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HomeMy WebLinkAboutKDF QV, LP. - Huntington Pointe Apartments - 2001-05-07I4TIEN RECORDED RETURN TO: Record:d in Official Records, County of Orange Darlene Bioort% clerk County KDF QV, L.P. 1111113,11111111111N111111111111011011..li11, 1'1' 110.00 alias MacArthur Ct., Suite 422 200200113115311:57am 12/12/02 Newport Beach, California 92660 203 73 Roo s Attn: Mark Hyatt 0•00 0.00 0.00 0.00 8.00 0.00 0.00 0.00 (Spatz Above This tine For Recorder's Office Use Only) �Y ='>-x Cr RELEASE OF CONSTRICTION COVENANTS —cr►-- ca x a WHEREAS, KDF QV, L.P., a California limited partnership ("Owner'), is the owner of the i'ee crest in that certain real property more particularly described in the legal description attached hereto as Exhibit No. 1 and incorporated herein (the "Site"); and WHEREAS, by an Owner ParticiDation Agreement (hereinafter referred to as the "Agreement") dated 'as of ,y 7, 2001, by and between Owner and the REDEVELOPMENT AGENCY OF THE C,'1TY OF HUNTINGTON BEACH, a public body, corporate and politic (hereinafter referred to as "Agency"), Owner has constructed and rehabilitated the improvements on the Site according to the terms and conditions of said Agreement; and WHEREAS, pursuant to the Agreement, prompt:y after satisfactory completion of all construction, and rehabilitation work by Owner upon the Site, Agency shall furnish Owner with a Release of Construction Covenants in such form as to permit it to be recorded in the Official Records of the County of Orange; and WHEREAS, the issuance by Agency of the Release of Construction Covenants shall be conclusive evidence that Owner has complied with the terms of the Agreement pertaining to the construction and rehabilitation of improvements on the Site; and WHEREAS, Agency has conclusively detennined that the construction and rehabilitation of improvements on the Site has been satisfactorily completed as required by the Agreement; and NOW, THEREFORE: 1. As provided in the Agreement, Agency does hereby certify that construction and rehabilitation of the improvements on the Site have been fully and satisfactorily performed and completed, and that such development is in full compliance with said Agreement. 2. This Release of Construction Covenants shall not constitute evidence of compliance with or satisfaction of any obligation of Owner to any holder of a mortgage, or any insurer of a mcrtgage, securing money loaned to finance construction work on the Site, or any part thereof. Nothing contained herein shall modify in any way any other provision of said Agreement. Release of Construction Covenants Page 1 3. This Release is not a Notice of Completion as referred to in Californfa Civil Code Section 3093. 4. All covenants set forth in the Agreement and the Regulatory Agreement cntered into by and between the Agency and Participant on , Jtlnp ,S, 2401.� remain in effect in accordance with the terms thereof: IN WITNESS WHEREOF, Agency has executed this Release as of this 20th day of Noverlber, 2002 ATTEST: Agency Clerk REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body corporate and politic I� . • Release of Construction Covenants Pate 2 CONSENT TO RECORDATION KDF QV, L.P., a California limited partnership, owner of the fee interest in the Site legally described in Exhibit No. 1 attached hereto does hereby consent to the recordation of the foregoing Release of Construction Covenants against the Site. Wgjw%di%Wwe "OWTIER" KDF QV, L.P., a Califonda limited partnership By: KDF Communities — QV LLC, Its Co -General Partner By!2 Release of Construction Covenants Managing Member STATE OF CALIFORNIA ) ) ss. COUNTY OF ORANGE ) On OeAbefore me, personally appeared personally known to me (or rmved to nie-en-4he-basiq at c) to be the person( whose name(x5 is/ere subscribed to the within instrument and acknowledged to me that helslrthey executed the same in his4w*eir authorized capacit) ( ), and that by his/hwheir signatures on the instrument the person(, or the entity upon behalf of which the p=onW acted, executed the instrument. NVITNESS my hand and official seal. 1 � Notary Public (SEAL) STATE OF CALIFORNIA ) ) ss. COUNTY OF ORANGE ) On &M before mc, ' personally appeared pe onall o to me (or proved to me on the basis of satisriclory evidence) to be the person(s) whose name(s) islare subscribed to the within instrument and acknowledged to me that helshefthey executed the same in his.'herhheir 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. CWZ;L6t'-; @&,"o No p blic (SEAL) LEGAL-DESCRiUO�F_ Ste. ALL THAT CERTAIN LAND SITUATED IN THE STATE OF CALIFORNIA, COUNTY OF ORANGE, CITY OF 11UNTINGTON BEACH, DESCRIBED AS FOLLOWS: PARCEL 1, AS SHOWN ON A MAP FILED IN BOOK 43, PAGE 19 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF ORANGE COUNTY, CALIFORNIA. L- ��� ACC: v ke 7-4 S. ?t GE WHEN RECORDED RETURN TO: KDF QV, L.P. 6e /N Le-zN-r f.=) 4685 MacArthurCt., Suite 422VGI„ Newport Beach, California 92660 Attn: Mark Hyatt (Space Above This Line For Recordees Office Use Only) CM.'4%%=/z ;zq-� RELEASE OF CONSTRUCTION COVENANTS Ila 00 WHEREAS, KDF QV, L.P., a California limited partnership ("Owner"), is the owner of the fee interest in that certain real property more particularly described in the legal description attached hereto as Exhibit No. I and incorporated herein (the "Site"); and WHEREAS, by an Owner Participation Agreement (hereinafter referred to as the "Agreement") dated as of __ May 7, . _. 2001, by and between Owner and the REDEVEL0P1v1ENT AGENCY OF THE'L^ - OF HUNTINGTON BEACH, a public body, corporate and politic (hereinafter referred to as "Agency"), Owner has constructed and rehabilitated 'the improvements on the Site according to the terms and conditions of said Agreement; and WHEREAS, pursuant to the Agreement, promptly after satisfactory completion of all construction and rehabilitation work by Owner upon the Site, Agency shall furnish Owner with a Release of Construction Covenants in such form as to permit it to be recorded in the Official Records of the County of Orange; and WHEREAS, the issuance by Agency of the Release of Construction Covenants shall be conclusive evidence that Owner has complied with the terms of the Agreement pertaining to the construction and rehabilitation of improvements on the Site; and WHEREAS, Agency has conclusively determined that the construction and rehabilitation of improvements on the Site has been satisfactorily completed as required by the Agreement; and NOW, THEREFORE: 1. As provided in the Agreement, Agency does hereby certify that construction and rehabilitation of the improvements on the Site have been fully and satisfactorily performed and completed, and that such development is in full compliance with said Agreement. 2. This Release of Construction Covenants shalt not constitute evidence of compliance with or satisfaction of any obligation of Owner to any holder of a mortgage, or any insurer of a mortgage, securing money loaned to finance construction work on the Site, or any part thereof. t Nothing contained herein shall modify in any way any other provision of said Agreement. Release of Constniction Covenants Page I } ..: 3. This Release is not a Notice of Completion as referred to in California Civil Code Section 3093. 4. All covenants set forth in the Agreement and the Regulatory Agreement entered into by and between the Agency and Participant.T on ,me 1 � �p�i remain in effect in accordance with the terms thereof. IN WITNESS WHEREOF, Agency has executed this Release as of this 20th day of November 2002 ATTEST: L�7u�ucx Agency Clerk REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body corporate and politic David C. Biggs'- Its:-.uty EX-e=tive= Release of Construction Covenants Page 2 h CONSENT TO RECORDATION KDF QV, L.P., a California limited partnership, owner of the fee interest in the Site legally described in Exhibit No. 1 attached hereto does hereby consent to the recordation of the foregoing Release of Construction Covenants against the Site. hb%quorad Wlem "OWNER" KDF QV, L.P., a California limited partnership By: KDF Communities — QV LLC, Its Co -General Partner ited Managing Member Release of Construction Covenants Page 3 STATE OF CALIFORNIA ) .� ) ss. COUJNTY OF ORANGE ) On QeA oVt,, .zoo zr before me, C b r"L personally appeared personally known to me (or sis-Qf—sa ist'aciory-cvidcnce} to be the person} whose name(4 is/an subscribed to the within instrument and acknowledged to me that he/and lrey executed the same in his4ierAheir authorized capacity(tes), and that by his4w&4 ieir signatureo on the instrument the person(s), or the entity upon behalf of which the peson(. ) acted, executed the instrument. WITNESS my hand and official seal. Notary Public (SEAL) STATE OF CALIFORNIA ) �1. ) ss. COUNTY OF ORANGE ) On oZA before me, personally appeared e � pe onall on to me -(or proved to me on the basis of satisfac ory evidence) to be the person(s) whose name(s) islare 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. Nota.. blic (SEAL) KA"FELEEK kELSOli CoMMWon * 126873d - ,: Notary Pubtic - Co wrbCrange + My CorrrnE�k�sC auvOy �I Ewe' EXHIBIT NO. I LEGAL DESCRIPTION ION OF SITE ALL THAT CERTAIN LAND SITUATED IN THE STATE OF CALIFORNIA, COUNTY OF ORANGE, CITY OF HUNTINGTON BEACH, DESCRIBED AS FOLLOWS: PARCEL 1, AS SHOWN ON A MAP FILED IN BOOK 43, PAGE 19 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF ORANGE COUNTY, CALIFORNIA. W OWNER PARTICIPATION AGREEMENT By and Between REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body, corporate and politic and KDF QV, L.F., a California limited partnership (18922 Florida Street) May 7, 2001 TABLE OF CONTENTS Page SECTION 1. DEFINITIONS SECTION 2. SUBJECT OF THIS AGREEMENT 6 2.1 Purpose of the Agreement 6 2.2 The Redevelopment Plan 6 2.3 Participant 7 2.4 Term of Agreement 7 2.5 Prohibition Against Transfers; Right of First Refusal 7 SECTION 3 FINANCING FOR ACQUISITION AND REHABILITATION OF THE SITE 8 3.1 Financing 8 3.2 Agency Financial Assistance 10 3.3 Terms of Agency Loan 10 3.4 Conditions Precedent to Close of Escrow and Disbursement of the Agency Loan 11 3.5 Disbursement Procedures 13 3.6 Relationship of Agency and the Participant as Creditor and Debtor Only 13 3.7 First Deed of Trust 13 3.8 Subordination of Agency Loan and Deed of Trust 13 3.9 Recordation 14 SECTION 4 DEVELOPMENT OF THE SITE 14 4.1 GeneraI 14 4.2 Construction of the Project 14 4.3 Insurance 16 4.4 Indemnification 17 4.5 Hazardous Materials 17 4.6 Security Financing; Right of Holders 18 4.7 Release of Construction Covenants 19 4.8 Mechanics Liens, Stop Notices, and Notices 19 of Completion SECTION 5 USE OF THE SITE 20 5.1 No Inconsistent Uses 20 5.2 Regulatory Agreement 20 5.3 Relocation 20 5.4 Maintenance of the Site 20 5.5 Nondiscrimination 21 5.6 Form of Nondiscrimination and Nonsegregation Clauses 21 5.7 Effect and Duration of Covenants 22 5.8 Creation of Replacement Reserve Account 22 5.9 Replacement Reserves 23 5.10 Operation of Project 23 5.11 Financial Statements 23 5.12 Lead -Based Paint 24 5.13 Barriers to the Disabled 24 SECTON 6 DEFAULTS AND REMEDIES 24 6.1 Participant Defaults 24 6.2 Agency Defaults 24 6.3 Notice of Default 25 6.4 Agency's Remedies 25 6.5 Participant's Remedies 25 6.6 Rights and Remedies are Cumulative 25 SECTON 7 GENERAL PROVISIONS 26 7.1 Participant's Warranties/Agency's Warranties 26 7.2 Governing Law 26 7.3 Attorneys' Fees and Costs 26 7.4 Notices, Demands, and Communications Between the Parties 27 7.5 Acceptance of Service of Process 27 7.6 Conflicts of Interest 27 7.7 Interpretation of Agreement 27 7.8 Modifications 28 7.9 Merger of Prior Agreements and Understandings 28 7.10 Effect of Violation of the Terms and Provisions of this Agreement 29 7.11 No Third Parties Benefited 29 7.12 Assurances to Act in Good Faith 29 7.13 Warranty Against Payment of Consideration for Agreement 29 7.14 Nonliability of Agency Officials and Employees 29 7.15 Counterparts 29 7.16 Extension of Times of Performance 29 7.17 Inspection of Books and Records 30 7.18 Waivers 30 SECTION 8 EXECUTION OF AGREEMENT; TIME FOR ACCEPTANCE 30 ii J A - B - C - D - E - F - G - H - I - Exhibits Legal Description Site Map Scope of Development Schedule of Performance Release of Construction Covenants Promissory Note Form of Deed of Trust Form of Regulatory Agreement Project Budget iii OWNER PARTICIPATIO`' AGREEMENT THIS OWNER PARTICIPATION AGREEMENT ("Agreement") is entered into as of the May 7 , 2001 ("Effective Date"), by and between REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body, corporate and politic ("Agency"), and KDF QV, L.P., a California limited partnership ("Participant"). RECITALS A. 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 (California Health and Safety Code Section 33000 et seq.). B. Participant is the owner of the "Site" (as such term is defined herein) which is located in the City of Huntington Beach and intends to develop the "Project" (as such term is defined herein) on the Site in accordance with the terms of this Agreement. C. Agency desires to meet its affordable housing goals pursuant to the California Community Redevelopment Law by assisting Participant in the payment of costs for acquisition of the Site and for Participant's rehabilitation -in -place of a multifamily rental housing complex consisting of one hundred and four (104) total dwelling units on the Site. After rehabilitation, the Project shall be rented to tenants whose household incomes do not exceed low income and very Iow income as defined by California law. Agency's assistance shall be in the form of a loan in the amount of ONE MILLION SEVEN HUNDRED THOUSAND DOLLARS ($1,700,000.00) to assist Participant in meeting the costs of acquisition and rehabilitation of the Site. D. Pursuant to the California Redevelopment Law, Agency has established a Housing Set Aside Fund and has deposited therein certain tax revenues made available to the Agency exclusively for the purpose of increasing and improving the community's supply of affordable low and moderate income housing, including very low income housing ("Set Aside Funds'). Agency's loan to Participant shall be funded from a combination of such Set Aside Funds and funds Agency obtains from the HOME Investment Partnership Program ("HOME Funds'). NOW, THEREFORE, in consideration of the promises and covenants contained herein, the above recitals, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: AGREEMENT SECTION 1. DEFINITIONS The following terms, as used in this Agreement, shall have the meanings given unless expressly provided to the contrary: The term "Agency" shall mean the Redevelopment Agency of the City of Huntington Beach, a public body, corporate and politic, having its offices at 2000 Main Street, Huntington Beach, CA 92648, and any assignee of, or successer to, the rights, powers, and responsibilities of Agency. The term "Agency Deed of Trust" shall mean the Deed of Trust With Assignment of Rents securing (1) the Agency Loan as evidenced by the Promissory Note and (2) Participant's obligations under the Regulatory Agreement and Sections 5.1-5.13 of this Agreement, which Deed of Trust is attached as Exhibit "0" hereto. The term "Agency Loan" shall mean the Agency's loan to Participant in an amount not to exceed ONE MILLION SEVEN HUNDRED THOUSAND DOLLARS ($1,700,000.00) of Set Aside Funds and HOME Funds, as evidenced by the Agency Note and secured by the Agency Deed of Trust. The term "Agency Note" shall mean the Promissory Note evidencing the Agency Loan attached as Exhibit "F" hereto. The term "Agreement" or any reference to this "Agreement" shall mean this Owner Participation Agreement executed by and between Agency and Participant, including all exhibits attached hereto, which exhibits are incorporated herein by this reference and all other documents incorporated herein by reference. The term "Approved Project Plans and Permits" shall mean all of the applicable plans, per► dts, and approvals required for the Project, as approved by the Agency andlor the City including, but not limited to, preliminary and final drawings (final drawings shall be in sufficient detail to obtain -a building permit), site plans, building plans and elevations, grading plans, landscaping plans, parking plans, material pallets, a description of structural, mechanical, and electrical systems, and all other plans, drawings and specifications that City and Agency customarily require for such a Project, and including all required approvals and findings pursuant the California Environmental Quality Act of 1970, as amended, and regulations promulgated thereunder ("CEQA"), and, if applicable, the National Environmental Policy Act of 1969, as amended, and regulations promulgated thereunder. The term 'Bonds" shall mean tax-exempt mortgage revenue bonds to be issued by the California Statewide Communities Development Authority ("CSCDA'), in an amount not to exceed SEVEN MILLION SEVEN HUNDRED THOUSAND DOLLARS ($7,700,000.00), the proceeds of which will be used to pay for a part of the acquisition and rehabilitation costs for the Site. The Bonds will be secured by a First Deed of Trust to be recorded against the Site, and will be credit enhanced by Fannie Mae. The term "City" shall mean the City of Huntington Beach, a municipal corporation, having its offices at 2000 Main Street, Huntington Beach, CA 92648. The term "Days" shall mean calendar days and the statement of any time period herein shall be calendar days and not working days, unless otherwise specified. The "Close of Escrow" shall mean the dat: on which all conditions precedent to Agency disbursement of the Agency Loan for acquisition and rehabilitation costs for the Site have been satisfied and Agency has authorized the disbursement of the Agency Loan. The term "Effective Date" shall mean the date on which the Agency's governing body approves this Agreement and authorizes its Chairman to sign it; which date shall be inserted into the preamble of this Agreement. The term "Eligible Tenant" shall mean any person entitled to rent a Unit as set forth in the Regulatory Agreement. The term "Equity Investment" shall mean Participant's equity investment into the Project in the approximate amount of EIGHTY FIVE THOUSAND DOLLARS ($85,000.00), to be used to pay a portion of the acquisition and rehabilitation costs for the Site The term "Escrow" shall mean that certain escrow established with an escrow company mutually acceptable to Agency and Participant, into which Participant shall deposit the documents required under Section 3A and Agency shall deposit the portion of the Agency Loan funds described in Section 3.5, all in accordance with the terms of this Agreement. The escrow company may, but is not required to be, the same title company which issues the title insurance policy pursuant to Section 3A (i). The term "Escrow Agent" shall mean the escrow agent who shall perform the duties of Escrow pursuant to this Agreement, including, but not limited to, collecting the documents required under Section 3.4, recording the instruments required under Section 3.9, and disbursing a portion of the Agency Loan as described under Section 3.5. The term "Executive Director" shall mean the individual duly appointed to the position of Executive Director of the Agency, or authorized designee. Whenever an administrative action is required by Agency to implement the terms of this Agreement, the Executive Director, or an authorized designee, shall have authority to act on behalf of Agency, except with respect to matters reserved under California law wholly for Agency Board determination. The term "First Deed of Trust" shall mean one or more deed(s) of trust securing the The term "Force Majeure" shall mean any war, insurrection; strike; lock -out; labor dispute; riot; flood; earthquake; fire; casualty; Act of God; act of the public enemy; epidemic; quarantine; restriction; freight embargo; unavoidable lack of transportation; governmental restriction; unusually severe weather, inability to secure necessary labor, materials or tools; delay of any contractor, subcontractor or supplier, economic or market conditions; lack of tenant commitments or tenant changes; inability to secure satisfactory financing; act of the other party including act or failure to act of City or any other public or governmental agency or entity (except that any act or failure to act of City or Agency shall not excuse performance by Agency); or any 3 other cause beyond the control or without the fault of the party claiming an extension of time to perform. The term "Hazardous Materials" means any substance, material or waste which is or becomes regulated by the United States government, the State of California, or any local or other governmental authority, including, without limitation, any material, substance or waste which is (i) defined as a "hazardous waste," *acutely hazardous waste," "restricted hazardous waste," or "extremely hazardous waste" under Sections 25115, 25117 or 25122.7, or listed pursuant to Section 25140, of the California Health and Safety Code; (ii) defined as a "hazardous substance" under Section 253I6 of the California health and Safety Code; (iii) defined as a "hazardous material," "hazardous substance," or "hazardous waste" under Section 25501 of the California Health and Safety Code; (iv) defined as a "hazardous substance" under Section 25281 of the California Health and Safety Code; (v) petroleum; (vi) asbestos; (vii) a polychlorinated biphenyl; (viii) listed under Article 9 or defined as "hazardous" or "extremely hazardous" pursuant to Article I 1 of Title 22 of the California Code of Regulations, Chapter 20; (ix) designated as a "hazardous substance" pursuant to Section 311 of the Clean eater Act (33 U.S.C. Section 1317); (x) defined as a "hazardous waste" pursuant to Section 1004 of the Resource Conservation and Recovery Act (42 U.S.C. Section 6903); (xi) defined as a "hazardous substance" pursuant to Section I01 of the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. Section 9601); or (xii) any other substance, whether in the form of a solid, liquid, gas or any other form whatsoever, which by any governmental requirements either requires special handling in its use, transportation, generation, collection, storage, treatment or disposal, or is defined as "hazardous" or is harmful to the environment or capable of posing a risk of injury to public health and safety. Hazardous Materials do not include substances that are used or consumed in the normal course of developing, operating, or occupying a housing project, to the extent and degree that such substances are stored, used, and disposed of in the manner and in amounts that are consistent with normal practice and legal standards. The term 910ME" means the HOME Investment Partnership Program created by the National Affordable Housing Act of 1990. The term "I"" means the United States Department of Housing and Urban Development. The term "Lease" means the lease entered into between Participant and a tenant of a Unit in the Project. The term "Law Income Tenants" shall mean a family or individual whose annual income does not exceed sixty percent (60%) of the median income for the Orange County PMSA as determined by HUD, adjusted for family size. The term "Material Default" shall have the meaning as set forth in Sections 6.1 and 6.2 herein. The term "Median Income" means the median income for the Orange County Primary Metropolitan Statistical Area (PMSA), with adjustments for household size, as determined from 4 time to time by the U.S. Department of Housing and Urban Development (HUD) pursuant to the United States Housing Act of 1937 as amended, or such other method of median income calculation applicable to the City that HUD may hereafter adopt in connection with said Act. The term "Net Operating Income" shall mean as set forth in Section 5.9 (a). The term "Participant" shall mean KDF QV, L.P., a California limited partnership, whose address is 4685 MacArthur Ct., Suite 422, Newport Beach, California 92660, Attention: Marls Hyatt. The Term "Project" shall mean generally the rehabilitation of the existing apartment complex on the Site and the subsequent rental of the one hundred and four (104) Units therein to Eligible Tenants, pursuant to the procedures set forth herein and more particularly described in the Scope of Development. The term "Project Budget" shall mean the total sources and uses of funds for acquisition of the Site and rehabilitation of the Project as set forth in Exhibit "I". The term "Regulatory Agreement" shall mean that certain Regulatory Agreement and Declaration of Covenants and Restrictions attached hereto as Exhibit "H". The term "Release of Construction Covenants" shall mean that release attached hereto as Exhibit "E" issued by Agency to Participant pursuant to the provisions of Section 4.7 below. The term "Schedule of Performance" shall mean that certain schedule attached hereto as Exhibit "D" setting forth the times upon which performance by the parties under this Agreement is due. The term "Scope of Development" shall mean that certain exhibit attached hereto as Exhibit "C". The term "Set Aside Funds" shall mean the fund established by Agency pursuant to California Redevelopment Law, wherein certain tax revenues have been deposited and made available to the Agency exclusively for the purpose of increasing and improving the community's supply of affordable low and moderate income housing, including very low income lousing. The term "Site" shall mean that certain real property located in the City of Huntington Beach, County of Orange, State of California commonly known as 18992 Florida Street (aka the "Quo Vadis Apartments'), Huntington Beach, California, and legally described in Exhibit "A" and depicted on the Site Map. The term "Site Map" shall mean the map attached hereto as Exhibit "B" depicting the location of the Site. The term "Tax Credits" shall mean the California Tax Credit Allocation Committee ("TCAC") approval of a "Four Percent" Low Income Housing Tax Credit for the Project in the 5 approximate net amount of TWO MILLION EIGHT HUNDRED NINETY-TWO THOUSAND AND NINETY-SIX DOLLARS ($2,892,096.00), to be used to pay a portion of the acquisition and rehabilitation costs for the Site. "Four Percent" refers to the applicable percentage of the qualified basis for a building which is not federally subsidized, as provided in Internal Revenue Code Section 42(b)(1). The term "Unit" or "Units" shall mean one or more of the one hundred and four (104) dwelling units (consisting of 24 studio units, 64 one -bedroom units, and 16 two -bedroom units) comprising the Project and subject to rent restrictions as set forth in the Regulatory Agreement. The term "Unit" and "Units" shall be used as the context mandates and shall be reasonably interpreted in light of the context in which the term appears. The term "Very Low Income Tenants" shall mean a family or individual whose annual income does not exceed fifty percent (50%) of the median income for the Orange County PMSA as determined by HUD, adjusted for family size. SECTION 2. SUBJECT OF THIS AGREEMENT. 2.1 Purpose of the Agreement (a) The purpose of this Agreement is to implement the Community Redevelopment Law by providing the Agency Loan to assist Participant in paying a portion of the acquisition costs and rehabilitation costs for the Project, in an amount not to exceed ONE MILLION SEVEN HUNDRED THOUSAND DOLLARS ($1,700,000.00), as evidenced by the Agency Note secured by the Agency Deed of Trust, which Agency Loan is composed of Set Aside Funds and HOME Funds. (b) This Agreement is intended to assist in Participant's acquisition costs for the Site and the rehabilitation costs for the existing apartment complex located thereon for rental to Low Income Tenants and Very Low Income Tenants. The Project pursuant to this Agreement and the fulfillment generally of this Agreement are in flit best interests of the City and the welfare of its residents, and are in accordance with the public purposes and provisions of applicable federal, state, and local laws and requirements under which the Project has been undertaken and is being assisted. (c) The Project will be used wid operated for not less than sixty (60) years as rental housing, with all of the Units restricted to occupancy to Low Income Tenants and Very Low Income Tenants in accordance with the Regulatory Agreement. The restrictions shall terminate pursuant to the terms of the Regulatory Agreement, subject to Section 3.3 (c) herein. 2.2 The Redevelopment Plan. This Agreement is made in accordance with the Huntington Beach Redevelopment Project (the "Merged Redevelopment Project') which was approved by adoption of Ordinance No. 3343 on December 16, 1996, and which merged together four different, previously approved project areas. The Site is located within the Merged Redevelopment Project. Agency intends this Agreement to meet its obligations pursuant to Health and Safety Code Sections 33413 (including, without limitation, sub -section 33413(b)(2)(A)(ii)) and 33334.2. 6 2.3 Participant. The Participant is KDF QV, L.P., a California limited partnership, whose address is 4685 MacArthur Ct., Suite 422, Newport Beach, California 92660, Attention: Mark Hyatt. 2.4 Term of Amemcnt. The term of this Agreement shall be for a period of no less than sixty (60) years; with such period commencing on the Effective Date of this Agreement and ending on the expiration of the Regulatory Agreement. 2.5 Prohibition Against Transfers: Right of First Refusal. (a) The qualifications and identity of the Participant are of particular concern to the Agency. It is because of those qualifications and identity that the Agency has entered into this Agreement with the Participant. No voluntary or involuntary successor in interest of the Participant shall acquire any rights or powers under this Agreement except as expressly set forth herein. (b) If at any time during the term of this Agreement Participant decides to sell the Site or Participant receives from any third party a bona fide offer to purchase the Site on terms acceptable to Participant, Participant agrees that Participant shall not sell the Site or accept the third party offer, unless and until Participant has given to Agency notice in writing of its intent to sell or of the third party offer (whichever is applicable), specifying the identity of the prospective buyer and the price and terms of the contemplated sale. Within ninety (90) days after Participant gives Agency such written notice, Agency shall have the right to purchase the Site at the same price and on the same terms and conditions set forth in Participant's written notice of intent to sell or third party offer. To exercise its option, Agency must, within the same ninety (90) clay period, deposit in escrow with any escrow company in Orange County, California, all moneys and instruments required by the terms of Participant's notice to be paid or delivered to Participant on close of escrow and shall also give Participant written notice of the deposit. If Agency does not exercise the right in accordance with the provisions of this section, Participant may sell the Site to the prospective buyer for the price and on the terms contained in the notice; provided, however, that Participant has made every reasonable effort to sell the Site to a nonprofit housing corporation with Participant's similar experience and reputation in the field of low-income housing (including the management of properties with income and affordability restrictions), and provided further that Agency has approved such prospective buyer in writing. If for any reason the Site is not sold to the party described in Participant's notice, Participant shall give Agency the same right to purchase the Site upon any subsequent decision by Participant to sell the Site, or upon Participant receiving any subsequent offer from a third party to purchase the Site. (c) For the reasons cited above, the Participant represents and agrees for itself and any successor in interest that without the prior written approval of the Agency, there shall be no significant change in the ownership of the Participant or in the relative proportions thereof, or with respect to the identity of the parties in control of the Participant or the degree thereof, by any method or means. (d) The Participant shall promptly notify the Agency of any and all changes 7 whatsoever in the identity of the parties in ownership and/or in control of the Participant or the degree thereof, of which it or any of its officers have been notified or otherwise have knowledge or information. This Agreement may be terminated by the Agency and the Agency may exercise its remedies pursuant to this Agreement, the Agency Note or Agency Deed of Trust if there is any significant change (voluntary or involuntary) in membership, ownership, management or control, of the Participant (other than such changes occasioned by the death or incapacity of any individual). (e) Participant shall not, except as permitted by this Agreement, assign or attempt to assign this Agreement or any right herein, nor make any total or partial sale, transfer, conveyance or assignment of the whole or any part of the Site (referred to hereinafter as a "Transfer'), without prior written approval of the Agency, except as expressly permitted by this Agreement. Consent to a Transfer in accordance with this Agreement shall not result in acceleration of the Agency Note. Any such proposed transferee shall have the qualifications and financial responsibility necessary and adequate as may be reasonably determined by the Agency, to fulfill the obligations undertaken in this Agreement by the Participant. Any such proposed transferee, by instrument in writing satisfactory to the Agency and in form recordable among the land records, for itself and its successors and assigns, and for the benefit of the Agency shall expressly assume all of the obligations of the Participant under this Agreement and agree to be subject to all conditions and restrictions applicable to the Participant in this Agreement. There shall be submitted to the Agency for review all instruments and other legal documents proposed to effect any such Transfer, and if approved by the Agency its approval shall be indicated to the Participant in writing. (0 In the absence of specific written agreement by the Agency, no unauthorized Transfer, or approval thereof by the Agency, shall be deemed to relieve the Participant or any other party from any obligations under this Agreement. (g) Consent to any Transfer shall not be deemed to be a waiver of the right to require consent to future or successive Transfers. (h) The provisions of this Section 2.5 shall be of no force or effect as of the expiration of the Regulatory Agreement. SECTION 3. FINANCING FOR ACQUISITION AND REHABILITATION OF THE SITE. 3.1 Financing. As of the Effective Date of this Agreement, Participant is the owner of the Site, and as such Participant qualifies as an "owner -participant" within the meaning of the Connunity Redevelopment Law (Health & Safety Code §33000 et seq.). Participant's financing of the acquisition and rehabilitation of the Site includes the following: (a) Agency Loan. The Agency Loan in an amount not to exceed ONE MILLION SEVEN HUNDRED THOUSAND DOLLARS ($1,700,000.00) (b) Bonds. Bonds (tax-exempt mortgage revenue bonds) to be issued by the California Statewide Communities Development Authority, in an amount not to 8 exceed SEVEN MILLION SEVEN HUNDRED THOUSAND DOLLARS ($7,700,000.00). (c) FAui . Equity from Participant consisting of the following: 1. Approximately TWO MILLION EIGHT HUNDRED NINETY- TWO THOUSAND AND NINETY-SIX DOLLARS ($2,892,096.00), to be derived from Tax Credits for the Project. 2. Approximately ONE MILLION TWO HUNDRED FORTY-FIVE THOUSAND NINE HUNDRED AND FOUR DOLLARS ($1,245,904), comprising of Participant's Equity Investment into the Project and a deferred developer's fee. 3. Such additional equity contribution from Participant in an amount to fully provide for the total costs of acquisition and rehabilitation of the Site and the Project. Participant equity consists of funds provided by Participant which are not secured by any deed of trust. (d) Evidence of Financing. Within ten (10) days prior to the Close of Escrow, Participant shall submit, for Agency review and approval, evidence that the sum of sources described in this Section shall be sufficient at all times to pay all Project costs as described in the Project Budget, including, but not limited to, the following documents: copies of all documents required by the Tax Credit Equity Investor relating to the Tax Credits, all documents required by CSCDA and Fannie Mae relating to the Bonds, evidence that Participant has sufficient equity capital, in sufficiently liquid form, not otherwise encumbered by any pledge or grant of a security interest to a third party, to assure complete funding for the acquisition and rehabilitation of the Site. As to Participant equity, Participant shall have the right to use any funds or assets available to Participant for actual payment of costs, notwithstanding that said funds or assets may be different from the sources of equity capital utilized to demonstrate the evidence of equity financing required by this Agreement. Participant's evidence of equity financing shall be satisfied by evidence of any combination of the following: 1. Cash, on deposit in a construction account, checking account, money market account, escrow or other immediately available form of deposit, held in the name of Participant, over which Participant retains the right to direct investments; 2. An irrevocable direct pay letter of credit, in favor of Participant, drawn on a bank or other financial institution first approved in writing by Agency, with a term that is consistent with the 9 anticipated need for funds during the rehabilitation period, the terms of which are consistent with this Agreement; 3. An available line of credit with a bank or other financial institution approved in writing by the Executive Director, the terms of which are consistent with this Agreement, provided that the collateral or assets pledged by Participant for such line of credit shall not otherwise be utilized to demonstrate the evidence of equity financing required by this Agreement, unless Participant has the right to substitute such collateral or assets with other collateral or assets which other collateral or assets are not otherwise utilized to demonstrate the evidence of equity financing required by this Agreement and which may or may not be liquid; or 4. Evidence of any other comparable form of assets that the Executive Director reasonably determines is sufficiently liquid to assure that it will be available to Participant when needed to pay Project expenses. 3.2 Afzency Financial Assistance. The Agency, in accordance with the terms of this Agreement, shall provide to Participant the Agency Loan. Upon satisfaction of all conditions precedent to Agency's disbursement of the Agency Loan under this Agreement, Agency shall disburse the Agency Loan funds to Participant for acquisition and rehabilitation costs at the Close of Escrow. 3.3 Terms of the Agency Loan. (a) Amount. The Agency Loan shall be evidenced by the Agency Note in the amount of ONE MILLION SEVEN HUNDRED THOUSAND DOLLARS (S 1,700,000.00), and shall accrue interest at a rate of THREE PERCENT (3%) per annum for the term of the Agency Note. (b) Term. The term of the Agency Note shall be sixty (60) years, commencing on the date of the Agency Note. (c) Repayment. Beginning on the third anniversary date of the Agency Note, and on each annual anniversary date of the Agency Note thereafter until the Agency Loan is paid in full or otherwise canceled or forgiven pursuant to its terms, Participant shall pay to Agency an amount equal to FIFTY PERCENT (50%) of the Project's Net Operating income for the immediately preceding year. After the sixtieth (60`s) anniversary date of the Agency Note, all remaining unpaid principal and interest on the Agency Loan shall immediately become due and payable, and the Regulatory Agreement shall terminate; provided, however, that if Participant provides thirty (30) days' prior written notice to Agency stating that Participant shall continue maintaining all the restrictions of the Regulatory Agreement on the Site beyond its 60- year term, then the unpaid principal and interest on the Agency Loan shall not require payment 10 and shall not accrue further interest for the period during which Participant continuously maintains the restrictions of the Regulatory Agreement on the Site. (d) Affordability Covenants Continue for Full 60-Year Term of Regulatory Agreement. Notwithstanding repayment of the Agency Loan and any cancellation, forgiveness, waiver, or discharge of the Agency Note, Participant shall continue to comply with the Regulatory Agreement for the full term of the Regulatory Agreement (subject to Section 3.3 (c) herein). (e) AgencyEncumbrances. The Agency Loan and Participant's obligations set forth in the Regulatory Agreement and Sections 5.1-5.I3 of this Agreement shall be secured by the Agency Deed of Trust. The Agency Loan and the Agency Deed of Trust and the respective liens related thereto shall be senior to any other lien or security interest in the Site except for liens of property taxes not yet delinquent and the Bonds and First Deed of Trust and the respective liens related thereto. Without the express written consent of the Executive Director, Participant shall not place any other encumbrances, or permit any encumbrances to be placed, on or against title to the Site, including security interests that are subordinate to the Agency Loan and Agency Deed of Trust. 