Loading...
Item 3.1 - Poway Commons, LLC Purchase, Sale and Development AgreementCity of Poway (ED COUNCIL AGENDA REPORT DATE: TO: March 19, 2019 APPROVED a APPROVED AS AMENDED ❑ (SEE MINUTES) DENIED ❑ REMOVED ❑ CONTINUED RESOLUTION NO. +j .� Honorable Mayor and Members of the City Council Honorable Chair and Members of the Poway Housing Authority FROM: Tina White, City Manager/Executive Director CONTACT: Craig Ruiz, Economic Development Administrator (858) 668-4509 or cruiz@poway.org SUBJECT: Poway Commons Purchase, Sale, and Development Agreement, Affordable Housing Purchase, Sale, and Development Agreement, Property Exchange Implementation Agreement, and a Government Code Section 52201 Summary Report Summary: In April 2017, the City of Poway ("City") initiated a Request for Qualifications/Proposals ("RFQ/P") process to identify a developer to acquire and develop City and Poway Housing Authority ("Authority") owned properties within the Town Center area of the Poway Road Specific Plan. The RFQ/P process identified the development team of Meridian Development, LLC and Sudberry Properties, Inc. as having the most qualified proposal. In December 2017, the City and the Authority entered into an Exclusive Negotiation Agreement ("ENA") with the Developers. The ENA allowed the City, Authority and Developers to negotiate a Purchase, Sale, and Development Agreement ("PSDA") for a mixed-use, market -rate development and an Affordable Housing and Property Disposition Agreement ("AHPDA") for an affordable housing project. The purpose of this item is to approve the PSDA, the AHPDA, Property Exchange Agreement, Loan Agreements and Government Code Section 52201 Summary Report. Recommended Action: It is recommended that the City Council: 1) Approve the Purchase, Sale, and Development Agreement (Exhibit B of City of Poway Resolution); 2) Adopt a resolution authorizing the City Manager to execute the Purchase, Sale, and Development Agreement, the Property Exchange Implementation Agreement and all ancillary documents related to its implementation (Exhibit C of City of Poway Resolution); 3) Authorize the approval of a Loan in the Amount of $1,700,000 for the purchase of the property; 4) Hold a public hearing and make specified findings to allow for the disposition of the Property in compliance with Government Code Section 52201 (Attachment C). It is recommended that the governing board of the Poway Housing Authority: 1) Approve the Affordable Housing and Property Disposition Agreement between the Authority and Poway Commons, LLC (Exhibit B to Housing Authority Resolution); 2) Approve the Property Exchange Implementation Agreement between the Authority and the City (Exhibit C to Housing Authority Resolution); 3) Adopt a resolution authorizing the Executive Director to execute the Affordable Housing and Property Disposition Agreement, the Property Exchange Implementation Agreement and all ancillary documents related to its implementation; and 4) Authorize the allocation of up to $2,200,000 from the Authority's Low- and Moderate -Income Housing Asset Fund. 1 of 323 March 19, 2019 Item #3.1 Poway Commons Development Agreements March 19, 2019 Page 2 Discussion: Background Historically, the City has pursued different approaches to revitalizing the Poway Road corridor. Most recently, in 2014, the City initiated the Poway Road Corridor Study and an updated Poway Road Specific Plan ("PRSP"). The PRSP was adopted in December 2017 and provides an implementation strategy to help guide land use, transportation, design/aesthetics, and economic development decisions for Poway Road. In April 2017, the City initiated a Request for Qualifications/Proposals ("RFP/Q") to select a developer to develop City and Housing Authority and privately-owned properties ("Properties"). The purpose of the RFP/Q was to select a developer to construct a mixed-use residential and commercial project along with 44 units of affordable housing in the Town Center area of the PRSP. The initial solicitation resulted in proposals from four development teams. After evaluating the proposals, and interviewing all four firms, the top two firms were invited to submit term sheets further detailing their development concepts for the Properties. After evaluating the term sheets, staff recommended to council the development team of Meridian Development, LLC ("Meridian") and Sudberry Properties, Inc. ("Sudberry") (collectively the "Developers") to continue in the process. In December 2017, the City and Authority entered into an Exclusive Negotiating Agreement (ENA) with the Developers. The ENA allowed staff and the Developers enough time to negotiate the terms and conditions of a PSDA for the market rate, mixed use development and an AHPDA (collectively the "Development Agreements") for the affordable housing. The Development Agreements set forth the schedule for acquisition and development of the Properties, the type and scale of development and purchase price and terms. Approval of the Development Agreements does not approve or commit the City Council to approve the market rate or affordable developments (collectively the "Developments"). The Developments must still go through the City's standard entitlement process. Project Concept Description The development concept entails three distinct product types, including approximately 98 for-sale, market rate, attached housing units, approximately 25,000 square feet of commercial retail space on 2.2 acres and 44 affordable senior housing units. Meridian will develop the market rate housing and Sudberry Properties will develop the commercial space. Meridian has identified Chelsea Investment Corporation ("Chelsea") as the developer of the affordable units. The mixed-use concept of the project will consist of the Retail Parcels comprising approximately 2.2 acres and approximately 25,000 square feet of retail, and residential parcels with three for- sale product types. The first for-sale product type will be approximately 38 units of two-story attached condominiums. Unit sizes will generally range from 1,400-1,600 square footage, configured with 2-3 bedrooms, with approximately 2.5 baths. A second product type will be approximately 54 units configured in three-story buildings. This product type consists of three- story attached buildings, containing two-story townhomes and flat condominiums. Unit sizes will generally range from 1, 700-2,200 square footage and will be configured with 3 bedrooms/lofts and 2 to 3 baths. Product type three is approximately 6 units of three-story attached condominiums. Unit sizes will generally range from 1,300-1,800 square footage with 2-3 bedrooms and 2.5 baths. This product will include a small live/work space associated with the units along Poway Road. Every for-sale unit will have an attached two-car garage. 2 of 323 March 19, 2019 Item #3.1 Poway Commons Development Agreements March 19, 2019 Page 3 The affordable senior housing project will be developed by Chelsea and the on-site manager will be Con Am Properties. Chelsea has developed over 10,000 affordable units in over 100 affordable communities. The project will consist of 36 one-bedroom units (includes one manager's unit), 8 two-bedroom units, a 2,750 square foot community room for classes and activities, and the manager's office. The affordability levels are expected to range from 50% to 60% of area median income, with an average affordability of 58%. Chelsea anticipates financing the project primarily with 4% tax credits, construction and permanent loans, a loan from the County of San Diego's Innovative Housing Trust Funds, a loan from Meridian in the amount of $2,022,000, and a loan from the Housing Authority in an amount not to exceed $2,200,000 (discussed in the Fiscal Impact section below). Initially, both the PSDA and the AHPDA will be between the City and Meridian. When the commercial project commences, the commercial portion of the project will be assigned to Sudberry. When the affordable housing project commences, that portion of the development will be assigned to Chelsea. Project Exchange Implementation Agreement The land discussed for the Developments involves five properties currently owned by the City and two properties currently owned by the Poway Housing Authority as shown in Attachment E, Site Plan -Current Ownership. As shown in the proposed Subdivision Map (Attachment D), the ultimate development will involve the affordable housing development to be located on land currently owned by the City (the "City-Owned Mixed Site") and a portion of both the market rate housing and retail area will be located on land currently owned by the Authority. The Property Exchange Implementation Agreement (the "Exchange Agreement") allows for the City to exchange the Affordable Site for 2.91 acres owned by the Authority (as shown in Attachment F). All of the properties in the Development have been appraised by the City's approved MAI appraiser lntegra Realty Resources (IRR). Poway Commons is paying $2,693,305 for the Housing Authority properties and $1,200,000 for the southernmost 0.9 acres of the City-Owned Mixed Site. Both purchase amounts exceed the appraised value of the properties. The Exchange Agreement provides that the difference in value between the properties will be deposited into the Authority's Low-and Moderate-Income Housing Asset Fund from the proceeds of the sale of the City properties. Project Construction and Phasing If the PSDA and AHPDA are approved, Meridian and Chelsea will begin the process to obtain City entitlements for the residential developments. Entitlements would include a tentative map and design review, as well as grading and improvement plans. As with any other entitlement process, Meridian would be required to hold neighborhood meeting(s) and Council approval of a map and design review would be needed. Once entitlements are received and all conditions to close escrow have been satisfied, escrow will close, and all properties will be owned by Meridian. It is expected that this could take somewhere between nine and 15 months. Meridian would then begin the site preparation work for the site. The site preparation will include rough grading the entire site, demolishing approximately 60,000 square feet of vacant office and storage buildings, removing contaminated soil, lead based paint and asbestos from the vacant buildings, and providing backbone utilities to the Affordable Site (water, sewer, electricity). When the grading and utility work is completed on the Affordable Site, a final map has been recorded and Chelsea has received project financing, the Affordable Site will be transferred from Meridian to Chelsea, and Chelsea will assume all the requirements of the AHPDA. The development of the affordable and market rate housing will generally be constructed concurrently. 3 of 323 March 19, 2019 Item #3.1 Poway Commons Development Agreements March 19, 2019 Page 4 In the initial RFP/Q, the intent was to not only develop City and Authority owned properties, but to potentially include surrounding privately owned properties. Meridian has been able to enter into purchase agreements with three surrounding private property owners. As shown on the proposed Subdivision Map (Attachment D), there are two areas labeled "Retail Area". The PSDA allows Meridian and Sudberry two years to find a suitable tenant for the project. If no suitable tenant has be identified at the end of the second year, the City and Meridian will meet to determine if the tenant search should continue for an additional year. At the end of the third year, Meridian can apply to the City to amend the PSDA to pursue alternative development options. If alternative developments cannot be agreed upon, the City has the option to repurchase the Retail Parcels from the Developer. The purchase price would be the greater of (i) the outstanding amount owed on the City Note (described below), or (ii) eighty percent (80%) of the appraised value of the Retail Parcels as of that date. Government Code Section 52201 Summary Report Government Code Section 52201 requires the City to prepare and make publicly available a report (the "Summary Report") disclosing certain information regarding property sold to create an economic opportunity. The City retained Kosmont Companies, a nationally recognized real estate, financial advisory and economic development services firm to prepare the Summary Report (Attachment C).The proposed sale of the City Parcels to the Developer, as described therein, will create an economic opportunity by facilitating the development of the City Parcels in alignment with the PRSP, thereby increasing the City's revenue base (e.g. property tax, sales tax, etc.), promoting an increase in the supply of housing, stimulating economic activity and job growth within the City, and ultimately serving as a catalyst for the revival of the City's Town Center area and mixed-use core. Environmental Review: The environmental impacts of the contemplated development of the parcels subject to the AHPDA and PSDA (the "Retail/Residential and Affordable Projects") are fully analyzed in and covered by the previously certified Poway Road Specific Plan ("PRSP") environmental impact report ("EIR"; SCH# 2017031035), and no conditions set forth in Public Resources Code section 21166 and CEQA Guidelines section 15162 exist. However, if the City Council approves the AHPDA and PSDA, it is still not committing itself to approve any of the entitlements required for the Retail/Residential and Affordable Projects, and instead the City Council has expressly retained its full discretion to deny the Retail/Residential and Affordable Projects, which will still be subject to further environmental review pursuant to the California Environmental Quality Act ("CEQA") to ensure that the PRSP EIR fully analyzes and covers all of the Retail/Residential and Affordable Projects' impacts, and no conditions set forth in Public Resources Code section 21166 and CEQA Guidelines section 15162 exist. Fiscal Impact: There are seven properties subject to the two development agreements. Of the seven properties, only the property containing Poway Stoway at 13033 Poway Road produces revenue for the City. The City's former Redevelopment Agency purchased the Poway Stoway property in 2004 and the City continues to lease the property to the business. The rent is currently $13,104 per month. The terms of the lease agreement require the City to give six months' notice to the business owner to vacate the property. Notice to vacate will be given to the business owner within five days of the 4 of 323 March 19, 2019 Item #3.1 Poway Commons Development Agreements March 19, 2019 Page 5 Developer receiving entitlements from the City. The remaining properties consist of four vacant parcels and two parcels with vacant buildings. These six properties cost the City/Authority approximately $7,000 per year to maintain, although that figure would increase over time as the buildings continue to age and deteriorate. The City retained IRR to conduct a highest and best use appraisal of the City and Authority properties. IRR is the largest independent commercial real estate valuation, counseling, and advisory services firm in the United States. IRR conducted two appraisals. The first was for the single property at 13100 Poway Road ("North Appraisal") and the second appraisal was for the six properties on the south side of Poway Road ("South Appraisal). The North Appraisal valued the land at $1,820,000 and the South Appraisal valued the properties at $4,740,000, for a combined appraised value of $6,560,000. Meridian has offered to purchase the properties for $7,620,500 (the "Purchase Price") which exceeds the appraised value. Of the Purchase Price, $1,200,000 will be paid to the Housing Authority for the Affordable Site and $6,420,500 will be paid to the City for the remaining properties. As stated above, the City and the Authority will be exchanging property as part of this transaction. The Authority currently owns two parcels totaling 2.91 acres. Based upon the South Appraisal, the Authority's properties are valued at $2, 693,305. The difference between the purchase price for the Authority's properties on the South Side of Poway Road and the Affordable Site is $1,493,305, which amount will be deposited into the Authority's low-and moderate-income housing asset fund from the proceeds of the sale of the City properties. The balance of the sales proceeds, less the loan described below will be deposited into the City's General Fund. Chelsea is requesting a loan from the Authority in an amount up to $2,200,000 for the Affordable Development. The loan is a $1,500,000 cash loan to bridge its funding gap and a loan of an amount not to exceed $700,000 to pay the City's estimated development impact fees. When Chelsea submits for building permit approval, the exact amount of the impact fees will be determined. The loans will be repaid from residual receipt revenue from the project, which is a typical funding mechanism for an affordable development. The residual receipts will be divided 50% to Chelsea (or their lender) and 50% to the Authority once the project generates enough cash flow to cover operations with surplus. The term of the loan is 55 years and the interest rate is 3%. The loan funds will be from the Authority's low-and moderate-income housing trust fund and the funds for the development impact fees shall be transferred from the low-and moderate- income housing trust fund to the respective development impact fund accounts. Meridian is requesting a loan of $1,700,000 for the purchase of the property for the Retail project. The term of the loan would be four years, and the interest rate is equal to the Five-Year Treasury Bill, plus two and one-quarter percent (2.25%). Using an average of the past 20 years, the rate is estimated to be approximately 5.07%. The Note will be secured only against the Retail Parcels and all outstanding principal and interest would be due on the fourth anniversary of the Note. The breakdown of the Purchase Price, loans to Chelsea and Meridian, and deposits to the City and the Authority can be found in the Section 52201 Summary Report (Attachment C). Public Notification: Notice of this hearing was published in the San Diego Union Tribune on March 5, 2019 and on March 12, 2019. 5 of 323 March 19, 2019 Item #3.1 Poway Commons Development Agreements March 19, 2019 Page6 Attachments : A. City of Poway Resolution -Page 7 • Exhibit A -Vicinity Map -Page 12 • Exhibit B -Purchase , Sale and Development Agreement -Page 13 • Exhibit C -Property Exchange Implementation Agreement -Page 120 B. Housing Authority Resolution -Page 125 • Exhibit A -Affordable Parcel Map -Page 129 • Ex hibit B -Affordable Housing and Property Disposition Agreement -Page 130 • Exhibit C -Property Exchange Implementation Agreement -Page 304 C. Section 52201 Summary Report -Page 309 D. Proposed Subdivision Map -Page 321 E. Site Plan -Current Ownership -Page 322 F. Site Plan -Property Exchange -Page 323 Reviewed/Approved By: Wendy Kaserman Assistant City Manager 6 of 323 Reviewed By: Alan Fenstermacher City Attorney ~-AA~ Tina M. White City Manager March 19, 2019 Item #3.1 RESOLUTION NO. 19- A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF POWAY, CALIFORNIA, APPROVING (I) A PURCHASE, SALE, AND DEVELOPMENT AGREEMENT WITH POWAY COMMONS, LLC, FOR CITY-OWNED PROPERTIES BEARING ASSESSOR'S PARCEL NUMBER 317-472-18, 317-472-23, 317-472-24, 317-472- 25 AND THE NORTHERLY APPROXIMATELY .64 ACRES OF 317- 101-06, AND (II) A PROPERTY EXCHANGE IMPLEMENTATION AGREEMENT BETWEEN THE CITY AND THE CITY OF POWAY HOUSING AUTHORITY WHEREAS, the City of Poway (the "City") is a municipal corporation and general law city duly organized and existing under and pursuant to the Constitution and laws of the State of California; and WHEREAS, the City is authorized to "control, dispose of, and convey" public property for "the benefit of the city" (Gov. Code Section 37351); WHEREAS, the City is also authorized to sell property to create an economic opportunity (Gov. Code Section 52201 ); WHEREAS, the City is the fee title owner of five (5) parcels comprising approximately 4.56 acres of real property generally located at 13100 Poway Road and bearing Assessor's Parcel Number 317-101-06, 317-472-18, 317-472-23, 317-472-24 and 317-472-25 (the "City Parcels"), in the City of Poway, County of San Diego, State of California; WHEREAS, the City of Poway Housing Authority (the "Authority") is the fee title owner of two (2) parcels comprising approximately 2.91 acres of real property generally located at 13021 and 13031 Poway Road and bearing Assessor's Parcel Numbers 317-472-01 and 317-472-06 (the "Housing Authority Parcels"), in the City of Poway, County of San Diego, State of California; WHEREAS, the Housing Authority Parcels and the City Parcels (with the exception of the southernmost approximately .9 acres of Assessor's Parcel Number 317-101-06 of the City Parcels, referred to hereinafter as the "Affordable Parcel") are collectively referred to as the "Properties", and are identified on the Vicinity Map, which is included as Exhibit A to this Resolution; WHEREAS, the City retained lntegra Realty Resources to prepare an MAI appraisal of the Properties, which identified the current full fair market value of the Properties as $5,579,091; WHEREAS, the Properties are currently zoned for the Poway Road Specific Plan ("Specific Plan"), are designated as Town Center, and allow general commercial and multi-family residential uses; WHEREAS, City staff have negotiated a Purchase, Sale, and Development Agreement (the "PSDA") with Poway Commons, LLC, a California limited liability company ("Developer"), pursuant to which the City would sell the Properties to Developer for a purchase price of $6,400,500, and the Developer would be required to develop the Properties with a commercial retail development and residential uses permitted by, and in compliance with, the development standards set forth in, the Specific Plan (the "Project"), all as more particularly described in the 7 of 323 Attachment A March 19, 2019 Item #3.1 PSDA; Resolution No. 19- Page WHEREAS, pursuant to the PSDA, the Developer would be required to perform certain improvements to the Properties, including demolishing existing buildings, removing hazardous materials, and remediating contaminated soil, and would also be required to maintain the completed development in a good condition and repair; WHEREAS, pursuant to the PSDA, City would make a loan to the Developer to assist in the purchase of the Properties and the Developer would be required to execute a note evidencing its obligation to repay the City loan, with interest compounded monthly, with such repayment due in full on the fourth anniversary of the note; WHEREAS, concurrently with the negotiation of the PSDA, Housing Authority staff have negotiated an Affordable Housing and Property Disposition Agreement with the Developer (the "AHPDA"), pursuant to which the Housing Authority would sell to the Developer the Affordable Parcel, for the Developer's subsequent sale (after establishing the Affordable Parcel as a separate legal parcel and performing certain grading and infrastructure work on the Affordable Parcel) to a limited partnership established by Chelsea Investment Company, an experienced affordable housing developer, or similarly qualified affordable housing developer acceptable to the Authority (an "Affordable Developer"), and for the Affordable Developer's development and operation on the Affordable Parcel of a 44 unit senior affordable housing development; WHEREAS, City and Authority staff have determined that the proposed AHPDA and PSDA reflect the optimal development potential of the Affordable Parcel and Properties; WHEREAS, to facilitate the implementation of the AHPDA and PSDA, City and Authority staff have prepared a Property Exchange Implementation Agreement, pursuant to which, concurrently with the close of escrow under the AHPDA and PSDA, (i) the City would transfer the Affordable Parcel to Authority, (ii) Authority would transfer the Housing Authority Parcels to the City, and (iii) the City would deposit into the Authority's Low and Moderate Income Housing Asset Fund the sum of One Million Four Hundred Ninety-Three Thousand Three Hundred Five Dollars ($1,493,305), which is the difference between the value of the Affordable Parcel and the Housing Authority Parcels; WHEREAS, Government Code 52201 requires that the City prepare a Summary Report to consider the financial terms of the transaction, as set forth in the PSDA, that the City Council conduct a noticed public hearing with respect to the PSDA, and that the approval of the PSDA be accompanied by certain findings and determinations as set forth herein; WHEREAS, a Summary Report for the PSDA has been prepared and the public hearing has been conducted in accordance with applicable requirements of law; WHEREAS, the City Council has considered all the information and evidence set forth in the Summary Report presented by City staff and presented by persons wishing to appear and be heard concerning the impact of the PSDA on the City; WHEREAS, the PSDA is of benefit to and in the best interests of the City of Poway; and WHEREAS, City staff recommend that the City Council find and determine that the environmental impacts of the contemplated development of the parcels subject to the AHPDA and PSDA (the "Retail/Residential and Affordable Projects") are fully analyzed in and covered by 8 of 323 March 19, 2019 Item #3.1 Resolution No. 19- Page the previously certified Poway Road Specific Plan ("PRSP") environmental impact report ("EIR"; SCH# 2017031035), and that the City, by approving this resolution, is not committing itself nor the City Council to approve any of the entitlements required for the Retail/Residential and Affordable Projects, and instead both the City and Housing Authority retain the discretion to deny the Retail/Residential and Affordable Projects, which will still be subject to further environmental review pursuant to the California Environmental Quality Act ("CEQA") to ensure the PRSP EIR covers all of the Retail/Residential and Affordable Projects' impacts, and no conditions set forth in Public Resources Code section 21166 and CEQA Guidelines section 15162 exist. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Poway as follows: Section 1: The foregoing recitals are true and correct and are a substantive part of this Resolution. Section 2. The environmental impacts of the Retail/Residential and Affordable Projects are fully analyzed in and covered by the previously certified PRSP EIR (SCH# 2017031035), and no conditions set forth in Public Resources Code section 21166 and CEQA Guidelines section 15162 exist. Section 3. Notwithstanding the foregoing, the City Council retains all discretion to deny any entitlements required for the Retail/Residential and Affordable Projects. The Retail/Residential and Affordable Projects will be subject to further environmental review pursuant to CEQA ensure the PRSP EIR covers all of the Retail/Residential and Affordable Projects' impacts, and no conditions set forth in Public Resources Code section 21166 and CEQA Guidelines section 15162 exist. Section 4. The City Council hereby finds and determines that the purchase price for the Properties pursuant to the PSDA is not less than the fair market value of the Properties at their highest and best use. Section 5. The City Council hereby finds and determines that the PSDA will assist in the creation of economic opportunity in that the PSDA will create at least one full-time equivalent, permanent job after full capacity and implementation. Section 6. The City Council approves the PSDA and the sale of the Properties to the Developer for the purchase price of $6,420,500, which purchase price is not less than the full fair market value of the Properties, pursuant to the PSDA, a copy of which is attached hereto as Exhibit B. Section 7. The City Council approves the Property Exchange Implementation Agreement, a copy of which is attached hereto as Exhibit C. Section 8. The City Council authorizes and directs the City Manager and City Attorney to make final modifications to the PSDA and Property Exchange Implementation Agreement that are consistent with the substantive terms of the PSDA and Property Exchange Implementation Agreement approved hereby, and to thereafter sign the PSDA and Property Exchange Implementation Agreement on behalf of the City. Section 9. The City Council authorizes and directs the City Manager to (i) sign such other and further documents, including but not limited to escrow instructions, that require the City's signature, and (ii) take such other and further actions, as may be necessary and proper 9 of 323 March 19, 2019 Item #3.1 Resolution No. 19- Page to carry out the terms of the PSDA and Property Exchange Implementation Agreement. Section 10. This Resolution shall take effect from and after its adoption. PASSED, ADOPTED AND APPROVED by the City Council of the City of Poway, California, at a regular meeting this 19th day of March 2019. Steve Vaus, Mayor ATIEST: Faviola Medina, CMG, City Clerk 10 of 323 March 19, 2019 Item #3.1 STATE OF CALIFORNIA ) ) ss COUNTY OF SAN DIEGO ) Resolution No. 19- Page I, Faviola Medina, City Clerk of the City of Poway, California, do hereby certify under penalty of perjury that the foregoing Resolution No. 19-*** was duly adopted by the City Council at a meeting of said City Council held on the 19th day of March 2019, and that it was so adopted by the following vote: AYES: NOES: ABSENT: DISQUALIFIED: 11 of 323 Faviola Medina, CMC, City Clerk City of Poway March 19, 2019 Item #3.1 12 of 323 Exhibit A Vicinity Map Resolution No . 19- Page March 19, 2019 Item #3.1 882/012782-0020 1¥96¥'32~3115/19 EXHIBIT B to CITY RESOLUTION PURCHASE, SALE, AND DEVELOPMENT AGREEMENT by and between CITY OF POWAY a California municipal corporation, and POWAY COMMONS, LLC a Delaware limited liability company March 19, 2019 Item #3.1 PURCHASE. SALE, AND DEVELOPMENT AGREEMENT THIS PURCHASE, SALE, AND DEVELOPMENT AGREEMENT (this "Agreement") is dated as of , 2019 (the "Effective Date"), and is entered into by and between POWAY COMMONS, LLC, a Delaware limited liability company ("Developer"), and the CITY OF POWAY, a California municipal corporation {the "City"). City and Developer enter into this Agreement with reference to the following recited facts (each a "Recital"): RECITALS A. City owns fee title to that certain real property located in the City of Poway, County of San Diego, State of California, commonly known as APN Nos. 317-472-18, 23, 24 & 25 (collectively, the "City-Owned Property"). B. City also owns fee title to that certain real property located in the City of Poway, County of San Diego, State of California, commonly known as APN No. 317-101- 06 (the "City-Owned Mixed Property"). C. Concurrently with the execution of this Agreement, City is entering into an agreement with the City of Poway Housing Authority ("Authority") to acquire that certain real property located in the City of Poway, County of San Diego, State of California, commonly known as APN No. 317-472-01 & 06 (the "Authority-Owned Property"). D. Developer has entered into purchase and sale agreements (the "Private Parcels Purchase Agreements") with the owners of the real property located at 13029, 13117, and 13126 Poway Road, in the City of Poway, County of San Diego, State of California (collectively, the "Private Parcels"). E. City and Developer desire by this Agreement for (i) Developer to close escrow under the Private Parcels Purchase Agreements and acquire fee title to the Private Parcels; (ii) City to sell to Developer fee title to the "City Parcels," which is comprised of (a) the City-Owned Property, (b) the City-Owned Mixed Property, other than approximately nine tenths (.9) acres located in the southernmost portion of the parcel, and (c) the Authority-Owned Property; (iii) Developer to (a) process through City one or more subdivision maps to create (1) from the southernmost nine tenths (.9) acre portion of the City-Owned Mixed Property, the "Affordable Housing Parcel", (2) a subdivision containing approximately four (4) parcels (collectively, the "Residential Parcels") for development thereon of a residential condominium development containing ninety-eight (98) condominium units and common area improvements and amenities to serve such units (collectively, the "Residential Development"), and (3) approximately two (2) parcels (the "Retail Parcels"); and (b)(1) construct on the Residential Parcels the Residential Development, and (2) diligently pursue and attempt to plan and develop a comprehensive retail development that includes the Retail Parcels and certain other real property within the City of Poway, County of San Diego, State of California, encompassing a minimum of twenty-five thousand square feet (25,000 sf) (a "Comprehensive Retail Development"). 882/012782-0020 1tl'"Jf'32f 3115119 March 19, 2019 Item #3.1 F. The City-Owned Property, the City-Owned Mixed Property, and the Authority-Owned Property are legally described in Attachment No. 1, which is attached hereto and incorporated herein by this reference. G. The City-Owned Property, the City-Owned Mixed Property, the Authority- Owned Property, and the Private Parcels are depicted on the area site map attached hereto and incorporated herein as Attachment No. 2A (the "Area Site Map"). H. The proposed subdivisions and locations of the Affordable Housing Parcel, Residential Parcels, and Retail Parcels are depicted on the proposed subdivision map attached hereto and incorporated herein as Attachment No. 28 (the "Proposed Subdivision Map"). I. City's disposition of the City Parcels to Developer, and Developer's subsequent construction and completion of the "Project" (as that term is defined in Article II below), pursuant to the terms of this Agreement, are in the vital and best interest of the City of Poway and the health, safety and welfare of its residents, and in accord with the public purposes and provisions of applicable federal, state, and local laws and requirements. NOW, THEREFORE, FOR GOOD AND VALUABLE CONSIDERATION AND THE PROMISES AND COVENANTS OF THE PARTIES SET FORTH IN THIS AGREEMENT, CITY AND DEVELOPER AGREE, AS FOLLOWS: ARTICLE I RECITALS AND IDENTITIES OF PARTIES Section 1.1 Incorporation of Recitals. The Recitals of fact set forth above are true and correct and are incorporated into this Agreement in their entirety by this reference. Section 1.2 and Developer. Parties to the Agreement. The Parties to this Agreement are City Section 1.3 Restrictions on Change in Management or Control of Developer and Assignment or Transfer. (a) Developer acknowledges that the qualifications and identity of Developer are of particular importance to City. Developer further recognizes and acknowledges that City has relied and is relying on the specific qualifications and identity of Developer in entering into this Agreement with Developer and, as a consequence, Transfers are permitted only as expressly provided in this Agreement. (b) Developer shall promptly notify City in writing of any and all changes whatsoever in the identity of the business entities or individuals either comprising or in control of Developer, as well as any and all changes in the interest or the degree of control of Developer by any such person, of which information Developer or any of its partners, members or officers are notified or may otherwise have knowledge or information. If there 882/012782-0020 1 !f96¥'32~3115119 -2- March 19, 2019 Item #3.1 is any Transfer, whether voluntary or involuntary, in membership, ownership, management or control of Developer (other than such changes occasioned by the death or incapacity of any individual) other than a Permitted Transfer or a Transfer that has been approved in writing by City prior to the time of such Transfer, then prior to the Project Completion Date City may exercise any remedy available to City under the terms of this Agreement; provided, however, that (i) City shall first notify Developer in writing of its intention to terminate this Agreement or to exercise any other remedy, and (ii) Developer shall have twenty (20) calendar days following its receipt of such written notice to commence and, thereafter, diligently and continuously proceed to cure the default of Developer and submit evidence of the initiation and satisfactory completion of such cure to City, in a form and substance reasonably satisfactory to City. (c) Except for Permitted Transfers or as otherwise set forth in this Section 1.3, and notwithstanding any provision to the contrary in this Agreement, prior to the Project Completion Date, Developer shall not sell, assign, convey, create any trust estate with respect to or otherwise Transfer any of its interests in this Agreement, the Property, and/or the Project, without the prior written approval of the City Manager, which approval shall not be unreasonably conditioned, delayed, or denied; this restriction shall not apply on and after the Project Completion Date. Developer recognizes that the qualifications and identity of Developer are of particular concern to City and that a sale, assignment, conveyance with respect to or other Transfer of any of Developer's interests in this Agreement, the Property, and/or the Project is for all practical purposes a transfer or disposition of the responsibilities of Developer with respect to this Agreement, the Property, and/or the Project and, therefore, are only allowed in accordance with the provisions of this Section 1.3. Except as expressly permitted in this Agreement, Developer represents and agrees that it has not made and will not create or suffer to be made or created, any Transfer, either voluntarily, involuntarily or by operation of law, without the prior written approval of City, until after the Project Completion Date. Any Transfer made in contravention of this Section 1.3 shall be voidable at the election of City and, if voided, shall be deemed to be an Event of Default by Developer, whether or not Developer knew of or participated in such Transfer. (d) Subject to the terms of paragraph (c) above in this Section 1.3, Developer is not required to give City advance notice of, nor shall City have the right to approve, a Permitted Transfer. Additionally, City may, in its reasonable discretion, approve in writing any other Transfer (meaning, a Transfer that is not a Permitted Transfer) requested by Developer, provided the proposed transferee can satisfactorily demonstrate successful experience in the development of a project of the same type as the Project, acquires fee title to the Property, and expressly assumes in writing all of the obligations of the Developer under this Agreement. Further, Developer may allow an investor to acquire an ownership interest in Developer, and/or Developer may assign (a) all of its rights and obligations under this Agreement, (b) all of its rights and obligations with respect to the Retail Parcels and the Comprehensive Retail Development, or (c) all of its rights and obligations with respect to (I) obtaining all of the Entitlements, (II) the Residential Parcels, (Ill) the Residential Development, and (IV) performance of all demolition and grading activities required by this Agreement to be performed on or with respect to the Property, to an entity in which Developer or an Affiliate thereof and an 882/012782-0020 11f•6¥'3~!3/15119 -3- March 19, 2019 Item #3.1 investor are the sole owners, provided (i) City approves the investor, and (ii) Poway Commons, LLC, a Delaware limited liability company, or an Affiliate thereof, retains control of the day-to-day operations of the development of the Project. City shall be required to approve any proposed investor that provides evidence to City that it (1) is a Person that has been legally established and is operating in good standing in the jurisdiction in which it has been established, (2) has experience in developing and/or financing development projects similar in nature to the Project, and (3) has the financial capability to undertake the obligations proposed to be undertaken pursuant to the contractual arrangement between said investor and Developer. All instruments and other legal documents proposed to effect any Transfer shall be submitted to City for review, prior to the Transfer, and the written approval or disapproval of City shall be provided to Developer, within fifteen (15) calendar days of City's receipt of Developer's request. (e) The provisions of this Section 1.3 shall terminate and be of no further force and effect upon issuance of a Release of Construction Covenants for the Project. (f) Upon an approved or Permitted Transfer of the Property by Developer prior to the Project Completion Date or any Transfer thereafter, Developer shall be deemed released from any obligations under this Agreement except for any indemnification obligations with respect to Claims based on actions and/or inactions occurring prior to such Permitted Transfer. ARTICLE II DEFINITIONS Section 2.1 Defined Terms. In addition to the usage of certain words, terms or phrases that are defined in the initial paragraph or Recitals of this Agreement, the following words, terms and phrases are used in this Agreement, including in ARTICLE I above, unless the particular context of usage of a word, term or phrase requires another interpretation: (a) "13033 Poway Road Parcel" means and refers to the portion of the City Parcels located at 13033 Poway Road. (b) "Additional Deposit" means and refers to the amount of One Hundred Twenty-Five Thousand Dollars ($125,000), in cash or other immediately available funds. (c) "Affiliate" means and refers to any Person, directly or indirectly, Controlling or Controlled by or under common Control with Developer, whether by direct or indirect ownership of equity interests, by contract or otherwise. (d) "Affordable Housing Parcel" means and refers to the southernmost portion of the City-Owned Mixed Property, which is designated as the "Affordable Housing Parcel" on the Proposed Subdivision Map. The Affordable Housing Parcel comprises approximately nine tenths (.9) acres. Notwithstanding anything in this Agreement to the contrary, the Affordable Housing Parcel shall not comprise a portion of the City Parcels 882/012782-0020 1f9Jf3~!3115119 -4-March 19, 2019 Item #3.1 or the Property, and the disposition and development of the Affordable Housing Parcel shall be addressed in the AHPDA. (e) "AHPDA" means and refers to that certain Affordable Housing and Property Disposition Agreement entered into between the Authority and Developer on or about the Effective Date, pursuant to which the Authority has agreed to sell to Developer the Affordable Housing Parcel, and Developer has agreed to perform certain grading and infrastructure work, and to thereafter transfer the Affordable Housing Parcel and assign its rights and obligations under the AHPDA to a limited partnership in which any of (i) Chelsea Investment Corporation, a California nonprofit public benefit corporation ("Chelsea"), (ii) an affiliate of Chelsea, or (iii) another entity experienced in the development and operation of affordable housing and acceptable to the Authority in the Authority's reasonable discretion, is a general partner, for said limited partnership to develop and operate on the Affordable Housing Parcel a forty-four (44) unit affordable senior rental apartment development. (f) "Authority" means and refers to the City of Poway Housing Authority. (g) "CEQA" means and refers to the California Environmental Quality Act, Public Resources Code Section 21000, el seq. (h) "CEQA Claims" means and refers to any appeals or protests (including litigation) taken or filed with respect to City's findings, determinations, and/or certifications pursuant to CEQA in connection with City's approval of this Agreement and in connection with City's approval, conditional approval, or denial, of the Entitlements. (i) "City" means and refers to the City of Poway, California. (j) "City and City Personnel" means and refers, collectively, to City, its elected and appointed officials, commissions, employees, agents, representatives, and attorneys. (k) "City Deed of Trust" means and refers to a deed of trust substantially in the form of Attachment No. 8 to this Agreement, securing Developer's obligation to repay the City Note. The City Deed of Trust shall be recorded against the Retail Parcels. (I) "City Grant Deed" means and refers to a grant deed substantially in the form of Attachment No. 5 to this Agreement, conveying all of City's interest in the Property to Developer. (m) "City Loan " means and refers to the loan to be made by City at the Close of Escrow, in the amount of One Million Seven Hundred Thousand Dollars ($1,700,000). The City Loan shall be provided to Developer in the form of a credit towards Developer's payment of the Purchase Price. 882/012782-0020 1f•c5f'32f3115/19 -5- March 19, 2019 Item #3.1 (n) "City Manager" means and refers to the person duly appointed to the position of City Manager of the City or his or her designee or successor in function. (o) "City Note" means and refers to a note substantially in the form of Attachment No. 7 to this Agreement, evidencing the City Loan. (p) "City-Owned Mixed Property" shall have the meaning ascribed thereto in Recital B. The City-Owned Mixed Property comprises approximately one and fifty-four hundredths (1.54) acres. The City-Owned Mixed Property is legally described in Attachment No. 1, which is incorporated herein by this reference. (q) "City Parcels" shall have the meaning ascribed thereto in Recital A. The City Parcels comprise approximately three and two hundredths (3.02) acres. The City Parcels are legally described in Attachment No. 1, which is attached hereto and incorporated herein by this reference. Notwithstanding anything to the contrary in this Agreement, the City Parcels shall not include the Affordable Housing Parcel. The Affordable Housing Parcel shall be conveyed to Developer pursuant to the AHPDA. (r) "City's Right of First Refusal" means and refers to City's right to acquire all or any portion of the Property pursuant to the terms set forth in Section 10.6 below. (s) "City's Title Notice Response" means and refers to the written response of City to Developer's Title Notice, in which City elects to (i) cause the removal from the Preliminary Report of some or all of the disapproved exceptions, or (ii) not to cause the removal from the Preliminary Title Report of any disapproved exceptions. (t) "City's Title Policy" means and refers to a standard AL TA lenders' policy of title insurance issued by the Title Company, with coverage in the full amount of the City Loan and insuring the priority of the City Loan. (u) "Claims" means any and all claims, losses, costs, damages, expenses, liabilities, liens, actions, causes of action (whether in tort or contract, at law or in equity, or otherwise), charges, awards, assessments, fines, and penalties of any kind (including consultant and expert expenses, court costs, and reasonable attorney's fees of counsel retained by the City Parties, expert fees, costs of staff time, and investigation costs, of whatever kind or nature), and judgments, including, but not limited to, Claims for: (1) injury to any person (including death at any time resulting from that injury); (2) loss of, injury or damage to, or destruction of, property (including all loss of use resulting from that loss, injury, damage, or destruction) regardless of where located, including the property of the City Parties; (3) any workers' compensation or prevailing wage determination; and (4) all economic losses and consequential or resulting damage of any kind. (v) "Close of Escrow" means and refers to the recording of the City Grant Deed in the Official Records of the Recorder of the County of San Diego, California, and completion of each of the actions set forth in ARTICLE IV by the Escrow Holder for 882/012782-0020 1~'cW'32~311s11, -6- March 19, 2019 Item #3.1 City to sell the City Parcels to Developer and Developer to purchase the City Parcels from City. (w) "Comprehensive Retail Development" shall have the meaning ascribed thereto in Recital C. (x) "Control" means and refers to possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether by ownership of equity interests, by contract or otherwise. (y) having Control. (z) Section 5.12. "Controlling" and "Controlled" mean and refer to exercising or "Developer CC&Rs" shall have the meaning ascribed thereto in (aa) "Developer's Second Title Notice" means and refers to a written notice from Developer to City indicating Developer's continued disapproval of specific matters shown in Schedule B of the Preliminary Title Report or Supplement Report, as exceptions to coverage under the proposed Developer's Title Policy for the City Parcels, describing in suitable detail the actions that Developer reasonably believes are necessary to obtain Developer's approval of the state of the title to the City Parcels. (bb) "Developer's Title Notice" means and refers to a written notice from Developer to City indicating Developer's acceptance of the state of the title to the City Parcels, as described in the Preliminary Report or Supplemental Report, or Developer's disapproval of specific matters shown in Schedule B of the Preliminary Report or Supplemental Report, as exceptions to coverage under the proposed Developer's Title Policy for the City Parcels, describing in suitable detail the actions that Developer reasonably believes are necessary to obtain Developer's approval of the state of the title to the City Parcels. (cc) "Developer's Title Notice Waiver" means and refers to a written notice from Developer to City waiving Developer's previous disapproval in the Developer's Title Notice of specific matters shown in Schedule B of the Preliminary Report or in the Supplemental Report as exceptions to coverage under the proposed Developer's Title Policy for the City Parcels. (dd) "Developer's Title Policy" means and refers to a standard AL TA owners' policy of title insurance issued by the Title Company, with coverage in the full amount of the Purchase Price and insuring fee title to the City Parcels vested in the Developer; provided, however, that Developer shall have the right, at Developer's sole cost, to elect to obtain title endorsements and/or an extended coverage AL TA owner's policy, as further set forth in Section 4.8 below. (ee) "Development Agreement" means and refers to a Development Agreement entered into or to be entered into between City and Developer pursuant to Government Code section 65864 et seq., in a form acceptable to City and Developer. 882/012782-0020 :Hl''Jf32f311 "" -7- March 19, 2019 Item #3.1 (ff) "Due Diligence Investigations" means and refers to Developer's due diligence investigations of the City Parcels to determine the condition of the City Parcels and the suitability of the City Parcels for development of the Project, and such other matters as Developer may deem relevant. (gg) "Due Diligence Investigation Conclusion Notice" means and refers to a written notice of Developer delivered to both City and the Escrow Holder, prior to the end of the Due Diligence Period, indicating Developer's acceptance of the City Parcels or indicating Developer's rejection of the City Parcels and refusal to accept a conveyance of fee title to the City Parcels, describing in reasonable detail the actions or circumstances that Developer reasonably believes are necessary to allow Developer to accept the City Parcels; provided, however, that Developer may, in its sole and absolute discretion, determine not to accept the City Parcels without identifying any such actions or circumstances. (hh) "Due Diligence Period" means and refers to the time period of one hundred twenty (120) continuous days commencing on the day immediately following the Escrow Opening Date. (ii) "Earnest Money Deposit" means and refers, collectively, to the Initial Deposit and the Additional Deposit. Uj) "Entitlement Approval Date" means the date that all of the Entitlements have been approved by each required Governmental Agency and all appeal and protest periods have expired with no appeals or protests (including litigation) taken or filed ("Entitlement Claims"), or, if any are so taken or filed, then upon the resolution of the Entitlement Claims upon terms acceptable to each of City and Developer, in their respective sole and absolute discretion. (kk) "Entitlements" means and refers to all of the discretionary entitlements, permits and approvals required for the development of the Project, including, without limitation, the Development Agreement, a Development Review and Tentative Map. (II) "Environmental Claims" means and refers to any and all claims, demands, damages, losses, liabilities, obligations, penalties, fines, actions, causes of action, judgments, suits, proceedings, costs, disbursements and expenses, including, without limitation, attorney fees, disbursements and costs of attorneys, environmental consultants and other experts, and all foreseeable and unforeseeable damages or costs of any kind or of any nature whatsoever directly or indirectly relating to or arising from any Environmental Matters existing or occurring during or arising from Developer's Due Diligence Investigations, Developer's ownership or occupancy of the Property or Developer's construction of the Project. (mm) "Environmental Laws" means and refers to all federal, state, local, or municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees, or requirements of any governmental authority regulating, relating to, or imposing liability or 882/012782-0020 2f'6f°32~)3f15/jg -8- March 19, 2019 Item #3.1 standards of conduct concerning any Hazardous Substance, or pertaining to occupational health or industrial hygiene (to the extent that the occupational health or industrial hygiene laws, ordinances, or regulations relate to any Hazardous Substance on, under, or about the Property), occupational or environmental conditions on, under, or about the Property, as now or may, at any later time, be in effect, including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA") [42 U.S.C. Section 9601 et seq.]; the Resource Conservation and Recovery Act of 1976 ("RCRA") [42 U.S.C. Section 6901 et seq.]; the Clean Water Act, also known as the Federal Water Pollution Control Act ("FWPCA") [33 U.S.C. Section 1251 et seq.]; the Toxic Substances Control Act ("TSCA") [15 U.S.C. Section 2601 et seq.]; the Hazardous Materials Transportation Act ("HMTA") [49 U.S.C. Section 1801 et seq.]; the Insecticide, Fungicide, Rodenticide Act [7 U.S.C. Section 6901 et seq.] the Clean Air Act [42 U.S.C. Section 7401 et seq.]; the Safe Drinking Water Act [42 U.S.C. Section 300f et seq.]; the Solid Waste Disposal Act [42 U.S.C. Section 6901 et seq.]; the Surface Mining Control and Reclamation Act [30 U.S.C. Section 101 et seq.]; the Emergency Planning and Community Right to Know Act [42 U.S.C. Section 11001 et seq.]; the Occupational Safety and Health Act [29 U.S.C. Section 655 and 657]; the California Underground Storage of Hazardous Substances Act [Health and Safety Code Section 25280 et seq.]; the California Hazardous Substances Account Act [Health and Safety Code Section 25300 et seq.]; the California Safe Drinking Water and Toxic Enforcement Act [Health and Safety Code Section 24249.5 et seq.] the Porter-Cologne Water Quality Act [Water Code Section 13000 et seq.] together with any amendments of, or regulations promulgated under the statutes cited above and any other federal, state, or local law, statute, ordinance, or regulation, now in effect or later enacted, that pertains to occupational health or industrial hygiene, and only to the extent the occupational health or industrial hygiene laws, ordinances, or regulations relating to any Hazardous Substance on, under, or about the Property, or the regulation or protection of the environment, including ambient air, soil, soil vapor, groundwater, surface water, or land use. (nn) "Environmental Matters" means and refers to any of the following: (1) The presence of any Hazardous Substances on, in, under, from or affecting all or any portion of the Property or the Project; (2) The storage, holding, handling, release, threatened release, discharge, generation, leak, abatement, removal or transportation of any Hazardous Substances on, in, under, from or affecting the Property or the Project; (3) The violation of any law, rule, regulation, judgment, order, permit, license, agreement, covenant, restriction, requirement or the like by Developer, its agents or contractors, relating to or governing in any way Hazardous Substances on, in, under, from or affecting the Property or the Project; (4) The failure of Developer, its agents or contractors, to properly complete, obtain, submit and/or file any and all notices, permits, licenses, authorizations, 882/012782-0020 2i'6¥'32~3115119 -9- March 19, 2019 Item #3.1 covenants and the like in connection with Developer's activities on the Property or regarding the Project; (5) The implementation and enforcement by Developer, its agents or contractors of any monitoring, notification or other precautionary measures that may, at any time, become necessary to protect against the release, potential release or discharge of any Hazardous Substances on, in, under, from or affecting the Property or the Project; (6) The failure of Developer, its agents or contractors, in compliance with all applicable Environmental Laws, to lawfully remove, contain, transport or dispose of any Hazardous Substances existing, stored or generated on, in, under or from the Property or the Project; (7) Any investigation, inquiry, order, hearing, action or other proceeding by or before any Governmental Agency in connection with any Hazardous Substances on, in, under, from or affecting the Property or the Project or the violation of any Environmental Law relating to the Property. or the Project (oo) "Escrow" means and refers to an escrow, as defined in Civil Code Section 1057, that is conducted by the Escrow Holder with respect to the Property, pursuant to this Agreement. (pp) "Escrow Closing Date" means and refers to the earliest of: (1) a date two (2) business days after the date that Developer is issued the first grading permit for the Project, or fifteen (15) months after the Effective Date; provided, however, if any of such dates is not a business day (meaning a day that documents can be placed of record in San Diego County), then the applicable date shall be extended to the second such business day thereafter. Developer shall have the right, but not the obligation and upon five (5) days advance written notice to City, to extend the Escrow Closing Date for two successive periods of one (1) month each. (qq) "Escrow Holder" means and refers to First American Title Insurance Company, with its offices at 4380 La Jolla Village Drive, Suite 200, San Diego, CA 92122. (rr) "Escrow Opening Date" means and refers to the first date on which a fully executed copy of this Agreement, the Initial Earnest Money Deposit is deposited with the Escrow Holder. (ss) "Event of Default" shall have the meaning ascribed to the term in Section 9.2. (II) "FIRPTA Affidavit" means and refers to an affidavit complying with Section 1445 of the United States Internal Revenue Code ("IRC 1445") evidencing that neither Developer nor Escrow Holder is required to withhold City's closing funds pursuant to IRC 1445. 882/012782-0020 2!!''6¥'32~3115119 -10- March 19, 2019 Item #3.1 (uu) "First Phase" shall have the meaning ascribed to the term in Section 4.2(b)(17). (vv) "Form 593" means and refers to a California Franchise Tax Board Form 593-W evidencing that neither Developer nor Escrow Holder is required to withhold City's closing funds pursuant to California Revenue and Taxation Code Section 18662e). (ww) "Governmental Agency" means and refers to any and all courts, boards, agencies, commissions, offices, or authorities of any nature whatsoever for any governmental unit (federal, state, county, district, municipal, city, or otherwise), including the City, pursuant to its general police power jurisdiction, whether now or later in existence with jurisdiction over the Property or the construction of any portion of the Project. (xx) "Governmental Requirements" means and refers to all codes, statutes, ordinances, laws, permits, orders, and any rules and regulations promulgated thereunder of any Governmental Agency. (yy) "Hazardous Substance" means and refers to, without limitation, substances defined as a "Hazardous Substance," "hazardous material," "toxic substance," "solid waste," or "pollutant or contaminate" in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Sections 9601, et seq.; the Toxic Substances Control Act ("TSCA") [15 U.S.C. Sections 2601, et seq.]; the Hazardous Materials Transportation Act, 49 U.S.C. Sections 1801, et seq.; the Resource Conservation and Recovery Act, 42 U.S.C. Sections 6901, et seq.; those substances listed in the United States Department of Transportation (DOT) Table [ 49 CFR 172.101], or by the EPA, or any successor authority, as a Hazardous Substance [ 40 CFR Part 302]; and those substances defined as "hazardous waste" in Section 25117 of the California Health and Safety Code or, as a "Hazardous Substance" in Section 25316 of the California Health and Safety Code; other substances, materials, and wastes that are, or become, regulated or classified as hazardous or toxic under federal, state, or local laws or regulations and in the regulations adopted pursuant to said laws, and shall also include manure, asbestos, polychlorinated biphenyl, flammable explosives, radioactive material, petroleum products, and substances designated as a hazardous substance pursuant to 33 U.S.C. Section 1321 or listed pursuant to 33 U.S.C. Section 1317. (zz) "Initial Deposit" means and refers to the amount of One Hundred Twenty-Five Thousand Dollars ($125,000), in cash or other immediately available funds. (aaa) "Institutional Lender" means any of the following institutions having assets or deposits in the aggregate of not less than One Hundred Million Dollars ($100,000,000): a California chartered bank; a bank created and operated under and pursuant to the laws of the United States of America; an "incorporated admitted insurer'' (as that term is used in Section 1100.1 of the California Insurance Code); a "foreign (other state) bank" (as that term is defined in Section 1700(1) of the California Financial Code); a federal savings and loan association (Cal. Fin. Code Section 8600); a commercial finance lender (within the meaning of Sections 2600 et seq. of the California Financial 882/012782-0020 2lf•Jfj2~3/15/19 -11-March 19, 2019 Item #3.1 Code); a "foreign (other nation) bank" provided it is licensed to maintain an office in California, is licensed or otherwise authorized by another state to maintain an agency or branch office in that state, or maintains a federal agency or federal branch in any state (Section 1716 of the California Financial Code); a bank holding company or a subsidiary of a bank holding company which is not a bank (Section 3707 of the California Financial Code); a trust company, savings and loan association, insurance company, investment banker; college or university; pension or retirement fund or system, either governmental or private, or any pension or retirement fund or system of which any of the foregoing shall be trustee, provided the same be organized under the laws of the United States or of any state thereof; and a Real Estate Investment Trust, as defined in Section 856 of the Internal Revenue Code of 1986, as amended, provided such trust is listed on either the American Stock Exchange or the New York Stock Exchange. (bbb) "Lender" means and refers to any person or entity making a Loan to Developer. (ccc) "Loan" means and refers, individually, to any loan that Developer shall obtain, the proceeds of which are to be used and applied solely to pay the reasonable costs of obtaining such loan and: (1) the Purchase Price and the other costs of acquiring the Property through the Escrow and/or (2) the costs of developing the Project. (ddd) "Memorandum of Agreement" means and refers to the memorandum in substantially the form of Attachment No. 6 to this Agreement to be recorded against the Property at the Close of Escrow to provide constructive record notice of the existence and application of this Agreement to the Property. (eee) "Party" means and refers, individually, to either City or Developer, as applicable. (fff) "Parties" means and refers, collectively, to City and Developer. (ggg) "PCO Report" means and refers to a preliminary change of ownership report required under California Revenue and Taxation Code Section 480.3. (hhh) "Permitted Transfer" means and refers to any of the following types of Transfers by Developer, where the Person to which such Transfer is made, acquires the Property or a portion thereof (if such Permitted Transfer occurs after the Closing) and expressly assumes the obligations of Developer under this Agreement with respect to the portion of the Property so Transferred in a written instrument satisfactory to the City or acquires an equity interest in Developer: (1) Any Transfer of stock or equity of Developer that does not change management or operational control of the Property or the Project or is less than a 49% interest, as set forth in Section (1) of the definition of Transfer. (2) Any Transfer of any interest in Developer irrespective of the percentage of ownership (i) to any other owner of any interest in Developer; or (ii) to any 882/012782-0020 2J•Jra2!"' "1 • -12-March 19, 2019 Item #3.1 Affiliate, or (iii) to any other Person in which any holder of an interest (including any beneficial interest) in Developer as a manager, officer or partner or in which any of the aforementioned is a shareholder, member or partner (including a beneficial owner). (3) The pledge of any interest in the Property as security for a Loan. (4) Any foreclosure or deed in lieu of foreclose under the documents evidencing and securing repayment of a Loan. (5) Any Property Transfer to an entity in which Developer (or an Affiliate) has an ownership interest and which is formed with a third party to fund the development of the Project, and the exercise of any and all remedies under the applicable entity documents. (6) The recordation of replacemenVpermanent financing to replace a Loan. (7) The granting of easements and licenses in the ordinary course of the development and ownership of the Property and the Project. (8) A Transfer of the Retail Parcels to Sudberry Development Inc., a California corporation, or an Affiliate thereof. (iii) "Person" means and refers to any association, corporation, governmental entity or agency, individual, joint venture, joint-stock company, limited liability company, partnership, trust, unincorporated organization, or other entity of any kind. (jjj) "Poway Stoway Self-Storage Lease" means and refers to that certain month-to-month lease between City and Poway Stoway Self-Storage with respect to the 13033 Poway Road Parcel. (kkk) "Pre-Closing Liquidated Damages Amount" means and refers to the amount of Fifty Thousand Dollars ($50,000). (Ill) "Preliminary Report" means and refers to a preliminary report issued by the Title Company for the City Parcels, in contemplation of the issuance of the Developer's Title Policy, accompanied by copies of all documents listed in Schedule B of the report as exceptions to coverage under the proposed Developer's Title Policy. (mmm) "Private Parcels" shall have the meaning ascribed thereto in Recital C. The Private Parcels are legally described in Attachment No. 1, which is attached hereto and incorporated herein by this reference. (nnn) "Private Parcels Purchase Agreements" shall have the meaning ascribed thereto in Recital C. 882/012782-0020 2lf'c5f"32,3115 ' 19 -13-March 19, 2019 Item #3.1 (ooo) "Project" means and refers to Developer's development of (i) the Residential Development on the Residential Property, (ii) the Comprehensive Retail Development on the Retail Parcels, and (iii) all required and/or associated on-site and off- site improvements, all as generally described in the Scope of Development, and all to be developed in accordance with plans and specifications approved by City and any conditions imposed by City in its approval of the Developer's development application(s) related to the Project. (ppp) "Project Budget" means and refers to the budget attached hereto and incorporated herein as Attachment No. 9. With respect to said attached budget, City acknowledges and agrees that Developer's cost estimates may change between the Effective Date and the Close of Escrow. Prior to the Close of Escrow, Developer shall submit its revised proposed budget to City for review and approval, which approval shall not be unreasonably withheld, conditioned or delayed. Upon City's approval thereof, said revised proposed budget shall become the Project Budget, and said budget shall be the budget upon which City bases its review pursuant to Section 4.2(b)(4). (qqq) "Project Completion Date" means and refers to the date on which City issues a Release of Construction Covenants for the Project. (rrr) "Property" means and refers to the City Parcels, the Private Parcels, and any other real property that Developer acquires during the term of this Agreement and proposes to develop as part of a Comprehensive Retail Development. (sss) "Property Transfer" means and refers to any "change in ownership," as defined in Revenue and Taxation Code Sections 60, et seq., of all or any portion of the Property. {tit) "Purchase Price" means and refers to the amount of Six Million Four Hundred Twenty Thousand Five Hundred Dollars ($6,420,500). (uuu) "Record," "recorded," "recording" or "recordation" each mean and refer to recordation of the referenced document in the official records of the Recorder of the County of San Diego, California. (vvv) "Release of Construction Covenants" means and refers to the written certification of City that the Project is complete and in compliance with the terms and conditions of this Agreement, in substantially the form of Attachment No. 1 O to this Agreement. (www) "Residential Development" shall have the meaning ascribed thereto in Recital D. (xxx) " Residential Property" shall have the meaning ascribed thereto in Recital D. (yyy) "Retail Parcels" shall have the meaning ascribed thereto in Recital D. 882/012782-0020 2f 96f'32~3115119 -14- March 19, 2019 Item #3.1 (zzz) "Schedule of Performance" means and refers to the schedule for the performance of certain actions by City or Developer pursuant to the terms and conditions of this Agreement, attached to this Agreement as Attachment No. 4. (aaaa)"Scope of Development" means and refers to the detailed description of the primary elements of the Project attached to this Agreement as Attachment No. 3. (bbbb)"Specific Plan" means and refers to the Poway Road Specific Plan, which was approved by the City Council of City on December 5, 2017. Developer's development and operation of the Project shall be in substantial conformance with the Specific Plan, as it may be amended from time to time in accordance with its provisions. In the event this Agreement is inconsistent with the Specific Plan, the terms of the Specific Plan shall prevail. (cccc) "Supplemental Report" means and refers to a supplement issued to the Preliminary Report by Title Company, accompanied by the additional documents referred to thereon. (dddd)"Tentative Map" means and refers to a tentative map subdividing the Property into multiple parcels, as necessary to accomplish the development of the Project. (eeee)"Title Company" means and refers to First American Title Insurance Company, with its offices at 4380 La Jolla Village Drive, Suite 200, San Diego, CA 92122. (ffff) "Transfer" means and refers to any of the following: (1) Any total or partial sale, assignment, conveyance, trust, power, or transfer in any other mode or form, by Developer of more than a 49% interest in Developer's interest in this Agreement, the Property, or the Project or a series of such sales, assignments and the like that, in the aggregate, result in a disposition of more than a 49% interest in Developer's interest in this Agreement, the Property, or the Project; or (2) Any total or partial sale, assignment, conveyance, or transfer in any other mode or form, of or with respect to any interest in Developer or a series of such sales, assignments and the like that, in the aggregate, result in a disposition of more than a 49% interest in any interest in Developer; or (3) Any merger, consolidation, sale or lease of all or substantially all of the assets of Developer or a series of such sales, assignments and the like that, in the aggregate, result in a disposition of more than a 49% interest of all or substantially all of the assets of Developer; or (4) Any Property Transfer; or (5) The recordation of any deed of trust, mortgage, lien or similar encumbrance against all or any portion of the Property or the Project other than a Loan. 882/012782-0020 2lf 915f'32f"15119 -15- March 19, 2019 Item #3.1 (gggg)"Unavoidable Delay" means and refers to a delay in either Party performing any obligation under this Agreement, except payment of money, arising from or on account of any cause whatsoever beyond the Party's reasonable control, despite such Party's commercially reasonable efforts, including, without limitation, floods, earthquakes, or other extreme acts of nature, industry-wide strikes, unreasonable delays in obtaining governmental, utility company approvals or actions (provided, however, the Party claiming such delay makes a showing of reasonable and timely submission of all necessary materials and information, and that the response to such submittals was unusual, unreasonable and/or untimely), labor troubles or other union activities (but only to the extent such actions affect similar persons at that time and do not result from an act or omission of the Party), casualty, war, acts of terrorism or riots. Unavoidable Delay shall not include delay caused by a Party's financial condition, illiquidity, or insolvency. ARTICLE Ill PUBLIC PARCELS DISPOSITION: AS-IS SALE Section 3.1 Purchase and Sale. City shall sell the City Parcels to Developer and Developer shall purchase the City Parcels from City pursuant to the terms and conditions of this Agreement. For the purposes of exchanging funds and documents to complete the sale from City to Developer and the purchase by Developer from City of the City Parcels, pursuant to the terms and conditions of this Agreement, City and the Developer agree to open the Escrow with the Escrow Holder. ARTICLE IV of this Agreement constitutes the joint escrow instructions of the Parties to the Escrow Holder for the conduct of the Escrow for the sale of the Property. Developer and City shall execute the Escrow Holder's standard or general escrow instructions, provided, however, that the provisions of this Agreement shall be controlling, in the event of any conflict between the provisions of this Agreement and any such standard or general escrow instructions requested by the Escrow Holder. Section 3.2 Payment of Purchase Price. As further described in this Section 3.2, Developer shall deposit the Purchase Price less the sum of (a) the City Loan, and (b) the Earnest Money Deposit (for which Developer will receive a credit), into the Escrow in immediately available funds, as provided in this Agreement. (a) Earnest Money Deposit. Concurrent with its opening of the Escrow, Developer shall deposit the Initial Deposit into the Escrow. Upon Developer's acceptance of the City Parcels in a Due Diligence Investigation Conclusion Notice pursuant to Section 3.3, (i) Developer shall deposit the Additional Deposit into the Escrow, and (ii) Escrow Holder shall promptly release the entire Earnest Money Deposit to City. Upon the Close of Escrow, the Earnest Money Deposit shall be credited to Developer toward the Purchase Price. In the event the Close of Escrow does not occur as a result of the failure of one of Developer's conditions to closing to be satisfied, or waived by Developer, pursuant to the terms of this Agreement, or a material default by City, the Earnest Money Deposit shall be refundable to Developer. Notwithstanding anything in this Agreement to the contrary, a portion of the Earnest Money Deposit, in the amount of One Hundred Dollars ($100) (the "Independent Contract Consideration"), shall be released immediately to City as consideration for City's execution and delivery of this Agreement 882/012782-0020 2~96¥'a2f"15119 -16-March 19, 2019 Item #3.1 and Developer's right to approve or disapprove any Developer contingencies set forth in this Agreement with respect to the Property. The Independent Contract Consideration is in all respects nonrefundable to Developer. (b) At Close of Escrow. At least one (1) business day preceding the Escrow Closing Date, Developer shall deposit into the Escrow the Purchase Price less the sum of (a) the Earnest Money Deposit, and (b) the City Loan. (c) Title Approval. As soon as practicable following the Escrow Opening Date, City shall obtain the Preliminary Report from the Title Company and deliver a copy of the Preliminary Report to Developer. In addition to the foregoing, Developer shall have a right, at its own cost, to conduct a survey of the City Parcels. Within forty-five (45) days following Developer's receipt of the Preliminary Report, Developer shall deliver the Developer's Title Notice to City. If Developer fails to deliver Developer's Title Notice to City, within such forty-five (45) day period, Developer will be deemed to approve the status of title to the City Parcels and to accept title to the City Parcels. Within twenty (20) days following the earlier of City's receipt of Developer's Title Notice or expiration of the lime period provided in this Section 3.2 for delivery of Developer's Title Notice, City shall serve City's Title Notice Response. If the Developer's Title Notice does not disapprove any matter in the Preliminary Report, City shall not be required to serve City's Title Notice Response. If City does not serve City's Title Notice Response, if necessary, within twenty (20) days following its receipt of the Developer's Title Notice, City shall be deemed to elect not to cause any matter disapproved in the Developer's Title Notice to be removed from the Preliminary Report. If City elects in City's Title Notice Response to cause the removal of any matter disapproved in Developer's Title Notice from the Preliminary Report, City shall cause the removal of each such matter from the Preliminary Report, prior to or concurrently with the Escrow Closing Date. Notwithstanding anything herein to the contrary, City shall be obligated to remove from record, on or before the Escrow Closing Date, any liens, claims, encumbrances, deeds of trust or mortgages encumbering the Property, except to the extent directly caused by Developer. If City elects or is deemed to have elected not to cause the removal of any matter disapproved in the Developer's Title Notice from the Preliminary Report, then, within ten (10) days following the earlier of Developer's receipt of City's Title Notice Response or the expiration of the time period provided in this Section 3.2 for delivery of City's Title Notice Response, Developer shall either: (1) refuse to accept the title to and conveyance of the Property by delivering the Developer's Second Title Notice to City, or (2) waive its disapproval of any matters set forth in the Developer's Title Notice by delivering the Developer's Title Notice Waiver to City. Failure by Developer to deliver Developer's Title Notice Waiver, where City's Title Notice Response or City's failure to serve City's Title Notice Response indicates or results in City's election not to cause the removal of any one or more matters disapproved in Developer's Title Notice from the Preliminary Report, within ten (10) days following Developer's receipt of City's Title Notice Response or expiration of the time period for City to deliver City's Title Notice Response under this Agreement, will be deemed Developer's agreement to accept the title to and conveyance of the City Parcels. In the event Developer delivers Developer's Second Title Notice to City, either City or Developer shall have the right to cancel the Escrow and terminate this Agreement, each in their respective sole and absolute discretion, by delivery of a written 882/012782-0020 3!f•c5f'32~3/15/19 -17- March 19, 2019 Item #3.1 notice of termination to both the other Party and the Escrow Holder, in which case the Parties and the Escrow Holder shall proceed pursuant to Section 4.10. (d) In the event that a Supplement is issued, the Parties shall follow and otherwise abide by the same process set forth in Section 3.2(c). Section 3.3 Developer Due Diligence Investigations. (a) City represents to Developer that prior to the Effective Date, City has provided Developer with hard copies, electronic files, or other access to all reports, plans, studies and other similar records with respect to the City Parcels (collectively, "City Reports") that are in City's possession and reasonably known to City. Developer acknowledges and agrees that (i) the City Parcels were acquired at different times and by various City entities, and (ii) although City has reviewed its real property files for City Reports, City has not conducted a comprehensive search of all City files for City Reports. (b) Developer shall complete all of its Due Diligence Investigations within the Due Diligence Period and shall conduct all of its Due Diligence Investigations at its sole cost and expense. (c) City licenses, permits and authorizes Developer to enter the City Parcels for the sole purpose of conducting Developer's Due Diligence Investigations, subject to all of the terms and conditions of this Agreement. Developer shall have the right, but not the obligation, to engage in environmental testing, soils testing and surveying on the City Parcels. Following the conduct of any Due Diligence Investigations on the City Parcels, Developer shall restore the City Parcels to substantially its condition prior to the conduct of such Due Diligence Investigations. (d) Any Due Diligence Investigations of the City Parcels by Developer shall not unreasonably disrupt any then-existing use or occupancy of the City Parcels or the operations of City, including without limitation the use by Poway Stoway Self-Storage of the 13033 Poway Road Parcel pursuant to the Poway Stoway Self-Storage Lease. The activities of Developer or its agents directly or indirectly related to Developer's Due Diligence Investigations shall be subject to Developer's indemnity, defense and hold harmless obligations pursuant to Section 9.8. Prior to commencing any Due Diligence Investigations on the City Parcels, Developer shall deliver all copies of policies or certificates of insurance required to be delivered pursuant to Section 5.11. (e) Developer shall deliver to City and the Escrow Holder prior to the end of the Due Diligence Period a Due Diligence Investigation Conclusion Notice that either rejects the City Parcels or unconditionally accepts the City Parcels. If Developer does not deliver a Due Diligence Investigation Conclusion Notice unconditionally accepting the City Parcels prior to the end of the Due Diligence Period, then Developer shall be deemed to have accepted the Property and agreed to accept conveyance of title to the City Parcels. If the City Parcels are rejected by Developer, then each of City or Developer shall have the right, in their sole and absolute discretion, to cancel the Escrow and terminate this Agreement, by delivery of a written notice of termination to the other Party 882/012782-0020 3f915f'3~f 3115119 -18- March 19, 2019 Item #3.1 and the Escrow Holder, in which case the Parties and the Escrow Holder shall proceed pursuant to Section 4.10. Section 3.4 Developer to Obtain all Project Approvals. (a) Following the Escrow Opening Date, City shall reasonably consent, as necessary, to Developer processing necessary entitlements, permits or applications with each Governmental Agency for development of the Project, including, as necessary, the City Manager signing any such applications on behalf of the City, as the owner of the City Parcels. (b) Developer shall, within the lime period(s) for such actions set forth in the Schedule of Performance (subject to Unavoidable Delays), prepare and submit a complete application and any other required application, document, fee, charge or other item (including, without limitation, deposit, fund or surety) required for construction of the Project, pursuant to all Governmental Requirements, to each necessary Governmental Agency for review and approval. City's zoning, building and land use regulations (whether contained in ordinances, City's municipal code, conditions of approval or elsewhere), shall be applicable to the construction of the Project by Developer, pursuant to this Agreement. Developer acknowledges that all plans and specifications and any changes to plans and specifications for the Project shall be subject to all Governmental Requirements. No action by City with reference to this Agreement or any related documents shall be deemed to constitute a waiver of any required City permit, approval or authorization regarding the City Parcels, the Project, Developer, any successor-in-interest of the Developer or any successor-in-interest to the City Parcels. (c) The approval of this Agreement by City shall not constitute a pre- commitment by City or the City Council of City regarding any approvals required for development of the Project, including, without limitation, all required analysis under CEQA. Developer obtains no right or entitlement to construct the Project by virtue of this Agreement. City reserves unfettered discretion to approve, conditionally approve, or deny any entitlements and/or other approvals required for the Project and all proceedings and decisions in connection therewith. This Agreement shall not be construed as a grant of development rights or land use entitlements to construct the Project on the Property. All design, architectural, and building plans for the Project shall be subject to the review and approval of City and any other Governmental Agency. By its execution of this Agreement, City is not committing itself to or agreeing to undertake any acts or activities requiring the subsequent independent exercise of discretion by City or any agency or department thereof. (d) If any revisions of the Project are required by a Governmental Agency, Developer shall promptly make any such revisions, provided such revisions are generally consistent with the Scope of Development. (e) Notwithstanding any provision to the contrary in this Agreement, Developer agrees to abide by and comply fully with any and all conditions of approval applicable to all approvals, permits and other governmental actions regarding the 882/012782-0020 3:J''Jf 32f "15 " 9 -19- March 19, 2019 Item #3.1 construction of the Project; provided, however, that Developer reserves its rights to challenge any illegally imposed condition of approval applicable to an approval, permit, or other governmental action regarding the construction of the Project. (f) Developer and City agree that City shall not provide any financial assistance to Developer in connection with the construction of the Project. Developer shall be solely responsible for paying for the costs of all design work, construction, labor, materials, fees, permit, application, surety bond and other expenses associated with the Project. Developer shall pay any and all fees pertaining to the review and approval of the Project by each Governmental Agency and utility service providers, including the costs of preparation of all required construction, planning and other documents reasonably required by each Governmental Agency or utility service provider pertinent to the construction of the Project, including, but not limited to, specifications, drawings, plans, maps, permit applications, land use applications, zoning applications, environmental review and disclosure documents and design review documents. Developer shall obtain any and all necessary governmental approvals, prior to the commencement of applicable portions of construction of the Project, and Developer shall take all necessary precautions to ensure the safety and stability of surrounding properties during the construction of the Project. (g) Developer shall obtain all entitlements, permits and other approvals for construction of the Project from each Governmental