\ 11-13-01\Duke Power Plont S;t;ng.doc 4-3 AGENCY RESOLUTION NO. AND COUNCIL RESOLUTION NO. JOINT RESOLUTION OF THE CITY COUNCIL AND THE REDEVELOPMENT AGENCY OF THE CITY OF CHULA VISTA SUPPORTING THE CONCEPT OF RE-SITING THE DUKE ENERGY SOUTH BAY POWER PLANT TO THE LNG SITE, AND DIRECTING STAFF TO EXPLORE ALL ASSOCIATED DEVELOPMENT OPPORTUNITIES IN COOPERATION WITH THE SAN DIEGO UNIFIED PORT DISTRICT AND DUKE ENERGY OF NORTH AMERICA WHEREAS, in April 1999 the San Diego Unified Port District ("Port") completed the purchase ofthe South Bay Power Plant located in the Bayfront Redevelopment Project Area in the City of Chula Vista from San Diego Gas & Electric and concurrently leased the facility to Duke Energy of North America ("Duke"); and WHEREAS, by the terms of the lease Agreement between the Port and Duke, Duke is to use reasonable efforts to site and develop a replacement plant and decommission the existing plant prior to the expiration of the Lease Agreement on November 1, 2009; and WHEREAS, the agreements have set the stage for the aging existing 706 MW plant to be replaced by a modern state-of-the-art combined cycle facility designed to increase generation capacity, reduce emissions, increase fuel efficiency on a smaller development footprint; WHEREAS, the Port, Duke and the City of Chula Vista have been working in cooperation to determine the most feasible site for the replacement power plant in the general South Bay area; and WHEREAS, after some exploratory analysis of various potential sites, the Port, Duke and the City all support the concept of re-siting the plant on the LNG parcel immediately to the south of the existing location just north of the Bayside Commerce Center in the Southwest Redevelopment Project Area; and WHEREAS, the LNG site offers for the replacement plant to be built in an area already impacted by nearby power plant uses on a smaller development footprint thereby freeing up substantial property on the existing plant site to the north for highest and best use development; and WHEREAS, it is important for the Port, Duke and City to perform more focused analysis and studies on the feasibility of re-siting the new plant on the LNG site. WHEREAS, this action does not constitute formal City/Agency approyal of a new plant on the LNG site which would be the subject of future actions by the Port, the California Energy Commission and the City/Agency; and any other governing regulatory agencies. NOW, THEREFORE, BE IT RESOLVED the City Council of the City of Chula Vista and the Redevelopment Agency of the City of Chula Vista do hereby (1) support the concept of re-siting the Duke Energy South Bay Power Plant to the LNG site; and (2) direct staff to explore all associated development opportunities in cooperation with the Port and Duke. Presented by Approyed as to form by ~ ~ Chris Salomone Director of Community Deyelopment J: \COMM DEVIRE SOS\Du ke. doc 4-1 r- , . " Â . Â CD > Z 0 - '" " 0 :Þ ...J :$ £ 1 ,..¡ :t> 4-~ -- SAN DIEGO BAY CITY COUNCIL/REDEVELOPMENT AGENCY/HOUSING AUTHORITY AGENDA STATEMENT 5" ITEM NO.: MEETING DATE: 11/13/01 ITEM TITLE: CONSIDERATION OF THE ISSUANCE OF MULTIFAMILY HOUSING REVENUE BONDS AND APPROVAL AND EXECUTION OF THE NECESSARY DOCUMENTS AND APPROVAL OF THE AGENCY'S LOAN AND REGULATORY AGREEMENTS FOR THE HERITAGE TOWN CENTER MULTIFAMILY RENTAL HOUSING DEVELOPMENT RESOLUTION OF THE HOUSING AUTHORITY OF THE CITY OF CHULA VISTA AUTHORIZING THE ISSUANCE OF MULTIFAMILY HOUSING REVENUE BONDS IN AN AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $15,400,000 FOR THE PURPOSE OF FINANCING THE ACQUISITION AND CONSTRUCTION OF THE HERITAGE TOWN CENTER MULTIFAMILY RENTAL HOUSING PROJECT, APPROVING AND AUTHORIZING THE EXECUTION AND DELIVERY OF ANY AND ALL DOCUMENTS NECESSARY TO ISSUE THE BONDS AND IMPLEMENT THIS RESOLUTION, AND RATIFYING AND APPROVING ANY ACTION HERETOFORE TAKEN IN CONNECTION WITH THE BONDS RESOLUTION OF THE CITY COUNCIL AND THE REDEVELOPMENT AGENCY OF THE CITY OF CHULA VISTA [A] APPROVING A LOAN AGREEMENT AND RELATED RESTRICTIVE COVENANTS AND THE AFFORDABLE HOUSING AGREEMENT BY AND BETWEEN THE REDEVELOPMENT AGENCY AND SOUTH BAY COMMUNITY VILLAS, L.P. AND AUTHORIZING THE CHAIRMAN OF THE REDEVELOPMENT AGENCY TO EXECUTE SAID AGREEMENTS; [B] APPROPRIATING $4,400,000 FROM THE UNAPPROPRIATED BALANCE IN THE LOW AND MODERATE INCOME HOUSING FUND FOR FINANCIAL ASSISTANCE TO SOUTH BAY COMMUNITY VILLAS, L.P.; [C] APPROVING A TEN YEAR DEFERRAL OF THE PUBLIC FACILITIES DEVELOPMENT IMPACT FEE AND WAIVER OF THE PARK FEE; AND [D] APPROVING A DEFERRAL AGREEMENT FOR THE PUBLIC FACILITIES DEVELOPMENT IMPACT FEE AND AUTHORIZING THE MAYOR TO EXECUTE SAID AGREEMENT FOR THE DEVELOPMENT AND OPERATION OF HERITAGE TOWN CENTER SUBMlnED BY: COMMUNITY DEV~PMENT DIRECTOR ~ ~ ~ REVIEWED BY: CITY MANAGE~ 4/5THS VOTE: YES 0 NO D 5- f PAGE 2, ITEM NO.: MEETING DATE: 11/13/01 BACKGROUND On May 29, 2001, the Housing Authority of the City of Chu/a Visto held a public hearing ond approved Housing Authority Resolution No. 18 which expressed the Authority's intent to issue mulfi- family housing revenue bonds to finance 0 proposed 271 unit multi-family rental housing project for low and moderate income households, known as "Herifage Town Center", within the Otay Ranch mosler planned community. Addifionally, the City Council and Agency conditionolly approyed financial assistance in the form of a residual receipts loan from the Agency's Low and Moderate Income Housing fund in an amount not to exceed $4.4 million and a deferral and waiver of certain City fees (reference Agency Resolution 1730 And Council Resolution No. 2001- 1). Since that time, the developer, South Bay Community Villas, L.P., received a commitmenf of 2001 privofe activity bonds for mulfi-family rental housing projects from the California Debt Limit Allocafion Committee (CDLAC). At this time, the Housing Authority is asked to approve 0 bond resolution aufhorizing the issuonce of $15,400,000 in tax-exempt bonds for the financing of the project and execution in substanfial form and other related documenfs. As a condition of the Agency's financial assistance, the developer is to enter info a loan and regulafory agreement with the Agency and the City specifying the terms of the financial assistonce and use of the project as an affordable housing development for low and moderate-income households for a period of fifty-five (55) years. The required Loan Agreements and Related Restrictive Covenants and Affordable Housing Agreement have been prepared and are attached os Attachments 1 and 2. RECOMMENDATION It is recommended that the Housing Authority and Redevelopmenf Agency take fhe following actions: 1. That the Housing Authority adopf a resolution aufhorizing the issuance, sale ond delivery of Multi-family Housing Revenue Bonds Series A of 2001 (Heritage Town Center Apartments) in a combined principal omounf not to exceed $15,400,000, and approving in substontial form related documents, and authorizing official action. 2. That the Agency and City Council [aJ approve a loan agreement and related restriciive covenants in substantial form; the affordable housing ogreement by and between the Redevelopment Agency ond South Bay Community Villas, LP and authorizing the Chairman of the Redevelopment Agency to execute said ogreement; [bl appropriating $4,400,000 from fhe unappropriafed balance in the Low and Moderate-Income Housing fund to South Bay Community Villas; [c] opprove 0 ten year deferral of the payment of the applicable Public Facilities Development Impaci Fee for the senior unifs ($238,238)ond a waiver of the Park Fee ($355,466) subjeci to the Developer dedicafing an additional 1.8 acres of land for a future community park; and [d] approve the City Deferral Agreement in substantially the form presented to the City, subjeci to such revisions as may be made by the City Manager or his designee subjeci ~-;)... PAGE 3, ITEM NO.: MEETING DATE: "/13/01 to the reyiew and approyal of the City Attorney, and authorizing the Mayor to execute soid agreement BOARDS/COMMISSIONS RECOMMENDATION On February 7, 2001, the Housing Advisory Commission voted fo recommend fhe development of the proposed Heritage Town Center and the use of tax-exempt bonds and Low and Moderate Income Housing Set-aside funds to finance the project. On January 22, 2001, the Design Review Committee reviewed the proposed plans and recommended approyal of the project. On November 7, 2001, the Planning Commission voted to recommend a series of amendments to the Otay Ronch SPA One Plan. As recommend fhe Land Use Plan will be revised to reflect a reollocation of dwelling units to Neighborhood C1, which will allow for the development of fhe proposed 91 senior housing units. Council will consider the omendments ot such fime this ifem is considered. DISCUSSION THE PROPOSED PROJECT South Bay Community Villas, loP., a partnership between The Otay Ranch Company and South Bay Community Services, has proposed the development of a total of 271 housing units within 0 mixed use commercial project to satisfy their affordable housing obligation for Otay Ranch Section Planning Area (SPA) One. Of the 271 units, the 91 one bedroom units above the commercial space is proposed specifically for senior citizens. The site is in the final permitting stages with the City and the graded, fully improved site, is expected to be available to the Developer by January 2002. INCOME AND RENT RESTRICTIONS The Loan Agreements and Related Restrictive Covenants for the Agency's financial assistance restrict rents and occupancy of 49 percent of the 271 unifs (131 units) for lower income households, with 30 units for very low at 50 percent of the Area Medion Income (AMI) and 101 unifs for low income households at 60 percent of AMI. The requirements of the other funding sources will result in the remoining units being affordable for households at 60 percent of AMI. The Agency's affordobility and low income restrictions is limited to only 49 percent of the units and therefore, the project is exempt under Article XXXIV of the State Constitution. Article XXXIV of the California Constitution (Article 34) requires that voter approval be obtained before ony "state public body" develops, constructs or acquires a "low rent housing project". Projects which are less thon 50 percent restricted are not considered "public housing" for purposes of Article XXXIV. :5~3 PAGE 4, IIEM NO.: MElliNG DAlE: 1 1113/01 The income and rent restrictions outlined above are incorporated into the Affordable Housing Agreement, the Agency Regulotory Agreement, and the Loon Agreement for fhe Agency laan, which will be recorded against the property. These agreements ore being presented for consideration by the Agency. PROPOSED FINANCING OF PROjECT It is estimated that the proposed tofal project cost will be $30,904,000 with $15,400,000 to be paid by bond proceeds and approximately $9,388,000 fo be covered by low income housing tax credits, $4,400,000 in Agency assistance, $1,200,000 in deferred Developer fee, and a $516,000 cash contribution from the Developer. Additionolly, City Council conditionally approved the deferred payment of the public facilities development impact fee (PDIF) ($238,238) for 10 years, the waiver of the Residential Construction Tax($73,075), and the waiver of the park fee ($355,466 for land and improvemenfs) in exchange for the developer dedicating an additional 1.8 acres for a future community park. At this time, staff and the developer are working on arrangemenfs fo provide the City with the property for future use as a community park. BOND STRUCIURE The City is being asked to outhorize the issuonce of a series of bonds to finance the construction of Heritoge Town Center. These bonds would be roted AM by virtue of a credit enhoncement provided by Fannie Mae. ISSUER FEE As issuer of the bonds, the City will receive issuer fees related to the costs of issuance of the bonds and ongoing monitoring of fhe project for compliance with the Regulatory Agreement. The standard originofion fee and annuol adminisfrative fee is 0.25 percent of the bond proceeds. Based upon negotiations with the Developer, staff is recommending an originotion fee and an annual administrative fee of 0.13 percent, estimafed at $19,250. The Developer has, in turn, agreed to maintain the affordability of the low income units for 0 period not less than 55 years, exceeding the 30 year term of the bonds. BOND DOCUMENTS The Authority is being asked to approve in substantiol form all documents related fo the bond issuance. These documents are as follows and ore on file in the Office of the City Clerk due to fhe substantial length of the documents, with exceptions os noted: . The Trust Indenture for the Series A Bonds is 0 dpcument which specifies the terms ond condifions for the issuance ond selling of the bonds and the use of bond proceeds. . The Financing Agreemenf and Loan Agreement for the Series A Bonds, respectively, are documents which specify the terms and conditions of the Mortgoge Loan financing the Project. ;}-1 PAGE 5, ITEM NO.: MEETING DATE: 11/13/01 . The Regulotory Agreement is a document which specifies the regulations for the use and operation of the Project (see Attachment 4). . The Subordinotion Agreement is a document which specifies fhe terms and condifions for the subordinate loans on the project. . The Contract of Purchase, also known as the Bond Purchase Agreement, for the Series A Bonds set forth the terms upon which Newman and Associates, Inc. will buy the bonds from the City. . The Preliminary Official Statement describes for investors the terms of the Series A Bonds (see Attachment 5). . The Assignmenf of Mortgage Loan provides for the assignment by the City fo the bond trustee of its interest in fhe Series A mortgage loan. Redevelopment Aaency Loan/City Assistance Agency assistance will be provided strictly for the development of the residential units ond will be in the form of a residual receipfs loan secured by a promissory note and deed of trust. The outstanding principal and interest on the loan will be repaid over fifty-five years and shall accrue with simple interest ot 3 percent per annum. Payment of principal and interest, or portions thereof, on the Agency loan shall be made on an annual basis, out of a fund equal fo fifty (50%) percent of fhe net cash flow of the project (Residual Receipfs) offer debt service on bonds, payment of deferred developer fee, and reasonable operating expenses have been paid. The ferms of the loan are incorporated into the Agency Loon Agreement and Reloted Restrictive Covenanfs. The City will help to reduce the costs of the proiect by the approval of a deferred payment of the Public Facilities Developmenf Impact Fee (PDIF) the 91 senior units for ten years and the waiver of of her additional fees as previously discussed. The terms for the deferral of the PDIF are incorporated into the City PDIF Deferral Agreement. FISCAL IMPACT All costs related to the issuance of the bonds will be paid for from bond proceeds or profits. The bonds will be secured by fhe project and will not constitute a liability or obligation to the City. Some staff time cosfs will be associated with monitoring compliance with fhe Regulatory Agreement. Those costs will be reimbursed from an origination fee of 0.13 percent of the bond proceeds, estimated ot $19,250, and an annual administrative fee of 0.13 percent of the bond proceeds to be paid by the Developer to the City for 30 year period. The Agency loan of $4,400,000 will be appropriafed from fhe unappropriated balance in the Low/Moderafe Income Housing Set-aside funds for the project. Currently, the Agency's Low and Moderate Income Housing Set-Aside fund has an ovailable balance of approximately $4.5 million. Any repaymenf of this loan will be deposited into the Low and Moderate Income Housing Set-aside fund for further use in providing affordable housing programs. ~-S- PAGE 6, ITEM NO.: MEETING DATE: 11 /13/01 ATTACHMENTS The following are affoched: 1. Agency Loon Agreement and Relafed Resfrided Covenants 2. Agency Affordable Housing Agreement 3. City PDIF Deferral Agreement 4. Bond Regulatory Agreement 5. Series A Preliminory Official Statement The following are on file in the Office of the City Clerk: 6. Series A Trust Indenture 7. Series A Finoncing Agreement 8. Series A Subordination Agreement 9. Series A Contrad of Purchase 10. Series A Assignment of Mortgage Loan ~- b HOUSING AUTHORITY RESOLUTION NO. A RESOLUTION OF THE HOUSING AUTHORITY OF THE CITY OF CHULA VISTA AUTHORIZING THE ISSUANCE OF MULTIFAMILY HOUSING REVENUE BONDS IN AN AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $15,400,000 FOR THE PURPOSE OF FINANCING THE ACQUISITION AND CONSTRUCTION OF THE HERITAGE TOWN CENTER MULTIFAMILY RENTAL HOUSING PROJECT, APPROVING AND AUTHORIZING THE EXECUTION AND DELIVERY OF ANY AND ALL DOCUMENTS NECESSARY TO ISSUE THE BONDS AND IMPLEMENT THIS RESOLUTION, AND RATIFYING AND APPROVING ANY ACTION HERETOFORE TAKEN IN CONNECTION WITH THE BONDS WHEREAS, pursuant to Section 34312.3 of the California Health & Safety Code ("Housing Law"), the Housing Authority of the City of Chula Vista (the "Authority") is empowered to issue revenue bonds for the purpose of financing the acquisition, construction, rehabilitation refinancing or development of multifamily rental housing; and WHEREAS, South Bay Community Villas, L.P., a California limited partnership (the "Borrower"), on behalf of itself intends to acquire and construct a 271-unit project located in the Otay Ranch area of the City of Chula Vista (the "Projecf'); and WHEREAS, the Borrower has requested the Authority to issue multifamily housing revenue bonds and loan the proceeds of the bonds to the Borrower to finance the acquisition and construction of the Project; and WHEREAS, the Board of Commissioners of the Authority (the "Board") desires to assist the Borrower by making a portion of the units in the Project available for low and very low income persons or families, and in order to accomplish such purposes it is desirable for the Authority to provide for the issuance of the bonds and financing of the Project; and WHEREAS, the Authority will loan the proceeds of the bonds to the Borrower; and WHEREAS, Fannie Mae will, subject to the satisfaction of certain conditions, facilitate the financing of the Project by causing the issuance of a credit facility (the "Credit Facility") guaranteeing payments of principal and interest on the loan; and WHEREAS, Government Code Section 50191 requires a local agency to file an application with the California Debt Limit Allocation Committee (the "Committee") prior to the issuance of tax-exempt multifamily housing revenue bonds; and WHEREAS, the Committee has allocated to the Project $15,400,000 of the State of California 2001 State ceiling for private activity bonds under Section 146 of the Internal Revenue Code of 1986. NOW, THEREFORE, BE IT RESOLVED, by the Board of Commissioners of the Housing Authority of the City of Chula Vista, as follows: DOCSOC\854 940v 2\2403 6.0027 $- 7 1. In accordance with the Housing Law and pursuant to the Indenture (hereinafter defined), the Authority is authorized to issue the bonds in one or more series to be designated "Housing Authority of the City of Chula Vista, California Multifamily Housing Revenue Bonds (Heritage Town Center Apartments), Series A of 2001," in an aggregate principal amount not to exceed $15,400,000 (the "Bonds"), with an interest rate or rates, a maturity date or dates and other terms as provided in the Indenture as finally executed for the Bonds. The Bonds shall be in the forms set forth in and otherwise in accordance with the Indenture, and shall be executed by the manual or facsimile signature of the Chair or the Executive Director of the Authority and the manual or facsimile seal of the Authority shall be impressed or reproduced thereon and attested by the manual or facsimile signature of the Secretary of the Authority. 2. The form of trust indenture (the "Indenture"), between the Authority and Wells Fargo Bank, National Association, as trustee (the "Trustee"), in substantially the form presented to the Board, a copy of which is on file in the office of the Executive Director, is approved for the Bonds. Anyone of the Chair or Executive Director or any designee thereof (each, an "Authorized Officer") is authorized to execute, and the Secretary of the Authority is authorized to attest, the Indenture in substantially said form, with such additions thereto and changes therein as such Authorized Officer may approve or recommend in accordance with Section 8 hereof. The date, maturity date or dates, interest rate or rates, interest payment dates, denominations, form, registration privileges, manner of execution, place of payment, terms of redemption, and other terms of the Bonds shall be as provided in the Indenture as finally executed. 3. The form of financing agreement (the "Financing Agreemenf'), among the Authority, the Borrower and the Trustee, in substantially the form presented to the Board, a copy of which is on file in the office of the Executive Director, is approved. Any Authorized Officer is authorized to execute, and the Secretary of the Authority is authorized to attest, the Financing Agreement, in substantially said form, with such additions thereto and changes therein as such Authorized Officer may approve or recommend in accordance with Section 8 hereof. 4. The form of regulatory agreement and declaration of restrictive covenants (the "Regulatory Agreemenf'), among the Authority, the Trustee and the Borrower, in substantially the form presented to the Board, a copy of which is on file in the office of the Executive Director, is approved. Any Authorized Officer is authorized to execute, and the Secretary of the Authority is authorized to attest, the Regulatory Agreement, in substantially said form, with such additions thereto and changes therein as such Authorized Officer may approve or recommend in accordance with Section 8 hereof. 5. The form of assignment and intercreditor agreement (the "Assignment"), among the Authority, the Trustee and Fannie Mae, in substantially the form presented to the Board, a copy of which is on file in the office of the Executive Director, is approved. Any Authorized Officer is authorized to execute, and the Secretary of the Authority is authorized to attest, the Assignment, in substantially said form, with such additions thereto and changes therein as such Authorized Officer may approve or recommend in accordance with Section 8 hereof. 6. The Authority is authorized to sell the Bonds to Newman & Associates, Inc. (the "Purchaser") and Fannie Mae pursuant to the terms and conditions of a bond purchase contract (the "Purchase Contracf') among the Authority, the Borrower and the Purchaser and, should Fannie Mae buy all or a portion of the Bonds, Fannie Mae, in substantially the form DOCS0C\8 54 940v 2\240 36. 00 27 Q"-? presented to the Board, a copy of which is on file in the office of the Executive Director, and such Purchase Contract is approved for the Bonds. Any Authorized Officer is authorized to execute, and the Secretary of the Authority is authorized to attest, the Purchase Contract, in substantially said form, with such additions thereto and changes therein as such Authorized Officer may approve or recommend in accordance with Section 8 hereof. 7. The form of the Preliminary Official Statement presented at this meeting is hereby approved and the Purchaser is hereby authorized to distribute the Preliminary Official Statement to prospective purchasers of the Bonds substantially in the form hereby approved, together with such additions thereto and changes therein as are determined necessary by the Executive Director of the Authority, or his written designee, to make such Preliminary Official Statement final as of its date for purposes of Rule 15c2-12 of the Securities and Exchange Commission, including, but not limited to, such additions and changes as are necessary to reflect the terms imposed by any rating agency or Fannie Mae or to make the information therein accurate and not misleading. Each Authorized Officer is hereby authorized to execute a final Official Statement in the form of the Preliminary Official Statement, together with such changes as are determined necessary by the Authorized Officer to make such Official Statement complete and accurate as of its date. The Purchaser is further authorized to distribute the final Official Statement for the Bonds and any supplement thereto to the purchasers thereof upon its execution on behalf of the Authority as described above. 8. Any Authorized Officer executing a document approved herein, in consultation with General Counsel to the Authority and Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, Bond Counsel, is authorized to approve and make such modifications, changes or additions to the Indenture, the Financing Agreement, the Regulatory Agreement, the Assignment, the Purchase Contract, the Preliminary Official Statement and the final Official Statement, or other document as may be necessary or advisable, and the approval of any modification, change or addition to any of the aforementioned agreements shall be evidenced conclusively by the execution and delivery thereof by such Authorized Officer. 9. All actions heretofore taken by the officers, employees and agents of the Authority with respect to the issuance and sale of the Bonds are approved, confirmed and ratified, and the officers, employees and agents of the Authority are authorized and directed, for and in the name and on behalf of the Authority, to do any and all things and take any and all actions and execute and deliver any and all certificates, agreements and other documents, including, but not limited to, those documents described in the Indenture and the other documents herein approved, which they, or any of them, may deem necessary or advisable in order to consummate the lawful issuance and delivery of the Bonds and to effectuate the purposes thereof and of the documents herein approved in accordance with this resolution and resolutions heretofore adopted by the Board. In the event that the Secretary of the Authority is unavailable to sign any document related to the Bonds, any Deputy Secretary of the Authority may sign on behalf of the Secretary. 10. All prior resolutions or parts thereof in conflict with this resolution herewith are, to the ex1ent of such conflict, repealed. 11. If any section, paragraph or provision of this resolution shall be held to be invalid or unenforceable for any reason, the invalidity or unenforceability of such section, paragraph or provision shall not affect any remaining sections, paragraphs or provisions of this resolution. DOC S OC\8 5 4 94Ov 2\240 3 6.0027 ~-c¡ 12. This resolution shall take effect immediately upon its adoption. Presented by Approved as to form by &.~ g. .i/:. i" / . / /' , Ii I. : . / / ~ ~~:¡ - ¿ /-!ce'Yí { l' Ík:c-L( Chris Salomone - - Jo n. . Kaheny ? Director of Community Development ~cy Attorney DOCSOO854 940v 2\240 3 6. ()() 27 5- (() RESOLUTION NO. (COUNCIL RESOLUTION NO. ) JOINT RESOLUTION OF THE CITY COUNCil AND THE REDEVELOPMENT AGENCY OF THE CITY OF CHULA VISTA [AI APPROVING A lOAN AGREEMENT AND RELATED RESTRICTIVE COVENANTS AND THE AFFORDABLE HOUSING AGREEMENT BY AND BElWEEN THE REDEVELOPMENT AGENCY AND SOUTH BAY COMMUNITY VilLAS, loP. AND AUTHORIZING THE CHAIRMAN OF THE REDEVELOPMENT AGENCY TO EXECUTE SAID AGREEMENTS; [B] APPROPRIATING $4,400,000 FROM THE UNAPPROPRIATED BALANCE IN THE LOW AND MODERATE INCOME HOUSING FUND FOR FINANCIAL ASSISTANCE TO SOUTH BAY COMMUNITY VILLAS, loP.; [CI APPROVING A TEN YEAR DEFERRAL OF THE PUBLIC FACILITIES DEVELOPMENT IMPACT FEE AND WAIVER OF THE PARK FEE; AND [DI APPROVING A DEFERRAL AGREEMENT FOR THE PUBLIC FACILITIES DEVELOPMENT IMPACT FEE AND AUTHORIZING THE MAYOR TO EXECUTE SAID AGREEMENT FOR THE DEVELOPMENT AND OPERATION OF HERITAGE TOWN CENTER WHEREAS, California Health and Safety Code Sections 33334.2 and 33334.6 authorize and direct the Redevelopment Agency of the City of Chula Vista (the "Agency") to expend a certain percentage of all taxes which are allocated to the Agency pursuant to Section 33670 for the purposes of increasing, improving and preserving the community's supply of low and moderate income housing available at affordable housing cost to persons and families of low- and moderate-income, lower income, and very low income; and WHEREAS, pursuant to applicable law the Agency has established a low and Moderate Income Housing Fund (the "Housing Fund"); and WHEREAS, pursuant to Health and Safety Code Section 33334.2(e), in carrying out its affordable housing activities, the Agency is authorized to provide subsidies to or for the benefit of very low income and lower income households, or persons and families of low or moderate income, to the extent those households cannot obtain housing at affordable costs on the open market, and to provide financial assistance for the construction and/or rehabilitation of housing which will be made available at an affordable housing cost to such persons; and WHEREAS, pursuant to Section 33413(b), the Agency is required to ensure that at least 15 percent of all new and substantially rehabilitated dwelling units developed within a project area under the jurisdiction of the Agency by private or public entities or persons other than the Agency shall be available at affordable housing cost to persons and families of low or moderate income; and WHEREAS, South Bay Community Villas, loP. ("Developer") proposes to construct a multifamily housing development consisting of 91 units for senior citizens and 180 units of family housing, within the Otay Ranch master planned community. The residential units will consist of 30 units affordable to very low income households at or below 50 percent of the Area Median Income ("AMI"), with 10 of those units for senior citizens, 101 units affordable to low-income households at or below 60 percent of AMI, with 33 units for senior citizens, and the remainder of the units affordable to moderate income households at or below 120 percent of the Area Median Income, with 47 of these moderate income units for senior citizens, to be located on East Palomar Street between S-II Santa Rita Avenue and Santa Andrea Avenue within a multi-family and commercial area identified in the Otay Ranch Village 1 tentative map as R47 & C1 ("Projecf'); and WHEREAS, the Developer requires assistance to reduce the development costs for the construction of the residential units in order to make the Project feasible; and WHEREAS, Chula Vista Municipal Code § 17.10.070 provides that the City Council may waive all or any portion of the park lands dedication or fee requirements upon finding that said waiver will stimulate the construction of housing for low and moderate-income families; and WHEREAS, the City of Chula Vista (the "City") wishes to defer for a ten year period the applicable Public Facilities Development Impact Fee (PDIF) for the 91 senior housing units {$238,238} and waive the Park Fee ($355,466 for land and improvements) to assist in reducing the development costs for the construction of the residential units of the Project; and WHEREAS, in order to carry out and implement the Redevelopment Plan for the Agency's redevelopment projects, the City's Consolidated Plan and the affordable housing requirements and goals thereof, the Agency and City propose to enter into an Agency loan Agreement and Related Restricted Covenants (the "Agency Loan Agreemenf') and the City PDIF Deferral Agreement (the "Deferral Agreemenf'), respectively, with the Developer, together with an "Affordable Housing Agreement" which would be recorded as an encumbrance to the Project, pursuant to which the Agency would make a loan to the Developer (the "Agency Loan"), and the Developer would agree to develop and operate the Project in accordance with the requirements of the Agency Loan Agreement, restrict occupancy of 131 of the apartment units in the Project to very low and lower income households and 140 of the apartment units to moderate income households, and rent those units at an affordable housing cost; and WHEREAS, the Agency loan Agreement will leverage the investment of the Agency by requiring the Developer to obtain additional financing for the construction and operation of the Project through a combination of a loan obtained from the proceeds of multifamily mortgage revenue bond financing and an equity contribution by a limited partner investor in consideration for the "4% Tax Credits" to be generated by the Project; and WHEREAS, in carrying out its affordable housing activities, the Agency may subordinate its affordability covenants or restrictions to the lien, encumbrance, or regulatory agreement of a lender or from a bond issuance providing financing of rental units if certain requirements, as specified in Health and Safety Code Section 33334.14(a}, are met; and WHEREAS, the Project is located outside of the Agency's redevelopment project areas, but the acquisition, construction and operation of the Project pursuant to the loan Agreement would benefit the Agency's redevelopment project areas by providing affordable housing for persons who currently live and work within those redevelopment project areas; and WHEREAS, the Agency has adopted an Implementation Plan pursuant to Health and Safety Code Section 33490, which sets forth the objective of providing housing to satisfy the needs and desires of various age, income and ethnic groups of the community, and which specifically provides for the development and operation of rental housing units through Agency assistance; and 5-('2-- WHEREAS, the Agency loan Agreement furthers the goals of the Agency to facilitate the creation of affordable housing which will serve the residents of the neighborhood and the City as set forth in the Implementation Plan and the Consolidated Plan; and WHEREAS, the legislature declares in Health and Safety Code Section 37000, et seq., that new forms of cooperation with the private sector, such as leased housing, disposition of real property acquired through redevelopment, development approvals, and other forms of housing assistance may involve close participation with the private sector in meeting housing needs, without amounting to development, construction or acquisition of low rent housing projects as contemplated under Article XXXIV of the State Constitution; and WHEREAS, Health and Safety Code Section 37001 proYides that a low rent housing project under Article XXXIV of the State Constitution does not include a development which is privately owned housing, receiving no ad yalorem property tax exemption, other than exemptions granted pursuant to subdivision (f) or (g) of Section 214 of the Reyenue and Taxation Code, and less than 49 percent of the units within the Project will be occupied by persons of low and very low income; and WHEREAS, the Project will not receive any ad valorem property tax exemption, other than exemptions granted pursuant to subdivision (f) or (g) of Section 214 of the Reyenue and Taxation Code, and the Agreement restricts less than 49 percent of the units within the Project to persons of low and very low income; and WHEREAS, Health and Safety Code Section 37001.5 provides that a public body does not develop, construct, or acquire a low rent housing project under Article XXXIV of the State Constitution when the public body provides assistance to a low rent housing project and monitors construction and/or rehabilitation of the project to the extent of carrying out routine governmental functions, performing conventional activities of a lender, and imposing constitutionally mandated or statutorily authorized conditions accepted by a grantee of assistance; and WHEREAS, the loan Agreement provide for assistance by the Agency to the Project, and the Agency's monitoring of construction of the Project to the extent of carrying out routine governmental functions, performing conventional activities of a lender, and imposing constitutionally mandated or statutorily authorized conditions accepted by a grantee of assistance; and WHEREAS, the Agency have duly considered all terms and conditions of the proposed Agency loan Agreement and Affordable Housing Agreement and believes that the loan Agreement and Affordable Housing Agreement are in the best interests of the Agency and the health, safety, and welfare of its residents, and in accord with the public purposes and provisions of applicable State and local law requirements; S-t3 NOW, THEREFORE, THE CITY COUNCil AND REDEVELOPMENT AGENCY OF THE CITY OF CHULA VISTA DO RESOLVE AS FOLLOWS: Section 1. The Agency hereby finds that the use of funds from the Agency's Low and Moderate Income Housing Fund pursuant to the loan Agreement, for the development and operation of real property will be of benefit to the Agency's redevelopment project areas for the reasons set forth above. Section 2. The Agency hereby finds that an economically feasible alternative method of financing the Project on substantially comparable terms and conditions, without subordination, is not reasonably available and the Agency will receive written commitments reasonably designed to protect the Agency's investment in the event of default. Section 3. The Agency hereby determines that the Project is not a "low rent housing projecf' within the meaning of Article XXXIV of the State Constitution, and that the assistance to be provided pursuant to the Loan Agreements does not constitute development, construction or acquisition of a low-rent housing project within the meaning of Article XXXIV of the State Constitution. This Resolution is hereby deemed to constitute a final approval of a proposal which may result in housing assistance benefiting persons of low income, within the meaning of Health and Safety Code Section 36005. Section 4. The Agency hereby [A] approves the Agency loan Agreement and Affordable Housing Agreement in substantially the form presented to the Agency, subject to such revisions as may be made by the Agency Executive Director or his designee subject to the review and approval of the Agency Attorney, and the Chairman of the Agency is hereby authorized to execute the loan Agreement and Affordable Housing Agreement on behalf of the Agency and [B] appropriates $4,400,000 from the unappropriated balance in the low And Moderate Income Housing Fund for financial assistance to South Bay Community Villas, L.P. for the development and operation of Heritage Town Center. A copy of the Loan Agreement and Affordable Housing Agreement when executed by the Agency shall be placed on file in the office of the Secretary of the Agency and the City Clerk. Section 5. The City Council finds pursuant to Chula Vista Municipal Code § 17.10.070 that the waiver of the Park Fee will stimulate the production of housing for low and moderate-income families. Section 6. The City Council hereby [A] approves a ten year deferral of the payment of the applicable Public Facilities Development Impact Fee for the 91 senior housing units in the approximate amount of $238,238, a waiver of the Residential Construction Tax in the approximate amount of $73,075 and a waiver of the Park Fee in the approximate amount of $355,466 to assist with reducing the development costs for the construction of the residential units of the Project subject to the Developer dedicating an additional 1.8 acres of land for a future community park and [B] approves the City Deferral Agreement in substantially the form presented to the City, subject to such revisions as may be made by the City Manager or his designee subject to the review and approval of the City Attorney, and the Mayor is hereby authorized to execute the Deferral Agreement on behalf of the City. A copy of the Deferral Agreement when executed by the Mayor shall be placed on file in the office of the City Clerk. ..5'-1'1 Section 7. The Executive Director of the Agency (or his designee) is hereby authorized, on behalf of the Agency, to make revisions to the Loan Agreement and Affordable Housing Agreement which do not materially or substantially increase the Agency's obligations thereunder or materially or substantially change the uses or development permitted on the Site, to sign all documents, to make all approvals and take all actions necessary or appropriate to carry out and implement the Loan Agreement and Affordable Housing Agreement and to administer the Agency's obligations, responsibilities and duties to be performed under the loan Agreement, Affordable Housing Agreement and related documents. Any such revisions or modifications to the loan Agreement or the Affordable Housing Agreement are subject to the review and approval of the Agency Attorney. PRESENTED BY APPROVED AS TO FORM BY ~ ~ {~Z¿(~¿¡jfk HH !It L( ,~ Chris Salomone Joh M. Kaheny ) Director of Community Development /Ag'ency/City Attorney / S-(~- RECORDING REQUESTED BY: Redevelopment Agency of the City of Chula Vista City ofChula Vista WHEN RECORDED MAIL TO: Redevelopment Agency of the City of Chula Vista Attn: Housing Manager 276 Fourth Avenue Chula Vista CA 91910 No fee for recording pursuant to Government Code Section 27383 (Space above/or Recorder's Use) HERITAGE TOWN CENTER LOAN AGREEMENT AND RELATED RESTRICTIVE COVENANTS by and among THE REDEVELOPMENT AGENCY OF THE CITY OF CHULA VISTA a public body, corporate and politic and SOUTH BAY COMMUNITY VILLAS LP. a Califomia Limited Partnership DOCSOC\859837v I \29999 .0000 A- \ TABLE OF CONTENTS ARTICLE 1- RECITALS 5 1.1 AUTHORITY. 5 1.2 A v AILABLE fuNDS. 5 1.3 THE PROPERTY. 5 1.4 PROJECT. 5 1.5 AGENCY FINANCIAL ASSISTANCE TO BORROWER. 6 1.6 INTERESTS OF THE AGENCY AND THE PUBLIC. 6 1.7 HOUSING OBJECTIVES AND GOALS. 6 ARTICLE 2 . DEFINITIONS 6 ARTICLE 3 - FINANCING OF THE PROJECT 10 3.1 SUMMARY OF FINANCING. 10 ARTICLE 4 - AGENCY LOAN 10 4.1 AMOUNT. 10 4.2 INTEREST. 11 4.3 BORROWER'S OBLIGATiONS. 11 4.4 SOURCE OF AGENCY LOAN. 12 4.5 REPAYMENT. 12 4.6 PREPAYMENT. 14 4.7 ASSUMPTION. 14 4.8 USE OF LOAN PROCEEDS. 14 4.9 LIEN PRIORITY, TITLE INSURANCE. 14 4.10 SUBORDINATiON; REFINANCING. 15 4.12 BORROWER'S EVIDENCE OF FINANCIAL CAPABILITY. 15 4.12 REpORTS AND ACCOUNTING OF RESIDUAL RECEIPTS. 15 ARTICLE 5 - NOTES AND DEEDS OF TRUST 16 5.1 SECURITY FOR LoANS. 16 5.2 NONRECOURSE OBLIGATiON. 16 ARTICLE 6 -DISBURSEMENT OF AGENCY LOAN 17 DOCSOC\859837v I \29999 .0000 /¡-~ ARTICLE 7 -CALIFORNIA COMMUNITY REDEVELOPMENT LAW REOUIREMENTS 17 7.1 REQUIREMENTS. 17 ARTICLE 8. DEVELOPMENT FEE 18 8.1 DEVELOPMENT FEE. 18 ARTICLE 9 -DEVELOPMENT OF THE PROJECT 19 9.1 WORK TO BE PERFORMED. 19 9.2 COMPLIANCE WITH PERMITS AND LAWS. 19 9.3 COSTS OF DEVELOPMENT. 20 9.4 SCHEDULE OF PERFORMANCE: PROGRESS REPORTS. 20 9.5 ANTI-DISCRIMINATION. 20 9.6 RIGHT OF ACCESS. 20 9.7 MECHANICS LIENS, STOP NOTICES, AND NOTICES OF COMPLETION. 21 9.8 CERTIFICATE OF COMPLETION. 21 9.9 ESTOPPELS. 22 ARTICLE 10 USES OF THE PROPERTY 22 10.1 SUMMARY. 22 10.2 AFFORDABLE HOUSING. 22 10.3 REpORTS. 23 ARTICLE 11 - CONTINUING OBLIGATIONS OF BORROWER 27 11.1 ApPLICABILITY. 27 11.2 INSURANCE. 27 11.3 PRoCEEDS OF INSURANCE. 27 11.4 TAXES, ASSESSMENTS, ENCUMBRANCES, AND LIENS. 28 11.5 HOLD HARMLESS. 28 11.6 FURTHER INDEMNIFICATION OF AGENCY. 28 11.7 OBLIGATION TO REFRAIN FROM DISCRIMINATION. 29 11.8 FORM OF NONDISCRIMINATION AND NONSEGREGATION CLAUSES. 29 11.1OPROHIBITION AGAINST ASSIGNMENT AND TRANSFER. 31 l1.IOSECURED FINANCING; RIGHT OF HOLDERS. 32 11.11 RIGHT OF AGENCY TO SATISFY LIENS. 33 DOCSOO859837 v 1 \29999.0000 A-3 ARTICLE 12 - DEFAULTS. REMEDIES, AND TERMINATION 34 12.1 DEFAULTS - GENERAL. 34 12.2 TERMINATION. 34 12.3 LEGAL ACTIONS. 35 ARTICLE 13 - GENERAL PROVISIONS 36 13.1 NOTICES, DEMANDS, AND COMMUNICATIONS BETWEEN THE PARTIES. 36 13.2 NONLIABILITY OF AGENCY OFFICIALS AND EMPLOYEES: CONFLICTS OF INTEREST. 37 13.3 ENFORCED DELAY; EXTENSION OF TIMES OF PERFORMANCE. 37 13.4 INSPECTION OF BOOKS AND RECORDS. 37 13.5 INTERPRETATION. 38 13.6 ENTIRE AGREEMENT, WAIVERS AND AMENDMENTS. 38 13.7 CONSENT/REASONABLENESS. 38 13.8 SEVERABILITY. 38 13.9 THIRD PARTY BENEFICIARIES. 38 13.lOREpRESENTATIONS AND WARRANTIES. 39 13.11ExECUTION. 39 13.12RELATIONSHIP OF PARTIES. 39 13.13ATTORNEY'S FEES. 39 DOCS0C\859837v 1129999.0000 A-4 LOAN AGREEMENT AND RELATED RESTRICTED COVENANTS THIS LOAN AGREEMENT AND RELATED RESTRICTED COVENANTS (the "Agreement") is entered into as of 2001 between the REDEVELOPMENT AGENCY OF THE CITY OF CHULA VISTA, a public body, corporate and politic ("Agency"), and SOUTH BAY COMMUNITY VILLAS LP., a California limited partnership ("Borrower"), and/or its successors or assignees. ARTICLE 1 - Recitals 1.1 Authoritv. Agency is a public body, corporate and politic, exercising governmental functions and powers and organized and existing under the Community Redevelopment Law of the State of California (Health and Safety Code Section 33000, et seq.). Agency is authorized to enter into binding agreements for the purpose of carrying out its obligations pursuant to the Community Redevelopment Law. 1.2 Available Funds. Agency has available funds from the Agency's Low and Moderate-Income Housing Fund pursuant to Health and Safety Code Section 33334.2 and 33334.3 which can be used for the purposes of funding the obligations of the Agency under this Agreement in accordance with the Community Redevelopment Law of the State of California. 1.3 The Provertv. Borrower is or will become the legal owner of the fee title to the real property in the Otay Ranch master planned community located on East Palomar Street between Santa Rita Avenue and Santa Andrea Avenue, within a multi-family and commercial area identified in the Otay Ranch Village I tentative map as R47 & C1 in the City of Chula Vista, California, as described in the attached Exhibit A, which is incorporated herein (the "Property"). 1.4 Project. Borrower proposes to construct a multifamily rental housing development on the Property which will contain 91 units of senior citizen housing and 180 units of family housing (the "Project"). The residential units will consist of 30 units affordable to very low income households at or below 50 percent of the Area Median Income ("AMI"), with 10 of those very low income units for senior citizens, 101 units affordable to low income households at or below 60 percent of AMI, with 33 units of those low income units for senior citizens, and the remainder of the units (other than the three units which may be made available to on-site managers and a maintenance employee) affordable to moderate income households at or below 120 percent of the Area Median Income, with 47 of those moderate income units for senior citizens. The Project will be subject to certain affordable housing obligations pursuant to the Regulatory Agreement and Declaration of Restrictive Covenants by and among the Borrower, the Bond Issuer and Lender and City to Insert Name of Trustee. (the "Regulatory Agreement"). The Project does not include the retail and commercial space which is to be developed on the Property. 5 DOCSOC\859837v 1\29999.0000 A$' 1.5 Ag:encv Financial Assistance to Borrower. Through the development and operation of the Project, Agency and Borrower desire to provide very low, lower and low and moderate income households with affordable housing opportunities within the City in accordance with the Community Redevelopment Law, the Agency's redevelopment plans, and the Housing Element of the City General Plan. In order to accomplish this goal, the Agency desires to make a loan to Borrower from its Low and Moderate Income Housing Fund for a portion of the costs of the Deyeloper to Insert Use of Funds (i.e. property acquisition, development) of the Project, subject to certain conditions designed to assure the implementation of the Project in accordance with the redevelopment plans, the General Plan, state and federal law, and as otherwise provided herein. 1.6 Interests of the Agencv and the Public. The acquisition, construction and operation of the Project pursuant to this Agreement, and the fulfillment generally of this Agreement, are in the vital and best interests of the Agency and the welfare of the residents of the City of Chula Vista, and in accordance with the public purposes and provisions of applicable federal, state, and local laws and requirements. 1.7 Housing Objectives and Goals. The Project acconunodates several of the City's Comprehensive Housing Plan Objectives, which are expressly noted in the Housing Element as priorities for the City. The objectives this Project serves are: (1) Achievement of a balanced residential conununity through integration of low and moderate income housing throughout the City, and the adequate dispersal of such housing to preclude establishment of specific low-income enclaves. (2) The provision of adequate rental housing opportunities and assistance to households with low and very low incomes, including those with special needs such as the elderly, handicapped, single- headed households, large families and those "at-risk" of homelessness. WHEREFORE, based upon the foregoing recitals and in consideration of their mutual and prospective promises and subject to the terms and conditions hereinafter set forth, the parties do hereby agree as follows: ARTICLE 2 - Definitions The following terms as used in this Agreement shall have the meanings given unless expressly provided to the contrary: 2.1 "Affordable Housing Agreement" means that certain agreement, in substantially the form set forth in Exhibit D attached hereto and incorporated herein, which sets forth Borrower's obligations to maintain the Project as an affordable multifamily housing project for very low, lower and low and moderate income households, and other obligations related to the operation and management of the Project, which shall be recorded in the order of priority set forth in this Agreement. 6 DOCSOC\859837v] 129999 .0000 fl.- Go, 2.2 "Agency" means the Redevelopment Agency of the City of Chula Vista, a public body, corporate and politic, having its offices at 276 Fourth Avenue, Chula Vista, California 91910. The term "Agency" as used herein also includes any assignee of, or successor to, the rights, powers, and responsibilities of the Redevelopment Agency of the City of Chula Vista. 2.3 "Agency Loan" means the loan for an amount of Four Million Four Hundred Thousand Dollars ($4,400,000) by the Agency to Borrower, which loan is the subject of this Agreement. 2.4 "Agency Note" shall mean the promissory note, in substantially the form set forth in Exhibit B attached hereto and incorporated herein, in the principal amount of One Million Five Hundred Ten Thousand Dollars ($4,400,000), evidencing the Agency Loan. 2.5 "Agency Trust Deed" shall mean that certain deed of trust, in substantially the form set forth in Exhibit C attached hereto and incorporated herein, which secures Borrower's obligations pursuant to the Agency Note, which shall be recorded in the order of priority set forth in this Agreement. 2.6 "Agreement" means this Loan Agreement and Related Restricted Covenants. 2.7 "Bond IssuerlLender" means the Housing Authority of the City of Chu1a Vista. 2.8 "Bond Loan" means the loan to be made by the Bond Issuer/Lender to the Borrower with the proceeds of the Bonds. 2.9 "Bond Loan Documents" means the Loan Agreement of even date herewith by and among the California Statewide Communities Development Authority, U.S. Bank National Association, and the Borrower, and the promissory note, deed of trust and other documents entered into pursuant to such Loan Agreement. 2.10 "Bonds" means multifamily mortgage revenue bonds issued by the Bond IssuerlLender in the approximate aggregate amount of$15 million, as set forth in Section 3.1 of this Agreement. 2.11 "Borrower" means South Bay Community Villas LP., a California limited partnership. The term "Borrower" includes any legally permissible assignee or successor to the rights, powers, and responsibilities of Borrower hereunder, following such assignment and succession, in accordance with Section 11.10 of this Agreement. 2.12 "Borrower's Limited Partner" means Developer to Insert Name of Limited Partner, a Delaware limited liability company, and its successors and assigns. 2.13 "Certificate of Completion" shall have the meaning ascribed in Section 10.8 of this Agreement. The form of the Certificate of Completion shall be as set forth in Exhibit H to this Agreement, which is incorporated herein. 2.14 "City" shall mean the City of Chula Vista, a municipal corporation, organized under the laws of the State of California and having its offices at 276 Fourth A venue, Chula Vista, California 91910. 2.15 "Construction Loan" means the construction financing from First Bank & Trust in the amount of approximately Four Million Dollars ($4,000,000) 7 DOCSOC\859837v I \29999 .0000 A-7 2.16 "Developer" means South Bay Community Villas, LLc. ;¡,.{; 2.11 "Development Fee" and "Deferred Development Fee" shall have the meaning ascribed in Section 8.1. bl-+ 2Jll "Effective Date" means the date first appearing in this Agreement above. ;!4& 2J..2 "Gap Financing" means the additional financing which may be obtained for the Project, as described in Section 3.1. H9 8 A-~ DOCSOC\859837vl \29999.0000 2.2ll "Gross Revenue" shall have the meaning ascribed in Section 4.5. ~ 2.2l "Housing Manager" means the Housing Manager of the Community Development Department of the City. ~ l.Z2 "Project" shall have the meaning ascribed in Section 1.4 of this Agreement. ~ z.23. "Project Budget" means that certain budget referred to in Section 4.12 of this Agreement and attached hereto as Exhibit F, which is incorporated herein by this reference, which budget may not be materially changed without the prior approval of the Housing Manager, which approval shall not be unreasonably withheld (a material change is a change that causes the total Project cost to increase or decrease by three percent (3%) or more from what is shown in Exhibit F). ~ 2.2j "Project Pro Forma" means that certain Project Pro Forma referred to in Section 4.12 of this Agreement and attached hereto as Exhibit G, which is incorporated herein by this reference, which pro forma Borrower represents to be a good faith projection of the information set forth therein. ~ 2..2S. "Property" means that certain real property legally described in Exhibit A which is attached hereto and incorporated herein. ~ 2.2(i "Property Manager" means the property management company managing the Project, whether or not the Project is managed by Borrower. The term Property Manager shall not mean the on- site property manager. ~ 2.21 "Reasonable Operating Expenses" shall have the meaning ascribed in Section 4.5. ~ 2.28 "Regulatory Agreement" means the Regulatory Agreement and Declaration of Restrictive Covenants by and among the Borrower, the Housing Authority of the City of Chula Vista, and Trustee to be Detennined. ~ 9 ;1- q DOCSOC\859837v I \29999.0000 2.22 "Residual Receipts" shall have the meaning ascribed in Section 4.5. ~ 2.3!! "Restricted Units" means the residential units in the Project whose rent levels and occupancy are to be restricted as set forth in Section 10.2 of this Agreement. ~ 2.3l "Schedule of Performance" means that certain Schedule of Performance attached hereto as Exhibit L and incorporated herein, as the same may be modified or extended pursuant to Sections 10.4 and 13.3 hereof. ~ 2.J2 "Title Insurer" means Developer to Insert Name of Title Insurer. ARTICLE 3 - Financim! of the Project 3.1 SUmmary of Financing. Borrower's current sources and uses of funds summary for the Project is attached hereto as Exhibit E, which is incorporated herein. Borrower contemplates a total project budget of approximately $31,000,000. Borrower shall obtain construction and permanent loan financing funded by one series of multifamily mortgage revenue bonds issued by the Housing Authority of the City of Chula Vista ("Bond Issuer") in the approximate aggregate amount of $15,400,000 (the "Bonds"). The Bonds shall qualify as bonds which receive allocation of a portion of the state ceiling pursuant to Chapter 11.8 of Division 1 (commencing with Section 8369.80) of the Government Code, and the Project shall qualify as a qualified residential rental project, as defined by Section 142(d) of the Internal Revenue Code, within the meaning of Labor Code Section InO(d)(2) (effective as of January 1, 2002). Accordingly, the parties intend that the Project will not be paid in whole or in part out of public funds within the meaning of Labor Code Section InO(d)(2) (effective as of January I, 2002). Agency shall loan to Borrower the amount of $4,400,000 (approximately $16,236 for each housing unit in the Project), secured by the Agency Trust Deed, which shall be subordinate to the Bond Loan funded by the Bonds. Borrower shall ohtain additional construction financin" from First Bank & Trust in the amount of annroximatelv Four Million Dollars ($4.000.000) (the "Construction ~ Borrower represents that it has received a Tax Exempt Reservation Letter reserving $Developer to Insert Amount of "4%" tax credits for the Project from the California Tax Credit Allocation Committee ("TCAC") which will support an equity investment in Borrower by Borrower's Limited Partner in the amount of approximately $Developer to Insert Amount, pursuant to the terms and conditions of Borrower's Amended and Restated Partnership Agreement. ARTICLE 4 - Al!encv Loan 4.1 Amount. Subject to the terms and conditions set forth herein, the Agency hereby commits to loan to Borrower the total sum of $4,400,000 (the "Agency Loan") to be applied solely for Developer to Insert Use of Funds. 10 ¡l- (Ò OOCSOC\859837v 1 \29999.0000 4.2 Interest. The outstanding principal amount of the Agency Loan shall accrue simple interest at the rate of three (3%) percent per annum. 4.3 Borrower's Obligations. The following conditions must be fully satisfied as reasonably detennined by the Agency in order to obligate the Agency to make the Agency Loan: a. Borrower shall have submitted a complete application for a preliminary allocation of "4%" low-income housing tax credits from the California Tax Credit Allocation Committee in the amount set forth in the Sources and Uses attached hereto as Exhibit E, or such greater or lesser amount as may be mutually agreed to by the parties. b. Borrower shall have acquired fee title to the Property, or shall be acquiring fee title to the Property concurrently with the disbursement of the Agency Loan. c. Borrower shall have received a firm commitment for an equity contribution from Borrower's Limited Partner in Borrower of not less than Developer to Insert Use of Funds, which number is subject to adjustment pursuant to the funding agreement between Borrower and Borrower's limited partner investor, or such lesser amount as may be mutually agreed to by the parties. The Agency shall not unreasonably withhold or delay their consent to Borrower's request to approve such a lower amount. d. Borrower shall have obtained a firm commitment for the Bond Loan in an amount equal to the net proceeds of the Bonds or such greater or lesser amount as may be mutually agreed to by the parties, and the Bond Loan shall have closed or be ready to close concurrently with the Agency Loan. e. Borrower shall have duly executed (and acknowledged, if applicable) the Agency Note, the Agency Trust Deed, and the Affordable Housing Agreement, and shall have submitted the same into the escrow established for the Borrower's acquisition of the Property, and the Agency Trust Deed, and Affordable Housing Agreement shall be ready to be recorded concurrently with the recording of the grant deed conveying title to the Property to the Borrower as an encumbrance to the Property, subordinate only to the liens securing the Bonds, the Regulatory Agreement and other nonmonetary encumbrances approved by the Agency. f. Borrower shall have submitted to the Agency and Agency shall have reviewed and approved, in their reasonable discretion, any and all loan documents, regulatory agreements or grant contracts to be executed by or otherwise to be binding upon Borrower in connection with its acquisition of the Property, its construction and operation of the Project and/or its financing thereof, including without limitation the Bond Loan Documents, the Buildin.. Loan A..reement hetween fhe Borrower and First Bank & Trust and documents to be executed Dursuant thereto the regulatory agreement to be executed and recorded in favor of the TCAC (the "TCAC Regulatory Agreement"), and the partnership agreement of the Borrower and documents executed pursuant thereto, such as guaranties. g. The Title Insurer or another title insurance company reasonably acceptable to the Agency shall have unconditionally committed to issue the Lender's Policies to the Agency in accordance with Section 4.8 hereof. 11 DOCSOO859837v ¡ \29999.0000 11 ¡I h. Borrower shall have submitted to the Agency a copy of an executed property management agreement for the Project with an experienced property manager which is reasonably acceptable to the parties, in accordance with Section 10.8 hereof. i. At least 60 days shall have passed since the Agency's final approval of this Agreement. Alternatively, the Borrower shall have provided to the Agency (i) an opinion of legal counsel, in a form and from legal counsel which is reasonably satisfactory to the Agency, that the Project is not a "low rent housing project" subject to the requirements of Article XXXIV of the California Constitution, or (b) an agreement in a form and from a party which is reasonably satisfactory to the Agency, in which the party agrees to indemnify, defend and hold harmless the Agency from any losses or liability arising from a legal claim that the Agency Loan violate the provisions of Article XXXIV of the California Constitution. j. Borrower shall have satisfied all other obligations under this Agreement required to be performed prior to the closing on the Agency Loan, and shall not be in default in any of its obligations under the terms of this Agreement. All representations and warranties of Borrower contained herein shall be true and correct in all material respects on and as of the date of the disbursement of the Agency Loan as though made at that time. 4.4 Source of Agencv Loan. The source of the Agency Loan is the Agency's Low and Moderate-Income Housing Fund and no other source. Pursuant to California Community Redevelopment Law the Project must meet all of the California Community Redevelopment Law requirements for the term of the affordability restrictions on the units set forth herein. 4.5 Renavment. Payments under the Agency Loan shall be made as follows: a. Commencing on the Initial Payment Date (defined below), payment of principal and interest on the Agency Note shall be made, on an annual basis, in an amount equal to fifty percent (50%) of the "Residual Receipts" (defined below) derived from the Property and/or the operation of the Project. Such amounts shall be paid on a priority basis to all other debt service on the Property, except for the Bond Loan funded with the proceeds of the Bonds the Constnlction Loan and the Deferred Development Fee (as defined below), if any. Residual Receipts shall be calculated by Borrower each and every year commencing with the first anniversary of the issuance of the Certificate of Completion by the Agency. The fifty percent (50%) Residual Receipts payments, if any, shall be made on or before thirty (30) days after the later of (i) the first year anniversary of the issuance of the Certificate of Completion by the Agency or (ii) the first year anniversary of the date on which the Deferred Development Fee, if any, has been paid in full (the "Initial Payment Date"), and on or before 30 days after each subsequent yearly anniversary of the Initial Payment Date. b. "Residual Receipts" is specifically defined as the "Gross Revenue" (as defined below) from the Project minus the "Reasonable Operating Expenses" (as defined below) for the same period. (i) "Gross Revenue" shall mean all revenue, income, receipts, and other consideration actually received from operation and leasing of the Project. Gross Revenue shall include, but not be limited to: all rents, fees and charges paid by tenants, Section 8 payments or other 12 DOCSOC\859837 v 1 \29999.0000 11 (d-- rental subsidy payments received for the dwelling units, all cancellation fees; proceeds from vending and laundry room machines: the proceeds of business interruption or similar insurance to the extent not applied to the Bond Loan; the proceeds of casualty insurance to the extent not utilized to repair or rebuild the Project or applied to the Bond Loan; and condemnation awards for a taking of part or all of the Project for a temporary period to the extent not applied to the Bond Loan or used to repair or restore the Project. Gross Revenue shall not include tenants' security deposits, loan proceeds, capital contributions or similar advances or payments from reserve funds, or any revenue received from the commercial retail development located on the Property. (ii) "Reasonable Operating Expenses" shall include any and all reasonable and actually incurred costs associated with the ownership, operation, use or maintenance of the Property, calculated in accordance with generally accepted accounting principles. Such expenses may include, without limitation, property and other taxes and assessments imposed on the Project; premiums for property damage and liability insurance; utilities not directly paid for by the tenants including water, sewer, trash collection, gas and electricity, maintenance and repairs including pest control, landscaping and grounds maintenance, painting and decorating, cleaning, general repairs, and supplies; tenant relocation costs and expenses; license fees or certificate of occupancy fees required for operation of the Project; general administrative expenses directly attributable to the Property including advertising and marketing, security services and systems, and professional fees for legal, audit and accounting; property management fees and reimbursements including on-site manager and assistance manager expenses; asset management fees payable to the investor limited partner of the Borrower in an amount which does not exceed the amount set forth therefor in the Sources and Uses, Project Budget and Pro Forma attached hereto; a reasonable property management fee, cash deposited into a reserve for capital replacements of the Project improvements and an operating reserve (and such other reserve accounts required with respect to the Bond Loan) in such amounts as are required by the Bond Issuer/Lender and as may be reasonably required by Project equity investors; tenant services costs; debt service payments (excluding debt service due to Agency from Residual Receipts of the Project) on financing for the Project; reasonable supplemental management fees; and payment of the Deferred Development Fee. In no event shall expenditures, including attorneys' fees or litigation costs, normally required to be paid out of the Replacement Reserve, be treated as Reasonable Operating Expenses unless specifically approved in writing by the Agency. For purposes of the foregoing definition of "Reasonable Operating Expenses," any property management fee or partnership management fee which is paid to Borrower or an affiliate of Borrower shall at no time exceed an amount as is customary and standard for affordable housing projects similar in size, scope and character to the Project. Notwithstanding the foregoing, for purposes of this calculation, Reasonable Operating Expenses shall not include the following: principal and interest payments on any debt subordinate to the Agency Note, depreciation, amortization, depletion or other non-cash expenses, incentive partnership asset management fees payable to the Borrower or its affiliate (other than the supplemental management fee described above), or any amount expended from a reserve account. e. The fifty percent (50%) of Residual Receipts remaining after the annual Residual Receipts payments on the Agency Note may be retained and used by Borrower in Borrower's sole discretion. f. Except as otherwise expressly provided hereunder, Borrower's obligation to repay the Agency Loan shall be limited to Borrower's annual payment, until the Agency Loan is repaid in full, of fifty percent (50%) of the Residual Receipts as described above for a period from the completion of the Project until the date which is fifty-five (55) years following the date of the Agency's issuance 13 DOCSOC\859837v!\29999.()()()() A- 13 of the final Certificate of Completion for the Project (but in no event later than sixty (60) years from the date of execution of the Agency Note) (the "Conditional Maturity Date"). Upon the Conditional Maturity Date, Agency shall have the option, at any time, in its sole discretion, but after good faith discussions with Borrower as to available options, upon ninety (90) days' written notice to Borrower, to (a) declare the remaining balance of all amounts owed under the Agency Note immediately due and payable, or (b) to require installment payments under the Agency Note based upon (i) a restated principal balance comprised, in the aggregate, of any and all outstanding principal and interest under the Agency Note existing as of the date of their election, (ii) a prospective fixed interest rate per annum equal to the prime rate then in effect for Bank of America, San Diego office, or such other rate mutually agreed to by the Agency and Borrower, and (iii) monthly installments of principal and interest paid over the course of an amortization schedule to be determined by the Agency in its sole discretion, not to be less than ten (10) years. In the event that Agency elects repayment approach (b), Borrower agrees to execute an amendment to the Note in favor of Agency (as applicable) reflecting the amended repayment terms described above. g. Notwithstanding the foregoing, in the event that Borrower, or any successors thereto, Agency is in default under this Agreement pursuant to Section 12.1 hereof, the Agency shall haye the right in its sole discretion, to declare immediately due and payable all outstanding principal, interest and other sums due under the Agency Note, or to pursue any and all other remedies provided herein, under the Agency Note, Agency Trust Deed, or the Affordable Housing Agreement, or as otherwise provided at law or in equity. 4.6 Prepavment. Borrower may prepay the principal and any interest due under the Agency Note prior to or in advance of the time for payment thereof as provided in the Agency Note, without penalty; provided, however, that Borrower acknowledges that certain provisions hereof and the provisions of the Affordable Housing Agreement and the Regulatory Agreement will be applicable to the Project in accordance with their respective terms even though Borrower may have prepaid the Agency Note. 4.7 Assumption. In the event the Project is sold or transferred as approved by the Agency or otherwise permitted pursuant to Section 10.10 hereof, the Agency Loan shall be fully assumable by the approved or permitted transferee. The Agency Loan shall not be assumable by any other transferee, and shall become due and payable upon such a transfer which has not been so approved or permitted. 4.8 Use of Loan Proceeds. Borrower shall use Agency Loan proceeds only to pay for 4.9 Lien Prioritv, Title Insurance. As a condition to the obligations of Agency to fund the Agency Loan, there shall be no liens or encumbrances upon the Property having priority over the Agency Trust Deed, other than: (a) the deed of trust securing the Bond Loan; (b) the deed of trust securinl' the Constnlction Loan (c) the Affordable Housing Agreement, fe1@ the Regulatory Agreement, and ~ those existing non- monetary encumbrances which are disclosed in title reports delivered to Agency and which have not been objected to by the Agency in writing. Such priority shall be evidenced by an ALTA lender's 14 Docsoa859837vI129999.0000 ¡1-lcj insurance policy, including title endorsements reasonably requested by the Agency with liability equal to the amount of the Agency Loan, or such other amount as may be mutually agreed to by the parties (the "Lender's Policies") to be issued to Agency by Insert Name of Title Company at the close of escrow for the Borrower's acquisition of the Property. Borrower shall be responsible for the cost of the Lender's Policies, which may be paid for from the proceeds of the Agency Loan. 4.10 Subordination: Refinancing. Agency agrees to take such actions as may be necessary to subordinate the Agency Trust Deed to the Bond Loan and the Construction Loan or any future refinancings thereof; provided, however, that any such subordination to the Bond Loan and the Constmction Loan shall be evidenced by a recorded subordination agreement containing such notice, cure, loan purchase or assumption and Project purchase rights as may be reasonably required by the Agency in a fonn to be approved by the Agency's attorneys, which approval shall not be unreasonably withheld or delayed. 4.12 Borrower's Evidence of Financial CaDabilitv. The anticipated sources and uses of funds for acquisition of the Property and construction of the Project are set forth in the Project Budget (Exhibit F). The financial projections for the Project are set forth in the Project Pro Fonna (Exhibit G). The Agency acknowledges that the numbers in the foregoing exhibits may change, subject to reasonable Agency approval of such changes. Upon request but in no event later than the disbursement of the Agency Loan proceeds, Borrower shall submit to the Housing Manager evidence reasonably satisfactory to the Housing Manager that Borrower has the financial capability necessary for the acquisition of the Property and the construction of the Project thereon in accordance with this Agreement, the Project Budget, and the Project Pro Fonna. Such evidence of financial capability shall include the following: a. Copy of the partnership agreement, funding agreement, and other documents evidencing commitments for equity financing. b. Copy of the construction contract between Borrower and its general contractor for all of the improvements required to be constructed by Borrower hereunder, which shall be deemed to be certified by Borrower to be a true and correct copy thereof. c. Verifiable documentation that Borrower will receive an allocation of "4%" low income housing tax credits with respect to the Project. 4.12 ReDorts and Accounting of Residual ReceiDts. a. In connection with the annual repayment of the Agency Loan, commencing upon the Initial Payment Date, the Borrower shall furnish the Agency with an audited statement duly certified by an independent finn of certified public accountants approved by the Agency, setting forth in reasonable detail the computation and amount of Residual Receipts during the preceding calendar year. b. The Borrower shall keep and maintain in accordance with Section 13.4 hereof full, complete and appropriate books, records and accounts necessary or prudent to evidence and substantiate in full detail Borrower's calculation of Residual Receipts. All such books, records, and 15 DOCSOC\85983 7 v 1 \29999 .()()OO ¡-7. /) accounts shall be open to and available for inspection by the Agency, and their auditors or other authorized representatives in accordance with Section 13.4 hereof. ARTICLE 5 - Notes and Deeds of Trust 5.1 Securitv for Loans. Borrower's obligations to repay the Agency Loan shall be evidenced by the Agency Note, and shall be subject to the terms and conditions contained therein. The Agency Note shall provide for simple interest at the rate of three percent (3%) per annum. Among other things, the Agency Note shall further provide that such Note is non-recourse to the Borrower and the partners of Borrower and that payments of principal and interest shall be made only from fifty percent (50%) of the Residual Receipts (as defined in Article 4 hereof). The Agency Note shall be secured by the Agency Trust Deed encumbering the Property as a ffiæff PfleHty third er--fe¡ffift priority deed of trust. The Agency Trust Deed shall further provide that the occurrence of any default pursuant to Section 12.1 of this Agreement shall constitute a "default" or "event of default" under such Trust Deed. Prior to the close of escrow for the Borrower's acquisition of the Property, Borrower shall execute and deliver to Agency the Agency Note and the Agency Trust Deed. The Agency Trust Deed shall be recorded with the Office of the San Diego County Recorder in accordance with Agency's instructions to escrow. Borrower shall be responsible for any and all of Agency's escrow, title and recording costs arising in connection with the Agency Loan, with such costs to be paid by Borrower through escrow. 5.2 Nonrecourse Obligation. Nothing herein contained shall be deemed to cause Borrower (or any of its partners, or any of their respective directors, officers, employees, partners, principals or members) personally to be liable to payor perform any of its obligations evidenced hereby, and the Agency shall not seek any personal or deficiency judgment on such obligations, and the sole remedy of the Agency with respect to the repayment of the Agency Loan shall be against the Property; provided, however, that the foregoing shall not in any way affect any rights the Agency may have (as a secured party or otherwise) hereunder or under the Agency Note or Agency Trust Deed, or any other rights the Agency may have to: (a) recover directly from the Borrower any funds, damages or costs (including, without limitation, reasonable attorneys' fees and costs) incurred by the Agency as a result of fraud, intentional misrepresentation or intentional waste by Borrower; or (b) recover directly from the Borrower any condemnation or insurance proceeds, or other similar funds or payments attributable to the Property which under the terms of the Agency Trust Deed should have been paid to the Agency, and any costs and expenses incurred by the Agency in connection therewith (including, without limitation, reasonable attorneys' fees and costs). 16 DOCSOC\859837v 1 \29999.0000 A.- /~ ARTICLE 6 -Disbursement of A2encv Loan 6.1 Disbursement. The proceeds of the Agency Loan shall be disbursed on behalf of Borrower in the escrow established for Borrower's acquisition of the Property. ARTICLE 7 -California Communitv Redeve1oument Law ReQuirements 7.1 ReQuirements. Because the source of the Agency Loan is the Agency's Low and Moderate-Income Housing Fund, Borrower is required to acquire, rehabilitate and operate the Project in compliance with all requirements of California Community Redevelopment Law (Health and Safety Code, Division 24), as said code may be amended from time to time. Not by way of limitation of the foregoing, in compliance with Health and Safety Code, Division 24, from the Effective Date of this Agreement through the end of the tenn that the units are required to remain affordable pursuant to the California Community Redevelopment Law and the Affordable Housing Agreement, Borrower, as the operating entity, shall comply with all of the following reqUIrements: a. Use of the Agencv Low and Moderate Income Housing Funds. Low and Moderate Income Housing Funds shall be used only for eligible costs (see, e.g., Health and Safety Code Section 33334.3) in accordance with the Project Budget and Project Pro Fonna; all acquisition and development activities shall be completed within the times referenced in the Schedule of Perfonnance attached hereto, as said times may be extended in accordance with Sections lOA and 13.3 hereof. b. Affordabilitv. The units shall meet the affordability requirements set forth in Section 10.2 herein. c. Housing Standards. Borrower shall maintain units in compliance with local housing code requirements or the provisions of this Agreement, whichever requirements are more restrictive. d. Records and Reoorts. In addition to the other provisions of this Agreement, including without limitation Section 4.12(b) hereof, Borrower shall provide to Agency all records and reports relating to the Project that may be reasonably requested by Agency in order to enable it to perfonn its recordkeeping and reporting obligations pursuant to Health and Safety Code Sections 33080.1 and 33418. e. Enforcement of Agreement. In addition to the other provisions set forth herein, Agency shall have the authority to enforce Borrower's obligation to comply with the California Community Redevelopment Law as set forth in this Agreement. f. Duration of Covenants. In accordance with Health and Safety Code Section 33334.3, the covenants in this Section 7.1 relating to Borrower's compliance with the California Community Redevelopment Law shall remain in effect for the longest 17 DOCSOO859837v 1\29999.0000 11-/7 feasible time but not less than a period of at least fifty-five (55) years from the date of the Agency's issuance of the final Certificate of Completion for the Project. g. Monitoring. Not less than once every two years during the period covered by this Section 7.1, Agency may review Borrower's activities and operations under this Agreement and Borrower's compliance with the requirements of the California Community Redevelopment Law, including, but not limited to, Borrower's compliance with the requirements of this Section 7.1. Such review may include an on-site inspection of the Project (including unit interiors, subject, however, to the rights of tenants in possession). If such an on-site inspection of the Project is to be undertaken, Agency shall coordinate such inspection with Borrower and/or the Property Manager. ARTICLE 8- Development Fee 8.1 Development Fee. In the event that South Bay Community Villas, LLC, a California limited liability company ("Developer"), is entitled to a development fee to be paid by the Borrower (the "Development Fee"), which may include general overhead and profit, the amount of such development fee shall not exceed the amount set forth therefor in the Sources and Uses, Project Budget and Pro Fonna attached hereto, and shall in no event be greater than the maximum amount pennitted pursuant to the Low Income Housing Tax Credit statutes and regulations. It is anticipated that a portion of the Development Fee shall be paid by Borrower from the proceeds of the financing for the acquisition and construction of the Project upon the close of such financing, with the balance of the Development Fee (the "Deferred Development Fee") to be paid from Gross Revenue of the Project and equity contributions to Borrower made after the closing. The Borrower's obligation to pay the Deferred Development Fee shall be set forth in a written agreement. In the event there are any cost savings realized in the construction of the Project, all available funds attributable to such cost savings shall also be applied to the Deferred Development Fee. Developer shall specifically be entitled to payment of the Deferred Development Fee before payment of the amounts due to Agency pursuant to the Agency Note. 18 DOCSOC\859837v I \29999.0000 /l- r2 ARTICLE 9 -Develooment of the Project 9.1 Work to be Performed. Borrower agrees to develop on the Property a multifamily housing development consisting of 91 units for senior citizen housing and 180 units for family housing, and to operate the Project for occupancy by very low, lower and low and moderate income households, subject to the terms of this Agreement, the Scope of Work attached hereto as Exhibit L and incorporated herein, the Bond Loan Documents, the Affordable Housing Agreement, and the Regulatory Agreement. The Project shall consist of 91 one-bedroom units restricted to senior citizens, 114 two-bedroom units, 54 three- bedroom units, and 12 four-bedroom units, open space, a recreation area, storage areas, laundry rooms, and other common area facilities in accordance with the plans approved by the City in connection with issuance of the building permit(s), and with the terms of and conditions of all land use permits and approvals required by the City to the extent such permits and approvals are required by applicable law. The apartment units to be restricted to senior citizens shall be designed to meet the physical and social needs of senior citizens, as set forth in Civil Code Section 51.2. The Project's units and occupancy shall be restricted in accordance with the terms of this Agreement. If Borrower desires to make any change in any construction or building plans after the same have been approved, Borrower shall submit the proposed change to the appropriate body for approval, if and to the extent required by applicable law. Borrower shall be responsible for all construction and installation and for obtaining all the necessary permits. 9.2 Compliance with Permits and Laws. Borrower and its contractors shall carry out the development of the Project and operation of the Project in conformity with all applicable laws, regulations, and rules of the governmental agencies having jurisdiction, including without limitation all legally applicable conditions and requirements of California Community Redevelopment Law (Health and Safety Code, Division 24); all legally applicable prevailing wage requirements, if any, the applicability of which is for Borrower to determine, pursuant to federal and state law, including California Labor Code §1770 et seq.; all legally applicable conditions and requirements imposed by the Low Income Housing Tax Credit Program; all legally applicable labor standards; the legally applicable provisions of the City zoning and development standards, building, plumbing, mechanical and electrical codes, and all other provisions of the City Municipal Code, and all legally applicable disabled and handicapped access requirements, which may include, without limitation, the Americans With Disabilities Act, 42 U.S.c. Section 12101, et seq., Government Code Section 4450, et seq., Government Code Section 11135, et seq., the Unruh Civil Rights Act, Civil Code Section 51, et seq., and the California Building Standards Code, Health and Safety Code Section 18900, et seq., and Agency policies adopted pursuant to said federal standard regulations and requirements, and applicable MBE/WBE regulations and City policies adopted pursuant to said federal regulations and requirements. Borrower shall not take any action which would cause the Project to be construed as a low rent housing project under Article XXXIV of the California Constitution or otherwise be in violation of Article XXXIV of the California Constitution. The work shall proceed only after procurement of each permit, license, or other authorization that may be required under applicable law by any governmental agency having jurisdiction, and the Borrower shall be responsible to the Agency for procurement and maintenance thereof, as may be required of the Borrower and all entities engaged in work on the Project. 19 DOCSOC\859837vl\29999.0000 11-/9 9.3 Costs of Development. Subject to the terms and conditions of this Agreement, Borrower shall be responsible for all costs of developing the Project, including but not limited to predevelopment costs incurred for items such as planning, design, engineering, and environmental remediation; all development and building fees; the cost incurred to demolish and clear any and an existing improvements, furnishings, fixtures, and equipment from the Property; costs for insurance and bonds (as required); costs for financing; preparation of the Property for construction; and all on-site construction costs. This Agreement does not require Borrower to construct any off-site improvements. Borrower shall be responsible for verifying the adequacy and availability of all utilities. If at any time during the course of the development of the Project, Borrower exhausts fifty percent (50%) or more of the contingency amounts set forth in the Project Budget, Agency shall have the right, but not the obligation, to approve any additional cost overruns (unless such approval has been obtained from the Bond Issuer/Lender), which approval shall not be unreasonably withheld. 9.4 Schedule of Performance: Progress Reports. Subject to Section 13.3, Borrower shall begin and complete all construction within the times specified in the Schedule of Performance, subject to any extension granted by Agency, which extension shall not unreasonably be withheld upon the written request of the Borrower. Once construction has commenced, it shall be continuously and diligently pursued to completion, and shall not be abandoned for more than fifteen (15) consecutive business days, except when due to causes beyond the control and without the fault of Borrower, as set forth in Section 13.3 of this Agreement. During the course of the construction, and prior to the completion of the Project, Borrower shall keep Agency informed of the progress of the construction on the Property and, if requested, shall provide Agency with monthly written progress reports and meet with Agency staff as appropriate. If requested, Borrower shall furnish a construction schedule to Agency indicating completion dates for each portion of work showing progress toward completion of the Project. After completion of construction of the Project and within the time set forth in the Schedule of Performance (as it may be revised as provided above), Borrower shall provide the Agency's Housing Manager a true and correct copy of the final cost certification submitted to TCAC concerning the construction of the Project on the Property. Borrower shall provide additional cost information as may be reasonably requested by the Agency's Housing Manager to permit the Agency's Housing Manager to make such determinations as is reasonably required for Agency to verify Borrower's conformance to this Agreement and the Scope of Work, as it may be revised by mutual agreement of the parties from time to time during the course of the construction. 9.5 Anti-discrimination. Borrower, for itself and its successors and assigns, agrees that Borrower will not discriminate against any employee or applicant for employment because of race, color, creed, religion, sex, marital status, ancestry, or national origin in connection with activities undertaken pursuant to this Agreement. 