3.4 Conditions Precedent to CIose of Escrow and Disbursement of the Agency_Loan Agency shall not be obligated to make any disbursements into Escrow, close Escrow or take any other action under this Agreement, the Agency Note or the Agency Deed of Trust unless all of the following conditions precedent are satisfied at the time of such action: (a) There exists no Material Default, or event, omission or failure of condition which would constitute a Material Default after notice or lapse of time, or both, under this Agreement and all documents and instruments referred to herein or executed by Participant in furtherance of this Agreement; (b) Participant fully executes and delivers to Agency this Agreement, and fully executes and delivers into Escrow the Regulatory Agreement, the Agency Note and the Agency Deed of Trust; (c) Participant delivers into Escrow the Bond documents, First Deed of Trust, regulatory agreement, and all other instruments to be executed in connection with the Bonds; (d) Participant submits to the Agency the Project Budget and Agency approves such Project Budget as described in Section 4.2 (h); (e) Participant submits to the Agency the construction contract and Agency approves such construction contract as described in Section 4.2 (b); (0 Participant submits to the Agency a list of the Approved Project Plans and Permits, demonstrating that all approvals have been obtained and all conditions for the issuance 11 of all necessary permits have been satisfied. Subject to the foregoing, permits arc not required to be issued until needed for the appropriate stage of rehabilitation; (g) Participant submits to Agency a detailed description and list of the proposed rehabilitation of the Site, including planned time schedules and a detailed rehabilitation budget, and Agency approves such proposed rehabilitation, schedule and budget as described in Section 4.2 (b); (h) Pursuant to Section 3.1, Participant submits to the Agency evidence reasonably satisfactory to the Executive Director that Participant has sufficient funds, including the Agency Loan, Bonds, Tax Credits (including any regulatory agreement required by TCAC) and Participant equity contribution, to complete the acquisition and rehabilitation of the Project, and all documents required to be executed in connection with such financing shall have been duly executed, acknowledged (if required) and delivered; (i) Participant submits to the Agency satisfactory evidence that the policies of - insurance required by this Agreement are in full force and effect; Q) A title company acceptable to Agency is committed to issue a CLTA standard form ownces policy of title insurance in the amount of the Agency Loan, insuring in favor of the Agency the priority of the Agency Deed of Trust and the Regulatory Agreement in accordance with the priority established by this Agreement. The cost of said policy shall be paid by Participant; (k) Participant shall deliver to the Agency copies of all pertinent formation documents relating to Participant's status as a California limited partnership, including, without limitation: a fully executed amended and restated limited partnership agreement for Participant (admitting tax credit partner), or other final limited partnership agreement and related documents, and a State of California Certificate of Limited Partnership (LP-1); copies of all resolutions or other necessary actions taken by the limited partnership to authorize the execution of this Agreement and related documents; and a good standing certificate issued by the California Secretary of State's office indicating that Participant exists in good standing at the time of the Close of Escrow; (1) Participant submits, and the Executive Director approves, the Management Plan required by the Regulatory Agreement; (m) Agency shall determine that Participant delivered all documents as required by this Agreement and is in full compliance with the terms and conditions of this Agreement and all documents and instruments referred to herein or executed by Participant in furtherance of this Agreement; (n) Escrow Agent shall deliver a closing statement of costs; (o) Agency counsel to prepare such supplemental escrow instructions or recording instructions as needed. 12 The Executive Director shall have the authority to waive any condition of disbursement set forth herein; however any waiver must be expressly made in writing and signed by the Executive Director. The decision to waive any condition of disbursement shall be in the sole discretion of the Executive Director, and the decision to waive any requirement may be conditioned upon its satisfaction at a later date and/or upon the substitution of another condition. The disbursement of all or any portion of the Agency Loan prior to fulfillment of one or more of the foregoing conditions shall not be construed as a waiver of such conditions, and Agency reserves the right to require their fulfillment prior to making any subsequent disbursements. 3.5 Disbursement Procedures. (a) Use of Funds. Participant shall use the Agency Loan exclusively for payment of acquisition and rehabilitation costs for the Site in accordance with this Agreement. (b) Disbursement_ for Acquisition Costs. Upon the determination by the Executive Director and Agency notice to the Escrow Agent that all of the conditions precedent to disbursement of the Agency Loan have been satisfied or waived by the Agency, the Escrow Agent shall disburse to Participant the Agency Loan at the Close of Escrow. 3.6 Relationship of Agency and the Partici ant as Creditor and Debtor Onl Agency and the Participant intend that the relationship between Agency and Participant shall be solely that of creditor and debtor. Nothing contained in this Agreement or in any other document or instrument made in connection with this Agreement small be deemed or construed to create a partnership, tenancy in common, joint tenancy, joint venture or co-ov6mership by or between Agency and Participant. Agency shall not be in any way responsible or liable for the debts, losses, obligations or duties of Participant with respect to the Site or otherwise. 3.7 First Deed of Trust. Participant shall obtain revenue from the Bonds to pay a portion of the acquisition and rehabilitation costs for the Site pursuant to this Agreement. The amount of the Bonds shall not exceed SEVEN MILLION SEVEN HUNDRED THOUSAND DOLLARS ($7,700,000.00), and may be secured by a First Deed of Trust on the Site. 3.8 Subordination of Agency Loan and Deed of Trust. The Agency hereby agrees that the Bonds and First Deed of Trust shall be a lien or charge upon the Site prior and superior to the lien or charge of the Agency Loan and Agency Deed of Trust. Prior to the Close of Escrow, the Agency shall agree to subordinate the Agency Loan and Agency Deed of Trust to the Bonds and First Deed of Trust, pursuant to a subordination agreement in a form approved by the Executive Director and consistent with this Agreement and applicable law. 13 3.9 Recordation. At the Close of Escrow, the Escrow Agent shall record against the Site the following documents in the following order of priority: (i) the regulatory agreement required by CSCDA or Fannie Mae; (ii) the regulatory agreement required by TCAC; (iii) the Agency Regulatory Agreement; (iv) the First Deed of Trust; and (v) the Agency Deed of Trust. One or more subordination agreements, if required to effectuate the proper priority of the foregoing deeds of trust and regulatory agreements, shall be recorded at the direction of Agency and Participant in accordance with the terms of this Agreement and applicable law. SECTION4. DEVELOPIMEh'T OF TIfE SITE. 4.1 General. The Project shall connist of rehabilitation of an existing apartment complex containing a total of one hundred and four (104) Units on the Site and the use of the Site as an affordable rental apartment complex in accordance with this Agreement and the Regulatory Agreement. 4.2 Construction of the Project. (a) Development in Accordance with Approved Project Plans and Permits. Participant shall undertake the Project and rehabilitate the Site in accordance with this Agreement, the Scope of Development, and the Approved Project Plans and Permits and any changes thereto as may be subsequently approved in writing by both Participant and Agency and, if necessary, City. As completed, the Project shall comply with all applicable laws and ordinances of all governmental auffiorities, including, without limitation, all Federal Housing Quality Standards as set forth at Section 982AOI of Title 24 of the Code of Federal Regulations. A portion of the Agency Loan funds shall be used for rehabilitation costs necessary to bring the Site into compliance with HUD Housing Quality Standards and the foregoing laws and ordinances. All Units must be rehabilitated no later than eighteen (18) months from the Close of Escrow. (b) Agency Approvals. Participant will furnish to the Agency a detailed description and list of the proposed rehabilitation of the Site, including planned time schedules and a detailed rehabilitation budget, for Agency approval prior to the Close of Escrow. In addition, the Agency will have the right to review and approve any revisions in the proposed rehabilitation list which are made after the Close of Escrow. Participant shall provide to Agency an executed construction contract with a contract price that is consistent with the Project Budget. The comtruction contract, together with all other contracts for services necessary to construct the Project shall be submitted to the Agency for approval prior to the Close of Escrow. The Agency shall approve the contracts if they are consistent with the Project Budget. The Agency shall have the right at its option and cost to hire a construction management firm to supervise the rehabilitation work in progress. Participant will furnish copies of all building permits for all items required to be permitted under the Huntington Beach Municipal Code, with proof of inspection by the Huntington Beach Building Department, where applicable. (c) Evolution of Project Plans. On or before the date set forth in the Schedule of Performance, Participant shall submit to City, and shall use reasonable efforts to obtain approval of, the Approved Project Plans and Permits as may be required for the rehabilitation work, including City approval of, preliminary, and thereafter final drawings and specifications for 14 development of the Site in accordance with the Scope of Development, and all in accordance with the City's requirements. The term preliminary and final drawings shall be deemed to include site plans, building plans and elevations, grading plans, if applicable, landscaping plans, parking plans, material pallets, a description of structural, mechanical, and electrical systems, and all other plans, drawings and specifications as City and Agency customarily require for such a Project. Final drawings will be in sufficient detail to obtain a building permit. Said plans, drawings and specifications shall be consistent with the Scope of Development and the various development approvals referenced hereinabove, except as such items may be amended by City (if applicable) and by mutual consent of Agency and Participant. Participant shall not be in default of this Agreement due to any delay of Agency or City processing any plans or permit applications submitted by Participant. (d) Other Governmental Permits. Participant shall, at its own expense and before commencement of construction or rehabilitation of any buildings, structures, or other work of improvement upon the Site, secure or cause to be secured any and all permits and approvals which may be required by any governmental agency affected by such construction, development, or work to be performed by Participant pursuant to the Scope of Development, including but not limited to, necessary building permits and all approvals required under the California Environmental Quality Act ("CEQA"). In constructing and developing the Project, Participant shall comply with all applicable development standards in City's Municipal Code and shall comply with all building code, landscaping, signage, parking requirements, and any applicable federal and local labor requirements and standards (except as may be permitted through approved variances and modifications). (e) Approval by Agency. The Agency shall approve or disapprove any submittal made by the Participant pursuant to this Agreement within twenty (20) days after such submittal. Any disapproval shall state in writing the reason for the disapproval and the changes which the Agency requests to be made. After Participant resubmits the corrected submittal, Agency shall have an additional seven (7) days for the review of the resubmittal but if the Agency disapproves the resubmittaI, then the cycle shall repeat, until the Agency's approval has been obtained. (0 Agency_Assistancc. So long as Participant is not in Material Default of any term or provision of this Agreement, Agency agrees to provide reasonable assistance to Participant, at no cost to Agency, in the processing of Participant's submittals required under this Agreement in order that Participant may obtain a final City action on such matters on or before the date set forth in the Schedule of Performance; provided that Agency does not warrant or represent that such approval shall be obtained. (g) Cost of Rehabilitation. Participant (with the assistance of the Agency Loan) shall bear all costs for the Project, including, but not limited to any and all costs for preparing or obtaining the Approved Project Plans and Permits, environmental remediation, interim and permanent financing, broker's and leasing commissions, and fees or charges for development and building, except as specifically provided herein. (h) Project _Budge. Participant shall provide to Agency for approval a Project Budget prior to the Close of Escrow. Participant shall develop the Project in accordance is with such Project Budget (attached hereto as Exhibit "I" . Any revisions to the Project Budget must be approved by the Agency. (i) Project Schedule. Participant shall commence and complete the construction of the Project within the times set forth in the Schedule of Performance. 4.3 Insurance. Participant shall procure and maintain, during the term of this Agreement, at its sole cost and expense, until the date that Agency waives any such insurance requirement or requirements, the following policies of insurance: (a) Worker's Compensation Insurance. Pursuant to California Labor Code Section 1861, Participant acknowledges awareness of Section 3700 et seq. of said code, which requires every employer to be insured against liability for workers' compensation. Participant covenants that it will comply with such laws and provisions prior to commencing any work of construction or rehabilitation on the Site. Participant shall maintain such Workers' Compensation Insurance in an amount not Iess than ONE HUNDRED THOUSAND DOLLARS ($100,000.00) bodily injury, each occurrence, ONE HUNDRED THOUSAND DOLLARS ($100,000.00) bodily injury by disease, each employee, and TWO HUNDRED FIFTY THOUSAND DOLLARS ($250,000.00) bodily injury by disease, policy limit, at all times incident thereto, in forms and underwritten by insurance companies admitted in California, or if not admitted in California then reasonably acceptable to Agency. Participant shall require all subcontractors to provide such Workers' Compensation Insurance for all of the subcontractor's employees. Participant shall furnish Agency with a certificate of waiver of subrogation under the terms of the Workers' Compensation Insurance and Participant shall similarly require all subcontractors to waive subrogation. (b) General Liabilily Insurance. Participant shall carry general commercial liability insurance, including coverage for bodily injury, property damage, products/completed operations and blanket contractual liability, in an amount not Iess than ONE MILLION DOLLARS ($1,000,000.00), combined single limit. Such insurance shall also include automotive bodily injury and property damage liability insurance. All such insurance shall be provided by insurance companies admitted in California, or if not admitted in California then reasonably acceptable to Agency. Such insurance shall name the City and Agency and their officers, agents, and employees acting in their official capacity, as additional insureds pursuant to a standard endorsement form. In the event of aggregate coverage, such limit shall be no less than ONE MILLION DOLLARS ($1,000,000.00). Participant shall require its insurer to waive its subrogation rights against Agency and shall provide certificates of insurance evidencing; same. (c) Property Insurance. Participant shall obtain and maintain in force, all - perils (to include fine and vandalism) property imurance with extended coverage endorsements thereon, on the Site, in an amount equal to the full replacement costs and/or value thereof (but in no event in an amount less than the total Agency Loan plus the amount of the Bonds, Tax Credits and Equity Investment); this policy shall contain a replacement cost endorsement naming Agency as the insured and shall not contain a coinsurance penalty provision. The policy shall contain a special endorsement that such proceeds shall be used to repair or rebuild any Units or other improvements situated on the Site so damaged or destroyed; and if not so used, such proceeds shall be paid to Agency. The proceeds of any such insurance payable to Agency shall be used for rebuilding or 16 repair as necessary to restore the site at the discretion of Agency. The policy shall name Agency and City, their officers, agents and employees acting in their official capacity as additional insureds. (d) Certificates of Insurance;_ Additional Insured Endorsements. Prior to performance of any work upon the Site, Participant shall furnish to Agency certificates of insurance and additional insured endorsements evidencing the foregoing insurance coverages as required by this Agreement. Such certificates and endorsements shall be subject to the reasonable approval of the City Attorney and shall provide the name and policy number of each carrier and policy and shall state that the policy is currently in force and shall promise to provide that such policies will not be amended or cancelled without thirty (30) days prior written notice to Agency. 4.4 Indemnification. During any period of rehabilitation of any of the Project pursuant to this Agreement and until the expiration of this Agreement, Participant agrees to and shall protect, defend, indemnify and hold the Agency and City harmless from and against all liability, loss, damage, cost or expenses (including reasonable attorneys' fees and court costs) arising from or as a result of (i) Participant's failure to perform any obligations as and when required by this Agreement or any document referred to herein, and (ii) the death of any person or any accident, injury, loss, or damage whatsoever caused to any person or to the property of any person which shall occur on the Site and which shall be directly or indirectly caused by the acts of, or any errors or omissions of, the Participant or its officers, shareholders, directors, members, agents, servants, employees, contractors, or invitees. Participant shall not be responsible for any liability, loss, damage, cost, or expense (including reasonable attorney's fees and court costs) arising from or as a result of the gross negligence or sole willful misconduct of the Agency or the City or their respective members, officers, officials, employees, agents, representatives, servants, or contractors. 4.5 Hazardous Materials. (a) Lead Paint and Asbestos. Participant shall inspect the Site for lead -paint hazards in accordance Aith Title X of the 1992 Housing and Community Development Act. Any lead -paint hazards identified must be abated as part of the rehabilitation of the Site. In the event the abatement cost for the lead -paint hazards increases the total costs for the Project, Participant may reasonably request additional Agency Loan funds to pay for such additional cost. The Agency Board of Directors, in its sole discretion, shall approve or disapprove any such loan request based upon the recommendation of the Agency Executive Director and Deputy Executive Director. With regard to asbestos, Participant shall take all actions recommended by the operation and maintenance procedures for any asbestos identified on the Site, as established pursuant to that certain Phase I Environmental Site Assessment Report on the Site which is dated March 9, 2001 and prepared by Eckland Consultants, Inc. (b) Indemnification. Participant, from and after the Effective Date, and until a transfer, sale, or assignment of the Site upon which the following covenant shall then be the obligation of the transferee, purchaser, or assignee, shall indemnify, defend, and gold harmless Agency and City and their respective officers, employees, agents and representatives (collectively, the "Indemnified Parties") from and against any and all liabilities (including penalties, fines, and monetary sanctions) arising from a violation of state or federal law pertaining to (i) the storage of Hazardous Materials on the Site or (ii) contamination of the Site by a release of Hazardous 17 Materials. Participant, prior to the Close of Escrow, shall provide to Agency a copy of any notices, orders, or reports concerning the presence of any Hazardous Materials on or affecting the Site that is in Participant's possession. 4.6 Security Financing; Right of Holders. (a) Permitted Encumbrances. Participant, prior to the date Agency issues or is required to issue the Release of Construction Covenants, shall be permitted to enter into mortgages, deeds of trust, conveyances, and leases -back or any other form of conveyance in which the Site is used as security for the purpose of securing loans of funds (including the Bonds) in an amount not to exceed 57,700,000, to be used for payment of the acquisition and rehabilitation costs for the Site without the consent of the Agency provided such conveyance (i) is for the purposes permitted herein and (ii) is given to a financial or lending institution or other acceptable person or entity capable of performing or causing to be performed Participant's obligations under this Agreement, including without limitation a pension fund, insurance company, or real estate investment trust. Conveyances for refinancing and for financing purposes not meeting the foregoing requirements shall be subject to the prior approval of the Agency's Executive Director, which approval shall not be unreasonably withheld. In determining whether to approve a refinancing request, Agency shall consider various factors including, but not limited to, the following: compliance with this Agreement and the Agency Loan terms, the capitalization rate used to value the Site, the projected income based upon restricted rents used to value the Site, and the percentage of debt equity that wrill be established under any refinancing structure. The Agency will reasonably approve a request to refinance which improves upon the original loan terms. In addition, the Agency shall have the right to approve (a) any amended and restated or modified First Deed of Trust andfor one or more additional deeds of trust securing any such refinanced amount and (b) the subordination of the Agency Loan, Agency Deed of Trust or Regulatory Agreement to any such amended and restated or modified First Deed of Trust and/or one or more additional deeds of trust. (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; nor shall any covenant or any provision in the Regulatory Agreement be construed to so obligate such holder. (c) Notice of Default to Mortgage, Deed of Trust or Other Securi Interest Holders; Right to Cure. Whenever Agency shall deliver any notice or demand to Participant with respect to any breach or default by Participant in completion of construction of the improvements, Agency shall at the same time deliver a copy of such notice or demand to each approved holder of record of any mortgage, deed of trust, or other security interest 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 of 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 security interest. Any holder completing the improvements in accordance 18 with this Agreement shall be entitled to a Release of Construction Covenants upon written request made to Agency. 4.7 Release of Construction Covenams. Upon satisfactory completion of the Project, Agency shall issue to Participant a Release of Construction Covenants. The Release of Construction Covenants shall be, and shall so state, a conclusive determination of satisfactory completion of the Project required by this Agreement, and of full compliance with the terms of this Agreement relating to commencement and completion of the Project. The Release of Construction Covenants is not a notice of completion as referred to in California Civil Code Section 3093. If Agency refuses or fails to furnish a Release of Construction Covenants upon completion of the Project, Agency, after written request from Participant, shall, within fifteen (15) days of Participant's written request, provide Participant a written statement of the reasons Agency refused or failed to furnish a Release of Construction Covenants. The statement shall also contain a detailed description of the specific actions Participant must take to obtain a Release of Construction Covenants. If the Agency shall have failed to provide such KTitten statement within ffieen (15) days, Participant shall be deemed entitled to the Release of Construction Covenants. If Agency refuses or fails to furnish the Release of Construction Covenants for the reason that specific items or materials are not available or landscaping is not complete, Agency shall issue the Release of Construction Covenants upon the posting by Participant with Agency of a cash deposit, bond or irrevocable letter of credit (in a form acceptable to Agency) in an amount representing the fair value of the work not yet completed. 4.8 Mechanics Liens, Stop Notices, and Notices of Completion (a) if any claim of lien is filed against the Site or the Project, or a stop notice is served on any lender or other third party in connection with the Project, then the Participant shall, within twenty (20) 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 party entitled thereto a surety bond in sufficient form and amount, or provide other assurances reasonably satisfactory to the Agency that the claim of lien or stop notice will be paid or discharged. (b) If the Participant fails to discharge any lien, encumbrance, charge, or claim in the manner required in subsection (a) of this Section 4.8, then in addition to any other right or remedy, the Agency may (but shall be under no obligation to) require the Participant to immediately deposit with the Agency the amount necessary to satisfy such lien or claim and any costs, pending resolution thereof. The Agency may use such deposit to satisfy any claim or lien that is adversely determined against the Participant. (c) The Participant 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 or liens against the Project. The Agency may (but has no obligation to) record any notices of completion or cessation of labor, or any other notice that the Agency deems necessary or desirable to protect its interest in the Project. 19 SECTION 5. USE OF THE SITE. 5.1 No inconsistent Uses. Participant covenants and agrees, for itself, its successors, its assigns, and every successor in interest to the Site, or any part thereof, that for the period beginning at the Close of Escrow and ending on the expiration date of the Regulatory Agreement, Participant and such successors shall not devote the Site to uses inconsistent with the applicable zoning restrictions, this Agreement, and the Regulatory Agreement; provided that, in the event of any inconsistency, the provisions of the provisions of the Regulatory Agreement shall prevail over this Agreement. 5.2 Regulatory Agreement. At the Close of Escrow the Regulatory Agreement and the Agency Deed of Trust shall be recorded against the Site in the priority set forth in the Section 3.9. 5.3 Relocation. (a) Relocation Plan. As the Project is a "rehabilitation -in -place," no relocation of tenants living on the Site as of the Effective Date of this Agreement is contemplated by the parties hereto or is required to occur as a result of this Agreement. In the event, however, that off -Site relocation of existing tenants becomes necessary as a result of the Project, Participant, prior to such off Site relocation, shall submit a relocation plan to Agency for review and approval ("Relocation Plan"). The Relocation Plan shall include the name, gender, age, ethnicity, household size and income, and amount of relocation payment to be paid; provided, however, that Participant shall not be obligated to provide any of the foregoing referenced personal information about relocatees if such relocate -es refuse to provide such kiformation or the gathering or provision of such information is contrary to applicable law. Participant shall comply with the requirements of all applicable relocation laws, including, but not limited to, the Uniform Relocation Act, and shall comply with related tenant notice requirements and shall provide the Agency with true and correct copies of such notices to tenants. Participant shall also retain all required records and the originals and'or copies of tenant notices in its files as mandated by applicable law. The relocation requirements of this Section do not apply to any tenants who are required to move as a result of an increase in such tenant's household income resulting in such tenant being no longer qualified for residency in an affordable Unit. (b) Relocation Cost. Participant shall be obligated for the payment of all relocation benefits and costs identified in the Relocation Plan, as well as relocation benefits and costs that arise from the acquisition or rehabilitation of the Site beyond those obligations identified in the Relocation Plan. Participant shall indemnify, defend, and hold harmless the Agency and City from and against any claims for relocation and the payment of relocation benefits that are the obligations of Participant under this Agreement. Notwithstanding the above, Agency may (but is not obligated to) provide relocated tenants Section 8 HUD housing vouchers, which Participant may use to offset its relocation obligations. 5.4 Maintenance of the Site. After completion of the rehabilitation, all Units must be maintained in compliance with Federal Housing Quality Standards (24 CFR § 982A01) and other applicable state and local laws and codes. In addition, Participant shall maintain the Units and the 20 Site in accordance with the terms of the Regulatory Agreement. Subject to applicable law, the Agency shall have the right at all reasonable times to enter and inspect the Units and the Site in order to ensure compliance with the foregoing requirements. In the event Participant fails to maintain the Units and the Site as required by this Section, Participant shall, within thirty (30) days after Agency's notification or Participant's own discovery of any deficiency, take all necessary steps to correct such deficiency. In the event Agency determines that Participant has failed to maintain the Units and the Site as required by this Section and the Regulatory Agreement for a continuous period of sixty (60) days after Agency's notification or Participant's own discovery of any deficiency, Agency shall have the right, but not the obligation, to enter the Site and Units and make all necessary repairs to the Site and Units, as applicable. Participant shall be responsible for the full construction cost plus the prevailing market interest of any such repairs made by Agency, and such cost plus interest, until paid by Participant, shall constitute a separate lien on the Site and shall be recorded against the Site pursuant to Civil Code Section 2881. In the event Agency finds that Participant has failed to maintain the Units and the Site as required by this Section and the Regulatory Agreement on three separate occasions, Participant shall be deemed in Material Default of this Agreement and the Regulatory Agreement, and Agency shall be entitled to all rights and remedies hereunder and Lander the Regulatory Agreement. Notwithstanding the foregoing, if any property conditions are reasonably identified by Agency after a property inspection attended by a representative of Participant that pose an immediate danger to life or limb, Participant shall have three (3) days to effect corrections of such condition(s) to Agency's reasonable satisfaction. Failure by Participant to effect such corrections shall constitute a Material Default. 5.5 Nondiscrimination. There shall be no discrimination against or segregation of any person, or group of persons, on account of race, color, creed, age, class, income, religion, sex, sexual orientation, marital status, national origin or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Site, or any part thereof, or in the awarding of contracts for the Project, nor shall Participant, 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 Site, or any part thereof, or in the awarding of contracts for the Project. Participant shall comply with all applicable federal, state and local nondiscrimination, fair housing, and equal opportunity requirements. In addition, Participant shall conduct affirmative marketing and minority outreach activities as required by the HOME regulations. 5.6 Form of Nondiscrimination and Nonsegregation Clauses. The Participant shall refrain from restricting the rental, sale or lease of the property on the basis of race, color, creed, age, class, income, religion, sex, sexual orientation, marital status, national origin or ancestry of any person. All such deeds, leases or contracts shall contain or be subject to substantially the following nondiscrimination or nonsegregation clauses: 21 (a) In Deeds: "The grantee herein covenants by and for himself, his heirs, executors, administrators and assigns, and all persons claiming under or through him, that there shall be no discrimination against or segregation of, any person or group of persons on account of race, color, creed, age, class, income, religion, sex, sexual orientation, marital status, national origin or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the land herein conveyed, nor shall the grantee 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, Iocation, number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees in the land herein conveyed. The foregoing covenants shall run with the land. (b) - In Leases: "The lessee herein covenants by and for himself, 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 of any person or group of persons, on account of race, color, creed, age, class, income, religion, sex, sexual orientation, marital status, national origin or ancestry in the Easing, 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 leased," (c) In Contracts: "There shall be no discrimination against or segregation of any person, or group of persons on account of race, color, creed, age, class, income, religion, sex, sexual orientation, marital status, national origin or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the 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 lessees, subtenants, sublessees or vendees of the land." 5.7 Effect and Duration of Covenants. The Participant has, concurrently with the execution of this Agreement, executed in recordable form the Regulatory Agreement. Every agreement, obligation, covenant, condition and restriction contained in the Regulatory Agreement shall run with the Iand and remain in effect for sixty (60) years, commencing at the Close of Escrow (regardless of whether th.e Agency Loan has been repaid prior to the end of the 60-year loan period), except that the covenants against discrimination set forth in Sections 5.5 and 5.6 shall remain in effect in perpetuity. Participant's obligations to comply with the Regulatory Agreement and Sections 5.1-5.13 of this Agreement shall be secured by the Agency Deed of Trust. 5.8 Creation of Replacement Reserve Account. No Iater than thirty (30) days after the Close of Escrow, Participant shall create a "Replacement Reserve Account" in order to fund repairs to and maintenance of the Site and to ensure that the Site remains in compliance with the standards required by this Agreement and the Regulatory Agreement. No later than thirty (30) days after the Close of Escrow, Participant shall provide to Agency a pro forma statement concerning the account, for Agency's review and approval. At any time thereafter during the term of this Agreement, Agency, on ten (10) days prior written notice to Participant, may request that Participant submit to it an updated, revised Replacement Reserve Account statement. Agency, at its 22 o%m expense, may audit any updated, revised Replacement Reserve Account statement submitted by Participant. 5.9 Replacement Reserves. Commencing upon the recordation of the Release of Construction Covenants, and on every succeeding year thereafter during the term of this Agreement, Participant shall deposit One Hundred and Fifty Dollars (S150.00) per Unit per year, or One Hundred percent (100%) of Participant's Net Operating Income (defined below), whichever amount is less, into the Replacement Reserve Account for repairs to and maintenance of the Site. The Replacement Reserve Account shall at all times be maintained at a level sufficient to adequately fund the cost of all repairs and improvements to the Site and to maintain the Site in compliance %%ith the requirements of this Agreement and the Regulatory Agreement. Should Participant believe Project revenues to be insufficient to permit Participant to make such a full deposit in any year, Participant may appeal to the Agency to have the payment reduced, suspended, renegotiated, or forgiven. Participant shall carry the burden of proof in this regard. Agency shall have the unfettered discretion to reduce, suspend, renegotiate, or forgive the payment based on the evidence submitted by Participant. As capital repairs become necessary for the improvements on the Site, expenses for any such capital repairs must first be paid from the Replacement Reserve Account, and then, if necessary, from Participant's equity. As used herein, the term "Net Operating Income" shall mean, for any reporting period (calendar year or fiscal year), all income derived by Participant from the Site, including %Nithout limitation all tenant rent, less (i) payments of principal and interest, if any, required to be paid in such year by Participant with respect to any note, mortgage, or deed of trust with respect to the Site or Project, (ii) depreciation expenses, (iii) all expenses actually incurred (or to be incurred if accounted for on an accrual basis) by Participant in leasing, managing, operating, maintaining, and repairing the Site, (iv) all capital expenses incurred pertaining to the Site; (v) the deposits into the Replacement Reserve Account; and (vi) property management fees, administrative costs, salaries, benefits, overhead costs, and such other and further operating and management expenses incurred in operating the Site. 5.10 Operation of Project. Participant shall lease, operate and manage the Project in full conformance with the terms of this Agreement and the Regulatory Agreement. Further, all of the Units in the Project shall be designated as HOME Units and the rents for these units shall not exceed the "low income" and "eery low income" rent defined by the HOME Program, as set forth at Section 92.252 of Title 24 of the Code of Federal Regulations. Not later than sixty (60) days after Close of Escrow, Participant shall submit to Agency, for Agency's review and approval, an annual budget outlining each proposed service to be offered by Participant in operating and managing the Project, and the anticipated cost of each such service. The first such proposed budget shall cover the period from the Close of Escrow to the beginning of the second year of the term of this Agreement. Not later than sixty (60) days after the beginning of the second year of the term of this Agreement, and for every year thereafter during this Agreement's term, Participant shall submit an annual, proposed budget to Agency, for the Agency's review and approval. 5.11 Financial Statements. Participant shall submit to Agency, on a yearly basis, a true and correct copy of Participant's audited financial statements for the Project clearly identifying the status of the Project's Replacement Reserve Account, including a line -item breakdoum of the categories enumerated in the definition of Net Operating Income. Before such statements are 23 submitted to Agency, they should (but are not required to) be reviewed and certified by Participant. After receipt of Participant's financial statements for the Project, Agency may request additional financial analyses or obtain a third party review of Participant's financial statements for the Project to verify the accuracy of such statements. 