Agency, within the time periods for such actions set forth in the Schedule of Performance, subject to any extensions of time authorized by this Agreement upon the occurrence of an Unavoidable Delay. Section 3.5 Notice to Vacate. Within five (5) business days after the occurrence of the Entitlement Approval Date, City shall deliver to each tenant and occupant of any occupied City Parcels a written notice of termination. Section 3.6 Quale Court. If requested in writing by Developer, City staff will agendize, for City Council consideration, Developer's request to vacate Quale Court. ARTICLE IV JOINT ESCROW INSTRUCTIONS Section 4.1 Opening of Escrow. City and Developer shall cause the Escrow to be opened within five (5) days following the Effective Date. Escrow Holder shall promptly confirm in writing to each of the Parties the date of the Escrow Opening Date. This ARTICLE IV shall constitute the joint escrow instructions of City and Developer to Escrow Holder for conduct of the Escrow. Section 4.2 Conditions to Close of Escrow. The conditions set forth below in this Section 4.2 shall be satisfied or waived by the respective benefited Party on or before the Escrow Closing Date or the Party benefited by any unsatisfied condition shall not be required to proceed to close the Escrow. (a) Developer's Conditions. Developer's obligation to purchase the City Parcels from City on the Escrow Closing Date shall be subject to the satisfaction or waiver 882/012782·0020 3J•5f 32~3115/19 -20- March 19, 2019 Item #3.1 of each of the following conditions precedent, each of which can only be waived in writing by Developer, in Developer's sole and absolute discretion: (1) Developer has not timely elected to terminate the Escrow and this Agreement pursuant to the provisions in Section 3.2; (2) The occurrence of the Entitlement Approval Date; (3) The Title Company is unconditionally committed to issue the Developer's Title Policy to Developer, at the Close of Escrow; (4) City has deposited all of the items into the Escrow required by Section 4.4; (5) Developer has reasonably approved the Escrow Holder's final estimated closing/settlement statement; (6) The escrow under the Private Parcels Purchase Agreements has closed, and Developer has acquired fee title to the Private Parcels; (7) City has acquired fee title to all of the City Parcels; (8) The escrow under the AHPDA has closed, and Developer has acquired fee title to the Affordable Housing Parcel; (9) The City Council of City has approved, and City and Developer have entered into, a Development Agreement; (10) Developer has obtained all City permits required to complete the rough grading of the Property; (11) The City Parcels have been vacated and are free from occupancy; and (12) City has performed all of its material obligations required to be performed by City under this Agreement prior to Close of Escrow; and is not in default of any of its obligations under this Agreement. (b) City's Conditions. City's obligation to sell the City Parcels to Developer on or before the Escrow Closing Date shall be subject to the satisfaction or waiver of each of the following conditions precedent, which can only be waived in writing by City, in City's sole and absolute discretion: (1) Developer has deposited the Earnest Money Deposit into Escrow, pursuant to Section 3.2(a), and the Earnest Money Deposit has been released to City; 882/012782-0020 alf'6t°J2~3115119 -21- March 19, 2019 Item #3.1 (2) Developer has not timely elected to terminate the Escrow and this Agreement pursuant to the provisions in Section 3.2; (3) The occurrence of the Entitlement Approval Date; (4) Developer has provided evidence reasonably satisfactory to City that Developer has sufficient financing, or Developer has obtained commitments for sufficient financing, to develop the Project in accordance with the Project Budget, and any such financing for which Developer has obtained commitments shall close and be available to Developer on the Escrow Closing Date; (5) Developer has delivered to City, at least fourteen (14) days prior to the Escrow Closing Date, a legally binding written contract between Developer and a general contractor, licensed in California, experienced in the construction of projects similar to the Project, for the construction of the Project, which general contractor may be an Affiliate of Developer provided that the terms of the construction contract are standard, competitive, market-based terms; (6) Developer has deposited all of the items into Escrow required by Section 4.3; (7) City has reasonably approved the Escrow Holder's final estimated closing/settlement statement; (8) The escrow under the Private Parcels Purchase Agreements has closed and Developer has acquired fee title to the Private Parcels, (9) City has acquired fee title to all of the City Parcels; (10) The escrow under the AHPDA has closed and Developer has acquired fee title to the Affordable Housing Parcel; (11) Developer has performed all of its material obligations required to be performed by Developer under this Agreement prior to Close of Escrow; and is not in default of any of its obligations under this Agreement; (12) The Title Company is unconditionally committed to issue the City's Title Policy to City, at the Close of Escrow; (13) Developer has obtained all City permits required to complete the rough grading of the Property; (14) Developer, at its sole cost and expense, shall have provided to City all studies, reports, data, and supporting materials necessary for City to conduct all required analysis under CEQA, City shall have completed such analysis, and the City Council or City Planning Commission (as applicable), in its sole and absolute discretion, shall have made all requisite findings, determinations, and/or certifications necessary to enable the Project to move forward; 882/012782-0020 3!f •Jf'32~3/15/19 -22- March 19, 2019 Item #3.1 (15) The City Parcels have been vacated and are free from occupancy; (16) The representations, warranties and covenants of Developer set forth in ARTICLE VIII are true and correct in all material respects on the Effective Date and continuing through and including on the Escrow Closing Date; (17) Developer has provided City with a residential real estate report or other documentation and/or analysis reasonably acceptable to the City Manager evidencing that the residential real estate market for new "for-sale" multifamily homes in general, and in the City of Poway in particular is in a condition to enable Developer to sell not less than twelve (12) "for-sale" multifamily homes (the "First Phase"), and (18) Developer has delivered to City organizational documents evidencing the establishment and good standing of Developer, and the authority of Developer to enter into this Agreement and perform its obligations hereunder. Section 4.3 Developer's Escrow Deposits. Following satisfaction or waiver of each of Developer's conditions to the Close of Escrow set forth in Section 4.2(a), at least one (1) business day prior to the Escrow Closing Date scheduled by the Escrow Holder in a writing delivered to each of the Parties, Developer shall deposit the following funds and documents into the Escrow and, concurrently, provide a copy of each such document to City: (a) Purchase Price. The Purchase Price, less the sum of (i) the Earnest Money Deposit, and (ii) the City Loan, plus any additional funds required to be deposited into the Escrow by Developer under the terms of this Agreement to close the Escrow, all in immediately available funds; (b) PCO Report. A Preliminary Change of Ownership Report executed by the authorized representative(s) of Developer; (c) Memorandum of Agreement. The Memorandum of Agreement executed by the authorized representative(s) of Developer in recordable form; (d) City Note. The City Note, executed by the authorized representative(s) of Developer; and (e) City Deed of Trust. The City Deed of Trust, executed by the authorized representative(s) of Developer. Section 4.4 City's Escrow Deposits. Following satisfaction or waiver of each of City's conditions to Close of Escrow set forth in Section 4.2(b), at least one (1) business day prior to the Escrow Closing Date scheduled by the Escrow Holder in a writing delivered to each of the Parties, City shall deposit the following funds and documents into the Escrow and, concurrently, provide a copy of each such document to Developer: 882/012782-0020 alf'&¥'3~~""'" -23- March 19, 2019 Item #3.1 (a) City Grant Deed. The City Grant Deed executed by the authorized representative(s) of City in recordable form; (b) Fl RPT A Affidavit. The FIRPTA Affidavit completed and executed by the authorized representative( s) of City; (c) Memorandum of Agreement. The Memorandum of Agreement executed by the authorized representative(s) of City in recordable form; and (d) Form 593. A Form 593 executed by the authorized representative(s) of City. Section 4.5 Closing Procedure. When each of Developer's Escrow deposits, as set forth in Section 4.3, and each of City's Escrow deposits, as set forth in Section 4.4, are deposited into the Escrow, the Escrow Holder shall request confirmation in writing from both City and Developer that each of their respective conditions to the Close of Escrow, as set forth in Section 4.2, are satisfied or waived. Upon the Escrow Holder's receipt of written confirmation from both City and Developer that each of their respective conditions to the Close of Escrow are either satisfied or waived, the Escrow Holder shall close the Escrow by doing all of the following: (a) Insertion of Dates. Insert the Escrow Closing Date into the City Grant Deed, Memorandum of Agreement, City Note, and City Deed of Trust, as the date of such document, prior to the recordation of the City Grant Deed, Memorandum of Agreement and City Deed of Trust; (b) Recordation of Documents. File the City Grant Deed, the Memorandum of Agreement, and City Deed of Trust (as applicable) with the Office of the Recorder of the County of San Diego, California, for recordation in the order set forth in Section 4.7; (c) Distribution of Recorded Documents. Distribute conformed copies of each recorded document to the Party or person designated for such distribution in Section 4.7; (d) PCO Report. File the PCO Report with the Office of the Recorder of the County of San Diego, California; (e) FIRPTA Affidavit. Deliver the FIRPTA Affidavit to Developer, and deliver a copy to City; (f) Form 593. Deliver the Form 593 to Developer, and deliver a copy to City; (g) Developer's Title Policy. Obtain and deliver to Developer the Developer's Title Policy; (h) City's Title Policy. Obtain and deliver to City the City's Title Policy; 882/012782-0020 3f 915f'321 3115119 -24- March 19, 2019 Item #3.1 (i) Purchase Price. Deliver the Purchase Price to City, less the sum of (i) the Earnest Money Deposit, (ii) the City Loan, and (iii) any other charges to the account of City, and return all remaining funds held by the Escrow Holder for the account of Developer to Developer, less Developer's share of the Escrow closing costs, and less any other charges chargeable to the account of Developer under the terms of this Agreement; and U) Report to IRS. Following the Close of Escrow and prior to the last date on which such report is required to be filed with the Internal Revenue Service, if such report is required pursuant to Section 6045(e) of the Internal Revenue Code, the Escrow Holder shall report the gross proceeds of the purchase and sale of the Property to the Internal Revenue Service on Form 1099-B, W-9 or such other form(s) as may be specified by the Internal Revenue Service pursuant to Section 6045(e). Upon the filing of such reporting form with the Internal Revenue Service, the Escrow Holder shall deliver a copy of the filed form to City and Developer. Section 4.6 Close of Escrow. Close of Escrow shall occur on or before the Escrow Closing Date. lffor any reason the Close of Escrow has not occurred on or before the Escrow Closing Date, then any Party not then in default of this Agreement may cancel the Escrow and terminate this Agreement, without liability to the other Party or any other person for such cancellation and termination, by delivering written notice of termination to both the other Party and the Escrow Holder and, thereafter, the Parties shall proceed pursuant to Section 4.10. Without limiting the right of either Party to cancel the Escrow and terminate this Agreement pursuant to the preceding sentence, if the Escrow does not close on or before the Escrow Closing Date, and neither Party has exercised its contractual right to cancel the Escrow and terminate this Agreement before such time, then the Escrow shall close as soon as reasonably possible following the first date on which the Escrow Holder is in a position to close the Escrow, pursuant to the terms and conditions of this Agreement. Section 4.7 Recordation and Distribution of Documents. Escrow Holder shall cause the following documents to be recorded in the official records of the Recorder of the County of San Diego, California, in the following order at the Close of Escrow: (i) the City Grant Deed, (ii) the City Deed of Trust, (iii) the Memorandum of Agreement, and (iv) any other documents to be recorded through the Escrow upon the joint instructions of the Parties. The Escrow Holder shall deliver conformed copies of all documents recorded through the Escrow to City and Developer and any other person designated in the joint escrow instructions of the Parties to receive a conformed copy of each such document, each showing all recording information. Section 4.8 Escrow Closing Costs. Taxes and Title Policy Premium. Developer and City shall each pay half of the documentary transfer taxes, Escrow fees, and such other costs as the Escrow Holder may charge for the conduct of the Escrow. The Escrow Holder shall notify Developer and City of the costs to be borne by each of Developer and City at the Close of Escrow by delivering the Escrow Holder's estimated closing/settlement statement to both City and Developer, at least, four (4) business days prior to the Escrow Closing Date. City shall pay the premium charged by the 882/012782·0020 :1ff•Jra2~'115 '" -25- March 19. 2019 Item #3.1 Title Company for the Developer's Title Policy, with standard coverage, and for the City's Title Policy; provided, however, that Developer shall pay the costs of any endorsements or other supplements to the coverage of the Developer's Title Policy that may be requested by Developer, including the additional cost for extended ALTA coverage, if such coverage is elected by Developer. City shall pay any and all recording fees, and any and all other charges, fees and taxes levied by a governmental authority relative to the conveyance of the Property through the Escrow. Section 4.9 Escrow Cancellation Charges. If the Escrow fails to close due to City's material default under this Agreement, City shall pay all ordinary and reasonable cancellation charges relating to the Escrow, the Developer's Title Policy and the City's Title Policy. If the Escrow fails to close due to Developer's material default under this Agreement, or for any reason other than the material default of City, Developer shall pay all ordinary and reasonable cancellation charges relating to the Escrow, the Developer's Title Policy, and the City's Title Policy. Section 4.10 Escrow Cancellation. If the Escrow is cancelled and this Agreement is terminated pursuant to a contractual right granted to a Party in this Agreement to cancel the Escrow and terminate this Agreement, other than due to the default of another Party, the Parties shall do each of the following: (a) Cancellation Instructions. The Parties shall, within three (3) business days following receipt of the Escrow Holder's written request, execute any reasonable Escrow cancellation instructions requested by the Escrow Holder; (b) Return of Funds and Documents. Within ten (10) days following receipt by the Parties of a settlement statement from the Escrow Holder of cancellation charges regarding the Escrow, the Developer's Title Policy, and the City's Title Policy, if any: (i) Developer or the Escrow Holder shall return to City any documents previously delivered by City to Developer or the Escrow Holder regarding the Escrow, (ii) City or the Escrow Holder shall return to Developer all documents previously delivered by Developer to City or the Escrow Holder regarding the Escrow; and (iii) the Escrow Holder shall return to Developer any funds deposited into the Escrow, except as otherwise provided in either Section 3.2(a) or Section 9.3, less the customary and reasonable Escrow and title order cancellation charges regarding the Escrow, the Developer's Title Policy, and the City's Title Policy, if any. Section 4.11 Entitlement Claims: CEQA Claims. If any Entitlement Claims and/or CEQA Claims are taken or filed, then Developer shall have the right to elect to either defend the same or not defend the same, at Developer's cost, including, without limitation, all of the court costs, attorney fees, monetary awards, sanctions, attorney fee awards, expert witness and consulting fees, and the expenses of any and all financial or performance obligations resulting from the disposition of the legal action. If Developer elects to so defend the same, then Developer shall appoint counsel and direct strategy; provided, however, that such counsel shall be acceptable to City. If Developer elects not to so defend, then either City or Developer shall have the right to terminate this Agreement. 882/012782-0020 3J•6f:i2~3115/19 -26- March 19, 2019 Item #3.1 ARTICLE V PROJECT DEVELOPMENT Section 5.1 Developer Covenant to Undertake Project. Developer covenants and agrees for itself and its successors and assigns, to and for the exclusive benefit of City, that Developer shall develop the Project in a good and workmanlike manner, within the applicable time periods set forth in the Schedule of Performance, and in conformity with the terms and conditions of this Agreement, the Scope of Development, the Entitlements, any and all plans, specifications and similar development documents required by this Agreement and approved by City, including all conditions of approval issued in connection with any of the foregoing approvals, except for such changes as may be mutually agreed upon in writing by and between Developer and City, and all applicable laws, regulations, orders and conditions of each Governmental Agency. The covenants of this Section 5.1 shall run with the land of the City Parcels until the Project Completion Date. Section 5.2 Developer Changes to Project Plans and Specifications During Course of Construction. Developer shall have the right, during the course of construction of the Project, to make "Minor Field Changes" (as defined in the following sentence), without seeking the approval of City, if such changes do not affect the type of use to be conducted within all or any portion of a structure. "Minor Field Changes" shall be defined as those changes from the approved construction drawings, plans and specifications that: (1) have no substantial effect on the Project and are made in order to expedite, clarify or facilitate the work of construction in response to field conditions; (2) are changes to the Project's interior spaces that substantially conform to the drawings, plans, and specifications and/or are required pursuant to an applicable law by a lender or equity partner; (3) are changes that represent the selection of a particular design option or feature; (4) are changes that are required under applicable laws; and/or (5) are changes dictated by the identification of any unforeseen conditions. Nothing contained in this Section 5.2 shall be deemed to constitute a waiver of or change in any Governmental Requirements governing any such Minor Field Changes or in any approvals by any Governmental Agency otherwise required for any such Minor Field Changes. Section 5.3 Completion of Project. (a) Upon Developer's completion of the Project, Developer shall: (1) Record a Notice of Completion, in accordance with California Civil Code Section 3093, for the entirety of the Project; (2) Cause the Project to be inspected by each Governmental Agency and correct any defects and deficiencies that may be disclosed by any such inspection; and (3) Cause all occupancy certificates and other licenses, permits and authorizations necessary for the operation and occupancy of the completed Project to be duly issued. 882/012782-0020 4!f•c5f'32f"15119 -27- March 19, 2019 Item #3.1 (b) After commencement of the work of improvement of the Project, Developer shall not permit the work of improvement of the Project to cease or be suspended for a time period in excess of thirty (30) calendar days, either consecutively or in the aggregate. Notwithstanding the foregoing, such thirty (30) calendar day period may be extended by the City Manager for up to an additional thirty (30) calendar days, in the aggregate, unless caused by Unavoidable Delays. Section 5.4 Compliance with Laws. All work performed in connection with the construction of the Project shall comply with all Governmental Requirements. Section 5.5 Schedule of Performance. All planning, construction, and other development obligations and responsibilities of Developer related to the Project shall be initiated and completed within the times specified in the Schedule of Performance, or within such reasonable extensions of such times granted by City in writing or as otherwise provided for in this Agreement. Section 5.6 Developer Attendance at City Meetings. Developer agrees to have one or more of its employees or consultants who are knowledgeable regarding this Agreement and the development of the Project, such that such person(s) can meaningfully respond to City staff questions regarding the progress of the Project, attend meetings with City staff or meetings of the Poway City Council, when requested to do so by City staff. Section 5.7 City Right to Inspect Project and Property. Officers, employees, agents and representatives of City shall have the right of reasonable access to the Property, without the payment of charges or fees, during normal construction hours, during the period of construction of the Project. Any and all officers, employees, agents or representatives of City who enter the Property shall identify themselves at the construction management office or, if none, to the apparent on-site construction supervisor on the Property, upon their entrance onto the Property, and shall at all times be accompanied by a representative of Developer, while on the Property. Developer shall make a representative of Developer available for this purpose at all times during normal construction hours, upon reasonable advance notice from City. If in City's reasonable judgment ii is necessary, City shall have the further right, from time to time, to retain a consultant or consultants to inspect the Project and verify compliance by Developer with the provisions of this Agreement. Developer acknowledges and agrees that any such City inspections are for the sole purpose of protecting City's rights under this Agreement, are made solely for City's benefit, may be superficial and general in nature, and are for the purposes of informing City of the progress of the Project and the conformity of the Project with the terms and conditions of this Agreement, and that Developer shall not be entitled to rely on any such inspection(s) as constituting City's approval, satisfaction or acceptance of any materials, workmanship, conformity of the Project with this Agreement or otherwise. Developer agrees to make its own regular inspections of the work of construction of the Project to determine that the quality of the Project and all other requirements of the work of construction of the Project are being performed in a manner satisfactory to Developer. 882/012782-0020 ,if9,jf'j2f 311 " 1 • -28- March 19, 2019 Item #3.1 Section 5.8 Construction in Compliance with Applicable Laws. (a) Developer shall be solely responsible, expressly or impliedly and legally and financially, for determining and effectuating compliance with all applicable federal, state and local public works requirements, prevailing wage laws, and labor laws and standards, and City makes no representation, either legally and/or financially, as to the applicability or non-applicability of any federal, state and local laws to Developer's construction of the Project. Developer expressly, knowingly and voluntarily acknowledges and agrees that City has not previously represented to Developer or to any representative, agent or affiliate of Developer, or any contractor(s) or any subcontractor(s) for the construction or development of the Project, in writing or otherwise, in a call for bids or otherwise, that the work and construction of the Project is (or is not) a "public work," as defined in Section 1720 of the Labor Code or under the Davis-Bacon Act, 40 U.S.C. Section 3141, et seq., and the regulations promulgated thereunder set forth at 29 CFR Part 1 (collectively, "Davis-Bacon"). (b) Developer knowingly and voluntarily agrees that Developer shall have the obligation to provide any and all disclosures or identifications as and to the extent required by Labor Code Section 1781 and/or by Davis-Bacon, as the same may be amended from time to lime, or any other similar law or regulation. Developer shall indemnify, protect, pay for, defend and hold harmless City, with legal counsel reasonably acceptable to City from and against any and all loss, liability, damage, claim, cost, expense and/or "increased costs" (including reasonable attorney's fees, court and litigation costs, and fees of expert witnesses) which, in connection with the development, construction (as defined by applicable law) and/or operation of the Project, including, without limitation, any and all public works (as defined by applicable law), results or arises in any way from any of the following: (i) the noncompliance by Developer or its contractor with any applicable local, state and/or federal law or regulation, including, without limitation, any applicable federal and/or state labor laws or regulations (including, without limitation, if applicable, the requirement to pay state and/or federal prevailing wages and hire apprentices); (ii) the implementation of Section 1781 of the Labor Code and/or of Davis-Bacon, as the same may be amended from time to time, or any other similar law or regulation; and/or (iii) failure by Developer to provide any required disclosure or identification as required by Labor Code Section 1781 and/or by Davis-Bacon, as the same may be amended from time to lime, or any other similar law or regulation. It is agreed by the Parties that, in connection with the development and construction (as defined by applicable law or regulation) of the Project, including, without limitation, any and all public works (as defined by applicable law or regulation), Developer shall bear all risks of payment or non-payment of prevailing wages under applicable federal, state and local law or regulation and/or the implementation of Labor Code Section 1781 and/or by Davis-Bacon, as the same may be amended from lime to time, and/or any other similar law or regulation. The foregoing indemnity shall survive termination of this Agreement and shall continue after completion of the construction and development of the Project. "Increased costs," as used in this Section 5.8, shall have the meaning ascribed to it in Labor Code Section 1781, as the same may be amended from lime to time. 882/012782-0020 41 96r321 3/15/19 -29- March 19, 2019 Item #3.1 DEVELOPER, ON BEHALF OF ITSELF, ITS SUCCESSORS, AND ASSIGNS, WAIVES AND RELEASES CITY FROM ANY RIGHT OF ACTION THAT MAY BE AVAILABLE TO ANY OF THEM PURSUANT TO LABOR CODE SECTION 1781. DEVELOPER ACKNOWLEDGES THE PROTECTIONS OF CIVIL CODE SECTION 1542 RELATIVE TO THE WAIVER AND RELEASE CONTAINED IN THIS SECTION 5.8, WHICH READS AS FOLLOWS: A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR. BY INITIALING BELOW, DEVELOPER KNOWINGLY AND VOLUNTARILY WAIVES THE PROVISIONS OF SECTION 1542 SOLELY IN CONNECTION WITH THE WAIVERS AND RELEASES OF THIS SECTION 5.8: Developer's Initials Section 5.9 AS-IS SALE; RELEASE (a) Developer acknowledges, agrees, and represents to City that Developer is experienced in the acquisition and development of land similar to the City Parcels and that as of the Close of Escrow, it has been given an adequate opportunity to review and inspect, and has approved all aspects of, the City Parcels. Developer shall rely solely and exclusively upon the results of its Due Diligence Investigations of the City Parcels, including, without limitation, investigations regarding geotechnical soil conditions, compliance with applicable laws pertaining to the use of the City Parcels by Developer and any other matters relevant to the condition or suitability of the City Parcels for the Project, as Developer may deem necessary or appropriate. City makes no representation or warranty to Developer relating to the condition of the City Parcels or suitability of the City Parcels for any intended use or development by Developer. (b) Developer shall accept all conditions of the City Parcels, without any liability of City whatsoever, upon Developer's acceptance of the City Parcels indicated in its Due Diligence Investigation Conclusion Notice, or Developer's deemed acceptance of the City Parcels by Developer's failure to deliver a Due Diligence Investigation Conclusion Notice. Developer's delivery of its Due Diligence Investigation Conclusion Notice indicating Developer's unconditional acceptance of the City Parcels, or Developer's deemed acceptance of the City Parcels by Developer's failure to deliver a Due Diligence Investigation Conclusion Notice, shall evidence Developer's unconditional and irrevocable acceptance of the City Parcels in the Public Parcel's AS IS, WHERE IS, SUBJECT TO ALL FAUL TS CONDITION, WITHOUT WARRANTY AS TO QUALITY, CHARACTER, PERFORMANCE OR CONDITION and with full knowledge of the physical condition of the City Parcels, all zoning, other land use laws and other Governmental 882/012782-0020 4:f 96f'32~3115119 -30- March 19, 2019 Item #3.1 Requirements affecting the City Parcels, and of the conditions, restrictions, encumbrances and all matters of record relating to the City Parcels. Developer's delivery of its Due Diligence Investigation Conclusion Notice indicating Developer's unconditional acceptance of the City Parcels, or Developer's deemed acceptance of the City Parcels by Developer's failure to deliver a Due Diligence Investigation Conclusion Notice, shall constitute Developer's representation and warranty to City that Developer has received assurances acceptable to Developer by means independent of City or any agent of City of the truth of all facts material to Developer's acquisition of the City Parcels pursuant to this Agreement, and that the City Parcels are being acquired by Developer as a result of its own knowledge, inspection and investigation of the City Parcels and not as a result of any representations made by City or any employee, official, consultant or agent of City relating to the condition of the City Parcels, unless such statement or representation is expressly and specifically set forth in this Agreement. City hereby expressly and specifically disclaims any express or implied warranties regarding the City Parcels. DEVELOPER, ON BEHALF OF ITSELF, ITS SUCCESSORS, AND ASSIGNS, WAIVES AND RELEASES CITY FROM ANY RIGHT OF ACTION THAT MAY BE AVAILABLE TO ANY OF THEM WITH RESPECT TO THE CONDITION OF THE PUBLIC PARCELS. DEVELOPER ACKNOWLEDGES THE PROTECTIONS OF CIVIL CODE SECTION 1542 RELATIVE TO THE WAIVER AND RELEASE CONTAINED IN THIS SECTION 5.9, WHICH READS AS FOLLOWS: A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR. BY INITIALING BELOW, DEVELOPER KNOWINGLY AND VOLUNTARILY WAIVES THE PROVISIONS OF SECTION 1542 SOLELY IN CONNECTION WITH THE WAIVERS AND RELEASES OF THIS SECTION 5.9: Developer's Initials Section 5.10 Environmental Indemnity of City by Developer. On and after the Escrow Closing Date, Developer agrees, at its sole cost and expense, to fully indemnify, protect, hold harmless, and defend (with counsel selected by Developer and approved by City) City and City Personnel, and each of them, from and against any and all claims, demands, damages, losses, liabilities, obligations, penalties, fines, actions, causes of action, judgments, suits, proceedings, costs, disbursements and expenses, including, without limitation, attorney fees, disbursements and costs of attorneys, environmental consultants and other experts, and all foreseeable and unforeseeable damages or costs of any kind or of any nature whatsoever (collectively, "Environmental Losses") that may, at any time, be imposed upon, incurred or suffered by, or claimed, asserted or awarded against, City directly or indirectly relating to or arising from any of the following 882/012782-0020 4/f 'c5f°32f '115/19 -31- March 19, 2019 Item #3.1 "Environmental Matters" occurring during and/or arising from Developer's ownership of the Property or construction or operation of the Project: (a) the presence of Hazardous Substances on, in, under, from or affecting all or any portion of the Property or the Project. (b) The storage, holding, handling, release, threatened release, discharge, generation, leak, abatement, removal or transportation of any Hazardous Substances on, in, under, from or affecting the Property or the Project. (c) The violation of any law, rule, regulation, judgment, order, permit, license, agreement, covenant, restriction, requirement or the like by Developer, its agents or contractors, relating to or governing in any way Hazardous Substances on, in, under, from or affecting the Property or the Project. (d) The violation of any law, rule, regulation, judgment, order, permit, license, agreement, covenant, restriction, requirement or the like by Developer, its agents or contractors, relating to or governing in any way the discharge of storm water on, in, under, from or affecting the Property or the Project, and the failure of Developer, its agents or contractors to comply with any permit issued pursuant to the National Pollutant Discharge Elimination System and applicable to the Project and/or Property. (e) The failure of Developer, its agents or contractors, to properly complete, obtain, submit and/or file any and all notices, permits, licenses, authorizations, covenants and the like in connection with Developer's activities on the Property or regarding the Project. (f) The implementation and enforcement by Developer, its agents or contractors of any monitoring, notification or other precautionary measures that may, at any time, become necessary to protect against the release, potential release or discharge of Hazardous Substances on, in, under, from or affecting the Property or the Project. (g) The failure of Developer, its agents or contractors, in compliance with all applicable Environmental Laws, to lawfully remove, contain, transport or dispose of any Hazardous Substances existing, stored or generated on, in, under or from the Property or the Project. (h) Any investigation, inquiry, order, hearing, action or other proceeding by or before any Governmental Agency in connection with any Hazardous Substances on, in, under, from or affecting the Property or the Project or the violation of any Environmental Law relating to the Property or the Project. On and after the Escrow Closing Date, Developer shall pay to City all costs and expenses including, without limitation, reasonable attorney's fees and costs, incurred by City in connection with enforcement of the aforementioned environmental indemnity. Section 5.11 Insurance. On and after the Escrow Closing Date, Developer, to protect City, and City Personnel against any and all claims and liability for death, injury, 882/012782-0020 4jj''c5f'32~3/15/19 -32- March 19, 2019 Item #3.1 loss and damage resulting from Developer's actions in connection with this Agreement, the Property and the Project, shall secure and maintain the insurance coverage, described in and required by this Section 5.11. Developer shall pay any deductibles and self-insured retentions under all insurance policies issued in satisfaction of the terms of this Agreement. (a) Workers' Compensation Insurance Requirement. On and after the Escrow Closing Date, Developer shall submit written proof, if Developer has employees, that Developer is insured against liability for workers' compensation in accordance with the provisions of Section 3700 of the Labor Code. By executing this Agreement, Developer makes the following certification, required by Section 1861 of the Labor Code: "I am aware of the provisions of section 3700 of the Labor Code which require every employer to be insured against liability for workers' compensation or to undertake self- insurance in accordance with the provisions of that code, and I will comply with such provisions before commencing the performance of the work of the Agreement." (1) On and after the Escrow Closing Date, Developer shall require each contractor and sub-contractor performing work on the Project or the Property to provide workers' compensation coverage for all of such contractor's or sub-contractor's employees, unless the contractor's or sub-contractor's employees are covered by workers' compensation insurance provided by Developer. If any class of employees engaged in work or services performed in connection with the Project is not covered by Labor Code Section 3700, Developer shall provide and/or require each contractor or sub- contractor to provide adequate workers' compensation insurance covering such employees. (b) Liability and Permanent Insurance Requirements. (1) On and after the Escrow Closing Date, Developer shall maintain in full force and effect, until the Project Completion Date, subject to subsection (e), the following insurance coverage: Commercial General Liability Insurance coverage, including, but not limited to, Premises-Operations, Contractual Liability Insurance (specifically covering the indemnity obligations of Developer pursuant to this Agreement), Products-Completed Operations Hazards, Personal Injury (including bodily injury and death), and Property Damage for liability arising out of the construction of the Project and/or the Developer's operation of the Property or the Project. (i) Commercial general liability insurance coverage shall have minimum limits for Bodily Injury and Property Damage liability of FIVE MILLION 882/012782-0020 .nf•c5f'a2f"15 '" -33- March 19, 2019 Item #3.1 DOLLARS ($5,000,000) each occurrence and TEN MILLION DOLLARS ($10,000,000) aggregate. (ii) Automobile Liability Insurance against claims of Personal Injury (including bodily injury and death) and Property Damage covering all owned, leased, hired and non-owned vehicles used by Developer with minimum limits for Bodily Injury and Property Damage of ONE MILLION DOLLARS ($1,000,000) each occurrence and TWO MILLION DOLLARS ($2,000,000) aggregate. Such insurance shall be provided by a business or commercial vehicle policy. (iii) If Developer hires a consultant to provide design services, such as architectural or engineering services in connection with the Project, or any portion of the Project, Developer shall require each such consultant to provide Professional Liability (Errors and Omissions) Insurance, for liability arising out of, or in connection with, the performance of such design services, with limits of not less than ONE MILLION DOLLARS ($1,000,000). (c) On and after the Escrow Closing Date, Developer shall require that each contractor performing work on the Project maintain the following insurance coverage, as specified below: (1) Each General Contractor shall maintain Builder's Risk Insurance to be written on an All Risk Completed Value form, in an aggregate amount equal to 100% of the completed insurable value of the Project. (2) Each General Contractor and each sub-contractor shall maintain Commercial General Liability Insurance with limits of not less than FIVE MILLION DOLLARS ($5,000,000) per occurrence and TEN MILLION DOLLARS ($10,000,000) aggregate to protect the Developer during the construction of the Project from claims involving bodily injury and/or death and damage to the property of others. (3) Each General Contractor and each sub-contractor shall maintain Automobile Liability Insurance against claims of personal injury (including bodily injury and death) and property damage covering all owned, leased, hired and non-owned vehicles used in the performance of the contractor's obligations with minimum limits for bodily injury and property damage of ONE MILLION DOLLARS ($1,000,000) each occurrence and TWO MILLION DOLLARS ($2,000,000) aggregate. Such insurance shall be provided by a business or commercial vehicle policy. (d) The Commercial General Liability Insurance required in subsection (b)(1 )(i) above, shall include an endorsement naming City and City Personnel as additional insureds for liability arising out of this Agreement and any operation related to this Agreement. (e) If any of the insurance coverage required under this Agreement is written on a claims-made basis, such insurance policy shall provide an extended reporting period continuing through the fifth (5th) anniversary of the Project Completion Date. The requirements of this subsection (e) shall survive any expiration or termination of this 882/012782-0020 ,W96t"J2!3/15/19 -34- March 19, 2019 Item #3.1 Agreement and the recordation of the City Grant Deed and City's issuance of the Release of Construction Covenants for the Project. (f) Receipt by City of evidence of insurance that does not comply with the above requirements shall not constitute a waiver of the insurance requirements of this Agreement. (g) Subject to subsection (e), the above required insurance coverage shall be maintained by Developer or its contractors, as required by the terms of this Agreement, shall not be reduced, modified, or canceled without, at least, thirty (30) days prior written notice to City. Also, phrases such as "endeavor to" and "but failure to mail such notice shall impose no obligation or liability of any kind upon the company" shall not be included in the cancellation wording of any Certificates of Insurance or any coverage for City and City Personnel. Developer shall immediately obtain replacement coverage for any insurance policy that is terminated, canceled, non-renewed, or whose policy limits are exhausted or upon insolvency of the insurer that issued the policy. (h) All insurance to be obtained and maintained by Developer under this Agreement shall be issued by a company or companies listed in the then current "Best's Key Rating Guide" publication with a minimum of an "A; IX" rating and be admitted to business in the State of California by the State of California Department of Insurance. (i) City will not accept self-insurance in satisfaction of the insurance requirements of this Section 5.11. U) All insurance obtained and maintained by Developer in satisfaction of the requirements of this Agreement shall be primary to and not contributing to any insurance maintained by any of City and City Personnel. (k) Insurance coverage in the minimum amounts set forth in this Agreement shall not be construed to relieve Developer of any liability, whether within, outside, or in excess of such coverage, and regardless of solvency or insolvency of the insurer that issues the coverage; nor shall it preclude City from taking such other actions as are available to it under any other provision of this Agreement or otherwise at law. (I) Failure by Developer to maintain all insurance required by this Agreement in effect at all times shall be an Event of Default by Developer. City, at its sole option, may exercise any remedy available to ii in connection with such an Event of Default. Additionally, City may purchase such required insurance coverage and City shall be entitled to immediate payment from Developer for any premiums and associated costs paid by City for such insurance coverage. Any election by City to purchase or not to purchase insurance for Developer shall not relieve Developer of its obligation to obtain and maintain the insurance coverage required by this Agreement. Section 5.12 Developer CC&Rs. Prior to City's issuance of a final certificate of occupancy for any of individual residential dwelling units in the Residential Development, Developer shall have submitted to City, obtained City's approval of (such approval not to be unreasonably withheld, conditioned or delayed), and recorded against the underlying 882/012782-0020 4~'6¥'321 3115119 -35- March 19, 2019 Item #3.1 real property a declaration of covenants, conditions, and restrictions that (i) establishes a homeowners' association, (ii) is necessary to create a condominium regime for the condominiums described on the condominium plan to be recorded in accordance with all applicable laws (for any portion of the Residential Development developed with condominium-style units); and (iii) clearly sets forth the maintenance obligations of the owners of the residential dwelling units (the "Developer CC&Rs"). The Developer CC&Rs shall provide that the City is a third party beneficiary thereof with the right, but not the obligation, to enforce the terms thereof which are required by this Section 5.12 (the "City Required Provisions"), and shall require that (a) any proposed amendments to the Developer CC&Rs that would amend any of the City Required Provisions must be provided to City, (b) City shall have the right, in City's reasonable discretion, to provide a written objection to any such proposed amendment, within thirty (30) days after City's receipt of the proposed amendment, and (c) if no objection is provided by City within such thirty (30) day period, the proposed amendment may be approved. Section 5.13 Release of Construction Covenants. (a) Following the completion of the Residential Development or Retail Development (either of the foregoing, a "Project Component"), excluding any normal and minor building "punch-list" items to be completed by Developer, and upon written request from Developer for issuance of a Release of Construction Covenants, City shall inspect the Project Component to determine whether or not the Project Component has been completed in substantial conformance with this Agreement. If City determines that the Project Component is complete and in substantial conformance with this Agreement, which determination shall not be unreasonably withheld, City shall furnish Developer with a Release of Construction Covenants for the Project Component. If City determines that the Project Component is not in substantial conformance with this Agreement, City shall send written notice of each non-conformity to Developer, pursuant to Section 5.13(c). (b) A Release of Construction Covenants shall be evidence of City's conclusive determination of satisfactory completion of the Project Component pursuant to the terms of this Agreement. After the recordation of a Release of Construction Covenants for the Project Component, any person then owning or thereafter purchasing, leasing or otherwise acquiring any interest in the portion of the Property improved with the Project Component shall not (because of such ownership, purchase, lease or acquisition) incur any obligation or liability under this Agreement regarding construction of the Project Component, except that such person shall be bound by any reservations, covenants, conditions, restrictions and other interests affecting the such portion of the Property pursuant to this Agreement. (c) If City in its reasonable discretion fails or refuses to issue a Release of Construction Covenants for a Project Component, following a written request from Developer, City shall, within fifteen (15) calendar days following City's receipt of Developer's written request or within three (3) calendar days after the next regular meeting of the City Council, whichever date occurs later, provide Developer with a written statement setting forth in reasonable detail the reasons for City's failure or refusal to issue a Release of Construction Covenants. The statement shall also contain City's opinion of 882/012782-0020 4i'6¥'32!3115119 -36- March 19, 2019 Item #3.1 the action(s) Developer must take to obtain a Release of Construction Covenants from City. If the reason for Developer's failure to complete the Project Component is confined to the immediate unavailability of specific items or materials for construction or landscaping at a price reasonably acceptable to Developer or other minor building "punch-list" items, City may issue its Release of Construction Covenants upon the posting of a bond or irrevocable standby letter of credit by Developer in a form reasonably acceptable to City in an amount representing the fair value of the work on the Project Component remaining to be completed, as reasonably determined by City. If City fails to provide such written statement, within the specified time period, Developer shall be deemed, conclusively and without further action of City, to have satisfied the requirements of this Agreement with respect to the Project Component, as if a Release of Construction Covenants had been issued by City pursuant to this Agreement. (d) A Release of Construction Covenants shall not be deemed to constitute a Notice of Completion under Section 3093 of the California Civil Code, nor shall it act to terminate the continuing covenants, restrictions or conditions contained in the City Grant Deed or any other instruments recorded against the Property or set forth in this Agreement or otherwise. A Release of Construction Covenants is not evidence of the compliance of the Project Component with any Governmental Requirements. A Release of Construction Covenants shall not evidence the satisfaction of any obligation of Developer to City under this Agreement or otherwise, except Developer's obligation to construct the Project Component. (e) Notwithstanding anything in this Section 5.13 to the contrary, at such time as Developer has completed construction of a residential dwelling unit comprising a portion of the Residential Development, as evidenced by City's issuance of a certificate of occupancy for said dwelling unit, City agrees to execute a document in a form reasonably acceptable to the Title Company terminating the Memorandum of Agreement with respect to such dwelling unit. Section 5.14 Comprehensive Retail Development; Phasing. Developer represents to City that as of the Effective Date, Developer has negotiated in good faith with the owners of various properties adjacent to the Retail Parcels to acquire those parcels on commercially reasonable terms. During the term of this Agreement, Developer shall continue to diligently pursue acquisition of suitable real properties, and attempt to plan and design a Comprehensive Retail Development. Commencing on the first day of the first calendar quarter following the Effective Date, Developer shall provide written updates to the City Manager, on a quarterly basis, describing in reasonable detail Developer's efforts during the immediately preceding quarter with respect to planning and designing a Comprehensive Retail Development, and the outcome of such efforts. (a) The Parties acknowledge and agree that the "Project" as defined in this Agreement contemplates that Developer will fully develop the Comprehensive Retail Development. Upon the Close of Escrow, Developer shall commence, and diligently proceed to completion, the "Phase 1 Retail Development Work," as described in the Scope of Development. If Developer is unable to plan and design a Comprehensive Retail Development within two (2) years following the Effective Date, Developer and City 882/012782-0020 5{f 9Jf'32f'115119 -37- March 19, 2019 Item #3.1 shall meet and confer regarding an appropriate alternative development as the Comprehensive Retail Development (an "Alternative Development"). If by the third (3'd) anniversary of the Effective Date (the "Third Anniversary"), Developer has not been able to plan and design a Comprehensive Retail Development, and the Parties have not agreed on an appropriate Alternative Development, then City shall have a right to purchase the Retail Parcels from Developer ("City's Retail Parcels Purchase Right") for the greater of (i) the outstanding amount owed on the City Note, or (ii) eighty percent (80%) of the appraised value of the Retail Parcels as of that date (the "Retail Parcels Purchase Price"). City shall exercise City's Retail Parcels Purchase Right by providing a written notice to Developer, within sixty (60) days after the Third Anniversary, staling City's intention to exercise City's Retail Parcels Purchase Right, and purchase the Retail Parcels ("City's Notice of Exercise"). The appraised value of the Retail Parcels shall be determined by an appraisal conducted by an MAI appraiser selected by City and reasonably acceptable to Developer. At such lime as the Parties receive the appraisal, City shall have the right to terminate its prior election to exercise City's Retail Parcels Purchase Right ("City's Right of Termination"). City shall exercise City's Right of Termination by providing a written notice to Developer, within thirty (30) days after the Parties receive the appraisal. Notwithstanding anything in this Section 5.14 to the contrary, the following shall apply if City elects to not exercise City's Retail Parcels Purchase Right: If at any time within the three (3) year period after such election by City Developer desires to develop the Retail Parcels with a residential development or sell the Retail Parcels, as a condition to either of such action, Developer shall be required to pay to City fifty percent (50%) of the difference between (a) the appraised value of the Retail Parcels for residential use, determined by an appraisal conducted by an MAI appraiser selected by City and reasonably acceptable to Developer, and (b) One Million Seven Hundred Thousand Dollars ($1,700,000), which is the portion of the Purchase Price attributable to the Retail Parcels. (b) The provisions of this subparagraph (b) shall apply in the event City exercises City's Retail Parcels Purchase Right, and does not exercise City's Right of Termination. The provisions of this subparagraph (b) shall also apply in the event City exercises its right of first refusal pursuant to Section 10.6 below, except to the extent the provisions in this subparagraph (b) conflict with the Acceptable Terms or Acceptable Offer (as applicable), as reasonably determined by the City Manager, in which case the conflicting provisions of the Acceptable Terms or Acceptable Offer (as applicable) shall control. (1) Within thirty (30) business days after City exercises City's Retail Parcels Purchase Right, Developer and City shall cause an escrow ("City's Repurchase Escrow") to be opened with the Escrow Holder for the conveyance of the Retail Parcels by Developer to City. City's Repurchase Escrow shall be deemed opened on the date City delivers to Escrow Holder (a) a copy of this Section 5.14, and (b) a copy of City's Notice of Exercise, accompanied by a written certification from City that City has not exercised City's Right of Termination ("Opening of City's Repurchase Escrow"). Escrow Holder shall notify Developer and City in writing of the date of the Opening of City's Repurchase Escrow promptly following the opening of City's Repurchase Escrow. 882/012782-0020 sf'c5¥'32~3115119 -38- March 19, 2019 Item #3.1 (2) City's Repurchase Escrow shall close on or before the date that is sixty (60) days after the Opening of City's Repurchase Escrow ("City's Repurchase Escrow Closing Date"). The terms "Close of City's Repurchase Escrow" and/or the "City's Repurchase Escrow Closing" shall mean the date the "City's Repurchase Grant Deed" (as that term is defined in paragraph (6) below) conveying fee title to the Retail Parcels to City is recorded in the Office of the County Recorder of San Diego County, California. Possession of the Retail Parcels shall be delivered to City at the Close of City's Repurchase Escrow free and clear of all tenancies, lessees, occupants, and all possessory rights of any kind or nature. (3) This Section 5.14, together with any standard instructions of Escrow Holder, shall constitute the joint escrow instructions of Developer and City to Escrow Holder as well as an agreement between Developer and City with respect to Developer's conveyance to City of the Retail Parcels. In the event of any conflict between the provisions of this Section 5.14 and Escrow Holder's standard instructions, this Section 5.14 shall prevail. (4) Developer shall convey and City shall accept fee simple title to the Retail Parcels free and clear of all recorded and unrecorded monetary liens, encumbrances, easements, leases, covenants, conditions, restrictions, and other exceptions to or defects in title, excepting only the following: (a) the title exceptions listed in City's Title Policy with respect to the Retail Parcels; (b) current taxes not yet delinquent; (c) the lien of any construction loan obtained by Developer for construction of the Project that has been approved by City; and (d) those additional title exceptions as may be approved in writing by City in its sole and absolute discretion. (5) Developer shall be responsible for all of the escrow fees, recording fees, documentary transfer taxes, and any other costs and expenses of escrow, and any property taxes and assessments and all costs required to place title in the condition described in paragraph (4) above. Concurrently with the conveyance of the Retail Parcels to City, and as a condition to City's acceptance of said conveyance, Developer shall cause the Title Company to deliver to City an AL TA standard owner's policy of title insurance showing title vested in City in the condition described in paragraph (4) above with insurance coverage in the amount of the Retail Parcels Purchase Price ("City's Repurchase Title Policy"). Developer shall pay the premium for the City's Repurchase Title Policy. City shall pay for any additional coverage or endorsements to the City's Repurchase Title Policy. (6) On or before 1 :00 p.m. on the last business day preceding the scheduled City's Repurchase Escrow Closing Date, City shall deposit or cause to be deposited with Escrow Holder the following: the Retail Parcels Purchase Price, and any and all additional instruments or other documents required from City (executed and acknowledged if appropriate) as may be necessary in order to effect the transfer of the Retail Parcels to City. On or before 1 :00 p.m. on the last business day preceding the scheduled City's Repurchase Escrow Closing Date, Developer shall deposit or cause to be deposited with Escrow Holder the following: (a) an executed and acknowledged grant deed conveying the Retail Parcels to City substantially in the form of the City Grant Deed 882/012782-0020 5:f'&f'32f"15119 -39- March 19, 2019 Item #3.1 ("Retail Parcels Grant Deed"); (b) all escrow fees and closing costs; and (c) any and all additional funds, instruments, or other documents required from Developer (executed and acknowledged if appropriate), as may be necessary in order to effect the transfer of the Retail Parcels to City. (7) On or before the City's Repurchase Escrow Closing Date, and when Escrow Holder has received all of the documents and funds listed in paragraph (6) above, and Escrow Holder is in a position to cause the City's Repurchase Title Policy referred to in paragraph (5) above to be issued to City, and provided City has approved the physical condition of the Retail Parcels, Escrow Holder shall close the City's Repurchase Escrow by (i) recording the Retail Parcels Grant Deed in the Office of the Official Records of San Diego County, California, (ii) delivering the recorded Retail Parcels Grant Deed to City, (iii) causing the City's Repurchase Title Policy to be issued to City, and (iv) delivering the Retail Parcels Purchase Price to Developer. Section 5.15 City Option to Repurchase Residential Parcels. (a) Grant of Option .• Developer hereby grants to City an option to repurchase all or any portion of the Residential Parcels not yet then completed. as evidenced by City's issuance of a certificate of occupancy ("Residential Parcels Repurchase Option") on the terms set forth in this Section 5.15. The term of the Residential Parcels Repurchase Option shall commence on the Close of Escrow and shall extend to the Project Completion Date (the "Residential Parcels Repurchase Option Period"). City's rights under the Residential Parcels Repurchase Option are in addition to and are not limited by the City"s Retail Parcels Purchase Right granted to City pursuant to Section 5.14 above. (b) Conditions to Exercise of Repurchase Option. City shall be entitled to exercise the Residential Parcels Repurchase Option during the Residential Parcels Repurchase Option Period in the event of the occurrence of any of the following events (any such event, a "Residential Parcels Repurchase Option Event"): (1) Developer's failure to commence vertical construction of the First Phase of the Residential Development on the Residential Parcels within the time frame therefor set forth in the Schedule of Performance, subject to the notice and right to cure provisions set forth in Section 9.2(a) below, unless such failure is a result of an "Adverse Market Condition" (as that term is defined below) or Unavoidable Delay. (2) Developer's failure to diligently and continuously develop the Residential Parcels and construct, complete and market residential units within the Residential Parcels. Without limitation of the following, any period of inactivity in actually conducting material construction work on the Residential Development within the Residential Parcels until completion for more than forty five (45) days, subject to the notice and right to cure provisions set forth in Section 9.2(a) below, unless such delays are caused by an Adverse Market Condition or Unavoidable Delay. 882/012782-0020 5:f 9Jf32f"15119 -40- March 19. 2019 Item #3.1 As used in this Section 5.15, the term "Adverse Market Condition" shall mean and refer to adverse changes in economic conditions of the market for new homes in general or in the City of Poway in particular. In the event of an Adverse Market Condition that results in the occurrence of one of the failures described in paragraph (1) or (2) above, Developer shall provide reasonable evidence thereof to City. (c) Exercise of Residential Parcels Repurchase Option. City may, but shall not be obligated to, exercise its Residential Parcels Repurchase Option following the occurrence of any Residential Parcels Repurchase Option Event (but in no event later than six (6) months following the occurrence of such Residential Parcels Repurchase Option Event), City shall do so by delivery of written notice ("Residential Parcels Repurchase Option Notice") thereof to Developer. (d) Residential Parcels Repurchase Price. The price at which City shall be entitled to repurchase the Residential Parcels ("Residential Parcels Repurchase Price") shall be the lesser of (a) ninety percent (90%) of the appraised value of the Residential Parcels or portion thereof which City is entitled, and elects, to purchase or (b) the sum of (i) the "Base Price" plus (ii) the "Design and Hard Construction Costs" (as those terms are defined below), if any, actually paid by Developer with respect to the construction of improvements on the Residential Parcels or portion thereof which City is entitled, and elects, to purchase, provided such Design and Hard Construction Costs have been verified to City's reasonable satisfaction. Developer will present City with paid invoices or other reasonable evidence to support the calculation of such costs. For the purpose of this Section 5.15, the following defined terms shall have the following meanings: (i) "Base Price" means the applicable portion of Purchase Price paid by Developer to City and to private parties for the acquisition of the Residential Parcels or portion thereof which City is entitled, and elects, to purchase, and (ii) "Design and Hard Construction Costs" means actual out of pocket construction costs paid by Developer to any contractor (including but not limited to the Contractor) or subcontractor for construction costs and materials and inspection, payments made to consultants, architects, engineers, or other design professionals, and building permit and similar fees actually paid by Developer to City or other governmental agency for the construction of the Residential Development or portion thereof which City is entitled, and elects, to purchase. Design and Hard Construction Costs specifically exclude, without limitation, (1) salaries and other charges for office personnel, (2) office expenses, (3) overhead and general expense of any kind, (4) interest or return on capital, financing costs or expenses, or depreciation, (5) insurance expenses, (6) sales and marketing expenses, (7) legal and accounting fees and expenses, (8) taxes or assessments of any kind, or (9) any costs or expenses attributable to the negligence or misconduct of Developer of its employees, agents, or contractors. (e) The appraised value of the Residential Parcels or portion thereof which City is entitled, and elects, to purchase, shall be determined by an appraisal conducted by an MAI appraiser selected by City and reasonably acceptable to 882/012782-0020 slt''Jf'32~3115 '" -41- March 19, 2019 Item #3.1 Developer. At such time as the Parties receive the appraisal, City shall have the right to terminate its prior election to exercise City's Residential Parcels Repurchase Option ("City's Residential Parcels Repurchase Option Right of Termination"). City shall exercise City's Residential Parcels Repurchase Option Right of Termination by providing a written notice to Developer, within thirty (30) days after the Parties receive the appraisal. In the event City does not timely deliver its Residential Parcels Repurchase Option Notice or in the event the City delivers the City's Residential Parcels Repurchase Option Right of Termination, then the City's Residential Parcels Repurchase Option shall be deemed terminated and of no further force or effect. (f) The provisions of this subparagraph (f) shall apply in the event City timely delivers its Residential Parcels Repurchase Option Notice and does not exercise City's Residential Parcels Repurchase Right of Termination. The provisions of this subparagraph (f) shall also apply in the event City exercises its right of first refusal pursuant to Section 10.6 below, except to the extent the provisions in this subparagraph (f) conflict with the Acceptable Terms or Acceptable Offer (as applicable), as reasonably determined by the City Manager, in which case the conflicting provisions of the Acceptable Terms or Acceptable Offer (as applicable) shall control. (1) Within thirty (30) days after receipt of the appraisal, Developer and City shall cause an escrow ("City's Residential Parcels Repurchase Escrow") to be opened with the Escrow Holder for the conveyance of the Residential Parcels or portion thereof which City has the right, and elects, to purchase, by Developer to City. City's Residential Parcels Repurchase Escrow shall be deemed opened on the date City delivers to Escrow Holder (a) a copy of this Section 5.15, and (b) a copy of City's Notice of Exercise, accompanied by a written certification from City that City has not exercised City's Right of Termination ("Opening of City's Residential Parcels Repurchase Escrow"). Escrow Holder shall notify Developer and City in writing of the date of the Opening of City's Residential Parcels Repurchase Escrow promptly following the opening of City's Residential Parcels Repurchase Escrow. (2) City's Residential Parcels Repurchase Escrow shall close on or before the date that is sixty (60) days after the Opening of City's Residential Parcels Repurchase Escrow ("City's Residential Parcels Repurchase Escrow Closing Date"). The terms "Close of City's Residential Parcels Repurchase Escrow" and/or the "City's Residential Parcels Repurchase Escrow Closing" shall mean the date the "City's Residential Parcels Repurchase Grant Deed" (as that term is defined in paragraph (6) below) conveying fee title to the Residential Parcels or portion thereof which City has the right, and elects, to purchase, to City is recorded in the Office of the County Recorder of San Diego County, California. Possession of the Residential Parcels or portion thereof which City has the right, and elects, to purchase, shall be delivered to City at the Close of City's Residential Parcels Repurchase Escrow free and clear of all tenancies, lessees, occupants, and all possessory rights of any kind or nature. (3) This Section 5.15, together with any standard instructions of Escrow Holder, shall constitute the joint escrow instructions of Developer and City to Escrow Holder as well as an agreement between Developer and City with respect to 882/012782-0020 s?f·&f :12~3/15/19 -42- March 19, 2019 Item #3.1 Developer's conveyance to City of the Residential Parcels or portion thereof which City has the right, and elects, to purchase. In the event of any conflict between the provisions of this Section 5.15 and Escrow Holder's standard instructions, this Section 5.15 shall prevail. (4) Developer shall convey and City shall accept fee simple title to the Residential Parcels or portion thereof which City has the right, and elects, to purchase, free and clear of all recorded and unrecorded monetary liens, encumbrances, easements, leases, covenants, conditions, restrictions, and other exceptions to or defects in title, excepting only the following: (a) the title exceptions listed in Developer's Title Policy with respect to the Residential Parcels; (b) current taxes not yet delinquent; (c) the lien of any construction loan obtained by Developer for construction of the Project that has been approved by City; and (d) those additional title exceptions as may be approved in writing by City in its sole and absolute discretion. (5) Developer shall be responsible for all of the escrow fees, recording fees, documentary transfer taxes, and any other costs and expenses of escrow, and any property taxes and assessments and all costs required to place title in the condition described in paragraph (4) above. Concurrently with the conveyance of the Residential Parcels or portion thereof which City has the right, and elects, to purchase, to City, and as a condition to City's acceptance of said conveyance, Developer shall cause the Title Company to deliver to City an AL TA standard owner's policy of title insurance showing title vested in City in the condition described in paragraph (4) above with insurance coverage in the amount of the Residential Parcels Repurchase Price ("City's Residential Parcels Repurchase Title Policy"). Developer shall pay the premium for the City's Residential Parcels Repurchase Title Policy. City shall pay for any additional coverage or endorsements to the City's Residential Parcels Repurchase Title Policy. (6) On or before 1 :00 p.m. on the last business day preceding the scheduled City's Residential Parcels Repurchase Escrow Closing Date, City shall deposit or cause to be deposited with Escrow Holder the following: the Residential Parcels Repurchase Price, and any and all additional instruments or other documents required from City (executed and acknowledged if appropriate) as may be necessary in order to effect the transfer of the Residential Parcels or portion thereof that City has the right, and elects, to purchase, to City. On or before 1 :00 p.m. on the last business day preceding the scheduled City's Residential Parcels Repurchase Escrow Closing Date, Developer shall deposit or cause to be deposited with Escrow Holder the following: (a) an executed and acknowledged grant deed conveying the Residential Parcels or portion thereof which City has the right, and elects, to purchase, to City substantially in the form of the City Grant Deed ("Residential Parcels Repurchase Grant Deed"); (b) all escrow fees and closing costs; and (c) any and all additional funds, instruments, or other documents required from Developer (executed and acknowledged if appropriate), as may be necessary in order to effect the transfer of the Residential Parcels or portion thereof which City has a right, and elects, to purchase, to City. (7) On or before the City's Residential Parcels Repurchase Escrow Closing Date, and when Escrow Holder has received all of the documents and 882/012782-0020 slf'8¥'a2~'"5 "' -43- March 19, 2019 Item #3.1 funds listed in paragraph (6) above, and Escrow Holder is in a position to cause the City's Residential Parcels Repurchase Title Policy referred to in paragraph (5) above to be issued to City, and provided City has approved the physical condition of the Residential Parcels or portion thereof which City has the right, and elects, to purchase, Escrow Holder shall close the City's Residential Parcels Repurchase Escrow by (i) recording the Residential Parcels Repurchase Grant Deed in the Office of the Official Records of San Diego County, California, (ii) delivering the recorded Residential Parcels Repurchase Grant Deed to City, (iii) causing the City's Repurchase Parcels Title Policy to be issued to City, and (iv) delivering the Residential Parcels Repurchase Price to Developer. ARTICLE VI USE AND OPERATION OF THE PROJECT Section 6.1 Encumbrances and Liens. Developer shall not record and shall not allow to be recorded against the Property or any portion of the Property any mortgage, trust deed, deed of trust, encumbrance or lien not expressly authorized by this Agreement. Developer shall remove, or shall have removed, any unauthorized lien, encumbrance, mortgage, levy or attachment made or recorded against the Property or any portion of the Property, or shall assure the satisfaction thereof to the satisfaction of City. The covenants of Developer set forth in this Section 6.2 regarding the placement of any unauthorized mortgage, trust deed, deed of trust, encumbrance or lien on the Property shall only remain in effect until the Project Completion Date. Section 6.2 Nondiscrimination. In addition to any other nondiscrimination provisions applicable to the Property under federal, state or local law, Developer covenants by and for itself and any successors in interest that there shall be no discrimination against or segregation of any person, or group of persons on any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Property, or any part thereof, nor shall Developer, or any person claiming under or through him or her, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees of the Property, or any part thereof. The foregoing covenants shall run with the land. Developer agrees for itself and any successor in interest that Developer shall refrain from restricting the rental, sale, or lease of any portion of the Property, or contracts relating to the Property, on the basis of race, color, creed, religion, sex, marital status, ancestry, or national origin of any person. All such deeds, leases or contracts shall contain or be subject to substantially the following nondiscrimination or nonsegregation clauses: 1. In deeds: "The grantee herein covenants by and for himself or herself, his or her heirs, executors, administrators, and assigns, and all persons claiming under or through them, that there shall be no discrimination against or segregation of, any 882/012782-0020 sf9Jf32:f 311 " 1 • -44- March 19, 2019 Item #3.1 person or group of persons on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the premises herein conveyed, nor shall the grantee or any person claiming under or through him or her, establish or permit any practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the premises herein conveyed. The foregoing covenants shall run with the land." 2. In leases: "The lessee herein covenants by and for himself or herself, his or her heirs, executors, administrators, and assigns, and all persons claiming under or through him or her, 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 any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the leasing, subleasing, transferring, use, occupancy, tenure, or enjoyment of the premises herein leased nor shall the lessee himself or herself, or any person claiming under or through him or her, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy, of tenants, lessees, sublessees, subtenants, or vendees in the premises herein leased. The foregoing covenants shall run with the land" 3. In contracts: "There shall be no discrimination against or segregation of, any person or group of persons on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the premises which are the subject of this agreement, nor shall the grantee or any person claiming under or through him or her, establish or permit any practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the premises herein conveyed. The foregoing covenants shall run with the land." Section 6.3 Effect of Covenants. The covenants established in this Agreement shall, without regard to technical classification and designation, be binding for the benefit and in favor of City and City's successors and assigns, and any successor in interest to the Property, together with any property acquired by Developer pursuant to this Agreement, or any part thereof. The covenants against discrimination shall remain in effect in perpetuity. Section 6.4 Taxes and Assessments. Developer shall pay prior to delinquency all real estate taxes and assessments on the Property, so long as Developer retains any ownership interest therein. Developer shall remove or have removed any levy or 882/012782-0020 sif '&f'32:f 311 ' 1 " -45- March 19, 2019 Item #3.1 attachment made on the Property or any part thereof, or assure the satisfaction thereof within a reasonable time but in any event prior to any sale or transfer of all or any portions thereof. Notwithstanding the above, Developer shall have the right to contest the validity or amounts of any tax, assessment, or encumbrance available to Developer in respect thereto, and nothing herein shall limit the remedies available to Developer in respect thereto. Section 6.5 Developer Covenant to Defend this Agreement. Developer acknowledges that City is a "public entity" and/or a "public agency" as defined under applicable California law. Therefore, City must satisfy the requirements of certain California statutes relating to the actions of public entities, including, without limitation, CEQA. Also, as a California municipal corporation, City's action in approving this Agreement may be subject to proceedings to invalidate this Agreement or mandamus. Developer assumes the risk of delays and damages that may result to Developer from any third-party legal actions related to City's approval of this Agreement or the pursuit of the activities contemplated by this Agreement, including, without limitation, City's approval of any Project approvals and issuance of any permits required for development of the Project, even in the event that an error, omission or abuse of discretion by City is determined to have occurred. If a third-party files a legal action regarding City's approval of this Agreement or the pursuit of the activities contemplated by this Agreement, including, without limitation, City's approval of any Project approvals and issuance of any permits required for development of the Project, City may terminate this Agreement on thirty (30) days written notice to Developer of City's intent to terminate this Agreement, referencing this Section 6.6, without any further obligation to perform the terms of this Agreement and without any liability to Developer resulting from such termination, unless Developer unconditionally agrees to indemnify and defend City and City Personnel, with legal counsel acceptable to City, against such third-party legal action, as provided hereinafter in this Section 6.6 Within 30 days of receipt of City's notice of intent to terminate this Agreement, as provided in the preceding sentence, Developer may in Developer's sole and absolute discretion offer to defend City, with legal counsel acceptable to City, in the third-party legal action and pay all of the court costs, attorney fees, monetary awards, sanctions, attorney fee awards, expert witness and consulting fees, and the expenses of any and all financial or performance obligations resulting from the disposition of the legal action. At the request of Developer, City shall cooperate with and assist Developer in its defense of any such third-party legal action, provided that City shall not be obligated to incur any expense in connection with such cooperation or assistance. ARTICLE VII RIGHTS OF HOLDERS OF APPROVED SECURITY INTERESTS IN PROPERTY Notwithstanding anything to the contrary in this Agreement, the provisions in this Article VII shall automatically terminate upon City's issuance of a Release of Construction Covenants for the Project. 