9.6 Right of Access. For the purpose of assuring compliance with this Agreement, representatives of Agency, upon reasonable prior notice, shall have the reasonable right of access to the Property, without charges or 20 ;1-J-o DOCSOC\859837v 1 \29999.0000 fees, at normal construction hours during the period of construction for the purposes of this Agreement, including but not limited to the inspection of the work being performed by Borrower in rehabilitating the Project. Such representatives of Agency shall be those who are so identified in writing by the Housing Manager. Agency shall indemnify, defend, and hold harmless Borrower and Borrower's officers, employees, and agents from any damage caused or liability arising out of the sole negligence or willful misconduct of Agency or their officers, officials, employees, volunteers, agents, or representatives in their exercise of this right of access; provided that it is understood that Agency does not by this Section 9.6 assume any responsibility or liability for a negligent inspection or failure to inspect. Any inspection by Agency pursuant to this section shall be conducted so as not to interfere or impede the construction or operations of the Project. 9.7 Mechanics Liens. Stov Notices. and Notices of Comvletion. a. Subject to Borrower's right to contest set forth in Section 11.4 of this Agreement, if any claim or lien is filed against the Project 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 Project, then the Borrower shall, within forty-five (45) 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 (as applicable) a surety bond in sufficient form and amount, or provide the Agency (as applicable) with other assurance satisfactory to the Agency (as applicable) that the claim of lien or stop notice will be paid or discharged. b. If Borrower fails to discharge any lien, encumbrance, charge, or claim in the manner required in Section 9.7 (a), 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 Borrower's expense. Alternately, the Agency may require the Borrower to immediately deposit with the Agency or title company the amount necessary to satisfy such lien or claim and any costs pending resolution thereof. The Agency shall use such deposit to satisfy any claim or lien that is adversely determined against the Borrower. c. The Borrower shall file a valid notice of cessation or notice of completion upon cessation of construction on the Project 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 Project. The Borrower authorizes the Agency, but without any obligation, to record any notices of completion or cessation of labor, or any other appropriate notice that the Agency deems necessary or desirable to protect its respective interest in the Project. 9.8 Certificate of Comvletion. Upon Borrower's satisfactory completion of construction of the Project, Agency shall furnish Borrower with a Certificate of Completion upon written request therefor by Borrower. Such Certificate of Completion shall be in a form so as to permit recordation in the Office of the Recorder of the County of San Diego as set forth in Exhibit H which is incorporated herein. The Certificate of Completion shall be, and shall so state, a conclusive determination of satisfactory completion of the construction of the Project and of full compliance with the terms of this Agreement relating to such construction. After the date of the issuance of the Certificate of Completion, and notwithstanding any other provisions of this Agreement to the contrary, any party then owning or thereafter purchasing, leasing, or otherwise acquiring any interest in the Property shall not (because 21 OOCSOC\859837v 1129999 .0000 /7-;1 / of such ownership, purchase, lease, or acquisition) incur any obligation or liability under this Agreement for the construction of the Project. Agency shall not unreasonably withhold the Certificate of Completion. If Agency refuses or fails to furnish the Certificate of Completion after written request from Borrower, such party shall, within fifteen (15) days after such written request, provide Borrower with a written statement of the reasons such party refused or failed to furnish such Certificate of Completion. The statement shall also contain such party's opinion of the action Borrower must take to obtain such Certificate of Completion. If the reason for such refusal is confined to the immediate availability of specific items or materials for landscaping, Agency shall issue the Certificate of Completion upon the posting of cash deposit or an irrevocable letter of credit in favor of Agency in an amount representing the fair value of the work not yet completed and in a form reasonably acceptable to Agency's attorneys. A Certificate of Completion is not a notice of completion as referred to in California Civil Code Section 3093. 9.9 Estoppels. At the request of Borrower or any holder of a mortgage or deed of trust, Agency shall, from time to time and upon the request of such holder, timely execute and deliver to Borrower or such holder a written statement of Agency that no default or breach exists (or would exist with the passage of time, or giving of notice, or both) by Borrower under this Agreement, the Agency Note, the Agency Trust Deed, and/or the Affordable Housing Agreement, if such be the case, and certifying as to whether or not Borrower has at the date of such certification complied with any obligation of Borrower hereunder or under such of those documents as to which such holder may inquire. The form of any estoppel letter shall be prepared by the holder or Borrower. ARTICLE 10 Uses Of The Property 10.1 Summary. Borrower covenants and agrees for itself and its successors and assigns to its interest in the Property that Borrower and such successors and assigns shall devote the Property to uses consistent with California Community Redevelopment Law, the Bond Loan Documents, the Regulatory Agreement, the Affordable Housing Agreement, the Agency Trust Deed, and this Agreement, whichever is most restrictive, for a period ending fifty-five (55) years from the date of the Agency's issuance of the final Certificate of Completion for the Project. Agency shall be a third-party beneficiary under the Regulatory Agreement and shall have full authority to enforce any breach or default by Borrower under such agreement in the same manner as though it were a breach or default hereunder. Without Agency's prior written consent, which consent may be withheld in Agency's sole and absolute discretion, Borrower shall not consent to any amendment of or modification to the TCAC Regulatory Agreement or Regulatory Agreement which (i) shortens the term of the affordability restrictions on the units in the Project to a term of less than fifty-five (55) years after the date of the Agency's issuance of the final Certificate of Completion for the Project or (ii) modifies the number of units required to be rented at affordable housing costs to persons of specified incomes. 10.2 Affordable Housing. Borrower covenants and agrees for itself and its successors and assigns to its interest in the Property that commencing upon the completion of the Project and continuing thereafter for a period of fifty- five (55) years from the date of the Agency's issuance of the final Certificate of Completion for the Project, Borrower and such successors and assigns shall devote two hundred sixty-eight (268) of the 22 /I-;)d.- DOCSOC\859837v 1 \29999.0000 two hundred seventy-one (271) residential units on the Property (hereinafter the "Restricted Units") to its continuous use as affordable rental housing for very low, lower and low and moderate income households in accordance with the terms of this Agreement [(two units may be occupied by on-site property managers with 47 of these moderate income units for senior citizens)], subject to the occupancy restrictions contained in this Section 10.2. 30 Restricted Units shall be made available to very low income households at or below 50 percent of the Area Median Income ("AM!"), with 10 of those units restricted to senior citizens, 101 Restricted Units shall be made available to lower-income households at or below 60 percent of AMI, with 33 of those units restricted to senior citizens, and 137 Restricted Units shall be made available to low and moderate income households at or below 120 percent of AMI, with 47 of these units restricted to senior citizens, all at an affordable rent. Up to one of the Restricted Units may be rented or provided at an affordable rent to operational or maintenance employees of the Property Manager who otherwise meet the income requirements hereof which are applicable to their Restricted Units. In determining income eligibility for a particular Restricted Unit, Borrower shall be entitled to rely upon the documentation provided by the prospective tenant as required pursuant to the TCAC Regulatory Agreement, Affordable Housing Agreement and Regulatory Agreement. Borrower shall not be required to perform further investigations into the household income other than those which are required pursuant to such agreements. Throughout this Agreement, wherever it is stated that Borrower must comply with the affordability requirements and/or verify such compliance, Borrower shall be entitled to rely upon the tenant documentation discussed in this paragraph. In addition to the foregoing, to the fullest extent allowed by law the lease agreement for each Restricted Unit in the Project shall restrict occupancy of the Restricted Unit to a total of three (3) persons for a one bedroom unit, five (5) persons for two bedroom units, seven (7) persons for three bedroom units, and nine (9) persons for four bedroom apartment units. Any violation of such restrictions shall constitute a default by the tenant, unless such occupancy restriction is found invalid by a court of competent jurisdiction in a final non-appealable judgment in a lawsuit in which the Project's occupancy restriction is at-issue, or in an applicable and binding published appellate opinion, or by statute, regulation or other binding court order. 10.3 ReDorts. Borrower, at its expense, shall submit, or cause the Property Manager to submit, to the appropriate entities any and all reports required to be submitted pursuant to California Community Redevelopment Law. lOA Subordination of Affordabilitv Covenants. In the event that the Agency finds that an economically feasible method of financing for the construction and operation of the Project, without the subordination of the affordable housing covenants as may be set forth in this Agreement, is not reasonably available, the Agency shall make the affordable housing covenants set forth in this Agreement junior and subordinate to the deeds of trust and other documents required in connection with the construction and permanent financing for the Project approved pursuant to this Agreement, and the TCAC Regulatory Agreement. Any subordination agreement entered into by the Agency shall contain written commitments which the Agency find are reasonably designed to protect Agency's investment in the event of default, such as any of the following: (a) a right of Agency to cure a default on the loan prior to foreclosure, (b) a right of Agency to negotiate with the lender after notice of default from the lender and prior to 23 /4- ;¿3 DOCSOC\859837v 1 \29999.0000 foreclosure, (c) an agreement that if prior to foreclosure of the loan, Agency takes title to the property and cures the default on the loan, the lender will not exercise any right it may have to accelerate the loan by reason of the transfer of title to Agency, and (d) a right of Agency to reacquire the Property from the Borrower at any time after a material default on the loan. 10.5 Condition of the ProDertv. a. Borrower hereby represents that to the best of its knowledge, except as otherwise disclosed to the Agency in writing, it is not aware of and has not received any notice or communication from any government agency having jurisdiction over the Property notifying Borrower of the presence of surface or subsurface zone Hazardous Materials in, on, or under the Property, or any portion thereof. "Best knowledge," as used herein, shall mean the actual knowledge of the Borrower and its officers, directors, employees, agents and representatives, as based upon the documents and materials in the possession of Borrower, and its officers, employees, agents and representatives, including the site investigation report or study referred to in Section 1O.5(b) herein. b. In addition to the foregoing, the Borrower has, at its sole cost and expense, engaged its own environmental consultant to conduct a Phase I investigation of the Property and produce a report thereof, a copy of which has been provided to the Agency by Borrower. Such report concludes that no Hazardous Materials have been detected on the Property. c. Borrower shall take all necessary precautions to prevent the release into the environment of any Hazardous Materials which may be located in, on or under the Property. Such precautions shall include compliance with all Governmental Requirements with respect to Hazardous Materials. In addition, Borrower shall install and utilize such equipment and implement and adhere to such procedures as are consistent with commercially reasonable standards as respects the disclosure, storage, use, removal and disposal of Hazardous Materials. d. Borrower shall indemnify, defend and hold Agency harmless from and against any claim, action, suit, proceeding, loss, cost, damage, liability, deficiency, fine, penalty, punitive damage, or expense (including, without limitation, reasonable attorneys' fees), resulting from, arising out of, or based upon (i) the release, use, generation, discharge, storage or disposal of any Hazardous Materials on, under, in or about, or the transportation of any such Hazardous Materials to or from, the Property, no matter when such claim, action, suit or proceeding is first asserted or begun and no matter how the Hazardous Materials came to be released, used, generated, discharged, stored or disposed of on, under, in or about, to or from the Property, or by whom or how they are discovered, or (ii) the violation, or alleged violation, of any statute, ordinance, order, rule, regulation, permit, judgment or license relating to the use, generation, release, discharge, storage, disposal or transportation of Hazardous Materials on, under, in or about, to or from, the Property. This indemnity shall include, without limitation, any damage, liability, fine, penalty, parallel indemnity after closing, cost or expense arising from or out of any claim, action, suit or proceeding, including injunctive, mandamus, equity or action at law, for personal injury (including sickness, disease or death), tangible or intangible property damage, compensation for lost wages, business income, profits or other economic loss, damage to the natural resource or the environment, nuisance, contamination, leak, spill, release or other adverse effect on the environment. e. For purposes of this Agreement, "Hazardous Materials" means any substance, material, or waste which is or becomes regulated by any local governmental authority, San Diego County, the State of California, regional governmental authority, or the United States Government, 24 /1..;2 c¡ DOCSOC\859837v 1 \29999.0000 including, but not limited to, any material or substance which is (i) defined as a "hazardous waste," "extremely hazardous waste," or "restricted hazardous waste" under Section 25115, 25117 or 25122.7, or listed pursuant to Section 25130 of the California Health and Safety Code, Division 20, Chapter 6.5 (Hazardous Waste Control Law», (ii) defined as a "hazardous substance" under Section 25316 of the California Health and Safety Code, Division 20, Chapter 6.8 (Carpenter-Presley-Tanner Hazardous Substance Account Act), (iii) defined as a "hazardous material," "hazardous substance," or "hazardous waste" under Section 25501 of the California Health and Safety Code, Division 20, Chapter 6.95 (Hazardous Materials Release Response Plans and Inventory), (iv) defined as a "hazardous substance" under Section 25281 of the California Health and Safety Code, Division 20, Chapter 6.7 (Underground Storage of Hazardous Substances), (v) petroleum, (vi) friable asbestos, (vii) polychlorinated byphenyls, (viii) methyl tertiary butyl ether, (ix) listed under Article 9 or defined as "hazardous" or "extremely hazardous" pursuant to Article II of Title 22 of the California Code of Regulations, Division 4, Chapter 20, (x) designated as "hazardous substances" pursuant to Section 311 of the Clean Water Act (33 U.S.C. § 1317), (xi) defined as a "hazardous waste" pursuant to Section 1004 of the Resource Conservation and Recovery Act, 42 U.S.c. §6901, et seq. (42 U.S.C. §6903) or (xii) defined as "hazardous substances" pursuant to Section 101 of the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. §9601, et seq. The tenn hazardous materials shall not include any material in such quantities as are commonly used in the operation and/or occupancy of a multifamily housing project. 10.6 Marketing Plan. Borrower shall submit for the approval of the Agency, which approval shall not unreasonably be withheld, a plan for marketing the rental of the apartment units in compliance with federal and state fair housing law. Such marketing plan shall include a plan for publicizing the availability of the apartment units within the City, such as notices in any City sponsored newsletter, newspaper advertising in local newspapers and notices in City offices. The marketing plan shall require Borrower to obtain from the Agency the names of low- and moderate-income households who have been displaced by the Agency's redevelopment projects, and to notify persons on such list of the availability of units in the Project prior to undertaking other fonns of marketing. The marketing plan shall provide that the persons on such list of displaced persons be given not fewer than ten (10) days after receipt of such notice to respond by completing application fonns for rental of apartment units, as applicable. 10.7 Maintenance of Property. Borrower agrees for itself and its successors in interest to all or any portion of the Property, to maintain the improvements on the Property in confonnity with applicable provisions of the City Municipal Code, and shall keep the Property free from any accumulation of debris or waste materials. During such period, the Borrower shall also maintain the landscaping planted on the Property in a healthy condition. If at any time Borrower fails to maintain the Property and such condition is not corrected within ten days after written notice from Agency with respect to graffiti, debris, waste material, and general maintenance, or thirty days after written notice from Agency with respect to landscaping and building improvements, then Agency, in addition to whatever remedy it may have at law or at equity, but subject to the rights of the Bond Issuer/Lender, shall have the right to enter upon the applicable portion of the Property and perfonn all acts and work necessary to protect, maintain, and preserve the improvements and landscaped areas on the Property, and to attach a lien upon the Property, or to assess the Property, in the amount of the expenditures arising from such acts and work of protection, maintenance, and preservation by Agency (as applicable) and/or 25 /l-:!s DOCSOC\859837v I \29999.0000 costs of such cure, including a fifteen percent (15%) administrative charge, which amount shall be promptly paid by Borrower to Agency (as applicable) upon demand. 10.8 ProDertv Management. The parties acknowledge that the Agency are interested in the long term management and operation of the Property and in the qualifications of any person or entity retained by the Borrower for that purpose (the "Property Manager"). Therefore, during the period of the effectiveness of the affordability covenants set forth herein, the Agency may from time to time review and evaluate the identity and performance of the Property Manager as it deems appropriate. If the Agency determines that the performance of the Property Manager is materially deficient based upon the standards and rèquirements set forth in this Section 10.8 and the approved Management Plan (as defined below), the Agency shall provide notice to the Borrower of such deficiencies and the Borrower shall use its best efforts to correct such deficiencies within a reasonable period of time, subject to the requirements of the Bond IssuerlLender and the terms and conditions of the Borrower's Limited Partnership Agreement. Upon the failure of the Property Manager to cure such deficiencies within the time set forth herein, the Agency shall have the right to require the Borrower to immediately remove and replace the Property Manager with another property manager or property management company who is reasonably acceptable to the Agency, who is not related to or affiliated with the Borrower. In addition, the Borrower shall submit for the reasonable approval of the Agency a detailed "Management Plan" which sets forth in reasonable detail the duties of the Property Manager, the tenant selection process, a security system and crime prevention program, the procedures for the collection of rent, the procedures for monitoring of occupancy levels, the procedures for eviction of tenants, the rules and regulations of the Property and manner of enforcement, a standard lease form, and other matters relevant to the management of the Property. The management plan shall require the Property Manager to adhere to a fair lease and grievance procedure and provide a plan for tenant participation in management decisions. The management of the Property shall be in compliance with the Management Plan which is approved by the Agency, subject, however, to any requirements of the Bond IssuerlLender pursuant to the Bond Loan Documents. The Management Plan may be revised from time to time upon the approval ofthe Agency and the Borrower. 10.09 OccuDancv of Senior Units. Borrower shall restrict occupancy of all of the 91 senior citizen apartment units to "Senior Citizens" and "Qualified Permanent Residents" (as those terms are or may be defined in California Civil Code Section 51.3). California Civil Code Section 51.3 presently provides as follows: At least one person in residence in each dwelling unit must be a Senior Citizen, and other residents in the same dwelling unit who are not Senior Citizens must be Qualified Permanent Residents. Temporary guests of a Senior Citizen or Qualified Permanent Resident shall be allowed for a period of not more than sixty (60) days in any twelve (12) month period. Upon the death, dissolution of marriage, hospitalization or other prolonged absence of the Senior Citizen in a dwelling unit, any Qualified Permanent Resident who has continuously resided in the dwelling unit with such Senior Citizen shall be permitted to continue as a resident of that dwelling unit. "Permitted Health Care Residents" (as that term is or may be defined in California Civil Code Section 51.3) shall be permitted to occupy any dwelling unit during any period that such person is actually providing live-in, long-term or hospice health care to a Senior Citizen tenant or Qualified Permanent Resident tenant for compensation. Notwithstanding the foregoing, however, in the event that the Borrower in its sole discretion elects to 26 /1-;2 Co DOCSOC\859837 v 1 \29999.0000 provide one of the senior citizen apartment units for residency by an on-site manager, the manager's unit shall not be required by this Agreement to be restricted to Senior Citizens and Qualified Permanent Residents. 10.10 Affordable Housing Agreement. Certain requirements with respect to the affordable housing obligations and other operational and maintenance obligations of the Project are set forth in the Affordable Housing Agreement. The execution and recordation of the Affordable Housing Agreement is a condition precedent to the disbursement of the Agency Loan, as set forth in Section 4.3 hereof. ARTICLE 11 - Continuing Obligations of Borrower 11.1 Applicabilitv. For the entire term of the requirements set forth in Section 11.1 hereof, the Borrower shall comply with the provisions of this Article 11. 11.2 Insurance. Within ten (10) days after the Borrower's acquisition of the Property, Borrower shall furnish to the Agency duplicate originals or appropriate certificates of insurance coverage evidencing that Borrower has obtained, or cause to be obtained, insurance coverage with respect to the Property and Project in type, amount and from insurers with Best's ratings as are reasonably acceptable to Agency (or have been approved by the Bond Issuer/Lender), naming the Agency and their officers, agents, employees, representatives and their respective successors, as named or additional insureds by appropriate endorsements. Such policy shall include, without limitation "all risk" property casualty insurance and comprehensive general liability insurance. Without limiting the generality of the foregoing, such policy shall also include coverage to insure Borrower's indemnity obligations provided herein. Borrower covenants and agrees for itself and its successors and assigns that Borrower and such successors and assigns shall keep such liability policy in full force and effect for the term of the Agency Loan and Regulatory Agreement. In addition to any other remedy which Agency may have hereunder for Borrower's failure to procure, maintain, and/or pay for the insurance required herein, Agency may (but without any obligation to do so, and subject to the rights of the Bond Issuer/Lender under the Bond Loan Documents) at any time or from time to time, after thirty (30) days written notice to Borrower, procure such insurance and pay the premiums therefor, in which eyent Borrower shall immediately repay the procuring party all sums so paid by such party together with interest thereon at the rate of ten percent (10%) per annum or the maximum legal rate, whichever is less. 11.3 Proceeds ofInsurance. Should the Project be totally or partially destroyed or rendered wholly or partly uninhabitable by fire or other casualty required to be insured against by Borrower, Borrower shall promptly proceed to obtain insurance proceeds and take all steps necessary to promptly and diligently commence the repair or replacement of the Project to substantially the same condition as the Project is required to be maintained in pursuant to this Agreement if (i) the Borrower agrees in writing within ninety (90) days after payment of the proceeds that such repair or rebuilding is economically feasible, and (ii) the 27 IY--') 7 DOCSOO859837v I \29999.0000 Bond Issuer/Lender permits such repair or rebuilding, provided that the extent of Borrower's obligation to restore the Project shall be limited to the amount of the insurance proceeds actually received by the Borrower. If the Borrower is unable or is not permitted to repair, replace, or restore the Project, Borrower must give notice to Agency (in which event Borrower will be entitled to all insurance proceeds, subject to any outstanding lien obligations, but Borrower shall be required to remove all debris from the Property) and Borrower may construct such other improvements on the Property as are consistent with applicable land use regulations and approved by the Agency and the other governmental agencies with jurisdiction. 11.4 Taxes. Assessments. Encumbrances. and Liens. Borrower shall pay prior to delinquency all real estate taxes and assessments properly assessed and levied on the Property. Until the payment in full of all amounts owing under the Agency Note, Borrower shall not place or allow to be placed thereon any mortgage, trust deed, encumbrance, or lien (except mechanic's liens prior to suit to foreclose the same being filed) not authorized by this Agreement. Borrower shall remove or have removed any levy or attachment made on the Property, or assure the satisfaction thereof, within a reasonable time, but in any event prior to a sale thereunder. Nothing herein contained shall be deemed to prohibit Borrower from contesting the validity or amounts of any tax, assessment, encumbrance, or lien, nor to limit the remedies available to Borrower in respect thereto. 11.5 Hold Harmless. Borrower agrees to indemnify, protect, defend and hold harmless Agency, and Agency's officers, agents, employees, representatives and successors, from and against any and all claims, damages, actions, costs, demands, expenses or liability, including without limitation, reasonable attorneys' fees and court costs, which may arise from the direct or indirect actions or inactions of the Borrower or those of its contractors, sub-contractors, agents, employees or other persons acting on Borrowers' behalf which relate to the Property or Project. This hold harmless agreement applies, without limitation, to all damages and claims for damages suffered or alleged to have been suffered by reasons of the operations referred to in this paragraph, regardless of whether or not the Agency prepared, supplied or approved plans or specifications, or both, for the Property or Project. This indemnity by Borrower, and all other indemnities set forth herein shall survive any foreclosure of the Property by the Agency pursuant to the terms of the Agency Trust Deed. 11.6 Further Indemnification of Agencv. It is understood and agreed that the parties hereto have entered this Agreement as a method of providing necessary assistance to Borrower in connection with the construction of low and moderate income housing and development of the Property pursuant to all applicable laws and that by contributing public funds to assist in the accomplishment of such development, or by otherwise contributing or assisting with the accomplishment of such development, the Agency assume no responsibility for insuring that the same is adequately undertaken (including, without limitation, the existence and/or remediation of any hazardous or toxic substances on the Property) and as a material consideration to Agency for entering into this Agreement (and not by way of limiting the generality of Section 11.5 above) Borrower agrees to indemnify, protect, defend and hold harmless Agency and 28 IJ-d ~ DOCSOC\859837v 1 \29999 .0000 all Agency's representatives, officers, employees and their respective successors from and against any and all claims, damages, actions, demands, liabilities, obligations, expenses, losses or costs, including without limitation, reasonable attorneys' fees and court costs, which may arise or in any manner connected with the development of the Project pursuant to this Agreement; excluding, however, from Borrower's indemnity any such liability, losses, damages (including foreseeable or unforeseeable consequential damages), penalties, fines, expenses (including out-of-pocket litigation costs and reasonable attorneys' fees) directly or indirectly arising out of the actions of Agency or their employees, contractors, subcontractors or agents. 11.7 Obligation to Refrain from Discrimination. There shall be no discrimination against, or segregation of, any persons, or group of persons, on account of race, color, creed, religion, sex, marital status, ancestry, or national origin in the enjoyment of the Property, nor shall Borrower itself, or any person claiming under or through it, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy of tenants, lessees, subtenants, sublessees, or vendees of the Property or any portion thereof. Borrower shall further comply with all the requirements of the Americans with Disabilities Act. 11.8 Form of Nondiscrimination and Nonsegregation Clauses. Borrower shall refrain from restricting the rental, sale, or lease of any portion of the Property, or contracts relating to the Property, on the basis of race, color, creed, religion, sex, marital status, ancestry, or national origin of any person and shall comply with all the applicable requirements of the Americans with Disabilities Act of 1990. All such deeds, leases or contracts, shall contain or be subject to substantially the following nondiscrimination or nonsegregation clauses: a. In deeds: "The grantee herein covenants by and for himself or herself, his or her heirs, executors, administrators, and assigns, and all persons claiming under or through them, that there shall be no discrimination against or segregation of any person or group of persons on account of race, color, creed, religion, sex, marital status, ancestry, or national origin in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the land herein conveyed, nor shall the grantee himself, or any persons claiming under or through him, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the land herein conveyed and further covenants that all such individuals and entities shall comply with all applicable requirements of the Americans with Disabilities Act of 1990, as the same may be amended from time to time (42 V.S.C. §12101, et seq.). The foregoing covenants shall run with the land." b. In leases: "The lessee herein covenants by and for himself or herself, his or her heirs, executors, administrators, and assigns, and all persons claiming under or through him, and this lease is made and accepted upon and subject to the following conditions: 'That there shall be no discrimination against or segregation of any person or group of persons on account of race, color, creed, religion, sex, marital status, ancestry, or national origin in the leasing, subleasing, transferring, use, occupancy, tenure, or enjoyment of the land herein leased, nor shall the lessee himself, or any person claiming under or through him, 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, sub lessees, subtenants, or vendees in the land herein lease and the lease shall be 29 /1.. .;29 DOCSOC\859837v 1 \29999.üOoo carried out in compliance with all applicable requirements of the Americans with Disabilities Act of 1990, as the same may be amended from time to time (42 V.S.C. §121O1, et seq.).'" c. In contracts: "There shall be no discrimination against or segregation of any persons or group of persons on account of race, color, creed, religion, sex, marital status, ancestry, or national origin in the sale, lease, transfer, use, occupancy, tenure, or enjoyment of land, nor shall the transferee himself, or any person claiming under or through him, 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 land and all such activities shall be conducted in compliance with all applicable requirements of the Americans with Disabilities Act of 1990, as the same may be amended from time to time (42 V.S.C. §12101, et seq.)." 11.9. Effect of Covenants. a. Unless sooner terminated by Agency as provided for herein, all covenants contained herein shall run with the land and shall be extinguished and of no further force and effect upon the fifty-fifth anniversary of the issuance of the Certificate of Completion for the Project by the Agency, with the exception of the non-discrimination and non-segregation covenants which shall run in perpetuity. The covenants established herein shall, without regard to technical classification and designation, be binding on the part of Borrower and any successors and assigns to the Property or any part thereof, and the tenants, lessees, sublessees and occupants of the Property, for the benefit of and in favor of the Property and the Agency, and their successors and assigns and any successor in interest thereto. Agency is deemed the beneficiary of such covenants for and in its own right and for the purposes of protecting the interest of the community and other parties, public or private, in whose favor and for whose benefit of such covenants running with the land have been provided, without regard to whether Agency has been, remained, or are owners of any particular land or interest therein. Agency shall have the right to unilaterally terminate the covenants at any time (subject to the TCAC Regulatory Agreement) or, if such covenants are breached (subject to any cure rights provided herein) to exercise all rights and remedies and to maintain any actions or suits at law or in equity or other proper proceedings to enforce the curing of such breaches to which it or any other beneficiaries of this Agreement and the covenants may be entitled, including specific performance (it being recognized that the breach of such covenants cannot be adequately compensated by monetary damages), and any and all remedies provided in the Agency Trust Deed and Agency Note including, without limitation, foreclosure proceedings against the Property. b. Without limiting the generality of the foregoing, in the event that there is a breach of the terms of this Agreement or any covenants provided herein, the Agency shall have the right, but not the obligation, to take any and all actions the Agency deem necessary to cure such breach, including, without limitation, taking possession of the Property for management and/or repair purposes, and to obtain reimbursement from Borrower for any reasonable costs incurred by the Agency in the exercise of such remedy. Furthermore, Borrower hereby covenants by and for itself, its successors and assigns and every person acquiring an interest in the Property, or any part thereof, that Agency and other public agencies at their sole risk and expense, and subject to the rights of tenants in possession, shall have the right to enter the Property or any part thereof at all reasonable times and with as little interference as possible for the purposes of construction, reconstruction, maintenance, repair or service of any public improvements or public facilities located on the Property and to ensure compliance with the restrictions and covenants contained herein. Any such entry shall be made only after reasonable notice to Borrower (provided, however, that entry to ensure 30 DOCSOC\8598 37 v 1 \29999 .0000 ;1-30 compliance with any restrictions may be without notice to Borrower) and, any damage or injury to the Property resulting from such entry shall be promptly repaired at the sole expense of the public agency responsible for the entry except to the extent any such damage or injury arises as a result of the negligence or willful misconduct of the Borrower or its officers, employees, agents, invitees or contractors. c. No violation or breach of the covenants, conditions, restrictions, provisions or limitations contained in this Agreement 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; provided, however, that any successor of Borrower to the Property shall be bound by such remaining 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. Failure to comply with the covenants, conditions, restrictions, provisions or the limitation contained in this Agreement within the time period required by Section 12.1 shall constitute a material default hereunder permitting the Agency to exercise any of its rights or obligations provided hereunder, including, without limitation, those provided under the Agency Note or Agency Trust Deed or otherwise provided at law or in equity. 11.10 Prohibition Against Assignment and Transfer. The qualifications and identity of Borrower are of particular concern to Agency. It is because of those qualifications and identity that Agency has entered into this Agreement with Borrower. Accordingly, for Agency the term of the Agency Loan and Affordable Housing Agreement, Borrower, without Agency's prior written approval, shall not, whether voluntarily, involuntarily, or by operation of law, and except as permitted in this Section 11.10, (1) undergo any significant change in ownership (including the sale or conveyance of any of the general partnership interests in the Borrower), or (2) assign all or any part of this Agreement or any rights hereunder, or (3) sell, lease, assign or otherwise convey all or any part of the Property or Project, whether voluntarily, involuntarily, or by operation oflaw. Notwithstanding the foregoing, the following shall not be considered a significant change in ownership or an assignment or transfer and shall not require Agency approval for purposes of this Section 11.10: (i) Transfers to any entity or entities wholly owned and controlled by Borrower or all of its partners. (ii) The conveyance or dedication of portions of the Property to the Agency or other appropriate governmental agency for the formation of an assessment district, or the granting of easements or permits to facilitate the development of the Property. (iii) A sale or transfer of some or all of the limited partnership interests in the Borrower. (iv) The leasing of all or any apartment units to tenants in the ordinary course of business. 31 DOCSOC\859837vJ\29999.0000 11 -3 ( (vi) The leasing of furniture, fixtures or equipment in the ordinary course of business, including, without limitation, laundry equipment and facilities, cable television equipment and facilities, and vending machine equipment and facilities. (vii) Transfers of property management responsibilities in accordance with Section 11.8 hereof, provided, however, that Borrower shall provide Agency thirty (30) days prior written notice of any such management change, and that this exception shall be limited to transfers to property managers with significant experience in managing projects similar to the Project. Any such assignee shall be subject to all terms and conditions of this Agreement, including, without limitation, all affordability restrictions concerning the occupancy of the Property. Borrower shall deliver written notice to Agency requesting approval of any assignment or transfer requiring Agency approval hereunder. Such notice shall be given prior to Borrower entering into a formal written agreement with the proposed assignee. In considering whether it will grant approval to any assignment by Borrower of its interest in the Property or any portion thereof, which assignment requires Agency approval, Agency shall consider factors such as (i) the financial strength and capability of the proposed assignee to perform Borrower's obligations hereunder and (ii) the proposed assignee's experience and expertise in the planning, financing, construction, development, and operation of similar projects. No assignment, including assignments which do not require Agency approval hereunder, but excluding assignments for financing purposes, shall be effective unless and until the proposed assignee executes and delivers to Agency an agreement, in form satisfactory to the Agency's attorneys, assuming the obligations of the assignor which have been assigned. Thereafter, the assignor shall be relieved of all responsibility to Agency for performance of the obligations assumed by the assignee. No lender approved by Agency pursuant to Section 4 shall be required to execute an assumption agreement and such lender's rights and obligations hereunder shall be as set forth in Section 4. 11.10 Secured Financing: Right of Holders. a. Permitted Encumbrances. Mortgages, deeds of trust, conveyances, and leases-back or any other form of conveyance required for any financing permitted and/or approved by the Agency pursuant to Section 4 hereof are permitted before Agency's issuance of the Certificate of Completion. b. Holder Not Obligated to Construct Improvements. The holder of any mortgage or deed of trust or other security interest authorized by this Agreement shall in no way be obligated by the provisions of this Agreement to construct or complete the improvements or to guarantee such construction or completion: provided, however, that nothing in this Agreement shall be deemed or construed to permit or authorize any such holder (with the exception of the holder of any deed of trust securing the loan made from the proceeds of the Bonds) to devote the Property or any part thereof to any uses, or to construct any improvements thereon, other than those uses or improvements provided for or authorized by this Agreement. 32 DOCSOC\859837v 1 \29999.üOoo A-32 c. Notice of Default to Mortgage, Deed of Trust or Other Secured Instrument Holders: Right to Cure. Whenever Agency shall deliver any notice or demand to Borrower with respect to any breach or default by Borrower hereof, such party shall at the same time deliver a copy of such notice or demand to Borrower's Limited Partner and each approved holder of record of any mortgage, deed of trust, or other security instrument which has previously requested such notice in writing. Each such holder shall (insofar as the rights of Agency are concerned) have the right, at its option within ninety (90) days after the receipt for the notice, to commence and thereafter to diligently proceed to cure or remedy such default and add the cost thereof to the security interest debt and the lien on its secunty mterest. d. Right of Agencv to Cure Mortgage, Deed of Trust. or Other Securitv Instrument Default. In the event of a default or breach by Borrower of a mortgage, deed of trust, or other security instrument or lease-back or conveyance for financing prior to the issuance by Agency of the Certificate of Completion for the Project, Agency may cure the default prior to completion of any foreclosure. In such event, the curing party shall be entitled to reimbursement from Borrower of all costs and expenses reasonably incurred by such party in curing the default, which right of reimbursement shall be secured by a lien upon the Property to the extent of such costs and disbursements. Any such lien shall be subject to: (i) Any mortgage, deed of trust, or other security instrument or sale and lease- back or other conveyance for financing permitted by this Agreement; or Oi) Any rights or interests provided in this Agreement for the protection of the holders of such mortgages, deed of trust, or other security instruments, the lessor under a sale and lease-back, or the grantee under such other conveyance for financing; provided that nothing herein shall be deemed to impose upon Agency any affirmative obligations (by the payment of money, construction, or otherwise) with respect to the Property in the event of its enforcement of its lien. 11.11 Right of Agencv to Satisfv Liens. Prior to the issuance by Agency of the Certificate of Completion for the Project, and after Borrower has had a reasonable time to challenge, cure, or satisfy any liens or encumbrances on the Property, Agency, after sixty (60) days prior written notice to Borrower, shall have the right, but not the obligation, to satisfy any liens or encumbrances on the Property; provided, however, that nothing in this Agreement shall require Borrower to payor make provision for the payment of any tax, assessment, lien, or charge so long as Borrower in good faith shall contest the validity or amount thereof, and so long as such delay in payment shall not subject the Property to forfeiture or sale. 33 DOCSQC\859837v I \29999.0000 /133 ARTICLE 12 - Defaults, Remedies. And Termination 12.1 Defaults - General. Subject to all of the extensions of time available in Section 13.3, failure or delay by any party to perform any term or provision of this Agreement constitutes a default under this Agreement; however, the party shall not be deemed to be in default if (i) such party cures, corrects, or remedies such default within thirty (30) days after receipt of a notice specifying such failure or delay, or (ii) for such defaults that cannot reasonably be cured, corrected, or remedied within thirty (30) days, if such party commences to cure, correct, or remedy such failure or delay within thirty (30) days after receipt of a notice specifying such failure or delay, and diligently prosecutes such cure, correction or remedy to completion. The injured party shall give written notice of default to the party in default, specifying the default complained of by the injured party. Copies of any notice of default given to Borrower shall also be delivered to the Bond IssuerlLender, the Limited Partner of Borrower, and any other permitted lender requesting such notice. Except as provided in Section 12.3 herein or as required to protect against further damages, the injured party may not institute proceedings against the party in default until thirty (30) days after giving such notice. Except as otherwise expressly provided in this Agreement, any failure or delay in giving such notice or in asserting any of its rights and remedies as to any default shall not constitute a waiver of any default, nor shall it change the time of default, nor shall it deprive either party of its rights to institute and maintain any actions or proceedings which it may deem necessary to protect, assert or enforce any such rights or remedies. 12.2 Termination. 12.2.1 Termination bv Agencv. Notwithstanding any other provision of this Agreement to the contrary, in the event that the Agency is not in default under this Agreement, Agency shall have the right to terminate this Agreement prior to disbursement of the Agency Loan upon written notice to the other parties if: (i) Borrower commits a material default hereunder and fails to cure said default within the time specified in Section 12.1 hereof; or (ii) Borrower fails to obtain the necessary approvals from the Tax Credit Allocation Committee for an allocation of "4%" Low Income Housing Tax Credits under terms that will restrict the residential units in the Project to the requirements set forth herein; or (iii) Escrow has not closed on the conveyance of the Property to Borrower on or before ,2001, as such date may be extended by agreement of all the parties hereto in their sole and absolute discretion; or (iv) Subject to extensions of time made pursuant to Section 13.3 hereof, Borrower shall have failed to commence construction of the Project pursuant to a valid building permit or permits and is not diligently proceeding with such construction on or before the time required in the Schedule of Performance and does not timely cure such default. In addition, in the event of Borrower's uncured material default under this Agreement at the time Agency exercises its right under this Section 12.2 to terminate the Agreement, nothing in this Section 12.2 is intended or shall be interpreted as a limitation of any other legal or equitable rights to which Agency may be entitled. 34 A-3Ý DOCSOO859837vl 129999.()()()() 12.2.2 Termination bv Borrower. Notwithstanding any other provision of this Agreement to the contrary, provided that Borrower is not in default under this Agreement, Borrower shall have the right to terminate this Agreement prior to disbursement of the Agency Loan, upon written notice to Agency, if: (i) Agency commits a material default hereunder and fails to cure said default within the time specified in Section 12.1; or (ii) Escrow has not closed on the conveyance of the Property to Borrower on or before 2001, as such date may be extended by agreement of all the parties hereto, in their sole and absolute discretion; or (iii) Agency fails to approve, after best efforts by Borrower to obtain such approval, such permits as are required to commence and complete construction of the Project on the Property. In addition, in the event of Agency's uncured material default under this Agreement at the time Borrower exercises its right under this Section 12.2 to terminate the Agreement, nothing in this Section 12.2 is intended or shall be interpreted as a limitation of any other legal or equitable rights to which Borrower may be entitled. 12.3 Legal Actions. 12.3.1 Institution of Legal Actions. In addition to any other rights or remedies, any party may institute legal action to cure, correct, or remedy any default, to recover damages for any default, or to obtain any other remedy consistent with the purposes of this Agreement. Such legal actions must be instituted and maintained in the Superior Court of the County of San Diego, State of California, or in any other appropriate court in that county. 12.3.2 Applicable Law. The laws of the State of California shall govern the interpretation and enforcement of this Agreement. 12.3.3 Acceptance of Service of Process. In the event that any legal action is commenced by Borrower against Agency, service of process on Agency shall be made by personal service upon the Agency's Housing Manager or City Clerk, or in such other manner as may be provided by law. In the event that any legal action is commenced by Agency against Borrower, service of process on Borrower shall be made in such manner as may be provided by law, and shall be valid whether made within or without the State of California. 12.3.4 Action for Specific Performance. If either the Borrower or Agency defaults with regard to any of the provisions of this Agreement, the non-defaulting party shall serve written notice of such default upon the defaulting party. If the default does not commence to be cured by the defaulting party within thirty (30) days after service of the notice of default, the non-defaulting party at its option may thereafter commence an action for specific performance of the terms of this Agreement pertaining to such default, subject to the provisions of Sections 12.1 and 13.3 hereof. 35 11-35 OOCSOC\85983 7 v I \29999 .0000 12.3.5 Rights and Remedies are Cumulative. Except as otherwise expressly stated in this Agreement, the rights and remedies of the parties are cumulative, and the exercise by either party of one or more of its rights or remedies shall not preclude the exercise by it, at the same or different times, of any other rights or remedies for the same default or any other default by the other party. ARTICLE 13 - General Provisions 13.1 Notices, Demands. and Communications Between the Parties. Formal notices, demands, and communications between Agency and Borrower shall be given either by (i) personal service, (ii) delivery by reputable document delivery service such as Federal Express that provides a receipt showing date and time of delivery, or (iii) mailing in the United States mail, certified mail, postage prepaid, return receipt requested, to the address of the party as set forth below, or at any other address as that party may later designate by notice: To Agencv: Redevelopment Agency of the City of Chula Vista 276 Fourth Avenue Chula Vista, CA 91910 Attn: Housing Manager With a copy to: Redevelopment Agency of the City of Chula Vista 276 Fourth Avenue Chula Vista, CA 91910 Attn: Agency Attorney To Borrower: South Bay Community Villas LP. c/o The Otay Company 350 West Ash Street San Diego, CA 92101 Attn: Robert Cameron With a copy to: Luce, Forward, Hamilton, Scripps 600 West Broadway #2600 San Diego CA 92101 Attn: Darryl Steinhause, Esq. With a copy to: Notices personally delivered or delivered by document delivery service shall be deemed effective upon receipt. Notices mailed shall be deemed effective on the second business day following deposit in the United States mail. Such written notices, demands, and communications shall be sent in the same manner to such other addresses as either party may from time to time designate by mail. 36 DOCSOC\859837vl \29999.0000 ¡7-3&. 13.2 Nonliabilitv of Agencv Officials and Emplovees: Conflicts of Interest. No member, official, employee, or contractor of Agency shall be personally liable to Borrower in the event of any default or breach by Agency or for any amount which may become due to Borrower or on any obligations under the terms of this Agreement. No member, official, emp10ýee, or agent of Agency shall have any direct or indirect interest in this Agreement nor participate in any decision relating to this Agreement which is prohibited by law. 13.3 Enforced Delav; Extension of Times of Performance. In addition to specific provisions of this Agreement, and except as expressly set forth in Section 12.2 and this Section 13.3, performance by either party hereunder shall not be deemed to be in default and such party shall be entitled to an extension of time to perform its obligations hereunder where delays in performance are due to causes beyond the control and without the fault of such party, including as applicable: war; insurrection; strikes; lock-outs; riots; floods: earthquakes; fires; casualties; supernatural causes; acts of the public enemy; epidemics; quarantine restrictions; freight embargoes; lack of transportation; governmental restrictions or priority; litigation; unusually severe weather; inability to secure necessary labor, materials or tools; delays of any contractor, subcontractor or supplies; acts of the other party; acts or the failure to act of Agency or any other public or governmental agency or entity (except that any act or failure to act of or by Agency shall not excuse timely performance by Agency). In addition, nothing in this Section 13.3 is intended or shall be interpreted to entitle Borrower to an extension of time to close the escrow for acquisition of the Property or to delay commencement of construction of the Project. An extension of time for any cause permitted under this Section 13.3 shall be limited to the period of the enforced delay and shall commence to run from the time of the commencement of the cause, if notice by the party claiming such extension is sent to the other party within thirty (30) days of knowledge of the commencement of the cause, or if no written notice is sent within thirty (30) days, from the date written notice is sent by the other party. Times of performance under this Agreement may be extended by mutual written agreement of Agency and Borrower. 13.4 Inspection of Books and Records. The Borrower shall keep and maintain at the Project, or elsewhere within the County of San Diego, full, complete and appropriate books, records and accounts relating to the Project, including all such books, records and accounts necessary or prudent to evidence and substantiate in full detail Borrower's calculation of Residual Receipts and compliance with the affordable housing requirements herein. Books, records and accounts relating to Borrower's compliance with the terms, provisions, covenants, and conditions of this Agreement shall be kept and maintained in accordance with generally accepted accounting principles consistently applied, and shall be consistent with requirements of this Agreement. All such books, records, and accounts shall be open to and available for inspection by the Agency, and their auditors or other authorized representatives at reasonable intervals during normal business hours upon reasonable prior notice to Borrower. Copies of all tax returns and other reports that Borrower may be required to furnish any governmental agency shall at all reasonable times, upon reasonable prior notice to Borrower, be open for inspection by the Agency at the place that the books, records, accounts of the Borrower are kept. The Borrower shall preserve 37 DOCSOC\859837v I \29999.0000 /1-37 records on which any statement of Residual Receipts is based for a period of not less than five (5) years after such statement is rendered. Agency shall have the right at all reasonable times to inspect the books and records of Borrower pertaining to the Property and the Project as pertinent to the purposes of this Agreement. Borrower shall provide its books and records to Agency without reasonable delay upon no less than five (5) days prior written request by Agency. Borrower shall have the right at all reasonable times to inspect the books and records of Agency pertaining to the Property and the Project as pertinent to the purposes of this Agreement. 13.5 Interoretation. The terms of this Agreement shall be construed in accordance with the meaning of the language used and shall not be construed for or against any party by reason of the authorship of this Agreement or any other rule of construction which might otherwise apply. The section headings are for purposes of convenience only, and shall not be construed to limit or extend the meaning of this Agreement. 13.6 Entire Agreement. Waivers and Amendments. This Agreement integrates all of the terms and conditions mentioned herein, or incidental hereto, and supersedes all negotiations and previous agreements between the parties with respect to all or any part of the subject matter hereof. All waivers of the provisions of this Agreement must be in writing and signed by the appropriate authorities of the party to be charged, and all amendments and modifications hereto must be in writing and signed by the appropriate authorities of Agency and Borrower. 13.7 Consen t/Reasona b I enes s. Except when this Agreement specifically authorizes a party to withhold its approval or consent in its sole and absolute discretion, when either Agency or Borrower shall require the consent or approval of another party in fulfilling any agreement, covenant, provision, or condition contained in this Agreement, such consent or approval shall not be unreasonably withheld, conditioned, or delayed by the party from whom such consent or approval is sought. 13.8 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 this Agreement shall not be affected thereby to the extent such remaining provisions are not rendered impractical to perform taking into consideration the purposes of this Agreement. In the event that all or any portion of this Agreement is found to be unenforceable, this Agreement or that portion which is found to be unenforceable shall be deemed to be a statement of intention by the parties; and the parties further agree that in such event, and to the maximum extent permitted by law, they shall take all steps reasonably necessary to comply with such procedures or requirements as may be reasonably necessary in order to make valid this Agreement or that portion which is found to be unenforceable. 13.9 Third Partv Beneficiaries. Notwithstanding any other provision of this Agreement to the contrary nothing herein is intended to create any third party beneficiaries to this Agreement, and no person or entity other than Agency and 38 ¡/ DOCSOC\859837v 1 \29999 .0000 - 38' Borrower, and the pennitted successors and assigns of each of them, shall be authorized to enforce the provisions of this Agreement. 13.10 Representations and Warranties. Borrower and each partner of Borrower executing this Agreement on behalf of Borrower represents and warrants that: (i) Borrower is a limited partnership organized and existing under the laws of the State of California, in good standing, and authorized to do business and doing business in the County of San Diego; (ii) Borrower has all requisite power and authority to carry out its business as now and whenever conducted and to enter into and perform its obligations under this Agreement; (iii) by proper action of Borrower, Borrower's signatories have been duly authorized to execute and deliver this Agreement; (iv) the execution of this Agreement by Borrower does not violate any provision of any other agreement to which Borrower is a party; (v) except as may be specifically set forth in this Agreement, and except for the approval of Borrower's investor limited partner, no approvals or consents not heretofore obtained by Borrower are necessary in connection with the execution of this Agreement by Borrower or with the performance by Borrower of its obligations hereunder, and (vi) no attachments, execution proceedings, assignments for the benefit of creditors, insolvency, bankruptcy, reorganization, receivership or other proceedings are pending or threatened against the Borrower, or any partners of Borrower, nor are any of such proceedings contemplated by Borrower or any partners of Borrower. 13.11 Execution. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, and such counterparts shall constitute one and the same instrument. 13.12 Relationship of Parties. It is understood that the contractual relationship between the Agency and Borrower is such that Borrower is an independent entity and not an agent or partner of Agency. Nothing in this Agreement shall constitute Borrower as the agent or partner or representative of Agency for any purpose whatsoever. 13.13 Attornev's Fees. If either party to this Agreement is required to initiate or defend litigation in any way connected with this Agreement, the prevailing party in such litigation, in addition to any other relief which may be granted, whether legal or equitable, shall be entitled to its actual and reasonable attorney's fees. If either party to this Agreement is required to initiate or defend litigation with a third party because of the violation of any term or provision of this Agreement by the other party, then the party so litigating shall be entitled to its actual and reasonable attorney's fees from the other party to this Agreement. Attorney's fees shall include attorney's fees on any appeal, and in addition a party entitled to attorney's fees shall be entitled to all other reasonable costs for investigating such action, retaining expert witnesses, taking depositions and discovery, and all other necessary costs incurred in such litigation. All such fees shall be deemed to have accrued on conunencement of such action and shall be enforceable whether or not such action is prosecuted to judgment. The parties hereto acknowledge and agree that each such party shall bear its own legal costs incurred in connection with the negotiation, approval, and execution of this Agreement. 39 /I'-3i DOCSOC\859837v ¡ \29999.0000 [NEXT PAGE IS SIGNATURE PAGE] 40 . DOCSOO859837v1I29999.0000 A -10 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Effective Date specified herein. "AGENCY" REDEVELOPMENT AGENCY OF THE CITY OF CHULA VISTA, a public body, coIporate and politic By: Its: Chair ATTEST: Agency Secretary APPROVED AS TO FORM: John M. Kaheny, Agency Attorney S-l DOCSOC\859837v 1 \29999.0000 /1- <-If [SIGNATURE PAGE CONTINUED] "BORROWER" South Bay Community Villas LP. By: By: Sol 11- {;L DOCSOC\859837v 1129999.0000 EXHIBIT A LEGAL DESCRIPTION DOCSOC\859837vl\29999.0000 A-I 11- r./.3 EXHIBIT B AGENCY PROMISSORY NOTE B-1 A--4t/ DOCSOO859837v I \29999.0000 PROMISSORY NOTE Secured by a Deed of Trust $4,400,000 Date: , 2001 Chu1a Vista, CA I. Borrower's Promise to Pay. For value received, the undersigned SOUTH BAY COMMUNITY VILLAS, LP., ("Borrower"), promises to pay to the REDEVELOPMENT AGENCY OF THE CITY OF CHULA VISTA, a public body, corporate and politic (the "Agency"), or order, at 276 Fourth Avenue, Chula Vista, California 91910, or such other place as the Agency may designate in writing, the principal sum of Four Million Four Hundred Thousand Dollars ($4,400,000) (the "principal"), plus interest as set forth in Section 4 below. (a) Use Of Funds. Borrower is improving certain real property in the City of Chula Vista, as legally described in the Loan Agreement (the "Property") with a multifamily housing development consisting of 91 units for senior citizen housing and 180 units for family housing, within the Otay Ranch master planned community (the "Project"), subject to the terms of the Permanent Loan Documents, the Regulatory Agreement and Declaration of Restrictive Covenants, the Affordable Housing Agreement and the TCAC Regulatory Agreement, as those terms are defined in that certain Loan Agreement and Related Restricted Covenants between the Borrower and the Agency dated as of , 2001 (the "Loan Agreement"). This Note evidences the loan made by the Agency to assist Borrower in acquiring and improving the Property for occupation by very low, lower and low and moderate income households, as more particularly set forth in the Loan Agreement. 2. Definitions. Capitalized terms used herein not otherwise defined shall have the meanings set forth in the Loan Agreement. 3. Security. This Note is secured by the Deed of Trust with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing of the same date as this Note (the "Deed of Trust"), executed by Borrower, as trustor, in favor of the Agency, as beneficiary, and encumbering the real property described in the Deed of Trust. The Agency will be entitled to the benefits of the security provided by the Deed of Trust and will have the right to enforce the covenants and agreements of Borrower specified within the Deed of Trust. 4. Interest. Simple interest will accrue on the principal balance remaining unpaid from time to time at the rate of three percent (3%) per annum. 5. Payments. Payments of principal and interest due under this Note shall be made in accordance with the payment terms set forth in Section 4.5 of the Loan Agreement, which terms are incorporated herein by this reference. All payments on this Note shall be applied first to payment of accrued but unpaid interest, and after all such interest has been paid, any remainder shall be applied to reduction of the principal balance. Unless the Loan Agreement is extended pursuant to the terms of the Loan Agreement, all principal and interest shall be due and payable on the date that is fifty- five (55) years from the date of the Agency's issuance of the Certificate of Completion (as defined in the Loan Agreement). 1 ¡l-q~ DOCSOOS55197v2\24036.0027 6. Borrower's Right To Repay. BoITower has the right to pay, without penalty or premium, all or any portion of the outstanding amount of this Note prior to the maturity date. 7. No Assumptions of Note. BoITower acknowledges that this Note is given in connection with the development of the Project as part of a program of the Agency to assist with the provision of housing for very low, low and moderate income households. Consequently, this Note is not assumable by transferees of the Property, but is immediately due and payable in full on the date of the Transfer of the Property, whether voluntary or involuntary, unless such Transfer is permitted by the Loan Agreement or by the Agency in writing in the Agency's sole and absolute discretion. In order to implement this provision, the Loan Agreement contains a "DUE ON SALE" provision. 8. Maintenance; Taxes; Insurance. BoITower shall maintain the Property in good, clean and orderly condition. BoITower shall promptly pay all property taxes due on the Property prior to any delinquency and shall comply with the insurance requirements set forth in the Loan Agreement. 9. Default. The OCCUITence of anyone or more of the following events shall constitute an "Event of Default": (a) Default after the expiration of the all applicable cure periods under any agreement or other writing executed in favor of the Agency in connection with this Note, including but not limited to the Loan Agreement or the Deed of Trust, beyond all applicable cure periods; (b) Default in the payment when due of any installment or amount of principal or interest due on this Note, beyond the applicable cure period contained in Section 12.1 of the Loan Agreement; (c) The making by BoITower of any assignment for the benefit of creditors or the voluntary appointment (at the request or with the consent of BoITower) of a receiver, custodian, liquidator or trustee in bankruptcy of any of BoITower's property, or the filing by BoITower of a petition in bankruptcy or other similar proceeding under any law for relief of debtors; (d) The filing against BoITower (by anyone other than the Agency) of a petition in bankruptcy or other similar proceeding under any law for relief of debtors, or the involuntary appointment (by anyone other than the Agency) of a receiver, custodian, liquidator or trustee in bankruptcy of the property of BoITower, if such petition or appointment is not vacated or discharged within sixty (60) calendar days after the filing or making thereof; or (e) The OCCUITence of a default under any note or deed of trust to which the Deed of Trust is junior and subordinate, beyond the applicable cure period. Upon the OCCUITence of an Event of Default, the Agency may, at its option, declare the entire unpaid principal balance and accrued interest to be immediately due and payable in full pursuant to Section 10 hereof or pursue any and all other remedies provided at law or in equity. Upon the OCCUITence of an Event of Default of the type described in clause (b) above, the entire unpaid principal balance and unpaid interest accrued thereon shall bear interest, from the date of the Event of Default until such default is cured, at a rate of nine percent (9%) compounded monthly ("Default Rate"). 10. Acceleration. Upon the OCCUITence of an Event of Default, the Agency shall have the right to declare the full amount of the principal, interest and other amounts owing under this Note immediately due and payable. Any failure by the Agency to pursue its legal and equitable remedies upon an Event of Default shall not constitute a waiver of the Agency's right to declare an Event of Default and exercise all of its rights under this Note, the Deed of Trust or the Loan Agreement. Nor shall acceptance by the Agency of any payment provided for in the Note constitute a waiver of the Agency's right to require prompt payment of any remaining amounts owed. 11. No Offset. BoITower hereby waives any rights of offset it now has or may later have against the Agency, its successors and assigns, and agrees to make the payments called for in this Note in accordance with the terms of this Note. 2 Il- 4~ DOCSOC\855197v2\24036.0027 12. Waivers. Borrower 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 reasons of any extension of time or change in tenns 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 attorney fees. If an action is instituted on this Note, the Borrower 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. 13. No Waiver by the Agency. No previous waiver, failure, or delay by the Agency in acting with respect to the tenns of this Note, the Deed of Trust, or any other loan documents in favor of the Agency executed by Borrower in connection with this Note will constitute a waiver of any breach, default or failure of conditions under this Note, Deed of Trust, or such other associated documents. A waiver of any tenns must be made in writing. 14. Non Recourse Obligation. Nothing herein contained shall be deemed to cause Borrower (or any of its partners, or any of their respective directors, officers, employees, partners, principals or members) personally to be liable to payor perfonn any of its obligations evidenced hereby, and Agency shall not seek any personal or deficiency judgment on such obligations, and the sole remedy of Agency shall be against the Property and the collateral under the Deed of Trust; provided, however, that the foregoing shall not in any way affect any rights Agency may have (as a secured party or otherwise) hereunder or under the Deed of Trust or Loan Agreement, or any other rights Agency may have to: (a) recover directly from Borrower any funds, damages or costs (including, without limitation, reasonable attorneys' fees and costs) incurred by Agency as a result of fraud, intentional misrepresentation or intentional waste by Borrower; or (b) recover directly from Borrower any condemnation or insurance proceeds, or other similar funds or payments attributable to the Property which under the tenns of the Loan Agreement should have been paid to Agency and any costs and expenses incurred by Agency in connection therewith (including, without limitation, reasonable attorneys' fees and costs). 15. Late Fees. Borrower acknowledges that if any payment required under this Note is not paid within fifteen (15) days after the date when the same becomes due and payable, the Agency will incur extra administrative expenses (i.e., in addition to expenses incident to receipt of timely payment) and the loss of the use of funds in connection with the delinquency in payment. Because, from the nature of the case, the actual damages suffered by the Agency by reason of such extra administrative expenses and loss of use of funds would be impracticable or extremely difficult to ascertain, Borrower agrees that five percent (5%) of the amount of the delinquent payment shall be the amount of damages to which the Agency is entitled, upon such breach, in compensation therefor. Therefore, Borrower shall, in such event, without further notice, pay to the Agency as the Agency's sole monetary recovery to cover such extra administrative expenses and loss of use of funds, liquidated damages in the amount of five percent (5%) of the amount of such delinquent payment. The provisions of this paragraph are intended to govern only the detennination of damages in the event of a breach in the perfonnance of the obligation of Borrower to make timely payments hereunder. Nothing in this Note shall be construed as an expressed or implied agreement by the Agency to forbear in the collection of any delinquent payment, or be construed as in any way giving Borrower the right, expressed or implied, to fail to make timely payments hereunder, whether upon payment of such damages or otherwise. The right of the holder hereof to receive payment of such 3 DOCSOC\855197v2\24036.0027 f/~L/Î liquidated and actual damages, and receipt thereof, are without prejudice to the right of such holder to collect such delinquent payments and other amounts provided to be paid hereunder or under any security for this Note or to declare a default hereunder or under any security for this Note. 16. Giving Of Notices. Formal notices, demands, and communications between Agency and Borrower shall be given either by (i) personal service, (ii) delivery by reputable document delivery service such as Federal Express that provides a receipt showing date and time of delivery, or (iii) mailing in the United States mail, certified mail, postage prepaid, return receipt requested, to the address of the party as set forth below, or at any other address as that party may later designate by notice: Borrower: SOUTH BAY COMMUNITY VILLAS, LP. c/o Otay Ranch Company 350 West Ash Street Suite 730 San Diego CA 92101 Attn: Robert Cameron Agencv: Redevelopment Agency of the City of Chula Vista 276 Fourth Avenue Chula Vista CA 91910 Attn: Housing Coordinator With copies to: Executive Director and Agency Attorney The parties may subsequently change addresses by providing written notice of the change in address to the other parties in accordance with this Section. 17. No Partnership or Joint Venture. The relationship of Borrower and the Agency under this Note is solely that of borrower and lender, and the loan evidenced by this Note and secured by the Deed of Trust will in no manner make the Agency the partner or joint venturer of Borrower. 18. Joint and Several Obligations. This Note is the joint and several obligation of all makers, sureties, guarantors and endorsers, and shall be binding upon them and their successors and assigns. 19. Attorney's Fees. In the event of any conflict or dispute concerning any term or provision of this Note or otherwise arising out of this Note, the prevailing party shall be entitled to recover from the other party any and all reasonable costs and expenses incurred in connection therewith, including, but not limited to, attorney's fees and court costs, whether or not a legal action is commenced. 20. Controlling Law. This Note shall be construed in accordance with and be governed by the laws of the State of California. 21. Invalid Provisions. If anyone or more of the provisions contained in this Note shall for any reason be held to be invalid, illegal or unenforceable in any respect, then such provision or provisions shall be deemed severable from the remaining provisions contained in this Note, and this Note shall be construed as if such invalid, illegal or unenforceable provision had never been contained in this Note. 4 DOCSOC\855197v2\24036.0027 A .- c/ ({ 22. Amendments. Any amendment, alteration or interpretation of this Note must be in writing signed and signed by a duly authorized officer of the Agency and Borrower. If there are any inconsistencies between the terms of this Note and the terms of any of the other loan documents, the terms of the Loan Agreement will prevail. [NEXT PAGE IS SIGNATURE PAGEl 5 11- c/ 1 DOCSOC\855197v2\24036.0027 IN WITNESS WHEREOF the Borrower has caused this Promissory Note to be executed as of the day and year first written above. SOUTH BAY COMMUNITY VILLAS L.P., a limited partnership By: By: Developer tolnsert Name, Managing Member 6 DOCSOC\855 I 97v2\24036.0027 A -s-V EXHIBIT C AGENCY DEED OF TRUST C-l DOCS0C\85983 7 v I \29999 .0000 A - ~- / RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: Redevelopment Agency of the City of Chula Vista 276 Fourth Avenue Chula Vista, California 91910 Attention: Housing Manager DEED OF TRUST WITH ABSOLUTE ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING THE PARTIES TO THIS DEED OF TRUST WITH ABSOLUTE ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING ("Deed of Trust"), made as of , 2001, are SOUTH BAY COMMUNITY VILLAS L.P. ("Trustor"), Developer to Insert Name, a California corporation ("Trustee"), and the REDEVELOPMENT AGENCY OF THE CITY OF CHULA VISTA, a public body, corporate and politic ("Beneficiary"). ARTICLE 1. GRANT IN TRUST 1.1 GRANT. For the purposes of and upon the terms and conditions in this Deed of Trust, Trustor irrevocably grants, conveys and assigns to Trustee, in trust for the benefit of Beneficiary, with power of sale and right of entry and possession, all of that real property located in the City of Chula Vista, County of San Diego, State of California, described on Exhibit A attached hereto, together with all development rights or credits, air rights, water, water rights and water stock related to the real property, and all minerals, oil and gas, and other hydrocarbon substances in, on or under the real property, and all appurtenances, easements, rights and rights of way appurtenant or related thereto; all buildings, other improvements and fixtures now or hereafter located on the real property, including, but not limited to, all apparatus, equipment, and appliances used in the operation or occupancy of the real property, it being intended by the parties that all such items shall be conclusively considered to be a part of the real property, whether or not attached or affixed to the real property (the "Improvements"); all interest or estate which Trustor may hereafter acquire in the property described above, and all additions and accretions thereto, and the proceeds of any of the foregoing; (all of the foregoing being collectively referred to as the "Subject Property"). The listing of specific rights or property shall not be interpreted as a limit of general terms. 1.2 ADDRESS. The address of the Subject Property is East Palomar Street between Santa Rita Avenue and Santa Andrea Avenue within a multi-family and commercial area identified in the Otay Ranch Village I tentative map as R47 & Cl in the City of Chula Vista, California. However, neither the failure to designate an address nor any inaccuracy in the address designated shall affect the validity or priority of the lien of this Deed of Trust on the Subject Property as described on Exhibit A. ARTICLE 2. OBLIGATIONS SECURED 2.1 OBLIGA TIONS SECURED. Trustor makes this grant and assignment for the purpose of securing the following obligations ("Secured Obligations"): (a) Payment to Beneficiary of all sums at any time owing under that certain Promissory Note of even date herewith executed by Trustor in favor of Beneficiary in the principal amount of Four Million Four Hundred Thousand Dollars ($4,400,000), and the performance of all covenants and -1- DOCSOC\859843vI129999.0000 ¡1 , S.J- obligations of Trustor under the Promissory Note and the Loan Agreement and Related Restricted Covenants of even date herewith between Trustor and Beneficiary ("Loan Agreement"); and (b) Payment and performance of all covenants and obligations of Trustor under this Deed of Trust; and (c) All modifications, extensions and renewals of any of the obligations secured hereby, however evidenced, including, without limitation: (i) modifications of the reqllired principal payment dates or interest payment dates or both, as the case may be, deferring or accelerating payment dates wholly or partly: or (ii) modifications of the required debt service payments. 2.2 INCORPORATION. All terms of the Secured Obligations and the documents evidencing such obligations are incorporated herein by this reference. All persons who may have or acquire an interest in the Subject Property shall be deemed to have notice of the terms of the Secured Obligations. ARTICLE 3. ASSIGNMENT OF LEASES AND RENTS 3.1 ASSIGNMENT. Subject to the rights of the ~ beneficiaries under the Senior ÐeeEI DI:i:ds of Trust (as defined below), Trustor hereby irrevocably assigns to Beneficiary all of Trustor's right, title and interest in, to and under: (a) all leases of the Subject Property or any portion thereof, all licenses and agreements relating to the management, leasing or operation of the Subject Property or any portion thereof, and all other agreements of any kind relating to the use or occupancy of the Subject Property or any portion thereof, whether now existing or entered into after the date hereof ("Leases"): and (b) the rents, issues, deposits and profits of the Subject Property, including, without limitation, all amounts payable and all rights and benefits accruing to Trustor under the Leases ("Payments"). The term "Leases" shall also include all guarantees of and security for the lessees' performance thereunder, and all amendments, extensions, renewals or modifications thereto which are permitted hereunder. This is a present and absolute assignment, not an assignment for security purposes only, and Beneficiary's right to the Leases and Payments is not contingent upon, and may be exercised without possession of, the Subject Property. 3.2 GRANT OF LICENSE. Beneficiary confers upon Trustor a license ("License") to collect and retain the Payments as they become due and payable, until the occurrence of a Default (as hereinafter defined). Upon a Default, the License shall be automatically revoked and Subject to the rights of the ~ beneficiaries under the Senior ÐeeEI DI:i:ds of Trust, Beneficiary may collect and apply the Payments pursuant to Section 6.4 without notice and without taking possession of the Subject Property. Trustor hereby irrevocably authorizes and directs the lessees under the Leases to rely upon and comply with any notice or demand by Beneficiary for the payment to Beneficiary of any rental or other sums which may at any time become due under the Leases, or for the performance of any of the lessees' undertakings under the Leases, and the lessees shall have no right or duty to inquire as to whether any Default has actually occurred or is then existing hereunder. Trustor hereby relieves the lessees from any liability to Trustor by reason of relying upon and complying with any such notice or demand by Beneficiary. 3.3 EFFECT OF ASSIGNMENT. The foregoing irrevocable Assignment shall not cause Beneficiary to be: (a) a mortgagee in possession: (b) responsible or liable for the control, care, management or repair of the Subject Property or for performing any of the terms, agreements, undertakings, obligations, representations, warranties, covenants and conditions of the Leases; or (c) responsible or liable for any waste committed on the Subject Property by the lessees under any of the Leases or any other parties; for any dangerous or defective condition of the Subject Property; or for any negligence in the management, upkeep, repair or control of the Subject Property resulting in loss or injury or death to any lessee, licensee, employee, invitee or other person, unless caused by the gross negligence or wilful misconduct of Beneficiary or its agents. Beneficiary shall not directly or indirectly be liable to Trustor or any other person as a consequence of: (i) the exercise or failure to exercise any of the rights, remedies or powers granted to Beneficiary hereunder; or (ii) the failure or refusal of Beneficiary to perform or discharge any obligation, duty or liability of Trustor arising under the Leases. -2- 1/- s3 Docsoa859843v I \29999.0000 3.4 REPRESENTATIONS AND WARRANTIES. Trustor represents and warrants that as of the date of this Deed of Trust there are no Leases affecting any portion of the Subject Property. 3.5 COVENANTS. Trustor covenants and agrees at Trustor's sole cost and expense to: (a) perform the obligations of lessor contained in the Leases and enforce by all available remedies performance by the lessees of the obligations of the lessees contained in the Leases; (b) give Beneficiary prompt written notice of any material default which occurs with respect to any of the Leases, whether the default be that of the lessee or of the lessor; (c) exercise commercially reasonable efforts to keep all portions of the Subject Property that are currently subject to Leases leased at all times at rentals not less than the fair market rental value; (d) deliver to Beneficiary fully executed, counterpart original(s) of each and every Lease if requested to do so; and (e) execute and record such additional assignments of any Lease or specific subordinations of any Lease to the Deed of Trust, in form and substance acceptable to Beneficiary, as Beneficiary may request. Except as required or permitted by the Senior I)eeà Dœds of Trust, or its beneficiary, or by the loan agreement secured thereby, Trustor shall not, without Beneficiary's prior written consent or as otherwise permitted by any provision of the Loan Agreement: (i) execute any other assignment relating to any of the Leases: (ii) discount any rent or other sums due under the Leases or collect the same in advance, other than to collect rent one (I) month in advance of the time when it becomes due; (iii) terminate, modify or amend any of the material terms of the Leases or in any material manner release or discharge the lessees from any obligations thereunder; (iv) consent to any assignment or subletting by any lessee; or (v) subordinate or agree to subordinate any of the Leases to any other deed of trust or encumbrance. Any such attempted action in violation of the provisions of this Section 3.5 shall be null and void. Without in any way limiting the requirement of Beneficiary's consent hereunder, but subject to the right of the àeHefie;ary benefiriaries under the Senior I)eeà Deeds of Trust, any sums received by Trustor in consideration of any termination (or the release or discharge of any lessee) modification or amendment of any Lease shall be applied to reduce the outstanding Secured Obligations and any such sums received by Trustor shall be held in trust by Trustor for such purpose. 