5.12 Lead -Based Paint. Participant shall ensure that it and its contractors and subcontractors shall not use lead -based paint in the construction or maintenance of the Site. Participant shall insert this provision in all contracts and subcontracts for work performed on the Project which involve the application of paint. Participant will test the Site for the presence of lead - based paint as required by HUD regulations, and furnish copies of test results to Agency. Participant will remediate any lead -based paint hazards where the level of that substance is found to be in excess of acceptable thresholds. 5.13 Barriers to the Disabled. Participant shall ensure that the Project shall be developed and the Site shall be maintained to comply with all applicable federal state, and local requirements for access for disabled persons. SECTION 6. DEFAULTS AND REMEDIES. 6.1 Participant_ Defaults. The occurrence of any one or more of the following events shall constitute a "Material Default" by Participant hereunder if, after receiving written notice from Agency as provided in Section 6.3 below identifying such event, Participant fails to cure said event within thirty (30) days; provided that if such default is not reasonably capable of being cured within thirty (30) days, Participant commences to cure said event within thirty (30) days and diligently and in good faith continues to cure the event of default: (a) Participant fails to observe or perform any material term of this Agreement or any agreement incorporated hereunder by reference including, but not limited to, the Regulatory Agreement, the Agency Note, the Agency Deed of Trust, or the subordination agreement (if applicable), within the time set forth in this Agreement or any of the documents referred to herein; (b) Participant knowingly and intentionally makes or delivers to Agency any statement, report, or certificate that is not true or correct in any material respect; or (c) Any item that is specifically referred to as a Material Default in this Agreement or any incorporated hereunder by reference. In no event shall Agency be precluded from exercising remedies if the default is not cured within ninety (90) days, or if Agency's rights under this Agreement becomes or is about to become materially jeopardized by any failure to cure a default. 6.2 Agency Defaults. The occurrence of any one or more of the following events shad constitute a "Material Default" by Agency hereunder if, after receiving written notice from Participant as provided in Section 6.3 below identifying such event, Agency fails to cure said event within thirty (30) days; provided that if such default is not reasonably capable of being cured within 24 thirty (30) days, Agency commences to cure said event within thirty (30) days and diligently and in good faith continues to cure the event of default: (a) Agency fails to observe or perform any material term of this Agreement within the time set forth in this Agreement; or (b) Agency knowingly and intentionally makes or delivers to Participant any statement, report, or certificate that is not true or correct in any material respect. In no event shall Participant be precluded from exercising remedies if the default is not cured within ninety (90) days, or if Participant's rights under this Agreement becomes or is about to become materially jeopardized by any failure to cure a default. 6.3 Notice of Default. The non -defaulting party shall give written notice of any default under this Section to the defaulting party, clearly specifying the default. Copies of any notice of default given to the defaulting party shall also be given to any permitted lender requesting such notice. Any failure or delay in giving such notice or in asserting any of either party's 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. 6.4 Agency's Remedies. (a) The Agency, at its option, may terminate this Agreement prior to the Close of Escrow in the event of any Material Default that the Participant fails to cure within the time set forth in Section 6.1 (subject to the right of notice and expiration of applicable cure periods). (b) FoIlowing the Close of Escrow, in the event of any Material Default that the Participant fails to cure within the time set forth in Section 6.1 (subject to the right of notice and expiration of applicable cure periods), the entire principal balance of the Agency Loan including all interest shall immediately become due and payable, and Agency shall have the option to: (a) demand full payment of the principal balance of the Agency Loan including all interest; (b) take over ownership and management of the Site; (c) foreclose on the Site under the Agency Deed of Trust; or (d) 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 purpose of this Agreement. 6.5 Participant's Remedies. Subject to any applicable cure periods and the general right to notice provided for in this Agreement, upon a default under this Agreement by Agency, Participant may bring an action for specific performance of this Agreement or any term or provision hereof, or may terminate this Agreement. Participant may not sue for monetary damages. 6.6 Rights and Remedies are Cumulative. Except as otherwise expressly stated in this Agreement, the rights and remedies of the parties hereto are cumulative, and the exercise by any 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 another party. 25 SECTION 7. GENERAL PROVISIONS. 7.1 (a) Participant's Warranties. Participant represents and warrants (1) that it has access to professional advice and support to the extent necessary to enable Participant to fully comply with the terms of this Agreement; (2) that it is duly organized, validly existing and in good standing under the laws of the State of California; (3) that it has the full power and authority to undertake the Project and to execute this Agreement; (4) that the persons executing and delivery this Agreement are authorized to execute and deliver such documents on behalf of Participant; (5) except as disclosed to the Agency in writing, there are no actions or proceedings pending or, to the best of the Participant's knowledge, threatened against the Participant before any court or administrative agency in any way connected with the Site or the Project which could adversely affect the Participant's ability to perform the activities contemplated hereunder; (6) neither this Agreement nor anything provided to be done hereunder violates or shall violate any contract, agreement or instrument to which the Participant is a party or which affects the Project or any part thereof, (7) the Participant is not in default with respect to any of its obligations or liabilities pertaining to this Agreement, nor is there any state of facts or circumstances or conditions or events which, after notice, lapse of time, or both, would constitute or result in any such default under this Agreement; and, (8) the Participant has not entered into any agreements which will adversely affect the title to the Project or the Participant's right to develop and use the Project as provided in this Agreement, and the Participant will not enter into any such agreements after the date hereof. (b) Agency's Warranties. Agency represents and warrants (1) that it has the full power and authority to execute this Agreement; (2) that the persons executing and delivery this Agreement are authorized to execute and deliver such documents on behalf of Agency; (3) except as disclosed to the Participant in writing, there are no actions or proceedings pending or, to the best of the Agency's knowledge, threatened against the Agency before any court or administrative agency in any way connected with the Site or the Project which could adversely affect the Agency's ability to perform the activities contemplated hereunder; (4) neither this Agreement nor anything provided to be done hereunder violates or shall violate any contract, agreement or instrument to which the Agency is a party or which affects the Project or any part thereof, (5) the Agency is not in default in respect of any of its obligations or liabilities pertaining to this Agreement, nor is there any state of facts or circumstances or conditions or events which, after notice, lapse of time, or both, would constitute or result in any such default under this Agreement; and, (6) the Agency has not entered into any agreements which will adversely affect Agency's ability to fulfill its obligations under this Agreement, and the Agency will not enter into any such agreements after the date hereof. 7.2 Governing Law. The laws of the State of California shall govern the interpretation and enforcement of this Agreement. 7.3 Attorneys' Fees and Costs. If any action or proceeding is brought by either party against the other under this Agreement, whether for interpretation, enforcement or otherwise, Participant hereby expressly agrees to pay for all costs and expenses for such action or proceeding, including the fees of attorneys and any expert witnesses. This provision shall also 26 apply to any postjudgment action by either party, including without limitation efforts to enforce a judgment. 7A Notices, Demands, and Communications Between the Parties. Formal notices, demands, and communications between Agency and Participant shall be sufficiently given if. (i) personally delivered; (ii) delivered by same day cr overnight courier (acknowledged by receipt showing date and time of delivery); or (iii) dispatched by registered or certified mail, postage prepaid, return receipt requested, to the addresses set forth below. If to Participant: KDF QV, L.P. 4685 MacArthur Ct., Suite 422 Newport Beach, California 92660 Attn: Mark Hyatt If to Agency: Redevelopment Agency of the City of Huntington Beach 2000 Main Street Huntington Beach, CA 92648 Attn: Executive Director Notices personally delivered or delivered by courier shall be effective shall be effective upon receipt or refusal to accept delivery. Mailed notices shall be effective on the earlier of (i) receipt of refusal to accept delivery, or (ii) noon on the second business day following deposit in the United States mail. 7.5 Acceptance of Service of Process. In the event that any legal action is commenced by Participant against Agency, service of process on Agency shall be made by personal sen-ice upon Executive Director or the Clerk of Agency, or in such other manner as may be provided by law. In the event that any legal action is commenced by Agency against Participant, ser% ice of process on Participant shall be made by in any manner provided by law, and shall be valid whether made within or without the State of California. 7.6 Conflicts of Interest. No member, official, or employee of Agency shall have any personal interest in this Agreement, nor participate in any decision relating to this Agreement, that is in violation of any applicable law, regulation or ordinance. 7.7 Interpretation of Agreement (a) The language in all parts of this Agreement shall in all cases be construed simply, as a whole and in accordance with its fair meaning and not strictly for or against any party. The parties hereto acknowledge and agree that this Agreement has been prepared jointly by the parties and has been the subject of arm's length and careful negotiation over a considerable period of time, that each party has been given the opportunity to independently review this Agreement with legal counsel, and that each party has the requisite experience and sophistication to understand, interpret, and agree to the particular language of the provisions hereof. Accordingly, in the event of an ambiguity in or dispute regarding the interpretation of 27 this Agreement, this Agreement shall not be interFreted or construed against the party preparing it. (b) If any terra or provision of this Agreement, the deletion of which would not adversely affect the receipt of any material benefit by any party hereunder, shall be held by a court of competent jurisdiction to be invalid or unenforceable, the remainder of this Agreement shall not be affected thereby and each other term and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law. It is the intention of the parties hereto that in lieu of each such clause or provision of this Agreement that is illegal, invalid, or unenforceable, there be added as a part of this Agreement an enforceable clause or provision as similar in terms to such illegal, invalid, or unenforceable clause or provision as may be possible. (c) The captions of the articles, sections, and subsections herein are inserted solely for convenience and under no circumstances are they or any of them to be treated or construed as part of this instrument. (d) References in this instrument to this "Agreement" mean, refer to and include this instrument as well as any riders, exhibits, addenda and attachments hereto (which are hereby incorporated herein by this reference) or other documents expressly incorporated by reference in this instrument. Any references to any covenant, condition, obligation, and/or undertaking "herein," "hereunder" or "pursuant hereto" (or language of like import) shall mean, refer to, and include the covenants, obligations, and undertakings existing pursuant to this instrument and any riders, exhibits, addenda, and attachments or other documents affixed to or expressly incorporated by reference in this instrument. (e) As used in this Agreement, and as the context may require, the singular includes the plural and vice versa, and the masculine gender includes the feminine and vice versa. (f) Except as otherwise expressly provided in this Agreement, approvals or consents required of Agency or Participant in this Agreement shall not be unreasonably withheld or delayed. All approvals or consents shall be in wTiting. 7.8 Modifications. Any amendment, alteration, change, or modification of or to this Agreement, in order to become effective, shall be made by written instrument or endorsement thereon and in each such instance executed on behalf of each party hereto. 7.9 Merger of Prior -AgLrements and Understandings. This Agreement and all documents incorporated herein contain the entire understanding among the parties hereto relating to the transactions contemplated herein and all prior or contemporaneous agreements, understandings, representations, and statements, oral or written, including but not limited to that certain "Preliminary Project Deal Points" Memorandum approved by Participant and the Agency and/or City Council of the City of Huntington Beach, are merged herein and shall be of no further force or effect. 28 7.10 Effect of Violation of the Terms and Provisions of this A Bement The Agency is deemed the beneficiary of the terms and provisions of this Agreement and the covenants running with the land, both for and in its own right and for the purpose of protecting the interests of the community. The Agreement and the covenants shall run in favor of the Agency without regard to whether the Agency has been, remains or is an owner of any interest in the Site or any portion thereof. The Agency shall have the right if any covenants or other provisions of this Agreement are breached to exercise all rights and remedies, and to maintain any actions or suits at law or in equity or other proper proceedings to enforce the curing of such breaches to which it is entitled. 7.11 No Third Parties Benefited. Other than the general and limited partners of Participant, this Agreement shall create no third -party beneficiary rights or any other rights in favor of any persons, firms or corporations, except as may be expressly stated in this Agreement. This Agreement is for the sole use and benefit of the parties hereto and is not for the use or benefit of any other person or entity. 7.12 Assurances to Act in Good Faith. Participant and Agency each agree to execute all documents and instruments and to take all action, including timely depositing funds as required hereby, and shall use their respective best efforts to accomplish the rehabilitation of the Site in accordance with the provisions hereof. 7.13 Warranty A ainst Payment of Consideration for Agreement. Except as provided in this Agreement, Participant warrants that it has not paid or given, and will not pay or give, any person any money or other consideration for obtaining this Agreement that is in violation of any law. 7.14 NonIiabili of Agency Officials and Employees. No member, official, or employee of the Agency shall be personally liable Io the Participant or any successor in interest, in the event of any default or breach by the Agency or for any amount which may become due to the Participant or to its successor, or on any obligations under the terms of this Agreement. 7.15 Countemarts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. 7.16 Extension of Times of Performance. Notwithstanding the foregoing, in addition to the specific provisions of this Agreement, performance by either party hereunder shall not be deemed to be in default during an event of Force Majeure. An extension of time for an event of Force Majeure shall be limited to the period of such event, and shall commence to run from the time of the commencement of the cause, provided notice by the party claiming such extension is sent to the other party within sixty (60) days of the commencement of the cause. In the event of such delay, the party delayed shall continue to exercise reasonable diligence to minimize the period of delay. Times of performance under this Agreement may also be extended by mutual written agreement by Agency and Participant. In addition, the Executive Director shall have the authority on behalf of Agency to approve extensions of time rot to exceed a cumulative total of one (1) year. 29 7.17 Inspection of Books and Records. The Agency or its designee has the right at all reasonable times to inspect the books, records, an&or other documents of the Participant pertaining to the Site and/or the Project as pertinent to the purposes of this Agreement. 7.18 Waivers. The waiver by Agency or Participant of any term, covenant, or condition herein contained shall not be a waiver of such term, covenant, or condition on any subsequent breach. SECTION 8. EXECUTION OF AGREEMENT; TIME FOR ACCEPTANCE This Agreement consists of thirty-one (31) pages and nine (9) attachments which constitute the entire understanding and agreement of the parties. This Agreement does not take effect until executed by the Participant and Agency. This Agreement, when executed by the Participant and delivered to the Agency, must be authorized, executed and delivered by the Agency within forty-five (45) days after the date of signature by the Participant, or this Agreement may be terminated by the Participant on written notice to the Agency. The Agency Executive Director is hereby authorized and directed to take such other and further actions, and sign such other and further agreements and documents on behalf of the Agency as may be necessary or proper to effect the terms of the Owner Participation Agreement on behalf of the Agency. [end - signature page follows] 30 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Effective Date. ATTEST: "AGENCY" REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body corporate and politic By-_Ipa= QI&I /71-� APPROVED AS TO FORM: "7-:�-- Agency Clerk9SAgency General Counsel gjVg t REVIEWED AND APPROVED: INITIATED AND APPROVED: Qe= t-A� &d (,. 6z Ray Silv , Executive Director ErOid Biggs, Deputy Executive Director APPROVED AS TO FORM: n K� Kane, Ballmer & Berkman Agency Special Counsel hb\quovadis\opa1 "PARTICIPANT" KDF QV, L.P., a California limited partnership By: KDF Communities — QV LLC, Its Co -General Partner B� Mar .Hyatt imited Managing Member 31 EXHIBIT A Legal Description [behind this page] LEGAL DESCRIPTION ALL THAT CERTAIN LAND SITUATED IN THE STATE OF CALIFORNIA, COUNTY OF ORANGE, CITY OF HUNTINGTON BEACH, DESCRIBED AS FOLLOWS: PARCEL 1, AS SHOWN ON A MAP FILED IN BOOR 43, PAGE 19 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF ORANGE COUNTY, CALIFORNIA. EXHIBIT B Site Map jbehind this page] Site Map Quo Vadis Apartments 18992 Florida Street L-L-t � ELLIS NOW � kUNTINGTON CREEK M FIVE POINTS CONDOS SHOPPING CENTER � � 1YfI t•{{r wrl W W � \lmMA I r� .YG 10GYI aM 3 IWIBERLEIIF £A ii iw. iX� • i � /�S�X X�XIX w�w"� 1047 r r..r �. Y■ • Sa•al I I : � IIII JIIIl111E: 111� i !■YA � i�Ill •I+1 � CawWa � :III lltltt\ `� :• �.`, {•�" _ y..\� AGING &87&5 WulJ ti f i rlmcmL wwa.. Q w• a { p LU Im ` `, / ,- to Sol"■■Ic{v/WKM a s.■0. Um Slott 1■Ifr UMl wy CWY. nW rRy + }faM i Nnl Aaa}I /! Y/ loaf* 7 G Small I Uvf 14023 y1 IFS - 1� }fffi p kONTE 1 SHAFFE r —'CRIST0 4N. 7.17:7— ,�C X I X I' I' C 1xfA :Geri GARFIELD EXHIBIT C Scope of Development [behind this page] EXHIBIT "C" SCOPE OF DEVELOPMENT Participant's rehabilitation of an existing apartment complex consisting of a total of one hundred and four (104) units located at 18992 Florida Street in the City of Huntington Beach shall be undertaken as follows: 1. The rehabilitation shall be in substantial conformance with the Approved Project Plans and Permits. In the event of any conflict between the description of the Project and - rehabilitation work described in this Agreement and in the Approved Project Plans and Permits, the Approved Project Plans and Permits shall control. Notwithstanding the above, the rehabilitation of the Units shall result in Units meeting, at a minimum, federal housing quality standards as existing on the Effective Date of this Agreement; said standards are set forth at Title 24 of the Code of Federal Regulations, Section 982AOL Participant shall provide Agency with copies of all required permits under the City Municipal Code and proofs of City inspections. 2. Participant, prior to the Close of Escrow, shall submit to Agency for review and approval a rehabilitation work list that describes the nature and order of the rehabilitation work, including but not limited to, proposed repairs acid improvements and planned cost and time schedules for such rehabilitation work. 3. Participant shall be responsible for testing and detecting the presence of asbestos and lead -based paint as required by HUD regulations or any applicable law. Participant shall also be responsible for remediating any lead -based paint where the levels of those substances are found to be in violation of IIUD regulations or any applicable law. If the cost of remediation of lead - based paint increase the Project costs, Participant may reasonably request additional financial assistance from Agency. The decision to provide financial assistance, and the amount of such assistance, shall be made in the sole discretion of Agency. With regards to asbestos, Participant shall take all actions recommended by the operation and maintenance procedures for any asbestos identified on the Site, as established pursuant to that certain Phase 1 Environmental Site Assessment Report on the Site which is dated March 9, 2001 and prepared by Eckland Consultants, Inc. Copies of all test results, tenant notifications, and remediation plans shall be provided to the Agency or its authorized representatives or consultants. 4. Agency shall have the right to independently inspect the progress of the rehabilitation work, including both interiors and exteriors of the Units, upon forty-eight (48) hours prior notice to Participant; provided that such inspections shall not interfere with Participant's rehabilitation work. In this regard, Participant shall provide access to the Site and Units to Agency 5. Subject to Section 4.2(a) and 7.16 of the OPA and the Schedule of Performance (Exhibit D of the OPA), Participant shall complete the rehabilitation work within eighteen (18) months after the Close of Escrow. Mquovsdis\scope Scope of Development Page t EXHIBIT D Schedule of Performance [behind this page] EXHIBIT "D^ SCHEDULE OF PERFORMANCE ITEM OF PERFORMANCE TUBE FOR PERFORMANCE REFERENCE 1. Participant take all actions and execute and provide Not later than twelve noon on the §3.4; §3.5 all documents as required by this Agreement for business day immediately prior to the disbursement of the Agency Loan. scheduled Close of Escrow. 2. Participant obtains the Approved Project Plans and Not later than sixty (60) days after the §4.2 Permits for the Project. Effective Date. 3. Close of Escrow. Within one -hundred and twenty (120) §3.4; §3.5 days after the Effective Date (and upon satisfaction of all conditions precedent to disbursement of the Agency Loan). 4. Participant commences the rehabilitation work on ff.e Within ten (10) days after the Close of §4.2 Site. Escrow. 5. Participants completes the rehabilitation of the Site. Within eighteen (18) months after the §41 Close of Escrow. b. Agency issues Release of Construction Covenants. Upon satisfactory completion by §4.7 Participant of the rehabilitation work on the Site. It is understood that this Schedule of Performance is subject to all of the terms and conditions of the text of the Agreement. The summary of the items performance in this Schedule of Perfbrinance is not intended to supersede or modify the more complete description in the text; in the event of any conflict or inconsistency between this Schedule of Performance and the text of the Agreement, the text of the Agreement shall govern. The time periods set forth in this Schedule of P(-rformance may be altered or amended only by written agreement signed by both the Participant and the Agency. The Executive Director of Agency shall have the authority to approve extensions of time urithout action of the Board of Directors of Agency not to exceed a cumulative total of one (1) year. Schedule of Performance Page 1 EXHIBIT E Release of Construction Covenants [behind this page] WHEN RECORDED RETURN TO: KDF QV, L.P. 4685 MacArthur Ct., Suite 422 Newport Beach, California 92660 Attn: Mark Hyatt (Space Above This Line For Recorder's Office Use Only) RELEASE OF CONSTRUCTION COVENANTS WHEREAS, KDF QV, L.P., a California limited partnership ("Owner"), is the owner of the fee interest in that certain real property more particularly described in the legal description attached hereto as Exhibit No. 1 and incorporated herein (the "Site"); and WHEREAS, by an Owner Participation Agreement (hereinafter referred to as the "Agreement") dated as of , 2001, by and between Owner and the REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body, corporate and politic (hereinafter referred to as "Agency"), Owner has constructed and rehabilitated the improvements on the Site according to the terms and conditions of said Agreement; and WHEREAS, pursuant to the Agreement, promptly after satisfactory completion of all construction and rehabilitation work by Owner upon the Site, Agency shall furnish Owner with a Release of Construction Covenants in such form as to permit it to be recorded in the Official Records of the County of Orange; and WHEREAS, the issuance by Agency of tl:e Release of Construction Covenants shall be conclusive evidence that Owner has complied with the terms of the Agreement pertaining to the construction and rehabilitation of improvements on the Site; and WHEREAS, Agency has conclusively determined that the construction and rehabilitation of improvements on the Site has been satisfactorily completed as required by the Agreement; and NOW, THEREFORE: 1. As provided in the Agreement, Agency does hereby certify that construction and rehabilitation of the improvements on the Site have been fully and satisfactorily performed and completed, and that such development is in full compliance with said Agreement. 2. This Release of Construction Covenants shall not constitute evidence of compliance with or satisfaction of any obligation of Owner to any holder of a mortgage, or any insurer of a mortgage, securing money loaned to finance construction work on the Site, or any part thereof. Nothing contained herein shall modify in any way any other provision of said Agreement. Release of Construction Covenants Page 1 3. This Release is not a Notice of Completion as referred to in California Civil Code Section 3093. 4. All covenants set forth in the Agreement and the Regulatory Agreement entered into by and between the Agency and Participant on remain in effect in accordance with the terms thereof. IN WITNESS WHEREOF, Agency has executed this Release as of this day of ATTEST: Agency Clerk REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body corporate and politic By: Its: Release of Construction Covenants Page 2 CONSENT TO RECORDATION KDF QV, L.P., a California limited partnership, owner of the fee interest in the Site Iegally described in Exhibit No. I attached hereto does hereby consent to the recordation of the foregoing Release of Construction Covenants against the Site. Wq�mlcm "OWNER" KDF QV, L.P., a California limited partnership By: KDF Communities — QV LLC, Its Co -General Partner By: Mark E. Hyatt Its Limited Managing Member Release of Construction Covenants Page 3 STATE OF CALIFORNIA ) ) ss. COUNTY OF ORANGE } On before me, personally appeared _ , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) islare subscribed to the within instrument and acknowledged to me that helshe/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. Notary Public (SEAL) STATE OF CALIFORNIA ) ) ss. COUNTY OF ORANGE ) On before me, personally appeared , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instr=cnt. WITNESS my hand and official seal. Notary Public (SEAL) EXHIBIT NO. I LEGAL DESCRIPTION OF SITE ALL THAT CERTAIN LAND SITUATED IN THE STATE OF CALIFORNIA, COUNTY OF ORANGE, CITY OF HUNTINGTON BEACH, DESCRIBED AS FOLLOWS: PARCEL 1, AS SHOWN ON A MAP FILED IN BOOK 43, PAGE 19 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF ORANGE COUNTY, CALIFORNIA. EXHIBIT F Promissory Note jbehind this page] DO NOT DESTROY THIS NOTE: At the end of the term of this Note, this Note, with the Deed of Trust securing same, must be surrendered to Trustee for cancellation before reconveyance will be made. PROMISSORY NOTE SECURED BY DEED OF TRUST Principal Loan Amount: $1,700,000.00 Interest: 3% Note Date: FOR VALUE RECEIVED, the undersigned ("Maker") hereby promises to pay to the order of the REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body, corporate and politic ("Holder"), at a place designated by Holder, the principal sum of ONE MILLION SEVEN HUNDRED THOUSAND DOLLARS ($1,700,000.00) at the rate of THREE PERCENT (3%) simple interest per annum, or such lesser amount which shall from time to time be owing hereunder pursuant to the terms hereof, pursuant to an Owner Participation Agreement (the "OPA') dated as of _ _ , 2001 by and between Maker and Holder. The OPA is hereby incorporated by reference as though fully set forth herein. Any capitalized terns not defined herein shall have the meanings ascribed to them in the OPA. The obligation of the Maker to the Holder hereunder shall be secured by a deed of trust made by the Maker encumbering the Site to be rehabilitated (the "Site) pursuant to the OPA, which Agency Deed of Trust is dated and executed by the Maker and recorded in the Recorder's Office of Orange County, California, on _ , as Document No. (the "Agency Deed of Trust'). The obligation of the Maker set forth in this Note is subject to acceleration as set forth herein and in the OPA. The OPA and the Agency Deed of Trust are public records on file in the offices of the Holder. 1. I Agency Y_ Loan. This Note evidences the obligation of the Maker -to the Holder for the repayment of funds loaned to the Maker by the Holder (the "Agency Loan') to finance the acquisition and rehabilitation of the Site pursuant to the OPA. The Maker shall not make any sale, assignment or conveyance, or transfer in any other form, of the Site, or any part thereof, or interest therein in violation of the OPA. 2. Terms of the Agency Loan. (a) Term. The term of this Note shall be sixty (60) years, commencing on the date of this Note. (b) Repayment. Beginning on the third anniversary date of this Note, and on each annual anniversary date of this Note thereafter until the Agency Loan is paid in full or otherwise canceled or forgiven pursuant to the terms of this Note, Maker shall pay to Holder an amount equal to FIFTY PERCENT (50%) of the Project's Net Operating Income for the Promissory Note Page I immediately preceding year. After the sixtieth (60`h) anniversary date of this Note, all remaining unpaid principal and interest on the Agency Loan shall immediately become due and payable, and the Regulatory Agreement shall terminate; provided, however, that if Maker provides thirty (30) days' prior written notice to Holder stating that Maker shall continue maintaining all the restrictions of the Regulatory Agreement on the Site beyond its 60-year term, then the unpaid principal and interest on the Agency Loan shall not require payment and shall not accrue further interest for the period during which Maker continuously maintains the restrictions of the Regulatory Agreement on the Site. (c) Disbursement of the Agency Loan. Holder shall disburse the Agency Loan as set forth in the OPA. At the end of the term of this Note and the forgiveness, waiver, and discharge of this Note as set forth above, Holder shall mark this Note "PAID IN FULL" and shall the deliver this Note to the Trustee of the Deed of Trust that secures this Note for the Trustee's delivery to Maker in conjunction with the reconveyance of the Deed of Trust. 3. Prepayment -Penalties. In the event Maker prepays the entire balance of this Note including all accrued interest within two years from the date of this Note, then Maker shall pay to Holder a prepayment penalty consisting of TWENTY-FIVE PERCENT (25%) of the original principal balance of this Note. Such prepayment penalty shall not apply upon a discharge or waiver of this Note. In the event Maker prepays the entire balance of this Note including aII accrued interest at any time after two years from the date of this Note, then there shall be no prepayment penalty. Notwithstanding any early repayment of this Note, the covenants, conditions and restrictions imposed on the Site by the Regulatory Agreement and OPA shall remain in full force and effect for the terms set forth therein. 4. Acceleration of Obligation. Upon the occurrence of an uncured Material Default of Maker under this Note, the Deed of Trust or any obligation secured thereby, or in any other instrument now or hereafter securing the obligations evidenced hereby, then, and in any of such events, Holder may, at its option, declare this Note and all the obligations hereby evidenced to be immediately due and payable and collectible then or thereafter as Holder may elect, regardless of the date of maturity. 5. Default Interest. If any event occurs giving Holder the right to accelerate this Note pursuant to Scction 4 above, the entire unpaid and unforgiven principal owing hereunder shall, as of the date of such default, continence to accrue interest at a rate equal to two percentage points above the reference rate published by Bank of America N.A., or the maximum non -usurious interest rate permitted by law, whichever is less. 6. Collection Costs: Attorne s' Fees. If any action or proceeding is brought by either party against the other under this Note, whether for interpretation, enforcement or otherwise, Maker hereby expressly agrees to pay for all costs and expenses for such action or proceeding, including the fees of attorneys and any expert witnesses. This provision shall also apply to any posijudgment action by either party, including without Iimitation efforts to enforce a judgment. Promissory Note Page 2 7. Severability. The unenforceability or invalidity of any provision or provisions of this Note as to any persons or circumstances shall not render that provision or those provisions unenforceable or invalid as to any other provisions or circumstances, and all provisions hereof, in all other respects, shall remain valid and enforceable. 8. Modifications. Neither this Note nor any term hereof may be waived, amended, discharged, modified, changed or terminated orally; nor shall any waiver of any provision hereof be effective except by an instrument in writing signed by Maker and Holder. 9. U_ sury. Notwithstanding any provision in this Note, Agency Deed of Trust or other document securing same, the total liability for payment in the nature of interest shall not exceed the limit now imposed by applicable laws of the State of California. 10. Governing Law. This Note has been executed and delivered by Maker in the State of California and is to be governed and construed in accordance with the laws thereof. IN WITNESS WHEREOF, Maker has executed this Note as of the date and year first above written. 6biquou.dis�nm "MAKER" KDF QV, L.P., a California limited partnership By: KDF Communities — QV LLC, Its Co -General Partner By: Mark E. Hyatt Its Limited Managing Member Promissory Note Page 3 EXHIBIT G Form of Deed of Trust [behind thii page] FREE RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH 2000 Main Street Huntington Beach, CA 92648 Attn: Executive Director (Spaoe Abovc'lhis Line for Recorders office Use Only) (Exempt from Recording Fee Per Gov. Code 16103) DEED OF TRUST AND ASSIGNMENT OF RENTS ($1,700,000.00) This Deed of Trust and Assignment of Rents ("Deed of Trust"), dated this day of , 2001, is made by KDF QV, L.P., a California limited partnership ("Trustor") whose address is 4685 MacArthur Ct., Suite 422, Newport Beach, California 92660, THE CITY OF HUNTINGTON BEACH, a California corporation ("Trustee") whose address is 2000 Main Street, Huntington Beach, CA 92648, and THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body, corporate and politic ("Beneficiary") whose address is 2000 Main Street, Huntington Beach, CA 92648, and is executed to secure the obligations contained in that certain Promissory Note Secured by Dced of Trust executed by Trustor in favor of Benef ciary and dated (the "Note'), that certain Regulatory Agreement and Declaration of Covenants and Restrictions by and between Trustor and Beneficiary dated (the "Regulatory Agreement'), and Sections 5.1-5.13 of that certain Owner Participation Agreement by and between Trustor and Beneficiary dated (the "OPA"). The Note, Regulatory Agreement, and OPA are hereby incorporated herein by reference. All capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the OPA. 1. Grant in Trust and Security A eement. For valuable consideration, Trustor irrevocably grants, transfers and assigns to Trustee, in trust, with power of sale, for the benefit of Beneficiary, the following property (the "Trust Estate"): (a) the real property described in Exhibit A attached to this Deed of Trust and incorporated in this Deed of Trust by reference (the "Land"); and (b) all buildings, structures and other improvements now or in the future located or to be constructed on the Land (the "Improvements*); and (c) alI tenements, hereditaments, appurtenances, privileges and other rights and interests now or in the future benefitting or otherwise relating to the Land or the Improvements, including easements, rights -of -way, development rights, mineral Deed of Trust rights, water tights and water stock (the "Appurtenances," together with the Land and the Improvements, the "Property'). 2. Obligations Secured. This Deed of Trust is given for the purpose of securing payment and performance of the following (the 'Secured Obligations"): (a) all present and future indebtedness evidenced by the Note, the value of which Trustor acknowledges to be in the amount of ONE MILLION SEVEN HUNDRED THOUSAND DOLLARS (S 1,700,000.00); (b) all present and future obligations of Trustor under the Regulatory Agreement; (c) all present and future obligations of Trustor under Sections 5.1-5.13 of the OPA; (d) all present and future obligations of Trustor to Beneficiary under this Deed of Trust; and (e) all additional present and future obligations of Trustor to Beneficiary under any other agreement or instrument (whether existing now or in the future) which states that it is, or such obligations are, secured by this Deed of Trust; in each case as such indebtedness and other obligations may from time to time be supplemented, modified, amended, renewed and extended, whether evidenced by new or additional documents or resulting in a change in the interest rate on any indebtedness or otherwise. 3. Trustoes Covenants. To protect the security of this Deed of Trust, Trustor agrees as follows: 3.I Payment and Performance of Secured Obligations. (a) Trustor shall pay and perform all obligations under this Deed of Trust and all Secured Obligations in accordance with the respective terms of such Secured Obligations. (b) At the end of the sixty -year term of the Note (and the forgiveness, waiver, and discharge of the Note as set forth therein), Beneficiary shall deliver the cancelled Note to the Trustee whereupon Trustee shall reconvey this Deed of Trust in full. 3.2 Liens and Taxes. Trustor shall pay, prior to delinquency, all taxes, if any, which are or may become a lien affecting any part of the Trust Estate and Trustor shall pay and perform when due all other obligations secured by or constituting a lien affecting any part of the Trust Estate, provided that Trustor shall not be in violation of this provision if Trustor is protesting or contesting such taxes in good faith and by legal means. 