882/012782-0020 sf9&f'a2f 3 "' 119 -46- March 19, 2019 Item #3.1 Section 7.1 No Encumbrances Except Mortgages. Deeds of Trust. or Sale and Lease-Back for Development. Mortgages, deeds of trust, and sales and leases-back or any other method of financing shall be permitted before the completion of the Project only for the purpose of securing loans of funds to be used for financing the construction of the Project, if necessary, and only if such loans are provided by an Institutional Lender or other acceptable person or entity reasonably acceptable to City, on commercially reasonable terms. Developer shall notify City in advance of any mortgage, deed of trust, sale and lease-back or other form of conveyance for financing if Developer proposes to enter into the same. Any such form of conveyance (i) shall only encumber the Residential Parcels, and (ii) may be in a first-priority lien position. Any such construction loan may include terms that convert the loan to a term loan upon completion of construction of the Project. Developer shall not enter into any such conveyance that will encumber the Retail Parcels without the prior written approval of City, which approval City may withhold in its sole and absolute discretion. Section 7 .2 Holder Not Obligated to Construct Project. The holder of any mortgage or deed of trust authorized by this Agreement shall not be obligated by the provisions of this Agreement to construct, repair, or complete the Project or any portion thereof, or to guarantee such construction or completion; nor shall any covenant or any other provision in this Agreement be construed so to obligate such holder. Nothing in this Agreement shall be deemed to construe, permit or authorize any such holder to devote the Property to any uses or to construct any improvements thereon, other than those uses or improvements provided for or authorized by this Agreement. Section 7 .3 Notice of Default to Mortgagee or Deed of Trust Holders: Right to Cure. With respect to any mortgage or deed of trust granted by Developer as provided herein, whenever City may deliver any notice or demand to Developer with respect to any breach or default by Developer in completion of construction of the Project, City shall at the same time deliver a copy of such notice or demand to each holder of record of any mortgage or deed of trust authorized by this Agreement who has previously requested such notice in writing. Each such holder shall (insofar as the rights granted by City are concerned) have the right, at its option, but not the obligation, within thirty (30) days after the receipt of the notice, to cure or remedy or commence to cure or remedy and thereafter to pursue with due diligence the cure or remedy of any such default and to add the cost thereof to the mortgage debt and the lien of its mortgage. Nothing contained in this Agreement shall be deemed to permit or authorize such holder to undertake or continue the construction or completion of the Project, or any portion thereof (beyond the extent necessary to conserve or protect the improvements or construction already made) without first having expressly assumed Developer's obligations to City by written agreement satisfactory to City. The holder, in that event, must agree to complete, in the manner provided in this Agreement, the improvements to which the lien or title of such holder relates. Any such holder properly completing such improvement shall be entitled, upon compliance with the requirements of this Section 7.3, to a Release of Construction Covenants. It is understood that a holder shall be deemed to have satisfied the thirty (30) day time limit set forth above for commencing to cure or remedy a Developer default which requires title and/or possession of the Property (or portion of this Agreement) if and to the extent any such holder has within such thirty (30) day period commenced -47- March 19, 2019 Item #3.1 proceedings to obtain title and/or possession and thereafter the holder diligently pursues such proceedings to completion and cures or remedies the default. Section 7.4 Right of City to Cure Mortgage or Deed of Trust Default. In the event of a mortgage or deed of trust default or breach by Developer prior to the completion of construction of the Project or any part of this Agreement, Developer shall immediately deliver to City a copy of any mortgage holder's notice of default. If the holder of any mortgage or deed of trust has not exercised its option to construct, City shall have the right but no obligation to cure the default. In such event, City shall be entitled to reimbursement from Developer of all proper costs and expenses incurred by City in curing such default. City shall also be entitled to a lien upon the Property to the extent of such costs and disbursements. Any such lien shall be junior and subordinate to the mortgages or deeds of trust permitted pursuant to Section 7 .1. Section 7.5 Right of City to Satisfy Other Liens on the Property. After the Close of Escrow and prior to the completion of construction, and after Developer has had written notice and has failed, after a reasonable time, to challenge, cure, or satisfy any other liens or encumbrances on the Property, City shall have the right but no obligation to satisfy any such other liens or encumbrances. ARTICLE VIII REPRESENTATIONS AND WARRANTIES OF DEVELOPER Section 8.1 Representations and Warranties by Developer. Developer makes the following representations, covenants and warranties, which shall be deemed to have been given on the Effective Date and on each date thereafter until the Project Completion Date, and acknowledges that the execution of this Agreement by City is made in material reliance by City on such covenants, representations and warranties of Developer: (a) Developer has taken all requisite action and obtained all requisite consents in connection with entering into this Agreement, such that this Agreement is valid and enforceable against Developer in accordance with its terms and each instrument to be executed by Developer pursuant to or in connection with this Agreement will, when executed, be valid and enforceable against Developer in accordance with its terms. No approval, consent, order or authorization of, or designation or declaration of any other person, is required in connection with the valid execution, delivery or performance of this Agreement by Developer. (b) If Developer becomes aware of any act or circumstance that would change or render incorrect, in whole or in part, any representation or warranty made by Developer under this Agreement, whether as of the date given or any time thereafter, whether or not such representation or warranty was based upon Developer's knowledge and/or belief as of a certain date, Developer will give immediate written notice of such changed fact or circumstance to City. 882/012782-0020 sr•Jf 32~"' 5'" -48- March 19, 2019 Item #3.1 ARTICLE IX DEFAULTS, REMEDIES AND TERMINATION Section 9.1 Defaults -General. (a) Subject to any extensions of time provided for in this Agreement, failure or delay by either Party to perform any term or provision of this Agreement within thirty (30) calendar days after receipt of written notice from the injured Party specifying such default, or if such default cannot reasonably be cured within thirty (30) days, to commence to cure, correct or remedy such default and to diligently and continuously prosecute such cure, correction or remedy to completion, shall constitute a default under this Agreement. (b) Delay in giving such written notice shall not constitute a waiver of any default nor shall it change the time of default. (c) Any failure or delays by either Party in asserting any of their rights and/or remedies as to any default shall not operate as a waiver of any default or of any such rights or remedies. Delays by either Party in asserting any of their rights and/or remedies shall not deprive either Party of its right to institute and maintain any actions or proceedings that ii may deem necessary to protect, assert or enforce any such rights or remedies. Section 9.2 Events of Default. In addition to other acts or omissions of Developer that may constitute a default or breach of this Agreement, the occurrence of any of the following specific events, prior to the issuance of a Release of Construction Covenants for the Project, shall constitute an "Event of Default" under this Agreement and shall not be subject to the provisions of Section 9.1: (a) Any default by Developer of any of the non-monetary covenants and conditions of this Agreement that is not cured within thirty (30) days following written notice of the default to Developer from City or the expiration of an applicable shorter cure period set forth in this Agreement, or if such default cannot reasonably be cured within the applicable cure period, to commence to cure, correct or remedy such and to diligently and continuously prosecute such cure, correction or remedy to completion. (b) Any representation, warranty or disclosure made to City by Developer regarding this Agreement or the Project is materially false or misleading at the time it is made. (c) Developer fails to make any payment or deposit of funds required under this Agreement, or to pay any other charge set forth in this Agreement, following seven (7) days' written notice to Developer from City of such failure. (d) Any material deviation in the work of improvement of the Project from the approved Scope of Development, other than Minor Field Changes, without the prior written approval of City, which approval shall not be unreasonably withheld or delayed, or the appearance, during the course of initial construction, of materially defective 882/012782-0020 s:f'Jfa2f"1 "" -49- March 19, 2019 Item #3.1 workmanship or materials and such material defects are not corrected or substantially corrected, within thirty (30) days after receipt of written notice thereof from City to Developer, subject to a time extension as required in order to address any subcontractor disputes, design a "fix" for the defects and to allow the same to be so repaired. (e) The construction of the Project is delayed or suspended, or the development of the Project does not proceed with reasonable due diligence, pursuant to the Schedule of Performance, subject to the occurrence of Unavoidable Delays. (f) The Developer sells, Transfers, hypothecates, encumbers or assigns its interest in this Agreement, the Property or any portion thereof, whether voluntarily or involuntarily or by operation of law, in violation of the terms and conditions of this Agreement; it being agreed that Permitted Transfers shall not be in violation hereof. Section 9.3 Liquidated Damages to City. (a) UPON THE OCCURRENCE, PRIOR TO THE CLOSE OF ESCROW, OF AN EVENT OF DEFAULT, OR OTHER MATERIAL DEFAULT OF DEVELOPER UNDER THIS AGREEMENT THAT IS NOT CURED WITHIN THE APPLICABLE CURE PERIOD SET FORTH IN THIS AGREEMENT, CITY MAY TERMINATE THIS AGREEMENT AND CANCEL THE ESCROW, PURSUANT TO SECTION 4.10, WITHOUT ANY LIABILITY OF CITY TO DEVELOPER OR ANY OTHER PERSON ARISING FROM SUCH ACTIONS. CITY AND DEVELOPER ACKNOWLEDGE THAT IT IS EXTREMELY DIFFICULT AND IMPRACTICAL, IF NOT IMPOSSIBLE, TO ASCERTAIN THE AMOUNT OF DAMAGES THAT WOULD BE SUFFERED BY CITY, IN THE EVENT OF A TERMINATION OF THIS AGREEMENT DUE TO THE OCCURRENCE, PRIOR TO THE CLOSE OF ESCROW, OF AN EVENT OF DEFAULT, OR OTHER MATERIAL DEFAULT OF DEVELOPER UNDER THIS AGREEMENT THAT IS NOT CURED WITHIN THE APPLICABLE CURE PERIOD SET FORTH IN THIS AGREEMENT. HAVING MADE DILIGENT BUT UNSUCCESSFUL ATTEMPTS TO ASCERTAIN THE ACTUAL DAMAGES CITY WOULD SUFFER, IN THE EVENT OF A TERMINATION OF THIS AGREEMENT DUE TO THE OCCURRENCE, PRIOR TO THE CLOSE OF ESCROW, OF AN EVENT OF DEFAULT, OR OTHER MATERIAL DEFAULT OF DEVELOPER UNDER THIS AGREEMENT THAT IS NOT CURED WITHIN THE APPLICABLE CURE PERIOD SET FORTH IN THIS AGREEMENT, CITY AND DEVELOPER AGREE THAT A REASONABLE ESTIMATE OF CITY'S DAMAGES IN SUCH EVENT IS THE EARNEST MONEY DEPOSIT OF TWO HUNDRED FIFTY THOUSAND DOLLARS ($250,000). THEREFORE, UPON THE TERMINATION OF THIS AGREEMENT BY CITY DUE TO THE OCCURRENCE, PRIOR TO THE CLOSE OF ESCROW, OF AN EVENT OF DEFAULT, OR OTHER MATERIAL DEFAULT OF DEVELOPER UNDER THIS AGREEMENT THAT IS NOT CURED WITHIN THE APPLICABLE CURE PERIOD SET FORTH IN THIS AGREEMENT, ESCROW HOLDER SHALL IMMEDIATELY CANCEL THE ESCROW AND CITY SHALL BE ENTITLED TO RETAIN THE EARNEST MONEY DEPOSIT. RETENTION OF THE EARNEST MONEY DEPOSIT SHALL BE CITY'S SOLE AND EXCLUSIVE REMEDY UPON THE OCCURRENCE, PRIOR TO THE CLOSE OF ESCROW, OF AN EVENT OF DEFAULT OR OTHER MATERIAL DEFAULT OF DEVELOPER UNDER THIS 882/012782-0020 s:f'&¥'3~~""'" -50- March 19, 2019 Item #3.1 AGREEMENT THAT IS NOT CURED WITHIN THE APPLICABLE CURE PERIOD SET FORTH IN THIS AGREEMENT. (b) CITY ACKNOWLEDGES THE PROTECTIONS OF CIVIL CODE SECTION 1542 RELATIVE TO THE WAIVER AND RELEASE CONTAINED IN THIS SECTION 9.3, WHICH CIVIL CODE SECTION READS AS FOLLOWS: A general release does not extend to claims which the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release and that, if known by him or her, would have materially affected his or her settlement with the debtor or released party. (c) BY INITIALING BELOW, CITY KNOWINGLY AND VOLUNTARILY WAIVES THE PROVISIONS OF SECTION 1542 SOLELY IN CONNECTION WITH THE WAIVERS AND RELEASES OF THIS SECTION 9.3: CITY'S INITIALS Section 9.4 Developer's Limitation on Recovery of Damages Prior to Close of Escrow. (a) IN THE EVENT OF ANY MATERIAL BREACH OF THIS AGREEMENT BY CITY PRIOR TO THE CLOSE OF ESCROW, DEVELOPER'S REMEDIES SHALL BE LIMITED TO A CHOICE BETWEEN (1) SPECIFIC PERFORMANCE OR (2) TERMINATION OF THIS AGREEMENT AND RECOVERY OF THE EARNEST MONEY DEPOSIT. DEVELOPER WAIVES ANY RIGHT TO RECOVER ANY OTHER SUMS FROM CITY ARISING FROM A MATERIAL BREACH OF THIS AGREEMENT BY CITY PRIOR TO THE CLOSE OF ESCROW. NOTWITHSTANDING THE FOREGOING OR ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT, IF SPECIFIC PERFORMANCE OF THIS AGREEMENT IS NOT AVAILABLE TO DEVELOPER BECAUSE (A) CITY HAS SOLD, OR GRANTED AN OPTION AS TO, THE PROPERTY TO A THIRD PARTY, OR (B) CITY HAS MORTGAGED OR OTHERWISE BY AFFIRMATIVE ACTION OF CITY ENCUMBERED THE PROPERTY, AND IS UNWILLING OR UNABLE TO REMOVE SUCH MORTGAGE OR ENCUMBRANCE (IT BEING UNDERSTOOD THAT IF CITY IS UNWILLING OR UNABLE TO REMOVE SUCH MORTGAGE OR ENCUMBRANCE, DEVELOPER SHALL HAVE THE RIGHT TO REMOVE SUCH MORTGAGE OR ENCUMBRANCE THROUGH PAYMENT ON BEHALF OF CITY AND TO OBTAIN A CREDIT TOWARDS THE PURCHASE PRICE IN THE AMOUNT OF SUCH PAYMENT), THEN IN ADDITION TO THE RETURN OF THE EARNEST MONEY DEPOSIT, CITY SHALL REIMBURSE DEVELOPER FOR DEVELOPER'S ACTUAL OUT-OF-POCKET, THIRD PARTY COSTS IN CONNECTION WITH ITS DUE DILIGENCE INVESTIGATION AND RELATED ACTIVITIES AND ITS LEGAL FEES IN NEGOTIATING AND DRAFTING THIS AGREEMENT AND RELATED DOCUMENTS, SUCH AMOUNT NOT TO EXCEED TWO HUNDRED THOUSAND DOLLARS ($200,000) IN TOTAL, WHICH EXPENSES 882/012782-0020 slf 9c5f':i~!'11 "" -51- March 19, 2019 Item #3.1 SHALL BE IDENTIFIED ON A WRITTEN SCHEDULE (TOGETHER WITH REASONABLY SUFFICIENT BACK-UP DOCUMENTATION EVIDENCING THE EXPENSES INCURRED) DELIVERED BY DEVELOPER TO CITY. DEVELOPER ACKNOWLEDGES THE PROTECTIONS OF CIVIL CODE SECTION 1542 RELATIVE TO THE WAIVER AND RELEASE CONTAINED IN THIS SECTION 9.4, WHICH CIVIL CODE SECTION READS AS FOLLOWS: A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR. (b) BY INITIALING BELOW, DEVELOPER KNOWINGLY AND VOLUNTARILY WAIVES THE PROVISIONS OF SECTION 1542 SOLELY IN CONNECTION WITH THE WAIVERS AND RELEASES OF THIS SECTION 9.4: DEVELOPER'S INITIALS Section 9.5 Legal Actions. (a) In addition to any other rights or remedies and subject to the restrictions set forth in this Agreement, following the Close of Escrow, either Party may institute an action at law or equity to seek specific performance of the terms of this Agreement, or to cure, correct or remedy any default, to recover damages for any default (subject to the restriction on Developer's rights to recover monetary damages against City set forth in the final clause of this sentence), or to obtain any other remedy consistent with the purpose of this Agreement; provided, however, that notwithstanding anything in the foregoing to the contrary, with the exception of Developer's rights pursuant to Section 9.4 above, in no event shall Developer be entitled to obtain monetary damages of any kind from City, including but not limited to damages for economic loss, lost profits, or any other economic or consequential damages of any kind. Such legal actions must be instituted in the Superior Court of the State of California in and for the County of San Diego, California, in any other appropriate court within the County of San Diego, California, or in the United States District Court for the Central District of California. (b) The laws of the State of California shall govern the interpretation and enforcement of this Agreement. The Parties acknowledge and agree that this Agreement is entered into, is to be fully performed in and relates to real property located in the City of Poway, County of San Diego, California. Section 9.6 Rights and Remedies are Cumulative. Except as otherwise expressly stated in this Agreement, the rights and remedies of the Parties as set forth in this Section 9.6 are cumulative and the exercise by either Party of one or more of such 882/012782-0020 s!f·Jr32!'" "1 • -52-March 19, 2019 Item #3.1 rights or remedies shall not preclude the exercise by ii, at the same or different times, of any other rights or remedies for the same default or any other default by the other Party. Section 9. 7 Attorneys' Fees. If either Party to this Agreement is required to initiate or defend litigation in any way connected with this Agreement, the prevailing Party in such litigation, in addition to any other relief which may be granted, whether legal or equitable, shall be entitled to reasonable attorneys' fees. If either Party to this Agreement is required to initiate or defend litigation with a third party because of the violation of any term or provision of this Agreement by the other Party, then the Party so litigating shall be entitled to reasonable attorneys' fees from the other Party to this Agreement. Attorneys' fees shall include attorney's fees on any appeal, and in addition a Party entitled to attorney's fees shall be entitled to all other reasonable costs for investigating such action, retaining expert witnesses, taking depositions and discovery, and all other necessary costs incurred with respect to such litigation. All such fees shall be deemed to have accrued on commencement of such action and shall be enforceable whether or not such action is prosecuted to judgment. Section 9.8 Developer Indemnification of the City. In addition to any other specific indemnification or defense obligations of the Developer set forth in this Agreement, the Developer agrees to indemnify, defend (upon written request by the City and with counsel reasonably acceptable to the City) and hold harmless the City and City Personnel from any and all losses, liabilities, charges, damages, claims, liens, causes of action, awards, judgments, costs and expenses, including, but not limited to reasonable attorney's fees of counsel retained by the City, expert fees, and investigation costs, of whatever kind or nature (collectively, "Claims"), that are in any manner directly or indirectly caused, occasioned or contributed to in whole or in part, through any act, omission, fault or negligence, whether active or passive, of Developer or Developer's officers, agents, employees, independent contractors, subcontractors of any tier, or authorized representatives, relating in any manner to this Agreement, any work to be performed by Developer related to this Agreement, the Project, or any authority or obligation exercised or undertaken by Developer under this Agreement, except to the extent any such Claims are caused by the willful misconduct or active negligence of any of City and City Personnel. Without limiting the generality of the foregoing, Developer's obligation to indemnify City shall include injury or death to any person or persons, damage to any property, regardless of where located, including the property of City, any workers' compensation or prevailing wage determination, claim or suit or any other matter arising from or connected with any goods or materials provided or services or labor performed regarding the Project or the Property on behalf of Developer by any person or entity. ARTICLEX GENERAL PROVISIONS Section 10.1 Notices. Demands and Communications Between the Parties. (a) Any and all notices, demands or communications submitted by any Party to another Party pursuant to or as required by this Agreement shall be proper, if in writing and dispatched by messenger for immediate personal delivery, by a nationally 882/012782-0020 s!f·&fj2f3"5'" -53- March 19, 2019 Item #3.1 recognized overnight courier service or by registered or certified United States mail, postage prepaid, return receipt requested, to the principal office of City or Developer, as applicable, as designated in subsection (b). Such written notices, demands and communications may be sent in the same manner to such other addresses as either Party may from time to time designate. Any such notice, demand or communication shall be deemed to be received by the addressee, regardless of whether or when any return receipt is received by the sender or the date set forth on such return receipt, on the day that it is delivered by personal delivery, on the date of delivery by a nationally recognized overnight courier service or three (3) calendar days after it is placed in the United States mail, as provided in this Section 10.1 (a). (b) The following are the authorized addresses for the submission of notices, demands or communications to the Parties: To the Developer: Poway Commons, LLC c/o Meridian Development, LLC 9988 Hibert Street, Suite 210 San Diego, CA 92131 Attention: Guy Asaro With copy to: Higgs, Fletcher & Mack, LLP 401 West "A" Street, Suite 2600 San Diego, CA 92101 Attention: Tim Waters, Esq. To the City: City of Poway 13325 Civic Center Drive Poway, CA 92064 Attention: City Manager With copies to: Rutan & Tucker, LLP 611 Anton Blvd., Suite 1400 Costa Mesa, CA 92626 Attention: Alan Fenstermacher, Esq. Rutan & Tucker, LLP 611 Anton Blvd., Suite 1400 Costa Mesa, CA 92626 Attention: John A. Ramirez, Esq. Section 10.2 Conflict of Interest. No member, official or employee of City having any conflict of interest, direct or indirect, related to this Agreement or the development of the Project shall participate in any decision relating to this Agreement. The Parties represent and warrant that they do not have knowledge of any such conflict of interest. Section 10.3 Warranty Against Payment of Consideration for Agreement. Developer warrants that it has not paid or given, and will not pay or give, any third party any money or other consideration for obtaining this Agreement. Third parties, for the 882/012782-0020 sf•J¥'32 ~3/15/19 -54- March 19, 2019 Item #3.1 purposes of this Section 10.3, shall not include persons to whom fees are paid for professional services, if rendered by attorneys, financial consultants, accountants, engineers, architects and the like when such fees are considered necessary by Developer. Section 10.4 Non-liability of City Officials and Employees. No member, official or employee of City shall be personally liable to Developer, or any successor in interest, in the event of any default or breach by City under this Agreement or for any amount that may become due to Developer or to its successor, or on any obligations under the terms of this Agreement, except as may arise from the gross negligence or willful acts of such member, official or employee. Section 10.5 Unavoidable Delay: Extension of Time of Performance. (a) Subject to specific provisions of this Agreement, performance by either Party under this Agreement shall not be deemed to be in default, or considered to be a default, where any such delays or defaults are due to an Unavoidable Delay that is not attributable to the fault of the Party claiming an extension of time to perform. An extension of time for any Unavoidable Delay shall be for the period of the Unavoidable Delay and shall commence to run from the date of occurrence of the Unavoidable Delay, but only if the Party asserting the existence of the Unavoidable Delay has first provided the other Party with written notice of the occurrence of the Unavoidable Delay, within ten (10) days of the commencement of such asserted Unavoidable Delay. (b) The Parties expressly acknowledge and agree that changes in either general economic conditions or changes in the economic assumptions of either of them that may have provided a basis for entering into this Agreement and that occur at any time after the execution of this Agreement, do not constitute an Unavoidable Delay and do not provide any Party with grounds for asserting the existence of an Unavoidable Delay in the performance of any covenant or undertaking arising under this Agreement. Each Party expressly assumes the risk that changes in general economic conditions or changes in such economic assumptions relating to the terms and covenants of this Agreement could impose an inconvenience or hardship on the continued performance of such Party under this Agreement. Section 10.6 Right of First Refusal. Upon the Close of Escrow, City shall have a right of first refusal with respect to any sale of the Property, pursuant to the following process: If at any time prior to the Project Completion Date, Developer (i) receives an offer acceptable to Developer for the purchase of the Property (or any portion thereof not completed) (an "Acceptable Offer"), or (ii) determines terms on which Developer is willing to sell the Property (or applicable portion thereof) ("Acceptable Terms"), then Developer shall forthwith forward a copy of such Acceptable Offer or Acceptable Terms (as applicable) to City. 882/012782-0020 s!f'c5f'32~"15"' -55-March 19, 2019 Item #3.1 City shall have a period of sixty (60) days after receiving such copy of the Acceptable Offer or Acceptable Terms (as applicable) within which to notify Developer that City elects to purchase the Property (or applicable portion thereof) on the terms contained therein (except, with respect to an Acceptable Offer, any terms not relevant to City's purchase of the Property (or applicable portion thereof), such as contingency clauses, etc.) (a "Right of First Refusal Exercise Notice"). Any Right of First Refusal Exercise Notice shall be accompanied by any earnest money required under the terms of the Acceptable Offer (if applicable), and collectively with the Acceptable Offer or Acceptable Terms (as applicable) shall then constitute a contract between City and Developer. If City does not provide a Right of First Refusal Notice within the sixty (60) day period stated in the immediately preceding paragraph, City shall be deemed to have waived its right of first refusal with respect to the foregoing Acceptable Offer or Acceptable Terms, and City shall upon request execute and deliver an instrument in recordable form appropriate to evidence City's relinquishment of its rights under this Section 10.6 with respect to such transaction. Notwithstanding any such relinquishment, City's rights under this Section 10.6 shall remain in effect if the transaction contemplated by the Acceptable Offer or a transaction pursuant to the Acceptable Terms (as applicable) fails for any reason to close, with respect to any subsequent offer to purchase the Property (or applicable portion thereof). Nothing in this Section 10.6 authorizes Developer to sell any portion of the Property in violation of the provisions of Section 1.3 of this Agreement. Section 10.7 Real Estate Commissions. City shall not be liable for any real estate commissions, brokerage fees or finder fees that may arise from or be related to this Agreement. Developer shall pay any fees or commissions or other expenses related to its retention or employment of real estate brokers, agents or other professionals. Section 10.8 Binding on Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective heirs, executors, administrators, legal representatives, successors and assigns. Section 10.9 Entire Agreement. This Agreement integrates all of the terms and conditions mentioned in this Agreement or incidental to this Agreement, and supersedes all negotiations or previous agreements between the Parties with respect to the Property and the Project. Section 10.10 No Merger. None of the terms, covenants, agreements or conditions set forth in this Agreement shall be deemed to be merged with any deed conveying title to the Property, and this Agreement shall continue in full force and effect before and after such conveyances. Section 10.11 Waivers. All waivers of the provisions of this Agreement and all amendments to this Agreement must be in writing and signed by the authorized representative(s) of both City and Developer. 882/012782-0020 s~'Jf':i2f 311 "" -56- March 19, 2019 Item #3.1 Section 10.12 Survival of Indemnity Obligations. All general and specific indemnity and defense obligations of the Parties set forth in this Agreement shall survive the expiration or termination of this Agreement and the execution or recordation of the City Grant Deed and/or City's issuance of a Release of Construction Covenants for the Project for a period of three (3) years. Section 10.13 City Approvals and Actions. City shall maintain authority of this Agreement and the authority to implement this Agreement through the City Manager (or his or her duly authorized representative). The City Manager shall have the authority to make approvals, issue interpretations, execute documents, waive provisions, and/or enter into certain amendments of this Agreement on behalf of City so long as such actions do not materially or substantially change the basic business terms hereof, change the uses or development permitted on the Property, or add to the costs incurred or to be incurred by City as specified herein, and such approvals, interpretations, waivers and/or amendments may include extensions of time to perform as set forth in Section 5.5. All other material and/or substantive interpretations, waivers, or amendments shall require the consideration, action and written consent of the City Council. Section 10.14 Developer Termination. In the event that prior to the Close of Escrow all or a portion of the Property is condemned or there is a written threat of condemnation issued by a governmental authority or there is a spill or release of any Hazardous Substances not caused by Developer upon the Property, then Developer shall have the right, but not the obligation and upon written notice to City, to terminate the Agreement and be refunded the Earnest Money Deposit. Section 10.15 Possession. Upon the Escrow Closing Date, City shall deliver possession of the Property to Developer (or its assignee) free and clear of all rights or claims to possession and use. Section 10.16 Termination. Except where expressly set forth herein, Developer's obligations hereunder shall terminate upon the issuance of the Release of Construction Covenants. Section 10.17 Counterparts. This Agreement may be executed in several counterparts, and all so executed shall constitute one agreement binding on both Parties hereto, notwithstanding that both Parties are not signatories to the same counterpart. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK, SIGNATURE PAGE FOLLOWS] 882/012782-0020 7!f'Jf'32f"1 ' 11 ' -57- March 19, 2019 Item #3.1 IN WITNESS WHEREOF, City and Developer have executed this Purchase, Sale, and Development Agreement by and through the signatures of their duly authorized representative(s) set forth below: ATTEST: Faviola Medina, City Clerk APPROVED AS TO FORM: RUT AN & TUCKER, LLP Alan Fenstermacher, City Attorney 882/012782-0020 ff 'cW'32~'11 ' 11 ' "City" CITY OF POWAY, a California municipal corporation By: Tina M. White, City Manager "Developer": POWAY COMMONS, LLC, a Delaware limited liability company By: Guy Asaro, Manager -58- March 19, 2019 Item #3.1 A. ATTACHMENT NO. 1 LEGAL DESCRIPTIONS Legal Description of City-Owned Property 13029 1/2 Poway Road: Real property in the City of Poway, County of San Diego, State of California, described as follows: PARCEL A: PARCEL 2, IN THE CITY OF POWAY, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, AS SHOWN AT PAGE 8847 OF PARCEL MAPS, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, JUNE 21, 1979. EXCEPTING THAT PORTION DESCRIBED AS FOLLOWS: BEGINNING AT THE SOUTHEAST CORNER OF SAID PARCEL 2; THENCE WESTERLY ALONG THE SOUTHERLY LINE THEREOF A DISTANCE OF 100.29 FEET; THENCE LEAVING SAID SOUTHERLY LINE NORTH 0° 51' 30" EAST OF 0.40 FEET; THENCE SOUTH 89° 08' 30" EAST PARALLEL WITH SAID SOUTH LINE A DISTANCE OF 19.80 FEET; THENCE SOUTH 88° 59' 58" EAST 80.49 FEET TO THE INTERSECTION WITH THE EASTERLY LINE OF SAID PARCEL 2; THENCE SOUTHERLY ALONG SAID EASTERLY LINE A DISTANCE OF 0.20 FEET TO THE POINT OF BEGINNING. PARCEL B: AN EASEMENT FOR ROAD AND PUBLIC UTILITY PURPOSES OVER, UNDER, ALONG AND ACROSS THE WESTERLY 30.00 FEET OF PARCEL 1, IN THE COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, AS SHOWN AT PAGE 8847 OF PARCEL MAPS, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, JUNE 21, 1979. PARCEL C: AN EASEMENT FOR ROAD AND PUBLIC UTILITY PURPOSES OVER, UNDER, ALONG AND ACROSS A STRIP OF LAND 30.00 FEET IN WIDTH LYING WITHIN THE NORTHWEST QUARTER OF THE SOUTHWEST QUARTER OF SECTION 13, TOWNSHIP 14 SOUTH, RANGE 2 WEST, SAN BERNARDINO MERIDIAN, IN THE COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO THE OFFICIAL PLAT THEREOF, THE EASTERLY LINE OF SAID STRIP BEING THE MOST WESTERLY LINE OF PARCELS 1 AND 2 AS SHOWN AT PAGE 8847 OF PARCEL MAPS, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, JUNE 21, 1979. APN: 317-472-25 882/012782-0020 7f'c5f'32f3115119 March 19, 2019 Item #3.1 13053 Poway Road: Real property in the City of Poway, County of San Diego, State of California, described as follows: PARCEL A: THE SOUTHERLY 100.00 FEET OF THE NORTHERLY 315.00 FEET OF THE EASTERLY 133.495 FEET OF THE WESTERLY 466.99 FEET OF THE NORTHWEST QUARTER OF THE SOUTHWEST QUARTER OF SECTION 13, TOWNSHIP 14 SOUTH, RANGE 2 WEST, SAN BERNARDINO MERIDIAN, IN THE COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO OFFICIAL PLAT THEREOF. PARCEL B: AN EASEMENT FOR ROAD AND PUBLIC UTILITY PURPOSES TO BE USED IN COMMON WITH OTHERS OVER, UNDER, ALONG, AND ACROSS A STRIP OF LAND 60.00 FEET IN WIDTH LYING WITHIN THE NORTHWEST QUARTER OF THE SOUTHWEST QUARTER OF SECTION 13, TOWNSHIP 14 SOUTH, RANGE 2 WEST, SAN BERNARDINO MERIDIAN, IN THE COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO OFFICIAL PLAT THEREOF, THE CENTER LINE OF SAID 60.00 FOOT STRIP BEING DESCRIBED AS FOLLOWS: BEGINNING AT THE SOUTHWESTERLY CORNER OF PARCEL 1 ABOVE; THENCE NORTHERLY ALONG THE WESTERLY LINE OF SAID PARCEL 1 AND THE NORTHERLY EXTENSION OF SAID WESTERLY LINE 265.00 FEET TO THE SOUTH LINE OF THE NORTH 50.00 FEET OF THE SAID NORTHWEST QUARTER OF THE SOUTHWEST QUARTER OF SECTION 13. EXCEPTING THEREFROM THAT PORTION INCLUDED WITHIN PARCEL A HEREINABOVE DESCRIBED. PARCEL C: AN EASEMENT FOR PUBLIC UTILITY PURPOSES OVER, UNDER, AND ACROSS THE SOUTHERLY 5.00 FEET OF THE NORTHERLY 315.00 FEET OF THAT PORTION OF THE NORTHWEST QUARTER OF THE SOUTHWEST QUARTER OF SECTION 13, TOWNSHIP 14 SOUTH, RANGE 2 WEST, SAN BERNARDINO MERIDIAN, IN THE COUNTY OF SAN DIEGO, , STATE OF CALIFORNIA, ACCORDING TO OFFICIAL PLAT THEREOF, DESCRIBED AS FOLLOWS: BEGINNING AT THE NORTHWEST CORNER OF THE SOUTHWEST QUARTER OF SAID SECTION 13; THENCE ALONG THE WESTERLY LINE OF SAID SOUTHWEST QUARTER, SOUTH 00° 49' 00" WEST, 614.99 FEET TO THE MOST WESTERLY NORTHWEST CORNER OF LAND DESCRIBED IN DEED TO RUDOLPH WALTER MATZ, ET AL, RECORDED SEPTEMBER 13, 1956 IN BOOK6255. PAGE 520 OF OFFICIAL RECORDS; THENCE ALONG THE BOUNDARY OF SAID MATZ'S LAND AS FOLLOWS: SOUTH 89° 08' 30" EAST, 733.99 FEET, AND NORTH 01° 07' 00" EAST, 615.00 FEET TO THE NORTHERLY LINE OF THE SOUTHWEST QUARTER OF SAID SECTION 13; 882/012782-0020 7:f '15f'32~3115119 -2- March 19, 2019 Item #3.1 THENCE ALONG THE NORTHERLY LINE OF SAID SOUTHWEST QUARTER, NORTH 89° 08' 30" WEST TO THE POINT OF BEGINNING. EXCEPTING THEREFROM THE WESTERLY 466.99 FEET. THEREFROM THE EASTERLY 134.26 FEET. PARCEL D: EXCEPTING THAT PORTION OF PARCEL 2, IN THE COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, AS SHOWN AT PAGE 8847 OF PARCEL MAPS, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, JUNE 21, 1979, MORE PARTICULARLY DESCRIBED AS FOLLOWS: BEGINNING AT THE SOUTHEAST CORNER OF SAID PARCEL 2; THENCE ALONG THE SOUTHERLY LINE OF SAID PARCEL2 NORTH 89°08' 30"WEST, 100.29 FEET; THENCE LEAVING SAID SOUTHERLY LINE NORTH 00° 51' 30" EAST. 0.40 FEET; THENCE PARALLEL WITH THE SOUTHERLY LINE OF SAID PARCEL 2, SOUTH 89° 08' 30' EAST, 19.80 FEET; THENCE SOUTH 88° 59' 58" EAST, 80.49 FEET TO THE EASTERLY LINE OF SAID PARCEL 2; THENCE ALONG SAID EASTERLY LINE SOUTH 00° 49' 00" WEST, 0.20 FEET TO THE POINT OF BEGINNING. APN: 317-472-24 882/012782-0020 ·nf '&¥'321'11 " 1 ' -3- March 19, 2019 Item #3.1 13033 Poway Road: Real property in the City of Poway, County of San Diego, State of California, described as follows: PARCEL 1: LOT 2 AND THAT PORTION OF LOT 1 OF K.N.Q. DEVELOPMENT IN THE COUNTY OF SAN DIEGO, STATE OF CALIFORNIA ACCORDING TO MAP THEREOF NO. 8019 FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, SEPTEMBER 12, 1974, BEING A PORTION OF THE NORTHWEST QUARTER OF THE SOUTHWEST QUARTER OF SECTION 13, TOWNSHIP 14 SOUTH, RANGE 2 WEST, SAN BERNARDINO MERIDIAN, ACCORDING TO THE U.S. GOVERNMENT SURVEY APPROVED NOVEMBER 19, 1880, BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS: BEGINNING AT THE SOUTHWEST CORNER OF SAID LOT 2 OF MAP NO. 8019: THENCE ALONG THE SOUTHERLY LINE OF SAID MAP 8019 SOUTH 89°08'30" EAST 281.73 FEET; THENCE NORTH 1 °07'00" EAST 270.00 FEET TO THE NORTH LINE OF SAID LOT 1; THENCE NORTH 89°08'30" WEST 149.67 FEET TO A TANGENT 30.00 FOOT RADIUS CURVE CONCAVE NORTHEASTERLY; THENCE ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 90°00'00" A DISTANCE OF 47.12 FEET; THENCE NORTH 89°08'30" WEST 103.50 FEET TO THE WEST LINE OF SAID MAP 8019: THENCE SOUTH 0°49'00" WEST 300.00 FEET TO THE POINT OF BEGINNING. PARCEL 2: AN EASEMENT AND RIGHT OF WAY FOR ROAD AND PUBLIC UTILITY PURPOSES OVER. UNDER, ALONG AND ACROSS A STRIP OF LAND 60.00 FEET IN WIDTH, LYING WITHIN THE NORTHWEST QUARTER OF THE SOUTHWEST QUARTER OF SECTION 13, TOWNSHIP 14 SOUTH, RANGE 2 WEST, SAN BERNARDINO BASE AND MERIDIAN, IN THE COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO UNITED STATES GOVERNMENT SURVEY APPROVED NOVEMBER 19, 1880, THE CENTER LINE OF SAID STRIP OF LAND BEING THE EASTERLY LINE OF THE SOUTHERLY 265.00 FEET OF THE NORTHERLY 315.00 FEET OF THE WEST HALF OF THE EASTERLY 266.99 FEET OF THE WESTERLY 466.99 FEET OF THAT PORTION OF THE NORTHWEST QUARTER OF THE SOUTHWEST QUARTER OF SECTION 13, TOWNSHIP 14 SOUTH, RANGE 2 WEST, SAN BERNARDINO BASE AND MERIDIAN, IN THE COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO UNITED STATES GOVERNMENT SURVEY APPROVED NOVEMBER 19, 1880, DESCRIBED AS FOLLOWS: BEGINNING AT THE NORTHWEST CORNER OF THE SOUTHWEST QUARTER OF SAID SECTION 13; THENCE ALONG THE WESTERLY LINE OF SAID SOUTHWEST QUARTER, SOUTH 00°49'00" WEST, 614.99 FEET TO THE MOST WESTERLY NORTHWEST CORNER OF LAND DESCRIBED IN DEED TO RUDOLPH WALTER MATZ, ET AL., RECORDED SEPTEMBER 13, 1956, IN BOOK 6255, PAGE 520 OF OFFICIAL RECORDS; THENCE ALONG THE BOUNDARY OF SAID MATZ'S LAND AS 882/012782-0020 7!J''Jf'32~3/15119 -4- March 19, 2019 Item #3.1 FOLLOWS: SOUTH 89°08'30" EAST, 733.99 FEET, AND NORTH 01'07'00" EAST, 615.00 FEET TO THE NORTHERLY LINE OF THE SOUTHWEST QUARTER OF SAID SECTION 13; THENCE ALONG THE NORTHERLY LINE OF SAID SOUTHWEST QUARTER, NORTH 89°08'30" WEST TO THE POINT OF BEGINNING. APN: 317-472-18 882/012782-0020 7~96¥'32~3115119 -5- March 19, 2019 Item #3.1 Real property in the City of Poway, County of San Diego, State of California, described as follows: PARCEL 2 OF PARCEL MAP NO. 9105. IN THE CITY OF POWAY, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, AUGUST 30, 1979 AS INSTRUMENT NO. 79-366067 OF OFFICIAL RECORDS. APN: 317-472-23 882/012782-0020 f¥'96t°J2!3115119 -6- March 19. 2019 Item #3.1 B. Legal Description of City-Owned Mixed Property 13100 Poway Road: The land referred to herein is situated in the State of California, County of San Diego and is described as follows: That portion of the Southwest Quarter of the Northwest Quarter of Section 13, Township 14 South, Range 2 West, San Bernardino Base and Meridian, in the City of Poway, County of San Diego, State of California, according to Official Plat thereof described as follows: Beginning at a point on the Southerly line of said Southwest Quarter of the Northwest Quarter, distant, thereon South 89°08'30" East 332.00 feet from the Southwest corner thereof, said point being the Southeast corner of land conveyed to James Albert Silkwood and wife, by deed recorded in Book 5316, Page 83 of Official Records; thence continuing South 89°08'30" East 281.00 feet; thence parallel with the West line of said Northwest Quarter North 01 °26'1 O" East 50 feet to the North line of the South 50 feet of said Northwest Quarter being the True Point of Beginning; thence along said line South 89°08'30" East 176.48 feet to a tangent 20 foot radius curve, concave Northwesterly in the Westerly line ofTarascan Drive as shown on Heritage Hills according to Map No. 5934 filed in the Office of the County Recorder of San Diego County; thence along the boundary line of said Map No. 5934, Northeasterly along said curve 31.17 feet; thence tangent to said curve North 1 °33'47" East 320.27 feet; thence North 89°08'30" West 68 feet; thence leaving said boundary North 89°08'30" West 129 feet to a line which bears North 01 °26'1 O" East parallel with said West line from the True Point of Beginning; thence South 01 °26'1 O" West 340.02 feet to the True Point of Beginning. APN: 317-101-06 882/012782-0020 7fl'915f'32f "15119 -7- March 19, 2019 Item #3.1 C. Legal Description of Authority-Owned Property 13021 Poway Road: Real property in the City of Poway, County of San Diego, State of California, described as follows: THE WEST 200.00 FEET OF THAT PORTION OF THE NORTHWEST QUARTER OF THE SOUTHWEST QUARTER OF SECTION 13, TOWNSHIP 14 SOUTH, RANGE 2 WEST, SAN BERNARDINO BASE AND MERIDIAN, IN THE CITY OF POWAY, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO THE UNITED STATES GOVERNMENT SURVEY APPROVED NOVEMBER 19, 1880, DESCRIBED AS FOLLOWS: BEGINNING AT THE NORTHWEST CORNER OF THE SOUTHWEST QUARTER OF SAID SECTION 13 HEREIN DESCRIBED; THENCE SOUTH 0° 49' 00" WEST, 614.99 FEET; THENCE SOUTH 89° 08' 30" EAST, 733.99 FEET TO THE SOUTHWEST CORNER OF THAT PORTION OF PROPERTY CONVEYED TO RUDOLPH WALTER MATZ ET AL, ON SEPTEMBER 13, 1956 IN BOOK 6255, PAGE 520 OF OFFICIAL RECORDS; THENCE ALONG THE WESTERLY LINE OF THE PROPERTY CONVEYED TO MATZ, NORTH 1° 07' 00" EAST, 615.00 FEET TO THE NORTH LINE OF SAID SOUTHWEST QUARTER OF SECTION 13 HEREIN DESCRIBED; THENCE ALONG THE NORTH LINE OF THE SOUTHWEST QUARTER, NORTH 89° 08' 30" WEST TO THE POINT OF BEGINNING. EXCEPTING THEREFROM THE NORTH 50.00 FEET OF THE WEST 200.00 FEET OF THE NORTHWEST QUARTER OF THE SOUTHWEST QUARTER OF SECTION 13, TOWNSHIP 14 SOUTH, RANGE 2 WEST. APN: 317-472-01 882/012782-0020 7!f•c5f'32!"15/19 -8- March 19, 2019 Item #3.1 13031 Poway Road: Real property in the City of Poway, County of San Diego, State of California, described as follows: PARCEL 1: THE SOUTHERLY 100.00 FEET OF THE NORTHERLY 315.00 FEET OF THE WEST HALF OF THE EASTERLY 266.99 FEET OF THE WESTERLY 466.99 FEET OF THAT PORTION OF THE NORTHWEST QUARTER OF THE SOUTHWEST QUARTER OF SECTION 13, TOWNSHIP 14 SOUTH, RANGE 2 WEST, SAN BERNARDINO BASE AND MERIDIAN, IN THE CITY OF POWAY, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO THE UNITED STATES GOVERNMENT SURVEY, APPROVED NOVEMBER 19, 1880, DESCRIBED AS FOLLOWS: BEGINNING AT THE NORTHWEST CORNER OF THE SOUTHWEST QUARTER OF SAID SECTION 13; THENCE ALONG THE WESTERLY LINE OF SAID SOUTHWEST QUARTER SOUTH 00° 49' 00" WEST, 614.99 FEET TO THE MOST WESTERLY NORTHWEST CORNER OF LAND DESCRIBED IN DEED TO RUDOLPH WALTER MATZ, ET AL, RECORDED SEPTEMBER 13, 1956, IN BOOK 6255, PAGE 520 OF OFFICIAL RECORDS; THENCE ALONG THE BOUNDARY OF SAID MATZ'S LAND AS FOLLOWS: SOUTH 89° 08' 30" EAST, 733.99 FEET AND NORTH 01 ° 07' 00" EAST, 615.00 FEET TO THE NORTHERLY LINE OF THE SOUTHWEST QUARTER OF SAID SECTION 13; THENCE ALONG THE NORTHERLY LINE OF SAID SOUTHWEST QUARTER, NORTH 89° 08' 30" WEST TO THE POINT OF BEGINNING. PARCEL 2: AN EASEMENT FOR ROAD AND PUBLIC UTILITY PURPOSES, TO BE USED IN COMMON WITH OTHERS OVER, UNDER, ALONG, AND ACROSS A STRIP OF LAND 60 FEET WIDE IN THE NORTHWEST QUARTER OF THE SOUTHWEST QUARTER OF SECTION 13, TOWNSHIP 14 SOUTH, RANGE 2 WEST, SAN BERNARDINO MERIDIAN, IN THE COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO UNITED STATES GOVERNMENT SURVEY APPROVED, NOVEMBER 19, 1880, THE CENTER LINE OF SAID 60 FOOT STRIP BEING DESCRIBED AS FOLLOWS: BEGINNING AT THE SOUTHEASTERLY CORNER OF PARCEL 1 ABOVE; THENCE NORTHERLY ALONG THE EASTERLY LINE OF SAID PARCEL 1 AND THE NORTHERLY EXTENSION OF SAID EASTERLY LINE, 265 FEET TO THE SOUTH LINE OF THE NORTH 50 FEET OF THE SAID NORTHWEST QUARTER OF THE SOUTHWEST QUARTER OF SECTION 13. EXCEPTING THEREFROM THAT PORTION INCLUDED WITH PARCEL 1 ABOVE. APN: 317-472-06-00 882/012782-0020 s!f•Jr:i2!"15 '" -9- March 19, 2019 Item #3.1 882/012782-0020 sf9Jfj21 3/15/19 ATTACHMENT NO. 2A AREA SITE MAP ATTACHMENT2A March 19, 2019 Item #3.1 ATTACHMENT 28 PROPOSED SUBDIVISION MAP PROPOSED SUBDIVISION MAP P ·OWAY C ·OMl\lIONS ls '5;) RETAIL AREA -Approx 2 .3 gross acres [:::::;:;::1 AFFO RDABLE A REA -Approx 0.9 gross acres 111111 RES1DENTIALAREA-Approx 6 .1gross ac res 882/012782-0020 8~96J°32!31 15119 March 19, 2019 Item #3.1 ATTACHMENT NO. 3 SCOPE OF DEVELOPMENT (Total Project Site area includes approximately 9.6 gross acres) The Project will consist of: • A retail land area on the Retail Parcels comprising approximately 2.2 acres that could include approximately 25,000 square feet of retail. The Phase1 Retail Development Work shall include: (i) establishment of at least two legal lots defining the approximately 2.2 acre Retail Parcels area; (ii) completing remedial, rough and finish grading to an approved City plan, in accordance with compaction standards, (iii) installing wet and dry backbone utility services to ultimately service the future retail project, and (iv) stabilizing the Retail Parcels in accordance with the City's storm water standards. • A residential component that will include development of approximately 98 units of for-sale housing. All units are contemplated to be type V non-rate wood framed. Architectural style is "Gill/ Monterrey style," subject to City approval. The units are generally described as follows: o Approximately 38 units of two-story attached condominiums. Unit size generally ranges from 1400-1600 square footage. The units will be configured 2-3 bedrooms, with approximately 2.5 baths. Each unit will have an attached two-car garage. o Approximately 54 units configured in three-story buildings. Product consists of three-story attached buildings, containing two-story townhomes and flat condominiums. Unit size generally ranges from 1700-2200 square footage. The units will be configured 3 bedrooms/lofts with 2 to 3 baths. Each unit will have an attached two-car garage. o Approximately 6 units of three-story attached condominiums. Unit size generally ranges from 1300-1800 square footage. The units will be configured 2-3 bedrooms, 2.5 baths. Each unit will have an attached two- car garage. This product will include a small live/work space associated with the units along Poway Road. Land development consists of demolition of approximately 59,000 square feet of existing structures, grading and remediation of soils, installation of wet & dry utilities and surface improvements. 882/012782-0020 s:fs6r3~~3115/19 March 19, 2019 Item #3.1 ATTACHMENT NO. 4 SCHEDULE OF PERFORMANCE Task/Event Time for Performance 1. Open of Escrow 2. Developer submits tentative map application and Within 120 days of Escrow opening design review package. 3. After City staff approval* and within 60 days of Within 150 days of submittal said approval, City Council's approval of le ntative map and design review package. 4. Developer submits grading plan Within 30 days of tentative map and design review approval 5. City Staff approval of grading plans Within 120 days of submittal 6. Close of Escrow. Developer submits improvement Within 30 days of grading plan plans and final map. approval 7. Developer posts bonds for grading, pulls Within 30 days of Close of Escrow grading permit, and after City staff approval* commences grading. 8. Developer post bonds for improvement plans. City Within 150 days of submittal Staff approval* of public improvement plans. City after City staff approval Council approval offinal map after City staff approval. 9. Developer commences improvements and submtts Within 60 days of City's approval of residential building plans final map 10. Developer completes all public improvements Within 150 days of Developer start required in the public improvement plans and rough of improvements grading and for first phase of all residential and retail -, 11. Developer obtains building permits and commences Within 30 days after Developer's construction of first phase of Residential completion of first phase stte Development. improvements • City staff approval is contingent upon developer addressing all staff corrections. Developer hereby advises City that the residential units comprising the Residential Development are expected to sell at a rate of 4.0/ units per month. The pace of construction and completion of units after the first phase of the Residential Development will be commensurate with sales performance, bank covenants on sales, inventory, backlog and other lending guidelines as well as general economic conditions. 882/012782-0020 alf 9Jf"321'1151 " March 19, 2019 Item #3.1 882/012782-0020 aJ 98f32~3115 '" ATTACHMENT NO. 5 FORM OF CITY GRANT DEED [SEE ATTACHED] March 19, 2019 Item #3.1 RECORDING REQUESTED BY: AND WHEN RECORDED MAIL TO: (Space above for Recorder's Use Only) Documentary transfer tax $ _____ _ Computed on the consideration of the full value of property conveyed [Exempt from recorder's fee pursuant to Government Code Section 27383] The undersigned declares exemption under the following: Exempt from fee per Government Code Section 27388.1 (a)(2).1 (a)(2); recorded concurrently in connection with a transfer subject to the imposition of documentary transfer tax GRANT DEED For valuable consideration, the receipt of which is hereby acknowledged, the CITY OF POWAY, a California municipal corporation (the "City"), hereby grants to POWAY COMMONS, LLC, a Delaware limited liability company (the "Grantee"), the real property legally described in Exhibit "A" attached hereto and made a part hereof (the "Property"), subject to all matters of record and subject to the following: Grantee, on behalf of itself and its successors and assigns to all or any portion of the Property, covenants and agrees as follows: Section 1. Nondiscrimination Covenants. That there shall be no discrimination against or segregation of any person, or group of persons on any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision 882/012782-0020 5ij''Jf'32~3/15119 March 19, 2019 Item #3.1 (p) of Section 12955, and Section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Property, or any part thereof, nor shall Grantee, or any person claiming under or through him or her, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees of the Property, or any part thereof. The foregoing covenants shall run with the land. Section 2. Nondiscrimination Clauses in Agreements. Grantee agrees for itself and any successor in interest that Grantee shall refrain from restricting the rental, sale, or lease of any portion of the Property, or contracts relating to the Property, on the basis of race, color, creed, religion, sex, marital status, ancestry, or national origin of any person. All such deeds, leases or contracts shall contain or be subject to substantially the following nondiscrimination or nonsegregation clauses: i. In deeds: "The grantee herein covenants by and for himself or herself, his or her heirs, executors, administrators, and assigns, and all persons claiming under or through them, that there shall be no discrimination against or segregation of, any person or group of persons on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision {m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the premises herein conveyed, nor shall the grantee or any person claiming under or through him or her, establish or permit any practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the premises herein conveyed. The foregoing covenants shall run with the land." ii. In leases: "The lessee herein covenants by and for himself or herself, his or her heirs, executors, administrators, and assigns, and all persons claiming under or through him or her, 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 any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the leasing, subleasing, transferring, use, occupancy, tenure, or enjoyment of the premises herein leased nor shall the lessee himself or herself, or any person claiming under or through him or her, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy, of tenants, lessees, sublessees, subtenants, or vendees in the premises herein leased." iii. In contracts relating to the sale. transfer. or leasing of the land or any interest therein: "There shall be no discrimination against or segregation of, any person or group of persons on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and 882/012782-0020 af•&f"32~"' '" • -2- March 19, 2019 Item #3.1 Section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the premises which are the subject of this agreement, nor shall the grantee or any person claiming under or through him or her, establish or permit any practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the premises herein conveyed. The foregoing covenants shall run with the land." The foregoing nondiscrimination covenants shall remain in effect in perpetuity. IN WITNESS WHEREOF, the City has caused this Grant Deed to be executed by its authorized representative(s) on this_ day of , 20 City: CITY OF POWAY, a California municipal corporation By: _____________ _ Tina M. White, City Manager By execution below, Grantee accepts and agrees to be bound by all of the covenants, restrictions, and obligations set forth in this Grant Deed. Grantee: POWAY COMMONS, LLC, a Delaware limited liability company By: __________ _ Guy Asaro, Manager 882/012782-0020 d1!'96¥'32~3115119 -3- March 19, 2019 Item #3.1 A Notary Public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California ) County of _________ _ On ___________ , before me,------------ (insert name and title of the officer) Notary Public, personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENAL TY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature ____________ _ (Seal) A Notary Public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California ) County of _________ _ ) On ___________ , before me,------------ (insert name and title of the officer) Notary Public, personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENAL TY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature. ____________ _ (Seal) 882/012782-0020 s~·Jf'32~"'s"· March 19, 2019 Item #3.1 EXHIBIT "A" LEGAL DESCRIPTION OF PROPERTY Real property in the City of Poway, County of San Diego, State of California, described as follows: 882/012782-0020 9lf 9Jf"j2f"15 ' 19 March 19, 2019 Item #3.1 882/012782-0020 9Jf "Jf 32:i'3115/19 ATTACHMENT NO. 6 FORM OF MEMORANDUM OF AGREEMENT [SEE ATTACHED] March 19, 2019 Item #3.1 RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: City of Poway 13325 Civic Center Drive Poway, CA 92064 Attn: City Clerk (Space above for Recorder's Use Only) [Recordation of this Document is Exempt From Fees Payable to the Recorder Under Government Code Section 27383] CITY OF POWAY MEMORANDUM OF AGREEMENT (PURCHASE. SALE. AND DEVELOPMENT AGREEMENT) This MEMORANDUM OF AGREEMENT (PURCHASE, SALE, AND DEVELOPMENT AGREEMENT) ("Memorandum") is entered into as of this_ day of ____ , 2019, by and between POWAY COMMONS, LLC, a Delaware limited liability company (the "Developer") and the CITY OF POWAY, a California municipal corporation (the "City"). This Memorandum is made with reference to the following: 1. Developer is the owner in fee of that certain real property located in the City of Poway, County of San Diego, State of California, more particularly described in the legal description attached hereto as Exhibit "A" and incorporated herein by this reference ("Property"). 2. On or about , 2019, City and Developer entered into that certain Purchase, Sale, and Development Agreement ("PSDA") which provides for, among other things, Developer to develop a development with detached single family residential units and common area improvements and amenities to serve such units, and a retail development. 3. The PSDA provides City with (i) a right of first refusal to purchase the Property (or certain portions thereof) if Developer desires to sell the Property, and (ii) a right to purchase the retail portion of the Property on the occurrence of certain, specified events, all as more fully described in the PSDA. 4. The PSDA provides for City and Developer to enter into this Memorandum and to record the same in the Official Records of San Diego County, California, to provide notice to all persons of the existence of said PSDA, which PSDA is binding on Developer and Developer's successors-in-interest as to the Property. 882/012782-0020 s:i'"Jf:i:1,"''1,. March 19, 2019 Item #3.1 5. A copy of the PSDA is on file with the City Clerk of City and is available for inspection and copying by interested persons as a public record of City during the regular business hours of City. 6. This Memorandum may be executed in several counterparts, and all so executed shall constitute one agreement binding on both parties hereto, notwithstanding that both parties are not signatories to the original or the same counterpart. THIS MEMORANDUM OF AGREEMENT is dated as of , 20_, and has been executed on behalf of Developer and City by and through the signatures of their authorized representative(s) set forth below. This Memorandum of Agreement may be executed in counterparts and when fully executed each counterpart shall be deemed to be one original instrument. ATTEST: Faviola Medina, City Clerk APPROVED AS TO FORM: RUTAN & TUCKER, LLP Alan Fenstermacher, City Attorney 882/012782-0020 9J'&t°:i2!'" '119 -2- "City" CITY OF POWAY, a California municipal corporation By: Tina M. White, City Manager "Developer" POWAY COMMONS, LLC, a Delaware limited liability company By: Guy Asaro, Manager March 19, 2019 Item #3.1 A Notary Public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California ) County of _________ _ ) On ___________ , before me,------------ (insert name and title of the officer) Notary Public, personally appeared------------------ who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENAL TY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature. ____________ _ (Seal) A Notary Public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California County of _________ _ On ___________ , before me, ___________ _ (insert name and title of the officer) Notary Public, personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENAL TY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature. ____________ _ (Seal) 882/012782-0020 9lf'J¥':i21"1 " 1 ' March 19, 2019 Item #3.1 EXHIBIT "A" PROPERTY LEGAL DESCRIPTION Real property in the City of Poway, County of San Diego, State of California, described as follows: 882/012782-0020 9~9c5f'32!""'19 March 19, 2019 Item #3.1 882/012782-0020 9lf'Jf'32~3/15119 ATTACHMENT NO. 7 CITY NOTE [SEE ATTACHED] March 19, 2019 Item #3.1 PROMISSORY NOTE SECURED BY DEED OF TRUST $1,700,000 Poway, California ______ , 2019 (the "Note Date") FOR VALUE RECEIVED, the undersigned ("Maker") promises to pay to the CITY OF POWAY, a California municipal corporation ("Holder"), at 13325 Civic Center Drive, Poway, CA 92064, or at such other address as Holder may direct from time to time in writing, One Million Seven Hundred Thousand Dollars ($1,700,000) (the "Note Amount"), together with interest thereon as hereafter set forth. All sums hereunder shall be payable in lawful money of the United States of America. This Promissory Note Secured by Deed of Trust (the "Promissory Note" or "Note") is secured by a Deed of Trust with Assignment of Rents and Rider to Deed of Trust Attached Hereto of even date herewith, executed by Maker as Trustor in favor of Holder as Beneficiary (the "Deed of Trust"). 1. Purchase, Sale, and Development Agreement. This Promissory Note is made and delivered pursuant to and in implementation of that certain Purchase, Sale, and Development Agreement entered into between Holder and Maker on or about _______ , 2019 (the "Agreement"), a copy of which is on file as a public record with Holder and is incorporated herein by reference. Pursuant to the terms of the Agreement, Holder sold to Maker certain real property located at in the City of Poway, County of San Diego, State of California (the "Property"), for a purchase price of Six Million Four Hundred Twenty Thousand Five Hundred Dollars ($6,420,500).(the "Purchase Price"). At the close of the escrow under the Agreement, Maker paid to Holder a portion of the Purchase Price, in the amount of Four Million Seven Hundred Twenty Thousand Five Hundred Dollars ($4,720,500), in cash. Holder agreed to loan to Maker the balance of the Purchase Price, which is the Note Amount. 2. Interest. Interest on the Note Amount shall accrue at the "Applicable Rate", which shall be the sum of (i) the rate published by the United States Department of the Treasury, as the interest rate for its Five-Year Treasury Bill, plus (ii) two and one- quarter percent (2.25%), compounded monthly. With respect to repayment of the Note Amount, the Applicable Rate shall be determined on the date that is fourteen (14) days prior to the date such repayment is due. 3. Time and Amount of Payment. The Note Amount, and all accrued interest thereon, shall be paid on the fourth (4 1h) anniversary of the Note Date. 4. Default Rate. Any amounts (including but not limited to amounts of principal and interest on the Note Amount) which Maker does not pay when otherwise due under the terms of this Note, shall bear interest at the rate of the lesser of ten percent (10%) or the maximum rate allowed per law per annum ("Default Rate"), simple interest, from the date which is ten (10) days after such amount would otherwise be due until the date paid. 882/012782-0020 9f 9c5f32:f 3115119 March 19, 2019 Item #3.1 5. Events of Acceleration. The entire outstanding principal balance of this Note, together with any outstanding interest and other amounts payable hereunder, shall, at the election of Holder and upon notice to Maker thereof, become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by Maker, if: a. Notwithstanding the payment terms set forth in Section 3 above, upon the occurrence of any "Event of Default" as set forth in Section 10 below; or b. Maker effects an assignment of this Note and/or sells or transfers any or all of its interests in the Property in violation of the terms and conditions of the Agreement. 6. Security for Note. This Promissory Note is secured by the Deed of Trust. 7. Prepayment of Note. Maker may prepay all or any portion of the outstanding principal or interest due under this Note to Holder without penalty. 8. Holder May Assign. Holder may, at its option and without obtaining the consent of Maker, assign its right to receive payment under this Promissory Note. 9. Maker Assignment. In no event shall Maker assign or transfer any portion of the Property or this Promissory Note except in compliance with the terms and conditions of the Agreement. Any assignment prohibited by this Section 9 shall be null and void. 10. Events of Default. The occurrence of any of the following shall, after the giving of any notice and expiration of any applicable cure period as described herein, constitute an event of default by Maker hereunder ("Event of Default"): a. The failure of Maker to pay or perform any monetary covenant or obligation under the terms of this Note without curing such failure within ten (10) days after receipt of written notice of such default from Holder (or from any party authorized by Holder to deliver such notice as identified by Holder in writing to Maker); b. The failure of Maker to perform any non-monetary covenant or obligation under this Note or the Deed of Trust without curing such failure within thirty (30) days after receipt of written notice of such default from Holder (or from any party authorized by Holder to deliver such notice as identified by Holder in writing to Maker) specifying the nature of the event or deficiency giving rise to the default and the action required to cure such deficiency. Provided, however, that if any default with respect to a non-monetary obligation is such that it cannot be cured within a thirty (30) day period, it shall be deemed cured if Maker commences the cure within said thirty (30) day period and diligently prosecutes such cure to completion thereafter. Notwithstanding anything herein to the contrary, the herein described notice requirements and cure periods shall not apply to any Event of Default described in Sections 10(c) or 10(d) below; 882/012782-0020 gif96¥'32!'115/19 -2-March 19, 2019 Item #3.1 c. Maker shall (i) apply for or consent to the appointment of a receiver, trustee, liquidator or custodian or the like of its property, (ii) fail to pay or admit in writing its inability to pay its debts generally as they become due, (iii) make a general assignment for the benefit of creditors, (iv) be adjudicated bankrupt or insolvent or (v) commence a voluntary petition that is not withdrawn within ten (10) days of the filing thereof or answer seeking an arrangement with creditors or an order for relief or seeking to take advantage of any insolvency law or file an answer admitting the material allegations of a petition filed against it in any bankruptcy or insolvency proceeding; d. If without the application, approval or consent of Holder, a proceeding shall be instituted in any court of competent jurisdiction, under any law relating to bankruptcy, in respect of Holder, for an order for relief or an adjudication in bankruptcy, a composition or arrangement with creditors, a readjustment of debts, the appointment of a trustee, receiver, liquidator or custodian or the like of Holder or of all or any substantial part of Holder's assets, or other like relief in respect thereof under any bankruptcy or insolvency law, and, if such proceeding is being contested by Holder, in good faith, the same shall (i) result in the entry of an order for relief or any such adjudication or appointment, or (ii) continue undismissed, or pending and unstayed, for any period of ninety (90) consecutive days; or e. Maker shall be in default under any of the terms of any loan obtained by Maker that is secured by the Property, unless the default is cured within the cure period, if any, applicable thereto under the terms and obligation which is in default. f. Maker shall be in default under any of the terms of the Agreement, unless the default is cured within the cure period, if any, applicable thereto under the Agreement. 11. Holder Remedies. Upon the occurrence and during the continuance of an Event of Default hereunder, Holder may, in its sole discretion, take any one or more of the following actions: a. Declare the entire then unpaid outstanding balance due under this Note immediately due and payable, and the same shall become due and payable without further demand, protest or further notice of any kind, all of which are expressly waived. Upon such declaration, outstanding principal and (to the extent permitted by law) interest and any other sums outstanding in connection with this Note shall thereafter bear interest at the Default Rate, payable from the date of such declaration until paid in full; b. Take any and all actions and do any and all things which are allowed, permitted or provided by law, in equity or by statute, in the sole discretion of Holder, to collect the amounts then due and thereafter to become due hereunder, to exercise its rights under the Deed of Trust, and to enforce performance and observance of any obligation, agreement or covenant of Maker under this Note; No remedy herein conferred upon or reserved to Holder is intended to be exclusive of any other available remedy or remedies, but each such remedy shall be cumulative 882/012782-0020 9§'96f'32~3115119 -3- March 19, 2019 Item #3.1 and shall be in addition to every other remedy given under this Note or now existing at law or in equity or by statute; and may be exercised in such number, at such times and in such order as Holder may determine in its sole discretion. No delay or omission to exercise any right or power upon the occurrence of any Event of Default hereunder shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient by Holder. In order to entitle Holder to exercise any right or remedy reserved to it under this Note, no notice shall be required except as expressly provided herein. 12. Agreement to Pay Attorneys' Fees and Expenses. In the event that Holder brings any action or files any proceeding in connection with the enforcement of its rights under this Note or the Deed of Trust, as a consequence of any breach by Maker of its obligations hereunder or thereunder, the prevailing party in such action or proceeding shall be entitled to have its reasonable attorneys' fees and out-of-pocket expenditures paid by the losing party. The attorneys' fees so recovered shall include fees for prosecuting or defending any appeal and shall be awarded for any supplemental proceedings until the final judgment is satisfied in full. In addition to the foregoing award of attorneys' fees, the prevailing party in any lawsuit on this Note or the Deed of Trust shall also be entitled to its reasonable attorneys' fees incurred in any post judgment proceedings to collect or enforce the judgment. In addition to the foregoing, Maker agrees to pay or reimburse Holder, upon demand by Holder, for all costs incurred by Holder in connection with enforcement of this Note or the Deed of Trust, including without limitation, reasonable attorneys' fees and costs, if there shall be filed by or against Maker any proceedings under any federal or state bankruptcy or insolvency laws, whether Holder is a creditor in such proceedings or otherwise. 13. Amendments. This Note may not be modified or amended except by an instrument in writing expressing such intention executed by the parties sought to be bound thereby, which writing must be so firmly attached to this Note so as to become a permanent part thereof. 14. Maker's Waivers. Maker waives any rights to require the Holder to: (a) demand payment of amounts due (known as "presentment"), (b) give notice that amounts due have not been paid (known as "notice of dishonor"), and (c) obtain an official certification of nonpayment (known as "protest"). 15. Notice. Any notice that must be given to Maker under this Note shall be in writing and shall be effective when personally delivered or delivered by reputable overnight courier that provides a receipt with the date and time of delivery, or forty-eight (48) hours after deposit in the United States Mail, as certified or registered mail, return receipt requested, first-class postage and fees prepaid, addressed to Maker at: City of Poway, 13325 Civic Center Drive, Poway, CA 92064, Attn: , or such other address as Maker shall direct from time to time in writing, and to Holder at Holder's address stated in the preamble to this Note. Failure or delay in giving any notice required hereunder shall not constitute a waiver of any default or late payment, nor shall ii change the time for any default or payment. 882/012782-0020 1!fo2lJt:i13'15'" -4-March 19, 2019 Item #3.1 16. Successors Bound. This Promissory Note shall be binding upon the parties hereto and their respective heirs, successors and assigns. 17. Severability. The invalidity or unenforceability of any one or more provisions of this Note will in no way affect any other provisions. 18. Interpretation. Whenever the context requires, all words used in the singular will be construed to have been used in the plural, and vice versa, and each gender will include any other gender. The captions of the paragraphs of this Note are for convenience only and do not define or limit any terms or provisions. Time is of the essence in the performance of this Note by Maker. Maker has been represented by counsel in the negotiation of this Note, and it shall not be interpreted in favor of or against any party on account of relative responsibilities in drafting. Notwithstanding any other provision of this Note, nothing in this Section 18 or elsewhere in this Note shall be deemed to require Maker to pay interest in an amount in excess of any applicable usury law or other legal limitation on interest, and the terms of this Note shall be interpreted to require in each instance the lesser of (a) the amount stated in this Note, and (b) the maximum applicable legal limit. 19. No Waiver; Consents. Any waiver by Holder must be in writing and will not be construed as a continuing waiver. No waiver will be implied from any delay or failure by Holder to take action on account of any default of Maker. Consent by Holder to any act or omission by Maker will not be construed to be a consent to any other or subsequent act or omission or to waive the requirements for Holder's consent to be obtained in any future or other instance. 20. Governing Law. This Note shall be governed by the internal laws of the State of California without regard to conflict of law principles. [End -Signature Page Follows] 882/012782-0020 1ll't2~1:i13''5/19 -5- March 19, 2019 Item #3.1 IN WITNESS WHEREOF, Maker has executed this Promissory Note. "Maker" POWAY COMMONS, LLC, a Delaware limited liability company By: Guy Asaro, Manager 882/012782-0020 1!1'22 ~{313"'119 -6- Dated: ------------ March 19, 2019 Item #3.1 882/012782-0020 1 !l'f tl'l:113'15119 ATTACHMENT NO. 8 CITY DEED OF TRUST [SEE ATTACHED] March 19, 2019 Item #3.1 RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: City of Poway 13325 Civic Center Drive Poway, California 92064 Attn: Cit Clerk (Space Above This Line For Recorder's Use) (Exempt From Recording Fees Pursuant To Government Code Section 27383) DEED OF TRUST WITH ASSIGNMENT OF RENTS AND RIDER ATTACHED HERETO NOTE: RIDER ATTACHED TO THIS DEED OF TRUST CONTAINING TERMS INCLUDING SECURITY AGREEMENT AND FIXTURE FILING. This DEED OF TRUST WITH ASSIGNMENT OF RENTS AND RIDER ATTACHED HERETO ("Deed of Trust"), is made , 2019, between POWAY COMMONS, LLC, a Delaware limited liability company, herein called TRUSTOR, whose address is , FIRST AMERICAN TITLE INSURANCE COMPANY, a California corporation, herein called TRUSTEE, and CITY OF POWAY, a California municipal corporation, herein called BENEFICIARY. WITNESSETH: That Truster grants to Trustee in trust, with power of sale, Truster's estate, dated on or about the date hereof, in that property in the City of Poway, County of San Diego, State of California, described in Exhibit "A" (the "Property"), together with the rents, issues and profits thereof, subject, however, to the right, power and authority hereinafter given to and conferred upon Beneficiary to collect and apply such rents, issues and profits for the purpose of securing (1) payment of the sum of ONE MILLION SEVEN HUNDRED THOUSAND DOLLARS ($1,700,000), with interest thereon according to the terms of a promissory note or notes of even date herewith made by Truster, payable to order of Beneficiary, and extensions or renewals thereof; (2) the performance of each agreement of Truster incorporated by reference or contained herein; and (3) payment of additional sums and interest thereon which may hereafter be loaned to Truster, or its successors or assigns, when evidenced by a promissory note or notes reciting that they are secured by this Deed of Trust. To protect the security of this Deed of Trust, and with respect to the Property above described, Truster expressly makes each and all of the agreements, and adopts and agrees to perform and be bound by each and all of the terms and provisions set forth in subdivision A, and it is mutually agreed that each and all of the terms and provisions set forth in subdivision B of the fictitious deed of trust recorded in Orange County August 17, 1964, and in all other counties August 18, 1964, in the book and at the page of Official 882/012782-0020 1!f42~1:i1!"'" March 19, 2019 Item #3.1 Records in the office of the county recorder of the county where said property is located, noted below opposite the name of such county, namely: COUNTY BOOK PAGE COUNTY BOOK PAGE COUNTY BOOK PAGE COUNTY BOOK PAGE Alameda 1288 556 Kings 858 713 Placer 1028 379 Sierra 38 187 Alpine 3 130-31 Lake 437 110 Plumas 166 1307 Siskiyou 506 762 Amador 133 438 Lassen 192 367 Riverside 3778 347 Solano 1287 621 Butte 1330 513 Los Angeles T-3878 874 Sacramento 5039 124 Sonoma 2067 427 Calaveras 185 338 Madera 911 136 San Benito 300 405 Stanislaus 1970 56 Colusa 323 391 Marin 1849 122 San Bernardino 6213 768 Sutter 655 585 Contra Costa 4684 1 Mariposa 90 453 San Francisco A-804 596 Tehama 457 183 Del Norte 101 549 Mendocino 667 99 San Joaquin 2855 283 Trinity 108 595 El Dorado 704 635 Merced 1660 753 San Luis Obispo 1311 137 Tulare 2530 108 Fresno 5052 623 Modoc 191 93 San Mateo 4778 175 Tuolumne 177 160 Glenn 469 76 Mono 69 302 Santa Barbara 2065 881 Ventura 2607 237 Humboldt 801 83 Monterey 357 239 Santa Clara 6626 664 Yolo 769 16 Imperial 1189 701 Napa 704 742 Santa Cruz 1638 607 Yuba 398 693 Inyo 165 672 Nevada 363 94 Shasta 800 633 Kern 3756 690 Orange 7182 18 San Diego SERIES 5 Book 1964, Page 149774 shall inure to and bind the parties hereto, with respect to the property above described. Said agreements, terms and provisions contained in said subdivisions A and B (identical in all counties, and printed on pages 3 and 4 hereof) are by the within reference thereto, incorporated herein and made a part of this Deed of Trust for all purposes as fully as if set forth at length herein, and Beneficiary may charge for a statement regarding the obligation secured hereby, provided the charge therefor does not exceed the maximum allowed by law. The undersigned Truster, requests that a copy of any notice of default and any notice of sale hereunder be mailed to him at his address hereinbefore set forth. SEE RIDERS ATTACHED TO THIS DEED OF TRUST By: POWAY COMMONS, LLC, a Delaware limited liability company By: Guy Asarao, Manager 882/012782-0020 11fs2g'f31f 15119 -2- March 19, 2019 Item #3.1 A Notary Public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California ) County of _________ _ ) On ___________ , before me,------------ (insert name and title of the officer) Notary Public, personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENAL TY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature ____________ _ (Seal) 882/012782-0020 1lfs2~/313"5 ' 19 March 19, 2019 Item #3.1 DO NOT RECORD The following is a copy of Subdivisions A and B of the fictitious Deed of Trust recorded in each county in California as stated in the foregoing Deed of Trust and incorporated by reference in said Deed of Trust as being a part thereof as if set forth at length therein. A. To protect the security ofthis Deed of Trust, Trustor agrees: I) To keep said property in good condition and repair, not to remove or demolish any building thereon; to complete or restore promptly and in a good and workmanlike manner any building which may be constructed, damaged or destroyed thereon and to pay when due all claims for labor perfonned and materials furnished therefor, to comply with all laws affecting said property or requiring any alterations or improvements to be made thereon; not to commit or pennit waste thereof; not to commit, suffer or pennit any act upon said property in violation of law; to cultivate, irrigate, fertilize, fumigate, prune and do all other acts which from the character or use of said property may be reasonably necessary, the specific enumerations herein not excluding the general. 2) To provide, maintain and deliver to Beneficiary fire insurance satisfactory to and with loss payable to Beneficiary The amount collected under any fire or other insurance policy may be applied by Beneficiary upon any indebtedness secured hereby and in such order as Beneficiary may determine, or at the option of Beneficiary the entire amount so collected or any part thereof may be released to Trustor. Such application or release shall not cure or waive any default or notice of default hereunder or invalidate any act done pursuant to such notice. 3) To appear in and defend any action or proceeding purporting to affect the security hereof or the rights or powers of Beneficiary or Trustee; and to pay all costs and expenses, including cost of evidence of title and attorney's fees in a reasonable sum, in any such action or proceeding in which Beneficiary or Trustee may appear, and in any suit brought by Beneficiary to foreclose this Deed. 4) To pay: at least ten ( JO) days before delinquency all taxes and assessments affecting said property, including assessments on appurtenant water stock; when due, all encumbrances, charges and liens, with interest, on said property or any part thereof, which appear to be prior or superior hereto; all costs, fees and expenses of this Trust Should Trustor fail to make any payment or to do any act as herein provided, then Beneficiary or Trustee, but without obligation so to do and without notice to or demand upon Trustor and without releasing Trustor from any obligation hereof, may: make or do the same in such manner and to such extent as either may deem necessary to protect the security hereof, Beneficiary or Trustee being authorized to enter upon said property for such purposes; appear in and defend any action or proceeding purporting to affect the security hereof or the rights or powers of Beneficiary or Trustee; pay, purchase, contest or compromise any encumbrance, charge or lien which in the judgment of either appears to be prior or superior hereto; and, in exercising any such powers, pay necessary expenses, employ counsel and pay his or her reasonable fees. 5) To pay immediately and without demand all sums so expended by Beneficiary or Trustee, with interest from the date of expenditure at the amount allowed by law in effect at the date hereof, and to pay for any statement provided for by law in effect at the date hereof regarding the obligation secured hereby any amount demanded by the Beneficiary not to exceed the maximum allowed by law at the time when said statement is demanded. B It is mutually agreed: I) That any award in connection with any condemnation for public use ofor injury to said property or any part thereof is hereby assigned and shall be paid to Beneficiary who may apply or release such moneys received by him in the same manner and with the same effect as above provided for disposition of proceeds of fire or other insurance 2) That by accepting payment of any sum secured hereby after its due date, Beneficiary does not waive its right either to require prompt payment when due of all other sums so secured or to declare default for failure so to pay. 3) That at any time or from time to time, without liability therefor and without notice, upon \',Titten request of Beneficiary and presentation of this Deed and said note for endorsement, and without affecting the personal liability of any person for payment of the indebtedness secured hereby, Trustee may: reconvey any part of said property; consent to the making of any map or plat thereof; join in granting any easement thereon, or join in any extension agreement or any agreement subordinating the lien or charge hereof. 4) That upon \',Titten request of Beneficiary stating that all sums secured hereby have been paid, and upon surrender of this Deed and said note to Trustee for cancellation and retention or other disposition as Tmstee in its sole discretion may choose and upon payment of its fees, Trustee shall reconvey, without v.arranty, the property then held hereunder. The recitals in such reconveyance of any matters or facts shall be conclusive proof of the truthfulness thereof. The Grantee in such reconveyance may be described as "the person or persons legally entitled thereto" 5) That as additional security, Trustor hereby gives to and confers upon Beneficiary the right, power and authority, during the continuance of these Trusts, to collect the rents, issues and profits of said property, reserving unto Trustor the right, prior to any default by Trustor in payment of any indebtedness secured hereby or in the performance of any agreement hereunder, to collect and retain such rents, issues and profits as they become due and payable. Upon any such default (beyond any applicable cure period, and during the continuance of such default), Beneficiary may at any time without notice, either in person, by agent, or be a receiver to be appointed by a court, and without regard to the adequacy of any security for the indebtedness hereby secured, enter upon and take possession of said property or any part thereof, in its own name 882/012782-0020 1!lfl:\'l:i13'"11 ' March 19, 2019 Item #3.1 sue for or othenvise collect such rents, issues, and profits, includmg those past due and unpaid, and apply the same, less costs and expenses of operation and collection, including reasonable attorney's fees, upon any indebtedness secured hereby, and in such order as Beneficiary may determine. The entering upon and taking possession of said property, the collecting of such rents, issues and profits and the application thereof as aforesaid, shall not cure or waive any default or notice of default hereunder or invalidate any act done pursuant to such notice. 6) That upon default by Trustor in payment of any indebtedness secured hereby or in the perfonnance of any agreement hereunder, Beneficiary may declare all sums secured hereby immediately due and payable by delivery to Trustee of written declaration of default and demand for sale and of written notice of default and of election to cause to be sold said property, which notice Trustee shall cause to be filed for record. Beneficiary also shall deposit "'ith Trustee this Deed, said note and alt documents evidencing expenditures secured hereby. After the lapse of such time as may then be required by law following the recordation of said notice of default, and notice of sale having been given as then required by law, Trustee, without demand on Trustor, shall sell said property at the time and place fixed by it in said notice of sale, either as a whole or in separate parcels, and in such order as it may detennine, at public auction to the highest bidder for cash in lawful money ofthe United States, payable at time of sale. Trustee may postpone sale of all or any portion of said property by public announcement at such time and place of sale, and from time to time thereafter may postpone such sale by public announcement at the time fixed by the preceding postponement. Trustee shall deliver to such purchaser its deed conveying the property so sold, but without any covenant or warranty, express or implied. The recitals in such deed of any matters or facts shall be conclusive proof of the truthfulness thereof. Any person, including Trustor, Trustee, or Beneficiary as hereinafter defined, may purchase at such sale. After deducting all costs, fees and expenses of Trustee and of this Trust, including cost of evidence of title in connection with sale, Trustee shall apply the proceeds of sale to payment of: all sums expended under the terms hereof, not then repaid, with accrued interest at the amount allowed by law in effect at the date hereof; alt other sums then secured hereby; and the remainder, if any, to the person or persons legally entitled thereto. 7) Beneficiary, or any successor in ovmership of any indebtedness secured hereby, may from time to time, by instrument in \',Titing, substitute a successor or successors to any Trustee named herein or acting hereunder, which instrument, executed by the Beneficiary and duly acknowledged and recorded in the office of the recorder of the county or counties where said property is situated shall be conclusive proof of proper substitution of such successor Trustee or Trustees, who shall, without conveyance from the Trustee predecessor, succeed to all its title, estate, rights, powers and duties. Said instrument must contain the name of the original Trustor, Trustee and Beneficiary hereunder, the book and page where this Deed is recorded and the name and address of the new Trustee 8) That this Deed applies to, inures to the benefit of, and binds all parties hereto, their heirs, legatees, devisees, administrators, executors, successors and assigns. The term Beneficiary shall mean the owner and holder, including pledgees, of the note secured hereby, whether or not named as Beneficiary herein. In this Deed, whenever the context so requires, the masculine gender includes the feminine and/or neuter, and the singular number includes the plural. 9) That Trustee accepts this Trust when this Deed, duly executed and acknowledged, is made a public record as provided by Jaw. Trustee is not obligated to notify any party hereto of pending sale under any other Deed of Trust or of any action or proceeding in which Trustor, Beneficiary or Trustee shall be a party unless brought by Trustee. DO NOT RECORD REQUEST FOR FULL RECONVEY ANCE TO ____________ , TRUSTEE: The undersigned is the legal mvner and holder of the note or notes and of all indebtedness secured by the foregoing Deed of Trust. Said note or notes, together with all other indebtedness secured by said Deed ofTrust, have been fully paid and satisfied; and you are hereby requested and directed, on payment to you of any sums owing to you under the tenns of said Deed of Trust, to cancel said note or notes above mentioned, an all other evidences of indebtedness secured by said Deed of Trust delivered to you herewith, together v..ith the said Deed of Trust, and to reconvey, without warranty, to the parties designated by the terms of said Deed of Trust, all the estate now held by you under the same Dated ________________ _ Please mail Deed of Trust, Note and Reconveyance to __________________________________ _ Do Not lose or destroy this Deed of Trust OR THE NOTE which it secures. Both must be delivered to the Trustee for cancellation before reconveyance will be made. 882/012782-0020 1rfs2~t?313''s,,9 -2- March 19, 2019 Item #3.1 Exhibit A LEGAL DESCRIPTION OF PROPERTY Real property in the City of Poway County of San Diego, State of California, described as follows: 882/012782-0020 1!1'02~1313'1 " 19 March 19, 2019 Item #3.1 RIDER TO DEED OF TRUST WITH ASSIGNMENT OF RENTS This RIDER TO DEED OF TRUST WITH ASSIGNMENT OF RENTS ("Rider") is executed this day of , 2019, by POWAY COMMONS, LLC, a Delaware limited liability company, herein "Trustor," in favor of the CITY OF POWAY, a California municipal corporation, herein "Beneficiary," the same parties to that certain form Deed of Trust With Assignment of Rents, of even date hereto, to which this Rider is attached. This Rider is made a part of and is incorporated into said Deed of Trust. This Rider shall supersede any conflicting term or provision of the form Deed of Trust to which it is attached. Reference is made to that certain Promissory Note executed by Trustor on or about the date set forth above, the repayment of which by Trustor is secured by this Deed of Trust ("City Note") The parties hereto agree: 1. Property. The estate subject to this Deed of Trust is Trustor's fee estate in the real property legally described in the foregoing Deed of Trust to which this Rider is attached (the "Property"). 2. Obligations Secured. Trustor makes this grant and assignment for the purpose of securing the following obligations ("Secured Obligations"): a. Payment to Beneficiary of all indebtedness at any time owing under the terms of the City Note; b. Payment and performance of all obligations of Trustor under this Deed of Trust; c. All modifications, extensions and renewals of any of the obligations secured hereby, however evidenced. 3. Obligations. The term "obligations" is used herein in its broadest and most comprehensive sense and shall be deemed to include, without limitation, all interest and charges, prepayment charges, late charges and fees at any time accruing or assessed on any of the Secured Obligations. 4. Incorporation. All terms of the City Note and the Secured Obligations are incorporated herein by this reference. All persons who may have or acquire an interest in the Property shall be deemed to have notice of the terms of all of the foregoing documents. 5. Mortgagee-in-Possession. Neither the assignment of rents set forth in the Deed of Trust nor the exercise by Beneficiary of any of its rights or remedies hereunder shall be deemed to make Beneficiary a "mortgagee-in-possession" or otherwise liable in any manner with respect to the Property, unless Beneficiary, in person or by agent, assumes actual possession thereof. Nor shall appointment of a receiver for the Property 882/012782-0020 H0ifll'l:i13'"'" March 19, 2019 Item #3.1 by any court at the request of Beneficiary or by agreement with Trustor, or the entering into possession of the Property by such receiver, be deemed to make Beneficiary a "mortgagee-in-possession" or otherwise liable in any manner with respect to the Property. 6. No Cure. In the event Beneficiary collects and receives any rents under the Deed of Trust upon any default hereof, such collection or receipt shall in no way constitute a curing of the default, except if and to the extent the same are sufficient to cure all monetary defaults and no other defaults then exist. 7. Possession Upon Default. Upon the occurrence of and during the continuation of a default, Beneficiary, after having given notice and the applicable cure periods having expired with the default having not been cured (hereinafter, a "default"), may, at its option, without any action on its part being required and without in any way waiving such default, take possession of the Property in accordance with applicable law and have, hold, manage, lease and operate the same, on such terms and for such period of time as Beneficiary may deem proper, and may collect and receive all rents and profits, with full power to make, from time to time, all commercially reasonable alterations, renovations, repairs or replacements thereto as may seem proper to Beneficiary, and to apply such rents and profits to the payment of (a) the cost of all such alterations, renovations, repairs and replacements, and all costs and expenses incident to taking and retaining possession of the Property, and the management and operation thereof, and keeping the same properly insured; (b) all taxes, charges, claims, assessments, and any other liens which may be prior in lien or payment of the City Note, and premiums for insurance, with interest on all such items; and (c) the indebtedness secured hereby, together with all costs and attorney's fees, in such order or priority as to any of such items as Beneficiary in its sole discretion may determine, any statute, law, custom or use to the contrary notwithstanding. Any amounts received by Beneficiary or its agents in the performance of any acts prohibited by the terms of this assignment, including, but not limited to, any amounts received in connection with any cancellation, modification or amendment of any lease prohibited by the terms of this assignment and any rents and profits received by Trustor after the occurrence of a default shall be held by Trustor as trustee for Beneficiary and all such amounts shall be accounted for to Beneficiary and shall not be commingled with other funds of the Trustor. Any person receiving any portion of such trust funds shall receive the same in trust for Beneficiary as if such person had actual or constructive notice that such funds were impressed with a trust in accordance therewith. 