3.6 ESTOPPEL CERTIFICATES. Within thirty (30) days after written request by Beneficiary, Trustor shall deliver to Beneficiary and to any party designated by Beneficiary estoppel certificates executed by Trustor and by each of the lessees, in recordable form, certifying (if such be the case): (a) that the foregoing assignment and the Leases are in full force and effect; (b) the date of each lessee's most recent payment of rent; (c) that there are no defenses or offsets outstanding, or stating those claimed by Trustor or lessees under the foregoing assignment or the Leases, as the case may be; and (d) any other information reasonably requested by Beneficiary. ARTICLE 4. SECURITY AGREEMENT AND FIXTURE FILING 4.1 SECURITY INTEREST. Trustor hereby grants and assigns to Beneficiary as of the date hereof ("Effective Date") a security interest, to secure payment and performance of all of the Secured Obligations, in all of the following described personal property in which Trustor now or at any time hereafter has any interest (collectively, the "Collateral"): All goods, building and other materials, supplies, work in process, equipment, machinery, fixtures, furniture, furnishings, signs and other personal property, wherever situated, which are or are to be incorporated into, used in connection with, or appropriated for the use and operation of Subject Property (to the extent the same are not effectively made a part of the real property pursuant to Section 1.1 above) together with all rents, issues, deposits and profits of the Subject Property (to the extent, if any, they are not subject to Article 3); all inventory, accounts, cash receipts, deposit accounts, accounts receivable, contract rights, general intangibles, chattel paper, instruments, documents, notes, drafts, letters of credit, insurance policies, insurance and condemnation awards and proceeds, any other rights to the payment of money, trade names, trademarks and service marks arising from or related to -3- ¡:¡ -~cj DOCSOO859843v I \29999.oooo the Subject Property or any business now or hereafter conducted thereon by Trustor; all permits consents, approvals, licenses, authorizations and other rights granted by, given by or obtained from, any governmental entity with respect to the Subject Property; all deposits or other security now or hereafter made with or given to utility companies by Trustor with respect to the Subject Property; all advance payments of insurance premiums made by Trustor with respect to the Subject Property; all plans, drawings and specifications relating to the Subject Property; all funds deposited with Beneficiary pursuant to any loan agreement; all reserves, deferred payments, deposits, accounts, refunds, cost savings and payments of any kind related to the Subject Property or any portion thereof; together with all replacements and proceeds of, and additions and accessions to, any of the foregoing; together with all books, records and files relating to any of the foregoing. As to all of the above described personal property which is or which hereafter becomes a "fixture" under applicable law, this Deed of Trust constitutes and is filed as a fixture filing under Sections 9313 and 9402(6) of the California Uniform Commercial Code, as amended or recodified from time to time, and covers goods which are or are to become fixtures. 4.2 REPRESENTATIONS AND WARRANTIES. Trustor represents and warrants that: (a) Trustor has, or will have, good title to the Collateral (except for items that are leased by Trustor); and (b) Trustor's principal place of business is located at the address shown in Section 7.9. 4.3 RIGHTS OF BENEFICIARY. In addition to Beneficiary's rights as a "Secured Party" under the California Uniform Commercial Code, as amended or recodified from time to time ("UCC"), Beneficiary may, but shall not be obligated to, at any time without notice and at the expense of Trustor: (a) give notice to any person of Beneficiary's rights hereunder and enforce such rights at law or in equity; (b) insure, protect, defend and preserve the Collateral or any rights or interests of Beneficiary therein; (c) inspect the Collateral; and (d) endorse, collect and receive any right to payment of money owing to Trustor under or from the Collateral. Notwithstanding the above, in no event shall Beneficiary be deemed to have accepted any property other than cash in satisfaction of any obligation of Trustor to Beneficiary unless Beneficiary shall make an express written election of said remedy under UCC §9505, or other applicable law. 4.4 RIGHTS OF BENEFICIARY ON DEFAULT. Upon the occurrence and during the continuance of a Default (hereinafter defined) under this Deed of Trust, then in addition to all of Beneficiary's rights as a "Secured Party" under the UCC or otherwise at law: (a) Beneficiary may (i) upon written notice, require Trustor to assemble any or all of the Collateral and make it available to Beneficiary at a place designated by Beneficiary; (ii) without prior notice, enter upon the Subject Property or other place where any of the Collateral may be located and take possession of, collect, sell, and dispose of any or all of the Collateral, and store the same at locations acceptable to Beneficiary at Trustor's expense: (iii) sell, assign and deliver at any place or in any lawful manner all or any part of the Collateral and bid and become purchaser at any such sales; and (b) Beneficiary may, for the account of Trustor and at Trustor's expense: (i) operate, use, consume, sell or dispose of the Collateral as Beneficiary deems appropriate for the purpose of performing any or all of the Secured Obligations; (ii) enter into any agreement, compromise, or settlement, including insurance claims, which Beneficiary may deem desirable or proper with respect to any of the Collateral; and (iii) endorse and deliver evidences of title for, and receive, enforce and collect by legal action or otherwise, all indebtedness and obligations now or hereafter owing to Trustor in connection with or on account of any or all of the Collateral. -4- A Docsoa859843v 1129999.0000 -~-S- Notwithstanding any other provision hereof, Beneficiary shall not be deemed to have accepted any property other than cash in satisfaction of any obligation of Trustor to Beneficiary unless Trustor shall make an express written election of said remedy under UCC §9505, or other applicable law. 4.5 POWER OF ATTORNEY. Trustor hereby irrevocably appoints Beneficiary as Trustor's attorney-in-fact (such agency being conpled with an interest), and as snch attorney-in-fact Beneficiary may, upon the occurrence and during the continuance of a Default, without the obligation to do so, in Beneficiary's name, or in the name of Trustor, prepare, execute and file or record financing statements, continuation statements, applications for registration and like papers necessary to create, perfect or preserve any of Beneficiary's security interests and rights in or to any of the Collateral, and, upon the occurrence and during the continuance of a Default hereunder, take any other action required of Trustor; provided, however, that Beneficiary as such attorney-in-fact shall be accountable only for such funds as are actually received by Beneficiary. 4.6 POSSESSION AND USE OF COLLATERAL. Except as otherwise provided in this Section, so long as no Default exists under this Deed of Trust, Trustor may possess, use, move, transfer or dispose of any of the Collateral in the ordinary course of Trustor's business. ARTICLE 5. RIGHTS AND DUTIES OF THE PARTIES 5.1 TAXES AND ASSESSMENTS. Subject to Trustor's rights to contest payment of taxes, Trustor shall pay prior to delinquency all taxes, assessments, levies and charges imposed by any public or quasi-public authority or utility company which are or which may become a lien upon or cause a loss in value of the Subject Property or any interest therein. Trustor shall also pay prior to delinquency all taxes, assessments, levies and charges imposed by any public authority upon Beneficiary by reason of its interest in any Secured Obligation or in the Subject Property, or by reason of any payment made to Beneficiary pursuant to any Secured Obligation; provided, however, Trustor shall have no obligation to pay taxes which may be imposed from time to time upon Beneficiary and which are measured by and imposed upon Beneficiary's net Income. 5.2 PERFORMANCE OF SECURED OBLIGA TIONS. Trustor shall promptly pay and perform each Secured Obligation when due. 5.3 LIENS. ENCUMBRANCES AND CHARGES. This Deed of Trust shall constitute a seeeøà thiJ::d priority security interest, junior and subordinate only to ill a Construction Deed of Trust with Assignment of Rents, Security Agreement and Fixture Filing, dated concurrently herewith, made in connection with the loan made by the U.S. Bank Þl.tieR.¡ ¡'.sseei.tieR, Housinp Authoritv of the City of Chula Visfa with the proceeds of multifamily revenue bonds in the approximate amount of dollars ($ ), and (2\ a Constmction Tmst Deed with Ass;pnment of Rents Security Apreement and Fixture Filinp dated concurrently herewith made in connection with the loan made hv First Rank & Tmst in the annroximate amount of dollars ($ \ and the refinancing thereof which have been approved by Beneficiary or are permitted pursuant to the Loan Agreement (the "Senior Bee<! Deeds of Trust"). Trustor shall immediately discharge any other lien not approved by Beneficiary in writing that has or may attain priority over this Deed of Trust. Trustor shall pay when due all obligations secured by or reducible to liens which shall now or hereafter encumber or appear to encumber all or any part of the Subject Property or any interest therein, whether senior or subordinate hereto; provided, however, Trustor shall have the right to contest in good faith any claims and liens for labor done and materials and services furnished in connection with the construction of any Improvements and any such claim or lien so contested may remain unpaid during the period of such contest and any appeal therefrom. 5.4 DAMAGES: INSURANCE AND CONDEMNATION PROCEEDS. Proceeds of casualty insurance policies and condemnation awards shall be disposed of in accordance with and subject to the conditions contained in the Loan Agreement. -5- /l - ~k, DOCSOC\859843v 1 \29999.0000 5.5 MAINTENANCE AND PRESERVATION OF THE SUBJECT PROPERTY. Trustor covenants: (a) to insure the Subject Property against such risks as are required under the Loan Agreement and, at Beneficiary's request, to provide evidence of such insurance to Beneficiary, and to comply with the requirements of any insurance companies insuring the Subject Property; (b) to keep the Subject Property in good condition and repair; (c) except as permitted by the Senior I:Jeeè Dœds of Trust, or its beneficiary, or the loan agreement secured thereby, not to remove or demolish the Subject Property or any part thereof, not to materially alter, restore or add to the Subject Property and not to initiate or acquiesce in any change in any zoning or other land classification which affects the Subject Property without Beneficiary's prior written consent; (d) to complete or restore promptly and in good and workmanlike manner the Subject Property, or any part thereof which may be damaged or destroyed; (e) to comply with all laws, ordinances, regulations and standards, and all covenants, conditions, restrictions and equitable servitudes, whether public or private, of every kind and character which affect the Subject Property and pertain to acts committed or conditions existing thereon, including, without limitation, any work, alteration, improvement or demolition mandated by such laws, covenants or requirements; (I) not to commit or permit waste of the Subject Property: and (g) to do all other acts which from the character or use of the Subject Property may be reasonably necessary to maintain and preserve its value. 5.6 DEFENSE AND NOTICE OF LOSSES. CLAIMS AND ACTIONS. At Trustor's sole expense, Trustor shall protect, preserve and defend the Subject Property and title to and right of possession of the Subject Property, the security hereof and the rights and powers of Beneficiary and Trustee hereunder against all adverse claims. Trustor shall give Beneficiary and Trustee prompt notice in writing of the assertion of any claim, of the filing of any action or proceeding, of the occurrence of any damage to the Subject Property and of any condemnation offer or action. 5.7 ACCEPTANCE OF TRUST: POWERS AND DUTIES OF TRUSTEE. Trustee accepts this trust when this Deed of Trust is recorded. From time to time upon written request of Beneficiary and presentation of this Deed of Trust or a certified copy thereof for endorsement, and without affecting the personal liability of any person for payment of any indebtedness or performance of any obligations secured hereby, Trustee may, without liability therefor and without notice: (a) reconvey all or any part of the Subject Property; (b) consent to the making of any map or plat thereof; and (c) join in any grant of easement thereon, any declaration of covenants and restrictions, or any extension agreement or any agreement subordinating the lien or charge of this Deed of Trust. Except as may be required by applicable law, Trustee or Beneficiary may from time to time apply to any court of competent jurisdiction for aid and direction in the execution of the trust hereunder and the enforcement of the rights and remedies available hereunder, and may obtain orders or decrees directing or confirming or approving acts in the execution of said trust and the enforcement of said remedies. Trustee has no obligation to notify any party of any pending sale or any action or proceeding, including, without limitation, actions in which Trustor, Beneficiary or Trustee shall be a party unless held or commenced and maintained by Trustee under this Deed of Trust. Trustee shall not be obligated to perform any act required of it hereunder unless the performance of the act is requested in writing and Trustee is reasonably indemnified and held harmless against loss, cost, liability or expense. 5.8 EXCULPATION: INDEMNIFICATION. (a) Beneficiary shall not directly or indirectly be liable to Trustor or any other person as a consequence of (i) the exercise of the rights, remedies or powers granted to Beneficiary in this Deed of Trust; (ii) the failure or refusal of Beneficiary to perform or discharge any obligation or liability of Trustor under any agreement related to the Subject Property or under this Deed of Trust; or (iii) any loss sustained by Trustor or any third party resulting from Beneficiary's failure to lease the Subject Property after a Default (hereinafter defined) or from any other act or omission of Beneficiary in managing the Subject Property after a Default unless the loss is caused by the gross negligence or willful misconduct of Beneficiary and no such liability shall be asserted against or imposed upon Beneficiary or its agents, and all such liability is hereby expressly waived and released by Trustor. (b) Trustor indemnifies Trustee and Beneficiary against, and holds Trustee and Beneficiary harmless from, all losses, damages, liabilities, claims, causes of action, judgments, court costs, attorneys' -6- A-57 DOCSOC\859843 v 1 \29999 .0000 fees and other legal expenses, cost of evidence of title, cost of evidence of value, and other expenses which either may suffer or incur: (i) by reason of this Deed of Trust; (ii) by reason of the execution of this trust or in performance of any act required or permitted hereunder or by law; (iii) as a result of any failure of Trustor to perform Trustor's obligations; or (iv) by reason of any alleged obligation or undertaking on Beneficiary's part to perform or discharge any of the representations, warranties, conditions, covenants or other obligations contained in any other document related to the Subject Property; provided, however, such indemnity does not include matters caused by the gross negligence or willful misconduct of Beneficiary or its agents. The above obligation of Trustor to indemnify and hold harmless Trustee and Beneficiary shall survive the release and cancellation of the Secured Obligations and the release and reconveyance or partial release and reconveyance of this Deed of Trust. (c) Trustor shall pay all amounts and indebtedness arising under this Section 5.10 immediately upon written demand by Trustee or Beneficiary together with interest thereon from the date of such demand at the rate often percent (10%) per annum. 5.9 SUBSTITUTION OF TRUSTEES. From time to time, by a writing, signed and acknowledged by Beneficiary and recorded in the Office of the Recorder of the County in which the Subject Property is situated, Beneficiary may appoint another trustee to act in the place and stead of Trustee or any successor. Such writing shall set forth any information required by law. The recordation of such instrument of substitution shall discharge Trustee herein named and shall appoint the new trustee as the trustee hereunder with the same effect as if originally named Trustee herein. A writing recorded pursuant to the provisions of this Section 5.11 shall be conclusive proof of the proper substitution of such new Trustee. 5.10 NONRECOURSE OBLIGATION. Nothing herein contained shall be deemed to cause Trustor (or any of its partners, or any of their respective directors, officers, employees, partners, principals or members) personally to be liable to payor perform any of its obligations secured hereby, and Beneficiary shall not seek any personal or deficiency judgment on such obligations, and the sole remedy of Beneficiary shall be against the Subject Property and the Collateral; provided, however, that the foregoing shall not in any way affect any rights Beneficiary may have (as a secured party or otherwise) hereunder or under the Promissory Note or Loan Agreement, or any other rights Beneficiary may have to: (a) recover directly from Trustor any funds, damages or costs (including, without limitation, reasonable attorneys' fees and costs) incurred by Beneficiary as a result of fraud, misrepresentation or waste; or (b) recover directly from Trustor any condemnation or insurance proceeds, or other similar funds or payments attributable to the Property which under the terms of this Deed of Trust should have been paid to Beneficiary and any costs and expenses incurred by Beneficiary in connection therewith (including, without limitation, reasonable attorneys' fees and costs). 5.11 RELEASES. EXTENSIONS. MODIFICATIONS AND ADDITIONAL SECURITY. Without notice to or the consent, approval or agreement of any persons or entities having any interest at any time in the Subject Property or in any manner obligated under the Secured Obligations ("Interested Parties"), Beneficiary may, from time to time, release any person or entity from liability for the payment or performance of any Secured Obligation, take any action or make any agreement extending the maturity or otherwise altering the terms or increasing the amount of any Secured Obligation, or accept additional security or release all or a portion of the Subject Property and other security for the Secured Obligations. None of the foregoing actions (other than a duly executed written release) shall release or reduce the liability of any of said Interested Parties, to the extent such liability exists, or release or impair the priority of the lien of this Deed of Trust upon the Subject Property. 5.12 RECONVEYANCE. Upon Beneficiary's written request, and upon surrender to Trustee for cancellation of this Deed of Trust or a certified copy thereof and any note, instrument, or instruments setting forth all obligations secured hereby, Trustee shall reconvey, without warranty, the Subject Property or that portion thereof then held hereunder. To the extent permitted by law, the reconveyance may describe the grantee as "the person or persons legally entitled thereto" and the recitals of any matters or facts in any reconveyance executed hereunder shall be conclusive proof of the truthfulness thereof. Neither Beneficiary nor Trustee shall have any duty to determine the rights of persons claiming to be rightful grantees of any reconveyance. -7- A -~-g' DOCSOC\859843v I \29999.0000 When the Subject Property has been fully reconveyed, the last such reconveyance shall operate as a reassignment of all future rents, issues and profits of the Subject Property to the person or persons legally entitled thereto. 5.13 SUBROGATION. Beneficiary shall be subrogated to the lien of all encumbrances, whether released of record or not, paid in whole or in part by Beneficiary pursuant to this Deed of Trust or by the proceeds of any loan secured by this Deed of Trust. 5.14 RIGHT OF INSPECTION. Subject to the rights of tenants or occupants of the Subject Property, Beneficiary, its agents and employees, may enter the Subject Property at any reasonable time upon reasonable notice for the purpose of inspecting the Subject Property and ascertaining Trustor's compliance with the terms hereof. 5.15 HAZARDOUS MATERIALS. Without in any way limiting the other representations and warranties set forth in this Deed of Trust, and except as otherwise disclosed in written reports and surveys previously delivered to Beneficiary, Trustor hereby specifically represents and warrants to the best of Trustor's actual knowledge, without inquiry, as of the date of this Deed of Trust as follows: (a) The Subject Property is not and has not been a site for the use, generation, manufacture, storage, treatment, release, threatened release, discharge, disposal, transportation or presence of any oil, flammable explosives, asbestos, urea formaldehyde insulation, radioactive materials, hazardous wastes, toxic or contaminated substances or similar materials, including, without limitation, any substances which are "hazardous substances," "hazardous wastes," "hazardous materials" or "toxic substances" under the Hazardous Materials Laws, as described below, andlor other applicable environmental laws, ordinances and regulations (collectively, the "Hazardous Materials"). "Hazardous Materials" shall not include commercially reasonable amounts of such materials used (i) in laboratories for educational purposes, (ii) in business offices and schools of the type and nature currently operated by Trustor, (iii) in the ordinary course of construction of the Subject Property, and (iv) by occupants of residential units for normal household activities, and by Trustor for normal maintenance and operations of the Subject Property, all of which materials set forth in (i)-(iv) above are used and stored in accordance with all applicable environmental laws, ordinances and regulations. (b) The Subject Property is in compliance with all laws, ordinances and regulations relating to Hazardous Materials ("Hazardous Materials Laws"), including, without limitation: the Clean Air Act, as amended, 42 V.S.C. Section 7401 et seq.; the Federal Water Pollution Control Act, as amended. 33 V.S.C. Section 1251 et seq.; the Resource Conservation and Recovery Act of 1976, as amended, 42 V.S.C. Section 6901 et seq.: the Comprehensive Environment Response, Compensation and Liability Act of 1980, as amended (including the Superfund Amendments and Reauthorization Act of 1986, "CERCLA"), 42 V.S.c. Section 9601 et seq.; the Toxic Substances Control Act, as amended, 15 V.S.c. Section 2601 et seq.; the Occupational Safety and Health Act, as amended, 29 V.S.C. Section 651, the Emergency Planning and Community Right-to-Know Act of 1986, 42 V.S.c. Section 11001 et seq.; the Mine Safety and Health Act of 1977, as amended, 30 V.S.C. Section 801 et seq.; the Safe Drinking Water Act, as amended, 42 V.S.C. Section 300f et seq.; and all comparable state and local laws, laws of other jurisdictions or orders and regulations. (c) There are no claims or actions ("Hazardous Materials Claims") pending or threatened against Trustor or the Subject Property by any governmental entity or agency or by any other person or entity relating to Hazardous Materials or pursuant to the Hazardous Materials Laws. (d) The Subject Property has not been designated as Border Zone Property under the provisions of California Health and Safety Code, Sections 25220 et seq. and there has been no occurrence or condition on any real property adjoining or in the vicinity of the Subject Property that could cause the Subject Property or any part thereof to be designated as Border Zone Property. -8- ¡f. 5-9 DOCSOO859843v t \29999.0000 5.16 HAZARDOUS MATERIALS COVENANTS. Trustor agrees as follows: (a) Trustor shall not cause or permit the Subject Property to be used as a site for the use, generation, manufacture, storage, treatment, release, discharge, disposal, transportation or presence of any Hazardous Materials (other than as provided in Section 5.15(a)(i)-(iii) above). (b) Trustor shall comply and cause the Subject Property to comply with all Hazardous Materials Laws. (c) Trustor shall immediately notify Beneficiary in writing of: (i) the discovery of any Hazardous Materials (other than those set forth in Section 5.15(a)(i)-(iv) above) on or under the Subject Property; (ii) any knowledge by Trustor that the Subject Property does not comply with any Hazardous Materials Laws; (iii) any Hazardous Materials Claims; and (iv) the discovery of any occurrence or condition on any real property adjoining or in the vicinity of the Subject Property that could cause the Subject Property or any part thereof to be designated as Border Zone Property. (d) In response to the presence of any Hazardous Materials on or under the Subject Property, Trustor shall immediately take, at Trustor's sole expense, in a commercially reasonable manner, all remedial action required by any Hazardous Materials Laws or any judgment, consent decree. settlement or compromise in respect to any Hazardous Materials Claims. 5.17 1NSPECTlON BY BENEFICIARY. At any reasonable time, upon twenty-four (24) hours' notice (except in cases of emergency where no notice is required) to Trustor, but subject to the rights of tenants and occupants of the Subject Property, Beneficiary, its employees and agents, may from time to time (whether before or after the commencement of a nonjudicial or judicial foreclosure proceeding) enter and inspect the Subject Property for the purpose of determining the existence, location, nature and magnitude of any past or present release or threatened release of any hazardous substance into, onto, beneath or from the Subject Property. 5.18 HAZARDOUS MATERIALS INDEMNITY. Trustor hereby agrees to defend, indemnify and hold harmless Beneficiary, its directors, officers, employees, agents, successors and assigns from and against any and all losses, damages, liabilities, claims, actions, judgments, court costs and legal or other expenses (including, without limitation, reasonable attorneys' fees and expenses) which Beneficiary may incur as a direct or indirect consequence of the use, generation, manufacture, storage, disposal, threatened disposal, transportation or presence of Hazardous Materials in, on or under the Subject Property. Trustor shall immediately pay to Beneficiary upon written demand any amounts owing under this indemnity, together with interest from the date of demand therefor until paid at the rate of ten percent (10%) per annum. TRUSTOR'S DUTY AND OBLIGATIONS TO DEFEND, INDEMNIFY AND HOLD HARMLESS BENEFICIARY SHALL SURVIVE THE TERMINATION OF THE LOAN AGREEMENT AND THE RELEASE, RECONVEYANCE OR PARTIAL RECONVEYANCE OF THE DEED OF TRUST. 5.19 LEGAL EFFECT. Trustor and Beneficiary agree that: (a) Sections 5.15 through 5.18 are intended as Beneficiary's written request for information (and Trustor's response) concerning the environmental condition of the real property security as required by California Code of Civil Procedure §726.5; and (b) each provision in such sections (together with any indemnity applicable to a breach of any such provision) with respect to the environmental condition of the real property security is intended by Beneficiary and Trustor to be an "environmental provision" for purposes of California Code of Civil Procedure §736, and as such it is expressly understood that Trustor's duty to indemnify Beneficiary hereunder shall survive: (a) any judicial or non-judicial foreclosure under the Deed of Trust, or transfer of the Subject Property in lieu thereof, and (b) the release and reconveyance or cancellation of the Deed of Trust. ARTICLE6. DEFAULT PROVISIONS -9- A- b 0 DOCSOC\85984 3 v 1129999.0000 6.1 DEFAULT. For all purposes hereof, the term "Default" shall mean (a) the occurrence of an "event of default" as defined in the Promissory Note or the Loan Agreement beyond all applicable cure periods provided therein; (b) the failure of Trustor to make any payment of any amount due hereunder when the same is due and payable, where such failure has continued for thirty (30) days after notice (c) Trustor's failure to observe and perfonn any other covenant, condition or agreement on its part to be observed or performed under this Deed of Trust for a period of thirty (30) days after written notice specifying such failure and requesting that it be remedied is given to Trustor by Beneficiary; provided, however, if the failure stated in the notice is correctable but cannot be corrected within such thirty (30) day period, Trustor shall have such additional time as reasonably necessary to effect such cure, provided that such corrective action is instituted by Trustor within such thirty (30) day period and diligently pursued until the default is corrected, (d) at the option of Beneficiary, the occurrence of a breach or default (beyond any applicable cure period) under any other deed of trust to Trustee executed by Trustor for the benefit of Beneficiary of even date herewith or hereafter executed (the "Other Deeds of Trust") which secures (i) payment to Beneficiary of sums owing under the Loan Agreement and/or (ii) the performance of the covenants and obligations of Trustor under the Loan Agreement, or (e) the failure (in any material respect) of any of the representations and warranties of Trustor herein to be true and correct when made. 6.2 RIGHTS AND REMEDIES. At any time after Default, Beneficiary and Trustee shall each have all the following rights and remedies; provided, however, Beneficiary and Trustee may not exercise the rights and remedies under subsections (c), (f) and (g) below until there has been a Default: (a) With or without notice, to declare all Secured Obligations immediately due and payable; (b) With or without notice, and without releasing Trustor from any Secured Obligation, and without becoming a mortgagee in possession, to cure any breach or Default of Trustor and, in connection therewith, to enter upon the Subject Property and do such acts and things as Beneficiary or Trustee deem necessary or desirable to protect the security hereof, including, without limitation: (i) to appear in and defend any action or proceeding purporting to affect the security of this Deed of Trust or the rights or powers of Beneficiary or Trustee under this Deed of Trust; (ii) to pay, purchase, contest or compromise any encumbrance, charge, lien or claim of lien which, in the sole judgment of either Beneficiary or Trustee, is or may be senior in priority to this Deed of Trust, the judgment of Beneficiary or Trustee being conclusive as between the parties hereto; (iii) to obtain insurance; (iv) to pay any premiums or charges with respect to insurance required to be carried under this Deed of Trust; or (v) to employ counsel, accountants, contractors and other appropriate persons. (c) To commence and maintain an action or actions in any court of competent jurisdiction to foreclose this instrument as a mortgage or to obtain specific enforcement of the covenants of Trustor hereunder, and Trustor agrees that such covenants shall be specifically enforceable by injunction or any other appropriate equ.itable remedy and that for the purposes of any suit brought under this subparagraph, Trustor waives the defense of laches and any applicable statute of limitations; (d) To apply to a court of competent jurisdiction for and obtain appointment of a receiver of the Subject Property as a matter of strict right and without regard to the adequacy of the security for the repayment of the Secured Obligations, the existence of a declaration that the Secured Obligations are immediately due and payable, or the filing of a notice of default, and Trustor hereby consents to such appointment; (e) To enter upon, possess, manage and operate the Subject Property or any part thereof, to take and possess all documents, books, records, papers and accounts of Trustor or the then owner of the Subject Property, to make, terminate, enforce or modify Leases of the Subject Property upon such terms and conditions as Beneficiary deems proper, to make repairs, alterations and improvements to the Subject Property as necessary, in Trustee's or Beneficiary's sole judgment, to protect or enhance the security hereof; -10- II-b( DOCSOO859843 v 1 \29999 .0000 (I) To execute a written notice of such Default and of its election to cause the Subject Property to be sold to satisfy the Secured Obligations. As a condition precedent to any such sale, Trustee shall give and record such notice as the law then requires. When the minimum period of time required by law after such notice has elapsed, Trustee, without notice to or demand upon Trustor except as required by law, shall sell the Subject Property at the time and place of sale fixed by it in the notice of sale, at one or several sales, either as a whole or in separate parcels and in such manner and order, all as Beneficiary in its sale discretion may determine, at public auction to the highest bidder for cash, in lawful money of the United States, payable at time of sale. Neither Trustor nor any other person or entity other than Beneficiary shall have the right to direct the order in which the Subject Property is sold. Subject to requirements and limits imposed by law, Trustee may from time to time postpone sale of all or any portion of the Subject Property by public announcement at such time and place of sale. Trustee shall deliver to the purchaser at such sale a deed conveying the Subject Property or portion thereof so sold, but without any covenant or warranty, express or implied. The recitals in the deed of any matters or facts shall be conclusive proof of the truthfulness thereof. Any person, including Trustee, Trustor or Beneficiary may purchase at the sale; (g) To resort to and realize upon the security hereunder and any other security now or later held by Beneficiary concurrently or successively and in one or several consolidated or independent judicial actions or lawfully taken non-judicial proceedings, or both, and to apply the proceeds received upon the Secured Obligations all in such order and manner as Trustee and Beneficiary, or either of them. determine in their sole discretion; (h) Upon sale of the Subject Property at any judicial or non-judicial foreclosure, Beneficiary may credit bid (as determined by Beneficiary in its sale and absolute discretion) all or any portion of the Secured Obligations. In determining such credit bid, Beneficiary may, but is not obligated to, take into account all or any of the following: (i) appraisals of the Subject Property as such appraisals may be discounted or adjusted by Beneficiary in its sale and absolute underwriting discretion; (ii) expenses and costs incurred by Beneficiary with respect to the Subject Property prior to foreclosure; (iii) expenses and costs which Beneficiary anticipates will be incurred with respect to the Subject Property after foreclosure, but prior to resale, including, without limitation, costs of structural reports and other due diligence, costs to carry the Subject Property prior to resale, costs of resale (e.g., commissions, attorneys' fees, and taxes), costs of any hazardous materials clean-up and monitoring, costs of deferred maintenance, repair, refurbishment and retrofit, costs of defending or settling litigation affecting the Subject Property, and lost opportunity costs (if any), including the time value of money during any anticipated holding period by Beneficiary; (iv) declining trends in real property values generally and with respect to properties similar to the Subject Property; (v) anticipated discounts upon resale of the Subject Property as a distressed or foreclosed property; (vi) the fact of additional collateral (if any), for the Secured Obligations; and (vii) such other factors or matters that Beneficiary (in its sole and absolute discretion) deems appropriate. In regard to the above, Trustor acknowledges and agrees that: (w) Beneficiary is not required to use any or all of the foregoing factors to determine the amount of its credit bid; (x) this Section does not impose upon Beneficiary any additional obligations that are not imposed by law at the time the credit bid is made; (y) the amount of Beneficiary's credit bid need not have any relation to any loan-to-value ratios previously discussed between Trustor and Beneficiary; and (z) Beneficiary's credit bid may be (at Beneficiary's sole and absolute discretion) higher or lower than any appraised value of the Subject Property. 6.3 APPLICA nON OF FORECLOSURE SALE PROCEEDS. After deducting all costs, fees and expenses of Trustee, and of this trust, including, without limitation, cost of evidence of title and attorneys' fees in connection with sale and costs and expenses of sale and of any judicial proceeding wherein such sale may be made, Trustee shall apply all proceeds of any foreclosure sale: (a) to payment of all sums expended by Beneficiary under the terms hereof and not then re-paid, with accrued interest; (b) to payment of all other Secured Obligations; and (c) the remainder, if any, to the person or persons legally entitled thereto. -11- /1- bJ- DOCSOC\859843 v 1 \29999.0000 6.4 APPLICA TION OF OTHER SUMS. All sums received by Beneficiary under Section 6.2 or Section 3.2, less all costs and expenses incurred by Beneficiary or any receiver under Section 6.2 or Section 3.2, including, without limitation, attorneys' fees, shall be applied in payment of the Secured Obligations in such order as Beneficiary shall determine in its sole discretion; provided, however, Beneficiary shall have no liability for funds not actually received by Beneficiary. 6.5 NO CURE OR WAIVER. Neither Beneficiary's nor Trustee's nor any receiver's entry upon and taking possession of all or any part of the Subject Property, nor any collection of rents, issues, profits, insurance proceeds, condemnation proceeds or damages, other security or proceeds of other security, or other sums, nor the application of any collected sum to any Secured Obligation, nor the exercise or failure to exercise of any other right or remedy by Beneficiary or Trustee or any receiver shall cure or waive any breach, Default or notice of default under this Deed of Trust, or nullify the effect of any notice of default or sale (unless all Secured Obligations then due have been paid and performed and Trustor has cured all other defaults), or impair the status of the security, or prejudice Beneficiary or Trustee in the exercise of any right or remedy, or be construed as an affirmation by Beneficiary of any tenancy, lease or option or a subordination of the lien of this Deed of Trust. 6.6 PAYMENT OF COSTS. EXPENSES AND ATTORNEYS' FEES. Trustor agrees to pay to Beneficiary immediately and without demand all reasonable costs and reasonable expenses incurred by Trustee and Beneficiary pursuant to Section 6.2 (including, without limitation, court costs and attomeys' fees, whether incurred in litigation or not) with interest from the date of expenditure until said sums have been paid at the rate of interest then applicable to the principal balance of the indebtedness as specified in the Loan Agreement. In addition, Trustor shall pay to Trustee all Trustee's fees hereunder and shall reimburse Trustee for all expenses incurred in the administration of this trust, including, without limitation, any attorneys' fees. 6.7 POWER TO FILE NOTICES AND CURE DEFAULTS. Trustor hereby irrevocably appoints Beneficiary and its successors and assigns, as its attorney-in-fact, which agency is coupled with an interest, upon the occurrence and during the continuance of a default, (a) to execute and/or record any notices of completion, cessation of labor, or any other notices that Beneficiary deems appropriate to protect Beneficiary's interest, (b) upon the issuance of a deed pursuant to the foreclosure of this Deed of Trust or the delivery of a deed in lieu of foreclosure, to execute all instruments of assignment or further assurance with respect to the Leases and Payments in favor of the grantee of any such deed, as may be necessary or desirable for such purpose, (c) to prepare, execute and file or record financing statements, continuation statements, applications for registration and like papers necessary to create, perfect or preserve Beneficiary's security interests and rights in or to any of the Collateral, and (d) to perform any obligation of Trustor hereunder; provided, however, that: (i) Beneficiary as such attorney-in-fact shall only be accountable for such funds as are actually received by Beneficiary; and (ii) Beneficiary shall not be liable to Trustor or any other person or entity for any failure to act under this Section. ARTICLE 7. MISCELLANEOUS PROVISIONS 7.1 MERGER. No merger shall occur as a result of Beneficiary's acquiring any other estate in, or any other lien on, the Subject Property unless Beneficiary consents to a merger in writing. 7.2 OBLIGATIONS OF TRUSTOR, JOINT AND SEVERAL. If more than one person has executed this Deed of Trust as "Trustor", the obligations of all such persons hereunder shall be joint and several. 7.3 WAIVER OF MARSHALLING RIGHTS. Trustor, for itself and for all parties claiming through or under Trustor, and for all parties who may acquire a lien on or interest in the Subject Property, hereby waives all rights to have the Subject Property and/or any other property, including, without limitation, the Collateral, which is now or later may be security for any Secured Obligation ("Other Property") marshaled upon any foreclosure of this Deed of Trust or on a foreclosure of any other security for any of the Secured Obligations. Beneficiary shall have the right to sell, and any court in which foreclosure proceedings may be brought shall have the right to order a sale of, the Subject Property and any or all of the Collateral or Other Property as a whole or in separate parcels, in any order that Beneficiary may designate. -12- A-63 DOCSOC\859843v 1 \29999.0000 7.4 RULES OF CONSTRUCTION. When the identity of the parties or other circumstances make it appropriate the masculine gender includes the feminine and/or neuter, and the singular number includes the plural. The term "Subject Property" means all and any part of the Subject Property and any interest in the Subject Property. 7.5 SUCCESSORS IN INTEREST. The terms, covenants, and conditions herein contained shall be binding upon and inure to the benefit of the heirs, successors and assigns of the parties hereto; provided, however, that this Section 7.5 does not waive or modify the provisions of Section 5.10. 7.6 EXECUTION IN COUNTERPARTS. This Deed of Trust may be executed in any number of counterparts, each of which, when executed and delivered to Beneficiary, will be deemed to be an original and all of which, taken together, will be deemed to be one and the same instrument. 7.7 CALIFORNIA LAW. This Deed of Trust shall be construed in accordance with the laws of the State of California, except to the extent that Federal laws preempt the laws of the State of California. 7.8 INCORPORATION. Exhibit A, as attached, is incorporated into this Deed of Trust by this reference. 7.9 NOTICES. All notices or other communications required or pernritted to be given pursuant to the provisions of this Deed of Trust shall be in writing and shall be considered as properly given if delivered personally or sent by first class U.S. mail, postage prepaid, except that notice of a Default may be sent by certified mail, return receipt requested, or by Overnight Express Mail or by ovemight commercial courier service, charges prepaid. Notices so sent shall be effective three (3) days after mailing, if mailed by first class mail, and otherwise upon receipt at the addresses set forth below. For purposes of notice. the addresses of the parties shall be: Trustor: The Dtay Ranch Company 350 West Ash Street Suite 730 San Diego CA 92101 Attention: Robert Cameron With a copy to: _/SOUTH BAY COMMUNITY VILLAS, LLC c/o Alliant Capitol-Newport Division 26461 Crown Valley Parkway Suite 140 Mission Viejo CA 92691 Attention: Trustee: Developer to Insert Name & Address Beneficiary: Redevelopment Agency of the City of Chula Vista 276 Fourth Avenue Chula Vista, CA 91910 Attn: Executive Director With a copy to Agency Attorney and Housing Coordinator Any party shall have the right to change its address for notice hereunder to any other location within the continental United States by the giving of thirty (30) days notice to the other party in the manner set forth hereinabove. Trustor shall forward to Beneficiary, without delay, any notices, letters or -13- A 61 DOCSOC\859843v I \29999 .0000 other communications delivered to the Subject Property or to Trustor naming Beneficiary, as addressee, or which could reasonably be deemed to affect the ability of Trustor to perform its obligations to Beneficiary under the Loan Agreement. 7.10 LOAN AGREEMENT AND PROMISSORY NOTE CONTROL. In the event of conflict between the terms of this Deed of Trust and the Loan Agreement or the Promissory Note, the terms of the Loan Agreement and Pronrissory Note shall prevail, except that the provisions of 6.2 of this Deed of Trust shall control with respect to rights and remedies of Beneficiary and Trustee hereunder. 7.11 NONDISCRIMINATION. Trustor herein covenants by and for itself, its heirs, executors, administrators, and assigns, and all persons claiming under or through it that there shall be no discrimination against or segregation of, any person or group of persons on account of race, color, creed, religion, sex, marital status, national origin, or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the Subject Property, nor shall the grantee of any person claiming under or through it, establish or permit any such practice or practices of discrinrination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the Subject Property. [SIGNATURE ON NEXT PAGE] -14- 11- GS- DOCSOC\859843v 1 \29999.0000 IN WITNESS WHEREOF, Trustor has executed this Deed of Trust as of the day and year set forth above. "TRUSTOR" SOUTH BAY COMMUNITY VILLAS LP., (Limited Partnership) By: Developer to Insert Name (Limited Liability Company) By: Developer to Insert Name & Title By: SOUTH BAY COMMUNITY SERVICES, a California nonprofit public benefit corporation, General Partner By: Kathryn Lembo, Executive Director (ALL SIGNATURES MUST BE ACKNOWLEDGED) Sol ¡l-~b DOCSOC\B59843 v 1 \29999 .0000 DESCRIPTION OF SUBJECT PROPERTY Exhibit A to Deed of Trust with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing executed by SOUTH BAY COMMUNITY VILLAS LP., as Trustor to Developer to Insert Namc of Trustee, a California corporation, as Trustee for the benefit of the REDEVELOPMENT AGENCY OF THE CITY OF CHULA VISTA, a public body, corporate and politic, as Beneficiary, dated as of ,2001. All the certain real property located in the City of Chula Vista, County of San Diego, State of California, described as follows: Developer to Insert Legal Description DOCS0C\859843vl \29999.0000 /l- G 7 STATE OF CALIFORNIA COUNTY OF ss. On this day of , 19_, before me a Notary Public in and for the State of California, personally appeared personally known to me (or proved 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 My commission expires -2- ll-b6' DOCSOC\859843v 1 \29999.0000 EXHIBIT D AFFORDABLE HOUSING AGREEMENT D-l /i-be¡ DOCSOC\859837 v I \29999.0000 EXHIBIT E SOURCES AND USES (To be Inserted by Borrower) E-I ;1- 70 DOCSOC\859837v 1 \29999.0000 EXHIBIT F PROJECT BUDGET (To be Inserted by Borrower) F-l /}- 7 ( DOCSOC\859837vl\29999.0000 EXHIBIT G PROJECT PRO FORMA (To be Inserted by Borrower) G-l A- 7;;L DOCSOC\859837v I \29999.0000 EXHIBIT H CERTIFICATE OF COMPLETION TillS CERTIFICATE OF COMPLETION (the "Certifiice") i s made by the REDEVELOPMENT AGENCY OF THE CITY OF CHULA VISTA, a public body, corporate and politic (the "Agency"), in favor of SOUTH BAY COMMUNITY VILLAS, LP., a California limited partnership (the "Property Owner"), as of ,200_. RECITALS A. The Agenccand the Property Owner have entered into that certain Loan Agreement and Related Restricted Coyenants (the "Loan Agreement") dated , 2001, concerning the redevelopment of certain real property situated in the City of Chula Vista, California as more fully described in Exhibit A attached hereto and made a part hereof. B. As referenced in Section 9.8 of the Loan Agreement, the Agency is required to furnish the Property Owner with a Certificate of Completion upon completion of the development and construction of the Project in accordance with the Loan Agreement. This Certificate of Completion is conclusive determination of satisfactory completion of the development and construction required by Article 9 of the Loan Agreement. C. The Agency have conclusively determined that the development and construction of the Project has been satisfactorily completed. NOW, THEREFORE, the Agency hereby certifies as follows: The development and construction of the Project to be performed by the Property Owner has been fully and satisfactorily completed in conformance with Article 9 of the Loan Agreement. [NEXT PAGE IS SIGNATURE PAGE] H-l ;4 - 73 DOCSOO859837v 1 \29999 .0000 IN WITNESS WHEREOF, the Agency has executed this Certificate of Completion as of the date set forth above. REDEVELOPMENT AGENCY OF THE CITY OF CHULA VISTA, a public body, corporate and politic By: Its: ATTEST: Agency Secretary ATTEST: City Clerk APPROVED AS TO FORM: Agency Counsel H-2 /l- 7c.( DOCSOO859837vl \29999.0000 EXHIBIT L SCOPE OF WORK (To be Inserted by Borrower) 1-1 ¡J- 7S- DOCSOC\859837v I129999.DOOO EXHIBIT J SCHEDULE OF PERFORMANCE (To be Inserted by Borrower) J-1 A-Ire DOCSOO859837v 1129999.0000 RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: Redevelopment Agency of the City of Chula Vista City of Chula Vista 276 Fourth Avenue Chula Vista CA 91910 Attn: Housing Manager No fee for recording pursuant to Government Code Section 27383 (Space above for Recorder's Use) AFFORDABLE HOUSING AGREEMENT THIS AFFORDABLE HOUSING AGREEMENT (the "Agreement") is entered into as of , 2001, between the REDEVELOPMENT AGENCY OF THE CITY OF CHULA VISTA, a public body, corporate and politic ("Agency"), and SOUTH BAY COMMUNITY VILLAS LP., a California limited partnership ("Property Owner") and/or its successors or assignees. ARTICLE 1- Recitals 1.1 Authority. Agency is a public body, corporate and politic, exercising governmental functions and powers and organized and existing under the Community Redevelopment Law of the State of California (Health and Safety Code Section 33000, et seq.). Agency is authorized to enter into binding agreements for the purposes set forth in the Community Redevelopment Law. 1.2 Prooertv Owner. Property Owner is the legal owner of the fee title to the real property located at East Palomar Street between Santa Rita Avenue and Santa Andrea Avenue within a multi-family and commercial area identified in the Otay Ranch Village 1 tentative map as R47 & Cl in the City of Chula Vista, California, which is described in the attached Exhibit A, which is hereby incorporated herein ("the Real Property"). The Real Property is currently unimproved. 1.3 Loan Agreement. Property Owner and Agency have entered into a Loan Agreement and Related Restricted Covenants dated as of , 2001 (the "Loan Agreement"), whereby the Agency has agreed to make a loan to the Property Owner, and the Owner has agreed to develop, construct, and operate the Real Property as an affordable housing project. The execution and recording of this Affordable Housing Agreement is a requirement of the Loan Agreement. ,B-¡ DOCSDaS55195v2\24036.0027 1.4 Project. Property Owner proposes to construct a multifamily housing project with a multifamily housing development consisting of 91 units for senior citizen housing and 180 units for family housing, within the Otay Ranch master planned community. The residential units will consist of 30 units affordable to very low income households at or below 50 percent of the Area Median Income ("AMI"), with 10 of those very low income units for senior citizens, 101 units affordable to low income households at or below 60 percent of AMI, with 33 of those low income units for senior citizens, and the remainder of the units (other than the three units which may be made available to on-site managers and a maintenance employee) affordable to moderate income households at or below 120 percent of the Area Median Income, with 47 of those moderate income units for senior citizens (the "Project"). 1.5 Agreement. The Agency established in Agency Resolution No. 2001-165 as a condition to approval of the financial assistance, a requirement that an agreement be entered into between the Agency and Property Owner providing for the creation and maintenance of a specified percentage of the dwelling units on the Rea] Property for low income housing. 1.6 Intent. These parties intend that this Agreement constitute the agreement referred to in Paragraph 1.3. AGENCY AND PROPERTY OWNER HEREBY AGREE AS FOLLOWS: ARTICLE 2- Low Income Housinl! 2.1 Definitions. For the purposes of this article, the following definitions apply: 2.1.1 "Area Median Income" means the latest median income from time to time determined by the United States Department of Housing and Urban Development (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 and Safety Code Section 50093. 2.1.2 "Low Income Tenants" means individuals or families with an income which does not exceed 60 percent of the Area Median Income, as adjusted for household size. 2.1.3 "Moderate Income Tenants" means families with an income which does not exceed 120 percent of the Area Median Income, as adjusted for household size. 2.1.4 "Very Low Income Tenants" means individuals or families with an income which does not exceed 50 percent of the Area Median Income, as adjusted for household size. 2.1.5 "Very Low Income Apartment" means any of the thirty (30) apartment units on the Real Property which shall be continuously occupied only by and affordable to a Very Low Income Tenant. B-2 DOCSOC\855195 v2\24036 .0027 2.1.6 "Low Income Apartment" means any of the one hundred one (101) apartment units on the Real Property which shall be continuously occupied only by and affordable to a Low Income Tenant. 2.1.7 "Moderate Income Apartment" means any of the one hundred thirty-seven (137) apartment units on the Real Property which shall continuously be occupied only by and affordable to a Moderate Income Tenant. 2.1.8 "Affordable Apartment" means anyone of the apartments defined in Paragraph 2.1.5 through 2.1.7; "Affordable Apartments" means all of such apartments collectively. 2.1.9 "Manager's Units" means those two (2) units on the Real Property occupied by a resident property manager which may be exempt from occupancy restrictions. 2.1.10 "Maintenance Employee's Unit" means the unit on the Real Property occupied by a resident maintenance employee which may be exempt from occupancy restrictions. 2.1.11 "Rent" means the total of monthly payments for all of the following: (a) use and occupancy of the apartment unit and land and facilities associated therewith, (b) any separately charged fees or service charges assessed by the lessor which are required of all tenants, other than security deposits, and (c) a reasonable allowance for utilities not included in the above costs, excluding telephone service, which takes into consideration an adequate level of service. 2.1.12 "Housing Manager" means the Housing Manager of the Agency. 2.2 Oualification of Tenants. As to the Affordable Apartments, the following will apply: 2.2.1 1 BR Verv Low Income Apartments. Each one bedroom Very Low Income Apartment will be leased to a senior household of up to three persons which is a Very Low Income Tenant. 2.2.2 2 BR Verv Low Income Apartments. Each two bedroom Very Low Income Apartment will be leased to a household of up to five persons which is a Very Low Income Tenant. 2.2.3 3 BR Verv Low Income Apartments. Each three bedroom Very Low Income Apartment will be leased to a household of up to seven persons which is a Very Low Income Tenant. 2.2.4 4 BR Verv Low Income Apartments. Each four bedroom Very Low Income Apartment will be leased to a household of up to nine persons which is a Very Low Income Tenant. 2.2.5 1 BR Lower Income Apartments. Each one bedroom Lower Income Apartment will be leased to a senior household of up to three persons which is a Lower Income Tenant. B~ 3 DOCS0C\855195v2\24036.0027 2.2.6 2 BR Lower Income Apartments. Each two bedroom Lower Income Apartment will be leased to a household of up to five persons which is a Lower Income Tenant. 2.2.7 3 BR Lower Income Apartments. Each three bedroom Lower Income Apartment will be leased to a household of up to seven persons which is a Lower Income Tenant. 2.2.8 4 BR Low Income Apartments. Each four bedroom Lower Income Apartment will be leased to a household of up to nine persons which is a Lower Income Tenant. 2.2.9 1 BR Moderate Income Apartments. Each one bedroom Moderate Income Apartment will be leased to a senior household of up to three persons which is a Moderate Income Tenant. 2.2.10 2 BR Moderate Income Apartments. Each two bedroom Moderate Income Apartment will be leased to a household of up to fiye persons which is a Moderate Income Tenant. 2.2.11 3 BR Moderate Income Apartments. Each three bedroom Moderate Income Apartment will be leased to a household of up to seven persons which is a Moderate Income Tenant. 2.2.12 4 BR Moderate Income Apartments. Each four bedroom Moderate Income Apartment will be leased to a household of up to nine persons which is a Moderate Income Tenant. 2.3 Monthly Rent. As to the Affordable Apartments, the following will apply: 2.3.1 Verv Low Income Apartments. The monthly rent charged for all the Very Low Income Apartments shall not exceed one-twelfth of the amount obtained by multiplying 30 percent times 50 percent of the Area Median Income, as adjusted for household size appropriate to the unit as specified in paragraph 2.3.4. 2.3.2 Lower Income Apartments. The monthly rent charged for all the Low Income Apartments shall not exceed one-twelfth of the amount obtained by multiplying 30 percent times 60 percent of the Area Median Income, as adjusted for household size appropriate to the unit as specified in paragraph 2.3.4. 2.3.3 Moderate Income Apartments. The monthly rent charged for all the Moderate Income Apartments shall not exceed one-twelfth of the amount obtained by multiplying 30 percent times 110 percent of the Area Median Income, as adjusted for household size appropriate to the unit as specified in paragraph 2.3.4. 2.3.4 Unit Sizes and Approvriate Household Sizes. The following are the household sizes appropriate to the unit, for calculation of monthly rent limits: Unit Size Household Size One Bedroom Two Persons Two Bedroom Three Persons 6- 4 DOCS0C\855195v2124036.0027 Three Bedroom Four Persons Four Bedroom Five Persons 2.4 Proof of Oualification. Property Owner will obtain from each person(s) to whom Property Owner rents an Affordable Apartment a "Supplemental Rental Application" ("the Application") in the form of Exhibit B attached hereto and incorporated herein (or such other form as Agency may from time to time adopt and of which Agency notifies Property Owner in writing). Property Owner will be entitled to rely on the Application and the supporting documents thereto in determining the eligibility of such person(s) to rent such Affordable Apartment. Property Owner will retain the Application and supporting documents for a period of at least three years after the applicant thereof ceases to occupy such Affordable Apartment. Copies of the most recent Supplemental Rental Application for Very Low, Lower and Moderate Income Tenants commencing or continuing occupancy of an Affordable Apartment shall be attached to the semi-annual report to be filed with the Agency in compliance with Section 3.6 of this Agreement. An Affordable Apartment occupied by a qualified tenant who at the commencement of the occupancy qualifies as a very low income, low income or moderate income household shall be treated as occupied by a Very Low, Low Income Tenant or Moderate Income Tenant (as applicable) until a recertification of such tenant's income in accordance with Section 2.4.1 below demonstrates that such tenant no longer qualifies as a Very Low, Low or Moderate Income Tenant in accordance with the standards set forth in this Article 2. 2.4.1 Recertification of Income. Immediately prior to the first anniversary date of the occupancy of an Affordable Apartment by a qualified tenant, and on each anniversary date thereafter, the Property Owner shall recertify the income of the occupants of each Affordable Apartment by obtaining a completed Supplemental Rental Application based upon the current income of each occupant of the Affordable Apartment. In the event the recertification demonstrates that such household's income exceeds the income at which such household originally qualified, but such household remains qualified as a Very Low Income Tenant, Low Income Tenant, or Moderate Income Tenant, such tenant shall not be required to vacate the unit, and the Property Owner will rent the next available unit of comparable or smaller size to a household of the tenant's original income level. In the event the recertification demonstrates that such household's income exceeds the income for a Moderate Income Tenant, such tenant shall be required to vacate the unit. 2.5 Waiver. Property Owner may apply in writing to the Housing Manager for a waiver, as to a specifically designated Affordable Apartment. Each such application will be accompanied by written data or other evidence relied upon by Property Owner to show that, for the near future, there will be no reasonable demand for such Affordable Apartments(s). Within 30 days after receipt of any such application, the Housing Manager will, in writing, either grant or disapprove the requested waiver. If such waiver is granted, Property Owner may lease the Affordable Apartment(s) affected by the granted waiver to such person(s) and at such rental as Property Owner determines, subject to each of the following: B- 5 DOCSOC\855195v2\24036.0027 2.5.1 Month-to-Month Tenancy. Anything in Paragraph 2.5 to the contrary notwithstanding, the lease or rental agreement will create only a month-to-month tenancy. 2.5.2 Termination of Waiver. At any time after granting any such waiver, the Housing Manager may, by writing delivered to Property Owner, terminate such grant. Within five days after such delivery, Property Owner will appropriately notify the tenant(s) and occupant(s) (of the Affordable Apartment(s) for which the grant of waiver has been terminated) that the month-to-month tenancy thereof will be and become terminated one month after delivery of such notification by Property Owner. Property Owner will take reasonable steps to effectuate such termination, including diligent commencement and prosecution of an unlawful detainer action. 2.6 Records. Audits. Property Owner will submit to Agency semi-annual certified rent rolls, disclosing with respect to each Affordable Apartment (i) monthly rent rate, (ii) number of occupants for which the Affordable Apartment is rented, and (iii) the income of such occupant(s) and in the form of Exhibit C attached hereto and incorporated herein (or such other form as Agency may from time to time adopt and of which Agency notifies Property Owner in writing). If Agency reasonably believes that violations of the rent, occupancy and/or income requirements of this Agreement have occurred, and that an audit is necessary to verify a submitted rent roll, it will so notify Property Owner in writing thereof. Within ten days after delivery of said notice, Property Owner will deliver to Agency the names of three certified public accountants doing business in the metropolitan San Diego area. Agency will promptly deliver to Property Owner the former's approval of one or more of said names. The audit will be completed by an approved certified public accountant, at Property Owner's cost, within 60 days after the delivery to Property Owner of Agency's approval. The certified public accountant will promptly deliver a copy of the written audit to Agency. 2.7 Term. The term during which this Article 2 applies commences on the date hereof. Said term ends on the date which is fifty-five (55) years after the date of issuance of a final certificate of completion for the Project. 2.8 Reports. Property Owner, at its expense, shall submit, or cause the Property Manager to submit, to the appropriate entities any and all reports required to be submitted pursuant to California Community Redevelopment Law. 2.9 Subordination of Affordabilitv Covenants. In the event that the Agency finds that an economically feasible method of financing for the rehabilitation and operation of the Project, without the subordination of the affordable housing covenants as may be set forth in this Agreement, is not reasonably available, the Agency shall make the affordable housing covenants set forth in this Agreement junior and subordinate to the deeds of trust and other documents required in connection with the construction and permanent financing for the Project approved pursuant to the Loan Agreement, and the TCAC Regulatory Agreement. Any subordination agreement entered into by the Agency shall contain written commitments which the B~ 6 DOCSOC\855195v2124036.0027 Agency find are reasonably designed to protect Agency's investment in the event of default, such as any of the following: (a) a right of Agency to cure a default on the loan prior to foreclosure, (b) a right of Agency to negotiate with the lender after notice of default from the lender and prior to foreclosure, (c) an agreement that if prior to foreclosure of the loan, Agency takes title to the property and cures the default on the loan, the lender will not exercise any right it may have to accelerate the loan by reason of the transfer of title to Agency, and (d) a right of Agency to reacquire the Real Property from the Property Owner at any time after a material default on the loan. ARTICLE 3 -Uses Of The Real Prooertv 3.1 Condition of the Real Prooertv. a. Property Owner shall take all necessary precautions to prevent the release into the environment of any Hazardous Materials which may be located in, on or under the Real Property. Such precautions shall include compliance with all Governmental Requirements with respect to Hazardous Materials. In addition, Property Owner shall install and utilize such equipment and implement and adhere to such procedures as are consistent with commercially reasonable standards as respects the disclosure, storage, use, removal and disposal of Hazardous Materials. b. Property Owner shall indemnify, defend and hold Agency harmless from and against any claim, action, suit, proceeding, loss, cost, damage, liability, deficiency, fine, penalty, punitive damage, or expense (including, without limitation, reasonable attorneys' fees), resulting from, arising out of, or based upon (i) the release, use, generation, discharge, storage or disposal of any Hazardous Materials on, under, in or about, or the transportation of any such Hazardous Materials to or from, the Real Property, no matter when such claim, action, suit or proceeding is first asserted or begun and no matter how the Hazardous Materials came to be released, used, generated, discharged, stored or disposed of on, under, in or about, to or from the Real Property, or by whom or how they are discovered, or (ii) the violation, or alleged violation, of any statute, ordinance, order, rule, regulation, permit, judgment or license relating to the use, generation, release, discharge, storage, disposal or transportation of Hazardous Materials on, under, in or about, to or from, the Real Property. This indemnity shall include, without limitation, any damage, liability, fine, penalty, parallel indemnity after closing, cost or expense arising from or out of any claim, action, suit or proceeding, including injunctive, mandamus, equity or action at law, for personal injury (including sickness, disease or death), tangible or intangible property damage, compensation for lost wages, business income, profits or other economic loss, damage to the natural resource or the environment, nuisance, contamination, leak, spill, release or other adverse effect on the environment. c. For purposes of this Agreement, "Hazardous Materials" means any substance, material, or waste which is or becomes regulated by any local governmental authority, San Diego County, the State of California, regional governmental authority, or the United States Government, including, but not limited to, any material or substance which is (i) defined as a "hazardous waste," "extremely hazardous waste," or "restricted hazardous waste" under Section 25115, 25117 or 25122.7, or listed pursuant to Section 25130 of the California Health and Safety Code, Division 20, Chapter 6.5 (Hazardous Waste Control Law», (ii) defined as a "hazardous substance" under Section 25316 of the California Health and Safety Code, Division 20, Chapter 6.8 (Carpenter-Presley-Tanner Hazardous Substance Account Act), (iii) defined as a "hazardous material," "hazardous substance," or "hazardous waste" under Section 25501 of the California Health and Safety Code, Division 20, Chapter 6.95 (Hazardous Materials Release Response P1ans and Inventory), (iv) defined as a "hazardous substance" under Section 25281 of the California Health and Safety Code, Division 20, ß- 7 DOCsoaS55195v2\24036.0027 Chapter 6.7 (Underground Storage of Hazardous Substances), (v) petroleum, (vi) friable asbestos, (vii) polychlorinated byphenyls, (viii) methyl tertiary butyl ether, (ix) listed under Article 9 or defined as "hazardous" or "extremely hazardous" pursuant to Article 11 of Title 22 of the California Code of Regulations, Division 4, Chapter 20, (x) designated as "hazardous substances" pursuant to Section 311 of the Clean Water Act (33 U.S.c. §1317), (xi) defined as a "hazardous waste" pursuant to Section 1004 of the Resource Conservation and Recovery Act, 42 V.S.c. §6901, et seq. (42 V.S.C. §6903) or (xii) defined as "hazardous substances" pursuant to Section 101 of the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. §9601, et seq. d. For purposes of this Agreement, "Governmental Requirements" means all laws, ordinances, statutes, codes, rules, regulations, orders and decrees of the United States, the State, the County of San Diego, the City, or any other political subdivision in which the Property is located, and of any other political subdivision, agency or instrumentality exercising jurisdiction over the Agency, the City, the Borrower or the Property. 3.2 Marketing Plan. Property Owner shall submit for the approval of the Agency, which approval shall not unreasonably be withheld, a plan for marketing the rental of the apartment units in compliance with federal and state fair housing law. Such marketing plan shall include a plan for publicizing the availability of the apartment units within the City, such as notices in any City sponsored newsletter, newspaper advertising in local newspapers and notices in City offices. The marketing plan shall require Property Owner to obtain from the Agency the names of low- and moderate-income households who have been displaced by the Agency's redevelopment projects, and to notify persons on such list of the availability of units in the Project prior to undertaking other forms of marketing. The marketing plan shall provide that the persons on such list of displaced persons be given not fewer than ten (10) days after receipt of such notice to respond by completing application forms for rental of apartment units, as applicable. 3.3 Maintenance of Real Property. Property Owner agrees for itself and its successors in interest to all or any portion of the Real Property, to maintain the improvements on the Real Property in conformity with applicable provisions of the City Municipal Code, and shall keep the Real Property free from any accumulation of debris or waste materials. During such period, the Property Owner shall also maintain the landscaping planted on the Real Property in a healthy condition. If at any time Property Owner fails to maintain the Real Property and such condition is not corrected within five days after written notice from Agency with respect to graffiti, debris, waste material, and general maintenance, or thirty days after written notice from Agency with respect to landscaping and building improvements, then Agency, in addition to whatever remedy it may have at law or at equity, but subject to the rights of the Permanent Lender, shall have the right to enter upon the applicable portion of the Real Property and perform all acts and work necessary to protect, maintain, and preserve the improvements and landscaped areas on the Real Property, and to attach a lien upon the Real Property, or to assess the Real Property, in the amount of the expenditures arising from such acts and work of protection, maintenance, and preservation by Agency and/or costs of such cure, including a fifteen percent (15%) administrative charge, which amount shall be promptly paid by Property Owner to Agency upon demand. 3.4 Propertv Management. B~ 8 POCS0C\855 ¡ 95 v2\24036.0027 The parties acknowledge that the Agency is interested in the long tenn management and operation of the Real Property and in the qualifications of any person or entity retained by the Property Owner for that purpose (the "Property Manager"). Therefore, during the period of the effectiveness of the affordability covenants set forth herein, the Agency may from time to time review and evaluate the identity and perfonnance of the Property Manager as it deems appropriate. If the Agency determines that the perfonnance of the Property Manager is materially deficient based upon the standards and requirements set forth in this Section 3.4 and the approved Management Plan (as defined below), the Agency shall provide notice to the Property Owner of such deficiencies and the Property Owner shall use its best efforts to correct such deficiencies within a reasonable period of time. Upon the failure of the Property Manager to cure such deficiencies within the time set forth herein, the Agency shall have the right to require the Property Owner to immediately remove and replace the Property Manager with another property manager or property management company who is reasonably acceptable to the Agency, who (if required in the reasonable discretion of the Agency) is not related to or affiliated with the Property Owner, and who has not less than five (5) years experience in property management, including experience managing multifamily residential developments of the size, quality and scope of the Real Property. In addition, the Property Owner shall submit for the reasonable approval of the Agency a detailed "Management Plan" which sets forth in reasonable detail the duties of the Property Manager, the tenant selection process, a security system and crime prevention program, the procedures for the collection of rent, the procedures for monitoring of occupancy levels, the procedures for eviction of tenants, the rules and regulations of the Real Property and manner of enforcement, a standard lease fonn, and other matters relevant to the management of the Real Property. The management plan shall require the Property Manager to adhere to a fair lease and grievance procedure and provide a plan for tenant participation in management decisions. The management of the Real Property shall be in compliance with the Management Plan which is approved by the Agency, subject, however, to any requirements of the Pennanent Lender pursuant to the Pennanent Loan Documents. The Management Plan may be revised from time to time upon the reasonable approval of the Agency and the Property Owner. 3.5 Insurance. Within ten (10) days after the Property Owner's acquisition of the Real Property, Property Owner shall furnish to the Agency duplicate originals or appropriate certificates of insurance coverage evidencing that Property Owner has obtained, or cause to be obtained, insurance coverage with respect to the Real Property and Project in type, amount and from insurers with Best's ratings as are reasonably acceptable to Agency (or have been approved by the Pennanent Lender), naming the Agency and its officers, agents, employees, representatives and its successors, as named or additional insureds by appropriate endorsements. Such policy shall include, without limitation "all risk" property casualty insurance and comprehensive general liability insurance. Without limiting the generality of the foregoing, such policy shall also include coverage to insure Property Owner's indemnity obligations provided herein; unless Property Owner can demonstrate to the Agency's reasonable satisfaction that such coverage is not available, or is not available at a commercially reasonable cost consistent with the Project Budget. Property Owner covenants and agrees for itself and its successors and assigns that Property Owner and such successors and assigns shall keep such liability policy in full force and effect until the date that is fifty-two (52) years from the date of the City's issuance of the final certificate of completion for the Project. DOCSOa855195v2\24036.0027 B- 9 In addition to any other remedy which Agency may have hereunder for Property Owner's failure to procure, maintain, and/or pay for the insurance required herein, Agency may (but without any obligation to do so, and subject to the rights of the Permanent Lender under the Permanent Loan Documents) at any time or from time to time, after thirty (30) days written notice to Property Owner, procure such insurance and pay the premiums therefor, in which event Property Owner shall immediately repay Agency all sums so paid by Agency together with interest thereon at the rate of ten percent (10%) per annum or the maximum legal rate, whichever is less. 3.6 Proceeds of Insurance. Should the Project be totally or partially destroyed or rendered wholly or partly uninhabitable by fire or other casualty required to be insured against by Property Owner, Property Owner shall promptly proceed to obtain insurance proceeds and take all steps necessary to promptly and diligently commence the repair or replacement of the Project to substantially the same condition as the Project is required to be maintained in pursuant to this Agreement if (i) the Property Owner agrees in writing within ninety (90) days after payment of the proceeds that such repair or rebuilding is economically feasible, and (ii) the Permanent Lender permits such repair or rebuilding, provided that the extent of Property Owner's obligation to restore the Project shall be limited to the amount of the insurance proceeds actually received by the Property Owner. If the Property Owner is unable or is not permitted to repair, replace, or restore the Project, Property Owner must give notice to Agency (in which eyent Property Owner will be entitled to all insurance proceeds, subject to any outstanding lien obligations, but Property Owner shall be required to remove all debris from the Real Property) and Property Owner may construct such other improvements on the Real Property as are consistent with applicable land use regulations and approved by the Agency and the other governmental agency or agencies with jurisdiction. 3.7 Taxes, Assessments. Encumbrances, and Liens. Property Owner shall pay prior to delinquency all real estate taxes and assessments properly assessed and levied on the Real Property. Until the payment in full of all amounts owing under the Agency Note, Property Owner shall not place or allow to be placed thereon any mortgage, trust deed, encumbrance, or lien (except mechanic's liens prior to suit to foreclose the same being filed) not authorized by the Loan Agreement. Property Owner shall remove or have removed any levy or attachment made on the Real Property, or assure the satisfaction thereof, within a reasonable time, but in any event prior to a sale thereunder. Nothing herein contained shall be deemed to prohibit Property Owner from contesting the validity or amounts of any tax, assessment, encumbrance, or lien, nor to limit the remedies available to Property Owner in respect thereto. £3>- 10 DOCsoa855 I 95v2\24036.0027 3.8 Hold Harmless. PtOperty Owner agrees to indemnify, protect, defend and hold harmless Agency, and their officers, agents, employees, representatives and successors, from and against any and all claims, damages, actions, costs, demands, expenses or liability, including without limitation, reasonable attorneys' fees and court costs, which may arise from the direct or indirect actions or inactions of the Property Owner or those of its contractors, subcontractors, agents, employees or other persons acting on Property Owners' behalf which relate to the Real Property or Project. This hold harmless agreement applies, without limitation, to all damages and claims for damages suffered or alleged to have been suffered by reasons of the operations referred to in this paragraph, regardless of whether or not the Agency prepared, supplied or apptOved plans or specifications, or both, for the Property or Project. This indemnity by Property Owner, and all other indemnities set forth herein shall survive any foreclosure of the Real Property by the Agency pursuant to the terms of the Agency Trust Deed. 3.9 Further Indemnification of Agencv. It is understood and agreed that the parties hereto have entered the Loan Agreement as a method of ptOviding necessary assistance to Property Owner in connection with the rehabilitation of very low, lower and low and moderate income housing and rehabilitation of the Real Property pursuant to all applicable laws and that by contributing public funds to assist in the accomplishment of such rehabilitation, or by otherwise contributing or assisting with the accomplishment of such rehabilitation, the Agency assumes no responsibility for insuring that the same is adequately undertaken (including, without limitation, the existence and/or remediation of any hazardous or toxic substances on the Real PtOperty) and as a material consideration to Agency for entering into the Loan Agreement (and not by way oflimiting the generality of Section 4.8 above) Property Owner agrees to indemnify, ptOtect, defend and hold harmless Agency and all its representatives, officers, employees and their respective successors from and against any and all claims, damages, actions, demands, liabilities, obligations, expenses, losses or costs, including without limitation, reasonable attorneys' fees and court costs, which may arise or in any manner connected with the rehabilitation of the Project pursuant to the Loan Agreement; excluding, however, from Property Owner's indemnity any such liability, losses, damages (including foreseeable or unforeseeable consequential damages), penalties, fines, expenses (including out-of-pocket litigation costs and reasonable attorneys' fees) arising out of the sole negligence of Agency or its employees, contractors, subcontractors or agents. 3.10 Obligation to Refrain from Discrimination. There shall be no discrimination against, or segregation of, any persons, or group of persons, on account of race, color, creed, religion, sex, marital status, ancestry, or national origin in the enjoyment of the Real Property, nor shall Property Owner 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, sub lessees, or vendees of the Real Property or any portion thereof. Property Owner shall further comply with all the requirements of the Americans with Disabilities Act. B- 11 DOCSOO855195v2\24036.0027 3.11 Form of Nondiscrimination and Nonsegregation Clauses. Property Owner shall refrain from restricting the rental, sale, or lease of any portion of the Real Property, or contracts relating to the Real Property, on the basis of race, color, creed, religion, sex, marital status, ancestry, or national origin of any person and shall comply with all the requirements for the ADA. All such deeds, leases or contracts, shall contain or be subject to substantially the following nondiscrimination or nonsegregation clauses: a. In deeds: "The grantee herein covenants by and for himself or herself, his or her heirs, executors, administrators, and assigns, and all persons claiming under or through them, that there shall be no discrimination against or segregation of any person or group of persons on account of race, color, creed, religion, sex, marital status, ancestry, or national origin in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the land herein conveyed, nor shall the grantee himself, or any persons claiming under or through him, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the land herein conveyed and further covenants that all such individuals and entities shall comply with all requirements of the Americans with Disabilities Act of 1990, as the same may be amended from time to time (42 U.S.C. §121O1, et seq.). The foregoing covenants shall run with the land." b. In leases: "The lessee herein covenants by and for himself or herself, his or her heirs, executors, administrators, and assigns, and all persons claiming under or through him, and this lease is made and accepted upon and subject to the following conditions: 'That there shall be no discrimination against or segregation of any person or group of persons on account of race, color, creed, religion, sex, marital status, ancestry, or national origin in the leasing, subleasing, transferring, use, occupancy, tenure, or enjoyment of the land herein leased, nor shall the lessee himself, or any person claiming under or through him, 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 land herein lease and the lease shall be carried out in compliance with all requirements of the Americans with Disabilities Act of 1990, as the same may be amended from time to time (42 U.S.c. §12101, et seq.).'" c. In contracts: "There shall be no discrimination against or segregation of any persons or group of persons on account of race, color, creed, religion, sex, marital status, ancestry, or national origin in the sale, lease, transfer, use, occupancy, tenure, or enjoyment of land, nor shall the transferee himself, or any person claiming under or through him, 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, sub1essees, or vendees of land and all such activities shall be conducted in compliance with all the requirements of the Americans with Disabilities Act of 1990, as the same may be amended from time to time (42 U.S.C. §12101, et seq.)." 3.12. OccuDancv of Senior Units. Property Owner shall restrict occupancy of all of the 91 senior citizen apartment units to "Senior Citizens" and "Qualified Permanent Residents" (as those terms are or may be defined in California Civil Code Section 51.3). California Civil Code Section 51.3 presently provides as follows: At least one person in residence in each dwelling unit must be a Senior Citizen, and other residents in the same dwelling unit who are not Senior Citizens must be Qualified Permanent ß- 12 DOCSOOS55 ¡ 95v2\24036.0027 Residents. Temporary guests of a Senior Citizen or Qualified Permanent Resident shall be allowed for a period of not more than sixty (60) days in any twelve (12) month period. Upon the death, dissolution of marriage, hospitalization or other prolonged absence of the Senior Citizen in a dwelling unit, any Qualified Permanent Resident who has continuously resided in the dwelling unit with such Senior Citizen shall be permitted to continue as a resident of that dwelling unit. "Permitted Health Care Residents" (as that term is or may be defined in California Civil Code Section 51.3) shall be permitted to occupy any dwelling unit during any period that such person is actually providing live-in, long-term or hospice health care to a Senior Citizen tenant or Qualified Permanent Resident tenant for compensation. Notwithstanding the foregoing, however, in the event that the Property Owner elects to provide one of the senior citizen apartment units for residency by an on-site manager, the manager's unit shall not be required by this Agreement to be restricted to Senior Citizens and Qualified Permanent Residents. ARTICLE 4 - Breach 4.1 Breach bv Agencv. If Agency breaches any of its covenants contained in this Agreement, Property Owner will have available to it all legal and equitable remedies afforded by the laws of the State of California. 4.2 Breach bv Provertv Owner of Rent Limit Requirements. If, with respect to any Affordable Apartment, Property Owner breaches this Agreement by charging higher rent than that herein permitted, Property Owner will, immediately upon Agency's demand, (i) reduce the rent to that permitted herein and (ii) refund to any tenants who theretofore paid such higher rent the amount of the excess, together with interest hereon at the rate of 10 percent per annum, computed from the date(s) of payment of the excess by said tenants to the date of said refund. The provisions of this paragraph constitute a third-party beneficiary contract in favor of such tenants. Further, Agency is hereby granted the power (but not the duty) to act as attorney-in-fact of such tenants in enforcing this paragraph. 4.3 Breach bv Provertv Owner of Leasing Requirements. If, with respect to any Affordable Apartment, Property Owner breaches this Agreement by leasing to tenants who are not, pursuant to paragraph 2.2, qualified, Property Owner will, immediately upon Agency's written demand, and at Property Owner's sole cost, take all lawful steps to terminate such leasing. 4.4 Breach bv Provertv Owner of Other Requirements. If the Property Owner breaches any of its covenants contained in this Agreement, the Agency will have available to it all legal and equitable remedies afforded by the laws of the State of California. 