4. Obligations With Respect to Trust Estate. Neither Beneficiary nor Trustee shall be under any obligation to preserve, maintain or protect the Trust Estate or any of Trustoes, rights or interests in the Trust Estate, or make or give any presentments, demands for performance, protests, notices of nonperformance, protest or dishonor or other notices of any kind in connection with any rights, or take any other action with respect to any other matters relating to the Trust Estate. Beneficiaryand Trustee do not assume and shall have no liability for, and shall not be obligated to perform, any of Trustoes obligations with respect to any rights or any other matters relating to the Trust Estate, and nothing contained in this Deed of Trust shall release Trustor from any such obligations. 5. Assignment of Rents and Profits. Subject to any rights of or any assignment of rents and profits to a mortgagee or trustee holding a permitted senior lien against the Property, Trustor irrevocably grants, transfers and assigns to Beneficiary, during the continuance of this Deed of Trust, all of Trustor's right, title and interest in and to the rents, issues, income, revenues, royalties 2 Dced of Trust and profits from any lease of the Property (Rents"). Notwithstanding such assignment, so long as no Material Default has occurred and is continuing, Trustor shall have the right to collect, receive, hold and dispose of the Rents as the same become due and payable, provided that unless Beneficiary otherwise consents in writing: (i) any such Rents paid more than 30 days in advance of the date when due (excluding amounts paid as initial security deposits) shall be delivered to Beneficiary and held by Bencficiary in a cash collateral account (over which Beneficiary shall have sole and executive control and right of withdrawal), to be released and applied on the date when due (or, if a Material Default has occurred and is continuing, at such other time or times and in such manner as Beneficiary may determine), and (ii) if a Material Default has occurred and is continuing, Trusto?s right to collect and receive the Rents shall cease and Beneficiary shall have the sole right, with or without taking possession of the Property, to collect all Rents, including those past due and unpaid. Any such collection of Rents by Beneficiary shall not cure or waive any Material Default or notice of default or invalidate any act done pursuant to such notice. Failure or discontinuance of Beneficiary at any time, or from time to time, to collect the Rents shall not in any manner affect the subsequent enforcement by Beneficiary of the right to collect the same. Nothing contained in this Deed of Trust, nor the exercise of the right by Beneficiary to collect the Rents, shall be deemed to make Beneficiary a "mortgagee in possession" or shall be, or be construed to be, an affirmation by Beneficiary of, or an assumption of liability by Beneficiary under, or a subordination of the lien of this Deed of Trust to any tenancy, lease or option. 6. Remedies Upon Material Default. Upon the occurrence of any Material Default: (i) Trustor shall be in default under this Deed of Trust, and, subject to Section 6 of the OPA regarding notice and cure, all Secured Obligations shall immediately become due and payable without further notice to Trustor; (ii) upon demand by Beneficiary, Trustor shall pay to Beneficiary, in addition to all other payments specifically required under the OPA, at the times and in the amounts required by Beneficiary from time to time, sums which when cumulated will be sufficient to pay one month prior to the time the same become delinquent, all taxes which are or may become a lien affecting the Trust Estate and the premiums for any policies of insurance to be obtained hereunder (all such payments to be held in a cash collateral account as additional security for the Secured Obligations over which Beneficiary shall have sole and exclusive control and right of withdrawal); and (iii) Beneficiary may, without notice to or demand upon Trustor, which are expressly waived by Trustor (except for notices or demands otherwise required by applicable laws to the extent not effectively waived by Trustor and any notices or demands specified below), and without releasing Trustor from any of its Obligations, exercise any one or more of the following remedies as Beneficiary may determine. Beneficiary may, either directly or through an agent or court -appointed receiver, and without regard to the adequacy of any security for the Secured Obligations: (i) enter, take possession of, manage, operate, protect, preserve and maintain, and exercise any other rights of an owner ofthe Trust Estate, and use any other properties or facilities of Trustor relating to the Trust Estate, all without payment of rent or other compensation to Trustor, (ii) enter into such contracts and take such other action as Beneficiary deems appropriate to complete all or any part of any construction which may have commenced on the band, subject to such modifications and other changes in the plan of development as Beneficiary may deem 3 Deed of Trust appropriate; (iii) make, cancel, enforce or modify leases, obtain and evict tenants, fix or modify rents and, in its own name or in the name of Trustor, otherwise conduct any business of Trustor in relation to the Trust Estate and deal with Trustor's creditors, debtors, tenants, agents and employees and any other persons having any relationship with Trustor in relation to the Trust Estate, and amend any contracts between them, in any manner Beneficiary may determine; (iv) endorse, in the name of Trustor, all checks, drafts and other evidences of payment relating to the Trust Estate, and receive, open and di 3pose of all mail addressed to Trustor and notify the postal authorities to change the address for delivery of such mail to such address as Beneficiary may designate; and (v) take such other action as Beneficiary deems appropriate to protect the security of this Deed of Trust. Beneficiary's agent or court -appointed receiver shall holdall monies and proceeds, including, without limitation, proceeds from the sale of the Property or any portion thereof, for the benefit of the Trustor and shall not disburse the monies or proceeds for the satisfaction of the Secured Obligations without the prior written consent of Beneficiary. The Beneficiary's agent or court - appointed receiver may, but without any obligation to do so and without notice to or demand upon Trustor and without releasing Trustor from any Obligations under this Deed of Trust, and at the expense of Trustor, follow the written instruction of Beneficiary under this Section 6. Beneficiary may execute and deliver to Trustee written declaration of default and demand for sale and written notice of default and of election to cause all or any part of the Trust Estate to be sold, which notice Trustee shall cause to be filed fo_ record; and after the lapse of such time as may then be required by law following the recordation of such notice of default, and notice of sale having been given as then required by law, Trustee, without demand on Trustor, shall sell such Property at the time and place fixed by it in such notice of sale, either as a whole or in separate parcels and in such order as Beneficiary may direct (Trustor waiving any right to direct the order of sale), at public auction to the highest bidder for cash in lawful money of the United States (or cash equivalents acceptable to Trustee to the extent permitted by applicable law), payable at the time of sale. Trustee may postpone the sale of all or any part of the Trust Estate by public announcement at such time and place of sale, and from time to time after any such postponement may postpone such sale by public announcement at the time fixed by the preceding postponement. Trustee shall deliver to the purchaser at such sale its deed conveying the property so sold, but without any covenant or warranty, express or implied, and the recitals in such deed of any matters or facts shall be conclusive proof of the truthfulness thereof. Any person, including Trustee or Beneficiary, may purchase at such sale, and any bid by Beneficiary may be, in whole or in part, in the form of cancellation of all or any part of the Secured Obligations. Any such sale shall be free and clear of any interest of Trustor and any lease, encumbrance or other matter affecting the property so sold which is subject or subordinate to this Deed of Trust, except that any such sale shall not result in the termination of any such lease (i) if and to the extent otherwise provided in any estoppel or other agreement executed by the tenant and Beneficiary (or executed by the tenant in favor of, and accepted by, Beneficiary), or (ii) if the purchaser at such sale gives written notice to the tenant, within 30 days after date of sale, that the Deed of Trust lease will continue in effect. Beneficiary may proceed to protect, exercise and enforce any and all other remedies provided under the Note, Regulatory Agreement, OPA, this Deed of Trust or by applicable laws. All proceeds of collection, sale orother liquidation of Trust Estate shall be applied first to all costs, fees, expenses and other amounts (including interest) payable by Trustor under this Deed of Trust and to all other Secured Obligations not otherwise repaid in such order and manner as Beneficiary may determine, and the remainder, if any, to the person or persons legally entitled thereto. Each of the remedies provided in this Deed of Trust is cumulative and not exclusive of, and shall not prejudice, any other remedy provided in this Deed of Trust or by applicable laws and shall be subject and subordinate to the remedies of any holder of a senior lien permitted hereunder. Each remedy may be exercised from time to time as often as deemed necessary by Trustee and Beneficiary, and in such order and mariner as Beneficiary may determine. This Deed of Trust is independent of any other security for the Secured Obligations, and upon the occurrence of a Material Default, Trustee or Beneficiary may proceed in the enforcement of this Deed of Trust independently of any other remedy that Trustee or Beneficiary may at any time hold with respect to the Trust Estate or the Secured Obligations or any other security. Trustor, for itself and for any other person claiming by or through Trustor, waives, to the fullest extent permitted by applicable laws, all rights to require a marshaling of assets by Trustee or Beneficiary or to require Trustee or Beneficiary to first resort to any particular portion of the Trust Estate or any other security (whether such portion shall have been retained or conveyed by Trustor) before resorting to any other portion, and all rights of redemption, stay and appraisal. 7. Material Default. A `Material Default" shall be deemed to occur if: (i) Trustor is in Material Default under any of the Secured Obligations; or (ii) Trustor is in breach of any of its obl igations under this Deed ofTrust and such breach is not Cured within thirty (30) days after Trustor receives initial notice of such breach. S. Costs, Fees and Expenses. Trustor shall pay, on demand, all costs, fees, expenses, advances, charges, losses and liabilities of Trustee and Beneficiary under or in connection with this Deed of Trt:st or the enforcement of, or the exercise of any remedy or any other action taken by Trustee or Beneficiary under, this Deed of Trust or the collection of the Secured Obligations, in each case including (i) reconveyance and foreclosure fees of Trustee, (ii) costs and expenses of Beneficiary or Trustee or any receiver appointed under this Deed of Trust in connection with the operation, maintenance, management, protection, preservation, collection, sale or other liquidation of the Trust Estate or foreclosure of this Deed of Trust, (iii) advances made by Beneficiary to complete or partially construct all or any part of any construction which may have commenced on the Land or otherwise to protect the security of this Deed of Trust, (iv) cost of evidence of title, and (v) the reasonable fees and disbursements of Trustee's and Beneficiary's legal counsel and other out-of- pocket expenses, and the reasonable charges of Beneficiary's internal legal counsel. Deed of Trust 9. Late Pa ents. By accepting payment of any part of the Secured Obligations after its due date, Beneficiary does not waive its right either to require prompt payment when due of all other Secured Obligations or to declare a default for failure to so pay. 10. Action by Trustee. At anytime and from time to time upon written request of Beneficiary and presentation of this Deed of Trust for endorsement, and without affecting the personal liability of any person for payment of the Secured Obligations or the security of this Deed of Trust for the full amount of the Secured Obligations on all Property remaining subject to this Deed of Trust, Trustee may, without notice and without liability for such action, and notwithstanding the absence of any payment on the Secured Obligations or any oth.-r consideration: (i) reconvey all or any part of the Trust Estate, (ii) consent to the making and recording, or either, of any map or plat of the Land, (iii) join in granting any easement affecting the Land, or (iv) join in or consent to any extension agreement or any agreement subordinating the lien of this Deed of Trust. Trustee is not obligated to notify Trustor or Beneficiary of any pending sale under any other deed of trust or of any action or other proceeding in which Trustor, Beneficiary or Trustee is a party unless brought by Trustee. 11. Reconveyance. Upon written request of Beneficiary and surrender of this Deed of Trust to Trustee for cancellation or endorsement, and upon payment of its fees and charges, Trustee shall reconvey, without warranty, all or any part of the Property then subject to this Deed of Trust. Any reconveyance, whether full or partial, may be made in terms to "the person or persons legally entitled thereto," and the recitals in such reconveyance of any matters or facts shall be conclusive proof of the truthfulness thereof. Beneficiary shall not be required to cause any Property to be released from this Deed of Trust until final payment and performance in full of all Secured Obligations and termination of all obligations of Beneficiary under or in connection with the Secured Obligations or until the Secured Obligations are forgiven. 12. Substitution of Trustee. Beneficiary may from time to time, by instrument in writing, substitute a successor or successors to any Trustee named in or acting under this Deed of Trust, which instrument, when executed by Beneficiary and duly acknowledged and recorded in the office of the recorder of the county or counties where the Land is situated, shall be conclusive proof of proper substitution of such successor Trustee or Trustees who shall, without conveyance from the predecessor Trustee, succeed to all of its title, estate, rights, powers and duties. Such instrument must contain the name of the original Trustor, Trustee and Beneficiary, the book and page where this Deed of Trust is recorded (or the date of recording and instrument number) and the name and address of the new Trustee. 13. Successors and Assigns. This Deed of Trust applies to and shall be binding on and inure to the benefit of all parties to this Deed of Trust and their respective successors and permitted assigns. 14. Acceptance. Notice of acceptance of this Deed of Trust by Beneficiary or Trustee is waived by Trustor. Trustee accepts this Deed of Trust when this Deed of Trust, duly executed and acknowledged, is made a public record as provided by law. 15. Beneficial ►�'s Statements. For any statement regarding the Secured Obligations, Beneficiary may charge the maximum amount permitted by law at the time of the request for such statement. G Deed of Trust 16. Priori • Subordination. Pursuant to the OPA, Beneficiary agreed to subordinate this Deed of Trust to the liens of the deeds of trust identified in the OPA as the First Deed of Trust, and to such other and further documents as such lender(s) may require including but not limited to regulatory agreements (including those required by CSCDA, Fannie Mae and TCAC), not to exceed an indebtedness in the amount permitted by the OPA. The lien of this Deed of Trust therefore shall bejunior and subordinate to the lien(s) of the foregoing listed deed(s) of trust and such other and further documents as such lenders may require. Beneficiary agrees to execute such subordination agreements, pursuant to the OPA, as are necessary to effect such subordination of the lien of this Deed of Trust. 17. Governin Law. This Deed of Trust shall be governed by, and construed and enforced in accordance with, the Laws of California. 18. Request for Notice. Trustor requests that a copy of any notice of default and a copy of any notice of sale be mailed to Trustor at Trustoes address set forth above. 19. Countemarts. This Deed of Trust may be executed in two or more counterparts, each ofwhich shall be deemed an original and all of which together shall constitute one and the same instrument. [Signatures on following page] Deed of Trust ATTEST: Agency Clerk REVIEWED AND APPROVED: Ray Silver, Executive Director APPROVED AS TO FORM: Kane, Ballmer & Berkman Agency Special Counsel BENEFICIARY REDEVELOPMENT AGENCY OF THE CITY OF HUNIWGTON BEACH, a public body corporate and politic am Chairman APPROVED AS TO FORM: Agency General Counsel INITIATED AND APPROVED: David Biggs, Deputy Executive Director TRUSTOR KDF QV, L.P., a California limited partnership By: KDF Communities — QV LLC, Its Co -General Partner By: Mark E. Hyatt Its Limited Managing Member S Deed of Trust ATTEST: City Clerk REVIEWED AND APPROVED: Ray Silver, City Administrator Wquovadisldot t TRUSTEE CITY OF HUNTINGTON BEACH By: Mayor APPROVED AS TO FORI`'i: City Attorney INITIATED AND APPROVED: Director of Economic Development 9 Deed of Trust EXHIBIT A TO DEED OF TRUST Legal Description ALL THAT CERTAIN LAND SITUATED IN THE STATE OF CALIFORNIA, COUNTY OF ORANGE, CITY OF HUNTINGTON BEACH, DESCRIBED AS FOLLOWS: PARCEL 1, AS SHOWN ON A MAP FILED IN BOOK 43, PAGE 19 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF ORANGE COUNTY, CALIFORNIA. STATE OF CALIFORNIA COUNTY OF } ) ss. On J. before me, , personally appeared , personally known to me (or proved to me on the basis of satisfactory evidence) to be the pmon(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 STATE OF CALIFORNIA ) ) ss. COUNTY OF } On before me, , personally appeared personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose namc(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 s ignature(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 STATE OF CALIFORNIA } ) ss. COUNTY OF ) On . before me, , . personally appeared , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) islare subscribed to the within instrument and acknowledged to me that helshe/they executed the same in his/her/their authorized capaeity(ies), and that by his/her/their si pature(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 EXHIBIT H Form of Regulatory Agreement [behind this page] FREE RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH 200D Main Street Huntington Beach, CA 92648 Attn: Executive Director (Space Above This Line for Recorder's Office Use Only) (Exempt from Recording Fee Per Gov. Code §6103) REGULATORY AGREEMENT AND DECLARATION OF COVENANTS AND RESTRICTIONS THIS REGULATORY AGREEMENT AND DECLARATION OF COVENANTS AND RESTRICTIONS ("Agreement") is made and enter.-d into this day of , 2001, by and between REDEVELOPMENT AGENCY OF THE CITY OF HUNIINGTON BEACH, a public body, corporate and politic ("Agency") and KDF QV, L.P., a California limited partnership ("Participant"). RECITALS: A. Agency and Participant have entered into that certain Owner Participation Agreement, dated 2001 (the "OPA"), concerning Participant's redevelopment of that certain real property, owned in fee by Participant, more particularly described in Attachment No. I attached hereto and incorporated by reference herein (the "Site"). The OPA describes the "Project" which generally consists of Participant's rehabilitation of an existing multi -family apartment complex comprised of a total of one hundred and four (104) Units on the Site and subsequent management thereof as an affordable rental housing complex. The OPA is hereby incorporated herein by this reference as though fully set forth herein. Any capitalized terms not def►ned herein shall have the meanings ascribed to such terms in the OPA. B. Participant has executed that certain promissory note (the "Note") dated , 2001, pursuant to which Agency has provided Participant with a loan in the principal amount of ONE MILLION SEVEN HUNDRED THOUSAND DOLLARS ($1,700,000.00) ("Loan Amount"). The Note is secured by an Agency Deed of Trust With Assignment of Rents dared on or about the date of the Note. C. Agency and Participant now desire to place restrictions upon the use and operation of the Project, in order to ensure that the Project shall be operated continuously as an affordable hottsing project available for rental in accordance with the terms set forth below for the term of this Agreement. Regulatory Agrocment Page l AGREEMENT: NOW, THEREFORE, the Participant and Agency declare, covenant and agree, by and for themselves, their heirs, executors, administrators and assigns, and all persons claming under or through them, that the Site, for the term of this Agreement, shall beheld, transferred, encumbered, used, sold, conveyed, leased and occupied, subject to the covenants and restrictions hereinafter set forth: 1. DEFINITIONS. 1.1 Affordable Rent. As used in this Agreement, the term "Affordable Rent" shall mean rental rates described in Section 3.2 herein, but in no event to exceed "low income" and "very low income" rent as defined by California Health & Safety Code Section 50053, or its successor, and as set forth by the HOME Program in 24 C.F.R. 92.252, or its successor. 11 Eligible Tenant. As used in this Agreement, the term "Eligible Tenant" shall refer to Eligible Low Income Tenants and Eligible Very Low Income Tenants who are eligible to rent a Unit. 1.3 Eligible_ Low Income Tenant. As used in this Agreement, the term "Eligible Low Income Tenant" shall mean a family or individual whose annual income does not exceed sixty percent (601/o) of the median income for the Orange County Primary Metropolitan Statistical Area (PMSA) as de-termined by the U.S. Department of Housing and Urban Development (HUD) with adjustments for smaller and larger families. 1.4 Elijziblc-Veiy Low Income Tenant. As used in this Agreement, the term "Eligible Very Low Income Tenant" shall mean a family or individual whose annual income does not exceed fifty percent (50%) of the median income for the Orange County PMSA as determined by the U.S. Department of Housing and Urban Development (HUD) with adjustments for smaller and larger families. 1.5 Orange Coun Median Income. For purposes of this Agreement, the term "Orange County Median Income" shall mean the median income for the Orange County PMSA, with adjustments for household size, as determined from time to time by HUD pursuant to the United States Housing Act of 1937 as amended, or such other method of median income calculation applicable to the City that HUD may hereafter adopt in connection with said Act. 1.6 Unit and Units. As used in this Agreement, the term "Unit" shall mean one of the one hundred and four (104) rental dwelling units in the Project (comprised of 24 studio units, 64 one -bedroom units, and 16 two -bedroom units), and the term "Units" shall mean two or more of the one hundred and four (104) rental dwelling units in the Project. The term "Unit" and "Units" shall be used as the context mandates and shall be reasonably interpreted in light of the context in which tl_e term appears. Regulatory Agreefrent Page 2 2. TERM OF AGREEMENT; RESIDENTIAL RENTAL PROPERTY. The term of this Agreement shall be sixty (60) years, commencing on the date of this Agreement. Participant hereby agrees that the Project is to be owned, managed, and operated as a project for Eligible Tenants for the term of this Agreement. To that end, and for the term of this Agreement, the Participant hereby represents, covenants, warrants and agrees as follows: 2.1 Purpose. The Site uill be acquired and the Project developed for the purpose of providing Eligible Tenants rental housing. 2.2 Facilities. All of the Units ir. the Project shall contain facilities adequate for living, sleeping, eating, cooking and sanitation in accordance with all applicable federal, state and local laws and codes. 2.3 Residential Use. None of the 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, or trailer court or park without the Agency's prior written consent. 2.4 Maximum Occupancy. The maximum number of persons in a household that may occupy any of the studio Units may not exceed two (2) persons; any of the one - bedroom Units may not exceed three (3) persons; and any of the two -bedroom Units may not exceed (5) five persons. 2.5 Conversion of Units. No part of the Project will at any time be owned by a cooperative housing corporation, nor shall the Participant take any steps in connection with the conversion to such ownership or uses to condominiums, or to any other form of ownership, without the prior written approval of Agency. 2.6 Preference to Eligible Tenants. All of the Units will be made available for rental in accordance with the tenons of this Agreement, and the Participant shall not give preference to any particular class or group in renting the Units in the Project, except to the extent that the Units are required to be leased or rented to Eligible Tenants and except as provided in Section 3.3 below. 2.7 Liability of Participant. Participant and the management agent shall not incur any liability under this Agreement as a result of fraud or negligent or intentional misrepresentation by a tenant. 3. OCCUPANCY OF PROJECT BY ELIGIBLE TENANTS. Participant hereby represents, warr=ts, and covenants as follows: 3.1 Incomc Restrictions. Except as expressly provided herein, throughout the term of this Agreement, all the Units shall be rented only to Eligible Tenants, and shall be rented only at Affordable Rates. Regulatory Agreement Page 3 3.2 Rental Rates. Participant shall rent the Units in accordance with the following rental rates, adjusted to subtract the amount of any tenant paid utilities: (a) Studio Units: (i) Nineteen (19) of the studio Units shall be rented to Eligible Low Income Tenants at 3011/o x 601/o of the Orange County Median Income for a one -person household; (ii) Five (5) of the studio Units shall be rented to Eligible Very Low Income Tenants at 30% x 50% of the Orange County Median Income for a one -person household; (b) One -Bedroom Units: (i) Fifty-one (51) of the one -bedroom Units shall be rented to Eligible Low Income Tenants at 30% x 60% of the Orange County Median Income for a one -and -one-half person household; (ii) Thirteen (13) of the one -bedroom Units shall be rented to Eligible Very Low Income Tenants at 30% x 50° o of the Orange County Median Income for a two -person household; (c) Two -Bedroom Units: (i) Thirteen (13) of the two -bedroom Units shall be rented to Eligible Low Income Tenants at 30% x 60% of the Orange County Median Income for a three -person household; (ii) Three (3) of the two -bedroom Units shall be rented to Eligible Very Low Income Tenants at-30% x 501/o of the Orange County Median Income for a three -person household; The rental rates for the Units shall be adjusted annually based upon current updates of HUD income and rent standards. In no event shall any of the Units be rented at a rate greater than the Affordable Rent applicable to the particular Unit. 3.3 Occupancy By Eligible Tenant. A Unit occupied by an Eligible Tenant at the time of this Agreement shall be treated as occupied by an Eligible Tenant until such Unit is vacated. A Unit previously occupied by an Eligible Tenant and then vacated shall be considered occupied by an Eligible Tenant until reoccupied. If at any time a tenant's household income increases, resulting in disqualification of such tenant as an Eligible Tenant, such tenant shall have a period of ninety (90) days to relocate from the Site. The disqualified tenant shall be fully responsible Regulatory Agree rent Page 4 for the costs and expenses related to the relocation. Should such tenant face extraordinary hardship in relocating from the Site, the tenant may submit a written appeal to the Agency requesting an extension of the time period within which the tenant must relocate. Upon receipt of the written appeal, the Agency Deputy Executive Director in his sole discretion may extend the relocation period for up to a maximum of ninety (90) additional days. 3.4 Income Com utation. Immediately prior to a prospective Eligible Tenant's occupancy of a Unit, Participant shall obtain and maintain on file an income computation and certification form for each such prospective Eligible Tenant dated immediately prior to the date of initial occupancy in a Unit. Participant shall use its best efforts to verify that the income information provided by an applicant is accurate by following the Agency Housing Rehabilitation Loan Program Policies and Procedures and by taking one or more the following steps as a part of the verification process: (i) obtain two (2) pay stubs for the most recent pay periods; (ii) obtain a written verification of income and employment from applicant's current employer, (iii) obtain an income verification form from the Social Security Administration and/or California Department of Social Services if the applicant receives assistance from either agency, (iv) 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 as is reasonably satisfactory; or (v) obtain such other information as may be reasonably required. Participant shall update the foregoing records annually and shall provide copies of updated tenant eligibility records and monthly rental records to Agency for review. Upon review of such records, Agency may at its option perform an independent audit of the tenant eligibility records in order to verify compliance with the income and affordability requirements set forth herein. For each tenant, Participant shall retain the records described in this Section for a period of three years after such tenant no longer resides at the Site. 3.5 Rental _Priority. Tenants living in the Project prior to Participant's rehabilitation of the Units as contemplated by the OPA ("Initial Rehabilitation") who are Eligible Tenants meeting the income restrictions of the Units as set forth in Section 3.1 shall be given first priority in re -leasing Units in the Project follom ing completion of the Initial Rehabilitation. Except as set forth above, Units shall be rented to Eligible Tenants on a first -come, first -served basis; provided, however, that Participant may, in Participant's sole discretion, maintain an "interest list" or "eligibility list" of potential tenants; provided, however, that Participant shall not be liable to Agency or any person, firm, or entity in the event a Unit is rented to a person who is not on any such list or is on such list but is listed lower than another person on such list. 3.6 Rentiniz vacant Units. When a Unit becomes available as a result of a tenant vacating the Unit, Participant shall rent the Unit to an Eligible Tenant in accordance with the following procedure: (a) First, Participant shall rent the Unit to persons who have been displaced by Agency activities, pursuant to California Health and Safety Code Section 33411.3, pro-vided that Agency provides Participant with reasonable notice. Regulatory Agreement Page 5 (b) Second, Participant shall rent any vacant Unit in the order of priority as set forth in Section 3.5. 3.7 Maintenance of Records. Participant shall maintain complete and accurate records pertaining to the Units, and shall permit any duly authorized representative of the Agency to inspect the books and records of Participant pertaining to the Project including, but not limited to, those records pertaining to tenant eligibility and occupancy of the Units. Records pertaining to the Project and Units shall be retained for a period of five (5) years after the termination of this Agreement; records pertaining to tenant and eligibility shall be retained for the period set forth in Section 3.5. 3.8 Reliance on Tenant Representations. Each tenant lease shall contain a provision to the effect that Participant has relied on the income certification and supporting information supplied by the tenant in determining qualification for occupancy of a Unit, and that any material misstatement in such certification (whether or not intentional) will be cause for immediate termination of such lease. 3.9 Conflicts. The rental priority provision set forth in Section 3.6 shall apply only in the event, and to the extent, such provisions are not in conflict with any applicable federal or state law or any regulatory agreement affecting the Project that is recorded in superior priority to this Agreement. 4. MAINTENANCE. 4.1 Maintenance Covenant. Participant agrees to maintain all interior and exterior improvements, including landscaping, on the Site in good condition and repair (and, as to landscaping, in a healthy condition), reasonable wear and tear excepted, and in accordance with all applicable laws, rules, ordinances, orders, and regulations of all federal, state, county, municipal, and other governmental agencies and bodies having or claiming jurisdiction (including, but not limited to, Federal Housing Quality Standards as set forth in 24 C.F.R. 982.401). In addition, Participant shall keep the Site free from all graffiti and any accumulation of debris or waste material. Participant shall make all repairs and replacements necessary to keep the improvements in good condition and repair and shall promptly eliminate all graffiti and replace dead and diseased plants and landscaping with comparable approved materials. The maintenance covenant contained in this Section shall remain in effect for the term of this Agreement. 4.2 Agency Rights. Agency shall have the right to enter upon the Site to inspect both the interiors and exteriors of the Site, upon seventy-two (72) hours' notice to Participant. Agency may perform or cause to be performed the maintenance necessary to cure any default of these maintenance covenants and Participant shall be liable for payment to Agency for Agency's reasonable costs (excluding staff salaries and overhead and other similar costs) to perform such required maintenance; provided, however, that Participant first be given written notice by Agency of the actions required to cure any default, and Participant, after receipt of such notice, shall have thirty (30) days to cure such defaults, but Participant shall not be deemed in default of the foregoing maintenance covenant if such Regulatory Agreement Page 6 default cannot reasonably be cured within the thirty (30) day period referenced above so long as Participant has commcnced to cure such default within the same thirty (30) day period and is diligently proceeding with the work to cure such default. Notwithstanding the foregoing, if any property conditions are reasonably identified by Agency after a property inspection attended by a representative of Participant that pose an immediate danger to life or limb, Participant shall have three (3) days to effect corrections of such condition(s) to Agency's reasonable satisfaction. 4.3 Annual Report. Participant covenants and agrees to submit to the Agency an annual report (the "Annual Report') required by California Health and Safety Code Section 33418. The Annual Report shall include for each Unit the rental rate and the income and family size of the occupants, and shall also include the records described in Section 3.5 herein and the audited financial statements described in Section 5.11 of the OPA. The income information shall be supplied by the tenant in a certified statement on a form provided by the Agency. The Participant shall submit the Annual Report on or before the end of the first calendar quarter of the year following the year covered by the Annual Report. The Participant shall provide for the submission of such information in its leases with tenants. Agency shall not charge Participant a fee for reviewing the Annual Report, or for Agency's or Participant's compliance with Health and Safety Code § 33418. 4.4 Mana ement Plan. Prior to the date of this Agreement, Participant shall prepare and submit to the Agency Executive Director a management plan in accordance with the following {"Management Plan'): (a) The Management Plan, including such amendments as may be approved in writing by the Agency, shall remain in effect for the terra of this Agreement. Participant shall not amend the Management Plan or any of its components without the prior written consent of the Agency. The components of the Management Plan shall include: (1) Management Agent. The name and qualifications of the proposed management agent. The Agency shall approve or disapprove the proposed management agent in writing based on the experience and qualifications of the management agent. The management agent shall have demonstrated experience in operating affordable housing comparable to the Project. (2) Management Program. A description of the proposed management, maintenance, tenant selection and occupancy policies and procedures for the Units. (3) Management A refit. A copy of the proposed management agreement specifying the amount of the management fee and the relationship and division of responsibilities between Participant and management agent. (4) Tenant Lease or Rental Agreement. A copy of the Regulatory Agreement Page 7 proposed tenant lease or rental agreement to be used in renting the Units. (5) Annual Qperating_ Budget. Prior to the completion of rehabilitation and annually thereafter not later than fifteen (15) days prior to the beginning of the next fiscal year of the Project, Participant shall submit a projected operating budget to the Agency Executive Director for review and approval. The Agency shall not unreasonably withhold, condition or delay its approval of any matter for which its approval is required hereunder, and such matter shall be deemed approved unless the Agency provid::s to Participant its written disapproval within thirty (30) days after receipt of a request for approval, provided Participant includes %ith its request, a written notice, in capital letters, stating as follows: NOTICE: PURSUANT TO SECTION 4A OF THE REGULATORY AGREEMENT BETWEEN THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH AND KDF QV, L.P., FAILURE BY THE AGENCY TO APPROVE OR DISAPPROVE THE MATTER SUBMITTED WITH THIS REQUEST WITHIN 30 DAYS SHALL BE DEEMED AN APPROVAL. Any disapproval shall be in writing and contain the Agency's reasons for disapproval. (b) Participant hereby covenants and agrees the Agency shall have the right, at any time and from time to time, to give notice to Participant if the Agency determines that the Project is not being managed or maintained in accordance with the Management Plan. The Agency may require the Participant to change management practices or to terminate the management agent and retain a different management agent, approved by the Agency. The Agency agrees that prior to requiring the Participant to change its management agent or the management practices the Agency shall informay consult with Participant, in an attempt to resolve the dispute. If the Agency determines that such an attempt at informal resolution has been unsuccessful, it shall give the Participant thirty (30) days written notice to change the management agent or practice, as the case may be. If Participant fails to do as requested by the Agency in the written notice, the Agency may then require the immediate change of the management practice or agent, as the case may be. The management agreement shall provide that it is subject to termination by the Participant without penalty, upon thirty (30) days prior written notice, at the direction of the Agency. Within ten (10) days following a direction of the Agency to replace the management agent, the Participant shall select another management agent or make other arrangements satisfactory to the Agency for continuing management of the Project. The Participant shall notify the Agency upon learning that there is a voluntary change in the management or control of the management agent, and, if the change is unsatisfactory to the Agency, the Agency shall be entitled to require the Participant to change the management agent in accordance with the terms of this paragraph. Regulatory Agreement Page 8 5. ENFORCEMENT. In the event Participant defaults in the performance or observance of any covenant, agreement or obligation of Participant pursuant to this Agreement, and if such default remains uncured for a period of thirty (30) days after written notice thereof (or such longer period as may apply to the specific alleged default) shall have been given by Agency, or, in the event said default cannot be cured within said time period, Participant has failed to commence to cure such default within said thirty (30) days and diligently prosecute said cure to completion, then Agency shall declare an "Event of Default" to have occurred hereunder, and, at its option, may take one or more of the following steps: (a) By mandamus or other suit, action or proceeding at law or in equity, require Participant to perform its obligations and covenants hereunder or enjoin any acts or things which may be unlawful or in violation of this Agreement; or (b) Take such other action at law or in equity as may appear necessary or desirable to enforce the obligations, covenants and agreements of Participant hereunder, including foreclosure pursuant to the OPA. Except as otherwise expressly stated in this Agreement, the rights and remedies of the parties are cumulative, and the exercise by any 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 another party. 