8. Receiver. In addition to any and all other remedies of Beneficiary set forth under this Deed of Trust or permitted at law or in equity, if a default shall have occurred and not have been cured within any applicable cure period, Beneficiary, to the extent permitted by law and without regard to the value, adequacy or occupancy of the security for the Note and other sums secured hereby, shall be entitled as a matter of right if it so elects to the appointment of a receiver to enter upon and take possession of the Property and to collect all rents and profits and apply the same as the court may direct, and such receiver may be appointed by any court of competent jurisdiction by ex parte application and without notice, notice of hearing being hereby expressly waived. The expenses, 882/012782-0020 1'f 12lJ/~13" 5119 -2- March 19, 2019 Item #3.1 including receiver's fees, attorneys' fees, costs and agent's compensation, incurred pursuant to the power herein contained shall be secured by this Deed of Trust. 9. Notice to Beneficiary. Notices to Beneficiary shall be sent to Beneficiary addressed to: City of Poway 13325 Civic Center Drive Poway, CA 92064 Attn: City Clerk [End -Signature page follows] 882/012782-0020 H"!fiJ/313'1511 ' -3- March 19, 2019 Item #3.1 IN WITNESS WHEREOF, Truster has executed this Rider on the date of Truster's acknowledgment herein below, to be effective for all purposes as of the day and year first set forth above. Dated: -------~-· 2019 882/012782-0020 H0:l'~l313'1 " 19 -4- POWAY COMMONS, LLC, a Delaware limited liability company By: Guy Asaro, Manager March 19, 2019 Item #3.1 Poway Commons, LLC Preliminary Project Cost Budget I. Project Description Site Area Average Unit Size Number of Units Future Retail Pads II. Development Costs A. Direct Costs Site Improvements Direct Vertical Construction Other/Contingency Total Direct Costs B. Indirect Costs Engineering Permits & Fees ATTACHMENT NO. 9 PROJECT BUDGET Other Soft Costs (Prop Tax, Title, Escrow, Bonding) G&A Selling & Marketing Costs Other Indirects Total Indirect Costs C. Financing Costs D. Developer Land Cost E. Total Development Costs 9.30 Acres 1,721 SF 98 Units 2.30 Acres $6,451,000 $20,100,034 $2,340,260 $28,891,294 $1,092,000 $2,205,000 $1,335,667 $2,376,340 $5,391,933 $950,000 $13,350,939 $2,233,416 $8,300,000 $52,775,649 *These are preliminary budget estimates based on preliminary site plans. Subject to change with entitlement, project conditions and approved plans. 882/012782-0020 H042 H'l:i13'1 " 19 March 19, 2019 Item #3.1 882/012782-0020 1'¥'5"~1~13''5/19 ATTACHMENT NO. 10 FORM OF RELEASE OF CONSTRUCTION COVENANTS [SEE ATTACHED] March 19, 2019 Item #3.1 RECORDING REQUESTED BY: AND WHEN RECORDED MAIL TO: (Space above for Recorder's Use Only) CITY OF POWAY RELEASE OF CONSTRUCTION COVENANTS A. POWAY COMMONS, LLC, a Delaware limited liability company ("Developer"), is the owner of fee title to that certain real property legally described in Exhibit "A" attached hereto and incorporated herein by reference (the "Site"); and B. By a Purchase, Sale, and Development Agreement (hereinafter referred to as the "Agreement") dated , 2019, by and between Developer and the City of Poway, a California municipal corporation ("City"), the Developer has redeveloped the Site in accordance with the Agreement; and C. Pursuant to Section 5.13 of the Agreement, promptly after Developer's completion of the "Project" (as that term is defined in the Agreement) upon the Site, and upon request by Developer, City shall furnish Developer with a Release of Construction Covenants in such form as to permit it to be recorded in the Official Records of the County of San Diego; and D. The issuance by City of the Release of Construction Covenants shall be conclusive evidence that Developer has complied with the terms of the Agreement pertaining to the development of the Site; and E. Developer has requested that City furnish Developer with the Release of Construction Covenants; and F. City has conclusively determined that the development of the Site has been satisfactorily completed as required by the Agreement. NOW, THEREFORE: 882/012782-0020 H"s2~1:if3'1s'" March 19, 2019 Item #3.1 1. As provided in the Agreement, City does hereby certify that development of the Site has 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 Developer 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. 3. This Release of Construction Covenants is not a Notice of Completion as referred to in California Civil Code Section 3093. 4. Except as stated herein, nothing contained in this instrument shall modify in any way any other provisions of the Agreement or any other provisions of any agreements or documents referenced therein. IN WITNESS WHEREOF, City has executed this Release of Construction Covenants as of this~-day of , 20 . City Manager, City of Poway ATTEST: City Clerk, City of Poway 882/012782-0020 H'f~/313'"11 • -2- March 19, 2019 Item #3.1 A Notary Public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California ) County of _________ _ On ___________ , before me,------------ (insert name and title of the officer) Notary Public, personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENAL TY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature ____________ _ (Seal) A Notary Public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California County of _________ _ On ___________ , before me,------------ (insert name and title of the officer) Notary Public, personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENAL TY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature. ____________ _ (Seal) March 19, 2019 Item #3.1 EXHIBIT "A" LEGAL DESCRIPTION OF PROPERTY Real property in the City of Poway, County of San Diego, State of California, described as follows: 882/012782-0020 i1/'g'g'/~13''5/19 March 19, 2019 Item #3.1 Exhibit C to City Resolution PROPERTY EXCHANGE IMPLEMENTATION AGREEMENT This PROPERTY EXCHANGE IMPLEMENTATION AGREEMENT (this "Agreement") is entered into as of the _ day of , 2019 (the "Effective Date"), by and between CITY OF POWAY, a California municipal corporation ("City"), and CITY OF POWAY HOUSING AUTHORITY, a public body, corporate and politic ("Authority"). RECITALS A. City owns fee title to certain real property located generally at 13100 Poway Road, in the City of Poway, County of San Diego, State of California, commonly known as APN 317-101-06 (the "City Exchange Property"). The City Exchange Property comprises approximately nine tenths (.9) acres, and is depicted in Exhibit "A", which is attached hereto and incorporated herein by this reference. B. Authority owns fee title to certain real property located south of Poway Road, in the City of Poway, County of San Diego, State of California, commonly known as APN 317-472-01 & 06 (the "Authority Exchange Property"). The Authority Exchange Property comprises approximately two and ninety-one hundredths (2.91) acres, and is depicted in Exhibit "A", which is attached hereto and incorporated herein by this reference. C. In furtherance of Poway's Long Range Property Management Plan, City staff have been negotiating with Poway Commons, LLC, a Delaware limited liability company (the "Developer") for the proposed sale by City to Developer of various parcels of real property owned in fee by City, for Developer's development thereon of a residential and retail development project (the "Residential/Retail Project"). D. To maximize the financial viability of a Residential/Retail Project, the Developer has recommended that the Authority Exchange Property be included with the property contemplated to be developed with the Residential/Retail Project. E. Authority staff have been negotiating with Developer regarding the development of an affordable housing development (an "Affordable Project"), to occur concurrently with the development of the Residential/Retail Project. The Developer has recommended that the Affordable Project be developed on the City Exchange Property. F. To facilitate the development of each of the Residential/Retail Project and Affordable Project, City staff have negotiated with Developer the terms of a Purchase, Sale, and Development Agreement (the "PSDA"). To facilitate the development of the Affordable Project, Authority staff have negotiated with Developer the terms of an Affordable Housing and Property Disposition Agreement (the "AHPDA"). The PSDA and AHPDA are being considered by the City Council and Authority Board, respectively, concurrently with the City Council's and Authority Board's consideration of this Agreement. 882/012782-0020 12ti''<1ir j~~'11 ' March 19, 2019 Item #3.1 G. In order to effect the property transfers contemplated under the PSDA and AHPDA, City and Authority would need to (i) exchange the City Exchange Property and Authority Exchange Property, and (ii) provide for the deposit into Authority's low and moderate income housing asset fund (the "LMIHAF") the sum of One Million Four Hundred Ninety-Three Thousand Three Hundred Five Dollars ($1,493,305) (the "Excess Value"), which is the difference between the value of the Authority Exchange Property and the value of the City Exchange Property. NOW, THEREFORE, IN CONSIDERATION OF THE FOREGOING RECITALS, WHICH ARE INCORPORATED HEREIN BY THIS REFERENCE, AND THE MUTUAL PROMISES CONTAINED IN THIS AGREEMENT, CITY AND AUTHORITY AGREE AS FOLLOWS: AGREEMENT 1. Exchange. City and Authority agree that if the close of escrow occurs under both of the PSDA and AHPDA, then concurrently with said closings, (i) City will transfer and convey the City Exchange Property to Authority, for Authority's sale to the Developer under the AHPDA, and (ii) Authority will transfer and convey the Authority Exchange Property to City, for City's sale to the Developer under the PSDA. 2. Deposit of Excess Value into LMIHAF. Promptly after the closings under the PSDA and AHPDA, City will provide to Authority the Excess Value, and Authority will deposit the Excess Value into the LMIHAF. 3. Termination. If the closings under the PSDA and AHPDA have not occurred by June 30, 2020, this Agreement shall automatically terminate, unless City and Authority each agree, in writing, to extend the term. 4. Approvals and Actions. City shall maintain authority of this Agreement and the authority to implement this Agreement through the City Manager (or his or her duly authorized representative). Authority shall maintain authority of this Agreement and the authority to implement this Agreement through the Executive Director (or his or her duly authorized representative). Each of the City Manager and Executive Director shall have the authority to make approvals, issue interpretations, execute documents, waive provisions, and/or enter into certain amendments of this Agreement on behalf of their respective party so long as such actions do not materially or substantially change the basic business terms hereof, and such approvals, interpretations, waivers and/or amendments may include extensions of time to perform. 5. Time. Time is of the essence of this Agreement. 6. Captions. The captions of the sections/paragraphs of this Agreement are for convenience and reference only, and the words contained in the captions shall in no way be held to explain, modify, amplify or aid in the interpretations, constructions or meaning of the provisions of this Agreement. 8821012782-0020 12r b't' 3'!B'119 -2-March 19, 2019 Item #3.1 7. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same Agreement. 8. Entire Agreement. This Agreement contains the entire agreement between the parties respecting the matters set forth herein, and supersedes all prior agreements between the parties respecting such matters. [SIGNATURES ON FOLLOWING PAGE] 882/012782-0020 12~6b'f j~~5119 -3- March 19, 2019 Item #3.1 IN WITNESS WHEREOF, City and Authority have executed this Agreement as of the Effective Date. ATTEST: By: ___________ _ Faviola Medina, City Clerk APPROVED AS TO FORM: RUTAN & TUCKER, LLP Alan Fenstermacher, City Attorney ATTEST: By: ___________ _ Faviola Medina, Authority Secretary APPROVED AS TO FORM: RUTAN & TUCKER, LLP Alan Fenstermacher, Authority Counsel 882/012782-0020 f~~'b'r a'll~,11, "City" CITY OF POWAY, a California municipal corporation By: _________ _ Tina M. White, City Manager "Authority" CITY OF POWAY HOUSING AUTHORITY, a public body, corporate and politic By: ___________ _ Tina M. White, Executive Director -4- March 19, 2019 Item #3.1 882 /0 12782-0020 1~~6b1r 3,35/19 EXHIBIT "A" DEPICTION OF CITY EXCHANGE PROPERTY AND AUTHORITY EXCHANGE PROPERTY Future City P creels Future Affor dcbl e Site -5- March 19, 2019 Item #3.1 RESOLUTION NO. 19- A RESOLUTION OF THE CITY OF POWAY HOUSING AUTHORITY (I) APPROVING AN AFFORDABLE HOUSING AND PROPERTY DISPOSITION AGREEMENT WITH POWAY COMMONS, LLC, FOR THE SOUTHERLY APPROXIMATELY NINE TENTHS ACRE OF ASSESSOR'S PARCEL NUMBER 317- 101-06, AND A PROPERTY EXCHANGE IMPLEMENTATION AGREEMENT BETWEEN THE HOUSING AUTHORITY AND THE CITY, AND (II) DECLARING ASSESSOR'S PARCEL NUMBERS 317-420-01 & 06, AND THE SOUTHERLY APPROXIMATELY .9 ACRES OF ASSESSOR'S PARCEL NUMBER 317-101-06 NOT NEEDED FOR FORESEEABLE NEEDS WHEREAS, the City of Poway Housing Authority ("Authority") is a public body, corporate and politic, organized and existing under the Housing Authorities Law (Health & Safety Code §34200 et seq.) (the "HAL"); WHEREAS, a fundamental purpose of the HAL is to expand the supply of low-and moderate-income housing (Health & Safety Code, § 33071); WHEREAS, Authority staff have negotiated an Affordable Housing and Property Disposition Agreement ("AHPDA") with Poway Commons, LLC ("Master Developer"), pursuant to which (i) the Master Developer would apply for and receive entitlements to develop on the southerly approximately .9 acres of the property generally located at 13100 Poway Road bearing Assessor's Parcel Number 317-101-06 (the "Affordable Parcel"), which property is currently owned by the City, a 44 unit affordable senior housing development at rental levels affordable to low and very low-income households (the "Affordable Project"), (ii) Authority would sell the Affordable Parcel to the Master Developer for the purchase price of $1,200,000 (iii) the Master Developer would grade the Affordable Parcel and provide public utilities to the Affordable Parcel, (iv) the Master Developer would sell the Affordable Parcel to a limited partnership established by Chelsea Investment Company, an experienced affordable housing developer, or similarly qualified affordable housing developer acceptable to the Authority (an "Affordable Developer"), at such time as the Affordable Developer has secured various sources of financing, including a commercial loan and California Debt Limit Allocation 4% Tax Credit, and processed plans for the Affordable Project through the City, and (v) the Authority would provide to the Affordable Developer a loan in an amount not to exceed $2,200,000, with $1,500,000 of the loan to be provided in cash, for the development of the Affordable Project, and an amount not to exceed $700,000 to be provided as a credit, to pay City development impact fees, with such loan to be evidenced by a promissory note requiring the Affordable Developer to repay the loan amount all as more particularly described in the AHPDA; WHEREAS, pursuant to the AHPDA, as a condition to Authority's sale of the Affordable Parcel and provision of the Authority financial assistance, Developer and Authority would record against the Affordable Parcel an affordable housing regulatory agreement substantially in the form attached to the AHPDA (the "Regulatory Agreement"), that restricts the use of the Affordable Parcel, for a period of fifty-five (55) years, as a senior affordable rental housing project; WHEREAS, concurrently with the negotiation of the AHPDA, City staff have negotiated a Purchase, Sale, and Development Agreement with the Master Developer (the "PSDA"), pursuant to which the City would sell to Developer certain real property, including, among other parcels, 125 of 323 Attachment B March 19, 2019 Item #3.1 Resolution No. 19- Page real property generally located at 13021 and 13031 Poway Road, comprising approximately 2.91 acres and bearing Assessor's Parcel Numbers 317-472-01 & 06, in the City of Poway, County of San Diego, State of California (the "Authority Exchange Parcels"), which parcels are currently owned by Authority, for the Master Developer's development thereon of a residential and retail development; WHEREAS, City and Authority staff have determined that the proposed AHPDA and PSDA reflect the optimal development potential of the various parcels owned by the City and Authority on or adjacent to Poway Road, including the Affordable Parcel and Authority Exchange Properties; WHEREAS, to facilitate the implementation of the AHPDA and PSDA, City and Authority staff have prepared a Property Exchange Implementation Agreement, pursuant to which, concurrently with the close of escrow under the AHPDA and PSDA, (i) the City would transfer the Affordable Parcel to Authority, (ii) Authority would transfer the Authority Exchange Parcels to the City, and (iii) the City would deposit into the Authority's Low and Moderate Income Housing Asset Fund the sum of One Million Four Hundred Ninety-Three Thousand Three Hundred Five Dollars ($1,493,305), which amount represents the difference in the purchase price to be received by Authority and the City for said parcels; WHEREAS, Authority staff recommends that the Housing Authority determine that the Authority Exchange Parcels and the Affordable Parcel are not required for the Authority's foreseeable needs; WHEREAS, the Authority has considered all the information and evidence set forth in the staff report presented by Authority staff and presented by persons wishing to appear and be heard concerning the impact of each of the AHPDA and Property Exchange Implementation Agreement on the Authority; WHEREAS, each of the AHPDA and Property Exchange Implementation Agreement will increase, improve, and preserve affordable housing in the City of Poway; and WHEREAS, Authority staff recommend that the Poway Housing Authority find and determine that the environmental impacts of the contemplated development of the parcels subject to the AHPDA and PSDA (the "Project") are fully analyzed in and covered by the previously certified Poway Road Specific Plan ("PRSP") environmental impact report ("EIR"; SCH# 2017031035), and that the Authority, by approving this resolution, is not committing itself nor the City Council to approve any of the entitlements required for the Project, and instead both bodies retain the discretion to deny the Project, which will still be subject to further environmental review pursuant to the California Environmental Quality Act ("CEQA") to ensure the PRSP EIR covers all of the Project's impacts, and no conditions set forth in Public Resources Code section 21166 and CEQA Guidelines section 15162 exist. NOW, THEREFORE, BE IT RESOLVED by the Poway Housing Authority as follows: Section 1: part of this Resolution. The foregoing recitals are true and correct and are a substantive Section 2: The Poway Housing Authority has received and heard all oral and written objections to the Authority's proposed AHPDA and Property Exchange Implementation 126 of 323 March 19, 2019 Item #3.1 Resolution No. 19- Page Agreement, and to other matters pertaining to this negotiation, and (finding such objections to be without merit) all such oral and written objections are hereby rejected. Section 3. That the Poway Housing Authority resolves as follows a. The environmental impacts of the Project are fully analyzed in and covered by the previously certified PRSP EIR (SCH# 2017031035), and no conditions set forth in Public Resources Code section 21166 and CEQA Guidelines section 15162 exist. b. Notwithstanding the foregoing, the Authority understands that the City Council retains all discretion to deny any entitlements required for the Project, and to the extent any entitlements are required from the Authority, the Authority retains all discretion to deny the same. The Project will be subject to further environmental review pursuant to CEQA to ensure the PRSP EIR covers all of the Project's impacts, and no conditions set forth in Public Resources Code section 21166 and CEQA Guidelines section 15162 exist. c. Each of the AHPDA and Property Exchange Implementation Agreement is in the best interests of the citizens of the City of Poway. d. Authority's sale of the Affordable Parcel (as shown on Exhibit A) will provide housing for very low and low--income persons, and will further the Authority's goal of increasing, improving and preserving the supply of affordable housing in the City of Poway. Section 4: The AHPDA and Property Exchange Implementation Agreement, copies of which are on file with the Authority Secretary, and are attached hereto as Exhibit B and Exhibit C, respectively, are hereby approved, and the Poway Housing Authority hereby determines that the Authority Exchange Parcels and Affordable Parcel are not needed for foreseeable needs of the Poway Housing Authority. Section 5: The Poway Housing Authority authorizes and directs its Executive Director and Authority counsel to make final modifications to the AHPDA and Property Exchange Implementation Agreement that are consistent with the substantive terms of the AHPDA and Property Exchange Implementation Agreement approved hereby, and to thereafter sign the AHPDA and Property Exchange Implementation Agreement on behalf of Authority. Section 6: The Poway Housing Authority authorizes and directs its Executive Director to (i) sign such other and further documents, including but not limited to escrow instructions, that require Authority's signature, and (ii) take such other and further actions, as may be necessary and proper to carry out the terms of the AHPDA and Property Exchange Implementation Agreement. Section 7: This Resolution shall take effect upon the date of its adoption. PASSED, ADOPTED AND APPROVED by the Poway Housing Authority of the City of Poway, California, at a regular meeting this 19th day of March 2019. Steve Vaus, Chairman ATIEST: 127 of 323 March 19, 2019 Item #3.1 Resolution No. 19- Page Faviola Medina, Poway Housing Authority Secretary STATE OF CALIFORNIA ) ) ss COUNTY OF SAN DIEGO ) I, Faviola Medina, Poway Housing Authority Secretary, Poway California, do hereby certify under penalty of perjury that the foregoing Resolution No. 19-*** was duly adopted by the City Council at a meeting of said City Council held on the 19th day of March 2019, and that it was so adopted by the following vote: AYES: NOES: ABSENT: DISQUALIFIED: 128 of 323 Faviola Medina City Clerk Poway Housing Authority Secretary City of Poway March 19, 2019 Item #3.1 129 of 323 Exhibit A Affordable Parcel Resolution No. 19- Page March 19, 2019 Item #3.1 Exhibit B to Housing Authority Resolution AFFORDABLE HOUSING AND PROPERTY DISPOSITION AGREEMENT By and Between CITY OF POWAY HOUSING AUTHORITY and POWAY COMMONS, LLC Dated as of ______ , 2019 882/012782-0020 1~1f'b't' 3'!1~5119 March 19, 2019 Item #3.1 AFFORDABLE HOUSING AND PROPERTY DISPOSITION AGREEMENT THIS AFFORDABLE HOUSING AND PROPERTY DISPOSITION AGREEMENT (the "Agreement") is made and entered into as of , 2019 (the "Effective Date"), by and between the CITY OF POWAY HOUSING AUTHORITY, a public body, corporate and politic (the "Authority"), and POWAY COMMONS, LLC, a Delaware limited liability company (the "Developer"). Authority and Developer are sometimes referred to hereinafter individually as a "Party" and collectively as the "Parties." RECITALS A Authority is the City of Poway Housing Authority, a public body, corporate and politic, organized and existing pursuant to and under the general laws of the State of California. B. Developer is Poway Commons, LLC, a Delaware limited liability company. C. Concurrently with the execution of this Agreement, Authority is entering into an agreement with the City of Poway to acquire the southernmost approximately nine- tenths (.9) acres portion (the "Property") of that certain real property located in the City of Poway, County of San Diego, State of California, commonly known as APN 317-101- 06 (the "City-Owned Mixed Property"). The City-Owned Mixed Property is legally described in Attachment No. 1A, which is attached hereto and incorporated herein by this reference. The City-Owned Mixed Property, including the portion thereof proposed to comprise the Property, are depicted on the area site map attached hereto and incorporated herein as Attachment No. 1 B. D. This Agreement sets forth the terms and conditions on which (i) Authority shall sell fee title to the Property to Developer, and (ii) Developer shall develop and subsequently operate on the Property a forty-four (44) unit senior affordable apartment community (the "Project"). E. The sale of the Property to Developer and Developer's development and subsequent operation of the Project on the Property pursuant to this Agreement, and the fulfillment generally of this Agreement, are in furtherance of Authority's goals to provide affordable housing in the City of Poway, are in the vital and best interests of the City of Poway 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. NOW, THEREFORE, for and in consideration of the foregoing Recitals, which are incorporated herein by this reference, and the mutual promises, covenants, and conditions herein contained, Authority and Developer hereto agree as follows: 882/012782-0020 1~!f'b'f1 j'\B'1 " -1-March 19, 2019 Item #3.1 1. DEFINITIONS As used in this Agreement, capitalized terms are defined where first used or as set forth in this Section 1 . Capitalized terms used in an attachment attached hereto and not defined therein shall also have the meanings set forth in this Section 1. "Affiliate" means any person or entity directly or indirectly, through one or more intermediaries, controlling, controlled by or under common control with Developer which, if Developer is a partnership or limited liability company, shall include each of the constituent members or partners, respectively thereof. The term "control" as used in the immediately preceding sentence, means, with respect to a person that is a corporation, the right to the exercise, directly or indirectly, of more than fifty percent (50%) of the voting rights attributable to the shares of the controlled corporation, and, with respect to a person that is not a corporation, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of the controlled person. "Annual Financial Statement" shall mean the financial statements prepared by Developer for each calendar year, including a balance sheet, income statement, statement of retained earnings, statement of cash flow, and footnotes thereto, prepared in accordance with generally accepted accounting principles consistently applied, as audited by an independent certified public accountant. "Authority" means the City of Poway Housing Authority. "Authority Deed of Trust" means a deed of trust substantially in the form attached hereto and incorporated herein as Attachment No. 8, to be executed by Developer pursuant to Section 10.2 in order to secure repayment of the Authority Note. Authority/Lender Subordination Agreement" means, with respect to the Partnership Transfer/Financing Closing, (i) a subordination agreement between Authority and the Construction Lender, pursuant to which Authority agrees to subordinate the Authority Loan to the Construction Loan Security Documents, and the Construction Lender agrees to subordinate the Construction Loan Security Documents to the Authority Regulatory Agreement, and, with respect to the closing of the Take-Out Loan at conversion, (ii) a subordination agreement between Authority and the Take-Out Lender, pursuant to which Authority agrees to subordinate the Authority Loan to the documents securing the Take-Out Loan, and the Take-Out Lender agrees to subordinate the documents securing the Take-Out Loan to the Authority Regulatory Agreement. Authority/Master Developer Work Construction Lender Subordination Agreement" means a subordination agreement between Authority and the Master Developer Work Construction Lender, pursuant to which the Master Developer Work Construction Lender agrees to subordinate any instrument securing its loan, including, without limitation, a deed of trust, to the Authority Regulatory Agreement; provided, however, that notwithstanding anything to the contrary in this Agreement, an Authority/Master Developer Work Construction Lender Subordination Agreement shall 882/012782-0020 1~!f'b7f'3~~5/19 -2- March 19, 2019 Item #3.1 only be required if the Master Developer Work Construction Lender will record a security instrument against the Property on the Closing Date. "Authority Loan" has the meaning set forth in Section 10.2 of this Agreement. "Authority Note" means a promissory note substantially in the form attached hereto and incorporated herein as Attachment No. 7, to be executed by Developer in favor of Authority to evidence the obligation of Developer to repay the Authority Loan. "Authority Regulatory Agreement" means a regulatory agreement substantially in the form attached hereto and incorporated herein as Attachment No. 10, which will establish certain restrictive covenants against the Property. "Authority Title Policy" has the meaning set forth in Section 9.2(r) of this Agreement. "Building Permit" means all permits issued by the City and required for commencement of construction of the Project. "CDLAC" means the California Debt Limit Allocation Committee. "CEQA" means the California Environmental Quality Act, Public Resources Code Section 21000, et seq. "CEQA Claims" means any appeals or protests (including litigation) taken or filed with respect to Authority's (or the Poway Planning Commission's, as applicable) findings, determinations, and/or certifications pursuant to CEQA in connection with Authority's approval of this Agreement and in connection with the City's approval, conditional approval, or denial, of the Entitlements. "Chelsea" means Chelsea Investment Corporation, a California corporation, or another entity (i) experienced in the development and operation of affordable housing with requirements and restrictions similar to those set forth in the Authority Regulatory Agreement, and (ii) acceptable to Authority in Authority's reasonable discretion. "City" means the City of Poway, a California municipal corporation. "Closing" shall mean the conveyance of the Property from Authority to Developer through the Escrow. "Closing Date" shall mean the date that the Grant Deed is recorded in the Official Records, which shall occur, if at all, no later than the Outside Closing Date. "Construction Contract" has the meaning set forth in Section 9.4(e) of this Agreement. "Construction Lender" means the first trust deed lender that holds Tax-Exempt Bonds issued to finance the Project through the construction period (e.g., until a 8821012782-0020 1~!'b'f1 j?f1 " -3- March 19, 2019 Item #3.1 "conversion date"). The Construction Lender may or may not also be the Take-Out Lender. The Construction Lender shall be an Institutional Lender. "Construction Loan" means the proceeds of Tax-Exempt Bonds issued to finance the Project through the construction period (e.g., until a "conversion date"), in the anticipated amount of approximately Eight Million Four Hundred Thousand Dollars ($8,400,000). The Construction Loan is secured by the Construction Loan Security Documents. "Construction Loan Security Documents" means the documents and instruments required by the Construction Lender to secure the Construction Loan. "County" means the County of San Diego, California. "Conversion Date" has the meaning set forth in the Construction Loan Security Documents, or, if such term is not defined therein, means the date the Construction Loan converts from a construction loan to a permanent loan. "Developer" has the meaning set forth in the opening paragraph of this Agreement. "Developer Title Policy" has the meaning set forth in Section 6.3(e) of this Agreement. "Escrow" means the escrow through which the Closing is conducted. "Escrow Holder" means First American Title Insurance Company, with its offices located at 4380 La Jolla Village Drive, Suite 200, San Diego, CA 92122, or such other escrow company as may be agreed to by Developer and the Executive Director. "Event of Default" has the meaning set forth in Section 14.1 of this Agreement. "Executive Director" means the person duly appointed to the position of Executive Director, or his or her designee. The Executive Director shall represent Authority in all matters pertaining to this Agreement. Whenever a reference is made herein to an action or approval to be undertaken by Authority, the Executive Director is authorized to act unless this Agreement specifically provides otherwise or the context should otherwise require. "Final Construction Documents" means the final plans, drawings and specifications upon which the Building Permit is issued. "Final Map" has the meaning set forth in Section 4 of this Agreement. "FIRPTA Affidavit" means and refers to an affidavit complying with Section 1445 of the United States Internal Revenue Code ("IRC 1445") evidencing that neither Developer nor Escrow Holder is required to withhold Authority's closing funds pursuant to IRC 1445. 882/012782-0020 1~1l'b't' j~~5/19 -4-March 19, 2019 Item #3.1 "Form 593" means and refers to a California Franchise Tax Board Form 593-W evidencing that neither Developer nor Escrow Holder is required to withhold Authority's closing funds pursuant to California Revenue and Taxation Code Section 18662e). "General Contractor" has the meaning set forth in Section 9.4(d) of this Agreement. "Governmental Requirements" means all laws, ordinances, statutes, codes, rules, regulations, requirements, orders and decrees, of the United States, the State of California, the County of San Diego, Authority, and of any other political subdivision, agency or instrumentality exercising jurisdiction over Authority, Developer, the Property, and/or the Project. "Grant Deed" means a grant deed substantially in the form attached hereto and incorporated herein as Attachment No. 5, by which Authority will transfer fee title to the Property to Developer at the Closing. "Hazardous Materials" means any substance, material, or waste which is or becomes regulated by any local governmental authority, the State of California, or the United States Government, including, but not limited to, any material or substance which is (i) defined as a "hazardous waste", "acutely hazardous waste", "extremely hazardous waste", or "restricted hazardous waste" under Section 25115, 25117 or 25122.7, or listed pursuant to Section 25140 of the California Health and Safety Code, Division 20, Chapter 6.5 (Hazardous Waste Control Law), (ii) defined as a "hazardous substance" under Section 25316 of the California Health and Safety Code, Division 20, Chapter 6.8 (Carpenter-Presley-Tanner Hazardous Substance Account Act), (iii) defined as a "hazardous material", "hazardous substance", or "hazardous waste" under Section 25501 of the California Health and Safety Code, Division 20, Chapter 6.95 (Hazardous Materials Release Response Plans and Inventory), (iv) defined as a "hazardous substance" under Section 25281 of the California Health and Safety Code, Division 20, Chapter 6.7 (Underground Storage of Hazardous Substances), (v) petroleum, (vi) asbestos, (vii) polychlorinated biphenyls, (viii) listed under Article 9 or defined as "hazardous" or "extremely hazardous" pursuant to Article 11 of Title 22 of the California Code of Regulations, Chapter 20, (ix) designated as "hazardous substances" pursuant to Section 311 of the Clean Water 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 6901 et seq. (42 U.S.C. Section 6903), (xi) defined as "hazardous substances" pursuant to Section 101 of the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq., (xii) methyl-tertiary butyl ether, (xiii) perchlorate or (xiv) 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, handling, treatment or disposal, or is defined as "hazardous" or harmful to the environment. For purposes hereof, "Hazardous Materials" excludes materials and substances in quantities as are commonly used in the construction and operation of an apartment complex, provided that such materials and substances are used in accordance with all applicable laws. 882/012782-0020 1~!f'b't' :!'!1~5119 -5-March 19, 2019 Item #3.1 "HUD" means the United States Department of Housing and Urban Development. "lndemnitees" means Authority and the City and their respective officers, officials, members, employees, representatives, agents and volunteers. "Institutional Lender" means any of the following institutions having assets or deposits in the aggregate of not less than One Hundred Million Dollars ($100,000,000): a California chartered bank; a bank created and operated under and pursuant to the laws of the United States of America; an "incorporated admitted insurer'' (as that term is used in Section 1100.1 of the California Insurance Code); a "foreign (other state) bank" (as that term is defined in Section 1700(1) of the California Financial Code); a federal savings and loan association (Cal. Fin. Code Section 8600); a commercial finance lender (within the meaning of Sections 2600 et seq. of the California Financial Code); a "foreign (other nation) bank" provided it is licensed to maintain an office in California, is licensed or otherwise authorized by another state to maintain an agency or branch office in that state, or maintains a federal agency or federal branch in any state (Section 1716 of the California Financial Code); a bank holding company or a subsidiary of a bank holding company which is not a bank (Section 3707 of the California Financial Code); a trust company, savings and loan association, insurance company, investment banker; college or university; pension or retirement fund or system, either governmental or private, or any pension or retirement fund or system of which any of the foregoing shall be trustee, provided the same be organized under the laws of the United States or of any state thereof; and a Real Estate Investment Trust, as defined in Section 856 of the Internal Revenue Code of 1986, as amended, provided such trust is listed on either the American Stock Exchange or the New York Stock Exchange. "Investor" means the limited partner of the Partnership. "Land Use Entitlements" has the meaning set forth in Section 4 of this Agreement. "Land Use Entitlement Approval Date" means the date that all of the Land Use Entitlements have been approved by each required governmental agency with jurisdiction over the Property and/or the construction of the Project, and all appeal and protest periods have expired with no appeals or protests (including litigation) taken or filed ("Land Use Entitlement Claims"), or, if any are so taken or filed, then upon the resolution of the Land Use Entitlement Claims upon terms acceptable to each of Authority and Developer, in their respective sole and absolute discretion. "Management Agreement" has the meaning set forth in Section 9.4(n) of this Agreement. "Notice of Affordability" means a Notice of Affordability Restrictions on Transfer of Property substantially in the form attached hereto and incorporated herein as Attachment No. 11, to be executed by Authority and Developer and recorded in the Official Records to notify members of the public regarding the affordability restrictions for the Project. 882/012782-0020 1~~'b't' j~~5/]9 -6-March 19, 2019 Item #3.1 "Notices" has the meaning set forth in Section 15 of this Agreement. "Official Records" means the Official Records of the County. "Outside Closing Date" " means and refers to the earliest of: (1) a date two (2) business days after the date that Developer is issued the first grading permit for the Project, (2) thirty (30) calendar days after the Land Use Entitlement Approval Date, or (3) nine (9) months after the Effective Date; provided, however, if any of such dates is not a business day (meaning a day that documents can be placed of record in San Diego County), then the applicable date shall be extended to the second such business day thereafter. Developer shall have the right, but not the obligation and upon five (5) days advance written notice to City, to extend the Outside Closing Date for two successive periods of one (1) month each. "Partnership" has the meaning set forth in Section 6.1 of this Agreement. "Partnership Agreement" has the meaning set forth in Section 9.4(a) of this Agreement. "Partnership Transfer/Financing Closing" has the meaning set forth in Section 9.4 of this Agreement. "Partnership Transfer/Financing Escrow" has the meaning set forth in Section 9.4 of this Agreement. "Permitted Poway Commons Transfer" means and refers to any of the following types of Transfer, where the Person to which such Transfer is made, acquires the Property or a portion thereof (if such Permitted Poway Commons Transfer occurs after the Closing) and expressly assumes the obligations of Poway Commons under this Agreement with respect to the Property so Transferred in a written instrument satisfactory to Authority or acquires an equity interest in Poway Commons: (1) Any Transfer of stock or equity of Poway Commons that does not change management or operational control of the day to day operations in the development of the Property or the Project or is less than a 49% interest, as set forth in Section (1) of the definition of Transfer. (2) Any Transfer of any interest in Poway Commons irrespective of the percentage of ownership (i) to any other owner of any interest in Poway Commons; or (ii) to any Affiliate, or (iii) to any other Person in which any holder of an interest (including any beneficial interest) in Poway Commons as a manager, officer or partner or in which any of the aforementioned is a shareholder, member or partner (including a beneficial owner). (3) The pledge of any interest in the Property as security for a loan that has been approved by Authority pursuant to the terms of this Agreement. 8821012782-0020 1 ~ f 'b't' j~~5119 -7- March 19, 2019 Item #3.1 (4) Any foreclosure or deed in lieu of foreclose under the documents evidencing and securing repayment of a loan that has been approved by Authority pursuant to the terms of this Agreement. (5) Any Property Transfer to an entity in which Poway Commons (or an Affiliate) has an ownership interest and which is formed with a third party to fund the development of the Project, and the exercise of any and all remedies under the applicable entity documents. (6) The recordation of replacemenVpermanent financing to replace a loan that has been approved by Authority pursuant to the terms of this Agreement. (7) The granting of easements and licenses in the ordinary course of the development and ownership of the Property and the Project. A Permitted Poway Commons Transfer also includes a Transfer of Poway Commons' rights and obligations under this Agreement with respect to the entitlement and grading of the Property to an entity in which Poway Commons or an Affiliate thereof maintains management or operational control of the day to day operations of such entity. "Person" means and refers to any association, corporation, governmental entity or agency, individual, joint venture, joint-stock company, limited liability company, partnership, trust, unincorporated organization, or other entity of any kind. "Poway Commons" means Poway Commons, LLC, a Delaware limited liability company. "Project" means Developer's construction of a senior affordable rental housing development consisting of forty-four (44) residential dwelling units and all required on-site improvements necessary to serve the development in accordance with this Agreement, including, without limitation, in accordance with the Scope of Development, the Land Use Entitlements, and the Final Construction Documents. The Project is depicted in the Site Plan. "Project Architect" means, The McKinley Associates, Inc., or such other architect or architectural firm as may be approved by the Executive Director. "Project Budget" shall mean that certain budget attached hereto and incorporated herein as Attachment No. 9. "Project Costs" means all costs of any nature incurred in connection with the planning, design, and development of the Project. "Project Financing" has the meaning set forth in Section 10.1 of this Agreement. "Property" has the meaning set forth in Recital C of this Agreement. 882/012782-0020 1~if'b'f7 j~~S/19 -8- March 19, 2019 Item #3.1 "PSDA" means that certain Purchase, Sale, and Development Agreement entered into between Developer and the City on or about the Effective Date, pursuant to which the City has agreed to sell to Developer the PSDA Property, and Developer has agreed to develop thereon a residential condominium and retail development. "PSDA Property" means that certain real property described in the PSDA as the "City Parcels." "Purchase Price" means the purchase price to be paid by Developer to Authority for the purchase of the Property. The Purchase Price is One Million Two Hundred Thousand Dollars ($1,200,000). "Release of Construction Covenants" means a release document substantially in the form attached hereto and incorporated herein as Attachment No. 12, to be executed by Authority and recorded in the Official Records upon Developer's completion of the Project, as described in Section 11.17. "Request for Notice" has the meaning set forth in Section 6.2(p) of this Agreement "Schedule of Performance" means the Schedule of Performance attached hereto and incorporated herein as Attachment No. 3. The Schedule of Performance sets forth the times by which the Parties are required to perform certain obligations set forth in this Agreement. "Scope of Development" means the Scope of Development attached hereto and incorporated herein as Attachment No. 4. "Sources and Uses of Funds Statement" means the Sources and Uses of Funds statement attached to the Project Budget. "Site Plan" means the site plan attached hereto and incorporated herein as Attachment No. 2A. "Take-Out Lender" means the institution that holds or institutions that hold the Tax-Exempt Bonds that remain outstanding from and after the construction period (e.g., from and after a "conversion date"). The Take-Out Lender shall be an Institutional Lender. "Take-Out Loan" means the proceeds of the Tax-Exempt Bonds that remain outstanding from and after the construction period (e.g., from and after a "conversion date"). "Tax Credits" has the meaning set forth in Section 10.1 (b) of this Agreement. "Tax Credit Program" means the low-income housing tax credit program authorized pursuant to Internal Revenue Code Section 42, California Health and Safety Code Sections 50199.6-50199.19, Revenue and Taxation Code Sections 17057.5, 882/012782-0020 1~i'li'f' j'!j~5119 -9-March 19, 2019 Item #3.1 17058, 23610.4, 23610.5, and applicable federal and State regulations such as 4 California Code of Regulations Sections 10300-10340. "Tax-Exempt Bonds" shall mean tax-exempt multi-family housing revenue bonds, in the approximate amount of Eight Million Four Hundred Thousand Dollars ($8,400,000). "TCAC" means the California Tax Credit Allocation Committee. "Tentative Map" means and refers to a tentative map subdividing the Property and PSDA Property into multiple legal parcels, as necessary to accomplish the development of the Project and the development project contemplated under the PSDA. The proposed subdivisions and locations of the Property and PSDA Property are depicted on the proposed subdivision map attached hereto and incorporated herein as Attachment No. 2B (the "Proposed Subdivision Map"); provided, however, that the Property is designated thereon as the "Affordable Area," and the "PSDA Property" is designated thereon as the "Retail Area" and the "Residential Area." "Title Company" means First American Title Insurance Company, with its offices located at 4380 La Jolla Village Drive, Suite 200, San Diego, CA 92122, or such other title insurance company as may be agreed to by Developer and the Executive Director. "Transfer" means and refers to any of the following: (a) Any total or partial sale, assignment, conveyance, trust, power, or transfer in any other mode or form, by Developer of more than a 49% interest in Developer's interest in this Agreement, the Property, or the Project or a series of such sales, assignments and the like that, in the aggregate, result in a disposition of more than a 49% interest in Developer's interest in this Agreement, the Property, or the Project; or (b) Any total or partial sale, assignment, conveyance, or transfer in any other mode or form, of or with respect to any interest in Developer or a series of such sales, assignments and the like that, in the aggregate, result in a disposition of more than a 49% interest in any interest in Developer; or (c) Any merger, consolidation, sale or lease of all or substantially all of the assets of Developer or a series of such sales, assignments and the like that, in the aggregate, result in a disposition of more than a 49% interest of all or substantially all of the assets of Developer; or (d) Any Property transfer; or (e) The recordation of any deed of trust, mortgage, lien or similar encumbrance against all or any portion of the Property or the Project other than a loan that has been approved by Authority pursuant to the terms of this Agreement. 8821012782-0020 1~~'b't' a'!B'11 ' -10-March 19, 2019 Item #3.1 2. PARTIES 2.1 Authority. Authority is the City of Poway Housing Authority, a public body, corporate and politic, organized and existing pursuant to and under the general laws of the State of California. 2.2 Developer. Developer is Poway Commons, LLC, a Delaware limited liability company, and any successor to its rights, powers, and responsibilities. Developer's principal offices are located at 9988 Hibert Street, Suite 210, San Diego, CA 92131. As further set forth in Section 6.1, Developer contemplates assigning all of its right, title and interest in and to this Agreement to the Partnership. 3. OPENING OF ESCROW; INDEPENDENT CONTRACT CONSIDERATION Within five (5) days after the Effective Date, the Parties shall open the Escrow, by delivering a copy of this Agreement, fully executed, to Escrow Holder. Concurrently with the opening of the Escrow, Developer shall deposit with Escrow Holder the sum of One Hundred Dollars ($100) in cash or other immediately available funds (the "Independent Contract Consideration"). The Independent Contract Consideration shall be released immediately to Authority as consideration for Authority's execution and delivery of this Agreement and Developer's right to approve or disapprove any Developer contingencies set forth in this Agreement with respect to the Property. The Independent Contract Consideration is in all respects nonrefundable to Developer. 4. LAND USE ENTITLEMENTS Within the time set forth in the Schedule of Performance, Developer shall submit to the City and thereafter diligently process an application or applications for all discretionary governmental permits as may be necessary to allow Developer to develop the Project in the manner required by this Agreement including, without limitation, a Development Review and Tentative Map (collectively, the "Land Use Entitlements"). Authority, without any cost or expense to Authority other than as may be expressly provided in the Project Budget, agrees to reasonably assist Developer to secure said Land Use Entitlements. Notwithstanding the foregoing, Authority shall sign (or shall cause City to sign, as applicable), as the "Owner," all such applications to be submitted by Developer pursuant to this paragraph. Authority and Developer acknowledge and agree that as of the Effective Date the Property does not comprise a legal parcel. Within the time set forth in the Schedule of Performance, Developer shall obtain approval of and record a final map consistent with the proposed subdivisions depicted in Attachment No. 28 attached hereto (the "Final Map"). Notwithstanding that as of the Effective Date the Property does not constitute a legal parcel, the Parties acknowledge and agree that Authority has the legal right to convey the Property to Developer using a metes and bounds legal description. The approval of this Agreement by Authority shall not constitute a pre-commitment by Authority or the City or the City Council of City regarding any approvals required for development of the Project, including, without limitation, all required analysis under 882/0\2782-0020 1lt!\"b't' 3':!~5119 -11- March 19, 2019 Item #3.1 CEQA. Developer obtains no right or entitlement to construct the Project by virtue of this Agreement. The City retains unfettered discretion to approve, conditionally approve, or deny any entitlements and/or other approvals required for the Project and all proceedings and decisions in connection therewith. This Agreement shall not be construed as a grant of development rights or land use entitlements to construct the Project on the Property. All design, architectural, and building plans for the Project shall be subject to the review and approval of the City and any other governmental agency with jurisdiction over the Property and/or Project. By its execution of this Agreement, Authority is not committing itself to or agreeing to undertake any acts or activities requiring the subsequent independent exercise of discretion by the City or any agency or department thereof. Within ten (10) days after the City takes final action with respect to all of the Land Use Entitlements, Developer shall notify Authority in writing whether Developer approves or disapproves the Land Use Entitlements, including all of the terms and conditions pertaining thereto. Any disapproval shall be in writing and shall state the reasons therefor. If Developer fails to timely notify Authority in writing of Developer's approval or disapproval of the Land Use Entitlements, Developer shall be conclusively deemed to have approved the same. If Developer timely disapproves the Land Use Entitlements, this Agreement shall be terminated unless the Parties mutually agree to approve an extension of time for reconsideration of Authority's actions with respect to the Land Use Entitlements, with each Party reserving the right to approve or disapprove the same in its sole and absolute discretion. 5. DUE DILIGENCE PERIOD; PERMISSION TO ENTER PROPERTY; AS-IS; PHYSICAL AND ENVIRONMENTAL CONDITION 5.1 Due Diligence Period. Authority represents to Developer that prior to the Effective Date, Authority and/or City has provided Developer with hard copies, electronic files, or other access to all reports, plans, studies and other similar records with respect to the Property (collectively, "Property Reports") that are in Authority's and/or City's possession and reasonably known to Authority and/or City. Developer acknowledges and agrees that (i) although Authority and City have reviewed their real property files for Property Reports, neither Authority or City has conducted a comprehensive search of all Authority and/or City files for Property Reports, and (ii) the Property Reports are provided for information and disclosure purposes only, without any representation or warranty. Authority shall permit Developer and Developer's representatives and agents to enter onto the Property commencing on the Effective Date and continuing for a period of one hundred twenty (120) days thereafter ("Due Diligence Period"), for purposes of enabling Developer to examine, inspect, and investigate the physical and environmental condition of the Property, including any foundations, soil, subsurface soils, drainage, seismic and other geological and topographical matters, location of asbestos, toxic substances, Hazardous Materials, if any, and, at Developer's sole and absolute discretion, to enable Developer to determine whether the Property is acceptable to Developer and suitable for Developer's intended use; provided, however, in no event shall Developer conduct any intrusive testing procedures on the Property without the prior written consent of Authority, which consent may not be unreasonably withheld. Developer and Developer's representatives and agents shall also be entitled to enter onto the Property to conduct 882/012782-0020 ~~!'li't' 3~~5/19 -12- March 19, 2019 Item #3.1 additional examinations and investigations at any time after expiration of the Due Diligence Period and through the Closing. As a condition to Developer's entry onto the Property prior to the Closing, whether before or after the expiration of the Due Diligence Period, Developer shall provide to Authority a copy of all reports, studies and test results prepared by Developer's consultants, without representation or warranty. Developer shall notify Authority, in writing, at least twenty-four (24) hours prior to any entry by Developer or Developer's representatives on the Property. Authority shall have the right, but not the obligation, to accompany Developer during such investigations. As an additional condition of such entry, Developer shall (i) conduct all work or studies in a diligent, expeditious, and safe manner and not allow any dangerous or hazardous conditions to occur on the Property during or after the investigation; (ii) obtain any required governmental permits and comply with all applicable laws and governmental regulations; (iii) keep the Property free and clear of all materialmen's liens, lis pendens and other liens arising out of the entry and work performed under this paragraph; (iv) maintain or assure maintenance of workers' compensation insurance (or state approved self-insurance) for all persons entering the Property in the amounts required by the State of California; and (v) provide to Authority prior to initial entry a certificate of insurance evidencing that Developer and/or the persons entering the Property have procured and have in effect commercial general liability insurance that satisfies the requirements set forth in Section 11.8 hereof. Developer shall, in a timely manner, repair any and all damage to the Property caused by such inspections or investigations and shall indemnify, defend, and hold harmless the lndemnitees from and against any claims, liabilities, and losses arising from the entries of Developer and its representatives and agents on the Property pursuant to this Section 5.1. Notwithstanding Developer's right to enter the Property after expiration of the Due Diligence Period pursuant to the second sentence in the first paragraph of this Section 5.1, Developer shall notify Authority in writing on or before the expiration of the Due Diligence Period of Developer's approval or disapproval of the physical and environmental condition of the Property and Developer's investigations with respect thereto. Developer's disapproval shall constitute Developer's election to terminate this Agreement and cancel the Escrow. Developer's failure to deliver notice to Authority on or before the expiration of the Due Diligence Period shall be conclusively deemed Developer's approval thereof. 5.2 "AS-IS". Developer acknowledges and agrees that it has been provided with copies of the Property Reports, including the Phase 1 and Phase 2, and that Developer is purchasing the Property from Authority solely in reliance on its own investigation, and that no representations and/or warranties of any kind whatsoever, express or implied, have been made by Authority or by any of Authority's officers, officials, members, employees, representatives or agents. Developer further acknowledges and agrees that Developer will be purchasing the Property in "AS IS" condition with all faults and conditions then existing in and on the Property, whether known or unknown. Notwithstanding the foregoing, Authority acknowledges and agrees that neither this Section 5.2, nor any other term, provision or condition of this Agreement obligates Developer, prior to the Closing, to remediate, or to incur any cost to remediate, any 882/012782-0020 1ll~'li't' 3'!B'1 " -13- March 19, 2019 Item #3.1 Hazardous Materials that were released or existed on the Property prior to the Closing. Developer acknowledges and agrees that, as between it and Authority, nothing in this Agreement or in the Authority Regulatory Agreement shall ever be deemed, construed, or interpreted to obligate Authority to remediate, or to incur any expense to remediate, any Hazardous Materials discovered on the Property either before or after the Closing unless and until Authority expressly agrees to do so in writing. 5.3 Developer Indemnity and Release. Upon the Closing, Developer shall indemnify, defend, and hold the lndemnitees harmless from and against any and all claims, suits, penalties, expenses, losses, damages, attorney's fees, judgments, or any other action or damage of any kind or nature arising out of or related to any of the matters described in Section 5.2, except for (i) the presence on the Property or any portion thereof of Hazardous Materials placed or otherwise caused to be placed thereon by Authority, or (ii) any defect or adverse physical or environmental condition of the Property directly caused by Authority or the City. Subject to the foregoing limitation, notwithstanding any other provision of this Agreement to the contrary, Developer's indemnification as set forth in this Section 5.3 shall survive any termination of this Agreement and the Closing and shall continue in perpetuity; provided, however, that Authority shall cooperate, at no cost to Authority, in Developer's defense under this Section 5.3. With the exception of the presence on the Property or any portion thereof of Hazardous Materials placed or otherwise caused to be placed thereon by Authority, Developer shall be deemed conclusively to have released and discharged the lndemnitees from any and all damages, losses, demands, claims, debts, liabilities, obligations, causes of action and rights, whether known or unknown, by Developer regarding the physical condition of the Property, including, but not limited to, the environmental condition of the Property. Developer agrees that, with respect to the General Release contained in the immediately preceding paragraph, the general release extends to all matters regarding the Property, whether or not claimed or suspected, to and including the date of execution hereof, and constitutes a waiver of each and all the provisions of the California Civil Code § 1542, which reads as follows: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR." DEVELOPER'S INITIALS: __ _ Developer herein acknowledges that the effect and import of the provisions of Civil Code § 1542 have been explained to it by its own counsel. Developer understands and acknowledges the significance and the consequence of such specific waiver of unknown claims and hereby assumes full responsibility for any injuries, damages, losses or liabilities that it may hereinafter incur from the waiver of these unknown claims. 882/0 l 2782-0020 fllit'b't' j'!B'1 ' 9 -14- March 19, 2019 Item #3.1 5.4 Materiality. Developer acknowledges and agrees that the defense, indemnification, protection and hold harmless obligations of Developer for the benefit of Authority set forth in this Agreement are a material element of the consideration to Authority under this Agreement, and that Authority would not have entered into this Agreement unless Developer's obligations were as provided for herein. 5.5 Review of Title of Site. Within thirty (30) days after the Effective Date, Authority shall cause the Title Company to deliver to Developer a standard preliminary title report dated no earlier than the Effective Date (the "Preliminary Title Report") with respect to the title to the Property, together with legible copies of the documents underlying the exceptions ("Title Exceptions") set forth in the Preliminary Title Report. Developer shall have the right to approve or disapprove the Title Exceptions and any proposed encumbrances to the Property in the exercise of its sole discretion; provided, however, that Developer hereby approves the following Title Exceptions: (a) The standard printed exceptions and exclusions contained in the Preliminary Title Report. (b) The lien of any non-delinquent property taxes and assessments (to be prorated at Closing). (d) All documents to be recorded at the Closing pursuant to this Agreement. Developer shall have fifteen (15) days after the later of (i) the date of its receipt of the Preliminary Title Report, or (ii) the date Developer receives the documents underlying the Title Exceptions, to give written notice to Authority and Escrow Holder of Developer's approval or disapproval of any of such Title Exceptions. Developer's failure to give written disapproval of any of the Title Exceptions in the Preliminary Title Report within such time limit shall be deemed Developer's approval of the Preliminary Title Report. If Developer notifies Authority of its disapproval of any Title Exceptions in the Preliminary Title Report, Authority shall have the right, but not the obligation, to remove any such disapproved Title Exceptions within thirty (30) days after receiving written notice of Developer's disapproval or provide assurances satisfactory to Developer that such disapproved Title Exception(s) will be removed on or before the Closing. If Authority cannot or does not agree to remove any of the disapproved Title Exceptions before the Closing, Developer shall have fifteen (15) days after the expiration of such thirty (30) day period to either give Authority written notice that Developer elects to proceed with the purchase of the Property subject to the disapproved Title Exceptions or to give Authority written notice that Developer elects to terminate this Agreement. Developer's failure to give written notice of its election within such fifteen (15) day period shall be deemed to be an election to proceed with the purchase of the Property subject to the disapproved Title Exceptions. The condition of title, including all of the Title Exceptions approved (or deemed approved) by Developer as provided herein shall hereinafter be referred to as the "Condition of Property Title." From and after the Effective Date hereof, and continuing until the earlier of (i) the Closing, or (ii) termination of this Agreement, Authority shall not further encumber the Property with additional Title Exceptions without Developer's prior written consent. Developer shall 88210 l 2782-0020 1ll~'b'f1 j'l!~'1 " -15-March 19, 2019 Item #3.1 have the right to approve or disapprove any further Title Exceptions reported by the Title Company after Developer has approved the Condition of Property Title (which are not created by Developer). Developer and the Executive Director, on behalf of Authority, shall have the authority to extend the foregoing fifteen (15) day period by written agreement. 6. DISPOSITION OF PROPERTY TO MASTER DEVELOPER 6.1 Agreement to Sell Property to Developer. Authority, subject to the conditions set forth in Section 6.2 below, agrees to sell the Property to Developer, and Developer, subject to the conditions set forth in Section 6.3 below, agrees to purchase the Property from Authority. Subject to each Party's reserved rights hereunder, the Parties shall cooperate with one another and shall exercise commercially reasonable diligence in an effort to ensure that the conditions precedent set forth in Sections 6.2 and 6.3 are timely satisfied. Authority and Developer acknowledge and agree that Authority's disposition of the Property to Developer pursuant to Sections 6, 7, and 8 is intended as an interim conveyance, whereby Developer, in its capacity as the "master developer," will undertake certain site improvement work, including demolition, grading, and installation of utility infrastructure (collectively, the "Master Developer Work"). Authority and Developer contemplate that at such time as the Master Developer Work has been completed, as determined by the City's Director of Development Services, and the conditions set forth in Section 9.4 have all been satisfied, or waived by Authority, Developer will transfer the Property, and transfer and assign this Agreement, to Poway Commons Affordable CIC, LP, a California limited partnership (the "Partnership"), which will assume all of Developer's remaining obligations under this Agreement, and proceed to develop and operate the Project. 6.2 Conditions for Authority's Benefit. Authority's obligation to sell and convey the Property to Developer shall be subject to satisfaction of all of the following conditions precedent or Authority's written waiver of such conditions precedent in its sole and absolute discretion: (a) Organizational Documents. The Executive Director shall have received and approved a copy of such portions of the organizational documents of Developer or Developer's successor-in-interest as the Executive Director deems reasonably necessary to document the power and authority of Developer to perform its obligations set forth in this Agreement. Developer shall have made full disclosure to Authority of the names and addresses of all persons and entities that have a beneficial interest in Developer. (b) Insurance. Developer shall have submitted to Authority and Authority shall have approved Developer's evidence of the liability insurance required pursuant to Section 11.8 hereof. (c) Land Use Entitlements. The City shall have approved the Land Use Entitlements for the Project, in accordance with Section 4, and Developer shall have 882/012782-0020 1~~'b't' 3':!~5119 -16- March 19, 2019 Item #3.1 approved or be deemed to have approved the same, including without limitation all terms and conditions applicable thereto. (d) Completion of CEQA Analysis. Developer, at its sole cost and expense, shall have provided to Authority all studies, reports, data, and supporting materials necessary for Authority to conduct all required analysis under CEQA, Authority shall have completed such analysis, and the Authority Board of Directors or City Planning Commission (as applicable), in its sole and absolute discretion, shall have made all requisite findings, determinations, and/or certifications necessary to enable the Project to move forward. (e) Evidence of Master Developer Work Financing. The Executive Director shall have received and reasonably approved commitments from all Master Developer Work financing sources, as evidenced by letters of commitment and/or true and complete copies of loan documents, and all of such financing shall close concurrently with the Closing. (f) Master Developer Work General Contractor. The general contractor for the Master Developer Work (the "Master Developer Work General Contractor") shall have been approved by the Executive Director. The Authority hereby approves Meridian Building Services, Inc. as the Master Developer Work General Contractor. (g) Master Developer Work Construction Contract. Authority shall have received a true and complete copy of a contract by and between Developer and the Master Developer Work General Contractor pursuant to which the Master Developer Work General Contractor has agreed to construct the Master Developer Work at a cost consistent with the costs set forth therefor in Project Budget for the Master Developer Work (the "Master Developer Work Construction Contract") and the Executive Director shall have approved said Master Developer Work Construction Contract. (h) Master Developer Work Construction Documents. Authority shall have approved the final plans, drawings and specifications for the Master Developer Work and Authority shall have received a full set thereof. (i) Completion Bond. If the lender (if any) providing financing for the Master Developer Work (the "Master Developer Work Construction Lender") requires that a completion bond be posted by the Master Developer Work General Contractor, then such completion bond shall name Authority as a co-obligee, unless the Master Developer Work Construction Lender provides a written objection thereof to Authority, indicating with specificity the basis for the objection. U) Completion Guaranty. If the Master Developer Work Construction Lender (if any) requires a completion guaranty from Developer, or any Affiliate thereof, then Authority shall have also received a completion guaranty from Developer in similar form and content, unless the Master Developer Work Construction Lender provides a written objection thereof to Authority, indicating with specificity the basis for the objection. 882/012782-0020 1li'f'b't1 !~~5119 -17-March 19, 2019 Item #3.1 (k) Gap Financing. Developer shall have deposited the sum of Four Hundred Eighty-Seven Thousand Dollars ($487,000) (the "Gap Financing") with Authority or provided a bond or other security in the amount of the Gap Financing reasonably acceptable to the Authority Executive Director. (I) City Permits. Developer shall have obtained all City permits required to complete the rough grading of the Property. (m) Master Developer Work to Commence. The Executive Director shall be reasonably satisfied that construction of the Master Developer Work will commence not later than thirty (30) days after the Closing and thereafter will be pursued to completion in a diligent and continuous manner. (n) Assignment of Master Developer Work Construction Documents. Developer shall have conditionally assigned to Authority the final construction documents for the Master Developer Work by an instrument substantially in the form attached hereto and incorporated herein as Attachment No. 6, which assignment shall be subordinated to any pledge or assignment to the Master Developer Work Construction Lender (if any). Developer shall have also delivered to Authority the written consent of the other Party to each such final construction document to said assignment in the form included as part of said Attachment No. 6, including, without limitation, to the use by Authority of the final construction documents, as well as the ideas, designs, and concepts contained within them. (o) Assignment of Master Developer Work Construction Contract. Developer shall have conditionally assigned to Authority the Master Developer Work Construction Contract by an instrument substantially in the form attached hereto and incorporated herein as Attachment No. 6, including obtaining the consent thereto of the Master Developer Work General Contractor, which assignment shall be subordinated to any pledge or assignment to the Master Developer Work Construction Lender (if any). (p) Request for Notice of Default. Escrow Holder shall be ready to record a request for notice of default pursuant to Civil Code Section 2924(b), requesting that any beneficiaries of liens securing the Master Developer Work financing notify Authority of any default under the instrument creating the lien (the "Request for Notice"). (q) Documents Executed. Developer shall have duly executed the Grant Deed, Authority Regulatory Agreement, Notice of Affordability, and Authority/Master Developer Work Construction Lender Subordination Agreement, with signatures acknowledged (as applicable) and deposited them into Escrow. (r) Developer's Acquisition of City Parcels. The escrow under the PSDA shall have closed and Developer shall have acquired fee title to the City Parcels. (s) Developer's Acquisition of Private Parcels. The escrow under the "Private Parcels Purchase Agreements" shall have closed and Developer shall have acquired fee title to the "Private Parcels" (as those terms are defined in the PSDA). 882/0\2782-0020 1li1f'b't' 3'!!~5119 -18- March 19, 2019 Item #3.1 (t) Settlement Statement. Authority shall have reasonably approved the Escrow Holder's final estimated closing/settlement statement. (u) Delivery by Developer. Developer shall have deposited all of the items into the Escrow required by Section 7.1. (v) Performance by Developer. Developer shall have performed all of its material obligations required to be performed by Developer under this Agreement prior to the Closing; and is not in default of any of its obligations under this Agreement. (w) Representations and Warranties. The representations of Developer contained in this Agreement shall be correct in all material respects as of the Closing as though made on and as of that date and, if requested by the Executive Director, Authority shall have received a certificate to that effect signed by Developer. (x) No Default. No Event of Default by Developer shall then exist, and no event shall then exist which, with the giving of notice or the passage of time or both, would constitute an Event of Default by Developer and, if requested by the Executive Director, Authority shall have received a certificate to that effect signed by Developer. 6.3 Conditions for Developer's Benefit. Developer's obligation to purchase the Property from Authority shall be subject to satisfaction of all of the following conditions precedent or Developer's written waiver of such conditions precedent in its sole and absolute discretion: (a) Land Use Entitlements. Developer shall have approved, or have been deemed to have approved, the Land Use Entitlements for the Project, in accordance with Section 4. (b) Condition of Property. Developer shall have approved, or have been deemed to have approved, the condition of the Property, in accordance with Section 5.1, and no material changes shall have occurred after the Effective Date with respect to the condition of the Property. (c) Evidence of Master Developer Work Financing. Developer shall have received commitments for all Master Developer Work financing, and all of such financing shall close concurrently with the Closing. (d) City Permits. Developer shall have obtained all City permits required to complete the rough grading of the Property. (e) Title Insurance. The Title Company shall be unconditionally committed to issue its AL TA owner's form policy of title insurance, with liability in the amount not less than the Purchase Price, showing fee title to the Property and fee title to the improvements located thereon vested in Developer, in the Condition of Property Title, with no other encumbrances or title exceptions, except (i) the lien of any financing obtained by Developer for the Master Developer Work, and (ii) the standard conditions and exceptions contained in an AL TA standard owner's policy of title insurance that is 882/012782-0020 1 ~!i'b'f' j'\H'1 " -19- March 19, 2019 Item #3.1 regularly issued by the Title Company in transactions similar to the one contemplated by this Agreement; provided, however that Developer shall have the right, at Developer's sole cost, to elect to obtain title endorsements and/or an extended coverage ALT A owner's policy (the "Developer Title Policy"). The Title Company shall provide Authority with a copy of Developer Title Policy. (f) No Termination. Developer shall not have timely elected to terminate the Escrow and this Agreement pursuant to the provisions in Section 5.1. (g) Land Use Entitlement Approval Date. The occurrence of the Land Use Entitlement Approval Date. (h) Delivery by Authority. Authority shall have deposited all of the items into the Escrow required by Section 7.2. (i) Settlement Statement. Developer shall have reasonably approved the Escrow Holder's final estimated closing/settlement statement. U) Authority Acquisition of the Property. Authority shall have acquired fee title to the Property. (k) Acquisition of Other Property. The escrow under the PDSA shall have closed, and Developer shall have acquired fee title to the "Residential Parcels," the "Retail Parcels," and the "Private Parcels," (as those terms are defined in the PDSA). (I) Property Vacant. The Property shall have been vacated and shall be free from occupancy. (m) Performance by Authority. Authority shall have performed all of its material obligations required to be performed by Authority under this Agreement prior to the Closing; and is not in default of any of its obligations under this Agreement. (n) No Default. No Event of Default by Authority shall then exist, and no event shall then exist which, with only the giving of notice or the passage of time or both, would constitute an Event of Default by Authority. 6.4 Developer Right to Terminate. If, by the time provided in the Schedule of Performance, any of the conditions set forth in Section 6.3 have not been satisfied, or waived by Developer, then Developer, provided that it is not then in material default under this Agreement (subject to the notice and cure provisions of Section 14.1 ), may terminate this Agreement by giving thirty (30) days' written notice to Authority. 6.5 Authority Right to Terminate. If, by the time provided in the Schedule of Performance, any of the conditions set forth in Section 6.2 have not been satisfied, or waived by Authority, then Authority, provided that it is not then in material default under this Agreement (subject to the notice and cure provisions of Section 14.1 ), may terminate this Agreement by giving thirty (30) days' written notice to Developer. 882/012782-0020 rnff 'li'f' :3':1~'11 ' -20- March 19, 2019 Item #3.1 6.6 Waiver of Conditions. The conditions set forth in Section 6.2 are for Authority's benefit only and the Executive Director may waive all or any part of such rights by written notice to Developer. The conditions set forth in Section 6.3 are for Developer's benefit only and Developer may waive all or any part of such rights by written notice to Authority. 7. CLOSING; ESCROW EXPENSES 7.1 Developer's Escrow Deposits. Following satisfaction or waiver of each of Developer's conditions to the Closing set forth in Section 6.3, at least one (1) business day prior to the Closing Date scheduled by the Escrow Holder in a writing delivered to each of the Parties, Developer shall deposit the following funds and documents into the Escrow and, concurrently, provide a copy of each such document to Authority: (a) Purchase Price. The Purchase Price, plus any additional funds required to be deposited into the Escrow by Developer under the terms of this Agreement to close the Escrow, all in immediately available funds; (b) Closing Documents. The Grant Deed, Authority Regulatory Agreement, Notice of Affordability, and Authority/Master Developer Work Construction Lender Subordination Agreement, with signatures acknowledged (as applicable); and (c) PCO Report. A Preliminary Change of Ownership Report executed by the authorized representative(s) of Developer ("PCO Report"). 7 .2 Authority's Escrow Deposits. Following satisfaction or waiver of each of Authority's conditions to Closing set forth in Section 6.2, at least one (1) business day prior to the Closing Date scheduled by the Escrow Holder in a writing delivered to each of the Parties, Authority shall deposit the following funds and documents into the Escrow and, concurrently, provide a copy of each such document to Developer: (a) Closing Documents. The Grant Deed, Authority Regulatory Agreement, Notice of Affordability, and Authority/Master Developer Work Construction Lender Subordination Agreement, with signatures acknowledged (as applicable); (b) FIRPTA Affidavit. The FIRPT A Affidavit completed and executed by the authorized representative( s) of Authority; and (c) Form 593. A Form 593 executed by the authorized representative(s) of Authority. 7.3 Closing. Upon receipt by the Escrow Holder of all funds and documents required to conduct the Closing in accordance with this Agreement, and when the conditions precedent described in Section 6.2 have been satisfied, or waived by the Executive Director, and the conditions precedent described in Section 6.3 have been satisfied, or waived by Developer, the Escrow Holder shall insert the Closing Date into the Grant Deed, Authority Regulatory Agreement, Notice of Affordability, and Authority/Master Developer Work Construction Lender Subordination Agreement and any 882/0\2782-0020 ~Wf'b't' j'!!~S/19 -21- March 19, 2019 Item #3.1 other documents Escrow Holder has received from Authority or Developer as appropriate, and take all of the following actions: (a) Recordation. Escrow Holder shall file the PCO Report with the County Recorder of San Diego County and record the following documents in the Official Records in the following order: (i) the Grant Deed; (ii) the Authority Regulatory Agreement; (iii) the Notice of Affordability; (iv) the Authority/Master Developer Work Construction Lender Subordination Agreement (if applicable); (v) the deed of trust securing the loan provided by the Master Developer Work Construction Lender (if any), and any other documents to be recorded in connection with such loan; (vi) the Request for Notice; and (vii) such other documents required to close the Escrow in accordance with this Agreement; (b) Deliveries to Authority. Escrow Holder shall deliver to Authority a conformed copy of each of the documents recorded pursuant to paragraph (a) above. (c) Deliveries to Developer. Escrow Holder shall deliver to Developer: (i) Developer Title Policy; (ii) The FIRPTA Report; (iii) The Form 593; and (iv) a conformed copy of each of the documents recorded pursuant to paragraph (a) above. (d) Purchase Price. Deliver the Purchase Price to Authority, less the sum of (i) the Independent Contract Consideration, and (ii) any other charges to the account of Authority, and return all remaining funds held by the Escrow Holder for the account of Developer to Developer, less Developer's share of the Escrow closing costs, and less any other charges chargeable to the account of Developer under the terms of this Agreement. 7.4 Closing. The Closing shall occur on or before the Outside Closing Date. If for any reason the Closing has not occurred on or before the Outside Closing Date, then any Party not then in default of this Agreement may cancel the Escrow and terminate this 8821012782-0020 fll~'b't' 3'!;l~'1 " -22- March 19, 2019 Item #3.1 Agreement, without liability to the other Party or any other person for such cancellation and termination, by delivering written notice of termination to both the other Party and the Escrow Holder and, thereafter, the Parties shall proceed pursuant to Section 7.5. Without limiting the right of either Party to cancel the Escrow and terminate this Agreement pursuant to the preceding sentence, if the Escrow does not close on or before the Escrow Closing Date, and neither Party has exercised its contractual right to cancel the Escrow and terminate this Agreement before such time, then the Escrow shall close as soon as reasonably possible following the first date on which the Escrow Holder is in a position to close the Escrow, pursuant to the terms and conditions of this Agreement. 7 .5 Escrow Cancellation Charges. If the Escrow fails to close due to Authority's material default under this Agreement, Authority shall pay all ordinary and reasonable cancellation charges relating to the Escrow and the Developer Title Policy. If the Escrow fails to close due to Developer's material default under this Agreement, or for any reason other than the material default of Authority, Developer shall pay all ordinary and reasonable cancellation charges relating to the Escrow and the Developer Title Policy. 7.6 Escrow Cancellation. If the Escrow is cancelled and this Agreement is terminated pursuant to a contractual right granted to a Party in this Agreement to cancel the Escrow and terminate this Agreement, other than due to the default of another Party, the Parties shall do each of the following: (a) Cancellation Instructions. The Parties shall, within three (3) business days following receipt of the Escrow Holder's written request, execute any reasonable Escrow cancellation instructions requested by the Escrow Holder; (b) Return of Funds and Documents. Within ten (10) days following receipt by the Parties of a settlement statement from the Escrow Holder of cancellation charges regarding the Escrow, and the Developer Title Policy, if any: (i) Developer or the Escrow Holder shall return to Authority any documents previously delivered by Authority to Developer or the Escrow Holder regarding the Escrow, (ii) Authority or the Escrow Holder shall return to Developer all documents previously delivered by Developer to Authority or the Escrow Holder regarding the Escrow; and (iii) the Escrow Holder shall return to Developer any funds deposited into the Escrow, except as otherwise provided in this Agreement, less the customary and reasonable Escrow and title order cancellation charges regarding the Escrow and the Developer Title Policy, if any. 7.7 Land Use Entitlement Claims: CEQA Claims. If any Land Use Entitlement Claims and/or CEQA Claims are taken or filed, then Developer shall have the right to elect to either defend the same or not defend the same, at Developer's cost, including, without limitation, all of the court costs, attorney fees, monetary awards, sanctions, attorney fee awards, expert witness and consulting fees, and the expenses of any and all financial or performance obligations resulting from the disposition of the legal action. If Developer elects to so defend the same, then Developer shall appoint counsel and direct strategy; provided, however, that such counsel shall be acceptable to Authority. If Developer elects not to so defend, then either Authority or Developer shall have the right to terminate this Agreement. 