4.5 Remedies Not Exclusive. The remedies set forth in Paragraphs 4.2 and 4.3 are not exclusive, but are in addition to all legal or equitable remedies otherwise available to Agency. B. 13 DOCSOO855 I 95v2\24036.0027 ARTICLE 5 - General Provisions 5.1 Assignment. The rights and obligations of Property Owner under this Agreement may be transferred or assigned, provided such transfer or assignment is made as a part of the conveyance of the fee of all or a portion of the Real Property. Any such transfer or assignment will be subject to the provisions of this Agreement. During the term of this Agreement, any such assignee or transferee will observe and perform all of the duties and obligations of Property Owner contained in this Agreement as such duties and obligations pertain to the portion of said real property so conveyed. 5.2 Amendment or Cancellation of Agreement. This Agreement may be amended from time-to-time or cancelled by the mutual consent of the parties hereto but only in the same manner as its adoption. The term "this Agreement" includes any such amendment properly approved and executed. 5.3 Enforcement. Unless amended or cancelled as provided in Section 5.2, this Agreement is enforceable by any party to it despite a change in the applicable general or specific plans, zoning, subdivision or building regulations adopted by City which alter or amend the rules, regulations or policies governing permitted uses of the land, density and design. 5.4 Binding Effect of Agreement. The burdens of this Agreement bind and the benefits of the Agreement inure to the parties' successors or assignees in interest. 5.5 Relationship of Parties. It is understood that the contractual relationship between Agency and Property Owner is such that Property Owner is an independent contractor and not an agent of Agency. 5.6 Notices. All notices, demands or requests provided for or permitted to be given pursuant to this Agreement must be in writing. All notices, demands or requests to be sent to any party shall be deemed to have been properly given or served if personally served or deposited in the United States mail, addressed to such party, postage prepaid, registered or certified, with return receipt requested, at the addresses identified herein as the places of business for each of the designated parties. Agencv: Redevelopment Agency of the City of Chula Vista 276 Fourth Avenue Chula Vista, CA 91910 Attn: Community Development Director DOCSOC\855195v2\24036.0027 B- 14 Provertv Owner: SOUTH BAY COMMUNITY VILLAS LP. c/o Avalon Communities, LLC 1801 E. Parkcourt Place Building E, Suite 204 Santa Ana, CA 92701 Attn: Lionel Puig A party may change its address by giving notice in writing to the other party. Thereafter, notices, demands and requests shall be addressed and transmitted to the new address. ARTICLE 6 - Conflicts of Law 6.1 Conflict of Citv and State or Federal Laws. In the event that state or federal laws or regulations prevent or preclude compliance with one or more provisions of this Agreement, or require changes in plans, maps or pennits approved by the City, the parties will: 6.1.1 Notice and Copies: Provide the other party with written notice of such state or federal restriction, provide a copy of such regulation or policy and statement of conflict with the provisions of this Agreement. 6.1.2 Modification Conferences: The parties will, within 30 days, meet and confer in good faith in a reasonable attempt to modify this Agreement to comply with such federal or state law or regulation. 6.2 Agencv Board Hearings. Thereafter, regardless of whether the parties reach an agreement on the effect of such federal or state law or regulation upon this Agreement, the matter will be scheduled for consideration by the governing board of the Agency. The Agency, at such meeting, will detennine the exact modification or suspension which shall be necessitated by such federal or state law or regulation. Property Owner, at the meeting, will have the right to offer oral and written testimony. Any modification or suspension will be taken by the affinnative vote of not less than a majority of the authorized voting members of the governing board of the Agency. 6.3 Cooveration in Securing Pennits. The Agency shall cooperate with the Property Owner in the securing of any permits which may be required as a result of such modifications or suspensions. ARTICLE 7 - Miscellaneous Provisions 7.1 Rules of Construction. The singular includes the plural and the neuter gender includes the masculine and the feminine. Any tenns used herein which are not defined herein shall have the meaning given to such tenns in the Loan Agreement. 13- 15 OOCSOO855195v2124036.0027 7.2 Severabilitv. The parties hereto agree that the provisions are severable. If any provision of this Agreement is held invalid, the remainder of this Agreement will be effective and will remain in full force and effect unless amended or modified by mutual consent of the parties. 7.3 Entire Agreement. Waivers and Amendments; Regulatorv Agreement to Control. Except for the Regulatory Agreement, this Agreement, together with any other written document referred to or contemplated herein, embody the entire Agreement and understanding between the parties relating to the subject matter hereof. Notwithstanding any provision in this Agreement to the contrary, so long as the Regulatory Agreement is in effect, the terms of the Regulatory Agreement shall control with respect to the Very Low Income Apartments. Neither this Agreement nor any provision hereof may be amended, modified, waived, or discharged except by an instrument in writing executed by the party against which enforcement or such amendment, waiver, or discharge is sought. 7.4 Capacities of Parties. Each signatory and party hereto hereby warrants and represents to the other party that it has legal authority and capacity and direction from its principal to enter into this Agreement, and that all resolutions or other actions have been taken so as to enable it to enter into this Agreement. 7.5 Governing LawNenue. This Agreement shall be governed by and construed in accordance with the laws of the State of California. Any action arising under or relating to this Agreement shall be brought only in the Federal or State courts located in San Diego County, State of California, and if applicable, the City of Chula Vista, or as close thereto as possible. Venue for this Agreement, and performance hereunder, shall be the City of Chula Vista. [NEXT PAGE IS SIGNATURE PAGE] DOCSOC\855195v2\24036.0027 B- 16 IN WITNESS WHEREOF the parties hereto have caused this agreement to be executed as of the day and year first written above. SOUTH SAY COMMUNITY VILLAS, LP, a California linrited partnership By: Deve10perto InsertName (Limited Liability Company) By: Developer to Insert Name. &. Title REDEVELOPMENT AGENCY OF THE CITY OF CHULA VISTA, a public body, corporate and politic Shirley Horton, Chair ATTEST: Chris Salomone, Agency Secretary APPROVED AS TO FORM: John M. Kaheny, Agency Attorney 00CSOC\855195v2\24036.0027 ß-17 EXHIBIT A LEGAL PROPERTY DESCRIPTION All that certain real property situated in the City of Chula Vista, County of San Diego, State of California, described as follows: Oeveloper"to."lm¡ert." Legal "Description DOCSOC\855195v2\24035.0027 ß.tB EXHIBIT B AGENCY RESOLUTION 2001-165 00CSOC\855195v2\24036.0027 f3. -1'9 EXHIBIT C DOCSOC\855195v2\24036.0027 \2>.2-0 EXHIBIT C DOCSOC\855195v2\24036.0027 B' .2-1 ~~ ¡'¡ ÕZ ::~z 0 .- c.' 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U'I W II: -CII) ~ CI 0 ¡.!!IE ~ ~-g8 ~ Q.:æ.E I- Z >- 0 :E'I:I.,. :¡; ¡: Õ II) CI °iE ~ ~(g8 ~~ ~~.E ~I~~~ 0 - <I> (¡j ';:í;'1 6:S J: CD i2w:! >- u~ ...C ~ m 0" 0 < .0. co 0 ~ù ~ II: u 0 0 a ~ ~ ~ < ~ >- ~ i ~ ~ 0 ~ z j c z ~ co < ... ~ ..!. - 0 ï:o :¡; g II) ~ W '" E ~ (/ <= .. co ~ z ~ , c ~.,. ~ .c 0 ¡: ~ -¡¡¡ ¡;¡ ~a: ~ E8 ~ E <ó .08 ~ ... .. ê~ ø~ '" '1:1- ~~ E ID moo .E~ Z'" ãí CD :ß 0 c 59 ~:;:- d :gg "e ~ :: æ ~ 0.. « C 08 ::I ~ ~ ~ = m ci ~ N M ~ ~ U'I U'I U'I U'I U'I ~ ~ ~ ~ ~ ~ 6- 7- c.. ~!f? 7f",-; aTVQf CHUIA VISTA SEMI-ANNUAL AFFORDABLE HOUSING MONITORING REPORT Owner's Certification I am the owner or owner's representative for an affordable housing development in the City of Chula Vista, which is bound by a Housing Agreement with the Agency. I certify under penalty or perjury that the attached rent roll for affordable units at my project is true and correct to the best of my knowledge and complies with the terms and conditions stipulated in the Affordable Housing Agreement, or any agreement that implements the same, with the Redevelopment Agency of the City of Chula Vista. Name Title Signature Date DOCSOC\855195v2\24036,OO27 f!?-2--í ~!ft. 7;1';-; OlYQf (HULA VISrA SUPPLEMENTAL RENTAL APPLICATION The rental unit for which you are applying has received governmental assistance under programs to encourage more affordable housing. As a result, the unit carries a rent level restriction and is restricted to occupancy by low and moderate-income households. The information required on this form is necessary to determine you income eligibility to occupy the unit. You must report all household income. Information provided will be confidential and not subject to public disclosure pursuant to State Government Code Section 6254(h). 1. Rental Unit Address 2. Head of Household Name 3. Household Members Household Name Date of Birth Age Member No. 1 (Head of Household) 2 3 4 5 4. Total Current Annual Household Income from all Sources: Household Source Income Member No. 1 (Head of Household) $ TOTAL 00CSOC\855195v2\24036.0027 B-Z6 Supplemental Rental Application Page 2 of 2 5. Total Gross Annual Household Income shown on most recent Federal Tax return (attach copies of most recent Federal Tax returns for all household members receiving income). Total Gross Annual Income $ 6. Unit Size: Bedrooms 7. Monthly Rental Rate: $ APPLICANT'S STATEMENT I certify, under penalty of perjury, that the foregoing information is true and correct to the best of my knowledge. I understand that any misrepresentation of the information contained herein may be cause for eviction. Signature Date Applicant OWNER'S STATEMENT Based on the foregoing information, I certify, under penalty of perjury, that the applicant is eligible to occupy this restricted affordable unit. Eligibility is based on finding that the applicant household's current annual income is $ and does not exceed the current maximum household income of $ allowed under the terms of an Affordable Housing Agreement with the Redevelopment Agency of the City of Chula Vista regarding this residential development. Name Title Signature Date OOCSOC\855195v2\24036.0027 B~ Z?1 ATTACHMENT C DEFERRAL AGREEMENT FOR THE PUBLIC FACILITIES DEVELOPMENT IMPACT FEE THIS AGREEMENT, made and entered into this - day of 2001, by and between the CITY OF CHULA VISTA, a municipal corporation, ("City") and SOUTH BAY COMMUNITY VILLAS L.P. ("Developer") with reference to the following facts: I RECITALS WHEREAS, Developer (and/or their affiliates) owns, in fee, certain real property ("Property") located at East Palomar Street between Santa Rita Avenue and Santa Andrea Avenue within a multi-family and commercial area identified in the Otay Ranch Village 1 tentative map as R47 & CI in the City of Chula Vista, California, as described in the attached Exhibit A, which is incorporated herein (the "Property"); and WHEREAS, Developer proposed to construct a senior citizen and multi-family housing development project ("Project"); and WHEREAS, said development project will consist of 91 units for low and moderate income seniors; and WHEREAS, said development project will also consist of 180 units for low and moderate income households; and WHEREAS, Developer has pursued numerous funding sources to finance this Project; and WHEREAS, although Developer has obtained private and public assistance to finance this Project; and WHEREAS, Developer requires additional assistance to reduce the development costs for the construction of the residential units in order to make the Project feasible; and WHEREAS, prior to obtaining a building permit for the Project, the Developer is required to pay the Public Facilities Development Impact Fee ("PDIF") pursuant to Chula Vista Municipal Code Section 3.50 et seq.; and G- - \ WHEREAS, Developer has requested and City desires to defer the applicable PDIF for the 91 senior units, estimated to be $238,238. NOW, THEREFORE, IT IS MUTUALLY AGREED by and between the parties hereto as follows: 1. Acknowledgments. The parties hereby certify that the Recitals set forth above are true and correct. 2. Terms of Payment: a. Developer agrees to pay the PDIF, in the amount of $238,238, with interest, accruing at the rate of 3% per annum within ten (10) years of obtaining a building permit for the Project. b. Developer's obligation to make such payments shall be evidenced by a Promissory Note ("Note") executed by Developer in favor of the City in the form attached hereto as Exhibit B. Developer shall execute and deliver the Note to City concurrently with its execution of this Agreement. Developer may prepay the outstanding balance under the Note at any time without penalty. Upon full payment of the outstanding principal balance and accrued interest under the Note, Developer's obligations under the Note shall terminate. c. All other fees required by the Master Fee Schedule, other than the PDIF and those expressly waived by the City pursuant to Agency Resolution No. 1730 and City Council Resolution No. 2001-1 dated November 13, 2001, shall be due and payable at the time the building permit is obtained or as otherwise required or allowed by the Chula Vista Municipal Code or action of the City Council. 3. Assignment and Transfers. a. Developer may not assign its obligations or rights hereunder without City's prior written consent to be exercised in City's sole discretion. Any attempted assignment in c- 2 violation of this Section shall be void and shall constitute a material default hereunder. b. Should all or any portion of Developer's interest in the Property or the Project be transferred before the Note is paid in full, Developer shall remain liable as the "Debtor" under the Note. Furthermore, in the event of such a transfer, or as may otherwise be provided in the Note, City shall retain the right to accelerate Developer's obligations under the Note and to pursue the Bond. 4. Remedies. In order to enforce Developer's obligations under the terms of this Agreement or the Note, the City shall be entitled to pursue any and all remedies provided at law or in equity, including, without limitation, any and all remedies provided under the Note, and all ancillary agreements referred to therein. Without limiting the generality of the foregoing, in the event of a default by D4eveloper of its obligations hereunder, the City shall have the right to (a) withdraw all building or other permits, inspections or approvals issued by the City permitting the construction or operation of all or any portion of the Project on the property; (b) and/or accelerate the debt owned under the Note and pursue collection of the PDIF, plus interest, directly from Developer. All such remedies shall be cumulative and non-exclusive. 5. Indemnification. Developer shall and does hereby agree to indemnify, protect, defend and hold harmless City, its councilmembers, officers, employees, agents and representatives, from and against any and all liabili ties, losses, damages, demands, claims and costs, including court costs and attorneys' fees (collectively "liabilities") incurred by City arising directly or indirectly, from City's approval of the deferral of the PDIF or this Agreement. 6. Miscellaneous provisions: (..-3 a. Authority: Developer represents and warrants that they have full power and authority to enter into this Agreement. b. Notices: Unless otherwise provided in this Agreement or by law, any and all notices required or permitted by this Agreement or by law to be served on or delivered to either party shall be in writing and shall be deemed duly served, delivered, and received when personally delivered to the party to whom it is directed, or in lieu thereof, when three (3) business days have elapsed following deposit in the u.s. Mail, certified, or registered mail, return receipt requested, first-class postage prepaid, addressed to the address indicated in the Agreement. A party may change such address for purpose of this paragraph by giving notice of such change to he other party. Facsimile transmissions shall constitute personal delivery. City: City of Chula Vista 276 Fourth Avenue Chula Vista, CA 91910 Attn: City Attorney's Office Developer: South Bay Community Villas L.P. 350 W. Ash Street, Suite 730 San Diego, CA 92101 Attn: Rob Cameron (A party may change such address for the purpose of this paragraph by giving written notice of such change to the other party in the manner provided in this paragraph. Facsimile transmission shall constitute personal delivery.) c. Captions: Captions in this Agreement are inserted for convenience of reference and do not define, describe or limi t the scope or intent of this Agreement or any of is terms. d. Entire Agreement: This Agreement contains the entire agreement between the parties regarding the subject matter hereof. Any prior oral or written representations, agreements, 6-4 understandings, and/or statements shall be of no force and effect. e. Preparation of Agreement: No inference, assumption or presumption shall be drawn from the fact that a party or his attorney prepared and/or drafted this Agreement. It shall be conclusively presumed that both parties participated equally in the preparation and/or drafting of this Agreement. f. Recitals; Exhibits: Any recitals set forth are incorporated by reference into this Agreement. g. Attorneys' Fees: The prevailing party in any action enforcing the provisions of this Agreement shall be entitled to reasonable attorneys' fees and court costs in addition to any other costs, damages, or remedies. h. Governing Law: The Agreement has been executed in California and shall be governed by the laws of the State of California. i. Invalidity: If any term, covenant or provisions of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the provisions hereof shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby. j. Time: Time is of the essence in the performance of the Parties' obligations contained herein. k. Waivers: The waiver by one Party of the performance of any covenant, condition or promise shall not invalidate this Agreement, nor shall it be considered a waiver by him of any other covenant, condition or promise. The waiver by either or both Parties of the time for performing any other act or identical act required to be performed at a later time. The exercise of any remedy provided in this Agreement shall not be a waiver of any consistent remedy provided by law, and any provision of this Agreement for any G- 5 remedy shall not exclude other consistent remedies unless they are expressly excluded. 1. Further Assurances: The Parties agree to perform such further acts and to execute and deliver such additional documents and instruments as may be reasonably required in order to carry out the provisions of this Agreement, or any of the agreements or documents referred to herein, and the intentions of the Parties. m. Successors: Subject to the restrictions on assignment contained herein, all terms of this Agreement shall be binding upon and be enforceable by the Parties hereto and their respective heirs, legal representatives, successors and assigns. n. Joint and Several Liability: Each individual compromising the Developer shall be jointly and severally liable for all obligations hereunder. (NEXT PAGE IS SIGNATURE PAGE) c..~ 6 SIGNATURE PAGE TO DEFERRAL AGREEMENT FOR THE PUBLIC FACILITIES DEVELOPMENT IMPACT FEE CITY OF CHULA VISTA SOUTH BAY COMMUNITY VILLAS L.P. David D. Rowlands, Jr. City Manager Attest: Susan Bigelow, City Clerk Approved as to form by John M. Kaheny City Attorney J, \Attorney\Agree\PDIF Deferral G- 7 PROMISSORY NOTE $238,238 Chula Vista, CA 2001 This Promissory Note ("Note") is executed pursuant to the Public Facilities Development Impact Fee Deferral Agreement (the "Agreement") dated as of , 2001, South Bay Community Villas L.P. ("Debtor") and the City of Chula Vista, a municipal corporation ("City"). (Capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Agreement) . 1. For value received, Debtor promises to pay to City, or order, the principal sum of TWO HUNDRED THIRTY EIGHT THOUSAND TWO HUNDRED THIRTY EIGHT DOLLARS ($238,238), together with interest on the principal balance from time to time remaining unpaid from the date of the Agreement until paid at the rate of three (3%) percent per annum. Interest shall be calculated on the basis of a 360 day year and actual days elapsed, and shall be compounded monthly. 2. Any and all principal and interest hereunder shall be due and payable in full within ten (10) years of obtaining a building permit for the Project. 3. All payments on this Note shall be applied first to the payment of accrued but unpaid interest, and after all such interest has been paid, any remainder shall be applied to reduction of the principal balance. 4. The occurrence of any one or more of the following events shall constitute an "Event of Default": (a) default under any agreement or other writing executed in favor of City in connection with this Note, including but not limited to the Agreement or the Bond; (b) default in the payment when due of any installment or amount of principal or interest due on this Note; (c) the making by Debtor of any assignment for the benefit of creditors or the voluntary appointment (at the request or with the consent of Debtor) of a receiver, custodian, liquidator or trustee in bankruptcy of any of Debtor's property, or the filing by Debtor of a petition in bankruptcy or other similar proceeding under any law for relief of debtors; (d) the filing against Debtor of a petition in bankruptcy or other similar proceeding under any law for relief of debtors, or the involuntary appointment of a receiver, custodian, liquidator or trustee in bankruptcy of the property of Debtor, if such peti tion or appointment is not vacated or discharged within sixty (60) calendar days after the filing or making thereof; or 1 C--B (e) the occurrence of a default under any deed of trust with respect to the Proj ect. Upon the occurrence of an Event of Default, City may, at its option, declare the entire unpaid principal balance and accrued interest hereunder to be immediately due and payable in full or pursue any and all other remedies provided herein, under the Note, or as otherwise provided at law or in equi ty. Upon the occurrence of an Event of Default, the entire unpaid principal balance and unpaid interest accrued thereon shall bear interest, from the date of the Event of Default until such default is cured at a rate of nine (9%) percent, compounded monthly ("Default Rate"). 5. Debtor hereby agrees and acknowledges that the City may, at its option, declare the entire unpaid principal balance and accrued interest hereunder to be immediately due and payable, without notice to Debtor or its successor, upon the occurrence of any sale, further encumbrance or other transfer, whether voluntary or involuntary, of the Project unless such transfer is expressly authorized by City in writing, in advance, in City's sole discretion. Consent to one such transaction shall not be deemed a waiver of the right to require consent to each subsequent transaction. 6. Debtor acknowledges that if any payment required under this Note is not paid within fifteen (15) days after the date when the same becomes due and payable, the holder hereof will incur extra administrative expenses (i.e., in addition to expenses incident to receipt of timely payment) and the loss of the use of funds in connection with the delinquency in payment. Because, from the nature of the case, the actual damages suffered by the holder hereof by reason of such extra administrative expenses and loss of use of funds would be impracticable or extremely difficult to ascertain, Debtor agrees that ten percent (10%) of the amount of the delinquent payment shall be the amount of damages to which such holder is entitled, upon such breach, in compensation therefor. Therefore, Debtor shall, in such event, without further notice, pay to the holder hereof as such holder's sole monetary recovery to cover such extra administrative expenses and loss of use of funds, liquidated damages in the amount of ten percent (10%) of the amount of such delinquent payment. The provisions of this paragraph are intended to govern only the determination of damages in the event of a breach in the performance of the obligation of Debtor to make timely payments hereunder. Nothing in this Note shall be construed as an express or implied agreement by the holder hereof to forbear in the collection of any delinquent payment, or be construed as in any way giving Debtor the right, express or implied, to fail to make timely payments hereunder, whether upon payment of such damages or otherwise. The right of the holder hereof to receive payment of such liquidated and actual damages, and receipt thereof, are without prejudice to the right of such holder to collect such delinquent payments and 2 Ú=t other amounts provided to be paid hereunder or under any security for this Note or to declare a default hereunder or under any security for this Note. 7. Accrued but unpaid interest not paid when due and any unpaid liquidated damages shall bear interest as principal. All payments of this Notes shall be made in lawful money of the United States of America and in immediately available funds at City's office, the address for which is specified in the Agreement, or at such other place as the holder hereof may form time to time direct by written notice to Debtor. 8. Debtor waives any right of offset it now has or may hereafter have against the holder hereof and its successors and assigns. Debtor waives presentment, demand, protest, notice of protect, notice of nonpayment or dishonor and all other notices in connection with the delivery, acceptance, performance, default or enforcement of this Note (other than notices expressly required by the terms of the Agreement). Notwithstanding any provision herein or in any instrument now or hereafter securing this Note the total liability for payments in nature of interest shall not exceed the limits imposed by the applicable usury laws. 9. Debtor expressly agrees to any extension or delay in the time for payment or enforcement of the Note, to renewal of this Note and to any substitution or release of any of the Collateral, all without any way affecting the liability of Debtor hereunder. Any delay on City's part in exercising any right hereunder shall not operate as a waiver. City's acceptance of partial or delinquent payments or the failure of City to exercise any rights shall not waive any obligation of Debtor or any right of City, or modify this Note, or waive any other similar default. 10. Debtor agrees to pay all costs of collection when incurred and all costs incurred by the holder hereof in exercising or preserving any rights or remedies in connection with the enforcement and administration of this Note or following a default by Debtor, including but not limited to reasonable attorney's fees. If any suitor action is instituted to enforce this Note, Debtor promises to pay, in addition to the costs and disbursements otherwise allowed by law, such sum as the court may adjudge reasonable attorney's fees in such suit or action. 11. This Note shall be governed by and construed according to the laws of the State of California. 12. Time is of the essence for each and every obligation under this Note. 13. Debtor represents and warrants that: (a) it has full legal right, power and authority to execute and fully perform 3 e--IO its obligations under the Note and the Deed of Trust; and (b) the persons executing this Note on behalf of Debtor are the duly designated agents of Debtor and are authorized to do so; and (c) that the execution of this Note and the Agreement have been authorized by a duly adopted resolution of its Board of Directors. "Debtor": South Bay Community Villas L.P. By J, \Attorney\Agree\Prom Note Otay Ranch 4 c.-II ATTACHMENT D RECORDING REQUESTED BY AND ) WHEN RECORDED RETURN TO: ) ) ROBERT J. WHALEN, ESQ. ) STRADLING YOCCA CARLSON & RAUTH ) P. O. Box 7680 ) Newport Beach, Calüornia 92660 ) [Space above for Recorder's use.] REGULATORY AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS By and Among HOUSING AUTHORITY OF THE CITY OF CHULA VISTA, CALIFORNIA and WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee and SOUTH BAY COMMUNITY VILLAS, LP., as Borrower Dated as of November 1, 2001 Relating to $15,400,000 HOUSING AUTHORITY OF THE CITY OF CHULA VISTA, CALIFORNIA MUL TIF AMIL Y HOUSING REVENUE BONDS (HERITAGE TOWN CENTER APARTMENTS) SERIES A OF 2001 .D - I DOC S0C\85 23 99v 4 \24036. ()() 27 REGULATORY AGREEMENT AND DECLARA nON OF RESTRICTIVE COVENANTS THIS REGULATORY AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS (the "Regulatory Agreement"), made and entered into as of November 1, 2001, by and among the HOUSING AUTHORITY OF THE CITY OF CHULA VISTA, CALIFORNIA, a political subdivision and public body corporate and politic duly organized and existing under the laws of the State of California (together with any successor to its rights, duties and obligations, the "Issuer"), WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee (the "Trustee"), and SOUTH BAY COMMUNITY VILLAS, LP., a California limited partnership (the "Borrower"), WITNESSETH: WHEREAS, the Legislature of the State of California enacted Chapter 1 of Part 2 of Division 24 of the Health and Safety Code (the "Act") to authorize cities and counties to issue bonds to finance the acquisition, construction, rehabilitation and development of multifamily rental housing for families and individuals of low or moderate income; and WHEREAS, the Issuer is a political subdivision (within the meaning of that term in the Regulations of the Department of Treasury and the rulings of the Internal Revenue Service prescribed and promulgated pursuant to Section 103 of the Internal Revenue Code of 1986, as amended (the "Code"»; and WHEREAS, on November 13, 2001, the governing board of the Issuer adopted a resolution (the "Resolution") authorizing the issuance of revenue bonds in connection with financing the acquisition and construction of a 271-unit multifamily rental housing project located in the City of Chula Vista (the "Project"); and WHEREAS, in furtherance of the purposes of the Act and the Resolution and as a part of the Issuer's plan of financing residential rental housing, the Issuer has issued $15,400,000 aggregate principal amount of its revenue bonds designated "Housing Authority of the City of Chula Vista, California, Multifamily Housing Revenue Bonds (Heritage Town Center Apartments) , Series A of 2001" (the "Bonds"), the proceeds of which will be loaned to the Borrower which will use the proceeds of the Bonds to finance the acquisition and construction of the Project for the public purpose of providing decent, safe and sanitary housing for families and individuals of low and moderate income; and WHEREAS, the Issuer, the Trustee, and the Borrower have entered into a Financing Agreement, dated the date hereof (the "Financing Agreement"), providing the terms and conditions under which the Issuer will make the Mortgage Loan to the Borrower to finance the acquisition and construction of the Project; and WHEREAS, all things necessary to make the Bonds, when issued as provided in the Indenture, the valid, binding, and limited obligations of the Issuer according to the import thereof, and to constitute the Indenture a valid assignment of the amounts pledged to the payment of the principal of, and premium, if any, and interest on the Bonds have been done and performed, and the creation, execution, and delivery of the Indenture and the execution and issuance of the Bonds, subject to the terms thereof, in all respects have been duly authorized: and D-"'Z.- DOCSOC\8 5 23 99v 4 \24036. 00 27 WHEREAS, the Issuer has obtained an allocation for the Project of a portion of the State of California's private activity bond volume cap, within the meaning of Section 146 of the Code, in accordance with the procedures established by the California Debt Limit Allocation Committee; and WHEREAS, the Code and the regulations and rulings promulgated with respect thereto and the Act prescribe that the use and operation of the Project be restricted in certain respects and in order to ensure that the Project will be owned and operated in accordance with the Code and the Act, the Issuer, the Trustee and the Borrower have detennined to enter into this Regulatory Agreement in order to set forth certain tenns and conditions relating to the acquisition, construction, equipping and operation of the Project; NOW, THEREFORE, in consideration of the mutual covenants and undertakings set forth herein, and other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the Issuer, the Trustee and the Borrower hereby agree as follows: Section 1. Definitions and Interoretation. The following terms shall have the respective meanings assigned to them in this Section 1 unless the context in which they are used clearly requires otherwise: "Adjusted Income" - The adjusted income of all persons who intend to reside in one residential unit as calculated in the manner determined by the Secretary of the Treasury pursuant to Section 142(d)(2)(B) of the Code. "Administration Agreement" - The administration agreement to be entered into among the Issuer, the Borrower and any entity other than Issuer, which is acting as the Program Administrator. "Affiliated Party" - (1) a Person whose relationship with the Borrower would result in a disallowance of losses under Section 267 or 707(b) of the Code, (2) a Person who together with the Borrower are members of the same controlled group of corporations (as defined in Section 1563(a) of the Code, except that "more than 50 percent" shall be substituted for "at least 80 percent" each place it appears therein), (3) a partnership and each of its partners (and their spouses and minor children) whose relationship with the Borrower would result in a disallowance of losses under Section 267 or 707(b) of the Code or (4) an S Corporation and each of its shareholders (and their spouses and minor children) whose relationship with the Borrower would result in a disallowance of losses under Section 267 or 707 (b) of the Code. "Affordable Housing Agreement" - The Affordable Housing Agreement, dated February 10, 1998, made by and between McMillin-D.A. America Otay Ranch, LLC, McMillin Otay Ranch, Inc., as Developer, and the Housing Authority of the City of Chula Vista, which was recorded on March 4, 1998 in the Official Records of San Diego County, California as Instrument No. 1998-0115872, as amended by that certain First Amendment to Affordable Housing Agreement dated as of October 6, 1998. "Area" - The San Diego County, California Primary Metropolitan Statistical Area. "Bonds" - Housing Authority of the City of Chu1a Vista, California, Multifamily Housing Revenue Bonds (Heritage Town Center Apartments), Series A of 2001. 2 DOCS0a85 23 99v 4 \240 36. 0027 D..3 "Borrower's Tax Certificate" - The certificate of the Borrower, dated as of the Closing Date, with respect to certain Project Costs delivered to the Issuer by the Borrower. "CD LAC" - The California Debt Limit Allocation Committee. "CD LAC Resolution" - Resolution No. 01-176 adopted by CDLAC on August 22,2001. "Certificate of Continuing Program Compliance" - The certificate with respect to the Project to be filed by the Borrower with the Program Administrator, which shall be substantially in the form attached hereto as Exhibit B. "City" - The Housing Authority of the City of Chula Vista, California. "Completion Date" - The date on which the Project is completed as set forth in the certificate regarding the Completion Date that is delivered pursuant to Section 2(c) hereof. "Credit Facility" - The Credit Enhancement Instrument (Standby), dated as of the Bond Issuance Date, issued by Fannie Mae to the Trustee, or any Replacement Credit Facility in effect at the time, as any such facility may be amended, supplemented or restated from time to time. "Credit Facility Agreement" shall have the meaning set forth in the Indenture. "Credit Provider" - So long as the initial Credit Facility is in effect, Fannie Mae, or so long as any Credit Facility is in effect, the Alternate Credit Provider then obligated under the Credit Facility. "Fannie Mae" - Fannie Mae, a corporation organized and existing under the Federal National Mortgage Association Charter Act, 12 V.S.C., § 1716 et seq., and its successors and assigns. "Income Certification" - The Income Computation and Certification Form in substantially the form attached hereto as Exhibit C. "Indenture" - The Trust Indenture, dated as of the date hereof, between the Issuer and the Trustee, pursuant to which the Bonds have been issued, as amended or supplemented from time to time. "Issuer's Annual Fee" - The Issuer's annual fee equal to $19,250 payable by the Borrower in equal semiannual installments on January I and July 1 of each year, commencing July 1, 2002, in arrears, as provided in Section 4.3 of the Financing Agreement. "Low Income Tenants" - Individuals or families with an Adjusted Income which does not exceed 60 percent of the Median Income for the Area as adjusted for household size as set forth below. In no event, however, will the occupants of a residential unit be considered to be Low Income Tenants if all the occupants are students, as defined in Section 151(c)(4) of the Code, as such may be amended, no one of which is entitled to file a joint federal income tax return. Currently, Section 151(c)(4) defines a student as an individual enrolled as a full-time student during each of 5 calendar months during the calendar year in which occupancy of the unit begins at an educational organization which normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of students in attendance or is an individual pursuing a full-time course of institutional on-farm training under the supervision of an accredited agent of such an educational organization or of a state or political subdivision thereof. 3 DOCS 008 5 23 99v 4\24036 . 00 27 0-4 Adjustment to 60% of Household Size Median Income for the Area 1 70% 2 80% 3 90% 4 100% 5 108% 6 116% 7 124% 8 132% "Low Income Units" - The dwelling units in the Project designated for occupancy by Low Income Tenants pursuant to Section 4(a) of this Regulatory Agreement. "Median Income for the Area" - The median gross income for the Area as most recently determined by the Secretary of Treasury pursuant to Section 142(d)(2)(B) of the Code. "Person" - Any natural person, firm, partnership, association, limited liability company, corporation, company or public body. "Program Administrator" - The Issuer, or such other entity as is appointed by the Issuer from time to time to act in such capacity hereunder. "Program Administrator's Fee" - The administrative fee of the Program Administrator as set forth in the Administration Agreement. "Project" - The Project Facilities and the Project Site. "Project Costs" - To the extent authorized by the Code, the Regulations and the Act, any and all costs incurred by the Borrower with respect to the acquisition and construction of the Project, whether paid or incurred prior to or after the sixtieth day preceding February 10, 2001, including, without limitation, costs for site preparation, the planning of housing and related facilities and improvements, the acquisition of property, the removal or demolition of existing structures, the construction of housing and related facilities and improvements, and all other work in connection therewith, and all costs of financing, including, without limitation, the cost of consultant, accounting and legal services, other expenses necessary or incident to determining the feasibility of the Project, administrative and other expenses necessary or incident to the Project and the financing thereof (including reimbursement to any municipality, county or entity for expenditures made for the Project) and all other costs approved by Bond Counsel. "Project Facilities" - The buildings, structures and other improvements on the Project Site, and all fixtures and other property owned by the Borrower and located on, or used in connection with, such buildings, structures and other improvements constituting the Project. "Project Site" - The parcel or parcels of real property described in Exhibit "A", which is attached hereto and by this reference incorporated herein, and all rights and appurtenances thereunto appertaining. 4 DOC S OC\85 2 3 99v 4\2403 6. ()() 27 D.S "Qualified Project Costs" - The Project Costs (excluding Costs of Issuance) incurred not more than 60 days prior to February 13, 2001 which either constitute land or property of a character subject to the allowance for depreciation under Section 167 of the Code or are chargeable to a capital account with respect to the Project for federal income tax and financial accounting purposes, or would be so chargeable either with a proper election by the Borrower or but for the proper election by the Borrower to deduct those amounts within the meaning of Regulation 1.103-8(a)(l)(i); provided, however, that only such portion of interest accrued during construction of the Project shall constitute a Qualified Project Cost as bears the same ratio to all such interest as the Qualified Project Costs bear to all Project Costs paid from Bond proceeds and interest earnings thereon; and provided further that interest accruing after the Completion Date shall not be a Qualified Project Cost; and provided still further that if any portion of the Project is being constructed by an Affiliated Party (whether as a general contractor or a subcontractor), "Qualified Project Costs" shall include only the actual out-of-pocket costs incurred by such Affiliated Party in constructing the Project (or any portion thereof) within the meaning of Section 147(d)(2) of the Code, as provided in the Tax Certificate. "Qualified Project Period" - The period beginning on the first date on which ten percent of the units in the Project are occupied and ending on the latest of the following dates; (a) the date which is 55 years after the date on which fifty percent of the units in the Project are occupied, (b) the first day on which no tax exempt bonds with respect to the Project are Outstanding, or (c) the date on which any assistance provided with respect to the Project under Section 8 of the United States Housing Act of 1937 terminates. "Security Instrument" - The Multifamily Deed of Trust Assignment of Rents and Security Agreement, dated as of November 1, 2001, together with all riders and exhibits, securing the Note and the obligations of the Borrower to the Credit Provider under the Credit Facility Agreement, executed by the Borrower with respect to the Mortgaged Property, as it may be amended, supplemented or restated from time to time, or any security instrument executed in substitution therefor, as such substitute security instrument may be amended, supplemented or restated from time to time. "Servicer" - The multifamily mortgage loan servicer designated from time to time by the Credit Provider. "Very Low Income Tenants" - Individuals or families with an Adjusted Income that does not exceed 50 percent of the Median Income for the Area as adjusted for household size as set forth below. In no event, however, will the occupants of a residential unit be considered to be Very Low Income Tenants if all the occupants are students, as defined in Section 151 (c)( 4) of the Code, as such may be amended, no one of which is entitled to file a joint federal income tax return. Currently, Section 151(c)(4) defines a student as an individual enrolled as a full-time student during each of 5 calendar months during the calendar year in which occupancy of the unit begins at an educational organization which normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of students in attendance or is an individual pursuing a full-time course of institutional on-farm training under the supervision of an accredited agent of such an educational organization or of a state or political subdivision thereof. 5 DOCS0C\8 5 23 99v 4 \240 36. OC)27 D-G,:, Adjustment to 50% of Median Income for the Household Size Area 1 70% 2 80% 3 90% 4 100% 5 108% 6 116% 7 124% 8 132% "Very Low Income Units" - The dwelling units in the Project designated for occupancy by Very Low Income Tenants pursuant to Section 4(a) of this Regulatory Agreement. Such tenus as are not defined herein shall have the meanings assigned to them in the Indenture. Unless the context clearly requires otherwise, as used in this Regulatory Agreement, words of the masculine, feminine or neuter gender shall be construed to include each other gender when appropriate and words of the singular number shall be construed to include the plural number, and vice versa, when appropriate. This Regulatory Agreement and all the tenus and provisions hereof shall be construed to effectuate the purposes set forth herein and to sustain the validity hereof. The defined tenus used in the preamble and recitals of this Regulatory Agreement have been included for convenience of reference only, and the meaning, construction and interpretation of all defined tenus shall be detenuined by reference to this Section 1 notwithstanding any contrary definition in the preamble or recitals hereof. The titles and headings of the sections of this Regulatory Agreement have been inserted for convenience of reference only, and are not to be considered a part hereof and shall not in any way modify or restrict any of the tenus or provisions hereof or be considered or given any effect in construing this Regulatory Agreement or any provisions hereof or in ascertaining intent, if any question of intent shall arise. Section 2. Acauisition. Construction. Eauiooing and Completion of the Proiect. The BolTower hereby represents, as of the date hereof, and covenants, warrants and agrees as follows: (a) The BolTower has inculTed a substantial binding obligation to acquire, construct and equip the Project, pursuant to which the BolTower is obligated to expend at least five percent of the net sale proceeds of the Bonds. (b) The BolTower's reasonable expectations respecting the total cost of the acquisition, construction and equipping of the Project and the disbursement of Bond proceeds are accurately set forth in the BolTower's Tax Certificate attached to the Tax Certificate which has been delivered to the Issuer. (c) The BolTower shall construct the Project and will proceed with due diligence to complete the acquisition, construction and equipping of the Project and expects to expend the full amount of the proceeds of the Mortgage Loan for Project Costs prior to November 1,2004. Upon 6 DOC S 008 5 23 99v 4\2403 6.0027 D-7 completion of the Project, the Borrower shall deliver to the County and the Program Administrator a certificate executed by the Borrower certifying the date the Project is completed, which the Borrower shall cause to be recorded in the real property records of the County. (d) The statements made in the various certificates delivered by the Borrower to the Issuer or the Trustee are true and correct. (e) Money on deposit in any fund or account in connection with the Bonds, whether or not such money was derived from other sources, shall not be used by or under the direction of the Borrower, in a manner which would cause the Bonds to be "arbitrage bonds" within the meaning of Section 148 of the Code, and the Borrower specifically agrees that the investment of money in any such fund shall be restricted as may be necessary to prevent the Bonds from being "arbitrage bonds" under the Code. (t) The Borrower (and any person related to it within the meaning of Section 147(a)(2) of the Code) will not take or omit to take, as is applicable, any action if such action or omission would in any way cause the proceeds from the sale of the Bonds to be applied in a manner contrary to the requirements of the Indenture, the Financing Agreement or this Regulatory Agreement. Section 3. Residential Rental PrODertv. The Borrower shall own, manage and operate the Project as a "qualified residential rental project" (within the meaning of Section 142(d) of the Code) until the expiration of the Qualified Project Period. To that end, and for the term of this Regulatory Agreement, the Borrower hereby represents, as of the date hereof, and covenants, warrants and agrees as follows: (a) The Project is being acquired, constructed and equipped for the purpose of providing multifamily residential rental property, and the Borrower shall own, manage and operate the Project as a project to provide multifamily residential rental property comprised of a building or structure or several interrelated buildings or structures, together with any functionally related and subordinate facilities, and no other facilities, in accordance with applicable provisions of Section 142( d) of the Code and Section 1.1 03-8(b) of the Regulations, and the Act, and in accordance with such requirements as may be imposed thereby on the Project from time to time. (b) All of the dwelling units in the Project will be similarly constructed units, and, to the extent required by the Code and the Regulations, each dwelling unit in the Project will contain complete separate and distinct facilities for living, sleeping, eating, cooking and sanitation for a single person or a family, including a sleeping area, bathing and sanitation facilities and cooking facilities equipped with a cooking range, refrigerator and sink; provided that any Low Income Tenant may, but shall not be obligated to, provide a refrigerator for the unit to be occupied. (c) None of the dwelling units in the Project will at any time be utilized on a transient basis, or will ever be used as a hotel, motel, dormitory, fraternity house, sorority house, rooming house, nursing home, hospital, sanitarium, rest home, retirement house or trailer court or park. (d) No part of the Project will at any time be owned or used as a condominium or by a cooperative housing corporation. Other than obtaining a final subdivision map on the Project and a Pinal Subdivision Public Report from the California Department of Real Estate, the Borrower 7 DOC S OC\8 5 23 99v 4 \2403 6.0027 D-S shall not take any steps in connection with a conversion of the Project to a condominium or cooperative ownership except with the prior written approving opinion of Bond Counsel that the interest on the Bonds will not become taxable thereby under Section 103 of the Code. (e) All of the dwelling units will be available for rental on a continuous basis to members of the general public and the Borrower will not give preference to any particular class or group in renting the dwelling units in the Project, except to the extent that dwelling units are required to be leased or rented to Low Income Tenants, Very Low Income Tenants, senior citizens over the age of 55 and to holders of Section 8 certificates or vouchers. (t) The Project Site consists of a parcel or parcels that are contiguous except for the interposition of a road, street or stream, and all of the Project Facilities will comprise a single geographically and functionally integrated project for residential rental property, as evidenced by the ownership, management, accounting and operation of the Project. (g) No dwelling unit in any building or structure in the Project which contains fewer than fiye units shall be occupied by the Borrower or by persons related to or affiliated with the Borrower. (h) Should involuntary noncompliance with the provisions of Section 1.103-8(b) of the Regulations be caused by fire, seizure, requisition, foreclosure, transfer of title by deed in lieu of foreclosure, change in a federal law or an action of a federal agency after the Closing Date which prevents the Issuer from enforcing the requirements of the Regulations, or condemnation or similar event, the Borrower covenants that, within a "reasonable period" determined in accordance with the Regulations, it will either prepay the Mortgage Note or apply any proceeds received as a result of any of the preceding events to reconstruct the Project to meet the requirements of Section 142(d) of the Code and the Regulations. (i) The Borrower shall not discriminate on the basis of race, religion, creed, color, ethnic group identification, sex, source of income (e.g. AFDC, SSI), mental or physical disability, age, national origin or marital status in the rental, lease, use or occupancy of the Project or in connection with the employment or application for employment of persons for the operation and management of the Project. 0) Following the expiration or termination of the Qualified Project Period, Low Income Units shall remain available to the Low Income Tenants then occupying such units at the date of expiration or termination of the Qualified Project Period at a rent not greater than the rent determined pursuant to Section 4(a)(ii) below until the earliest of any of the following occurs: (i) The household's income exceeds 140 percent of the income at which such household would qualify as a Low Income Tenant. (ii) The household voluntarily moves or is evicted for "good cause." For these purposes, "good cause" means the nonpayment of rent or allegation of facts necessary to prove major, or repeated minor, violations of material provisions of the lease agreement which detrimentally affect the health and safety of other persons or the structure, the fiscal integrity of the Project, or the purposes or special programs of the Project. 8 DOCS0C\8 5 23 99v 4\240 36 . 0027 D-q (iii) Sixty (60) years after the commencement of the Qualified Project Period. (iv) The Borrower pays relocation assistance and benefits to such tenant as provided in Government Code Section 7264(b). (k) During the three-year period prior to the expiration of the Qualified Project Period, the Borrower shall continue to make available to Low Income Tenants Low Income Units that have been vacated to the same extent that other units in the Project are made available to the general public. (I) The Issuer may but shall not be required to monitor the Borrower's compliance with the provisions of subparagraph (j) above. Section 4. Low Income Tenants. Pursuant to the requirements of Section 142(d) of the Code and applicable provisions of the Act, the Borrower hereby represents, as of the date hereof, and warrants, covenants and agrees as fonows: (a) During the Qualified Project Period: (i) not less than ten percent (10%) of the units in the Project shall be designated as Very Low Income Units and shan be continuously occupied by or held available for occupancy by Very Low Income Tenants at monthly rents paid by the Very Low Income Tenants which do not exceed one-twelfth of the amount obtained by multiplying 30% times 50% of the Median Income for the Area, as adjusted for household size utilizing the percentages set forth above under the definition of Very Low Income Tenant less a reasonable deduction for utilities paid by the tenant and assuming the fonowing unit sizes and household sizes: Unit Size Household Size Studio One Person One Bedroom Two Persons Two Bedrooms Three Persons Three Bedrooms Four Persons Such Very Low Income Units shan be of comparable quality and offer a range of sizes and number of bedrooms comparable to those units which are available to other tenants and shall be distributed throughout the Project. A unit occupied by a Very Low Income Tenant who at the commencement of the occupancy is a Very Low Income Tenant shall be treated as occupied by a Very Low Income Tenant until a recertification of such tenant's income in accordance with Section 4(c) below demonstrates that such tenant no longer qualifies as a Very Low Income Tenant and thereafter any residential unit of comparable size in the Project is occupied by a new resident other than a Very Low Income Tenant. Moreover, a unit previously occupied by a Very Low Income Tenant and then vacated shall be considered occupied by a Very Low Income Tenant until reoccupied, other than for a temporary period, at which time the character of the unit shan be redetermined. In no event shall such temporary period exceed thirty-one (31) days. 9 DOCS0C\8 5 23 99 v 412403 6.0027 D~lb (ii) in addition to the Very Low Income Units set aside under paragraph (i) above, not less than another thirty-nine percent (39%) of the units in the Project shall be designated as Low Income Units and shall be continuously occupied by or held available for occupancy by Low Income Tenants at monthly rents paid by the Low Income Tenants which do not exceed one-twelfth of the amount obtained by multiplying 30% times 60% of the Median Income for the Area, as adjusted for household size utilizing the percentages set forth above under the definition of Low Income Tenant less a reasonable deduction for utilities paid by the tenant and assuming the following unit sizes and household sizes: Unit Size Household Size One Bedroom Two Persons Two Bedrooms Three Persons Three Bedrooms Four Persons Such Low Income Units shall be of comparable quality and offer a range of sizes and number of bedrooms comparable to those units which are available to other tenants and shall be distributed throughout the Project. A unit occupied by a Low Income Tenant who at the commencement of the occupancy is a Low Income Tenant shall be treated as occupied by a Low Income Tenant until a recertification of such tenant's income in accordance with Section 4(c) below demonstrates that such tenant no longer qualifies as a Low Income Tenant and thereafter any residential unit of comparable size in the Project is occupied by a new resident other than a Low Income Tenant. Moreover, a unit previously occupied by a Low Income Tenant and then vacated shall be considered occupied by a Low Income Tenant until reoccupied, other than for a temporary period, at which time the character of the unit shall be redetermined. In no event shall such temporary period exceed thirty-one (31) days. (b) Immediately prior to a Very Low Income Tenant's occupancy of a Very Low Income Unit and a Low Income Tenant's occupancy of a Low Income Unit, the Owner will obtain and maintain on file an Income Certification from each Very Low Income Tenant occupying a Very Low Income Unit and each Low Income Tenant occupying a Low Income Unit, dated immediately prior to the initial occupancy of such Very Low Income Tenant or Low Income Tenant, as applicable, in the Project. In addition, the Owner will provide such further information as may be required in the future by the State of California, the Issuer, the Act, Section 142(d) of the Code and the Regulations, as the same may be amended from time to time, or in such other form and manner as may be required by applicable rules, rulings, policies, procedures or other official statements now or hereafter promulgated, proposed or made by the Department of the Treasury or the Internal Revenue Service with respect to obligations issued under Section 142(d) of the Code. The Owner shall verify that the income provided by an applicant is accurate by taking one or more of the following steps as a part of the verification process: (1) obtain a federal income tax return for the most recent tax year, (2) obtain a written verification of income and employment from the applicant's current employer, (3) if an applicant is unemployed or did not file a tax return for the previous calendar year, obtain other verification of such applicant's income satisfactory to the Issuer or (4) such other information as may be reasonably requested by the Issuer. Copies of the most recent Income Certifications for Very Low Income Tenants and Low Income Tenants shall be attached to the quarterly report to be filed with the Issuer as required in (d) below. 10 DOCS oa85 2 3 99v 4 \24036. DO 2 7 [::::>-11 (c) (i) Immediately prior to the first anniversary date of the occupancy of a Very Low Income Unit by one or more Very Low Income Tenants, and on each anniversary date thereafter, the Owner shall recertify the income of the occupants of each Very Low Income Unit by obtaining a completed Income Certification based upon the current income of each occupant of the unit. In the event the recertification demonstrates that such household's income exceeds 140% of the income at which such household would qualify as Very Low Income Tenants, such household will no longer qualify as Very Low Income Tenants and to the extent necessary to comply with the requirements of Section 4(a)(i) above, the Owner will rent the next available unit of comparable size to one or more Very Low Income Tenants. (ii) Immediately prior to the first anniversary date of the occupancy of a Low Income Unit by one or more Low Income Tenants, and on each anniversary date thereafter, the Owner shall recertify the income of the occupants of each Low Income Unit by obtaining a completed Income Certification based upon the current income of each occupant of the unit. In the event the recertification demonstrates that such household's income exceeds 140% of the income at which such household would qualify as Low Income Tenants, such household will no longer qualify as Low Income Tenants and to the extent necessary to comply with the requirements of Section 4(a)(ii) above, the Owner will rent the next available unit of comparable size to one or more Low Income Tenants. (d) Not later than ten (10) days after the commencement of the Qualified Project Period, and within ten days of the last day of each quarter thereafter during the term of this Regulatory Agreement, the Borrower shall advise the Program Administrator of the status of the occupancy of the Project by delivering to such parties a Certificate of Continuing Program Compliance. (e) The Borrower will maintain complete and accurate records pertaining to the Very Low Income Units and the Low Income Units, and will permit any duly authorized representative of the Issuer, the Program Administrator, the Trustee, Fannie Mae, the Department of the Treasury or the Internal Revenue Service to inspect the books and records of the Borrower pertaining to the Project, including those records pertaining to the occupancy of the Low Income Units. (f) The Borrower shall submit to the Secretary of the Treasury annually on the anniversary date of the start of the Qualified Project Period, or such other date as is required by the Secretary, a certification that the Project continues to meet the requirements of Section 142(d) of the Code, and shall provide a copy of such certification to the Program Administrator. (g) Prior to renting any Very Low Income Units or Low Income Units, the Borrower shall prepare and present to the City a marketing plan for the Very Low Income Units and the Low Income Units. The Borrower may begin leasing the Very Low Income Units and the Low Income Units following the City Manager's approval of the marketing plan, which consent shall not be unreasonably withheld. The Borrower shall accept as tenants on the same basis as all other prospective tenants, persons who are recipients of federal certificates or vouchers for rent subsidies pursuant to the existing program under Section 8 of the United States Housing Act of 1937, or its successor. The Borrower agrees to contact the San Diego County Housing Authority for a list of persons who are recipients of, or who are applying for, Section 8 certificates or vouchers whenever a Very Low Income Unit or a Low Income Unit becomes available but not more frequently than every 11 DOCS 008 5 23 99v 4 \24036. ()() 27 D-IZ- four weeks. The Borrower shall not apply selection criteria to Section 8 certificate or voucher holders that are more burdensome than criteria applied to all other prospective tenants. (h) The Very Low Income Units and the Low Income Units shall be of a comparable quality and offer a range of sizes and number of bedrooms comparable to the units that are available to other tenants. (i) The Borrower shall not collect any additional fees or payments from a Very Low Income Tenant or a Low Income Tenant except security deposits or other deposits required of all tenants or for services or items requested by a tenant. The Borrower shall not collect security deposits or other deposits from Section 8 certificate or voucher holders in excess of those allowed under the Section 8 Program. The Borrower shall not discriminate against Very Low Income Tenant or Low Income Tenant applicants on the basis of source of income (i.e., AFDC or SSI), and the Borrower shall consider a prospective tenant's previous rent history of at least one year as evidence of the ability to pay the applicable rent. (j) Each lease pertaining to a Very Low Income Unit and a Low Income Unit shall contain a provision to the effect that the Borrower has relied on the Income Certification and supporting information supplied by the Very Low Income Tenant and the Low Income Tenant in determining qualification for occupancy of the Very Low Income Unit or Low Income Unit, as applicable, and that any material misstatement in such certification (whether or not intentional) will be cause for inunediate termination of such lease. Each lease will also contain a provision that failure to cooperate with the annual recertification process reasonably instituted by the Borrower pursuant to Section 4(c) above may at the option of the Borrower disqualify the unit as a Very Low Income Unit or Low Income Unit, as applicable, or provide grounds for termination of the lease. (k) The Borrower will execute and deliver to the Issuer an Administration Agreement applicable to the Project on or before the Closing Date. (I) Prior to the Closing Date, the Borrower agrees to provide to the Program Administrator a copy of the form of application and lease to be provided to prospective Very Low Income Tenants and Low Income Tenants. The term of the lease shall be not less than thirty (30) days. (m) The Borrower shall notify the Program Administrator of any change in leasing agents or managers for the Project. Section 5. Tax Status of the Bonds. The Borrower and the Issuer each represents, as of the date hereof, and warrants, covenants and agrees that: (a) It will not knowingly take or permit, or omit to take or cause to be taken, as is appropriate, any action that would adversely affect the exclusion from gross income for federal income tax purposes or the exemption from California personal income taxation of the interest on the Bonds and, if it should take or permit, or omit to take or cause to be taken, any such action, it will take all lawful actions necessary to rescind or correct such actions or omissions promptly upon obtaining knowledge thereof; (b) It will take such action or actions as may be necessary, in the written opinion of Bond Counsel filed with the Issuer and the Trustee, to comply fully with the Act and all applicable 12 DOCS0C\8 5 23 99v 4124036 . 002 7 D-I3, rules, rulings, policies, procedures, Regulations or other official statements promulgated, proposed or made by the Department of the Treasury or the Internal Revenue Service pertaining to obligations issued under Section 142( d) of the Code to the extent necessary to maintain the exclusion from gross income for federal income tax purposes of interest on the Bonds; and (c) The Borrower, at the Borrower's expense, will file of record such documents and take such other steps as are necessary, in the written opinion of Bond Counsel filed with the Issuer and the Trustee, in order to insure that the requirements and restrictions of this Regulatory Agreement will be binding upon all owners of the Project, including, but not limited to, the execution and recordation of this Regulatory Agreement in the real property records of the County of San Diego. The Borrower hereby covenants to notify any subsequent owner of the Project of the requirements and restrictions contained in this Regulatory Agreement in any documents transferring any interest in the Project to another person to the end that such transferee has notice of such restrictions, and to obtain the agreement from any transferee to abide by all requirements and restrictions of this Regulatory Agreement; provided that the covenants contained in this paragraph shall not apply to Fannie Mae should Fannie Mae become the owner of the Project by foreclosure, deed in lieu of foreclosure or comparable conversion of the Mortgage Loan. Section 6. Modification of Special Tax Covenants. The Borrower, the Trustee and the Issuer hereby agree as follows: (a) To the extent any amendments to the Act, the Regulations or the Code shall, in the written opinion of Bond Counsel filed with the Issuer, the Credit Provider, the Borrower and the Trustee, impose requirements upon the ownership or operation of the Project more restrictive than those imposed by this Regulatory Agreement which must be complied with in order to maintain the exclusion from gross income for federal income tax purposes of interest on the Bonds, this Regulatory Agreement shall be deemed to be automatically amended to impose such additional or more restrictive requirements. (b) To the extent any amendments to the Act, the Regulations or the Code shall, in the written opinion of Bond Counsel filed with the Issuer, the Credit Provider, the Borrower and the Trustee, impose requirements upon the ownership or operation of the Project less restrictive than imposed by this Regulatory Agreement, this Regulatory Agreement may be amended or modified to provide such less restrictive requirements but only by written amendment approved and signed by the County, the Trustee and the Borrower, approved by the Credit Provider and approved by the written opinion of Bond Counsel that such amendment will not affect the exclusion from gross income for federal income tax purposes of interest on the Bonds. 13 DOCSDa85 23 99v 4\24036. 00 27 D-14 (c) The Borrower, the Issuer and, if applicable, the Trustee shall execute, deliver and, if applicable, file of record any and all documents and instruments, necessary to effectuate the intent of this Section 6, and each of the Borrower and the Issuer hereby appoints the Trustee as its true and lawful attorney-in-fact to execute, deliver and, if applicable, file of record on beha)f of the Borrower or the Issuer, as is applicable, any such document or instrument (in such form as may be approved in writing by Bond Counsel) if either the Borrower or the Issuer defaults in the performance of its obligations under this subsection (c); provided, however, that the Trustee shall take no action under this subsection (c) without first notifying the Borrower or the Issuer, or both of them, as is applicable, unless directed in writing by the Issuer or the Borrower and without first providing the Borrower or the Issuer, or both, as is applicable, an opportunity to comply with the requirements of this Section 6. Section 7. Indemnification. The Borrower hereby releases the Issuer, the Trustee and the Program Administrator and their officers and employees from, and covenants and agrees to indemnify, hold harmless and defend the Issuer, the Trustee and the Program Administrator and their respective officers, members, directors, officials, agents and employees and each of them (each, an "indemnified party") from and against any and all claims, losses, costs, damages, demands, expenses, taxes, suits, judgments, actions and liabilities of whatever nature, joint and several (including, without limitation, costs of investigation, attorneys' fees, litigation and court costs, amounts paid in settlement, and amounts paid to discharge judgments), directly or indirectly (a) by or on behalf of any person arising from any cause whatsoever in connection with transactions contemplated hereby or otherwise in connection with the Project, the Bonds, or the execution or amendment of any document relating thereto; (b) arising from any act or omission of the Borrower or any of its agents, servants, employees or licensees, in connection with the Mortgage Loan or the Project; (c) arising in connection with the issuance and sale, resale or reissuance of any Bonds or any certifications or representations made by any person other than the Issuer or the party seeking indemnification in connection therewith and the carrying out by the Borrower of any of the transactions contemplated by the Bonds, the Indenture, the Financing Agreement and this Regulatory Agreement; (d) arising in connection with the operation of the Project, or the conditions, environmental or otherwise, occupancy, use, possession, conduct or management of work done in or about, or from the planning, design, acquisition, installation or construction of, the Project or any part thereof; and (e) arising out of or in connection with the Trustee's acceptance or administration of the trusts created by the Indenture and the exercise of its powers or duties thereunder or under the Financing Agreement, this Regulatory Agreement or any other agreements in connection therewith to which it is a party; except (I) in the case of the foregoing indemnification of the Trustee, the Program Administrator or any of their respective officers, members, directors, agents and employees, to the extent such damages are caused by the negligence or willful misconduct of such person, and (2) in the case of the foregoing indemnification of the Issuer or any of its officers, members, directors, officials, agents and employees, to the extent such damages are caused by the willful misconduct of such person. In the event that any action or proceeding is brought against any indemnified party with respect to which indemnity may be sought hereunder, the Borrower, upon written notice from the indemnified party, shall assume the investigation and defense thereof, including the employment of counsel selected (i) by the Borrower and reasonably approved by the indemnified party, when the indemnified party is other than the Issuer, and (ii) by the Issuer when the indemnified party is the Issuer or any of its officers, members, directors, officials, agents and employees; and the Borrower shall assume the payment of all expenses related thereto, with full power to litigate, compromise or settle the same in its sole discretion; provided that an affected indemnified party shall have the right to review and approve or disapprove any such compromise or settlement. Each indemnified party 14 DOC S0C\8 5 23 99v 4 \24036 . 00 27 D-15 shall have the right if such indemnified party shall conclude in good faith that a conflict of interest exists to employ separate counsel in any such action or proceeding and participate in the investigation and defense thereof, and the Borrower shall pay the reasonable fees and expenses of such separate counsel. The Borrower also shall pay and discharge and shall indemnify and hold harmless the Trustee, the Issuer and the Program Administrator from (i) any lien or charge upon payments by the Borrower to the Trustee, the Issuer or the Program Administrator hereunder and (ii) any taxes (including, without limitation, all ad valorem taxes and sales taxes), assessments, impositions and other charges in respect of any portion of the Project. If any such claim is asserted, or any such lien or charge upon payments, or any such taxes, assessments, impositions or other charges, are sought to be imposed, the Issuer or the Program Administrator shall give prompt notice to the Borrower and the Borrower shall have the sole right and duty to assume, and will assume, the defense thereof, with full power to litigate, compromise or settle the same in its sole discretion. Notwithstanding any transfer of the Project to another owner in accordance with the provisions of the Financing Agreement, the Security Agreement and this Regulatory Agreement, the transferor shall remain obligated to indemnify each indemnified party pursuant to this Section for all matters arising prior to the date of transfer and with respect to the Issuer for all matters arising on or after the transfer date if such subsequent owner fails to indemnify the Issuer, unless the Issuer consents at the time of transfer to indemnification under this Section 7 from such subsequent owner. In no event, however, shall any such consent by any indemnified party hereunder be deemed to constitute the consent of any other indemnified party. Notwithstanding the foregoing, neither Fannie Mae nor any successor in interest to Fannie Mae, the Construction Lender nor any successor to the Construction Lender, will assume or take subject to any liability for the indemnification obligations of the Borrower for acts or omissions of the Borrower prior to any transfer of title to Fannie Mae, or the Construction Lender, as applicable, whether by foreclosure, deed in lieu of foreclosure or comparable conversion of the Mortgage Loan; the Borrower shall remain liable under the indemnification provisions of the Regulatory Agreement for its acts and omissions prior to any transfer of title to Fannie Mae, or the Construction Lender, as applicable. Fannie Mae, or the Construction Lender, as applicable, shall indemnify the Issuer and the Trustee following acquisition of the Project by Fannie Mae, or the Construction Lender, as applicable, by foreclosure, deed in lieu of foreclosure or comparable conversion for the Mortgage Loan, during, and only during, any ensuing period that Fannie Mae, or the Construction Lender, as applicable, owns and operates the Project, provided that the liability of Fannie Mae, or the Construction Lender, as applicable, shall be strictly limited to acts and omissions of Fannie Mae, or the Construction Lender, as applicable, occurring during the period of ownership and operation of the Project by Fannie Mae, or the Construction Lender, as applicable. Fannie Mae's or the Construction Lender's obligation, as applicable, to provide indemnification shall be contingent upon Fannie Mae's or the Construction Lender's receipt of written notice from any party asserting a right to indemnification in time sufficient to enable Fannie Mae, or the Construction Lender, as applicable, to defend any action, claim or proceeding in a manner which is not prejudicial to Fannie Mae's rights. Fannie Mae, or the Construction Lender, as applicable, shall have no indemnification obligations with respect to the Bonds or the Mortgage Loan Documents. In addition thereto, subject to Section 17 hereof, the Borrower will pay upon demand all of the fees and expenses paid or incurred by the Trustee, the Issuer or the Program Administrator in enforcing the provisions hereof. 15 DOC S 0C\8 5 23 99 v 4\2403 6.0027 D-<.::, The provisions of this Section 7 shall survive the term of the Bonds and this Regulatory Agreement and the resignation or removal of the Trustee. The obligations of the Borrower under this Section are independent of any other contractual obligation of the Borrower to provide indemnity to the parties n'amed herein or otherwise, and the obligation of the Borrower to provide indemnity hereunder shall not be interpreted, construed or limited in light of any other separate indemnification obligation of the Borrower. Any indemnified party shall be entitled simultaneously to seek indemnity under this Section and any other provision under which it is entitled to indemnity. Section 8. Consideration. The Issuer has issued the Bonds to make the Mortgage Loan to finance the Project, all for the purpose, among others, of inducing the Borrower to acquire, rehabilitate, equip and operate the Project. In consideration of the issuance of the Bonds by the Issuer, the Borrower has entered into this Regulatory Agreement and has agreed to restrict the uses to which the Project can be put on the terms and conditions set forth herein. Section 9. Reliance. The Issuer and the Borrower hereby recognize and agree that the representations, warranties, covenants and agreements set forth herein may be relied upon by all persons interested in the legality and validity of the Bonds, and in the exclusion from gross income for federal income tax purposes and the exemption from California personal income taxes of the interest on the Bonds. In performing their duties and obligations hereunder, the Issuer, the Trustee and the Program Administrator may rely upon statements and certificates of the Borrower, the Very Low Income Tenants and the Low Income Tenants, and upon audits of the books and records of the Borrower pertaining to the Project. In addition, the Issuer, the Program Administrator and the Trustee may consult with counsel, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by the Issuer, the Program Administrator or the Trustee under this Regulatory Agreement in good faith and in conformity with such opinion; provided, however, if there are conflicting opinions among the counsel selected by such parties, the opinion of Bond Counsel shall govern the interpretation and enforcement of this Regulatory Agreement. In determining whether any default or lack of compliance by the Borrower exists under this Regulatory Agreement, the Trustee shall not be required to conduct any investigation into or review of the operations or records of the Borrower and may rely solely on any notice or certificate delivered to the Trustee by the Borrower, the Issuer or the Program Administrator with respect to the occurrence or absence of a default. Section 10. Sale or Transfer of the Proiect: Svndication. The Borrower intends to hold the Project for its own account, has no current plans to sell, transfer or otherwise dispose of the Project, and hereby covenants and agrees not to sell, transfer or otherwise dispose of the Project, or any portion thereof (other than for individual tenant use as contemplated hereunder and replacement of personal property), without obtaining the prior written consent of the Issuer, which consent shall be given upon receipt by the Issuer of (i) such certifications from the Borrower or the Trustee as are reasonably deemed necessary by the Issuer to establish that the Borrower shall not be in default under this Regulatory Agreement or under the Financing Agreement or, if any such defaults exist, the purchaser or assignee undertakes to cure such defaults to the satisfaction of the Issuer; (ii) a written instrument by which the Borrower's purchaser or transferee has assumed in writing and in full the Borrower's duties and obligations under this Regulatory Agreement and under the Administration Agreement, (iii) an opinion of counsel for the transferee that the transferee has duly assumed the obligations of the Borrower under this Regulatory Agreement and the Administration Agreement and that such obligations and this Regulatory Agreement and the Administration Agreement are binding 16 DOCS0C\85 2399v4\24O36 ,0027 D-17 on the transferee, (iv) documentation from the transferee reflecting the transferee's experience with owning and/or operating multifamily housing projects such as the Project and with use and occupancy restrictions similar to those contained in this Regulatory Agreement, and (v) an opinion of Bond Counsel addressed to the Issuer to the effect that such transfer will not cause interest on any Bond to become includable in the gross income of the recipients thereof for federal income tax purposes. No transfer of the Project shall operate to release the Borrower from its obligations under this Regulatory Agreement with respect to any action or inaction taken prior to such transfer. Nothing contained in this Section 10 shall affect any provision of the Security Instrument, any of the other Mortgage Loan Documents or the Construction Phase Credit Documents to which the Borrower is a party which requires the Borrower to obtain the consent of Fannie Mae or the Construction Lender as a precondition to sale, transfer or other disposition of, or any direct or indirect interest in, the Project or of any direct or indirect interest in the Borrower or which gives the holder of the Mortgage Note or the Construction Phase Credit Documents the right to accelerate the maturity of the Mortgage Loan or any obligations of Borrower under the Construction Phase Credit Documents, or to take some other similar action with respect to the Mortgage Loan or any obligations of Borrower under the Construction Phase Credit Documents, upon the sale, transfer or other disposition of the Project. Notwithstanding anything contained in this Section 10 to the contrary, neither the consent of the Issuer nor the delivery of items (i) through (v) of the preceding paragraph shall be required in the case of a foreclosure or deed in lieu of foreclosure, whereby Fannie Mae or its designee, or the Construction Phase Credit Facility Provider, or its designee, becomes the owner of the Project, and nothing contained in this Section 10 shall otherwise affect the right of Fannie Mae, or its designee, or the Construction Phase Credit Facility Provider, or its designee, to foreclose on the Project or to accept a deed in lieu of foreclosure or to effect a comparable conversion of the Mortgage Loan or the Construction Phase Credit Documents. Consent of the Issuer and delivery of items (i) through (v) of the preceding paragraph shall be required for any transfer of the Project subsequent to the purchase at foreclosure or transfer pursuant to deed in lieu of foreclosure as described in the preceding sentence. It is hereby expressly stipulated and agreed that any sale, transfer or other disposition of the Project in violation of this Section 10 shall be null, void and without effect, shall cause a reversion of title to the Borrower, and shall be ineffective to relieve the Borrower of its obligations under this Regulatory Agreement. Not less than 20 days prior to consummating any sale, transfer or disposition of any interest in the Project, the Borrower shall deliver to the Issuer and the Trustee a notice in writing explaining the nature of the proposed transfer. The Borrower shall not syndicate the Project unless, prior to such syndication, an opinion of counsel acceptable to the Issuer is delivered to the Issuer to the effect that (i) the terms and conditions of the syndication do not reduce or limit any of the requirements of the Act or regulations adopted or documents executed pursuant to the Act, (ii) no requirements of the Issuer shall be subordinated to the syndication agreement and (iii) the syndication shall not result in the provision of fewer assisted units, or the reduction of any benefits or services, than were in existence prior to the syndication agreement. Section 11. Term. Except as provided in Section 3(j), (k), (I) and Section 7 above, which provisions shall continue beyond the Qualified Project Period, and, except as provided in the second paragraph of this Section 11, this Regulatory Agreement and all and several of the terms hereof shall become effective upon its execution and delivery and shall remain in full force and effect during the Qualified Project Period, it being expressly agreed and understood that the provisions hereof are intended to survive the retirement of the Bonds and expiration of the Indenture, the Financing Agreement, the Mortgage Note and the Security Agreement. Notwithstanding any other provisions 17 Docsoas 5 23 99v 4\24036. 002 7 O-IB of this Regulatory Agreement to the contrary, this entire Regulatory Agreement, or any of the provisions or sections hereof, may be terminated upon agreement by the Issuer, the Trustee and the Borrower only if there shall have been received by the Issuer an opinion of Bond Counsel that such tennination will not adversely affect the exclusion from gross income for federal income tax purposes or the exemption from State personal income taxes of the interest on the Bonds. The tenns of this Regulatory Agreement to the contrary notwithstanding, this Regulatory Agreement, and each and all of the tenns hereof, shall tenninate and be of no further force and effect in the event of involuntary noncompliance with the provisions of this Regulatory Agreement caused by (a) foreclosure of the Security Instrument or deed of trust securing the obligations of the Borrower under the Construction Phase Credit Documents or delivery of a deed in lieu of foreclosure, or (b) fire, seizure, requisition, change in a federal law or an action of a federal agency after the Closing Date which prevents the Issuer and the Trustee from enforcing the provisions of this Regulatory Agreement or condemnation or a similar event, but only if within a reasonable period thereafter the Bonds are paid in full and retired or amounts received as a consequence of such event are used to provide a project that meets the requirements of the Code set forth in this Regulatory Agreement: provided, however, that the preceding provisions of this sentence shall cease to apply and the restrictions contained herein shall be reinstated if, at any time subsequent to the termination of such provisions as the result of the foreclosure on the Project or the delivery of a deed in lieu of foreclosure or a similar event, the Borrower or any Affiliated Party obtains an ownership interest in the Project for federal income tax purposes. Upon the tennination of the tenns of this Regulatory Agreement, the parties hereto agree to execute, deliver and record appropriate instruments of release and discharge of the tenns hereof; provided, however, that the execution and delivery of such instruments shall not be necessary or a prerequisite to the termination of this Regulatory Agreement in accordance with its tenns. Section 12. Covenants to Run With the Land. The Borrower hereby subjects the Project (including the Project Site) to the covenants, reservations and restrictions set forth in this Regulatory Agreement. The Issuer, the Trustee and the Borrower hereby declare their express intent that the covenants, reservations and restrictions set forth herein shall be deemed covenants running with the land and shall pass to and be binding upon the Borrower's successors in title to the Project; provided, however, that on the tennination of this Regulatory Agreement said covenants, reservations and restrictions shall expire. Each and every contract, deed or other instrument hereafter executed covering or conveying the Project or any portion thereof shall conclusively be held to have been executed, delivered and accepted subject to such covenants, reservations and restrictions, regardless of whether such covenants, reservations and restrictions are set forth in such contract, deed or other instruments. No breach of any of the provisions of the Regulatory Agreement shall defeat or render invalid the lien of the Security Instrument or the lien of any deed of trust securing the obligations of the Borrower under the Construction Phase Credit Documents. Section 13. Burden and Benefit. The Issuer, the Trustee and the Borrower hereby declare their understanding and intent that the burden of the covenants set forth herein touch and concern the land in that the Borrower's legal interest in the Project is rendered less valuable thereby. The Issuer, the Trustee and the Borrower hereby further declare their understanding and intent that the benefit of such covenants touch and concern the land by enhancing and increasing the enjoyment and use of the Project by Very Low Income Tenants and Low Income Tenants, the intended beneficiaries of such covenants, reservations and restrictions, and by furthering the public purposes for which the Bonds were issued. 