6. NONDISCRIMINATION. There shall be no discrimination against or segregation of any person, or group of persons, on account of race, color, creed, age, class, income, religion, sex, sexual orientation, marital status, rational origin or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Site, or any part thereof, or in the awarding of contracts for the Project, nor shall Participant, 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, Iessees, subtenants, sublessees or vendees of the Site, or any part thereof, or in the awarding of contracts for the Project (except as permitted by this Agreement). Participant shall comply with all applicable federal, state and local nondiscrimination, fair housing, and equal opportunity requirements. In addition, Participant shall conduct affirmative marketing and minority outreach activities as required by HOME regulations. 6.1 Form of Nondiscrimination and Nonsegregation _Clauses. The Participant shall refrain from restricting the rental, sale or lease of the property on the basis of race, color, creed, age, class, income, religion, sex, sexual orientation, marital status, national origin or ancestry of any person. 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, his heirs, executors, administrators and assigns, and all persons claiming under or through him, that there shall be no discrimination against or segregation of, any person or group of persons on account of Regulatory Agreement Page 9 race, color, creed, age, class, income, religion, sex, sexual orientation, marital status, national origin or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the land herein conveyed, nor shall the grantee 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 in the land herein conveyed. The foregoing covenants shall run with the land. (b) In Leases: "Me Iessee herein covenants by and for himself, 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 follov6ng conditions: That there shall be no discrimination against or segregation of any person or group of persons, on account of race, color, creed, age, class, income, religion, sex, sexual orientation, marital status, national origin or ancestry 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 leased." (c) In Contracts: "There shall be no discrimination against or segregation of any person, or group of persons on account of race, color, creed, age, class, income, religion, sex, sexual orientation, marital status, national origin or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the 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 lessees, subtenants, sublessees or vendees of the land" 7. COVENANTS TO RUN WITH THE LAND. Participant hereby subjects the Site to the covenants, reservations, and restrictions set forth in this Agreement. Agency and Participant hereby declare their express intent that all such covenants, reservations, and restrictions shall be deemed covenants running with the land and shall pass to and be binding upon the Participant's successors in title to the Site; provided, however, that on the termination of this Agreement said covenants, reservations and restrictions shall expire, except the nondiscrimination covenants contained in Section 6 and Section 6.I shall remain in perpetuity. All covenants without regard to technical classification or designation shall be binding for the benefit of the Agency, and such covenants shall run in favor of the Agency for the entire term of this Agreement, without regard to whether the Agency is or remains an owner of any land or interest therein to which such covenants relate. 8. ATTORNEYS' FEES. If any action or proceeding is brought by either party against the other under this Agreement, whether for interpretation, enforcement or otherwise, Participant hereby expressly agrees to pay for all costs and expenses for such action or proceeding, including the fees of attorneys and any expert witnesses. This provision shall also apply to any postjudgment action by either party, including without limitation efforts to enforce a judgment. Regulatory Agreement Page 10 9. AMENDMENTS. This Agreement shall be amended only 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 of Orange. 10. NOTICE. Any notice required to b , given hereunder shall be made in writing and shall be given by (i) personal delivery, (ii) courier service that provides a receipt showing date and time of delivery, or (iii) certified or registered mail, postage prepaid, return receipt requested, at the addresses specified below, or at such other addresses as may be specified in writing by the parties hereto: Agency: Redevelopment Agency of the City of Huntington Beach 2000 Main Street Huntington Beach, CA 92648 Attn: City Clerk Participant: KDF QV, L.P. 4685 MacArthur Ct., Suite 422 Newport Beach, California 92660 Attn: Mark Hyatt Notices personally delivered or delivered by courier shall be effective upon receipt. Mailed notices shall be effective on the earlier of receipt or Noon on the second business day following deposit in the United States mail. 11. SEVERABILIW/WAIVER/INTEGRATION. 11.1 Severability. If any provision of this 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. 11.2 Waiver. A waiver by either party of the performance of any covenant or condition herein shall not invalidate this Agreement nor shall it be considered a waiver of any other covenants or conditions, nor shall the delay or forbearance by either party in exercising any remedy or right be considered a waiver of, or an estoppel against, the later exercise of such remedy or right. 11.3 Integration. This Agreement contains the entire Agreement between the parties and neither party relies on any warranty or representation not contained in this Agreement. 12. GOVERNING LAW. This Agreement shall be governed by the laws of the State of California. 13. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall constitute one original and all of which shall be one and the same instrument. Regulatory Agreement Page I I 14. SUBORDINATION. This Agreement shall be junior and subordinate to the liens of the deeds of trust identified in the OPA as the First Deed of Trust, and such other and further documents, including regulatory agreements, as the California Statewide Communities Development Authority or other lenders may require, not to exceed SEVEN MILLION SEVEN HUNDRED THOUSAND DOLLARS ($7,700,000.00) in debt. If, from time to time and at one or more times, Participant seeks to refinance the loan secured by any deed of trust which is either superior or junior to this Agreement, Agency shall have the right to approve such refinancing and deed of trust pursuant to the OPA. Agency agrees to execute such subordination agreements as may be required to effect the priority set forth in this Section. IN WITNESS WHEREOF, the Agency and Participant have executed this Regulatory Agreement and Declaration of Covenants and Restrictions by duly authorized representatives on the date fast written hereinabove. [end — signature page follows] Regulatory Agreement Page 12 ATTEST: Agency Clerk REVIEWED AND APPROVED: Ray Silver, Executive Director APPROVED AS TO FORM: Kane, Ballmer & Berkman Agency Special Counsel hb1qpvadi WV1atory "AGENCY" REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body corporate and politic By: Chairman APPROVED AS TO FORM: Agency General Counsel INITIATED AND APPROVED: David Biggs, Deputy Executive Director "PARTICIPANT" KDF QV, L.P., a California Iimited partnership By: KDF Communities -- QV LLC, Its Co -General Partner By: Mark E. Hyatt Its Limited Managing Member Regulatory Agreement Page 13 STATE OF CALIFORNIA ) ) ss. COUNTY OF ORANGE ) On before me, personally appeared personally ]mown to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose names) is/arc subscribed to the within instrument and acknowledged to me that he/shelthey executed the same in his/her/their authorized capacity ies), and that by his/her/their signatures(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. Notary Public [SEAL] STATE OF CALIFORNIA ) ) ss. COUNTY OF ) On _ , before me, _ _ , personally appeared personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/shelthey executed the same in hisiber/their authorized capacity(ies), and that by his/her/their signatures(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. Notary Public [SEAL] ATTACHMINT NO. 1 LEGAL DESCRIPTION OF SITE ALL THAT CERTAIN LAND SITUATED IN THE STATE OF CALIFORNIA, COUNTY OF ORANGE, CITY OF HUNTINGTON BEACH, DESCRIBED AS FOLLOWS: PARCEL 1, AS SHOWN ON A MAP FILED IN BOOK 43, PAGE 19 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF ORANGE COUNTY, CALIFORNIA. EXHIBIT I Project Budget [behind this page] QUO VAD1S APTS. Sources and Uses USES 104 TOTALS AC(OUISfTIQN Purchase Price 9,500.000 Land 25% 2,375,000 Building 7.125.000 Brokerage Fees 190.000 9,690,C00 Sub -Total CONSTRUCTION COSTS Rehab 675,475 Supervision 39,OC3 Profs & ON 70,2C5 Contingency 104.575 889,257 Sub Total $8,551 per unit FINANCING COSTS Permanent Lender 247.750 Construction Lender 160.000 Bond Issuance 272,800 Other (legal) 10,000 690,550 Sub -Total INTEREST Bridge Loan Interest 40,000 Letter of Credit Fees 192,500 Sub Total 232,500 OTHER Survey 6,000 Engineering 3,500 Appraisal 12,530 Environmental Audit 3,510 Tax Credit Fees 47.340 Consulting 11,000 Title & Recording 10,000 Accounting 10,000 Operating Reserve 200.000 303,840 Sub -Total DEVELOPER EEE 1,200.000 TOTAL USES 13,006,`147 sources Tax Credit Equity 2,871.406 Deferred Developer Fee 649,741 Tax Credit Bridge ban Perm. Debt 7.700,000 City of Fib Loan 1,700,000 Developer Equity 85.000 TOTAL SOURCES 13.006,147 »»»»zf »RY R»�»»g gam» V�jq R�-sR �Ra-g- � I 5 s "» M «o 29 »tts� HE m 1 » W F z �m MEN¢8i �a rnc�daoaa aauw E �urSw r-m LL S�:�v� �d�'rco ¢a y3c>�a � t 06 Wiz„ � V4MN RECORDED RETURN T0: ' KDF QV, L.P. 4685 MacArthur Ct., Suite 422 Newport Beach, California 92660 Attn: Mark Hyatt (Space Above This Line For Recordees Office Use only) MLEASE OF CONSTRUCTION COVENANTS WHEREAS, KDF QV, L.P., a California limited partnership ("Owner"), is the owner of the fee interest in that certain real property more pa.•ticularly described in the legal description attached hereto as Exhibit No. 1 and incorporated herein (the "Site"); and WHEREAS, by an Owner Particina+.ion Agreement (hereinafter referred to as the "Agreement") dated as of _ May 7, 2001, by and between Owner and the REDEVELOPMENT AGENCY OF :TIC L"1TY OF HUNTINGTON BEACH, a public body, corporate and politic (hereinafter referred to as "Agency"), Owner has constructed and rehabilitated " 'the.improvements on the Site according to the terms and conditions of said Agreement; and WHEREAS, pursuant to the Agreement, promptly after satisfactory completion of all construction and rehabilitation work by Owner upon the Site, Agency shall furnish Owner with a Release of Construction Covenants in such form as to permit it to be recorded in the Official Records of the County of Orange; and WHEREAS, the issuance by Agency of the Release of Construction Covenants shall be conclusive evidence that Owner has complied with the terms of the Agreement pertaining to the construction and rehabilitation of improvements on the Site; and WHEREAS, Agency has conclusively determined that the construction and rehabilitation of improvements on the Site has been satisfactorily completed as required by the Agreement; and • NOW, THEREFORE: 1. As provided in the Agreement, Agency does hereby certify that construction and rehabilitation of the improvements on the Site have been fully . and satisfactorily performed and completed, and that such development is'in full compliance with said Agreement. 2. This Release of Construction Covenants shall not constitute evidence of compliance with or satisfaction of any obligation of Owner to any holder of a mortgage, or any insurer of a mortgage, securing money loaned to finance construction work on the Site, or any part thereof. t Nothing contained herein shall modify in any way any other provision of said Agreement. Release of Comtruction Coverzants Page 1 3. This Release is not a Notice of Completion as referred to in California QW1 Code Section 3093. 4. All covenants set forth_ in the Agreement and the Regulatory Agreement entered into by and between the Agency and Participant on re main in effect in accordance with the terms thereof. IN WITNESS WHEREOF, Agency has executed this Release as of this loth clay of November, 2002 REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body corporate and politic By: A& Dave C. Biggs Its: N ty__&ecutive birector -ATTEST: Agency Clerk Release ofConstruetion Covenants Page 2 CONSENT TO RECORDATION KDF QV, L.P., a California limited partnership, owner of the fee interest in the Site legally described in Exhibit No. 1 attached hereto does hereby consent to the recordation of the foregoing Release of Construction Covenants against the Site. - "OWNER" KDF QV, L.P., a California limited partnership Fay: KDF Communities — QV LLC, Its Co -General Partner By- )"`iimited Managing Member Release of Construction Covenants Page 3 STATE OF CALIFORNIA ) (W-1 ) ss. COUNTY OF ORANGE ) On D o Zoo 2; before- me, 1 ,tQ-4L'-*?ytn, . . ta,�,i��.�4 personally appeared personally known to me (or f�FOTH to ' facia -evidence) to be the persono whose name(4 is/are subscribed to the within instrument and acknowledged to me that helsli{they executed the same in his4wAheir authorized capacity(ies), and that by hisAwAkir signatureo on the instrument the persons), or the entity upon behalf of which the person(,s'j acted, executed the instrument. WTI'NESS my hand and official seal. / 77. ;r Notary Public (SEAL) WO:Zia • r. STATE OF CALIFORNIA ) : ss. . COUNTY OF ORANGE ) On o� D before me, J personally appeared pe onall o to me '(or proved to me on the basis of satisfactory evidence) to be the person(s) whose names) islare subscribed to the within instrument and acknowledged to me that he/shelthey 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. (SEAL) L-- -A FA V WN � IM70%,"'N' MW _{ PR 77 .. EXHIBIT NO. I LEGAL DESCRIPTION OF SITE ALL THAT CERTAIN LAND SITUATED IN THE STATE OF CALIFORNIA, COUNTY. OF ORANGE, CITY OF HUNTINGTON BEACH, DESCRIBED AS FOLLOWS: PARCEL 1, AS SHOWN ON A MAP FILED IN BOOK 43, PAGE 19 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF ORANGE COUNTY, CALIFORNIA. KANE, BALLMER & BERKMAN A uw CORPOR7nON 515 SOL'TIl FICUEROA STREET, SUITE 1850 LOS ANGELES, CALIFOR\L% 90071 TELEPHONE (213) 61744SO M (213) 625-0931 MEMORANDUM TO: Steve Holtz FROM: Murray Kane DATE:June , 2001 RE: Quo Vadis Execution Documents Steve: As you knoxv, on May 7, 2001, the Agency board approved the OPA between the Agency and KDF QV, L.P. (AParticipant=) for the AQuo Vadis= affordable housing development. As part of its approval, the Agency allowed for certain documents to be finalized between the Agency and the Participant for execution prior to the Close of Escrow, so long as those documents did not change the — substance of the OPA. Therefore, enclosed please find the following finalized documents for Agency execution: 1. Regulatory Agreement and Declaration of Covenants and Restrictions - NO CHANGE to form attached to OPA. 2. Deed of Trust and Assignment of Rents - NO CHANGE to form attached to OPA. 3. Subordination Agreement - Pursuant to Section 3.8 of the OPA, the Agency authorized the Executive Director to approve a form of Subordination Agreement that reflects the subordination of the Agency Loan and which is consistent with the OPA. This Subordination Agreement satisfies Section 3.8 of the OPA and is consistent %Kith the OPA. hb1gwYadis,ho11z11r °.A.CITY OF HUNTINGTON BEACH 161J Inter -Office Communication Economic Development Department TO: Connie Brockway, City Clerk FROM: Steve Holtz, Assistant Project Manager DATE: June 20, 2001 SUBJECT: Owner Participation Agreement for Quo Vadis Affordable Housing Project One original copy of the Ovmer Participation Agreement (OPA) for the Quo Vadis affordable housing project, which was approved by the City Council and Redevelopment Agency on May 7, 2001, was delivered to the project developer earlier today. The OPA (without any of the OPA attachments) was sent to Mark Hyatt, the managing limited partner of KDF QV, L.P. One additional original copy of the OPA is on file in your office. L.__ _. 5-1 qt,-TCyi pv. . CounciVAgency Meeting Held: 6S - 01--01 Deferred/Continued to: N4.4-1— V Approved q Conditiona'ly Approved ❑ Denied WC le gnature Council Meeting Date: 5/7/01 Department ID Number: ED 01-19 CITY OF HUNTINGTON BEACH REQUEST FOR COUNCIUREDEVELOPNIENT AGENCY ACTION SUBMITTED TO: HONORABLE MAYOR/CHAIRMAN AND CITY COUNCIL MEMBERS/REDEVELOPMENT AGENCY MEMBERS z SUBMITTED BY: RAY SILVER, City Administrator/Executive Directory -Ic PREPARED BY: DAVID C. BIGGS, Director of Economic Development/Deput9� Executive Director n c JQe s. �✓o . -? �9 � � � SUBJECT: Approve an Owner Participation Agreement with KDF Qt L.P. for the Quo Vadis Apartments Affordable Housing Project _i A Statement of Issue, Funding Source, Recommended Action, Alternative Action(s), Analysis, Environmental Status, Attachment(s) Statement of Issue: An Owner Participation Agreement (OPA) between the Agency and KDF QV, L.P. is submitted for approval. This agreement provides for a loan in the amount of $1,700,000 of HOME Investment Partnership program funds and Agency Housing Set Aside funds for the acquisition and rehabilitation of Quo Vadis Apartments, located at 18992 Florida Street. In addition, an Agency resolution is submitted for adoption. This resolution would allow the Agency to substitute bond proceeds as the source of financing for this project, at some point in the future, should it become feasible. Funding Source: $480,000 from HOME Investment Partnership program funds (account 84780401.8220), $193,000 from Agency Housing Set Aside funds (account 30680301.82800), and $1,027,000 from the unappropriated Agency Housing Set Aside fund balance. Recommended Action: Motion to: City Council Action: 1. Temporarily waive the City's insurance requirements for the purpose of approving the Agency loan. Direct staff to ensure that insurance requirements as described in the Owner Participation Agreement are met by KDF QV L.P. by the close of escrow. Redevelopment Agency Actions: 1. Approve an Owner Participation Agreement with KDF QV, L.P. for $1,700,000 using Agency Housing Set Aside and HOME Investment Partnership Program funds for the acquisition and rehabilitation of 18992 Florida Street. r r REQUEST FOR COUNCIUREDEVELOPMENT AGENCY ACTION MEETING DATE: 517101 DEPARTMENT ID NUMBER: ED 01-19 2. Appropriate $1,027,000 from the Agency Housing Set Aside Fund to pay for site acquisition costs. 3. Authorize execution and recordation of the OPA, all attachments, and other necessary related documents by the Agency Chairman and Clerk, when advised by the Agency General Counsel's Office. 4. Authorize the wire transfer of Agency funds in the amount of $1,700,000 to First American Title Company to effect the closing of the acquisition escrow. 5. Adopt Resolution Number / , A resolution of the Redevelopment Agency of the City of Huntington Beach Declaring Intention to Reimburse Expenditures from the Proceeds of Tax -Exempt Obligations and Directing Certain Actions 6. Authorize acceptance of deposit funds from KDF Communities, L.L.C. to cover Agency expenses associated with this transaction, authorize expenditure of such deposit funds to pay for project costs, authorize reimbursement to KDF Communities, L.L.C. of any unspent deposit funds after the close of escrow, and authorize the Executive Director to enter into any required reimbursement agreement in connection therewith. Alternative Actions): Do not approve the proposed transaction, or direct staff to renegotiate the deal terms with KDF QV, L.P. Analysis: The Economic Development Department was recently approached by Village Investments and KDF Communities, L.L.C. with a proposal to acquire and rehabilitate the Quo Vadis Apartments complex, which is located at 18992 Florida Street. This property is a 104-unit, two-story complex with studio, one bedroom, and two bedroom units located on the corner of Florida Street and Garfield Avenue. Village Investments and KDF Communities proposed financing the acquisition and rehabilitation of Quo Vadis Apartments, which will cost a approximately $13,006,000, by leveraging multifamily housing revenue bonds proceeds, 4% Tax Credit proceeds, a Redevelopment Agency residual receipts loan, and developer equity. In exchange for an Agency loan of $1,700,000, the developer has agreed to make all 104 units affordable to very low and low-income households for at least 60 years. Village Investments and KDF Communities, L.L.C. have experience developing and managing affordable housing projects, having completed twelve similar projects in the past ten years. For this project, the two have created a partnership using the name KDF QV, L.P. to act as developer and owner of the site. Staff negotiated deal points with the partners for this project, which are attached to this request as Attachment 2. These deal points include the following terms: RCA for Quo Vadis OPA -2- 4130101 11:20 AM REQUEST FOR COUNCILIREDEVELOPMENT AGENCY ACTION MEETING DATE: 5/7101 DEPARTMENT ID NUMBER: ED 01-19 1. The Agency will provide $1,700,000 in HOME Investment Partnership program funds and Housing Set Aside funds as an acquisition/rehabilitation residual receipts loan with 3% annual simple interest. 2. For a period not less than 60 years, all 104 units in the properties will be subject to tenant household income and rent affordability restrictions as described in the following schedule: Unit Size Tenant Income Level Number of Units Proposed Rent Studio 60% 19 $741 50% _ 5 $645 1 Bedroom 60% 51 $786 50% 13 $738 2 Bedrooms 60% 13 $936 50% 3 $829 Total Number of Units 104 3. To ensure that overcrowding will not take place, the maximum number of persons that may occupy a single residential unit may not exceed the following limits. Unit Size Maximum Occupancy Studio 2 1 Bedroom 3 2 Bedroom 5 4. KDF QV, L.P. will obtain multifamily housing revenue bond financing in an amount up to $7,700,000, tax credit financing in amount anticipated to be $2,800,000, and will contribute equity of $85,000 for property acquisition and rehabilitation expenses. 5. KDF QV, L.P. will fund repairs and improvements to the properties so as to ensure that the buildings are brought into and will remain in compliance with HUD Housing Quality Standards along with City and State laws and codes. RCA for Quo Vadis OPA -3- 4130101 11:20 AM REQUEST FOR COUNCILIREDEVELOPMENT AGENCY ACTION MEETING DATE: 517101 DEPARTMENT ID NUMBER: ED 01-19 6. At the beginning of the third year of the loan agreement, and continuing for the duration of the agreement, KDF QV, L.P. will make annual payments to the Agency consisting of fifty percent (50%) of the project's end -of -year net income. 7. After the 60t" year of the loan agreement, should KDF QV, L.P. elect to terminate the project's income and affordability restrictions, all remaining unpaid principal and interested on the Agency's loan will be due; however, the unpaid balance of the loan will not require repayment and will not accrue further interest charges for whatever period KDF QV, L.P. maintains the income and affordability restrictions on the properties. This project is an opportunity for the Agency to physically improve and indefinitely preserve the affordability of 104-units of existing housing, thereby enhancing the quality of life for a significant number of lower -income families. The developer's experience in affordable housing demonstrates their commitment to the Agency's goals of providing high quality housing for working -wage residents. On March 19, 2001, the City Council held a public hearing and approved a resolution authorizing the developer to submit an application to the State for an allocation of multifamily housing revenue bonds. In approving the developer's request to apply for bond proceeds, the City incurred no pecuniary liability for the bonds. If a bond allocation is received, all bond payments and security will be supported solely by the project. In addition, if a bond allocation is received, the developer will automatically qualify for tax credit financing. The current requested action of the Agency is approval of a residual receipts loan in the amount of $1,700,000. Approval of the loan will demonstrate Agency support for the project and will enable the developer to proceed with a significant financial commitment to purchase the apartments. The Agency's loan has been made contingent upon the developer's successful receipt of bond and tax credit funds Included in this request with the loan agreement between the Agency and KDF QV, L.P. is an Agency resolution regarding bond financing. This resolution will allow the Agency to, at some point in the future, consider issuing multifamily housing revenue bonds as a funding source for affordable housing projects thereby freeing other funds for additional affordable housing projects. Also included is requested authorization to receive and expend deposit funds provided by KDF Communities, L.L.C. for the purpose of covering Agency expenses associated with this project. This project was reviewed two times by the Council's Economic Development Committee and on April 4, 2001 was recommended for approval under the current deal terms. The Agency's economic consultant, Keyser Marston Associates Inc., additionally favorably reviewed the project. The attached Agency resolution was prepared by the City Attorneys Office for submission together with the Owner Participation Agreement. These documents are attached for your review. RCA for Quo Vadis OPA -4- 4130101 11:20 AM REQUEST FOR COUNCIUREDEVELOPMENT AGENCY ACTION MEETING DATE: 517101 DEPARTMENT ID NUMBER: ED 01-19 Environmental Status: Categorically excluded under the National Environmental Protection Act (NEPA). Categorically exempt under the California Environmental Quality Act (CEQA), Section 15061(b)(3). Attachments : 1. Owner Participation Agreement 2. Project Deal Points 3. Agency Resolution Number 3 /9 Declaring Intention to Reimburse Expenditures 4. 1 Fiscal Imoact Statement RCA Author. HOLTZ(5901) RCA for Quo Vadis OPA -5- 4130101 11:20 AM Owner Participation Agreement between the Redevelopment Agency and KDF QV, L.P. ATTACHIIISIENT #1 ---------- °j, j CITY OF HUNTINGTON BEACH AAIL InterOffice Communication Economic Devclopment Department TO: Honorable Mayor/Chairman and City Council Members/Redevelopment Agency Members FROM: Ray Silver, City Administrator/Executive Director N PP.EPARED BY: David C. Biggs, Director of Economic Development/Deputy Executive Director DATE: May 7, 2001 C 2 o- 4-[c'� z -< C-) a: ©pr < >-n�0 c-� F Cl) a SUBJECT: Late Communication for Agenda Item F-1 Please accept this late communication of the PowerPoint Presentation that will be sho%NM for Agenda Item F-1: Affordable Housing Loan Agreement with KDF QV, L.P. for Quo Vadis Apartments. Thank You. LATE COMMWJIGiTOf✓ Affordable Housing Loan Agreement with KDF QV, LP City of Huntington Beach May 7, 2001 Agenda Item F-1 • Located at Florida Street & Garfield Avenue. • Total of 104 apartments (studios; one -bedrooms, & two -bedrooms). • Includes Pool, Jacuzzi, & Carport Parking. .This partnership has experience creating affordable housing with 12 similar projects in the past 10 years. Staff negotiated deal points with the partners for this project that include an Agency residual receipts loan of $1.7 million in exchange for long term rent and income restrictions. �4 Tax Credits . $2,871,406 On March 19; 2001, the City Council approved a resolution supporting the developer'sapplication for Multifamily Housing Revenue Bonds. •.- Affordability for 60 .years. All units restricted to low-income households: ® 20% for households earning 50% median income. 0 80% for households earning 60% median income. Agency residual receipts loan of $1.7 million at 3% interest for 60_years (cost per unit is $16,346). Loan repayment begins in year 3 with annual payments of 50% of the projects net income. After 60 years, all outstanding loan principal and interest must be repaid before affordability restrictions go away. During Rehabilitation ® KDF QV, LP will provide tenant relocation, if needed. ® Property will .come into compliance with City Housing Codes and Federal Housing Quality Standards. After Rehabilitation • All tenants must be low-income. • Rents must be affordable. • Maximum unit occupancy limits must be enforced. • The property must be well maintained. ',- 0 Household Size 50% of Median 60% of Median 1 $25,800 ' $30,950 2 . $29,500 $35,400 3 $33,150 $39,800 4 $36,850 $44,200 5 $39,800 $47,750 Unit Size Tenant Income Level Number of Units Restricted Rent Studio 60% 19 $741 50% 5 $645. 1 Bedroom 60% 51 $786 50% 13 $738 2 Bedrooms 60% 13 $936 50% 3 $829 Total Number of Units 104 WF 1 Reduces overcrowded housing for families with children Reduces households overpaying for rent Improves quality of housing through rehabilitation Provides affordable rents for low-income working families •, �T kz"°,�, Action- Temporarily 01®� ®0 l-. Action 1. Approve a $1,700,000 loan agreement with KDF QV, LID for the acquisition and rehabilitation. of Quo Vadis Apartments. 2. Appropriate $1,027,000 from the Agency Housing Set Aside Fund. 3. Authorize the Agency Chairman and Clerk, to execute/record the loan agreement and related documents. Cont. w.y. Agencyecommended 4. Authorize the wire transfer of funds to escrow. 5. :Adopt Resolution No. 319, which would allow the Agency to consider issuing future housing bonds for this project. . 6. Authorize staff to accept and use deposit funds from the developer to cover Agency expenses associated with this transaction, and authorize reimbursement to the developer of any unused deposit funds.. .4 The End This Document was electronically recorded by First American Title 3 FREE RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH 2000 Main Street Huntington Beach, CA 92648 Attn: ecter ca r C14'K Recorded In Official Records,County of Orange Gary L Granville, Clerk -Recorder NO FEE 20010430761 03:26pm 06128/01 200 21 Al2 D01 15 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 (Space Above This Line for Recordees Office Use Only) (Exempt from Recording Fee Per Gov. Cafe §6103) REGULATORY AGREEMENT AND DECLARATION OF COVENANTS AND RESTRICTIONS THIS REGULATORY AGREEMENT AND DECLARATION OF COVENANTS AND RESTRICTIONS ("Agreement") is made and entered into this Ist day of June , 2001, by and between REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body, corporate and politic ("Agency") and KDF QV, L.P., a California limited partnership ("Participant"). RECITALS: A. Agency and Participant have entered into that certain Owner Participation Agreement, dated May 7, 2001 (the "OPA"), concerning Participant's redevelopment of that certain real property, owned in fee by Participant, more particularly described in Attachment No. 1 attached hereto and incorporated by reference herein (the "Site"). The OPA describes the "Project" which generally consists of Participant's rehabilitation of an existing multi -family apartment complex comprised of a total of one hundred and four (104) Units on the Site and subsequent management thereof as an affordable rental housing complex. The OPA is hereby incorporated herein by this reference as though fully set forth herein. Any capitalized terms not defined herein shall have the meanings ascribed to such terms in the OPA. B. Participant has executed that certain promissory note (the "Note") dated June Z , 2001, pursuant to which Agency has provided Participant with a loan in the principal amount of ONE MILLION SEVEN HUNDRED THOUSAND DOLLARS ($1,700,000.00) ("Loan Amount"). The Note is secured by an Agency Deed of Trust With Assignment of Rents dated on or about the date of the Note. C. Agency and Participant now desire to place restrictions upon the use and operation of the Project, in order to ensure that the Project shall be operated continuously as an affordable housing project available for rental in accordance with the terms set forth below for the term of this Agreement. Regulatory Agreemeit Page l AGREEMENT: NOW, THEREFORE, the Participant and Agency declare, covenant and agree, by and for themselves, their heirs, executors, administrators and assigns, and all persons claiming under or through them, that the Site, for the term of this Agreement, shall be held, transferred, encumbered, used, sold, conveyed, leased and occupied, subject to the covenants and restrictions hereinafter set forth: 1. DEFINITIONS. 1.1 Affordable Rent. As used in this Agreement, the term "Affordable Rent" shall mean rental rates described in Section 3.2 herein, but in no event to exceed "low income" and "very low income" rent as defined by California Health &. Safety Code Section 50053, or its successor, and as set forth by the HOME Program in 24 C.F.R. 92.252, or its successor. 1.2 Eligible Tenant. As used in this Agreement, the tern "Eligible Tenant" shall refer to Eligible Low Income Tenants and Eligible Very Low Income Tenants who are eligible to rent a Unit. 1.3 Elipible_Low_Income Tenant. As used in this Agreement, the term "Eligible Low Income Tenant" shall mean a family or individual whose annual income does not exceed sixty percent (60%) of the median income for the Orange County Primary Metropolitan Statistical Area (PMSA) as determined by the U.S. Department of Housing and Urban Development (HUD) with adjustments for smaller and larger families. 1.4 Eligible Very Low Income Tenant. As used in this Agreement, the term "Eligible Very Low Income Tenant" shall mean a family or individual whose annual income does not exceed fifty percent (501/o) of the median income for the Orange County PMSA as determined by the U.S. Department of Housing and Urban Development (HUD) with adjustments for smaller and larger families. 1.5 Orange County Median Income. For purposes of this Agreement, the term "Orange County Median Income" shall mean the median income for the Orange County PMSA, with adjustments for household sip:, as determined from time to time by HUD pursuant to the United States Housing Act of 1937 as amended, or such other method of median income calculation applicable to the City that HUD may hereafter adopt in connection with said Act. 1.6 Unit and Units. As used in this Agreement, the term "Unit" shall mean one of the one hundred and four (104) rental dwelling units in the Project (comprised of 24 studio units, 64 one -bedroom units, and 16 two -bedroom units), and the term "Units" shall mean two or more of the one hundred and four (104) rental dwelling units in the Project. The term "Unit" and "Units" shall be used as the context mandates and shall be reasonably interpreted in light of the context in which the term appears. Regulatory Agreement Page 2 2. TERM OF AGREEMENT; RESIDENTIAL -RENTAL PROPERTY. The term of this Agreement shall be sixty (60) years, commencing on the elate of this Agreement. Participant hereby agrees that the Project is to be owned, managed, and operated as a project for Eligible Tenants for the term of this Agreement. To that end, and for the term of this Agreement, the Participant hereby represents, covenants, warrants and agrees as follows: 2.1 Purpose. The Site will be acquired and the Project developed for the purpose of providing Eligible Tenants rental housing. 2.2 Facilities. All of the Units in the Project shall contain facilities adequate for living, sleeping, eating, cooking and sanitation in accordance with all applicable federal, state and local laws and codes. 2.3 Residential Use. None of the 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, or trailer court or park without the Agency's prior written consent. 2.4 Maximum Occurancx. The maximum number of persons in a household that may occupy any of the studio Units may not exceed two (2) persons; any of the one - bedroom Units may not exceed three (3) persons; and any of the two -bedroom Units may not exceed (5) five persons. 2.5 Conversion of Units. No part of the Project will at any time be owned by a cooperative housing corporation, nor shall the Participant take any steps in connection with the conversion to such ownership or uses to condominiums, or to any other form of ownership, without the prior written approval of Agency. 2.6 Preference to Eligible Tenants. All of the Units will be made available for rental in accordance with the terms of this Agreement, and the Participant shall not give preference to any particular class or group in renting the Units in the Project, except to the extent that the Units are required to be leased or rented to Eligible Tenants and except as provided in Section 3.3 below. 2.7 Liability of Participant. Participant and the management agent shall not incur any liability under this Agreement as a result of fraud or negligent or intentional misrepresentation by a tenant. 3. OCCUPANCY OF PROJECT BY ELIGIBLE TENANTS. Participant hereby represents, warrants, and covenants as follows: 3.1 Income Restrictions. Except as expressly provided herein, throughout the term of this Agreement, all the Units shall be rented only to Eligible Tenants, and shall be rented only at Affordable Rates. Regulatory Agreement Page 3 d 3.2 Rental Rates. Participant shall rent the Units in accordance .kith the following rental rates, adjusted to subtract the amount of any tenant paid utilities: (a) Studio Units: (i) Nineteen (19) of the studio Units shall be rented to Eligible Low Income Tenants at 30% x 60% of the Orange County Median Income for a one -person household; (ii) Five (5) of the studio Units shall be rented to Eligible Very Low Income Tenants at 30% x 50% of the Orange County Median Income for a one -person household; (b) One -Bedroom Units: (i) Fifty-one, (51) of the one -bedroom Units shall be rented to Eligible Law Income Tenants at 30% x 60% of the Orange County Median Income for a one -and -one-half person household; (ii) Thirteen (I3) of the one -bedroom Units shall be rented to Eligible Very Low Income Tenants at 30% x 50% of the Orange County Median Income for a two -person household; (c) Two -Bedroom Units: (i) Thirteen (13) of the two -bedroom Units shall be rented to Eligible Low Income Tenants at 30% x 60% of the Orange County Median Income for a three -person household; (ii) Three (3) of the two -bedroom Units shall be rented to Eligible Very Low Income Tenants at 30% x 50% of the Orange County Median Income for a three -person household; The rental rates for the Units shall be adjusted annually based upon current updates of HUD income and rent standards. In no event shall any of the Units be rented at a rate greater than the Affordable Rent applicable to the particular Unit. 3.3 Occupancy By Eligible Tenant. A Unit occupied by an Eligible Tenant at the time of this Agreement shall be treated as occupied by an Eligible Tenant until such Unit is vacated. A Unit previously occupied by an Eligible Tenant and then vacated shall be considered occupied by an Eligible Tenant until reoccupied. If at any time a tenant's household income increases, resulting in disqualification of such tenant as an Eligible Tenant, such tenant shall have a period of ninety (90) days to relocate from the Site. The disqualified tenant shall be fully responsible Regulatory Agreement Page 4 s for the costs and expenses related to the relocation. Should such tenant face extraordinary hardship in relocating from the Site, the tenant may submit a written appeal to the Agency requesting an extension of the time period within which the tenant must relocate. Upon receipt of the written appeal, the Agency Deputy Executive Director in his sole discretion may extend the relocation period for up to a maximum of ninety (90) additional days. 3A Income Computation. Immediately prior to a prospective Eligible Tenant's occupancy of a Unit, Participant shall obtain and maintain on file an income computation and certification form for each such prospective Eligible Tenant dated immediately prior to the date of initial occupancy in a Unit. Participant shall use its best efforts to verify that the income information provided by an applicant is accurate by following the Agency Housing Rehabilitation Loan Program Policies and Procedures and by taking one or more the following steps as a part of the verification process: (i) obtain two (2) pay stubs for the most recent pay periods; (ii) obtain a written verification of income and employment from applicant's current employer; (iii) obtain an income verification form from the Social Security Administration and/or California Department of Social Services if the applicant receives assistance from either agency; (iv) 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 as is reasonably satisfactory; or (v) obtain such other information as may be reasonably required. Participant shall update the foregoing records annually and shall provide copies of updated tenant eligibility records and monthly rental records to Agency for review. Upon review of such records, Agency may at its option perform an independent audit of the tenant eligibility records in order to verify compliance with the income and affordability requirements set forth herein. For each tenant, Participant shall retain the records described in this Section for a period of three years after such tenant no longer resides at the Site. 3.5 Rental Priority. Tenants living in the Project prior to Participant's rehabilitation of the Units as contemplated by the OPA ("Initial Rehabilitation") who are Eligible Tenants meeting the income restrictions of the Units as set forth in Section 3.1 shall be given first priority in re -leasing Units in the Project following completion of the Initial Rehabilitation. Except as set forth above, Units shall be rented to Eligible Tenants on a first -come, first -served basis; provided, however, that Participant may, in Participant's sole discretion, maintain an "interest list" or "eligibility list" of potential tenants; provided, however, that Participant shall not be liable to Agency or any person, firm, or entity in the event a Unit is rented to a person who is not on any such list or is on such list but is listed lower than another person on such list. 3.6 Renting Vacant Units. When a Unit becomes available as a result of a tenant vacating the Unit, Participant shall rent the Unit to an Eligible Tenant in accordance with the following procedure: (a) First, Participant shall rent the Unit to persons who have been displaced by Agency activities, pursuant to California Health and Safety Code Section 3341 I.3, provided that Agency provides Participant with reasonable notice. Regulatory Agreement Page 5 N (b) Second, Participant shall rent any vacant Unit in the order of priority as set forth in Section 3.5. 