8821012782-0020 rn!'b't' 3'!!~'1 " -23- March 19, 2019 Item #3.1 7 .8 Escrow Closing Costs. Developer and Authority shall each pay half of the documentary transfer taxes, Escrow fees, and such other costs as the Escrow Holder may charge for the conduct of the Escrow. The Escrow Holder shall notify Developer and Authority of the costs to be borne by each of Developer and Authority at the Close of Escrow by delivering the Escrow Holder's estimated closing/settlement statement to both Authority and Developer, at least, four (4) business days prior to the Closing Date. Authority shall pay the premium charged by the Title Company for the Developer Title Policy, with standard coverage; provided, however, that Developer shall pay the costs of any endorsements or other supplements to the coverage of the Developer Title Policy that may be requested by Developer, including the additional cost for extended AL TA coverage, if such coverage is elected by Developer. Authority shall pay any and all recording fees, and any and all other charges, fees and taxes levied by a governmental authority relative to the conveyance of the Property through the Escrow. 7.9 Instruction to Escrow Holder Regarding Waiver of Transfer Taxes and Recording Fees. The Escrow Holder is hereby instructed to seek such waivers and exemptions from transfer taxes and recording fees as are available pursuant to Revenue and Taxation Code Section 11922 and Government Code Sections 6103 and 27383, respectively. 7.10 Broker's Commissions. Developer represents and warrants to Authority that Developer has not engaged any broker, agent or finder in connection with this Agreement, and Developer agrees to indemnify, protect, hold harmless, and defend the lndemnitees from any claim by any brokers, agents or finders retained by Developer. Authority represents and warrants to Developer that Authority has not engaged any broker, agent, or finder in connection with this Agreement, and Authority agrees to indemnify, protect, hold harmless, and defend Developer and its officers, officials, members, employees, representatives, agents, and volunteers from any claim by any brokers, agents, or finders retained by Authority. 8. OTHER ESCROW INSTRUCTIONS 8.1 Funds in Escrow. All funds received in the Escrow shall be deposited by the Escrow Holder in a general escrow account with any state or national bank doing business in the State of California and reasonably approved by the Executive Director and Developer, and such funds may be combined with other escrow funds of the Escrow Holder. All disbursements shall be made on the basis of a thirty (30) day month. 8.2 Failure to Close. If the Closing does not occur on or before the Outside Closing Date, either Party not then in default may, in writing, demand the return of its money, papers, or documents from the Escrow Holder. No demand for return shall be recognized until fifteen (15) days after the Escrow Holder (or the Party making such demand) shall have mailed copies of such demand to the other Party. Objections, if any, shall be raised by written notice to the Escrow Holder and to the other Party within the fifteen (15) day period, in which event the Escrow Holder is authorized to hold all money, papers and documents until instructed by mutual agreement of the Parties or, upon failure 882/0 l 2782-0020 1ijf'b'f7 j~~S/l9 -24- March 19, 2019 Item #3.1 thereof, by a court of competent jurisdiction. If no such demands are made, the Escrow Holder shall conduct the Closing as soon as possible. If objections are raised in the manner provided above, the Escrow Holder shall not be obligated to return any such money, papers or documents except upon the written instructions of both the Executive Director and Developer, or until the Party entitled thereto has been determined by a final decision of a court of competent jurisdiction. If no such objections are made within said fifteen (15) period, the Escrow Holder shall immediately return the demanded money, papers or documents. 8.3 Amendments. Any amendment to these Escrow instructions shall be in writing and signed by the Executive Director or legal counsel to Authority and Developer. At the time of any amendment, the Escrow Holder shall agree to carry out its duties as the Escrow Holder under such amendment. 8.4 Notices. All Notices from the Escrow Holder to Authority or Developer shall be given in the manner provided in Section 15. 8.5 Liability. The liability of the Escrow Holder under this Agreement is limited to performance of the obligations imposed upon it under Section 3, and Sections 6, 7 and 8 and such additional general or special instructions as may be prepared by the Escrow Holder and approved and executed by the Parties. 9. MASTER DEVELOPMENT WORK; TRANSFER AND ASSIGNMENT TO PARTNERSHIP 9.1 Land Use Approvals. Within the time set forth in the Schedule of Performance and as one of Authority's conditions to the Closing, Developer shall obtain all land use and other entitlements required for development of the Project, including, without limitation, approval of a Development Review and Tentative Map. 9.2 Completion of Master Developer Work. Subject to Section 18.12 below, Developer shall commence and complete construction of the Master Developer Work by the respective times established therefor in the Schedule of Performance. 9.3 Applicability of Article 11. All of the provisions of Article 11 shall be applicable to Developer's performance and construction of the Master Developer Work, except and only to the extent that a particular provision cannot reasonably apply to such work, with such determination to be made by the Executive Director, in his or her reasonable discretion. 9.4 Authority Conditions to Transfer and Assignment to Partnership. Developer has represented to Authority that Developer will perform and complete the Master Developer Work and thereafter transfer the Property, and transfer and assign its rights and obligations under this Agreement and the Authority Regulatory Agreement, to the Partnership. Notwithstanding any provisions to the contrary in this Agreement, Developer may only transfer the Property, and transfer and assign its rights and obligations under this Agreement and the Authority Regulatory Agreement, (a) to the Partnership, and (b) 882/012782-0020 1ij!f'b'f' j';!~S/19 -25- March 19, 2019 Item #3.1 at such time as all of the conditions set forth below have been satisfied, or waived by Authority. Any such waiver shall be in writing and shall be provided in Authority's sole and absolute discretion. The consummation of such transfers and assignment to the Partnership shall hereafter be referred to as the "Partnership Transfer/Financing Closing" and shall be conducted by Escrow Holder, either as a sub-escrow to the Escrow, or as a new escrow (either of the foregoing, the "Partnership Transfer/Financing Escrow"). Upon the Partnership Transfer/Financing Closing, the Partnership shall be the "Developer" hereunder. (a) Organizational Documents. The Executive Director shall have received and approved a copy of such portions of the organizational documents of the Partnership and the entities comprising the Partnership as the Executive Director deems reasonably necessary to document the power and authority of the Partnership to perform the obligations of Developer set forth in this Agreement, including, without limitation, a copy of the limited partnership agreement of the Partnership, as amended (the "Partnership Agreement"). The Partnership shall have made full disclosure to Authority of the names and addresses of all persons and entities that have a beneficial interest in the Partnership. (b) Insurance. The Partnership shall have submitted to Authority and Authority shall have approved the Partnership's evidence of the liability insurance required pursuant to Section 11.8 hereof. (c) Evidence of Project Financing. Developer shall have received a reservation of Tax Credits and an allocation of Tax-Exempt Bonds, and the Executive Director shall have received and reasonably approved commitments from all Project Financing sources, as evidenced by letters of commitment and/or true and complete copies of loan documents, and such financing shall be prepared to close concurrently with the Partnership Transfer/Financing Closing. The Executive Director shall be required to approve any such commitments provided they are from reputable entities on commercially reasonable terms. (d) General Contractor. The general contractor for the Project (the "General Contractor") shall have been approved by the Executive Director. The Authority hereby approves Emmerson Construction, Inc. as the General Contractor. (e) Construction Contract. Authority shall have received a true and complete copy of a contract by and between the Partnership and the General Contractor pursuant to which the General Contractor has agreed to construct the Project at a cost consistent with the costs set forth therefor in the Project Budget (the "Construction Contract") and the Executive Director shall have reasonably approved said Construction Contract. (f) Final Construction Documents. Authority shall have approved the Final Construction Documents for the Project and Authority shall have received a full set thereof. 882/0\2782-0020 1ij1f'b't' 3~~5119 -26- March 19, 2019 Item #3.1 (g) Completion Bond. If the Construction Lender or the Investor require that a completion bond be posted by the General Contractor, then such completion bond shall name Authority as a co-obligee. (h) Completion Guaranty. If the Construction Lender or the Investor require a completion guaranty from the Partnership, or any Affiliate thereof, then Authority shall have also received a completion guaranty from the Partnership in similar form and content. (i) Building Permit. The Building Permit for the Project shall have issued or shall be ready to issue subject only to the payment of applicable fees, the posting of required security, or both. (j) Construction to Commence. The Executive Director shall be reasonably satisfied that construction of the Project will commence not later than thirty (30) days after the Partnership Transfer/Financing Closing and thereafter will be pursued to completion in a diligent and continuous manner. (k) Assignment of Final Construction Documents. The Partnership shall have conditionally assigned to Authority (to be effective as of the Partnership Transfer/Financing Closing) the Final Construction Documents for the Project by an instrument substantially in the form attached hereto and incorporated herein as Attachment No. 6, which assignment shall be subordinated to any pledge or assignment to the Construction Lender. The Partnership shall have also delivered to Authority the written consent of the other party to each such Final Construction Document to said assignment in the form included as part of said Attachment No. 6, including, without limitation, to the use by Authority of the Final Construction Documents, as well as the ideas, designs, and concepts contained within them. (I) Assignment of Construction Contract. The Partnership shall have conditionally assigned to Authority (to be effective as of the Partnership Transfer/Financing Closing) the Construction Contract by an instrument substantially in the form attached hereto and incorporated herein as Attachment No. 6, including obtaining the consent thereto of the General Contractor, which assignment shall be subordinated to any pledge or assignment to the Construction Lender. (m) Management Plan. The Partnership shall have submitted a comprehensive management plan for the Project to the Executive Director in accordance with Section 7 of the Authority Regulatory Agreement and the Executive Director shall have reasonably approved the same. (n) Management Agreement. The Partnership shall have submitted an executed agreement by and between the Partnership and a property manager approved by Authority for management of the Project (the "Management Agreement"), which Management Agreement shall be consistent with this Agreement and the requirements of Section 7 of the Authority Regulatory Agreement, and the Executive Director shall have reasonably approved the same. 8821012782-0020 1~'f'b't'j'35119 -27- March 19, 2019 Item #3.1 (o) Resident Services Plan. The Partnership shall have submitted a detailed resident services plan for the Project to the Executive Director, including any specialized supportive services to be provided to targeted populations, if applicable, and the Executive Director shall have reasonably approved the same. (p) Request for Notice of Default. Escrow Holder shall be ready to record a request for notice of default pursuant to Civil Code Section 2924(b), requesting that any beneficiaries of liens securing the Project Financing notify Authority of any default under the instrument creating the lien (the "Partnership Transfer/Financing Closing Request for Notice"). (q) Documents Executed. Developer and the Partnership shall have duly executed (in recordable form) an assignment and assumption agreement in a form approved by Authority legal Counsel, with signatures acknowledged, pursuant to which Developer shall assign to the Partnership and the Partnership shall assume from Developer, all of Developer's rights and obligations under this Agreement, the Authority Regulatory Agreement, and the Notice of Affordability, and the Partnership shall have duly executed the Authority Note and Authority Deed of Trust, with signatures acknowledged (as applicable), and all of the foregoing documents shall have been deposited into the Partnership Transfer/Financing Escrow. (r) Title Policy. Title Company is prepared to issue a lender's policy of title insurance naming Authority as the insured, in a policy amount not less than the principal amount of Authority Loan, showing the Partnership as holding fee title to the Property and insuring the Authority Deed of Trust to be a valid lien on the Property subject only to exceptions approved by Authority (the "Authority Title Policy"). The Partnership shall be deemed to have approved the Project Documents to be recorded against the Property at the Partnership Transfer/Financing Closing. (s) Final Project Budget. Authority shall have received, approved, and initialed, a proposed final Project Budget, submitted by and initialed by Chelsea. Such final Project Budget shall replace, in its entirety, the preliminary version of the Project Budget attached to this Agreement on the Effective Date. (t) Total Project Cost. Nothing shall have come to the attention of Developer, the Partnership, and/or Authority to indicate that the Project cannot be completed at a cost consistent with the Project Budget and, if there has been such an indication, Developer and/or the Partnership (as applicable) has provided evidence, reasonably satisfactory to the Executive Director, of the availability of funding sources other than Authority to complete the Project. If Developer becomes aware of any such information, Developer shall promptly give notice thereof to Authority. (u) Representations and Warranties. The Partnership shall have submitted to the Executive Director a written certification, signed by the Partnership, containing the following representations and warranties: 8821012782-0020 rn~'b't' j~~'1 " -28- March 19, 2019 Item #3.1 (i) the Partnership represents and warrants that (a) it is validly existing and in good standing under the laws of the State of California, (b) it has all requisite authority to conduct its business and own its properties, (c) it has all requisite authority to execute of the documents listed in paragraph q above (collectively, the "Partnership Transfer/Financing Closing Documents"), and upon the Partnership Transfer/Financing Closing, to perform its obligations under this Agreement, (d) upon the Partnership Transfer/Financing Closing, this Agreement shall be binding upon the Partnership in accordance with its terms, and (e) the individuals executing the Partnership Transfer/Financing Closing Documents on behalf of the Partnership are duly authorized to execute and deliver such documents on behalf of the Partnership. (ii) the Partnership represents and warrants that there are no actions, lawsuits or proceedings pending or, to the best of the Partnership's knowledge, threatened against or affecting the Partnership, the adverse outcome of which could have a material adverse effect on the Partnership's ability to perform its obligations under this Agreement. (v) No Default. No Event of Default by Developer shall then exist, and no event shall then exist which, with the giving of notice or the passage of time or both, would constitute an Event of Default by Developer and, if requested by the Executive Director, Authority shall have received a certificate to that effect signed by Developer. 10. FINANCING PLAN FOR THE PROJECT 10.1 Financing Plan. It is contemplated that the Partnership (in its role as Developer) will finance the Project (the "Project Financing") through a combination of funds from the proceeds of the following: (a) Construction Loan. The Construction Loan; (b) 4% Tax Credits. Equity, consisting of equity raised by the syndication to reputable investors of state and/or federal low-income housing credit and obtained pursuant to 26 U.S.C. §42, in the anticipated amount of approximately Five Million Six Hundred Sixty-Nine Thousand Five Hundred Nine Dollars ($5,669,509) (the "Tax Credits"); (c) Authority Loan. The Authority Loan, as more particularly provided in Section 10.2 below; (d) Take-Out Loan. The Take-Out Loan; and (e) Master Developer Loan. A loan from Poway Commons to the Partnership in the approximate amount of Two Million Twenty-Two Thousand Dollars ($2,022,000), reflecting the financing of reimbursements payable by the Partnership to 882/0) 2782-0020 {!l~'b't' 3'!!~5119 -29- March 19, 2019 Item #3.1 Poway Commons for infrastructure costs incurred by Poway Commons for the benefit of the Project (the "Master Developer Loan"). Notwithstanding the foregoing, Developer shall cause the Partnership to continue to pursue additional sources of funds that may be available to assist with the costs of developing the Project, including, without limitation, funds from the San Diego Innovative Housing Trust Fund Program. To the extent Developer receives funding from any such additional source, the Authority Loan shall be reduced on a dollar-for-dollar basis by the amount of such additional funding, unless Developer provides evidence that the full amount of the Authority Loan is still required to make the Project financially feasible. 10.2 Authority Loan. Subject to the terms and conditions of this Agreement, Authority agrees to make a loan to the Partnership, in its role as Developer after the Partnership Transfer/Financing Closing, in an amount of up to Two Million Two Hundred Thousand Dollars ($2,200,000) (the "Authority Loan"). The Authority Loan is comprised of a cash loan in the amount of One Million Five Hundred Thousand Dollars ($1,500,000), and a loan in an amount of up to Seven Hundred Thousand Dollars ($700,000) to cover the cost of impact fees payable for the Project. The Authority Loan shall be evidenced by the Authority Note, and shall be secured by the Authority Deed of Trust, at the Partnership Transfer/Financing Closing. If the Partnership provides evidence satisfactory to the Executive Director in his or her reasonable discretion that some or all of the Gap Financing is necessary to make the Project financially viable, Authority shall retain such portion of the Gap Financing as is necessary to fund the difference between the amount of the Project Financing and the total Project Costs, and the Authority Loan shall be increased by such amount. If at the Partnership Transfer/Finance Closing, the Partnership determines that no portion, or less than all, of the Gap Financing is necessary for Project financial feasibility, with the approval of the Executive Director, the Authority shall return any such unneeded portion of the Gap Financing to Poway Commons. 10.3 Applications to CDLAC and TCAC . Within the time set forth in the Schedule of Performance, Developer shall cause the Partnership to (i)(a) prepare for filing in the name of the California Municipal Finance Authority or other reputable issuer acceptable to Authority a complete application to CDLAC for an allocation for the Tax-Exempt Bonds; and (b) apply to reputable institutional lenders for the third party credit enhancement or private placement of the Tax-Exempt Bonds in order to provide the Construction Loan and Take-Out Loan for the Project; and (ii)(a) prepare and submit a complete application to TCAC for an allocation of 4% Tax Credits; and (b) apply to reputable institutional investors and syndicators qualified to act as the Investor. Developer agrees to promptly submit to Authority all of the following documents not less than ten (10) days prior to submittal by the Partnership to TCAC or other applicable body or when such documents are received by the Partnership, as applicable (any documents submitted prior to the Effective Date of this Agreement shall also have been submitted by Developer to Authority and reviewed by Authority prior to the Effective Date of this Agreement): 882/012782-0020 1tiff'b'f1 a'!B"19 -30- March 19, 2019 Item #3.1 (1) A true and correct copy of the preliminary reservation letter from TCAC, a copy of the letter of intent from the Investor reflecting the total amount of the syndication proceeds and the timing of the payment of such proceeds. (2) A complete copy of the Tax Credit Regulatory Agreement (4 California Code of Regulations§ 10340(c)). (As more fully discussed in Section 4.14 of Authority Regulatory Agreement, should Authority be prevented by a final order of a court of competent jurisdiction, applicable and binding appellate opinion, or regulatory body with jurisdiction from enforcing, for any reason, the affordability restrictions set forth in this Agreement, Authority shall be a third-party beneficiary under said agreement and shall have full authority to enforce any breach or default by the Partnership, in its role as Developer thereunder, in the same manner as though it were a breach or default under this Agreement.) (3) Complete copies of all correspondence or transmittals from TCAC or other jurisdiction (such as the Internal Revenue Service) containing any notification regarding the Project's noncompliance with applicable provisions of the Tax Credit Program. 10.4 Project Budget. The Project Budget includes all of the following: (i) a detailed budget; (ii) a Sources and Uses of Funds Statement; (iii) a Cash Flow Projection; and (iv) a First Year Operating Budget. 10.5 Developer Submittals. Promptly upon the Partnership's receipt of a notification of an award of any of the financing described in the Project Budget, Developer shall submit to the Executive Director copies of all of the correspondence and other documentation received by the Partnership in connection with the same. Within five (5) days after the Effective Date, Developer shall provide to Authority a copy of Chelsea's most recently prepared Annual Financial Statement, and a copy of Chelsea's most recent internally prepared, unaudited financial statement, which shall include a balance sheet, income statement, statement of retained earnings, statement of cash flows, and footnotes thereto, prepared in accordance with generally accepted accounting principles consistently applied. 10.6 Financing Commitments. Not later than the time provided in the Schedule of Performance, Developer shall submit to the Executive Director for approval preliminary commitments obtained by Chelsea for the Project Financing, including, without limitation, bids received from qualified parties for the Tax Credits. The Executive Director shall be required to approve any such commitments provided they are from reputable entities on commercially reasonable terms. 11. DEVELOPMENT OF THE PROJECT 11.1 Scope of Development. Developer shall construct the Project on the Property in accordance with all applicable Governmental Requirements, the approved 882/0\2782-0020 1 ij ''b't' 3'!1~5119 -31- March 19, 2019 Item #3.1 Land Use Entitlements, and the Scope of Development. In the event of any conflict between the approved Land Use Entitlements and the Scope of Development, the approved Land Use Entitlements shall govern and control. Subject to Section 17.12 below, Developer shall commence and complete construction of the Project on the Property by the respective times established therefor in the Schedule of Performance. The Scope of Development shall be deemed to include any plans and specifications submitted to the Authority and/or Authority for approval, and shall incorporate or show compliance with all mitigation measures. 11.2 Architectural Plans. Within the time set forth in the Schedule of Performance, Developer shall prepare or cause to be prepared and submit to the City and to Authority for review and approval the architectural plans and related documents for the Project, and Developer shall exercise reasonable diligence to obtain the City's and Authority's approval of same. The architectural plans shall include the sizes, heights, and locations of all buildings; building elevations; construction materials; construction colors; site plan configuration/dimensions; parking; conceptual landscape and irrigation plan; and lighting concept. 11.3 Final Construction Drawings. Within the lime set forth in the Schedule of Performance, Developer shall submit or cause to be submitted to the City and to Authority for review and approval a complete set of final construction drawings, plans and specifications for the Project, in conformity with the previously approved architectural plans. The final plans and drawings shall contain all information required to obtain a Building Permit. 11.4 Additional Governmental Permits and Approvals. (a) Before commencement of construction or development of any buildings, structures or other works of improvement upon the Property by Developer, Developer shall, at its own expense, secure or cause to be secured any and all permits and approvals not included in the Land Use Entitlements which may be required by the City or any other governmental agency affected by or with jurisdiction over such construction, development or work. (b) The landscaping and finish grading plans shall be prepared by a professional landscape architect or registered civil engineer who may be the same firm as Developer's architect or civil engineer. During the preparation of all drawings and plans, staff of Authority and Developer shall hold regular progress meetings to coordinate the preparation of, submission to, and review of drawings, plans and related documents by the City and by Authority. The staff of Authority and Developer shall communicate and consult informally as frequently as is necessary to insure that the formal submittal of any documents to the City and to Authority can receive prompt and speedy consideration. Developer shall be responsible to cause representatives of the Partnership to attend such meetings and participate in any such communications. 882/012782-0020 1ti~'b't' j'lj~5119 -32-March 19, 2019 Item #3.1 (c) Developer shall pay or cause to be paid all necessary fees and timely submit or cause to be submitted to the City Final Construction Documents with final corrections required by the City to obtain a Building Permit. 11.5 Review and Approval of Plans. Drawings. and Related Documents. If Authority determines that any submittal by Developer is not substantially complete or not in accordance with procedures, such tender shall not be deemed to constitute a submittal for purposes of satisfying the Schedule of Performance. If Developer desires to make any changes in the construction plans after their approval by Authority, Developer shall submit or cause to be submitted the proposed change to Authority for approval. If the construction plans, as modified by the proposed change, conform to the requirements of this Section 11.5, the Land Use Entitlements, the Scope of Development, and all Governmental Requirements, Authority shall approve the proposed change, and shall notify Developer in writing within thirty (30) days after submission to Authority. 11.6 Cost of Development. Developer acknowledges and agrees that all Project Costs shall be borne exclusively by Developer. Developer shall also bear all costs related to discharging the duties of Developer set forth in this Agreement. Developer shall also be responsible for all fees associated with development of the Project, including, but not limited to, development impact fees. 11. 7 Indemnity. Developer shall defend (by counsel satisfactory to Authority), assume all responsibility for and hold the lndemnitees harmless from all claims or suits for, and damages to, property and injuries to persons, including accidental death (including expert witness fees, attorney's fees and costs), which may be caused by the activities or performance of Developer or any of Developer's employees, agents, representatives, contractors, or subcontractors under or with respect to (i) this Agreement, (ii) the making of the Authority Loan; (iii) a claim, demand or cause of action that any person has or asserts against Developer; (iv) any act or omission of Developer, any of Developer's contractors, subcontractors or material suppliers, engineers, architects or other persons with respect to the Property; or (v) the ownership, occupancy or use of the Property by Developer, whether such damage shall accrue or be discovered before or after termination of this Agreement. The obligations and indemnifications in this Section 11 shall constitute covenants running with the land. 11.8 Insurance Requirements. (a) Commencing on the date of the Closing and continuing in perpetuity, Developer shall procure and maintain, at its sole cost and expense, in a form and content satisfactory to the Executive Director, the following policies of insurance: 882/012782-0020 fll!'b't' j~~51] 9 (i) Commercial General Liability Insurance covering bodily injury, property damage, personal injury and advertising injury written on a per-occurrence and not a claims-made basis containing the following minimum limits: (i) general aggregate limit of Five Million Dollars ($5,000,000); (ii) products-completed operations aggregate limit of Three Million Dollars ($3,000,000); -33- March 19. 2019 Item #3.1 (iii) personal and advertising injury limit of Three Million Dollars ($3,000,000); and (iv) each occurrence limit of Three Million Dollars ($3,000,000). Said policy shall include the following coverages: (i) blanket contractual liability (specifically covering the indemnification clause contained in Section 11. 7 hereof); (ii) products and completed operations; (iii) independent contractors; (iv) Owner's broad form property damage; (v) severability of interest; (vi) cross liability; and (vii) property damage liability arising out of the so-called "XCU" hazards (explosion, collapse and underground hazards). The policy shall be endorsed to have the general aggregate apply to this Project only. (ii) A policy of worker's compensation insurance in such amount as will fully comply with the laws of the State of California and which shall indemnify, insure, and provide legal defense for Authority and Developer against any loss, claim or damage arising from any injuries or occupational diseases occurring to any worker employed by or any persons retained by Developer in the course of carrying out the work or services contemplated in this Agreement, and Employers Liability Insurance in an amount not less than One Million Dollars ($1,000,000) combined single limit for all damages arising from each accident or occupational disease. (iii) A policy of comprehensive automobile liability insurance written on a per-occurrence basis in an amount not less than Two Million Dollars ($2,000,000) combined single limit covering all owned, non-owned, leased and hired vehicles used in connection with the work. (b) Commencing on the date of the Closing and continuing until Authority issues a Release of Construction Covenants for the Project, Developer shall procure and maintain, at its sole cost and expense, in a form and content reasonably satisfactory to the Executive Director, Builder's Risk (course of construction) insurance coverage in an amount equal to the full cost of the hard construction costs of the Project. Such insurance shall cover, at a minimum: all work, materials, and equipment to be incorporated into the Project; the Project during construction; the completed Project until such time as (i) the Authority issues a final certificate of occupancy, and (ii) Authority issues a Release of Construction Covenants, for the Project, and storage and transportation risks. Such insurance shall protect/insure the interests of Developer/owner and all of Developer's contractor(s), and subcontractors, as each of their interests may appear. If such insurance includes an exclusion for "design error," such exclusion shall only be for the object or portion which failed. Authority shall be a loss payee under such policy or policies and such insurance shall contain a replacement cost endorsement. (c) Prior to commencing any activities hereunder, Developer shall cause any general contractor with whom it has contracted for the performance of work on the 882/012782-0020 1tiit'b'f1 j,35119 -34- March 19, 2019 Item #3.1 Property to secure and thereafter to maintain insurance that satisfies all of the requirements of this Section 11.8. (d) Commencing on the date Authority issues a Release of Construction Covenants, and continuing in perpetuity, Developer shall procure and maintain, at its sole cost and expense, in a form and content satisfactory to the Executive Director, the following types of insurance: (i) Insurance against fire, extended coverage, vandalism, and malicious mischief, and such other additional perils, hazards, and risks as now are or may be included in the standard "all risk" form in general use in San Diego County, California, with the standard form fire insurance coverage in an amount equal to full actual replacement cost thereof, as the same may change from time to time. The above insurance policy or policies shall include coverage for earthquakes to the extent generally and commercially available at commercially reasonable rates, if such insurance is generally obtained for affordable housing developments in the Counties of San Diego and Orange County. Authority shall be a loss payee under such policy or policies and such insurance shall contain a replacement cost endorsement. (ii) Business interruption and extra expense insurance to protect Developer and Authority covering loss of revenues and/or extra expense incurred by reason of the total or partial suspension or delay of, or interruption in, the operation of the Project caused by loss or damage to, or destruction of, any part of the insurable real property structures or equipment as a result of the perils insured against under the all risk physical damage insurance. covering a period of suspension, delay or interruption of at least twelve (12) months, in an amount not less than the amount required to cover such business interruption and/or extra expense loss during such period. (iii) Boiler and machinery insurance in the aggregate amount of the full replacement value of the equipment typically covered by such insurance. (e) The following additional requirements shall apply to all of the above policies of insurance: 882/012782-0020 1ij!f'b'f7 j'Jl~S/19 (i) All of the above policies of insurance shall be primary insurance and, except the Worker's Compensation, Employer Liability insurance, and automobile liability insurance, shall name the lndemnitees as additional insureds on an ISO Form CG 20:10 (current version) or substantially similar form and not an ISO Form CG 20:09. The insurer shall waive all rights of subrogation and -35- March 19, 2019 Item #3.1 contribution it may have against the lndemnitees and their respective insurers. All of said policies of insurance shall provide that said insurance may not be amended or cancelled without providing thirty (30) days' prior written notice to Authority. In the event any of said policies of insurance are cancelled, Developer shall, prior to the cancellation date, submit new evidence of insurance in conformance with this Section to the Executive Director. Not later than the Effective Date, Developer shall provide the Executive Director with Certificates of Insurance or appropriate insurance binders evidencing the above insurance coverages and said Certificates of Insurance or binders shall be subject to the reasonable approval of the Executive Director. (ii) The policies of insurance required by this Agreement shall be satisfactory only if issued by companies of recognized good standing authorized to do business in California, rated "A-" or better in the most recent edition of Best Rating Guide, The Key Rating Guide or in the Federal Register, and only if they are of a financial category Class VII or better, unless such requirements are waived by the Executive Director due to unique circumstances. (iii) The Developer agrees that the provisions of this Section shall not be construed as limiting in any way Authority's right to indemnification or the extent to which Developer may be held responsible for the payment of damages to any persons or property resulting from Developer's activities or the activities of any person or persons for which Developer is otherwise responsible. 11.9 Remedies for Defaults Re: Insurance. In addition to any other remedies Authority may have, if Developer commits a default hereunder by failing to provide or maintain any insurance policies or policy endorsements to the extent and within the time herein required, Authority may at its sole option, obtain such insurance and invoice the Developer for the amount of said premium. Exercise of the remedy set forth herein, however, is an alternative to other remedies Authority may have and is not the exclusive remedy for Developer's failure to maintain insurance or secure appropriate endorsements. 11.10 Obligation to Repair and Restore Damage Due to Casualty Covered by Insurance. If the Project shall be totally or partially destroyed or rendered uninhabitable by fire or other casualty required to be insured against by Developer, Developer shall, subject to the rights of the Construction Lender, promptly proceed to obtain all available insurance proceeds and, to the extent proceeds are available, take all steps necessary to begin reconstruction and, immediately upon receipt of insurance proceeds, to promptly and diligently commence the repair or replacement of the Project to substantially the same condition as it existed prior to the casualty, and Developer shall complete or cause to be completed the same as soon as possible thereafter so that the Project can be operated in accordance with this Agreement. Authority shall cooperate with Developer, 882/012782-0020 1tlf'b't' j~~5/l 9 -36- March 19, 2019 Item #3.1 at no expense to Authority, in an effort to obtain any governmental permits required for such repair, replacement, or restoration. 11.11 Rights of Access. For purposes of assuring compliance with this Agreement, representatives of Authority shall have the right of access to the Property without charges or fees, at normal business hours during the construction of the Project (subject to reasonable job safety rules as may be imposed by Developer, the Master Developer Work General Contractor, or the General Contractor (as applicable)), including, but not limited to, the inspection of the work being performed in constructing the Project, so long as they comply with all safety rules. Such representatives of Authority shall be those who are so identified in writing by the Executive Director. 11.12 Compliance with Laws; Compliance with Prevailing Wage Laws. (a) Compliance with Laws. Developer shall carry out the construction, development and operation of the Project in conformity with all Governmental Requirements, including without limitation all applicable labor standards, City zoning and development standards, building, plumbing, mechanical and electrical codes, and all applicable disabled and handicapped access requirements, including without limitation the Americans With Disabilities Act, 42 U.S.C. Section 12101, et seq., Government Code Section 4450, et seq., Government Code Section 11135, et seq., and the Unruh Civil Rights Act, Civil Code Section 51, et seq. 882/012782-0020 1ti¥'b't' 3'\B'1 " (b) Compliance with Prevailing Wage Laws. (i) Developer shall carry out the construction through completion of the Project and the overall development of the Property in conformity with all applicable Governmental Requirements relating to the payment of prevailing wages and compliance with prevailing wage rules, including, without limitation, if applicable, the requirements to pay prevailing wages under federal law (the Davis-Bacon Act, 40 U.S.C. Section 3141, et seq., and the regulations promulgated thereunder set forth at 29 CFR Part 1 (collectively, "Davis-Bacon")) and California law (Labor Code Section 1720, et seq.) ("California Prevailing Wage Law"). The Parties acknowledge that a financing structure utilizing certain federal and/or state funding sources and financing scenarios may trigger compliance with applicable state and federal prevailing wage laws and regulations. Developer shall determine the applicability of federal, state, and local prevailing wage laws based upon the final financing structure and sources of funding of the Project, as approved by the Executive Director. (ii) Developer shall be solely responsible, expressly or impliedly and legally and financially, for determining and effectuating compliance with all applicable federal, state, and local public works requirements, prevailing wage laws, and labor laws -37- March 19, 2019 Item #3.1 882/012782-0020 1ti1f'b't' 3~~S/J 9 and standards, and Authority makes no representation, either legally and/or financially, as to the applicability or non-applicability of any federal, state, and local laws to the construction of the Project. Developer expressly, knowingly, and voluntarily acknowledges and agrees that Authority has not previously represented to Developer or to any representative, agent, or Affiliate of Developer, or any contractor(s) or any subcontractor(s) for the construction or development of the Project, in writing or otherwise, in a call for bids or otherwise, that the work and construction of the Project is (or is not) a "public work," as defined in Section 1720 of the Labor Code or under Davis-Bacon. (iii) Developer knowingly and voluntarily agrees that Developer shall have the obligation to provide any and all disclosures or identifications as required by Labor Code Section 1781 and/or by Davis-Bacon, as the same may be amended from time to time, or any other similar law or regulation. Developer shall indemnify, protect, pay for, defend, and hold harmless the lndemnitees, with legal counsel reasonably acceptable to Authority, from and against any and all loss, liability, damage, claim, cost, expense, and/or "increased costs" (including reasonable attorney's fees, court and litigation costs, and fees of expert witnesses) which, in connection with the development, construction (as defined by applicable law) and/or operation of the Project, including, without limitation, any and all public works (as defined by applicable law), results or arises in any way from any of the following: (i) the noncompliance by Developer or its contractor with any applicable local, state, and/or federal law or regulation, including, without limitation, any applicable federal and/or state labor laws or regulations (including, without limitation, if applicable, the requirement to pay state and/or federal prevailing wages and hire apprentices); (ii) the implementation of Section 1781 of the Labor Code and/or of Davis-Bacon, as the same may be amended from time to time, or any other similar law or regulation; and/or (iii) failure by Developer to provide any required disclosure or identification as required by Labor Code Section 1781 and/or by Davis-Bacon, as the same may be amended from time to time, or any other similar law or regulation. It is agreed by the Parties that, in connection with the development and construction (as defined by applicable law or regulation) of the Project, including, without limitation, any and all public works (as defined by applicable law or regulation), Developer shall bear all risks of payment or non- payment of prevailing wages under applicable federal, state, and local law or regulation and/or the implementation of Labor Code Section 1781 and/or by Davis-Bacon, as the same may be amended from time to time, and/or any other similar law or regulation. The foregoing indemnity shall survive termination of -38- March 19, 2019 Item #3.1 this Agreement and shall continue after completion of the construction and development of the Project by Developer. (iv) "Increased costs," as used in this Section 11.12, shall have the meaning ascribed to it in Labor Code Section 1781, as the same may be amended from time to time. 11.13 Anti-Discrimination. Developer for itself and its successors and assigns, agrees, that in the construction of the Project on the Property or other performance under this Agreement, Developer shall not discriminate against any employee or applicant for employment on any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955 and Section 12955.2 of the Government Code. Notwithstanding the immediately preceding sentence, with respect to familial status, the immediately preceding sentence shall not be construed to apply to housing for older persons, as defined in Section 12955.9 of the Government Code. With respect to familial status, nothing in the immediately preceding sentence shall be construed to affect Sections 51.2, 51.3, 51.4, 51.10, 51.11, and 799.5 of the Civil Code, relating to housing for senior citizens. Subdivision (d) of Section 51, Section 4760, and Section 6714 of the Civil Code, and subdivisions (n), (o), and (p) of Section 12955 of the Government Code shall apply to the immediately preceding sentence. 11.14 Taxes and Assessments. After the Closing, Developer shall pay prior to delinquency all real estate taxes and assessments on the Property so long as Developer retains any interest therein. Notwithstanding the above, Developer shall have the right to contest the validity or amounts of any tax, assessment, or encumbrance available to Developer in respect thereto, or obtain any available exemptions. 11.15 Right of Authority to Satisfy Other Liens on the Property(s). At any time prior to the completion of construction, and after Developer has had written notice and has failed after a reasonable time, but in any event not less than twenty (20) days, to challenge, cure, adequately bond against, or satisfy any liens or encumbrances on the Property which are not otherwise permitted under this Agreement, Authority shall have the right but no obligation to satisfy any such liens or encumbrances. Notwithstanding the above, Developer shall have the right to contest the validity or amounts of any tax, assessment, or encumbrance available to Developer in respect thereto. 11.16 Non-liability of Authority. Developer acknowledges and agrees that: (a) Authority neither undertakes nor assumes any responsibility to review, inspect, supervise, approve (other than for aesthetics) or inform Developer of any matter in connection with the Project, including matters relating to: (i) the Final Construction Documents, (ii) architects, contractors, subcontractors and materialmen, or the workmanship of or materials used by any of them, and/or (iii) the progress of the Project and its conformity with the Final Construction Documents; and Developer shall rely entirely on its own judgment with respect to such matters and acknowledges that any 882/012782-0020 1ti~'b'f1 j,35119 -39- March 19, 2019 Item #3.1 review, inspection, supervision, approval or information supplied to Developer by Authority in connection with such matters is solely for the protection of Authority and that neither Developer nor any third party is entitled to rely on it; (b) Authority is not a partner, joint venturer, alter-ego, manager, controlling person or other business associate or participant of any kind of Developer and Authority does not intend to ever assume any such status; and Authority shall not be deemed responsible for or a participant in any acts, omissions or decisions of Developer; (c) Authority shall not be directly or indirectly liable or responsible for any loss or injury of any kind to any person or property resulting from any construction on, or occupancy or use of, the Property whether arising from: (i) any defect in any building, grading, landscaping or other onsite or offsite improvement; (ii) any act or omission of Developer or any of Developer's agents, employees, contractors, licensees or invitees; or (iii) from and after the Closing any accident on the Property or any fire or other casualty or hazard thereon not caused by the lndemnitees; and (d) By accepting or approving anything required to be performed or given to Authority under this Agreement, including any certificate, financial statement, survey, appraisal or insurance policy, Authority shall not be deemed to have warranted or represented the sufficiency or legal effect of the same, and no such acceptance or approval shall constitute a warranty or representation by Authority to anyone. 11.17 Release of Construction Covenants. Promptly after completion of construction of the Project by Developer in conformity with this Agreement, Authority shall furnish Developer with a Release of Construction Covenants upon written request therefor by Developer. Authority shall not unreasonably withhold such Release of Construction Covenants. Such Release of Construction Covenants shall be a conclusive determination of satisfactory completion of the construction required by this Agreement and the Release of Construction Covenants shall so state. The Release of Construction Covenants shall be in the form attached hereto as Attachment No. 12 or such other similar form as to permit it to be recorded in the Official Records. If Authority refuses or fails to furnish a Release of Construction Covenants for the Project after written request from Developer, Authority shall, within fifteen (15) days of written request therefor, provide Developer with a written statement of the reasons Authority refused or failed to furnish the requested Release of Construction Covenants. The statement shall also contain Authority's opinion of the actions Developer must take to obtain the Release of Construction Covenants. If the reason for such refusal is confined to the immediate unavailability of specific items of materials for landscaping or other minor "punch list" items, Authority shall issue its Release of Construction Covenants upon the posting of cash, a bond, or other security acceptable to Authority in Authority's sole discretion by Developer with Authority in an amount representing the fair value of the work not yet completed, and Developer shall thereafter complete the "punch list" work with reasonable diligence and in no event later than sixty (60) days after Authority's issuance of the Release of Construction Covenants. A Release of Construction Covenants shall not constitute evidence of compliance with or satisfaction of any obligation of Developer to any holder of any mortgage or any insurer of a mortgage securing money loaned to 8821012782-0020 1~ff'b't' j'!z~5119 -40- March 19, 2019 Item #3.1 finance the improvements, or any part of this Agreement, or a release of any obligations under this Agreement which survives issuance of the Release of Construction Covenants. A Release of Construction Covenants is not a notice of completion as referred to in the California Civil Code Section 3093. 11.18 Developer Fee. The Parties acknowledge and agree that an Affiliate of Chelsea shall be entitled to the maximum development fee permitted by TCAC for developing the Project, the amount of which shall be set forth in the Project Budget. 11.19 Cost Savings Obligation. Subject to the requirements of TCAC and other lenders providing loans to the Project that have been approved by Authority, Developer hereby agrees to provide and pay to each of Authority and Poway Commons a "Cost Savings" payment for the Project in an amount to be determined based on the "Audit" (as those terms are described in subparagraph (a) below) to be conducted upon completion of construction of the Project. (a) Audit to Determine Cost Savings Amount. The actual amount of Cost Savings to be paid to Authority and Poway Commons shall be determined after the Audit, as hereafter described, and the amount of such Cost Savings shall be equal to the amount by which the total sources of permanent financing for the Project (which financing includes, but is not limited to, the Authority Loan, the Take-Out Loan, the Master Developer Loan, the Gap Financing (to the extent applicable) and the equity raised by the sale of the Tax Credits) exceed the costs of development incurred for the Project (which costs include, but are not limited to, the hard and soft costs incurred by Developer to perform predevelopment activities and construct the Project, and the amount spent to reduce the principal balance of the Construction Loan to the principal balance of the Take- Out Loan). Within sixty (60) days following the receipt of the final equity installment from the Investor, Developer shall cause its certified public accountant(s) to perform a final audit of the costs of development of the Project in accordance with the requirements of the Tax Credits and generally accepted accounting principles ("GAAP") and generally accepted auditing standards (herein referred to as "Audit"). If the Audit determines that the total sources of permanent financing for the Project (which financing includes, but is not limited to, the Authority Loan, the Take-Out Loan, the Master Developer Loan, the Gap Financing (to the extent applicable) and the equity raised by the sale of the Tax Credits) exceed Developer's total costs to develop the Project (which costs include, but are not limited to, the hard and soft costs incurred by Developer to perform predevelopment activities and construct the Project, and the amount spent to reduce the principal balance of the Construction Loan to the principal balance of the Take-Out Loan), such excess shall be considered the "Cost Savings" for the Project. Notwithstanding anything to the contrary in this Section 11.19, the phrase "the hard and soft costs incurred by Developer to perform predevelopment activities and construct the Project" shall not include any costs incurred by Poway Commons, LLC ("Poway Commons"). (b) Cost Savings Payment as Payment of Principal on Authority Loan; Master Developer Share. Subject to the requirements of TCAC and other lenders providing loans to the Project that have been approved by Authority, the Cost Savings for the Project, once determined by the Audit pursuant to Section 10.8(a) above and subject 882/012782-0020 Wf'b't' :l'!B'11 ' -41- March 19, 2019 Item #3.1 to Section 10.8(c) below, shall be allocated between Authority and Poway Commons, in its capacity as the master developer, as follows: (i) to Poway Commons, to the extent of the Gap Financing, and (ii) if there are Cost Savings remaining after payment pursuant to the foregoing clause (i), (a) Fifty percent (50%) of such remaining Cost Savings for the Project shall be paid by Developer to Authority and allocated and credited as a principal payment on the Authority Loan, as and when paid; and (b) fifty percent (50%) of such remaining Cost Savings for the Project shall be paid by Developer to Poway Commons, to be utilized by Poway Commons for repayment of its Master Developer Loan. (c) Timing of Payment of Cost Savings. The Cost Savings for the Project shall become due and payable by Developer to Authority and Poway Commons, as set forth in Section 11.19(b) above, upon the later of (i) one hundred twenty (120) days after receipt by Developer of the final Tax Credit equity, and (ii) completion of construction of the Project, as evidenced by Authority's issuance of a Release of Construction Covenants. 11.20 Authority's Right to Reacquire Property. Notwithstanding anything in this Agreement to the contrary, in the event Authority's conditions precedent to the Partnership Transfer/Financing Closing have not been satisfied, or waived by Authority, and the Partnership Transfer/Financing Closing has not occurred, by the date that is twelve (12) months after the Closing Date (the "Outside Partnership Transfer/Financing Closing Date"), Authority shall reacquire the Property pursuant to the terms of this Section 11.20. Notwithstanding the foregoing, if at any time prior to the Outside Partnership Transfer/Financing Closing Date, Developer discovers that the Partnership will not be able to satisfy all of Authority's conditions precedent to the Partnership Transfer/Financing Closing by the Outside Partnership Transfer/Financing Closing Date, Developer shall promptly notify Authority, in writing, of such discovery. Developer's notice may request an extension to the Outside Partnership transfer/Financing Closing Date and/or permission to transfer the Property and transfer and assign Developer's rights and obligations under this Agreement and under the Authority Regulatory Agreement to another limited partnership with experience in developing and operating affordable housing with requirements and restrictions similar to those set forth in the Authority Regulatory Agreement. Authority may grant or deny any such request in its sole and absolute discretion, in a written response to Developer. If Authority grants any such request, Authority shall designate in its written response the new Outside Partnership Transfer/Financing Closing Date, and the Parties shall reasonably cooperate to execute an implementation agreement or amendment to this Agreement, as necessary to effect Authority's determination. (a) Within ten (10) business days after the Outside Partnership Transfer/Financing Closing Date, Developer and Authority shall cause an escrow ("Authority's Reacquisition Escrow") to be opened with the Escrow Holder for the conveyance of the Property by Developer to Authority. The Authority's Reacquisition Escrow shall be deemed opened on the date that Authority delivers to Escrow Holder a copy of this Section 11.20 ("Opening of Authority's Reacquisition Escrow"). Escrow 8821012782-0020 1¥,'b'f' 3'!!~5119 -42- March 19, 2019 Item #3.1 Holder shall notify Developer and Authority in writing of the date of the Opening of Authority's Reacquisition Escrow promptly following the opening of Authority's Reacquisition Escrow. (b) Authority's Reacquisition Escrow shall close on or before the date that is sixty (60) days after the Opening of Authority's Reacquisition Escrow ("Authority's Reacquisition Escrow Closing Date"). The terms "Close of Authority's Reacquisition Escrow" and/or the "Authority's Reacquisition Escrow Closing" shall mean the date the "Authority's Reacquisition Grant Deed" (as that term is defined in paragraph (f) below) conveying fee title to the Property to Authority is recorded in the Official Records. Possession of the Property shall be delivered to Authority at the Close of Authority's Reacquisition Escrow free and clear of all tenancies, lessees, occupants, and all possessory rights of any kind or nature. (c) This Section 11.20, together with any standard instructions of Escrow Holder, shall constitute the joint escrow instructions of Developer and Authority to Escrow Holder as well as an agreement between Developer and Authority with respect to Developer's conveyance to Authority of the Property. In the event of any conflict between the provisions of this Section 11.20 and Escrow Holder's standard instructions, this Section 11.20 shall prevail. (d) Developer shall convey and Authority shall accept fee simple title to the Property free and clear of all recorded and unrecorded monetary liens, encumbrances, easements, leases, covenants, conditions, restrictions, and other exceptions to or defects in title, excepting only the following: (a) the title exceptions listed in the Authority Title Policy with respect to the Property; (b) current taxes not yet delinquent; (c) the lien of any construction loan obtained by Developer for construction of the Project that has been approved by Authority; and (d) those additional title exceptions as may be approved in writing by Authority in its sole and absolute discretion. (e) Developer shall be responsible for all of the escrow fees, recording fees, documentary transfer taxes, and any other costs and expenses of escrow, and any property taxes and assessments and all costs required to place title in the condition described in paragraph (d) above. Concurrently with the conveyance of the Property to Authority, and as a condition to Authority's acceptance of said conveyance, Developer shall cause the Title Company to deliver to Authority an AL TA standard owner's policy of title insurance showing title vested in Authority in the condition described in paragraph (d) above with insurance coverage in the amount of the fair market value of the Property as reasonably determined by Authority ("Authority's Reacquisition Title Policy"). Developer shall pay the premium for the Authority's Reacquisition Title Policy. Authority shall pay for any additional coverage or endorsements to the Authority's Reacquisition Title Policy. (f) On or before 1 :00 p.m. on the last business day preceding the scheduled Authority's Reacquisition Escrow Closing Date, Authority shall deposit or cause to be deposited with Escrow Holder the following: (1) funds in the amount of the "Authority Reacquisition Price" (as that term is defined below), and (2) any and all 882/012782-0020 1l/!'8t' a,a'1 " -43-March 19, 2019 Item #3.1 additional instruments or other documents required from Authority (executed and acknowledged if appropriate) as may be necessary in order to effect the transfer of the Property to Authority. On or before 1 :00 p.m. on the last business day preceding the scheduled Authority's Reacquisition Escrow Closing Date, Developer shall deposit or cause to be deposited with Escrow Holder the following: (a) an executed and acknowledged grant deed conveying the Property to Authority substantially in the form of the Grant Deed ("Authority's Grant Deed"); (b) all escrow fees and closing costs; and (c) any and all additional funds, instruments, or other documents required from Developer (executed and acknowledged if appropriate), as may be necessary in order to effect the transfer of the Property to Authority. As used herein, the term "Authority Reacquisition Price" shall mean the lesser of (i) One Million Two Hundred Thousand Dollars ($1,200,000), and (ii) the appraised value of the Property at the time of Authority's reacquisition. The appraised value of the Property shall be determined by an appraisal conducted by an MAI appraiser selected by Authority and reasonably acceptable to Developer. (g) On or before the Authority's Reacquisition Escrow Closing Date, and when Escrow Holder has received all of the documents and funds listed in paragraph (f) above, and Escrow Holder is in a position to cause the Authority's Reacquisition Title Policy referred to in paragraph (e) above to be issued to Authority, and provided Authority has approved the physical condition of the Property, Escrow Holder shall close the Authority's Reacquisition Escrow by recording the Authority's Grant Deed in the Official Records, and delivering the recorded Authority's Grant Deed to Authority, and causing the Authority's Reacquisition Title Policy to be issued to Authority. 12. AFFORDABILITY COVENANTS As more particularly provided in the Authority Regulatory Agreement, five (5) of the dwelling units in the Project shall be rented to qualified senior households whose incomes do not exceed fifty percent (50%) of the area median income for San Diego County, adjusted for household size; and thirty-eight (38) of the dwelling units in the Project shall be rented to qualified senior households whose incomes do not exceed sixty percent (60%) of the area median income for San Diego County, adjusted for household size, with all of such dwelling units rented at an affordable rent, pursuant to Health and Safety Code Section 50053(b). One (1) unit in the Project shall be an unrestricted manager's unit. 13. GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS 13.1 Developer's Formation, Qualification and Compliance. Developer represents and warrants that (a) it is validly existing and in good standing under the laws of the State of California, (b) it has all requisite authority to conduct its business and own its properties, (c) ii has all requisite authority to execute and perform its obligations under this Agreement, (d) this Agreement is binding upon Developer in accordance with its terms, and (e) the individuals executing this Agreement on behalf of Developer are duly authorized to execute and deliver this Agreement on behalf of Developer. 882/012782-0020 1lf './f'b't' j~~5/19 -44- March 19, 2019 Item #3.1 13.2 Litigation. Developer represents and warrants that there are no actions, lawsuits or proceedings pending or, to the best of Developer's knowledge, threatened against or affecting Developer, the adverse outcome of which could have a material adverse effect on Developer's ability to perform its obligations under this Agreement. 13.3 Authority. Authority represents and warrants that (a) it is validly existing and in good standing under the laws of the State of California, (b) it has all requisite authority to conduct its business and own and sell its properties, (c) it has all requisite authority to execute and perform its obligations under this Agreement, (d) this Agreement is binding upon Authority in accordance with its terms, and (e) the individuals executing this Agreement on behalf of Authority are duly authorized to execute and deliver this Agreement on behalf of Authority. 14. DEFAULTS AND REMEDIES 14.1 Event of Default. Any of the following events or occurrences with respect to either Party shall constitute a material breach of this Agreement and, after the expiration of any applicable cure period, shall constitute an "Event of Default" by such Party: (a) The failure by either Party to pay any amount in full when it is due under this Agreement, if the failure has continued for a period of ten (10) days after the Party entitled to payment demands in writing that the other Party cure that failure. (b) The failure by either Party to perform any other obligation under this Agreement, if the failure has continued for a period of thirty (30) days after demand in writing that such Party cure the failure, or such shorter time period as may be provided for in one of the other Project Documents. If, however, by its nature the failure cannot reasonably be cured within said time period, such Party may have such longer period of time as is reasonably necessary to cure the failure, provided that such Party commences said cure within said thirty (30)-day period, and thereafter diligently prosecutes said cure to completion. 14.2 No Waiver. Except as otherwise expressly provided in this Agreement, any failure or delay by either Party in asserting any of its rights or remedies as to any default shall not operate as a waiver of any default, or of any such rights or remedies, or deprive any such Party of its right to institute and maintain any actions or proceedings which it may deem necessary to protect, assert or enforce any such rights or remedies. 14.3 Rights and Remedies are Cumulative. Except as otherwise expressly stated in this Agreement, the rights and remedies of the Parties are cumulative, and the exercise by either Party of one or more of such rights or remedies shall not preclude the exercise by it, at the same lime or different times, of any other rights or remedies for the same default or any other default by the other Party. 14.4 Attorneys' Fees. If either Party to this Agreement is required to initiate or defend litigation in any way connected with this Agreement, the prevailing Party in such litigation, in addition to any other relief which may be granted, whether legal or equitable, 882/012782-0020 1~~'b't' 31:B'119 -45- March 19, 2019 Item #3.1 shall be entitled to reasonable attorneys' fees. If either Party to this Agreement is required to initiate or defend litigation with a third party because of the violation of any term or provision of this Agreement by the other Party, then the Party so litigating shall be entitled to reasonable attorneys' fees from the other Party to this Agreement. Attorneys' fees shall include attorney's fees on any appeal, and in addition a Party entitled to attorney's fees shall be entitled to all other reasonable costs for investigating such action, retaining expert witnesses, taking depositions and discovery, and all other necessary costs incurred with respect to such litigation. All such fees shall be deemed to have accrued on commencement of such action and shall be enforceable whether or not such action is prosecuted to judgment. 14.5 Reimbursement of Authority. Within fifteen (15) days after its receipt of written demand from Authority, Developer shall reimburse Authority for all costs reasonably incurred by Authority (including the reasonable fees and expenses of attorneys, accountants, appraisers and other consultants) in connection with Authority enforcement of the Project Documents and all related matters, including, without limitation, the following: (a) Authority's commencement of, appearance in, or defense of any action or proceeding purporting to affect the rights or obligations of the Parties to any Project Document; and (b) all claims, demands, causes of action, liabilities, losses, and other costs against which any of the lndemnitees is indemnified under the Project Documents. Such reimbursement obligations shall bear interest from the date occurring fifteen (15) days after Authority makes written demand to Developer at the rate of ten percent (10%) per annum or the maximum legal rate, whichever is less. Such reimbursement obligations shall survive termination of this Agreement. 15. NOTICES All notices, consents, demands, approvals and other communications (the "Notices") that are given pursuant to this Agreement shall be in writing to the appropriate Party and shall be deemed to have been fully given when delivered, including personal delivery, delivery by reputable commercial delivery service that provides a receipt with the time and date of delivery, or if deposited in the United States mail, certified or registered, postage prepaid, within two (2) days after deposit. All Notices shall be addressed as follows: If to Developer: with copies to: 882/012782-0020 1~1f'8t'j~~5119 Poway Commons, LLC c/o Meridian Development, LLC 9988 Hibert Street, Suite 210 San Diego, CA 92131 Attention: Guy Asaro Higgs, Fletcher & Mack, LLP 401 West "A" Street, Suite 2600 San Diego, CA 92101 Attention: Tim Waters, Esq. -46- March 19, 2019 Item #3.1 and and If to Authority: with a copy to and Chelsea Investment Corporation 6339 Pasea del Lago Carlsbad, CA 92008 Attention: Cheri Hoffman Odu & Associates, PC 2195 Queensberry Road Pasadena, CA 91104 Attention: Nkechi C. Odu, Esq City of Poway Housing Authority 13325 Civic Center Drive Poway, CA 92064 Attn: Executive Director Rutan & Tucker, LLP 611 Anton, Suite 1400 Costa Mesa, CA 92626 Attn: Alan Fenstermacher, Esq. Rutan & Tucker, LLP 611 Anton, Suite 1400 Costa Mesa, CA 92626 Attn: John A. Ramirez, Esq. Addresses for notice may be changed from time to time by notice to the other Party. Notwithstanding that Notices shall be deemed given when delivered, the non-receipt of any Notice as the result of the intended recipient's refusal of delivery, or of a change of address of which the sending Party was not notified shall be deemed receipt of such Notice. 16. ASSIGNMENT 16.1 Generally Prohibited. Except for Permitted Poway Commons Transfers as otherwise expressly provided to the contrary in this Agreement, Developer shall not Transfer any of its rights or delegate any of its duties under this Agreement, nor shall any changes occur with respect to the ownership and/or control of Developer, including, without limitation, stock transfers, or transfers, sales or issuances of membership or ownership interests, or statutory conversions, without the prior written consent of the Executive Director, which consent may be withheld in his or her sole and absolute discretion. Any such Transfer or delegation without such consent shall, at Authority's option, be void. Notwithstanding the foregoing, however, on and after the Partnership Transfer/Financing Closing, (i) the Investor may be admitted to the Partnership as an up to 99.99% Tax Credit limited partner without obtaining any consent, and such Investor may assign its interests as an up to 99.99% Tax Credit limited partner to a subsequent 882/012782-0020 1~¥'li't' :3'!!~5/19 -47- March 19, 2019 Item #3.1 reputable institutional investor without any consent; (ii) the Investor may remove any general partner for a default under the Partnership Agreement, provided any replacement general partner that is not an Affiliate of the Investor is reasonably acceptable to Authority, and (iii) Developer may transfer partnership interests in the Project to an Affiliate under the purchase option and right of first refusal set forth in the Partnership Agreement or related documents with the Investor. For purposes of this Section 16.1, if the Investor transfers to an entity in which the Investor or an Affiliate of the Investor is the administrative general partner or managing member such transferee entity shall be deemed to be a "reputable institutional investor." This Section 16.1 shall not be applicable to the leasing of individual dwelling units to income eligible senior households in accordance with the Authority Regulatory Agreement. 16.2 Assignment by Poway Commons. Notwithstanding any provision to the contrary in Section 16.1, Poway Commons may make Permitted Poway Commons Transfers. 16.3 Release of Developer. Upon any such assignment made in compliance with Section 9.4, 16.1, or 16.2 above which is evidenced by a written assignment and assumption agreement in a form approved by Authority legal counsel in his or her reasonable discretion, the transferor shall be released from any liability under this Agreement arising from and after the effective date of such assignment, shall have no obligation to pay the Authority Loan or the Authority Note, and shall have no further obligations with respect to the Project, except with respect to any actions and/or omissions of the transferor occurring, and/or claims arising, prior to the date of such assignment. In the event Authority legal counsel does not approve the form of assignment and assumption agreement presented, such counsel shall inform the assignor in writing within thirty (30) days of receipt of the reasons for such disapproval. 17. ADMINISTRATION Following approval of this Agreement by Authority, this Agreement shall be administered and executed on behalf of Authority by the Executive Director. The Executive Director shall have the authority to issue interpretations, waive terms and conditions, enter into one or more Authority/Lender Subordination Agreements, enter into subordination agreements with public funding sources where the public funding source's regulations require such subordination, and enter into implementing agreements and amendments of this Agreement (including, without limitation, to the Project Budget and the Schedule of Performance) on behalf of Authority provided that such actions do not substantially change the uses or development permitted on the Property, materially add to the costs or obligations, increase the risk of liability, or impair the rights or remedies, of Authority provided herein, or materially decrease the revenues or other compensation to be received by Authority hereby. All other waivers or amendments shall require the formal consent of the Housing Authority Board. 882/012782-0020 1¥1f'li't' ~~~5119 -48- March 19, 2019 Item #3.1 18. MISCELLANEOUS 18.1 Counterparts. This Agreement may be executed in counterparts, all of which, taken together, shall be deemed to be one and the same document. 18.2 Prior Agreements: Amendments. This Agreement contains the entire agreement between Authority and Developer with respect to the Project and the Property, and all prior negotiations, understandings and agreements are superseded by this Agreement. No modification of this Agreement (including waivers of rights and conditions) shall be effective unless in writing and signed by the Party against whom enforcement of such modification is sought, and then only in the specific instance and for the specific purpose given. Authority agrees to consider in good faith making reasonable modifications to this Agreement that are necessary to finance the development of the Project. 18.3 Governing Law. This Agreement shall be governed by, and construed and enforced in accordance with, the internal laws of the State of California, without regard to conflict of law principles. 18.4 Acceptance of Service of Process. In the event that any legal action is commenced by Developer against Authority, service of process on Authority shall be made by personal service upon the Executive Director or in such other manner as may be provided by law. In the event that any legal action is commenced by Authority against Developer, service of process on Developer shall be made in such manner as may be provided by law. 18.5 Severability of Provisions. No provision of this Agreement that is held to be unenforceable or invalid shall affect the remaining provisions if and to the extent that the primary purposes of this Agreement can still be accomplished without materially impairing the rights or increasing the obligations or risks of each Party, as reasonably determined by that Party. 18.6 Interpretation. Both Parties have participated in the drafting of this Agreement and any ambiguities in this Agreement shall not be construed for or against either Party on account of the authorship or presumed authorship hereof. Article and section headings are included in this Agreement for convenience of reference only and shall not be used in construing this Agreement. Any defined term used in the plural in this Agreement shall refer to all members of the relevant class and any defined term used in the singular shall refer to any of the members of the relevant class. References herein to Articles, Sections, and Attachments shall be construed as references to this Agreement unless a different document is named. References to subparagraphs shall be construed as references to the same Section in which the reference appears. The terms "including" and "include" mean "including (include) without limitation." 18.7 Accounting Principles. Any accounting term used and not specifically defined in this Agreement shall be construed, and all financial data required to be submitted under this Agreement shall be prepared, in conformity with generally accepted 882/012782-0020 1 ~f'b't' 3~~5119 -49- March 19, 2019 Item #3.1 accounting principles applied on a consistent basis or in accordance with such other principles or methods as are reasonably acceptable to Authority. 18.8 Attachments Incorporated. All attachments to this Agreement, as now existing and as the same may from time to time be modified, are incorporated herein by this reference. 18.9 Time of the Essence. Time is of the essence of this Agreement. 18.10 Warranty Against Payment of Consideration. Developer warrants that it has not paid or given, and will not pay or give, any third person any money or other consideration for obtaining this Agreement. 18.11 Non-liability of Authority Officials and Employees. No member, director, officer, employee, or volunteer of Authority shall be personally liable to Developer, or any successor in interest, in the event of any default or breach by Authority or for any amount which may become due to Developer or successor, or on any obligation under the terms of this Agreement. 18.12 Force Majeure. In addition to specific provisions of this Agreement, performance by either Party hereunder shall not be deemed to be in default where delays or defaults are due to war; insurrection; strikes; lockouts; riots; floods; earthquakes; fires; casualties; acts of God or other deities; acts of the public enemy; epidemics; quarantine restrictions; freight embargoes; litigation beyond the reasonable control of a Party; unusually severe weather; inability, despite commercially reasonable efforts, to secure necessary labor, materials or tools; delays of any contractor, subcontractor or supplier beyond the reasonable control of a Party; acts of the other Party; acts or the failure to act of any public or governmental entity (except that acts or the failure to act of Authority shall not excuse performance by Authority); or any other acts or causes beyond the reasonable control of the Party claiming an extension of time to perform. An extension of time for any such cause shall be for the period of the enforced delay and shall commence to run from the time of the commencement of the cause, if notice by the Party claiming such extension is sent to the other Party within thirty (30) days of the commencement of the cause. Force Majeure shall serve also to extend the time by which any condition, for the benefit of either Party, shall be satisfied under this Agreement. Notwithstanding any provision of this Agreement to the contrary, in no event shall adverse market conditions, interest rates, the lack of funding or difficulty obtaining the financing necessary to complete the Project constitute grounds of enforced delay pursuant to this Section. 18.13 Developer Covenant to Defend this Agreement. Developer acknowledges that Authority is a "public entity" and/or a "public agency" as defined under applicable California law. Therefore, Authority must satisfy the requirements of certain California statutes relating to the actions of public entities, including, without limitation, CEQA. Also, as a California public body, Authority's action in approving this Agreement may be subject to proceedings to invalidate this Agreement or mandamus. Developer assumes the risk of delays and damages that may result to Developer from any third-party legal actions related to Authority's approval of this Agreement or the pursuit of the activities 882/0 [2782-0020 1ti1f'b'f13,3'11 ' -50- March 19, 2019 Item #3.1 contemplated by this Agreement, including, without limitation, the City's approval of any Project approvals and issuance of any permits required for development of the Project, even in the event that an error, omission or abuse of discretion by Authority is determined to have occurred. If a third-party files a legal action regarding Authority's approval of this Agreement or the pursuit of the activities contemplated by this Agreement, including, without limitation, the City's approval of any Project approvals and issuance of any permits required for development of the Project, Authority may terminate this Agreement on thirty (30) days written notice to Developer of Authority's intent to terminate this Agreement, referencing this Section 18.13, without any further obligation to perform the terms of this Agreement and without any liability to Developer resulting from such termination, unless Developer unconditionally agrees to indemnify and defend Authority and City and Authority and City Personnel, with legal counsel acceptable to Authority, against such third-party legal action, as provided hereinafter in this Section 18.13. Within 30 days of receipt of Authority's notice of intent to terminate this Agreement, as provided in the preceding sentence, Developer may in Developer's sole and absolute discretion offer to defend Authority and the City, with legal counsel acceptable to Authority, in the third-party legal action and pay all of the court costs, attorney fees, monetary awards, sanctions, attorney fee awards, expert witness and consulting fees, and the expenses of any and all financial or performance obligations resulting from the disposition of the legal action. At the request of Developer, Authority shall cooperate with and assist Developer in its defense of any such third-party legal action, provided that Authority shall not be obligated to incur any expense in connection with such cooperation or assistance. 18.14 Nondiscrimination Covenants. (a) Developer covenants by and for itself and any successors in interest that there shall be no discrimination against or segregation of, any person or group of persons on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the Property, nor shall the grantee or any person claiming under or through him or her, establish or permit any practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the Property. The foregoing covenants shall run with the land. (b) Notwithstanding paragraph (a), with respect to familial status, paragraph (a) shall not be construed to apply to housing for older persons, as defined in Section 12955.9 of the Government Code. With respect to familial status, nothing in paragraph (a) shall be construed to affect Sections 51.2, 51.3, 51.4, 51.10, 51.11, and 799.5 of the Civil Code, relating to housing for senior citizens. Subdivision (d) of Section 51, Section 4760, and Section 6714 of the Civil Code, and subdivisions (n), (o), and (p) of Section 12955 of the Government Code shall apply to paragraph (a). (c) Developer shall refrain from restricting the rental, sale or lease of the Property on any of the bases listed above in this Section 18.13. All such deeds, leases 882/012782-0020 1ti!