18 DOCSDa852399v4 \24036,0027 D.lq Section 14. Unifonnitv: Common Plan. The covenants, reservations and restrictions hereof shall apply unifonnly to the entire Project in order to establish and carry out a common plan for the use, development and improvement of the Project Site. Section 15. Enforcement. If the Borrower defaults in the perfonnance or observance of any covenant, agreement or obligation of the Borrower set forth in this Regulatory Agreement, and if such default remains uncured for a period of 60 days after written notice thereof shall have been given by the Issuer or the Trustee to the Borrower, the Credit Provider, the Construction Lender and the Loan Servicer (or such longer period if the Borrower provides the Issuer with an opinion of Bond Counsel to the effect that such extension will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds), then the Trustee, subject to the provisions of Section 9 hereof and acting on its own behalf or on behalf of the Issuer, or the Issuer shall declare an "Event of Default" to have occurred hereunder, and, at its option, may take anyone or more of the following steps: (i) by mandamus or other suit, action or proceeding at law or in equity, require the Borrower to perfonn its obligations and covenants hereunder or enjoin any acts or things which may be unlawful or in violation of the rights of the Issuer or the Trustee hereunder; (ii) have access to and inspect, examine and make copies of all of the books and records of the Borrower pertaining to the Project; (iii) with the prior written consent of Fannie Mae, take such other action at law or in equity as may appear necessary or desirable to enforce the obligations, covenants and agreements of the Borrower hereunder. The Borrower hereby agrees that specific enforcement of the Borrower's agreements contained herein is the only means by which the Issuer may fully obtain the benefits of such agreements made by the Borrower herein, and the Borrower therefore agrees to the imposition of the remedy of specific perfonnance against it in the case of any Event of Default by the Borrower hereunder. The Trustee shall have the right, in accordance with this Section 15 and the provisions of the Indenture, upon notice to but without the consent or approval of the Issuer, to exercise any or all of the rights or remedies of the Issuer hereunder. All fees, costs and expenses of the Trustee (including, without limitation, reasonable attorneys fees) incurred in taking any action pursuant to this Section 15 shall be the sole responsibility of the Borrower. After the Indenture has been discharged, or if the Trustee fails to act under this Section 15, the Issuer may act on its own behalf to declare an "Event of Default" to have occurred and to take anyone or more of the steps specified hereinabove to the same extent and with the same effect as if taken by the Trustee. After the date on which no Bonds remain outstanding as provided in the Indenture, the Trustee shall no longer have any duties or obligations under this Regulatory Agreement, and all references to the Trustee herein shall be deemed references to the Issuer. As long as the Credit Provider is not in payment default under the tenus of the Credit Facility, neither the County, the Trustee nor any person under their control shall, without the prior written consent of the Credit Provider, exercise any remedies or direct any proceedings hereunder 19 DOC s oC\8 5 23 99v 4\2403 6.0027 D-20 other than to enforce rights of specific performance hereunder against the Borrower, provided that such enforcement shall not include a judgment lien against the Ptoject for monetary damages. Notwithstanding anything contained in this Regulatory Agreement and the Indenture to the contrary, the occurrence of an event of default under this Regulatory Agreement shall not be deemed, under any circumstances whatsoever, to constitute a default under the Mortgage Loan Documents, or the Construction Phase Credit Documents, except as may be otherwise specified in the Mortgage Loan Documents or the Construction Phase Credit Documents. The parties hereto agree that the maturity date of the Mortgage Loan may be accelerated solely by the holder thereof upon the occurrence of a default on the part of the Borrower under the Mortgage Loan Documents and that no person other than Fannie Mae shall have the right to (i) declare the principal balance of the Mortgage Note to be immediately due and payable, or (ii) commence foreclosure or other like action without express written authorization from Fannie Mae. The rights of the Trustee under this Section are in addition to all rights conferred upon the Trustee under the Indenture and in no way limit those rights. All monetary obligations of the Borrower that may arise under this Regulatory Agreement shall be subject and subordinate to the repayment of amounts owed by the Borrower under the Mortgage Loan Documents and the Construction Phase Credit Documents. Section 16. Recording and Filing. The Borrower shall cause this Regulatory Agreement and all amendments and supplements hereto and thereto, to be recorded and filed in the real property records of the County of San Diego and in such other places as the Issuer or the Trustee may reasonably request. The Borrower shall pay all fees and charges incurred in connection with any such recording. Section 17. Pavment of Fees. The Borrower shall pay to the Issuer the Issuer's Annual Fee through the end of the Qualified Ptoject Period. It is anticipated that moneys on deposit in the funds established under the Indenture will be sufficient to pay the Trustee's and Issuer's costs and expenses. However, to the extent that there are unforeseen and unusual costs and expenses and the moneys in said funds are insufficient therefor, the Borrower hereby agrees to pay all reasonable costs and expenses of the Trustee and the Issuer in connection with the Bonds and the financing of the Ptoject as such costs and expenses become due and payable. Neither Fannie Mae, the Servicer, nor the Construction Lender shall have any liability with respect to accrued and upaid fees which the Borrower or any other prior or subsequent owner of the Project failed to pay if Fannie Mae, the Servicer or the Construction Lender acquire title to the Ptoject by foreclosure, deed-in-lieu of foreclosure or comparable conversion of the Mortgage Loan. Notwithstanding any prepayment of the Mortgage Loan and notwithstanding a discharge of the Indenture, throughout the term specified in clauses (a), (b) and (c) of the Qualified Ptoject Period, the Borrower shall continue to pay to the Issuer an annual fee of $- in equal semiannual installments on each January 1 and July 1, and to the Trustee reasonable compensation for any services rendered by it hereunder and reimbursement for all expenses reasonably incurred by either of them in connection therewith. The foregoing provisions of this Section 17 shall in no way limit amounts payable by the Borrower under Section 7 hereof, or arising after an Event of Default in connection with the Issuer's or the Trustee's enforcement of the provisions of this Regulatory Agreement. 20 DOCS 0085 23 99v 4 \24036.0027 O-~ During any period that Fannie Mae owns the Project, Fannie Mae's obligations to make payments under this Section 17 shall be limited to amounts due in respect of the Bonds accruing during such period. Neither Fannie Mae, the Servicer, nor the Construction Lender shall be liable for the payment of any compensation or any fees, costs, expenses or penalties otherwise payable by the Borrower or any subsequent owner of the Project. Section 18. Governing Law. This Regulatory Agreement shall be governed by the laws of the State of California. Except as expressly provided herein and in the Agreement, the Trustee's rights, duties and obligations hereunder are governed in their entirety by the terms and provisions of the Indenture. Section 19. Amendments. Except as provided in Section 6(a) hereof, this Regulatory Agreement shall be amended only with the written consent of Fannie Mae and the Construction Lender (so long as the Letter of Credit is in effect) by a written instrument executed by the parties hereto or their successors in title, and duly recorded in the real property records of the County. The parties hereto acknowledge that for so long as the Bonds are outstanding, Fannie Mae and the owners of the Bonds are third party beneficiaries to this Regulatory Agreement. Section 20. Consents of Fannie Mae. The written consents of Fannie Mae as required under this Regulatory Agreement shall not be required if Fannie Mae is not the provider of credit enhancement for the Bonds. Section 21. Trustee Acting Solelv in Such Capacitv. In accepting its obligations hereunder, the Trustee acts solely as trustee for the benefit of the Registered Owners, and not in its individual capacity; and the duties, powers, rights and liabilities of the Trustee in acting hereunder shall be subject to the provisions of the Indenture, including, without limitation, Article X of the Indenture. Section 22. Compliance bv Borrower. Unless it acts as the Program Administrator, the Trustee shall not be responsible for monitoring or verifying compliance by the Borrower with its obligations under this Regulatory Agreement. The Program Administrator shall assume such responsibilities under the terms of the Administration Agreement among the Program Administrator, the Issuer and the Borrower. Section 23. Affordable Housing Agreement. Upon the recordation of this Regulatory Agreement in the real property records of the County of San Diego, the provisions of the Affordable Housing Agreement shall no longer be applicable to the Project, and the recordation of this Regulatory Agreement shall operate to release the Project from the terms of the Affordable Housing Agreement. The release of the Project from the terms of the Affordable Housing Agreement shall in no way alter the obligations of McMillin-DA American Otay Ranch, LLC and McMillin Otay Ranch, Inc. under the Affordable Housing Agreement. Section 24. Notice. All notices, certificates or other communications shall be sufficiently given and (except for notices to the Trustee, which shall be deemed given only when actually received by the Trustee) shall be deemed given on the date personally delivered or on the second day following the date on which the same have been mailed by certified mail, return receipt requested, postage prepaid, addressed as follows: Issuer: Housing Authority of the City of Chula Vista 21 POCSDaS 5 23 99 v 4\2403 6.0027 D-22- 430 Davidson Street, Suite B Chula Vista, California 91910 Attention: Executive Director Program Housing Authority of the City of Chula Vista Administrator: 276 Fourth Avenue Chula Vista, California 91910 Attention: Executive Director Trustee: Wells Fargo Bank, National Association 707 Wilshire Blvd., 17th Floor Los Angeles, California 90017 Attention: Corporate Trust Department BolTower: South Bay Community Villas, LP. c/o Village Development 270 Newport Center Dr., Suite 200 Newport Beach, CA 92660 Attention: Ron TheITien Telephone: (949) 644-4202, x113 with copies to: Attention: Telephone: Fax: Fannie Mae: Fannie Mae 3900 Wisconsin A venue, NW Drawer AM Washington, D.c. 20016-2899 Attention: Director, Multifamily Asset Management Telephone: (202) 752-2854 Facsimile: (202) 752-3542 RE: $15,400,000 Housing Authority of the City ofChula Vista Multifamily Housing Revenue Bonds (Heritage Town Center Apartments), Series A of 2001; Prudential with a copy to: Fannie Mae 3900 Wisconsin A venue, NW Drawer AM Washington, D.c. 20016-2899 Attention: Vice President, Multifamily Services Telephone: (202) 752-7869 Facsimile: (202) 752-8369 RE: $15,400,000 Housing Authority of the City ofChula Vista Multifamily Housing Revenue Bonds (Heritage Town Center Apartments), Series A of 2001; Prudential 22 DOCS OC\8 5 23 99v 4 \2403 6.0027 D. :z.!š [For courier to all Fannie Mae addresses use 4000 Wisconsin Avenue, N.W. and delete Drawer AM] with a copy to: O'Melveny & Myers 400 South Hope Street Los Angeles, California Attention: Debbie J. Gezon Telephone: (213) 430-6492 Facsimile: (213) 430-6407 (provided however. that any notice required to be delivered to the Credit Provider pursuant to Section 2.17( 1)( 1) will also be sent to: Fannie Mae 3900 Wisconsin A venue, N. W. Washington, DC 20016-2899 Attention: Director, Fiscal Agency Relations and Treasury Backoffice Telephone: (202) 752-7916 Facsimile: (202) 752-6087J Servicer: Prudential Multifamily Mortgage, Inc. 8401 Greensboro Drive, Suite 200 McLean, VA 22102 Telephone: (703) 610-1400 Facsimile: (703) 610-1430 with a copy to: Fannie Mae at the address specified above Construction First Bank & Trust Lender (only so 4301 MacArthur Blvd., 2nd Floor long as the Newport Beach, CA 92660 Letter of Credit Attn: Mr. Brian O'Connor is in effect): Telephone: (949) 475-6311 Facsimile: (949) 476-8445 Any of the foregoing parties may, by notice given hereunder, designate any further or different addresses to which subsequent notices, certificates, documents or other communications shall be sent. Copies of notices sent by any party hereto shall be sent concurrently to the Servicer and Fannie Mae and the Construction Lender (so long as the Letter of Credit is in effect). Section 25. CDLAC Requirements. The acquisition, construction and operation of the Project and the financing thereof are and shall be in compliance with the conditions set forth in Exhibit A to the CDLAC Resolution, a copy of which is attached hereto as Exhibit D, which conditions are incorporated herein by reference and are made a part hereof. The Issuer shall have the right, but not the obligation, to monitor and enforce the Borrower's compliance with the provisions of this Section 25. The Borrower shall prepare and submit to CDLAC on each anniversary of the Closing Date, and on such other date as is reasonably requested by CDLAC, a Certificate of Compliance in substantially the fonn attached hereto as Exhibit E, executed by an authorized 23 OOCS0C\8 5 23 99 v 4\2403 6. 00 27 D-.2k representative of the Borrower. CDLAC shall be a third-party beneficiary of this Regulatory Agreement for purposes of enforcing the terms of the CDLAC Resolution. CDLAC shall have the right to enforce the terms of the CDLAC Resolution through an action for specific performance or any other available remedy; provided, however, that CDLAC shall not take any action or enforce any remedy that would be materially adverse to the interests of the Bondholders or Fannie Mae and any such action or enforcement shall otherwise be subject to the terms, conditions and limitations applicable to the enforcement of remedies under this Regulatory Agreement. Section 26. Third-Partv Beneficiarv. The parties to this Regulatory Agreement recognize and agree that the terms of this Regulatory Agreement and the enforcement of those terms are essential to the security of the Credit Provider and are entered into for the benefit of the Credit Provider. The Credit Provider shall accordingly have contractual rights in this Regulatory Agreement and shall be entitled (but not obligated) to enforce, separately or jointly with the Issuer and/or the Trustee, or to cause the Issuer or the Trustee to enforce, the terms of this Regulatory Agreement. In addition, the Credit Provider is intended to be and shall be a third-party beneficiary of this Regulatory Agreement, and the Credit Provider shall have the right (but not the obligation) to enforce the terms of this Regulatory Agreement insofar as this Regulatory Agreement sets forth obligations of the Borrower. Section 27. Severabilitv. If any provision of this Regulatory Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining portions hereof shall not in any way be affected or impaired thereby. Section 28. Multiple Counteroarts. This Regulatory Agreement may be executed in multiple counterparts, all of which shall constitute one and the same instrument, and each of which shall be deemed to be an original. Section 29. Personal Obli!!ation of Borrower: Limitations on Recourse to Borrower. Notwithstanding any provisions of this Regulatory Agreement to the contrary, all obligations of the Borrower under this Regulatory Agreement for the payment of money and all claims for damages against the Borrower occasioned by breach or alleged breach by the Borrower of its obligations under this Regulatory Agreement, including indemnification obligations, shall be unsecured by, and subordinated in priority and right to, payment and in all other respects to the obligations and liens, rights (including, without limitation, the right to payment) and interests arising or created under the Mortgage Loan Documents. This Regulatory Agreement shall not be deemed to create a lien or security interest of any kind in the Project in favor of the Issuer, the Trustee or any other person with respect to any monetary obligations of the Borrower arising under this Regulatory Agreement, and no such person shall have recourse to the Project or have the right to enforce such obligations other than directly against the Borrower as provided in Section 15 of this Regulatory Agreement. Except as otherwise provided in Section 7 of this Regulatory Agreement, no subsequent Borrower shall be liable or obligated for the breach or default of any obligation of the Borrower under this Regulatory Agreement on the part of any prior Borrower. Such obligations shall be personal to the Person who was the Borrower at the time the default or breach was alleged to have occurred, and such Person shall remain liable for any and all damages occasioned by the default or breach eyen after such Person ceases to be the Borrower. Notwithstanding anything contained in any other provision of this Regulatory Agreement to the contrary, the Borrower's obligations under Sections 7 and 17 hereof shall be and remain the joint and several full recourse obligations of the Borrower and each general partner of the Borrower, which, subject to the provisions of the first paragraph of this Section 29, are payable from and 24 POCS0C\8 5 23 99 v 4 \24036. 0027 /;/-26 enforceable against any and all income, assets and properties of the Borrower and each general partner of the Borrower; provided that in no event shall Borrower or any partner of Borrower be personally liable for the payment of the principal, interest or any premium on the Mortgage Loan or the Bonds, which shall be non-recourse to Borrower and shall be enforced solely against the Project and other property securing such obligations, in each case subject to and in accordance with the terms and conditions of the Mortgage Loan Documents. IN WITNESS WHEREOF, the Issuer, the Trustee and the Borrower have executed this Regulatory Agreement by duly authorized representatives, all as of the date first written hereinabove. HOUSING AUTHORITY OF THE CITY OF CHULA VISTA, CALIFORNIA By: Its: Executive Director [SEAL] ATTEST: Secretary WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee By: Its: Authorized Officer SOUTH BAY COMMUNITY VILLAS, LP., a California limited partnership By: 25 DOCS OC\8 5 23 99 v 4\2403 6. ()() 27 D. z.ç." STATE OF CALIFORNIA ) ) ss COUNTY OF SAN DIEGO ) On - -, 2001 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 nemeses) 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 whiic 26 DOCsoa852399v4124O36 .0027 D-z.? PRELIMINARY OFFICIAL STATEMENT DATED NOVEMBER, 2001 ATTACHMENT E 6.~ - .~ 1; .¡¡ NEW ISSUE RATING: S&P: "-" f~ :¡ õ BOOK-ENTRY ONLY (See "RATINGS" herein) Æ ~ i In lhe opinion ofSlmdhng Yocca Carlmn & Raulh, a Pmfwianal Carparar;an, Newpn.l Beach, California, Bond Coun.<el, undaex;..r;ng slalule.' " õ 0 «gular;on" mhng., andjudidal ded,'ion.', and a."uming certain «pmentation, and compliance with cmain covenants and requi«n«nts de.,aibed hmin, : ". : intemton the Bond,' i.s exc/uMblefrmn gm'.' income for federal income tax purposes, exceptfor intemt on any Bondforany period during which such Bond g" !' Ù held bya ".sub.5lanr;al user" ofanyfacilir;e.,financedwith the pmceed,'ofthe Bond, or bya ",elated person " as .<uch lerm.' a« used in Section 147(a) of the ~ ~ o. Internal Re"nue Code of 1986, as amended, but intmst on the Bond.'¡san item oftaxpr~ferencefor purpose.' of calculating thefedeml alternalive minimum .£ 11:¡§ lax imposed on individual,s and carpamliom. Bond Coun,5e1 is alsaoflhe apinion that in/erest on the Bands isexemplframpresenlSlaleofCalifarnwpersanal 13 - õ .~ income tax. Band Coun.sel expm.".S no opinion «gaeding any other lax consequenceJ eelated 10 the ownership 0' disposition of, 0' Ihe acaual n. «ceipl of " g c" in/emton the Bond." See "TAX MATTERS" herein. E ~ .!J§ : ~ .~ i $15,400,000' ": " 5i ¡; Housing Authority of the City of Chula Vista, California ;;, ci: ro ~ Multifamily Housing Revenue Bonds ::: J! -" :' (Heritage Town Center Apartments) õ>- ]I ~ Series A of 2001 Hd . E .. Dated: November 1, 2001 Due: as shown on the inside front cover ¡1' ~ 1; .f! hùtial Remarketing Dale: July 1, 2022 J!' ¡¡, c " The above-captioned Bonds (the "Bonds") a" being issued by the Housing Authority of the City ofChula Vista, CaIifomia (the "Issuee") in fully "gisteeed ~ m ~ ~ form only and, when issued and deIiveeed, will be "gistered in the name of Cede &Co., as nominee of The Depository Trust Company, New York, New Yoek ("DTC"). wQ 5: Ownership inte"st 50 the Bonds may be parchased only in book-entty form in denominations of $5,000 and integral multiples theeeoL Pu'lhasees of Bonds will not ~ i§E £ "ceive physical certificates "p"senting their owneeship inte"st in such Bonds. So long as the Bonds are "gistered in the name of Cede & Co., as nominee of OTC, " - ~. "feeences herein to the Bondholders shall mean Cede & Co. and shall not mean the ultimate purchasers of the Bonds. See "THE BONOS-Book-EntryOnly System" Û .~ 8 " herein. J5 ~ ë " Interest on the Bonds will be payable semiannually on January I and July I of each year (each, an "Interest Payment Date"), commencing July I, 2002. ~ .c E§ SO long as the Bonds areregistered in the name of Cede & Co., as nominee ofDTC, payments of the principal of, premium, if any, and interest on, the Bonds will be "' ~ . ~ made directly to DTC or its nominee, Cede & Co., by Wells Fargo Bank,Nationa I Association, as Trustee (the "Trustee"). DisbummentsofsuchpaymentstoDTC's .iJ ¡¡ § ¿i Participants ar"he responsibility ofDTe. c .§ "' '" The Bonds are being issued by the Issuer to provide funding for a mortgage loan (the "Mortgage Loan") to be made by the Issuer to South Bay Community ~ § ~ ¡; Villas, LP., a California limited partnership (the "Borrower"), forthepurposeofprovidingfinaneingfortheacquisition.construction, and equipping of the multifamily .,- E ¿i 0; rental housing project described herein (the "Project") and located in Chula Vista, California, to be occupied, to theextentrequired by federal tax law, state law onhe ';; ~ Õ c Issuer, by (i) in the case of the 180 Family Component UOlts (as such term is defined herein), persons 0< families of low and very low income, and (ii) in the case of ~ 0 >.2 the 91 Senior Component units (as such term is defined herein), seniors. The applicable income and rent restrictions a" descrihed more fully herein. See "THE -;;§ ~ § PROIEcr AND THE PRIVATE PARTlCIPANTS-Regulatory Agreements" herein. ri' :;; j,,!' . The Bonds are being issued pursuantto a Trustlndenture, dated as ofNovembet I, 2001 (the "Indenture"), between thelssuerand the Trustee. The Mortgage - ê- '" ¡¡' Loan w.1I be made pursuantto a Fmancmg Agreement, dated as of November I, 2001 (the "Financmg Agreement"), among the Issuer, the Trustee, and the Borrower. 0 õ à: ~ Fannie Mae (the "Credit Provider") has issued an unconditional commitment, subject to certain conditions (a "Fan Ole Mae Commitment"), to provide credit ~ ~": enhancement for the Mortgage Loan and, if Conversion occurs, liquidity support for the Bonds Outstanding on each Remarketing Date so long as the Credit Facility g § £g remains in effect pursuant to, and subject to the limitations of, a Credit Enhancement Instrument (Stand-By) (the "Credit Facility"). See "SECURITY FOR THE "" ;¡ Q BONOS--conversion-Failure of Convmion to Occar" herein. :=- ~ .¡¡ :;0 If the Conditions to Conversion are not timely satisfied (or wai"d by Fannie Mae) on or before the Termination Date specified in the Fannie Mae .E ~ *" Commitment (and described herein), the Bonds will be subject to special mandatory redemption at par plus accrued interest on the Bonds to the Redemption Date (as m: g'¡: definedinthelndenture),withoutpremium. Priorto the Conversion Date, payment of the principal of and interest ontheBondswilibesecured,totheextentdescribed l' g ~ ~ herein, by the Mortgage Loan and by certain other resources and assets constituting the Trust Estate under the Indenture, all as described herein. In addition, prior to ìJ ~ ~ ~ Ihe Convmion Date, certain rcquired payments due under the Mort~gage Note evidencing the Mortgage Loan will be secured, to the extent demibed herein, by ¡¡.~-s J1\ . ~ ~ ~ ~ r-'.. FanmeMae. E c c . 0; l' .:: undenheCreditFacility. On and aftenhe Conversion Date, ifitoccurs, payment of the principal of and interest on the Bonds will be secured in the same way. /fthe :; § l' 0; Borrower fails to make scheduled principal and intmst payments to be made on the Mortgage Loan, Fannie Mae is obligated under the Credit Facility to fund such E .~ "c payments (less certain fees payable to the Loan Servicer and Fannie Mae referred to as the "Spread Amount," as defined herein). See "SECURITY FOR THE BONDS" . c.9 herein " ~ § .~ The Bonds a" subject to optional, mandatory sinking fund and special mandatory redemption priorto maturity at the times and to theextent described herein. ~ 9 -" See "THE BONDS-Redemption" herem l' ~ :; 1i. On July 1,2022 (the "Initial Remarketing Date"), the Bonds are subject to mandatory tender and "marketing and the interest rate on such Bonds will be l' f= "' c- adjusted to a new rate, all in accordance with the Indenture. The purchase price of Bonds tendered for purchase on the Initial Remarketing Date and not remarketed 9 _,9 !' in accordance with the Indentu" will be covered by the Credit Facility. See "THE BONDS-Mandatory Purchase of Bonds on Initial Remarketing Date." Unles.,' f! :: l' 0 appmp,;atelysupplemented in Ihefuluce, this Official Stalem,"1 is intended .wlelyfoe u'" ",ith «.speet 10 the Bonds p,;o, /0 Ihe Inilial Re",a,keting Dale and at no 0 :ê . j¡ /one thmaftee. ~ Ñ ~ ¡; THEBONDSARESPECIAL,LIMITEDOBLIGATIONSOFTIIEISSUER,PAYABLESOLELY OUTOFTHE REVENUES, RECEIPTS AND g ;:: .¡¡ j¡ OTHER MONEYS PLEDGED THEREFOR UNDER THE INDENTURE, THE BONDS ARE NOT A DEBT OF THE STATE, THE ISSUER (EXCEPT ~.g "i' TO TIlE LIMITED EXTENT SET FORTH IN THE INDENTURE) OROF ANY OTHER POLITICAL SUBDIVISION OF THE STATE, AND NEITHER E - ë ~ THE STATE, THE ISSUER (EXCEPT TO TIlE LIMITED EXTENT SET FORTIIINTHE INDENTURE) NOR ANY OT HER POLITICAL SUBDIVISION -E .£ ~9 OFTHE STATE IS LIABLE FOR THE PAYMENT OF THE BONDS, NEITHER THE FAITH AND CREDIT OF THE STATE, THE ISSUER NOR OF ; <è § § ANY OTHER POLITICAL SUBDIVISION OF THE STATE ARE PLEDGED TO THE PAYMENT OF THE PRINCIPAL OR OF INTEREST ON THE £ . ~ = BONDS, õ l' ~ ii Fannie Mae's obligations with respect to the Bonds are solely as provided in the Credit Facility. The obligations of Fannie Mae under the Credit Facility c "' ~ will be obligations solely of Fannie Mae, a fedcmlly chartered stockholder-owned corporation, and will not be backed by thefull faith and credit of the United States § l' .i'.ê, of America. The Bonds are not a debt of the United States of America Ot any other agency or instrumentality thereof or of Fannie Mae. The Bonds a" not guaranteed .; Õ ~ by the full faith and credit of the United States of America. ~ ¡s l' ~ ThÜ row' page of the Qlficial Statement conlains cee/ain "'Ioemationfo, quirk '~faence only. It ¡, nol a romplete .,"mmary of Ihe Bonds. Inves""" ~ 0 -- .,¡'ould cead the "'1'« Olfinal Stateo"," to obta", "'fom<alwn wennal WI/" o<akmg of 00 ",foemed ""'-'tmenl den."""'-. - ~ ~ ~ The Bonds are offmd when, as and if issued subject to ptior sale, to withdrawal 01 modification of the offer without notice and to the appmval of validity ~ ~ =" by St"dling, Yocca, Catlson & Rauth, Bond Counsel, and certain other conditions. CertaIn legal matters will be passed upon for Fannie Mae by its Legal Department ¡¡ ~ "~q and by O'Meiveny & Myers LLP; forthe Borrower by Luce, Folward, Hamilton, Scripps, San Diego, California; and for Newman and Associates, Inc by Ritter Eichner ro " ; ¡; & Norris PLLe. Washington, D.e. Itis expected thatthe Bonds will beavailahlefordelivmin hook-entry form through thefaciliticsofDTC in New York, New York, V5 ~ - ~ on orabout No"mber 29, 2001 ' ."ii§1! § ~ ~ ~ NEWMAN & ASSOCIATES, INc. i ~ ~~ Dated; Nowmber_, 2001 f ; i' ru . Ptcliminaty; subject [0 change ~ L¡ ~E:' - I ¡"õ9.i" MATURITY SCHEDULE $15,400,000* _% Tenn Bonds, due July 1, 2034** (Price of all Bonds - %, plus accrued interest from November I, 2001) *Preliminary; subject to change. *~Bonds subject to mandatory tender for purchase on ~ 1, 2022. E-Z- No dealer, broker, salesperson or other person has been authorized by the Issuer, the Borrower, the Remarketing Agent or the Underwriter to give any information or to make any representations with respect to the Bonds other than those contained in this Official Statement, and, if given or made, such infonnation or representations must not be relied upon as having been authorized by any of the foregoing. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy any securities other than the Bonds offered herein, nor shall there be any sale ofthe Bonds by any person in any jurisdiction in which such offer, solicitation or sale is not authorized or in which the person making such offer, solicitation or sale is not qualified to do so or to any person to whom it is unlawful to make such offer, solicitation or sale. The information set forth herein has been furnished by the Issuer, the Borrower and other sources that are believed to be reliable, but has not been independently verified and such infonnation is not guaranteed as to accuracy or completeness by, and is not to be construed as a representation by, the Issuer, the Borrower, Fannie Mae, the Remarketing Agent or the Underwriter. The information and expressions of opinion stated herein are subject to change without notice. Accordingly, the deliyery of this Official Statement shall not, under any circumstances, create any implication that there has been no change in the infonnation or opinions set forth herein or in the affairs of the Issuer, the Borrower or any other parties described herein since the date hereof. The Issuer has not and will not assume any responsibility as to the accuracy or completeness of the information contained in this Official Statement (other than information relating to the Issuer under the headings "THE ISSUER" and "LITIGATION - The Issuer"), all of which has been furnished by others. The Borrower has not and will not assume any responsibility as to the accuracy or completeness of the information contained in this Official Statement which has been furnished by others. Fannie Mae has not provided or approved any information in this Official Statement except with respect to the description herein under the caption "FANNIE MAE," takes no responsibility for any other information contained in this Official Statement and makes no representation as to the contents of this Official Statement (other than with respect to the description herein under the caption "FANNIE MAE"). Without limiting the foregoing, Fannie Mae makes no representation as to the suitability of the Bonds for any investor, the feasibility or performance of the project or compliance with any securities, tax or other laws or regulations. Fannie Mae's role is limited to issuing the Fannie Mae Commitment, entering into the Credit Facility and making payments under the Credit Facility, if required, all as described herein. This Official Statement, including the cover page hereof, is provided for the purpose of setting forth information in connection with the issuance and sale of the Bonds. This Official Statement speaks only as of its date, and the information herein is subject to change without notice, and neither the deliyery of this Official Statement nor any sale made hereunder may, under any circumstances, create any implication that there has been no change in the affairs of the Issuer, the Borrower or Fannie Mae since the date hereof. Information in this Official Statement under the heading "THE PROJECT AND THE PRIVATE PARTICIPANTS" has been provided by the Borrower, and the Issuer and the Underwriter specifically disclaim any responsibility therefor. References in this Official Statement to the Indenture, the Financing Agreement, the Regulatory Agreement, the Fannie Mae Commitment, the Credit Facility and other documents do not purport to be complete, and reference should be made to such documents for full and complete details of their contents. THE BONDS HAVE NOT BEEN REGISTERED WITH THE SECURITIES EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR HAS THE INDENTURE BEEN QUALIFIED UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED. IN RELIANCE UPON EXEMPTIONS CONTAINED IN SUCH ACTS. THE REGISTRATION OR lE-3 QUALIFICATION OF THE BONDS IN ACCORDANCE WITH APPLICABLE PROVISIONS OF THE SECURITIES LAWS OF THE STATES, IF ANY, IN WHICH THE BONDS HAVE BEEN REGISTERED OR QUALIFIED AND THE EXEMPTION FROM REGISTRA nON OR QUALIFICA nON IN CERTAIN OTHER STATES CANNOT BE REGARDED AS A RECOMMENDATION THEREOF. NEITHER THESE STATES NOR ANY OF THEIR AGENCIES HAVE PASSED UPON THE MERITS OF THE BONDS OR THE ACCURACY OR COMPLETENESS OF TillS OFFICIAL STATEMENT. ANY REPRESENT A nONS TO THE CONTRARY MAYBE A CRIMINAL OFFENSE. E>4 TABLE OF CONTENTS Page INTRODUCTION ................................................................... I THEBONDS .......................................................................5 ESTIMATED SOURCES AND USES OF FUNDS ........................................17 SECURITY FOR THE BONDS ....................................................... 18 BONDHOLDERS' RISKS ...........................................................21 LIMITEDLIABILITY...............................................................24 FANNIEMAE.....................................................................24 THEISSUER......................................................................25 THEPROJECTANDTHEPRIVATEPARTIClPANTS...... ......................... ..... 26 THE MORTGAGE NOTE ...........................................................31 THE INDENTURE, FINANCING AGREEMENT AND REGULATORY AGREEMENT. . . . . . . .. 32 ENFORCEABILITYOFREMEDIES...................................................32 TAXMATTERS ...................................................................32 LITIGATION......................................................................33 CERTAINLEGALMATTERS........................................................33 CONTINUINGDISCLOSURE........................................................34 VERIFICATIONOFCASHFLOWS ............................................. .....35 RATINGS ........................................................................35 UNDERWRITING..................................................................36 MISCELLANEOUS ................................................................36 APPENDIX A SUMMARY OF CERTAIN DEFINITIONS APPENDIX B SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE APPENDIX C SUMMARY OF CERTAIN PROVISIONS OF THE REGULATORY AGREEMENT APPENDIX D SUMMARY OF CERTAIN PROVISIONS OF THE FINANCING AGREEMENT APPENDIX E FORM OF CONTINUING DISCLOSURE AGREEMENT APPENDIX F FORM OF THE CREDIT FACILITY APPENDIX G PROPOSED FORM OF BOND COUNSEL OPINION E-5 OFFICIAL STATEMENT relating to $15,400,000* Housing Authority of the City of Chula Vista, California Multifamily Housing Revenue Bonds (Heritage Town Center Apartments) Series A of 2001 INTRODUCTION This Official Statement and the Appendices hereto (this "Official Statement") set forth certain information relating to the issuance by the Housing Authority of the City of Chula Vista, California (the "Issuer") of the above-captioned Bonds (the Bonds"). Certain capitalized terms used in this Official Statement are summarized in APPENDIX A-"SUMMARY OF CERTAIN DEFINITIONS" attached hereto. The Bonds are being issued pursuant to a Trust Indenture (the "Indenture"), dated as of November 1,2001, between the Issuer and Wells Fargo Bank, National Association, as trustee (the "Trustee"), and pursuant to Chapter 1 of Part 2 of Division 24 of the California Health and Safety Code, as amended (the "Ac!"). The Bonds are being issued by the Issuer to provide funding for a mortgage loan (the "Mortgage Loan") to be made by the Issuer to South Bay Community Villas, LP., a California limited partnership (the "Borrower"), for the purpose of financing the construction and equipping of a 271-unit multifamily and seniors rental housing project known as Heritage Town Center Apartments (the "Project") located in Chula Vista, California. The Mortgage Loan will be made pursuant to a Financing Agreement, dated as of November 1, 2001 (the "Financing Agreement"), among the Issuer, the Trustee and the Borrower, and in accordance with the requirements of Fannie Mae. The Mortgage Loan will be evidenced by a Multifamily Note, dated as of November 1,2001 (the "Mortgage Note"), executed by the Borrower. The Mortgage Note will be payable to the Issuer and will be secured by, among other things, a Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing, dated as of November 1,2001 (together with certain riders, the "Security Instrument"), from the Borrower, in favor of the Issuer. The Security Instrument will encumber the Project. On the date of issuance and delivery of the Bonds (the "Closing Date"), the Mortgage Note and the Security Instrument will be assigned by the Issuer to the Trustee and Fannie Mae ("Fannie Mae" or the "Credit Provider"), as their interests may appear, and upon such assignment, will be part of the Trust Estate securing the Bonds. In addition to the other security provided under the Indenture (as described herein under the caption "SECURITY FOR THE BONDS-Credit Facility"), credit enhancement for certain required mortgage payments under the Mortgage Note designated in the Credit Enhancement Instrument (Stand-By) dated November 29, 2001 from Fannie Mae to the Trustee (the "Credit Facility") as "Required Mortgage Payments" and. if Conversion occurs, liquidity support for the Bonds Outstanding on each Remarketing Date so long as the Credit Facility remains in effect will be provided, pursuant to the Credit Facility, by Fannie Mae. The Credit Facility will be a stand-by facility, providing credit enhancement for the Mortgage Loan and, if Conversion occurs, liquidity support for the Bonds Outstanding on each Remarketing Date so long 'Preliminary; subject to change. e-(P as the Credit Facility is in effect, should the Borrower fail to make a Required Mortgage Payment (in that event, Fannie Mae will be obligated, under the Credit Facility, to fund the payment in default). The Credit Facility will also cover the risk of disgorgement in bankruptcy. The obligation of the Borrower to reimburse Fannie Mae for any funds provided by Fannie Mae pursuant to the Credit Facility is established by the terms and conditions of a Reimbursement Agreement dated as of November 1, 2001 by and between the Borrower and Fannie Mae (the "Reimbursement Agreement"). See "APPENDIX F-FORM OF THE CREDIT FACILITY" and "SECURITY FOR THE BONDS - Credit Facility" herein. The Mortgage Loan will be made by the Issuer in accordance with the requirements of Fannie Mae and subject to the terms and conditions of a commitment (the "Fannie Mae Commitment"), issued by Fannie Mae to Prudential Multifamily Mortgage, Inc. (the "Loan Servicer"), as seryicer of the Mortgage Loan, with respect to the Mortgage Loan. Under the Fannie Mae Commitment, Fannie Mae has agreed, subject to satisfaction of the terms and conditions of the Fannie Mae Commitment, to provide credit enhancement for the Mortgage Loan pursuant to, and subject to the limitations of, the Credit Facility. The Fannie Mae Commitment further provides that, if the Conditions to Conversion (as described herein under the caption "SECURITY FOR THE BONDS-Conversion") are satisfied prior to the Termination Date such that the Loan Servicer will issue a Conversion Notice prior to the Termination Date, the Mortgage Loan will convert from the Construction Phase to the Permanent Phase, effective on the Conversion Date, and on such date, or thereafter upon satisfaction of the Conversion Requirements, the Letter of Credit (defined below) will be returned to its provider. Fannie Mae's participation in the financing of the Project will not extend beyond the Construction Phase (as defined in the Fannie Mae Commitment) unless the Conditions to Conversion (as described below) set forth in the Fannie Mae Commitment are satisfied prior to the Termination Date set forth in the Fannie Mae Commitment (or, to the extent not satisfied, are waived by Fannie Mae). If the Conditions to Conversion set forth in the Fannie Mae Commitment are sa'tisfied on or before the Termination Date (or, to the extent not satisfied, are wai ved by Fannie Mae) the Loan Servicer shall, on or before the Termination Date, issue a Conversion Notice, in which event the Mortgage Loan is to convert ("Conversion") from the Construction Phase to the Permanent Phase (as each such term is defined in the Fannie Mae Commitment) and Fannie Mae's participation in the financing will continue. If, however, the Conditions to Conversion are not satisfied on or before the Termination Date (or, to the extent not satisfied, are not waived by Fannie Mae) with the result that the Loan Servicer fails to issue a Conversion Notice on or before the Termination Date, the Mortgage Loan will not convert from the Construction Phase to the Permanent Phase, and the Bonds will be subject to special mandatory redemption in whole. Any such special mandatory redemption will be at a redemption price equal to the principal amount of the Bonds plus accrued interest to the Redemption Date, without premium. In the event of such a special mandatory redemption in whole, the redemption price is to be paid with funds provided under the Credit Facility. The Credit Facility will then terminate in accordance with its terms. Alternatively, in lieu of such redemption, the Bonds may be purchased by the Trustee for the account of the Construction Lender defined below. See "THE BONDS-Redemption" herein. In either case, the Bondholders will be required to deliver their Bonds for redemption or purchase, as the case may be. The Termination Date specified in the Fannie Mae Commitment is December 1, 2003: the Loan Servicer may request one six-month extension of the Termination Date. The grant of any such extension is in the sole discretion of Fannie Mae. Prior to Conversion, Fannie Mae will be protected against risk of loss by a Letter of Credit issued by First Bank & Trust, a California corporation (the "Construction Lender"), or a successor acceptable to Fannie Mae, pursuant to the Construction Phase Financing Agreement. Certain events concerning the 2 £-, Construction Lender, the Construction Phase Financing Agreement and the Letter of Credit may result in the prepayment of the Mortgage Loan and a corresponding special mandatory redemption or purchase in lieu of redemption of the Bonds. See "THE BONDS-Redemption-Special Mandatory Redemption in Certain Events" herein. The Conditions to Conversion include satisfaction of each of the terms and conditions of the Fannie Mae Commitment. The Conditions to Conyersion set forth in the Fannie Mae Commitment include for example, completion of construction of the Project and the achievement of a specified level of occupancy from the leasing of units in the Project. No assurance can be given that all of the Conditions to Conversion stipulated by Fannie Mae in the Fannie Mae Commitment will be satisfied with respect to the Project or that other events or circumstances mayor may not occur as a result of which Conyersion will not occur. In addition, even if Conversion occurs, no assurance can be given that the principal amount of the Mortgage Loan, as finally determined in accordance with the Fannie Mae Commitment, will not be less than the original principal amount of the Mortgage Loan; if the principal amount of the Mortgage Loan, as finally determined in accordance with the Fannie Mae Commitment, is less than the original principal amount of the Mortgage Loan, then the principal amount of the Mortgage Loan must, as a Condition to Conversion, be reduced by the Borrower's prepayment of the Mortgage Loan in part; upon such prepayment, a corresponding portion of the Bonds will be subject to special mandatory redemption. Any such special mandatory redemption in part will be at a redemption price equal to the principal amount of the Bonds to be redeemed plus accrued interest to the Redemption Date. No such redemption will be made at a premium. If such prepayment in part is required as a Condition to Conversion and is not made, Conversion will not occur and the Bonds will be subject to special mandatory redemption in whole, as described above. See "THE BONDS-Redemption-Special Mandatory Redemption in Certain Eyents" herein. If Conversion does occur, Fannie Mae is to release the Letter of Credit to the Construction Lender described herein. If payments on the Mortgage Loan are not paid when due, Fannie Mae will be obligated under the Credit Facility to fund the payment corresponding to the scheduled monthly payments of principal and interest on the Mortgage Loan (less the Spread Amount with respect thereto, comprising the servicing and guaranty fees payable to the Loan Servicer and Fannie Mae, respectively) to the Trustee. Fannie Mae's obligation to make payments under the Credit Facility is absolute, unconditional and irrevocable. See "SECURITY FOR THE BONDS-Credit Facility" herein. Fannie Mae has designated the Loan Servicer to service the Mortgage Loan. However, Fannie Mae may subsequently designate another eligible servicing institution to service the Mortgage Loan for Fannie Mae or may elect to service the Mortgage Loan itself. Fannie Mae will have no obligation under the Credit Facility to pay premium, if any, on the Bonds. The obligation of Fannie Mae to make payments under the Credit Facility will be a general, unsecured obligation of Fannie Mae. If Fannie Mae fails to perform such obligation, the Trustee would receive only payments and other recoveries on the Mortgage Loan itself, and a delinquency or default on the Mortgage Loan at that time would seriously and adversely affect monthly payments to the Trustee. The Trustee will accumulate and invest the monthly payments on the Mortgage Loan for application semiannually to payments of interest and principal, as due, on the Bonds and for the payment of certain fees and expenses. See APPENDIX B-"SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE" attached hereto. 3 5-5 The interest rate on the Mortgage Note will be established at a rate, and the monthly payments under the Mortgage Note will be scheduled, such that the monthly payments of interest (prior to Conversion) or principal and interest (on and after Conversion) on the Mortgage Note, together with other money on deposit with the Trustee pursuant to the Indenture, and certain Investment Income, are projected to be sufficient to pay, when due, the semi-annual interest or principal and interest payments on the Bonds as well as the Spread Amount (after Conversion) and the Third Party Fees (as defined and described below). Upon Conversion, the corresponding payments on the Mortgage Note, together with other moneys on deposit with the Trustee pursuant to the Indenture and certain Investment Income, are projected to be sufficient to pay, when due, the semiannual principal of and interest on the Bonds, as well as the Issuer's Annual Fee, the Trustee's Annual Fee and the Rebate Analyst's Annual Fee, if any (collectiyely, the 'Third Party Fees"). Fannie Mae has not prepared, reviewed or verified, and makes no representation or warranty with respect to, does not certify to, and assumes no responsibility or liability for, any calculations used to establish such schedule of payments or distributions, the assumptions used in making such calculations, their mathematical accuracy or for the sufficiency of payments on which they are based to pay the principal of and interest on the Bonds when due, the Third Party Fees when due or any other amounts at any time. The Project is required to be occupied by persons or families whose incomes satisfy certain provisions of the Act, the Internal Revenue Code of 1986, as amended (the "Code"), the applicable income tax regulations issued under the Code, and the requirements of the Issuer as set forth in a Regulatory Agreement and Declaration of Restrictive Covenants, dated as of November I, 2001 (the "Regulatory Agreement"), and entered into by and among the Issuer, the Trustee and the Borrower. See "THE PROJECT AND THE PRIVATE PARTICIPANTS" herein and APPENDIX C-"SUMMARY OF CERTAIN PROVISIONS OF THE REGULA TORY AGREEMENT" attached hereto. The Project will also be subject to certain income and rent restrictions as a result of participation in the low income housing tax credit program. In addition, in connection with the issuance by the Redevelopment Agency of the City of Chula Vista (the "Agency") of a loan to the Borrower (the "Agency Loan"), the Project will be further subject to restrictions set forth in a related Loan Agreement and Related Restrictive Covenants (the "Agency Loan Agreement"). See "THE PROJECT AND THE PRIV ATE PARTICIPANTS - The Regulatory Agreements." Any failure of the Borrower to comply with certain terms of the Regulatory Agreement may cause interest on the Bonds to be included in the gross income of the owners thereof for federal income tax purposes, possibly retroactively as well as prospectively. See "TAX MATTERS" herein. None of the Trustee, the Issuer or the Bondholders may cause an acceleration or redemption of the Bonds solely because of a default by the Borrower under the Regulatory Agreement or because interest on the Bonds becomes includable in the gross income of the owners thereof for federal income tax purposes. In addition, the interest rate on the Bonds will not be adjusted in the event that interest payable on the Bonds becomes includable in the gross income of the owners thereof for federal income tax purposes. The Bonds are subject to mandatory tender for purchase and remarketing or for redemption on July i, 2022 (the "initial Remarketing Date"). If the Bonds are remarketed on the initial Remarketing Date, the terms of the Bonds after such date may differ materially from the description provided in this Official Statement. Therefore, prospective purchasers of the Bonds on and after the initial Remarketing Date cannot rely on this Official Statement, but rather must rely upon any disclosure documents prepared in connection with such remarketing. The Bonds are special obligations of the Issuer payable solely from and secured by, among other property comprising the Trust Estate described in the Indenture and the security for such Bonds, the following: (a) the Mortgage Loan, (b) Fannie Mae's credit enhancement of the Mortgage Loan and, if 4 E'-q Conversion occurs, liquidity support for the Bonds Outstanding on each Remarketing Date so long as the Credit Facility remains in effect pursuant to the Credit Facility, (c) the Net Bond Proceeds, to the extent not disbursed to the Borrower, (d) the Revenues and any other moneys received by the Trustee for the payment of the principal of and interest on the Bonds, (e) amounts otherwise on deposit in the Funds and Accounts under the Indenture, (other than moneys on deposit from time to time in the Rebate Fund, the Costs of Issuance Deposit Account of the Costs of Issuance Fund and the Fees Account) and (f) certain Investment Income (excluding Investment Income earned on amounts on deposit in the Rebate Fund, the Costs of Issuance Deposit Account of the Costs of Issuance Fund and the Fees Account, if any). THE BONDS ARE SPECIAL, LIMITED OBLIGATIONS OF THE ISSUER, PAYABLE SOLELY OUT OF THE REVENUES, RECEIPTS AND OTHER MONEYS PLEDGED THEREFOR UNDER THE INDENTURE. THE BONDS ARE NOT A DEBT OF THE STATE, THE ISSUER (EXCEPT TO THE LIMITED EXTENT SET FORTH IN THE INDENTURE) OR OF ANY OTHER POLITICAL SUBDIVISION OF THE STATE, AND NEITHER THE STATE, THE ISSUER (EXCEPT TO THE LIMITED EXTENT SET FORTH IN THE INDENTURE) NOR ANY OTHER POLITICAL SUBDIVISION OF THE STATE IS LIABLE FOR THEPA YMENT OF THE BONDS. NEITHER THE FAITH AND CREDIT OF THE STATE, THE ISSUER NOR OF ANY OTHER POLITICAL SUBDIVISION OF THE STATE ARE PLEDGED TO THE PAYMENT OF THE PRINCIPAL OR OF INTEREST ON THE BONDS. Fannie Mae's obligations with respect to the Bonds are solely as provided in the Credit Facility. The obligations of Fannie Mae under the Credit Facility will be obligations solely of Fannie Mae, a federally chartered stockholder-owned corporation, and will not be backed by the full faith and credit of the United States of America. The Bonds are not a debt of the United States of America or any other agency or instrumentality thereof or of Fannie Mae. The Bonds are not guaranteed by the full faith and credit of the United States of America. Brief descriptions of the Bonds, the security for the Bonds, the Credit Facility, the Issuer, Fannie Mae, the Fannie Mae Commitment, the Loan Servicer, the Borrower and the Project are included in this Official Statement together with summaries of the Indenture, the Financing Agreement, the Regulatory Agreement, the Credit Facility, the Reimbursement Agreement and the Continuing Disclosure Agreement. Such descriptions do not purport to be comprehensive or definitiye. All references herein to the Indenture, the Financing Agreement, the Regulatory Agreement, the Continuing Disclosure Agreement, the Credit Facility, the Fannie Mae Commitment, the Reimbursement Agreement and other documents are qualified in their entirety by reference to such documents, and references herein to the Bonds are qualified in their entirety by reference to the forms thereof included in the Indenture and the information with respect thereto in the aforementioned documents, copies of all of which are available for inspection in the designated office of the Trustee. THE BONDS General The Bonds are issuable only as fully registered bonds, without coupons, in denominations of $5,000 or any integral multiple thereof. The Bonds are dated as of the date set forth on the cover hereof and will bear interest at the rates per annum, and mature on the dates as set forth on the inside cover of this Official Statement, subject to prior redemption as described under the caption "-Redemption" below. 5 ~~IO Interest on the Bonds will be calculated on the basis of a 360-day year consisting of twelve 30-day months and be payable on January 1 and July 1 of each year, commencing on July 1,2002 (each, an "Interest Payment Date"). The interest rate borne by the Bonds shall be borne by the Bonds to, but not including, July 1,2022 (the "Initial Remarketing Date"). On the Initial Remarketing Date, the Bonds will be subject to mandatory tender and purchase as described under the caption "Mandatory Tender, Purchase and Remarketing of Bonds on Initial Remarketing Date." The Bonds will bear interest from the Interest Payment Date next preceding the date of authentication of the Bonds, provided that if the date of authentication is an Interest Payment Date for which interest has been paid or is after the Record Date, but prior to the next Interest Payment Date, the Bonds shall bear interest from such Interest Payment Date, provided further that if the date of authentication is prior to the Record Date for the first Interest Payment Date, the Bonds shall bear interest from the Dated Date of the Bonds. Notwithstanding the foregoing, if, at the time of authentication of any Bond, interest on any Bond is in default, the Bond shall bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment or, if no interest has theretofore been paid on the Bond, from the Dated Date of the Bond. The Bonds will be delivered in fully registered form only and, when issued and delivered, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ("DTC"). Ownership interest in the Bonds may be purchased in book-entry form only. Ultimate purchasers of Bonds will not receive physical certificates representing their interest in the Bonds. So long as the Bonds are registered in the name of Cede & Co., as nominee of DTC, references herein to the Bondholders shall mean Cede & Co. and shall not mean the ultimate purchasers of the Bonds. Payments of the principal of and interest on the Bonds while under the Book-Entry System shall be made in accordance with the rules, regulations and procedures established by DTC in connection with such Book-Entry System. See "urn BONDS-Book-Entry Only System" herein. Mandatory Tender, Purchase and Remarketing of Bonds on Initial Remarketing Date The Bonds Outstanding on each Remarketing Date will be subject to Mandatory Tender, Purchase and Remarketing in accordance with the mandatory tender, purchase and remarketing provisions of the Indenture as described below. Notice. Not less than 60 days preceding a Remarketing Date, the Trustee shall give written notice of the Remarketing Date to the Credit Provider and the Loan Servicer; not less than 30 days preceding a Remarketing Date, the Trustee shall give written notice of tender and remarketing to the Bondholders of the Bonds then Outstanding (with a copy to the Credit Provider and the Loan Servicer) by mail, at their respective addresses appearing on the Bond Register; the notice shall state: (i) the Remarketing Date and that (a) all Outstanding Bonds are subject to mandatory tender for purchase on the Remarketing Date, (b) all Outstanding Bonds must be tendered for purchase on the Remarketing Date and (c) Bondholders will not have the right to elect to retain their Bonds; (ii) the address of the office of the Trustee at which Bondholders should deliver their Bonds for purchase and the date of the required delivery; (iii) that all Outstanding Bonds will be purchased on the Remarketing Date (or not later than three (3) Business Days after the Remarketing Date, in the event that the Trustee does not, after a remarketing, have sufficient funds on the Remarketing Date to purchase all of the Outstanding Bonds) at a price equal to the principal amount of the Outstanding Bonds plus interest accrued to the Remarketing Date; and (iv) any Bonds not tendered will nevertheless be deemed to have been tendered and will cease to bear interest from and after the Remarketing Date. 6 5-11 Remarketing Not less than 10 days before each Remarketing Date, the Remarketing Agent is to offer for sale and use its best efforts to sell the Bonds Outstanding on the Remarketing Date at a price equal to 100% of the principal amount of such Bonds. 'Not less than four Business Days before each Remarketing Date, the Remarketing Agent is to give notice, by Electronic Means, promptly confinned in writing, to the Trustee, the Credit Provider and the Loan Servicer specifying the principal amount of Bonds, if any, it has remarketed (including Bonds to be purchased by the Remarketing Agent on the Remarketing Date for its own account), the Remarketing Rate and the Remarketing Period applicable to the Bonds. Immediately upon receipt of the Remarketing Agent's notice, the Trustee is to give notice, by Electronic Means, to the Borrower, the Loan Servicer and the Issuer of the principal amount of Bonds remarketed, the Remarketing Rate and the Remarketing Period. Conditions. If, not less than four Business Days preceding the Remarketing Date: (a) the Remarketing Agent shall haye notified the Trustee, pursuant to the Indenture, of the remarketing of the Outstanding Bonds and that the proceeds from the remarketing (including proceeds of remarketing of Outstanding Bonds to be purchased by the Remarketing Agent on the Remarketing Date for its own account) or other funds equal to the amount needed to purchase the remarketed Bonds on the Remarketing Date are expected to be available to the Trustee on the Remarketing Date and deposited into the Bond Purchase Fund in an amount equal to the principal amount of the Outstanding Bonds; (b) there shall be on deposit with the Trustee, in the Bond Purchase Fund, from funds provided by the Borrower, the Issuer or the Credit Provider, an additional amount sufficient to pay estimated Remarketing Expenses, or provision for the payment of the estimated Remarketing Expenses shall have been made to the satisfaction of the Trustee and the Remarketing Agent; (c) the Issuer shall have notified the Trustee in writing that it has approved as to form and substance any disclosure document or offering materials which, in the opinion of counsel to the Issuer and the Remarketing Agent, is necessary to be used in connection with the remarketing of the Outstanding Bonds; (d) the Trustee shall have received written confirmation from the Credit Providerthat the Credit Facility is in full force and effect and will continue in full force and effect during the ensuing Remarketing Period or that a Replacement Credit Facility will be in full force and effect during the ensuing Remarketing Period; (e) the Trustee shall have received confinnation that the Rating Agency shall have received and approved a Cash Flow Projection and a Verification Report, each based on the Mortgage Note Rate, as revised, to reflect the interest rate to be in effect with respect to the Outstanding Bonds on and after the Remarketing Date; and (1) the Trustee shall have received written notice from the Remarketing Agent that the Remarketing Agent has received written confirmation from the Rating Agency that the then current rating assigned to the Outstanding Bonds will continue to be effective on the Remarketing Date; then the Trustee shall immediately give notice, by Electronic Means, which notice shall be immediately confirmed in writing, to the Credit Provider, the Remarketing Agent and the Loan Servicer that (a) all conditions precedent to the remarketing of the Outstanding Bonds have been satisfied and (b) the sale and 7 E'I2- settlement of the Outstanding Bonds is expected to occur on the Remarketing Date. Following the Trustee's notice, the Outstanding Bonds shall be sold to the purchasers identified by the Remarketing Agent for delivery and settlement on the Remarketing Date, and the Trustee shall apply the funds in the Bond Purchase Fund on the Remarketing Date to payment of the purchase price of the Outstanding Bonds. Purchase of Tendered Bonds. If, not less than four (4) Business Days preceding a Remarketing Date, any condition to the remarketing of the Bonds set forth in the Indenture has not been satisfied, then, unless the Outstanding Bonds are otherwise purchased on the Remarketing Date (a) the Remarketing Agent shall not sell any of the Outstanding Bonds on the Remarketing Date and (b) the Trustee shall, not less than four (4) Business Days preceding the Remarketing Date, give notice of that fact to the Credit Provider, by Electronic Means, and shall, not later than 9:30 a.m., Washington, D.c. time, on the third Business Day preceding the Remarketing Date, present a Certificate for a Purchased Bonds Advance under the Credit Facility. In the event that all of the conditions to Remarketing set forth in the Indenture are satisfied not less than four (4) Business Days preceding the Remarketing Date, but there are insufficient moneys available to the Trustee on the Remarketing Date to purchase all of the tendered Outstanding Bonds on the Remarketing Date, then, unless the Outstanding Bonds are otherwise purchased on the Remarketing Date, (a) the Trustee shall, not later than 9:30 a.m., Washington, D.c. time, on the Business Day following the Remarketing Date, give notice of that fact to the Credit Provider, by Electronic Means, and with such notice shall present a certificate for a Purchased Bonds Advance under the Credit Facility and (b) any funds deposited by the Remarketing Agent with the Trustee shall be returned to the Remarketing Agent. Under all circumstances the Bonds will cease to bear interest from and after the date of Purchase, even if the Trustee does not have sufficient funds on the Remarketing Date to purchase all of the Outstanding Bonds. Delivery of Bonds. Not later than 12:00 Noon, New York time, on the Remarketing Date, each Bondholder of the Bonds then Outstanding will be required to deliver its Bonds to the Trustee for delivery to the purchaser or purchasers identified by the Remarketing Agent or for purchase by the Trustee for the account of the Borrower if the Outstanding Bonds are not to be remarketed. Bonds received by the Trustee shall be held by the Trustee in trust for the tendering Bondholders pending receipt of funds for the payment of such Bonds. Additional Remarketings. After the Initial Remarketing Date and prior to the final maturity of the Bonds, the Bonds Outstanding on the day immediately following the last day of each Remarketing Period shall be remarketed on such day in accordance with the procedures set forth in the Indenture. Ownership and Pledge of Purchased Bonds. Purchased Bonds shall be owned by the Borrower and pledged to the Custodian, for the benefit of the Credit Provider, pursuant to the Pledge Agreement. As set forth in the Pledge Agreement, the Trustee shall either (a) ensure that Purchased Bonds are delivered to the Custodian under the Pledge Agreement or (b) if, and only if, delivery of the Bonds is not possible, deliver a written entitlement order to the applicable financial intermediaries on whose records ownership of the Purchased Bonds is reflected directing the intermediaries to credit the security entitlement to the Purchased Bonds to the account of the custodian for the benefit of the Credit Provider and deliver to the Custodian a written confirmation of such credit, whether or not the Borrower notifies the Remarketing Agent to do so. Purchased Bonds shall not be held as Book-Entry Bonds, but shall, as soon as practicable, be issued in certificated form. 8 E -I-:? Remarketing of Purchased Bonds. At such time as a Purchased Bond is remarketed by the Remarketing Agent, the Trustee shall (a) remit the proceeds from the remarketing to the Credit Provider, and (b) give written notice to the Remarketing Agent, the Borrower, and the Credit Provider that such Bond is no longer a Purchased Bond. A Purchased Bond shall not be remarketed without the consent of the Credit Proyider during the occurrence and continuance of an Event of Default under the Indenture or any Credit Facility Agreement. Cancellation of Purchased Bonds. Purchased Bonds shall be cancelled and deemed redeemed, without any further action by the Trustee or otherwise under the Indenture, at the direction of the Credit Provider if the Purchased Bonds are not remarketed as of the first anniversary of the date of purchase of such Bonds. Purchased Bonds: No Credit Facility Support. The Credit Facility shall not constitute security, or provide liquidity, for Purchased Bonds. Registration, Exchange and Delivery of Bonds In Connection With Remarketing Execution, Authentication and Delivery. Bonds sold by the Remarketing Agent pursuant to the Indenture shall be transferred by the Bond Registrar on the Bond Register and registered in the names of the purchasers of such Bonds, as specified in instructions from the Remarketing Agent; new Bonds shall be executed by the Issuer by manual or facsimile signature, authenticated by the Trustee and delivered to or upon the direction of such purchasers. Undelivered Bonds. An Undelivered Bond shall be treated as a lost Bond and shall be deemed tendered and a new Bond may be issued in place of it pursuant to the Indenture without providing indemnity. An Undelivered Bond shall not bear interest from and after the applicable Remarketing Date except as provided in "-Payment of Accrued Interest; Payment of Principal" below, and shall not be otherwise entitled to any rights under, or be secured by the lien of, the Indenture, but shall have only the right to receive the amount due as a result of the purchase of the Bonds pursuant to the Indenture, and only upon surrender of such Undelivered Bond to the Trustee or compliance with the provisions of the Indenture concerning payment of lost, stolen or destroyed Bonds. Second Notices. In the event that any Bond required to be delivered to the Trustee for payment of the purchase price of such Bond shall not have been delivered to the Trustee on or before the 30th day following a Remarketing Date, the Trustee shall mail a second notice to the holder of the Bond at its address as shown on the Bond Register setting forth the requirements set forth in the Indenture for delivery of the Bond to the Trustee and stating that deliyery of the Bond to the Trustee (or compliance with the proyisions of the Indenture concerning payment oflost, stolen or destroyed Bonds) must be accomplished as a condition to payment of the purchase price or redemption price applicable to the Bond. Payment of Accrued Interest; Payment of Principal. Accrued interest payable to the Remarketing Date on the Outstanding Bonds shall be paid to the owners of the Outstanding Bonds as of the Record Date in the same manner as if the Outstanding Bonds were not purchased pursuant to the Indenture. The principal portion of the purchase price of the Outstanding Bonds shall be payable only upon surrender of such Bonds pursuant to the Indenture. 9 e-Ik Redemption Optional Redemption. The Bonds are not subject to optional redemption prior to January 1,2012. Optional Redemption on and After January 1,2012 and Prior to the Initial Remarketing Date. On and after January 1,2012, and prior to the Initial Remarketing Date, the Bonds will be subject to optional redemption in whole, or in part, only upon optional prepayment of the Mortgage Loan in whole or in part in accordance with the Mortgage Loan Documents. Optional Redemption will occur on the first day of any month for which timely notice of redemption can be given during the periods and at the respective redemption prices set forth below, expressed as percentages of the principal amount of the Bonds to be redeemed, plus accrued interest, if any, to the Redemption Date: Redemption Period Redemption Prices (Both Dates Inclusive) (Expressed as a Percentage) January 1,2012 to December 31, 2012 102% January 1,2013 to December 31, 2013 101% January 1,2014 and thereafter 100% Available Moneys Requirement. Optional redemption pursuant to the Indenture is not permitted unless (a) the redemption is effected solely with Available Moneys or (b) the Credit Provider provides its prior written consent to a redemption with other than Available Moneys. Notwithstanding any other provision of the Indenture to the contrary, optional redemption of the Bonds will not be permitted, unless, on or before the Redemption Date, the Trustee has on hand Available Moneys in an amount sufficient to pay the End Period Payment on the Redemption Date. Neither the Issuer, the Credit Provider nor the Loan Servicer shall have any responsibility or liability to provide funds to be included in the End Period Payment. Mandatory Redemption. Special Mandatory Redemption in Certain Events. The Bonds are subject to special mandatory redemption as follows: (a) in part in the event that the Borrower makes a Pre-Conversion Loan Equalization Payment, and in the amount of such Pre-Conversion Loan Equalization Payment; or (b) in part in the event and to the extent that amounts remaining in the Mortgage Loan Fund are transferred to the Redemption Account pursuant to the Indenture for application to the redemption of Bonds; or (c) in whole if the Loan Servicer does not issue the Conversion Notice on or before the Termination Date, unless the Credit Provider shall otherwise direct the Trustee and the Loan Servicer in writing; or (d) in whole or in part, at the direction of the Credit Provider in the event and to the extent that proceeds of insurance from any casualty to, or proceeds of any award from any 10 B~15 condemnation, or any award as part of a settlement in lieu of condemnation, of the Project (in any such events, "Proceeds") are applied to the prepayment of the Loan in accordance with the Security Instrument (or, prior to the Conversion Date, the Construction Phase Credit Documents subject to the proyisions of the Construction Phase Financing Agreement); or (e) in whole or in part, at the written direction or with the prior written consent of the Credit Provider given to the Trustee, and in the amount specified by the Credit Provider if the redemption is in part, as follows: (i) in whole prior to the Conversion Date, or in whole or in part on or after the Conversion Date, upon the occurrence of (A) any default under the Security Instrument or (B) any default under any Credit Facility Agreement or (C) any default under the Financing Agreement; or (ii) in whole, upon the occurrence of a "Borrower Default" under, and as defined in, the Construction Phase Financing Agreement; or (f) in whole or in part, after the Conversion Date, in the event and to the extent that certain excess funds are transferred to the Redemption Account pursuant to the Indenture. A special mandatory redemption pursuant to any of paragraphs (a) through (f) above will be effected on the earliest practicable Redemption Date for which timely notice of redemption can be given pursuant to the provisions of the Indenture following the occurrence of an event described in paragraph (a) through (f) above. A special mandatory redemption pursuant to paragraph (a) through (f) above will be at a redemption price equal to 100% of the principal amount of the Bonds to be redeemed plus accrued interest on such Bonds to the Redemption Date. Bonds subject to special mandatory redemption in part shall be redeemed in Authorized Denominations; if the Trustee receives an amount for the special mandatory redemption of the Bonds which is not equivalent to an Authorized Denomination, Bonds shall be redeemed in an amount equal to the next lowest whole integral of an Authorized Denomination to the amount received by the Trustee, with any excess to be held in the Redemption Account. Mandatory Sinking Fund Redemption. The Bonds shall be subject to mandatory sinking fund redemption in part, by lot, prior to maturity, from sinking fund installments (a) on and before the Initial Remarketing Date on the dates and in the amounts set forth in the table below, and (b) after the Initial Remarketing Date in principal amounts to be determined by the Remarketing Agent and the Loan Servicer upon the remarketing of the Outstanding Bonds on the Remarketing Date, so as to maintain payments on the Mortgage Loan, and amortization of principal of the Mortgage Loan, consistent with a term equivalent to the II E-ICo number of months remaining to the maturity date of the Mortgage Loan. The redemption price will be equal to 100% of the principal amount of the Bonds to be redeemed (and, therefore, without premium), plus accrued interest to the Redemption Date, on the dates and in the amounts set forth in the table below: Redemption Redemption Redemption Redemption Date Amount Date Amount [January 1,2005] January 1,2014 July 1,2005 July 1,2014 January 1,2006 January 1,2015 July 1,2006 July 1,2015 January 1, 2007 January 1,2016 July 1, 2007 July 1,2016 January 1,2008 January 1,2017 July 1,2008 July 1,2017 January 1,2009 January 1,2018 July 1,2009 July 1,2018 January 1,2010 January 1,2019 July 1,2010 July 1,2019 January 1,2011 January 1,2020 July 1,2011 July 1,2020 January I, 2012 January 1,2021 July 1,2012 July I, 2021 January 1,2013 January 1,2022 July 1,2013 July 1,2022* 'Initial Remarketing Date. The remaining $- in principal amount of the Bonds will be subject to Mandatory Tender, Purchase and Remarketing on July 1,2022, the Initial Remarketing Date. See "The Bonds-Mandatory Tender, Purchase and Remarketing of Bonds on the Initial Remarketing Date." Not less than two Business Days prior to each Remarketing Date, the Loan Servicer shall prepare and provide to the Trustee, the Borrower, the Remarketing Agent and the Credit Provider an amortization schedule for the Mortgage Note showing substantially level monthly debt service on the Mortgage Note, based on the principal amount of the Mortgage Note outstanding on the applicable Remarketing Date and 12 ~-n the interest rate established under the Mortgage Note in connection with the remarketing of the Bonds. Based on that amortization schedule, the Remarketing Agent shall provide to the Trustee, the Borrower, the Loan Servicer and the Credit Proyider a schedule showing the sinking fund installments for the Bonds beginning on January 1 following the Remarketing Date. The amortization schedule shall become effectiYe on the applicable Remarketing Date and shall be binding on the Trustee, the Issuer, the Borrower, the Loan Servicer, the Credit Provider and the Bondholders, absent manifest error in the amortization schedule. Adjustment for Redemptions From Other Than Sinking Fund Installments. If less than all of the Bonds of a specific maturity have been redeemed other than from sinking fund installments applicable to such Bonds, the principal amount of Bonds of such maturity to be redeemed in each year from sinking fund installments shall be decreased pro rata among all sinking fund installments applicable to such Bonds. Any such proportional redemption shall be confirmed in writing to the Trustee by the Loan Servicer. Notice of Redemption The Trustee shall give notice of redemption of any Bonds in the name and on behalf of the Issuer by mail not less than 15 nor more than 20 days prior to the specified Redemption Date, to the Registered Owner of each Bond to be redeemed at the address of such Registered Owner as shown on the Bond Register. The Trustee shall cause a second notice of redemption to be sent by mail, on or within 10 days after the thirtieth day after the Redemption Date to any Bondholder who has not submitted its Bond to the Trustee for payment on or before the thirtieth day following the Redemption Date. Notwithstanding the foregoing, so long as the Book-Entry System is maintained in effect, the Trustee must give notice of redemption only to the entity designated in the Representation Letter. Notice of redemption may be given by the Trustee prior to the receipt of all funds necessary to effect the redemption, provided that redemption shall not occur unless and until the Trustee has on deposit and available or, if applicable, has received all of the funds necessary to effect the redemption; otherwise, such redemption shall be canceled. So long as the Letter of Credit remains in effect, the Trustee shall gi Ve a copy of the notice of any special mandatory redemption under the Indenture to the Construction Lender. NEITHER FAILURE TO GIVE OR RECEIVE ANY NOTICE OF REDEMPTION AS REQUIRED UNDER THE INDENTURE, FAILURE TO GIVE NOTICE TlMEL Y NOR ANY DEFECT IN ANY NOTICE (OR IN ITS CONTENT OR IN THE MANNER IN WHICH NOTICE IS GIVEN) SHALL AFFECT THE VALIDITY OR SUFFICŒNCY OF ANY PROCEEDINGS FOR THE REDEMPTION OF THE BONDS TO BE REDEEMED. Any notice of optional redemption shall be revoked by the Trustee by notice given in the same manner for the giving of notice of redemption or by Electronic Means, confirmed in writing, and the redemption canceled, if Available Moneys or, with Fannie Mae's prior written consent, moneys other than Available Moneys, sufficient to effect such redemption have not been received by, or are not on hand with, the Trustee on the Redemption Date. Redemption Payments If notice of redemption of Bonds has been given pursuant to the Indenture and if all conditions precedent to redemption have been satisfied, the Bonds called for redemption will become due and payable on the Redemption Date, interest on the Bonds will cease to accrue from and after the Redemption Date and the holders of the Bonds so called for redemption will thereafter no longer have any security or benefit under 13 G;:-15 the Indenture except to receive payment of the redemption price for such Bonds upon surrender of such Bonds to the Trustee. Except during any period in which the Bonds are subject to the Book-Entry System: (a) no payment will be made by the Trustee with respect to any Bonds called for redemption until such Bond is presented for payment or cancellation or the Trustee receives the items required by the Indenture with respect to any mutilated, lost, stolen or destroyed Bond; and (b) ifless than the entire principal amount of a Bond is called for redemption, the Issuer will execute, and the Trustee will authenticate and deliver, upon the surrender of such Bond to the Trustee, without charge by the Issuer or the Trustee to the Bondholder, in exchange for the unredeemed principal amount of such Bond, a new Bond or Bonds of the same interest rate, maturity and term, in any Authorized Denomination, in aggregate principal amount equal to the unredeemed balance of the principal amount of the Bond surrendered. During any period in which the Bonds are subject to the Book-Entry System, the rules, regulations and practices governing the Book-Entry System will govern whether and the extent to which the Trustee will make payments on any Bond called for redemption with or without surrender of the Bond (or portion of the Bond) to be redeemed, and the circumstances (if any) under which the Issuer is required to execute, and the Trustee is to authenticate and deliver, a new Bond in exchange for the unredeemed portion of any Bond called for redemption in part. All moneys held by or on behalf of the Trustee for the redemption of particular Bonds will be held in trust for the account of the holders of the Bonds to be redeemed, as provided in and in accordance with the Indenture. CUSIP number identification with appropriate dollar amounts for each CUSIP number also shall accompany all redemption payments. Selection of Bonds To Be Redeemed Upon Partial Redemption of Bonds Except as otherwise described in paragraphs (a), (b) and (f) under the heading "Mandatory Redemption-Special Mandatory Redemption in Certain Events," if less than all of the Outstanding Bonds are to be called for redemption (other than Mandatory Sinlång Fund Redemption), Bonds to be redeemed will be selected by the Trustee on a reasonably proportionate basis, in minimum amounts of $5,000. "Reasonably proportionate basis" will be determined and effectuated as nearly as practicable by multiplying the total amount of money available to redeem Bonds by the ratio which the principal amount of Bonds of such series Outstanding in each maturity bears to the principal amount of all of the Bonds Outstanding, and within a maturity by lot, or in such other manner as the Trustee shall deem fair. In the case of an optional redemption from an optional prepayment of the Mortgage Loan, the Trustee will make its selection immediately following receipt of notice of the optional prepayment. If there is called for redemption less than the entire principal amount of a Bond, the Issuer shall execute and the Trustee will authenticate and deliver, upon surrender of such Bond, without charge to the holder of such Bond, in exchange for the unredeemed principal amount of such Bond, Bonds of the same maturity, interest rate, principal amount, series and tenor in any Authorized Denomination in the amount of the unredeemed principal of the surrendered Bond. Purchase of Bonds in Lieu of Redemption Unless otherwise expressly provided in the Indenture, if at any time Available Moneys are held in any Fund or Account to be used to redeem Bonds, in lieu of such redemption the Borrower may, in writing, and with the written consent of the Credit Provider, direct the Trustee to use part or all of such moneys to purchase Bonds which would otherwise be subject to redemption from such moneys. The purchase price of such Bonds (excluding accrued interest, but including any brokerage and other charges) shall not exceed the 14 e:>f9 applicable redemption price of the Bonds which would be redeemed but for the operation of the proyision of the Indenture described in this paragraph (accrued interest to be paid on any such Bond shall be paid from the same Fund or Account from which accrued interest would be paid upon the redemption of such Bonds). Any such purchase must be completed prior to the time notice would otherwise be required to redeem the Bonds and may not occur, without the consent of the Trustee, after a Record Date. All Bonds so purchased shall be canceled by the Trustee and the face amount of the Bonds so purchased shall be applied as a credit against the Issuer's obligation to redeem such Bonds from such moneys. Special Purchase in Lieu of Redemption Subject to the satisfaction of all applicable tenns and conditions set forth in the Indenture, if all the Bonds Outstanding are called for redemption in whole under the Indenture at any time that the Letter of Credit is in effect, the Bonds may, in lieu of such redemption, be purchased ("Special Purchase Bonds") by the Trustee, at the written direction of the Construction Lender, for the account of the Construction Lender. Any purchase of the Bonds pursuant to this provision will be in whole and not in part, and will be made on the date the Bonds are otherwise scheduled to be redeemed (the "Special Purchase Date"). The purchase price of the Special Purchase Bonds ("Special Purchase Price") will be equal to the principal amount of the Special Purchase Bonds otherwise subject to redemption, plus accrued interest, if any, on such Bonds to the Special Purchase Date. The payment source shall consist solely of funds to be advanced by the Credit Provider under the Credit Facility together with funds otherwise available under the Indenture to otherwise pay the redemption price of the Special Purchase Bonds as directed by the Credit Provider. Book-Entry Only System The information in this section concerning DTC and DTC's book-entry system has been obtained from DTC and the Issuer does not make any representation or warranty or take any responsibility for the accuracy or completeness of such information. DTC will act as securities depository for the Bonds. The Bonds will be issued as fully registered Bonds, registered in the name of Cede & Co. (DTC's partnership nominee). One fully registered bond certificate will be issued for each Bond maturity in the aggregate principal amount thereof, and will be deposited with DTc. DTC is a limited-purpose trust company organized under the New York Banking Law, as a "Banking Organization" within the meaning of the New York Banking Law. DTC is a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code and a "clearing agency" registered pursuant to the proyisions of Section 17 A of the Securities Exchange Act of 1934, as amended. DTC was created to hold securities of its participants (the "DTC Participants") and to facilitate the settlement of securities transactions among DTC Participants in such securities through computerized book-entry changes in DTC Participant's accounts, thereby eliminating the need for physical movement of securities certificates. DTC participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. DTC is owned by a number of its DTC Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks and trust companies that clear through or maintain a custodial relationship with a DTC Participant, either directly or indirectly (the "Indirect DTC Participant" and, together with DTC Participants, the "Participants"). The rules applicable to DTC and its Participants are on file with the Securities and Exchange Commission. 