3.7 Maintenance of Records. Participant shall maintain complete and accurate records pertaining to the Units, and shall permit any duly authorized representative of the Agency to inspect the books and records of Participant pertaining to the Project including, but not limited to, those records pertaining to tenant eligibility and occupancy of the Units. Records pertaining to the Project and Units shall be retained for a period of five (5) years after the termination of this Agreement; records pertaining to tenant and eligibility shall be retained for the period set forth in Section 3.5. 3.8 Reliance on Tenant Representations. Each tenant lease shall contain a provision to the effect that Participant has relied on the income certification and supporting information supplied by the tenant in determining qualification for occupancy of a Unit, and that any material misstatement in such certification (whether or not intentional) will be cause for immediate termination of such lease. 3.9 Conflicts. The rental priority provision set forth in Section 3.6 shall apply only in the event, and to the extent, such provisions are not in conflict with any applicable federal or state law or any regulatory agreement affecting the Project that is recorded in superior priority to this Agreement. 4. MAINTENANCE. 4.I Maintenance Covenant. Participant agrees to maintain all interior and exterior improvements, including landscaping, on the Site in good condition and repair (and, as to landscaping, in a healthy condition), reasonable wear and tear excepted, and in accordance with all applicable laws, rules, ordinances, orders, and regulations of all federal, state, county, municipal, and other governmental agencies and bodies having or claiming jurisdiction (including, but not limited to, Federal Housing Quality Standards as set forth in 24 C.F.R. 982.401). In addition, Participant shall keep the Site free from all graffiti and any accumulation of debris or waste material. Participant shall make all repairs and replacements necessary to keep the improvements in good condition and repair and shall promptly eliminate all graffiti and replace dead and diseased plants and landscaping with comparable approved materials. The maintenance covenant contained in this Section shall remain in effect for the term of this Agreement. 4.2 Agency Rights. Agency shall have the right to enter upon the Site to inspect both the interiors and exteriors of the Site, upon seventy-two (72) hours' notice to Participant. Agency may perform or cause to be performed the maintenance necessary to cure any default of these maintenance covenants and Participant shall be Iiable for payment to Agency for Agency's reasonable costs (excluding staff salaries and overhead and other similar costs) to perform such required maintenance; provided, however, that Participant first be given written notice by Agency of the actions required to cure any default, and Participant, after receipt of such notice, shall have thirty (30) days to cure such defaults, but Participant shall not be deemed in default of the foregoing maintenance covenant if such Regulatory Agreement Page 6 1 default cannot reasonably be cured within the thirty (30) day period referenced above so long as Participant has commenced to cure such default within the same thirty (30) day period and is diligently proceeding with the work to cure such default. Notwithstanding the foregoing, if any property conditions are reasonably identified by Agency after a property inspection attended by a representative of Participant that pose an immediate danger to life or limb, Participant shall have three (3) days to effect corrections of such condition(s) to Agency's reasonable satisfaction. 4.3 Annual Report. Participant covenants and agrees to submit to the Agency an annual report (the "Annual Report") required by California Health and Safety Code Section 33418. The Annual Report shall include for each Unit the rental rate and the income and family size of the occupants, and shall also include the records described in Section 3.5 herein and the audited financial statements described in Section 5.11 of the OPA. The income information shall be supplied by the tenant in a certified statement on a form provided by the Agency. The Participant shall submit the Annual Report on or before the end of the first calendar quarter of the year following the year covered by the Annual Report. The Participant shall provide for the submission of such information in its leases with tenants. Agency shall not charge Participant a fee for reviewing the Annual Report, or for Agency's or Participant's compliance with Health and Safety Code § 33418. 4.4 Management Plan. Prior to the date of this Agreement, Participant shall prepare and submit to the Agency Executive Director a management plan in accordance with the following ("Management Plan"): (a) The Management Plan, including such amendments as may be approved in writing by the Agency, shall remain in effect for the term of this Agreement. Participant shall not amend the Management Plan or any of its components without the prior written consent of the Agency. The components of the Management Plan shall include: (1) Management Agent. The name and qualifications of the proposed management agent. The Agency shall approve or disapprove the proposed management agent in writing based on the experience and qualifications of the management agent. The management agent shall have demonstrated experience in operating affordable housing comparable to the Project. (2) Management Program. A description of the proposed management, maintenance, tenant selection and occupancy policies and procedures for the Units. (3) Management Agreement. A copy of the proposed management agreement specifying the amount of the management fee and the relationship and division of responsibilities between Participant and management agent. (4) Tenant Lease or Rental Agreement. A copy of the Regulatory Agreernmt Page 7 proposed tenant lease or rental agreement to be used in renting the Units. (5) Annual Operating Budget. Prior to the completion of rehabilitation and annually thereafter not later than fifteen (15) days prior to the beginning of the next fiscal year of the Project, Participant shall submit a projected operating budget to the Agency Executive Director for review and approval. The Agency shall not unreasonably withhold, condition or delay its approval of any matter for which its approval is required hereunder, and such matter shall be deemed approved unless the Agency provides to Participant its written disapproval within thirty (30) days after receipt of a request for approval, provided Participant includes ,%ith its request, a written notice, in capital letters, stating as follows: NOTICE: PURSUANT TO SECTION 4.4 OF THE REGULATORY AGREEMENT BETWEEN THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH AND KDF QV, L.P., FAILURE BY THE AGENCY TO APPROVE OR DISAPPROVE THE MATTER SUBMITTED WITH THIS REQUEST WITHrN 30 DAYS SHALL BE DEEMED AN APPROVAL. Any disapproval shall be in writing and contain the Agency's reasons for disapproval. (b) Participant hereby covenants and agrees the Agency shall have the right, at any time and from time to time, to give notice to Participant if the Agency determines that the Project is not being managed or maintained in accordance with the Management Plan. The Agency may require the Participant to change management practices or to terminate the management agent and retain a different management agent, approved by the Agency. The Agency agrees that prior to requiring the Participant to change its management agent or the management practices the Agency shall informally consult with Participant, in an attempt to resolve the dispute. If the Agency determines that such an attempt at informal resolution has been unsuccessful, it stall give the Participant thirty (30) days written notice to change the management agent or practice, as the case may be. If Participant fails to do as requested by the Agency in the written notice, the Agency may then require the immediate change of the management practice or agent, as the case may be. The management agreement shall provide that it is subject to termination by the Participant without penalty, upon thirty (30) days prior written notice, at the direction of the Agency. Within ten (10) days following a direction of the Agency to replace the management agent, the Participant shall select another management agent or make other arrangements satisfactory to the Agency for continuing management of the Project. The Participant shall notify the Agency upon learning that there is a voluntary change in the management or control of the management agent, and, if the change is unsatisfactory to the Agency, the Agency shall be entitled to require the Participant to change the management agent in accordance with the terms of this paragraph. Regulatory Agreement Page 8 5. ENFORCEMENT. In the event Participant defaults in the performance or observance of any covenant, agreement or obligation. of Participant pursuant to this Agreement, and if such default remains uncured for a period of thirty (30) days after written notice thereof (or such longer period as may apply to the specific alleged default) shall have been given by Agency, or, in the event said default cannot be cured within said time period, Participant has failed to commence to cure such default within said thirty (30) days and diligently prosecute said cure to completion, then Agency shall declare an "Event of Default" to have occurred hereunder, and, at its option, may take one or more of the following steps: (a) By mandamus or other suit, action or proceeding at law or in equity, require Participant to perform its obligations and covenants hereunder or enjoin any acts or things which may be unlawful or in violation of this Agreement; or (b) Take such other action at law or in equity as may appear necessary or desirable to enforce the obligations, covenants and agreements of Participant hereunder, including foreclosure pursuant to the OPA. Except as otherwise expressly stated in this Agreement, the rights and remedies of the parties are cumulative, and the exercise by any 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 another party. 6. NONDIS RIMINATION. There shall be no discrimination against or segregation of any person, or group of persons, on account of race, color, creed, age, class, income, religion, sex, sexual orientation, marital status, national origin or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Site, or any part thereof, or in the awarding of contracts for the Project, nor shall Participant, 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 Site, or any part thereof, or in the awarding of contracts for the Project (except as permitted by this Agreement). Participant shall comply with all applicable federal, state and local nondiscrimination, fair housing, and equal opportunity requirements. In addition, Participant shall conduct affirmative marketing and minority outreach activities as required by HOME regulations. 6.1 Form of Nondiscrimination and Nonseg_reaation Clauses. The Participant shall refrain from restricting the rental, sale or lease of the property on the basis of race, color, creed, age, class, income, religion, sex, sexual orientation, marital status, national origin or ancestry of any person. 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, his heirs, executors, administrators and assigns, and all persons claiming under or through him, that there shall be no discrimination against or segregation of, any person or group of persons on account of Regulatory Agreement Page 9 race, color, creed, age, class, income, religion, sex, sexual orientation, marital status, national origin or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the land herein conveyed, nor shall the grantee 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 in the land herein conveyed. The foregoing covenants shall run with the land. (b) In Leases: "The lessee herein covenants by and for himself, 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 of any person or group of persons, on account of race, color, creed, age, class, income, religion, sex, sexual orientation, marital status, national origin or ancestry 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 Ieased" (c) In Contracts: "There shall be no discrimination against or segregation of any person, or group of persons on account of race, color, creed, age, class, income, religion, sex, sexual orientation, marital status, national origin or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the land, nor shall the transferee himself or any person claiming under or through him, establish or permit any su-.h practice or practices of discrimination or segregation with reference to the lessees, subtenants, sublessees or vendees of the land" 7. COVENANTS TO RUN WITH THE LAND. Participant hereby subjects the Site to the covenants, reservations, and restrictions set forth in this Agreement. Agency and Participant hereby declare their express intent that all such covenants, reservations, and restrictions shall be deemed covenants running with the land and shall pass to and be binding upon the Participant's successors in title to the Site; provided, however, that on the termination of this Agreement said covenants, reservations and restrictions shall expire, except the nondiscrimination covenants contained in Section 6 and Section 6.1 shall remain in perpetuity. All covenants without regard to technical classification or designation shall be binding for the benefit of the Agency, and such covenants shall run in favor of the Agency for the entire term of this Agreement, without regard to whether the Agency is or remains an owner of any land or interest therein to which such covenants relate. 8. ATTORNEYS' FEES. If any action or proceeding is brought by either party against the other under this Agreement, whether for interpretation, enforcement or otherwise, Participant hereby expressly agrees to pay for all costs and expenses for such action or proceeding, including the fees of attorneys and any expert witnesses. This provision shall also apply to any postjudgment action by either party, including without limitation efforts to enforce a judgment. Regulatory Agmemert Page 10 9. AMENDMENTS. This Agreement shall be amended only 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 of Orange. 10. NOTICE. Any notice required to be given hereunder shall be made in writing and shall be given by (i) personal delivery, (ii) courier service that provides a receipt showing date and time of delivery, or (iii) certified or registered mail, postage prepaid, return receipt requested, at the addresses specified below, or at such other addresses as may be specified in writing by the parties hereto: Agency: Redevelopment Agency of the City of Huntington Beach 2000 Main Street Huntington Beach, CA 92648 Attn: City Clerk Participant: KDF QV, L.P. 4685 MacArthur Q., Suite 422 Newport Beach, California 92660 Attn: Mark Hyatt Notices personally delivered or delivered by courier shall be effective upon receipt. Mailed notices shall be effective on the earlier of receipt or Noon on the second business day following deposit in the United States mail. 1I. SEVERABILITY/WAIVER/rNTEGRATION. 11.1 Severabili!y. If any provision of this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforeability of the remaining portions hereof shall not in any way be affected or impaired thereby. 11.2 Wltiver. A waiver by either party of the performance of any covenant or condition herein shall not invalidate this Agreement nor shall it be considered a waiver of any other covenants or conditions, nor shall the delay or forbearance by either party in exercising any remedy or right be considered a waiver of, or an estoppel against, the later exercise of such remedy or right. 11.3 Integration. This Agreement contains the entire Agreement between the parties and neither party relies on any warranty or representation not contained in this Agreement. 12. GOVERNING LAW. This Agreement shall be governed by the laws of the State of California. 13. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall constitute one original and all of which shall be one and the same instr=ent. Regulatory Agrecraerr Page t 1 IN WITNESS WHEREOF, the Agency and Participant have executed this Regulatory Agreement and Declaration of Covenants and Restrictions by duly authorized representatives on the date first written hereinabove. ATTEST: Agency Clerk jot = REVIEWED AND APPROVED: Ray elver, Executive Director APPROVED AS TO FORM: /Al Z �' � d Kanc, Ballmer K Berkman Agency Special Counsel hbNqumadislregulatory l "AGENCY" REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body corporate and politic By: Ch ' an APPROVED AS TO FORM: hcy�Gelneral Counsel b- INITIATED AND APPROVED: d �- David Biggs, Deputy Executive Director "PARTICIPANT" KDF QV, L.P., a California limited partnership By: KDF Communities — QV LLC, Its Co -General Partner Ole By: Mark E. att Its L' ited Managing Member Regulatory Agreement Page 12 STATE OF CALIFORNIA ) ss. COUNTY OF . 0(- ) On �f 20D1 . before me, "A-6 %�W�r,1�1r c1A.c /24f,Gpersonally appeared fae,e. personally known Co me (OF FFeved-i me nn,the 2tE) to be the person(4 whose namc(s&ar scribed to the within instrument and acknowledged to me tha&shc4hc executed the same i u /hefA&-if- authorized capacity(iea), and that by(!P>erAheir signature(s) on the instrument the person(s), or the entity upon behalf of which the person() acted, executed the instrument. WITNESS my hand and official seal. Signature comr,�is�on � t2aeosa � rwtav�w+c—cot+ania � Coorate county rwn. 6�:es xw n. � STATE OF CALIFORNIA ) ) ss. COUNTY OF ORANGE ) On t before me, !j personally appeared .• r - - 10 ._- . -. -A -V " personally known to me { to be the persogSwhose namC(] t&re subscribed to the within instrument and acknowledged to me thahhefslxexecuted the same in �authorized capacityip, and that by l� signaturesM)on the instrument the persortgDr the entity upon behalf of which the persos 3�cted, executed the instrument. Witness my hand and official seal. uuwu. M3MN CwWrissSM # 12Z6Ms � _ norQy, rwtc—coar� �_ [SEAL] conx„ 2oc� STATE OF CALIFORNM ) ) ss. COUNTY OF ) Notary Public On , before me, personally appeared personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) islare subscribed to the within instrument and acknowledged to me that he/shelthey executed the same in his/her/their authorized capacity(ies), and that by his/her/their signatures(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. Notary Public [SEAL] . �.1 ...�� .. .. � 4♦ ,KJy L..� .i. •1 ... � -� � M1....w...41-.'- J:.-. i �iw 1. .ai e 1 1�'i:r• ki�ylw .w: �.N�.=i +. li .-s EXHIBIT A TO DEED OF TRUST Legal Description ALL THAT CERTAIN LAND SITUATED IN THE STATE OF CALIFORNIA, COUNTY OF ORANGE, CITY OF HUNTINGTON BEACH, DESCRIBED AS FOLLOWS: PARCEL I, AS SHOWN ON A MAP FILED IN BOOK 43, PAGE 19 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF ORANGE COUNTY, CALIFORNIA. i t r' RECORDING REQUESTED BY • FIRST AMERICAN TITLE COMPANY CCMMERCIALliNDU.STRIAL DIVISION FREE RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: This Document was electronically recorded by First American Title Recorded In Official Records,County of Orange Gary L- Granville, Clerk -Recorder Iq�1�11�Igq�111�g1qqC1�Iq NO FEE REDEVELOPMENT AGENCY OF THE 20010430765 03:26pm 06/28/01 200 21 D11 A3612 CITY OF HUNTINGTON BEACH 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2000 Main Street Huntington Beach, CA 92648 Ann: EAU C� �, �y �q r � ` _ 1 (Space Above This Line for Rernrdces Office Use Only) vj D yt •11V (Exempt from Recording Fee Per Gov. Cade §6103) DEED OF TRUST AND ASSIGNMENT OF RENTS ($1,700,000.00) This Deed of Trust and Assignment of Rents ("Deed of Trust"), dated this 1 fir day of June , 2001, is made by KDF QV, L.P., a California limited partnership ff rustor") whose address is 4685 MacArthur Ct., Suite 422, Newport Beach, California 92660, THE CITY OF HUNTINGTON BEACH, a California corporation ("Trustee") whose address is 2000 Main Street, Huntington Beach, CA 92648, and THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body, corporate and politic ("Beneficiary") whose address is 2000 Main Street, Huntington Beach, CA 92648, and is executed to secure the obligations contained in that certain Promissory Note Secured by Deed of Trust executed by Trustor in favor of Beneficiary and dated June 1, 2001 (the "Note'), that certain Regulatory Agreement and Declaration of Covenants and Restrictions by and between Trustor and Beneficiary dated June 1, 2001 (the "Regulatory Agreement"), and Sections 5.1-5.13 of that certain Owner Participation Agreement by and between Trustor and Beneficiary dated May 7, 2001 (the "OPX). The Note, Regulatory Agreement, and OPA are hereby incorporated herein by reference. All capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the OPA. 1. Grant in Trust and Security Agreement. For valuable consideration, Trustor irrevocably grants, transfers and assigns to Trustee, in trust, with power of sale, for the benefit of Beneficiary, the following property (Lhe "Trust Estate"): (a) the real property described in Exhibit A attached to this Deed of Trust and incorporated in this Deed of Trust by reference (the "Land"); and (b) all buildings, structures and other improvements now or in the future located or to be constructed on the Land (the "Improvements"); and (c) all tenements, hereditaments, appurtenances, privileges and other rights and interests now or in the future benefitting or otherwise relating to the Land or the Improvements, including easements, rights -of -way, development rights, mineral rights, water rights and water stock (the "Appurtenances," together with the Land and Deed of Trust FrA the Improvements, the `Property"). 2. Obligations Secured. This Deed of Trust is given for the purpose of securing payment and performance of the following (the "Secured Obligations"): (a) all present and future indebtedness evidenced by the Note, the value of which Trustor acknowledges to be in the amount of ONE MILLION SEVEN HUNDRED THOUSAND DOLLARS ($1,700,000.00); (b) all present and future obligations of Trustor under the Regulatory Agreement; (c) all present and future obligations of Trustor under Sections 5.1-5.13 of the OPA; (d) all present and future obligations of Trustor to Beneficiary under this Deed of Trust; and (e) all additional present and future obligations of Trustor to Beneficiary under any other agreement or instrument (whether existing now or in the future) which states that it is, or such obligations are, secured by this Deed of Trust; in each case as such indebtedness and other obligations may from time to time be supplemented, modified, amended, renewed and extended, whether evidenced by new or additional documents or resulting in a change in the interest rate on any indebtedness or otherwise. 3. Trustor's Covenants. To protect the security of this Deed of Trust, Trustor agrees as follows: 3.1 Payment and Performance of Secured Obligations. (a) Trustor shall pay and perform all obligations under this Deed of Trust and all Secured Obligations in accordance with the respective terms of such Secured Obligations. (b) At the end of the sixty -year term of the Note (and the forgiveness, waiver, and discharge of the Note as set forth therein), Beneficiary shall deliver the cancelled Note to the Trustee whereupon Trustee shall reconvey this Deed of Trust in full. 3.2 Liens and Taxes. Trustor shall pay, prior to delinquency, all taxes, if any, which are or may become a lien affecting any part of the Trust Estate and Trustor shall pay and perform when due all other obligations secured by or constituting a lien affecting any part of the Trust Estate, provided that Trustor shall not be in violation of this provision if Trustor is protesting or contesting such taxes in good faith and by legal means. 4. Obligations With Respect to Trust Estate. Neither Beneficiary nor Trustee shall be under any obligation to preserve, maintain or protect the Trust Estate or any of Trustor's rights or interests in the Trust Estate, or make or give any presentments, demands for performance, protests, notices of nonperformance, protest or dishonor or other notices of any kind in connection with any rights, or take any other action with respect to any other matters relating to the Trust Estate. Beneficiary and Trustee do not assume and shall have no liability for, and shall not be obligated to perform, any of Trustoes obligations with respect to any rights or any other matters relating to the Trust Estate, and nothing contained in this Deed of Trust shall release Trustor from any such obligations. 5. Assignment of Rents and Profits. Subject to any rights of or any assignment of rents and profits to a mortgagee or trustee holding a permitted senior lien against the Property, Trustor irrevocably grants, transfers and assigns to Beneficiary, during the continuance of this Deed of Trust, all of Trustoes right, title and interest in and to the rents, issues, income, revenues, royalties and profits from any lease of the Property ("Rents"). Notwithstanding such assignment, so long as Deed of Trust no Material Default has occurred and is continuing, Trustor shall have the right to collect, receive, hold and dispose of the Rents as the same become due and payable, provided that unless Beneficiary otherwise consents in writing: (i) any such Rents paid more than 30 days in advance of the date when due (excluding amounts paid as initial security deposits) shall be delivered to Beneficiary and held by Beneficiary in a cash collateral account (over which Beneficiary shall have sole and executive control and right of withdrawal), to be released and applied on the date when due (or, if a Material Default has occurred and is continuing, at such other time or times and in such manner as Beneficiary may determine), and (ii) if a Material Default has occurred and is continuing, Trustoes right to collect and receive the Rents shall cease and Beneficiary shall have the sole right, with or without taking possession of the Property, to collect all Rents, including those past due and unpaid. Any such collection of Rents by Beneficiary shall not cure or waive any Material Default or notice of default or invalidate any act done pursuant to such notice. Failure or discontinuance of Beneficiary at any time, or from time to time, to collect the Rents shall not in any manner affect the subsequent enforcement by Beneficiary of the right to collect the same. Nothing contained in this Deed of Trust, nor the exercise of the right by Beneficiary to collect the Rents, shall be deemed to make Beneficiary a 'mortgagee in possession` or shall be, or be construed to be, an affirmation by Beneficiary of, or an assumption of liability by Beneficiary under, or a subordination of the lien of this Deed of Trust to any tenancy, lease or option. 6. Remedies Upon Material Default. Upon the occurrence of any Material Default: (i) Trustor shall be in default under this Deed of Trust, and, subject to Section 6 of the OPA regarding notice and cure, all Secured Obligations shall immediately become due and payable without further notice to Trustor; (ii) upon demand by Beneficiary, Trustor shall pay to Beneficiary, in addition to all other payments specifically required under the OPA, at the times and in the amounts required by Beneficiary from time to time, sums which when cumulated will be sufficient to pay one month prior to the time the same become delinquent, all taxes which are or may become a lien affecting the Trust Estate and the premiums for any policies of insurance to be obtained hereunder (all such payments to be held in a cash collateral account as additional security for the Secured Obligations over which Beneficiary shall have sole and exclusive control and right of withdrawal); and (iii) Beneficiary may, without notice to or demand upon Trustor, which are expressly waived by Trustor (except for notices or demands otherwise required by applicable laws to the extent not effectively waived by Trustor and any notices or demands specified below), and without releasing Trustor from any of its Obligations, exercise any one or more of the following remedies as Beneficiary may determine. Beneficiary may, either directly or through an agent or court -appointed receiver, and without regard to the adequacy of any security for the Secured Obligations: (i) enter, take possession of, manage, operate, protect, preserve and maintain, and exercise any other rights of an owner of the Trust Estate, and use any other properties or facilities of Trustor relating to the Trust Estate, all without payment of rent or other compensation to Trustor, (ii) enter into such contracts and take such other action as Beneficiary deems appropriate to complete all or any part of any construction which may have commenced on the Land, subject to such modifications and other changes in the plan of development as Beneficiary may deem appropriate; Deed of Trust 610 (iii) make, cancel, enforce or modify leases, obtain and evict tenants, fix or modify rents and, in its own name or in the name of Trustor, otherwise conduct any business of Trustor in relation to the Trust Estate and deal with Trustoes creditors, debtors, tenants, agents and employees and any other persons having any relationship with Trustor in relation to the Trust Estate, and amend any contracts between them, in any manner Beneficiary may determine; (iv) endorse, in the name of Trustor, all checks, drafts and other evidences of payment relating to the Trust Estate, and receive, open and dispose of all mail addressed to Trustor and notify the postal authorities to change the address for delivery of such mail to such address as Beneficiary may designate; and (v) take such other action as Beneficiary deems appropriate to protect the security of this Deed of Trust. Beneficiary's agent or court -appointed receiver shall hold all monies and proceeds, including, without limitation, proceeds from the sale of the Property or any portion thereof, for the benefit of the Trustor and shall not disburse the monies or proceeds for the satisfaction of the Secured Obligations without the prior written consent of Beneficiary. The Beneficiary's agent or court - appointed receiver may, but without any obligation to do so and without notice to or demand upon Trustor and without releasing Trustor from any Obligations under this Deed of Trust, and at the expense of Trustor, follow the written instruction of Beneficiary under this Section 6. Beneficiary may execute and deliver to Trustee written declaration of default and demand for sale and written notice of default and of election to cause all or any part of the Trust Estate to be sold, which notice Trustee shall cause to be filed for record; and after the lapse of such time as may then be required by law following the recordation of such notice of default, and notice of sale having been given as then required by law, Trustee, without demand on Trustor, shall sell such Property at the time and place fixed by it in such notice of sale, either as a whole or in separate parcels and in such order as Beneficiary may direct (Trustor waiving any right to direct the order of sale), at public auction to the highest bidder for cash in lawful money of the United States (or cash equivalents acceptable to Trustee to the extent permitted by applicable law), payable at the time of sale. Trustee may postpone the sale of all or any part of the Trust Estate by public announcement at such time and place of sale, and from time to time after any such postponement may postpone such sale by public announcement at the time fixed by the preceding postponement. Trustee shall deliver to the purchaser at such sale its deed conveying the property so sold, but without any covenant or warranty, express or implied, and the recitals in such deed of any matters or facts shall be conclusive proof of the truthfulness thereof. Any person, including Trustee or Beneficiary, may purchase at such sale, and any bid by Beneficiary may be, in whole or in part, in the form of cancellation of all or any part of the Secured Obligations. Any such sale shall be free and clear of any interest of Trustor and any lease, encumbrance or other matter affecting the property so sold which is subject or subordinate to this Deed of Trust, except that any such sale shall not result in the termination of any such lease (i) if and to the extent otherwise provided in any estoppel or other agreement executed by the tenant and Beneficiary (or executed by the tenant in favor of, and accepted by, Beneficiary), or (ii) if the purchaser at such sale gives written notice to the tenant, within 30 days after date of sale, that the lease will continue in effect. 4 Dced of Trust Beneficiary may proceed to protect, exercise and enforce any and all other remedies provided under the Note, Regulatory Agreement, OPA, this Deed of Trust or by applicable laws. All proceeds of collection, sale or other liquidation of the Trust Estate shall be applied first to all costs, fees, expenses and other amounts (including interest) payable by Trustor under this Deed of Trust and to all other Secured Obligations not ctherwise repaid in such order and manner as Beneficiary may determine, and the remainder, if any, to the person or persons legally entitled thereto. Each of the remedies provided in this Deed of Trust is cumulative and not exclusive of, and shall not prejudice, any other remedy provided in this Deed of Trust or by applicable laws and shall be subject and subordinate to the remedies of any holder of senior lien permitted hereunder. Each remedy may be exercised from time to time as often as deemed necessary by Trustee and Beneficiary, and in such order and manner as Beneficiary may determine. This Deed of Trust is independent of any other security for the Secured Obligations, and upon the occurrence of a Material Default, Trustee or Beneficiary may proceed in the enforcement of this Deed of Trust independently of any other remedy that Trustee or Beneficiary may at any time hold with respect to the Trust Estate or the Secured Obligations or any other security. Trustor, for itself and for any other person claiming by or through Trustor, waives, to the fullest extent permitted by applicable laws, all rights to require a marshaling of assets by Trustee or Beneficiary or to require Trustee or Beneficiary to first resort to any particular portion of the Trust Estate or any other security (whether such portion shall have been retained or conveyed by Trustor) before resorting to any other portion, and all rights of redemption, stay and appraisal. 7. Material Default. A "Material Default" shall be deemed to occur if: (i) Trustor is in Material Default under any of the Secured Obligations; or (ii) Trustor is in breach of any of its obligations under this Deed of Trust and such breach is not cured within thirty (30) days after Trustor receives initial notice of such breach. 8. Costs Fees and Expenses. Trustor shall pay, on demand, all costs, fees, expenses, advances, charges, losses and liabilities of Trustee and Beneficiary under or in connection with this Deed of Trust or the enforcement of, or the exercise of any remedy or any other action taken by Trustee or Beneficiary under, this Deed of Trust or the collection of the Secured Obligations, in each case including (i) reconveyance and foreclosure fees of Trustee, (ii) costs and expenses of Beneficiary or Trustee or any receiver appointed under this Deed of Trust in connection with the operation, maintenance, management, protection, preservation, collection, sale or other liquidation of the Trust Estate or foreclosure of this Deed of Trust, (iii) advances made by Beneficiary to complete or partially construct all or any part of any construction which may have commenced on the Land or otherwise to protect the security of this Deed of Trust, (iv) cost of evidence of title, and (v) the reasonable fees and disbursements of Trustee's and Beneficiary's legal counsel and other out-of- pocket expenses, and the reasonable charges of Beneficiary's internal legal counsel. Dced of Trust 9. Late Payments. By accepting payment of any part of the Secured Obligations after its due date, Beneficiary does not waive its right either to require prompt payment when due of all other Secured Obligations or to declare a default for failure to so pay. 10. Action by Trustee. At any time and from time to time upon written request of Beneficiary and presentation of this Deed of Trust for endorsement, and without affecting the personal liability of any person for payment of the Secured Obligations or the security of this Deed of Trust for the full amount of the Secured Obligations on all Property remaining subject to this Deed of Trust, Trustee may, without notice and without liability for such action, and notwithstanding the absence of any payment on the Secured Obligations or any other consideration: (i) reconvey all or any part of the Trust Estate, (ii) consent to the making and recording, or either, of any map or plat of the Land, (iii) join in granting any easement affecting the Land, or (iv) join in or consent to any extension agreement or any agreement subordinating the lien of this Deed of Trust. Trustee is not obligated to notify Trustor or Beneficiary of any pending sale under any other deed of trust or of any action or other proceeding in which Trustor, Beneficiary or Trustee is a party unless brought by Trustee. 11. Reconvevance. Upon written request of Beneficiary and surrender of this Deed of Trust to Trustee for cancellation or endorsement, and upon payment of its fees and charges, Trustee shall reconvey, without warranty, all or any part of the Property then subject to this Deed of Trust. Any reconveyance, whether full or partial, may be made in terms to "the person or persons legally entitled thereto," and the recitals in such reconveyance of any matters or facts shall be conclusive proof of the truthfulness thereof. Beneficiary shall not be required to cause any Property to be released from this Deed of Trust until final payment and performance in full of all Secured Obligations and termination of all obligations of Beneficiary under or in connection with the Secured Obligations or until the Secured Obligations are forgiven. 