\''b't' 3,35119 -51-March 19, 2019 Item #3.1 or contracts shall contain or be subject to substantially the following nondiscrimination or nonsegregation clauses: 882/012782-0020 1ti~'li't' a'!B'11 ' (i) In deeds: (A) "The grantee herein covenants by and for himself or herself, his or her heirs, executors, administrators, and assigns, and all persons claiming under or through them, that there shall be no discrimination against or segregation of, any person or group of persons on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the premises herein conveyed, nor shall the grantee or any person claiming under or through him or her, establish or permit any practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the premises herein conveyed. The foregoing covenants shall run with the land." (B) Notwithstanding paragraph (a), with respect to familial status, paragraph (a) shall not be construed to apply to housing for older persons, as defined in Section 12955.9 of the Government Code. With respect to familial status, nothing in paragraph (a) shall be construed to affect Sections 51.2, 51.3, 51.4, 51.10, 51.11, and 799.5 of the Civil Code, relating to housing for senior citizens. Subdivision (d) of Section 51, Section 4760, and Section 6714 of the Civil Code, and subdivisions (n), (o), and (p) of Section 12955 of the Government Code shall apply to paragraph (a). (ii) In leases: "The lessee herein covenants by and for himself or herself, his or her heirs, executors, administrators, and assigns, and all persons claiming under or through him or her, and this lease is made and accepted upon and subject to the following conditions: (A) "That there shall be no discrimination against or segregation of any person or group of persons, on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the leasing, subleasing, transferring, use, occupancy, tenure, or enjoyment of the premises herein leased nor shall the lessee himself or herself, or any person claiming under or through him or her, establish or permit any such practice or practices of discrimination or -52- March 19, 2019 Item #3.1 segregation with reference to the selection, location, number, use, or occupancy, of tenants, lessees, sublessees, subtenants, or vendees in the premises herein leased." (B) Notwithstanding paragraph (a), with respect to familial status, paragraph (a) shall not be construed to apply to housing for older persons, as defined in Section 12955.9 of the Government Code. With respect to familial status, nothing in paragraph (a) shall be construed to affect Sections 51.2, 51.3, 51.4, 51.10, 51.11, and 799.5 of the Civil Code, relating to housing for senior citizens. Subdivision (d) of Section 51, Section 4760, and Section 6714 of the Civil Code, and subdivisions (n), (o), and (p) of Section 12955 of the Government Code shall apply to paragraph (a). (iii) In contracts: (A) "There shall be no discrimination against or segregation of, any person or group of persons on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the premises which are the subject of this Agreement, nor shall the grantee or any person claiming under or through him or her, establish or permit any practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sub lessees, or vendees in the premises herein conveyed. The foregoing covenants shall run with the land." (B) Notwithstanding paragraph (a), with respect to familial status, paragraph (a) shall not be construed to apply to housing for older persons, as defined in Section 12955.9 of the Government Code. With respect to familial status, nothing in paragraph (a) shall be construed to affect Sections 51.2, 51.3, 51.4, 51.10, 51.11, and 799.5 of the Civil Code, relating to housing for senior citizens. Subdivision (d) of Section 51, Section 4 760, and Section 6714 of the Civil Code, and subdivisions (n), (o), and (p) of Section 12955 of the Government Code shall apply to paragraph (a). The covenants established in this Section 18.13 shall, without regard to technical classification and designation, be binding for the benefit and in favor of Authority and its successors and assigns, and shall remain in effect in perpetuity. 8821012782-0020 1'!l!'li't' 3,3,,1, -53- March 19, 2019 Item #3.1 18.15 Consents and Approvals. Unless otherwise expressly set forth in this Agreement, any consents or approvals to be given by a Party under this Agreement shall not be unreasonably withheld, conditioned or delayed. 18.16 No Third Party Beneficiaries. No person or entity other than Authority and Developer and the permitted successors and assigns of each of them, shall be authorized to enforce the provisions of this Agreement. [End of Agreement -Signature page follows] 882/012782-0020 1tist'b'f' :!~~5119 -54- March 19, 2019 Item #3.1 IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be duly executed. Attest: By: _________ _ Faviola Medina, Authority Secretary APPROVED AS TO FORM RUTAN & TUCKER, LLP By:. __________ ~ Alan Fenstermacher, Authority Counsel "Authority" CITY OF POWAY HOUSING AUTHORITY, a public body, corporate and politic By:------------- Tina M. White, Executive Director "Developer" POWAY COMMONS, LLC a Delaware limited liability company By: ------------- Guy Asaro, Manager -55- March 19, 2019 Item #3.1 ATTACHMENTS 1A Legal Description of City-Owned Mixed Property 1 B Depiction of City-Owned Mixed Property and Property 2A Site Plan 2B Proposed Subdivision Site Map 3 Schedule of Performance 4 Scope of Development 5 Form of Grant Deed 6 Form of Assignment of Architectural Agreements 7 Form of the Authority Note 8 Form of the Authority Deed of Trust 9 Project Budget 10 Form of Authority Regulatory Agreement 11 Form of Notice of Affordability Restrictions 12 Form of Release of Construction Covenants 8821012782-0020 1ti~'b't' j~~5119 -56- March 19, 2019 Item #3.1 ATTACHMENT NO. 1A LEGAL DESCRIPTION OF CITY-OWNED MIXED PROPERTY 13100 Poway Road: The land referred to herein is situated in the State of California, County of San Diego and is described as follows: That portion of the Southwest Quarter of the Northwest Quarter of Section 13, Township 14 South, Range 2 West, San Bernardino Base and Meridian, in the City of Poway, County of San Diego, State of California, according to Official Plat thereof described as follows: Beginning at a point on the Southerly line of said Southwest Quarter of the Northwest Quarter, distant, thereon South 89°08'30" East 332.00 feet from the Southwest corner thereof, said point being the Southeast corner of land conveyed to James Albert Silkwood and wife, by deed recorded in Book 5316, Page 83 of Official Records; thence continuing South 89°08'30" East 281.00 feet; thence parallel with the West line of said Northwest Quarter North 01 °26'1 O" East 50 feet to the North line of the South 50 feet of said Northwest Quarter being the True Point of Beginning; thence along said line South 89°08'30" East 176.48 feet to a tangent 20 foot radius curve, concave Northwesterly in the Westerly line of Tarascan Drive as shown on Heritage Hills according to Map No. 5934 filed in the Office of the County Recorder of San Diego County; thence along the boundary line of said Map No. 5934, Northeasterly along said curve 31.17 feet; thence tangent to said curve North 1°33'47" East 320.27 feet; thence North 89°08'30" West 68 feet; thence leaving said boundary North 89°08'30" West 129 feet to a line which bears North 01 °26'1 O" East parallel with said West line from the True Point of Beginning; thence South 01 °26'1 O" West 340.02 feet to the True Point of Beginning. APN: 317-101-06 882/012782-0020 1ijf~/31f15119 ATTACHMENT NO. 1A March 19, 2019 Item #3.1 .... 00 00 0 -w N w 3: SI,) ... C') :::r .... .!D N 0 .... (D ;::; CD 3 :it w .... 882/012782-0020 1ij§6~f-3!3'15/19 ATTACHMENT NO. 1 B DEPICTION OF CITY-OWNED MIXED PROPERTY AND PROPERTY ATTACHMENT 18 ATIACHMENT NO. 1B N ~ --~ ... ----.. _. u ::a Cl ~ -· -~· II ~~~-lati rudell! cc ~ -:.~~ March 19, 2019 Item #3.1 Ci1':1l l 88210 12782 -0020 1§§6~/313'15/19 A TT ACHM ENT NO. 2A SITE PLAN NOT A PART 81 Fl ATTACHMENT NO. 2A .n.o rr h ~~ March 19, 2019 Item #3.1 ATTACHMENT NO. 28 PROPOSED SUBDIVISION SITE MAP POWAY C ,OMMONS l S: SJ RETAIL AREA -Approx 2.3 gross acres I : : : : :1 AFFORDABLE AREA -Approx 0.9 gross acres U J ! 11 RESIDENTIAL AREA -Approx 6.1 gross acres ss2101 21s2-1iD of 323 13 106627.7 aOJ/15/19 ATTACHMENT NO. 28 March 19, 2019 Item #3.1 1. 2. 3 4 5 6 7 8 9 10 11 ATTACHMENT NO. 3 SCHEDULE OF PERFORMANCE Task/Event Time for Performance Completion of architectural drawings for June 1, 2020 the project Building Permit Application submitted to August 1, 2020 City. Copy of Construction Drawings submitted to the Authority Partnership to obtain financing September 1, 2020 commitments for construction and permanent financing, including tax credit equity Submission of application to CDLAC for October 2020 an allocation of Tax-Exempt Bonds Submission of application to TCAC for October 2020 an allocation of 4% Tax Credits Secure CDLAC Allocation and TCAC December 2020 Reservation Issuance of Building Permit-ready letter February 1 , 2021 by the City Partnership Transfer/Financing Closing February 15, 2021 and Acquisition of the Site from Poway Commons, LLC Commencement of Construction of the March 1, 2021 Project March 1 , 2022 Completion of Construction of the Project 100% Qualified Occupancy May 1, 2022 882/0\2782-0020 ATTACHMENT NO. 3 -1-1~!\6'8t' j'!z~5119 March 19, 2019 Jtem #3.1 It is expressly understood and agreed by the Parties that the foregoing schedule of performance is subject to all of the terms and conditions set forth in the text of the Agreement including, without limitation, extension due to Force Majeure. Times of performance under the Agreement may be extended by request of any Party memorialized by a mutual written agreement between the Parties, which agreement may be granted or denied in the non-requesting Party's sole and absolute discretion (subject to events of force majeure set forth in this Agreement. 882/0\2782-0020 1ij~'b't1 j'lz~5119 ATTACHMENT NO. 3 -2- March 19, 2019 Item #3.1 ATTACHMENT NO. 4 SCOPE OF DEVELOPMENT The Project is a 44-unit new construction development servicing seniors age 62 and older. The preliminary work to be conducted by Poway Commons consists of (i) establishing the Property as a legal parcel, (ii) completing remedial, rough and finish grading to an approved City plan, in accordance with compaction standards, (iii) installing wet and dry backbone utility services to ultimately service the future affordable housing development, and (iv) stabilizing the Property in accordance with the City's storm water standards. The affordable housing development will be comprised of 35 one-bedroom, one bathroom units, and 9 two-bedroom, one bathroom units. One of the two-bedroom units will be reserved for an on-site manager and will be unrestricted with regards to affordability and age. The one-bedroom units consist of approximately 520 net square feet and the two- bedroom units are approximately 750 net square feet. Each unit will have a kitchen equipped with refrigerator, stove, dishwasher and sink. The Project will be constructed on grade and consist of a single three-story type-VA wood- framed building served by an elevator. The Project will include 44 surface parking spaces to serve residents and guests. The units will be equipped with a storage closet, window coverings, sustainable vinyl plank flooring and energy star rated appliances. The Project will include an approximate 1400 square foot community building with common area space that includes a kitchenette, a community laundry room, and management office. Sufficiently landscaped outdoor common area space will be provided. The Project will be designed in accordance with CTCAC and CDLAC requirements, design and sustainability requirements. 882/012782-0020 ~~~'b't'j~/35/19 ATTACHMENT NO. 4 March 19, 2019 Item #3.1 882/012782-0020 1~lt'b't1 3,35119 ATTACHMENT NO. 5 GRANT DEED [See following document] ATTACHMENT NO. 5 March 19, 2019 Item #3.1 RECORDING REQUESTED BY AND WHEN RECORDED RETURN TO: Poway Commons, LLC c/o Meridian Development, LLC 9988 Hibert Street, Suite 210 San Diego, CA 92131 Attention: Guy Asaro AND ALL TAX STATEMENTS TO: SAME AS ABOVE DOCUMENTARY TRANSFER TAX IS $ Computed on the consideration or value of property conveyed. (Space Above for Recorder's Use) Exempt from Recordation Fee per Gov. Code§ 27383 The undersigned declares exemption under the following: Exempt from fee per Government Code Section 27388.1 (a)(2); recorded concurrently in connection with a transfer subject to the imposition of documentary transfer tax GRANT DEED FOR VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, CITY OF POWAY HOUSING AUTHORITY, a public body, corporate and politic ("Grantor"), hereby grants to POWAY COMMONS, LLC, a Delaware limited liability company ("Grantee"), the real property located in the City of Poway, County of San Diego, State of California, described on Exhibit 1 attached hereto and made a part hereof (the "Property"), with all improvements thereon, subject to all matters of record and subject to the following: Grantee, on behalf of itself and its successors and assigns to all or any portion of the Property, covenants and agrees as follows: 1. Nondiscrimination Covenants. (a) That there shall be no discrimination against or segregation of any person, or group of persons on any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Property, or any part thereof, nor shall Grantee, or any person claiming under or through him or her, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sub lessees or vendees of the Property, or any part thereof. 8821012782-0020 1~~'b't' j~~l/19 -1- March 19, 2019 Item #3.1 (b) Notwithstanding paragraph (a), with respect to familial status, paragraph (a) shall not be construed to apply to housing for older persons, as defined in Section 12955.9 of the Government Code. With respect to familial status, nothing in paragraph (a) shall be construed to affect Sections 51.2, 51.3, 51.4, 51.10, 51.11, and 799.5 of the Civil Code, relating to housing for senior citizens. Subdivision (d) of Section 51, Section 4760, and Section 6714 of the Civil Code, and subdivisions (n), (o), and (p) of Section 12955 of the Government Code shall apply to paragraph (a)." (c) The foregoing covenants shall run with the land. 2. Nondiscrimination Clauses in Agreements. Grantee agrees for itself and any successor in interest that Grantee shall refrain from restricting the rental, sale, or lease of any portion of the Property, or contracts relating to the Property, on the basis of race, color, creed, religion, sex, marital status, ancestry, or national origin of any person. All such deeds, leases or contracts shall contain or be subject to substantially the following nondiscrimination or nonsegregation clauses: 882/012782-0020 1~1f'b't' :i,35119 (a) In deeds: (i) ''The grantee herein covenants by and for himself or herself, his or her heirs, executors, administrators, and assigns, and all persons claiming under or through them, that there shall be no discrimination against or segregation of, any person or group of persons on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the premises herein conveyed, nor shall the grantee or any person claiming under or through him or her, establish or permit any practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the premises herein conveyed. The foregoing covenants shall run with the land." (ii) Notwithstanding paragraph (i), with respect to familial status, paragraph (i) shall not be construed to apply to housing for older persons, as defined in Section 12955.9 of the Government Code. With respect to familial status, nothing in paragraph (i) shall be construed to affect Sections 51.2, 51.3, 51.4, 51.10, 51.11, and 799.5 of the Civil Code, relating to housing for senior citizens. Subdivision (d) of Section 51, Section 4760, and Section 6714 of the Civil Code, and subdivisions (n), (o), and (p) of Section 12955 of the Government Code shall apply to paragraph (i)." (iii) The foregoing covenants shall run with the land." -2- March 19, 2019 Item #3.1 (b) In leases: (i) "The lessee herein covenants by and for himself or herself, his or her heirs, executors, administrators, and assigns, and all persons claiming under or through him or her, 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 any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the leasing, subleasing, transferring, use, occupancy, tenure, or enjoyment of the premises herein leased nor shall the lessee himself or herself, or any person claiming under or through him or her, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy, of tenants, lessees, sublessees, subtenants, or vendees in the premises herein leased." (ii) Notwithstanding paragraph (i), with respect to familial status, paragraph (i) shall not be construed to apply to housing for older persons, as defined in Section 12955.9 of the Government Code. With respect to familial status, nothing in paragraph (i) shall be construed to affect Sections 51.2, 51.3, 51.4, 51.10, 51.11, and 799.5 of the Civil Code, relating to housing for senior citizens. Subdivision (d) of Section 51, Section 4760, and Section 6714 of the Civil Code, and subdivisions (n), (o), and (p) of Section 12955 of the Government Code shall apply to paragraph (i)." (c) interest therein: In contracts relating to the sale. transfer. or leasing of the land or any 882/0 [ 2782-0020 1~'f'li't' 3'!!~5119 (i) "There shall be no discrimination against or segregation of, any person or group of persons on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the premises which are the subject of this agreement, nor shall the grantee or any person claiming under or through him or her, establish or permit any practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the premises herein conveyed. The foregoing covenants shall run with the land." (ii) Notwithstanding paragraph (i), with respect to familial status, paragraph (i) shall not be construed to apply to housing for older persons, as defined in Section 12955.9 of the Government Code. With respect to familial status, nothing in paragraph (i) shall be construed to affect Sections -3- March 19, 2019 Item #3.1 51.2, 51.3, 51.4, 51.10, 51.11, and 799.5 of the Civil Code, relating to housing for senior citizens. Subdivision (d) of Section 51, Section 4760, and Section 6714 of the Civil Code, and subdivisions (n), (o), and (p) of Section 12955 of the Government Code shall apply to paragraph (i)." The foregoing nondiscrimination covenants shall remain in effect in perpetuity. [Signatures on next page) 882/012782-0020 1~!'8t13~~5119 -4- March 19, 2019 Item #3.1 Dated: ________ _ ATTEST: GRANTOR: CITY OF POWAY HOUSING AUTHORITY, a public body, corporate and politic By: ___________ _ Tina M. White, Executive Director By:----------- Faviola Medina, Authority Secretary APPROVED AS TO FORM: RUTAN &TUCKER, LLP Alan Fenstermacher, Authority Counsel Dated: ________ _ 882/0 l 2782-0020 1ij1f'b't' 3':!1:3'119 GRANTEE: POWAY COMMONS, LLC, a Delaware limited liability company By: ___________ _ Guy Asaro, Manager -5- March 19, 2019 Item #3.1 A Notary Public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California County of San Diego ) ) On ___________ , before me,------------ (insert name and titre of the officer) Notary Public, personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENAL TY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature. ____________ _ (Seal) A Notary Public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California County of San Diego On ___________ , before me, ___________ _ (insert name and title of the officer) Notary Public, personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENAL TY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature ____________ _ (Seal) 8821012782-0020 2ti1f'b'f1 j'\,B'11 ' March 19, 2019 Item #3.1 Exhibit 1 to Grant Deed Legal Description Real property in the City of Poway, County of San Diego, State of California, described as follows: 882/012782-0020 2tilf'b't' j,35119 -2- March 19, 2019 Item #3.1 8821012782-0020 2ti~'b't' :!~~5119 ATTACHMENT NO. 6 ASSIGNMENT OF ARCHITECTURAL AGREEMENTS [See following document] ATTACHMENT NO. 6 March 19, 2019 Item #3.1 ASSIGNMENT OF ARCHITECTURAL AGREEMENTS AND PLANS AND SPECIFICATIONS FOR VALUE RECEIVED, the undersigned, , L.P., a California limited partnership ("Developer"), assigns to City of Poway Housing Authority, a public body, corporate and politic ("Authority"), all of its right, title and interest in and to: 1. All architectural, design, engineering and development agreements, and any and all amendments, modifications, supplements, addenda and general conditions thereto (collectively, "Architectural Agreements"), and 2. All plans and specifications, blueprints, sketches, shop drawings, working drawings, landscape plans, utilities plans, soils reports, noise studies, environmental assessment reports, and grading plans, and all amendments, modifications, changes, supplements, general conditions and addenda thereto (collectively, "Plans and Specifications"), heretofore or hereafter entered into or prepared by any architect, engineer or other person or entity (collectively, "Architect"), for or on behalf of Developer in connection with the Real Property described on Exhibit "A" attached hereto. The Plans and Specifications, as of the date hereof, are those which Developer have heretofore, or will hereafter deliver to Authority. The Architectural Agreements include, but are not limited to, the architectural agreement or contract between and _________ ,dated ______ _ This ASSIGNMENT OF ARCHITECTURAL AGREEMENTS AND PLANS AND SPECIFICATIONS ("Assignment") constitutes a present, absolute and unconditional assignment to Authority. Developer acknowledges that by accepting this Assignment, Authority does not assume any of Developer's obligations under the Architectural Agreements with respect to the Plans and Specifications. Developer represents and warrants to Authority that: (a) no default by Developer, or event which would constitute a default by Developer after notice or the passage of time, or both, exists with respect to said Architectural Agreements, and (b) all copies of the Architectural Agreements and Plans and Specifications delivered to Authority are complete and correct. Developer has not assigned any of its rights under the Architectural Agreements or with respect to the Plans and Specifications. Notwithstanding the foregoing, this Assignment shall be subordinated to any assignment required to be made by Developer to the "Construction Lender'' (as that term is defined in that certain Affordable Housing and Property Disposition Agreement entered into by and between Authority and Developer on or about (the "AHPDA")) at the "Closing" (as that term is defined in the AHPDA). Further, as long as no Event of Default by Developer has occurred under the AHPDA, Developer shall have the right to exercise all of its rights under the Architectural Agreements. Authority shall not exercise its rights under this 882/012782-0020 2ti!'b't' 3'!1~5119 -1-March 19, 2019 Jtem #3.1 Assignment until the occurrence and during the continuation of an Event of Default under the AHPDA. Upon the occurrence and during the continuation of such an Event of Default, Authority may, at its option, upon written notice to Architect, exercise all of its rights granted under this Assignment. This Assignment shall be governed by the laws of the State of California, except to the extent that federal laws preempt the laws of the State of California, and Developer consents to the jurisdiction of any federal or state court within the State of California having proper venue for the filing and maintenance of any action arising hereunder and agrees that the prevailing party in any such action shall be entitled, in addition to any other recovery, to reasonable attorneys' fees and costs. This Assignment shall be binding upon and inure to the benefit of the heirs, legal representatives, assigns, and successors-in-interest of Developer and Authority. The attached Architect's/Engineer's Consent and Exhibit "A" are incorporated by reference. Executed by _____ on _________ , 20_. Date.: _________ , 20_ Attest: By: _________ _ Faviola Medina, Authority Secretary 8821012782-0020 2tiit'b't1 j':B'119 "Developer" ------------' L.P., a California limited partnership By: -------------- Its: --------------- "Authority" CITY OF POWAY HOUSING AUTHORITY, a public body, corporate and politic By:------------- Tina M. White, Executive Director -2- March 19, 2019 Item #3.1 APPROVED AS TO FORM RUTAN & TUCKER, LLP By: __________ _ Alan Fenstermacher, Authority Counsel 882/0 l 2782-0020 2ti1f'b't1 j'\,B'11 ' -3- March 19, 2019 Item #3.1 ARCHITECT'S/ENGINEER'S CONSENT The undersigned architect and/or engineer (collectively referred to as "Architect") hereby consents to the foregoing Assignment to which this Architect's/Engineer's Consent ("Consent") is a part, and acknowledges that there presently exists no unpaid claims due to the Architect/Engineer arising out of the preparation and delivery of the Plans and Specifications to and/or the performance of the Architect's obligations under the Architectural Agreements described in the Assignment. Architect agrees that, by virtue of the foregoing Assignment, Authority has succeeded to all of 's right, title and interest in, to and under the Architectural Agreements and the Plans and Specifications and, therefore, so long as the Architect continues to receive the compensation called for under the Architectural Agreements, Authority and its successors and assigns may, at their option, use and rely on the Plans and Specifications for the purposes for which they were prepared, and Architect will continue to perform its obligations under the Architectural Agreements for the benefit and account of Authority and its successors and assigns in the same manner as if performed for the benefit or account of in the absence of the Assignment. Architect warrants and presents that it/he has no knowledge of any prior assignment(s) of any interest in either the Plans and Specifications and/or the Architectural Agreements. Except as otherwise defined herein, the terms used herein shall have the meanings given them in the Assignment. Executed on ___________ , 20_ 882/0 l 2782-0020 2ti1f'b't' j,35119 "Architect" a ________________ _ By:------------- Name: ------------- Its: -------------- Architect's Address: Phone No.: ~--> _______ _ Fax No.: ) _______ _ -4- March 19, 2019 Item #3.1 882/012782-0020 :ztit·b't' j~~5119 EXHIBIT "A" PROPERTY DESCRIPTION -5- March 19, 2019 Item #3.1 882/012782-0020 2ti~'b't' j'lB'1 " ATTACHMENT NO. 7 AUTHORITY NOTE [See following document] ATTACHMENT NO. 7 March 19, 2019 Item #3.1 $2,200,000 AUTHORITY PROMISSORY NOTE (Poway Commons) San Diego, California FOR VALUE RECEIVED, , LP., a California limited partnership ("Borrower"), as maker and obliger, promises to pay to the CITY OF POWAY HOUSING AUTHORITY, a public body, corporate and politic ("Authority"), as holder and beneficiary, or order, at Authority's office at 13325 Civic Center Drive, Poway, CA 92064, or such other place as Authority may designate in writing, the sum of (a) Two Million Two Hundred Thousand Dollars ($2,200,000), or so much thereof as may be disbursed hereunder ("Note Amount"), and (b) all costs and expenses payable hereunder, in currency of the United States of America, which at the time of payment is lawful for the payment of public and private debts. 1. Agreement. This Authority Promissory Note ("Note") is given in accordance with that certain Affordable Housing and Property Disposition Agreement executed by Authority and Poway Commons, LLC, a Delaware limited liability company ("PC, LLC"), as "Developer", and thereafter assigned by PC, LLC to Borrower, as of ("Agreement"). The rights and obligations of Borrower and Authority under this Note shall be governed by the Agreement and by the additional terms set forth in this Note. In the event of any inconsistencies between the terms of this Note and the terms of the Agreement or any other document related to the Note Amount, the terms of this Note shall prevail. Unless otherwise defined herein, capitalized terms used herein shall have the meanings ascribed to them in the Agreement. An Event of Default by Developer under any of the provisions of the Agreement, and/or a default under any and all attachments and all breakout documents executed, attested and/or recorded in implementation of the Agreement, including, without limitation, the Authority Deed of Trust, Authority Regulatory Agreement, or the income and/or rent restrictions as set forth in the regulatory agreement which may be required to be recorded against the Property with respect to the issuance of Tax Credits for the Project and/or the regulatory agreement with the institutional lender responsible for placing the Tax-Exempt Bonds (collectively, the "Transaction Documents") shall, after the expiration of any cure period under the respective agreement or document, be a default under this Note (a "Default"), and a default under this Note, after notice and expiration of a ten (10) day cure period, shall be an Event of Default under the Agreement and a default under the Transaction Documents. Notwithstanding anything to the contrary set forth herein, Authority shall not exercise any right hereunder without providing the limited partner of Borrower with not less than thirty (30) days prior written notice and right to cure any default giving rise to the exercise of said remedy. Authoity agrees that any cure tendered by the limited partner of Borrower shall be accepted or rejected on the same terms and conditions as if tendered directly by Borrower. 2091of231Wl 13106627.7 a03/15/19 -1-March 19, 2019 Item #3.1 2. Disbursement of Note Amount. (a) Impact Fee Portion. Borrower acknowledges and agrees that a portion of the Note Amount, in an amount up to Seven Hundred Thousand Dollars ($700,000) (the "Impact Fee Portion") is being loaned to Borrower to cover the impact fees required to be paid by Borrower in connection with the Project. The Impact Fee Portion shall be provided in the form of a credit rather than through an actual cash disbursement of funds to Borrower. The Project would not be feasible without Authority's provision of the Impact Fee Portion of the Note Amount and, accordingly, the Impact Fee Portion is being provided to Borrower for the development and construction of the Project. (b) Cash Portion. The portion of the Note Amount to be provided in the form of cash disbursements, in an amount of up to One Million Five Hundred Thousand Dollars ($1,500,000) (the "Cash Portion") shall be disbursed pursuant to the following disbursement schedule: (i) Sixty percent (60%) shall be disbursed upon the Partnership Transfer/Financing Closing City's issuance of a building permit for the Project; (ii) Thirty percent (30%) shall be disbursed upon the City's issuance of a certificate of occupancy for the Project; and (iii) Ten percent (10%) shall be disbursed upon Authority's recordation of a Release of Construction Covenants for the Project. Notwithstanding the foregoing, however, in no event shall Authority have any obligation to disburse any amount for any item in excess of the amount allocated to such item in the Project Budget, unless approved, in writing, by the Executive Director; provided, however, that upon Borrower's completion and payment of all work for a particular line item, Borrower may move any amounts remaining in such line to any other line item where payment for work has not been completed, and no Authority consent shall be required therefor. Disbursement shall be made only upon Borrower's written request in a form reasonably approved by the Executive Director (a "Disbursement Request") showing all costs that Borrower intends to fund with such disbursement, itemized in such detail as the Executive Director may reasonably require, accompanied in each case by (a) invoices and lien releases (if such work could give rise to mechanic's or materialmen's liens) reasonably satisfactory to the Executive Director, including in any event conditional lien releases executed by each contractor and subcontractor who has received any payment for work performed, and (b) all other documents and information reasonably required by the Executive Director. Authority agrees to fund each Disbursement Request within twenty-one (21) days after Authority's receipt of the Disbursement Request in completed form with all required supporting documentation, and reasonable determination by Authority that all of the conditions to disbursement set forth in this Section 2(b) have been satisfied, or waived by Authority. Authority shall make disbursements by wire transfer. 3. Interest. The Note Amount shall bear simple interest at three percent (3%) per annum. 4. Repayment of Note Amount. The Note Amount shall be paid by the Borrower's annual payment to Authority of fifty percent (50%) of the Residual Receipts from operation of the Project, as determined by a Residual Receipts calculation from the 882/012782-0020 2~1f'b't'j~~51\9 -2- March 19, 2019 Item #3.1 operation of the Project the preceding calendar year; provided, however, that said fifty percent (50%) shall be divided proportionately with any other lenders with loans payable from Residual Receipts or net cash flow, if any such loans are obtained by Developer. Annual Residual Receipts payments shall be made by the Borrower by cashier's check and shall be delivered on or before May 1'1 for each year during the term of this Note commencing in the first fiscal year following the date construction of the Project has been completed, and continuing until the Note Amount and all unpaid interest thereon has been repaid in full. Additionally, the Note Amount shall be paid by any or all of the following: (i) one hundred percent (100%) of the Refinancing Net Proceeds immediately upon any refinancing of the loans secured by the Property (or any part thereof), (ii) one hundred percent (100%) of the Transfer Net Proceeds immediately upon any transfer in whole or in part of the Project, and (iii) any Cost Savings, pursuant to Section 6.8 of the Agreement. Notwithstanding the foregoing, in the event of a re-syndication of the Project by an affiliate of the Borrower after the expiration of the Tax Credit compliance period, Authority may, in its sole and absolute discretion, agree to allow the Authority Loan to be assumed and remain outstanding. As used herein, "Affiliate" means any person or entity directly or indirectly, through one or more intermediaries, controlling, controlled by or under common control with Borrower which, if Borrower is a partnership or limited liability company, shall include each of the constituent members or general partners, respectively thereof. The term "control" as used in the immediately preceding sentence, means, with respect to a person that is a corporation, the right to the exercise, directly or indirectly, of more than fifty percent (50%) of the voting rights attributable to the shares of the controlled corporation, and, with respect to a person that is not a corporation, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of the controlled person. As used herein, "Annual Financial Statemenf' shall mean each certified financial statement of Borrower for the Project using generally accepted accounting principles ("GAAP"), as separately accounted for this Project, including Operating Expenses and Annual Project Revenue, prepared annually at Borrower's expense, by an independent certified public accountant reasonably acceptable to Authority. As used herein, "Annual Project Revenue" means all gross income and all revenues of any kind from the Project in a calendar year, of whatever form or nature, whether direct or indirect, with the exception of the items excluded below, actually received by or paid to or for the account or benefit of Borrower or any Affiliate of Borrower or any of their agents or employees, from any and all sources, resulting from or attributable to the ownership, operation, leasing and occupancy of the Project, determined on the basis of generally accepted accounting principles applied on a consistent basis, and shall include, but not be limited to: (i) gross rentals paid by tenants of the Project under leases, and payments and subsidies of whatever nature, including without limitation any payments, vouchers or subsidies from the U.S. Department of Housing and Urban Development or any other person or organization, received on behalf of tenants under 882/012782-0020 2~!f'b'f' j'l!~5/i 9 -3- March 19, 2019 Item #3.1 their leases, (ii) amounts paid by residents of the Project to Borrower or any Affiliate of Borrower on account of Operating Expenses for further disbursement by Borrower or such Affiliate to a third party or parties, (iii) late charges and interest paid on rentals, (iv) rents and receipts from licenses, concessions, vending machines, coin laundry and similar sources, (v) other fees, charges or payments not denominated as rental but payable to Borrower in connection with the rental of office, retail, storage, or other space in the Project, (vi) consideration received in whole or in part for the cancellation, modification, extension or renewal of leases, and (vii) interest and other investment earnings on security deposits, reserve accounts and other Project accounts to the extent disbursed for other than the purpose of the reserve. Notwithstanding the foregoing, gross income shall not include the following items: (a) security deposits from tenants (except when applied by Borrower to rent or other amounts owing by tenants); (b) capital contributions to Borrower by its members, partners or shareholders (including capital contributions required to pay any Deferred Developer Fee); (c) condemnation or insurance proceeds; (d) funds received from any source actually and directly used for initial development of the Project; (e) receipt by an Affiliate of management fees or other bona fide arms-length payments for reasonable and necessary Operating Expenses associated with the Project; (f) Transfer Net Proceeds; or (g) Refinancing Net Proceeds. As used herein "Capital Replacement Reserve" shall have the meaning ascribed thereto in the Authority Regulatory Agreement. As used herein, "CPI Adjustment'' means the increase in the cost of living index, as measured by the Consumer Price Index for All Urban Consumers, Los Angeles- Riverside-San Diego County statistical area, all items (1982-84 = 100) published by the United States Department of Labor, Bureau of Labor Statistics ("CPI") in effect as of the date on which the Certificate of Occupancy is issued for the Project to the CPI in effect as of the date on which an adjustment is made. If such index is discontinued or revised, such other index with which such index is replaced (or if not replaced, another index which reasonably reflects and monitors consumer prices) shall be used in order to obtain substantially the same results as would have been obtained if the discontinued index had not been discontinued or revised. If the CPI is changed so that the base year is other than 1982-84, the CPI shall be converted in accordance with the conversion factor published by the United States Department of Labor, Bureau of Labor Statistics. As used herein, "Debt Service" shall mean payments made in a calendar year pursuant to the approved Construction Loan or the Take-Out Loan, as applicable, obtained for the construction/development, and ownership of the Project, as set forth in the Project Budget, or any permitted refinancing or modification thereof, but excluding payments made pursuant to this Note. As used herein, "Deferred Developer Fee" shall mean the portion of the Borrower's development fee, if any, that is payable out of the Annual Project Revenue and not from capital sources, as set forth in the Project Budget. Disbursement of the Deferred Developer Fee (all or any part thereof) shall be subject to the provisions of the next paragraph. 882/012782-0020 2~ ''b't' j'\!':1'119 -4-March 19, 2019 Item #3.1 In connection with Borrower's eligibility to disburse all or any part of the Deferred Developer Fee, in the event the cost of completing the Project exceeds the amount set forth in the final Budget; then, to the extent necessary, the funds otherwise available to pay the developer fee from capital sources shall be expended and used to pay the remaining costs of completing the Project to the extent necessary to ensure the completion of the Project and the balance of the developer fee shall be paid as Deferred Developer Fee in accordance with the priority set forth in the Partnership Agreement, and/or payable from the proceeds of any approved refinancing or transfer of the Property and/or the Project. In no event shall Borrower be eligible for disbursement of the Deferred Developer Fee or any part thereof prior to completion of the Project, as approved by the Executive Director as evidenced by the issuance by Authority of the Release of Construction Covenants. As used herein, "Operating Expenses" shall mean actual, reasonable and customary (for comparable high quality rental Projects in San Diego County) costs, fees and expenses directly incurred, paid, and attributable to the operation, maintenance and management of the Project in a calendar year, which are in accordance with the annual Operating Budget approved by Authority pursuant to Section 9 of Authority Regulatory Agreement, including, without limitation, painting, cleaning, repairs, alterations, landscaping, utilities, refuse removal, certificates, permits and licenses, sewer charges, real and personal property taxes, assessments, insurance, security, advertising and promotion, janitorial services, cleaning and building supplies, purchase, repair, servicing and installation of appliances, equipment, fixtures and furnishings, fees and expenses of property management, fees and expenses of accountants, attorneys and other professionals, and other actual, reasonable and customary operating costs which are directly incurred and paid by Borrower, but which are not paid from or eligible to be paid from the Operating Reserve or any other reserve accounts. In addition, Operating Expenses shall include payment annually of (a) asset management fees payable to Borrower's partners in an amount not to exceed, cumulatively, Ten Thousand Dollars ($10,000), increased by three percent (3%) each year following the first year of operation; (b) a property management fee in an amount not to exceed Fifty Dollars ($50) per unit, increasing by three and five-tenths percent (3.5%) each year following the first year of operation; and (c) a social services fee in an amount not to exceed Eleven Thousand Dollars ($11,000) per year, increasing by three percent (3%) each year following the first year of operation, provided Borrower provides the social services described in (a) the Tenant Services Agreement that was included in Borrower's tax credit application, and (b) the Scope of Development. Operating Expenses shall not include any of the following: (i) salaries of employees of Borrower or Borrower's general overhead expenses, or expenses, costs and fees paid to an Affiliate of Borrower, to the extent any of the foregoing exceed the expenses, costs or fees that would be payable in a bona fide arms' length transaction between unrelated parties in the San Diego County area for the same work or services; (ii) any amounts paid directly by a tenant of the Project to a third party in connection with expenses which, if incurred by Borrower, would be Operating Expenses; (iii) optional or elective payments with respect to the Construction Loan; (iv) any payments with respect to any Project-related loan or financing that has not been approved by Authority; (v) expenses, expenditures, and charges of any nature whatsoever arising or incurred by Borrower prior to completion of the Project with respect 882/012782-0020 2~ !'b't' 3'\B'1 " -5-March 19, 2019 Item #3.1 to the development of the Project, or any portion thereof, including, without limitation, all predevelopment and preconstruction activities conducted by Borrower in connection with the Project, including without limitation, the preparation of all plans and the performance of any tests, studies, investigations or other work, and the construction of the Project and any on site or off site work in connection therewith; or (vi) depreciation, amortization, and accrued principal and interest expense on deferred payment debt. As used herein, "Operating Reserve" shall have the meaning ascribed thereto in the Authority Regulatory Agreement. As used herein, "Partnership Agreemenf' means the agreement which sets forth the terms of the Borrower's limited partnership, as such agreement may be amended from time to time. As used herein, "Refinancing Net Proceeds" means the proceeds of any approved refinancing of the Construction Loan or other approved financing secured by the Property, net of the following actual costs and fees incurred: (i) the amount of the financing which is satisfied out of such proceeds, (ii) reasonable and customary costs and expenses incurred in connection with the refinancing, (iii) the balance, if any, of the Deferred Developer Fee, (iv) the balance, if any, of authorized loans to the Project made by the limited partners of Borrower, including interest at the rate set forth in the Partnership Agreement for such loans, (v) the balance, if any, of authorized operating loans or development loans made by the general partners of a limited partnership that succeeds to Borrower's interest in the Agreement and the Project, including interest at the rate set forth in the Partnership Agreement for such loans, (vi) the return of capital contributions, if any, to the Project made by the general partners of a limited partnership that succeeds to Borrower's interest in the Agreement and the Project that were used to pay the Deferred Developer Fee, and (vii) the amount of proceeds required to be reserved for the repair, rehabilitation, reconstruction or refurbishment of the Project. As used herein, "Reserve Deposits" shall mean any payments to the Capital Replacement Reserve account and payments to the Operating Reserve account pursuant to Sections 10 and 11, respectively, of Authority Regulatory Agreement or such higher amounts as may be otherwise required by (i) any lender of a Project-related loan that has been approved by Authority, or (ii) the Investor, pursuant to the terms of the Partnership Agreement. As used herein, "Residual Receipts" shall mean Annual Project Revenue less the sum of: (i) Operating Expenses; (ii) Debt Service; (iii) Reserve Deposits to the Capital Replacement Reserve; (iv) Reserve Deposits to the Operating Reserve; (v) Deferred Developer Fees; 882/012782-0020 :H ~'b't' j'!z~'/" -6-March 19, 2019 Item #3.1 (vi) Unpaid Tax Credit adjustment amounts, if any, pursuant to the Partnership Agreement; (vii) Repayment of loans to the Project, if any, made by the limited partner(s) of Borrower pursuant to the Partnership Agreement, including interest at the rate set forth in the Partnership Agreement, for eligible development and/or operating expense deficits or other eligible loans (provided that if made during the compliance period Borrower shall provide to Executive Director documentation showing the propriety of such loan(s) and if made subsequent to the expiration of the compliance period each such loan must be reasonably approved by the Executive Director before being provided to the Project after review of documentation provided by Borrower showing propriety of such loans); (viii) Repayment to the administrative and/or managing general partners of Borrower for loans to the Project for development advance(s) pursuant to the Partnership Agreement, operating deficit advance(s) pursuant to the Partnership Agreement), credit adjuster payment(s) pursuant to the Partnership Agreement), and/or development fee advance(s) pursuant to the Partnership Agreement, and with all such loans to be repaid without interest (provided that if made during the compliance period Borrower shall provide to Executive Director documentation showing the propriety of such loan(s) and if made subsequent to the expiration of the compliance period each such loan must be reasonably approved by the Executive Director before being provided to the Project after review of documentation provided by Borrower showing propriety of such loans); (ix) Repayment to the administrative and/or managing general partners of Borrower of certain loans made to the Project after the expiration or earlier termination of the Partnership Agreement to cover shortfalls in funding for Operating Expenses in excess of the Operating Expenses included in the approved annual Operating Budget for the year in which such loan is made (if at all), all such loans to be repaid without interest (provided that if made during the compliance period Borrower shall provide to Executive Director documentation showing the propriety of such loan(s) and if made subsequent to the expiration of the compliance period each such loan must be reasonably approved by the Executive Director before being provided to the Project after review of documentation provided by Borrower showing propriety of such loans); and (x) Capital contributions to the Project, if any, made by the general partners of Borrower that were used to pay developer fee. In the event any calculation of Annual Project Revenue less subsections (i) through (x) inclusive above results in a negative number, then Residual Receipts shall be zero ($0) for that year and shall not carry over to the next or any other subsequent year. In addition, none of the fees, costs, expenses, or items described above in calculation of Residual Receipts shall include any duplicate entry/item, or double accounting for a cost item. The calculation of Residual Receipts shall be conducted at Borrower's sole cost and expense, by a third party auditor and submitted to Borrower annually, along with Borrower's payment of Residual Receipts. 882/012782-0020 2~~'b't' 3'!!~5/19 -7- March 19, 2019 Item #3.1 As used herein, "Transfer Net Proceeds" shall mean the proceeds of any sale or other transfer, in whole or part, of the Property or Borrower's interests therein, net only of (i) the reasonable and customary costs and expenses incurred in connection with such transfer; (ii) the amount of the financing which is satisfied out of such proceeds, (iii) the balance, if any, of the Deferred Developer Fee, (iv) the balance, if any, of loans to the Project made by the limited partners of Borrower, including interest thereon as provided in the Partnership Agreement, (v) the balance, if any, of operating loans or development loans made by the general partners of Borrower, including interest thereon as provided in the Partnership Agreement, and (vi) the return of capital contributions, if any, to the Project made by the general partners of Borrower that were used to pay the Deferred Developer Fee. 5. Security. Borrower's obligations under this Note and the Agreement shall, at all times during which any amount remains outstanding hereunder, be secured by the Authority Deed of Trust, which Authority Deed of Trust shall only be subordinated to the approved deed(s) of trust for the Construction Loan and Take-Out Loan, and such encumbrances approved by Authority in writing, pursuant to a written subordination agreement in a form approved by the Authority Attorney. Upon execution of the same, the terms of the Authority Deed of Trust are incorporated herein and made a part hereof to the same extent and with the same force and effect as if fully set forth herein. 6. Maturity. This Note shall be due and payable on the fifty-fifth (551h) anniversary of the date the Construction Loan converts to a Take-Out Loan. 7. Application of Payments. All payments shall be applied (i) first, to costs and fees owing under this Note, (ii) second, to the payment of unpaid accrued interest owing under this Note for each calendar year in which no payment was made by Borrower pursuant to Section 4 above, (iii) third, to the payment of accrued interest for the preceding calendar year, and (iv) fourth, to payment of principal. 8. Waivers. (a) Borrower expressly agrees that this Note or any payment hereunder may be extended from time to time at Authority's sole discretion and that Authority may accept security in consideration for any such extension or release any security for this Note at its sole discretion all without in any way affecting the liability of Borrower. (b) No extension of lime for payment of this Note made by agreement by Authority with any person now or hereafter liable for the payment of this Note shall operate to release, discharge, modify, change or affect the original liability of Borrower under this Note, either in whole or in part. (c) The obligations of Borrower under this Note shall be absolute and Borrower waives any and all rights to offset, deduct or withhold any payments or charges due under this Note for any reasons whatsoever. (d) Borrower waives presentment, demand, notice of protest and nonpayment, notice of default or delinquency, notice of acceleration, notice of costs, 882/012782-0020 2~1f'b't' 3'!1~5119 -8- March 19, 2019 Item #3.1 expenses or leases or interest thereon, notice of dishonor, diligence in collection or in proceeding against any of the rights or interests in or to properties securing this Note, and the benefit of any exemption under any homestead exemption laws, if applicable. (e) No previous waiver and no failure or delay by Authority in acting with respect to the terms of this Note or the Authority Deed of Trust shall constitute a waiver of any breach, default, or failure or condition under this Note, the Authority Deed of Trust or the obligations secured thereby. A waiver of any term of this Note, the Authority Deed of Trust or of any of the obligations secured thereby must be made in writing and shall be limited to the express written terms of such waiver. 9. Attorneys' Fees and Costs. Borrower agrees that if any amounts due under this Note are not paid when due, Borrower will pay all costs and expenses of collection and reasonable attorneys' fees paid or incurred in connection with the collection or enforcement of this Note, whether or not suit is filed. 10. Joint and Several Obligation. This Note is the joint and several obligation of all makers, sureties, guarantors and endorsers, and shall be binding upon them and their heirs, successors and assigns. 11. Amendments and Modifications. This Note may not be changed orally, but only by an amendment approved by Authority and evidenced in a writing signed by Borrower and by Authority. 12. Authority May Assign. Authority may, at its option, assign its right to receive payment under this Note without necessity of obtaining the consent of the Borrower. 13. Borrower Assignment Prohibited. In no event shall Borrower assign or transfer any portion of this Note without the prior express written consent of Authority, which consent shall not unreasonably be withheld, except pursuant to a transfer that is authorized under Section 15 of the Agreement. 14. Acceleration and Other Remedies. Upon the occurrence of a Default, Authority may, at Authority's option, declare the outstanding principal amount of this Note, together with the then accrued and unpaid interest thereon and other charges hereunder, and all other sums secured by the Authority Deed of Trust, to be due and payable immediately, and upon such declaration, such principal and interest and other sums shall immediately become and be due and payable without demand or notice, all as further set forth in the Authority Deed of Trust. All costs of collection, including, but not limited to, reasonable attorneys' fees and all expenses incurred in connection with protection of, or realization on, the security for this Note, may be added to the principal hereunder, and shall accrue interest as provided herein. Authority shall at all times have the right to proceed against any portion of the security for this Note in such order and in such manner as Authority may consider appropriate, without waiving any rights with respect to any of the security. Any delay or omission on the part of Authority in exercising any right hereunder, under the Agreement or under the Authority Deed of Trust shall not operate 882/012782-0020 2~f'b't' 3'l!~5119 -9-March 19, 2019 Item #3.1 as a waiver of such right, or of any other right. No single or partial exercise of any right or remedy hereunder or under the Agreement or any other document or agreement shall preclude other or further exercises thereof, or the exercise of any other right or remedy. The acceptance of payment of any sum payable hereunder, or part thereof, after the due date of such payment shall not be a waiver of Authority's right to either require prompt payment when due of all other sums payable hereunder or to declare a Default for failure to make prompt or complete payment. 15. Alternate Rate. Upon the occurrence of any Default, or upon the maturity hereof (by acceleration or otherwise), the entire unpaid principal sum, at the option of Authority, shall bear interest, from the date of occurrence of such Default or maturity and after judgment and until collection, at the "Alternate Rate", such rate being the highest interest rate then permitted by law. Interest calculated at the Alternate Rate, when and if applicable, shall be due and payable immediately without notice or demand. Borrower agrees that in the event of any Default, Authority will incur additional expense in servicing the loan evidenced by this Note and will suffer damage and loss resulting from such Default. Borrower agrees that in such event Authority shall be entitled to damages for the detriment caused thereby, which damages are extremely difficult and impractical to ascertain. Therefore, Borrower agrees that the Alternate Rate (as applied to the unpaid principal balance, accrued interest, fees, costs and expenses incurred) is a reasonable estimate of such damages to Authority, and Borrower agrees to pay such sum on demand. 16. Consents. Borrower hereby consents to: (a) any extension (whether one or more) of the time of payment under this Note, (b) the release or surrender or exchange or substitution of all or any part of the security, whether real or personal, or direct or indirect, for the payment hereof, (c) the granting of any other indulgences to Borrower, and (d) the taking or releasing of other or additional parties primarily or contingently liable hereunder. Any such extension, release, surrender, exchange or substitution may be made without notice to Borrower or to any endorser, guarantor or surety hereof, and without affecting the liability of said parties hereunder. 17. Interest Rate Limitation. Authority and Borrower stipulate and agree that none of the terms and provisions contained herein or in any of the loan instruments shall ever be construed to create a contract for the use, forbearance or detention of money requiring payment of interest at a rate in excess of the maximum interest rate permitted to be charged by the laws of the State of California. In such event, if any holder of this Note shall collect monies which are deemed to constitute interest which would otherwise increase the effective interest rate on this Note to a rate in excess of the maximum rate permitted to be charged by the laws of the State of California, all such sums deemed to constitute interest in excess of such maximum rate shall, at the option of such holder, be credited to the payment of the sums due hereunder or returned to Borrower. 18. Successors and Assigns. Whenever"Authority" is referred to in this Note, such reference shall be deemed to include Authority and its successors and assigns, including, without limitation, any successor to its rights, powers, and responsibilities, and any subsequent assignee or holder of this Note. All covenants, provisions and 882/012782-0020 ~~1f'b't' 3,35119 -10- March 19, 2019 Item #3.1 agreements by or on behalf of Borrower, and on behalf of any makers, endorsers, guarantors and sureties hereof which are contained herein shall inure to the benefit of Authority and Authority's successors and assigns. 19. Miscellaneous. Time is of the essence hereof. This Note shall be governed by and construed under the laws of the State of California except to the extent Federal laws preempt the laws of the State of California. Borrower irrevocably and unconditionally submits to the jurisdiction of the Superior Court of the State of California for the County of San Diego or the United States District Court of the Southern District of California, as Authority may deem appropriate, in connection with any legal action or proceeding arising out of or relating to this Note. Borrower also waives any objection regarding personal or in rem jurisdiction or venue. 20. Non-Recourse Obligation. Borrower and its partners shall not be personally liable for the payment of this Note or for the payment of any deficiency established after judicial foreclosure or trustee's sale; provided, however, that the foregoing shall not in any way affect any rights Authority may have (as a secured party or otherwise) hereunder or under the Agreement or the Authority Deed of Trust to recover directly from Borrower any amounts, or any funds, damages or costs (including without limitation reasonable attorneys' fees and costs) incurred by Authority as a result of fraud, intentional misrepresentation or bad faith waste, and any costs and expenses incurred by Authority in connection therewith (including without limitation reasonable attorneys' fees and costs). 21. Accounting. (a) Accounting Terms and Determinations. Unless otherwise specified herein, (i) all accounting terms used herein shall be interpreted, (ii) all accounting determinations hereunder shall be made, and (c) all books, records and financial statements required to be delivered hereunder shall be prepared, in accordance with GAAP, consistently applied, except for changes approved by Authority. (b) Financial Reporting and Accounting Covenants. Borrower shall permit the representatives of Authority at any time or from time to time, upon three (3) business days' notice and during normal business hours, to inspect, audit, and copy all of Borrower's books, records, and accounts relating to the Property. Borrower shall furnish or cause to be furnished to Authority the following: (i) Annual Financial Statement. Borrower shall submit to Authority, on or before May 1 of each year commencing in the first year after the issuance of the first certificate of occupancy for the Project, an Annual Financial Statement, with respect to the Project that has been reviewed by an independent certified public accountant, together with an expressed written opinion of the certified public accountant that such Annual Financial Statement presents the financial position, results of operations, and cash flows of the Project fairly and in accordance with GAAP. 8821012782-0020 2~ ~'b'f' 3~~5119 -11-March 19, 2019 Item #3.1 (ii) Tax Returns. As soon as available, but in no event later than thirty (30) days after the time of filing with the Internal Revenue Service, the federal tax returns (and supporting schedules, if any) of Borrower. (iii) Audit Reports. Not later than ten (10) days after receipt thereof by Borrower, copies of all reports submitted to Borrower by independent public accountants in connection with each annual, interim or special audit of the financial statements of Borrower, made by such accountants, including the comment letter submitted by such accountants to management in connection with their annual audit. If any such audit report results in Borrower restating Residual Receipts upward for any fiscal year, then Borrower shall accompany delivery of such audit report to Authority with the additional payment to Authority resulting from said restatement pursuant to Section 4 of this Note. If any such audit report results in Borrower restating Residual Receipts downward for any fiscal year, Borrower may carry forward the overpayment made to Authority pursuant to such Section 4 as a credit against payments thereunder in subsequent fiscal years. (c) Late Payment. If any annual payment required pursuant to Section 4 above is not received by Authority within ten (10) calendar days after payment is due, Borrower shall pay to Authority a late charge of five percent (5%) of such payment, such late charge to be immediately due and payable without demand by Authority. (d) Dispute Regarding Annual Financial Statement. If Authority disputes any Annual Financial Statement, Authority shall notify Borrower of such dispute within sixty (60) days after receipt of an Annual Financial Statement and the parties shall cause their representatives to meet and confer concerning the dispute and to use all reasonable efforts to reach a mutually acceptable resolution of the matter in question within thirty (30) days after Authority's notice of such dispute. If the parties are unable to reach a mutually acceptable resolution within such thirty (30) day period, then, within twenty (20) days after the expiration of such period, Borrower and Authority shall appoint a national firm of certified public accountants to review the dispute and to make a determination as to the matter in question within thirty (30) days after such appointment. If the parties cannot, within ten (10) days, agree upon the firm to be appointed, then, upon the application of either party, such firm shall be appointed by the Presiding Judge of the Superior Court for the County of San Diego, California. Such firm's determination shall be final and binding upon the parties. Such firm shall have full access to the books, records and accounts of Borrower and the Property. (e) Underpayment. If any audit by Authority reports an underpayment by Borrower on this Note, Borrower shall pay the amount of such underpayment, together with the late charge set forth in Section 21 (c) of this Note, to Authority within ten (10) days after written notice thereof to Borrower or, in the event of a dispute, after timely notice to Borrower of the resolution of such dispute by the independent firm of certified public accountants, as the case may be, and if such underpayment amounts to more than five percent (5%) of the disputed payment for the period audited, then, notwithstanding anything to the contrary in this section, Borrower shall pay to Authority, within ten (10) 882/012782-0020 2~1f'b'f' 3'!!~5119 -12- March 19, 2019 Item #3.1 days after written demand, Authority's reasonable costs and expenses in conducting such audit and exercising its rights under this Section 21 of this Note. [End of document -Signature page follows] BORROWER: _____________ , LP., a California limited partnership Date: ________ , 20_ By: Its: 882/012782-0020 2~!f'b't' :l'!l~'/19 -13- March 19, 2019 Item #3.1 8821012782-0020 2~''b't' j'J!~5119 ATTACHMENT NO. 8 AUTHORITY DEED OF TRUST [See following document] ATTACHMENT NO. 8 March 19, 2019 Item #3.1 RECORDING REQUESTED BY: AND WHEN RECORDED RETURN TO: City of Poway Housing Authority 13325 Civic Center Drive Poway, CA 92064 Attn: City Clerk APN: _____ _ [Free Recording Requested Government Code Sections 6103 and 27383] DEED OF TRUST WITH ASSIGNMENT OF RENTS NOTE: RIDER ATTACHED TO THIS DEED OF TRUST CONTAINING TERMS INCLUDING SECURITY AGREEMENT AND FIXTURE FILING. This DEED OF TRUST WITH ASSIGNMENT OF RENTS AND RIDER ATIACHED HERETO ("Deed of Trust"), is made , , between _________ , a California Limited Partnership, herein called TRUSTOR, whose address is , CA , FIRST AMERICAN TITLE INSURANCE COMPANY, a California corporation, herein called TRUSTEE, and CITY OF POWAY HOUSING AUTHORITY, a public body, corporate and politic, herein called BENEFICIARY. WITNESSETH: That Trustor grants to Trustee in trust, with power of sale, Trustor's estate, dated on or about the date hereof, in that property in the City of Poway, County of San Diego, State of California, described in Exhibit "A" (the "Property"), together with the rents, issues and profits thereof, subject, however, to the right, power and authority hereinafter given to and conferred upon Beneficiary to collect and apply such rents, issues and profits for the purpose of securing (1) payment of the sum of TWO MILLION TWO HUNDRED THOUSAND DOLLARS ($2,200,000), with interest thereon according to the terms of a promissory note or notes of even date herewith made by Trustor, payable to order of Beneficiary, and extensions or renewals thereof; (2) the performance of each agreement of Trustor incorporated by reference or contained herein; and (3) payment of additional sums and interest thereon which may hereafter be loaned to Trustor, or its successors or assigns, when evidenced by a promissory note or notes reciting that they are secured by this Deed of Trust. To protect the security of this Deed of Trust, and with respect to the Property above described, Trustor expressly makes each and all of the agreements, and adopts and agrees to perform and be bound by each and all of the terms and provisions set forth in subdivision A, and it is mutually agreed that each and all of the terms and provisions set forth in subdivision B of the fictitious deed of trust recorded in Orange County August 17, 1964, and in all other counties August 18, 1964, in the book and at the page of Official 882/012782-0020 :z~?'b't' j'lz~5/l 9 -1-March 19, 2019 Item #3.1 Records in the office of the county recorder of the county where said property is located, noted below opposite the name of such county, namely: COUNTY BOOK PAGE COUNTY BOOK PAGE COUNTY BOOK PAGE COUNTY BOOK PAGE Alameda 1288 556 Kings 858 713 Placer 1028 379 Sierra 38 187 Alpine 3 130-Lake 437 110 Plumas 166 1307 Siskiyou 506 762 31 Amador 133 438 Lassen 192 367 Riverside 3778 347 Solano 1287 621 Butte 1330 513 Los T-874 Sacramento 5039 124 Sonoma 2067 427 Angeles 3878 Calaveras 185 338 Madera 911 136 San Benito 300 405 Stanislaus 1970 56 Colusa 323 391 Marin 1849 122 San 6213 768 Sutter 655 585 Bernardino Contra 4684 1 Mariposa 90 453 San A-804 596 Tehama 457 183 Costa Francisco Del Norte 101 549 Mendocino 667 99 San Joaquin 2855 283 Trinity 108 595 El Dorado 704 635 Merced 1660 753 San Luis 1311 137 Tulare 2530 108 Obispo Fresno 5052 623 Modoc 191 93 San Diego 4778 175 Tuolumne 177 160 Glenn 469 76 Mono 69 302 Santa 2065 881 Ventura 2607 237 Barbara Humboldt 801 83 Monterey 357 239 Santa Clara 6626 664 Yolo 769 16 Imperial 1189 701 Napa 704 742 Santa Cruz 1638 607 Yuba 398 693 Inyo 165 672 Nevada 363 94 Shasta 800 633 Kern 3756 690 San Diego 7182 18 San Diego SERIES 5 Book 1964, Page 149774 shall inure to and bind the parties hereto, with respect to the property above described. Said agreements, terms and provisions contained in said subdivisions A and B (identical in all counties, and printed on pages 3 and 4 hereof) are by the within reference thereto, incorporated herein and made a part of this Deed of Trust for all purposes as fully as if set forth at length herein, and Beneficiary may charge for a statement regarding the obligation secured hereby, provided the charge therefor does not exceed the maximum allowed by law. The undersigned Trustor, requests that a copy of any notice of default and any notice of sale hereunder be mailed to him at his address hereinbefore set forth. SEE RIDERS ATTACHED TO THIS DEED OF TRUST 882/012782-0020 2'!2'./t'b't' 3~~5119 -2- March 19, 2019 Item #3.1 A Notary Public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California County of _________ _ On ___________ , before me,------------ (insert name and title of the officer) Notary Public, personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capaAuthority(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENAL TY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature. ____________ _ (Seal) 882!012782-0020 2~1f'b't1 j':\'1 " March 19, 2019 Item #3.1 DO NOT RECORD The following is a copy of Subdivisions A and B of the fictitious Deed of Trust recorded in each county in California as stated in the foregoing Deed of Trust and incorporated by reference in said Deed of Trust as being a part thereof as if set forth at length therein. A. To protect the security of this Deed of Trust, Truster agrees: 1) To keep said property in good condition and repair, not to remove or demolish any building thereon; to complete or restore promptly and in a good and workmanlike manner any building which may be constructed, damaged or destroyed thereon and to pay when due all claims for labor performed and materials furnished therefor, to comply with all laws affecting said property or requiring any alterations or improvements to be made thereon; not to commit or permit waste thereof; not to commit, suffer or permit any act upon said property in violation of law; to cultivate, irrigate, fertilize, fumigate, prune and do all other acts which from the character or use of said property may be reasonably necessary, the specific enumerations herein not excluding the general. 2) To provide, maintain and deliver to Beneficiary fire insurance satisfactory to and with loss payable to Beneficiary. The amount collected under any fire or other insurance policy may be applied by Beneficiary upon any indebtedness secured hereby and in such order as Beneficiary may determine, or at the option of Beneficiary the entire amount so collected or any part thereof may be released to Trustor. Such application or release shall not cure or waive any default or notice of default hereunder or invalidate any act done pursuant to such notice. 3) To appear in and defend any action or proceeding purporting to affect the security hereof or the rights or powers of Beneficiary or Trustee; and to pay all costs and expenses, including cost of evidence of title and attorney's fees in a reasonable sum, in any such action or proceeding in which Beneficiary or Trustee may appear, and in any suit brought by Beneficiary to foreclose this Deed. 4) To pay: at least ten (10) days before delinquency all taxes and assessments affecting said property, including assessments on appurtenant water stock; when due, all encumbrances, charges and liens, with interest, on said property or any part thereof, which appear to be prior or superior hereto; all costs, fees and expenses of this Trust. Should Truster fail to make any payment or to do any act as herein provided, then Beneficiary or Trustee, but without obligation so to do and without notice to or demand upon Trustor and without releasing Trustor from any obligation hereof, may: make or do the same in such manner and to such extent as either may deem necessary to protect the security hereof, Beneficiary or Trustee being authorized to enter upon said property for such purposes; appear in and defend any action or proceeding purporting to affect the security hereof or the rights or powers of Beneficiary or Trustee; pay, purchase, contest or compromise any encumbrance, charge or lien which in the judgment of either appears 882/012782-0020 2~1f'b't' 3'!1~5/19 March 19, 2019 Item #3.1 to be prior or superior hereto; and, in exercising any such powers, pay necessary expenses, employ counsel and pay his or her reasonable fees. 5) To pay immediately and without demand all sums so expended by Beneficiary or Trustee, with interest from the date of expenditure at the amount allowed by law in effect at the date hereof, and to pay for any statement provided for by law in effect at the date hereof regarding the obligation secured hereby any amount demanded by the Beneficiary not to exceed the maximum allowed by law at the time when said statement is demanded. B. It is mutually agreed: 1) That any award in connection with any condemnation for public use of or injury to said property or any part thereof is hereby assigned and shall be paid to Beneficiary who may apply or release such moneys received by him in the same manner and with the same effect as above provided for disposition of proceeds of fire or other insurance. 2) That by accepting payment of any sum secured hereby after its due date, Beneficiary does not waive its right either to require prompt payment when due of all other sums so secured or to declare default for failure so to pay. 3) That at any time or from time to time, without liability therefor and without notice, upon written request of Beneficiary and presentation of this Deed and said note for endorsement, and without affecting the personal liability of any person for payment of the indebtedness secured hereby, Trustee may: reconvey any part of said property; consent to the making of any map or plat thereof; join in granting any easement thereon, or join in any extension agreement or any agreement subordinating the lien or charge hereof. 4) That upon written request of Beneficiary stating that all sums secured hereby have been paid, and upon surrender of this Deed and said note to Trustee for cancellation and retention or other disposition as Trustee in its sole discretion may choose and upon payment of its fees, Trustee shall reconvey, without warranty, the property then held hereunder. The recitals in such reconveyance of any matters or facts shall be conclusive proof of the truthfulness thereof. The Grantee in such reconveyance may be described as "the person or persons legally entitled thereto". 5) That as additional security, Trustor hereby gives to and confers upon Beneficiary the right, power and authority, during the continuance of these Trusts, to collect the rents, issues and profits of said property, reserving unto Trustor the right, prior to any default by Trustor in payment of any indebtedness secured hereby or in the performance of any agreement hereunder, to collect and retain such rents, issues and profits as they become due and payable. Upon any such default (beyond any applicable cure period, and during the continuance of such default), Beneficiary may at any time without notice, either in person, by agent, or be a receiver to be appointed by a court, and without regard to the adequacy of any security for the indebtedness hereby secured, enter 882/012782-0020 2~f'b'f1 j':z~'1 " -2- March 19, 2019 Item #3.1 upon and take possession of said property or any part thereof, in its own name sue for or otherwise collect such rents, issues, and profits, including those past due and unpaid, and apply the same, less costs and expenses of operation and collection, including reasonable attorney's fees, upon any indebtedness secured hereby, and in such order as Beneficiary may determine. The entering upon and taking possession of said property, the collecting of such rents, issues and profits and the application thereof as aforesaid, shall not cure or waive any default or notice of default hereunder or invalidate any act done pursuant to such notice. 6) That upon default by Truster in payment of any indebtedness secured hereby or in the performance of any agreement hereunder, Beneficiary may declare all sums secured hereby immediately due and payable by delivery to Trustee of written declaration of default and demand for sale and of written notice of default and of election to cause to be sold said property, which notice Trustee shall cause to be filed for record. Beneficiary also shall deposit with Trustee this Deed, said note and all documents evidencing expenditures secured hereby. After the lapse of such time as may then be required by law following the recordation of said notice of default, and notice of sale having been given as then required by law, Trustee, without demand on Truster, shall sell said property at the time and place fixed by it in said notice of sale, either as a whole or in separate parcels, and in such order as it may determine, at public auction to the highest bidder for cash in lawful money of the United States, payable at time of sale. Trustee may postpone sale of all or any portion of said property by public announcement at such time and place of sale, and from time to time thereafter may postpone such sale by public announcement at the time fixed by the preceding postponement. Trustee shall deliver to such purchaser its deed conveying the property so sold, but without any covenant or warranty, express or implied. The recitals in such deed of any matters or facts shall be conclusive proof of the truthfulness thereof. Any person, including Truster, Trustee, or Beneficiary as hereinafter defined, may purchase at such sale. After deducting all costs, fees and expenses of Trustee and of this Trust, including cost of evidence of title in connection with sale, Trustee shall apply the proceeds of sale to payment of: all sums expended under the terms hereof, not then repaid, with accrued interest at the amount allowed by law in effect at the date hereof; all other sums then secured hereby; and the remainder, if any, to the person or persons legally entitled thereto. 7) Beneficiary, or any successor in ownership of any indebtedness secured hereby, may from time to time, by instrument in writing, substitute a successor or successors to any Trustee named herein or acting hereunder, which instrument, executed by the Beneficiary and duly acknowledged and recorded in the office of the recorder of the county or counties where said property is situated shall be conclusive proof of proper substitution of such successor Trustee or Trustees, who shall, without conveyance from the Trustee predecessor, succeed to all its title, estate, rights, powers and duties. Said instrument must contain the name of the original Truster, Trustee and Beneficiary 882/012782-0020 2~l'b't' j':!~5119 -3- March 19, 2019 Item #3.1 hereunder, the book and page where this Deed is recorded and the name and address of the new Trustee. 8) That this Deed applies to, inures to the benefit of, and binds all parties hereto, their heirs, legatees, devisees, administrators, executors, successors and assigns. The term Beneficiary shall mean the owner and holder, including pledgees, of the note secured hereby, whether or not named as Beneficiary herein. In this Deed, whenever the context so requires, the masculine gender includes the feminine and/or neuter, and the singular number includes the plural. 9) That Trustee accepts this Trust when this Deed, duly executed and acknowledged, is made a public record as provided by law. Trustee is not obligated to notify any party hereto of pending sale under any other Deed of Trust or of any action or proceeding in which Trustor, Beneficiary or Trustee shall be a party unless brought by Trustee. DO NOT RECORD -REQUEST FOR FULL RECONVEYANCE TO _____________ , TRUSTEE: The undersigned is the legal owner and holder of the note or notes and of all indebtedness secured by the foregoing Deed of Trust. Said note or notes, together with all other indebtedness secured by said Deed of Trust, have been fully paid and satisfied; and you are hereby requested and directed, on payment to you of any sums owing to you under the terms of said Deed of Trust, to cancel said note or notes above mentioned, an all other evidences of indebtedness secured by said Deed of Trust delivered to you herewith, together with the said Deed of Trust, and to reconvey, without warranty, to the parties designated by the terms of said Deed of Trust, all the estate now held by you under the same. Dated----------------- Please mail Deed of Trust, Note and Reconveyance to Do Not lose or destroy this Deed of Trust OR THE NOTE which it secures. Both must be delivered to the Trustee for cancellation before reconveyance will be made. 882/012782-0020 2'!!1f'b't' 3'!!~5/19 -4- March 19, 2019 Item #3.1 882/012782-0020 13106627.7 a03/15119 230 of 323 EXHIBIT "A" LEGAL DESCRIPTION OF PROPERTY March 19, 2019 Item #3.1 RIDER TO DEED OF TRUST WITH ASSIGNMENT OF RENTS This RIDER TO DEED OF TRUST WITH ASSIGNMENT OF RENTS ("Rider") is executed this _ day of by , L.P., a California limited partnership, herein "Truster," in favor of the CITY OF POWAY HOUSING AUTHORITY, a public body, corporate and politic, herein "Beneficiary," the same parties to that certain form Deed of Trust With Assignment of Rents, of even date hereto, to which this Rider is attached. This Rider is made a part of and is incorporated into said Deed of Trust. This Rider shall supersede any conflicting term or provision of the form Deed of Trust to which it is attached. Reference is made to (i) that certain Authority Promissory Note executed by Truster on or about the date set forth above, the repayment of which by Truster is secured by this Deed of Trust ("Authority Note"), (ii) that certain Affordable Housing and Property Disposition Agreement between Poway Commons, LLC, a Delaware limited liability company and Beneficiary dated for identification purposes only as of as assigned to and assumed by the Truster (collectively, the "Agreement"), and (iii) that certain Affordable Housing Regulatory Agreement, by and between Truster and Beneficiary, for the benefit of Beneficiary, and recorded in the Office of the San Diego County Recorder ("Authority Regulatory Agreement"). The parties hereto agree: 1. Property. The estate subject to this Deed of Trust is Trustor's fee estate in the real property legally described in the foregoing Deed of Trust to which this Rider is attached (the "Property"). 2. Obligations Secured. Truster makes this grant and assignment for the purpose of securing the following obligations ("Secured Obligations"): 882/012782-0020 13106627.7 a03/15119 231 of 323 a. Payment to Beneficiary of all indebtedness at any time owing under the terms of the Authority Note; b. Payment and performance of all obligations of Truster under this Deed of Trust; c. Payment and performance of all obligations of Truster under the Agreement and the Authority Regulatory Agreement. d. Payment and performance of all future advances and other obligations of Truster or any other person, firm, or entity with the approval of Truster, may agree to pay and/or perform (whether as principal, surety or guarantor) for the benefit of Beneficiary, when the obligation is evidenced by a writing which recites that it is secured by this Deed of Trust; and -1- March 19, 2019 Item #3.1 e. All modifications, extensions and renewals of any of the obligations secured hereby, however evidenced. 3. Obligations. The term "obligations" is used herein in its broadest and most comprehensive sense and shall be deemed to include, without limitation, all interest and charges, prepayment charges, late charges and fees at any time accruing or assessed on any of the Secured Obligations. 4. Incorporation. All terms of the Authority Note, Agreement, and Authority Regulatory Agreement, and the Secured Obligations are incorporated herein by this reference. All persons who may have or acquire an interest in the Property shall be deemed to have notice of the terms of all of the foregoing documents. 5. Mortgagee-in-Possession. Neither the assignment of rents set forth in the Deed of Trust nor the exercise by Beneficiary of any of its rights or remedies hereunder shall be deemed to make Beneficiary a "mortgagee-in-possession" or otherwise liable in any manner with respect to the Property, unless Beneficiary, in person or by agent, assumes actual possession thereof. Nor shall appointment of a receiver for the Property by any court at the request of Beneficiary or by agreement with Truster, or the entering into possession of the Property by such receiver, be deemed to make Beneficiary a "mortgagee-in-possession" or otherwise liable in any manner with respect to the Property. 6. No Cure. In the event Beneficiary collects and receives any rents under the Deed of Trust upon any default hereof, such collection or receipt shall in no way constitute a curing of the default, except if and to the extent the same are sufficient to cure all monetary defaults and no other defaults then exist. 7. Possession Upon Default. Upon the occurrence of and during the continuation of a default, Beneficiary, after having given notice and the applicable cure periods having expired with the default having not been cured (hereinafter, a "default"), may, at its option, without any action on its part being required and without in any way waiving such default, take possession of the Property in accordance with applicable law and have, hold, manage, lease and operate the same, on such terms and for such period of time as Beneficiary may deem proper, and may collect and receive all rents and profits, with full power to make, from time to lime, all commercially reasonable alterations, renovations, repairs or replacements thereto as may seem proper to Beneficiary, and to apply such rents and profits to the payment of (a) the cost of all such alterations, renovations, repairs and replacements, and all costs and expenses incident to taking and retaining possession of the Property, and the management and operation thereof, and keeping the same properly insured; (b) all taxes, charges, claims, assessments, and any other liens which may be prior in lien or payment of the Authority Note, and premiums for insurance, with interest on all such items; and (c) the indebtedness secured hereby, together with all costs and attorney's fees, in such order or priority as to any of such items as Beneficiary in its sole discretion may determine, any statute, law, custom or use to the contrary notwithstanding. Any amounts received by Beneficiary or its agents in the performance of any acts prohibited by the terms of this assignment, including, but not limited to, any amounts received in connection with any cancellation, modification or 882/012782-0020 13106627.7 a03/15/19 232 of 323 -2- March 19, 2019 Item #3.1 amendment of any lease prohibited by the terms of this assignment and any rents and profits received by Truster after the occurrence of a default shall be held by Truster as trustee for Beneficiary and all such amounts shall be accounted for to Beneficiary and shall not be commingled with other funds of the Truster. Any person receiving any portion of such trust funds shall receive the same in trust for Beneficiary as if such person had actual or constructive notice that such funds were impressed with a trust in accordance therewith. 