15 E . :z.o Purchases of the Bonds under the DTC system must be made by or through DTC Participants, which will receive a credit for the Bonds on DTC's records. The ownership interest of each actual purchaser of each Bond (the "Beneficial Owner") will be recorded on the DTC Participants' records. Beneficial Owners will not receiye written confirmation from DTC of their purchase, but Beneficial Owners are expected to receive written confirmation providing details of the transaction, as well as periodic statements of their holdings, from the DTC Participant or the Indirect DTC Participant through which the Beneficial Owners entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Participants with DTC are registered in the name of DTC' s partnership nominee, Cede & Co. The deposit of Bonds with DTC and their registration in the name of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC's records reflect only the identity of the DTC Participants to whose accounts such Bonds are credited, which mayor may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers. The Issuer, the Trustee, Fannie Mae, the Loan Servicer and the Borrower will not have any responsibility or obligation with respect to (a) the accuracy of the records of DTC, Cede & Co. or any DTC Participant with respect to any ownership interest in the Bonds, (b) the delivery to any DTC Participant or any Indirect Participant or any other person, other than Cede & Co., as nominee of DTC, as Bondholder on the Bond Register, of any notice with respect to the Bonds, including any notice of redemption, (c) the payment to any DTC Participant or Indirect Participant or any other Person, other than Cede & Co., as nominee ofDTC, as Bondholder on the Bond Register, of any amount with respect to principal of, premium, if any, or interest on, the Bonds, or (d) any consent given by Cede & Co., as nominee ofDTC as registered owner. So long as certificates for the Bonds are not issued pursuant to the Indenture and the Bonds are registered in the name of Cede & Co., as nominee for DTC, the Issuer, the Borrower, Fannie Mae, the Loan Servicer and the Trustee will treat DTC or any successor securities depository as, and deem DTC or any successor securities depository to be, the absolute owner of the Bonds for all purposes whatsoever, including, without limitation, the (a) payment of principal and interest on the Bonds, (b) giving notice of redemption and other matters with respect to the Bonds, (c) registration of transfers with respect to the Bonds, and (d) selection of Bonds for redemption. SO LONG AS CEDE & CO., AS NOMINEE OF DTC, IS THE REGISTERED OWNER OF THE BONDS, REFERENCE HEREIN TO THE BONDHOLDERS OR OWNERS (OTHER THAN UNDER THE CAPTION "TAX MATTERS" HEREIN) SHALL MEAN CEDE & CO. AND SHALL NOT MEAN THE BENEFICIAL OWNERS OF THE BONDS. SO LONG AS DTC OR ITS NOMINEE, CEDE & CO., IS THE REGISTERED OWNER OF THE BONDS, PAYMENTS OF PRINCIPAL OF, REDEMPTION PREMIUM, IF ANY, AND INTEREST ON, THE BONDS WILL BE MADE DIRECTL Y TO CEDE &CO., WHICH WILL REMIT SUCH PAYMENTS TO PARTICIPANTS OF DTc. SUCH PARTICIPANTS WILL, IN TURN, REMIT SUCH PAYMENTS TO THE BENEFICIAL OWNERS OF THE BONDS. Conveyances of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. 16 e- - 1--\ Redemption notices shall be sent to Cede & Co. If less than all of the Bonds are being redeemed, DTC's practice is to determine by lot the amount of the interest of each DTC Participant in the Bonds to be redeemed. Neither DTC nor Cede & Co. will consent or vote with respect to the Bonds. Under its usual procedures, DTC mails an Omnibus Proxy to the Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or yoting rights to those DTC Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Payments of principal and premium, if any, and interest on the Bonds will be made to DTc. DTC's practice is to credit Direct Participants' accounts on a payable date in accordance with their respective holdings shown on DTC's records unless DTC has reason to believe that it will not receive payment on a payment date. Payments by DTC Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is now the case with municipal securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not ofDTC, the Trustee or the Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal of, premium, if any, and interest on, the Bonds to DTC is the responsibility of the Issuer or the Trustee. Disbursement of such payments to DTC Participants is the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect DTC Participants. Removal From the Book-Entry System DTC may discontinue providing its services as securities depository with respect to the Bonds at any time by giving written notice to the Issuer, the Trustee and the Borrower. The Issuer may terminate the services of DTC (or a successor securities depository). Upon the discontinuance or termination of the services ofDTC, unless a substitute securities depository is appointed, Bond certificates will be printed and delivered to the Beneficial Owners of the Bonds. In the event the Bonds are removed from the Book-Entry System, the principal of and the interest on the Bonds shall be payable to the persons in whose names the Bonds are registered on the Bond Register on the applicable Record Date. Payments of interest on the Bonds shall be made to the registered owners of the Bonds (as determined at the close of business on the Record Date next preceding the applicable Interest Payment Date) by check drawn upon the Trustee mailed by first class mail, postage prepaid, on the Interest Payment Date. The principal amount of any Bond and premium, if any, together with interest payable on any Bond Payment Date (other than interest payable on a regularly scheduled Interest Payment Date) will be made by check only upon presentation and surrender of the Bond on or after its maturity date or date fixed for redemption, purchase or other payment at the office of the Trustee designated by the Trustee for that purpose. Notwithstanding the foregoing, payment of principal of, premium, if any, and interest on any Bond shall be made by wire transfer to any account within the United States of America designated by a Bondholder owning $1,000,000 or more in aggregate principal amount of Bonds (if requested in writing of the Trustee by such Bondholder not less than five days prior to the applicable Bond Payment Date and if such Bondholder otherwise complies with the reasonable requirements of the Trustee). A request for wire transfer may specify that it is effective with respect to all succeeding payments of principal, premium, if any, and interest and will be so effective unless and until rescinded in writing by the Bondholder at least five days prior to the Record Date for the first Bond Payment Date to which such rescission is designated to apply. If interest on the Bonds is in default, the Trustee shall, prior to payment of interest, establish a special record date (the "Special Record Date") for such payment, which Special Record Date shall be not more than 15 17 e. - 2--7- nor less than 10 days prior to the date of the proposed payment. Payment of such defaulted interest shall then be made by check or wire transfer, as described above, mailed or remitted to the persons in whose names the Bonds are registered on the Special Record Date at the addresses or accounts of such persons shown on the Bond Register. ESTIMATED SOURCES AND USES OF FUNDS* The following is a list of the approximate sources and uses of funds, exclusive of accrued interest on the Bonds. Source of Funds Proceeds of Bonds $15,400,000 Equity Contribution Total Source of Funds $ Uses of Funds Mortgage Loan Fund Deposit $ Initial Debt Service Deposit Real Estate Fees and Costs of Issuance Deposit Total Uses of Funds $ SECURITY FOR THE BONDS Pledge of Trust Estate Pursuant to the Indenture, and on the basis of (i) the recitals and premises set forth therein and (ii) the acceptance by the Trustee of its obligations under the Indenture, in order to secure the payment of the principal of, redemption premium, if any, and interest on, and the purchase price of, the Bonds according to their tenor and effect, to secure, on a parity basis, all obligations owed to the Credit Provider under the Credit Facility Agreement and the Mortgage Loan Documents, and to secure the performance and observance by the Issuer of the coyenants expressed or implied in the Indenture and in the Bonds, the Issuer has assigned and granted a security interest in and to the property described in paragraphs (a) through (e) below (the "Trust Estate") to the Trustee and its successors in trust, for the benefit of the Bondholders, and to the Credit Provider, and its successors and assigns, as their interests may appear, subject to the provisions of the Assignment and subject to the provisions of the Indenture: (a) all right, title and interest of the Issuer in and to the Financing Agreement, the Mortgage Loan, including the Mortgage Note, the Security Instrument and the other Mortgage Loan Documents, and all amendments, modifications, supplements, renewals and restatements of the foregoing, reserving, however, the Reserved Rights; *Preliminary; subject to change. 18 5-2--~ (b) all rights to receive payments on the Mortgage Note and under the other Mortgage Loan Documents, including all proceeds of insurance or condemnation awards; (c) all right, title and interest of the Issuer in and to the Net Bond Proceeds and the accrued interest, if any, derived from the sale of the Bonds and all Funds, Accounts and Investments under the Indenture (including, but not limited to, moneys, documents, securities, investments, instruments and general intangibles on deposit, or otherwise held by the Trustee under the Indenture), including Investment Income, but excluding moneys in the Fees Account, the Rebate Fund and the Costs of Issuance Deposit Account of the Costs of Issuance Fund (including within such exclusion Investment Income earned on amounts on deposit in the Costs of Issuance Fund and Investment Income retained in the Rebate Fund); (d) all documents, securities, instruments and general intangibles and any and all other rights and interests in property, whether tangible or intangible, from time to time by delivery or by writing of any kind conveyed, mortgaged, pledged, assigned or transferred as and for additional security under the Indenture for the Bonds by the Issuer, or by anyone on its behalf, or with its written consent, to the Trustee, which is authorized to receiye by the Indenture any and all such property at any and all times, and to hold and apply the same subject to the terms of the Indenture; and (e) all of the proceeds of the foregoing, including, but not limited to, Permitted Investments and Investment Income (except as excluded in paragraph (c) above). The Bonds will be secured by, among other property comprising the Trust Estate and the security for the Bonds, the following: (a) the Mortgage Loan, (b) the Credit Provider's credit enhancement of the Mortgage Loan and, if Conversion occurs, liquidity support for Bonds Outstanding on each Remarketing Date so long as the Credit Facility is in effect pursuant to the Credit Facility, (c) the Net Bond Proceeds, to the extent not disbursed to the Borrower, (d) the Revenues and any other moneys received by the Trustee for the payment of the principal of and interest on the Bonds, (e) amounts otherwise on deposit in the Funds and Accounts (excluding amounts on deposit from time to time, in the Rebate Fund, the Costs of Issuance Deposit Account of the Costs of Issuance Fund and the Fees Account) and (f) Investment Income (excluding Investment Income earned on amounts on deposit in the Rebate Fund and Investment Income earned on amounts on deposit in the Costs of Issuance Deposit Account of the Costs of Issuance Fund). Credit Facility General. On the Closing Date, the Trustee will accept the Credit Facility from Fannie Mae, and, thereafter the Trustee is required to abide by and take all actions required of the Trustee under the Credit Facility in accordance with its terms. Each purchaser of the Bonds should be aware that[, except in the event of a remarketing of the Bonds,] the Credit Facility does not guarantee payment of principal of, premium, if any, or interest on the Bonds. The Credit Facility only provides that payments corresponding to the Required Mortgage Payments due under the Mortgage Note will be made by Fannie Mae if not made by the Borrower[, except in the eventofa remarketing of the Bonds, the Credit Facility does provide liquidity support for the Bonds]. 19 E-zA. A form of the Credit Facility is contained in "APPENDIX F-FORM OF THE CREDIT FACILITY" attached hereto. Information regarding Fannie Mae is contained herein under the caption "FANNIE MAE." Trust Indenture Provisions Relating to Credit Facility. The Trustee is required to give notices to Fannie Mae as required by, and pursuant to and in accordance with, the terms and conditions of the Credit Facility, in order to receive payments from Fannie Mae under, and as and to the extent provided in and permitted by, the Credit Facility, and is to cause moneys received from Fannie Mae to be applied for the purposes specified in the Credit Facility and the Indenture. All moneys derived from the Credit Facility are to be deposited into the Credit Facility Account of the Revenue Fund under the Indenture pending their application by the Trustee. In the event that the Trustee shall haye received any payment from Fannie Mae under or pursuant to the Credit Facility, and thereafter amounts are received by the Trustee from the Bon-ower or other source, which later received amounts are in payment of amounts satisfied by the payment under or pursuant to the Credit Facility, then such later received amounts are to be promptly reimbursed to Fannie Mae to the extent of the amount so paid by Fannie Mae. Under the Indenture, the Trustee has covenanted that it will not, without the prior written consent of the registered owners of all of the Bonds then Outstanding, transfer, assign or release the Credit Facility until the principal of and interest on the Bonds shall have been paid or duly provided for in accordance with the terms of the Indenture, except (a) to a successor Trustee or (b) to Fannie Mae upon expiration or other termination of the Credit Facility in accordance with its terms, including tennination on its stated expiration date or (c) upon payment under the Credit Facility of the full amount payable under the Credit Facility. If at any time during the term of the Credit Facility a successor Trustee is appointed and qualified under the Indenture and the Credit Facility is not assignable or transferable to the successor Trustee, the resigning Trustee is to request that Fannie Mae deliver a new Credit Facility, substantially identical to the Credit Facility, to the successor Trustee, and the resigning Trustee is to continue to serve as Trustee under the Indenture until such time as the new Credit Facility is delivered to the successor Trustee. Ifthe resigning Trustee fails to make the request of Fannie Mae for delivery of a new Credit Facility, the successor Trustee is directed under the Indenture to do so before accepting its appointment. Upon delivery of the new Credit Facility to the successor Trustee, the prior Credit Facility is to be returned to the Credit Provider and canceled, and the new Credit Facility shall thereafter be subject to all of the provisions of the Indenture relating to the Credit Facility, and shall be deemed for all purposes of the Indenture to be the Credit Facility then in effect. If all Conditions to Conversion have not been satisfied prior to the Termination Date set forth in the Fannie Mae Commitment, the Credit Facility will tenninate and the Bonds will be subject to special mandatory redemption unless purchased by or for the account of the Construction Lender. See "THE BONDS-Redemption" herein. Conversion Failure of Conversion to Occur. Fannie Mae has issued the Fannie Mae Commitment to the Loan Servicer, pursuant to which Fannie Mae has agreed, subject to satisfaction of the terms and conditions of the Fannie Mae Commitment, to provide credit enhancement for the Mortgage Loan pursuant to, and subject to the limitations of, the Credit Facility. If the Conversion Notice is not issued on or before the Termination Date (as such date may be extended from time to time), no matter the reason, then the Bonds are to be redeemed in whole unless the Credit Provider otherwise directs the Trustee and the Loan Servicer in w iting. In lieu of such redemption, the Bonds may be purchased by the Trustee, at the written direction of the Construction Lender, for the account of the Construction Lender. 20 e-2-S Conversion to the Permanent Phase. If each of the following conditions (collectively, the "Conditions to Conversion") are satisfied on or before the Termination Date, the Mortgage Loan will convert from the Construction Phase to the Permanent Phase effective on the Conversion Date. Unless otherwise agreed in writing by Fannie Mae, the Conyersion Date must be the first day of a month and must occur no later than the first day of the month which is two full months after the end of the Three-Month Period (as defined in the Construction Phase Financing Agreement). The Conditions to Conversion are: (a) The Loan Seryicer has issued the Conversion Notice as provided in the Construction Phase Financing Agreement. (b) The outstanding principal balance of the Mortgage Loan does not exceed the "Permanent Phase Loan Amount" determined in accordance with the Construction Phase Financing Agreement, or, if the outstanding principal balance of the Mortgage Loan exceeds the Permanent Phase Loan Amount, the Borrower has made a Pre-Conversion Loan Equalization Payment (as defined in the Mortgage Note) to effect a special mandatory redemption of the Bonds in part pursuant to the Indenture. (c) Any gap or bridge financing provided by the Construction Lender to the Borrower has been paid in full. (d) No event has occurred and is continuing, or would result from the conversion to the Permanent Phase, which constitutes an Event of Default under the Reimbursement Agreement or any Approved Subordinate Financing or would constitute an Eyent of Default under the Reimbursement Agreement or any Approved Subordinate Financing but for the requirement that notice be given or time elapse or both. (e) Any other terms and conditions required to be satisfied by the Construction Phase Financing Agreement as a condition to the occurrence of the Conversion Date have been satisfied. FANNIE MAE'S OBLIGATIONS WITH RESPECT TO THE BONDS ARE SOLELY AS PROVIDED IN THE CREDIT FACILITY. THE OBLIGATIONS OF FANNIE MAE UNDER THE CREDIT FACILITY WILL BE OBLIGATIONS SOLELY OF FANNIE MAE, A FEDERALLY CHARTERED STOCKHOLDER-OWNED CORPORATION, AND WILL NOT BE BACKED BY THE FULL FAITH AND CREDIT OF THE UNITED STATES OF AMERICA. THE BONDS ARE NOT A DEBT OF THE UNITED STATES OF AMERICA OR ANY OTHER AGENCY OR INSTRUMENTALITY THEREOF OR OFF ANNIE MAE. THE BONDS ARE NOT GUARANTEED BY THE FULL FAITH AND CREDIT OF THE UNITED STATES OF AMERICA. THE BONDS ARE NOT A DEBT OF THE UNITED STATES OF AMERICA, OR ANY AGENCY THEREOF, OR OF FANNŒ MAE. PAYMENT OF PRINCIPAL OF, PREMruM, IF ANY, AND INTEREST ON, THE BONDS IS NOT GUARANTEED BY FANNŒ MAE, EXCEPT IN THE EVENT OF A REMARKETING OF THE BONDS, THE CREDIT FACILITY PROVIDES LIQUIDITY SUPPORT FOR THE BONDS. SO LONG AS THE CREDIT FACILITY IS IN EFFECT, FANNŒ MAE'S OBLIGATIONS, AS DESCRIBED GENERALLY HEREIN, WILL BE SOLELY AS PROVIDED IN THE CREDIT FACILITY. THE OBLIGATIONS OF FANNŒ MAE UNDER THE CREDIT FACILITY WILL BE OBLIGATIONS SOLELY OF FANNIE MAE, A FEDERALLY CHARTERED STOCKHOLDER-OWNED CORPORATION. THE OBLIGATIONS OF FANNŒ MAE ARE NOT 21 t:: . Zk:o BACKED BY THE FULL FAITH AND CREDIT OF THE UNITED STATES OF AMERICA. FANNIE MAE HAS NO OBLIGATION TO PURCHASE, DIRECTLY OR INDIRECTLY, ANY OF THE BONDS. BONDHOLDERS' RISKS The following is a summary of certain risks associated with the purchase of the Bonds. This summary is not intended to be a comprehensive list of the risk factors associated with the Bonds. The Bonds are to be payable from payments to be made by the Borrower under the Mortgage Note. The Borrower's obligation to make such payments pursuant to the Financing Agreement and Mortgage Note is nonrecourse and secured only by the Security Instrument. The Borrower's ability to make such payments is subject to financial conditions applicable to the Borrower and the Project which may change in the future to an extent that cannot be determined at this time. Failure To Satisfy Conditions to Conversion If the Conversion Notice is not issued on or before the Termination Date, (a) Conversion will not occur and (b) the Bonds will be subject to special mandatory redemption pursuant to the Indenture unless the Bonds are purchased by or for the account of the Construction Lender pursuant to the Indenture. Construction Lender Pursuant to the Construction Phase Financing Agreement, the Construction Lender has provided to Fannie Mae a letter of credit (the "Letter of Credit"). The Letter of Credit is to be used to reimburse Fannie Mae in the event Fannie Mae is required to pay amounts under the Credit Facility during the Construction Phase. Under the terms of the Construction Phase Financing Agreement, Fannie Mae will be authorized, subject to the tenus and conditions of the Construction Phase Financing Agreement, to draw on the Letter of Credit in certain events, including, but not limited to, (a) the failure of the Borrower to pay the Facility Fee as and when due or to reimburse Fannie Mae as and when due for any amounts provided by Fannie Mae under the Credit Enhancement Instrument or to pay to Fannie Mae as and when due any other amounts owing under the Reimbursement Agreement and the failure of the Construction Lender to pay any such amount to Fannie Mae on behalf of the Borrower within three Business Days of notice from Loan Servicer or Fannie Mae of nonpayment of such amounts; (b) the failure of the Borrower to pay any amount when due and owing to the Issuer, the Trustee or the Remarketing Agent and the failure of the Construction Lender to pay any such amount on behalf of the Borrower within three Business Days of notice from Issuer, Trustee, Remarketing Agent, Loan Servicer or Fannie Mae of nonpayment of such amounts: (c) a Transfer that is an Event of Default under of the Security Instrument; (d) construction of the Project occurs in accordance with changed, modified or amended Plans which change, modification or amendment was not consented to by the Loan Servicer if and as required pursuant to Construction Phase Financing Agreement; and (e) the failure of the Conditions to Conversion to be satisfied on or before the Termination Date. Bankruptcy of Borrower In the event of a bankruptcy filing by or against the Borrower, all or a portion of any payments made to Bondholders within 91 days of the filing of such bankruptcy could be recovered from Bondholders by the order of a bankruptcy judge finding that such payments to Bondholders were "preferential" payments within the meaning of Section 547 of the United States Bankruptcy Code. In the event Bondholders were ordered 22 8 - 2--7 to return payments previously received, Bondholders' recourse, through the Trustee, would be to the obligations of Fannie Mae to the Trustee as and to the extent provided in the Credit Facility. The United States Bankruptcy Code automatically stays enforcement of any liens, such as the Security Instrument, against the property of a bankrupt estate, even if such liens arose prior to the filing of the bankruptcy petition. In the event ofthe bankruptcy of the Borrower, the Trustee's ability to enforce the provisions of the Security Instrument would be substantially impaired, absent relief by the bankruptcy court from the automatic stay. In the eyent of such a stay, Bondholders recourse, through the Trustee, would be to the obligations of Fannie Mae to the Trustee as and to the extent provided in the Credit Facility. Failure To Complete Project Under certain circumstances, the Bonds are subject to early redemption. Among such circumstances are failure to complete the construction of the Project or otherwise satisfy the Conditions to Conversion (as set forth in the Construction Phase Financing Agreement) on or before the Termination Date. Prior to the Conversion Date, upon the occurrence of a default under the Construction Phase Credit Documents (including the Construction Phase Credit Reimbursement Agreement), the Construction Lender can direct Fannie Mae to draw on the Letter of Credit to effect a corresponding special mandatory redemption of the Bonds in whole. See "THE BONDS-Redemption" herein. Reduction in Authorized Mortgage Loan Amount The Bonds are also subject to early redemption in part if the Mortgage Loan is prepaid in part in order to satisfy Fannie Mae's underwriting criteria for determining the final principal amount of the Mortgage Loan as of the Conversion Date. This would occur, for example, if the net income from the Project does not provide sufficient debt service coverage to support a loan amount equal to the original principal amount of the Mortgage Loan. A prepayment of the Mortgage Loan will result in a mandatory redemption of the Bonds in an amount equal to such prepayment at a price of par plus accrued interest thereon. If the Borrower fails to make such prepayment, a condition to Conversion will not have been satisfied and the Bonds will be subject to special mandatory redemption in whole. No premium will be paid in connection with any such redemption. No Acceleration or Redemption upon Loss of Tax Exemption The Borrower has covenanted and agreed to comply with the provisions of the Code relating to the exclusion from gross income for federal income tax purposes of the interest payable on the Bonds. The financing documents contain provisions and procedures designed to assure compliance with such covenant. See "TAX MATTERS" herein. However, the Borrower's covenant to comply with the requirements of the Code is nonrecourse to the Borrower, and the Borrower's liability is limited to the revenues and assets comprising the Project. Furthermore, the Borrower's failure to comply with such provisions will not constitute a default under the Mortgage Loan and will not give rise to a redemption or acceleration of the Bonds (unless Fannie Mae determines, at its option and in its sole and absolute discretion, that such failure will constitute such a default) and is not the basis for an increase in the rate of interest payable on the Bonds. Consequently, interest on the Bonds may become includable in gross income for purposes offederal income taxation retroactive to the date of issuance of the Bonds by reason of the Borrower's failure to comply with the requirements of federal tax law, and the Issuer and the Trustee will not have remedies available to them to mitigate the adverse economic effects to the owners of the Bonds of such inclusion by reason of the Borrower's noncompliance. 23 E -z.B Performance of the Project No assurance can be given as to the future perfonnance of the Project. The economic feasibility of the Project depends in large part upon the ability of the Borrower to attract sufficient numbers of residents and to maintain substantial occupancy throughout the term of the Bonds. Failure to meet projected net operating income at the time of Conversion could result in a redemption of the Bonds in whole or in part. See "BONDHOLDERS' RISKS-Failure to Complete Project; Reduction in Authorized Mortgage Loan Amount." Occupancy of the Project may be affected by competition from existing housing facilities (including facilities owned by the Borrower or an affiliate of the Borrower) or from housing facilities which may be constructed in the area served by the Project (including facilities constructed by the Borrower or affiliates of the Borrower). The Issuer has not independently reviewed the feasibility of the Project and makes no representation, direct or indirect, that the Project will be able to generate sufficient income for the Borrower to make its debt service payments under the Mortgage Note or other payment obligations of the Borrower under the Bond Documents or the Mortgage Loan Documents and its operating expenses. Restrictions imposed under the Code on tenant income and the rent that can be charged could have an adverse effect on the Borrower's ability to satisfy its obligations under the Mortgage Loan Documents, especially if operating expenses should increase beyond what the Borrower had anticipated. A default by the Borrower under the Financing Agreement, including the failure by the Borrower to pay on the date due any amounts required to be paid by the Borrower under the Financing Agreement, the Mortgage Note, the Security Instrument or the Reimbursement Agreement, may result in a mandatory redemption or acceleration of the Bonds. No premium will be paid on the Bonds in the event of such a redemption or acceleration. See APPENDIX B-"SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE-Default Provisions and Remedies" attached hereto and "THE PROJECT AND THE PRIVATE PARTICIPANTS" herein. Environmental Matters There are potential risks relating to environmental liability associated with the ownership of any property. If hazardous substances are found to be located on a property, the owners of such property may be held liable for costs and other liabilities relating to such hazardous substances. In the event of a foreclosure of the Project or active participation in the management of the Project by the Trustee on behalf of the Bondholders, the Trustee (and, indirectly, the Bondholders) may be held liable for costs and other liabilities related to hazardous substances, if any, on the site of the Project on a strict liability basis and such costs might exceed the value of such property. Early Redemption A variety of factors described herein will result in an early redemption of the Bonds. The possibility of an early redemption could affect the value of the Bonds, "THE BONDS-Redemption-Mandatory Redemption-Special Mandatory Redemption in Certain Events" herein. Delayed Purchase on Failed Remarketing In the event that the Trustee does not, after a Remarketing, have sufficient funds on the Remarketing Date to purchase all of the Outstanding Bonds, the Trustee shall present a certificate for a Purchased Bonds Advance under the Credit Facility. Such advance, shall be applied to purchase the Bonds not later than three Business Days following the Remarketing Date at a purchase price of 100% of the principal amount of the Bonds purchased plus accrued interest to the date of Purchase. 24 6'~'9 LIMITED LIABILITY THE BONDS ARE SPECIAL, LIMITED OBLIGATIONS OF THE ISSUER, PAYABLE SOLELY OUT OFTHE REVENUES, RECEIPTS AND OTHER MONEYS PLEDGED THEREFOR UNDER THE INDENTURE. THE BONDS ARE NOT A DEBT OF THE STATE, THE ISSUER (EXCEPT TO THE LIMITED EXTENT SET FORTH IN THE INDENTURE) OR OF ANY OTHER POLITICAL SUBDIVISION OF THE STATE, AND NEITHER THE STATE, THE ISSUER (EXCEPT TO THE LIMITED EXTENT SET FORTH IN THE INDENTURE) NOR ANY OTHER POLITICAL SUBDIVISION OF THE STATE IS LIABLE FOR THE PA YMENT OF THE BONDS. NEITHER THE FAITH AND CREDIT OF THE STATE, THE ISSUER NOR OF ANY OTHER POLITICAL SUBDIVISION OF THE STATE ARE PLEDGED TO THE PAYMENT OF THE PRINCIPAL OR OF INTEREST ON THE BONDS. NONE OF THE UNITED STATES OF AMERICA, [FANNIE MAE,] ANY AGENCY OF THE UNITED STATES OF AMERICA, THE STATE, ANY POLITICAL SUBDIVISION THEREOF (EXCEPT THE ISSUER, TO THE LIMITED EXTENT SET FORTH IN THE INDENTURE) SHALL IN ANY EVENT BE LIABLE FOR THE PAYMENT OF THE PRINCIPAL OF, PREMIUM (IF ANY) OR INTEREST ON THE BONDS OR FOR THE PERFORMANCE OF ANY PLEDGE, OBLIGATION OR AGREEMENT OF ANY KIND WHATSOEVER OF THE ISSUER, AND NONE OF THE BONDS OR ANY OF THE ISSUER'S AGREEMENTS OR OBLIGATIONS SHALL BE CONSTRUED TO CONSTITUTE AN INDEBTEDNESS OFOR A PLEDGE OF THE FAITH AND CREDIT OF OR A LOAN OF THE CREDIT OF ANY OF THE FOREGOING WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY PROVISIONS WHATSOEVER. THE BONDS ARE NOT GUARANTEED BY THE FULL FAITH AND CREDIT OF THE UNITED STATES OF AMERICA. FANNIE MAE Fannie Mae is a federally chartered and stockholder-owned corporation organized and existing under the Federal National Mortgage Association Charter Act, 12 u.S.C 1716 et seq. It is the largest investor in home mortgage loans in the United States with a net portfolio of $663 billion of mortgage loans as of June 30,2001. Fannie Mae was originally established in 1938 as a United States government agency to provide supplemental liquidity to the mortgage market and became a stockholder-owned and privately managed corporation by legislation enacted in 1968. Fannie Mae purchases, sells, and otherwise deals in mortgages in the secondary market rather than as a primary lender. It does not make direct mortgage loans but acquires mortgage loans originated by others. In addition, Fannie Mae issues mortgage-backed securities ("MBS"), primarily in exchange for pools of mortgage loans from lenders. Fannie Mae receives guaranty fees for its guarantee of timely payment of principal of and interest on MBS certificates. Fannie Mae is subject to regulation by the Secretary of Housing and Urban Development ("mID") and the Director of the independent Office of Federal Housing Enterprise Oversight within mID. Approval of the Secretary of Treasury is required for Fannie Mae's issuance of its debt obligations and MBS. Five of the eighteen members of Fannie Mae's Board of Directors are appointed by the President of the United States, and the other thirteen are elected by the holders of Fannie Mae's common stock. 25 E-;$O The securities of Fannie Mae are not guaranteed by the United States and do not constitute a debt or obligation of the United States or any agency or instrumentality thereof other than Fannie Mae. As of June 30,2001, Fannie Mae's stockholders' equity was $19.4 billion. Information on Fannie Mae and its financial condition is contained in Fannie Mae's Information Statement dated March 30, 2001 and Supplements thereto dated May 15,2001 and August 14,2001 (and any later supplement to or update of such Information Statement). Copies of the most recent Information Statement, as well as any Supplements to the Information Statement and Fannie Mae's most recent annual report to stockholders and proxy statement, are available without charge from the Office of Investor Relations, Fannie Mae, 3900 Wisconsin A yenue, NW, Washington, DC 200 16 (telephone: 2021752-7115) or by accessing Fannie Mae's world wide web business site at http:\\www. fanniemae.com. Fannie Mae makes no representation as to the contents of this Official Statement, the suitability of the Bonds for any investor, the feasibility of performance of any project, or compliance with any securities, tax or other laws or regulations. Fannie Mae's role with respect to the Bonds is limited to issuing and discharging its obligations under the Credit Facility and exercising the rights reserved to it in the Indenture, the Reimbursement Agreement and various other documents. The above information concerning Fannie Mae has been obtained from Fannie Mae, and neither the Issuer, the Borrower nor the Trustee takes responsibility of the accuracy thereof. THE ISSUER The City ofChula Vista, incorporated in 1911, is a municipal corporation and charter city organized and existing under the laws of the State of California. Under the Act, the Issuer is empowered to issue revenue bonds for the purpose, among others, of financing multifamily rental housing for persons oflow and moderate income. The Bonds are limited obligations of the Issuer and are not payable from the Issuer's general funds. See "LIMITED LIABILITY" herein. THE PROJECT AND THE PRIVATE PARTICIPANTS The following has been proYided by the Borrower and the Loan Seryicer (limited to the information concerning such Loan Servicer), respectively. Neither the Issuer, Fannie Mae, nor the Underwriter, nor any of their counsel, officers or employees, makes any representations as to the accuracy or sufficiency of such information. The Borrower The Borrower is South Bay Community Villas, LP., a California limited partnership organized for the purpose of owning and operating the Project. The co-general partners of the Borrower are (i) R-47 Housing, LLC ("R-47"), a California limited liability company with a 0.09% ownership interest in the Borrower, and (ii) South Bay Community Services ("SBCS"), a non-profit organization with a 0.01 % ownership interest in the Borrower. The initial investor member of the Borrower is an affiliate of Alliant Capital-Newport Division (the 'Tax Credit Partner"), which will have a 99.90% interest in the profits and losses of the Borrower, having purchased the low income housing tax credits relating to the Project. See "Low Income Housing Tax Credit Based Equity Syndication" below. 26 E.~I SBCS has been involved in the Chula Vista community since 1971 and has developed and/or owns five multifamily affordable housing rental projects. In addition to affordable housing, SBCS offers a number of programs which provide outreach and education in the community, community development and social service actiyities, and career opportunities for children, youth and families. The principals involved in R-47 have been involved in the building industry for over four decades. Over that time frame, the principals have acquired land, entitled that land, and built on that land 15,000 single and multifamily homes, a 232-unit apartment complex, a 137,522 square foot commercial retail center, a two- building office center and a 230-room hotel complex. The apartments were developed as a project with 80% of the units at market rate and the remaining 20% subsidized as affordable units through the City of San Diego Housing Commission. In conjunction with their development of several award-winning master planned communities, these principals have financed over $100 million worth of infrastructure through tax- exempt bond financing. The principals involved in R-47 Housing, LLC are the owners of Otay Project LP., which is in turn one of the owners of The Otay Ranch Community in which the Project is to be located. Otay Project LP. is conveying the property for this Project to the Borrower. The Borrower was recently formed, has no operating history and has no year-end financial statements at this time. The Borrower has no assets other than the Project. The Mortgage Loan is a nonrecourse obligation of the Borrower. Consequently, no financial information with respect to the Borrower is set forth herein. Low Income Housing Tax Credit Based Equity Syndication Simultaneously with the issuance of the Bonds, the Borrower expects to sell to the Tax Credit Partner a 99.90% limited partnership interest in the Borrower. Pursuant to this sale, the equity funding arrangements for the funding of the tax credit equity are expected to be approximately as follows; [(a) $- at start of construction; (b) $- to be funded on the later to occur of (i) completion of twenty-five percent of construction or (ii) ,20_; (c) $- to be funded on the later to occur of (i) completion of fifty percent of construction or (ii) - _,2002; (d) $- to be funded on the later to occur of (i) completion of seventy-five percent of construction or (ii) - _,2002; (e) $- to be funded upon completion of construction; ([) $- to be funded upon, among other items, Conversion; and ([) $- to be funded upon receipt of all IRS Forms 8609 and achievement of debt service coverage ratio of not less than 110%1. These funding levels and the timing of the funding are subject to numerous adjustments and conditions, which could result in the amounts funded and/or the timing or even occurrence of the funding varying significantly from the projections set forth above. Neither the Issuer nor the Underwriter make any representation as to the availability of such funds. The Managing Agent The Project will be managed by Cuatro Properties, Inc. (the "Managing Agent"). The Managing Agent was founded in 1995 and currently manages approximately 40 apartment projects, induding approximately 2,255 multifamily units, located in California. 27 t::-.3z- The Loan Servicer Beginning on the Conversion Date, Prudential Multifamily Mortgage, Inc. (the "Loan SerYicer"), will perform mortgage servicing functions with respect to the Mortgage Loan on behalf of and in accordance with Fannie Mae requirements. The servicing arrangements between Fannie Mae and the Loan Servicer for the servicing of the Mortgage Loan are solely between Fannie Mae and the Loan Servicer and neither the Issuer nor the Trustee is deemed to be party thereto or has any claim, right, obligation, duty or liability with respect to the servicing of the Mortgage Loan. The Loan Servicer will be obligated, pursuant to its arrangement with Fannie Mae and Fannie Mae's servicing requirements, to perform diligently all services and duties customary to the servicing of mortgages, as well as those specifically prescribed by Fannie Mae. Fannie Mae will monitor the Loan Servicer's performance and has the right to remove the Loan Servicer with or without cause. The duties performed by the Loan Servicer include general loan servicing responsibilities, collection and remittance of principal and interest payments, administration of mortgage escrow accounts and collection of insurance claims. The Trustee Wells Fargo Bank, National Association, will serve as Trustee under the Indenture. The Trustee is a national banking association organized under the laws of the United States of America, having all of the powers of a bank, including fiduciary powers, and is a member of the Federal Deposit Insurance Corporation and the Federal Reserve System. The mailing address of the Trustee is Wells Fargo Bank, National Association, MAC# E2818-176, 707 Wilshire Boulevard, 17'" Floor, Los Angeles, California 90017, Attention: Corporate Trust Department. The Project The Project will consist of a total of 271 units contained in two- and three-story buildings and will be situated on approximately 9.5 acres of land in the City of Chula Vista, California. The Project will be located in The Otay Ranch Community, a new master planned community which is receiving local, state and national recognition for urban planning. The Project is located within the immediate vicinity of a medical facility, a village market and other retail uses, a transit corridor, an II-acre park and an elementary school. The architectural design is by David T. Lorimer and Associates. The Project consists of two components. First, 180 of the 271 total units are to be designed as family units (the "Family Componen!"). The Family Component will be contained in a total of twenty-four buildings built on fee title land. Of the Family Component units, 114 units are 2 bedroom; the remaining 66 are 3 bedroom and 4 bedroom units. The Family Component includes a 2,800 square foot community center, an outdoor recreational area, laundry facilities and access to the private Heritage Swim Club across East Palomar Street from the Project. The remaining 91 senior units (the "Senior Component" and together with the Family Component, the "Project") are to be located on the second and third stories of two buildings over commercial uses (the "Commercial Project") along East Palomar Street. The Commercial Project is to be built by Otay Commercial One, LLC[, an affiliate of the Borrower] (the "Commercial Project Owner"). All 91 of the Senior Component units are to be one bedroom units. The Senior Component will include a 2,200 square foot recreation area with an adjoining kitchen, sitting areas, laundry facility, a large lobby area, office space, storage areas, an exercise room and a library/computer room. While built on the same property as the 180 28 8-2>3 Family Component units, the Senior Component will be physically separated by the parking area and function separately as its own complex within the mixed use portion of the Commercial Project. Construction of both the Family Component and the Senior Component is projected to start December I, 2001. The Senior Component will be completed sooner than the Family Component with completion of the two buildings planned for January and February, 2003. The 24 buildings which will house the Family Component units will be completed starting in March, 2003 with the last completion projected for June, 2003. The funding of the Project will be provided by a combination of sources as shown below*: Tax Credit Equity $10,114,551 Permanent Loan 15,400,000 Deferred Developer Fee 290,232 Developer Contribution 558,000 Agency Loan 4,400,000 [Chula Vista PFDIF Loan 712.0961 Total: $[31,474,879] The Commercial Project will be financed by a construction/mini-perm loan (the "Commercial Loan") to the Commercial Project Owner from First Bank & Trust, a California corporation (the "Bank"), the same entity serving as the Construction Lender that will be (i) posting the Letter of Credit as construction period credit enhancement for the Mortgage Loan and (ii) issuing the Bank Loan to the Borrower for the construction costs of the Project. See "Subordinate Financing" below. It is a condition of the Bond Financing and of the Commercial Loan financing that the financings close simultaneously. A default on the Bank Loan will also constitute a default on the Mortgage Loan relating to the Project and the Bonds. Construction for the Senior Component and the Commercial Project is to take place concurrently. FINANCING FOR THE COMMERCIAL PROJECT IS NOT CONTEMPLATED IN THIS OFFICIAL STATEMENT, ANY OTHER BOND DOCUMENT, THE MORTGAGE LOAN DOCUMENTS OR THE CONSTRUCTION PHASE CREDIT DOCUMENTS. Subordinate Financing Simultaneously with the Bond Closing, the Redevelopment Agency of the City of Chula Vista (the "Agency") will make a loan to the Borrower in the principal amount of $4,400,000 (the "Agency Loan") to provide additional financing for the acquisition of the property on which the Project will be built. The obligation of the Borrower to repay the Agency Loan is evidenced by a promissory note dated as of November I, 2001 (the "Agency Note") from the Borrower to the Agency, secured by a subordinate deed of trust on the Project. The outstanding principal amount of the Agency Loan will accrue simple interest at 'Preliminary; subject to change. 29 e. -;:;4 the rate of 3.00% per annum. Commencing on the later of (i) the first year anniversary of the issuance of the certificate of completion by the Agency or (ii) the first year anniversary ofthe date on which the deferred developer fee, if any, has been paid in full (the "Agency Loan Initial Payment Date"), and on or before 30 days after each subsequent yearly anniversary of the Agency Loan Initial Payment Date, payment ofprincipal and interest on the Agency Note is to be made by the Borrower in an amount equal to 50% of "Residual Receipts," defined as the gross revenues of the Project [minus all amounts due under the Mortgage Note] minus the reasonable operating expenses, as all such terms are defined in the Agency Loan Agreement. Except as otherwise provided in the Agency Loan Agreement, the Borrower's obligation to repay the Agency Loan is to be limited to the Borrower's annual payment, until the Agency Loan is repaid in full, of the amounts due under the Agency Note (as described above) for a period from the completion of the Project until the date which is 55 years following the date of the Agency's issuance of the final Certificate of Completion for the Project (but in no event later than sixty (60) years from the date of execution of the Agency Note) (the "Agency Loan Conditional Maturity Date"). Upon the Agency Loan Conditional Maturity Date, the Agency will have the option to (i) declare the remaining balance of all amounts owing under the Agency Note immediately due and payable, or (ii) require installment payments under the Agency Note in accordance with the provisions of the Agency Loan Agreement. Simultaneously with the Bond Closing, the Bank will make a loan to the Borrower in the principal amount of [$4,000.000] (the "Bank Loan") to provide additional financing for the construction of the Project. The obligation of the Borrower to repay the Bank Loan is evidenced by a promissory note dated November _,2001 (the "Bank Note") from the Borrower to the Bank and secured by a subordinate deed of trust on the Project. The Bank Loan will mature on December 16, 2003, with the possibility of one six-month extension. The Bank Loan will bear interest at a rate equal to the greater of (i) the Bank's prime rate plus one percent or (ii) seven percent per annum through maturity. Under the Bank Loan, the Borrower will be obligated to make interest only payments in arrears on the first day of each calendar month from and including January 1,2002, the Maturity Date and on the date offinal payment of the principal of the Bank Note in full, except that any interest which accrues after the maturity of the Bank Note (December 16, 2003) or after an acceleration of the maturity of the Bank Note is to be payable immediately and without demand. All principal and accrued and unpaid interest and other sums due under the Bank Loan will be due and payable on the maturity date of the Bank Loan; provided, however, that the Borrower may prepay some or all of the principal under the Bank Loan, from time to time, without penalty or premium. The primary sources of repayment of the Bank Loan is the tax credit equity payment due upon Conversion of the Bonds. Pursuant to a Subordination Agreement, dated as of the date of the Indenture, by and among the Issuer, the Trustee, the Loan Servicer and the Borrower, revenues from the Project will be applied, first, to satisfy the obligations of the Borrower under the Financing Agreement and the other Mortgage Loan Documents with respect to the Bonds, and only thereafter, to repay first, the Bank Loan and secondly, the Agency Loan. The Regulatory Agreements The Project will be subject to two regulatory agreements. The Regulatory Agreement imposes certain requirements on the Borrower with respect to the tax-exempt status of the Bonds under the Code, which include (i) a set-aside of39% of the units for rental to persons or families having incomes at or below 60% of area media gross income, adjusted for family size and determined in accordance with Section l42(d) of the Code and (ii) a set-aside of an additional 10% of the units for rental to persons or families having incomes at or below 50% of area media gross income, adjusted for family size. In addition, the Regulatory Agreement requires that all such set-aside units be rented to tenants at affordable rents, defined as rents not 30 e.-2>? greater than 30% of 50% of area median income, in the case of Very Low Income Tenants, or 30% of 60% of area median income, in the case of Low Income Tenants, as applicable, adjusted for family size. In addition, the Regulatory Agreement incorporates the terms of the California Debt Limit Allocation Committee Resolution (the "CDLAC Resolution") as described in the Regulatory Agreement. See "APPENDIX C-SUMMARY OF CERTAIN PROVISIONS OF THE REGULATORY AGREEMENT" for further description of the requirements affecting the operation of the Project in order to assume compliance with the Code. In connection with the Agency's issuance of the Agency Loan (as described in "Subordinate Financing" aboye), the Borrower and the Agency will enter a separate Loan Agreement and Related Restrictive Covenants (the "Agency Loan Agreement") which will encumber the Project. The Agency Loan Agreement imposes certain requirements on the Borrower which include, among others, (A) a set-aside of: (i) 30 units for rental to persons or families having incomes at or below 50% of the Area Median Income, with 10 of those units restricted to senior citizens, (ii) 101 units for rental to persons or families having incomes at or below 60% of the Area Median Income, with 33 of those units restricted to senior citizens, and (iii) 137 units for rental to persons or families having incomes at or below 120% of the Area Median Income, with 47 of those units restricted to senior citizens; and (B) the Borrower's compliance with the terms and conditions of the Affordable Housing Agreement attached as an exhibit to the Agency Loan Agreement, which, among other things, requires (i) a reservation of all 91 Senior Component units for occupancy by "Senior Citizens" and "Qualified Permanent Residents" (as both such terms are defined in the Agency Loan Agreement), and (ii) that all such units described in this subsection (A) are to be rented at affordable rents, which are rents equal to 30% of the maximum permitted income for each of the respective units, adjusted for family size. In connection with the low-income housing tax credits anticipated to be granted for the Project, the Borrower will execute a low-income housing agreement in compliance with the requirements of Section 42 of the Code (the "Low-Income Housing Agreement"). The Low-Income Housing Agreement requires the low-income housing tax credit income targeting and rent restrictions for the Project under Section 42 of the Code for the initial IS-year compliance period, subject only to a few exceptions. The Low-Income Housing Agreement must be executed by the Borrower before the end of the first year of the credit period (as defined in Section 42 of the Code) and recorded in the land records as a covenant running with the land. The Low-Income Housing Agreement for the Project will, among other things, require that [100]% of the completed and occupied dwelling units in the Project be occupied by tenants whose gross income is at or below 60% of area median gross income and that units be rent -restricted under Section 42(g)(2) of the Code throughout the extended use period as defined in the Code. Since the Low Income Housing Tax Credit ("LIHTC") rent schedule and set aside requirements are more stringent than the requirements under the Code, the maximum rents will be established in accordance with the LIHTC rent schedule and the set asides will be determined under the LlliTc. Under the Code, the extended use period terminates prior to its expiration date if the Project is acquired by foreclosure. Notwithstanding the foregoing, the Code requires that any termination of the extended use period due to foreclosure shall not permit before the close of a three-year period following such foreclosure (a) the eviction or termination of tenancy of an existing tenant without cause or (b) any increase in the gross rent of any such units. 31 £-3&:> THE MORTGAGE NOTE The Mortgage Loan will be evidenced by a Mortgage Note. The Mortgage Note will be a nonrecourse obligation of the Borrower (subject to certain express exceptions to nonrecourse liability) to repay the Mortgage Loan and is secured by the Security Instrument. The Mortgage Note will be payable monthly, interest only, in arrears, to but not including the Conversion Date and thereafter will be due and payable in 360 consecutive level monthly installments of principal and interest (computed at the Mortgage Note Rate then in effect on the outstanding principal amount of the Mortgage Note) beginning on the first day of the month following the month in which the Conversion Date occurs until the entire indebtedness evidenced by the Mortgage Note is paid in full, provided that any remaining indebtedness, if not sooner paid, will be due and payable on the 30th anniversary of the Conversion Date, but in any event not later than June 1,2034. The Mortgage Note is subject to optional and mandatory prepayment at the times, in the manner and on the terms set forth therein. The Mortgage Note will bear interest at the "Mortgage Note Rate." The Mortgage Note Rate is (a) - % per annum for the period beginning on the Closing Date (the "Accrual Date") to, but not including, the Conversion Date, and (b) - % per annum for the period beginning on the Conversion Date to, but not including the first day of the month preceding the Initial Remarketing Date (the "Initial Adjustment Date") and will be subject to adjustment effective as of the Initial Adjustment Date, in the manner provided in the Mortgage Note. The Mortgage Note Rate (as defined in the Financing Agreement) shall be comprised of: (a) a pass-through rate of interest (the "Pass-Through Rate"); and (b) a fixed rate of interest, which (i) prior to the Conversion Date, will be equivalent to the Facility Fee payable to Fannie Mae (as set forth in the Mortgage Note) and (ii) on and after the Conversion Date, will be equivalent to the sum of a Facility Fee payable to Fannie Mae and the Servicing Fee payable to the Loan Servicer. The Pass-Through Rate is, beginning on and including the Accrual Date to but not including the first day of the month immediately preceding the Initial Remarketing Date, - % per annum, which Pass-Through Rate includes an amount, expressed as a percentage, sufficient to pay Third Party Fees to the extent included, in accordance with the Financing Agreement in, and payable out of, the Mortgage Note Rate. The Mortgage Note provides that, if any installment under the Mortgage Note is not paid when due, or any other default exists under the Mortgage Note (in each case, subject to applicable notice requirements and cure periods), the Mortgage of any other Mortgage Loan Document, Fannie Mae, at its option, may declare the entire principal amount outstanding under the Mortgage Note, plus accrued interest thereon, at once due and payable. THE INDENTURE, FINANCING AGREEMENT AND REGULATORY AGREEMENT Certain provisions regarding the deposit and disbursement of moneys in the Funds and Accounts, Events of Default, remedies and rights with respect to the Indenture are described in APPENDIX B-"SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE" hereto. Certain provisions of the Regulatory Agreement regarding income and rental restrictions on the Project and remedies thereunder are 32 e-87 described in APPENDIX C-"SUMMARY OF CERTAIN PROVISIONS OF THE REGULATORY AGREEMENT" hereto. Certain provisions of the Financing Agreement regarding the terms of the Mortgage Loan, prepayment rights of the Borrower and rights upon damage to the Project are described in APPENDIX D-"SUMMARY OF CERTAIN PROVISIONS OF THE FINANCING AGREEMENT" hereto. ENFORCEABILITY OF REMEDIES The remedies available to the Trustee, the Issuer and the OWners of the Bonds upon an Event of Default under the Indenture are in many respects dependent upon regulatory and judicial actions, which are often subject to discretion and delay. Under existing law and judicial decisions, the remedies provided for under the Financing Agreement, the Regulatory Agreement and the Indenture may not be readily available or may be limited. The various legal opinions to be delivered concurrently with the delivery of the Bonds, the Financing Agreement, the Regulatory Agreement and the Indenture will be qualified as to enforceability of the yarious legal instruments by limitations imposed by bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally and by equitable remedies and proceedings generally. TAX MATTERS In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California ("Bond Counsel"), under existing statutes, regulations, rulings and judicial decisions, and assuming certain representations and compliance with certain covenants and requirements described herein, interest On the Bonds is excludable from gross income for federal income tax purposes, except for interest on any Bond for any period during which such Bond is held by a "substantial user" of any facilities financed with the proceeds of the Bonds or by a "related person" as such terms are used in Section 147(a) of the Code, but interest on the Bonds is an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. Bond Counsel is also of the opinion that interest on the Bonds is exempt from present State of California personal income tax. A complete copy of the proposed form of the opinion of Bond Counsel is set forth in Appendix G hereto. The opinions expressed by Bond Counsel are based on an analysis of existing statutes, regulations, rulings and judicial decisions. Such opinions may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. Bond Counsel has not undertaken to determine or to inform any person, whether any such actions or events are taken or do occur. Additionally, Bond Counsel's opinion is based upon certain representations made by the Issuer and others, and is subject to the condition that the Issuer and the Borrower comply with certain covenants and the requirements of the Code and Regulations that must be satisfied subsequent to the issuance of the Bonds to assure that interest On the Bonds will remain excludable from gross income for federal income tax purposes. Failure to comply with such requirements may cause interest On the Bonds to be includable in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The Issuer and the Borrower each have covenanted to comply with all such requirements. Although Bond Counsel has rendered an opinion that interest on the Bonds is excludable from gross income for federal income tax purposes, as described above, the ownership of the Bonds and the accrual or receipt of interest on the Bonds may otherwise affect the tax liability of certain persons. Bond Counsel expresses no opinion regarding any such tax consequences. Accordingly, all potential purchasers of the 33 E-~e, Bonds should consult their tax advisors before purchasing any of the Bonds with respect to collateral tax consequences. LITIGATION The Borrower There is no action, suit, proceeding, inquiry or investigation at law or in equity before or by any court, public board or body for which service of process has been effected on the Borrower or, to the knowledge of the Borrower, threatened against or affecting the Borrower, or to its knowledge, any basis therefor, wherein an unfavorable decision, ruling or finding would adversely affect the transactions contemplated by this Official Statement, the exclusion of interest on the Bonds from the gross income for federal income tax pùrposes of the owners of the Bonds or the validity or enforceability of the Bonds, the Indenture, the Financing Agreement, the Mortgage Note or any other agreement or instrument to which the Borrower is a party and which is used or contemplated for use in the transactions contemplated by this Official Statement. The Issuer There is no action, suit, proceeding, inquiry or investigation at law or in equity before or by any court, public board or body for which service of process has been effected on the Issuer or, to the best knowledge of the Issuer, threatened against or affecting the Issuer, or to its knowledge, any basis therefor, wherein an unfavorable decision, ruling or finding would adversely affect the transactions contemplated by the Official Statement, the validity or enforceability of the Bonds, the exclusion Ç>f interest on the Bonds from the gross income of the owners of the Bonds for federal income tax purposes or the validity or enforceability of the Bonds, the Indenture, the Financing Agreement, the Mortgage Note or any other agreement or instrument to which the Issuer is a party and which is used or contemplated for use in the transactions contemplated by this Official Statement. CERTAIN LEGAL MATTERS Legal matters incident to the authorization, issuance and sale of the Bonds are subject to the approving opinion of Stradling, Yocca, Carlson & Rauth, as Bond Counsel. A complete copy of the proposed form of opinion of Bond Counsel is attached hereto as APPENDIX G. Bond Counsel undertakes no responsibility for the accuracy, completeness or fairness of this Official Statement. Certain legal matters will be passed upon for the Borrower by Luce, Forward, Hauúlton, Scripps, San Diego, California; for Fannie Mae by its Legal Department and by O'Melveny & Myers LLP, Fannie Mae's Special Counsel; and for the Underwriter by its counsel, Ritter Eichner & Norris PLLC, Washington, D.C.. Fees and expenses of certain of the above-mentioned counsel are contingent upon issuance of the Bonds. The various legal opinions to be delivered concurrently with the delivery of the Bonds will be qualified as to the enforceability of the various legal instruments by liuútations imposed by the valid exercise of the constitutional powers of the State of California and the United States of America and bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally, and by general 34 ~-3'1 principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). The various legal opinions to be deliyered concurrently with the deliyery of the Bonds express the professionalj udgment of the attorneys rendering the opinions on the legal issues explicitly addressed therein. By rendering a legal opinion, the opinion giver does not become an insurer or guarantor of that expression of professional judgment, of the transaction opined upon or of the future performance of parties to such transaction, nor does the rendering of an opinion guarantee the outcome of any legal dispute that may arise out of the transaction. The remedies available to the Bondholders upon a default under the Indenture or Financing Agreement are in many respects dependent upon judicial actions which are often subject to discretion and delay. Under existing constitutional and statutory law and judicial decisions, including specifically Title II of the United States Code (the federal bankruptcy code), the remedies provided in the Indenture and the Financing Agreement may not be readily available or may be limited. CONTINUING DISCLOSURE The Borrower has entered into a Continuing Disclosure Agreement dated as of November 1,2001 (the "Disclosure Agreement") with the Trustee, acting as the Dissemination Agent, obligating the Borrower to send, or cause to be sent, certain financial infonnation with respect to the Project to certain information repositories annually and to provide notice, or cause notice to be provided, to the Municipal Securities Rulemaking Board and a state information repository, if any, of certain enumerated events for the benefit of the Beneficial Owners and Holders of any of the Bonds, pursuant to the requirements of Section (b)(S)(i) of Securities Exchange Commission Rule ISc2-12 (the "Rule"). See APPENDIX E - "FORM OF CONTINUING DISCLOSURE AGREEMENT" attached hereto. A failure by the Borrower to comply with the provisions of the Disclosure Agreement will not constitute a default under the Indenture or Financing Agreement (although Bondholders will have any available remedy at law or in equity for obtaining necessary disclosures). Nevertheless, such a failure to comply must be reported in accordance with the Rule and must be considered by any broker, dealer or municipal securities dealer before recommending the purchase or sale of the Bonds in the secondary market. Consequently, such a failure may adversely affect the transferability and liquidity of the Bonds. VERIFICA nON OF CASH FLOWS The mathematical accuracy of certain computations included in the schedules provided by the Underwriter on behalf of the Issuer relating to the computation of the cash flows for the projected payments of principal and interest on the Mortgage Loan and the sufficiency of such payments together with certain amounts held under the Indenture for the payment of the principal of and interest on the Bonds and certain fees will be verified by [Ritter Eichner & Norris PLLC, Washington, D.c.] (the "Verification Agent"). The Verification Agent has restricted its procedures to verifying the arithmetical accuracy of certain computations and has not made any study or evaluation of the assumptions and information on which the computations are based and, accordingly, has not expressed an opinion on the data used, the reasonableness of the assumptions or the achievability of the projected outcome. 35 E-40 Sufficiency of Cash Flow Fannie Mae does not guarantee the payment of the principal of, premium, if any, or interest on, the Bonds or the return on any inyestment. The interest rate on the Mortgage Loan has been established at a rate such that payments on the Mortgage Loan (and any interest earned on such payments during the period they are on deposit with the Trustee) are expected by the Borrower, on the basis of a Cash Flow Projection prepared by Newman and Associates, Inc. and verified by the Verification Agent, to be sufficient to pay the principal of and interest on the Bonds, the Seryicing Fee of the Loan Servicer, the Fannie Mae Facility Fee and Third Party Fees (to the extent included in the Mortgage Note Rate). The Cash Flow Projection takes into consideration the projected investment earnings on certain moneys on deposit in the various Funds and Accounts. In the event that the investment earnings on any investment is less than the return anticipated in the Cash Flow Projections or if there is an error in the Cash Flow Projections, there may not be sufficient amounts available to pay the principal of and interest on the Bonds. This could result in a payment default on the Bonds even though there is no default under the Mortgage Loan or under the Credit Facility. The remedies of the Trustee are limited in this event. Fannie Mae has not prepared, reviewed or verified, makes no representation or warranty with respect to, does not certify to, and assumes no responsibility or liability for, any Cash Flow Projection or Verification Report, the calculations used in any Cash Flow Projection, the assumptions used in making such calculations, the mathematical accuracy of such calculations or the sufficiency of any payments based on any Cash Flow Projection to pay the principal of and interest on the Bonds when due, any fees, including any Third Party Fees, when due, or any other amounts at any time. RATINGS Standard & Poor's Ratings Services, a di vision of the McGraw-Hill Companies, Inc. ("S&P") has assigned the rating set forth on the cover hereof to the Bonds. Such rating expresses only the views of such rating agency. An explanation of the significance of the rating may be obtained from such rating agency at 55 Water Street, New York, New York 10041 (telephone (212) 438-2000). There is no assurance that such rating will continue for any given period of time or will not be revised or withdrawn entirely by the rating agency if, in its judgment, circumstances so warrant. Neither the Issuer, the Underwriter, Fannie Mae, the Loan Servicer nor the Borrower has undertaken any responsibility to bring to the attention of the holders of the Bonds any proposed downward revision or withdrawal of a rating of the Bonds, or to oppose any such proposed downward revision or withdrawal. Any such downward revision in or withdrawal of such rating may have an adverse effect on the market price of the Bonds. UNDERWRITING Newman and Associates, Inc. (the "Underwriter") has agreed, subject to certain conditions, to place with Fannie Mae, who will purchase directly from the Issuer, the Bonds at the prices set forth on the inside front cover of this Official Statement, plus accrued interest thereon. As consideration for its efforts in connection with the placement of the Bonds, the Underwriter will be paid a fee aggregating $-, which includes certain reimbursable fees and expenses. In addition, the Indenture designates Newman and Associates, Inc. (the "Remarketing Agent") as Remarketing Agent to remarket the Bonds on each Remarketing Date. In consideration for its remarketing services under the Remarketing Agreement, the Remarketing Agent will be paid a fee to be determined at least 90 days prior to each Remarketing Date. The 36 E-41 Remarketing Agent is entitled to resign such appointment and may be removed and replaced as provided in the Indenture. The obligation of the Underwriter is subject to certain terms and conditions set forth in a separate Bond Purchase Agreement entered into among the Underwriter, Fannie Mae, the Borrower and the Issuer. The Bonds may be offered and sold to certain dealers, banks and others at prices lower than the initial offering prices, and such initial offering prices may be changed, from time to time, by the Underwriter. MISCELLANEOUS This Official Statement is submitted in connection with the sale of the securities referred to herein and may not be reproduced or used, as a whole or in part, for any other purpose. Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. This Official Statement is not to be construed as a contract or agreement between the Issuer and the purchasers or owners of any of the Bonds. 37 E -.of Z-- The use of this Official Statement in connection with the offering of the Bonds has been duly authorized by the Issuer and the Borrower. HOUSING AUTHORITY OF THE CITY OF CHULA VISTA, CALIFORNIA By: Its: [Signatures continue on next page] E -43 [Official Statement signatures continued from previous page] SOUTH BAY COMMUNITY VILLAS, L.P., a California limited partnership By: R-47 Housing, LLC, a California limited liability company, its General Partner By: Otay Project LP., a California limited partnership, its Managing Member By: Otay Project, LLC, a California limited liability company, its General Partner By: Otay Ranch Development, LLC, a Delaware limited liability company, its Manager By: Robert B. Cameron, Vice President By: South Bay Community Services, a California non-profit corporation, its General Partner By: Kathryn Lembo, Executive Director E:::-44 APPENDIX A SUMMARY OF CERTAIN DEFINITIONS The following summary of the definitions contained in the various documents entered into with respect to the Bonds is a summary only and does not purport to be a complete statement of the contents thereof. Reference is made to the full text of the documents herein described for the complete terms thereof. Additional definitions are set forth in "APPENDIX F-FORM OF CREDIT FACILITY." "Accounts" means any Account established within a Fund created by the Indenture. "Act" means Chapter 1 of Part 2 of Division 24 of the California Health and Safety Code, as amended. "Act of Bankruptcy" means any proceeding instituted under the Bankruptcy Code or other applicable insolvency law by or against the Issuer. "Advance" means an advance under the Credit Facility, which may be a Scheduled Payment Advance, a Bankruptcy-Related Advance, an Extraordinary Advance or a Purchased Bonds Advance as each is defined in the Credit Facility. "Assignment" means the Assignment and Intercreditor Agreement, dated as of November I, 2001, by and among the Issuer, the Trustee and Fannie Mae, and acknowledged, accepted and agreed to by the Borrower, as it may be amended, modified, supplemented or restated from time to time. "Authorized Borrower Representatiye" means any person who, at any time and from time to time, is designated as the Borrower's authorized representative by written certificate furnished to the Issuer, the Loan Servicer, the Credit Provider and the Trustee containing the specimen signature of such person and signed on behalf of the Borrower by or on behalf of any authorized general partner of the Borrower if the Borrower is a general or limited partnership, by any authorized managing member of the Borrower if the Borrower is a limited liability company, or by any authorized officer of the Borrower if the Borrower is a corporation, which certificate may designate an alternate or alternates. The Trustee may conclusively presume that a person designated in a written certificate filed with it as an Authorized Borrower Representative is an Authorized Borrower Representative until such time as the Borrower files with it (with a copy to the Issuer, the Loan Servicer and the Credit Provider) a written certificate identifying a different person or persons to act in such capacity. "Authorized Construction Lender Representative" means any person from time to time designated to act on behalf of the Construction Lender by written certificate furnished to the Trustee and the Issuer containing the specimen signature of such person and authorized to act by resolution or other appropriate action of the Board of Directors of the Construction Lender or by its bylaws. Such resolution or other appropriate action may designate an alternate or alternates who shall have the same authority, duties and powers as the Authorized Construction Lender Representative. The Trustee may conclusively presume that a person designated in a written certificate filed with it as an Authorized Construction Lender Representative is an Authorized Construction Lender Representative until such time as such provider files with it and with the Issuer, the Loan Servicer and the Credit Provider a written certificate identifying a different person or persons to act in such capacity. "Aulhorized Denomination" means $5,000 or any integral multiple of $5,000. -E--45 "Available Moneys" means, as of any date of determination (a) the proceeds of the Bonds and remarketing proceeds (other than funds provided by the Borrower, any general partner of the Borrower or any guarantor of the Borrower's obligations relating to the Mortgage Loan or the Bonds, if applicable, or the Issuer), (b) moneys received by the Trustee pursuant to the Credit Facility, (c) any other amounts with respect to which the Trustee has received an Opinion of Counsel to the effect that (i) the use of such amounts to make payments on the Bonds would not violate Section 362(a) of the Bankruptcy Code or that relief from the automatic stay provisions of such Section 362(a) would be available from the bankruptcy court and (ii) payments of such amounts to the Bondholders would not be avoidable as preferential payments under Section 547 of the Bankruptcy Code should the Issuer or the Borrower become a debtor in proceedings commenced under the Bankruptcy Code and (d) Investment Income derived from the investment of moneys described in clause (a), (b) or (c). "Bankruptcy Code" means Title 11 of the United States Code, entitled "Bankruptcy," as in effect now and in the future, or any successor statute. "Beneficial Owner" means the beneficial owner of any Bond held in book-entry form or the Registered Owner of any Bond held in certificated form. "Bond" or "Bonds" means Housing Authority of the City of Chula Vista, California Multifamily Housing Revenue Bonds (Heritage Town Center Apartments), Series A of 2001 in the original aggregate principal amount of $15,400,000*. "Bond Counsel" means (a) on the Closing Date, the law firm or law firms delivering the approving opinion(s) with respect to the Bonds or (b) after the Closing Date, any law finn selected by the Issuer, of nationally recognized standing in matters pertaining to the excludability from gross income, for federal income tax purposes, of the interest payable on bonds issued by states and political subdivisions. "Bond Documents" means the Indenture, the Financing Agreement, the Regulatory Agreement, the Bond Purchase Agreement, the Assignment, the endorsement of the Mortgage Note, the Credit Facility, the Tax Certificate, the Disclosure Agreement and on and after the Conversion Date, the Remarketing Agreement, and all other documents, agreements and instruments executed and deli vered in connection with the issuance, sale and delivery andlor remarketing of the Bonds, as each such document, agreement or instrument may be amended, modified, supplemented or restated from time to time. "Bondholder," "holder," "Owner," "owner," "Registered Owner" or "registered owner" means, with respect to any Bond, the Registered Owner of the Bond. "Bond Payment Date" means any (a) Interest Payment Date, (b) other date on which interest is payable, including any Redemption Date, each Maturity Date and the date of acceleration of the Bonds and (c) date on which principal of the Bonds is payable. "Bond Purchase Agreement" means the Bond Purchase Agreement by and among the Issuer, the Borrower and the Underwriter. "Bond Purchase Fund" means the Bond Purchase Fund created by the Indenture. *Preliminary; subject to change. A-2 e: -4-& "Bond Register" means the bond register established and maintained by the Trustee pursuant to the Indenture. "Bond Registrar" means the Trustee or its designee as keeper of the Bond Register. "Bond Resolution" means the resolution adopted by the Issuer on [November 6], 2001, authorizing and approving the issuance and sale of the Bonds and authorizing and approving the execution and delivery of the Indenture, the Financing Agreement, the Regulatory Agreement, the Bond Purchase Agreement, the Assignment, the endorsement of the Mortgage Note, the Tax Certificate and certain other documents. "Bond Year" means the period of 12 consecutive months ending on November 1 in any year in which Bonds are or will be Outstanding, provided that the first Bond Year shall commence on the Closing Date and end on November 1, 2002. "Book-Entry Bonds" means any Bonds which are issued in book-entry form, as evidenced by a single certificate for each stated principal maturity of the Bonds, and registered in the name of and delivered to a Securities Depository. "Book-Entry System" means an electronic system in which the clearance and settlement of securities transactions is made through electronic book-entry changes. "Borrower" means South Bay Community Villas, LP., a California limited partnership. "Business Day" means any day other than (a) a Saturday or a Sunday, (b) any day on which banking institutions located in the city or cities in which the Principal Office of the Trustee is located are required or authorized by law or executive order to close, (c) on and after the Conversion Date, a day on which banking institutions located in the city in which the Principal Office of the Loan Servicer is located are required or authorized by law or executive order to close, (d) a day on which the Credit Provider is closed or (e) a day or on which the New York Stock Exchange is closed. "Cash Flow Projection" means a cash flow projection prepared by an independent firm of certified public accountants, a financial advisory firm or other independent third party qualified and experienced in the preparation of cash flow projections for mortgage loans, designated by the Borrower and acceptable to the Credit Provider and the Rating Agency, establishing, to the satisfaction of the Rating Agency, the sufficiency of (a) the scheduled payments due under the Mortgage Note (together with and after taking into account the Initial Debt Service Deposit) and (b) Investment Income with respect to the General Account, to pay the principal of and interest on the Bonds and the Third Party Fees (to the extent included in the Mortgage Note Rate), in each instance, when due and payable, including, but not limited to, any cash flow projection prepared in connection with (i) the initial issuance and deliyery of the Bonds, (ii) Conversion, (iii) a remarketing of the Bonds or (iv) a partial prepayment of the Mortgage Loan and a corresponding partial redemption of Bonds. "Closing Date" means the date on which the Bonds are issued and delivered. "Code" means the Internal Revenue Code of 1986; and each reference to the Code shall be deemed to include (a) any successor internal revenue law and (b) the applicable regulations whether final, temporary or proposed under the Code or such successor law. Any reference to a particular provision of the Code shall A-3 ~.47 be deemed to include (i) any successor provision of any successor internal revenue law and (ii) the applicable regulations, whether final, temporary or proposed, under such provision or successor provision. "Completion Date" means the date on which the Project is completed, in accordance with the Credit Provider's requirements, as evidenced by a certification of the Loan Servicer delivered to the Issuer, the Trustee, the Credit Provider, the Construction Lender and the Borrower. "Computation Date" means the last day of each Bond Year commencing November 1,2002, and the date on which the final payment in full of all Outstanding Bonds is made. "Conditions to Conversion" has the meaning given to that term in the Construction Phase Financing Agreement. "Construction Phase" has the meaning given to that term in the Construction Phase Financing Agreement. "Construction Phase Credit Documents" means, individually and collecti vely, the Construction Phase Financing Agreement, the Letter of Credit, the Construction Phase Credit Reimbursement Agreement and all other documents evidencing, securing or otherwise relating to the Letter of Credit, including all amendments, modifications, supplements and restatements of such documents. "Construction Lender" means, so long as the Letter of Credit is in effect, First Bank & Trust, a California corporation, or its successor as provider of the Letter of Credit. "Construction Phase Reimbursement Agreement" means the Construction Credit Facility Reimbursement Agreement, dated as of November I, 2001, between the Borrower and the Construction Lender, as such agreement may be amended, modified, supplemented or restated from time to time. "Construction Phase Financing Agreement" means the Construction Phase Financing Agreement, dated as of November 1,2001, by and among the Credit Provider, the Loan Servicer and the Construction Lender, and acknowledged, accepted and agreed to by the Borrower, as such agreement may be amended, modified, supplemented or restated from time to time. "Conversion" means the conversion of the Mortgage Loan from the Construction Phase to the Permanent Phase. "Conversion Date" means the first day of the month following the month in which the Conversion Notice is issued by the Loan Servicer or such other date as is approved by the Credit Provider. "Conversion Notice" means a written notice by the Loan Servicer to the Issuer, the Trustee, the Borrower, the Construction Lender and the Credit Provider given on or before the Termination Date (a) stating that each of the Conditions to Conversion have been satisfied on or before the Termination Date or, if any Condition to Conversion has not been so satisfied, specifying each Condition to Conversion that has been waived in writing by the Credit Provider, and (b) specifying that Conversion has occurred. "Cost," "Costs" or "Costs of the Project" means, with respect to the Project, the costs chargeable to the Project in accordance with generally accepted accounting principles, including, but not limited to, the costs of construction, rehabilitation, reconstruction, restoration, repair, alteration, improvement and extension A-4 ~-4B (in any of such events, "construction") of any building, structure, facility or other improvement; stored materials for work in progress; the cost of machinery and equipment; the cost of rights-in-lands, easements, privileges, agreements, franchises, utility extensions, disposal facilities, access roads and site development necessary or useful and conyenient for the Project; financing costs, including, but not limited to, the Costs of Issuance, engineering and inspection costs; fees paid to the deyeloper of the Project; organization, adIllinistrative, insurance, legal, operating, letter of credit and other expenses of the Borrower actually incurred prior to and during construction; and all such other expenses as may be necessary or incidental to the financing, construction or completion of the Project or any part of it, including, but not liIllited to, the amount of interest expense incurred with respect to the Mortgage Loan incurred prior to the Conversion Date; insurance preIlliums payable by the Borrower and taxes and other governmental charges levied on the Project. "Costs ofIssuance" means (a) the fees, costs and expenses of (i) the Issuer, the Issuer's counsel and the Issuer's financial adyisor, if any, (ii) the Underwriter (including discounts to the Underwriter or other purchasers of the Bonds (other than original issue discount) incurred in the issuance and sale of the Bonds) and the Underwriter's counsel, (iii) Bond Counsel, (iv) the Trustee and the Trustee's counsel, (v) the Loan Servicer and the Loan Servicer's counsel, (vi) the Credit Provider and the Credit Provider's counsel, (vii) the Borrower's counsel and the Borrower's financial advisor, if any, and (viii) the Rating Agency, (b) the costs of preparing the initial Cash Flow Projection and the initial Verification Report, (c) costs of printing the offering documents relating to the sale of the Bonds and (d) all other fees, costs and expenses directly associated with the authorization, issuance, sale and delivery of the Bonds, including, without liIllitation, printing costs, costs of reproducing documents, filing and recording fees, and any fees, costs and expenses required to be paid to the Loan Servicer in connection with the Mortgage Loan. "Costs of Issuance Deposit" means the deposit to be made by the Borrower with the Trustee on the Closing Date as required by the Financing Agreement, to be funded [in part] with Net Bond Proceeds to pay Costs of Issuance. "Costs of Issuance Fund" means the Costs of Issuance Fund created by the Indenture. "Credit Facility" means the Credit Enhancement Instrument (Stand-By), dated November _,2001, issued by the Credit Provider to the Trustee, or any Replacement Credit Facility provided in accordance with the Indenture. "Credit Facility Account" means the Credit Facility Account of the Revenue Fund created by the Indenture. "Credit Facility Agreement"means, individually or collectively, the Reimbursement Agreement, the Pledge Agreement and all other agreements and documents securing the Credit Provider or otherwise relating to the provision of the Credit Facility, as any such agreement may be amended, modified, supplemented or restated from time to time. "Credit Provider" means Fannie Mae. "Custodian" means the custodian under the Pledge Agreement. "Dated Date" means the date designated as such on the face of the Bonds. A-5 e. -4'1 "Disclosure Agreement" means the Continuing Disclosure Agreement, dated as of November 1, 2001, between the Borrower and Wells Fargo Bank, National Association, as Trustee. "DTC" means The Depository Trust Company and any successor to it or any nominee of it. "DTC Participant" has the meaning given to that term in the Indenture. "DTC System" has the meaning given to that term in the Indenture. "Electronic Means" means telecopy, transmission or other similar electronic means of communication approved in writing by the Credit Provider, including a telephonic communication confirmed by writing or written transmission. "End Period Payment" means, with respect to any optional redemption of Bonds pursuant to the Indenture, the premium due on the Bonds, if any, and interest due on the Bonds from the date of prepayment of the Mortgage Loan to the Redemption Date. "Event of Default" means any of the events specified in the Indenture. "Extraordinary Items" means, with respect to the Trustee, reasonable compensation forextraordinary services and/or reimbursement for reasonable extraordinary costs and expenses. "Fannie Mae" means Fannie Mae, a corporation duly organized and existing under the Federal National Mortgage Association Charter Act, 12 u.S.c., § 1716 et seq., and its successors and assigns. "Fannie Mae Commitment" means Fannie Mae's Commitment to the Loan Servicer accepted by the Loan Servicer, pursuant to