12. Substitution of Trustee. Beneficiary may from time to time, by instrument in writing, substitute a successor or successors to any Trustee named in or acting under this Deed of Trust, which instrument, when executed by Beneficiary and duly acknowledged and recorded in the office of the recorder of the county or counties where the Land is situated, shall be conclusive proof of proper substitution of such successor Trustee or Trustees who shall, without conveyance from the predecessor Trustee, succeed to all of its title, estate, rights, powers and duties. Such instrument must contain the name of the original Trustor, Trustee and Beneficiary, the book and page where this Deed of Trust is recorded (or the date of recording and instrument number) and the name and address of the new Trustee. 13. Successors and Assigns. This Deed of Trust applies to and shall be binding on and inure to the benefit of all parties to this Deed of Trust and their respective successors and permitted assigns. 14. Acceptance. Notice of acceptance of this Deed of Trust by Beneficiary or Trustee is waived by Trustor. Trustee accepts this Deed of Trust when this Deed of Trust, duly executed and acknowledged, is made a public record as provided by law. 15. Beneficiary's Statements. For any statement regarding the Secured Obligations, Beneficiary may charge the maximum amount permitted by law at the time of the request for such statement. Deed of Trust 16. Priori=Subordination. Pursuant to the OPA, Beneficiary agreed to subordinate this Deed of Trust to the liens of the deeds of trust identified in the OPA as the First Deed ofTrust, and to such other and further documents as such lender(s) may require including but not limited to regulatory agreements (including those required by CSCDA, Fannie Mae and TCAC), not to exceed an indebtedness in the amount permitted by the OPA. The lien of this Deed ofTrust therefore shall be junior and subordinate to the lien(s) of the foregoing listed deed(s) of trust and such other and further documents as such lenders may require. Beneficiary agrees to execute such subordination agreements, pursuant to the OPA, as are necessary to effect such subordination of the lien of this Deed of Trust. 17. Governing Law. This Deed of Trust shall be governed by, and construed and enforced in accordance with, the Laws of California. 18. Request for Notice. Trustor requests that a copy of any notice of default and a copy of any notice of sale be mailed to Trustor at Trustor's address set forth above. 19. Counterparts. This Deed of Trust maybe executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. [Signatures on following page] Dced of Trust ATTEST: • r :Agency Ierk CMNt KWAJ REVIEWED AND APPROVED: Ray i ver, Executive Director APPROVED AS TO FORM: Kane, Ballmer &: Berkman Agency Special Counsel BENEFICIARY REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body corporate and politic By'-�'vYrt -- Cha an , fAM JVW05 004R APPROVED AS TO FORM: i icy General Counsel v t'. o l INITIATED AND APPROVED: -- Ad�- dw David Biggs, Depu y Executive Director TRUS'TOR KDF QV, L.P., a California limited partnership By: KDF Communities — QV LLC, Its Co -General Partner By Mark yatt It mited Managing Member Deed of Trust ATTEST: City Clerk, Co N N!f, P1, Al REVIEWED AND APPROVED: Ray elver, City Administrator hb\quovadis\dot1 TRUSTEE CITY OF HUNTINGTON BEACH By. Mayo/1 ?AM JUWgrl Ho-JCM&K APPROVED AS TO FORM: Cty,�lttorney INITIATED AND APPROVED: Director of Economic Development 9 Deed of Trust EXHIBIT A TO DEED OF TRUST Legal Description ALL THAT CERTAIN LAND SITUATED IN THE STATE OF CALIFORNIA, COUNTY OF ORANGE, CITY OF HUNTINGTON BEACH, DESCRIBED AS FOLLOWS: PARCEL 1, AS SHOWN ON A MAP FILED IN BOOK 43, PAGE 19 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF ORANGE COUNTY, CALIFORNIA. STATE OF CALIFORNIA ) ) ss. COUNTY OF ) personally appeared Lak -f. &Cgik a •yet em tom, Jcrsonally known'to me (oF-grm%+to to be4he person(Dwhose name WMubscribed to the within instrument and acknowledged to me that _,4� executed the same in-hiq+65ZE) authorized capaeit} i ), and that by l++!t4 �signaturcUpon the instrument the perso>VP, or the entity upon behalf of which the persoroacted, executed the instrument. WITNESS my hand and official seal. Signature STATE OF CALIFORNIA } COUNTY OF ) 5S. � ) Cwrffrkan 0 122W" Notary Puotc—costario >: Crangecowtf C*wn. Fxr* Jut 212= OileAncAjdu before me, 1&uM*4-AGJSan- A o� P,�e (k.., personally appeared, personally known to me (GF jw*vc+to n ) o be the persoq vhose namCo k4o subscribed to the within instrument and acknowledged to me that l rr' re executed the same in *i-sA, , [n authorized capacity(, and that by ' e signatures on the instrument the persore or the entity upon behalf of which the persq q acted, executed the instrument. WITNESS my hand and official seal. Signature L4.URA . NasoN 0 122M". pioMpLeDIC—Ca atroe county Cvwr. Ev*w Jul 23.2003 STATE OF CALIFORNIA ) ) ss. COUNTY OF Pal ) On tg� ?.(o , ZDP ( , before me, L4a4wl-A• Ardwfll�i9 ak4crsonally appeared ' MawL 6 t , personally known t6 me (fie r _ ag") to be the person(} whose names 1, &r subscribed to the within instrument and acknowledged to me tha fi 1stw" executed the same i ' authorized capacity(ies), and that b}t�� signature(4) on the instrument the person{, or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. Signature UUM A. NU30M Cb r *iW i 1MUM This Document was electronically recorded by f First American Title In Official Records,County e Coun of Oran Recorded g RECORDING REQUESTED BY: Gary L. Granville, Clerk -Recorder nlla[�I���aC1�llp[al��al1 NO FEE FIRST AMERICAN TITLE COMPANY 20010430766 03:26pm 0612810/ COMMERCIAL/INDUSTRIAL DIVISION20021 s1226 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 OR-2188596-DMN WHEN RECORDED MAIL TO: City of Huntington Beach Redevelopment Agency 2000 Main Street Huntington Beach, CA 92648 Attn: City Clerk TIES SPACE FOR RECORDERS' USE ONLY SUBORDINATION AGREEMENT (Exempt from Recording Fee Per Gov. Code 6103) THIS PAGE ADDED TO PROVIDE ADEQUATE SPACE FOR RECORDING INFORMATION (ADDITIONAL RECORDING FEE APPLIES) z SUBORDINATION AGREENIEN-F THIS SUBORDINATION AGREEMENT (this "Agreement") is entered into as of the 1st day of June, 2001 by and among (i) FANNIE MAE. and WELLS FARGO BAND, NATIONAL ASSOCIATION, as trustee (collectively referred to herein as the "Senior Lender'), as their interests may appear, (ii) THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body, corporate and politic, of the State of California ("Subordinate Lender"}, and (iii) KDF QV, L.P., a California limited partnership ("Borrower'). Recitals: A. The California Statewide Communities Development Authority, a joint exercise of powers authority of the State of California (the "Issuer') will issue tax exempt multifamily revenue bonds (the "Bonds'), the proceeds of which will be cr have been used for a loan to the Borrower in the original principal amount of $6,995,000 (the "First Mortgage Loan'). The Firs'. Mortgage Loan is or will be secured by a first mortgage lien (the "First Mortgage") on a multifamily housing project located in Huntington Beach, Orange County, California and known as the Quo Vadis Apartments (the "Property'). The Property is more fully described in Exhibit A attached hereto. The Borrower's obligation to repay the First Mortgage Loan is evidenced by a Multifamily Note dated as of the date hereof together with all addenda (the "First Mortgage Note), and due in full on July 1, 2031. B. The First Mortgage Loan will be credit enhanced by Fannie Mae and, pursuant to the provisions of an Assignment and Intercreditor Agreement, dated as of the date hereof, among the Issuer, the Trustee and Fannie Mae, the First Mortgage and the First Mortgage Note wil[ be assigned and endorsed, respectively, by the Issuer to Senior Lender. C. The Borrower, the Subordinate Lender and the City of Huntington Beach have entered into an O%Nmer Participation Agreement, dated as of May 7, 2001, %%pith respect to the Property (the "OPA'). The Borrower has requested the Senior Lender to permit the Subordinate Lender to make a subordinate loan pursuant to the OPA to Borrower in the amount of $1,700,000 (the "Subordinate Loaro and to secure the Subordinate Loan by placing a mortgage lien against the Property. D. The Senior Lender has agreed to permit the Subordinate Lender to make the Subordinate Loan and to place a subordinate mortgage lien against the Property subject to all of the conditions contained in this Agreement. NOW, THEREFORE, in order to induce L%e Senior Lender to permit the Subordinate Lender to make the Subordinate Loan to the Borrower and to place a subordinate mortgage lien Fannie Mae Subordination Agr:ement -- Form 4503 12198 (Page 1) Affordable Housing RRXIF512349310 against the Property, and in consideration thereof, &.e Senior Lender, the Subordinate Lender and the Borrower agree as follows: 1. Definitions. In addition to the terms defined in the Recitals to this Agreement, for purposes of this Agreement the following terms have the respective meanings set forth below: "Affiliate" means, when used with respect to a Person, any corporation, partnership, joint venture, limited liability company, limited liability partnership, trust or individual controlled by, under common control witr, or which controls such Person (the term "control" for these purposes shall mean the ability, whether by the ownership of shares or other equity interests, by contract or otherwise, to elect a majority of the directors of a corporation, to make management decisions on behalf of, or independently to select the managing partner of, a partnership, or otherwise to have the power independently to remove and then select a majority of those individuals exercising managerial authority over an entity, and control shall be conclusively presumed in the case of the ownership of 50% or more of the equity interests). "Borrower' means the Person na.-ned as such in the first paragraph of this Agreement and any other Person (other than the Senior Lender) who acquires title to the Property after the date of this Agreement. "Business Day" means any day other than Saturday, Sunday or a day on which the Fannie Mae is not open for business. "Default Notice" means: (a) a copy of the written notice from the Fannie Mae to the Borrower stating that a First Mortgage Loan Default has occurred under the First Mortgage Loan; or (b) a copy of the written notice from the Subordinate Lender to the Borrower stating that a Subordinate Loan Default has occurred under the Subordinate Loan. Each Default Notice shall specify the default upon which such Default Notice is based. "First Mortgage Loan Default" means the occurrence of an "Event of Default" as that term is defined in the First.Mortgage Loan Documents. "First Mortgage Loan Documents" means the First Mortgage Note and all other documents evidencing, securing or othem7se executed and delivered in connection with the First Mortgage Loan. "Person" means an individual, estate, trust, partnership, corporation, limited liability company, limited liability partnership, governmental department or agency or any other Fannie Mae Subordination Agreement -- Form 4503 12P9S (Page 2) Affo:-dablc housing BR\iFS 1 2549310 entity which has tt a legal capacity to o%vn property. "Regulatory Agreement" means the Regulatory Agreement and Declaration of Covenants and Restrictions, dated as of the date hereof by and between the Subordination Lender and Borrower. "Senior Lender" means the Person na.~ned as such in the first paragraph on page 1 of this Agreement. When any other Person becomes the legal holder of the First Mortgage Note, Senior Lender or such other Person shall automatically become the Senior Lender. "Servicer" means ARCS Commercial Mortgage Co., L.P., a California limited partnership, or any successor loan servicer appointed from time to time in respect of the First Mortgage Loan by Fannie Mae. "Subordinate Lender' means the Person named as such in the first paragraph on page 1 of this Agreement and any other Person who becomes the legal holder of the Subordinate Note after the date of this Agreement. "Subordinate Loan Default" means a default by the Borrower in performing or observing any of the terms, covenants or conditions in the Subordinate Loan Documents to be performed or observed by it, which continues beyond any applicable period provided in the Subordinate Loan Documents for curing the default. "Subordinate Loan Documents" means the OPA, the Subordinate Note, the Subordinate Mortgage, and all other documents evidencing, securing or othen%ise executed and delivered in connection vrith the Subordinate Loan, provided, however, that the term "Subordinate Loan Documents" shall not include the Regulatory Agreement. "Subordinate Mortgage" means the Deed of Trust and Assignment of Rents, dated as of the date hereof, encumbering the Property as security for the Subordinate Loan, which the Subordinate Lender %ill cause to be recorded among the applicable lani records immediately before this Agreement. "Subordinate Note" means the promissory note, dated as of the date hereof, issued by the Borrower to the Subordinate Lender, or order, to c%idence the Subordinate Loan. Fannie Mae Subordination Agreement -- Form 4503 12/98 (Page 3) Affordable Housing BMIF51 2549310 2. Permission to Place Mortgage Lien Against Property. The Senior Lender agrees, notwithstanding the prohibition against inferior liens on the Property contained in the First Mortgage Loan Documents and subject to the provisions of this Agreement, to permit the Subordinate Lender to record the Subordinate Mortgage and the Regulatory Agreement against the Property to secure the Borrowees obligation to repay the Subordinate Note and all other obligations, indebtedness and liabilities of the Borrower to the Subordinate Lender under and in connection with the Subordinate Loan. Such permission is subject to the condition that each of the representations and warranties made by the Borrower and the Subordinate Lender in Section 3 is true and correct on the date of this Agreement and on the date on which the proceeds of the Subordinate Loan are disbursed to the Borrower. If any of the representations and warranties made by the Borrower and the Subordinate Lender in Section 3 is not true and correct on both of those dates, the provisions of the First Mortgage Loan Documents applicable to unpermitted liens on the Property shall apply. 3. Borrower's and Subordinate Lender's Representations and Warranties. The Borrower and the Subordinate Lender each makes the following representations and warranties to the Senior Lender: (a) Subordinate Vote. The Subordinate Note contains the following provision: The indebtedness evidenced by this Note is and shall be subordinate in right of payment to the prior payment in full of the indebtedness evidenced by a Multifamily Note of even date herewith in the original principal amount of $6,995,000 issued by KDF QV, L.P. and payable to the California Statewide Communities Development Authority, as assigned to Wells Fargo Bank, National Association, as Trustee and Fannie Mae, as their interest may appear ("Senior Lender'), or order, to the extent and in the manner provided in that certain Subordination Agreement of even date herewith between the payee of this Note, and the Senior Lender and the maker of this Note (the "Subordination Agreement'). The Deed of Trust securing this Note is and shall be subject and subordinate in all respects to the liens, terms, covenants and conditions of the Multifamily Deed of Trust securing the Multifamily Note as more fully set forth in the Subordination Agreement. The rights and remedies of the payee and each subsequent holder of this Note under the Deed of Trust securing this Note are subject to the restrictions and limitations set forth in the Subordination Agreement. Each subsequent holder of this Note shall be deemed, by virtue of such holdees acquisition of the Note, to have agreed to perform and observe all of Fannie Mae Subordination Agreement — Form 4503 12198 (Page 4) Affordable Housing BP-NIFSf 2549310 the terms, covenants and conditions to be performed or observed by the Subordinate Lender under the Subordination Agreement. (b) Relationship of Borrower to Subordinate Lender and Senior Lender. The Subordinate Lender is not an Affiliate of the Borrower and is not in possession of any facts which would lead it to believe that the Senior Lender is an Affiliate of the Borrower. (c) Term. The term of the Subordinate Note does not end before the term of the First Mortgage Note. (d) Subordinate Loan Documents. The executed Subordinate Loan Documents are substantially in the same ferns as those submitted to, and approved by, Fannie Mae prior to the date of this Agreement. Upon execution and delivery of the Subordinate Loan Documents, Borrower shall deliver to Fannie Mae an executed copy of each of the Subordinate Loan Documents, certified to be true, correct and complete. (e) First Mortgage Loan Documents. The executed First Mortgage Loan Documents are substantially in the same forms as, when applicable, those submitted to, and approved by, Fannie Mae prior to the date of this Agreement. Upon execution and delivery of the First Mortgage Loan Documents, Do --rower shall deliver to Subordinate Lender an executed copy of each of the First Mortgage Loan Documents, certified to be true, correct and complete. 4. Tcrms of Subordination. (a) Agreement to Subordinate. The Senior Lender and the Subordinate Lender agree that: (i) the indebtedness evidenced by the Subordinate Loan Documents is and shall be subordinated in right of payment, to the extent and in the manner provided in this Agreement to the prior payment in full of the indebtedness evidenced by the First Mortgage Loan Documents, and (ii) the Subordinate Mortgage and the other Subordinate Loan Documents are and shall be subject and subordinate in all respects to the liens, terms, covenants and conditions of the .First Mortgage and the other First Mortgage Loan Documents and to all advances heretofore made or which may hereafter be made pursuant to the First Mortgage and the other First Mortgage Loan Documents (including but not limited to, all sutras advanced for the purposes of (1) protecting or further securing the lien of the First Mortgage, curing defaults by the Borrower under the First Mortgage Loan Documents or for any other purpose expressly permitted by the First Mortgage, or (2) constructing, renovating, repairing, furnishing, ftxturing or equipping the Property). (b) Subordination of Subrogation Rights. The Subordinate Lender agrees that if, by reason of its payment of real estate .taxes or other monetary obligations of the Fannie Mae Subordination Agreement -- Form 4503 12198 (Page 5) Affordable Housing. BRAIFS 12549310 Borrower, or by reason of its exercise of any other right or remedy under the Subordinate Loan Documents, it acquires by right of subrogation or other%,ise a lien on the Property which (but for this subsection) would be senior to the lien of the First Mortgage, then, in that event, such lien shall be subject and subordinate to the lien of the First Mortgage. (c) Payments Before First Mortgage Loan Default. Until the Subordinate ft Lender receives a Default Notice of a First Mortgage Loan Dcfault from the Fannie Mae, the Subordinate Lender shall be entitled to retain for its own account all payments made under or pursuant to the Subordinate Loan Documents. (d) Payments After First Mortgage Loan Default. The Borrower agrees that, after it receives notice (or otherwise acquires knowledge) of a First Mortgage Loan Default, it will not make any payments under or pursuant to the Subordinate Loan Documents (including but not limited to principal, interest, additional interest, late payment charges, default interest, attorney's fees, or any other sums secured by the Subordinate Mortgage) without the Senior Lender's prior written consent. The Subordinate Lender agrees that, after it receives a Default Notice from the Fannie Mae with written instructions directing the Subordinate Lender not to accept payments from the Borrower on account of the Subordinate Loan, it will not accept any payments under or pursuant to the Subordinate Loan Documents (including but not limited to principal, interest, additional interest, late payment charges, default interest, attorney's fees, or any other sums secured by the Subordinate Mortgage) without the Fannie rvlae's prior written consent. If the Subordinate Lender receives written notice from the Fannie Mae that the First Mortgage Loan Default which gave rise to the Subordinate Lenders obligation not to accept payments has been cured, waived, or otherwise suspended by the Fannie Mae, the restrictions on payment to the Subordinate Lender in this Section 4 shall terminate, and the Senior Lender shall have no right to any subsequent payments made to the Subordinate Lender by the Borrower prior to the Subordinate Lender's receipt of a new Default Notice from the Fannie Mae in accordance with the provisions of this Section 4(d). (e) Remittinb Subordinate Loan Payments to Senior Lender. If, after the Subordinate Lender receives a Default Notice from the Fannie Mae in accordance with subsection (d) above, the Subordinate Lender receives any payments under the Subordinate Loan Documents, the Subordinate Lender agrees that such payment or other distribution will be received and held in trust for the Senior Lender and unless the Fannie Mae otherwise notifies the Subordinate Lender in writing, will be promptly remitted, in kind to the Senior Lender, properly endorsed to the Senior Lender, to be applied to the principal of, interest on and other amounts due under the First Mortgage Loan Documents in accordance with the provisions of the First Mortgage Loan Documents. By executing this Agreement, the Borrower specifically authorizes the Subordinate Lender to endorse and remit any such payments to the Senior Lender, and specifically waives any and all rights to have such Fannie Mae Subordination Agreement — Form 4503 12/98 (Page 6) Affordable Housing 1 RNIFS12549310 payments returned to the Borrower or credited against the Subordinate Loan. Borrower and Senior Lender acknowledge and agree that payments received by the Subordinate Lender, and remitted to the Senior Lender under this Section 4, shall not be applied or otherwise credited against the Subordinate Loan, nor shall the tender of such payment to the Senior Lender waive any Subordinate Loan Default which may arise from the inability of the Subordinate Lender to retain such payment or apply such payment to the Subordinate Loan. (0 Agreement Not to Commence Bankruptcy Proceeding. The Subordinate Lender agrees that during the term of this Agreement it wrill not commence, or join with any other creditor in commencing any bankruptcy reorganization, arrangement, insolvency or liquidation proceedings with respect to the Borrower, without the Fannie Mae's prior written consent. S. Default Under Subordinate Loan Documents. (a) Notice of Default and Cure Rights. The Subordinate Lender shall deliver to the Senior Lender a Default Notice %%ithin five Business Days in each case where the Subordinate Lender has given a Default Notice to the Borrower. Failure of the Subordinate Lender to send a Default Notice to the Senior Lender shall not prevent the exercise of the Subordinate Lendefs rights and remedies under the Subordinate Loan Documents, subject to the provisions of this Agreement. The Fannie Mae shall have the right, but not the obligation, to cure any Subordinate Loan Default within 60 days follov-ring the date of such notice; provided, however that the Subordinate Lender shall be entitled, during such 60-day period, to continue to pursue its rights and remedies under the Subordinate Loan Documents subject to the provisions of this Agreement. All amounts paid by the Senior Lender in accordance with the First Mortgage Loan Documents to cure a Subordinate Loan Default shall be deemed to have been advanced by the Senior Lender pursuant to, and shall be secured by the lien of, the First Mortgage. (b) Subordinate Lender's Exercise of Remedies After Notice to Senior Lender. if a Subordinate Loan Default occurs and is continuing, the Subordinate Lender agrees that, without the Farnue Mae's prior written consent, it will not commence foreclosure proceedings with respect to the Property under the Subordinate Loan Documents or exercise any other rights or remedies it may have under the Subordinate Loan Documents, including, but not limited to accelerating the Subordinate Loan, collecting rents, appointing (or seeking the appointment of) a receiver or exercising any other rights or remedies thereunder unless and until it has given the Senior Lender at least 60 days' prior written notice; during such 60 day period, however, the Subordinate Lender shall be entitled to exercise and enforce all other rights and remedies available to the Subordinate Lender under the Subordinate Loan Documents and'or under applicable laws, including without limitation, rights to enforce covenants and agreements of the Borrower relating to income, Fannie Mae Subordination Agreement -- Form 4503 12198 (Page 7) Affordable Housing BP,%IFS 1 254931 v3 rent, or affordability restrictions contained in the Regulatory Agreement. (c) Cross Default. The Borrower and the Subordinate Lender agree that a Subordinate Loan Default shall constitute a First Mortgage Loan Default under the First Mortgage Loan Documents and the Senior Lender shall have the right to exercise all rights or remedies under the First Mortgage Loan Documents in the same manner as in the case of any other First Mortgage Loan Default. If the Subordinate Lender notifies the Senior Lender in «riling that any Subordinate Loan Default of which the Senior Lender has received a Default Notice has been cured or waived, as determined by the Subordinate Lender in its sole discretion, then provided that Senior Lender has not conducted a sale of the Property pursuant to its rights under the First Mortgage Loan Documents, any First Mortgage Loan Default under the First Mortgage Loan Documents arising solely from such Subordinate Loan Default shall be deemed cured, and the First Mortgage Loan shall be reinstated, provided, however, that the Senior Lender shall not be required to return or otherwise credit for the benefit of the Borrower any default rate interest or other default related charges or payments received by the Senior Lender during such First Mortgage Loan Default. 6. Default Under First Mortgage Loan Documents. (a) Notice of Default and Cure Rights. The Fannie Mae shall deliver to the Subordinate Lender a Default Notice within five Business Days in each case where the Fannie Mae has given a Default Notice to the Borrower. Failure of the Fannie Mae to send a Default Notice to the Subordinate Lender shall not prevent the exercise of the Fannie Mae's rights and remedies under the First Mortgage Loan Documents, subject to the provisions of this Agreement. The Subordinate Lender shall have the right, but not the obligation, to cure any such First Mortgage Loan Default within 60 days follo%%ing the date of such notice; provided, however, that the Fannie Mae shall be entitled during such 60-day period to continue to pursue its remedies under the First Mortgage Loan Documents. Subordinate Lender may have up to 90 days from the date of the Default Notice to cure a non -monetary default if during such 90-day period Subordinate Lender keeps current all payments required by the First Mortgage Loan Documents. In the event that such a non - monetary default creates an unacceptable level of risk relative to the Property, or Fannie Mae's secured position relative to the Property, as determined by Fannie Mae in its sole discretion, then Fannie Mae may exercise during such 90-day period all available rights and remedies to protect and preserve the Property and the rents, revenues and other proceeds from the Property. All amounts paid by the Subordinate Lender to the Senior Lender to cure a First Mortgage Loan Default shall be deemed to have been advanced by the Subordinate Lender pursuant to, and shall be secured by the lien of, the Subordinate Mortgage. (b) Cross Default. The Subordinate Lender agrees that, notwithstanding any Fannie Mae Subordination Agreement — Form 4503 12/98 (Page 8) Affordable Housing BRXIFS 12549310 contrary provision contained in the Subordinate Loan Documents, a First Mortgage Loan Default shall not constitute a default under the Subordinate Loan Documents if no other default occurred under the Subordinate Loan Documents until either (i) the Fannie Mae has accelerated the maturity of the First Mortgage Loan, or (ii) the Fannie Mae has taken affirmative action to exercise its rights under the First Mortgage to collect rent, to appoint (or seek the appointment of) a receiver or to foreclose on (or to exercise a power of sale contained in) the First Mortgage. At any time after a First Mortgage Loan Default is determined to constitute a default under the Subordinate Loan Documents, the Subordinate Lender shall be permitted to pursue its remedies for default under the Subordinate Loan Documents, subject to the restrictions and limitations of this Agreement. If at any time the Borrower cures any First Mortgage Loan Default to the satisfaction of the Fannie Mae, as evidenced by vmtten notice from the Fannie Mae to the Subordinate Lender, any default under the Subordinate Loan Documents arising from such First Mortgage Loan Default shall be deemed cured and the Subordinate Loan shall be retroactively reinstated as if such First Mortgage Loan Default had never occurred. 7. Conflict. The Borrower, the Senior Lender and the Subordinate Lender each agrees that, in the event of any conflict or inconsistency between the terms of the First Mortgage Loan Documents, the Subordinate Loan Documents and the terms of this Agreement, the terms of this Agreement shall govern and control solely as to the follo«7ng: (a) the relative priority of the security interests of the Senior Lender and the Subordinate Lender in the Property; (b) the timing of the exercise of remedies by the Senior Lender and the Subordinate Lender under the First Mortgage and the Subordinate Mortgage, respectively; and (c) solely as between the Senior Lender and the Subordinate Lender, the notice requirements, cure rights, and the other rights and obligations which the Senior Lender and the Subordinate Lender have agreed to as expressly provided in this Agreement. Borrower acknowledges that the terms and provisions of this Agreement shall not, and shall not be deemed to: extend Borrower's time to cure any First Mortgage Loan Default or Subordinate Loan Default, as the case may be; give the Borrower the right to notice of any First Mortgage Loan Default or Subordinate Loan Default, as the case may be other than that, if any, provided, respectively under the First Mortgage Loan Documents or the Subordinate Loan Documents; or create any other right or benefit for Borrower as against Senior Lender or Subordinate Lender. 8. Rights and Obligations of the Subordinate Lender Under the Subordinate Loan Documents and of the Senior Lender under the First !Mortgage Loan Documents. Subject to each of the other terms of this Agreement, all of the follo.-ving provisions shall supersede any provisions of the Subordinate Loan Documents covering the same subject matter: Fannie Mae Subordination Agreement -- Form 4503 1198 (Page 9) Affordable Housing- B N1FS1254931v3 (a) Protection of Security Interest. The Subordinate Lender shall not, without the prior written consent of the Fannie Mae in each instance, take any action which has the effect of increasing the indebtedness outstanding under, or secured by, the Subordinate Loan Documents, except that the Subordinate Lend=r shall have the right to advance funds to cure First Mortgage Loan Defaults pursuant to Section 6(a) above and advance funds pursuant to the Subordinate Mortgage for the purpose of paying real estate taxes and insurance premiums, making necessary repairs to the Property and curing other defaults by the Borrower under the Subordinate Loan Documents. (b) Condemnation or Casualty. In the event of a taking or threatened taking by condemnation or other exercise of eminent domain of all or a portion of the Property (collectively, a "Taking'); or the occurrence of a fire or other casualty resulting in damage to all or a portion of the Property (collectively, a "Casualty'), at any time or times when the First Mortgage remains a lien on the Property the following provisions shall apply: (1) The Subordinate Lender hereby agrees that its rights (under the Subordinate Loan Documents or otherMse) to participate in any proceeding or action relating to a Taking and/or a Casualty, or to participate or join in any settlement of, or to adjust, any claims resulting from a Taking or a Casualty shall be and remain subordinate in all respects to the Senior Lender's rights under the First Mortgage Loan Documents with respect thereto, and the Subordinate Lender shall be bound by any settlement or adjustment of a claim resulting from a Taking or a Casualty made by the Senior Lender; provided, however, this subsection and/or anything contained in this Agreement shall not limit the rights of the Subordinate Lender to file any pleadings, documents, claims or notices with the appropriate court with jurisdiction over the proposed Taking and/or Casualty; and (2) all proceeds received or to be received on account of a Taking or a Casualty, or both, shall be applied (either to payment of the costs and expenses of repair and restoration or to payment of the First Mortgage Loan) in the manner determined by the Fannie Mae in its sole discretion; provided, however, that if the Senior Lender elects to apply such proceeds to payment of the principal of, interest on and other amounts payable under the First Mortgage Loan, any proceeds remaining after the satisfaction in full of the principal of, interest on and other amounts payable under the First Mortgage Loan shall be paid to, and may be applied by, the Subordinate Lender in accordance with the applicable provisions of the Subordinate Loan Documents, provided however, the Fannie Mae agrees to consult with the Subordinate Lender in determining the application of Casualty proceeds, provided further however that in the event of any disagreement between the Senior Lender and the Subordinate Lender over the application of Casualty proceeds, the decision of the Senior Lender, in its sole discretion, shall prevail. Fannie Mae Subordination Agreement -- Form 4503 12/98 (Page 10) Affordable Housing BP-\IFS1254931v3 (c) No Modification of Subordinate Loan Documents. The Borrower and the Subordinate Lender each agrees that, until the principal of, interest on and all other amounts payable under the First Mortgage Loan Documents have been paid in full, it gill not, -without the prior %vritten consent of the Fannie Mae in each instance, increase the amount of the Subordinate Loan, increase the required payments due under the Subordinate Loan, decrease the term of the Subordinate Loan, increase the interest rate on the Subordinate Loan, or otherwise amend the Subordinate Loan terms in a manner that creates an adverse effect upon the Senior Lender under the First Mortgage Loan Documents. Any unauthorized amendment of the Subordinate Loan Documents or assignment of the Subordinate Lender's interest in the Subordinate Loan without the Fannie Mae's consent shall be void ab initio and of no effect whatsoever. 9. Alodification or Refinancing of First Mortgage Loan. The Subordinate Lender consents to any agreement or arrangement in which the Fannie Mae waives, postpones, extends, reduces or modifies any provisions of the First Mortgage Loan Documents, including any provision requiring the payment of money. Subordinate Lender further agrees that its agreement to subordinate hereunder shall extend to any new mortgage debt which is for &.e purpose of refinancing all or any part of the First Mortgage Loan (including reasonable and necessary costs associated with the closing and/or the refinancing); and that all the terms and covenants of this Agreement shall inure to the benefit of any holder of any such refinanced debt; and that all references to the First Mortgage Loan, the First Mortgage Note, the First Mortgage, the First Mortgage Loan Documents and Senior Lender shall mean, respectively, the refinance loan, the refinance note, the mortgage securing the refinance note, all documents evidencing securing or otherwise pertaining to the refinance note and the holder of the refinance note. 10. Default by the Subordinate Lender or Senior Lender. If the Subordinate Lender or Senior Lender defaults in performing or observing any of the terms, covenants or conditions to be performed or observed by it under this Agreement, the other, non -defaulting lender shall have the right to all available legal and equitable relief. Fannie Mae Subordination Agreement -- Form 4503 12198 (Page 11) Afferdable }lousing BRMFS 12549310 11. Notices. Each notice, request, demand, consent, approval or other communication (hereinafter in this Section referred to collectively as "notices" and referred to singly as a "notice') which the Senior Lender or the Subordinate Lender is required or permitted to give to the other party pursuant to this Agreement shall be in writing and shall be deemed to have been duly and sufficiently given if: (a) personally delivered with proof of delivery thereof (any notice so delivered shall be deemed to have been received at the time so delivered); or (b) sent by Federal Express (or other similar national overnight courier) designating early morning delivery (any notice so delivered shall be deemed to have been received on the next Business Day following receipt by the courier); or (c) sent by United States registered or certified mail, return receipt requested, postage prepaid, at a post office regularly maintained by the United States Postal Service (any notice so sent shall be deemed to have been received two days after mailing in the United States), addressed to the respective parties as follows: SENIOR LENDER: Fannie Mae 3900 Wisconsin Avenue, N.W. Washington, DC 20016 Attn: Multifamily Operations - Asset Management Drawer AM And Wells Fargo Bank, National Association 120 Kearny Street, Suite 2530 MAC# A0190-242 San Francisco, CA 9,1104 Attn: Corporate Tnist Services With a copy to Servicer: ARCS Commercial Mortgage Co., L.P. 26901 Agoura Road, Suite 200 Calabasas Hills, CA 91301 Attn: Mortgage Servicing SUBORDINATE LENDER: Redevelopment Agency of the City of Huntington Beach 2000 Main Street Fannie We Subordination Agreement -- Form 4503 12/98 (Page 12) Affordable Mousing BMWS 1254931 v3 Huntington Beach, CA 92648 Attn: Executive Director Either party may, by notice given pursuant to this Section, change the person or persons and/or address or addresses, or designate an additional person or persons or an additional address or addresses for its notices, but notice of a change of address shall only be effective upon receipt. 13. General. (a) Assibnment/Successors. This Agreement shall be binding upon the Borrower, the Senior Lender and the Subordinate Lender and shall inure to the benefit of the respective legal successors and assigns of the Senior Lender and the Subordinate Lender. (b) No Partnership or Joint Venture. The Senior Lender's permission for the placement of the Subordinate Loan Documents does not constitute the Senior Lender as a joint venturer or partner of the Subordinate Lender. Neither party hereto shall hold itself out as a partner, agent or Affiliate of the other party hereto. (c) Senior Lender's and Subordinate Lender's Consent. Wherever the Senior Lender's consent or approval is required by any provision of this Agreement, such consent or approval may be granted or denied by the Senior Lender in its sole and absolute discretion, unless othernise expressly provided in this Agreement. Wherever the Subordinate Lender's consent or approval is required by any provision of this Agreement, such consent or approval may be granted or denied by the Subordinate Lender in its sole and absolute discretion, unless otherwise expressly provided in this Agreement. (d) Farther Assurances. The Subordinate Lender, the Senior Lender and the Borrower each agree, at the Borrower's expense, to execute and deliver all additional instruments and/or documents reasonably required by any other party to this Agreement in order to evidence that the Subordinate Mortgage is subordinate to the lien, covenants and conditions of the First Mortgage, or to further evidence the intent of this Agreement. (e) Amendment. This Agreement shall not be amended except by written instrument signed by all parties hereto. (f) Governing Law. This Agreement shall be governed by the laws of the State in which the Property is located. (g) Severable Provisions. If any provision of this Agreement shall be invalid or unenforceable to any extent, then the other provisions of this Agreement, shall not be Fannie Mae Subordination Agreement — Form 4503 12/98 (Page 13) Affordable Housing BR.