8. Receiver. In addition to any and all other remedies of Beneficiary set forth under this Deed of Trust or permitted at law or in equity, if a default shall have occurred and not have been cured within any applicable cure period, Beneficiary, to the extent permitted by law and without regard to the value, adequacy or occupancy of the security for the Note and other sums secured hereby, shall be entitled as a matter of right if it so elects to the appointment of a receiver to enter upon and take possession of the Property and to collect all rents and profits and apply the same as the court may direct, and such receiver may be appointed by any court of competent jurisdiction by ex parte application and without notice, notice of hearing being hereby expressly waived. The expenses, including receiver's fees, attorneys' fees, costs and agent's compensation, incurred pursuant to the power herein contained shall be secured by this Deed of Trust. 9. Notice to Beneficiary. Notices to Beneficiary shall be sent to Beneficiary addressed to: City of Poway Housing Authority 13325 Civic Center Drive Poway, CA 92064 Attn: Executive Director Reference: Poway Commons Affordable Senior Project 10. Limited Partner Cure Rights. Notwithstanding anything to the contrary set forth herein, Beneficiary shall not exercise any right hereunder without providing the limited partner of Truster with not less than thirty (30) days prior written notice and right to cure any default giving rise to the exercise of said remedy. Beneficiary agrees that any cure tendered by the limited partner of Truster shall be accepted or rejected on the same terms and conditions as if tendered directly by Truster. 11. Subordination Acknowledgement. Beneficiary hereby acknowledges that the loan secured by this Deed of Trust is also subordinate to the extended use agreement required to be executed by Borrower pursuant to Section 42(h)(6)(B) of the Internal Revenue Code, for purposes of the low-income housing tax credits to be allocated to Truster. In addition, Beneficiary hereby acknowledges that the loan secured by this Deed of Trust is further subordinate to Section 42(h)(6)(e)(ii) of the Internal Revenue Code, which prohibits the eviction or termination of a tenancy, other than for good cause, of an existing tenant of any low-income housing tax credit unit or any increase in the gross rent with respect to such unit, not otherwise permitted under Section 42, for a period of three (3) years after the date the Property is acquired by Beneficiary through foreclosure or instrument in lieu of foreclosure. 882/012782-0020 13106627.7 a031l5/19 233 of 323 [signatures on next page] -3- March 19, 2019 Item #3.1 IN WITNESS WHEREOF, Trustor has executed this Rider on the date of Truster's acknowledgment herein below, to be effective for all purposes as of the day and year first set forth above. 882/012782-0020 13106627.7 a03/15!19 234 of 323 TRUSTOR: ---------' L.P., a California Limited Partnership By: --------------- -4- March 19, 2019 Item #3.1 A Notary Public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California ) County of _________ _ ) On ___________ , before me,---------,,,--- (insert name and title of the officer) Notary Public, personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capaAuthority(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENAL TY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature __________________ _ (Seal) 882/012782-0020 2~~'b't' 3'!!~5/19 March 19, 2019 Item #3.1 A Notary Public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California County of _________ _ On ___________ , before me,------------ (insert name and title of the officer) Notary Public, personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capaAuthority(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENAL TY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature ____________ _ (Seal) 882(0 l 2782-0020 2~1f'b't13~135119 March 19, 2019 Item #3.1 882/012782-0020 2~if'b't1 3'!B'11 ' ATTACHMENT NO. 9 PROJECT BUDGET [see following pages] ATTACHMENT NO. 9 March 19, 2019 Item #3.1 Poway Commons, LLC Affordable Master Developer Costs I. Project Description Site Area 1.00 Acres Average Unit Size 900 SF Number of Units 44 Units II. Development Costs A. Direct Costs Engineering $31,250 Entitlement $20,000 Mapping $15,000 Legal $20,000 Site Demolition $87,120 Grading $40,000 Back Bone Utilities $100,000 Strom water/ Misc $35,000 Total Direct Costs $348,370 *These are preliminary budget estimates based on preliminary site plans. Subject to change with entitlement, project conditions and approved plans. 882/012782-0020 2~1f'8t' 3~~5119 ATTACHMENT NO. 9 March 19, 2019 Item #3.1 Poway Common s Seniors Affordable I-lousing 44 Units : 4% Credits & Bond Financing Ho us ing A utho rity Impact Fee Loan and Authority $1 ,500,000 S ubsidy Loan Maste r Developer Land Contribution and Reim bursement Note 2/1/2019 PRELIMINARY SOURCES AND USES SUMMARY SUBJECT TO REVISION - Development Costs Acquisition Land Cost $0/unit $ 1.00 Basis eligible acqlisition $45 ,9 67/unlt 2,022,537 Subtotal Acquisition $45,967/unlt 2,022,538 Hard Costs -preliminary estimates Design Assist (exduded from contingency) $0/unit 0 Offsites -completed by Seller $0/unit 0 Sitework -induded below with Vertical 792,744 Onsite and Vertical Cons1ruction Costs $1 3 7 ,564/unit 6,052,821 GC Contingecy $3 ,890/unit 171,139 Overhead , Profit , General Conditions $22.326/un it 982,339 Owner Hard Costs Contingency $9,090/unit 399,952 Subtotal Hard Costs $303.21/gsf $190,886/unlt 8,398,995 A&E $12.727/unit 560,000 Financing Fees and hterest $21 ,5 54 /unit 948,376 Legal Fees $4 ,943/unit 217,500 Reserves $2,745/unit 120,783 Development Impact and Pem,it Fees $16.722/unit 735,765 Developer Fee $1,000,000 Pllid Fee $38 ,398/unit 1,689 ,531 Remain ing Development Soft costs $3 ,309/unit 145 ,609 Owner Soft Costs Contingency $1 .459/unit 64 ,210 Subtotal Soij Costs $101 ,869/unlt 4,481,775 Total Development Costs $338,712/unlt 1419031308 Sources Federal LIHTC Eqlity 38% 5,669,509 State LIHTC Equity 0% 0 Permanent Loan (Tranche A) 26% 3,830,000 Deferred Developer Fee 5% 689 ,531 Financing Gap .. 2% 370 ,009 Poway Housing Authority mpact Fee Loan $14,091/l.nit 4% 619 ,989 Poway Housing Authority Cash Subsidy Loan $34 ,091/tnt " 10% 1,500,000 Master Developer lnfrastrucit.r'e Note $45 ,967 A.rlit 14% 2,022,537 Residual Receipt Loans Acaued hterest 1% 201 ,733 0% Total Development Sources 100% 1419031308 882/0 12782-0020 L 2~~6b7t7 3~~5/19 ATTACHMENT NO . 9 March 19, 2019 Item #3.1 ATTACHMENT NO. 10 HOUSING AUTHORITY REGULATORY AGREEMENT [See following document] 882/012782-0020 2~ff 'b't 1 j'!B'11 ' ATTACHMENT NO. 10 March 19, 2019 Item #3.1 REQUESTED BY AND WHEN RECORDED MAIL TO: City of Poway Housing Authority 13325 Civic Center Drive Poway, CA 92064 Attention: City Clerk This document is exempt from a recording fee pursuant to Government Code Sections 6103 and 27383. AFFORDABLE HOUSING REGULATORY AGREEMENT This AFFORDABLE HOUSING REGULATORY AGREEMENT (this "Regulatory Agreement"), dated for purposes of identification only as of (the "Date of Regulatory Agreement"), is entered by and between the CITY OF POWAY HOUSING AUTHORITY, a public body, corporate and politic (the "Authority"), and POWAY COMMONS, LLC, a Delaware limited liability company (the "Developer"). Authority and Developer are hereinafter referred to individually as a "Party" and collectively as the "Parties." RECITALS The following recitals are a substantive part of this Regulatory Agreement; all capitalized terms set forth in the Recitals shall have the meanings ascribed to such terms in Section 1 hereof. A. Authority is a California municipal corporation, organized and existing pursuant to and under the general laws of the State of California. B. Authority owns fee title to that certain real property located in the City of Poway, County of San Diego, State of California more particularly described in Exhibit "A", which is attached hereto and incorporated herein by this reference (the "Property"). C. Authority entered into an Affordable Housing and Property Disposition Agreement with Developer dated as of ("Agreement"). D. The Agreement provides for Authority to sell the Property to Developer and for Developer to subsequently transfer and convey the Property to a limited partnership for the limited partnership to construct and operate thereon a forty-four (44) unit senior affordable rental apartment project with all but one (1) of such units restricted, in perpetuity, for occupancy by income-qualified senior households (the "Project"). The Agreement further provides that the Parties execute and record this Regulatory Agreement against the Property, to ensure that the Property shall be operated continuously as a senior affordable rental apartment complex in accordance with the terms hereof. 882/012782-0020 13106627.7 a03115/l9 241 of 323 -1- March 19, 2019 Item #3.1 NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS: SECTION 1. DEFINITIONS. "50% Income Household" means those person(s) or households whose income does not exceed fifty percent (50%) of AMI. "60% Income Household" means those person(s) or households whose income does not exceed sixty percent (60%) of AMI. "50% Income Unit" means an Affordable Unit designated for occupancy by a 50% Income Household. "60% Income Unit" means an Affordable Unit designated for occupancy by a 60% Income Household. "Additional Regulatory Agreements" means the Tax Credit Regulatory Agreement, the Bond Regulatory Agreement, and any other regulatory agreement Developer is required to execute as a condition to obtaining financing to develop and/or operate the Project. "Affiliate" means any person or entity directly or indirectly, through one or more intermediaries, controlling, controlled by or under common control with Developer which, if Developer is a partnership or limited liability company, shall include each of the constituent members or general partners, respectively thereof. The term "control" as used in the immediately preceding sentence, means, with respect to a person that is a corporation, the right to the exercise, directly or indirectly, of more than fifty percent (50%) of the voting rights attributable to the shares of the controlled corporation, and, with respect to a person that is not a corporation, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of the controlled person. "Affordable Rent" means the maximum Monthly Rent that may be charged to and paid by 50% Income Households and 60% Income Households, as applicable, for the Affordable Units, as annually determined pursuant to Health and Safety Code Section 50053(b), as of the date hereof, and the regulations promulgated pursuant to and incorporated therein. "Affordable Units" means the following forty-three (43) rental units in the Project: (i) Thirty-six (36), one (1) bedroom, one (1) bath units; and (ii) Seven (7), two (2) bedroom, one (1) bath units. "Agreement" is defined in Recital C hereof. "AMI" means the median family income (adjusted for household size) for the San Diego County Area promulgated and published annually by HCD pursuant to Title 25, Section 6932 of the California Code of Regulations. If HCD ceases to annually publish 882/012782-0020 13106627.7 a03/\5/l9 242 of 323 -2- March 19, 2019 Item #3.1 median incomes, the Parties shall agree upon an adequate substituted manner for determining AMI. "Annual Project Revenue" has the meaning ascribed thereto in the Authority Note. "Approved Financing" means the financing approved by Authority pursuant to the Agreement, as set forth in the Project Budget attached to the Agreement, obtained by Developer for Developer's acquisition of the Property and the construction/development and ownership of the Project. In addition, "Approved Financing" shall include any refinancing of the Approved Financing which has been approved by Authority. "Approved Pro Forma" means that certain proforma created in connection with the Project Budget attached to the Agreement. "Authority" means the City of Poway Housing Authority, a public body, corporate and politic. "Authority and City and Authority and City Personnel" means Authority and the City of Poway, and their respective officers, officials, directors, members, employees, agents, and representatives. "Authority Deed of Trust" means that certain deed of trust executed by Developer, as "Truster," in favor of Authority, as "Beneficiary," securing Developer's repayment under the Authority Note. "Authority Loan" means the loan provided by Authority to Developer pursuant to the Agreement to assist the Developer with the costs Developer incurs in acquiring the Property and developing the Project. "Authority Note" means that certain Authority Promissory Note executed by Developer on or about the same date hereof, that evidences Developer's obligation to repay the Authority Loan. "Bond Regulatory Agreement" means the regulatory agreement with the Institutional Lender responsible for placing the Tax-Exempt Bonds. "Capital Replacement Reserve" means a capital replacement reserve for the Project, to be set aside in a separate interest-bearing trust account, consisting of annual deposits of Two Hundred Fifty Dollars ($250) per Unit (e.g., $11,000) of Annual Project Revenue, increased annually after the first year of operation by three and five tenths percent (3.5%) (unless otherwise agreed to by Developer and Authority) or as required under the Partnership Agreement (or such greater amount required under any Additional Regulatory Agreement, or under the Partnership Agreement). "Certification of Continuing Program Compliance" means an annual recertification form substantially in the form attached hereto and incorporated herein as Exhibit E. 882/012782-0020 13106627.7 a03/15119 243 of 323 -3- March 19, 2019 Item #3.1 "Certificate of Occupancy" means the final certificate of occupancy issued by the City of Poway for the completion of construction of the Project. "Closing" means the time and day that the Grant Deed, Deed of Trust, Project Financing, and this Regulatory Agreement are filed for record with the San Diego County Recorder. "Closing Date" means the date on which the Closing occurs. "Construction Financing" means the proceeds of Tax-Exempt Bonds issued to finance the Project through the construction period (e.g., until a "conversion date"), in the anticipated amount of approximately Eight Million Four Hundred Thousand Dollars ($8,400,000). "County" means the County of San Diego. "CPI Adjustment" means the percentage increase in the cost of living index, as measured by the Consumer Price Index for all urban consumers, San Diego-Carlsbad statistical area, all items (1982-84 = 100) published by the United States Department of Labor, Bureau of Labor Statistics ("CPI") between the CPI figure in effect as of the date on which the Certificate of Occupancy is issued and the CPI figure in effect as of the date on which an adjustment is made. If such index is discontinued or revised, such other index with which such index is replaced (or if not replaced, another index which reasonably reflects and monitors consumer prices) shall be used in order to obtain substantially the same results as would have been obtained if the discontinued index had not been discontinued or revised. If the CPI is changed so that the base year is other than 1982-84, the CPI shall be converted in accordance with the conversion factor published by the United States Department of Labor, Bureau of Labor Statistics. "Date of Regulatory Agreement" is defined in the initial paragraph hereof. "Default" means the failure of a Party to perform any action or covenant required by the Agreement or hereunder within the time periods provided in the Agreement or hereunder, respectively, following notice and opportunity to cure, as set forth in Section 13.1 of the Agreement and Section 16.01 hereof, respectively. "Developer" means Poway Commons, LLC, a Delaware limited liability company, and any permitted assignees of Developer. "Eligible Tenant" means a household which satisfies all of the following requirements: (i) at least one member of the household is a "qualifying resident" or "senior citizen" (as those terms are defined in California Civil Code Section 51.3(b)(1 )) that is sixty-two (62) years of age or older; (ii) each other member of the household is either a "qualifying resident" or "senior citizen" that is sixty-two (62) years of age or older, or is a "qualified permanent resident" or "permitted health care resident" within the meaning of California Civil Code section 51.3(b)(2), (3), and (7); and (iii) such household qualifies as a 50% Income Household or as a 60% Income Household. 882/012782-0020 13106627.7 a03/15/19 244 of 323 -4- March 19, 2019 Item #3.1 "Environmental Laws" means (i) Sections 25115, 25117, 25122.7 or 25140 of the California Health and Safety Code, Division 20, Chapter 6.5 (Hazardous Waste Control Law)), (ii) Section 25316 of the California Health and Safety Code, Division 20, Chapter 6.8 (Carpenter-Presley-Tanner Hazardous Substance Account Act), (iii) Section 25501 of the California Health and Safety Code, Division 20, Chapter 6.95 (Hazardous Materials Release Response Plans and Inventory), (iv) Section 25281 of the California Health and Safety Code, Division 20, Chapter 6. 7 (Underground Storage of Hazardous Substances), (v) Article 9 or Article 11 of Title 22 of the California Administrative Code, Division 4, Chapter 20, (vi) Section 311 of the Clean Water Act (33 U.S.C. §1317), (vii) Section 1004 of the Resource Conservation and Recovery Act, 42 U.S.C. §6901 el seq. (42 U.S.C. §6903) or (viii) Section 101 of the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. §9601 et seq. "Executive Director" means the person duly appointed to the position of Executive Director, or his or her designee. The Executive Director shall represent Authority in all matters pertaining to this Regulatory Agreement. Whenever a reference is made herein to an action or approval to be undertaken by Authority, the Executive Director is authorized to act unless this Regulatory Agreement specifically provides otherwise or the context should otherwise require. "Governmental Requirements" means all laws, ordinances, statutes, codes, rules, regulations, orders and decrees, of the United States, the State of California, the County, City, and any other political subdivision, agency, instrumentality, or other entity exercising jurisdiction over Authority, Developer, the Project, or the Property. "Hazardous Materials" means any substance, material, or waste which is or becomes regulated by any local governmental authority, the State of California, or the United States Government, including, but not limited to, any material or substance which is (i) defined as a "hazardous waste", "acutely hazardous waste", "extremely hazardous waste", or "restricted hazardous waste" under Section 25115, 25117 or 25122.7, or listed pursuant to Section 25140 of the California Health and Safety Code, Division 20, Chapter 6.5 (Hazardous Waste Control Law), (ii) defined as a "hazardous substance" under Section 25316 of the California Health and Safety Code, Division 20, Chapter 6.8 (Carpenter-Presley-Tanner Hazardous Substance Account Act), (iii) defined as a "hazardous material", "hazardous substance", or "hazardous waste" under Section 25501 of the California Health and Safety Code, Division 20, Chapter 6.95 (Hazardous Materials Release Response Plans and Inventory), (iv) defined as a "hazardous substance" under Section 25281 of the California Health and Safety Code, Division 20, Chapter 6.7 (Underground Storage of Hazardous Substances), (v) petroleum, (vi) asbestos, (vii) polychlorinated biphenyls, (viii) listed under Article 9 or defined as "hazardous" or "extremely hazardous" pursuant to Article 11 of Title 22 of the California Code of Regulations, Chapter 20, (ix) designated as "hazardous substances" pursuant to Section 311 of the Clean Water 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 6901 et seq. (42 U.S.C. Section 6903), (xi) defined as "hazardous substances" pursuant to Section 101 of the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq., (xii) methyl-tertiary butyl ether, (xiii) perchlorate, or (xiv) any other substance, whether in the form of a solid, liquid, gas or any 882/012782-0020 13106627.7 a03/l5/19 245 of 323 -5- March 19, 2019 Item #3.1 other form whatsoever, which by any Governmental Requirements either requires special handling in its use, transportation, generation, collection, storage, handling, treatment or disposal, or is defined as "hazardous" or harmful to the environment. For purposes hereof, "Hazardous Materials" excludes materials and substances in quantities as are commonly used in constructing and operating apartment complexes, provided such materials and substances are used in accordance with all applicable laws. "Hazardous Materials Contamination" means the contamination (whether presently existing or hereafter occurring) of the improvements, facilities, soil, groundwater, air or other elements on, in or of the Property by Hazardous Materials, or the contamination of the buildings, facilities, soil, groundwater, air or other elements on, in or of any other property as a result of Hazardous Materials at any time emanating from the Property. "HCD" means the California Department of Housing and Community Development. "HUD" means the United States Department of Housing and Urban Development. "Institutional Lender" means any of the following institutions having assets or deposits in the aggregate of not less than One Hundred Million Dollars ($100,000,000): a California chartered bank; a bank created and operated under and pursuant to the laws of the United States of America; an "incorporated admitted insurer'' (as that term is used in Section 1100.1 of the California Insurance Code); a "foreign (other state) bank" (as that term is defined in Section 1700(1) of the California Financial Code); a federal savings and loan association (Cal. Fin. Code Section 8600); a commercial finance lender (within the meaning of Sections 2600 et seq. of the California Financial Code); a "foreign (other nation) bank" provided it is licensed to maintain an office in California, is licensed or otherwise authorized by another state to maintain an agency or branch office in that state, or maintains a federal agency or federal branch in any state (Section 1716 of the California Financial Code); a bank holding company or a subsidiary of a bank holding company which is not a bank (Section 3707 of the California Financial Code); a trust company, savings and loan association, insurance company, investment banker; college or university; pension or retirement fund or system, either governmental or private, or any pension or retirement fund or system of which any of the foregoing shall be trustee, provided the same be organized under the laws of the United States or of any state thereof; and a Real Estate Investment Trust, as defined in Section 856 of the Internal Revenue Code of 1986, as amended, provided such trust is listed on either the American Stock Exchange or the New York Stock Exchange. Each of and are hereby deemed to be an Institutional Lender. "Legal Description" means that certain legal description of the Property which is attached hereto and incorporated herein as Exhibit "A". "Map" means a map depicting the Property which is attached hereto and incorporated herein as Exhibit "B". 882/012782-0020 13106627.7 a03/l5/19 246 of 323 -6- March 19, 2019 Item #3.1 "Marketing Plan" means a marketing plan for the rental of the Affordable Units which provides, to the extent authorized by applicable federal, state and local laws and regulations, that a preference be given to tenants who are currently residents of the City and/or currently work in the City. The Marketing Plan shall include a tenant selection system in conformance with fair housing laws and the Tax Credit Rules which establishes a chronological waiting list system for selection of tenants. Authority shall have approved the Marketing Plan, in its reasonable discretion, as one of Authority's conditions to the Closing. "Monthly Rent" means the total of monthly payments for (a) use and occupancy of each Affordable Unit and land and facilities associated therewith, (b) any separately charged fees or service charges assessed by Developer which are required of all tenants, other than security deposits, (c) a reasonable allowance for an adequate level of service of utilities not included in (a) or (b) above, including garbage collection, sewer, water, electricity, gas and other heating, cooking and refrigeration fuels, but not including telephone or cable service, and (d) possessory interest, taxes or other fees or charges assessed for use of the land and facilities associated therewith by a public or private entity other than Developer. In the event that all utility charges are paid by the landlord rather than the tenant, no utility allowance shall be deducted from the rent. "Notice" means a notice in the form prescribed by Section 17.01 hereof. "Official Records" means the Official Records of the County of San Diego, California. "Operating Budget" means an operating budget for the Project, which budget shall be subject to the annual written approval of Authority in accordance with Section 9.01 hereof. "Operating Expenses" has the meaning ascribed thereto in the Authority Nole. "Operating Reserve" means an operating reserve for the Project (i) initially consisting of not less than the sum necessary to cover three (3) months of debt service and three (3) months of deposits into the Capital Replacement Reserve (or such greater amount required under any Additional Regulatory Agreement, under the Partnership Agreement, or by any lender of a Project-related loan that has been approved by Authority) set aside in a separate interest-bearing trust account, commencing upon the rental of the Affordable Units, and (ii) replenished from annual deposits of the Annual Project Revenue, to the extent available, such that the balance of the Operating Reserve consists of not less than three (3) months of projected Operating Expenses, adjusted annually by the CPI Adjustment (unless otherwise agreed to by Developer and Authority) or as required under the Partnership Agreement (or such greater amount required under any Additional Regulatory Agreement, or under the Partnership Agreement), provided in no event shall the balance in such account exceed a sum equal to one (1) year of debt service for the Project (or such greater amount required under any Additional Regulatory Agreement, pursuant to any of the Approved Financing or under the Partnership Agreement). Developer's requirement to maintain the Operating Reserve shall terminate at such time as the Project has achieved a minimum annual debt service ratio of 1.15 for three (3) years following the date Developer has initially rented ninety-five percent (95%) 882/012782-0020 -7- 13106627.7 a03/l5/19 247 of 323 March 19, 2019 Item #3.1 of the Affordable Units to Eligible Tenants in accordance with the terms of this Regulatory Agreement. "Partnership Agreement" means the agreement which sets forth the terms of Developer's limited partnership, as such agreement may be amended from time to time. "Permanent Financing" means a loan in an amount not to exceed the amount of the Construction Financing from an Institutional Lender to be secured by a deed of trust against the Property which replaces the Construction Financing upon Developer's completion of the construction of the Project. "Project" means a senior affordable rental Project consisting of forty-four (44) residential dwelling units and all required on-site improvements necessary to serve the Project. "Property" means that certain real property (i) consisting of approximately (1) acre, (ii) located in the City of Poway, County of San Diego, State of California, (iii) depicted on the Map, and (iv) described in the Legal Description. "Regulatory Agreement" means this Regulatory Agreement. "Release of Construction Covenants" means the document which evidences Developer's satisfactory completion of construction of the Project, as set forth in Section 10.15 of the Agreement, substantially in the form which is attached thereto as Attachment No. 12 and incorporated therein by reference. "Restricted Unit Matrix" means that certain affordability matrix attached hereto and incorporated herein as Exhibit "F". "Scope of Development" means that certain Scope of Development which is attached to the Agreement as Attachment No. 4 and incorporated therein by reference. The Scope of Development describes the scope, amount and quality of the construction to be done by Developer pursuant to the terms and conditions of the Agreement and this Regulatory Agreement. "Tax Credits" means Low Income Housing Tax Credits, in the anticipated amount of Five Million Nine Hundred Thirty-Five Thousand Eighty-Three Dollars ($5,935,083), granted pursuant to Section 42 of the Internal Revenue Code and/or California Revenue and Taxation Code Sections 17057.5, 17058, 23610.4 and 23610.5 and California Health and Safety Code Section 50199, et seq. "Tax Credit Regulatory Agreement" means the regulatory agreement which may be required to be recorded against the Property with respect to the issuance of Tax Credits for the Project. "Tax Credit Rules" means Section 42 of the Internal Revenue Code and/or California Revenue and Taxation Code Sections 17057.5, 17058, 23610.4 and 23610.5 and California Health and Safety Code Section 50199, et seq., and the rules and regulations implementing the foregoing, as the same may be amended from time to time. 882/012782-0020 13106627.7 a03/15!\9 248 of 323 -8- March 19, 2019 Item #3.1 "Tax-Exempt Bonds" means tax-exempt multi-family housing revenue bonds, in the approximate amount of Eight Million Four Hundred Thousand Dollars ($8,400,000). "TCAC" means the California Tax Credit Allocation Committee. SECTION 2. COVENANTS REGARDING CONSTRUCTION OF THE IMPROVEMENTS. Developer shall carry out the design, construction, and operation of the Project in compliance with applicable Governmental Requirements and all of the terms and conditions set forth in the Agreement. SECTION 3. COVENANTS REGARDING USE. 3.01 Covenants To Use In Accordance With Agreement. Developer covenants and agrees for itself, its successors, assigns, and every successor in interest to Developer's interest in the Property or any part thereof, that Developer shall devote the Property to the uses specified in this Regulatory Agreement. The foregoing covenants shall run with the land. 3.02 Covenant Regarding Specific Uses. Developer covenants and agrees for itself, its successors, assigns, and every successor in interest to Developer's interest in the Property or any part thereof, that Developer shall use the Property to operate the Project. 3.03 Covenants Regarding Term And Priority Of Agreement. This Regulatory Agreement shall remain in effect in perpetuity, notwithstanding the payment in full of the Authority Loan. Developer's performance under this Regulatory Agreement is secured by the Authority Deed of Trust, and Developer shall not be entitled to a reconveyance of the Authority Deed of Trust prior to the expiration of the Affordability Period; provided that, upon Developer's repayment of the Authority Loan, Developer shall be entitled to a partial reconveyance of the Authority Deed of Trust solely to release therefrom Developer's obligations to repay the Authority Loan. This Regulatory Agreement shall unconditionally be and remain at all times prior and superior to the liens created by the Construction Financing, the Permanent Financing, the Tax Credit Regulatory Agreement, Bond Regulatory Agreement, any other Additional Regulatory Agreement, and any other documents related to any of the foregoing and all of the terms and conditions contained therein, and to the lien of any new mortgage debt which is for the purpose of refinancing all or any part of the Construction Financing or Permanent Financing. SECTION 4. COVENANTS REGARDING AFFORDABLE UNITS. Developer shall provide for the Affordable Units in accordance with this Section. 4.01 Residential Use. Without Authority's prior written consent, which consent may be given or withheld in Authority's sole and absolute discretion, none of the Affordable 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, 882/012782-0020 13106627.7 a03/15/J9 249 of 323 -9- March 19, 2019 Item #3.1 nursing home, hospital, sanitarium, or trailer court or park, nor shall the Affordable Units be used as a place of business except as may otherwise be allowed by applicable law. 4.02 Provision of Affordable Units. Developer shall make available, restrict occupancy to, and rent the Affordable Units to Eligible Tenants at Affordable Rents, in compliance with the Restricted Unit Matrix, throughout the Affordability Period. 4.03 Selection of Tenants. Developer shall be responsible for the selection of tenants for the Affordable Units in compliance with all lawful and reasonable criteria, as set forth in the Marketing Plan. Developer shall not refuse to lease to (i) a holder of a certificate of family participation under 24 CFR part 882 (Rental Certificate Program) or a rental voucher under 24 CFR part 887 (Rental Voucher Program) or to the holder of a comparable document evidencing participation in a Section 8 program or other tenant- based assistance program, who is otherwise qualified to be a tenant in accordance with the approved tenant selection criteria, or (ii) an applicant who would be qualified to be a tenant in accordance with the approved tenant selection criteria but for a poor credit rating resulting from a foreclosure of a mortgage on a single family home previously owned by the applicant. 4.04 Occupancy By Eligible Tenant. An Affordable Unit occupied by an Eligible Tenant who qualified as an Eligible Tenant at the commencement of the occupancy shall be treated as occupied by an Eligible Tenant until a recertification of such Eligible Tenant's income in accordance with Section 4.08 below demonstrates that such tenant no longer qualifies as an Eligible Tenant at the applicable income level. An Affordable Unit previously occupied by an Eligible Tenant and then vacated shall be considered occupied by an Eligible Tenant until the Affordable Unit is reoccupied, provided Developer uses its best efforts to re-lease the vacant Affordable Unit to an Eligible Tenant. Any vacated Affordable Unit shall be held vacant until re-leased to an Eligible Tenant. Developer shall take any or all of the following actions, as necessary, to locate Eligible Tenants for the Project: (i) notification to the Authority of the available Affordable Unit; (ii) advertisement of the available Affordable Unit in a newspaper of general circulation in San Diego County, and (iii) outreach and marketing activities typically used by Chelsea or limited partnerships in which Chelsea is the managing general partner to fill unoccupied or vacated units, including available units, if any, for which a specified target population will receive a preference. 4.05 Occupancy Restrictions. The maximum number of occupants that may reside in an Affordable Unit shall be as follows: three (3) persons in a one (1) bedroom Affordable Unit; and five (5) persons in a two (2) bedroom Affordable Unit. Developer shall comply with all applicable minimum occupancy restrictions promulgated by HUD, TCAC, and/or any other applicable funding source. 4.06 Income Computation and Certification. Immediately prior to an Eligible Tenant's occupancy of an Affordable Unit, Developer shall obtain an Income Computation and Certification Form in the form attached hereto and incorporated herein as Exhibit "C", or on a similar form required by any Additional Regulatory Agreement if such form requires inclusion of the same information as required in Exhibit "C", from each such Eligible Tenant dated no more than 90 days prior to the date of initial occupancy in the Project by such Eligible Tenant. In addition, Developer shall provide such further 8821012782-0020 13)06627.7 a03/\5/19 -10- 250 of 323 March 19, 2019 Item #3.1 information as may be reasonably required in the future by Authority for purposes of verifying a tenant's status as an Eligible Tenant. Developer shall use good faith efforts to verify that the income provided by an applicant is accurate by taking the following steps as a part of the verification process:(i) obtain three (3) pay stubs for the most recent pay periods; (ii) obtain a written verification of income and employment from the applicant's current employer; (iii) obtain an income verification form from the Social Security Administration, California Department of Social Services, and/or California Employment Development Department if the applicant receives assistance from any of said agencies; (iv) if an applicant is unemployed or did not file a tax return for the previous calendar year, obtain other evidence and/or verification of such applicant's total income received during the calendar year from any source, taxable or nontaxable, or such other information as is satisfactory to Authority. Developer shall maintain in its records each Income Computation and Certification Form obtained pursuant to this section for a minimum of five (5) years. 4.07 Rental Priority. Subject to all applicable Governmental Requirements, and any funding obtained by Developer to operate and/or develop the Project that has been approved by Authority, during the term of this Regulatory Agreement, Developer shall use its reasonable commercial efforts to lease the Affordable Units to credit-worthy Eligible Tenants in the following order of priority: (a) Eligible Tenants who have been or will be displaced by an activity of Authority, or (b) Eligible Tenants who live and/or work in the City of Poway. Should multiple tenants be equally eligible (as to income, credit history, and other nondiscriminatory criteria) and qualified to rent a unit, Developer shall rent available Affordable Units to Eligible Tenants on a first-come, first-served basis or a lottery system established by Developer and approved by Authority. 4.08 Recertification. Within sixty (60) days prior to the first anniversary date of the occupancy of an Affordable Unit by an Eligible Tenant, and on each anniversary date thereafter, Developer shall recertify the income of such Eligible Tenant by obtaining a completed Income Recertification Form, in the form attached hereto and incorporated herein as Exhibit "D", based upon the current income of each known occupant of the Affordable Unit; provided, however, that if any Additional Regulatory Agreement requires Developer to obtain a recertification form which requires inclusion of the same information as required in Exhibit "D", then Developer shall not be deemed to be in default hereunder if during the term of such Additional Regulatory Agreement Developer obtains from each Eligible Tenant the recertification form required pursuant to said Additional Regulatory Agreement. If, after renting a 50% Income Unit, the household income increases above the income level permitted for the 50% Income Unit, but meets the income level permitted for a 60% Income Unit, the household shall continue to be permitted to reside in such Unit provided that Developer shall increase the rent for that 50% Income Unit to the rent level designated for a 60% Income Unit, and shall restrict and designate as a 50% Income Unit the next available Affordable Unit with the same number of bedrooms that is not already designated hereunder as a 50% Income Unit. If, after renting an Affordable Unit, the household income increases above the income level permitted for a 60% Income Unit, that household may not be permitted to 882/012782-0020 13106627.7 a03/J5119 251 of 323 -11- March 19, 2019 Item #3.1 remain in the unit unless requiring such household to move will violate the Tax Credit Rules. In such event, Developer shall notify Authority in writing of such occurrence, and shall inform Authority of (1) its plans for removing the household from the Affordable Unit, or (2) the specific rule in the Tax Credit Rules that prohibits such action providing written evidence of the same. 4.09 Certification of Continuing Program Compliance. During the term of this Regulatory Agreement, on or before each May 1 '1 following the date Authority issues a Release of Construction Covenants for the Project, Developer shall annually advise Authority of the occupancy of the Project during the preceding calendar year by delivering a Certification of Continuing Program Compliance in the form attached hereto and incorporated herein as Exhibit "E", stating (i) the Affordable Units of the Project which have been rented to and are occupied by Eligible Tenants and (ii) that to the knowledge of Developer either (a) no unremedied default has occurred under this Regulatory Agreement, or (b) a default has occurred, in which event said certification shall describe the nature of the default and set forth the measures being taken by Developer to remedy such default. 4.10 Leases: Rental Agreements for Affordable Units. Developer shall submit a standard lease form, which shall comply with the requirements of this Regulatory Agreement, to Authority for its approval. Authority shall reasonably approve such lease form upon finding that such lease form is consistent with this Regulatory Agreement. Developer shall enter into a written lease, in the form approved by Authority, with each tenant/tenant household of the Affordable Units. Developer shall not make any material changes to such form of lease without obtaining Authority's prior written consent. Any proposed increase in the monthly rent to be charged to an Eligible Household is hereby deemed material and shall require Authority's written consent prior to imposition of the same. 4.11 Reliance on Tenant Representations. Each tenant lease shall contain a provision to the effect that Developer has relied on the income certification and supporting information supplied by the tenant in determining qualification for occupancy of the Affordable Unit, and that any material misstatement in such certification {whether or not intentional) will be cause for immediate termination of such lease. 4.12 Monitoring and Record Keeping. Representatives of Authority shall be entitled to enter the Property during normal business hours, upon not less than twenty- four (24) hours' notice, to monitor compliance with this Regulatory Agreement, to inspect the records of the Property, and to conduct an independent audit or inspection of such records. Developer agrees to cooperate with Authority in making the Property and all Affordable Units thereon available for such inspection or audit. Developer agrees to maintain records in a businesslike manner, and to maintain copies of original tenant certifications for fifteen (15) years (or such longer period as required under the Tax Credit Rules) and all other records pertaining to the Project for five (5) years. 4.13 Remedy For Violation of Rental Requirements. (a) It shall constitute a default for Developer to charge or accept for any Affordable Unit rent amounts in excess of the amount provided for in Section 4.02 of this 8821012782-0020 -12- 13106627.7 a03/J5/\9 252 of 323 March 19, 2019 Item #3.1 Regulatory Agreement. In the event that Developer charges or receives such higher rental amounts, Developer shall be required to reimburse the tenant that occupied said Affordable Unit at the time the excess rent was received for the entire amount of such excess rent received, provided that such tenant can be found following reasonable inquiry, and to pay to such tenant interest on said excess amount, at the rate of six percent (6%) per annum, for the period commencing on the date the first excess rent was received from said tenant and ending on the date reimbursement is made to the tenant. For purposes of this Section 4.13, "reasonable inquiry" shall include Developer's review of information provided by the tenant as part of the tenant's application, and forwarding information provided by the tenant, and Developer's reasonable attempts to contact the tenant and any other persons listed in either of such documents. If, after such reasonable inquiry, Developer is unable to locate the tenant, Developer shall pay all of such amounts otherwise to be paid to the tenant to Authority. (b) Except as otherwise provided in this Regulatory Agreement, it shall constitute a default for Developer to knowingly (or without investigation as required herein) initially rent any Affordable Unit to a tenant who is not an Eligible Tenant. In the event Developer violates this Section, in addition to any other equitable remedy Authority shall have for such default, Developer, for each separate violation, shall be required to pay to Authority an amount equal to (i) the greater of (A) the total rent Developer received from such ineligible tenant, or (B) the total rent Developer was entitled to receive for renting that Affordable Unit, plus (ii) any relocation expenses incurred by Authority as a result of Developer having rented to such ineligible person. The terms of this Section shall not apply if Developer rents to an ineligible person as a result of such person's fraud or misrepresentation. (c) It shall constitute a default for Developer to knowingly (or without investigation as required herein) rent an Affordable Unit in violation of the leasing preference requirements of Section 4.07 of this Regulatory Agreement. In the event Developer violates this Section, in addition to any other equitable remedy Authority shall have for such default, Developer, for each separate violation, shall be required to pay Authority an amount equal to two (2) months of rental charges. THE PARTIES HERETO AGREE THAT THE AMOUNTS SET FORTH IN THIS SECTION 4.13 (THE "DAMAGE AMOUNTS") CONSTITUTE A REASONABLE APPROXIMATION OF THE ACTUAL DAMAGES THAT AUTHORITY WOULD SUFFER DUE TO THE DEFAULTS BY DEVELOPER SET FORTH IN THIS SECTION 4.13, CONSIDERING ALL OF THE CIRCUMSTANCES EXISTING ON THE DATE OF REGULATORY AGREEMENT, INCLUDING THE RELATIONSHIP OF THE DAMAGE AMOUNTS TO THE RANGE OF HARM TO AUTHORITY AND ACCOMPLISHMENT OF AUTHORITY'S PURPOSE OF ASSISTING IN THE PROVISION OF AFFORDABLE HOUSING TO ELIGIBLE TENANTS THAT REASONABLY COULD BE ANTICIPATED AND THE ANTICIPATION THAT PROOF OF ACTUAL DAMAGES WOULD BE COSTLY OR INCONVENIENT. THE AMOUNTS SET FORTH IN THIS SECTION 4.13 SHALL BE THE SOLE MONETARY DAMAGES REMEDY FOR THE DEFAULTS SET FORTH IN THIS SECTION 4.13, BUT NOTHING IN THIS SECTION 4.13 SHALL BE INTERPRETED TO LIMIT AUTHORITY'S REMEDY FOR SUCH DEFAULT TO SUCH A DAMAGES REMEDY AND IN THAT REGARD AUTHORITY MAY DECLARE A DEFAULT UNDER 882/012782-0020 13106627.7 a03/\5/19 253 of 323 -13- March 19, 2019 Item #3.1 THE TERMS OF THE AUTHORITY NOTE, THE AGREEMENT, OR OTHER AGREEMENTS ENTERED INTO BY AND BETWEEN AUTHORITY AND DEVELOPER. IN PLACING ITS INITIALS AT THE PLACES PROVIDED HEREINBELOW, EACH PARTY SPECIFICALLY CONFIRMS THE ACCURACY OF THE STATEMENTS MADE ABOVE AND THE FACT THAT EACH PARTY HAS BEEN REPRESENTED BY COUNSEL WHO HAS EXPLAINED THE CONSEQUENCES OF THE LIQUIDATED DAMAGES PROVISION AT OR PRIOR TO THE TIME EACH EXECUTED THIS REGULATORY AGREEMENT. DEVELOPER'S INITIALS: AUTHORITY'S INITIALS: 4.14 Relationship to Additional Regulatory Agreements. Notwithstanding any other provisions set forth in this Regulatory Agreement and subject to the following sentence, to the extent that the provisions related to tenant selection, tenant income levels and unit rent levels set forth in any Additional Regulatory Agreement are less restrictive than those provisions set forth in this Section 4, then the provisions set forth in this Section 4 shall govern and control. To the extent of any inconsistency between this Regulatory Agreement and any Additional Regulatory Agreement regarding Affordable Rent for the Affordable Units, the more restrictive agreement or covenants shall prevail unless compliance with such more restrictive provisions would violate the provisions of the less restrictive document. Developer agrees to perform all of Developer's obligations under this Regulatory Agreement, and under each of the Additional Regulatory Agreements. In the event Authority is prevented by a final, non-appealable order of a court of competent jurisdiction in a lawsuit involving the Project, or by an applicable and binding published appellate opinion, or by a final, non-appealable order of a regulatory body having jurisdiction, from enforcing, for any reason, the affordability restrictions set forth in this Regulatory Agreement or in the Agreement, then in such event Authority shall be a third-party beneficiary under the Additional Regulatory Agreements, and shall have full authority to enforce any breach or default by Developer thereunder in the same manner as though it were a breach or default hereunder. Without Authority's prior written consent, which consent may be withheld in Authority's sole and absolute discretion, Developer shall not consent to any amendment of or modification to any of the Additional Regulatory Agreements which (i) shortens the term of the affordability restrictions on the Affordable Units or (ii) modifies the affordability mix in a manner inconsistent with the Restricted Unit Matrix. SECTION 5. COVENANT TO PAY TAXES AND ASSESSMENTS. Developer shall pay prior to delinquency all ad valorem real estate taxes, special taxes, assessments and special assessments levied against the Property, subject to Developer's right to contest any such tax in good faith and any property tax exemption. 882/012782-0020 13106627.7 a03/i5fl9 254 of 323 ·14· March 19, 2019 Item #3.1 SECTION 6. COVENANTS REGARDING MAINTENANCE. Developer shall maintain the Property and all improvements thereon, including lighting and signage, in good condition, free of debris, waste and graffiti, and in compliance with all applicable laws and regulations, including, without limitation, HUD's Housing Quality Standards. Developer shall maintain the improvements and landscaping on the Property in accordance with the "Maintenance Standards," as hereinafter defined. Such Maintenance Standards shall apply to all buildings, signage, lighting, landscaping, irrigation of landscaping, architectural elements identifying the Property and any and all other improvements on the Property. To accomplish the maintenance, Developer shall either staff or contract with and hire licensed and qualified personnel to perform the maintenance work, including the provision of labor, equipment, materials, support facilities, and any and all other items necessary to comply with the requirements of this Regulatory Agreement. Developer and its maintenance staff, contractors or subcontractors shall comply with the following standards (the "Maintenance Standards"): (a) The Property shall be maintained in good condition and in accordance with the custom and practice generally applicable to comparable high quality, well-managed apartment complexes, including but not limited to painting and cleaning of all exterior surfaces and other exterior facades comprising all private improvements and public improvements to the curbline. (b) Landscape maintenance shall include, but not be limited to: watering/irrigation; fertilization; mowing; edging; trimming of grass; tree and shrub pruning; trimming and shaping of trees and shrubs to maintain a healthy, natural appearance and safe road conditions and visibility, and irrigation coverage; replacement, as needed, of all plant materials; control of weeds in all planters, shrubs, lawns, ground covers, or other planted areas; and staking for support of trees. (c) Clean-up maintenance shall include, but not be limited to: maintenance of all sidewalks, paths, and other paved areas in clean and weed-free condition; maintenance of all such areas clear of dirt, mud, trash, debris, or other matter which is unsafe or unsightly; removal of all trash, litter, and other debris from improvements and landscaping prior to mowing; clearance and cleaning of all areas maintained prior to the end of the day on which the maintenance operations are performed to ensure that all cuttings, weeds, leaves, and other debris are properly disposed of by maintenance workers. Upon Authority's written notification to Developer of any maintenance deficiency, Developer shall have thirty (30) days within which to correct, remedy or cure the deficiency, or such longer period as is reasonably necessary to complete the cure, provided Developer commences the correction, remedy, or cure within such thirty (30) day period and diligently pursues such correction, remedy, or cure to completion. 882/012782-0020 13106627.7 a03/15/\9 255 of 323 -15- March 19, 2019 Item #3.1 SECTION 7. COVENANTS REGARDING MANAGEMENT. Developer shall provide for the management of the Project in accordance with this Section. 7.01 Property Manager. Developer shall manage or cause the Project, and all appurtenances thereto that are a part of the Project, to be managed in a prudent and business-like manner, consistent with property management standards for other comparable high quality, well-managed rental housing projects and commercial developments in San Diego County, California. Developer may contract with a property management company or property manager to operate and maintain the Project in accordance with the terms of this Section ("Property Manager"); provided, however, the selection and hiring of the Property Manager (and each successor or assignee) is and shall be subject to prior written approval of Authority. Developer shall conduct due diligence and background evaluation of any potential outside property manager or property management company to evaluate experience, references, credit worthiness, and related qualifications as a property manager. Any proposed property manager shall have prior experience with projects and properties comparable to the Project and the references and credit record of such manager/company shall be investigated (or caused to be investigated) by Developer prior to submitting the name and qualifications of such proposed property manager to Authority for review and approval. A complete and true copy of the results of such background evaluation shall be provided to Authority. Approval of a Property Manager by Authority shall not be unreasonably withheld or delayed and shall be in Authority's reasonable discretion, and Authority shall use good faith efforts to respond as promptly as practicable in order to facilitate effective and ongoing management of the Project. Furthermore, the identity and retention of any approved Property Manager shall not be changed without the prior written approval of Authority, which approval shall not be unreasonably delayed, and shall be in Authority's reasonable discretion. The selection by Developer of any new Property Manager also shall be subject to the foregoing requirements. 7.02 Management Plan. Prior to and as one of Authority's conditions to the Closing under the Agreement, Developer shall have prepared and submitted to the Executive Director for review and approval an updated and supplemented management plan which includes a detailed plan and strategy for long-term marketing for the Affordable Units, operation, maintenance, repair, and security of the Project, method of selection of tenants, rules and regulations for tenants, and other rental policies for the Affordable Units (the "Management Plan"). Subsequent to approval of the Management Plan by the Executive Director, the ongoing management and operation of the Project shall be in compliance with the approved Management Plan. Developer and Property Manager may from time to time submit to the Executive Director proposed amendments to the Management Plan, which are also subject to the prior written approval of the Executive Director. 7.03 Social Services. Prior to and as one of Authority's conditions to the Closing under the Agreement, Developer shall have prepared and submitted to the Executive Director for review and approval a resident services plan (the "Resident Services Plan"). Developer shall provide a variety of social services at the Project, as set forth in the 882/012782-0020 13106627.7 a03/l5/t9 256 of 323 -16- March 19, 2019 Item #3.1 Resident Services Plan. No changes may be made to the Resident Services Plan without the prior written approval of the Executive Director, which shall be given or withheld in his or her reasonable discretion. Developer's social service program shall be targeted to the needs of the senior residents of the Project which shall include, but not be limited to the following services: exercise classes, social programs, events and celebrations, nutrition classes, health and wellness and financial education (budgeting, fraud prevention, governmental programming/benefits). Developer shall ensure that all personnel providing or coordinating all social services shall be adequately trained and counseled, including with respect to the appropriate means and methods of communicating and interacting with residents. If Developer intends to partner with a third party to provide the social services required pursuant to this Section 7.03, Developer shall obtain Authority's prior written approval of Developer's proposed social service provider, which approval shall not be unreasonably withheld, conditioned or delayed. Any substantive change in the scope, amount, or type of supportive services to be provided at the Property, whether or not such change requires a change to the Resident Services Plan, shall be subject to prior reasonable approval of Authority. Authority shall respond to any such proposed changes within thirty (30) days after submittal to Authority by Developer. 7.04 Gross Mismanagement. In the event of "Gross Mismanagement" (as that term is defined below) of the Affordable Units or any part of the Project, Authority shall have and retain the authority to direct and require any condition(s), acts, or inactions of Gross Mismanagement to cease and/or be corrected immediately, and further to direct and require the immediate removal of the Property Manager and replacement with a new qualified and approved Property Manager, if such condition(s) is/are not ceased and/or corrected after expiration of thirty (30) days from the date of Notice from Authority. If such condition(s) acts, or inactions of gross mismanagement do persist beyond such period, Authority shall have the sole and absolute right to immediately and without further notice to Developer (or to Property Manager or any other person/entity) replace the Property Manager with a new property manager of Authority's selection at the sole cost and expense of Developer. If Developer takes steps to select a new property manager that selection is subject to the requirements set forth above for selection of a Property Manager. For purposes of this Regulatory Agreement, the term "Gross Mismanagement" shall mean management of any part of the Project in a manner which materially violates the terms and/or intention of this Regulatory Agreement to operate a high quality, well- managed residential complex, and shall include, but is not limited to, any one or more of the following: (a) knowingly leasing Affordable Units to tenants who exceed the prescribed income levels and/or otherwise fail to qualify as an Eligible Tenant; (b) knowingly allowing the tenants of Affordable Units to exceed the prescribed occupancy levels without taking immediate action to stop such overcrowding; (c) underfunding Capital Replacement or Operating Reserve accounts, unless funds are not available to deposit in such accounts; 882/012782-0020 13106627. 7 a0]/15/19 257 of 323 -17- March 19, 2019 Item #3.1 (d) failing to timely maintain the Project in accordance with the Management Plan and the manner prescribed herein; (e) failing to submit timely and/or adequate annual reports to Authority as required herein; (f) committing fraud or embezzlement with respect to Project funds, including without limitation funds in the reserve accounts; (g) failing to reasonably cooperate with law enforcement in its attempts to maintain a safe, crime-free environment within the Project; (h) spending funds from the Capital Reserve account(s) for items that are not defined as capital costs under the standards imposed by generally accepted accounting principles (GAAP) (and/or, as applicable, generally accepted auditing principles). Notwithstanding the requirements of the Property Manager to correct any condition of Gross Mismanagement as described above, Developer is obligated and shall use its best efforts to correct any defects in property management or operations at the earliest feasible time and, if necessary, to replace the Property Manager as provided above. Developer shall include advisement and provisions of the foregoing requirements and requirements of this Regulatory Agreement within any contract between Developer and its Property Manager. 7.05 Authority Inspections. Authority and Authority employees and authorized agents shall have the right to conduct inspections of the Project and the individual Affordable Units, both exterior and interior, at reasonable times and upon reasonable notice (not less than 48 hours prior notice) to Developer and/or an individual tenant. If such notice is provided by Authority or its representative(s) to Developer, then Developer (or its Property Manager) shall immediately and directly advise tenants of such upcoming inspection and cause access to the area(s) and/or units to be made available and open for inspection. Developer shall include express advisement of such inspection rights within the lease/rental agreements for each Affordable Unit in order for each and every tenant and tenant household to be aware of this inspection right. 7.06 Drug Free Covenant. Developer shall use its best efforts to maintain a drug free environment on the Property. Developer covenants to Authority that Developer shall use its best efforts to ensure that all persons working or residing on the Property shall not unlawfully manufacture, distribute, dispense, possess or use controlled substances, as said term is defined in 21 United States Code Section 812 and California Health and Safety Code Section 11007 (or successor statutes) on the Property. SECTION 8. COVENANTS REGARDING NONDISCRIMINATION. Developer covenants by and for itself and any successors in interest that there shall be no discrimination against or segregation of any person, or group of persons on any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) 8821012782-0020 13106627.7 a03/15119 258 of 323 -18- March 19, 2019 Item #3.1 of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the Property, or any part thereof, nor shall Developer, or any person claiming under or through him or her, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy of tenants, lessees, subtenants, sublessees, or vendees of the Property, or any part thereof. The foregoing covenants shall run with the land. Developer agrees for itself and any successor in interest that Developer shall refrain from restricting the rental, sale, or lease of any portion of the Property, or contracts relating to the Property, on the basis of race, color, creed, religion, sex, marital status, ancestry, or national origin of any person. All such deeds, leases, or contracts shall contain or be subject to substantially the following nondiscrimination or nonsegregation clauses: (a) In deeds: "The grantee herein covenants by and for himself or herself, his or her heirs, executors, administrators, and assigns, and all persons claiming under or through them, that there shall be no discrimination against or segregation of, any person or group of persons on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the premises herein conveyed, nor shall the grantee or any person claiming under or through him or her, establish or permit any practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the premises herein conveyed. The foregoing covenants shall run with the land." (b) In leases: "The lessee herein covenants by and for himself or herself, his or her heirs, executors, administrators, and assigns, and all persons claiming under or through him or her, 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 any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the leasing, subleasing, transferring, use, occupancy, tenure, or enjoyment of the premises herein leased nor shall the lessee himself or herself, or any person claiming under or through him or her, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy, of tenants, lessees, sublessees, subtenants, or vendees in the premises herein leased." (c) In contracts: "There shall be no discrimination against or segregation of, any person or group of persons on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the premises which are the 882/012782-0020 13106627.7 a03/15/19 259 of 323 -19- March 19, 2019 Item #3.1 subject of this agreement, nor shall the grantee or any person claiming under or through him or her, establish or permit any practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the premises herein conveyed. The foregoing covenants shall run with the land." The covenants established in this Regulatory Agreement shall, without regard to technical classification and designation, be binding for the benefit and in favor of Authority, its successors and assigns, and any successor in interest to the Property, together with any property acquired by Developer pursuant to this Regulatory Agreement, or any part thereof. The covenants against discrimination shall remain in effect in perpetuity. SECTION 9. OPERATING BUDGET OR ANNUAL BUDGET; ANNUAL AND QUARTERLY REPORTS 9.01 Operating Budget. Developer shall submit to Authority on or before November 1st of each year during the Affordability Period an operating budget for the Project ("Operating Budget" or "Annual Budget"), which budget, including the format thereof, shall be subject to the written approval of the Executive Director or designee, which approval shall not be unreasonably withheld or conditioned so long as such budget is not inconsistent with this Regulatory Agreement. The Executive Director's discretion in review and approval of each proposed annual Operating Budget or Annual Budget shall include, without limitation, authority to review individual categories, line items, and accounts, such as the following: property and other taxes and assessments imposed on the Project; premiums for property damage and liability insurance; utility services not paid for directly by the tenants, including (as applicable), but not limited to, water, sewer, trash collection, gas, and electricity; maintenance and repairs including but not limited to pest control, landscaping and grounds maintenance, painting and decorating, cleaning, common systems repairs, general repairs, janitorial supplies; resident services pursuant to the Resident Services Plan; additional supportive services necessary to help residents maintain personal or household stability and housing status; any license or certificates of occupancy fees required for operation of the Project; general administrative expenses, including, but not limited to, advertising, marketing, security services and systems, professional fees for legal, audit, accounting and tax returns, and other; property management fees and reimbursements including on-site manager expenses, not to exceed fees and reimbursements which are standard in the industry and pursuant to a management contract approved by Authority (which such approval will not be unreasonably withheld); asset management fees; annual cash deposited into the Capital Replacement Reserve in an amount of up to $250 dollars per unit per year (increased by 3.5% per year), provided any changes to the amount deposited into the Capital Replacement Reserve will require Authority approval; cash deposited into the Operating Reserve for the Project and such other reserves as may be required by Developer's senior lender or tax credit investor; and debt service payments of loans in senior position to this loan. In the event Developer requires an amendment to an approved Annual Budget during an applicable year of the Affordability Period, then Developer shall submit a written request to the Executive Director explaining the requested amendment and reasons therefor; the Executive Director shall reasonably review and approve (or disapprove) each 882/012782-0020 13106627.7 a03/15/19 260 of 323 -20- March 19, 2019 Item #3.1 request for an amendment to an approved Annual Budget. The Executive Director shall communicate to Developer his or her reasonable approval or disapproval of a proposed annual Operating Budget or Annual Budget within thirty (30) days after receipt thereof; as to each amendment, the Executive Developer shall communicate to Developer his or her reasonable approval or disapproval within fifteen (15) days after receipt of a complete submittal requesting an amendment to an approved Annual Budget. In the event the Executive Director fails to approve a proposed annual Operating Budget or Annual Budget within thirty (30) days after receipt thereof, Developer may operate the Project in accordance with such proposed annual Operating Budget or Annual Budget until the Executive Director notifies Developer that such proposed annual Operating Budget or Annual Budget is not approved; provided, however, that in such case any expenditure made by Developer after expiration of the aforementioned thirty (30) days period but prior to the Executive Director's notification that the proposed annual Operating Budget or Annual Budget is not approved shall be deemed an approved expenditure. 9.02 Annual Reports. Developer covenants and agrees to submit to Authority an annual report (the "Annual Report"), which shall include the information required by California Health & Safety Code Section 33418.The Annual Report shall include for each Affordable Unit the rental rate and the income and family size of the occupants. The Developer shall submit the Annual Report on or before May 1st of the year following the year covered by the Annual Report. The Developer shall provide for the submission of household information and certification in its leases with tenants. 9.03 Quarterly Reports. Upon execution of this Regulatory Agreement and until permanent loan conversion, Developer shall also submit on a quarterly basis a quarterly report for the management of the Property (the "Quarterly Report"). The Quarterly Report shall describe the Project-related tasks performed in the past 3 months and the expected Project-related tasks to be performed in the upcoming 3 months. The report should include an updated Project schedule, including a schedule for completing milestones and/or tasks, and should indicate the status of the Project in relationship to this limeline. Developer shall document any changes from the timeline submitted with the most recent funding application. From lime to time, Authority may request from Developer an updated Project proforma which shall include a development budget with sources and uses, debt sizing, calculations and pricing for the Tax Credits, 30-year operating proforma, base year income projection, and maintenance and operating expenses; Developer will have thirty (30) days to satisfy such request. The Quarterly Report shall be in a form that is reasonably acceptable to the Executive Director. The Executive Director, in his/her sole discretion may waive the requirement of the Quarterly Report for one or more quarterly reporting periods. However, such waiver shall not operate to waive any subsequent requirement of the Quarterly Report. After receipt of such certified financial statements for the Project, Authority may request additional financial analysis or obtain a third party review at Authority's own expense, of financial statements for the Project to verify the accuracy of the payments by Developer on the Authority Note or the required deposits into the Capital Replacement Reserve. 882(012782-0020 13106627.7 a03/15/\9 261 of 323 -21- March 19, 2019 Item #3.1 SECTION 10. COVENANTS REGARDING CAPITAL REPLACEMENT RESERVE. Upon the closing of the Take-Out Loan or conversion of the Construction Loan, Developer shall establish the Capital Replacement Reserve. Funds in the Capital Replacement Reserve shall be used only for capital repairs, improvements, and replacements to the Project fixtures and equipment which are normally capitalized under generally accepted accounting principles. The non-availability of funds in the Capital Replacement Reserve does not in any manner relieve or lessen Developer's obligation to undertake any and all necessary capital repairs, improvements, or replacements and to continue to maintain the Project in the manner prescribed herein. Not less than once per year, Developer, at its expense, shall submit to Authority an accounting for the Capital Replacement Reserve. Capital repairs to and replacement of the Project shall include only those items with a long useful life, including, without limitation, the following: carpet and drape replacement; appliance replacement; exterior painting, including exterior trim; hot water heater replacement; plumbing fixtures replacement, including tubs and showers, toilets, lavatories, sinks, faucets; air conditioning and heating replacement; asphalt repair and replacement, and seal coating; roofing repair and replacement; landscape tree replacement; irrigation pipe and controls replacement; sewer line replacement; water line replacement; gas line pipe replacement; lighting fixture replacement; elevator replacement and upgrade work; miscellaneous motors and blowers; common area furniture replacement; and common area repainting. SECTION 11. COVENANTS REGARDING OPERATING RESERVE. Upon the closing of the Take-Out Loan or conversion of the Construction Loan, Developer shall establish the Operating Reserve. The Operating Reserve shall be used to cover shortfalls between Annual Project Revenue and actual operating expenses, but shall in no event be used to pay for capital items or capital costs properly payable from the Capital Replacement Reserve. Developer shall, not less than once per every twelve (12) months, submit to Authority evidence reasonably satisfactory to Authority of compliance herewith. SECTION 12. EFFECT OF VIOLATION OF THE TERMS AND PROVISIONS OF THIS REGULATORY AGREEMENT AFTER COMPLETION OF CONSTRUCTION. Authority is deemed the beneficiary of the terms and provisions of this Regulatory Agreement and of the covenants running with the land, without regard to whether Authority has been, remains or is an owner of any land or interest therein in the Property or in the Project. Authority shall have the right, if this Regulatory Agreement or any of the covenants herein are breached, to exercise all rights and remedies, and to maintain any actions or suits at law or in equity or other proper proceedings to enforce the curing of such breaches to which it or any other beneficiaries of this Regulatory Agreement and covenants may be entitled. The County is hereby deemed to be a third party beneficiary of this Regulatory Agreement and the covenants contained herein with the right, but not the obligation, to enforce the terms hereof. Except as provided in the following sentence, the covenants contained in this Regulatory Agreement shall remain in effect until the expiration of the Affordability Period. The covenants regarding discrimination as set forth in Section 8 shall remain in effect in perpetuity. 882/012782-0020 13106627.7 a03/15/19 -22- 262 of 323 March 19, 2019 Item #3.1 SECTION 13. COMPLIANCE WITH LAWS; ENVIRONMENTAL MATTERS. 13.01 Compliance With Laws. Developer shall comply with (i) all Governmental Requirements applicable to the Project and/or Property, (ii) any permit issued pursuant to the National Pollutant Discharge Elimination System ("NPDES") and applicable to the Project and/or Property; and (ii) all rules and regulations of any assessment district of the City with jurisdiction over the Property. 13.02 Indemnity. Developer shall save, protect, defend, indemnify and hold harmless Authority and City and Authority and City Personnel from and against any and all liabilities, suits, actions, claims, demands, penalties, damages (including, without limitation, penalties, fines, and monetary sanctions), losses, costs or expenses (including, without limitation, consultants' fees, investigation and laboratory fees, reasonable attorneys' fees, and remedial and response costs) (the foregoing are hereinafter collectively referred to as "Liabilities") which may now or in the future be incurred or suffered by any of Authority and City and Authority and City Personnel by reason of, resulting from, in connection with, or existing in any manner whatsoever as a direct or indirect result of (i) Developer's placement on or under the Property of any Hazardous Materials or Hazardous Materials Contamination, (ii) the escape, seepage, leakage, spillage, discharge, emission or release from the Property of any Hazardous Materials or Hazardous Materials Contamination that occurs after the Closing Date, (iii) Developer's failure to comply with any applicable NPDES permit, or (iv) any Liabilities incurred under any Governmental Requirements relating to the acts described in the foregoing clauses (i), (ii) and (iii). 13.03 Duty to Prevent Hazardous Material Contamination. Developer shall take commercially reasonable action to prevent the release of any Hazardous Materials into the environment. Such precautions shall include compliance with all Governmental Requirements with respect to Hazardous Materials. In addition, Developer shall install and utilize such equipment and implement and adhere to such procedures as are consistent with the standards generally applied by apartment complexes in San Diego County, California as respects the disclosure, storage, use, removal, and disposal of Hazardous Materials. 13.04 Obligation of Developer to Remediate Premises. Notwithstanding the obligation of Developer to indemnify Authority and County and Authority and County Personnel pursuant to Section 13.02, and provided no Hazardous Materials exist on the Property as a result of Authority's actions, Developer shall, at its sole cost and expense, promptly take (i) all actions required by any federal, state, regional, or local governmental agency or political subdivision or any Governmental Requirements and (ii) all actions necessary to make full economic use of the Property for the purposes contemplated by this Regulatory Agreement and the Agreement, which requirements or necessity arise from the presence upon, about or beneath the Property, of any Hazardous Materials or Hazardous Materials Contamination. Such actions shall include, but not be limited to, the investigation of the environmental condition of the Property, the preparation of any feasibility studies or reports and the performance of any cleanup, remedial, removal or restoration work. 882/012782-0020 13106627.7 a03/lS/\9 263 of 323 -23- March 19, 2019 Item #3.1 13.05 Environmental Inquiries. Developer, when it has received any notices of violation, notices to comply, citations, inquiries, clean-up or abatement orders, or cease and desist orders related to Hazardous Materials or Hazardous Materials Contamination, or when Developer is required to report to any governmental agency any violation or potential violation of any Governmental Requirement pertaining to Hazardous Materials or Hazardous Materials Contamination, shall concurrently notify the Executive Director, and provide to him/her a copy or copies, of the environmental permits, disclosures, applications, entitlements, or inquiries relating to the Property, the notices of violation, notices to comply, citations, inquiries, clean-up or abatement orders, cease and desist orders, reports filed pursuant to self-reporting requirements, and reports filed or applications made pursuant to any Governmental Requirement relating to Hazardous Materials and underground tanks, and Developer shall report to the Executive Director, as soon as possible after each incident, any unusual, potentially important incidents. In the event of a responsible release of any Hazardous Materials into the environment, Developer shall, as soon as possible after it becomes aware of the release, furnish to the Executive Director a copy of any and all reports relating thereto and copies of all correspondence with governmental agencies relating to the release. Upon request of the Executive Director, Developer shall furnish to the Executive Director a copy or copies of any and all other environmental entitlements or inquiries relating to or affecting the Property including, but not limited to, all permit applications, permits and reports including, without limitation, those reports and other matters which may be characterized as confidential. SECTION 14. INSURANCE REQUIREMENTS. 14.01 Commercial General Automobile Liability: Worker's Compensation. Commencing on the Closing Date and continuing in perpetuity, Developer shall procure and maintain, at its sole cost and expense, in a form and content satisfactory to the Executive Director, the following policies of insurance: (a) Commercial General Liability Insurance covering bodily injury, property damage, personal injury and advertising injury written on a per-occurrence and not a claims-made basis containing the following minimum limits:(i) general aggregate limit of Five Million Dollars ($5,000,000.00); (ii) products-completed operations aggregate limit of Three Million Dollars ($3,000,000.00); (iii) personal and advertising injury limit of Three Million Dollars ($3,000,000.00); and (iv) each occurrence limit of Three Million Dollars ($3,000,000.00).Said policy shall include the following coverages:(i) blanket contractual liability (specifically covering the indemnification clause contained below); (ii) products and completed operations; (iii) independent contractors; (iv) Owner's broad form property damage; (v) severability of interest; (vi) cross liability; and (vii) property damage liability arising out of the so-called "XCU" hazards (explosion, collapse and underground hazards). The policy shall be endorsed to have the general aggregate apply to this Project only. (b) A policy of worker's compensation insurance in such amount as will fully comply with the laws of the State of California and which shall indemnify, insure, and 882/012782-0020 13106627.7 a03/15/19 -24- 264 of 323 March 19, 2019 Item #3.1 provide legal defense for Authority and Developer against any loss, claim or damage arising from any injuries or occupational diseases occurring to any worker employed by or any persons retained by Developer in the course of carrying out the work or services contemplated in this Regulatory Agreement, and Employers Liability Insurance in an amount not less than One Million Dollars ($1,000,000) combined single limit for all damages arising from each accident or occupational disease. (c) A policy of comprehensive automobile liability insurance written on a per-occurrence basis in an amount not less than Two Million Dollars ($2,000,000.00) combined single limit covering all owned, non-owned, leased and hired vehicles used in connection with the Work. 14.02 Builder's Risk. Commencing on the Closing Date and continuing until Authority issues a Release of Construction Covenants for the Project, Developer shall procure and maintain, at its sole cost and expense, in a form and content satisfactory to the Executive Director, Builder's Risk (course of construction) insurance coverage in an amount equal to the full cost of the hard construction costs of the Project. Such insurance shall cover, at a minimum: all work, materials, and equipment to be incorporated into the Project; the Project during construction; the completed Project until such time as the Authority issues a final certificate of occupancy for the Project, and storage and transportation risks. Such insurance shall protecUinsure the interests of Developer/owner and all of Developer's contractor(s), and subcontractors, as each of their interests may appear. If such insurance includes an exclusion for "design error," such exclusion shall only be for the object or portion which failed. Authority shall be a loss payee under such policy or policies and such insurance shall contain a replacement cost endorsement. 14.03 Property: Business Interruption: Boiler and Machinery Insurance. Commencing on the date Authority issues a Release of Construction Covenants for the Project and continuing in perpetuity, Developer shall procure and maintain, at its sole cost and expense, in a form and content satisfactory to the Executive Director, the following insurance: (a) Insurance against fire, extended coverage, vandalism, and malicious mischief, and such other additional perils, hazards, and risks as now are or may be included in the standard "all risk" form in general use in San Diego County, California, with the standard form fire insurance coverage in an amount equal to full actual replacement cost thereof, as the same may change from time to time. The above insurance policy or policies shall include coverage for earthquakes to the extent generally and commercially available at commercially reasonable rates, if such insurance is generally obtained for affordable Projects in the counties of San Diego and Los Angeles. Authority shall be a loss payee under such policy or policies and such insurance shall contain a replacement cost endorsement. (b) Business interruption and extra expense insurance to protect Authority and Developer covering loss of revenues and/or extra expense incurred by reason of the total or partial suspension or delay of, or interruption in, the operation of the Project caused by loss or damage to, or destruction of, any part of the insurable real property structures or equipment as a result of the perils insured against under the all risk physical damage insurance, covering a period of suspension, delay or interruption of at 882/012782-0020 13106627.7 a03/!5/19 -25- 265 of 323 March 19, 2019 Item #3.1 least twelve (12) months, in an amount not less than the amount required to cover such business interruption and/or extra expense loss during such period. (c) Boiler and machinery insurance in the aggregate amount of the full replacement value of the equipment typically covered by such insurance. 14.04 Contract Insurance Requirements. Developer shall cause any general contractor with whom it has contracted for the performance of work on the Property to secure, prior to commencing any activities hereunder and maintain insurance that satisfies all of the requirements of this Section 14. 14.05 Additional Requirements. The following additional requirements shall apply to all of the above policies of insurance: (a) All of the above policies of insurance shall be primary insurance and, except the Worker's Compensation, Employer Liability insurance, and automobile liability insurance, shall name Authority and City and Authority and City Personnel as additional insureds on an ISO Form CG 20:10 (current version) or substantially similar form and not an ISO Form CG 20:09. The insurer shall waive all rights of subrogation and contribution it may have against any of Authority and City and Authority and City Personnel and their respective insurers. All of said policies of insurance shall provide that said insurance may not be amended or cancelled without providing thirty (30) days' prior written notice to Authority. In the event any of said policies of insurance are cancelled, Developer shall, prior to the cancellation date, submit new evidence of insurance in conformance with this Section to the Executive Director. Not later than the Effective, Developer shall provide the Executive Director with Certificates of Insurance or appropriate insurance binders evidencing the above insurance coverages and said Certificates of Insurance or binders shall be subject to the reasonable approval of the Executive Director. (b) The policies of insurance required by this Regulatory Agreement shall be satisfactory only if issued by companies of recognized good standing authorized to do business in California, rated "A-" or better in the most recent edition of Best Rating Guide, The Key Rating Guide or in the Federal Register, and only if they are of a financial category Class VII or better, unless such requirements are waived by the Executive Director due to unique circumstances. (c) The Executive Director is hereby authorized to reduce or otherwise modify Developer's insurance requirements set forth herein in the event he or she determines, in his or her sole and absolute discretion, that such reduction or modification is consistent with reasonable commercial practices. (d) The Developer agrees that the provisions of this Section shall not be construed as limiting in any way Authority's right to indemnification or the extent to which Developer may be held responsible for the payment of damages to any persons or property resulting from Developer's activities or the activities of any person or persons for which Developer is otherwise responsible. 