which Fannie Mae has agreed, upon satisfaction of the terms and conditions set forth in the Fannie Mae Commitment, to provide credit enhancement for the Mortgage Loan and, if Conversion occurs, liquidity support for the Bonds Outstanding on the Remarketing Date so long as the Credit Facility remains in effect. "Fees Account" means the Fees Account of the Revenue Fund created by the Indenture. "Financing Agreement" means the Financing Agreement, dated as of November 1,2001, among the Issuer, the Trustee and the Borrower, as amended, modified, supplemented or restated from time to time. "Fund" means any Fund created by the Indenture. "General Account" means the General Account of the Revenue Fund created by the Indenture. "Government Obligations" means direct obligations of, and obligations on which the full and timely payment of principal and interest is unconditionally guaranteed by, the full faith and credit of the United States of America. "Highest Rating Category" means, with respect to an Investment, that the Investment is rated by S&P or Moody's, or both, and the rating assigned to the security is the highest rating given by that rating agency for that general category of security; by way of example, the Highest Rating Category for the general category of tax-exempt municipal debt established by S&P is "A-1+" for debt with a term of one year or less A-6 E-50 and "AAA" for a term greater than one year, with corresponding ratings by Moody's of "MIG-I" (for fixed rate) or "VMIG-l" (for variable rate) for one year or less and "Aaa" for greater than one year; if both S&P and Moody's rate the Inyestment and one of those ratings is not in the Highest Rating Category, then such Inyestment is not rated in the Highest Rating Category. "Improvements" means the improvements made or to be made upon the Land. "Indenture" means the Trust Indenture, dated as of November I, 2001, as amended, modified, supplemented or restated from time to time as permitted by the Indenture. "Indirect Participant" has the meaning given to that term in the Indenture. "Initial Debt Service Deposit" means the deposit to be made on the Closing Date by the Borrower with the Trustee, as required by the Financing Agreement, and deposited by the Trustee, into the General Account. "Initial Remarketing Date" means July 1,2022. "Interest Payment Date" means January 1 and July 1 of each year, beginning July I, 2002, each Redemption Date, each Maturity Date and the date of acceleration of the Bonds. "Investment Agreement" means any investment agreement with respect to amounts on deposit in any Fund or Account, as described in paragraph (g) of the definition of Permitted Investments. "Investment Income" means the earnings, profits and accreted value derived from the investment of moneys pursuant to the Indenture. "Investments" means any Permitted Investments and any other investment held under the Indenture that does not constitute a Permitted Investment. "Issuer" means Housing Authority of the City of Chula Vista, California, a public body corporate and politic, duly organized and existing under the laws of the State of California, and its successors and assigns. "Issuer's Annual Fee" means the annual fee equal to an amount equal to $- per annum payable in equal semiannual installments on January I and July I of each year, commencing July 1,2002 in arrears, as provided in the Financing Agreement. "Land" means the real property described in the Security Instrument. "Letter of Credit" means the letter of credit to be issued by the Construction Lender in accordance with the terms and conditions of the Construction Phase Financing Agreement, as such letter of credit may be amended or replaced in accordance with the Construction Phase Financing Agreement, and including any confirming letter of credit issued in accordance with the terms and conditions of the Construction Phase Financing Agreement. "Loan Servicer" means Prudential Multifamily Mortgage, Inc., as servicer of the Mortgage Loan, and any successor servicer appointed by the Credit Provider. A-7 8"-51 "Maturity Date" means July 1,2034. "Moody's" means Moody's Investors Service, a Delaware corporation, and its successors and assigns, or if it shall be dissolved or shall no longer assign credit ratings to long-term debt, then any other nationally recognized statistical rating agency, designated by the Credit Provider, as shall assign credit ratings to long-term debt. "Mortgage Loan" means the loan made by the Issuer to the Borrower pursuant to the terms and provisions of the Financing Agreement for the purpose of providing funds to the Borrower to finance the construction and equipping of the Project. "Mortgage Loan Fund" means the Mortgage Loan Fund created by the Indenture. "Mortgage Loan Payments Interest" has the meaning given to that term in the Assignment. "Mortgage Loan Rights" has the meaning given to that term in the Assignment. "Mortgage Note" means the Multifamily Note, dated as of November 1, 2001, together with all addenda and schedules, executed by the Borrower in favor of the Issuer, as the same may be amended, modified, supplemented or restated from time to time, or any note executed in substitution therefor, as such substitute note may be amended, modified, supplemented or restated from time to time. "Mortgage Note Rate" means the per annum rate of interest set forth in the Mortgage Note. "Mortgaged Property" means the Project. "Net Bond Proceeds" means the proceeds derived from the issuance, sale and delivery of the Bonds, representing the total purchase price of the Bonds, including any premium paid as part of the purchase price of the Bonds, but excluding the accrued interest, if any, on the Bonds paid by the initial purchaser(s) of the Bonds. "Opinion of Bond Counsel" means a written opinion of Bond Counsel addressed to the Issuer, the Trustee and, at its request, the Credit Provider, and in form and substance acceptable to the Issuer and the Credit Provider. "Opinion of Counsel" means a written opinion oflegal counsel acceptable to the recipient(s) of the opinion; if the opinion is with respect to an interpretation of federal tax laws or regulations, or bankruptcy matters, such legal counsel shall also be an attorney or firm of attorneys experienced in such matters. "Outstanding" means, when used with reference to the Bonds at any date as of which the amount of Outstanding Bonds is to be determined, all Bonds which have been authenticated and delivered under the Indenture except: (a) Bonds canceled or delivered for cancellation at or prior to such date: (b) Bonds deemed to be paid in accordance with the Indenture; and (c) Bonds in lieu of which others have been authenticated under the Indenture. A-8 8- ~ 5z.. In determining whether the owners of a requisite aggregate principal amount of Outstanding Bonds have concurred in any request, demand, authorization, direction, notice, consent or waiver under the provisions of the Indenture, Bonds which are owned or held by or for the account of the Borrower, including Purchased Bonds, shall be disregarded and deemed not to be Outstanding under the Indenture for the purpose of any such detennination unless all Bonds are owned or held by or for the account of the Borrower. In determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Bonds which are registered in the name of or known by the Trustee to be held for the account of the Borrower including Purchased Bonds shall be disregarded. "Pass-Through Rate" has the meaning given to that term in the Mortgage Note. "Paying Agent" means the entity authorized to remit principal andlor interest payments to Bondholders, as provided in the Indenture. "Permanent Phase" has the meaning given to that term in the Construction Phase Financing Agreement. "Permitted Investments" means, to the extent authorized by law for the investment of moneys of the Issuer: (i) Government Obligations; (ii) direct obligations of, and obligations on which the full and timely payment of principal and interest is unconditionally guaranteed by, any agency or instrumentality of the United States of America (other than the Federal Home Loan Mortgage Corporation) or direct obligations of the World Bank, which obligations are rated in the Highest Rating Category; (iii) obligations, in each case rated in the Highest Rating Category, of (a) any state or territory of the United States of America, (b) any agency, instrumentality, authority or political subdivision of a state or territory, (c) any public benefit or municipal corporation the principal of and interest on which are guaranteed by such state or political subdivision or (d) any state or territory of the United States of America or any agency, instrumentality, authority or political subdivision of a state or territory which have been advance refunded and are secured by Government Obligations or by other such pre-refunded municipal securities; (iv) any written repurchase agreement entered into with a Qualified Financial Institution whose unsecured short-term obligations are rated in the Highest Rating Category; (v) commercial paper rated in the Highest Rating Category; (vi) (a) interest-bearing negotiable certificates of deposit, interest-bearing time deposits, interest -bearing savings accounts and bankers' acceptances, issued by a Qualified Financial Institution if either (a) the Qualified Financial Institution's unsecured short-term obligations are rated in the Highest Rating Category or (b) such deposits or accounts are fully insured by the Federal Deposit Insurance Corporation: (vii) an agreement held by the Trustee for the investment of moneys at a guaranteed rate (an "Investment Agreement") with (a) the Credit Provider or (b) a Qualified Financial Institution A-9 e::~S'3 whose unsecured long-term obligations are rated in the Highest Rating Category, or whose obligations are unconditionally guaranteed or insured by a Qualified Financial Institution whose unsecured long-term obligations are rated in the Highest Rating Category, provided that the Investment Agreement is in a form acceptable to the Issuer and the Credit Proyider, and provided, further, that the Investment Agreement includes the following restrictions: (I) the invested funds are available for withdrawal without penalty or premium at any time that (a) the Trustee is required to pay moneys from the Fund(s) to which the Investment Agreement is applicable or (b) any Rating Agency indicates that it will lower, suspend or withdraw or actually lowers, suspends or withdraws the rating on the Bonds on account of the rating of the Qualified Financial Institution providing, guaranteeing or insuring, as applicable, the Investment Agreement; (2) the Investment Agreement is the unconditional and general obligation of the Qualified Financial Institution providing, and, if applicable, the Qualified Financial Institution guaranteeing or insuring, the Investment Agreement, and is not subordinated to any other obligation: (3) the Trustee receives an Opinion of Counsel that the Investment Agreement is legal, valid, binding and enforceable, in accordance with its terms, upon the Qualified Financial Institution providing the Investment Agreement and, if applicable, an Opinion of Counsel that any guaranty or insurance policy provided by a Qualified Financial Institution guaranteeing or insuring the Investment Agreement is legal, valid, binding and enforceable, in accordance with its terms, upon such Qualified Financial Institution; and (4) the Investment Agreement provides that if during its term the rating of the Qualified Financial Institution providing, guaranteeing or insuring, as applicable, the Investment Agreement is withdrawn or suspended by any rating agency or falls below the Highest Rating Category, such Qualified Financial Institution will, within ten (10) days following the withdrawal, suspension or downgrade, either: (a) (1) collateralize the Investment Agreement (if the Investment Agreement is not already collateralized) with Permitted Investments described in paragraph (i) or (ii) above by depositing such collateral with the Trustee or a third party custodian, such collateralization to be effected in a manner and in an amount sufficient to maintain (A) the integrity of the Cash Flow Projection most recently provided with respect to the Bonds and (B) Then-current rating of the Bonds, or, if the Investment Agreement is already collateralized, increase the collateral with Permitted Investments described in paragraph (i) or (ii) above by depositing such collateral with the Trustee or a third party custodian, such collateralization to be effected in a manner and in an amount sufficient to maintain (C) the integrity of the Cash Flow Projection most recently provided with respect to the Bonds and (D) the then-current rating of the Bonds, (2) transfer the Investment Agreement and the rights and obligations of the Qualified Financial Institution under the Investment Agreement to a Qualified Financial Institution whose unsecured long-term obligations are rated in the Highest Rating Category or whose obligations are unconditionally guaranteed or insured by a Qualified Financial Institution whose unsecured long-term obligations are rated in the Highest Rating Category or (3) deliver a guarantee from a Qualified Financial Institution whose unsecured long-term obligations are rated in the Highest Rating Category or (b) at the direction of the Trustee, following the failure of the Qualified Financial Institution to take one or more of the actions A-IO 5-54 described in the foregoing clauses (a)(1)-(1)(3), repay the principal of and accrued but unpaid interest on the investment, in either case with no penalty or premium to the Trustee unless required by law (the Investment Agreement may proyide that the Qualified Financial Institution providing the Investment Agreement shall have the right to elect among the actions described in clauses (a)(1), (a)(2) and (a)(3), but shall not have the right to elect the action described in clause (b) as an alternative to the actions described in clauses (a)(I), (a)(2) and (a)(3); (viii) any money market mutual fund (including those of the Trustee and its affiliates) registered underthe Investment Company Act of 1940, as amended, that have been rated "AAAm-G" or "AAAm" by S&P or "Aaa" by Moody's, so long as the portfolio of such money market mutual fund is limited to Government Obligations and/or agreements to purchase Government Obligations; if approved in writing by the Credit Provider, a money market mutual fund portfolio may also contain obligations and agreements to repurchase obligations described in paragraphs (ii) or (iii) above; a money market mutual fund is not a Permitted Investment if both S&P and Moody's rate the money market mutual fund and one such rating is below the level required by this paragraph (viii); (ix) any other investment authorized by the laws of the State if such investment is approved by the Credit Provider (and, prior to the Conversion Date, the Construction Lender) and the Rating Agency; provided that Permitted Investments shall not include the following: (1) any investment with a final maturity or any agreement with a term greater than one year from the date of the investment (except (a) obligations that provide for the optional or mandatory tender, at par, by the holder of such obligations at least once within one year of the date of purchase, (b) Government Obligations irrevocably deposited with the Trustee for payment of Bonds pursuant to Article VIII and (c) investments listed in paragraph (vii) and (ix) above), (2) any obligation (other than obligations described in paragraph (i) and (ii) above) with a purchase price greater or less than the par value of such obligation, (3) any asset-backed security, including mortgage-backed securities, real estate mortgage investment conduits, collateralized mortgage obligations, credit card receivable asset- backed securities and auto loan asset-backed securities, (4) any interest-only or principal-only stripped security, (5) any obligation bearing interest at an inverse floating rate, (6) any investment which may be prepaid or called at a price less than its purchase price prior to stated maturity, (7) any investment the interest rate on which is yariable and is established other than by reference to a single interest rate index plus a single fixed spread, if any, and which interest rate moves proportionately with that index, (8) any investment described in paragraph (iv) or (vii) above with a Qualified Financial Institution (as defined in clause (d) of the definition of "Qualified Financial Institution") if the Qualified Financial Institution does not agree to submit to jurisdiction, venue and service of process in the United States of America in the Investment Agreement and (9) any investment to which the Rating Agency has added an "r" or "t" highlighter. If an Investment Agreement is entered into which does not require the Qualified Financial Institution providing the Investment Agreement to either (a) satisfy one or more of the requirements of clause (a) of subparagraph (4) of paragraph (vii) above upon a withdrawal or suspension of, or downgrade in the rating of the Qualified Financial Institution providing the Investment Agreement or (b) compensate the Trustee for any loss in yield upon reinvestment if the Investment Agreement is terminated following a withdrawal or suspension of, or downgrade in, the rating of the Qualified Financial Institution providing, guaranteeing or insuring the Investment Agreement, the yield on the A-II E-55 Investment Agreement above the minimum yield permitted by the Rating Agency (presently 2.5% per annum) shall not be taken into account in any Cash Flow Projection provided to the Rating Agency in connection with its rating of the Bonds. "Person" means any natural person, firm, partnership, association, limited liability company, corporation, company or public body. "Pledge Agreement" means the Pledge, Security and Custody Agreement, dated as of November 1, 2001, by and among the Borrower, the Trustee, as collateral agent for the Credit Provider, and the Credit Provider, as such agreement may be amended, modified, supplemented or restated from time to time. "Pre-Conversion Loan Equalization Payment" has the meaning given to that term in the Mortgage Note. "Preference Claim" has the meaning given that term in the Indenture. "Principal Amount" means $15,400,000*, being the original principal amount of the Bonds on the Closing Date. "Project" means the Land and the Improvements. "Project Account" means the Project Account of the Mortgage Loan Fund created by the Indenture. "Purchased Bond" means any Bond (a) tendered for purchase by a Bondholder pursuant to the Indenture and purchased by the Trustee for the account of the Borrower, with amounts provided by the Credit Provider under the Credit Facility, and (b) pledged to the Custodian under the Pledge Agreement for the benefit of the Credit Proyider. A Bond is a "Purchased Bond" only during the period (a) beginning on and including the date of its purchase by the Borrower and (b) ending on and excluding the date on which the Amount Available under (and as defined in) the Credit Facility with respect to the Bond is reinstated under the Credit Facility. "Qualified Financial Institution" means any (a) bank or trust company organized under the laws of any state ofthe United States of America, (b) national banking association, (c) savings bank, a savings and loan association or an insurance company or association chartered or organized under the laws of any state of the United States of America, (d) federal branch or agency pursuant to the International Banking Act of 1978 or any successor provisions of law or a domestic branch or agency of a foreign bank, which branch or agency is duly licensed or authorized to do business under the laws of any state or territory of the United States of America, (e) government bond dealer reporting to, trading with and recognized as a primary dealer by the Federal Reserve Bank of New York (I) securities dealer approved in writing by the Credit Provider and prior to the Conversion Date, the Construction Lender, the liquidation of which is subject to the Securities Investors Protection Corporation or other similar corporation and (g) any other entity specifically approved by Fannie Mae. "Rating Agency" means any national rating agency then maintaining a rating on the Bonds. *Preliminary; subject to change. A-12 E - '5(", "Rating Category" means one of the generic rating categories of the Rating Agency. "Rebate Analyst" means a person that is (a) qualified and experienced in the calculation of rebate payments under Section 148 of the Code and in compliance with the arbitrage rebate regulations promulgated under the Code, (b) chosen by the Borrower and (c) engaged for the purpose of determining the amount of required deposits, if any, to the Rebate Fund. "Rebate Analyst's Annual Fee" means the annual fee of the Rebate Analyst, if any, for its rebate calculation services in the amount of $[750]. "Rebate Fund" means the Rebate Fund created by the Indenture. "Record Date" means, with respect to any Interest Payment Date, the fifteenth day of the month preceding the month in which the Interest Payment Date falls. "Redemption Account" means the Redemption Account of the Revenue Fund created by the Indenture. "Redemption Date" means any date upon which Bonds are to be redeemed pursuant to the Indenture. "Registered Owner" means the registered owner of any Bonds, as shown in the Bond Register. "Regulatory Agreement" means the Regulatory Agreement and Declaration of Restrictive Covenants, relating to the Project, dated as of November I, 2001, by and among the Issuer, the Trustee and the Borrower, as amended, modified, supplemented or restated from time to time. "Reimbursement Agreement" means the Reimbursement Agreement, dated as of November 1,2001, between the Credit Provider and the Borrower, as amended, modified, supplemented or restated from time to time or any agreement entered into in substitution therefor. "Remarketing Agent" means Newman and Associates, Inc., and any successor designated in the manner provided in the Indenture. "Remarketing Agreement" means the Remarketing Agreement, dated as of November 1,2001, between the Borrower and the Remarketing Agent, as amended, modified, supplemented or restated from time to time, or any agreement entered into in substitution therefor with a substitute Remarketing Agent. "Remarketing Date" means the Initial Remarketing Date and, if the Bonds Outstanding on such date or on any subsequent Remarketing Date are remarketed pursuant to the Indenture for a Remarketing Period which does not extend to the final maturity of the Bonds, the day afterthe last day of the Remarketing Period. "Remarketing Expenses" means the costs and expenses incurred by the Trustee and its counsel, the Remarketing Agent and its counsel, the Issuer and its counsel, the Loan Servicer and its counsel, the Credit Provider and its counsel and Bond Counsel in connection with the remarketing of the Bonds, including bond printing and registration costs, costs of funds advanced by the Remarketing Agent, registration and filing fees, rating agency fees and other costs and expenses incurred in connection with or properly attributable to the remarketing of Bonds. A-13 r:=..57 "Remarketing Expenses Account" means the Remarketing Expenses Account of the Bond Purchase Fund. "Remarketing Period" means the period beginning on a Remarketing Date and ending on the last day of the term for which Bonds are remarketed pursuant to the Indenture or the final Maturity Date of the Bonds, as applicable. "Remarketing Proceeds Account" means the Remarketing Proceeds Account of the Bond Purchase Fund. "Remarketing Rate" means the interest rate established pursuant to the Indenture and borne by the Bonds then Outstanding from and including each Remarketing Date to, but not including, the next succeeding Remarketing Date or the final Maturity Date of the Bonds, as applicable. "Replacement Credit Facility" has the meaning given to that term in the Indenture. "Requisition" means, with respect to the Mortgage Loan Fund, the requisition in the form of Exhibit B to the Indenture required to be submitted in connection with disbursements from the Project Account of the Mortgage Loan Fund and, with respect to the Costs ofIssuance Fund, the requisition in the form provided in the Indenture required to be submitted in connection with disbursements from the Costs ofIssuance Fund. "Reserved Rights" means those certain rights of the Issuer under the Financing Agreement to indemnification and to payment or reimbursement of fees and expenses of the Issuer, its right to give and receive notices and to enforce notice and reporting requirements and restrictions on transfer of ownership, its right to inspect and audit the books, records and premises of the Borrower and of the Project, its right to collect attorneys' fees and related expenses, its right to specifically enforce the Borrower's covenant to comply with applicable federal tax law and State law (including the Act and the rules and regulations of the Issuer, if any) and its rights to give or withhold consent to amendments, changes, modifications and alterations to the Financing Agreement. "Revenue Fund" means the Revenue Fund created by the Indenture. "Revenues" means all (a) payments made under the Mortgage Note, (b) payments made under the Credit Facility and (c) Investment Income (excluding Investment Income earned from moneys on deposit in the Rebate Fund and the Costs of Issuance Deposit Account of the Costs of Issuance Fund). "Securities Depository" means, initially, The Depository Trust Company, New York, New York, and its successors and assigns, and any replacement securities depository appointed under the Indenture. "Security" means the Trust Estate and the Credit Facility. "Security Instrument" means the Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing, together with all riders and exhibits, securing the Mortgage Note, executed by the Borrower with respect to the Project, as it may be amended, modified, supplemented or restated from time to time, or any security instrument executed in substitution therefor, as such substitute security instrument may be amended, modified, supplemented or restated from time to time. A-14 S-SB "S&P" means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc., and its successors and assigns, or if it shall be dissol ved or shall no longer assign credit ratings to long-term debt, then any other nationally recognized statistical rating agency, designated by the Issuer and acceptable to the Credit Provider and the Borrower, as shall assign credit ratings to long-term debt. "State" means the State of California. "Supplemental Indenture" means any indenture duly authorized and entered into between the Issuer and the Trustee amending or supplementing the Indenture in accordance with the provisions of the Indenture. "Tax Certificate" means the Tax Certificate and Agreement dated as of the Closing Date, executed and deliyered by the Issuer and the Borrower, as it may be supplemented or amended in accordance with its terms. "Termination Date" means December 1,2003, unless extended by the Credit Provider at the request of the Loan Servicer, including any Termination Date permitted by the Credit Provider retroactively. "Third Party Fees" means, individually or collectively, as the context shall require, (a) the Issuer's Annual Fee, (b) the Trustee's Annual Fee and (c) the Rebate Analyst's Annual Fee, if any. "Trust Estate" means the property, rights, money, securities and other amounts pledged and assigned by the Issuer pursuant to the Indenture and the Assignment. "Trustee" means Wells Fargo Bank, National Association, duly organized and existing under the laws of the United States of America, or its successors or assigns. or any other corporation or association resulting from or surviving any consolidation or merger to which it or its successors may be a party and any successor trustee at any time serving as successor trustee under the Indenture. 'Trustee's Annual Fee" means the annual ongoing trust administration fee of the Trustee equal to the amount set forth in the Indenture per annum, computed and paid semiannually in advance on each Interest Payment Date. "U.c.c." means the Uniform Commercial Code of the State as in effect now or in the future, whether or not such Uniform Commercial Code is applicable to the parties or the transactions. "Undelivered Bond" means any Bond that is required under the Indenture to be delivered to the Remarketing Agent or the Trustee for purchase on a Remarketing Date but that has not been received on the date such Bond is required to be so delivered. "Underwriter" means Newman and Associates, Inc. "Verification Agent" means an independent firm of certified public accountants, an independent financial adyisory firm or other independent third party designated by the Borrower and acceptable to the Credit Provider and the Issuer, qualified and experienced in the verification of the mathematical accuracy of scheduled cash flows and other funds to pay the principal of and interest on bonds and fees, which has been engaged to prepare a Verification Report. A-IS e-B"I "Verification Report" means a report prepared by a Verification Agent verifying the mathematical accuracy of a Cash Flow Projection. "Wrongful Dishonor" has the meaning giyen to that term in the Assignment. A-16 6-&>0 APPENDIX B SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE The following summary of the Indenture is a summary only and does not purport to be a complete statement of the contents thereof. Reference is made to the Indenture for the complete tenns thereof. If all Conditions to Conversion have not been satisfied prior on or before Teroúnation Date, (a) Conversion will not occur, (b) the Bonds shall be subject to special mandatory redemption pursuant to the Indenture or to purchase by or for the account of the Construction Lender pursuant to the Indenture, and (c) the Credit Facility will tenninate in accordance with its tenns. Creation of Funds and Accounts The following Funds and Accounts are created by and shall be held and adoúnistered by the Trustee in accordance with the provisions of the Indenture: (a) the Mortgage Loan Fund and within the Mortgage Loan Fund, a Project Account and a Capitalized Interest Account; (b) the Revenue Fund and, within the Revenue Fund, the General Account, the Credit Facility Account, the Redemption Account and the Fees Account; (c) the Costs of Issuance Fund and within the Costs of Issuance Fund, a Costs of Issuance Deposit Account and a Net Bond Proceeds Account; and (d) the Rebate Fund; and (e) the Bond Purchase Fund and, within the Bond Purchase Fund, a Remarketing Proceeds Account and a Remarketing Expenses Account. The Mortgage Loan Fund Deposit; Disbursement. The Trustee shall receive the Net Bond Proceeds, less any amounts deposited in the Costs of Issuance Fund, and shall deposit them into the Mortgage Loan Fund as provided in the Indenture. The Revenue Fund General. Moneys in the Revenue Fund shall be used solely for the purposes set forth in the Indenture. Deposits Into the General Account. The Trustee shall deposit each of the following amounts into the General Account of the Revenue Fund: (a) on the Closing Date, the accrued interest, if any, on the Bonds, as provided in the Indenture; (b) on the Closing Date, the Initial Debt Service Deposit, as provided in the Indenture; E- - <01 (c) all moneys transferred from the Capitalized Interest Account; (d) all regularly scheduled payments of principal, if any, and interest on the Mortgage Loan; (e) interest paid in connection with any prepayment of the Mortgage Loan: (f) all Inyestment Income on the Funds and Accounts (except that Investment Income earned on amounts on deposit in the Accounts of the Mortgage Loan Fund shall be credited to and be retained in the respective Accounts of the Mortgage Loan Fund, Investment Income earned on accounts on deposit in the Rebate Fund shall be credited to and be retained in the Rebate Fund and Investment Income earned on amounts on deposit in the Costs of Issuance Deposit Account of the Costs ofIssuance Fund shall be credited to and be retained in the Costs ofIssuance Deposit Account of the Costs of Issuance Fund); (g) from time to time, upon receipt, Available Moneys provided pursuant to the Indenture to fund the interest portion of any End Period Payment; and (h) any other moneys made available for deposit into the General Account from any other source, including, but not limited to, any excess amounts in the Bond Purchase Fund pursuant to the Indenture. Disbursements From the General Account. Moneys on deposit in the General Account of the Revenue Fund shall be disbursed or transferred, as applicable, from the General Account at the following times, applied in the following manner and in the following order of priority: (a) on each Interest Payment Date, the Trustee shall disburse an amount equal to the amount of interest due on the Bonds on such Interest Payment Date and shall apply such amount to the payment of such interest so due; (b) on each Redemption Date on which a mandatory sinking fund redemption pursuant to the Indenture is scheduled to take place, the Trustee shall transfer to the Redemption Account an amount equal to the sinking fund redemption payment due on such Redemption Date; (c) on each Maturity Date and on the date of acceleration of the Bonds, the Trustee shall disburse an amount equal to the principal due on the Bonds on such date and shall apply such amount to the payment of such principal so due; (d) on each Interest Payment Date, the Trustee shall transfer an aggregate amount equal to that portion of the Issuer's Annual Fee, the Trustee's Annual Fee and the Rebate Analyst's Annual Fee (to the extent (i) such Third Party Fees are included in the Mortgage Note Rate, as described in the Financing Agreement and (ii) such Third Party Fees are not paid in advance on the Closing Date) payable on such date (or on any date prior to the next Interest Payment Date) to the Fees Account; and (e) on each Interest Payment Date following the Conversion Date, and following the disbursement, transfer and application of funds described in the preceding paragraphs (a) through (d), the Trustee shall transfer any amounts remaining in the General Account in excess of the B-2 B: -(Ó~ corresponding amount set forth for such Interest Payment Date in the table attached to the Indenture, the minimum balance required to be maintained on the basis of the Cash Flow Projection, to the Redemption Account and, following such transfer, shall apply any moneys so transferred (including any moneys so transferred on any prior Interest Payment Date), to the redemption of Bonds as provided in the Indenture. Deposits Into the Redemption Account. The Trustee shall deposit each of the following amounts into the Redemption Account of the Revenue Fund: (a) any prepayment of principal of the Mortgage Loan, and any Available Moneys provided by or on behalf of the Borrower pursuant to the Indenture to fund premium on the Bonds to be paid in connection with such prepayment; (b) that portion of any other deposit or transfer of funds representing principal corresponding to the principal to be paid on any optional or special mandatory redemption of Bonds; (c) any amounts required to be transferred to the Redemption Account pursuant to the Indenture to effect certain mandatory redemptions of Bonds; (d) any amount required to be transferred to the Redemption Account from the General Account pursuant to the Indenture: (e) after the Conversion Date, the amounts provided for in the Indenture; and (I) any other amount received by the Trustee and required by the terms of the Indenture or the Financing Agreement to be deposited into the Redemption Account. Disbursements From the Redemption Account. The Trustee shall disburse moneys on deposit in the Redemption Account at the following times and apply such monies in the following manner: (i) on each Redemption Date on which a mandatory sinking fund redemption pursuant to the Indenture is scheduled to take place, the Trustee shall apply amounts on deposit in the Redemption Account, including amounts transferred for scheduled mandatory sinking fund redemptions pursuant to the Indenture, to payment of the sinking fund redemption due on such Redemption Date; and (ii) on each Redemption Date on which a redemption pursuant to the Indenture is scheduled to take place, the Trustee shall apply amounts on deposit in the Redemption Account to the payment of principal of and premium, if any, on the Bonds to be redeemed on such Redemption Date. Deposits Into the Credit Facility Account. The Trustee shall deposit all amounts advanced under the Credit Facility, including amounts advanced under the Credit Facility in respect of the Special Purchase Price of Bonds to be purchased in lieu of redemption pursuant to the Indenture. No other moneys shall be deposited into the Credit Facility Account. The Credit Facility Account shall be closed at such time as the Credit Provider has no continuing liability under the Credit Facility. B-3 E,-c"3> Disbursements From the Credit Facility Account. The Trustee shall, on each date on which a payment is due under the Indenture and in respect of which an Advance is made under the Credit Facility, apply such Advance, on the date such payment is due. to the payment of the amounts in respect of which such Advance was made Deposits Into the Fees Account. The Trustee shall deposit into the Fees Account (a) amounts provided for in the Iodenture, and (b) any payment of a Third Party Fee pursuant to the Financing Agreement to the extent that such Third Party Fee is not included in the Mortgage Note Rate. Disbursements From the Fees Account. Following the deposit provided for in the Indenture, the Trustee shall disburse moneys on deposit in the Fees Account on each Interest Payment Date to the payment of Third Party Fees in satisfaction of the obligations of the Borrower under the Financing Agreement. In the event the amount in the Fees Account is insufficient to pay such Third Party Fees, the Trustee shall inform the Loan Servicer and make written demand on the Borrower for the amount of such insufficiency and, pursuant to the terms of the Financing Agreement, the Borrower shall be liable to promptly pay the amount of such insufficiency to the Trustee within five Business Days after the date of the Trustee's written demand. The Costs of Issuance Fund Deposits Into Costs of Issuance Fund. On the Closing Date the Trustee shall deposit that portion of the Costs of Issuance Deposit paid directly by the Borrower into the Costs of Issuance Deposit of the Costs of Issuance Fund and shall deposit that portion of the Costs of Issuance Deposit funded with Net Bond Proceeds into the Net Bond Proceeds Account of the Costs of Issuance Fund. Disbursements from the Costs of Issuance Fund. The Trustee shall disburse moneys on deposit in the Costs of Issuance Fund pursuant to Requisitions, signed by an Authorized Borrower Representative and the Construction Lender, to pay Costs of Issuance. The Trustee may conclusively rely on such requisitions for purposes of making such disbursements. Moneys on deposit in the Costs oflssuance Deposit Account of the Costs of Issuance Fund shall not be part of the Trust Estate and shall be used solely to pay Costs of Issuance. Moneys on deposit in the Net Bond Proceeds Account of the Costs oflssuance Fund shall be part of the Trust Estate and shall be used to pay Costs of Issuance. Disposition of Remaining Amounts. Any moneys remaining in the Costs of Issuance Fund six (6) months after the Closing Date and not needed to pay still unpaid Costs of Issuance shall be returned to the Borrower; provided, however, that prior to the Conversion Date, all amounts that would otherwise be paid to Borrower under this section shall instead be paid to the Construction Lender for deposit in the "Borrower's Funds Account" (as defined in the Construction Phase Reimbursement Agreement). Upon final disbursement, the Trustee shall close the Costs of Issuance Fund. The Rebate Fund Deposits; Administration. The "Rebate Fund" shall be held and applied as provided in the Indenture. All money at any time deposited in the Rebate Fund shall be held by the Trustee in trust, to the extent required to satisfy any rebate requirement (as calculated by the Rebate Analyst) to the United States government; neither the Issuer, the Borrower, the Bondholders nor the Credit Provider shall have any rights in or claim to such moneys. All amounts deposited into or on deposit in the Rebate Fund shall be governed by the Indenture, by the Financing Agreement and by the Tax Certificate. B-4 e-GA- The Bond Purchase Fund The Trustee is to deposit into the Bond Purchase Fund (i) all proceeds of the remarketing of Bonds remitted to the Trustee by the Remarketing Agent pursuant to the provisions of the Indenture into the Remarketing Proceeds Account and (ii) all amounts paid to the Trustee by the Borrower, the Issuer or Fannie Mae to pay Remarketing Expenses in the Remarketing Expenses Account. The Trustee is to apply amounts on deposit in the (a) Remarketing Proceeds Account to pay the purchase price of Bonds purchased under the Indenture to the former owners of Bonds upon presentation thereof to the Trustee and (b) Remarketing Expenses Account to pay Remarketing Expenses. In the event Bonds are not remarketed on a scheduled Remarketing Date, all amounts in the Bond Purchase Fund in excess of amounts on deposit therein required to pay the purchase price of Bonds shall be disbursed as provided in the Indenture. In the event that the Bonds are remarketed and the proceeds of such remarketing exceed 100% of the principal amount of the Bonds Outstanding or in the event funds received by the Trustee to pay Remarketing Expenses are not required for such purpose, any such excess amounts will be transferred to the General Account. Investments Moneys held as part of any Fund or Account shall be invested and reinvested in Permitted Investments. Permitted Investments shall have maturities corresponding to, or shall be available for withdrawal without penalty no later than, the dates upon which such moneys will be needed for the purpose for which such moneys are held. Moneys on deposit in the (a) General Account shall be invested only in investments described in paragraphs (a), (b), (c), (g) and (h) of the definition of Permitted Investments, (b) Redemption Account shall be invested only in investments described in paragraph (a) of the definition of Permitted Investments, (c) Credit Facility Account and the Bond Purchase Fund shall be uninvested, and (d) Costs of Issuance Fund shall, until disbursed pursuant to the Indenture, be invested only in investments described in paragraph (h) of the definition of Permitted Investments. Permitted Investments shall be held by or under the control of the Trustee. All Investment Income from moneys held in all Funds and Accounts other than the Mortgage Loan Fund, the Rebate Fund and the Costs of Issuance Fund (other than as provided below) shall, upon receipt, be deposited into the General Account of the Revenue Fund; Investment Income from moneys held in the Mortgage Loan Fund shall be retained in the Mortgage Loan Fund; Investment Income from moneys held in the Rebate Fund shall be retained in the Rebate Fund; Investment Income from moneys held in the Costs of Issuance Deposit Account of the Costs of Issuance Fund shall be retained in the Costs of Issuance Fund. Discharge of Lien and Security Interest General. Upon (a) payment in full of the Bonds, (b) payment of all amounts due to the Trustee under the Indenture, (c) receipt by the Trustee of a written statement from the Credit Provider stating that all obligations owed "to the Credit Provider under the Credit Facility Agreement and the Mortgage Loan Documents have been fully paid, (d) receipt by the Trustee of a written statement from the Construction Lender stating that all amounts owed to the Construction Lender in respect of the Letter of Credit have been fully paid (e) payment of all Extraordinary Items, (f) receipt by the Trustee of a written statement from the Issuer stating all amounts owed to the Issuer with respect to Reserved Rights have been fully paid, (g) receipt of an Opinion of Counsel, at Borrower's expense, to the effect that the Credit Provider has no further B-5 E-&6 obligation under the Credit Facility and (h) receipt of an Opinion of Counsel, at the expense of the Borrower, stating that all conditions precedent to the satisfaction and discharge of the Indenture have been satisfied, the Trustee shall (i) execute and deliver to the Issuer such instruments in writing prepared by the Issuer or its counsel and provided to the Trustee and the Credit Provider as shall be required to cancel and discharge the Indenture and the pledge and assignment of the TrustEstate, (ii) reconvey, assign and deliver to the Issuer so much of the Trust Estate as may be in its possession or subject to its control, except for (A) moneys and Government Obligations held for the purpose of paying Bonds and (B) moneys and Permitted Investments held in the Rebate Fund for payment to the United States Government, who shall, in turn, convey, assign and deliver the remaining Trust Estate to the Borrower, and (iii) return the Credit Facility to the Credit Provider. Defeasance Provision for Payment of Bonds. Any Bond shall be deemed to have been paid within the meaning of the Indenture if: (a) there has been irrevocably deposited with the Trustee either (i) sufficient Available Moneys or (ii) Government Obligations, which are not subject to early redemption and which are purchased with Available Moneys, of such maturities and interest payment dates and bearing such interest as will, without further investment or reinvestment of either the principal amount of such Government Obligations or the interest eamings on Goyernment Obligations (the earnings to be held in trust also), be sufficient, together with any Available Moneys deposited pursuant to the paragraph, in each case, as verified by a written report of an independent certified public accountant, for the payment on their respective maturity dates, or redemption dates prior to maturity, of the principal of such Bonds and redemption premium, if any, and interest to accrue on such Bonds to such maturity or redemption dates, provided that the Trustee shall have received, at the expense of the Borrower (A) an Opinion of Counsel rendered by bankruptcy counsel that such Available Moneys or Government Obligations purchased with Available Moneys are not subject to avoidance under the Indenture 547 or 544 and are not subject to an automatic stay pursuant to Section 362 of the Bankruptcy Code or any successor statute, and, as such, are not recoverable under Section 550(a) of the Bankruptcy Code or other applicable insolvency law, should there be a petition by or against the Borrower, any general partner of the Borrower or the Issuer under the Bankruptcy Code or any other bankruptcy act, and (B) an Opinion of Bond Counsel to the effect that such deposit with the Trustee and consequent defeasance of the Bonds does not adversely affect the excludability of the interest payable on the Bonds from gross income for federal income tax purposes; (b) there shall have been paid all Third Party Fees due or to become due or there shall be irrevocably deposited with the Trustee sufficient additional moneys to make the required payments; and (c) for any such Bonds to be redeemed on any date prior to their maturity, the Trustee shall ha ve received in form satisfactory to it irrevocable instructions to redeem such Bonds on a date on which the Bonds are subject to redemption, and either evidence satisfactory to the Trustee that all redemption notices required by the Indenture haye been given or irrevocable power authorizing the Trustee to give such redemption notices. B-6 E ~IP& Default Provisions and Remedies Events of Default. Events of Default. Each of the following shall constitute an Event of Default: . (a) default in the payment of any interest due on any Bond (other than a Purchased Bond) (including, unless the Construction Lender specifies otherwise by written notice to the Trustee, a Special Purchase Bond), on any Interest Payment Date or any other date when and as the same becomes due; (b) default in the payment of the principal of any Bond (other than a Purchased Bond) (including, unless the Construction Lender specifies otherwise by written notice to the Trustee, a Special Purchase Bond), when and as the same becomes due, whether at the stated maturity of the Bond or upon any redemption of the Bond; (c) written notice to the Trustee from the Credit Provider of a default by the Issuer in the observance or performance of any covenant, agreement, warranty, representation or condition on the part of the Issuer included in the Indenture or in the Bonds (other than an Event of Default set forth in paragraph (a) or (b) above) and the continuance of such default for a period of 30 days after the Trustee receives such notice; or (d) an Act of Bankruptcy. Nondefault and Prohibition of Mandatory Redemption Upon Event of Taxability. The occurrence of any event (a 'Tax Event") which results in the interest payable on the Bonds being includable for federal income tax purposes, in the gross income of the Bondholders, including, but not limited to, any violation of any provision of the Regulatory Agreement or any of the other Bond Documents, shall not (a) constitute an Event of Default under the Indenture, the Bonds or any of the other Bond Documents, or permit any party (other than the Credit Provider) to accelerate, or require acceleration of, the Mortgage Loan or the Bonds or give rise to a mandatory redemption of the Bonds, unless the Credit Provider, in its sole and absolute discretion, proYides written notice to the Trustee that such Tax Event constitutes a default under the Mortgage Loan and, by cross default, a default under the Financing Agreement, or (b) give rise to the payment to the Bondholders of any amount, denoted as "supplemental interest," "additional interest," "penalty interest," "damages," "liquidated damages" or otherwise, in addition to the amounts payable to the owners of the Bonds prior to the occurrence of the Tax Event. Nothing contained in the Indenture shall be deemed to amend or modify the terms of the Mortgage Loan Documents. Promptly upon determining that a Tax Event has occurred, the Issuer or the Trustee shall, by notice in writing to the Credit Provider, the Construction Lender (so long as the Letter of Credit is in place) the Loan Servicer, all Registered Owners of the Bonds and the Remarketing Agent, inform the Credit Provider, the Construction Lender (so long as the Letter of Credit is in place) and the Loan Servicer that a Tax Event has occurred and whether the Tax Event has been cured, is curable within a reasonable period, oris incurable. Notwithstanding the availability of the remedy of specific performance to cure a Tax Event that is curable within a reasonable period, neither the Issuer nor the Trustee shall have, and each of them acknowledges that they shall not have, upon the occurrence of a Tax Event, any right or obligation to cause or direct acceleration of the Bonds or the Mortgage Loan, to enforce the Mortgage Note or to foreclose the Security Instrument, to accept a deed to the Project in lieu of foreclosure, or to effect any other comparable conversion of the Mortgage Loan. B-7 \:5-GøÎ Remedies; Rights of Bondholders. Acceleration; Rescission of Acceleration. Upon: (a) the occurrence of the Event .of Default described as clauses (a) and (b) in the previous section hereof "Default Provisions and Remedies-Events of Default," the Trustee may, and shall upon the written request of Bondholders owning not less than 51 % in aggregate principal amount of Bonds then Outstanding, by written notice to the Issuer, the Borrower, the Credit Provider, the Construction Lender (so long as the Letter of Credit is in place) and the Loan Servicer, declare the principal of all Bonds then Outstanding (if not then due and payable) and the interest accrued, and to accrue, on the Outstanding Bonds to the date of payment immediately due and payable; or (b) the occurrence of an Event of Default described as clauses (c) and (d) in the previous section hereof "Default Provisions and Remedies-Events of Default," the Trustee may, upon receiving the prior written consent of the Credit Provider, and shall, upon the written direction of the Credit Provider, by written notice to the Issuer, the Borrower, the Credit Provider, the Construction Lender (so long as the Letter of Credit is in place) and the Loan Servicer, declare the principal of all Bonds then Outstanding (if not then due and payable) and the interest accrued, and to accrue, on the Outstanding Bonds to the date of payment immediately due and payable. Waiver. To the extent not precluded by law, the Trustee, upon notice to and with the prior written consent of the Credit Provider (unless a Wrongful Dishonor has occurred and is continuing) and, so long as the Letter of Credit is in effect, the Construction Lender, may waive any Event of Default under the Indenture and its consequences and, if the Trustee has accelerated payment of the Bonds, rescind the declaration of acceleration (unless precluded by the Indenture or unless clause 9b) following shall be applicable) and will do so upon the written request of (a) the Credit Provider or (b) Bondholders owning not less than 51 % in aggregate principal amount of Bonds then Outstanding, provided, however, that there will be no such waiver or rescission unless the principal and interest on the Bonds in arrears (without regard to the acceleration), together with interest at the applicable rate or rates of interest borne by the Bonds on such overdue principal and, to the extent permitted by law, on such overdue interest, has been paid or provided for by the Borrower or by the Credit Provider and all fees and expenses of the Trustee have been paid or provided for by the Borrower or the Credit Provider. In the case of any such waiver, the Issuer, the Borrower, the Trustee and the Bondholders will be restored to their former positions and rights under the Indenture. The Trustee may not waive any Event of Default under the Indenture unless, after the waiver, the Credit Facility will remain in effect in an amount equal to the aggregate principal amount of the Bonds outstanding (other than Purchased Bonds) plus the Interest Requirement, proyided, however, that such waiver will be permitted if (a) the Issuer consents to the waiver, (b) the Rating Agency then rating the Bonds is notified and the Trustee gives written notice to the Bondholders that the ratings on the Bonds may be reduced or withdrawn upon the occurrence of such waiver, and (c) 100% of the Bondholders consent to the waiver. Other Remedies. Subject to the Indenture, upon the occurrence and continuance of an Event of Default, the Trustee may, with or without taking action under the Indenture, but only with the prior written consent of the Credit Provider and shall, at the direction of the Credit Provider or, if there has been a Wrongful Dishonor by the Credit Provider, then by the Bondholders of not less than 51 % of the aggregate principal amount of Bonds Outstanding, if the Event of Default described in clause (c) or (d) under "Default Provisions and Remedies-Events of Default," occurs pursue any of the following remedies: B-3 E: -(pE:; (a) an action in mandamus or other suit, action or proceeding at law or in equity (i) to enforce the payment of the principal of, prenllum, if any, or interest on the Bonds then Outstanding, (ii) for the specific performance of any covenant or agreement contained in the Indenture or in the Financing Agreement or the Regulatory Agreement or (iii) to require the Issuer to carry out any other covenant or agreement with Bondholders and to perform its duties under the Act; (b) the liquidation of the Trust Estate pledged under the Indenture (subject to the provisions of the Indenture); or (c) an action or suit in equity, to enjoin any acts or things which may be unlawful or in violation of the rights of the Bondholders and to execute any other papers and documents and do and perfonn any and all such acts and things as may be necessary or advisable in the opinion of the Trustee in order to have the respective claims of the Bondholders against the Issuer allowed in any bankruptcy or other proceeding. Subject to the provisions of the Indenture and the requirement, if any, that the Credit Provider consent in writing to the exercise by the Trustee of any such available remedy, upon the occurrence and continuance of an Event of Default and provided that the Trustee is indemnified as provided in the Indenture, the Trustee shall exercise such of the rights and powers conferred by the Indenture as the Trustee, being advised by counsel, shall deem most effective to enforce and protect the interests of the Bondholders and, unless there has been a Wrongful Dishonor by the Credit Provider, the Credit Provider. Remedies Not Exclusive. Subject to certain provisions ofthe Indenture, no right orremedy conferred upon or reserved to the Trustee (or to the Bondholders) by the terms of the Indenture is intended to be exclusive of any other right or remedy, but each and every such right and remedy shall be cumulative and shall be in addition to any other right or remedy given to the Trustee or to the Bondholders under the Indenture or under the Financing Agreement, the Regulatory Agreement or the Credit Facility or now or hereafter existing at law or in equity. Rights o/the Credit Provider and the Bondholders To Direct Proceedings; Rights and Limitations Applicable to Bondholders, Issuer and Trustee. Rights To Direct Proceedings. Notwithstanding anything contained in the Indenture to the contrary, the Credit Provider itself or Bondholders owning not less than 51 % in aggregate principal amount of Bonds then Outstanding, but only with the prior written consent of the Credit Provider, shall have the right, at any time, by an instrument or instruments in writing executed and delivered to the Trustee, to direct the method and place of conducting all proceedings to be taken in connection with the enforcement of the terms and conditions of the Indenture or any other proceedings under the Indenture, provided that such direction shall not be otherwise than in accordance with the provisions of law and of the Indenture, and provided that the Trustee shall be indemnified to its satisfaction (except for certain actions required under the Indenture). Limitations on Bondholders' Rights. No Bondholder shall have the right to enforce the provisions of the Indenture, the Financing Agreement or any Mortgage Loan Document, or to institute any proceeding in equity or at law for the enforcement of the Indenture or the Financing Agreement, or to take any action with respect to an Event of Default under the Indenture or an Event of Default under (and as defined in) the Financing Agreement, or to institute, appear in or defend any suit or other proceeding with respect to the Indenture, the Financing Agreement or any Mortgage Loan Document upon an Event of Default unless (a) such Bondholder has given the Trustee, the Issuer, the Credit Provider, the Loan Servicer and the Borrower B-9 e:;;-(Ó'1 written notice of the Event of Default, (b) the holders of not less than 51% in aggregate principal amount of Bonds then Outstanding shall have requested the Trustee in writing to institute such proceeding, (c) the Trustee shall have been afforded a reasonable opportunity to exercise its powers or to institute such proceeding, (d) the Trustee has been offered reasonable indemnity, where required and (e) the Trustee has thereafter failed or refused to exercise such powers or to institute such proceeding within a reasonable period of time. No Bondholder shall have any right in any manner whatever by his or her action to affect, disturb or prejudice the pledge of revenues or of any other moneys, funds or securities under the Indenture. No Bondholder shall haye the right, directly or indirectly, indiyidually or as a group, to seek to enforce, collect amounts available under, or otherwise realize on, the Credit Facility. Application a/Moneys. Amounts derived from payments under the Credit Facility shall be deposited into the Credit Facility Account and applied solely to pay the principal of and interest on the Bonds and shall not be applied to pay any fees or expenses or advances of the Trustee or the Issuer (except to the extent such fees are payable out of the Fees Account from transfers to the Fees Account from the General Account), including amounts in respect of indemnification. All other moneys received by the Trustee pursuant to any action described in this section and all moneys on deposit in the Funds and Accounts under the Indenture (other than the Rebate Funds, the Costs of Issuance Fund and the Fees Account) shall be deposited into the General Account and, other than with respect to an Event of Default described in paragraph (c) under "Default Provisions and Remedies-Events of Default," after payment, first, of any unpaid portion of the Trustee's Annual Fee currently due and unpaid and the ordinary costs and expenses and Extraordinary Items of the Trustee, and second, of the fees and expenses of the Issuer, the balance of such moneys, less such amounts as the Trustee determines may be needed for possible use in paying future fees and expenses and for the preservation and management of the Project (as identified and required by the Credit Provider), shall be applied as set forth in the following subsections: (a) unless the principal on all Bonds shall have become or been declared due and payable, all such moneys shall be applied: First-to the payment of amounts, if any, payable to the United States pursuant to the Indenture: Second-to the payment of all interest then due on the Bonds, in the order of the maturity of such interest and, if the amount available shall not be sufficient to pay in full said amount, then to the payment ratably of the amounts due without any discrimination or privilege; Third-to the payment of the unpaid principal of any of the Bonds which shall have become due (other than Bonds matured or called for redemption for the payment of which moneys are held pursuant to the provisions of the Indenture), in the order of their due dates, upon which they became due with interest On such Bonds from the respective dates upon which they became due at the rate or rates borne by the Bonds to the extent permitted by law, and, ¡fthe amount ayailable shall not be sufficient to pay in full Bonds due On any particular date, together with such interest, then to the payment ratably, according to the amount of principal due On such date, to the persons entitled to such payment without any discrimination or privilege; Fourth-to the payment of amounts owed to the Credit Provider under the Credit Facility Agreement, the Financing Agreement and the Mortgage Loan Documents, as specified to the Trustee in writing by the Credit Provider and then to any amounts due to the Trustee as B-lO s-íO for Extraordinary Items, for this purpose including the costs and expenses of any proceedings resulting in the collection of such moneys and of advances incurred or made by the Trustee; and Fifth - to pay the Construction Lender amounts owed to it under the Construction Phase Credit Documents as specified by the Construction Lender to the Trustee in writing; (b) if the principal of all the Bonds has become or been declared due and payable, all such moneys shall be applied first, to the payment of amounts, if any, payable to the United States pursuant to the Indenture; second, to the payment of the principal and interest then due and unpaid upon the Bonds, without preference or priority of principal oyer interest or of interest over principal, or of any installment of interest over any other installment of interest, or of any Bond over any other Bond, ratably according to the amounts due respectively for principal and interest to the persons entitled to payment, until all such principal and interest has been paid; and third, to pay the Credit Provider amounts owed to it under the Credit Facility Agreement and the Mortgage Loan Documents, as specified to the Trustee in writing by the Credit Provider; and fourth, to the Borrower (but only if all amounts due the Trustee, the Issuer and the Construction Lender have been paid, otherwise to first pay such amounts in the priority set forth in the Indenture). (c) if the principal of all the Bonds has been declared due and payable, and if such declaration is thereafter rescinded under the Indenture, then, in the event that the principal of all the Bonds shall later become or be declared due and payable, the moneys shall be applied as described in (b) above. The Trustee Resignation of Trustee. The Trustee and any successor Trustee may resign only upon giving 60 days' prior written notice to the Issuer, the Credit Provider, the Loan Servicer, the Borrower, the Construction Lender (if such resignation is on or before the Conversion Date) and to each Registered Owner of Bonds then outstanding as shown on the records of the Trustee. Notwithstanding such notice, such resignation shall take effect only upon the appointment of a successor Trustee in accordance with the Indenture and the acceptance of such appointment by such successor Trustee. Removal of Trustee. The Trustee may be removed at any time, upon 30 days' prior written notice to the Trustee, (a) by the Issuer, with the consent of the Credit Provider, (b) by an instrument or concurrent instruments in writing delivered to the Issuer, the Credit Provider, the Loan Servicer, the Trustee and the Borrower, signed by the owners of not less than 51 % in aggregate principal amount of Bonds then Outstanding, and approved by the Credit Provider, which written instrument shall designate a successor Trustee or (c) by written request of the Credit Provider. Such removal shall not be effective until a successor Trustee satisfying the requirements of the Indenture is appointed and has accepted its appointment. Appointment of Successor Trustee. Upon the resignation or removal of the Trustee, a successor Trustee shall be appointed by the Borrower, with the prior written consent of the Issuer and the Credit Provider, provided that if the Borrower is then in default under any Bond Document or any Mortgage Loan Document or if an event of default has occurred and is continuing which, with notice or the passage of time or both, would constitute such a default, such appointment shall be made by the Issuer with the prior written consent of the Credit Provider. If, in the case of resignation or removal of the Trustee, no successor is appointed within 30 days after the notice of resignation or within 30 days after removal, as the case may be, B-ll 8-71 then, in the case of a resignation, the resigning Trustee shall appoint a successor with the prior written consent of the Issuer and the Credit Provider or apply to a court of competent jurisdiction for the appointment of a successor Trustee and, in the case of a removal, the Credit Provider shall have the right to appoint a successor Trustee or to apply to a court of competent jurisdiction for the appointment ofa successor Trustee. Servicing the Mortgage Loan. The Issuer and the Trustee acknowledge that on and after the Conversion Date, the Loan Servicer. as servicer of the Mortgage Loan, will be responsible to the Credit Provider for the ongoing servicing and administering of the Mortgage Loan, but that the Credit Provider, in its discretion, may contract with another servicer designated by the Credit Provider to perform such functions for the Credit Provider. Any servicing contracts or arrangements by the Credit Provider with such loan servicer for servicing the Mortgage Loan shall constitute a contractual obligation only between the Credit Provider and such loan servicer and neither the Trustee nor the Issuer will be deemed to be a party to such arrangements nor have any claim, right, duty, obligation or liability with respect to the servicing of the Mortgage Loan. Disclosure Agreement. The Borrower and the Trustee shall enter into a Disclosure Agreement to provide for the continuing disclosure of infonnation about the Bonds, the Borrower and other matters as specifically provided for in such agreement pursuant to Rule 15c2-12 of the Securities and Exchange Commission. The Trustee is authorized and directed to enter into the Disclosure Agreement and to make information public as provided in the Disclosure Agreement. Under the Disclosure Agreement, the Trustee shall act as the agent of the Borrower and not as the agent of the Issuer. The duties and obligations of the Trustee under the Disclosure Agreement shall be as set forth in the Disclosure Agreement, and the Trustee shall be responsible only for the express duties and obligations set forth in the Disclosure Agreement. The fees and expenses of the Trustee related to the Disclosure Agreement shall be the responsibility of and be paid by the Borrower. A default under any Disclosure Agreement shall not be a default under the Indenture, the Financing Agreement, any of the other Bond Documents or any of the Mortgage Loan Documents. However, the Trustee, at the written request of any underwriter of or placement agent for the Bonds required to comply with Securities and Exchange Commission Rule 15c-2-12(b )(5) or the holders of at least 25% aggregate principal amount of Outstanding Bonds, shall, but only to the extent indemnified to its reasonable satisfaction by any Bondholder or Beneficial Owner, may take such actions as may be necessary and appropriate, including seeking mandamus or specific performance by court order, to cause the Borrower to comply with its obligations under the Financing Agreement. Supplemental Indentures; Amendments Supplemental Indentures Not Requiring Bondholder Consent. The Issuer and the Trustee, without the consent of or notice to any of the Bondholders, may enter into an indenture or indentures supplemental to the Indenture for one or more of the following purposes: (a) to cure any ambiguity or to correct or supplement any proyision contained in the Indenture or in any supplemental indenture which may be defective or inconsistent with any other provision contained in the Indenture or in any supplemental indenture; (b) to amend, modify or supplement the Indenture in any respect if such amendment, modification or supplement is not materially adverse to the interests of the Bondholders; (c) to grant to or confer upon the Trustee for the benefit of the Bondholders any additional rights, remedies, powers or authority that may lawfully be granted to or conferred upon B-12 E -7"2- the Bondholders or the Trustee, or to grant or pledge to the Trustee for the benefit of the Bondholders any additional security other than that granted or pledged under the Indenture; (d) to modify, amend or supplement the Indenture or any supplemental indenture in such manner as to permit the qualification of the Indenture or such supplemental indenture under the Trust Indenture Act of 1939, as amended, or any similar federal statute then in effect, or to permit the qualification of the Bonds for sale underthe securities laws of any of the States of the United States; (e) to appoint a successor trustee, separate trustee or co-trustee, or a separate Bond Registrar or Paying Agent, in the manner provided in the Indenture; (I) to make any change requested by the Credit Provider which is not materially adverse to the interests of the Bondholders, including, but not limited to, provision of a Credit Facility other than or in substitution for the Credit Facility then in effect, provided that the provision of such other Credit Facility does not adversely affect the rating then in effect for the Bonds: (g) to make any change in the Indenture or in the terms of the Bonds necessary or desirable in order to maintain the rating of"AAA" and/or "Aaa" awarded to the Bonds by the Rating Agency or to otherwise to comply with the requirements of any Rating Agency then rating the Bonds: (h) to comply with the Code and the regulations and rulings issued with respect to the Code, to the extent determined as necessary or desirable in the Opinion of Bond Counsel; (i) to implement any secondary market disclosure, required under applicable law with respect to the Bonds, the Issuer, the Borrower or the Mortgaged Property; UJ to implement any secondary market disclosure, required under applicable law with respect to the Bonds, the Issuer, the Borrower or the Mortgaged Property: (k) to modify the terms of the Indenture orthe Bonds to be effective as of a Remarketing Date if a supplemental indenture is executed and delivered at least 30 days prior to such Remarketing Date and notice of the execution and deliyery together with a copy of the supplemental indenture or a summary of the provisions of the supplemental indenture is given to all Bondholders and to the Rating Agency not later than the time notice of remarketing of Bonds is given to Bondholders pursuant to the Indenture: (1) to change any of the time periods for provision of notice relating to: (a) the remarketing of Bonds and (b) the determination of the interest rate on the Bonds; (m) to change or modify any provision of the Indenture in connection with the remarketing of Bonds following any mandatory tender of the Bonds pursuant to the Indenture, but only upon the condition that such change is effective only after mandatory purchase; or (n) in connection with any other change in the Indenture which is not materially adverse to the interests of the Bondholders. B-13 E>73 Supplemental Indentures Requiring Bondholder Consent. Exclusive of supplemental indentures described above under "Supplemental Indentures Not Requiring Bondholder Consent" and subject to the terms and provisions described in this Section, the Issuer, in its sole discretion, and the Trustee may, with the consent of Bondholders owning 51 % or more in aggregate principal amount of Bonds then Outstanding, from time to time, execute indentures supplemental to the Indenture for the purpose of modifying, altering, amending, adding to or rescinding, in any particular, any of the tenns or provisions contained in the Indenture or in any supplemental indenture, provided that nothing in this Section shall permit, or be construed as pennitting: (a) an extension of the maturity of the principal of or interest on, or the mandatory redemption date of, any Bond, without the consent of the owners of all of the Bonds then Outstanding; (b) a reduction in the principal amount of, or the rate of interest on, any Bond, without the consent of the owner of such Bond; (c) a preference or priority of any Bond or Bonds over any other Bond or Bonds, without the consent of the owners of all such Bonds; (d) the creation of a lien prior to or on parity with the lien of the Indenture, without the consent of the owners of all of the Bonds then Outstanding; (e) a change in the percentage of Bondholders necessary to waive an Event of Default or otherwise approve matters requiring Bondholder approval under the Indenture, including consent to any supplemental indenture, without the consent of the owners of all the Bonds then Outstanding; (f) a transfer, assignment or release of the Credit Facility (or modification of the provisions of the Indenture governing such transfer, assignment or release), other than as pennitted by the Indenture, the Assignment or the Credit Facility; (g) a reduction in the aggregate principal amount of the Bonds required for consent to such supplemental indenture, without the consent of the holders of all of the Bonds then Outstanding; (h) the creation of any lien other than a lien ratably securing all of the Bonds at any time Outstanding under the Indenture, without the consent of the holders of all of the Bonds then Outstanding; or (i) the amendment of the tenns of the Indenture described in this Section, without the consent of the holders of all of the Bonds then Outstanding. Amendments to Financing Agreement Not Requiring Bondholder Consent. The Issuer and the Trustee, without the consent of or notice to any of the Bondholders, (a) may enter into or permit any amendment ofthe Financing Agreement and (b) shall, at the direction of the Credit Provider, enter into any amendment of the Financing Agreement, for one or more of the following purposes: B-14 e-ì4 (i) to cure any ambiguity or to correct or supplement any provision contained in the Financing Agreement which may be defective or inconsistent with any other provision of the Financing Agreement; (ii) to make such other provisions with regard to matters or questions arising under the Financing Agreement which are not materially adverse to the interests of the Bondholders: (iii) to amend, modify or supplement the Financing Agreement in any respect if such amendment, modification or supplement is not materially adverse to the interests of the Bondholders; (iv) to grant to or confer upon the Issuer or the Trustee for the benefit of the Bondholders any additional rights, remedies, powers or authority that may lawfully be so granted or conferred, or to grant or pledge to the Issuer or the Trustee for the benefit of the Bondholders any additional securIty; (v) to make any change requested by the Credit Provider which is not materially adverse to the interests of the Bondholders; (vi) to comply with the requirements of any Rating Agency then rating the Bonds; (vii) to comply with regulations or rulings issued with respect to the Code, to the extent determined as necessary or desirable in the opinion of Bond Counsel; (viii) to permit the Borrower to enter into a modification of any Mortgage Loan Document on terms approved by the Credit Provider, proyided that there has first been delivered to the Trustee (A) written evidence of such approval and the approval by the Credit Provider of the proposed form of amendment and any other documents relating to the amendment and (B) written evidence from the Rating Agency that such modifications and any related changes to the terms of the financing will not adversely affect the rating then applicable to the Bonds; or (ix) in connection with any other change which is not materially adverse to the interests of the Bondholders. Amendments to Financing Agreement Requiring Bondholder Consent. Except as described above under "Amendments to Financing Agreement Not Requiring Bondholder Consent," the Issuer and the Trustee shall not enter into any other modification or amendment of the Financing Agreement, nor shall any such modification or amendment become effective, without the written consent of the owners of not less than 51 % in aggregate principal amount of Bonds then Outstanding, such consent to be obtained in accordance with the Indenture. No such amendment may, without the consent of the owners of all the Outstanding Bonds, reduce the amounts or delay the payments on the Mortgage Loan under the Financing Agreement, provided that any such amounts may be reduced without such consent solely to the extent that such reduction (a) results from a partial redemption from other than sinking fund installments or (b) represents a reduction in any fees payable from such amounts (including, but not limited to, a reduction in Set Rate Interest). B-15 r=.