%IFS 12549310 affected thereby and shall be enforced to the greatest extent permitted by law. (h) Term. The term of this Agreement shall commence on the date hereof and shall continue until the earliest to occur of the following events: (i) the payment of all of the principal of, interest on and other amounts payable under the First Mortgage Loan Documents; (ii) the payment of all of the principal of, interest on and other amounts payable under the Subordinate Loan Documents, other than by reason of payments which the Subordinate Lender is obligated to remit to the Senior Lender pursuant to Section 4 hereof; (iii) the acquisition by the Senior Lender of title to the Property pursuant to a foreclosure or a deed in lieu of foreclosure of, or the exercise of a power of sale contained in, the First Mortgage; or (iv) the acquisition by the Subordinate Lender of title to the Property pursuani to a foreclosure or a deed in lieu of foreclosure of, or the exercise of a power of sale contained in, the Subordinate Mortgage, but only if such acquisition of title does not violate any of the terms of this Agreement. (i) Counterparts. This Agreement may be executed in any number of counterparts, each of %vbich shall be considered an original for all purposes; provided, however, that all such counterparts shall together constitute one and the same instrument. U) Rights of Fannie Mae, Trustee and Servicer. NotL%ithstanding any provision of this Agreement to the contrary, the parties acknowledge and agree that, as between Fannie Mae, Trustee and Servicer, the relative rights of the parties constituting Senior Lender under this Agreement shall be governed by the terms of the Assignment and Intercreditor Agreement dated as of the date hereof by and among the Issuer, Trustee and Fannie Mae, a copy of which has been reviewed and acknowledged by Borrower. The foregoing shall in no event relieve Borrower of, or modify, the obligations of Borrower to the Senior Lender under this Agreement. 14. Regarding the Regulatory Agreement. Senior Lender and the Subordinate Lender expressly acknowledge and agree that the First Mortgage is and shall be subordinate to the Regulatory Agreement, subject to the foiloming conditions: (a) The Subordinate Lender may exercise their respective rights and/or remedies to obtain specific performance of the Regulatory Agreement at any time %%ithout the consent of, but upon prior notice to, the Senior Lender but in no event, without the prior vnitten consent of Senior Lender, shall the Subordinate Lender seek to recover any monetary damages against the Borrower so long as the Borrower is the owner or operator of the Property or seek a judgment lien against the Property for monetary damages. Without limiting the foregoing, it is expressly understood and agreed that (i) all obligations of the Borrower under the Regulatory Agreement for the payment of money and all claims or judgments for monetary damages against the Borrower occasioned by breach or alleged breach by the Borrower of its obligations under the Regulatory Agreement, shall Fannie Mae Subordination Agreement -- Form 4503 12198 (Page 14) Affcrdable Housing BP-NIFS 12549310 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 and the right to payment) and interests arising or created under the First Mortgage Loan Documents and (ii) the Regulatory Agreement shall not be deemed to create a lien or security interest of any kind in the Property in favor of the Subordinate Lender, or any other person with respect to any monetary obligations of the Borrower arising under the Regulatory Agreement, and no such Person shall have recourse to the Property in respect thereof. (b) In no event shall Senior Lender be liable under the Regulatory Agreement for any indemnification or liquidated damages arising from or relating to any acts or omissions of the Borrower prior to any transfer of title to Senior Lender, whether by foreclosure, deed in lieu of foreclosure or otherwise; and any liability of Senior Lender under Cie Regulatory Agreement shall be limited to acts and omissions of Senior Lender occurring during the period of Senior Lender's ownership and operation of the Property. (c) In no event shall Senior Lender, or any successor or assign of Senior Lender, be liable for any accrued and unpaid fees or damages for default owed by the Borrower under the Regulatory Agreement for any periods prior to the acquisition of the Property by Senior Lender or such successor or assign, whether by foreclosure, deed in lieu of foreclosure or otherwise, it being understood and agreed that the Borrower shall remain liable for any and all damages occasioned by its default even after the Borrower ceases to be the owner of the Property, and the Subordinate Lender shall not have any recourse against the Property for any such amounts. (d) Notwithstanding any provision of the Regulatory Agreement to the contrary, (i) in the event that Subordinate Lender shall determine that specified items of repair or maintenance are required in respect of the Property pursuant to the Regulatory Agreement, Subordinate Lender, within thirty ('30) days thereafter, shall provide written notice of such determination to Senior Lender, (ii) Senior Lender and Subordinate Lender shall cooperate, in good faith and with reasonable dispatch to establish and implement a mutually acceptable procedure for addressing the specified items of repair or maintenance, it being understood and agreed, however, that without limiting the rights of Subordinate Lender under Sections 5(a) and 5(b) of this Agreement, any right of the Subordinate Lender to enter onto the Property and to undertake or cause repairs or maintenance to be performed in respect of the Property, to remove, or cause to be removed, the borrower's managing agent in respect of the Property, or to require changes to the management plan or management agreement in respect of the Property shall, in each instance, be subject to the prior written consent of Senior Lender, and (iii) the provisions of Sections 4.1, 4.2, 4.4 and 4.5 and 4.6 of the Regulatory Agreement shall be suspended and inoperative at any time that a First Mortgage Loan Default shall be continuing or at any time that Senior Lender, its successors or assigns, shall become or be the owner or the Property. (e) No transfer of the Property may operate to release the Borrower from its obligations Fannie Mae Subordination Agreement » Form 4503 12198 (Page 15) Affordable Housing 131LNtFS 12549310 under the Regulatory Agreement. Nothing contained in the Regulatory Agreement may affect any provision of the First Mortgage or any other First Mortgage Loan Document which requires the Borrower to obtain the consent of Senior Lender as a precondition to sale, transfer or other disposition of the Property. (f) The Subordinate Lender agrees to deliver copies of all notices given under the Regulatory Agreement to Senior Lender, including written notices of each default under the Regulatory Agreement to the Senior Lender contemporaneously with the delivery by the Subordinate Lender of any such notice to the Borrower. The Senior Lender shall have the right, but not the obligation, to cure any such default within the same time period for curing a default which is given to the Borrower under the Regulatory Agreement, except that the Senior Lender's time period for cure shall begin on the date on which it receives notice of the default. All amounts advanced or expended by the Senior Lender to the Subordinate Lender to cure a default under the Regulatory Agreement shall be deemed to have been advanced by the Senior Lender pursuant to, and shall be secured by the lien of, the Senior Mortgage. (g) The Borrower and the Subordinate Lender each agrees that, until the principal of, interest on and all other amounts payable under the First Mortgage Loan Documents have been paid in full, it will not, without the prior written consent of the Senior Lender in each instance, amend, extend, renew or replace the Regulatory Agreement. Any amendment of the Regulatory Agreement without the Senior Lender's consent shall be void ab initio and of no effect whatsoever [THE BALANCE OF THIS PAGE IS LEFT INTENTIONALLY BLAND] Fannie Mae Subordination Agreement -- Form 4503 12/98 (Page 16) Affordable Housing BP -%IFS 1 234931 v3 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first written above. Fannie Mae Subordination Agreement -- Affordable Housing UNFS 12549310 FA'KNIE E By: Name: _ HEIDI H Mc;KlBREN Title: VICE PRESIDENT WELLS FARGO BANK, NATIONAL ASSOCIATION By: Name: Title: KDF QV, L.P., a California limited partnership By: AFFORDABLE HOUSING ACCESS, INC., a California non-profit public benefit corporation Its: Managing General Partner By: Jonathan B. Webb Its: Executive Director By: KDF COMMUNITIES -QV LLC, a California limited liability company Its: Co -General Partner By: Mark E. Hyatt Its: Limited Managing Member Form 4503 12/98 (Page 17) IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first written above. FANNIE MAE By: Name: Title: WELLS FARGO BANK, NATIONAL ASSOCIAT By: /"/ .gj='��4k Name: Title: KDF QV, L.P., a California limited partnership By: AFFORDABLE HOUSING ACCESS, INC., a California non-profit public benefit corporation Its: Managing General Partner By: &athawn B. Webb Its: Executive Director By: KDF C0vIl1dUNITIES-QV LLC, a California limited liability company Its: Co -General Partner BY��' Mark E. HZa Its: Limitedg Member Fannie Mae Subordination Agreement — Form 4503 11-98 (Page 17) Affordable Housing BP-%IFS12549310 ATTEST: Agency Clerk 1 CoNN BRoucwA`( REVIEWED AND APPROVED: Ray Si er, Executive Direcwi APPROVED AS TO FORM: /7/111 Kane, Ballmerlcl& Berkman Agency Special Counsel REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body corporate and politic By: .4�" G"i3' Chai , PAM jot.IEN NoJrH ENS APPROVED AS TO FORM: �J� Agency General Counsel d - ZS,vI 4o4* INITIATED AND APPROVED: Awd e. &Or David Biggs, Deputy Executive Director Fannie Mae Subordination Agreement -- Form 4503 12/98 (Page 18) Affordable Housing BRMFS 1 2549310 CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT State of California County of Los Angeles On _June 22, 2001 before me, Inez E. Moran Notary Public personally appear:d Fleidi K. McKibben X personally known to me - OR - pmved i-e-1-i-I to be the person(s) whose name(s) is/w subscribed to the within instrument and acknowledged to me that he/she/lhey executed the same in h4Vherltlwif authorized capacity(ic.), and that by hi@lherlt signature(@) on the instrument the person(@), or the entity upon behalf of which the person(@) acted, executed the INEZ L MORAN 1eFCommLwion / 12MIT instrument. Notary Public - CaA oMk LmAnp imCovnV WITNESS my hand and official seal. MyC"mmEVhwAV14.2=1 Jtv-.,—�. OPTIONAL Though the information below is not required by lmv, it may prove valuable to persons relying on the document and could prevent fraudulent removal and reattachment of this form to another document_ Description of Attached Document Title or Type of Document: SubordinationAgreement Document Date: June 1, 2001 Number of Pages: 18 Signer(s) Other Than Named Above: Capacity(ics) CIaimed by Signer(s) Signer's Name: Heidi McKibben ❑ Individual ❑ Corporate Officer Title(s): Vice President ❑ Partner— ❑ Limited ❑ General ❑ Attorney -in -Fact Right Thumbprim ❑ Trustee or signer 0 Guardian or Conservator Top of Thumb Here ❑ Other: Signer is Representing: Fannie Mae Signer's Name: 0 Individual ❑ Corporate Officer Title(s): ❑ Partner--- ❑ Limited 0 General D Attorney -in -Fact Right Thumbprint D Trustee or signer 0 Guardian or Conservator Top oFThumb Hem ❑ Other: Signer is Representing: CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT State of California ) )ss. County of Se,, Frartc�5c a ) On 21 .2 oo i , before me, _��`nret rio u , Notary Public, personally appeared .Wersonally kno.%m to me oproved to me on the basis of satisfactory evidence to be 6e person(s) whose name(.is/a;e subscribed to the DEBPA KNOX within instrument and acknowledged to me that Ccrnm�*0n* t259M he/Atc4hty executed the same in his/her. Air authorized y � ��°�° capacity(ies), and that by hisTher*rcir signature(s) on the MyCamm.E0wApr,%2 M4 instrument the person(s), or the entity upon behalf of which the person(&) acted, executed the instrument. WITNESS my hand and official seal. a) L) A-0. -k)., Place Notary Sol Above Signature of Nd';IIUY Putilic OPTIONAL Though the information below is not required by law. it tray prove valuable to persons relying on the document and could prevent fraudulent removal and teattubment of this form to mother document. Description of Attached Document Title or Type of Document: Document Date: Number of Pages: Signer(s) Other Than Named Above: Capacity(ics) Claimed by Signer Signer's Name: C) Individual o Corporate Officer -Title(s): o Partner - ❑ Limited ❑ General p Attorney in Fact E3 Trustee o Guardian or Conservator 0 Other: Sign:r is Representing: CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT State of California 55. County of r � On D , before me, D+ a Name aria Tice d O9rcer (e.g..'Jarie Oo . notary PubrC) personally appeared t•9 � I +. 1 •:r Nrry)s) a sage"s) R personally known to me ❑ proved to me on the basis of satisfactory evidence to be the person(d) whose name(a) idol& subscribed to the within instrument and acknowledged to me that helstraUhey executed the same in hislhef4ha4r authorized capacity(ies), and that by hisliaeFAheir sigrature(s) on the instrument the person(s), or the entity upon behalf of which the person(* acted, executed the instrument. W17NESS my hand and official seal. Ram Notary seat Above Spriatum of Notary Puorc OPTIONAL Though the information below is not required by law, it ma/ prove valuable to persons relying on the document and could prevent fraudulent removal and reattachment of this form to another document. Description of Attached Docu en Title or Type of Document: _ Document Date: %t LLzc& i Number of Pages: Signer(s) Other Than Named Above: Capacity(les) Claimed by Signer Signer's Name: :1 Individual " rop d tntrnq Here ❑ Corporate Officer — Title(s): ZI Partner — ❑ Limited ❑ General ZI Attorney in Fact J Trustee ❑ Guardian or Conservator ❑ Other: Signer Is Representing: 01999 Nsxnel NoWy Aommmi, - 9MQ Do SaboMe.. PO. Ow 2402 - hwr.offt CA 913t}24M - i rahxwmowyep Prod No. BW Wadw CM ha•F." 14ri0-97"W CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT State of California ss. County of --O-Mm- e—A On Up before me, Date personally appeared �- LAURAA.14130N Cor+rirlan 1fo" NaMQyR1GiC—CAlf��77tiO O7e:tpe tooth MMCarnm. F1Ip 2 kA 29. 20M .A&4%. A - Af 11PI) A� �- P444 .4 Na +M r+6 Title of 011 cw le g . 'JanaW. notary PW NaMIKS) of ❑ personally known to me Nq)roved to me on the basis of satisfactory evidence to be the personN whose named &am sutscribed to the within instrument and acknowledged to me that helshelthey executed the same in &H-Cah if+ authorized capacity(ia&), and that by ( 'heekhek- signaturets) on the instrument the person(s), or the entity upon behalf of which the person(} acted, executed the instrument. WITNES hand and official seal. Place Notary Sad Aw" S"tva o1 Notary Pub1-c OPTIONAL Though the information below is not required by taw, it may prove valuable to persons relying on the document and could prevent fraudulent removal and reatt3rhment of this form to another document. Description of Attached D cument e Title or Type of Document: _Q•d_rs Document Date: (ep Number of Pages:. Signer(s) Other Than Named Above: K• 1% UP. do Wieki6 Capacity(ies) Claimed by Signer yh Signer's Name:f ❑ Individual Top of vvrno rye e ❑ Corporate Officer —Title(s): ❑ Partner — ❑ Limited ❑ General ❑ Attorney In Fact ❑ Trustee ❑ Guardian o Conspryator Other.,(; T� Signer Is Representing: Cr cy> tky 1J 1 ZC`E $ Q V t1.C. 0 1999 Naeantt Notwy Awa ton • fto De Sm Ave., P.O. Box 24M • Clretworal CA 91313-2402 • www w onM.ifty a9 Prod 10 5W7 Aaeadw CY TotFoe 14opdN4827 CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT State of California County of Orange as. On June 26, 2001 , before me, .._.—... Laura A. Nelson, Notary Public 01" twm and n" a oRkw is 0. -jX* oo*. Nm" P�erc� personally appeared Connie Brockway and Pam Julien Houchen------- N.miKsj a S9r'M0 LAUitA A. NaSON Comrrisdon t ! 22AW N031y Fubft— Cattomka arvge c«antr t�v comro. Evian JU 23- 20M epersonaliy known to me ❑ proved to me on the basis of satisfactory evidence to be the person(2) whose name(s) -Ware subscribed to the within Instrument and acknowiedged to me that heishelthey executed the same in "sAo dtheir authorized capacity(j), and that by +49A+ rltheir signature(;) on the Instrument the person(s), or the entity upon behalf of which the person(j) acted, executed the Instrument. WITNESS hand and official seal. Rua Ndwy SW Abm GP M Of NO" K06C OPTIONAL Though the Information below is not required by law. it may Now valuable to persons mtyrng on the document and couldprevent fraudulent removal and reaRachment of this form to another document. Description of Attached Document Title or Type of Document: _ Subordination Agreement — Quo Vadis Document Date: 6101101 Number of Pages: 18 Signer Other Than Named Above: Thomas M. Nmchuk, Jonathan B. Webb, Mark E. Hyatt, Gall Hutton, Ray Silver, David C. Biggs, Murray 0. Kane, Heidi X McKibben Capacityan) Claimed by Signer Signer's Name: Conn a Brockway and Pam Julien Houchen ❑ Individual roP of rune h" ❑ Corporate Officer — Tibe(s): ❑ Partner --❑ Limited ❑ General ❑ Attorney In Fact ❑ Trustee ❑ Guardian or Conservator LV other Agency Clerk and Chairman — Signer is Representing: Redevelopment Agency of the City of Huntington Beech O IM Nabs* Now^ Aswdam • MSG Do S M Ave, PA. a 240 • Chehbwf� CA 113117W? • . I G.%LAURAVORMTACKNOWLEDGEMENT AGENCY.DOC EXHIBIT A ALL THAT CERTAN LAND SITUATED I,I THE STATE OF CALIFORNIA. COUNTY OF ORANGE, CITY OF HUNTINGTON BEACH, DESCRIBED AS FOLLOWS: PARCEL I, AS SHOWN ON A MAP FILED IN BOOK 43, PAGE 19 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF ORANGE COUNTY, CALIFORNIA. PAGE 4 Project Deaf Points ATTACHMENT #2 PROJECT DEAL POINTS BY AND BETWEEN THE CITY OF HUNTINGTON BEACH REDEVELOPMENT AGENCY AND KDF QV, L.P. 18992 FLORIDA STREET QUO VADIS APARTMENTS As of April 2, 2001 The Redevelopment Agency will provide $1,700,000 in HOME Investment Partnership Program funds and/or Redevelopment Agency Housing Set Aside funds as a loan to KDF QV, L.P. The Agency's loan funds will be used to acquire and rehabilitate a multifamily rental -housing property located at 18992 Florida Street, commonly known as Quo Vadis Apartments. 1. There will be an annual 3% interest charge applied to the outstanding loan balance during the term of the loan agreement. 2. For a period not less than 60 years, all 104 units in the properties will be subject to tenant household income and rent affordability restrictions as provided in the following schedule: Tenant Income Number of Unit Size Level Units Current Restricted Rent 30% X 60% of the monthly 60% 19 income of the OC i person Studio household median income 30% X 50% of the monthly 50% 5 income of the OC 'I person household median income 30% X 60% of the monthly 60°!o 51 income of the OC 1 %2 person 1 Bedroom household median income/ 30% X 50% of the monthly 50% 13 income of the OC 2 person household median income 30% X 60% of the monthly 60% 13 income of the OC 3 person 2 Bedrooms household median income 30% X 50% of the monthly 50% 3 income of the OC 3 person household median income Total Number of Units 1 D4 3. To verify that tenant households meet the above income restrictions, KDF QV, L.P. will maintain records that clearly document tenant eligibility. These records Page 1 of 4 will be updated at least annually and will be maintained for a period not less than three years after a tenant no longer resides at the property. Verification of tenant income will be performed in compliance with the Agency's Housing Rehabilitation Loan Program Policies and Procedures. If a tenant household's gross income increases and thus the household no longer qualifies for residency in the restricted unit, that family will be given 90 days to relocate. Should a tenant face extraordinary hardship satisfying this requirement, a written appeal may be submitted to the Agency. Upon receipt of a written appeal and at the sole discretion of the Director of Economic Development, this period may be extended for a period not to exceed 90 additional days. 4. The maximum allowable rents will be adjusted annually upon receipt of updated federal department of Housing and Urban Development (HUD) income and rent standards. All tenant paid utilities must be subtracted from the maximum allowable rents for the project. 5. The maximum number of persons in a household that may occupy a single residential unit may not exceed the following limits. It will be the responsibility of KDF QV, L.P. to enforce these occupancy limits. Unit Size Maximum Occupancy Studio 2 1 Bedroom 3 2 Bedroom 5 6. KDF QV, L.P. will obtain multifamily housing revenue bond financing in an amount anticipated to be $7,025,000, tax credit financing in amount anticipated to be $2,829,096, which together with the Agency's $1,700,000 loan and the developer's $85,000 equity investment will be used for property acquisition and rehabilitation expenses. The bond financing shall be secured in first position, with the Agency's loan secured in second position. 7. KDF QV, L.P. will be required to demonstrate that $11.1 million if first trust deed financing, net tax credit proceeds, deferred Developer Fee, and Developer equity have been committed to the project before the Agency funds any of its $1.7 million loan. 8. The Agency's assistance package shall not exceed $1.7 million. If the project incurs cost overruns during the development process, KDF QV, L.P. must fund the costs with an additional equity infusion. 9. In the event KDF QV, L.P. wishes to refinance the original first lien, the Agency will have authority to approve or deny such request. Although approval of such a request shall not be unreasonably withheld, the Agency will consider various factors including the following: compliance with Agency loan terms, the capitalization rate used to value the property, the projected income based on Page 2 of 4 restricted rents that used to value the property, and the percent of debt to equity that will be established under the new loan. The Agency will support a request to refinance that will improve loan terms. 10. KDF QV, L.P. will inspect the properties for lead -paint hazards in accordance with Title X of the 1992 Housing and Community Development Act. Any lead - paint hazards identified must be abated as part of the rehabilitation process. Should lead -paint hazards be found, KDF QV, L.P. may request lead paint related rehabilitation loan funds from the Agency. Authority to approve a requested loan increase shall rest solely with the Agency's Board of Directors only upon the recommendation of the Director of Economic Development and Executive Director. 11. KDF QV, L.P. will maintain the properties in compliance with HUD Housing Quality Standards along with City and State laws and codes. The Agency may perform inspections of the property to ensure compliance with this requirement. Should KDF QV, L.P. fail to adequately maintain the property, any deficiencies identified by the Agency must be addressed within 30 days and cured within a reasonable time thereafter. 12. KDF QV, L.P. will establish an operating reserve at a sufficient level to fund repairs and improvements to the properties so as to ensure that the buildings remain in compliance with HUD Housing Quality Standards along with City and State laws and codes. KDF QV, L.P. will invest at least $150 per unit per year into the operating reserves. As capital repairs become necessary, all expenses must be paid first through operating reserves then from cash flow. 13. Each year during the term of the loan, KDF QV, L.P. will provide the Agency with copies of audited financial statements of KDF QV, L.P. along with cash flows of the project. These financial statements must clearly show the status of the project's operating reserve account and end of year cash balance. Upon review of the financial statements, the Agency may at its option perform a comprehensive review of appropriate records to verify the accuracy of such records. 14. At the end of each year while income and affordability restrictions apply to the project, KDF QV, L.P. will provide the Agency with copies of monthly rent records and tenant eligibility certifications. These reports shall be in a format provided by the Agency. Upon review of such records, the Agency may at its .option perform an audit of tenant files to verify compliance with income and affordability requirements. 15. At the beginning of the third year of the loan agreement, and continuing for the duration of the agreement, KDF QV, L.P. will make annual payments to the Agency. Such payments shall be fifty percent (50%) of the project's end -of -year net income. After the 60`' year of the loan agreement, should KDF QV, L.P. elect to terminate the project's income and affordability restrictions, all remaining unpaid principal and interested on the Agency's loan will be due; however, the unpaid balance of the loan will not require repayment and will not accrue further interest charges for whatever period KDF QV, L.P. maintains the income and affordability restrictions on the properties. Page 3 of 4 1 6. KDF QV, L.P. must agree to indemnify the Agency against any relocation obligations and expenses that may arise during the term of the loan agreement. If relocation is required, KDF QV, L.P. must submit a relocation plan to the Agency prior to the removal of any tenants from the property. The plan must include the following for each affected household: name, gender, age, ethnicity, household size, income, and relocation cost. In addition, KDF QV, L.P. must comply with all obligations under the Uniform Relocation Act. This relocation requirement does not apply to tenants required to move due to an increase in household income. In such instances, because such households would no longer qualify for residency in an affordable unit, the law does not require relocation assistance. 17. KDF QV, L.P. will provide adequate insurance to protect the Agency from loss due to fire or other standard property hazards. The property must be insured for an amount equal to the replacement cost of the entire project site, and the insurance must include a guarantee for full replacement of the site. The Agency must be designated on such insurance as an additional loss payee. The property is located in Flood Zone X, which is not a designated 100-year flood zone, so flood insurance coverage will not be required. 18. KDF QV, L.P. will comply with all federal, state, and local nondiscrimination, fair housing, and equal opportunity requirements. In addition, KDF QV, L.P. will conduct affirmative marketing and minority outreach activities as required by federal HOME regulations. 19. The Agency will have a first right of refusal to purchase the property should KDF QV, L.P. choose to sell the property. The Agency must be given written notice of an intent to sell the property, upon receipt of such written notice, the Agency will have 90 days to exercise its option. Should the Agency elect not to exercise this option, it will have the right to approve any buyer of the property. Under this scenario, KDF QV, L.P. will agree to make every reasonable effort to sell the property to an affordable housing organization with similar experience and qualifications managing properties with income and affordability restrictions. 20. KDF QV, L.P. will be responsible for paying all legal costs associated with enforcing the loan agreement. Reviewed and Accepted: y Mark E H Date Limited Managing Member, KDF Communities - QV LLC Co -General Partner of KDF QV, L.P. A W Ce David Biggs Deputy Executive Director Huntington Beach Redevelopment Agency Date Page 4 of 4 Resolution Number 317 , A Resolution of the Redevelopment Agency of the City of Huntington Beach Declaring Intention to Reimburse Expenditures from the Proceeds of Tax -Exempt Obligations and Directing Certain Actions ATTACHMENT #3 RESOLUTION NO 319 A RESOLUTION OF THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH DECLARING INTENTION TO REIMBURSE EXPENDITURES FROM THE PROCEEDS OF TAX-EXEMPT OBLIGATIONS AND DIRECTING CERTAIN ACTIONS WHEREAS, the Redevelopment Agency of the City of Huntington Beach or a public entity associated therewith (the "Issuer") intends to issue tax-exempt obligations (the "Obligations") for the purpose, among other things, of assisting in the financing of the acquisition, rehabilitation and development of a multifamily housing residential facility generally located at 18892 Florida Street, Huntington Beach, California, (the "Project"); and - United States Income Tax Regulations section 1.103-18 provides generally that proceeds of tax-exempt debt are not deemed to be expended when such proceeds are used for reimbursement of expenditures made prior to the date of issuance of such debt unless certain procedures are followed, among which is a requirement that (with certain exceptions), prior to the payment of any such expenditure, the issuer must declare an intention to reimburse such expenditure; and It is in the public interest and for the public benefit that the Issuer declare its official intent to reimburse the expenditures referenced herein; NOW, THEREFORE, BE IT RESOLVED that the Redevelopment Agency of the City of Huntington Beach DECLARES and ORDERS as follows: 1. The Issuer intends to issue the Obligations for the purpose of paying the costs of financing the acquisition and development of the Project. 2. The Issuer hereby approves the financing of the Project with the proceeds of the Obligations subject to the approval by the Issuer of the bond documents to be executed in connection therewith. 3. The Issuer hereby declares that it reasonably expects that a portion of the proceeds of the Obligations will be used for reimbursement of expenditures for the acquisition and development of the Project that are paid before the date of initial execution and delivery of the Obligations. 4. The maximum amount of proceeds of the Obligations to be used for reimbursement of expenditures for the acquisition, rehabilitation and development of the Project that are paid before the date of initial execution and delivery of the Obligations is S 1,700,000. SF-2001 Rcsol: Agency — Florida St. RLS 2001-0308 a-25-01 5. The foregoing declaration is consistent with the budgetary and financial circumstances of the Issuer, in that there are no funds (other than proceeds of the Obligations) that are reasonably expected to be (i) reserved, (ii) allocated or (iii) otherwise set aside, on a Iong-term basis, by or on behalf of the Issuer, or any public entity controlled by or associated with the Issuer for the expenditures for the acquisition and development of the Projects that are expected to be reimbursed from the proceeds of the Obligations. PASSED AND ADOPTED by the Redevelopment Agency of the City of Huntington Beach at a regular meeting thereof held on the 7th day May , 2001. ATTEST: Agency Clerk M- —01 REVIEWED AND APPROVED: e� r-AL44_ Exo<tive Director Chairman APPROVED AS TO FORM: Agency General Counsel INITIATED AND APPROVED: &W zy. Igo Director of E no�mic Development Deputy Executive Dire r SF-2001 Rcsol: Agency —Florida St. RLS 2001.0308 a-25-01 Res. No. 319 STATE OF CALIFORNIA ) COUNTY OF ORANGE j ss CITY OF HUNTINGTON BEACH ) I, CONNIE BROCKWAY, Clerk of the Redevelopment Agency of the City of Huntington Beach, California, DO HEREBY CERTIFY that the foregoing resolution was duly adopted by the Redevelopment Agency of the City of Huntington Beach at a regular meeting of said Redevelopment Agency held on the 7th day of May, 2001 and that it was so adopted by the following vote: AYES: Green, Boardman, Cook, Julien Houchen, Garofalo, Dettloff, Bauer NOES: None ABSENT: None ABSTAIN: None e eowl� Clerk of the Redevelopment Agency of the City of Huntington Beach. CA Fiscal Impact Statement ATTACHMENT #4 CITY OF HUNTINGTON BEACH INTERDEPARTMENTAL COMMUNICA TION To: Ray Silver, City Administrator From: Clay Martin, Director of Administrative Services Subject: FIS 2001-38 Approve an Owner Participation Agreement for Quo Vadis Apartments Affordable Housing Project Date: April 27, 2001 As required by Resolution 4832, this Fiscal Impact Statement has been prepared for "Approve an Owner Participation Agreement for Quo Vadis Apartments Affordable Housing Project." If the City Council approves this request (total appropriation $1,700,000, of which $673,000 was previously appropriated and $1,027,000 represents new appropriations) the estimated unreserved Low -Income Housing Fund balance at September 30, 2001 will be reduced to $866,000. -70 lay Martin, Director of Administrative Services L i�mrMG�rrsE March 31, 2003 Attn: City Clerk Redevelopment Agency of the City of Huntington Beach 2000 Main Street Huntington Beach, CA 92648 RE: Huntington Pointe Apartments (formerly KDF Quo Vadis, L.P.) Annual Report To Whom It May Concern: Enclosed please find the 2002 Annual Report for Huntington Pointe Apartments as of December 3I, 2002. Please also find a copy of tl:e "eligibility lists" or waiting lists currently utilized on the property. If you have any questions or you need anything further please feel free to contact me at 949-863-1500 Ext. 223. Thank you. Sincerely, Christina L. Weinmann Regional Property Supervisor Enclosures - - t. C-3 2400 Main Street, Suite 201, Irvine, California 92614 - (949) 863-1500 - Fax (949) 863-1801 MLLAGE April 16, 2004 Attn: City Clerk Redevelopment Agency of the City of Huntington Beach 2000 Main Street =4 Huntington Beach, CA 92648 RE: Huntington Pointe Apartments (formerly KDF Quo Vadis, L.P.) Annual Report D To Whom It May Concern: u, Enclosed please find the 2003 Annual Report for Huntington Pointe Apartments as of December 31, 2003. If you have any questions or you need anything further please feel free to contact me at 949-863-1500 Ext. 223. Thank you. Sincerely, I Christina L. Weinmann Regional Property Supervisor Enclosures r 2400 Main Street, Suite 201, Irvine, California 92614 • (949) 863-1500 • Fax (949) 863-1801 BOND PROGRAM REPORT Property: HUNTINGTON POINTE Location: 18992 Florida Street, Huntington Beach, CA 92648 Today's Date: 12/31/03 Submitted by: Village Investments Total # Units: 104 Total Units Occupied: 101 Total Habitable/Living Units: 104 Total Low Income Units Occupied: 42 ;Percentage of Low Income Units Occupied: 40% !Number of Units Held Vacant and Available to Rent to Lower Income Tenants: 0 INumber of Units Held For Qualified Households Upon 0/I Move -outs: 0 LIST ALL BOND PROGRAM UNITS BELOW IN NUMERIC OR ALPHABETIC ORDER: (Indicate nr if vacant) A t.# Name # of FOcu ants # of Bdrrrs Rent Annual Income Low or VeryLow Cert. Date 001 1 Dill, Carol J 1 BACH 789 19,159 Low 2/14/2003 0012 Wintzen, Donna 1 BACH 789 26,400 Low 10/9/2003 0013 Orellana,Mar oth 2 BACH 789 27629.50 Low 7/1/2003 0014 Ri don, Jesse 1 BACH 657 24,000 Very Low 1/1/2003 0015 lFrench, Catherine 2 BACH 789 30,189 Low 4/23/2003 0016 Ra a, Pasty 1 BACH 657 8,808 Very Low 1/1/2003 0017 Hashmene'ad, Teresa 2 BACH 789 21,724 Low 7/1/2003 0018 Rome . John 1 BACH 162 8,176 Low 2/1/2003 0019 Stinson, Connie 1 BACH 789 19,760 Low 3/1/2003 001 10 Jeffrey, Gerde 1 BACH 789 23,912 Low 6/1/2003 00111 Bernardo, Joseph 1 BACH 789 19,889 Low 6/1/2003 001 12 Wittkamm, Thomas 1 BACH 160 9,584.40 Low 12/1/03 001 13 Norton, Cherie 1 BACH 147 9,324 Low 3/1/2003 uez, Cita 1 BACH 85 4,800 Low 3/24/2003 Hansaiia, Hitesh 2 BACH 789 34,822 Low 1/17/2003 K0011Rodri Gawarran, Lorena 1 BACH 789 31,203 Low 2/21/2003 Reed, Matt 1 BACH 657 24,877 Ve Low 1/1/2003 Koska, Jennifer 1 1 BACH 1 789 124,024.01 Low 112101103 001 19 Mendoza, Richard 1 BACH 789 20,499.2 Low 8113/2003 00120 Carrera, Frank 1 BACH 657 14,560 Very Low 1/1/2003 00121 Rutherford, Bryanne L 1 BACH 657 17,524.9 VeryLow 12/16/2003 00122 Graves, Kevin 1 BACH 186 19675.20 Low 9/1/2003 00123 jArroyo, Maria 1 BACH 789 31,158 Low 7/18/2003 00124 Dowens, Thomas 1 BACH 789 19,515 Low 4/1/2003 0021 Nascimento, Amanda 2 1 846 27819.55 Low 9/1/2003 0022 Farcas, Gabriela 2 1 846 34,320 Low 6/112003 0023 Holnes, Lincoln 1 1 846 30,300 Low 2/1/2003 0024 Ferricks, Melinda 1 1 409 21,460 Low 7/112003 0025 Hernandez, Karen 1 1 846 27099.28 Low 8/1/2003 0026 Polowa . Elizabeth 2 1 846 16756.40 Low 7/1/2003 0027 Manson, Aarron 3 1 846 25,104. Low 10/16/2003 0028 Herein, Rammy 1 1 203 9589.64 Very Low 8/1/2003 0029 Rene ar, Beverly 2 1 752 24,440 Very Low 1/1/2003 00210 Ramirez, Adalberto 1 1 158 9,084 Low 3/14/2003 00211 1 Lizarzaburu, Carlos 2 1 752 16,390 Very Low 6/3/2003 00212 Crawford, Debbie 2 1 846 16,612.7 Low 8/1/2003 00213 Gardner,Beverly 1 1 125 9,578.40 Low 10/16/2003 00214 Bernal, Stephanie 1 1 143 8,604 Low 7/1/2003 00215 Copeland, Carolyn 1 1 153 9,046 Low 1/1/2003 00216 Taylor, Lindsay 2 1 846 34,184 Low 5116/2003 0031 Anderson, Jean 1 1 191 10,496 Low 6111/2003 0032 Neville, David 1 1 846 28,860 Low 1/1/2002 0033 Black, Velma 1 1 752 21,223 Very Low 1 /112003 0034 : Zarb'Cousin, Donna 1 1 162 9,332 Low 1/1/2003 0035 Besancon Violette 1 1 846 15,240 Low 1/17/2003 0036 Melville, Robert 1 1 752 24 436.3 Very Low 12/1/2003 0037 Alvarado, Brian 3 1 846 29,744 Low 1/1012003 0038 Osawa, Sanae 1 1 752 24,518 Very Low 1/1/2003 0039 Farmer, Jamie 1 1 231 9,084 Low 5/1/2003 00310 Andrade, Denise 2 1 846 30,472 Low 1/1/2003 00311 Hunter Terry 1 1 846 21 285 Low .211/2003 00312 1 Henderson, Robin 1 1 209 21 645.9 Low 8/1/2003 00313 Chamaa Saleh 2 1 156 17,148 Very Low 2/7/2003 00314 Eschner, Peter 1 1 846 23,789 1 Low 1/1/2003 00315 Bergman, Dustin J 2 1 846 34,278.4 Low 12/1/2003 00316 Barron K mar 2 1 846 32 307 Low 5/1/2003 0041 Marquez, Lisa 1 1 49 5,520 Low 7/18/2003 0042 Gonzalez Elva 2 1 488 20779.20 Low 7/1/2003 0043 LaBlond, Serena 2 1 752 23-172 Very Low 1/1/2003 .0044 Teplity, Michael 1 1 846 27,370 Low V112003 0045 Fa iri Bibi K. 1 1 158 9,084 Low 7/22/2003 0046 Knaub Ronald 1 1 158 . 9,284 Low 5/8/200311 0047 A uitera Liliana 3 1 846 21840.00 Low 9/1/2003 0D4 8 VACANT 1 846 . I Low 0049 Orszewski Casmere 1 1 199 10,021 Low 1/1/2003 00410 Dharam Paul 3 1 752 23,446 Very Low 1/1/2003 00411 VACANT 1 1 752 Ve Low 00412 Saunders Evelyn 1 1 372 11,898 Low 9/4/2003 00413 lGertzbew, Boris 1 1 203 9084.00 Low 7/1/2003 004 14 , O'Brien Terri 1 1 846 17,691.0 Low 11/24/2003 00415 Gonzalez Ramona 1 1 846 3057231 Low 10/1/2003 00416 Ngu en, Hoan 1 1 125 9,727.20 Low 12/15/2003 0051 Villa omez Na ive 2 1 752 27,612 Very Low 4/17/2003 0052 Mendoza Vanessa 1 1 846 - 30,160 Low 1/1/2003 0053 Galindo Feli a 1 1 138 6,948 Low 6/1/2003 0054 Cantoran Elena 2 1 408 22891.50 Low 8/8/2003 0055 Bautista, Jose 3 1 846 35,25E 1 Low 1/1/2003 0056 Grand Barbara 1 1 846 16,536.0 Low 11/21/2003 .0057 Mori, Artemio 1 1 846 28,343 Low 111 /2003 0058 Umali Gladys 2 1 - 846 24,120.4 Low 11/10/2003 0059 Lester Robert 1 1 752 10875.96 Veg Low 9/1/2003 00510 Moeller Chris 1 1 846 26,124 Low 1/1/2003 00511 N ssen Julie 2 1 846 19395.00 Low 7/1 /2003 00512 Huerta Oscar 3 1 752 27,124 VervLow 211 /2003 .00513 Lopez, Kenny 3 1 846 26 790.4 Low 10/17/2003 00514 Gildea, Nancy 1 1 704 23,400 Very Low 4/10/2003 00515 Everett, Michael G 1 1 846 30233.24 Low 9/10/2003 00516 De Blask Melody 2 1 1 846 31,068.0 Low 11/9/2003 0061 Gonzalez, Pablo 4 2 1,016 41059.20 Low 7/1/2003 0062 Garcia, Maria L 3 2 264 22,270 Low 2/24/2003 0063 Williams Michelle 4 2 1,016 43,652.0 Low 11/21/2003 - 006 4 VACANT 2 1,016 Low 0065 Hanlon Kevin W 4 2 530 24,837 Low 3/7/2003 .0066 - STAFF 2 _ 0067 Anderson Daniel 2 2 1,016 22,437 Low 1/15/2003 0068 Diaz, Carlos 4 2 1,016 39,704.E Low 12/3/2003 0071 Alvarez Alvaro 4 2 1,016 21 648 Low 5/1/2003 007 2 Tatum Lloyd 3 2 1,016 38,415 Low 3/17/2003 0073 Chau Le 3 2 111 17,040 Low 2/4/2003 0074 Lopez, Maria 4 2 846 24 460.8 Very Low .1019/2003 .0075 Sharda Satish 5 2 1 016 31.590 Low 2/1/2003 007 6 Dbdt. Rai 5 2. 846 31,971 1 Ve . Low 1/1/2003 0077 lVilla, Francisco 4 2 1 016 361157 Low 2/1/2003 0078 IMorus, Chard 1 4 1 2. 46 8 26,000 Ve Low 1/1/2003 0/1= Over Income Household BACH = Bachelor STAFF = Unit occupied by property staff member V = Vacant and being held for a low-income household Low = Household's annual income does not exceed 60% of O.C: s median income Very Low = Household's annual income does not exceed 50% of O.C.'s median income Unit # New Move Ins: Mll Date: A-21 Rutherford, Bryanne L. 12/16/03 Unit # Move Out's : Ml0 Date: Unit # Re -certification Effective Date A-12 Wittkamm, Thomas 12/1/2003 A-18 Koska, Jennifer 12/1/2003 RCA ROUTING SHEET INITIATING DEPARTMENT: Economic Development SUBJECT: 1. Approve an Owner Participation Agreement for Quo Vadis Aaartments Affordable Housing Project COUNCIL MEETING DATE: May 7, 2001 RCA ATTACHMENTS STATUS Ordinance (w/exhibits & legislative draft if applicable) Not Applicable Resolution wlexhibits & legislative draft if applicable) Attached Tract Map, Location Map and/or other Exhibits Attached Contract/Agreement (wlexhibits if applicable) (Signed Ln full by the Cit Attorney) Attached Subleases, Third Party Agreements, etc. A roved as to foml 4y City Attome Not Applicable Certificates of Insurance (Ap2roved by the Uty Attome Not Attached (Explain) Financial Impact Statement Unbud et, over S5,000 Not Applicable Bonds If applicable) Not Applicable Staff Report If applicable) Not Applicable Commission, Board or Committee Report If a licable Not Applicable Findin s/Conditions for Approval and/or Denial Not Applicable EXPLANATION FOR MISSING ATTACHMENTS The City's insurance requirements are requested to be temporarily waived until the close of escrow. At that time, insurance certificates will be obtained and approved. I EXPLANATIO"OR RETURN OF ITEM: - 1 RCA Author. HOLTZ (5901)