14.06 Indemnification. Developer shall defend (by counsel satisfactory to Authority), assume all responsibility for and hold Authority and City and Authority and City 882/012782-0020 13106627.7 a03/J5/J9 266 of 323 -26- March 19, 2019 Item #3.1 Personnel harmless from all claims or suits for, and damages to, property and injuries to persons, including accidental death (including expert witness fees, attorney's fees and costs), which may be caused by the activities or performance of Developer or any of Developer's employees, agents, representatives, contractors, or subcontractors under (i) this Regulatory Agreement, (ii) a claim, demand or cause of action that any person has or asserts against Developer; (iii) any act or omission of Developer, any contractor, subcontractor or material supplier, engineer, architect or other person with respect to the Property; or (iv) the ownership, occupancy or use of the Property by Developer. The obligations and indemnifications in this Section 14.06 shall constitute covenants running with the land. SECTION 15. ASSIGNMENT. 15.01 Generally Prohibited. Except as otherwise expressly provided to the contrary in this Regulatory Agreement, Developer shall not assign any of its rights or delegate any of its duties under this Regulatory Agreement, nor shall any changes occur with respect to the ownership and/or control of Developer, including, without limitation, stock transfers, sales of issuances, or transfers, sales or issuances of membership or ownership interests, or statutory conversions, without the prior written consent of the Executive Director, which consent may be withheld in his or her sole and absolute discretion. Any such assignment or delegation without such consent shall, at Authority's option, be void. Notwithstanding the foregoing, however, (i) Developer may admit Developer's Tax Credit investor as an up to 99.99% Tax Credit limited partner without obtaining any consent, and such Tax Credit investor may assign its interests as an up to 99.99% Tax Credit limited partner to a subsequent reputable institutional investor without any consent; and (ii) the Tax Credit investor may remove the general partner for a default under the Partnership Agreement, provided the replacement general partner is reasonably acceptable to Authority. For purposes of this Section 15.01, if the Tax Credit investor transfers to an entity in which the Tax Credit investor or an Affiliate of the Tax Credit investor is the general partner or managing member such transferee entity shall be deemed to be a "reputable institutional investor." This Section 15.01 shall not be applicable to the leasing of Affordable Units to Eligible Tenants in accordance with this Regulatory Agreement. 15.02 Release of Developer. Upon any such assignment made in compliance with Section 15.01 above which is evidenced by a written assignment and assumption agreement in a form approved by Authority's counsel, Developer shall be released from any liability under this Regulatory Agreement arising from and after the date of such assignment. SECTION 16. DEFAULTS AND REMEDIES. 16.01 Default. Subject to the extensions of time set forth in Section 17.02 of this Regulatory Agreement, failure by either Party to perform any action or covenant required by this Regulatory Agreement or under the Agreement within the time periods provided herein and therein following Notice and failure to cure as described hereafter, constitutes a "Default" under this Regulatory Agreement. A Party claiming a Default shall give written Notice of Default to the other Party specifying such Default. Except as otherwise expressly provided in this Regulatory Agreement or in the Agreement, the claimant shall 882/012782-0020 -27- 13106627.7 a03/15/l9 267 of 323 March 19, 2019 Item #3.1 not institute any proceeding against any other Party, and the other Party shall not be in Default if such party within thirty (30) days from receipt of such Notice, cures, corrects or remedies such failure or delay, or if such Default cannot reasonably be cured within thirty (30) days, such Party commences such cure within thirty (30) days of receipt of such Notice and thereafter diligently prosecutes such cure to completion. 16.02 Remedies; Institution of Legal Actions. Developer's sole remedy for Authority's breach of this Regulatory Agreement shall be to institute an action at law or equity to seek specific performance of the terms of this Regulatory Agreement. Developer shall not be entitled to recover damages for any Default of Authority hereunder. Authority shall be entitled to seek any remedy available at law and in equity for Developer's breach of this Regulatory Agreement. All legal actions must be instituted in the Superior Court of the County of San Diego, State of California, or in the United States District Court for District of California in which San Diego County is located. 16.03 Termination by Authority. In the event that Developer is in Default of this Regulatory Agreement or the Agreement, and (i) such Default is material and (ii) Developer fails to cure such Default within the time set forth in Section 16.01 hereof, then Authority may, at Authority's option, terminate this Regulatory Agreement. 16.04 Acceptance of Service of Process. In the event that any legal action is commenced by Developer against Authority, service of process on Authority shall be made by personal service upon the Executive Director or in such other manner as may be provided by law. In the event that any legal action is commenced by Authority against Developer, service of process on Developer shall be made in such manner as may be provided by law. 16.05 Rights and Remedies Are Cumulative. Except as otherwise expressly stated in this Regulatory Agreement, the rights and remedies of the Parties are cumulative, and the exercise by either Party of one or more of such rights or remedies shall not preclude the exercise by it, at the same or different times, of any other rights or remedies for the same Default or any other Default by the other Party. 16.06 Inaction Not a Waiver of Default. Any failures or delays by either Party in asserting any of its rights and remedies as to any Default shall not operate as a waiver of any Default or of any such rights or remedies, or deprive either such Party of its right to institute and maintain any actions or proceedings which it may deem necessary to protect, assert or enforce any such rights or remedies. 16.07 Applicable Law. The internal laws of the State of California shall govern the interpretation and enforcement of this Regulatory Agreement, without regard to conflict of law principles. SECTION 17. GENERAL PROVISIONS. Notices, Demands and Communications Between the Parties. Any notices, requests, demands, documents, approvals or disapprovals given or sent under this Regulatory Agreement from one Party to another (collectively, "Notices") may be personally delivered, delivered by reputable courier that provides a receipt with the date 882/0 l 2782-0020 13106627.7 a03/\5fl9 268 of 323 -28- March 19, 2019 Item #3.1 and time of delivery, or deposited with the United States Postal Service for mailing, postage prepaid, to the address of the other Party as stated in this Section, and shall be deemed to have been given or sent at the time of personal delivery, delivery by courier, or, if mailed, on the second day following the date of deposit in the course of transmission with the United States Postal Service. Notices shall be sent as follows: If to Developer: with a copy to: and to and to If to Authority: with a copy to and to Poway Commons, LLC c/o Meridian Development, LLC 9988 Hibert Street, Suite 210 San Diego, CA 92131 Attn: Guy Asaro Higgs, Fletcher & Mack, LLP 401 West "A" Street, Suite 2600 San Diego, CA 92101 Attn: Tim Waters, Esq. Chelsea Investment Corporation 6339 Pasea del Lago Carlsbad, CA 92008 Attn: Cheri Hoffman Odu & Associates, PC 2195 Queensberry Road Pasadena, CA 91104 Attn: Nkechi C. Odu, Esq City of Poway Housing Authority 13325 Civic Center Drive Poway, CA 92064 Attn: Executive Director Rutan & Tucker, LLP 611 Anton, Suite 1400 Costa Mesa, CA 92626 Attn: Alan Fenstermacher, Esq. Rutan & Tucker, LLP 611 Anton, Suite 1400 Costa Mesa, CA 92626 Attn: John A. Ramirez, Esq. 17.01 Enforced Delay; Extension of Times of Performance. In addition to specific provisions of this Regulatory Agreement, performance by either Party hereunder shall not be deemed to be in Default, and all performance and other dates specified in this Regulatory Agreement shall be extended, where delays or Defaults are due to: war; 882/012782-0020 13106627.7 aOJ/lS/19 269 of 323 -29- March 19, 2019 Item #3.1 insurrection; strikes; lockouts; riots; floods; earthquakes; fires; casualties; acts of God; acts of the public enemy; epidemics; quarantine; restrictions; freight embargoes; lack of transportation; governmental restrictions or priority; litigation; unusually severe weather; inability to secure necessary labor, materials or tools; delays of any contractor, subcontractor or supplier; acts or omissions of the other Party; acts or failures to act of any public or governmental agency or entity (other than the acts or failures to act of Authority which shall not excuse performance by Authority); or any other causes beyond the control or without the fault of the Party claiming an extension of time to perform. Notwithstanding anything to the contrary in this Regulatory Agreement, an extension of time for any such cause shall be for the period of the enforced delay and shall commence to run from the time of the commencement of the cause, if notice by the Party claiming such extension is sent to the other party within ten (10) days of the commencement of the cause. Times of performance under this Regulatory Agreement may also be extended in writing by the mutual agreement of Authority and Developer. Notwithstanding any provision of this Regulatory Agreement to the contrary, the lack of funding to complete the construction of the Project shall not constitute grounds of enforced delay pursuant to this Section. 17.02 Relationship Between Authority and Developer. It is hereby acknowledged by Developer that the relationship between Authority and Developer is not that of a partnership or joint venture and that Authority and Developer shall not be deemed or construed for any purpose to be the agent of the other. Accordingly, with the exception of any provisions expressly set forth to the contrary in the Agreement, herein, or in the exhibits hereto, Authority shall have no rights, powers, duties or obligations with respect to the development, operation, maintenance or management of the Project. Developer agrees to indemnify, hold harmless and defend Authority from any claim made against Authority arising from a claimed relationship of partnership or joint venture between Authority and Developer with respect to the development, operation, maintenance or management of the Property or the Project, except to the extent occasioned by the active negligence or willful misconduct of Authority or its designated agents or employees. 17.03 No Third Party Rights. The Parties intend that no rights nor remedies be granted to any third party as a beneficiary of this Regulatory Agreement or of any covenant, duty, obligation or undertaking established herein. 17.04 Authority Approvals and Actions. This Regulatory Agreement shall be administered and executed on behalf of Authority by the Executive Director. The Executive Director shall have the authority to issue interpretations, waive terms and conditions, enter into implementing agreements and amendments of this Regulatory Agreement on behalf of Authority provided that such actions do not substantially change the uses or development permitted on the Property, materially add to the costs or obligations, increase the risk of liability, or impair the rights or remedies, of Authority provided herein, or materially decrease the revenues or other compensation to be received by Authority hereby. All other waivers or amendments shall require the formal consent of the Board of Directors of Authority. 17.05 Counterparts. This Regulatory Agreement may be signed in multiple counterparts which, when signed by all Parties, shall constitute a binding agreement. 8821012782-0020 13106627.7 a0]/15/19 270 of 323 -30- March 19, 2019 Item #3.1 17.06 Integration. This Regulatory Agreement contains the entire understanding between the parties relating to the transaction contemplated by this Regulatory Agreement. Each Party is entering this Regulatory Agreement based solely upon the representations set forth herein and upon each Party's own independent investigation of any and all facts such party deems material. This Regulatory Agreement constitutes the entire understanding and agreement of the Parties, notwithstanding any previous negotiations or agreements between the parties or their predecessors in interest with respect to all or any part of the subject matter hereof. 17.07 Real Estate Brokerage Commission. Authority and Developer each represent and warrant to the other that no broker or finder is entitled to any commission or finder's fee in connection with this transaction, and each agrees to defend and hold harmless the other from any claim to any such commission or fee resulting from any action on its part. 17.08 Attorneys' Fees. In any action between the Parties to interpret, enforce, reform, modify, rescind, or otherwise in connection with, any of the terms or provisions of this Regulatory Agreement, the prevailing Party in the action shall be entitled, in addition to damages, injunctive relief, or any other relief to which it might be entitled, reasonable costs, expenses including, without limitation, litigation costs, reasonable attorneys' fees, and expert witness fees. 17.09 Titles and Captions. Titles and captions are for convenience of reference only and do not define, describe, or limit the scope or the intent of this Regulatory Agreement or of any of its terms. Reference to section numbers are to sections in this Regulatory Agreement, unless expressly stated otherwise. 17.10 Interpretation. As used in this Regulatory Agreement, masculine, feminine, or neuter gender and the singular or plural number shall each be deemed to include the others where and when the context so dictates. The word "including" shall be construed as if followed by the words "without limitation." This Regulatory Agreement shall be interpreted as though prepared jointly by both Parties. 17.11 No Waiver. All waivers of the provisions of this Regulatory Agreement must be in writing by the appropriate authorities of Developer and Authority. A waiver by either Party of a breach of any of the covenants, conditions or agreements under this Regulatory Agreement to be performed by the other Party shall not be construed as a waiver of any succeeding breach of the same or other covenants, agreements, restrictions or conditions of this Regulatory Agreement. 17.12 Modifications. Any alteration, change or modification of or to this Regulatory Agreement, in order to become effective, shall be made in writing and in each instance signed on behalf of each Party. 17.13 Severability. If any term, provision, condition or covenant of this Regulatory Agreement or its application to any party or circumstances shall be held, to any extent, invalid or unenforceable, the remainder of this Regulatory Agreement, or the application of the term, provision, condition or covenant to persons or circumstances other than those 882/0 l 2782-0020 13106627.7 a03/J5/J9 271 of 323 -31- March 19, 2019 Item #3.1 as to whom or which it is held invalid or unenforceable, shall not be affected, and shall be valid and enforceable to the fullest extent permitted by law. 17.14 Computation of Time. The time in which any act is to be done under this Regulatory Agreement is computed by excluding the first day (such as the day escrow opens), and including the last day, unless the last day is a holiday or Saturday or Sunday, and then that day is also excluded. The term "holiday" shall mean all holidays as specified in Section 6700 and 6701 of the California Government Code. If any act is to be done by a particular time during a day, that time shall be Pacific Time Zone time. 17.15 Legal Advice. Each Party represents and warrants to the other the following: they have carefully read this Regulatory Agreement, and in signing this Regulatory Agreement, they do so with full knowledge of any right which they may have; they have received independent legal advice from their respective legal counsel as to the matters set forth in this Regulatory Agreement, or have knowingly chosen not to consult legal counsel as to the matters set forth in this Regulatory Agreement; and, they have freely signed this Regulatory Agreement without any reliance upon any agreement, promise, statement or representation by or on behalf of the other Party, or their respective agents, employees, or attorneys, except as specifically set forth in this Regulatory Agreement, and without duress or coercion, whether economic or otherwise. 17 .16 Time of Essence. Time is expressly made of the essence with respect to the performance by Authority and Developer of each and every obligation and condition of this Regulatory Agreement. 17.17 Cooperation. Each Party agrees to cooperate with the other in this transaction and, in that regard, to sign any and all documents which may be reasonably necessary, helpful, or appropriate to carry out the purposes and intent of this Regulatory Agreement including, but not limited to, releases or additional agreements. 17.18 Non-Liability of Officials and Employees of Authority. No member, official, officer, employee, or volunteer of Authority shall be personally liable to Developer, or any successor in interest, in the event of any Default or breach by Authority or for any amount which may become due to Developer or its successors, or on any obligations under the terms of this Regulatory Agreement. Developer hereby waives and releases any claim it may have against any of the Authority and City and Authority and City Personnel with respect to any Default or breach by Authority or for any amount which may become due to Developer or its successors, or on any obligations under the terms of this Regulatory Agreement. Developer makes such release with full knowledge of Civil Code Section 1542 and hereby waives any and all rights thereunder to the extent of this release, if such Section 1542 is applicable. Section 1542 of the Civil Code provides as follows: 882/012782-0020 13106627.7 a031l5/19 272 of 323 A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR OR RELEASING PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE AND THAT, IF KNOWN BY HIM OR HER, WOULD HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR OR RELEASED PARTY. -32- March 19, 2019 Item #3.1 882/012782-0020 13\06627.7 aOJ/15/19 273 of 323 Developer's Initials [End -signatures on next page] -33- March 19, 2019 Item #3.1 IN WITNESS WHEREOF, the parties have executed this Regulatory Agreement as of the respective dates set forth below. Date: __________ _ ATTEST: Faviola Medina, Authority Secretary APPROVED AS TO FORM RUTAN & TUCKER, LLP Alan Fenstermacher, Counsel Authority Date:. _________ _ 882/012782-0020 13106627.7 a03/15/19 274 of 323 "Authority" CITY OF POWAY HOUSING AUTHORITY, a public body, corporate and politic By:------------ Tina M. White, Executive Director "Developer" POWAY COMMONS, LLC, a Delaware limited liability company By: -------------- Guy Asaro, Manager -34- March 19, 2019 Item #3.1 A Notary Public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California County of _________ _ On ____________ , before me,-------=--~-=--- (insert name and title of the officer) Notary Public, personally appeared ----,----------,---,------- who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capaAuthority(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENAL TY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature _____________ _ 882/012782-0020 13106627.7 a03/15/J9 275 of 323 (Seal) March 19, 2019 Item #3.1 A Notary Public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California ) County of _________ _ ) On ____________ , before me, ---,,-,-------,-=---=---c=--,---- (insert name and title of the officer) Notary Public, personally appeared------------------ who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capaAuthority(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENAL TY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature _____________ _ 882/012782-0020 13106627.7 a03/l5119 276 of 323 (Seal) March 19, 2019 Item #3.1 A Notary Public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California ) County of _________ _ On ____________ , before me, ----,--,-----,-=-....,,,-cc--,--- (insert name and title of the officer) Notary Public, personally appeared ------------------ who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capaAuthority(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENAL TY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature _____________ _ 882/012782-0020 13106627.7 aOJ/15/19 277 of 323 (Seal) March 19, 2019 Item #3.1 882/012782-0020 13106627.7 a031l5/19 278 of 323 EXHIBIT "A" LEGAL DESCRIPTION OF THE PROPERTY March 19, 2019 Item #3.1 882/012782-0020 13106627.7 a03/15119 279 of 323 EXHIBIT B [See following page] March 19, 2019 Item #3.1 8821012782-0020 13106627.7 a03/\5119 280 of 323 EXHIBIT C INCOME COMPUTATION AND CERTIFICATION FORM (See following document) March 19, 2019 Item #3.1 CITY OF POWAY HOUSING AUTHORITY 13325 Civic Center Drive, Poway, CA 92064 INCOME COMPUTATION AND CERTIFICATION FORM (Affordable Housing Eligibility for Renter Occupied Unit PART I. PROPERTY FINANCED WITH GOVERNMENT ASSISTANCE Property Address: ______________________ _ PART II. TENANT HOUSEHOLD INFORMATION Date of Soc. Sec.# Relationshi Birth p TOTAL NUMBER OF PERSONS IN HOUSEHOLD: ___ (Please list information on other household members below) Mailing Address: _________ _ Telephone Numbers: WorkL_) Home L_) ______ _ PART Ill. GROSS HOUSEHOLD INCOME Complete the following, attach copies of required verification as specified below. Attach a note explaining any significant changes in household income between the previous year and the current year. INFORMATION IS REQUIRED FOR ALL MEMBERS OF THE HOUSEHOLD AGE 18 OR OLDER REGARDLESS OF WHETHER THEY CONTRIBUTE TO THE COSTS OF THE HOUSEHOLD. If you are not required to file a tax return, please indicate this in Part V by your signature. INCOME SOURCES A. Employment earnings 882/012782-0020 13106627.7 a03/15119 281 of 323 ANN INCOME for owner -1- ANN INCOME others in VERIFICATIONS (needed for hshld file) Last tax return & last 3 pay stubs, employer verification March 19, 2019 Item #3.1 B. Self-employment earnings Last 2 tax returns & current financial stmt C. Social Security (OASDI) Annual award letter D. Supplemental Security Annual award letter Income (SSI) E. Public assistance (AFDC, Current benefit statement general assistance, unemployment, etc.) F. Pension (s) Annual award letter, year end stmt, W-2 G. Interest income Last 2 statements for all accounts H. Investment income (stocks, Last 2 statements for all bonds, accounts real estate, etc.) I. Room rental Rental agreement, copies of checks, etc. J. Other income (list type/source) K. TOTAL INCOME (sum of A / 12 months= thru J) mo. income PART IV. PROPERTY STATUS Will this property be your primary residence? __ _ Will someone other than the individuals listed above be occupying this property? __ _ If yes -Name of occupants: --------------------- Telephone Number: _______ Mailing Address: __________ _ My/our housing expenses are as follows: 1.Monthly tenant rent ________ _ 2.Average monthly utilities PART V. TENANT CERTIFICATION I/We understand that after the initial eligibility determination, completion of monitoring forms is required on an annual basis. I/We certify that I/we have disclosed all information pertaining to 882/012782-0020 13!06627.7 a03/15/19 282 of 323 -2- March 19, 2019 Item #3.1 my/our application and that the information presented in the foregoing Sections I through IV is true and accurate to the best of my (our) knowledge. Tenant Date Tenant Date For more information regarding this application, please contact management staff at (760) Information verified Income category FOR OFFICE USE ONLY Maximum allowable annual income (, __ % of median) Applicant's annual income gross monthly _____ max housing costs Comments: ___________________________ _ 882/012782-0020 13106627.7 a03115i\9 283 of 323 Management Staff Date -3- March 19, 2019 Item #3.1 882/012782-0020 13106627.7 aOJ/15/19 284 of 323 EXHIBIT D INCOME RECERTIFICATION FORM (See following document) -4- March 19, 2019 Item #3.1 PART I. 1. 2. 3. 4. PART II. 5. 6. PART Ill. CITY OF POWAY 13325 Civic Center Drive, Poway, CA 92064 INCOME RECERTIFICATION FORM (Renter Occupied Unit) GENERAL INFORMATION Property Owner Name _________________ _ Renter Name --------------------- Property Address --------------------Poway, CA _____ (Please include P.O. Box No. if applicable) Has there been a change in ownership of this property during the preceding 12 month period? Yes() No() (If yes, please explain)------------------ UNIT INFORMATION Number of Bedrooms Number of Occupants Names: AFFIDAVIT OF RENTER I, , and I, , as renters of units assisted pursuant to the City of Poway Housing Authority ("Authority") Affordable Housing Program (the "Program"), do hereby represent and warrant that the following computation includes all income (I/we) anticipate receiving for the 12-month period commencing on January 1, 20_ (including the renter(s) and all family members of the renters): 882/012782-0020 13106627.7 a03/l5/19 285 of 323 (a) amount of wages, salaries, overtime pay, commissions, fees, (b) (c) (d) (e) tips and bonuses, and payments in lieu of earnings, such as unemployment and disability compensation, worker's compensation and severance pay (before payroll deduction) net income from business or profession or rental of property (without deduction for repayment of debts or expansion of business) interest and dividends periodic receipts such as social security, annuities, pensions, retirement funds, insurance policies, disability or death benefits, alimony, child support, regular contributions or gifts from persons not occupying unit public assistance allowance or grant plus excess of maximum allowable for shelter or utilities over the actual allowance for such purposes -5- March 19, 2019 Item #3.1 (f) regular and special pay and allowances of a member of armed services (whether or not living in the dwelling) who is head of the family or spouse Subtotal (a) through (f) LESS: Portion of above items which are income of a family member who is less than 18 years old or a full-time student ( ____ ) TOTAL ELIGIBLE INCOME NOTE: The following items are not considered income: casual or sporadic gifts; amounts specifically for or in reimbursement of medical expenses; lump sum payment such as inheritances, insurance payments, capital gains and settlement for personal or property losses; educational scholarships paid directly to the student or educational institution; government benefits to a veteran for education; special pay to a serviceman head of family away from home and under hostile fire; foster child care payments; value of coupon allotments for purpose of food under Food Stamp Act of 1964 which is in excess of amount actually charged the eligible household; relocation payments under Title II of Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970; payments received pursuant to participation in the following programs: VISTA, Service Learning Programs, and Special Volunteer Programs, SCORE, ACE, Retired Senior Volunteer Program, Foster Grandparent Program, Older American Community Services Program, and National Volunteer Program to Assist Small Business Experience. 2. This affidavit is made with the knowledge that it will be relied upon by the Developer and Authority to determine maximum income for eligibility and (I/we) warrant that all information set forth in this Part Ill is true, correct and complete and based upon information (I/we) deem reliable and that the estimate contained in paragraph 1 is reasonable and based upon such investigation as the undersigned deemed necessary. 3. (I/We) will assist the Developer and Authority in obtaining any information or documents required to verify the statements made in this Part Ill and have attached hereto a copy of our federal income tax return for the last year (20_). 4. (I/We) acknowledge that (I/we) have been advised that the making of any misrepresentation or misstatement in this affidavit will constitute a material breach of (my/our) agreement with the Developer to rent the unit and will additionally enable Authority to initiate and pursue all applicable legal and equitable remedies with respect to the unit and to me/us. B. (My/Our) monthly housing expenses are limited to the following: 1. Base rent 2. Average Monthly Utilities 3. Other (explain) (I/We) understand that completion of monitoring forms is required on an annual basis and agree to notify Authority in writing of any change in ownership or rental of the unit.(1/We) do hereby swear under penalty of perjury that the foregoing statements are true and correct. Date. ___________ _ 882/012782-0020 13106627.7 a03/l 5/l 9 286 of 323 Renter(s). ____________ _ -6- March 19, 2019 Item #3.1 EXHIBIT E FORM OF CERTIFICATION OF CONTINUING PROGRAM COMPLIANCE (See following document) 882/012782-0020 13106627.7 a031l5/l9 287 of 323 -7- March 19, 2019 Item #3.1 CERTIFICATION OF CONTINUING PROGRAM COMPLIANCE The undersigned, being duly authorized to execute this certificate on behalf of __________ , owner of the Project, hereby represents and warrants that: 1. He/she has read and is thoroughly familiar with the provisions of the Affordable Housing Regulatory Agreement between Authority and 2. As of June 30, 20_, the following number of residential units in the Project (i) are currently occupied by tenants qualifying as Income Households at Affordable Rents; (ii) are currently occupied by tenants qualifying as ________ Income Households at Affordable Rents; (iii) are currently occupied by tenants qualifying as Income Households at Affordable Rents; or (iv) are currently vacant and being held available for occupancy by Eligible Tenants and have been so held continuously since the date Eligible Tenants vacated such unit, as indicated: i. ii. iii. iv. __ Units occupied by ________ Income Households __ Units occupied by ________ Income Households __ Units occupied by ________ Income Households __ vacant Units 3. The unit number, unit size, rental amount charged and collected, number of occupants, and the income of the occupants for each Affordable Unit in the Project are set forth on the attached list. All Affordable Units in the Project are rented at Affordable Rent. DEVELOPER NAME a California limited partnership Dated.: _________ , 20_ By: _____________ _ (Printed name and title) 882/012782-0020 2ti~'b't1 j';z~'11 ' -8- March 19, 2019 Item #3.1 EXHIBIT F RESTRICTED UNIT MATRIX Size No. of 50% 60% Mgr Units Income Income Unit One bedroom 36 4 32 Two bedrooms 8 1 6 1 882/012782-0020 2ti~'b't1 3':!~5119 -9- March 19, 2019 Item #3.1 882/012782-0020 2~1f'b't' j~~51J 9 ATTACHMENT N0.11 NOTICE OF AFFORDABILITY RESTRICTIONS (See following document) ATTACHMENT N0.11 March 19, 2019 Item #3.1 RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: City of Poway 13325 Civic Center Drive Poway, CA 92064 Attn: Cit Clerk Exempt From Recording Fee Pursuant to Government Code § 27383 NOTICE OF AFFORDABILITY RESTRICTIONS ON TRANSFER OF PROPERTY Important notice to owners, purchasers, tenants, lenders, brokers, escrow and title companies, and other persons, regarding affordable housing restrictions on the real property described in this Notice: Affordable housing restrictions have been recorded with respect to the property described below (referred to in this Notice as the "Property") which require that the Property be developed as an affordable rental housing development and that all of the units be rented to and occupied by persons and households of limited income at affordable rents. Title of Document Containing Affordable Housing Restrictions: Affordable Housing Regulatory Agreement ("Agreement"). Parties to Agreement: Poway Commons, LLC, a Delaware limited liability company ("Developer"), and the City of Poway Housing Authority, a public body, corporate and politic ("Authority"). The Agreement is recorded concurrently with this Notice, in the Official Records of San Diego County. Legal Description of Property: See Exhibit "A" attached hereto and incorporated herein by this reference. Property Location: Located in the City of Poway, County of San Diego, State of California. Assessor's Parcel Numbers of Property: 882/012782·0020 2~i\6'b't' 3'!!~5119 -1- March 19, 2019 Item #3.1 Summary of Agreement: o The Agreement requires Developer to develop a forty-four (44) unit senior affordable rental Project on the Property; o The Agreement restricts the rental of (i) five (5) units to households whose annual income does not exceed the 50% of the area median income for San Diego County, adjusted for household size; and thirty-eight (38) units to households whose annual income does not exceed the 60% of the area median income for San Diego County, adjusted for household size, all as established by HUD, and as published periodically by HCD. o The Regulatory Agreement restricts the rents that may be charged to such households to the maximum amount of rent, including a reasonable utility allowance, that does not exceed the rent permitted to be charged to the applicable household, as the case may be, determined pursuant to Health and Safety Code Section 50053(b). o The Agreement will remain in effect for 55 years. This Notice does not contain a full description of the details of all of the terms and conditions of the Agreement. You will need to obtain and read the Agreement to fully understand the restrictions and requirements which apply to the Property. This Notice is being recorded and filed in compliance with Health and Safety Code Section 33334.3(f)(3) and (4), and shall be indexed against Developer, who will own fee title to the Property, and Authority. [signature on next page] 882/012782-0020 2~~'b't' 3'!!~5/19 -2- March 19, 2019 Item #3.1 Date: _______ , 201_ 882/012782-0020 2'!l!'b't' 3'!1~5/19 "Authority" CITY OF POWAY HOUSING AUTHORITY, a public body, corporate and politic By: Tina M. White, Executive Director -3- March 19, 2019 Item #3.1 A Notary Public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California ) County of _________ _ ) On ___________ , before me,----~-~~---- (insert name and title of the officer) Notary Public, personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capaAuthority(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENAL TY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature. ____ _ (Seal) 882/0\2782-0020 2~Sl'b't' j':;!~5119 March 19, 2019 Item #3.1 EXHIBIT "A" LEGAL DESCRIPTION OF PROPERTY 882/012782-0020 :z~!'b'f 7 j~~S/19 -2- March 19, 2019 Item #3.1 882/012782-0020 2~1f'b't1 j'JB'1 " ATTACHMENT NO. 12 RELEASE OF CONSTRUCTION COVENANTS (See following document) ATTACHMENT NO. 12 March 19, 2019 Item #3.1 RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: City of Poway Housing Authority 13325 Civic Center Drive Poway, CA 92064 Attn: City Clerk (Space Above for Recorder's Use) Exempt from Recordation Fee per Gov. Code § 27383 RELEASE OF CONSTRUCTION COVENANTS This RELEASE OF CONSTRUCTION COVENANTS ("Release") is made this __ day of , by the CITY OF POWAY HOUSING AUTHORITY, a public body, corporate and politic ("Authority"), in favor of __________ , a California limited partnership ("Developer"). A. Developer owns fee title to that certain real property located in the City of Poway, County of San Diego, State of California, more particularly described in the legal description attached hereto as Exhibit "A" ("Property"). B. On or about , Authority and Poway Commons, LLC ("Poway Commons") entered into that certain Affordable Housing and Property Disposition Agreement ("Agreement") which provides for Poway Commons to develop on the Property a forty-four (44) unit senior rental affordable housing development, as more particularly described therein as the "Project." Poway Commons has assigned to Developer, and Developer has assumed from Poway Commons, all of Poway Common's rights and obligations in and to the Agreement. C. Pursuant to the Agreement, Authority is required to furnish Developer with this Release upon request by Developer after completion of construction of the Project. D. The issuance by Authority of this Release shall be conclusive evidence that Developer has complied with the terms of the Agreement pertaining to the construction of the Project. NOW, THEREFORE, in consideration of the foregoing Recitals, which are incorporated herein by this reference, the parties hereto agree as follows: 1. As provided in the Agreement, Authority does hereby certify that the construction of the Project has been satisfactorily performed and completed, and that such development and construction work complies with the Agreement. 8821012782-0020 29'1'of'3'23'119 -1-March 19, 2019 Item #3.1 2. This Release does not constitute evidence of compliance with or satisfaction of any obligation of Developer to any holder of a mortgage or any insurer of a mortgage security money loaned to finance the work of construction of improvements and development of the Property, or any part of thereof. 3. This Release is not a notice of completion as referred to in Section 3093 of the California Civil Code. 4. This Release does not terminate any other agreement or document executed by Developer in connection with the Agreement, including, without limitation, that certain Affordable Housing Regulatory Agreement recorded on , as Instrument No. , in the Official Records of the County of San Diego (the "Official Records"), and that certain Deed of Trust recorded on , as Instrument No. , in the Official Records, all of which shall survive recordation of this Release. IN WITNESS WHEREOF, Authority has executed this Release as of the date set forth above. Date: ____________ _ 882/012782-0020 :!~!f'b't' :i,:15119 -2- CITY OF POWAY HOUSING AUTHORITY, a public body, corporate and politic By:------------ Tina M. White, Executive Director March 19, 2019 Item #3.1 A Notary Public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California ) County of _________ _ ) On ___________ , before me, ___________ _ (insert name and title of the officer) Notary Public, personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capaAuthority(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENAL TY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. 882/012782·0020 29f'of'3235119 Signature _________ _ (Seal) March 19, 2019 Item #3.1 EXHIBIT "A" LEGAL DESCRIPTION OF PROPERTY 882/012782-0020 3ijff 'b't 1 j'!!~'11 ' -2- March 19, 2019 Item #3.1 TABLE OF CONTENTS 1. DEFINITIONS ................................................................................................................. 5 2. PARTIES ....................................................................................................................... 11 2.1 Authority ....................................................................................................... 11 3. SCHEDULE OF PERFORMANCE ............................................................................... 12 4. LAND USE ENTITLEMENTS ..................................................................................... 12 5. DUE DILIGENCE PERIOD; PERMISSION TO ENTER PROPERTY; AS-IS; PHYSICAL AND ENVIRONMENTAL CONDITION ................................... 12 5.1 Due Diligence Period ................................................................................. 12 5.2 "AS-IS" ......................................................................................................... 13 5.3 Developer Indemnity and Release .......................................................... 14 5.4 Materiality .................................................................................................... 15 5.5 Review of Title of Site ................................................................................ 15 6. FINANCING PLAN FOR THE PROJECT ................................................................ 16 6.1 Financing Plan ............................................................................................ 16 6.2 Authority Loan ............................................................................................. 16 6.3 Applications to CD LAC and TCAC .......................................................... 17 6.4 Project Budget ............................................................................................ 17 6.5 Developer Submittals ................................................................................ 17 6.6 Financing Commitments ........................................................................... 18 6.7 Developer Fee ............................................................................................ 18 7. GROUND LEASE OF PROPERTY ........................................................................... 19 7.1 Agreement ................................................................................................... 19 7.2 Conditions for Authority's Benefit... .......................................................... 19 7.3 Conditions for Developer's Benefit.. ........................................................ 22 7.4 Developer Right to Terminate .................................................................. 23 7.5 Developer's Failure to Satisfy Conditions .............................................. 23 7.6 Waiver of Conditions .................................................................................. 23 8. PROPERTY CLOSING; ESCROW EXPENSES ..................................................... 23 8.1 Closing ......................................................................................................... 23 8.2 Expenses of Developer ............................................................................. 24 8.3 Instruction to Escrow Holder Regarding Waiver of Transfer Taxes and Recording Fees ....................................................................... 24 8.4 Broker's Commissions ............................................................................... 24 9. OTHER ESCROW INSTRUCTIONS ........................................................................ 25 9.1 Funds in Escrow ......................................................................................... 25 9.2 Failure to Close ........................................................................................... 25 882/012782-0020 30'1''of'3235119 -i-March 19, 2019 Item #3.1 10. 11. 12. 13. 14. 15. 16. 17. 9.3 Amendments ............................................................................................... 25 9 .4 Notices ......................................................................................................... 25 9.5 Liability ......................................................................................................... 25 DEVELOPMENT OF THE PROJECT ....................................................................... 25 10.1 Scope of Development .............................................................................. 25 10.2 Additional Governmental Permits and Approvals ................................. 26 10.3 Review and Approval of Plans, Drawings, and Related 10.4 10.5 10.6 10.7 10.8 10.9 10.10 10.11 10.12 10.13 10.14 10.15 Documents .................................................................................................. 26 Cost of Development ................................................................................. 27 Indemnity ..................................................................................................... 27 Insurance Requirements ........................................................................... 27 Remedies for Defaults Re: lnsurance ..................................................... 30 Obligation to Repair and Restore Damage Due to Casualty Covered by Insurance ............................................................................... 30 Rights of Access ......................................................................................... 30 Compliance with Laws; Compliance with Prevailing Wage Laws ...... 31 Anti-Discrimination ..................................................................................... 32 Taxes and Assessments ........................................................................... 33 Right of Authority to Satisfy Other Liens on the Property(s) ............... 33 Non-liability of Authority ............................................................................ 33 Release of Construction Covenants ........................................................ 34 AFFORDABILITY COVENANTS ............................................................................... 34 GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS ............ 35 12.1 Developer's Formation, Qualification and Compliance ........................ 35 12.2 Litigation ....................................................................................................... 35 12.3 Authority ....................................................................................................... 35 DEF AUL TS AND REMEDIES .................................................................................... 35 13.1 Event of Default .......................................................................................... 35 13.2 No Waiver .................................................................................................... 36 13.3 Rights and Remedies are Cumulative .................................................... 36 13.4 Attorneys' Fees ........................................................................................... 36 13.5 Reimbursement of Authority ..................................................................... 36 NOTICES ....................................................................................................................... 36 ASSIGNMENT .............................................................................................................. 37 15.1 Generally Prohibited .................................................................................. 37 15.2 Release of Developer ................................................................................ 38 ADMINISTRATION ...................................................................................................... 38 MISCELLANEOUS ....................................................................................................... 38 882/012782-0020 -ii-3ij~'b't' 3'!!~5119 March 19, 2019 Item #3.1 17.1 Counterparts ............................................................................................... 38 17 .2 Prior Agreements; Amendments .............................................................. 38 17.3 Governing Law ............................................................................................ 39 17.4 Acceptance of Service of Process ........................................................... 39 17 .5 Severability of Provisions .......................................................................... 39 17.6 lnterpretation ............................................................................................... 39 17. 7 Accounting Principles ................................................................................ 39 17.8 Attachments lncorporated ......................................................................... 39 17.9 Time of the Essence .................................................................................. 39 17.10 Warranty Against Payment of Consideration ......................................... 40 17.11 Non-liability of Authority or County Officials and Employees ............. .40 17.12 Force Majeure ............................................................................................. 40 17 .13 Nondiscrimination Covenants ................................................................... 40 17.14 Consents and Approvals .......................................................................... .42 17.15 Third Party Beneficiary ............................................................................. .42 List of Attachments: 1A Legal Description of City-Owned Mixed Property 1 B Depiction of City-Owned Mixed Property and Property 2A Site Plan 2B Proposed Subdivision Site Map 3 Schedule of Performance 4 Scope of Development 5 Form of Grant Deed 6 Form of Assignment of Plans and Contract 7 Form of the Authority Note 8 Form of the Authority Deed of Trust 9 Project Budget 10 Form of Authority Regulatory Agreement 11 Form of Notice of Affordability 12 Form of Release of Construction Covenants 882/012782-0020 :lti~'b'f' j'!B'11 ' -iii- March 19, 2019 Item #3.1 Exhibit C to Housing Authority Resolution PROPERTY EXCHANGE IMPLEMENTATION AGREEMENT This PROPERTY EXCHANGE IMPLEMENTATION AGREEMENT (this "Agreement") is entered into as of the _ day of , 2019 (the "Effective Date"), by and between CITY OF POWAY, a California municipal corporation ("City"), and CITY OF POWAY HOUSING AUTHORITY, a public body, corporate and politic ("Authority"). RECITALS A. City owns fee title to certain real property located generally at 13100 Poway Road, in the City of Poway, County of San Diego, State of California, commonly known as APN 317-101-06 (the "City Exchange Property"). The City Exchange Property comprises approximately nine tenths (.9) acres, and is depicted in Exhibit "A", which is attached hereto and incorporated herein by this reference. B. Authority owns fee title to certain real property located south of Poway Road, in the City of Poway, County of San Diego, State of California, commonly known as APN 317-472-01 & 06 (the "Authority Exchange Property"). The Authority Exchange Property comprises approximately two and ninety-one hundredths (2.91) acres, and is depicted in Exhibit "A", which is attached hereto and incorporated herein by this reference. C. In furtherance of Poway's Long Range Property Management Plan, City staff have been negotiating with Poway Commons, LLC, a Delaware limited liability company (the "Developer") for the proposed sale by City to Developer of various parcels of real property owned in fee by City, for Developer's development thereon of a residential and retail development project (the "Residential/Retail Project"). D. To maximize the financial viability of a Residential/Retail Project, the Developer has recommended that the Authority Exchange Property be included with the property contemplated to be developed with the Residential/Retail Project. E. Authority staff have been negotiating with Developer regarding the development of an affordable housing development (an "Affordable Project"), to occur concurrently with the development of the Residential/Retail Project. The Developer has recommended that the Affordable Project be developed on the City Exchange Property. F. To facilitate the development of each of the Residential/Retail Project and Affordable Project, City staff have negotiated with Developer the terms of a Purchase, Sale, and Development Agreement (the "PSDA"). To facilitate the development of the Affordable Project, Authority staff have negotiated with Developer the terms of an Affordable Housing and Property Disposition Agreement (the "AHPDA"). The PSDA and AHPDA are being considered by the City Council and Authority Board, respectively, concurrently with the City Council's and Authority Board's consideration of this Agreement. 8821012782-0020 :lti1i''b'f'j,35119 March 19, 2019 Item #3.1 G. In order to effect the property transfers contemplated under the PSDA and AH PDA, City and Authority would need to (i) exchange the City Exchange Property and Authority Exchange Property, and (ii) provide for the deposit into Authority's low and moderate income housing asset fund (the "LMIHAF") the sum of One Million Four Hundred Ninety-Three Thousand Three Hundred Five Dollars ($1,493,305) (the "Excess Value"), which is the difference between the value of the Authority Exchange Property and the value of the City Exchange Property. NOW, THEREFORE, IN CONSIDERATION OF THE FOREGOING RECITALS, WHICH ARE INCORPORATED HEREIN BY THIS REFERENCE, AND THE MUTUAL PROMISES CONTAINED IN THIS AGREEMENT, CITY AND AUTHORITY AGREE AS FOLLOWS: AGREEMENT I. Exchange. City and Authority agree that if the close of escrow occurs under both of the PSDA and AHPDA, then concurrently with said closings, (i) City will transfer and convey the City Exchange Property to Authority, for Authority's sale to the Developer under the AHPDA, and (ii) Authority will transfer and convey the Authority Exchange Property to City, for City's sale to the Developer under the PSDA. 2. Deposit of Excess Value into LMIHAF. Promptly after the closings under the PSDA and AHPDA, City will provide to Authority the Excess Value, and Authority will deposit the Excess Value into the LMIHAF. 3. Termination. If the closings under the PSDA and AHPDA have not occurred by June 30, 2020, this Agreement shall automatically terminate, unless City and Authority each agree, in writing, to extend the term. 4. Approvals and Actions. City shall maintain authority of this Agreement and the authority to implement this Agreement through the City Manager (or his or her duly authorized representative). Authority shall maintain authority of this Agreement and the authority to implement this Agreement through the Executive Director (or his or her duly authorized representative). Each of the City Manager and Executive Director shall have the authority to make approvals, issue interpretations, execute documents, waive provisions, and/or enter into certain amendments of this Agreement on behalf of their respective party so long as such actions do not materially or substantially change the basic business terms hereof, and such approvals, interpretations, waivers and/or amendments may include extensions of time to perform. 5. Time. Time is of the essence of this Agreement. 6. Captions. The captions of the sections/paragraphs of this Agreement are for convenience and reference only, and the words contained in the captions shall in no way be held to explain, modify, amplify or aid in the interpretations, constructions or meaning of the provisions of this Agreement. 8821012782-0020 :!ll!i''b'r a'!!~"" -2- March 19, 2019 Item #3.1 7. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same Agreement. 8. Entire Agreement. This Agreement contains the entire agreement between the parties respecting the matters set forth herein, and supersedes all prior agreements between the parties respecting such matters. [SIGNATURES ON FOLLOWING PAGE] 882/012782-0020 aill;''b'ta,a'1 " -3- March 19, 2019 Item #3.1 IN WITNESS WHEREOF, City and Authority have executed this Agreement as of the Effective Date. ATTEST: By:, ___________ _ Faviola Medina, City Clerk APPROVED AS TO FORM: RUTAN & TUCKER, LLP Alan Fenstermacher, City Attorney ATTEST: By: ___________ _ Faviola Medina, Authority Secretary APPROVED AS TO FORM: RUTAN & TUCKER, LLP Alan Fenstermacher, Authority Counsel 882/012782-0020 atif'~r j~3"'9 "City" CITY OF POWAY, a California municipal corporation By:, _________ ~ Tina M. White, City Manager "Authority" CITY OF POWAY HOUSING AUTHORITY, a public body, corporate and politic By:, ____________ _ Tina M. White, Executive Director -4- March 19, 2019 Item #3.1 882/0 12782-0020 36 ii6b1r 3~~5/19 EXHIBIT "A" DEPICTION OF CITY EXCHANGE PROPERTY AND AUTHORITY EXCHANGE PROPERTY Future City Pa-eels Future Affor da:il e Site -5- March 19, 2019 Item #3.1 SUMMARY REPORT PURSUANT TO SECTION 52201 OF CALIFORNIA GOVERNMENT CODE IN CONNECTION WITH THE SALE OF PROPERTY BY AND BETWEEN THE CITY OF POWAY AND POWAY COMMONS, LLC The City of Poway is considering the approval of a sale of publicly owned properties within its Town Center area to create an economic opportunity. The subject parcels are categorized under the following property groupings (collectively referred to as the "City Parcels"): (portions of) City- Owned Mixed Property; Housing Authority Property; and City-Owned Property. The City Parcels are described in greater detail below and are also identified and defined as such in the Purchase, Sale, and Development Agreement ("PSDA") proposed to be entered into by and between the City and Poway Commons, LLC, a Delaware limited liability company (the "Developer"): Portions of City-Owned Mixed Property The City-Owned Mixed Property, identified below, is currently vacant, unimproved land and is approximately 1.54 acres. The City-Owned Mixed Property was acquired by the former Poway Redevelopment Agency ("RDA") in 2001 and title was transferred to the City pursuant to the Long- Range Property Management Plan ("LRPMP") of the Successor Agency to the former Poway Redevelopment Agency ("Successor Agency"). The City and City of Poway Housing Authority ("Housing Authority") contemplate exchanging the 0.9 acres of the southernmost portion of the City-Owned Mixed Property for the Housing Authority Property pursuant to a property exchange and implementation agreement ("Property Exchange and Implementation Agreement") proposed to be entered into between the City and Housing Authority, as described in greater detail in Section IV A of this Report. The Housing Authority and Developer have negotiated an agreement ("Affordable Housing and Property Disposition Agreement" or "AHPDA"), separate from the PSDA, which would provide for the Housing Authority to convey the Affordable Housing Parcel to the Developer for an agreed upon purchase price of $1,200,000. The remaining .64 acres of the City-Owned Mixed Property is proposed to be sold to the Developer as contemplated in the PSDA. 13100 Poway Rd (Assessor's Parcel Number ("APN"): 317-101-06), -1.54 Acres Housing Authority l"HA"l Property The following properties are currently owned by the Poway Housing Authority ("Housing Authority") and consist of a mix of vacant and improved land, comprising a total of approximately 2.91 acres. The Housing Authority Property is contemplated to be exchanged with the Affordable Housing Parcel pursuant to the Property Exchange and Implementation Agreement, as described in greater detail in Section IV of this Report, to effectuate their development as envisioned under the PSDA: 13021 Poway Rd (APN: 317-472-01), -2.6 acres 13031 Poway Rd (APN:317-472-06), -.31 acres 309 of 323 _,_ Attachment C March 19, 2019 Item #3.1 Purchase, Sale, and Development Agreement Summary Report Prepared Pursuant to Government Code 52201 City of Poway March 5, 2019 City-Owned Property The following properties consist of a mix of vacant and improved land and comprise a total of approximately 3.02 acres. The properties were originally acquired by the RDA but were purchased by the City on March 24, 2018, pursuant to the Successor Agency's approved Long-Range Property Management Plan: 13033 Poway Rd (APN:317-472-18), -1.83 acres Poway Rd (APN:317-472-23), -.61 acres 13053 Poway Rd (APN:317-472-24), -.33 acres 13029 Y:z Poway Rd (APN:317-472-25), -.25 acres This summary report ("Report") for the proposed sale of the City Parcels has been prepared by the City of Poway ("City") pursuant to California Government Code Section 52201 (a)(2)(B). This Report sets forth certain details of the proposed PSDA. I. BACKGROUND Section 52201(a)(2)(B) of the California Government Code provides that a city, county, or city and county may sell or lease property to create an economic opportunity. The acquisition, sale, or lease shall first be approved by the legislative body by resolution after a legally noticed public hearing. The city, county, or city and county shall also make available a copy of a report that describes and contains specific elements of the proposed transaction(s) for public inspection prior to the public hearing. Pursuant to 52201 (a)(2)(B), the Report must include the following information: • A copy of the proposed acquisition, sale, or lease agreement. • A summary that describes and specifies all of the following: 310 of 323 o The cost of the agreement to the city, county, or city and county, including land acquisition costs, clearance costs, relocation costs, the costs of any improvements to be provided by the city, county, or city and county, plus the expected interest on any loans or bonds to finance the agreements. o For the sale or lease of property, the estimated value of the interest to be conveyed or leased, determined at the highest and best uses permitted under the general plan or zoning. o For the sale or lease of property, the estimated value of the interest to be conveyed or leased, determined at the use and with the conditions, covenants, and development costs required by the sale or lease. The purchase price or present value of the lease payments which the lessor will be required to make during the term of the lease. If the sale price or total rental amount is less than the fair market value of the interest to be conveyed or leased, determined at the highest and best use, then the city, county, or city and county shall provide as part of the summary an explanation of the reasons for the difference. -2- March 19, 2019 Item #3.1 Purchase, Sale, and Development Agreement Summary Report Prepared Pursuant to Government Code 52201 City of Poway March 5, 2019 o An explanation of why the acquisition, sale, or lease of the property will assist in the creation of economic opportunity, with reference to all supporting facts and materials relied upon in making this explanation. This Report outlines the primary details of the proposed sale and disposition of the City Parcels between the City and prospective Developer as outlined in the proposed PSDA and addresses the requirements pursuant to Government Code Section 52201. II. REPORT ORGANIZATION This Report is based upon information provided in connection with the proposed sale and disposition of the City Parcels and is organized into the following sections: • Summary of the Proposed Sale & Disposition -This section includes a description of and other relevant information pertaining to the proposed conveyance of the City Parcels between the City and prospective Developer under the PSDA; • Cost of the Agreement to the City -This section summarizes the cost of the agreement to the City, including land acquisition costs, clearance costs, relocation costs, the costs of any improvements to be provided by the City, plus the expected interest on any loans or bonds to finance the agreements; • Estimated Value of the Interest to be Conveyed Determined at the Highest and Best Use Permitted Under the General Plan or Zoning -This section estimates the value of the interest to be conveyed, determined at the highest and best use permitted under the general plan or zoning for the City Parcels; • Estimated Value of the Interest to be Conveyed Determined at the Use and with the Conditions, Covenants, and Development Costs Required by the Sale -This section estimates the value of the property interest to be conveyed determined at the use and with the conditions, covenants, and development costs required by the sale or lease of the City Parcels; The purchase price or present value of the lease payments which the lessor will be required to make during the term of the lease, as applicable; • Consideration Received and Comparison with the Established Value -This section includes an explanation of the reasons for the difference If the sale price or total rental amount of the City Parcels is less than the fair market value of the interest to be conveyed or leased, determined at the highest and best use; • Economic Opportunity-This section describes the existing condition of the City Parcels and includes an explanation of why the sale or lease of the City Parcels will assist in the creation of economic opportunity. This Summary Report sets forth certain details of the proposed sale and disposition of the City Parcels by the City to the prospective Developer. A copy of the proposed PSDA, which prospective Developer will be required to execute, in substantially the attached form, to effectuate the conveyance of the City Parcels is attached to this Summary Report (see Attachment "A"). This Summary Report is made available for public inspection and copying on the date that the first -3- 311 of323 March 19, 2019 Item #3.1 Purchase, Sale, and Development Agreement Summary Report Prepared Pursuant to Government Code 52201 City of Poway March 5, 2019 notice of the joint public hearing is published, which is March 5, 2019. The public hearing relating to the proposed sale of the City Parcels is scheduled for Tuesday, March 19, 2019 at 7:00 p.m., in the City Council Chambers, at 13325 Civic Center Drive, Poway, CA 92064. Ill. SUMMARY OF PROPOSED SALE AND DISPOSITION OF CITY PARCELS Under the terms of the PSDA, the City would sell the City Parcels, which are comprised of (a) the City-Owned Property, (b) the City-Owned Mixed Property, other than approximately 0.9 acres located in the southernmost portion of the parcel, and (c) the Housing Authority Property, at fair market value, to the Developer in "As-ls" condition for a purchase price of $6,420,500 to effectuate the development of a neighborhood-serving mixed-use commercial and residential project, which would stimulate local economic activity, job growth, preserve and enhance the City's economic base, and serve as a catalyst for the revival of the City's Town Center area and mixed-use core. The following table summarizes the appraised value and agreed upon purchase price per parcel and categorizes the parcels by their intended use as envisioned for the proposed project and described in further detail herein: Ownershi!;! Address APN Land AC Land SF Original (Post Aeeraised Purchase Owner Pro(;!erti Value Price Exchange} MARKET RATE TOWN HOMES 13100 Poway Rd 317-101-06 0.64 27,878 City City 756,364 677,381 (Portion) 13033 Poway Rd 317-472-18 1.83 79,715 City City 1,462,766 1,936,887 Poway Rd 317-472-23 0.61 26,572 City City 487,589 645,629 13021 Poway Rd 317-472-01 1.38 60,113 Housing City 1,103,069 1,460,603 (Portion) Authority SUBTOTAL 4.46 194,278 3,809,787 4,720,500 RETAIL 13021 Poway Rd 317-472-01 1.22 53,143 Housing City 975,177 982,938 (Portion) Authority 13031 Poway Rd 317-472-06 0.31 13,504 Housing City 247,791 249,763 Authority 13053 Poway Rd 317-472-24 0.33 14,375 City City 263,777 265,877 13029 1/2 Poway 317-472-25 0.25 10,890 City City 199,831 201,422 Rd SUBTOTAL 2.11 91,912 1,686,577 1,700,000 GRAND TOTAL 6.57 286,189 5,496,364 6,420,500 -4- 312 of 323 March 19, 2019 Item #3.1 Purchase, Sale, and Development Agreement Summary Report Prepared Pursuant to Government Code 52201 City of Poway March 5, 2019 The Developer's proposed project, as outlined in the PSDA, is a high-quality neighborhood- serving mixed-use commercial and residential project that generally consists of the development of approximately 25,000 square feet of retail and approximately 98 units of for-sale housing, of which approximately 38 units would be two-story attached condominiums, approximately 54 units would be three-story attached buildings, containing two-story townhomes and flat condominiums, and approximately 6 units of three-story attached condominiums ("Project"). A summary of the salient points of the PSDA are as follows: • Developer to close escrow and acquire fee title to adjacent privately-owned properties located at 13029 Poway Road (APN: 317-472-20), 13117 Poway Rd (APN: 317-472-26), and 13126 Quale Court (APN: 317-472-19) in the City of Poway ("Private Parcels"), as a condition to City's sale of the City Parcels. • Upon satisfaction (or waiver by the appropriate party) of various closing conditions, City to sell to Developer fee title to the City Parcels, which are comprised of (a) the City-Owned Property, (b) the City-Owned Mixed Property, other than approximately 0.9-acre located in the southernmost portion of the parcel, and (c) the Housing Authority Property, in "as- is" condition. • Developer to acquire fee title to the City Parcels for a purchase price of $6,420,500, of which, $4,720,500 will be paid in cash at the close of escrow and the balance of the purchase price ($1,700,000) will be paid by the Developer pursuant to a promissory note between the City and Developer as outlined in the PSDA. • The Developer's proposed Project is currently not entitled, and Developer will be required to obtain the entitlements necessary for the proposed Project, including all required environmental review and analysis under the California Environmental Quality Act ("CEQA"), as a condition to the sale of the City Parcels to the Developer. • Acknowledgement and agreement by City and Developer that the ultimate sale of the City Parcels to Developer under the PSDA is expressly conditioned upon the review and approval of all necessary findings and conclusions which the City Council of the City of Poway ("City Council") is required to make, including all necessary review, findings and determinations required under CEQA as applicable under relevant state and local land use provisions and the City has full discretion with regards to such matters that is in no way constrained by the PSDA. • City's reservation of the right to exercise its discretion as to all matters with respect to the PSDA, the entitlements, and the Project which City is, by law, entitled or required to exercise, at its discretion. • Developer to construct associated on-site and off-site improvements in accordance with plans and specifications approved by City and any conditions imposed by City in its approval of the Developer's development application(s) related to the Project. • City would not be required to provide any form of financial or other assistance to the Developer with the construction of the Project. -5- 313 of 323 March 19, 2019 Item #3.1 Purchase, Sale, and Development Agreement Summary Report Prepared Pursuant to Government Code 52201 City of Poway March 5, 2019 Other PSDA Terms: Escrow Opening Date: Within five (5) days following the effective date of PSDA Due Diligence Period: 120 days from Escrow Opening Date Initial Deposit: $125,000 (applicable to purchase price) deposited upon opening of Escrow Additional Deposit: $125,000 (applicable to purchase price) and deposited upon expiration of the Due Diligence Period and Developer's delivery of Due Diligence Investigation Conclusion Notice Note: Total deposit amount ($250,000) to be immediately released to City, but applicable to the purchase price, upon expiration of the Due Diligence Period and Developer's delivery of Due Diligence Investigation Conclusion Notice Escrow Closing Date: The earliest of: (1) a date two (2) business days after the date that Developer is issued the first grading permit for the Project, (2) five (5) business days following the one hundred eightieth (180th) calendar day after expiration of the date by which a challenge could be brought regarding the entitlements, or (3) three hundred sixty-five (365) days after the effective date of the PSDA. Developer shall have the right, but not the obligation and upon five (5) days advance written notice to City, to extend the Escrow Closing Date for two successive periods of one (1) month each. IV. COST OF THE AGREEMENT TO THE CITY This section outlines the costs of the PSDA to the City, including land acquisition costs, clearance costs, relocation costs, the costs of any improvements to be provided by the City, plus the expected interest on any loans or bonds to finance the agreements. For the purpose of this Report, the City's costs under the proposed conveyance of the City Parcels in accordance with the PSDA are comprised of land acquisition costs of the City-Owned Mixed Property, City-Owned Property, and Housing Authority Property. A. City-Housing Authority Land Exchange Properties In order to effectuate the disposition and development of the Housing Authority Property and the City-Owned Mixed Property, as contemplated under the PSDA, the City and Housing Authority are considering, concurrently with the City's consideration of the PSDA, a property exchange implementation agreement ("Property Exchange Implementation Agreement"). Under the terms of the Property Exchange Implementation Agreement, the Housing Authority Properties, comprising approximately 2.91 acres, would be exchanged with 0.9 acres of the southernmost portion of the 1.54-acre City-Owned Mixed Property ("Affordable Housing Parcel"). The Property Exchange Implementation Agreement also provides that if there's a difference between the value of the Housing Authority Property and the value of the City-Owned Mixed Property, the City would deposit the funds associated with that difference ("Excess Value Deposit") into the low-and moderate-income housing trust fund (the "LMIHTF") to be utilized for the expansion or preservation of affordable housing and/or other affordable housing activities of the Housing Authority in accordance with the laws governing the use of affordable housing monies. -6- 314 of 323 March 19, 2019 Item #3.1 Purchase, Sale, and Development Agreement Summary Report Prepared Pursuant to Government Code 52201 City of Poway March 5, 2019 The following table provides an estimate of the Excess Value Deposit that the City is to deposit into the LMIHTF, which is approximately $1,493,305 and is based on the agreed upon purchase price in the PSDA for the properties subject to the Property Exchange Implementation Agreement. The agreed upon purchase price, as reflected in the following table, is greater than the appraised value, which was based on an appraisal prepared by lntegra Realty Resources dated as of February 15, 2019. City-Owned Mixed Property Appraised Purchase Value Price Ownership: City Transfer to Housing Authority (0.90 Acres) Address: 13100 Poway Rd APN: 317-101-06 Total Amount $1,063,636 $1,200,000 Acreage 0.90 0.90 Housing Authority Property Ownership: Housing Authority Transfer to City Address: 13021 and 13031 Poway Rd APN: 317-472-01, 317-472-06 Total Amount $2,326,037 $2,693,305 Acreage 2.91 2.91 Excess Value Deposit (Estimate) Estimated Property Value (Housing Authority Property) $2,326,037 $2,693,305 Estimated Property Value ( .. 9 Acre-Affordable Housing Parcel) $(1,063,636) $(1,200,000) Estimated "Excess Value" Deposit into LMIHTF $1,262,401 $1,493,305 B. Land Acquisition Costs City-Owned Mixed Property and City-Owned Property The City-Owned Mixed Property and City-Owned Property, as identified in the table below, were originally acquired by the former RDA over a multi-year period prior to the dissolution of the RDA in 2012. The former RDA sought to acquire them for the purpose of eliminating existing blight conditions, specifically to eliminate environmental deficiencies, encourage private development activities, and enhance and renovate existing businesses. Pursuant to Assembly Bill ("AB")x1 26, AB 1484, and Senate Bill ("SB") 107 (collectively, the "Dissolution Act"), the Successor Agency included the City-Owned Properties in its Long Range -7- 315 of 323 March 19, 2019 Item #3. 1 Purchase, Sale, and Development Agreement Summary Report Prepared Pursuant to Government Code 52201 City of Poway March 5, 2019 Property Management Plan ("LRPMP") that identified the proposed future disposition of the subject properties, which were designated under the permissible use category For Sale and Governmental Use. The LRPMP was subsequently approved by the Oversight Board to the Successor Agency and the State Department of Finance ("DOF") in 2015. In accordance with the LRPMP and to further the goals and objectives of the former RDA and ultimate disposition and development of the City-Owned Mixed Property and City-Owned Property, as contemplated under the PSDA, the Successor Agency sold the City-Owned Property to the City via a purchase and sale agreement for a purchase price of $5,191,000 on March 24, 2018 and conveyed fee title to the City-Owned Mixed Property to the City in accordance with the Dissolution Act for Governmental Use. A breakdown of the former RDA's original cost of acquisition and the City's cost of acquisition from the Successor Agency by parcel is identified in the following table: RDA Land City Land PSDA Property Address APN Acquisition Acquisition Category/Definition Cost• Cost Per LRPMP** City-Owned Mixed 13100 Poway Rd 317-101-06 $1,158,018 $0 Property City-Owned Property 13029 Y, Poway Rd 317-472-25 $1,497,966 $726,000 City-Owned Property 13053 Poway Rd 317-472-24 $865,895 $824,000 City-Owned Property 13033 Poway Rd 317-472-18 $4,601,382 $3,300,000 City-Owned Property Poway Rd. 317-472-23 $315,000 $340,000 Total: $8,438,261 $5,191,000 .. ·The former RDA acqwred the vanous properties 1denflfled m the above table between 1997 and 2008, which was prior to the dissolution of the former RDA in 2012 . .. As part of dissolution of the former RDA, the Successor Agency was mandated by the State to sell and dispose of the properties identified in the above table through the implementation of the DOF approved LRPMP. The City opted to acquire the parcels from the Successor Agency on March 24, 2018 as part of the mandated RDA dissolution process. Housing Authority Property The Housing Authority Property, as identified in the table below, were both originally acquired by the former RDA in 2002 and 2010, respectively. Post dissolution of the RDA and in accordance with the Dissolution Act, the Housing Authority assumed the housing assets and housing responsibilities of the former RDA as the housing successor entity of the former RDA. As required under the Dissolution Act, the Successor Agency prepared, submitted, and received approval of the Housing Asset Transfer list by the DOF on August 31, 2012, thereby approving and affirming the transfer of fee title of the Housing Authority Property to the Housing Authority. As mentioned previously, in conformance with the requirements of the PSDA as proposed, the Housing Authority Property is contemplated to be exchanged with the Affordable Housing Parcel -8- 316 of 323 March 19, 2019 Item #3.1 Purchase, Sale, and Development Agreement Summary Report Prepared Pursuant to Government Code 52201 City of Poway March 5, 2019 pursuant to the Property Exchange Implementation Agreement, as described in greater detail herein, to effectuate their development as envisioned under the PSDA. A breakdown of the former RDA's original cost of acquisition and the Housing Authority's cost of acquisition by parcel is identified in the following table: PSDA Property RDA Housing Authority Category/ Address APN Acquisition Cost Acquisition Cost Definition Housing Authority 13021 Property Poway Rd 317-472-01 $2,228, 140* $0 Housing Authority 13031 Property Poway Rd 317-472-06 $348,021 $0 Total: $2,576,161 $0 . . . ... 'Acqws1t1on cost for 13021 Poway Rd includes land acqws1t1on cost, relocaflon assistance, and cost for title, escrow, and environmental studies. C. Agreement Financing Pursuant to the PSDA, the City and Developer have agreed to a purchase price of $6,420,500 for the acquisition of the City Parcels. Of which, $4,720,500 will be paid in cash at the closing of the transaction and the balance of the purchase price ($1,700,000) will be paid by the Developer pursuant to a promissory note between the City and Developer, which is secured by the Deed of Trust with Assignment of Rents and Rider to Deed of Trust ("City Note"). The terms of the City Note are as follows: • Principal Note Amount: $1,700,000 • Term: 4 years • Interest: Interest shall accrue at the "Applicable Rate", which shall be the sum of (i) the rate published by the United States Department of the Treasury, as the interest rate for its Five-Year Treasury Bill, plus (ii) two and one-quarter percent (2.25%), compounded monthly. • Time and Amount of Payment: The Note Amount, and all accrued interest thereon, shall be paid on the fourth (4"') anniversary of the Note Date. Assuming the terms outlined above, the estimated future value of the City Note at the end of the term (48 months) would be approximately $2,081,317 (-$381,317 of interest). In terms of the interest calculation, the analysis assumes interest is compounded monthly and utilizes a placeholder estimate of 5.07%, which is the sum of: (i) an average over the last twenty (20) years of the United States Department of the Treasury interest rate for its Five-Year Treasury Bill (2.82%), plus (ii) two and one-quarter percent (2.25%). -9- 317 of 323 March 19, 2019 Item #3.1 Purchase, Sale, and Development Agreement Summary Report Prepared Pursuant to Government Code 52201 City of Poway March 5, 2019 It should be noted that, pursuant to the City Note, the Applicable Rate shall be determined on the date that is fourteen (14) days prior to the date such repayment is due, which is the fourth (4th) anniversary of the Note Date. Therefore, the Applicable Rate applied for purposes of the estimated future value of the City Note, is subject to change, which may impact the future value and amount of payment received by the City from the Developer for the City Note. V. ESTIMATED VALUE OF THE INTEREST TO BE CONVEYED DETERMINED AT THE HIGHEST AND BEST USE PERMITTED UNDER THE GENERAL PLAN AND ZONING As described throughout this Report, the City is proposing to sell the City Parcels to the Developer under the terms of the PSDA. If the PSDA is approved, the City Parcels will be sold in their current "as is" condition and no express or implied representations have been made to the prospective Developer by the City regarding suitability for desired use, zoning and land use, subsurface compaction and/or the existence or non-existence of toxic waste, hazardous materials, and/or undesirable substances in or on the City Parcels. The prospective Developer of the City Parcels will be required under the PSDA to secure any and all land use and other entitlements, permits and approvals, which may be required by the City and any other governmental agency having jurisdiction over the City Parcels, including all environmental review and analysis required in connection with any development project application submitted by the prospective Developer. The estimated value of the interest to be conveyed for the City Parcels, not including the 0.9-acre southernmost portion of the City-Owned Mixed Property, determined at the highest and best use permitted under the current General Plan and zoning code is $5,579,091 based on an appraisal prepared by lntegra Realty Resources effective February 15, 2019, which conforms with the Uniform Standards of Professional Appraisal Practice, the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute, and applicable state appraisal regulations. It should be noted that the value conclusion considers specific cost adjustments to address uncompacted fill, asbestos/lead abatement, and environmental remediation issues associated with the City Parcels. VI. ESTIMATED VALUE OF THE INTEREST TO BE CONVEYED AT THE USE AND WITH THE CONDITIONS, COVENANTS, AND DEVELOPMENT COSTS REQUIRED BY THE SALE The estimated value of the interest to be conveyed at the use and with the conditions, covenants, and development costs required by the PSDA for the City Parcels is a purchase price of $6,420,500, which is higher than the fair market value as determined at the highest and best use permitted under the City's General Plan and zoning, as identified in Section V. VII. CONSIDERATION RECEIVED AND COMPARISON WITH THE ESTIMATED VALUE OF THE INTEREST TO BE CONVEYED AT HIGHEST AND BEST USE Pursuant to this Section, the City must provide an explanation of the reasons for the difference If the sale price of the City Parcels is less than the fair market value of the interest to be conveyed, determined at the highest and best use. The City Parcels, not including the 0.9-acre southernmost portion of the City-Owned Mixed Property, will be sold for a purchase price of $6,420,500, which is higher than the fair market value as determined at the highest and best use permitted under the City's General Plan and zoning, as identified in Section V. -I 0- 318 of 323 March 19, 2019 Item #3.1 Purchase, Sale, and Development Agreement Summary Report Prepared Pursuant to Government Code 52201 City of Poway March 5, 2019 VIII. ECONOMIC OPPORTUNITY The former RDA, established in 1983, sought to acquire the City Parcels for the original purpose of eliminating remaining blight conditions and enhancing and stimulating private investment and the economic vitality of businesses along the Poway Road corridor. The former RDA specifically sought, among other goals, to eliminate environmental deficiencies, encourage private development activities, and enhance and renovate existing businesses. However, some of the signs of blight that existed prior to the dissolution of the former RDA in 2012 still exist today. The City Parcels are currently comprised of a mix of vacant and improved parcels, which are underutilized and do not meet their full development and economic potential. The City envisions the development of the City Parcels as an integral component of the Poway Road commercial corridor, which, if developed as envisioned in the PSDA, would create an attractive and quality mixed-use commercial and residential project and provide Poway residents, youth, and visitors with a lively day and nighttime environment and further the City's efforts to improve and enhance its local economic base. In 2017, the City amended the Poway Road Specific Plan ("PRSP") (originally adopted in May 1996) pursuant to a Poway Road Corridor Study ("PRCS"), which includes the City Parcels within its boundaries, in order to make comprehensive modifications to the existing Specific Plan that includes district/zoning realignments, refined development standards and development incentives/bonuses for projects that consolidate lots and provide community benefits. The goals and objectives contained in the PRSP are as follows: District Goals/Objectives • Implement tools to promote a unique sense of place, where the Town Center is the "heart" of the City. • Encourage the development of a mixed-use project for the properties north of Poway Community Park and west of Civic Center Drive. • Promote pedestrian connections through larger new developments to access public space and parking areas and specifically, a trail connecting Poway Community Park, Hilleary Park, and the Poway Community Library. • Encourage the provision of privately-owned public gathering spaces designed as active places that provide pedestrian connections, primary building entrances, and views to Poway Community Park and the Poway Community Library. • Require pedestrian-oriented uses, such as retail and restaurants, at the ground level of new development fronting Poway Road. • Integrate residential uses either as stand-alone or mixed-use projects to provide housing in walkable proximity to commercial and civic uses. The proposed sale of the City Parcels to the Developer, as described herein, will create an economic opportunity by facilitating the development of the City Parcels in alignment with the PRSP, thereby increasing its revenue base (e.g. property tax, sales tax, etc.), promoting the increase in the supply of housing, stimulating economic activity and job growth within the City, -11- 319 of 323 March 19, 2019 Item #3.1 Purchase, Sale, and Development Agreement Summary Report Prepared Pursuant to Government Code 52201 City of Poway March 5, 2019 and ultimately serving as a catalyst for the revival of the City's Town Center area and mixed-use core. -12- 320 of 323 March 19, 2019 Item #3.1 Attachment D Proposed Subdivision Map POWAY COM1VIONS LSSJ f::::::::: :I II I I I I 321 of 323 RETAIL AREA -Approx 2 .3 gross acres AFFORDABLE AREA -Approx 0 .9 gros s acres RESIDEN TIALAREA -Approx 6 .1 gross acres Attachment D March 19, 2019 Item #3.1 322 of 323 Vicinity Map Current Ownership Property# Ownership 1 Mix ed City Property 2 City-owned 3 City-owned 4 City-owned 5 City-own ed 6 Housing Authority-owned 7 Housing Authority-owned Attachment E March 19, 2019 Item #3.1 Attachment F Site Plan -Property Exchange Future City P creels FutureAffordcble Site 882/012782-0020 3~~6b't3 3~~5/19 A ttachment F March 19, 2019 Item #3.1