- 7S Amendments; Changes and Modifications to the Credit Facility and the Regulatory Agreement The Credit Facility. Subject to the certain provisions of the Indenture requiring certain Opinions of Counsel and Certificates of the Borrower, the Trustee may, without notice to or the consent of the owners of the Bonds, accept any amendment to the Credit Facility (a) in connection with any change in the Credit Facility, including a revised Mortgage Loan Payment Amortization Schedule to the Credit Facility as a result of a partial prepayment and re-amortization of the Mortgage Loan or otherwise or (b) as may be required for purposes of curing any ambiguity, formal defect or omission which is not materially adverse to the interests of the Bondholders or which does not prejudice in any material respect the interests of the Bondholders. Except for such amendments, the Credit Facility may be amended only with the written consent of the owners of not less than 51 % in aggregate principal amount of Bonds then Outstanding, except that, without the written consent of the owners of all Outstanding Bonds, no amendment may be made to the Credit Facility which would reduce the amounts required to be paid under the Credit Facility or change the time for payment of such amounts; provided that any such amounts may be reduced without such consent solely to the extent that such reduction represents a written agreement to reduce fees payable from such amounts. The Regulatory Agreement. Subject to certain provisions of the Indenture and the terms of the Regulatory agreement requiring certain Opinions of Counsel and Certificates of the Borrower, the Borrower, the Trustee and the Issuer may enter into any amendment or modification of the Regulatory Agreement without the consent of the owners of the Bonds, provided that the Borrower shall cause to be furnished to the Trustee and the Issuer (a) an Opinion of Bond Counsel tothe effect that such amendment or modification of the Regulatory Agreement will not adversely affect the exclusion of interest on the Bonds from gross income for federal income tax purposes and (b) the written consent of the Credit Provider. B-16 &- -7l.p APPENDIX C SUMMARY OF CERTAIN PROVISIONS OF THE REGULA TORY AGREEMENT The following summary of the Regulatory Agreement is a summary only and does not purport to be a complete statement of the contents thereof. Reference is made to the Regulatory Agreement for the complete terms thereof. Definitions The following terms have the respective meanings assigned to them in the Regulatory Agreement unless the context in which they are used clearly requires otherwise: "Adjusted Income" - The adjusted income of all persons who intend to reside in one residential unit as calculated in the manner determined by the Secretary of the Treasury pursuant to Section 142(d)(2)(B) of the Code. "Area" - The San Diego County, California Primary Metropolitan Statistical Area. "CD LAC" - The California Debt Limit Allocation Committee. "CDLAC Resolution" - Resolution No. 01-176 adopted by CDLAC on August 22,2001. "Certificate of Continuing Program Compliance" - The certificate with respect to the Project to be filed by the Borrower with the Program Administrator, which shall be substantially in the form attached as an exhibit to the Regulatory Agreement. "Completion Date" - The date on which the Project is completed as set forth in the certificate regarding the Completion Date that is delivered pursuant to the Regulatory Agreement. "Income Certification" - The Income Computation and Certification Form in substantially the form attached as an exhibit to the Regulatory Agreement. "Low Income Tenants" - Individuals or families with an Adjusted Income which does not exceed 60 percent of the Median Income for the Area as adjusted for household size as set forth below. In no eyent, however, will the occupants of a residential unit be considered to be Low Income Tenants if all the occupants are students, as defined in Section 151(c)(4) of the Code, as such may be amended, no one of which is entitled to file a joint federal income tax return. Currently, Section 151(c)(4) defines a student as an individual enrolled as a full-time student during each of 5 calendar months during the calendar year in which occupancy of the unit begins at an educational organization which normally maintains a regular faculty and 8-77 curriculum and normally has a regularly enrolled body of students in attendance or is an individual pursuing a full-time course of institutional on-farm training under the supervision of an accredited agent of such an educational organization or of a state or political subdivision thereof. Household Size Adjustment to 60% of Median Income for the Area 1 70% 2 80% 3 90% 4 100% 5 108% 6 116% 7 124% 8 132% "Low Income Units" - The dwelling units in the Project designated for occupancy by Low Income Tenants pursuant to the Regulatory Agreement. "Median Income for the Area" - The median gross income for the Area as most recently determined by the Secretary of Treasury pursuant to Section 142(d)(2)(B) of the Code. "Program Adnúnistrator" - The Issuer, or such other entity as is appointed by the Issuer from time to time to act in such capacity under the Regulatory Agreement. "Project Costs" - To the extent authorized by the Code, the Regulations and the Act, any and all costs incurred by the Borrower with respect to the acquisition and construction of the Project, whether paid or incurred prior to or after the sixtieth day preceding February 10,2001, including, without linútation, costs for site preparation, the planning of housing and related facilities and improvements, the acquisition of property, the removal or demolition of existing structures, the construction of housing and related facilities and improvements, and all other work in connection therewith, and all costs of financing, including, without limitation, the cost of consultant, accounting and legal services, other expenses necessary or incident to determining the feasibility of the Project, adnúnistrative and other expenses necessary or incident to the Project and the financing thereof (including reimbursement to any municipality, county or entity for expenditures made for the Project) and all other costs approved by Bond Counsel. "Qualified Project Costs" - The Project Costs (excluding Costs of Issuance) incurred not more than 60 days prior to February 13, 2001 which either constitute land or property of a character subject to the allowance for depreciation under Section 167 of the Code or are chargeable to a capital account with respect to the Project for federal income tax and financial accounting purposes, or would be so chargeable either with a proper election by the Borrower or but for the proper election by the Borrower to deduct those amounts within the meaning of Regulation 1.103-8(a)(1)(i); provided, however, that only such portion of interest accrued during construction of the Project shall constitute a Qualified Project Cost as bears the same ratio to all such interest as the Qualified Project Costs bear to all Project Costs paid from Bond proceeds and interest earnings thereon; and provided further that interest accruing after the Completion Date shall not be a Qualified Project Cost; and provided still further that if any portion of the Project is being constructed by an Affiliated Party (whether as a general contractor or a subcontractor), "Qualified Project Costs" shall include only the actual out-of-pocket costs incurred by such Affiliated Party in constructing the Project (or any portion thereof) within the meaning of Section 147(d)(2) of the Code, as provided in the Tax Certificate. C-2 e. -75 "Qualified Project Period" - The period beginning on the first date on which ten percent of the units in the Project are occupied and ending on the latest of the following dates: (a) the date which is 55 years afterthe date on which fifty percent of the units in the Project are occupied, (b) the first day on which no tax exempt bonds with respect to the Project are Outstanding, (c) the date on which any assistance provided with respect to the Project under Section 8 of the United States Housing Act of 1937 terminates, or (d) November I, 2050. "Very Low Income Tenants" - Individuals orfamilies with an Adjusted Income that does not exceed 50 percent of the Median Income for the Area as adjusted for household size as set forth below. In no event, however, will the occupants of a residential unit be considered to be Very Low Income Tenants if all the occupants are students, as defined in Section 151(c)(4) of the Code, as such may be amended, no one of which is entitled to file ajoint federal income tax return. Currently, Section 151(c)(4) defines a student as an individual enrolled as a full-time student during each of 5 calendar months during the calendar year in which occupancy of the unit begins at an educational organization which normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of students in attendance or is an individual pursuing a full-time course of institutional on-farm training under the supervision of an accredited agent of such an educational organization or of a state or political subdivision thereof. Household Size Adjustment to 50% of Median Income for the Area I 70% 2 80% 3 90% 4 100% 5 108% 6 116% 7 124% 8 132% "Very Low Income Units" - The dwelling units in the Project designated for occupancy by Very Low Income Tenants pursuant to the Regulatory Agreement. Residential Rental Property The Borrower shall own, manage and operate the Project as a "qualified residential rental project" (within the meaning of Section 142(d) of the Code) until the expiration of the Qualified Project Period. To that end, and for the term of the Regulatory Agreement, the Borrower has represented in the Regulatory Agreement, as of the date thereof, and covenanted, warranted and agreed as follows: (a) The Project is being acquired, constructed and equipped for the purpose of providing multifamily residential rental property, and the Borrower shall own, manage and operate the Project as a project to provide multifamily residential rental property comprised of a building or structure or several interrelated buildings or structures, together with any functionally related and subordinate facilities, and no other facilities, in accordance with applicable provisions of Section 142(d) of the Code and Section 1.103- 8(b) of the Regulations, and the Act, and in accordance with such requirements as may be imposed thereby on the Project from time to time. C-3 5- 71 (b) All of the dwelling units in the Project will be similarly constructed units, and. to the extent required by the Code and the Regulations, each dwelling unit in the Project will contain complete separate and distinct facilities for living, sleeping, eating, cooldng and sanitation for a single person or a family, including a sleeping area, bathing and sanitation facilities and cooking facilities equipped with a cooking range, refrigerator and sink; provided that any Low Income Tenant may, but shall not be obligated to, proyide a refrigerator for the unit to be occupied. (c) None of the dwelling units in the Project will at any time be utilized on a transient basis, or will ever be used as a hotel, motel, dormitory, fraternity house, sorority house, rooming house, nursing home, hospital, sanitarium, rest home, retirement house or trailer court or park. (d) No part of the Project will at any time be owned or used as a condominium or by a cooperative housing corporation. Other than obtaining a final subdivision map on the Project and a Final Subdivision Public Report from the California Department of Real Estate, the Borrower shall not take any steps in connection with a conversion of the Project to a condominium or cooperative ownership except with the prior written approving opinion of Bond Counsel that the interest on the Bonds will not become taxable thereby under Section 103 of the Code. (e) All of the dwelling units will be available for rental on a continuous basis to members of the general public and the Borrower will not give preference to any particular class or group in renting the dwelling units in the Project, except to the extent that dwelling units are required to be leased or rented to Low Income Tenants, Very Low Income Tenants and to holders of Section 8 certificates or vouchers. (f) The Project Site consists of a parcel or parcels that are contiguous except for the interposition of a road, street or stream, and all of the Project Facilities will comprise a single geographically and functionally integrated project for residential rental property, as evidenced by the ownership, management, accounting and operation of the Project. (g) No dwelling unit in any building or structure in the Project which contains fewer than five units shall be occupied by the Borrower or by persons related to or affiliated with the Borrower. (h) Should involuntary noncompliance with the provisions of Section 1.1O3-8(b) of the Regulations be caused by fire, seizure, requisition, foreclosure, transfer of title by deed in lieu offoreclosure, change in a federal law or an action of a federal agency after the Closing Date which prevents the Issuer from enforcing the requirements of the Regulations, or condemnation or similar event, the Borrower covenants that, within a "reasonable period" determined in accordance with the Regulations, it will either prepay the Mortgage Note or apply any proceeds received as a result of any of the preceding events to reconstruct the Project to meet the requirements of Section 142(d) of the Code and the Regulations. (i) The Borrower shall not discriminate on the basis of race, religion, creed, color, ethnic group identification, sex, source of income (e.g. AFDC, SSI), mental or physical disability, age, national origin or marital status in the rental, lease, use or occupancy of the Project or in connection with the employment or application for employment of persons for the operation and management of the Project. (j) Following the expiration or termination of the Qualified Project Period, Low Income Units shall remain available to the Low Income Tenants then occupying such units at the date of expiration or termination of the Qualified Project Period at a rent not greater than the rent determined pursuant to Section 4(a)(ii) below until the earliest of any of the following occurs: C-4 '5-60 (i) The household's income exceeds 140 percent ofthe income at which such household would qualify as a Low Income Tenant. (ii) The household voluntarily moves or is evicted for "good cause," For these purposes, "good cause" means the nonpayment of rent or allegation of facts necessary to prove major, or repeated minor, violations of material provisions of the lease agreement which detrimentally affect the health and safety of other persons or the structure, the fiscal integrity of the Project, or the purposes or special programs of the Project. (iii) Sixty (60) years after the commencement of the Qualified Project Period, (iv) The Borrower pays relocation assistance and benefits to such tenant as provided in Government Code Section 7264(b). (k) During the three-year period prior to the expiration of the Qualified Project Period. the Borrower shall continue to make available to Low Income Tenants Low Income Units that have been vacated to the same extent that other units in the Project are made ayailable to the general public. (I) The Issuer may but shall not be required to monitor the Borrower's compliance with the provisions of the Regulatory Agreement described in subparagraph (j) above. Low Income Tenants Pursuant to the requirements of Section l42(d) of the Code and applicable provisions of the Act, the Borrower has represented in the Regulatory Agreement, as of the date thereof, and warranted, covenanted and agreed as follows: (a) During the Qualified Project Period: (i) not less than ten percent (10%) of the units in the Project shall be designated as Very Low Income Units and shall be continuously occupied by or held available for occupancy by Very Low Income Tenants at monthly rents paid by the Very Low Income Tenants which do not exceed one-twelfth of the amount obtained by multiplying 30% times 50% of the Median Income for the Area, as adjusted for household size utilizing the percentages set forth above under the definition of Very Low Income Tenant less a reasonable deduction for utilities paid by the tenant and assuming the following unit sizes and household sizes: Unit Size Household Size Studio One Person One Bedroom Two Persons Two Bedrooms Three Persons Three Bedrooms Four Persons Such Very Low Income Units shall be of comparable quality and offer a range of sizes and number of bedrooms comparable to those units which are available to other tenants and shall be distributed throughout the Project. C-5 E:-BI A unit occupied by a Very Low Income Tenant who at the commencement of the occupancy is a Very Low Income Tenant shall be treated as occupied by a Very Low Income Tenant until a recertification of such tenant's income, in accordance with the tenDs of the Regulatory Agreement described in paragraph (c) below, demonstrates that such tenant no longer qualifies as a Very Low Income Tenant and thereafter any residential unit of comparable size in the Project is occupied by a new resident other than a Very Low Income Tenant. Moreover, a unit previously occupied by a Very Low Income Tenant and then vacated shall be considered occupied by a Very Low Income Tenant until reoccupied, other than for a temporary period, at which time the character of the unit shall be redetermined. In no event shall such temporary period exceed thirty-one (31) days. (ii) in addition to the Very Low Income Units set aside under paragraph (i) above, not less than another thirty-nine percent (39%) of the units in the Project shall be designated as Low Income Units and shall be continuously occupied by or held available for occupancy by Low Income Tenants at monthly rents paid by the Low Income Tenants which do not exceed one-twelfth of the amount obtained by multiplying 30% times 60% of the Median Income for the Area, as adjusted for household size utilizing the percentages set forth above under the definition of Low Income Tenant less a reasonable deduction for utilities paid by the tenant and assuming the following unit sizes and household sizes: Unit Size Household Size One Bedroom Two Persons Two Bedrooms Three Persons Three Bedrooms Four Persons Such Low Income Units shall be of comparable quality and offer a range of sizes and number of bedrooms comparable to those units which are available to other tenants and shall be distributed throughout the Project. A unit occupied by a Low Income Tenant who at the commencement of the occupancy is a Low Income Tenant shall be treated as occupied by a Low Income Tenant until a recertification of such tenant's income, in accordance with the tenos of the Regulatory Agreement described in paragraph (c) below, demonstrates that such tenant no longer qualifies as a Low Income Tenant and thereafter any residential unit of comparable size in the Project is occupied by a new resident other than aLow Income Tenant. Moreover, a unit previously occupied by aLow Income Tenant and then vacated shall be considered occupied by a Low Income Tenant until reoccupied, other than for a temporary period, at which time the character of the unit shall be redetermined. In no event shall such temporary period exceed thirty-one (31) days. (b) Immediately prior to a Very Low Income Tenant's occupancy of a Very Low Income Unit and a Low Income Tenant's occupancy of a Low Income Unit, the Owner will obtain and maintain on file an Income Certification from each Very Low Income Tenant occupying a Very Low Income Unit and each Low Income Tenant occupying a Low Income Unit, dated immediately prior to the initial occupancy of such Very Low Income Tenant or Low Income Tenant, as applicable, in the Project. In addition, the Owner will provide such further information as may be required in the future by the State of California, the Issuer, the Act, Section 142(d) of the Code and the Regulations, as the same may be amended from time to time, or in such other form and manner as may be required by applicable rules, rulings, policies, procedures or other official statements now or hereafter promulgated, proposed or made by the Department of the Treasury or the Internal Revenue Service with respect to obligations issued under Section l42(d) of the Code. The C-6 E~Bz.... Owner shall verify that the income provided by an applicant is accurate by taking one or more of the following steps as a part of the verification process: (1) obtain a federal income tax return for the most recent tax year, (2) obtain a written verification of income and employment from the applicant's current employer, (3) if an applicant is unemployed or did not file a tax return for the preyious calendar year, obtain other verification of such applicant's income satisfactory to the Issuer or (4) such other information as may be reasonably requested by the Issuer. Copies of the most recent Income Certifications for Very Low Income Tenants and Low Income Tenants shall be attached to the quarterly report to be filed with the Issuer as described in (d) below. (c) (i) Immediately prior to the first anniversary date of the occupancy of a Very Low Income Unit by one or more Very Low Income Tenants, and on each anniversary date thereafter, the Owner shall recertify the income of the occupants of each Very Low Income Unit by obtaining a completed Income Certification based upon the current income of each occupant of the unit. In the event the recertification demonstrates that such household's income exceeds 140% of the income at which such household would qualify as Very Low Income Tenants, such household will no longer qualify as Very Low Income Tenants and to the extent necessary to comply with the requirements of the Regulatory Agreement as described in (a) (i) above, the Owner will rent the next available unit of comparable size to one or more Very Low Income Tenants (ii) Immediately prior to the first anniversary date of the occupancy of a Low Income Unit by one or more Low Income Tenants, and on each anniversary date thereafter, the Owner shall recertify the income of the occupants of each Low Income Unit by obtaining a completed Income Certification based upon the current income of each occupant of the unit. In the event the recertification demonstrates that such household's income exceeds 140% of the income at which such household would qualify as Low Income Tenants, such household will no longer qualify as Low Income Tenants and to the extent necessary to comply with the requirements of Section 4(a)(ii) above, the Owner will rent the next available unit of comparable size to one or more Low Income Tenants. (d) Not later than ten (10) days after the commencement of the Qualified Project Period, and within ten days of the last day of each quarter thereafter during the term of the Regulatory Agreement, the Borrower shall advise the Program Administrator of the status of the occupancy of the Project by delivering to such parties a Certificate of Continuing Program Compliance. (e) The Borrower will maintain complete and accurate records pertaining to the Very Low Income Units and the Low Income Units, and will permit any duly authorized representative of the Issuer, the Program Administrator, the Trustee, Fannie Mae, the Department of the Treasury or the Internal Reyenue Service to inspect the books and records of the Borrower pertaining to the Project, including those records pertaining to the occupancy of the Low Income Units. (I) The Borrower shall submit to the Secretary of the Treasury annually on the anniversary date of the start of the Qualified Project Period, or such other date as is required by the Secretary, a certification that the Project continues to meet the requirements of Section 142(d) ofthe Code, and shall provide a copy of such certification to the Program Administrator. (g) Prior to renting any Very Low Income Units or Low Income Units, the Borrower shall prepare and present to the City a marketing plan for the Very Low Income Units and the Low Income Units. C-7 E-B~ The Borrower may begin leasing the Very Low Income Units and the Low Income Units following the City Manager's approval of the marketing plan, which consent shall not be unreasonably withheld. The Borrower shall accept as tenants on the same basis as all other prospective tenants, persons who are recipients of federal certificates or vouchers for rent subsidies pursuant to the existing program under Section 8 of the United States Housing Act of 1937, or its successor. The Borrower agrees to contact the San Diego County Housing Authority for a list of persons who are recipients of, or who are applying for, Section 8 certificates or vouchers whenever a Very Low Income Unit or a Low Income Unit becomes available but not more frequently than every four weeks. The Borrower shall not apply selection criteria to Section 8 certificate or voucher holders that are more burdensome than criteria applied to all other prospective tenants. (h) The Very Low Income Units and the Low Income Units shall be of a comparable quality and offer a range of sizes and number of bedrooms comparable to the units that are ayailable to other tenants, and not less than - Low Income Units shall be three bedroom units. (i) The Borrower shall not collect any additional fees or payments from a Low Income Tenant except security deposits or other deposits required of all tenants or for services or items requested by a tenant. The Borrower shall not collect security deposits or other deposits from Section 8 certificate or voucher holders in excess of those allowed under the Section 8 Program. The Borrower shall not discriminate against Low Income Tenant applicants on the basis of source of income (i.e., AFDC or SSI), and the Borrower shall consider a prospective tenant's previous rent history of at least one year as eyidence of the ability to pay the applicable rent. U) Each lease pertaining to a Very Low Income Unit and a Low Income Unit shall contain a provision to the effect that the Borrower has relied on the Income Certification and supporting information supplied by the Very Low Income Tenant and the Low Income Tenant in determining qualification for occupancy of the Very Low Income Unit or Low Income Unit, as applicable, and that any material misstatement in such certification (whether or not intentional) will be cause for immediate termination of such lease. Each lease will also contain a provision that failure to cooperate with the annual recertification process reasonably instituted by the Borrower pursuant to the terms of the Regulatory Agreement described in paragraph (c) of this section may at the option of the Borrower disqualify the unit as a Very Low Income Unit or Low Income Unit, as applicable, or provide grounds for termination of the lease. (k) The Borrower will execute and deliver to the Issuer an Administration Agreement applicable to the Project on or before the Closing Date. (I) Prior to the Closing Date, the Borrower agrees to provide to the Program Administrator a copy bfthe form of application and lease to be provided to prospective Very Low Income Tenants and Low Income Tenants. The term of the lease shall be not less than thirty (30) days. (m) The Borrower shall notify the Program Administrator of any change in leasing agents or managers for the Project. Tax Status of the Bonds The Borrower and the Issuer each has represented in the Regulatory Agreement, as of the date thereof, and warranted, covenanted and agreed that: C-S 6~B4 (a) It will not knowingly take or permit, or omit to take or cause to be taken, as is appropriate, any action that would adversely affect the exclusion from gross income for federal income tax purposes or the exemption from California personal income taxation of the interest on the Bonds and, if it should take or permit, or omit to take or cause to be taken, any such action, it will take all lawful actions necessary to rescind or correct such actions or omissions promptly upon obtaining knowledge thereof; (b) It will take such action or actions as may be necessary, in the written opinion of Bond Counsel filed with the Issuer and the Trustee, to comply fully with the Act and all applicable rules, rulings, policies, procedures, Regulations or other official statements promulgated, proposed or made by the Department of the Treasury or the Internal Revenue Seryice pertaining to obligations issued under Section 142(d) of the Code to the extent necessary to maintain the exclusion from gross income for federal income tax purposes of interest on the Bonds: and (c) The Borrower, at the Borrower's expense, will file of record such documents and take such other steps as are necessary, in the written opinion of Bond Counsel filed with the Issuer and the Trustee, in order to insure that the requirements and restrictions of the Regulatory Agreement will be binding upon all owners of the Project, including, but not limited to, the execution and recordation of the Regulatory Agreement in the real property records of the County of San Diego. The Borrower has covenanted in the Regulatory Agreement to notify any subsequent owner of the Project of the requirements and restrictions contained in the Regulatory Agreement in any documents transferring any interest in the Project to another person to the end that such transferee has notice of such restrictions, and to obtain the agreement from any transferee to abide by all requirements and restrictions of the Regulatory Agreement. Sale or Transfer of the Project; Syndication The Borrower intends to hold the Project for its own account, has no current plans to sell, transfer or otherwise dispose of the Project, and has covenanted and agreed in the Regulatory Agreement not to sell, transfer or otherwise dispose of the Project, or any portion thereof (other than for individual tenant use as contemplated in the Regulatory Agreement and replacement of personal property), without obtaining the prior written consent of the Issuer, which consent shall be given upon receipt by the Issuer of (i) such certifications from the Borrower or the Trustee as are reasonably deemed necessary by the Issuer to establish that the Borrower shall not be in default under the Regulatory Agreement or under the Financing Agreement or, if any such defaults exist, the purchaser or assignee undertakes to cure such defaults to the satisfaction of the Issuer; (ii) a written instrument by which the Borrower's purchaser or transferee has assumed in writing and in full the Borrower's duties and obligations under the Regulatory Agreement and under the Administration Agreement, (iii) an opinion of counsel for the transferee that the transferee has duly assumed the obligations of the Borrower under the Regulatory Agreement and the Administration Agreement and that such obligations and the Regulatory Agreement and the Administration Agreement are binding on the transferee, (iv) documentation from the transferee reflecting the transferee's experience with owning and/or operating multifamily housing projects such as the Project and with use and occupancy restrictions similar to those contained in the Regulatory Agreement, and (v) an opinion of Bond Counsel addressed to the Issuer to the effect that such transfer will not cause interest on any Bond to become includable in the gross income of the recipients thereof for federal income tax purposes. Nothing contained in the Regulatory Agreement shall affect any provision of the Security Agreement or any of the other Mortgage Loan Documents to which the Borrower is a party which requires the Borrower C-9 t:: ~65 to obtain the consent of the holder of the note as a precondition to sale, transfer or other disposition of, or any direct or indirect interest in, the Project or of any interest in the Borrower or which gives the holder of the Mortgage Note the right to accelerate the maturity of the Mortgage Loan, or to take some other similar action with respect to the Mortgage Loan, upon the sale, transfer or other disposition ofthe Project. Nothing contained in the Regulatory Agreement shall require the consent of the Issuer or otherwise affect the right of Fannie Mae or a Fannie Mae created entity or the Construction Lender or its affiliates to foreclose on the Project or accept a deed in lieu of foreclosure or comparable conversion of the Mortgage Loan or the Letter of Credit. It is expressly stipulated in the Regulatory Agreement and agreed that any sale, transfer or other disposition of the Project in violation of the Regulatory Agreement shall be null, void and without effect, shall cause a reversion of title to the Borrower, and shall be ineffective to relieve the Borrower of its obligations under the Regulatory Agreement. Not less than 20 days prior to consummating any sale, transfer or disposition of any interest in the Project, the Borrower shall deliver to the Issuer and the Trustee a notice in writing explaining the nature of the proposed transfer. The Borrower shall not syndicate the Project unless, prior to such syndication, an opinion of counsel acceptable to the Issuer is delivered to the Issuer to the effect that (í) the terms and conditions of the syndication do not reduce or limit any of the requirements of the Act or regulations adopted or documents executed pursuant to the Act, (ii) no requirements of the Issuer shall be subordinated to the syndication agreement and (iii) the syndication shall not result in the provision of fewer assisted units, or the reduction of any benefits or services, than were in existence prior to the syndication agreement. Term Except as provided otherwise in the Regulatory Agreement, the Regulatory Agreement and all and several of the terms thereof shall become effective upon its execution and delivery and shall remain in full force and effect during the Qualified Project Period, it being expressly agreed and understood that the provisions thereof are intended to survive the retirement of the Bonds and expiration of the Indenture, the Financing Agreement, the Mortgage Note and the Security Agreement. Notwithstanding any other provisions of the Regulatory Agreement to the contrary, the entire Regulatory Agreement, or any of the provisions or sections hereof, may be terminated upon agreement by the Issuer, the Trustee and the Borrower only if there shall have been received by the Issuer an opinion of Bond Counsel that such termination will not adyersely affect the exclusion from gross income for federal income tax purposes or the exemption from State personal income taxes of the interest on the Bonds. The terms of the Regulatory Agreement to the contrary notwithstanding, the Regulatory Agreement, and each and all of the terms hereof, shall terminate and be of no further force and effect in the event of an involuntary noncompliance with the provisions of the Regulatory Agreement caused by foreclosure on the Project or delivery of a deed in lieu of foreclosure, fire, seizure, requisition, change in a federal law or an action of a federal agency after the Closing Date which prevents the Issuer and the Trustee from enforcing the provisions of the Regulatory Agreement or condemnation or a similar event, but only if within a reasonable period thereafter the Bonds are paid in full and retired or amounts received as a consequence of such event are used to provide a project that meets the requirements of the Code set forth in the Regulatory Agreement; provided, however, that the preceding provisions of this sentence shall cease to apply and the restrictions contained in the Regulatory Agreement shall be reinstated if, at any time subsequent to the termination of such provisions as the result of the foreclosure on the Project or the delivery of a deed in lieu of foreclosure or a similar event, the Borrower or any Affiliated Party obtains an ownership interest in the Project for federal income tax purposes. Upon the termination of the terms of the Regulatory Agreement, C-lO E:-B~ the parties thereto agree to execute, deliver and record appropriate instruments of release and discharge of the terms thereof: provided, however, that the execution and delivery of such instruments shall not be necessary or a prerequisite to the termination of the Regulatory Agreement in accordance with its terms. Covenants to Run With the Land Under the Regulatory Agreement, the Borrower has subjected the Project (including the Project Site) to the covenants, reservations and restrictions set forth in the Regulatory Agreement. In the Regulatory Agreement, the Issuer, the Trustee and the Borrower have declared their express intent that the covenants, reservations and restrictions set forth therein shall be deemed covenants running with the land and shall pass to and be binding upon the Borrower's successors in title to the Project; provided, however, that on the termination of the Regulatory Agreement said covenants, reservations and restrictions shall expire. Each and every contract, deed or other instrument executed after the execution of the Regulatory Agreement covering or conveying the Project or any portion thereof shall conclusively be held to have been executed, delivered and accepted subject to such coyenants, reseryations and restrictions, regardless of whether such covenants, reservations and restrictions are set forth in such contract, deed or other instruments. Burden and Benefit The Issuer, the Trustee and the Borrower have declared in the Regulatory Agreement their understanding and intent that the burden of the covenants set forth therein touch and concern the land in that the Borrower's legal interest in the Project is rendered less valuable thereby. The Issuer, the Trustee and the Borrower have further declared in the Regulatory Agreement their understanding and intent that the benefit of such covenants touch and concern the land by enhancing and increasing the enjoyment and use of the Project by Very Low Income Tenants and Low Income Tenants, the intended beneficiaries of such covenants, reservations and restrictions, and by furthering the public purposes for which the Bonds were issued. Enforcement If the Borrower defaults in the perfonnance or observance of any covenant, agreement or obligation of the Borrower set forth in the Regulatory Agreement, and if such default remains uncured for a period of 60 days after written notice thereof shall have been given by the Issuer or the Trustee to the Borrower, the Credit Provider, the Construction Lender and the Loan Servicer (or such longer period if the Borrower provides the Issuer with an opinion of Bond Counsel to the effect that such extension will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds), then the Trustee, subject to the provisions of the Regulatory Agreement and acting on its own behalf or on behalf of the Issuer, or the Issuer shall declare an "Event of Default" to have occurred under the Regulatory Agreement, and, at its option, may take anyone or more of the following steps: (i) by mandamus or other suit, action or proceeding at law or in equity, require the Borrower to perform its obligations and covenants under the Regulatory Agreement or enjoin any acts or things which may be unlawful or in violation of the rights of the Issuer or the Trustee thereunder: (ii) have access to and inspect, examine and make copies of all of the books and records of the Borrower pertaining to the Project; C-ll E.-57 (iii) with the prior written consent of Fannie Mae, take such other action at law or in equity as may appear necessary or desirable to enforce the obligations, covenants and agreements of the Borrower under the Regulatory Agreement. The Borrower has agreed in the Regulatory Agreement that specific enforcement of the Borrower's agreements contained therein is the only means by which the Issuer may fully obtain the benefits of such agreements made by the Borrower therein, and the Borrower therefore has agreed to the imposition of the remedy of specific performance against it in the case of any Eyent of Default by the Borrower thereunder. The Trustee shall have the right, in accordance with the provisions of the Regulatory Agreement and of the Indenture, upon notice to but without the consent or approval of the Issuer, to exercise any or all of the rights or remedies of the Issuer under the Regulatory Agreement. All fees, costs and expenses of the Trustee (including, without limitation, reasonable attorneys fees) incurred in taking.any action pursuant to the Regulatory Agreement shall be the sole responsibility of the Borrower. After the Indenture has been discharged, or if the Trustee fails to act under the Regulatory Agreement, the Issuer may act on its own behalf to declare an "Event of Default" to have occurred and to take anyone or more of the steps specified in the Regulatory Agreement to the same extent and with the same effect as if taken by the Trustee. After the date on which no Bonds remain outstanding as provided in the Indenture, the Trustee shall no longer have any duties or obligations under the Regulatory Agreement, and all references to the Trustee therein shall be deemed references to the Issuer. As long as the Credit Provider is not in payment default underthe terms of the Credit Facility, neither the County, the Trustee nor any person under their control shall, without the prior written consent of the Credit Provider, exercise any remedies or direct any proceedings under the Regulatory Agreement other than to enforce rights of specific performance thereunder against the Borrower, provided that such enforcement shall not include a judgment lien against the Project for monetary damages. Notwithstanding anything contained in the Regulatory Agreement and the Indenture to the contrary, the occurrence of an event of default under the Regulatory Agreement shall not be deemed, under any circumstances whatsoever, to constitute a default under the Mortgage Loan Documents, except as may be otherwise specified in the Mortgage Loan Documents. The parties to the Regulatory Agreement have agreed that the maturity date of the Mortgage Loan may be accelerated solely by the holder thereof upon the occurrence of a default on the part of the Borrower under the Mortgage Loan Documents and that no person other than Fannie Mae shall have the right to (i) declare the principal balance of the Mortgage Note to be immediately due and payable, or (ii) commence foreclosure or other like action without express written authorization from Fannie Mae. The rights of the Trustee under the Regulatory Agreement are in addition to all rights conferred upon the Trustee under the Indenture and in no way limit those rights. All monetary obligations of the Borrower that may arise under the Regulatory Agreement shall be subject and subordinate to the repayment of amounts owed by the Borrower under the Mortgage Loan Documents. C-12 E-8B Trustee Acting Solely in Such Capacity In accepting its obligations under the Regulatory Agreement, the Trustee acts solely as trustee for the benefit of the Registered Owners, and not in its individual capacity; and the duties, powers, rights and liabilities of the Trustee in acting thereunder shall be subject to the provisions of the Indenture, including, without limitation, the section or sections of the Indenture relating to the role of the Trustee. CDLAC Reqnirements The acquisition, construction and operation of the Project and the financing thereof are and shall be in compliance with the conditions set forth in Exhibit A to the CDLAC Resolution, a copy of which is attached as an exhibit to the Regulatory Agreement, which conditions are incorporated into the Regulatory Agreement by reference and are made a part thereof. The Issuer shall have the right, but not the obligation, to monitor and enforce the Borrower's compliance with the provisions of the Regulatory Agreement. The Borrower shall prepare and submit to CDLAC on each anniversary of the Closing Date, and on such other date as is reasonably requested by CDLAC, a Certificate of Compliance in substantially the form attached as an exhibit to the Regulatory Agreement, executed by an authorized representative of the Borrower. CDLAC shall be a third-party beneficiary of the Regulatory Agreement for purposes of enforcing the terms of the CDLAC Resolution. CDLAC shall have the right to enforce the terms of the CDLAC Resolution through an action for specific performance or any other ayailable remedy; provided, however, that CDLAC shall not take any action or enforce any remedy that would be materially adverse to the interests of the Bondholders or Fannie Mae and any such action or enforcement shall otherwise be subject to the terms, conditions and limitations applicable to the enforcement of remedies under the Regulatory Agreement. C-B E-tff APPENDIX D SUMMARY OF CERTAIN PROVISIONS OF THE FINANCING AGREEMENT The following is a brief summary of the Financing Agreement. The summary does not purport to be a complete or definitive and is qualified in its entirety by reference to the Financing Agreement, a copy of which is on file with the Trustee. "Activity Fee" has the meaning given to that term in the Reimbursement Agreement. "Activity Rate" has the meaning given to that term in the Reimbursement Agreement. "Borrower Documents" means the Bond Documents to which the Borrower is a party, the Mortgage Loan Documents to which the Borrower is a party, the Construction Phase Credit Documents to which the Borrower is a party and all other documents to which the Borrower is a party and which are being executed and deliyered by the Borrower in connection with the transactions provided for in the Bond Documents, the Mortgage Loan Documents and the Construction Phase Credit Documents. "Event of Default" means any event of default specified and defined in the Financing Agreement. "Facility Fee" has the meaning given to that term in the Mortgage Note. "Indemnified Parties" has the meaning given to that term in the Financing Agreement. "Key Principal" has the meaning given to that term in the Security Instrument. "Mortgage Loan Documents" means, collectively, the Mortgage Note, the Security Instrument, the Reimbursement Agreement, and all other agreements, documents and instruments evidencing, securing or otherwise relating to the Mortgage Loan, including all amendments, modifications, supplements and restatements of such agreements, documents and instruments, but excluding the Financing Agreement and the Regulatory Agreement. "Mortgage Loan Term" means the period from the Closing Date to and including the maturity date of the Mortgage Loan. "Mortgage Note" has the meaning given to that term in the Indenture. "Mortgage Note Rate" means the per annum rate of interest set forth in the Mortgage Note. "Pass-Through Rate" has the meaning given to that term in the Financing Agreement. "Permitted Liens" has the meaning given to that term in the Reimbursement Agreement. "Project Purposes" means use of the Project as a 27 I-unit multifamily and seniors apartment complex in Chula Vista, California, or any other use of the Project which will not (a) cause the Project to cease to qualify for financing under the Act or (b) cause the interest on the Bonds to become includable for federal income tax purposes in the gross income of the Bondholders (other than a holder who is a "substantial user" of the Project or a "related person" as such terms are used in the Code). "Qualified Project Costs" has the meaning given to that term in the Regulatory Agreement. e-qO "Servicing Fee" means the servicing fee payable to the Loan Servicer for servicing the Mortgage Loan for the Credit Provider on and after the Conversion Date. The Mortgage Loan Terms. The Mortgage Loan shall (a) be evidenced by the Mortgage Note, (b) be in a principal amount approved by the Credit Provider, not to exceed $15,400,000*, (c) bear interest at the Mortgage Note Rate, (d) be payable on the terms provided in the Mortgage Note, (e) be secured by, among other instruments, the Security Instrument and as otherwise provided in the other Mortgage Loan Documents and/or the Financing Agreement and (f) be subject to optional and mandatory prepayment at the times, in the manner and on the tenus, and have such other terms and provisions as are, set forth in the Mortgage Loan Documents. The Mortgage Note Rate shall be comprised of: (i) a pass-through rate of interest (the "Pass-Through Rate"), which shall be a rate sufficient to pay when due the interest on the Bonds and the Third Party Fees (to the extent included in the Mortgage Note Rate); and (ii) Set Rate Interest, which (A) prior to the Conversion Date, shall be equivalent to the Facility Fee payable to the Credit Provider and (B) on and after the Conversion Date, shall be equivalent to the sum of (I) the Facility Fee payable to the Credit Provider and (2) the Servicing Fee. Mortgage Loan Payments. All regularly scheduled payments due under the Mortgage Note shall be timely paid by the Borrower, when due, in immediately available funds. All payments of interest, principal or other amounts payable by the Borrower under the Mortgage Note shall be paid (a) on and before the Conversion Date (and in respect of payments due on and before the Conversion Date), to the Trustee, and (b) after the Conversion Date, to the Loan Servicer (or other entity then servicing the Mortgage Loan for the Credit Provider). Payments received by the Loan Servicer after the Conversion Date are to be remitted (net of Set Rate Interest) to the Trustee. The Borrower agrees to hold the Issuer, the Trustee, the Loan Seryicer and the Credit Provider harmless from any liability on account of any failure of the Borrower to make such payments. Prepayment Optional Prepayment. The Borrower shall have the right to prepay the Mortgage Loan in whole, but not in part (except for a Pre-Conversion Loan Equalization Payment (as defined in the Indenture}), on the tenus provided in, and subject to the limitations of, the Mortgage Note and, to the extent applicable, the Security Instrument and the Reimbursement Agreement, provided that the Borrower shall comply with the provisions of the Financing Agreement. The Borrower agrees that the payment of all amounts set forth in the Financing Agreement shall be a condition precedent to the effectiveness of any prepayment of the Mortgage Loan. Involuntary Prepayment. The Mortgage Loan shall be subject to involuntary prepayment in whole or in part on the terms provided in the Mortgage Note. *Preliminary; subject to change. D-2 E-Cft Covenants of the Borrower The covenants contained in the Financing Agreement are not intended to modify or limit any provisions of the Mortgage Loan Documents. Maintenance of Project; Insurance; Operation So long as any of the Bonds are outstanding, the Borrower will (a) own and operate the Project (i) in accordance with the requirements of the Financing Agreement, the Regulatory Agreement, the Mortgage Loan Documents, the Act and with all other applicable federal, state and local laws, ordinances, orders, rules and regulations, including, without limitation, those relating to zoning, building, safety and environmental quality, and (ii) strictly for Project Purposes, (b) keep and maintain the Project, including all appurtenances to it and any personal property in or on the Project (other than property of tenants), in good repair and good operating condition and (c) insure the Project as required by the Mortgage Loan Documents. Taxes; Other Governmental Charges and Utility Charges The Borrower will pay, or cause to be paid, promptly as the same become due and payable, every obligation of every kind and nature, foreseen or unforeseen, for the payment of which the Issuer, the Trustee or the Credit Provider, or any other party, is or may become liable by reason of its or their estate or interest in the Project, by reason of any right or interest of the Issuer, the Trustee or the Credit Proyider in or under the Financing Agreement, or by reason of or in any manner connected with or arising out of the possession, operation, maintenance, alteration, repair, rebuilding, use or occupancy of the Project or any portion of it, including, without limitation, all taxes, assessments, whether general or special, and governmental charges of any kind that may at any time be lawfully assessed or levied against or with respect to the Project or any machinery, equipment or other property installed or brought by the Borrower in or on the Project, provided that any amounts payable under the Financing Agreement that are also required to be paid by the terms of the Security Instrument shall be paid on the terms provided in the Security Instrument. Upon request, the Borrower will furnish to the Issuer, the Trustee, the Credit Provider and the Loan Servicer proof of the payment of any such tax, assessment or other governmental or similar charge, or any other charge payable by the Borrower. Remodeling and Improvements Subject to the terms of the Mortgage Loan Documents, the Borrower may remodel the Project or make modifications or improvements on or to the Project from time to time as it, in its discretion, may deem to be desirable for its uses and purposes, provided that such remodeling, modifications or improvements (a) do not materially alter the scope or character or diminish the value of the Project, (b) are permitted under the Act and the Code and (c) are approved by the Loan Servicer and the Credit Provider. The cost of such remodeling, modifications or improvements shall be paid by the Borrower. Compliance With Laws The Borrower will, throughout the term of the Financing Agreement, promptly comply or cause compliance with all laws, ordinances, rules, regulations and requirements of duly constituted public authorities which may be applicable to the Project or to the construction, repair and alteration of the Project, or to the use or manner of use of the Project, including, but not limited to, the Act, the ADA, Environmental Laws and all federal, State and local labor, health and safety laws, rules and regulations. Subject to the 0-3 e-qz....- provisions of the Mortgage Loan Documents, the Borrower may, at its expense and in its own name, provided it is not in default under any Mortgage Loan Document or any Bond Document, in good faith contest compliance with any such legal requirement and, in the event of any such contest, upon notice to the Issuer, the Trustee, the Loan Servicer and the Credit Provider, may permit the legal requirement so contested to remain in noncompliance during the pendency of such contest and any appeal from it, unless the Issuer, the Trustee, the Loan Servicer or the Credit Provider shall notify the Borrower that, in the opinion of counsel to the Issuer, the Trustee, the Loan Servicer or the Credit Provider, noncompliance with any such legal requirement may subject the Project or any part of it to foreclosure or forfeiture, in which event the legal requirement must be complied with. Nothing contained in the Financing Agreement is intended to modify or limit any provisions of the Regulatory Agreement or any Mortgage Loan Document. Maintenance of Legal Existence During the term of the Financing Agreement, the Borrower will maintain its existence and good standing in order to continue the accuracy of the certain representations set forth in the Financing Agreement and will not terminate, dissolve or dispose of all or substantially all of its assets; provided, however, that the Borrower may, with the prior written consent of the Credit Provider, consolidate with or merge into another entity or pennit one or more other entities to consolidate with or merge into it, or transfer all or substantially all of its assets to another entity, but only on the conditions that (a) the assignee entity or the entity resulting from or surviving a merger or consolidation (if other than the Borrower), or the entity to which a transfer shall be made, is duly organized and existing and in good standing under the laws of a state of the United States of America, is qualified to do business in and is in good standing under the laws of the State and will remain so continuously during the term of the Financing Agreement, and expressly assumes in writing and agrees to perform all of the Borrower's obligations under the Borrower Documents, (b) the Borrower delivers an Opinion of Bond Counsel to the Issuer, the Trustee, the Credit Provider, the Loan Servicer and, prior to the Conversion Date, the Construction Lender, to the effect that the consolidation or merger will not cause the interest payable on the Bonds to be included in gross income for federal or state income tax purposes and (c) any transfer of the Project is effected in accordance with the terms of the Regulatory Agreement and the Mortgage Loan Documents. Nothing in the Financing Agreement shall be deemed to relieve the Borrower of its obligations to comply with the provisions of the Mortgage Loan Documents. Disposition of Project The Borrower will not sell, transfer or otherwise dispose of the Project except as pennitted by the Regulatory Agreement and the Security Instrument. The Borrower agrees that any sale, transfer or other disposition of the Project in violation of the Financing Agreement shall be null, void and without effect and shall be ineffective to relieve the Borrower of its obligations under the Financing Agreement, provided that this section shall not be construed to prohibit (a) the granting by the Borrower of (i) the Security Instrument or (ii) the instrument securing the obligations of the Borrower to the Construction Lender or (iii) any other subordinate instrument or instruments approved by Credit Provider (each, in this clause (a)(iii), a "Subordinate Mortgage"), provided that each Subordinate Mortgage shall be subject to a subordination agreement (the "Subordination Agreement") in form and substance acceptable to the Credit Provider, or (b) the (i) foreclosure of the Security Instrument, acceptance of a deed-in-lieu of foreclosure or comparable conversion of the Mortgage Loan, or (ii) foreclosure, subject to the terms and conditions of the Construction Phase Financing Agreement, of the instrument securing the Construction Lender or Oii) the foreclosure of any Subordinate Security Instrument" by the holder of the Mortgage Note or the beneficiary of the Subordinate Security Instrument subject, in all cases, to the terms and conditions of the applicable Subordination Agreement. D-4 e - '9.3 The Project Damage, Destruction and Condemnation. If prior to full payment of the Bonds (or provision for payment of the Bonds in accordance with the provisions of the Indenture) the Project or any portion of it is destroyed (in whole or in part) or is damaged by fire or other casualty, or title to, or the temporary use of, the Project or any portion of it shall be taken under the exercise of the power of eminent domain by any governmental body or by any person, firm or corporation acting under governmental authority, or shall be transferred pursuant to an agreement or settlement in lieu of eminent domain proceedings, the Borrower shall nevertheless be obligated to continue to pay the amounts specified in the Financing Agreement and in the Mortgage Note to the extent the Mortgage Loan is not prepaid in accordance with the terms of the Mortgage Loan Documents. Obligation of the Borrower To Acquire, Construct and Equip the Project. The Borrower shall proceed with reasonable dispatch to complete the construction and equipping of the Project. If amounts on deposit in the Mortgage Loan Fund designated for the Project and available to be disbursed to the Borrower are not sufficient to pay the costs of such construction and equipping, the Borrower shall pay such costs from its oWn funds. The Borrower shall not be entitled to any reimbursement from the Issuer, the Trustee, the Credit Provider, the Loan Servicer or the Bondholders in respect of any such costs or to any diminution or abatement in the repayment of the Mortgage Loan. Neither the Issuer nor the Credit Provider shall be liable to the Borrower, the Bondholders or any other person if for any reason the Project is not completed or if the proceeds of the Mortgage Loan are insufficient to pay all Costs of the Project. The Issuer does not make any representation or warranty, either express or implied, that moneys, if any, which will be paid into the Mortgage Loan Fund or otherwise made available to the Borrower will be sufficient to complete the Project, and the Issuer shall not be liable to the Borrower, the Bondholders or any other person if for any reason the Project is not completed. Nonrecourse Liability Except as otherwise provided in the Mortgage Loan Documents, in any action or proceeding brought with respect to the Mortgage Loan or the Bonds, no deficiency or other money judgment shall be enforced against the Borrower or any partner of the Borrower or any successor or assign of the Borrower, and any judgment obtained shall be enforced only against the Project and other property ofthe Borrower encumbered by the Mortgage Loan Documents and not against the Borrower or any partner of the Borrower or any successor or assign of the Borrower. Notwithstanding the foregoing, anything to the contrary contained in the Financing Agreement, the obligations of the Borrower to the Issuer, the Trustee or any other party (a) with regard to the payment of third party fees and expenses and Indemnity and (b) to pay any and all rebate amounts that may be or become owing with respect to the Bonds, shall be recourse to the Borrower (subject to any limitations contained in the Mortgage Loan Documents), and, except with respect to obligations owing under the Mortgage Note or Reimbursement Agreement, not to the Project or any other property encumbered by the Mortgage Loan Documents. Events of Default and Remedies Events of Default. Each of the following shall constitute an event of default under the Financing Agreement, and the term "Event of Default" shall mean, whenever used in the Financing Agreement, anyone or more of the following events: D-5 e-94 (a) the failure by the Borrower to pay any amounts due under the Financing Agreement at the times and in the amounts required by the Financing Agreement; (b) the failure by the Borrower to observe or perfonn any covenants, agreements or obligations in the Financing Agreement on its part to be observed or perfonned (other than as provided in paragraph (a) above) for a period of 30 days after receipt of written notice from the Trustee specifying such failure and requesting that it be remedied; provided, however, that if the failure is such that it cannot be corrected within such period, it shall not constitute an Event of Default if the failure is correctable without material adverse effect on the validity or enforceability of the Bonds or on the exclusion from gross income, for federal income tax purposes, of the interest on the Bonds, and if corrective action is instituted by the Borrower within such period and diligently pursued until the failure is corrected, and provided further that any such failure shall have been cured within 90 days of receipt of notice of such failure; (c) any breach of any of the covenants, agreements or obligations of the Borrower under, or the occurrence of a default under, the Regulatory Agreement, including any exhibits to the Regulatory Agreement which remains uncured after the expiration of all applicable cure periods, if any, contained in the Regulatory Agreement; (d) the determination by the Issuer, the Trustee, the Loan Servicer or the Credit Provider that any representation or warranty made by the Borrower in the Financing Agreement or in any document delivered by or on behalf of the Borrower to the Trustee, the Loan Servicer, the Credit Provider or the Issuer in connection with the Project, the Mortgage Loan or the Bonds was untrue or misleading in any material respect as of the date made or deemed made; (e) the occurrence of an Event of Default under and as defined in the Indenture or under and as defined in any other Bond Document caused by the Borrower's failure to comply with the tenns or conditions of any such Bond Document; (t) the occurrence of any of the following: the Borrower shall generally not pay its debts as they become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors or shall institute any proceeding or voluntary case seeking to adjudicate it a bankrupt or insolvent or seeking liquidation, winding-up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization orrelief or protection of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property; or the Borrower shall take any action to authorize any of the actions described aboye in this paragraph (t), or any proceeding shall be instituted against the Borrower seeking to adjudicate it a bankrupt or insolvent or seeking liquidation, winding-up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief or protection of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property, and, if such proceeding is being contested by the Borrower in good faith, such proceeding shall remain undismissed or unstayed for a period of 60 days; (g) the filing or making of any claim against the Trust Estate as a result of any action or proceeding described (t) above by, or with respect to, the Issuer; or D-6 E -'95 (h) an Event of Default as a result of a determination by the Credit Provider pursuant to the Financing Agreement. Cross Default. The occurrence of a default under the Mortgage Loan Documents shall not constitute an Event of Default under the Financing Agreement unless the default is declared by the Credit Provider, in its sole and absolute discretion, to be an Event of Default under the Financing Agreement, such declaration to be made by written notice to the Trustee. The occurrence of an Event of Default under the Financing Agreement shall not constitute a default under any Mortgage Loan Document unless the Eyent of Default is declared by the Credit Provider, in its sole and absolute discretion, to be a default under the Mortgage Loan, such declaration to be made by written notice to the Trustee. Remedies Upon an Event of Default. General. Whenever any Event of Default shall haye occurred and be continuing under the Financing Agreement, the Trustee may take anyone or more of the following remedial steps: (a) give immediate notice to the Issuer, the Construction Lender (so long as the Letter of Credit is in place), the Loan Servicer and the Credit Provider and, if the Event of Default is the failure to receive a Required Mortgage Payment (as defined in the Credit Facility), the Trustee shall give notice to the Credit Provider, pursuant to and in accordance with the Credit Facility, and shall give notice to the Issuer, the Construction Lender (so long as the Letter of Credit is in place) and to the Loan Servicer of such failure and present an appropriate certificate for an Advance under the Credit Facility; or (b) if the principal and interest accrued on the Bonds shall have been declared immediately due and payable pursuant to the Indenture, the Trustee shall giye notice to the Issuer, the Loan Servicer, the Construction Lender (so long as the Letter of Credit is in place) and the Credit Provider and present an appropriate certificate for an Advance under the Credit Facility; proyided, however, that if the Trustee shall rescind or annul a declaration of acceleration of Bonds pursuant to the Indenture, the Issuer, the Loan Servicer, the Credit Provider and, prior to the Conversion Date, the Construction Lender (so long as the Letter of Credit is in place), the Trustee and the Credit Provider shall be restored to their fonner rights and positions, and all rights, duties and obligations of the parties shall continue as if no adverse proceeding had been taken, subject to the limits of any adverse determination; (c) take such action as is permitted by the Mortgage Loan Documents but only with the prior written consent of the Credit Provider; (d) to the extent of any insufficiency in the payment of the Bonds after the Trustee shall have received an Advance under the Credit Facility, the Trustee may, by any suit, action or proceeding, pursue all remedies now or hereafter existing at law or in equity to collect all amounts then due and thereafter to become due under the Financing Agreement, to enforce the perfonnance of any covenant, obligation or agreement of the Borrower under the Financing Agreement (subject to the nonrecourse provisions of the Financing Agreement and the Regulatory Agreement) or to enjoin acts or things which may be unlawful or in violation of the rights of the Issuer or the Trustee; D-7 g-4G:> (e) at the written direction or with the prior written consent of the Credit Provider, apply in any court of competent jurisdiction for specific performance by the Borrower of its covenants, obligations and agreement under the Financing Agreement or for injunctive relief to prevent any violation of the covenants, obligations or agreements on the part of the Borrower to be obseryed or perfonned under the Financing Agreement (the Borrower acknowledges and agrees that money damages alone would not be an adequate remedy at law for a default by the Borrower arising from a failure to comply with the Financing Agreement; therefore, the Borrower agrees that the rernedy of specific performance or injunctive relief shaIl be available to the Trustee in any such case); or (I) at the written direction or with the prior written consent or of the Credit Provider, take whatever other action at law or in equity may appear necessary or desirable to enforce any obligation of the Borrower under the Financing Agreement. In addition, upon the occurrence of an Event of Default, the Issuer, the Credit Provider, the Loan Seryicer, the Trustee and the Construction Lender (so long as the Letter of Credit is in effect) shall have access to and may inspect, examine, audit and make copies of the books and records and any and all accounts, data and income tax and other tax returns of the Borrower. Pennitled Cures by the Borrower of an Event of Default. The Trustee may, with the prior written consent of the Credit Provider, or, at the written direction of Fannie Mae, pennit the Borrower, for a period specified by the Credit Provider, to cure any default under the Mortgage Note and the Security Instrument, but only if (a) the Borrower pays to the Trustee or the Loan Servicer, as the case may be, for proper remittance, all overdue payments of principal and interest on the Mortgage Note, (b) the Borrower cures any nonmonetary defaults under the Mortgage Note, the Security Instrument and the other Mortgage Loan Documents to the satisfaction of the Credit Provider, and (c) the Borrower pays all fees, costs and expenses of the Trustee, the Issuer, the Construction Lender (so long as the Letter of Credit is in place), the Loan Servicer and the Credit Provider, including, without limitation, Extraordinary Items due to the Trustee and all legal fees and expenses, incurred in connection with the default. The Borrower acknowledges that any cure of any default will not affect any subsequent default under the Mortgage Loan Documents. Waiver and Annulment. If, after any Event of Default, (a) all amounts which would then be payable under the Financing Agreement by the Borrower if such Event of Default had not occurred and was not continuing shall have been paid by or on behalf of the Borrower, and (b) the Borrower shall have also performed all other obligations in respect of which it is then in default under the Financing Agreement and shall have paid the reasonable fees and expenses of the Issuer, the Trustee, the Credit Provider and the Loan Servicer, including reasonable attorney fees and expenses paid or incurred in connection with such default, then, and in every such case, such Event of Default shall be waived and annulled by the Trustee, but only if so directed by the Credit Provider, in its sole and absolute discretion; no such waiver or annulment shall extend to or affect any subsequent Event of Default or impair any right or remedy consequent on such Event of Default. D-8 e- - '17 APPENDIX E FORM OF CONTINUING DISCLOSURE AGREEMENT $15,400,000* Housing Authority of the City of Chula Vista, California Multifamily Housing Revenue Bonds (Heritage Town Center Apartments) Series A of 2001 THIS CONTINUING DISCLOSURE AGREEMENT dated as of November 1,200 I (this "Disclosure Agreement") is executed and delivered by South Bay Community Villas, LP., a California limited partnership (the "Borrower"), and Wells Fargo Bank, National Association, in its capacity as Dissemination Agent hereunder and in its capacity as trustee (the "Trustee"), for the holders of the above-captioned bonds (the "Bonds") under the Trust Indenture dated as of November I, 2001 (the "Indenture") between Housing Authority of the City of Chula Vista, California (the "Issuer") and the Trustee. The Borrower, the Dissemination Agent and the Trustee covenant and agree as follows: Section 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the Borrower, the Dissemination Agent and the Trustee for the benefit of the Holders and Beneficial Borrowers of the Bonds and in order to assist the Participating Underwriter in complying with, and constitutes the written undertaking of the Borrower for the benefit of the Bondholders required by, Section (b)(5)(i) of Securities and Exchange Commission Rule 15c2-12 under the Securities Exchange Act of 1934, as amended (17 c.P.R. § 240.15c2-12) (the "Rule"). The Borrower, as an "obligated person" within the meaning of the Rule, undertakes to provide the following information as proyided in this Disclosure Agreement: (I) Annual Financial Infonnation; (2) Audited Financial Statements, if any; and (3) Material Event Notices. Section 2. Definitions. In addition to the definitions set forth in the Indenture, which apply to any capitalized tenn used in this Disclosure Agreement unless otherwise defined in this Section, the following capitalized tenns shall have the following meanings: "Annual Financial Information" means, in the case of the Borrower, the financial infonnation or operating data with respect to the Project, provided at least annually, of the type included in Exhibit A hereto, which Annual Financial Information may, but is not required to, include Audited Financial Statements. "Audited Financial Statements" means, in the case of the Borrower, the annual audited financial statements, if any. 'Preliminary; subject to change. e-'"IB "Beneficial Owners" means any person which has the power, directly or indirectly, to vote or consent with respect to, ortodispose of ownership of, any Bonds, including persons holding Bonds through nominees or depositories. "Dissemination Agent" means Wells Fargo Bank, National Association, acting in its capacity as Dissemination Agent hereunder, or any successor Dissemination Agent designated in writing by the Borrower and which has filed with the Trustee and the Borrower a written acceptance of such designation. "Holders" means either the registered owners of the Bonds, or, if the Bonds are registered in the name of The Depository Trust Company or another recognized depository, any applicable participant in its depository system. "Material Event" means any of the following events with respect to the Bonds, if material: 0) Principal and interest payment delinquencies; Oi) Non-payment related Events of Default under and as defined in the Indenture; Oii) Unscheduled draws on debt service reserves reflecting financial difficulties: (iv) Unscheduled draws on credit enhancements reflecting financial difficulties; (v) Substitution of credit or liquidity providers, or their failure to perform; (vi) Adverse tax opinions or events affecting the tax-exempt status of the Bonds; (vii) Modifications to rights of Bondholders; (viii) Bond calls (other than mandatory sinking fund redemptions); (ix) Defeasances; (x) Release, substitution, or sale of property securing repayment of the Bonds; and (xi) Rating changes. "Material Event Notice" means written or electronic notice of a Material Event. "NRMSIR" means a nationally recognized municipal securities information repository, as recognized from time to time by the Securities and Exchange Commission for the purposes referred to in the Rule. The NRMSIRs as of the date of this Disclosure Agreement are as follows: Bloomberg Municipal Repositories 100 Business Park Driye Skillman, New Jersey 08558 Phone: (609) 279-3225 Facsimile: (609) 279-5962 E-mail: munis@bloomberg.com E-2 s-'9'1 DPC Data Inc. One Executive Drive Fort Lee, New Jersey 07024 Phone: (201) 346-0701 Fax: (201) 947-0107 Email: nrmsir@dpcdata.com FT Interactive Data Attn: NRMSIR 100 Williams Street New York, New York 10038 Phone: (212) 771-6999 Fax: (212) 771-7390 (Secondary Market Infonnation) (212) 771-7391 (Primary Market Infonnation) Email: NRMSIR@FTID.com Standard & Poor's U. Kenny Repository 55 Water Street 45th Floor New York, New York 10041 Phone: (212) 438-4595 Fax: (212) 438-3975 Email: nrmsir_repository@sandp.com The names and addresses of all current NRMSIRs should be verified each time infonnation is delivered pursuant to this Disclosure Agreement. A current NRMSIR list can be found on the SEC's website at: httpllwww.sec.gov/info/municipal/nnnsir.htm. "Participating Underwriter" means any original underwriter of the Bonds required to comply with the Rule in connection with offering of the Bonds. "Project" means the project financed with proceeds of the Bonds. "SID" means a state infonnation depository as operated or designated by the State of California as such for the purposes referred to in the Rule. As of the date of this Disclosure Agreement, there is no SID operated or designated by the State of California as such for the purposes referred to in the Rule. Section 3. Provision of Annual Reports. (a) While any Bonds are outstanding with respect to the Project, the Borrower shall, or upon written direction shall cause the Dissemination Agent to, provide the Annual Financial Information on or before June 1 of each year (the "Borrower Report Date"), beginning on or before June 1,2002 to each then existing NRMSIR and the SID, if any. If the Dissemination Agent is to provide the Annual Financial Information, not later than 15 Business Days prior to said date, the Borrower shall provide the Annual Financial Information to the Dissemination Agent. The Borrower shall include with each such submission of Annual Financial Information to the Dissemination Agent a written representation addressed to the Dissemination Agent, upon which the Dissemination Agent may conclusively rely, to the effect that the Annual Financial Infonnation is the Annual Financial E-3 E-IOO Information required to be provided by it pursuant to this Disclosure Agreement and that it complies with the applicable requirements of this Disclosure Agreement. In each case, the Annual Financial Information may be submitted as a single document or as a set of documents, and all or any part of such Annual Financial Information may be provided by specific cross-reference to other documents preyiously provided to each NRMSIR and the SID, if any, or filed with the Securities and Exchange Commission and, if such a document is a final official statement within the meaning of the Rule, available from the Municipal Securities Rulemaking Board, as provided in the definition of Annual Financial Information. The Audited Financial Statements, if any, may, but are not required to be, provided as a part of the Annual Financial Information. If not provided as part of the Annual Financial Information, the Borrower shall, or, upon furnishing such Audited Financial Statements to the Dissemination Agent, shall cause the Dissemination Agent to, provide Audited Financial Statements when and if available while any Bonds are Outstanding with respect to the Project to each then existing NRMSIR and the SID, if any. If by 15 Business Days prior to a Borrower Report Date the Dissemination Agent has not received a copy of the Annual Financial Information, the Dissemination Agent shall contact the Borrower to give notice that the Dissemination Agent has not received the Annual Financial Information and that such information must be provided to the NRMSIRS and SID, if any, by the applicable Report Date. The Dissemination Agent shall: (i) determine prior to the Borrower Report Date the name and address of each NRMSIR and each SID, if any; and (ii) to the extent the Borrower has provided the Annual Financial Information to the Dissemination Agent and required such information be sent to each NRMSIR or SID, file a report with the Borrower certifying that the Annual Financial Information has been provided by the Dissemination Agent to each NRMSIR and SID, if any, pursuant to this Disclosure Agreement, stating the date it was provided and listing each then existing NRMSIR and the SID, if any, to which it was provided. If the Dissemination Agent does not receive the Annual Financial Information from the Borrower required by clause (a) of this Section by the applicable Report Date, the Dissemination Agent shall, without further direction or instruction from the Borrower, provide to the Municipal Securities Rulemaking Board and to the SID, if any, notice of any such failure to provide to the Dissemination Agent Annual Financial Information by the applicable Report Date. For the purposes of determining whether information received from the Borrower is Annual Financial Information, the Dissemination Agent shall be entitled conclusively to rely on the written representation made by the Borrower pursuant to this Section. Section 4. Reporting of Significant Events. (a) (i) If a Material Event occurs while any Bonds are Outstanding, the Borrower shall provide a Material Event Notice in a timely manner to the Dissemination Agent and E-4 ~-IO\ instruct the Dissemination Agent to provide such Material Event Notice in a timely manner to the Municipal Securities Rulemaking Board and the SID, if any. Each Material Event Notice shall be so captioned and shall prominently state the date, title and CUSIP numbers of the Bonds. (ii) The Trustee shall promptly adyise the Borrower of the occurrence of any event with respect to the Bonds of which the Trustee has actual knowledge which, if material, would constitute a Material Event. For purposes of this Disclosure Agreement, "actual knowledge" of such event shall mean knowledge by a Responsible Officer of the Trustee at the Corporate Trust Office of the existence of such event. Notwithstanding anything to the contrary herein, the Trustee shall have no duty to determine the materiality of any such event. (b) Whenever a Borrower obtains knowledge of the occurrence of an event which, if material, would constitute a Material Event, whether because of a notice from the Trustee pursuant to subsection (a) or otherwise, such Borrower shall as soon as reasonably possible determine if such event would constitute material information for Bondholders and is, therefore, a Material Event. If the Borrower provides to the Dissemination Agent information relating to such Borrower or the Bonds, which information is not designated as a Material Event Notice, and directs the Dissemination Agent to provide such information to NRMSIRs, the Dissemination Agent shall provide such information in a timely manner to the NRMSIRs or the Municipal Securities Rulemaking Board and the SID, if any. Section 5. Termination of Reporting Obligation. The Borrower's, the Dissemination Agent's and the Trustee's obligations under this Disclosure Agreement shall automatically terminate once the Bonds are no longer outstanding or, with respect to the Trustee or the Dissemination Agent, as appropriate, upon the resignation or removal of the Trustee or the Dissemination Agent. Section 6. Dissemination Agent. The Borrower may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent upon notice to the Issuer and the Dissemination Agent. The Dissemination Agent may resign at any time by providing 30 days' written notice to the Borrower and the Issuer. The initial Dissemination Agent shall be Wells Fargo Bank, National Association. Section 7. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Agreement, the Borrower, the Dissemination Agent and the Trustee may amend this Disclosure Agreement and any provision of this Disclosure Agreement may be waived by the parties hereto, if such amendment or waiver is supported by an opinion of counsel expert in federal securities laws, acceptable to the Borrower and the Trustee, to the effect that such amendment or waiver would not, in and of itself, cause the undertakings herein to violate the Rule if such amendment or waiver had been effectiye on the date hereof but taking into account any subsequent change in or official interpretation of the Rule, provided that the Borrower shall have provided notice of such delivery and of the amendment to each then existing NRMSIR or the MSRB and the SID, if any, provided that neither the Trustee nor the Dissemination Agent shall be obligated to agree to any amendment that modifies the duties or liabilities of the Dissemination Agent or the Trustee without their respective consent thereto. Any such amendment shall satisfy, unless otherwise permitted by the Rule, the following conditions: E-5 E.~ taL (i) The amendment may only be made in connection with a change in circumstances that arises from a change in legal reimbursements, change in law or change in the identity, nature or status of the obligated person or type of business conducted; (ii) This Disclosure Agreement, as amended, would have complied with the requirements of the Rule at the time of the primary offering, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and (iii) The amendment does not materially impair the interests of Beneficial Owners and Holders of any of the Bonds, as detennined either by parties unaffiliated with the BolTower (such as counsel expert in federal securities laws), or by approving vote of Bondholders pursuant to the terms of the Indenture at the time of the amendment. The initial Annual Financial infonnation after the amendment shall explain, in naITative fonn, the reasons for the amendment and the effect of the change, if any, in the type of operating data or financial infonnation being provided. Section 8. Additional Information. Nothing in this Disclosure Agreement shall be deemed to preyent the BolTower from disseminating any other infonnation, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Financial Information or notice of OCCUITence of a Material Event, in addition to that which is required by this Disclosure Agreement. If the BolTower chooses to include any infonnation in any Annual Financial Information or notice of OCCUITence of a Material Event in addition to that which is specifically required by this Disclosure Agreement, the BolTower shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Financial Information or notice of OCCUITence of a Material Event. Section 9. Default. In the event of a failure of the BolTower, the Dissemination Agent or the Trustee to comply with any provision of this Disclosure Agreement, the Trustee, at the written direction of the Holders of at least 25% in aggregate principal amount of Outstanding Bonds, shall, but only to the extent the Trustee receives indemnification to its satisfaction, or any Beneficial Owner or Holder of any of the Bonds may, seek mandate or specific performance by court order, to cause the BolTower, the Issuer, the Dissemination Agent or the Trustee, as the case may be, to comply with its obligations under this Disclosure Agreement; provided that neither the BolTower, the Dissemination Agent nor the Trustee shall be liable for monetary damages or any other monetary penalty or payment for breach of any of its obligations under this Section or unless, in the case of the Borrower, such breach shall have been willful or reckless. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Indenture, and the rights and remedies provided by the Indenture upon the OCCUITence of an "Event of Default" shall not apply to any such failure. The sole remedy under this Disclosure Agreement in the event of any failure of the BolTower, the Dissemination Agent or the Trustee to comply with this Disclosure Agreement shall be an action to compel perfonnance. Section 10. Duties, Immunities and Liabilities of Trustee and Dissemination Agent. Article X of the Indenture is hereby made applicable to this Disclosure Agreement as if this Disclosure Agreement were (solely for this purpose) contained in the Indenture and the Dissemination Agent shall be entitled to the benefits, protections and provisions thereof to the same extent as the Trustee. The Dissemination Agent (if other than the Trustee or the Trustee in its capacity as Dissemination Agent) and the Trustee shall have only such duties as are specifically set forth in this Disclosure Agreement, and the BolTower agrees to indemnify and save the Dissemination Agent and the Trustee and their officers, directors, employees and agents hannless against any loss, expense and liabilities which they may incur arising out of or in the exercise or E-6 1:::-103 performance of their powers and duties hereunder, including the costs and expenses (including attorneys' fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's orTrustee's respective negligence or willful misconduct. The Dissemination Agent and Trustee shall be paid compensation by the Borrower (on a pro rata basis based on the outstanding principal balance of its Mortgage Loan) for its services provided hereunder and all expenses, legal fees and advances made or incurred by the Dissemination Agent hereunder. The Dissemination Agent and Trustee shall have no duty or obligation to review any information provided to it by the Borrower and shall not be deemed to be acting in a fiduciary capacity for the Borrower, the Holders or Beneficial Owners of the Bonds or any other party. The obligations of the Borrower under this Section shall survive resignation or removal of the Dissemination Agent or Trustee and payment of the Bonds. Section 11. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the Borrower, the Trustee, the Dissemination Agent, the Participating Underwriter and the Beneficial Owners and Holders of any Bonds and shall create no rights in any other person or entity. Section 12. Interpretation. It being the intention of the Borrower that there be full and complete compliance with the Rule, this Disclosure Agreement shall be construed in accordance with the written guidance and no-action letters published from time to time by the Securities and Exchange Commission and its staff with respect to the Rule. Section 13. Governing Law. This Disclosure Agreement shall be governed by the laws of the State of California. E-7 IS- - 104 Section 14. Connterparts. This Disclosure Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. Dated as of: November 1,2001 SOUTH BAY COMMUNITY VILLAS, L.P., a California limited partnership By: R-47 Housing, LLC, a California limited liability company, its General Partner By: Otay Project LP., a California limited partnership, its Managing Member By: Otay Project, LLC, a California limited liability company, its General Partner By: Otay Ranch Development, LLC, a Delaware limited liability company, its Manager By: Robert B. Cameron, Vice President By: South Bay Community Services, a California non-profit corporation, its General Partner By: Kathryn Lembo, Executive Director WELLS FARGO BANK, NATIONAL ASSOCIA nON, as Trustee and as Dissemination Agent By: Authorized Officer B' ~ 105 Exhibit A ANNUAL DISCLOSURE REPORT $15,400,000' Housing Authority of the City of Chula Vista, California Multifamily Housing Revenue Bonds (Heritage Town Center Apartments), Series A of 2001 Report For Period Ending THE PROJECT Name: Address: Occupancy Number of Units Number of Units Occupied as of Report Date Operating History of the Project The following table sets forth a summary of the operating results of the Project for fiscal year ended -' as deriyed from the Owner's [unJaudited financial statements. Revenues Operating Expensesl Net Operating Income Debt Service on the Mortgage Loan' Net Operating Income/(Loss) After Debt Service The average occupancy of the Project for the fiscal year ended [_J was [_J%. lExcludes depreciation and other noncash expenses, includes management fee. 'Interest and scheduled principal payments on the Mortgage Loan during the period indicated. .Preliminary; subject to change. E-9 E:: ~ 10(.. APPENDIX F FORM OF THE CREDIT FACILITY [To Come] 8-\07 APPENDIX G PROPOSED FORM OF BOND COUNSEL OPINION November _,2001 Housing Authority of the City of Chula Vista, California 430 Davidson Street, Suite B Chula Vista, California 91910 $15,400,000* Housing Authority of the City of Chula Vista, California Multifamily Housing Revenue Bonds (Heritage Town Center Apartments) Series A of 2001 Ladies and Gentlemen: We have acted as Bond Counsel to the Housing Authority of the City ofChula Vista, California (the "Issuer") in connection with the issuance of its $15,400,000* Housing Authority of the City ofChula Vista, California Multifamily Housing Revenue Bonds (Heritage Town Center Apartments) Series A of 2001 (the "Bonds"). We have examined certified copies of the proceedings of the Issuer, and other infonnation and documents submitted to us relative to the issuance and sale by the Issuer of the Bonds. The Bonds have been issued pursuant to a resolution of the Issuer adopted on October _,2001 Chapter I of Part 2 of Division 24 of the California Health and Safety Code of the State of California, as amended (the "Act") and an Indenture dated as of November 1,2001 (the "Indenture"), between the Issuer and Wells Fargo Bank, National Association, as trustee (the "Trustee"). The repayment of the Bonds is secured by the Revenues (as defined in the Indenture) and payments under a Credit Enhancement Instrument (Stand-By) dated as of November 1, 2001 (the "Credit Facility") issued in favor of the Trustee by Fannie Mae. We express no opinion as to the validity or enforceability of the Credit Facility. The Bonds are dated November 1, 2001, mature on the date and bear interest payable on the dates and at the rates per annum to be established from time to time in the manner set forth in the Indenture. The Bonds are issuable only as fully registered Bonds in the fonn set forth in the Indenture, redeemable in the amounts, at the times and in the manner provided for in the Indenture. In rendering our opinion, we have examined the Act and originals or certified copies of the Resolution, the Indenture, the Financing Agreement dated as of November 1, 2001 (the "Financing Agreement"), among the Issuer, the Trustee and South Bay Community Villas, LP., a California limited partnership (the "Borrower"), the Regulatory Agreement and Declaration of Restrictive Covenants dated as of November 1,2001 (the "Regulatory Agreement"), by and among the Issuer, the Trustee and the Borrower, and such other infonnation and documents as we have deemed necessary to render the opinions set forth *Preliminary; subject to change. 1;::.-\05 herein. As to questions of fact material to the opinions stated herein, we have relied upon representations made by the Issuer and the Borrower contained in the Indenture, the Financing Agreement, the Regulatory Agreement and the Tax Certificate and the certified proceedings of the Issuer and certifications of public officials, the Issuer, the Borrower, the initial purchasers of the Bonds and others furnished to us without undertaking to verify through independent investigation the accuracy of the representations and certifications relied upon by us. Based upon our examination of all of the foregoing, and in reliance thereon, and on all matters of fact as we deem relevant under the circumstances, and upon consideration of applicable laws, we are of the opinion that: (1) The Issuer is a public body and corporate politic of the State of California, duly organized and validly existing under the laws of the State of California, with full power and authority to adopt the Resolution and to execute and deliver the Indenture, the Financing Agreement and the Regulatory Agreement (collectively, the "Bond Documents"), to loan the proceeds from the sale of the Bonds to the Borrower, and to issue, sell and deliver the Bonds. (2) The execution and delivery of the Bond Documents have been duly authorized by the Issuer and, assuming proper authorization, execution and delivery by the respective other parties thereto, are valid and binding obligations of the Issuer enforceable against the Issuer in accordance with their tenns, except to the extent that enforceability may be limited by moratorium, bankruptcy, reorganization, fraudulent conveyance or transfer, insolvency or other laws affecting creditors' rights generally or by the exercise of judicial discretion in accordance with general principles of equity. (3) The Bonds have been duly and validly authorized and executed by the Issuer and are valid and binding special and limited obligations of the Issuer, payable solely out of the revenues and receipts provided therefor in the Indenture. The Bonds are enforceable in accordance with their tenns and the tenns of the Indenture, except to the extent that enforceability may be limited by moratorium, bankruptcy, reorganization, fraudulent conveyance or transfer, insolvency or other laws affecting creditors' rights generally or by the exercise of judicial discretion in accordance with general principles of equity. (4) The Indenture creates a yalid, express and irrevocable pledge under the laws of the State of California of the Revenues (as defined in the Indenture) and certain other funds and accounts held or set aside under the Indenture (as described in the Indenture), subject to the application thereof to the purposes and on the conditions pennitted by the Indenture. (5) Assuming continuing compliance subsequent to the issuance of the Bonds by the Issuer and the Borrower with the applicable provisions of the Internal Revenue Code of 1986, as amended (the "Code"), under existing statutes, regulations, rulings and judicial decisions, interest on the Bonds is excludable from gross income for federal income tax purposes (except during any period while a Bond is held by a "substantial user," or a "related person," within the meaning of Section 147(a) of the Code of the property financed by proceeds of the Bonds), but such interest is an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. (6) Interest on the Bonds is exempt from State of California personal income tax. The opinion expressed in paragraph (5) above as to the exclusion from gross income for federal income tax purposes of interest on the Bonds is subject to the condition that the applicable requirements of G-2 £:: - I D"'1 the Code are complied with subsequent to the issuance of the Bonds. Failure to comply with such requirements may cause interest on the Bonds to be includable in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. Except as expressly set forth in paragraphs (5) and (6) above, we express no opinion regarding other tax consequences with respect to the Bonds. Certain requirements and procedures contained or referred to in the Bond Documents may be changed, and certain actions may be taken, under the circumstances and subject to the terms and conditions set forth in such documents, upon the advice or with the approving opinion of counsel nationally recognized in the area of tax-exempt obligations. We express no opinion as to the exclusion of interest on the Bonds from gross income for federal income tax purposes on and after the date on which any such change occurs or action is taken upon the advice or approval of counsel other than Bond Counsel. We are admitted to the practice of law only in the State of California and our opinion is limited to matters governed by the laws of the State of California and federal law. We assume no responsibility with respect to the applicability or the effect of the laws of any other jurisdiction and express no opinion as to the enforceability of the choice of law provisions contained in the Bond Documents. The opinions expressed herein are based on an analysis of existing statutes, regulations, rulings and judicial decisions and cover certain matters not directly addressed by such authorities. Such opinions may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. We haye not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur. We have not been engaged to prepare orreview the Official Statement on behalf of the Issuer orthe owners of the Bonds and express no opinion herein as to the Official Statement and expressly disclaim any duty to advise either the Issuer or the owners of the Bonds with respect to the matters contained in the Official Statement. Respectfully submitted, G-3 6- 110 -.